DEVELOPMENT AND SERVICES AGREEMENT

 

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                                                                   EXHIBIT 10.18

 

                                                            VITRIA CONTRACT 8511

 

                       DEVELOPMENT AND SERVICES AGREEMENT

 

         This Development and Services Agreement is entered into between Vitria

Technology, Inc., a Delaware corporation, ("Vitria") and CHILIN, LLC, a

California limited liability company, ("ChiLin") and shall become effective on

the Effective Date.

 

         WHEREAS, Vitria desires that ChiLin develop certain Deliverables that

shall be defined in separate Statements of Work to be mutually agreed upon in

writing by the parties and subject to the terms and conditions of this

Agreement;

 

         WHEREAS, ChiLin desires to develop such Deliverables for Vitria under

the terms and conditions of this Agreement.

 

         WHEREAS, Vitria desires to retain ChiLin for its experience and

abilities in connection with creating, revising, updating or troubleshooting

relating to the Deliverables, and has offered to engage ChiLin to render such

services (hereinafter the "Services") to Vitria, which shall be specifically

described in Statements of Work as mutually agreed by the parties and as

attached hereto; and

 

         NOW THEREFORE, in consideration of the mutual covenants, terms and

conditions hereinafter expressed, the parties hereby agree as follows:

 

1.       DEFINITIONS

 

1.1      "Affiliate" means any corporate entity which, directly or indirectly,

through one or more intermediaries, controls or is controlled by, or is under

common control with, another corporate entity.

 

1.2      "Change Request" means a document detailing additional features,

enhancements or other modifications as set forth in Section 2.2.

 

1.3      "Confidential Information means any business, marketing or technical

information disclosed by Vitria or ChiLin to the other in relation to this

Agreement, and identified in writing as being confidential, proprietary or trade

secret in nature to, the disclosing party. If disclosed orally, such information

must be identified at the time of disclosure as confidential, proprietary, or

trade secret in nature and thereafter summarized in writing, marked as

confidential, with the summary delivered to the receiving party within 30 days

after disclosure. Notwithstanding the foregoing, all Deliverables shall be the

Confidential Information of Vitria regardless of the marking requirements.

 

1.4      "Deliverables" means those goods and Services developed or performed by

ChiLin and provided to Vitria pursuant to a Statement of Work.

 

1.5      "Dependencies" means are those conditions, goods or services necessary

or precedent for the delivery of the Deliverables as set forth in the Statement

of Work.

 

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                                                            VITRIA CONTRACT 8511

 

1.6      "Derivatives" means any translation, abridgement, revision,

transformation, adaptation, improvement, or new material derived from any ChiLin

technology, tools, and components existing in trade secret material, including

new material which may be protected by copyright, patent and/or trade secret

that are contained, integrated and/or embedded in the Deliverables.

 

1.7      "Development Center" means the location(s) in Greater China where the

Services are to be performed.

 

1.8      "ChiLin Fee" means those fees set forth in the Statement of Work.

 

1.9      "Documentation" means the user manuals and other related materials,

including without limitation any training materials, installation documentation

and documentation for the Software, in whatever medium regarding the proper

installation and use of the Deliverables described therein, and all updates, new

versions and any other modifications made to such materials.

 

1.10     "Effective Date" means the last date this Agreement is signed by both

parties.

 

1.11     "Export Laws" means all laws, administrative regulations, and executive

orders of any applicable jurisdiction relating to the control of imports and

exports of commodities and technical data, including, without limitation, the

Export Administration Regulations of the U.S. Department of Commerce, the

International Traffic in Arms Regulations of the U.S. Department of State, and

the Enhanced Proliferation Control Initiative.

 

1.12     "Object Code" means the machine-readable computer code that (i) enables

the computer to execute a program, (ii) is derived from the Source Code to the

product by a process generally referred to as compiling and (iii) may be stored

in a variety of magnetic media or other formats.

 

1.13     "Software" means Object Code and Source Code of the Deliverables as set

forth in the Statement of Work which include without limitation, any and all

enhancements, bug fixes, updates, new versions, ports, localized versions and

other modifications made for such products that are provided to Vitria pursuant

to the terms of this Agreement.

 

1.14     "Source Code" means the underlying computer program which (i) comprises

a product, (ii) is readable by human beings when displayed on a monitor or

printed on paper, regardless of the media on which the product is stored, and

(iii) that must be translated by a process generally known as compiling into

Object Code before the product can be executed by a computer.

 

1.15     "Statement of Work" means a document substantially in the form attached

as Exhibit A and signed by authorized representatives of both parties under

which ChiLin agrees to perform Services for Vitria.

 

1.16     "User Acceptance Tests ("UATs") means tests run by Vitria to determine

that the Deliverables have met the requirements in the Statement of Work,

including but not limited to running manual spot tests and the product sample.

 

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                                                            VITRIA CONTRACT 8511

 

2.       SCOPE OF WORK

 

2.1      ChiLin agrees to use commercially reasonable efforts to develop for

         Vitria the Deliverables, and provide to Vitria the Services, in

         accordance with the requirements and specifications set forth in the

         executed Statements of Work referencing this Agreement. The terms of

         each respective Statement of Work are intended to establish the

         applicable requirements, specifications, schedules, outputs, and other

         services associated with the Deliverables and the Services. The parties

         also intend to discuss certain additional work efforts in the future

         and will mutually agree in writing on any such additional Statements of

         Work. The terms and conditions of this Agreement will govern additional

         Statements of Work. Although the parties agree to consider additional

         work efforts, there is no assurance that additional Statements of Work

         will be authorized or agreed upon.

 

2.2      Requested Changes.

 

         2.2.1    If Vitria desires a variation to any Statement of Work, it

                  will supply a Change Request to ChiLin. A Change Request must

                  specify in sufficient detail the change to be considered. If

                  Vitria supplies a Change Request, at ChiLin's cost, ChiLin

                  shall conduct an analysis of the impact of the request on the

                  price, schedule, Deliverables and/or Services of the relevant

                  Statement of Work and submit a written summary to Vitria for

                  approval. ChiLin reserves the right, for a significant work

                  effort associated in an impact analysis for a change request,

                  to charge Vitria on a time and materials basis, using the time

                  and materials services rates specified in the Statement of

                  Work to which the Change Request applies, or as otherwise

                  mutually agreed by Vitria and ChiLin. Any impact analysis work

                  to be charged to Vitria shall require prior approval from

                  Vitria; such approval shall not be unreasonably withheld. The

                  authority to authorize any impact analysis work must come, in

                  writing, from Vitria's VP of Customer Services and Engineering

                  Operations (or other designated executive officer), otherwise,

                  no such charges will be honored.

 

         2.2.2    Once the impact analysis of a Change Request has been

                  completed, it shall be submitted in writing to Vitria

                  management for approval. Change Requests shall only be acted

                  upon once they have been agreed and duly authorized in writing

                  by both ChiLin and Vitria. Neither party will have any

                  obligation to execute a Change Request.

 

2.3      The parties will discuss progress made on the Deliverables and issues

         that may arise with respect to the Services during the status meetings

         as required under a Statement of Work. Either party will notify the

         other promptly upon learning of any event that may impact the

         Deliverables or the Services.

 

3.       DEVELOPMENT, DELIVERY AND SERVICES

 

3.1      ChiLin will use commercially reasonable efforts to develop and deliver

         the Deliverables, and provide the Services, to Vitria in accordance

         with the applicable schedules set forth in the relevant Statement of

         Work; ChiLin acknowledges and agrees that time is of the essence in

         performance of it obligations hereunder provided, however, that ChiLin

         shall not be responsible for delays in the:

 

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                                                            VITRIA CONTRACT 8511

 

         3.1.1    development or delivery of the Deliverables attributable to

                  time incurred as a result of defective Dependencies (as

                  defined in the applicable Statements of Work) to be delivered

                  by Vitria or a third party not in the control of ChiLin or

                  delays in the delivery of conforming Dependencies by Vitria or

                  a third party not in the control of ChiLin, or

 

         3.1.2    development or delivery of the Deliverables or provision of

                  the Services attributable to circumstances beyond ChiLin's

                  reasonable control, including, without limitation, delays in

                  the delivery of materials by Vitria or a third party not in

                  the control of ChiLin. If any such delays occur, the delivery

                  schedule of the Deliverables and/or the Services, but not the

                  associated fees, shall be adjusted by a period equal to the

                  period of such delay. For purposes of this Section 3.1.2,

                  circumstances beyond ChiLin's control include, without

                  limitation, events such as earthquakes, wars, severe power

                  outages affecting the region where ChiLin is located, but does

                  not include failure of ChiLin's equipment, labor unrest,

                  illness or other similar circumstances.

 

3.2      ChiLin shall designate in Statements of Work from time to time which of

         its employees or consultants are to provide the Services thereunder.

         ChiLin shall be entitled to change the persons designated to provide

         the Services in its reasonable discretion as a result of, (a)

         termination of such person's employment or engagement with ChiLin for

         any reason, (b) such person's illness or death, or (c) such person's

         failure to perform the Services in a manner satisfactory to ChiLin. If

         Vitria is dissatisfied with the performance of any of ChiLin's

         consultants or employees performing Services under this Agreement,

         ChiLin shall, within seven (7) calendar days of Vitria's written notice

         to ChiLin, replace such consultant or employee with a trained and

         skilled individual suitable to Vitria.

 

3.3      ChiLin may make and retain in its possession a reasonable number of

         copies of the Deliverables. Such copies shall remain the property of

         Vitria, except as provided in Section 10, and shall be used by ChiLin

         only for the purpose of enabling ChiLin to satisfy ChiLin 's

         obligations under this Agreement.

 

4.       PROGRESS REPORTS

 

4.1      As required under a Statement of Work, ChiLin agrees to provide Vitria

         with written progress reports showing the status of the Deliverables

         being developed hereunder, and to participate in other status review

         meetings with Vitria, at such times agreed upon by the parties.

         Participation in such meetings may occur via teleconferencing. Such

         review meetings will be for the purpose of:

 

         4.1.1    reviewing the progress of the development of the Deliverables

                  and the Services provided by ChiLin; and

 

         4.1.2    formulating, if necessary, details of development activity in

                  the following weeks or details of the Services to be provided

                  in the future; and coordinating UAT, installation and training

                  schedules.

 

4.2      Additional meetings will be held as reasonably requested by either

         party.

 

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                                                            VITRIA CONTRACT 8511

 

5.       MAINTENANCE, INSTALLATION, TRAINING AND TECHNICAL SUPPORT

 

5.1      The maintenance, installation, training, and/or other technical

         support, if any, which ChiLin will perform in connection with the

         Deliverables (which include Software and Documentation) are as set

         forth in the Statements of Work.

 

5.2      At ChiLin's written request, Vitria shall provide two FTE resources,

         for up to 12 months from the Effective Date, to work with ChiLin at the

         Development Center on product training, engineering process, product

         enhancements, product specifications, and related product engineering

         tasks. The costs associated with such employees during their work with

         ChiLin, including salary, travel, and expenses, shall be borne by

         ChiLin.

 

6.       PAYMENT

 

6.1      Vitria shall pay to ChiLin the ChiLin Fee and other fees specified in,

         and in accordance with, the payment schedule set forth in the relevant

         Statements of Work. The ChiLin Fee and such other fees shall be full

         payment for development of the Deliverables, provision of the Services,

         and all other agreed upon activities, Deliverables and Services

         rendered under this Agreement, unless otherwise set forth herein or in

         a Statement of Work.

 

6.2      Unless otherwise set forth in a Statement of Work, Vitria shall be

         responsible for all travel expenses pre-approved by Vitria in writing

         incurred by ChiLin during the performance of services pursuant to a

         Statement of Work.

 

6.3      Vitria shall be responsible for the payment of all taxes, duties and

         licenses, including taxes paid or payable by ChiLin or which ChiLin is

         required to collect, in connection with the performance of this

         Agreement, the delivery of the Deliverables, the provision of the

         Services, or arising from the use, operation or possession of the

         Deliverables or any part thereof, excluding any taxes based on ChiLin's

         income and any income, payroll or other withholding taxes. If either

         party is exempt from any taxes, the exempt party shall provide the

         other party with the necessary documentation required by the taxing

         authority to sustain such an exemption.

 

6.4      Payment of all invoices shall be made by Vitria net 30 days following

         the date Vitria's receipt of an undisputed invoice. Vitria shall pay

         all undisputed portions of such invoice net 30 days following receipt.

 

6.5      All fees shall be deemed overdue if, unless disputed, they remain

         unpaid thirty (30) days after they become payable. All overdue amounts

         shall bear interest at the rate of one and one-half percent (1 - 1/2%)

         per month or the maximum legal rate, whichever is lower. Vitria shall

         reimburse ChiLin for all reasonable costs incurred (including without

         limitation reasonable attorneys' fees) in collecting past due amounts.

 

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                                                            VITRIA CONTRACT 8511

 

7.0      DELIVERABLES ACCEPTANCE

 

7.1      UAT of the Deliverables (which include Software and Documentation)

         shall commence on the appropriate delivery dates set forth in the

         relevant Statement of Work. UAT shall be conducted in accordance with

         the procedures, criteria, and timeframes set forth in such Statement of

         Work. If the Deliverables or any portion thereof are not accepted

         (Vitria's acceptance not to be unreasonably withheld, delayed or

         conditioned), ChiLin agrees to make (without any additional charge to

         Vitria) any necessary changes to the Deliverables to correct such

         errors or deviations as soon as commercially practicable following

         receipt of notice of such errors and deviations. If ChiLin reasonably

         believes that correction of such errors or deviations will take longer

         than ten (10) business days to complete and redeliver, ChiLin shall

         notify Vitria immediately, discuss the timing of the delay and the

         means necessary to correct it and propose, if applicable, alternate or

         interim solutions.

 

8.0      CHILIN PERSONNEL

 

8.1      ChiLin warrants that all personnel assigned to perform work under this

         Agreement have entered into, or will enter into prior to performing

         such work, an agreement consistent with the provisions of this

         Agreement.

 

9.0.     OWNERSHIP

 

9.1      Vitria shall own exclusively (i) all Vitria software and other

         materials Vitria provides ChiLin pursuant to this Agreement, (ii) any

         and all changes or other modifications made by Vitria or ChiLin to the

         Vitria software or other Vitria materials, whether in Source Code or

         Object Code form (the "Vitria Modifications"), and (iii) all of the

         other development Deliverables, development notes and other tangible

         materials generated by Vitria or ChiLin in connection with any

         development effort pursuant to this Agreement (the "ChiLin Materials").

         Except as warranted in Section 11 below, ChiLin expressly disclaims any

         authorship or ownership of the Vitria software, whether or not

         resulting from the development efforts contemplated hereunder, whether

         in Source Code or Object Code form, or any proprietary rights related

         thereto, whether now known or hereunder recognized in any jurisdiction

         including but not limited to any copyrights or patent, trademark or

         trade secret rights thereto.

 

         ChiLin hereby assigns, and shall assign when developed, to Vitria

         ownership of all right, title and interest in and to the Deliverables,

         Vitria Owned Modifications and Vitria Materials, as and when created,

         including but not limited to all copyrights, and other intellectual

         property rights now known or hereafter recognized, including without

         limitation any patent, trademark or trade secret rights in any of the

         foregoing, and ChiLin acknowledges and agrees that Vitria shall be

         considered the author for copyright purposes of all copyrightable

         material contained in the Deliverables, the Vitria Modifications and