Change of Control Severance Agreement - LynuxWorks Inc.


                               LYNUXWORKS, INC.

                     CHANGE OF CONTROL SEVERANCE AGREEMENT


     This Change of Control Severance Agreement (the "Agreement") is made and
entered into effective as of _________ ___, 2000 (the "Effective Date"), by and
between _____________________ (the "Employee") and LynuxWorks, a California
corporation (the "Company").  Certain capitalized terms used in this Agreement
are defined in Section 1 below.


                                R E C I T A L S
                                ---------------

     A.  It is expected that the Company from time to time will consider the
possibility of a Change of Control. The Board of Directors of the Company (the
"Board") recognizes that such consideration can be a distraction to the Employee
and can cause the Employee to consider alternative employment opportunities.

     B.  The Board believes that it is in the best interests of the Company and
its shareholders to provide the Employee with an incentive to continue his
employment and to maximize the value of the Company upon a Change of Control for
the benefit of its shareholders.

     C.  In order to provide the Employee with enhanced financial security and
sufficient encouragement to remain with the Company notwithstanding the
possibility of a Change of Control, the Board believes that it is imperative to
provide the Employee with certain severance benefits upon the Employee's
termination of employment following a Change of Control.


                                   AGREEMENT
                                   ---------

     In consideration of the mutual covenants herein contained and the continued
employment of Employee by the Company, the parties agree as follows:

     1.  Definition of Terms.  The following terms referred to in this Agreement
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shall have the following meanings:

         (a) Cause. "Cause" shall mean (i) any act of personal dishonesty taken
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by the Employee in connection with his responsibilities as an employee which is
intended to result in substantial personal enrichment of the Employee, (ii)
Employee's conviction of a felony which the Board reasonably believes has had or
will have a material detrimental effect on the Company's reputation or business,
(iii) a willful act by the Employee which constitutes misconduct and is
injurious to the Company, and (iv) continued willful violations by the Employee
of the Employee's obligations to the Company after there has been delivered to
the Employee a written demand for


 
performance from the Company which describes the basis for the Company's belief
that the Employee has not substantially performed his duties.

         (b) Change of Control. "Change of Control" shall mean the occurrence of
             -----------------
any of the following events:

             (i)   the approval by shareholders of the Company of a merger or
consolidation of the Company with any other corporation, other than a merger or
consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) more than fifty percent (50%) of the total voting power
represented by the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation;

             (ii)  the approval by the shareholders of the Company of a plan of
complete liquidation of the Company or an agreement for the sale or disposition
by the Company of all or substantially all of the Company's assets; or

             (iii) any "person" (as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended) becoming the
"beneficial owner" (as defined in Rule 13d-3 under said Act), directly or
indirectly, of securities of the Company representing 50% or more of the total
voting power represented by the Company's then outstanding voting securities.

         (c) Compensation Continuation Period. "Compensation Continuation
             --------------------------------
Period" shall mean the period of time commencing with termination of the
Employee's employment as a result of Involuntary Termination at anytime within
twelve (12) months after a Change of Control and ending with the expiration of
six (6) months following the date of the Employee's termination.

         (d) Involuntary Termination. "Involuntary Termination" shall mean (i)
             -----------------------
without the Employee's express written consent, a significant reduction of the
Employee's duties, position or responsibilities relative to the Employee's
duties, position or responsibilities in effect immediately prior to such
reduction, or the removal of the Employee from such position, duties and
responsibilities, unless the Employee is provided with comparable duties,
position and responsibilities; provided, however, that a reduction in duties,
position or responsibilities solely by virtue of the Company being acquired and
made part of a larger entity (as, for example, when the Chief Financial Officer
of the Company remains as such following a Change of Control but is not made the
Chief Financial Officer of the acquiring corporation) shall not constitute an
"Involuntary Termination;" (ii) without the Employee's express written consent,
a substantial reduction, without good business reasons, of the facilities and
perquisites (including office space and location) available to the Employee
immediately prior to such reduction; (iii) a reduction by the Company of the
Employee's base salary as in effect immediately prior to such reduction; (iv) a
material reduction by the Company in the kind or level of employee benefits to
which the Employee is entitled immediately prior to such reduction with the
result that the Employee's overall benefits package is significantly reduced;
(v) without the Employee's express written consent, the relocation of the

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Employee to a facility or a location more than thirty-five (35) miles from his
current location; (vi) any purported termination of the Employee by the Company
which is not effected for Cause or for which the grounds relied upon are not
valid; or (vii) the failure of the Company to obtain the assumption of this
Agreement by any successors contemplated in Section 5 below.

         (e)  Termination Date. "Termination Date" shall mean the effective date
              ----------------
of any notice of termination delivered by one party to the other hereunder.

     2.  Term of Agreement. This Agreement shall terminate upon the date that
         -----------------
all obligations of the parties hereto under this Agreement have been satisfied.

     3.  At-Will Employment. The Company and the Employee acknowledge that the
         ------------------    
Employee's employment is and shall continue to be at-will, as defined under
applicable law. If the Employee's employment terminates for any reason, the
Employee shall not be entitled to any payments, benefits, damages, awards or
compensation other than as provided by this Agreement, or as may otherwise be
established under the Company's then existing employee benefit plans or policies
at the time of termination.

     4.  Severance Benefits.
         ------------------ 

         (a) Termination Following A Change of Control.
             ----------------------------------------- 

             (i)  Involuntary Termination. If the Employee's employment with the
                  -----------------------       
Company terminates as a result of an Involuntary Termination at any time within
twelve (12) months after a Change of Control, the Employee shall be entitled to
receive continuing payments of severance pay at a rate equal to the sum of: six
(6) months of the Employee's base salary or target commission goal, if
applicable, (as in effect immediately prior to the Change of Control). Such
severance payments shall be paid monthly in accordance with the Company's normal
payroll practices during the Compensation Continuation Period. In addition,
during the Compensation Continuation Period, the Company shall continue to make
available to the Employee and Employee's spouse and dependents covered under any
group health, life or other similar insurance plans of the Company on the date
of such termination (the "Covered Dependents"), and pay for, to the same extent
as paid prior to termination of employment, all group health, life and other
similar insurance plans in which Employee or such Covered Dependents participate
on the date of the Employee's termination.

             (ii) Other Termination. If the Employee's employment with the
                  -----------------
Company terminates other than as a result of an Involuntary Termination at any
time within twelve (12) months after a Change of Control, then the Employee
shall not be entitled to receive severance or other benefits hereunder, but may
be eligible for those benefits (if any) as may then be established under the
Company's then existing severance and benefits plans and policies at the
Termination Date.

         (b) Termination Apart from a Change of Control. If the Employee's
             ------------------------------------------
employment with the Company terminates for any or no reason other than within
the twelve (12) months following a Change of Control, then the Employee shall
not be entitled to receive severance or other

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benefits hereunder, but may be eligible for those benefits (if any) as may then
be established under the Company's then existing severance and benefits plans
and policies at the time of such termination.

         (c)   Accrued Wages and Vacation; Expenses. Without regard to the
               ------------------------------------
reason for, or the timing of, Employee's termination of employment: (i) the
Company shall pay the Employee any unpaid base salary due for periods prior to
the Termination Date; (ii) the Company shall pay the Employee all of the
Employee's accrued and unused vacation through the Termination Date; and (iii)
following submission of proper expense reports by the Employee, the Company
shall reimburse the Employee for all expenses reasonably and necessarily
incurred by the Employee in connection with the business of the Company prior to
the Termination Date. These payments shall be made promptly upon termination and
within the period of time mandated by law.

     5.  Option Acceleration.  If the Employee's employment with the Company
         -------------------                                                
terminates as a result of an Involuntary Termination at any time within twelve
(12) months after a Change of Control, the vesting and exercisability of one
hundred percent (100%) of any unvested options granted to the Employee by the
Company shall become vested and exercisable as of the date of the Employee's
Involuntary Termination.

     6.  Successors.
         ---------- 

         (a) Company's Successors.  Any successor to the Company (whether
             --------------------                                        
direct or indirect and whether by purchase, lease, merger, consolidation,
liquidation or otherwise) to all or substantially all of the Company's business
and/or assets shall assume the Company's obligations under this Agreement and
agree expressly to perform the Company's obligations under this Agreement in the
same manner and to the same extent as the Company would be required to perform
such obligations in the absence of a succession.  For all purposes under this
Agreement, the term "Company" shall include any successor to the Company's
business and/or assets which executes and delivers the assumption agreement
described in this subsection (a) or which becomes bound by the terms of this
Agreement by operation of law.

         (b) Employee's Successors. Without the written consent of the Company,
             ---------------------
Employee shall not assign or transfer this Agreement or any right or obligation
under this Agreement to any other person or entity. Notwithstanding the
foregoing, the terms of this Agreement and all rights of Employee hereunder
shall inure to the benefit of, and be enforceable by, Employee's personal or
legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees.

     7.  Notices.
         ------- 

         (a) General.  Notices and all other communications contemplated by
             -------                                                       
this Agreement shall be in writing and shall be deemed to have been duly given
when personally delivered or when mailed by U.S. registered or certified mail,
return receipt requested and postage prepaid.  In the case of the Employee,
mailed notices shall be addressed to him at the home address

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which he most recently communicated to the Company in writing. In the case of
the Company, mailed notices shall be addressed to its corporate headquarters,
and all notices shall be directed to the attention of its Secretary.

          (b)  Notice of Termination.  Any termination by the Company for Cause
               ---------------------                                           
or by the Employee as a result of a voluntary resignation or an Involuntary
Termination shall be communicated by a notice of termination to the other party
hereto given in accordance with this Section.  Such notice shall indicate the
specific termination provision in this Agreement relied upon, shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination under the provision so indicated, and shall specify the Termination
Date (which shall be not more than 30 days after the giving of such notice).
The failure by the Employee to include in the notice any fact or circumstance
which contributes to a showing of Involuntary Termination shall not waive any
right of the Employee hereunder or preclude the Employee from asserting such
fact or circumstance in enforcing his rights hereunder.

     8.   Arbitration.
          ----------- 

          (a)   Any dispute or controversy arising out of, relating to, or in
connection with this Agreement, or the interpretation, validity, construction,
performance, breach, or termination thereof, shall be settled by binding
arbitration to be held in Santa Clara County, California, in accordance with the
National Rules for the Resolution of Employment Disputes then in effect of the
American Arbitration Association (the "Rules"). The arbitrator may grant
injunctions or other relief in such dispute or controversy. The decision of the
arbitrator shall be final, conclusive and binding on the parties to the
arbitration. Judgment may be entered on the arbitrator's decision in any court
having jurisdiction.

          (b)   The arbitrator(s) shall apply California law to the merits of
any dispute or claim, without reference to conflicts of law rules. The
arbitration proceedings shall be governed by federal arbitration law and by the
Rules, without reference to state arbitration law. Employee hereby consents to
the personal jurisdiction of the state and federal courts located in California
for any action or proceeding arising from or relating to this Agreement or
relating to any arbitration in which the parties are participants.

          (c)   The Company and Employee shall each pay one-half of the costs
and expenses of such arbitration, and each shall separately pay its counsel fees
and expenses.

          (d)   Employee understands that nothing in this Section modifies
Employee's at-will employment status. Either Employee or the Company can
terminate the employment relationship at any time, with or without cause.

          (e)   EMPLOYEE HAS READ AND UNDERSTANDS THIS SECTION, WHICH DISCUSSES
ARBITRATION. EMPLOYEE UNDERSTANDS THAT SUBMITTING ANY CLAIMS ARISING OUT OF,
RELATING TO, OR IN CONNECTION WITH THIS AGREEMENT, OR THE INTERPRETATION,
VALIDITY, CONSTRUCTION, PERFORMANCE,

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BREACH OR TERMINATION THEREOF TO BINDING ARBITRATION, CONSTITUTES A WAIVER OF
EMPLOYEE'S RIGHT TO A JURY TRIAL AND RELATES TO THE RESOLUTION OF ALL DISPUTES
RELATING TO ALL ASPECTS OF THE EMPLOYER/EMPLOYEE RELATIONSHIP, INCLUDING BUT NOT
LIMITED TO, THE FOLLOWING CLAIMS:

          (i)   ANY AND ALL CLAIMS FOR WRONGFUL DISCHARGE OF EMPLOYMENT; BREACH
OF CONTRACT, BOTH EXPRESS AND IMPLIED; BREACH OF THE COVENANT OF GOOD FAITH AND
FAIR DEALING, BOTH EXPRESS AND IMPLIED; NEGLIGENT OR INTENTIONAL INFLICTION OF
EMOTIONAL DISTRESS; NEGLIGENT OR INTENTIONAL MISREPRESENTATION; NEGLIGENT OR
INTENTIONAL INTERFERENCE WITH CONTRACT OR PROSPECTIVE ECONOMIC ADVANTAGE; AND
DEFAMATION.

          (ii)  ANY AND ALL CLAIMS FOR VIOLATION OF ANY FEDERAL STATE OR
MUNICIPAL STATUTE, INCLUDING, BUT NOT LIMITED TO, TITLE VII OF THE CIVIL RIGHTS
ACT OF 1964, THE CIVIL RIGHTS ACT OF 1991, THE AGE DISCRIMINATION IN EMPLOYMENT
ACT OF 1967, THE AMERICANS WITH DISABILITIES ACT OF 1990, THE FAIR LABOR
STANDARDS ACT, THE CALIFORNIA FAIR EMPLOYMENT AND HOUSING ACT, AND LABOR CODE
SECTION 201, et seq;

          (iii) ANY AND ALL CLAIMS ARISING OUT OF ANY OTHER LAWS AND REGULATIONS
RELATING TO EMPLOYMENT OR EMPLOYMENT DISCRIMINATION.

     9.  Miscellaneous Provisions.
         ------------------------ 

         (a)  No Duty to Mitigate. The Employee shall not be required to
              ------------------- 
mitigate the amount of any payment contemplated by this Agreement, nor shall any
such payment be reduced by any earnings that the Employee may receive from any
other source.

         (b)  Waiver. No provision of this Agreement may be modified, waived or
              ------
discharged unless the modification, waiver or discharge is agreed to in writing
and signed by the Employee and by an authorized officer of the Company (other
than the Employee). No waiver by either party of any breach of, or of compliance
with, any condition or provision of this Agreement by the other party shall be
considered a waiver of any other condition or provision or of the same condition
or provision at another time.

         (c)  Integration. This Agreement, the Employment Agreement dated July
              -----------    
____, 2000, and the stock option agreements representing the Options represent
the entire agreement and understanding between the parties as to the subject
matter herein and supersede all prior or contemporaneous agreements, whether
written or oral.

         (d)  Choice of Law. The validity, interpretation, construction and
              ------------- 
performance of this Agreement shall be governed by the internal substantive
laws, but not the conflicts of law rules, 

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of the State of California.

          (e)  Severability. The invalidity or unenforceability of any provision
               ------------
or provisions of this Agreement shall not affect the validity or enforceability
of any other provision hereof, which shall remain in full force and effect.

          (f)  Employment Taxes. All payments made pursuant to this Agreement
               ----------------
shall be subject to withholding of applicable income and employment taxes.

          (g)  Counterparts. This Agreement may be executed in counterparts,
               ------------
each of which shall be deemed an original, but all of which together will
constitute one and the same instrument.

     IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the
case of the Company by its duly authorized officer, as of the day and year first
above written.


COMPANY:                                 LYNUXWORKS, INC.

     
                                         By:_________________________________

                                         Title:______________________________
    

EMPLOYEE:                                ____________________________________ 

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