Software Development And Services Agreement

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED FOR CERTAIN PORTIONS OF THIS EXHIBIT PURSUANT TO RULE 406 UNDER THE SECURITIES ACT OF 1933, AS AMENDED.


Agreement No. R12450A
Effective Date: January 15, 2001
Page 1 of 25


THIS SOFTWARE DEVELOPMENT AND SERVICES AGREEMENT (hereinafter "Agreement") is made by and between BellSouth Telecommunications, Inc., a Georgia corporation, (hereafter "Customer") with offices located at 675 West Peachtree Street, N.E., Atlanta, Georgia 30375, and Predictive Systems, Inc., a Delaware corporation (hereinafter "Supplier") having an office at 2400 Century Boulevard, Atlanta, GA 30345.


WITNESSETH


WHEREAS, Supplier has software development expertise directly related to the type of software to be developed pursuant to this Agreement and Customer desires to engage Supplier to develop, create, test and deliver certain software and other deliverables; and


WHEREAS, Customer is desirous of obtaining advice and assistance for consultant or professional services to be provided by Supplier which has sufficient expertise and experience in rendering such services to meet the particular needs of Customer.


NOW, THEREFORE, Supplier and Customer, intending to be legally bound, hereby agree as follows:


1. DEFINITIONS.


1.1. "Acceptance" or "Accept" shall mean Customer has determined
the material or Software delivered or Services rendered
conform with the applicable Specifications.


1.2. "Affiliated Company(ies)" shall mean BellSouth Corporation or
any company that is owned in whole or in which is owned not
less than a [*] interest, now or in the future, by BellSouth
Corporation or by one or more of its direct or indirect
subsidiaries, controlled by BellSouth Corporation.


1.3. "Authorized Third Party(ies)" shall mean any third party
retained by Customer to perform services for Customer that has
undertaken: (i) an obligation of non-disclosure consistent
with this Agreement and (ii) an obligation to use information
provided by Customer, including information proprietary to
Supplier, solely to perform services for Customer.


1.4. "Bypass" or "Work Around" shall mean a temporary procedure by
which a user can avoid a reported problem by changes to the
procedures followed or data supplied by the user when using
the Software or a temporary Fix supplied by the Supplier.


1.5. "Customer" shall mean Bellsouth Telecommunications, Inc. or
any Affiliated Company which places an Order pursuant to the
terms and conditions of this Agreement.


1.6. "Deliverables" shall mean any and all system deliverables set
forth in a fully executed Order as defined in Appendix A.
Deliverables include, but are not limited to, any technical
information, drawings, records, reports, data, designs, plans,
specifications, models, prototypes, performance requirements,
inventions, creative works, concepts, and any Software and/or
documentation, implementation, deployment, and/or system
integration delivered pursuant to this Agreement and must be
regarded as Customer's Information hereunder.


1.7. "Development Timetable" shall mean the dates set forth in a
fully executed Order, whereby: (i) the Supplier shall have
completed the development of the Deliverable associated with
such date and (ii) the Supplier shall deliver the Deliverable
to Customer for Acceptance testing.


1.8. "Documentation" shall mean any materials relating to, arising
out of or resulting from Services or Software provided by
Supplier hereunder including, without limitation, such
materials sufficient for: (i) Customer to determine interface
capabilities with other hardware or software and (ii) Customer
to plan for, install, engineer, operate, repair, train Users
and maintain the Software. Documentation includes, but is not
limited to, specifications, drawings, schematics and/or
instructions provided by Supplier.


* Represents material which has been redacted pursuant to a request for confidential treatment pursuant to Rule 406 under the Securities Act of 1933, as amended.


Agreement No. R12450A
Effective Date: January 15, 2001
Page 2 of 25


1.9. "Enhancement" shall mean a new version of the Software that
adds substantially new features and functionality in addition
to the original functional characteristics of the Software as
provided to Customer. Said Enhancement shall be deemed to be a
new item of Software, may be subject to additional fees,
acceptance and warranty.


1.10. "Error(s)" shall mean a failure of the Software to conform to
Supplier's marketing literature, the response time as
warranted, the Documentation and operating manuals furnished
by Supplier and the Specifications governing said Software;
where such failure impacts operational performance, functional
performance or licensability.


1.11. "Fix(es)" shall mean corrections of Error(s) in order for the
Software to continue performing functionally in the manner for
which it was acquired and any and all improvements that relate
to performance but do not provide new features or
functionality for the Software.


1.12. "Object Code" shall mean software assembled or compiled in
magnetic or electronic binary form on software media, which is
readable and usable by computers to control or operate a
computer system and/or perform user defined or predetermined
tasks.


1.13. "Order(s)" shall mean a written order issued by Customer and
accepted by Supplier pursuant to this Agreement for Software
and/or Services as is set forth in Appendix A.


1.14. "Services" shall mean and may include, but not be limited to,
Supplier's consultant, professional, technical and engineering
services, Software Maintenance, installation services,
training and on site support ancillary to the acquisition of
Software as described hereafter or in a properly executed
Order.


1.15. "Software" shall mean the computer program or programs
developed by Supplier under this Agreement for Customer which
consist of a set or sets of logical instructions and tables of
information which guides the functions of a processor
including Object Code, Source Code, Documentation and all
Fixes, Upgrades, Enhancements, Error corrections,
modifications, updates and made thereto and provided
hereunder.


1.16. "Software Maintenance" shall include the services described in
Appendix C or in a properly executed Order which, if purchased
by Customer, shall be performed by the Supplier to provide
Fixes, updates, Upgrades, and Enhancements to the Software and
shall include, but not be limited to, corrections of any and
all Errors, regardless of whether such Error is brought to the
attention of Supplier by Customer, another user of comparable
software, or any third party.


1.17. "Source Code" shall mean the computer program expressed in a
source or human readable language consisting of a full source
language statement of the program comprising the Software and
complete maintenance documentation, procedures, flow charts,
schematic diagrams and annotations which comprise the
precoding detail design specification, and all other material
necessary to allow a reasonably skilled programmer or analyst
to maintain and enhance the Software without the assistance of
the Supplier or reference to other material.


1.18. "Specifications" shall mean, with respect to the Software, the
functions, features and performance requirements of the
Software set forth in a fully executed Order.


1.19. "Underlying Components" shall mean Supplier's pre-existing
programs, systems, data, processes, techniques, methodologies,
procedures, know-how and methods of analysis that it utilizes
to provide Services in the performance of this Agreement. No
title or ownership of intellectual property rights, except as
provided herein, is transferred to Customer for Supplier's
Underlying Components.


Agreement No. R12450A
Effective Date: January 15, 2001
Page 3 of 25


1.20. "Upgrade(s)" shall mean an improvement to or a change in the
Software that alters the original functional characteristics
of the Software or corrects errors but does not add
substantially new features to the Software. Said Upgrade shall
be deemed to be a new item of Software and subject to
warranty.


1.21. "User(s)" shall mean Customer, its Authorized Third Parties,
as well as each of their respective agents, representatives
and customers, if any, who use goods or services relating to,
resulting from, or arising out of Services or Software
provided by Supplier hereunder.


2. PROVISIONS APPLICABLE TO DEVELOPED SOFTWARE.


2.1. DEVELOPMENT UNDERTAKING.


2.1.1. Supplier hereby acknowledges Customer's reliance on
Supplier's strict adherence to the Development
Timetable and therefore Supplier shall commit and
utilize sufficient resources to complete development
of the Deliverables in accordance with the
Development Timetable. Supplier shall notify Customer
of any circumstances, when and as they arise, that
may reasonably be anticipated to lead to a material
deviation from the development.


2.1.2. Customer shall, upon reasonable prior written notice,
have access during normal business hours to those
premises where development work under this Agreement
is performed for the purposes of review,
"walk-throughs," and discussions between Customer's
and Supplier's management and personnel concerning
the status and conduct of the work being performed
and to monitor the progress of such work.


2.1.3. Supplier shall designate a technical coordinator who
shall be assigned by Supplier to supervise the
development of the Deliverables and shall be
responsible for technical and performance matters and
the transmission of technical information between the
parties. Such employee shall devote as much of his or
her business time required to fully supervise such
endeavor (hereinafter "Supplier Technical
Coordinator").


2.1.4. Customer shall designate a technical coordinator who
shall be responsible for technical and performance
matters and the transmission of technical information
between the parties (hereinafter "Customer Technical
Coordinator"). Supplier understands and agrees that
the delivery of Deliverables which perform in
accordance with the applicable Specifications on or
before the dates set forth in the Development
Timetable, Order or this Agreement are critical to
Customer's business and that Customer may be
irreparably injured by any delays or failures to
deliver or meet the Specifications. In order to
anticipate and reduce the effect of such delays or
failures, Supplier agrees to notify Customer as soon
as there is any reason to believe that a delivery
will be delayed and/or that the Deliverable scheduled
for delivery will fail to meet its Specifications and
to advise Customer of the projected delay, if any, in
the delivery date and the nature of all anticipated
failures, if any. Supplier understands and agrees
that any such delay in meeting a delivery date or
failure to meet Specifications is a material breach
of this Agreement and will result in a written notice
of such breach. Upon termination following an uncured
material breach by Supplier, Supplier shall promptly
deliver all work in progress to Customer and refund
to Customer all funds paid under this Agreement
except for funds paid for Deliverable(s) already
received and Accepted by Customer and the value of
all work in progress delivered to Customer. Upon such
cancellation, all right, title and interest in such
work in progress shall immediately vest in Customer.
Agreement No. R12450A
Effective Date: January 15, 2001
Page 4 of 25


2.2. DELIVERY.


2.2.1. Immediately upon the completion of each development
milestone as set forth in a fully executed Order,
Supplier shall deliver and install, when necessary,
the Deliverable required by such milestone at the
location specified in the Order and shall deliver
therewith all Documentation and other materials
required to be provided in accordance with such
milestone. Supplier shall notify Customer in writing
of the availability of each portion of the
Deliverable for testing by Customer (the date of such
notification hereinafter being referred to as the
"Acceptance Test Date").


2.3. TESTING AND ACCEPTANCE.


2.3.1. [*]


2.3.2. When a Deliverable successfully passes Acceptance
testing, Customer shall provide Supplier with written
notice of Acceptance for such Deliverable and the
date of such notification shall be the date on which
Supplier shall be entitled to invoice the milestone
payment associated with such Deliverable. A
Deliverable shall be deemed Accepted by Customer if
written notice of Acceptance is not received by
Supplier within the time periods stated in Section
2.3.1.


2.3.3. In the event that Customer determines that a
Deliverable does not conform to and perform in
accordance with the Specifications, Customer shall
notify Supplier in writing of the exact nature of the
non-conformity and Supplier shall modify the
Deliverable within [*] of receipt of such
notification to Supplier, to ensure that it will so
conform and Supplier shall redeliver such Deliverable
to Customer. Customer shall thereafter undertake
further Acceptance testing of equal duration as set
forth in. Failure of any Deliverable to conform with
the Specifications after such second round of
Acceptance testing shall constitute a material breach
by Supplier of this Agreement and any related Orders.


2.4. CHANGE IN THE SCOPE OF WORK.


2.4.1. Customer shall have the right to make changes in the
scope of the work to be performed under this
Agreement as set forth in a fully executed Order or
any other item which would affect the ability of the
Deliverables to meet Customer's needs. All changes
shall be authorized and made in writing by Customer's
Technical Coordinator.


2.4.2. Supplier shall not make any changes in the scope of
the work to be performed under this Agreement which
have not been authorized in writing by the Customer's
Technical Coordinator. Any changes in the scope of
the work made by Supplier that have not been approved
in writing by the Customer's Technical Coordinator
shall not excuse any delay in the Development
Timetable or form the basis for any claim or
rationale to increase Supplier's pricing.


2.4.3. If Supplier receives written instructions, directions
or requests to make any change or changes that will
result in a change or changes in the scope of the
work to be performed under this Agreement from anyone
other than the Customer's Technical Coordinator,
Supplier shall promptly notify the Customer's
Technical Coordinator and provide a description of
the proposed change, or changes, the length of the
delay, if any, that will result from the change or
changes and the increased cost, if any, that will
result from


* Represents material which has been redacted pursuant to a request for confidential treatment pursuant to Rule 406 under the Securities Act of 1933, as amended.


Agreement No. R12450A
Effective Date: January 15, 2001
Page 5 of 25


such change or changes. Supplier shall not proceed to
implement any such change without written
authorization from the Customer's Technical
Coordinator.


2.4.4. If Supplier receives instructions, directions or
requests from Customer's Technical Coordinator to
make any change or changes that will result in a
change or changes in the scope of the work to be
performed under this Agreement, Supplier shall
promptly provide Customer's Technical Coordinator
with the length of the delay, if any, that will
result from the change or changes and the increased
cost, if any, that will result from such change or
changes. Supplier shall not proceed to implement any
such change without the written approval of
Customer's Technical Coordinator of the delay, if
any, or increased cost, if any. Any such changes that
are made by Supplier without written approval of
Customer's Technical Coordinator's shall not excuse
any delay in a delivery date or form the basis for
any claim or rationale to increase Supplier's
pricing.


2.4.5. Any delays in the Development Timetable date that are
approved in writing by the Customer's Technical
Coordinator shall be excused and any increase in the
cost approved in writing by the Customer's Technical
Coordinator shall be added to Supplier's price.


2.5. STATUS REPORTS.


2.5.1. Supplier understands and agrees that the time frames
for the project as set forth in the Development
Timetable are critical to Customer's business. In
order to keep Customer appraised of Supplier's
schedule and to allow Customer to effectively manage
Customer's portions of this project, [*]. Supplier
understands and agrees that failure to timely deliver
a status report is a breach by Supplier of this
Agreement. Notwithstanding any cure period set forth
elsewhere in this Agreement and due to the time
sensitivity of these status reports, Supplier hereby
agrees that the cure period for its failure to timely
deliver a status report shall be [*] following
receipt of written notification by Customer that
Supplier has not timely delivered the [*] status
report.


2.6. TRAINING.


2.6.1. [*]


2.6.2. If reasonable on-line training and help modules for
training are not available and where analysis, design
and development of such items are not feasible and
practical, if requested by Customer, Supplier shall
then at prices as mutually agreed upon:


(i). Provide instructors and the necessary
instructional material which meets mutually
agreed upon standards, at mutually agreed
upon locations and times, to train
Customer's personnel in the installation,
operation, use and maintenance of Software
furnished hereunder, and/or


(ii).Provide Customer and/or User's with
training modules or manuals, including any
succeeding changes thereto, and any
necessary assistance covering those areas
outlined above in sufficient detail, format
and quantity to allow Customer and/or User's
to develop and conduct its own training
program. Customer may reproduce such
training modules or manuals only for
internal use hereunder with no restrictions
or charges.


* Represents material which has been redacted pursuant to a request for confidential treatment pursuant to Rule 406 under the Securities Act of 1933, as amended.


Agreement No. R12450A
Effective Date: January 15, 2001
Page 6 of 25


3. GENERAL PROVISIONS APPLICABLE TO THE ENTIRE AGREEMENT.


3.1. TERM.


3.1.1. This Agreement shall commence and be effective on the
effective date specified in this Agreement
("Effective Date"), and [*].


3.2. TERMINATION FOR CONVENIENCE.


3.2.1. Customer may upon[*]


3.2.2. Customer may terminate Software Maintenance, for its
own convenience and without cause, by providing
written notice to Supplier at least thirty (30) days
prior to the commencement of any renewal term for
Software Maintenance.


3.2.3. [*] provided there are no outstanding Orders pursuant
to which Services are to be performed.


3.3. TERMINATION FOR CAUSE.


3.3.1. If eithe ...