CLEARING AGREEMENT
U.S.Clearing (sm)
A Division of Fleet Securities, Inc
Member New York Stock Exchange, Inc
Xxxxx 00, 0000
Xxxxxxx First Associates Corp.
000 Xxxxxxx Xxx
0xx Xxxxx
Xxx Xxxx XX 00000
Gentlemen:
We understand that you, America First Associates Corp, ("AFA", "
Correspondent" or "Introducing Broker") propose to offer all individuals who
desire to establish an account with you a facility pursuant to which
customers through such account may purchase and sell securities. U.S.
Clearing is a division of Fleet Securities, Inc. ("USC"), a registered
broker-dealer and a member firm of the New York Stock Exchange, Inc. ("NYSE")
and other national securities exchanges. You propose that this facility
would be made available through customer accounts ("Accounts") which would
be opened with us by you as agent for each of your customers. You agree that
all your Accounts, both customer and proprietary, whether cash, margin or
delivery vs. payment, will be introduced to USC on a fully disclosed basis.
All orders to buy or sell securities (other than options), whether equity or
debt, may be executed away from USC but will be cleared through USC
regardless of where executed. In the event AFA does option transactions,
AFA agrees that all option transactions will be placed exclusively with,
effected and executed by, and cleared through USC. It is agreed and
understood that all dealings between us are pursuant to applicable rules of
the NYSE, Securities and Exchange Commission ("SEC"), the National
Association of Securities Dealers, Inc., ("NASD"), and such other designated
examining authority having primary jurisdiction for our two firms. It is
also agreed and understood that you are, and during the term of this
Agreement will remain, a duly registered broker-dealer in good standing and
properly licensed under the SEC, the NASD, and applicable state regulations
and that you will register both the firm and your account executives in the
respective states in which you intend to transact business. If such
registration or licensing as a broker-dealer is to be terminated, you agree
to notify us in writing promptly after you have first become aware of such
facts.
This letter sets forth our Agreement with respect to the Accounts to
be established by us for the securities transactions of, and custodial
services for, your customers and yourselves.
Rev. 7/19/99 - EA
00 XXXXXXXX - XXX XXXX, XX 00000-0000 - (000) 000-0000 - (000) 000-0000
We hereby agree as follows:
1. Customer Accounts
You will obtain from each customer desiring to establish an Account the
personal information concerning the Account which we may require in the
format necessary to input to our computer system. You will also have
your representative obtain from the customer a customer information statement
in the form previously agreed to by us which information statement shall
contain but which is not limited to,, an explanation of the customer's
investment objectives. You will make such information statement available
to us for our permanent records upon our request. In accordance with
NYSE Rule 382, we will notify each customer, subsequent to the establishment
of an Account with us, of the existence of this Agreement and of the
allocation of the functions that will affect the Account.
You will be completely and solely responsible for all Compliance,
Supervisory and Internal Audit functions as they relate to your officers,
partners, employees, agents, associates and introduced customer and
proprietary Accounts. Upon our request you will promptly provide USC with
a complete copy of your most recent audit report as prepared by the NYSE,
SEC, NASD and/or any other designated examining authority having primary
jurisdiction for your firm.
You will be responsible for complying with the NASD's Rules of Fair
Practice regarding options, those of the Options Clearing Corporation, and
to the applicable rules of such other designated examining authority having
primary jurisdiction for our two firms. You agree that you will be familiar
with all the applicable option rules and that you will qualify appoint
and maintain a Senior Registered Options Principal ("SROP") whose
responsibilities will include ensuring that the options rules are observed,
suitability standards are applied and due diligence exercised in the approval
of customer Accounts for option transactions. Through your SROP you agree
to approve the customer information and option agreements and to ensure that
each customer has been furnished with the current risk disclosure document
prior to the initial option transactions.
You are solely responsible for the supervisory review of any Accounts
over which your officers, partners, employees, or agents have discretionary
authority pursuant to the applicable rules of the NYSE, NASD, SEC or such
other designated examining authority having primary jurisdiction for our
two firms. You will furnish us with properly executed power of attorney
forms for discretionary Accounts handled by you or any other third parties.
You hereby agree to indemnify and hold USC harmless against all losses,
costs or expenses including reasonable attomey's fees, suffered or incurred
by us directly or indirectly as a result of any liabilities or claims
alleging the exercise by you or your partners, officers or employees,
or agents of discretionary authority over Accounts.
You acknowledge that you are familiar with Rules 405 and 721 of the NYSE
and the applicable rules of the NASD which require you to adequately "know
your customer", his/her investment objectives and to observe the suitability
requirements of such rules. You will follow the guidelines of such rules
in the introduction of customers to us for the purpose of our opening
Accounts and you are to accept no Account until you have completed the
2 Rev. 7/19/99 - EA
customer information statement and made credit reference checks and
have exercised due diligence to learn, and on a continuing basis to know,
the essential facts with respect to each customer who desires to establish
an Account. You also warrant that each Account shall not be such as to
come under any prohibition referred to in Rule 407 of the NYSE (Accounts
for employees of the NYSE, brokerage firms or banks,) nor will such Accounts
you open be in violation of the rules of the NASD, SEC, or such other
designated examining authority having primary jurisdiction for our two
firms, and no customer who establishes an Account shall be a minor or
such person as comes within the prohibitions of law. You shall herewith
indemnify USC from any and all claims alleging the unsuitability of
transactions effected in introduced Accounts, claims of "churning"
(excessive trading), and/or misrepresentation or fraud.
You, as the introducing firm, agree to establish and maintain a program
of supervision and compliance consistent with applicable requirements
of the NYSE, SEC, NASD, and/or any other designated examining authority
having primary Jurisdiction for your firm. You represent that one or
more of your officers have been delegated with supervisory responsibility
for all of your accounts and employees and you have established and
implemented written supervisory procedures to ensure that the conduct of
Accounts introduced to USC comply with applicable federal, state and
self-regulatory laws, requirements and rules. You shall also be responsible
and you agree to indemnify USC for any loss, liability, damage, expense or
claim which our firm may incur because of the failure or neglect of your
organization or its officer, managers, and designees to adequately discharge
their supervisory responsibilities.
You warrant and indemnify USC against loss resulting from any legal
action or claim arising from the improper conversion of customer securities
or funds through theft, fraud or deception, which actions were committed
by anyone in your employ, your customers, or anyone otherwise affiliated
with you.
You warrant the proper and legal ownership of all moneys and securities
introduced to USC for credit to any Account established for your customers
or yourselves.
We will give no investment advice and will not be held responsible for
the investment results of any transaction arising from any advice given
by you to your clients. You shall be responsible to supervise and review
orders and transactions of your customers, and any claims or charges made
by any client alleging the failure to supervise your employees' actions
and customer accounts shall be your responsibility to make amends. Nothing
in this agreement shall be construed to be a joint venture or partnership
of any kind between your firm and usc.
Upon our request you will make available to us, prior to the execution
of this Agreement, a complete run of current statements for the Accounts
of your customers.
We reserve the absolute right to reject any customer, any Account or
any transaction, and to refuse to establish any Account which you may
tender to us, if in our opinion such action is necessary for our protection.
No action taken by us or any of our employees, including, without limitation,
clearing a trade forwarded to us by you on behalf of a customer shall
constitute acceptance of any such customer or Account until we have been
furnished with such Account documentation and until the Account has been
accepted as required by Rules 405 and 721 and our internal procedures.
USC's right to refuse to accept or to reject Accounts shall be a continuing
one and is not restricted by the passage of time. Reasons for rejecting
or expelling Accounts shall include, but not be limited to, any evidence
of illegal
3 Rev. 7/19/99 - EA
activity, stock or price manipulation, a history implying credit unworthiness,
reneges on transactions, being the subject of securities investigations,
violations or convictions, improper margin or securities concentration
(on margin) or any other reason which is deemed sufficient or necessary
by us for USC's own protection.
We, pursuant to, and in accordance with, the NYSE and NASD rules
regarding clearing relationships, will promptly forward any written
customer complaints which we receive regarding your firm or any associated
persons of your firm to you and your Designated Examining Authority ("DEA")
and/or the appropriate regulatory agency or authority. You agree to advise
us in writing of the identity of your DEA and hereby specifically authorize
us to file any complaints. Additionally, once we have received the complaint
you authorize us to notify the customer in writing that we have received the
complaint. This written notification to the customer will also be forwarded
to you and to your DEA (or, if none, to the appropriate regulatory agency or
authority).
2. SEC's Financial Responsibili!y Considerations
In accordance with the SEC Net Capital Rule (Rule 15c3-1) and for the
purposes of the Securities Investor Protection Act and the SEC's financial
responsibility rules, the introducing fin-n's customers (your customers)
are treated as customers of the clearing firm (USC) and not of the
introducing firm.
Account statements of activity for your introduced Accounts are issued
and forwarded directly by USC.
Your introduced clients are notified, in language contained on their
account statements, that USC provides for the safeguarding of funds and
securities while in the possession of USC. In addition, they are informed
that their inquiries regarding positions and balances, on their account
statements, may be addressed to USC with a telephone number provided,
to the attention of the Client Services Department.
This Section of the Agreement is in conformity with the SEC No-Action
Letter, dated November 3, 1998 ("No-Action Letter") relating to the capital
treatment of assets in the proprietary account of an introducing broker
("PAIB") and to permit Introducing Broker to use PAIB assets in its net
capital computations. Introducing Broker shall identify to Clearing Broker
in writing all accounts that are, or from time to time may be, proprietary
accounts of Introducing Broker. Clearing Broker shall perform a computation
for PAIB assets ("PAIB Reserve Computation") of Introducing Broker in
accordance with the customer reserve computation set forth in Rule 15c3-3
("customer reserve formula") with the following modifications:
a.) Any credit (including a credit applied to reduce a debit) that is
included in the customer reserve formula may not be included as a credit
in the PAIB reserve computation;
b.) Note E(3) to Rule 15c3-3a which reduces debit balances by 1% under
the basic method and subparagraph (a)(1)(ii)(A) of the net capital rule
which reduces debit balances by 3% under the alternative method shall
not apply; and
4 Rev. 7/19/99 - XX
x.) Neither Note E(l) to Rule 15c3-3a nor NYSE Interpretation /04 to
Item 10 of Rule 15c3-3a regarding securities concentration charges shall
be applicable to the PAIB reserve computation.
The PAIB reserve computation shall be prepared within the same time
frames as those prescribed by Rule 15c3-3 for the customer reserve formula.
Clearing Broker shall establish and maintain a separate "Special Reserve
Account for the Exclusive Benefit of Customers" with a bank in conformity
with the standards of paragraph (f) of Rule 15c3-3 ("PAIB Reserve Account").
Cash and/or qualified securities as defined in the customer reserve formula
shall be maintained in the PAIB Reserve Account in an amount equal to
the PAIB reserve requirement.
If the PAIB reserve computation results in a deposit requirement, the
requirement may be satisfied to the extent of any excess debit in the
customer reserve formula of the same date. However, a deposit requirement
resulting from the customer reserve formula shall not be satisfied with
excess debits from the PAIB reserve computation.
Within two business days of entering into this PAIB Agreement,
Introducing Broker shall notify its designated examining authority in writing
(with copy to Clearing Broker) that it has entered into this PAIB Agreement.
Commissions receivable and other receivables of Introducing Broker from
Clearing Broker (excluding clearing deposits) that are otherwise allowable
assets under the net capital rule may not be included in the PAIB reserve
computation, provided the amounts have been clearly identified as receivables
on the books and records of Introducing Broker and as payables on the
books of Clearing Broker.
If Introducing Broker is a guaranteed subsidiary of Clearing Broker or
if Introducing Broker guarantees Clearing Broker (i.e., guarantees all
liabilities and obligations) then the proprietary account of Introducing
Broker shall be excluded from the PAIB Reserve Computation.
Upon discovery that any deposit made to the PAIB Reserve Account did
not satisfy its deposit requirement, Clearing Broker shall by facsimile
or telegram immediately notify its designated examining authority and
the Securities and Exchange Commission ("Commission"). Unless a corrective
plan is found acceptable by the Commission and the designated examining
authority, Clearing Broker shall provide written notification within 5
business days of the date of discovery to Introducing Brokers that PAIB
assets held by Clearing Broker shall not be deemed allowable assets for
net capital purposes. The notification shall also state that if Introducing
Broker wishes to continue to count its PAIB assets as allowable, it has until
the last business day of the month following the month in which the
notification was made to transfer all PAIB assets to another clearing broker.
However, if the deposit deficiency is remedied before the time at which
Introducing Broker must transfer its PAIB assets to another clearing broker,
the Introducing Broker may choose to keep its assets at Clearing Broker.
The parties shall adhere to the terms of the No-Action Letter, including
the Interpretations set forth therein, in all respects.
5 Rev. 7/19/99 - EA
3. Execution of Orders, Settlement
In the event you execute your own orders and give USC's name to the
other broker for clearance and settlement, you agree that you will only
execute bona fide orders or request free delivery of cash or securities where
you have reasonable grounds to believe that the Account and the other
broker have the financial capability to complete the transaction. USC
reserves the right at any time to place a limit (of either dollars or
number of securities) on the size of transactions that USC in these
circumstances will accept for clearance. If, after you have received notice
of such limitation, you execute an order in excess of the limit established
by USC, USC shall have the right to notify the other party and other broker
that it will not accept the transaction for clearance and settlement.
In the event any claim is asserted against USC by the other broker
because of such action by USC, you agree to indemnify and hold USC harmless
from any loss, liability, damage, cost or expense (including but not limited
to fees and expenses of legal counsel) arising directly or indirectly
therefrom.
In the event you execute orders away from USC, USC will on a best
efforts basis attempt to clear the transaction within a reasonable period and
utilize the same procedures it utilizes when clearing transactions on behalf
of other firms clearing through USC. If either you or the other broker for
any reason whatsoever fall to settle the transaction, you will be solely
liable to USC for any and all loss, including expenses caused thereby and USC
shall have no liability to you whatsoever in any such circumstance. You
further agree to take all appropriate capital charges on your books arising
out of or incurred in connection with your executing orders away from USC.
You agree to place exclusively with or through USC for execution all
orders to buy or sell options for your own accounts or the accounts of
all introduced customers. Your execution of any such orders away from
USC, with or without USC's prior or subsequent knowledge, shall not
constitute or be deemed to constitute a waiver on the part of USC of any of
its rights and your obligation as stated immediately above unless such
waiver is in writing and signed by an authorized officer of USC. In addition,
if AFA requests USC to execute any other transactions pursuant to this
Agreement, AFA agrees to follow the procedures outlined below.
Upon receiving a buy or sell order for an Account from a customer, your
personnel will transmit the details of such order electronically to us
using procedures and formats with which we will supply you. We will endeavor
to reasonably comply with the customer order and execute the transaction.
If no instructions are given, we will use our best efforts to obtain
"best execution." For orders involving over-the-counter securities we
will assume the risk for the dealers with whom we execute transactions.
Upon our receipt of notification of the execution of the customer order
we will confirm the relevant details of such execution to your representative
and will generate for you electronically confirmations of the transaction.
We, or you as our agent, will print such confirmation on a form approved by
us and send it to the customer. USC shall not be liable for loss caused
directly or indirectly by the cessation, delay, malfunction or interruption
in telecommunications systems, order transmission facilities or of any
electronic, automated or computer assisted equipment. In addition, USC shall
not be responsible for the failures or mistakes of operators of such
equipment who are not our employees. We shall not be liable for loss
resulting from the interruption of services
6 Rev. 7/19/99 - EA
caused by governmental rulings, regulatory restrictions, suspensions
of trading or interferences which are beyond our control.
In the event that on settlement date of any customer transaction
involving a sale, the relevant securities have not been received by us, we
will take such actions as are necessary and in conformity with securities
industry practices to fulfill our obligations to the brokers and dealers
involved in such transactions. Errors in execution of orders will be
corrected by us as soon as practicable after we are notified by you or such
errors are discovered by our employees. In the case of purchases or sales
of securities in an Account, you will be financially liable for such
transactions until the client has satisfactorily made settlement with the
necessary cleared funds and/or securities.
USC will be responsible for the hypothecation, lending and borrowing
of securities and, in keeping with Rule 440c of the NYSE, you agree not
to enter any orders to sell short on behalf of your customers or yourselves,
until you have obtained specific prior approval from the USC Stock Loan
Department that the relevant stock, or other securities, can be borrowed
in order to complete the transaction. All orders to sell short must be
so designated at the time the order is placed. In addition, you also
agree that on all of your trading and other firm proprietary Accounts
payment will be made in full by settlement date. You agree to assume
sole responsibility for any loss incurred in transactions with firms with
which you deal on a principal basis giving up USC for clearance.
Notwithstanding anything in this Agreement to the contrary, we may refuse
on prompt notice to you to accept any Account or to effect any transaction
which, in our sole discretion, we believe will be contrary to our obligations
under Law or regulations thereunder, or as a member of the NYSE or any
other exchange of which we are a member.
4. Responsibilily for Customers
You shall be responsible to ensure that all securities sold by customers
will be delivered to us by settlement date in compliance with SEC and
industry regulations and that cash amounts payable by customers will be
paid by such customers by settlement date. You shall arrange for timely
settlement of "delivery versus payment" transactions in accordance with
Rule 387 of the NYSE or such other rules and procedures as may be directed
by the NYSE and American Stock Exchange ("AMEX").
We reserve the right to give prior oral or written notice to you or to
any customer for whom we have established an Account of failure to make
timely settlement and our intentions to take remedial action. In the
event of such notice, you will cooperate with us in taking such steps
as may be appropriate to ensure that such customer fulfills his obligations.
In all Accounts, including Margin Accounts, you shall be responsible
for customer transactions and maintenance margin calls until actual and
complete payment and settlement have been received by us, and in the case
of checks representing such payments received by us, you shall be responsible
until the funds received have actually been credited to us by our bank.
We agree to use diligence in depositing such checks promptly.
Without limitation you, as the introducing firm, agree to assume any
and all liabilities and losses incurred in connection with any check-writing
privilege and/or credit or debit card services extended by a service provider
to your introduced Accounts and customers through USC. Such liabilities
include, but are not limited to, losses and claims
7 Rev. 7/19/99 - EA
resulting from loss, theft, fraud, overdrafts, unauthorized withdrawals
or charges and misappropriations.
5. Options Policy
At USC it is the policy that no uncovered ("naked") index options orders
are to be entered on behalf of any client or correspondent. In addition,
all option orders are required to be designated as opening or closing,
whichever term applies. Correspondents are responsible for ensuring
compliance with this policy and will be liable for the consequences of any
violations, including, but not limited to, any damages caused. USC may
terminate this Agreement in the event that you fall to comply with this
policy.
6. Participation in Underwritings / Special Requirements
You agree to the following procedures which must be complied with in
order to participate in Initial Public Offerings (IPO's):
a) Approval must be granted in advance of any participation in an
underwriting where involvement is either as a Manager, Co - Manager, part
of the Selling Group or simply participating in selling the securities in the
initial distribution.
b.) At the very earliest, a preliminary prospectus ("Red Xxxxxxx") must
be forwarded to USC's Director of Operations together with details concerning
the size of your commitment, expected price and the names of all brokerage
firms which are known to be participants. c.) In order to participate
and takedown shares in an underwriting, you as the Correspondent must
have at least $250,000 in net capital. Your Good Faith Deposit must be
increased so that it will represent no less than 30% of your commitment
(take-down).
d.) You must indicate whether or not you intend to be a market maker
in the secondary market with respect to the securities which are part of the
public distribution.
e.) You are not to proceed with your IPO participation unless and until
the Director of Operations of USC has specifically granted his approval and
indicated the size of the commitment granted. Such approvals must be
received either by fax or wire and they are to be retained as part of your
records.
Any requests for exceptions to the above, must be submitted in writing
with all pertinent details included to USC's Chief Financial Officer.
7. Commissions
For each securities purchase or sale initiated by a customer and
transmitted to us for execution and clearing, the confirmation information
generated by us as contemplated by "Section 3" hereof will contain a
commission charge in accordance with the schedule you have instructed us
to use. You may from time to time request changes in the commissions to be
charged and we will make such changes within 45 days, provided that we
shall not be required to make any change that is not compatible with our
computer system. On the settlement date for any securities transaction, the
commissions payable by the customer will
8 Rev. 7/19/99 - EA
be paid to us. We will hold all commissions until the month-end settlement
between us as contemplated by "Section 10" hereof.
8. Custodial Services
We shall have custody of all securities in the Accounts and shall cause
such securities to be registered in our name or the name of our nominee
or the names of nominees of any depositories used by us. However, we
will not be responsible for any cash or securities delivered by any customer
to you, your employees or agents until such cash or securities are physically
(or electronically) delivered to us. Upon proper instructions from you
we will receive in securities free from other brokers and entities for
Accounts or make deliveries, unless we have determined that to comply
with such instructions will cause us financial harm, in which case we
reserve the right to be selective in following such instructions.
Consistent with practices generally used in the securities industry,
we will maintain accurate stock records and other records, and diligently
perform all services required in connection with acting as custodian for
securities in the Accounts of customers including the following:
(a) collection of dividends and interest; (b) transmittal of proxy materials
and other shareholder communications and voting upon the instructions of
customer; (c) transmittal and handling of tenders or exchanges pursuant to
tender offers and exchange offers; and, (d) handling of exercises or
expirations of rights and warrants and of redemptions. You and we shall each
be responsible for preparing and filing the reports required by the
governmental and self regulatory authorities which have respective
jurisdiction over us and each of us will provide the other with such
information as may be required for preparation of such reports. Upon
receipt of proper instructions from a customer through you, we will make
such transfers of securities or of Accounts as may be reasonably requested.
You will be responsible for acting diligently in ensuring that
unregistered, restricted and control securities, owned or introduced by your
clients or yourselves, will be sold only pursuant to the applicable
securities regulations and in accordance with the rules set forth by the SEC
regarding such securities. You shall be responsible for obtaining all the
necessary forms and documentation required and associated with the proper
sale and clearance of unregistered, restricted and control securities and,
to see to it that the proper regulatory filings have been accomplished. You
will be liable for any resultant loss which may occur, which is not satisfied
by your client, and which involves corrective action which we deem necessary
in order to correct any improper sale of such securities. We are not
required to make payments on sales of such securities until the certificates
have been transferred into good deliverable form. You are obliged to
inform us of the existence of any unregistered, restricted or control
stock before such securities are introduced in any Account of yours or
your customers.
9. Customer Statements
We will generate on our equipment and provide to each customer for whom
we have established an Account a statement of his/her Account to comply
with the rules of the NYSE and the other regulatory agencies which govern
us. We will also provide to each customer who has an Account with us
such statement of financial condition and other notices or information
as we shall be required by law to provide to our customers. We will be
9 Rev. 7/19/99 - EA
responsible for preparing and providing to each Account the information
necessary for Form 1099 of the Internal Revenue Service.
10. Fees and Compensation
All commissions collected by us in regard to Accounts of customers shall
be payable to you net of the fees payable to us, as set forth herein,
after taking into consideration any outstanding obligations due USC, as
defined in this Agreement.
a) Clearing Fees: For each securities transaction in an Account we will
charge you on a per ticket basis" based upon an actual number of
tickets per trading day for all customers. For the purposes of this
Agreement a "ticket" shall mean an order which results in a
confirmation to such customer or Account. At the end of each month
we will compute the actual number of tickets per trading day for
such month and charge you according to the following schedule:
Equity Transactions: (Clearing and Execution)
Listed Securities: (Price per ticket up to 1,999 shares, thereafter
plus Pass along floor brokerage.)
Average # of Trades Daily Price per Ticket
0 - 150 $16.50 per ticket
151 - 200 $16.00 per ticket
201 -above $15.00 per ticket
OTC Transactions
Average # of Trades Daily Price per Ticket
0 - 150 $16.50 per ticket
151 - 200 $16.00 per ticket
201 -above $15.00 per ticket
Fixed Income: Price per Ticket
Muni Bonds $25.00
Government Bonds $25.00
Corp Bonds $25.00
Principal Trades: $6.00 per ticket
Average Price Trades $3.50 per ticket
10 Rev. 7/19/99 - EA
Mutual Funds: (Clearing and Execution)
Per ticket
Fund/SERV Eligible 0-25 trades per day $22.50
26-50 " $20.00
50-75 " $18.00
(above 75 Fund/SERV trades per day, USC agrees to review rates)
Non Fund/SERV Eligible $35.00
NTF (No Transaction Fee) no charge
PIPS / SWAPS $5.00
Options: $11.50 per ticket, plus execution schedule below.
Premium Per Contract
Under $ 1.00 $0.75
$1.00 and Above $1.25
b) Trade Cancellations and Rebills. We will charge $5.00 for each trade
confirmation generated from cancellations and rebills when the total
number of cancellations accumulates and reaches 5% of your total
volume of trades within a given monthly period. AFA will only be
charged for the trades that exceed the 5% level.
c) Partial Deliveries. Charges associated with interest expense on
unmatched or partial deliveries vs. payment are passed along to you.
d) This Agreement shall also cover all of the addenda referred to in
Exhibit "A".
e) Accounting: Within 10 days after the end of each month we will deliver
to you a written statement of the amount of commissions earned and the
aggregate amount of our clearing fees. Simultaneously with delivering
such statement we will pay you any net amount owing to you. If, with
respect to any such statement, any amounts are disputed, all undisputed
amounts will be paid as prescribed above and disputed amounts will be
set aside for resolution by research or negotiations between us.
11. Order Flow Disclosure and Payments
Any payment for order flow contemplated by this Agreement will only be
made if permissible under the rules and regulations of the Securities
and Exchange Commission, the Federal Reserve Board, the self-regulatory
organizations that regulate USC and the laws of the various states that
regulate any of the activities of USC. In the event that industry practices
result in a reduction or elimination of payment for order flow, USC reserves
the right, in its sole discretion, to reduce or eliminate any payment
provided for hereunder.
In order to facilitate and increase your ability to comply with SEC Rules
1Ob-1O and 11Ac1-3, USC will be offering two versions of the order
flow disclosure currently being used in the confirmations, the Rule 382
letter and the annual order flow disclosure. One version applies to those
firms who either share in order flow payments received by USC or directly
receive order flow payments. The other applies to those firms who neither
share in order flow payments received by USC nor directly receive order
flow payments.
11 Rev. 7/19/99 - EA
Please be advised that it is your sole responsibility to notify USC
immediately upon a change in your participation in order flow payments
so that the specific disclosure used will accurately reflect such
participation.
12. Allocation of Responsibilily
Errors, misunderstandings or controversies, except those specifically
otherwise covered in this Agreement, between customers or us and you,
your agents, or your employees, which shall arise out of the acts or omissions
of you, your agents or employees, shall be your responsibility and liability
and shall be adjusted accordingly. We will be responsible for the acts
of our employees and we will take such reasonable actions as may be necessary
or appropriate and consistent with sound business practices of the securities
industry to correct or adjust errors, misunderstandings or controversies
arising out of the acts or omissions of our employees, providing that
your client has not been unduly enriched, in which case you will be responsible
for making every reasonable effort to resolve the problem.
In the event USC permits you to issue negotiable instruments directly
to your customers on an account and using instruments for which USC is
the maker or drawer, you agree to establish, and maintain and enforce,
supervisory procedures with respect to the issuance of such instruments
that are satisfactory to USC.
13. Confidentiality
Correspondent acknowledges that USC considers the terms of this Agreement
to be proprietary and that disclosure of the terms of this Agreement
(including exhibits hereto) to third parties may have adverse consequences
to USC, and Correspondent agrees that it will not disclose any of the terms
of this Agreement (including the exhibits hereto) to any third party other
than (a) its legal counsel or auditors (in each case who agree to maintain
the confidential nature hereof) or (b) any governmental or quasi-govemmental
authority, including without limitation the NASD (but only as and to the
extent required by such authority). Correspondent further acknowledges
that any breach or threatened breach of this Section by Correspondent
will cause irreparable and continuing injury to USC for which monetary
relief alone would be inadequate and, accordingly, Correspondent agrees
that in addition to and not in lieu of any other rights and remedies USC
may have at law or in equity, USC shall be entitled to injunctive relief
in the event of any breach or threatened breach of this Section 13 by
Correspondent.
14. Indemnification
You agree to indemnify and hold harmless USC, its officers, employees,
agents and corporate affiliates, from and against all claims, demands,
liabilities, losses, expenses and costs (including legal fees and expenses,
arbitration costs and awards relating to USC's defense of any such claims)
arising from any allegations of any fraudulent, illegal or wrongful actions
of your officers, employees, agents or customers. Without in anyway limiting
the foregoing, this indemnity clause shall apply to the sale of stolen
or misappropriated securities, unregistered, restricted or control stock
(which were sold in violation of the securities laws
12 Rev. 7/19/99 - EA
and regulations), transactions involving the illegal use of inside information
and to all transactions requiring corrective action, or involving the
need to make offers of rescission. You will indemnify and hold us harmless
against any losses brought about by the default in payment of funds by
or delivery of securities to you or us from any customer for any Account
and will pay all costs or expenses, including reasonable attorney's fees,
suffered or incurred by us directly or indirectly in our efforts to collect
any such funds or securities due us. You shall be responsible and agree
to indemnify USC for any loss or expense including interest incurred by
USC due to the failure of any of your customers or Accounts to: pay for
securities purchased; promptly deliver securities sold; deposit sufficient
margin at any time that same is requested or to remit dividends, stock
splits, rights, over-deliveries of securities, excessive disbursements
of funds, or any other valid charges imposed on the Account by USC.
You will also indemnify and hold us harmless against all losses, costs
or expenses, including reasonable attorney's fees, suffered or incurred
by us directly or indirectly as a result of any allegations claiming the
exercise by you, your agents or your employees, of any discretionary authority
(either authorized or unauthorized) over an Account.
Without limitation you agree to indemnify USC and hold it harmless from
any and all claims, causes of action, suits, judgments, expenses, damages
and liabilities, including, but not limited to reasonable attomey's fees,
court costs and disbursements that may arise as a result of the acts and
omissions of your employees, agents and customers in connection with USC
making available to you, or your customers, check-writing privileges and/or
credit or debit card services.
You shall be responsible for establishing proper ownership of ftinds
and securities introduced to customer Accounts and for our guarantee of
signatures of customers, except in those instances where we or our employees
have been negligent in the guarantee of signatures. You shall accept
the responsibility for responding to customer complaints and you shall
promptly give us written notice of any threat of action or commencement
of litigation against you involving an Account.
We will indemnify and hold you harmless against all losses, costs or
expenses, including reasonable attorneys fees, suffered or incurred by
you directly or indirectly as a result of our negligence in failing to
perform our execution or clearing obligations or our duties as custodian,
as contemplated by this Agreement.
If an error, misunderstanding, controversy or failure shall result in
the bringing of an action or proceeding against us or you, as the case
may be, by a customer or third party, for which we or you shall claim
indemnification hereunder, the indemnified party shall notify the other
and, if requested, at its own cost and expense the indemnifying party
will defend any such action or proceeding. No indemnified party shall
be entitled to settle any such action or proceeding without the prior
notification of the party against whom indemnification is to be sought.
Nothing in this Section shall be construed to preclude you from making
any claim against us which you may have, or us from making any claim against
you which we may have, arising out of a failure to perform obligations
under this Agreement. Neither we nor you shall be precluded from claiming
or commencing an action for contribution to any amounts you or we may
be required to pay to a customer or a third party.
13 Rev. 7/19/99 - EA
15. Margin Accounts
In all Accounts which are margin accounts you shall be responsible
for your clients satisfying the initial margin requirements for each
transaction until such initial margin has been received by us in acceptable
form and for satisfying all maintenance margin calls as required by USC.
You will be responsible for customers paying off any deficiencies in all
Accounts, which are unsecured or inadequately margined, and for securing
customer payment of debits resulting from customer defaults. We shall be
responsible for determining, in compliance with Regulation T of the Federal
Reserve Board of Governors and the rules of the applicable self-regulatory
organizations, what is adequate and proper margin maintenance in any Account
which is a margin account, including, in our sole discretion, any application
for an extension of time for any Account to make any payment required
by Regulation T. It is understood that Accounts shall be required to maintain
a minimum margin maintenance percentage that may be changed from time
to time in accordance with market conditions. You shall endeavor to notify
your customers immediately and promptly provide us with adequate protection
either in cash or securities. In the event that satisfactory margin is
not provided within the time specified by us, we shall be at liberty to
take such action as we may in our judgment deem best.
We reserve the right to refuse any transaction in any Account which is
a margin account after the initial transaction when in our opinion the
past history of such Account will not justify the risk of executing such
new transactions before the actual receipt of the necessary margin. If
at any time an officer, manager, or employee of your firm requests that
we refrain from contemplated actions such as "sell-outs", "buy-ins" or
the sending of margin notices, and USC complies with such request either
in full or in part, you agree to indemnify USC for any loss including
interest and reasonable attomey's fees which may occur as a result of
our complying with this request.
Notwithstanding the foregoing, if through the action of the SEC, a court
of competent jurisdiction, or other regulatory body, trading is halted
in securities held by Accounts introduced by you the loss suffered as
a result shall be borne by the customer and you shall guarantee the collection
of any resultant margin or cash Account deficiency.
At USC it is the policy that no naked index options orders are to be
entered on behalf of any client or correspondent. In addition, all option
orders are required to be designated opening or closing, whichever term
applies. Correspondents are responsible for ensuring compliance with
this policy and will be liable for the consequences of any violations,
which may include termination of our clearing agreement.
16. Interest Profit and Charges
Interest profit earned on debit balances in Accounts will be proprietary
to and fully retained by USC, except as modified in Exhibit A hereto.
You may be charged interest at the call rate on any securities delivered
to and paid for by USC which must be redelivered by draft, require transfer,
have improper instructions or which for any reason require USC to carry
such securities for more than one day. In addition, you will pay the
interest charges on regular loans in connection with any underwriting
in which you participate as manager or syndicate member. Interest charges
may, at our option, be imposed in cash Accounts, in
14 Rev. 7/19/99 - EA
situations where a debit balance has been incurred or increased as a
result of deposited checks which have been returned for non-sufficient
funds or otherwise have not been collected upon, or where overpayments
have occurred as a result of your actions or those of your employees.
Interest will be charged to you for debit balances in your trading and
other proprietary Accounts at the lowest rate that USC then currently
charges to customer margin Accounts. In addition, USC will have the right
to charge you for the aggregate cash account debits outstanding, beyond
settlement dates, in your customer Accounts, at the lowest rate of interest
then currently charged customer margin Accounts.
17. Capital and Good Standing
USC and you hereby warrant that as of the date of this Agreement and
until any termination thereof their net capital shall at all times exceed
the requirements of Rule ]5c3-1 under the Securities Exchange Act of 1934
and the applicable requirements of the NYSE and the SEC.
You hereby agree to provide us with a statement of your financial
condition as of a date within 30 days prior to this Agreement and copies of
such additional financial statements as are to be filed with regulatory
bodies at the time of this Agreement. In addition, copies of additional
financial statements (such as FOCUS reports etc.) as are to be filed with
regulatory bodies shall be presented to USC on a regular basis shortly after
such regulatory filing is completed. Upon our request at anytime, you agree
to promptly provide USC with a copy of your most recent Broker-Dealer
registration, including all accompanying schedules, as required to be
filed by law.
18. Proprieta!:y Information
All names and addresses of customers and customer lists shall be treated
as proprietary to and owned by you. Except as specified in this Section
(or permissible elsewhere in the Agreement) we will not use any information
relating to your customers or the Accounts to make a solicitation. Customer
information will be disclosed to the proper authorities or third parties
if we are required by law or by a regulatory agency to which we are subject
to make such disclosure. You will not knowingly undertake any sales,
advertising, marketing, or solicitation effort which identifies, makes
references to or targets any of the subsidiaries or affiliates of USC
or Fleet Securities, Inc. including, without limiting the generality of
the foregoing, the divisions of Fleet Securities, Inc., as well as Quick
& Xxxxxx, Inc., SureTrade, Inc., and Fleet Financial Group or any of its
subsidiaries and affiliates, without our express written consent.
Any specific remedies provided for in this Agreement that permit us to
exercise various rights, powers, remedies or privileges contained herein
or, that may exist under federal or state statute or law, shall not be
construed as a waiver or limitation of such rights, powers, or remedies.
15 Rev. 7/19/99 - EA
19. Liabilitv
We shall have no liability to you arising out of this Agreement or
otherwise except for:
(a) breach of the express terms of this Agreement, (b) acts by our employees
or officers that are grossly negligent, dishonest, fraudulent or involve
a criminal act or, (c) violations of applicable law by us. USC shall
have no liability to any of your customers for any loss suffered by any
customer unless such loss was solely caused by gross negligence or fraud
on the part of USC.
20. Securi!y Interest and Set-Off
Correspondent grants to USC a first lien and security interest on any
and all money and securities of correspondent held by USC. USC may liquidate
any securities held without notice to Correspondent but will use its "best
efforts" to notify and consult with Correspondent. USC shall have the
unlimited right to set-off any amounts owed to it by Correspondent from
the Commissions Payable Account and/or any other money or securities of
Correspondent in USC's possession.
21. Term and Termination
(a) Term. The term of this Agreement shall commence on the date on which
this Agreement has been executed by both parties. The term of this Agreement
will expire on the last day of the 36th full calendar month after such
execution and, unless terminated in accordance with paragraph 21 (b),
will continue after such initial term for additional successive twelve
(12) month terms. Notwithstanding the foregoing, this Agreement is subject
to earlier termination by USC as provided in paragraphs 21(c) and (d).
(b) Termination upon expiration. Either party may terminate this
Agreement, effective at the end of the initial term or any subsequent
twelve (12) month term by providing to the other party written notice that
it will not renew this Agreement. Such notice will not be effective unless
it is delivered at least three (3) months prior to the end of the then
current term.
(c) Termination by USC. USC may immediately terminate this Agreement
upon written notice if you (the introducing firm) have:
1) Committed a material breach of any provision of the Agreement;
or
2) Embarked on a course of action which USC's management reasonably
believes is contrary to the rules and/or regulations of any
regulatory agency and/or governing body; or
3) Net capital below the requirements of the Securities Exchange Act
of 1934, as amended, Rule 15c3-1 thereunder, as amended (or any
successor to
16 Rev. 7/19/99 - EA
such Rule), or the net capital requirements established by USC as
stipulated in this Agreement, whichever is higher; or
4) Made any representation and/or warranty in connection with this
Agreement that was, at the time made, untrue or later becomes
untrue; or
5) Made representations as to the nature of your business; its
control, ownership or affiliations which were, at the time made,
untrue or later become untrue as a result of changes, additions,
or alterations which were not approved in writing by USC; or
6) Failed to promptly respond to cash or margin calls in your
proprietary account(s) with the necessary cash deposits and/or
securities, as requested by USC; or
7) Effected transactions which your clients failed to promptly
settle, or refused to promptly settle based upon the allegation
that such transactions were unauthorized; or
8) Failed to maintain the required security deposit in your
proprietary account(s) as stipulated in Exhibit A of this
Agreement. This security deposit shall be maintained above and
apart from the amounts requested from you by USC for the
settlement and maintenance of your trading and proprietary
account(s) and for any unsecured customer debits charged against
you in accordance with your liability under this Agreement; or
9) Been enjoined, prohibited, censured, suspended or otherwise
disciplined as a result of an administrative proceeding or other
action of the SEC, a court of law, a state regulatory authority,
or any selfregulatory organization of which you are a member, if
such proceeding/action shall curtail all or a portion of your
business activity.
In addition, USC, at its discretion, may terminate this Agreement upon
30 days prior written notice to you (the introducing firm) in the event
that any of your or your affiliates' directors or executive officers (or
any other person acting in a similar capacity), general securities principals,
financial principals or operations principals is enjoined, prohibited,
disciplined or suspended as a result of administrative or 'udicial proceedings
from engaging in all or any portion of the securities business.
In the event this Agreement is not approved by The New York Stock
Exchange, Inc., the National Association of Securities Dealers, Inc. or any
other required regulatory
17 Rev. 7/19/99 - EA
organization/agency, USC has the right to terminate this Agreement upon
written not' you.
Moreover, USC may terminate this Agreement upon written notice to you
if USC determines, in its sole discretion, that you are incapable or unwilling
to fulfill your financial or contractual obligations under the terms of
this Agreement.
(d) Termination Upon Sale. You will give USC at least 15 business days
prior written notice of any proposed sale or transfer (in whole or in
part) of your securities business, your customers' Accounts and/or your
broker-dealer's license (regardless of whether such sale or transfer occurs
directly or indirectly by a merger, sale, transfer or other transaction
involving you or any entity that controls you). Such notice shall be
accompanied by reasonably detailed information regarding the financial
position, management and ownership of the successor to such business.
It shall be a condition to the consummation of any such proposed sale
or transfer that this Agreement remain or become a binding obligation
of such successor, enforceable against it as if it were itself the original
signatory hereto. At any time during the 60 day period after consummation
of such sale or transfer, USC may terminate this Agreement by delivery
of notice to that effect, which notice shall fix a termination date not
less than 20 nor more than 60 days after the date thereof In the event
USC delivers such notice, you (and/or such successor) shall pay to USC
at the time of such termination an amount equal to (i) the average monthly
charges of USC hereunder during the 12 month period (or lesser period
this Agreement has been in effect) preceding such sale or transfer (ii)
multiplied by the lesser of (x) 12 or (y) the number of months left in
the term of this Agreement as if early termination were not elected by
USC.
(e) Termination of this Agreement, however caused, shall not release
either you or ourselves from liability or responsibility with respect
to the transactions effected and the Accounts established prior to the
date of termination.
Upon termination of this Agreement, we will endeavor to transfer all
Accounts of your customers to you or your designee, providing that your
customers do not object and any problems in such Accounts are resolved
to our satisfaction. Upon termination of this Agreement, you will be
responsible for promptly notifying your customers that USC will no longer
be providing you and your clients with its clearance, execution and/or
custodial services, and that arrangements must be made for the expeditious
transfer of Accounts to a successor clearing broker, and you shall make
a diligent effort to determine that such transfers are not contrary to
your customers' wishes. USC shall have the right, although not the
obligation, to inform your customers directly of the termination of this
Agreement and the need for them to decide upon a successor carrying and
clearing broker.
In the event of termination of this Agreement upon expiration of the
term or upon earlier termination by either party, you agree to pay to
USC any reasonable conversion and/or termination charges established or
incurred by USC in connection with the transfer of Accounts and the cessation
of the clearing arrangement with USC.
18 Rev. 7/19/99 - EA
22. Provisions Relating to Electronic Services
In addition to the charges and responsibilities set forth elsewhere in
this Clearing Agreement, the Introducing Firm (also referred to herein
as "You"), in order to induce USC to offer any of its Electronic Services
(defined below) to customers of Introducing Firm (a "Customer" or
"Customers"), agrees to the provisions set forth below:
(a) Electronic Services Defined. For purposes of this Agreement, you
acknowledge that USC's Electronic Services will be defined as any interactive
product or service offered by USC and/or any third party vendor of USC
which allows your Customer(s) to communicate with you or an authorized
third party service provider; to obtain information or quotations from
you or an authorized third party service provider; or to enter into brokerage
transactions with you through the use of electronic data communications.
This includes, but is not limited to, electronic data communications
transmitted by your Customer(s) through the use of personal, home or business
computers connected by modem or other device to an authorized
telecommunications network designated by you, subject to our approval and
the use of automated touch-tone telephone services through which your
Customer(s) can obtain account information, quotations and enter brokerage
transactions. USC's Electronic Services include, but are not limited to,
Market Touch, Market Touch Plus, Market Touch Web and the services of any
third party information providers offered in conjunction with USC's
Electronic Services. You acknowledge that USC may modify (including changes
to the pricing schedule), add to, re-name or discontinue the Electronic
Services offered pursuant to this Agreement at any time. You also
acknowledge that this Agreement applies to the Electronic Services as
modified, added to or re-named, in addition to those Electronic Services
currently offered.
(b) New Account Review. Introducing Firm agrees to have the appropriate
supervisory personnel review the new account information transmitted
from the prospective Customer(s) on-line to your Broker Access Terminal
and either approve or reject each new account.
(c) "Review and Release". Introducing Firm agrees to "Review and
Release" all orders entered through any of USC's Electronic Services using
the ADP Advanced Order Management System ("AOM"). You agree to maintain a
computer terminal and printer dedicated exclusively to AOM Review and
Release.
(d) Compliance With Securities Rules and Regulations. Introducing Firm
agrees to take sole responsibility to comply with the rules and regulations
of SEC, NASD and/or other exchanges or regulatory bodies having jurisdiction
over you regarding electronic communications, including, but not limited
to, E-mall archiving.
(e) Resource Support. Introducing Firm agrees to supply ongoing
customer service support and marketing support for USC's Electronic Services
and to provide resources to USC for the development and testing of Market
Touch Web.
19 Rev. 7/19/99 - EA
(f) Termination By USC. USC hereby reserves the right to terminate
any or all of the provisions of this Paragraph 22 immediately upon the
termination of USC's Agreement with any third party vendors involved in
the provision of USC's Electronic Services. In addition, USC reserves
the right to terminate any or all provisions of this Paragraph 22 upon
30 days written notice upon the occurrence of any of the following events:
(i) the failure of the Introducing Firm to comply with any of the provisions
of this Paragraph 22 or (ii) the occurrence of any event that, in the
good faith opinion of USC, would materially impair USC's participation
in Electronic Services. Furthermore, USC may terminate any or all provisions
of this Paragraph 22 at will upon ninety (90) days written notice to
Introducing Firm. Termination of the provisions of this Paragraph 22 shall
not terminate any other provision contained in the Clearing Agreement.
(g) Termination By Introduciny, Firm. Introducing Fin-n hereby reserves
the right to terminate this Paragraph 22 in its entirety upon thirty (30)
days written notice to USC. Introducing Firm may NOT terminate only selected
provisions of this Paragraph 22, but may elect to ten-ninate its use of
a specific service (i.e. Market Touch Web). However, in the event that
Introducing Firm terminates its use of Market Touch Web (or any intemet
service offered through USC) less than ninety (90) days from the date
of production, Introducing Firm will be required to pay to USC a penalty
fee, as delineated in Exhibit B. Termination of this Paragraph 22 shall
not terminate any other provision contained in the Clearing Agreement.
(h) Pricing. See attached Exhibit B. All charges are due within thirty
(30) days, including those collected by USC on behalf of third parties.
(i) No Warranties/Limitations of Liability. YOU AGREE THAT THERE ARE
NO WARRANTIES, EXPRESS OR IMPLIED, WITH RESPECT TO USC'S ELECTRONIC SERVICES
OR THE SOFTWARE OR THE MARKET DATA PROVIDED, INCLUDING, BUT NOT LIMITED
TO, ANY IMPLIED WARRANTIES OF MERCHANTIBILITY OR FITNESS FOR A PARTICULAR
PURPOSE, MADE BY USC OR ITS LICENSORS OR INFORMATION PROVIDERS.
(j) Advertising, Public Announcements. The Introducing Firm agrees NOT
to use USC's name; the name of any divisions, affiliates, subsidiaries
or parent companies of USC or Fleet Securities, Inc., including, but not
limited to Quick & Xxxxxx, Inc.; the name of any of USC's Electronic Services,
including, but not limited to, Market Touch, Market Touch Plus, or Market
Touch Web without the prior written permission of USC.
23. No Solicitation of Employees
For a period of one year after termination of this Agreement neither
you nor we shall contact or solicit any of the other party's employees,
including employees of any subsidiaries or affiliates, with a view to
offering them employment without the prior written consent of you or us,
as the case may be. This section shall not prohibit the employment by
either you or us of individuals employed by the other party if those
individuals contact you or us directly.
20 Rev. 7/19/99 - EA
24. Arbitration
It is agreed and understood that any controversy arising between us in
connection with this Agreement which cannot be adjusted to our mutual
satisfaction shall be submitted to arbitration in the city of New York
and shall be subject to settlement under the rules of the New York Stock
Exchange, Inc. or in accordance with the arbitration procedures of the
National Association of Securities Dealers, Inc.
25. Miscellaneous
Any amendment to this Agreement shall be in writing and signed by the
parties hereto. This Agreement shall be governed by and interpreted according
to the laws of the State of New York.
If any provision or condition of this Agreement shall be held to be
invalid or unenforceable, such invalidity or unenforceability shall attach
only to such provision or condition and all other provisions and conditions
of this Agreement shall remain in full force and effect.
This Agreement shall be binding upon and inure to the benefit of each
of the parties and their respective successors and assigns.
Very truly yours,
U.S. Clearing, a division of
Fleet Securities, Inc.
/s/Xxxxxx X. Xxxxxxxx
-----------------------------
Xxxxxx X. Xxxxxxxx
Chairman and
Chief Executive Officer
Fleet Securities, Inc.
ACCEPTED AND AGREED TO:
By: /s/Xxxxxx Xxxxxxxx Date: 3/22/00
----------------------------- ----------------
Xxxxxx Xxxxxxxx
President- CEO
American First Associates Corp.
21 Rev. 7/19/99 - EA
Exhibit A
1. Extensions: $5.00 per
2. Sell Out/Buy In Telegrams: $10.00 per, split 50/50 with AFA
3. Excess SIPC Insurance: Waived
Other Items
1. America First Associates Corp. (AFA) agrees to maintain a good faith
deposit of $100,000.00. This deposit will be held at USC in either cash,
Treasury Bills, or a Money Fund. Interest is proprietary to AFA. The
amount of the Good Faith Deposit may be increased if you engage in market
making activity and/or participate in IPO'S. (see Section 6.)
2. AFA agrees to maintain a Broker's Blanket Bond in the amount of $250,000
prior to starting business with USC.
3. AFA agrees to maintain a minimum of $250,000.00 in Net Capital. (see
Section 6.)
4. AFA agrees to use a communication system (at their expense) to transmit
orders to USC electronically. All communication charges are subject to
any AT&T or other telephone company increase and USC will pass along such
increase.
5. Professional and Institutional size orders which may result in a Pass
Along Floor Brokerage charge will be billed monthly on our regular
Correspondent Settlement Sheet.
6. Postage & Handling Fee: $10.00 per ticket, USC retains $1.00.
7. OTC Order Flow Rebate: For all OTC orders executed through USC, USC
will rebate to AFA using the following spread based schedule for all
eligible trades (no payment on Xxxxxxx or price improvement orders):
Market Orders:
Spread greater than 1/16 - 1 1/2 cents per share
Spread less than or equal to 1/16 but greater than 1/32 -3/4
cent per share
Spread equal to 1/32 - 1/4 cent per share
Spread less than 1/32 - 1/4% of principal (amt. not to exceed 1/4
cent per share)
Less than $2.00 - no payment
Limit Orders at half of the above Market Order Rates
8. Listed (Third Market) Securities: will be executed through the Chicago
Stock Exchange ("CSE") or comparable regional exchange or third
market-market maker, and carry an approximate rebate as follows:
Eligible Stocks and Rate Structure
Tier I - All OEX Stocks $.0175/share (market and marketable limit on
stocks priced >$2.00)
Tier 2 - All S&P 500 - $.0125/share (market and marketable limit on
stocks priced >$2.00)
Tier 3 - All Other Stocks - $.Ol/share (market and marketable limit on
stocks > $2.00
22 Rev. 7/19/99 - EA
9. Interest Sharing:
Margin Debits for participating Internet AFA clients (50,000 account
range) AFA must finance its own debits with cash positions. USC will
share the profits from the spread between matched debits and credits
with AFA 50/50. USC will keep all excess profits. There will be no
sweeps into the Money Fund. Cash position credits will be paid 3% below
the Broker Call rate.
10. Money Fund Balances: A rebate of 30 Basis Points will be returned
to AFA on balances in the Galaxy Money Market Funds.
11. Other Charges:
A. Wire Transfer of Funds $15.00 charged to customer
B. Bounced Checks $15.00 " " "
C. Accommodation Transfers** $15.00 " " "
D. Legal Transfers $15.00 " " "
E. ACAT out** $50.00 " " "
F. Reorganization activity Voluntary/
Post Action** $25.00 " " "
G. Inactive Account Custody Fee** $35.00 " " "
H. Postage & Handling (Internet Confirms) $.50 " " "
I. Safe Keeping Not available
**USC will split with AFA 50/50
23 Rev. 7/19/99 - EA
Exhibit B
Internet Pricingfor Electronic Trading
Average # of trades per day Ticket Charge
0 - 250 $7.50
251-500 $7.25
500-1000 $7.00
(When AFA averages 1000 trades per day USC agrees to review the
above Internet ticket charge scale.)
Internet trades must be held in street name, request for transfer and
ship will carry a $15.00 per transaction fee.
Electronic Services Pricing
Market Touch Web Products
Start-up Cost Hosting/Maintenance Fee
Market Touch Web Access Plus $50,000 $54,000
Market Touch Web Custom(1) $70,000 $96,000
Market Touch Web Custom Plus(1) $70,000(2) $144,000-$240,000(3)
(AFA currently has Market Touch Web Access Plus and has already paid
their start up cost)
Custom Programming and Design Cost is based on time and materials.
Market Touch
Start-up $0
Telecom cost $0.131 for the first minute per call.
$0.05 for each additional minute per call.
AOM Charges
All USC AOM charges for printer(s) and terininal(s) dedicated exclusively
for use with the Market Touch products are being waived. However,
correspondents will be responsible for all ADP and telecommunication charges
related to AOM.
(1) Prices of Market Touch Web Custom and Market Touch Web Custom Plus do
not include hardware costs.
(2) Price of Market Touch Web Custom Plus does not include any time and
material charges for software customization.
(3) Hosting fees of Market Touch Web Custom Plus is dependent on the
complexity of the software customization and number of servers of
purchased.
24 Rev. 7/19/99 - EA
