Software Development & License & Services Agreement

EXHIBIT 10.13


CONFIDENTIAL TREATMENT REQUESTED


SOFTWARE DEVELOPMENT AND LICENSE AND SERVICES AGREEMENT


This Software Development and License and Services Agreement (the " Agreement") is made effective as of September 30, 2000 (the " Effective Date"), by and between MICROSOFT NETWORK, LLC, a Washington limited liability company, with its principal offices at One Microsoft Way, Redmond, WA 98052 (" Microsoft" or " MS"), and BRIGHTMAIL, INC., a California corporation, with its principal offices at 301 Howard Street, Suite 1800, San Francisco, CA 94105 (" BI") (each a " Party" and collectively, the " Parties").


RECITALS

WHEREAS, Microsoft owns and operates (i) a network of web sites currently known as " The Microsoft Network ," or " MS" with a home page currently located at http://www.msn.com, (ii) an Internet access service known as Microsoft Internet Access Service or " MSNIA ," and (iii) other web-based properties and services (such network, properties and services shall be referred to collectively as the " MSN Services");


WHEREAS, Microsoft desires to have the right to offer, provide and make available to users of MSN, MSNIA and other MSN Services (collectively, " MSN Users") software and services that can be used to monitor, manage and filter Spam;

WHEREAS, BI is in the business of providing software (including Rules and Rule Updates) and services, which are capable of monitoring, managing and filtering Spam on web-based properties and services in a timely and efficient manner;


WHEREAS, BI has the necessary technical capability and expertise to provide Microsoft with versions of such software and services capable of monitoring, managing and filtering Spam on MSN, MSNIA and other MSN Services; and


WHEREAS, the Parties desire to enter into an agreement whereby BI shall develop for Microsoft and license to Microsoft such software (including Rules and Rule Updates) and provide to Microsoft such services in accordance with the terms and conditions set forth in this Agreement.


NOW THEREFORE, in consideration of the premises, the mutual covenants and agreements contained herein, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged and accepted, Bl and Microsoft hereby agree as follows:

AGREEMENT

1. DEFINITIONS

1.1 Defined Terms . The capitalized terms contained and used in this Agreement shall have the meanings ascribed to them hereunder, including in the text and at Exhibit A.


1.2 Rules of Construction . The words "hereby," "herein," "hereunder" and words of similar import refer to this Agreement as a whole (including any Appendices, Attachments, Exhibits and Schedules hereto) and not merely to the specific Section, paragraph or clause in which such word appears. The terms "include" and "including" shall be understood in their inclusive sense as "include(-ing), but not limited to."

CONFIDENTIAL TREATMENT REQUESTED

2. DEVELOPMENT, DELIVERY, ACCEPTANCE

2.1 Development and Delivery . BI shall develop for Microsoft the Software associated with each Due Date in accordance with the specifications set forth in Exhibit B (the " Specifications"). BI shall deliver such Software to Microsoft on or before the associated Due Date set forth in Exhibit B.


2.2 Installation Services . Upon each delivery of Software, BI shall install and integrate the Software with the MS Servers and with any other hardware or software designated by Microsoft. BI shall provide all reasonably necessary testing, debugging, initial integration of, and any required fixes of the Software, until functionality of the Software is demonstrated to Microsoft's satisfaction (collectively, the " Installation Services"). Without limitation to the foregoing, BI shall provide Microsoft with sufficient professional service assistance to test and verify that all Software functions in accordance with the Specifications.


2.3 Enhancements .


2.3.1 BI shall promptly notify Microsoft of the availability and purpose of each Enhancement associated with the Software, or with any substantially similar product or service that BI distributes, offers for sale, sells, markets, promotes, displays, transmits, or otherwise makes available for commercial use. Microsoft shall have the right to request a copy of each such Enhancement within thirty (30) days of its receipt of notice of the availability and purpose of such Enhancement. Within ten (10) days of BI's receipt of such request from Microsoft, BI shall deliver such Enhancement to Microsoft, and Microsoft shall have the right to test such Enhancement and request that BI make any necessary modifications thereto to cause such Enhancement to conform to the Specifications. Within ten (10) days of BI's receipt of Microsoft's request for modifications, BI shall modify such Enhancement in accordance with Microsoft's request and deliver such modified Enhancement to Microsoft for evaluation by Microsoft in accordance with Section 2.4. For the avoidance of doubt, in the event Microsoft does not request any modifications, Microsoft shall still retain the right to evaluate the Enhancement, in accordance with Section 2.4, upon the expiration of the period for requesting such modifications.

2.3.2 In addition to BI's obligations under Section 2.3.1, upon Microsoft's request, BI shall develop, in accordance with such request, other Enhancements for the Software to address or otherwise accommodate any additions, deletions, modifications, updates, upgrades or changes to the Windows 2000 Operating System used with MSN, MSNIA or other MSN Services, which may affect the operation or use of the Software or Filtering Functionality by Microsoft or MSN Users. Unless otherwise specified by Microsoft in writing, BI shall deliver each such Enhancement to Microsoft no later than thirty (30) days following Microsoft's request for such Enhancement, and Microsoft shall have the right to evaluate such Enhancement in accordance with Section 2.4.

2.3.3 Unless otherwise specified in writing by Microsoft, all Enhancements shall be delivered by BI to Microsoft via a secure File Transfer Protocol.


2.4 Evaluation and Acceptance Procedures .


2.4.1 With respect to each delivery of Software (including each Enhancement but excluding Rules and Rule Updates), Microsoft shall have the right to evaluate such Software within thirty (30) days following the receipt of such Software by Microsoft or, if applicable, the completion of the Installation Services, if any, by BI associated with such Software for the purposes of determining whether such Software contains one or more Errors. Promptly following the completion of such thirty (30) day evaluation period, Microsoft shall notify BI in writing of its decision to accept, conditionally accept, or


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CONFIDENTIAL TREATMENT REQUESTED


reject such Software. Without limitation to the foregoing, Microsoft shall have the right, but not the obligation, to reject or conditionally accept any Software that contains one or more Errors. In the event Microsoft decides to conditionally accept any Software, Microsoft's notice of such conditional acceptance shall include a description of any Errors which, if fixed, would render such Software acceptable in accordance with the Specifications. BI shall deliver fixed Software to Microsoft within fifteen (15) days of its receipt of such notice of conditional acceptance, and Microsoft thereafter shall have the right to evaluate such fixed Software for an additional thirty (30) day period in accordance with this Section 2.4.1. If BI fails to deliver fixed Software to Microsoft in accordance with this Section 2.4.1, Microsoft shall have the right to (a) reject the Software immediately, or (b) extend the period for fixing such Software for an additional period of time, as determined by Microsoft in its sole discretion.

2.4.2 Without limitation to Section 2.4.1, if BI (a) fails to deliver any portion of the Software identified in Exhibit B by the associated Due Date or as required under Section 2.3 or any other provision of this Agreement, (b) receives a notice of rejection of any portion of such Software from Microsoft, or (c) fails to fix, in accordance with Section 2.4.1, all of the Errors in such Software as described in Microsoft's notice of conditional acceptance, then Microsoft shall have the right to (x) suspend its performance under this Agreement, or (y) terminate this Agreement pursuant to Section 13.2.2(c). For the avoidance of doubt, Microsoft shall have no obligation to provide BI with any cure period. Without limiting any of Microsoft's other rights or remedies, all of which are expressly reserved, if Microsoft terminates this Agreement in accordance with this Section 2.4.2, BI immediately shall * to * to BI hereunder.

2.5 Design Review & Specifications Changes . The Parties may mutually agree upon additions, deletions and other changes to the Software which may affect the Specifications at any time during the Term; provided , however , such additions, deletions and other changes to the Software shall be provided by BI to Microsoft * to Microsoft, unless otherwise agreed to in writing by the Parties.


2.6 User Interface . Microsoft shall have the right, but not the obligation, to develop and use a user interface for the Software to facilitate access and use of the Software and Filtering Functionality by MSN Users (a " User Interface"). Microsoft shall determine, in its sole discretion, the design, development, features and functionality of such User Interface and shall have sole control over all decisions relating to such User Interface, including all decisions relating to the desirability or need for such User Interface.


2.7 BI Marks . BI shall provide to Microsoft, within ten (10) days of the Effective Date, the BI Marks for use in accordance with the license granted in Section 4.4.1.


2.8 Reporting Requirement . BI shall provide a written report to Microsoft within fifteen (15) days after the last day of each calendar month describing in reasonable detail all Enhancements that have been developed by or on behalf of BI during the immediately preceding calendar month.

3. RULES AND RULE UPDATES

3.1 Rules and Rule Updates . BI acknowledges and agrees that (i) the Software cannot provide Filtering Functionality to Microsoft or MSN Users unless BI develops Rules and Rule Updates for use in conjunction with the Software and delivers such Rules and Rule Updates promptly to Microsoft; (ii) a positive customer experience by MSN Users is essential for the effective functioning of the MSN Services and the Filtering Functionality; and (iii) Microsoft has the right, in its sole discretion, to monitor and measure the level of satisfaction of MSN Users with respect to the Software and the Filtering Functionality; provided , however , BI shall have the right to provide suggestions to Microsoft for the


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contents of surveys of MSN Users relating to the Software and Filtering Functionality; provided , further , however , Microsoft shall retain sole control over all aspects of such surveys.


3.2 *.


3.2.1 Throughout the Term and the Wind-Down Period, if any, BI shall develop Rules and Rule Updates that are capable of monitoring, managing and filtering Spam and otherwise providing Filtering Functionality in conjunction with the Software. Without limitation to the foregoing, BI shall develop Rules and Rule Updates for commercial use in sufficient quality and quantity to cause the Software to provide Filtering Functionality to Microsoft and MSN Users in a manner that * (* shall be *").

3.2.2 Microsoft shall notify BI in a commercially reasonable time period following the completion of * in which the Software or Filtering Functionality has * (such * shall be referred to as *. Such * also shall notify BI of each instance when the * for the Software or Filtering Functionality is *, according to the *. Upon * of each *, BI immediately shall take all necessary actions to cause the Software and Filtering Functionality to *. With respect to each * or * this Agreement, such * or *, as the case may be, shall be * based upon BI's * of *.


3.3 Delivery of Rules and Rule Updates . On the Effective Date, BI shall deliver all Rules and Rules Updates that exist as of the Effective Date to Microsoft, in a format acceptable to Microsoft. In addition, BI shall deliver all other Rules and Rule Updates to Microsoft, in a format acceptable to Microsoft, as soon as such Rules and Rule Updates are available for commercial use. BI shall cause each Rule and Rule Update to include a verification mechanism, which verification mechanism shall verify immediately for BI whether Microsoft has received and processed such Rule or Rule Update. In the event BI does not receive such verification, BI immediately shall notify Microsoft of the availability of such Rule or Rule Update and shall deliver an additional copy of such Rule or Rule Update to Microsoft. BI shall provide such Rules, Rule Updates and services to Microsoft in accordance with Exhibit C.

4. LICENSE GRANTS.

4.1 BI License Grant . Subject to the terms and conditions of this Agreement, BI hereby grants to Microsoft during the Term and the Wind-Down Period, if any, the worldwide, non-exclusive, fully paid-up, irrevocable, right and license to:

4.1.1 make, use, reproduce, perform, display, import, broadcast, transmit, install, host, execute, and store one or more copies of the Software in object code form on any and all servers, including the servers and Devices designated by Microsoft which are used for the purpose of offering or providing the Filtering Functionality to MSN Users (the " MS Servers");


4.1.2 make, use, reproduce, perform, display, import, broadcast, transmit, install, host, execute, and store one or more copies of the Software in object code form on any and all MS Servers for the purpose of testing the Software and Filtering Functionality and otherwise using the foregoing for Microsoft's internal purposes and operations relating to the offering or provision of the Filtering Functionality to MSN Users;

4.1.3 promote, perform, execute, transmit, display, use and provide access to the Software for the purposes of providing the Filtering Functionality to MSN Users;


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CONFIDENTIAL TREATMENT REQUESTED


4.1.4 store, transmit and display the Software's instructions or data in, through, and on, Devices and other servers and computers which are operated with or otherwise access or use the MS Servers;

4.1.5 copy and store the Software for the purposes of maintaining up to two (2) backup copies of the Software;

4.1.6 copy, transmit, publicly perform or display, adapt and distribute all Documentation via any and all means and media to MSN Users, including any instructions relating to the use of the of the Software or Filtering Functionality via the Internet; and

4.1.7 sublicense the rights and licenses set forth in this Section 4.1, in whole or in part, to one or more Microsoft Affiliates.


4.2 Sublicense Rights . Without limitation of the foregoing Section 4.1, Microsoft shall have the right to grant the necessary rights, licenses, and sublicenses to permit * of the MSN Users to access and use the Software on the MS Servers, via any and all means and media, for the purpose of accessing and using the Filtering Functionality.

4.3 Software Conies . Notwithstanding anything contained in Section 4.1, Microsoft may make and use as many copies of the Software as necessary to accommodate all MSN Users who desire to access or use the Software or Filtering Functionality.

4.4 Trademarks and Branding .

4.4.1 Subject to the terms and conditions of this Agreement, BI hereby grants to Microsoft, during the Term and the Wind-Down Period, if any, a non-exclusive, non-transferable, fully paid-up, irrevocable, personal, worldwide limited purpose right and license to use the BI Marks, in conjunction with the Microsoft Network, MSNIA, and other MSN Services and in connection with the marketing, promotion, offer for sale, sale, and distribution of MSN, MSNIA and other MSN Services incorporating the Software or Filtering Functionality.

4.4.2 Microsoft is not required to use the BI Marks on or in connection with the Software licensed hereunder or to exercise the rights and licenses granted to Microsoft pursuant to Section 4.4.1. Additionally, Microsoft reserves the right to use Microsoft's own proprietary branding in conjunction with the use, promotion, offer and distribution of MSN, MSNIA and all other MSN Services using the Software or Filtering Functionality. The Parties agree that the Software, at Microsoft's option, may contain or display Microsoft's copyrights, trade names, trademarks or service marks (as an indication of the respective authorship, source, sponsorship and/or affiliation of such copyrightable works, trade names, products and/or services).

4.4.3 Subject to the terms and conditions of this Agreement, BI shall have the right to enter into a separate agreement with Microsoft Corporation (" MS Corp."), on terms and conditions acceptable to MS Corps, to obtain the non-exclusive, non-transferable, royalty-free right during the Term, to use the MS Mark (a) on B1's web site (with a home page currently located at http://www.brightmail.com) in a pixel size, page position and placement approved in advance by MS Corp. in writing, and (b) in product presentations for the Software which are approved in advance by MS Corp. in writing. For the avoidance of doubt, the agreement shall grant BI the right to use the MS Mark only in materials that also include the logos of other licensees of BI (e.g., not on a stand-alone basis) and only with accompanying text .disclosing the limited nature of BI's relationship with Microsoft. The Parties


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acknowledge and agree that a breach by BI of any such agreement shall be deemed to be a material breach of this Agreement.

4.5 Reservation of Rights . All rights not explicitly granted by BI under Sections 4.1, 4.2, 4.3, 4.4.1, and 13.5 are expressly reserved by Bl; provided , however , to the extent that BI IP is incorporated in the Software or Filtering Functionality, BI grants to Microsoft the right to use such BI IP solely in accordance with and for the duration of this Agreement, and the Wind-Down Period, if any. All rights not explicitly granted by Microsoft or MS Corp. under Section 4.4.3 are expressly reserved by Microsoft or MS Corp., as the case may be.


4.6 No Obligation to Exercise . For the avoidance of any doubt, Microsoft is not required to exercise the rights and licenses granted in this Section 4 with respect to the Software or otherwise use the Software in accordance with this Agreement for the purposes of providing the Filtering Functionality to MSN Users.

5. FEES

5.1 Fees . Except as expressly set forth in this Agreement, Microsoft shall make fee payments in the amounts and in accordance with the schedule set forth in Exhibit D.


5.2 Additional Services . For any Additional Services requested in writing by Microsoft under Section 6.4, Microsoft shall pay any fees previously agreed to by Microsoft in writing within * of receipt of an undisputed invoice. 6. BI SUPPORT SERVICES

6.1 Routine Maintenance and Quality Fix Engineering Support . During the Term, and the Wind-Down Period, if any, BI shall be solely responsible for the maintenance and support of the Filtering Functionality and the Software including (i) fixing any Errors that are related to the Filtering Functionality, the Software or its interaction or interoperability with the MS Servers or any hardware or software designated by Microsoft; (ii) ensuring that the Software conforms in all material respects to the Specifications; (iii) providing Filtering Functionality and Software support for the identification and resolution of any Errors; (iv) providing technical assistance from the Brightmail Logistics Operations Center (" BLOC"); and (v) generally providing other quality control and engineering support. Without limitation to the foregoing, BI shall provide maintenance and support services in accordance with the Service Level Agreement and response times set forth in Exhibit C (the " Service Level Agreement" or " SLA").

6.2 First Line Customer Support . Microsoft shall provide initial customer support to MSN Users who are receiving the Filtering Functionality in conjunction with an MSN Service, in a manner determined in Microsoft's sole discretion; provided , however , Microsoft shall have the right to obtain the second line support from BI in accordance with Section 6.3 for purposes of responding to any inquiries or requests from MSN Users or otherwise providing such customer support.

6.3 Second Line Technical Support . BI shall provide second line support to Microsoft, in a time frame and manner specified by Microsoft, for the Software and the Filtering Functionality, which second line support shall include information, technical support and other assistance relating to the Software and the Filtering Functionality. Notwithstanding anything contained herein to the contrary, BI shall not have any contact or communication with any MSN Users without Microsoft's prior written consent.

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6.4 Additional Developmental Assistance . In addition to BI's other obligations under this Agreement, and upon Microsoft's request, BI shall provide additional development assistance to Microsoft, which development assistance shall include, in Microsoft's sole discretion, consulting and customization services to permit the use of the Software in connection with additional MSN Services offered by Microsoft (such additional development assistance shall be referred to herein as " Additional Services"), subject to the reasonable availability of personnel and resources. Upon Microsoft's request, such Additional Services shall be provided to Microsoft by BI via telephone, email, or during onsite visits to the premises of Microsoft on a temporary basis not to exceed two (2) weeks during each month of the Term. Upon Microsoft's request, and subject to the reasonable availability of BI's personnel, BI shall provide a reasonable number of BI employees to Microsoft for such Additional Services in accordance with this Section 6.4. BI shall provide such Additional Services to Microsoft *.

6.5 Onsite Requirements . In the event that BI employees or designees are located at the premises of Microsoft for the purpose of providing Installation Services, Additional Services, or fulfilling other support obligations hereunder, including those described in Sections 6.1, 6.3 or 6.4, or for any other reason, BI is not authorized to use, and agrees that it shall not use its location on such premises, or its access to Microsoft employees or facilities, to obtain information or materials from sources at Microsoft other than as expressly authorized by Microsoft. For example, although a BI employee or designee may be given security card access to select facilities at Microsoft, it is Microsoft's intent to grant access to only the office space allocated to BI and such other spaces as may be designated by Microsoft from time to time. It is not Microsoft's intent to grant BI employees or designees full access to all areas of the Microsoft premises accessible by security card or to other floors of such premises. BI agrees to direct its employees and designees not to access areas of the premises other than those specifically designated by Microsoft. BI's employees and designees shall abide by all of the rules, regulations, and security measures adopted by Microsoft while present at its premises, provided that in the event of any inconsistency between such rules, regulations and security measures and this Agreement, this Agreement shall prevail with respect to confidentiality and ownership of and rights in and to MS IP. 7. COMMUNICATION

7.1 Quarterly Steering Meetings . The Parties shall meet at the Microsoft premises located in Redmond, Washington, on a day to be mutually agreed upon by the Parties in the months of September, December, March, and June of each year during the Term to evaluate the relationship of the Parties (the " Quarterly Steering Meetings"). The Parties shall be represented by authorized personnel directly responsible for performance hereunder, and shall bear their own expenses with respect to such Quarterly Steering Meetings. The agenda for each Quarterly Steering Meeting shall include an evaluation of the quality of the Filtering Functionality and Software, and the need for technical updates and upgrades to the Software, including Enhancements, Rules and Rule Updates, service level guarantees, technical issues, and overall customer experience. 8. AFFILIATE OPTION

8.1 Option of Affiliates of Microsoft . For a period of one hundred and forty (140) days following the Effective Date (the " Exercise Period"), MS Corp. shall have the right to notify BI of its desire to enter into one or more agreements with BI to license software (including Rules and Rule Updates) and obtain services from BI relating to the monitoring, managing and filtering of Spam for use in conjunction with Hotmail, ITG or the Software Subscription Division of MS Corp. (collectively " E-Mail Services"), or any combination of such E-Mail Services, on terms and conditions (including financial terms and conditions) that are no less favorable to MS Corp. than the terms and conditions provided to Microsoft under this Agreement (the " Option"). For the avoidance of doubt, MS Corp. shall have the right to exercise the Option separately, at any time during the Exercise Period, for each of the E-Mail Services,


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and any failure by MS Corp. to exercise the Option with respect to one (1) or more of such E-Mail Services shall not be deemed to be a waiver of any right of MS Corp. or Microsoft under this Agreement. With respect to each instance that MS Corp. timely notifies BI of its desire to exercise the Option, upon obtaining such timely notification, BI shall immediately commence to negotiate, and shall continue to negotiate, in good faith with MS Corp. to determine the terms and conditions of a definitive agreement under which MS Corp. would license software (including Rules and Rule Updates) and obtain services from BI subject to this Section 8.1. Without limitation to the foregoing, MS Corp. shall have the right to license software and obtain services from BI for each of the E-Mail Services through the exercise of the Option for a maximum term of three (3) years. The aggregate amount owed by MS Corp. to Bl, with respect to each E-Mail Service, during each year of the term of the agreement applicable to such E-Mail Service, shall * multiplied by the * licensed or obtained by MS Corp. from BI for such E-Mail Service during such year.


8.2 WebTV Option . For a period of eighty (80) days following the Effective Date, WebTV shall have the right to notify BI of its desire to enter into an agreement with BI to license software (including Rules and Rule Updates) and obtain services from BI relating to the monitoring, managing and filtering of Spam on terms and conditions (including financial terms and conditions) that are no less favorable to WebTV than the terms and conditions provided to Microsoft under this Agreement (the " WebTV Option"). Upon obtaining timely notification from WebTV of its desire to exercise the WebTV Option, BI shall immediately commence to negotiate, and shall continue to negotiate, in good faith with WebTV to determine the terms and conditions of a definitive agreement under which WebTV would license software (including Rules and Rule Updates) and obtain services from BI subject to this Section 8.2. Without limitation to the foregoing, WebTV shall have the right to license software and obtain services from BI through the exercise of the WebTV Option for a maximum term of three (3) years, and the aggregate amount owed by WebTV to BI during each year of such term shall * multiplied by * licensed or obtained by WebTV from BI during such year *; provided , however , that for purposes of calculating such * fee only, WebTV shall be deemed to have, at a minimum: *

9. INTELLECTUAL PROPERTY

9.1 Proprietary Rights .

9.1.1 Software . Except as set forth in this Section 9, nothing in this Agreement, and no use of the Software by Microsoft pursuant to this Agreem ...