Exhibit 10.1
[Wexford Clearing Services Corporation Letterhead]
Agreement for Securities Clearance Services
Maxcor Financial Inc.
This letter sets forth our agreement (the "Agreement"), made as of March 20,
2000, concerning certain clearing services to be performed by Wexford Clearing
Services Corp. ("Wexford"), a wholly owned, fully guaranteed subsidiary of
Prudential Securities Inc. ("PSI"), for Maxcor Financial Inc. ("Introducing
Firm") with respect to transactions of Approved Counterparties (as defined
below) in the securities specified in Exhibit A hereto ("Specified Securities").
It is understood and agreed that this Agreement is contingent upon the approval
of the New York Stock Exchange, Inc. ("NYSE").
1. Certain Definitions
A. "Applicable Rules" are, to the extent applicable, the Securities
Act of 1933 and The Exchange Act of 1934, all rules and
regulations thereunder and interpretations by the Securities and
Exchange Commission ("SEC"), the rules and regulations of the
National Association of Securities Dealers ("NASD") and the NYSE,
all as in effect from time to time.
B. An "Approved Counterparty" is a dealer trading with Introducing
Firm or a customer of Introducing Firm, which Wexford as of the
date of this Agreement is accepting as a counterparty for trades
brokered by Introducing Firm or to which Wexford hereafter sends a
letter in the form of Exhibit B and which, in either case, Wexford
continues to consider acceptable; provided, however, that (i)
Wexford will make no material changes to the form of Exhibit B
without the prior consent of Introducing Firm and (ii) any
decision by Wexford to change the status of an Approved
Counterparty will be communicated either orally and followed by
fax or in writing to Introducing Firm in advance of its
implementation.
C. A "Back-to-Back Transaction" occurs where Introducing Firm (i) has
executed in a recorded conversation a sale by an Approved
Counterparty to be settled by Wexford's parent, PSI, ("Side One")
of Specified Securities and a buy to be settled by Wexford's
parent, PSI, by another Approved Counterparty of Specified
Securities ("Side Two"), (ii) has confirmed that Side One and Side
Two agree on all details of the trade that must be met in order to
settle (i.e. that Side One and Side Two are Validated
Transactions) and (iii) has transmitted Side One and Side Two to
Wexford on the same day.
D. "Clearing Corporation" means CEDEL/Euroclear or any other clearing
organization that settles Transactions that Wexford clears for
Introducing Firm.
E. A "Matching Back-to-Back Transaction" is a Back-to-Back
Transaction with respect to which the counterparty to Side One and
Side Two have both submitted instructions to the Clearing
Corporation in the form required to settle Side One and Side Two,
and a "Matching Transaction" is a Back-to-Back Transaction with
respect to which only one counterparty has submitted instructions
to the Clearing
Corporation in the form required to settle the side to which such
counterparty is a party.
F. "Transactions" are any trades transmitted by Introducing Firm
hereunder to Wexford for clearing and settlement.
G. A "Validated Transaction" is a sale or purchase of Specified
Securities with an Approved Counterparty for which the Introducing
Firm has confirmed all of the trade details necessary for
settlement.
2. Responsibilities of Introducing Firm
A. Transmitting Transactions
Introducing Firm shall execute orders for purchases and sales
of Specified Securities by Approved Counterparties and transmit the
Transactions to Wexford three times a day, at approximately 12:00 p.m.
and 3:00 p.m., and by no later than 6:00 p.m. Eastern Standard Time
(EST), (the last of which being referred to as the "Cut-Off Time"). Any
Transactions that Wexford receives after the Cut-Off Time shall be
subject to the additional fees set forth on Schedule A hereto.
(i) Transmitting Back-to-Back Transactions
Introducing Firm shall not transmit to Wexford any Transaction
that, by the Cut-Off Time, is not a Back-to-Back Transaction, with the
following exception. Notwithstanding anything to the contrary in the
Additional Terms forming a part of Exhibit B (the "Additional Terms"),
Introducing Firm may transmit only Side One or Side Two, if at the end
of the trading day one of the two sides is not a Validated Transaction,
subject to the aggregate amount of such one-sided Transactions not
exceeding a limit established by Wexford and communicated to
Introducing Firm from time to time. Introducing Firm shall exert
reasonable best efforts to transmit a Validated Side One or Side two
the following business day. If Introducing Firm has not done so by the
end of the day after the settlement date, Wexford may, upon prior
notice to Introducing Firm, on the second day after settlement date buy
in or sell out the securities to settle the other side. Introducing
Firm shall be liable for all loss, costs and expenses relating thereto
to the extent set forth in Sections 2.D. and 5.A. The foregoing right
of Introducing Firm to delay the transmission of one side is subject to
(i) termination at any time that Wexford deems that it is no longer
prudent to accept only one side and (ii) satisfactory amounts on
deposit in the Collateral Account, in Wexford's sole discretion. In any
event, such one-sided Transactions shall give rise to the additional
fees established in Section 3.A. (iii) and Schedule A, regardless of
when after trade date Introducing Firm transmits to Wexford the other
side of the Transaction.
B. Responsibility for Accounts
Except as otherwise specified in this Agreement, Introducing Firm
shall be solely responsible for the opening, approving and monitoring
of counterparties (the "Accounts"), and ensuring that Transactions are
in compliance with the Applicable Rules. Such responsibility, where
applicable, includes, but is not limited to:
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(i) Using due diligence to learn and on a continuing basis to
know the essential facts of each customer, knowing all persons
holding power of attorney over any Account, being familiar
with each order in any Account and at all times to comply
fully with Rule 405 of the NYSE and the Conduct Rules of the
NASD, and any interpretations thereof, and all similar
Applicable Rules; (ii) selecting, investigating, training and
supervising all personnel who open, approve or authorize
transaction in the Accounts; (iii) establishing written
procedures for the conduct of the Accounts and ongoing review
of all Transactions in Accounts, and maintaining compliance
and supervisory personnel adequate to implement such
procedures; (iv) determining the suitability of all
Transactions; (v) ensuring that there is a reasonable basis
for all recommendations made; (vi) determining the
appropriateness of the frequency of trading in Accounts; (vii)
determining the authorization and legality of each transaction
in the Account; (viii) determining the amount of any
difference between the prices paid or received by an Account
for a Specified Security and the prices paid or received by
Wexford for said Specified Security; (ix) obtaining and
maintaining all documents necessary for the performance of
Introducing Firm's responsibilities under this Agreement and
retaining such documents in accordance with all the Applicable
Rules; (x) responding to all its customer inquiries and
complaints, and promptly notifying Wexford in writing of
complaints concerning Wexford; (xi) arranging for completion
of all Wexford forms and providing any supporting documents
required for the opening and maintenance of the Account and
(xii) promptly furnishing Wexford with all information
concerning its customer and Introducing Firm's relationship
with its customer and any related documents that Wexford may
reasonably require. Nothing herein shall restrict Wexford from
making any further inquiry or investigation, as Wexford deems
necessary.
Introducing Firm authorizes and directs Wexford to (i) furnish promptly
any written customer complaint received by Wexford, regarding
Introducing Firm or its associated persons and relating to functions
and responsibilities allocated to Introducing Firm, directly to
Introducing Firm and to Introducing Firm's designated examining
authority, and (ii) notify the customer, in writing, that Wexford has
received the complaint and that the complaint has been furnished to
Introducing Firm and Introducing Firm's designated examining authority.
All other correspondence in the nature of customer inquiries or
customer complaints relating to functions and responsibilities
allocated to Wexford is to be directed to and responded to by Wexford.
All such correspondence (including customer inquiries and complaints)
is to be reviewed and replied to by Wexford or Introducing Firm
depending on who is responsible for the function which is the subject
matter of the correspondence. If such correspondence is not directed to
the appropriate party initially, Wexford or Introducing Firm shall
promptly forward such correspondence to the appropriate party.
C. Volume Limitations
Introducing Firm shall not transmit to Wexford more than the number of
Transactions per day that Wexford informs Introducing Firm from time to
time constitute the Introducing Firm's volume limit, as set by Wexford
in its reasonable discretion, acting in good faith. Any Transactions in
excess of the volume limitation, as in effect from time to time, may be
rejected by Wexford unless Wexford has earlier indicated orally or in
writing in the course of the applicable day that it will accept such
Transactions.
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D. Indemnification
Introducing Firm agrees to indemnify and hold harmless Wexford, its
officers, directors, employees and affiliates, against any and all
losses, costs, claims and expenses (including reasonable attorneys'
fees), as incurred, (a) arising out of (i) Wexford acting as clearing
broker for Introducing Firm pursuant to this Agreement, (ii)
Introducing Firm's failure to perform its obligations under this
Agreement or the willful misconduct of Introducing Firm, and (b)
constituting Introducing Firm Failure Costs or Counterparty Failure
Costs (all referred to as "Indemnified Losses"), but excluding Credit
Failure Costs, as defined in Section 5.B., any indirect or
consequential losses, lost opportunity costs, or any Indemnified Loss
caused by Wexford's or PSI's negligence, Wexford's or PSI's failure to
perform their respective obligations under this Agreement, or Wexford's
or PSI's willful misconduct. Wexford shall give Introducing Firm prompt
written notice of any matter that may constitute an Indemnified Loss
hereunder, and, if the Indemnified Loss involves a third-party claim,
the Introducing Firm may, but shall not be obligated to, assume the
defense thereof with counsel of its own choosing and at its own
expense.
E. Recording, Retaining Tapes
Introducing Firm shall record every trading conversation with
counterparties to Transactions and shall retain tapes of all such
conversations for at least thirty business days, and longer with
respect to specified days, Approved Counterparties or Transactions if
Wexford so requests, either orally and confirmed by fax or in writing.
3. Responsibilities of Wexford
A. Clearing
Subject to the exception described in Section 2. A. (i), Wexford's
parent, PSI, is obligated to clear only Matching Back-to-Back
Transactions and Matching Transactions with Approved Counterparties in
Specified Securities, which entails Wexford's parent, PSI, taking a
position as a fully disclosed principal on Side One and on Side Two of
Matching Back-to-Back Transactions (or, in the case of Matching
Transactions on the side that is matched) pursuant to the following
procedure.
(i) Upon receipt of a transmission of Back-to-Back
Transactions from Introducing Firm, Wexford may, but
is not obligated to, check whether all or any number
of such Transactions fail to meet the definition of a
Back-to-Back Transaction. Subject to the exception
established in Section 2.A. (i), any Transaction that
does not meet the definition of a Back-to-Back
Transaction may be rejected by Wexford, and Wexford's
parent, PSI, shall not, unless the Transaction is
subsequently accepted by Wexford, be principal to the
counterparty nor carry the position on its books.
(ii) Wexford shall download to the Clearing Corporation by
either the end of the day of trade date or, with
respect to Transactions transmitted after the Cut-Off
Time, on T +1, the trade details received from
Introducing
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Broker for each Transaction that Wexford has not
rejected pursuant to subsection (i) above.
(iii) On the business day following the download of
information regarding any Transaction to the Clearing
Corporation, Wexford shall review a report from the
Clearing Corporation indicating whether any
Transactions were not Back-to-Back Transactions or
were not Matching Back-to-Back Transactions. In
either case, if Introducing Firm has transmitted any
Transaction to Wexford other than a Back-to-Back
Transaction, Introducing Firm shall pay to Wexford
the applicable fees set forth in Schedule A, and, as
set forth in Section 5.A., Introducing Firm shall
reimburse Wexford for all Introducing Firm Failure
Costs. Wexford's parent, PSI, shall settle as fully
disclosed principal any Transactions for which
Wexford has sent a confirmation, pursuant to Section
3.B. The sending of a confirmation shall mean that
Wexford's parent, PSI, has taken a position as
principal and is therefore carrying such Transactions
on its books, notwithstanding that Introducing Firm
remains financially responsible to Wexford hereunder
for any Introducing Firm Failure Costs and
Counterparty Failure Costs. Upon prior notice to
Introducing Firm, Wexford may take commercially
reasonable action to settle or liquidate any
unmatched Back-to-Back Transactions for which it has
sent a confirmation to the counterparty and has
submitted settlement instructions to the Clearing
Corporation.
B. Confirmations
No later than T+1 or one day after Wexford has received a Transaction,
whichever is later, Wexford shall deliver confirmations to all
counterparties on Transactions that Wexford has not rejected pursuant
to Section 3.A. (i) hereof and that Wexford is obligated to transmit to
the Clearing Corporation, pursuant to Section 3.A. (ii). From the time
that Wexford transmits a confirmation with respect to a Transaction
pursuant to this Section 3.B, its parent, PSI, shall be acting as
principal for and carrying such Transaction on its books for regulatory
capital purposes. For the avoidance of doubt with respect to any
Transaction transmitted to Wexford pursuant to the exception described
in Section 2.A (i), Wexford's parent, PSI, shall act as principal for
and carry such Transaction on its books for regulatory capital
purposes, provided that it is a Validated Transaction, notwithstanding
anything to the contrary in the Additional Terms.
C. Revenue; Fees
Wexford shall receive on settled Matching Back-to-Back Transactions and
Matching Transactions revenue in the form of commissions of Introducing
Firm or the spread between Side One and Side Two. Wexford shall remit
to Introducing Firm within five business days of the end of each
calendar month such amounts remaining after Wexford deducts (i) its
fee, as established in Schedule A, including any additional fees set
forth therein for transmissions after the Cut-Off Time pursuant to
Section 2.A. and for transmissions of non Back-to-Back Transactions
pursuant to Section 3.A (iii) ("Fees"), (ii) Introducing Firm Failure
Costs, (iii) Counterparty Failure Costs and (iv) amounts for any
Indemnified Losses.
Wexford shall furnish Introducing Firm with a detailed supporting
schedule with each revenue payment. Wexford's determination of the
amount payable to Introducing Firm
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with respect to any calendar month shall be conclusive and binding on
the parties hereto if Introducing Firm does not object thereto in
writing, with details of its objections, within thirty (30) days after
its receipt of such supporting schedule and any reasonably requested
additional information with respect thereto, provided such request is
made no later than 15 days after initial receipt of the supporting
schedule.
D. Safekeeping/Credit
Wexford shall be responsible for (i) the delivery and receipt of funds
and/or Specified Securities to and from Accounts, as applicable, and
for the transfer of Specified Securities to and from Accounts and (ii)
the receipt, timely delivery and safeguarding of funds and securities
and maintenance of books and records (including preparation and timely
transmittal of the trade confirmations and statements) relating to all
Transactions settled by Wexford or PSI pursuant to Section 3.A.
Although Wexford in no way undertakes to extend credit to any Approved
Counterparty, if it were to do so, any credit shall be extended in
compliance with Regulation T, Rule 431 of the NYSE Rules and any other
applicable margin regulations.
E. Indemnification
Wexford agrees to indemnify and hold harmless Introducing Firm, its
officers, directors, employees and affiliates, against any and all
losses, costs, claims and expenses, reasonable legal fees (including
reasonable legal fees incurred in the enforcement of this provision),
as incurred, (a) caused by (i) Wexford's or PSI's failure to perform
their respective obligations under this Agreement or (ii) Wexford's or
PSI's negligence or willful misconduct or (b) constituting Credit
Failure Costs, as defined in Section 5.B. (all referred to as "IF
Indemnified Losses"), but excluding any indirect or consequential
losses, or lost opportunity costs. The Introducing Firm shall give
Wexford prompt written notice of any matter that may constitute an IF
Indemnified Loss hereunder, and, if the IF Indemnified Loss involves a
third party claim, Wexford may, but shall not be obligated to, assume
the defense thereof with counsel of its own choosing and at its own
expense.
F. Reports
Wexford will provide Introducing Firm with same-day reports of
Transactions that do not constitute Back-to-Back Transactions and with
daily morning reports, starting with T+1, of Transactions that are not
Matching Transactions.
Simultaneously with the execution of this Agreement, and annually
thereafter, Wexford shall furnish to Introducing Firm a list of all
reports (i.e., exception and other types of reports) which it offers to
Introducing Firm to assist Introducing Firm to supervise and monitor
its introduced accounts in order for Introducing Firm to carry out its
functions and responsibilities pursuant to this Agreement. These
reports are in addition to the data, information or reports provided to
Introducing Firm in the ordinary course of providing clearing Services
to Introducing Firm. Introducing Firm shall notify Wexford promptly, in
writing, of those specific reports offered by Wexford that Introducing
Firm requires to supervise and monitor its introduced accounts.
Annually, within 30 days of July 1 of each year, Wexford shall give
written notice to Introducing Firm's chief executive and compliance
officers, indicating, as of the date of such notice, the list of
reports offered to
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Introducing Firm pursuant to this paragraph and specifying those
reports that were actually requested by and/or supplied to Introducing
Firm as of such date. At the same time, Wexford shall provide a copy of
this written notice to Introducing Firm's designated examining
authority. Simultaneously with the execution of this Agreement,
Introducing Firm shall furnish Wexford with a list of its chief
executive and compliance officers and the name of its designated
examining authority.
4. Separate Responsibilities
Pursuant to NYSE Rule 382, the parties have allocated between
themselves in this Agreement responsibility for compliance with all
applicable laws, rules and regulations of the SEC, NYSE and NASD. In
addition, for purposes of the Securities and Exchange Commission's
financial responsibility rules and SIPC, the Introducing Firm's
customers will be considered customers of Wexford and not customers of
the Introducing Firm; provided, however, that nothing in this Section
shall cause the Introducing Firm's customers to be construed or
interpreted as customers of Wexford 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.
Each party shall be solely responsible for (i) adherence to Applicable
Rules and for the supervision of its own operations area and personnel;
(ii) compliance with all restricted/control stock requirements, as
applicable to it; (iii) compiling and filing its respective regulatory
reports, as applicable; and (iv) supplying the other with reasonable
access to its relevant records and supplying any information in its
possession reasonably requested by such party in order for both parties
to properly perform their respective functions under the Agreement.
Each party shall be responsible for its own errors with respect to this
Section 4.
5. Failure to Match; Failure to Settle; Responsibilities of the Parties
A. Not Back-to-Back Transactions/Introducing Firm Failure
In the event Wexford receives a Transaction that does not meet the
definition of a Back-to-Back Transaction for any reason, including
without limitation, (i) the failure of Introducing Firm to transmit to
Wexford Validated Transactions or (ii) the failure of Introducing Firm
to transmit to Wexford Side One and Side Two on the same day,
Introducing Firm shall have full responsibility for, and shall pay to
Wexford upon demand, all amounts constituting Wexford's reasonable
out-of-pocket costs (whether or not already paid), losses and expenses
(including reasonable attorneys' fees) arising therefrom including,
without limitation, costs to buy-in, borrow or sell-out the securities,
to compel performance by the counterparty, or to pay additional
personnel or overtime, but only if such additional personnel or
overtime costs are beyond the ordinary course of business. All of the
foregoing is referred to as "Introducing Firm Failure Costs".
B. Settlement Failure/Counterparty Failure
In the event Wexford has transmitted a Back-to-Back Transaction to the
Clearing Corporation that becomes a Matching Back-to-Back Transaction
but that (i) fails on settlement date due to failure of the
counterparty to deliver securities or cash or (ii) fails
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to become a Matching Back-to-Back Transaction because of the failure of
the counterparty to either Side One or Side Two to send to the Clearing
Corporation adequate instructions required for settlement, but
excluding in either case counterparty failure due to actual or
impending bankruptcy or similar insolvency proceedings or credit issues
("Credit Failure Costs"), Introducing Firm shall be responsible for,
and shall pay to Wexford upon demand, all amounts constituting
Wexford's reasonable out-of-pocket costs (whether or not already paid),
losses and expenses (including reasonable attorneys' fees) arising from
such fail, including, without limitation, costs to buy-in, borrow or
sell-out securities, to compel performance by the counterparty, to pay
additional personnel or to pay overtime, but only if such personnel or
overtime costs are beyond the ordinary course of business. All of the
foregoing costs, losses, and expenses are referred to herein as the
"Counterparty Failure Costs".
C. Suspension of Certain Trading
If at any time the number of Transactions (either Side One or Side
Two), with respect to which the counterparty has not provided Clearing
Corporation with matching instructions, reaches an amount that Wexford
finds unacceptable Wexford may, acting in good faith, suspend accepting
Transactions from Introducing Firm, with respect to that counterparty,
immediately upon written or oral notice, until such time that Wexford
decides that it is prudent to resume accepting such Transactions
hereunder. If at any time the number of Transactions that are not
Back-to-Back Transactions reaches an amount that Wexford finds
unacceptable (subject to Section 2.A. (i)), Wexford may, acting in good
faith, suspend accepting Transactions from Introducing Firm immediately
upon written or oral notice, until such time that Wexford decides that
it is prudent to resume accepting Transactions hereunder.
D. Regulatory Capital
It is understood that in no event shall Introducing Firm Failure Costs,
Counterparty Failure Costs or Indemnified Losses include any costs or
expenses of Wexford or PSI incurred in connection with capital charges
for Transactions.
In conformity with the SEC No-Action Letter dated November 3, 1998 and
publicly available November 10, 1998 ("No-Action Letter") relating to
the capital treatment of assets in the proprietary account of an
introducing broker ("PAIB") and to permit Introducing Firm to use PAIB
assets in its net capital computations, Wexford and Introducing Firm
agree as follows:
1) Introducing Firm shall identify to Wexford in writing all
accounts that are, or from time to time may be, proprietary
accounts of Introducing Firm. Wexford shall perform a
computation for PAIB assets of Introducing Firm ("PAIB Reserve
Computation") in accordance with the customer reserve
computation set forth in Rule 15c3-3 under the Securities
Exchange Act of 1934 ("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;
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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
Rule 15c3-1 which reduces debit balances by 3% under the
alternative method shall not apply; and C) Neither Note E (1)
to Rule 15c3-3a nor Exchange Interpretation /04 to Item 10 of
Rule 15c3-3a regarding securities concentration charges shall
be applied to the PAIB Reserve Computation.
2) The PAIB Reserve Computation shall include all proprietary
accounts of introducing Firm. All PAIB assets shall be kept
separate and distinct from customer assets under the Customer
Reserve Formula in Rule 15c3-3.
3) The PAIB Reserve Computation shall be prepared within the same
time frames as those prescribed by Rule 15c3-3 for the
Customer Reserve Formula.
4) Wexford shall establish and maintain a separate "Special
Reserve Account for the Exclusive Benefit of Customers" with a
bank in conformity with the standards of paragraph (f) of Rule
15c3-3 ("PAIB Reserve Account"). Cash and/or qualified
securities as defined in the Customer Reserve Formula shall be
maintained in the PAIB Reserve Account in an amount equal to
the PAIB reserve requirement.
5) 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.
6) Within two business days of entering into this Agreement,
Introducing Firm shall notify its designated examining
authority in writing (with a copy to Wexford) that it has
entered into this Agreement regarding the capital treatment of
Introducing Firm's PAIB assets.
7) Commissions receivable and other receivables of Introducing
Firm from Wexford (excluding clearing deposits) that are
otherwise allowable assets under Rule 15c3-1 may not be
included in the PAIB Reserve Computation, provided the amounts
have been clearly identified as receivables on the books and
records of Introducing Firm and as payables on the books of
Wexford.
8) If Introducing Firm is a guaranteed subsidiary of Wexford or
if Introducing Firm guarantees Wexford (i.e., guarantees all
liabilities and obligations) then the proprietary accounts of
Introducing Firm shall be excluded from the PAIB Reserve
Computation.
9) Upon discovery that any deposit made to the PAIB Reserve
Account did not satisfy its deposit requirement, Wexford shall
by facsimile or telegram immediately notify its designated
examining authority and the SEC. Unless a corrective plan is
found acceptable by the SEC and the designated examining
authority, Wexford shall provide written notification within 5
business days of the date of discovery to Introducing Firm
that PAIB assets held by Wexford shall not be deemed allowable
assets for net capital purposes. The notification shall also
state that if Introducing Firm 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 Introducing Firm must transfer its PAIB assets to
another clearing broker, Introducing Firm may choose to keep
its assets at Xxxxxxx.
00) Xxxxxxx and Introducing Firm shall adhere to the terms of the
No Action Letter, including the Interpretations as set forth
therein, in all respects.
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6. Fees and Charges
Introducing Firm agrees to pay Wexford the fees and charges set forth
in Schedule A hereto.
7. Introducing Firm Representations and Covenants
Introducing Firm represents, warrants and covenants to Wexford as
follows:
(i) It is a member in good standing of the NASD.
(ii) It is and during the term of this Agreement will remain
duly registered or licensed and in good standing as a
broker/dealer under the Applicable Rules.
(iii) It has all the requisite authority in conformity with
all Applicable Rules to enter into this Agreement and
to retain the services of Wexford in accordance with
the terms hereof and has taken all necessary action
to authorize the execution of this Agreement and the
performance of the obligations hereunder.
(iv) It is in compliance, and during the term of this
Agreement will remain in compliance with (a) the
capital and financial reporting requirements of any
and all national securities exchange or other
securities exchange and/or securities association of
which it is a member, (b) the capital requirements of
the Securities and Exchange Commission and (c) the
NASD Conduct Rules.
(v) It shall provide representatives of any governmental
body having jurisdiction over the respective
businesses of the parties with reasonable access to
the records relating to Accounts and their owners.
(vi) It shall keep confidential any information it may
acquire as a result of this Agreement regarding the
business and affairs of Wexford, which requirements
shall survive the termination of this Agreement.
8. Wexford and PSI Representations and Covenants
Each of PSI and Wexford represents, warrants and covenants to
Introducing Firm as follows:
(i) Each of PSI and Wexford is a member in good standing
of the NASD and of the NYSE.
(ii) Each of PSI and Wexford is and during the term of
this Agreement will remain duly licensed and in good
standing as a broker/dealer under the Applicable
Rules.
(iii) Each of PSI and Wexford has all the requisite
authority, in conformity with all Applicable Rules to
enter into and perform this Agreement and has taken
all necessary action to authorize the execution of
this Agreement and the performance of the obligations
hereunder.
(iv) Each of PSI and Wexford is in compliance, and during
the term of this Agreement will remain in compliance
with (a) the capital and financial reporting
requirements of every national securities exchange
and/or other securities exchange or association of
which it is a member, (b) the capital requirements of
the Securities and Exchange Commission and (c) the
NASD Conduct Rules.
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(v) The names and addresses of Introducing Firm's
customers which have or which may come to Wexford's
or PSI's attention in connection with the clearing
and related functions it has assumed under this
Agreement are confidential and shall not be utilized
by Wexford or PSI except in connection with the
functions performed by Wexford and PSI pursuant to
this Agreement. Notwithstanding the foregoing, should
any customer of Introducing Firm request, on an
unsolicited basis that Wexford become its broker,
acceptance of such Account by Wexford and PSI shall
in no way violate this representation and warranty,
nor result in a breach of this Agreement.
(vi) Each of PSI and Wexford shall keep confidential any
information it may acquire as a result of this
Agreement regarding Introducing Firm's business and
affairs, which requirement shall survive the
termination of this Agreement.
9. Nature of Relationship
A. Wexford shall limit its services pursuant to the terms of this
Agreement to that of the clearing and the specified related
functions described herein, and Introducing Firm shall not
hold itself out as an agent of Wexford or of any subsidiary or
company controlled directly or indirectly by or affiliated
with Wexford. Neither this Agreement nor any operation
hereunder shall create a general or limited partnership,
association or joint venture or agency relationship between
the parties.
B. Introducing Firm shall not, without the prior written approval
of Wexford, place any advertisement in any newspaper,
publication, periodical or any other media if such
advertisement in any manner makes reference to Wexford or to
the clearing arrangements set forth in this Agreement;
provided, however, that the public parent company of
Introducing Firm may name Wexford and accurately describe this
Agreement in any filing such company makes with the Securities
and Exchange Commission pursuant to either the Securities Act
of 1933 or the Securities Exchange Act of 1934.
C. Should Introducing Firm in any way hold itself out as,
advertise or represent that it is the agent of Wexford,
Wexford may, at its option, terminate this Agreement and
Introducing Firm shall be liable for any loss, liability,
damage, claim, cost or expense (including but not limited to
reasonable fees and expenses of legal counsel) sustained or
incurred by Wexford as a result of such a representation of
agency or apparent authority to act as an agent of Wexford or
agency by estoppel.
10. Deposit of Collateral
A. To ensure Introducing Firm's performance of its obligations
under this Agreement (including, without limitation, the
payment of Fees, Introducing Firm Failure Costs, Counterparty
Failure Costs and Indemnified Losses), there shall be
established a securities holding account with Wexford to be
opened in the name of Introducing Firm and designated as the
Introducing Firm Collateral Account (the "Collateral
Account"). The Collateral Account shall at all times contain
cash, securities, or a combination of both, having a market
value of not less than the sum required by Wexford as of the
date of this Agreement; provided that Wexford shall have the
right, in its reasonable discretion, to increase upon not less
than three business days
11
notice to Introducing Firm, the Collateral Amount to reflect
materially changed conditions relating to the Introducing Firm
or its business or an unusually high number or value of
unresolved errors or fails with respect to Transactions (the
"Collateral Amount"). Said securities shall consist only of
direct obligations issued by or guaranteed as to principal and
interest by the United States and such other securities as
Wexford may in writing consent to, in its sole discretion,
from time to time. As collateral security for all of its
obligations to Wexford under and with respect to this
Agreement, Introducing Firm hereby pledges, assigns and grants
a first priority security interest and lien to Wexford in and
upon all property from time to time now or hereafter in the
Collateral Account, and Wexford shall have all rights and
remedies with respect thereto of a secured party under the New
York Uniform Commercial Code or other applicable law, as well
as its other rights hereunder. Introducing Firm represents and
warrants that any Collateral shall be free of any lien, pledge
or interest other than that of Wexford. Introducing Firm shall
be entitled to receive all cash distributions made on or in
respect of the securities unless the market value of the cash
and/or securities in the Collateral Account is less than the
Collateral Amount. If the Collateral Account consists of cash,
Wexford shall pay interest to the Introducing Firm on this
cash held from time to time at an agreed upon rate. If at any
time the market value of the cash and/or securities in the
Collateral Account fall below 90% of the Collateral Amount, as
determined by Wexford, Wexford may, by notice to Introducing
Firm, demand that Introducing Firm deliver additional
collateral to the Collateral Account no later than the third
following business day to increase the market value to the
full Collateral Amount.
B. Except as provided herein, Introducing Firm shall not have
access to, nor have any right to transfer or withdraw any cash
or securities from, the Collateral Account without the prior
written consent of Wexford. The Collateral Account shall not
be deemed to be margin for any Approved Counterparty accounts.
C. Wexford shall have the right to deduct the amount of any and
all amounts owed to Wexford hereunder, including without
limitation, Fees, Introducing Firm Failure Costs and
Counterparty Failure Costs and Indemnified Losses, from the
securities collateral, and, in such event, Wexford shall have
the right to liquidate the securities in a commercially
reasonable manner; provided, however, Wexford agrees to deduct
the foregoing amounts first from revenue, pursuant to Section
3.C. and then, to the extent revenue is insufficient, from the
Collateral Account. Any amounts deducted from revenue or the
Collateral Account, which are subsequently determined (by
Wexford, mutual agreement, arbitration or otherwise) to be
incorrect, excessive or otherwise not the responsibility of
Introducing Firm, shall be promptly reimbursed by Wexford to
Introducing Firm together with interest thereon (from the date
of deduction to the date of reimbursement) calculated at a
comparable Treasury rate.
D. Within thirty (30) days of the termination of this Agreement,
Wexford will (a) effect the payment and delivery to
Introducing Firm of the funds and/or securities in the
Collateral Account, less any amounts Wexford is entitled to
withdraw under the preceding paragraph; provided, however,
that Wexford may retain in the Collateral Account such amount
as it reasonably deems appropriate for its protection from any
claim or proceeding of any type then threatened or pending,
until the final determination thereof is made, and (b) deliver
or cause to be delivered to Introducing Firm (without the
reproduction or other copying thereof) all documents and other
materials, including customer lists, prepared in connection
with this Agreement or
12
the business of Introducing Firm, except for such documents
and other materials as Wexford may have destroyed in the
normal course of its business or may be required to keep for
regulatory purposes or otherwise as may be required by law. In
any event, Wexford agrees that no such documents or other
materials will be distributed by it to any person or group in
or outside Wexford that does not have responsibility for the
administration, legal or audit review of this Agreement or
transactions thereunder.
11. Assignment
This Agreement shall be binding upon and inure to the benefit
of each party hereto and its successors and assigns.
Introducing Firm may not assign its rights and/or obligations
hereunder without the prior written consent of Wexford, which
consent shall not be unreasonably withheld.
12. Amendments; Waiver; Integration
Any amendment or supplement to this Agreement and any waiver
of any rights hereunder must be in writing signed by the
Parties. Further, without limiting the foregoing, no failure
to enforce a right, no act or pattern of conduct shall
constitute an amendment, supplement or waiver. This Agreement
supersedes all other agreements between the parties with
respect to the subject matter hereof.
13. Governing Law
This agreement shall be construed and interpreted in
accordance with the internal laws of the state of New York
without reference to choice of law principles.
14. Arbitration
Each party agrees that any claim, dispute, grievance or
controversy arising under this Agreement or any Transactions
executed or arising therefrom or thereunder shall be settled
by arbitration pursuant to and in accordance with Article XI
of the NYSE Constitution and the NYSE Arbitration Rules. Each
party further agrees to service of process in any arbitration
proceeding by mailing of copies thereof (by registered or
certified mail, if practicable) postage prepaid, or by telex,
to it at an address for notices under this Agreement; and
agrees that nothing herein shall affect the other party's
right to effect service of process in any other manner
permitted by NYSE Arbitration Rules, and that each party shall
have the right to bring a proceeding for enforcement of a
judgment entered by any arbitration panel against the other
party in any court or jurisdiction in accordance with
applicable law.
15. Termination
This Agreement may be terminated by either party upon ninety
days' written notice given to the other party at any time, or
immediately upon written notice following an
13
Event of Default which event shall occur if (i) either party
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 un-remedied for a period of five
business days after written notice from the non-defaulting
party to the defaulting party specifying the failure and
demanding that the same be remedied; (ii) any representation
or warranty made by either party shall prove to be incorrect
at any time in any material respect; (iii) a receiver,
liquidator or trustee of either party, or of any material
property held by either party, is appointed by court order; or
either party is adjudicated bankrupt or insolvent; or any of
its material property is sequestered by court order and such
order is not appealed and stayed within fifteen days of its
entrance; or a petition is filed against either party under
the 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 fifteen days of such filing, or (iv) either
party makes an assignment for the benefit of its creditors, or
admits in writing its inability to pay its debts generally as
they become due, or consents to the appointment of a receiver,
trustee or liquidator of either party, or of any property held
by either party.
16. Notices
Written notices shall be properly made if hand delivered,
mailed (registered mail) or telecopied ("faxed") to the party
entitled to receive such notices at the following address or
telephone number:
To Introducing Firm:
Maxcor Financial Inc
0 Xxxxx Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, X.X. 00000-0000
Tel. No: (000) 000-0000
Fax No.: (000) 000-0000
Attn.: Xxxxxx Xxxxxxxxx, Chief Financial Officer
To Wexford:
Wexford Clearing Services Corp.
Xxx Xxx Xxxx Xxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Tel. No.: 000-000-0000
Fax No.: 000-000-0000
Attn. Xxxxxx X. Xxxxxx, Executive Vice President
17. Miscellaneous
There will be no Account opened on behalf of any employee or
officer of any New York Stock Exchange member organization,
self-regulatory organization or other financial institution
without the prior written consent of Wexford.
14
This Agreement and all transactions in the Accounts, will be subject to
the applicable constitution, rules, by-laws, regulations and customs of
any securities market, association, exchange or clearing house where
such transactions are effected, and also to all applicable NYSE and
NASD Rules and to all U.S. federal and state laws and regulations.
All telephone conversations in connection with Transactions under the
Agreement may be electronically recorded and may be used to resolve any
uncertainty or any dispute arising in connection with this Agreement or
any transaction hereunder.
15
Please indicate your agreement with the foregoing by signing and
returning the enclosed copy of this letter.
Very truly yours,
Wexford Clearing Services Corporation
By: /s/ Xxxxxx X. Xxxxxx
-----------------------------------
Name: Xxxxxx X. Xxxxxx
-----------------------------------
Title: Executive Vice President
-----------------------------------
Prudential Securities Incorporated
By: /s/ Xxxxxx Xxxxxxxxx
-----------------------------------
Name: Xxxxxx Xxxxxxxxx
-----------------------------------
Title: Senior Vice President
-----------------------------------
ACCEPTED AND AGREED TO AS OF
THE DATE FIRST SET FORTH ABOVE:
Maxcor Financial Inc
By: /s/ Xxxxx X. Xxxxx
-----------------------------------
Name: Xxxxx X. Xxxxx
-----------------------------------
Title: Chief Operating Officer
-----------------------------------
16
Exhibit A
---------
Schedule of Specified Securities
--------------------------------
1. Securitized Adjustable Rate Mortgages
2. Asset-backed Securities bearing a credit rating of AA or better
3. Collateralized Mortgage Obligations bearing a credit rating
Have AA or better
4. GNMA, FNMA and Xxxxxxx Mac Securities
5. Xxxxx Xxxxx
6. U.S. Government and Agency Securities
7. Sovereign Debt - EuroClear/CEDEL/DTC Eligible
8. Euro Bonds
9. Corporate Securities
10. Convertible Bonds
11. Municipal Securities
12. High Yield Corporate Bonds
17
Exhibit B
---------
RE: Maxcor Financial Inc.
Allocation of Brokerage Account Responsibilities
------------------------------------------------
Ladies and Gentlemen:
As you know, your account has been introduced to Wexford Clearing
Services Corporation ("Wexford"), a wholly owned, fully guaranteed subsidiary of
Prudential Securities Incorporated ("PSI"), by your brokerage firm, Maxcor
Financial Inc. ("Maxcor"), for the purpose of Wexford's parent, PSI, clearing
trades, as fully disclosed principal, in certain specified securities pursuant
to the clearing services agreement between Maxcor and Wexford.
Once Wexford enters a trade on its books, you will be considered a
customer of Wexford for purposes of the Securities and Exchange Commission's
financial responsibility rules and the Securities Investor Protection Act.
Nothing herein shall cause customers of Maxcor to be construed as customers of
Wexford for any other purpose..
In establishing this relationship, Maxcor is acting solely on your
behalf and not on behalf of, or as agent of, Wexford. Maxcor shall remain
responsible for the ongoing relationship that it has with you, and for the
following:
o Learning your investment objectives and opening, approving and
monitoring your account and in all respects complying with Rule 405
of the New York Stock Exchange.
o Reviewing your account and all orders in it and supervising all
investment advice.
o Accepting or rejecting your orders and correcting errors in trade
details in order to transmit only matching transactions to Wexford.
o Ensuring that all the transactions conducted in your account are in
compliance with all applicable law and rules.
o Responding to any inquiries or complaints you may make concerning
your account.
o Supervising all functions performed by Maxcor's employees, including
investment advisory, sales, trading and account opening and
approving activities.
Additionally, Maxcor is responsible to Wexford for supplying all
documentation required by Wexford, notwithstanding the fact that Wexford has at
all times the right to contact you directly regarding its information
requirements. Wexford has at all times the right, exercisable in its sole
discretion, to refuse to accept orders for your account.
Wexford will be responsible for the following areas:
18
o Clearing as a principal, transactions in your account pursuant to
Maxcor's instruction.
o Maintaining books and records and filing regulatory reports.
o Delivering and receiving funds and securities to or from your
account, transfers of securities, payment of dividends or interest
and the handling of exchange or tender offers, rights, warrants and
redemptions in accordance with the last instructions received either
from you or Maxcor.
o Safeguarding funds and securities.
o Preparing and transmitting confirmations and statements.
Any questions you may have concerning the conduct of your account
should be addressed directly to Maxcor.
You agree that any and all telephone conversations between us with
respect to the contemplated transactions may be tape recorded and we each
authorize the other to do so and we each hereby waive further notice of tape
recording. In the event of any dispute, tapes can be used in any forum in which
a dispute is sought to be resolved.
THE ATTACHED ADDITIONAL TERMS SET FORTH ADDITIONAL INFORMATION,
PROCEDURES AND LIMITATIONS APPLICABLE TO TRANSACTIONS IN YOUR ACCOUNT. PLEASE
READ IT CAREFULLY. UNLESS AND UNTIL OTHERWISE AGREED AMONG YOU, WEXFORD AND
MAXCOR, THE TERMS OF THIS LETTER, INCLUDING THE ATTACHED ADDITIONAL TERMS, WILL
GOVERN ANY TRADES THAT MAXCOR INTRODUCES TO WEXFORD ON YOUR BEHALF.
Very truly yours,
WEXFORD CLEARING SERVICES CORPORATION
By:
----------------------------------
Xxxxxx X. Xxxxxx
Executive Vice President
19
ADDITIONAL TERMS
----------------
The following are procedures for trades in the specified securities below which
will be initiated by Maxcor Financial Inc. ("Maxcor"), and in which you and
Wexford Clearing Services Corporation's ("Wexford") parent, Prudential
Securities Incorporated ("PSI"), will act as principals. In general, Wexford
will be responsible for the booking of trades initiated by Maxcor and approved
by Wexford and for maintaining appropriate records of all such transactions and
sending you confirmation. Maxcor. is responsible for adherence to those
securities laws, regulations and rules, that apply to it regarding its own
operations and for supervision of its own personnel.
Authorized employees of Maxcor may, by telephone, directly contact your trading
desk to initiate transactions between you and Wexford. However, such employees
of Maxcor will not be acting as agent for Wexford and no proposed transaction
will be deemed approved or confirmed by Wexford and no such transaction will be
consummated by Wexford until your trading desk compares the transaction by
telephone with Wexford's authorized personnel and Wexford directly confirms by
telephone the transaction. Wexford's parent, PSI, will act as a principal in
each of these back-to-back transactions only after each side, i.e., the purchase
side and the sell side is independently and severally confirmed by Wexford's
authorized personnel. Exceptions to telephonic confirmation will be if trades
are confirmed via GSCC for Government Securities; MBSCC for Mortgage-backed
Securities; MATCH-EM System operated by Emerging Markets Clearing Corporation,
or EuroClear, or CEDEL for Euro Bonds and Emerging Debt Securities (LDC's); and
GEMS MATCH-EM System or EuroClear or CEDEL for Xxxxx Xxxxx. Wexford agrees that
once a transaction has been so confirmed, Wexford's parent, PSI, is thereafter
acting as principal in the trade, and you agree that you will always act as
principal on the other side of the trade. All your customary documentation for
trades in which you act as principal, regardless of how initiated, should be
sent directly to Wexford and Wexford will send you its usual documentation.
The specified securities are: Securitized Adjustable Rate Mortgages;
Asset-backed Securities bearing a credit rating of AA or better; CMO's bearing a
credit rating of AA or better; GNMA, FNMA and Xxxxxxx Mac Securities; Xxxxx
Xxxxx; U.S. Government and Agency Securities; Sovereign Debt/ EuroClear/CEDEL
eligible; Euro Bonds; Corporate Bonds; Convertible Bonds; Municipal Securities;
High Yield Corporate Bonds.
Euro and Xxxxx Xxxx transactions should be submitted to Xxx Xxxxx for
comparison. Our number is (000) 000-0000; FAX (000) 000-0000/7244/7962.
Confirmations should be sent to Wexford Clearing Services Corporation, Attn: Xxx
Xxxxx, One New York Plaza, and 34th floor, New York, N.Y. 10292.
Mortgage trades should be submitted to Xxx Xxxxxxx for comparison. Our number is
000-000-0000; FAX (000) 000-0000. Confirmations of such trades should be sent to
Wexford Clearing Services Corporation, Attn: Xxx Xxxxxxx, Xxx Xxx Xxxx Xxxxx,
00xx xxxxx, Xxx Xxxx, X.X. 00000.
Government trades should be submitted to Xxxxx Xxxxxxx for comparison. Our
number is (000) 000-0000. Confirmations of such trades should be sent to:
Wexford Clearing Services Corporation, Attn: Xxxxx Xxxxxxx, Xxx Xxx Xxxx Xxxxx,
00xx Xxxxx, Xxx Xxxx, XX 00000.
Corporate and Equity transactions should be submitted to Xxxxx Xxxx for
comparison. Our number is (000) 000-0000; FAX (000) 000-0000. Confirmations
should be sent to Wexford
20
Clearing Services Corporation, Attn: Xxxxx Xxxx, Xxx Xxx Xxxx Xxxxx, xxx 00xx
xxxxx, Xxx Xxxx, X.X. 00000.
Attached please find a complete list of all delivery instructions.
21
Schedule A
----------
Schedule A has been omitted and filed separately with the Securities and
Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of
1934, as amended.
22
