Exhibit 10.19
Pershing
FULLY DISCLOSED CLEARING AGREEMENT
OF
PERSHING DIVISION
DONALDSON, LUFKIN
& JENRETTE SECURITIES CORPORATION
THIS AGREEMENT is made and entered into
this 28th day of December 2000 by and
between the Pershing Division of Donaldson,
Lufkin & Jenrette Securities
Corporation ("Pershing"), a Delaware
Corporation, and B.C. Ziegler & Company
("Broker"), a Wisconsin Corporation.
1.0 APPROVAL
This Agreement shall be subject to approval by the New York
Stock
Exchange, Inc. ("NYSE") and by any other
self-regulatory organization vested
with the authority to review or approve it.
Pershing shall submit this
Agreement to the NYSE and Broker shall
submit the Agreement to any other such
organization from which Broker is required
to obtain approval. In the event of
disapproval, the parties shall bargain in
good faith to achieve the requisite
approval.
2.0 AGREEMENT
From the date of this Agreement until the termination of this
Agreement as provided in Paragraph 22
hereof, Pershing shall carry the
proprietary accounts of Broker and the cash
and margin accounts of the
customers of Broker introduced by Broker to
Pershing, and accepted by
Pershing, and shall clear transactions on a
fully disclosed basis for such
accounts, in the manner and to the extent
set forth in this Agreement.
3.0 ALLOCATION OF RESPONSIBILITY
3.1 Responsibilities of the
Parties.
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Pursuant to NYSE Rule 382, responsibility for compliance with
applicable laws, rules, and regulations of
the Securities and Exchange
Commission ("SEC"), the National
Association of Securities Dealers, Inc.
("NASD"), the NYSE, and any other
regulatory or self-regulatory agency or
organization (collectively the "Rules")
shall be allocated between Pershing
and Broker as set forth in this Agreement.
To the extent that a particular
function is allocated to one party under
this Agreement, the other party shall
supply that party with information in its
possession pertinent to the
performance and supervision of that
function.
Pershing Division of Donaldson, Lufkin
& Jenrette Securities Corporation
<Page>
3.2 Relationship with Customers.
---------------------------
Except as provided in Paragraph 27.11 of this Agreement, all
customers receiving services pursuant to
this Agreement shall remain customers
of Broker. Pershing shall provide services
under this Agreement to Broker only
to the extent explicitly required by
specific provisions contained in this
Agreement and shall not be responsible for
any duties or obligations not
specifically allocated to Pershing pursuant
to this Agreement. Broker shall
enter into appropriate contractual
arrangements with customers on its own
behalf, and such agreements shall make
Broker, and not Pershing, responsible
to customers for the provision of services.
Broker shall not be deemed to be
an agent of Pershing for any purpose, nor
shall Pershing be deemed to have a
fiduciary relationship with any of Broker's
customers. Broker acknowledges
that Pershing does not control the business
or operations of Broker.
4.0 REPRESENTATIONS AND WARRANTIES
4.1 Broker. Broker represents and
warrants that:
------
4.1.1 Corporation Duly Organized. Broker
is a corporation duly organized,
--------------------------
validly existing, and in good standing
under the laws of the state of its
incorporation.
4.1.2 Registration. Broker is duly
registered and in good standing as a
------------
broker-dealer with the SEC.
4.1.3 Authority to Enter Agreement.
Broker has all requisite authority,
----------------------------
whether arising under applicable federal or
state law or the rules and
regulations of any regulatory or
self-regulatory organization to which Broker
is subject, to enter into this Agreement
and to retain the services of
Pershing in accordance with the terms of
this Agreement.
4.1.4 Material Compliance with Rules and
Regulations. Broker and each of its
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employees is in material compliance with,
and during the term of this
Agreement shall remain in material
compliance with, the registration,
qualification, capital, financial
reporting, customer protection, and other
requirements of every self-regulatory
organization of which Broker is a
member, of the SEC, and of every state to
the extent that Broker or any of its
employees is subject to the jurisdiction of
that state.
4.1.5 No Pending Action, Suit,
Investigation, or Inquiry. Broker has
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disclosed to Pershing every material
action, suit, investigation, inquiry, or
proceeding (formal or informal) pending or
threatened against or affecting
Broker, any of its affiliates, or any
officer, director, or general securities
principal or financial and operations
principal of Broker, or their respective
property or assets, by or before any court
or other tribunal, any arbitrator,
any governmental authority, or any
self-regulatory organization of which any
of them is a member. Broker shall notify
Pershing promptly, of the initiation
of any such action, suit, investigation,
inquiry, or proceeding that may have
a material impact on the capital of
Broker.
4.1.6 Broker Responsibility. Broker
shall be responsible for all internal
---------------------
operations related to its business
including without limitation (i) all
accounting, bookkeeping, record-keeping,
cashiering, commodity transactions,
or any other transactions not involving
securities; or any matter not
contemplated by the Agreement; (ii)
preparation of Broker's payroll records,
financial statements, or any analysis
thereof; (iii) preparation or issuance
of checks in payment of Broker's expenses,
other
<Page 2>
than expenses incurred by Pershing on
behalf of Broker pursuant to this
Agreement; and (iv) payment of commissions
to Broker's sales personnel.
4.2 Pershing. Pershing represents and
warrants that:
--------
4.2.1 Corporation Duly Organized.
Donaldson, Lufkin & Jenrette Securities
--------------------------
Corporation ("DLJ") is a corporation duly
organized, validly existing, and in
good standing under the laws of the state
of Delaware.
4.2.2 Registration. DLJ is duly
registered and in good standing as a broker
------------
dealer with the SEC and is a member firm in
good standing of the NYSE and the
NASD.
4.2.3 Authority to Enter Agreement. DLJ
has all requisite authority, whether
----------------------------
arising under applicable federal or state
law, or the rules and regulations of
any regulatory or self-regulatory
organization to which DLJ is subject, to
enter into this Agreement and provide
services in accordance with the terms of
this Agreement.
4.2.4 Compliance with Registration.
Pershing and each of its employees is in
----------------------------
material compliance with, and during the
term of this Agreement shall remain
in material compliance with the
registration, qualification, capital,
financial reporting, customer protection,
and other requirements of every
self-regulatory organization of which
Pershing is a member, of the SEC, and
every state.
5.0 ESTABLISHING AND ACCEPTING NEW
ACCOUNTS
5.1 Acceptance of New Accounts. Broker
shall be responsible for opening and
--------------------------
approving new accounts in compliance with
the Rules.
5.1.1 Pershing reserves the right to
reject any account which the Broker may
forward to Pershing as a potential new
account. Pershing also reserves the
right to terminate any account previously
accepted by it as a new account.
5.1.2 At the time of the opening of any
new account, the Broker must obtain
sufficient information from its customer to
satisfy itself as to the identify
of its client and the source of its funds
to satisfy itself that opening the
account would not violate the provisions of
various Executive Orders and
regulations issued there under by the
Office of Foreign Assets Control (OFAC),
which enforces economic and trade sanctions
against foreign countries and
their agents, terrorism sponsoring agencies
and organizations and
international narcotics traffickers.
5.2 Maintenance of Account
Information. Pershing may rely without inquiry on
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the validity of all customer information
furnished to it by Broker. Possession
of any such documents or information,
however provided, concerning Broker's
customers does not create a duty on the
part of Pershing to review or
understand the content of those
documents.
5.3 Pershing Operations Manual. Broker
acknowledges receipt and familiarity
--------------------------
with the Pershing "Quick Reference Guide"
and "Bulletins" and agrees to
familiarize itself with any modifications
or supplements to such documents
that may be issued from time to time.
<Page 3>
6.0 SUPERVISION OF ORDERS AND
ACCOUNTS
6.1 Responsibility for Compliance.
Broker shall be solely responsible for
-----------------------------
compliance with suitability, "Know Your
Customer" rules, and other
requirements of federal and state law and
regulatory and self-regulatory rules
and regulations governing transactions and
accounts. Possession by Pershing of
surveillance records, exception reports, or
other similar data shall not
obligate Pershing to review or be aware of
their contents. Pershing shall not
be required to make any investigation into
the facts surrounding any
transaction that it may execute or clear
for Broker or any customer of Broker.
6.2 Compliance Procedures. Broker
agrees to supervise compliance with the
---------------------
Rules. Broker shall review transactions and
accounts to assure compliance with
prohibitions against manipulative practices
and insider trading and other
requirements of federal and state law and
applicable regulatory and self-
regulatory rules and regulations to which
Broker or its customer are subject.
Without limiting the above, Broker shall be
responsible for compliance with
the supervisory requirements in Section
15(b)(4) of the Securities Exchange
Act of 1934, as amended, NASD Rule 3010,
NYSE Rules 342, 351 and 431, and
similar rules adopted by any other
regulatory or self-regulatory agency or
organization, to the extent applicable.
6.3 Knowledge of Customer's Financial
Resources and Investment Objectives.
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Broker shall comply with Rule 405(1) of the
NYSE or comparable requirements of
similar rules of any other regulatory or
self-regulatory organization to which
Broker is subject. Broker shall obtain all
essential facts relating to each
customer, each cash and margin account,
each order, and each person holding a
power of attorney over any account, in
order to assess the suitability of
transactions (when required by applicable
rules), the authenticity of orders,
signatures, endorsements, certificates, or
other documentation, and the
frequency of trading. Broker warrants that,
to the best of its knowledge,
Broker will not open or maintain accounts
for persons who are minors or who
are otherwise legally incompetent and that
Broker will comply with NYSE Rule
407 and other laws, rules, or regulations
that govern the manner and
circumstances in which accounts may be
opened or transactions authorized.
6.4 Furnishing of Investment Advice.
Broker shall be solely responsible for
-------------------------------
any recommendation or advice it may offer
to its customers.
6.5 Discretionary Accounts. Broker
shall be solely responsible for obtaining
----------------------
customer approval for and supervising
discretionary accounts.
6.6 Obligations Regarding Certain
Disclosures. Broker shall make any
-----------------------------------------
disclosures and obtain any agreements from
its customers required by
applicable law or regulation, including,
without limitation, any disclosures
or agreements required for listed options,
penny stocks, or derivative
securities. In the case of listed options,
the customer shall execute option
agreements that are satisfactory to
Pershing.
7.0 EXTENSION OF CREDIT
7.1 Presumption of Cash Account.
Pershing may, but is not required to, permit
---------------------------
customers of Broker to purchase securities
on margin, but all transactions for
a customer will be deemed to be cash
transactions, and payment for those
transactions will be required in the manner
applicable to cash transactions,
unless, on or prior to settlement, Broker
has furnished Pershing with an
executed margin agreement and consent to
loan of securities.
<Page 4>
7.2 Margin Requirements. Margin
accounts introduced by Broker shall be
-------------------
subject to Pershing's margin requirements
as in effect from time to time.
Pershing reserves the right to refuse to
accept any transaction in a margin
account without the actual receipt of the
necessary margin and to impose a
higher margin requirement for a particular
account when, in Pershing's
discretion, the past history or nature of
the account or other factors or the
securities held in it warrant such action.
In all instances, Broker may
require higher margin than imposed by
Pershing for any particular account,
group of accounts, or all accounts
introduced by Broker to Pershing.
In any case where Broker requests Pershing
to extend credit upon control or
restricted securities, pursuant to Rule 144
under the Securities Act of 1933,
as amended, or otherwise; Broker shall
submit to Pershing such documentation,
agreements and information as shall be
reasonably required by Pershing to
decide to extend such credit. Any extension
of credit so approved shall be
subject to Pershing's credit policies as
shall be in effect from time to time.
7.3 Margin Maintenance and Compliance
with Regulation T and SEC
Rule
15c3-3(m).
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7.3.1 Initial Margin. Broker shall be
responsible for the initial margin
--------------
requirement for any transaction until such
initial margin has been received by
Pershing in acceptable form. Pershing shall
be responsible for notifying
Broker for any margin due in a customer's
account.
7.3.2 Margin Calls. After the initial
margin for a transaction has been
------------
received, subsequent margin calls may be
made by Pershing at its discretion.
Pershing shall calculate the maintenance
requirement and notify Broker of any
amounts due. Broker shall be responsible
for issuing the margin call to its
customer and obtaining the amount due
directly from Broker's customer. If
Broker fails to take the appropriate
action, Pershing reserves the right to
collect the amount due directly from
Broker's customer. Broker agrees to
cooperate with Pershing in complying with
and obtaining margin in response to
such calls.
7.3.3 Actions Upon Failure to Meet
Margin Calls or Deliver Securities. In the
---------------------------------------------------------------
event that satisfactory margin is not
provided within the time specified by
Pershing, or securities sold are not
delivered as required, Pershing may take
such actions as Pershing deems appropriate,
including, but not limited to,
entering orders to buy in or sell-out.
Broker shall cooperate with Pershing by
entering orders to buy-in or sell-out
securities. Compliance with a request to
withhold action shall not be deemed a
waiver by Pershing of any of its rights
under this Agreement.
7.4 Charging of Interest and
Disclosures Pursuant to Rule lOb-16. Interest
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charged with respect to debit balances in
customers' accounts shall be
determined in accordance with Schedule A
attached to this Agreement. Broker
shall send each margin customer a written
disclosure statement, in a form
acceptable to Pershing, at the time of the
opening of a margin account as
required by SEC Rule lOb-16.
7.5 Unsecured Debits or Unsecured
Short Positions. Pershing shall charge
---------------------------------------------
against the accounts of Broker an amount
equal to the value of any unsecured
debit or short position (on a "mark to
market" basis) in a customer account if
that position has not been promptly
resolved by payment or delivery. Any
remaining debit may be charged against
Broker pursuant to Paragraph 19 of this
Agreement.
<Page 5>
8.0 MAINTENANCE OF BOOKS AND RECORDS
8.1 Stock Records. Pershing shall
maintain stock records and other prescribed
-------------
books and records of all transactions
executed or cleared through it.
8.2 Regulatory Reports and Records.
Broker shall prepare, submit, and
------------------------------
maintain copies of all reports, records,
and regulatory filings required of
Broker by any entity that regulates it,
including, but not limited to, copies
of all account agreements and similar
documentation obtained pursuant to
Paragraph 5.0 of this Agreement and any
reports and records required to be
made or kept under the Currency and Foreign
Transactions Reporting Act of
1970, (the "Bank Secrecy Act"), and any
rules and regulations promulgated
pursuant thereto.
8.3 Broker's Anti-Money Laundering and
OFAC Reporting and Recordkeeping and
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Obligations. Broker recognizes that it is
obligated to comply with, among
-----------
others, the following anti-money laundering
and OFAC legal and regulatory
rules, and reporting and recordkeeping
requirements including:
8.3.1 SEC Rule 17a-8 relating to
"Financial recordkeeping and reporting of
currency and foreign transactions".
8.3.2 Rules of the self-regulatory
organizations relating to currency
reporting, suspicious activity reporting, and related
recordkeeping
requirements.
8.3.3 Applicable state reporting and
recordkeeping requirements with regard
to
certain currency transactions, transportation of currency or
monetary instruments, or reports of suspicious activity.
8.3.4 Federal, state, and international
criminal and civil prohibitions
against money laundering, including, among others, the Money
Laundering
Act
of 1986 as applicable. The federal regulations and Executive
Orders
imposed by the OFAC which prohibit, among other things, the
engagement
in
transactions with and the provision of services to certain
embargoed
foreign countries and specially designated nationals, specially
designated narcotics traffickers and other blocked parties.
8.3.5 To the extent permissible by law,
at the time of filing of any required
reports or other communication, or at such time as requested by
Pershing, Broker will provide Pershing with copies of all reports
or
other communications with regard to the introduced accounts filed
with
the
U.S. Treasury Department or any regulatory body or organization
relating to the reporting of currency transactions, the transfer
of
currency or monetary instruments into or outside of the United
States,
suspicious activity, including, but not limited to, Currency or
Monetary International Reports (CMIRs), Cash Transaction
Reports
(CTRs), and Suspicious Activity Reports (SARs), Broker also
shall
advise Pershing of all reports made to OFAC with regard to the
introduced accounts.
8.3.6 Pershing reserves the right to
make and file such reports where it
deems it appropriate for its own protection. Broker recognizes
that
when
Pershing does so, Pershing does not thereby assume any
responsibility for such services and/or relieve the Broker of
any
responsibility for such services. Furthermore, to the extent
that
Pershing is required to prepare or submit any reports or records by
any
entity that regulates it, Broker shall cooperate in providing
Pershing
with
any information needed in order to prepare such reports or
records.
<Page 6>
8.4 Audio Taping of Telephone
Conversations. Each party understands that for
---------------------------------------
quality control, dispute resolution or
other business purposes, the parties
may record some or all telephone
conversations between them. Each party hereby
consents to such recording and will inform
its employees, representatives and
agents of this practice. It is further
understood that all such conversations
are deemed to be solely for business
purposes.
9.0 RECEIPT AND DELIVERY OF FUNDS AND
SECURITIES
9.1 Receipt and Delivery of Funds and
Securities.
--------------------------------------------
9.1.1 Cashiering Functions. Pershing
shall perform cashiering functions for
--------------------
accounts introduced by Broker. These
functions shall include receipt and
delivery of securities; receipt and payment
of funds owed by or to customers;
and provision of custody for securities and
funds. Broker shall provide
Pershing with the data and documents that
are necessary or appropriate to
permit Pershing to perform its obligations
under this Paragraph, including but
not limited to copies of records
documenting receipt of customers' funds and
securities received directly by Broker.
Such data and documents must be
compatible with the requirements of
Pershing's data processing systems.
9.1.2 Purchases. Broker shall be
responsible for purchases (including
---------
transactions on a "when issued" basis) made
for customers until actual and
complete payment has been received by
Pershing. Broker shall not introduce
accounts requiring settlement on a
"delivery versus payment" or "receive
versus payment" basis unless such account
utilizes the facilities of a
securities depository or qualified vendor
as defined in NYSE Rule 387, for
all depository eligible transactions.
9.1.3 Sales. Broker shall be responsible
for sales (including those on a
-----
"when issued" basis), until Pershing has
received, in acceptable form, the
securities involved in the transaction. If
Pershing does not receive delivery
of securities in an acceptable form,
Pershing may buy-in all or part of the
securities.
9.1.4 Funds and Securities Received by
Broker. Broker shall promptly deposit
---------------------------------------
with Pershing funds or securities received
by Broker from its customers,
together with such information as may be
relevant or necessary to enable
Pershing to record such remittances and
receipts in the respective customer
accounts.
9.1.5 Failure to Settle or Pay. In the
event of a failure to timely deposit
------------------------
required funds or securities, Pershing may
take appropriate remedial action.
Without waiving or otherwise limiting its
right to take other remedial action,
Pershing may at its option charge interest
at rates as agreed in Schedule A
("Fully Disclosed Pricing Schedule") to
this Agreement. Broker may pass such
charges on to its customers but Broker
remains responsible therefore until
actually paid.
9.1.6 Check Writing Authority. Pershing
may, but is not required to,
-----------------------
authorize certain of Broker's employees to
sign checks to Broker's customers
for amounts due to, and requested by them,
with respect to their accounts.
Broker shall designate, in writing, the
names of any employees it wishes to
receive the authorization described in this
subparagraph. All checks must be
signed by two employees who have received
written authorization from Pershing.
No check or checks totaling more than
$250,000 shall be provided to any
customer by Broker on the same business
day. All expenses incurred in
connection with the issuance of checks
under the authority described in this
<Page 7>
subparagraph shall be charged to Broker.
Broker remains responsible for the
disbursement and delivery of such checks to
its customers. Any lien on the
customer's property granted by the customer
to Broker or Pershing shall extend
to any funds which may be segregated in a
separate account in connection with
the exercise of the authority described in
this subparagraph. Broker has
established, and will maintain and enforce,
supervisory procedures with
respect to the issuance of such instruments
that are satisfactory to Pershing.
9.2 Restricted and Control Stock
Requirements. Broker shall be responsible
-----------------------------------------
for determining whether any securities held
in Broker's or its customer
accounts are restricted or control
securities as defined by applicable laws,
rules, or regulations. Broker is
responsible for assuring that orders and
other transactions executed for such
securities comply with such laws, rules,
and regulations.
9.3 Corporate Action
Requests/Soliciting Dealer Agreements. Broker requests
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and authorizes Pershing to execute as
Broker's agent-in-fact any and all
Soliciting Dealer Agreements for corporate
actions involving securities or
other interests held by Broker's customers
on the books of Pershing. Pershing
agrees to provide notice of the pending
corporate action to Broker at its
designated locations. Pershing further
agrees to collect and submit corporate
action requests from Broker and submit them
to the soliciting party in
accordance with the instructions received
from the soliciting party. Pershing
agrees to use its best efforts to
communicate corporate action information to
Broker and, where applicable, Broker's
customers, but shall not be liable for
a) any delays in the communication of
corporate action information or b)
delays in the transmission of collected
corporate action requests to the
soliciting party unless caused by
Pershing's gross negligence. All fees
received from the soliciting party will be
credited to Broker. In
consideration of providing this service to
Broker, Broker agrees to indemnify
and hold harmless Pershing, its affiliates,
officers, agents and employees
from all claims, suits, investigations,
damages and defense costs (including
reasonable attorney's fees) that arise in
connection with this paragraph.
10.0 SAFEGUARDING OF FUNDS AND
SECURITIES
Except as otherwise provided in this Agreement, Pershing shall
be
responsible for the safekeeping of all
money and securities received by it
pursuant to this Agreement. However,
Pershing will not be responsible for any
funds or securities delivered by a customer
to Broker until such funds or
securities are actually received by
Pershing or deposited in bank accounts
maintained by Pershing.
11.0 CONFIRMATIONS AND STATEMENTS
11.1 Preparation and Transmission of
Confirmations and Statements. Pershing
------------------------------------------------------------
shall prepare confirmations and summary
periodic statements and shall, to the
extent required, transmit them to customers
and Broker in a timely fashion
except to the extent Broker has agreed to
transmit confirmations to customers.
Confirmations and statements shall be
prepared on forms disclosing that the
account is carried on a fully-disclosed
basis for the Broker in accordance
with applicable rules, regulations, and
interpretations. Broker will have the
ultimate regulatory responsibility for
compliance with the prospectus delivery
requirements of the Securities Act of 1933,
as amended, regardless of its
retention of a prospectus fulfillment
service to perform delivery of same.
<Page 8>
11.2 Examination and Notification of
Errors. Broker shall examine all
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confirmations, statements, and other
reports in whatever medium provided to
Broker by Pershing. Broker must notify
Pershing promptly of any error claimed
by Broker in any account.. If Broker fails
to do so, Broker shall be deemed to
have waived its right to make any claim
against Pershing with respect to such
error.
12.0 ACCEPTANCE AND EXECUTION OF
TRANSACTIONS
12.1 Responsibility to Accept or Reject
Trades. Pershing shall execute
-----------------------------------------
transactions in customers' accounts and
release or deposit money or securities
to or for accounts only upon Broker's
instructions. Pershing reserves the
right to accept written or oral transaction
orders from Broker's customers in
circumstances where it determines that
either (i) the customers are unable to
execute those transactions through Broker
(ii) or Pershing is required to do
so by applicable or relevant law.
Notwithstanding any instructions to the
contrary, Pershing may, after notifying
Broker orally or in writing; (i)
refuse to confirm a transaction or cancel a
confirmation, (ii) reject a
delivery or receipt of securities or money;
(iii) refuse to clear a trade
executed by Broker; or (iv) refuse to
execute a trade for the account of a
customer or Broker.
12.2 Responsibility for Errors in
Execution. Broker shall be responsible for
--------------------------------------
transmission to Pershing of all orders and
for any errors in the Broker's
recording or transmission of such orders.
Pershing shall be responsible for
any errors it might make in the further
transmission and execution of such
orders after their receipt, in proper and
complete form, from Broker.
13.0 OTHER OBLIGATIONS AND
RESPONSIBILITIES OF BROKER
13.1 Other Clearing Agreements. During
the term of this Agreement, Broker
-------------------------
shall not enter into any other similar
agreement or obtain the services
contemplated by this Agreement from any
other party or supply the services
contemplated by the Agreement without prior
written consent of Pershing.
13.2 Disciplinary Action, Suspension,
or Restriction. If Broker or any of its
-----------------------------------------------
affiliates, or any officer, director, or
general securities principal or
financial and operational principal of
Broker, becomes subject to disciplinary
action, suspension, or restriction by a
federal or state agency, stock
exchange, or regulatory or self-regulatory
organization having jurisdiction
over Broker or Broker's securities or
commodities business, Broker shall give
notice to Pershing immediately, orally and
in writing, and provide Pershing a
copy of any decision relating to such
action, suspension, or restriction.
Pershing may take any action it reasonably
deems to be necessary (i) to assure
that it will continue to comply with all
applicable legal, regulatory, and
self-regulatory requirements,
notwithstanding such action, suspension, or
restriction; and (ii) to comply with any
requests, directives, or demands made
upon Pershing by any such federal or state
agency, stock exchange, or
regulatory or self-regulatory
organization.
13.3 Provision of Financial
Information. Broker shall furnish Pershing copies
----------------------------------
of FOCUS Reports, financial statements for
the current fiscal year, the
executed Forms X- 1 7a-5 (Parts I and IIA)
filed with the SEC, any amendments
to Broker's Form BD, and any other
regulatory or financial reports Pershing
may from time to time require. Broker shall
provide such reports to Pershing
at the time Broker files such reports with
its primary examining authority.
Broker shall also notify Pershing in
advance of withdrawals of more than 20
percent of its net capital.
<Page 9>
13.4 Executing Brokers. If Broker
wishes to act as an "Executing Broker" as
-----------------
such term is understood in that certain
letter dated January 25, 1994, from
the Division of Market Regulation of the
Securities and Exchange Commission,
as the same may be amended, modified or
supplemented from time to time (the
"No-Action Letter"), then all terms herein
shall have the same meaning as
ascribed thereto either in the Agreement or
in the No-Action Letter as the
sense thereof shall require. Broker may,
from time to time, execute trades
(either directly or through Pershing) for
Prime Brokerage Accounts in
compliance with the requirements of the
No-Action Letter. (The No-Action
Letter requires, inter alia, that a
contract be executed between Pershing and
Prime Broker, and between Broker and Prime
Brokerage Customer prior to the
transaction of any business hereunder.)
Broker shall promptly notify Pershing,
but in no event later than 5:00 p.m. New
York time, of trade date in a
mutually acceptable fashion, of such trades
in sufficient detail for Pershing
to be able to report and transfer any trade
executed by Broker on behalf of a
Prime Brokerage Account to the relevant
Prime Broker. Broker understands and
agrees that if Prime Broker shall disaffirm
or "dk" any trade executed by
Broker on behalf of a Prime Brokerage
Account; Broker shall open an account
for such Prime Brokerage Account in its
range of accounts and shall transfer
or deliver the trade to such account at the
risk and expense of Broker to the
same extent as for any account introduced
by Broker pursuant to this
Agreement. Broker understands and agrees
that all Prime Brokerage Accounts
shall be conducted in accordance with the
requirements of the No-Action Letter
and any relevant agreement between Broker
and a Prime Brokerage Customer or
between Pershing and relevant Prime Broker.
Broker further agrees to supply
Pershing with such documents, papers and
things, which from time to time are
reasonably required by Pershing to carry
out the intention of this Paragraph.
Broker agrees that it shall know its
customer, obtain appropriate
documentation, including new account form,
conduct its own credit check and
determine the availability of shares as
required for processing of any short
sales. Broker shall maintain facilities to
clear any disaffirmed trades.
13.5 Protection of Intellectual
Property. Broker shall use all reasonable
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efforts to preserve and protect Pershing's
and its affiliates' patent, trade
secret, copyright and other proprietary
rights in Pershing's or its
affiliates' products, services, trademarks
and tradenames, at least to the
same extent used by Broker to preserve and
protect its own proprietary data or
information and to notify Pershing of any
action by any third party known by
Broker to constitute an infringement of
Pershing's or any of its affiliates'
proprietary
