Software Development Agreement, Dated May 25, 2000

Exhibit 10.13


Software Development Agreement
Agreement No. D1279_____
HP Agreement No. VER-00-018
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THIS SOFTWARE DEVELOPMENT AGREEMENT (this "Agreement") is made as of May 25, 2000, by and between VeriFone, Inc, a division of HEWLETT-PACKARD COMPANY, a Delaware corporation ("HP"), and LYNUXWORKS, INC., a California corporation ("Developer").


1. DEFINITIONS


1.1 "Developer Code" shall mean the BlueCat Linux Operating System and
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Cross Development Environment software source code existing as of the
date of this Agreement which is incorporated into the source code of
the Software. The "BlueCat Lynx Operating System and Cross
Development Environment contains non-GPL code, as developed by
LynuxWorks. This non-GPL code will be available under this Agreement
in binary form only. The license terms for the non-GPL code
(including VisualLynx) will be stated in section 4 herein.


1.2 "Development Program" shall mean the activities undertaken by the
---------------------
parties hereunder for the development of the Software and
Documentation satisfying the Specifications pursuant to this
Agreement.


1.3 "Development Work" shall mean the Software, Documentation and all
------------------
other results and items arising out of the Development Program,
including without limitation, all Deliverables, programming
materials, source code and binary code for the GPL portions of the
code, binaries for the non-GPL portions of the code, inventions,
designs, notes, records, memoranda, documentation and other
materials, as well as all Enhancements, derivatives and modifications
thereof, and all intellectual property rights thereto.


1.4 "Deliverables" shall mean the Software, Documentation and other
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materials to be delivered by Developer to HP with respect to each
Milestone.


1.5 "Documentation" shall mean the reference, implementation and user
---------------
manuals which describe in reasonable detail the operation of the
Software that is normally provided by Developer as part of its
deliveries to its customers.


1.6 "Enhancements" shall mean error corrections, bug fixes, modifications
--------------
and updates with respect to the Software.


1.7 "HP Property" shall mean all property, including, designs, software,
-------------
documentation, models, tools, devices and other materials, owned or
licensed to HP, which may be furnished to Developer by HP under this
Agreement.


1.8 "Milestone" shall mean each development or delivery milestone of the
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Development Program as set forth in the "Milestone Schedule" attached
hereto as Exhibit B. "Milestone Payment" means a payment obligation
related to the achievement and acceptance of a particular Milestone.


1.9 "Software" shall mean the computer software program(s) described in
---------
Exhibit A to be developed by Developer pursuant to the Development
Program, together-with all Enhancements made thereunder.


1.10 "Source Code" shall mean the readable forms together with make and
------------
build files.


CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED POTIONS.


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1.11 "Specifications" shall mean the specifications set forth in Exhibit A
---------------- ---------
for the Software to be developed hereunder.


2. DEVELOPMENT EFFORT


2.1 Development. Commencing upon the execution of this Agreement,
------------ Developer agrees to use its commercially reasonable efforts to perform its obligations under the Development Program, to achieve each Milestone and to deliver Deliverables, which satisfy the test criteria specified in Exhibit A, section 7.0.


2.2 Subcontractors. Developer may subcontract the performance of the
-------------- Development Program to third parties, provided that each such subcontractor shall have agreed in writing to be bound by terms and conditions at least as stringent and restrictive as the terms and conditions of this Agreement and the license agreement covering the non-GPL code, including in particular Sections 4, 7 and 10.


2.3 Program Management and Changes. Each party designated the person(s)
------------------------------- set forth in Exhibit D as the primary contact of each party with respect to this Agreement, which person(s) may be redesignated by a party by notice to the other. In the event of a necessary or desired change in any material aspect of the Development Program, the parties shall mutually agree to any such change in writing prior to its implementation. A proposed change shall be initiated by the proposing party in a written notice to the other party. The receiving party shall review such proposal in a timely manner. The parties agree to discuss in good-faith the effect on each party of such proposed change, including any effect on the binary and/or cost of the Development Program.


3. DELIVERY AND ACCEPTANCE


3.1 Delivery. Upon completion of each Milestone for which Developer is
--------- responsible, Developer shall promptly notify HP and deliver to HP the corresponding Deliverables. Prior to the delivery of any Deliverable, Developer will have performed its internal testing to assure that such Deliverable conforms to the Specifications. Deliverables shall be in source code and binary code for the GPL portions of the Software and in binary code forms for the non- GPL Deliverable portions. Deliverables consisting of Documentation shall be in both human-readable and electronic formats.


3.2 Acceptance:
-----------


a. Upon Developer's delivery to HP of Deliverables with respect to a
milestone, HP will evaluate whether such Deliverables conform to
the applicable Specifications pursuant to the acceptance test
criteria and acceptance procedure detailed in 3.2. HP will give
Developer written notice of acceptance or rejection of Deliverable
within 15 business days after receipt of the Deliverable (the
"Acceptance Period"). If a statement of rejection is given:


Developer agrees to make commercially reasonable efforts to
correct all nonconformities to Specifications as stated by HP
and redeliver the corrected Deliverables for acceptance within
fifteen (15) business days or as agreed to between the parties
after receipt of such notice of rejection.


b. A Milestone shall be deemed completed with Deliverables with
respect to that Milestone accepted by HP, only when HP provides a
written acceptance notice to Developer;


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provided, however, if HP fails to provide such an acceptance notice
or a statement of rejection to Developer within Acceptance Period,
such Deliverables will be deemed accepted by HP.


c. In the event that Developer fails to deliver to HP acceptable
Deliverables for any Milestone within sixty (60) days after the
original Milestone date therefor, or after three (3) attempts to
correct stated nonconformities to Specifications, HP may in its
sole option, terminate this Agreement pursuant to section 8, Term
and Termination.


3.3 License. Once all Deliverables have been accepted by HP, Developer
-------
agrees to commercially license the Software arising out of such
Development Work within a commercially reasonable time period after
the Development Work is complete. Developer understands that the
payments made by HP hereunder are to expedite Developer's development
of the Software so that HP can purchase the commercial Software
product resulting from such Development when such Development is
complete.


4. OWNERSHIP AND LICENSES


4.1 Ownership and License:
----------------------


a. Portions of the Developer Code are open source and may be
distributed under the terms of the GNU General Public License
(GPL), which terms are located at
http://www.gnu.org/copyleft/gpl.html or other open source license
------------------------------------
modules and which are incorporated herein by reference. Except as
may otherwise be permitted, the Software, Documentation,
Enhancements and other Development Work shall also be governed by
the terms of the GPL. To the extent that the Software,
Documentation, Enhancements and other Development Work or any part
thereof falls outside the scope of Section 2 of the GPL, HP shall
own Confidential Information that HP owned prior to the Agreement
and for which it provided under this Agreement to Developer and
Developer shall own the Software and any modifications to the
Software, Documentation, Enhancements and other Development Work.
Except for any Confidential Information of HP, Developer shall
have the right to use, sell, sublicense and distribute the
Software, Documentation, Enhancements and any other Development
Work to third parties. In any event the non-GPL code will be
delivered in binary form to HP as a Deliverable as otherwise
required by this Agreement. To the extent not covered by the grant
of license in the GPL or other open source licenses, Developer
hereby grants to HP and its subsidiaries and affiliates a non-
exclusive, worldwide, perpetual, irrevocable right and license,
including the right to sublicense, to use, reproduce, modify and
distribute the Software, Documentation, Enhancements and other
Development Work to any third parties, subject to the royalty
provisions in Exhibit B stated herein.


4.2 Developer Code. Notwithstanding any provision to the contrary,
--------------
Developer shall own and retain all right, title and interest it may
have in the Developer Code incorporated within the Software existing
as of the effective date of this of this Agreement. With respect to
such Developer Code incorporated within the Software, Developer hereby
grants to HP a non-exclusive, world-wide, perpetual right and license,
subject to applicable royalty provisions, in Exhibit B including the
right to sublicense, to use, reproduce, modify, display and distribute
the Developer Code, in binary code only, solely as part of the
Software unless such Developer Code is governed by the GPL or other
open source provisions. In such case, such provisions shall apply.


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4.3 HP Property. HP hereby grants to Developer a non-exclusive, royalty-
-----------
free, non-transferable internal license to use the HP Property and
intellectual property embodied therein, for the sole purpose of
performing Developer's obligation under this Agreement. No HP Property
may be provided to any third party without the prior written approval
by HP, unless otherwise required by the GPL or other open source
license. All HP Property shall returned immediately upon HP's request.


5. MAINTENANCE AND SUPPORT


5.1 Maintenance and Support for Software. Developer agrees to provide to
------------------------------------
HP the maintenance and support services as set forth in Exhibit C for
the duration of this Agreement. Maintenance and support thereafter
shall be governed by a separate and independent agreement. Except as
otherwise agreed in writing between HP and Developer, HP will be
responsible for all maintenance and support of the Software with
respect to any end-users.


5.2 Product Evolution. The parties anticipate that HP may from time to
-----------------
time request additional functionalities to be made to the Software.
Upon request by HP, Developer agrees to make such adaptations, or
develop such enhancements on terms and conditions to be mutually
agreed upon in writing, which may provide for additional payments by
HP to Developer. The fee for any such adaptations or enhancements
shall be at the Developer's then current rates.


5.3 Additional Developer Services. Upon request by HP, Developer agrees to
-----------------------------
negotiate in good faith with HP with respect to providing additional
maintenance, support or other service with respect to the Software for
HP and/or its customers.


6. COST AND FEES


6.1 Development Costs. In consideration of the development activities to
-----------------
undertaken by Developer hereunder, HP will pay Developer an aggregate
amount of [*] Dollars ($[*]), payable in installments in accordance
with the Milestones Schedule.


6.2 Payment Process. Unless otherwise agreed in writing, Milestone
---------------
payments will be made within thirty (30) days after acceptance by HP
of the Deliverables associated with such Milestones. The payment
milestones are as follows:


[*] ([*]%) percent of the Development costs upon [*]
[*] ([*]%) percent ...