Contribution Agreement

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
---- -------

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 ...