Software Development Agreement

Letterhead of Celerity Systems]



3/31/93



Letter of Agreement



Celerity Systems, Inc. is hereby contracted by Herzog, Heine, and Geduld, Inc. to develop the Back Office System Proposal of January 21, 1993.



The overall scope of the project is provided in the aforementioned proposal. The first step of the project will provide detailed specifications of the project.



A timeline will be developed as a part of the first step, which will show the chronology of the steps and related deliverables. Each step of the overall project will be considered complete upon approval of Herzog, Heine, and Geduld.



/s/ Mahmoud Youssefi /s/ Herzog, Heine, and Geduld, Inc. - -------------------- ----------------------------------- Mahmoud Youssefi Herzog, Heine, and Geduld, Inc Managing Director Celerity Systems, Inc.

DEVELOPMENT AGREEMENT



TABLE OF CONTENTS



---- 1.0 DEFINITIONS.......................................................... 1 2.0 STATEMENT OF WORK.................................................... 3 3.0 MAINTENANCE SERVICES................................................. 3 4.0 OWNERSHIP OF MATERIALS............................................... 4 5.0 PRICE AND PAYMENT.................................................... 4 6.0 ACCEPTANCE........................................................... 5 7.0 CHANG E S.............................................................. 7 8.0 COPYRIGHT............................................................ 8 9.0 WARRANTY............................................................. 8 10.0 INDEMNIFICATION...... . ............................................... 9 11.0 TERM AND TERMINATION................................................. 10 12.0 CONFIDENTIAL INFORMATION............................................. 11 13.0 COMPLIANCE WITH LAWS................. ................................ 12 14.0 GENERAL.............................................................. 12





Attachment I -- REQUIREMENTS ANALYSIS

Attachment II -- SCHEDULE

Attachment III -- DOCUMENTATION

Attachment IV -- MAINTENANCE AGREEMENT

SOFTWARE-DEVELOPMENT AGREEMENT





This Development Agreement (hereinafter "Agreement") is made effective as of the ____ day of ______________, ____, by and between Celerity Systems, Inc., incorporated under the laws of the State of Tennessee, U.S.A., having an office for the transaction o f business at 9051 Executive Park Drive, Knoxville, Tennessee 37923 (hereinafter referred to as "CSI"), and Herzog Heine Geduld, Inc., organized under the laws of the State of __________, having an office for the transaction of business at ________________ _ (hereinafter referred to as "Herzog").



1.0 DEFINITIONS



The definitions set forth in this Section shall apply to the following

capitalized words and terms when used in this Agreement.



1.1 "Code" shall mean that computer program code, in source, object and

load executable form, licensed to Herzog, and more fully described

in Attachment III, and Support thereof, and any additional computer

program code provided by CSI to Herzog hereunder. Code shall include

newly created sounds and visuals, including screens music and

characters, displayed or heard as a result of the execution of the



1.2 "Documentation" shall mean written materials itemized in Attachment

III, and Support thereof, furnished hereunder to Herzog by CSI.



1.3 "Derivative Work" shall mean a work which is based upon one or more

preexisting work(s), such as a revision, modification, translation,

abridgement, condensation, expansion, collection, compilation or any

other form in which such preexisting works may be recast,

transformed or adapted, and which, if prepared without authorization

by the owner of the preexisting work, would constitute a copyright



1.4 "Error" shall mean any one or more of the following conditions:



(a) a function described in Attachment I which is omitted from the

Code; or



(b) a function of the Code which does not operate or gives

incorrect results; or



(c) a function or user interface in the Code which does not

operate satisfactorily in the environment for which it was

designed; or



(d) a failure of the Documentation to accurately describe a

function contained in Attachment III; or



(e) a failure of the Documentation to enable the intended user to

correctly operate Code.

1.5 "Maintenance" shall mean modifications, revisions or additions which

provide Error corrections for Code or Documentation.



1.6 "Modifications" shall mean modifications, revisions or additions

made to the Code or Documentation other than Maintenance.



1.7 "Work" shall mean the goods, products, services, supplies,

performance, documents, software, data, drawings or other items

constituting the subject matter of this Agreement which are

furnished by CSI to Herzog.



1.8 "Object Code" shall mean the machine-readable form of computer

program code.



1.9 "Source Code" shall mean the human-readable form of computer program

code and related system documentation, including all comments and

any procedural code such as job control language.



1.10 "Subsidiary" shall mean a corporation, company or other entity: 1)

more than (50%) of whose outstanding shares or securities

(representing the right, other than as affected by events or

default, to vote for the election of directors or other managing

authority) are; or 2) which does not have outstanding shares or

securities, as may be the case in a partnership, joint venture or

unincorporated association, but more than (50%) of the ownership

interest representing the right to make the decisions for such

corporation, company or other entity is; now or hereafter, owned or

controlled, directly or indirectly, by a party hereto; but such

corporation, company or other entity shall be deemed to be a

Subsidiary only so long as such ownership or control exists.



2.0 STATEMENT OF WORK



CSI agrees to perform the Work set forth in this Section, only pursuant to

Herzog Purchase Orders issued hereunder for the compensation specified in

Section 5.0.



CSI shall design, develop, code, integrate and test the Code in accordance

with the specifications of the approved Requirements Analysis.



CSI shall deliver one (1) copy of the Object Code and Source Code of the

Code to Herzog for Herzog's testing and approval.



CSI shall deliver Documentation as set forth in Attachment III in

preliminary form sufficient for Herzog's verification of the Code design,

and then in final form after Herzog's approval. Such information shall be

in a format suitable for Herzog's preparation of an End User's Manual.



CSI shall provide technical assistance to Herzog during Code verification

testing. CSI shall debug the Code as required in order to pass these

tests, and revise the design documentation accordingly.







Within ten (10) days of Herzog's request, and at no additional charge, CSI

shall deliver to Herzog such data necessary to maintain and operate the

Code delivered hereunder or to conduct further development efforts with

respect to the Code.



CSI shall integrate and test additional specific software, as indicated in

Attachment I, along with the Code.



3.0 MAINTENANCE SERVICES



3.1 CSI agrees to maintain the ability to provide Maintenance to Herzog,

and agrees to provide such Maintenance at terms, conditions and

prices substantially as set forth in Attachment V. Herzog is under

no obligation to utilize or purchase such Maintenance from CSI.



4.0 OWNERSHIP OF MATERIALS



4.1 All Code and Documentation delivered to Herzog hereunder, shall

belong exclusively to CSI.



4.2 CSI hereby grants Herzog an irrevocable, nonexclusive, royalty-free,

paid-up license to use, execute, reproduce, display, distribute

internally and prepare Derivative Works of the Code and



5.0 PRICE AND PAYMENT



5.1 Price



Subject to the terms and conditions of this Agreement, and in

consideration for the rights and licenses granted to Herzog herein,

Herzog will pay to CSI the fixed price of Two Hundred Twenty-Five

Thousand Dollars ($210,000.00).



5.2 Payment



Without limiting the obligation of CSI to comply with all the

requirements of this Agreement, CSI will submit invoices and Herzog

will pay for Work completed according to this Agreement on the

following schedule:



DATE DESCRIPTION AMOUNT PERCENT

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

6/13/93 Requirements Analysis $ 15,000 7.14%

7/19/93 LAN/HUB 3270 $ 35,000 16.67

8/26/93 Phase 1 Prototype 45,000 21.43

9/20/93 Phase 1 Completion 55,000 26.19

12/16/93 Phase 2 $ 60,000 28.57

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

Total $210,000 100.00%

======== ======







All payments are exclusive of any tariffs, duties, or taxes imposed or

levied by any government or governmental agency. Herzog shall be

responsible for payment of all such taxes, however designated, levied, or

based upon Herzog's possession or use of the Code and the Documentation,

or in this Agreement, including without limitation, state or local sales,

use and personal property taxes.



5.3 Herzog shall reimburse CSI for actual and reasonable travel and

living expenses incurred by CSI employees while performing Work at

Herzog facilities. Such Work shall be authorized by Herzog prior to

CSI incurring any expenses. CSI shall invoice such authorized travel

and living expenses at cost. Copies of all receipts shall accompany

any invoice submitted to Herzog.



5.4 Herzog shall pay to CSI the applicable amount within fifteen (15)

days net after receipt of an invoice in which CSI has certified that

the Work that is the subject of the invoice has been completed in

accordance with the requirements of this Agreement, and that all

conditions established by this Agreement as prerequisite to payment

of the invoice have been fulfilled.



6.0 ACCEPTANCE



6.1 CSI shall deliver to Herzog the Code and Documentation in accordance

with the schedule in Attachment II. Herzog will promptly notify CSI

of any Errors which it identifies prior to final delivery.



CSI shall promptly correct all Errors so identified by Herzog prior

to CSI's final delivery of the Code and Documentation.



6.2 After final delivery of all installments of the Code and

Documentation, Herzog may perform evaluation and test for a period

of thirty (30) days after receipt (hereinafter called "Evaluation

Period"). During the Evaluation Period, Herzog shall promptly notify

CSI of Errors identified by Herzog. CSI shall promptly correct all

Errors and deliver the corrected items to Herzog.



6.3 Within ten (10) days after the end of the Evaluation Period, CSI

shall provide to Herzog corrections for all Errors found during the

Evaluation Period and/or a statement identifying those Errors CSI

has been unable to correct, together with a schedule for delivering

the corrected items to Herzog.



6.4 Herzog shall furnish written notice to CSI within thirty (30) days

after receipt of the corrected Code and Documentation of acceptance

or rejection. Herzog may reject the Code and Documentation, if any

one or more Errors are not corrected and CSI's schedule for

correcting Errors is unacceptable to Herzog; Herzog may treat such

rejection as a material breach by CSI and terminate this Agreement

in accordance with the Section entitled "TERM AND TERMINATION."







6.5 CSI recognizes that Herzog relies on CSI to fully test and correct

all Errors in the Code and Documentation. Accordingly, should Herzog

elect to accept the Code and Documentation with any one or more

System Critical Error(s), Herzog may withhold all payment due upon

or after their acceptance, as provided in the Section entitled

"PRICE AND PAYMENT" until all such Error(s) are corrected. Should

Herzog elect to accept the Code and Documentation with any one or

more Conditional Error(s), Herzog may withhold forty percent (40%)

of any such payments until all such Error(s) are corrected.



"Error Severity Level" as used herein shall mean classifications of

Errors as assigned by Herzog according to the following definitions:



(a) "System Critical Error" shall mean an emergency condition

which causes critical impact or significantly affects a Herzog

schedule or which makes the performance or continued

performance of any one or more functions difficult or



(b) "Conditional Error" shall mean a condition which is not

critical in that no loss of data occurs and which may be

circumvented or avoided on a temporary basis by the intended



6.6 If no written notice of acceptance or rejection is furnished to CSI

by Herzog within the time period set forth in Subsection 6.4, CSI

shall provide Herzog with written notice stating that if Herzog does

not accept or reject within five (5) days after Herzog's receipt of

such notice, Herzog shall be deemed to have accepted the Code and

Documentation. Herzog's failure to accept or reject within five (5)

days after receipt of such notice shall be deemed to be acceptance.



6.7 If any one (1) item is rejected by Herzog pursuant to this Section,

Herzog may, at its option, reject all items regardless of whether or

not any of those items were previously accepted by Herzog.



7.0 CHANGES



7.1 Herzog may, by written change order, make reasonable changes within

the general scope of this Agreement in drawings, designs,

specifications, procedures, quantities, or time or place of

delivery; require additional Work; or direct the omission of Work

and CSI shall promptly proceed with the change(s). All change orders

will be specifically identified as a change order to this Agreement

and will be signed by the Herzog Contract Administrator. If any such

change causes an increase or decrease in the cost of, or the time

required for performance of the Work, an equitable adjustment shall

be made in the price(s), or delivery date(s), or both; and this

Agreement shall be amended in writing accordingly. Any claim for

adjustment by CSI shall be deemed waived unless asserted in writing

within ten (10) days from the date of receipt by CSI of the Herzog

written change order. The amount of claim shall be stated when it is







7.2 If CSI or Herzog claims a right to adjustment pursuant to this

Section, CSI shall prepare and furnish to Herzog the evidence

necessary to establish the amount of any increase or decrease in the

cost of, or the time required for, Work affected by the change

order. The amount of any cost increase or decrease shall be

determined in accordance with CSI's regularly established accounting

practices and shall, if requested by Herzog, be verified by an

independent Certified Public Accounting firm.



7.3 Herzog technical personnel may from time to time render technical

assistance or give advice to, or effect an exchange of information

with CSI personnel concerning the Work to be furnished hereunder.

Such advice, assistance or exchange of information shall not be

deemed to be a change order requiring deviation from the Work

described in this Agreement, unless submitted to CSI in writing

pursuant to Subsection 7.1.



8.0 COPYRIGHT



All Code, Documentation, or Derivative Works thereof, developed or

produced by CSI shall contain an appropriate copyright notice in the name

of CSI, or other author in a manner to be determined by CSI.



9.0 WARRANTY



CSI represents and warrants to Herzog that the Code shall be fit for its

intended use, conforming to the Documentation and Requirements Analy ...