UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended Commission File Number 0-10592
June 30, 2004
TRUSTCO BANK CORP NY
(Exact name of registrant as specified in its charter)
NEW YORK 14-1630287
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5 SARNOWSKI DRIVE, GLENVILLE, NEW YORK 12302
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (518) 377-3311
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes.(x) No.( )
Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes (x) No.( )
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Number of Shares Outstanding
Class of Common Stock as of July 30,2004
--------------------------- ----------------------
$1 Par Value 74,309,810
TrustCo Bank Corp NY
INDEX
Part I. FINANCIAL INFORMATION PAGE NO.
Item 1. Interim Financial Statements (Unaudited): 2
Consolidated Statements of Income for the Three
Months and Six Months Ended June 30, 2004 and 2003
Consolidated Statements of Condition as of June 30, 3
2004 and December 31, 2003
Consolidated Statements of Cash Flows for the Six 4 - 5
Months Ended June 30, 2004 and 2003
Notes to Consolidated Interim Financial Statements 6 - 11
Report of Independent Registered Public 12
Accounting Firm
Item 2. Management's Discussion and Analysis 13 - 28
Item 3. Quantitative and Qualitative Disclosures About 29
Market Risk
Item 4. Controls and Procedures 29
Part II. OTHER INFORMATION
Item 1. Legal Proceedings 30
Item 2. Changes in Securities, Use of Proceeds and 30
Issuer Purchases of Equity Securities
Item 3. Defaults Upon Senior Securities 30
Item 4. Submissions of Matters to Vote of Security Holders 31
Item 5. Other Information 32
Item 6. Exhibits and Reports on Form 8-K 32
1
TRUSTCO BANK CORP NY
Consolidated Statements of Income (Unaudited)
(dollars in thousands, except per share data)
3 Months Ended 6 Months Ended
June 30 June 30
2004 2003 2004 2003
---- ---- ---- ----
Interest income:
Interest and fees on loans $ 18,429 22,722 37,210 47,308
Interest on U. S. Treasuries and agencies 9,892 5,707 20,727 9,094
Interest on states and
political
subdivisions 2,180 2,950 4,511 5,918
Interest on mortgage-backed securities 657 1,014 1,537 2,005
Interest and dividends on other securities 1,741 870 2,129 2,684
Interest on federal funds sold and other short-term 1,206 1,482 2,400 3,137
investments
-------------------------------------------------
Total interest income 34,105 34,745 68,514 70,146
-------------------------------------------------
Interest expense:
Interest on deposits:
Interest-bearing checking 395 379 785 890
Savings 1,982 2,373 3,905 4,943
Money market deposit accounts 379 508 828 1,061
Time deposits 6,480 6,822 12,883 14,541
Interest on short-term borrowings 201 259 379 606
Interest on long-term debt 2 5 5 11
-------------------------------------------------
Total interest expense 9,439 10,346 18,785 22,052
-------------------------------------------------
Net interest income 24,666 24,399 49,729 48,094
Provision for loan losses 150 300 300 600
-------------------------------------------------
Net interest income after provision
for loan losses 24,516 24,099 49,429 47,494
-------------------------------------------------
Noninterest income:
Trust department income 1,532 1,573 2,999 2,972
Fees for other services to customers 2,814 2,936 5,295 5,556
Net gain on securities transactions 3,588 2,234 7,774 5,330
Other 441 765 1,028 1,500
-------------------------------------------------
Total noninterest income 8,375 7,508 17,096 15,358
-------------------------------------------------
Noninterest expenses:
Salaries and employee benefits 5,185 5,066 10,462 10,314
Net occupancy expense 1,580 1,482 3,504 3,184
Equipment expense 487 688 940 1,914
Professional services 953 777 1,757 1,397
Outsourced services 1,054 1,850 2,177 3,100
Other real estate expenses / (income) (76) (163) (221) (197)
Other 2,516 2,879 5,588 5,536
-------------------------------------------------
Total noninterest expenses 11,699 12,579 24,207 25,248
-------------------------------------------------
Income before taxes 21,192 19,028 42,318 37,604
Income taxes 6,821 5,617 13,814 11,001
-------------------------------------------------
Net income $ 14,371 13,411 28,504 26,603
================================================
Net income per Common Share:
- Basic $ 0.193 0.180 0.384 0.358
===============================================
- Diluted $ 0.191 0.178 0.380 0.354
==============================================
See accompanying notes to consolidated interim financial statements.
2
TRUSTCO BANK CORP NY
Consolidated Statements of Condition (Unaudited)
(dollars in thousands, except per share data)
6/30/04 12/31/03
------- --------
ASSETS:
Cash and due from banks $ 46,575 56,425
Federal funds sold and other short-term investments 484,433 355,257
---------------- ----------------
Total cash and cash equivalents 531,008 411,682
---------------- ----------------
Securities available for sale:
U. S. Treasuries and agencies 744,749 863,658
States and political subdivisions 165,203 191,727
Mortgage-backed securities 179,079 66,322
Other 33,235 55,219
---------------- ----------------
Total securities available for sale 1,122,266 1,176,926
---------------- ----------------
Loans:
Commercial 193,669 193,613
Residential mortgage loans 778,550 783,591
Home equity line of credit 181,302 171,078
Installment loans 13,271 14,365
---------------- ----------------
Total loans 1,166,792 1,162,647
Less:
Allowance for loan losses 48,347 48,739
Unearned income 382 381
---------------- ----------------
Net loans 1,118,063 1,113,527
---------------- ----------------
Bank premises and equipment 20,091 20,168
Other assets 57,799 55,816
---------------- ----------------
Total assets $ 2,849,227 2,778,119
================ ================
LIABILITIES:
Deposits:
Demand $ 209,271 197,116
Interest-bearing checking 332,269 334,038
Savings 827,145 780,862
Money market deposit accounts 160,944 159,645
Certificates of deposit (in denominations of
$100,000 or more) 174,882 170,423
Other time deposits 789,485 777,726
---------------- ----------------
Total deposits 2,493,996 2,419,810
Short-term borrowings 106,656 90,608
Long-term debt 141 239
Accrued expenses and other liabilities 33,815 40,700
---------------- ----------------
Total liabilities 2,634,608 2,551,357
---------------- ----------------
SHAREHOLDERS' EQUITY:
Capital stock par value $1; 100,000,000 shares authorized,
and 81,447,650 and 80,711,016 shares issued at June 30, 2004
and December 31, 2003, respectively 81,448 80,711
Surplus 108,144 103,611
Undivided profits 84,297 78,051
Accumulated other comprehensive income:
Net unrealized gain on securities available for sale 3,924 21,042
Treasury stock at cost - 7,256,734 and 6,765,119 shares at
June 30, 2004 and December 31, 2003, respectively (63,194) (56,653)
---------------- ----------------
Total shareholders' equity 214,619 226,762
---------------- ----------------
Total liabilities and shareholders' equity $ 2,849,227 2,778,119
================ ================
See accompanying notes to consolidated interim financial statements.
3
TRUSTCO BANK CORP NY
Consolidated Statements of Cash Flows (Unaudited)
(dollars in thousands)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
SIX MONTHS ENDED June 30, 2004 2003
---------------- ----------------
Cash flows from operating activities:
Net income $ 28,504 26,603
---------------- ----------------
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 943 1,362
Net loss on sales of bank premises and equipment 55 ---
Provision for loan losses 300 600
Net gain on securities transactions (7,774) (5,330)
Deferred tax expense (benefit) 1,264 (835)
(Increase)/decrease in taxes receivable (8,969) 9,496
Decrease/(increase) in interest receivable 481 (1,448)
Decrease in interest payable (191) (530)
Decrease in other assets 16,573 1,124
Decrease in accrued expenses and other liabilities (6,725) (2,796)
---------------- ----------------
Total adjustments (4,043) 1,643
---------------- ----------------
Net cash provided by operating activities 24,461 28,246
---------------- ----------------
Cash flows from investing activities:
Proceeds from sales and calls of securities available for sale 836,549 398,039
Purchase of securities available for sale (803,126) (704,548)
Proceeds from maturities of securities available for sale 561 2,366
Net (increase)/decrease in loans (4,836) 142,338
Proceeds from sales of bank premises and equipment 23 ---
Proceeds from sales of real estate owned --- 86
Capital expenditures (944) (1,066)
---------------- ----------------
Net cash provided by (used in) investing activities 28,227 (162,785)
---------------- ----------------
Cash flows from financing activities:
Net increase in deposits 74,186 61,314
Net increase/(decrease) in short-term borrowings 16,048 (69,948)
Repayment of long-term debt (98) (93)
Proceeds from exercise of stock options 5,270 4,417
Proceeds from sale of treasury stock 3,893 3,786
Purchase of treasury stock (10,434) (14,230)
Dividends paid (22,227) (22,687)
---------------- ----------------
Net cash provided by (used in) financing activities 66,638 (37,441)
---------------- ----------------
Net increase/(decrease) in cash and cash equivalents 119,326 (171,980)
Cash and cash equivalents at beginning of period 411,682 606,082
---------------- ----------------
Cash and cash equivalents at end of period $ 531,008 434,102
================ ================
See accompanying notes to consolidated interim financial
statements.
(Continued)
4
TRUSTCO BANK CORP NY
Consolidated Statements of Cash Flows Continued (Unaudited)
(dollars in thousands)
SUPPLEMENTAL INFORMATION:
SIX MONTHS ENDED June 30, 2004 2003
---------------- ----------------
Interest paid $ 18,976 22,582
Income taxes paid 3,384 2,385
Increase/(decrease) in dividends payable 31 (454)
Increase/(decrease) in net unrealized gain on securities
available for sale (pre-tax) (28,450) 1,524
Change in deferred tax effect on net unrealized gain
on securities available for sale 11,332 (283)
See accompanying notes to consolidated interim financial statements.
5
TrustCo Bank Corp NY
Notes to Consolidated Interim Financial Statements
(Unaudited)
1. Financial Statement Presentation
In the opinion of the management of TrustCo Bank Corp NY (the Company), the
accompanying unaudited Consolidated Interim Financial Statements contain all
adjustments necessary to present fairly the financial position as of June 30,
2004, the results of operations for the three months and six months ended June
30, 2004 and 2003, and cash flows for the six months ended June 30, 2004 and
2003. The accompanying Consolidated Interim Financial Statements should be read
in conjunction with the TrustCo Bank Corp NY year-end Consolidated Financial
Statements, including notes thereto, which are included in TrustCo Bank Corp
NY's 2003 Annual Report to Shareholders on Form 10-K.
2. Earnings Per Share
A reconciliation of the component parts of earnings per share for the three
month and six month periods ended June 30, 2004 and 2003 follows:
Weighted Average Shares
(In thousands, Net Outstanding Per Share
except per share data) Income Amounts
----------------- -------------------------- -------------------
For the quarter ended June 30, 2004:
Basic EPS:
Net income available to
common shareholders.............. $14,371 74,354 $0.193
Effect of Dilutive Securities:
Stock options............................. ------ 741 (0.002)
----------------- -------------------------- -------------------
Diluted EPS $14,371 75,095 $0.191
================= ========================== ===================
For six months ended June 30, 2004:
Basic EPS:
Net income available to
common shareholders.............. $28,504 74,241 $0.384
Effect of Dilutive Securities:
Stock options............................. ------- 844 (0.004)
----------------- -------------------------- -------------------
Diluted EPS $28,504 75,085 $0.380
================= ========================== ===================
There were no antidilutive stock options as of June 30, 2004.
6
TrustCo Bank Corp NY
Notes to Consolidated Interim Financial Statements (unaudited) continued
2. Earnings Per Share (continued)
Weighted Average Shares
(In thousands, Net Outstanding Per Share
except per share data) Income Amounts
----------------- -------------------------- -------------------
For the quarter ended June 30, 2003:
Basic EPS:
Net income available to
common shareholders.............. $13,411 74,369 $0.180
Effect of Dilutive Securities:
Stock options............................. ------ 868 (0.002)
----------------- -------------------------- -------------------
Diluted EPS $13,411 75,237 $0.178
================= ========================== ===================
For six months ended June 30, 2003:
Basic EPS:
Net income available to
common shareholders.............. $26,603 74,309 $0.358
Effect of Dilutive Securities:
Stock options............................. ------- 901 (0.004)
----------------- -------------------------- -------------------
Diluted EPS $26,603 75,210 $0.354
================= ========================== ===================
There were 793,250 stock options which were antidilutive as of June 30, 2003
and were therefore excluded from the June 30, 2003 calculations.
7
TrustCo Bank Corp NY
Notes to Consolidated Interim Financial Statements (unaudited) continued
3. Stock Option Plans
The Company has stock option plans for officers and directors and has adopted
the disclosure only provisions of Statement of Financial Accounting Standards
No. 123, "Accounting for Stock-Based Compensation" (Statement 123), as amended
by Statement of Financial Accounting Standards No. 148, "Accounting for
Stock-Based Compensation-Transition and Disclosure". The Company's stock option
plans are accounted for in accordance with the provisions of Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" and
as such, no compensation expense has been recorded for these plans. Had
compensation expense for the Company's stock option plans been determined
consistent with Statement 123, the Company's net income and earnings per share
for the periods ended June 30, 2004 and 2003 would have been as follows:
(dollars in thousands except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
2004 2003 2004 2003
-------------------- ----------------------
Net income:
As reported $14,371 13,411 28,504 26,603
Deduct: total stock-based
compensation expense
determined under fair
value based method
for all awards, net of
related tax effects (165) (231) (331) (463)
------------------------- --------------------------
Pro forma net income $14,206 13,180 28,173 26,140
-------------------------- ---------------------------
Earnings per share:
Basic - as reported $ .193 .180 .384 .358
Basic - pro forma .191 .177 .379 .352
Diluted - as reported .191 .178 .380 .354
Diluted - pro forma .189 .175 .375 .348
The weighted average fair value of each option as of the grant date was
estimated using the Black-Scholes pricing model, and calculated in accordance
with Statement 123. No options were granted in the first six months of 2004.
8
TrustCo Bank Corp NY
Notes to Consolidated Interim Financial Statements (unaudited) continued
4. Comprehensive Income (Loss)
Comprehensive income (loss) for the three month periods ended June 30, 2004 and
2003 was $(6,720,000) and $18,057,000, respectively, and $11,386,000 and
$27,844,000 for the six month periods ended June 30, 2004 and 2003,
respectively. The following summarizes the components of other comprehensive
income (loss):
(dollars in thousands)
Three months ended June 30
2004 2003
----------------------------------------
Unrealized holding gains (losses) arising during period, net of
tax (pre-tax loss of $31,471 for 2004 and pre-tax gain of $9,917
for 2003)
$(18,933) 5,997
Reclassification adjustment for net gain realized in net income
during the period, net of tax (pre-tax gains of $3,588 for 2004
and $2,234 for 2003) (2,158) (1,351)
--------------------------------------
Other comprehensive income (loss) $(21,091) 4,646
=======================================
(dollars in thousands)
Six months ended June 30
2004 2003
Unrealized holding gains (losses) arising during period, net of
tax (pre-tax loss of $20,676 for 2004 and pre-tax gain of $6,854
for 2003) $(12,442) 4,436
Reclassification adjustment for net gain realized in net income
during the period, net of tax (pre-tax gains of $7,774 for 2004
and $5,330 for 2003) (4,676) (3,195)
---------------------------------------
Other comprehensive income (loss) $(17,118) 1,241
=======================================
9
TrustCo Bank Corp NY
Notes to Consolidated Interim Financial Statements (unaudited) continued
5. Benefit Plans
The table below outlines the component's of the Company's net periodic expense
(benefit) recognized during the periods ended June 30, 2004 and 2003 for its
pension and other postretirement benefit plans:
Components of Net Periodic Expense/(Benefit) for the three months ended June 30,
Pension Benefits Other Postretirement Benefits
2004 2003 2004 2003
---------------------------- -----------------------------
Service cost $ 216 174 1 1
Interest cost 410 352 8 12
Expected return on plan assets (348) (416) (58) (94)
Amortization of prior
service cost (credit) 38 6 (114) (101)
Amortization of net actuarial gain - - - (11)
---------------------------- -----------------------------
Net periodic expense/(benefit) $ 316 116 (163) (193)
============================ ==============================
Components of Net Periodic Expense/(Benefit) for the six months ended June 30,
Pension Benefits Other Postretirement Benefits
2004 2003 2004 2003
----------------------- ------------------------------
Service cost $ 432 348 2 2
Interest cost 820 704 16 24
Expected return on plan assets (859) (832) (247) (188)
Amortization of prior
service cost (credit) 76 12 (228) (202)
Amortization of net actuarial gain - - - (22)
------------------------ -------------------------------
Net periodic expense/(benefit) $ 469 232 (457) (386)
========================= ===============================
10
TrustCo Bank Corp NY
Notes to Consolidated Interim Financial Statements (unaudited) continued
5. Benefit Plans (Continued)
Contributions
The Company previously disclosed in its consolidated financial statements for
the year ended December 31, 2003 , that it did not expect to make any
contributions to its pension and other postretirement benefit plans in 2004. As
of June 30, 2004, no contributions have been made. The Company presently
anticipates that, in accordance with IRS limitations and accounting standards,
it will not make any contributions in 2004.
6. Guarantees
The Company does not issue any guarantees that would require
liability-recognition or disclosure, other than its standby letters of credit.
Standby letters of credit are conditional commitments issued by the Company to
guarantee the performance of a customer to a third party. Standby letters of
credit generally arise in connection with lending relationships. The credit risk
involved in issuing these instruments is essentially the same as that involved
in extending loans to customers. Contingent obligations under standby letters of
credit totaled approximately $ 4.2 million at June 30, 2004 and represent the
maximum potential future payments the Company could be required to make.
Typically, these instruments have terms of twelve months or less and expire
unused; therefore, the total amounts do not necessarily represent future cash
requirements. Each customer is evaluated individually for creditworthiness under
the same underwriting standards used for commitments to extend credit and
on-balance sheet instruments. Company policies governing loan collateral apply
to standby letters of credit at the time of credit extension. Loan-to-value
ratios are generally consistent with loan-to-value requirements for other
commercial loans secured by similar types of collateral. The fair value of the
Company's standby letters of credit at June 30, 2004 was insignificant.
11
Report of Independent Registered Public Accounting Firm
The Board of Directors and Shareholders
TrustCo Bank Corp NY:
We have reviewed the consolidated statement of condition of TrustCo Bank Corp NY
and subsidiaries (the Company) as of June 30, 2004, the related consolidated
statements of income for the three month and six month periods ended June 30,
2004 and 2003, and the related consolidated statements of cash flows for the six
month periods ended June 30, 2004 and 2003. These consolidated financial
statements are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the Public
Company Accounting Oversight Board (United States). A review of interim
financial information consists principally of applying analytical procedures and
making inquiries of persons responsible for financial and accounting matters. It
is substantially less in scope than an audit conducted in accordance with the
standards of the Public Company Accounting Oversight Board (United States), the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the consolidated financial statements referred to above for them to
be in conformity with U.S. generally accepted accounting principles.
We have previously audited, in accordance with standards established by the
Public Company Accounting Oversight Board (United States), the consolidated
statement of condition of TrustCo Bank Corp NY and subsidiaries as of December
31, 2003, and the related consolidated statements of income, changes in
shareholders' equity, and cash flows for the year then ended (not presented
herein); and in our report dated February 20, 2004, we expressed an unqualified
opinion on those consolidated financial statements. In our opinion, the
information set forth in the accompanying consolidated statement of condition as
of December 31, 2003 is fairly stated, in all material respects, in relation to
the consolidated statement of condition from which it has been derived.
/s/KPMG LLP
- ------------------------------
KPMG LLP
Albany, New York
July 12, 2004
12
TrustCo Bank Corp NY
Management's Discussion and Analysis
June 30, 2004
The review that follows focuses on the factors affecting the financial condition
and results of operations of TrustCo Bank Corp NY ("TrustCo" or "Company")
during the three month and six month periods ended June 30, 2004, with
comparisons to 2003 as applicable. Interest income, net interest income and net
interest margin are presented on a fully taxable equivalent basis in this
discussion. The consolidated interim financial statements and related notes, as
well as the 2003 Annual Report to Shareholders should be read in conjunction
with this review. Amounts in prior period consolidated interim financial
statements are reclassified whenever necessary to conform to the current
period's presentation.
Forward-looking Statements
Statements included in this review and in future filings by TrustCo with the
Securities and Exchange Commission, in TrustCo's press releases, and in oral
statements made with the approval of an authorized executive officer, which are
not historical or current facts, are "forward-looking statements" made pursuant
to the safe harbor provisions of the Private Securities Litigation Reform Act of
1995, and are subject to certain risks and uncertainties that could cause actual
results to differ materially from historical earnings and those presently
anticipated or projected. TrustCo wishes to caution readers not to place undue
reliance on any such forward-looking statements, which speak only as of the date
made. The following important factors, among others, in some cases have affected
and in the future could affect TrustCo's actual results, and could cause
TrustCo's actual financial performance to differ materially from that expressed
in any forward-looking statement: (1) credit risk, (2) interest rate risk, (3)
competition, (4) changes in the regulatory environment, and (5) changes in
general business and economic trends. The foregoing list should not be construed
as exhaustive, and the Company disclaims any obligation to subsequently revise
any forward-looking statements to reflect events or circumstances after the date
of such statements, or to reflect the occurrence of anticipated or unanticipated
events.
Following this discussion is the table "Distribution of Assets, Liabilities and
Shareholders' Equity: Interest Rates and Interest Differential" which gives a
detailed breakdown of TrustCo's average interest earning assets and interest
bearing liabilities for the three months and six months ended June 30, 2004 and
2003.
Overview
TrustCo recorded net income of $14.4 million, or $0.191 of diluted earnings per
share for the three months ended June 30, 2004, as compared to net income of
$13.4 million or $0.178 of diluted earnings per share in the same period in
2003. For the six month period ended June 30, 2004, TrustCo recorded net income
of $28.5 million, or $0.380 of diluted earnings per share, as compared to $26.6
million, or $0.354 of diluted earnings per share for the comparable period in
2003.
13
TrustCo Bank Corp NY
Management's Discussion and Analysis - continued
June 30, 2004
The primary factors accounting for the year to date increases are:
` A $112.7 million increase in the average balance of interest
earning assets from $2.60 billion for the six-month period ended
June 30, 2003 to $2.71 billion for the six-month period ended
June 30, 2004,
` A reduction in the provision for loan losses from $600 thousand in 2003 to
$300 thousand in 2004,
` An increase in total noninterest income from $15.4 million in
2003 to $17.1 million in 2004. Within this category, securities
transactions resulted in $5.3 million of net gains in 2003
compared to $7.8 million in 2004, and
` A reduction in total noninterest expense from $25.2 million for the six
months ended June 30, 2003 to $24.2 million for the comparable period in
2004.
Partially offsetting these year to date positive factors was a decrease in net
interest margin from 3.98% in 2003 to 3.87% in 2004.
Asset/Liability Management
The Company strives to generate superior earnings capabilities through a mix of
core deposits, funding a prudent mix of earning assets. This is, in its most
fundamental form, the essence of asset/liability management. Additionally,
TrustCo attempts to maintain adequate liquidity and reduce the sensitivity of
net interest income to changes in interest rates to an acceptable level while
enhancing profitability both on a short-term and long-term basis.
The following Management's Discussion and Analysis for the second quarter and
first six months of 2004 compared to the comparable periods in 2003 is greatly
affected by the change in interest rates in the marketplace in which TrustCo
competes. Included in the 2003 Annual Report to Shareholders is a description of
the effect interest rates had on the results for the year 2003 compared to 2002.
Most of the same market factors discussed in the 2003 Annual Report also had a
significant impact on 2004 results.
Interest rates have remained at low levels during the second quarter of 2004 and
for the six months ended June 30,2004. The federal funds rate was 1.00% for most
of the first half of 2004 and was increased to 1.25% on June 30, 2004. The
federal funds rate has a significant effect on the general marketplace and
impacts the rates earned on loans and investments along with rates paid on
deposits. As described in this management's discussion and analysis, the effect
of this prolonged period of low interest rates has caused the average yield on
the interest earning assets to decrease from 5.70% for the first half of 2003 to
5.27% for the comparable period in 2004, a reduction of 43 basis points. Along
with this reduction in the yields on assets, there has been a corresponding
decrease in the rates paid on interest bearing liabilities from 1.97% in 2003 to
1.60% for the first half of 2004. The net effect of these changes has resulted
in a net interest margin of 3.87% on a year to date basis for 2004 compared to
3.98% for 2003.
14
During the second quarter of 2004 market interest rates on securities and loans
have increased in anticipation of increases in the federal funds rate. As an
example, the 10 year treasury bond yielded 3.84% at the end of the first quarter
of 2004 and has increased 74 basis points to 4.58% as of June 30, 2004. These
changes have had a significant impact on the market value of the securities
available for sale portfolio. At March 31, 2004 the net unrealized gain in the
securities available for sale portfolio was $41.6 million as compared to $ 6.5
million at June 30, 2004. This increase in market interest rates has significant
implications on the fair value of assets and liabilities on the balance sheet
along with net interest income implications as the Company reinvests excess
liquidity at these higher interest rates. Through early August there has not yet
been a noticeable corresponding increase in rates on interest bearing
liabilities.
Earning Assets
Total average balance of interest earning assets increased from $2.62 billion
for the second quarter of 2003 to $2.75 billion for the second quarter of 2004
with an average yield of 5.58% in 2003 and 5.16% in 2004. Income on earning
assets decreased during this same time-period from $36.5 million in 2003 to
$35.5 million in 2004.
For the six month period ended June 30, 2004, the average balance of interest
earning assets was $2.71 billion, an increase of $112.7 million from the
comparable period in 2003 of $2.60 billion. The average yield on interest
earning assets was 5.70% for 2003, compared to 5.27% in 2004. The increase in
the average balance of earning assets did not offset the decrease in the yield
earned on these assets, thereby resulting in a reduction in interest income of
$2.6 million to $71.2 million for the six months of 2004, compared to $73.8
million for the six months of 2003.
Loans
The average balance of loans for the second quarter was $1.16 billion in 2004
and $1.31 billion in 2003. The yield on loans decreased from 6.96% in 2003 to
6.35% in 2004. The combination of the lower average balances and the lower rates
resulted in a decrease in the interest income on loans by $4.3 million.
For the six-month period ended June 30, 2004, the average balance in the loan
portfolio was $1.16 billion compared to $1.35 billion for the comparable period
in 2003. The average yield decreased from 7.04% in 2003 to 6.41% in 2004. The
decrease in the average balance of loans outstanding and the impact of the
decrease in the yield resulted in total interest income of $37.2 million in 2004
compared to $47.3 million in 2003.
15
During the second quarter and first half of 2004, the balance of the loan
portfolio decreased primarily as a result of residential mortgages, though
changes were also noted in other loan areas. The average balance of residential
mortgage loans for the first half of 2004 was $779.8 million compared to $982.7
million in 2003, a decrease of 20.6%. The average yield on residential mortgage
loans decreased by 51 basis points compared to 2003. The average balance of
residential mortgage loans for the second quarter of 2004 was $777.4 million
compared to $939.5 million for the comparable period in 2003. The average yield
decreased to 6.72% for the second quarter of 2004 compared to 7.26% for 2003.
TrustCo actively markets the residential mortgage loan products within its
market territory. Mortgage loan rates are affected by a number of factors
including the prime rate, the federal funds rate, rates set by competitors and
secondary market participants. As noted previously, market interest rates have
dropped significantly as a result of national economic policy in the United
States. During this period of low interest rates, TrustCo aggressively marketed
the unique aspects of its loan products thereby attempting to create a
differentiation from other lenders. These unique aspects include extremely low
closing costs, fast turnaround time on loan approvals, no escrow or mortgage
insurance requirements and the fact that the Company holds these loans in
portfolio and does not sell them into the secondary markets. However, the
decrease in the residential mortgage loan portfolio reflects the results of
historical low interest rates in the residential loan area and the desire by
loan customers to obtain these historic low rates. In light of TrustCo's
decision to hold loans in portfolio, management made the decision to offer loans
at slightly higher interest rates compared to the local competition. The end
result was the decline in balances in this portfolio from a combination of lower
originations and higher prepayments from refinancings with other lenders.
TrustCo was somewhat successful in its marketing efforts with respect to the
unique aspects of its loan products, however, these successes were not enough to
offset the amount of refinancings as a result of customers looking for
absolutely the lowest interest rates being offered in the marketplace.
Though there is debate among nationally recognized economists, the general tenor
of the national economy is for improvement and increases in long-term interest
rates. Consequently the significant amount of refinancing that has occurred may
be substantially completed with only residual effects into the second half of
2004. Assuming a rise in long-term interest rates, the Company would anticipate
that the unique features of its loan product will once again attract customers
in the residential mortgage loan area.
16
TrustCo Bank Corp NY
Management's Discussion and Analysis - continued
June 30, 2004
The impact of the prolonged period of decreases in the benchmark interest rate
indexes (prime rate, federal funds rate, etc.) is apparent in the decrease in
the yield earned in the commercial loan, home equity loan and consumer loan
portfolios. The average yields earned on these loan types in 2004 were 55 bp, 28
bp andr 162 bp respectively, less than the average yields earned in the first
six months of 2003.
The average balance of home equity lines of credit increased to $179.3 million
in the second quarter of 2004 compared to $150.9 million in the comparable
period in 2003. The average yield during this time period was 3.88% in 2004 and
4.10% in 2003. The six month results reflected these same trends with an average
balance of $146.6 million in 2003 and $176.8 million in 2004. The average yield
for the six months of 2004 was 3.88% and 4.16% for 2003. The increase in the
average balance of home equity lines of credit reflects consumers' desire to
obtain the lowest cost financing vehicles available. Trustco's home equity line
of credit is at the prime rate during an introductory period and then floats
with prime over the life of the line. Closing costs are waived for consumers so
long as the line remains active and utilized for a set period of time.
Securities Available for Sale
During the second quarter of 2004, the average balance of securities available
for sale was $1.09 billion with a yield of 5.80%, compared to $832.5 million for
the second quarter of 2003 with a yield of 5.89%. The combination of the
increase in average balance partially offset by the decrease in the average
yield caused an increase in interest income on securities available for sale of
approximately $3.6 million between the second quarter of 2004 and 2003.
The six-month results reflect similar trends. The total average balance of
securities available for sale during the six months of 2004 was $1.06 billion
with an average yield of 5.97% compared to an average balance for 2003 of $741.3
million with a yield of 6.30%.
Within the portfolio of securities available for sale, there was a $246.2
million increase in the average balance of US Treasury and agency obligations
from $479.2 million in the second quarter of 2003 to $725.4 million for the
comparable period in 2004. The yield on this category of securities increased
from 4.76% in 2003 to 5.45% in 2004.
The increased balances of securities available for sale was in response to the
historically low yield available in the federal funds marketplace, increased
cash flow as a result of loan refinancing and deposit inflows. Though the
investment yields on 2004 purchases are overall lower than the yield earned on
the existing securities portfolio, the new investments provide additional
interest income and help to offset the loss of interest income from other areas.
Virtually all of the new purchases of US Treasury and agency obligations were
callable agency bonds issued by Freddie Mac, FNMA and the FHLB.
17
These bonds have call features that allow the issuer to redeem the bonds at
predetermined times.
The six month balance for US Treasury and agency obligations increased from
$365.0 million in 2003 to $735.5 million in 2004. The yield was 5.64% in 2004 as
compared to 4.99% in 2003.
The other securities category also increased during the second quarter of 2004
to an average balance of $146.2 million as compared to $63.7 million for the
comparable period in 2003. This increase was due to the purchase of
approximately $128.2 million of collateralized mortgage obligations during 2004.
All of the collateralized mortgage obligations are government agency issued
bonds with relatively short anticipated cash flow lives.
As previously noted, during the second half of 2003 and into 2004 management
decided to invest some of the additional cash flows coming from the loan
portfolio refinancings into the securities available for sale portfolio so as to
provide interest income and as a means of utilizing these funds other than in
overnight investments. The securities purchased during this time period have
been primarily federal agency bonds consistent with the Company's past
practices. While this strategy provides the Company with additional interest
income over the federal funds rate, it does subject these assets to a greater
degree of interest rate risk. General market interest rate increases impact the
market value of the securities available for sale portfolio thereby creating a
reduction in the overall portfolio's unrealized gain position and lowering the
Company's accumulated other comprehensive income (a component of shareholders'
equity).
Federal Funds Sold and Other Short-Term Investments
During the second quarter of 2004, the average balance of federal funds sold and
other short-term investments was $496.2 million with a yield of 0.98%, compared
to the average balance for the three month period ended June 30, 2003 of $475.5
million with an average yield of 1.25%. The $20.8 million increase in the
average balance, combined with the 27 basis points decrease in the average
yield, resulted in total interest income on federal funds sold and other
short-term investments of $1.2 million for 2004 compared to $1.5 million for
2003.
During the six-month period ended June 30, 2004, the average balance of federal
funds sold and other short-term investments was $486.1 million with a yield of
0.99% compared to an average balance of $507.8 million in 2003 with an average
yield of 1.25%.
Changes in the yield on the federal funds and other short-term investment
portfolios resulted primarily from changes in the target rate set of the Federal
Reserve Board for federal funds sold. That rate was increased at the end of June
2004 from 1.00% to 1.25%.
18
Funding Opportunities
TrustCo utilizes various funding sources to support its earning asset portfolio.
The vast majority of the Company's funding comes from traditional deposit
vehicles such as savings, interest bearing checking and time deposit accounts.
During the quarter, total average interest bearing liabilities were $2.38
billion for 2004 and $2.26 billion for 2003. The rate paid on total interest
bearing liabilities was 1.59% for the second quarter of 2004 and 1.84% for 2003.
Total interest expense for the second quarter decreased approximately $906
thousand to $9.4 million for 2004 compared to $10.3 million for 2003.
Similar changes in interest bearing liabilities were noted for the six-month
period. Total interest bearing liabilities were $2.35 billion for the six-month
periods ended June 30, 2004 and $2.25 billion for 2003. The rate paid on total
interest bearing liabilities was 1.60% for 2004 and 1.97% for 2003 and total
interest expense was $18.8 million in 2004 and $22.1 million in 2003.
Demand deposit average balances increased $20.6 million for the second quarter
of 2004 compared to the second quarter of 2003. Demand deposits averaged $208.6
million in 2004 and $188.0 million in 2003. On a year to date basis, average
demand deposits were $201.8 million in 2004 compared to $180.7 million in 2003.
Interest bearing deposit balances have increased from an average of $2.12
billion for the first six months of 2003 to $2.25 billion for 2004. Each of the
deposit categories has also increased with the most notable being the increase
in the average balance of savings accounts which averaged $743.2 million in 2003
and $798.2 million in 2004. TrustCo has experienced a deposit inflow primarily
as a result of customers moving funds back into the banking system from the
stock and bond market and from TrustCo's new branch openings.
The average balance of certificates of deposit and other time deposits increased
from $911.5 million for the six-month period ended June 30, 2003 to $956.9
million for the comparable period in 2004. The average yield on these deposits
decreased from 3.22% in 2003 to 2.71% in 2004.
The second quarter results reflect similar trends as noted for the six-month
results. Interest bearing deposits increased from an average of $2.14 billion
for the second quarter of 2003 to $2.27 billion in 2004. The average yield paid
on these deposits was 1.89% in 2003 and 1.64% in 2004. Savings account balances
increased from an average of $761.0 million for the second quarter of 2003 to
$811.8 million for the comparable period in 2004. Certificates of deposit and
other time deposits also increased during the quarter from an average of $911.6
million in 2003 to $961.6 million in 2004.
19
In addition to customers moving funds back into the banking market, TrustCo has
also attracted customers as a result of the branch expansion program. New
branches opened since 2003 are continuing to attract customers which has added
to the deposit increases.
Short-term borrowings for the quarter averaged $112.1 million in 2004 compared
to $124.4 million in 2003. The average yield decreased during this time period
from 0.83% to 0.72% for the second quarter of 2004. On a year to date basis,
short term borrowings averaged $105.9 million for the six months ended June 30,
2004 compared to $136.3 million for the comparable period in 2003. The average
yield was 0.72% for the six months of 2004 and 0.90% for 2003.
Net Interest Income
Taxable equivalent net interest income decreased by $114 thousand to $26.0
million for the second quarter of 2004. The net interest spread decreased 17
basis points between 2003 and 2004 and the net interest margin decreased by 22
basis points.
Taxable equivalent net interest income for the first six months of 2004 was
$52.5 million, an increase of approximately $690 thousand over the $51.8 million
for the first six months of 2003. Net interest spread decreased 6 basis points
to 3.67% and net interest margin decreased 11 basis points to 3.87% for the
six-month period ended June 30, 2004, compared to the six-month period ended
June 30, 2003.
Nonperforming Assets
Nonperforming assets include nonperforming loans, which are those loans in a
nonaccrual status, loans that have been restructured, and loans past due three
payments or more, and still accruing interest. Also included in the total of
nonperforming assets are foreclosed real estate properties, which are
categorized as real estate owned.
Impaired loans are considered to be those commercial and commercial real estate
loans in a nonaccrual status and loans restructured since January 1, 1995, when
the accounting standards required the identification, measurement and reporting
of impaired loans. The following will describe the nonperforming assets of
TrustCo as of June 30, 2004.
20
TrustCo Bank Corp NY
Management's Discussion and Analysis - continued
June 30, 2004
Nonperforming loans: Total nonperforming loans were $2.9 million at June 30,
2004, a decrease from the $3.9 million of nonperforming loans at June 30, 2003.
There were no nonaccrual loans at June 30, 2004 and 2003. Restructured loans
were $2.9 million at June 30, 2004 compared to $3.9 million at June 30, 2003.
There were no loans past due three payments or more and still accruing interest
at June 30, 2004 and 2003.
All of the $2.9 million of nonperforming loans as of June 30, 2004 are
restructured residential real estate or retail consumer loans. The vast majority
of nonperforming loans in the past were concentrated in the commercial and
commercial real estate portfolios. Since 2000, there has been a continued
shifting in the components of Trustco's problem loans and chargeoffs from
commercial and commercial real estate to the residential real estate and retail
consumer loan portfolios. Contributing factors to this shift include:
` The overall emphasis within TrustCo for residential real estate originations,
` The relatively weak economic environment in the upstate New York territory,
and
` The reduction in real estate values in selected sections of
TrustCo's market area that has occurred since the middle of the
1990's, thereby causing a reduction in the collateral that
supports the real estate loans.
Consumer defaults and bankruptcies have increased over the last several years
and this has lead to an increase in defaults on loans. TrustCo strives to
identify borrowers that are experiencing financial difficulties and to work
aggressively with them to minimize losses or exposures.
Total impaired loans at June 30, 2004 of $2.7 million, consisted of restructured
residential loans. During the first six months of 2004, there have been $61
thousand of commercial loan charge offs, $192 thousand of consumer loan charge
offs and $3.3 million of mortgage loan charge offs as compared with $134
thousand of commercial loan charge offs, $290 thousand of consumer loan charge
offs and $5.3 million of mortgage loan charge offs in the first six months of
2003. Recoveries during the first six-month periods have been $2.8 million in
2004 and $2.0 million in 2003.
Real estate owned: There was no real estate owned as of June 30, 2004 and 2003.
Allowance for loan losses: The balance of the allowance for loan losses is
maintained at a level that is, in management's judgment, representative of the
amount of the risk inherent in the loan portfolio.
21
At June 30, 2004, the allowance for loan losses was $48.3 million, which
represents a decrease from the $48.7 million in the allowance at December 31,
2003. The allowance represents 4.14% of the loan portfolio as of June 30, 2004
compared to 3.88% at June 30, 2003. The provision charged to expense was $150
thousand for the second quarter of 2004 and $300 thousand for the second quarter
of 2003. For the six-month periods, the provision charged to expense was $300
thousand for 2004 and $600 thousand for 2003.
In deciding on the adequacy of the allowance for loan losses, management reviews
the current nonperforming loan portfolio as well as loans that are past due and
not yet categorized as nonperforming for reporting purposes. Also, there are a
number of other factors that are taken into consideration, including:
` The magnitude and nature of the recent loan charge offs and the
movement of charge offs to the residential real estate loan
portfolio,
` The change in the loan portfolio and the implication that has in relation
to the economic climate in the bank's business territory,
` Changes in underwriting standards in the competitive environment in which
TrustCo operates,
` Significant growth in the level of losses associated with bankruptcies
and the time period needed to foreclose, secure and dispose of collateral,
and
` The relatively weak economic environment in the upstate New York
territory combined with declining real estate prices.
In the Company's primary market area, consumer bankruptcies and defaults in
general have risen significantly since the 1990's. This trend appears to be
continuing as a result of economic strife and the relative ease of access by
consumers to additional credit. Job growth in the upstate New York area has been
modest to declining and there continues to be a shifting of higher paying jobs
in manufacturing and government to lower paying service jobs.
Management continues to monitor these and other asset quality trends in the
review of allowance adequacy.
Liquidity and Interest Rate Sensitivity
TrustCo seeks to obtain favorable sources of funding and to maintain prudent
levels of liquid assets in order to satisfy varied liquidity demands. TrustCo's
earnings performance and strong capital position enable the Company to raise
funds easily in the marketplace and to secure new sources of funding. The
Company actively manages its liquidity through target ratios established under
its liquidity policies. Continual monitoring of both historical and prospective
ratios allows TrustCo to employ strategies necessary to maintain adequate
liquidity. Management has also defined various degrees of adverse liquidity
situations, which could potentially occur, and has prepared appropriate
contingency plans should such a situation arise.
22
Noninterest Income
Total noninterest income for the three months ended June 30, 2004 was $8.4
million, an increase of $867 thousand from the comparable period in 2003. During
the 2004 period, the Company recorded net securities gains of $3.6 million
compared to $2.2 million for the comparable period in 2003. Excluding these
securities transactions, noninterest income decreased from $5.3 million in the
second quarter of 2003 to $4.8 million for the comparable period in 2004.
Total noninterest income was $17.1 million for the six months of 2004 compared
to $15.4 million for 2003. Excluding net securities gains of $7.8 million and
$5.3 million, in the six month period ended June 30, 2004 and 2003,
respectively, the balances for 2004 and 2003 would have been $9.3 million and
$10.0 million, respectively.
Net securities transactions have been significant for both the six-month and
quarterly results in 2004 and 2003. The level of these transactions reflects
management's decision to liquidate certain investments as interest rates were at
historically low levels and therefore the gains on security sales were high.
These sales provide the Company with additional liquidity for potential
reinvestment at higher interest rates later in 2004. Management also has begun
liquidating certain of the equity investments that had accumulated over the last
several years as part of the expansion program to acquire other companies.
Trust department income decreased by $41 thousand to $1.5 million for the second
quarter of 2004. The reduction in trust fee income is the result of a decrease
in assets under management from $961 million as of March 31, 2004 to $945
million as of June 30, 2004.
Service fees and other income are down between 2004 and 2003 due primarily to
loan volume and refinancing activities.
Noninterest Expenses
Total noninterest expense for the second quarter of 2004 and 2003 was $11.7
million and $12.6 million, respectively. For the six months ended June 30, 2004
and 2003, total noninterest expense was $24.2 million and $25.2 million,
respectively.
Salaries and employee benefits cost increased from $5.1 million for the second
quarter of 2003 to $5.2 million for the comparable period in 2004. The increase
in salaries and employee benefits is the result of additional personnel due to
the branch expansion program and normal employee turnover.
23
Similar increases in salaries and benefits were also noted for the six month
period ended June 30, 2004 compared to 2003. Total salaries and employee
benefits were $10.5 million for 2004 and $10.3 million for 2003.
Net occupancy expense increased $98 thousand for the second quarter of 2004
compared to 2003 due primarily to the new branch operations and the cost of
utilities.
The TrustCo branch expansion program added two new offices during the first six
months of 2003 and five additional sites in the second half of 2003. No new
locations were opened during the first half of 2004, however approximately seven
locations are under development in the Capital District, downstate New York and
the Orlando, Florida regions and are expected to open prior to year-end 2004.
Equipment expense decreased approximately $201 thousand during the second
quarter of 2004 compared to 2003 as a result of reduced computer expense due to
contracts not being renewed in 2004 as a result of the 2002 computer software
conversion. On a year to date basis, equipment expense decreased by $974
thousand to $940 thousand due to this non-renewal and the write-off in 2003 of
equipment and software no longer utilized.
Professional service expenses for the second quarter of 2004 were $953 thousand,
an increase of $176 thousand from the comparable period in 2003. On a year to
date basis, professional service expenses were $1.8 million in 2004 compared to
$1.4 million in 2003. Included in the 2004 expense accounts were additional fees
paid for consultants to assist in the upcoming 2004 computer software
conversion. Those expenses were not incurred in 2003.
Outsourced services decreased from $1.9 million in the second quarter of 2003 to
$1.1 million for the second quarter of 2004. On a year to date basis, outsourced
services were $2.2 million in 2004 compared to $3.1 million in 2003. These costs
are for data processing, item processing and certain back room operations that
were transferred to a third party vendor in the fourth quarter of 2003. The
decrease in outsourced services expense between 2003 and 2004 was the
elimination of one item of outsourced service in the latter part of 2003 that
was brought back in-house. There was a reduction in the fees paid to the third
party services as a result of this change, however the additional work was
absorbed by the existing TrustCo employees.
24
Income Taxes
In the second quarter of 2004 and 2003, TrustCo recognized income tax expense of
$6.8 million and $5.6 million, respectively. This resulted in an effective tax
rate of 32.2% for 2004 and 29.5% for 2003. For the six months of 2004, total
income tax expense was $13.8 million compared to $11.0 million for 2003. This
resulted in an effective tax rate of 32.6% for 2004 and 29.3% for 2003. The
increase in effective tax rates during 2004 is primarily due to a reduction in
the proportion of tax exempt income to total pre-tax income as compared to 2003.
Capital Resources
Consistent with its long-term goal of operating a sound and profitable financial
organization, TrustCo strives to maintain strong capital ratios. New issues of
equity securities have not been required since traditionally, most of its
capital requirements are met through the capital retention.
Total shareholders' equity at June 30, 2004 was $214.6 million, a decrease of
$12.1 million from the year-end 2003 balance of $226.8 million. The change in
shareholders' equity between year-end 2003 and June 30, 2004 primarily reflects
net income retained by TrustCo ($ 6.2 million), the proceeds from shares issued
upon the exercise of stock options ($5.3 million), a $17.1 million decrease in
accumulated other comprehensive income and a $6.5 million increase in treasury
stock.
The change in the accumulated other comprehensive income is a result of the
reduction in the unrealized appreciation in value of the securities available
for sale portfolio. As noted previously, since the end of the first quarter of
2004 there has been a significant increase in the general market interest rates,
which have therefore caused a reduction in the market value of these securities.
TrustCo declared dividends of $0.300 per share during the first six months of
2004 and 2003. These resulted in a dividend payout ratio of 78.1% in 2004 and
83.6% in 2003. The Company achieved the following capital ratios as of June 30,
2004 and 2003.
June 30, Minimum Regulatory
2004 2003 Guidelines
--------------------------------------------
Tier 1 risk adjusted
capital 16.61% 16.33 4.00
Total risk adjusted
capital 17.89 17.62 8.00
25
TrustCo Bank Corp NY
Management's Discussion and Analysis - continued
June 30, 2004
In addition, at June 30, 2004 and 2003, the consolidated equity to total assets
ratio (excluding the mark to market effect of securities available for sale) was
7.41% and 7.76%, respectively, compared to a minimum regulatory guideline of
4.00%.
Critical Accounting Policies
Pursuant to SEC guidance, management of the Company is encouraged to evaluate
and disclose those accounting policies that are judged to be critical policies -
those most important to the portrayal of the Company's financial condition and
results, and that require management's most difficult subjective or complex
judgments.
Management considers the accounting policy relating to the allowance for loan
losses to be a critical accounting policy given the inherent uncertainty in
evaluating the levels of the allowance required to cover credit losses in the
portfolio and the material effect that such judgments can have on the results of
operations. Included in Note 1 to the Consolidated Financial Statements
contained in the Company's 2003 Annual Report on Form 10-K is a description of
the significant accounting policies that are utilized by the Company in the
preparation of the Consolidated Financial Statements.
26
TrustCo Bank Corp NY
Management's Discussion and Analysis
STATISTICAL DISCLOSURE
I. DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY;
INTEREST RATES AND INTEREST DIFFERENTIAL
The following table summarizes the component distribution of average balance sheet,
related interest income and expense and the average annualized yields on interest earning
assets and annualized rates on interest bearing liabilities of TrustCo (adjusted for tax
equivalency) for each of the reported periods. Nonaccrual loans are included in loans for this
analysis. The average balances of securities available for sale are calculated using amortized
costs for these securities. Included in the balance of shareholders' equity is unrealized appreciation,
net of tax, in the available for sale portfolio of $8.4 million in 2004 and $26.8 million in 2003. The
subtotals contained In the following table are the arithmetic totals of the items contained in that
category.
Three 2004 Three 2003
Months Months
--------- --- ------- --------- --- -------- --- ------- ------- ---------- -------- ----------
Average Interest Average Average Interest Average Change in Variance Variance
Balance Rate Balance Rate Interest Balance Rate
(dollars in thousands) Income/ Change Change
Expense
Assets
Commercial loans $ 193,113 $ 3,302 6.84% $ 202,690 $ 3,693 7.29% $(391) $(134) $(257)
Residential mortgage loans 777,383 13,050 6.72% 939,518 17,041 7.26% (3,991) (3,131) (860)
Home equity lines of credit 179,303 1,732 3.88% 150,925 1,540 4.10% 192 857 (665)
Installment loans 12,408 354 11.47% 14,220 461 13.04% (107) (57) (50)
----------- ----------- ------ -------- ------- -------- -------- ------- ------
Loans, net of unearned income 1,162,207 18,438 6.35% 1,307,353 22,735 6.96% (4,297) (2,465) (1,832)
Securities available for sale:
U.S. Treasuries and agencies 725,402 9,892 5.45% 479,208 5,707 4.76% 4,186 4,047 139
Mortgage-backed securities 49,930 657 5.26% 67,223 1,014 6.03% (357) 546 (903)
States and political
subdivisions 169,126 3,326 7.87% 222,340 4,440 7.99% (1,114) (965) (149)
Other 146,219 1,945 5.32% 63,745 1,107 6.95% 838 653 185
----------- ---------- ------ -------- -------- ------ --------- ------- -------
Total securities available 1,090,677 15,820 5.80% 832,516 12,268 5.89% 3,553 4,281 (728)
for sale
Federal funds sold and other
short-term investments 496,233 1,206 0.98% 475,475 1,482 1.25% (276) (114) (162)
----------- ----------- ------ -------- ------- ------- ------- -------- --------
Total Interest earning 2,749,117 35,464 5.16% 2,615,344 36,485 5.58% (1,020) 1,702 (2,722)
assets
------------------- ------------------------------------------------
Allowance for loan losses (49,020) (52,336)
Cash and non-interest earning 140,655 153,158
assets
----------- --------
Total assets $ 2,840,752 $ 2,716,166
=========== ===========
Liabilities and shareholders' equity
Deposits:
Interest bearing checking $ 331,312 395 0.48% $ 313,820 379 0.48% 16 141 (125)
Money market accounts 166,482 379 0.92% 148,607 508 1.37% (129) 368 (497)
Savings 811,822 1,982 0.98% 761,004 2,373 1.25% (391) 1,369 (1,760)
Time deposits 961,644 6,480 2.71% 911,604 6,822 3.00% (342) 2,580 (2,922)
----------- -------------------------------- -------------------------------------------------
Total interest bearing
deposits 2,271,260 9,236 1.64% 2,135,035 10,082 1.89% (846) 4,458 (5,304)
Short-term borrowings 112,124 201 0.72% 124,418 259 0.83% (58) (33) (25)
Long-term debt 158 2 5.45% 350 5 5.84% (2) (2) ---
----------- --------------------------------- ------------------------------------------------
Total interest bearing
liabilities 2,383,542 9,439 1.59% 2,259,803 10,346 1.84% (906) 4,423 (5,329)
------ ------ -------------------------
Demand deposits 208,612 187,977
Other liabilities 35,065 36,616
Shareholders' equity 213,533 231,770
----------- --------
Total liab. & shareholders'
equity $ 2,840,752 $ 2,716,166
=========== ==========
Net interest income 26,025 26,139 (114) (2,721) 2,607
-------- ------- --------------------------
Net interest spread 3.57% 3.74%
Net interest margin (net interest
Income to total interest earning
assets) 3.78% 4.00%
Tax equivalent adjustment (1,359) 1,740
------- --------
Net interest income per book $ 24,666 $ 24,399
====== ======
27
TrustCo Bank Corp NY
Management's Discussion and Analysis
STATISTICAL DISCLOSURE
I. DISTRIBUTION OF ASSETS, LIABILITIES AND SHAREHOLDERS' EQUITY;
INTEREST RATES AND INTEREST DIFFERENTIAL
The following table summarizes the component distribution of average balance sheet, related interest income
and expense and the average annualized yields on interest earning assets and annualized rates on interest bearing
liabilities of TrustCo (adjusted for tax equivalency) for each of the reported periods. Nonaccrual loans are included
in loans for this analysis. The average balances of securities available for sale are calculated using amortized costs
for these securities. Included in the balance of shareholders' equity is unrealized appreciation, net of tax, in the
available for sale portfolio of $15.3 million in 2004 and $27.2 million in 2003. The subtotals contained In the following
table are the arithmetic totals of the items contained in that category.
Six 2004 Six 2003
Months Months
----------- --- --------- -------- --- ------- ---- -------- ------- ---------- -------- --------
Average Interest Average Average Interest Average Change in Variance Variance
Balance Rate Balance Rate Interest Balance Rate
(dollars in thousands) Income/ Change Change
Expense
Assets
Commercial loans $ 192,755 $ 6,607 6.86% $ 202,121 $ 7,479 7.41% $(872) $(299) $(573)
Residential mortgage loans 779,822 26,481 6.79% 982,656 35,889 7.30% (9,408) (7,381) (2,027)
Home equity lines of credit 176,841 3,413 3.88% 146,618 3,019 4.16% 394 958 (564)
Installment loans 12,571 728 11.65% 14,523 953 13.27% (225) (120) (105)
--------- ---------- ------ ---------- -------------------------------------------------
Loans, net of unearned income 1,161,989 37,229 6.41% 1,345,918 47,340 7.04% (10,111) (6,842) 3,269)
Securities available for sale:
U.S. Treasuries and agencies 735,454 20,727 5.64% 364,981 9,098 4.99% 11,629 11,243 386
Mortgage-backed securities 59,206 1,537 5.19% 63,465 2,005 6.32% (468) 490 (958)
States and political
subdivisions 174,812 6,884 7.87% 222,643 8,907 8.00% (2,025) (1,754) (271)
Other 90,125 2,468 5.48% 90,186 3,335 7.40% (867) (676) (191)
----------- ------------------- -------- ------------------------------------------------
Total securities available
for sale 1,059,597 31,616 5.97% 741,275 23,345 6.30% 8,269 9,303 (1,034)
Federal funds sold and other
short-term investments 486,135 2,400 0.99% 507,836 3,137 1.25% (735) (304) (431)
----------- -------------------- -------- ------------------------------------------------
Total Interest earning
assets 2,707,721 71,245 5.27% 2,595,029 73,822 5.70% (2,577) 2,157 (4,734)
-------------------- ------------------------------------------------
Allowance for loan losses (49,259) (52,508)
Cash and non-interest earning
assets 152,798 160,954
----------- ----------
Total assets $ 2,811,260 $ 2,703,475
=========== ===========
Liabilities and shareholders' equity
Deposits:
Interest bearing checking $ 328,577 785 0.48% $ 316,454 890 0.57% (105) 80 (185)
Money market accounts 164,943 828 1.01% 146,388 1,061 1.46% (233) 316 (549)
Savings 798,231 3,905 0.98% 743,206 4,943 1.34% (1,038) 1,045 (2,083)
Time deposits 956,891 12,883 2.71% 911,526 14,541 3.22% (1,658) 1,922 (3,580)
----------- ---------------------------------- ------------------------------------------------
Total interest bearing
deposits 2,248,642 18,401 1.65% 2,117,574 21,435 2.04% (3,034) 3,363 (6,397)
Short-term borrowings 105,885 379 0.72% 136,296 606 0.90% (227) (129) (98)
Long-term debt 182 5 5.55% 373 11 5.89% (6) (6) ---
----------- --------------------------------- ------------------------------------------------
Total interest bearing
liabilities 2,354,709 18,785 1.60% 2,254,243 22,052 1.97% (3,267) 3,228 (6,495)
------ ------ ----------------------------
Demand deposits 201,832 180,728
Other liabilities 32,751 36,163
Shareholders' equity 221,968 232,341
----------- --------
Total liab. & shareholders'
equity $ 2,811,260 $ 2,703,475
=========== ==========
Net interest income 52,460 51,770 690 (1,071) 1,761
--------- ---------- ----------------------------
Net interest spread 3.67% 3.73%
Net interest margin (net interest
Income to total interest earning
assets) 3.87% 3.98%
Tax equivalent adjustment (2,731) 3,676
------ ------
Net interest income per book $ 49,729 $ 48,094
====== ======
28
Item 3.
Quantitative and Qualitative Disclosures about Market Risk
As detailed in the Annual Report to Shareholders as of December 31, 2003, the
Company is subject to interest rate risk as its principal market risk. As noted
in Item 2 (Management's Discussion and Analysis for the six months ended June
30, 2004), the Company continues to respond to changes in interest rates in a
fashion to position the Company to meet both short term earning goals but to
also allow the Company to respond to changes in interest rates in the future.
The average balance of federal funds sold and other short-term investments has
decreased from $540.6 million in 2003 to $486.1 million in 2004. As investment
opportunities presented themselves, management began investing funds from the
federal funds sold and other short-term investment portfolio into the securities
available for sale and loan portfolios. This trend is expected to continue into
the third quarter. The Company believes there was no significant change to its
interest rate risk during the second quarter of 2004.
Item 4.
Controls and Procedures
The Company maintains disclosure controls and procedures (as that term is
defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934
("Exchange Act") designed to ensure that information required to be disclosed in
the reports that the Company files or submits under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified
in the rules and forms of the Securities and Exchange Commission. Based upon
this evaluation of those disclosure controls and procedures, the Chief Executive
Officer and Chief Financial Officer of the Company concluded, as of the end of
the period covered by this report, that the Company's disclosure controls and
procedures were effective to ensure that information required to be disclosed in
the reports the Company files and submits under the Exchange Act is recorded,
processed, summarized and reported as and when required.
In designing and evaluating the disclosure controls and procedures, management
recognized that any controls and procedures, no matter how well designed and
operated, can provide only reasonable assurance of achieving the desired control
objectives, and management necessarily was required to apply its judgment in
evaluating the cost-benefit relationship of possible controls and procedures.
Further, no evaluation of a cost-effective system of controls can provide
absolute assurance that all control issues and instances of fraud, if any, will
be detected.
There have been no changes in internal control over financial reporting (as
defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act) during the quarter
to which this report relates that have materially affected or are reasonably
likely to materially affect, the internal control over financial reporting.
29
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities, Use of Proceeds and Issuer
Purchases of Equity Securities
------------------------------------------------------------------------
-----------------------------------------------------------------------
Total Maximum
Number of Number
Shares of Shares
Purchased as that May
Part of Yet Be
Total Average Publicly Purchased
Number of Price Announced Under the
2004 Shares Paid per Plans or Plans or
Period Purchased Share Programs Programs
------------------------------------------------------------------------
------------------------------------------------------------------------
April 1 - April 30 33,800 $ 12.98 0 N/A
------------------------------------------------------------------------
------------------------------------------------------------------------
May 1 - May 31 153,700 $ 12.52 0 N/A
-------------------------------------------------------------------------
-------------------------------------------------------------------------
June 1 - June 30 112,500 $ 12.90 0 N/A
---------------------------------------------------------------------------
---------------------------------------------------------------------------
Total 300,000 $ 12.72 0 N/A
---------------------------------------------------------------------------
---------------------------------------------------------------------------
All 300,000 shares were purchased by other than through a publicly announced
plan or program. All purchases were made in open-market transactions to provide
shares for issuance upon exercise of outstanding stock options issued by the
Company and to provide shares for issuance under the Company's dividend
reinvestment plan.
Item 3. Defaults Upon Senior Securities
None.
30
Item 4. Submissions of Matters to Vote of Security Holders
At the annual meeting held May 17, 2004, shareholders
of the Company were asked to consider the Company's
nominees for directors and to elect three (3)
directors. The Company's nominees for director were
Joseph A. Lucarelli (three-year term), Robert A.
McCormick (three-year term), Anthony J. Marinello,
MD, PhD (one-year term).
The results of shareholder voting are as follows:
1. Election of Directors:
Director For Withheld
-------- --- --------
Joseph A. Lucarelli 62,221,792 4,119,922
Robert A. McCormick 58,694,677 7,647,038
Anthony J. Marinello, MD, PhD 61,941,026 4,400,698
Directors continuing in office are Barton A. Andreoli,
William D. Powers, and William J. Purdy.
2. Proposal to adopt the 2004 TrustCo Directors Stock
Option Plan.
For Withheld Abstain
--- -------- -------
39,503,591 10,299,500 1,713,767
3. Proposal to adopt the 2004 TrustCo Stock Option Plan.
For Withheld Abstain
--- -------- -------
42,498,898 7,366,391 1,651,566
4. Proposal to adopt amendment to the Amended and
Restated Certificate of Incorporation of TrustCo
to change the minimum and maximum numbers of
directors.
For Withheld Abstain
--- -------- -------
60,288,855 4,771,636 1,281,214
5. Proposal to ratify the appointment of KPMG LLP as the
independent certified public accountants of TrustCo
for the fiscal year ending December 31, 2004.
For Withheld Abstain
--- ---------- --------
61,267,732 4,567,809 505,173
31
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Reg S-K (Item 601)
Exhibit No. Description
3(i)(a) Amended and Restated Certificate of Incorporation of TrustCo Bank
Corp NY, dated May 20, 2004.
10(a) Master Service Agreement by and between Sungard Wealth
Management Services, LLC and TrustCo Bank Corp NY dated April
1, 2004 (portions omitted pursuant to a request for
confidential treatment).
10(b) 2004 TrustCo Directors Stock Option Plan (incorporated by
reference to Exhibit 4.1 to the Registration Statement on
Form S-8 (File No. 333-115689), filed May 20, 2004).
10(c) 2004 TrustCo Stock Option Plan (incorporated by reference to
Exhibit 4.1 to the Registration Statement on Form S-8
(File No. 333-115674), filed May 20, 2004).
31(a) Rule 13a-15(e)/15d-15(e) Certification of Robert J. McCormick,
principal executive officer.
31(b) Rule 13a-15(e)/15d-15(e) Certification of Robert T. Cushing,
principal financial officer.
32 Section 1350 Certifications of Robert J. McCormick, principal
executive officer and Robert T. Cushing, principal financial
officer.
32
(b) Reports on Form 8-K
During the quarter ended June 30, 2004, TrustCo filed the following reports on
Form 8-K:
April 20, 2004, regarding two press releases dated April 20, 2004, detailing
first quarter financial results.
April 28, 2004, regarding a press release dated April 28, 2004, providing
additional information to Institutional Shareholder Services about tax fees that
TrustCo reported in its proxy statement for its 2004 Annual Meeting of
Shareholders.
May 3, 2004, regarding a press release dated May 3, 2004, announcing the
retirement of Nancy A. McNamara, Senior Vice President, effective April 30,
2004.
May 17, 2004, regarding a press release dated May 17, 2004, announcing the
results of its 2004 Annual Meeting of Shareholders.
May 18, 2004, regarding a press release dated May 18, 2004, declaring a cash
dividend of $0.15 per share payable on July 1, 2004, to shareholders of record
at the close of business on June 4, 2004.
33
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TrustCo Bank Corp NY
By: /s/ Robert J. McCormick
-----------------------------
Robert J. McCormick
President
and Chief Executive Officer
By: /s/ Robert T. Cushing
--------------------------
Robert T. Cushing
Executive Vice President
and Chief Financial Officer
Date: August 9, 2004
34
Exhibits
Exhibits Index
Reg S-K
Exhibit No. Description
3(i)(a) Amended and Restated Certificate of Incorporation of TrustCo Bank
Corp NY, dated May 20, 2004.
10(a) Master Service Agreement by and between Sungard Wealth
Management Services, LLC and TrustCo Bank Corp NY dated April
1, 2004 (portions omitted pursuant to a request for
confidential treatment).
10(b) 2004 TrustCo Directors Stock Option Plan (incorporated by
reference to Exhibit 4.1 to the Registration Statement on
Form S-8 (File No. 333-115689), filed May 20, 2004).
10(b) 2004 TrustCo Stock Option Plan (incorporated by reference to
Exhibit 4.1 to the Registration Statement on Form S-8
(File No. 333-115674), filed May 20, 2004).
31(a) Rule 13a-15(e)/15d-15(e) Certification of Robert J. McCormick,
principal executive officer.
31(b) Rule 13a-15(e)/15d-15(e) Certification of Robert T. Cushing,
principal financial officer.
32 Section 1350 Certifications of Robert J. McCormick, principal
executive officer and Robert T. Cushing, principal financial
officer.
35
Exhibits
Exhibit 3(i)(a)
Article VI - CERTIFICATE OF INCORPORATION
Directors; Election and Classification
The following is the text of Article VI of TrustCo's Amended and Restated
Certificate of Incorporation, as approved for amendment:
6. The entire Board of Directors, consisting of not less than five (5)
members and not more than fifteen (15) members, shall be divided into three
(3) classes of not less than two (2) members each, which classes are hereby
designated as Class A, Class B and Class C. The number of directors of
Class A shall equal one-third (1/3) of the total number of directors as
determined in the manner provided in the Bylaws (with any fractional
remainder to count as one); the number of directors of Class B shall equal
one-third (1/3) of said total number of directors (or the nearest whole
number thereto); and the number of Directors in Class C shall equal said
total number of directors minus the aggregate number of Directors in
Classes A and B. At the election of the first Board of Directors, the class
of each of the members then elected shall be designated. The term of office
of each member then designated as a Class A director shall expire at the
annual meeting of shareholders next ensuing, that of each member then
designated as a Class B director at the annual meeting of shareholders one
year thereafter, and that of each member then designated as a Class C
director at the annual meeting of shareholders two years thereafter. At
each annual meeting of shareholders held after the election and
classification of the first Board of Directors, directors to succeed those
whose terms expire at such annual meeting shall be elected to hold office
for a term expiring at the third succeeding annual meeting of shareholders
and until their respective successors are elected and have qualified or
until their respective earlier displacement from office by resignation,
removal or otherwise.
The Board of Directors of the Corporation shall have the authority to
establish from time to time the exact number of directors, as shall be set forth
in resolutions that may be adopted by the Board of Directors.
36
Exhibit 10(a)
MASTER SERVICES AGREEMENT
between
SunGard Wealth Management Services, LLC
and
TRUSTCO BANK
Dated as of April 1, 2004
MATERIAL INDICATED BY AN ASTERISK ("*") HAS BEEN OMITTED
AND FILED SEPARATELY WITH THE SEC.
37
TABLE OF CONTENTS
MASTER SERVICES AGREEMENT........................................................................................23
1. Definitions.............................................................................................28
1.1. "Additional Service Levels"....................................................................28
1.2. "Additional Services"..........................................................................28
1.3. "Additional Services Task Order"...............................................................28
1.4. "Affiliate"....................................................................................28
1.5. "Aggregated Data"..............................................................................28
1.6. "Agreement"....................................................................................28
1.7. "Bank Regulatory Requirements".................................................................28
1.8. "Base Services"................................................................................28
1.9. "Base Service Levels"..........................................................................29
1.10. "Changes"......................................................................................29
1.11. "Confidential Information".....................................................................29
1.12. "Conversion Date"..............................................................................29
1.13. "Critical Problem".............................................................................29
1.14. "Customer".....................................................................................29
1.15. "Developed Software"...........................................................................29
1.16. "Dispute"......................................................................................30
1.17. "Effective Date"...............................................................................30
1.18. "Equipment"....................................................................................30
1.19. "Executive"....................................................................................30
1.20. "Force Majeure Event"..........................................................................30
1.21. "Indemnified Claim"............................................................................30
1.22. "Industry Change"..............................................................................30
1.23. "Other Intellectual Property"..................................................................30
1.24. "Professional".................................................................................31
1.25. "Relationship Manager".........................................................................31
1.26. "Services".....................................................................................31
1.27. "Service Levels"...............................................................................31
1.28. "Software".....................................................................................31
1.29. "SunGard"......................................................................................31
1.30. "SWMS Personnel"...............................................................................31
1.31. "SWMS Third Party Providers"...................................................................31
1.32. "SWMS Third Party Software"....................................................................31
1.33. "System"...................................................................................... 31
1.34. "Term"...................................................................................... 31
1.35. Termination Assistance Period".................................................................31
1.36. "Termination Assistance Services"..............................................................32
1.37. "Terms of Service".............................................................................32
1.38. "Third Party Claim"............................................................................32
1.39. "Third Party Contracts"........................................................................32
1.40. "Third Party Provider..........................................................................32
1.41. "Transitioned Out Services"....................................................................32
1.42. "TRUSTCO Data".................................................................................32
38
1.43. "TRUSTCO Proprietary Software".................................................................32
1.44. "TRUSTCO Software".............................................................................32
1.45. "TRUSTCO Third Party Providers"................................................................32
1.46. "TRUSTCO Third Party Software".................................................................33
1.47. "Nominee Partnership"..........................................................................33
1.48. "Unaffiliated Third Party Provider"............................................................33
1.49. "User Documentation"...........................................................................33
2. Term....................................................................................................33
2.1. Initial Term...................................................................................33
2.2. Renewal Term(s)................................................................................33
3. Services................................................................................................34
3.1. Transition-In Services/Workplan................................................................34
3.2. Base Services..................................................................................34
3.3. Terms of Service...............................................................................34
3.4. Scope of Use...................................................................................35
3.5. Additional Services............................................................................35
3.6. Changes........................................................................................35
3.7. Additional Services Task Order Procedures......................................................36
4. SWMS Personnel..........................................................................................36
4.1. Assignment of SWMS Personnel...................................................................36
4.2. Subcontractors and Affiliates..................................................................36
5. Equipment, Facilities, and Third Party Contracts........................................................37
5.1. SWMS Facilities................................................................................37
5.2. Third Party Contracts..........................................................................37
6. Proprietary Rights and Intellectual Property............................................................38
6.1. SWMS Third Party Software......................................................................38
6.2. Third Party Providers..........................................................................39
6.3. Rights in Developed Software and Other Intellectual Property...................................40
6.4. TRUSTCO Software...............................................................................41
6.5. TRUSTCO Wealth Management Intellectual Property andDocumentation...............................42
6.6. License Rights and Trademarks..................................................................42
6.7. Export.........................................................................................43
7. Service Levels..........................................................................................43
7.1. Service Levels.................................................................................43
7.2. Additional Service Levels......................................................................46
7.3. Responsibility for Achieving Service Levels....................................................46
8. Contract Management and Procedures......................................................................47
8.1. Relationship Managers..........................................................................47
8.2. Reliance on Instructions.......................................................................47
8.3. Information, Approvals and Cooperation.........................................................48
9. Regulatory Access.......................................................................................48
10. Charges.................................................................................................48
10.1. Charges for Base Services......................................................................48
10.2. Charges for Additional Services................................................................49
10.3. Expenses...................................................................................... 49
10.4. Taxes...................................................................................... 49
39
11. Invoicing and Payment...................................................................................49
11.1. Invoicing......................................................................................49
11.2. Payment Due....................................................................................50
11.3. Audit of Charges...............................................................................50
12. Safeguarding Of Data and Confidentiality................................................................50
12.1. TRUSTCO Data...................................................................................50
12.2. Records Retention..............................................................................51
12.3. Privacy Laws and Regulations...................................................................51
12.4. Confidentiality................................................................................51
13. Representations and Warranties..........................................................................53
13.1. Authorization..................................................................................53
13.2. Bank Regulatory Requirements...................................................................53
13.3. Covenant of Cooperation and Good Faith.........................................................53
13.4. Noninfringement................................................................................53
13.5. DISCLAIMER OF WARRANTIES.......................................................................54
14. Insurance...............................................................................................54
14.1. Worker's Compensation Insurance................................................................55
14.2. Commercial General Liability Insurance.........................................................55
14.3. Errors and Omissions coverage..................................................................55
14.4. Employee Dishonesty Insurance (Crime Policy)...................................................55
15. Indemnification.........................................................................................55
15.1. Personal Injury and Property Damage............................................................55
15.2. Intellectual Property Indemnity................................................................56
15.3. Indemnification Procedures.....................................................................57
16. Liability...............................................................................................57
16.1. LIMITATION AS TO TYPES OF DAMAGES..............................................................57
16.2. DOLLAR LIMITATION..............................................................................58
16.3. Statute of Limitations.........................................................................58
16.4. Force Majeure..................................................................................58
16.5 SunGard Business Systems Guarantee.............................................................59
17. Dispute Resolution......................................................................................59
17.1. Review of Performance..........................................................................59
17.2. Dispute Escalation.............................................................................60
17.3. Contract Enforcement...........................................................................60
17.4. Continued Performance..........................................................................60
18. Termination.............................................................................................60
18.1. Termination for Cause..........................................................................60
18.2. Termination for Non-Payment....................................................................61
18.3. Termination for Insolvency.....................................................................61
18.4. Termination for Convenience....................................................................62
18.5 Termination Assistance and Rights upon Termination or Expiration...................................62
19. Miscellaneous...........................................................................................65
19.1. Notices...................................................................................... 65
19.2. Binding Nature and Assignment..................................................................66
40
19.3. Severability...................................................................................66
19.4. Counterparts...................................................................................67
19.5. Relationship of Parties........................................................................67
19.6. Further Assurances.............................................................................67
19.7. Non-competition................................................................................67
19.8. Third Party Beneficiaries......................................................................68
19.9. Media Releases.................................................................................68
19.10. Modification and Waiver........................................................................68
19.11. Entire Agreement...............................................................................68
19.12. Governing Law..................................................................................69
19.13. Attorney's Fees................................................................................69
SCHEDULES TO MASTER SERVICES AGREEMENT..................................................................70
104
41
MASTER SERVICES AGREEMENT
THIS MASTER SERVICES AGREEMENT, dated as of March , 2004, is between
Trustco Bank. ("TRUSTCO or BANK"), and SunGard Wealth Management Services, LLC,
a Delaware limited liability corporation ("SWMS"). TRUSTCO and SWMS are
collectively hereinafter referred to as the "Parties," and individually, a
"Party".
1. Definitions
The following defined terms used in this Agreement shall have the
meanings set forth below. Other terms are defined as indicated in the
context of specific provisions.
"Additional Service Levels"
Additional Service Levels has the meaning given in Section 7.3 hereof.
"Additional Services"
Additional Services means any services, functions or responsibilities
other than the Base Services that SWMS will provide to TRUSTCO
pursuant to Additional Services Task Orders in accordance with the
Additional Services Task Order procedures provided for herein.
"Additional Services Task Order"
Additional Services Task Order(s) has the meaning given in Section 3.7
hereof.
"Affiliate"
Affiliate means a company or other business organization or other
entity related through common ownership, common control of management
or owners, or through some other control mechanism to another business
organization and that is providing or receiving services pursuant to
this Agreement.
"Aggregated Data"
Aggregated Data has the meaning given in Section 12.1 hereof.
"Agreement"
Agreement means this Master Services Agreement, the Schedules to this
Master Services Agreement referenced herein and any Additional
Services Task Order agreed to by the Parties that references this
Master Services Agreement.
"Bank Regulatory Requirements"
Bank Regulatory Requirements mean the rules and regulations
promulgated by the regulatory authority that is authorized by law to
regulate TRUSTCO including but not limited to the Securities Exchange
Commission and the Office of Thrift Supervision.
"Base Services"
Base Services means all of the wealth management operations
outsourcing services, functions, activities, tasks and
responsibilities, other than the Additional Services pursuant to the
Additional Services Task Orders in accordance with the Additional
Services Task Order procedures provided for herein, that SWMS will
perform and provide, as such services, functions, activities, tasks,
and responsibilities may evolve and be supplemented during the Term of
the Agreement to TRUSTCO pursuant to the Agreement as described on the
attached Schedule A.
42
"Base Service Levels"
Base Service Levels has the meaning given in Section 7. 1(A).
"Changes"
Changes has the meaning given in Section 3.6 hereof.
"Confidential Information"
Confidential Information means all non-public written, electronic, and
oral proprietary information communicated from one Party (the
"Disclosing Party") to the other Party (the "Receiving Party") during
the Term and the Termination Assistance Period in connection with this
Agreement or any Additional Services Task Order, including without
limitation (a) with respect to TRUSTCO, all non-public information of
or relating to TRUSTCO or its Customers, (b) with respect to SWMS, the
SWMS Third Party Software, the Other Intellectual Property, all
costing, pricing, technology, techniques, processes, methodologies,
and other proprietary information of SWMS, and (c) with respect to
each Party, the terms of this Agreement and all Additional Services
Task Orders. Confidential Information will not include information
that (i) was known by the Receiving Party without an obligation of
confidentiality before its receipt from the Disclosing Party, (ii) is
independently developed by the Receiving Party without reliance on
Confidential Information of the Disclosing Party, (iii) is or becomes
publicly available without a breach by the Receiving Party of this
Agreement, or (iv) is disclosed to the Receiving Party by a third
person who is not required to maintain its confidentiality.
"Conversion Date"
Conversion Date has the meaning given in Section 3.3 hereof.
"Critical Problem"
Critical Problem has the meaning given in Section 7.1 (C) hereof.
"Customer"
Customer means TRUSTCO's Customers who are authorized by TRUSTCO to
use and access the Services pursuant to the terms, conditions and
restrictions of this Agreement.
"Developed Software"
Developed Software means all programming, applets, scripts, code,
applications and other software made, developed, or actually or
constructively reduced to practice by SWMS (whether solely by SWMS or
jointly with others, including, but not limited to SWMS's affiliates
and TRUSTCO) pursuant to this Agreement or any Additional Services
Task Order, contained in, comprising, or otherwise necessary to use,
display and/or maintain the Services; provided, however, that Software
developed solely by TRUSTCO for its own use and purposes during the
Term of this Agreement and which does not utilize any information
obtained by TRUSTCO concerning any SWMS Third Party Software shall not
be considered to be Developed Software for the purposes of this
Agreement
43
"Dispute"
Dispute has the meaning given in Section 17.2 hereof.
"Effective Date"
Effective Date means the date on which the last party to this
Agreement signs this Agreement.
"Equipment"
Equipment includes all computer and communications equipment,
including personal computers, network servers, modems, printers,
mainframes, routers, cabling and related equipment that SWMS uses or
needs to provide the Services.
"Executive"
Executive means an officer or senior employee of SWMS with at least
ten (10) years experience in the wealth management or trust industry.
"Force Majeure Event"
Force Majeure Event has the meaning given in Section 16.4 hereof.
"Indemnified Claim"
Indemnified Claim has the meaning given in Section 15.3 hereof.
"Industry Change"
Industry Change means a regulatory change or an industry wide or
technological change materially affecting the delivery of the
applicable products or services.
"Other Intellectual Property"
Other Intellectual Property means all inventions (whether or not
protectable under patent laws), works of authorship, information fixed
in any tangible medium of expression (whether or not protectable under
copyright laws), moral rights, mask works, trademarks, trade names,
trade dress, service marks, trade secrets, publicity rights, know-how,
ideas (whether or not protectable under trade secret laws), and all
other subject matter protectable under patent, copyright, moral right,
mask work, trademark, trade secret, or other laws, including without
limitation all documentation, new or useful art, combinations,
discoveries, formulae, procedures, processes, manufacturing
techniques, technical developments, specifications, manuals, artwork,
software, programming, applets, scripts, designs, logos, tags lines,
corporate branding/identity, or other tangible or intangible
embodiments of information made, conceived, developed, or actually or
constructively reduced to practice by SWMS (whether solely by SWMS or
jointly with others, including, but not limited to SWMS's affiliates
or TRUSTCO) pursuant to this Agreement, an Additional Services Task
Order or for any other SWMS customer, contained in, comprising, or
otherwise necessary to use, display and/or maintain the Services or
services for other SWMS's customers; provided, however, that Software
developed solely by TRUSTCO for its own use and purposes during the
Term of this Agreement and which does not utilize any information
obtained by TRUSTCO concerning any SWMS Third Party Software shall not
be considered to be Other Intellectual Property for the purposes of
this Agreement.
44
"Professional"
Professional means an employee of SWMS having more than five (5) years
but less than ten (10) years experience in the wealth management or
trust industry.
"Relationship Manager"
Relationship Manager has the meaning given in Section 8.1 hereof.
"Services"
Services means the Base Services, the Termination Assistance Services
and any Additional Services.
"Service Levels"
Service Levels means the Base Service Levels and any Additional
Service Levels.
"Software"
Software means the SWMS Third Party Software, TRUSTCO Software and the
Developed Software.
"SunGard"
SunGard means SunGard Business Systems Inc., a Delaware corporation.
"SWMS Personnel"
SWMS Personnel means the SWMS employees, together with any
subcontractors and independent contractors of SWMS, who are assigned
by SWMS to perform the Services.
"SWMS Third Party Providers"
SWMS Third Party Providers means any company, entity, person or other
third party that is owned or affiliated with SWMS and is providing
services or products to SWMS for delivery of wealth management
operations outsourcing services to TRUSTCO. SWMS Third Party Providers
specifically excludes TRUSTCO Third Party Providers defined in Section
1.45 below and Unaffiliated Third Party Providers defined in Section
1.48 below.
"SWMS Third Party Software"
SWMS Third Party Software means any software, or part of any software,
that is licensed or leased by SWMS from a third party and is used by
SWMS to provide the Services. The SWMS Third Party Software as of the
Effective Date is identified in Schedule F. Schedule F may be amended
from time to time pursuant to the terms of the Agreement.
"System"
System means the Software and Equipment covered under this Agreement
including the SunGard AddVantage system.
"Term"
Term has the meaning given in Section 2 hereof.
"Termination Assistance Period"
Termination Assistance Period has the meaning given in Section
18.5 hereof.
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"Termination Assistance Services"
Termination Assistance Services has the meaning given in Section 18.5
hereof.
"Terms of Service"
Terms of Service has the meaning given in Section 3.3 hereof.
"Third Party Claim"
Any claim asserted by any person or entity that is not (a) a party to
this Agreement or (b) an Affiliate of a party to this Agreement.
"Third Party Contracts"
Third Party Contracts means the agreements between TRUSTCO and third
parties listed in Schedule G under which the third parties are, as of
the Effective Date, furnishing or providing services or products to
TRUSTCO, and with respect to which SWMS will be required to act for or
on behalf of TRUSTCO in order to provide the Services.
"Third Party Provider"
Third Party Provider means any company, entity, person or other third
party providing services or products to or for SWMS with respect to
SWMS providing the Services to TRUSTCO, excluding any entity majority
owned or directly controlled by SunGard Data Systems Inc. or any of
its subsidiaries.
"Transitioned Out Services"
Transitioned Out Services has the meaning given in Section 18.5
hereof.
"TRUSTCO Data"
TRUSTCO Data means all data and information that TRUSTCO submits,
provides or transmits to SWMS in connection with the Services,
including information submitted to SWMS before the Effective Date;
data and information of TRUSTCO's Customers; and all information
derived from that information, including as stored in or processed
through the Equipment or the Software; excluding however, all SWMS
Confidential Information, Developed Software and Other Intellectual
Property.
"TRUSTCO Proprietary Software"
TRUSTCO Proprietary Software means any software, or part of any
software, owned by TRUSTCO which SWMS uses or needs to use to provide
the Services. The TRUSTCO Proprietary Software as of the Effective
Date is listed in Schedule D. The Parties may amend Schedule D from
time to time pursuant to mutual agreement.
"TRUSTCO Software"
TRUSTCO Software means the TRUSTCO Proprietary Software and the
TRUSTCO Third Party Software.
"TRUSTCO Third Party Providers"
TRUSTCO Third Party Provider(s) means any company, entity, person or
other third party that was providing services or products to TRUSTCO
for delivery of wealth management operations services by TRUSTCO on or
before the Effective Date and any comparable replacement. TRUSTCO
Third Party Provider specifically excludes SWMS Third Party Providers
defined in Section 1.31 and Unaffiliated Third Party Providers defined
in Section 1.48 below.
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"TRUSTCO Third Party Software"
TRUSTCO Third Party Software means any software, or part of any
software, licensed or leased by TRUSTCO from a third party whose use
by SWMS is reasonably necessary for SWMS to provide the Services. The
TRUSTCO Third Party Software as of the Effective Date is listed in
Schedule E. The Parties may amend Schedule E from time to time
pursuant to mutual agreement.
"Nominee Partnership"
Nominee Partnership has the meaning given in Section 6.5 (B) hereof.
"Unaffiliated Third Party Provider"
Unaffiliated Third Party Provider means any Third Party Provider which
is not a SWMS Third Party Provider or a TRUSTCO Third Party Provider.
Notwithstanding anything in this Agreement to the contrary,
Unaffiliated Third Party Providers shall also mean Third Party
Providers such as Interactive Data Corporation and other Third Party
Providers of services for the delivery of wealth management operation
services from whom industry users cannot obtain contracts containing
material warranties and indemnities with respect to the Third Party
Provider's services, excluding any entity owned or affiliated with
SWMS.
"User Documentation"
User Documentation means the descriptions of functionality of the SWMS
Third Party Software as published from time to time by SWMS, or as
otherwise agreed to in writing by the Parties, and the descriptions of
functionality of the Developed Software as provided in an Additional
Services Task Order, or as otherwise agreed to in writing by the
Parties.
2. Term
Initial Term
The initial term of this Agreement will begin on the Effective Date
and will continue in effect for a period of five (5) years ("Initial
Term") unless earlier terminated in accordance with the provisions of
this Agreement.
Renewal Term(s)
The Agreement can be renewed at the end of the Initial Term pursuant
to a written agreement duly executed by both Parties for an additional
five (5) year term upon essentially the same terms and conditions
exclusive of any pricing terms and conditions. In order for TRUSTCO to
exercise the right of renewal they must provide SWMS with written
notice of TRUSTCO's intent to renew at least 180 days prior to the
expiration of the Initial Term. Upon receipt of TRUSTCO's notice of
intent to renew both Parties shall enter into good faith negotiations
to negotiate the pricing terms and conditions of the renewal term.
Should the Parties be unable to come to mutual agreement on the terms
and conditions of a renewal contract, the contract shall terminate
upon the expiration of the Initial Term and SWMS shall provide
termination assistance to TRUSTCO in accordance with the Termination
Assistance Services provisions of Section 18.5 of this Agreement. The
Agreement can be renewed at the end of the Initial Term only. The
Initial Term and the Renewal Terms are collectively referred to herein
as the "Term."
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3. Services
Transition-In Services/Workplan
A. Transition-In Services. SWMS shall provide to TRUSTCO the
transition-in services described in the Workplan and in accordance
with the transition schedule set forth in Schedule I, which describes,
among other things, the transition of the performance of and
responsibility for the functions, responsibilities and tasks currently
performed by TRUSTCO to SWMS which comprise the Base Services. SWMS'
performance of the transition-in services and its adherence to the
transition schedule set forth in Schedule I is subject to TRUSTCO's
prompt performance of its obligations hereunder, including all tasks
set forth in the Workplan. SWMS shall not be responsible for delays or
additional costs arising from TRUSTCO's or its agents' failure to
perform as required hereunder.
B. Training. SWMS will provide training to TRUSTCO as described in
Schedule A (Base Services).
Base Services
During the Term, SWMS will provide to TRUSTCO the Services identified
in Schedule A (the "Base Services") for the fees as identified in
Section 10 and Schedule C. During the Term, SWMS shall be the
exclusive provider of the Base Services and types of services
identified in Schedule A (Base Services), together with any Additional
Services and types of services provided pursuant to Additional
Services Task Orders. Provided that SWMS is not in material default of
any of its obligations under this Agreement, TRUSTCO agrees that
during the Term the Services shall be provided exclusively by SWMS
hereunder and not by any other third party or by TRUSTCO itself;
provided, however, that TRUSTCO may provide such services for its own
assets but not for wealth management assets of its customers or its
Affiliates' customers.
Terms of Service
The use of the Services by TRUSTCO and its Customers shall conform to
the terms, procedures, requirements, and limitations ("Terms of
Services") contained in the documentation and other instructions
provided to TRUSTCO on the first Business Day after the TRUSTCO assets
are converted to the SunGard AddVantage system and TRUSTCO has
accepted the commencement of the Base Services by SWMS, which
acceptance shall not be unreasonably withheld ("Conversion Date") and
from time to time amended. SWMS reserves the right to deny Services to
any Customers who breach or fail to comply with the Terms of Service;
providing that SWMS will provide notice to TRUSTCO within a reasonable
period of time of the denial of service to the Customer. TRUSTCO
agrees to cooperate with SWMS and assist SWMS with enforcing the Terms
of Services, and notifying TRUSTCO's Customers of the Terms of
Service. TRUSTCO shall notify its Customers of SWMS' rights and
obligations under this Agreement, and provide such other instructions
and documentation to its Customers, as is reasonably necessary for
SWMS to provide the Services and otherwise perform under this
Agreement. TRUSTCO shall, at its expense and pursuant to the
procedures set forth in Section 15.3 (Indemnification Procedures),
defend SWMS from any third-party claims brought against SWMS arising
out of a TRUSTCO Customer's unauthorized or improper use or
modification of the Services; provided, however, that TRUSTCO shall
not be required to defend SWMS or pay any judgment against SWMS for
such third-party claims if such claims are primarily caused by a
failure of SWMS' system security or SWMS' negligence. TRUSTCO shall
pay any judgments finally awarded by a court of competent jurisdiction
to such third parties against SWMS based on such claims after TRUSTCO
has presented its defenses (or after TRUSTCO elected not to defend
such claims) and any settlements to which TRUSTCO agrees in writing
(or to which SWMS agreed after TRUSTCO elected not to defend such
claims). SWMS' ability to deliver the Services is dependent upon
TRUSTCO handling certain responsibilities which are critical to the
delivery of the Services including, but are not limited to, the
responsibilities listed on Schedule K. As such, TRUSTCO agrees to
perform the critical responsibilities listed on Schedule K in
accordance with the Terms of Service. Scope of Use TRUSTCO may use the
Services only in the ordinary course of its business operations and
for its own internal business purposes, which shall include making the
Services available to its Customers as provided herein. TRUSTCO shall
use the Services only in accordance with the User Documentation and
the other terms and conditions of this Agreement. TRUSTCO may copy the
User Documentation to the extent reasonably necessary for use of the
System under this Agreement.
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Additional Services
During the Term, SWMS will perform such Additional Services as the
Parties from time to time agree in writing in accordance with the
Additional Services Task Order procedures described in Section 3.7.
Changes
If, at any time, SWMS determines, reasonably and in good faith, that a
material change or addition to any of the Base Services is required to
efficiently continue provision of the Base Service or Additional
Services, SWMS shall give written notice to TRUSTCO of the proposed
change or addition and an estimate of the additional project time
required to complete the proposed change or addition ("Changes").
Changes which are required in order to comply with regulatory changes
will be effective upon provision of notice by SWMS to TRUSTCO. For all
other changes, within ten (10) business days after receipt of such
notice, TRUSTCO shall give written notice to SWMS that TRUSTCO elects
to (a) disagree with SWMS's Changes or (b) accept SWMS's Changes.
TRUSTCO shall be deemed to have elected to implement SWMS's Changes if
no such notice is received by SWMS within ten (10) business days of
TRUSTCO's receipt of such notice. If TRUSTCO timely notifies SWMS that
it disagrees with SWMS's determination that the change or addition is
necessary, SWMS will reevaluate the determination, and, if necessary,
the parties shall institute informal dispute resolution pursuant to
17.2 (Dispute Escalation).
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Additional Services Task Order Procedures
A. Additional Services shall be provided by SWMS only pursuant to a
task order ("Additional Services Task Order") describing, at a
minimum, the scope of such Additional Services; the charges, fees,
expenses or other amounts to be paid to SWMS for such Additional
Services ("Additional Services Charges"); and the impact, if any, that
performance of the Additional Services will have on the Base Service
Levels, and any other pending delivery or performance schedules or
obligations of either Party hereunder. Upon execution of an Additional
Services Task Order by a duly authorized representative of each Party,
it shall be subject to and part of this Agreement and shall be binding
on SWMS and TRUSTCO. To the extent there is any inconsistency or
conflict between the terms of any Additional Services Task Order and
the terms of this Agreement, the terms of the Additional Services Task
Order shall control but only with respect to such Additional Services
Task Order.
B. Additional Services which require special programming to the
AddVantage system will be considered only pursuant to an Additional
Services Task Order describing at a minimum, the scope of such
Additional Services. SWMS will forward the request for programming on
to AddVantage and will respond back to TRUSTCO within a reasonable
period of time with an estimate of the cost of such programming and an
estimate of the time frame for completion of the programming. The
special programming will only be placed in line for development upon
TRUSTCO's direction to proceed with the programming and agreement to
pay for the programming costs and such fees will be subject to payment
in accordance with the agreed upon Additional Services Task Order.
4. SWMS Personnel
Assignment of SWMS Personnel
Without limiting any other provisions of this Agreement or any Additional
Services Task Order relating to Service Levels, SWMS will assign the number
of SWMS Personnel reasonably necessary to perform the Services.
Subcontractors and Affiliates
A. The Services will be performed by SWMS, itself and through its
direct and indirect wholly-owned subsidiaries or Affiliates. SWMS may
subcontract any portion of the Services to third parties, including to
SWMS Affiliates and non-Affiliates. SWMS will not disclose any
confidential information of TRUSTCO to any unaffiliated subcontractor
unless and until such subcontractor has agreed in writing to protect
the confidentiality of such confidential information in the manner
required by Section 12 and then only to the extent necessary for such
subcontractor to perform those Services subcontracted to it. SWMS will
remain responsible for the obligations it performs and those performed
by any SWMS Third Party Provider to the same extent as if such
obligations were performed by SWMS.
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B. With respect to TRUSTCO Third Party Providers and Unaffiliated
Third Party Providers, SWMS will not be responsible or liable to
TRUSTCO to the extent SWMS's ability to deliver the Services, meet the
Service Levels or other default is adversely affected by any failure,
default or delay by such Third Party Provider, provided however that
SWMS shall:
1) Use commercially reasonable efforts to require the TRUSTCO
Third Party Provider and/or Unaffiliated Third Party Provider, in
its contract with SWMS, to provide the applicable services or
products in manner consistent with the Service Levels,
2) Use commercially reasonable efforts to require or compel the
TRUSTCO and/or Unaffiliated Third Party Provider to comply with
all contractual and other obligations owed to SWMS,
3) pass through to TRUSTCO all amounts recovered or received from
the TRUSTCO and/or Unaffiliated Third Party Provider with respect
to damages sustained by TRUSTCO or TRUSTCO'S Customers as a
result of the TRUSTCO and/or Unaffiliated Third Party Provider's
failure, default or delay,
4) take corrective action pursuant to Section 7.1 (E) for all
Critical Problems (as defined in Section 7) caused by a TRUSTCO
and/or Unaffiliated Third Party Provider, and
5) Promptly advise TRUSTCO of all material failures, defaults or
delays by a TRUSTCO and/or Unaffiliated Third Party Provider.
5. Equipment, Facilities, and Third Party Contracts
SWMS Facilities
SWMS may perform the Services in such facilities maintained by SWMS
(collectively, "SWMS Facilities"), including without limitation SunGard's
data center operations in Birmingham, Alabama (the "Data Center") as SWMS
deems appropriate, following consultation with TRUSTCO, so long as
appropriate security procedures have been implemented and are being
observed at the SWMS Facilities.
Third Party Contracts
On or within ten (10) days after the Effective Date, TRUSTCO shall notify
the third party suppliers and vendors under the Third Party Contracts
described in Schedule G in writing of its appointment of SWMS as its agent
under the Third Party Contracts for administrative, ministerial and
managerial purposes. Unless agreed to otherwise pursuant to a written
assignment, TRUSTCO will retain financial responsibility for the Third
Party Contracts at all times during the Term and the Termination Assistance
Period. If the actions or failures to act of the vendors under the Third
Party Contracts cause a failure to meet Service Levels, SWMS shall be
excused from liability for such failures in accordance with Section 7.
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Proprietary Rights and Intellectual Property
SWMS Third Party Software
Except as provided in this Section 6 or as otherwise provided in this Agreement,
neither TRUSTCO nor its Affiliates nor its Customers will have any rights or
interests in the SWMS Third Party Software and SWMS shall remain the contracting
party of record for the SWMS Third Party Software. SWMS hereby grants to TRUSTCO
and its Customers a non-exclusive, non-transferable (except as permitted by
herein) right during the Term to access and employ the SWMS Third Party Software
for the purpose of receiving the Services or will otherwise make arrangements to
confirm or acquire TRUSTCO and its Customers the right to access and employ the
SWMS Third Party Software for the purpose of receiving the Services, to the
extent reasonably necessary for TRUSTCO and its Customers to access and employ
the Services, subject to all terms, conditions and restrictions as may be
imposed by the licensor of the applicable SWMS Third Party Software. Unless
otherwise agreed to in writing by the Parties, (i) no SWMS Third Party Software
shall be delivered to TRUSTCO (physically, electronically or otherwise), (ii)
all SWMS Third Party Software shall remain in the possession and control of SWMS
or the applicable third party, and (iii) TRUSTCO's rights hereunder to the SWMS
Third Party Software is limited to the right to access and employ the SWMS Third
Party Software and related services via the Internet or other network for the
purposes of using the Services and obtaining information and data in connection
with the Services, and permitting the Customers to do the foregoing subject to
SWMS right to limit Customer access as provided elsewhere in this Agreement.
Except as expressly provided in this Agreement, TRUSTCO shall not be required to
pay any additional fees to access and employ the SunGard AddVantage Software.
SWMS Third Party Software Required Consents
Prior to giving TRUSTCO access to the SWMS Third Party Software, SWMS
will obtain those consents as may be required for the grant to TRUSTCO
of the rights to SWMS Third Party Software specified in herein (the
"SWMS Third Party Software Required Consents"). SWMS will pay any fees
(including transfer or upgrade fees) that may be required to obtain
the SWMS Third Party Software Required Consents, provided however that
the Parties shall negotiate and agree upon payment of the fees for
SWMS Third Party Software for Additional Services.
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Software Access and Employment Restrictions
Except as provided herein, TRUSTCO shall not permit others to use,
copy, decompile or otherwise reverse engineer the SWMS Third Party
Software, and TRUSTCO, its Affiliates and their Customers shall comply
with all terms, conditions and restrictions as may be imposed by the
owner of the applicable SWMS Third Party Software. Except as
specifically provided in Section 6.1 (A) above, TRUSTCO may not allow
any other third parties to use or access the SWMS Third Party Software
or the Services without the written consent of SWMS. TRUSTCO shall be
responsible for all damages, losses, expenses and other costs to SWMS
or TRUSTCO.
Expiration of Access Rights
Unless otherwise expressly provided this Agreement, (i) the rights of
access granted herein shall immediately and automatically expire
contemporaneously with the expiration or termination of this Agreement
and any applicable Termination Assistance Period, and (ii) upon
expiration or termination of this Agreement and any applicable
Termination Assistance Period , TRUSTCO's and its Affiliates and their
Customers' access to the SWMS Third Party Software and the Services
shall be discontinued and TRUSTCO shall either return to SWMS, or at
SWMS' election destroy, all SWMS Third Party Software and related user
documentation in its possession and certify to SWMS that TRUSTCO has
divested itself of all ability to access and employ the SWMS Third
Party Software.
Third Party Providers
TRUSTCO hereby acknowledges and agrees that the Services provided under this
Agreement contain information obtained, selected and consolidated by the certain
Third Party Providers. TRUSTCO's use of the market data and/or other data and
services provided by the Third Party Providers described herein is authorized
and regulated by the Third Party Providers and further that the Third Party
Providers may require SWMS to provide such information and data about TRUSTCO
and the Third Party Users in connection with their provision of the Services.
TRUSTCO also acknowledges that the Third Party Providers may modify the
Services, discontinue availability of the Services or modify the rules
concerning availability and applicable royalty fees of any of the Services or
require changes to the Services, in which case neither SWMS nor the Third Party
Providers may be held responsible for such modification and discontinuance;
provided, however, that if a material service is discontinued by a Third Party
Provider, SWMS will use commercially reasonable efforts to find an alternative
provider for such discontinued service. If an alternative provider can not be
found to provide substantially similar services for substantially similar costs
for the material discontinued services, the parties agree to negotiate in good
faith an adjustment to the Base Charges for the material discontinued service.
Any changes required by the Third Party Providers shall be made a part of this
Agreement by SWMS's written notice of any such changes to TRUSTCO. For a thirty
(30) day period after receiving such notice from SWMS, TRUSTCO may reject such
changes and terminate the affected Third Party Data or Service by written notice
to SWMS. If such notice is not received by SWMS within such thirty (30) day
period, this Agreement shall be modified by such changes, and shall remain in
full force and effect.
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TRUSTCO acknowledges that SWMS is required to display certain notices and
agreements and to report certain data related to TRUSTCO's use of the Services
to the Third Party Providers from whom the information is selected and
consolidated by SWMS. To enable SWMS to meet its obligation in this regard,
TRUSTCO agrees to inform SWMS, in writing, whenever its display of notices or
utilization of any information derived from the Services changes. TRUSTCO shall
display all such notices and agreements in the exact manner specified by SWMS or
a Third Party Provider in writing or as set forth herein. TRUSTCO acknowledges
and agrees that the number and content of such notices, as well as other terms
and conditions, may be changed from time to time by the Third Party Providers.
TRUSTCO shall comply with all applicable laws and obtain all reasonable and
necessary consents from any person, including its employees and the TRUSTCO
Customers and their respective employees, if any, regarding the collection, use
and distribution to SWMS of any information or data regarding any TRUSTCO
Customer and to the use by TRUSTCO and TRUSTCO Customers of the Services for the
purposes set forth herein. The information and data may include personal and
other information about TRUSTCO, its employees, the TRUSTCO Customers and
TRUSTCO's employees, including their use of the market data. SWMS may use this
information and data to carry out its obligations under this Agreement,
including the provision of such information to the Third Party Providers;
provided, however, that any such disclosure must be made in compliance with
Section 12 of this Agreement.
Rights in Developed Software and Other Intellectual Property
SWMS will retain all right, title and interest in and to all the
Developed Software and all Other Intellectual Property, and TRUSTCO
and its Affiliates will have no rights or interests in such Developed
Software or Other Intellectual Property except as otherwise provided
in this Agreement or an Additional Services Task Order. SWMS hereby
grants to TRUSTCO a non-exclusive, non-transferable (except as
permitted herein) right during the Term to access and employ the
Developed Software and the Other Intellectual Property reasonably
necessary for itself and its Customers to access and employ the
Services. TRUSTCO's rights to Developed Software and Other
Intellectual Property after the expiration or termination of this
Agreement are set forth in Section 18.5 (Termination Assistance and
Rights Upon Termination or Expiration). In the event, by operation of
law or otherwise, TRUSTCO is deemed to be the owner of all or any
portion of the intellectual property rights in the Developed Software
and/or Other Intellectual Property, TRUSTCO hereby assigns all such
rights to SWMS and agrees to cooperate with SWMS in confirming SWMS'
sole and exclusive ownership of the Developed Software and Other
Intellectual Property; provided, however, that Software developed
solely by TRUSTCO for its own use and purposes during the Term of this
Agreement and which does not utilize any information obtained by
TRUSTCO concerning any SWMS Third Party Software shall not be
considered to be Developed Software or Other Intellectual Property for
the purposes of this provision.
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TRUSTCO Software
A. Rights to TRUSTCO Proprietary Software
As between SWMS and TRUSTCO, TRUSTCO shall retain all right, title and
interest in and to the TRUSTCO Proprietary Software, and SWMS will
have no rights or interests in TRUSTCO Proprietary Software except as
set forth in this Section or as otherwise described in this Agreement.
To the extent reasonably necessary for SWMS to provide the Services,
TRUSTCO hereby grants to SWMS and its Affiliates a non-exclusive,
non-transferable (except as provided herein), fully paid up, right
during the Term to access and employ the TRUSTCO Proprietary Software.
B. Rights to TRUSTCO Third Party Software
TRUSTCO agrees, at TRUSTCO's expense, to assign to SWMS and to cause
vendors or owners of the TRUSTCO Third Party Software to consent to
and accept the assignment of all licenses and rights and to grant to
SWMS the rights access and employ the TRUSTCO Third Party Software as
is necessary for SWMS to provide the Services and services to other
customers of SWMS, including the right, if necessary to grant access
to and employment of the Third Party Software to provide the Services
and services to other customers of SWMS. At SWMS' discretion, in lieu
of such assignment, TRUSTCO shall grant to SWMS and its Affiliates a
non-exclusive, non-transferable (except as provided herein), fully
paid up, right during the Term to access and employ the TRUSTCO
Proprietary software as is necessary for SWMS to provide the Services
and services to other customers of SWMS.
C. TRUSTCO Third Party Software Required Consents
Prior to giving SWMS access to the TRUSTCO Third Party Software,
TRUSTCO will obtain those consents as may be required for the grant to
SWMS of the rights to TRUSTCO Third Party Software specified in herein
(the "TRUSTCO Third Party Software Required Consents"). TRUSTCO will
pay any fees (including transfer or upgrade fees) that may be required
to obtain the TRUSTCO Third Party Software Required Consents.
D. License and Sublicense Restrictions
SWMS shall not sublicense, copy, decompile or otherwise reverse
engineer the TRUSTCO Software.
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TRUSTCO Wealth Management Intellectual Property and Documentation
A. TRUSTCO agrees to provide to SWMS a reasonable number of copies of
and access to all wealth management operations policies and procedures
and other information that is reasonably necessary, to enable SWMS to
provide the Services to TRUSTCO. TRUSTCO further agrees to promptly
provide SWMS with written notice of any changes in TRUSTCO's policies
or procedures which affect the delivery of the Services.
B. TRUSTCO further agrees to provide to SWMS all reasonable assistance
and cooperation, and grant such rights to SWMS as are reasonably
necessary, to enable SWMS to use TRUSTCO's nominee partnership WESCO
(the "Nominee Partnership") to provide the Services. Only assets of
TRUSTCO or its subsidiaries shall be transferred to the Nominee
Partnership or accounts of the Nominee Partnership.
C. During the Term of this Agreement TRUSTCO agrees to select a
financial institution to serve as custodian for TRUSTCO's wealth
management assets covered by this Agreement and selects Union Planters
Bank ("UPC") to serve as custodian under this Agreement. TRUSTCO
further agrees and authorizes all assets, which are held by custodian
on behalf of TRUSTCO pursuant to this Agreement, to be held in the
nominee partnership name ("Nominee Partnership") of the custodian.
D. TRUSTCO represents and warrants that as of the Execution Date to
the best of its knowledge that the policies and procedures encompassed
or included in the TRUSTCO Wealth Management Intellectual Property
comply with all applicable laws and regulations in effect on the
Effective Date. TRUSTCO shall indemnify and hold SWMS harmless
pursuant to the procedures of Section 15.3 (Indemnification Procedure)
from and against any liability, loss, damage, cost, or expense
(including, without limitation, reasonable attorneys' fees as provided
herein) resulting from (a) TRUSTCO's breach of the warranty set forth
in this paragraph or (b) a third party claim asserting that the Wealth
Management Intellectual Property infringes a third person's copyright,
trade secret or United States patent enforceable in the United States.
License Rights and Trademarks
Except for the access and employment rights contained in this
Agreement or any Additional Services Task Order, this Agreement, the
Additional Services Task Order, and any disclosures made hereunder or
thereunder do not grant any right to either Party under any patents,
trademarks or copyrights of the other Party. Neither party shall use
the trademarks, service marks or logos or designs of the other Party
without the advance written consent of such Party.
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Export
The Parties acknowledge that certain Software and technical data to be
provided under this Agreement and any Additional Services Task Order
may be subject to export controls under the laws and regulations of
the United States or other countries. Neither Party will export or
re-export any of those items or any direct product of them nor
undertake any transaction in violation of any of those laws or
regulations. To the extent within a Party's control, that Party will
be responsible for, and will coordinate and oversee, compliance with
those export laws concerning any items it exports or imports under
this Agreement.
Service Levels
Service Levels
Commencing on the Conversion Date, SWMS shall provide the Base Services at a
level of service at least equal to the levels of service set forth in Schedule C
(Schedule C is entitled "Base Services); such levels of services are referred to
herein as the "Base Service Levels"), and as set forth in more detail therein.
SWMS is relieved from any obligation to achieve any Service Levels pursuant to
this Agreement if the failure to achieve any Service Level is caused by the
action or inaction of TRUSTCO, its Affiliates, employees, their Customers, the
TRUSTCO Third Party Providers, or the Unaffiliated Third Party Providers.
In the event SWMS fails to perform the Services as agreed, or fails to achieve a
Service Level with respect to Services, that (a) results, or could immediately
or imminently result, in financial loss or financial harm to an TRUSTCO Customer
or (b) constitutes a serious violation of Bank Regulatory Requirements resulting
in the applicable agency or regulator requiring the violation to be addressed by
the full Board of Directors of TRUSTCO (a "Critical Problem"), TRUSTCO shall
promptly notify SWMS in writing, electronically or telephonically of the
occurrence of the Critical Problem, describing the circumstances in reasonable
detail.
Issues which do no rise to the level of a Critical Problem will be handled
through the normal Relationship Manager process.
E. With respect to Critical Problems, SWMS shall: Acknowledge receipt
and provide a preliminary response to TRUSTCO's notice of such
Critical Problem within one hour. Assign qualified, dedicated staff to
analyze, identify and implement potential solutions to remedy the
Critical Problem, working sixteen (16) hours per day, six (6) days per
week. Commence corrective action to remedy the Critical Problem within
one hour of notice of the Critical Problem from TRUSTCO. Provide
status updates with respect to remedying the Critical Problem to
TRUSTCO at least three times a day.
F. In the event SWMS fails to take the corrective action required
above with respect to a Critical Problem, and the Relationship
Managers are unable to agree on an appropriate course of action to
remedy the Critical Problem, the Relationship Mangers shall escalate
the dispute to the executive level of each Party, or higher if
warranted under the circumstances. If the appropriate executives are
unable to resolve the dispute, and the issue has not been
satisfactorily resolved by SWMS five business days after TRUSTCO has
declared the Critical Problem and which if necessary pursuant to
Section 7.1 (D) has been determined to be a Critical Problem, the
following remedial actions shall apply:
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(i) For Critical Problems which are not related to the AddVantage
System, TRUSTCO shall have the right take all reasonable and necessary
steps and actions to remedy the Critical Problem using its own
employees and Third Party Providers to assist SWMS or assume full
responsibility for performance of that aspect of the Services to which
the Critical Problem relates until such time as the Critical Problem
is resolved and the service is capable of being performed in
accordance with the Service Level Standard; provided, however, that
Third Party Providers shall not be granted access to the AddVantage
System or its proprietary information; and
(ii) For Critical Problems which are related to the AddVantage System,
TRUSTCO shall have the right to procure such service from an alternate
source for performance of that aspect of the service to which the
Critical Problem relates until such time as the Critical Problem is
resolved and the service is capable of being performed in accordance
with the Service Level Standard.
G.. In the event TRUSTCO designates a failure to achieve a Service
Level as a Critical Problem and SWMS disagrees with such designation,
SWMS shall provisionally treat the problem as a Critical Problem for
the purposes of responding to and correcting the problem while the
parties work to settle the disagreement. The Parties' Relationship
Managers shall promptly meet in person or telephonically to attempt to
resolve the dispute with respect to such designation. In the event the
Relationship Managers cannot promptly resolve the dispute, the Parties
will resolve the dispute in accordance with the procedures of Section
17. In the event, it is determined that TRUSTCO improperly or
erroneously designated the failure as a Critical Problem, then TRUSTCO
shall pay to SWMS, as damages, the reasonable additional costs and
expenses incurred by SWMS as a direct result of such accelerated and
heightened response and remedial activities, all reasonable and
documented costs and expenses incurred by SWMS in connection with such
determination, together with liquidated damages in the amount of
$10,000.00 per occurrence, the Parties acknowledging that the
additional costs and expenses would not adequately and fully
compensate SWMS for the impacts, delays, disruptions and
inefficiencies caused by an improper or erroneous Critical Problem
designation by TRUSTCO; provided however, that TRUSTCO shall be
entitled to one erroneous Critical Problem designation each year of
the Term with no liability for damages.
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H. Subject to the limitations set forth in Sections 16, SWMS agrees to
defend, indemnify, and hold harmless TRUSTCO, its directors, officers
and employees, from and against any liability, loss, damage, cost, or
expense (including, without limitation, reasonable attorneys' fees as
provided herein) resulting from a claim by a TRUSTCO Customer arising
out of or based on a Critical Problem caused solely by SWMS's failure
to perform the Services as agreed, or failure to achieve a Service
Level with respect to Services. In the event TRUSTCO is entitled to
indemnification under this Section 7, the indemnification procedures
outlined in Section 15.3 (Indemnification Procedures) shall apply.
I. Within 120 days after the Effective Date, the Parties shall
mutually develop a list of criteria for monitoring and evaluating both
Parties' performance under this Agreement (the "Report Card"). The
Report Card is intended to provide an overall assessment of the
Parties' performance based on major categories of Services ("Service
Categories"), and shall not necessarily grade each service on a line
by line basis. The Parties shall meet monthly for the first six months
after the Effective Date, with at least the Relationship Managers in
attendance, to discuss and complete the Report Card, cooperating in
good faith in an effort to reach consensus, and noting points of
disagreement, where applicable. Thereafter, the Parties shall meet
quarterly to discuss and complete the Report Card for the prior
quarter. The Report Card will be completed for the calendar quarters
ending in March, June, September and December.
J. In the event a Party receives a failing grade in a Service
Category, the Parties will mutually discuss, including at a minimum
the Relationship Managers, the steps to be taken to respond to and
remedy the problem ("Equitable Response"). The Equitable Response may
include modification to the Services (without materially reducing the
Services or the Service Level), Additional Services, or a credit or
other monetary payment to fairly compensate the non-failing party for
the losses or damages resulting from the deficient Service Category.
In the event the Relationship Managers are unable to agree on a grade
or an Equitable Response, the Relationship Managers will escalate the
dispute to the executive level of each Party, or higher if warranted
under the circumstances.
K. In the event the Parties' executives are unable to resolve the
dispute and a Party has a failing grade (or the other Party asserts a
Party has a failing grade) with respect to a Service Category for at
least three (3) consecutive months, the deficiency shall be treated as
a Critical Problem with respect to corrective action to be taken as
set forth in Section 7.1 (C).
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L. Adjustment of Service Levels The Parties will meet to review the
Base Service Levels annually. As a result of those meetings and as
necessary from time to time during the Term, the Parties may by mutual
agreement add to, delete or adjust the Base Service Levels. The
reasons for those additions, deletions or adjustments may include new
products, services or functionality; improved performance capabilities
associated with advances in the technology and methods used to perform
the Base Services; or changes in TRUSTCO's business or technology
environment, such as the implementation of a major initiative that
changes the nature of the Base Services. Where the Parties agree to
make such an addition, deletion or adjustment, the Parties shall also
agree on any adjustment in SWMS' charges appropriate and equitable to
reflect changes in the costs to provide the Base Services in
accordance with the new or adjusted Base Service Levels.
Additional Service Levels
With respect to each Additional Services project, the Parties may
agree on any services levels applicable to any such project
("Additional Service Levels") on a case by case basis and document
such Additional Services Levels in the applicable Additional Services
Task Order. With respect to any such Additional Service Levels,
beginning on the date specified in the applicable Additional Services
Task Order, SWMS will perform the Additional Services described in the
applicable Additional Services Task Order in conformance with the
Additional Service Levels set forth in such Additional Services Task
Order. The impact, if any, of the Additional Services on the Base
Service Levels shall, if reasonably feasible to identify in advance,
be set forth in the Additional Service Task Order as described in
Section 3.7, and the Services Levels shall be adjusted accordingly.
Responsibility for Achieving Service Levels
SWMS will not be responsible for the Service Levels to the extent
SWMS's and/or its Affiliates abilities to deliver the Services are
adversely affected by (i) TRUSTCO's failure to materially perform its
obligations under this Agreement or any applicable Additional Services
Task Order; (ii) the negligence, wrongful acts or omissions of TRUSTCO
or its third party vendors(including those third party vendors under
the Third Party Contracts that are managed by SWMS); (iii) the failure
of any of TRUSTCO's employees to adequately perform their tasks
related to the Services; (iv) unreasonable, untimely, incomplete or
inaccurate information from TRUSTCO to the extent such materially and
adversely affects SWMS ability to deliver the Services; (v) TRUSTCO's
material failure to make information, materials, software, facilities,
hardware, Equipment or qualified personnel available to SWMS in the
manner required by this Agreement; (vi) the material failure of any
Equipment owned or leased by TRUSTCO to the extent such failure is not
caused by SWMS; (vii) the failure, default or delay by any third party
not affiliated with SMWS; (viii) Industry Change, or (ix) the
occurrence of a Force Majeure Event as defined in Section 16.4. In the
event of an Industry Change, SWMS shall not be responsible for the
Service Levels directly affected by such change for a reasonable
period of time to allow SWMS to adjust to the new industry demands.
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Contract Management and Procedures
Relationship Managers
Each Party (an "Appointing Party") will appoint an individual (a
"Relationship Manager") who, from the Effective Date until replaced by
the Appointing Party, will serve as that Appointing Party's
representative under this Agreement. Each Relationship Manager will
(i) have overall responsibility for managing and coordinating the
performance of the Appointing Party's obligations under this
Agreement, and (ii) be authorized to act for and on behalf of the
Appointing Party concerning all matters relating to this Agreement.
The Relationship Managers shall meet and confer in good faith to agree
upon mutually acceptable procedures for meetings and reports with
respect to the Parties' respective obligations hereunder. Neither
Party will reassign its Relationship Manager, unless it provides at
least 10 days prior written notice to the other Party. If a Party
terminates the employment of or reassigns its Relationship Manager, it
will appoint a new Relationship Manager with prior written notice to,
the other Party.
Reliance on Instructions
A. In performing its obligations under this Agreement, SWMS will be
entitled to rely upon any routine instructions, authorizations,
approvals or other information provided to SWMS by (a) TRUSTCO's
Relationship Manager, (b) any other TRUSTCO personnel identified by
TRUSTCO's Relationship Manager or (c) except with respect to
additional financial obligations on the part of TRUSTCO, any other
TRUSTCO management personnel reasonably appearing to SWMS as having
authority to provide the same on behalf of TRUSTCO. TRUSTCO shall
provide a list of management personnel ("Management List") as of the
Conversion Date and agrees to update the Management List from time to
time as necessary and SWMS may rely on the Management List for the
purposes of this Section 8.2. Unless SWMS knew of any lack of actual
authority, error, incorrectness or inaccuracy in such instructions,
authorizations, approvals or other information, SWMS will incur no
liability or responsibility of any kind in relying on or complying
with any such instructions or information. With respect to actions
concerning or affecting cash, investment or other financial interests
of TRUSTCO's Customers, SWMS shall rely exclusively upon TRUSTCO's
instructions with respect to such matters, and SWMS shall not exercise
discretion with respect to such matters.
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B. In performing its obligations under this Agreement, TRUSTCO will be
entitled to rely upon any routine instructions, authorizations,
approvals or other information provided to TRUSTCO by (a) SWMS's
Relationship Manager, (b) any other SWMS personnel identified by
SWMS's Relationship Manager or (c) except with respect to Additional
Services or additional financial obligations on the part of SWMS, any
other SWMS personnel reasonably appearing to TRUSTCO as having
authority to provide the same on behalf of SWMS. Unless TRUSTCO knew
of any lack of actual authority, error, incorrectness or inaccuracy in
such instructions, authorizations, approvals or other information,
TRUSTCO will incur no liability or responsibility of any kind in
relying on or complying with any such instructions or information.
Information, Approvals and Cooperation The Parties shall cooperate
with each other by, among other things, making its management
decisions, information, approvals and acceptances related to the
Services, and the provision thereof, available to each other on a
timely basis upon reasonable request, so that the Parties may
accomplish their obligations and responsibilities under this Agreement
and each Additional Services Task Order. Each Party's Relationship
Manager, or his or her designee, will be the Party's principal point
of contact for obtaining those decisions, information, approvals and
acceptances.
Regulatory Access
The records regarding TRUSTCO that are maintained and/or produced by
SWMS under this Agreement will during normal business hours, upon
reasonable notice to SWMS, or as otherwise required by law be
available for examination and audit by any governmental agency or
regulator that has jurisdiction over TRUSTCO's business. Each Party
will notify the other promptly of any formal request by an authorized
governmental agency or regulator to examine records regarding TRUSTCO
that are maintained by SWMS. Upon TRUSTCO's written request, SWMS will
provide any relevant information to those agencies and/or regulators
and will subject itself to any required examination or regulation. The
costs of ordinary and routine regulatory examinations and audits are
included in the Base Services Charges. TRUSTCO will reimburse SWMS for
the reasonable costs SWMS' incurs in connection with any extraordinary
or non-routine regulatory examinations or audits by such regulators to
the extent such extraordinary or non-routine regulatory examinations
or audits are caused by TRUSTCO, its employees or Customers. SWMS will
be excused from its obligation to meet the Service Levels during any
such examination or audit to the extent such examination or audit
precludes, interferes with or delays SWMS ability to perform the
Services in accordance with such Service Levels.
Charges
Charges for Base Services
TRUSTCO will pay to SWMS the conversion charges in accordance with the
provisions of Schedule C and will pay the charges for the Base
Services and expenses on a monthly basis, beginning with the month
during which the Conversion Date occurs in the amounts set forth in
Schedule C (the "Base Services Charges") for the Base Services. The
Base Service Charges as subject to change in accordance with the
provisions of Schedule C for any changes in the Base Services made
pursuant to Section 3.6.
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Charges for Additional Services
For each month during the Term that SWMS provides Additional Services
to TRUSTCO, TRUSTCO will pay SWMS all Additional Services Charges for
such Additional Services at such rates set forth in the applicable
Additional Services Task Order. To the extent Charges are based on an
hourly rate, TRUSTCO shall pay the amount of $250 per hour for
executives and $175 per hour for professionals during the first year
of the Term. The hourly rates will adjust annually at each anniversary
date of the Effective Date to an amount equal to the rate during the
preceding year plus (a) the most recent Consumer Price Index
(Employment Cost Index Compensation White Collar-ECICWIT) percentage
adjustment, provided however, any one annual adjustment shall not
exceed six (6) percent.
Expenses
TRUSTCO will pay, or reimburse SWMS for (a) reasonable and documented
expenses described or otherwise provided for in the Schedules, and (b)
any extraordinary expenses with respect to providing the Services
and/or which are the result of regulatory changes or Industry Changes;
provided that any expenses which exceed five thousand dollars ($5,000)
must have the prior written approval of TRUSTCO, which will not be
unreasonably withheld. TRUSTCO will continue to be responsible for all
postage (including overnight delivery service and courier charges)
utilized by SWMS for TRUSTCO's wealth management customers.
Taxes
The Parties' respective responsibilities for taxes arising under or in
connection with this Agreement and each Additional Services Task Order
are as follows:
A. Property Taxes
Each Party is responsible for any personal property taxes on
property it owns or leases, for franchise and privilege taxes on
its business, and for taxes based on its net income.
B. Taxes on Services
TRUSTCO shall be responsible for all federal, state or local
taxes, however designated or levied, based on those charges, on
this Agreement, on an Additional Services Task Order, or on the
Services.
Invoicing and Payment
Invoicing
Except as otherwise expressly provided in this Agreement or an
Additional Services Task Order, SWMS will invoice TRUSTCO monthly in
arrears for all amounts due under this Agreement. SWMS will invoice
TRUSTCO for Base Services in accordance with the provisions of
Schedule C (Base Services Charges). On or about the beginning of each
month, SWMS will deliver to TRUSTCO an invoice for any Additional
Services Charges for any Additional Services provided during the
previous month calculated in accordance with the rates for Additional
Services specified in the applicable Additional Services Task Orders.
SWMS will compute periodic charges under this Agreement and each
Additional Services Task Order on a calendar month basis and prorate
those charges for any partial month.
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Payment Due
Subject to the other provisions of this Section 11 and unless
otherwise agreed, TRUSTCO will pay invoices that SWMS submits under
this Agreement and each Additional Services Task Order within thirty
(30) days after receipt. Any amount not paid when due will thereafter
bear interest paid at a rate equal to the lesser of (i) one percent
(1%) per month or twelve percent (12%) per annum, pro-rated on the
basis of a 365 day year, or (ii) the highest rate allowed by
applicable law.
Audit of Charges
On a least thirty (30) days advance written notice by TRUSTCO, SWMS
will permit TRUSTCO or its independent auditors (who will not be
competitors SWMS, other than TRUSTCO's reporting external auditors),
at no additional expense to SWMS, to access SWMS' books and records at
a mutually agreeable time and place to perform an annual audit to the
extent necessary to verify SWMS' charges to TRUSTCO under this
Agreement and any Additional Services Task Order. TRUSTCO will provide
SWMS with a copy of the audit report resulting from each audit. As
promptly as practicable after providing the audit report, the Parties
will review it and work in good faith to agree on any adjustment of
charges and any appropriate future adjustments to SWMS' charges or
practices under, and necessary for compliance with, this Agreement and
any Additional Services Task Order. If SWMS desires to limit the scope
of TRUSTCO's audit in order to protect confidential or proprietary
information of SWMS or any customer of SWMS, the audit will be
conducted by an independent third party auditor mutually acceptable to
SWMS and TRUSTCO, who will verify SWMS' charges to TRUSTCO for the
relevant period without disclosing any confidential information to
TRUSTCO. Any third party auditors shall execute a
non-disclosure/confidentiality agreement provided by SWMS before being
granted access to SWMS' facilities and records.
Safeguarding Of Data and Confidentiality
TRUSTCO Data
As between TRUSTCO and SWMS, TRUSTCO owns and will continue to own all
right, title and interest in and to all TRUSTCO Data. Upon the
termination of the Termination Assistance Period or on any earlier
date as TRUSTCO and SWMS mutually determine that SWMS will no longer
need the TRUSTCO Data to render the Services, SWMS will either return
TRUSTCO Data in its possession to TRUSTCO, or at TRUSTCO's election
erase TRUSTCO Data from the data files maintained by SWMS. Except as
provided herein, SWMS may not use TRUSTCO Data for any purpose except
to provide the Services, nor may SWMS sell, assign, lease or otherwise
dispose of or commercially exploit TRUSTCO Data or any part of
thereof. Notwithstanding the foregoing, SWMS shall have the right to
use aggregated non-customer identifiable TRUSTCO Data relating to
TRUSTCO and its Customers ("Aggregated Data") for purposes of
improving the Services or marketing SWMS' services to other customers
or potential customers of SWMS. When used by SWMS for these purposes
and not for purposes of providing the Services, Aggregated Data will
not include information that discloses the name or physical street
address of a TRUSTCO Customer, and will not link information regarding
the TRUSTCO Customer to the identity of the Customer.
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Records Retention
SWMS shall retain TRUSTCO Data in accordance with the records
retention provisions of the Record Retention Policy attached hereto as
Schedule J; provided, however, that the Parties are in agreement that
SWMS shall have the right to place reasonable limitations on the
amount of historical data maintained on the system at any one time
(currently two (2) years history), and that the delivery of electronic
data in a standard format to TRUSTCO for cold storage purposes and the
subsequent purging of history shall be deemed by the Parties to be in
accordance with any Record Retention Policy adopted by the Parties.
SWMS sole responsibility for data being purged from the system is to
deliver the data to TRUSTCO in a standard format for TRUSTCO's use
with its archival system. The parties recognize that additional
history storage on the AddVantage system may be available for
additional fees.
Privacy Laws and Regulations
TRUSTCO shall be responsible for developing, preparing and providing
all notices required by an act, law, rule or regulation, including
without limitation the Gramm-Leach Bliley Act and its implementing
regulations, pertaining to the collection, protection and sharing of
information relating to TRUSTCO's Customers ("Privacy Policy").
TRUSTCO shall provide a copy of its current Privacy Policy to SWMS,
and SWMS shall comply with TRUSTCO's reasonable Privacy Policy with
respect to all TRUSTCO Data that comes into the possession or control
of SWMS, or is otherwise handled or transmitted by SWMS. TRUSTCO shall
promptly reimburse SWMS for all material expenses incurred in
complying with the Privacy Policy. TRUSTCO shall provide SWMS with a
minimum of thirty (30) days prior written notice of any material
changes to the Privacy Policy.
Confidentiality
C. The Receiving Party agrees that all Confidential Information
provided under this Agreement or an Additional Services Task Order by
the Disclosing Party will be treated as confidential, regardless of
whether marked or described as Confidential Information, and all
confidentiality notices on that Confidential Information will be
retained.
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D. In avoiding unauthorized disclosure or use of the Disclosing
Party's Confidential Information, the Receiving Party will use at
least the same degree of care, but no less than a reasonable degree of
care, as it employs concerning its own Confidential Information of
similar importance.
E. The Receiving Party may disclose Confidential Information only to
its own officers, directors, and employees and to its consultants,
subcontractors and advisors who reasonably need to know it. The
Receiving Party will be responsible to the Disclosing Party for any
violation of the provisions of this Section 12, by its officers,
directors, employees, consultants, subcontractors or advisors. SWMS
shall be permitted to provide access to Confidential Information to
its Affiliates, and to any regulatory agency or other third party in
connection with providing or as required to provide the Services, or
as required by law or applicable regulation.
F. The Receiving Party may not use the Disclosing Party's Confidential
Information for any purpose not in furtherance of this Agreement,
unless it obtains the Disclosing Party's prior written authorization.
G. If the Receiving Party is requested to disclose any of the
Disclosing Party's Confidential Information as part of an
administrative or judicial proceeding, the Receiving Party will, to
the extent permitted by applicable law, promptly notify the Disclosing
Party of that request and cooperate with the Disclosing Party, at the
Disclosing Party's expense, in seeking a protective order or similar
confidential treatment for the Confidential Information. If no
protective order or other confidential treatment is obtained, the
Receiving Party will (i) disclose only that portion of the
Confidential Information that is legally required to be disclosed
based on the opinion of its counsel and (ii) use reasonable efforts to
obtain reliable assurance that confidential treatment will be accorded
the Confidential Information so disclosed.
H. The Receiving Party agrees that in the event of a breach or
threatened breach by the Disclosing Party, or any officer, director,
consultant, subcontractor, advisor or employee of the Disclosing
Party, of the provisions of this Section 12, the Disclosing Party will
have no adequate remedy in money damages. Accordingly, each Party
agrees that the other may seek, from any court of competent
jurisdiction, injunctive and preliminary relief to remedy any actual
or threatened unauthorized use or disclosure of the other party's
Confidential Information.
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Representations and Warranties
Authorization
Each Party represents and warrants to the other that (i) it has the
requisite corporate power and authority to enter into this Agreement
and each Additional Services Task Order and to carry out the
transactions contemplated by this Agreement and each Additional
Services Task Order, including the giving or withholding of any
approval, acceptance, consent, notice or other action required or
permitted by this Agreement or that Additional Services Task Order,
and (ii) the execution, delivery and performance of this Agreement and
each Additional Services Task Order and the consummation of the
transactions contemplated by this Agreement and each Additional
Services Task Order have been and will be duly authorized by the
requisite corporate action on the part of that Party.
Bank Regulatory Requirements
During the Term, the Services provided under this Agreement by SWMS
shall comply in all material respects with Bank Regulatory
Requirements which apply to TRUSTCO including compliance with all
reasonable policies adopted by TRUSTCO in order to meet the objectives
of the Interagency Guidelines Establishing Standards for Safeguarding
Customer Information (12 CFR 570, Appendix B) SWMS will provide
TRUSTCO with its current Security and Privacy overview which will be
updated and supplemented from time to time and reports generated by
SWMS pursuant to compliance with the service levels..
Covenant of Cooperation and Good Faith
The Parties covenant to timely and diligently cooperate to effect the
goals, objectives and purposes of this Agreement and to facilitate the
performance of their respective duties and obligations under the
Agreement in a commercially reasonably manner. Further, the Parties
agree to deal and negotiate with each other in good faith in the
execution and implementation of their duties and obligations under the
Agreement. However, nothing in this Agreement shall be construed as
creating a relationship in which SWMS is the fiduciary of TRUSTCO.
Noninfringement
A. SWMS covenants, represents and warrants that SWMS and the SWMS
Third Party Providers will perform their respective responsibilities
under the Agreement in a manner that does not infringe, or constitute
an infringement or misappropriation of, any patent, trade secret,
copyright or other proprietary right of any third party.
Notwithstanding this provision or any other provision in the
Agreement, SWMS makes no warranty or representation with respect to
any claims for such infringement or misappropriation by virtue of its
compliance with such obligations herein to provide TRUSTCO access to,
use of or benefits of any Third Party Contracts prior to receiving the
necessary Required Consents. However, SWMS agrees to pay through to
TRUSTCO the amounts recovered or received by SWMS from the TRUSTCO
Third Party Providers with respect to damages sustained by TRUSTCO as
a result of the Third Party's infringement.
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B. TRUSTCO covenants, represents and warrants that TRUSTCO and its
Affiliates will perform their respective responsibilities under the
Agreement in a manner that does not infringe, or constitute an
infringement or misappropriation of, any patent, trade secret,
copyright or other proprietary right of any third party.
Notwithstanding this provision or any other provision in the
Agreement, TRUSTCO makes no warranty or representation with respect to
any claims for such infringement or misappropriation by virtue of its
compliance with such obligations herein to provide SWMS access to, use
of or benefits of any Third Party Contracts prior to receiving the
necessary Required Consents. However, TRUSTCO agrees to pay through to
SWMS the amounts recovered or received by TRUSTCO from the TRUSTCO
Third Party Providers and/or Unaffiliated Third Party Providers with
respect to damages sustained by SWMS as a result of the Third Party's
infringement.
DISCLAIMER OF WARRANTIES
THE SERVICES AND THE SWMS THIRD PARTY SOFTWARE ARE PROVIDED "AS-IS" AND "AS
AVAILABLE," WITHOUT REPRESENTATIONS OR WARRANTIES OF ANY KIND, ORAL OR WRITTEN.
EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT, NEITHER PARTY MAKES AND EACH
PARTY DISCLAIMS ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, ARISING FROM COURSE OF
DEALING, COURSE OF PERFORMANCE, USAGE OF TRADE, QUALITY OF INFORMATION, QUIET
ENJOYMENT OR OTHERWISE, INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY,
FITNESS FOR A PARTICULAR PURPOSE, QUALITY OF INFORMATION, QUIET ENJOYMENT, AND
TITLE/NON-INFRINGEMENT, OR THAT THE SERVICES OR DATA PROCESSED OR PROVIDED BY
SWMS WILL BE ERROR-FREE INTERRUPTION-FREE. EXCEPT AS EXPRESSLY PROVIDED IN THIS
AGREEMENT, SWMS SHALL HAVE NO LIABILITY WITH RESPECT TO ANY THIRD PARTY DATA AND
SERVICES OR THIRD PARTY PRODUCTS. EXCEPT TO THE EXTENT THAT SWMS' IS ENTITLED TO
ASSERT DEFENSES UNDER ANY PROVISIONS OF THE AGREEMENT OTHER THAN THIS SECTION
13.5, THIS DISCLAIMER AS SET FORTH ABOVE CANNOT BE INTERPOSED AS A DEFENSE TO
SWMS' OBLIGATION TO PROVIDE THE SERVICES IN ACCORDANCE WITH THE BASE SERVICE
LEVELS AS PROVIDED IN SCHEDULE B TO THIS AGREEMENT.
Insurance
During the Term, SWMS will be covered by the following insurance:
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Worker's Compensation Insurance, including occupational illness or disease
coverage, or other similar social insurance in accordance with the laws of the
country, state, or territory exercising jurisdiction over the employee and
Employer's Liability Insurance with coverage limits of $1,000,000 per accident
and a policy limit of $1,000,000.
Commercial General Liability Insurance, including Products, Completed
Operations, and Personal Injury Liability, Contractual Liability and Broad Form
Property Damage Liability covering bodily injury and property damage with
coverage limits of $1,000,000 per occurrence and $2,000,000 general aggregate.
Errors and Omissions coverage with coverage limits of $10,000,000 per wrongful
act and an aggregate of $10,000,000.
Employee Dishonesty Insurance (Crime Policy) for loss arising out of or in
connection with fraudulent or dishonest acts committed by SWMS' employees,
acting alone or in collusion with others, including loss of money, securities
and other property of others in SWMS' care, custody or control with coverage
limits of $15,000,000 per loss with an aggregate of $15,000,000..
Indemnification
Personal Injury and Property Damage
I. By SWMS
SWMS shall, subject to the provisions of Section 16, at its expense,
defend TRUSTCO from and against any third-party claims brought against
TRUSTCO relating to personal injury (including death) or loss or
damage to tangible property (other than data or information) to the
extent such personal injury or damage to tangible property is the
result of the negligence or wrongful misconduct of SWMS, its
employees, Affiliates, agents, representatives and SWMS Third Party
Providers. In addition, SWMS shall pay any judgments finally awarded
by a court of competent jurisdiction to such third parties against
TRUSTCO based on such claims after SWMS has presented its defenses (or
after SWMS elected not to defend such claims), and any settlements to
which SWMS agrees in writing (or to which TRUSTCO agreed after SWMS
elected not to defend such claims).
By TRUSTCO
TRUSTCO shall, at its expense, defend SWMS from and against any
third-party claims brought against SWMS relating to personal injury
(including death) or loss or damage to tangible property (other than
data or information) to the extent such personal injury or damage to
tangible property is the result of the negligence or wrongful
misconduct of TRUSTCO, its employees, Affiliates, agents,
representatives, TRUSTCO Third Party Providers, and Unaffiliated Third
Party Providers. In addition, TRUSTCO shall pay any judgments finally
awarded by a court of competent jurisdiction to such third parties
against SWMS based on such claims after TRUSTCO has presented its
defenses (or after TRUSTCO elected not to defend such claims) and any
settlements to which TRUSTCO agrees in writing (or to which SWMS
agreed after TRUSTCO elected not to defend such claims).
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Intellectual Property Indemnity
J. By SWMS
SWMS shall, at its expense, and pursuant to the other terms,
conditions and procedures of this Section 15, indemnify and defend
TRUSTCO from and against any third-party claims brought against
TRUSTCO alleging that TRUSTCO's use, in accordance with the terms of
this Agreement, of the SWMS Third Party Software (but only to the
extent such software is licensed to SWMS by an entity majority owned
or directly controlled by SunGard Data Systems Inc. or any of its
subsidiaries) the SWMS Intellectual Property infringes a third
person's copyright, trade secret or United States patent enforceable
in the United States. In addition, in the event a third party asserts
a claim against TRUSTCO relating to any other SWMS Third Party
Software, SWMS will reasonably cooperate with TRUSTCO with respect to
assigning or otherwise passing through to TRUSTCO any infringement
warranties or indemnification rights available to SWMS from vendors of
SWMS Third Party Software. SWMS shall pay any judgments finally
awarded by a court of competent jurisdiction to such third parties
against TRUSTCO based on such claims after SWMS has presented its
defenses (or after SWMS elected not to defend such claims) and any
settlements to which SWMS agrees in writing (or to which TRUSTCO
agreed after SWMS elected not to defend such claims).
Mitigation
Upon receiving notice of an infringement claim, the indemnifying party
may, in its sole discretion, (i) modify the allegedly infringing item
to be non-infringing without materially impairing its functionality,
(ii) replace the allegedly infringing item with a non-infringing item
of substantially equivalent functionality, or (iii) obtain for the
indemnified party the right to continue to use the item in accordance
with the terms of this Agreement.
Exclusions
Notwithstanding the other provisions of this Section 15.2 and except
as expressly provided otherwise, the indemnifying party shall have no
liability to the indemnified party for any claim of infringement to
the extent that such claim is based on modifications or enhancements
to the applicable software or equipment created by the indemnified
party, or the misuse or use of the applicable software or equipment by
the indemnified party in a manner not intended by the indemnifying
party.
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Indemnification Procedures
With respect to any third party claims for which either Party is
entitled to indemnification under this Section 15 (an "Indemnified
Claim"), the following procedures will apply:
K. Notice
After any entity entitled to indemnification under this Section
receives notice of the commencement or threatened commencement of any
civil, criminal, administrative, or investigative action or proceeding
involving an Indemnified Claim for which the indemnified party will
seek indemnification under this Section, the indemnified party will
promptly notify the indemnifying party of that claim in writing. Such
notice shall describe any matters with respect to the Indemnified
Claim of which the indemnified party has knowledge. However, failing
to notify an indemnifying party of an Indemnified Claim will not
relieve the indemnifying party of its obligations under this Agreement
except to the extent the indemnifying party is prejudiced thereby. The
indemnified party will give the indemnifying party full opportunity to
control the response to the Indemnified Claim and the defense thereof,
including, without limitation, any agreement relating to the
settlement thereof; provided, however, the indemnified party may
participate, at its own expense, in any defense and any settlement
directly or through counsel of its choice. As soon as reasonably
practicable after receiving written notice of the claim, the
indemnifying party will notify the indemnified party in writing as to
whether the indemnifying party elects to assume control of the defense
and settlement of that claim. If the indemnifying party elects not to
defend, the indemnified party will have the right to defend or settle
the claim as it may deem appropriate, at the cost and expense of the
indemnifying party, which will promptly reimburse the indemnified
party for such costs, expenses and settlement amounts.
L. Subrogation
If an indemnifying party is obligated to indemnify an indemnified
party under this Section, then, upon paying that indemnity in full,
the indemnifying party will be subrogated to all rights of the
indemnified party concerning the claims to which the indemnification
relates.
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Liability
LIMITATION AS TO TYPES OF DAMAGES
NOTHWITHSTANDING ANY OTHER PROVISION IN THIS AGREEMENT, WITH RESPECT
TO ALL CLAIMS ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
AGREEMENT (INCLUDING WITHOUT LIMITATION CLAIMS FOR BREACH OF AN
OBLIGATION TO PROVIDE INDEMNIFICATION), THE MEASURE OF DAMAGES PAYABLE
BY EITHER PARTY WILL NOT INCLUDE, AND NEITHER PARTY'S LIABILITY WILL
INCLUDE, ANY AMOUNTS FOR INDIRECT, INCIDENTAL, RELIANCE, SPECIAL,
CONSEQUENTIAL OR PUNITIVE DAMAGES (INCLUDING LOST REVENUE, LOST
PROFIT, LOSS OF DATA, OR BUSINESS INTERRUPTION LOSSES) OF ANY PARTY,
INCLUDING THIRD PARTIES, WHETHER IN TORT OR CONTRACT, AND WHETHER OR
NOT SUCH DAMAGES ARE FORESEEN OR UNFORESEEN. THE LIMITATIONS IN THIS
SECTION SHALL NOT APPLY TO DAMAGES ARISING OUT OF (A) A PARTY'S BREACH
OF A CONFIDENTIALITY OBLIGATION UNDER THIS AGREEMENT, (B) TRUSTCO'S
BREACH OF THE LIMITATIONS ON USE OF THE SWMS INTELLECTUAL PROPERTY OR
THE SERVICES, OR (C) A CLAIM UNDER SECTION 15.2 (Intellectual Property
Indemnity).
DOLLAR LIMITATION
NOTHWITHSTANDING ANY OTHER PROVISION IN THIS AGREEMENT, SWMS's
LIABILITY TO TRUSTCO FOR ANY CLAIM UNDER OR RELATING TO THIS
AGREEMENT, OR RELATING IN ANY WAY TO THE SERVICES, WHETHER BREACH OF
CONTRACT OR TORT, WILL NOT EXCEED, IN THE AGGREGATE, AN AMOUNT EQUAL
TO THE AMOUNT PAID BY THE CUSTOMER TO SWMS UNDER THIS AGREEMENT FOR
THE TWO (2) YEAR PERIOD PRIOR TO THE MOST RECENT CAUSE OF ACTION.
Statute of Limitations
A Party may not assert against the other any cause of action arising
under this Agreement or any Additional Services Task Order that
accrued more than three (3) years before that Party filed a suit
alleging that cause of action.
Force Majeure
M. Force Majeure Event
Neither Party is or will be liable for any default or delay in the
performance of its obligations under this Agreement or any Additional
Services Task Order (excluding payment obligations hereunder or
thereunder) if and to the extent a Force Majeure Event occurs. For
purposes of this Agreement, a "Force Majeure Event" occurs if and to
the extent: (i) the default or delay is caused, directly or
indirectly, by fire, flood, earthquake, natural disasters, elements of
nature or acts of God; riots, civil disorders, terrorist acts,
rebellions or revolutions in any country; delay or failure in
communications or electronic data transmission as a result of
excessive or extraordinary traffic caused by extraordinary market
occurrences or circumstances; acts or omissions of third parties not
subcontractors of the defaulting party or suppliers; or any other
cause beyond the reasonable control of that Party; (ii) the
non-performing Party is without fault in causing that default or
delay; and (iii) the non-performing Party cannot reasonably circumvent
the default or delay through the use of alternate sources, workaround
plans or other means (including, with respect to SWMS, by SWMS meeting
any express obligations it may have for performing disaster recovery
services as part of the Services; provided however, SWMS shall be
relieved from performing disaster recovery services to the extent SWMS
is prevented or hindered by performing such services as a result of or
during the occurrence a Force Majeure Event).
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N. Excused from Performance
If and for so long as a Force Majeure Event occurs, the non-performing
Party is excused from further performing or observing the
obligation(s) affected, provided the Party continues to use
commercially reasonable efforts to recommence performance. Any Party
delayed in its performance under those circumstances will promptly
notify the Party to whom performance is due and describe at a
reasonable level of detail the circumstances causing the delay.
16.5 ....SunGard Business Systems Guarantee
SunGard guarantees, subject to the provisions of Section 16, (i) the timely
payment of all liabilities, damages, indemnities and other amounts owed by
SWMS to TRUSTCO under this Agreement and shall assume full responsibility
for payment of such amounts in the event that SWMS is unable or refuses to
pay such amounts after SWMS liability therefore has clearly been
established and is not in dispute and (ii) performance of all of SWMS
obligations under this Agreement if SWMS fails to fulfill any such
obligations. With respect to all claims asserted by TRUSTCO against
SunGard, SunGard shall be entitled to raise and assert all defenses and
contract limitations under this Agreement that would otherwise be available
to SWMS and SunGard's liabilities shall not extend beyond the limits of
this Agreement.
Dispute Resolution
Review of Performance
The Relationship Managers will meet as often as mutually agreed to review
performance under this Agreement and each Additional Services Task Order.
If any dispute between the Parties arises out of or in connection with this
Agreement or any Additional Services Task Order the procedures in this
Section 17 shall be implemented.
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Dispute Escalation
In the event of any dispute, controversy or claim of any kind or nature
arising under or in connection with this Agreement or any Additional
Services Task Order (including disputes as to the creation, validity,
interpretation, breach or termination of this Agreement or any Additional
Services Task Order) which cannot be resolved by the Relationship Managers
(a "Dispute"), then upon the written request of either Party, each of the
Parties will appoint a designated senior business executive (other than the
Parties' designated Relationship Managers) whose task it will be to meet
for the purpose of endeavoring to resolve the Dispute. The designated
executives will meet as often as the Parties reasonably deem necessary in
order to gather and furnish to the other all information with respect to
the matter in issue which the Parties believe to be appropriate and germane
in connection with its resolution. Such executives will discuss the Dispute
and will negotiate in good faith in an effort to resolve the Dispute
without the necessity of any formal proceeding relating thereto. The
specific format for such discussions will be left to the discretion of the
designated executives but may include the preparation of agreed upon
statements of fact or written statements of position furnished to the other
Party. No formal proceedings for the resolution of the Dispute may be
commenced until the earlier to occur of (a) a mutual good faith conclusion
by the designated executives that amicable resolution through continued
negotiation of the matter in issue does not appear likely or (b) the 30th
day after the initial request to negotiate the Dispute.
Contract Enforcement
The Parties agree that any dispute, controversy, claim or disagreement
between or among either of the Parties to this Agreement that the Parties
are unable to resolve through the informal discussions or negotiations
pursuant to Section 17.2 may be submitted in order to settle such
unresolved dispute upon the completion of the dispute resolution process to
a court of competent jurisdiction in either Pennsylvania or New York. The
Parties stipulate that the submission of disputes to the dispute resolution
process as provided in Section 17.2 shall be a condition precedent to any
suit, action or proceeding instituted in any court or before any
administrative tribunal with respect to such dispute.
Continued Performance
Unless this Agreement or the applicable Additional Services Task Order has
been terminated in accordance with the provisions of Section 18, SWMS will
continue to provide the Services during any dispute resolution proceedings,
provided TRUSTCO continues to make payment for those Services as provided
in this Agreement.
Termination
Termination for Cause
If either party materially defaults in performing any of its duties or
obligations (except for payment obligations) under this Agreement or under
an Additional Services Task Order, and fails to substantially cure that
default within 60 days after receiving written notice specifying the
default (or, concerning any default that cannot reasonably be cured within
that 60 day period but is curable, if the defaulting party fails to proceed
within that 60 day period to commence curing the default and thereafter to
proceed with all due diligence to substantially cure it, and to
substantially cure it within 120 days after the giving of that written
notice), then the non-defaulting party may, by giving written notice of the
default to the defaulting party, terminate the Additional Services Task
Order that was breached and, where applicable due to material breach with
respect to Base Services, this Agreement, as of a date specified in the
notice of termination, which date will be no later than one year after the
date on which the terminating Party's right to terminate arose. If the
default is incapable of being cured, then the 60 day cure period shall not
apply, and notice of termination may be given directly by the party not in
default. A Party's right to give a termination notice under this Section 18
will expire once the default is substantially cured.
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Termination for Non-Payment
If TRUSTCO defaults in the payment when due of any material amount under
this Agreement or an Additional Services Task Order, other than amounts in
dispute pursuant to Section 17 so long as any disputed amount for which
payment is not made is attributable to specific Services that TRUSTCO
reasonably contends have not been performed in accordance with this
Agreement, and does not cure the default within 15 days after receiving
written notice of the default, then SWMS may, by giving written notice of
the default to TRUSTCO, terminate this Agreement as of a date specified in
the notice of termination, which date will be no later than one year after
the date on which SWMS' right to terminate arose. SWMS right to give a
termination notice under this Section will expire once TRUSTCO is current
in its payment obligations hereunder, including any applicable interest
payments.
Termination for Insolvency
If a Party (the "Insolvent Party") becomes or is declared insolvent or
bankrupt; is the subject of any proceedings relating to its liquidation,
insolvency or for the appointment of a receiver or similar officer for it
(which, in the case of involuntary proceedings, remains pending without
dismissal for at least 60 days); makes an assignment for the benefit of
substantially all of its creditors; or enters into an agreement for the
composition, extension, or readjustment of substantially all of its
obligations, then the other Party may, by giving written notice to the
Insolvent Party, terminate this Agreement and each Additional Services Task
Order as of a date specified in the notice of termination. However, neither
this Agreement nor any Additional Services Task Order may be terminated
under this Section 18 once the Insolvent Party ceases to be insolvent or be
the subject of a proceeding relating to its liquidation, insolvency or the
appointment of a receiver. ANY RIGHT OF ACCESS TO AND EMPLOYMENT OF THE
SYSTEMS CONTEMPLATED BY THIS AGREEMENT, SHALL BE DEEMED AN EXECUTORY
CONTRACT UNDER SECTION 365(n) OF TITLE 11 TO THE U.S. BANKRUPTCY CODE AND
SHALL REMAIN IN FULL AND FORCE AND EFFECT UPON THE TRUSTCO'S ELECTION AND
TRUSTCO'S SUBSTANTIAL PERFORMANCE HEREUNDER, NOTWITHSTANDING ANY BANKRUPTCY
OR INSOLVENCY OF THE OWNER.
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Termination for Convenience
TRUSTCO may terminate this Agreement without cause at any time after the
second anniversary the Conversion Date upon written notice to SWMS, and
such termination shall be effective as of the date specified in such
termination notice but in no event less than ninety (90) days after the
date of such termination notice. In the event of any termination by TRUSTCO
in accordance herewith prior to the Conversion Date, the Conversion Charge
provided for in Section 2 of Schedule C shall be considered by the Parties
to represent liquidated damages which shall be retained by SWMS to
partially compensate it for early termination of the Agreement and such
liquidated damages shall be in addition to TRUSTCO's obligation to pay any
other fees and expenses that are owed by TRUSTCO for Services provided up
to the effective date of termination. In the event of any termination by
TRUSTCO in accordance herewith on or after the Conversion Date, TRUSTCO
shall pay a termination fee equal to the following (based on the prevailing
rates for Treasury securities with a maturity comparable to the unexpired
term of the contract, as of the first business day of the month in which
termination is effective and as published in The Wall Street Journal) on
the effective date of termination of the minimum monthly payments that
would be due during the unexpired portion of the Term in accordance with
Section 3(d) of Schedule C: During the Initial Term of the Agreement-100%
of the net present value of the monthly payments due during the remaining
unexpired term of the Agreement; and During any renewal term an amount to
be determined by the parties at the time the renewal fees are negotiated.
18.5 Termination Assistance and Rights upon Termination or Expiration
Upon receiving any notice of termination by TRUSTCO, or upon expiration of
the Term, SWMS will, for a period of up to 12 (twelve) months (plus an
additional 30 days if the 12 month period ends on or between December 15
and December 31) after the termination or expiration of the Term
("Termination Assistance Period"), provide to TRUSTCO the termination
assistance reasonably requested to allow the Services provided under this
Agreement to continue, and to facilitate the orderly transfer of
responsibility for performance of the Services to TRUSTCO or to a third
party designated by TRUSTCO ("Termination Assistance Services"); provided
that TRUSTCO pays SWMS for the resources used by SWMS to provide such
Termination Assistance Services on a time and materials basis at rates
equal to SWMS' then-current reasonable commercial rates for those resources
charged to similarly situated customers. Additionally, TRUSTCO shall
continue to pay all Charges as provided by this Agreement during the
Termination Assistance Period. SWMS shall be relieved from complying with
Service Levels for Services that TRUSTCO discontinues obtaining from SWMS
(the "Transitioned Out Services") and to the extent the Service Levels for
the remaining Services are adversely impacted by the Transitioned Out
Services or third parties providing the Transitioned Out Services. If
termination of this Agreement is a result of a breach of any part of this
Agreement or any Additional Services Task Order by TRUSTCO, then (i)
TRUSTCO will pay SWMS in advance for such Termination Assistance Services,
and (ii) SWMS will invoice TRUSTCO each month in advance in an amount equal
to SWMS' reasonable estimate of the total amount payable to SWMS for such
Termination Assistance Services for that month, adjusted as necessary, to
reconcile the estimated and actual charges for Termination Assistance
Services provided during the prior month. All such advance payments will be
payable on the first day of each month during the Termination Assistance
Period, provided the first month's payment will be paid on the first day of
the Termination Assistance Period if that day does not fall the first day
of the month. For any termination or expiration of this Agreement other
than as a result of a breach of any part of this Agreement or any
Additional Services Task Order by TRUSTCO, SWMS will invoice TRUSTCO at the
beginning of each month in arrears in an amount equal to the total charges
payable to SWMS for any Termination Assistance Services provided during the
previous month. The Termination Assistance Services to be provided will
include without limitation the following:
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A. Transition Out Plan Developing, together with TRUSTCO, a plan for the
orderly transition of the performance of the Services from SWMS to TRUSTCO
or to a third party designated by TRUSTCO.
B. Training Providing reasonable formal training for personnel of TRUSTCO
in the performance of the Services then being transitioned to TRUSTCO;
provided SWMS shall not be obligated to provide training or disclose
information concerning the workings or methodology of any proprietary
software or systems.
C. Equipment Providing TRUSTCO the right to (i) assume any leases for
Equipment leased by SWMS that is then dedicated to providing Services for
TRUSTCO under this Agreement, if and to the extent SWMS has the necessary
rights to allow the assumption of the leases, and (ii) purchase from SWMS
any Equipment owned by SWMS that is then dedicated to providing Services
for TRUSTCO under this Agreement. If TRUSTCO exercises its right under item
(ii), it will pay to SWMS an amount equal to the fair market value of the
applicable Equipment. SWMS will also provide all users manuals and other
documentation in its possession that relates to that Equipment. TRUSTCO
will assume responsibility under any third party software license fees or
maintenance agreements for that Equipment to the extent those
responsibilities relate to periods after the date of termination or
expiration of this Agreement.
D. Third Party Services Assigning, at TRUSTCO's request and expense, to
TRUSTCO or its designee, any third party services then being used by SWMS
solely in performing the Services pursuant to this Agreement; and,
assisting TRUSTCO in obtaining, at TRUSTCO's expense, any necessary rights
to any third party services then being utilized by SWMS in performing the
Services and in the performance of services for any other SWMS Customer.
SWMS will be entitled to retain the right to use any of those third party
services in connection with the performance of services for any other SWMS
customer.
E. SWMS Third Party Software Assisting TRUSTCO in obtaining, at TRUSTCO's
expense, any necessary licenses to any SWMS Third Party Software then being
utilized by SWMS in performing the Services. SWMS will be entitled to
retain the right to continue to license and use any of the SWMS Third Party
Software in connection with the performance of services for any other SWMS
customer.
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F. Developed Software
Provided that TRUSTCO is not in breach of this Agreement, granting to
TRUSTCO during the Termination Assistance Period a non-transferable,
non-exclusive, fully paid up, royalty free right to access and employ any
Developed Software (including all related documentation) and Other
Intellectual Property that SWMS used as of the termination of the Agreement
for providing the Services to TRUSTCO. The Developed Software that are the
subject of the rights granted under this subsection are collectively
referred to as the "Transition SWMS Materials". The licenses to access and
use the Transition SWMS Materials will be subject to the following:
1. Except with the prior written consent of SWMS, the Transition SWMS
Materials will not be accessed, operated, directly or indirectly, (i) by
persons other than employees of TRUSTCO, or (ii) on equipment that is not
under the control of TRUSTCO.
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2. The Transition SWMS Materials may only be accessed or used for continued
use of the Services (or replacement or transitioned services) during the
transition. TRUSTCO (i) will keep the Transition SWMS Materials
confidential, (ii) will not at any time allow the Transition SWMS
Materials, or any of the various components of them or any modifications to
them, to be disclosed to or accessed by third parties, sold, assigned,
leased or commercially exploited or marketed in any way, with or without
charge, by TRUSTCO or its employees or agents and, (iii) except to the
extent necessary for normal operation of the Transition SWMS Materials as
permitted in this Agreement, will not permit the Licensed SWMS Materials to
be accessed, copied or reproduced, in whole or in part, by any person at
any time.
3. TRUSTCO acknowledges and agrees that the Transition SWMS Materials are
SWMS' and its licensors' valuable property, that violation in any material
respect of any provision of this Section would cause SWMS irreparable
injury for which it would have no adequate remedy at law, and, in addition
to any and all other remedies or rights SWMS may have at law or in equity,
SWMS will be entitled to preliminary and other injunctive relief against a
violation of that nature.
Miscellaneous
Notices
All notices, requests, demands and other communications to be given or
delivered under or by reason of the provisions of this Agreement or any
Additional Services Task Order for the enforcement of the Agreement
provisions will be in writing and will be deemed given (i) on the date
sent, when sent by facsimile or delivered personally, (ii) on the next
business day when sent by overnight Federal Express, Express Mail or
similar service and (iii) on the third business day after being mailed when
mailed by certified first class mail, return receipt requested, to each
Party at the following address (or to such other address as that Party may
have specified by notice given to the other pursuant to this provision):
If to SWMS:
SunGard Wealth Management Services, LLC
8300 East Thorn Drive, Suite 100
Wichita, Kansas 67226
Attention: President
With a copy to:
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SunGard Data Systems Inc.
1285 Drummers Lane
Wayne, Pennsylvania 19087
Attention: General Counsel
Trustco Bank
3 Sarnowski Drive
Glenville, N.Y. 12302
Attention: Kevin Curley
With a copy to:
Trustco Bank
5 Sarnowski Drive
Glenville, N.Y. 12305
Attention: President & CEO
Notwithstanding the notice provisions above, the directions and instructions
delivered by the Parties in the context of facilitating the day to day
operations outsourcing functions by SWMS for TRUSTCO pursuant to this Agreement
or any Additional Services Task Order may be delivered in writing, through
e-mail or through Quickflow forms or other AddVantage methodologies without
having to adhere to the formal notice provisions above.
Binding Nature and Assignment
This Agreement and each Additional Services Task Order is binding on
the Parties and their respective successors and assigns. Either party
may assign its right to receive payments under this Agreement and each
Additional Services Task Order by providing written notice of that
assignment to the other Party, and SWMS shall be permitted to assign
this Agreement in the event of a restructuring that does not material
impact its (or the assignee's) ability to provide the Services. In
addition, either Party may assign all of its rights and obligations
under this Agreement and all Additional Services Task Orders to any
acquirer of all, or substantially all, of that Party's assets,
provided that such transfer may not (a) increase the scope of the
Services, (b) decrease the Charges, fees or other compensation paid or
to be paid to SWMS, or (c) increase the scope of any other obligations
of the non-assigning Party. Except as otherwise provided in this
Section, neither Party will, nor has the power to, assign this
Agreement nor any Additional Services Task Order without the other
Party's prior written consent, which consent shall not be unreasonably
withheld.
Severability
Whenever possible, each provision, or any portion of each provision,
of this Agreement and each Additional Services Task Order will be
interpreted in such a manner as to be effective and valid under
applicable law, but if any provision, or any portion of any provision,
of this Agreement or an Additional Services Task Order is held to be
prohibited by or invalid under applicable law, that provision, or
portion of that provision, will be deemed restated to reflect the
original intentions of the Parties as nearly as possible in accordance
with applicable law, and, if capable of substantial performance, the
remaining provisions of this Agreement will be enforced as if this
Agreement and that Additional Services Task Order was entered into
without the invalid provision.
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Counterparts
This Agreement and each Additional Services Task Order may be executed
in one or more counterparts, all of which taken together will
constitute one and the same instrument.
Relationship of Parties
A. SWMS SHALL NOT OWE A FIDUCIARY OBLIGATION TO, AND SHALL NOT BE
DEEMED A FIDUCIARY OF, TRUSTCO OR TRUSTCO'S CUSTOMERS, SWMS SHALL NOT
PROVIDE, AND SHALL NOT BE REQUIRED OR OBLIGATED TO PROVIDE LEGAL, TAX
OR INVESTMENT ADVICE (EXCEPT WITH RESPECT TO MAINTAINING THE
INVESTMENT NETWORK) TO TRUSTCO OR ITS CUSTOMERS.
B. Except as expressly provided, SWMS does not undertake by this
Agreement or any Additional Services Task Order or otherwise to
perform any of TRUSTCO's obligations, whether regulatory or
contractual, or to assume any responsibility for any of TRUSTCO's
business or operations. SWMS shall not owe a fiduciary obligation to,
and shall not be deemed a fiduciary of, TRUSTCO or TRUSTCO's
customers. SWMS has the sole right and obligation to supervise,
manage, contract, direct, procure, perform or cause to be performed,
all work to be performed by SWMS under this Agreement and each
Additional Services Task Order. TRUSTCO acknowledges and agrees that,
except as otherwise provided by Section (Non-competition), or this
Agreement or any Additional Services Task Order, SWMS may perform
information technology services, including services similar to those
performed for TRUSTCO under this Agreement and any Additional Services
Task Order, for any third party and at any SWMS Facility that SWMS may
use to provide the Services.
Further Assurances
The Parties agree to execute and deliver such other letters,
instruments and documents as either Party reasonably requests to in
order to permit SWMS to provide the Services, and for TRUSTCO to
access and use the Services. Neither Party's execution, delivery, or
performance of this Agreement or any Additional Services Task Order
will constitute a violation of any judgment, order, or decree; a
material default under any material contract by which it or any of its
material assets are bound; or an event that would, with notice or
lapse of time, or both, constitute such a default.
Non-competition
Except as expressly provided herein, during the Term and continuing
until and for so long as TRUSTCO is receiving Base Services from SWMS,
and for a period of two (2) years thereafter, TRUSTCO shall not,
directly or indirectly, offer or become a shareholder, member, partner
or otherwise have an ownership in any entity offering wealth
management operation services in competition with SWMS; provided,
however, that this provision shall not apply if TRUSTCO acquires or is
acquired by an organization that in the aggregate (and without regard
to the revenues of any individual business unit) received less than
thirty-five percent (35%) of its revenues from wealth management
operations outsourcing services at the time of the acquisition.
Notwithstanding the foregoing, nothing contained in this Agreement or
any Additional Services Task Order, or any other document shall
prohibit TRUSTCO, its parent, subsidiaries or affiliates, from
providing trust services to TRUSTCO, its parent, subsidiaries or
affiliates.
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Third Party Beneficiaries
This Agreement does not, and neither Party intends that this Agreement
will, confer any legal rights on any third party, including TRUSTCO
Customers, or to be enforceable in any part by a third party. Media
Releases other than references by SWMS to TRUSTCO in its promotional,
marketing and related materials, all media releases, public
announcements and public disclosures by either Party relating to this
Agreement or its subject matter shall be subject to the other Party's
review and approval prior to release. This restriction does not apply
(i) to any announcement intended solely for internal distribution or
(ii) any disclosure required by law. This Agreement does not confer
and neither Party will have any right to use the other Party's
trademarks, service marks or logos without the other Party's prior
written consent.
Modification and Waiver
Only a written instrument duly executed by or on behalf of each Party
may modify this Agreement or any Additional Services Task Order. No
delay or omission by either Party to exercise any right or power under
this Agreement or any Additional Services Task Order will impair that
modification right or power, nor be construed to be a waiver of it. If
either Party waives any of the other Party's obligations under this
Agreement or any Additional Services Task Order, or waives any breach
of this Agreement or any Additional Services Task Order, that waiver
will not be construed to be a waiver of any succeeding breach nor of
any other obligation under this Agreement or any Additional Services
Task Order.
Entire Agreement
This Agreement and each Additional Services Task Order, including the
Schedules referred to in this Agreement and that Additional Services
Task Order and attached to it, each of which is incorporated in this
Agreement for all purposes, constitutes the entire agreement between
the Parties concerning the subject matter of this Agreement and that
Additional Services Task Order, and supercedes all prior agreements or
understanding with respect to the subject matter of this Agreement
(except of obligations expressly provided for surviving termination of
the Letter of Intent signed by the Parties in contemplation of this
Agreement). There are no (and neither party has relied on in executing
this Agreement any) representations, understandings or agreements,
written or oral, relative to this Agreement that are not fully
expressed in this Agreement or an Additional Services Task Order.
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Governing Law
The laws of the State of New York (other than the choice of law rules)
will govern all questions concerning the construction, validity,
enforceability and interpretation of this Agreement and each
Additional Services Task Order and the performance of the obligations
imposed by this Agreement and each Additional Services Task Order.
Attorney's Fees
Should either party to this Agreement institute any action or
proceeding (excluding mediation proceedings) to enforce this Agreement
or any provision hereof, or for damages by reason of any alleged
breach of this Agreement, otherwise arising under this Agreement, or
for a declaration of rights hereunder, the prevailing party in any
such action or proceeding shall be entitled to receive from the other
party all costs and expenses, including, without limitation,
reasonable attorney's fees, incurred by the prevailing party in such
action or proceeding, including appellate proceedings.
IN WITNESS WHEREOF, SWMS and TRUSTCO have each caused this Agreement to be
signed and delivered by its duly authorized representative, all as of the
Effective Date.
SunGard Wealth Management Services, LLC Trustco Bank
By: ______________________________ By:________________________
Title: ______________________________ Title:_____________________
83
SCHEDULES TO MASTER SERVICES AGREEMENT BETWEEN
SUNGARD WEALTH MANAGEMENT SERVICES AND TRUSTCO CORPORATION
LIST OF SCHEDULES
A. Base Services
B. Base Service Levels
C. Base Services Charges
D. TRUSTCO Proprietary Software
E. TRUSTCO Third Party Software
F. SWMS Third Party Software
G. Third Party Contracts
H. Disaster Recovery Plan
I. Workplan
J. Records Retention
K. TRUSTCO Specified Responsibilities
L. SWMS Third Party Providers
M. Unaffiliated Third Party Providers
[See separate document for Schedules]
84
SCHEDULE A
BASE SERVICES
The Base Services shall include the following summarized services which are more
completely described in the Base Service Level Standards Schedule (B):
I. Conversion Services.
Upon execution of this Agreement and subject to the terms and
conditions of this Agreement, SWMS and TRUSTCO will jointly work
without delay to convert TRUSTCO's Wealth management Assets to the
SunGard AddVantage system and SWMS outsourcing solution by the
targeted date noted below or such later date as mutually agreed by the
parties. The conversion services shall include the following:
o Conversion Plan: Within a reasonable period of time after the
Effective Date, SWMS and TRUSTCO will jointly formulate a conversion
plan that identifies specific responsibilities of SWMS and TRUSTCO and
a schedule for completion of such responsibilities (the "Conversion
Plan").
o Data Conversion: Conversion of the current TRUSTCO wealth management
accounts from the Series 7 system to the SunGard AddVantage System in
accordance with the Conversion Plan which will include the following
services:
o SWMS shall provide the necessary Programming to convert the
TRUSTCO assets from their current system.
o TRUSTCO and/or its current Third Party Provider shall be
responsible for extracting appropriate data from their current
System in order to populate the AddVantage files as follows:
o Account Master
o Interested Party Master
o Interested Party Sub-master
o Master Account related Central accounts
o Holdings/Tax/Cash Lots
o Non-standard conversion programs that have
been done by SWMS for clients when
appropriate data files could be obtained:
o Trade Date/Accrual Statement Accruals
o Pricing Overlay
o Upload of data for loading post conversion
income
o Implementation Support
The SWMS Conversion will result in the conversion of all reasonably
necessary data contained in the final Conversion Plan which will
enable the TRUSTCO wealth management accounts that are to be converted
to be processed on the SunGard AddVantage system. SWMS shall be
responsible for using the developed Conversion Programming to convert
the TRUSTCO data files extracted from their current system to the
format required by the AddVantage System. Historical data will not be
converted from TRUSTCO's previous system. SWMS will maintain
historical data going forward from the date of conversion. As noted in
the Agreement two years of history will be maintained on the system.
Older data will be purged on a scheduled basis and delivered to
TRUSTCO in a standard format for use by TRUSTCO on their archival
system. TRUSTCO and SWMS will jointly be responsible for identifying
any data conversion errors created in the data extracted from the
Series 7 system and the conversion to the AddVantage System. TRUSTCO
will be responsible for correcting all errors which are caused by the
data extract and SWMS will be responsible for correcting all errors
created by the conversion programming which do not result from the
data extract provided by TRUSTCO.
85
o Data Conversion Schedule:The conversion of TRUSTCO data from their
current system to the SunGard AddVantage System will be targeted for
completion by SWMS by August 1, 2004 subject to: i) the determination of
the feasibility of successfully completing the conversion on that date
based on the results of due diligence completed on TRUSTCO's current wealth
management system provider by SWMS; ii) that the necessary communication
lines can be installed on a timely basis; and iii) SWMS receives reasonable
cooperation and necessary and good data (including accounts and assets
which are reconciled with all custodians) from both TRUSTCO and their
current wealth management system provider on a timely basis and in
accordance with the conversion plan jointly adopted by SWMS and TRUSTCO.
o The conversion will be delayed if the test conversion and processing
controls raise significant concerns which in SWMS or TRUSTCO's opinion
would make a conversion by unwise.
o Establish Network Connectivity: SWMS shall provide connectivity from
TRUSTCO to the AddVantage system through the installation of necessary
communication and back up lines. The connectivity provided will be the
amount determined by SWMS and its Affiliates necessary to support the
services, but TRUSTCO may request communication line enhancements at an
additional charge to TRUSTCO. The ongoing monthly connectivity and line
management charges for the communication lines will be TRUSTCO's
responsibility.
o TRUSTCO System Operations: During the period prior to the Conversion
Date, TRUSTCO will be responsible for continuing to operate its current
wealth management systems and for providing the appropriate and reasonable
resources to assist SWMS with the orderly conversion of the TRUSTCO Data to
the AddVantage system.
o Training: SWMS shall provide initial training prior to the Conversion
Date and as jointly deemed necessary for a period of up to 30 days after
the Conversion Date to the TRUSTCO staff and trainers on the use of the
AddVantage system in accordance with the Conversion Plan. (The training
will be performed both on site at TRUSTCO and at SWMS training facilities.)
The training will be reasonably sufficient to enable TRUSTCO to access and
use the Base Services.
o Post-Conversion On-Site Support: SWMS shall provide on site support for a
period of two weeks after conversion or such longer period as may be
necessary in SWMS's opinion to correct any conversion issues.
o Workflow Consulting Services: SWMS shall provide sample work flow forms
and procedures and TRUSTCO a minimum of 120 person days of consulting
services for the purposes of: (a) recommending workflow procedures and
Quickflow forms to be adopted by TRUSTCO for utilization in processing of
the wealth management assets after the Conversion Date; (b) helping create
workflow forms; and (c) assisting TRUSTCO with implementation of workflow
procedures and Quickflow forms.
o SQL Report Writing: SWMS will provide training to TRUSTCO on SQL to
enable TRUSTCO to create reports which are not available as standard
reports on AddVantage. In addition in the one year period after conversion,
SWMS will, for the Base Charges, provide up to twenty (20) hours of SQL
report writing support for TRUSTCO.
II. Wealth Management Operations Services.
o Wealth Management operations Services are provided on an outsourcing
basis and all services are provided pursuant to the direction of TRUSTCO.
86
1 Securities Processing (Including)
o Security registration and data maintenance -
o Receipt and Delivery of Assets-
o Security custody services (through a third party custodian)-
o Security Trade Settlement-
o Security Pricing (through a third party pricing service)- o Security
Reconciliation-
o Security Research (subject to availability of archival records)-
o Income & Maturity Processing-
o Capital Changes (through a third party provider)-
o Special Securities Pricing (Securities which cannot be priced
through an automated third party pricing system will be provided
through Third Party Provider such as SparData and are subject to
additional fees)-
o Special Securities Research (Research for securities which cannot be
priced through an automated third party pricing system will be
provided through Third Party Provider such as SparData and are subject
to additional fees)-
o System Generated Report Data for Escheatment of idle funds-
o Third Party Manager liaison (outside manager follow up)-
o Special Asset Processing for loans, notes and liabilities- o Asset
Pledge Processing-
o Securities Set-Up and Maintenance
TRUSTCO shall be responsible for directing trades for mutual funds and money
market funds through QuickFlow and for placing trades on its marketable
securities, either through QuickFlow forms to the network or with
TRUSTCO's local brokerage firms.
2 Accounting-
o Cash receipt and disbursement-
o Cash Transfer-
o Fee calculation and invoicing (system generated)
o Cash reconcilement-
o Manual balancing (transactions in and out)
o Cash Management (Sweep)-
o ACH Processing (in and out) o Pension payments-
o System Generated Tax Reporting for 1099R and 5498
o System Generated Financial management reports-
o Common Trust Fund Processing-
o Wire Processing(through access to custodian's or TRUSTCO's wire
system)-
o Accrual calculations-
o Amortization, accretion, original issue discount- o Account
terminations (pursuant to TRUSTCO instructions)-
o Master Trust rollup reporting -
o Short Term Investment Fund accounting-
3 Customer Reporting
o SWMS shall provide standard SWMS customer statement formats via the
AddVantage system from which to select.
87
4. Technological Components Included in Base System
o AddVantage Asset Management System (with the functionality offered
through SWMS and all standard updates)
o AddVantage Query
o Accrual and Trade Date Reporting
o ACH Interface
o As of Date Reporting o Available Funds
o DTC/Custody Interfaces
o Funds and Equities Trade Uploads
o Fee Receivables
o Investment Scorecard Interface
o Master Maintenance Change and Control
o AddVantage Modeling-
o Mortgage-Backed Securities and CMO Processing
o Multi-Institutional and Branch Processing
o On Demand Valuation o Pension Payment System
o Security Movement and Control
o Short Term Investment Fund
o Statement Builder
o Investment & Cash Modeling
o Trade Order Entry
III. Tax and Other Services
o 1099R, 5498, 1099 Misc. Issuance utilizing the current AddVantage
system capabilities-
o A data extract will be provided via an interface to either Trust Tax
Services of America or Fast Tax for preparation of all other 1099 and
tax reporting. TRUSTCO will be responsible for entering into a
contract with either Trust Tax Services of America or Fast Tax for
preparation of 1099's and other tax services.
o Estimated Tax payments file upload based on payments generated from
TTSOA or FastTax.
IV. Other Services
o Automated Proxy Solicitation-(provided through a third party
provider, currently ADP). Currently the third party provider does not
charge for these services. Should that change in the future these
third party proxy solicitation expenses would be the responsibility of
TRUSTCO.
o Schedule D Insurance Reporting (subject to additional fees)-
o Toll free Help Desks for operations and system issues-
o Securities Lending (subject to additional fees)-
o SAS 70 for SWMS -
88
SCHEDULE B
BASE SERVICE LEVEL STANDARDS
In delivering its outsourcing services, SWMS will seek to deliver each Base
Service Level Standard listed below in accordance with the Minimum Service
Level. SWMS will attempt to handle transactions that occur after agreed upon cut
off times on a best efforts basis, but will only be responsible for meeting the
standards established by the Minimum Service Levels.
---------------------------- ------------------------- ------------------------- -----------------------
Service Level Description Exceptions Minimum Service Level
---------------------------- ------------------------- ------------------------- -----------------------
---------------------------- ------------------------- ------------------------- -----------------------
B-1 SWMS shall safely Assets not eligible for 100% Compliance with
Security Safekeeping maintain all eligible nominee registration the standard measured over
assets in the nominee including all assets a calendar quarter
name currently used by held in TRUSTCO's vault
the custodian in order to
efficiently effectuate the
transfer of securities.
Physical assets received for
transfer on behalf of TRUSTCO
will be safely maintained
in a secure vault subject to
dual control until such time as
said assets can be delivered to
third party custody providers.
Physical asset transfer will be
initiated within three (3) business
days of receipt.
---------------------------- ------------------------- ------------------------- -----------------------
---------------------------- ------------------------- ------------------------- -----------------------
B-2 Security receipts and If TRUSTCO exits a line 99% Compliance with
Securities Movement deliveries will be of business or a the standard
communicated to SWMS substantial measured over a
via Quickflow forms and relationship is calendar quarter
will be posted to an transitioning in or out
account by the end of of TRUSTCO, the
the business day, if relationship managers
received by 4:00 PM will establish a
Eastern Time if the mutually agreeable
asset was received or service level and an
delivered by the appropriate conversion
depository. If plan.
received after 4:00 PM
Eastern Time they will be
posted the next business day,
if received by the depository.
Securities which are not received
or delivered on a timely basis create
an out of balance occurrence if they are
not resolved within forty-eight hours.
In the event of an occurrence notice will
be given of the resolution process.
---------------------------- ------------------------- ------------------------- -----------------------
89
---------------------------- ------------------------- ------------------------- -----------------------
B-3 Equity and fixed income Trades for which 99% Compliance
Security trade settlement trades which are TRUSTCO has not with the standard
initiated by TRUSTCO provided SWMS with measured over a
will be settled on the proper notification and calendar quarter
contractual settlement direction.
date unless the assets
are subject to a
specific standard in this Schedule B.
Failed trade occurrences will be reported
to the designated TRUSTCO personnel on the
following business day by viewing a failed
trade report via the system.
---------------------------- ------------------------- ------------------------- -----------------------
---------------------------- ------------------------- ------------------------- -----------------------
B-4 A) Trades for If TRUSTCO decides to A) 100% by the 5th
Common/Collective Fund Common/collective fund close or liquidate a business day of the
Trades which are valued on a fund, a service level month.
monthly, quarterly or agreement would need to B) 100% by the next
annual basis will be be established by the business day
posted by the 5th relationship managers. C) 100% by the 15th
business day of the If TRUSTCO utilizes non calendar day
month standard investment
B) Trades for products (i.e. Hedge
Common/collective fund Funds) or outside
which are valued on a managers to manage all
daily basis will be or part of the
posted by the end of Common/collective
the next business day funds, then the service
C) Trades for Unitized level standard will be
Pools which are valued subject to adjustment.
on a monthly, quarterly
or annual basis will be
posted by the 15th
calendar day of the
month.
---------------------------- ------------------------- ------------------------- -----------------------
---------------------------- ------------------------- ------------------------- -----------------------
B-5 Institutional mutual First time trades into 100% on settlement
STN Mutual Fund Trades fund trades will be a new fund or a new date.
posted on settlement dividend payment option.
date.
Trades must be received
by SWMS via Quickflow
forms by 2:30 PM
Eastern Time.
---------------------------- ------------------------- ------------------------- -----------------------
90
---------------------------- ------------------------- ------------------------- -----------------------
B-6 Trades for mutual First time trades into 100% on day of
NON-STN Mutual Fund Trades funds, which cannot be a new fund or a new receipt of statement,
traded through STN or dividend payment option wire or check.
where the customer or funds which require
requires a registration delivery of physical
other than in nominee information by mail or
form will be posted on overnight delivery
receipt of funds or
statement.
---------------------------- ------------------------- ------------------------- -----------------------
---------------------------- ------------------------- ------------------------- -----------------------
B-7 Manual trade requests Requested trades in 100% within one day
Manual Trades for Changing to shut off or change excess of 100 accounts of receipt
Automatic Sweep Models sweep models will be per day require 72
executed within one day hours prior notice.
of receipt. If SWMS
receives trade request
one hour prior to fund
cut off, it will be
processed on the same
day; if not, then
trade will be processed
the next day.
---------------------------- ------------------------- ------------------------- -----------------------
---------------------------- ------------------------- ------------------------- -----------------------
B-8 Automated sweep Sweep vehicles that are 100% compliance with
Automatic Sweep investments of not approved by SWMS the standard
un-invested cash and will be processed on a
sales to raise cash 'best efforts' basis.
will be executed by Accounts not properly
SWMS on a daily basis, coded.
based on established
cutoff times, in
temporary money market
vehicles, as chosen by
TRUSTCO.
Trade settlement amounts must be received
by SWMS one hour before published fund cut
off times.
---------------------------- ------------------------- ------------------------- -----------------------
---------------------------- ------------------------- ------------------------- -----------------------
B-9 Manual mutual fund Money market fund 100% compliance with
Manual Money Market Fund trades will be made by vehicles that are not the standard
Trades SWMS on a daily basis, approved by SWMS will
based on established be processed on a 'best
cutoffs, in temporary efforts' basis.
money market vehicles, Accounts not properly
as chosen by TRUSTCO coded.
Trade settlement
amounts must be
received one hour
before published fund
cut off times.
---------------------------- ------------------------- ------------------------- -----------------------
---------------------------- ------------------------- ------------------------- -----------------------
B-10 Maturities will be Securities that are 100% posted on
Maturity Postings processed on maturity pledged for which maturity date
date for all items that release of collateral
are held at a has not been provided.
depository. Securities for which
the custodian does not
pay the maturity on
settlement date.
---------------------------- ------------------------- ------------------------- -----------------------
91
---------------------------- ------------------------- ------------------------- -----------------------
B-11 Securities not held at 100% posted on
Maturity Posting for Non a depository will be receipt of funds.
Depository Assets posted upon receipt.
---------------------------- ------------------------- ------------------------- -----------------------
---------------------------- ------------------------- ------------------------- -----------------------
B-12 A) Stock splits will be Out of balance A) 99% on ex-date
Stock Splits/Stock posted on ex-date. conditions, shares held B) 99% on payable date
Dividends B) Stock dividends in the name of TRUSTCO
will be posted on or their customer.
payable date.
---------------------------- ------------------------- ------------------------- -----------------------
---------------------------- ----------------------- ----------------------- -----------------------
B-13 Within two business Any capital change 100% within 2
Capital Change days of receipt of announcement for business days
Notifications capital change which notification
announcements by was not received from
electronic the third party
notification or by service providers or
mail or delivery agents or for which
service, SWMS shall TRUSTCO does not
notify TRUSTCO which provide direction or
will include a criteria
summary of the offer
and the due date for
written response to
the offer.
TRUSTCO will provide SWMS with directions
and criteria for handling the capital
change which will be handled in accordance
with TRUSTCO's internal policies. TRUSTCO
will notify SWMS of their decision by the
deadline utilizing Quickflow form.
---------------------------- ----------------------- ----------------------- -----------------------
---------------------------- ----------------------- ----------------------- -----------------------
B-14 Mandatory and Complex corporate 100% according to the
Corporate Actions Posting voluntary corporate actions that require time of receipt
actions will be allocation of cost
posted on the day basis to multiple new
funds are receive if issues.
received by 1:00PM
Eastern Time; if funds
are received after 1:00 PM ET, then they
will be posted on the next business day.
---------------------------- ----------------------- ----------------------- -----------------------
92
---------------------------- ----------------------- ----------------------- -----------------------
B-15 A) Security movements A) 100% Compliance
Security Movement will be reconciled by with the standard
Reconciliation the end of the
business day. Any out B) 100% Compliance
of balance occurrence within 3 business days
will be reported to
the designated C) 100% Compliance
TRUSTCO personnel on with the standard
the following
business day. An
occurrence is defined
as an out of balance
condition, which
cannot be resolved
within 48 hours.
B) In the event of such an occurrence,
TRUSTCO will be notified as to the
resolution of the exception or the steps
being taken to resolve the occurrence. C)
SWMS shall provide a semi-annual position
reconciliation report for all assets held
for TRUSTCO in the nominee name. Findings
will be published 15 days after the end of
the reporting period.
---------------------------- ----------------------- ----------------------- -----------------------
---------------------------- ----------------------- ----------------------- -----------------------
B-16 Stock, bond, mutual If TRUSTCO exits a 100% within 1
Re-Registration fund, CD and physical line of business or a business day of
item re-registrations substantial receipt.
will be initiated relationship is
upon receipt of the transitioning in or
appropriate out of TRUSTCO, the
documentation if relationship managers
received by 1:00PM will establish a
Eastern Time. mutually agreeable
service level and
appropriate
conversion plan.
---------------------------- ----------------------- ----------------------- -----------------------
93
---------------------------- ----------------------- -------------------------- -----------------------
B-17 Securities will be Special assets, which 100% Compliance with
Securities Pricing priced on a daily cannot be priced by the standard
basis utilizing a normal industry pricing
third party service services, will be priced
provider per the on a predetermined
attached Exhibit A-1. frequency from TRUSTCO
utilizing
specialized pricing
services.
Common/Collective
funds will be
priced daily,
monthly, quarterly,
or annually in
accordance with the
fund provisions.
Manually priced
assets will be
updated when
valuations are
provided in
accordance with
standard B-19.
Assets which cannot
be priced due to
the data not being
available or the
failure of a Third
Party Provider,
other than a
SunGard affiliate.
SWMS will run a
price variance
report off the
AddVantage system
every business day
based on the lowest
reasonable
tolerance level of
any of our
outsourcing
customers
(currently 10%).
Prices for
securities that
show up on the
variance report
will be cross
checked against the
prices provided by
Bloomberg. If any
variance cannot be
resolved through
the cross check
against Bloomberg
and the pricing
vendor, TRUSTCO
will be notified on
the same business
day.
---------------------------- ----------------------- -------------------------- -----------------------
94
---------------------------- ----------------------- ----------------------- -----------------------
B-18 Assets will be priced 99% Compliant with
Special Asset Pricing in accordance with the standard
the frequency code on measured over a
the AddVantage calendar year
system.
For assets that
cannot be priced
utilizing the
standard pricing
services SWMS will
notify TRUSTCO of the
need for a non
standard price.
TRUSTCO is responsible for providing the
non standard prices which can be provided
by TRUSTCO or through utilization of
outside pricing services as follows: Thinly
traded securities, can be handled either by
TRUSTCO or an approved outside provider and
the pricing will be accomplished through a
call in process or data feed. TRUSTCO will
be responsible for the costs of any third
party fee data provider other than the
standard pricing service offered by SWMS.
Real estate can be valued on an annual
basis utilizing a specialized pricing
service approved by TRUSTCO and the costs
of such real estate pricing (currently
$500.00 per asset) will be in addition to
the base service fees. Prices will be
entered within 1 business day of receipt of
the special valuation from the specialized
pricing service. TRUSTCO may request that
an asset be valued utilizing a specialized
pricing service at any time and the costs
of such valuation will be in addition to
the base service fee
---------------------------- ----------------------- ----------------------- -----------------------
95
---------------------------- ----------------------- ----------------------- -----------------------
B-19 Manual pricing Requests that are 100% compliance with
Manual Pricing Updates updates received from submitted without the the standard
the appropriate proper documentations
TRUSTCO personnel via or approvals
Quickflow will be
entered on the date
received, if received by
4:00PM Eastern
Time.
---------------------------- ----------------------- ----------------------- -----------------------
---------------------------- ------------------------- ------------------------- -----------------------
B-20 A) Common/collective If TRUSTCO decides to A) 98% within the
Common/Collective Fund fund valuation and close or liquidate a first five business
Valuations income calculation will fund, a service level day of the month
be performed within the agreement would need to following a valuation
first five business day be established by the period
of the month following relationship managers B) 98% within the 15
a valuation period. and an appropriate calendar days.
B) Valuations for conversion plan.
Unitized Pools which If TRUSTCO utilizes non
are valued on a standard investment
monthly, quarterly or products (i.e. Hedge
annual basis will be Funds) or outside
available by the 15th managers to manage all
calendar day of the or part of the
month Common/collective
funds, then the service
level standard will be
subject to adjustment.
---------------------------- ------------------------- ------------------------- -----------------------
---------------------------- ------------------------- ------------------------- -----------------------
B-21 Research concerning Research will not be 98% Compliance with
Asset Research asset history beginning provided for assets for the standard
on the date of the periods prior to the measured over a
. conversion of the date the assets were calendar quarter
assets will be provided converted. Research is
upon request from defined as retrieving
current and archival information that is not
records currently available
SWMS will acknowledge a through the use of the
request within one wealth management
business day and accounting system
provide a specific date provided by SunGard
to provide TRUSTCO with Data Systems Inc.
the research. A
research request will
be resolved within
thirty business days
unless otherwise
mutually agreed upon by
SWMS and TRUSTCO.
---------------------------- ------------------------- ------------------------- -----------------------
96
---------------------------- ----------------------- -------------------------- -----------------------
B-22 Research concerning Research will not be SWMS will acknowledge
Archived Asset Research archived asset provided for assets for a request within one
history will be periods prior to the business day and will
. provided upon request date of this Agreement provide to TRUSTCO an
from current and and for assets for which estimated date for
archival records no information exists. the completed research.
Research is defined
as retrieving
information
research by a Third
that is not
currently Party
Provider is
available through
the needed, TRUSTCO
will use of the
wealth be notified
that this
management
accounting request
has been system
provided by
submitted to the
SunGard Asset
Management Third
Party Provider
Systems. TRUSTCO
will and timing of
the provide
assistance on a
reply is subject to
mutually agreeable
time the current
terms and frame
where the
conditions of the
information only
resides Third Party
Provider. on the
TRUSTCO's optical
retrieval system.
---------------------------- ----------------------- -------------------------- -----------------------
---------------------------- ----------------------- -------------------------- -----------------------
B-23 SWMS shall receive Funds received after 100% compliance with
Receipts & Disbursements and disburse funds on 4:00 PM Eastern Time the standard
a daily basis at the will not be posted until
direction of the next business day.
appropriate TRUSTCO
personnel via Funds will only be
Quickflow forms, so distributed if TRUSTCO
long as received by has provided directions
4:00 PM Eastern Time in an agreed upon format.
otherwise will be
posted the next Funds will only be
business day. accepted if SWMS has
been provided with
information by
TRUSTCO via
Quickflow form(s)
to post the funds
being received to
the appropriate
wealth management
account
---------------------------- ----------------------- -------------------------- -----------------------
97
---------------------------- ----------------------- -------------------------- -----------------------
B-24 SWMS will utilize a If TRUSTCO does not 100% on the next
Demand Deposit Account demand deposit provide their portion of business day
Control account on behalf of the data within the
TRUSTCO for required processing time
processing TRUSTCO's frames to complete the
wealth management reconciliation.
transactions. The The reconcilement report
account will be may contain outstanding
TRUSTCO's, and will items to be cleared or
be maintained with reconciled.
the custodian, but
SWMS will be provided
with on-line direct
access to the demand
deposit account.
SWMS will balance the demand deposit
account and provide the previous business
day's reconcilement to TRUSTCO on the
following business day.
---------------------------- ----------------------- -------------------------- -----------------------
---------------------------- ----------------------- -------------------------- -----------------------
B-25 Cash and processing None 99% cleared within 2
Cash & System Exceptions exceptions will be business days of
cleared within 2 reconcilement
business days of the
reconcilement date.
---------------------------- ----------------------- -------------------------- -----------------------
---------------------------- ----------------------- -------------------------- -----------------------
B-26 Stop payments More than 25 check 100% within 24 hours
Stop Payments requests will be requests received for of receipt
processed on the one wealth management
business day the account.
request is received
if the request is
received by 3:00PM Eastern Time; otherwise,
the stop payment will be processed on the
next business day.
---------------------------- ----------------------- -------------------------- -----------------------
---------------------------- ----------------------- -------------------------- -----------------------
B-27 Check reconciliations Provided the bank 99% compliance with
Check Reconciliation will be provided checking account has the standard
within 3 business automated
days provided SWMS reconciliations and SWMS
has access to an has access.
automated
reconciliation system
---------------------------- ----------------------- -------------------------- -----------------------
---------------------------- ----------------------- -------------------------- -----------------------
B-28 Income will be posted Income that is received 100% compliance with
Income Collection on the date it is after the time that the standard measured
received by the end wealth management books over a calendar
of that business day, are closed for the day quarter
if received by 3:00 and income that cannot
PM Eastern Time, be readily tied to a
except for income wealth management
which is subject to a account. In the event
separate service there is such an
level pursuant to occurrence, that cannot
this Schedule. be resolved within
forty-eight hours,
TRUSTCO will be notified
as to the exception and
a timeframe for
resolution.
---------------------------- ----------------------- -------------------------- -----------------------
98
---------------------------- ---------------------------- ------------------------ -----------------------
B-29 Cash dividends will be Dividends which can 99.5% on payable date
Cash Dividend Collection posted on payable date for not be posted due to measured over a
issues held at a actions or inactions calendar quarter
depository. of third parties.
---------------------------- ---------------------------- ------------------------ -----------------------
---------------------------- ---------------------------- ------------------------ -----------------------
B-30 CD interest on TRUSTCO Interest which can not 99.5% on the date
CD Interest Collection certificates will be be posted due to that funds are
posted on the date that actions or inactions received measured
funds are received. of third parties. over a calendar
quarter
---------------------------- ---------------------------- ------------------------ -----------------------
---------------------------- ---------------------------- ------------------------ -----------------------
B-31 A) Income on If TRUSTCO decides to A) 98% by the 5th
Common/Collective Fund collective/common funds close or liquidate a business day of the
Income Posting will be posted by the 5th fund, a service level month after a
business day of the month agreement would need valuation period
after a valuation period to be established by B) 98% by the 15
B) Income for Unitized the relationship calendar day of the
Pools which are valued on managers. month
a monthly, quarterly or If TRUSTCO utilizes
annual basis will be non standard
posted by the 15th investment products
calendar day of the month (i.e. Hedge Funds) or
outside
managers to
manage all or
part of the
Common/collective
funds, then
the service
level standard
will be
subject to
adjustment.
---------------------------- ---------------------------- ------------------------ -----------------------
---------------------------- ---------------------------- ------------------------ -----------------------
B-32 STN mutual fund dividends If announcements of 99.5% on payable date
STN Mutual Funds Income will be posted no later dividends are not + 1 business day
Collection than payable date +1 received.
business day.
---------------------------- ---------------------------- ------------------------ -----------------------
---------------------------- ---------------------------- ------------------------ -----------------------
B-33 Interest on money market Corrections to the 100% on first
Money Market Funds Income instruments will be posted factors that are business day of the
Posting by payable date on the received after the month measured over a
first business day of the last business day of calendar quarter
month, even if not the month.
received.
---------------------------- ---------------------------- ------------------------ -----------------------
---------------------------- ---------------------------- ------------------------ -----------------------
B-34 Interest or dividend Payments that are 100% on date of
Interest/Dividend received payments received by check received for assets receipt +1 business
by Check will be processed no later that are not day
than 1 day after receipt. established in an
account on the
wealth
management
accounting
system for
which the
proper
documentation
has not been
provided to
process the
payment.
---------------------------- ---------------------------- ------------------------ -----------------------
---------------------------- ---------------------------- ------------------------ -----------------------
B-35 Liability adjustments will Liability adjustments 100% on date of
Liability Adjustments be processed no later than that are received for receipt + 1 business
1 business day after the first time without day
receipt the proper documentation.
---------------------------- ---------------------------- ------------------------ -----------------------
---------------------------- ---------------------------- ------------------------ -----------------------
B-36 Limited partnership None 99.5% on payable date
Limited Partnership payments will be posted no + 1business day
Payments later than payable date + 1 business day
for issues held at a depository.
---------------------------- ---------------------------- ------------------------ -----------------------
99
---------------------------- ---------------------------- ------------------------ -----------------------
B-37 Loan payments will be Payments that are 100% on date of
Loan Payments processed within 1 received for assets receipt +1 business
business day of receipt. that are not day
established in an
account on the wealth
management accounting
system for which the
proper documentation
has not been provided
to process the payment.
---------------------------- ---------------------------- ------------------------ -----------------------
---------------------------- ---------------------------- ------------------------ -----------------------
B-38 Promissory note payments, Payments that are 99% on date of
Miscellaneous Receipts rent payments, other received for the first receipt +1 business
assets, annuity payments, time that have been day
Social Security payments, sent to the income
royalty payments and other processing unit
miscellaneous receipts without the proper
will be processed no documentation.
later than 1 business day
after receipt.
---------------------------- ---------------------------- ------------------------ -----------------------
---------------------------- ---------------------------- ------------------------ -----------------------
B-39 A) Non-STN eligible mutual A) None A) 99.5% on date of
Non-STN Mutual Fund fund dividends will be B) Fund distributor receipt
Receipts posted upon receipt of and/or TRUSTCO fails B) 99.5% on Payable
statement/check/wire. to notify SWMS in date
B) Providing that SWMS is writing prior to
in receipt of funds, payable date
Dividends on TRUSTCO
Proprietary Mutual Funds
will be posted on payable
date
---------------------------- ---------------------------- ------------------------ -----------------------
---------------------------- ---------------------------- ------------------------ -----------------------
B-40 Providing that SWMS is in Any securities that 99% on payable date
US Government Income and receipt of funds, U S are not held at a
Debt Payments Government, corporate, depository due to
municipal debt income and client or TRUSTCO
other debt payments will requirements.
be posted on payable date. Any security for which
a factor is not
available on payable
date. Payments will
be posted upon receipt
of the factors.
---------------------------- ---------------------------- ------------------------ -----------------------
---------------------------- ---------------------------- ------------------------ -----------------------
B-41 Domestic outgoing wires Requests that are 99% compliance with
Domestic Outgoing Wires received by the cutoff submitted without the the standard
times established by SWMS proper forms or
will be initiated and approvals.
verified within 90 minutes
of receipt if received by
SWMS by 3:30 PM Eastern
Time.
Cutoff Times are preliminary and are
subject to change based on the custodian
and TRUSTCO utilized.
---------------------------- ---------------------------- ------------------------ -----------------------
100
---------------------------- ----------------------- ----------------------- -----------------------
B-42 Incoming wires Requests that are 99% compliance with
Incoming Wires received by the SWMS submitted without the the standard
established cut off proper forms or
times (currently 5 PM approvals.
Eastern Time) will be Wires received after
identified and the SWMS established
credited to the cutoff times will be
appropriate handled on a best
account/unit on the efforts basis.
same business day.
Incoming wires
received after the
SWMS established cut
off times will be
credited on the
following business
day.
Cutoff Times are preliminary and are
subject to change based on the custodian
and TRUSTCO utilized.
---------------------------- ----------------------- ----------------------- -----------------------
---------------------------- ----------------------- ----------------------- -----------------------
B-43 SWMS will provide fee Fee calculations and 99% Compliance with
Fee Calculation and computation data for invoices will not be the standard
Invoicing TRUSTCO and will provided for accounts
provide a monthly fee for which fee
calculations and schedules have not
invoices to TRUSTCO. been provided or for
SWMS will also charge fee schedules that
the customer account cannot be calculated
monthly and remit the by SWMS's current
fees to TRUSTCO. accounting system.
SWMS will not
collect fees via
auto cash or by
direct debit to
TRUSTCO customers.
---------------------------- ----------------------- ----------------------- -----------------------
---------------------------- ----------------------- ----------------------- -----------------------
B-44 Fee information sent Requests that are 100% completed for
Fee Schedule Set Up prior to the 25th of submitted without the month end fee
any month will be proper documentation processing.
applied to new or approvals.
accounts for that Additional time will
month end. be required for mass
changes of fee
schedules in order
to properly set up
the schedules for
testing and
application to the
accounts. SWMS and
TRUSTCO will
mutually agree to a
schedule as
required. SWMS
should be notified
45 days in advance
of a mass change of
fee schedules.
---------------------------- ----------------------- ----------------------- -----------------------
101
---------------------------- ----------------------- ----------------------- -----------------------
B-45 Final or special fee Requests that are 100% completed
Special Fee Requests requests will be submitted without the within 5 days of receipt.
days of receipt. completed within 5 proper documentation
days of receipt. or approvals and the
request for new fee
schedules.
---------------------------- ----------------------- ----------------------- -----------------------
---------------------------- ----------------------- ----------------------- -----------------------
B-46 Payments for Requests that are 100% completed within
Repayment of Fees reimbursement of fees submitted without the 5 days of receipt
will be processed proper documentation
within 5 days of or approvals.
receipt.
---------------------------- ----------------------- ----------------------- -----------------------
---------------------------- ----------------------- ----------------------- -----------------------
B-47 Fees will be posted SWMS will not collect 100% compliance with
Fee Postings on the fourth fees via auto cash or the standard
business day of the by direct debit to
month. TRUSTCO client bank
accounts.
---------------------------- ----------------------- ----------------------- -----------------------
102
---------------------------- ----------------------- ----------------------- -----------------------
B-48 In conjunction with Scheduled maintenance 99.0% of scheduled
Wealth Management the Services, SWMS and processing time up-time measured
Accounting System will provide access frame requirements quarterly
to the SunGard (normally performed
AddVantage Accounting on weekends);
System. The tele-communication
AddVantage accounting service provider
system will be disruptions that are
available during not affiliates of
scheduled up-time, SWMS. Modifications
currently defined as to scheduled up-time
7:00 AM - 9:00 PM must be requested
Eastern Time, Monday seven days in advance.
through Friday.
---------------------------- ----------------------- ----------------------- -----------------------
---------------------------- ----------------------- ----------------------- -----------------------
B-49 System access will be Requests that are 100% completed within
System Access for New provided for new submitted without the two business days
Employees employees or changes proper documentation
to current employee or approvals.
access, within one
(1) week of
notification in
writing; provided
that these response
times apply to normal
business hours from
Monday thru Friday.
---------------------------- ----------------------- ----------------------- -----------------------
---------------------------- ----------------------- ----------------------- -----------------------
B-50 System access will be Requests that are 100% completed within
Revocation of System Access revoked for submitted without the 2 hours during
terminated TRUSTCO proper documentation normal business hours
employees within two or approvals. Monday through Friday
(2) hours of receipt of
notification from
an authorized TRUSTCO employee
if received in writing or received
orally and followed up in writing by
3:00 PM Eastern Time, provided that these
response times apply to
normal business hours from Monday thru
Friday.
---------------------------- ----------------------- ----------------------- -----------------------
---------------------------- ----------------------- ----------------------- -----------------------
B-51 SWMS will provide an Subject to the 99% file delivery
Tax System Interface interface between the compatibility of within 2 business
wealth management systems between SWMS days of availability
accounting system and and TRUSTCO tax of the complete
Trust Tax Services of providers. information for the
America or FastTax, tax period
for the delivery of
data on a monthly
basis on the 10th
business day of each
month.
---------------------------- ----------------------- ----------------------- -----------------------
103
---------------------------- ----------------------- ----------------------- -----------------------
B-52 SWMS will provide the None 100% compliance with
Tax Data data required for the standard
pension tax reporting,
Trust Tax Services
of America or FastTax reporting,
state tax
reporting, estimated tax reporting and 5498
reporting.
---------------------------- ----------------------- ----------------------- -----------------------
---------------------------- ----------------------- ---------------------------- -----------------------
B-53 SWMS will provide TRUSTCO and SWMS shall System levels to be
SQL Training initial training to a jointly coordinate the delivered shall be in
limited number of running of the SQL accordance with the
TRUSTCO users of to Database and SWMS shall usual standards as
enable TRUSTCO to not unreasonably deny developed by SunGard
utilize the SQL data access. Asset Management
base for the AddVantage System.
system for creating Scheduled maintenance,
reports. standard downtime for
backups, EOD and
interface
scheduling/processing
requirements,
software movement
requirements, and
any other scheduled
outages shall be
performed after
normal business
hours.
Outages which are
not within the
control of SWMS, a
SWMS Third Party
Provider or an
affiliate of SWMS.
---------------------------- ----------------------- ---------------------------- -----------------------
---------------------------- ----------------------- ---------------------------- -----------------------
B-54 SWMS will provide Subject to reasonable System levels to be
Internet Access TRUSTCO Wealth downtime for maintenance delivered shall be in
Management customers and upgrades. accordance with the
with the ability to Customers of TRUSTCO that usual standards as
view transactions and do not comply with SWMS developed by SunGard
download their security policies. Asset Management
account information System
via the Internet
---------------------------- ----------------------- ---------------------------- -----------------------
---------------------------- ----------------------- ---------------------------- -----------------------
B-55 SWMS will provide a The help desk will not be 100% compliance with
Help Desk help desk during the available on Saturday, the standard
hours of 8:00 AM to Sunday or holidays.
8:00 PM Eastern Time
that is accessible
toll free and/or via
e-mail.
---------------------------- ----------------------- ---------------------------- -----------------------
---------------------------- ----------------------- ---------------------------- -----------------------
B-56 The Help Desk will Requests that are 99% completed within
Help Desk respond to written submitted without the 5 days
Response to Written inquiries within five proper documentation or
Inquiries calendar days of approvals.
receipt, unless the
requestor is informed
prior to the expiration of
five calendar
days that it will take more
time to
complete the request/inquiry.
---------------------------- ----------------------- ---------------------------- -----------------------
104
---------------------------- ----------------------- ---------------------------- -----------------------
B-57 Five business days None 100% within 5
Escheatment before the applicable business days of
filing deadline, SWMS filing date
will provide to
TRUSTCO in a
mutually-agreeable
format the
information required
to complete the
annual reports of
unclaimed property
for the appropriate
state agencies.
---------------------------- ----------------------- ---------------------------- -----------------------
---------------------------- ----------------------- ---------------------------- -----------------------
B-58 SWMS will deliver SWMS shall not be 100% within 5
Performance Measurement asset performance responsible for the business days of
measurement data failure to deliver the month end close
extracts to TRUSTCO data that is due to
by providing an Investment Scorecard's or
interface of TRUSTCO other performance vendor
data to an approved failures.
SWMS vendor to help
facilitate TRUSTCO's
development of compliant
performance
reports.
Files are to be delivered to
a SWMS
approved vendor, by electronic
transmission
by the 5th business day of the month for
the previous month end.
---------------------------- ----------------------- ---------------------------- -----------------------
---------------------------- ----------------------- ---------------------------- -----------------------
B-59 SWMS will provide a Subject to the provision 100% Compliance
Automated Proxy link to a Third Party of services with the standards.
Solicitation Provider of proxy by an outside
solicitation services third party provider and
(currently ADP). SWMS the proper account coding
will deliver a record by TRUSTCO.
date position file TRUSTCO is required to
daily for processing correct any errors in
by the third party account coding reported on
vendor of proxy a record date file by 3:00
mailing services. PM Eastern Time on the same day.
The record date
position files are
based on the proxy
information that is
transmitted and
received in
AddVantage on a daily
basis from ADP
Any fees charged for
utilization of the
Third Party proxy
solicitation service
will be the TRUSTCO's
responsibility.
---------------------------- ----------------------- ---------------------------- -----------------------
105
---------------------------- ----------------------- ---------------------------- -----------------------
B-60 SWMS will provide 100% Compliance with
Training Program initial training the standard
sessions for TRUSTCO
employees and
trainers on
operational functions
and use of the
AddVantage system.
---------------------------- ----------------------- ---------------------------- -----------------------
---------------------------- ----------------------- ---------------------------- -----------------------
B-61 As part of the 100% Compliance with
Workflow Analysis conversion program the standard
and as agreed upon in the Workplan, SWMS
will initially provide sample workflow
procedures in accordance with Schedule A
work with TRUSTCO to recommend workflow
procedures, Quickflow forms to be adopted
by TRUSTCO for utilization in the
processing of wealth management assets
after the Conversion Date, and assist
TRUSTCO with implementation of workflow
procedures and Quickflow forms.
---------------------------- ----------------------- ---------------------------- -----------------------
106
---------------------------- ----------------------- ----------------------- -----------------------
B-62 For non institutional Out of balance 100% Compliance with
Non Institutional statements, SWMS will statements and the standard
Statement Production provide the data feed statements for which
to a third party pricing information
statement provider is not available.
as follows: TRUSTCO will be
a) For accounts where notified of an out of
all assets are priced balance statement,
by an automatic the cause of the out
pricing services by of balance condition
the 5th business day and the measures that
of the month after need to be taken to
the end of the re-balance the
reporting period statement.
b) For accounts that Statements will be
have assets that must re-balanced within 5
be priced manually, business days.
and so long as
TRUSTCO provides
directions to produce
the statements
without waiting on
the manual prices,
by the 5th business
day of the month
after the end of the
reporting period;
provided that SWMS
has received the
manual prices by the
end of the month.
Otherwise, statements will be provided ten
(10) business days after SWMS receives the
manual prices.
---------------------------- ----------------------- ----------------------- -----------------------
107
---------------------------- ----------------------- ----------------------- -----------------------
B-63 For institutional Out of balance 100% Compliance with
Institutional Customer statements, SWMS will statements and the standard
Statement provide the data feed statements for which
Production to a third party pricing information
statement provider are not available.
as follows: TRUSTCO will be
a) For accounts where notified of an out of
all assets are priced balance statement,
by an automatic the cause of the out
pricing services by of balance condition
the 5th business day and the measures that
of the month after need to be taken to
the end of the re-balance the
reporting period statement.
b) For accounts that Statements will be
have assets that must re-balanced within 7
be priced manually, business days.
and so long as
TRUSTCO provides
directions to produce
the statements
without waiting on
the manual prices, by
the 5th business day
of the month after
the end of the
reporting period;
provided that SWMS
has received the
manual prices by the
end of the month.
Otherwise, statements will be provided ten
(10) business days after SWMS receives the
manual prices.
---------------------------- ----------------------- ----------------------- -----------------------
---------------------------- ----------------------- ----------------------- -----------------------
B-64 SWMS will provide an 100% Compliance with
SAS 70 annual SAS 70 audit the service
report for SWMS. standards
---------------------------- ----------------------- ----------------------- -----------------------
---------------------------- ----------------------- ----------------------- -----------------------
B-65 All mutual fund Subject to the 100% Compliance with
SunGard Transaction Network trades for assets eligibility of the the service standard
that are held on the mutual funds to be
AddVantage system and traded through the
that are eligible network.
will be accomplished
through utilization
of the SunGard
Transaction Network
("STN").
---------------------------- ----------------------- ----------------------- -----------------------
---------------------------- ----------------------- ----------------------- -----------------------
B-66 SWMS will provide 99.5% compliance with
Required Reports access to TRUSTCO to the service standard,
the reports which are measured monthly
generally available
from the AddVantage
system.
---------------------------- ----------------------- ----------------------- -----------------------
108
SCHEDULE C
BASE SERVICES CHARGES
Introduction
This Schedule details (i) the Base Charges payable by TRUSTCO for
the Base Services described in the Agreement and (ii) the pricing
methodologies applicable to the Base Services.
The Base Charges identified below, in the aggregate, compensate
SunGard in full for the provision and performance of the Base
Services as they currently exist. Except as set forth herein and
in the Agreement, there are no additional charges or fees,
however described, for the provision by SWMS of the Base
Services. The Base Charges include charges for the SWMS Third
Party Software and Equipment and the standard upgrades to and
refreshes of the SWMS Third Party Software and Equipment
sufficient to support the Base Services and satisfaction of the
Service Levels set forth in Schedule B, during the Initial Term.
Conversion Charge
For conversion of the TRUSTCO Trust Assets to the SunGard
AddVantage system TRUSTCO shall pay a one time conversion fee to
SWMS of $* plus reasonable travel costs and per diem expenses.
The conversion fee may be billed in increments or in a lump sum
and these fees are payable within 30 days of receipt of the
statement. In the event that the contract for the provision of
SWMS' outsourcing services is terminated prior to the end of its
initial term, the conversion charges provided for in this
Agreement shall be considered by the parties to represent
liquidated damages which shall be retained by SWMS to compensate
it for the early termination of the agreement and such liquidated
damages shall be in addition to any other fees and expenses which
are owed by TRUSTCO to SWMS pursuant to the provisions of the
contract.
Monthly Base Charge
3.1 During the Initial Term , TRUSTCO shall pay a Monthly Base
Services Charge to SWMS, which shall be calculated as follows: i)
during the Initial Term of the Agreement, the monthly Base
Charges will be calculated on a pro-rata basis on the market
value of all TRUSTCO Trust Assets relating to the Base Services,
including without limitation, private wealth (personal trust)
assets, institutional wealth (employee benefits, endowment and
foundations) assets, safekeeping and custodianship assets and
investment advisory assets, (the "TRUSTCO Trust Assets") as
follows:
i) * basis points (* bps.) on the first $* market value of
all the TRUSTCO Trust Assets under management;
ii) For all TRUSTCO Trust Assets in excess of $* and less
than $* there shall be no charge;
MATERIAL INDICATED BY AN ASTERISK ("*") HAS BEEN OMITTED
AND FILED SEPARATELY WITH THE SEC.
109
iii) * basis points (* bps) on TRUSTCO Trust Assets in
excess of $* and less than $*; and
iv) * basis points (* bps) on all TRUSTCO Trust Assets in
excess of $*.
v) An example of the calculation of the basis point fees on
the first $* of assets is as follows:
. Each "basis point" (bps) is equal to one one-hundredth of
one percent (0.01%); thus, for example, the Basis Point Fee
of * basis points (* bps) of the wealth management assets is
equal to * one-hundredths of one percent (*%) per annum of
the total fair market value of the wealth management assets
or $*. The monthly fee will be calculated on the basis of
one twelfth (1 12th) of the annual basis point fee charge.
and ii) during any Renewal Term, the monthly Base Charges will be
calculated in accordance with the agreements reached by the Parties
pursuant to Section 2.2 of the Agreement. Any TRUSTCO proprietary fund
assets and TRUSTCO collective fund assets for which TRUSTCO provides
custody services ("Other Assets") shall be included in the calculation
of total TRUSTCO Trust Assets, provided that if such assets are
recorded in more than one place in the system, such assets shall only
be counted once. Assets of accounts for which TRUSTCO does have
investment authority but no custody that are established for the
purpose of shadow accounting shall be included in the calculation of
total Trust Assets. The Parties recognize and are in agreement that
the monthly Base Charges payable by TRUSTCO to SWMS are * percent (*%)
attributable to the delivery of operational services by SWMS to
TRUSTCO and * percent (*%) attributable to the provision by SWMS to
TRUSTCO of access to systems and customized software.
In addition to the monthly Base Charges TRUSTCO shall reimburse SWMS
for all reasonable out of pocket expenses including postage, envelopes
etc and pay a pro-rata portion of any mutually agreed upon fees for
any Additional Services. Should TRUSTCO choose to utilize a statement
type other than a standard SWMS statement format, TRUSTCO will be
responsible for all costs in creating the statement type.
Provided that SWMS is not in material default of any of its
obligations under this Agreement, TRUSTCO agrees that during the Term
the Base Services shall be provided exclusively by SWMS for the
TRUSTCO Trust Assets on the Effective Date and any additional TRUSTCO
assets for which Base Services are subsequently provided by SWMS and
not by any other third party engaged by TRUSTCO or by TRUSTCO itself.
The monthly Base Charges are subject to adjustment by SWMS upon 30 day
notice in the event of a significant legal or regulatory change that
results in an alteration in the way that trust account operations are
required to be operated.
MATERIAL INDICATED BY AN ASTERISK ("*") HAS BEEN OMITTED
AND FILED SEPARATELY WITH THE SEC.
110
The monthly Base Charges are also subject to adjustment by SWMS upon
30 day notice in the event of a significant change in the way that
trust account operations are required to be operated that is not the
result of a legal or regulatory change; provided, however, that if
TRUSTCO should reasonably disagree with the proposed adjustment based
on its belief that the change is not significant enough to warrant the
proposed Base Charges adjustment, the Parties agree to handle the
disagreement in accordance with the dispute resolution provisions of
Section 17.
The basis points factor for determining the monthly Base Charges
(calculated on the entire market value of the TRUSTCO Trust Assets
shall be subject to a minimum monthly charge. During the Initial Term
TRUSTCO shall pay a minimum monthly Base Charge which is a prorated
amount of an annual minimum fee of * dollars ($*) (the "Annual Minimum
Fee"). In other words, if, at any time during the Initial Term, the
monthly Base Charge as calculated pursuant to Section 2.1 above shall
fall below the minimum Base Charge applicable to such year, TRUSTCO
shall pay to SWMS the minimum Base Charge described above for such
month.
4. Conversion Date
Upon execution of this Agreement and subject to the terms and
conditions of this Agreement, SWMS and TRUSTCO will jointly work
without delay to convert TRUSTCO's Trust Assets to the SunGard
AddVantage system and SWMS outsourcing solution.
5. Mutual Fund Trades, Equity Trades and Custody
All eligible mutual funds will be traded through the SunGard
Transaction Network and Union Planters Bank will serve as the
custodian of TRUSTCO assets. SWMS shall be entitled to receive any
revenue derived from such trades as part of its compensation. TRUSTCO
will continue to be responsible for all trading charges for its
Customers' assets.
6. Additional Storage on the AddVantage System
For the Base Charges noted above SWMS provides two year's history plus
the current year on the system. The history maintained on the system
begins upon conversion and older history is purged on a systematic
basis. TRUSTCO may retain a full five years history on the AddVantage
system for an additional charge of * dollars ($*) per year for the
fourth and fifth years of the Initial Term. Fees for maintaining
additional history during any renewal term would be subject to
agreement by the Parties on the fees to be paid.
7. Outside Tax Provider
As noted in the Agreement, TRUSTCO is responsible for entering into a
contract with an outside tax provider to prepare its 1099's and other
tax reporting needs. TRUSTCO will be responsible for all fees in
connection with the outside provider's services.
8. Investment Scorecard Performance Reporting
If TRUSTCO decides to utilize Investment Scorecard through SWMS to
provide its investment performance reporting the Investment Scorecard
costs will be TRUSTCO's responsibility. The costs if contracted for
through SWMS are estimated to be $* per account per month.
MATERIAL INDICATED BY AN ASTERISK ("*") HAS BEEN OMITTED
AND FILED SEPARATELY WITH THE SEC.
111
SCHEDULE K
TRUSTCO Specified responsibilities
SWMS' ability to deliver the Services is dependent upon TRUSTCO handling certain
responsibilities which are critical to the delivery of the Services including,
but not limited to, the responsibilities listed on this Schedule K. As such,
TRUSTCO agrees to perform the critical responsibilities listed on this Schedule
K in accordance with the Terms of Service.
o QuickFlow is the required means of communication between TRUSTCO and
SWMS. As such TRUSTCO agrees to utilize Quickflow as its means of
communicating all transactions, requests etc. to SWMS.
o TRUSTCO will be responsible for all marketable security transaction trade
entry either through Quickflow or the trades can be made directly to
TRUSTCO's local brokers.
o As part of the Workplan to be developed by the Parties there will be
routine responsibilities that are necessary in order to deliver the
Services, but which will be TRUSTCO's responsibility. Some of these routine
responsibilities are for such things as:
o Printing of on-site trust checks
o Processing of cash transactions and daily blotter balancing
o Transactional direction to SWMS through QuickFlow
o Operations liaison for handling on site demands and work processes
o Designated relationship manager to handle liaison between TRUSTCO
and SWMS
o Creating non standard reports
o Approving all forms utilized
In addition there will be other responsibilities which will be formalized in the
Work Plan process.
112
Exhibit 31(a)
Certification
I, Robert J. McCormick, the principal executive officer of TrustCo Bank Corp NY
("registrant"), certify that:
1. I have reviewed this quarterly report on Form 10-Q of TrustCo Bank Corp
NY;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this quarterly report is being prepared; and
b) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation;
c) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in
the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting; and
113
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation of internal control over financial reporting,
to the registrant's auditors and the audit committee of registrant's board
of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting.
Date: August 9, 2004
/s/ Robert J. McCormick
------------------
President and
Chief Executive Officer
114
Exhibit 31(b)
Certification
I, Robert T. Cushing, the principal financial officer of TrustCo Bank Corp NY
("registrant"), certify that:
1. I have reviewed this quarterly report on Form 10-Q of TrustCo Bank Corp
NY;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in
which this quarterly report is being prepared; and
b) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end
of the period covered by this report based on such evaluation;
c) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in
the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant's internal
control over financial reporting; and
115
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation of internal control over financial reporting,
to the registrant's auditors and the audit committee of registrant's board
of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting.
Date: August 9, 2004
/s/ Robert T. Cushing
------------------
Executive Vice President and
Chief Financial Officer
116
Exhibit 32
Certification
Pursuant To 18 U.S.C. Section 1350,
As Adopted Pursuant to
Section 906 Of The Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report of TrustCo Bank Corp NY (the
"Company") on Form 10-Q for the period ending June 30, 2004 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), the
undersigned hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1. The Report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all
material respects, the financial condition and result of operations of
the Company.
/s/ Robert J. McCormick
-----------------------
Robert J. McCormick
President and
Chief Executive Officer
/s/ Robert T. Cushing
----------------------
Robert T. Cushing
Executive Vice President and
Chief Financial Officer
August 9, 2004
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