Exhibit 10.10
CLEARING AGREEMENT
This agreement, made this _____17_____ day of ______June________, 1994 (the
"Agreement") between Correspondent Services Corporation (hereinafter referred to
as "CSC"), and X.X. Xxxx & Company, Inc. (hereinafter referred to as the
"Correspondent").
WITNESSETH THAT:
WHEREAS, the Correspondent is desirous of availing itself of clearing, execution
and other services related to the securities business as more fully set forth
herein; and Whereas, CSC desires to extend the foregoing types of services to
the Correspondent. Now Therefore, in consideration of the mutual covenants
hereinafter set forth and other good and valuable consideration the receipt of
which is hereby acknowledged, the parties hereto hereby covenant and agree as
follows:
I. Services
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A. Services to be Performed by CSC
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(i) CSC will execute orders for the Correspondent's proprietary accounts
and for the Correspondent's customers whose cash or margin accounts
have been accepted by CSC ("Introduced Accounts"), but only insofar as
such orders are transmitted by the Correspondent to CSC.
(ii) CSC will generate, prepare and, to the extent mutually agreed upon by
the parties hereto, mail confirmations respecting each of the
Introduced Accounts.
(iii) CSC will prepare and mail the summary monthly statements (or quarterly
statements if no activity in any Introduced Account occurs during any
quarter covered by such statement) to every Introduced Account.
(iv) CSC will settle contracts and transactions in securities (including
options to buy or sell securities) (i) between the Correspondent and
other brokers and dealers, (ii) between the Correspondent and the
Introduced Accounts, and (iii) between the Correspondent and persons
other than the Introduced Accounts or other brokers and dealers.
(v) CSC will engage in all cashiering functions for the Introduced
Accounts, including the receipt, delivery and transfer of securities
purchased, sold, borrowed and loaned, receiving and distributing
payment therefore, holding in custody and safekeeping all securities
and payments so received, the handling of margin accounts, including
paying and charging of interest, the receipt and distribution of
dividends and other distributions, and the processing of exchange
offers, rights offerings, warrants, tender offers and redemptions. For
purposes of the Securities Investor Protection Act of 1970, as
amended, and the financial responsibility rules of the Securities and
Exchange Commission, the Correspondent's customers will be the
customers of CSC. Upon mutual agreement of the parties hereto, the
cashiering functions with respect to the receipt of securities and the
making and receiving payments therefor may be relinquished to the
Correspondent.
(vi) CSC will construct and maintain books and records of all transactions
executed or cleared through it and not specifically charged to the
Correspondent pursuant to the terms of this Agreement, including a
daily record of required margin and other information required by Rule
432(a) of the rules of the Board of Directors of the New York Stock
Exchange, Inc. (the "Rules"), or by the constitution, articles of
incorporation, by-laws (or comparable instruments) or rules,
regulations or other instruments corresponding to the foregoing, and
the stated policies or practices of any other securities exchange (the
"Standards"), including but not otherwise limited to any national
securities exchanges registered under the Securities Exchange Act of
1934, as amended ("National Securities Exchange").
B. Services Which Shall Not be Performed by CSC
--------------------------------------------
Unless otherwise agreed to in a writing executed by the parties hereto, CSC
shall not engage in any of the following services on behalf of the
Correspondent:
(i) Accounting, bookkeeping or recordkeeping, cashiering, or any other
services with respect to commodity transactions, and/or any
transaction other than securities transactions.
(ii) Preparation of the Correspondent's payroll records, financial
statements or any analysis or review thereof or any recommendations
relating thereto.
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(iii) Preparation or issuance of checks in payment of the Correspondent's
expenses, other than expenses incurred by CSC on behalf of the
Correspondent pursuant to this Agreement.
(iv) Payment of commissions, salaries or other remuneration to the
Correspondent's salespersons or any other employees of the
Correspondent.
(v) Preparation and filing of reports (the "Reports") with the Securities
and Exchange Commission, any state securities commission, any
National Securities Exchange, or other securities exchange or
securities association or any other regulatory or self-regulatory
body or agency with which the Correspondent is associated and/or by
which it is regulated. Furthermore, CSC will, at the request of the
Correspondent, furnish the Correspondent with any necessary
information and data contained in books and records kept by CSC and
not otherwise reasonably available to the Correspondent if such
information is required in connection with the preparation and fling
of Reports by the Correspondent.
(vi) Making and maintaining reports and records required to be kept by the
Correspondent by the Currency and Foreign Transactions Reporting Act
of 1970 and the regulations promulgated pursuant thereto, or any
similar laws or regulations enacted or adopted hereafter.
(vii) Verification of the address changes of any Introduced Account.
(viii) Obtaining and verifying new account information, and insuring that
such information meets the requirements of Rule 405 { 1 } of the
Rules and any other Rules or applicable standards.
(ix) Maintaining a record of all personal and financial information
concerning any Introduced Account and all orders received therefrom,
and maintaining all documents and agreements executed by any
Introduced Account.
(x) Holding for safekeeping of the securities of any Introduced Account
registered in the name of the Introduced Account.
(xi) Accepting deposits from the Correspondent in the form of coin or
currency of the United States or any other country.
II. Clearing Charges
----------------
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See Schedule "A" attached hereto and incorporated herein by reference.
Correspondent shall have sole discretion to determine the amount of
commission/xxxx up charged to its Introduced Accounts cleared by CSC. CSC agrees
to pay Correspondent certain commissions and/or sales credits received by CSC
less any amounts due to CSC under this Agreement or otherwise and any expenses
or other sums to third parties paid on the Correspondent's behalf by CSC.
In no event shall the fees charged in this Article II for the above services be
in contravention of the Securities Act of 1933, as amended, the Securities
Exchange Act of 1934, the Investment Advisers Act of 1940, as amended, and the
Employee Retirement Income Security Act of 1974, as amended, or any rules or
regulations thereunder, or any other law, rule or regulation, Federal, State or
Local, or any constitution, by-law, rule, regulation or instrument correspondent
to the foregoing, or stated policy or practice of any national securities
exchange or other securities exchange or association or other regulatory or
self-regulatory body or agency ("Laws and Regulations"). In the event that such
fees are deemed by CSC or the Correspondent to be in contravention of the Laws
and Regulations, they shall be replaced with fees mutually agreed upon by CSC
and the Correspondent.
III. Notation on Statements, Confirmation and Other Written Material
---------------------------------------------------------------
CSC shall carry all Introduced Accounts in the names of the Correspondent's
customer, with a notation on its books and records that such Introduced
Accounts were introduced by the Correspondent, and all monthly or quarterly
statements, confirmations relating to such Introduced Accounts shall also
indicate that the Introduced Accounts were introduced by the Correspondent.
In addition, account statements will indicate that customer funds and
securities received by CSC will be held at CSC and will contain the
telephone number of a contact area at CSC. Inadvertent omission of such
notations shall not be deemed to constitute a breach of this Agreement.
Copies of the forms covering the foregoing shall be furnished by CSC to the
Correspondent.
IV. Opening of Accounts
-------------------
(i) At the time of the opening of each Introduced Account, Correspondent
shall furnish CSC with all financial and personal information
concerning such Introduced Accounts as CSC may reasonably require. At
the time of the opening of Introduced Accounts which are margin
accounts, the Correspondent shall furnish CSC with executed
customers' agreements, hypothecation agreements and consents to loans
of securities (collectively, the
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"margin agreement"). CSC shall supply the Correspondent with margin
agreement forms regarding margin accounts in sufficient quantities,
such forms to be submitted to CSC upon their completion by the
Correspondent. If any Introduced Account may have been opened without
CSC having previously received a properly executed margin agreement,
failure of CSC to receive such margin agreements shall not be deemed
to be a waiver of the information requirements set forth herein. Upon
the written or oral request of CSC, the Correspondent shall furnish
CSC with any other documents and agreements executed by the
Introduced Account on forms which shall be supplied by CSC in
sufficient quantities and which may reasonably be required by CSC in
connection with the opening, operating or maintaining of Introduced
Accounts. CSC may, at its option, mail margin agreements or "new
account" forms directly to the Introduced Accounts upon notification
by the Correspondent, and/or require completion of its own margin
agreement or "new account" forms and, if required, option account
agreements for the Introduced Accounts. The Correspondent shall
promptly provide CSC with basic data and copies of documents relating
to each of the Introduced Accounts, including, but not otherwise
limited to, copies of records of any receipts of the Introduced
Accounts' funds and/or securities received directly by the
Correspondent, as shall be necessary for CSC to discharge its service
obligations hereunder.
(ii) All transactions in any Introduced Account are to be considered cash
transactions until such time as CSC has received margin agreements,
duly and validly executed in respect of such Introduced Account.
Nevertheless, it is intended that Correspondent will obtain executed
margin agreements within the time periods set forth in procedural
manuals provided by CSC or any entity affiliated with CSC. In the
event credit is inadvertently extended with respect to such
Introduced Accounts, Correspondent shall indemnify and hold CSC
harmless from and against all loss, liability, damage, cost and
expense (including but not otherwise limited to fees and expenses of
legal counsel) arising therefrom.
(iii) At the time of the opening of any Introduced Account, the
Correspondent shall furnish CSC with the name of any principal other
than the account name for whom the Correspondent is acting as agent,
and written evidence of such authority.
(iv) The Correspondent shall have the sole and exclusive responsibility
for compliance with Rule 405(3) of the Rules and shall specifically
approve the opening of any new account before forwarding such
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account to CSC as a potential Introduced Account. CSC, in its
reasonable business judgement, reserves the right to reject any
account which the Correspondent may forward to CSC as a potential
Introduced Account. CSC also reserves the right to terminate any
account previously accepted by it as an Introduced Account.
(v) Pursuant to written notification received by the Correspondent and
forwarded to CSC, any account of the Correspondent may choose to
reject the services to be performed by CSC pursuant to this Agreement
and thus choose not to be serviced as an Introduced Account pursuant
hereto. Upon notice from another member organization that an
Introduced Account intends to transfer his account thereto, CSC shall
expedite such transfer and shall have the sole and exclusive
responsibility for compliance with Rule 412 of the Rules.
(vi) It shall be the sole and exclusive responsibility of the
Correspondent to make every reasonable effort to ascertain the
essential facts relative to any Introduced Account and any order
therefore, in compliance with Rule 405(1) of the Rules, including but
not otherwise limited to ascertaining the authority of all orders for
Introduced Accounts, and the genuineness of certificates, papers and
signatures provided by each Introduced Account. Any investment advice
furnished to an Introduced Account by the Correspondent shall be the
sole and exclusive responsibility of the Correspondent.
(vii) The Correspondent shall be solely and exclusively responsible for the
handling and supervisory review of any Introduced Accounts over which
the Correspondent's partners, officers or employees have
discretionary authority, as required by Rule 408 of the Rules and any
other applicable Laws and Regulations. The Correspondent shall
furnish CSC with such documentation with respect thereto as may be
requested by CSC. The Correspondent hereby agrees to indemnify and
hold CSC harmless against any loss, liability, damage, cost or
expense (including but not otherwise limited to fees and expenses of
legal counsel) suffered or incurred by CSC directly or indirectly as
a result of any liabilities or claims arising from the exercise by
the Correspondent, its partners, officers or employees of
discretionary authority over Introduced Accounts. The Correspondent
hereby warrants that with regard to any orders or instructions given
by the Correspondent with respect to such discretionary accounts, its
partners, officers or employees shall have been fully and properly
authorized relative thereto and that the
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execution of such orders shall not be in violation of the Laws and
Regulations. Furthermore, the Correspondent hereby agrees to
indemnify and hold CSC harmless against any loss, liability, damage,
cost or expense (including but not otherwise limited to fees and
expenses to legal counsel) suffered or incurred by CSC directly or
indirectly as a result of any breach of the Correspondent's said
warranty.
(viii) The Correspondent shall have the sole and exclusive responsibility
for the handling and supervisory review of any Introduced Account for
an employee or officer of any member organization, self-regulatory
organization, bank, trust company, insurance company or other
organization engaged in the securities business, and for compliance
with Rule 407 of the Rules relating thereto. The Correspondent shall
furnish CSC with such documentation with respect thereto as may be
requested by CSC.
(ix) The Correspondent shall have the sole and exclusive responsibility to
insure that those of its customers who become Introduced Accounts
hereunder shall not be minors or subject to those prohibitions
existing under the Laws and Regulations generally relating to the
incapacity of any Introduced Account or any conflict of interest
relating to such Introduced Account
(x) The Correspondent shall be solely and exclusively responsible for any
loss, liability, damage, cost or expense (including but not otherwise
limited to fees and expenses of legal counsel) sustained or incurred
by either the Correspondent or CSC, arising out of or resulting from
any orders the Correspondent has taken from Introduced Account
residing or being domiciled in jurisdictions in which the
Correspondent has not been or is no longer authorized to do business.
(xi) It shall be the sole and exclusive responsibility of the
Correspondent to comply with the Laws and Regulations relating to
each Introduced Account which effect listed option transactions
including, but not limited to, approval by the Correspondent's
Registered Options Principal or Senior Registered Options Principal
(as applicable), delivery of required Options Disclosure Documents
(and Supplements where applicable) and option documentation.
V. Transactions and Margin
-----------------------
(i) It is understood that with respect to Introduced Accounts which are
margin accounts, CSC is responsible for compliance with Regulation T,
12 C.F.R. Part 220, the Federal margin regulation promulgated by the
Board of Governors of the Federal Reserve System (the "Board"), and
any
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interpretative ruling issued by the Board, and letter rulings of the
Federal Reserve Bank of New York, Rules and Interpretations of the
New York Stock Exchange, Inc. and any other applicable margin and
margin maintenance requirements of the Laws and Regulations. The
Correspondent is responsible to CSC for the collection of the margin
required to support each transaction for, and to maintain margin in,
each Introduced Account and such margin, in conformity with the above
margin and margin maintenance requirements. After such initial margin
on each transaction has been received, maintenance margin calls shall
be generated by CSC and made by CSC or by the Correspondent at the
instructions of CSC. CSC shall have the right to modify, in its sole
discretion, the margin requirements of any Introduced Account from
time to time so that CSC may call for additional margin. Therefore,
CSC shall be the sole judge as to the amount of margin to be required
of and maintained by Introduced Accounts. CSC may impose such margin
by individual security within an account or by a specified Introduced
Account and such margin need not be of general application to all
accounts.
CSC shall impose no fees on the Correspondent, other than any fees or
charges imposed directly or by any regulatory body with regard to
margin extensions obtained by CSC pursuant to written requests from a
principal of the Correspondent.
(ii) On all transactions, the Correspondent shall be solely and
exclusively responsible to CSC for any loss, liability, damage, cost
or expense (including but not otherwise limited to fees and expenses
of legal counsel) incurred or sustained by the Correspondent or CSC
as result of the failure of any Introduced Account to make timely
payment for the securities purchased by it or timely and good
delivery of securities sold for it, or timely compliance by it with
margin or margin maintenance calls (provided that CSC has timely
issued such call and/or given notice thereof to the Correspondent or
if conditions creating such call should be reasonably known by
Correspondent), whether or not any margin extensions have been
granted by CSC pursuant to the request of the Correspondent, except
that no interest will be charged by CSC for cash shorts in Introduced
Accounts. The Correspondent agrees to be solely and exclusively
responsible for the payment and delivery of all "when issued" or
"when distributed" transactions which CSC may accept, forward or
execute for Introduced Accounts.
(iii) On all over-the-counter transactions for Introduced Accounts, the
Correspondent shall furnish CSC with the names of the respective
purchasing and selling broker-dealers (except as otherwise provided
in paragraph (iv) of this Section, as set forth below), the names of
the purchasing and selling customers, and the wholesale and retail
purchase and sale prices.
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(iv) Should the Correspondent entrust the execution of an order in an
over-the-counter security to CSC or any entity affiliated with CSC
and the counter party is left at CSC's discretion. CSC will assume
the responsibility of paying the Correspondent that which the counter
party has failed to pay pursuant to the over-the-counter order
transaction (counter party risk). In the case the Correspondent
executes its own over-the-counter order or designates the counter
party, it shall be understood that in the event the over-the-counter
dealer with whom the Correspondent dealt or whom it designated fails
to live up to its part of the transaction, the Correspondent will
assume the counter party risk and reimburse CSC for any loss
sustained thereby.
(v) The Correspondent shall be solely and exclusively responsible for
approving all orders for the Introduced Accounts and for establishing
procedures to insure that such approved orders are transmitted
properly to CSC for execution. CSC, in its reasonable business
judgement, reserves the right to reject any order which the
Correspondent may transmit to CSC for execution.
(vi) The Correspondent shall be solely and exclusively responsible for the
supervisory review of all orders for the Introduced Accounts and
shall insure that any orders and instructions given by it or any of
its employees to CSC pursuant to the terms of this Agreement shall
have been properly authorized in advance.
(vii) The Correspondent shall be solely and exclusively responsible for
sales and purchases for the Introduced Accounts that may create or
result in violation of any of the Laws and Regulations.
(viii) All transactions pursuant to the terms of this Agreement shall be
subject to the constitution, rules, by-laws, regulations, stated
practices, and customs and any modifications thereof of any national
securities exchange or other securities exchange or market and its
clearing house, if any, where executed, and the Laws and Regulations.
It is understood that the Correspondent assumes sole and exclusive
responsibility for compliance with the Laws and Regulations in the
same manner and to the same degree as if the Correspondent were
performing the services for the Introduced Accounts that have been
assumed by CSC pursuant to this Agreement, except insofar as CSC may
pursuant to paragraph (iv) of this Section, as set forth above,
select the counter party to a particular transaction.
(ix) All transactions heretofore had between the Correspondent and CSC
with respect to orders given by or for the Introduced Accounts and
cleared through CSC shall be subject to the Provisions of this
Agreement.
VI. Supervisory Responsibility
--------------------------
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(i) Correspondent shall have the sole and exclusive responsibility for
the review of all Introduced Accounts and for compliance with any
supervisory responsibilities under Rule 405(2) of the Rules,
including but not otherwise limited to matters involving the
investment objectives of the Introduced Accounts, the reasonable
basis for recommendations made to Introduced Accounts, and the
frequency of trading in the Introduced Accounts, whether or not such
transactions are instituted by the Correspondent, its partners,
officers, employees or any registered investment advisor.
(ii) The Correspondent and CSC shall each be responsible for compliance
with any supervisory procedures under Rule 342 of the Rules and, to
the extent applicable, any other provisions of the Laws and
Regulations, including but not otherwise limited to supervising the
activities and training of their respective registered
representatives, as well as all of their other respective employees
in the performance of functions specifically allocated to them
pursuant to the terms of this Agreement.
VII. Information to be provided by the Correspondent
-----------------------------------------------
(i) The Correspondent shall provide CSC with copies of all financial
information and reports filed by the Correspondent with the New York
Stock Exchange, Inc. (if a member), the National Association of
Securities Dealers, Inc., the Securities and Exchange Commission, and
any other National Securities Exchange (where a member) (including
but not otherwise limited to monthly and quarterly Financial and
Operational Combined Uniform Single Reports, i.e., "FOCUS" Reports)
simultaneous with the filing therewith.
(ii) The Correspondent shall submit to CSC on an annual basis the audited
financial statements of the Correspondent, its parent organization
(if applicable) and, when requested by CSC, its affiliated entities.
In addition, the Correspondent shall submit to CSC upon request,
information and reports relating to the financial integrity of
Correspondent, its parent organization (if applicable) and its
affiliated entities, including but not otherwise limited to
information regarding the Correspondent's aggregate indebtedness
ratio and net capital.
(iii) The Correspondent shall provide CSC with all appropriate data in its
possession pertinent to the performance and supervision of any
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function or responsibility specifically allocated to CSC pursuant to
the terms of this Agreement.
(iv) The Correspondent shall provide CSC with any amendment or supplement
to the Form BD of the Correspondent.
VIII. Information to be provided by CSC
---------------------------------
CSC shall provide the Correspondent with all appropriate data in its possession
pertinent to the proper performance and supervision of any function specifically
allocated to the Correspondent pursuant to the terms of this Agreement. The
Correspondent shall be responsible for and shall promptly reimburse CSC for all
costs incurred by CSC in connection with the preparation and mailing of such
information.
IX. Customer Notification and Correspondence
----------------------------------------
(i) The Correspondent shall be solely and exclusively responsible for
informing its customers in a written correspondence, the form and
substance of which will be mutually agreed upon, prior to the
effective date of this Agreement, as to the general nature of the
services to be provided by CSC pursuant to this agreement and the
right of such customers to reject the services provided herein. Any
new customers of the Correspondent shall also be informed as
provided herein, verbally prior to such customers becoming
Introduced Accounts and in writing, once the new accounts have been
opened and accepted. The Correspondent shall be solely and
exclusively responsible for the payment of all costs incurred in
connection with the preparation and mailing of such customer
correspondence.
(ii) The Correspondent shall inform its customers pursuant to such
written correspondence that all inquiries and correspondence should
be directed to the Correspondent. All customer correspondence shall
be reviewed and responded to by the party responsible for the
specific area to which the inquiry or complaint relates pursuant to
the terms of this Agreement. In the event such correspondence is not
directed to such party originally, the Correspondent or CSC shall
expeditiously forward such correspondence to the appropriate party.
X. Errors Controversies and Indemnification
----------------------------------------
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(i) Errors, misunderstandings or controversies, except those specifically
otherwise covered in this Agreement, between the Introduced Accounts
and the Correspondent or any of its employees, which shall arise out
of acts or omissions or the Correspondent or any of its employees
(including, without limiting the foregoing, the failure of the
Correspondent to deliver promptly to CSC any instructions received by
the Correspondent from an Introduced Account with respect to the
voting, tender or exchange of shares held in such Introduced
Account), shall be the sole and exclusive responsibility and
liability of the Correspondent. In the event, however, that by reason
of such error, misunderstanding or controversy, the Correspondent in
its discretion deems it advisable to commence an action or proceeding
against an Introduced Account, the Correspondent shall indemnify and
hold CSC harmless from any loss, liability, damage, cost or expense
(including but not otherwise limited to fees and expenses of legal
counsel) which CSC may incur or sustain in connection therewith or
under any settlement thereto. If such error, misunderstanding or
controversy shall result in the bringing of an action or proceeding
against CSC, the Correspondent shall indemnify and hold CSC harmless
from any loss, liability, damage, cost or expense (including but not
otherwise limited to reasonable fees and expenses of legal counsel)
which CSC may incur or sustain in connection therewith or under any
settlement thereof.
(ii) Errors, misunderstandings or controversies, except those specifically
otherwise covered in this Agreement, between the Introduced Accounts
and the Correspondent or any of its employees, which shall arise out
of acts or omissions of CSC or any of its employees, shall be the
sole and exclusive responsibility and liability of CSC. In the event,
however, that by reason of such error, misunderstanding or
controversy, CSC in its discretion deems it advisable to commence an
action or proceeding against an Introduced Account, CSC shall
indemnify and hold the Correspondent harmless from any loss,
liability, damage, cost or expense (including but not otherwise
limited to reasonable fees and expenses of legal counsel) which the
Correspondent may incur or sustain in connection therewith or under
any settlement thereof. If such error, misunderstanding or
controversy shall result in the bringing of an action or proceeding
against the Correspondent, CSC shall indemnify and hold the
Correspondent harmless from any loss, liability, damage, cost or
expense (including but not otherwise limited to reasonable fees and
expenses of legal counsel) which the
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Correspondent may incur or sustain in connection therewith or under
any settlement thereof.
(iii) CSC and the Correspondent both agree to indemnify the other and hold
the other harmless from and against any loss, liability, damage, cost
or expense (including but not otherwise limited to reasonable fees
and expenses of legal counsel) arising out of or resulting from any
failure by the indemnifying party or any of its employees to carry
out fully the duties and responsibilities assigned to the
indemnifying party herein or any breach of any representation or
warranty herein by the indemnifying party under this Agreement. The
Correspondent hereby agrees to indemnify and hold CSC harmless from
and against any loss, liability, damage, cost or expense (including
but not otherwise limited to reasonable fees and expenses of legal
counsel) sustained or incurred in connection herewith in the event
any Introduced Account fails to meet any initial margin call or
subsequent maintenance calls, in conformity with Section V hereof.
(iv) The indemnification provisions in this Agreement, shall remain
operative and in full force and effect, regardless of the termination
of this Agreement, and shall survive any such termination.
(v) Correspondent agrees to maintain, and to provide evidence thereof to
CSC, at least $250,000 blanket bond indemnity bond insurance covering
any and all acts of its employees, agents and partners, with an
insurance company reasonably acceptable to CSC, listing CSC as an
insured party and permitting CSC to assume the policy in the event of
the Correspondent ceasing operations.
XI. Representations and Warranties
------------------------------
(a) The Correspondent represents and warrants as follows:
(i) The Correspondent will maintain at all times while this Agreement is
in full force and effect stated net capital of not less than $100,000
unless CSC has otherwise agreed in writing. The Correspondent will
not carry customer, broker or dealer accounts and will not receive or
hold funds under Rule 15c3- 1 of the Securities Exchange Act of 1934,
as amended, for those persons. The Correspondent will immediately
notify CSC when [i] its Aggregate Indebtedness Ratio reaches or
exceeds 10 to 1, [ii] if the Correspondent has elected to operate
under paragraph [f] or Rule 15c3- 1 of the Securities Exchange Act of
1934, as amended, when its net capital is less than 5% of aggregate
debit items computed in accordance with Rule 15c3-
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3, [iii] when the aggregate amount of any withdrawals of equity
capital and/or unsecured advances or loans exceed 20% of excess net
capital in any 30 day period or 30% of excess net capital in any 90
day period or [iv] its stated net capital is less than the minimum
amount required under this Agreement.
(ii) The Correspondent is a member of good standing of the National
Association of Securities Dealers, Inc. The Correspondent will
promptly notify CSC of any additional exchange memberships or
affiliations. The Correspondent shall also comply with whatever non-
member access rules have been promulgated by any National Securities
Exchange or any other securities exchange of which it is not a
member.
(iii) The Correspondent is and during the term of this Agreement will
remain duly registered or licensed and in good standing as a
broker/dealer under all applicable Laws and Regulations.
(iv) The Correspondent has all the requisite authority in conformity with
all applicable Laws and Regulations to enter into this Agreement and
to retain the services of CSC in accordance with the term thereof.
(v) The Correspondent is in compliance, and during the term of this
Agreement will remain in compliance with [i] the capital and
financial reporting requirements of every National Securities
Exchange or other securities exchange and/or securities association
of which the Correspondent is a member, [ii] the capital requirements
of the Securities and Exchange Commission, and [iii] the capital
requirements of every state in which the Correspondent is licensed as
a broker/dealer.
(vi) The Correspondent shall not generate and/or prepare any statements,
xxxxxxxx or confirmations respecting any Introduced Account unless
expressly so instructed in writing by CSC.
(vii) The Correspondent shall keep confidential any information it may
acquire as a result of this Agreement regarding the business and
affairs of CSC, which requirement shall survive the life of this
Agreement.
(b) CSC represents and warrants as follows:
(i) CSC is a member in good standing of the National Association of
Securities Dealers, Inc., and the New York Stock Exchange, Inc.
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(ii) CSC is and during the term of this Agreement will remain duly
licensed and in good standing as a broker/dealer under all
applicable Laws and Regulations.
(iii) CSC has all the requisite authority, in conformity with all
applicable Laws and Regulations, to enter into and perform this
Agreement.
(iv) CSC is in compliance, and during the term of this Agreement, will
remain to compliance, with [i] the capital and financial reporting
requirements of every National Securities Exchange and/or other
securities exchange or association of which it is a member, [ii] the
capital requirements of the Securities and Exchange Commission, and
[iii] the capital requirements of every state in which it is
licensed as a broker/dealer.
(v) CSC represents and warrants that the names and addresses of the
Correspondent's customers which have or which may come to its
attention in connection with the clearing and related functions it
has assumed under this Agreement are confidential and shall not be
utilized by CSC except in connection with the functions performed by
CSC pursuant to this Agreement. CSC shall send no written
information to such customers other than statements, bills or
notices of transactions in connection with its role as clearing
agent. Notwithstanding the foregoing, should an Introduced Account
request, on an unsolicited basis, that CSC or any entity affiliated
with CSC become its broker, acceptance or such Introduced Account by
CSC or any entity affiliated with CSC shall in no way violate this
representation and warranty, nor result in a breach of this
Agreement.
(vi) CSC shall keep confidential any information it may acquire as a
result of this Agreement regarding the business and affairs of the
Correspondent, which requirement shall survive the life of this
Agreement.
XII. Termination - Event of Default
------------------------------
Notwithstanding any provision in this Agreement, the following events or
occurrences shall constitute an Event of Default under this Agreement:
(i) Either CSC or the Correspondent shall fail to perform or observe any
term, covenant or condition to be performed or observed by it
hereunder and such failure shall continue to be unremedied for a
15
period of 30 days after written notice from the non-defaulting party
to the defaulting party specifying the failure and demanding that
the same be remedied; or
(ii) Any representation or warranty made by either CSC or the
Correspondent herein shall prove to be incorrect at any time in any
material respect; or
(iii) A receiver, liquidator or trustee of either CSC or the
Correspondent, or of its property, held by either party, is
appointed by court order and such order remains in effect for more
than 30 days; or either CSC or the Correspondent is adjudicated
bankrupt or insolvent; or any of its property is sequestered by
court order and such order remains in effect for more than 30 days;
or a petition is filed against CSC or the Correspondent under any
bankruptcy, reorganization, arrangement, insolvency, readjustment of
debt, dissolution or liquidation law of any jurisdiction, whether
now or hereafter in effect, and is not dismissed within 30 days
after such filing; or
(iv) Either CSC or the Correspondent files a petition in voluntary
bankruptcy or seeking relief under any provision of any bankruptcy,
reorganization. arrangement, insolvency, readjustment of debt,
dissolution or liquidation law of any jurisdiction, whether now or
hereinafter in effect, or consents to filing of any petition against
it under any such law; or
(v) Either CSC or the Correspondent makes an assignment for the benefit
of its creditors, or admits in writing its inability to pay its
debts generally as they become due, or consents to the appointment
of a receiver, trustee or liquidator of either CSC or the
Correspondent, or of any property held by either party; or
(vi) Either party hereto knowingly and willfully solicits or causes to
solicit for employment the employees of either party or their
affiliates, subsidiaries, successors or assignees without prior
consent of the other party; or
(vii) If research is provided by CSC or any entity affiliated with CSC to
the Correspondent and the Correspondent knowingly and willfully
reproduces or reprints in any fashion same or represents to
customers or to an unrelated third party that the research supplied
by CSC or such affiliated entity is that of the Correspondent.
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Upon the occurrence of any such Event of Default, the non-defaulting party may,
at its option, by notice to the defaulting party declare that this Agreement
shall be thereby terminated and such termination shall be effective as of the
date such notice has been sent or communicated to the defaulting party.
XIII. Remedies Cumulative
-------------------
The enumeration herein of specific remedies shall not be exclusive of any other
remedies. Any delay or failure by any party of this Agreement to exercise any
right, power, remedy or privilege herein contained, or now or hereafter existing
under any applicable statute or law, shall not be construed to be a waiver of
such right, power, remedy or privilege or to limit the exercise of such right,
power, remedy or privilege. No single, partial or other exercise of any such
right, power, remedy or privilege shall preclude the further exercise thereof or
the exercise of any other right, power, remedy or privilege.
XIV. Miscellaneous
-------------
(i) As of the effective date of this Agreement CSC will not convert or
allow to be converted to its records as Introduced Accounts customer
accounts of the Correspondent that are partially or totally
unsecured, securities in the name of the Correspondent's customers,
or legal transfer securities (securities in the name of estates,
trust, joint ownership, foreign ownership and such), unless
previously approved in writing by CSC. If in error such accounts are
converted to CSC books or records, CSC reserves the right to convert
back to the Correspondent or its clearing agent said customer
accounts and the positions.
(ii) CSC shall have the power to place open orders as instructed by the
Correspondent as of the effective date of this Agreement, and
appropriate adjustments shall be made by CSC to reflect that CSC has
acted as broker on the open orders with specialists on any national
securities exchange or other securities exchange.
(iii) CSC shall have the power to effect appropriate adjustments with
respect to pending dividends and other distributions from the
effective date of this Agreement through the last payable date of
such pending dividends.
(iv) The Correspondent shall be responsible for providing annual dividend
and distribution information as contained in IRS Form l087 (to
include individual l099 filings) and any other information required
to be reported by Federal, state or local tax laws, rules or
17
regulations, to its customers until the effective date of this
Agreement, whereupon CSC shall assume this function as to Introduced
Accounts.
(v) CSC shall have the power to allocate and make appropriate
adjustments for fails, reorganization accounts, other work in
process accounts, and overages relating to accounts of the customers
of the Correspondent that have become Introduced Accounts pursuant
to the terms of this Agreement.
(vi) The Correspondent shall assume all liabilities in connection with
the bad debts of all Introduced Accounts. Unsecured debits in the
Introduced Accounts shall be paid within 30 days of their origin
date, and it shall be the responsibility of the Correspondent to
collect such payments from its customers and transmit them to CSC
within such 30-day period. If any unsecured debit balances remain
outstanding beyond such 30-day period, CSC is authorized to apply as
payment of such debit balances commission fees owed to the
Correspondent in connection with transactions pursuant to this
Agreement.
(vii) Transfers of securities relating to introduced accounts shall tee
frozen ten business days prior to the effective date of this
Agreement.
(viii) CSC shall limit its services pursuant to the terms of this Agreement
to that of clearing functions and the related services expressly set
forth herein and the Correspondent shall not hold itself out as an
agent of CSC or any of the subsidiaries or companies controlled
directly or indirectly by or affiliated with CSC or its parent.
(ix) This Agreement supersedes any previous agreement and may be modified
only by a writing signed by both parties to this Agreement. Such
modification shall not be deemed as a cancellation of this
Agreement.
(x) This Agreement shall be submitted to and/or approved by any national
securities exchange, or other regulatory and self-regulatory bodies
vested with the authority to review and/or approve this Agreement or
any amendment or modifications hereto. In the event of any such
disapproval, the parties hereto agree to bargain in good faith to
achieve the requisite approval. CSC will file a fully executed copy
of this agreement with the New York Stock Exchange.
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(xi) This Agreement may be canceled by either of the parties hereto upon
one hundred eighty (180) days' written notice; provided, however,
that this Agreement may be canceled by either party upon thirty (30)
days' written notice if (i) the net capital ratio of the other party
exceeds 10 to 1, (ii) if the other party has elected to operate
under paragraph [f] of Rule 15c3- 1 of the Securities Exchange Act
of 1934, as amended, when its net capital is less than 5% of
aggregate debit items computed in accordance with Rule 15c3-3, (iii)
when the aggregate amount of any withdrawals of equity capital
and/or unsecured advances or loans exceed 20% of excess net capital
in any 30 day period or 30% of excess net capital in any 90 day
period or (iv) its stated net capital is less than the minimum
amount required under this Agreement; and provided, further, that
this Agreement may be canceled by CSC at any time between the date
on which this Agreement is executed and the effective date of this
Agreement, if there is a material change in the control or
management of the Correspondent.
(xii) Any dispute or controversy between the Correspondent and CSC
relating to or arising out of this Agreement shall be settled by
arbitration before and under the rules of the Arbitration Committee
of the New York Stock Exchange, Inc., unless the transaction which
gave rise to such dispute or controversy was effected in another
exchange or market which provides arbitration facilities, in which
case it shall be settled by arbitration under such facilities.
(xiii) CSC will not be bound to make any investigation into the facts
surrounding any transaction that it may have with the Correspondent
on a principal or agency basis or that the Correspondent may have
with its customers or other persons, nor will CSC be under any
responsibility for compliance by the Correspondent with any Laws and
Regulations which may be applicable to the Correspondent. It is
understood that CSC will assist the Correspondent in any
investigation conducted by the Correspondent.
(xiv) To facilitate the keeping of records by CSC the Correspondent will
turn over promptly to CSC any and all cash remittances and
securities which the Correspondent receives from its customer.
Concurrently with the delivery of such funds or securities to the
Correspondent, it shall furnish CSC with such information as may be
relevant or necessary to enable CSC to record promptly and properly
such cash remittances and securities in the respective Introduced
Accounts.
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(xv) This Agreement shall be binding upon all successors, assigns or
transferees of both parties hereto, irrespective of any change with
regard to the name of or the personnel of the Correspondent or CSC.
Any assignments of this Agreement shall be subject to the requisite
review and/or approval of any regulatory or self-regulatory agency
or body whose review and/or approval must be obtained prior to the
effectiveness and validity of such assignment. Except as indicated
below, no assignment of this Agreement by either party shall be
valid unless consented to in writing by the other party. Any
assignment by CSC to any subsidiary or to a company affiliated with
or controlled directly or indirectly by CSC will be deemed valid
and enforceable in the absence of any consent from Correspondent.
Neither this Agreement nor any operation hereunder is intended to
be, shall not be deemed to be, and shall not be treated as a
general or limited partnership, association or joint venture or
agency relationship between the Correspondent and CSC.
(xvi) Should the Correspondent in any way attempt to hold itself out as,
advertise or in any way represent that it is the agent of CSC, CSC
shall have the power, at is option, to terminate the Agreement and
the Correspondent shall be liable for any loss, liability, damage,
cost or expense (including but not otherwise limited to reasonable
fees and expenses of legal counsel) sustained or incurred by CSC as
a result of such representation of agency or apparent authority to
act as an agent of CSC or agency by estoppel.
(xvii) The Correspondent shall not, without having obtained the prior
written approval of CSC, agree to place or place any advertisement
in any newspaper, publication, periodical or any other media if
such advertisement in any manner makes reference to CSC, to any
person or entity that directly, or indirectly through one or more
intermediaries, controls or is controlled by, or is under common
control with CSC and to the clearing arrangements and/or any of the
services embodied in this Agreement.
(xviii) The Laws and Regulations require that CSC must have proper
documentation to support any account opened on its books, including
Introduced Accounts. If, after reasonable requests therefor, the
necessary documents so as to enable CSC to comply with such account
documentation requirements of the Laws and Regulations have not
been received by CSC, the Correspondent shall receive notification
that no further orders will be accepted for the Introduced Accounts
involved. Should it happen that inadvertent orders are placed for
such accounts after this notice is received, no
20
commission credit will be granted from such order. On receipt of
the necessary documents, this restriction will be lifted on future
commissions, but any commissions withheld will be credited or paid.
This Agreement is not in any way intended to limit the
responsibility of CSC under the Laws and Regulations with respect
to Introduced Accounts.
(xix) The construction and effect of every provision of this Agreement,
the rights of the parties hereunder and any questions arising out
of this Agreement, shall be subject to the statutory and common law
of the State of New York.
(xx) The headings preceding the text, articles and sections hereof have
been inserted for convenience and reference only and shall not be
construed to affect the meaning, construction or effect of this
Agreement.
(xxi) This Agreement shall cover only the type of services set forth
herein and is in no way intended nor shall be construed to bestow
upon the Correspondent any special treatment regarding any other
arrangements, agreements or understandings which presently exist
between Correspondent and CSC or which may hereinafter exist. The
Correspondent shall be under no obligation whatsoever to deal with
CSC or any of its subsidiaries or any companies controlled directly
or indirectly by or affiliated with CSC or its parent, in any
capacity other than as set forth in this Agreement. Likewise, CSC
shall be under no obligation whatsoever to deal with the
Correspondent or any of its affiliates in any capacity other than
as set forth in this Agreement.
(xxii) If any provision or condition of this Agreement shall be held to be
invalid or unenforceable by any court, or regulatory or self-
regulatory agency or body, such invalidity or unenforceability
shall attach only to such provision or condition. The validity of
the remaining provisions and conditions shall not be affected
thereby and this Agreement shall be carried out as if any such
invalid or unenforceable provision or condition were not contained
herein.
(xxiii) In the event that CSC assumes any contractual obligation on behalf
of the Correspondent relative to communication equipment, the
Correspondent hereby agrees to immediately absorb the remaining
portion of said contract if Correspondent terminates the
relationship with CSC. The Correspondent further agrees to absorb
any and all costs associated with the removal or relocation of any
21
communication equipment installed by or at the direction of CSC, if
this agreement is terminated by the Correspondent.
(xxiv) Any unsecured debit residing in a customer account as a result of
the failure to perform on behalf of the customer and/or the
Correspondent will be the responsibility of the Correspondent.
Thirty (30) calendar days will be allowed for collection. If funds
are not received, CSC reserves the right to debit the
Correspondent; bad debit, collateral and/or commission refund
account the amount of the unsecured balance plus interest at the
rate of l/2% above the prevailing broker call loan rate.
(xxv) The interest and handling expense (to include day charges) for any
DVP transaction that does not settle on a normal or regular way
basis or is rejected by the agent for any reason other than CSC
negligence is the responsibility of the Correspondent.
(xxvi) For the purposes of any and all notices, consents, directions,
approvals, restrictions, requests or other communications required
or permitted to be delivered hereunder, CSC's address shall be 000
Xxxxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx, 00000 and the
Correspondent's address shall be 0000 Xxxxxxx Xxxxxx, Xxxxx 0000.
--------------------------------
Xxxxxx, XX 00000, and either party may change its address for
----------------
notice purposes by giving written notice pursuant to registered
mail of the new address to the other party.
(xxvii) This Agreement shall become effective on or about_6/1/94____ or
such date mutually agreed upon by the parties hereto.
Made and executed at _____Denver__________ on the date hereinabove set forth.
Accepted and Agreed to:
CORRESPONDENT SERVICES CORPORATION (CSC)
By: /s/ Xxxxxx Xxxxx
Title: President
Date: 7/11/94
Accepted and Agreed to:
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X.X. XXXX & COMPANY, INC.
By: /s/ Xxxxx X. Xxxxxxx
Title: President
Date 6/17/94
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