<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
Commission file number 0-16633
THE JONES FINANCIAL COMPANIES, A LIMITED PARTNERSHIP
______________________________________________________________________
(Exact name of registrant as specified in its charter)
MISSOURI 43-1450818
______________________________________________________________________
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
201 Progress Parkway
Maryland Heights, Missouri 63043
______________________________________________________________________
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (314) 851-2000
__________________
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports,
and (2) has been subject to such filing requirements for the past 90 days.
YES X NO
____ ____
As of the filing date, there are no voting
securities held by non-affiliates of the Registrant.
<PAGE>
THE JONES FINANCIAL COMPANIES, A LIMITED PARTNERSHIP
INDEX
Page
Number
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statement of Financial Condition 3
Consolidated Statement of Income 5
Consolidated Statement of Cash Flows 6
Consolidated Statement of Changes in Partnership Capital 7
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Part II.OTHER INFORMATION
Item 1. Legal Proceedings 13
Signatures 14
<PAGE>
THE JONES FINANCIAL COMPANIES, A LIMITED PARTNERSHIP
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
ASSETS
(Unaudited)
June 30, Dec 31,
(Amounts in thousands) 1995 1994
Cash and cash equivalents $ 36,238 $ 36,682
Receivable from:
Customers 466,988 497,961
Brokers or dealers and clearing
organization deposits 20,710 16,604
Securities owned, at market value:
Trading securities 85,827 91,308
Investment securities 130,061 137,066
Office equipment, property and improvements,
at cost, net of accumulated depreciation and
amortization of $104,859 in 1995 and
$86,258 in 1994 135,227 125,764
Other assets 45,268 47,974
__________ __________
$ 920,319 $ 953,359
========== ==========
The accompanying notes are an integral part of these financial
statements.
<PAGE>
THE JONES FINANCIAL COMPANIES, A LIMITED PARTNERSHIP
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
LIABILITIES AND PARTNERSHIP CAPITAL
(Unaudited)
June 30, Dec 31,
(Amounts in thousands) 1995 1994
Bank loans $ 147,000 $ 165,000
Payable to:
Customers 291,333 293,324
Brokers or dealers and clearing
organizations 7,825 13,225
Securities sold but not yet purchased,
at market value 18,890 16,037
Accounts payable and accrued expenses 44,013 39,425
Accrued compensation and employee benefits 49,058 58,046
Long-term debt 42,730 41,779
__________ __________
600,849 626,836
Liabilities subordinated to claims
of general creditors 129,000 136,000
Partnership capital 190,470 190,523
__________ __________
$ 920,319 $ 953,359
========== ==========
The accompanying notes are an integral part of these financial
statements.
<PAGE>
THE JONES FINANCIAL COMPANIES, A LIMITED PARTNERSHIP
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
Three Months Ended Six Months Ended
(Amounts in thousands, June 30, June 24, June 30, June 24,
except per unit information) 1995 1994 1995 1994
Revenues:
Commissions $108,751 $ 96,530 $ 196,406 $209,248
Principal transactions 31,374 39,033 72,087 62,136
Investment banking 9,153 9,251 18,974 17,682
Interest and dividends 15,209 12,691 28,730 21,756
Other 11,011 8,618 19,739 16,714
________ ________ _________ ________
175,498 166,123 335,936 327,536
________ ________ _________ ________
Expenses:
Employee and partner
compensation and benefits 97,573 98,928 187,825 195,536
Occupancy and equipment 20,174 16,454 40,067 34,258
Communications and
data processing 12,785 11,788 25,279 21,134
Interest 7,908 6,975 15,836 12,310
Payroll and other taxes 5,474 5,378 12,662 11,896
Floor brokerage and
clearance fees 1,509 1,519 2,916 2,904
Other operating expenses 14,630 11,479 26,966 22,161
_________ ________ _________ ________
160,053 152,521 311,551 300,199
_________ ________ _________ ________
Net income $ 15,445 $ 13,602 $ 24,385 $27,337
======= ======= ======= =======
Net income allocated to:
Limited partners $ 1,809 $ 2,045 $ 3,120 $ 4,121
Subordinated limited partners 1,607 1,309 2,574 2,669
General partners 12,029 10,248 18,691 20,547
_______ _______ _______ _______
$ 15,445 $ 13,602 $ 24,385 $27,337
======= ======= ======= =======
Net income per weighted average
$1,000 equivalent partnership
unit outstanding:
Limited partners $ 29.44 $ 32.24 $ 50.54 $ 64.75
======= ======= ======= =======
Subordinated limited partners $ 62.78 $ 61.06 $ 98.58 $124.42
======= ======= ======= =======
Weighted average $1,000 equivalent
partnership units outstanding:
Limited partners 61,438 63,432 61,731 63,643
======= ======= ======= =======
Subordinated limited partners 25,599 21,440 26,112 21,454
======= ======= ======= =======
The accompanying notes are an integral part of these financial
statements.
<PAGE>
THE JONES FINANCIAL COMPANIES, A LIMITED PARTNERSHIP
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Six Months Ended
June 30, June 24,
(Amounts in thousands) 1995 1994
Cash Flows Provided (Used) by Operating Activities:
Net income $ 24,385 $ 27,337
Adjustments to reconcile net income to
net cash provided (used) by operating
activities:
Depreciation and amortization 10,275 8,371
Decrease (increase) in net receivable
from/payable to customers 28,982 (75,916)
(Increase) decrease in net receivable from/
payable to brokers or dealers and clearing
organizations (9,506) 22,340
Decrease (increase) in securities owned, net 15,339 (65,545)
Decrease in accounts payable, and other
accrued expenses (4,400) (21,333)
Decrease in other assets 2,706 1,280
__________ __________
Net cash provided (used) by operating
activities 67,781 (103,466)
__________ __________
Cash Flows Used by Investing Activities:
Purchase of equipment, property and
improvements (19,738) (29,266)
__________ __________
Cash Flows (Used) Provided by Financing
Activities:
(Repayment) increase in bank loans (18,000) 88,739
Issuance of long-term debt 3,345 44,859
Repayment of long-term debt (2,394) (34,127)
Repayment of subordinated debt (7,000) (29,000)
Issuance of subordinated debt - 92,000
Issuance of partnership interests 4,651 4,349
Redemption of partnership interests (4,178) (1,180)
Withdrawals and distributions from
partnership capital (24,911) (32,678)
__________ __________
Net cash (used) provided by financing
activities (48,487) 132,962
__________ __________
Net (decrease) increase in cash and cash
equivalents (444) 230
Cash and Cash Equivalents, beginning of period 36,682 28,798
__________ __________
Cash and Cash Equivalents, end of period $ 36,238 $ 29,028
========== ==========
Interest payments for the periods were $11,473 and $7,203.
The accompanying notes are an integral part of these financial
statements.
<PAGE>
THE JONES FINANCIAL COMPANIES, A LIMITED PARTNERSHIP
CONSOLIDATED STATEMENT OF CHANGES IN PARTNERSHIP CAPITAL
SIX MONTHS ENDED JUNE 30, 1995, AND JUNE 24, 1994
(Unaudited)
Subordinated
Limited Limited General
partnership partnership partnership
(Amounts in thousands) capital capital capital Total
Balance, December 31, 1993 $ 71,222 $ 19,163 $ 89,390 $179,775
Issuance of partnership
interests - 4,349 - 4,349
Redemption of partnership
interests (980) (200) - (1,180)
Net income 4,121 2,669 20,547 27,337
Withdrawals and distributions (7,353) (4,267) (21,058) (32,678)
________ ________ ________ ________
Balance, June 24, 1994 $ 67,010 $ 21,714 $ 88,879 $177,603
======= ======= ======= =======
Balance, December 31, 1994 $ 67,461 $ 23,722 $ 99,340 $190,523
Issuance of partnership
interests - 4,605 - 4,605
Redemption of partnership
interests (1,200) (2,978) - (4,178)
Net income 3,120 2,574 18,691 24,385
Withdrawals and distributions (5,448) (3,527) (15,890) (24,865)
________ ________ ________ _______
Balance, June 30, 1995 $ 63,933 $ 24,396 $102,141 $190,470
======= ======= ======= =======
The accompanying notes are an integral part of these financial
statements.
<PAGE>
THE JONES FINANCIAL COMPANIES, A LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
BASIS OF PRESENTATION
The accompanying consolidated financial statements include the
accounts of The Jones Financial Companies, A Limited Partnership and
all wholly owned subsidiaries (The "Partnership"), including the
Partnership's principal subsidiary, Edward D. Jones & Co., L.P.,
("EDJ"), a registered broker/dealer.
The financial information included herein is unaudited. However,
in the opinion of management, such information includes all
adjustments, consisting solely of normal recurring accruals, which are
necessary for a fair presentation of the results of interim
operations.
Certain 1994 amounts have been reclassified to conform to 1995
financial statement presentation.
The results of operations for the three and six months ended June
30, 1995, are not necessarily indicative of the results to be expected
for the full year.
NET CAPITAL REQUIREMENTS
As a result of its activities as a registered broker/dealer, EDJ is
subject to the Net Capital requirements of the Securities and Exchange
Commission and the New York Stock Exchange. Under the alternative
method permitted by the rules, EDJ is required to maintain minimum Net
Capital of 2% of aggregate debit items arising from customer
transactions. The Net Capital rules also provide that EDJ may not
expand its business nor may partnership capital be withdrawn if
resulting Net Capital would be less than 5% of aggregate debit items.
At June 30, 1995, EDJ's Net Capital of $150.5 million was 33% of
aggregate debit items and its Net Capital in excess of the minimum
required was $141.4 million.
THE JONES FINANCIAL COMPANIES, A LIMITED PARTNERSHIP
MANAGEMENT'S FINANCIAL DISCUSSION
OPERATIONS
QUARTER ENDED JUNE 30, 1995, VERSUS
QUARTER ENDED JUNE 24, 1994
The Partnership has experienced significant growth in its
salesforce in recent years, averaging 23% over the last three calendar
years. The Partnership anticipates limited or no change in the size
of its salesforce in 1995. The number of investment representatives
increased 3% to 3,161 as of June 30, 1995, from 3,084 as of June 24,
1994.
On July 21, 1995, the Partnership completed its acquisition of
Boone National Savings and Loan Association, F.A., for a total
purchase price of $8.6 million.
With this quarter's equity market pushing stock prices to record
levels, the product mix has shifted from taxable and tax free bonds to
listed and over-the-counter equity products. Total revenues increased
6% ($9.4 million) to $175.5 million compared to the quarter ended June
24, 1994. Expenses increased 5% ($7.5 million) to $160 million. As a
result, net income increased by $1.9 million to $15.4 million.
Commission revenues increased 13% ($12.2 million). Mutual fund
commissions increased 5% ($2.5 million). Listed and over-the-counter
(O-T-C) agency equity commission revenues increased 45% ($9.3
million). Investors, attracted by record stock price levels, favored
equity securities during the quarter.
Principal transaction revenues decreased 20% ($7.7 million) to
$31.4 million for the period. Municipal bond principal revenue
decreased 34% ($6.0 million) and government bond principal revenue
decreased 33% ($1.9 million). O-T-C stock revenue increased 104% ($.9
million). Collateralized Mortgage Obligations (CMO) revenues
decreased 18% ($1.4 million).
Investment banking revenues decreased 1% ($.1 million) to $9.2
million for the period. Certificate of deposit revenues decreased 34%
($1.6 million). Muni bond origination revenues increased 36% ($.6
million) while Unit Trust underwriting fees declined $.5 million.
Interest and dividend income increased 20% ($2.5 million) to $15.2
million due to a 22% ($2.1 million) increase in interest income earned
on margin balances as a result of higher interest rates. U.S.
Government and agency interest income increased 7% ($.2 million) from
larger investment security positions purchased by the Partnership with
subordinated debt proceeds from the second quarter of 1994.
Compensation costs decreased 1% ($1.4 million) compared to the same
period last year. As a result of expenses increasing more than
revenues, profit margins were decreased and sales bonuses were lower.
Salaries and wages earned by non-sales personnel were higher during
the period due to increases in personnel necessary to support an
increased sales force.
Of the Partnership's remaining expenses, the most significant
changes were seen in occupancy, equipment, communications and data
processing expenses in order to support an expanding number of offices
and branch network.
SIX MONTHS ENDED JUNE 30, 1995 VERSUS
SIX MONTHS ENDED JUNE 24, 1994
Increasing securities prices fueled sales of listed and over-the-
counter equity product. Overall, revenues increased from levels
attained in the first half of 1994. Revenue increased 3% ($8.4
million) to $336 million compared to the six months ended June 24,
1994. Expenses increased 4% ($11.4 million) to $311.6 million. As a
result, net income decreased by 11% ($3.0 million) to $24.4 million.
Commission revenues decreased 6% ($12.8 million). Mutual fund
commissions decreased 18% ($21.8 million). Listed and over-the-
counter agency equity commissions increased 24% ($10.2 million).
Insurance and annuity commissions decreased 3% ($1.4 million).
Principal transaction revenues increased 16% ($10 million) to $72.1
million for the period. Corporate and government bond principal
revenues increased 22% ($2.2 million) and 55% ($4.2 million),
respectively. Mortgage backed product revenues increased 31% ($4.2
million). OTC stock commission revenues increased 63% ($1.2 million).
These increases were offset by a 11% ($3.1 million) decline in
municipal bond principal revenue. Concern over possible flat-tax
legislation caused investors to focus more on higher yielding
corporate and government bonds than comparatively lower tax equivalent
yielding municipal bonds. Strong investor demand for equities caused
OTC stocks to increase during the year.
Investment banking revenues increased 7% ($1.3 million) to $19.0
million for the period. Origination of debt and equity issues
increased $1.2 million. Municipal bond origination revenues decreased
20% ($.9 million) and Unit Trust underwriting declined $1.9 million.
Certificate of deposit ("CD") revenues increased 34% ($2.3 million)
with the yield curve relatively flat. First quarter 1995 sales of CDs
remained strong and caused year-to-date CD sales to remain higher than
the same periods in 1994.
Interest and dividend income increased 32% ($7.0 million) to $28.7
million primarily due to a 30% ($5.1 million) increase in margin
interest due to increased interest rates.
Compensation costs decreased 4% ($7.7 million) compared to the same
period last year. Sales bonuses and profit sharing provisions were
lower due to lower profit margins. Salaries and wages earned by non-
sales personnel were higher during the period due to increased
personnel necessary to support the increased sales force.
Of the Partnership's remaining expenses, the most significant
changes were seen in occupancy, equipment, communications and data
processing expenses in order to support an expanding branch network.
LIQUIDITY AND CAPITAL ADEQUACY
The Partnership's equity capital at June 30, 1995, was $190.5
million compared to $177.6 million as of June 24, 1994. General
partnership capital increased $13.3 million due to retention of
earnings and to an increase in distributable profits. Subordinated
limited partnership capital increased $2.7 million due to capital
contributions. Limited partnership capital decreased $3.1 million
primarily due to withdrawals and distributions of earnings.
At June 30, 1995, the Partnership had $36.2 million in cash and
cash equivalents. Lines of credit are in place at ten banks
aggregating $580 million ($555 million of which are through
uncommitted lines of credit). Actual borrowing availability is
primarily based on securities owned and customers' margin securities
which serve as collateral for the loans.
Subordinated debt has decreased by $7 million due to the maturity
of one of the Partnership's issues. The Partnership believes that the
liquidity provided by existing cash balances and borrowing
arrangements will be sufficient to meet the Partnership capital and
liquidity requirements.
CASH FLOWS
Cash and cash equivalents decreased $.4 million from December 31,
1994 to June 30, 1995. Cash flows provided were primarily from net
income, depreciation, decreases in net customer receivables,
securities owned, and other assets and the issuance of long-term debt
and partnership interests. Cash was primarily used to fund increased
net receivables from brokers and dealers, reduce accounts payable,
purchase fixed assets, repay bank loans, long-term debt, and
subordinated debt, and to fund withdrawals and distributions.
There were no material changes in the partnership's overall
financial condition during the six months ended June 30, 1995,
compared with the six months ended June 24, 1994. The Partnership's
balance sheet is comprised primarily of cash and assets readily
convertible into cash. Securities inventories are carried at market
values and are readily marketable. Customer margin accounts are
collateralized by marketable securities. Other customer receivables
and receivables and payables with other broker/dealers normally settle
on a current basis. Liabilities, including amounts payable to
customers, checks and accounts payable and accrued expenses are non-
interest bearing sources of funds to the Partnership. These
liabilities, to the extent not utilized to finance assets, are
available to meet liquidity needs and provide funds for short term
investments, which favorably impacts profitability.
The Partnership's growth in recent years has been financed through
sales of limited partnership interests to its employees, retention of
earnings, and private placements of long-term and subordinated debt.
At the beginning of the third quarter of 1995, the Partnership filed a
registration statement on Form S-2 with the Securities and Exchange
Commission for the issuance of additional Limited Partnership
interests.
The Partnership's principal subsidiary, Edward D. Jones & Co.,
L.P., ("EDJ") as a securities broker/dealer, is subject to the
Securities and Exchange Commission regulations requiring EDJ to
maintain certain liquidity and capital standards. EDJ has been in
compliance with these regulations at all times.
<PAGE>
THE JONES FINANCIAL COMPANIES, A LIMITED PARTNERSHIP
Item 1: Legal Proceedings
There have been no material changes in the legal proceedings
previously reported.
Item 5: Other Information
None
Item 6: Exhibits and Reports on Form 8-K
(a) Exhibits
Reference is made to the Exhibit Index contained hereinafter..
(b) Reports on Form 8-K
No reports were filed on Form 8-K for the quarter ended June 30,
1995.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
THE JONES FINANCIAL COMPANIES, A LIMITED PARTNERSHIP
(Registrant)
Dated: August 12, 1995 /s/ John W. Bachmann
_____________________
John W. Bachmann
Managing Partner
Dated: August 12, 1995 /s/ Steven Novik
_____________________
Steven Novik
Chief Financial Officer
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
THE JONES FINANCIAL COMPANIES, A LIMITED PARTNERSHIP
(Registrant)
Dated: August 12, 1995
_____________________
John W. Bachmann
Managing Partner
Dated: August 12, 1995
_____________________
Steven Novik
Chief Financial Officer
EXHIBIT INDEX
THE JONES FINANCIAL COMPANIES, A LIMITED PARTNERSHIP
For the quarter ended June 30, 1995
Exhibit No. Description Page
3.1 Sixth Amended and Restated Limited
Partnership Agreement of Edward D.
Jones & Co., L.., dated
April 1, 1995.
10.1 Conforming Systems Agreement between
Tri-Tek Information Systems, Inc. and
Edward D. Jones & Co., L.P., dated
May 31, 1995.
27.0 Financial Data Schedule (provided for the
Securities and Exchange Commission only)<PAGE>
Exhibit 3.1
EDWARD D. JONES & CO., L.P.
SIXTH AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
Dated: April 1, 1995
EDWARD D. JONES & CO., L.P.
(a Missouri Limited Partnership)
SIXTH AMENDED AND RESTATED AGREEMENT
OF LIMITED PARTNERSHIP<PAGE>
THIS SIXTH AMENDED AND RESTATED AGREEMENT OF LIMITED
PARTNERSHIP dated and effective as of the 1st day of April, 1995,
by and between EDJ Holding Company, Inc., a Missouri corporation,
as the General Partner, and The Jones Financial Companies, a
Limited Partnership, as the Limited Partner, as provided herein.
W I T N E S S E T H:
WHEREAS, the Partnership was formed as a limited
partnership under The Uniform Limited Partnership Law of the
State of Missouri on May 23, 1969; and
WHEREAS, the Partnership elected to be governed by the
provisions of the Missouri Revised Uniform Limited Partnership
Act on August 28, 1987; and
WHEREAS, the parties restated in full Amendment No. 40
dated August 28, 1987 and the Agreement of Limited Partnership
dated as of May 23, 1969 of Edward D. Jones & Co., L.P. and the
related Certificate of Limited Partnership dated August 28, 1987
into the Amended and Restated Agreement and Certificate of
Limited Partnership (the "First Restated Agreement") of Edward D.
Jones & Co., L.P. dated August 28, 1987; and
WHEREAS, the parties amended and restated the First
Restated Agreement pursuant to the Second Amended and Restated
Agreement of Limited Partnership (the "Second Restated
Agreement") of Edward D. Jones & Co., L.P. dated January 31,
1991; and
WHEREAS, the parties amended and restated the Second
Restated Agreement pursuant to the Third Amended and Restated
Agreement of Limited Partnership (the "Third Restated Agreement")
of Edward D. Jones & Co., L.P. dated May 7, 1992; and
WHEREAS, the parties amended and restated the Third
Restated Agreement pursuant to the Fourth Amended and Restated
Agreement of Limited Partnership (the "Fourth Restated
Agreement") of Edward D. Jones & Co., L.P. dated November 1,
1993; and
WHEREAS, the parties amended and restated the Fourth
Restated Agreement pursuant to the Fifth Amended and Restated
Agreement of Limited Partnership (the "Fifth Restated Agreement")
of Edward D. Jones & Co., L.P. dated April 28, 1994; and
WHEREAS, the parties hereto now desire to amend and
restate the Fifth Restated Agreement to provide for a special
allocation and distribution of book income as provided herein and
restate the Fifth Restated Agreement in its entirety;
NOW, THEREFORE, pursuant to the terms, covenants and
conditions set forth herein and the mutual promises contained
herein, the parties hereto agree as follows:
ARTICLE ONE<PAGE>
DEFINED TERMS
The defined terms used in this Agreement shall have the
meanings specified below:
"Affiliate" means (l) any Person directly or indirectly
controlling, controlled by or under common control with another
Person, (2) any Person owning or controlling ten percent (l0%) or
more of the outstanding voting securities of such other Person,
(3) any officer, director or partner of such Person, or (4) if
such other Person is an officer, director or partner, any company
for which such Person acts in any such capacity.
"Agreement" means this Sixth Amended and Restated
Agreement of Limited Partnership, as amended from time to time.
"Applicable Effective Tax Rate" means the highest
statutory federal corporate income tax rate as set forth in
Section 11, or any successor section, of the Internal Revenue
Code and the highest Missouri corporate income tax rate as set
forth in section 143.071, or any successor section, of the
Revised Statutes of Missouri.
"Capital Account" means an account established by the
Partnership and maintained for each Partner, for federal income
tax purposes, which account shall be credited with:
(i) the amount of the Partner's Capital Contributions;
and
(ii) the amount of Partnership income (including income
exempt from federal income tax) and gain (or items thereof)
allocated to the Partner pursuant to Article Eight hereof;
and which shall be debited by:
(iii) the amount of Partnership losses and
deductions (or items thereof) allocated to the Partner
pursuant to Article Eight hereof;
(iv) the amount of Partnership expenditures described
in Treasury Regulations Section l.704-l(b)(2)(iv)(i)
allocable to the Partner in the same proportion as that in
which the Partner bears the economic burden of those
expenditures; and
(v) the amount of all distributions to the Partner
pursuant to Article Eight hereof.
In addition, the Capital Account of each Partner shall
be adjusted as necessary to comply with Treasury Regulations
Section l.704-l(b)(2)(iv). In the event the General Partner
shall determine that it is prudent to modify the manner in which
the Capital Accounts or any debits or credits thereto, are
completed in order to comply with such regulations, the General
Partner may amend this Agreement to reflect such modification,<PAGE>
provided that it is not likely to have a material effect on the
amounts distributable to the partners pursuant to Article Eight
upon dissolution of the Partnership.
If any Partner would otherwise have a negative balance
in his Capital Account, the amount of any such negative balance
shall be reduced (but not in excess of such negative balance) by
the amount of such Partner's share of Partnership Minimum Gain
(determined in accordance with Treasury Regulations Section
l.704-l(b)(4)(iv)(f)) after taking into account all increases and
decreases to such Partnership Minimum Gain during the taxable
year.
In the event that the Partnership is deemed to be
terminated for federal income tax purposes due to the sale or
exchange of fifty percent (50%) or more of the Partnership
interests in the capital or profits of the Partnership (the
"Partnership Interests") within a twelve (12) month period,
appropriate adjustment shall be made to the Capital Accounts to
reflect the constructive liquidation and reformation deemed to
occur upon a termination.
In the event that interests in the Partnership are
sold, exchanged or otherwise transferred, and the transfer is
recognized under Article Seven hereof, or by operation of law,
the Capital Account of the transferee will equal the Capital
Account of the transferor immediately before the transfer.
However, if such a sale or exchange, either alone or in
combination with other sales or exchanges within a twelve-month
period results in a transfer of fifty percent (50%) or more of
the Partnership Interests causing a termination of the
Partnership for federal income tax purposes, the adjustment
required by the immediately preceding paragraph shall be made.
"Capital Contribution" means the total amount of cash
or property contributed to the Partnership by each Partner (and
not thereafter returned to such Partner by the Partnership)
pursuant to the terms of this Agreement. The Capital
Contributions of the Partners have been previously set forth on
exhibits to this Agreement. From the date hereof, the Capital
Contributions of the Partners shall be reflected in the books and
records of the Partnership.
"Certificate of Limited Partnership" means the
document, as amended or restated, filed as a certificate of
limited partnership under the Missouri Act.
"General Partner" means EDJ Holding Company, Inc., a
Missouri corporation.<PAGE>
"Internal Revenue Code" means the Internal Revenue
Code of 1986, as amended from time to time, or any successor law
thereto.
"Limited Partner" means The Jones Financial Company, a
Limited Partnership, a Missouri limited partnership.
"Missouri Act" means the Missouri Revised Uniform
Limited Partnership Act, as amended from time to time.
"Net Income or Net Loss" means, with respect to any
fiscal period, the net income or the net loss of the Partnership,
determined in accordance with generally accepted accounting
principles; provided, however, there shall be excluded from such
net income or net loss (i) the amount defined as "Specially
Allocated Book Income" and (ii) any unrealized gains or losses on
securities held (whether at the discretion of the Partnership or
otherwise) by the Partnership in Trading Account Number 001-
00103-12 (or any successor account) as a hedge against fixed rate
Partnership borrowings (as opposed to other securities held by
the Partnership in trading accounts as inventory for resale in
the ordinary course of business).
"Notice" means a writing, containing the information
required by this Agreement to be communicated to a party,
delivered personally or sent by U.S. mail, postage prepaid, to
such party at the last known address of such party as shown on
the records of the Partnership, the date of personal delivery or
the date of mailing thereof being deemed the date of receipt
thereof.
"Partner" means the General Partner or the Limited
Partner.
"Partnership" means the limited partnership continued
by this Agreement by the parties hereto, as said limited
partnership may from time to time be constituted.
"Partnership Minimum Gain" means, for Partnership tax
purposes, as set forth in Treasury Regulations Section l.704-
l(b)(4)(iv)(c), the amount of gain, if any, that would be
realized by the Partnership if it were to sell or dispose of (in
a taxable transaction) property subject to a non-recourse
liability of the Partnership, in full satisfaction of such
liability.
"Person" means a natural person, partnership, limited
partnership (domestic or foreign), trust, estate, association or
corporation.
"Profits and Losses For Tax Purposes" means, for
Partnership accounting and tax purposes, the various items set
forth in Section 702(a) of the Internal Revenue Code and all
applicable regulations or any successor law, and shall include,
but not be limited to, each item of income, gain, deduction,
loss, preference or credit.<PAGE>
"Specially Allocated Book Income" means, with respect
to any fiscal period, the amount of Profits and Losses for Tax
Purposes arising in any calendar year allocated to the General
Partner in accordance with Section 8.4B multiplied by the
"Applicable Effective Tax Rate" for such fiscal period.
ARTICLE TWO
CONTINUATION, NAME AND OFFICE,
PURPOSES, TERM AND DISSOLUTION
2.1 Continuation.
The parties hereto hereby continue the Partnership as a
limited partnership pursuant to the provisions of the Missouri
Act.
2.2 Name, Place of Business and Office.
The name of the Partnership shall be "Edward D. Jones &
Co., L.P". The principal office and place of business shall be
201 Progress Parkway, Maryland Heights, Missouri 63043. The
General Partner may at any time change the location of such
principal office. Notice of any such change shall be given to
the Limited Partner on or before the date of any such change.
2.3 Purposes.
The Partnership shall continue to conduct its business
under the firm name of Edward D. Jones & Co., L.P. (or under the
name of Edward D. Jones & Co. if such name is registered as a
fictitious name with the State of Missouri) and shall engage in a
general brokerage and commission business including without
limitation the purchase of, sale of, and dealing in stocks,
bonds, notes and evidences of indebtedness of any person, firm,
enterprise, corporation or association domestic or foreign, and
bonds and any other political subdivision thereof, domestic or
foreign, and bills of exchange and commercial papers, and any and
all securities of any kind, nature or description whatsoever; and
any kind of commodities and provisions usually dealt with on
exchanges, or upon the over-the-counter market, or any option
contracts upon any of the foregoing, or otherwise as principals,
brokers, agents, or otherwise to act as investment adviser under
the Investment Advisers Act of 1940, as amended and the rules and
regulations thereunder; the general conduct of any securities
transfer business; the general conduct of any trustee service
business; the general conduct of any insurance business,
including but not limited to acting in the capacity of an
insurance agency, to act as a depositor under any and all forms
of trust indentures providing for the deposit of bonds, stocks,
debentures, and any other type of security and the issuance of
beneficial interests in the securities so deposited and to
perform any and all acts necessary or incidental thereto; to
conduct through itself or any associated enterprise in which it
has an interest, a mortgage processing and lending business; and
in general, without limitation of the foregoing, such business as
is usually conducted in the City of New York by so-called stock<PAGE>
exchange and commodity exchange brokers or such business as is
permitted under the Missouri Act. The Partnership may enter into
such financing arrangements and guarantees as the General Partner
may deem appropriate in connection with the business of the
Partnership. The Partnership may act as a partner or shareholder
of, or act as an advisor to, any other organization as the
General Partner may deem advisable. No business, however, shall
be conducted which shall be forbidden by, or be contrary to, any
applicable law, or any lawful rules and regulations, promulgated
thereunder, including without limitation any of the provisions of
the Securities Exchange Act of 1934, as amended, or any of the
rules and regulations of the Securities and Exchange Commission
promulgated thereunder, or any of the rules and regulations of
the National Association of Securities Dealers, Inc., or of the
constitution, rules, regulations, and practices of the New York
Stock Exchange, Inc. or any other exchange or exchanges in which
the Partnership or its Affiliates may hold a membership.
2.4 Term and Dissolution.
A. The Partnership shall continue in full force and
effect until December 31, 2087, or until dissolution prior
thereto upon the happening of any of the following events:
(i) The sale of all of the assets of the Partnership;
(ii) The withdrawal of either Partner; or
(iii)The dissolution of the Partnership by the General
Partner.
B. Upon dissolution of the Partnership, the General
Partner shall cause the cancellation of the Partnership's
Certificate of Limited Partnership, liquidate the Partnership's
assets and apply and distribute the proceeds thereof in
accordance with Section 8.3 hereof.
2.5 Registered Office and Agent.
The name and address of the Registered Agent and
Registered Office for service of process on the Partnership are
set forth in the Certificate of Limited Partnership.
2.6 Amendment to Certificate of Limited Partnership.
The Certificate of Limited Partnership shall be amended
within thirty days of the admission or withdrawal of a General
Partner.
ARTICLE THREE
PARTNERS, CAPITAL AND DEMAND NOTES
3.1 General Partner.<PAGE>
A. The name, last known mailing address and Capital
Contribution of the General Partner are reflected in the books
and records of the Partnership.
B. The General Partner may increase or decrease its
Capital Contribution from time to time.
3.2 Limited Partner.
A. The name, last known mailing address and Capital
Contribution of the Limited Partner are reflected in the books
and records of the Partnership.
B. The Limited Partner shall, if requested by the
General Partner, increase or decrease its capital contribution
from time to time.
3.3 Partnership Capital.
A. The total capital of the Partnership shall be the
aggregate amount of the Capital Contributions of the Partners as
provided for herein.
B. No Partner shall be paid interest on any Capital
Contribution to the Partnership.
C. Except as otherwise provided herein, prior to
dissolution of the Partnership, no Partner shall have the right
to demand the return of its Capital Contribution. No Partner
shall have the right to demand and receive property other than
cash in return for its Capital Contribution.
D. The General Partner shall have no personal
liability for the repayment of the Capital Contribution of the
Limited Partner.
E. The Limited Partner shall contribute its Capital
Contribution in the form of cash or pursuant to a subordination
agreement in a form acceptable to the New York Stock Exchange.
3.4 Liability of the Limited Partner.
The Limited Partner shall only be liable to make the
payment of its Capital Contribution. Except as provided in the
Missouri Act, the Limited Partner shall not be liable for any
obligations of the Partnership.
3.5 Participation in Partnership Business by the
Limited Partner.
The Limited Partner shall neither participate in or
have any control over the Partnership business (except as
required by law) nor have any authority or right to act for or
bind the Partnership. The Limited Partner hereby consent to the
exercise by the General Partner of the powers conferred on it by
this Agreement.<PAGE>
3.6 Demand Notes and Cash Subordination Agreements.
The General Partner or the Limited Partner may, from
time to time, upon prior approval from the General Partner,
execute and deliver a Secured Demand Note (together with a
Secured Demand Note Collateral Agreement) or a Cash Subordination
Agreement to the Partnership in the form and under the terms and
conditions presented by Rule 325 of the New York Stock Exchange
or shall deliver to the Partnership such other documents as are
acceptable to the New York Stock Exchange, and such Secured
Demand Note (together with the Secured Demand Note Collateral
Agreement) or Cash Subordination Agreement or such other
documents shall be treated as a contribution of additional
capital (for regulatory purposes) to the Partnership by the
Partner executing and delivering the same to the Partnership. In
conjunction with any such Secured Demand Notes (and related
Secured Demand Note Collateral Agreements) or Cash Subordination
Agreements or such other documents, the General Partner or
Limited Partner may also execute and deliver to the Partnership
in the form and under the conditions and terms prescribed by Rule
326.13 of the New York Stock Exchange, a subordination agreement
for the purpose of enabling the Partnership to include in its
"net worth", the prescribed value of the securities held by the
Partnership under the Secured Demand Note Collateral Agreement or
such other documents of the General Partner or the Limited
Partner.
ARTICLE FOUR
RIGHTS, POWERS, AND DUTIES OF THE GENERAL PARTNER
4.1 Authorized Acts; Management and Control.
A. The General Partner has the exclusive right to
manage the business of the Partnership and is hereby authorized
to take any action (including, but not limited to, the acts
authorized by Section 4.1B below) of any kind and to do anything
and everything in accordance with the provisions of this
Agreement.
B. The General Partner through any of its officers
for, in the name and on behalf of, the Partnership is hereby
authorized to take any and all actions, and to engage in any kind
of activity and to perform and carry out all functions of any
kind necessary to, or in connection with, the business of the
Partnership including, but not limited to: (i) executing any
instruments on behalf of the Partnership; (ii) acquiring or
selling assets of the Partnership; (iii) entering into loans or
guarantees in connection with the business of the Partnership;
(iv) acting as a partner or shareholder of, or adviser to, any
other organization; (v) contributing capital, as a limited
partner or as a general partner, or purchasing other securities
in or otherwise investing any limited partnership, general
partnership, corporation or other entity and taking all actions
required as a partner, shareholder or investor in any such<PAGE>
entity; or (vi) doing any other act in furtherance of the
purposes of the Partnership
4.2 Time and Effort; Independent Activities.
The General Partner shall devote its full time to the
business of the Partnership. The Limited Partner may engage
independently or with others in other business ventures of every
nature and description, including, without limitation, the
ownership, operation, management, syndication and development of
business ventures related to or competitive with the business of
the Partnership. The General Partner may also, indirectly
through subsidiaries or affiliated entities, or directly,
simultaneously independently engage in other related or unrelated
activities. Neither the Partnership nor the other Partner shall
have any rights in or to such independent ventures or the income
or profits derived therefrom.
4.3 Duties and Obligations of the General Partner.
A. The General Partner shall prepare (or cause to be
prepared) and file such amendments to this Agreement or any
certificate of limited partnership as are required by law or as
it deems necessary to cause this Agreement or any certificate of
limited partnership to reflect accurately the agreement of the
Partners the identity of the Partners and the amounts of their
respective Capital Contributions.
B. The General Partner shall prepare (or cause to be
prepared) and file such tax returns and other documents, as are
required by law or as it deems necessary, for the operation of
the Partnership.
4.4 Liability for Acts and Omissions; Indemnification.
The General Partner shall not be liable, responsible or
accountable in damages or otherwise to the Limited Partner for,
and the Partnership shall indemnify and save harmless the General
Partner from any loss or damage incurred by reason of, any act or
omission performed or omitted by it in good faith on behalf of
the Partnership and in a manner reasonably believed by it to be
within the scope of the authority granted to it by this Agreement
and in the best interests of the Partnership, provided that the
General Partner shall not have been guilty of gross negligence or
gross misconduct with respect to such acts or omissions and,
further, provided that the satisfaction of any indemnification
and any saving harmless shall be paid out of and limited to
Partnership assets and no Partner shall have any personal
liability on account thereof.
4.5 Dealing with an Affiliate.
The General Partner may for, in the name of and on
behalf of, the Partnership enter into such agreements, contracts
or the like with any Affiliate of the General Partner or with the
General Partner, in an independent capacity, as distinguished<PAGE>
from its capacity (if any) as a Partner, to undertake and carry
out the business of the Partnership as if such Affiliate or
General Partner were an independent contractor; and the General
Partner may obligate the Partnership to pay reasonable
compensation for and on account of any such services.
4.6 Appointment of Special Committee.
Pursuant to rights granted to the General Partner
pursuant to Section 4.1 hereof, the General Partner hereby
appoints John W. Bachmann, Darryl L. Pope and the then Managing
Partner of The Jones Financial Companies, a Limited Partnership
(at any time the Managing Partner thereof is not John W.
Bachmann), as committee members of a special committee of the
Partnership, which committee (acting through one or more of its
members) shall have full power and authority on behalf of the
General Partner, at any time and from time to time, (a) to
designate one or more Persons (i) to assign securities
registered in the name of the Partnership, (ii) to execute powers
of substitution, (iii) to guarantee the signatures of others to
assignments of securities and (iv) to make any certification or
guarantee of any signature or document submitted in support of
the transfer of any securities, all with the same effect as if
the name of the Partnership had been signed under like
circumstanced by the General Partner, (b) to adopt and authorize
the use of a mechanically reproduced facsimile signature of the
Partnership in connection with (i) the assignment of securities
registered in the name of the Partnership and (ii) the execution
of powers of substitution and (c) to designate one or more
Persons to sign written contracts covering "seller's option,"
"when issued," and "when distributed" transactions in the name of
the Partnership with the same effect as if the name of the
Partnership had been signed under like circumstances the General
Partner, any and all such powers of attorney, agreements, and
other instruments (including agreements of indemnification) as
may be required to evidence or support action under (a), (b), or
(c) above.
ARTICLE FIVE
WITHDRAWAL OF A PARTNER
Neither Partner shall have the right to retire or
voluntarily withdraw from the Partnership without the prior
written consent of the other Partner.
ARTICLE SIX
RESTRICTIONS ON RETURN OF CAPITAL CONTRIBUTIONS
AND CERTAIN OTHER TRANSACTIONS
A. The Limited Partner may by written notice to the
General Partner request that all or a portion of its Capital
Contribution be returned prior to the maturity of its Cash
Subordination Agreement; however, the General Partner may, in its
absolute discretion, refuse to return all or any portion of such
Capital Contribution to the Limited Partner until the Partnership
is dissolved pursuant to Section 2.4 hereof.<PAGE>
B. It is understood and agreed that the Capital
Contributions of the Partners to the Partnership will be used, in
part, by the Partnership as part of the Partnership's required
capital as a brokerage firm regulated by the Securities and
Exchange Commission and the New York Stock Exchange and other
regulatory agencies. Therefore, notwithstanding any other
provision contained in this Agreement to the contrary, no Partner
shall have returned to it (under any provision of this Agreement)
its Capital Contribution, if after giving effect thereto, the
Partnership be in violation of (i) any rule of the New York Stock
Exchange Inc., (ii) any rule issued under the Securities Exchange
Act of 1934, (iii) any agreement (cash subordination or
otherwise) which has been entered into by the Partnership or (iv)
any other law, rule or regulation to which the Partnership is
subject. In the event there is returned to any Partner all or
any portion of its Capital Contribution and because of such
return the Partnership violated any of the aforementioned rules,
agreements or regulations, then such Partner hereby irrevocably
agrees (whether or not such Partner had any knowledge or notice
of such facts at the time of such return) to repay to the
Partnership, its successors or assigns, the sum so returned to
such Partner to be held by the Partnership pursuant to the
provisions hereof as if such return had never been made;
provided, however, that any suit for the recovery of any such
return must be commenced within two years of the date of such
return.
C. Notwithstanding any other provision contained
herein, no Partner shall, without the prior written approval of
the New York Stock Exchange, Inc. and without the prior written
approval of the General Partner, withdraw its Capital
Contribution to the Partnership on less than six (6) months
written notice, given no sooner than six (6) months after such
contribution was first made, of its intent to withdraw such
Capital Contribution; provided, however, that the Capital
Contribution of any Partner may not be withdrawn nor may any
unsecured advance or loan to the Partnership which qualifies as
capital under Rule 15c3-1 promulgated under the Securities
Exchange Act of 1934 be withdrawn nor may any unsecured advance
or loan be made to a Partner or employee or any Affiliate hereof,
if, after giving effect thereto and to any other withdrawals,
advances, or loans which are scheduled to occur within six (6)
months following such withdrawal, advance, or loan, the
Partnership would be in violation of said Rule.
D. Notwithstanding anything to the contrary contained
in this Agreement, in the event of the termination of the
Partnership on the expiration of the term of this Agreement, or
any extension or renewal thereof, each Partner agrees if
withdrawals of Capital Contributions on any such termination
would cause the Partnership's capital position to violate
Rules 326(a) and 326(b) of the Rules of the Board of Directors of
the New York Stock Exchange, Inc. during the six (6) months
immediately preceding the date of termination, such withdrawals
may be postponed for a period of up to six (6) months from the<PAGE>
state date of termination, as the General Partner may deem
necessary to insure compliance with said Rules and any such
Capital Contributions so retained by the Partnership after the
date of termination shall continue to be subject to all debts and
obligations of the Partnership.
E. The Partnership will not, and it will not permit
any Subsidiary of the Partnership (as defined in the Note
Purchase Agreement as of April 15, 1986 relating to the 9-3/8%
Secured Guaranteed Notes due 1996 of Tempus Corporation and the
9-3/8% Capital Notes due 1996 of Edward D. Jones & Co., the Note
Purchase Agreement dated as of March 15, 1988 relating to the
10.60% Secured Guaranteed Notes due 1997 of Tempus Corporation
and the 10.60% Capital Notes due 1997 of Edward D. Jones & Co.,
L.P. and the Note Purchase Agreement dated as of May 1992
relating to the 8.96% Subordinated Capital Notes due 2002 of
Edward D. Jones & Co., L.P. and the Note Purchase Agreement dated
as of April 22, 1994 relating to the 7.95% Subordinated Capital
Notes Due 2006) [referred to herein collectively as the "Note
Agreements"] to, directly or indirectly, incur, assume or
otherwise become or be or remain liable to any partner, officer
or director, or any former partner, officer or director, of the
Partnership or any subsidiary, or to the heir or legal
representatives of any such person, with respect to any
Indebtedness (as defined in the Note Agreements) relating to such
person's status as a partner, director or officer of the
Partnership or any subsidiary (but excluding in any event
Indebtedness with respect to any account of such person or such
heirs or legal representatives or transactions and securities or
commodities), unless such Indebtedness shall be subordinated to
the 9-3/8% Capital Notes due 1996, the 10.60% Capital Notes due
1997, the 8.96% Subordinated Capital Notes due 2002, the 9-3/8%
Secured Guaranteed Notes due 1996, the 10.60% Secured Guaranteed
Notes due 1997, the 7.95% Subordinated Capital Notes due 2006 and
the Guarantees (as contained in the Note Agreements) to at least
the same extent as the 9-3/8% Capital Notes due 1996, the 10.60%
Capital Notes due 1997, the 8.96% Subordinated Capital Notes, the
7.95% Subordinated Capital Notes due 2006 and the related
Guarantees, are subordinated to the claims of general creditors
as contained in the Note Agreements.
ARTICLE SEVEN
TRANSFERABILITY OF PARTNER INTERESTS
7.1 Restrictions on Transfer.
A. Each Partner agrees that it will not sell, pledge
exchange, transfer or assign its interest in the Partnership to
any Person without the express written consent of the other
Partner.
B. Any sale, exchange, assignment or other transfer
in contravention of any of the provisions of this Section 7.l
shall be void and ineffectual and shall not bind or be recognized
by the Partnership.<PAGE>
7.2 Substituted Limited Partners.
No Limited Partner shall have a power to grant the
right to become a substituted Limited Partner to an assignee of
any part of such Limited Partner's Partnership interest.
ARTICLE EIGHT
DISTRIBUTIONS AND ALLOCATIONS
8.1 Distribution of Specially Allocated Book Income.
Cash distributions in an amount equal to Specially
Allocated Book Income, if any, of the Partnership for each fiscal
year shall be distributed 100% to the General Partner.
8.2 Distribution of Net Income.
A. All Net Income, if any, of the Partnership for
each calendar year shall (except for Net Income generated in any
transaction in connection with the dissolution and liquidation of
the Partnership) be distributed 99% to the Limited Partner and 1%
to the General Partner.
B. In any year in which there is a Net Loss and the
Partnership is not dissolved and liquidated in accordance with
Section 8.3 hereof, such Net Loss, on the books of the
Partnership, shall be borne 99% by the Limited Partner and 1% by
the General Partner. Any such Net Losses borne by the Limited
Partner shall only be applied against and reduce its Capital
Contribution. The total amount of all such Net Losses to be
borne by the Limited Partner may never exceed the total amount of
the Capital Contributions of the Limited Partner as shown on the
books of the Partnership.
C. Notwithstanding any other provision of this
Agreement to the contrary, the aggregate interest of the General
Partner in each material item of Partnership income, gain, loss,
deduction, preference or credit shall be equal to at least one
percent (1%) of each such item at all times during the existence
of the Partnership.
D. Notwithstanding any other provision of this
Agreement to the contrary, the General Partner, in its sole and
absolute discretion, may withhold cash distributions to the
Partners if the General Partner determined that such cash should
be retained by the Partnership for working capital or other
purposes.
It is intended that a sum ranging between 15%-35%
of the Net Income of the Partnership will be retained by the
Partnership as additional equity for qualified net capital and
shall be credited as additions to the capital accounts of the
General Partner and Limited Partner in the same proportion equal
to their entitled share of distributions described above.
Notwithstanding the foregoing, the decision of whether to make
this retention of capital in accordance with this Section or<PAGE>
whether to vary the amount of capital to be retained in any year,
is vested in the General Partner, and it is agreed that its
decision in this matter shall be final.
8.3 Cash Distributions Upon Dissolution.
A. Upon the dissolution of the Partnership as a
result of the occurrence of any of the events set forth in
Section 2.4 hereof, the General Partner shall proceed to
liquidate the Partnership, and the proceeds of liquidation (the
"Proceeds of Liquidation") shall be applied and distributed in
the following order of priority:
(i) To the payment of debts and liabilities of the
Partnership, including accrued salaries and the expenses of
liquidation.
(ii) To the repayment of the 9-3/8% Capital Notes due
1996, the 10.60% Capital Notes due 1997, the 8.96%
Subordinated Capital Notes due 2002 and the 7.95%
Subordinated Capital Notes due 2006.
(iii) The balance of the Proceeds of Liquidation,
if any, shall be distributed to the Partners in accordance
with positive Capital Account balances.
B. Notwithstanding the foregoing, in the event the
General Partner shall determine that an immediate sale of part or
all of the Partnership assets would cause undue loss to the
Partners, the General Partner, in order to avoid such loss, may
either defer liquidation of, and withhold from distribution for a
reasonable time, any assets of the Partnership except those
necessary to satisfy the Partnership debts and obligations, or
distribute the assets to the Partners in kind.
8.4 Allocation of Profits and Losses for Tax Purposes.
A. Except as provided in Sections 8.4B, C or D
hereof, all Profits And Losses For Tax Purposes of the
Partnership shall be allocated 99% to the Limited Partner and l%
to the General Partner, provided however, if any allocation of
loss or deduction would reduce the Limited Partner's Capital
Account below zero (determined after taking into account all
prior or contemporaneous cash distributions and all prior or
contemporaneous allocations of income, gain, loss, deduction or
credit and as determined at the close of the taxable year in
respect of which such loss or deduction is to be allocated), such
excess losses or deductions shall be allocated to the General
Partner; and provided further however, that the General Partner
shall not be allocated any income, gain or loss with respect to
the amount of the Partnership's unrealized receivables (within
the meaning of Section 751(c) of the Internal Revenue Code) or
inventory items which have appreciated substantially in value
(within the meaning of Section 751(d) of the Internal Revenue
Code) on the date such General Partner first became a Partner
hereof. For purposes of this provision, the term "Partnership"
shall include any subsidiary partnerships.<PAGE>
B. The General Partner is authorized to allocate
Profits and Losses For Tax Purposes arising in any calendar year
differently than otherwise provided for in this Article Eight to
the extent the General Partner determines, in his discretion,
that such modifications are appropriate to cause the allocations
to comply with the principles of Section 704 of the Internal
Revenue Code and such modifications are in the overall best
interests of the Partners, including without limitation the
special allocation of any income to the General Partner
attributable to the nondeductibility of nonqualified deferred
compensation expense. Any allocation made pursuant to this
Section 8.4B shall be deemed to be a complete substitute for any
allocation otherwise provided for in this Article Eight and no
amendment of this Agreement or approval of any Partner shall be
required.
C. Notwithstanding any other provisions of this
Agreement to the contrary, if the amount of any Partnership
Minimum Gain at the end of any taxable year is less than the
amount of such Partnership Minimum Gain at the beginning of such
taxable year, there shall be allocated to any Partner having a
negative Capital Account at the end of such taxable year
(determined after taking into account any adjustments,
allocations and distributions described in Treasury Regulations
Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6)) gross income and
gain (in respect of the current taxable year and any future
taxable year) in an amount sufficient to eliminate such negative
Capital Account in compliance with Treasury Regulations Section
1.704-1(b)(4)(iv)(e). Such allocation of gross income and gain
shall be made prior to any other allocation of profits and losses
for tax purposes. Any such allocation of gross income or gain
pursuant to this Section 8.4C shall be in proportion with such
negative Capital Accounts of the Partners and such allocations of
gross income and gain shall be taken into account, to the extent
feasible, in computing subsequent allocations of Profits and
Losses For Tax Purposes of the Partnership so that the net amount
of all items allocated pursuant to each Partner pursuant to this
Article Eight shall, to the extent possible, be equal to the net
amount that would have been allocated to each such Partner
pursuant to the provisions of this Article Eight if the
allocations made pursuant to the first sentence of this Section
8.4C had not occurred.
D. Notwithstanding any other provisions of this
Agreement to the contrary, except as provided in Section 8.4C
hereof, if any Partner receives any adjustment, allocations, or
distributions described in Treasury Regulations Section 1.704-
1(b)(2)(ii)(d)(4), (5) or (6) that reduces any Partner's Capital
Account below zero or increases the negative balance in such
Partner's Capital Account, gross income and gain shall be
allocated to such Partner in an amount and manner sufficient to
eliminate any negative balance in his Capital Account created by
such adjustments, allocations, or distributions as quickly as
possible in accordance with Treasury Regulations Section 1.704-
1(b)(2)(ii)(d). Any such allocation of gross income or gain
pursuant to this Section 8.4D shall be in proportion with such<PAGE>
negative Capital Accounts of the Partners. Any allocations of
items of gross income or gain pursuant to this Section 8.4D shall
(i) not duplicate any allocations of gross income or gain made
pursuant to Section 8.4C hereof, and (ii) be taken into account,
to the extent feasible, in computing subsequent allocations of
Profits and Losses For Tax Purposes of the Partnership, so that
the net amount of all items allocated to each Partner pursuant to
this Article Eight shall, to the extent possible, be equal to the
net amount that would have been allocated to each such partner
pursuant to the provisions of this Article Eight if such
adjustments, allocations or distributions had not occurred.
E. If and to the extent upon dissolution of the
Partnership pursuant to Section 2.4 hereof the allocations under
Section 8.4A are inconsistent with the following provision, then
such allocations shall be adjusted to conform to the following
provision: income and gain (whether ordinary income, gain under
Section 1231 of the Code, or capital gain) from disposition of
all remaining Partnership assets shall be allocated among the
Partners so that the positive balance of each Partner's Capital
Account is equal to the cash to be distributed to such Partner
pursuant to Article 8.3 determined after all Capital Accounts
have been adjusted to reflect the allocations of Profits and
Losses For Tax Purposes of the Partnership and cash distributions
made pursuant to Section 8.2 hereof.
ARTICLE NINE
BOOKS, RECORDS AND REPORTS,
ACCOUNTING, TAX ELECTIONS, ETC.
9.1 Books, Records and Reports.
A. Proper and complete records and books of account
shall be kept (or caused to be kept) by the General Partner in
which shall be entered all transactions and other matters
relative to the Partnership's business. The Partnership's books
and records shall be prepared in accordance with generally
accepted accounting principles, consistently applied. The books
and records shall at all times be maintained at the principal
office of the Partnership and shall be open for examination and
inspection by the Partners or by their duly authorized
representatives during reasonable business hours. In particular,
the following books and records shall be kept:
(i) a current list and a past list of the full names
and last known mailing address of each Partner, specifying
the General Partners and the Limited Partners in
alphabetical order, including the date of admission or
withdrawal of each Partner. To the extent provided by the
Missouri Act, these lists shall be provided to the Secretary
of State of Missouri, without cost, upon his written
request;
(ii) a copy of the Certificate of Limited Partnership
and all Certificates of Amendment thereto, together with<PAGE>
executed copies of any Powers of Attorney pursuant to which
any Certificate has been executed;
(iii) copies of the Partnership's federal, state
and local income tax returns and reports, if any, for the
three most recent fiscal years; and
(iv) copies of any written Partnership Agreements in
effect and any financial statements of the Partnership for
the three most recent years.
B. The General Partner shall have prepared at least
annually, at the Partnership's expense, financial statements
(balance sheet, statement of income or loss, partners' equity,
and changes in financial position) prepared in accordance with
generally accepted accounting principles which shall fairly
reflect the Partnership's financial position at the date shown
and its results of operations for the period indicated. Copies
of such statements and report shall be made available to the
Partners annually.
C. The General Partner shall have prepared at least
annually, at the Partnership's expense, a report containing
Partnership information necessary in the preparation of the
Partners' federal income tax return. Copies of such report shall
be distributed to each Partner as promptly as possible.
9.2 Bank Accounts.
The bank accounts of the Partnership shall be
maintained in such banking institutions as the General Partner
shall determine, and withdrawals shall be made only in the
regular course of Partnership business on such signature or
signatures as the General Partner may determine.
9.3 Depreciation and Elections.
A. All elections required or permitted to be made by
the Partnership under the Internal Revenue Code shall be made by
the General Partner.
B. Notwithstanding anything to the contrary in this
Section 9.3, the General Partner shall not be responsible for
initiating any change in accounting methods from the methods
initially chosen.
C. The General Partner is hereby designated as the
"Tax Matters Partner" under Section 6231(a)(7) of the Internal
Revenue Code.
9.4 Fiscal Year.
The fiscal year of the Partnership shall be the
calendar year for tax purposes.
ARTICLE TEN<PAGE>
GENERAL PROVISIONS
10.1 Appointment of Attorneys-in-Fact.
A. The Limited Partner, by the execution hereof,
hereby irrevocably constitutes and appoints the General Partner
its true and lawful attorney-in-fact, with full power and
authority in its name, place and stead, to execute or acknowledge
under oath, deliver, file and record at the appropriate public
offices such documents as may be necessary or appropriate to
carry out the provisions of this Agreement including:
(i) All certificates and other instruments (including
this Agreement or any certificate of limited partnership and
any amendment thereof) which the General Partner deems
appropriate to qualify or continue the Partnership as a
limited partnership under the Missouri Act (or a partnership
in which the Limited Partner will have limited liability
comparable to that provided by the Missouri Act) or under
the laws of any other jurisdiction in which the Partnership
may conduct business;
(ii) All amendments to this Agreement or any
certificate of limited partnership which are required to be
filed or which the General Partner deems to be advisable to
file;
(iii) All instruments which the General Partner
deems appropriate to reflect a change or modification of the
Partnership in accordance with the terms of this Agreement;
(iv) All conveyances and other instruments which the
General Partner deems appropriate to reflect the dissolution
and termination of the Partnership; and
(v) All other instruments, documents or contracts
(including, without limiting the foregoing, any deed, lease,
mortgage, note, bill of sale, contract, trust agreement,
guarantee, partnership agreement, indenture, underwriting
agreement or any instrument or documentation which may be
required to be filed (or which the General Partner deems
advisable to file) by the Partnership under the laws of any
state or by any governmental agency) requisite to carrying
out the intent and purpose of this Agreement and the
business of the Partnership and its Affiliates.
B. The appointment by the Limited Partner of the
General Partner as attorney-in-fact shall be deemed to be a power
coupled with an interest in recognition of the fact that each of
the Partners under this Agreement will be relying upon the power
of the General Partner to act as contemplated by this Agreement
in any filing and other action by them on behalf of the
Partnership.
10.2 Word Meanings.<PAGE>
The words such as "herein", "hereinafter", "hereof",
and "hereunder" refer to this Agreement as a whole and not merely
to a subdivision in which such words appear unless the context
otherwise requires. The singular shall include the plural and
the masculine gender shall include the feminine and neuter, and
vice versa, unless the context otherwise requires.
10.3 Binding Provisions.
The covenants and agreements contained herein shall be
binding upon, and inure to the benefit of the heirs, executors,
administrators, successors and assigns of the respective parties
hereto.
10.4 Applicable Law.
This Agreement shall be construed and enforced in
accordance with the laws of the State of Missouri.
10.5 Counterparts.
This Agreement may be executed in several counterparts,
all of which together shall constitute one agreement binding on
all parties hereto, notwithstanding that all the parties have not
signed the same counterpart, except that no counterpart shall be
binding unless signed by the General Partner.
10.6 Entire Agreement.
This Agreement contains the entire agreement between
the parties and supersedes all prior writings or representations.
10.7 Separability of Provisions.
Each provision of this Agreement shall be considered
separable and if for any reason any provision or provisions
hereby are determined to be invalid or unenforceable such
validity or unenforceability shall not impair the operation of or
affect any other portion of this Agreement and this Agreement
shall be construed in all respects as if such invalid or
unenforceable provision was omitted.
10.8 Section Titles.
Paragraph titles are for descriptive purposes only and
shall not control or alter the meaning of this Agreement as set
forth in the text.
10.9 Amendments.
This Agreement may be amended, from time to time by the
written agreement of the Limited Partner and the General Partner
provided, however, that the provisions of Section 10.10 hereof
shall not be amended without the prior written consent of the
holders of 66-2/3% in aggregate principal amount of the Capital
Notes.<PAGE>
10.10 Payments Prohibited.
The Partnership shall not (i) return to either Partner
all or any portion of its Capital Contribution or (ii) make any
distribution of Net Income at any time when a default in the
payment of the principal of or premium or interest on any of the
15% Capital Notes Due 1992, the 9-3/8% Capital Notes Due 1996,
the 10.60% Capital Notes Due 1997, the 8.96% Subordinated Capital
Notes due 2002 or the 7.95% Subordinated Capital Notes due 2006
of the Partnership (the "Capital Notes") or any indebtedness for
money borrowed of the Partnership ranking on a parity with such
Capital Notes shall have occurred and be continuing; and any such
act shall constitute a violation of this Agreement prohibited by
Article Six (B)(iii).
IN WITNESS WHEREOF, the undersigned has executed this
Fifth Amended and Restated Agreement of Limited Partnership as of
the day and year first above written.
GENERAL PARTNER:
EDJ HOLDING COMPANY, INC.
By:
Vice President
LIMITED PARTNER:
THE JONES FINANCIAL COMPANIES,
a Limited Partnership
By:
John W. Bachmann<PAGE>
<TABLE> <S> <C>
<ARTICLE> BD
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements for The Jones Financial Companies for the quarter
ended June 30, 1995, and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<RESTATED>
<CIK> 0000815917
<NAME> THE JONES FINANCIAL COMPANIES, A LIMITED PARTNERSHIP
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> APR-01-1995
<PERIOD-END> JUN-30-1995
<EXCHANGE-RATE> 1
<CASH> 36,238
<RECEIVABLES> 475,352
<SECURITIES-RESALE> 0
<SECURITIES-BORROWED> 12,346
<INSTRUMENTS-OWNED> 215,888
<PP&E> 135,227
<TOTAL-ASSETS> 920,319
<SHORT-TERM> 147,000
<PAYABLES> 295,608
<REPOS-SOLD> 0
<SECURITIES-LOANED> 3,550
<INSTRUMENTS-SOLD> 18,890
<LONG-TERM> 171,730
<COMMON> 0
0
0
<OTHER-SE> 190,470
<TOTAL-LIABILITY-AND-EQUITY> 920,319
<TRADING-REVENUE> 0
<INTEREST-DIVIDENDS> 15,209
<COMMISSIONS> 140,125
<INVESTMENT-BANKING-REVENUES> 9,153
<FEE-REVENUE> 11,011
<INTEREST-EXPENSE> 7,908
<COMPENSATION> 97,573
<INCOME-PRETAX> 15,445
<INCOME-PRE-EXTRAORDINARY> 15,445
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,445
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
Exhibit 10.1 AGREEMENT
THIS AGREEMENT ("Agreement") is made and entered into as of the
30th day of May, 1995, by and between EDWARD D. JONES & CO., L.P., a
Missouri limited partnership ("Jones"), and TRI-TEK INFORMATION
SYSTEMS, INC., a Missouri corporation ("Tri-Tek").
RECITALS
A. Tri-Tek holds itself out as possessing superior knowledge,
expertise and experience in, among other things, (a) the design,
configuration and assembly of customized computer software and
hardware systems including, without limitation, customized file server
systems, (b) the access to a broad range of vendors of all components
for customized file server systems, and (c) the ability to purchase
such components at the most competitive prices.
B. Jones desires to engage Tri-Tek to finalize the development,
and to assemble and sell, solely to Jones, customized file server
systems which meet Jones' special needs and satisfy Jones' special
requirements, and Tri-Tek desires to be so engaged, all on and subject
to the terms and conditions set forth below.
AGREEMENTS
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements set forth below, the parties hereto do hereby
covenant and agree as follows:
1. Definitions. As used in this Agreement, the following terms
shall have the meanings ascribed to those term as hereinafter set
forth:
1.1 "Actual Cost" means (a) as it relates to a System, the sum
total of the actual cost to Tri-Tek for all System Components thereof,
(b) as it relates to each System Component not constructed by Tri-Tek,
the actual cost to Tri-Tek for the System Component from the third
party vendor thereof, or (c) as it relates to each System Component
constructed by Tri-Tek (including, without limitation, the
Monitoring/Control Subsystem), the actual cost to Tri-Tek for the
System Components (purchased by Tri-Tek from third party vendors
thereof) which are utilized by Tri-Tek to construct the System
Component (such as the Monitoring/Control Subsystem).
1.2 "Affiliates" means (a) Jones Companies, (b) all entities,
other than Jones, which directly are controlled by Jones Companies (as
is Jones) and/or its general partners, and (c) all entities which
indirectly are controlled by Jones Companies and/or its general
partners including, without limitation, all entities which directly or
indirectly are controlled by Jones. For the foregoing purposes, (y)
control of the general partner(s) of a limited partnership constitutes
control of the partnership, and (z) once an entity becomes an
Affiliate, it thereafter shall continue to constitute an Affiliate for
all purposes of this Agreement, even if it ceases to satisfy the
foregoing definitional criteria of an Affiliate. All Affiliates shall
be deemed to be third party beneficiaries of this Agreement.<PAGE>
1.3 "Allowance" means the dollar amount, or monetary equivalent
of value or other consideration, not reflected in Actual Cost which,
directly or indirectly, is received by Tri-Tek from or for a vendor to
Tri-Tek of one or more System Components on account of Tri-Tek's
purchase of any System Component(s) from the vendor. Allowances shall
not include CO-OP Dollars.
1.4 "Assembly Charge" means $350.00 (in the case of a System,
there being no Assembly Charge in the case of any System Component).
1.5 "Audit" shall have the meaning ascribed to that term in
Section 7.6 below.
1.6 "Bankruptcy Code" means The Bankruptcy Code of 1978, as
amended, 11 U.S.C. S101, et. seq., as hereafter amended from time-to-
time.
1.7 "Business Day" means Monday through Friday which is not a
Federal or Missouri legal holiday.
1.8 "Conforming Systems" means Systems which, together with all
System Components properly to constitute a part thereof, individually
and collectively, conform with all representations and warranties
contained in this Agreement in respect thereof including, without
limitation, the representation and warranty that they meet all
approved Specifications and otherwise meet Jones' Needs at the time.
1.9 "Contractor" means a person, other than an employee of Tri-
Tek, or an entity, in each instance who or which heretofore and/or
hereafter participated and/or participates, directly or indirectly,
with Tri-Tek in the development of Systems including, without
limitation, System Components heretofore developed and/or hereafter to
be developed (and constructed) by Tri-Tek pursuant to this Agreement.
1.10 "CO-OP Dollars" means credits (a) made available by any
vendor to Tri-Tek of any System Component which that vendor makes
available to Tri-Tek and which other vendors of like items at the time
generally make available to the same extent in the ordinary course of
their respective businesses to purchasers of like or similar items,
(b) to Tri-Tek's account and/or otherwise made available to Tri-Tek as
a result of Tri-Tek's purchase of any System Component(s) from the
vendor, (c) which may be redeemed by Tri-Tek solely to obtain services
of and from the vendor, or another, for free or at a discount, in
exchange for such credits, (d) which are lost if not used, and (e)
which do not result in an increase in the Actual Cost of the System
Component(s) when compared with the cost for the System Component(s)
then available to Tri-Tek from another vendor of the System
Component(s).
1.11 "Copyright Act" means the Copyright Act of 1976, as amended,
17 U.S.C. S101, et. seq., as hereafter amended from time-to-time.
1.12 "Cost And Vendor Schedule" means the from time-to-time
approved schedule which identifies (a) particular System Components to
be purchased by Tri-Tek from third party vendors, the vendors to Tri-<PAGE>
Tek of such System Components, respectively, and the manufacturer of
such System Components, respectively, (b) the maximum cost (i) to
Jones and Maintenance Providers, respectively, of (A) each System
Component not constructed by Tri-Tek if sold separately, and (B) each
System Component constructed by Tri-Tek (including, without
limitation, the Monitoring/Control Subsystem) if sold separately, and
(ii) to Jones of each System, each such maximum cost being subject to
the applicable Profit Percent and, in the case of Systems, also the
Assembly Charge, in each instance pursuant to Section 7.1 below, and
(c) generally, as a whole, all System Components not otherwise
identified with particularity or included pursuant to the foregoing
(such as, without limitation, nuts, bolts and screws) and the total
cost associated therewith, in each and every instance which are
reflective of Actual Cost and the Specifications at the time in
question. The initially approved Cost And Vendor Schedule is attached
hereto as Exhibit 1.12.
1.13 "Customer" means an individual or entity or any type who or
which, at the time is question, is a actual or potential customer or
client of Jones and/or any Affiliate.
1.14 "Design Specifications" means the from time-to-time approved
specifications of the design of Systems and of particular System
Components. The current Design Specifications for the Prototype
System (and for particular System Components thereof) including,
without limitation, the manner in which the System Serial Number and
the MCS Serial Number, respectively, are to be determined and the
location on, as applicable, Systems and the Monitoring/Control
Subsystem at which such numbers are to be etched, include, without
limitation, those which are set forth on Exhibit 1.14 hereto and on
other exhibits hereto.
1.15 "Developed Firmware" means a System Component which consists
of firmware developed by Tri-Tek (whether alone or in conjunction with
Jones) which is embedded in any other System Component including,
without limitation, the firmware embedded in any Monitoring/Control
Subsystem.
1.16 "Developments" means any and all items made, developed,
conceived and/or reduced to practice by Tri-Tek (or by anyone for Tri-
Tek or otherwise on Tri-Tek's behalf) (a) in anticipation of and/or
pursuant to this Agreement, and/or (b) in connection with, or in any
way related to, the design, development and/or construction of any
System and/or any System Component, in each instance whether or not
the item was, is and/or hereafter is (w) at any time utilized in any
System or any System Component, (x) written, oral or otherwise, (y)
patentable or copyrightable, and/or (z) heretofore and/or hereafter
made, developed, conceived and/or reduced to practice by Tri-Tek alone
and/or in conjunction with others (including, without limitation,
Jones) including, without limitation, any and all inventions, works-
of-authorship, ideas, processes, formulas, works, materials, software
(including, without limitation, all source codes, object codes and
microcodes), specifications, systems, drawings, sketches, models,
circuits, firmware, computer boards, computer cards, layouts,
algorithms, samples, tools, computers and other similar apparatus,<PAGE>
programs, research, technical and business information and data, and
all other work product of Tri-Tek.
1.17 "Document Production" shall have the meaning ascribed to
that term in Section 7.4 below.
1.18 "Documents" shall have the meaning ascribed to that term in
Section 7.5 below.
1.19 "Final Phase One Test Date" shall have the meaning ascribed
to that term in Section 4.1.5 below.
1.20 "Final Phase Two Test Date" shall have the meaning ascribed
to that term in Section 4.2.5 below.
1.21 "Final Rejection Notice" shall have the meaning ascribed to
that term in Section 5.7.1 below.
1.22 "Indemnified Parties" shall have the meaning ascribed to
that term in Article 12 below.
1.23 "Initial Phase One Test Date" shall have the meaning
ascribed to that term in Section 4.1.3 below.
1.24 "Initial Phase Two Test Date" means the last day of the
Initial Phase Two Test Period.
1.25 "Initial Phase Two Test Period" means the period which (a)
commences on the Phase One Completion Date, and (b) ends on that day
which is three months after the Phase One Completion Date plus, if and
as applicable, the number of days of Tri-Tek's delayed performance in
the timely delivery of any Phase Two Test Systems pursuant to
Section 4.2.1 below, subject, however, to Section 4.2.9 below.
1.26 "Initial Phase Two Test Systems" shall have the meaning
ascribed to that term in Section 4.2.1 below.
1.27 "Initial Rejection Notice" shall have the meaning ascribed
to that term in Section 5.7.1 below.
1.28 "Invoice" shall have the meaning ascribed to that term in
Section 7.2.1 below.
1.29 "Jones' Additional Deposit" means the sums set forth in
Section 2.4 below.
1.30 "Jones' Branch Office" means a business office of Jones
other than Jones' Headquarters.
1.31 "Jones Companies" means The Jones Financial Companies, a
limited partnership.
1.32 "Jones' Confidential Information" means information which
(a) relates in any manner or fashion to a System (or any part or
element thereof including, without limitation, any System Component),
(b) relates in any manner or fashion to the development and/or use of
a System (or any part or element thereof including, without<PAGE>
limitation, a System Component), (c) directly or indirectly relates in
any manner or fashion to Jones' business, and/or (d) Jones treats as
confidential, in each instance whether written, oral or otherwise,
whether or not patentable or copyrightable, and whether or not marked
"Confidential". Specifically, but without limiting the generality of
the foregoing, Jones' Confidential Information includes all
Developments, all Jones' Software, all Specifications, all information
which Jones expressly informs Tri-Tek is confidential, and all
information concerning Jones' business including, without limitation,
Jones' manner of doing business, its Customers, its sales volume and
its profits. Notwithstanding the foregoing, Jones' Confidential
Information does not include information which is (x) generally known
in the relevant industry or industry segment other than on account of
a breach of this Agreement by Tri-Tek, (y) described in an issued or
published U.S. or non-U.S. patent, or (z) disclosed to Tri-Tek by a
third party, other than a Maintenance Provider or affiliate of Jones,
not having an obligation of confidence to Jones. As between Tri-Tek
and Jones, Tri-Tek shall have the burden of proving that information
does not constitute Jones' Confidential Information.
1.33 "Jones' Headquarters" means Jones' principal business
headquarters located at 201 Progress Parkway, St. Louis, Missouri
63043, or such other location of which Jones gives Tri-Tek written
notice from time-to-time.
1.34 "Jones' Initial Deposit" means the sum of $250,000.
1.35 "Jones' Needs" means the needs of Jones to be satisfied by
Systems, as such needs evolve and change from time-to-time and are
expressed in writing or in any other recorded media by Jones to Tri-
Tek from time-to-time. Jones' Needs, as of the date of this
Agreement, are set forth in this Agreement (including, without
limitation, in Section 3.2.7 below and in Article 10 below) and/or on
Exhibit 1.35 hereto.
1.36 "Jones' Software" means System Components which consist of
all software supplied by Jones to Tri-Tek from time-to-time for
installation into Systems, all rights to which are owned by Jones,
including, without limitation, software which Jones develops
specifically for use with Systems.
1.37 "Jones' Third Party Software" means System Components which
consist of all software supplied by Jones to Tri-Tek for installation
into Systems, the rights to which are licensed by a third party to
Jones, including, without limitation, the operating system software
and database software.
1.38 "Maintenance Providers" means those entities with which
Jones from time-to-time has an agreement to maintain, among other
things, Systems, the identity of which Jones gives Tri-Tek written
notice from time-to-time.
1.39 "Monitoring/Control Subsystem" (or "MCS") means a System
Component which consists of a computer board, the current design,
functions and performance specifications of which include, without<PAGE>
limitation, those which are set forth on Exhibit 1.39 hereto, which is
to be constructed by Tri-Tek with other System Components.
1.40 "MCS Serial Number" means a number assigned to each
Monitoring/Control Subsystem. The manner in which such number is to
be determined and the location on the Monitoring/Control Subsystem at
which such number is to be etched are encompassed by the Design
Specifications.
1.41 "Packaging Specifications" means the specifications for the
packaging, for delivery, of Systems including, without limitation,
those which are set forth in Exhibit 1.41 hereto.
1.42 "Performance Specifications" means the from time-to-time
approved specifications of the performance and functions of Systems
and of particular System Components. The current Performance
Specifications for the Prototype System (and for particular System
Components thereof) include, without limitation, those which are set
forth on Exhibit 1.42 hereto and on other exhibits hereto.
1.43 "Phase One Completion Date" means the day on which Jones
conditionally acknowledges in writing to Tri-Tek pursuant to
Section 4.1.7 below, or is deemed conditionally to have acknowledged
pursuant to, as applicable, Section 4.1.3 or Section 4.1.5 below, that
the Phase One Test Systems constitute Conforming Systems.
1.44 "Phase One Systems Test Date" means that date which is 45
days after the Specification Date, or such earlier or later date as
provided in and/or determined pursuant to Section 3.2.4 below.
1.45 "Phase One Test Systems" means three Systems.
1.46 "Phase Two Completion Date" means the day on which Jones
conditionally acknowledges in writing to Tri-Tek pursuant to
Section 4.2.9 below, or is deemed conditionally to have acknowledged
pursuant to, as applicable, Section 4.2.3 or Section 4.2.5 below, that
all Phase Two Test Systems constitute Conforming Systems.
1.47 "Phase Two Test Period" means that period of time which (a)
commences on the Phase One Completion Date, and (b) ends on the Phase
Two Completion Date.
1.48 "Phase Two Test Systems" means the Systems ordered by Jones
from Tri-Tek pursuant to Purchase Orders during the Phase Two Test
Period.
1.49 "Price" shall have the meaning ascribed to that term in
Section 7.1 below.
1.50 "Profit Percent" means (a) 15% in the case of a System, and
(b) 5% in the case of a System Component, in each instance subject,
however, to decrease pursuant to Section 7.7(b) below.
1.51 "Project Manager" shall have the meaning ascribed to that
term in Article 11 below.<PAGE>
1.52 "Prototype System" means the file server system, as of the
date of this Agreement, which has heretofore been developed for Jones,
jointly by Tri-Tek and Jones, in anticipation of the execution of this
Agreement and is intended by Tri-Tek and Jones as a basis further to
develop Systems.
1.53 "Purchase Order" means (a) an order submitted to Tri-Tek by
Jones to purchase Conforming Systems and/or particular System
Components, and (b) an order submitted to Tri-Tek by a Maintenance
Provider to purchase particular System Components.
1.54 "RAID System" means a System Component, the current design,
functions and performance specifications of which include, without
limitation, those which are set forth on Exhibit 1.54 hereto.
1.55 "System Serial Number" means a number assigned to each
System. The manner in which such number is to be determined and the
location on the System at which such number is to be etched are
encompassed by the Design Specifications.
1.56 "Specification Date" means the tenth Business Day after the
date of this Agreement first written above, or such earlier or later
date as Tri-Tek and Jones mutually may agree in writing subject,
however, to extension pursuant to Section 3.1.2 below.
1.57 "Specifications" means the from time-to-time approved Design
Specifications and the from time-to-time approved Performance
Specifications, collectively.
1.58 "Standing Order" shall have the meaning ascribed to that
term in Section 5.1.1 below.
1.59 "Systems" means file server systems which are assembled by
Tri-Tek for Jones, some of which may constitute Conforming Systems.
1.60 "System Components" means all components (including, without
limitation, Jones' Software, Tri-Tek's Third Party Software, Jones'
Third Party Software, Developed Firmware, the RAID System and the
Monitoring/Control Subsystem) of a System including, without
limitation, (a) those components identified with particularity on any
Cost And Vendor Schedule, and (b) those components (including, without
limitation, those components set forth on any Cost And Vendor
Schedule) which constitute a part of one or more other System
Components.
1.61 "System Lessors" shall have the meaning ascribed to that
term in Section 14.1 below.
1.62 "Technology Changes" means technology innovations, updates
and/or enhancements which may improve or otherwise affect Systems
(including one or more System Components).
1.63 "Test Systems" means the Phase One Test Systems and the
Phase Two Test Systems.<PAGE>
1.64 "Third Parties" means the owner of the right to license or
sell, as the case may be, Jones' Third Party Software and/or Third
Party Rights.
1.65 "Third Party Rights" means any proprietary rights which are
owned by one or more third parties including, without limitation, any
and all patent rights, copyright rights and mask work rights in or to
(a) any of Tri-Tek's Third Party Software or (b) other System
Components.
1.66 "Third Party Firmware" means System Components which consist
of all software embedded in any other System Component, the rights to
which are owned by a third party, including, without limitation, the
software that is part of the RAID System.
1.67 "Tri-Tek's Headquarters" means 425 Woodsmill Road South,
Suite 270, Chesterfield, Missouri 63017, which now constitutes Tri-
Tek's principal business headquarters, or such other location as Tri-
Tek and Jones hereafter mutually may agree in writing from time-to-
time.
1.68 "Tri-Tek's Third Party Software" means System Components
which consist of all software, the rights to which are owned by a
third party, including, without limitation, Third Party Firmware, but
not including Jones' Third Party Software (or Jones' Software or
Developed Firmware, the rights to which are not owned by a third
party).
1.69 "UCC" means the Missouri Uniform Commercial Code, as
amended, Mo. Rev. Stat. S400.1-101, et. seq., as hereafter amended
from time-to-time.
2. Jones' Initial Deposit And Jones' Additional Deposit.
2.1 Payment Of Jones' Initial Deposit. Unless already paid by
Jones to Tri-Tek, which only would be paid in anticipation of the
execution and delivery of this Agreement, upon the execution and
delivery of this Agreement by Tri-Tek and Jones, Jones shall pay
Jones' Initial Deposit to Tri-Tek. Jones' Initial Deposit shall be
dealt with as further provided in this Agreement.
2.2 Refund Of Jones' Initial Deposit. Without limiting the
generality of Section 2.1 above, Tri-Tek shall refund Jones' Initial
Deposit, in full or in part, to Jones as and when so provided in this
Agreement.
2.3 Application Of Jones' Initial Deposit. Jones' Initial
Deposit shall serve as, among other things, a deposit by Jones against
the sale and delivery by Tri-Tek to Jones of the first 1,000 Systems
(excluding only the Phase One Test Systems) purchased by Jones from
Tri-Tek at any time pursuant to this Agreement for which Jones has a
payment obligation under any section of this Agreement. In
furtherance thereof, on the date on which payment is made by Jones to
Tri-Tek for a System other than a Phase One Test System, (a) Jones'
Initial Deposit shall be decreased by the sum of $250.00 for each such
System, and (b) Jones shall thereby be deemed then to have paid Tri-<PAGE>
Tek the sum of $250.00 for each such System, in each instance until
such time as Jones' Initial Deposit is exhausted fully thereby or is
refunded by Tri-Tek to Jones pursuant to this Agreement.
2.4 Payment Of Jones' Additional Deposit. Jones shall pay the
following amounts to Tri-Tek on the following dates, namely (a)
$100,000.00 on the Phase One Completion Date, (b) $50,000.00 on the
Phase Two Completion Date, and (c) $100,000.00 on that day which is 60
days after the Phase Two Completion Date (such $250,000 being
collectively referred to herein as "Jones' Additional Deposit")
provided, in each instance, that this Agreement is not terminated for
any reason prior to the stated date. Jones' Additional Deposit shall
be dealt with as further provided in this Agreement.
2.5 Refund Of Jones' Additional Deposit. Without limiting the
generality of Section 2.4 above, Tri-Tek shall refund Jones'
Additional Deposit, in full or in part, to Jones as and when so
provided in this Agreement.
2.6 Application Of Jones' Additional Deposit. Jones' Additional
Deposit shall, among other things, serve as a deposit by Jones against
the sale and delivery by Tri-Tek to Jones of the first 2,500 Systems
(excluding only the Phase One Test Systems) purchased by Jones from
Tri-Tek at any time pursuant to this Agreement for which Jones has a
payment obligation under any section of this Agreement. In
furtherance thereof, on the date on which payment is made by Jones to
Tri-Tek for a Conforming System other than a Phase One Test System,
(a) Jones' Initial Deposit shall be decreased by the sum of $100.00
for each such System, and (b) Jones shall thereby be deemed then to
have paid Tri-Tek the sum of $100.00 for each such System, in each
instance until such time as Jones' Additional Deposit is exhausted
fully thereby or is refunded by Tri-Tek to Jones pursuant to this
Agreement.
2.7 Minimum Purchase Of Systems. Notwithstanding Section 2.3
and/or Section 2.6 above, there shall be no minimum number of Systems
which Jones is required to purchase from Tri-Tek pursuant to this
Agreement.
3. Development Of System And System Components.
3.1 Tri-Tek's Initial Duties. Tri-Tek and Jones acknowledge
that the Prototype System does not satisfy Jones' Needs as of the date
of this Agreement. Until the Specification Date, Tri-Tek shall
continuously and diligently use its best efforts further to develop a
System (including, without limitation, all System Components to be
developed by Tri-Tek, such as the Monitoring/Control Subsystem) which
meets Jones' Needs on the Specification Date, to produce revised
Specifications for such System and to develop all other Developments
related to such System. In furtherance thereof:
3.1.1 On the Specification Date, Tri-Tek shall deliver
proposed revised Specifications for such System to Jones together with
Tri-Tek's proposed revised Cost And Vendor Schedule reflective of such
proposed revised Specifications, and Tri-Tek shall thereby be deemed
to represent and warrant to Jones that (a) such proposed revised<PAGE>
Specifications are for a System, including System Components, which
will meet Jones' Needs at that time, and (b) such proposed revised
Cost and Vendor Schedule reflects a System, including System
Components, which embody such Specifications.
3.1.2 If Jones, in its sole and absolute discretion,
approves such proposed revised Specifications and such proposed
revised Cost And Vendor Schedule by giving written notice thereof to
Tri-Tek within ten Business Days after the Specification Date, such
proposed revised Specifications and such proposed revised Cost And
Vendor Schedule shall then become, as applicable, the then approved
Specifications and the then approved Cost And Vendor Schedule. Jones'
failure so to approve both such proposed revised Specifications and
such proposed revised Cost And Vendor Schedule shall constitute Jones'
rejection of both of them on such tenth Business Day unless, prior to
the expiration of such ten day period, Jones agrees, by written notice
to Tri-Tek, to extend the Specification Date, in which event the
foregoing provisions of this Section 3.1 shall again be applicable
regarding the extended Specification Date.
3.1.3 If, for any reason whatsoever, Jones does not
approve, and thereby rejects, such proposed revised Specifications and
such proposed revised Cost And Vendor Schedule, (a) such rejection
shall constitute Jones' termination of this Agreement for cause, (b)
Tri-Tek shall refund Jones' Initial Deposit in full to Jones within
five Business Days after the date of such rejection, and (c) within
such period, Tri-Tek also shall refund to Jones the full amount of
Jones' Additional Deposit which Jones may theretofore have paid Tri-
Tek.
3.1.4 If Jones approves such proposed revised
Specifications and proposed revised Cost And Vendor Schedule, Tri-Tek
fully shall develop and assemble the Phase One Test Systems by the
Phase One Systems Test Date.
3.1.5 Approval by Jones of such proposed revised
Specifications and proposed revised Cost And Vendor Schedule shall be
in reliance on all representations and warranties deemed made by Tri-
Tek in respect thereof.
3.2 Tri-Tek's Further Duties.
3.2.1 Until the Specification Date, Tri-Tek shall
continuously and diligently (a) keep apprised of all Technology
Changes, and (b) timely advise Jones of all Technology Changes and of
Tri-Tek's expectation of the changes, if any, to the then approved
Cost And Vendor Schedule which are reflective of such Technology
Changes in the event Jones elects to avail itself of some or all of
such Technology Changes.
3.2.2 On and after the Specification Date, Tri-Tek shall
continuously and diligently (a) keep apprised of all Technology
Changes, and (b) timely advise Jones of all such Technology Changes
by, at Tri-Tek's sole cost and expense, preparing and submitting
proposed revisions of the then approved Specifications, as applicable,
and, if applicable, the then approved Cost And Vendor Schedule, in<PAGE>
each instance which are reflective solely of such Technology Changes
and implementation of such Technology Changes into Systems, and Tri-
Tek shall thereby be deemed to represent and warrant to Jones that (y)
such proposed revised Specifications reflect such Technology Changes
and are for a System, including System Components, which will meet
Jones' Needs at that time, and (z) such proposed revised Cost and
Vendor Schedule reflects a System, including System Components, which
embody such Technology Changes. In revising any Cost And Vendor
Schedule pursuant to this Section 3.2.2, Tri-Tek shall not have the
right to change any System Component which is not directly related to
the Technology Change or to change the maximum cost to Jones of any
other System Component.
3.2.3 Without limiting the generality of Section 3.2.2
above, after the Specification Date, Tri-Tek, at its sole cost and
expense, shall prepare and submit to Jones Tri-Tek's proposed revised
Specifications, if and as applicable, and, if applicable, Tri-Tek's
proposed revised Cost And Vendor Schedule, in each instance which are
reflective of Jones' Needs including, without limitation, changes in
System Components (including the manufacturer thereof), updates and
enhancements of Systems and System Components, and/or the inclusion,
in Systems and System Components, of additional System Components
which Jones then conditionally requests be made (in each instance
including, without limitation, those which may have been previously
submitted by Tri-Tek to Jones pursuant to Section 3.1.1 and/or
Section 3.2.2 above but not previously approved by Jones), and Tri-Tek
shall thereby be deemed to represent and warrant to Jones that (a)
such proposed revised Specifications reflect the items conditionally
requested by Jones and are for a System, including System Components,
which will meet Jones' Needs at that time, and (b) such proposed
revised Cost and Vendor Schedule reflects a System, including System
Components, which embody such Specifications. In revising any Cost
And Vendor Schedule pursuant to this Section 3.2.3, Tri-Tek shall not
have the right to change any System Component which is not directly
related to the items which Jones conditionally requests be made or to
change the maximum cost to Jones of any other System Component. Such
proposed revision(s) shall be submitted by Tri-Tek to Jones within 60
days after the day on which Jones from time-to-time requests the
proposed revision(s).
3.2.4 If Jones, in its sole and absolute discretion,
approves, as applicable, the proposed revised Specifications and the
proposed revised Cost And Vendor Schedule which are submitted by Tri-
Tek to Jones pursuant to Section 3.2.2 or Section 3.2.3 above, Jones
shall give Tri-Tek written notice thereof within 30 Business Days
after the day on which such items are in-hand received by Jones from
Tri-Tek, in which event (a) the proposed revised Specifications and/or
the proposed revised Cost And Vendor Schedule, as applicable, shall
then become, the approved Specifications and/or the approved Cost And
Vendor Schedule, as applicable, (b) Tri-Tek shall continuously and
diligently develop all other Developments related thereto, and (c)
subject to changes in Jones' Needs and further revisions of such
approved Specifications pursuant to this Agreement, all Systems and,
as applicable, System Components which are delivered by Tri-Tek to
Jones and each Maintenance Provider, respectively, commencing no later
than 60 days after the date on which such notice of approval is given<PAGE>
shall conform with such newly approved Specifications and otherwise
meet Jones' Needs at that time. Notwithstanding the foregoing, if
Jones approves, as applicable, any proposed revised Specifications and
the corresponding proposed revised Cost And Vendor Schedule, if any,
which are (is) submitted by Tri-Tek to Jones pursuant to Section 3.2.2
or Section 3.2.3 above on or before the Phase One Systems Test Date,
the Phase One Systems Test Date automatically shall be extended by
such 60 day period, or by such lesser or greater period of time as
Tri-Tek and Jones mutually may agree in writing. Jones' failure so to
accept, as applicable, such proposed revised Specifications and such
proposed revised Cost And Vendor Schedule shall constitute its
rejection thereof unless, before the expiration of such 30 day period,
Jones extends the date by which it shall have to approve such items,
in which event the foregoing provisions of this Section 3.2.4 shall
apply in respect of such extended date.
3.2.5 After the Specification Date, Tri-Tek shall (a)
change a vendor of a System Component if such vendor no longer sells
or is not able legally to sell the System Component, (b) change a
vendor of a System Component if Tri-Tek is able to purchase the same
System Component from another vendor at a reduced price, and (c)
change a vendor of a System Component when required or directed by
Jones pursuant to Section 6.2 below. In any such event, Tri-Tek, at
its sole cost and expense, shall prepare and submit to Jones Tri-Tek's
proposed revised Cost And Vendor Schedule which reflects the change in
vendor and, at the same time, provide Jones with Tri-Tek's reasons for
the change in accordance with the foregoing provisions of this
Section 3.2.5. Such proposed revised Cost And Vendor Schedule may not
contain an increase or decrease in the cost of the affected System
Component, whether or not the cost to Tri-Tek of the affected System
Component increases or decreases as a result of the change in vendor,
unless the change results solely as a result of (y) a vendor no longer
selling or no longer being able legally to sell the System Component,
or (z) Jones' requirement or direction pursuant to Section 6.2 below,
in which events the proposed revised Cost And Vendor Schedule shall
reflect the actual increase or decrease in the cost to Tri-Tek from
the new vendor of the affected System Component. Jones shall be
deemed to approve such proposed revised Cost And Vendor Schedule upon
its receipt of same, subject, however, to Jones' continuous rights
under Section 6.2 below.
3.2.6 After the Specification Date, Tri-Tek, at its sole
cost and expense, shall correct all failures in all Systems and System
Components in order for them continuously to meet the applicable
Specifications and Jones' Needs at the applicable time including,
without limitation, correcting programming errors and/or bugs
contained in such Systems and System Components.
3.2.7 After the Specification Date, Tri-Tek shall (a)
permanently etch the System Serial Number to the outside of each
System in 8 point type, (b) electronically store the same number in
the System so that the System Serial Number of the System may be
retrieved by Jones pursuant to software which permits such retrieval,
(c) permanently etch the MCS Serial Number to the outside of each
Monitoring/Control Subsystem in 8 point type, and (d) electronically
store the same number in the Monitoring/Control Subsystem so that such<PAGE>
MCS Serial Number of the Monitoring/Control Subsystem may be retrieved
by Jones pursuant to software which permits such retrieval.
3.2.8 Notwithstanding any of the foregoing provisions of
this Section 3.2, and without diminishing any of Tri-Tek's other
obligations under this Agreement, in the event Jones requests Tri-Tek
to correct a failure in any System or System Component to meet the
applicable Specifications and/or Jones' Needs at the applicable time
including, without limitation, the correction of programming errors
and/or bugs, Tri-Tek promptly shall, at its sole cost and expense,
locate and correct the problem of which Jones is complaining even if
Tri-Tek believes that the problem is due to Jones' Software or Jones'
Third Party Software or another item for which Tri-Tek has no
responsibility under this Agreement, and irrespective of whether Tri-
Tek believes that correction of the problem involves a Technology
Change for which Jones could have monetary liability under this
Agreement. If, however, Tri-Tek believes that correction of the
complained-of problem involves correction of a problem with Jones'
Software or Jones' Third Party Software or another item for which Tri-
Tek has no responsibility under this Agreement, or involves a
Technology Change for which Jones could have monetary liability under
this Agreement, Tri-Tek shall, before correcting the problem, so
advise Jones in writing and thereafter receive Jones' authorization to
correct the problem before proceeding to correct the problem. Such
authorization shall not constitute Jones' acknowledgment that Jones
could have any monetary liability for correction of the complained-of
problem. Tri-Tek's correction of the problem shall not constitute its
release of any monetary claim which it may have against Jones to pay
for Tri-Tek's correction of the problem if, but only if, Tri-Tek
timely has given the aforesaid notice to Jones and it is later
conclusively determined that correction of the complained-of problem
solely constituted correction of a problem with Jones' Software or
Jones' Third Party Software or another item for which Tri-Tek has no
responsibility under this Agreement, or involves a Technology Change
for which Jones could have monetary liability under this Agreement, in
which events Jones shall reimburse Tri-Tek for all costs of and to
Tri-Tek which are directly attributable to Tri-Tek's correction of the
problem.
3.2.9 Approval by Jones of any proposed revised
Specifications and any proposed revised Cost And Vendor Schedule to
which reference is made in this Section 3.2 shall be in reliance on
all representations and warranties deemed made by Tri-Tek in respect
thereof.
4. Testing Of Systems.
4.1 Phase One Testing. Subject to Jones' termination of this
Agreement pursuant to Section 3.1.3 above:
4.1.1 Tri-Tek shall deliver, at its sole cost and expense,
the Phase One Test Systems and all Developments in respect thereof to
Jones at Jones' Headquarters for actual receipt by Jones on or before
the Phase One Systems Test Date. Title to, and sole ownership of, the
Phase One Test Systems shall be deemed to pass to Jones on the date of
such delivery, subject, however, to such title and ownership reverting<PAGE>
to Tri-Tek as provided in Section 4.1.6 below. The total cost to
Jones for all of the Phase One Test Systems shall not exceed, in the
aggregate, the lesser of (a) the Actual Cost for the Phase One Test
Systems, and (b) the sum of $30,000, and Jones shall pay for all Phase
One Test Systems within 10 days after the day on which such Invoice is
rendered. Payment of such Invoice shall not constitute a waiver or
release by Jones of any claims which it may have against Tri-Tek (x)
that the Phase One Test Systems do not constitute Conforming Systems
including, without limitation, any right or remedy under this
Article 4 if any of the Phase One Test Systems do not constitute
Conforming Systems, (y) under Article 10 below, or (z) regarding the
appropriateness of any charges on such Invoice.
4.1.2 Jones, by written notice to Tri-Tek at any time, may
terminate this Agreement for cause if Tri-Tek does not deliver the
Phase One Test Systems and all Developments in respect thereof to
Jones at Jones' Headquarters by the Phase One Systems Test Date, in
which event (a) Tri-Tek shall refund Jones' Initial Deposit in full to
Jones within five Business Days after the date on which such notice is
given, (b) within such period, Tri-Tek also shall refund to Jones the
full amount of Jones' Additional Deposit which Jones may theretofore
have paid Tri-Tek, and (c) within such period, Tri-Tek also shall
refund to Jones the full amount which Jones may theretofore have paid
Tri-Tek pursuant to Section 4.1.1 above.
4.1.3 Subject to Jones' termination of this Agreement for
cause pursuant to Section 4.1.2 above, Jones shall have 100 days after
the day on which the Phase One Test Systems and the Developments in
respect thereof are delivered by Tri-Tek to Jones (the last day of
such period being referred to herein as the "Initial Phase One Test
Date") within which to test the Phase One Test Systems at Jones'
Headquarters in order for Jones itself conditionally to determine if
the Phase One Test Systems constitute Conforming Systems. If, on or
before the Initial Phase One Test Date, Jones, for any reason
whatsoever in its sole and absolute discretion, determines that any
one or more of the Phase One Test Systems do not constitute Conforming
Systems, Jones may, no later than the Initial Phase One Test Date,
return the Phase One Test Systems to Tri-Tek, at Tri-Tek's sole cost
and expense, and at about the same time provide Tri-Tek with a written
explanation of why Jones has determined that the Phase One Test
Systems do not constitute Conforming Systems, failing which Jones
shall be deemed conditionally to have acknowledged that the Phase One
Test Systems constitute Conforming Systems as of the Initial Phase One
Test Date. Such acknowledgment shall not, however, constitute a
waiver or release by Jones of any claims which it may have against
Tri-Tek (a) that the Phase One Test Systems do not constitute
Conforming Systems, or (b) under Article 10 below.
4.1.4 If Jones returns any of the Phase One Test Systems to
Tri-Tek as permitted by Section 4.1.3 above, Tri-Tek, at its sole cost
and expense, shall, within 30 days after the day on which the Phase
One Test Systems are returned to it, (a) modify such Phase One Test
Systems in order for them to constitute Conforming Systems, and (b)
deliver the modified Phase One Test Systems to Jones at Jones'
Headquarters for actual receipt by Jones by the last day of such 30
day time period. If Tri-Tek does not satisfy such obligations timely,
Jones shall have the right to terminate this Agreement for cause by<PAGE>
written notice thereof to Tri-Tek at any time, in which event all of
the provisions of Section 4.1.6 below shall apply.
4.1.5 If Tri-Tek satisfies its obligations under
Section 4.1.4 above, Jones shall have 30 days after the day on which
the last of the modified Phase One Test Systems is delivered by Tri-
Tek to Jones (such last day of such period being referred to herein as
the "Final Phase One Test Date") within which to test the modified
Phase One Test Systems and, if applicable, the other Phase One Test
Systems at Jones' Headquarters in order for Jones itself conditionally
to determine if the modified Phase One Test Systems and, if
applicable, the other Phase One Test Systems constitute Conforming
Systems. If, on or before the Final Phase One Test Date, Jones, for
any reason whatsoever in its sole and absolute discretion, determines
that any of the Phase One Test Systems (including those which have
been modified) do not constitute Conforming Systems, Jones shall have
the right to terminate this Agreement for cause by written notice
thereof to Tri-Tek on or before the Final Phase One Test Date, in
which event all of the provisions of Section 4.1.6 below shall apply.
If Jones does not terminate this Agreement pursuant to the foregoing
provisions of this Section 4.1.5, Jones shall, as of the day next
following the Final Phase One Test Date, be deemed conditionally to
have acknowledged that the modified Phase One Test Systems constitute
Conforming Systems. Such acknowledgment shall not, however,
constitute a waiver or release by Jones of any claims which it may
have against Tri-Tek (a) that the Phase One Test Systems do not
constitute Conforming Systems, or (b) under Article 10 below.
4.1.6 If Jones terminates this Agreement pursuant to
Section 4.1.4 or Section 4.1.5 above, (a) within five Business Days
after the day on which the notice of termination is given by Jones to
Tri-Tek, Tri-Tek shall refund to Jones the full amount (i) of Jones'
Initial Deposit, (ii) of Jones' Additional Deposit which Jones may
theretofore have paid Tri-Tek, and (iii) which Jones theretofore paid
Tri-Tek pursuant to Section 4.1.1 above, and (b) Jones shall, after
all amounts set forth in Section 4.1.6(a) are refunded to Jones in
full, return to Tri-Tek, at Tri-Tek's sole cost and expense, all Phase
One Test Systems which Jones may then have in its possession or under
its control, whereupon title to, and sole ownership of, such Phase One
Test Systems shall revert to Tri-Tek.
4.1.7 Anything set forth above in this Section 4.1 to the
contrary notwithstanding, Jones shall have the right conditionally to
acknowledge, by written notice thereof to Tri-Tek, that the Phase One
Test Systems constitute Conforming Systems pursuant to either or both
of Section 4.1.3 and Section 4.1.5 above prior to, as applicable, the
Initial Phase One Test Date or the Final Phase One Test Date, in which
event the Initial Phase One Test Date and/or the Final Phase One Test
Date shall, as applicable, be the day on which such a notice is given.
4.2 Phase Two Testing. Subject to Jones' termination of this
Agreement pursuant to Section 3.1.3, Section 4.1.2, Section 4.1.4 or
Section 4.1.5 above:
4.2.1 Jones may, from time-to-time during the Initial Phase
Two Test Period, issue Purchase Orders to Tri-Tek for up to, but not<PAGE>
more than, 80 Phase Two Test Systems (in the aggregate), which Tri-Tek
agrees to sell and deliver to Jones at such locations as Jones
designates in the Purchase Orders. Each Purchase Order from Jones to
Tri-Tek pursuant to this Section 4.2.1 shall, at a minimum, identify
(a) the quantity of Conforming Phase Two Test Systems which Jones then
desires to purchase from Tri-Tek, and (b) the place to which such
Systems shall be shipped by Tri-Tek for delivery to Jones. Each of
the Phase Two Test Systems shall be delivered, at Tri-Tek's sole cost
and expense, to Jones for actual receipt by Jones no later than seven
Business Days after the day on which the Purchase Order for the Phase
Two Test Systems is issued. For the foregoing purposes, without the
necessity of any further documentation, Jones shall be deemed to issue
Tri-Tek a Purchase Order for ten (of such 80) Phase Two Test Systems
(collectively, "Initial Phase Two Test Systems") on the first day of
the Initial Phase Two Test Period, for delivery by Tri-Tek to Jones at
Jones' Headquarters. Notwithstanding the foregoing, in no event shall
Tri-Tek be required to deliver more than ten Phase Two Test Systems in
any consecutive seven Business Day period. If Tri-Tek timely does not
deliver any Phase Two Test Systems to Jones, Jones shall have the
right, by written notice to Tri-Tek at any time during the Initial
Phase Two Test Period, to terminate this Agreement for cause by
written notice thereof to Tri-Tek, in which event all of the
provisions of Section 4.2.8 below shall apply.
4.2.2 Tri-Tek shall not render Jones an Invoice for the
Initial Phase Two Test Systems unless and until Jones thereafter may
issue a Purchase Order to Tri-Tek, pursuant to Section 4.2.1 above,
for additional Phase Two Test Systems. Thereafter, Tri-Tek shall not
render Jones an Invoice for any Phase Two Test Systems encompassed by
a Purchase Order issued pursuant to Section 4.2.1 above unless and
until Jones thereafter may issue another Purchase Order to Tri-Tek,
pursuant to Section 4.2.1 above, for additional Phase Two Test
Systems, except that, if applicable, Tri-Tek may render Jones an
Invoice for all Phase Two Test Systems not yet encompassed by an
Invoice on or after the Phase Two Completion Date. Invoices for Phase
Two Test Systems which are rendered prematurely by Tri-Tek shall not
be deemed rendered until the first day on which Tri-Tek may render
Jones an Invoice therefor pursuant to the foregoing provisions of this
Section 4.2.2. Subject thereto and the provisions of Section 4.2.8
below, Jones shall pay for Phase Two Test Systems within 30 days after
the day on which the Invoice in respect of the Phase Two Test Systems
is rendered by Tri-Tek to Jones. All Invoices for all Phase Two Test
Systems shall be in accordance with Section 7.2 below, except that
freight charges in respect of Phase Two Test Systems encompassed by an
Invoice shall not be included as a charge on the Invoice. Title to,
and sole ownership of, all Phase Two Test Systems shall be deemed to
pass to Jones on the day the Phase Two Test Systems are shipped by
Tri-Tek for delivery to Jones subject, however, to such title and
ownership reverting to Tri-Tek as provided in Section 4.2.8(h) below.
4.2.3 During the Initial Phase Two Test Period, Jones may
test the Phase Two Test Systems (delivered by Tri-Tek to Jones) at
Jones' Headquarters and/or at one or more of Jones' Branch Offices as
Jones determines appropriate in order for Jones itself conditionally
to determine if such Phase Two Test Systems constitute Conforming
Systems. If, at any time during the Initial Phase Two Test Period,<PAGE>
Jones, for any reason whatsoever in its sole and absolute discretion,
determines that any of such Phase Two Test Systems do not constitute
Conforming Systems, Jones may, from time-to-time during the Initial
Phase Two Test Period, return to Tri-Tek, at Tri-Tek's sole cost and
expense, such number of such Phase Two Test Systems as Jones
determines appropriate at the time, and at about the same time provide
Tri-Tek with a written explanation of why Jones has determined that
such Phase Two Test Systems do not constitute Conforming Systems. If
Jones does not return any of the Phase Two Test Systems to Tri-Tek
during the Initial Phase Two Test Period, then on the day next
following the Initial Phase Two Test Date, Jones shall be deemed
conditionally to have acknowledged that all Phase Two Test Systems
constitute Conforming Systems as of the Initial Phase Two Test Date.
Such acknowledgment shall not, however, constitute a waiver or release
by Jones of any claims which it may have against Tri-Tek (a) that the
Phase Two Test Systems do not constitute Conforming Systems, or (b)
under Article 10 below.
4.2.4 If Jones returns any Phase Two Test Systems to Tri-
Tek as permitted by Section 4.2.3 above, Tri-Tek shall, within 30 days
after the day on which each Phase Two Test System is returned to Tri-
Tek and at its sole cost and expense, (a) modify such Phase Two Test
System in order for it to constitute a Conforming System, and (b)
deliver the modified Phase Two Test System to Jones at Jones'
Headquarters and/or such of Jones' Branch Office as Jones advises Tri-
Tek for actual receipt by Jones by the last day of such 30 day time
period. If Tri-Tek does not satisfy such obligations timely, Jones
shall have the right to terminate this Agreement for cause by written
notice thereof to Tri-Tek at any time, in which event all of the
provisions of Section 4.2.8 below shall apply.
4.2.5 If Jones does not terminate this Agreement pursuant
to Section 4.2.4 above, Jones shall have 30 days after the day on
which the last of the modified Phase Two Test Systems is delivered by
Tri-Tek to Jones (such last day of such period being referred to
herein as the "Final Phase Two Test Date") within which to test the
modified Phase Two Test Systems and, if applicable, the other Phase
Two Test Systems (theretofore delivered by Tri-Tek to Jones but not
returned by Jones to Tri-Tek) in order for Jones itself conditionally
to determine if all of such Phase Two Test Systems (including those
which have been modified) constitute Conforming Systems. If, on or
before the Final Phase Two Test Date, Jones, for any reason whatsoever
in its sole and absolute discretion, determines that any of the Phase
Two Test Systems do not constitute Conforming Systems, or if Tri-Tek
timely has not delivered all Phase Two Test Systems to Jones, Jones
shall have the right to terminate this Agreement for cause by written
notice thereof to Tri-Tek on or before the Final Phase Two Test Date,
in which event all of the provisions of Section 4.2.8 below shall
apply. If Jones does not terminate this Agreement, as aforesaid,
Jones shall, as of the day next following the Final Phase Two Test
Date, be deemed conditionally to have acknowledged that the modified
Phase Two Test Systems constitute Conforming Systems. Such
acknowledgment shall not, however, constitute a waiver or release by
Jones of any claims which it may have against Tri-Tek (a) that the
Phase Two Test Systems do not constitute Conforming Systems, or (b)
under Article 10 below.<PAGE>
4.2.6 If Jones does not terminate this Agreement pursuant
to Section 4.2.1, Section 4.2.4 or Section 4.2.5 above, Tri-Tek shall,
on the Phase Two Completion Date, deliver to Jones all Developments
not theretofore delivered by Tri-Tek to Jones.
4.2.7 Payment for any Phase Two Test Systems shall not
constitute a waiver or release by Jones of any claims which it may
have against Tri-Tek including, without limitation, claims (a) that
the subject Systems do not constitute Conforming Systems including,
without limitation, any right or remedy of Jones under this Article 4
if any Phase Two Test Systems do not constitute Conforming Systems,
(b) under Article 10 below, or (c) regarding the appropriateness of
any charges on any Invoice in respect of any of the Phase Two Test
Systems.
4.2.8 If Jones terminates this Agreement pursuant to
Section 4.2.1, Section 4.2.4 or Section 4.2.5 above, (a) within five
Business Days after the day on which the notice of termination is
given by Jones to Tri-Tek, Tri-Tek shall refund to Jones the full
amount (i) of Jones' Initial Deposit, (ii) of Jones' Additional
Deposit which Jones may theretofore have paid Tri-Tek, (iii) which
Jones theretofore paid Tri-Tek pursuant to Section 4.1.1 above, (iv)
which Jones theretofore paid Tri-Tek for all Phase Two Test Systems
which theretofore were returned by Jones to Tri-Tek as permitted by
Section 4.2.3 above but were not theretofore modified and returned by
Tri-Tek to Jones as required thereby, (b) all unfilled Purchase Orders
for Phase Two Test Systems shall be deemed canceled, (c) Jones shall
have no payment obligation in respect of any Phase Two Test Systems as
to which Tri-Tek has a refund obligation pursuant to
Section 4.2.8(a)(iv) above, (d) within five Business Days after the
day on which the notice of termination is given by Jones to Tri-Tek,
Tri-Tek shall deliver to Jones all Developments not theretofore
delivered by Tri-Tek to Jones, and (e) title to, and sole ownership
of, all Phase Two Test Systems theretofore returned by Jones to Tri-
Tek as permitted by Section 4.2.3 above but not theretofore returned
by Tri-Tek to Jones as required by the foregoing provisions of this
Section 4.2.4, shall revert to Tri-Tek.
4.2.9 Anything set forth above in this Section 4.2 to the
contrary notwithstanding, Jones shall have the right conditionally to
acknowledge, by written notice thereof to Tri-Tek, that the Phase Two
Test Systems constitute Conforming Systems pursuant to either or both
of Section 4.2.3 and Section 4.2.5 above prior to, as applicable, the
Initial Phase Two Test Date or the Final Phase Two Test Date, in which
event the Initial Phase Two Test Date and/or the Final Phase Two Test
Date shall, as applicable, be the day on which such a notice is given.
5. Sales And Purchases Of Systems And System Components.
5.1 Sales And Purchases Of Systems Pursuant To Standing Orders.
Subject to Article 8 below, from and after the Phase Two Completion
Date Tri-Tek timely shall sell and deliver to Jones that quantity of
Conforming Systems as Jones may desire to purchase from Tri-Tek from
time-to-time. In furtherance thereof:
5.1.1 Subject to the further provisions of this Section 5.1
and Section 7.7(c) and Article 8 below, Jones shall purchase from Tri-<PAGE>
Tek, and Tri-Tek shall sell and deliver to Jones, 150 Conforming
Systems per calendar month ("Standing Order") commencing with the
third calendar month next following the month during which the Phase
Two Completion Date lies. All of such Systems, deliverable during a
calendar month, shall be delivered at one time on or before the 10th
day of the calendar month.
5.1.2 Jones, for any reason whatsoever in its sole and
absolute discretion from time-to-time, shall have the right, by
written notice to Tri-Tek at least 30 days prior to the first day of
any calendar month, to reduce, to no less than 75, or to increase, to
no more than 200, the number of Conforming Systems which Jones
purchases from Tri-Tek, and which Tri-Tek sells and delivers to Jones,
during the next following calendar month pursuant to the Standing
Order. Notwithstanding the foregoing, the number of Conforming
Systems which Jones purchases from Tri-Tek (and which Tri-Tek sells
and delivers to Jones) during any one or more calendar months pursuant
to the Standing Order may be changed to such number, including zero,
as Tri-Tek and Jones mutually may agree.
5.1.3 Subject to Section 7.7(c) and Article 8 below and the
further provisions of this Section 5.1.3, Jones shall have the right,
without cause, by written notice to Tri-Tek, to terminate the Standing
Order effective with the first calendar month after the 30th day next
following the day on which such notice is given, in which event the
number of Conforming Systems thereafter purchased by Jones from Tri-
Tek shall be as set forth in Jones' respective Purchase Orders to Tri-
Tek therefor from time-to-time during the term of this Agreement.
Such notice of termination of the Standing Order may not be given by
Jones to Tri-Tek until Tri-Tek has delivered to Jones, pursuant to the
Standing Order and/or Purchase Orders, 1,000 Systems less that number
of Systems which equals the sum of (a) the number of Conforming
Systems to be purchased by Jones from Tri-Tek, and delivered by Tri-
Tek to Jones, during the next following calendar month pursuant to the
Standing Order, and (b) the remaining number of Systems to be
delivered by Tri-Tek to Jones pursuant to Purchase Orders theretofore
issued by Jones to Tri-Tek.
5.2 Sales And Purchases Of Systems And System Components
Pursuant To Purchase Orders. Subject to Section 4.2.1 above and
Article 8 below, from and after the date of this Agreement, Tri-Tek
timely shall sell and deliver (a) to Jones, that quantity of
Conforming Systems and that quantity of System Components, in each
instance as Jones may desire to purchase from Tri-Tek from time-to-
time as evidenced by Jones' respective Purchase Orders to Tri-Tek
therefor (whether or not the Standing Order is then in effect), and
(b) to Maintenance Providers (which qualify as such at the time of
delivery and not otherwise), that quantity of System Components as the
Maintenance Provider may desire to purchase from Tri-Tek, for use by
Jones, from time-to-time as evidenced by the Maintenance Provider's
respective Purchase Orders to Tri-Tek therefor. In furtherance
thereof:
5.2.1 Each Purchase Order from Jones to Tri-Tek pursuant to
this Article 5 shall identify, as applicable, (a) the quantity of
Conforming Systems, and/or (b) the System Component(s) and the<PAGE>
quantity of each System Component, in each case which Jones then
desires to purchase from Tri-Tek.
5.2.2 Each Purchase Order from a Maintenance Provider to
Tri-Tek shall identify the quantity of System Component(s) which the
Maintenance Provider then desires to purchase from Tri-Tek.
5.2.3 Purchase Orders pursuant to this Article 5 may also
set forth, as applicable, Jones' or the Maintenance Provider's
preferred delivery date(s) of the items encompassed by the Purchase
Order and whether Jones or the Maintenance Provider prefers delivery
of the items encompassed by the Purchase Order at one time or at
different times, and Tri-Tek shall use its best efforts to honor
preferences. Subject thereto, all Systems and System Components
encompassed by each Purchase Order shall be sold and delivered by Tri-
Tek to, as applicable, Jones or the Maintenance Provider no later than
(a) 30 days after the day on which, as applicable, Jones or the
Maintenance Provider issues its Purchase Order to Tri-Tek if the
Standing Order is then in effect, or (b) 45 days after the day on
which, as applicable, Jones or the Maintenance Provider issues its
Purchase Order to Tri-Tek if the Standing Order is not then in effect.
5.3 Place And Means Of Delivery Of Systems And System
Components. All Systems and System Components purchased by Jones from
Tri-Tek pursuant to this Article 5 and, if applicable, Article 8
below, and all System Components purchased by Maintenance Providers
from Tri-Tek pursuant to this Article 5, shall be shipped by Tri-Tek,
freight prepaid by Tri-Tek, for delivery (a) to the place(s) from
time-to-time designated to Tri-Tek by, as applicable, Jones or the
Maintenance Provider, and (b) utilizing the means of shipment from
time-to-time designated to Tri-Tek by, as applicable, Jones or the
Maintenance Provider. Notwithstanding the foregoing, (x) all such
Systems and System Components shall be deemed delivered by Tri-Tek
f.o.b. shipping point at Tri-Tek's Headquarters, (y) Tri-Tek shall
have the right to substitute the designated means of shipment as and
when the designated means of shipment is not available for reasons
beyond Tri-Tek's control, (z) Jones and Maintenance Providers shall
each have the right, by notice to Tri-Tek from time-to-time, to (i)
pick up, as applicable, Systems and System Components from Tri-Tek at
Tri-Tek's Headquarters, (ii) direct that payment for shipments to
them, respectively, be other than prepaid by Tri-Tek.
5.4 Packaging And Invoicing. Tri-Tek shall, at its sole cost
and expense, package (a) all Test Systems for delivery to Jones
pursuant to Article 4 above and all Systems for delivery to Jones
pursuant to this Article 5 and, if applicable, Article 8 below, in
accordance with the Packaging Specifications, and (b) all System
Components and other items in an appropriate manner. Tri-Tek shall
include (y) with each packaged shipment to Jones, copies of all
applicable quality and testing records in respect of the packaged
items, but not include Tri-Tek's Invoice (or a copy thereof) to Jones
for the items delivered, and (z) with each packaged shipment to each
Maintenance Provider, copies of all applicable quality and testing
records in respect of the packaged items and a copy of Tri-Tek's
Invoice to the Maintenance Provider for the items shipped. Neither
Jones nor any Maintenance Provider shall have any liability to Tri-Tek<PAGE>
for the cost to Tri-Tek for any packaging materials (and the Profit
Percent shall not be applicable thereto).
5.5 Freight Charges. The actual freight cost to Tri-Tek (not
including the cost of any freight agent) for all Systems and System
Components delivered by Tri-Tek to Jones pursuant to this Article 5
and, if applicable, Article 8 below, and the actual freight cost to
Tri-Tek (not including the cost of any freight agent) for all System
Components delivered by Tri-Tek to Maintenance Providers pursuant to
this Article 5, in each instance which is prepaid by Tri-Tek, shall be
itemized separately on all Invoices rendered by Tri-Tek to Jones and
each Maintenance Provider, respectively, and shall be due and payable
if and when payment is due and payable for, as applicable, the Systems
and/or the System Components encompassed by the Invoice as to which
such charges apply.
5.6 Taxes. Jones shall be responsible for all sales and use
taxes which Tri-Tek is required to collect from Jones on account of
Systems (including the Test Systems) and System Components sold by
Tri-Tek to Jones for which Jones has a payment obligation to Tri-Tek.
Each Maintenance Provider shall be responsible for all sales and use
taxes which Tri-Tek is required to collect from the Maintenance
Provider on account of System Components sold by Tri-Tek to the
Maintenance Provider for which the Maintenance Provider has a payment
obligation to Tri-Tek. Such taxes shall be itemized separately on all
Invoices rendered by Tri-Tek to Jones and each Maintenance Provider,
respectively, and shall be due and payable when payment is due and
payable for the Systems (including the Test Systems) and/or the System
Components encompassed by the Invoice as to which the taxes apply.
5.7 Rejection Of Systems And System Components For Non-
Conformance. Jones may reject (a) Systems sold by Tri-Tek to Jones
pursuant to this Article 5 and, if applicable, Article 8 below, which
do not constitute Conforming Systems, and (b) System Components which
do not meet all Specifications and/or do not otherwise satisfy Jones'
Needs, in each instance which are applicable thereto. In furtherance
thereof:
5.7.1 In order to reject a System or System Component for a
defect which, upon a reasonable examination thereof by Jones, should
readily be discovered, Jones shall, on the earlier of the (a) seventh
day after the day on which the System or System Component is installed
at one of Jones' Offices, and (b) 120th day after the day on which the
System or System Component is delivered to Tri-Tek, give written
notice ("Initial Rejection Notice") to Tri-Tek of Jones' initial
intention to reject the items identified in the Initial Rejection
Notice and the reason(s) therefor, and within seven days after the day
on which Jones gives an Initial Rejection Notice, give Tri-Tek another
written notice ("Final Rejection Notice") of Jones' final rejection of
the items identified in the Final Rejection Notice and the reason(s)
therefor. Within three days after an Initial Rejection Notice is
given, Tri-Tek shall provide Jones with such items (including
replacement items) and expertise as may be required in order for the
identified items to be acceptable to Jones in accordance with this
Agreement.<PAGE>
5.7.2 Jones' rejection of (a) Systems or particular System
Components thereof, and (b) System Components sold separately, may, in
each instance, be based on the determinations of conformance thereof
and the extent of the appropriate rejection which may be made by Jones
and/or any Maintenance Provider.
5.7.3 Jones shall be deemed conditionally to have accepted
all Systems and System Components on the earlier of the (a) seventh
day after the day on which they are installed at one of Jones'
Offices, and (b) 120th day after the day on which they are delivered
to Tri-Tek unless they are encompassed, and then only to the extent
they are encompassed, by an Initial Rejection Notice. Systems and
System Components encompassed by an Initial Rejection Notice shall be
deemed conditionally accepted by Jones on the date a Final Rejection
Notice applicable to them must be given (pursuant to Section 5.7.1
above) unless they are encompassed, and then only to the extent they
are encompassed, by a Final Rejection Notice. Such acceptance shall
not, however, constitute a waiver or release by Jones of any claims
which it may have against Tri-Tek (x) that the subject Systems do not
constitute Conforming Systems, (y) that the subject System Components
do not satisfy all Specifications applicable thereto, or (z) under
Article 10 below.
5.7.4 Tri-Tek shall, at no additional cost to Jones,
deliver, as applicable, replacement Systems and/or System Components
to Jones (or as Jones may direct) within seven days after the day on
which a Final Rejection Notice is given. The provisions of
Section 5.7.1 and Section 5.7.3 above shall apply to all of such
replacement items.
5.7.5 Tri-Tek shall be entitled to a return of finally
rejected Systems and System Components if Tri-Tek gives Jones written
notice thereof within 30 days after the date the Final Rejection
Notice applicable thereto is given, in which event Jones shall, at
Tri-Tek's sole cost and expense, return the applicable items to Tri-
Tek. Unless Tri-Tek timely gives such a notice, Tri-Tek shall be
deemed to have abandoned such Systems and System Components to Jones,
with no additional payment obligation by Jones therefor.
5.7.6 If Jones returns a finally rejected System or System Component
to Tri-Tek pursuant to Section 5.7.5 above and it is thereafter
conclusively determined that Jones' final rejection thereof was not
warranted, Jones shall be obligated to reimburse Tri-Tek, upon written
demand of Tri-Tek to Jones, the freight charges incurred by Tri-Tek in
connection with such return and, if applicable, the delivery of, as
applicable, a replacement System or System Component by Tri-Tek to
Jones, which shall be the sole remedy of Tri-Tek as a result of such
an unwarranted rejection.
6. Tri-Tek's Purchase Of System Components And Cost And Vendor
Schedules.
6.1 Tri-Tek's Purchase Of System Components. Subject to
Section 6.2 below, Tri-Tek shall only purchase System Components (not
to be supplied by Jones or constructed by Tri-Tek) from vendors wholly
independent of Tri-Tek which sell System Component(s) of the requisite<PAGE>
quality and capability(ies) at the most competitive cost(s) at the
time. Therefore, Tri-Tek shall at all times monitor vendors of System
Components to insure that Tri-Tek is obtaining the most competitive
prices for all System Components not constructed by Tri-Tek, including
all quantity and other discounts which could be available to Tri-Tek.
In furtherance thereof:
6.1.1 Tri-Tek shall insure that all of its orders or other
agreements to purchase items from third party vendors which constitute
System Components (including System Components which constitute a part
of another System Component) shall, at a minimum, provide Tri-Tek with
a cost for the item which reflects a quantity discount from the third
party vendor, at the time of the order or other agreement, for
purchases of not less than that number of the item which equals the
product of (a) 3,000, and (b) the total quantity of the item in each
System, and cost to Tri-Tek from the third party vendor for all items
encompassed by the order or other agreement shall reflect such
quantity discount.
6.1.2 Tri-Tek shall also insure that all of its orders or
other agreements to purchase items from third party vendors which
constitute System Components (including System Components which
constitute a part of another System Component) shall, at a minimum,
also contain an enforceable technology update clause by the terms of
which, among other things, (a) Tri-Tek is not required to take
delivery of all System Components at one time, (b) at any time and
from time-to-time Tri-Tek may substitute System Components in order to
take advantage of desired Technology Changes, and (c) the quantity
discount applicable to the System Components applies with equal effect
to all of such substituted System Components.
6.2 Jones' Rights Regarding System Components. Without
diminishing Tri-Tek's obligations under Section 6.1 above or Jones'
rights or remedies as a result of any breach thereof, Jones shall have
the right, but it shall not be obligated, itself to monitor the
pricing by vendors of System Components and advise Tri-Tek of Jones'
findings in that regard. Jones also shall have the right to (a)
require Tri-Tek to purchase particular System Components, not
constructed by Tri-Tek, from a particular vendor, and/or (b) direct
Tri-Tek not to purchase particular System Components from particular
vendors thereof, in which event Tri-Tek shall select another vendor of
the System Component in accordance with the requirements of
Section 6.1 above. Notwithstanding the foregoing, in no event may
Tri-Tek purchase, or utilize in the production of Systems or System
Components, any System Component which does not meet the
Specifications and Jones' Needs which are applicable thereto.
6.3 Allowances & CO-OP Dollars.
6.3.1 In no event shall Tri-Tek, in connection with or as a
result of its purchase of any System Component, receive any Allowance
which does not accrue solely to Jones' benefit.
6.3.2 In the event Tri-Tek receives any CO-OP Dollars, Tri-
Tek shall give Jones written notice thereof within ten days after the
day on which Tri-Tek receives the CO-OP Dollars. Each such notice<PAGE>
shall identify, with particularity, the vendor from whom or which the
CO-OP Dollars were received, the services for which the CO-OP Dollars
may be redeemed and the quantity of CO-OP Dollars required by the
vendor in order to receive the identified services, respectively. In
no event may Tri-Tek redeem any CO-OP Dollars for any of such
services, or otherwise avail itself of any of such services or allow
another to avail itself of any of such services, unless and until Tri-
Tek obtains Jones' prior written consent thereto, which Jones may give
or withhold in its sole and absolute discretion. Each such consent
shall (a) apply only to the CO-OP Dollars and services particularly
identified in such a consent, and (b) be strictly construed. Jones
may elect to avail itself of some or all of such services by written
notice thereof to Tri-Tek from time-to-time, in which event Tri-Tek
agrees timely to execute and deliver such documents and do all other
things which may be required in order to allow that to occur. Jones
shall pay the cost, if any, which may be imposed by the provider of
any of such services in order for Jones to avail itself of any of such
services.
6.4 Inventory Method Of Pricing. Tri-Tek represents that it
charges its customers for physical items purchased from third party
vendors on a first in, first out basis, and Tri-Tek's charges to Jones
and Maintenance Providers pursuant to this Agreement shall be on the
same basis.
6.5 Cost And Vendor Schedule Compliance. Tri-Tek represents and
warrants to Jones that all costs set forth on the initially approved
Cost And Vendor Schedule (attached hereto as Exhibit 1.12) (a) reflect
the current Actual Cost of the items encompassed by such Cost And
Vendor Schedule, and (b) have been determined and set by Tri-Tek in
accordance with Tri-Tek's obligations, and are not violative of any
prohibitions applicable to Tri-Tek, in each instance which are set
forth in this Agreement in respect of such costs. Tri-Tek shall be
deemed to make the same representations and warranties to Jones in
respect of all costs set forth on each proposed revised Cost And
Vendor Schedule submitted by Tri-Tek to Jones pursuant to Article 3
above, except that Tri-Tek's representations and warranties set forth
in Section 6.5(a) above in respect thereof shall be subject to the
conditions set forth in Article 3 above regarding the ability of Tri-
Tek to change costs on any proposed new Cost And Vendor Schedule from
what they were on the previously approved Cost And Vendor Schedule.
7. Price Of Systems And System Components, Payment Therefor And
Audits.
7.1 Price Of Systems And System Components. Subject to strict
compliance by Tri-Tek with all of its obligations and all prohibitions
applicable to Tri-Tek under this Agreement, the price ("Price") to be
paid by (a) Jones to Tri-Tek for each Conforming System (excluding
only the Phase One Test Systems and including the Phase Two Test
Systems) and each System Component purchased (separately) by Jones
from Tri-Tek, and (b) each Maintenance Provider to Tri-Tek for each
System Component purchased by the Maintenance Provider from Tri-Tek,
in each instance shall be as set forth in Section 7.1.1 below.<PAGE>
7.1.1 Subject to the foregoing provisions of this
Section 7.1, the Price of, as applicable, the Conforming System or the
System Component, shall equal the sum of:
(a) The lesser of:
(i) The Actual Cost of, as applicable, the Conforming
System or the System Component, plus the product of (A) such Actual
Cost, and (B) the Profit Percent applicable on the date of delivery of
the item by Tri-Tek; and
(ii) The cost of, as applicable, the Conforming System
or System Component as reflected on the approved Cost And Vendor
Schedule applicable to, as applicable, the Conforming System or the
System Component, plus the product of (A) such cost, and (B) the
Profit Percent applicable on the date of delivery of the item by Tri-
Tek; plus
(b) The Assembly Charge in the case of Systems (only); plus
(c) If the Actual Cost (pursuant to Section 7.1.1(a)(i)
above) of, as applicable, the Conforming System or the System
Component is less than the cost (pursuant to Section 7.1.1(a)(ii)
above), 20% of the dollar amount of the difference.
7.1.2 By way of examples in respect of Section 7.1.1 above:
(a) If the cost of a Conforming System pursuant to an
approved Cost and Vendor Schedule is $10,000 and the Actual Cost of
the Conforming System is $10,000, and if the applicable Profit Percent
is 15%, the Price of the Conforming System will be $11,850, which is
(i) $10,000, plus (ii) $1,500 (15% of $10,000), plus (iii) $350.
(b) If the cost of a Conforming System pursuant to an
approved Cost and Vendor Schedule is $10,000 and the Actual Cost of
the Conforming System is $8,000, and if the applicable Profit Percent
is 15%, the Price of the Conforming System will be $9,950, which is
(i) $8,000, plus (ii) $1,200 (15% of $8,000), plus (iii) $350, plus
(iv) $400 (20% of the difference between $10,000 less $8,000).
(c) If the cost of a Conforming System pursuant to an
approved Cost and Vendor Schedule is $10,000 and the Actual Cost of
the Conforming System is $12,000, and if the applicable Profit Percent
is 15%, the Price of the Conforming System will be $11,850, which is
(i) $10,000, plus (ii) $1,500 (15% of $10,000), plus (iii) $350.
7.2 Invoicing Jones And Maintenance Providers.
7.2.1 Tri-Tek shall render Jones and each Maintenance
Provider a separate invoice (each an "Invoice") in respect of, as
applicable, the Systems and/or System Components encompassed by each
shipment of such items to them, respectively, which are delivered by
Tri-Tek pursuant to any of the provisions of this Agreement including,
without limitation, all Test Systems and all replacement Systems and
System Components. Invoices to Jones shall be rendered to Jones at
its then current address for notices under Section 15.11 below, and<PAGE>
Invoices to Maintenance Providers shall be rendered to them at their
respective addresses furnished by them to Tri-Tek from time-to-time.
7.2.2 Each Invoice shall, at a minimum, (a) identify the
Purchase Order, by number and date, pursuant to which the shipment is
being made, and/or, as to Jones in respect of the Initial Phase Two
Test Systems and the Systems encompassed by the Standing Order,
identify such fact in respect of the applicable Systems, (b)
separately identify each System and System Component encompassed by
the Invoice, (c) in the case of Systems, list the System Serial
Numbers of the Systems encompassed by the Invoice and, for each such
System, the MCS Serial Number of the Monitoring/Control Subsystem
which constitutes a part of the System, (d) in the case of
Monitoring/Control Subsystems sold separately from Systems, list the
MCS Serial Number of the Monitoring/Control Subsystems encompassed by
the Invoice, (e) separately identify the quantity of each System and
type and quantity of each System Component encompassed by the Invoice,
(f) on Invoices for replacement items, separately identify and list
the number and date of the last Invoice in respect of the replaced
items and, if and as applicable, (i) the System Serial Numbers of the
Systems being replaced and the MCS Serial Number of the
Monitoring/Control Subsystem which constitutes a part of the replaced
System, and (ii) in the case of Monitoring/Control Subsystems replaced
separately from Systems, the MCS Serial Number of the
Monitoring/Control Subsystems being replaced, (g) on Invoices other
than for replacement items, separately identify the Price (and each
component thereof, and Tri-Tek's computation of the Price, pursuant to
Section 7.1 above and, in respect of the Phase One Test Systems,
pursuant to Section 4.1.1 above) of each System and System Component
encompassed by the Invoice and the total Price for all identified
Systems and System Components, (h) separately identify all sales and
use taxes applicable to the total Price for which, as applicable,
Jones or the Maintenance Provider is liable and Tri-Tek is required to
collect from them, respectively, and (i) separately identify all
freight charges applicable to the shipment, if any. If the provisions
of Section 2.3 and/or Section 2.6 above are applicable in respect of
Systems identified on an Invoice, then that Invoice to Jones also
shall identify (y) the total amount which Jones shall be deemed to pay
Tri-Tek for such Systems pursuant to Section 2.3 and/or Section 2.6
above, and (z) the net amount due and payable by Jones to Tri-Tek
after giving effect to such deemed payments. Each Invoice rendered to
each of Jones and each Maintenance Provider shall contain an implied
representation and warranty by Tri-Tek of strict compliance by Tri-Tek
with all of its obligations and all prohibitions applicable to Tri-Tek
under this Agreement and that all Prices set forth on the Invoice are
correct in accordance with Section 7.1 above. Any contrary statement
on any Invoice shall not be binding on Jones or a Maintenance
Provider, and neither Jones not a Maintenance Provider shall be
obligated to make any payment on or in respect of any Invoice which
does not satisfy all of the foregoing conditions, anything contained
in this Agreement to the contrary notwithstanding.
7.2.3 Subject to Section 4.2.2 above in respect of Phase
Two Test Systems, (a) Invoices shall not be rendered until on or after
the day on which the Systems and/or System Components encompassed by
the Invoice are shipped by Tri-Tek to, as applicable, Jones or a<PAGE>
Maintenance Provider, and (b) Invoices rendered prematurely pursuant
to the foregoing shall not, for payment purposes pursuant to, as
applicable, Section 7.3.1 or Section 7.3.2 below, be deemed to have
been rendered until the day on which the Systems and/or System
Components encompassed by the Invoice are delivered to, as applicable,
Jones or a Maintenance Provider.
7.3 Payment For Systems And System Components. Subject to
strict compliance by Tri-Tek with all of its obligations and all
prohibitions applicable to Tri-Tek under this Agreement:
7.3.1 Subject to Section 7.2.3 above, payment by Jones to
Tri-Tek for all Systems and System Components purchased by Jones under
Article 5 above and, if applicable, under Article 8 below, shall be
due within 30 days after the day on which the Invoice in respect of
the Systems and/or System Components, and/or other items, is sent by
Tri-Tek to Jones. Such payment shall not, however, constitute a
waiver or release by Jones of any claims which it may have against
Tri-Tek (a) that the subject Systems do not constitute Conforming
Systems, (b) that the subject System Components do not satisfy all
Specifications applicable thereto, (c) under Article 10 below, or (d)
regarding the appropriateness of any charges on the Invoice.
7.3.2 Subject to Section 7.2.3 above and Section 7.3.3
below, payment by each Maintenance Provider to Tri-Tek for all System
Components shall be due within 30 days after the day on which the
Invoice in respect of the System Components is rendered by Tri-Tek to
the Maintenance Provider. A Maintenance Provider's payment of an
Invoice to it shall not constitute a waiver or release by (a) the
Maintenance Provider of any claims which it may have against Tri-Tek
(i) that the subject System Components do not satisfy all
Specifications applicable thereto, (ii) under Article 10 below, or
(iii) regarding the appropriateness of any charges on the Invoice, or
(b) Jones of any claims which it may have against Tri-Tek (i) that the
subject System Components do not satisfy all Specifications applicable
thereto, or (ii) under Article 10 below; however, the Maintenance
Provider may suspend payment for each System Component which does not
satisfy all Specifications applicable thereto during the period such a
failure continues in respect of the System Component.
7.3.3 Tri-Tek's obligation to sell System Components to
each Maintenance Provider on credit pursuant to Section 7.3.2 above
shall be conditioned upon the Maintenance Provider generally being
recognized and remaining credit-worthy in the industry. Further, if,
at any time, any monetary obligation of any Maintenance Provider to
Tri-Tek remains unpaid for more than 30 days after the day on which it
is due, Tri-Tek, following written notice thereof to the Maintenance
Provider and Jones, shall be permitted only to sell System Components
to that Maintenance Provider C.O.D. until such time as all of such
monetary obligations are paid.
7.4 Actual Cost Documentation. During the term of this
Agreement and after natural expiration of the term or earlier
termination of this Agreement for any reason, Tri-Tek shall provide
Jones with copies of all documents, books, records, memoranda and
notes of conversations with third party vendors regarding the cost of<PAGE>
System Components in Tri-Tek's possession or under its control and
also all computations made by Tri-Tek which support the propriety of
all charges on all Invoices, in all forms in which they are maintained
by Tri-Tek, including, without limitation, documents which evidence
the Actual Cost to Tri-Tek of Systems and System Components, Tri-Tek's
compliance with its obligations and the prohibitions applicable to
Tri-Tek under Article 6 above and compliance by Tri-Tek with
Section 7.1 above (each a "Document Production"), within three
Business Days after the day on which a written request for the same,
or any of the same, is given by Jones to Tri-Tek from time-to-time.
7.5 Retention Of Documents. Tri-Tek shall retain all items
encompassed by Section 7.4 above (collectively, "Documents") during
the entire term of this Agreement and for no less than three years
after the natural expiration of the term or the earlier termination of
this Agreement for any reason.
7.6 Review Of Documents And Audit Of Books And Records. Once
each month during the term of this Agreement and after natural
expiration of the term or earlier termination of this Agreement for
any reason, Jones shall have the right to have its designated
employees, representatives and/or agents inspect and audit (each an
"Audit") and make copies of all Documents. Each Audit may be
conducted at each location where any Documents are kept and shall be
as broad or as narrow as Jones determines appropriate in its sole
discretion from time-to-time. Jones shall bear all costs and expenses
incurred by it in conducting each such audit unless the Audit reflects
any breach of this Agreement by Tri-Tek, in which event Tri-Tek shall
reimburse Jones for all costs and expenses of the audit within 30 days
after the date on which Jones renders Tri-Tek an invoice therefor.
7.7 Results Of Document Productions And Audits. If, as a result
of any one Document Production (which is not followed by an Audit of
the same Documents) or any one Audit, it is determined that any charge
on any Invoice, rendered on or after that day which is one year prior
to the day on which the Audit is commenced, is other than as permitted
by this Agreement, then as a result of such a breach:
(a) Tri-Tek immediately also shall be liable to, as
applicable, Jones and/or Maintenance Providers, for 120% of the actual
damages sustained by Jones and 100% of the actual damages sustained by
Maintenance Providers, including overpayments to Tri-Tek, which the
Audit reveals; and
(b) the Profit Percent applicable to subsequent deliveries
of (i) Systems and System Components (sold separately) by Tri-Tek to
Jones, and (ii) System Components to Maintenance Providers, in each
instance shall decrease by 1/2 of a percentage point (subject to
additional decreases of the same amount as a result of subsequent
breaches of this Agreement of a like kind) in respect of the next 150
Systems which are delivered by Tri-Tek to Jones and also the next 150
System Components (sold separately) which are delivered by Tri-Tek to
Jones and/or Maintenance Providers; and<PAGE>
(c) Jones shall have the right to terminate the Standing
Order upon written notice thereof to Tri-Tek which shall specify the
effective date of such termination selected by Jones; and/or
(d) Jones shall have the right to terminate this Agreement
for cause upon written notice thereof to Tri-Tek, with the effective
date of such termination being the day such notice is given.
8. Term And Termination.
8.1 General. The term of this Agreement shall expire at 11:59
P.M. on the last day of that month which is three years after the
month during which Tri-Tek is first required to deliver Conforming
System to Tri-Tek pursuant to the Standing Order, except that the term
shall automatically renew and be extended for successive terms of one
year (on the same terms and conditions of this Agreement) unless Tri-
Tek or Jones gives the other of them written notice to the contrary no
more than six months and no less than sixty days prior to the last day
of the then current term, subject, however, to early termination
pursuant to Article 3, Article 4 and Article 7 above and the following
provisions of this Article 8, in which event the term of this
Agreement shall end on the effective date of such termination as
therein provided. Subject to the further provisions of this
Article 8, after natural expiration of the term or earlier termination
of this Agreement for any reason, (a) Tri-Tek shall not be obligated
to sell any Systems or System Components pursuant to this Agreement,
and (b) Jones and Maintenance Providers shall not have the right to
purchase any Systems or System Components pursuant to this Agreement.
8.2 Tri-Tek's Breach. Subject to Article 3 and Article 4 above,
Jones shall have the right to terminate this Agreement on account of
any breach of this Agreement by Tri-Tek, specified in a written notice
thereof given to Tri-Tek, if all breaches specified in such notice are
not cured within 15 days after the date on which such notice is given;
provided, however, that in the event a specified breach reasonably
cannot be cured within such 15 day period, Tri-Tek shall have a
reasonable period of time, but not to exceed 45 days, within which to
cure the breach provided Tri-Tek commences to cure the breach within
such 15 day period, proceeds with dispatch to cure the breach and
cures the breach within a reasonable period of time after expiration
of such 15 day period. Termination by Jones pursuant to the foregoing
shall be effectuated by written notice thereof to Tri-Tek which is
given to Tri-Tek at any time after termination is permitted pursuant
to the foregoing, irrespective of whether all specified breaches are
cured prior to the time such termination notice is given, and the
effective date of such termination shall be the day on which such
notice of termination is given. If such breach(es) are not cured
timely pursuant to the foregoing, Jones also shall have the right to
terminate the Standing Order upon written notice thereof to Tri-Tek
which shall specify the effective date of such termination selected by
Jones.
8.3 Jones' Termination Without Cause. Anything contained in
this Agreement to the contrary notwithstanding, Jones shall have the
right to terminate this Agreement, without cause, effective on the
date selected by Jones which is set forth in a written notice thereof<PAGE>
given to Tri-Tek, except that such date may not be earlier than 45
days after the date on which such notice is given. Termination of
this Agreement by Jones without cause, whether or not as permitted
pursuant to the foregoing provisions of this Section 8.3, shall not be
deemed a breach of this Agreement by Jones and shall not give rise to
any claim by Tri-Tek for any damages. However, (a) such termination
shall not negate or otherwise affect Jones' obligation to purchase
from Tri-Tek all Conforming Systems and System Components which, on
the date such notice of termination is given, are encompassed by the
Standing Order, if applicable, and/or Purchase Orders theretofore
rendered by Jones to Tri-Tek, if any, during the period which
commences on the day on which such notice is given and ends on the
last day of the Term, (b) if Jones does not purchase a total of 2,500
Conforming Systems (excluding only the Phase One Test Systems) from
Tri-Tek pursuant to any of the provisions of this Agreement, Jones
shall (i) forfeit, to Tri-Tek, Jones' Initial Deposit and also Jones'
Additional Deposit to the extent theretofore paid, in each instance to
the extent remaining after giving effect to all credits allowable
under Section 2.3 and/or Section 2.6 above, and (ii) be obligated to
pay Tri-Tek that portion of Jones' Additional Deposit to the extent
not theretofore paid by Jones to Tri-Tek, and (c) the operative
provisions of Section 8.7.4 below shall apply as if Tri-Tek had
terminated this Agreement as a result of any breach(es) of this
Agreement by Jones, but the payment obligation provided in
Section 8.7.4 below shall be conditioned upon satisfaction of the
other conditions thereto as provided therein.
8.4 Tri-Tek's Superior Skill And Expertise. Jones is relying
on, among other things, the superior knowledge, expertise and
experience of Tri-Tek in the design, configuration and assembly of
customized computer software and hardware systems, including, without
limitation, customized file server systems, Tri-Tek's superior access
to a broad range of vendors of all components for customized file
server systems and Tri-Tek's superior ability to purchase such
components at the most competitive prices. Accordingly, in addition
to other rights which Jones may have to terminate this Agreement,
Jones shall have the right to terminate this Agreement, effective on
the date written notice thereof is given by Jones to Tri-Tek, in any
of the following events, namely (a) if Tri-Tek voluntarily files a
petition for relief under the Bankruptcy Code, (b) if an order for
relief under the Code is entered against Tri-Tek following the filing
of an involuntary petition for relief under the Code against Tri-Tek,
(c) if such an involuntary petition is filed and the proceeding
initiated by such filing is not terminated within 30 days after the
day on which such an involuntary petition is filed, (d) if Tri-Tek
makes an assignment for the benefit of its creditors, (e) if a
receiver is appointed for Tri-Tek or any of its assets, (f) if any
assets of Tri-Tek are attached or foreclosed, (g) if Tri-Tek is in
default of any of its obligations to any lender and, as a result
thereof, the lender accelerates the maturity of any indebtedness of
Tri-Tek to the lender, or (h) if David Fuchs ceases to constitute the
President, a member of the Board of Directors, or the owner of more
than 50% of the voting shares of Tri-Tek.
8.5 Jones' Breach. Tri-Tek shall have the right to terminate
this Agreement on account of any breach of this Agreement by Jones,<PAGE>
specified in a written notice thereof given to Jones, if all breaches
specified in such notice are not cured within 15 days after the date
on which such notice is given; provided, however, that in the event a
specified breach reasonably cannot be cured within such 15 day period,
Jones shall have a reasonable period of time, but not to exceed 45
days, within which to cure the breach provided Jones commences to cure
the breach within such 15 day period, proceeds with dispatch to cure
the breach and cures the breach within a reasonable period of time
after expiration of such 15 day period. Termination by Tri-Tek
pursuant to the foregoing shall be effectuated by written notice
thereof given to Tri-Tek at any time after termination is permitted
pursuant to the foregoing, irrespective of whether all specified
breaches are cured prior to the time such termination notice is given,
and the effective date of such termination shall be the day on which
such notice of termination is given.
8.6 Jones' Damages And Remedies.
8.6.1 Jones shall be entitled to seek and obtain all
damages (including, without limitation, actual, special, incidental
and consequential damages) and remedies which Jones may sustain or
incur as a result of (a) all breaches of this Agreement by Tri-Tek,
irrespective of whether Jones terminates this Agreement as a result of
any such breach, and (b) Jones' termination of this Agreement as a
result of any such breach. In addition thereto, if Jones terminates
this Agreement as a result of any such breach, Jones (y) shall be
entitled to an immediate refund of Jones' Initial Deposit and also
Jones' Additional Deposit to the extent theretofore paid, in each
instance to the extent remaining after giving effect to all credits
allowable under Section 2.3 and/or Section 2.6 above, and (z) all
unpaid portions of Jones' Additional Deposit under Section 2.4 above
shall be absolved.
8.6.2 If (a) Jones terminates this Agreement pursuant to
(i) Section 4.1.2 above solely as a result of Tri-Tek's failure to
deliver the Phase One Test Systems to Jones at Jones' Headquarters by
the Phase One Systems Test Date, or (ii) Section 3.1.3, Section 4.1.4,
Section 4.1.5, Section 4.2.1, Section 4.2.4 or Section 4.2.5 above,
and (b) Tri-Tek has not committed and does not commit any other breach
of this Agreement, then anything contained in Section 8.6.1 above to
the contrary notwithstanding, Tri-Tek shall not be liable to Jones for
any damages (including, without limitation, actual, special,
incidental and consequential damages) which Jones may sustain or incur
as a result of, as applicable, (i) Tri-Tek's failure to deliver the
Phase One Test Systems to Jones at Jones' Headquarters by the Phase
One Systems Test Date pursuant to Section 4.1.1 above, or (ii) any act
or omission of Tri-Tek specified in, as applicable, Section 3.1.3,
Section 4.1.4, Section 4.1.5, Section 4.2.1, Section 4.2.4 or
Section 4.2.5 above which gives rise to Jones' right to terminate this
Agreement pursuant thereto.
8.7 Tri-Tek's Damages And Remedies. Anything contained in
Section 15.14 below to the contrary notwithstanding:
8.7.1 Subject to Section 8.7.3 and Section 8.7.4 below,
Tri-Tek's sole remedy as a result of any breach of this Agreement by<PAGE>
Jones, other than a failure of Jones timely to pay any monetary
obligation to Tri-Tek under this Agreement for Conforming Systems and
System Components purchased from Tri-Tek by Jones for which Jones is
obligated under this Agreement, shall be to terminate this Agreement,
in which event Tri-Tek shall not be entitled to any damages as a
result of the breach(es) or the termination, but Tri-Tek shall be
entitled to require Jones to purchase from Tri-Tek that number of
Conforming Systems which, but for such termination, Jones would have
been obligated to purchase pursuant to the Standing Order, if
applicable, and pursuant to Purchase Orders issued by Jones to Tri-Tek
for Systems prior to the day on which Tri-Tek gives Jones notice of
Tri-Tek's termination of this Agreement as a result of the breach, if
any, in each instance during the 45 day period commencing on the date
on which Tri-Tek's notice of termination is given to Jones. In order
for Tri-Tek to require Jones to purchase Conforming Systems pursuant
to the foregoing provisions of this Section 8.7.1, Tri-Tek must give
Jones written notice thereof within one day after the day on which
such notice of termination is given to Jones, failing which such right
of requirement of purchase of Conforming Systems shall be deemed
irrevocably waived by Tri-Tek. Such notice, to be effective, shall
identify the quantity of Conforming Systems which Tri-Tek is requiring
Jones to purchase pursuant to this Section 8.7.1.
8.7.2 Subject to Section 8.7.3 and Section 8.7.4 below,
Tri-Tek's sole remedy as a result of any failure by Jones timely to
pay any monetary obligation to Tri-Tek under this Agreement for
Conforming Systems and System Components purchased from Tri-Tek by
Jones shall be:
(a) Without terminating this Agreement as a result of such
breach, to seek and recover the unpaid amount of such payment
obligation together with interest thereon from the due date thereof;
or
(b) To terminate this Agreement as a result of such breach,
in which event Tri-Tek shall not be entitled to any damages as a
result of the breaches or the termination, but Tri-Tek shall be
entitled to (i) seek and recover the unpaid amount of such payment
obligation together with interest thereon from the due date thereof,
and (ii) require Jones to purchase from Tri-Tek that number of
Conforming Systems which, but for such termination, Jones would have
been obligated to purchase pursuant to the Standing Order, if
applicable, and pursuant to Purchase Orders issued by Jones to Tri-Tek
for Systems prior to the day on which Tri-Tek gives Jones notice of
Tri-Tek's termination of this Agreement as a result of the breaches,
if any, in each instance during the 45 day period commencing on the
date Tri-Tek's notice of termination is given to Jones. In order for
Tri-Tek to require Jones to purchase Conforming Systems pursuant to
the foregoing, Tri-Tek must give Jones written notice thereof within
one day after the day on which such notice of termination is given to
Jones, failing which such right of requirement of purchase of
Conforming Systems shall be deemed irrevocably waived by Tri-Tek.
Such notice, to be effective, shall identify the quantity of Systems
which Tri-Tek is requiring Jones to purchase pursuant to this
Section 8.7.2(b).<PAGE>
8.7.3 If Tri-Tek terminates this Agreement as a result of
any breach(es) of this Agreement by Jones and, on and prior to the
date on which Tri-Tek gives Jones notice of such termination, Jones
has not purchased a total of 2,500 Conforming Systems (excluding only
the Phase One Test Systems) from Tri-Tek, Tri-Tek shall not be
entitled to require Jones to purchase any Conforming Systems from Tri-
Tek pursuant to Section 8.7.1 or Section 8.7.2(b) above, but Jones
shall forfeit, to Tri-Tek, Jones' Initial Deposit and also Jones'
Additional Deposit to the extent theretofore paid pursuant to
Section 2.4 above, in each instance to the extent remaining after
giving effect to all credits allowable pursuant to Section 2.3 and/or
Section 2.6 above for all Conforming Systems (excluding only the Phase
One Test Systems) which Jones purchases from Tri-Tek pursuant to any
of the provisions of this Agreement.
8.7.4 If (a) Tri-Tek terminates this Agreement as a result
of any breach(es) of this Agreement by Jones, (b) a Phase Two
Completion Date occurs, (c) Jones does not purchase a total of 3,000
Conforming Systems (excluding only the Phase One Test Systems) from
Tri-Tek pursuant to any of the provisions of this Agreement, (d) any
third party vendor which has provided Tri-Tek a quantity discount
based upon Tri-Tek's agreement to purchase, from the third party
vendor, items which constitute System Components (including System
Components which constitute a part of another System Component) which
equals not less than the product of (i) 3,000, and (ii) the total
quantity of the item in each System, properly charges Tri-Tek solely
on account of Tri-Tek's failure to purchase (to constitute System
Components and/or also for use by Tri-Tek other than as System
Components) that number of the item which equals such product, and (e)
Tri-Tek has a legal obligation to pay the amount of the charge
referenced in Section 8.7.4(d), above, then Jones shall be obligated
to pay Tri-Tek that amount which equals the lesser of (x) the amount
actually charged Tri-Tek by the third party vendor solely on account
of such failure in respect of the item, (y) the amount by which (i)
the amount the vendor would have charged Tri-Tek, with all applicable
discounts, for the total quantity of the item utilized by Tri-Tek in
that number of Conforming Systems (excluding only the Phase One Test
Systems) which Jones purchases from Tri-Tek pursuant to any of the
provisions of this Agreement, exceeds (ii) the amount the vendor
actually charged Tri-Tek, with the quantity discount specified in
Section 6.1.1 above, for the total quantity of the item utilized by
Tri-Tek in that number of Conforming Systems (excluding only the Phase
One Test Systems) which Jones purchases from Tri-Tek pursuant to any
of the provisions of this Agreement, and (z) 5% of the Actual Cost for
the total quantity of the item utilized by Tri-Tek in that number of
Conforming Systems (excluding only the Phase One Test Systems) which
Jones purchases from Tri-Tek pursuant to any of the provisions of this
Agreement. Notwithstanding the foregoing, Jones' payment obligation
pursuant to the foregoing provisions of this Section 8.7.4 shall be
conditioned upon Tri-Tek providing Jones with documentary evidence, in
reasonable detail, which supports the propriety of such charge and the
amount of its claim against Jones pursuant thereto within 45 days
after the day on which Tri-Tek terminates this Agreement as a result
of any breach(es) of this Agreement by Jones.<PAGE>
8.8 Jones' Permissive Purchase Of Systems And System Components.
Subject to Jones' obligation to purchase Conforming Systems pursuant
to Section 8.3 above, if Jones terminates this Agreement pursuant to
said Section 8.3, or if this Agreement terminates for any other
reason, (a) Tri-Tek shall, within ten days after the day on which this
Agreement terminates, give Jones a written itemization of the number
of Conforming Systems, partially assembled Systems, partially and
finally assembled System Components constructed by Tri-Tek (including,
without limitation, all Monitoring/Control Subsystems) and other
System Components then in Tri-Tek's possession or under its control,
and (b) Jones shall have the right, but it shall not be obligated, to
purchase from Tri-Tek some or all of such Conforming Systems,
partially assembled Systems, partially and finally assembled System
Components constructed by Tri-Tek (including, without limitation, all
Monitoring/Control Subsystems) and/or other System Components provided
Jones gives Tri-Tek written notice thereof within 30 days after the
day on which such itemization is given by Tri-Tek to Jones. Such
notice, to be effective, shall identify each such item which Jones
desires to purchase and the quantity of each such item which Jones
desires to purchase.
8.9 Price Of Systems And System Components To Jones On
Termination. The price to be paid by Jones for items purchased by
Jones pursuant to Section 8.7.1 and Section 8.7.2(b) above shall be
computed in the manner provided in Section 7.1 above. The price to be
paid by Jones for items purchased by Jones pursuant to Section 8.8
above shall also be computed in the manner provided in Section 7.1
above, except that the Profit Percent shall not be applied to any of
such items. Notwithstanding the foregoing, the price to be paid by
Jones for partially completed System Components shall be the lesser of
(a) the cost of the item, if completed, pursuant to the then current
Cost And Vendor Schedule, and (b) the Actual Cost of the components of
the item in its partially completed state, with no Profit Percent
applied to any of such items.
8.10 Termination Of Standing Order And Cancellation Of Purchase
Orders. The Standing Order and all Purchase Orders shall be deemed
revoked, without any liability by, as applicable, Jones or any
Maintenance Provider, on, as applicable, the day of the natural
expiration of the term of this Agreement or the day of the earlier
termination of this Agreement for any reason, and Tri-Tek shall not
thereafter deliver any Systems or System Components to Jones or any
Maintenance Provider encompassed by the Standing Order or any Purchase
Order.
8.11 Duties Upon Termination. Upon the expiration or earlier
termination of this Agreement for any reason, Tri-Tek shall
immediately (a) subject to Section 8.11(b) below, immediately deliver
to Jones any and all materials (including, without limitation, all of
Jones' Confidential Information [including, without limitation, all
Developments] then in Tri-Tek's possession or under its control
[without the retention of any copies, notes or excerpts]) unless Jones
instructs Tri-Tek in writing to destroy all or any part of such
materials, in which case Tri-Tek shall immediately destroy the
materials as to which such instruction is given, and (b) subject to
the foregoing provisions of this Article 8 regarding Conforming<PAGE>
Systems and System Components which Jones is required to purchase or
elects to purchase, promptly either (i) destroy all Systems and System
Components constructed by Tri-Tek (including, without limitation,
Monitoring/Control Subsystems) which constitute Developments, in each
instance which are completed and are in process of completion, or (ii)
deliver all of the same to Jones.
9. Intellectual Property Rights.
9.1 Rights In Developments. Tri-Tek irrevocably agrees that all
right, title and interest throughout the world in and to all
Developments including, without limitation, copies of Developments
which Tri-Tek now or hereafter may possess, shall belong solely to
Jones without Tri-Tek or any of Tri-Tek's employees or Contractors
reserving or otherwise having any rights whatsoever in any of the
Developments. Specifically, and without limiting the generality of
the foregoing, all intellectual property rights (including, without
limitation, any and all mask work rights, copyrights, patent rights,
trade secrets, and know-how) in any and all Developments shall belong
solely to Jones without Tri-Tek or any of its employees or Contractors
reserving or otherwise having any rights therein whatsoever. In
furtherance thereof:
9.1.1 Tri-Tek agrees that each copyrightable Development
shall be deemed a "work made for hire" within the meaning of the
Copyright Act for the sole benefit of Jones. In the event and to the
extent that (a) title to any Development, or any part or element
thereof, may not, by operation of law, vest in Jones, and/or (b) any
copyrightable Development, or any part or element thereof, may be
found, as a matter of law, not to be a "work made for hire" within the
meaning of the Copyright Act for the sole benefit of Jones, Tri-Tek
hereby conveys and irrevocably assigns to Jones the sole and exclusive
right, title, and interest in and to such Developments (including,
without limitation, the ownership of all intellectual property rights
such as, without limitation, the copyright in such Developments), or
such part or element thereof, and all copies of any of such
Development, or such part or element thereof, in each instance without
further consideration.
9.1.2 Tri-Tek agrees to (a) execute (and, if necessary, to
cause its employees and Contractors to execute) any and all
documentation requested by Jones to assign to Jones all
Development(s), all parts or elements thereof, and all intellectual
property rights relating thereto (including, without limitation, any
and all copyrights, patent rights, mask work rights, trade secrets,
know-how, and other rights), in each instance promptly after Jones
requests such execution, and (b) upon Jones' request, diligently and
timely assist Jones, and/or any party designated by Jones, to (i)
perfect and/or register all patents, copyrights, mask work rights and
other rights and protection relating to all Development(s), or any
part or element thereof, in any and all countries, (ii) obtain
extensions and renewals of any such registrations, and (iii) from
time-to-time enforce all patents, copyrights, mask work rights, other
intellectual property rights and other rights and projections relating
to any Development(s), or any part or element thereof, in any and all
countries. Tri-Tek agrees to provide Jones with an original of each<PAGE>
document executed pursuant to the foregoing provisions of this
Section 9.1.2 promptly after the document is executed.
9.1.3 The assignment of any copyright under this Agreement
includes all rights of paternity, integrity, disclosure and withdrawal
and any other rights that may be known or referred to as "moral
rights". To the extent such "moral rights" cannot be assigned under
applicable law and to the extent such assignment is not allowed by the
laws in the various countries where "moral rights" exist, Tri-Tek
hereby waives such "moral rights" and consents to any action that
would violate such "moral rights" in the absence of such consent.
Tri-Tek promptly shall confirm, in writing, all such waivers and
consents which are requested by Jones from time-to-time by providing
Jones with an original thereof.
9.1.4 Without limiting the generality of the foregoing
provisions of this Section 9.1, reference in this Agreement to title
to and ownership of Systems including, without limitation, Test
Systems, by Tri-Tek shall not constitute title to or ownership of any
Developments by Tri-Tek.
9.2 Third Party Rights. If any System Component contains any
Third Party Rights, Tri-Tek shall obtain from the owner(s) of such
Third Party Rights (a) a perpetual right and license for Tri-Tek,
Jones and all Maintenance Providers, Affiliates and Customers to (i)
use such Third Party Rights (including, without limitation, the right
and license to use such Third Party Rights in Systems and the right
and license to manufacture Systems and all System Components), and
(ii) distribute by any means including, without limitation, sale, with
the right and license to use, Systems and System Components containing
such Third Party Rights, (b) all other rights and licenses necessary
for (i) Tri-Tek properly to carry out its obligations under this
Agreement, and (ii) Jones, Jones' assigns, and Maintenance Providers,
Affiliates and Customers to use (and otherwise meet their objectives
regarding) Systems and System Components (including, without
limitation, the right to copy the System Component), and (c) an
agreement to indemnify Jones, Tri-Tek, and all Maintenance Providers,
Affiliates and Customers and their respective assignees in the event
such Third Party Rights infringe or otherwise violate the rights of
any third party (such indemnification to contain substantially the
same terms as set forth in Article 12 below). Notwithstanding the
foregoing, such right and license for Customers shall only be required
to the extent necessary to allow Customers to use Systems and other
software contained on Systems. Tri-Tek shall obtain Jones' prior
written approval before entering into any agreement which would, or
with the passage of time could, place any restrictions of any kind
whatsoever on Jones' use or distribution including, without
limitation, resale of Systems or System Components or the use or
distribution including, without limitation, resale of System
Components by any Maintenance Provider. Tri-Tek shall provide Jones
with copies of all agreements entered into which relate to any items
encompassed by this Section 9.2.
9.3 Jones' Third Party Software. Jones shall obtain the
appropriate licenses, the terms of which shall be agreed upon by Jones
in its sole and absolute discretion, for Jones' Third Party Software.<PAGE>
Such licenses shall, perhaps among other things, provide a license for
Tri-Tek to test and install Jones' Third Party Software in Systems
solely for Jones or the right of Jones. Tri-Tek agrees strictly to
comply with the terms of any such license and, if, as and when
requested by Jones, promptly to execute and deliver any such license
(or other document evidencing such license) and all reports,
certifications, affidavits and other documents which the licensor of
Jones' Third Party Software from time-to-time requires be executed in
connection with the license. In furtherance thereof but without
limiting the generality thereof, Tri-Tek agrees, promptly after
requested by Jones from time-to-time, to execute and deliver an
agreement with each licensor of Jones' Third Party Software which may
contain (a) a description of Jones' Third Party Software, (b) a
recitation of the license granted by the licensor thereof to Tri-Tek
including, without limitation, the duration thereof, as to Tri-Tek,
(c) an acknowledgment by Tri-Tek that it is prohibited from using any
of such Jones' Third Party Software other than as specifically
permitted by such license grant, (d) an acknowledgment by Tri-Tek that
it shall be liable to such licensor in the event of any breach of the
license by Tri-Tek, (e) an agreement by Tri-Tek to indemnify such
licensor for any breach of such license by Tri-Tek, and (f) such terms
and conditions as Jones and/or the licensor reasonably may require.
In no event shall Jones shall have any liability to Tri-Tek on account
of any breach of any such license by the licensor of Jones' Third
Party Software.
9.4 Jones' Software.
9.4.1 Jones shall own all right, title and interest in all
of Jones' Software including, without limitation, all copies of Jones'
Software which Tri-Tek may possess. Tri-Tek shall have no right or
license in Jones' Software except as expressly provided in this
Agreement, all other rights therein being expressly retained by Jones.
9.4.2 Jones hereby grants Tri-Tek the nonexclusive license
to use and copy Jones' Software solely for the limited purpose of
constructing and testing (a) Systems for sale to Jones, and (b) System
Components for sale to Jones and Maintenance Providers. The term of
such license shall run concurrently with the term of this Agreement
and shall terminate automatically upon the natural expiration of the
term or earlier termination of this Agreement for any reason.
9.4.3 Anything contained in this Agreement to the contrary
notwithstanding, Jones may, by providing written notice to Tri-Tek,
terminate (a) the entire license granted in Section 9.4.2, or (b) the
license granted in Section 9.4.2 with respect to particular Jones'
Software (or any part or element thereof), in each instance without
terminating this Agreement. Such termination by Jones shall be
effective on the date such a notice is given or on a later date set
forth by Jones in such a notice.
9.5 Disclosure Of Developments. Tri-Tek shall disclose and
deliver all Developments to Jones. Such disclosures and deliveries
shall be (a) made (i) within two days after Jones' request therefor
made at any time and from time-to-time throughout the term of this
Agreement, (ii) on the Specification Date, and (iii) on the first day<PAGE>
of the calendar month next following the month during which the Phase
One Systems Test Date falls and every three months thereafter, and (b)
in tangible form and in such detail as necessary for a person
reasonably skilled in the art of computer design to understand such
Developments and fully and properly to construct Systems and all
System Components constructed by Tri-Tek (including, without
limitation, the Monitoring/Control Subsystem) and shall include,
without limitation and as applicable, complete and accurate copies of
all source codes, object codes, executable codes, design
documentation, user documentation, work notes, test data, reports,
samples, and other tangible evidence or results.
9.6 Third Party Infringement. If Tri-Tek becomes aware of any
product or activity of any third party that involves infringement,
potential infringement, violation or potential violation of Jones'
rights in any System, any System Component or in any other
Development, then Tri-Tek shall, within five days after the day on
which Tri-Tek becomes aware of such product or activity, notify Jones
in writing of such infringement or violation. Jones may, in its sole
and absolute discretion, take or not take whatever action it believes
is appropriate, and if Jones elects to take action, Tri-Tek shall
fully cooperate therewith.
9.7 Tri-Tek's Rights In The Developments.
9.7.1 Tri-Tek shall have no right or license in the
Developments except as expressly provided in this Agreement, all other
rights therein being expressly retained by Jones.
9.7.2 Jones hereby grants to Tri-Tek a nonexclusive license
to use, copy and modify the Developments solely for the limited
purpose of the development, construction and testing of (a) Systems
for sale to Jones, and (b) System Components for sale to Jones and
Maintenance Providers. The term of such license shall run
concurrently with the term of this Agreement and shall terminate
automatically upon the natural expiration of the term or earlier
termination of this Agreement for any reason.
9.7.3 Anything contained in this Agreement to the contrary
notwithstanding, Jones may, by providing written notice to Tri-Tek,
terminate (a) the entire license granted in Section 9.7.2, or (b) the
license granted in Section 9.7.2 with respect to a particular
Development (or any part or element thereof), in each instance without
terminating this Agreement. Such termination by Jones shall be
effective on the date such a notice is given or on a later date set
forth by Jones in such a notice.
9.8 Intellectual Property Markings. Tri-Tek shall affix the
appropriate intellectual property notices (such as, but not limited
to, copyright notices and mask work notices) on the Developments
showing Jones as the owner of such rights. Such notices shall be
affixed to those portions of the Developments as Jones may instruct
Tri-Tek from time-to-time.
10. Representations And Warranties.<PAGE>
10.1 Systems And System Components. Tri-Tek represents and
warrants that each System and System Component shall (a) be free from
defects in manufacturing and workmanship (including, without
limitation, programming errors and bugs), (b) meet all approved
Specifications and otherwise meet Jones' Needs at the time, and (c) be
constructed solely of new (as opposed to used or refurbished) System
Components. Without limiting the generality of the foregoing:
10.1.1 For a period of 12 months after (a) the Phase One
Completion Date in respect of the Phase One Test Systems, and (b) the
Phase Two Completion Date in respect of the Phase Two Test Systems,
Jones (or a Maintenance Provider on Jones' behalf) shall have the
right to return to Tri-Tek, for repair or replacement (as determined
by Tri-Tek in its reasonable discretion), the Test System (or System
Component(s) thereof) which fails to satisfy Tri-Tek's representations
and warranties applicable thereto which are set forth above in this
Section 10.1.
10.1.2 For a period of 12 months after the day on which
payment is due by Jones pursuant to Section 7.3.1 above for a System
or System Component (purchased separately), Jones (or a Maintenance
Provider on Jones' behalf) shall have the right to return to Tri-Tek,
for repair or replacement (as determined by Tri-Tek in its reasonable
discretion), the System (or System Component(s) thereof) which fails
to satisfy Tri-Tek's representations and warranties applicable thereto
which are set forth above in this Section 10.1.
10.1.3 For a period of 12 months after the day on which
payment is due by a Maintenance Provider pursuant to Section 7.3.2
above for a System Component, the Maintenance Provider shall have the
right to return to Tri-Tek, for repair or replacement (as determined
by Tri-Tek in its reasonable discretion), the System Component which
fails to satisfy Tri-Tek's representations and warranties applicable
thereto which are set forth above in this Section 10.1.
10.1.4 The repair and replacement of Systems and System
Components pursuant to the foregoing provisions of this Section 10.1,
and the return thereof to Jones, shall be at the sole cost and expense
of Tri-Tek, it being understood thereby that Jones shall pay the
freight charges incurred by it in returning Systems and System
Components to Tri-Tek.
10.1.5 Tri-Tek shall deliver repaired or replacement
Systems and System Components, in each instance which satisfy Tri-
Tek's representations and warranties applicable thereto, promptly
after the Systems and System Components which are to be repaired or
replaced are returned to Tri-Tek pursuant to the foregoing provisions
of this Section 10.1. The 12-month period set forth in
Section 10.1.1, 10.1.2 and 10.1.3 above shall also apply to each
repaired and replacement System and System Component commencing on the
day it is delivered by Tri-Tek to Jones.
10.1.6 Determinations of failures of compliance with the
warranty set forth in Section 10.1 above, the appropriateness of the
return of, as applicable, a System or particular System Component(s)
thereof, or System Components sold separately by Tri-Tek shall, in<PAGE>
each instance, be based on the determinations thereof by Jones and/or
a Maintenance Provider, and such determinations shall be binding on
Tri-Tek.
10.2 Manufacturer's Warranties. In addition to all warranties of
Tri-Tek under this Agreement, Jones and Maintenance Providers shall
have the benefit of all warranties of all third party vendors to Tri-
Tek of System Components. In furtherance thereof, Tri-Tek agrees,
from time-to-time as requested by Jones or a Maintenance Provider, to
(a) execute such documents as reasonably may be requested in order to
assign such warranties to, as applicable, Jones and Maintenance
Providers, and (b) otherwise assist Jones and Maintenance Providers in
enforcing such warranties.
10.3 Warranties At Law. Nothing contained in this Agreement
(including, without limitation, any (a) sub-part of Section 10.1
above, or (b) Section 10.2 above) shall, in any way, limit any
warranties which are provided by law or any remedies which are
provided by law for any breach of any warranties including, without
limitation, warranties provided by the UCC such as, but not limited
to, warranties of title, merchantability and fitness for a particular
purpose.
10.4 Authority. Tri-Tek represents and warrants that (a) it has
(or will obtain prior to use in a System or any System Component) the
rights and licenses that Tri-Tek is required to obtain in order to
comply with Tri-Tek's obligations in this Agreement including, without
limitation, the rights and licenses required by Section 9.2 above, and
(b) no one other than Jones, and Tri-Tek pursuant to Section 9.7.2
above, has or will have any rights, of any kind whatsoever, in any
Development.
10.5 No Infringement. Tri-Tek represents and warrants that (a)
Jones' and any Maintenance Provider's use, sale, development,
construction and modification of Systems, System Components,
Developments, the Developed Firmware and/or Tri-Tek's Third Party
Software, (b) the performance of maintenance services on the System
and System Components by Maintenance Providers, and (c) the
performance by Tri-Tek of any services pursuant to this Agreement, in
each instance will not in any way constitute an infringement or other
violation of any copyright, trade secret, trade dress, trademark,
patent, invention, mask work, proprietary information, nondisclosure
or other right of any third party.
10.6 Compatibility. Tri-Tek represents and warrants that all
software components of the Developments (including, without
limitation, the Developed Firmware) shall (a) be free from programming
errors and from defects in workmanship and materials, (b) operate and
be compatible with Systems, Jones' Software, Tri-Tek's Third Party
Software and Jones' Third Party Software such that each System will
conform to the performance capabilities, specifications, functions and
other descriptions and standards applicable thereto as represented by
Tri-Tek to Jones, as set forth on the exhibits attached to this
Agreement and as such exhibits may be modified from time-to-time
pursuant to the terms of this Agreement, and (c) conform to standards
generally observed in the industry for similar software. Tri-Tek<PAGE>
further represents and warrants that (y) it has thoroughly examined
Jones' current computer system, and (z) Systems will be compatible
with, among other things, Jones' other hardware and software which
Jones now intends to use with Systems including, without limitation,
equipment which is to be plugged into a System Component and equipment
which is to be contained in the cabinet which constitutes a System
Component, some of which is identified on one or more exhibits hereto
including, without limitation, Genicom laser printers and Sun
Sparcstations.
10.7 No Impairment. Tri-Tek represents and warrants that each
System including, without limitation, all software embedded or
installed therein, and each System Component including, without
limitation, all software embedded or installed therein, does not (and
will not, at the time of delivery) contain any feature which would in
any way impair the operation of the System (or any System Component)
including, without limitation, (a) software locks, drop dead devices,
back doors, time bombs, or other software routines which may disable a
computer program automatically with the passage of time or under the
positive control of a person other than Jones, or (b) any form of
virus, a Trojan horse, worm or other software routines or hardware
components which may (i) permit unauthorized access or (ii) disable,
erase, or otherwise harm software, hardware, or data, except that Tri-
Tek makes no representation or warranty regarding any of the matters
identified in Section 10.7(a) in respect of any Jones' Third Party
Software. Tri-Tek further represents and warrants that it will not
impair the operation of any System (or any System Component) in any
way for any reason whatsoever.
10.8 Tri-Tek's Experience. Tri-Tek represents and warrants that
it possesses the skill, experience, expertise and capacity (including,
without limitation, the financial wherewithal) necessary to fulfill
all of its obligations under this Agreement. Without limiting the
generality of the foregoing, Tri-Tek represents and warrants that it
has the experience, contacts and skill necessary to negotiate and
obtain the lowest price in the industry for System Components which
Tri-Tek is to purchase from third party vendors.
10.9 Tri-Tek's Employees. Tri-Tek represents and warrants that
all employees and Contractors of Tri-Tek that will or may work, in any
way whatsoever, on any System or System Component (including, without
limitation, those that work on the development thereof) now have
executed or will, before working on any System or System Component,
execute agreements timely hereafter wherein and whereby they
acknowledge and agree that (a) their respective work product
(including, without limitation, all proprietary rights in Systems)
belongs solely to Tri-Tek as their employer in order that such work
product will become the property of Jones pursuant to this Agreement
and (b) the performance of services by such employee or Contractor to
and for Tri-Tek has not at any time or in any way constituted, and
will not hereafter at any time or in any way constitute, an
infringement or other violation of any intellectual property right,
nondisclosure or other right of any third party. In furtherance
thereof, in all such contracts, Tri-Tek's employees and Contractors
shall acknowledge and agree (y) that all proprietary rights in any
ideas, inventions and the like made, developed, conceived and/or<PAGE>
reduced to practice by such employee during his or her employment with
Tri-Tek belong to Tri-Tek (and Tri-Tek's assignees), and (z) to
execute any and all documents necessary to (i) assign such rights to
Tri-Tek (and/or Tri-Tek's assignees) and (ii) protect Tri-Tek's
(and/or Tri-Tek's assignees) rights therein. In addition, and without
limiting the generality of the foregoing, such agreements with Tri-
Tek's employees shall contain language similar to that contained in
Section 9.1.2 and Section 9.1.3 above and shall further provide, among
other things, that they are employees of Tri-Tek within the meaning of
the Copyright Act, and that if, as a matter of law, any copyrightable
work created during such employee's employment with Tri-Tek is not
considered a "work made for hire" within the meaning of the Copyright
Act for the sole benefit of Tri-Tek, the copyright in such work shall
be automatically assigned to Tri-Tek. In addition, and without
limiting of the foregoing, such agreements with Tri-Tek's Contractors
shall contain language similar to that contained in Section 9.1.2 and
Section 9.1.3 above and shall further provide, among other things,
that all copyrightable works shall be "works made for hire" within the
meaning of the Copyright Act, and shall therefore belong to Tri-Tek
and that if, as a matter of law, any copyrightable work created during
the term such Contractor is engaged by Tri-Tek is not deemed a "work
made for hire" within the meaning of the Copyright Act for the sole
benefit of Tri-Tek, the copyright in such work shall be automatically
assigned to Tri-Tek. Tri-Tek agrees to provide Jones with a copy of
each document executed pursuant to the foregoing provisions of this
Section 10.9 promptly after the document is executed.
10.10 Packaging Specifications. Tri-Tek represents and
warrants that the Packaging Specifications (a) meet commercially
acceptable standards for similar items, and (b) are adequate to
package Systems in order that Systems can be shipped and delivered
without damage unless extremely unusual circumstances arise after the
Systems leave Tri-Tek's control.
10.11 Qualified Personnel. Tri-Tek represents and warrants
that its employees and Contractors are, and at all times shall be,
qualified professional personnel, consistent with the standards
prevailing in the industry.
10.12 Ownership And Control Of Tri-Tek. Tri-Tek represents
and warrants that David Fuchs is (a) the owner of more than 50% of the
voting shares of Tri-Tek, (b) the President of Tri-Tek, and (c) a
member of the Board of Directors of Tri-Tek.
10.13 Continuous Representations And Warranties. All
representations and warranties made by Tri-Tek in this Agreement shall
be deemed first made on the date of this Agreement (and as an
inducement to Jones' execution and delivery of this Agreement) and
they shall run continuously throughout the term of this Agreement and
after natural expiration of the term or earlier termination of this
Agreement for any reason.
10.14 Application To Maintenance Providers. Each
representation and each warranty made by Tri-Tek in this Agreement
shall be deemed made to Jones and, in the case of a System Component
sold or delivered to a Maintenance Provider, to each Maintenance<PAGE>
Provider and also Jones, and all rights on account of a breach of any
such representation and/or warranty shall accrue, as applicable, to
Jones and/or the Maintenance Providers as the injured party(ies).
11. Project Manager.
11.1 Appointment. During the entire term of this Agreement, Tri-
Tek shall, on a full-time basis, employ an individual who shall have
(a) the title of Project Manager for Jones, and (b) the capabilities
and expertise in order properly to perform, among other things, those
duties specified in Section 11.2 below. Upon the execution of this
Agreement, Tri-Tek shall appoint Dave Mytyk to the position of initial
Project Manager, and Jones hereby approves that appointment.
11.2 Duties. The Project Manager shall (a) until the
Specification Date, work (i) full-time on the development and
construction of the System and System Components which are to be
manufactured by Tri-Tek, including, without limitation, the B.O.C
Board, and (ii) at Jones' Headquarters during such periods as Jones
determines appropriate in its discretion, (b) throughout the remaining
term of this Agreement (i) expend such time exclusively on the
development and construction of Systems (and all matters incidental or
related thereto) as may be required from time-to-time, and (ii) act as
the liaison between Tri-Tek and Jones.
11.3 Termination Of Project Manager By Jones. In all events,
Jones may require Tri-Tek to remove a particular Project Manager from
that position for any reason whatsoever by giving written notice
thereof to Tri-Tek, in which event Tri-Tek promptly shall effectuate
such removal and, accordingly, Tri-Tek shall preclude such former
Project Manager from thereafter performing any duties with respect to
Jones, Systems and System Components for Jones.
11.4 Appointment Of New Project Manager. In no event may (a)
Tri-Tek appoint any successor Project Manager without Jones' prior
written approval of the individual who Tri-Tek proposes to appoint to
that position, or (b) there be a vacancy in the position of approved
Project Manager for Jones for more than ten days in the aggregate
without Jones' prior written approval from time-to-time. In the event
of an anticipated or actual vacancy in the Project Manager position
for any reason, Tri-Tek shall provide Jones with the full credentials
of each individual who Tri-Tek considers for employment and/or
appointment as the next Project Manager and the then anticipated date
on which Jones desires to make such appointment, and Jones shall have
the right to interview each such individual.
11.5 Status Of Project Manager And Other Employees Of Tri-Tek.
The Project Manager, and all other employees of Tri-Tek, shall at all
times constitute the employees of Tri-Tek, and not of Jones, for all
purposes, and be and remain solely under the supervision and control
of Tri-Tek. No employee, Contractor or agent of Tri-Tek, or any other
individual who may perform any services for Tri-Tek in furtherance of
this Agreement, shall be, or shall be deemed to be, an employee, agent
or servant of, or contractor with, Jones, and no benefits provided by
Jones to any of its employees are available to, or shall be provided
to, any such individual including, without limitation, any of Tri-<PAGE>
Tek's employees and agents. In furtherance thereof, Tri-Tek agrees
duly and timely to (a) withhold from the compensation which it pays
each of its employees all amounts which Tri-Tek is required by law to
withhold for federal, state and local income tax purposes, (b) deposit
and pay all amounts so withheld and also all other amounts which Tri-
Tek legally is required to pay on account of such compensation under
all applicable Federal, state and local laws including, without
limitation, under the Federal Insurance Contributions Act, the Federal
Unemployment Tax Act and the applicable state unemployment laws, (c)
maintain worker's compensation insurance in respect of all of its
employees with limits of liability and coverages not less than is from
time-to-time required by all applicable laws, and (d) provide Jones
with evidence of compliance with this Section 11.5 as and when Jones
may request such evidence.
12. Indemnification.
12.1 Tri-Tek's Obligation To Indemnify. Anything contained in
this Agreement to the contrary notwithstanding, but subject to the
further provisions of this Article 12, in all events and under all
circumstances Tri-Tek shall, at Tri-Tek's sole cost and expense,
during the term of this Agreement and after natural expiration of the
term or earlier termination of this Agreement for any reason,
indemnify, defend and hold harmless Jones, Affiliates, System Lessors,
Maintenance Providers and Customers and, in each instance, their
respective or collective partners, principals, employees, agents,
contractors insurers (collectively, "Indemnified Parties"), and each
and all of them, from and against any and all loss or liability,
claims, demands, damages, losses and expenses including, without
limitation, attorneys', accountants' and expert witness fees, costs
and expenses, which the Indemnified Parties, or any one or more of
them, may sustain or incur directly or indirectly from or as a result
of (a) any claim against any one or more of the Indemnified Parties
which arises as a result of a breach of this Agreement by Tri-Tek
and/or the falsity of any representation and/or warranty made by Tri-
Tek in this Agreement, (b) the negligence of Tri-Tek including,
without limitation, the negligence of any of its employees,
Contractors or agents, (c) the sale or use of Systems (or any part or
element thereof) by any of the Indemnified Parties including, without
limitation, (i) the violation (or alleged violation) by any of the
Indemnified Parties of any third party's trade secrets, proprietary
information, trade mark, trade dress, copyright, mask work rights or
patent rights or (ii) any similar claim, (d) any claim of any type by
any employee, Contractor or agent of Tri-Tek or any individual who may
perform any services for Tri-Tek in furtherance of this Agreement,
and/or (e) any claim against any of the Indemnified Parties by any
Third Party on account of any act or omission of Tri-Tek including,
without limitation, on account of any breach by Tri-Tek of any
agreement with or otherwise in favor of any Third Party. Each
Indemnified Party who and which is not a party to this Agreement shall
be deemed to be a third party beneficiary of this Agreement.
12.2 Notice, Defense And Settlement Of Claims.
12.2.1 Each Indemnified Party which or who desires to
obtain indemnification from Tri-Tek pursuant to Section 12.1 above in<PAGE>
respect of a particular claim shall give Tri-Tek written notice of the
claim (as to which such indemnification may be sought by such
Indemnified Party) within 60 days after the day on which such
Indemnified Party receives written notice of such claim from or on
behalf of the claimant who or which makes such claim, and such notice
to Tri-Tek shall be accompanied by a copy of such written notice of
such claim from or on behalf of such claimant. Such notice also shall
state whether such Indemnified Party desires to (a) afford Tri-Tek the
opportunity to undertake, and thereafter to have sole control over,
the defense (including settlement) of such claim, which shall be at
the sole cost and expense of, and at the sole risk of, Tri-Tek, in
which event Tri-Tek promptly shall assume such defense and diligently
thereafter defend such claim, or (b) itself to undertake, or to have
another for it undertake, the defense (including settlement) of such
claim, in which event such Indemnified Party, or such other on its
behalf, shall have sole control over the defense (including
settlement) of such claim, which shall be on behalf of, for the
account of, and at the sole risk of Tri-Tek. A failure by Tri-Tek to
undertake such defense, or timely to undertake such defense, of such
claim shall not release Tri-Tek from its obligations and liabilities
under Section 12.1 above in respect of such claim and, accordingly, in
the event of such a failure or delay, such Indemnified Party shall
have the right, but not the obligation, itself to undertake, or to
have another for it undertake, the defense (including settlement) of
such claim, which shall be on behalf of, for the account of, and at
the sole risk of Tri-Tek.
12.2.2 Notwithstanding Section 12.2.1 above, if Tri-Tek
properly undertakes to defend an Indemnified Party in respect of a
claim and diligently thereafter defend such claim but, at any time
thereafter and for any reason, that Indemnified Party desires itself
to have, or another on its behalf to have, sole prospective control
over the defense (including settlement) of such claim as to which such
undertaking by Tri-Tek exists, that Indemnified Party shall have the
right to do the same by written notice thereof given to Tri-Tek, in
which event Tri-Tek shall take all actions which reasonably are
required and shall cause all actions to be taken which Tri-Tek
reasonably can cause to be taken in order to effectuate an orderly
transition of such defense and, if applicable, such negotiations in
respect of the settlement of such claim, to that Indemnified Party and
legal counsel selected by or for that Indemnified Party to represent
that Indemnified Party in the foregoing regards in respect of such
claim including, without limitation, providing that Indemnified Party
and/or such counsel with a copy of all related documents including,
without limitation, all work product developed or otherwise generated
in the course of satisfaction by Tri-Tek of its indemnification
obligations in respect of such claim as to such Indemnified Party.
Neither the giving of such a notice nor assumption of the defense of
such claim against such Indemnified Party by or for that Indemnified
Party pursuant to the foregoing provisions of this Section 12.2.2
shall release Tri-Tek from its obligations and liabilities under
Section 12.1 above to such Indemnified Party in respect of such claim
and, accordingly, such defense (including settlement) of such claim
shall be on behalf of, for the account of, and at the sole risk of
Tri-Tek.<PAGE>
12.2.3 After Tri-Tek has assumed control over the defense
(including settlement) of a claim and during the period thereafter
while Tri-Tek has sole control over such defense, the Indemnified
Party in respect of such claim reasonably shall provide Tri-Tek with
reasonable assistance, information and authority which reasonably is
necessary to perform such defense and related settlement negotiations
as and when specifically requested by Tri-Tek or on its behalf, which
shall be provided at the sole cost and expense of Tri-Tek. Likewise,
after an Indemnified Party (or another on its behalf) has assumed the
defense (including settlement) of a claim pursuant to Section 12.2.1
or Section 12.2.2 above and during the period thereafter while such
Indemnified Party (or another on its behalf) has sole control over
such defense, Tri-Tek shall provide reasonable assistance, information
and authority which reasonably is necessary to perform such defense
and related settlement negotiations as and when specifically requested
by or on behalf of such Indemnified Party, which shall be provided at
the sole cost and expense of Tri-Tek.
12.2.4 A failure or delay by an Indemnified Party in
performing any of the obligations imposed on such Indemnified Party
pursuant to any of the foregoing provisions of this Article 12.2 in
respect of a particular claim shall not void the indemnification
obligation of Tri-Tek set forth in Section 12.1 above as to such
Indemnified Party in respect of such claim but merely shall reduce the
scope of the indemnification to such Indemnified Party in respect of
such claim to the extent, if any, of the proven damages which the
claimant actually sustains, and for which such Indemnified Party is
held liable to such claimant, in respect of such claim as a direct
result of such delay during the actual period of the delay.
12.2.5 Anything set forth above in this Article 12 to the
contrary notwithstanding, during the course of its defense of a claim
Tri-Tek only shall have the right and authority to settle such claim
as to an Indemnified Party if Tri-Tek then has the ability to satisfy,
and fully satisfies, all obligations (including liabilities) of such
Indemnified Party pursuant to such settlement; otherwise, Tri-Tek
shall first secure such authority, in writing, in respect of the
proposed settlement from such Indemnified Party, but such Indemnified
Party shall not be obligated to give such authority and the giving of
such authority shall not relieve Tri-Tek from its obligation fully to
satisfy all obligations (including liabilities) of such Indemnified
Party pursuant to such settlement.
13. Confidentiality And Non-Competition.
13.1 Maintenance Of Confidentiality By Jones. Jones acknowledges
that Jones may have heretofore received and may from time-to-time
hereafter receive information from Tri-Tek marked "Confidential" which
is the confidential property of Tri-Tek and Jones shall not reveal to
any person or entity any such confidential information.
Notwithstanding the foregoing, no such information shall be considered
Tri-Tek's confidential information if such information (a) is
generally known in the relevant industry or industry segment other
than on account of a breach hereof by Jones, (b) does not afford
possessors of the information a commercial or business advantage over
others who do not have the information, (c) is described in an issued<PAGE>
or published U.S. or non-U.S. patent, (d) is developed independently
by or on behalf of Jones, (e) is disclosed to Jones by a third party
not having an obligation of confidence to Tri-Tek, and/or (f) is or
becomes part of the Developments. As between Tri-Tek and Jones, Tri-
Tek shall have the burden of proving that information constitutes Tri-
Tek's confidential information.
13.2 Maintenance Of Confidentiality By Tri-Tek. Tri-Tek agrees
(a) to keep all of Jones' Confidential Information confidential, (b)
to insure that all of Tri-Tek's employees, Contractors and agents keep
all of Jones' Confidential Information confidential, and (c) not to
use any of Jones' Confidential Information except for the benefit of
Jones as permitted by this Agreement. Such obligation shall require
Tri-Tek, without limitation, to have each such employee, Contractor
and agent enter into formal agreements wherein they agree to keep all
of Jones' Confidential Information confidential, and promptly after
each such agreement is executed to provide Jones with a copy thereof.
13.3 Non-Competition. During the term of this Agreement and for
two years thereafter, Tri-Tek agrees not to perform the same or
similar services as are to be performed for Jones under this Agreement
for any person or entity who or which conducts the same business as is
conducted by Jones.
14. Sales Of Systems To System Lessors.
14.1 General Statement. Tri-Tek acknowledges that Jones
hereafter may desire to lease Conforming Systems from entities with
which Jones from time-to-time has or intends to have an agreement to
lease Systems (collectively, "System Lessors"). All articles of this
Agreement, other than this Article 14, are written as if there would
not be any System Lessor. The further provisions of this Article 14
apply in respect of System Lessors including, without limitation, by
specifying how terms and provisions of other articles of this
Agreement are affected including, without limitation, how they are
modified in respect of System Lessors and Systems sold and/or
delivered by Tri-Tek to System Lessors. Except to the extent modified
pursuant to the further provisions of this Article 14, all terms and
provisions of this Agreement fully shall apply and be applicable in
respect of all Systems purchased and to be purchased by all Systems
Lessors from Tri-Tek and to all Systems which constitute or are to
constitute such Conforming Systems which are purchased and to be
purchased by System Lessors.
14.2 Status Of System Lessors. Without limiting the generality
of Section 14.1 above, this Agreement shall govern the sale of
Conforming Systems by Tri-Tek to System Lessors. By placing a
Purchase Order for Conforming Systems, by accepting the assignment
from Jones, in whole or in part, of a Purchase Order for Conforming
Systems previously submitted by Jones to Tri-Tek and/or by accepting
the assignment from Jones, in whole or in part, of the Standing Order,
each System Lessor agrees to be bound by all of the terms and
provisions of this Agreement which are applicable to the System Lessor
in respect of the Systems encompassed by its Purchase Orders.
Accordingly, each System Lessor shall be deemed to be a third party
beneficiary of this Agreement, and termination by Jones of an entity's<PAGE>
status as a System Lessor shall not diminish such status in respect of
Systems theretofore sold by Tri-Tek to the System Lessor. All acts
and omissions of a System Lessor shall be attributable solely to that
System Lessor, as a result of which (a) Jones shall not be liable or
otherwise responsible for any act or omission of any System Lessor,
(b) no System Lessor shall be liable or otherwise responsible for any
act or omission of Jones or any other System Lessor, and (c) Tri-Tek
shall not have the right to terminate this Agreement as a result of
any act or omission of any System Lessor.
14.3 Identity Of System Lessors. Each entity which Jones desires
from time-to-time to qualify as a System Lessor shall be identified as
such in a written notice thereof given by Jones to Tri-Tek, which
notice, to be effective, shall specify the name and address of the
System Lessor and may specify the number of Conforming Systems which
the identified System Lessor is then authorized to purchase for
subsequent lease to Jones. Whether or not such number is so
specified, Jones, by written notice to Tri-Tek, may thereafter specify
the number of Conforming Systems which the System Lessor, identified
in such notice, is then authorized to purchase for subsequent lease to
Jones, which may constitute an increase or a decrease in the number of
Conforming Systems previously specified by Jones to Tri-Tek.
Likewise, Jones shall give Tri-Tek written notice from time-to-time as
and when Jones no longer desires a System Lessor to qualify as such,
which notice, to be effective, shall specify the name and address of
the former System Lessor. Tri-Tek shall not sell (a) any Systems to
any entity which does not constitute a System Lessor at the time of
the sale, or (b) sell more Conforming Systems to any System Lessor
then the System Lessor is authorized by Jones to purchase for
subsequent lease to Jones.
14.4 Sales Of Systems To System Lessors. Subject to Article 8
and Section 14.3 above and the further provisions of this Article 14,
from and after the Phase Two Completion Date Tri-Tek timely shall sell
to each System Lessor that quantity of Conforming Systems as the
System Lessor may desire to purchase from Tri-Tek from time to time as
evidenced by assignments and/or Purchase Orders to which references
are made in Section 14.5 below. All Conforming Systems purchased by
System Lessors shall be delivered to Jones and all matters relating to
such delivery shall be handled by Jones as the agent of the System
Lessors, respectively, for such purpose.
14.5 Purchases Of Systems By System Lessors.
14.5.1 Jones shall have the right from time-to-time to
assign to one or more System Lessors, in whole or in part, Jones'
right and obligation to purchase Conforming Systems pursuant to the
Standing Order by written notice thereof to Tri-Tek from time-to-time.
To be effective, each such notice shall specify the number of affected
Systems, the month during which such Conforming Systems are to be
delivered by Tri-Tek pursuant to Section 5.1 above and the name and
address of the System Lessor as to which such assignment is made.
Each such notice may constitute a notice from Jones to Tri-Tek
pursuant to Section 14.3 above. Upon such assignment, (a) Jones'
obligation to purchase Conforming Systems pursuant to the Standing
Order shall be deemed satisfied to the extent of the number of Systems<PAGE>
encompassed by such assignments, respectively, (b) the conditions to
Jones' right to terminate the Standing Order which are set forth in
Section 5.1.3 above also shall be deemed satisfied to the extent of
the number of Conforming Systems to be purchased by System Lessors
pursuant to the Standing Order, as aforesaid, and pursuant to Purchase
Orders for Systems submitted and deemed submitted by System Lessors
pursuant to the further provisions of this Section 14.5, (c) Jones
shall be deemed prospectively released from all obligations to pay
Tri-Tek for such Systems, the freight charges pursuant to Section 5.5
above in respect of such Systems and the taxes pursuant to Section 5.6
above in respect of such Systems, and (d) the System Lessor to which
the assignment is made shall be deemed to have agreed to pay Tri-Tek
for such Conforming Systems, freight charges and taxes as and when
payment therefor would be due by Jones for such Systems pursuant to
Section 7.3 above if Jones were the purchaser of such Systems.
14.5.2 For all purposes of this Agreement, the term
"Purchase Order" also shall include an order submitted or deemed
submitted to Tri-Tek by a System Lessor to purchase Conforming
Systems.
14.5.3 Jones shall have the right from time-to-time to
assign to one or more System Lessors, in whole or in part, any one or
more Purchase Orders for Conforming Systems theretofore submitted by
Jones to Tri-Tek by written notice thereof to Tri-tek from time-to-
time. To be effective, each such notice shall specify the number of
affected Systems, the number and date of the affected Purchase Order
and the name and address of the System Lessor as to which such
assignment is made. Each such notice may constitute a notice from
Jones to Tri-Tek pursuant to Section 14.3 above. Upon such an
assignment, (a) the identified System Lessor to which such assignment
is made shall, in lieu of Jones, be deemed to have submitted such
Purchase Order to Tri-Tek pursuant to Section 5.2 above in respect of
the number of Systems specified in such notice, (b) Jones shall be
deemed prospectively released from all obligations to pay Tri-Tek for
such Systems, the freight charges pursuant to Section 5.5 above in
respect of such Systems and the taxes pursuant to Section 5.6 above in
respect of such Systems, and (c) the System Lessor to which the
assignment is made shall be deemed to have agreed to pay Tri-Tek for
such Conforming Systems, freight charges and taxes as and when payment
therefor would otherwise be due by Jones for such Systems pursuant to
Section 7.3 above if Jones were the purchaser of such Systems.
14.5.4 Subject to Article 8 and Section 14.3 above and the
further provisions of this Article 14, System Lessors shall have the
right to submit Purchase Orders for Conforming Systems to Tri-Tek
pursuant to Section 5.2 above. The System Lessor which submits the
Purchase Order shall be deemed to have agreed to pay Tri-Tek for such
Conforming Systems, the freight charges pursuant to Section 5.5 above
in respect of such Systems and the taxes pursuant to Section 5.6 above
in respect of such Systems as and when payment therefor would be due
by Jones for such Systems pursuant to Section 7.3 above if Jones had
submitted the Purchase Order to Tri-Tek for the Conforming Systems.
14.5.5 Each Purchase Order submitted by each System Lessor
shall identify those items enumerated in Section 5.2.1 and also may<PAGE>
specify any one or more of the items enumerated in Section 5.2.3
above, in each instance to the same extent as required of or afforded
Jones therein.
14.5.6 Each obligation of Tri-Tek under Article 5 above to
and in favor of Jones in respect of Systems for which Jones could have
a payment obligation shall constitute an obligation of Tri-Tek to each
and both of Jones and the obligated System Lessor in respect of all
Systems for which that System Lessor could have a payment obligation
to Tri-Tek.
14.5.7 Subject to the further provisions of this
Section 14.5, each right and remedy of Jones under Article 5 above in
respect of Systems for which Jones could have a payment obligation
shall (a) apply with equal force and effect to and in respect of all
Systems for which a System Lessor could have a payment obligation to
Tri-Tek, and (b) constitute the rights and remedies of each and both
of Jones and such obligated System Lessor in respect of such Systems.
All of such rights and remedies may be exercised and enforced by the
obligated System Lessor on its own behalf and/or by Jones on its own
behalf and/or as the agent of such obligated System Lessor for such
purposes.
14.5.8 The acceptance provisions of Section 5.7 above in
respect of Systems for which Jones could have a payment obligation
shall apply with each force and effect to all Systems for which a
System Lessor could have a payment obligation to Tri-Tek, and deemed
acceptance of such Systems by Jones shall be binding on the obligated
System Lessor. Accordingly, Jones shall constitute the agent of the
obligated System Lessor for the foregoing purposes.
14.5.9 All rejections by Jones of Systems (and System
Component thereof) for which a System Lessor could have a payment
obligation shall constitute the rejection thereof by the obligated
System Lessor, and such rejections shall be binding on the obligated
System Lessor. Accordingly, Jones shall constitute the agent of the
obligated System Lessor for the foregoing purposes.
14.6 Pricing And Invoices To System Lessors.
14.6.1 The price to be paid by System Lessors to Tri-Tek
for Conforming Systems purchased other than pursuant to Article 8
above shall be the same Price determined pursuant to Section 7.1 above
which would be payable by Jones to Tri-Tek if Jones were the purchaser
of the Conforming Systems. Without limiting the generality of the
foregoing:
(a) Each Cost And Vendor Schedule also means the from time-
to-time approved schedule which identifies the maximum cost to System
Lessors of each System, such maximum cost being subject to the
applicable Profit Percent and, in the case of Systems, also the
Assembly Charge, in each instance pursuant to Section 7.1 above.
(b) Tri-Tek's charges to System Lessors pursuant to this
Agreement also shall be on a first in, first out basis pursuant to
Section 6.4 above.<PAGE>
14.6.2 For all purposes of this Agreement, the term
"Invoice" also shall include each invoice which Tri-Tek renders each
System Lessor. Each Invoice to a System Lessor shall be rendered by
Tri-Tek to the System Lessor at its most current address (a) of which
Jones advised Tri-Tek in writing pursuant to Section 14.3 above or
otherwise, or (b) the System Lessor advised Tri-Tek in writing. Tri-
Tek shall send Jones a copy of each Invoice to each System Lessor on
the date Tri-Tek renders that Invoice to the System Lessor, and Tri-
Tek shall not be deemed to have rendered an Invoice to a System Lessor
unless and until Tri-Tek sends a copy thereof to Jones. Such copies
shall be sent to Jones at its then current address for notices under
Section 15.11 below.
14.6.3 The provisions of Section 7.3.1 above shall apply
with equal force and effect to and in respect of all Invoices to all
System Lessors and the payment of Invoices by System Lessors. Without
limiting the generality of the foregoing, payment of any Invoice by
any System Lessor shall not, however, constitute a waiver or release
by Jones and/or the System Lessor of any claims which they,
respectively or collectively, may have against Tri-Tek (a) that the
subject Systems do not constitute Conforming Systems, (b) under
Article 10 above, or (c) regarding the appropriateness of any charges
on the Invoice.
14.6.4 As between Tri-Tek and Jones, Tri-Tek's liability
under Section 7.7(a) above shall be to Jones and not to any System
Lessor for 120% of the actual damages sustained, including
overpayments by System Lessors to Tri-Tek, which any Audit reveals.
Accordingly, the rights of Jones set forth in Section 7.7(c) and
Section 7.7(d) above may be exercised by Jones on account of such
damages and/or overpayments.
14.7 Jones' Deposits And System Lessors. Subject to the further
provisions of this Section 14.7, Jones' Initial Deposit and Jones'
Additional Deposit also shall serve as a deposit by Jones against the
sale of Systems to System Lessors at any time pursuant to this
Agreement. Anything set forth in this Agreement including, without
limitation, Article 2 above to the contrary notwithstanding:
14.7.1 The first 1,000 Systems to which reference is made
in Section 2.3 above and the first 2,500 Systems to which reference is
made in Section 2.6 above also shall include Systems purchased by
System Lessors at any time pursuant to this Agreement.
14.7.2 No System Lessor shall receive any monetary benefit
for or on account of Jones' Initial Deposit or Jones' Additional
Deposit.
14.7.3 Within five days after the day on which payment is
made by any System Lessor to Tri-Tek for any System which constitutes
one of the first 1,000 Systems to which reference is made in
Section 2.3 above, as amended by Section 14.7.1 above, (a) Tri-Tek
shall refund to Jones the sum of $250.00 in respect of each such
System, and (b) Jones' Initial Deposit thereby shall be decreased by
the total amount of such refund, in each instance until such time as
(y) Jones' Initial Deposit is exhausted fully thereby and/or pursuant<PAGE>
to Section 2.3 above, or (z) otherwise is refunded by Tri-Tek to Jones
pursuant to this Agreement.
14.7.4 Within five days after the day on which payment is
made by any System Lessor to Tri-Tek for any System which constitutes
one of the first 2,500 Systems to which reference is made in
Section 2.6 above, as amended by Section 14.7.1 above, (a) Tri-Tek
shall refund to Jones the sum of $100.00 in respect of each such
System, and (b) Jones' Additional Deposit thereby shall be decreased
by the total amount of such refund, in each instance until such time
as (y) Jones' Initial Deposit is exhausted fully thereby and/or
pursuant to Section 2.6 above, or (z) otherwise is refunded by Tri-Tek
to Jones pursuant to this Agreement.
14.7.5 Notwithstanding Section 14.7.3 or Section 14.7.4
above, Tri-Tek may, in lieu of making the refunds to Jones which are
referenced therein, give System Lessors a credit for the amount of
such refunds on Invoices by Tri-Tek to System Lessors for the Systems
as to which such refunds apply. However, such credits must be
separately itemized and identified on such Invoices. As between Tri-
Tek and Jones, (a) Tri-Tek shall be deemed to have given Jones such
refunds on the day on which the subject Invoice is due and payable by
the System Lessor pursuant to this Agreement, and (b) it shall be
Jones' responsibility to assure that the System Lessor pays Jones or
give Jones credit for the amount of such refunds.
14.8 Termination Of Agreement And System Lessors.
14.8.1 Jones shall have the right from time-to-time to
assign to one or more System Lessors, in whole or in part, Jones'
right or obligation, as applicable, to purchase Conforming Systems
pursuant to Article 8 above by written notice thereof to Tri-Tek from
time-to-time. To be effective, each such notice shall specify the
number of affected Systems and the name and address of the System
Lessor as to which such assignment is made. Each such notice may
constitute a notice from Jones to Tri-Tek pursuant to Section 14.3
above. Upon such assignment, (a) Jones' right or obligation, as
applicable, to purchase Conforming Systems pursuant to Article 8 above
shall be deemed satisfied to the extent of the number of Systems
encompassed by such assignments, respectively, (b) Jones shall be
deemed prospectively released from all obligations to pay Tri-Tek for
such Systems, the freight charges pursuant to Section 5.5 above in
respect of such Systems and the taxes pursuant to Section 5.6 above in
respect of such Systems, and (c) the System Lessor to which the
assignment is made shall be deemed to have agreed to pay Tri-Tek for
such Conforming Systems, freight charges and taxes as and when payment
therefor would be due by Jones for such Systems pursuant to
Section 7.3 above if Jones were the purchaser of such Systems.
14.8.2 The price to be paid by System Lessors to Tri-Tek
for Conforming Systems purchased pursuant to Article 8 above shall be
the same Price determined pursuant to, and/or as provided in,
Section 8.9 above which would be payable by Jones to Tri-Tek if Jones
were the purchaser of the Conforming Systems.<PAGE>
14.8.3 The provisions of Section 8.10 above shall apply
with equal force and effect to and in respect of all System Lessors.
14.9 Representations, Warranties And System Lessors.
14.9.1 Tri-Tek acknowledges that Jones will rely on all
representations and warranties of Tri-Tek set forth in this Agreement
in all matters with and with respect to System Lessors which in any
manner or fashion relate to Systems including, without limitation,
when (a) making any assignment to any System Lessor to which reference
is made above in this Article 14, (b) taking any action which results
in a System Lessor submitting a Purchase Order to Tri-Tek, and (c)
entering into any contract or agreement with any System Lessor
pursuant to which the System Lessor agrees to purchase any Systems
from Tri-Tek and/or lease any Systems to Jones.
14.9.2 Without diminishing any of the representations,
warranties, covenants, agreements, duties, responsibilities,
obligations, liabilities, rights and/or remedies at law in favor of
System Lessors as the purchasers of System and/or any of the
indemnities in favor of System Lessors pursuant to Section 12.1 above,
all of the representations, warranties, covenants, agreements, duties,
responsibilities, obligations and liabilities including, without
limitation, indemnities, of Tri-Tek set forth in this Agreement and
those which at law, and all representations and/or warranties which,
pursuant to this Agreement or at law, are deemed made by Tri-Tek,
shall be for the benefit of Jones in respect of all Systems for which
any System Lessor could have a payment obligation to Tri-Tek,
notwithstanding such payment obligation and/or the status of a System
Lessor as the purchaser of any Systems. Accordingly, Jones shall
retain, undiminished, all of rights and remedies. Such rights and
remedies of Jones and System Lessors, respectively, shall be deemed
independent of each other and may be exercised and enforced
independently by Jones and System Lessors, respectively.
14.10 General Provisions Regarding System Lessors.
14.10.1 No System Lessor shall have any payment obligation
or other liability to Tri-Tek for any item or with respect to any
matter as to which Jones would have no payment obligation or other
liability to Tri-Tek under this Agreement.
14.10.2 In no event shall any System Lessor be or be deemed
to be the agent of Jones in connection with the System Lessor's
ordering and/or purchasing any System from Tri-Tek.
14.10.3 All notices by Tri-Tek to any System Lessor shall
be given by Tri-Tek in the manner specified in Section 15.11 below,
and the further provisions of Section 15.11 below also shall apply in
respect of notices given by Tri-Tek to System Lessors. Each notice to
a System Lessor shall be given to the System Lessor at its most
current address (a) of which Jones advised Tri-Tek in writing pursuant
to Section 14.3 above or otherwise, or (b) the System Lessor advised
Tri-Tek in writing. Tri-Tek shall send Jones a copy of each notice to
each System Lessor on the date Tri-Tek gives the notice to the System
Lessor, and Tri-Tek shall not be deemed to have given the notice to<PAGE>
the System Lessor unless and until Tri-Tek sends a copy thereof to
Jones. Such copies shall be deemed notices to Jones and shall be
given to Jones at its then current address for notices under
Section 15.11 below in the manner therein set forth.
14.10.4 No term or provision of this Agreement shall be
deemed modified or amended in any respect except to the extent
specifically modified or amended by the foregoing provisions of this
Article 14.
15. Miscellaneous.
15.1 Amendments. Except to the extent provided to the contrary
herein, this Agreement (including any exhibit to this Agreement) may
not be modified or amended except by an instrument in writing signed
by the parties hereto. Accordingly, no course of conduct shall
constitute an amendment or modification of this Agreement (including
any exhibit to this Agreement).
15.2 Severability. In the event any one or more of the provisions
contained in this Agreement or any application thereof finally shall
be declared by a court of competent jurisdiction to be invalid,
illegal or unenforceable in any respect, the validity, legality or
enforceability of the remaining provisions of this Agreement or any
application thereof shall not in any way be affected or impaired,
except that, in such an event, this Agreement shall be amended in such
respects as are necessary to provide the party adversely affected by
such declaration with the benefit of its expectation, such expectation
being evidenced by the provision(s) affected by such declaration, to
the maximum extent legally permitted. The parties hereto shall
negotiate the terms of such amendment in good faith but, in the event
they do not reach an agreement in that regard for any reason, the
court in which the aforesaid declaration is made shall have the right
to effectuate such amendment or, if that is not possible, provide the
party adversely affected by such declaration with another appropriate
remedy.
15.3 Binding Agreement. Subject to the provisions of Section 15.4
below, this Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective legal
representatives, successors and permitted assigns.
15.4 Assignment And Subcontracting. This Agreement may not be
assigned, transferred, pledged or hypothecated by Tri-Tek, whether
voluntarily or involuntarily, and Tri-Tek may not subcontract to
another any of the obligations of Tri-Tek under this Agreement, in
each instance without the prior written consent of Jones which may be
withheld for any reason whatsoever and, if given, may be subject to
such conditions as Jones determines appropriate in its sole
discretion.
15.5 Independent Contractor. Tri-Tek shall carry out its duties and
obligations under this Agreement as an independent contractor and not
as a joint venturer with Jones or an agent of Jones, and Tri-Tek's
performance shall not be subject to supervision or control by Jones,
but shall be subject solely to the terms of this Agreement.<PAGE>
15.6 Headings. Headings of articles and sections in this Agreement
are for the convenience of the parties only. Accordingly, they shall
not constitute a part of this Agreement when interpreting or enforcing
this Agreement.
15.7 Defined Terms. All defined terms used in this Agreement
shall be deemed to refer to the masculine, feminine, neuter, singular
and/or plural, in each instance as the context and/or particular facts
may require.
15.8 Set-Off Rights. Jones shall have the right to set-off,
against all of its monetary obligations to Tri-Tek from time-to-time,
all then unsatisfied obligations of Tri-Tek to Jones.
15.9 Limitation On Jones' Obligations. Jones shall have no
monetary obligation to Tri-Tek under or as a result of this Agreement
other than to pay (a) Jones' Initial Deposit and, to the extent
applicable under this Agreement, Jones' Additional Deposit, and (b)
for Conforming Systems and System Components which Jones purchases
(including those which Jones is required to purchase) from Tri-Tek
pursuant to this Agreement, together with applicable taxes and freight
charges as specifically provided in this Agreement. Likewise, all
obligations of Tri-Tek under this Agreement shall be performed and
satisfied by Tri-Tek (y) at Tri-Tek's sole cost and expense, and (z)
without any charge to Jones therefor other than as specifically set
forth in this Agreement.
15.10 Sales Free And Clear Of Liens. All Systems and System
Components delivered by Tri-Tek to Jones and all Maintenance
Providers, respectively, shall be free and clear of all liens,
encumbrances and security interests for monies borrowed by Tri-Tek.
In furtherance thereof, unless Tri-Tek notifies Jones to the contrary
from time-to-time, Tri-Tek shall be deemed continuously to represent
to Jones that Tri-Tek has no financing which is secured by any Systems
or System Components. If any such financing exists, Tri-Tek shall be
required to obtain and provide Jones with such documents as Jones
reasonably may request in order to evidence that the holder of such
financings release all interests they have or could have in Systems
and System Components after they are delivered by Tri-Tek to Jones and
a Maintenance Provider, respectively.
15.11 Notices. Any notice, demand, request or other communication
required or permitted under this Agreement (collectively, "Notices")
shall be deemed sufficiently given if delivered personally, sent by
registered or certified U.S. Mail, return receipt requested, postage
prepaid, sent by a national overnight delivery service (such as
Federal Express), or sent by telefax, in each instance addressed and
delivered personally or sent for delivery as hereinafter provided in
this Section 15.11.
15.11.1 In the case of Tri-Tek:
Tri-Tek Information Systems, Inc.
425 Woodsmill Road South, Suite 270
Chesterfield, Missouri 63017<PAGE>
Attn: David Fuchs
Telefax No. (314) 569-5088
15.11.2 In the case of Jones:
Edward D. Jones & Co., L.P.
201 Progress Parkway
St. Louis, Missouri 63043-3042
Attn: Rich Malone
Telefax No. (314) 851-4471
With a contemporaneous copy to:
Lewis, Rice & Fingersh
500 N. Broadway - Suite 2000
St. Louis Missouri 63102-2147
Attention: Charles H. Fendell, Esq.
Telefax No. (314) 241-6056
15.11.3 Each of Tri-Tek and Jones shall have the right to
change its address, the person to whose attention notices and other
communications are to be given to it, its telefax number, and the
entity, and particulars regarding such entity, to which copies of
notices and other communications to it are to be given, in each
instance by written notice to the other of them in the manner provided
in this Section 15.11.
15.11.4 Any notice or copy thereof (i) personally delivered
shall be deemed given when received by the intended recipient, (ii)
sent by telefax shall be deemed given when so sent to the intended
recipient provided the original of, as applicable, the notice or copy
thereof is given by another means specified above in this
Section 15.11, and (iii) sent by registered or certified U.S. Mail or
an overnight delivery service shall be deemed given on the earlier of
the date of receipt by the intended recipient or three days after the
date on which, as applicable, the notice or copy thereof is so sent,
provided, however, that any notice or copy thereof by Jones to Tri-Tek
pursuant to Article 3, Article 4 or Section 7.7(c) above, and all
termination notices by Tri-Tek and Jones pursuant to Article 8 above,
which are sent by registered or certified U.S. Mail or an overnight
delivery service shall be deemed given on the day it is deposited in
the U.S. Mail or delivered to the overnight delivery service.
15.12 Recitals. The recitals to this Agreement are hereby
incorporated herein as an integral part hereof.
15.13 Interest. Interest on any monetary obligation under
this Agreement shall accrue at the from time-to-time prime rate of
interest of The Boatmen's National Bank of St. Louis, or the successor
thereto, plus 0.5% from the due date thereof to the date of payment
thereof.
15.14 Noncumulative Remedies. Except to the extent expressly
provided to the contrary in this Agreement, no right or remedy
conferred by this Agreement is exclusive of any other right or remedy
conferred herein or by law or in equity; rather, all of such rights<PAGE>
and remedies are cumulative of every other such right or remedy and
may be exercised concurrently or separately from time-to-time.
15.15 Breach And Waiver. No waiver of any breach of this
Agreement shall (a) be effective unless it is in a writing which is
executed by the party charged with the waiver, or (b) constitute a
waiver of a subsequent breach, whether or not of the same nature. All
waivers shall be strictly construed. No delay in enforcing any right
or remedy as a result of a breach of this Agreement shall constitute a
waiver thereof. Further, and without limiting the generality of the
foregoing, (y) reference in this Agreement to an act by Jones not
constituting a waiver or release in respect of particularly identified
matters is for illustrative purposes only and, accordingly, shall not
constitute a waiver or release by Jones of other obligation of Tri-Tek
under this Agreement, and (z) an act which, by this Agreement, is
stated not to constitute a waiver or release of matters, whether or
not particularly identified, also shall not constitute a waiver or
release of any right or remedy which exists under this Agreement or
otherwise as a result of a breach of this Agreement.
15.16 Appointment Of Attorney-In-Fact. Tri-Tek hereby
irrevocably designates and appoints Jones and Jones' officers as Tri-
Tek's agents and attorneys-in-fact to execute and file all documents
which Tri-Tek fails to, as applicable, execute and file, with the same
legal force and effect as if, as applicable, executed and filed by
Tri-Tek. The foregoing shall not, however, constitute a waiver by
Jones of (a) a breach of this Agreement by Tri-Tek which results from
Tri-Tek's failure timely to execute and, if applicable, file such
documents, or (b) any right or remedy which Jones has or could have as
a result of such a breach.
15.17 Force Majeure. Any delays or failures by either party
hereto in the performance of the obligations hereunder shall be
excused if and to the extent such delays or failures are caused by
occurrences beyond such party's control, including, without
limitation, acts of God, strikes or other labor disturbances, war,
whether declared or not, sabotage, and/or any other cause or causes,
whether similar or dissimilar to those herein specified, which cannot
reasonably be controlled by such party. The period of excused
performance pursuant to the foregoing shall be (and only shall be) the
actual period during which such an occurrence continues. Accordingly,
neither party hereto shall have the right to terminate this Agreement
for cause on account of a failure of the other party timely to perform
its obligations hereunder during the period of such excused
performance pursuant to the foregoing.
15.18 Exhibits. Each exhibit to this Agreement to which
reference is made in this Agreement is hereby incorporated in this
Agreement as an integral part of this Agreement. In the event of a
conflict between the terms and provisions of this Agreement, absent
the exhibits, and any of the terms and provisions of any of such
exhibits or any amendments thereto as permitted by this Agreement, the
terms of this Agreement, absent the exhibits, shall control.
15.19 Specific Performance And Injunctions. Recognizing that
damages may not be an adequate remedy to Jones in the event of a<PAGE>
breach (or an alleged or threatened breach) of this Agreement by Tri-
Tek, Jones shall have the right to, as applicable, specifically
enforce this Agreement and restrain and enjoin breaches or threatened
breaches of this Agreement by Tri-Tek, without the necessity of Jones
posting any bond in connection therewith (which is hereby waived by
Tri-Tek).
15.20 Attorney's Fees. In the event either party hereto
institutes litigation against the other party as a result of a breach
(or an alleged breach) of this Agreement, the prevailing party in such
litigation shall have the right to seek and obtain in such litigation
its attorneys', accountants' and expert fees, costs and expenses
incurred in connection with, as applicable, the institution and
prosecution, or the defense, of such litigation, which shall be in
addition to the damages and relief which the prevailing party may seek
and be awarded in such litigation.
15.21 Use Of Jones' Name. No right, express or implied, is
granted by this Agreement to Tri-Tek to use, in any manner or fashion,
the name of Jones or any other trade name or trademark of Jones.
15.22 Survival. All of Tri-Tek's and Jones' respective
obligations, representations and warranties under this Agreement which
are not, by the expressed terms of this Agreement, fully to be
performed during the term of this Agreement shall survive the
expiration of the term or earlier termination of this Agreement for
any reason.
15.23 Delivery Of Documents. Jones shall not have any
obligation to review any documents delivered by Tri-Tek to Jones under
this Agreement. In the event Jones does review any of such documents,
such review shall not be deemed an acknowledgement by Jones that such
documents fulfill the requirements of this Agreement and Jones shall
have no duty to inform Tri-Tek that such documents do not meet the
requirements of this Agreement.
15.24 Inspection Of Tri-Tek's Headquarters. At any time and
from time-to-time during the term of this Agreement, Jones may,
without prior notice, during Tri-Tek's business hours inspect Tri-
Tek's facilities at Tri-Tek's Headquarters which are being used, in
any manner, in the development and/or construction of Systems and/or
any System Component.
15.25 Performance Bond. Tri-Tek acknowledges that Jones may
seek one or more bonds which secure performance by Tri-Tek of some or
all of its obligations under this Agreement. Accordingly, in the
event Jones applies for any such bond, Tri-Tek agrees fully to
cooperate with Jones in order for Jones to obtain the bond including,
without limitation, by providing the entity which Jones may seek to
issue the bond with all documents the entity may request of or with
respect to Tri-Tek for the stated purpose. The cost of the issuance
of each such bond shall be paid by Jones.
15.26 Tri-Tek's Financial Statements. On the date this
Agreement is executed and delivered, Tri-Tek shall provide Jones with
a copy of Tri-Tek's audited or reviewed financial statements,
including all notes thereto, by a nationally recognized certified<PAGE>
public accounting firm or by a regionally or locally recognized
certified public accounting firm if, and then during the period, such
firm is approved by Jones in the exercise of its reasonable business
judgment (collectively, "Tri-Tek's Financial Statements") as of the
close of business of Tri-Tek's fiscal year last completed. Tri-Tek
shall deliver to Jones a copy of Tri-Tek's Financial Statements for
Tri-Tek's current fiscal year and for each subsequent fiscal year
(during the term of this Agreement) within ten days after the day on
which the applicable Financial Statements are received by Tri-Tek but
in no event later than ninety days after the completion of the
applicable fiscal year.
15.27 Tri-Tek's Estoppel. Tri-Tek shall be estopped from
denying and/or defending any claim against Tri-Tek on the basis of (a)
Jones' participation in the design and development of any System, and
(b) Jones' exercise of any other rights under this Agreement
including, without limitation, Jones' approval of the appointment of a
Project Manager.
15.28 Maintenance Providers.
15.28.1 Jones shall have the right, from time-to-time by
written notice to Tri-Tek, to (a) delete entities which no longer
constitute Maintenance Providers, and (b) add entities which shall
thereafter constitute Maintenance Providers. Tri-Tek shall not sell
or deliver any System Components to any entity after the time the
entity ceases to constitute a Maintenance Provider and notice thereof
is given by Jones to Tri-Tek.
15.28.2 All of the representations, warranties, covenants,
agreements, duties, responsibilities, obligations and liabilities
including, without limitation, indemnifies, of Tri-Tek set forth in
this Agreement, and all representations and/or warranties which,
pursuant to this Agreement, are deemed made by Tri-Tek, and also those
which exist at law, shall be for the benefit of each and both of Jones
and the obligated Maintenance Provider in respect of all System
Components for which that Maintenance Provider could have a payment
obligation to Tri-Tek, irrespective of such payment obligation or the
Maintenance Provider's status as the purchaser of the System
Component. Accordingly, all rights and remedies in respect thereof
shall constitute the rights and remedies of each and both of Jones and
such obligated Maintenance Provider. All of such rights and remedies
may be exercised and enforced by the obligated Maintenance Provider on
its own behalf and/or by Jones on its own behalf and/or as the agent
of such obligated Maintenance Provider.
15.28.3 Each Maintenance Provider shall be deemed to be a
third party beneficiary of this Agreement, and termination by Jones of
an entity's status as a Maintenance Provider shall not diminish such
status in respect of System Components theretofore sold by Tri-Tek to
the Maintenance Provider.
15.28.4 All acts and omissions of a Maintenance Provider
shall be attributable solely to that Maintenance Provider, as a result
of which (x) Jones shall not be liable or otherwise responsible for
any act or omission of any Maintenance Provider, (y) no Maintenance<PAGE>
Provider shall be liable or otherwise responsible for any act or
omission of Jones or any other Maintenance Provider, and (z) Tri-Tek
shall not have the right to terminate this Agreement as a result of
any act or omission of any Maintenance Provider.
15.29 Entire Agreement. Except to the extent provided to the
contrary herein, this Agreement contains all of the understanding and
agreements of the parties hereto in respect of the subject matter
hereof as of the date of this Agreement, and any and all prior
understanding and agreements, expressed or implied, between the
parties hereto are superseded hereby.
15.30 Governing Law. This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of
Missouri, the courts of which shall have exclusive jurisdiction over
any dispute arising hereunder.
15.31 Use Of Terms. Use of the terms "hereunder", "herein",
"hereby", and similar terms refer to this Agreement.
15.32 Legal Representation. Each of Tri-Tek and Jones, as
the representing party, represents to the other of them that (a) it
has sought, obtained and received independent legal representation,
advice and counsel from attorneys of its choice in connection with
this Agreement and the negotiation and execution of this Agreement,
(b) it has read and fully understands all of the provisions of this
Agreement, (c) this Agreement fairly and adequately sets forth its
intentions and agreements in respect of the subject matter of this
Agreement, and (d) upon its execution of this Agreement it intends to
be bound, and it acknowledges that it will be bound, by this
Agreement.
15.33 Tri-Tek's Authority. Tri-Tek represents and warrants
to Jones that (a) Tri-Tek is a corporation duly organized, validly
existing and in good standing under and in accordance with the laws of
the State of Missouri, (b) Tri-Tek's execution and delivery of this
Agreement has been duly authorized by all requisite corporation
action, (c) the execution and delivery of this Agreement by Tri-Tek,
and the performance by it of all of its obligations hereunder, do not
and will not conflict with its Articles of Incorporation, its By-Laws,
or any contract to which it is a party or by which it otherwise may be
bound, (d) the person who will execute and deliver this Agreement for
Tri-Tek and on its behalf is duly authorized and has all requisite
authority to do the same, and (e) upon Tri-Tek's execution and
delivery of this Agreement, it shall be binding upon and enforceable
against Tri-Tek in accordance with its terms.
15.34 Jones' Authority. Jones represents and warrants to
Tri-Tek that (a) Jones is a limited partnership duly organized,
validly existing and in good standing under and in accordance with the
laws of the State of Missouri, (b) Jones' execution and delivery of
this Agreement has been duly authorized by all requisite action, (c)
the execution and delivery of this Agreement by Jones, and the
performance by it of all of its obligations hereunder, do not and will
not conflict with its Certificate of Limited Partnership, its limited
partnership agreement or any contract to which it is a party or by<PAGE>
which it otherwise may be bound, (d) the person who will execute and
deliver this Agreement for Jones and on its behalf is duly authorized
and has all requisite authority to do the same, and (e) upon Jones'
execution and delivery of this Agreement, it shall be binding upon and
enforceable against Jones in accordance with its terms.
IN WITNESS WHEREOF, the parties hereto have duly executed and
have caused this Agreement duly to be executed and delivered as of the
date first written above.
EDWARD D. JONES & CO., L.P.
By:__________________________________________
Rich Malone, Principal
TRI-TEK INFORMATION SYSTEMS, INC.
By:__________________________________________
David Fuchs, President
LIST OF EXHIBITS
Exhibit No. Identity of Exhibit
1.12 Initially approved Cost And Vendor Schedule
1.14 Current Design Specifications for the Prototype System
(and for particular System Components thereof)
1.35 Jones' Needs as of the date of the Agreement
1.39 Current design, functions and performance
specifications of the Monitoring/Control Subsystem
1.41 Packaging Specifications for shipment of Systems
1.42 Current Performance Specifications for the Prototype
System (and for particular System Components thereof)
1.54 Current design, functions and performance
specifications of the RAID System<PAGE>
TABLE OF CONTENTS
1. Definitions 1
1.1 Actual Cost 1
1.2 Affiliates 1
1.3 Allowance 2
1.4 Assembly Charge 2
1.5 Audit 2
1.6 Bankruptcy Code 2
1.7 Business Day 2
1.8 Conforming Systems 2
1.9 Contractor 2
1.10 CO-OP Dollars 2
1.11 Copyright Act 3
1.12 Cost And Vendor Schedule 3
1.13 Customer 3
1.14 Design Specifications 3
1.15 Developed Firmware 3
1.16 Developments 3
1.17 Document Production 4
1.18 Documents 4
1.19 Final Phase One Test Date 4
1.20 Final Phase Two Test Date 4
1.21 Final Rejection Notice 4
1.22 Indemnified Parties 4
1.23 Initial Phase One Test Date 4
1.24 Initial Phase Two Test Date 4
1.25 Initial Phase Two Test Period 4
1.26 Initial Phase Two Test Systems 4
1.27 Initial Rejection Notice 4
1.28 Invoice 4
1.29 Jones' Additional Deposit 4
1.30 Jones' Branch Office 5
1.31 Jones Companies 5
1.32 Jones' Confidential Information 5
1.33 Jones' Headquarters 5
1.34 Jones' Initial Deposit 5
1.35 Jones' Needs 5
1.36 Jones' Software 5
1.37 Jones' Third Party Software 5
1.38 Maintenance Providers 6
1.39 Monitoring/Control Subsystem 6
1.40 MCS Serial Number 6
1.41 Packaging Specifications 6
1.42 Performance Specifications 6
1.43 Phase One Completion Date 6
1.44 Phase One Systems Test Date 6
1.45 Phase One Test Systems 6
1.46 Phase Two Completion Date 6
1.47 Phase Two Test Period 7
1.48 Phase Two Test Systems 7
1.49 Price 7
1.50 Profit Percent 7
1.51 Project Manager 7
1.52 Prototype System 7<PAGE>
1.53 Purchase Order 7
1.54 RAID System 7
1.55 System Serial Number 7
1.56 Specification Date 7
1.57 Specifications 7
1.58 Standing Order 7
1.59 Systems 7
1.60 System Components 8
1.61 System Lessors 8
1.62 Technology Changes 8
1.63 Test Systems 8
1.64 Third Parties 8
1.65 Third Party Rights 8
1.66 Third Party Firmware 8
1.67 Tri-Tek's Headquarters 8
1.68 Tri-Tek's Third Party Software 8
1.69 UCC 8
2. Jones' Initial Deposit And Jones' Additional Deposit 9
2.1 Payment Of Jones' Initial Deposit 9
2.2 Refund Of Jones' Initial Deposit 9
2.3 Application Of Jones' Initial Deposit 9
2.4 Payment Of Jones' Additional Deposit 9
2.5 Refund Of Jones' Additional Deposit 9
2.6 Application Of Jones' Additional Deposit 9
2.7 Minimum Purchase Of Systems 10
3. Development Of System And System Components 10
3.1 Tri-Tek's Initial Duties 10
3.2 Tri-Tek's Further Duties 11
4. Testing Of Systems 14
4.1 Phase One Testing 14
4.2 Phase Two Testing 16
5. Sales And Purchases Of Systems And System Components 19
5.1 Sales And Purchases Of Systems Pursuant To Standing Orders 19
5.2 Sales And Purchases Of Systems And System Components
Pursuant To Purchase Orders 20
5.3 Place And Means Of Delivery Of Systems And System Components 21
5.4 Packaging And Invoicing 21
5.5 Freight Charges 21
5.6 Taxes22
5.7 Rejection Of Systems And System Components For Non-Conformance 22
6. Tri-Tek's Purchase Of System Components And Cost And Vendor
Schedules 23
6.1 Tri-Tek's Purchase Of System Components 23
6.2 Jones' Rights Regarding System Components 24
6.3 Allowances & CO-OP Dollars 24
6.4 Inventory Method Of Pricing 25
6.5 Cost And Vendor Schedule Compliance 25
7. Price Of Systems And System Components, Payment Therefor And
Audits 25
7.1 Price Of Systems And System Components 25<PAGE>
7.2 Invoicing Jones And Maintenance Providers 27
7.3 Payment For Systems And System Components 28
7.4 Actual Cost Documentation 29
7.5 Retention Of Documents 29
7.6 Review Of Documents And Audit Of Books And Records 29
7.7 Results Of Document Productions And Audits 29
8. Term And Termination 30
8.1 General 30
8.2 Tri-Tek's Breach 30
8.3 Jones' Termination Without Cause 31
8.4 Tri-Tek's Superior Skill And Expertise 31
8.5 Jones' Breach 32
8.6 Jones' Damages And Remedies 32
8.7 Tri-Tek's Damages And Remedies 33
8.8 Jones' Permissive Purchase Of Systems And System Components 35
8.9 Price Of Systems And System Components To Jones On Termination 35
8.10 Termination Of Standing Order And
Cancellation Of Purchase Orders 36
8.11 Duties Upon Termination 36
9. Intellectual Property Rights 36
9.1 Rights In Developments 36
9.2 Third Party Rights 37
9.3 Jones' Third Party Software 38
9.4 Jones' Software 39
9.5 Disclosure Of Developments 39
9.6 Third Party Infringement 39
9.7 Tri-Tek's Rights In The Developments 40
9.8 Intellectual Property Markings 40
10. Representations And Warranties 40
10.1 Systems And System Components 40
10.2 Manufacturer's Warranties 41
10.3 Warranties At Law 41
10.4 Authority 42
10.5 No Infringement 42
10.6 Compatibility 42
10.7 No Impairment 42
10.8 Tri-Tek's Experience 43
10.9 Tri-Tek's Employees 43
10.10 Packaging Specifications 44
10.11 Qualified Personnel 44
10.12 Ownership And Control Of Tri-Tek 44
10.13 Continuous Representations And Warranties 44
10.14 Application To Maintenance Providers 44
11. Project Manager 44
11.1 Appointment 44
11.2 Duties 45
11.3 Termination Of Project Manager By Jones 45
11.4 Appointment Of New Project Manager 45
11.5 Status Of Project Manager And Other Employees Of Tri-Tek 45
12. Indemnification 46
12.1 Tri-Tek's Obligation To Indemnify 46<PAGE>
12.2 Notice, Defense And Settlement Of Claims 46
13. Confidentiality And Non-Competition 48
13.1 Maintenance Of Confidentiality By Jones 48
13.2 Maintenance Of Confidentiality By Tri-Tek 48
13.3 Non-Competition 49
14. Sales Of Systems To System Lessors 49
14.1 General Statement 49
14.2 Status Of System Lessors 49
14.3 Identity Of System Lessors 50
14.4 Sales Of Systems To System Lessors 50
14.5 Purchases Of Systems By System Lessors 50
14.6 Pricing And Invoices To System Lessors 52
14.7 Jones' Deposits And System Lessors 53
14.8 Termination Of Agreement And System Lessors 54
14.9 Representations, Warranties And System Lessors 54
14.10 General Provisions Regarding System Lessors 55
15. Miscellaneous 56
15.1 Amendments 56
15.2 Severability 56
15.3 Binding Agreement 56
15.4 Assignment And Subcontracting 56
15.5 Independent Contractor 56
15.6 Headings 56
15.7 Defined Terms 57
15.8 Set-Off Rights 57
15.9 Limitation On Jones' Obligations 57
15.10 Sales Free And Clear Of Liens 57
15.11 Notices 57
15.12 Recitals 58
15.13 Interest 58
15.14 Noncumulative Remedies 58
15.15 Breach And Waiver 59
15.16 Appointment Of Attorney-In-Fact 59
15.17 Force Majeure 59
15.18 Exhibits 59
15.19 Specific Performance And Injunctions 60
15.20 Attorney's Fees 60
15.21 Use Of Jones' Name 60
15.22 Survival 60
15.23 Delivery Of Documents 60
15.24 Inspection Of Tri-Tek's Headquarters 60
15.25 Performance Bond 60
15.26 Tri-Tek's Financial Statements 61
15.27 Tri-Tek's Estoppel 61
15.28 Maintenance Providers 61
15.29 Entire Agreement 62
15.30 Governing Law 62
15.31 Use Of Terms 62
15.32 Legal Representation 62
15.33 Tri-Tek's Authority 62
15.34 Jones' Authority 62<PAGE>
<PAGE>
