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-1- § 3.17 Form: User Oriented Turnkey Hardware Purchase Agreement AGREEMENT made this _____ day of ____________ by and between Seller, a New York Corporation with its principal place of business at New York, New York and Buyer, a New York Corporation with its principal place of business at New York, New York. WHEREAS, Buyer desires to acquire a data processing system to perform a substantial part of its operations; and WHEREAS, Buyer desires to license certain software owned by Seller, and to purchase from Seller certain computer equipment upon which to run the software; and WHEREAS, Seller desires to license certain software to Buyer, and to sell to Buyer certain computer equipment upon which to run the software. NOW, THEREFORE, in consideration of the mutual promises contained herein, the parties agree as follows: 1. The System 1.1 System Definition Seller agrees to supply to Buyer a data processing system (the "System") as is partially defined in Seller's Specification Book ("Specification Book") and Seller's Operating Instructions Manual ("Operating Instructions Manual"). A copy of the Specification Book is attached hereto as Exhibit "1" and a copy of the Operating Instructions Manual is attached hereto as Exhibit "2" and their contents are expressly incorporated herein. Buyer agrees to pay for the System in accordance with the terms and conditions hereinafter set forth. The System shall consist of the Seller Licensed Software, and the Equipment, as those terms are hereinafter defined. 2. The Licensed Software2.1 License Seller hereby grants to Buyer a license in perpetuity to use the Seller proprietary software, including the Programs, Documentation and Training Manuals, set forth on Schedule "A" attached hereto (hereinafter the "Licensed Software"). 2.2 License Fee -2- Buyer shall pay to Seller for the license of each application of Seller Licensed Software the respective "License Fee" set forth in Schedule "A", in accordance with the payment terms set forth herein. Buyer shall pay to Seller the Software Initial Payment upon execution of this Agreement. 2.3 Seller's Property All aspects of the Seller's Licensed Software, including without limitation, programs and methods of processing, shall remain the sole and exclusive property of Seller and shall not be sold, revealed, disclosed or otherwise communicated, directly or indirectly, by Buyer to any person, company or institution whatsoever other than as set forth herein. It is understood that no title to or ownership of the Licensed Software, or any part thereof, is hereby transferred to Buyer. 2.4 Scope of License Buyer may use the Seller Licensed Software on any or all central processing units used, owned or controlled by Buyer or entities controlled or affiliated with Buyer, and like or similar organizations that may hereafter be formed or connected with Buyer. Irrespective of the number of central processing units owned or controlled by Buyer upon which the Licensed Software is used, Buyer shall pay only one "License Fee" for each application of Licensed Software licensed. Buyer shall have the right to reproduce the Seller Licensed Software, as necessary. 2.5. Ownership Seller warrants that it owns and possesses all rights and interests in the Seller Licensed Software necessary to enter into this Agreement, and shall indemnify and hold Buyer, its agents and employees, harmless from any loss, damage or liability for infringement of any United States patent right or copyright or other property right with respect to the use of the Licensed Software delivered hereunder; provided, that Buyer shall permit Seller to defend, compromise or settle said claim or infringement and give Seller all available information, assistance and authority to enable Seller to do so. 2.6 Updates Seller shall provide Buyer with any updates and enhancements including appropriate documentation to any application of Licensed Software which may become available from Seller for a period of one -3- year after Final Acceptance, for no additional fee except reasonable installation, media and handling charges.2.7 Programming Language Buyer understands that Seller represents that Licensed Software is written in COBOL for use with the Operating System Software set forth on Schedule "B". Buyer further agrees that its use of the Seller Licensed Software and the performance thereof in any other programming language and operating system combination is solely Buyer's responsibility unless Seller is engaged to convert or modify the Licensed Software to be operational under such circumstances. 3. The Equipment 3.1 Equipment and Price Seller shall sell to Buyer equipment listed on Schedule "C" attached hereto (the "Equipment"). Buyer shall pay for the Equipment in accordance with the terms and conditions set forth herein. 3.2 Additional Equipment Seller shall sell to Buyer additional equipment or equivalent equipment ("Additional Equipment") for Buyer's other offices, all as set forth in Schedule "D". The Additional Equipment shall be used for remote terminal operations and shall be connected via telephone lines to the Equipment in New York. The delivery date for the Additional Equipment shall be within two years from Final Acceptance. Fifteen percent (15%) of the purchase price for the Additional Equipment shall be payable upon order by Buyer. Seventy percent (70%) of the purchase price for the Additional Equipment shall be payable ten (10) days after Additional Equipment Acceptance. The remaining fifteen percent (15%) of the purchase price for the Additional Equipment shall be payable forty (40) days after Additional Equipment Acceptance. Any representations or warranties contained in this Agreement with respect to the System shall be applicable to the Additional Equipment. 3.3 Operating System Software Seller shall secure for Buyer sublicenses or direct licenses and associated maintenance agreements of all necessary Operating System Software Utilities including the Operating System Software listed in -4- Schedule "C". During the first year after installation, there shall be no charge for the maintenance of the Operating System Software. Thereafter, such maintenance agreements shall provide that the maintenance cost of the Operating System Software can either be paid for on an annual basis or on an hourly basis at the Manufacturer's rates then in effect. Under any licensing or sub-licensing agreement of Operating System Software and Utilities which Seller shall secure, Buyer shall have the right to make multiple copies of the licensed programs, and shall be entitled to use the licensed programs on multiple central processing units used by Buyer or entities owned or affiliated with Buyer at no additional licensing fee.3.4 Maintenance Seller warrants that the Equipment and Additional Equipment are eligible for maintenance under the Manufacturer's standard maintenance agreement. Seller shall secure for Buyer an acceptable maintenance agreement for the Equipment with the Manufacturer's maintenance division in New York City. The Additional equipment shall be maintained, at Buyer's election, by the Manufacturer or Seller. The fee for the maintenance service shall be at the Manufacturer's then prevailing rates which approximates the industry standard of one percent (1%) per month of equipment cost. At Buyer's option, the maintenance agreement shall be eligible for commencement upon date of installation of the Equipment. 3.5 Delivery The Equipment shall be available for delivery on or before January 1, 1985 (the "Equipment Delivery date"). Seller shall arrange for delivery of the Equipment to the installation site designated by Buyer on or about the Equipment Delivery Date. Seller shall arrange for all transportation and sufficient insurance to fully protect the Equipment. After delivery, Seller shall supervise the installation of the Equipment. Risk of damage or loss for whatever reason shall be upon Seller until the Equipment is safely set upon the loading dock at Buyer's installation site, at which time it shall pass to Buyer. Buyer shall pay all reasonable transportation charges for the Equipment. Prior to shipment, Seller shall inform Buyer of the estimated transportation charges. The scheduled Equipment Delivery Date for Equipment is January 1, 1985. Buyer has the right to delay delivery for a period not to exceed one hundred twenty (120) days by notifying Seller in writing on or before October 1, 1984. -5- 3.6 Testing The Equipment shall be configured, assembled and tested at the Manufacturer's factory prior to shipment to Buyer. 3.7 Payment for Equipment Upon execution of this Agreement, Buyer shall pay to Seller fifteen percent (15%) of the purchase price for the Equipment plus Operating System Software (the "Equipment Initial Payment"). Seventy percent (70%) of the purchase price for the Equipment shall be payable ten (10) days after Equipment Acceptance as hereinafter described. The remaining fifteen percent (15%) of the purchase price for the Equipment shall be payable forty (40) days after Equipment Acceptance. The Equipment payment schedule is set forth in Schedule "E", attached hereto. Additional Expenses as set forth in Schedule "F" are to be paid within thirty (30) days of receipt of invoice. 3.8 Site Preparation Buyer shall be responsible for supplying such space, lighting, utilities, air conditioning and other environmental requirements for the Equipment as the Manufacturer may reasonably direct. Seller shall promptly furnish such reasonable requirements as are acceptable to Buyer and upon advice from Buyer that such requirements have been fulfilled, Seller shall cause the installation site to be inspected and shall acknowledge that the site is suitable for effective installation and operation of the System or shall advise in what respect the installation does not comply with the stated requirements furnished by the Manufacturer. 3.9 Equipment Acceptance Equipment delivered hereunder shall be deemed to have been accepted ("Acceptance") when all of the following have occurred: (a) The Manufacturer certifies to Buyer that the Equipment including licensed and operating software has been properly installed and is ready for use. (b) The Equipment passes the Manufacturer's standard test procedures at Buyer's location. (c) The Equipment, including licensed Operating System Software, meet the Manufacturer's published specifications. -6- (d) The Preliminary Acceptance test for the Licensed Software previously completed at Seller's location is successfully completed on the installed Equipment at Buyer's location. (e) Under the control of Buyer's operators, each of three Software Applications has for a period of thirty (30) continuous days, been run on the installed Equipment with multiple runs using Buyer's supplied data in sufficient volumes and generating accurate results reasonably acceptable to both Seller and Buyer. 3.10 Title to Equipment Title and ownership of the Equipment shall remain vested in Seller until delivery to and acceptance by Buyer of the Equipment, at which time Seller shall execute and deliver a bill of sale for the Equipment. Seller warrants that Buyer, a related Buyer Entity, or its designated third-party lessor, shall acquire good and clear title to the Equipment being purchased hereunder, free and clear of all liens and encumbrances. Until such time as the Equipment shall be fully paid for, Buyer shall cooperate in executing any applicable U.C.C. financing statements necessary for Seller to maintain a security interest in the Equipment. After full payment has been made on the Equipment, Seller shall file the applicable U.C.C. satisfaction documents. 3.11 New Equipment Seller covenants and represents that the Equipment and all of its parts and components are new and unused, that Buyer shall be entitled to claim all available investment tax credits to the extent available with respect to the System and that Seller shall claim no such credits. 3.12 Equipment Warranty Seller warrants that the Equipment shall be free from defects in material and workmanship under normal use and that the Equipment shall remain in good working order for a period of ninety (90) days from date of Equipment Installation. Seller's Equipment warranty as herein set forth is the only warranty made by Seller and shall not be enlarged, diminished or affected by, and no liability or obligation, shall arise or grow out of Seller's rendering of technical or other advice or service in connection with Equipment or Licensed Software. -7- 3.13 Two Locations There are two installation sites for the Equipment to be delivered, installed, and accepted here under. The clauses in this Agreement with respect to Equipment are applicable to both installation sites. 3.14 Equipment for Seller Testing For the Licensed Software to be developed and delivered hereunder, Seller shall make available adequate equipment for Seller's testing purposes, at no additional charge to Buyer. 3.15. Equipment for Non-Seller Testing For Non-Seller software to be developed and delivered for Buyer, Seller shall arrange for sufficient equipment, at the equipment and service bureau charges set forth on Schedule "G". 3.16 Financing Option Seller understands that, at Buyer's option, some or all of the Equipment may be financed or leased through another party (hereinafter "Third-Party Lessor"). Seller agrees to sell the Equipment to any such Third-Party Lessor as Buyer may in writing direct upon the same or equivalent terms and conditions as set forth herein with respect to the sale to Buyer. Seller shall execute and deliver any documents necessary to effect such financing or leasing transaction. Any representations made by Seller or warranties extended by Seller herein shall continue to run to Buyer and be enforceable by Buyer irrespective of Buyer's entering into a financing or leasing transaction involving transfer of title or direct purchase by a Third-Party Lessor. 3.17 Equipment Substitution Seller may temporarily substitute equipment of equal or greater capacity and performance in the event any unit of ordered Equipment is unavailable to meet desired delivery requirements. Title to the substitute equipment shall at all times remain with Seller. Payment for the ordered Equipment shall commence in accordance with the payment terms of this Agreement only upon delivery, installation, and acceptance of ordered Equipment, with the exception that Buyer and Seller may mutually agree in writing to alter payment terms upon delivery and installation of substitute equipment. Equipment Maintenance charges shall not exceed maintenance charges for the ordered equipment as contracted. -8- 3.18 Equipment Upgrade It is recognized by the parties that either before or after delivery of the Equipment, Buyer may desire to upgrade or trade-in certain items of Equipment. Attached as Schedule "H" are the currently existing Manufacturer's guidelines with respect to trade-in and upgrade procedures. 3.19 Replacement of Components During the first year following Equipment Acceptance, if a unit of Equipment is inoperable more than ten percent (10%) of the time during Operational Use Time for any three (3) consecutive months as a result of Equipment malfunction not due to causes external to the Equipment, Buyer has the option to request replacement of such unit of Equipment at no additional charge. Buyer shall notify Seller in writing at the end of any calendar month that any unit of Equipment experiences the aforesaid inoperability. Operational Use Time is the time covered by a Manufacturer's Equipment Maintenance Agreement. The percentage of inoperability is determined by taking the inoperable down time as the numerator and dividing by the Operational Use Time as the denominator. If Buyer requests replacement pursuant to this paragraph, Seller shall replace the unit as soon as reasonably possible with comparable equipment of capacity and performance equal to or greater than the replaced unit. 3.20 Defective Equipment Written notice and an explanation of circumstances concerning any claim that the Equipment has proved defective in material or workmanship shall be given promptly by Buyer to Seller. Except as provided hereunder, Buyer's sole and exclusive remedy in the event of such defect is expressly limited to the correction of the defect by adjustment, repair or replacement, at Seller's election and sole expense. In the event Buyer wishes to employ any non-Manufacturer's attachment, feature, or device on the Equipment, or any part thereof, it shall first notify Seller in writing. Buyer shall be entitled to install such attachment, feature or device, without affecting Seller's representations and warranties hereunder as to the Equipment, unless Seller, within a reasonable time not to exceed thirty days, provides written notice to Buyer stating reasonable grounds upon which it concludes such attachment, feature or device will adversely affect its obligations, including any warranty or representation hereunder. If after receipt of -9- Seller's notice, Buyer employs such attachment, feature or device, Seller shall not be liable for those representations and warranties which it reasonably concluded would be adversely affected.Buyer understands that Seller, by not objecting to the use of such attachment, feature or device, does not in any way represent or warranty such attachment, feature or device, including its performance in conjunction with the Equipment. 3.21 Patent Indemnity Seller shall defend or settle any suit or proceeding brought against Buyer based on a claim that any unit of Equipment, or part thereof constitutes an infringement of any existing United States patent right, provided Seller is notified promptly in writing and is given complete authority and information required for the defense, and Seller shall pay all damages or costs awarded therein against Buyer and any other cost incurred by Buyer in defense of any suit, but shall not be responsible for any cost, expense or compromise incurred or made by Buyer without Seller's prior written consent. 4. Rights and Obligations4.1 Confidentiality Seller and Buyer each agrees to hold in strictest confidence any information and material which is related to either party's business or 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, development, pricing, trade secrets, customer lists, salaries or business affairs of the parties to this Agreement. The parties' obligations of confidentiality under this Agreement shall survive termination of this Agreement. 4.2 Expenses Reasonable out-of-pocket expenses, relating to travel and lodging incurred by Seller shall be reimbursed by Buyer. Seller shall endeavor to bill Buyer once each month for such expenses, and shall provide reasonable vouchers and associated documentation. 4.3 Source Code -10- Seller shall provide to Buyer all source codes for the entire Licensed Software provided hereunder. 4.4 Equipment Upgrade If the Manufacturer shall introduce newer or later models of the Equipment or any of its items or elements, Seller shall promptly notify Buyer of the introduction thereof, and as to any such models introduced prior to shipment, Buyer shall have the right to substitute such newer or later model, and receive an appropriate credit for the older model. In the event that there is a price reduction by the Manufacturer any time prior to delivery of the Equipment, Seller shall pass along to Buyer the appropriate price reduction. Seller recognizes that prior to the delivery of the Equipment, Buyer may find it necessary or desirable to make modifications in the configuration of the Equipment and accordingly agrees that Buyer may add to, substitute or delete items or components of the Equipment (at Seller's published list prices less the same discount as is applicable to the Equipment herein) provided that notice shall be given by Buyer not less than ninety days prior to the scheduled installation. 4.5 Training Training for Buyer personnel on the Manufacturer's Equipment and operating systems is available to Buyer at the Manufacturer's Education Centers. Schedule "J" is a schedule of currently effective prices for courses, and the recommended education for different levels of Buyer personnel. 4.6 Disclaimer EXCEPT FOR THOSE WARRANTIES SET FORTH IN THIS AGREEMENT, SELLER MAKES NO OTHER WARRANTIES, EXPRESS OR IMPLIED INCLUDING BUT NOT LIMITED TO ANY IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE. IN NO EVENT SHALL SELLER BE LIABLE FOR LOSS OF PROFITS, SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES ARISING OUT OF THE BREACH OF ANY PROVISION OF THIS AGREEMENT. 4.7 Terminal Response Time Seller warrants that with respect to each transaction initiated on an in- house terminal the System shall receive, process and respond to such -11- transaction on the average no greater than 3 seconds, and in no event greater than 5 seconds, from the time the transaction is completely keyed to the time the beginning of the appropriate System response appears on the terminal.4.8 Certain Failures of Performance (a) Buyer shall have the right to terminate this Agreement by giving written notice of termination to Seller of the occurrence of any of the following: 1. Slippage of final Implementation Schedule dates by more than ninety (90) days; 2. Inability of the Equipment or the System to substantially meet the performance criteria stated in this Agreement; or 3. For any material failure of performance by Seller, if within thirty (30) days after the giving of written notice to Seller of such failure of performance, Seller has not cured such failure; or if such failure of performance cannot be cured in thirty days, if Seller has not commenced curing such failure of performance promptly and within such thirty day period is not effectuating such cure and does not cure such failure of performance within a reasonable time. (b) (1) In the event this Agreement is terminated prior to acceptance of the Licensed Software, Seller shall refund to Buyer all payments made for the Equipment and all payments made for Seller Software License Fees. (2) The provisions set forth in this paragraph are the sole remedies available to the parties for termination of this Agreement prior to Acceptance. In the event this Agreement is terminated after Acceptance the parties shall not be limited by this paragraph. 4.9 Most Favored Customer For the complete period covered by this Agreement, Seller agrees to treat Buyer as its most favored customer. In according such treatment, Seller agrees not to reassign any staff assigned to Buyer projects to other projects until such time as the Buyer projects are satisfactorily completed. Seller represents that all of the prices, terms, warranties and benefits granted by Seller hereunder are comparable to or better than the equivalent terms being offered by it to any present customer of Seller. If during the term of this Agreement Seller shall enter into arrangements with any other customer providing such customer more favorable terms, -12- this Agreement shall thereupon be deemed amended to provide the same terms to Buyer.5. General 5.1 Force Majeure The parties hereto shall not be responsible for any failure or delay in the performance of any obligations hereunder caused by acts of God, flood, fire, war or public enemy. 5.2 Notices and Requests All notices and requests in connection with this Agreement shall be given or made upon the respective parties in writing and shall be deemed to be given as of the day such notice or request is deposited in the U.S. mails, postage pre-paid, certified or registered, return receipt requested, and addressed as follows: Buyer: _________________________ Seller: _________________________ or to such other address as the party to receive the notice or request so designates by written notice to the other. 5.3 Entire Agreement Each party acknowledges that it has read this Agreement, understands it, and agrees to be bound by its terms and further agrees that it 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. 5.4 Governing Law This Agreement and performance hereunder shall be governed by and construed in accordance with the laws of the State of New York. Seller agrees that substantial portions of this Agreement were negotiated in New York and are to be performed in 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 sitting in New York, which courts shall have exclusive jurisdiction for such purpose. -13- 5.5 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. 5.6 No Waiver The failure of either party to exercise in any respect any right provided for herein shall not be deemed a waiver of any right hereunder. 5.7 Assignment This Agreement and the rights and duties hereunder shall not be assignable by the parties hereto except upon written consent of the other. Seller hereby consents to an assignment of this Agreement and any license granted hereunder to any Buyer affiliated company or entity. IN WITNESS WHEREOF, the parties hereto have signed this Agreement the date and year first written above by their duly authorized representative. BUYER By:_________________ SELLER By:_________________