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Exhibit 10.13
AGREEMENT made in New York, New York on the 5th day of September, 1995,
by and between Prudential Securities Incorporated ("PSI"), a Delaware
corporation, having its principal office at Xxx Xxxxxxx Xxxxx, Xxx Xxxx, Xxx
Xxxx 00000 and Xxxx Xxxxxxx Clearing Corporation ("JHCC"), a Massachusetts
corporation, having its principal office at Xxx Xxxxx Xxxxxxxxx Xxxxxx, Xxx
Xxxx, Xxx Xxxx 00000, Xxxxxx Xxxxxxx Incorporated ("TA"), a Massachusetts
corporation, having its principal office at Xxx Xxxxxx Xxxxxx, Xxxxxx,
Xxxxxxxxxxxxx 00000 and Sutro & Co. Incorporated ("Sutro"), a Nevada
corporation, having its principal office at 000 Xxxxxxxxxx Xxxxxx, Xxx
Xxxxxxxxx, Xxxxxxxxxx 00000.
WHEREAS, PSI is registered as a broker/dealer in securities; and
WHEREAS, JHCC, TA and Sutro are also registered as broker/dealers in
securities; and
WHEREAS, Wexford Clearing Services Corporation ("WCSC") is a wholly
owned subsidiary of PSI; and
WHEREAS, JHCC is desirous of having PSI clear transactions and carry
accounts for the customers of JHCC (the term "JHCC" shall
CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AS TO CERTAIN
PORTIONS OF THIS EXHIBIT, WHICH PORTIONS HAVE BEEN OMITTED AND
REPLACED WITH [**] AND FILED SEPARATELY WITH THE COMMISSION
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include, unless stated otherwise or otherwise clear from the
context in which it is used, JHCC's affiliated companies, TA
and Sutro and any broker/dealer which JHCC may under the terms
of this Agreement provide with clearing services
["Correspondent" or "Correspondents"]) and JHCC's proprietary
accounts on a fully disclosed basis and whereby JHCC will be
an introducing firm as contemplated by Rule 382 of the New
York Stock Exchange, Inc. (the "EXCHANGE"), for which PSI will
receive compensation as set forth below; and
WHEREAS, PSI is also desirous of assigning its rights and obligations
under this Agreement to WCSC upon its becoming a registered
broker/dealer in securities;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
I. FINANCIAL ARRANGEMENTS: COMMISSIONS, CHARGES AND INTEREST
The financial arrangements between the parties shall be those contained
in Attachment I, which is made part of this Agreement.
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II. CONFIRMATIONS, STATEMENTS OF ACCOUNTS AND OTHER CUSTOMER REPORTS
PSI shall furnish to JHCC, commission runs, transaction summaries and
data feeds with respect to introduced accounts and other data which JHCC may
reasonably request. Reports of executions, confirmations, statements and other
notices relating to introduced accounts will be prepared by PSI appropriately
marked to indicate that such accounts were introduced by JHCC, TA, Sutro or any
Correspondent. Unless otherwise mutually agreed to in writing, confirmations
shall be mailed to JHCC's customers by JHCC or, at JHCC's option, by PSI to
JHCC's customers and monthly statements shall be mailed to JHCC's customers by
PSI. Copies of all such customer reports will be provided to JHCC at its
principal office or mailed directly to each of JHCC's branch offices at JHCC's
request.
III. OPENING AND HANDLING OF ACCOUNTS
A. GENERAL
1) JHCC will furnish PSI all information and documentation as required by
PSI for the opening of an account. Only PSI approved forms may be used.
Such forms are to be commercially reasonable and their terms consistent
with industry practice. To the extent permissible by applicable
regulation and desired by JHCC, such forms shall be marked
appropriately as being, as the case may be, documentation of JHCC, TA
or Sutro.
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2) After prior consultation with JHCC, PSI, in its sole discretion, may
refuse to accept any account or any order and may terminate any account
previously accepted.
3) JHCC agrees that none of its directors, partners, officers, agents,
employees or authorized persons shall have discretionary power with
respect to any account introduced to PSI, unless JHCC first obtains a
properly executed written power of attorney from the account. JHCC
hereby agrees to indemnify and hold PSI harmless against any loss,
liability, damage, cost or expense (including but not limited to
reasonable attorneys' fees and expenses) suffered or incurred by PSI
directly or indirectly as a result of any liabilities or claims related
to the exercise of discretionary authority over any accounts by JHCC,
its directors, partners, officers, agents, employees or authorized
persons.
4) All transactions in any account are to be considered cash transactions
until such time as JHCC has furnished to PSI margin and lending
agreements on PSI approved forms duly executed by the customer and
approved by a JHCC NASD principal.
5) Any request for an extension of time for payment must be made to PSI.
JHCC is responsible for determining that any such extension request is
valid and in compliance with the requirements of PSI. After prior
consultation with JHCC, PSI shall not be obligated to accept any such
extension request
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made by JHCC.
6) JHCC accepts full responsibility for the authenticity of orders placed
by JHCC for the accounts of JHCC's customers and proprietary accounts
and for complying with all rules of the EXCHANGE and the NASD in
placing such orders; without limiting the generality of the foregoing,
JHCC will specifically be responsible for compliance with Rule 405 of
the EXCHANGE and Article III, Subparagraph 2 of the NASD Rules of Fair
Practice in connection with the placing of such orders.
7) Nothing in this Paragraph (A), or the Agreement as a whole, shall be
construed to require, or to impose any duty upon, either of the parties
to do anything that might be in violation of the laws of any
jurisdiction in which the parties do business under this Agreement, or
the rules of any regulatory body (including Exchanges and Clearing
Corporations) to which either or both parties are subject.
8) JHCC agrees to familiarize itself with the basic guidelines of PSI
operations procedures as contained in the PSI Correspondent Operations
Manual ("Manual") which PSI shall provide to JHCC, along with any
modifications or supplements to such manual which may be issued from
time to time. JHCC agrees that it will be familiar with all applicable
guidelines prior to the first scheduled trade date. PSI agrees to make
the Manual, as then modified or supplemented, available to JHCC upon
the execution of this
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Agreement. PSI agrees further that the terms, requirements and
applications, then in effect or to take effect in the future, of the
Manual and its modifications and supplements will be commercially
reasonable and consistent with industry practice.
9) PSI will engage in all cashiering functions for introduced accounts,
including the receipt, delivery and transfer of securities purchased,
sold, borrowed and loaned, receiving and distributing payment therefor,
holding in custody and safekeeping all securities and cash so received,
the handling of margin accounts, the receipt and distribution of
dividends and other distributions, and the processing of exchange
offers, rights offerings, warrants, tender offers and redemptions.
10) All correspondence, in the nature of customer inquiries or complaints,
is to be directed to JHCC. Any such correspondence is to be reviewed
and replied to by PSI or JHCC depending on who is responsible for the
function which is the subject matter of the correspondence. If such
correspondence is not directed to the appropriate party initially, PSI
or JHCC shall promptly forward such correspondence to the appropriate
party. Each party shall promptly furnish the other party with copies of
all responses to any and all JHCC customer correspondence.
11) PSI and JHCC respectively agree to maintain in accordance with
applicable retention policies such books and records as may be required
to discharge
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their respective functions under this Agreement.
12) PSI and JHCC agree to cooperate with each other with respect to the
performance of the various functions performed by PSI or JHCC. Such
cooperation shall include the provision to the other party of
appropriate data pertinent to the functions to be performed by PSI or
JHCC.
13) PSI shall inform existing and future accounts in writing of the general
nature of the functions performed by JHCC and PSI pursuant to the
Agreement and Rule 382 of the Exchange, using PSI's standard letter, as
amended by PSI from time to time.
14) For the sole and exclusive purpose of the Securities Investor
Protection Act and the financial responsibility rules of the Securities
and Exchange Commission, JHCC's customers shall be deemed to be
customers of PSI, as JHCC's Clearing Broker. Nothing herein shall cause
JHCC's customers to be construed or interpreted as customers of PSI for
any other purpose, or to negate the intent of any other section of this
Agreement, including, but not limited to, the delineation of
responsibilities as set forth elsewhere in this Agreement.
B. CASH TRANSACTIONS
If securities purchased for cash are sold because of non-payment by
JHCC or JHCC's customers or if securities sold in a cash account must be covered
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PSI because of non-delivery or delivery of non-transferable securities by JHCC
or JHCC's customers, then JHCC will promptly pay PSI any losses PSI may sustain
as a result thereof.
C. MARGIN TRANSACTIONS
It is understood that JHCC is responsible to PSI for collection of the
margin required by PSI to support each transaction in margin accounts. After the
initial margin on a transaction has been received, maintenance margin calls are
to be made by PSI. JHCC agrees to be responsible for promptly obtaining margin
on maintenance calls. After prior consultation with JHCC, PSI shall have the
right to modify the margin requirements of any account or accounts from time to
time. After prior consultation with JHCC, PSI shall determine the manner in
which accounts are to be maintained for margin purposes. On all transactions,
JHCC shall be solely and exclusively responsible to PSI for any loss, liability,
damage, cost or expense (including but not limited to reasonable attorneys' fees
and expenses) incurred or sustained by JHCC or PSI as a result of the failure of
any account to make timely payment for the securities purchased by it or timely
and good delivery of securities sold for it, or timely compliance by it with
margin or margin maintenance calls, whether or not any margin extensions have
been granted by PSI pursuant to the request of JHCC.
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D. UNSECURED DEBIT BALANCES
1) Upon demand by PSI made upon JHCC, JHCC will pay PSI the amount of any
unsecured debit balance, deficit or other financial obligation in any
account other than such unsecured debit balances arising through the
errors and omissions of PSI.
2) Upon JHCC's failure to pay PSI the amount as required in this Paragraph
(D), Subparagraph 1, PSI after written notice to JHCC shall have the
right to liquidate a sufficient portion of any position in JHCC's
proprietary accounts and shall have the right to apply any proceeds of
such liquidation towards any payment required to be made from JHCC to
PSI pursuant to this Paragraph (D), Subparagraph 1; JHCC agrees and
represents that it shall not make any withdrawals which would reduce
the balance in its proprietary accounts below the amount demanded,
without PSI's written consent, during the demand period.
Notwithstanding Article XII, Paragraph (B) to the contrary, notice
under this Article III, Paragraph (D), Subparagraph 2, shall be given
by personal delivery or facsimile.
IV. SUPERVISION OF BUSINESS
JHCC has sole responsibility, including sole supervisory responsibility, with
respect to all accounts handled by the personnel of its organization. This sole
responsibility includes, but is not limited to, the following:
A. Assuring that no transactions are made in violation of any laws or
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regulations.
B. Selecting, investigating, training, registering and supervising all
personnel, registered or otherwise, who service the accounts.
C. Establishing procedures to review transactions and trading in the
accounts.
D. Assuring the suitability of all transactions, including recommendations
made to the accounts.
E. Assuring the appropriateness of the frequency of trading in the
accounts.
F. Handling of any account for an employee or officer of any Exchange
member organization, self-regulatory organization, bank, trust company,
insurance company or other organizations engaged in the securities
business and for the compliance with applicable rules and regulations.
G. Furnishing investment advice to the accounts.
V. INDEMNITY, INSURANCE REPRESENTATIONS AND WARRANTIES
A. INDEMNIFICATION
1) Each of the parties agrees to indemnify and hold the other harmless
from and against any loss, damage, liability and expense including but
not limited to reasonable attorney's fees and expenses which either
party may incur or sustain in connection with any customer complaint,
claim, cause of action, lawsuit or arbitration (collectively
"Proceedings") to the extent the Proceedings arise from or are
connected with the negligence or malfeasance of the other party in the
exercise of its rights, duties and obligations under
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this Agreement.
2) Any party seeking indemnification ("Indemnified Party") hereunder shall
(a) give written notice to the other party from whom indemnification is
sought ("Indemnifying Party") of any claim, suit, action or proceedings
for which it seeks indemnification; and (b) permit the Indemnifying
Party to retain counsel reasonably acceptable to the Indemnified Party
to represent the Indemnifying and the Indemnified Party. The
Indemnifying Party shall be responsible to pay reasonable attorney's
fees for separate counsel for the Indemnified Party if such party can
show that counsel retained by the Indemnifying Party would have a
conflict of interest in representing both the Indemnifying Party and
the Indemnified Party. However, in the event the Indemnified Party is
unable to show that a conflict of interest exists, the Indemnified
Party shall still have the right to hire separate counsel at its own
expense.
3) JHCC further agrees to indemnify PSI and hold it harmless from and
against any loss, damage, liability and expense including but not
limited to reasonable attorney's fees and expenses which PSI may
sustain or incur arising from or connected with any securities, cash,
checks, drafts, etc., received by PSI from JHCC or from any customer of
JHCC in a transaction subject to this Agreement which shall be, or
shall be claimed to be, counterfeit, forged, altered, spurious or
invalid, or arising from or connected with any dishonest, fraudulent or
criminal act of any person or persons
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connected with or associated with JHCC, including losses resulting from
trading, whether in the name of a genuine customer, or in JHCC's name,
or in a fictitious account, or arising from or connected with any act
or omission on the part of any person or persons connected with or
associated with JHCC, or a customer's failure to pay for a transaction
due to a delay in delivery or transfer of the securities to the
customer or his agent, unless due to the negligence or willful
misconduct of PSI or its agents. Notwithstanding anything herein to the
contrary, JHCC shall not indemnify and hold harmless PSI with respect
to matters set out in this Article V, Paragraph (A), Subparagraph 3, in
the event such matters relate to or arise from the negligence of PSI
with respect to any statutory or regulatory duty it may have in its
capacity as a clearing broker.
B. INSURANCE
1) JHCC agrees to keep in full force and effect a stockbroker's blanket
bond (Form 14), with coverage for all insuring clauses and other
insurance required by the rules of the EXCHANGE as of the date of this
Agreement in an amount acceptable to PSI, which amount shall be
commercially reasonable and not in excess of customary industry
practice, or in an amount representing the current minimum required
limits of the EXCHANGE, whichever is the greater. JHCC agrees to
furnish PSI within reasonable time after the completion of JHCC's
annual audit, a statement
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from its auditors to the effect that the bonds are in full force and
effect.
2) JHCC agrees to give PSI at least thirty (30) days prior written notice
of any change or cancellation of the insurance referred to above.
C. REPRESENTATIONS AND WARRANTIES
Each party warrants and represents that except as disclosed in writing
to the other party, there are no impediments, prior or existing regulatory,
self-regulatory, administrative, civil or criminal matters affecting it and
that each party is, and agrees to remain throughout its contractual
relationship with each other, qualified to do business and properly licensed
and registered as a broker/dealer in all states in which JHCC has and will be
doing business and is, and will remain throughout its contractual relationship
with each other, a member in good standing with the NASD. Each party further
warrants and represents that there are no financial circumstances which will
interfere with, or prevent it from fulfilling all of its duties and
obligations throughout the course of its contractual relationship with the
other party.
VI. DURATION AND TERMINATION OF AGREEMENT
A. This Agreement shall take effect on execution hereof. The financial
terms and services provided under this Agreement shall be for a term of
five (5) years ("initial term") commencing from the date of the
completion of conversion of JHCC to PSI in respect of JHCC's
proprietary and customer
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accounts (the "Conversion Date"), with the right of either party
upon written notice, after three (3) years and each year
thereafter, to renegotiate the financial terms and services in
accordance with the Terms of Renegotiation contained in Attachment I,
Article VI of this Agreement. The parties agree that, unless agreed to
the contrary, conversion shall commence with respect to JHCC on or
about February 16, 1996 and shall continue on each successive week
thereafter until the Conversion Date which PSI shall use its best
efforts to be on or about February 29, 1996.
B. Unless written notice of termination shall have been received from the
other party ninety (90) days prior to the expiration of the initial
term, or any additional term, the term of this Agreement shall
automatically be extended for a further twelve (12) months.
C. JHCC may terminate this Agreement at any time it is in effect,
including any extension hereof, by giving PSI eighteen (18) months
written notice of JHCC's desire to terminate this Agreement provided
that such notice of termination may not be effective before the one
year anniversary of the Conversion Date.
D. The termination or assignment of this agreement, howsoever caused,
shall not release either party from any liability or responsibility to
the other as of the date of termination or assignment, whether or not
then ascertained, provided that such liability shall relate to
transactions prior to the effective date of such termination or
assignment.
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E. Notwithstanding any provision in this Agreement, the following events
or occurrences shall constitute an Event of Default under this
Agreement:
1) either PSI or JHCC shall fail to perform or observe any term,
covenant or condition to be performed or observed by it
hereunder; or
2) any representation or warranty made by either PSI or JHCC
herein shall prove to be incorrect at any time in any material
respect; or
3) a receiver, liquidator or trustee of either PSI or JHCC or of
any property held by either party, is appointed by court order
and such order remains in effect for more than thirty (30)
days; or an order for relief is entered against either PSI or
JHCC in bankruptcy or similar proceedings; or any of its
property is requested by court order and such order remains in
effect for more than thirty (30) days; or a petition is filed
against either PSI or JHCC 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 filing; or
4) either PSI or JHCC files a petition in voluntary bankruptcy or
seeking 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 such law; or
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5) either PSI or JHCC 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 liquidation of either PSI or JHCC,
or of any property held by either party, or a judgment in
excess of fifty (50) percent of the aggregate net capital of
JHCC, TA and Sutro is entered against JHCC and is not appealed
from or satisfied within thirty (30) days; or
6) either PSI or JHCC, but not including any Correspondent, is
convicted of a felony.
F. Upon any Event of Default by either party (the "defaulting party"), the
defaulting party agrees to give immediate notice thereof to the other
party (the "non-defaulting party"). Upon the occurrence of any such
Event of Default, the non-defaulting 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 sent or communicated to the defaulting party.
If JHCC is the defaulting party, PSI agrees to provide JHCC with a
reasonable period of time to secure clearing services with another
party.
VII. ASSIGNMENT
This Agreement shall be binding and inure to the benefit of JHCC and PSI, and
their respective successors and assigns, except that JHCC may not assign or
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transfer any right hereunder without the prior written consent of PSI which
consent shall not be unreasonably withheld. Without JHCC's prior consent, which
consent shall not be unreasonably withheld, PSI may not assign this Agreement to
any legal person which is not a direct or indirect wholly owned subsidiary of
The Prudential Insurance Company of America. In the event of any assignment by
PSI hereunder to any direct or indirect subsidiary of The Prudential Insurance
Company of America, PSI agrees that at all times such assignment is in effect
PSI shall unconditionally guarantee the performance, obligations and duties of
the assignee and agrees further that in the event of any non-performance or
default by the assignee such guarantee shall be construed in such a manner that
PSI assumes liability as the primary obligor under this Agreement. In the event
of any other assignment, PSI shall guarantee the assignee on the same terms as
set forth in the immediately preceding sentence for a period which is the longer
of five (5) years from the Conversion Date or eighteen (18) months from the
date the assignment is in effect.
VIII. ARBITRATION
Any dispute or controversy between the parties relating to or arising out of
this Agreement shall be settled by using the arbitration facilities of the
EXCHANGE or the NASD in New York, New York. The party making claim against the
other will have the right to choose which arbitration facility will be utilized.
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IX. FINANCIAL INFORMATION, REPORTS AND CAPITAL WITHDRAWALS
A. Each party agrees to furnish to the other a copy of the quarterly
balance sheet and capital computation portion of the FOCUS Reports
prepared in accordance with Rule 17a-5 of the Securities Exchange Act
of 1934.
B. JHCC agrees to give PSI written notice prior to any capital withdrawals
exceeding thirty (30) percent of the aggregate net capital of JHCC, TA
and Sutro under Rule 15c3-1 of the Securities Exchange Act of 1934 as
reported in JHCC's most recent FOCUS Report furnished to PSI.
X. CAPITAL AND NET CAPITAL
A. JHCC, TA and Sutro agree to maintain in the aggregate net capital of
$25,000,000 or as required under the Rules of the EXCHANGE, Securities
and Exchange Commission and the State of New York, whichever of the
above is higher, and to maintain at all times a ratio of aggregate
indebtedness, as that term is defined in SEC Rule 15c3-1, to net
capital not in excess of 10 to 1.
B. JHCC agrees to notify PSI promptly, but in any event within three (3)
business days, if its net capital ratio exceeds 9 to 1.
XI. CONFIDENTIALITY
PSI and each of its affiliated companies shall hold in confidence and shall
use their best efforts to have all officers, directors and employees to hold in
confidence any
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and all knowledge of a proprietary, secret or confidential nature with respect
to the business of JHCC and its affiliated companies and shall not disclose,
publish or make use of such knowledge without the written consent of JHCC. For
the purpose of this Article XI the term "knowledge of a proprietary, secret or
confidential nature" shall include, but not be limited to, customer lists and
profile information, products and non-public JHCC marketing, business or trading
programs and strategy.
XII. GENERAL
A. As part of this Clearing Agreement, PSI will provide the following
additional services as outlined in Attachment II. Notwithstanding
anything in the Clearing Agreement to the contrary, the services
outlined in Attachment III will not be provided without the prior
written consent of PSI.
B. Notice, as provided herein, shall be by certified mail, return receipt
requested, and shall be sent to JHCC (Attention: Xxxx Xxxxxxxxx) at the
address in this Agreement. Further, notice to PSI shall be sent to the
attention of: Officer in Charge, Correspondent Division, at Xxx Xxx
Xxxx Xxxxx, 00xx xxxxx, Xxx Xxxx, XX 00000. 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.
C. This Agreement contains the entire Agreement between the parties and
cannot be amended or modified except in writing executed by both
parties.
D. Neither this Agreement nor the operations hereunder shall be deemed to
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create a joint venture, partnership or agency relationship.
E. Each party agrees not to use the name of the other party in advertising
or any promotional matters without the explicit written consent of the
party whose name is being used.
F. JHCC agrees not to maintain a fully disclosed clearing relationship
with any broker/dealer other than PSI during the life of this
Agreement.
G. PSI agrees and covenants that in the event PSI is acquired or there is
a change of control of PSI then (i) in the case where PSI is still
directly or indirectly controlled by The Prudential Insurance Company
of America, the terms of acquisition shall provide that without
interruption clearing services will continue to be provided to JHCC
consistent with the terms of this Agreement for a minimum period of
time which is the longer of the remaining term of this Agreement and
any extension thereof or eighteen (18) months from the date of
notification of acquisition or change of control or (ii) in any other
case, the terms of acquisition shall provide that without interruption
clearing services will continue to be provided to JHCC consistent with
the terms of this Agreement for a minimum period which is the longer of
either eighteen (18) months from the date of notification of
acquisition or change of control or eighteen (18) months from the
first anniversary of the Conversion Date. JHCC shall have the option to
terminate this Agreement without any further obligations to PSI or any
assignee within ninety (90) days of the announcement of acquisition or
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change of control provided six (6) months notice is given to PSI. Any
continuation of clearing services shall be of a quality consistent to
that contemplated by the terms of this Agreement and in the event that
no agreement is in place with respect to the financial terms of a
period of continuation, then such financial terms shall be commercially
reasonable. The determination of commercially reasonable financial
terms shall be based upon rates and amounts of prior year-to-year
adjustments.
H. The parties hereto acknowledge that PSI may use certain computer
programs written solely by PSI (the "Software") in carrying out its
duties under this Agreement. PSI hereby agrees that if during the term
of this Agreement PSI ceases to do business for any reason, or there is
a change of control of PSI, that PSI will provide JHCC at no cost a
copy of the source code and object code of the Software promptly after
such ceasing of PSI's business.
I. JHCC agrees not to enter into a fully disclosed clearing relationship
with any other introducing firm which is registered as a broker dealer
in securities other than the existing clearing relationships listed in
Schedule B annexed to this Agreement.
J. JHCC must have a Dealer's Agreement with each Mutual Fund where
required, prior to entering the initial order via PSI.
K. The indemnification provisions contained in this Agreement shall remain
operative and in full force and effect, regardless of the termination
of this
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Agreement, and shall survive any such termination.
L. This agreement shall be deemed a contract under the laws of the State
of New York and for all purposes, shall be construed and enforced in
accordance with the laws of such state.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first written above.
XXXX XXXXXXX PRUDENTIAL SECURITIES
CLEARING CORPORATION INCORPORATED
BY BY
Signature: Xxxxxxxx X. Xxxxxxxx Signature: Xxxxxx Xxxxxxxxx
-------------------------- --------------------------
Xxxxxxxx X. Xxxxxxxx Xxxxxx Xxxxxxxxx
TITLE: President TITLE: Managing Director
------------------------------ ------------------------------
DATE: September 8, 1995 DATE: September 8, 1995
------------------------------- -------------------------------
XXXXXX XXXXXXX INCORPORATED SUTRO & CO. INCORPORATED
BY BY
Signature: Xxxxxx X. Xxxxxx Signature: X.X. XxXxxxx
-------------------------- --------------------------
Xxxxxx X. Xxxxxx X.X. XxXxxxx
TITLE: Executive Vice President TITLE: Chairman and CEO
------------------------------ ------------------------------
DATE: September 8, 1995 DATE: September 8, 1995
------------------------------- -------------------------------
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ATTACHMENT I - FINANCIAL ARRANGEMENTS
Prudential Securities Incorporated ("PSI") and Xxxx Xxxxxxx Clearing Corporation
("JHCC"), Xxxxxx Xxxxxxx Incorporated ("TA") and Sutro & Co., Incorporated
("Sutro") agree to the following Financial Arrangements pursuant to the Clearing
Agreement dated ______________:
I. SECURITIES TRANSACTIONS
PSI will charge JHCC ** per trade with a minimum of $** per year for
the clearance and settlement of firm and customer transactions and the
maintenance of JHCC's firm and client accounts.
PSI will pay JHCC **% of their agency commissions, net of charges, on
settlement date, and the balance two days after settlement date. All
fees will be paid at month end. All wrap fees and other fees in lieu of
commission will be billed quarterly in advance and paid to JHCC on the
business day following the date on which such fees are charged to the
customers' accounts.
NOTE: A trade is defined as a transaction executed for the
same account, in the same security, on the same exchange, on
the same side, at the same price, on the same day.
II. INTEREST
A. Xxxx Xxxxxxx Freedom Securities Corporation ("JHFS") will
finance JHCC's customer and firm Net Debit Balance. The Net
Debit Balance is the net of JHCC's (customer and firm) cash
and margin debits, free credits, customer and firm short
account credit balances covered by excess inventory and Money
Market Fund suspense accounts.
PSI will charge JHCC ** basis points on the Net Debit Balance.
The amount to be financed by JHFS will be equal to the
estimated Net Debit Balance determined jointly by JHCC and PSI
by 11:00 a.m., New York time. If the Net Debit Balance exceeds
the amount sourced by JHCC, the difference will be charged to
JHCC at **. If the amount exceeds the Net Debit Balance,
PSI will credit JHCC at the **.
The interest charged on the Net Debit Balance will be debited
to the JHCC firm account monthly.
[**] Indicates that information has been omitted and filed
separately with the Commission pursuant to a request for
confidential treatment.
24
PSI will credit JHCC's firm account with any net interest
charged JHCC's customers on margin and cash debits monthly,
following the close of the customer interest cycle (Friday
following the third Thursday).
B. PSI will retain ** basis points of the stock borrow rebates
attributable to JHCC's firm and customer stock borrows. The
balance will be credited to JHCC monthly.
C. Stock Loan Credit - PSI will credit JHCC ** basis points on
**% of JHCC's average monthly margin debit balances,
calculated and credited monthly.
III. GENERAL
A. PSI will provide JHCC with S&P Market Scope at $** per
terminal. JHCC agrees to pay any increase in the service
charge imposed by S&P for service usage.
B. PSI will allow JHCC to use the Prudential Securities Municipal
Bond Trading and Syndicate systems in their present form at a
charge of $**.
C. PSI will charge JHCC $**.
D. If JHCC requests data feeds or reports which require custom
development, JHCC and PSI will determine what, if any, is a
reasonable fee for such data feeds or reports. In any event
PSI's fee to JHCC shall be at a commercially reasonable rate.
IV. JHCC WILL PAY THE FOLLOWING FEES AND OUT OF POCKET EXPENSES:
A. **
B. **
C. **
D. **
E. **
2
[**] Indicates that information has been omitted and filed separately with the
Commission pursuant to a request for confidential treatment.
25
F. **
G. **
H. **
I. **
J. **
K. **
L. **
M. **
N. **
O. **
V. ALLOCATION OF CUSTOMER SERVICE FEES
A. Physical delivery of U.S. Treasury Notes and Bonds - $** per
delivery retained by PSI.
B. Optional Exchange Fee - $** per security: $** retained by PSI
and balance of $** to JHCC.
C. ACAT Transfer Fee excluding XXX Accounts - $** per account:
$** retained by PSI and balance of $** to JHCC.
D. Quarterly Abandoned Account Safekeeping Fee- $** per account,
retained by PSI. (Fee will be reversed if owner of the account
is located.)
3
[**] Indicates that Information has been omitted and filed separately with the
Commission pursuant to a request for confidential treatment.
26
E. Postage and Handling Fee- $** to JHCC (or any amount
determined by JHCC).
F. Annual ASR Fee - Fee charged per household with less than two
(2) trades per year excluding Money Market trades. **
G. Purchase of U.S. Treasury Issues at auction - ** per
customer, per security retained by PSI if purchased through
PSI.
H. Estate handling fee optional and negotiated per account -
**
I. Returned check fee- *** per check, retained by PSI.
J. Transfer Agency Certificate Fee- **
VI. TERMS OF RENEGOTIATION
As set forth in Article VI, Paragraph (A), of the Agreement, it is
understood by and between the parties that any renegotiation as
provided for in the above referenced paragraph will be as follows:
A. Year 4 - The per trade charge described in Article I above
will be increased by an amount equal to the Consumer Price
Index increase (%) of calendar year 1998. The parties agree to
establish the per trade charge for year 6 or the basis for
calculating such charge on the fourth anniversary of the
conversion date of the Agreement. The parties further agree to
negotiate the increase in the per trade charge in good faith
in order to agree upon a commercially reasonable increase. In
determining a commercially reasonable increase the parties
shall use rates and amounts of prior year-to-year adjustments
as a basis of consideration.
B. Year 5 - The per trade charge of year 4 will be increased by
an amount equal to the Consumer Price Index increase (%) of
calendar year 1999.
The foregoing does not limit the renegotiation of any other financial
terms and services as provided for in this Agreement or as the parties
mutually agree to include herein.
[**] Indicates that information has been omitted and filed
separately with the commission pursuant to a request for
confidential treatment.
4
27
ATTACHMENT II
Prudential Securities Incorporated ("PSI") and Xxxx Xxxxxxx Clearing Corporation
("JHCC"), Xxxxxx Xxxxxxx Incorporated ("TA") and Sutro & Co., Incorporated
("Sutro") agree that the following additional services will be provided to JHCC
pursuant to the Clearing Agreement dated ______________:
A. BOSS 2000 functions outlined in Schedule A.
B. ACE System (Real time balances and positions).
C. Correspondent Trading System (Generic Trading System).
D. Automated Checkwriting System.
E. Development and implementation of a separate order routing
matrix for JHCC, TA and Sutro.
F. Client Profile System. (New Account System with customer new
account documents and controls).
G. Production of customer confirmations and statements with
JHCC's logos prominently displayed and Wexford Clearing
Services Corporation small print as the clearing broker.
H. Level 3 Networking and Fund Serv on all participating Mutual
Funds.
I. A Central Asset Account with an annual charge to the client.
(Utilizing a JHCC Money Market Fund with checking and debit
card through Prudential Bank and Trust).
J. Smart System for Branch originated Fed Fund wires (fee to JHCC
$5 per wire).
K. Production of Instant Replay statements for year-end tax
planning and reporting.
L. Downloading of JHCC customer and proprietary account
information in PSI format.
M. Customer Statements for select accounts with all the Command
Statement features to be charged at a reasonable fee to be
determined at a later date.
28
N. Furnishing services and functionality to clear all products of
Xxxx Xxxxxxx Mutual Life Insurance Company and its affiliates
offered by JHCC, Sutro and TA, provided that PSI provides
written consent to clear said products which consent shall not
be unreasonably withheld and further provided that none of the
products will violate the provisions of Article III, Paragraph
(A), Subparagraph 7. JHCC and PSI will determine what, if any,
is a reasonable fee for the modifications and/or enhancements
to PSI's existing systems for providing such services and
functionality. In any event PSI's fee to JHCC shall be at a
commercially reasonable rate.
2
29
SCHEDULE A
MARKETING BOSS
Broker Book Closed Lot Summary List Broker Book Summary
Branch Operations Index Contact Management System
Bond Yield Calculator Portfolio Evaluator
Commissions Calculator Year-end Closed Position Report
Dividend Information by Symbol/Cusip Fixed Income Portfolio Analysis
Dividend Operations Information Asset Allocation Reports
Household Information by Account Number
Margin Account Debit Ranking by Balance
Mutual Fund Operations Information REPORTS
General Margin Information
Option Yield Ranking (Calls) FA's Accounts Sorted by Balances
Option Yield Ranking (Puts) FA's Accounts Sorted by Security Positions
Automated Corporate Action System Good Till Canceled Orders
Security Look-up by Alpha Search Commissions by Product
Security Look-up by Symbol Total Commissions
Dividend Reinvestment System Total Commissions for one Product
Combined Statement Mailing Set-up System Commissions by Product for one FA
Telephone Directory Mutual Fund Commissions
WS/W9 Missing Documents Today's Trades by Product
Today's Trades by Account
Expiring Bonds
CLIENT Expiring Options
Expiring Options by Account
Client Balances Data Large Positions for Stocks
Client Positions Large Positions for Bonds
Client Transaction History Large Positions for Options
Client Name and Address All Items for Attention
List of Clients or Prospects Extensions Due Today
Operations Balance Data New Margin Calls
List of Active Accounts Cash Over the Wire
Client Memo List Securities Over the Wire
Delivery vs. Payment Information Journals Over the Wire
Interested Party Information
Related Accounts
Monthly Statements
Instant Replay (Year-end Consolidated
Statement)
30
ATTACHMENT III
Prudential Securities Incorporated ("PSI") and Xxxx Xxxxxxx Clearing Corporation
("JHCC"), Xxxxxx Xxxxxxx Incorporated ("TA") and Sutro & Co., Incorporated
("Sutro") agree that the following services will not be provided to JHCC
pursuant to the Clearing Agreement dated ______________:
A. Connection to the Internet
B. E-Mail
C. Administration of XXX accounts for which PSI is not custodian
D. Risk Management System
E. Research
F. General Ledger and Accounting Systems
G. Accounts Payable System
H. Programming for customized commission schedules
I. FA compensation package
J. FA registration package
K. Trading System:
Government Trading Bond Fund Trading
Corporate Hi-Yield Money Desk
Corporate Syndicate Mortgage-Backed Trading
Corporate Trading Block Trading
Bond Fund Syndicates
31
SCHEDULE B
**
[**] Indicates that information has been omitted and filed
separately with the Commission pursuant to a request for
confidential treatment.
32
ADDENDUM
Addendum to Attachment I - Financial Arrangements of the Clearing Agreement,
dated September 8, 1995, between Prudential Securities Incorporated ("PSI"),
Xxxxxx Xxxxxxx Incorporated ("TA") and Sutro & Co., Incorporated ("Sutro"),
effective December 18, 1995.
Paragraph II INTEREST, subparagraph A., second paragraph is changed to read as
follows:
PSI will charge JHCC **
For purposes of this calculation, Net Debit Balance is defined
as follows:
Customer account cash and margin debits net of
customer account free credits and customer short
account balances covered by PSI excess inventory.
Paragraph III GENERAL, add the following subparagraphs E, F and G:
E. PSI will provide the PSI Command Account Statement features
for ** at a charge of **
F. PSI will provide the support services described on the
attached schedule for JHCC Retirement accounts at the
following rates.
- All retirement accounts with the exception of spousal
accounts. **
- Spousal accounts **
[**] Indicates that information has been omitted and filed
separately with the commission pursuant to a request for
confidential treatment.
33
'
- Development charges on 70 1/2 mandatory distribution
system of**.
G. PSI will update tax buckets daily, via an automated data feed
from JHCC for JHCC 401K Employee Accounts. JHCC agrees to pay
programming expenses to PSI.** PSI reserves the right to
charge JHCC ****** expenses associated with **.
XXXX XXXXXXX PRUDENTIAL SECURITIES
CLEARING CORPORATION INCORPORATED
BY BY
Signature: Xxxxxxxx X. Xxxxxxxx Signature: Xxxxxx. Xxxxxxxxx
-------------------------- --------------------------
Xxxxxxxx X. Xxxxxxxx Xxxxxx. Xxxxxxxxx
TITLE: President TITLE: Managing Director
------------------------------ ------------------------------
DATE: January 5, 1996 DATE: January 19, 1996
------------------------------- -------------------------------
XXXXXX XXXXXXX INCORPORATED SUTRO & CO. INCORPORATED
BY BY
Signature: Xxxxxx X. Xxxxxx Signature: Xxxx Xxxxxxx
-------------------------- --------------------------
Xxxxxx X. Xxxxxx Xxxx Xxxxxxx
TITLE: President TITLE: President
------------------------------ ------------------------------
DATE: January 5, 1996 DATE: January 5, 1996
------------------------------- -------------------------------
[**] Indicates that Information has been omitted and filed separately with the
Commission pursuant to a request for confidential treatment.
34
SCHEDULE OF RETIREMENT ACCOUNT SERVICES
PSI WILL DO THE FOLLOWING FOR JHCC'S RETIREMENT ACCOUNTS
- File all 1099R's for IRA's, SEP's and SARSEP's with the IRS and the
clients.
- File all 5498's for IRA's, SEP's and SARSEP's with the IRS and the
clients.
- File 2439 for IRA's, SEP's and SARSEP's with the IRS.
- Do all tax correction from 1996 forward.
- Provide Service Desk availability Monday through Friday from 8:30 a.m.
to 6:00 p.m. NYT for their branch personnel only. Will not accept calls
from their clients.
- Do all Federal and State tax withholding (where applicable) for IRA's,
SEP's and SARSEP's.
- Do all Federal and state tax filings (where applicable) for IRA's,
SEP's and SARSEP's.
- Provide distribution processing and check disbursement for all
retirement accounts.
- Provide fee xxxx notices twice a year.
- Provide fee receipt processing.
- Provide quarterly statements for accounts that have no activity and
monthly statements for accounts that have activity.
- Provide a 70 1/2 mandatory distribution system for their Boston
operations.
- Provide full access to the RPIN system.
