EXHIBIT 10.2
DEALER'S OMNIBUS OPTIONS CLEARING AGREEMENT
(FIRM TRANSACTIONS)
THIS AGREEMENT, made and entered into this 12th day of April, 2000, by and
between ABN AMRO INCORPORATED ("AAI"), a New York corporation and WEB STREET
SECURITIES, INC. ("Dealer"), a Illinois corporation/partnership.
In consideration of the promises, mutual benefits, covenants and agreements
herein expressed, AAI will establish a Dealer's Omnibus Options Account
("Account") for Dealer's benefit in effecting transactions in option contracts
on a principal basis, all in accordance with the terms and conditions
hereinafter set forth:
I. REPRESENTATIONS BY DEALER
a. Dealer is a member in good standing of the National
Association of Securities Dealers, Inc. ("NASD") and the
following exchanges:
-------------------------------------------------------------
-------------------------------------------------------------
-------------------------------------------------------------
b. Dealer is registered as a Broker/Dealer under Section 15 of
the Securities Exchange Act of 1934, as amended, and is
licensed and in good standing as a Broker/Dealer under all
applicable Federal and state securities laws.
c. Dealer has all requisite authority, whether arising under
applicable Federal and state laws or the rules and regulations
of any securities exchange to which Dealer is subject, and has
taken all requisite action to enter into this Agreement and to
retain the services of AAI in accordance with the terms
hereof.
d. Dealer represents and warrants that it is in compliance, and
during the term of this Agreement shall remain in compliance,
with the capital and financial reporting requirements of every
securities exchange and securities clearing agency of which
Dealer is a member, and to the extent required, with the
capital and financial reporting requirements of the Securities
and Exchange Commission ("SEC"), the NASD and of every state
and other regulatory authority of whose jurisdiction it is
subject. A copy of any notice or report filed with any
securities exchange, the SEC, NASD, or any state setting forth
the Dealer's non-compliance with applicable capital and
financial reporting requirements shall be filed simultaneously
with AAI.
e. Dealer has received a copy of, and is familiar with, AAI's
clearing procedures and agrees to abide by such rules and
guidelines as may be in effect now and, upon written notice
thereof, in the future with respect to Dealer's Account.
f. Dealer is aware of and agrees to be bound by the rules of the
Chicago Board Options Exchange ("CBOE"), American Stock
Exchange ("AMEX"), Pacific Stock Exchange ("PCX"),
Philadelphia Stock Exchange ("PHLX"), and such other exchanges
as may commence trading in options, including, but not limited
to, rules regarding the unbundling of round lot orders to
execute such orders through an exchange automated system.
Orders eligible for execution through such automated means may
only be public customer market or marketable limit orders in
share amounts as designated by the exchange. Public customer
orders are defined as orders for an account in which a
broker/dealer does not have an interest.
g. Dealer shall promptly notify AAI and shall forthwith
discontinue effecting transactions in the Account if any of
the foregoing representations and warranties shall no longer
be true and correct in all respects.
h. Dealer agrees not to violate, either alone or in concert with
others, the position or exercise limits which may be
established from time to time pursuant to applicable exchange
rules. If any individual customer
carries reportable positions in one options class with Dealer,
Dealer shall promptly notify its designated examining
authority or appropriate exchange of such positions. If Dealer
carries a position of reportable size of aggregate options
contracts of the same class, Dealer shall promptly report to
its designated examining authority or appropriate exchange a
breakdown by customer of such positions.
i. Dealer agrees to notify AAI of any legal or regulatory actions
or proceedings which materially affect Dealer's standing as a
Broker/Dealer or its capital requirements. Dealer shall also
notify AAI if any person with significant managerial
responsibility or otherwise with significant ability to
influence the policies and actions of Dealer, whether or not
the person currently acts as a principal or a registered
representative, has a record which reflects any of the
following:
(1) any felony conviction (or a plea of guilty or
nolo contendere) or pending felony indictment, or
other institution of felony proceedings, or any
investment-related misdemeanor conviction, indictment
or institution of any investment-related proceeding.
For the purpose of this Addendum, the term
"investment-related" pertains, but is not limited to,
activities in connection with securities,
commodities, banking, insurance or real estate;.
(2) permanent bar or temporary suspension of ability
to act as a principal or registered representative or
otherwise to be associated with or performs
designated functions for a firm engaging in an
investment-related business;
(3) other disciplinary or adverse regulatory or
administrative actions taken by any governmental,
regulatory or self-regulatory body (a "Regulatory
Authority");
(4) arbitrations, administrative proceedings or civil
actions alleging violations of investment-related
statutes or regulations brought by individuals or a
Regulatory Authority not resolved in favor of the
person, including those ending in settlement;
(5) multiple customer complaints;
(6) a termination or permitted resignation after an
investigation or allegation of sales practice
problems or of violation of investment-related
statues, regulations, rules or industry standards of
conduct; or
(7) requirement that the person be subject to
heightened supervision in accordance with the
guidelines or recommendations promulgated by a
Regulatory Authority
II. REPRESENTATIONS BY AAI
a. AAI is a member in good standing of the New York Stock
Exchange ("NYSE"), AMEX, Chicago Stock Exchange ("CHX"), PHLX,
PCX, CBOE and the NASD.
b. AAI is duly registered or licensed and in good standing as a
Broker/ Dealer under applicable Federal and state securities
laws.
c. AAI has all requisite authority, whether arising under
applicable Federal and state laws or the rules and regulations
of any securities exchange to which AAI is subject, to enter
into this Agreement.
d. AAI is in compliance, and during the term of this Agreement
shall remain in compliance, with the capital and financial
reporting requirements of every securities exchange and
securities clearing agency of which it is a member, and to the
extent required, with the capital requirements of the SEC and
every state or other regulatory authority to whose
jurisdiction it is subject.
-2-
e. AAI is not a bank. Securities sold, offered or recommended by
AAI are not deposits, are not insured by the Federal Deposit
Insurance Corporation, and are not guaranteed or endorsed by
or an obligation or responsibility of AAI AMRO Bank or any
other affiliate U.S. bank or thrift institution.
III. DEFINITIONS
a. The term "securities under the control of AAI" shall mean
those securities maintained in the Account where both of the
following conditions are satisfied: (1) Dealer has instructed
AAI to maintain physical possession or control of such
securities free of any charge, lien or claim of any kind in
favor of AAI or any persons claiming through AAI; and, (2) AAI
shall, within 24 hours after receipt of instructions, inform
Dealer, in a form acceptable to both parties, that it
acknowledges such instructions. AAI shall be deemed to have
accepted such instructions for long options maintained in the
Account, other than options that are part of a qualified
spread, for which AAI has received full cash payment from
Dealer.
b. The term "qualified spread" shall mean one or more options
maintained in the Account in a short position and the same
number of options maintained in the Account in a long position
and such long options do not expire prior to the expiration of
the short options.
IV. SERVICES TO BE PERFORMED BY AAI
a. Execution of orders for the Account, but only insofar as such
orders are transmitted by Dealer and received by AAI. AAI
reserves the right, at any time, to reject any order. Such
notice to be provided according to reasonable and customary
industry practice. In the event AAI controls the routing of
any order as Executing Broker, AAI shall use its best efforts
to obtain the best price for Dealer, however, this Agreement
does not guarantee that the best price will be obtained when
compared across various markets. Unless otherwise notified in
writing, Dealer hereby grants AAI complete discretion as to
which market to route all Dealer orders and acknowledges that
such market may not be the primary market for such order.
Dealer agrees to hold AAI harmless from and against any claim
due to a difference in price when compared across different
markets.
b. Hold in one or more properly established accounts securities
under the control of AAI.
c. Settlement of contracts and transactions in options.
d. Preparation and mailing of summary trade lists to Dealer. Such
trade lists shall be provided in lieu of a confirmation
according to industry practice and custom and shall contain
the information required to be furnished on confirmations in
accordance with all applicable laws, rules and regulations.
V. SERVICES NOT TO BE PERFORMED BY AAI
a. Accounting, bookkeeping or record keeping, cashiering or other
services with respect to transactions in options or securities
unrelated to transactions in the Account.
b. Preparation of Dealer's financial statements or any analysis
thereof.
c. The making or filing of any reports, including option position
reports to the SEC, any state securities commission, any
securities exchange, securities association or other
membership to which dealer is subject.
d. Services of Dealer set forth under Paragraph VI below.
VI. SERVICES TO BE PERFORMED BY DEALER
-3-
a. Dealer shall notify AAI by 11:00 a.m. Chicago time on the
following business day if the trade list of transactions
provided by AAI under Paragraph IV above contains any
discrepancies.
b. Dealer will provide to AAI all papers required for the
operation of Dealer's account. Dealer will only place orders
for Dealer's benefit into the account and will determine all
of the facts regarding transactions effected in its account,
including but not limited to the suitability of all
transactions, the authenticity of all orders, and the
qualifications of any person holding power of attorney over
its account. Dealer agrees to maintain all necessary account
documentation to comply with Federal, state, exchange and
self-regulatory association laws, rules and regulations.
Dealer agrees to provide all documents to such agencies when
so requested.
c. Dealer shall be responsible for its compliance with all laws,
rules and regulations of all Federal, state, exchange or
securities agencies having regulatory jurisdiction over the
affairs of Dealer.
d. Upon request, Dealer shall furnish AAI promptly with a copy
of: (i) its complete annual audit report; (ii) its complete
quarterly FOCUS report; (iii) its monthly FOCUS reports upon
AAI's request; (iv) written control procedures regarding order
entry and, (v) such other regulatory or financial reports as
AAI, in its sole discretion, deems appropriate.
e. Dealer shall comply with the position limits established from
time to time by OCC, CBOE, AMEX or any other exchange on which
options may be traded.
VII. QUALIFIED SPREADS
Dealer shall not instruct AAI to carry long and short options as a
qualified spread unless all options to be included in a qualified
spread are carried for Dealer, and any instructions by Dealer to carry
options as part of a qualified spread shall be deemed to be a
representation by Dealer to AAI to such effect. AAI shall have a lien
as set forth in Paragraph XI on all long option contracts included as
part of a qualified spread (and proceeds from any sale or disposition
thereof), and such lien shall continue until: (i) the short option
contracts included in such qualified spread have been closed out in a
closing purchase transaction and Dealer has paid AAI the full purchase
price with respect to such transaction; (ii) an exercise notice has
been assigned to the short option contracts included in such qualified
spread and AAI has informed Dealer that, based on the deposit of the
underlying securities or other collateral satisfactory to AAI, AAI has
released its lien on such long option contracts; (iii) the time for the
assignment of an exercise notice to the short option contracts included
in such qualified spread has expired; or, (iv) Dealer has specifically
instructed AAI to treat such long option contracts as securities under
the control of AAI, and AAI has informed Dealer in writing that it
accepts such instruction.
VIII. MARGIN
AAI shall establish such initial or maintenance margin requirements as
it deems appropriate from time to time with respect to Dealer and may
revise or amend such requirements at any time and will provide notice
to the Dealer according to reasonable and customary industry practice.
Dealer shall comply with the Federal Reserve Board's Regulation X as a
borrower of securities credit which incorporates Regulation T and the
rules and regulations of the self-regulatory organizations having
jurisdiction over the securities and non-securities transactions
effected or held by AAI for Dealer.
IX. DEBIT BALANCE
AAI shall retain a lien upon all securities and collateral so long as
there is any debit in the Account. Debit balances shall accrue interest
on a daily basis at a rate per annum equal to one percent (1%) above
the quoted broker's current call loan rate, such rate being subject to
change, without prior notice, as the quoted broker's current call loan
rate changes. A designated delivery versus payment (DVP) account shall
not bear any interest charge.
X. MONEY OR COLLATERAL CALLS
-4-
Dealer shall satisfy money or collateral calls by 2:00 p.m. Chicago
time the next business day following issuance or notification. In the
event Dealer does not promptly satisfy such calls, AAI is authorized,
in its sole discretion and without notification to Dealer, to take any
and all steps AAI deems necessary to protect itself in connection with
option positions carried or option transactions entered for the
Account. Such steps include, but are not limited to, the right to
buy-in short or sell long positions for the Account's risk all or a
portion of the shares, options or other collateral carried by AAI for
the Account in compliance with SEC Rule 15c3-3(c)(2). The failure of
AAI to take such steps shall not be deemed acquiescence to the failure
of Dealer to satisfy money or collateral calls and shall not preclude
AAI from subsequently following any or all of the steps set forth
above. Dealer further agrees that any and all expenses or losses
incurred in this connection, including reasonable legal fees, shall be
reimbursed to AAI.
XI. SECURITIES LIEN
In the event of a default by Dealer under this Agreement, Dealer hereby
grants to AAI a lien on all securities in the Account, for all Dealer's
obligations to AAI with respect to all transactions effected through
and positions maintained in the Account and all other obligations from
Dealer to AAI arising under this Agreement. AAI is authorized, in its
discretion, for any reason whatsoever it deems necessary for AAI's
protection, to sell any or all of the securities or other property
which may be in its possession, or which AAI may be carrying for the
Account, or to purchase any securities or other property of which the
Account of Dealer may be short, or cancel any outstanding orders, to
close out the Account on behalf of Dealer. Such sale, purchase or
cancellation may be made according to AAI's judgment and may be made,
at AAI's discretion, on the exchange or other market where such
business is then usually transacted, or at public auction or at private
sale, without advertising the same and upon notice to Dealer or upon
personal representatives of Dealer according to reasonable and
customary industry practice, and AAI may purchase the whole or any part
thereof free from any right of redemption, and Dealer shall remain
liable for any deficiency.
A prior tender, demand or call of any kind from AAI, or prior notice
from AAI, of the time and place of such sale or purchase shall not be
considered a waiver of AAI's right to sell or buy any securities and/or
other property held by AAI or owed AAI by Dealer, at any time. A lack
of action on AAI's part shall not be considered a waiver of AAI's
rights under this paragraph.
XII. DEALER'S LOAN CONSENT
Dealer hereby authorizes AAI to lend and hypothecate to itself as
broker or to others any securities or other property maintained in the
Account that are not securities under the control of AAI to the extent
permitted by applicable SEC rules.
XIII. EXERCISE OF VALUABLE OPTIONS
OCC automatically exercises all equity and index options at expiration
when such options reach designated levels and establishes cut-off times
for the exercise of options. It is the responsibility of Dealer to
notify AAI of any such options they do not desire to be exercised.
Dealer shall have complete responsibility to instruct AAI to exercise
any option that does not fall within the OCC parameters or does not
have automatic execution parameters. Any profit or loss realized from
the exercise of such option by AAI will be applied to Dealer's Account.
Due to various exchange rules regarding trading halts (i.e. "circuit
breakers"), the exchange may close trading early if various conditions
exist. This may affect the closing price of securities and therefore
the exercise of options. AAI shall have no duty to notify Dealer of any
such trading halt and the exercise of options pursuant thereto. It
shall be Dealer's sole responsibility to provide AAI with the exchange
mandated contrary exercise instructions on the form provided by AAI. If
AAI for any reason does or does not exercise any option, Dealer waives
any and all claims for damage or loss which Dealer, its successors and
assigns, may have at any time against AAI arising out of the fact that
such option was or was not exercised. The authority granted AAI under
this paragraph shall not include any responsibilities with respect to
the liquidation of the underlying security if the option is exercised.
-5-
XIV. UNCOVERED OPTIONS
If Dealer writes an option contract without depositing the underlying
security promptly, Dealer agrees to honor all assignments and deliver
the underlying security to AAI during the prescribed time. If Dealer
fails to deliver the underlying security promptly, AAI is authorized to
act as Dealer's agent and buy-in such security at the then current
market price. In such event, the Account shall be debited for any loss
and AAI shall charge a fee and/or commission for this service.
XV. ALLOCATION OF ASSIGNMENT NOTICES
AAI will allocate assignment notices on a random basis, except that
assignments in excess of nine contracts may first be randomly allocated
to accounts holding short positions in excess of nine contracts, and
assignments less than ten contracts may first be randomly allocated to
accounts holding short positions less than ten contracts.
XVI. MANNER, PLACE AND TIME OF DELIVERY AND PAYMENT
Dealer agrees to deliver or accept delivery of all options in the
manner and form provided for by OCC. For all options, AAI shall
determine the place of delivery and payment procedures. AAI shall
impose deadlines of not more than one hour earlier than applicable
Exchange or OCC requirements for tendering exercise notices, making
deliveries, or any settlement activity.
XVII. COMMUNICATION
a. Dealer and AAI will mutually agree to methods of communication
and the number of access locations necessary to satisfy
Dealer. AAI shall not be responsible for any instructions or
orders which it does not receive due to malfunction of
communications equipment.
b. AAI will have discretion over the type and proper location of
communications equipment deemed necessary to render the most
efficient service to the Dealer.
c. Dealer and AAI mutually agree and consent to the recording of
telephone conversations with AAI or any of its employees or
agents, although AAI assumes no responsibility to do such or
retain such recordings. Further, Dealer waives any right to
object to the use of any such recording in any legal
proceeding between AAI and Dealer.
d. AAI and Dealer shall bear responsibility for their respective
errors, as determined in accordance with this Agreement and
the constitution and rules of the exchange on which the order
was executed, provided however, that AAI shall not be
responsible for any errors not reported prior to the opening
of the relevant contract, but not later than 11:00 a.m.
Chicago time on the following trade day.
XVIII. COMPENSATION
Dealer shall be charged fees, commissions and expenses (See Appendix).
In addition, the Account will be charged on a monthly basis any
interest in accordance with Paragraph IX.
XIX. INDEMNIFICATION
Dealer hereby agrees to indemnify, protect and hold harmless AAI from
and against all claims, demands, proceedings, suits and actions and all
liabilities, expenses and costs in connection herewith:
a. Dealer's failure to make payment for options purchased or
fails to promptly collateralize margin options sold;
-6-
b. Dealer's failure to meet any initial margin call or
maintenance call;
c. Dealer's failure to properly exercise the duties and
obligations with respect to this Agreement; or
If any action or proceeding is brought by or against either party, the
parties mutually agree to cooperate to the fullest extent possible in
the defense or prosecution of such action or proceeding.
XX. TERMINATION
This Agreement may be terminated by either party upon 48 hours written
notice by registered or certified mail, except that the lien and other
rights of AAI hereunder shall continue as long as there remain any
unsettled transactions or outstanding obligations from Dealer to AAI
with respect to the Account. AAI, in its discretion, may immediately
terminate this Agreement if any representations, warranties, duties,
responsibilities, or obligations of Dealer shall not be true or duly
performed or shall cease to become true or duly performed; provided,
however, that the failure of AAI to terminate this Agreement shall not
be deemed acquiescence in Dealer's misrepresentations or failure to
perform its duties, responsibilities or obligations and shall not
preclude AAI from subsequently terminating this Agreement. If AAI deems
it necessary to terminate this relationship for a reason other than a
violation of this Agreement, it shall allow Dealer 90 days to secure a
new correspondent relationship. Upon termination, Dealer agrees to
compensate AAI in accordance with Paragraph XI above for each transfer
or closing transaction necessary to liquidate or close the account.
The parties affirm and agree that neither the fixation of the
conversion rate of any European currency against the Euro as a single
currency, in accordance with the Treaty Establishing the European
Economic Community, as amended by the Treaty on the European Union (the
Maastricht Treaty), nor the conversion of any settlement obligations
under this agreement from any European currency into Euro will be a
reason for the early termination or revision of this Agreement or
create any liability of one party towards the other party for any
direct or consequential loss arising from any of these events.
XXI. ARBITRATION
The parties hereby consent to submit any dispute or controversy which
may arise from or relate to this Agreement to arbitration before the
NASD or an appropriate exchange. The parties further agree that such
arbitration shall be held in Chicago, Illinois unless the rules of the
NASD or an exchange require a different location.
XXII. CONSTRUCTION
This Agreement shall be construed and enforced under and in accordance
with the laws of the State of Illinois without regard to its conflict
of laws provisions. If any part, term or provision of this Agreement is
held to be illegal or in conflict with the law of any state or any
other law, the validity of the remaining portions or provisions shall
not be affected, and the rights and obligations of the parties shall be
construed and enforced as if this Agreement did not contain the
particular part, term or provisions held to be invalid.
XXIII. MISCELLANEOUS
a. The Chairman, President, Executive Vice Presidents or Senior
Vice Presidents of AAI are the only individuals authorized to
enter into this Agreement or other agreements on behalf of
AAI, or to modify any of the aforesaid agreements. Oral
statements shall under no circumstances be considered part of
the Agreement or otherwise legally binding on the parties
hereto.
b. Neither this Agreement nor the performance of the services
hereunder shall be considered to create a joint venture or
partnership between AAI and Dealer or between Dealer and other
brokers for whom AAI may perform the same or similar service.
-7-
c. For the purpose of delivery of any notice hereunder, the
addresses of the parties are set forth opposite their
respective signatures on the execution page hereof. Either
party may change its address for notice purposes by giving
written notice of the new address to the other party.
d. This Agreement shall be binding upon the parties hereto and
their respective successors and assigns, provided, however,
that no assignment of this Agreement shall be valid unless
expressly agreed to in writing by the other party or assigned
pursuant to the governing securities rules, regulations and
interpretations regarding the bulk transfer of accounts.
e. This Agreement is not intended to grant any right to, or
provide any basis for any claims by third parties.
IN WITNESS WHEREOF, the parties have hereunder affixed their hands as of the day
and year first above written.
ABN AMRO INCORPORATED By: /s/ Xxxxx X. Xxxxxxxx
000 Xxxxx XxXxxxx Xxxxxx ----------------------------------------
Xxxxxxx, Xxxxxxxx 00000 Xxxxx X. Xxxxxxxx, Senior Vice President
WEB STREET SECURITIES, INC. By: /s/ D. Xxxxxxxx Xxxxxxxxx
000 X. Xxxxxxxxx Xxxxx ----------------------------------------
11th Floor Signature
Xxxxxxx, Xxxxxxxx 00000
D. Xxxxxxxx Xxxxxxxxx,
EVP/Chief Operating Officer
----------------------------------------
Print Name and Title
-8-
Appendix A
TO OMNIBUS OPTIONS CLEARING AGREEMENT
DATED: April 12, 2000 by & between
ABN AMRO Incorporated & Web Street Securities, Inc.
Executions:
-----------
ABN AMRO Incorporated (AAI) will be compensated for all correspondent equity and
index option execution business on the American Stock Exchange, the Pacific
Exchange, the Philadelphia Stock Exchange and all equity execution business on
the Chicago Board Options Exchange at the rate of *** per contract.
ABN AMRO Incorporated (AAI) will be compensated for all correspondent index
option execution business on the Chicago Board Options Exchange at the rate of
*** per contract.
Clearance:
----------
o ABN AMRO Incorporated will be compensated for the clearance of all
option contracts at the rate of *** per contract.
o In addition to the above stated rates all exchange transaction and OCC
fees will be passed to the correspondent. (See attached copy)
o All exercise and assignment notices settled through NSCC correspondent
clearing will be billed at *** per notice regardless of size.
o All exercise and assignment notices settled via DVP/RVP will be billed
at *** per notice regardless of size.
Processing:
-----------
AAI will be compensated for all trades routed and executed through the CNESS
interface at the rate of *** per contract.
In consideration thereof AAI is to provide the following services, supplies and
facilities:
Execution Services:
-------------------
Phone Clerk (s)
Floor Support Personnel
Floor Locations and Supplies
Daily Recaps
Trade Checking
Clearing Services:
------------------
Margin Clerk (s)
Support Trade Data Reports (Daily)
- Daily Confirmations
- Position Reports
Support Trade Data Reports (Monthly)
- Monthly Statement
/s/ Xxxxx X. Xxxxxxxx Dated: 8/11/2000
-----------------------------------------------------------
Xxxxx X. Xxxxxxxx, Senior Vice President
ABN AMRO Incorporated
/s/ D. Xxxxxxxx Xxxxxxxxx Dated: 8/11/2000
-----------------------------------------------------------
Web Street Securities, Inc.
*** This information is omitted pursuant to a confidential treatment request
filed with the SEC.
