Outsourcing Agreement

OUTSOURCING AGREEMENT


BY AND BETWEEN


BAY CITIES BANK


and


MARSHALL & ILSLEY CORPORATION
acting through its division
M&I DATA SERVICES


DATED AS OF

NOVEMBER 30, 1998


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TABLE OF CONTENTS


PAGE
----


1. DEFINITIONS.................................................1
1.1 Background..............................................1
1.2 Definitions.............................................1
1.3 References..............................................6
1.4 Interpretation..........................................6 2. TERM........................................................7
2.1 Initial Term............................................7
2.2 Extensions..............................................7 3. APPOINTMENT.................................................7
3.1 Performance by M&I Affiliates or Subcontractors.........7
3.2 Third Party Products/Services...........................7
3.3 Proper Instructions.....................................8 4. CONVERSION..................................................8
4.1 Banking Applications....................................8
4.2 Development of Conversion Plan..........................8
4.3 Conversion Resources....................................8
4.4 Conversion Milestones...................................9 5. BANKING APPLICATIONS SERVICES...............................9
5.1 ADP Services............................................9
5.2 New Services............................................9
5.3 Automated Clearing House Services......................10
5.4 EFD Services...........................................10
5.5 Item Processing Services...............................10 6. RETAIL DELIVERY SYSTEMS AND SERVICES.......................10
6.1 Home Banking Services..................................10
6.2 Branch Automation Systems..............................11 7. BANKCARD PROCESSING FEES...................................11 8. FEES.......................................................11
8.1 Fee Structure..........................................11
8.2 Conversion.............................................11
8.3 Pricing and Operational Assumptions....................12
8.4 EFD Services...........................................12
8.5 Training and Education.................................12
8.6 Excluded Costs.........................................12
8.7 Disputed Amounts.......................................13
8.8 Terms of Payment.......................................13
8.9 Modifications of Terms and Pricing.....................13 9. PERFORMANCE STANDARDS......................................14
9.1 General................................................14
9.2 Service Deficiencies...................................14
9.3 Exclusive Remedy.......................................14 10.MODIFICATION OR PARTIAL TERMINATION........................15
10.1 Modifications to Services.............................15
10.2 Partial Termination by M&I............................15
10.3 Partial Termination by Customer.......................15
10.4 Development of Custom Software........................15
10.5 Millennium Modifications..............................16 11.TERMINATION................................................16
11.1 For Convenience of Default By Customer................16
11.2 For Cause.............................................16


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11.3 For Insolvency.....................................16 12. SERVICES FOLLOWING TERMINATION..........................17
12.1 Termination Assistance.............................17
12.2 Continuation of Services...........................17 13. DAMAGES.................................................18
13.1 Direct Damages.....................................18
13.2 No Consequential Damages...........................18
13.3 Equitable Relief...................................18
13.4 Limitation of Liability............................18
13.5 Liquidated Damages.................................18 14. INSURANCE AND INDEMNITY.................................19
14.1 Insurance..........................................19
14.2 Indemnity..........................................19
14.3 Indemnification Procedures.........................20 15. DISPUTE RESOLUTION......................................21
15.1 Representatives of Parties.........................21
15.2 Continuity of Performance..........................21 16. REPRESENTATIONS AND WARRANTIES..........................22
16.1 By M&I.............................................22
16.2 By Customer........................................22 17. CONFIDENTIALITY AND OWNERSHIP...........................23
17.1 Customer Data......................................23
17.2 M&I Systems........................................23
17.3 Confidential Information...........................23
17.4 Obligations of the Parties.........................24
17.5 Security...........................................24 18. MANAGEMENT OF PROJECT...................................24
18.1 Account Representatives............................24
18.2 Reporting and Meetings.............................25
18.3 Development Projects and Technical Support.........25 19. REGULATORY COMPLIANCE...................................25 20. DISASTER RECOVERY.......................................26
20.1 Services Continuity Plan...........................26
20.2 Relocation.........................................26
20.3 Resumption of Services.............................27
20.4 Annual Test........................................27 21. GENERAL TERMS AND CONDITIONS............................27
21.1 Transmission of Data...............................27
21.2 Equipment and Network..............................27
21.3 Reliance on Data...................................27
21.4 Data Backup........................................28
21.5 Balancing and Controls.............................28
21.6 Use of Services....................................28
21.7 Regulatory Assurances..............................28
21.8 IRS Filing.........................................29
21.9 Affiliates.........................................30
21.10 Future Acquisitions...............................30 22. MISCELLANEOUS PROVISIONS................................31
22.1 Governing Law......................................31
22.2 Venue and Jurisdiction.............................31
22.3 Entire Agreement; Amendments.......................31
22.4 Assignment.........................................32
22.5 Relationship of Parties............................32
22.6 Notices............................................32
22.7 Headings...........................................33


ii 4 22.8 Counterparts.................................................... 33 22.9 Waiver.......................................................... 33 22.10 Severability.................................................... 33 22.11 Attorneys' Fees and Costs....................................... 33 22.12 Financial Statements............................................ 34 22.13 Publicity....................................................... 34 22.14 Solicitation.................................................... 34 22.15 No Third Party Beneficiaries.................................... 34 22.16 Construction.................................................... 34 22.17 Acquisition/Creation of a Financial Institution................. 34 22.18 Force Majeure................................................... 35


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Schedules - ---------
1.2 Customer Affiliates
4.2 Conversion Plan
5.1 ADP Services Schedule
5.3 ACH Services Terms and Conditions
5.4 EFD Services
6.1 DirectPC Services
8.1 Fee Schedule
9.1 ADP Performance Standards 11.1 Termination Fee


Exhibits - --------
A ACH Authorization Agreement
B Attorney-in-Fact Appointment
C Affidavit


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OUTSOURCING AGREEMENT


This Outsourcing Agreement ("Agreement") is made as of the ___ day of November, 1998, by and between Bay Cities Bank, a ________ Corporation ("Customer") and Marshall & Ilsley Corporation, a Wisconsin corporation, acting through its division, M&I Data Services ("M&I"). "Customer" shall include all Affiliates receiving Services under this Agreement from M&I.


In consideration of the payments to be made and services to be performed hereunder, the parties agree as follows:


1. DEFINITIONS


1.1 BACKGROUND.


This Agreement is being made and entered into with reference to the following facts:


A. Customer provides systems development and operations, data processing, telecommunications and other information technology services for itself, and on behalf of its customers.


B. M&I is a provider of data processing, systems development and operations, corporate support and item processing, home banking, internet banking, retail delivery services, trust data processing, and other services. M&I desires to perform for Customer the outsourcing services described in this Agreement.


C. In reliance on its own independent analysis, and after careful evaluation of M&I's proposal and other alternatives, Customer has selected M&I to provide the Services (as defined in Section 1.2) to Customer. This Agreement documents the terms and conditions under which Customer agrees to purchase and M&I agrees to provide the Services.


1.2 DEFINITIONS.


The following terms shall have the meaning ascribed to them in this Section 1.2:


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A. "Account Representative" shall have the meaning set forth in Section 18.1.


B. "ADP Services" shall mean the Accounts Data Processing Services set forth in attached Schedule 5.1.


C. "Additional Term" shall mean any period of extension or renewal of this Agreement established after the Initial Term pursuant to Section 2.2 of this Agreement.


D. "Affiliate" shall mean, with respect to a party, any entity at any time Controlling, Controlled by or under common Control with, such party. Schedule 1.2 attached hereto identifies those Affiliates of Customer for whom M&I shall provide Services under this Agreement, as of the Effective Date.


E. "Branch Automation Agreement" shall mean the Branch Automation Agreement of even date herewith between M&I and Customer relating to the license and implementation of M&I's proprietary branch automation software.


F. "Change in Control" shall mean any event or series of events by which (i) any person or entity or group of persons or entities shall acquire Control of another person or entity or (ii) in the case of a corporation, during any period of 12 consecutive months commencing before or after the date hereof, individuals who at the beginning of such 12-month period were directors of such corporation shall cease for any reason to constitute a majority of the board of directors of such corporation.


G. "Commencement Date" shall mean the date on which Conversion for Customer and all Affiliates identified on Schedule 1.2 has been completed.


H. "Confidential Information" shall have the meaning set forth in Section 17.3 of this Agreement.


I. "Contract Year" shall mean a period commencing on the first day of the month in which the Commencement Date occurs (and each anniversary thereof) and terminating on the last date of the preceding month occurring one (1) year thereafter.


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J. "Control" shall mean the direct or indirect ownership of over 50% of the capital stock (or other ownership interest, if not a corporation) or any entity or the possession, directly or indirectly, of the power to direct the management and policies of such entity by ownership of voting securities, by contract or otherwise. "Controlling" shall mean having Control of any entity and "Controlled" shall mean being the subject of Control by another entity.


K. "Conversion" shall mean (i) the transfer of Customer's data processing and other information technology services to the M&I systems (ii) completion of upgrades, enhancements and software modifications as set forth in this Agreement; and (iii) completion of all interfaces set forth in this Agreement and full integration thereof such that Customer is able to receive the Services in a live operating environment.


L. "Conversion Data" shall mean the date on which Conversion for Customer or a particular Affiliate has been completed. Schedule 1.2 identifies the Conversion Date for Customer and each Affiliate identified therein.


M. "Conversion Period" shall mean that portion of the Term beginning on the Effective Date and ending on the Conversion Date.


N. "Core Services" shall mean services provided by M&I's Deposit System, Loan System and Customer Information System.


O. "Customer Data" shall have the meaning set forth in Section 17.1 of this Agreement.


P. "Damages" shall mean all direct, actual and verifiable losses, liabilities, damages and claims and related costs and expenses (including reasonable attorneys' fees and court costs, costs of investigation, litigation, settlement, judgment interest and penalties) but excluding any and all consequential, incidental, punitive and exemplary damages.


Q. "Effective Date" shall mean the date first set forth above.


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R. "Effective Date of Termination" shall mean the last day on which M&I provides the Services to Customer (excluding any Termination Assistance) following delivery of a notice of termination.


S. "Entity" means a corporation, partnership, sole proprietorship, limited liability company, joint venture or other form of organization, and includes the parties hereto.


T. "Estimated Remaining Value" shall mean the number of calendar months remaining between the Effective Date of Termination and the last day of the Term, multiplied by the average of the three (3) highest monthly Fees (but in any event no less than the Monthly Base Fee) payable by Customer during the twelve (12) month period prior to the event giving rise to termination rights under this Agreement. In the event the Effective Date of Termination occurs prior to the First Contract Year, the estimated monthly fees set forth in the Fee Schedule shall be substituted for the average monthly fees described in the preceding sentence.


U. "Expenses" shall mean any and all direct, pass through expenses incurred by M&I for any postage, supplies, materials, travel and lodging provided to or on behalf of Customer under this Agreement.


V. "Federal Regulator" shall have the meaning set forth in Section 21.7.


W. "Initial Services" shall mean those Services requested by Customer from M&I under this Agreement prior to the Conversion Date. The Services requested as of the Effective Date are set forth in the schedules attached hereto, which shall be modified to include Services requested by Customer during the Conversion Period.


X. "M&I software" shall mean the software owned by M&I and used to provide the Services.


Y. "Millennium Ready" shall mean the ability of the M&I Software to accurately process date/time data (including calculating, compare and sequence) from, into and between the years 1999 and 2000, including leap year calculations, to the extent that other information


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technology, used in combination therewith, properly exchanges date/time data with the M&I Software.


Z. "Monthly Base Fee" shall mean the minimum monthly fees payable by Customer to M&I for those Services identified in the ADP Services Schedule or the Fee Schedule as being included in the Monthly Base Fee.


AA. "New Services" shall mean any services which are identified in M&I's standard price list but not included in the Initial Services, as well as any future services developed by M&I. Upon Customer's election to receive the same New Services shall be included in the term "Services."


BB. "Operations Center" shall mean the datacenter used by M&I to provide the Services under this Agreement.


CC. "Performance Standards" shall mean those service levels set forth in Schedule 9.1 for the provision of ADP Services.


DD. "Proper Instructions" shall mean those instructions sent to M&I in accordance with Section 3.3 below.


EE. "Services" shall mean the services, functions and responsibilities described in this Agreement to be performed by M&I during the Term.


FF. "Taxes" shall mean any manufacturers, sales, use, gross receipts, excise personal property or similar tax or duty assessed by any governmental or quasi-governmental authority upon or as a result of the execution or performance of any service pursuant to this Agreement or materials furnished with respect to this Agreement, except any income, franchise, privilege or like tax on or measured by M&I's net income, capital stock or net worth.


GG. "Term" shall mean the Initial Term and any extension thereof, unless this Agreement is earlier terminated in accordance with its provisions.


HH. "Third party" shall mean any Entity other than the parties or any Affiliates of the parties.


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II. "User Manuals" shall mean the documentation provided by M&I to Customer which describes the features and functionalities of each of the ADP Services as modified and updated by the customer bulletins distributed by M&I from time to time.


1.3. References. In this Agreement and the schedules and exhibits attached hereto, which are hereby incorporated and deemed a part of this Agreement, references and mention of the word "include" and "including" shall mean "includes, with limitation" and "including, without limitation", as applicable.


1.4 Interpretation. In the event of a conflict between this Agreement and the terms of any exhibits and schedules attached hereto, the terms of the schedules and exhibits shall prevail and control the interpretation of the Agreement. The exhibits and schedules together with the Agreement shall be interpreted as a single document.


6 12 2. TERM


2.1 Initial Term. This Agreement shall commence on the Effective Date and end of the seventh (7th) anniversary of the last date of the month in which the Commencement Date occurs ("Initial Term").


2.2 Extensions. Unless this Agreement has been earlier terminated, at least one (1) year prior to the expiration of the Initial Term, M&I shall submit to Customer a written proposal for renewal of this Agreement. Customer will respond to such proposal within three (3) months following receipt and inform M&I in writing whether or not Customer desires to renew this Agreement. If M&I and Customer are unable to agree upon the terms for renewal of this Agreement at least six (6) months prior to the expiration of the Initial Term, then Customer may, at its option, renew this Agreement for one (1) twelve-month period at M&I's then-current standard prices. Customer shall exercise its option, if at all, by delivering written notice to M&I at least five (5) months prior to expiration of the Initial Term.


3. APPOINTMENT


3.1 Performance by M&I Affiliates or Subcontractors. Customer understands and agrees that Marshall & Ilsley Corporation is a bank holding company and that the actual performance of the Services may be made by the divisions, subsidiaries and/or Affiliates of Marshall & Ilsley Corporation or its subcontractors. For purposes of this Agreement, performance of the Services by any division, subsidiary or Affiliate of Marshall & Ilsley Corporation or its subcontractors shall be deemed performance by Marshall & Ilsley Corporation itself.


3.2 Third party Products/Services. The parties acknowledge that certain services and products necessary for the performance of the Services are being, and in the future may be, provided by Third Parties who will contract directly with Customer. M&I shall have no liability to Customer for information and products supplied by, or services performed by, such Third Parties in conjunction with the Services.


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3.3 Proper Instructions. "Proper Instructions shall mean those instructions sent to M&I by letter, memorandum, telegram, cable, telex, telecopy facsimile, computer terminal, e-mail or other "on line" system or similar means of communication or given orally over the telephone or given in person by one or more of the person(s) whose name(s) and signature(s) are listed on the most recent certificate delivered by Customer to M&I which lists those persons authorized to give orders, corrections and instructions in the name of and on behalf of Customer. Proper Instructions shall specify the action requested to be taken or omitted.


4. CONVERSION


4.1 Banking Applications. The parties agree to use their best efforts to perform the Conversion(s) such that the Commencement Date occurs on or before February 15, 1999.


4.2 Development of Conversion Plan. M&I has, in consultation with Customer, developed a detailed, customized plan for the Conversion (the "Conversion Plan"). The Conversion Plan includes (i) a description of the tasks to be performed for the Conversion; (ii) allocation of responsibility for each of such tasks; and (iii) the schedule on which each task is to be performed. The Conversion project leaders for each party shall regularly communicate on the progress of the Conversion, the feasibility of the Conversion Dates specified in the Conversion Plan, and such other matters which may affect the smooth transition of the Services. Customer agrees to maintain an adequate staff of persons who are knowledgeable about the banking, data processing and information technology systems currently used by Customer. Customer further agrees to provide such services and to perform such obligations as are specified as Customer's responsibility in the Conversion Plan and as necessary for Customer to timely and adequately meet the scheduled dates set forth therein. Each party shall cooperate fully with all reasonable requests of the other party made necessary to effect the Conversion in a timely and efficient manner. The Conversion Plan is attached hereto as Schedule 4.2 and may be amended by mutual agreement of the parties.


4.3 Conversion Resources. M&I and Customer will provide a team of qualified individuals to assist in the


8 14 Conversion effort. The anticipated team and description of their responsibilities is set forth in the Conversion Plan.


4.4 Conversion Milestones. During each Conversion process, M&I will analyze Customer's products, the setup of bank control, analyze and verify Customer's test data, analyze Customer's training needs and perform workflow analysis. During the next phase, Customer shall verify the converted test data and identify and changes to the Conversion programs. A review ("Readiness Review") will then be performed as a dress rehearsal to ensure that M&I and Customer are prepared to proceed with the Conversion. M&I and Customer shall mutually agree to and sign off on the Readiness Review assuring that each Entity is prepared to proceed with the Conversion. The stabilization phase takes place approximately three (3) to four (4) weeks prior to Conversion, during which time software programs, bank control and interface tables are completed and stabilized. Changes, if any, are managed and required approval of both M&I and Customer. Finally, the Conversion phase includes the Conversion weekend and Conversion week support. The M&I project team manages the Conversion weekend, working with Customer's existing processors to meet targeted deadlines. During the Conversion week, M&I will provide support on site for Customer. On a daily basis, M&I and Customer will have status update meetings to understand levels of self sufficiency and areas requiring attention.


5. BANKING APPLICATION SERVICES


5.1 ADP Services. M&I agrees to provide Customer with the ADP Services set forth on Schedule 5.1 ("ADP Services Schedule") in accordance with the applicable User Manuals.


5.2 New Services. If Customer wishes to receive any New Service which is identified on M&I's then-current standard price list, Customer shall notify M&I and the parties shall implement the same in accordance with a mutually acceptable schedule. If the New Service is not identified on M&I's then-current standard price list, Customer shall submit a written request to M&I in accordance with Section 18.3 of this Agreement. Nothing contained herein shall obligate M&I to develop a New Service for Customer.


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5.3 Automated Clearing House Services. The automated clearing house services ("ACH Services") included in the ADP Services Schedule shall be subject to the terms and conditions set forth on attached Schedule 5.3.


5.4 EFD Services. The electronic funds delivery services ("EFD Services") shall be provided by M&I subject to the terms and conditions set forth on attached Schedule 5.4.


5.5. Item Processing Services.


A. M&I shall perform for Customer those certain Item Processing Services described in Schedule 5.5 for which Customer agrees to pay M&I in accordance with the fees specified in the Fee Schedule.


B. M&I and Customer agree to perform their respective responsibilities associated with Item Processing Service in accordance with the procedures established by M&I as modified from time to time. A copy of M&I's procedure has been or will be provided to Customer.


C. M&I agrees that solely with respect to the Item Processing Services provided under Schedule 5.5, such Item Processing Services shall be performed in a commercially reasonable manner and no other o ...