FULLY DISCLOSED CLEARING AGREEMENT
This Fully Disclosed Clearing Agreement (the "Agreement") is
executed and entered into by and between Xxxxxx Financial Services, Inc.
("Xxxxxx"), a division of Service Asset Management Company, a North Carolina
corporation, and X.X. Xxxxxx, Inc. ("Correspondent").
WHEREAS, Correspondent is in the process of registering or is
registered with the Securities Exchange Commission ("SEC") as a broker-dealer of
securities in accordance with Section 15(b) of the Securities and Exchange Act
of 1934 (the "Act") and is applying for membership or is a member of the
National Association of Securities Dealers, Inc. ("'NASD"), and desires for
Xxxxxx to act as a clearing broker for Correspondent; and
WHEREAS, Xxxxxx meets all requirements of the SEC to function
as a clearing broker, and desires to enter into an agreement to clear and
maintain cash, margin, option or other accounts ("Accounts") for Correspondent
or customers ("Customers") of Correspondent.
NOW, THEREFORE, in consideration of the mutual covenants
contained herein, and of the guarantee of this Agreement by any guarantor(s),
and for other good and valuable consideration the receipt and sufficiency of
which is hereby acknowledged, the parties agree as follows:
1. REPRESENTATIONS AND WARRANTIES
Correspondent represents and warrants to Xxxxxx that:
(a) Correspondent is a corporation duly organized, validly existing and in
good standing under the laws of the state of its incorporation.
(b) 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 Xxxxxx in accordance with the terms hereof.
(c) Correspondent shall employ as a manager of its brokerage operation only
a person who has all requisite licenses and experience in compliance
with applicable securities laws and regulations.
(d) Correspondent shall duly employ personnel ("Registered
Representatives") who have the requisite licenses and experience in
compliance with applicable securities laws and regulations.
(e) Correspondent has advised Xxxxxx of any clearing arrangements that have
been made or are expected to be made with any other clearing broker or
dealer.
Xxxxxx represents and warrants to Correspondent that:
(a) Xxxxxx is a corporation duty organized, validly existing and in good
standing under the laws of the state of North Carolina.
(b) Xxxxxx is registered as a broker-dealer with the SEC and is in
compliance with the rules and regulations thereof.
(c) Xxxxxx is a member corporation in good standing of the NASD and is in
compliance with the rules and regulations thereof
(c) Xxxxxx is in compliance with the rules and regulations of each national
securities exchange of which it is a member.
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2. CUSTOMER AND CORRESPONDENT ACCOUNTS
Responsibility for compliance with the provisions of the NASD Rules of
Fair Practice regarding opening, approving and monitoring Customer accounts
shall be allocated between Xxxxxx and Correspondent as set forth in this Section
2.
(a) Account Documentation. Correspondent will be responsible for obtaining
and verifying all required information about, and the identity of, each
potential Customer. Correspondent will be responsible for obtaining all
documents related to customer accounts, and for the transmission of all
required documents to Xxxxxx on a timely basis. Xxxxxx may, in its
discretion, receive Documents directly from the Customer. Correspondent
acknowledges the obligation to retain all documents in an easily
accessible place in accordance with SEC rules and agrees to provide the
original application by overnight delivery or a legible copy by
facsimile transmission within 24 hours of a request from Xxxxxx.
Correspondent will be responsible for complying with the requirement of
SEC Rule 15g-9, if applicable.
(b) Knowledge of Customer and Customer's Investment Objectives.
Correspondent will be responsible for learning and documenting all the
required information relating to each and every Customer in order to
insure compliance by Correspondent with applicable rules and
regulations. This required information includes, but is not limited to,
all of the information and instructions submitted to Xxxxxx pursuant to
Section 2(a), any additional facts relative to the Customer's
investment objectives, and every person holding power of attorney over
any Customer Account. It shall be the responsibility of Correspondent
to ensure that those of its Customers who open Accounts hereunder shall
not be minors. Correspondent shall be solely responsible for any issues
regarding the suitability of any investments for its Customers.
(c) Acceptance of Accounts. Prior to any Customer Account being opened with
Xxxxxx, it must be approved by Correspondent. Xxxxxx reserves the right
to withhold acceptance of, or to reject, for any reason, any Customer,
Customer Account, Correspondent Account or any transaction for any
Account and to terminate any Account previously accepted by Xxxxxx.
Initial acceptance of each Account shall be conditioned upon Xxxxxx'x
receipt of completed forms as required by Section 2(a). Correspondent
shall not submit such forms with respect to any Customer Account unless
Correspondent has in its possession the documentation of all
information required pursuant to Section 2(b). Xxxxxx shall be under no
obligation to accept any Account as to which any documentation required
to be submitted to Xxxxxx or maintained by Correspondent pursuant to
Sections 2(a) and 2(b) is incomplete, Prior to acceptance of any
Account, no action taken by Xxxxxx or any of its employees, including,
without being limited to, executing or clearing a trade in any Account,
shall be deemed to be or shall constitute acceptance of such Account.
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(d) Supervision of Orders and Accounts. Xxxxxx will execute orders for
Correspondent's Customers after Correspondent's appropriate principals
have accepted and approved said Accounts. Correspondent will be
responsible for the review and supervision of, and the suitability of,
investments made by each and every one of its Customers and Xxxxxx
shall have no responsibility. Correspondent shall be responsible for
insuring that all transactions in and activities related to all
Accounts opened by it with Xxxxxx, including discretionary Accounts,
will be in compliance with all applicable laws, rules and regulations
of the United States, the several states, governmental agencies,
securities exchanges and the NASD, including any laws relating to
Correspondent's fiduciary responsibilities to Customers, either under
the Employee Retirement Income Security Act of 1974 or otherwise.
Correspondent shall diligently supervise the activities of its
officers, employees and representatives with respect to all Accounts.
Xxxxxx will perform the clearing services provided for in this
Agreement for Accounts accepted by it in accordance with the terms of
this Agreement, as it may be amended from time to time, and otherwise
in accordance with its best business judgment. To the extent, if any,
that Xxxxxx accepts from Correspondent orders for execution in
accordance with Section 7(a),Correspondent shall be responsible for
informing Xxxxxx of the location of the securities that are the subject
of the order so that Xxxxxx may comply with the provisions of Art. III,
Sec. 21 of the NASD Rules of Fair Practice.
(e) Accounts of Associated Persons. Correspondent will not accept Accounts
for any persons that come within the express provisions of Art. III,
Sec. 28 of the NASD Rules of Fair Practice unless Correspondent has
complied with the provisions of said Rule and, if applicable, provided
evidence of employer approval as required by said Rule.
(f) Account Responsibility for Certain Purposes. Notwithstanding anything
herein to the contrary, for purposes of the Securities Investment
Protection Act of 1970 and the financial responsibility rules of the
Securities and Exchange Commission, the Customer Accounts are the
responsibility of Xxxxxx. For all other purposes, the Customer Accounts
shall be the full, total and sole responsibility of Correspondent.
3. EXTENSION OF CREDIT
Responsibility for compliance with the provisions of Regulation T issued by
the Board of Governors of the Federal Reserve System pursuant to the Securities
Exchange Act of 1934 ("Regulation 7) and all other applicable rules, regulations
and requirements of any exchange or regulatory agency affecting the extension of
credit shall be allocated between Xxxxxx and Correspondent as set forth in this
Section 3.
(a) Margin Agreements. At the time of opening of each margin account,
Correspondent will furnish Xxxxxx with a Xxxxxx Customer Margin and Short
Account Agreement, executed by the Customer, on the form furnished to
Correspondent by Xxxxxx. Correspondent may use a substitute form upon written
approval by Xxxxxx.
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(b) Margin and Margin Maintenance. Correspondent is responsible for
assuring Customer's payment of Customer's initial margin requirements and of all
amounts necessary to meet subsequent maintenance calls in each Customer Account,
in order to insure compliance with Regulation T and the house rules of Xxxxxx.
Such payment may be collected by Correspondent on Xxxxxx'x behalf, or made
directly to Xxxxxx at Correspondent's option. Correspondent is responsible for
the payment of initial margin and of all amounts necessary to meet subsequent
margin calls in each Correspondent Account. Xxxxxx shall have the unlimited
right to buy in or sell out positions in Accounts whenever Xxxxxx, in its sole
discretion, deems such action appropriate and deso7ite whether, if the Account
is a Margin Account, any such Account is then in compliance with applicable
margin maintenance requirement or has requested an extension of time to make any
payment required by Regulation T. Correspondent acknowledges that Xxxxxx has the
right to demand payment on any debit balance and that Correspondent is
responsible to Xxxxxx for any unsecured debit balance resulting from any failure
of a Customer to make any such payments upon demand.
(c) Margin Requirements. Initial margin and margin maintenance requirements
applicable to any margin account shall be in accordance with the house rules of
Xxxxxx, rather than in accordance with any lower requirement of any law, any
exchange or any regulatory agency. Xxxxxx may change the margin requirements
applicable to any Account or class of accounts, as described in its house rules;
Correspondent shall be responsible for advising its Customer of the changed
requirements and for the payment by the Customer of any additional margin
necessary to insure compliance with such increased requirements.
(d) Losses. In addition to, and not in limitation of, Correspondent's
agreement to indemnify Xxxxxx pursuant to the provisions of Section 10,
Correspondent indemnifies and holds harmless Xxxxxx from and against any and all
loss, cost, expense and liability (including legal and accounting fees and
expenses) sustained by Xxxxxx arising out of any of the following:
(i) any failure by any Customer to comply with the terms of its Customer
Margin and Short Account Agreement with Xxxxxx;
(ii) The failure of Correspondent or any Customer to comply with
Regulation T;
(iii) the failure of Correspondent to satisfy its obligations under this
Section 3; or
(iv) The failure of delivery of securities sold or failure of payment for
securities purchased in accordance with the provisions of Regulation
T; the return to Xxxxxx unpaid of any check given to Xxxxxx by
Correspondent or any Customer; or the payment for and/or delivery of
all "when issued" transactions which Xxxxxx may accept or execute for
the Accounts.
4. MAINTENANCE OF BOOKS AND RECORDS
Xxxxxx will maintain stock records and other records on a basis consistent
with generally accepted practices in the securities industry and will maintain
copies of such records in accordance with the NASD and SEC guidelines for record
retention in effect from time to time. Xxxxxx and Correspondent shall each be
responsible for preparing and filing the reports required by the governmental
and regulatory agencies that have jurisdiction over each and Xxxxxx and
Correspondent will each provide the other with such information, if any, which
is in the control of one party but is required by the other to prepare any such
report.
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5. RECEIPT, DELIVERY AND SAFEGUARDING OF FUNDS AND SECURITIES
(a) Receipt and Delivery in the Ordinary Course of Business. Xxxxxx, acting
on behalf of Correspondent, will receive and deliver all funds and
securities in connection with transactions for Customer Accounts in
accordance with the Customer's instructions to Correspondent.
Correspondent shall be responsible for advising Customers of their
obligations to deliver funds or securities in connection with each such
transaction. Correspondent shall be responsible for any failure of any
Customer to fulfill such obligation. Xxxxxx shall be responsible for
the safeguarding, of all funds and securities delivered to and accepted
by it, subject to count and verification by Xxxxxx. However, Xxxxxx
will not be responsible for any funds or securities delivered by a
Customer or Correspondent, its agents or employees, until such funds or
securities are physically delivered to Xxxxxx'x premises and accepted
by Xxxxxx or deposited in bank accounts maintained in Xxxxxx'x name. It
is expressly understood and agreed, however, that Correspondent is
responsible for compliance with the Currency and Foreign Transactions
Reporting Act (31 U.S.C. Section 5311. et seq.) and the rules and
regulations promulgated thereunder (31 C.F.R. Section 103 ).11, as
amended, et seq.).
(b) Custody Services. Whenever Xxxxxx has been instructed to act as
custodian of the securities in any Correspondent or Customer Account,
or to hold such securities in "safekeeping," Xxxxxx may hold the
securities in the Customer's name or may cause such securities to be
registered in the name of Xxxxxx or its nominee or in the names of
nominees of any depository used by Xxxxxx. Xxxxxx will perform the
services required in connection with acting as custodian for securities
in Correspondent and Customer Accounts, such as (1) collection and
payment of dividends; (ii) transmittal and handling (through
Correspondent) of tenders or exchanges pursuant to tender offers and
exchange offers; (iii) transmittal of all proxy materials and other
shareholder communications; and (iv)handling of exercises or
expirations of rights and warrants, and of redemptions of securities.
(c) Receipt and Delivery Pursuant to Special Instruction. Upon instruction
from Correspondent or a Customer, Xxxxxx will make such transfers of
securities or Accounts as may be requested. Correspondent shall be
responsible for determining if any securities held in Correspondent or
Customer Accounts are "restricted securities" or "control stock" as
defined by the rules of the SEC and that orders executed for such
securities are in compliance with applicable laws, rules and
regulations.
(d) Draft-Issuing Authority. At its discretion Xxxxxx may authorize certain
of Correspondent's employees to sign drafts as drawer payable to
Correspondent's Customers in amounts and pursuant to conditions as may
be determined by Xxxxxx from time to time. Correspondent agrees that it
will not request Xxxxxx to authorize someone to sign drafts who is not
an employee of Correspondent. Correspondent agrees to fully indemnify
Xxxxxx from the negligence, fraud, or mistakes of Correspondent or
Correspondent's employees in connection with any draft Issuing
authority granted to them and Correspondent authorizes Xxxxxx to charge
any Correspondent Account or any other assets of Correspondent held by
Xxxxxx with the amount of any such losses. Notwithstanding Section
5(a), Xxxxxx will not be responsible for the safeguarding of funds
withdrawn by Correspondent or Correspondent's employees pursuant to
such draft issuing authority. Xxxxxx may withdraw this draft issuing
privilege without notice at any time during the term of this Agreement.
Notwithstanding anything herein to the contrary, Xxxxxx may at any
time, at its sole discretion, despite any prior authorization, refuse
payment on any draft for which Correspondent is drawer and Xxxxxx is
drawee.
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6. CONFIRMATIONS AND STATEMENTS
(a) Preparation and Transmission. Xxxxxx will prepare and send to Customers
monthly statements of account (or quarterly statements if no activity
occurs in an account during any quarter covered by such statement),
which statements shall meet Xxxxxx'x requirements as to format and
quality and will indicate that Correspondent is the introducing broker
for the Account. Xxxxxx will be responsible for preparing and
transmitting confirmations. Upon prior written approval from Xxxxxx,
Correspondent may assume the responsibility of preparing and
transmitting confirmations, including the responsibility for compliance
with the provisions of Art. III, Section 12 of the NASD Rules of Fair
Practice. Copies of all monthly or quarterly statements sent by Xxxxxx
to Customers will be send to Correspondent. Xxxxxx will also provide to
Correspondent monthly statements of clearing services performed by
Xxxxxx for Correspondent and Customer Accounts showing the fees charged
for such services during the month, as provided in Section 8.
(b) Examination and Notification of Errors. Correspondent shall examine
promptly all monthly statements of account, monthly statements of
clearing services and other reports provided to Correspondent by
Xxxxxx. Correspondent shall notify Xxxxxx of any error claimed by
Correspondent in any Account in connection with (i) any transaction
prior to the settlement date of such transaction,(ii) information
appearing on daily reports within seven days of such report, and
(iii)information appearing on monthly statements or reports within 30
days of Correspondent's receipt of any monthly statement or report. Any
notice of error shall be accompanied by such documentation as may be
necessary to substantiate Correspondent's claim. Correspondent shall
provide promptly upon Xxxxxx'x request any additional documentation
which Xxxxxx reasonably believes is necessary or desirable to determine
and correct any such error.
7. ACCEPTANCE OF ORDERS, EXECUTION OF TRANSACTIONS, OTHER SERVICES
(a) Customers' orders. Orders received by Correspondent can be executed By
Correspondent or forwarded to Xxxxxx for execution. The party executing
the order shall be responsible for errors in execution. Acceptance of
orders from Customers shall be the responsibility of Correspondent, and
Correspondent shall be responsible for the authenticity of all orders.
Correspondent shall advise each of its Customers that its relationship
with Xxxxxx is solely that of an introducing broker to a clearing
broker and that, except as set forth in Section 2(f) above,
Correspondent bears all responsibility for the Customer's Account.
Xxxxxx is not obligated to accept for execution any orders placed
directly with Xxxxxx by a Customer. In addition, Xxxxxx is not
obligated to accept any orders from Correspondent if Xxxxxx determines
in good faith that it should not. Correspondent assumes the risk of
failure by an over-the-counter dealer with which Correspondent executes
an order in the event such dealer fails to perform, and will reimburse
Xxxxxx for any loss incurred by it in the transaction.
(b) Transactions clearing. During the term of this Agreement, Xxxxxx will
clear transactions on a fully disclosed basis for Accounts of
Correspondent and the Customers that Correspondent introduces and
Xxxxxx accepts as provided in Section 2(b); provided, however, that
Xxxxxx is not obligated to clear any transactions for Correspondent or
Correspondent's Customers if Xxxxxx determines in good faith that it
should not.
(c) Other Services. Xxxxxx will perform such other services, upon such
terms and at such prices, as Xxxxxx and Correspondent may from time to
time agree.
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8. FEES AND SETTLEMENTS FOR SECURITIES TRANSACTIONS
(a) Commissions: Fees for Clearing Services.
(i) Correspondent has provided to Xxxxxx its basic commission
schedule and Xxxxxx will charge each Customer the commission
shown on such schedule or which Correspondent otherwise directs
Xxxxxx to charge on each transaction. Correspondent's basic
commission schedule may be amended from time to time by written
instructions to Xxxxxx from Correspondent. Xxxxxx shall be
required to implement such changes only to the extent that they
are within the usual capabilities of Xxxxxx'x data processing
and operations systems and only over such reasonable time as
Xxxxxx may xxxx necessary or desirable to avoid disruption of
Xxxxxx'x normal operational capabilities. Xxxxxx may charge
Correspondent for changes in the basic commission schedule.
Correspondent's basic commission schedule shall be within the
format of Xxxxxx'x computer system.
(ii) Xxxxxx will charge Correspondent for clearing services according
to the fee schedule set forth in Schedule A attached hereto and
incorporated herein for all purposes. Clearing charges may be
modified from time to time by Xxxxxx without re-execution of
this Agreement. To implement new charges, Xxxxxx will mail or
telecopy a new Schedule A to Correspondent. If Correspondent
does not object to the new charges within ten (10) days of such
mailing or telecopying, as provided below, the new charges shall
become effective and the new Schedule A shall become a part of
and modify this Ageement without any further action by the
parties. Upon such event, Xxxxxx and Correspondent shall replace
the previous Schedule A with the new Schedule A. Correspondent
may object to new charges by giving notice canceling this
Agreement as provided under Sections 12 and 19(m). During the
pendency of such notice period, the previous charges shall
continue to be effective until termination.
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(b) Settlements. Xxxxxx will collect commissions from Customers on behalf
of Correspondent and through Correspondent. Xxxxxx may make payments to
Correspondent against such commissions in advance of the monthly
settlement contemplated by this Section 8(b), the amount of such
payments to be determined in Xxxxxx'x sole discretion based upon
Xxxxxx'x experience with Correspondent.
As soon as practicable after the end of each month, Xxxxxx will
forward to the Correspondent a statement showing the amount of
commissions and other amounts collected by Xxxxxx on Correspondent's
behalf, and all amounts due to Xxxxxx from Correspondent (including,
without being limited to, clearing charges, other charges, other fees
and Customer's unsecured debit items, however arising), together with
the amount by which the total owed Correspondent exceeds the total owed
Xxxxxx. If such statement indicates that Correspondent owes monies to
Xxxxxx, Correspondent shall promptly pay Xxxxxx the amount by which the
total owed Xxxxxx exceeds the total owed Correspondent. If
Correspondent fails to make such payment on a timely basis, Xxxxxx
shall have the right to charge any other Account maintained by Xxxxxx
for Correspondent or any other assets of Correspondent held by Xxxxxx
(including the deposit required pursuant to Section 9 and positions and
balances in Correspondent Accounts) for the net amount due Xxxxxx. Any
failure by Xxxxxx to charge any Account or assets of Correspondent held
by Xxxxxx shall not act as a waiver of Xxxxxx'x right to demand payment
of, or to charge Correspondent's Accounts for, the full amount due at
any time.
9. DEPOSIT
Contemporaneously with the signing of this Agreement, Correspondent
will deliver cash or securities to Xxxxxx, as specified in Schedule A attached,
for deposit in an account maintained by Xxxxxx. If at any subsequent time
Xxxxxx, in its sole discretion, requires an additional deposit, Correspondent
will deposit additional cash or securities in an amount specified by Xxxxxx.
Instead of making, such additional deposit, Correspondent may reduce
Correspondent's business volume or modify the nature of the securities involved
in the Correspondent's transactions ("business mix") as specified by Xxxxxx. Any
failure by Xxxxxx to demand compliance with the requirement that Correspondent
either deposit additional amounts or modify Correspondent's business mix shall
not act as a waiver of Xxxxxx'x right to demand compliance with such
requirements at any time. If the deposit is not adequately funded as required by
Xxxxxx, Xxxxxx may, in addition to all other rights under this Agreement,
transfer cash or securities of Correspondent held by Xxxxxx to the deposit
account. Correspondent agrees that if Xxxxxx, at its sole discretion, determines
it to be necessary, Xxxxxx shall accept only liquidating transactions for
Customer Accounts and that Correspondent will give notice of such fact to
Customers. If such notice is not given to Customers by Correspondent,
Correspondent agrees that Xxxxxx may give such notice to Customers. Xxxxxx shall
be entitled to set-off against any deposit in addition to any and all other
rights or remedies Xxxxxx may have under this Agreement or otherwise.
Correspondent agrees that if this Agreement is terminated for any reason, Xxxxxx
may liquidate securities deposited and deduct from such deposit any amounts
Correspondent owes Xxxxxx because of failure to meet any of Correspondent's
obligations under this Agreement.
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10. INDEMNIFCATION
(a) Indemnity.
(i) Correspondent agrees to indemnify and hold harmless Xxxxxx, each
person who controls Xxxxxx within the meaning of the Securities
Exchange Act of 1934 and any directors, officers, employees, agents and
attorneys of Xxxxxx ("Xxxxxx Indemnified Persons") from and against all
claims, demands, proceedings, suits and actions and all liabilities,
losses, expenses and costs (including any legal and accounting fees and
expenses) relating to Xxxxxx'x defense of any failure, for any reason,
fraudulent or otherwise, by Correspondent, Correspondent's employees,
independent agents or contractors, or Customers to comply with any
obligation under this Agreement or any other agreement executed and
delivered to Xxxxxx in connection with Xxxxxx'x performance of services
hereunder and any act or failure to act by Xxxxxx Indemnified Persons,
except any act or failure to act which is the result of gross
negligence or willful misconduct on the part of any such Xxxxxx
Indemnified Person. Without limiting the generality of the foregoing,
such failure is explicitly intended by the parties to include failure
resulting from (i) suspension of trading or bankruptcy or insolvency of
any company, securities of which are held in a Customer's Accounts;
(ii) failure by any Customer to maintain adequate margin; or (iii)
breach of any obligation existing between Correspondent and a Customer
of Correspondent or any law, rule or regulation of the United States, a
state or territory thereof, the SEC, the Federal Reserve Board or other
authority, applicable to any transaction contemplated by this
Agreement.
(ii) Xxxxxx shall indemnify and hold Correspondent harmless against any
losses, claims, damages, liabilities or expenses including without
limitation those asserted by Customers (which shall include, but not be
limited to, all costs of defense and investigation and all attorney's
fees) to which Correspondent may become subject, insofar as such
losses, claims, damages, liabilities or expenses arise out of, or are
based upon the gross negligence or willful misconduct of Xxxxxx or its
employees in providing the services contemplated hereunder.
(iii) Upon receipt by any indemnified party under this Section of
notice of the commencement of any action, if a claim is to be made
against the indemnifying party under this Section, the indemnified
party will promptly notify the indemnifying party. The omission to
notify the indemnifying party will not relieve it from any liability
that it may have to any indemnified party otherwise than under this
Section 10(a)(iii). In any such action brought against any indemnified
party, the indemnifying party will be entitled to participate in and,
to the extent that it may wish, to assume the defense thereof, subject
to the provisions herein stated, with counsel satisfactory to such
indemnified party. After notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under
this Section for any legal or other expense subsequently incurred by
such indemnified party in connection with the defense thereof other
than reasonable costs of investigation. The indemnified party shall
have the right to employ separate counsel in any such action and to
participate in the defense thereof, but the fees and expenses of such
counsel shall not be at the expense of the indemnifying party if the
indemnifying party has assumed the defense of the action with counsel
satisfactory to the indemnified party.
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(b) Security Interest and Authorization to Charge. Correspondent grants to
Xxxxxx a first lien and security interest in any Correspondent Account
maintained by Xxxxxx and any other assets of Correspondent now or
hereafter held by Xxxxxx and authorizes Xxxxxx to discharge such lien
by charging such Account and assets with all amounts owing to Xxxxxx
including, but not limited to, (i) any cost or expense resulting from
failures to deliver or failures to receive, (ii) any losses resulting
from unsecured debit balances in any Customer or Correspondent Account
and (iii) any amounts to which Xxxxxx is otherwise entitled pursuant to
the provisions of Section 10(a). Xxxxxx shall have discretion to
liquidate or sell any securities without notice to Correspondent, and
to determine which securities to sell. Such charge may be made against
Correspondent Account or assets at any time and in such amount as
Penson deems appropriate. No delay in charging any Correspondent
Account or asset shall operate as a waiver of Xxxxxx'x right to do so
at any future time as and when Penson deems appropriate. Xxxxxx shall
have the unlimited right to set-off any indebtedness or other
obligations of Correspondent under this Agreement or otherwise
(absolute or contingent, matured or unmatured) against any obligations
of Xxxxxx to Correspondent, including from the Deposit (as described in
Section 9 and/or any other money, securities, or other property of
Correspondent in Xxxxxx'x possession).
(c) Reserves. In connection with any claim that does or could give rise to
a claim for indemnification under this Section 10 for Xxxxxx or an
Xxxxxx Indemnified Person, Xxxxxx may, in its discretion, in addition
to any and all other rights and remedies under this Agreement, reserve
and retain any money, securities or other property of Correspondent
pending a detennination of such claim. The money, securities or other
property of Correspondent set aside in such a reserve shall be subject
to Xxxxxx'x standard lien and security interest described in Section
10(b)above.
11. UNDERTAKINGS OF CORRESPONDENT
(a) Financial Statements and Other Reports. Correspondent will furnish to
Xxxxxx as soon as possible a copy of Correspondent's balance sheet and
statement of earnings for the current fiscal year and for each of
Correspondent's subsequent fiscal years. Each such balance sheet and
statement of earnings shall be certified by independent public
accountants. Correspondent also shall furnish Xxxxxx with copies of its
monthly and quarterly Focus filings promptly after filing.
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(b) Other Clearing Services. During the term of this Agreement,
Correspondent will not sign a clearing agreement with another clearing
broker or dealer without prior written approval by Xxxxxx.
(c) Suspension or Restriction. In the event that Correspondent or any
employee of Correspondent shall become subject to suspension or
restriction by any regulatory body having jurisdiction over
Correspondent and Correspondent's securities business, Correspondent
will notify Xxxxxx immediately and Correspondent authorizes Xxxxxx to
take such steps as may be necessary for Xxxxxx to maintain compliance
with the rules and regulations to which Xxxxxx is subject.
Correspondent further authorizes Xxxxxx, in any event, to comply with
directives or demands made upon Xxxxxx by any exchange or regulatory
body relative to Correspondent and Customers. In connection with such
directives or demands, Xxxxxx may seek advice or legal counsel and
Correspondent will reimburse Xxxxxx for reasonable fees and expenses of
such counsel.
(d) Fixed Price Offerings. Correspondent agrees that in making sales of
Securities, as a part of a fixed price offering, it will comply with
all applicable rules of the NASD, including, without limitation, the
NASD's Interpretations with respect to Free-Riding and Withholding
under Article III, Sections I and 24, of the NASD's Rules of Fair
Practice.
(e) Customer Orders. Correspondent represents that all orders received by
Xxxxxx will be in accordance with its Customers' instructions. The
parties hereto expressly agree that Xxxxxx shall not be responsible for
investigation into the facts surrounding any transaction that it may
have with Correspondent, or that Correspondent may have with its
Customers or other persons, nor shall Xxxxxx be under any
responsibility for compliance by Correspondent with any laws or
regulations which may be applicable to Correspondent.
(f) Inquiries on Certificates. Xxxxxx agrees to act as Correspondent's
direct inquirer under the Lost and Stolen Securities Program under Rule
l7f-1 (17CFR 240.17f-1).
12. TERMINATION OF AGREEMENT: TRANSFER OF ACCOUNTS
(a) Effectiveness. This Agreement shall remain in force for two years from
the date that Correspondent first processes trades with Xxxxxx.
Subsequent to this initial term, either party may terminate this
Agreement by giving thirty (30) days prior written notice to the other
party.
(b) Termination by Xxxxxx. Notwithstanding Section 12(a), Xxxxxx may
terminate this Agreement at any time on five (5) days written notice to
Correspondent in the event that Correspondent:
(i) fails to comply with the terms of this Agreement and upon
notification by Xxxxxx fails to begin compliance within 10 days
from said notification; or
(ii) is enjoined, prohibited or suspended, as a result of an
administrative or judicial proceeding, from engaging in
securities business activities constituting all or portions of
Correspondent's securities business, which injunction,
prohibition or suspension in Xxxxxx'x judgment makes
impracticable the fully disclosed clearing relationship
established in this Agreement.
11
(c) Automatic Termination. In addition to any other provisions for
termination herein, this Agreement shall terminate immediately in the
event that either Correspondent or Xxxxxx ceases to conduct its
business or that Xxxxxx:
(i) is no longer registered as a broker/dealer with the SEC; or
(ii) is no longer a member in good standing of the NASD; or
(iii) is suspended by any national securities exchange of which Xxxxxx
is a member for failure to comply with the rules and regulations
thereof.
(d) Conversion of Accounts. In the event that this Agreement is terminated
for any reason, it shall be Correspondent's responsibility to arrange
for the conversion of Correspondent and Customer Accounts to another
clearing broker. Correspondent will give Xxxxxx notice (the "Conversion
Notice") of:
(i) the name of the broker that will assume responsibility for
clearing services for Customers and Correspondent;
(ii) the date on which such broker will commence providing such
services;
(iii) Correspondent's undertaking, in form and substance satisfactory
to Xxxxxx, that Correspondent's agreement with such broker
provides that such broker will accept on conversion all
Correspondent and Customer Accounts, then maintained by Xxxxxx;
and
(iv) the name of an individual within that organization who Xxxxxx
can contact to coordinate the conversion. The Conversion Notice
shall accompany Correspondent's notice of termination given
pursuant to Section 12(a) or within thirty (30) days of the
occurrence of an event specified in Section 12(c).
If Correspondent fails to give the Conversion Notice to Xxxxxx,
Xxxxxx may give to Customers such notice as Penson deems appropriate of
the termination of this Agreement and may make such arrangements as
Penson deems appropriate for transfer or delivery of Customer and
Correspondent Accounts. Correspondent will pay to Xxxxxx $3,000.xx
programming charges to process the conversion. In addition,
Correspondent shall pay any costs incurred by Xxxxxx as billed by any
third party vendors such as transfer agents, etc.
12
(e) Survival. Termination of this Agreement shall not affect Xxxxxx'x
rights or liabilities relating to business transacted prior to the
effective date of such termination. From the date of termination until
transfer or delivery of all Customer and Correspondent Accounts,
Xxxxxx'x rights and liabilities relating to business transacted after
such termination shall be governed by the same terms as those set forth
in this Agreement.
(f) No Obligation to Release. Xxxxxx shall not be required to release to
Correspondent any securities or cash held by Xxxxxx for Correspondent
in one or more Correspondent Accounts until any amounts owing to Xxxxxx
pursuant to the provisions of this Agreement are paid; and
Correspondent's outstanding obligations hereunder to Xxxxxx are
determined, including determination of any disputed amounts, and
satisfied; and any property of Xxxxxx in the possession of
Correspondent is returned to Xxxxxx.
13. CONFIDENTIAL NATURE OF DOCUMENTS
All agreements, documents, papers, and data in any form, supplied by
Correspondent concerning Correspondent's business or Customers shall be treated
by Xxxxxx as confidential. To the extent such documents or data are retained by
Xxxxxx, they shall be kept in a safe place and shall be made available to third
parties only as authorized by Correspondent in writing or pursuant to any order
or request of a court or regulatory body having appropriate jurisdiction. Xxxxxx
shall give Correspondent prompt notice of the receipt by Xxxxxx of any such
order or subpoena, unless prohibited from doing so by the issuing authority
which notice shall be given prior to Xxxxxx'x compliance therewith. Such
documents shall be made available by Xxxxxx for inspection and examination by
Correspondent's auditors, by properly authorized agents or employees of any
regulatory bodies or commissions or by such other persons as Correspondent may
authorize in writing. Notwithstanding anything herein to the contrary,
Correspondent expressly authorizes Xxxxxx to supply any information requested
relating to Correspondent, its business, or its Customers to any regulatory body
having appropriate authority.
14. NOTICE TO CUSTOMERS
Subject to the requirements of the NASD Rules of Fair Practice,
Correspondent shall provide, or cause to be provided to every Customer upon the
opening of a Customer Account, notice of the existence and general terms of this
Agreement.
15. CUSTOMER COMPLAINT PROCEDURES
Correspondent will be responsible for the initial handling of all
Customer complaints. Any Customer who initiates a complaint with Xxxxxx will be
referred by Xxxxxx to Correspondent. If any such complaint is based upon an
alleged act or failure to act by Xxxxxx, Correspondent will notify Xxxxxx
promptly of such complaint and the basis therefor; and will consult with Xxxxxx;
and the parties will cooperate in determining the validity of such complaint and
the appropriate action to be taken.
13
16. REMEDIES CUMULATIVE
The enumeration herein of specific remedies shall not be exclusive of
any other remedies. Any delay or failure by any party to 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, nor to limit the
Exercise of such right, power, remedy or privilege, or shall preclude the
further exercise thereof or the exercise of any other night, power, remedy or
privilege.
17. GUARANTEE
The corporation or individual(s) who guarantee the obligations of
Correspondent under this Agreement by executing the signature lines designated
for such purpose at the end of this Agreement (the "Guarantor(s)"), in
consideration of Xxxxxx'x entering into the Agreement, do(es) hereby personally
guarantee(s) (jointly and severally, if more than one) the performance by
Correspondent of the provisions of the Agreement (including without limitation
the indemnification provisions of Section 10) and shall promptly pay any amount
that is not paid by Correspondent to Xxxxxx under the Agreement. This is an
absolute, unconditional and unlimited guarantee of payment and may be proceeded
upon by Xxxxxx or a Xxxxxx Indemnified Person before filing any action against
Correspondent or after any action against Correspondent has been commenced.
Guarantor(s) grants to Xxxxxx a first lien and security interest on any and all
money and securities of a Guarantor(s) held by Xxxxxx. Xxxxxx shall have the
unlimited right to set-off any amounts owed to it by Guarantor(s) against any
obligation of Xxxxxx to Guarantor(s). Xxxxxx also shall have the unlimited right
to set-off any amounts owed to it by Guarantor(s) against any obligation of
Xxxxxx to Guarantor(s). Xxxxxx also shall have the absolute and unlimited right
to sell, transfer, or liquidate any of the assets in any of Guarantor(s)'
accounts with Xxxxxx for any amounts owed to it by Correspondent or
Guarantor(s). The obligations of the Guarantor(s) shall not be discharged or
impaired or otherwise affected by the failure of Xxxxxx or a Xxxxxx Indemnified
Person to assert, claim, demand or enforce any remedy under this Agreement, nor
by waiver, modification or amendment of this Agreement or any compromise,
settlement or discharge of obligations of Correspondent under this Agreement, or
any release or impairment of any collateral by Xxxxxx or a Xxxxxx Indemnified
Person.
18. RESPONSIBILITY FOR ERRORS; LIMIT ON LIABILITY; NO CONSEQUENTIAL DAMAGES
In the general course of business, Xxxxxx and Correspondent shall each
be responsible for correcting their own errors. In any action by Correspondent
against Xxxxxx for any claim arising out of the relationship created by this
Agreement, Xxxxxx shall only be liable to Correspondent in cases of gross
negligence or willful misconduct, and in such cases Xxxxxx shall only be liable
for the amount or actual monetary losses suffered by Correspondent.
Correspondent, shall not, in any such action or proceeding, or other-wise,
assert any claim against Xxxxxx for consequential damages on account of any
loss, cost, damage or expense which Correspondent may suffer or incur related to
transactions in connection with this Agreement or otherwise, including, but not
limited to, any lost opportunity claims.
14
19. MISCELLANEOUS
(a) Tax Reporting. Xxxxxx shall be responsible for providing IRS Form 1099
and other information required to be reported by federal, state or
local tax laws, rules or regulations, to Accounts solely with respect
to events subsequent to the effective date of this Agreement and for
the mailing of same at Xxxxxx'x expense,
(b) Scope of Services. Xxxxxx shall limit its services pursuant to the
terms of this Agreement to those services expressly set forth herein
and related thereto.
(c) Modification. This Agreement 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. Subject to the NASD Rules
of Fair Practice, this agreement and all modifications may be required
to be submitted to the NASD for approval prior to effectiveness. It is
expressly understood that brokerage services cannot be provided by
Correspondent under this Agreement until such approval, if required, is
received.
(d) Assignment 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 Correspondent or Xxxxxx. Any
assignment 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. No assignment of this
Agreement shall be valid unless the non-assigning party, in its sole
discretion consents to such an assignment in writing. 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 Correspondent and Xxxxxx.
(e) Account Documentation. Applicable laws and regulations require that
Xxxxxx must have proper documentation and support for any Account
opened on its books. If, after reasonable requests, the necessary
documents to enable Xxxxxx to comply with such account documentation
requirements of the laws and regulations have not been received by
Xxxxxx, Correspondent shall receive notification that no further orders
will be accepted for the Account involved.
(f) Construction. The construction and effect of every provision of this
Agreement, the rights of the parties hereunder and any questions
arising out of the Agreement, shall be subject to the statutory and
common law of the state of Texas.
(g) Arbitration. In the event of a dispute between the parties, such
dispute shall be settled by arbitration before arbitrators sitting in
Dallas, Texas, in accordance with the rules of the Arbitration
Committee of the NASD then in effect. The arbitrators may allocate
attorneys' fees and arbitration costs between parties and such award
shall be final and binding between the parties and judgment thereon
maybe entered in any court of competent jurisdiction.
(h) Headings. 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.
(i) Entire Agreement. This Agreement shall cover only the types of services
set forth herein and is in no way intended nor shall it be construed to
bestow upon Correspondent or Xxxxxx any special treatment regarding any
other arrangements, agreements or understandings that presently exist
between Correspondent and Xxxxxx or that may hereinafter exist.
Correspondent shall be under no obligation whatsoever to deal with
Xxxxxx or any of its subsidiaries or any companies controlled directly
or indirectly by or affiliated with Xxxxxx, in any capacity other than
as set forth in this Agreement. Likewise, Xxxxxx shall be under no
obligation whatsoever to deal with Correspondent or any of its
affiliates in any capacity other than as set forth in this Agreement.
15
(j) Severability. 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.
(k) Force Majeure. In addition to any excuse provided by applicable law,
all parties hereto shall be excused for liability for non-performance
of this Agreement arising from any event beyond any party's control,
whether or not foreseeable by either party, including but not limited
to, labor disturbance, war, fire, accident, adverse weather, inability
to secure transportation, governmental act or regulation, inability to
obtain raw materials or other causes or events beyond either party's
control, whether or not similar to those enumerated above.
(l) Interpleader. If Xxxxxx receives conflicting claims from Correspondent,
a Customer and/or other persons regarding money, securities or other
property held by Xxxxxx, Xxxxxx may, in its sole discretion, tender
such money, securities or other property to a court of competent
jurisdiction and institute an action in interpleader or other
appropriate legal proceeding to determine the rights of the respective
claimants. Xxxxxx shall have no liability to Correspondent or Customers
in connection with any such action, and shall be entitled to
reimbursement for its costs and expenses in connection with such action
from Correspondent.
(m) Notice. For the purposes of any and all notices, consents, directions,
approvals, restrictions, requests or other communications required or
permitted to be delivered hereunder, Xxxxxx'x address shall be:
Attention: Xxxxxx X. Son
President
Xxxxxx Financial Services, Inc.
0000 X. Xxxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
and Correspondent's address shall be:
Xx. Xxxxxx Xxxxx
X.X. Xxxxxx, Inc.
00 Xxxx 00 Xxxxxx
Xxx Xxxx, XX 00000-0000
Either party may provide such notice or change its address for notice
purposes by giving written notice pursuant to registered or certified
mail, return receipt requested, of the new address to the other party.
(n) Counterparts: NASD Approval. This Agreement may be executed in one or
more counterparts, all of which taken together shall constitute a
single agreement. When each party hereto has executed and delivered to
the other a counterpart, this Agreement shall become binding on both
parties, subject only to any required approval by the NASD. If required
by the NASD, Xxxxxx will submit this Agreement to the NASD promptly
following execution and will notify Correspondent, or cause
Correspondent to be notified promptly upon receipt of such approval.
16
MADE AND EXECUTED AT __________THIS 3RD DAY OF October, 1996.
Xxxxxx: Xxxxxx Financial Services, Inc.
By: /s/ Xxxxx X. Son
---------------------------
Xxxxxx X. Son, President
0000 X. Xxxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
CORRESPONDENT:
INDIVIDUAL: _______________________________
[Signature]
_______________________________
[Print Name]
_______________________________
[Address]
ENTITY: X.X. Xxxxxx, Inc.
-------------------------------
[Name]
Corporation
-------------------------------
[Type of Entity, i.e.,
corporation, partnership,
etc.]
By: /s/ Xxxxxx Xxxxx
---------------------------
Its: President
---------------------------
33 W . 17th St. 10th flr.
---------------------------
[Address]
Xxx Xxxx, XX 00000
---------------------------
17
GUARANTEE: The undersigned individual(s) or corporation hereby guarantee(s) the
obligations of Correspondent under the Agreement as provided in Section 17 of
the Agreement.
INDIVIDUAL GUARANTOR(S): ______________________________________________________
[Signature]
______________________________________________________
[Print name]
______________________________________________________
[Signature]
______________________________________________________
[Print name]
______________________________________________________
[Signature]
______________________________________________________
[Print name]
CORPORATE GUARANTOR:
______________________________________________________
[Name of Corporation]
By:___________________________________________________
Its: _________________________________________________
[Address]
18
FULLY DISCLOSED CLEARING AGREEMENT
AMENDMENT
This amendment modifies and changes certain provisions of the Fully Disclosed
Clearing Agreement ("Agreement") between A,X. Xxxxxx, Inc. ("Correspondent) and
Xxxxxx Financial Services, Inc. ("Xxxxxx"), a division of Service Asset
Management Company, a North Carolina corporation.
The modifications are as follows:
Paragraph 12(a) is modified to read "This Agreement shall
remain in force until December 31,2000. Subsequent to this initial term, either
party may terminate this Agreement by giving thirty (30) days written notice to
the other party."
Paragraph 12(g) is added as follows: Notwithstanding any other
provision in this section, Correspondent may terminate this Agreement by giving
Xxxxxx one hundred eighty (180) days written notice in the event that
Correspondent begins clearing its own transactions, or begins clearing its
transactions through a clearing broker wholly owned by Correspondent or its
parent or wholly owned subsidiary.
The Schedule A attached to this amendment is adopted and
replaces any prior Schedule A to the Agreement.
All the remaining provisions of the Agreement between
Correspondent and Xxxxxx remain unchanged and in full force and effect.
Date: June 8, 1998 Agreed and Accepted
By: /s/ Xxxxx X. Son
Xxxxxx X. Son
President
Xxxxxx Financial Services, Inc.
0000 X. Xxxxxxx Xxxxxxxxxx
Xxxxx 0000
Xxxxxx, XX 00000
By: /s/ Xxxxxx Xxxxx
Xxxxxx Xxxxx
President
X.X. Xxxxxx, Inc.
00 X. 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
