CLEARING AGREEMENT
This agreement, made this 17 day of August, 1993 (the "Agreement") between
Correspondent Services Corporation (hereinafter referred to as "CSC"), and First
Colonial Securities Group, Inc. (hereinafter referred to as the
"Correspondent").
WITNESSETH THAT:
WHEREAS, the Correspondent is desirous of availing itself of clearing, execution
and other services related to the securities business as more fully set forth
herein; and WHEREAS, CSC desires to extend the foregoing types of services to
the Correspondent. NOW THEREFORE, in consideration of the mutual covenants
hereinafter set forth and other good and valuable consideration the receipt of
which is hereby acknowledged, the parties hereto hereby covenant and agree as
follows:
I. Services
A. Services to be Performed by CSC
(i) CSC will execute orders for the Correspondent's proprietary accounts
and for the Correspondent's customers whose cash or margin accounts
have been accepted by CSC ("Introduced Accounts"), but only insofar
as such orders are transmitted by the Correspondent to CSC.
(ii) CSC will generate, prepare and, to the extent mutually agreed upon
by the parties hereto, mail confirmations respecting each of the
Introduced Accounts.
(iii) CSC will prepare and mail the summary monthly statements (or
quarterly statements if no activity in any Introduced Account occurs
during any quarter covered by such statement) to every Introduced
Account.
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(iv) CSC will settle contracts and transactions in securities (including
options to buy or sell securities) (i) between the Correspondent and
other brokers and dealers, (ii) between the Correspondent and the
Introduced Accounts, and (iii) between the Correspondent and persons
other than the Introduced Accounts or other brokers and dealers.
(v) CSC will engage in all cashiering functions for the Introduced
Accounts, including the receipt, delivery and transfer of securities
purchased, sold, borrowed and loaned, receiving and distributing
payment therefore, holding in custody and safekeeping all securities
and payments so received, the handling of margin accounts, including
paying and charging of interest, the receipt and distribution of
dividends and other distributions, and the processing of exchange
offers, rights offerings, warrants, tender offers and redemptions.
Upon mutual agreement of the parties hereto, the cashiering
functions with respect to the receipt of securities and the making
and receiving payments therefor may be relinquished to the
Correspondent.
(vi) CSC will construct and maintain books and records of all
transactions executed or cleared through it and not specifically
charged to the Correspondent pursuant to the terms of this
Agreement, including a daily record of required margin and other
information required by Rule 432(a) of the rules of the Board of
Directors of the New York Stock Exchange, Inc. (the "Rules"), or by
the constitution, articles of incorporation, by-laws (or comparable
instruments) or rules, regulations or other instruments
corresponding to the foregoing, and the stated policies or practices
of any other securities exchange (the "Standards"), including but
not otherwise limited to any national securities exchanges
registered under the Securities Exchange Act of 1934, as amended
("National Securities Exchange").
B. Services Which Shall Not be Performed by CSC
Unless otherwise agreed to in a writing executed by the parties hereto, CSC
shall not engage in any of the following services on behalf of the
Correspondent:
(i) Accounting, bookkeeping or recordkeeping, cashiering, or any other
services with respect to commodity transactions, and/or any
transaction other than securities transactions.
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(ii) Preparation of the Correspondent's payroll records, financial
statements or any analysis or review thereof or any recommendations
relating thereto.
(iii) Preparation or issuance of checks in payment of the Correspondent's
expenses, other than expenses incurred by CSC on behalf of the
Correspondent pursuant to this Agreement.
(iv) Payment of commissions, salaries or other remuneration to the
Correspondent's salespersons or any other employees of the
Correspondent.
(v) Preparation and filing of reports (the "Reports") with the
Securities and Exchange Commission, any state securities commission,
any National Securities Exchange, or other securities exchange or
securities association or any other regulatory or self-regulatory
body or agency with which the Correspondent is associated and/or by
which it is regulated. Furthermore, CSC will, at the request of the
Correspondent, furnish the Correspondent with any necessary
information and data contained in books and records kept by CSC and
not otherwise reasonably available to the Correspondent if such
information is required in connection with the preparation and
filing of Reports by the Correspondent.
(vi) Making and maintaining reports and records required to be kept by
the Correspondent by the Currency and Foreign Transactions Reporting
Act of 1970 and the regulations promulgated pursuant thereto, or any
similar laws or regulations enacted or adopted hereafter.
(vii) Verification of the address changes of any Introduced Account.
(viii) Obtaining and verifying new account information, and insuring that
such information meets the requirements of Rule 405{1} of the Rules
and any other Rules or applicable standards.
(ix) Maintaining a record of all personal and financial information
concerning any Introduced Account and all orders received therefrom,
and maintaining all documents and agreements executed by any
Introduced Account.
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(x) Holding for safekeeping of the securities of any Introduced Account
registered in the name of the Introduced Account.
(xi) Accepting deposits from the Correspondent in the form of coin or
currency of the United States of any other country.
II. Clearing Charges
See Schedule "A" attached hereto and incorporated herein by reference.
Correspondent shall have sole discretion to determine the amount of
commission/xxxx up charged to its Introduced Accounts cleared by CSC. CSC
agrees to pay Correspondent certain commissions and/or sales credits
received by CSC less any amounts due to CSC under this Agreement or
otherwise and any expenses or other sums to third parties paid on the
Correspondent's behalf by CSC.
In no event shall the fees charged in this Article II for the above
services be in contravention of the Securities Act of 1933, as amended, the
Securities Exchange Act of 1934, the Investment Advisers Act of 1940, as
amended, and the Employee Retirement Income Security Act of 1974, as
amended, or any rules or regulations thereunder, or any other law, rule or
regulation, Federal, State or Local, or any constitution, by-law, rule,
regulation or instrument correspondent to the foregoing, or stated policy
or practice of any national securities exchange or other securities
exchange or association or other regulatory or self-regulatory body or
agency ("Laws and Regulations"). In the event that such fees are deemed by
CSC or the Correspondent to be in contravention of the Laws and
Regulations, they shall be replaced with fees mutually agreed upon by CSC
and the Correspondent.
III. Notation on Statements, Confirmation and Other Written Material
CSC shall carry all Introduced Accounts in the names of the Correspondent's
customer, with a notation on its books and records that such Introduced
Accounts were introduced by the Correspondent, and all monthly or quarterly
statements, confirmations relating to such Introduced Accounts shall also
indicate that the Introduced Accounts were introduced by the Correspondent.
Inadvertent omission of such notations shall not be deemed to constitute a
breach of this Agreement. Copies of the forms covering the foregoing shall
be furnished by CSC to the Correspondent.
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IV. Opening of Accounts
(i) At the time of the opening of each Introduced Account, Correspondent
shall furnish CSC with all financial and personal information
concerning such Introduced Accounts as CSC may reasonably require.
At the time of the opening of Introduced Accounts which are margin
accounts, the Correspondent shall furnish CSC with executed
customers' agreements, hypothecation agreements and consents to
loans of securities (collectively, the "margin agreement"). CSC
shall supply the Correspondent with margin agreement forms regarding
margin accounts in sufficient quantities, such forms to be submitted
to CSC upon their completion by the Correspondent. If any Introduced
Account may have been opened without CSC having previously received
a properly executed margin agreement, failure of CSC to receive such
margin agreements shall not be deemed to be a waiver of the
information requirements set forth herein. Upon the written or oral
request of CSC, the Correspondent shall furnish CSC with any other
documents and agreements executed by the Introduced Account on forms
which shall be supplied by CSC in sufficient quantities and which
may reasonably be required by CSC in connection with the opening,
operating or maintaining of Introduced Accounts. CSC may, at its
option, mail margin agreements or "new account" forms directly to
the Introduced Accounts upon notification by the Correspondent,
and/or require completion of its own margin agreement or "new
account" forms and, if required, option account agreements for the
Introduced Accounts. The Correspondent shall promptly provide CSC
with basic data and copies of documents relating to each of the
Introduced Accounts, including, but not otherwise limited to, copies
of records of any receipts of the Introduced Accounts' funds and/or
securities received directly by the Correspondent, as shall be
necessary for CSC to discharge its service obligations hereunder.
(ii) All transactions in any Introduced Account are to be considered cash
transactions until such time as CSC has received margin agreements,
duly and validly executed in respect of such Introduced Account.
Nevertheless, it is intended that Correspondent will obtain executed
margin agreements within the time periods set forth in procedural
manuals provided by CSC or any entity affiliated with CSC. In the
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event credit is inadvertently extended with respect to such
Introduced Accounts, Correspondent shall indemnify and hold CSC
harmless from and against all loss, liability, damage, cost and
expense (including but not otherwise limited to fees and expenses of
legal counsel) arising therefrom.
(iii) At the time of the opening of any Introduced Accounts, the
Correspondent shall furnish CSC with the name of any principal for
whom the Correspondent is acting as agent, and written evidence of
such authority.
(iv) The Correspondent shall have the sole and exclusive responsibility
for compliance with Rule 405(3) of the Rules and shall specifically
approve the opening of any new account before forwarding such
account to CSC as a potential Introduced Account. CSC, in its
reasonable business judgement, reserves the right to reject any
account which the Correspondent may forward to CSC as a potential
Introduced Account. CSC also reserves the right to terminate any
account previously accepted by it as an Introduced Account.
(v) Pursuant to written notification received by the Correspondent and
forwarded to CSC, any account of the Correspondent may choose to
reject the services to be performed by CSC pursuant to this
Agreement and thus choose not to be serviced as an Introduced
Account pursuant hereto. Upon notice from another member
organization that an Introduced Account intends to transfer his
account thereto, CSC shall expedite such transfer and shall have the
sole and exclusive responsibility for compliance with Rule 412 of
the Rules.
(vi) It shall be the sole and exclusive responsibility of the
Correspondent to make every reasonable effort to ascertain the
essential facts relative to any Introduced Account and any order
therefore, in compliance with Rule 405(1) of the Rules, including
but not otherwise limited to ascertaining the authority of all
orders for Introduced Accounts, and the genuineness of certificates,
papers and signatures provided by each Introduced Account. Any
investment advice furnished to an Introduced Account by the
Correspondent shall be the sole and exclusive responsibility of the
Correspondent.
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(vii) The Correspondent shall be solely and exclusively responsible for
the handling and supervisory review of any Introduced Accounts over
which the Correspondent's partners, officers or employees have
discretionary authority, as required by Rule 408 of the Rules and
any other applicable Laws and Regulations. The Correspondent shall
furnish CSC with such documentation with respect thereto as may be
requested by CSC. The Correspondent hereby agrees to indemnify and
hold CSC harmless against any loss, liability, damage, cost or
expense (including but not otherwise limited to fees and expenses of
legal counsel) suffered or incurred by CSC directly or indirectly as
a result of any liabilities or claims arising from the exercise by
the Correspondent, its partners, officers or employees of
discretionary authority over Introduced Accounts. The Correspondent
hereby warrants that with regard to any orders or instructions given
by the Correspondent with respect to such discretionary accounts,
its partners, officers or employees shall have been fully and
properly authorized relative thereto and that the execution of such
orders shall not be in violation of the Laws and Regulations.
Furthermore, the Correspondent hereby agrees to indemnify and hold
CSC harmless against any loss, liability, damage, cost or expense
(including but not otherwise limited to fees and expenses to legal
counsel) suffered or incurred by CSC directly or indirectly as a
result of any breach of the Correspondent's said warranty.
(viii) The Correspondent shall have the sole and exclusive responsibility
for the handling and supervisory review of any Introduced Account
for an employee or officer of any member organization,
self-regulatory organization, bank, trust company, insurance company
or other organization engaged in the securities business, and for
compliance with Rule 407 of the Rules relating thereto. The
Correspondent shall furnish CSC with such documentation with respect
thereto as may be requested by CSC.
(ix) The Correspondent shall have the sole and exclusive responsibility
to insure that those of its customers who become Introduced Accounts
hereunder shall not be minors or subject to those prohibitions
existing under the Laws and Regulations generally relating to the
incapacity of any Introduced Account or any conflict of interest
relating to such Introduced Account.
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(x) The Correspondent shall be solely and exclusively responsible for
any loss, liability, damage, cost or expense (including but not
otherwise limited to fees and expenses of legal counsel) sustained
or incurred by either the Correspondent or CSC, arising out of or
resulting from any orders the Correspondent has taken from
Introduced Account residing or being domiciled in jurisdictions in
which the Correspondent has not been or is no longer authorized to
do business.
(xi) It shall be the sole and exclusive responsibility of the
Correspondent to comply with the Laws and Regulations relating to
each Introduced Account which effect listed option transactions
including, but not limited to, approval by the Correspondent's
Registered Options Principal or Senior Registered Options Principal
(as applicable), delivery of required Options Disclosure Documents
(and Supplements where applicable) and option documentation.
V. Transactions and Margin
(i) It is understood that with respect to Introduced Accounts which are
margin accounts, CSC is responsible for compliance with Regulation
T, 12 C.F.R. Part 220, the Federal margin regulation promulgated by
the Board of Governors of the Federal Reserve System (the "Board"),
and any interpretative ruling issued by the Board, and letter
rulings of the Federal Reserve Bank of New York, Rules and
Interpretations of the New York Stock Exchange, Inc. and any other
applicable margin and margin maintenance requirements of the Laws
and Regulations. The Correspondent is responsible to CSC for the
collection of the margin required to support each transaction for,
and to maintain margin in, each Introduced Account and such margin,
in conformity with the above margin and margin maintenance
requirements. After such initial margin on each transaction has been
received, maintenance margin calls shall be generated by CSC and
made by CSC or by the Correspondent at the instructions of CSC. CSC
shall have the right to modify, in its sole discretion, the margin
requirements of any Introduced Account from time to time so that CSC
may call for additional margin. Therefore, CSC shall be the sole
judge as to the amount of margin to be required of and maintained by
Introduced Accounts. CSC may impose such margin by individual
security within an account or by a specified Introduced Account and
such margin need not be of general application to all accounts.
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CSC shall impose no fees on the Correspondent, other than any fees
or charges imposed directly or by any regulatory body with regard to
margin extensions obtained by CSC pursuant to written requests from
a principal of the Correspondent.
(ii) On all transactions, the Correspondent shall be solely and
exclusively responsible to CSC for any loss, liability, damage, cost
or expense (including but not otherwise limited to fees and expenses
of legal counsel) incurred or sustained by the Correspondent or CSC
as result of the failure of any Introduced 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 (provided that CSC has timely
issued such call and/or given notice thereof to the Correspondent or
if conditions creating such call should be reasonably known by
Correspondent), whether or not any margin extensions have been
granted by CSC pursuant to the request of the Correspondent, except
that no interest will be charged by CSC for cash shorts in
Introduced Accounts. The Correspondent agrees to be solely and
exclusively responsible for the payment and delivery of all "when
issued" or "when distributed" transactions which CSC may accept,
forward or execute for Introduced Accounts.
(iii) On all over-the-counter transactions for Introduced Accounts, the
Correspondent shall furnish CSC with the names of the respective
purchasing and selling broker-dealers (except as otherwise provided
in paragraph (iv) of this Section, as set forth below), the names of
the purchasing and selling customers, and the wholesale and retail
purchase and sale prices.
(iv) Should the Correspondent entrust the execution of an order in an
over-the-counter security to CSC or any entity affiliated with CSC
and the counter party is left at CSC's discretion, CSC will assume
the responsibility of paying the Correspondent that which the
counter party has failed to pay pursuant to the over-the-counter
order transaction (counter party risk). In the case the
Correspondent executes its own over-the-counter order or designates
the counter party, it shall be understood that in the event the
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over-the-counter dealer with whom the Correspondent dealt or whom it
designated fails to live up to its part of the transaction, the
Correspondent will assume the counter party risk and reimburse CSC
for any loss sustained thereby.
(v) The Correspondent shall be solely and exclusively responsible for
approving all orders for the Introduced Accounts and for
establishing procedures to insure that such approved orders are
transmitted properly to CSC for execution. CSC, in its reasonable
business judgement, reserves the right to reject any order which the
Correspondent may transmit to CSC for execution.
(vi) The Correspondent shall be solely and exclusively responsible for
the supervisory review of all orders for the Introduced Accounts and
shall insure that any orders and instructions given by it or any of
its employees to CSC pursuant to the terms of this Agreement shall
have been properly authorized in advance.
(vii) The Correspondent shall be solely and exclusively responsible for
sales and purchases for the Introduced Accounts that may create or
result in violation of any of the Laws and Regulations.
(viii) All transactions pursuant to the terms of this Agreement shall be
subject to the constitution, rules, by-laws, regulations, stated
practices, and customs and any modifications thereof of any national
securities exchange or other securities exchange or market and its
clearing house, if any, where executed, and the Laws and
Regulations. It is understood that the Correspondent assumes sole
and exclusive responsibility for compliance with the Laws and
Regulations in the same manner and to the same degree as if the
Correspondent were performing the services for the Introduced
Accounts that have been assumed by CSC pursuant to this Agreement,
except insofar as CSC may pursuant to paragraph (iv) of this
Section, as set forth above, select the counter party to a
particular transaction.
(ix) All transactions heretofore had between the Correspondent and CSC
with respect to orders given by or for the Introduced Accounts and
cleared through CSC shall be subject to the Provisions of this
Agreement.
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VI. Supervisory Responsibility
(i) Correspondent shall have the sole and exclusive responsibility for
the review of all Introduced Accounts and for compliance with any
supervisory responsibilities under Rule 405(2) of the Rules,
including but not otherwise limited to matters involving the
investment objectives of the Introduced Accounts, the reasonable
basis for recommendations made to Introduced Accounts, and the
frequency of trading in the Introduced Accounts, whether or not such
transactions are instituted by the Correspondent, its partners,
officers, employees or any registered investment advisor.
(ii) The Correspondent and CSC shall each be responsible for compliance
with any supervisory procedures under Rule 342 of the Rules and, to
the extent applicable, any other provisions of the Laws and
Regulations, including but not otherwise limited to supervising the
activities and training of their respective registered
representatives, as well as all of their other respective employees
in the performance of functions specifically allocated to them
pursuant to the terms of this Agreement.
VII. Information to be provided by the Correspondent
(i) The Correspondent shall provide CSC with copies of all financial
information and reports filed by the Correspondent with the New York
Stock Exchange, Inc. (if a member), the National Association of
Securities Dealers, Inc., the Securities and Exchange Commission,
and any other National Securities Exchange (where a member)
(including but not otherwise limited to monthly and quarterly
Financial and Operational Combined Uniform Single Reports, i.e.,
"FOCUS" Reports) simultaneous with the filing therewith.
(ii) The Correspondent shall submit to CSC on an annual basis the audited
financial statements of the Correspondent, its parent organization
(if applicable) and, when requested by CSC, its affiliated entities.
In addition, the Correspondent shall submit to CSC upon request,
information and reports relating to the financial integrity of
Correspondent, its parent organization (if applicable) and its
affiliated entities, including but not otherwise limited to
information regarding the Correspondent's aggregate indebtedness
ratio and net capital.
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(iii) The Correspondent shall provide CSC with all appropriate data in its
possession pertinent to the performance and supervision of any
function or responsibility specifically allocated to CSC pursuant to
the terms of this Agreement.
(iv) The Correspondent shall provide CSC with any amendment or supplement
to the Form BD of the Correspondent.
VIII. Information to be provided by CSC
CSC shall provide the Correspondent with all appropriate data in its
possession pertinent to the proper performance and supervision of any
function specifically allocated to the Correspondent pursuant to the terms
of this Agreement. The Correspondent shall be responsible for and shall
promptly reimburse CSC for all costs incurred by CSC in connection with the
preparation and mailing of such information.
IX. Customer Notification and Correspondence
(i) The Correspondent shall be solely and exclusively responsible for
informing its customers in a written correspondence, the form and
substance of which will be mutually agreed upon, prior to the
effective date of this Agreement, as to the general nature of the
services to be provided by CSC pursuant to this agreement and the
right of such customers to reject the services provided herein. Any
new customers of the Correspondent shall also be informed as
provided herein, verbally prior to such customers becoming
Introduced Accounts and in writing, once the new accounts have been
opened and accepted. The Correspondent shall be solely and
exclusively responsible for the payment of all costs incurred in
connection with the preparation and mailing of such customer
correspondence.
(ii) The Correspondent shall inform its customers pursuant to such
written correspondence that all inquiries and correspondence should
be directed to the Correspondent. All customer correspondence shall
be reviewed and responded to by the party responsible for the
specific area to which the inquiry or complaint relates pursuant to
the terms of this Agreement. In the event such correspondence is not
directed to such party originally, the Correspondent or CSC shall
expeditiously forward such correspondence to the appropriate party.
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X. Errors, Controversies and Indemnities
(i) Errors, misunderstandings or controversies, except those
specifically otherwise covered in this Agreement, between the
Introduced Accounts and the Correspondent or any of its employees,
which shall arise out of acts or omissions or the Correspondent or
any of its employees (including, without limiting the foregoing, the
failure of the Correspondent to deliver promptly to CSC any
instructions received by the Correspondent from an Introduced
Account with respect to the voting, tender or exchange of shares
held in such Introduced Account), shall be the sole and exclusive
responsibility and liability of the Correspondent. In the event,
however, that by reason of such error, misunderstanding or
controversy, the Correspondent in its discretion deems it advisable
to commence an action or proceeding against an Introduced Account,
the Correspondent shall indemnify and hold CSC harmless from any
loss, liability, damage, cost or expense (including but not
otherwise limited to fees and expenses of legal counsel) which CSC
may incur or sustain in connection therewith or under any settlement
thereto. If such error, misunderstanding or controversy shall result
in the bringing of an action or proceeding against CSC, the
Correspondent shall indemnify and hold CSC harmless from any loss,
liability, damage, cost or expense (including but not otherwise
limited to reasonable fees and expenses of legal counsel) which CSC
may incur or sustain in connection therewith or under any
settlement thereof.
(ii) Errors, misunderstandings or controversies, except those
specifically otherwise covered in this Agreement, between the
Introduced Accounts and the Correspondent or any of its employees,
which shall arise out of acts or omissions of CSC or any of its
employees, shall be the sole and exclusive responsibility and
liability of CSC. In the event, however, that by reason of such
error, misunderstanding or controversy, CSC in its discretion deems
it advisable to commence an action or proceeding against an
Introduced Account, CSC shall indemnify and hold the Correspondent
harmless from any loss, liability, damage, cost or expense
(including but not otherwise limited to reasonable fees and expenses
of legal counsel) which the Correspondent may incur or sustain in
connection therewith or under any settlement thereof. If such error,
misunderstanding or controversy shall result in the bringing of an
action or proceeding against the Correspondent, CSC shall indemnify
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and hold the Correspondent harmless from any loss, liability,
damage, cost or expense (including but not otherwise limited to
reasonable fees and expenses of legal counsel) which the
Correspondent may incur or sustain in connection therewith or under
any settlement thereof.
(iii) CSC and the Correspondent both agree to indemnify the other and hold
the other harmless from and against any loss, liability, damage,
cost or expense (including but not otherwise limited to reasonable
fees and expenses of legal counsel) arising out of or resulting from
any failure by the indemnifying party or any of its employees to
carry out fully the duties and responsibilities assigned to the
indemnifying party herein or any breach of any representation or
warranty herein by the indemnifying party under this Agreement. The
Correspondent hereby agrees to indemnify and hold CSC harmless from
and against any loss, liability, damage, cost or expense (including
but not otherwise limited to reasonable fees and expenses of legal
counsel) sustained or incurred in connection herewith in the event
any Introduced Account fails to meet any initial margin call or
subsequent maintenance calls, in conformity with Section V hereof.
(iv) The indemnification provisions in this Agreement, shall remain
operative and in full force and effect, regardless of the
termination of this Agreement, and shall survive any such
termination.
(v) Correspondent agrees to maintain, and to provide evidence thereof to
CSC, at least $250,000 blanket bond indemnity bond insurance
covering any and all acts of its employees, agents and partners,
with an insurance company reasonably acceptable to CSC, listing CSC
as an insured party and permitting CSC to assume the policy in the
event of the Correspondent ceasing operations.
XI. Representations and Warranties
(a) The Correspondent represents and warrants as follows:
(i) The Correspondent will maintain at all times while this Agreement is
in full force and effect stated net capital of not less than
$100,000 unless CSC has otherwise agreed in writing. The
Correspondent will immediately notify CSC when [i] its Aggregate
Indebtedness Ratio
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reaches or exceeds 10 to 1, [ii] if the Correspondent has elected
to operate under paragraph [b] or Rule 15c3-1 of the Securities
Exchange Act of 1934, as amended, when its net capital is less than
5% of aggregate debit items computed in accordance with Rule
15c3-3, [iii] when the aggregate amount of any withdrawals of
equity capital and/or unsecured advances or loans exceed 20% of
excess net capital in any 30 day period or 30% of excess net
capital in any 90 day period or [iv] its stated net capital is less
than the minimum amount required under this Agreement.
(ii) The Correspondent is a member of good standing of the National
Association of Securities Dealers, Inc. The Correspondent will
promptly notify CSC of any additional exchange memberships or
affiliations. The Correspondent shall also comply with whatever
non-member access rules have been promulgated by any National
Securities Exchange or any other securities exchange of which it is
not a member.
(iii) The Correspondent is and during the term of this Agreement will
remain duly registered or licensed and in good standing as a
broker/dealer under all applicable Laws and Regulations.
(iv) The Correspondent has all the requisite authority in conformity
with all applicable Laws and Regulations to enter into this
Agreement and to retain the services of CSC in accordance with the
terms thereof.
(v) The Correspondent is in compliance, and during the term of this
Agreement will remain in compliance with [i] the capital and
financial reporting requirements of every National Securities
Exchange or other securities exchange and/or securities association
of which the Correspondent is a member, [ii) the capital
requirements of the Securities and Exchange Commission, and [iii]
the capital requirements of every state in which the Correspondent
is licensed as a broker/dealer.
(vi) The Correspondent shall not generate and/or prepare any statements,
xxxxxxxx or confirmations respecting any Introduced Account unless
expressly so instructed in writing by CSC.
(vii) The Correspondent shall keep confidential any information it may
acquire as a result of this Agreement regarding the business and
affairs of CSC, which requirement shall survive the life of this
Agreement.
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(b) CSC represents and warrants as follows:
(i) CSC is a member in good standing of the National Association of
Securities Dealers, Inc., and the New York Stock Exchange, Inc.
(ii) CSC is and during the term of this Agreement will remain duly
licensed and in good standing as a broker/dealer under all
applicable Laws and Regulations.
(iii) CSC has all the requisite authority, in conformity with all
applicable Laws and Regulations, to enter into and perform this
Agreement.
(iv) CSC is in compliance, and during the term of this Agreement,
will remain to compliance, with [i] the capital and financial
reporting requirements of every National Securities Exchange
and/or other securities exchange or association of which it is a
member, [ii] the capital requirements of the Securities and
Exchange Commission, and [iii] the capital requirements of every
state in which it is licensed as a broker/dealer.
(v) CSC represents and warrants that the names and addresses of the
Correspondent's customers which have or which may come to its
attention in connection with the clearing and related functions
it has assumed under this Agreement are confidential and shall
not be utilized by CSC except in connection with the functions
performed by CSC pursuant to this Agreement. CSC shall send no
written information to such customers other than statements,
bills or notices of transactions in connection with its role as
clearing agent. Notwithstanding the foregoing, should an
Introduced Account request, on an unsolicited basis, that CSC or
any entity affiliated with CSC become its broker, acceptance or
such Introduced Account by CSC or any entity affiliated with CSC
shall in no way violate this representation and warranty, nor
result in a breach of this Agreement.
(vi) CSC shall keep confidential any information it may acquire as a
result of this Agreement regarding the business and affairs of
the Correspondent, which requirement shall survive the life of
this Agreement.
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XII. Termination - Event of Default
Notwithstanding any provision in this Agreement, the following events or
occurrences shall constitute an Event of Default under this Agreement:
(i) Either CSC or the Correspondent shall fail to perform or
observe any term, covenant or condition to be performed or
observed by it hereunder and such failure shall continue to be
unremedied for a period of 30 days after written notice from
the non-defaulting party to the defaulting party specifying the
failure and demanding that the same be remedied; or
(ii) Any representation or warranty made by either CSC or the
Correspondent herein shall prove to be incorrect at any time in
any material respect; or
(iii) A receiver, liquidator or trustee of either CSC or the
Correspondent, or of its property, held by either party, is
appointed by court order and such order remains in effect for
more than 30 days; or either CSC or the Correspondent is
adjudicated bankrupt or insolvent; or any of its property is
sequestered by court order and such order remains in effect for
more than 30 days; or a petition is filed against CSC or the
Correspondent 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 30 days after such
filing; or
(iv) Either CSC or the Correspondent 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 hereinafter in effect, or consents
to filing of any petition against it under any such law; or
(v) Either CSC or the Correspondent makes an assignment for the
benefit of its creditors, or admits in writing its inability to
pay its debts generally as they become due, or consents to the
appointment of a receiver, trustee or liquidator of either CSC
or the Correspondent, or of any property held by either party;
or
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(vi) Either party hereto knowingly and willfully solicits or causes
to solicit for employment the employees of either party or
their affiliates/subsidiaries, successors or assignees without
prior consent of the other party; or
(vii) If research is provided by CSC or any entity affiliated with
CSC to the Correspondent and the Correspondent knowingly and
willfully reproduces or reprints in any fashion same or
represents to customers or to an unrelated third party that the
research supplied by CSC or such affiliated entity is that of
the Correspondent.
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.
XIII. Remedies Cumulative
The enumeration herein of specific remedies shall not be exclusive of any
other remedies. Any delay or failure by any party of 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 or to
limit the exercise of such right, power, remedy or privilege. No single,
partial or other exercise of any such right, power, remedy or privilege
shall preclude the further exercise thereof or the exercise of any other
right, power, remedy or privilege.
XIV. Miscellaneous
(i) As of the effective date of this Agreement CSC will not
convert or allow to be converted to its records as Introduced
Accounts customer accounts of the Correspondent that are
partially or totally unsecured, securities in the name of the
Correspondent's customers, or legal transfer securities
(securities in the name of estates, trust, joint ownership,
foreign ownership and such), unless previously approved in
writing by CSC. If in error such accounts are converted to
CSC books or records, CSC reserves the right to convert back
to the Correspondent or its clearing agent said customer
accounts and the positions.
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(ii) CSC shall have the power to place open orders as instructed
by the Correspondent as of the effective date of this
Agreement, and appropriate adjustments shall be made by CSC
to reflect that CSC has acted as broker on the open orders
with specialists on any national securities exchange or other
securities exchange.
(iii) CSC shall have the power to effect appropriate adjustments
with respect to pending dividends and other distributions
from the effective date of this Agreement through the last
payable date of such pending dividends.
(iv) The Correspondent shall be responsible for providing annual
dividend and distribution information as contained in IRS
Form 1087 (to include individual 1099 filings) and any other
information required to be reported by Federal, state or
local tax laws, rules or regulations, to its customers until
the effective date of this Agreement, whereupon CSC shall
assume this function as to Introduced Accounts.
(v) CSC shall have the power to allocate and make appropriate
adjustments for fails, reorganization accounts, other work in
process accounts, and overages relating to accounts of the
customers of the Correspondent that have become Introduced
Accounts pursuant to the terms of this Agreement.
(vi) The Correspondent shall assume all liabilities in connection
with the bad debts of all Introduced Accounts. Unsecured
debits in the Introduced Accounts shall be paid within 30
days of their origin date, and it shall be the responsibility
of the Correspondent to collect such payments from its
customers and transmit them to CSC within such 30-day period.
If any unsecured debit balances remain outstanding beyond
such 30-day period, CSC is authorized to apply as payment of
such debit balances commission fees owed to the Correspondent
in connection with transactions pursuant to this Agreement.
(vii) Transfers of securities relating to Introduced Accounts shall
be frozen ten business days prior to the effective date of
this Agreement.
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(viii) CSC shall limit its services pursuant to the terms of this
Agreement to that of clearing functions and the related
services expressly set forth herein and the Correspondent
shall not hold itself out as an agent of CSC or any of the
subsidiaries or companies controlled directly or indirectly
by or affiliated with CSC or its parent.
(ix) This Agreement supersedes any previous agreement and may be
modified only by a writing signed by both parties to this
Agreement. Such modification shall not be deemed as a
cancellation of this Agreement.
(x) This Agreement shall be submitted to and/or approved by any
national securities exchange, or other regulatory and
self-regulatory bodies vested with the authority to review
and/or approve this Agreement or any amendment or
modifications hereto. In the event of any such disapproval,
the parties hereto agree to bargain in good faith to achieve
the requisite approval. CSC will file a fully executed copy
of this agreement with the New York Stock Exchange.
(xi) This Agreement may be canceled by either of the parties
hereto upon sixty (60) days' written notice; provided,
however, that this Agreement may be canceled by either party
upon thirty (30) days' written notice if (i) the net capital
ratio of the other party exceeds 10 to 1, (ii) if the other
party has elected to operate under paragraph [f] of Rule
15c3-1 of the Securities Exchange Act of 1934, as amended,
when its net capital is less than 5% of aggregate debit items
computed in accordance with Rule 15c3-3, (iii) when the
aggregate amount of any withdrawals of equity capital and/or
unsecured advances or loans exceed 20% of excess net capital
in any 30 day period or 30% of excess net capital in any 90
day period or (iv) its stated net capital is less than the
minimum amount required under this Agreement; and provided,
further, that this Agreement may be canceled by CSC at any
time between the date on which this Agreement is executed and
the effective date of this Agreement, if there is a material
change in the control or management of the Correspondent.
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(xii) Any dispute or controversy between the Correspondent and CSC
relating to or arising out of this Agreement shall be settled
by arbitration before and under the rules of the Arbitration
Committee of the New York Stock Exchange, Inc., unless the
transaction which gave rise to such dispute or controversy
was effected in another exchange or market which provides
arbitration facilities, in which case it shall be settled by
arbitration under such facilities.
(xiii) CSC will not be bound to make any investigation into the
facts surrounding any transaction that it may have with the
Correspondent on a principal or agency basis or that the
Correspondent may have with its customers or other persons,
nor will CSC be under any responsibility for compliance by
the Correspondent with any Laws and Regulations which may be
applicable to the Correspondent. It is understood that CSC
will assist the Correspondent in any investigation conducted
by the Correspondent.
(xiv) To facilitate the keeping of records by CSC the Correspondent
will turn over promptly to CSC any and all cash remittances
and securities which the Correspondent receives from its
customer. Concurrently with the delivery of such funds or
securities to the Correspondent, it shall furnish CSC with
such information as may be relevant or necessary to enable
CSC to record promptly and properly such cash remittances and
securities in the respective Introduced Accounts.
(xv) 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 the
Correspondent or CSC. Any assignments 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. Except as indicated below,
no assignment of this Agreement by either party shall be
valid unless consented to in writing by the other party. Any
assignment by CSC to any subsidiary or to a company
affiliated with or controlled directly or indirectly by CSC
will be deemed valid and enforceable in the absence of any
consent from Correspondent. 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 or agency
relationship between the Correspondent and CSC.
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(xvi) Should the Correspondent in any way attempt to hold itself
out as, advertise or in any way represent that it is the
agent of CSC, CSC shall have the power, at is option, to
terminate the Agreement and the Correspondent shall be liable
for any loss, liability, damage, cost or expense (including
but not otherwise limited to reasonable fees and expenses of
legal counsel) sustained or incurred by CSC as a result of
such representation of agency or apparent authority to act as
an agent of CSC or agency by estoppel.
(xvii) The Correspondent shall not, without have obtained the prior
written approval of CSC, agree to place or place any
advertisement in any newspaper, publication, periodical or
any other media if such advertisement in any manner makes
reference to CSC, to any person or entity that directly, or
indirectly through one or more intermediaries, controls or is
controlled by, or is under common control with CSC and to the
clearing arrangements and/or any of the services embodied in
this Agreement.
(xviii) The Laws and Regulations require that CSC must have proper
documentation to support any account opened on its books,
including Introduced Accounts. If, after reasonable requests
therefor, the necessary documents so as to enable CSC to
comply with such account documentation requirements of the
Laws and Regulations have not been received by CSC, the
Correspondent shall receive notification that no further
orders will be accepted for the Introduced Accounts involved.
Should it happen that inadvertent orders are placed for such
accounts after this notice is received, no commission credit
will be granted from such order. On receipt of the necessary
documents, this restriction will be lifted on future
commissions, but any commissions withheld will be credited or
paid. This Agreement is not in any way intended to limit the
responsibility of CSC under the Laws and Regulations with
respect to Introduced Accounts.
(xix) 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 subject to
the statutory and common law of the State of New York.
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(xx) The headings preceding the text, articles and sections hereof
have been inserted for convenience and reference only and
shall not be construed to affect the meaning, construction or
effect of this Agreement.
(xxi) This Agreement shall cover only the type of services set
forth herein and is in no way intended nor shall be construed
to bestow upon the Correspondent any special treatment
regarding any other arrangements, agreements or
understandings which presently exist between Correspondent
and CSC or which may hereinafter exist. The Correspondent
shall be under no obligation whatsoever to deal with CSC or
any of its subsidiaries or any companies controlled directly
or indirectly by or affiliated with CSC or its parent, in any
capacity other than as set forth in this Agreement. Likewise,
CSC shall be under no obligation whatsoever to deal with the
Correspondent or any of its affiliates in any capacity other
than as set forth in this Agreement.
(xxii) 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.
(xxiii) In the event that CSC assumes any contractual obligation on
behalf of the Correspondent relative to communication
equipment, the Correspondent hereby agrees to immediately
absorb the remaining portion of said contract if
Correspondent terminates the relationship with CSC. The
Correspondent further agrees to absorb any and all costs
associated with the removal or relocation of any
communication equipment installed by or at the direction of
CSC, if this agreement is terminated by the Correspondent.
(xxiv) Any unsecured debit residing in a customer account as a
result of the failure to perform on behalf of the customer
and/or the Correspondent will be the responsibility of the
Correspondent. Thirty (30) calendar days
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will be allowed for collection. If funds are not received,
CSC reserves the right to debit the Correspondent; bad debit,
collateral and/or commission refund account the amount of the
unsecured balance plus interest at the rate of 1/2% above the
prevailing broker call loan rate.
(xxv) The interest and handling expense (to include day charges)
for any DVP transaction that does not settle on a normal or
regular way basis or is rejected by the agent for any reason
other than CSC negligence is the responsibility of the
Correspondent.
(xxvi) For the purposes of any and all notices, consents,
directions, approvals, restrictions, requests or other
communications required or permitted to be delivered
hereunder, CSC's address shall be 000 Xxxxxxxx, 00xx Xxxxx,
Xxx Xxxx, Xxx Xxxx, 00000 and the Correspondent's address
shall be 10 Lake Cntr. Exec. Park, 000 X. Xxx. 00, Xxx 000
Xxxxxxx, XX 00000, and 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.
(xxvii) This Agreement shall become effective on or about ___________
or such date mutually agreed upon by the parties hereto.
Made and executed at ____________________on the date hereinabove set forth.
Accepted and Agreed to:
First Colonial Securities Group, Inc.
By: Xxxxxxx Xxxxxx
Title: President
Date: 7/22/93
Accepted and Agreed to:
CORRESPONDENT SERVICES CORPORATION (CSC)
By: Xxxxxx X. Xxxxxxxxx
Title: E.V.P.
Date: 8/17/93
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