EXHIBIT 10.22
BANC OF AMERICA SECURITIES LLC [LOGO]
Xxxxxxxxxx Correspondent Services
a division of Banc of America Securities LLC
August 31, 1999
Xxxxxx Financial, L.P.
0000 Xxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
RE: FULLY DISCLOSED CLEARING AGREEMENT
Dear Xx. Xxxxxx:
This Agreement sets forth the terms and conditions under which Xxxxxxxxxx
Correspondent Services, a division of Banc of America Securities LLC
("Xxxxxxxxxx Correspondent Services" or the "Clearing Broker"), will clear and
carry on a fully disclosed basis your customer and proprietary accounts, and
you ("you" or the "Introducing Broker") will become a correspondent of
Xxxxxxxxxx Correspondent Services.
SECTION 1. CERTAIN REGULATORY REQUIREMENTS.
(A) LAWS AND REGULATIONS. This Agreement, and all transactions and
activities hereunder, are subject to the federal and state securities laws,
including the Securities Act of 1933 (the "Securities Act"), the Securities
Exchange Act of 1934 (the "Exchange Act"), the Investment Company Act of 1940
and the Investment Advisers Act of 1940, and to the Employee Retirement Income
Security Act of 1974 ("ERISA"), and to any other applicable federal, state,
local or non-U.S. law, and to any rule or regulation under the foregoing,
including the rules of the Securities and Exchange Commission (the "SEC"), of
any state securities authority, of the Board of Governors of the Federal Reserve
System including Regulation T, of any "foreign financial regulatory authority"
(as defined in Section 3 of the Exchange Act), of any "self-regulatory
organization" ("SRO") (as defined in Section 3 of the Exchange Act), including
the New York Stock Exchange, Inc. (the "NYSE") and the National Association of
Securities Dealers, Inc., (the "NASD") (each of the foregoing entities, a
"Financial Regulatory Authority") or of any other regulatory body or agency
having authority over a transaction or an account (collectively, the "Laws and
Regulations"). For purposes of this Agreement, if you are not a member of the
NYSE, you
BANC OF AMERICA SECURITIES LLC, MEMBER NYSE/MASD/SIPC, IS A SUBSIDIARY OF
BANK OF AMERICA CORPORATION.
agree that in each case where there is a reference in this Agreement to a rule
of the NYSE (the "NYSE Rules") you will comply with the comparable rules of the
NASD.
(B) SIPC. Solely for the purposes of the financial responsibility
rules of the SEC and the Securities Investor Protection Act of 1970, the
Introduced Accounts shall be considered to be accounts of Xxxxxxxxxx
Correspondent Services, as your clearing broker.
SECTION 2. SERVICES TO BE PROVIDED BY XXXXXXXXXX CORRESPONDENT SERVICES.
Xxxxxxxxxx Correspondent Services will provide the following services to you
with respect to the accounts owned by your customers (the "Customers") and
your proprietary accounts (all such accounts, collectively, the "Introduced
Accounts"):
(A) EXECUTION, CLEARANCE AND SETTLEMENT. Xxxxxxxxxx Correspondent
Services will execute orders and/or clear and settle transactions for the
purchase and sale of securities in the Introduced Accounts. In the event you
execute orders for an Introduced Account away from Xxxxxxxxxx Correspondent
Services, Xxxxxxxxxx Correspondent Services will, on a best efforts basis,
attempt to clear and settle the transactions within a reasonable period.
(B) CONFIRMATIONS AND STATEMENTS. Xxxxxxxxxx Correspondent Services
will prepare trade confirmations and monthly or quarterly statements for
Customers as required by the Laws and Regulations; provided that you shall
provide Xxxxxxxxxx Correspondent Services on the day of any trade with any
information known to you and required for the order ticket and Customer
confirmation, including your role in any transaction. Xxxxxxxxxx
Correspondent Services will mail periodic statements and trade confirmations
to Customers.
(C) CASHIERING FUNCTIONS. Xxxxxxxxxx Correspondent Services will
perform all cashiering functions for the Introduced Accounts, including the
receipt, delivery, and transfer of securities purchased, sold, borrowed, and
loaned, the making and receipt of payments therefor, the custody and
safeguarding of securities and payments so received, the receipt and
distribution of dividends and other distributions, the processing of exchange
offers, rights offerings, warrants, tender offers, and redemptions, and such
other functions as may be agreed upon by the parties.
(D) PROVISION OF CERTAIN INFORMATION.
(i) Each business day with respect to the close of business on the
previous business day, Xxxxxxxxxx Correspondent Services will supply you with
copies of all margin activity statements, money lines, and daily commission
detail reports. Xxxxxxxxxx Correspondent Services will provide you with
copies of Customers' periodic statements on the day they are mailed to
Customers. Unless you notify Xxxxxxxxxx Correspondent Services within one
NYSE business day after your receipt of such information of any mistakes or
discrepancies therein, Xxxxxxxxxx Correspondent Services shall be entitled to
consider all such information correct absent manifest error.
(ii) Xxxxxxxxxx Correspondent Services will advise you, with
respect to the Introduced Accounts, of the need for buying-in or selling-out
positions, of any failures to deliver or pay, and of any required margin
calls.
(iii) Xxxxxxxxxx Correspondent Services shall provide you, upon
your written request and at your expense, with all appropriate data in its
possession pertinent to the proper performance and supervision of any
function specifically allocated to you pursuant to the terms of this
Agreement.
(E) BOOKS AND RECORDS. Xxxxxxxxxx Correspondent Services will
establish and maintain all prescribed books and records of transactions
executed or cleared through it that are customarily maintained by a clearing
broker and that are not specifically assigned to you pursuant to the terms of
this Agreement, including a stock record, a daily record of required margin,
and other information required by NYSE Rule 432(a).
(F) SERVICES EXPRESSLY LIMITED. Unless otherwise agreed to in
writing, Xxxxxxxxxx Correspondent Services shall not provide to you any
services that are not expressly and specifically set forth in this Agreement.
Further, Xxxxxxxxxx Correspondent Services will not be bound to make any
investigation into the facts surrounding any transaction that it may have
with you on a principal or agency basis or that you may have with your
Customers or other persons.
SECTION 3. FEES TO XXXXXXXXXX CORRESPONDENT SERVICES; YOUR COMMISSIONS.
(A) FEES. You agree to pay Xxxxxxxxxx Correspondent Services for its
services pursuant to this Agreement the amounts set forth in Schedule A to
this Agreement, but not less per month than the minimum fee amount set out in
Schedule A (the "Minimum Monthly Fee"). The Minimum Monthly Fee requirement
may be met only through fees paid Xxxxxxxxxx Correspondent Services for the
services set out in Schedule A, and not by other income, including interest
income, paid to or earned by Xxxxxxxxxx Correspondent Services from the
Introduced Accounts. The Schedule A fee service amounts and the Minimum
Monthly Fee may be changed by Xxxxxxxxxx Correspondent Services at any time
after the first anniversary of this Agreement on thirty (30) days' prior
written notice to you.
(B) INTRODUCING BROKER COMMISSIONS. Clearing Broker will remit
monthly to you any commission revenue or markups due you, payable by the 15th
day of each calendar month for all amounts earned during the preceding month,
and after deduction of (a) all clearing and other charges, costs, or expenses
due Xxxxxxxxxx Correspondent Services in accordance with the terms of this
Agreement, including the Minimum Monthly Fee to the extent applicable; (b)
all charges payable by Xxxxxxxxxx Correspondent Services on your account; and
(c) all amounts due Xxxxxxxxxx Correspondent Services from you under this
Agreement including amounts arising from any losses, liabilities, or damages
in accordance with the terms hereof.
SECTION 4. PROCEDURES FOR INTRODUCED ACCOUNTS.
(A) OPENING AND MAINTAINING ACCOUNTS; RESPONSIBILITY OF INTRODUCING
BROKER
(i) Customer Agreements; Documentation and Information. At or prior
to the time of the opening of each Introduced Account, you shall obtain,
verify and furnish Xxxxxxxxxx Correspondent Services with all information or
documentation concerning such Introduced Account which Xxxxxxxxxx
Correspondent Services may require including (i) a "Cash Account Agreement,"
(ii) for customers executing margin transactions, a "Margin Agreement, 'Vii)
in respect of any agency Introduced Account, the name of any principal for
whom the agent is acting and written evidence of the agent's authority, (iv)
tax-related documentation and certifications, and (v) any other document
necessary to comply with the Laws and Regulations. The Cash Agreement, the
Margin Agreement and any other agreements in respect of the Introduced
Accounts to which Xxxxxxxxxx Correspondent Services is a party or a
beneficiary (collectively, the "Customer Agreements") shall be on forms
supplied by Xxxxxxxxxx Correspondent Services. Xxxxxxxxxx Correspondent
Services will mail Customer Agreements and other documentation to Customers
or potential customers at your request. Within five days of any request of
Xxxxxxxxxx Correspondent Services, you shall furnish Xxxxxxxxxx Correspondent
Services with any other additional or supplementary documents regarding, and
agreements executed by, the Customer in respect of the Introduced Account on
forms supplied by Xxxxxxxxxx Correspondent Services. Xxxxxxxxxx Correspondent
Services reserves the right to negotiate the terms of its Customer Agreements
and other agreements executed by the Customers. All changes reflected in
writing on the Customer Agreements are deemed accepted by you if you do not
promptly, following your receipt of such agreement, object in writing to both
Xxxxxxxxxx Correspondent Services and the Customer. The terms of all existing
and future Customer Agreements are deemed incorporated herein by reference.
(ii) Requirement of Margin Agreements. All transactions in any
Introduced Account are to be considered cash transactions until such time as
Xxxxxxxxxx Correspondent Services has received and accepted a Margin
Agreement, duly and validly executed in respect of such Introduced Account.
(iii) Credit Review and Information. You will be solely responsible
for the conduct of your own credit review of any Customer. Each party will
make available upon request of the other the information it obtains from
standard industry services regarding the creditworthiness of any Introduced
Account.
(iv) Failure To Comply With Documentation Requirements. If any
documentary or agreement request made by Xxxxxxxxxx Correspondent Services
has not been satisfied, Xxxxxxxxxx Correspondent Services may in its sole
discretion refuse any or all orders or transactions for the Introduced
Account or close the Introduced Account at any time. If orders are placed or
transactions executed for an Introduced Account after Xxxxxxxxxx
Correspondent Services has given notice of insufficient documentation, no
commission credit will be granted to you on such orders or transactions. On
receipt of the necessary documents, this restriction will be lifted with
respect to future commissions, but no past commissions will be credited or
paid.
(v) Rejection or Termination of Accounts. Xxxxxxxxxx Correspondent
Services reserves the right to reject any requested Introduced Account and to
terminate any previously accepted Introduced Account at any time.
(B) CUSTOMER PAYMENT AND DELIVERY OBLIGATIONS; MARGIN REQUIREMENTS.
(i) Responsibility for Payments and Deliveries. You are liable as
primary obligor to Xxxxxxxxxx Correspondent Services for all payments of
money and deliveries of securities by the Introduced Accounts including (a)
timely payments and deliveries following or in respect of a transaction, (b)
maintaining at all times margin in each Introduced Account to the
satisfaction of Xxxxxxxxxx Correspondent Services, (c) the payment of any
debit balance in an Introduced Account and the delivery of securities in
respect of any short sale or securities borrowing, (d) until funds are
credited to Xxxxxxxxxx Correspondent Services, all payments to Xxxxxxxxxx
Correspondent Services on checks received by it in connection with the
Introduced Accounts, (e) payment and delivery of "when issued" transactions
in the Introduced Accounts, (f) the delivery of securities sold and the
return of securities loaned in good delivery form, without restrictive
legends of any kind, and (g) any loss or damage Xxxxxxxxxx Correspondent
Services may incur resulting from any failure by a Customer in respect of an
Introduced Account to pay or make delivery as required. Your obligations
shall continue whether or not any margin extensions have been granted by
Xxxxxxxxxx Correspondent Services and whether or not such extensions have
been requested by you. You acknowledge that Xxxxxxxxxx Correspondent Services
has sole discretion to execute buy-ins or sell-outs in any Introduced
Account, or to exercise any other remedies available against the Customer or
Introduced Account, regardless of whether such action is required by the Laws
and Regulations. You further agree that you are liable as primary obligor to
Xxxxxxxxxx Correspondent Services for the obligations of your Customers under
their respective Customer Agreements as such may exist from time to time and
as further provided in Section 11(C) of this Agreement.
(ii) Determination of Margin Requirements. It shall be solely within
the discretion of Xxxxxxxxxx Correspondent Services to determine from time to
time and at any time the minimum amount, type and timing of the collateral
("margin") to be collected in respect of any Introduced Account or position
held in an Introduced Account. Xxxxxxxxxx Correspondent Services may require
more margin of an Introduced Account than is required by the Laws and
Regulations. Xxxxxxxxxx Correspondent Services shall be responsible for
generating all initial and maintenance margin calls and may itself send such
calls or may instruct you to send such calls. You shall remain responsible as
primary obligor for the collection of such margin payments as set forth in
the preceding paragraph.
(C) PRIME BROKERAGE CUSTOMERS. Where you act as an executing broker
for Introduced Accounts that prime broker their securities away from you (a
"Prime Brokerage Customer"), you shall notify Xxxxxxxxxx Correspondent
Services with respect to each account for which you intend to act as an
executing broker and you shall be solely responsible for conducting your own
credit review with respect to each such Prime Brokerage Customer. You shall
promptly notify Xxxxxxxxxx Correspondent Services, but in no event later than
5:00 p.m. New York time of trade date, in a mutually acceptable fashion, of
such trades in sufficient
detail for Xxxxxxxxxx Correspondent Services to be able to report and
transfer any trade executed by you on behalf of a Prime Brokerage Customer to
the relevant prime broker. You understand and agree that if the prime broker
shall disaffirm or "DK" any trade executed by you on behalf of a Prime
Brokerage Customer, you shall, if you have not already done so, open an
account for such Prime Brokerage Customer with Xxxxxxxxxx Correspondent
Services and shall transfer or deliver the trade to such account for your
risk and expense to the same extent as for any other account introduced by
you pursuant to this Agreement and subject to the right of Xxxxxxxxxx
Correspondent Services to reject Introduced Accounts or individual trades.
You understand and agree that for certain Prime Brokerage Customers, Banc of
America Securities LLC may act as the prime broker. In certain instances,
Banc of America Securities LLC as the prime broker will notify you that a
problem exists and that it is unable to settle the trade and Banc of America
Securities LLC acting as the clearing broker will request that you open a
margin account for such Prime Brokerage Customer and transfer or deliver the
trade to such margin account for your risk and expense to the same extent as
for any account introduced by you pursuant to this Agreement and subject to
Xxxxxxxxxx Correspondent Services' right to reject an Introduced Account or
an individual trade. You understand and agree that all transactions for your
Prime Brokerage Customers shall be conducted in accordance with the
requirements of the SEC and of the Laws and Regulations generally governing
prime brokerage transactions. In this regard, you acknowledge that you will
enter into all prime brokerage agreements with your customers as principal
for your own account and that you are responsible for obtaining and
maintaining all prime brokerage documentation.
SECTION 5. TRADING AND TRADING PROCEDURES.
(A) TRANSMISSION OF ORDERS. An order for an Introduced Account may
be transmitted to Xxxxxxxxxx Correspondent Services only by you and your
agents. You shall be solely and exclusively responsible for approving all
orders for the Introduced Accounts and for establishing procedures to ensure
that such approved orders and transactions are transmitted properly to
Xxxxxxxxxx Correspondent Services for execution and/or clearance.
(B) ACCEPTANCE/REJECTION. Xxxxxxxxxx Correspondent Services reserves
the right to accept or reject for execution or clearance any order or
transaction for an Introduced Account. Further, Xxxxxxxxxx Correspondent
Services reserves the right, in its sole discretion, to restrict trading in
any Introduced Account, including your proprietary accounts, to liquidating
orders or cash transactions only, or to prohibit certain trading strategies
or trading of certain securities or types of securities.
(C) CONTRA BROKER. When you either execute your own orders or
otherwise designate the contra broker to any transaction, you shall be
responsible as primary obligor to Xxxxxxxxxx Correspondent Services for any
loss it suffers in the event that the contra broker fails to perform. Without
limiting the foregoing, Xxxxxxxxxx Correspondent Services shall have the
right in its sole discretion to refuse to trade with any contra broker or to
limit the size of any trade with a contra broker. In the event you trade with
a contra broker that has been not been approved by Xxxxxxxxxx Correspondent
Services, or in excess of an amount approved by Xxxxxxxxxx Correspondent
Services, Xxxxxxxxxx Correspondent Services shall have the right to reject
all or any part of the transaction for clearance and settlement. You agree to
take
all appropriate capital charges on your books arising out of or incurred in
connection with your executing orders away from Xxxxxxxxxx Correspondent
Services. You agree to comply with all requirements of the Automated
Confirmation Transaction system ("ACT"), including the provisions by which
Xxxxxxxxxx Correspondent Services may limit your "Gross Dollar Thresholds" as
such term is defined in the ACT Rules.
SECTION 6. CHARGES AND INTEREST PAYMENTS TO INTRODUCED ACCOUNTS.
(A) COMMISSIONS AND XXXX-UPS. You will have complete discretion over
the amount of commissions, mark-ups, or other charges or expenses in respect
of transactions in the Introduced Accounts (collectively, "Customer
Charges"); provided that any such Customer Charge shall be within the usual
and normal operational capabilities of Xxxxxxxxxx Correspondent Services. You
represent and warrant that no Customer Charge will violate the Laws and
Regulations.
(B) MARGIN INTEREST RATE. Xxxxxxxxxx Correspondent Services shall
determine the rate of margin interest charged on any Introduced Account that
has a debit balance. Interest income earned through such charges to any
Introduced Account shall be fully retained by Xxxxxxxxxx Correspondent
Services. Xxxxxxxxxx Correspondent Services shall inform you upon your
request of the interest rates it charges.
(C) DEFAULT CHARGES. Xxxxxxxxxx Correspondent Services shall
determine the charge, and the timing of such charge, to any Introduced
Account maintained by Xxxxxxxxxx Correspondent Services, including the
liquidation of securities held in the Introduced Account and the crediting of
the proceeds to satisfy any obligations owed to Xxxxxxxxxx Correspondent
Services, upon a loss or liability incurred by Xxxxxxxxxx Correspondent
Services resulting from transactions or positions in any Introduced Account,
including, but not limited to any item described in Section 4(B) of this
Agreement.
(D) FREE CREDIT BALANCES. Xxxxxxxxxx Correspondent Services shall
inform you, upon your request, of the interest rates it pays from time to
time on free credit balances in the Introduced Accounts.
SECTION 7. COMMUNICATIONS WITH CUSTOMERS AND OTHERS.
(A) NYSE RULE 382. You agree to provide written notice to your
existing Customers, and any future Customer, before Xxxxxxxxxx Correspondent
Services accepts the Introduced Account, as to the nature of the services to
be provided by Xxxxxxxxxx Correspondent Services pursuant to this Agreement,
and your and Xxxxxxxxxx Correspondent Services's respective obligations to
such Customers. Such written notice shall be in the form of a letter, in form
and content agreeable to both parties, that complies with NYSE Rule 382 (the
"Rule 382 Letter"). If Xxxxxxxxxx Correspondent Services so elects, it shall
mail the Rule 382 Letters, in which case you shall be responsible for
Xxxxxxxxxx Correspondent Services's costs incurred in connection with the
preparation and mailing of such Rule 382 Letters.
(B) NOTATIONS ON MAILINGS. All confirmations, and monthly or
quarterly statements, and other notices to Introduced Accounts shall indicate
that the Introduced Accounts were introduced by you and that the role of
Xxxxxxxxxx Correspondent Services is that of a clearing broker only.
Inadvertent omission of such notations shall not be deemed to constitute a
breach of this Agreement. Copies of the forms of all of the foregoing shall
be furnished by Xxxxxxxxxx Correspondent Services to you.
(C) WRITTEN APPROVAL FOR REFERENCES TO CLEARING BROKER. You shall
not, without the prior written approval of Xxxxxxxxxx Correspondent Services,
state in an advertisement or sales literature or any public media, including
any electronic media such as a Web site or over the Internet, that you have
entered into this Agreement with Xxxxxxxxxx Correspondent Services, or make
any reference to Xxxxxxxxxx Correspondent Services or the services it
furnishes to you pursuant to this Agreement. Neither shall Xxxxxxxxxx
Correspondent Services disclose this Agreement or make reference to the
Introducing Broker in any advertisement or sales literature or any public
media without the prior written approval of the Introducing Broker.
(D) CUSTOMER CORRESPONDENCE, COMPLAINTS, ACTIONS.
(i) Customer inquiries and complaints shall be promptly investigated
and answered by the party responsible for the subject matter of the inquiry.
(ii) In the event any Customer correspondence is not directed to the
party who is responsible under the terms of this Agreement for the area to
which the correspondence relates, the original recipient of the Customer
correspondence shall immediately forward the correspondence to the other
party, which shall respond to it.
(iii) You and Xxxxxxxxxx Correspondent Services shall give the other
written notice of any customer complaint, threat of action or commencement of
litigation involving any of the Introduced Accounts or Customers in
connection with the services provided hereunder. Each shall also provide the
other with a copy of any formal complaint or other action and inform the
other of the disposition of any such action.
(iv) In the event that Xxxxxxxxxx Correspondent Services deems it
advisable to commence an action or proceeding against any of your Customers
for malfeasance, misfeasance or nonfeasance, Xxxxxxxxxx Correspondent
Services may do so after notice to you, or, upon the request of Xxxxxxxxxx
Correspondent Services, you shall institute such action or proceeding. In any
of such events, you shall indemnify Xxxxxxxxxx Correspondent Services in
accordance with the provisions of Section 11 of this Agreement.
SECTION 8. CERTAIN RESPONSIBILITIES OF INTRODUCING BROKER.
(A) DEPOSITS OF PAYMENTS AND SECURITIES. You shall promptly turn
over to Xxxxxxxxxx Correspondent Services any and all payments and securities
that you receive from Customers and, concurrently therewith, all such
information as may be relevant or
necessary to enable Xxxxxxxxxx Correspondent Services to record promptly and
properly such payments and securities in the respective Introduced Accounts.
(B) RESPONSIBILITY AS TO INTRODUCED ACCOUNTS AND TRANSACTIONS.
Without limiting your general obligations in respect of the Introduced
Accounts, you shall be solely and exclusively responsible for the following
obligations in respect of all Introduced Accounts and transactions executed
with or for Introduced Accounts (including Introduced Accounts managed by any
investment adviser or other third party):
(i) ensuring that the Customers are not minors or subject to any
prohibitions under the Laws and Regulations generally relating to the
incapacity of any Introduced Account, or any conflict of interest relating to
such Introduced Account, such as those arising under Section 206(3) of the
Investment Advisers Act of 1940;
(ii) determining that any transactions introduced, or orders and
instructions given, to Xxxxxxxxxx Correspondent Services have been properly
authorized in advance by the Introduced Account and determining the
genuineness of all certificates, papers, and signatures provided by each
Introduced Account;
(iii) determining that all orders or transactions for Introduced
Accounts comply in all respects with the Laws and Regulations,
(iv) using due diligence to learn and know on a continuing basis the
essential facts concerning each Customer, including verifying the address
changes of each Customer, knowing all persons holding a power of attorney
over any Introduced Account, being familiar with each order in any Introduced
Account and at all times fully complying with NYSE Rule 405 and all similar
Laws and Regulations;
(v) determining the suitability of all transactions (including option
transactions) for Introduced Accounts, including with respect to the
frequency of trading in the Introduced Accounts and that any transaction is
consistent with the investment objectives of the Introduced Account;
(vi) ensuring that there is a reasonable basis for all recommendations
made to Customers;
(vii) the handling of any discretionary Introduced Accounts, as
required by NYSE Rule 408 or any other applicable Laws and Regulations;
(viii) compliance with any notice or approval requirement to any
employer of a Customer having an interest in, or controlling, an Introduced
Account, including obligations imposed by NYSE Rule 407 or any other
applicable Laws and Regulations;
(ix) compliance with any NASD regulation or interpretation governing
"Free-Riding and Withholding" and any other Law or Regulation governing
permitted purchases in a public offering;
(x) compliance with any and all disclosure document and prospectus
delivery requirements, option agreement requirements, and supervisory
requirements, in connection with Introduced Accounts that enter into option
transactions;
(xi) compliance with Rule lob-16 ("Truth In Lending") under the
Exchange Act and "payment for order flow" disclosure; provided, however, that
any documents provided to Customers in connection therewith shall be approved
in writing by Xxxxxxxxxx Correspondent Services in advance of transmission;
(xii) delivering (or making available to Xxxxxxxxxx Correspondent
Services for delivery) any prospectus required pursuant to the prospectus
delivery requirements of the Securities Act or by other applicable Laws and
Regulations;
(xiii) specifically approving the opening of any new account, in
compliance with NYSE Rule 405(3) and other applicable Laws and Regulations,
before forwarding such account to Xxxxxxxxxx Correspondent Services as a
potential Introduced Account;
(xiv) compliance with all Laws and Regulations concerning transfers of
"restricted" or "control" securities in Introduced Accounts; and
(xv) obtaining and maintaining all documents necessary for the
performance of your responsibilities under this Agreement and retaining such
documents in accordance with all applicable Laws and Regulations.
You shall promptly xxxxxxx Xxxxxxxxxx Correspondent Services with such
documentation with regard to any of the foregoing matters as may be requested
by Xxxxxxxxxx Correspondent Services.
(C) SUPERVISORY PROCEDURES/TRAINING/XXXXXXX XXXXXXX. You shall be
responsible for your compliance with applicable supervisory requirements
under the NYSE Rules, including NYSE Rule 342 and 351, or any related or
similar provisions of the Laws and Regulations, including those concerning
(i) supervising the activities and training of your principals and registered
representatives and other agents in the performance of their functions
allocated to you pursuant to the terms of this Agreement, (ii) periodic
reviews, investigations, and reports on xxxxxxx xxxxxxx and manipulative and
deceptive practices with respect to Introduced Accounts, (iii) hiring,
selecting, investigating, training, and supervising all of your personnel who
open, accept, approve, or authorize transactions in the Introduced Accounts;
(iv) establishing written compliance and supervisory procedures for the
conduct of the Introduced Accounts and ongoing review of all transactions in
Introduced Accounts, and (v) maintaining compliance and supervisory personnel
adequate to implement such procedures.
(D) REGISTERED PERSONNEL. You shall be responsible for, and you
represent that, before you commence any trading in options or other special
types of securities for any Introduced Account, you will have appropriately
registered representatives and principals with the appropriate SRO(s).
SECTION 9. INFORMATION TO BE PROVIDED BY INTRODUCING BROKER.
(A) FINANCIAL INFORMATION. At the time you enter into this
Agreement, you shall provide Xxxxxxxxxx Correspondent Services with your most
recent annual audited financial statements, and if of a later date, most
recent semi-annual unaudited financial statement, and with your most recent
Financial and Operational Combined Uniform Single Reports ("FOCUS" Reports).
Subsequently, you shall provide Xxxxxxxxxx Correspondent Services with copies
of your annual audited, and semi-annual unaudited, financial statements as
well as copies of all financial information and reports you file with or
provide to the SEC or any SRO, including but not otherwise limited to FOCUS
Reports, at the same time you so file or provide such document. At the time
you provide any notice or report to the SEC or any SRO pursuant to Rule
17a-11 under the Exchange Act, or pursuant to the Rules referenced in Rule
17a-11(h) under the Exchange Act, you shall notify Xxxxxxxxxx Correspondent
Services by telephone and immediately thereafter provide a copy of such
notice or report. You shall also immediately inform Xxxxxxxxxx Correspondent
Services of any alleged deficiency or violation asserted by a Financial
Regulatory Authority or by your accountants, relating to capital,
recordkeeping or accounting matters, including deficiencies asserted in
routine inspections, whether or not any report on such matter is required by
the Exchange Act. You shall further provide Xxxxxxxxxx Correspondent
Services, monthly or more frequently if so requested by Xxxxxxxxxx
Correspondent Services, information and reports relating to your financial
condition, including but not otherwise limited to information regarding your
aggregate indebtedness ratio, net capital and excess net capital.
(B) FORM BD AND RESTRICTION AGREEMENT. You shall provide Xxxxxxxxxx
Correspondent Services at the time of the execution of this Agreement, with a
current composite Form BD and any "restriction agreement", and subsequently
with any amendment or supplement to your Form BD or restriction agreement. In
addition, upon request of Xxxxxxxxxx Correspondent Services, you shall
provide any information you file or have on file with any Financial
Regulatory Authority relating to you or any of your directors, officers and
agents.
(C) LITIGATION AND REGULATORY. You shall promptly provide to
Xxxxxxxxxx Correspondent Services, but in any event within three (3) business
days of the initiation of any such event, to the extent it relates or could
foreseeably relate in a material way to your business activities, all
information concerning every action, suit, investigation, inquiry, or
proceeding (formal or informal) pending or threatened against or affecting
you, any of your affiliates, or any officer, director, general securities
principal, financial or operations principal, or employee, independent
contractor, or other person associated with you, or their respective property
or assets, by or before any court or other tribunal, any arbitrator, any
governmental authority, or any SRO.
(D) OTHER INFORMATION.. You shall provide Xxxxxxxxxx Correspondent
Services with all appropriate data in your possession pertinent to the proper
performance and supervision of any function or responsibility specifically
allocated to Xxxxxxxxxx Correspondent Services pursuant to the terms of this
Agreement.
SECTION 10. LIMITATIONS ON ACTIVITIES OF INTRODUCING BROKER.
(A) MARKET MAKING. Upon the execution of this Agreement, you shall
provide to Xxxxxxxxxx Correspondent Services a written list of all securities
with respect to which you area market maker. You shall give Xxxxxxxxxx
Correspondent Services prompt written notice of any change in the securities
as to which you make a market. You shall cease making a market in any
security or securities within one business day following any request by
Xxxxxxxxxx Correspondent Services that you so limit your activities.
(B) DISTRIBUTIONS AND LARGE POSITIONS. You shall provide to
Xxxxxxxxxx Correspondent Services two weeks prior written notice if you
desire to enter into any underwriting agreement or commitment. You agree that
you will not accept any underwriting commitment, without the prior written
consent of Xxxxxxxxxx Correspondent Services, which consent, if granted, may
limit the number or dollar value of any securities as to which you may
undertake a commitment. In addition, you will not accumulate a proprietary
position in the securities, whether debt or equity, of any single issuer that
is in excess of the dollar and percentage limits set out in Schedule A (the
"Issuer Limits").
(C) NO OTHER CLEARING AGENTS. You agree that Xxxxxxxxxx
Correspondent Services shall be your only clearing agent and that all
transactions in any customer or proprietary account serviced by your firm
shall be cleared exclusively through Xxxxxxxxxx Correspondent Services.
(D) NO STATEMENTS OR BILLINGS. You shall not generate and/or prepare
any statements, bills, or confirmations respecting any Introduced Account
unless expressly authorized to do so in writing by Xxxxxxxxxx Correspondent
Services.
(E) CHANGE IN BUSINESS. You shall not make any material change in
your line of business without the prior written consent of Xxxxxxxxxx
Correspondent Services. Such consent shall not be unreasonably withheld or
delayed. For this purpose, a material change in your line of business shall
include any change requiring an amendment to your Form BD or any "restriction
agreement" or any of the further changes set out in Schedule A (a "Material
Business Change").
SECTION 11. ERRORS, CONTROVERSIES AND INDEMNITIES.
(A) LIMITATIONS OF XXXXXXXXXX CORRESPONDENT SERVICES LIABILITY,
INCLUDING USE OF INDEPENDENT SERVICE PROVIDERS.
(i) Xxxxxxxxxx Correspondent Services's sole responsibility and
liability is expressly provided by the Agreement and is limited to you. In no
event shall Xxxxxxxxxx Correspondent Services be responsible to any person
for indirect or consequential damages arising out of any action or inaction
by it, regardless of any notice. Xxxxxxxxxx Correspondent Services shall not
be liable for any loss caused, directly or indirectly, by government
restrictions, exchange or market rulings, suspension of trading, war, strikes
or
other conditions beyond the control of Xxxxxxxxxx Correspondent Services. In
the event that any communication network, data processing system, or computer
system used by Xxxxxxxxxx Correspondent Services or by you, whether or not
owned or provided by Xxxxxxxxxx Correspondent Services, is rendered
inoperable, other than on account of the failure of any such system to
accurately receive, process, or provide date/time data within, from, into,
and between the 20th and 21st centuries, including leap year calculations,
Xxxxxxxxxx Correspondent Services shall not be liable to you for any loss,
liability, claim, damage or expense resulting, either directly or indirectly,
therefrom.
(ii) Xxxxxxxxxx Correspondent Services may, at its reasonable
option, retain one or more independent data processing or other service
bureaus to perform functions allocated to Xxxxxxxxxx Correspondent Services
under this Agreement. Xxxxxxxxxx Correspondent Services will not be
responsible for any losses, damages, liability or expenses claimed by you or
your Customers arising from any such failure beyond the amount of such
losses, damages, or expenses incurred by you that Xxxxxxxxxx Correspondent
Services is able to recover pursuant to the terms of its agreement with such
service bureau.
(B) INDEMNIFICATION FROM XXXXXXXXXX CORRESPONDENT SERVICES.
Xxxxxxxxxx Correspondent Services hereby agrees to indemnify, defend and hold
harmless you and each person, if any, who controls you within the meaning of
Section 20 of the Exchange Act, from and against any and all losses, claims,
damages, liabilities and expenses, including attorney's fees and costs,
arising out of the bad faith, gross negligence or criminal acts or omissions
on the part of any of Xxxxxxxxxx Correspondent Services's directors, officers
or employees with respect to the services provided by Xxxxxxxxxx
Correspondent Services under this Agreement.
(C) INDEMNIFICATION FROM INTRODUCING BROKER. You hereby agree to
indemnify, defend and hold harmless Xxxxxxxxxx Correspondent Services, its
agents, officers and directors, and each person, if any, who controls
Xxxxxxxxxx Correspondent Services within the meaning of Section 20 of the
Exchange Act (collectively, "Indemnified Persons") from and against any and
all losses, claims, damages, liabilities and expenses, including attorney's
fees and costs, arising out of one or more of the following:
(i) any obligation of an Introduced Account as provided in Section
4(B) of this Agreement and failure of an Introduced Account to comply with a
Customer Agreement or other agreement with Xxxxxxxxxx Correspondent Services
that you have approved or are deemed to have approved pursuant to Section
4(A) of this Agreement, whether or not such failure is within your control;
(ii) your failure to properly perform your duties, obligations and
responsibilities as set forth in this Agreement; provided, however, that the
participation of any employee of Xxxxxxxxxx Correspondent Services in any
transactions referred to herein shall not affect your indemnification
obligations hereunder unless such participation by such employee of
Xxxxxxxxxx Correspondent Services was in bad faith or grossly negligent, in
which case, your indemnity shall only extend to the degree of your relative
fault;
(iii) any dishonest, fraudulent, negligent or criminal act or
omission on the part of any of your shareholders, principals, officers,
partners, employees, registered representatives, agents or customers;
(iv) all claims or disputes between you and your Customers with
respect to the matters set forth in this Agreement, it being understood and
agreed that you guarantee the validity of Customer orders in the form such
orders are transmitted to Xxxxxxxxxx Correspondent Services by you and you
stand in the position of primary obligor to Xxxxxxxxxx Correspondent Services
for the purpose of assuring that each Customer will promptly and fully
perform its commitments and obligations with respect to all transactions in
its accounts carried by Xxxxxxxxxx Correspondent Services;
(v) any adverse claims with respect to any Customer securities
delivered to or cleared by Xxxxxxxxxx Correspondent Services, it being
understood and agreed that Xxxxxxxxxx Correspondent Services shall be deemed
to be an intermediary between you and your Customers and Xxxxxxxxxx
Correspondent Services shall be deemed to make no representations or
warranties other than as provided in Section 8-306(3) of the New York Uniform
Commercial Code;
(vi) any default by any over-the-counter contra broker as provided
in Section 5(C) of this Agreement and claim by any third-party or contra
broker arising out of Xxxxxxxxxx Correspondent Services's rejection of any
transaction pursuant to such Section;
(vii) your breach of any representation or warranty under this
reement; or
(viii) Xxxxxxxxxx Correspondent Services's guarantee of any
signatures with respect to transactions in the Introduced Accounts.
(D) CUSTOMER CONTROVERSIES. Errors, misunderstandings or
controversies, except those specifically otherwise covered in this Agreement,
between the Customer and you or any of your employees which shall arise out
of your acts or omissions (including, without limiting the foregoing, your
failure to deliver promptly to Xxxxxxxxxx Correspondent Services any
instructions received by you from Customers with respect to the voting,
tender or exchange of shares held in an Introduced Account) shall be your
sole and exclusive responsibility. In the event that, by reason of such
error, misunderstanding or controversy, you in your discretion deem it
advisable to commence an action or proceeding against a Customer, you shall
indemnify and hold Xxxxxxxxxx Correspondent Services and the Indemnified
Parties harmless from any loss, liability, damage, claim, cost or expense
(including but not limited to reasonable fees and expenses of legal counsel)
which Xxxxxxxxxx Correspondent Services or the Indemnified Parties may incur
or sustain directly or indirectly in connection therewith or under any
settlement thereof. If such error, misunderstanding or controversy shall
result in the bringing of any action or proceeding against Xxxxxxxxxx
Correspondent Services or the Indemnified Parties, you shall indemnify and
hold Xxxxxxxxxx Correspondent Services and the Indemnified Parties harmless
from any loss, liability, damage, claim, cost or expense (including but not
limited to reasonable fees and expenses of legal counsel) which Xxxxxxxxxx
Correspondent Services or the Indemnified Parties may incur or sustain
directly or indirectly in connection therewith or under any settlement
thereof.
(E) NOTIFICATION REQUIREMENTS. In case any proceeding (including any
Financial Regulatory Authority investigation) shall be instituted involving
any person in respect of which indemnity may be sought pursuant to this
Section, such person (hereinafter called the indemnified party) shall
promptly notify the person against whom such indemnity may be sought
(hereinafter called the indemnifying party) in writing and the indemnifying
party, upon request of the indemnified party, shall retain counsel
satisfactory to the indemnified party to represent the indemnified party. It
is understood that the indemnifying party shall not, in connection with any
proceeding or related proceeding in the same jurisdiction, be liable for the
reasonable fees and expenses of more than one separate firm (in addition to
any local counsel) for all such indemnified parties, and that all such fees
and expenses shall be reimbursed as they are incurred. The indemnifying party
shall not be liable for any settlement of any proceeding effected without its
written consent, but if settled with such consent or if there be a final
judgment for the plaintiff, the indemnifying party agrees to indemnify the
indemnified party from and against any loss or liability by reason of such
settlement or judgment. Notwithstanding the foregoing sentence, if at any
time an indemnified party shall have requested an indemnifying party to
reimburse the indemnified party for fees and expenses of counsel as
contemplated in this Section, the indemnifying party agrees that it shall be
liable for any settlement of any proceeding effected without written consent
if (i) such settlement is entered into more than thirty (30) days after
receipt by such indemnifying party of the aforesaid request and (ii) such
indemnifying party shall not have reimbursed the indemnified party in
accordance with such request prior to the date of such settlement. No
indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement of any pending or threatened
proceeding in respect of which any indemnified party is or could have been a
party and indemnity could have been sought hereunder by such indemnified
party, unless such settlement includes an unconditional release of such
indemnified party from all liability on claims that are the subject matter of
such proceeding.
(F) SURVIVAL OF INDEMNITY. The indemnification provisions in this
Section 11, shall remain operative and in full force and effect, regardless
of the termination of this Agreement, and shall survive any such termination.
SECTION 12. COLLATERAL ACCOUNT; SECURITY INTEREST.
(A) THE COLLATERAL ACCOUNT. You shall establish and maintain an
account at Xxxxxxxxxx Correspondent Services (the "Collateral Account"),
which shall at all times contain either cash, or securities issued or
guaranteed as to principal and interest by the United States of America, that
are maintained through the Treasury Reserve Automated Debt Entry System
("TRADES") referred to in 31 C.F.R. ss. 357.0 and that have a remaining
maturity of ten (10) years or less, or a combination of both, having in the
aggregate a market value of not less than the amount set out in Schedule A
(the "Required Deposit"). The Collateral Account shall not be deemed to be
margin for any Introduced Account and shall not in any way constitute an
ownership interest in Banc of America Securities LLC. Xxxxxxxxxx
Correspondent Services shall have the right, in its discretion, to increase
the amount of the Minimum Deposit to be maintained in the Collateral Account.
You may not reduce the value of cash or securities in the
Collateral Account below the Minimum Deposit until the latest of (i) the
termination of this Agreement, (ii) ten days after the last transaction in
respect of an Introduced Account has been settled and (iii) you have
transferred to another broker-dealer all margin accounts of your Customers or
other Introduced Accounts having a debit balance, other than accounts that
Banc of America Securities LLC has agreed in writing to accept.
(B) TRANSFERS TO COLLATERAL ACCOUNT. All transfers of funds by you
to the Collateral Account shall be in immediately available funds. All
securities transferred by you to the Collateral Account (i) shall be
transferred on the TRADES book-entry system of a Federal Reserve Bank for the
account of such participant therein as shall be designated from time to time
by Xxxxxxxxxx Correspondenthouse Services for credit to Xxxxxxxxxx
Correspondent Services or (ii) shall be transferred by any other method
acceptable to Xxxxxxxxxx Correspondent Services.
(C) SECURITY INTEREST; REMEDIES. You hereby xxxxx Xxxxxxxxxx
Correspondent Services a first priority perfected security interest in all of
your right, title, and interest in the Collateral Account, all cash,
securities, financial assets, investment property, or other assets from time
to time held in or credited to the Collateral Account and all other assets
now or hereafter in the possession of Xxxxxxxxxx Correspondent Services and
all income or profits thereon, and all dividends and other payments with
respect to and all proceeds of the foregoing (the "Collateral") as security
for the repayment of all your obligations and liabilities to Xxxxxxxxxx
Correspondent Services, whether now outstanding or hereafter arising or
incurred, including but not limited to the indemnification obligations under
Section 11 hereof, the clearing fees and the Minimum Monthly Fee and any
other amounts owed by you to Xxxxxxxxxx Correspondent Services. Upon the
occurrence of an Event of Default (as defined below), Xxxxxxxxxx
Correspondent Services may, without further notice to you, offset any and all
liabilities, costs, or expenses (whether mature or contingent, liquidated or
unliquidated and regardless of the currency in which denominated) due to it
from you, against any and all liabilities, costs, or expenses (whether fixed,
assured or contingent, liquidated or unliquidated, and regardless of the
currency in which denominated) due you from it.
Xxxxxxxxxx Correspondent Services has the right to take any further action
necessary to perfect its security interest in the Collateral, including
marking its books and records to indicate the existence of such security
interest. Moreover, you agree to execute such documents and take such other
action as Xxxxxxxxxx Correspondent Services shall reasonably request, now and
in the future, in order to allow it to perfect its rights with respect to any
such Collateral.
You appoint Xxxxxxxxxx Correspondent Services as your attorney-in-fact, with
full power of substitution to act on your behalf (i) to sign, seal, execute
and deliver all documents, and do all such acts as may be required to realize
upon all rights in the Collateral, (ii) to demand, sue for, collect, receive
and give acquittance for any and all monies due or to become due upon or by
virtue of any Collateral, (iii) to settle, compromise, compound, prosecute or
defend any action or proceeding with respect to any Collateral, (iv) to sell,
transfer, assign or otherwise deal in or with any Collateral or the proceeds
or avails thereof and (v) to extend the time of payment of any or all of the
Collateral and make allowance or other adjustments with reference thereto.
In the event of a breach or default by you under this Agreement or any other
agreement, instrument or document between Banc of America Securities LLC and
you, or by you for the benefit, in whole or in part, of Banc of America
Securities LLC, or in the event of the occurrence of any Event of Default (as
described below), by or in respect of you (any such breach, default or Event
of Default, a "Default"), Xxxxxxxxxx Correspondent Services shall have, in
addition to the rights and remedies provided below, all rights and remedies
available to a secured creditor under common law and any other applicable
law, including Articles 8 and 9 of the New York Uniform Commercial Code
(whether or not the New York Uniform Commercial Code is otherwise applicable).
Upon the occurrence of a Default, Xxxxxxxxxx Correspondent Services is hereby
authorized, in its discretion: (1) to cancel any outstanding orders for the
purchase or sale of any securities or other property, and/or (2) to sell or
otherwise dispose of any or all of the Collateral or any of your other
securities or other property which may be in its possession or control
(either individually or jointly with others), and/or (3) to buy in any
securities or other property of which your account or accounts may be short,
and/or (4) otherwise foreclose upon any Collateral. Such sale, purchase or
cancellation may be made on the exchange or other market, if any, where such
business is then usually transacted, or at public auction or at private sale.
Except for such notice as may be required under applicable law, Xxxxxxxxxx
Correspondent Services may make such sale or transfer without advertising the
same and without any notice of the time or place of sale to you or to your
representatives, and without prior tender, demand or call of any kind upon
you or upon your representatives, all of which are expressly waived.
Furthermore, Xxxxxxxxxx Correspondent Services may be a purchaser at any sale
of Collateral under this section. Xxxxxxxxxx Correspondent Services and any
other purchaser may purchase the whole or any part of the Collateral free
from any right of redemption (which you hereby waive), and you shall remain
liable for any deficiency; it being understood that a prior tender, demand or
call of any kind from Xxxxxxxxxx Correspondent Services, or prior notice from
Xxxxxxxxxx Correspondent Services, of the time and place of such sale or
purchase shall not be considered a waiver of its right to sell or buy any
securities or other Property held by it, or which you may owe to it, at any
time as provided herein.
To the extent permitted by the laws of the State of New York, you agree to
pay Xxxxxxxxxx Correspondent Services the reasonable costs and expenses of
collection, including, but not limited to, attorneys' fees incurred and
payable or paid by it, for any debit balance and any unpaid deficiency in any
Introduced Account.
(D) INTEREST. Clearing Broker shall, from time to time, pay interest
to you on the cash held in the Collateral Account at such rate as shall be
set out by Xxxxxxxxxx Correspondent Services in a separate letter agreement.
SECTION 13. PAIB AGREEMENTS.
(A) ESTABLISHMENT OF PAIB RESERVE ACCOUNT. In connection with the
proprietary accounts of its introducing brokers ("PAIB"), Xxxxxxxxxx
Correspondent Services has
established a separate "Special Reserve Account for the Exclusive Benefit of
Customers" (the "PAIB Account") with one or more banks in conformity with the
standards of paragraph (f) of Rule 15c3-3 under the Exchange Act.
(B) COMPUTATION OF THE PAIB RESERVE REQUIREMENT. Xxxxxxxxxx
Correspondent Services will perform a reserve computation for your
proprietary accounts together with the proprietary accounts of other
introducing brokers ("PAIB reserve computation") within the time frames
prescribed by Rule 15c3-3 under the Exchange Act for the customer reserve
computation (the "customer reserve formula"). Xxxxxxxxxx Correspondent
Services will conduct the PAIB reserve computation in accordance with the
customer reserve formula, subject to such applicable modifications thereto as
are appropriate for PAIB accounts.
(C) DEPOSITS. Xxxxxxxxxx Correspondent Services will make deposits
to the PAIB Account in accordance with the requirements set forth in Rule
15c3-3 for deposits to the customer reserve account, again subject to such
applicable modifications thereto as are appropriate for PAIB accounts.
(D) NOTIFICATION OF EXAMINING AUTHORITY. You agree and understand
that it is your responsibility to notify your designated examining authority
in writing within two business days of entering into this agreement.
(E) INTERPRETATIONS. Notwithstanding anything herein to the
contrary, Xxxxxxxxxx Correspondent Services shall be deemed to be in
compliance with the terms of this Agreement so long as it is in compliance
with all applicable regulatory requirements and attendant interpretations and
guidance relating to PAIB Accounts as from time-to-time in effect. Without
limitation, such requirements shall include the requirements and
interpretations set forth in that certain No-Action Letter dated November 3,
1998 and issued by the Securities and Exchange Commission's Division of
Market Regulation to Xx. Xxxxxxx X. Xxxxxxxxx of the New York Stock Exchange
and Xx. Xxxxxx Xxxxxxxx of the National Association of Securities Dealers.
SECTION 14. ADDITIONAL REPRESENTATIONS AND WARRANTIES.
(A) THE INTRODUCING BROKER. You represent, warrant, and covenant as
follows, which representations, warranties and covenants shall be deemed
repeated on each day that Xxxxxxxxxx Correspondent Services executes an order
or clears and settles a trade for an Introduced Account:
(i) You have and shall maintain at all times during the life of
this Agreement "net capital," computed in accordance with Rule 15c3-1 of the
1934 Act, equal to the greatest of the amount required of you by such Rule,
the amount required under the Rules of any SRO of which you are a member, and
the amount set out in Schedule A (the "Minimum Capital Requirement"). You are
in compliance, and during the term of this Agreement will remain in
compliance with, all financial reporting and recordkeeping requirements
applicable to you under the Laws and Regulations. You shall immediately
notify Xxxxxxxxxx Correspondent Services if (i) your net capital is less than
the amount set forth in the preceding sentence, (ii) your excess net capital
is less than 10% of required net capital, (iii) if you compute your net
capital under the "basic method," your aggregate indebtedness ratio reaches
or exceeds 10 to 1, or (iv) if you operate under the "alternative method,"
your net capital is less than 5% of aggregate debit items computed in
accordance with Rule 15c3-3.
(ii) You are a member in good standing of the NASD and your agents
that deal with any Introduced Accounts, or that trade for or supervise the
Introduced Accounts, are appropriately registered with the NASD or any other
required SRO. You agree to promptly notify Xxxxxxxxxx Correspondent Services
of any SRO memberships or affiliations. You are registered with the SEC under
Section 15 of the Exchange Act. You and your agents are registered or
licensed and are qualified to do business in each jurisdiction where such
registration or qualification shall be required in respect of transactions in
the Introduced Accounts or other services provided to the Customers.
(iii) You have all the requisite authority in conformity with all
applicable Laws and Regulations to enter into this Agreement and to retain
the services of Xxxxxxxxxx Correspondent Services in accordance with the
terms hereof and have taken all necessary action to authorize the execution
of this Agreement and the performance of your obligations hereunder.
(iv) You shall keep confidential any confidential information you
may acquire as a result of this Agreement regarding the business and affairs
of Xxxxxxxxxx Correspondent Services, which requirement shall survive the
life of this Agreement.
You shall carry a Securities Dealer Blanket Bond insurance policy in a
minimum dollar amount and with a maximum deductible set out in Schedule A and
otherwise acceptable to Xxxxxxxxxx Correspondent Services as to form, type of
coverage and insurance company, in order to fully protect and indemnify
Xxxxxxxxxx Correspondent Services and the Indemnified Parties against any
loss, liability, damage, cost, or expense (including but not otherwise
limited to fees and expenses of legal counsel) that Xxxxxxxxxx Correspondent
Services may suffer or incur, directly or indirectly, as a result of any act
of your employees, agents, or partners. The insurance policy should cover,
but is not limited to, the following items: employee fidelity, premises,
transit, forgery, securities, counterfeiting, facsimile signatures, central
handling of securities (if required), computer systems, and loss payee and
notification (with Banc of America Securities LLC designated as "joint loss
payee"). This insurance coverage shall remain in effect while Xxxxxxxxxx
Correspondent Services acts as your clearing agent and will include coverage
for any claims made or discovered within 90 days following the termination of
this clearing relationship. You further agree that if such a 90 day discovery
clause is exercisable at your option, you will exercise such option.
(B) BANC OF AMERICA SECURITIES LLC.
Banc of America Securities LLC represents, warrants, and covenants as follows:
(i) Banc of America Securities LLC is, and will remain during the
term of this Agreement, a member in good standing of the NASD and the NYSE
and duly registered with the SEC.
(ii) Banc of America Securities LLC has all the requisite authority,
in conformity with all applicable Laws and Regulations, to enter into and
perform this Agreement and has taken all necessary action to authorize the
execution of this Agreement and the performance of its obligations hereunder.
(iii) Banc of America Securities LLC is, and during the term of this
Agreement will remain, in compliance with the capital and financial reporting
requirements of the SEC and of every SRO of which it is a member.
(iv) Banc of America Securities LLC represents and warrants that the
names and addresses of your customers that have or may come to its attention
in connection with the clearing and related functions it has assumed under
this Agreement are confidential and shall not be utilized by Banc of America
Securities LLC except in connection with the functions performed by
Xxxxxxxxxx Correspondent Services pursuant to this Agreement. Notwithstanding
the foregoing, should an Introduced Account request, on an unsolicited basis,
that Banc of America Securities LLC become its broker, you acknowledge and
agree that it may accept such account.
Banc of America Securities LLC shall keep confidential any confidential
information it may acquire as a result of this Agreement regarding your
business and affairs, which requirement shall survive the life of this
Agreement.
Banc of America Securities LLC represents and warrants that the
communications network, data processing systems and computer systems used by
Xxxxxxxxxx Correspondent Services in connection with its performance under
this Agreement will be able to accurately receive, process, or provide
date/time data within, from, into, and between the 20th and 21st centuries,
including leap year calculations, and will not be materially adversely
affected by dates prior to, on, after, or spanning January 1, 2000.
SECTION 15. TERMINATION.
(A) EVENTS OF DEFAULT. Notwithstanding any provision in this
Agreement, the following events or occurrences shall constitute an Event of
Default under this Agreement.
(i) either party hereto shall fail to perform or observe any term,
covenant, or condition to be performed hereunder (including, but not limited
to, any representation, warranty, or covenant relating to net capital
requirements) and such failure shall continue to be unremedied for a period
of ten (10) days after receipt of written notice from the nondefaulting party
to the defaulting party specifying the failure and demanding that the same be
remedied; or
(ii) any representation or warranty made by either party hereto
shall prove to be incorrect at any time in any material respect; or
(iii) a receiver, liquidator, or trustee of either party hereto or
any property held by either party, is appointed by court order and such order
remains in effect for more than thirty (30) days; or either party is
adjudicated bankrupt or insolvent; or a substantial amount of
property of either party is sequestered by court order and such order remains
in effect for more than thirty (30) days; or a petition is filed against
either party under any bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, dissolution or liquidation law of any jurisdiction,
whether now or hereafter in effect, and is not dismissed within thirty (30)
days after such filings; or
(iv) either party hereto files a petition in voluntary bankruptcy
or seeks relief under any provision of any bankruptcy, reorganization,
arrangement, insolvency, readjustment of debt, dissolution or liquidation law
of any jurisdiction, whether now or hereafter in effect, or consents to the
filing of any petition against it under any such law; or
(v) either party hereto makes an assignment for the benefit of its
creditors, or admits in writing its inability to pay its debts generally as
they become due, or consents to the appointment of a receiver, trustee or
liquidator of either party, or of any property held by either party; or
(vi) either party is enjoined, disabled, suspended, prohibited, or
otherwise unable to engage in the securities business as a result of any
administrative or judicial proceeding or action by the SEC or any other
Financial Regulatory Authority.
(B) TERMINATION UPON THE OCCURRENCE OF AN EVENT OF DEFAULT. Upon the
occurrence of any such Event of Default, the nondefaulting party may, at its
option, by notice to the defaulting party declare that this Agreement shall
be thereby terminated and such termination shall be effective as of the date
such notice has been communicated to the defaulting party. If you default,
Xxxxxxxxxx Correspondent Services shall have sole discretion to determine
what orders, if any, it shall accept for any Introduced Account, and shall in
addition to all rights it has under this Agreement, have all rights granted
to it under the Customer Agreements incorporated by reference herein. In such
event, Xxxxxxxxxx Correspondent Services shall be entitled, upon the consent
of the Customer, to accept instructions directly from the Customer and to
transfer the accounts directly to Banc of America Securities, Inc.
(C) TERMINATION UPON MISREPRESENTATION OF CLEARING RELATIONSHIP AS
BRANCH, AFFILIATION OR AGENCY. Should you in any way hold yourself out as,
advertise or represent that your are the agent of, affiliated with, or a
branch of Xxxxxxxxxx Correspondent Services, Xxxxxxxxxx Correspondent
Services shall have the power, at its option, to terminate this Agreement and
you shall be liable for any, loss, liability, damage, cost or expense
(including but not limited to fees and expenses of legal counsel) sustained
or incurred by Xxxxxxxxxx Correspondent Services as a result of such
advertisement or representation.
(D) TERMINATION FOR OTHER REASONS. This Agreement may be canceled by
either of the parties hereto upon ninety (90) days' written notice.
(E) EARLY TERMINATION. In the event that this Agreement shall be
terminated for any reason prior to two (2) years following the date hereof,
you shall pay to Xxxxxxxxxx Correspondent Services a termination fee equal to
the expenses incurred by Xxxxxxxxxx
Correspondent Services in establishing systems procedures and capacity for
servicing you and in discontinuing this Agreement. If there is insufficient
collateral in the Collateral Account to cover all or part of the termination
fee (in addition to any other liabilities of you to Xxxxxxxxxx Correspondent
Services), said fee shall be paid within ten (10) days after your receipt of
a statement of Xxxxxxxxxx Correspondent Services setting forth the expenses
incurred by Xxxxxxxxxx Correspondent Services.
(F) SURVIVAL. Termination shall not affect any of the rights and
liabilities of the parties hereto incurred before the date of termination.
SECTION 16. MISCELLANEOUS.
(A) AGREEMENT SUPERSEDES PREVIOUS AGREEMENTS/MODIFICATIONS. This
Agreement supersedes any previous agreement and may be modified only by a
writing signed by both parties to this Agreement. Such modification shall not
be deemed to be a cancellation of this Agreement.
(B) SUBMISSION OF AGREEMENT FOR APPROVAL. This Agreement and any
amendment ox modification shall be submitted to and/or approved by the NYSE
or such other SRO having authority to review and/or approve this Agreement or
any amendment or modification hereof. In the event of any such disapproval,,
the parties hereto agree to bargain in good faith to achieve the requisite
approval.
(C) ARBITRATION/LITIGATION. All disputes and controversies between
you and Xxxxxxxxxx Correspondent Services relating to or arising out of their
relationship or this Agreement shall be submitted to binding arbitration
under the auspices of and pursuant to the arbitration rules of the NYSE and
shall take place in the city of New York, New York.
(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 you or Xxxxxxxxxx
Correspondent Services. Any assignment of this Agreement shall be subject to
the requisite review and/or approval of any SRO whose review and/or approval
must be obtained prior to the effectiveness and validity of such assignment.
No assignment of this Agreement by you shall be valid unless Xxxxxxxxxx
Correspondent Services consents to such an assignment in writing. Any
assignment by Xxxxxxxxxx Correspondent Services to any subsidiary that it may
create or acquire or control directly or indirectly will be deemed valid and
enforceable in the absence of any consent from you.
(E) GOVERNING LAW. 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 New York without reference to the conflict of law provisions thereof.
(F) 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.
(G) NOT A JOINT VENTURE OR AGENCY. Neither this Agreement nor any
operation hereunder shall create a general or limited partnership,
association, joint venture, branch, or agency relationship between you and
Xxxxxxxxxx Correspondent Services, and you shall not make any statement or
representation to the contrary.
(H) SERVICES COVERED BY THIS 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 you any special treatment regarding any
other arrangements, agreements or understandings that presently exist or
which may hereafter exist between you and your affiliates, on the one hand,
and Xxxxxxxxxx Correspondent Services and its affiliates, on the other.
(I) SEVERABILITY. 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. 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.
(J) WAIVER. 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 in the Agreement,
or under any applicable statute or law, shall not be construed to be a waiver
of, or to limit the exercise of, such right, power, remedy or privilege. No
single, partial or other exercise of any such right, power remedy or
privilege shall preclude the further exercise thereof or the exercise of any
other right, power, remedy or privilege.
(K) NOTICES. All notices, consents, directions, approvals,
restrictions, requests, or other communications required or permitted to be
delivered hereunder shall be given to the parties hereto, effective upon
delivery, at the addresses specified below:
If to Clearing Broker:
Montgomery Correspondent Services a
division of Banc of America Securities LLC
000 Xxxxxxxxxx Xxxxxx Xxx Xxxxxxxxx, XX
00000 Attn: Xxxx X. Xxxxxx
With a copy to: Xxxxxx X. Xxxxxxxxx
Managing Director and
Director, Legal & Regulatory Affairs
Banc of America Securities LLC
000 Xxxxx Xxxxx Xxxxxx, XX0-000-00-00
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
If to Introducing Broker:
Xxxxxx Financial, L.P.
0000 Xxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Attn: Xxxxx Xxxxxx
Either party may change its address for notice purposes by giving written
notice pursuant to registered mail of the new address to the other party.
(L) INVESTIGATION OF INTRODUCING BROKER'S CREDIT. The Clearing
Broker shall have the right to investigate your credit and financial
worthiness.
(M) HIRING AWAY. Without the prior written consent of Xxxxxxxxxx
Correspondent Services, you will not during the period of this Agreement and
for one year following its termination, hire or attempt to hire any person
who is employed by Xxxxxxxxxx Correspondent Services or whose employment with
Xxxxxxxxxx Correspondent Services terminated within the one-year period prior
to the termination of this Agreement. The same policy shall apply to
Xxxxxxxxxx Correspondent Services with regard to the hiring of persons
employed by Introducing Broker.
Please evidence your agreement to the foregoing by executing and delivery to
Xxxxxxxxxx Correspondent Services the enclosed copy hereof, and the
information required by Sections 9(A) and (B) and 10(A) herein, whereupon you
and Xxxxxxxxxx Correspondent Services, a division of Banc of America
Securities LLC shall have entered into this Agreement.
Very truly yours,
XXXXXXXXXX CORRESPONDENT SERVICES
a division of Banc of America Securities LLC
By: /s/ Xxxx X. Xxxxxx
Xxxx X. Xxxxxx, President and Chief Executive Officer
Accepted and Agreed:
Name of Introducing Broker
By: /s/ Xxxxx X. Xxxxxx
Xxxxx Xxxxxx X. Xxxxxx, President and Partner
Date:
