AGREED FORM OF
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FULLY DISCLOSED CORRESPONDENT AGREEMENT
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JWGenesis Clearing Corp. and Fiserv Correspondent Services, Inc.
(collectively referred to herein as "FCSI") and [fill in name of Broker-
Dealer] ("Correspondent") mutually agree as follows:
1. Purpose
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The purpose of this Agreement is to set forth the terms and conditions under
which FCSI will provide clearing, execution and other securities services on
a fully disclosed basis.
FCSI is registered as a broker/dealer with the Securities and Exchange
Commission ("SEC") and is a member of the New York Stock Exchange, Inc.
("NYSE"), the American Stock Exchange, Inc. ("ASE") (Associate), and the
National Association of Securities Dealers, Inc. ("NASD").
Correspondent represents that it is a broker/dealer registered with the SEC
and is a member in good standing of the NASD.
FCSI represents that it meets all requirements of the SEC to function as a
clearing broker/dealer and desires to enter into such an Agreement and to
maintain customer accounts on behalf of Correspondent.
2. Relationship Between the Parties
--------------------------------
Correspondent shall not hold itself out to the public as an employee,
partner, or agent of FCSI either orally or in writing. Further, this
Agreement shall not be construed as creating a partnership or joint
venture. Correspondent shall inform each of its customers, in writing,
of the general nature of the services to be performed by FCSI as more
specifically set forth herein, and of the nature of the relationship
with FCSI created hereby. Said writing shall be in the form set forth
in Exhibit A, attached hereto and incorporated herein by reference.
The format or content of Exhibit A may be revised at the sole
discretion of FCSI from time to time to insure compliance with the
various laws and regulations currently in effect at the time of said
revision. In addition, the parties intend to discuss and possibly
substitute another form of Customer Agreement, which form shall be
mutually acceptable to the parties. For the purposes of SIPA and the
SEC's financial responsibility rules, customers are customers of FCSI
and not the Correspondent. Nothing herein shall cause Correspondent
customers to be construed or interpreted as customers of FCSI's 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.
Furthermore, FCSI reiterates its responsibility of distributing
account statements directly to your customers. Each statement will
contain the name and telephone number of an FCSI representative who a
customer may contact regarding the customer's account. The account
statement will indicate that assets are held with FCSI and not the
Correspondent.
As long as Correspondent maintains its headquarters in South Florida
and during the term of this Agreement, FCSI agrees to maintain a
presence in the same city as Correspondent's headquarters. For the
purposes of this Agreement, the term "presence" shall mean that Fiserv
shall maintain at a minimum a Liaison Correspondent Service Desk
staffed with a minimum of 2.5 persons for each 100,000 of trades (on
an annual basis calculated on the total combined transactions of all
of the affiliates and subsidiaries during the prior twelve months).
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For a period of two years from the date on which Correspondent is
fully converted to the systems of FCSI, FCSI will not effect any
other such conversion(s) (the term "any other conversion(s)" as used
here shall mean a change that requires a change of customer account
numbers and/or a change of customer account forms and agreements,
excluding any customer account agreement changes that apply to all
broker-dealers as a result of a regulatory rule change and excluding
any changes described in paragraph 2 above). In the event any other
non-permitted conversion(s) is effected within said two year period,
FCSI shall provide Correspondent with the clearing services under this
Agreement at a 50% reduction of the then in effect clearance services
fee per transaction for the three month period following the
conversion in issue.
In the event that it is necessary for FCSI to effect a conversion of
Correspondent's business within two years form the date on which
Correspondent is fully converted to the systems of FCSI, the fee
reduction specified in the paragraph just above shall not apply if
such conversion results from failures related to Y2K issues beyond its
control.
3. Services to be Performed by FCSI
--------------------------------
FCSI hereby agrees to perform the following services for
Correspondent:
a) Clear transactions for Correspondent involving OTC securities,
listed securities, mutual funds, annuities, bonds and options (no
commodities);
b) Execute orders for Correspondent's customers, but only insofar as
such orders are transmitted to FCSI;
c) Prepare and mail at FCSI's expense confirmations of transactions
to customers of Correspondent on forms designed by FCSI in its
reasonable discretion;
d) Prepare and mail at FCSI's expense monthly statements of customer
accounts directly to Correspondent's customers. The customer
monthly statements will disclose the relationship of the parties
and the name and phone number of an individual at FCSI that
clients may contact regarding their account;
e) Confirmations, statements, and notices relating to the accounts
of Correspondent and its customers will be prepared by FCSI with
Correspondent's logo prominently displayed and FCSI in small print
as clearing broker. Copies of all customer statements, confirms,
notices, and other documents will be provided to Correspondent in
electronic or in hard copy form, at Correspondent's option, at
Correspondent's principal place of business.
f) Settle contracts and transactions in securities (i) between
Correspondent and its customers, and (ii) between Correspondent
and third person;
g) Engage in all cashiering functions for Correspondent's customer
accounts including receipt and delivery of securities purchased,
sold, borrowed and loaned, making and receiving payment therefore,
holding in custody and safekeeping all securities and cash so
received in a manner determined by FCSI, handling of margin and
option accounts, receipt of dividends and the processing of
exchange offers, rights offerings and tender offers;
h) Correspondent (when Correspondent is JW Genesis Securities, Inc.
or a successor) shall have check writing privileges, and checks
for JW Genesis Securities, Inc.'s customers shall be drawn on a
Florida bank, which bank shall be mutually agreeable to FCSI and
Correspondent.
i) Construct and maintain books and records of all transactions
executed and cleared through FCSI as may from time to time be
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required by the SEC and NASD. However, FCSI shall not maintain
those books and records specifically charged to Correspondent as
set forth in Section 4 hereinafter;
j) Provide Correspondent with a Summary of Compliance and
Operational Procedures which shall establish the specific manner
in which transactions will be executed and cleared by FCSI. The
procedures currently in effect at the time of execution of this
Agreement are attached hereto as Exhibit B, and are incorporated
herein by reference. From time to time, FCSI may, in its
reasonable discretion, revise the said procedures to comply with
and conform to the various laws and regulations in effect at the
time of revision. Correspondent agrees to abide by the said
procedures that may be promulgated;
k) Provide the Correspondent with a daily requirement report for its
customers' accounts and FCSI will provide the Correspondent with a
commission summary for each account executive on a daily basis in
electronic media or in hard copy form, at Correspondent's option;
l) Process and transfer all securities and accounts upon request
from Correspondent;
m) Notify, handle and process exchange/tender offers, rights,
warrants and redemptions;
n) Recognize that compliance with Regulation T is the responsibility
of the customer, and ultimately the Correspondent, and in the
event both parties fail to act, FCSI bears ultimate responsibility
for compliance with Regulation T. Any cost associated with
compliance with Regulation T on behalf of the Correspondent, or
the customer, will be paid by Correspondent;
o) Provide mutually agreeable and acceptable Internet access and
services to Correspondent and its customers and registered
representatives, related to the matters described herein. Any
custom or additional development required by Correspondent of FCSI
shall be charged to Correspondent at a cost as mutually agreed
upon between FCSI and Correspondent. The Internet access shall be
provided at no cost until FSCI implements a charge on internet
access to all of its correspondents, in which case, the charge to
Correspondent shall be no higher than the lowest such charge and
competitive in the industry.
FSCI will subscribe to and provide a data feed to Correspondent
for the ADP Prospectus Plus service, or a service of equal or
better quality, for the furnishing of prospectuses to
Correspondent's customers when Correspondent participates in an
underwriting or registered secondary offering or handles options
transactions or other transactions which require a disclosure
document.
FSCI shall provide Correspondent such additional data feeds as may
be reasonably necessary for Correspondent's business and mutually
agreed upon by FCSI and Correspondent.
p) FSCI shall perform a computation for proprietary accounts of
introducing brokers (PAIB) assets for the proprietary accounts of
all of its introducing brokers and maintain a separate special PAIB
reserve account in accordance with the customer reserve computation
set forth in SEC Rule 15c3-3 and the modifications and exclusions
thereto as set forth in the SEC's No Action Letter thereon.
4. Services Not to be Performed by FCSI
------------------------------------
Unless otherwise agreed in writing executed by the parties, FCSI will
not engage in any of the following services on behalf of
Correspondent:
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a) Accounting, bookkeeping, record keeping, cashiering or other services
for any transaction not involving a security including, but not
limited to commodities;
b) Preparation of Correspondent's payroll records, financial statements
or any analysis thereof;
c) Preparation or issuance of checks in payment of expenses of the
Correspondent, other than expenses incurred by FCSI on behalf of
Correspondent pursuant to the terms of this Agreement;
d) Payment of commissions to Correspondent's salesmen;
e) Making or filing of reports to the SEC, NASD, state securities
commission or any securities exchange on behalf of Correspondent.
Notwithstanding the foregoing, FCSI will, at Correspondent's
request, furnish information from FCSI's records not otherwise
available for use by Correspondent;
f) Supervision of Correspondent's activities to insure that Correspondent
is complying with the rules and regulations enacted and/or
promulgated from time to time by the Federal Government, various
state governments, NASD and the various securities exchanges.
Further, Correspondent will be responsible for, will pay, and will
fully indemnify and hold FCSI harmless from all losses, claims,
actions and expenses, including attorney's fees and costs, which
arise by reason of Correspondent's failure to comply with any of
the foregoing statutes, regulations or rules;
g) Furnishing of prospectus to Correspondent's customers when
Correspondent participates in an underwriting or registered
secondary offering or handles options transactions which require a
disclosure document;
h) Investigation of the facts surrounding any transactions FCSI may have
with Correspondent on a principal or agency basis or that
Correspondent may have with its customers or third parties;
i) Accept responsibility for the approval and monitoring of customer
accounts and/or orders;
j) Accept responsibility for the supervision of the Correspondent's
customer accounts and customer orders;
k) Offer investment advice to Correspondent's customers. Research
reports generated by FCSI and/or third party providers are
available under separate contract.
5. Information to be Provided by Correspondent
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The following information will be promptly provided to FCSI by
Correspondent:
a) Notification in writing of the commencement of any investigation,
administrative proceeding, civil action, or criminal action
relating to Correspondent's securities business filed against
Correspondent, its agents or employees, including a copy of all
subpoenas, complaints or petitions pertaining thereto, provided
however that no private civil action or arbitration must be
disclosed unless the same asserts claims totaling at least
$100,000, to the extent that such claims are not covered by
Correspondent's errors and omissions insurance policies.
b) Notification in writing of any instance in which Correspondent's
net capital drops below the minimum then required by SEC Rule
15c3-1;
c) Basic data and records, including but not limited to, copies of
records of any receipts of customer's funds and securities
received directly by Correspondent, as shall be necessary to
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permit FCSI to discharge its service obligations hereunder and
which will be compatible with the requirements of FCSI's
bookkeeping system;
d) Notification in writing of any discretionary account, either full
or partial, established by Correspondent. Further, Correspondent
will, prior to executing transactions in the account, provide FCSI
with copies of documents satisfactory to FCSI and executed by the
customer which establish the discretionary authority. Correspondent
represents and warrants that its procedures require
that all orders executed through FCSI will be in accordance with
its customer's instructions unless notification required by this
section has been made by Correspondent, and Correspondent shall
maintain in effect and follow such procedures.
6. Establishment of New Customer Accounts
--------------------------------------
FCSI and the Correspondent agree that new customer accounts will be
established in accordance with guidelines as follows:
a) Cash Accounts
Correspondent will furnish to FCSI, for each new account opened
through FCSI's New Accounts Department services, a New Account Data
Sheet on a form acceptable to FCSI and which contains all information
required thereon at the time submitted. Said sheets
will be submitted to FCSI within five (5) days from the date that a
new account number is assigned.
Correspondent will be responsible for obtaining from the customer,
within thirty (30) days from the date the account is opened, all
documents required due to the nature or type of the account. If the
required documents are not submitted, the account will be restricted
for trading purposes until they are received.
New accounts opened through FCSI's New Accounts Department services
will not be processed by FCSI for the purpose of this Agreement
until the required New Account Data Sheet is properly completed and
signed by the salesman and principal of Correspondent. Prior to
such receipt by FCSI, transactions executed in said new accounts may
be terminated by FCSI for any reason and any loss incurred thereby
will be borne by Correspondent, and any credit balance shall inure
to Correspondent.
Subsequent to receipt of the New Account Data Sheet (if applicable)
and applicable documents, transactions may be terminated by FCSI for
an apparent violation of any law, regulation or rule then in effect,
either by the customer or the Correspondent, with any loss incurred
borne by Correspondent, and any resulting credit balance inuring to
Correspondent.
Correspondent has ultimate responsibility for obtaining account
documentation and all documents received by FCSI will be maintained
by FCSI. FCSI will make available to Correspondent all new account
documents and account statements, at on microfiche, electronically,
or in hard copy form, at Correspondent's principal place of
business.
b) Margin Accounts
Correspondent will comply with the requirements set forth in
Paragraph 6 (a) when establishing a margin account. The
Correspondent's customer is responsible for the maintenance of
proper margin. FCSI is responsible to give proper and timely notice
of initial margin and maintenance requirements pursuant to the margin
Agreement with the customer. If the Correspondent's client
fails to maintain proper margin, the Correspondent is responsible
for the sellout and any deficit that may remain in the account.
FCSI charges the Correspondent's customers applicable margin
interest on debit balances and the Correspondent's customers are
responsible for payment of the interest. FCSI is responsible for
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and maintains the right to hypothecate the Correspondent's
customers' securities.
c) Option Accounts
Correspondent will comply with the requirements set forth in
Paragraph 6(a) when establishing an option account.
7. Receipt and Delivery of Money and Securities
--------------------------------------------
The parties agree that Correspondent shall have the following duties
and responsibilities regarding its receipt and delivery of money and
securities:
a) Correspondent agrees to promptly deliver to FCSI, or to a
designated account of FCSI, any and all cash remittances and/or
securities received from customers;
b) Concurrently with the delivery of funds or securities,
Correspondent will provide FCSI with such information as may be
relevant and necessary to enable FCSI to record said
funds/securities in the appropriate accounts;
c) Correspondent agrees to make payment to FCSI, or to a designated
account of FCSI, for securities purchased, and to make delivery of
securities sold both for its account and for the accounts of its
customers, on or before settlement date. For this purpose,
payment and delivery by settlement date shall mean payment and
delivery in accordance with the requirements of the various
regulatory authorities, including but not limited to, the Federal
Reserve Board, SEC and NASD.
d) Correspondent will insure that securities delivered by it and/or
by its customers are in good deliverable form, and FCSI reserves
the right to refuse securities not in good deliverable form. If
monetary loss results from the failure of Correspondent, or from
its customers, to either make prompt payment or deliver securities
in good deliverable form, Correspondent will promptly pay to FCSI
the amount of such loss, as more fully set forth in Exhibit B,
attached hereto;
e) Correspondent agrees to comply with provisions of Rule 144 for
the sale of restricted stock. FCSI will assist the Correspondent
in clearing Rule 144 restricted stock for an agreed-upon fee.
8. Duties of Correspondent with Respect to Customer Accounts
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The parties agree that Correspondent shall have the following duties
and responsibilities regarding its dealing with its customers:
a) Correspondent will learn all of the essential facts relative to
every customer, order, cash or initial margin account, and every
person holding power of attorney over any customer account
processed by Correspondent;
Correspondent will adopt and follow due procedures to determine all
of the facts necessary to comply with all rules, regulations and
laws governing transactions effected in customer accounts,
including but not limited to the suitability of all transactions,
the authenticity of all orders, and the genuineness of all
certificates, documents, papers and signatures submitted by
Correspondent, its employees, agents or customers;
c) Correspondent will adopt and follow due procedures to assure
compliance with all federal, exchange, NASD and state rules,
regulations and laws pertaining to customers and customer accounts
by itself, its agents and employees. This shall include, but not
be limited to the NASD Rules of Fair Practice and the attendant
Policies and Interpretations of the Board of Governors. It is
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specifically the responsibility of the Correspondent to comply
with the terms of NYSE Rule 407. The approval or rejection of a
customer account is the responsibility of the Correspondent;
d) In the event this Agreement is terminated for any reason,
Correspondent will pay to FCSI such reasonable amounts as FCSI may
determine are necessary to ship securities and credit balances to
customers or otherwise dispose of said funds and securities. FCSI
may, at its option, withhold such sums from any monies owing
Correspondent at the time this Agreement is terminated.
9. Acceptance and Execution of Orders
----------------------------------
FCSI and the Correspondent agree that the acceptance and execution of
orders will be in accordance with the following guidelines:
a) It is the responsibility of the Correspondent to assure itself
that the order is correct prior to entry;
b) It is the option of FCSI in its reasonable discretion to accept
or reject the order.
c) Any errors in execution of the order shall be the responsibility
of the party at fault;
d) The procedure for proper transmission of an order to FCSI is as
follows:
1) Correspondent's trading desk accepts the order;
2) Correspondent's trading desk telephones the order to the
FCSI trading desk;
3) FCSI's trading desk repeats the details of the order to
Correspondent's trading desk for approval;
4) FCSI's trading desk enters the order;
5) FCSI's trading desk notifies Correspondent's trading desk
upon execution of the order or receipt of a "nothing done".
e) The procedure for trades "done away" is as follows:
1) Correspondent executes order designating Correspondent as
executing (minor) broker and FCSI (symbol FSRV) as clearing
(major) broker.
2) Correspondent bills the executed order by entering the order
into an SIS terminal, and entering the transaction into the
Automatic Confirmation Transaction system (A.C.T.), or;
3) Correspondent transmits the executed order with all pertinent
details, via facsimile or physical ticket, to FCSI for billing
by the Operations Department.
f) FCSI reserves the right to rescind or DK (Don't Know) any
transaction which is inconsistent with the credit policies as
established for the Correspondent.
10. Access to Customer Information
------------------------------
The parties agree that FCSI may furnish customer information regarding
Correspondent, its operations and affairs as follows:
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a) Customer records in possession of FCSI and relating to
Correspondent may be inspected and copied by any and all of the
following entities and/or individuals:
1) Any officer or employee designated by Correspondent and any
officer or employee designated by FCSI; and
2) Representatives of a governmental agency, exchange, or
self-regulatory association which may have jurisdiction over
Correspondent and its business practices; and
3) Any governmental agency or court of competent jurisdiction
pursuant to a subpoena or civil investigative demand; and
4) The authorized representative of any registered "clearing
agency", as used in Section 3(a)(23)(A) of the Securities and
Exchange Act of 1934.
b) FCSI will exercise reasonable care to prevent access by persons
other than those set forth in this section to information
confidential to Correspondent. FCSI further agrees that in no way
will this confidential information be used in competition or to
the financial or other commercial detriment of the Correspondent.
c) Correspondent will exercise reasonable care to prevent access by
any person not an employee to any material, including but not
limited to the terms of this Agreement, provided by FCSI.
11. Access to Corporate Information
-------------------------------
The parties agree that FCSI may furnish corporate information
regarding Correspondent, its operations and affairs as follows:
a) Corporate records in possession of FCSI and relating to
Correspondent may be inspected and copied by any and all of the
following entities and/or individuals:
1) A designated officer or employee of Correspondent;
2) Representatives of a governmental agency, exchange, or
self-regulatory association with jurisdiction over Correspondent
and its business practices;
3) Any governmental agency or court of competent jurisdiction
pursuant to a subpoena or civil investigative demand;
4) The authorized representative of any registered "clearing
agency" as used in Section 3(a)(23)(A) of the Securities and
Exchange Act of 1934.
b) FCSI will exercise reasonable care to prevent access by persons
other than those set forth in this section to information
confidential to Correspondent. FCSI further agrees that in no way
will this confidential information be used in competition to the
financial or other commercial detriment of the Correspondent.
c) Correspondent will exercise reasonable care to prevent access by
any person not an employee to any material, including but not
limited to the terms of this Agreement, provided by FCSI.
12. Exchange of Financial Information
---------------------------------
Correspondent agrees to provide FCSI, and FCSI agrees to provide to
Correspondent, with copies of the monthly and quarterly Focus reports
within five (5) business days after the due date of the reports.
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13. Interest Charges
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Correspondent agrees to pay the interest and/or service charges
incurred by FCSI, and not collected directly from the customer, for
the following transactions: a) Customer debits delinquent beyond
settlement date; b) Draft charges for delivery versus payment
accounts; c) Accounts with payment due prior to settlement date.
Unless otherwise provided by law or FCSI policy, the interest charged
in the above transactions shall be one quarter (1/4) point over the
broker call rate in effect at the time the charges are incurred.
14. Debts, Errors, Lawsuits and Customer Complaints
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Correspondent, its agents, successors and assigns, will be responsible
for, will pay, and will fully indemnify FCSI and hold FCSI harmless
from all losses, claims, actions and expenses, including reasonable
attorney fees and costs, which are incurred by FCSI and arise by
reason of Correspondent's failure to comply with the following:
a) the provisions of Paragraph 4 (f) herein;
b) the provisions of Paragraph 5 (d) herein;
c) the provisions of Paragraph 8 herein;
d) the provisions of Exhibit B, attached hereto;
e) any provision of any applicable law, rule, or regulation or any
other provision of this Agreement not specifically set forth in
this section;
f) option and/or margin Agreements executed with FCSI by
Correspondent's customers;
g) the provisions of Paragraph 9;
h) Any debit balances in any Correspondent's accounts, including but
not limited to, customer or inventory accounts which result from
buy-ins, sell-outs, trade cancellations, or any other reason; FCSI
will notify Correspondent immediately when any such losses,
claims, actions and expenses are accruing or are about to accrue,
so that Correspondent may cure, limit or reduce such expenses.
FCSI shall in all instances, where possible, seek to mitigate all
such losses, claims, actions and expenses.
All customer inquiries and complaints received by FCSI will be
forwarded to the Correspondent for disposition. FCSI will respond
only to those inquiries and complaints addressing duties or procedures
for which FCSI is responsible under this Agreement. Correspondent is
responsible for responding to every complaint received, including but
not limited to, books or records maintenance, journal entry errors,
receipts, disbursements and sales practices.
15. Clearing Charges
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Correspondent agrees to fees for execution and clearing services as
set forth in Exhibit C attached hereto and incorporated herein by
reference to the Agreement.
16. Clearing Deposit
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The obligations of the Correspondent under this Agreement shall be
secured by a minimum equity deposit with FCSI of $100,000.00.
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17. Trading Activity
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Trading activity of the Correspondent shall be secured by an equity
deposit equal to the greater of $100,000.00 or 100% of the cost of all
securities owned (long) and the margin required of all securities sold
but not owned (short). Additionally FCSI reserves the right in its
reasonable discretion to increase the required deposit of the
Correspondent by the greater of 50% of the aggregate introduced
customer cash account trade date debit balances, or 50% of the
aggregate introduced customer cash account settlement date debit
balances.
18. Commissions
-----------
Correspondent shall, where appropriate, charge commissions on
transactions cleared through FCSI in accordance with the FCSI
standard agency commission schedule. Correspondent may at its option
substitute its own commission schedule. Trail commissions on mutual
funds cleared through FCSI will be credited to the Correspondent, and
whenever possible, will be paid directly to Correspondent.
19. Compensation
------------
FCSI shall promptly forward to Correspondent a statement of account at
the settlement date close of each month setting forth the commissions
earned by the Correspondent and any other amounts due the respective
parties hereunder.
20. Representations and Warranties
a) Correspondent represents and warrants as follows:
1) Correspondent is and during the term of this Agreement will
remain a member in good standing of the National Association of
Securities Dealers, Inc.
2) 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 federal and state securities
laws;
3) Correspondent shall, concurrent with the execution of this
Agreement, provide FCSI with a list of those states in which
Correspondent is registered and will update said list from time
to time as necessary. Correspondent shall further provide FCSI
with its most recent Form B/D;
4) Correspondent has all requisite authority, whether arising
under applicable federal or state laws, rules and regulations or
the rules and regulations of any securities exchange or
association to which Correspondent is subject, to enter into
this Agreement and to retain the services of FCSI in accordance
with the terms hereof;
5) Correspondent is, and during the term of this Agreement will
remain, in compliance with (i) the capital and financial
reporting requirements of every securities exchange and/or
association of which Correspondent is a member, (ii) the capital
requirements of the Securities and Exchange Commission and (iii )
the capital requirements of every state in which Correspondent
is licensed as a broker/dealer. If Correspondent fails to
remain in compliance with such requirements, it will notify FCSI
in writing within twenty-four hours of said failure;
6) Correspondent has a Financial and Operational Principal as
required by the By-Laws of the NASD. Correspondent shall notify
FCSI in writing within twenty-four hours from the time it fails
to comply with this requirement.
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7) Correspondent agrees to abide by the procedures in Exhibit B
as may be reasonably revised by FCSI from time to time and at
FCSI's discretion.
b) FCSI represents and warrants as follows:
1) FCSI is a member in good standing of the New York Stock
Exchange, the American Stock Exchange (Associate); and the
National Association of Securities Dealers;
2) FCSI is duly licensed and in good standing as a Broker/Dealer
under applicable federal and state securities laws;
3) FCSI has all requisite authority, whether arising under applicable
federal and state laws, rules and regulations or the laws and
regulations of any securities exchange to which FCSI is
subject, to enter into this Agreement.
4) The essential equipment, software and hardware, the title of
which is owned by FCSI and used for this Agreement, will
consistently function in the same manner after December 31,
1999, as they function prior to said date. FCSI has a
comprehensive Year 2000 project designed to achieve Y2K
readiness. Although FCSI has received certification of Y2K
readiness from its vendors and has conducted extensive Y2K
testing regarding such vendors, products and services, it
cannot warrant the Y2K readiness of same.
21. Exclusivity
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Subject to the terms and conditions of Section 3.05 of the April 16,
1999, Stock Purchase Agreement for the purchase and sale of the stock
of JW Genesis Clearing Corp. (the "SPA"), this Agreement constitutes
an exclusive clearing arrangement between the Correspondent and FCSI.
During the term of this Agreement, FCSI will be the sole agent for the
Correspondent in all transactions for which FCSI is an active clearing
broker.
22. Term
----
a) The term of this Agreement shall be ten years beginning on
the Closing Date as defined in the SPA, and in accordance
with the provisions of Paragraph 23 hereinafter;
b) Following the term specified in Paragraph 22 a) above this
Agreement shall continue in effect thereafter, provided that
either FCSI or Correspondent may during such period terminate
this Agreement by providing to the other at least 120 days prior
written notice of termination.
23. Termination
-----------
This Agreement shall be terminated upon the following terms:
a) Notwithstanding the provisions of Paragraph 22 (a) above, this
Agreement shall terminate in the event any material
representations, warranties, duties, responsibilities or
obligations of Correspondent or FCSI, as the case may be, as set
forth herein cease to be true or duly performed; provided that the
non-performing or breaching party is given notice of such breach
or purported breach, and given an opportunity to explain, cure or
correct such breach or purported breach to the reasonable
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satisfaction of the performing or non-breaching party. If any
such material breach is not explained, corrected or cured within a
reasonable time, the performing or non-breaching party may
immediately terminate this Agreement effective upon written notice
thereof to the non-performing or breaching party. Said
termination, and payment of any termination fee, shall not be
deemed a waiver by the performing or non-breaching party of its
legal or equitable remedies for the breach of the above
undertakings by the non-performing or breaching party or its right
to seek indemnification from the non-performing or breaching party
for its failure to perform the said undertakings. FCSI or
Correspondent, as the case may be, shall take all reasonable steps
to cure all breaches in a timely manner. The termination fee
schedule provided in paragraph 23 e) shall apply to any
termination under this paragraph 23 a) and will be paid upon
termination without regard to the circumstances surrounding the
breach.
b) The Parties agree that if this Agreement is terminated (i) all
revenues, costs and expenses incurred by FCSI prior to the date of
notice of termination will be paid by Correspondent within five
(5) days from the date of the event causing the termination or, at
FCSI's option, be deducted by FCSI from any monies then owing
Correspondent and (ii) such termination, for whatever reason,
shall have no effect upon any amounts then due to FCSI under the
terms and conditions of the Agreement;
c) The parties agree that FCSI will be reimbursed for the reasonable
automated de-conversion and related termination costs if the
Agreement is terminated by Correspondent.
d) At any time during this Agreement and at the discretion of FCSI, the
parties agree that FCSI may terminate this Agreement for any
reason upon the serving of 120 days prior written notice.
e) At any time during this Agreement and at the discretion of
Correspondent, the parties agree that Correspondent may terminate
this Agreement for any reason upon the serving of 120 days prior
written notice and the payment by Correspondent of a termination
fee calculated by multiplying the then existing Aggregate
Termination Amount by a fraction, the numerator which is (i) the
total number of Correspondent's transactions over the twelve
months prior to termination and the denominator which is (ii) the
total number of transactions over the twelve months prior to
termination from all subsidiaries or affiliates of JWGenesis
Financial Corp. as defined in the SPA which have not previously
terminated (hereinafter, the "Termination Factor").
Based upon the contract year in which such termination
notification is given, the Aggregate Termination Amount shall be
as follows:
Year of
Termination Aggregate
Notification Termination Amount
============ ==================
Year 1 $15,000,000
Year 2 $13,500,000
Year 3 $12,000,000
Year 4 $10,500,000
Year 5 $ 9,000,000
Year 6 $ 7,500,000
Year 7 $ 6,000,000
Year 8 $ 4,500,000
Year 9 $ 3,000,000
Year 10 $ 1,500,000
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For purposes of this Section 23, each of the annual Aggregate
Termination Amounts in the above schedule shall be reduced by the
relevant Termination Factor calculated as a result of any
termination pursuant to Section 23 by all subsidiaries or
affiliates of JWGenesis Financial Corp. as defined in the SPA and
such amounts shall be substituted in the above schedule (the "Then
Existing Aggregate Termination Amount"). In the event of more
than one termination by any subsidiaries or affiliates of
JWGenesis Financial Corp. as defined in the SPA within a twelve
month period, the denominators in Section 23 shall reduced by the
total number of transactions related to prior terminations
occurring within said twelve month period.
By way of example, assume that JWGenesis Securities, Inc.; GSG
Securities, Inc. and Corporate Securities Group, Inc. annually do
190,200; 115,000; and 84,370 trades, respectively. JWGenesis
Securities, Inc. elects to terminate its clearing agreement in the
middle of Year 1. The termination fee would be $7,320,000 (which is
calculated as $15,000,000 multiplied by the Termination Factor of
48.8% which is 190,200 divided by the sum of 190,200 plus 115,000 plus
84,370). As a result, the Aggregate Termination Amount in chart above
will be reduced by 48.8% for each year. Accordingly, the adjusted
Aggregate Termination Amount for Years 1, 2 and 3 will be $7,680,000;
$6,912,000 and $6,144,000, respectively, and would be reduced
similarly for years 4 through 10. If GSG Securities, Inc. were to
terminate its clearing agreement in the balance of Year 1, it would be
subject to a termination fee in the amount of $4,431,360 (which is
calculated as $7,680,000 multiplied by the Termination Factor of 57.7%
which is 115,000 divided the sum of 115,000 plus 84,370).
Accordingly, the adjusted Aggregate Termination Amount in the chart
above for Years 1, 2, and 3 will be $3,248,640; $2,923,776 and
$2,598,912, respectively, and would be reduced similarly for years 4
through 10.
f) At any time during this Agreement, if Correspondent sells all of
its business which is subject to this Agreement, Correspondent
shall pay to FCSI a termination fee calculated by multiplying the
Then Existing Aggregate Termination Amount by a fraction, the
numerator which is (i) the total number of Correspondent's
transactions processed by FCSI over the prior twelve months and
the denominator which is (ii) the total number of transactions
processed by FCSI over the prior twelve months from all
subsidiaries or affiliates of JWGenesis Financial Corp. as defined
in the SPA (hereinafter, the "Termination Factor"); provided,
however, that no termination fee shall be due to FCSI if FCSI
consents to the sale and if the sale does not directly result in a
loss of transactional revenue to FCSI. Such consent shall not
unreasonably be withheld and in the event of a direct loss of
transactional revenue to FCSI, for purposes of determining the
termination fee pursuant this paragraph 23 (f), the numerator
above shall only consist of those transactions lost as a direct
result of the sale.
g) At any time during this Agreement, if Correspondent sells any
part of its business which is subject to this Agreement,
Correspondent shall pay to FCSI a termination fee calculated by
multiplying the Then Existing Aggregate Termination Amount by a
fraction, the numerator which is (i) the total number of
Correspondent's transactions processed by FCSI over the prior
twelve months which were caused by the portion of Correspondent's
business being sold, and the denominator which is (ii) the total
number of transactions processed by FCSI over the prior twelve
from all subsidiaries or affiliates of JWGenesis Financial Corp.
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as defined in the SPA (hereinafter, the "Termination Factor");
provided, however, that no termination fee shall be due to FCSI if
FCSI consents to the sale and if the sale does not directly result
in a loss of transactional revenue to FCSI. Such consent shall
not unreasonably be withheld and in the event of a direct loss of
transactional revenue to FCSI, for purposes of determining the
termination fee pursuant this paragraph, 23 (f), the numerator
above shall only consist of those transactions lost as a direct
result of the sale.
In addition, if Correspondent acquires all or part of a broker-
dealer ("Relevant Acquisition"), and divests itself of the same
within two years of the date of the closing of the Relevant
Acquisition, Correspondent shall not be required to pay any
termination fee, or proportionate part of a termination fee, under
this paragraph 23 g) related to the divestment of the Relevant
Aquisition.
h) FCSI and Correspondent agree that if, within three years of the
date on which this Agreement is signed, FCSI is acquired by a
financial services company which has at least fifty percent of its
revenues derived from the retail securities brokerage business,
Correspondent will have an option to terminate all or part of the
business covered by this Agreement by providing 30 days prior
written notice to FCSI and by paying the termination fee in
accordance with 23 e) or 23 f) or 23 g) above, as applicable,
discounted in such applicable case by a factor of twenty-five
percent.
24. Arbitration
-----------
All disputes arising hereunder or related hereto shall be arbitrated
by the NASD
25. Notice
------
For the purpose of providing notice hereunder, said notice shall be
deemed provided when placed in the United States mail, postage prepaid
and addressed as follows:
Fiserv Correspondent Services, Inc.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: President
and
[Name of Correspondent]
▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: President
26. Miscellaneous
-------------
This Agreement shall be construed in accordance with the laws of the
State of Colorado. Headings are included solely for convenience and
are neither to be considered as part of this Agreement nor intended to
be accurate descriptions of the covenants hereof.
This Agreement shall be binding upon and inure to the benefit of the
Parties hereto and their respective successors, assigns and transfers
of every kind. Fiserv Correspondent Services, Inc. reserves the right
to assign this Agreement to its successor corporation at its
discretion.
If any clause or provision of this Agreement is illegal, invalid or
unenforceable under present or future laws effective during the term
hereof, then it is the intention of the Parties that the remainder of
this Agreement shall not be affected hereby, and it is also the
intention of the Parties that in lieu of each clause or provision of
this Agreement that is illegal, invalid or unenforceable, there shall
be added as a part of this Agreement a clause or provision as similar
in terms to such illegal, invalid or unenforceable as may be possible
and be legal, valid and enforceable.
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Notwithstanding anything to the contrary contained herein, FCSI's
liability under this Agreement shall be limited to the total proceeds
of the transactions from which the liability arises.
15
SIGNATURES & SEALS
------------------
This Agreement constitutes the entire Agreement of the Parties and may
not be changed terminated or discharged orally.
DATED: _____________________ DATED: _____________________
FISERV CORRESPONDENT SERVICES, INC., _____________________________)
A COLORADO CORPORATION Correspondent, a _______
Corporation
BY: ________________________________ BY: ____________________________
APPROPRIATE SIGNATURE APPROPRIATE SIGNATURE
ATTEST: ____________________________ ATTEST: _________________________
SECRETARY SECRETARY
(SEAL) (SEAL)
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