Exhibit 10.7
CONTRIBUTION AGREEMENT
This is a Contribution Agreement, dated as of November 30, 1998,
between DST Systems Inc., a Delaware corporation (the "CONTRIBUTOR"), and Boston
EquiServe Limited Partnership, a Delaware limited partnership (the
"PARTNERSHIP").
WHEREAS, each of Contributor and the Partnership operates a
shareholders services business;
WHEREAS, Contributor has agreed, pursuant to the Development Agreement,
to develop proprietary software known as the Fairway System for use by the
Partnership in the Partnership Shareholder Services Business; and
WHEREAS, subject to the terms and conditions set forth below and in the
Development Agreement, Contributor desires to contribute, and to cause
Contributor GP (as defined below) to contribute, and the Partnership desires to
accept, the Fairway System (as defined below) and certain assets used in the
shareholder services business of Contributor in exchange for the issuance to the
Contributor, or an affiliate of the Contributor, of a 19.5% limited partnership
interest (as set forth herein) in the Partnership and the issuance to, DST Stock
Transfer, Inc., a wholly owned subsidiary of Contributor (the "CONTRIBUTOR GP")
of a 0.5% general partnership interest in the Partnership;
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants set forth below, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
ARTICLE 1
DEFINITIONS
1.1. CERTAIN DEFINED TERMS. As used in this Agreement, the following
capitalized terms have the following meanings:
"ACCEPTANCE TESTING" shall have the meaning set forth in the
Development Agreement.
"ACQUIRED INTELLECTUAL PROPERTY" means the Acquired Assets referred to
in Sections 2.1(a) and 2.1(b) hereof and the STS License.
"AFFILIATE" means, with respect to any Person, any other Person
controlling, controlled by or under common control with, such Person. As used in
this definition, "CONTROL" (including, with its correlative meanings,
"CONTROLLED BY" and "UNDER COMMON CONTROL WITH") means the possession, directly
or indirectly, of power to direct or cause the direction of the management
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and policies of a Person, whether through the ownership of voting securities, by
contract or otherwise.
"AGREEMENT" means this Contribution Agreement, including all exhibits
and schedules hereto, as amended, restated or supplemented from time to time.
"BANK ONE" means BANK ONE CORPORATION, a Delaware corporation.
"BANK ONE CONTRIBUTION AGREEMENT" means the Contribution Agreement,
dated as of February 9, 1998, by and between BANK ONE and the Partnership.
"BANK ONE SUB" means FCTC General, Inc., a Delaware corporation.
"BFDS" means BFDS Limited, Inc., a Massachusetts corporation.
"BFDS SUB" means BFDS General, Inc., a Massachusetts corporation.
"BKB" means BankBoston, N.A., a national banking association.
"BKB SUB" means BancBoston Services, Inc., a Massachusetts corporation.
"BUSINESS DAY" means any other day than a day on which either the
Contributor or the Partnership is not open for business.
"CONTRIBUTED BUSINESS" shall mean the Acquired Assets and STS Customer
Contracts.
"CONTRIBUTOR" has the meaning set forth in the preamble.
"CONTRIBUTOR GP" has the meaning set forth in the recitals.
"CONTRIBUTOR MATERIAL ADVERSE EFFECT" means a material adverse effect
on the ability of Contributor or the Contributor GP to consummate the
transactions contemplated hereby or on the business, results of operations,
properties (including intangible properties), assets, liabilities or financial
condition of the Contributed Business.
"DELTA VANTAGE SYSTEM" means all of the Partnership's right, title and
interest in and to the computer program codes (including all object code, source
code, documentation and other media containing such code) comprising the "Delta
Vantage System" used by the Partnership to perform corporate stock transfer,
bond processing and mutual fund fulfillment functions and applicable interfaces
therefor, whether completed or in the process of development, and all
enhancements, upgrades or other modifications thereto.
"DELIVERY DATE" means the date by which each Release shall be delivered
by Contributor to the Partnership for Acceptance Testing as set forth in the
Development Agreement.
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"DEVELOPMENT AGREEMENT" means the agreement dated as of the date hereof
by and between the Partnership and the Contributor pursuant to which Contributor
agrees to develop and deliver the Fairway System for the Partnership, a copy of
which is attached hereto as EXHIBIT A.
"DISPUTE RESOLUTION PROCEDURES" shall have the meaning set forth in the
Development Agreement.
"FAIRWAY DATA PROCESSING AGREEMENT" means the Data Processing Service
Agreement to be entered into as of the date of the Final Closing by and between
the Contributor and the Partnership, in the form attached hereto as EXHIBIT B.
"FAIRWAY REMOTE SERVICE AGREEMENT" means the Remote Service Agreement
to be entered into as of the date hereof by and between the Contributor and the
Partnership, a copy of which is attached hereto as EXHIBIT C.
"FUNCTIONALITY" has the meaning set forth in the Development Agreement.
"GAAP", when used with respect to financial statements of any Person,
means generally accepted accounting principles and practices in effect from time
to time within the United States applied consistently throughout the period
involved by such Person.
"GOVERNMENT AUTHORITY" means any federal, national, state, municipal,
local, territorial or other governmental department, commission, board, bureau,
agency, regulatory authority, instrumentality, judicial or administrative body,
domestic or foreign.
"INTERIM ACCEPTANCE" shall have the meaning set forth in the
Development Agreement.
"PARTNERSHIP" has the meaning set forth in the preamble.
"PARTNERSHIP AGREEMENT" means the Second Amended and Restated Limited
Partnership Agreement, to be entered into as of the Initial Closing Date, among
BKB, BFDS, BANK ONE, Contributor, BKB Sub, BFDS Sub, BANK ONE Sub and
Contributor GP in the form attached hereto as SCHEDULE 10.2(a).
"PARTNERSHIP BUSINESS" means the business of providing services to:
(a) corporations and other securities issuers (excluding
open-end investment companies and unit investment trusts but including limited
partnerships, closed-end investment companies and issuers of American Depository
Receipts) (i) as registrar, transfer agent, dividend disbursement agent,
employee stock purchase plan agent, redemption agent, rights agent, exchange
agent, tender agent and reorganization agent, as applicable, (ii) as registrar
and paying agent for debt instruments (other than debt instruments with respect
to which such registrar or paying agent also acts as indenture trustee, fiscal
agent, issuing and paying agent, custodian or in similar capacities), (iii) as
proxy processing servicer, employee stock plan administrator, stock option
administrator, dividend reinvestment plan administrator and (iv) in similar
capacities,
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(b) stockholders and creditors as claims processor and in
similar capacities, including class action administration services, and/or
(c) government employees as government allotment administrator
and in similar capacities.
"PARTNERSHIP BUSINESS CONTRACTS" means the agreements entered into
between the Partnership or the Partnership Subsidiary, as applicable, and its
customers from time to time in connection with the Partnership Business, as such
agreements may be in effect from time to time, and the agreements entered into
between the existing partners in the Partnership and their respective customers,
the servicing obligations under which have been delegated to and the rights to
which have been assigned to the Partnership pursuant to the Shareholder Services
Agreements.
"PARTNERSHIP INTELLECTUAL PROPERTY" means all of the rights of the
Partnership or the Partnership Subsidiary, as applicable, in any trademarks,
service marks, trade names, design patents, patents, works of authorship,
copyrights, logos, inventions, computer software, trade secrets and other
confidential know-how protectible under applicable federal, state or foreign
law, and any other similar types of proprietary intellectual property
protectible under applicable federal, state or foreign law including all
applications, pending applications and registrations therefor, in each case to
the extent used by the Partnership or the Partnership Subsidiary, as applicable,
in connection with the conduct of the Partnership Business.
"PARTNERSHIP MATERIAL ADVERSE EFFECT" means a material adverse effect
on the ability of Partnership to consummate the transactions contemplated hereby
or on the business, results of operations, properties (including intangible
properties), assets, liabilities or financial condition of the Partnership and
its subsidiaries.
"PARTNERSHIP SUBSIDIARY" means Boston EquiServe Trust Company, N.A.,
limited purpose national bank.
"PARTNERSHIP THIRD PARTY INTELLECTUAL PROPERTY" means Partnership
Intellectual Property that is not owned by the Partnership or the Partnership
Subsidiary, as applicable, and is used by the Partnership or the Partnership
Subsidiary, as applicable, in the Partnership Business.
"PERMITTED LIENS" means any of the following liens created, incurred or
suffered to exist in, of or on the property of any Person: (i) liens for taxes,
assessments or governmental charges or levies, if the same shall not at the time
be delinquent or thereafter can be paid without penalty, or are being contested
in good faith by appropriate proceedings; (ii) liens imposed by law, such as
carriers', warehousemen's and mechanics' liens and other similar liens arising
in the ordinary course of business which secure payment of obligations not more
than 60 days past due or which are being contested in good faith by appropriate
proceedings and for which adequate reserves shall have been set aside on such
Person's books, as appropriate; (iii) liens arising out of pledges or deposits
under worker's compensation laws, unemployment insurance, old age pensions, or
other social security or retirement benefits, or similar legislation; (iv)
utility easements, building restrictions and such other encumbrances or charges
against real property as are of a nature generally existing with respect to
properties of a similar character and which do not in any
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material way affect the marketability of the same or interfere with the use
thereof in the Shareholder Services Business of such Person; and (v) liens
existing on the date hereof and described (x) in the case of Contributor or the
Contributor GP on SCHEDULE 1B and (y) in the case of the Partnership, on
SCHEDULE 1C.
"PERSON" means any individual, partnership, corporation, association,
trust, limited liability company, joint venture, unincorporated organization or
other entity and any government, governmental department or agency or political
subdivision thereof.
"RELATED AGREEMENTS" means those agreements by and between the
Partnership and the Contributor or the Contributor GP listed on SCHEDULE 1D
attached hereto.
"RELEASE" means any of Release 1.1, Release 1.2, Release 1.2.5, Release
1.3, or Release 1.3.5.
"RELEASE 1.2" means version 1.2 of the Fairway System to be developed
by Contributor and as more fully described in the Development Agreement.
"RELEASE 1.2.5" means version 1.2.5 of the Fairway System to be
developed by Contributor and as more fully described in the Development
Agreement.
"RELEASE 1.3" means version 1.3 of the Fairway System to be developed
by Contributor and as more fully described in the Development Agreement.
"RELEASE 1.3.5" means version 1.3.5 of the Fairway System to be
developed by Contributor and as more full described in the Development
Agreement.
"SHAREHOLDER SERVICES AGREEMENTS" means Services Agreements between BKB
and the Partnership and between SSBT and the Company, each dated September 29,
1995, as in effect from time to time.
"SPECIFICATIONS" shall have the meaning set forth in the Development
Agreement.
"STS CUSTOMER CONTRACTS" means the contracts listed on SCHEDULE 1A
hereto.
"STS DATA PROCESSING AGREEMENT" means the Data Processing Service
Agreement to be entered into as of the date of the Contributed Business Closing
by and between the Contributor and the Partnership, in the form attached hereto
as EXHIBIT D.
"STS LICENSE" means the royalty-free, worldwide license to the STS
System Software (as such term is defined in the STS License), including all
source code, object code and documentation, to be entered into as of the date of
the Contributed Business Closing by and between Contributor or Contributor GP
and the Partnership, substantially in the form of the license agreement)
attached as EXHIBIT G.
"SSBT" means State Street Bank and Trust Company, a Massachusetts trust
company.
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1.2. CROSS REFERENCES TO CERTAIN TERMS DEFINED ELSEWHERE IN THIS
AGREEMENT.
TERM SECTION
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Acquired Assets 2.1
BANK ONE Business 5.8
Claim 12.3
Closing(s) 8.7
Closing Dates(s) 8.7
Contributed Business Closing 8.3(a)
Contributed Business Closing Date 8.3(a)
Contributor Customers 4.8(e)
Contributor Losses 12.1
Contributor Necessary Permits 4.6
Contributor Shareholder Services Agreement 10.4(a)
Delivery Default 8.5(a)
Delivery Default Closing Date 8.5(b)
Delta Vantage Technical Documentation 5.18
Disclosing Party 6.5(b)
Encumbrances 4.3
Fairway System 2.1(b)
FCNB Business 5.8
Final Acceptance Default 8.6(a)
Final Acceptance Default Closing 8.6(b)
Final Acceptance Default Closing Date 8.6(b)
Final Closing 8.4(a)
Final Closing Date 8.4(a)
Indemnified Party 12.3(a)
Indemnifying Party 12.3(a)
Initial Closing 8.1(a)
Initial Closing Date 8.1(a)
Information 6.5(b)
Interim Closing 8.2(a)
Interim Closing Date 8.2(a)
Partnership Assets 5.3
Partnership Contracts 5.12(a)
Partnership Customers 5.12(d)
Partnership Employees 5.19
Partnership Losses 12.2
Partnership Necessary Permits 5.10
Proxy and Retained Rights License 2.2
Retained Liabilities 3
Retained Rights 2.2
Securities Act 4.12
Subject Losses 12.5
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Third Party Claim 12.3
Undelegated Contracts 7.1(c)
ARTICLE 2
CONTRIBUTION OF ASSETS
2.1. ACQUIRED ASSETS. Subject to the terms and conditions set forth in
this Agreement, the Contributor hereby agrees to, and to cause Contributor GP
to, contribute, assign, transfer and deliver to the Partnership, and the
Partnership hereby agrees to accept, acquire and take assignment and delivery
of, all of the following assets of the Contributor and the Contributor GP, all
of which assets are hereinafter referred to collectively as the "ACQUIRED
ASSETS":
(a) All of the rights of the Contributor and the Contributor
GP in any trademarks, service marks, trade names, design patents,
patents, works of authorship, copyrights, logos, inventions, computer
software, trade secrets and other confidential know-how protectible
under applicable federal, state or foreign law, and any other similar
types of proprietary intellectual property protectible under applicable
federal, state or foreign law including all applications, pending
applications and registrations therefor, in each case to the extent
used by Contributor or the Contributor GP in connection with the use of
the Contributed Business and required for the Partnership to satisfy
its obligations under the Contributor Shareholder Services Agreement,
as described on SCHEDULE 2.1(a) hereto;
(b) All of the right, title and interest of the Contributor
and the Contributor GP in and to all of the assets comprising the
"Fairway System" being developed by the Contributor pursuant to the
Development Agreement (as such term is more fully described in the
Development Agreement, the "FAIRWAY SYSTEM") including all
documentation and deliverables required to be delivered with the
Fairway System pursuant to the Development Agreement;
(c) Copies of (i) the accounting books, records and ledgers of
the Contributor and the Contributor GP relating to and used in or for
the Contributed Business, (ii) copies of all documents and records
relating to the Contributed Business, (iii) copies of the STS Customer
Contracts, and (iv) and all historical source data and other
information relating to the Contributed Business electronically stored
or otherwise recorded;
(d) All customer lists, customer records and information
relating to the Contributed Business (to the extent transferable);
(e) To the extent transferable, all licenses, permits or
governmental approvals applied for by, or issued or given to the
Contributor with respect to the Contributed Business, as described on
SCHEDULE 2.1(e) hereto; and
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2.2 CONTRIBUTOR RETAINED RIGHTS. Notwithstanding the assignment and
contribution of the Fairway System to the Partnership, Contributor shall retain
a fully-paid, non-exclusive, perpetual, irrevocable, worldwide license to (i)
use and to provide to others the know-how, solutions and objects developed for
or included in the Fairway System without limitation and (ii) use the separable,
discrete Functionality relating solely to proxy processing, (the "RETAINED
RIGHTS"), in the form attached as EXHIBIT E (the "PROXY AND RETAINED RIGHTS
LICENSE"), except only that Contributor may only use the Retained Rights in
compliance with the provisions of Section 16 of the form of Partnership
Agreement attached as SCHEDULE 10.2(a) hereto notwithstanding the fact that the
Partnership Agreement has not been executed by the parties as of the date of
this Agreement.
2.3 EXCLUDED ASSETS. Except for the Acquired Assets, neither
Contributor nor Contributor GP are contributing, assigning, or delivering to the
Partnership any assets.
ARTICLE 3
ASSUMPTION OF OBLIGATIONS
Anything in this Agreement to the contrary notwithstanding, the
Partnership shall not assume, and shall not be deemed to have assumed, any
liability or obligation of the Contributor or Contributor GP or the Contributed
Business whatsoever other than as specifically set forth in the Contributor
Shareholder Services Agreement (with all such non-assumed liabilities and
obligations referred to herein as the "RETAINED LIABILITIES").
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE CONTRIBUTOR
As a material inducement to the Partnership to enter into this
Agreement, Contributor hereby represents and warrants to the Partnership as
follows (with any item specifically disclosed in a Schedule hereunder deemed to
be disclosed for the purposes of any other Schedule hereunder):
4.1. ORGANIZATION, ETC. Each of the Contributor and Contributor GP is a
corporation duly organized and validly existing under its jurisdiction of
organization. Contributor GP has all requisite corporate power and authority to
own and operate the Acquired Assets and to carry on the Contributed Business as
now conducted by it. Each of Contributor and Contributor GP has the requisite
corporate power and authority to enter into this Agreement and the Related
Agreements to which it is a party and to perform its obligations hereunder and
thereunder.
4.2. AUTHORITY; COMPLIANCE WITH OTHER INSTRUMENTS; ENFORCEABILITY. The
execution, delivery and performance of this Agreement and each of the Related
Agreements to which either Contributor or Contributor GP is a party have been
duly authorized by all necessary corporate action on the part of Contributor or
Contributor GP, as applicable, and will not result in any
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violation of or conflict with or constitute a default under (i) any term of the
charter or by-laws or other constitutive documents of Contributor or Contributor
GP, as applicable, or (ii) any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation applicable to Contributor or
Contributor GP, as applicable, or otherwise result in the creation of any
Encumbrance upon any of the Acquired Assets, except for any such violation,
conflict or default under clause (ii) above or any such Encumbrance which shall
not, individually or in the aggregate, have a Contributor Material Adverse
Effect. This Agreement has been duly executed and delivered by Contributor and
constitutes, and each Related Agreement to which either Contributor or
Contributor GP is a party when executed and delivered by them will constitute,
the legal, valid and binding obligation of Contributor or Contributor GP, as
applicable, enforceable against Contributor or Contributor GP, as applicable, in
accordance with the terms hereof or thereof, subject only to the provisions of
bankruptcy, insolvency, moratorium, reorganization, fraudulent transfer or other
laws affecting the enforcement generally of creditors' rights and remedies.
4.3. TITLE TO ACQUIRED ASSETS. Contributor GP is the lawful owner of,
has good and valid title to, and, except for the consents to transfer described
on SCHEDULE 4.3 hereto, has the right to convey, transfer, assign and deliver
all of the Acquired Assets. Except as set forth on SCHEDULE 4.3 hereto, all of
the Acquired Assets and STS Customer Contracts are free and clear of any
security interests, pledges, liens, mortgages, deeds of trust, conditional sales
agreements, title retention agreements, material defects as to title or
restrictions against the transfer and assignment thereof (other than Permitted
Liens and other than restrictions against transfer and assignment in the STS
Customer Contracts) (collectively, "ENCUMBRANCES"). At each Closing, Contributor
will cause Contributor GP to, and the Contributor GP will, convey, transfer,
assign and deliver to the Partnership the Acquired Assets required to be
conveyed at such Closing, free and clear of any Encumbrances other than
Permitted Liens. There are no filings under the Uniform Commercial Code or
similar statute in any jurisdiction showing Contributor or Contributor GP as
debtor which create or perfect or which purport to create or perfect any
Encumbrance in or on any of the Acquired Assets other than Permitted Liens.
4.4. GOVERNMENTAL CONSENTS. Except for the Consent of the Federal
Reserve Bank of New York under its STS Customer Contract, no consent, approval
or authorization of, or registration, qualification or filing with, any
governmental agency or authority is required for the execution and delivery of
this Agreement or any Related Agreements by Contributor or Contributor GP or for
the consummation by Contributor or Contributor GP of the transactions
contemplated hereby or thereby.
4.5. [RESERVED]
4.6. COMPLIANCE WITH LAWS, ETC. Each of Contributor and the Contributor
GP is, and after giving effect to the transactions contemplated hereby,
Contributor and the Contributor GP will be, in compliance with all rules and
regulations applicable to the Contributed Business under applicable federal or
state law, except for any lack of compliance which, individually or in the
aggregate, would not have a Contributor Material Adverse Effect. In addition,
Contributor and the Contributor GP have all licenses, permits, ratings and
approvals of all federal, state, local or
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foreign governmental or regulatory bodies necessary for Contributor and the
Contributor GP to operate the Contributed Business as presently operated, except
for any licenses, permits, ratings and approvals the absence of which,
individually or in the aggregate, would not have a Contributor Material Adverse
Effect (the "CONTRIBUTOR NECESSARY PERMITS"). SCHEDULE 4.6 lists all Contributor
Necessary Permits. To the knowledge of Contributor and the Contributor GP, (a)
all of the Contributor Necessary Permits are in full force and effect, and (b)
no suspension or cancellation of any Contributor Necessary Permit has been
threatened, and no proceeding seeking any such suspension or cancellation is
pending.
4.7. LITIGATION, ETC. No civil, criminal, administrative or other
regulatory governmental action, suit, demand, claim, hearing, proceeding or
investigation is as of the date of this Agreement or as of the each Closing Date
pending or, to the knowledge of Contributor and the Contributor GP, threatened,
against Contributor and the Contributor GP or any of their directors or officers
which questions (a) the validity of this Agreement or challenges any of the
transactions contemplated hereby or (b) otherwise relates to the Contributed
Business or any of the Acquired Assets.
4.8. CONTRACTS.
(a) Each of the STS Customer Contracts is a valid, binding and
enforceable obligation of Contributor or Contributor GP party thereto, and, to
the knowledge of Contributor or the Contributor GP, the other party or parties
thereto (subject only to the provisions of bankruptcy, insolvency, moratorium,
reorganization, fraudulent transfer or other laws affecting the enforcement
generally of creditors' rights and remedies) and is in full force and effect.
There are no material oral modifications in effect with respect to any of the
STS Customer Contracts except as described on SCHEDULE 4.8(a).
(b) Except for the requirement to obtain consents as identified on
SCHEDULE 4.3 and as provided in SCHEDULE 4.8(e), neither Contributor nor the
Contributor GP party thereto nor, to the knowledge of Contributor or Contributor
GP, the other party or parties thereto, is in breach or non-compliance, or, to
the knowledge of Contributor and Contributor GP, is considered to be in breach
or non-compliance by the other party thereto, and no event has occurred or,
other than with respect to obligations not currently due, failed to occur which
event or failure would, with the passage of time or the giving of notice or
both, be a breach of any term of any of the STS Customer Contracts.
(c) Except as set forth on SCHEDULE 4.3, no STS Customer Contract
contains, in the aggregate, terms (i) commercially unreasonable or (ii) not
customary in similar contracts pertaining to the provision of services provided
in the Shareholder Services Business.
(d) All of the STS Customer Contracts require the consent of the
customer to delegate Contributor's obligations thereunder. No other consents are
required to delegate to the Partnership the services to be performed by the
Partnership under the STS Customer Contracts.
(e) SCHEDULE 4.8(e) sets forth the name of each customer pursuant to
each STS Customer Contract (the "CONTRIBUTOR CUSTOMERS"), and the gross revenues
received by
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Contributor and Contributor GP from each Contributor Customer for each of the
years 1996, 1997 and for the ten-month period ending October 31, 1998. Except as
disclosed on SCHEDULE 4.8(e) (such Schedule 4.8(e) to be updated for purposes of
this representation as of the Contributed Business Closing Date, which changes
shall not be deemed inaccuracies for the purpose of this representation and
warranty unless such changes were known as of the date of this Agreement), as of
the date of this Agreement and as of the Contributed Business Closing Date,
neither Contributor nor the Contributor GP has any knowledge that any
Contributor Customer (i) has expressed any material dissatisfaction with the
business relationship between the Contributor Customer and Contributor or the
Contributor GP concerning the Contributed Business provided by the Contributor,
(ii) has notified Contributor or the Contributor GP orally or in writing that it
intends to terminate a STS Customer Contract or an existing relationship
concerning the Contributed Business provided by Contributor or seek a payment or
reduction in fees, or (iii) has informed Contributor or the Contributor GP that
it believes the assignment of, or delegation of duties under, its STS Customer
Contract would violate the terms of such contract or entitle the Contributor
Customer to a payment or reduction in fees. Except as set forth in SCHEDULE
4.8(e), as of the date of this Agreement and the Contributed Business Closing
Date, none of the Contributor Customers is an Affiliate of Contributor or
Contributor GP.
4.9. INTELLECTUAL PROPERTY.
(a) SCHEDULE 4.9(a) sets forth a complete list of all
third-party software utilized to support the software subject to the STS License
and run such software on user workstations, all of which is generally available
to the public.
(b) Neither Contributor, Contributor GP nor any of their
Affiliates has authorized any Person to use any of the Acquired Intellectual
Property other than the Partnership and pursuant to the STS Customer Contracts.
(c) The right, title and interest to be assigned, transferred
and conveyed to the Partnership by Contributor and the Contributor GP with
respect to the Acquired Intellectual Property pursuant to this Agreement will
be, subject to receipt by Contributor or Contributor GP of any necessary third
party consents or approvals, adequate to vest the Partnership with such right,
title and interest in and to the Acquired Intellectual Property as shall be
necessary to enable the Partnership to conduct the Contributed Business in the
manner such business is currently conducted by Contributor and the Contributor
GP and to use the Fairway System.
(d) Except as set forth on SCHEDULE 4.3, there are no
Encumbrances on any of the Acquired Intellectual Property. Except as set forth
on SCHEDULE 4.3, neither Contributor nor the Contributor GP has received any
claim or demand asserted in writing by any Person pertaining to the Acquired
Intellectual Property, and no proceedings have been instituted or are pending or
threatened in writing which challenge the rights of Contributor or the
Contributor GP, in respect thereof. Except as set forth on SCHEDULE 4.3, none of
the proprietary rights of Contributor or the Contributor GP in the Acquired
Intellectual Property violates the rights of any Person or is being violated by
any other Person, other than violations that would not, individually or in the
aggregate, have a Contributor Material Adverse Effect. None of the Acquired
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Intellectual Property is subject to any outstanding order, decree, judgment,
stipulation, injunction or agreement binding on Contributor or Contributor GP
restricting the scope of its use by Contributor or, to the knowledge of
Contributor or the Contributor GP, is subject to any other restriction on the
scope of such use. Neither Contributor nor Contributor GP is violating the
rights of any Person with respect to any Acquired Intellectual Property.
4.10. NON-COMPETITION AGREEMENTS. Except as set forth in SCHEDULE 4.10,
neither Contributor nor Contributor GP is a party to or bound by any agreement,
written or oral, which is, or as a result of the transactions contemplated
hereby would become, applicable to the Partnership or any of its Affiliates or
its current or future employees and which would in any way limit the ability or
authority of the Partnership or any of its Affiliates or its current or future
employees to compete with, or engage in, any line of business contemplated to be
conducted by the Partnership, including, without limitation, the Contributed
Business or any and all transfer agency functions.
4.11. BROKERAGE AGREEMENTS. Neither Contributor nor the Contributor GP
nor any Affiliate of Contributor or Contributor GP has employed or is subject to
any valid claim of any broker, finder, consultant or other intermediary in
connection with the transactions contemplated by this Agreement who would be
entitled to any commission or broker's or finder's fee in connection with the
transactions contemplated hereby.
4.12. INVESTMENT REPRESENTATION. Each of Contributor and Contributor GP
(i) understands that the partnership interests to be issued in exchange for the
Acquired Assets and Contributed Business have not been and will not be
registered under the Securities Act of 1933, as amended (the "SECURITIES ACT"),
in reliance upon the exemption provided in Section 4(2) of the Securities Act,
or registered or qualified under the securities laws or "blue sky" laws of any
jurisdiction; (ii) represents and warrants that Contributor and Contributor GP,
respectively, (a) have such knowledge, sophistication and experience in
financial and business matters as to be capable of evaluating the merits and
risks of an investment in the Partnership, (b) are able to bear the economic
risk of an investment in the Partnership and (c) are "accredited investors"
within the meaning of Section 2(15) of the Securities Act and (iii) are
acquiring the partnership interests for their own respective accounts as to
which each exercises sole investment discretion, for investment purposes only
and not with a view to any distribution in violation of the Securities Act.
4.13. THIRD PARTY LICENSE FEES.
(a) Schedule 4.13 lists, to the knowledge of Contributor, all third
party license fees and annual maintenance fees relating to software used by
Contributor at its data center facilities to run the Fairway System and the STS
System which would be incurred in connection with a transfer of the Fairway
System and the STS System to the Partnership if the transfer were to occur at
the date of this Agreement.
(b) All fees incurred by Contributor in connection with the
contribution of the Fairway System and the licensing of the STS System to the
Partnership, including but not
13
limited to fees resulting from the status of the Partnership as owner of the
Fairway System or exclusive licensee of the STS System upon contribution or
licensing such systems, shall be paid by the Contributor EXCEPT that such fees
shall be paid by the Partnership to the extent such fees are based on (A)
additional Functionalities of the Fairway System identified in the course of
development of the Fairway System under the Development Agreement; (B)
Enhancements (as defined in the Development Agreement) in the Fairway System; or
(C) changes to the Partnership organization or ownership that may cause
additional fees to be due. Except for any fees described in clauses (A)-(C) of
this Section 4.13, and any other fees expressly set forth in clauses (A), (B)
and (E) of Paragraph 2(b)(iii) of the Development Agreement, no additional third
party license fees shall be due to or assessed by Contributor in respect of this
Agreement; provided, that (i) the direct and indirect ownership of Contributor
in the Partnership, in the aggregate, does not fall below 20% (PROVIDED,
HOWEVER, that transfers by Contributor of its interest in the Partnership shall
not be included within this clause (i)); and (ii) the System and the software
included in the Software Requirements are used solely by the Partnership. Except
as described above and in Paragraph 2(b)(iii) of the Development Agreement,
Contributor will not incur any additional third party software fees without the
Partnership's consent, which will not be unreasonably withheld. Contributor will
make a reasonable effort to work to minimize the third party license and
maintenance fees necessary to run the STS System and the Fairway System
following Contribution; provided, that actions taken to minimize such costs
shall not (1) subject Contributor to loss of any rights to use any third party
software; (2) cause Contributor to incur any penalties or costs; or (3) relieve
the Partnership of its responsibility for third party fees as described in
clauses (A)-(C) herein and in clauses (A), (B) and (E) of Paragraph 2(b)(iii) of
the Development Agreement. The Partnership shall receive Contributor's most
favorable customer rates for any proprietary Contributor software in the STS
System and the Fairway System; provided, that the Partnership has licensed use
of such software for at least as many workstations as other Contributor
customers who receive such rates. Notwithstanding any provision of this Section
4.13(b) to the contrary, Contributor shall be responsible for payment of any
fees incurred by Contributor in connection with the contribution of the Fairway
System and the STS System to the Partnership with respect to any third party
software vendor omitted from Schedule 4.13 and not covered by clauses (A)-(C) of
this Section 4.13(b).
4.14. INCREMENTAL FEES UNDER CONTRIBUTED BUSINESS CONTRACTS. Except in
connection with obtaining necessary consents as set forth on SCHEDULE 4.3,
neither the Contributor nor the Partnership will be required to pay any
incremental fee or penalty under any STS Customer Contract as a result of the
consummation of the transactions contemplated hereby.
4.15. ABSENCE OF OTHER WARRANTIES. Except as and to the extent
expressly set forth in this Agreement, neither Contributor nor Contributor GP
(i) makes any representations or warranties whatsoever, and (ii) each disclaims
any liability and responsibility for any negligent representation, warranty,
statement or information made or communicated, by oversight or otherwise (orally
or in writing), to the Partnership (including without limitation, any opinion,
information, projection, statement or advice which may have been provided to the
Partnership by
14
any employee, officer, agent, stockholder or other representative of Contributor
or the Contributor GP in connection with the transactions contemplated hereby).
For purposes of this Agreement, the term "knowledge of Contributor", "knowledge
of Contributor GP" or similar qualifiers shall be limited to the actual
knowledge of any of the officers and employees of the Contributor or the
Contributor GP listed on SCHEDULE 4.16 hereto.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE PARTNERSHIP
As a material inducement to the Contributor to enter into this
Agreement, the Partnership hereby represents and warrants to the Contributor as
follows (with any item specifically disclosed in a Schedule hereunder deemed to
be disclosed for the purposes of any other Schedule hereunder):
5.1. ORGANIZATION, ETC.. The Partnership is a Delaware limited
partnership validly existing and in good standing under the laws of the State of
Delaware or and the Partnership Subsidiary is a limited purpose national bank
duly organized under the laws of the United States, and each has all requisite
power and authority to own and operate the assets owned by it, to carry on its
business as now conducted by it and to enter into this Agreement and the other
Related Agreements to which it is a party and to perform its obligations
hereunder and thereunder.
5.2. AUTHORITY; COMPLIANCE WITH OTHER INSTRUMENTS; ENFORCEABILITY. The
execution, delivery and performance of this Agreement and each Related Agreement
to which the Partnership is a party has been duly authorized by all necessary
partnership action on the part of the Partnership and will not result in any
violation of or conflict with or constitute a default under (i) any term of the
Partnership Agreement or other constitutive documents of the Partnership or the
Partnership Subsidiary or (ii) any agreement or instrument, judgment, decree,
order, statute, rule or governmental regulation applicable to the Partnership or
the Partnership Subsidiary or otherwise result in the creation of any
Encumbrance upon any of the assets of the Partnership or the Partnership
Subsidiary, except for any such violation, conflict or default under clause (ii)
above or any such Encumbrance which shall not, individually or in the aggregate,
have a Partnership Material Adverse Effect. This Agreement has been duly
executed and delivered by the Partnership and constitutes, and each Related
Agreement to which the Partnership is a party when executed and delivered by the
Partnership will constitute, the legal, valid and binding obligation of the
Partnership, enforceable against the Partnership in accordance with its terms
subject only to the provisions of bankruptcy, insolvency, moratorium,
reorganization, fraudulent transfer or other laws affecting the enforcement
generally of creditors' rights and remedies.
5.3. ADEQUACY OF PARTNERSHIP ASSETS. Except as described on SCHEDULE
5.3, the Partnership or the Partnership Subsidiary owns or has the right to all
of the assets necessary to conduct the Partnership Business as conducted
immediately prior to the date hereof and the Final Closing Date (the
"PARTNERSHIP ASSETS") (such SCHEDULE 5.3 to be updated to the Final Closing
15
Date to reflect changes occurring in the ordinary course of business, which
changes shall not be deemed to be inaccuracies for purposes of this
representation).
5.4. TITLE TO PARTNERSHIP ASSETS.
(a) The Partnership or the Partnership Subsidiary is the
lawful owner of, and has good and valid title to, all of the Partnership Assets
necessary to the operation of the Partnership Business as operated on the date
hereof and the Final Closing Date. Except as set forth on SCHEDULE 5.4(a)
hereto, all of the Partnership Assets and Partnership Contracts are free and
clear of any security interests, pledges, liens, mortgages, deeds of trust,
conditional sales agreements, title retention agreements, material defects as to
title (other than Permitted Liens and other than restrictions against transfer
and assignment in the Partnership Business Contracts). There are no filings
under the Uniform Commercial Code or similar statute in any jurisdiction showing
the Partnership or the Partnership Subsidiary as debtor which create or perfect
or which purport to create or perfect any Encumbrance in or on any of the
Partnership Assets except with respect to Permitted Liens.
(b) All of the Partnership Assets that are in tangible form
are located at the addresses set forth in SCHEDULE 5.4(b).
5.5. PARTNERSHIP INTERESTS. The partnership interests to be issued
pursuant to this Agreement are duly authorized and, when issued, will be validly
issued, fully paid and nonassessable.
5.6. BROKERAGE AGREEMENTS. Neither the Partnership nor the Partnership
Subsidiary has employed or is subject to any valid claim of any broker, finder,
consultant or other intermediary in connection with the transactions
contemplated by this Agreement who would be entitled to any commission or
broker's or finder's fee in connection with the transactions contemplated
hereby.
5.7. GOVERNMENTAL CONSENTS. Except (a) as set forth on SCHEDULE 5.7
hereto and (b) for filing and recording appropriate documents normally required
in connection with conveyance of title to personal and real property, no
consent, approval or authorization of, or registration, qualification or filing
with, any governmental agency or authority is required for the execution and
delivery of this Agreement or any Related Agreements by the Partnership or for
the consummation by the Partnership of the transactions contemplated hereby or
thereby.
5.8. FINANCIAL STATEMENTS. Attached hereto as SCHEDULE 5.8A are copies
of the balance sheets of the Partnership as of December 31, 1997, and the
related statements of income, changes in stockholders' equity and cash flows for
fiscal year 1997, accompanied by the audit report of Ernst & Young, LLP,
independent accountants for the Partnership. Attached hereto as SCHEDULE 5.8B
are copies of the unaudited balance sheets of the Partnership as of March 31,
1998 and the related unaudited statements of income, changes in stockholders'
equity, and cash flow for the three (3) months then ended, including in each
case the notes thereto. Attached hereto as SCHEDULE 5.8C are copies of (i) the
unaudited pro forma balance sheet as of December 31, 1996
16
for the shareholder services business to be contributed by BANK ONE pursuant to
the BANK ONE Contribution Agreement (the "BANK ONE BUSINESS") and the related
unaudited pro forma statement of income, changes in stockholder's equity and
cash flows for fiscal year 1996, including in each case the notes thereto, (ii)
the unaudited pro forma balance sheet as of November 30, 1997 for the BANK ONE
Business and the related unaudited pro forma statement of income, changes in
stockholder's equity, and cash flow for the eleven (11) months then ended,
including in each case the notes thereto, and (iii) the unaudited pro forma
statement of income (including all charges incurred for intercompany purchased
services), for the BANK ONE Business for fiscal year 1997, including the notes
thereto, in each case, as delivered to the Partnership pursuant to the BANK ONE
Contribution Agreement. Except as set forth on SCHEDULE 5.8A, the financial
statements of the Partnership fairly present (including the related notes, where
applicable) the financial position and results of the operations and cash flows
and changes in shareholders' equity of the Partnership for the respective fiscal
periods or as of the respective dates therein set forth; and each of such
statements (including the related notes, where applicable) has been and will be
prepared in accordance with GAAP consistently applied during the periods
involved, except as otherwise set forth in the notes thereto (subject, in the
case of unaudited interim statements, to normal year-end adjustments and the
absence of footnotes thereto). The books and records of the Partnership have
been, and are being, maintained in accordance with GAAP and applicable legal and
regulatory requirements.
5.9. INSURANCE. The Partnership maintains insurance with respect to its
business, assets and properties of the kinds, with respect to the risks, and in
such amounts as are consistent with prudent business practices.
5.10. COMPLIANCE WITH LAWS, ETC. Each of the Partnership and the
Partnership Subsidiary is, and after giving effect to the transactions
contemplated hereby will be, in compliance with all rules and regulations
applicable to its business under applicable federal or state law, except for any
lack of compliance which, individually or in the aggregate, would not have a
Partnership Material Adverse Effect. In addition, the Partnership and each
Partnership Subsidiary has all licenses, permits, ratings and approvals of all
federal, state, local or foreign governmental or regulatory bodies necessary for
the Partnership and each Partnership Subsidiary to operate its business as
presently operated, except for any licenses, permits, ratings and approvals the
absence of which, individually or in the aggregate, would not have a Partnership
Material Adverse Effect (the "PARTNERSHIP NECESSARY PERMITS"). SCHEDULE 5.10
lists all Partnership Necessary Permits. To the knowledge of the Partnership:
(a) all of the Partnership Necessary Permits are in full force and effect, and
(b) no suspension or cancellation of any Partnership Necessary Permit has been
threatened, and no proceeding seeking any such suspension or cancellation is
pending.
5.11. LITIGATION, ETC. Except as set forth on SCHEDULE 5.11 hereto, no
civil, criminal, administrative or other regulatory governmental action, suit,
demand, claim (including employee or employment claims), hearing, proceeding or
investigation is as of the date of this Agreement or as of each Closing Date
(such SCHEDULE 5.11 to be updated with respect to the following clause (a) for
purposes of the representation as of each Closing Date, which changes shall not
be deemed inaccuracies for the purposes of this representation and warranty)
pending or, to the
17
knowledge of the Partnership, threatened, against the Partnership, any
Partnership Subsidiary, or any of their respective directors or officers which
questions (a) the validity of this Agreement or challenges any of the
transactions contemplated hereby or (b) otherwise relates to its business or any
of the Partnership's Assets, except for any threatened action, suit, demand,
claim, hearing or investigation that singly or in the aggregate would not have
Partnership Material Adverse Effect.
5.12. CONTRACTS.
(a) Each contract to which the Partnership or the Partnership
Subsidiary is a party, including, without limitation, the BANK ONE Contribution
Agreement (collectively, the "PARTNERSHIP CONTRACTS") is a valid, binding and
enforceable obligation of the Partnership or the Partnership Subsidiary and, to
the knowledge of the Partnership, the other party or parties thereto (subject
only to the provisions of bankruptcy, insolvency, moratorium, reorganization,
fraudulent transfer or other laws affecting the enforcement generally of
creditors' rights and remedies), and is in full force and effect. There are no
material oral modifications in effect with respect to any of the Partnership
Contracts except as described on SCHEDULE 5.12(a).
(b) Except as specifically identified in SCHEDULE 5.12(b), neither the
Partnership nor the Partnership Subsidiary nor, to the knowledge of the
Partnership, the other party or parties thereto, is in breach or non-compliance,
or is considered to be in breach or non-compliance by the other party thereto,
and no event has occurred or failed to occur which event or failure would, with
the passage of time or the giving of notice or both, be a breach, of any term of
any of the Partnership Contracts.
(c) Attached as part of SCHEDULE 5.12(c) are copies of standard forms
of Partnership Business Contracts. Except as disclosed on SCHEDULE 5.12(c), no
Partnership Business Contract which deviates from the standard forms attached
hereto contains, in the aggregate, terms (i) commercially unreasonable or (ii)
not customary in similar contracts pertaining to the provision of services
provided in the Shareholder Services Business.
(d) SCHEDULE 5.12(d) sets forth a list of each of the Persons for which
the Partnership is currently providing services under Partnership Business
Contracts (with such Persons at any time of reference referred to herein as the
"PARTNERSHIP CUSTOMERS"). Except as disclosed on SCHEDULE 5.12(d), as of the
date of this Agreement and as of each Closing Date (such SCHEDULE 5.12(d) to be
updated for purposes of this representation as of the Final Closing Date, which
changes shall not be deemed inaccuracies for the purposes of this representation
and warranty unless such changes should have been known as of the date of this
Agreement or any earlier Closing Date), the Partnership has no knowledge that
any Partnership Customer (i) has expressed any material dissatisfaction with the
business relationship between such Partnership Customer and the Partnership or
the Partnership Subsidiary, as applicable, (ii) has notified the Partnership or
the Partnership Subsidiary, as applicable, orally or in writing that it intends
to terminate an existing relationship with the Partnership, or seek a payment or
reduction in fees or (iii) has informed the Partnership or the Partnership
Subsidiary that the transactions contemplated by this Agreement would violate
the terms of such contract or entitle such
18
Partnership Customer to a payment or reduction in fees. Except as set forth in
SCHEDULE 5.12(d), as of the date of this Agreement no Partnership Customer is an
Affiliate of the Partnership.
(e) Except as described on SCHEDULE 5.12(e), no employee of the
Partnership or the Partnership Subsidiary has any employment contract or other
agreement or arrangement with the Partnership by which such employee is employed
by the Partnership or the Partnership Subsidiary on any basis other than as an
"at will" employee or by which the Partnership or the Partnership Subsidiary is
restricted in any manner from terminating the services of such employee at any
time without penalty or payment, subject only to the provisions of the
Partnership Employee Benefit Plans. A copy of each such employment contract or
other agreement or arrangement is included in SCHEDULE 5.12(e).
5.13. PARTNERSHIP INTELLECTUAL PROPERTY. (a) SCHEDULE 5.13(a) sets
forth a complete list of all Partnership Intellectual Property that is material
to the business, results of operations, properties (including intangible
properties), assets, liabilities or financial condition of the Partnership
Business, specifying in each case the manner in which such Partnership
Intellectual Property is protected (including the status of any applications or
registrations therefor) and, in the case of Partnership Third Party Intellectual
Property, the license or other agreement pursuant to which the Partnership or
the Partnership Subsidiary has the right to use such Partnership Third Party
Intellectual Property, other than Partnership Third Party Intellectual Property
generally available to the public.
(b) Except as set forth on SCHEDULE 5.13(b), none of the
Partnership Intellectual Property is used by the Partnership or the Partnership
Subsidiary or, to the knowledge of the Partnership, any Affiliate of the
Partnership (other than in the Partnership Business), and, to the knowledge of
the Partnership, neither the Partnership or the Partnership Subsidiary nor any
Affiliate of the Partnership has authorized any Person to use any of the
Partnership Intellectual Property. The registrations of trademarks, service
marks and copyrights and patents listed on SCHEDULE 5.13(a) (such SCHEDULE
5.13(a) to be updated as of each Closing Date, which changes shall not be deemed
inaccuracies for the purposes of this representation and warranty unless such
changes should have been known as of the date of this Agreement or any earlier
Closing Date) are valid, subsisting and maintained in full accordance with
applicable law and none have lapsed, expired or been abandoned, provided, that
no representation or warranty is made under this sentence with respect to any
Partnership Third Party Intellectual Property.
(c) Neither the Partnership nor the Partnership Subsidiary has
failed to prosecute properly or maintain or otherwise jeopardized the legal
protection of any Partnership Intellectual Property that (i) provides a material
competitive advantage to it in the Partnership Business and (ii) the legal
protection of which is material to the value of such business.
(d) There are no Encumbrances on any of the Partnership
Intellectual Property. Neither the Partnership nor the Partnership Subsidiary
has received any claim or demand asserted in writing by any Person pertaining to
the Partnership Intellectual Property, and no proceedings have been instituted
or are pending or threatened in writing which challenge the rights of the
Partnership or the Partnership Subsidiary in respect thereof. None of the
proprietary
19
rights of the Partnership or the Partnership Subsidiary in the Partnership
Intellectual Property violates the rights of any Person or is being violated by
any other Person, other than violations that would not, individually or in the
aggregate, have a Partnership Material Adverse Effect. None of the Partnership
Intellectual Property is subject to any outstanding order, decree, judgment,
stipulation, injunction or agreement binding on the Partnership restricting the
scope of its use by the Partnership or the Partnership Subsidiary (other than
restrictions contained in license agreements pursuant to which Partnership Third
Party Intellectual Property is used by the Partnership or the Partnership
Subsidiary), or, to the knowledge of the Partnership, is subject to any other
restriction on the scope of such use. Neither the Partnership nor the
Partnership Subsidiary is violating the rights of any Person with respect to any
Partnership Intellectual Property.
5.14. LEASES. The Partnership or the Partnership Subsidiary owns all of
the right, title and interest in, to and under the leases of personal and real
property used in the operation of the business of the Partnership as it is
currently conducted.
5.15. REGULATORY APPROVALS. The Partnership is not aware of any reason
why any of the necessary consents or approvals of governmental authorities
referred to in Section 5.7 above or of other non-governmental third parties
would not be obtained within a time period sufficient to enable the parties to
consummate the transactions contemplated by this Agreement.
5.16. NON-COMPETITION AGREEMENTS. Except as set forth in SCHEDULE 5.16,
neither the Partnership nor the Partnership Subsidiary is a party to or bound by
any agreement, written or oral, which is, or as a result of the transactions
contemplated hereby, would become applicable to the Partnership or any of its
Affiliates or its current or future employees and would in any way limit the
ability or authority of the Partnership or any of its Affiliates or its current
or future employees to compete with, or engage in, any line of business
contemplated to be conducted by the Partnership.
5.17. ENVIRONMENTAL COMPLIANCE. Except where the failure of any of the
following to be true and correct has not had and would not reasonably be
expected to have, and as set forth on SCHEDULE 5.17, individually or in the
aggregate, a Partnership Material Adverse Effect: (a) each of the Partnership
and the Partnership Subsidiary is in compliance with all applicable
environmental laws; (b) each of the Partnership and the Partnership Subsidiary
has all permits, authorizations and approvals required under any applicable
environmental laws and is in compliance with their respective requirements; (c)
there are no pending or threatened environmental claims against the Partnership
or the Partnership Subsidiary; and (d) under applicable law, there are no
circumstances with respect to any operations of the Partnership or the
Partnership Subsidiary or the use by either of them of any of its interests in
any real property that are reasonably likely to form the basis of an
environmental claim against the Partnership or the Partnership Subsidiary.
5.18. DELTA VANTAGE SYSTEM.
(a) The Delta Vantage System and the technical and descriptive
materials relating to the acquisition, design, development, use, maintenance or
marketing of computer code
20
and program documentation and materials relating to the Delta Vantage System
(the "DELTA VANTAGE TECHNICAL DOCUMENTATION") are free and clear of all liens,
claims, encumbrances, rights or equities whatsoever of any third party other
than liens granted to SSBT and BKB pursuant to the Partnership Credit Agreement.
The Delta Vantage System and the Delta Vantage Technical Documentation do not
infringe any patent, copyright, or trade secret of any third party. The source
code and system specifications for the Delta Vantage System have been maintained
by the Partnership, in confidence, have been disclosed by the Partnership, as
applicable, only to employees and consultants having "a need to know" the
contents thereof in connection with the performance of their duties to the
Partnership, and the Partnership has protected the Delta Vantage System and the
Delta Vantage Technical Documentation as trade secrets.
(b) PROCEDURES FOR COPYRIGHT PROTECTION. In no instance has eligibility
of the Delta Vantage System or the Delta Vantage Technical Documentation for
protection under applicable copyright law been forfeited to the public domain by
omission of any required notice or any other action.
(c) PERSONNEL AGREEMENTS. No personnel of the Partnership or an
Affiliate including employees, agents, consultants, and contractors, have any
ownership rights in the Delta Vantage System or the Delta Vantage Technical
Documentation.
(d) ADEQUACY OF DELTA VANTAGE SYSTEM. The Delta Vantage System will
perform as it does on the date hereof and is free of any program code errors or
defects that would adversely affect the use of the Delta Vantage System by the
Partnership or the licensees of the Delta Vantage System.
(e) THIRD-PARTY COMPONENTS IN DELTA VANTAGE SYSTEM. The Partnership has
validly and effectively obtained the right and license to use, copy, modify, and
distribute the third-party programming and materials needed to operate the Delta
Vantage System and the Delta Vantage Technical Documentation. The Delta Vantage
System and the Delta Vantage Technical Documentation contain no other derivative
works, programming or materials in which any third party may claim superior,
joint, or common ownership, including any right or license.
(f) THIRD-PARTY INTERESTS OR MARKETING RIGHTS IN DELTA VANTAGE SYSTEM.
Neither the Partnership nor any Affiliate has granted, transferred, or assigned
any right or interest in the Delta Vantage System to any Person. There are no
contracts, agreements, licenses, and other commitments or arrangements in effect
with respect to the use, marketing, distribution, licensing, or promotion of the
Delta Vantage System.
5.19. EMPLOYEES. The Partnership has made available to the Contributor
a list of all employees of the Partnership Business (the "PARTNERSHIP
EMPLOYEES"), showing for each the position held, the period employed by the
Partnership or the Partnership Subsidiary, as applicable, and current salary or
rate of pay. None of the Partnership Employees is covered by any collective
bargaining or similar agreement. There is no strike or other labor dispute
pending or, to the knowledge of the Partnership, threatened, against the
Partnership or the Partnership Subsidiary, as applicable, which could have a
Partnership Material Adverse Effect.
21
5.20. INCREMENTAL FEES UNDER PARTNERSHIP BUSINESS CONTRACTS. Neither
the Partnership nor the Contributor will be required to pay any incremental fee
or penalty under any Partnership Business Contract as a result of the
consummation of the transactions contemplated hereby.
5.21. ABSENCE OF OTHER WARRANTIES. Except as and to the extent
expressly set forth in this Agreement, the Partnership (i) makes no
representations or warranties whatsoever, and (ii) disclaims any liability and
responsibility for any negligent representation, warranty, statement or
information made or communicated, by oversight or otherwise (orally or in
writing), to the Contributor (including without limitation, any opinion,
information, projection, statement or advice which may have been provided to the
Contributor by any employee, officer, agent, stockholder or other representative
of the Partnership in connection with the transactions contemplated hereby).
For purposes of this Agreement, the term "knowledge of the Partnership" or
similar qualifiers shall be limited to the actual knowledge of any of the
officers and employees of the Partnership listed on SCHEDULE 5.22 hereto.
ARTICLE 6
CERTAIN TRANSITIONAL COVENANTS
6.1. ORDINARY COURSE OPERATION BY CONTRIBUTOR AND CONTRIBUTOR GP.
Contributor agrees that, between the date hereof and the Final Closing Date, it
will operate and will cause the Contributor GP to operate the Contributed
Business only in the ordinary course on a basis consistent with past practice.
Without limiting the generality of the foregoing, Contributor agrees that,
unless otherwise consented to by the Partnership:
(i) the Contributed Business will be conducted only in
the ordinary course;
(ii) the insurance on the Contributed Business in place on
the date hereof shall be maintained in all material
respects, provided such insurance is available;
(iii) Contributor will not, and will not permit the
Contributor GP to, permit any Encumbrance to be
placed upon any of the Acquired Assets, except for
permitted liens;
(iv) no existing STS Customer Contract with any Customer
shall be terminated by Contributor or the Contributor
GP (other than by expiration in accordance with its
terms) or be materially amended or modified by
Contributor or the Contributor GP, unless the
Partnership shall have been notified of the same and
the Partnership shall have failed to object within
ten (10) Business Days of receipt of such notice;
22
(v) Contributor will not, and will not permit the
Contributor GP to, do any act or omit to do any act
which will cause a material breach of any contract or
commitment that is materially related to the
Contributed Business;
(vi) no Acquired Assets shall be sold or transferred
except in the ordinary course; and
(vii) no claims of Contributor or the Contributor GP
relating to the Contributed Business shall be
released or rights of Contributor or the Contributor
GP waived except in the ordinary course or, with
respect to any material release or waiver relating to
a STS Customer Contract, unless the Partnership shall
have consented to the same or failed to notify
Contributor or the Contributor GP of its objection
thereto within ten (10) Business Days after notice
thereof to the Partnership.
In addition, Contributor will, and will cause the Contributor GP to:
(x) use all reasonable efforts to preserve the
Contributed Business and to keep available the
services of its full-time officers and employees
involved with the Contributed Business, provided,
however, that neither Contributor nor Contributor GP
shall be obligated to increase the compensation of
any such person;
(y) comply in all material respects with all
applicable laws, ordinances, rules and
regulations relating to the Contributed Business; and
(z) maintain the books of account and records of the
Contributed Business in the ordinary course and in
accordance with past practices.
6.2. ORDINARY COURSE OPERATION BY THE PARTNERSHIP. The Partnership
agrees that, between the date hereof and the Final Closing Date, it will
operate, and will cause the Partnership Subsidiary to operate, its respective
business only in the ordinary course on a basis consistent with past practice.
Without limiting the generality of the foregoing, the Partnership agrees that
unless otherwise consented to by the Contributor:
(i) except for the consummation of the transactions
contemplated by the BANK ONE Contribution Agreement,
the Partnership Business will be conducted only in
the ordinary course;
(ii) the insurance on the Partnership Business in place on
the date hereof shall be maintained in all material
respects;
(iii) no salaries or wages of any officer or employee of
the Partnership or any Partnership Subsidiary shall
be increased and no bonus, pension, option, incentive
or deferred compensation, retirement, death, profit
sharing, or
23
similar benefits of the officers or employees of the
Business of the Partnership shall be established or
increased, except in accordance with past practices
(including scheduled periodic increases in the
ordinary course);
(iv) the Partnership will not permit any Encumbrance to be
placed upon any of the Partnership Assets other than
pursuant to the Amended and Restated Credit Agreement
contemplated by the BANK ONE Contribution Agreement;
(v) no existing Partnership Business Contract with any
Partnership Customer shall be terminated by the
Partnership (other than by expiration in accordance
with its terms) or be materially amended or modified
by the Partnership, the Partnership Subsidiary or any
Partner, unless the Contributor shall have been
notified of the same and the Contributor shall have
failed to object within ten (10) Business Days of
receipt of such notice;
(vi) The Partnership will not, and will not permit the
Partnership Subsidiary or any Partner to, do any act
or omit to do any act which will cause a material
breach of any contract or commitment that is
materially related to the Partnership Business;
(vii) no property of the Partnership shall be sold or
transferred except in the ordinary course; and
(viii) no claims of the Partnership relating to the
Partnership Business shall be released or rights of
the Partnership waived except in the ordinary course
or, with respect to any material release or waiver
relating to a Partnership Business Contract, unless
the Contributor shall have consented to the same or
failed to notify the Partnership of its objection
thereto within 10 Business Days after notice thereof
to Contributor.
In addition, the Partnership will:
(x) use all reasonable efforts to preserve its business
and to keep available the services of the full-time
officers and employees of the Partnership and the
Partnership Subsidiaries involved in such businesses;
(y) comply in all material respects with all
applicable laws, ordinances, rules and
regulations relating to its business; and
(z) maintain the books of account and records of its
business in the ordinary course in accordance with
past practices.
24
6.3. COOPERATION. Each of the parties hereto will cooperate in good
faith and use reasonable efforts to cause the transactions contemplated by this
Agreement and the Related Agreements to be consummated in accordance with the
terms and conditions of this Agreement and the Related Agreements. The foregoing
obligations in this Section 6.3 shall not be deemed to require any party hereto
to waive any right under this Agreement or any Related Agreement.
6.4. CURRENT INFORMATION. Unless restricted by law, during the period
from the date of this Agreement to the Final Closing, each of the parties hereto
will cause one or more of its representatives to confer on a regular and
frequent basis with representatives of the other party hereto with respect to
the status of the ongoing operations of the Contributed Business and the
Partnership Business. Each party will promptly notify the other of any material
change in the normal course of their respective Shareholder Services Business or
in the operation of its properties relating thereto and, to the extent permitted
by applicable law, of any governmental complaints, investigations or hearings
(or communications indicating that the same may be contemplated), or the
institution or the threat of material litigation involving such party which
would in any manner, challenge, prevent, alter or materially delay any of the
transactions contemplated hereby or by the Related Agreements, and each party
will keep the other parties informed with respect to such events. Each party
hereto will also notify the other parties hereto of the status of regulatory
applications and third party consents related to the transactions contemplated
hereby.
6.5. ACCESS, INFORMATION AND CONFIDENTIALITY.
(a) Each party hereto shall, and shall cause each of their respective
subsidiaries to, with respect to the Shareholder Services Business conducted by
each party afford the other party and its representatives (including, without
limitation, officers and employees and their authorized agents, counsel,
accountants and other professionals retained) such access during normal business
hours throughout the period prior to the Final Closing Date to its books,
records (including, without limitation, appropriate work papers of independent
auditors under normal professional courtesy), properties, personnel and to such
other information related to the transactions contemplated herein as either the
Partnership may reasonably request, unless restricted by law or by contract.
(b) Each party to this Agreement shall hold, and shall cause its
respective subsidiaries and their directors, officers, employees, agents,
consultants and advisors to hold, in strict confidence and use solely for the
purpose of consummating the transactions contemplated by this Agreement and for
no other purpose including, without limitation, any purpose which is directly or
indirectly detrimental to the disclosing party or any of its respective
Affiliates, unless disclosure to a banking or other regulatory authority is
necessary or appropriate or unless compelled to disclose by judicial or
administrative process or, in the written opinion of its counsel, by other
requirement of law or the applicable requirements of any regulatory agency or
relevant stock exchange, all non-public records, books, contracts, reports,
instruments, computer data and other data and information (collectively,
"INFORMATION") concerning the other party (or, if required under a contract with
a third party, such third party) furnished it by such other party or its
representatives pursuant to this Agreement or any other Related Agreement,
except to the
25
extent that such Information can be shown to have been (a) previously known by
such party on a non-confidential basis, (b) available to such party on a
non-confidential basis from a source other than the disclosing party, (c) in the
public domain through no fault of such party or (d) later lawfully acquired from
other sources by the party to which it was furnished, and none of the parties
shall release or disclose such Information to any other person, except its
auditors, attorneys, financial advisors, bankers, other consultants and advisors
and, to the extent permitted above, to bank regulatory authorities. In the event
that a party to this Agreement becomes compelled to disclose any Information in
connection with any necessary regulatory approval or by judicial or
administrative process, such party shall provide the party who provided such
Information (the "DISCLOSING PARTY") with prompt prior written notice of such
requirement so that the Disclosing Party may seek a protective order or other
appropriate remedy. In the event that such protective order, or other remedy is
not obtained, only that portion of the Information which is legally required to
be disclosed shall be so disclosed.
6.6. CONSENTS AND APPROVALS OF THIRD PARTIES. Each party hereto shall
use all reasonable efforts to make all filings with, and obtain all consents and
approvals of, any other Person necessary or desirable for the consummation of
the transactions contemplated by this Agreement.
6.7. CONTRIBUTOR GP BOARD OBSERVER. From the date hereof until the
Initial Closing Date, the Contributor GP shall be entitled to receive notice of,
and to have one non-voting representative present at, all meetings of the Board
of Directors of the Partnership. The Contributor GP's representative shall be
excused from such meetings while business with or concerning the Contributor or
the Contributor GP is to be discussed.
ARTICLE 7
CERTAIN ADDITIONAL TRANSITIONAL MATTERS
7.1 TRANSFERS REQUIRING CONSENT.
(a) To the extent that any of Contributor or Contributor GP's
obligations under any STS Customer Contract is not capable of being delegated by
Contributor or the Contributor GP to the Partnership pursuant to this Agreement
and the Contributor Shareholder Services Agreement without the consent, approval
or waiver of a third Person, and such consent has not been obtained prior to the
Contributed Business Closing Date, or if such transfer or attempted transfer
would constitute a breach thereof or a violation of any law, rule or regulation,
nothing in this Agreement will constitute a transfer or an attempted transfer
thereof.
(b) Notwithstanding anything contained in this Agreement to the
contrary, the Contributor or the Contributor GP, as applicable, will not be
obligated to delegate to the Partnership any of its obligations in and to any of
the STS Customer Contracts referred to in paragraph (a) without first having
obtained all consents, approvals and waivers necessary for such delegation. The
Contributor or Contributor GP will use all reasonable efforts and the
26
Partnership will cooperate with the Contributor and the Contributor GP to obtain
such consents, approvals and waivers, to resolve the practicalities of transfer
referred to in paragraph (a) and to obtain any other consents, approvals and
waivers necessary to transfer to the Partnership any obligations under such STS
Customer Contracts. Each of the Partnership and the Contributor and the
Contributor GP shall bear its own expenses incurred in connection with such
efforts.
(c) In the event that such consents, approvals and waivers to the
delegation referred to in paragraph (a) have not been obtained by the
Contributor or the Contributor GP, as applicable, prior to the Contributed
Business Closing Date, then, unless and until any such STS Customer Contract
(collectively, "UNDELEGATED CONTRACTS") is assigned to the Partnership, the
Contributor, Contributor GP and the Partnership will use all reasonable efforts
to (i) provide to the Partnership the benefits and burdens of any Undelegated
Contract referred to in paragraph (a), (ii) cooperate in any reasonable and
lawful arrangement designed to provide such benefits to the Partnership,
including without limitation the appointment of the Partnership as the agent of
the Contributor or the Contributor GP for purposes of such Undelegated Contract,
and (iii) enforce, at the request of the Partnership and for the account of the
Partnership, any rights of the Contributor arising from any such Undelegated
Contract (including without limitation the right to elect to terminate such
Undelegated Contract in accordance with the terms thereof upon the advice of the
Partnership).
27
7.2. DST PARTNERSHIP INTEREST. Notwithstanding anything to the contrary
herein or in the Partnership Agreement, as in effect from time to time, the
Percentage Interest of Contributor or Contributor GP will not be diluted by the
issuance of any incremental partnership interest to Bank One pursuant to Section
12.2 of the Bank One Contribution Agreement.
ARTICLE 8
CLOSINGS;
CONSEQUENCES FOR FAILURE TO TIMELY DELIVER RELEASES FOR TESTING;
CONSEQUENCES FOR FAILURE TO TIMELY DELIVER FUNCTIONALITY
8.1. INITIAL CLOSING.
(a) INITIAL CLOSING DATE. Subject to the terms and conditions set forth
herein and in the Development Agreement, the consummation of the contribution of
those Acquired Assets comprising Releases 1.1 and 1.2 as contemplated by this
Agreement and the Development Agreement shall take place at a closing (the
"INITIAL CLOSING") to be held at the Boston, Massachusetts offices of Bingham
Dana LLP, on the tenth day after the date of Interim Acceptance of Release 1.2
by the Partnership in accordance with the terms of the Development Agreement or
on such other date as shall be agreed to in writing by all of the parties
hereto. The date on which the Initial Closing actually occurs is sometimes
referred to herein as the "INITIAL CLOSING DATE". In consideration of the
contribution by the Contributor to the Partnership of the Acquired Assets
comprising Releases 1.1 and 1.2, the Partnership shall, on the Initial Closing
Date, issue to the Contributor an undiluted direct 9.5% limited partnership
interest in the Partnership and issue to Contributor GP an undiluted direct 0.5%
general partnership interest in the Partnership as it exists at such time.
(b) DELIVERY AT THE INITIAL CLOSING. At the Initial Closing, the
Contributor and the Contributor GP shall duly execute and deliver to the
Partnership or its designated Affiliate such instruments of assignment or
transfer with respect to the Acquired Assets contributed hereby comprising
Releases 1.1 and 1.2 as contemplated by the Development Agreement as the
Partnership may reasonably request and as may be necessary to vest in the
Partnership or its designated Affiliates good record title to all of the
Acquired Assets comprising Releases 1.1 and 1.2 contributed pursuant hereto as
required under the Development Agreement.
8.2. INTERIM CLOSING.
(a) INTERIM CLOSING DATE. Subject to the terms and conditions set forth
herein and in the Development Agreement, the consummation of the contribution of
those Acquired Assets comprising Release 1.2.5 as contemplated by this Agreement
and the Development Agreement shall take place at a closing (the "INTERIM
CLOSING") to be held at the Boston, Massachusetts offices of Bingham Dana LLP,
on the tenth day after the date of delivery of Release 1.3 by the Contributor to
the Partnership in accordance with the terms of the Development Agreement
28
(provided Interim Acceptance of Release 1.2.5 by the Partnership has occurred in
accordance with the Development Agreement) or on such other date as shall be
agreed to in writing by all of the parties hereto. The date on which the Interim
Closing actually occurs is sometimes referred to herein as the "INTERIM CLOSING
DATE". In consideration of the contribution of the Acquired Assets comprising
Release 1.2.5, the Partnership shall issue to the Contributor and Contributor GP
additional partnership interests in the Partnership so that, upon such issuance,
Contributor shall have in the aggregate an undiluted direct 14.5% limited
partnership interest in the Partnership and Contributor GP shall have, in the
aggregate, an undiluted direct 0.5% general partnership interest in the
Partnership as it then exists. The date on which the Interim Closing actually
occurs is sometimes referred to herein as the "INTERIM CLOSING DATE".
(b) DELIVERY AT THE INTERIM CLOSING. At the Interim Closing, the
Contributor and the Contributor GP shall duly execute and deliver to the
Partnership or its designated Affiliate such instruments of assignment or
transfer with respect to the Acquired Assets contributed hereby comprising
Release 1.2.5 as the Partnership may reasonably request and as may be necessary
to vest in the Partnership or its designated Affiliates good record title to all
of the Acquired Assets comprising Release 1.2.5 contributed pursuant hereto as
required under the Development Agreement.
8.3. CONTRIBUTED BUSINESS CLOSING.
(a) CONTRIBUTED BUSINESS CLOSING DATE. Subject to the terms and
conditions set forth herein and in the Development Agreement, the consummation
of the contribution of the Contributed Business shall take place at a closing
(the "CONTRIBUTED BUSINESS CLOSING") to be held at the Boston, Massachusetts
offices of Bingham Dana LLP, on the earlier of (i) April 30, 2000 and (ii) the
Delivery Default Closing Date or such other date as mutually agreed to by the
parties hereto. The date on which the Contributed Business Closing actually
occurs is sometimes referred to herein as the "CONTRIBUTED BUSINESS CLOSING
DATE".
(b) DELIVERY AT THE CONTRIBUTED BUSINESS CLOSING. At the Contributed
Business Closing, the Contributor and the Contributor GP shall duly execute and
deliver to the Partnership or its designated Affiliate such instruments of
assignment or transfer with respect to the Acquired Assets contributed pursuant
hereto comprising the Contributed Business as the Partnership may reasonably
request and as may be necessary to vest in the Partnership or its designated
Affiliates good record title to all of the Acquired Assets comprising the
Contributed Business contributed pursuant hereto.
8.4. FINAL CLOSING.
(a) FINAL CLOSING DATE. Subject to the terms and conditions set forth
herein and in the Development Agreement, the consummation of the contribution of
Releases 1.3 and 1.3.5 as contemplated by this Agreement and the Development
Agreement shall take place at a closing (the "FINAL CLOSING") to be held at the
Boston, Massachusetts offices of Bingham Dana LLP, on the tenth business day
after the date of the Final Acceptance by the Partnership of the Fairway System
in accordance with the terms of the Development Agreement or on such other date
as
29
shall be agreed to in writing by all of the parties hereto. The date on which
the Final Closing actually occurs is sometimes referred to herein as the "FINAL
CLOSING DATE". In consideration of the contribution of the Acquired Assets
comprising Release 1.3, Release 1.3.5 and of all other Acquired Assets
comprising the Fairway System and the Contributed Business not previously
delivered at any other Closing, the Partnership shall issue to the Contributor
and Contributor GP additional partnership interests in the Partnership so that,
upon such issuance, Contributor shall have in the aggregate an undiluted direct
19.5% limited partnership interest in the Partnership and Contributor GP shall
have, in the aggregate, an undiluted direct 0.5% general partnership interest in
the Partnership as it then exists.
(b) DELIVERY AT THE FINAL CLOSING. At the Final Closing, the
Contributor and the Contributor GP shall duly execute and deliver to the
Partnership or its designated Affiliate such deeds, bills of sale, certificates
of title and other instruments of assignment or transfer with respect to the
Acquired Assets contributed hereby compromising Releases 1.1, 1.2, 1.2.5, 1.3
and 1.3.5, as the Partnership may reasonably request and as may be necessary to
vest in the Partnership or its designated Affiliates good record title to all of
the Acquired Assets contributed hereby and as required by the Development
Agreement which were not previously delivered by the Contributor at any other
Closing.
8.5. CONSEQUENCES FOR FAILURE TO TIMELY DELIVER RELEASES FOR ACCEPTANCE
TESTING.
(a) Notwithstanding anything to the contrary herein, as provided in the
Development Agreement, in the event that the delivery of any Release occurs
after its scheduled Delivery Date and the expiration of the applicable cure
period, and the Contributor is found, pursuant to the Dispute Resolution
Procedures set forth in the Development Agreement, at fault for such late
delivery (a "DELIVERY DEFAULT"), as its exclusive remedy (i) the Partnership
shall have the right to cause Contributor to pay all reasonable costs and
expenses of a third party developer to complete the development of any remaining
undelivered Functionality in accordance with the Specifications (having
reference to the rates quoted by recognized software consultants for similar
services on software systems of comparable complexity), and, (ii) the total
percentage interest in the Partnership issued to the Contributor shall be
reduced from 20% to 15% (an undiluted direct 14.5% limited partner interest and
an undiluted direct 0.5% general partner interest).
(b) DELIVERY DEFAULT CLOSING. Upon the election of the Partnership and
subject to the terms and conditions set forth herein and in the Development
Agreement, at a closing (the "DELIVERY DEFAULT CLOSING") to be held at the
Boston, Massachusetts offices of Bingham Dana LLP on the tenth Business Day
after the date of the final determination of the arbitrator in accordance with
the terms of the Development Agreement or on such other date as shall be agreed
to in writing by all of the parties hereto, the Contributor shall deliver to the
Partnership all of the Acquired Assets comprising the Fairway System and the
Contributed Business, in each case, to the extent not previously delivered at
any other Closing. In consideration of the contribution of such assets, the
Partnership shall issue to the Contributor and Contributor GP such amount of
additional partnership interests in the Partnership, if any, as shall be
required to ensure that, upon such issuance, Contributor shall have in the
aggregate an undiluted direct 14.5% limited partnership interest in the
Partnership and Contributor GP shall have, in the aggregate, an undiluted direct
30
0.5% general partnership interest in the Partnership as it then exists. The date
on which the Deliver Default Closing actually occurs is sometimes referred to
herein as the "DELIVERY DEFAULT CLOSING DATE".
(c) DELIVERY AT THE DELIVERY DEFAULT CLOSING. At the Delivery Default
Closing, the Contributor and the Contributor GP shall duly execute and
deliver to the Partnership or its designated Affiliate such deeds, bills of
sale, certificates of title and other instruments of assignment or transfer
with respect to the Acquired Assets contributed hereby compromising the
Fairway System and the Contributed Business, as the Partnership may
reasonably request and as may be necessary to vest in the Partnership or its
designated Affiliates good record title to all of the Acquired Assets
contributed pursuant hereto and as required by the Development Agreement
which were not previously delivered by the Contributor at any other Closing.
8.6. CONSEQUENCES FOR FAILURE TO OBTAIN FINAL ACCEPTANCE.
(a) Notwithstanding anything to the contrary herein, as provided in the
Development Agreement, in the event that the Fairway System as a whole is not
accepted by the Final Acceptance Date set forth in the Development Agreement and
the expiration of the applicable cure period, and the Contributor is found,
pursuant to the Dispute Resolution Procedures set forth in the Development
Agreement, at fault for such failure to obtain Final Acceptance (a "FINAL
ACCEPTANCE DEFAULT"), the Partnership shall have as its exclusive remedy the
right to cause Contributor to pay all reasonable costs and expenses of a third
party developer to complete the development of any remaining unaccepted
Functionality in accordance with the Specifications (having reference to the
rates quoted by recognized software consultants for similar services on software
systems of comparable complexity).
(b) FINAL ACCEPTANCE DEFAULT CLOSING. In the event of Final Acceptance
Default, upon the election of the Partnership and subject to the terms and
conditions set forth herein and in the Development Agreement, at a closing (the
"FINAL ACCEPTANCE DEFAULT CLOSING") to be held at the Boston, Massachusetts
offices of Bingham Dana LLP on the tenth Business Day after the later of (i) the
date of Final Acceptance of the Fairway System as completed by the third party
developer chosen by the Partnership, pursuant to commercially reasonable
criteria, pursuant to the Development Agreement and (ii) the date of final
payment by Contributor of all monies owed to such third party developer for
completing the Fairway System, the Partnership shall issue to the Contributor
and Contributor GP additional partnership interests in the Partnership so that,
upon such issuance, Contributor shall have, in the aggregate, an undiluted
direct 19.5% limited partnership interest in the Partnership and Contributor GP
shall have, in the aggregate, an undiluted direct 0.5% general partnership
interest in the Partnership as it then exists. The date on which the Final
Acceptance Default Closing actually occurs is sometimes referred to herein as
the "FINAL ACCEPTANCE DEFAULT CLOSING DATE".
(c) DELIVERY AT THE FINAL ACCEPTANCE DEFAULT CLOSING. At the Final
Acceptance Default Closing, the Contributor and the Contributor GP shall duly
execute and deliver to the Partnership or its designated Affiliate such deeds,
bills of sale, certificates of title and other
31
instruments of assignment or transfer with respect to the Acquired Assets
contributed hereby compromising the Fairway System and the Contributed Business,
as the Partnership may reasonably request and as may be necessary to vest in the
Partnership or its designated Affiliates good record title to all of the
Acquired Assets contributed hereby and as required by the Development Agreement
which were not previously delivered by the Contributor at any other Closing.
8.7. CLOSING DEFINITIONS. The Initial Closing, Interim Closing, the
Contributed Business Closing, the Delivery Default Closing, the Final Acceptance
Default Date and the Final Closing are each referred to herein individually as a
"CLOSING " and collectively as the "CLOSINGS". The Initial Closing Date, the
Interim Closing Date, the Contributed Business Closing Date, the Delivery
Default Closing Date, the Final Acceptance Default Closing Date and the Final
Closing Date are each referred to herein individually as a "CLOSING DATE" and
collectively as the "CLOSING DATES".
ARTICLE 9
TERMINATION
9.1. GROUNDS FOR TERMINATION. This Agreement may be terminated at any
time prior to the Final Closing:
(i) by mutual written consent of the parties hereto;
(ii) by Contributor or the Partnership (provided that the
terminating party is not then in material breach of
any representation, warranty, covenant or other
agreement contained herein), in the event of a
material breach by the other party of any
representation, warranty, covenant or other agreement
contained herein, which breach is not cured after
thirty (30) days written notice thereof is given to
the party committing such breach; or
(iii) by Contributor or the Partnership if the Development
Agreement shall have been terminated pursuant to the
terms thereof.
9.2. EFFECTS OF TERMINATION. In the event of termination of this
Agreement by either the Partnership or Contributor as provided in Section 9.1
above, this Agreement shall forthwith become null and void (other than Section
6.5(b) hereof, which shall remain in full force and effect) and there shall be
no further liability on the part of the Partnership or their respective officers
or directors to the other, except any liability of the Partnership or
Contributor under said Section 6.5(b) and in the event of a willful breach by
either party of any representation, warranty, covenant or agreement contained in
this Agreement, in which case, the breaching party shall remain liable for any
and all damages, costs and expenses, including all reasonable attorneys' fees,
sustained or incurred by the non-breaching party as a result thereof or in
connection therewith or with the enforcement of its rights hereunder.
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ARTICLE 10
CONDITIONS TO THE OBLIGATIONS OF THE PARTNERSHIP
10.1. CONDITIONS TO THE OBLIGATIONS OF THE PARTNERSHIP TO CONSUMMATE
EACH CLOSING. The obligations of the Partnership to consummate each Closing
under this Agreement and the Related Agreements shall be subject to the
satisfaction, prior to or at each Closing, of each of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE AT EACH CLOSING DATE;
NO MATERIAL ADVERSE EFFECT. Except as otherwise permitted or
contemplated by this Agreement, the representations and warranties of
Contributor contained in this Agreement and the Related Agreements
shall have been true and correct in all material respects at and as of
the date hereof, and shall be true and correct in all material respects
at and as of each Closing Date with the same force and effect as though
newly made at and as of each Closing Date (except for representations
and warranties which by their terms relate solely to a prior date,
which representations and warranties shall have been true as of the
respective dates thereof and for the respective periods covered
thereby). No event or events shall have occurred since December 31,
1996 that, individually or in the aggregate, have had or would
reasonably be expected to have a Contributor Material Adverse Effect.
(b) OFFICERS CERTIFICATE. Contributor shall have delivered to
the Partnership a certificate dated as of such Closing Date signed by
an authorized officer of Contributor and certifying the satisfaction of
the conditions set forth in this Agreement to be completed prior to or
as of such Closing Date.
(c) CONSENTS. Any consent, approval or authorization necessary
for the consummation of the transaction contemplated hereby by shall
have been obtained and shall be in full force and effect on each
relevant Closing Date. Except as otherwise set forth in Section 7.1
hereof, all consents of non-governmental third parties required for the
consummation of the transactions contemplated hereby at any closing
shall have been obtained and shall be in full force and effect the
applicable Closing Date.
(d) NO LEGAL RESTRAINT. No order, injunction or other legal
restraint or prohibition issued by any federal or state banking or
other regulatory authority or court of competent jurisdiction shall
prohibit the consummation of the transactions contemplated hereby.
(e) DELIVERY OF OTHER DOCUMENTS. Contributor shall have
furnished the Partnership with such certificates, instruments or other
documents in the name or on behalf of Contributor, executed by
appropriate officers of Contributor or others, including, without
limitation, certificates or correspondence of governmental agencies or
authorities or non-governmental third parties, to evidence fulfillment
of the conditions set forth in this Article 10 as the Partnership may
reasonably request; PROVIDED, HOWEVER, that
33
any such certificate, instrument or other document so requested by the
Partnership shall be of a type that is customary in transactions
similar to the transactions contemplated hereby.
10.2. CONDITIONS TO THE OBLIGATIONS OF THE PARTNERSHIP TO CONSUMMATE
THE INITIAL CLOSING. In addition to the satisfaction of the conditions set forth
in section 10.1, the obligations of the Partnership to consummate the Initial
Closing under this Agreement and the Related Agreements shall be subject to the
satisfaction, prior to or at the Initial Closing of each of the following
conditions:
(a) PARTNERSHIP AGREEMENT. BKB, BFDS, BANK ONE, Contributor,
BKB Sub, BFDS Sub, BANK ONE Sub and Contributor GP shall have each
executed and delivered the Partnership Agreement substantially in the
form set forth on SCHEDULE 10.2(a), and such agreement shall be in full
force and effect.
(b) CONTRIBUTOR'S PERFORMANCE. Each of the obligations of
Contributor or Contributor GP to be performed or complied with on or
before the Initial Closing Date pursuant to the terms of this
Agreement, the Development Agreement or any other related Agreement
shall have been duly and fully performed or complied with in all
material respects on or before the Initial Closing Date.
(c) BANK ONE CLOSING.The transactions contemplated by the BANK
ONE Contribution Agreement shall have been consummated at a closing as
contemplated therein.
(d) FAIRWAY DATA PROCESSING AGREEMENT. The Partnership and the
Contributor shall have entered into the Fairway Data Processing
Agreement on substantially the terms set forth on EXHIBIT B, and the
Fairway Data Processing Agreement shall be in full force and effect.
10.3. CONDITIONS TO THE OBLIGATIONS OF THE PARTNERSHIP TO CONSUMMATE
THE INTERIM CLOSING. In addition to the satisfaction of the conditions set forth
in section 10.1, the obligations of the Partnership to consummate the Interim
Closing under this Agreement and the Related Agreements shall be subject to the
satisfaction, prior to or at the Interim Closing of each of the following
conditions:
(a) CONSUMMATION OF THE INITIAL CLOSING/CONTRIBUTED BUSINESS
CLOSING. The Contributor and the Partnership shall have consummated the
Initial Closing, and, in the event the Interim Closing is to occur
after April 30, 2000, the Contributed Business Closing.
(b) CONTRIBUTOR'S PERFORMANCE. Each of the obligations of
Contributor to be performed or complied with on or before the Interim
Closing Date pursuant to the terms of this Agreement, the Development
Agreement or any other Related Agreement shall
34
have been duly and fully performed or complied with in all material
respects on or before the Interim Closing Date.
(c) AMENDMENT TO PARTNERSHIP AGREEMENT. BKB, BFDS, BANK ONE,
Contributor, BKB Sub, BFDS Sub, BANK ONE Sub and Contributor GP shall
have each executed and delivered an amendment to Partnership Agreement
of the Partnership to reflect the resulting ownership interests of each
of the partners.
10.4. CONDITIONS TO THE OBLIGATIONS OF THE PARTNERSHIP TO CONSUMMATE
THE CONTRIBUTED BUSINESS CLOSING. In addition to the satisfaction of the
conditions set forth in section 10.1, the obligations of the Partnership to
consummate the Contributed Business Closing under this Agreement and the Related
Agreements shall be subject to the satisfaction, prior to or at the Contributed
Business Closing of each of the following conditions:
(a) CONTRIBUTOR SHAREHOLDER SERVICES AGREEMENT. The
Partnership and the Contributor shall have entered into the Contributor
Shareholder Services Agreement on substantially the terms set forth on
SCHEDULE 10.4(a) (the "CONTRIBUTOR SHAREHOLDER SERVICES AGREEMENT"),
and the Contributor Shareholder Services Agreement shall be in full
force and effect.
(b) STS LICENSE. The Partnership and the Contributor shall
have entered into the STS License, and the STS License shall be in full
force and effect.
(c) STS DATA PROCESSING AGREEMENT. The Partnership and the
Contributor shall have entered into the STS Data Processing Agreement
on substantially the terms set forth on EXHIBIT D, and the STS Data
Processing Agreement shall be in full force and effect.
(d) CONTRIBUTOR'S PERFORMANCE. Each of the obligations of
Contributor to be performed or complied with on or before the
Contributed Business Closing Date pursuant to the terms of this
Agreement, the Development Agreement or any other Related Agreement
shall have been duly and fully performed or complied with in all
material respects on or before the Contributed Business Closing Date.
10.5. CONDITIONS TO THE OBLIGATIONS OF THE PARTNERSHIP TO CONSUMMATE
THE FINAL CLOSING. In addition to the satisfaction of the conditions set forth
in section 10.1, the obligations of the Partnership to consummate the Final
Closing under this Agreement and the Related Agreements shall be subject to the
satisfaction, prior to or at the Final Closing of each of the following
conditions:
(a) CONSUMMATION OF THE INITIAL CLOSING, THE INTERIM CLOSING
AND THE CONTRIBUTED BUSINESS CLOSING. The Contributor and the
Partnership shall have consummated the Initial Closing, the Interim
Closing and the Contributed Business Closing, or in lieu of the Initial
Closing or the Interim Closing, the Delivery Default Closing.
35
(b) CONTRIBUTOR'S PERFORMANCE. Each of the obligations of
Contributor to be performed or complied with on or before the Final
Closing Date pursuant to the terms of this Agreement, the Development
Agreement or any other Related Agreement shall have been duly and fully
performed or complied with in all material respects on or before the
Final Closing Date.
(c) AMENDMENT TO PARTNERSHIP AGREEMENT. BKB, BFDS, BANK ONE,
Contributor, BKB Sub, BFDS Sub, BANK ONE Sub and Contributor GP shall
have each executed and delivered an amendment to Partnership Agreement
of the Partnership to reflect the resulting ownership interests of the
partners.
10.6. CONDITIONS TO THE OBLIGATIONS OF THE PARTNERSHIP TO CONSUMMATE
THE DELIVERY DEFAULT CLOSING. In addition to the satisfaction of the conditions
set forth in Section 10.1, the obligations of the Partnership to consummate the
Delivery Default Closing under this Agreement and the Related Agreements shall
be subject to the satisfaction, prior to or at the Delivery Default Closing of
the conditions set forth in Sections 10.2(a), 10.2(d), 10.3(c), 10.4(a),
10.4(b), and 10.4(c) to the extent not satisfied at any prior Closing.
10.7 CONDITIONS TO THE OBLIGATIONS OF THE PARTNERSHIP TO CONSUMMATE THE
FINAL ACCEPTANCE DEFAULT CLOSING. In addition to the satisfaction of the
conditions set forth in Section 10.1, the obligations of the Partnership to
consummate Final Acceptance Default Closing under this Agreement and the Related
Agreements shall be subject to the satisfaction, prior to or at the Final
Acceptance Default Closing, of the conditions set forth in Sections 10.2(a),
10.2(d), 10.3(c), 10.4(a), 10.4(b), and 10.4(c) to the extent not satisfied at
any prior Closing.
ARTICLE 11
CONDITIONS TO THE OBLIGATIONS OF CONTRIBUTOR
11.1 CONDITIONS TO THE OBLIGATIONS OF THE CONTRIBUTOR TO CONSUMMATE
EACH CLOSING. The obligations of the Contributor to consummate each Closing
under this Agreement and the Related Agreements shall be subject to the
satisfaction, prior to or at each Closing, of each of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE AT EACH CLOSING DATE;
NO MATERIAL ADVERSE EFFECT. Except as otherwise permitted or
contemplated by this Agreement, the representations and warranties of
Partnership contained in this Agreement and the Related Agreements
shall have been true and correct in all material respects at and as of
the date hereof, and shall be true and correct in all material respects
at and as of each Closing Date with the same force and effect as though
newly made at and as of each Closing Date (except for representations
and warranties which by their terms relate solely to a prior date,
which representations and warranties shall have been true as of the
respective dates thereof and for the respective periods covered
thereby). No event or
36
events shall have occurred since December 31, 1996 that, individually
or in the aggregate, have had or would reasonably be expected to have a
Partnership Material Adverse Effect.
(b) CONSENTS. Any consent, approval or authorization listed on
SCHEDULE 5.7 shall have been obtained and shall be in full force and
effect on each Closing Date. Except as otherwise set forth in Section
7.1 hereof, all consents of non-governmental third parties required for
the consummation of the transactions contemplated hereby shall have
been obtained and shall be in full force and effect on each respective
Closing Date.
(c) NO LEGAL RESTRAINT. No order, injunction or other legal
restraint or prohibition issued by any federal or state banking or
other regulatory authority or court of competent jurisdiction shall
prohibit the consummation of the transactions contemplated hereby.
(d) OFFICERS CERTIFICATE. Partnership shall have delivered to
the Contributor a certificate dated as of the Initial Closing Date
signed by an authorized officer of Partnership and certifying the
satisfaction of the conditions set forth in this Agreement to be
completed prior to or as of such Closing Date.
(e) DELIVERY OF OTHER DOCUMENTS. The Partnership shall have
furnished the Contributor with such certificates, instruments or other
documents in the name or on behalf of the Partnership, executed by
appropriate officers of the Partnership or others, including, without
limitation, certificates or correspondence of governmental agencies or
authorities or non-governmental third parties, to evidence fulfillment
of the conditions set forth in this Article 11 as the Contributor may
reasonably request; PROVIDED, HOWEVER, that any such certificate,
instrument or other document so requested by the Contributor shall be
of a type that is customary in transactions similar to the transactions
contemplated hereby.
11.2. CONDITIONS TO THE OBLIGATIONS OF THE CONTRIBUTOR TO CONSUMMATE
THE INITIAL CLOSING. In addition to the satisfaction of the conditions set forth
in section 11.1, the obligations of the Contributor to consummate the Initial
Closing under this Agreement and the Related Agreements shall be subject to the
satisfaction, prior to or at the Initial Closing of each of the following
conditions:
(a) PARTNERSHIP AGREEMENT. BKB, BFDS, BANK ONE, Contributor,
BKB Sub, BFDS Sub, BANK ONE Sub and Contributor GP shall have each
executed and delivered the Partnership Agreement substantially in the
form set forth on SCHEDULE 10.2(a), and such agreement shall be in full
force and effect.
(b) PARTNERSHIP'S PERFORMANCE. Each of the obligations of
Partnership to be performed or complied with on or before the Initial
Closing Date pursuant to the terms of this Agreement, the Development
Agreement or any other related Agreement shall have been duly and fully
performed or complied with in all material respects on or before the
Initial Closing Date.
37
(c) BANK ONE CLOSING. The transactions contemplated by the
BANK ONE Contribution Agreement shall have been consummated at a
closing as contemplated therein.
(d) PROXY AND RETAINED RIGHT LICENSE. Contributor and the
Partnership shall have entered into the Proxy and Retained Rights
License, and the Proxy and Retained Rights License shall be in full
force and effect.
(e) FAIRWAY DATA PROCESSING AGREEMENT. The Partnership and the
Contributor shall have entered into the Fairway Data Processing
Agreement on substantially the terms set forth on EXHIBIT B, and the
Fairway Data Processing Agreement shall be in full force and effect.
11.3. CONDITIONS TO THE OBLIGATIONS OF THE CONTRIBUTOR TO CONSUMMATE
THE INTERIM CLOSING. In addition to the satisfaction of the conditions set forth
in Section 11.1, the obligations of the Contributor to consummate the Interim
Closing under this Agreement and the Related Agreements shall be subject to the
satisfaction, prior to or at the Interim Closing of each of the following
conditions:
(a) CONSUMMATION OF THE INITIAL CLOSING/CONTRIBUTED BUSINESS
CLOSING. The Partnership and the Contributor shall have consummated the
Initial Closing, and, in the event the Interim Closing is to occur
after April 30, 2000, the Contributed Business Closing.
(b) PARTNERSHIP'S PERFORMANCE. Each of the obligations of
Partnership to be performed or complied with on or before the Interim
Closing Date pursuant to the terms of this Agreement, the Development
Agreement or any other Related Agreement shall have been duly and fully
performed or complied with in all material respects on or before the
Interim Closing Date.
(c) AMENDMENT TO PARTNERSHIP AGREEMENT. BKB, BFDS, BANK ONE,
Contributor, BKB Sub, BFDS Sub, BANK ONE Sub and Contributor GP shall
have each executed and delivered an amendment to Partnership Agreement
of the Partnership to reflect the resulting ownership interests of the
parties.
11.4. CONDITIONS TO THE OBLIGATIONS OF THE CONTRIBUTOR TO CONSUMMATE
THE CONTRIBUTED BUSINESS CLOSING. In addition to the satisfaction of the
conditions set forth in section 11.1, the obligations of the Contributor to
consummate the Contributed Business Closing under this Agreement and the Related
Agreements shall be subject to the satisfaction, prior to or at the Contributed
Business Closing of each of the following conditions:
(a) CONTRIBUTOR SHAREHOLDER SERVICES AGREEMENT. The
Partnership and the Contributor shall have entered into the Contributor
Shareholder Services Agreement, and the Contributor Shareholder
Services Agreement shall be in full force and effect.
38
(b) STS LICENSE. The Partnership and the Contributor shall
have entered into the STS License, and the STS License shall be in full
force and effect.
(c) STS DATA PROCESSING AGREEMENT. The Partnership and the
Contributor shall have entered into the STS Data Processing Agreement
on substantially the terms set forth on EXHIBIT D, and the STS Data
Processing Agreement shall be in full force and effect.
(d) PARTNERSHIP'S PERFORMANCE. Each of the obligations of
Partnership to be performed or complied with on or before the
Contributed Business Closing Date pursuant to the terms of this
Agreement, the Development Agreement or any other Related Agreement
shall have been duly and fully performed or complied with in all
material respects on or before the Contributed Business Closing Date.
11.5. CONDITIONS TO THE OBLIGATIONS OF THE CONTRIBUTOR TO CONSUMMATE
THE FINAL CLOSING. In addition to the satisfaction of the conditions set forth
in section 11.1, the obligations of the Contributor to consummate the Final
Closing under this Agreement and the Related Agreements shall be subject to the
satisfaction, prior to or at the Final Closing of each of the following
conditions:
(a) CONSUMMATION OF THE INITIAL CLOSING, INTERIM CLOSING AND
THE CONTRIBUTED BUSINESS CLOSING. The Partnership and the Contributor
shall have consummated the Initial Closing and the Contributed Business
Closing, or in lieu of the Initial Closing or the Interim Closing, the
Delivery Default Closing.
(b) PARTNERSHIP'S PERFORMANCE. Each of the obligations of
Partnership to be performed or complied with on or before the Final
Closing Date pursuant to the terms of this Agreement, the Development
Agreement or any other Related Agreement shall have been duly and fully
performed or complied with in all material respects on or before the
Final Closing Date.
(c) AMENDMENT TO PARTNERSHIP AGREEMENT. BKB, BFDS, BANK ONE,
Contributor, BKB Sub, BFDS Sub, BANK ONE Sub and Contributor GP shall
have each executed and delivered an amendment to Partnership Agreement
of the Partnership to reflect the resulting ownership interests of the
partners.
11.6. CONDITIONS TO THE OBLIGATIONS OF THE CONTRIBUTOR TO CONSUMMATE
THE DELIVERY DEFAULT CLOSING. In addition to the satisfaction of the conditions
set forth in Section 11.1, the obligations of the Contributor to consummate the
Delivery Default Closing under this Agreement and the Related Agreements shall
be subject to the satisfaction, prior to or at the Delivery Default Closing, of
the conditions set forth in Sections 11.2(a), 11.2(d), 11.3(c), 11.4(a), 11.4(b)
and 11.4(c), to the extent not satisfied at any prior Closing.
39
11.7. CONDITIONS TO THE OBLIGATIONS OF THE CONTRIBUTOR TO CONSUMMATE
THE FINAL ACCEPTANCE DEFAULT CLOSING. In addition to the satisfaction of the
conditions set forth in Section 11.1, the obligations of the Partnership to
consummate the Final Acceptance Default Closing, as the case may be, under this
Agreement and the Related Agreements shall be subject to the satisfaction, prior
to or at the Final Acceptance Default Closing, Sections 11.2(a), 11.2(d),
11.3(c), 11.4(a), 11.4(b) and 11.4(c), to the extent not satisfied at any prior
Closing.
ARTICLE 12
INDEMNIFICATION
12.1. INDEMNITY BY THE CONTRIBUTOR. (a) Contributor agrees to indemnify
and hold the Partnership, and its Affiliates, employees, officers, directors,
controlling persons, successors and assigns, harmless from and with respect to
any and all claims, liabilities, losses, damages, diminution in value, costs and
expenses, including without limitation the reasonable fees and disbursements of
counsel and expert witnesses, net of insurance proceeds received (collectively,
the "CONTRIBUTOR LOSSES"), related to or arising directly or indirectly out of
(i) any inaccuracies in any representation or warranty made by Contributor in
this Agreement or the Development Agreement, determined without regard to any
qualifier relating to knowledge, materiality or Material Adverse Effect or any
similar qualifier and only to the extent that Contributor Losses relating to or
arising directly or indirectly out of such inaccuracies exceed $100,000 in the
aggregate, (ii) any failure or breach by Contributor of any covenant,
obligation, or undertaking made by Contributor in this Agreement or the
Development Agreement, (iii) liabilities of Contributor or Contributor GP
relating to employee benefit plans of the Contributor or the Contributor GP (iv)
the operation of the Contributed Business by Contributor or Contributor GP or
any predecessor of any such Person prior to the Final Closing, including all
civil, criminal, administrative or other regulatory governmental action, suit,
demand, claim (including employee or employment claims), hearing, proceeding or
investigation, or (v) the Retained Liabilities.
(b) In addition, the Contributor agrees to indemnify and hold the
Partnership, and its Affiliates, employees, officers, directors, controlling
persons, successors and assigns, harmless from and with respect to any and all
Contributor Losses relating to or arising directly or indirectly out of any
claim made, or any suit, action, investigation, demand or proceeding brought
against the Partnership or any of its Affiliates relating to or arising out of
any act or omission by Contributor or the Contributor GP any predecessor of any
such Person or any such Person's agents, directors, officers, employees or
representatives or relating to the Contributed Business on or before the Final
Closing Date.
12.2. INDEMNITY BY THE PARTNERSHIP. (a) The Partnership agrees to
indemnify and hold Contributor, and Contributor GP, and their Affiliates,
employees, officers, directors, controlling persons, successors and assigns,
harmless from and with respect to any and all claims, liabilities, losses,
damages, diminution in value, costs and expenses, including without limitation
the reasonable fees and disbursements of counsel and expert witnesses, net of
insurance proceeds
40
received (collectively, the "PARTNERSHIP LOSSES"), related to or arising
directly or indirectly out of (i) any liabilities incurred by Contributor in
connection with the performance after the Contributed Business Closing of the
Contributed Business Contracts by the Partnership; (ii) the operation of the
Contributed Business by the Partnership after the Contributed Business Closing,
except in the case of any Partnership Losses arising out of an event as to which
the Partnership is itself indemnified under any other Related Agreement by the
party indemnified by the Partnership pursuant to this Section 12.2
(b) The Partnership agrees to indemnify and hold Contributor and its
Affiliates, employees, officers, directors, controlling persons, successors and
assigns, harmless from and with respect to any and all Partnership Losses
related to or arising directly or indirectly out of (i) any inaccuracies in any
representation or warranty made by the Partnership in this Agreement or the
Development Agreement, determined without regard to any qualifier relating to
knowledge, materiality or Material Adverse Effect or any similar qualifier and
only to the extent that Partnership Losses relating to or arising directly or
indirectly out of such inaccuracies exceed $100,000 in the aggregate, (ii) any
failure or breach by the Partnership of any covenant, obligation, or undertaking
made by the Partnership in this Agreement or the Development Agreement;
PROVIDED, HOWEVER, that for such liabilities delineated in clauses 12.2(b)(i)
and 12(b)(ii), the Partnership shall indemnify the Contributor for Partnership
Losses net of any recovery by the Partnership from any indemnity to the
Partnership from BKB, BFDS or BANK ONE for such liabilities by increasing the
Contributor's limited partnership interest in the Partnership by the
"Contributor's Lost Interest" which is equal to (1) the Contributor's
partnership interest multiplied by the difference between (x) the Partnership
Loss, net of any recovery by the Partnership from any indemnity to the
Partnership from BKB, BFDS or BANK ONE from such liabilities minus (y) any tax
benefits attributable to such Partnership Loss divided by (2) the Fair Market
Value of the Partnership. For purposes of this section 12.2(b), "Fair Market
Value" shall be the appraised value of the Partnership for the fiscal year most
recently ended.
(c) Attached hereto as EXHIBIT F, for illustrative purposes only, is an
example of the calculation of Partnership indemnification calculated pursuant to
Sections 12(b)(i) and 12.2(b)(ii).
12.3. CLAIMS.
(a) Any party seeking indemnification hereunder (the "INDEMNIFIED
PARTY") shall promptly notify the party hereto obligated to provide
indemnification hereunder (the "INDEMNIFYING PARTY") of any action, suit,
proceeding, demand or breach (a "CLAIM") with respect to which the Indemnified
Party claims indemnification hereunder, provided that failure of the Indemnified
Party to give such notice shall not relieve the Indemnifying Party of its
obligations under this Article 12 except to the extent, if at all, that such
Indemnifying Party shall have been prejudiced thereby. If such Claim relates to
any action, suit, proceeding or demand instituted against the Indemnified Party
by a third party (a "THIRD PARTY CLAIM"), upon receipt of such notice from the
Indemnified Party the Indemnifying Party shall be entitled to participate in the
defense of such Third Party Claim, and if and only if each of the following
conditions is
41
satisfied, the Indemnifying Party may assume the defense of such Third Party
Claim, and in the case of such an assumption the Indemnifying Party shall have
the authority to negotiate, compromise and settle such Third Party Claim:
(i) the Indemnifying Party confirms in writing that it is
obligated hereunder to indemnify the Indemnified Party with respect to
such Third Party Claim; and
(ii) there is no conflict of interest which would make
separate representation by the Indemnified Party's own counsel
advisable.
The Indemnified Party shall retain the right to employ its own counsel and to
participate in the defense of any Third Party Claim, the defense of which has
been assumed by the Indemnifying Party pursuant hereto, but the Indemnified
Party shall bear and shall be solely responsible for its own costs and expenses
in connection with such participation. The Indemnifying Party shall not, without
the prior written consent of the Indemnified Party, settle or compromise any
claim or consent to the entry of any judgment that does not include as an
unconditional term thereof the giving by the claimant or the plaintiff to the
Indemnified Party a release from all liability in respect of such claim.
(b) In the event of any Claim under Section 12.1 or 12.2 hereof, the
Indemnified Party shall advise the Indemnifying Party in writing of the amount
and circumstances surrounding such Claim. With respect to liquidated Claims, if
within thirty (30) days the Indemnifying Party has not contested such Claim in
writing, the Indemnifying Party will pay the full amount thereof within ten (10)
days after the expiration of such period.
12.4. TIME LIMITS. No claim for indemnification under this Article 12
may be asserted for the first time for any breach of any representation or
warranty after the third anniversary of the earlier of the Delivery Default
Closing Date or Final Closing Date.
12.5. EXCLUSIVE REMEDY; DAMAGE LIMITATIONS. Contributor and the
Partnership acknowledge and agree that, except as set forth in Section 8.5 and
with respect to a Delivery Default and Section 8.6 with Respect to the Final
Acceptance Default, and except for the right to seek specific performance of
covenants and other agreements, the indemnification rights and remedies
available to each party under this Article 12 shall be the sole and exclusive
rights and remedies of the Partnership and Contributor with respect to any
Contributor Losses or Partnership Losses arising out of or relating in any way
to (i) any breach of this Agreement, (ii) the acquisition of the Contributed
Business by the Partnership and the acquisition of their interests in the
Partnership by Contributor and Contributor GP, or (iii) the consummation of the
transactions contemplated hereby (collectively, the "SUBJECT LOSSES"),
including, without limitation, any claims, rights or remedies for negligent
misrepresentation. Without limiting the generality of the foregoing, except as
specifically authorized by this Article 12, the Partnership and Contributor
hereby waive, release and disclaim any claims, rights or remedies arising in
tort, by statute, or otherwise, with respect to the Subject Losses. As provided
in Section 13.6, in no event shall the Partnership or Contributor be entitled to
recover from the other party hereto for incidental, consequential, exemplary or
punitive damages, and for all purposes of this
42
Agreement, neither the term "CONTRIBUTOR LOSSES" nor the term "PARTNERSHIP
LOSSES" shall be deemed to include any such damages.
ARTICLE 13
GENERAL
13.1. EXPENSES. Except as expressly set forth in this Agreement, all
expenses of the preparation, execution and consummation of this Agreement and
the Related Agreements and of the transactions contemplated hereby, including,
without limitation, attorneys', accountants' and outside advisers' fees and
disbursements, shall be borne by the party incurring such expenses.
13.2. NOTICES. All notices, demands and other communications hereunder
shall be in writing or by written telecommunication, and shall be deemed to have
been duly given if delivered personally or if mailed by certified mail, return
receipt requested, postage prepaid or if sent by overnight courier or sent by
written telecommunication, as follows:
If to the Contributor:
DST Systems, Inc.
333 West 11th Street
5th Floor
Kansas City, Missouri 64105
Attention: President
with a copy sent contemporaneously to:
DST Systems, Inc.
333 West 11th Street
5th Floor
Kansas City, Missouri 64105
Attention: Legal Department
If to the Partnership:
Boston EquiServe Limited Partnership
150 Royall Street
Canton, MA 02021
Attention: Chief Executive Officer
with a copy sent contemporaneously to:
43
Boston Financial Data Services, Inc.
2 Heritage Drive
North Quincy, MA 02171
Attention: David M. Elwood, Esq.
Senior Counsel
and
Bingham Dana LLP
150 Federal Street
Boston, MA 02110
Attention: Norman J. Shachoy, Esq.
13.3. ENTIRE AGREEMENT. This Agreement (including the Exhibits and
Schedules hereto), together with the Development Agreement and the other Related
Agreements, contains the entire understanding of the parties hereto and thereto,
supersedes all prior agreements and understandings relating to the subject
matter hereof and thereof and shall not be amended except by a written
instrument hereafter signed by all of the parties hereto or thereto, as
applicable. No waiver of any provision of this Agreement shall be effective
unless evidenced by a written instrument signed by the waiving party. Each of
the parties hereto further acknowledge and agree that, in entering into this
Agreement and entering into the Related Agreements, they have not in any way
relied upon any oral or written agreements, statements, promises, information,
arrangements, understandings, representations or warranties, express or implied,
not specifically set forth in this Agreement or the Related Agreements.
13.4. GOVERNING LAW. This Agreement shall be governed by, and construed
and enforced in accordance with, the laws of the State of Delaware without
regard to its conflict of laws rules.
13.5. CONSENT TO JURISDICTION. Each of the parties hereto agrees that
any suit, action or proceeding instituted against such party under or in
connection with this Agreement shall be brought, non-exclusively in a court of
competent jurisdiction of the State of Delaware. By execution hereof, each party
hereto irrevocably waives any objection to, and any right of immunity on the
grounds of, improper venue, the convenience of the forum, the personal
jurisdiction of such courts or the execution of judgments resulting therefrom.
Each party hereto hereby irrevocably accepts and submits to the exclusive
jurisdiction of such courts in any such action, suit or proceeding.
13.6. WAIVER OF CERTAIN DAMAGES. EACH OF THE PARTIES HERETO TO THE
FULLEST EXTENT PERMITTED BY LAW IRREVOCABLY WAIVES ANY RIGHTS THAT THEY MAY HAVE
TO PUNITIVE, SPECIAL, EXEMPLARY OR CONSEQUENTIAL DAMAGES IN RESPECT OF ANY
LITIGATION BASED UPON, OR ARISING OUT OF, THIS AGREEMENT, THE DEVELOPMENT
AGREEMENT OR
44
ANY RELATED AGREEMENT OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS OR
ACTIONS OF ANY OF THEM RELATING THERETO.
13.7. SECTIONS AND SECTION HEADINGS. The headings of sections and
subsections are for reference only and shall not limit or control the meaning
thereof.
13.8. ASSIGNS. This Agreement, the Development Agreement and the other
Related Agreements shall be binding upon and inure to the benefit of the parties
hereto and their respective heirs, successors and permitted assigns. Neither
this Agreement and the Related Agreements nor the obligations of any party
hereunder or thereunder shall be assignable or transferable by such party
without the prior written consent of the other party hereto or thereto.
13.9. NO IMPLIED RIGHTS OR REMEDIES. Except as otherwise expressly
provided herein, nothing herein expressed or implied is intended or shall be
construed to confer upon or to give any Person, except the parties and their
respective successors, if any, hereto, any rights or remedies under or by reason
of this Agreement.
13.10. COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
13.11. CONSTRUCTION. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rule of strict construction will be applied against any party.
13.12. SEVERABILITY. The invalidity or unenforceability of any
particular provision of this Agreement or any Related Agreement shall not affect
the other provisions hereof or thereof, and this Agreement shall be construed in
all respects as if such invalid or unenforceable provision was omitted.
13.13. SURVIVAL. The representations and warranties of each of the
Partnership and Contributor contained in this Agreement or otherwise made in
writing in connection with the transactions contemplated hereby shall survive
the Final Closing and the consummation of the transactions contemplated hereby
until the third anniversary of the Final Closing Date.
IN WITNESS WHEREOF, and intending to be legally bound hereby, the
parties hereto have caused this Agreement to be duly executed and delivered as a
sealed instrument as of the date and year first above written.
DST SYSTEMS, INC.
By: /s/ Thomas A. McCullough
-----------------------------------
Name: Thomas A. McCullough
Title: Executive Vice President
BOSTON EQUISERVE LIMITED PARTNERSHIP
By: /s/ Joseph L. Hooley
-----------------------------------
Name: Joseph L. Hooley
Title: Chairman of the Board