1
EXHIBIT 10.8
AGREEMENT
THIS AGREEMENT is between PARK MERIDIAN BANK, a North Carolina banking
association ("Financial Institution"), and FINANCIAL NETWORK INVESTMENT
CORPORATION, a California Corporation ("FNIC"), and is dated for reference as of
July 20, 1995.
Recitals
A. WHEREAS, Financial Institution is a bank doing business within the State
of North Carolina, (the "State").
B. WHEREAS, FNIC is a licensed broker/dealer actively involved in the sale of
debt and equity securities, mutual funds, fixed and variable annuities,
insurance and other investment, (collectively referred to as "Products");
C. WHEREAS, Financial Institution has reviewed the reputation and business
practices of FNIC prior to entering this agreement; and
D. WHEREAS, Financial Institution desires to have FNIC make itself available
to execute orders to purchase and sell Products for customers of Financial
Institution.
NOW, THEREFORE, in consideration of the mutual promises contained herein and for
other good and valuable consideration, the parties agree as follows:
Agreement
1. Introduction of FNIC. The parties shall agree upon certain actions
to be taken by Financial Institution to introduce the availability
of FNIC's broker/dealer services.
2. Services by FNIC. FNIC will perform the following:
a. Advise and assist regarding the placement and setup of FNIC
Branch Offices ("Branch Offices") on Financial Institution
premises;
b. Advise and assist in the development and execution of a
general marketing plan;
c. Recommend one or more registered representatives to execute
orders to purchase and sell Products for customers of
Financial Institution, such registered representatives shall
be subject to the continuing approval of Financial
Institution;
d. Recommend and advise Financial Institution on the selection of
Products that will be available for sale at Branch Office,
which Products shall be subject to the continuing approval of
Financial Institution;
e. Maintain at all times compliance and procedures guides for the
operation of the FNIC program;
f. Provide brokerage back office functions, including, but not
limited to, commission accounting, due diligence, data
processing, trading and operations.
3. FNIC Branch Offices; Separation of Business. The parties intend that
FNIC will open branch Offices at such branches of Financial
Institution as the parties may agree in the future. FNIC and
Financial Institution shall maintain strict and total separation of
their respective businesses, including separation of records and
physical facilities, and shall conduct their respective businesses
at all times so as not to lead to confusion between the business
conducted by Financial Institution and the business conducted by the
FNIC Branch Office. Any space used by FNIC within a Financial
Institution branch should be located in an area which is physically
distinct from the area where retail deposits are taken and shall
prominently display FNIC's name and logo. Financial Institution
shall provide space, telephone and telephone lines, (any direct
lines will be answered with FNIC's name) and furniture to FNIC.
Financial Institution may provide occasional administrative or
clerical support as requested by FNIC and if agreed to by Financial
Institution.
2
4. Promotional Cooperation. The parties may agree from time to time on
advertising and promoting the advice and services of FNIC through
promotional literature mailed to current Financial Institution
customers and others, newspaper and other media advertisements,
seminars, and other approaches. Any such advertisements or
promotions shall contain conspicuous and easy to comprehend
disclosures concerning the nature of and risk associated with
nondeposit investment products. The costs of all such marketing
shall be shared by the parties as they may agree. Each party must
obtain prior written permission from the other party before
distributing any advertisement or promotional material of any kind
that refers to the other party or the advice and services available
from it.
5. Regulatory Compliance by Financial Institution and FNIC. Financial
Institution and FNIC acknowledge their respective obligations to
comply with all applicable laws and regulations and specifically
reference the Securities and Exchange Commission, the National
Association of Securities Dealers, Inc. (the "NASD"), the Federal
Deposit Insurance Corporation, the North Carolina Banking
Commission, and the provisions of the Interagency Statement on
Retail Sales of Nondeposit Investment Products published by the
Board of Governors of the Federal Reserve System, the Federal
Deposit Insurance Corporation, the Officer of Comptroller of the
Currency and the Office of Thrift Supervision dated February 15,
1994, a such statement may be amended from time to time (the
"Interagency Statement"). Each of Financial Institution and FNIC
agree to conduct its activities in a manner consistent with the
Interagency Statement. Each of Financial Institution and FNIC
further agrees to comply with the provisions of FNIC's policies and
practices guide, to the extent such procedures and policies relate
to Financial Institution and FNIC, as the case may be, as such guide
may be modified from time to time, current copies of which FNIC has
provided or will provide to Financial Institution. FNIC agrees to
provide to Financial Institution such notices and records necessary
to permit Financial Institution to comply with Part 344 of the
regulations of the Federal Deposit Insurance Corporation or any
successor or replacement regulation. FNIC's and Financial
Institution's duties and obligations pursuant to the Interagency
Statement, FNIC's guide and/or Financial Institution's compliance
manual shall include, but are not limited to, the following:
a. Financial institution shall not make any loans to FNIC
customers if Financial Institution has actual knowledge that
the proceeds of the loan are to be used for the purchase of
Securities through FNIC so long as this practice is prohibited
by any rule applicable to FNIC or Financial Institution.
b. Financial Institution further acknowledges that its employees
who are not registered representatives with the NASD shall not
recommend the purchase of, or provide detailed information on,
the purchase or sale of any Products. Financial Institution
shall only inform potential customers of the availability of
the services of FNIC.
c. Financial Institution acknowledges that it is a "person
associated with a broker or dealer" as defined in Section
3(a)(18) of the Securities Exchange Act of 1934 as amended.
d. Financial Institution shall institute policies and procedures
reasonably necessary to insure compliance by its employees
with all applicable governmental rules, regulations, orders
and statements, including but not limited to, the provisions
of the Interagency Statement. In particular, Financial
Institution shall issue a written statement (the "Policy
Statement") that assesses the risks associated with the
activities contemplated by this agreement and provides a
summary of the policies and procedures that Financial
Institution has established to address these risks. Such
policies and procedures and the Policy Statement shall be
periodically reviewed, approved and adopted by the board of
directors of Financial Institution.
e. FNIC and Financial Institution shall each establish and
maintain compliance programs which monitor customer complaints
and periodically review customer accounts to detect and
prevent abusive practices.
6. Compensation to Financial Institution and FNIC.
a. FNIC shall pay Financial Institution rent in the amount
specified in the "Rent Schedule" ("Schedule"), attached hereto
and made part hereof as Exhibit "A". The rent as set forth on
the schedule shall be negotiated on a calendar quarter basis
between the parties. The Schedule as renegotiated shall become
2
3
a part of this Agreement and shall supersede and replace all
prior Schedules. Such rent shall constitute full and complete
compensation to Financial Institution for space used and
expenses incurred under this Agreement.
b. At Branch offices, transactions shall be effected only by
registered representatives associated with FNIC who shall
undertake such affiliation with FNIC in addition to their
employment by Financial Institution. Each dual affiliate shall
enter into a contract with Financial Institution setting forth
the terms of such individual's affiliation as a FNIC
registered representative and as a Financial Institution
employee. Financial Institution shall not have any
responsibility for supervision of the brokerage activities
performed by registered representatives or for compliance by
registered representatives with FNIC's guidelines established
for such persons. Financial Institution shall pay the
compensation of and provide benefits to the dual affiliates in
amounts to be determined solely by Financial Institution. FNIC
will not pay any compensation nor withhold any employment
taxes nor provide any benefits to such dual affiliates.
c. FNIC and Financial Institution shall not structure the
compensation of registered representatives in such a way as to
result in unsuitable recommendations or sales being made to
customers. FNIC further agrees to enter into a written
contract with each registered representative and to obtain
Financial Institution's approval of the terms of such
contract.
d. Financial Institution's employees or tellers who participate
in referral programs that include compensation features shall
not be compensated based on whether or not such referrals
result in the sale of Products to the referred party.
e. Financial Institution's employees who perform compliance
and/or audit functions in connection with FNIC's sale of
Products pursuant to the terms of this agreement shall not
receive incentive compensation which is directly related to
the sale of such Products.
7. Term. This Agreement shall continue in force unless terminated by 30
days' written notice given at any time by any party hereto. This
agreement shall terminate on any earlier date required by the order
of any governmental agency with jurisdiction over either party.
8. Non-Competition by Financial Institution. Financial Institution
agrees to direct all its customers' securities, fixed and variable
annuities and investment advisory business to FNIC during the term
of this agreement and Financial Institution shall not compete with
FNIC in the State nor shall it recommend the advice or services of
any other broker/dealer, insurance agency or investment advisor.
9. FNIC Services Not Exclusive. This Agreement shall not restrict the
ability of FNIC to carry on its business or to open and operate
branch offices in other locations.
10. Customers Accounts Are Controlled By Financial Institution. FNIC
makes no proprietary claim to customer accounts. In the event this
Agreement is terminated, FNIC agrees to cooperate, subject to
applicable securities regulations, in the transfer of all accounts
associated with and registered representatives employed by Financial
Institution. Financial Institution agrees for a period of two years
not to solicit any other retail accounts, registered representatives
or financial institutions associated with FNIC nor to permit a
registered representative associated with FNIC to work, directly or
indirectly, at Financial Institution in the area of marketing
Products. If accounts are not transferred in a timely manner, then
FNIC reserves the right to service these accounts as required by
NASD guidelines. In any event, FNIC will maintain all records
required by law or regulation.
11. Representations and Indemnification.
a. FNIC represents and warrants to Financial Institution that it
is a California corporation in good standing, that it has or
will have all governmental licenses and permits necessary for
it to carry on the activities contemplated by this agreement,
that it is not the subject of any disciplinary or license
revocation proceeding in any jurisdiction and that it may
enter into and perform this agreement without violating any
law, or any contractual or other obligation it has to anyone
else. These representations
3
4
shall survive the termination of this agreement. FNIC shall
promptly inform Financial Institution if it becomes the
subject of any disciplinary or license revocation proceeding,
or if it is the subject of any governmental order that affects
its right or ability to perform its obligations under this
agreement. FNIC shall indemnify and hold Financial Institution
harmless against all claims and damages, including attorney's
fees, arising out of the broker/dealer activities to be
conducted by FNIC pursuant to this agreement or FNIC's breach
of this agreement.
FNIC represents that upon execution of this agreement it will
cause Financial Institution to be listed as an additional
insured to FNIC's errors and omissions insurance policy. FNIC
agrees to maintain in full force and effect during the term of
this agreement the broker/dealer "E&O" insurance coverage in
the amount and term as represented to Park Meridian Bank in
June 1995 (minimum $10,000,000 aggregate coverage). FNIC does
not commit to maintain this policy in perpetuity; at some
point in the future this type of policy may not be available
or it may only be available at a price or from an insurance
carrier deemed not to be acceptable in which event coverage
would lapse. FNIC agrees to give Financial Institution prompt
notice of the termination or lapse of this insurance policy.
b. Financial Institution represents and warrants to FNIC that it
is a banking association in good standing, that the terms and
provisions of this agreement have been adopted and approved by
its board of directors, that it is not the subject of any
disciplinary or license revocation proceeding in any
jurisdiction and that it may enter into and perform this
agreement without violating any contractual or other
obligation it has to anyone else. These representations shall
survive the termination of this agreement. Financial
Institution shall promptly inform FNIC if it becomes the
subject of any disciplinary or license revocation proceeding,
or if it is the subject of any governmental order, that
affects its right or ability to perform its obligations under
this agreement. Financial Institution shall indemnify and hold
FNIC harmless against all claims and damages, including
attorney fees, arising out of the breach by Financial
Institution of this agreement or of the provisions contained
in the FNIC guide.
12. Scope of Assumption. Financial Institution acknowledges and agrees
that under this agreement FNIC obtains certain rights to offer
advice and services to customers of Financial Institution, and to
others. FNIC does not otherwise assume any of the assets or
liabilities of Financial Institution, which shall remain the
exclusive property and responsibility of Financial Institution.
13. Right of Inspection; Confidentiality. FNIC hereby authorizes
Financial Institution to monitor and periodically review and verify
FNIC's and its Registered Representatives' compliance with the terms
of this agreement and agrees to provide Financial Institution with
reasonable access to appropriate records in connection with any such
activities. FNIC shall also provide Financial Institution or its
regulatory examiners with reasonable access to appropriate records
in connection with any inspection by Financial Institution or its
regulatory examiners of FNIC's Branch Offices which Financial
Institution is required to make pursuant to the rules and
regulations of state and federal regulatory agencies.
Financial Institution shall provide FNIC with reasonable access to
appropriate records in connection with any inspection by FNIC or its
regulatory examiners of Financial Institution or FNIC's Branch
Offices, and shall permit FNIC to copy such records, provided that
such inspection and copying is limited to the broker/dealer
activities contemplated by this agreement.
All information obtained or reviewed in such inspections or through
the course of business during the term of this agreement shall be
held in strict confidence by FNIC or Financial Institution.
Financial Institution agrees to return to FNIC any materials
provided by FNIC upon termination of this agreement and shall not
use same thereafter. FNIC agrees to return to Financial Institution
any customer lists or other materials provided by Financial
Institution upon termination of this agreement and shall not use
same thereafter. Neither party shall permit any third party to copy
or use these materials at any time.
14. Arbitration. Any claim or controversy arising out of or relating to
the negotiation, performance or breach of this agreement, the
meaning of or obligations imposed by this agreement, or the
arbitrability of any such question including any issue as to the
jurisdiction of the arbitrator, shall be decided by arbitration
pursuant to the rules of the American Arbitration Association then
in effect.
4
5
15. Attorneys' Fees. The prevailing party in any arbitration or
litigation arising from the interpretation or enforcement of this
agreement shall be entitled to recover its attorneys' fees and
costs, including those incurred on appeal, as determined by the
arbitrator or court.
16. Notices. All notices, requests, demands and other communications
under this agreement shall be in writing and shall be deemed to have
been given on the earlier of the date of actual receipt, or three
days after mailing if mailed first class, postage prepaid, and
addressed to the party at the following address:
Park Meridian Bank
0000 Xxxxxxxx Xxxxxxxxx
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Attn: Xxxxx X. Xxxxxxxxx, III
Senior Vice President
5
6
Financial Network Investment Corporation
0000 Xxxxxxx Xxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxx X. Xxxxxxx
Executive Vice President
17. Partial Invalidity. If any portion of this agreement is held to be
invalid or unenforceable, the remainder of the agreement shall
continue in full force and effect.
18. Relationship of Parties. Financial Institution and FNIC are
independent of each other and each party has sole responsibility and
authority for the conduct of its own business. By the terms of this
agreement, no party is the agent, employee, joint venturer or
partner of the other. No party has the right to bind any other party
in any way.
19. Assignment. This agreement shall inure to the benefit of the parties
and their legal representatives, successors and assigns, but no
party may assign rights or obligations under this agreement without
the prior written approval of the other parties hereto.
20. Merger. This agreement contains the entire understanding between the
parties and supersedes any prior understanding and agreements
between them concerning its subject. There are no other oral or
written representations, agreements or understandings between them
relating to its subject. No amendment, modification, or waiver of
this agreement shall be binding unless executed in writing. No
waiver of any of the provisions of this agreement shall be a
continuing waiver unless expressly provided.
IN WITNESS WHEREOF, the parties hereto have executed this agreement on the date
set out next to their respective names.
PARK MERIDIAN BANK
A North Carolina Banking Association
By: /s/ Xxxxx X. Xxxxxxxx, President
---------------------------------
Date: 8-7-95
---------------------------------
Tax ID No.: 00-0000000
----------------------------
FINANCIAL NETWORK INVESTMENT CORPORATION
A California Corporation
By: /s/ Xxxx X. Xxxxx, Xx.
---------------------------------
Date: 08-04-95
---------------------------------
6
