Fill and Sign the Electronic Procurement Virginia Department of General Form

-1- § 3.27 Form: System Procurement and Integration Agreement This System Procurement and Integration Agreement (the "Agreement") is entered into this ___________ day of ___________, 20______ by and between Performance Builders, Inc., a New York corporation with offices at 100 Avenue of the Americas, New York, New York 10020 ("Supplier") and Rick's Records, L.P. a New York limited partnership with offices at 49 New Street, New York, New York 10012 ("Customer"). 1. Scope of Work Supplier hereby agrees to design, sell and provide, and Customer hereby agrees to purchase upon the terms and conditions set forth herein, a completely installed and usable turnkey system to meet Customer's material handling and warehouse distribution center management needs for wholesale phonorecord distribution. Supplier will design, fabricate, provide, install and support said system and assume the responsibility of system integrator. Supplier shall assume responsibility for assuring that all elements of the system are integrated to permit uninterrupted handling and distribution of inventory including uninterrupted processing of all necessary data to support Customer's business functions. Phase 1 of the project will include finalizing the design from detailed data provided by Customer from which Supplier and Customer will determine all mutually acceptable performance parameters to be embodied in "Final Functional Specifications". Upon acceptance of the resulting Final Functional Specifications, a firm fixed price for the system will be determined as provided in Section 7 of this Agreement. Currently, Customer's Preliminary Functional Specifications are attached on Schedule A. The Final Functional Specifications shall be agreed to by the parties within ninety (90) days following the execution of this Agreement. Phase 2 of the project will constitute the fabrication, installation, testing, acceptance and support of the System (as that term is defined in Section 2.1 below). 2. The System Supplier agrees to supply to Customer the "System" which shall consist of Material Handling Hardware, Computer Hardware and Software, all as hereinafter defined. The System shall meet all functional specifications detailed in the Final Functional Specifications. -2- 3. Installation Site Preparation Supplier shall survey the Customer installation site located at 1 Navy Square, Brooklyn, New York (the "Installation Site") and shall specify all electrical, environmental or other engineering changes required for proper installation, maintenance and operation of the System. Supplier shall promptly provide Customer with written notice of such reasonable requirements as are acceptable to Customer and shall review and approve all plans submitted by Customer, to ensure that the Installation Site's physical environment is compatible with the System's installation, maintenance and operation requirements. Customer shall be responsible for meeting the environmental requirements for the System at the Installation Site in accordance with the accepted plans. The Installation Site specifications and plans shall be incorporated herein as Schedule E. Supplier's review of the plans shall be conducted within a reasonable time to allow Customer sufficient time to construct the Installation Site to Supplier's specifications as provided in the Implementation Plan hereinafter described. Supplier's approval, in writing, shall constitute acceptance of said plans and there-after Supplier shall not assert any claim as to its inability to perform as required by this Agreement due to the physical environment at the Installation Site. 4. Material Handling Hardware 4.1 The Sale of Material Handling Hardware Supplier shall sell to Customer all of the materials handling machinery listed on Schedule B attached hereto (collectively "Material Handling Hardware"). Supplier shall not make any substitute for the Material Handling Hardware of any other model, capacity or manufacturer without the prior written consent of Customer. 4.2 Delivery and Installation Supplier shall arrange for delivery of the Material Handling Hardware to the Installation Site in accordance with the Implementation Plan set forth in Schedule C hereto. Shipment of the Material Handling Hardware shall be F.O.B. Customer's receiving point at the Installation Site. Supplier shall pay all reasonable transportation and insurance charges for the Material Handling Hardware. Supplier shall be responsible for moving the Material Handling Hardware from -3- Customer's receiving point to the Installation Site. Supplier shall bear the risk of loss or damage to the Material Handling Hardware while in transit to Customer's premises and the Installation Site. Customer shall bear all risk of loss or damage to the Material Handling Hardware after delivery to the Installation Site, unless such loss or damage is due to negligence or willful acts of Supplier, its employees, agents, representatives or subcontractors, or defects in the Material Handling Hardware. After delivery to the Installation Site, Supplier shall install the Material Handling Hardware, as set forth in the Implementation Plan. Customer has the right to delay the start of delivery as set forth in the Implementation Plan for a period not to exceed one-hundred twenty (120) days by notifying Supplier in writing.4.3 Title to Material Handling Hardware Supplier warrants that Customer shall acquire good and clear title to the Material Handling Hardware, free and clear of all liens and encumbrances. Title and ownership of the Material Handling Hardware shall remain vested in Supplier until delivery to and acceptance by Customer of the Material Handling Hardware, at which time Supplier shall execute and deliver to Customer a bill of sale for the Material Handling Hardware. 4.4 New Parts; Components; Conformity to Specifications Supplier covenants and represents that the Material Handling Hardware and all of its parts and components will be new and unused, and shall conform in all respects to all requirements therefor provided in the Final Functional Specifications. 5. Computer Hardware 5.1 The Sale of Computer Hardware Supplier shall sell to Customer all of the computers and information processing equipment listed in Schedule B attached hereto (collectively, the "Computer Hardware"). Supplier shall not make any substitute for the Computer Hardware of any other model, capacity or manufacturer without the prior written consent of Customer. 5.2 Delivery and Installation Supplier shall arrange for delivery of the Computer Hardware to the Installation Site in accordance with the Implementation Plan set forth in Schedule C. Shipment of the Computer Hardware shall be F.O.B. -4- Customer's receiving point at the Installation Site. Supplier shall pay all reasonable transportation and insurance charges for the Computer Hardware. Supplier shall be responsible for moving the Computer Hardware from Customer's receiving point to the Installation Site. Supplier shall bear the risk of loss or damage to the Computer Hardware while in transit to Customer's premises and the Installation Site. Customer shall bear all risk of loss or damage to the Computer Hardware after delivery to the Installation Site, unless such loss or damage is due to negligence or willful acts of Supplier, its employees, agents, representatives or subcontractors, or defects in the Computer Hardware. After delivery to the Installation Site, Supplier shall install the computer Hardware, as set forth in the Implementation Plan. Customer has the right to delay the start of delivery of Computer Hardware as set forth in the Implementation Plan for a period not to exceed one-hundred twenty (120) days by notifying Supplier in writing.5.3 Title to Computer Hardware Supplier warrants that Customer shall acquire good and clear title to the Computer Hardware, free and clear of all liens and encumbrances. Title and ownership of the Computer Hardware shall remain vested in Supplier until delivery to and acceptance by Customer of the Computer Hardware, at which time Supplier shall execute and deliver to Customer a bill of sale for the Computer Hardware. 5.4 Testing The Computer Hardware shall be configured, assembled and tested at Supplier's offices prior to shipment to Customer. A Customer employee or representative may participate in all of Supplier's testing procedures prior to shipment. 5.5 Capacity Supplier warrants that the Computer Hardware meets all requirements included in the Final Functional Specifications, including but not limited to capacity requirements. 5.6 New Parts and Components Supplier covenants and represents that the Computer Hardware and all of its parts and components will be new and unused. 6. Software -5- 6.1 Software Modules The Software to be developed and licensed hereunder shall be modular and each of the modules are identified and set forth in Schedule B. The modules shall be developed and implemented in accordance with the Implementation Plan set forth in Schedule C. 6.2 Detailed Design Specifications For each Software module Supplier shall, with Customer's full co- operation, gather the necessary data and develop detailed design specifications which shall be included in the Final Functional Specifications. The detailed design specifications shall include for each Software module: flow charts, program descriptions, file layouts, report layouts and screen layouts. 6.3 Custom Modifications Supplier shall make certain modifications to the Software, prior to delivery of same to Customer, as specified in Schedule F annexed hereto. The Software and the Documentation (as hereinafter defined) shall be deemed to include all such modifications for all purposes hereunder. The total charge for such modifications shall be included in the System Price (as hereinafter defined). In the event the Software as modified hereunder is accepted, then Customer shall be deemed the owner of such modifications and Supplier shall not distribute the Software with such modifications to any other party unless it first agrees to pay Customer a reasonable royalty, pursuant to such other reasonable terms as the parties may agree upon. 6.4 Coding and System Testing by Supplier Supplier shall commence coding and provide the necessary Software programming modifications specified in Schedule F. Upon completion of the program coding for each Software module, Supplier shall perform system testing as set forth in the Implementation Plan. Supplier shall notify Customer when program coding is complete and system testing has commenced. Upon completion of the program coding and system testing, Supplier shall install each Software module at the Installation Site pursuant to the Implementation Plan. 6.5 License Supplier hereby grants to Customer a nonexclusive, nontransferable, irrevocable, perpetual license (or sublicense, if software is owned by a -6- third party) (collectively referred to herein as the "License") to use, modify and maintain the Software. The term of the License shall commence upon the delivery of the Software to the Installation Site. Supplier shall deliver the Software modules to the Installation Site as set forth in the Implementation Plan attached hereto as Schedule C. Supplier shall deliver to Customer one copy of the Software on magnetic storage media.6.6 Scope of License Customer may use the Software at the Installation Site, at its executive offices and at any other site where it conducts distribution of goods either directly or through affiliated entities. Customer shall have the right to reproduce the Software, as necessary, for its use, modification and maintenance. 6.7 Supplier's Property The Software (exclusive of the modifications made thereto pursuant to this Agreement) shall remain the sole and exclusive property of Supplier and shall not be sold, revealed, disclosed or otherwise communicated, directly or indirectly, by Customer to any person, company or institution whatsoever other than as set forth herein. No title to the Software (exclusive of the modifications made thereto pursuant to this Agreement) or ownership of the Software (exclusive of the modifications made thereto pursuant to this Agreement) or any part thereof is hereby transferred to Customer. 6.8 Source Code Escrow Customer shall be entitled to a fully commented and documented copy of the source code form of the Software, a listing thereof and all relevant commentary, including explanation, flow charts, algorithms and sub-routine descriptions, memory and overlay maps and other documentation of the source code ("Commentary"), and may use same for its own benefit upon the occurrence of any one or more of the following events: (i) the sale or other disposition by Supplier of all, or substantially all, of its assets or properties, or Supplier's ceasing doing business and its business is not continued by another corporation or entity, or is continued by another corporation or entity which Customer for reasonable cause deems unsatisfactory; (ii) if Supplier shall (a) -7- generally not be paying its debts as they become due, (b) file, or consent, by answer or otherwise, to the filing against it of a petition for relief or reorganization or arrangement or any other petition in bankruptcy or insolvency under the laws of any jurisdiction, (c) make an assignment for the benefit of creditors, (d) consent to the appointment of a custodian, receiver, trustee or other officer with similar powers for Supplier, or for any substantial part of the property of Supplier, or (e) be adjudicated insolvent, (f) if any governmental entity of competent jurisdiction shall enter an order appointing, without consent of Supplier, a custodian, receiver, trustee or other officer with similar powers with respect to Supplier, or with respect to any substantial part of the property belonging to Supplier, or (g) if any order for relief shall be entered in any case or proceeding for liquidation or reorganization or otherwise to take advantage of any bankruptcy or insolvency law of any jurisdiction, or ordering the dissolution, winding- up or liquidation of Supplier, or if any petition for any such relief shall be filed against Supplier and such petition shall not be dismissed or stayed within ____________ (_____) days; or (iii) Supplier is in material default of performance under this Agreement.No later than the time of Supplier's delivery of each module of the Software to Customer as specified herein, Supplier shall place in escrow the source code with an escrow agent approved by Customer ("Technology Escrow Agreement"). 6.9 Updates Supplier shall provide Customer with any updates, enhancements and correction of any defects, including appropriate documentation, to the Software which may become available from Supplier during the Warranty Period, as defined herein, for no additional fee. After the Warranty Period, provision of updates and enhancements shall be subject to the terms and conditions of any System maintenance agreement between the parties. 7. Compensation 7.1 The System Price The price for the System shall include the Material Handling Hardware, Computer Hardware and Software, all services and expenses necessary to develop or modify the Software to meet Customer's requirements, and all services and expenses necessary to install, test and train Customer's employees on the use of the System. The price for the -8- System is ____________ dollars ($___________) and includes all of the elements set forth in Schedule B and the services set forth in Schedule H. Supplier represents that all of the Material Handling Hardware, Computer Hardware and Software are being offered to Customer at a discount from Supplier's current published prices for these elements of the System (the "Customer discount").The price set forth herein shall become the firm fixed price for the development of the System ("System Price") upon Customer's written acceptance of the Final Functional Specifications. During the implementation of the System, Supplier may recommend that Customer purchase additional Material Handling Hardware or Computer Hardware or Customer may determine that it does not require certain portions of the Material Handling Hardware or Computer Hardware. Upon mutual written agreement, the appropriate Schedule may be amended and substituted and the System Price will be changed accordingly. 7.2 Payments Customer shall make payments to Supplier in accordance with the System Payment Schedules set forth in Schedule D-1. 7.3 Subcontractors Nothing provided herein shall create any obligation on the part of Customer to pay or to see to the payment by Supplier of any monies to any subcontractor, supplier or vendor, nor create any relationship in contract or otherwise, express or implied, between any such subcontractor, supplier or vendor and Customer. 8. Change Procedures No change in or modification, termination of discharge of this Agreement or any part hereof, in any form whatsoever, shall be valid or enforceable unless it is in writing and signed by both parties. Supplier in developing the System may make minor modifications to the Software and Final Functional Specifications if such minor modifications do not limit, diminish or affect the functional operation or use of the System or its output, or result in the System failing to comply with the volume and response time criteria contained in the Final Functional Specifications and this Agreement. 9. Services and Documentation -9- 9.1 Implementation Services Supplier shall provide installation, training, customization and conversion services as set forth in the Implementation Plan. These services will be undertaken by Supplier and will be included in the System Price. 9.2 Training Supplier shall provide training services in connection with the implementation of the System in accordance with the Training Schedule attached hereto as Schedule H. The cost of training shall be included in the System Price. 9.3 Documentation Supplier will provide to Customer the documentation for the Material Handling Hardware, Computer Hardware and Software including relevant product literature, operator's and user's manuals, training materials, guides, technical manuals and any other documentation reasonably required for use and operation of the Material Handling Hardware, Computer Hardware and Software as set forth in Schedule B (the "Documentation"). Ten (10) copies of the Documentation shall be delivered upon execution of this Agreement. Customer may make as many copies of the Documentation as is necessary for its own use. 9.4 Project Leaders; Personnel Supplier shall appoint a Project Leader to coordinate all Supplier activities, or any of its subcontractors' activities, in connection with the implementation of the System. The services of the Project Leader shall be included in the System Price. Through Final System Integration Acceptance (as such term is defined in Section 11), Supplier shall have not less than the full time personnel assigned to this project required in accordance with the Implementation Plan. Customer shall appoint a Project Leader to coordinate all of Customer's activities in connection with the implementation of the System. Customer may change the Project Leader from time to time upon prior written notice to Supplier. In the event that any employee of Supplier, or of any of its subcontractors, performing services hereunder is found to be unacceptable to Customer, Customer shall notify supplier of such fact and Supplier shall immediately remove said employee or subcontractor -10- from performing services for Customer and provide a qualified replacement.9.5 Status Meetings The parties agree to participate in regularly scheduled meetings, during which the status of the Implementation Plan will be reviewed and discussed. At each status meeting, Supplier shall provide Customer with a detailed progress report providing (a) the current status of the services relative to the Implementation Plan, and (b) a listing of actual or anticipated problem areas, the impact thereof on the performance of the services and required actions to be taken by Supplier or Customer, to remedy the problem. 10. Delivery and Implementation 10.1 Deliverables and Progress Reports Deliverables and progress reports provided to Customer by Supplier shall be reviewed by Customer. Customer shall review each such deliverable and report, and shall notify Supplier of its acceptance or rejection within ______________ (______) business days from Customer's receipt thereof. Acceptance shall not be unreasonably withheld. Any rejection shall state specifically the manner in which the deliverable or report is defective. In the event of rejection, Supplier shall correct any deficiencies and shall resubmit such deliverable or progress report for acceptance by Customer in accordance with this Section. 10.2 Delivery, Installation and Implementation Supplier will deliver the Material Handling Hardware, Computer Hardware and Software to Customer's Installation Site and install same in accordance with the Implementation Plan. Supplier acknowledges that timely installation of the System is of the essence and further acknowledges that the failure to implement the System according to schedule shall result in expense and damage to Customer. 11. Acceptance Testing 11.1 Material Handling Hardware Testing After completion of the installation of the Material Handling Hardware in accordance with the Implementation Plan, Supplier will notify Customer in writing that Supplier has completed the installation -11- of the Material Handling Hardware, that the Material Handling Hardware has been modified, as required, and tested by Supplier, and that the Material Handling Hardware is fully operational and ready for acceptance testing by Customer (the "Material Initial Acceptance Test"). Customer, with the cooperation and assistance of Supplier, shall conduct the Material Initial Acceptance Test. Customer shall have thirty (30) business days to conduct the Material Initial Acceptance Test, which test shall demonstrate to Customer's satisfaction that all of the Material Handling Hardware set forth in this Agreement has been provided and the Material Handling Hardware performs in compliance with the Final Functional Specifications.11.2 Computer Hardware Testing After completion of the installation of the Computer Hardware in accordance with the Implementation Plan, Supplier will notify Customer in writing that Supplier has completed the installation of the Computer Hardware, that the Computer Hardware has been modified, as required, and tested by Supplier, and that the Computer Hardware is fully operational and ready for acceptance testing by Customer (the "Computer Initial Acceptance Test"). Customer, with the cooperation and assistance of Supplier, shall conduct the Computer Initial Acceptance Test. Customer shall have thirty (30) business days to conduct the Computer Initial Acceptance Test, which test shall demonstrate to Customer's satisfaction that all of the Computer Hardware set forth in this Agreement has been provided and the Computer Hardware performs in compliance with the Final Functional Specifications. 11.3 Software Testing After completion of the installation of each Software module in accordance with the Implementation Plan, Supplier will notify Customer in writing that Supplier has completed the installation of such Software module, that such Software module has been modified, as required, and tested by Supplier, and that such Software module is fully operational and ready for acceptance testing by Customer (the "Software Initial Acceptance Test"). Customer, with the cooperation and assistance of Supplier, shall conduct the Software Initial Acceptance Test for such Software module. Customer shall have thirty (30) business days to conduct the Software Initial Acceptance Test for each Software module, which test shall demonstrate to Customer's satisfaction that the Software modules set forth in this Agreement have -12- been provided and each Software module performs in compliance with the Final Functional Specifications.11.4 System Integration Testing After the acceptance tests as set forth in Sections 11.1 through 11.3 above, Customer, with the cooperation and assistance of Supplier, shall conduct the Initial System Integration Test utilizing all components of the System. Customer shall have thirty (30) business days to conduct the Initial System Integration Test for the System, which test shall demonstrate to Customer's satisfaction that (i) all of the functions of the System set forth in this Agreement have been provided and the System performs in compliance with the Final Functional Specifications, and (ii) those other criteria to be mutually agreed upon by the parties to test the System in its integrated state. "Initial System Integration Acceptance" shall mean receipt by Supplier of written notification from Customer that the Initial System Integration Test has been successfully completed. After Initial System Integration Acceptance, live testing of the System shall be conducted for a ____________ (______) month period ("Final System Integration Test"). "Final System Integration Acceptance" shall mean the receipt by Supplier of written notification from Customer that the live testing of the System has been successfully completed. 11.5 Corrections If the Material Handling Hardware, Computer Hardware or any Software module fails to pass an Acceptance Test as provided for in Sections 11.1 through 11.3, or if the System fails to pass the Initial System Integration Test or Final System Integration Test as provided for in Section 11.4, Customer shall so notify Supplier in writing within ____________ (______) business days of the determination that the acceptance test has failed, specifying the nature of such failures, and Supplier shall have ____________ (______) business days to correct such failures. Customer shall then have a period of ____________ (______) business days (or ____________ (______) business days for Final System Integration Test) to reconduct any and all of the foregoing acceptance tests to verify corrections. The testing and correction process may be repeated until acceptance, at Customer's sole discretion. 12. Warranties -13- 12.1 Warranty Period For purposes of this Agreement "Warranty Period" shall mean the period which is ____________ (______) year(s) from the date of the Final System Integration Acceptance. 12.2 System Warranties Supplier warrants that the System will meet the functional, performance, reliability and other business requirements and intended uses of Customer as provided in the Final Functional Specifications and is fit for such intended uses. The Software and each module or component and function thereof shall be capable of operating fully and correctly in conjunction with the Material Handling Hardware and Computer Hardware. Supplier warrants to Customer that for the Warranty Period and for as long as there is an agreement for System maintenance in effect between the parties, the system shall (i) be free from defects in material and workmanship and remain in good working order; and (ii) function in all respects in accordance with the Final Functional Specifications. 12.3 Remedies for Breach of System Warranties In the event that the System does not meet the warranties herein, Supplier shall provide, at no charge, the necessary software, hardware or services required to attain the levels or standards set forth in said warranties. 12.4 Ownership Warranty Supplier warrants that it owns or otherwise has the right to license the Software to Customer hereunder and that it possesses all rights and interests in the Software necessary to enter into this Agreement. 12.5 Service Warranties Supplier warrants that each of its employees assigned to perform any work hereunder or under any System maintenance agreement between the parties, shall have the proper skills, training and background so as to be able to perform in a competent and professional manner and that all work will be so performed. 12.6 Response Time and Capacity Warranties -14- Supplier warrants that, for the Warranty Period, the System shall meet all System specifications for computer response time and capacity set forth in the Final Functional Specifications. 12.7 Service Warranty During the Warranty Period and for as long as there is a System maintenance agreement in effect between the parties, Supplier warrants that it shall remedy any failure, malfunction, defect or nonconformity in the System, as follows: (i) Critical Failures. Supplier agrees that it will provide a response by as many qualified and knowledgeable representatives as necessary within ____________ (______) hour(s) after notification by Customer, to remedy a Critical Failure. Such representative(s) will furnish continuous efforts to remedy the Critical Failure on an emergency or highest priority basis. For purposes of this Agreement, a "Critical Failure" will have occurred if Customer has essentially no effective use of any material component of the System. (ii) Noncritical Failures. Supplier agrees to respond to any request for service due to a malfunction, defect or nonconformity (a "Noncritical Failure") as soon as reasonably possible, but in no event later than eight (8) hours after receipt of notification and request by Customer. Supplier agrees that it will provide a response by a qualified and knowledgeable representative or representatives, and that such representative(s) will furnish best efforts to remedy the Noncritical Failure. 13. Rights and Obligations 13.1 Confidentiality Supplier and Customer each agree to hold in strictest confidence any information and material which is related to either party's business, or which is designated as proprietary and confidential herein or otherwise by either party in connection with the transactions contemplated by this Agreement. Each party agrees not to make use of such designated information and material other than for the performance of this Agreement. Proprietary and confidential information includes information related to research, trade secrets, client lists, salaries or business affairs of the parties to this Agreement or their clients. The parties' obligations of confidentiality under this Agreement shall survive -15- termination of this Agreement. Both parties acknowledge that disclosure of confidential information in violation of this Section 13.1 will immediately give rise to continuing irreparable injury to the aggrieved party inadequately compensable in damages at law. Accordingly, such aggrieved party shall be entitled to obtain immediate injunctive relief against the breach or threatened breach of any of the aforesaid undertakings, in addition to any other remedies which may be available, and the other party hereby consents to the obtaining of such injunctive relief. Notwithstanding the foregoing, Supplier agrees that Customer shall be permitted to disclose to its employees and authorized agents aspects of the System which are reasonably necessary to Customer's use thereof, or required by applicable law, rule or regulation. The obligations of this Section shall apply to employees, subcontractors or agents of Supplier. Supplier shall advise, in writing, each of its employees, subcontractors or agents of their obligations hereunder.13.2 Indemnity Supplier, at its own expense, shall indemnify, defend and hold harmless Customer, its officers, directors, employees, agents and representatives and defend any action brought against same with respect to any claim, demand or cause of action, including attorney's fees, to the extent that it is based upon a claim that the Material Handling Hardware, Computer Hardware or Software used hereunder infringes or violates any patents, copyrights, trade secrets, licenses, or other property rights of any third party. Customer shall promptly provide Supplier with written notice of any claim which Customer believes falls within the scope of this Section. In the event that the Material Handling Hardware, Computer Hardware or Software or any portion thereof is held to constitute an infringement and its use is enjoined, Supplier shall at its own expense, (i) modify the infringing Material Handling Hardware, Computer Hardware or Software without impairing in any material respect its functionality or performance, so that it is noninfringing, (ii) procure for Customer the right to continue to use the infringing Material Handling Hardware, Computer Hardware or Software, or (iii) replace said Material Handling Hardware, Computer Hardware or Software with equally suitable, noninfringing equipment or software. Supplier agrees to indemnify, defend and hold harmless Customer for any liability or expense due to claims for personal injury or property damage arising out of (i) the furnishing or performance of the Material -16- Handling Hardware, Computer Hardware or Software, the services provided hereunder or by Supplier, its employees, agents, representatives or subcontractors, (ii) the fault, negligence or willful misconduct of Supplier, its employees, agents, representatives or subcontractors, or (iii) the use or operation of the Material Handling Hardware, Computer Hardware, Software or the System.13.3 Most Favored Customer Supplier agrees to treat Customer as its most favored customer. Supplier represents that all of the prices, terms, warranties and benefits granted by Supplier hereunder are comparable to or better than the equivalent terms being offered by it to any present customer of Supplier. If during the term of this Agreement, Supplier shall enter into arrangements with any other customer providing such customer more favorable terms, this Agreement shall thereupon be deemed amended to provide the same terms to Customer. 13.4 Taxes Unless imposition and payment thereof is being contested by Customer in good faith and by appropriate proceedings, Customer shall be responsible for all taxes, fees, assessments and other charges imposed by any federal, state, or local government or governmental agency resulting from this Agreement, the License granted hereby, or any activities hereunder, including, without limitation privilege, excise, sales, use, occupational and other taxes or amounts in lieu thereof paid or payable by Supplier (other than any income, franchise, privilege or like taxes on, or measured by, Supplier's net or gross income, including gross receipts taxes (other than retail sales and use taxes), capital, or net worth). 14. Events of Default by Supplier Events of Default shall include the following: (i) Except as expressly provided in subparagraphs (ii) through (vi) below, any material default or breach of this Agreement by Supplier which default or breach has or shall have continued for -17- a period of ____________ (______) days after notice from Customer of such default or breach unless such breach or default can be cured, but is not reasonably susceptible to cure within such ____________ (______) day period, in which case no Event of Default shall be deemed to have occurred or exist so long as Supplier has promptly commenced and shall diligently and continuously prosecute such a cure to completion; (ii) After giving effect to extensions of time, if any, provided in this Agreement, the development of the System, determined by reference to the Implementation Plan, is delayed by more than ____________ (______) days due to Supplier's or its subcontractor's fault or negligence; (iii) Supplier has abandoned the project; (iv) Supplier shall (a) generally not be paying its debts as they become due, (b) file, or consent, by answer or otherwise, to the filing against it of a petition for relief or reorganization or arrangement or any other petition in bankruptcy, or insolvency under the laws of any jurisdiction, (c) make an assignment for the benefit of creditors, (d) consent to the appointment of a custodian, receiver, trustee or other officer with similar powers for Supplier, or for any substantial part of the property of Supplier, (e) be adjudicated insolvent; or (f) if any governmental entity of competent jurisdiction shall enter an order appointing, without consent of Supplier, a custodian, receiver, trustee or other officer with similar powers with respect to Supplier, or if any petition for any such relief shall be filed against Supplier and such petition shall not be dismissed or stayed within ____________ (______) days; (v) Supplier has failed to obtain or maintain the types and levels of insurance required by Section 16.5 herein; (vi) Breach by Supplier of any of the warranties set forth in Section 12. 15. Termination 15.1 Grounds for Termination -18- Customer shall, reserving to itself the right to receive such other damages and remedies as it may have pursuant to this Agreement or at law or in equity, have the right to terminate this Agreement, in whole or in part, by giving written notice of termination to Supplier of the occurrence of any of the following: (1) Final Functional Specifications have not been mutually agreed to by the parties within ____________ (??) days following the execution of this Agreement; or (2) the occurrence of an Event of Default. Any notice of termination hereunder (a "Termination") shall specify the date Supplier is to discontinue all work on the project (the "Termination Date"), and Supplier shall discontinue all work hereunder on the Termination Date. 15.2 Termination for Event of Default (a) If an Event of Default occurs as set forth in Section 14, and Customer shall have given Supplier notice of Termination hereunder, all work by Supplier hereunder shall terminate and Customer shall have the rights and remedies herein provided. (b) Nothing contained in this Agreement shall be deemed to preclude Supplier from attempting to cure any default or failure of performance prior to Termination unless and until Customer notifies Supplier in writing to discontinue such efforts. (c) Nothing contained in this Agreement shall be construed to prevent Customer from using the System, as delivered at that time, to provide the basis for continuing the development of the System, or similar equipment or software, by itself or third parties. (d) Upon Termination for an Event of Default, Supplier shall: (1) not incur or pay any further obligation pursuant to this Agreement beyond the Termination Date, and (2) turn over to Customer or its designees all books, records, documents and material specifically related hereto, including, but not limited to, the documentation and the technical data necessary to complete the System and/or operate and maintain the Material Handling Hardware, Computer Hardware and Software (including object and source code) developed, manufactured and/or supplied up to and including the Termination Date. (e) Customer's option hereunder shall be in addition to and not in lieu of any other remedies contained herein. Termination by Customer hereunder shall be in addition to all other remedies provided herein, as well as those available at law or in equity. -19- 15.3 Remedies in the Event of Default (a) Upon Termination for an Event of Default, Customer will have the right, but not the obligation, to complete the System with its own personnel and/or with other contractors by whatever method it deems expedient. This obligation for payment shall survive any Termination of this Agreement. (b) Upon Termination for an Event of Default, Supplier shall be liable for all damages resulting from the default, including, without limitation, either the difference between the System Price and the amount actually expended by Customer to complete the System, or the difference between the "Value of the System" as existing on the Termination Date and the amounts theretofore paid and/or owing to Supplier under this Agreement. Supplier shall also remain liable for any other liabilities and claims related to the Agreement. For purposes of this Agreement, the "Value of the System" shall mean the sum of the prices listed on Schedule D-2 for only those component parts of the System which have passed Initial Acceptance Tests. (c) Customer may also bring any suit or proceeding for specific performance or for an injunction or to recover damages or to obtain any other relief or for any other purpose proper under this Agreement or otherwise. 15.4 Non-Waiver; Remedies Cumulative No course of dealing of either party, nor any delay or omission of Customer in exercising any right or remedy granted under this Agreement shall operate as a waiver of any rights of Customer hereunder, and every right and remedy hereunder shall be cumulative and, unless otherwise expressly provided, shall be in addition to every other right or remedy provided for herein or now or hereafter existing at law or in equity or by statute or otherwise. The exercise or attempted exercise of any such rights or remedies shall not preclude the simultaneous or later exercise of any or all other such rights or remedies. Such rights or remedies may be exercised from time to time and as often as shall be deemed expedient. -20- 16. General 16.1 Force Majeure Neither party shall be liable to the other for any delay or failure to perform due to acts of God or causes beyond its reasonable control. Performance times shall be considered extended for a period of time equivalent to the time lost because of any such delay. 16.2 Notices and Requests All notices provided for in this Agreement shall be given in writing and shall be deemed to be given (i) if by hand delivery, upon receipt thereof, (ii) the day following delivery to a recognized overnight carrier, (iii) when sent by confirmed telecopy, or (iv) if mailed, ____________ (______) days after the day it is deposited in the U.S. mails, postage pre-paid, certified or registered, return receipt requested, and addressed as follows: if to Customer: ____________________________________ ____________________________________ Attn:________________________________ if to Supplier: ____________________________________ ____________________________________ Attn:_________________________________ or to such other address as either party may designate by written notice to the other. 16.3 Survival All provision of this Agreement relating to confidentiality, non- disclosure and indemnification shall survive the termination of this Agreement. 16.4 No Waiver The waiver or failure of either party to exercise or enforce any right in any respect provided for herein shall not be deemed a waiver of any further right hereunder. 16.5 Insurance -21- Supplier shall procure and maintain for itself and its employees all insurance coverage as required by federal or state law, including workers' compensation insurance. From the date hereof and throughout the Warranty Period, Supplier agrees to maintain limits of _____________ Dollars ($_____________) comprehensive general liability coverage, including blanket contractual broad form property damage, products and completed operations coverage, and _____________ Dollars ($_____________) automobile coverage. Supplier shall furnish to Customer a certificate of insurance evidencing such coverage and naming Customer as an additional insured. Each such certificate shall confirm that the policies covered thereby include a requirement of not less than _____________ (______) days prior written notice to Customer of any material alteration or cancellation thereof by either Supplier or the insurer, and that it may not be cancelled or invalidated by any action or inaction of Supplier and shall insure Customer regardless of any breach or violation of any warranty, declaration or condition in such policies or any application therefor by Supplier. Supplier waives its rights of subrogation against Customer. 16.6 Personnel Rules and Regulations Supplier personnel will comply with Customer's work rules and security regulations while working at the Installation Site. 16.7 Advertising or Publicity Supplier shall not use the name of Customer, its officers, directors, employees or agents, in advertising or publicity releases or otherwise without securing the prior written consent of Customer in each instance. 16.8 Independent Contractor In performance of this Agreement, Supplier is acting as an independent contractor. Personnel supplied by Supplier hereunder, are not Customer's personnel or agents, and Supplier assumes full responsibility for their acts. Supplier shall be solely responsible for the payment of compensation of employees, agents, representatives and subcontractors of Supplier assigned to perform services hereunder. Customer shall not be responsible for payment of workers' compensation, disability benefits, unemployment insurance or for withholding income taxes and social security for such individuals, but such responsibility shall be that of Supplier. -22- 16.9 Governing Law This Agreement and performance hereunder shall be governed by and construed in accordance with the laws of the State of New York. Any and all proceedings relating to the subject matter hereof shall be maintained in the courts of the State of New York or the Federal District Courts in New York County, which courts shall have exclusive jurisdiction for such purpose. 16.10 Enforceability If any provision of this Agreement shall be held to be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall in no way be affected or impaired thereby. 16.11 Assignment This Agreement and the rights and duties of Supplier hereunder shall not be assigned or delegated by Supplier to any other person or entity without the prior written consent of Customer. This Agreement, or any or all of Customer's rights hereunder, may be assigned by Customer to any third party, transferee, successor, or assign of Customer, on notice to, but without the consent of, Supplier, and shall inure to the benefit of such third party, transferee, successor, or assign of Customer. 16.12 Remedies The rights and remedies of Customer set forth in this Agreement are not exclusive and are in addition to any other rights and remedies available to it at law or in equity. 16.13 Entire Agreement Each party acknowledges that this Agreement is the complete and exclusive statement of the agreement between the parties, which supersedes and merges all prior proposals, understandings and all other agreements, oral and written, between the parties relating to the subject matter of this Agreement. This Agreement may not be modified or altered except by a written instrument duly executed by both parties. IN WITNESS WHEREOF, the parties hereto have signed this Agreement the date and year first written above by their duly authorized representatives. RICK'S RECORDS, L.P. PERFORMANCE BUILDERS, INC. -23- By:____________________ By:_______________________ Title:___________________ Title:______________________