CLEARING AGREEMENT
This Agreement is made as of this 8th day of May, 2000, between Fiserv
Securities, Inc. (hereinafter referred to as the "Clearing Agent") and First
Montauk Securities Corp. (hereinafter referred to as the "Introducing Firm").
In consideration of the mutual covenants hereinafter set forth and other
good and valuable consideration, the receipt of which is hereby acknowledged,
and intending to be legally bound, the parties hereto hereby covenant and agree
as follows:
1. Services to be Performed by the Clearing Agent; Covenants of the
Clearing Agent.
a. Execution. The Clearing Agent will execute orders for the Introducing
Firm's proprietary accounts and customers whose cash or margin accounts have
been accepted by the Clearing Agent (hereinafter referred to as "Introduced
Accounts") . The Clearing Agent will execute only those orders that are
transmitted by the Introducing Firm to the Clearing Agent.
b. Confirmations. The Clearing Agent will generate and prepare
confirmations of each purchase or sale for each of the Introduced Accounts.
Information will be transmitted by the Clearing Agent via its communication
network in order to effect the printing of confirmations at the location of the
Introducing Firm. Unless the Clearing Agent is notified by Introducing Firm to
the contrary in accordance to the notice provision 13(g) of this Agreement, the
Introducing Firm shall mail such confirmations to the Introduced Accounts.
c. Statements. The Clearing Agent will prepare and mail the summary monthly
statements (or quarterly statements if no activity in any Introduced Account
occurs during any month covered by such statement) to every Introduced Account.
No statements will be prepared by the Clearing Agent with respect to an
Introduced Account in which there is no cash balance or security position and in
which there has been no other activity since the date of the last statement. The
Introducing Firm may mail or arrange for the mailing of such statements with the
concurrence of the Clearing Agent pursuant to terms of a separate agreement as
incorporated in Exhibit F.
d. Clearance Settlements. The Clearing Agent will settle contracts and
transactions in securities (including options to buy or sell securities): (i)
between the Introducing Firm and other brokers and dealers; (ii) between the
Introducing Firm and the Introduced Accounts; and (iii) between the Introducing
Firm and persons other than the Introduced Accounts or other brokers and
dealers. For the purposes of the Agreement the term "securities" includes, but
is not limited to, stocks, bonds, notes, listed options, commercial paper and
such other instruments as the Introducing Firm may designate with the consent of
the Clearing Agent and excludes commodities.
e. Cashiering. The Clearing Agent will engage in all cashiering functions
for the Introduced Accounts, including the receipt, delivery and transfer of
securities purchased, sold, borrowed and loaned, receiving and distributing
payment therefor, holding in custody and safekeeping all securities and cash so
received, the handling of margin accounts, the receipt and distribution of
dividends and other distributions, and the processing of exchange offers, rights
offerings, warrants, tender offers and redemptions. Only where the Clearing
Agent receives dividends in its nominee name and then distributes such dividends
to Introduced Accounts will the Clearing Agent backup withhold on those
Introduced Accounts which do not have a taxpayer identification number. Upon
written agreement of the Clearing Agent and the Introducing Firm, incorporated
in Exhibit F, the cashiering functions with respect to the receipt of securities
and the making and receiving of payment therefor may be relinquished to the
Introducing Firm.
f. Books and Records. The Clearing Agent will construct and maintain all
prescribed books and records of all transactions executed or cleared through it,
in accordance with Section 17 of the Securities Exchange Act of 1934 as amended
("the Exchange Act"), including a daily record of required margin and other
information required by rules, regulations and the stated policies or practices
of any securities exchange of which the Clearing Agent is a member (the
"Standards").
g. Lost Securities - Notice. The Clearing Agent when notified by the
Introducing Firm will notify either orally or in writing, the Securities
Information Center ("SIC") located in Massachusetts, regarding any lost, stolen
or missing securities. Any written notice will be made on forms prescribed by
the SIC by the Clearing Agent.
h. Tax Reporting. The Clearing Agent will prepare required annual dividend,
interest and distribution information on appropriate IRS Form 1099 and any other
information required to be reported by Federal, state or local tax laws, rules
or regulations solely with respect to activity in the Introduced Accounts
occurring subsequent to the effective date of this Agreement and prior to the
termination hereof. Such reports shall be mailed at the Introducing Firm's
expense by the Clearing Agent to the Introduced Accounts.
i. Account Transfer. Pursuant to written notification received by the
Introducing Firm and forwarded to the Clearing Agent, any account of the
Introducing Firm may choose to reject the services to be performed by the
Clearing Agent pursuant to this Agreement and thus choose not to be serviced as
an Introduced Account pursuant hereto. Upon notice from another member
organization that an Introduced Account intends to transfer his account thereto
or therefrom, the Clearing Agent shall expedite such transfer and shall have the
sole and exclusive responsibility for compliance with Rule 412 of the Rules of
the Board of Governors of the New York Stock Exchange, Inc. (the "Rules").
j. Supervisory Data. The Clearing Agent shall provide the Introducing Firm
with all data in its possession pertinent to the proper performance and
supervision of any function specifically allocated to the Introducing Firm
pursuant to the terms of this Agreement. The Introducing Firm shall be
responsible for and shall promptly reimburse the Clearing Agent for all costs
incurred by the Clearing Agent in connection with the preparation and mailing of
such information.
k. Option Prospectus. The Clearing Agent will deliver to the Introduced
Account a current prospectus or other disclosure document of the Options
Clearing Corporation together with any effective supplements thereto in
accordance with all applicable laws and/or regulations.
l. Compliance with Laws, Rules or Regulations. The Clearing Agent will
remain duly licensed and in good standing as a broker/dealer under all
applicable laws, rules and regulations and will comply with the capital and
financial reporting requirements of every securities exchange or securities
association of which it is a member, the Securities and Exchange Commission, and
each state in which it is registered as a broker/ dealer.
m. Confidentiality. The Clearing Agent shall keep confidential the names
and addresses of the Introducing Firm's customers, affiliates and clients which
have or which may come to the attention of the Clearing Agent in connection with
the clearing and related functions it has assumed under this Agreement and shall
not use such names and addresses except in connection with the functions
performed by the Clearing Agent pursuant to this Agreement. The Clearing Agent
shall send no written information without the express written consent of the
Introducing Firm to such customers and affiliates other than monthly or
quarterly account statements, trade confirmations, bills or notices or such
information as may be required or advisable under any applicable law or
regulation in connection with its role as a Clearing Agent.
n. Accounts. The Clearing Agent shall carry all Introduced Accounts in the
name of the Introducing Firm's customer with the notation on its new account
applications, monthly or quarterly statements and/or confirmations that such
Introduced Accounts are carried by the Clearing Agent and were introduced by the
Introducing Firm and will contain the Introducing Firm's address and telephone
number of the main office to the extent that Introducing Firm elects to
incorporate them as part of the statement logo and that such meets the necessary
parameters. Inadvertent omission of such notations shall not be deemed to
constitute a breach of this Agreement. Copies of sample or suggested forms
covering all of the foregoing shall be furnished by the Clearing Agent to the
Introducing Firm in advance of use.
For purposes of the Securities Investor Protection Act and the financial
responsibility rules of the U.S. Securities and Exchange Commission, the
Introduced Accounts are Introduced Accounts of the Clearing Agent and not the
Introducing Firm.
o. Advertising. Without the prior consent of the Introducing Firm, the
Clearing Agent will not place any advertisement in any newspaper, publication or
other media which makes reference to the Introducing Firm and the services to be
provided to the Introducing Firm in this Agreement.
p. Proxy Statements. The Clearing Agent shall send, or shall cause to be
sent, directly to an Introduced Account, proxy statements received by or on
behalf of the Clearing Agent relating to securities beneficially owned by such
Introduced Account but held of record by the Clearing Agent or its nominee. The
Clearing Agent shall be solely responsible for its failure to send, or to cause
to be sent by any election service in the business of mailing proxy statements
to shareholders, such proxy statements to Introduced Accounts.
q. Class Action Notices. The Clearing Agent shall send, or shall cause to
be sent by a third party, directly to an Introduced Account, class action
notices received by or on the behalf of the Clearing Agent relating to
securities beneficially owned by such Introduced Account but held of record by
the Clearing Agent or its nominee.
r. Prospectus. It shall be the sole and exclusive responsibility of the
Clearing Agent to comply with any and all prospectus delivery requirements
relating to prospectuses to be provided to Introduced Accounts, including any
new issues that the Introducing Firm acts as the managing underwriter provided
that such is made available for that purpose within a reasonable time to the
Clearing Agent by the Introducing Firm.
s. Reorganization Notices. The Clearing Agent shall send, or cause to be
sent by a third party, notice concerning voluntary reorganizations directly to
the Introduced Accounts.
t. Compliance with Law. The Clearing Agent assumes sole and exclusive
responsibility for compliance with the constitution, by-laws, rules,
regulations, stated policies, practices and customs and any modifications
thereof of any securities exchange of which it is a member or other securities
exchange or market and its clearing house if any, where executed, and any other
applicable laws and regulations for the service it performs pursuant to this
Agreement.
u. Reports to Regulators. The Clearing Agent shall provide the Introducing
Firm with copies of all financial information and reports filed by the Clearing
Agent with all stock exchanges of which it is a member, the National Association
of Securities Dealers Regulation, Inc. and the Securities and Exchange
Commission (including but not otherwise limited to quarterly Financial and
Operational Combined Uniform Single Reports, i.e., "FOCUS" Reports) simultaneous
with the filing therewith Copies of such financial information and reports will
be provided in a manner mutually agreed by Clearing Agent and Introduced Firm.
v. Competition. Throughout the term of this Agreement and for a period of
one year following the termination of this Agreement the Clearing Agent will not
knowingly solicit the brokerage or any other business of any Introduced Account,
and at no time during or after the termination of this Agreement shall the
Clearing Agent use the customer list of the Introducing Firm to solicit the
Introducing Firm's customers or allow the affiliates and/or clients of the
Clearing Agent to obtain or have access to the affiliated customer list of the
Introducing Broker.
w. Confidentiality. The Clearing Agent shall keep confidential any
information it may acquire as a result of this Agreement regarding the business
and affairs of the Introducing Firm, which requirement shall survive the
termination of this Agreement; provided further that this covenant shall not
apply to information which is, or becomes, in the public domain through no fault
of the Clearing Agent.
x. Hiring Introducing Firm's Employees. The Clearing Agent will not engage
in negotiations with a view to hiring or hire personnel of the Introducing Firm
without the Introducing Firm's prior written consent which obligation shall
survive the termination of this Agreement for a period of one year.
y. Customer Complaints. In order for the Clearing Agent to carry out its
functions and responsibilities under this Agreement, the Clearing Agent will
promptly forward any written customer complaint received regarding the
Introducing Firm or its associated persons including those relating to functions
and responsibilities allocated to the Introducing Firm under this Agreement to
(i) the Introducing Firm, attention: Legal and Compliance Department; and (ii)
the Introducing Firm's designated examining authority. The Clearing Agent will
also notify the customer who sent the written complaint that a copy of such
complaint was furnished to both the Introducing Firm and the Introducing Firm's
designated examining authority.
z. Clearing Agent Inspection. Upon reasonable prior written notice,
Clearing Agent may make visits to Introducing Firm's principal place of business
to inspect Customer Account documentation, provided that such visits do not
interfere with the conduct of Introducing Firm's normal business. Introducing
Firm shall, at all times during reasonable business hours, make such Customer
Account documentation readily available for inspection by Clearing Agent.
aa. Disaster Recovery. The Clearing Agent will maintain sufficient disaster
recovery and back up system capabilities to enable Clearing Agent to provide
reasonably alternative clearing and related services to Introducing Firm.
bb. Secondary Clearing Arrangements. Clearing Agent may provide clearing
services for the benefit of third parties introduced through the Introducing
Firm subject to a separate agreement related to that third party to be included
as part of Exhibit F hereto and which shall, upon execution, be incorporated by
reference herein.
2. Services Which Will Not be Performed by the Clearing Agent. Unless
otherwise agreed to in a writing executed by the parties hereto, the Clearing
Agent will not engage in any of the following services on behalf of the
Introducing Firm:
a. Books and Records. Accounting, bookkeeping or recordkeeping, cashiering,
or any other services with respect to commodity transactions, or any
transactions not involving cash or securities.
b. Financial Information. Preparation of the Introducing Firm's payroll
records, financial statements or any analysis or review thereof or any
recommendations relating thereto.
c. Disbursements. Preparation or issuance of checks in payment of the
Introducing Firm's expenses, other than expenses incurred by the Clearing Agent
on behalf of the Introducing Firm pursuant to this Agreement or any attached
schedules incorporated by reference herein.
d. Compensation. Payment of commissions, salaries or other remunerations to
the Introducing Firm's salespersons, or any other independent contractors or
employees of the Introducing Firm or payment of other obligations incurred by
the Introducing Firm.
e. Other Records. Preparation and maintenance of any records required to be
prepared and maintained by the Introducing Firm.
f. Reports. Preparation and filing of reports (the "Reports") with the
Securities and Exchange Commission, and state securities commission, or
securities exchange or securities association or any other regulatory of
self-regulatory body or agency with which the Introducing Firm is associated
and/or by which it is regulated. Notwithstanding the foregoing, the Clearing
Agent will, at the request of the Introducing Firm to the Customer Service
Department or any other department directed by the Clearing Agent, furnish the
Introducing Firm with any necessary information and data contained in books and
records kept by the Clearing Agent and not otherwise reasonably available to the
Introducing Firm if such information is required in connection with the
preparation and filing of Reports by the Introducing Firm.
g. Account information. Verification of tax identification numbers, changes
of address or any other information with respect to Introduced Accounts.
h. New Account Information. Obtaining and verifying new account
information, and ensuring that such information meets the requirements of Rule
405(1) of the Rules and any other Rules or applicable Standards.
i. Custody of Certain Securities. Holding for safekeeping (other than in
connection with its execution of an order to sell securities or securities that
are classified as Rule 144 stock or restricted stock ) the securities of any
Introduced Account registered in the name of anyone other than the nominee of
the Clearing Agent.
j. Investment Advice. Clearing Agent shall not furnish investment advice to
any Introduced Account.
3. Opening of Accounts.
The following procedures are to be followed in opening accounts:
a. Account Forms. The Clearing Agent shall supply the Introducing Firm with
the format for "new account" forms (including Cash Account and Option
Account Agreements) and Margin Agreements to be submitted to the Clearing
Agent upon their completion by the Introducing Firm. The Clearing Agent
will mail to each margin Introduced Account a written statement at the time
of opening of a margin account in accordance with Rule 10b-16 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act") from time
to time.
b. Cash Account ▇▇▇▇▇▇▇▇▇▇.▇▇ the time of opening the Introduced Accounts that
are cash accounts, the Introduced Firm shall furnish the Clearing Agent
with executed customers' agreements and any other documents required under
applicable rules or regulations.
c. Margin Account Agreements. At the time of opening Introduced Accounts which
are margin accounts, the Introducing Firm shall furnish the Clearing Agent
with executed customers' agreements, hypothecation agreements and consents
to loan of securities (hereinafter referred to collectively as the "Margin
Agreements") and any other documents required under the applicable rules or
regulations.
d. Option Account Agreements. At the time of opening Introduced Accounts which
trade options, the Introducing Firm shall furnish the Clearing Agent with
executed customers' option agreements and any other documents required
under applicable rules or regulations.
e. Account Information. At the time of opening each Introduced Account, the
Introducing Firm shall furnish the Clearing Agent with all financial and
personal information concerning such Introduced Accounts as the Clearing
Agent may reasonably require.
f. Waiver of Agreements. If an Introduced Account has been opened without the
Clearing Agent having previously received the foregoing information or, in
the case of a margin account, without the Clearing Agent having previously
received properly executed Margin Agreements, failure of the Clearing Agent
to receive such information or Margin Agreements shall not be deemed to be
a waiver of the information requirements set forth herein.
g. Additional Account Agreements. Upon the written or oral request of the
Clearing Agent, the Introducing Firm shall furnish the Clearing Agent with
any other documents and agreements executed by the Introduced Account as
shall be necessary for the Clearing Agent to discharge its service.
h. Account Agreements - Customer Contact. The Clearing Agent may upon written
request by the Introducing Firm, mail Margin Agreements or "new account"
forms directly to the Introduced Accounts, and/or require completion of its
own margin agreements or "new account" forms for the Introduced Accounts.
i. Account Information to Clearing Agent. The Introducing Firm shall promptly
provide the Clearing Agent with basic data and copies of documents relating
to each of the Introduced Accounts, including, but not otherwise limited
to, copies of records of any receipts of the Introduced Accounts' funds
and/or securities received directly by the Introducing Firm, as shall be
necessary for the Clearing Agent to discharge its services hereunder.
j. Cash Transactions. All transactions in any Introduced Account are to be
considered cash transactions until such time as the Clearing Agent has
received Margin Agreements duly and validly executed in respect of such
Introduced Account.
k. Agency Accounts. At the time of the opening of any agency Introduced
Account, the Introducing Firm shall furnish the Clearing Agent with the
name of any principal for whom the Introducing Firm is acting as agent, and
written evidence of such authority.
l. Rule 405(3). The Introducing Firm shall have the sole and exclusive
responsibility for substantial compliance with Rule 405(3) of the Rules and
shall specifically approve the opening of any new account before forwarding
such account to the Clearing Agent as a potential Introduced Account. The
Clearing Agent, in its reasonable business judgment, shall have the right
to reject any account which the Introducing Firm may tender to the Clearing
Agent as a potential Introduced Account and promptly notify the Introducing
Firm of such rejection. The Clearing Agent shall also have the right to
terminate any account previously accepted by it as an Introduced Account
and promptly notify the Introducing Firm of such termination. Failure of
the Clearing Agent to so notify the Introducing Firm, however, shall not
affect the effectiveness of such termination or rejection.
m. Tax Identification Numbers. The Introducing Firm will verify and furnish to
the Clearing Agent tax identification numbers, signatures and such other
information as are requested by the Clearing Agent for the opening and
carrying of Introduced Accounts on such forms as may have been approved
from time to time by the Clearing Agent and the Introducing Firm. The
Introducing Firm shall be responsible for any penalty or fine assessed as a
result of its failure to provide tax identification numbers or its
providing incorrect tax identification numbers.
n. Account Restriction for Lack of Proper Documentation. If, after reasonable
requests therefor, the documents necessary to enable the Clearing Agent to
comply with account documentation requirements of any applicable laws and
regulations have not been received by the Clearing Agent, the Clearing
Agent may notify the Introducing Firm that no further orders will be
accepted for the Introduced Accounts involved. In the event that
inadvertent orders are placed for such accounts after such notice is
received, all commissions collected from such orders will be retained by
the Clearing Agent. On receipt of the necessary documents, this restriction
will be lifted with respect to future commissions, and any commissions
collected by the Clearing Agent prior to its receipt of such documents will
be paid to the Introducing Firm.
o. Rule 405(1). It shall be the sole and exclusive responsibility of the
Introducing Firm to make every reasonable effort to ascertain the essential
facts relative to any Introduced Account and any order therefor, in
substantial compliance with Rule 405(1) of the Rules, including but not
otherwise limited to ascertaining the authority of all orders for
Introduced Accounts, and the genuineness of all certificates, papers and
signatures provided by each Introduced Account. Any investment advice
furnished by the Introducing Firm to an Introduced Account shall be the
sole and exclusive responsibility of the Introducing Firm.
p. Customer Incapacity. The Introducing Firm shall have the sole and exclusive
responsibility to ensure that those of its customers who become Introduced
Accounts hereunder shall not be minors or subject to those prohibitions
existing under any laws and regulations generally relating to the
incapacity of any Introduced Account.
4. Additional Responsibilities, Warranties and Covenants of the Introducing
Firm.
a. Exclusive Arrangement. The Introducing Firm covenants that the Clearing
Agent shall be the exclusive provider of clearing and settlement services
for the Introducing Firm and Introducing Firm's affiliates, subsidiaries,
agents and assigns subject to section 4(p) of this Agreement and except as
otherwise mutually agreed upon in writing by the parties as necessary to
facilitate temporary dual clearing arrangements related to acquisitions by
Introducing Firm.
b. Restricted and Control Stock. The Introducing Firm shall be solely and
exclusively responsible for determining if any securities held in any
Introduced Account are "restricted securities" or "control stock" and
ensuring that orders executed for such securities are in compliance with
applicable laws, rules and regulations.
c. Addresses and Tax Information. The Introducing Firm shall be solely and
exclusively responsible for maintaining proper addresses, correct tax
identification numbers and other information required by the Tax Equity and
Fiscal Responsibility Act, for each Introduced Account.
d. Rule 408. The Introducing Firm shall be solely and exclusively responsible
for the handling and supervisory review of any Introduced Accounts over
which the Introducing Firm's partners, officers or employees have
discretionary authority, as required by Rule 408 of the Rules and any other
applicable laws and regulations. The Introducing Firm shall furnish the
Clearing Agent with such documentation with respect thereto as may be
requested by the Clearing Agent.
e. Rule 407. The Introducing Firm shall have the sole and exclusive
responsibility for the handling and supervisory review of any Introduced
Account for an employee or officer of any member organization,
self-regulatory organization, bank, trust company, insurance company or
other organization engaged in the securities business, and for compliance
with Rule 407 of the Rules and any other applicable laws and regulations
relating thereto. The Introducing Firm shall furnish the Clearing Agent
with such documentation with respect thereto as may be requested by the
Clearing Agent.
f. Blue Sky Requirements. The Introducing Firm shall be solely and exclusively
responsible for any loss, liability, damage, cost or expense (including but
not otherwise limited to fees and expenses of legal counsel) sustained or
incurred by either the Introducing Firm or the Clearing Agent, arising out
of or resulting from any orders the Introducing Firm has taken from
Introduced Accounts residing or domiciled in jurisdictions in which the
Introducing Firm was not, is not or is no longer permitted to do so.
g. Payment Responsibility. In all cash accounts and with respect to all cash
transactions, as between the Introducing Firm and the Clearing Agent, the
Introducing Firm shall be responsible for purchases for Introduced Accounts
until final payment therefor has been received by the Clearing Agent. The
Introducing Firm shall be responsible for all sales until acceptable
deliveries to the Clearing Agent, or to a national clearing organization
mutually agreed upon by the Clearing Agent and the Introducing Firm, of the
securities have been made. The Introducing Firm shall be solely and
exclusively responsible to the Clearing Agent for any loss or liability
whatsoever in the event any check or draft given to the Clearing Agent by
any of the Introduced Accounts is returned to the Clearing Agent unpaid.
The Introducing Firm shall also be solely and exclusively responsible for
the payment and delivery of all "when issued" or "when distributed"
transactions which the Clearing Agent may accept, forward or execute for
Introduced Accounts.
h. Order Approval or Rejection. The Introducing Firm shall be solely and
exclusively responsible for approving all orders for the Introduced
Accounts and for establishing procedures to ensure that such approved
orders are transmitted properly to the Clearing Agent for execution. The
Clearing Agent, in its reasonable business judgment, reserves the right to
reject any order which the Introducing Firm may transmit to the Clearing
Agent for execution and to promptly notify such agent or registered
representative of the Introducing Firm of such rejection.
i. Order Review. The Introducing Firm shall be solely and exclusively
responsible for the supervisory review of all orders for the Introduced
Accounts and shall ensure that any orders and instructions given by it or
any of its employees to the Clearing Agent pursuant to the terms of this
Agreement shall have been properly authorized in advance and do not create
or result in a violation of any applicable laws and regulations.
j. Compliance with Law. The Introducing Firm assumes sole and exclusive
responsibility for compliance with the constitution, by-laws, rules,,
regulations, stated policies, practices, and customs and any amendments
thereof of any securities exchange of which it is a member or other
securities exchange or market and its clearing house, if any, where
executed, and any other applicable laws and regulations for the services it
performs pursuant to this Agreement.
k. Rule 405(2). The Introducing Firm shall have the sole and exclusive
responsibility for the review of all Introduced Accounts and for compliance
with any supervisory responsibility under rule 405(2) of the Rules and any
other applicable rules and laws, including but not otherwise limited to
matters involving the investment objectives of the Introduced Accounts, the
suitability of the investments made by the Introduced Accounts, the
reasonable bases for recommendations made to Introduced Accounts, and the
frequency of trading in the Introduced Accounts, whether or not such
transactions are instituted by the Introducing Firm, its partners,
officers, employees or any registered investment advisor.
l. Rule 342. The Introducing Firm shall be responsible for substantial
compliance with any supervisory procedures under Rule 342 of the Rules and,
to the extent applicable, any other provisions of any applicable laws and
regulations, including but not otherwise limited to supervising the
activities and training of its registered representatives, as well as all
of its other employees in the performance of functions specifically
allocated to it pursuant to the terms of this Agreement.
m. Customer Notification of Relationship. In accordance with Rule 382, the
Introducing Firm shall be solely and exclusively responsible for
determining the extent to which it will inform its customers, in writing,
of its relationship with the Clearing Agent, the form and substance of
which will be mutually agreed upon. Any new customers of the Introducing
Firm shall also be so informed prior to such customers becoming Introduced
Accounts. The Introducing Firm shall be solely and exclusively responsible
for the payment of all costs incurred in connection with the preparation
and mailing of such customer correspondence.
n. Equipment. The Introducing Firm shall be solely and exclusively responsible
for all rental and other fees relating to any equipment obtained by the
Introducing Firm in addition to that supplied by the Clearing Agent. Upon
the closing of an office of the Introducing Firm, the Clearing Agent shall
use its best efforts to locate promptly a new installation site for such
equipment.
o. Discretionary Accounts. The Introducing Firm covenants that with regard to
any orders or instructions given by the Introducing Firm with respect to
discretionary accounts, its officers, registered agents or employees shall
have been fully and properly authorized relative thereto and that the
execution of such orders shall not be in violation of any applicable laws
and regulations.
p. Over-the-Counter Trades by Introducing Firm. On all over-the-counter
transactions executed for Introduced Accounts by the Introducing Firm, the
Introducing Firm shall furnish the Clearing Agent with the names of the
respective purchasing and selling broker-dealers, the names of the
purchasing and selling customers, and the wholesale and retail purchase and
sale prices. Clearing Agent reserves the right, at any time, to place a
limit (of either dollars or numbers of securities) on the size of
transactions that Clearing Agent in these circumstances will accept for
clearance. If, after Introducing Firm has received notice of such
limitation, it executes an order in excess of the limit established by
Clearing Agent, Clearing Agent shall have the right to notify the other
parties and other broker that it will not accept the transaction for
clearance and settlement. In the event that Clearing Agent exercises the
right to not accept a particular transaction for clearance and settlement,
and only in such event, Introducing Firm may pursue alternative means of
clearing that transaction. Such exercise by the Clearing Agent and such
alternatively cleared transaction by the Introducing Firm shall in no way
alter or be construed to alter Introducing Firm's obligations pursuant to
Section 4(a) of this Agreement or constitute an event of default. In the
event any claim is asserted against Clearing Agent by the other broker
because of such action by Clearing Agent, Introducing Firm agrees to
indemnify and hold Clearing Agent harmless from any loss, liability,
damage, cost, or expense arising directly or indirectly therefrom. The
Clearing Agent may impose on the Introducing Firm additional charges for
any such trades or may at its discretion decline to handle such introduced
trades in the normal course of business.
q. Reports to Regulators. The Introducing Firm shall provide the Clearing
Agent with copies of all financial information and reports filed by the
Introducing Firm with all stock exchanges of which it is a member, the
National Association of Securities Dealers, Inc., and the Securities and
Exchange Commission (including but not otherwise limited to monthly and
quarterly Financial and Operational Combined Uniform Single Reports, i.e.,
"FOCUS" Reports) simultaneous with the filing therewith.
r. Data on Performance of Function. The Introducing Firm shall submit to the
Clearing Agent upon reasonable request all appropriate data in its
possession pertinent to the proper performance and supervision of any
function or responsibility specifically allocated to the Introducing Firm
pursuant to the terms of the Agreement.
s. Compliance with Financial Regulations. The Introducing Firm will remain in
substantial compliance with the capital and financial reporting
requirements of each securities exchange and securities association of
which it is a member, the Securities and Exchange Commission, and each
state in which the Introducing Firm is registered as a broker/dealer. The
Introducing Firm will immediately notify the Clearing Agent when: (i) its
Aggregate Indebtedness Ratio (as defined in Rule 15c3-3 of The Exchange
Act) reaches or exceeds 10 to 1; or (ii) the Introducing Firm has elected
to operate under paragraph (f) of Rule 15c3-1 of The Exchange Act, as
amended, when its net capital is less than 5% of aggregate debit items
computed in accordance with Rule 15c3-3.
t. Customer Correspondence. The Introducing Firm shall inform its customers
that all inquiries and correspondence relating to the services provided
pursuant to this Agreement should be directed to the Introducing Firm. All
customer correspondence shall be reviewed and responded to by the party
responsible for the specific area to which the inquiry or correspondence
relates pursuant to the terms of this Agreement. In the event such
correspondence is not directed to such party originally, the Introducing
Firm or Clearing Agent shall expeditiously forward such correspondence to
the appropriate party.
u. Membership on Exchanges and Compliance. The Introducing Firm will remain
duly licensed and in good standing as a broker/dealer under all applicable
laws and regulations. The Introducing Firm will promptly notify the
Clearing Agent in accordance with 13(q) of the Agreement of its becoming a
member or affiliate of any exchange in addition to those memberships and
affiliations existing on the date of this Agreement. The Introducing Firm
shall also comply with whatever non-member access rules have been
promulgated by any securities exchange of which it is a member or any other
securities exchange of which it is not a member.
v. Security Deposit. The Introducing Firm shall deposit with the Clearing
Agent, within 10 days after its execution of this Agreement, a cash
security deposit in the amount of $50,000.00. Should the security deposit
at any time during the term of this Agreement fall below $50,000.00, the
Introducing Firm will be notified as to the deficient amount and within 10
days of said notice, the Introducing Firm will deposit additional funds
sufficient to reach the required minimum of $50,000.00. The Clearing Agent
will pay the Introducing Firm interest monthly on such deposit based on the
13 week T-▇▇▇▇ rate in effect on the first trading day of the brokerage
month. Such deposit shall be returned to the Introducing Firm within ten
days after termination of this Agreement, and shall be subject to the
Clearing Agent's right from time to time to offset sums due to the Clearing
Agent by the Introducing Firm pursuant to the terms of the Agreement.
w. Preparation of Statements, etc. The Introducing Firm shall not generate
and/or prepare any statements, ▇▇▇▇▇▇▇▇ or confirmation with respect to any
Introduced Account unless agreed to in writing by the Clearing Agent and
the Introducing Firm.
x. Confidentiality. The Introducing Firm shall keep confidential any
information it may acquire as a result of this Agreement regarding the
business and affairs of the Clearing Agent, which requirement shall survive
the termination of this Agreement; provided, however, that this covenant
shall not apply to information which is, or becomes, in the public domain
through no fault of the Introducing Firm or which the Introducing firm is
legally required to provide to any court, regulatory agency or
self-regulatory organization.
y. Summary of Material Litigation/Arbitration. Introducing Firm shall provide
the Legal Department of the Clearing Agent, on an annual basis or upon
reasonable notice, with summaries of any pending litigation/arbitration
material to Introduced Accounts or Introducing Firm's ability to perform
its obligations under this Agreement.
z. Cash and Securities of Customers. The Introducing Firm will turn over
promptly to the Clearing Agent any and all cash remittances and securities
which the Introducing Firm receives from its customers. Concurrently with
the delivery of such funds or securities to the Clearing Agent, the
Introducing Firm shall furnish the Clearing Agent with such information as
may be relevant or necessary to enable the Clearing Agent to record
promptly and properly such cash remittances and securities in the
respective Introduced Accounts.
aa. Advertisements. The Introducing Firm shall not, without the prior written
approval of the Clearing Agent, place or agree to place any advertisement
for use in any newspaper, publication, periodical or any other media if
such advertisement in any manner makes reference to the Clearing Agent; any
person or entity that directly, or indirectly through one or more
intermediaries, controls or is controlled by, or is under common control
with the Clearing Agent; and the clearing arrangements and/or any of the
services embodied in this Agreement.
bb. Examination of Statements and Reports. Introducing Firm shall examine in a
reasonable manner all monthly statements of Accounts, monthly statements of
clearing services, customer confirmations, margin status reports, money
line, daily reports, and other reports provided on a timely basis to
Introducing Firm by Clearing Agent. Introducing Firm shall, within the time
specified below, notify Clearing Agent of any error claimed by Introducing
Firm in any Accounts in connection with (1) any transaction prior to the
settlement date of such transaction; (2) information appearing on daily
reports within thirty (30) days of Introducing Firm's receipt of such
report; and (3) information appearing on monthly or quarterly statements or
reports within thirty (30) days of Introducing Firm's receipt of any
monthly or quarterly statement or report. Any notice of error shall be
accompanied by such documentation as may be reasonably necessary and
available to Introducing Firm to substantiate Introducing Firm's claim.
Introducing Firm shall provide, upon Clearing Agent's request, any
additional documentation in Introducing Firm's possession, under its
control or otherwise readily available to it, which Clearing Agent
reasonably believes is necessary or desirable to establish and correct any
such error. Unless Introducing Firm notifies Clearing Agent within a
reasonable time of any mistakes or discrepancies in the above-described
reports and information, Clearing Agent shall, as between Clearing Agent
and Introducing Firm and to the extent Clearing Agent suffers monetary loss
arising from any such delay, be entitled to consider all the information
supplied to Introducing Firm as correct.
cc. Hiring Clearing Agent's Employees. The Introducing Firm will not engage in
negotiations with a view to hiring or hire personnel of the Clearing Agent
without the Clearing Agent's prior written consent which obligation shall
survive the termination of this Agreement for a period of one year.
5. Margin Transactions.
a. Regulation T. With respect to Introduced Accounts which are margin
accounts, the Clearing Agent is responsible for compliance with Regulation
T, 12 C.F.R. Part 220 [the federal margin regulation promulgated by the
Board of Governors of the Federal Reserve System (the "Board")], and
interpretive rulings issued by the Board, letter rulings of the Federal
Reserve Bank of New York, Rules, interpretations of the New York Stock
Exchange, Inc. and any other applicable margin and margin maintenance
requirements. The Introducing Firm is responsible to the Clearing Agent for
the collection of the margin required to support each transaction for, and
to maintain a position in, each Introduced Account, in conformity with the
above margin and margin maintenance requirements. After initial margin
relating to each transaction has been received, maintenance margin calls
shall be generated by the Clearing Agent or by the Introducing Firm at the
instruction of the Clearing Agent. The Clearing Agent shall have the right
to modify, in its sole discretion, the margin requirements of any
Introduced Account from time to time. All margin Introduced Accounts shall
be subject to the Clearing Agent's "house margin requirements" which shall
be delivered to the Introducing Firm on the Introducing Firm's request. The
Clearing Agent will not ▇▇▇▇ up any fees or charges imposed directly by any
regulatory body with regard to Regulation T call extensions granted by the
Clearing Agent pursuant to written requests from a principal of the
Introducing Firm.
b. Payment Responsibility. On all transactions, the Introducing Firm shall be
responsible to the Clearing Agent for any loss, liability, damage, cost or
expense (including but not otherwise limited to fees and expenses of legal
counsel) incurred or sustained by the Introducing Firm or the Clearing
Agent as a result of the failure of any Introduced Account to make timely
payment for the securities purchased by it or timely compliance by it with
margin or margin maintenance calls (provided that the Clearing Agent has
timely issued such call and given notice thereof to the Introducing Firm),
whether or not any margin extension has been granted by the Clearing Agent
pursuant to the request of the Introducing Firm, except that no interest
will be charged by the Clearing Agent for securities sold in cash accounts,
also referred to as cash shorts, in Introduced Accounts.
6. Self-Directed Individual Retirement Accounts Program
a. Services Performed. The Self-Directed Individual Retirement Accounts
Program (the "SDIRA Program") includes without limitation a brokerage
account by Clearing Agent and one or more liquid asset investment options.
Clearing Agent provides the various processing services described in this
section on behalf of the Introducing Firm, in connection with such SDIRA
program. Unless otherwise agreed to in writing, Clearing Agent will not act
a custodian of the SDIRA.
b. Responsibilities of the Parties.
i. The parties will develop the application form and other forms to be used by
Introduced Accounts who participate in the SDIRA Program (the SDIRA
Introduced Account").
ii. Introducing Firm and Clearing Agent will be responsible for processing the
application forms with regard to approving a SDIRA Introduced Account
application and shall approve, deny or otherwise handle the application
forms in accordance with applicable law, including without limitation
receipt, evaluation and retention of the application form and legal
documentation required to open an Account. Introducing Firm will retain a
copy of the application form and related documentation and materials as may
be required by applicable law.
iii. The following responsibilities will be undertaken by the Clearing Agent
regarding the SDIRA program:
a. Clearing Agent will perform all required tax reporting.
b. Clearing Agent will identify receipts into the SDIRA Introduced Account and
disbursements from the SDIRA Introduced Account by transaction type and tax
year. Clearing Agent will store this transaction information and produce
the proper tax reporting, on Forms 5498 and 1099R.
b. The maintenance of the annual fee billing system which includes (i) the
generation and mailing of fee due notices; (ii) support of various fee
incentive or waiver programs; and (iii) the ability to debit the SDIRA
Introduced Account for the required fee amount.
c. Forms Approval and Inventory. Introducing Firm will provide, at its cost,
all forms necessary to opening, operate and close SDIRA Introduced
Accounts. The use of such forms and all revisions thereto will be subject
to the prior approval of Clearing Agent, but Clearing Agent's review and
approval shall not be unreasonably withheld.
If any reprinting is required by a change in law applicable to the parties,
or any party hereto, or the SDIRA Program services offered by Introducing Firm,
the cost of reprinting and distributing revised forms will be borne by
Introducing Firm. If a change requiring forms reprinting is requested, other
than as required by a change in law applicable to the parties hereto or to the
SDIRA Program services offered by Introducing Firm, then all creative, printing,
inventory, distribution and other costs incurred as a result of such reprinting
shall be borne solely by the party requesting such change. Clearing Agent shall
have no responsibility for any creative, inventory, distribution or any other
costs incurred as a result of replacing an inventory of forms maintained by, or
for, Introducing Firm that exceeds the supply reasonably expected to be used in
a three-month period unless Clearing Agent shall have previously consented in
writing to the printing and distribution of more than a three month's supply of
such forms.
d. No Third Party Beneficiaries. The parties agree that there are no intended
or incidental third party beneficiaries of the SDIRA Program other than
those customers who are SDIRA Introduced Accounts.
e. Fees. Introducing Firm agrees to pay Clearing Agent all fees for those
services relating to the SDIRA Program, and for supplies and other services
as set forth in Exhibit A in the section titled RETIRMENT PLANS as the same
may be amended from time to time by the Clearing Agent on thirty (30) days
prior written notice or from time to time by agreement of the Introducing
Firm and the Clearing Agent.
Clearing Agent will invoice Introducing Firm in January for all charges
associated with the SDIRA Program. Such invoices shall be payable in full within
ten (10) days of receipt by Introducing Firm. Past-due accounts shall be subject
to a service charge of 1% per month calculated on the past-due balance. All
other charges, or out- of-pocket cost will be expensed as incurred and reflected
on the month-end settlement statement.
f. Reference to Each Other. Each party agrees, with respect to any and all
SDIRA Program forms, notices, agreements, advertising and promotional
materials to be used in connection with the SDIRA Program and which make
reference to any other party and/or mention any other party's products,
service or benefits, that it will submit the same to such other party for
review and comment relating to the reference or mention and that no such
form, notice, agreement, advertising or promotional materials will be
mailed to customers or distributed to the public by that party without the
prior consent of such other party or parties, which consent will not be
unreasonably withheld.
7. Additional Services. Mutual Fund and registered investment advisory
services shall be performed pursuant to a separate agreement as attached in
Exhibit F which shall, upon execution, be included by reference herein.
8. Representations, Warranties and Covenants.
a. Introducing Firm's Representations. The Introducing Firm represents,
warrants, and covenants as follows:
i. the Introducing Firm is a member in good standing of the National
Association of Securities Dealers, Inc.;
ii. the Introducing Firm is duly registered or licensed and is in good standing
as a broker/dealer under all applicable laws and regulations;
iii. the Introducing Firm has all the requisite authority in conformity with all
applicable laws and regulations to enter into this Agreement and to retain
the services of the Clearing Agent in accordance with the terms hereof;
iv. the Introducing Firm is in substantial compliance with: (A) the capital and
financial reporting requirements of every securities exchange and/or
securities association of which the Introducing Firm is a member; (B) the
capital requirements of the Securities and Exchange Commission; and (C) the
capital requirements of every state in which the Introducing Firm is
licensed as a broker/dealer;
v. the Introducing Firm has minimum net capital in an amount no less than the
greater of 130% of the net capital requirements of Rule 15c3-1 or
$50,000.00;
vi. the Introducing Firm has completed the requirements imposed by Rule
382(e)(1) in that it has provided written notice to the Clearing Agent of
those specific reports offered by the Clearing Agent that the Introducing
Firm requires to supervise and monitor Introduced Accounts; and
vii. the Introducing Firm has complied with the requirements of Rule 382(f) by
maintaining and enforcing supervisory procedures to the satisfaction of the
Clearing Agent with respect to the issuance of negotiable instruments to
Introduced Accounts, for which the Clearing Agent is the maker or drawer.
b. Clearing Agent's Representations. The Clearing Agent represents,
warrants, and covenants as follows:
i. the Clearing Agent is a member in good standing of the New York
Stock Exchange, Inc. and the National Association of Securities Dealers
Regulation, Inc., and is duly registered as a broker/dealer under the
Exchange Act and the rules and regulations of the Securities and Exchange
Commission and the various states thereunder;
ii. the Clearing Agent has all the requisite authority, in conformity
with all applicable laws and regulations, to enter into and perform this
Agreement;
iii. the Clearing Agent is in substantial compliance with (A) the
capital and financial reporting requirements of every securities exchange
or association of which it is a member, (B) the capital requirements of the
Securities and Exchange Commission, and (C) the capital requirements of
every state in which it is licensed as a broker/dealer; and
iv. the Clearing Agent has completed the requirements imposed by Rule
382(e)(1) in that it has provided the Introducing Firm with a list of all
reports made available by the Clearing Agent to assist the Introducing Firm
to supervise and monitor its Introduced Accounts in order for the
Introducing Firm to carry out its functions and responsibilities pursuant
to this Agreement.
9. Compensation, Charges and Credits.
a. Customer Charges. The Clearing Agent shall charge to and collect from
each Introduced Account the charge which the Introducing Firm directs it to make
for each transaction. If specific instructions are not received with respect to
a specific transaction in the time period required by the Clearing Agent to
implement same, the Clearing Agent shall charge the Introduced Account the
amount prescribed in the Introducing Firm's basic rate schedule as then in
effect. The basic schedule may be amended from time to time by written
instructions from the Introducing Firm to the Clearing Agent, provided that the
proposed terms are within the usual capabilities of the Clearing Agent's data
processing and operations systems.
b. Compensation. As compensation for services provided hereunder by the
Clearing Agent, the Introducing Firm shall pay to the Clearing Agent:
i. the amounts set forth in Exhibit A hereto, as the same may
be amended from time to time by the Clearing Agent on thirty
(30) days prior written notice or from time to time by
agreement of the Introducing Firm and the Clearing Agent;
ii. the Clearing Agent's reasonable charges, as invoiced, for
the services described in Exhibit B hereto as the same may
be amended from time to time by the Clearing Agent on thirty
(30) days prior written notice or from time to time by
agreement of the Introducing firm and the Clearing Agent;
iii. an amount equal to the daily broker call rate for debit
balances in the customers' cash accounts. For the purposes
of this Agreement, the "daily broker call rate" shall mean
the call money rate published daily in The Wall Street
Journal. If the daily broker call rate is published as a
range of rates, such rate shall be the median of such range.
iv. the interest charges made with respect to debit balances in
margin Introduced Accounts in accordance with Exhibit C
hereto, as may be amended from time to time by agreement of
the Clearing Agent and the Introducing Firm, but interest
income from such Introduced Accounts shall be proprietary to
and fully retained by the Clearing Agent, subject to certain
credits provided to the Introducing Firm as set forth on
Exhibit D hereto, as may be amended from time to time by
Clearing Agent on 30 days prior written notice or from time
to time by agreement of the Clearing Agent and the
Introducing Firm; and
v. additional charges, costs and fees if applicable:
(1) Returned Deliveries. In the event that any
Introduced Account or its agent (including but
not otherwise limited to its custodian bank)
rejects a valid "delivery against payment" (as
this phrase is customarily used in the
securities industry) made by the Clearing
Agent, the Clearing Agent reserves the right to
charge the Introduced Account interest, based
upon the then current brokers' call loan rate,
respecting the total payment due the Clearing
Agent from the date of such rejection until
such time as such valid delivery is accepted
and payment received therefore. Any interest
charged pursuant to this provision may be
deducted by the Clearing Agent from net
commission revenues then due and owing the
Introducing Firm pursuant to the provisions of
this Agreement. The Introducing Firm agrees
that all COD clients and/or their agents will
use the facilities of a securities depository
for the confirmation, acknowledgment and book
entry settlement of all depository eligible
transactions, subject to the exceptions set
forth under Rule 387(a)(5) of the Rules;
(2) Custodial Fee. The Clearing Agent may charge a
custodial fee in respect of any inactive
Introduced Account that maintains a fully paid
for security position. Inactivity is defined as
the absence of a bona fide security transaction
during any calendar year.
c. Credits. The Clearing Agent shall give the Introducing Firm a credit for
free credit balances in Customer cash accounts in excess of $1,000 as set forth
in Exhibit D hereto, as the same may be amended from time to time by the
Clearing Agent on thirty (30) days prior written notice or from time to time by
agreement of the Introducing Firm and the Clearing Agent.
d. Additional Charges. The charges set forth herein notwithstanding,
additional reasonable charges for specific services rendered may be charged to
the Introducing Firm upon proper prior notification by the Clearing Agent to the
Introducing Firm which are not otherwise covered by this Agreement.
e. Payments. Payment of commission revenue due the Introducing Firm shall
be made by the Clearing Agent to the Introducing Firm twice a month. The
mid-month payment will be based on trade activity to date of payment. The end-of
month payment, to be paid by the seventh business day of the next following
month, shall be an adjusted amount after deduction of all clearing and other
charges, costs and expenses due the Clearing Agent in accordance with the terms
of the Agreement and all amounts due and owing the Clearing Agent by the
Introducing Firm arising from any losses, liabilities or damages in accordance
with the terms of the Agreement which are not in dispute. Such end-of month
payment shall be accompanied by a settlement statement which will reflect the
deduction of all clearing and other charges, costs or expenses due the Clearing
Agent in accordance with the terms of the Agreement and all amounts due and
owing the Clearing Agent by the Introducing Firm arising from any losses,
liabilities or damages in accordance with the terms of this Agreement which are
not in dispute.
f. Cash Payments to Introducing Firm. The amounts of and methodology
regarding cash payments by the Clearing Agent to the Introducing Firm will be
detailed in the Financial Venture Agreement between the Clearing Agent and the
Introducing Firm, attached hereto as Exhibit E and the terms of which shall be
incorporated into the body of this Agreement as if fully set forth herein at
length.
10. Conversions.
The following provisions shall apply to the Introducing Firm in the event
the Introducing Firm is converting Introduced Accounts maintained with another
broker/dealer:
a. Accounts Not Converted. As of the effective date of this Agreement the
Clearing Agent will not convert to its records as Introduced Accounts those
customer accounts of the Introducing Firm which are partially or totally
unsecured; have securities in the name of the Introducing Firm's customers; or
have legal transfer securities (securities in the name of estates, trust, joint
ownership, foreign ownership and such).
b. Open Orders. The Clearing Agent shall have the power to place open
orders as instructed by the Introducing Firm as of the effective date of this
Agreement, and appropriate adjustments shall be made by the Clearing Agent to
reflect that the Clearing Agent has acted as broker on the open orders with
specialists on any securities exchange.
c. Adjustments - Dividends. The Clearing Agent shall have the power to
effect appropriate adjustments with respect to pending dividends and other
distributions from the effective date of this Agreement through the last payable
date of such pending dividends.
d. Adjustments - Other. The Clearing Agent shall have the power to allocate
and make appropriate adjustments for fails, reorganization accounts, other work
in process accounts, and overages relating to accounts of the customers of the
Introducing Firm that have become Introduced Accounts pursuant to the terms of
this Agreement.
e. Assumption of Liability. The Introducing Firm shall assume all
liabilities in connection with uncompared principal trades. The Introducing Firm
shall also assume all liabilities in connection with the bad debts of all
Introduced Accounts. Unsecured debits in the Introduced Accounts shall be paid
within 30 days of their origin date, and it shall be the responsibility of the
Introducing Firm to collect such payments from its customers and transmit them
to the Clearing Agent within such 30-day period. If any unsecured debit balances
remain outstanding beyond such 30-day period, the Clearing Agent is authorized
to apply as payment of such debit balances commission fees owed to the
Introducing Firm in connection with transactions pursuant to this Agreement.
f. Activity Before Conversion. Introducing Firm shall provide specific
written notice to Clearing Agent conversion team of any transfers of securities
relating to Introduced Accounts effected during the period commencing ten
business days prior to the conversion date.
11. Termination of Agreement; Events of Default; Remedies
a. Term. The term of this Agreement shall be for an initial period of ten
years commencing on May 8, 2000 (the "Commencement Date") and continuing until
the close of business on May 8, 2010 (the "Termination Date"). At no time during
the initial term of this Agreement shall either Introducing Firm or Clearing
Agent cancel this Agreement except for an Event of Default. During any renewal
term, either party hereto may cancel this Agreement without cause on ninety (90)
days prior written notice to the other party. Notwithstanding the foregoing,
Introducing Firm must provide written notice no later than ninety (90) days
prior to Termination Date if it intends not to renew this Agreement. Failure to
do so will result in this Agreement being renewed for an additional one year
period.
b. Events of Default. Each of the following events shall constitute an
event of default (an "Event of Default") under this Agreement:
i. Compliance with Agreement,. Either the Clearing Agent or the
Introducing Firm shall fail to perform, undertake, observe
or comply with any term, covenant, responsibility or
condition to be performed, undertaken, observed or complied
with by it hereunder, or any representation or warranty made
by either the Clearing Agent or the Introducing Firm herein
shall prove to be false or misleading in any material
respect and such failure or misrepresentation, if curable,
shall continue unremedied for a period of 30 days after
written notice from the non-defaulting party is transmitted
to the defaulting party specifying the failure or
misrepresentation and demanding that the same be remedied;
or
ii. Bankruptcy. A receiver, liquidator or trustee of either the
Clearing Agent or the Introducing Firm, or of any property
held by either party, is appointed by court order and such
order remains in effect for more than 30 days; or either the
Clearing Agent or the Introducing Firm is adjudicated
bankrupt or insolvent; or any of its property is sequestered
by court order and such order remains in effect for more
than 30 days; or a petition is filed against either the
Clearing Agent or the Introducing Firm under any bankruptcy,
reorganization, arrangement, insolvency, readjustment of
debt, dissolution or liquidation law of any jurisdiction,
whether now or hereafter in effect, and is not dismissed
within 30 days after such filing; or
iii. Creditor Relief. Either the Clearing Agent or the
Introducing Firm files a petition in voluntary bankruptcy or
seeking relief under any provisions of any bankruptcy,
reorganization, arrangement, insolvency, readjustment of
debt, dissolution or liquidation law of any jurisdiction,
whether now or hereafter in effect, or consents to the
filing of any petition against it under any such law;
iv. Insolvency. Either the Clearing Agent or the Introducing
Firm 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 the Clearing
Agent or the Introducing Firm, or of any property held by
either party;
v. False Representation. The Introducing Firm in any way
attempts to hold itself out as, advertise or in any way
represents that it is the agent of the Clearing Agent; or
vi. Failure to Comply with Financial Agreement. Either
Introducing Firm or Clearing Agent fails to comply with the
terms of the Financial Agreement.
Upon the occurrence of any such Event of Default, the
non-defaulting party may, at its option, by notice to the
defaulting party, declare that the Agreement shall be hereby
terminated and such termination shall be effective as of the
date such notice has been sent or communicated to the
defaulting party.
c. Payment for Terminations by Introducing Firm. In the event that
Introducing Firm gives notice to terminate this Agreement prior
to the close of business on Termination Date, other than for an
Event of Default, as defined above, it will pay the Clearing
Agent an early termination fee as set forth Section 3(b) of the
Financial Agreement between the parties attached hereto as
Exhibit E.
The amount and methodology regarding the payment of a
termination fee by the Introducing Firm to the Clearing Agent,
including the unamortized portion of the cash payment, shall be
governed by the Financial Agreement between the Clearing Agent
and the Introducing Firm, the terms of which shall be
incorporated into the body of this Agreement as if fully set
forth herein at length.
d. Continuation of Certain Responsibilities. Termination of this
Agreement however caused shall not release the Introducing Firm
or the Clearing Agent from any liability or responsibility to
the other with respect to transactions effected prior to the
effective date of such termination, whether or not claims
relating to such transactions shall have been made before or
after such termination. If no arrangements have been made
regarding the conversion of Introduced Accounts within 30 days
after termination of this Agreement, the Clearing Agent may
maintain such accounts in its own name until process is
completed.
e. Release of Information. In the event of termination of the
Agreement, the Clearing Agent shall release to the Introducing
Firm, at the Introducing Firm's request and upon payment by the
Introducing Firm to the Clearing Agent of a reasonable charge
for conversion expenses incurred by the Clearing Agent at the
request of the Introducing Firm, all information the
Introducing Firm may reasonably require to continue servicing
such Introduced Accounts.
f. Right of Offset. In the event that the Introducing Firm's acts
or omissions result in an Event of Default, the Clearing Agent
shall offset any and all liabilities, costs or expenses due it
from the Introducing Firm which remained unpaid as of the date
of such Event of Default against the commission revenue then in
the possession of the Clearing Agent, and if insufficient then
against the Introducing Firm's $50,000.00 deposit with the
Clearing Agent. Any remaining liability shall not be
extinguished thereby.
12. Action Against Customers
a. Withholding Payment or Delivery. The Clearing Agent shall be
obligated to follow the Introducing Firm's written
instructions to withhold payment for securities sold or to
withhold delivery of securities purchased for Introduced
Accounts after the Introducing Firm makes such a request
based upon failure of an Introduced Account to pay for a
purchase of securities or upon failure of an Introduced
Account to deliver securities sold.
b. Remedial Action. The Clearing Agent reserves the right (i)
to give prior oral or written notice to the Introducing Firm
and to any Introduced Account for failure to make timely
settlement and of the Clearing Agent's intention to take
remedial action and (ii) to take such remedial action with
respect to the Introduced Account which the Clearing Agent
in its sole judgment deems necessary or appropriate.
c. Account Responsibility. In the case of all transactions
placed by the Introducing Firm on behalf of Introduced
Accounts, the Introducing Firm assumes the risk of loss
associated with Introduced Accounts' obligations to pay for
securities purchased and to deliver securities sold and for
other defaults of customers. Nothing in this Agreement shall
relieve Introduced Accounts of responsibility for their
obligations. In the event any obligation of an Introduced
Account shall not be satisfied by the Introducing Firm, the
Clearing Agent shall have the right at all times, in its
sole discretion (but shall not be obliged) to institute and
prosecute in its name, any action or proceeding against any
of the Introduced Accounts as to any controversy or claim
arising out of the Clearing Agent's transactions with the
Introducing Firm or with the Introduced Accounts, and
nothing contained in the Agreement shall be deemed or
construed to impair or prejudice such right in any way
whatsoever, nor shall the institution or prosecution of any
such action or proceeding relieve the Introducing Firm of
any liability or responsibility which the Introducing Firm
would otherwise have or have had under this Agreement. If
the Introducing Firm shall pay or satisfy an obligation of
an Introduced Account, the Introducing Firm shall be
subrogated to the rights of the Clearing Agent against such
Introduced Account.
13. Indemnification
a. Introducing Firm. The Introducing Firm shall indemnify and hold the
Clearing Agent harmless from and against any losses, claims, damages,
liabilities or expenses including without limitation those asserted by
Introduced Accounts (which shall include, but not be limited to, all costs of
defense and investigation and all reasonable attorney's fees) to which the
Clearing Agent may become subject, insofar as such losses, claims, damages,
liabilities or expenses arise out of or are based upon any of the following:
i. any breach of any representation or warranty made by the
Introducing Firm under this Agreement or any failure of the
Introducing Firm to perform, undertake, honor or comply with any of
its responsibilities or covenants under this Agreement;
ii. the negligence or willful misconduct of the Introducing Firm or
its employees in providing the services contemplated hereunder,
including the unreasonable failure to obtain relevant information from
customers as requested by the Clearing Agent or required by this
Agreement;
iii. the loss of securities or cash prior to the actual receipt by the
Clearing Agent or an appropriate national clearing organization of
such securities from the Introducing Firm or after actual receipt of
such securities by the Introducing Firm from the Clearing Agent or an
appropriate national clearing organization;
iv. failure of the Introducing Firm to collect margin from its
customers after instruction by the Clearing Agent to collect such
margin;
v. failure of the Introducing Firm to provide the Clearing Agent with
a customer's correct tax identification number or address;
vi. with respect to any Introduced Account, errors, misunderstandings,
controversies or failure of any customer to satisfy his or her
obligations, unless such losses, claims, damages, liabilities or
expenses are the result of the Clearing Agent's error, negligence or
willful misconduct;
vii. the exercise by the Introducing Firm, its officers, affiliates or
employees of discretionary authority over Introduced Accounts;
viii.any attempt of the Introducing Firm to hold itself out as,
advertise or in any way represent that it is the agent of the Clearing
Agent, or has apparent authority to act as an agent of the Clearing
Agent or agency by estoppel; or
ix. the Introducing Firm executes its own over-the-counter order or
designates the counter party and the over-the-counter dealer with whom
the Introducing Firm dealt or whom it designated fails to honor its
part of the transaction.
b. Clearing Agent. The Clearing Agent shall indemnify and hold the
Introducing Firm harmless from and against any losses, claims, damages,
liabilities or expenses including without limitation those asserted by its
Introduced Accounts (which shall include, but not be limited to, all costs of
defense and investigation and all reasonable attorney's fees) to which the
Introducing Firm may become subject, insofar as such losses, claims, damages,
liabilities or expenses arise out of or are based upon any of the following:
i. any breach of any representation or warranty made by the Clearing
Agent under this Agreement or any failure of the Clearing Agent to
perform, undertake, honor or comply with any of its responsibilities
or covenants under this Agreement;
ii. the negligence or willful misconduct of the Clearing Agent or its
employees in providing the services contemplated hereunder;
iii. the loss of securities or cash after actual receipt by the
Clearing Agent from the Introducing Firm or an appropriate national
clearing organization or prior to the actual receipt of such
securities or cash by the Introducing Firm or an appropriate national
clearing organization from the Clearing Agent; or
iv. the operation of margin accounts in a manner not in conformity
with applicable law provided that such lack of conformity is not the
result of the failure by the Introducing Firm to follow instructions
of the Clearing Agent as provided hereunder.
c. Claims - Legal Authority. To the extent any legal challenge by a
regulatory body or any other entity or individual is brought which seeks to
declare or is based in whole or in part on a claim that the Introducing Firm or
the Clearing Agent is without authority to offer or provide the services
contemplated by this Agreement to its customers or the Introduced Accounts, or
has violated or will violate any statute, regulation or other rule of law in
connection with the offering of or providing of such services, each party hereto
shall bear its own cost and expenses related hereto.
d. Notification. Promptly after receipt by an indemnified party under this
Paragraph of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Paragraph, notify the indemnifying party of the commencement thereof;
but the omission so to notify the indemnifying party will not relieve it from
any liability which it may have to any indemnified party otherwise than under
this Paragraph. In case any such action is brought against any indemnified
party, and it notified the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate in and, to the extent that it
may wish, to assume the defense thereof, subject to the provisions herein
stated, with counsel reasonably satisfactory to such indemnified party, and
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party will not be
liable to such indemnified party under this Paragraph for any legal or other
expenses subsequently incurred by such indemnified party. The indemnified party
shall have the right to employ separate counsel in any such action and to
participate in the defense thereof, but the fees and expenses of such counsel
shall not be at the expense of the indemnifying party if the indemnifying party
has assumed the defense of the action with counsel reasonably satisfactory to
the indemnified party.
e. Survival of Indemnification after Termination. The indemnification
provision in this Paragraph 13 shall remain operative and in full force and
effect, regardless of the termination of this Agreement, and shall survive any
such termination.
14. Miscellaneous.
a. Limitation of Authority. The Clearing Agent shall limit its
services pursuant to the terms of this Agreement to that of clearing
functions and the related services expressly set forth herein and the
Introducing Firm shall not hold itself out as an agent of the Clearing
Agent or any of the subsidiaries or companies controlled directly or
indirectly by or affiliated with the Clearing Agent.
b. Modification of Agreement. Except as otherwise provided herein,
this Agreement may be modified only by a writing signed by both
parties to this Agreement. Such modification shall not be deemed a
cancellation of this Agreement.
c. Regulatory Review. This Agreement may be submitted to and/or
approved by any securities exchange or other regulatory and
self-regulatory bodies vested with the authority to review and/or
approve this Agreement or any amendment or modifications hereto. In
the event any such regulatory body disapproves of any provision of
this Agreement, the parties hereto agree to bargain in good faith to
achieve the requisite approval.
d. Disputes. Any dispute, controversy or claim arising out of this
Agreement or the performance or breach hereof respecting an Introduced
Account which the parties have not been able to settle amicably shall
be settled exclusively by arbitration in accordance with the NASD Code
of Arbitration Procedure by arbitrators appointed in accordance with
such Code. Any other dispute, controversy or claim arising out of this
Agreement or the performance or breach thereof, including matters
which the parties have not been able to settle amicably, shall be
settled exclusively by litigation in the federal courts unless the
parties mutually agree to arbitration in accordance with the NASD Code
of Arbitration Procedure by arbitrators appointed in accordance with
such Code.
e. Investigation of Facts. The Clearing Agent will not be bound to
make any investigation into the facts surrounding any transaction that
it may have with the Introducing Firm on a principal or agency basis
or that the Introducing Firm may have with its Introduced Accounts or
other persons. The Clearing Agent will not be under any responsibility
for compliance by the Introducing Firm with any laws or regulations
which may be applicable to the Introducing Firm.
f. Assignment. This Agreement shall be binding upon all successors,
assigns or transferees of both parties hereto, irrespective of any
change with regard to the name of or the personnel of the Introducing
Firm or the Clearing Agent. Any assignment of the Agreement shall be
subject to the requisite review and/or approval of any regulatory or
self-regulatory agency or body whose review and/or approval must be
obtained prior to the effectiveness and validity of such assignment.
No assignment of this Agreement shall be valid unless the
non-assigning party consents to such an assignment in writing, such
consent shall not however be unreasonably withheld by either party.
Any assignment by either the Clearing Agent or the Introducing Firm to
any subsidiary that they may create or to a company affiliated with or
controlled directly or indirectly by either of them will be deemed
valid and enforceable in the absence of any consent from either party.
Neither this Agreement nor any operation hereunder is intended to be,
shall not be deemed to be, and shall not be treated as a general or
limited partnership, association or joint venture or agency
relationship between the Introducing Firm and the Clearing Agent.
g. Choice of Law. The construction and effect of every provision of
this Agreement, the rights of the parties hereunder and any questions
arising out of this Agreement, shall be subject to the statutory and
common law of the Commonwealth of Pennsylvania.
h. Headings. The headings preceding the sections hereof have been
inserted for convenience and reference only and shall not be construed
to affect the meaning, construction or effect of this Agreement.
i. Validity. If any provision or condition of this Agreement shall be
held to be invalid or unenforceable by any court, or regulatory or
self-regulatory agency or body, such invalidity or unenforceability
shall attach only to such provision or condition. The validity of the
remaining provisions and conditions shall not be affected thereby and
this Agreement shall be carried out as if any such invalid or
unenforceable provision or condition were not contained herein.
j. No Ties. This Agreement shall cover only the types of services set
forth herein and is in no way intended nor shall it be construed to
bestow upon the Introducing Firm any special treatment regarding any
other arrangements, agreements or understandings which presently exist
between the Introducing Firm and the Clearing Agent or which may
hereinafter exist. The Introducing Firm shall be under no obligation
whatsoever to deal with the Clearing Agent or any of its subsidiaries
or any companies controlled directly or indirectly by or affiliated
with the Clearing Agent, in any capacity other than as set forth in
this Agreement. Likewise, the Clearing Agent shall be under no
obligation whatsoever to deal with the Introducing Firm or any of its
affiliates in any capacity other than as set forth in this Agreement.
k. Remedies Cumulative. The enumeration herein of specific remedies
shall not be exclusive of any other remedies. Any delay or failure by
any party to this Agreement to exercise any right, power, remedy or
privilege herein contained, or now or hereafter existing under any
applicable statute or law, shall not be construed to be a waiver of
such right, power, remedy or privilege or to limit the exercise of
such right, power, remedy or privilege. No single, partial or other
exercise of any such right, power, remedy or privilege shall preclude
the further exercise thereof or the exercise of any other right, power
remedy or privilege.
l. Time is of the Essence. The parties agree that, with respect to the
time deadlines stated in this Agreement, Exhibits or documents
incorporated by reference herein, time is of the essence.
m. Exhibits. The terms and conditions of the Exhibits to this
Agreement are incorporated herein by this reference and shall
constitute part of this Agreement as if fully set forth herein.
n. Severability. In the event any one or more of the provisions of
this Agreement shall for any reason be held to be invalid, illegal or
unenforceable, the remaining provisions of this Agreement shall be
unimpaired, and the invalid, illegal or unenforceable provision shall
be replaced by a mutually acceptable provision, which, being valid,
legal and enforceable, comes closest to the intention of the parties
underlying the invalid, illegal, or unenforceable provision. If this
Agreement or any provision hereof are held to be invalid, illegal or
unenforceable under the laws of a particular state or jurisdiction, it
is the intention of the parties that all of the provisions of this
Agreement shall remain in full force and effect in all other states
and jurisdictions.
o. Force Majeure. No party shall be liable for delay or failure in
performance hereunder due to causes beyond its control, including acts
of God, fires, strikes, acts of war or intervention by any
governmental authority, and each party shall take steps to minimize
any such delay.
p. Entire Agreement. The terms and conditions stated herein constitute
the entire agreement between Clearing Agent and Introducing Firm, and
no other statements, unless specifically agreed to in writing, shall
be binding upon the parties.
q. Notices. Any notice or request required or permitted to be given
under this Agreement shall be sufficient if in writing and sent by
hand or by certified mail, in either case, return receipt requested,
to the parties at the following addresses:
As to the Introducing Firm:
▇▇. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, CFO and COO
First Montauk Securities Corp.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
Parkway ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
As to the Clearing Agent:
▇▇. ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President
Fiserv Securities, Inc.
One Commerce Square
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
With a copy to:
▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, VP, General Counsel & Secretary
Fiserv Securities, Inc.
One Commerce Square
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
▇▇. ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, General Counsel
First Montauk Securities Corp.
Parkway 109 Office Center
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
IN WITNESS WHEREOF, the parties hereto have made and executed
this Agreement at Philadelphia, Pennsylvania, as of the date first herein above
set forth.
First Montauk Securities Corp. Fiserv Securities, Inc.
By _________________________ By___________________________
Title: Title: