EXHIBIT 10.9
TEJAS SECURITIES GROUP
CLEARING AGREEMENT
This agreement is made on 3rd day of December, 2001 (the "Agreement") between
Correspondent Services Corporation [csc] ("CSC") with its principal place of
business being 0000 Xxxxxx Xxxxxxxxx, 0xx Xxxxx, Xxxxxxxxx, Xxx Xxxxxx 00000
and Tejas Securities Group ("Correspondent") with its principal place of
business being 0000 Xxx Xxxxxxx, Xxxxx 000, Xxxxxx, Xxxxx 00000.
WITNESSETH
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.
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 may execute orders for the Correspondent's proprietary
accounts and/or the Correspondent's customers whose cash and/or
margin accounts have been accepted by CSC ("Introduced Accounts"),
but only insofar as such orders are transmitted by the
Correspondent or its designee to CSC.
(ii) CSC will generate, prepare and/or transmit the appropriate data to
effect the production of and cause to be mailed confirmations
respecting transactions effected by 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.
(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,
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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 cash and
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. Exclusively for purposes of the
Securities and Exchange Commission's financial responsibility
rules and SIPC requirements, the Correspondent's customers will
be considered customers of CSC and not customers of the
Correspondent. Nothing herein shall cause the Correspondent's
customers to be construed or interpreted as customers of CSC 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. Upon
mutual written 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").
(vii) Pursuant to an agreement with UBS PaineWebber Inc. ("UBSPW"),
UBSPW provides a variety of services to CSC including
administrative, financial, operational and related services, some
of which CSC may provide to Correspondent pursuant to this
Agreement. Specifically, such services include but are not limited
to, centralized cashiering functions, delivery and receipt of
securities, securities purchases and sales, custody of all
securities and funds, distribution of dividends, processing of
exchange offers, rights offerings, warrants and tender offers and
redemptions for your cash and margin account customers.
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(viii) Pursuant to NASD Rule 3230(b), CSC will, upon receipt of a
customer complaint from a client of the Correspondent, promptly
forward such complaint to (A) Correspondent and (B) its designated
examining authority ("DEN") (or, if none, to its appropriate
regulatory agency or authority) and notify the client of the
Correspondent, in writing, that CSC has done so. Correspondent
agrees to promptly notify CSC of any changes in their DEA.
(ix) CSC, upon the execution of this agreement and annually thereafter,
will provide to the Correspondent a list or description of all
reports (exception and other types of reports) which it offers to
the Correspondent to assist the Correspondent in supervising its
activities, monitoring its customer accounts, and carrying out is
functions and responsibilities under this agreement. Correspondent
must promptly notify CSC, in writing, of those specific reports
that the Correspondent requires to supervise and monitor its
customer accounts and CSC will retain as part of its books and
records, copies of the reports requested by or provided to
Correspondent. Each year, no later than July 31, CSC will notify
in writing Correspondent's chief executive and compliance officers
of the reports offered to the introducing member pursuant to this
agreement and the reports requested by or supplied to the
Correspondent as of such date. CSC will also provide a copy of the
notice to the Correspondent DEA (or, if none, to its appropriate
regulatory agency or authority).
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 (including derivatives, etc.)
transactions.
(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.
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(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 (Bank Secrecy Act) and the regulations
promulgated pursuant thereto, or any similar laws or regulations
enacted or adopted hereafter, except that CSC reserves the right
to make and file such reports on behalf of itself where it deems
it appropriate for its own protection; and the Correspondent
recognizes that when CSC does so, CSC does not thereby assume any
responsibility for such services and/or relieve the Correspondent
of any responsibility for such services.
(vii) Verification of the address changes of any Introduced Account.
(viii) Obtaining (except for bona fide institutional accounts) and
verifying new account information, and insuring that such
information meets the requirements of NYSE Rule 405(1) and/or NASD
Rule 3110(c)(2) 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, except as required by CSC.
(x) Holding for safekeeping of the securities of any Introduced
Account registered in the name of the Introduced Account, unless
mutually agreed.
(xi) Accepting deposits from the Correspondent in the form of coin or
currency of the United States or any other country.
(xii) Accepting any deposits from the Correspondent that appear to CSC
to be suspicious.
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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 and/or fees charged to its Introduced Accounts cleared
by CSC. CSC agrees to pay Correspondent all commissions and/or sales
credits received by CSC with respect to business introduced by
Correspondent less any amounts due to CSC under this Agreement or
otherwise and any expenses or other sums paid to third parties by CSC
paid on the Correspondent's behalf.
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, or 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 in
writing 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 customers, with a notation on its books and records that
such Introduced Accounts were introduced by the Correspondent, and all
monthly or quarterly statements and confirmations relating to such
Introduced Accounts shall also indicate that the Introduced Accounts were
introduced by the Correspondent. In addition, account statements will
indicate that customer funds and securities received by CSC will be held
at CSC and will contain the telephone number of a contact area at CSC.
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.
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 any 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
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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 any Introduced Account. CSC may, at
its option, mail margin agreements, option agreements, "new
account" forms or any other form at its discretion directly to the
Introduced Accounts upon notification of the Correspondent, and/or
require completion of said margin agreements, "new account" forms
and/or other 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 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 reasonable fees and expenses of legal
counsel) arising therefrom.
(iii) At the time of the opening of any Introduced Account, the
Correspondent shall furnish CSC with the name of any principal if
other than the account name, 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 NYSE Rule 405(3) and/or NASD Rule 3110 (c) 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
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Tejas Securities Group -- Agreement
accepted by it as an Introduced Account. By mutual agreement, CSC
may open institutional accounts on behalf of Correspondents, if
said institution deals directly with CSC or any affiliated
organization.
(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 NYSE
Rule 412 and/or NASD Rule 11870.
(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 NYSE Rule 405(1) and/or NASD Rules
2310 and 3110(c)(2), 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 to include selection of a qualified money manager furnished
to an Introduced Account by the Correspondent shall be the sole
and exclusive responsibility of the Correspondent.
(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 NYSE Rule 408 and/or
NASD Rules 2510 and 3110 (c)(3) 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
reasonable fees and expenses of legal counsel)
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Tejas Securities Group -- Agreement
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 NYSE Rule 407 and/or NASD Rule 3050
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.
(x) The Correspondent shall be solely and exclusively responsible for
any loss, liability, damage, cost or reasonable expense (including
but not otherwise limited to fees and expenses of legal counsel)
sustained or incurred by either itself or CSC, arising out of or
resulting from any orders the Correspondent has taken from an
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
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Tejas Securities Group -- Agreement
maintenance requirements of the Laws and Regulations. The
Correspondent is responsible to CSC for the collection of the
margin required to support each transaction, and to maintain the
proper margin in each Introduced Account and to insure that such
margin is 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,
(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 reasonable
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 cash
and/or margin extensions have been granted by CSC pursuant to the
request of the Correspondent. Interest will be charged by CSC for
cash debits in cash accounts past settlement date and/or margin
debits in all 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 (contra) broker-dealers (except as
otherwise provided in paragraph (iv) of this Section, as set forth
below), the names of the purchasing and selling customers, the
wholesale and retail purchase/sale prices and xxxx-ups/xxxx-xxxxx.
(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
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Tejas Securities Group -- Agreement
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 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
all orders placed on behalf of or by the Introduced Accounts
either directly or indirectly by a RIA third party advisor or
money manager. The Correspondent is also responsible for
establishing procedures to insure that such orders are transmitted
properly to CSC for execution. CSC, in its reasonable business
judgement, reserves the right to reject any order which the
Correspondent or its designate 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 NYSE Rule 405(2) and/or NASD
Rule 3110(c)(2), 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 NYSE Rule 342 and/or NASD
Rule 3010 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.
(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.
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(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
(i) 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.
(ii) From time to time, CSC and/or UBSPW may provide the Correspondent
with information regarding securities, funds and other products,
including investment and trading ideas and strategies, and
inventory availability. CSC and/or UBSPW may also provide the
Correspondent with access to certain investment or trading
programs, products and services available through CSC and/or
UBSPW. In providing such information and access, neither CSC nor
UBSPW is soliciting or recommending any action based upon it.
Such information and access does not constitute investment advice,
and neither CSC nor UBSPW represents that any product, idea,
strategy, program, or service discussed in the information or
accessible through CSC or UBSPW is suitable for any or all
Introduced Accounts. The Correspondent shall be solely and
exclusively responsible for exercising its own independent
judgment and evaluating independently the investment risk
associated with any particular product idea, strategy, program, or
service discussed in the information or accessible through CSC or
UBSPW. The Correspondent shall be solely and exclusively
responsible for making any recommendations or suitability
determinations with respect to Introduced Accounts.
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
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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 improperly directed to either party,
the Correspondent or CSC shall expeditiously forward such
correspondence to the appropriate party.
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 of 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 reasonable 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
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13
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 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
fully pay for a cash transaction or 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
Tejas Securities Group -- Agreement
14
CSC has otherwise agreed in writing. The Correspondent will not
carry customer, broker or dealer accounts and will not receive or
hold funds under Rule 15c3-1 of the Securities Exchange Act of
1934, as amended, for those persons. The Correspondent will
immediately notify CSC when [i] its Aggregate Indebtedness Ratio
reaches or exceeds 10 to 1, [ii] if the Correspondent has elected
to operate under paragraph [f] 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 properly licensed or otherwise properly
authorized to do business in all jurisdictions wherein
Correspondent opens client accounts.
(iii) 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.
(iv) 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.
(v) 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.
(vi) 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 other 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.
(vii) 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.
Tejas Securities Group -- Agreement
15
(viii) 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.
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 in 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 of 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.
Tejas Securities Group -- Agreement
16
C. Correspondent's Anti-Money Laundering Reporting and Recordkeeping
Obligations
Correspondent recognizes that it is obligated to comply with, among
others, the following anti-money laundering legal and regulatory rules
and reporting and recordkeeping requirements.
(i) The Bank Secrecy Act, which now requires, or which may in the
future require, among other things:
(a) reports of any transaction over $10,000 in currency,
including multiple transactions occurring during the course
of the same day, on a Currency Transaction Report, Form
4789 ("CTR");
(b) reports of any transportation of more than $10,000 in
currency or monetary instruments into or outside of the
United States, on a Report of International Transportation
of Currency or Monetary Instruments, Form 4790 ("CIMR");
(c) reports of any suspicious activity, on a Suspicious
Activity Report ("SAR");
(d) a system for monitoring and identifying suspicious activity
including procedures for determining the customer's
identity and the source of the customer's funds; and
(e) recordkeeping, including, but not limited to, collection
and maintenance of records regarding fund transfers of
$3,000 or more and the transmission of certain information
with such funds transfers.
(f) any future regulations which may be imposed on the
Correspondent involving the obligation to know its
customers and monitor for and identify suspicious activity.
(ii) SEC Rule 17a-8 relating to "Financial recordkeeping and reporting
of currency and foreign transactions" (17 C.F.R. Section
240.17a-8).
(iii) Rules of the self-regulatory organizations relating to currency
reporting, suspicious activity reporting and related recordkeeping
requirements.
(iv) Applicable state reporting and recordkeeping requirements with
regard to certain currency transactions, transportation of
currency or monetary instruments, or reports of suspicious
activity.
Tejas Securities Group -- Agreement
17
(v) Federal, state, and international criminal and civil prohibitions
against money laundering.
(vi) The federal regulations and Executive Orders imposed by the U.S.
Treasury Department's Office of Foreign Assets Control ("OFAC")
which prohibit, among others things, the engagement in
transactions with and the provision of services to certain
embargoed foreign countries and specially designated nationals,
specially designated narcotics traffickers and other blocked
parties.
To the extent permissible by law, at the time of filing of such report or
other communication, or at such time as requested by CSC, Correspondent
will provide CSC with copies of all reports or other communications with
regard to the Introduced Accounts filed with the U.S. Treasury Department
or any regulatory body or organization relating to the reporting of
currency transactions, the transfer of currency or monetary instruments
into or outside of the United States and suspicious activity, including,
but not limited to, CTRs, CMIRs and SARs.
XII. OATS Representations
Correspondent Services Corporation [csc] represents that it is familiar with
NASD Rule 6950 through 6957 regarding the Order Audit Trail System ("OATS") and
the OATS Reporting Technical Specifications, and has completed testing as
described in the Technical Specifications.
A. CSC represents that it has processes and procedures reasonably
designed to ensure compliance with OATS requirements;
B. CSC represents that it shall synchronize system clocks to National
Institute of Standards and Technology [NIST] and periodically
monitor these clocks to ensure that they are within the required
three-second (or such tolerance level as may hereafter be set by
NASDR) deviation from the NIST standard;
C. Reporting Obligations
(i) Responsibility for compliance with the provisions of NASD
rule 6950 through 6957 (the "OATS rules") shall be
allocated between CSC and Correspondent as follows:
(ii) Correspondent will be responsible for the timely, accurate
and complete transmission to CSC of all orders for which
CSC will be making OATS submissions;
Tejas Securities Group -- Agreement
18
(iii) CSC will be responsible for making and filing reports
required under the OATS rule and Technical Specifications,
and any subsequent modifications thereto. Correspondent
will provide CSC with all information necessary to prepare
such reports;
(iv) Reports prepared and transmitted by CSC on Correspondent's
behalf and at its direction shall remain, for all purposes,
the reports of Correspondent. Correspondent acknowledges
that it shall have sole and exclusive responsibility for
the content of such reports and for compliance with
applicable rules;
(v) Correspondent will register with OATS in order to access
record rejections and will be responsible for correcting
all rejected records within five (5) days. During the
registration process Correspondent will indicate that CSC
will be one of their Transmitting Order Sending
Organization. CSC will promptly notify Correspondent upon
the occurrence of any event, including physical damage to
CSC facilities or legal proceedings involving CSC that
would materially affect CSC ability to make OATS reports on
behalf of Correspondent;
D. Maintenance of Books and Records
(i) CSC will maintain the prescribed reports on a basis
consistent with generally accepted practices in the
securities industry.
XIII. Proprietary Accounts of Introducing Broker/Dealer (PAIB)
(i) In conformity with the SEC No-Action Letter, dated November 3,
1998 ("No-Action Letter") relating to the capital treatment of
assets in the proprietary account of a Correspondent ("PAIB") and
to permit the Correspondent to use PAIB assets in its net capital
computations. CSC shall perform a computation for PAIB assets
("PAIB Reserve Computation") of the Correspondent in accordance
with the customer reserve computation set forth in Rule 15c3-3
("customer reserve formula") with the following modifications;
(a) Any credit (including a credit applied to reduce a debit)
that is included in the customer reserve formula may not be
included as a credit in the PAIB reserve computation;
(b) Note E(3) to Rule 15c3-3A which reduces debit balances by
1% under the basic method and subparagraph (a) (1) (ii)(A)
of the net capital rule which reduces debit balances by 3%
under the alternative method shall not apply;
Tejas Securities Group -- Agreement
19
(c) Neither Note E(l) to Rule 15c3-3a nor NYSE
interpretation 104 to Item 10 of Rule 15c3-3a
regarding securities concentration charges shall be
applicable to the PAIB reserve computation;
(ii) The PAIB reserve computation shall include all proprietary
accounts of the Correspondent. All PAIB assets shall be
kept separate and distinct from customer assets under the
customer reserve formula in Rule 15c3-3;
(iii) The PAIB reserve computation shall be prepared within the
same time frames as those prescribed by Rule 15c3-3 for
the customer reserve formula;
(iv) Correspondent Services Corporation shall establish and
maintain a separate "Special Reserve Account for the
Exclusive Benefits of Customers" with a bank in conformity
with the standards of paragraph (f) of Rule 15c3-3 ("PAIB
Reserve Account"). Cash and/or qualified securities as
defined in the customer reserve formula shall be maintained
in the PAIB Reserve Account in an amount equal to the PAIB
reserve requirement;
(v) If the PAIB reserve computation results in a deposit
requirement, the requirement may be satisfied to the extent
of any excess debit in the customer reserve formula of the
same date. However, a deposit requirement resulting from
the customer reserve formula shall not be satisfied with
excess debits from the PAIB reserve computation;
(vi) Within two (2) business days of entering into this PAIB
Agreement, the Correspondent shall notify its designated
examining authority in writing (with a copy to CSC) that it
has entered into this a PAIB Agreement;
(vii) Commissions receivable and other receivables of the
Correspondent from CSC (excluding clearing deposits) that
are otherwise allowable assets under the net capital rule
may not be included in the PAIB reserve computation,
provided the amounts have been clearly identified as
receivables on the books and records of the Correspondent
and as payables on the books of CSC;
(viii) If the Correspondent is a guaranteed subsidiary of CSC or
if the Correspondent guarantees CSC (i.e., guarantees all
liabilities and obligations) then the proprietary accounts
of the Correspondent shall be excluded from the PAIB
Reserve Computation;
Tejas Securities Group -- Agreement
20
(ix) Upon discovery that any deposit made to the PAIB Reserve
Account did not satisfy its deposit requirement, CSC shall
by facsimile or telegram immediately notify its designated
examining authority and the Securities and Exchange
Commission ("Commission)". Unless a corrective plan is
found acceptable by the Commission and the designated
examining authority, CSC shall provide written notification
within five (5) business days of the date of discovery to
the Correspondent that PAIB assets held by CSC shall not be
deemed allowable assets for net capital purposes. The
notification shall also state that if the Correspondent
wishes to continue to count its PAIB assets as allowable,
it has until the last business day of the month following
the month in which the notification was made to transfer
all PAIB assets to another clearing broker. However, if the
deposit deficiency is remedied before the time at which the
Correspondent must transfer its PAIB assets to another
clearing broker, the Correspondent may choose to keep its
assets at CSC;
(x) The parties shall adhere to the terms of the No-Action
Letter, including the Interpretations set forth therein, in
all respects.
XIV. 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
Tejas Securities Group -- Agreement
21
(iv) Either CSC or the Correspondent or the respective parent
organization 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
(vi) Either CSC or the Correspondent or their affiliated
entities 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.
XV. 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.
XVI. 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
Tejas Securities Group -- Agreement
22
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 previous
clearing firm said customer accounts and the positions.
(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 will now act as broker on open orders
previously placed 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.
Tejas Securities Group -- Agreement
23
(viii) CSC shall limit its services pursuant to the terms of this
Agreement to that of clearing and execution functions and
related services expressly set forth herein, 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 in writing, signed by both CSC and the
Correspondent. 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 data of this
Agreement, if there is a material change in the control or
management of the Correspondent,
(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 ease 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
Tejas Securities Group -- Agreement
24
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.
(xvi) Neither CSC nor Correspondent shall utilize the name of the
other in any way without the other's prior written consent
nor shall either's employee use the other's name in such a
manner as to create the impression that the relationship
between them is anything other than that of clearing broker
and introducing broker. Correspondent shall not hold itself
out as a subsidiary or company controlled directly or
indirectly by or affiliated with CSC, its parent or its
affiliated companies.
(xvii) 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 or any affiliated entity, CSC shall have the
power, at its 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
Tejas Securities Group -- Agreement
25
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 any affiliated entity, or agency by
estoppel.
(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
not 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.
(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
Tejas Securities Group -- Agreement
26
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 communications 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
communications equipment installed by or at the direction of CSC,
if this agreement is terminated by the Correspondent.
(xxiv) 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.
(xxv) 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
0000 Xxxxxx Xxxxxxxxx, 0xx Xxxxx, Xxxxxxxxx, Xxx Xxxxxx 00000, and
the Correspondent's address shall be 0000 XXX XXXXXXX, XXXXX 000,
XXXXXX, Xxxxx 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.
(xxvi) This Agreement shall become effective on or about 11-28-01 or such
date mutually agreed upon by the parties hereto.
Accepted and Agreed to: Accepted and Agreed to:
Correspondent Services Corporation [csc] TEJAS SECURITIES GROUP
By: /s/ XXXXXXX X. XXXX By: /s/ XXXXXXX XXXXX
------------------------------- -----------------------------
Name: Xxxxxxx X. Xxxx Name: Xxxxxxx Xxxxx
----------------------------- ---------------------------
Title: President Title: President and Chief
---------------------------- Operating Officer
Date: 11/28/01 --------------------------
---------------------------- Date: 11/28/01
---------------------------
Tejas Securities Group -- Agreement 12/01/01
Rev. 10/20/01 27
