EXHIBIT 10
FULLY DISCLOSED CLEARING AGREEMENT
BETWEEN
XXXXXXXXX XXXXXXX & CO.
AND
FIRST SOUTHWEST COMPANY
TABLE OF CONTENTS
RECITALS..................................................................................................................1
1.0 Representations and Warranties .................................................................................1
2.0 Customer and ALEX Accounts .....................................................................................2
2.a. Opening, Approving and Monitoring, Customer Accounts ...................................................2
2.a. I Account Documentation ..................................................................................2
2.a.2 Know ledge of Customer and Customer's Investment Objectives ............................................3
2.a.3 Acceptance of Accounts .................................................................................3
2.a.4 Compliance Supervision .................................................................................4
2.a.5 Supervision of Orders and Accounts .....................................................................4
2.b. Extension of Credit ....................................................................................4
2.c. Maintenance of Books and Records .......................................................................4
2.d. Receipt, Delivery and Safeguarding of Funds and Securities .............................................4
2.e. Confirmations and Statements ...........................................................................4
2.f. Acceptance of Orders and Execution of Transaction.......................................................4
2.g. Customer Responsibility for Certain Purposes ............................................................4
2.h. Notice to Customers .....................................................................................4
2.i. Option Accounts .........................................................................................5
2.j. Accounts of Associated Persons ..........................................................................5
2.k. Proprietary Accounts ....................................................................................5
3.0 Extension of Credit ............................................................................................5
3.a. Margin Agreements ......................................................................................5
3.b. Margin and Mar-in Maintenance ..........................................................................5
3.c .Margin Requirements ...................................................................................6
3.d. Margin Disclosure ......................................................................................6
3.e. Losses .................................................................................................6
4.0 Maintenance of Books and Records ..............................................................................6
5.0 Receipt, Delivery and Safeguarding of Funds and Securities .....................................................7
5.a. Receipt and Delivery in the Ordinary Course of Business ................................................7
5.b. Custody Services .......................................................................................7
5.c. Receipt and Delivery Pursuant to Special Instruction ...................................................7
5.d. When Issued Transactions ...............................................................................8
6.0 Confirmations and Statements ...................................................................................8
6a. Preparation and Transmission ...........................................................................8
6b. Examination and Notification of Errors .................................................................8
7.0 Acceptance of Orders, Execution of Transactions, Other Services ................................................8
7.a. Customers' Orders ......................................................................................8
7.b. Transactions Clearing ..................................................................................9
7.c. Other Services .........................................................................................9
8.0 Fees and Settlements for Securities Transactions ...............................................................9
8.a. Commissions - Fees for Clearing Services...............................................................9
8.b. Settlements ...........................................................................................9
8.c. Training Expenses .....................................................................................10
9.0 Deposit .......................................................................................................10
10.0 Indemnification ...............................................................................................11
FULLY DISCLOSED CLEARING AGREEMENT
This Fully Disclosed Clearing Agreement (the "Agreement") is executed
and entered into by and between First Southwest Company ("FSWC"), a Texas
Corporation, and Xxxxxxxxx Xxxxxxx & Co. ("ALEX"). This Agreement will be deemed
effective at 12:01 a.m. on the first day business is transacted hereunder.
RECITALS:
WHEREAS, ALEX is in the process of registering or is registered with
the Securities and Exchange Commission ("SEC") as a broker-dealer of securities
in accordance with Section 15(b) of the Securities Exchange Act of 1934 (the
"Act") and is applying for membership or is a member of the National Association
of Securities Dealers, Inc. ("NASD"), and desires to enter into an agreement
with FSWC for FSWC to clear and maintain customer accounts on behalf of ALEX;
WHEREAS, FSWC desires to enter into an agreement to provide clearing
services and to maintain cash, margin, option or other accounts ("Accounts") for
ALEX or customers ("Customers") of ALEX;
WHEREAS, the parties intend that ALEX will introduce certain of
Customers to FSWC, and that FSWC, as an independent contractor, may elect to
clear and carry the Accounts of said Customers pursuant to the terms and
conditions hereof; and
WHEREAS, the parties do not intend that a joint venture, partnership,
or other similar relationship be created as between them, but rather that each
party will maintain an independent relationship with the Customers whose
Accounts are introduced hereunder.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, and of the guarantee of this Agreement by any guarantor(s), and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties agree as follows:
1. REPRESENTATIONS AND WARRANTIES
ALEX represents and warrants to FSWC that:
(a) ALEX is either a corporation, a partnership, limited liability
company or other entity as specified on the signature page
hereof, in either case duly organized, validly existing and good
standing under the laws of the state of its incorporation or
other formation.
(b) ALEX has all the requisite authority in conformity with all
applicable laws and regulations to enter into this Agreement, to
retain the services of FSWC in accordance with the terms hereof,
and to perform its obligations hereunder.
(c) ALEX shall employ as a manager of its brokerage operation only a
person who has all requisite licenses and experience in
compliance with applicable securities laws and regulations.
(d) ALEX shall duly employ only such sales and supervisory personnel
("Registered Representatives") who have the requisite licenses
and experience in compliance with applicable securities laws and
regulations.
(e) ALEX has advised FSWC of any arrangements in existence with any
other firm for the provision by such other firm of clearing
services for any Customer Accounts or ALEX Accounts; and
satisfactory provisions have been made for the termination of
any such arrangements in connection with the implementation of
the CLEARING services to be provided by FSWC hereunder.
(f) ALEX has, if applicable, informed FSWC of any independent agents
or independent contractors used in providing the services
contemplated hereunder.
(g) ALEX is registered as a broker/dealer with the SEC and is in
compliance with the rules and regulations thereof,
or is in the process of so registering
(h) ALEX is a member firm in good standing of the NASD and is in
compliance with the rules and regulations thereof, or has
applied for such membership.
FSWC represents and warrants to ALEX that:
(a) FSWC is a corporation duly organized, validly existing and in
good standing under the laws of the state of Texas.
(b) FSWC is registered as a broker-dealer with the SEC and is in
compliance with the rules and regulations thereof.
(c) FSWC is a member firm in good standing of the NASD and is in
compliance with the rules and regulations thereof.
(f) FSWC is in compliance with the rules and regulations of each
national securities exchange of which it is a member.
2. CUSTOMER AND ALEX ACCOUNTS
Responsibility for compliance with the provisions of the Conduct
Rules of the NASD regarding Customer accounts shall be allocated between FSWC
and ALEX as set forth below.
(a) OPENING, APPROVING AND MONITORING CUSTOMER ACCOUNTS.
(1) ACCOUNT DOCUMENTATION. ALEX will be responsible
for obtaining and verifying all required
information and the identity of each potential
Customer. ALEX will be responsible for the
maintenance and retention of all documents
relating to an Account. ALEX hereby acknowledges
its obligation to retain said documents in an
easily accessible place for the requisite time
periods in accordance with SEC rules and agrees
to provide the original application by overnight
delivery or a legible copy by facsimile
transmission of it within 24 hours of a request
from FSWC. The foregoing notwithstanding, New
Account Agreements, Customer Margin and Short
Account Agreements and any other documents and/or
Agreements as required by FSWC in the normal
course of business shall be provided by ALEX to
FSWC for maintenance and retention by FSWC. ALEX
shall forward completed documents, and copies of
any other documents as specified by FSWC, to FSWC
in accordance with FSWC's procedures. FSWC shall
have no responsibility for the verification of
signatures or other information contained on any
such agreements or documentation, but shall
retain the right, in any instance where FSWC
elects to do so, (i) to require ALEX to verify
and authenticate to FSWC any such signatures or
other information, or (ii) reject any such
agreement or documentation as insufficient or
incomplete. ALEX WILL be responsible for
complying with the requirements of SEC Rule
15g2-6, relating to transactions in xxxxx stocks,
if applicable.
(2) KNOWLEDGE OF CUSTOMER AND CUSTOMER'S INVESTMENT
OBJECTIVES. ALEX WILL be responsible for learning
and documenting all the facts relative to every
Customer necessary to insure compliance by ALEX
with applicable rules and regulations, including,
the information and instructions submitted to
FSWC pursuant to Section 2(a)(1), any additional
facts relative to the Customer's investment
objectives, and to the nature of every, Customer
Account, every order and every person holding
power of attorney over any Customer Account. It
shall be the responsibility of ALEX to ensure
that those of its Customers who open or maintain
Accounts hereunder shall not be minors; and ALEX
will not accept Accounts for such persons as come
within the express provisions of Rule 3050 of the
Conduct Rules of the NASD, relating to
transactions for or by associated persons, unless
ALEX has complied with the provisions of
said Rule and, if applicable, provided evidence
of employer approval as required by said Rule.
ALEX shall be solely responsible for any issues
regarding the suitability of any investments for
ALEX'S Customers.
(3) ACCEPTANCE OF ACCOUNTS. FSWC will execute orders
for ALEX'S customers whose Accounts have been
accepted by FSWC through ALEX, but only insofar
as such orders are transmitted by ALEX to FSWC
through the FSWC on-line system or telephonically
after ALEX'S appropriate principals have accepted
and approved said Accounts. ALEX shall be
responsible for notifying FSWC in writing of the
identity of the persons authorized to enter
orders for ALEX and its customers; and until such
notification is received, FSWC shall be fully
protected in relying on the incumbency and
authority of all persons who represent they are
registered representatives of ALEX, or represent
they are authorized to act for or on behalf of a
registered representative of ALEX, without
investigation or inquiry of any kind by FSWC. Any
person so identified to FSWC as BEING authorized
to enter orders shall be deemed to retain such
authority until such time as ALEX establishes to
the satisfaction of FSWC that such person is no
longer employed by ALEX. Each Customer and ALEX
Account approved by ALEX and opened with FSWC
shall be subject to FSWC's acceptance. ALEX WILL
not Submit any Customer for FSWC's acceptance
unless FSWC's standards for the establishment of
an Account, as set forth in this Agreement, have
been met. FSWC reserves the RIGHT to withhold
acceptance of or to reject, for any reason, any
Customer Account, ALEX Account or any transaction
for any Account and to terminate any Account
previously accepted by FSWC at any time, for any
reason, and without approval of or notice to
ALEX. Initial acceptance of each Account shall be
conditioned upon FSWC's receipt of completed
forms as required by Section 2(a)(1). ALEX shall
not submit such forms with respect to any
Customer Account unless ALEX has in its
possession the documentation of all information
required pursuant to Section 2(a)(2). FSWC shall
be under no obligation to accept any, Account as
to which any documentation required to be
submitted to FSWC or maintained by ALEX pursuant
to Sections 2(a)(1) and 2(a)(2) is incomplete.
Prior to acceptance of any Account, no action
taken by FSWC or any of its employees, including
without limitation the clearing of a trade in any
Account, shall be deemed to be or shall
constitute acceptance of such Account.
(4) COMPLIANCE SUPERVISION. FSWC will not provide any
compliance, supervision or enforcement support
activities to ALEX. There is no written, verbal
or implied agreement between FSWC and ALEX for
FSWC to offer or provide these services. However,
FSWC reserves the right to investigate any ALEX
client, order or Account for the purposes of
determining whether or not ALEX is, in fact, in
compliance with all applicable rules and
regulations, including compliance with FSWC House
Rules.
(5) SUPERVISION OF ORDERS AND ACCOUNTS. As between
FSWC and ALEX, ALEX WILL be responsible for the
review and supervision of, and the suitability
of, investments made by every Customer. ALEX
SHALL be responsible for insuring, that all
transactions in and activities related to all
Accounts opened by it with FSWC, including
discretionary Accounts, will be in compliance
with all applicable laws, rules and regulations
of the United States, the several states,
governmental agencies, securities exchanges and
the NASD, including any laws relating to ALEX'S
FIDUCIARY responsibilities to Customers, either
under the Employee Retirement Income Security
Act of 1974 or otherwise; and in this connection,
ALEX shall diligently supervise the activities
of its officers, employees and representatives
with respect to such Accounts. FSWC will perform
the clearing services provided for in this
Agreement for Accounts accepted by it in
accordance with the terms of this Agreement, as
it may be amended from time to time, and
otherwise in accordance with its judgment. To the
extent, if any, that FSWC accepts from ALEX
orders for execution in accordance with Section
7(a), ALEX SHALL be responsible for informing
FSWC of the location of the securities that are
the subject of the order so that FSWC may comply
with the provisions of Rule 3110 of the Conduct
Rules of the NASD.
(b) EXTENSION OF CREDIT. The division of responsibilities with
respect to the extension of credit is set forth in Section 3 of
this Agreement.
(c) MAINTENANCE OF BOOKS AND RECORDS. The division of
responsibilities with respect to the maintenance of books and
records is set forth in Section 4 of this Agreement.
(d) RECEIPT, DELIVERY AND SAFEGUARDING OF FUNDS AND SECURITIES. The
division of responsibilities with respect to the receipt and
delivery of and safeguarding of funds and securities is set forth
in Section 5 of this Agreement.
(e) CONFIRMATIONS AND STATEMENTS. The division of responsibilities
with respect to confirmations and statements is set forth in
Section 6 of this Agreement.
(f) ACCEPTANCE OF ORDERS AND EXECUTION OF TRANSACTION. The division
of responsibilities with respect to the acceptance of orders and
the execution of transactions is set forth in Section 7 of this
Agreement.
(g) CUSTOMER RESPONSIBILITY FOR CERTAIN PURPOSES. Notwithstanding
anything herein to the contrary, for purposes of the Securities
Investment Protection Act of 1970 and the Financial
Responsibility Rules adopted under the Act, the Customers ,who
maintain Accounts with FSWC are customers of FSWC. For all other
purposes, such Customers shall be customers of ALEX.
(h) Notice to Customers. Subject to the requirements of the Conduct
Rules of the NASD, ALEX shall provide, or cause to be provided,
to every Customer, upon the opening of a Customer Account, notice
of the existence and general terms of this Agreement.
(i) OPTION ACCOUNTS. In the event that any customer elects to engage
in listed securities options transactions in an Account accepted
by FSWC, or ALEX enters securities options transactions in an
Account accepted by FSWC, ALEX agrees to (i) abide by FSWC's
requirements and time limitation for accepting an exercise notice
with respect to a Customer's options positions, which
requirements and time limitations may be different from the
minimum requirements imposed by the Options Clearing Corporation
("OCC") or other regulatory or self-regulatory organization from
time to time, (ii) determine the suitability of the Customer for
trading options and approving specific options strategies and
transactions, (iii) provide the Customer with a Current copy of
the OCC disclosure document and applicable updates as published
from time to time by OCC (and complying with such other
requirements involving the dissemination of disclosure documents,
including prospectuses, as may be required from time to time by
applicable law), and (iv) notify the customer when customer has
been assigned delivery responsibility regarding any short
options positions, and accept exercise notices from the customer
regarding long options positions.
(j) ACCOUNTS OF ASSOCIATED PERSONS. In each case in which a Customer
is an employee or otherwise associated with an NASD member, ALEX
shall be responsible for notifying such member in accordance with
the provisions of Rule 3050 of the Conduct Rules of the NASD.
(k) PROPRIETARY ACCOUNTS. XXXX xxx request that FSWC maintain one or
more Accounts on its books to reflect the proprietary securities
and/or cash positions of ALEX (a "Proprietary Account"). FSWC
may, in its sole discretion, agree or refuse to maintain any such
Proprietary Account. If FSWC agrees to maintain one or more
Proprietary Accounts, all of the other terms and conditions of
this Agreement shall apply, and each such Proprietary Account
shall be deemed an "Account" hereunder, except to the extent that
this Agreement provides for differing treatment of Accounts and
Proprietary Accounts.
3. EXTENSION OF CREDIT
Responsibility for compliance with the provisions of Regulation T,
issued by the Board of Governors of the Federal Reserve System pursuant
to the Securities Exchange Act of 1934 ("Regulation T"), and all other
applicable rules, regulations and requirements of any EXCHANGE or
regulatory agency affecting the extension of credit shall be allocated
between FSWC and ALEX as set forth in this Section 3.
(a) MARGIN AGREEMENTS. At the time of opening of each margin account,
ALEX WILL furnish FSWC with an FSWC Customer Margin and Short
Account Agreement, executed by the Customer, on the form
furnished to ALEX by FSWC. As to any Account, until ALEX has
furnished FSWC with an executed margin agreement, FSWC may, at
its discretion, re-book any transactions initially cleared as a
margin transaction to be a cash transaction, liquidate the
Account or take any other action FSWC deems necessary.
(b) MARGIN AND MARGIN MAINTENANCE. ALEX is responsible for the
collection of initial margin and all amounts necessary to meet
subsequent maintenance calls in each Customer and ALEX Account to
insure compliance with Regulation T and the house rules of FSWC.
FSWC shall have the unlimited right to buy in or sell out
positions in Accounts whenever FSWC, in its sole discretion,
deems such action appropriate. FSWC may take any such action
regardless of whether any such Account is then in compliance with
applicable margin maintenance requirements or a request has been
made for an extension of time to make any payment required by
Regulation T. ALEX acknowledges that FSWC has the right to demand
payment on any debit balance in any ALEX Customer Account,
Proprietary Account or related ALEX Accounts; and ALEX shall be
liable to FSWC for any non-receipt of such payments upon demand.
(c) MARGIN REQUIREMENTS. Initial margin and margin maintenance
requirements applicable to any margin Account shall be in
accordance with the House Rules of FSWC, to the extent such rules
provide for higher requirements than those provided under any
law, any exchange or any regulatory agency. FSWC may, in its
discretion, change the margin requirements applicable to any
Account or class of accounts, as described in its House Rules,
and FSWC will notify ALEX of any such changes. ALEX shall be
responsible for advising each of its Customers of the changed
requirements, for collecting any additional Margin necessary to
insure compliance with such increased requirements and, if
necessary, liquidating positions in the Accounts.
(d) MARGIN DISCLOSURE. ALEX shall be responsible for providing
statements (Disclosure of Credit Terms in Margin Transactions)
under Rule 10b-16 to ALEX customers.
(e) LOSSES. In addition to, and not in limitation of, ALEX'S
agreement to indemnify FSWC pursuant to the provisions of Section
10, ALEX indemnifies and holds harmless FSWC from and against any
and all loss, cost, expense and liability (including legal and
accounting fees and expenses) sustained by FSWC arising out of
any of the following:
(i) any failure by any Customer to comply with the terms of
any agreement with FSWC, including without limitation, its
Customer Margin and Short Account Agreement;
(ii) FSWC's re-booking of margin transactions as cash
transactions pursuant to Section 3(a);
(iii) the execution by an FSWC broker of a transaction for the
account of a Customer pursuant to Section 3(b);
(iv) in a margin transaction, the failure of ALEX or any
Customer to comply with Regulation T;
(v) the failure of ALEX to satisfy its obligations under this
Section 3;
(vi) in a cash transaction, the failure of delivery of
securities sold or failure of payment for securities
purchased in accordance with the provisions of Regulation
T; the return to FSWC unpaid of any check given to FSWC by
ALEX or any Customer; or the payment and/or delivery of
all "when issued" transactions which FSWC may accept or
execute for the Accounts; or
(vii) FSWC's refusal of any transaction or instruction from ALEX
or a Customer of ALEX, regardless of the circumstances, if
FSWC determines, in its discretion, that effecting such
transaction or following such instruction is or could be
detrimental to any such Customer, to FSWC and/or to ALEX.
4. MAINTENANCE OF BOOKS AND RECORDS
FSWC will maintain stock records and other records on a basis
consistent with generally accepted practices and/or mandated in the securities
industry and will maintain copies of such records as are produced by FSWC, in
accordance with the NASD and SEC guidelines for record retention, in effect from
time to time. FSWC and ALEX shall each be responsible for preparing and filing
the reports required by the governmental and regulatory agencies that have
jurisdiction over each and FSWC and ALEX WILL each provide the other with such
information, if any, which is in the control of one party but is required by the
other to prepare any such report.
At the commencement of business under the terms of this Agreement and
annually thereafter, FSWC will furnish to ALEX a list of all reports (such as
exception reports) which FSWC will offer to assist ALEX in its efforts to
supervise and monitor Customer Accounts and in order for ALEX to carry out its
functions and responsibilities pursuant to this Agreement. ALEX must specify to
FSWC, in writing within ten (10) days of receipt of the list, those reports
offered by FSWC that ALEX requires to supervise and monitor its Customers'
Accounts. FSWC shall preserve, as part of its books and records, copies of the
specific reports requested by and/or supplied to ALEX.
FSWC will give written notice to the chief executive officer and the
compliance officer of ALEX, indicating as of the date of such notice, the list
of reports offered to ALEX and specifying those reports that were actually
requested by and/or supplied to ALEX as of such date. FSWC shall provide a copy
of this written notice at the same time to the NASD as the designated examining
authority of ALEX.
FSWC shall furnish, upon request of the NASD as the designated
examining authority of ALEX, (i) a recreated copy of the report originally
produced; or (ii) the format of the report and the applicable data elements
contained in the original report.
5. RECEIPT, DELIVERY AND SAFEGUARDING OF FUNDS AND SECURITIES
(a) RECEIPT AND DELIVERY IN THE ORDINARY COURSE of Business.
FSWC will receive and deliver all funds and securities
in connection with transactions for Customer Accounts
in accordance with the Customer's instructions to
ALEX, provided that ALEX shall be responsible for
advising Customers of their obligations to deliver
funds or securities in connection with each such
transaction and for any failure of any Customer to
fulfill such obligation. FSWC shall be responsible
for the safeguarding of all funds and securities
delivered to and accepted by it, subject to count and
verification by FSWC. However, FSWC will not be
responsible for any funds or securities delivered by
a Customer to ALEX, its agents or employees until
such funds or securities are physically delivered to
FSWC's premises and accepted by FSWC or deposited in
bank accounts maintained in FSWC's name. It is
expressly understood and agreed, however, that ALEX
is responsible for compliance with the Currency and
Foreign Transactions Reporting Act (31 U.S.C. Section
5311. ET SEQ.) and the rules and regulations
promulgated thereunder (31 C.F.R. Section 103.11, as
amended, ET SEQ.). FSWC reserves the right to
transfer any and all monies and securities in ALEX
Customer Account(s) to the ALEX Customer, if ALEX
Customer account(s) are deemed by FSWC, in its sole
discretion, to be a risk to FSWC or if the account(s)
do(es) not comply and conform to the House Rules of
FSWC after request for compliance is transmitted to
the ALEX and/or ALEX Customer.
(b) Custody Services. Whenever FSWC has been instructed to act
as custodian of the securities in any ALEX or Customer
Account, or to hold such securities in "safekeeping," FSWC
may hold the securities in the Customer's name or may
cause such securities to be registered in the name of FSWC
or its nominee or in the names of nominees of any
depository used by FSWC. FSWC will perform the services
required in connection with ACTING as custodian for
securities in ALEX and Customer Accounts, such as: (i)
collection and payment of dividends; (ii) transmittal and
handling (through ALEX) of tenders or exchanges pursuant
to tender offers and Exchange offers as, if and when
received by FSWC; (iii) transmittal of all proxy materials
and other shareholder communications; and (iv) handling of
exercised, or expirations of, rights, warrants or
redemptions; provided, however, FSWC shall not be
responsible for reviewing or analyzing the terms and
provisions of any securities held in any), Account or for
determining the rights of ALEX or any Customer with
respect thereto.
(c) RECEIPT AND DELIVERY PURSUANT TO SPECIAL INSTRUCTION.
Subject to the limitations set forth in this Agreement and
consistent with the systems and procedures of FSWC, upon
instruction from ALEX or a Customer, FSWC will make such
transfers of securities or Accounts as may be requested.
ALEX shall be responsible for determining if any
securities held in ALEX or Customer Accounts are
"restricted securities" or "control stock" as defined by
the rules of the SEC; that orders executed for such
securities are in compliance with applicable laws, rules
and regulations; and that all necessary documentation
required to clear legal transfer (including opinions of
legal Counsel, if requested by FSWC or the transfer agent)
are provided in a timely manner. However, FSWC will not be
required to transfer securities if, in the exercise of its
good faith judgment, such transfer would violate any
applicable laws, rules or regulations or would subject
FSWC to liability or additional cost or expense.
(d) When Issued Transactions. In the case of the payment and
delivery of securities on a "when issued" basis, ALEX
shall remain responsible, as set forth in this Agreement,
until necessary and satisfactory payment of funds or
delivery of securities has been received by XXXX.
0. CONFIRMATIONS AND STATEMENTS
(a) PREPARATION AND TRANSMISSION. FSWC will prepare and send
to Customers monthly or quarterly statements of
account, which statements shall meet FSWC's
requirements as to format and quality and will indicate
that ALEX introduced the Account. Unless otherwise
agreed in writing, FSWC will be responsible for
preparing and transmitting confirmations; provided,
however, that ALEX'S right to prepare and transmit
confirmations shall be subject to prior written
approval by FSWC and compliance by ALEX with the
provisions of Rule 2230 of the Conduct Rules of the
NASD. ALEX shall be responsible for notifying the
Customer and FSWC if it is preparing and transmitting
confirmations. ALEX shall not generate and/or prepare
any statements, xxxxxxxx or confirmation respecting any
Account except as provided in this Agreement or
pursuant to an agreement executed between FSWC and ALEX
that authorizes ALEX to print and mail statements to
Accounts on behalf of FSWC. If such an agreement has
been executed, ALEX covenants that it shall comply with
all requirements for statements imposed upon FSWC under
all applicable laws, rules and regulations, including,
but not limited to, the SEC, NASD, Federal Reserve
Board and all other regulatory organizations. Copies of
all monthly or quarterly statements sent by FSWC to
Customers will be sent to ALEX. FSWC will also provide
to ALEX monthly statements of clearing services
performed by FSWC for ALEX and Customer Accounts
showing, the fees charged for such services during the
month, as provided in Section 8.
(b) EXAMINATION AND NOTIFICATION OF ERRORS. ALEX shall examine
promptly all monthly statements of account, monthly
statements of clearing services and other reports provided
to ALEX by FSWC. ALEX shall notify FSWC of any error
claimed by ALEX in any Account in connection with (i) any
transaction, prior to the settlement date of such
transaction, (ii) information appearing on daily reports,
within five days of such report, and (iii) information
appearing on monthly statements or reports, within 10 days
of ALEX's receipt of any monthly statement or report. Any
notice of error shall be accompanied by such documentation
as may be necessary to substantiate ALEX's claim. ALEX
shall provide promptly upon FSWC's request any additional
documentation which FSWC reasonably believes is necessary
or desirable to establish and correct any such error. In
all cases, FSWC reserves the right to determine the
validity of any claimed error.
7. ACCEPTANCE OF ORDERS, EXECUTION OF TRANSACTIONS, OTHER SERVICES
(a) CUSTOMERS' ORDERS. Acceptance of Customers' orders shall
be the responsibility of ALEX. ALEX shall advise each of
its Customers that its relationship with FSWC is solely
that of an introducing broker to a Clearing broker and
that, except as set forth in Section 2 above, ALEX bears
all responsibility for the Customer's Account. ALEX shall
be responsible for the authenticity of all orders. FSWC is
not obligated to accept for execution any orders placed
directly with FSWC by a Customer. In addition, FSWC is not
obligated to accept any orders from ALEX if FSWC
determines in good faith that it should not. ALEX assumes
the risk of failure by an over-the-counter dealer with
which ALEX executes an order, in the event such dealer
fails to perform, and ALEX will reimburse FSWC for any,
loss incurred by it in the transaction.
(b) Transactions Clearing. During the term of this agreement
FSWC will clear transactions on a fully disclosed basis
for Accounts of ALEX and the Customers that ALEX
introduces and FSWC accepts as provided in Section
2(a)(3); provided, however, that FSWC is not obligated to
clear any transactions for ALEX OR ALEX'S Customers if
FSWC determines in good faith that it should not.
(c) Other Services. FSWC will perform such other services,
upon such terms and at such prices, as FSWC and XXXX xxx
from time to time agree.
8. FEES AND SETTLEMENTS FOR SECURITIES TRANSACTIONS
(a) COMMISSIONS - FEES FOR CLEARING SERVICES.
(i) ALEX has provided to FSWC its basic commission schedule
and FSWC will charge each Customer the commission shown on
such schedule or which ALEX otherwise directs FSWC to
charge on each transaction. ALEX'S basic commission
schedule may be amended from time to time by written
instructions to FSWC from ALEX; provided, however, that
FSWC shall be required to implement such changes only to
the extent that they are within the usual capabilities of
FSWC's data processing and operations systems and only
over such reasonable time as FSWC may deem necessary or
desirable to avoid disruption of FSWC's normal operational
capabilities. FSWC may charge ALEX for changes in the
basic commission schedule. ALEX'S basic commission
schedule shall be within the format of FSWC's computer
system and must be expressly agreed to by FSWC.
(ii) FSWC will charge ALEX for clearing services according to
the fee schedule set forth in Schedule A attached
hereto and incorporated herein for all purposes. As
of the close of each month, FSWC shall forward to
ALEX a statement setting forth the fees earned in
accordance with Schedule A and the amounts due
thereunder. These charges shall be promptly paid by
ALEX. Charges may be modified from time to time by
FSWC without re-execution of this Agreement. To
implement new charges, FSWC will mail or telecopy a
new Schedule A to ALEX; and the new charges shall
become effective upon the expiration of 30 days from
the date of such mailing or telecopy. Upon the
expiration of such 30 days, the new Schedule A shall
become a part of and modify this Agreement without
any further action by the parties. During the
pendency of such 30-day notice period, the previous
charges shall Continue to be effective. In addition,
FSWC will charge ALEX expenses incurred by FSWC on
behalf of ALEX pursuant to this Agreement. Expenses
incurred by FSWC on behalf of ALEX that shall be
deducted from any payments due to ALEX from FSWC
include, but are not limited to, overlay of forms,
system equipment expenses, changes to commission
schedules and financial report information related
thereto, installation of data communication lines and
brokerage related credit inquiries, legal transfers,
Regulation T extensions, Mailgrams (buy-in or
sellout), microfiche of records, excess Security
Investors Protection Corporation protection for
Accounts and costs incurred in failure of ALEX to
provide social security or tax identification numbers.
(b) SETTLEMENTS. FSWC will collect all commissions from
Customers on behalf of ALEX and through ALEX. Upon
request, FSWC may make payments to ALEX against such
commissions in advance of the monthly settlement
contemplated by this Section 8(b); however, the amount of
such payments shall be determined in FSWC's sole
discretion based upon FSWC's experience with ALEX'S
operations.
As soon as practicable after the end of each month, FSWC
will credit ALEX with the amount of commissions and other
amounts collected by FSWC on ALEX'S behalf, and deduct all
amounts due to FSWC from ALEX (including without
limitation, Customers' unsecured debit items, however
arising). FSWC shall pay ALEX the amount by which the
total owed ALEX exceeds the total owed FSWC, or shall send
a statement to ALEX and ALEX shall pay FSWC the amount by
which the total owed FSWC exceeds the total owed ALEX. If
ALEX fails to make such payment, FSWC shall have the right
to charge any other Account maintained by FSWC for ALEX or
any other assets of ALEX held by FSWC (including the
deposit required pursuant to Section 9 and positions and
balances in ALEX Accounts) for the net amount due FSWC.
Any failure by FSWC to charge any Account or assets of
ALEX held by FSWC shall not act as a waiver of FSWC's
right to demand payment of, or to thereafter charge ALEX'S
Accounts for, the full amount due at any time. In
addition, FSWC may establish on its books an "error
account" for the account and risk of ALEX, upon terms and
conditions
which are consistent with custom and practice in the
securities industry. The negative balance in such error
account, if any, may at any time be charged by FSWC in its
sole discretion, to ALEX and FSWC may include such amount
in the settlement statement from time to time.
(c) TRAINING EXPENSES. FSWC may provide on-site training or
other assistance which it deems necessary for the
effective use of the FSWC system. ALEX shall be
responsible for the prompt reimbursement of expenses upon
receipt of an invoice from FSWC, incurred in connection
with the training of ALEX personnel, including without
limitation, travel, lodging, meals, incidentals, and
amounts paid by FSWC to third parties under contracts to
perform such services. However, FSWC shall have no
obligation to provide such training or to supervise
personnel of ALEX.
9. DEPOSIT
(a) Contemporaneously with the signing of this Agreement, ALEX
will deliver cash or securities to FSWC as specified in
Schedule A attached, for deposit in an account maintained
by FSWC (the "Deposit Account"). If at any subsequent time
FSWC, in its sole discretion, requires an additional
deposit, ALEX will deposit additional cash or securities
in an amount specified by FSWC. Instead of making such
additional deposit, XXXX xxx reduce ALEX'S business volume
or modify the nature of the securities involved in the
ALEX'S transactions ("business mix") as specified by FSWC.
Any failure by FSWC to demand compliance with the
requirement that ALEX either deposit additional amounts or
modify ALEX'S business mix shall not act as a waiver of
FSWC's right to demand compliance with such requirements
at any time. If the Deposit Account is not adequately
funded as required by FSWC, FSWC may, in addition to all
other rights under this Agreement, transfer cash or
securities of ALEX held by FSWC in any other account to
the Deposit Account. If ALEX fails to comply with a
request by FSWC for an additional deposit, and FSWC does
not transfer other cash or securities of ALEX to the
Deposit Account, resulting in ALEX thereby electing to
reduce its business or to modify its business mix, ALEX
agrees that if FSWC determines it to be necessary, FSWC
shall accept only liquidating, transactions for Customer
Accounts and that ALEX WILL give notice of such fact to
Customers. If such notice is not given by ALEX to
Customers in a timely manner, ALEX agrees that FSWC may
give such notice to Customers. In addition to any and all
other rights afforded at law, in equity, under any
customer account agreement, under this Agreement, or
otherwise, FSWC shall have the unlimited right to set-off
any and all indebtedness or other obligations of ALEX to
FSWC, whether arising under this Agreement, from debit
balances in ALEX or Customer Accounts, or otherwise,
against all or any portion of the Deposit Account. ALEX
agrees that, if cash in the Deposit Account is
insufficient to satisfy the indebtedness of ALEX to FSWC,
or if this Agreement is terminated for any reason, FSWC
shall have the right to liquidate securities deposited in
the Deposit Account or maintained in any other ALEX
Account, without notice to ALEX, and to set off against
the cash proceeds from such liquidation any and all
indebtedness or other obligations of ALEX to FSWC.
(b) The cash and securities in the Deposit Account may be held
by FSWC for a period of time (the "Post-Termination
Retention Period") subsequent to the Termination Date of
this Agreement as may be necessary, as determined in the
sole discretion of FSWC, for the protection of FSWC from
and against any claims or proceedings, either pending or
threatened, and relating to the obligations of XXXX xxxxx
the terms of this Agreement. In particular, the Deposit
Account may continue to be held by FSWC pursuant to the
terms and provisions of Section 10(c) of this Agreement.
It is understood and agreed that the Post-Termination
Retention Period shall not be less than thirty (30) days.
Upon conclusion of the Post-Termination Retention Period,
FSWC shall remit, pay and deliver such cash and securities
as shall remain in the Deposit Account to ALEX.
10. INDEMNIFICATION
(a) INDEMNITY. ALEX agrees to indemnify and hold harmless
FSWC, each person who controls FSWC within the meaning of
the Act and any other of the directors, officers,
employees, agents and attorneys of FSWC ("FSWC Indemnified
Persons") from and against all claims, demands,
proceedings, suits and actions and all liabilities,
losses, expenses and costs (including any legal and
accounting fees and expenses) relating to FSWC's defense
of any failure, for any reason, fraudulent or otherwise,
by ALEX or ALEX's employees or Customers to comply with
any obligation under this agreement or any other agreement
executed and
delivered to FSWC in connection with FSWC's performance of
services hereunder, and any act or failure to act by FSWC
Indemnified Persons, except any act or failure to act
which is the result of gross negligence or willful
misconduct on the part of any such FSWC Indemnified
Person. It is expressly agreed and understood that ALEX
accepts full responsibility and liability for any act or
failure to act by, if applicable, an independent agent or
independent contractor used by ALEX in providing the
services contemplated hereunder. Without limiting the
generality of the foregoing, such failure is explicitly
intended by the parties to include failure resulting from
(i) suspension of trading or bankruptcy or insolvency of
any company, Securities of which are held in one or more
Accounts; (ii) failure by any Customer or ALEX to maintain
adequate margin; or (iii) breach of any obligation
existing between ALEX and a customer of ALEX or any law,
rule or regulation of the United States, a state or
territory thereof, the SEC, the Federal Reserve Board or
other authority, including but not limited to the CBOE,
NYSE, OCC, GSCC, NASD, MSRB, DTC, NSCC or any Transfer
Agent, applicable to any transaction contemplated by this
Agreement.
FSWC shall indemnify and hold ALEX harmless against any
losses, claims, damages, liabilities or expenses,
including without limitation, those asserted by its
customers (which shall include, but not be limited to,
all costs of defense and investigation and all attorney's
fees) to which XXXX xxx become subject, insofar as such
losses, claims, damages, liabilities or expenses arise out
of, or are based upon the gross negligence or willful
misconduct of FSWC or its employees in providing the
services contemplated hereunder.
Promptly after receipt by any indemnified party under this
Section of notice of the commencement of any action, such
indemnified party will, if a claim in respect thereof is
to be made against the indemnifying party under this
Section, notify the indemnifying party of the commencement
thereof, but the omission so to notify the indemnifying
party will not relieve it from any liability that it may
have to any indemnified party under this Section or
otherwise.
In case any such action is brought against any indemnified
party, and the indemnifying party receives notice of the
commencement thereof, the indemnifying party will be
entitled to participate in the defense thereof with
counsel reasonably satisfactory to such indemnified party.
Regardless of whether the indemnifying party elects to
participate in the defense, the indemnified party shall
have the right to employ separate counsel in any, such
action and to direct and control the defense thereof, and
all fees and expenses of such counsel shall be the
responsibility of the indemnifying party.
(b) Security, Interest and Authorization to Offset. In order
to secure the prompt payment when due of all indebtedness
of any kind or character of ALEX to FSWC, whether arising
under this Agreement, any Account agreement, by operation
of law, or otherwise, now existing or hereafter arising
including without limitation, (i) any cost or expense
resulting from failures to deliver or failures to receive
securities, (ii) the amount of any unsecured debit
balances in any Customer or ALEX Account which may exist
at any time, and (iii) as and when incurred by FSWC, all
amounts as to which FSWC shall be entitled to
indemnification pursuant to the provisions of Section
10(a) (the "Obligation"), ALEX hereby grants to FSWC a
first priority lien and security interest in and to any
ALEX Account (including Proprietary Accounts) maintained
by FSWC and any other assets of any kind of ALEX now or
hereafter held by FSWC. In addition to any and all other
rights and remedies to which FSWC may be entitled under
this Agreement or applicable law, upon the occurrence of a
default in the payment of any portion of the Obligation as
and when same becomes due, or following demand therefor by
FSWC, FSWC may satisfy the payment of the Obligation, in
whole or in part, by offsetting against any cash positions
in such Account without prior notice thereof to ALEX. In
this regard, FSWC shall have complete discretion to
liquidate or sell any securities or other assets of ALEX
from time to time held by FSWC, without notice to ALEX,
and to offset against the proceeds of such sale(s) all or
any part of the Obligation. No delay in proceeding against
any ALEX Account or asset shall operate as a waiver of
FSWC's right to do so at any future time as and when FSWC
deems appropriate. In addition, FSWC shall have the
unlimited right to set-off any part of the Obligation
against any obligations of FSWC to ALEX, including under
the Deposit Account (as described in Section 9).
ALEX hereby constitutes and appoints FSWC as its lawful
attorney-in-fact and grants to FSWC a power of attorney
with full power and authority, in the name, place, and
stead of ALEX, to exercise, do, or perform any act in
connection with, arising out of, or relating to the
exercise of any offset rights granted herein and the
right to liquidate securities held by FSWC. This power of
attorney further authorizes FSWC to sign, endorse,
execute, acknowledge, deliver, receive, and possess all
such notices, filings, agreements, covenants, conveyances,
receipts and other documents or instruments in writing of
whatever kind and nature as may be necessary or proper in
the exercise of the rights and powers herein granted.
(c) RESERVES. In connection with any claim that does or could
give rise to a claim for indemnification under this
Section 10 for FSWC or an FSWC Indemnified Person, FSWC
may, in its discretion, in addition to any and all other
rights and remedies under this Agreement, reserve and
retain any money, securities or other property of ALEX
pending a determination of such claim. The money,
securities or other property of ALEX set aside in such a
reserve shall be subject to FSWC's standard lien and
security interest described in Section 10(b) above.
11. UNDERTAKINGS OF ALEX
(a) FINANCIAL STATEMENTS AND OTHER REPORTS. As soon as same
become available, but in any event within 90 days after
the end of each fiscal year of ALEX during the term
hereof, ALEX WILL furnish to FSWC copies of ALEX'S balance
sheet and statement of earnings for such fiscal year. Each
such balance sheet and statement of earnings shall be
certified by independent public accountants. ALEX also
shall furnish FSWC with copies of its monthly and
quarterly Focus filings simultaneously with the filing
thereof.
(b) OTHER CLEARING SERVICES. During the term of this
Agreement, ALEX not will offer the services contemplated
hereunder to its Customers through a broker other than
FSWC without prior written approval by FSWC.
(c) SUSPENSION OR RESTRICTION. In the event that ALEX or any
employee of ALEX shall become subject to suspension or
restriction by any regulatory body having jurisdiction
over ALEX and ALEX'S securities business, ALEX WILL notify
FSWC immediately and ALEX authorizes FSWC to take such
steps as may be necessary for FSWC to maintain compliance
with the rules and regulations to which FSWC is subject.
ALEX further authorizes FSWC, in such event, to comply
with directives or demands made upon FSWC by any exchange
or regulatory body. In connection with such directives or
demands, FSWC may seek advice or legal counsel and ALEX
will reimburse FSWC for reasonable fees and expenses of
such counsel.
(d) NO LIENS OR ENCUMBRANCES. During the term of this
Agreement. and for so long thereafter as FSWC shall
maintain any Proprietary Account(s) for ALEX or hold any
cash or securities pursuant to the deposit arrangement
specified in Paragraph 9 hereof ("Deposit"), ALEX WILL
not, directly or indirectly, without the prior written
consent of FSWC, (i) create, incur, or suffer or permit to
be created or incurred or to exist any lien, security
interest or other encumbrance upon or against any of the
Proprietary Account(s) or the Deposit, other than the
liens, security interests and other rights held by FSWC as
provided for herein, or (ii) except for routine trading
activity conducted in the ordinary course of the brokerage
business of ALEX, transfer, assign or otherwise convey all
or any portion of the Proprietary Account(s) or the
Deposit to any other person or entity.
(e) UNDERWRITINGS; POWER OF ATTORNEY. During the term of this
Agreement and for so long thereafter as XXXX xxx be
indebted to FSWC under the further terms of this
Agreement, ALEX will not, without the prior written
consent of FSWC, engage or participate in the underwriting
of any securities offering. In the event ALEX shall
hereafter engage or participate in the underwriting of any
securities offering, ALEX hereby constitutes and appoints
FSWC as its lawful attorney-in-fact and grants to FSWC a
power of attorney with full power and authority, in the
name, place, and stead of ALEX, to exercise, do, or
perform any act, right, power, duty, or obligation
whatsoever that ALEX now has or may acquire the legal
right, power, or capacity to exercise, do, or perform in
connection with, arising out of, or relating to the
exercise of any overallotment rights or privileges held by
ALEX in connection with such underwriting or ALEX'S
participation therein. This power of attorney further
authorizes FSWC to sign, endorse, execute, acknowledge,
deliver, receive, and possess all such contracts,
agreements, options, covenants, conveyances, receipts and
other documents or instruments in writing of whatever kind
and nature as may be necessary or proper in the exercise
of the rights and powers herein granted. This power of
attorney shall be conclusive proof that the rights,
powers, and authority granted to FSWC are in full force
and effect and may be relied upon by any person who acts
in
good faith under this power of attorney.
(f) Regulatory, Investigations. ALEX will cooperate with FSWC
in any investigation which FSWC shall undertake with the
NASD, the SEC and any other regulatory body regarding the
history, qualifications, disciplinary actions, sanctions,
investigations and similar matters regarding ALEX and/or
any of its registered representatives. Specifically, ALEX
agrees to cause, or use its best efforts to cause, each
registered representative of ALEX to execute and deliver
such consents, approvals and authorizations regarding such
regulatory bodies as may be necessary in order for FSWC to
complete its investigation.
(g) NET CAPITAL REQUIREMENTS. ALEX shall at all times maintain
net capital levels which are in compliance with all
applicable rules and regulations of the SEC, including
without limitation SEC Rule 15c3-1, and other rules and
regulations of any other regulatory body having
jurisdiction with respect thereto. FSWC shall have no
obligation to determine the net capital position of ALEX
or whether or not such is in compliance with applicable
net capital rules; all responsibility for such
determinations shall rest with ALEX and ALEX shall notify
FSWC of any change in its net capital position which
effects its regulatory status in any manner, such notice
to be provided verbally to FSWC within 24 hours after the
determination of such change, to be followed by written
notification within 3 business days.
(h) MERGER, CONSOLIDATION, ETC. In the event ALEX shall
initiate, solicit, conduct, or negotiate with respect to,
any merger, consolidation, acquisition, sale of
substantially all of its assets, or other business
combination of ALEX by, with or through any other entity,
ALEX shall provide verbal notice thereof to FSWC within 24
hours of the initiation of discussions with respect to any
such transaction, to be followed by written notification
within 3 business days. During the term of this Agreement.
ALEX will not, without the prior written consent of FSWC,
consummate any such merger, consolidation, acquisition,
sale or other combination.
(i) PRODUCING DOCUMENTS AND PROVIDING TESTIMONY. ALEX shall
reimburse FSWC immediately upon request for any and all
costs incurred by FSWC in responding to any document
request, subpoena or similar demand or order (any such
being herein referred to as a "Demand") issued in
connection with any investigation, court proceeding,
arbitration, regulatory inquiry or otherwise, regarding
any of the business or activities of ALEX, its employees,
principals, agents or customers. Such costs shall include,
without limitation, all costs and expenses associated with
travel, food and lodging incurred in personal appearances
by personnel or attorneys of FSWC in response to a Demand,
reasonable compensation for time expended by personnel and
attorneys of FSWC (including, without limitation,
compensation for the services of counsel employed on a
full-time basis by FSWC) in responding to a Demand,
copying costs, communications costs, mailing and delivery
expenses and computer structuring fees.
12. TERMINATION OF AGREEMENT: TRANSFER OF ACCOUNTS
(a) Effectiveness. Unless earlier terminated as provided
herein, this Agreement shall remain in force for an
initial term of three years from the effective date
hereof, subject to any required approval by the NASD. At
any time during the forty-five (45) day period immediately
preceding the conclusion of the initial three-year term
(the "Notice Period"), either party may terminate this
Agreement by giving forty-five (45) days prior written
notice to the other party. In the event no written notice
of termination is given During the Notice Period, this
Agreement shall automatically be renewed for an
additional one-year period and may continue to be renewed
for subsequent one-year periods until terminated as
provided herein.
(b) TERMINATION BY FSWC. Notwithstanding Section 12(a), FSWC
may terminate this Agreement at any time by giving
forty-five (45) days prior written notice and may
terminate at any time on twenty-four (24) hours written
notice to ALEX in the event that ALEX:
(i) fails to comply with the terms of this Agreement
and upon notification by FSWC fails to begin
compliance within 10 days from said notification;
or
(ii) is enjoined, prohibited or suspended, as a result
of an administrative or judicial proceeding, from
engaging in securities business activities
constituting all or portions of ALEX'S securities
business, which injunction, prohibition or
suspension, in FSWC's judgment, makes
impracticable the fully disclosed clearing
relationship established in this Agreement.
(c) AUTOMATIC TERMINATION. In addition to any other provisions
for termination herein, this Agreement shall terminate
immediately in the event that:
(i) Either ALEX or FSWC is no longer registered as a
broker/dealer with the SEC; or
(ii) Either ALEX OR FSWC is no longer a member in good
standing of the NASD; or
(iii) ALEX ceases to operate as a Broker/Dealer; or
(iv) FSWC is suspended by any national securities
exchange of which FSWC is a member for failure to
comply with the rules and regulations thereof; or
(v) FSWC ceases to operate a Correspondent Clearing
Operation/Division; or
(vi) ALEX or any Guarantor hereof shall make a general
assignment for the benefit of creditors or shall
petition or apply to any tribunal for the
appointment of a trustee, custodian, receiver or
liquidator of all or any substantial part of its
business, estate or assets or shall commence any
proceeding under any debtor relief laws of any
jurisdiction; or any Such petition or application
shall be filed or any such proceeding shall be
commenced against ALEX or any Guarantor, and ALEX
or such Guarantor by any act or omission shall
indicate approval thereof, consent thereto or
acquiescence therein; or an order shall be
entered appointing a trustee, custodian, receiver
or liquidator of all or any substantial part of
the assets of ALEX and/or such Guarantor or
granting relief to ALEX and/or such Guarantor or
approving the petition in any Such proceeding,
and such order shall remain in effect for more
than thirty (30) days. As used herein, the term
"debtor relief laws" shall mean any applicable
liquidation, conservatorship, bankruptcy,
moratorium, rearrangement, insolvency,
reorganization or similar laws affecting the
rights or remedies of creditors generally as in
effect from time to time.
(d) CONVERSION OF ACCOUNTS. In the event that this Agreement
is terminated for any reason, it shall be ALEX'S
responsibility to arrange for the conversion of ALEX and
Customer Accounts to another clearing broker. ALEX will
give FSWC notice (the "Conversion Notice") of:
(i) the name of the broker that will assume
responsibility for clearing services for
Customers and ALEX;
(ii) the date on which such broker will commence
providing such services;
(iii) ALEX'S undertaking, in form and substance
satisfactory to FSWC, that ALEX'S agreement with
such broker provides that such broker will accept
on conversion all ALEX and Customer Accounts,
then maintained by FSWC; and
(iv) the name of an individual within that
organization who may be contacted by FSWC to
coordinate the conversion. The Conversion Notice
shall accompany ALEX'S notice of termination
GIVEN pursuant to Section 12(a) or within thirty
(30) days of the occurrence of an event specified
in Section 12(c) or a termination by FSWC.
FSWC shall not be responsible for transfers not within the normal capabilities
of its data processing and operational systems or for delays necessary to avoid
disruption of its normal operations.
If ALEX fails to provide the Conversion Notice to FSWC within the time
prescribed, FSWC may give to Customers of ALEX such notice as FSWC deems
appropriate of the termination of this Agreement and may make such arrangements
with the Customers as FSWC deems appropriate for transfer or delivery of
Customer and ALEX Accounts.
ALEX will pay to FSWC a termination fee equal to the greater of (i) the actual
costs and expenses incurred by FSWC in
discontinuing the clearing arrangement hereunder and transferring the Accounts
pursuant to the request of ALEX (ii) $ 10,000. Said termination fee shall be
paid within 10 days after ALEX'S receipt of FSWC's statement setting forth in
reasonable detail the costs and expenses incurred by FSWC. FSWC's determination
of the costs and expenses relating to the discontinuance of the clearing
arrangement hereunder and the transferring of the Accounts shall be conclusive
and binding on the parties hereto, absent a showing of manifest error. The
obligation of ALEX to pay the termination fee as specified herein shall be and
become a part of the Obligation and, if not paid when due, shall become subject
to FSWC's rights of offset as provided under the terms of this Agreement.
(e) SURVIVAL. Termination of this Agreement shall not affect
FSWC's rights or liabilities relating to business
transacted prior to the effective date of such
termination. From the date of termination until transfer
or delivery of all Customer and ALEX Accounts, FSWC's
rights and liabilities relating to business transacted
after such termination shall be Governed by the same terms
as those set forth in this Agreement. In addition, the
terms and provisions of Sections 8, 9, 10, 12(d), 00,
00,00, 00, xxx Xxxxxxxxxxx (x), (x), (x), and (o) of
Section 19 of this Agreement shall not be affected by any
termination hereof, and such terms and provisions shall
survive any such termination and shall remain in full
force and effect without modification.
(f) No Obligation to Release. FSWC shall not be required to
release to ALEX any securities or cash held by FSWC for
ALEX in one or more ALEX Accounts until (i) any amounts
owing to FSWC pursuant to the provisions of this Agreement
are paid; (ii) ALEX'S outstanding obligations hereunder to
FSWC are determined, including determination of any
disputed amounts, and satisfied; and (iii) any Property of
FSWC in the possession of ALEX is returned to FSWC.
(g) EFFECT OF TERMINATION UNDER CERTAIN CIRCUMSTANCES. In the
event this Agreement is terminated (A) by FSWC pursuant
to the provisions of Subsections 12(b)(i) or 12(b)(ii), or
(B) automatically under Subsections 12(c)(i), 12(c)(ii),
12(c)(iii) and/or 12(c)(vi) by reason of ALEX being no
longer registered as a broker/dealer, no longer a member
in good standing of the NASD, ceasing to operate as a
broker/dealer and/or becoming subject to debtor relief
laws, then in any Such event, the obligations of ALEX to
make the minimum monthly fee payments for each of the
months remaining on the term of this Agreement, as
provided in Schedule A attached hereto, shall be
accelerated and automatically become immediately due and
payable without further action of any kind or character
whatsoever by FSWC. In determining the amount which shall
become immediately due and payable pursuant to the
preceding sentence, the minimum monthly fee payment shall
be multiplied by the number of months remaining for the
contractually expressed term of this Agreement as same was
in effect immediately prior to the date of termination.
The amount so determined and accelerated shall become
immediately subject to the right of set-off by FSWC as
against the Deposit Account, any other Accounts of ALEX
and/or any obligations of FSWC to ALEX.
13. CONFIDENTIALITY AND CONFIDENTIAL NATURE OF DOCUMENTS
FSWC will hold the names and addresses of ALEX'S Customers in
confidence and will not disclose them to any third parties, except to the
extent necessary to comply with court process, judicial orders, investigative
process and administrative requests from the SEC, NASD or other regulatory
body having jurisdiction, or any applicable laws, rules or regulations. FSWC
will not use such information for any purposes not contemplated within this
Agreement.
ALEX acknowledges that the services offered by FSWC under this
Agreement, including the systems, software, procedures, facilities, and staff
are proprietary, and represent valuable assets of FSWC. Accordingly, ALEX agrees
that it will not make use of such services for any purposes not specifically
contemplated within this Agreement, nor will it disclose to any third parties
the terms of this Agreement or the assets of FSWC, except to its employees on a
need-to-know basis and except to the extent necessary to comply with court
process, judicial orders or any applicable laws, rules or regulations.
14. EMPLOYEES
Without FSWC's prior written consent, ALEX WILL not solicit, or engage
in negotiations with, any person who is, or within the preceding 12 months has
been, employed by FSWC for the purpose of inducing such person to become
employed or otherwise associated with ALEX. In the event ALEX does hire said
person, or such person otherwise becomes associated with ALEX, then ALEX shall
pay to FSWC the sum of $10,000.00 as liquidated damages for the loss sustained
or to be sustained by FSWC in connection therewith, such payment to be made no
later than thirty (30) days after said employee becomes employed or associated
with ALEX.
15. CUSTOMER COMPLAINT PROCEDURES
ALEX WILL be responsible for the handling of all Customer complaints.
FSWC AGREES to furnish promptly any written customer complaint received by FSWC
regarding ALEX or its associated persons relating to functions and
responsibilities allocated to ALEX pursuant to this Agreement directly to: (i)
ALEX, and (ii) the NASD as the designated examining authority of ALEX. FSWC
shall notify the customer submitting the complaint, in writing, that it has
received the complaint and that the complaint has been furnished to ALEX and to
the NASD as the designated examining authority of ALEX. ALEX specifically
authorizes and directs FSWC to furnish such written complaints and provide such
notices in the manner set forth in the two preceding sentences. If any complaint
received by ALEX IS based upon an ALLEGED act or failure to act by FSWC, ALEX
WILL notify FSWC promptly of such complaint and the basis therefor. ALEX WILL
consult with FSWC regarding such complaint and the parties will cooperate in
determining the validity of such complaint and the appropriate action to be
taken. However, FSWC shall, at all times, be free to take such actions with
regard to any such complaint as it deems necessary or appropriate to protect
and preserve the interests of XXXX.
00. REMEDIES CUMULATIVE
The enumeration herein of specific remedies shall not be exclusive of
any other remedies. Any delay or failure by any party to this Agreement. to
exercise any right, power, remedy or privilege herein contained, or now or
hereafter existing under any applicable statute or law, shall not be construed
to be a waiver of such right, power, remedy or privilege, nor to limit the
exercise of such right, power, remedy or privilege, nor shall it preclude the
further exercise thereof or the exercise of any other right, power, remedy or
privilege.
17. GUARANTEE
The corporation or individual(s) who guarantee the obligations of
XXXX xxxxx this Agreement by executing the signature lines designated for
such purpose at the end of this Agreement (the "Guarantor(s)"), in
consideration of FSWC's entering into the Agreement, do(es) hereby personally
guarantee(s) (jointly and severally, if more than one) the performance by
ALEX of the provisions of this Agreement (including without limitation the
indemnification provisions of Section 10) and shall promptly pay any amount
that is not paid by ALEX to FSWC under the Agreement. This is an absolute,
unconditional and unlimited guarantee of payment and may be proceeded upon by
FSWC or an FSWC Indemnified Person before filing any action against ALEX or
after any action against ALEX has been commenced. Guarantor(s) grants to FSWC
a first lien and security interest on any and all money and securities of a
Guarantor(s) held at any time by FSWC. FSWC shall have the unlimited right to
set-off any amounts owed to it by Guarantor(s) against any obligation of FSWC
to Guarantor(s). FSWC also shall have the absolute and unlimited right to
sell, transfer, or liquidate any of the assets in any of Guarantor(s)'
accounts with FSWC for any amounts owed to it by ALEX or Guarantor(s). The
obligations of the Guarantor(s) shall not be discharged or impaired or
otherwise affected by the failure of FSWC or an FSWC Indemnified Person to
assert, claim, demand or enforce any remedy under this Agreement, nor by
waiver, modification or amendment of this Agreement or any compromise,
settlement or discharge of obligations of XXXX xxxxx this Agreement, or any
release or impairment of any collateral by FSWC or an FSWC Indemnified Person.
18. LIMIT ON LIABILITY; NO CONSEQUENTIAL DAMAGES
In any action by ALEX against FSWC for any claim arising out of the
relationship created by this Agreement, FSWC shall only be liable to ALEX in
cases of gross negligence or willful misconduct, and in such cases FSWC shall
only be liable for the amount of actual monetary losses suffered by ALEX. ALEX
shall not, in any such action or proceeding, or otherwise, assert any claim, or
be or become entitled to any recovery, against FSWC for consequential damages on
account of any loss, cost, damage or expense which XXXX xxx suffer or incur
related to transactions in connection with this agreement or otherwise,
including, but not limited to, any lost opportunity claims.
19. MISCELLANEOUS
(a) TAX REPORTING. FSWC shall be responsible for providing IRS
form 1099 and other information required to be reported by
federal, state or local tax laws, rules or regulations, to
Accounts solely with respect to events subsequent to the
effective date of this Agreement and for the mailing of
same.
(b) SCOPE OF SERVICES. FSWC shall limit its services pursuant
to the terms of this Agreement to those services expressly
set forth herein and related thereto. FSWC shall perform
such services as agent for ALEX.
(c) MODIFICATION. This Agreement may be modified only by a
writing signed by both parties to this Agreement. Such
modification shall not be deemed as a cancellation of this
Agreement. Subject to the Conduct Rules of the NASD, this
agreement and all modifications may be required to be
submitted to the NASD for approval prior to effectiveness.
It is expressly understood that brokerage services cannot
be provided by XXXX xxxxx this Agreement until such
approval, if required, is received.
(d) ASSIGNMENT. This Agreement shall be binding upon all
successors, assigns or transferees of both parties hereto,
irrespective of any change with regard to the name of or
the personnel of ALEX or FSWC. Any Assignment of this
Agreement shall be subject to the requisite review and/or
approval of any regulatory or self-regulatory agency or
body whose review and/or approval must be obtained prior
to the effectiveness and validity of such assignment. No
assignment of this Agreement by ALEX shall be valid unless
FSWC consents to such an assignment in writing. Any
assignment by FSWC to any majority-owned subsidiary that
they may create or to an affiliated company controlling,
controlled directly or indirectly by, or under common
control with, FSWC will be deemed valid and enforceable in
the absence of any consent from ALEX. Neither this
Agreement nor any operation hereunder is intended to be,
shall not be deemed to be, and shall not be treated as, a
GENERAL or limited partnership, association or joint
venture relationship between ALEX and FSWC.
(e) ACCOUNT DOCUMENTATION. Applicable laws and regulations
require that FSWC must have proper documentation to
support any account opened on its books. If, after
reasonable requests therefor, the necessary documents to
enable FSWC to comply with such account documentation
requirements of the laws and regulations have not been
received by FSWC, ALEX shall receive notification that no
further orders will be accepted for the Account involved.
This Agreement is not in any way intended to limit the
responsibility of FSWC under the laws and regulations with
respect to Accounts.
(f) Governing Law. The construction and effect of every,
provision of this Agreement, the rights of the parties
hereunder and any questions arising out of this Agreement,
shall be governed by and construed in accordance with the
substantive laws of the state of Texas.
(g) ARBITRATION. In the event of a dispute between the parties
hereto, such dispute shall be settled by arbitration
before arbitrators sitting in Dallas, Texas in accordance
with the Code of Arbitration Procedures of the NASD, or
Such other codes of procedure of the NASD as may then be
in effect. The arbitrators may allocate attorneys' fees
and arbitration costs between the parties, and such award
shall be final and binding upon the parties and judgment
thereon may be entered in any court of competent
jurisdiction.
(h) Headings. The headings preceding the text, articles and
sections hereof have been inserted for convenience and
reference only and shall not affect the MEANING,
construction or effect of this Agreement.
(i) Entire Agreement. This Agreement represents the final and
entire agreement of the parties hereto with respect to the
subject matter hereof. 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 ALEX
or FSWC any special treatment regarding any other
arrangements, agreements, or understandings that presently
exist between ALEX and FSWC or that may hereafter exist.
ALEX shall be under no obligation whatsoever to deal with
FSWC or any of its subsidiaries or any companies
controlled directly or indirectly by or affiliated with
FSWC, in any capacity other than as set forth in this
Agreement. Likewise, FSWC shall be under no obligation
whatsoever to deal with ALEX or any of its affiliates in
any capacity other than as set forth in this Agreement.
(j) Severability. If any provision or condition of this
Agreement shall be held to be invalid or unenforceable by
any court, or regulatory or self-regulatory agency or
body, such invalidity or unenforceability shall attach
only to such provision or condition. The validity of the
remaining provisions and conditions shall not be
affected thereby and this Agreement shall be carried out
as if any such invalid or unenforceable provision or
condition were not contained herein.
(k) Force Majeure. The parties hereto shall be excused for
liability for non-performance of this Agreement arising
from any external event beyond any party's control,
whether or not foreseeable by either party, in the nature
of acts of war, civil uprising, imposition of martial law,
riots, acts of God, labor disturbances, trading
suspensions, general communications or transportation
failures, fire, earthquakes, and other similar events or
circumstances to those enumerated above.
(l) INTERPLEADER. If FSWC receives conflicting claims from
ALEX, a Customer and/or other persons regarding money,
securities or other property held by FSWC, FSWC may, in
its discretion, tender such money, securities or other
property to a court of competent jurisdiction and
institute an action in interpleader or other appropriate
legal proceeding to determine the rights of the respective
claimants. FSWC shall have no liability to ALEX in
connection with any such action, and shall be entitled to
reimbursement for its costs and expenses in connection
with such action from ALEX.
(m) Notice. For the purposes of any and all notices, consents,
directions, approvals, restrictions, requests or other
communications required or permitted to be delivered
hereunder, FSWC's address shall be:
Attention: Xxxxxxx X. Xxxxxxx
First Southwest Company
0000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
and ALEX'S address shall be:
Xxxxxxx Xxxx
Xxxxxxxxx Xxxxxxx & Co.
00 Xxxx Xxxxxx; 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Either party, may provide such notice or change its address for notice purposes
by giving written notice pursuant to registered or certified mail, return
receipt requested, of the new address to the other party.
(n) COUNTERPARTS: NASD APPROVAL. This Agreement may be
executed in one or more counterparts, all of which taken
together shall constitute a single agreement. When each
party hereto has executed and delivered to the other a
counterpart, this Agreement shall become binding on both
parties, subject only to any required approval by the
NASD. If required by the NASD, FSWC will submit this
Agreement to the NASD promptly following execution and
will notify ALEX, or cause ALEX to be notified, promptly
upon receipt of such approval.
(o) DISCLOSURE OF RELATIONSHIP WITH FSWC. ALEX shall not hold
itself out or represent to any third party, including
Customers, that it is affiliated with or is the agent of
FSWC. Notwithstanding the above, XXXX xxx specifically
represent that "customer accounts are cleared and carried
by XXXX."
00. AGREEMENT REGARDING PROPRIETARY ACCOUNTS.
In conformity with the SEC No-Action Letter dated November 3, 1998 (the
"No-Action Letter"), relating to the capital treatment of assets in the
proprietary accounts of an introducing broker ("PAIB"), ALEX and FSWC agree as
follows:
A. FSWC shall perform a computation for PAIB assets
("PAIB Reserve Computation") of ALEX in accordance
with the customer reserve computation set forth in
SEC Rule 15c3-3 ("customer reserve formula") with the
following modifications:
(i) Any credit (including a credit applied to
reduce a debit) that is included in the
customer reserve formula may not be
included as a credit in the PAIB reserve
computation;
(ii) Note E(3) to Rule 15c3-3a which reduces
debit balances by 1% tinder the basic
method and subparagraph (a)(1)(ii)(A) of
the net capital rule which reduces debit
balances by 3% under the alternative method
shall not apply; and
(iii) Neither Note E(1) to Rule 15c3-3a nor NYSE
Interpretation /04 to Item 10 of Rule
15c3-3a regarding securities concentration
charges shall be applicable to the PAIB
reserve computation.
B. The PAIB reserve Computation shall include all
proprietary accounts of ALEX. All PAIB assets
shall be kept separate and distinct from Customer
assets under the customer reserve formula in Rule
15c3-3. ALEX shall be responsible for identifying to
FSWC all proprietary accounts, whether now existing
or hereafter established or opened.
C. The PAIB reserve computation shall be prepared within
the same time frames as those prescribed by Rule
15c3-3 for the customer reserve formula.
D. FSWC shall establish and maintain a separate "Special
Reserve Account for the Exclusive Benefit of
Customers" with a bank in conformity with the
standards of paragraph (f) of Rule 15c3-3 ("PAIB
Reserve Account"). Cash and/or qualified
securities as defined in the customer reserve
formula shall be maintained in the PAIB Reserve
Account in an amount equal to the PAIB reserve
requirement.
E. If the PAIB reserve computation results in a deposit
requirement, the requirement may be satisfied to the
extent of any excess debit in the customer reserve
formula of the same date. However, a deposit
requirement resulting from the customer reserve
formula shall not be satisfied with excess debits
from the PAIB reserve computation.
F. Within two business days of entering into this
Agreement, ALEX shall notify its designated examining
authority in writing (with copy to FSWC) that it has
entered into this Agreement regarding PAIB Reserve
Computation.
G. Commissions receivable and other receivables of ALEX
from FSWC (excluding the Deposit) that are otherwise
allowable assets under the net capital rule may not
be included in the PAIB Reserve computation, provided
the amounts have been clearly identified as
receivables on the books and records of ALEX and as
payables on the books of FSWC.
H. Upon discovery that any deposit made to the PAIB
Reserve Account did not satisfy its deposit
requirement, ALEX SHALL by facsimile or telegram
immediately notify its designated examining authority
and the SEC. Unless a corrective plan is found
acceptable by the SEC and the designated examining
authority, FSWC shall provide written notification
within 5 business days of the date of discovery to
ALEX that PAIB assets held by FSWC shall not be
deemed allowable assets for net capital purposes. The
notification shall also state that, if ALEX wishes to
continue to count its PAIB assets as allowable, it
has until the last business day of the month
following the month in which the notification was
made to transfer all PAIB assets to another Clearing
broker. However, if the deposit deficiency is
remedied before the time at which ALEX must transfer
its PAIB assets to another clearing broker, XXXX xxx
choose to keep its assets at FSWC.
I. The parties shall adhere to the terms of the
No-Action Letter, including the Interpretations set
forth therein, in all respects.
21. CASH FORCE VISA PROGRAM
From time to time during the term of this Agreement, FSWC
may be or become a party to a VISA Processing Agreement, or similar contract
(the "VISA Agreement") with a bank or other party (the "VISA Provider")
authorized to establish and offer participation in a VISA card program.
Pursuant to the VISA Agreement, if requested by ALEX, FSWC may, but shall not
be obligated to, provide eligible Customers with the ability to access
certain assets in their Accounts, through the use of VISA cards, VISA checks
and/or automatic teller machine (ATM) transactions which are part of the Cash
Force VISA Program (the "Program") maintained by FSWC. Pursuant to the
Program, if requested by ALEX, FSWC may, but shall not be obligated to,
recommend that the VISA Provider establish VISA accounts for those Customers
who are eligible to participate in
the Program and who enter into appropriate Customer agreements and
documentation with FSWC and the VISA Provider.
In the event ALEX requests FSWC to offer participation in
the Program to ALEX'S eligible Customers and FSWC agrees to offer such
participation, then, as part of ALEX'S obligations under this Agreement, ALEX
agrees to fully cooperate with FSWC and/or the VISA Provider and to comply
promptly with all procedures applicable to operation of the
Program as specified by FSWC and/or the VISA Provider, including, without
limitation, all procedures applicable to the operation of the Program with
respect to eligibility requirements, agreements, forms, materials, notifications
and disclosures, credit terms and conditions. Procedures specified by FSWC
and/or the VISA Provider with respect to the operation of the Program may be in
the form of a written procedures manual, guide or brochure, one or more
memoranda, contract provisions, or other written or oral instructions as amended
or in effect from time to time.
In consideration of the offering of participation in the
Program to eligible Customers, ALEX and FSWC agree that ALEX'S indemnification
and hold harmless obligations as set forth in this Agreement, including those
under Section 10 hereof, shall include and cover, without limitation, any and
all claims, liabilities, losses and costs incurred or suffered by FSWC resulting
from or in connection with the use of VISA cards or checks issued or provided to
Customers OF ALEX PARTICIPATING IN the Program, including, without limitation,
any claims, liabilities, losses and costs resulting from the unauthorized use of
the cards or checks.
[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]
[ THE NEXT PAGE IS A SIGNATURE PAGE.]
22
MADE AND EXECUTED THIS 8th DAY OF FEBRUARY 2000
FSWC: FIRST SOUTHWEST COMPANY
By: /s/ Xxxxxxx X. Xxxxxxx
-----------------------------------
Xxxxxxx X. Xxxxxxx, Vice President
0000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
XXXX XXXXXXX & CO.
XXXX: ________________________________
[Name]
--------------------------------
[Type of Entity, i.e., corporation,
partnership, etc.]
By: /s/ Xxxxxxx Xxxx
-----------------------------------
Print Name: Xxxxxxx Xxxx
------------
Its: ______________________________
______________________________
[Address]
______________________________
GUARANTEE: The undersigned, by execution in the spaces provided below, hereby
guarantee(s) the obligations of XXXX xxxxx the foregoing Fully Disclosed
Clearing Agreement as provided in Section 17 of such Agreement.
CORPORATE GUARANTOR: The Financial Commerce Network, Inc.
[Name of Corporation]
By: /s/ Xxxxxxx Xxxx
------------------------------
Its: ______________________________
------------------------------
[Address]
------------------------------
------------------------------
