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                                                                   Exhibit 10.12

                         SOFTWARE LICENSING AGREEMENT
            SOURCE CODE LICENSE AND DERIVATIVE PRODUCT DISTRIBUTION
                              Agreement # S-1163
                                          ------

     THIS Agreement (the "Agreement") is made and entered into in San Jose,
California, and is effective as of June 8, 1999 ("Effective Date") between Lynx
Real-Time Systems, Inc., a California corporation with principal offices at 2239
Samaritan Drive, San Jose, CA 95124 ("Lynx"), and Rockwell Collins, Inc., a
Delaware corporation, with offices at 400 Collins Road, NE, Cedar Rapids, IA
52498 ("Licensee").

     IN CONSIDERATION OF THE MUTUAL PROMISES CONTAINED HEREIN, THE PARTIES AGREE
AS FOLLOWS:

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

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

     1.1  "Source Code" shall mean NFS Client and Server ("NFS"), and LynxOS
3.0.1 Development Operating System ("LynxOS"), which both include human-readable
code for version 3.0.1 and any later releases provided for Licensee by Lynx
under the Priority Software Support Agreement . LynxOS contains source code for
the PowerPC, and also includes test suites, electronic (FrameMaker) versions of
the LynxOS Documentation, and media.

     1.2  "Software Tools" shall mean Total View, TimeScan, and Insure++, in
object code only (not source code) and any later releases provided for Licensee
by Lynx under the Priority Software Support Agreement effective June 8, 1999.

     1.3  "ODE" means Open Development Environment, which includes LynxOS as
well as various other tools (but not including Software Tools). Certain tools
called utilities, which may be part of a public domain software collection, may
be included in the ODE as a convenience to Licensee at no charge. Such
utilities, if licensed by Licensee, shall be licensed under separate agreement.

     1.4  "LynxOS" means the binary code format of LynxOS 3.0.1 Development
Operating System (and any later releases provided for Licensee by Lynx under the
Priority Software Support Agreement effective June 8, 1999.

     1.5  "NFS" shall mean the binary code format of NFS Client and Server
version 3.0.1 and any later releases provided for Licensee by Lynx under the
Priority Software Support Agreement effective June 8, 1999.

     1.6  "Binary Distributables" means the binary code format (not the source
code format) of LynxOS and NFS, including any modifications made by Licensee.

     1.7  "Derivative Product" means a product developed and marketed by
Licensee which a) is based on the LynxOS, NFS or ODE; b) the Licensee adds
additional software which runs as part of LynxOS and NFS, and provides
additional or modified functionality; c) the end-user of the system cannot
directly access LynxOS or NFS and run general programs on LynxOS or NFS; d) the
system is marketed for a specialized application, provided by the modifications
added by Licensee, and not marketed or used as a general purpose computer or
workstation; and e) may or may not include functional applications layers.

     1.8  "Agreement" shall mean this SOFTWARE LICENSING AGREEMENT SOURCE CODE
LICENSE AND DERIVATIVE PRODUCT DISTRIBUTION, together with Exhibit A-SOURCE CODE
SOFTWARE LICENSE & DERIVATIVE PRODUCT DISTRIBUTION EXHIBIT, Exhibit B-PRODUCT
LIST & PRICING SCHEDULE, Exhibit C -END-USER SUBLICENSE RESTRICTIONS, Exhibit D-
LICENSED USERS and Exhibit E-PROPRIETARY NOTICE.

     1.9  "Sale or Selling. All references in this Agreement to the "sale" or
"selling" of products shall mean the granting of a license as defined in this
Agreement.

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

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     1.10 "Documentation" means all the manuals and other related user
documentation normally provided by Lynx for use with the Source Code, Software
Tools and/or ODE.

2.   GRANT OF LICENSE
     ----------------

     2.1  License. Subject to the terms and conditions of this Agreement, Lynx
          -------
hereby grants Licensee the rights as defined in Exhibit A, attached hereto.
Licensee and Lynx agree to the restrictions, obligations and other terms set
forth in Exhibit A.

3.   PAYMENT & COMPENSATION
     ----------------------

     3.1  Fees & Royalties. Licensee shall pay fees, if any, and royalties
          -----------------
according to the terms of Exhibits A & B. Upon execution of this Agreement, Lynx
will invoice Licensee for all applicable fees as defined in Exhibit B. In
addition, Lynx shall invoice Licensee for additional Source Code, Software Tools
or ODE ordered by Licensee and for any other amounts due to Lynx hereunder as
such amounts are incurred. Licensee agrees to pay all invoices, with the
exception of royalties, which are discussed in subsection 3.3 below, within
forty-five (45) days after Licensee receives all items included on such invoice.

     3.2  Taxes. All duties and taxes payable in the country of manufacture of
          ------
the Source Code, Software Tools or ODE due under the laws of that country shall
be borne by Lynx. Lynx is liable for and shall pay all taxes, impositions,
charges and exactions imposed on or measured by this Agreement except those
Licensee specifically agrees or is required by law to pay and which are
separately stated on Lynx's invoice. Prices shall not include any taxes,
impositions, charges and exactions for which Licensee has furnished an exemption
certificate.

     3.3  Reports. Licensee shall, within forty-five (45) days of the end of
          --------
each calendar quarter, deliver to Lynx a report detailing the number of copies
of Binary Distributables made and the number of Derivative Products distributed
by Licensee during the previous calendar quarter, and setting forth the
aggregate royalties due and owing to Lynx thereon. A payment for the amount of
aggregate royalties owed shall be sent by Licensee to Lynx within forty-five
(45) days of the end of each calendar quarter. All payments hereunder will be in
U.S. Dollars, without deductions of any kind. Royalty payments made by Licensee
under this Agreement will be non-refundable to Licensee, except as otherwise
stated in Section 11.1 herein.

     3.4  Audit Rights. Licensee agrees to make and to maintain until the
          ------------
expiration of five (5) years after the payment in question under this Agreement
is due, sufficient books, records and accounts regarding Licensee's copying for
internal use and distribution of Derivative Products in order to calculate and
confirm Licensee's royalty obligations hereunder. Lynx shall have the right not
more than once every twelve (12) months to examine such books, records and
accounts during Licensee's normal business hours to verify Licensee's reports on
the amount of payments made to Lynx under this Agreement, and Licensee's
compliance with the terms and conditions of this Agreement. If any such
examination discloses a shortfall in the royalties due to Lynx hereunder,
Licensee shall reimburse Lynx for the full amount of shortfall. Should an audit
discover any errors or omissions by Licensee amounting to more than five percent
(5%) shortfall of the amount due during the given calendar quarter, Licensee
shall reimburse Lynx for the reasonable costs of such audit. Any audit shall be
performed by a mutually acceptable accounting auditor. Such audit may also
include Lynx technical personnel, as approved by Licensee.

4.   PROPRIETARY RIGHTS
     -------------------

     4.1  Source Code, Software Tools and ODE. Licensee shall not be an owner of
          ------------------------------------
any copies of the Source Code, Software Tools or ODE, but, rather, is granted
particular rights pursuant to this Agreement. Licensee acknowledges and agrees
that, as between Licensee and Lynx, all right, title and interest in the Source
Code, Software Tools and ODE, and any part thereof, including, without
limitation, all rights to patent, copyright, trademark and trade secret rights
and all other intellectual property rights therein and thereto, and all copies
thereof, in whatever form, including any written documentation and all other
material describing such Source Code, Software Tools and ODE, shall at all times
remain solely with Lynx and its Licensor(s), except as otherwise stated in
Section 8.1 herein.

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     4.2  Licensee Modifications. Notwithstanding the foregoing, Licensee shall
          -----------------------
retain all right, title and interest in and to modifications to the Source Code,
Software Tools and ODE made by Licensee pursuant to the license granted herein
above, subject always to Lynx's ownership rights in the underlying Source Code,
Software Tools and ODE.

5.   CONFIDENTIALITY
     ---------------

     5.1  General. Lynx represents and  Licensee agrees that the Source Code,
          --------
Software Tools and ODE constitute the confidential and proprietary trade secrets
of Lynx or its licensors, and that Licensee's protection thereof is essential to
this Agreement and is a condition of Licensee's use and possession of the Source
Code, Software Tools and ODE. Licensee represents and Lynx agrees that the
Derivative Product and the design information related to the Derivative Product
are confidential and proprietary trade secrets of Licensee, subject always to
Lynx's or its licensors' ownership and proprietary trade secret rights in the
underlying Source Code, Software Tools and ODE, and that Lynx's protection
thereof, is essential to this Agreement. Licensee shall retain in strict
confidence any and all elements of the Source Code, Software Tools and ODE and
use the Source Code, Software Tools and ODE only as expressly licensed herein.
Licensee agrees that it will under no circumstances distribute or in any way
disseminate or disclose the Source Code, Software Tools and ODE to third
parties, except as expressly provided in this Agreement. Lynx shall retain in
strict confidence any and all elements of the Derivative Product and the design
information related to the Derivative Product.
In addition, both parties acknowledge that by reason of their relationship to
each other they will have access to certain information and materials concerning
the other's business, plans, customers, technology, and/or products that is
confidential and of substantial value to that party, which value would be
impaired if such information were disclosed to third parties. Each party agrees
that it will not use in any way for its own account or the account of any third
party, nor disclose to any third party, any such confidential information
revealed to it by either party, and will take every reasonable precaution to
protect the confidentiality of such information. Upon request by either party,
the other party will advise whether or not it considers any particular
information or materials to be confidential. In the event of termination of this
Agreement, there will be no use or disclosure by either party of any
confidential information. Neither party will at any time manufacture or have
manufactured any devices, components or assemblies or any other items tangible
or intangible, utilizing any of the other party's confidential information. The
parties shall be relieved of their obligation of confidentiality to the extent
that:
a)   such information was in the public domain at the time it was disclosed or
     has become in the public domain through no fault of the receiving party;
b)   such information is already in the possession of the receiving party
     without obligation of confidentiality prior to the receipt from the
     disclosing party;
c)   such information is independently developed by the receiving party without
     any breach of confidentiality;
d)   such information is rightfully received by the receiving party;
e)   such information is released for disclosure by one party with the other
     party's written consent; or
f)   is disclosed pursuant to the order or requirement of a court,
     administrative agency, or other governmental body, provided however, that
     the receiver shall provide prompt notice thereof to the discloser to enable
     the discloser to seek a protective order or otherwise prevent or restrict
     such disclosure.

     5.2  Notification. Each party agrees to notify the other promptly in the
          -------------
event of any breach of its security under conditions in which it would appear
that the Source Code, Software Tools and ODE, the Derivative Products or the
confidential information were prejudiced or exposed to loss. Each party shall,
upon request of the other, take all other reasonable steps necessary to recover
any compromised Source Code, Software Tools and ODE, Derivative Products or
confidential information disclosed to or placed in the possession of the other
party by virtue of this Agreement. The cost of taking such steps shall be borne
solely by party responsible for the breach.

     5.3  Remedies. Licensee acknowledges that any breach of any of its
          ---------
obligations to protect the Source Code as

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described under this Section 5, may cause or threaten irreparable harm to Lynx,
and accordingly, Licensee agrees that in such event, Lynx shall be entitled to
seek equitable relief to protect its interest therein, including but not limited
to preliminary and permanent injunctive relief, as well as money damages.

6.   WARRANTY & DISCLAIMER
     ---------------------

     6.1  LYNX REPRESENTS AND WARRANTS THAT LYNX OWNS ALL RIGHTS AND TITLE TO
THE SOURCE CODE, SOFTWARE TOOLS AND ODE OR OTHERWISE HAS SUFFICIENT RIGHTS TO
GRANT LICENSEE THE LICENSES GRANTED HEREIN. LYNX FURTHER WARRANTS THAT, FOR A
PERIOD OF NINETY (90) DAYS FROM THE EFFECTIVE DATE, THE MEDIA ON WHICH THE
SOURCE CODE, SOFTWARE TOOLS AND ODE IS FURNISHED UNDER NORMAL USE WILL BE FREE
FROM DEFECTS IN MATERIALS AND WORKMANSHIP. LYNX'S ENTIRE LIABILITY, AND
LICENSEE'S EXCLUSIVE REMEDY, UNDER THIS WARRANTY WILL BE, AT LYNX'S OPTION, TO
REPLACE THE MEDIA.

     6.2  LYNX WARRANTS THAT, AS OF THE EFFECTIVE DATE, ALL THE SOURCE CODE,
SOFTWARE TOOLS AND ODE WILL WORK WITH EACH OTHER AS DESCRIBED IN THE
DOCUMENTATION PROVIDED WITH THE SOURCE CODE, SOFTWARE TOOLS AND ODE, AND AS
STATED IN THE FOLLOWING:
LYNX REPRESENTS AND WARRANTS THAT THE ODE WILL WORK WITH EACH INDIVIDUAL
SOFTWARE TOOL (TOTAL VIEW, TIME SCAN AND INSURE ++). LYNX DOES NOT INTEND FOR
THE SOFTWARE TOOLS TO WORK TOGETHER AND LYNX, THEREFORE, DOES NOT WARRANT THAT
THEY WILL. EXCEPT FOR THE EXPRESS, LIMITED WARRANTIES SET FORTH IN THIS
AGREEMENT, THE SOURCE CODE, SOFTWARE TOOLS AND ODE ARE PROVIDED WITHOUT WARRANTY
OF ANY KIND, WHETHER EXPRESS, IMPLIED, STATUTORY OR OTHERWISE, AND LYNX HEREBY
DISCLAIMS ALL WARRANTIES OTHER THAN THOSE EXPRESS, LIMITED WARRANTIES SET FORTH
IN THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION, THE IMPLIED WARRANTIES OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. LYNX DOES NOT WARRANT THAT
USE OF THE SOURCE CODE, SOFTWARE TOOLS AND ODE WILL BE UNINTERRUPTED OR ERROR
FREE, WILL MEET LICENSEE'S REQUIREMENTS, OR THAT THEY WILL OPERATE WITH THE
COMBINATION OF HARDWARE AND SOFTWARE SELECTED BY LICENSEE, EXCEPT AS DESCRIBED
ABOVE.

     6.3  LYNX warrants that the Software Tools and ODE, when used in accordance
with all Lynx supplied documentation are designed to accurately process
date/time calculations (including, but not limited to, calculating, comparing
and sequencing) from, into and between the twentieth and twenty-first centuries,
between the years 1999 and 2000 and during a leap year and that the products and
services provided by Lynx will operate during each such time period without
error or detraction of functionality or performance relating to date data.

In the event that the Software Tools or ODE is not Year 2000 Ready, Lynx will
provide to Licensee an appropriate enhancement (at no extra cost) for the
affected Lynx product as described in the Priority Software Support Agreement
effective June 8, 1999 by and between the parties. Lynx's subsequent releases of
the affected Lynx product will also include the enhancement.

Lynx further represents and warrants that, if applicable:
a)   that the Software Tools and ODE will not abnormally end or provide invalid
     or incorrect results as a result of date data, specifically including date
     data, which represents or references different centuries or more than one
     century;
b)   that the Software Tools and ODE have been designed to ensure Year 2000
     compatibility, including, but not limited, to date data century
     recognition, calculations, which accommodate same century and multi-century
     formulas an date values, and date data interface values that reflect the
     century.
c)   that the Software Tools and ODE will manage and manipulate data involving
     dates, including single century

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     formulas, multi-century formulas and leap year, and will not cause an
     abnormally ending scenario within the application or generate incorrect
     values or invalid results involving such dates.

d)   that the Software Tools and ODE provide all date-related interface
     functionalities and data fields including the century indication.

7.   TERM AND TERMINATION
     --------------------

     7.1  Term. This Agreement shall become effective upon the Effective Date
          ----
and shall remain in effect for a term of [*] ([*]) years, whereupon this
Agreement shall terminate without notice unless the parties agree in writing to
extend the term of this Agreement prior to such expiration.

     7.2  Termination. This Agreement may be terminated by either party upon
          -----------
written notice if the other party (i) Breaches any term or condition of this
Agreement and fails to remedy the breach within sixty (60) days (or within such
other time as the parties may agree) after being given notice thereof; (ii)
becomes the subject of any voluntary or involuntary proceeding under the U.S.
Bankruptcy Code or state insolvency proceeding and such proceeding is not
terminated within sixty (60) days of its commencement, (iii) ceases to be
actively engaged in business. Additionally, Licensee shall have the right to
terminate this Agreement upon ninety (90) days written notice to Lynx.

     7.3  Effect of Termination. Should this Agreement expire or be terminated
          ---------------------
for any reason,

          (a)  the licenses granted to Licensee hereunder shall terminate
provided that Licensee may continue to distribute Binary Distributables as part
of those Derivative Products in production upon the expiration of this Agreement
(but not including new models, upgrades, line extensions, updates or any new
products of any kind) for so long as such Derivative Products are supported by
Licensee. Such right shall terminate with respect to each Derivative Product
upon Licensee's discontinuation or replacement of each such Derivative Product
in distribution upon expiration of this Agreement;

          (b)  end users sublicensed hereunder shall be permitted continued use
of the Derivative Product according to the terms of their sublicense agreements;

          (c)  all distribution agreements with Sub distributors shall terminate
concurrent with termination of this Agreement; and

          (d)  Licensee shall promptly return or destroy all copies of the
Source Code, Software Tools and ODE, including those in the possession of
Licensee's Sub distributors, provided that Licensee may retain a reasonable
number of copies of Source Code, Software Tools and ODE for use in supporting
Derivative Products pursuant to (a) above.

     7.4  Survival of Certain Terms. The provisions of Sections 3, 4, 5, 6, 7,
          -------------------------
9, 10, 11, and 12 will survive the termination of this Agreement for any reason.
In addition, termination of this Agreement shall not release Licensee from its
liability to pay to Lynx any royalties which shall have accrued to Lynx at the
time such termination becomes effective, or which accrue to Lynx after the
notice of termination is given. All other rights and obligations of the parties
will cease upon termination of this Agreement.

8.   TRADEMARK LICENSE
     -----------------

     8.1  Use. During the term of this Agreement, Licensee shall have the right
          ---
to indicate to the public that it utilizes the Binary Distributables in its
computer hardware, and to advertise such utilization under the trademarks,
marks, and trade names that Lynx may adopt from time to time ("Lynx's
Trademarks"). Licensee shall reproduce any of Lynx's Trademarks marked in or on
the Binary Distributables on each copy made by Licensee. Nothing herein shall
grant to Licensee any right, title or interest in Lynx's Trademarks, and
Licensee shall have no right to sublicense the rights to use Lynx's trademarks
to Sub distributors or another third party. At no time during or after the term
of this Agreement shall Licensee challenge or assist others to challenge Lynx's
Trademarks existing as of the Effective Date.

     8.2  Approval of Representations. All representations of Lynx's Trademarks
          ---------------------------
that Licensee intends to use shall first be submitted to

[*] = 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.

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Lynx for approval (which shall not be unreasonably withheld) of design, color,
and other details or shall be exact copies of those used by Lynx. Lynx agrees to
approve or disapprove of any representation of Lynx's Trademarks within fifteen
(15) business days of receipt of samples of such representation, provided
failure of Lynx to respond within such fifteen (15) business day period shall be
determined an approval. Licensee may not use any representation of Lynx's
Trademarks unless they have been so approved by Lynx and only as approved by
Lynx. If any of Lynx's Trademarks are to be used in conjunction with another
trademark on or in relation to the Licensee Products, then Lynx's mark shall be
presented equally legibly and equally prominently, but nevertheless separated
from the other so that each appears to be a mark in its own right, distinct from
the other mark.

9.   INDEMNIFICATION
     ---------------
Lynx hereby agrees to indemnify and hold harmless Licensee, its affiliates and
their respective successors and assigns, and its and their respective directors,
officers, agents and employees, from and against any and all direct damages and
reasonable attorneys' fees and costs and expenses incident thereto to the extent
such direct damages arise from (a) any defect in the design, workmanship or
material of any Source Code, Software Tools and ODE delivered by Lynx to
Licensee hereunder that was not caused by Licensee's modifications to the Source
Code, Software Tools and ODE, and/or (b) any negligence (whether active or
passive) or willful misconduct of Lynx, its contractors of any tier or its or
their directors, officers, agents, or employees up to $1 Million maximum, of
direct damages. In addition, Lynx shall indemnify and hold harmless Licensee,
its affiliates and their respective successors and assigns, and its and their
respective directors, officers, agents and employees, except for sole negligence
of Licensee, its directors, officers, agents and employees, from and against any
and all indirect, consequential, special and other damages (other than direct
damages), claims, liabilities, losses, causes of action and judgments brought by
any person, corporation, governmental entity or other entity not a party to this
Agreement, whether arising from injury or death to persons or loss or damage to
property or otherwise, up to the maximum value of all payments made under this
Agreement. This indemnity shall survive the termination or expiration of this
Agreement for a period of five (5) years.

10.  MAINTENANCE
     -----------

     Any obligation Lynx may have to provide support, updates or maintenance to
the Licensee shall be pursuant to a separate Support Agreement between the
parties. Licensee shall have the sole obligation to support all Derivative
Product(s) distributed by Licensee.

11.  INTELLECTUAL PROPERTY  INFRINGEMENT INDEMNITY
     ---------------------------------------------

     11.1  Indemnity. Lynx hereby indemnifies Licensee, its successors, assigns,
           ---------
agents, customers, and users of the articles against all loss, damage, or
liability, including costs and expenses, including attorneys' fees, which may be
incurred on account of any suit, claim, judgment, or demand involving
infringement or alleged infringement of any copyright, trademark, patent, trade
secret or any other intellectual property rights in the manufacture, use, or
disposition of any articles supplied hereunder in any form or media provided
that Licensee provides Lynx with (i) prompt written notice of such claim or
action, (ii) control and authority over the defense or settlement of such claim
or action, provided that Licensee may offer assistance in connection therewith
at Licensee's cost, and (iii) full information and reasonable assistance to
defend and/or settle any such claim or action. In addition to the remedies for
indemnification stated above, if a temporary or final injunction is entered, or
Lynx believes, in its sole discretion, is likely to be entered prohibiting
Licensee from exercising its right to use the Source Code, Software Tools and
ODE granted hereunder, Lynx, at its sole option and expense, may either (a)
procure for Licensee the right to use and distribute the Source Code, Software
Tools and ODE as provided herein, (b) replace the Source Code, Software Tools
and ODE with other non-infringing products; (c) suitably modify the Source Code,
Software Tools and ODE so that it is not infringing; or (d) accept return of the
Source Code, Software Tools and ODE and refund the amortized value of such
Source Code, Software Tools and ODE to Licensee. Lynx will use its commercially
reasonable efforts to resolve any such claims by executing subsections a, b and
c above and subsection d shall be the resolution of last resort. Notwithstanding
the foregoing, Lynx shall have no liability pursuant

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to this Section 11.1 for any cost or expense incurred by Licensee prior to
Lynx's assumption of control and authority of the investigation and defense of
such suit, claim or demand as set forth above.

     11.2    Limitations.  Notwithstanding the provisions of Section 11.1 above,
             -----------
Lynx assumes no liability for infringement claims arising from (i) combination
of the Source Code, Software Tools or ODE with other products not provided by
Lynx, or (ii) the modification of the Source Code, Software Tools or ODE unless
such modification was made by Lynx.

     11.3    Disclaimer. THE FOREGOING PROVISIONS OF THIS SECTION 11 STATES THE
             ----------
ENTIRE LIABILITY AND OBLIGATIONS OF LYNX AND THE EXCLUSIVE REMEDY OF LICENSEE,
WITH RESPECT TO ANY ALLEGED OR ACTUAL INFRINGEMENT BY THE SOURCE CODE, SOFTWARE
TOOL OR ODE OF ANY PATENT, COPYRIGHT, TRADE SECRET, TRADEMARK OR OTHER
INTELLECTUAL PROPERTY RIGHT.

12.  GENERAL PROVISIONS
     ------------------

     12.1    Independent Contractors.  The relationship of Lynx and Licensee
             -----------------------
established by this Agreement is that of independent contractors, and nothing
contained in this Agreement shall be construed  to constitute the parties as
partners, joint venturers, co-owners or otherwise as participants in a joint or
common undertaking.  All financial obligations associated with each party's
business are the sole responsibility of that party.  All sales and other
agreements between Licensee and its customers are Licensee's exclusive
responsibility and shall not affect Lynx's obligations under this Agreement.
Each party, pursuant to this subsection shall be solely responsible for, and
shall indemnify, defend, and hold the other harmless of any costs, liabilities
and expenses against all claims, damages, and lawsuits arising from the acts and
omissions of the other, its employees, servants, agents or any of them.

     12.2    Governing Law.  This Agreement shall be interpreted and governed by
             -------------
the laws of the State of California, without reference to conflict of laws
principles, but including the provisions of the Uniform Commercial Code of
California. This Agreement specifically excludes the provisions of the 1980
United Nations Convention on Contracts for the International Sale of Goods and
the U. N. Convention on the Limitation Period in the International Sale of
Goods, as amended by Protocol.

     12.3    Jurisdiction.  For any disputes arising out of this Agreement the
             ------------
parties consent to the personal and exclusive jurisdiction of, and venue in, the
state or federal courts within Los Angeles County, California.

     12.4    Modification.  No modification to this Agreement, nor any waiver of
             ------------
any rights, shall be effective unless assented to in writing signed by the
parties.

     12.5    Assignment. This Agreement and any rights and obligations provided
             ----------
hereunder are not assignable without the prior written consent of the other. Any
attempt at assignment without such consent shall be invalid and of no force and
effect. In the case of any permitted assignment or transfer of or under this
Agreement, this Agreement or the relevant provisions shall be binding upon, and
inure to the benefit of, the successors, executors, heirs, representatives,
administrators, and assigns of the parties hereto.

     12.6    Governmental Consent. Licensee represents and warrants that no
             --------------------
consent, approval or authorization of or designation, declaration or filing with
any governmental authority is required in connection with the valid execution of
this Agreement.

     12.7    Compliance with U.S. Export and Re-export Controls. The parties and
             --------------------------------------------------
their agents and employees shall not disclose, transfer, export, or re-export,
directly or indirectly, item or information provided to it by the other party
(or direct products thereof) provided under this Agreement to any destination,
end user, or end use prohibited under the U.S. Export Administration Regulations
or any other applicable export control laws, without the prior written approval
of the U.S. Department of Commerce or other relevant agency.  Lynx shall be
responsible for obtaining the required export licenses or other approvals from
the government of the country of the country of origin for items it is
responsible for delivering under this

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Agreement. This clause shall survive termination or lapse of the Agreement.

     12.8    U.S. Government Restricted Rights.  The Source Code, Software Tools
             ----------------------------------
and ODE are provided with RESTRICTED RIGHTS.  Use, duplication or disclosure of
the Software and accompanying documentation by the Government is subject to
restrictions as set forth in subparagraph (c)(1)(ii) of the Rights clause in
Technical Data and Computer Software clause at DFARS 252.227-7013 or in
subparagraphs (c)(1) and (2) of the Commercial Computer Software -- Restricted
Rights at 48 CFR 52.227-19, as applicable.  Contractor/ Manufacturer is Lynx
Real-Time Systems, Inc., 2239 Samaritan Drive, San Jose, California 95124.

     12.9    Severability.  If any provision of this Agreement is held to be
             ------------
invalid by a court of competent jurisdiction, then the remaining provisions will
nevertheless remain in full force and effect.  The parties agree to re-negotiate
in good faith any term held invalid and to be bound by the mutually agreed
substitute provision.

     12.10   No Waiver. Any and all failures, delays, or forbearances of either
             ---------
party in insisting upon or enforcing at any time or times any of the provisions
of this Agreement, or to exercise any rights or remedies under this Agreement,
shall not be construed as a waiver or relinquishment of any such provisions,
rights or remedies in those or any other instances; rather, the same shall be
and remain in full force and effect.  A waiver of a breach of any provision
hereof shall not constitute a waiver of any other breach.

     12.11   Notices. Any notices required to be given under this Agreement
             -------
shall be in writing and addressed to the respective party at the address shown
below or such other address as may be provided by each party from time-to-time.
Notices shall be effective when received and shall be sent by certified or
registered mail, return receipt requested, by electronic means when acknowledged
by the receiving party or by overnight courier.

Rockwell Collins, Inc.
400 Collins Road, NE,
Cedar Rapids, IA 52498
Attn: Subcontracts Manager

Lynx Real-Time Systems, Inc.
2239 Samaritan Drive
San Jose, CA 95124
Attn: Contract Administration Manager

     12.12   Dispute Resolution  The parties will attempt to settle any claim or
             ------------------
controversy arising out of this Agreement through good faith negotiations and
mutual cooperation. If those attempts fail, then the dispute will be first
submitted to a mutually acceptable neutral advisor for mediation. Neither party
may unreasonably withhold acceptance of such an advisor, and selection of the
advisor shall be made within forty-five (45) days after written notice by one
party demanding such resolution. The cost of such mediation shall be shared
equally by both parties. Any dispute, which cannot be resolved between the
parties within one hundred eighty (180) days of the date of the initial demand
by either party for such mediation, shall be finally determined by the courts.
The use of such a procedure shall not be construed to affect adversely the
rights of either party under the doctrines of laches, waiver or estoppel.
Nothing in this paragraph shall prevent either party from resorting to judicial
proceedings if: (A) good faith efforts to resolve a dispute under these
procedures have been unsuccessful; or (B) interim resort to a court is necessary
to prevent serious and irreparable injury to a party or to others. This section
shall not apply to claims or disputes relating to intellectual property rights.

     12.13   Rights and Remedies  The rights and remedies provided both parties
             -------------------
pursuant to this Agreement shall be cumulative and in addition to any other
rights and remedies provided by law or equity.  A waiver of a breach of any
provision hereof shall not constitute a waiver of any other breach.

     12.14   Compliance with Laws  Both parties warrant that it will comply with
             --------------------
all federal, state, and local laws, including, but not limited to, any statute,
rule, regulation, judgment, decree, order or permit applicable to their
performance under this Agreement

     12.15   Release of News Information and Advertising  Except as permitted
             -------------------------------------------
under this Agreement, neither party shall, without the prior written consent of
the other party: (a) make any news release, public announcement, denial or
confirmation of all or any part of the subject matter of this Agreement, or (b)
in any manner

                                       8
<PAGE>

advertise or publish the fact that the parties have entered into this Agreement.

     12.16   Gratuities  Seller warrants that neither it nor any of its
             ----------
employees, agents or representatives has offered or given any gratuities to
Buyer's employees, agents or representatives with a view toward securing this
Agreement or securing favorable treatment with respect thereto.

     12.17   Entire Agreement.  This Agreement, constitutes the entire and
             ----------------
exclusive Agreement between the parties hereto with respect to the subject
matter hereof and supersedes and cancels all previous registrations, agreements,
commitments and writings in respect of the subject matter hereof.

LYNX REAL-TIME SYSTEMS, INC.

By: /s/ Bhupi Singh
   ---------------------------

Print Name: Bhupi Singh
           -------------------

Title: V.P. Finance and CFO
      ------------------------

Date: 6/9/99
      ------------------------

ROCKWELL COLLINS, INC.

By: /s/ Cynthia A. Shaw
   ---------------------------

Print Name: Cynthia A. Shaw
           -------------------

Title: Subcontract Specialist
      ------------------------

Date: June 8, 1999
      ------------------------

                                       9
<PAGE>

                                   EXHIBIT A

        SOURCE CODE SOFTWARE LICENSE & DERIVATIVE PRODUCT DISTRIBUTION
                                    EXHIBIT
________________________________________________________________________________

This Exhibit A is attached to, made part of and governed by the SOFTWARE
LICENSING AGREEMENT SOURCE CODE LICENSE AND DERIVATIVE PRODUCT DISTRIBUTION
effective June 8, 1999 by and between Lynx Real-Time Systems, Inc., a California
corporation with principal offices at 2239 Samaritan Drive, San Jose, CA 95124
("Lynx"), and Rockwell Collins, Incorporated, a Delaware corporation, with
offices at 400 Collins Road, NE, Cedar Rapids, IA 52498 ("Licensee").

License. Subject to the terms and conditions of this Agreement, Lynx hereby
--------
grants to Licensee a nontransferable, world-wide and non-exclusive license to:
     1)  use the Source Code, Software Tools and ODE for internal development
purposes;

     2) modify and prepare Derivative Products from the Binary Distributables;

     3) produce copies of the Binary Distributables and to use and distribute
copies of the Binary Distributables in accordance with this Agreement.  Licensee
may create a Derivative Product for resale, internal use and/or distribution,
subject to the payment of royalties and the other terms and conditions hereof.

Licensee may:
  a. have up to the number of simultaneous users as the number of copies
     licensed for each product: the Source Code, Software Tools and ODE;
  b. make one (1) copy of the Software Tools and ODE in machine readable form
     and one (1) copy of the Source Code for backup purposes, provided that
     Licensee reproduces all proprietary notices on the copy; and
  c. physically transfer the Source Code, Software Tools and ODE from one
     computer to another, provided that the Source Code, Software Tools and ODE
     are used, simultaneously, by no more than the number of users licensed for
     each product and pursuant to the restrictions described in the Source Code
     License Restrictions section of Exhibit B.

Any purchase order providing for the purchase of Source Code, Software Tools or
ODE shall reference this Software License and Derivative Product Distribution
Agreement on its face.

Licensee is authorized to grant sublicenses to end-users for the use of
Derivative Products, provided that each sub-licensee enters into a written
agreement ("Sublicense Agreement") which contains provisions no more broad than
those set forth in Exhibit C hereto.

Licensee may grant to a third party ("Distributor") a right to make and/or
sublicense copies of the Derivative Products provided that each Distributor
enters into a written agreement ("Distributor Agreement") which includes terms
and conditions no more broad than those set forth in Exhibit C hereto.

Licensee shall use its best efforts to enforce the agreements with Distributors
and customers specified in this Sub-licensing Agreement.

License Fee.  Licensee agrees to pay the Source Code, Software Tools and ODE
-----------
license fees as defined in Exhibit B.  There is no initial license fee for re-
distribution of Derivative Products.

Royalties.  In consideration of the rights granted Licensee hereunder, for each
---------
copy of the Binary Distributables used, sold or distributed by Licensee or its
Distributors, Licensee shall pay Lynx a per copy royalty as set forth in Exhibit
B attached hereto. Royalties due on copies of a Derivative Product distributed
through Sub-distributors shall be due upon transfer of the Derivative Product by
Licensee to the Sub-distributor.

Third Party Contractors.  Licensee may appoint a third party contractor
------------------------
("Contractor") to assist Licensee in Licensee's modification of the Source Code,
Software Tools or ODE as authorized hereunder; provided that any such
Contractor's access to and use of the Source Code, Software Tools and ODE shall
only be permitted pursuant to a signed written agreement between Licensee and
such Contractor granting such Contractor rights no broader than those granted
Licensee in this Agreement and

                                       10
<PAGE>

including provisions incorporating the additional requirements set forth below:

(a)  Any claim, demand or right of action arising on behalf of a Contractor from
furnishing to it or use by it of Source Code, Software Tools and ODE shall be
solely against Licensee. This provision in no way restricts any rights Licensee
may have against Lynx pursuant to this Agreement, under law or in equity.

(b)  Contractor may not retain any copy of the Source Code, Software Tools and
ODE or any modification or derivative work thereof and, upon completion of the
project for which Contractor was permitted access to the Source Code, Software
Tools and ODE or termination of this Agreement, then (i) all copies of Source
Code, Software Tools and ODE furnished to such Contractor or made by such
Contractor and (ii) all copies of any modifications or derivative works made by
such Contractor based on such Source Code, Software Tools and ODE shall be
returned to Licensee or destroyed including any copies stored in any computer
memory or storage medium. A written document executed by an authorized
representative of Licensee shall be provided to Lynx certifying that the
Contractor has returned or destroyed all copies of the Source Code, Software
Tools and ODE in its possession or control.

(c)  Unless Contractor obtains a license for the Source Code, Software Tools and
ODE from Lynx, Contractor may not acquire any ownership interest in any
modification or derivative work prepared by such Contractor based upon or using
Source Code, Software Tools and ODE licensed to Licensee under this Agreement.

Modifications.  Modifications made by Licensee shall be the property of
--------------
Licensee; subject in each case to Lynx's ownership of the Source Code, Software
Tools and ODE provided; however, that any portion of the Source Code, Software
Tools and ODE included in the Derivative Products remains subject to the
provisions of this Agreement, and shall bear the proprietary notice set forth in
Exhibit E.

Reservation.  Lynx reserves all rights and licenses not expressly granted to
------------
Licensee.

ADDITIONAL OBLIGATIONS:
-----------------------

Delivery.  Within fifteen (15) days after Lynx receives the purchase order for
---------
the Source Code, Software Tools and ODE specified in Exhibit B, Lynx will
furnish to Licensee one (1) copy of such Source Code, Software Tools and ODE in
the media identified in Exhibit B.

                                       11
<PAGE>

                                   EXHIBIT B

                        PRODUCT LIST & PRICING SCHEDULE
                        -------------------------------

This Exhibit B is attached to, made part of and governed by the SOFTWARE
LICENSING AGREEMENT SOURCE CODE LICENSE AND DERIVATIVE PRODUCT DISTRIBUTION
effective June 8, 1999 by and between Lynx Real-Time Systems, Inc., a California
corporation with principal offices at 2239 Samaritan Drive, San Jose, CA 95124
("Lynx"), and Rockwell Collins, Incorporated, a Delaware corporation, with
offices at 400 Collins Road, NE, Cedar Rapids, IA 52498 ("Licensee").

     Source Code Pricing

     The source product includes only the source, documentation, source media,
     and support material. Cygnus and other Free Software Foundation source code
     can be provided at no charge in accordance with the GNU licensing
     agreement. Cygnus and other Free Software Foundation source code is not
     licensed to Licensee under this Agreement.

<TABLE>
<CAPTION>
     ------------------------------------------------------------------------------------------------------------
                                              Lynx Source Code Products
     ------------------------------------------------------------------------------------------------------------
              Product Number                         Software Package Description                  Single Copy
     ===========================================================================================================-
     <S>                                <C>                                                     <C>
      A-OSS-PPC-301                     LynxOS 3.0.1 Development Operating System Source Code           $[*]
                                        -----------------------------------------------------
                                        Includes the source for the PowerPC; also includes
                                        test suites, electronic (FrameMaker) versions of the
                                        LynxOS documentation, and media. PowerPC contains the
                                        following board support packages CT1, CT2, FP1, MB1,
                                        MC1, MP1, MP2.
     ------------------------------------------------------------------------------------------------------------
      A-NFF-PPC-301                     NFS Client and Server Source Code                               $[*]
                                        ---------------------------------
                                        Includes documentation, and media
     ------------------------------------------------------------------------------------------------------------
</TABLE>

     Note 1:   Cpu refers to x86, PPC, 68K, or USP
     Note 2:   All prices are F.O.B San Jose, California.
     Note 3:   Source for CBSP boards is not available
     Note 4:   For software products use IDACR 3 and for support products use
               IDACR 0.

     Source Code License Restrictions

     Each source code license comes with the following restrictions:

     .  Each source code license is limited to a specific project
     .  Each source code license is limited to a single copy and to a single CPU
     .  Source code licenses are tied to a specific LynOS product version
        release
     .  Source code licenses are not transferable to other projects within a
        customer's organization or to other organizations

[*]=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.

                                       12
<PAGE>

Production and Prototype Licensing
----------------------------------

Run-Time configuration
   Each run-time license comes with the following restrictions:
 .  Each run-time license is limited to a single copy for a specified hardware
   platform.

   Run-time Pricing for LynxOS is based on the kernel configuration. Additional
   RTOS components may incur an additional run-time license fee. The table below
   lists the royalty bearing components and the LynxOS Kernel configurations on
   which they are supported. The next to the last alpha-numeric set of digits in
   the model number is the target processor reference, i.e., either ppc for
   Power PC (601, 603, 603e, 604, 604r, 750, 760, PowerQUICC MPC860 and MPC821)
   or x86 for the Intel x86 processor family.

Production Pricing
The following table describes the Licensee's corporate-wide LynxOS Run-Time
pricing.  Note that the following conditions apply:

1.  The "per unit" pricing presented is based on a single blanket purchase
    order.
2.  The volume commitment is over a ten (10) year period, commencing upon the
    initial production shipment of any product using a LynxOS.
3.  Individual projects or groups of projects that can aggregate volumes
    together and make a commitment on one blanket purchase order may take
    advantage of the higher volume pricing for those projects.
4.  The pricing schedule below for Run-Time licenses will be firm for ten
    (10) years from the date of the initial Licensee production shipment of any
    LynxOS Run-Time kernel.

<TABLE>
<CAPTION>
Rockwell Collins, Inc. LynxOS Run-Time
------------------------------------------------------------------------------------------------------------
                      Volume                                 To [*]                     [*] to [*]
-------------------------------------------------------------------------------------------------------------
<S>                   <C>                              <C>                          <C>
Model Number                    Description             Per Unit Royalty             Per Unit Royalty
-------------------------------------------------------------------------------------------------------------
L-K5-PPC-301               POSIX Plus w/NFS C/S               $[*]                         $[*]
-------------------------------------------------------------------------------------------------------------
</TABLE>

Note:  POSIX Plus w/NFS C/S is sufficient for a production system requiring a
read/write file system, but not a shell nor the shell utilities, the NFS C/S
allows LynxOS the ability to perform either client or server accesses to remote
systems via a network.

[*]
---
Lynx Real-Time Systems will supply a quantity of [*] licenses to Rockwell
Collins at the agreed upon [*].  These licenses can be [*] to [*] licenses [*]
for revenue and will [*] towards the Volume.

LynxOS Tools
------------

The LynxOS Open Development Environment (ODE) includes LynxOS, X-Windows and
Motif, a cross development kit (one of SunOS 4.1.x/5.x, AIX 4.1, or Windows95/NT
4.0) PosixWorks Desk, documentation and media.

Licensee can license additional LynxOS Open Development Environment Licenses, in
single license quantities, based on pricing established below.

Note that the Open Development Environment is limited to a single processor
type.

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

                                       13
<PAGE>

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
  Licenses         Product Number                    Product Description                   Product Price
-----------------------------------------------------------------------------------------------------------
<S>            <C>                      <C>                                             <C>
      1            A-ODEW-FP14-301           LynxOS Open Development Environment               $[*]
-----------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------
</TABLE>

     TotalView

The TotalView Debugger supports the x86, PowerPC, MBX860, 68K, and microSPARC
microprocessors.  This product is available in native and cross development
versions.  Both SunOS 4.1.x/5.x and AIX 4.1 are supported for cross development.
This product includes TotalView, documentation and media. Licensee can license
additional TotalView Licenses, in single license quantities, based on pricing
established below.

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
  Licenses        Product Number                 Product Description                   Product Price
----------------------------------------------------------------------------------------------------------
<S>            <C>                    <C>                                         <C>
      1           A-TVN-PPC4-301                      TotalView                             $[*]
----------------------------------------------------------------------------------------------------------
</TABLE>

     TimeScan

TimeScan is an event-based tracing and performance analysis tool.  It supports
multiprocess multithreaded and multiprocessor applications with event logging at
a microsecond or better resolution. This product includes TimeScan,
documentation and media.  Licensee can license TimeScan, in single license
quantities, based on pricing established below.

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
  Licenses         Product Number                 Product Description                  Product Price
----------------------------------------------------------------------------------------------------------
<S>            <C>                      <C>                                       <C>
      1        A-TSN-PPC4-301                           TimeScan                            $[*]
----------------------------------------------------------------------------------------------------------
</TABLE>

     Insure++

LynxInsure++ supports the x86 and PowerPC microprocessors.  This product is
available in a native development version only.  This product includes
LynxInsure++ software, documentation, and media.  Licensee can license
LynxInsure++, in single license quantities, based on pricing established below.

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
  Licenses        Product Number                 Product Description                   Product Price
----------------------------------------------------------------------------------------------------------
<S>            <C>                    <C>                                         <C>
      1        A-LIP-PPCD-301                        LynxInsure++                           $[*]
----------------------------------------------------------------------------------------------------------
</TABLE>

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

                                       14
<PAGE>

                                   EXHIBIT C

                        END-USER SUBLICENSE RESTRICTIONS
                        --------------------------------

This Exhibit C is attached to, made part of and governed by the SOFTWARE
LICENSING AGREEMENT SOURCE CODE LICENSE AND DERIVATIVE PRODUCT DISTRIBUTION
effective June 8, 1999 by and between Lynx Real-Time Systems, Inc., a California
corporation with principal offices at 2239 Samaritan Drive, San Jose, CA 95124
("Lynx"), and Rockwell Collins, Incorporated, a Delaware corporation, with
offices at 400 Collins Road, NE, Cedar Rapids, IA 52498 ("Licensee").

          All end user sublicenses for the Binary Distributables and Derivative
Products shall include provisions that are no more broad than the following:

          (1) only a worldwide, non-exclusive right to use the Binary
Distributables on or with a single designated Derivative Product is granted to
such end user;

          (2) Licensee or its supplier retains all title to the Binary
Distributables and Derivative Product, and all copies thereof, and no title to
the Binary Distributables or Derivative Products, or any intellectual property
in the Binary Distributables or Derivative Products, is transferred to such end
user;

          (3) the end user may not copy the Binary Distributables or Derivative
Products, except for one (1) copy for backup or archival purposes only and only
as necessary to use the Binary Distributables on the designated Derivative
Product, and that all such copies including documentation shall contain all
copyright and other proprietary notices or legend of Licensee and its supplier;
and that no additional copies of the documentation may be made by the end user;

          (4) the end user agrees not to reverse assemble, decompile, or
otherwise attempt to derive source code from the Binary Distributables or
Derivative Products;

          (5) the end user agrees to comply with all export and re-export
restrictions and regulations of the Department of Commerce or other United
States agency or authority, and not to transfer, or authorize the transfer, of
the Binary Distributables or Derivative Products to a prohibited country or
otherwise in violation of any such restrictions or regulations;

          (6) the end user agrees not to separate any Java(R) technology from
the Binary Distributables or Derivative Products or use the Java(R) technology
except in connection with the Binary Distributables or Derivative Products.

          (7) the end user may transfer the Binary Distributables to a
transferee in connection with the transfer of the designated Derivative Product
in which it is incorporated, and such transfer is subject to the restrictions
contained herein;

          (8) Although the Binary Distributables and Derivative Products are or
may be copyrighted, they are or may be unpublished and contain proprietary and
confidential information of Licensee and its supplier and is considered by
Licensee and its supplier to contain trade secrets, and the end user shall agree
to hold the Binary Distributables and Derivative Products in confidence.
Without limiting the foregoing, the end user shall agree to protect the Binary
Distributables and Derivative Products at least to the same extent that the end
user protects its own similar confidential information and to take all
reasonable precautions to safeguard the confidentiality of such Binary
Distributables and Derivative Products.  The end user shall further agree not to
use the Binary Distributables or Derivative Products to develop competitive
systems or derivative products, or for any other purpose except the operation of
the designated Derivative Product; and

          (9)  NEITHER THE LICENSEE NOR THE LICENSEE'S SUPPLIER SHALL BE LIABLE
TO THE END USER FOR ANY GENERAL, SPECIAL, DIRECT, INDIRECT, CONSEQUENTIAL,
INCIDENTAL, OR OTHER DAMAGES ARISING OUT OF THE SUBLICENSE OF THE BINARY
DISTRIBUTABLES OR DERIVATIVE PRODUCTS.

                                       15
<PAGE>

                                   EXHIBIT D

                           SOURCE CODE LICENSED USERS
                           --------------------------

This Exhibit D is attached to, made part of and governed by the SOFTWARE
LICENSING AGREEMENT SOURCE CODE LICENSE AND DERIVATIVE PRODUCT DISTRIBUTION
effective June 8, 1999 by and between Lynx Real-Time Systems, Inc., a California
corporation with principal offices at 2239 Samaritan Drive, San Jose, CA 95124
("Lynx"), and Rockwell Collins, Incorporated, a Delaware corporation, with
offices at 400 Collins Road, NE, Cedar Rapids, IA 52498 ("Licensee").

LICENSED USERS:           1
                        ---------

SOFTWARE DESCRIPTION:   LynxOS 3.0.1 Development Operating System Source Code
                        ------------------------------------------------------

SERIAL NUMBERS:               77797
                        ------------------------------------

LICENSED USERS:            1
                        ---------

SOFTWARE DESCRIPTION:   NFS Client and Server Source Code
                        ----------------------------------

SERIAL NUMBERS:              77798
                        ------------------------------------

                                       16
<PAGE>

                                   EXHIBIT E

                               PROPRIETARY NOTICE
                               ------------------

This Exhibit E is attached to, made party of and governed by the SOFTWARE
LICENSING AGREEMENT SOURCE CODE LICENSE AND DERIVATIVE PRODUCT DISTRIBUTION
effective June 8, 1999 by and between Lynx Real-Time Systems, Inc., a California
corporation with principal offices at 2239 Samaritan Drive, San Jose, CA 95124
("Lynx"), and Rockwell Collins, Incorporated, a Delaware corporation, with
offices at 400 Collins Road, NE, Cedar Rapids, IA 52498 ("Licensee").

                                  CONFIDENTIAL

Licensee agrees to place the statutory copyright notice on the Derivative
Products and Documentation at all locations specified below.  This notice
consists of the word "Copyright", or the abbreviation "Copr.", followed by the
symbol C, in a circle, the year of the first public distribution of the
Derivative Products; and the copyright proprietor's name.  This notice of the
Derivative Products as of the date of this Agreement is:

                              Copyright (c) 1991
                              Lynx Real-Time Systems, Inc.
                              All Rights Reserved

The notice shall be applied to all tangible copies of the Derivative Products,
including all versions in human or machine readable form.  It shall also be
included on labels applied to disks, magnetic tape, etc., embodying the
Derivative Products and their container.  In addition, the operating system in
each computer will display the above notice whenever the display is first
actuated.

The notice shall also be included on or near the first page of the
Documentation.

Licensee may add Licensee's name in the copyright notice on any copy of the
Derivative Product or Documentation, which has been modified by Licensee.

                                       17<PAGE>

                                                                   Exhibit 10.13

                        Software Development Agreement
                            Agreement No. D1279_____
                          HP Agreement No. VER-00-018
                                           ----------

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
           ----------------
           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
           --------------
           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
           ----------
           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.

                                       1
<PAGE>

     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;

                                       2
<PAGE>

             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.

                                       3
<PAGE>

     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 of the Development costs upon [*].

7.   WARRANTIES AND INDEMNIFICATION

     7.1  General Warranty. Each party warrants that it has full power and
          -----------------
          authority to enter into this Agreement, perform its obligations
          hereunder, and grant the rights to the other party granted herein.

     7.2  Media Warranty. Developer warrants that the physical media of the
          ---------------
          disks supplied to HP shall contain true and correct copies of the
          Software developed under this Agreement and shall be free from defects
          in workmanship and materials. HP's remedy for breach of the foregoing
          warranty shall be replacement of the defective disk.

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

                                       4
<PAGE>

     7.3  No Infringement. To the extent that the Deliverables are not governed
          ----------------
          by the provisions of the GPL, Developer warrants that the Deliverables
          delivered to HP hereunder do not violate or infringe any patent,
          copyright, trade secret or other proprietary right of any third party,
          and that Developer is not aware of any facts upon which such a claim
          for infringement could be based. Developer makes no warranties as to
          the Developer's Code and/or "work based on the Program" as that term
          is used in the GPL; such code and/or work is governed by Section 11 of
          the GPL.

     7.4  Infringement Defense. Developer will defend any claim, suit, or
          ---------------------
          proceeding brought against HP or its customers insofar as it is based
          on a claim arising out of Developer's breach of Section 7.3, above;
          provided that Developer is notified promptly in writing of such claim,
          and given full authority, information and assistance (at Developer's
          expense) to handle the expense to handle the defense or settlement of
          any suit or proceeding. Developer agrees to pay all damages and costs
          awarded therein against HP and its customers.

     7.5  In case the Deliverables, or any part thereof not governed by the GPL,
          is held to constitute an infringement and its use is enjoined,
          Developer shall, at its own expense and at its option, either procure
          for HP and its customers the right to continue to use or, if
          applicable, replace such Deliverable or Documentation with
          noninfringing program or documentation of equivalent function and
          performance, or modify them so they become noninfringing without
          detracting from function or performance.

     7.6  Notwithstanding the forgoing, Developer shall have no responsibility
          for claims arising from (i) modifications of the Software or
          Documentation made by HP if such claim would not have arisen but for
          such modifications, or (ii) combination or use of the Software or
          Documentation with HP products if such claim would not have arisen but
          for such combination or use.

     7.7  Warranty. EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT, NEITHER
          --------
          PARTY MAKES ANY OTHER WARRANTIES OR CONDITIONS, EITHER EXPRESS OR
          IMPLIED, REGARDING THE SOFTWARE AND RELATED DOCUMENTATION, INCLUDING
          WITHOUT LIMITATION AS TO THEIR MERCHANTABILITY OR FITNESS FOR ANY
          PARTICULAR PURPOSE.

     7.8  Program Warranty. Developer warrants that, as of the time of
          ----------------
          acceptance, the Software will operate in accordance with and
          substantially conform to the Documentation and the test criteria
          stated in Exhibit A, section 7.0, manuals and any relevant data
          sheet(s) provided by Developer.

8.   TERM AND TERMINATION

     8.1  Term. Unless terminated earlier under this Section 8, this Agreement
          -----
          will terminate upon delivery and acceptance of the final Milestone and
          fulfillment of all obligations by Developer hereunder.

     8.2  Termination for Breach. HP may terminate this Agreement by written
          -----------------------
          notice to Developer if Developer breaches any material provision of
          this Agreement and such Breach is not cured within thirty (30) days
          after receipt of written notice thereof from HP.

     8.3  Effect of Termination.
          ----------------------

          a.  In the event of termination by HP due to the material breach of
              Developer prior to delivery and acceptance of the final Software
              to HP, Developer shall immediately deliver to HP all HP property
              and information in Developer's possession relating to the

                                       5
<PAGE>

              Software. In the event of such termination, HP shall be relieved
              of all obligations to make payment for any Deliverables that were
              not accepted by HP. This provision shall not limit or waive any
              other remedies that HP may have under law or equity.

          b.  Survival. Notwithstanding any termination of this Agreement, the
              following provisions shall survive for the period specified
              therein, if any; Sections 4.1 and 4.2 (Ownership and Licenses);
              Section 7 (Warranties and Indemnification); Section 9 (Limited
              Liability); Section 10 (Confidential Information); and Section 11
              (Other Provisions).

9.   LIMITED LIABIITY

     9.1  IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER FOR
          CONSEQUENTIAL OR SPECIAL DAMAGES ARISING FROM ANY CLAIM OR ACTION
          HEREUNDER, BASED ON CONTRACT, TORT OR OTHER LEGAL THEORY. IN NO EVENT
          SHALL EITHER PARTY BE LIABLE TO THE OTHER FOR DAMAGES FOR ANY CAUSE
          WHATSOEVER IN AN AMOUNT IN EXCESS OF THE AMOUNT PAYABLE TO DEVELOPER
          UNDER THIS AGREEMENT, EXCEPT FOR DAMAGES RELATING TO BREACHES
          CONCERNING SECTIONS 7.3 AND 10.

10.  CONFIDENTIAL INFORMATION

     10.1  Confidential Information. During the term of this Agreement, either
           ------------------------
           party may receive or have access to technical information, as well as
           information about product plans and strategies, promotions, customers
           and related non-technical business information which the disclosing
           party considers to be confidential ("Confidential Information"). In
           the event such information is disclosed, the parties shall first
           agree to disclose and receive such information in confidence. If then
           disclosed, the information shall (i) be marked as confidential at the
           time of disclosure, or (ii) if disclosed orally but stated to be
           confidential, be designated as confidential in writing by the
           disclosing party summarizing the Confidential Information disclosed
           and sent to the receiving party within a reasonable period of time
           after such oral disclosure. Notwithstanding any provision to the
           contrary, all source code provided by Developer or HP to the other,
           and all business information with respect to any unpublished
           Developer or HP products, are deemed Confidential Information for the
           purposes of this Section 10.

     10.2  Nondisclosure. Confidential Information may be used by the receiving
           --------------
           party only with respect to performance of its obligations under this
           Agreement, and only by those employees of the receiving party who
           have a need to know such information for the purposes related to this
           Agreement. The receiving party shall protect the Confidential
           Information of the disclosing party by using the same degree of care
           (but no less than a reasonable degree of care) to prevent the
           unauthorized use, dissemination or publication of such Confidential
           Information, as the receiving party uses to protect its own
           confidential information of like nature. The receiving party's
           obligation under this Section 10 shall be for a period of ten (10)
           years after the date of disclosure.

     10.3  The foregoing obligation shall not apply to any information which is
           (i) already known by the receiving party prior to disclosure; (ii)
           publicly available through no fault of the receiving party; (iii)
           rightfully received from a third party without a duty of
           confidentially (iv) disclosed by the disclosing party to a third
           party without a duty of confidentially on such third party; (v)
           independently developed by the receiving party prior to or
           independent of the disclosure;

                                       6
<PAGE>
           (vi) disclosed under operation of law; or (vii) disclosed by the
           receiving party with the disclosing party's prior written approval.

     10.4  Access to Information Systems. Access, if any, to HP's systems is
           ------------------------------
           granted solely to perform the Work under this Agreement, and is
           limited to those specific HP systems time periods and personnel as
           are separately agreed to by HP and Developer from time to time. HP
           may require Developer's employees, Subcontractors or agents to sign
           individual agreements prior to access to HP's systems. Use of any
           other HP systems is expressly prohibited. This prohibition applies
           even when an HP system that Developer is authorized to access serves
           as a gateway to other systems outside the Developer's scope of
           authorization. Developer agrees to access systems only from specific
           locations approved for access by HP. For access outside of HP
           premises, HP will designate the specific network connections to be
           used to access systems.

     10.5  Security of Information. Without limiting the foregoing, Developer
           ------------------------
           agrees to maintain security measures to comply with the above
           obligations and to ensure that access granted will not impair the
           integrity and availability of HP systems. Upon reasonable notice, HP
           may audit Developer to verify Developer's compliance with these
           obligations.

11.  OTHER PROVISIONS

     11.1  Publicity. Each party agrees not to publish or disclose the existence
           ---------
           or terms of this Agreement to any third party without the prior
           written consent of the other except as required by law. In
           particular, no press releases shall be made without the mutual
           written consent of each party, nor may Developer use HP marks or HP's
           name as a customer reference. Notwithstanding the previous sentence,
           the parties agree to issue a joint press release concerning this
           program at the earliest convenient date after Agreement execution.

     11.2  Independent Contractors. The relationship of the parties under this
           -----------------------
           Agreement is that of independent contractors, and neither party is an
           employee, agent, partner or joint venturer of the other.

     11.3  Dispute Resolution. In the event of disagreement with respect to any
           -------------------
           aspect of this Agreement, the parties agree to discuss in good-faith
           to reach an amicable resolution, and to escalate such resolution
           process to the appropriate members of their respective management
           organization who have the power and authority to achieve a successful
           resolution.

     11.4  Notice.  Unless otherwise stated, all notices required under this
           -------
           Agreement shall be in writing and shall be considered given upon
           personal delivery of the written notice or within forty eight (48)
           hours after deposit in the U.S. Mail, certified or registered, and
           addressed to the appropriate relationship manager as set forth in
           Exhibit D.

     11.5  No Assignment. Neither party may assign or transfer any of the rights
           --------------
           or responsibilities set forth herein, or change its control of
           ownership, without the express written consent of the other party
           (which consent shall not be unreasonably withheld or delayed) and any
           purported attempt to do so shall be deemed void. Notwithstanding the
           foregoing, such written consent is not required in the event of a
           merger or sale of all or substantially all of the assets of either
           company, in which case this Agreement shall be assigned to the
           surviving entity.

     11.6  Governing Law. This Agreement is made under and shall be construed in
           --------------
           accordance with the law of the State of California, without reference
           to conflict of laws principles.

                                       7
<PAGE>

     11.7  Severability. The terms of this Agreement shall be applicable
           -------------
           severally to each Software program, if more than one, and any dispute
           affecting either party's rights or obligations as to one or more
           Software program(s) shall not affect the rights granted hereunder as
           to any other Software program. If any provision of this Agreement is
           held to be invalid or unenforceable by a court of competent
           jurisdiction, then the remaining provisions will nevertheless remain
           in full force and effect, and the parties will negotiate in good-
           faith a substitute, valid and enforceable provision which most nearly
           effects the parties' intent in entering into this Agreement.

     11.8  Headings. The captions of and headings used in this Agreement are for
           ---------
           convenience of reference only and are not to be considered in any way
           as material terms or be used to interpret the provisions of this
           Agreement.

     11.9  No Use Obligation. Except as expressly provided herein, HP may in its
           ------------------
           sole discretion decide whether or not to use or distribute the
           Software as it deems appropriate. Nothing in this Agreement shall be
           construed or interpreted as placing a "best efforts" standard upon HP
           with respect to the use and distribution of the Software.

     11.10 Non-Restrictive Relationship. Nothing in this Agreement shall be
           -----------------------------
           construed to preclude HP from independently developing, acquiring
           from other third parties, distributing or marketing software programs
           or other products which may perform the same or similar functions as
           the Software provided under this Agreement.

11.11  Modifications.  This Agreement may only be modified only by a writing
       --------------
       signed by an authorized representative of each party.

11.12  Waiver.  Neither party's failure to exercise any of its rights hereunder
       -------
       shall constitute or be deemed a waiver or forfeiture of any such rights.

11.13  Force Majeure.  Nonperformance of either party will be excused to the
       --------------
       extent that performance is rendered impossible by strike, fire, flood,
       governmental acts or orders or restrictions, or other similar reason
       where failure to perform is beyond the control and not caused by the
       negligence of the non-performing party, provided that the non-performing
       party gives prompt notice of such conditions to the other party and makes
       all reasonable efforts to perform.

11.14  Export Control.  Each party agrees to comply with all applicable United
       ---------------
       States laws and regulations which may govern the export of Software
       abroad, including the Export Administration Act of 1979, as amended, any
       successor legislation, and the Export Administration Regulations issued
       by the Department of Commerce.

11.15  Entire Agreement.   This document represents the entire agreement between
       -----------------
       the parties as to the matter set forth herein and supersedes all prior
       discussions or understandings between them.

11.16  Exhibits.  Each Exhibit referred to in this Agreement is incorporated in
       ---------
       full in this Agreement whatever reference to it is made:

       EXHIBIT A    SOFTWARE DESCRIPTION AND STATEMENT OF WORK

       EXHIBIT B    ROYALTIES AND PRICING

       EXHIBIT C    SUPPORT AND MAINTENANCE

       EXHIBIT D    RELATIONSHIP MANAGERS

11.17  Counterparts.  This Agreement may be executed in counterparts, each of
       -------------
       which shall be deemed an original.

                                       8
<PAGE>

Agreed:

HEWLETT-PACKARD COMPANY                DEVELOPER

By: /s/ Mario Gonzalez                 By: /s/ Bhupi Singh
   ---------------------------------      ----------------------------------

Printed Name: Mario Gonzalez           Printed Name: Bhupi Singh
             -----------------------                ------------------------

Title: Controller                      Title: V.P. Finance & CFO
      ------------------------------         -------------------------------

Jennifer/LynuxWorks/hp.software.dev.051700

                                       9
<PAGE>

                                   Exhibit A
                           SOFTWARE DESCRIPTION AND
                         DEVELOPMENT STATEMENT OF WORK

Software:
--------

BlueCat Linux Operating System and Cross Development Environment for the [*]
microprocessor.

This includes [*] cross (VisualLynuxWorks) and. Cogent Computer Systems [*]
Motherboard with [*] CPU Module, which will be the reference platform.

Specifications:
--------------

Statement of Work

1.0 Introduction
This Exhibit provides the Statement of Work for the Development Program.

2.0 Project Description

The Development Program is to create a version of the BlueCat Linux Operating
System operating on the [*] microprocessor. The development environment shall be
based on [*] and Microsoft [*] or later. This development environment is called,
at the time of this contract execution, "VisualLynx."

The Development Program also includes the development of Flash File System (FFS)
and Advanced Power Management (APM) for BlueCat Linux. The FFS and APM
requirements are described below.

3.0 Requirements

 .    3.1 BlueCat Linux for [*]

     BlueCat Linux 2.0 shall be ported to run on the [*] microprocessor. The
     "reference platform" for this port shall be the [*] Computer Systems [*]
     Motherboard with the [*] CPU Module. BlueCat Linux shall run in [*] mode.
     BlueCat Linux shall support programs written in both C and C++.

 .    3.2 VisualLynx for [*]

     VisualLynx shall be ported to support BlueCat Linux and the [*]. The host
     platform will be a Microsoft Windows 98/NT based personal computer running
     Microsoft [*] or later. The VisualLynx GNU debugger (gdb) shall use the
     [*]. VisualLynx shall provide support for developing C or C++ applications.
     BlueCat Linux kernel or driver development shall be supported using the
     underlying GNU tools.

[*] = 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.

                                       10
<PAGE>

 .    3.3 FFS

     Flash File System (FFS) shall be provided to run with the BlueCat Linux
     operating system on the [*]. The FFS shall support the [*] device, [*], or
     its equivalent. Developer and HP shall develop a mutually agreeable
     requirements specification for FFS. The following FFS requirements have
     been tentatively identified.

        -  [*] and [*] support
        -  [*]
        -  [*] mapping
        -  [*] recovery

 .    3.4 APM

     Advanced Power Management (APM) shall be provided to run with the BlueCat
     Linux operating system on the [*]. Developer and HP shall develop a
     mutually agreeable requirements specification for APM. The following APM
     requirements have been tentatively identified:

        -  [*]
        -  [*]
        -  [*] and [*] Monitoring
        -  [*] Mode
        -  [*] control

4.0  Non-Requirements

The following have been deemed non-requirements as they have not been considered
in the scope of this project:

 .    4.1 VisualLynx for BlueCat Linux kernel

     VisualLynx provides an application development environment for
     LynuxWorks/'/ LynxOS and BlueCat Linux operating systems. This application
     development environment is highly integrated with Microsoft Visual C++.
     VisualLynx does not currently provide the ability to develop and debug
     operating system kernel or driver software. However, bundled with
     VisualLynx are the standard GNU development tools. These GNU development
     tools have been modified to run on Microsoft Windows in a "command window"
     (or sometimes called a "DOS window") and may be used to perform operating
     system kernel and driver development.

5.0  Deliverables

Following are the deliverables for the project. Tstart is defined to be start of
the development efforts described above and shall be no later than the execution
date of this agreement.

 .    BlueCat Linux Development Environment for Windows (including
     VisualLynx)

     Alpha Release: Tstart + [*] months

     Final Release: Tstart + [*] months

 .    BlueCat Linux Flash File System

     Alpha Release: TBD (based on finalizing requirements between Developer and
     HP)

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

                                       11
<PAGE>

     Final Release: TBD

 .    BlueCat Linux Advanced Power Management

     Alpha Release: TBD (based on finalizing requirements between Developer and
     HP)

     Final Release: TBD

6.0  Software Quality Assurance

LynuxWorks shall develop all software associated with this Statement of Work to
established LynuxWorks' ISO 9001 practices and procedures.

7.0  Acceptance Test Criteria

Valid acceptance of the BlueCat [*] port shall be the ability for Developer to
demonstrate and HP to reproduce the following:

 .    Successful installation of VisualLynx for BlueCat Linux onto an HP owned
     [*] cross development workstation with a VeriFone supplied copy of Visual
     C++ Version 6.0.

 .    Successful build on this Windows workstation of the acceptance tests
     targeting the [*] reference platform.

 .    Successful execution and debugging of the acceptance test demo applications
     running on the reference platform, debugging with GDB from the Windows
     NT/98 workstation across both serial and Ethernet connections.

 .    Successful execution of the FFS acceptance test demonstrating
     integrity during power fail.

 .    Successful execution of the APM acceptance test.

HP must provide all acceptance tests, which must be acceptable to Developer, to
Developer no later than 2 months prior to scheduled deliveries against which the
tests will be executed.

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

                                       12
<PAGE>

                                   Exhibit B
                             ROYALTIES AND PRICING

1.1  BlueCat Lynux Run-Time License Royalty Price
     --------------------------------------------

The BlueCat OS run-time royalty fee is $[*].

1.2  BlueCat Lynux Operating System Source Code
     -------------------------------------------

Source code for the BlueCat Lynux operating system kernel and Linux utilities is
included with the standard Cross Development Environment at no additional
charge.

1.3  VisualLynx Run-Time Pricing
     ---------------------------

The run-time royalties license price for VisualLynx will be: $[*] per seat for a
single unit quantity.

1.4  LynuxWorks Product Training
     ---------------------------

Standard Factory Training is offered in the form of the following BlueCat
workshop:

 .  Building Embedded Systems with BlueCat Linux
 .  On-Site Training (customized for your application requirement)

These workshops are offered on a repeating scheduled basis in San Jose. All
workshops are 5 days in length and are $[*] per student.

On-Site training can be obtained for any of the four training programs to be
presented at a customer site, plus options, as follows:

 .  Standard Workshops conducted at customer location
 .  Customer provides the hardware to be used for the training class
 .  Workshops are typically [*] to [*] days in length

On-site training at the customer site is $[*] plus travel and expenses for a
class of up to [*] students. Additional students beyond the original [*] may be
added at a cost of $[*] per student with a maximum of 5 additional students.

1.5  HP Board Support Package Validation
     -----------------------------------

In addition to providing a standard reference platform for the [*] processor,
Developer's Professional Services Organization offers a standard Board Support
Package validation service available for a mutually agreed upon fee per hardware
platform. The final price for this service is based on the complexity and custom
nature of the HP's hardware platform, so this is discussed and agreed upon in
advance between Developer and HP.

1.6  Support Pricing
     ---------------

Lynx will provide Priority Support pursuant to the terms contained in that
separate agreement at the price of $[*] per year per developer.

[*] = 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.

                                       13
<PAGE>

                                   Exhibit C
                            MAINTENANCE AND SUPPORT

Prior to the alpha release of the Deliverables, Developer shall provide support
to the BlueCat product, pursuant to the Priority Support Agreement, contained in
a separate Agreement.  After the release of the alpha release by Developerof the
Deliverables (currently expected to be BlueCat, FlashFile and Advanced Power
Management), Developer's engineering staff will provide support until the time
of final release for Deliverables, pursuant to the terms of the Priority Support
Agreement, contained under a separate agreement.  Points of contact will be
established under those agreements.

After the final release of the Deliverables, Developer will provide support for
the Deliverables by the Customer Support organization, pursuant to the Priority
Support Agreement.

                                       14
<PAGE>

                                   EXHIBIT D
                             RELATIONSHIP MANAGERS

The relationship manager for Developer is:  Rick Iorillo
                                            ---------------------------
                              PHONE:        408-626-2616
                                     ----------------------------------
                              E-MAIL:       riorillo@lynx.com
                                     ----------------------------------

The relationship manager for HP is:
                                      Lance Nakamura
                                      ----------------------------------
                              PHONE:  805-625-3207
                                      ----------------------------------
                              E-MAIL: lance_nakamura@hp.com
                                     ----------------------------------

                                       15

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