[COWEN LETTERHEAD]
February 13, 1997
Xx. Xxxxxxxx Xxx Xxxx, President
Xxxxx Xxxx and Shire
000 Xxxx Xxxxxx Xxx
Xxxx, XX 00000
Dear Xx. Xxxx:
Whereas, Xxxxx & Company ("Cowen") hereby enters into a Clearing Agreement
with Xxxxx Xxxx and Shire (hereinafter "Introducing Broker", "you" or "your")
and Introducing Broker and Cowen have agreed to the arrangements concerning
the clearing services to be performed as shown herein.
Therefore, from the date of this Agreement, we will execute and clear
transactions on a fully disclosed basis for public customer and proprietary
accounts introduced by you and accepted by Cowen, ("Introduced Accounts"),
upon the terms and conditions hereinafter set forth. It is agreed and
understood that all dealings between us are at all times subject to the rules
and regulations of the New York Stock Exchange, Inc. ("NYSE"), the American
Stock Exchange ("ASE"), the National Association of Securities Dealers
("NASD") and any other exchange or association of which either of us is or
may become a member, and of any governmental agencies to whose jurisdiction
either of us may be subject.
FIRST: (A) Commissions received from Introduced Accounts will be collected
by Xxxxx & Co. Cowen will deduct its clearing charge (see Appendix I attached
hereto and made a part hereof) from your gross commissions on a monthly
basis. Clearing charges shall be calculated monthly for that month's
business. The balance of such commissions, less any other charges or
deductions provided for herein, shall be paid to Introducing Broker on the
last Friday of the month.
Cowen shall bill Introducing Broker for all exchange and OCC transaction
fees relating to the handling of transactions in listed Options, Equities,
Bonds, Etc., for the accounts of Introducing Broker on the New York Stock
Exchange, the American Stock Exchange or any other exchange.
(B) Cowen reserves the right to refuse to clear trades for any reason
whatsoever between Introducing Broker and any broker as to which Cowen shall
notify the Introducing Broker. On all net transactions for which stamped
comparisons have not been received from the other broker by the third
business day following the transactions, Cowen will notify Introducing Broker
and if said transactions are not compared by settlement date they will be
handled pursuant to instructions from and for the account and risk of
Introducing Broker. In addition, Introducing Xxxxxx agrees that
all of its trading accounts will be paid in full by settlement date.
Introducing Xxxxxx agrees to assume sole responsibility for any loss incurred
by Cowen in transactions with firms with which it deals on a principal basis
giving up Cowen for clearance.
SECOND: Introducing Broker hereby represents that it is a member in good
standing of the exchanges and associations shown in this paragraph SECOND and
that its registration as a broker dealer is currently in effect. Conversely,
Cowen agrees to indemnify and hold Introducing Broker harmless from and
against losses, costs or expenses arising out of any failure of Cowen to
maintain proper registration with the Association shown below, including all
other exchanges and/or clearing organizations which Cowen is a member. You
have fulfilled all registration and other requirements of all states and the
District of Columbia to the extent that such registration and other
requirements are applicable to you. Introducing Xxxxxx agrees to indemnify
and hold Cowen harmless from and against any losses, costs or expenses
arising out of any failure of Introducing Broker to be properly registered.
You have advised us of any arrangement you have made or expect to make with
any other firm for the provision by such firm of clearing service for any of
your Customer or Firm accounts. It is understood that this agreement will be
submitted to the NYSE and will be subject to its approval under Rule 382.
Memberships: National Association of Securities Dealers, Inc.
THIRD: (A) Interest profit earned on debit balances in Introduced Accounts
will be proprietary to and fully retained by Cowen. Neither Introducing
Broker nor its customers will receive interest credit for any credit balances
which any Introduced Accounts may from time to time leave on deposit at
Cowen. Introducing Broker will be charged interest at the Cowen Base Debit
Interest Rate as defined below on any securities delivered to and paid for by
Cowen which must be redelivered by draft, require transfer, have improper
instructions or which for any reason other than Xxxxx'x negligence, require
Cowen to carry such securities, until delivery can be completed. In addition,
you will pay the interest charges on regular loans or day loans in connection
with any underwriting in which you participate as manager or syndicate
member. The "Cowen Base Debit Interest Rate" as used in this Agreement shall
mean the greater of (i) the average broker's call money rate published in the
Wall Street Journal each day or (ii) the daily average rate of interest paid
to banks by Xxxxx & Co. for broker's call loans.
(B) It is agreed that all expenses of the respective firms including
telephone and communications shall be borne by the party incurring the same
except as set forth in any and all supplements attached hereto. Cowen shall
provide to Introducing Broker at Xxxxx'x expense such forms and documents as
are currently utilized by Cowen in the handling of Introduced Accounts which
Cowen, in its
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reasonable judgment, believes will be necessary. Upon the request of the
Introducing Broker, prospectuses or disclosure documents including financial
statements shall be provided by Cowen but the cost shall be borne by
Introducing Broker.
FOURTH: Cowen will confirm all purchases and sales to Introduced Accounts
in writing with copies to you. Such confirmations shall bear our name with
the legend "By Arrangement with: Introducing Broker" or shall bear
Introducing Broker's name with the legend "Account Carried by Xxxxx &
Company". You will receive daily summaries of security transactions effected
by us for your account. Introduced Accounts will be provided with statements
of account by us at such times and with such frequency as we provide such
statements to our customers.
FIFTH: (A) It is agreed that it will be the responsibility of Introducing
Broker to obtain all necessary new account documentation required by Cowen
and to verify the information obtained from the customer upon the opening of
each Introduced Account. Xxxxx & Company's Account form will be used for this
purpose. It will be the responsibility of Introducing Broker to "know its
customers" and to be fully aware of their investment objectives and Cowen
shall have no responsibility in that respect. In accordance with Rule 405 of
the NYSE and the NASD Conduct Rules, an officer of the Introducing Broker
will approve the opening of each account, and forward any required
documentation to Xxxxx & Company on a timely basis.
Accordingly, you hereby undertake to learn the essential facts and will
make the necessary credit reference checks with respect to each Introduced
Account and a general partner or officer or other authorized employee or
appropriate securities principle of Introducing Broker will give an approval
for the opening of each account. We are authorized to make such further
inquiry or investigation as we deem necessary before accepting a new account
or continuing an account relationship. At the opening of each Introduced
Account, you shall furnish us with all personal information concerning the
account in a format necessary to input into Xxxxx'x computer system, and
within a reasonable time after the opening of margin accounts and option
accounts you shall also furnish us with executed Margin Agreements and/or
Option Agreements on our forms. However, where any account may have been
opened without Cowen having previously received a properly executed Margin
and/or Option Agreement, then or thereafter, our lack of success in
attempting to obtain the same shall not be deemed a waiver of our
requirements. In addition, upon our request, you shall furnish Cowen with any
other executed documents and/or agreements executed by your customers, on our
regularly used forms and which may be required by us in connection with our
opening, operating or maintaining the accounts of your customers. Introducing
Broker warrants that Introduced Accounts shall not be minors or come under
any prohibition referred to in Rule 407 of the NYSE.
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(B) For accounts subject to Rule 407 of the NYSE or other relevant NASD
Rules the Introducing Broker shall also be responsible for the supervision of
any Introduced Accounts which are for the employees or officers of member
organizations, selfregulatory organizations or other financial institutions.
The Introducing Broker will also be responsible for identifying these
accounts to Xxxxx & Company so that duplicate confirmations can be sent by
Xxxxx & Company to the employer.
(C) It is agreed that the Introducing Broker shall be solely responsible
for the handling and supervision of the Introduced Accounts except as may be
otherwise set forth hereunder and for furnishing of investment advice, if
any, to all Introduced Accounts.
(D) Cowen shall maintain stock records and will be responsible for all
regulatory filings other than those specifically required of introducing
firms or which specifically are required of Introducing Broker based on its
style of business or otherwise. In addition, all documentation and agreements
will be maintained on file by Cowen with Introducing Broker having access to
that documentation when requested which request shall not be unreasonably
denied. It is agreed that the Introducing Broker will maintain on file copies
of all documentation forwarded to Cowen.
SIXTH: (A) You are solely responsible for the supervisory review of any
Introduced Accounts over which your partners or employees have discretionary
authority as required by the various regulatory bodies and, regarding
discretionary orders, by Rule 408 of the NYSE or other relevant rules of the
NASD. You will furnish us with properly executed power of attorney forms for
discretionary accounts handled by you or any other third parties of
Introduced Accounts. Introducing Broker hereby agrees to indemnify and hold
Cowen harmless against all losses, costs, or expenses, including reasonable
attorneys' fees suffered or incurred by us directly or indirectly as a result
of any liabilities or claims arising from the exercise by Introducing Broker,
its partner or employees, or other third parties, of discretionary authority
over Introduced Accounts.
(B) Introducing Broker hereby warrants that any orders or instructions
given by Introducing Broker, its partners or employees, shall have been fully
and properly authorized and that the execution of such orders shall not be in
violation of the Securities Act of 1933 or the Securities Exchange Act of
1934 or any rules or regulations of any securities exchange or other
regulatory agency applicable to such transactions; and Introducing Broker
hereby agrees to indemnify and hold Cowen harmless against all losses, costs
or expenses, including reasonable attorneys' fees, suffered or incurred by us
directly or indirectly, as a result of any breach of Introducing Xxxxxx's
said warranty.
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(C) It shall be the responsibility of the Introducing Broker to review
orders of Introduced Accounts and to properly accept or reject them. The
Introducing Broker will also be responsible for the proper transmission of
all orders to Cowen through the established wire service or telephone to
Cowen, as the case may be. Cowen will be responsible for the review of these
orders for completeness only, prior to their execution, which it shall
handle. Cowen will be responsible for any errors in the execution of orders
which have been properly transmitted by the Introducing Broker. Cowen will
also be responsible for the settlement of these orders, except if failure to
settle is due to an omission on the part of the customer, in which case it
will be the responsibility of the Introducing Broker to seek performance from
the customer. Introducing Broker must notify Cowen in writing before the
close of business on the first business day after trade date of errors in
execution of any order. Xxxxx'x liability for any such errors in execution
shall expire thereafter.
SEVENTH: (A) Customer funds and securities received by the Introducing
Broker shall be promptly forwarded to Cowen for settlement and clearance
consistent with the rules of the NYSE and the NASD. Cowen shall be
responsible for the handling of tender offers, rights and warrants,
redemptions, proxy notices and the payment of dividends and interest. The
Introducing Broker shall be responsible for obtaining the necessary
documentation for the actual clearing and transfer of restricted securities
and for any cost, liability, loss or expense incurred by Cowen as a result of
the failure of such securities to clear and transfer unless such failure is
due to the act or omission of Cowen. Upon proper delivery of securities to
Cowen by the Introducing Broker, Cowen will be responsible for the transfer
of securities and will also handle the transfer of accounts upon receipt of
customer's properly executed instructions.
(B) The party having physical control over particular funds and securities
shall be responsible for their safekeeping.
EIGHTH: Introducing Broker agrees to indemnify and hold Cowen harmless
against any losses brought about by the default in payment of funds or
delivery of securities to you from any Introduced Accounts and to pay all
costs or expenses, including reasonable attorneys' fees, suffered or incurred
by us directly or indirectly in connection with any such funds or securities
due us provided the costs or expenses, including reasonable attorneys' fees
did not arise as a result of the negligence or act of admission by Cowen. You
shall be responsible for our guarantee of signatures of Introduced Accounts
except in those instances where Cowen or its employees have been grossly
negligent in the guarantee of signatures. Introducing Broker shall promptly
give Cowen written notice of commencement of litigation against Introducing
Broker involving any Introduced Account(s). Introducing Xxxxxx also agrees
to forward a copy of all written customer complaints to
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Cowen. All customer inquiries and complaints shall be initially handled by
Introducing Broker which will document the same and promptly deliver copies
thereof to Cowen. Separate customer complaint files shall be maintained by
both parties.
NINTH: In Introduced Accounts other than margin accounts you shall be
responsible for purchases for customers until actual and complete payment
therefore has been received by us, and in the case of checks representing
such payment received by us, you shall be responsible until they have been
paid and the proceeds actually received and credited to us by our bank. We
agree to use due diligence in depositing such checks promptly and shall be
responsible for the associated costs should we fail to use due diligence in
depositing such checks. You shall be responsible for sales until acceptable
deliveries to us of the securities involved; and you also agree that all
securities sold by you or your customers will be delivered to Cowen by
settlement date. In the case of failure by Introducing Broker or Introduced
Account(s) to deliver securities sold or pay for securities purchased on
settlement date, Cowen, in executing buy-ins or sell-outs, agrees to follow
the procedures of the NASD's Uniform Practice Code and to be bound by the
financial responsibility rules of the SEC. You shall arrange for timely
settlement of "delivery versus payment" transactions in accordance with NYSE
Rule 387 or such other rules and procedures as may be directed by the NYSE,
ASE, or NASD. You shall obtain your customer's agreement to accept "partial"
deliveries and to abide by other clearance agreements as may be directed by
NYSE, ASE, or the NASD.
We may, at our option, charge interest at 1% above the Cowen Base Debit
Interest Rate for late payments or deliveries. We reserve the right to give
prior oral and/or written notice to you and to any Introduced Account of a
failure to make timely settlement and our intention to take remedial action.
In the case of the purchase or sale of securities "when issued" or where
distribution or delivery is otherwise delayed in an Introduced Account other
than a margin account, you shall be responsible for the transactions until
necessary and satisfactory margin has been received by us for checks
representing such margin until they shall have been paid and the proceeds
actually received and credited to us by the bank.
TENTH: We shall not be required to endorse any "put" or "call" for any
Introduced Account unless the then condition of the account is satisfactory
to us. Introducing Broker will pay to Cowen all commissions paid to it by
option brokers on conventional options. Cowen reserves the right to refuse to
carry option positions which in its sole opinion show either undue
concentration or extraordinary risk.
ELEVENTH: In all Introduced Accounts which are margin
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accounts you shall be responsible for initial margin in the initial
transaction until such initial margin have been received by us in acceptable
form and to meet maintenance calls. We shall be responsible for the
maintenance of adequate and proper margin in any Introduced Account which is
a margin account and for compliance with Regulation T. It is understood that
customers of Introducing Broker shall be required to maintain the minimum
margin maintenance as established by Cowen. We shall review and call the
margin in Introduced Accounts with the same regularity and in the same manner
as we review and call those of our own customers. We shall endeavor to notify
you in advance of all margin calls and shall provide you with copies of all
such calls. In the event that adequate margin is not deposited in any
Introduced Account in order to bring the account up to the minimum applicable
regulatory requirements or house requirements, you will, upon our demand,
notify your customer to immediately provide us with adequate protection
either in cash or securities. In the event that satisfactory margin is not
provided within the time specified by us, we shall be at liberty to take such
action as we may in our judgement deem best. If such action is delayed by
your firm, any loss resulting from such delay shall be at your risk and
expense. We reserve the right to refuse any transaction in any Introduced
Account which is a margin account after the initial transaction when in our
opinion the past history of such Account will not justify the risk of
executing such new transaction before actual receipt of the necessary margin
therefore.
Notwithstanding the foregoing, if through the action of the SEC, a court
of competent jurisdiction or any regulatory body, trading is halted in
securities held by accounts introduced by you, the loss suffered as a result
shall be borne by the Introducing Broker.
TWELFTH: We shall have no liability to you arising out of this Agreement
or otherwise except for:
(A) Breach of the express terms of this Agreement; or
(B) Negligent, reckless, willful or intentional acts or violations of
applicable law by us.
THIRTEENTH: (A) It is mutually agreed that this agreement shall be
effective as of the date appearing on page One hereof and shall continue for
a period of one year and for additional one-year periods thereafter;
provided, however, that this agreement may be terminated at any time by
either party upon sixty (60) days written notice. This Agreement shall
terminate immediately in the event (i) you are no longer registered with the
Securities and Exchange Commission, or (ii) you cease to be a member of the
NASD, or (iii) you are suspended from membership in any national securities
exchange of which you are or hereafter become a member. In the event that
Introducing Broker terminates this Agreement and such
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termination requires a system deconversion of accounts and balances, Cowen
reserves the right to charge the Introducing Broker an applicable fee which
Introducing Xxxxxx agrees to pay. Termination of this Agreement shall not
release either of us from liability to the other as provided herein relating
to business transacted prior to such termination.
(B) You agree to deposit with us $100,000 as a Good Faith Deposit
("Deposit") . In the event the Deposit shall at any time and for any reason
consist of cash and/or securities having a value of less than the amount
specified in the immediately preceding sentence (such difference being
hereinafter referred to as the "Deposit Deficit"), you hereby grant to us,
and agree that Cowen shall have, a security interest in an amount equal to
such Deposit Deficit in any and all property belonging to you or in which you
have an interest which is held by us at any time including, but not limited
to, your trading and other proprietary accounts and any commissions or other
payments due to you from us. Cowen may deduct the following from such
Deposit: (i) claims against Introducing Broker or any of its customers which
are not resolved within three (3) days of presentment to Introducing Broker,
or (ii) any loss or expense suffered by Cowen for which it is entitled to be
indemnified under this Agreement as to which Introducing Broker has failed to
indemnify Cowen within three (3) days of being requested to do so and (iii)
any applicable fee to a system deconversion as contemplated in paragraph
THIRTEENTH (A). Cowen may also make such charges against any payments due to
Introducing Broker pursuant to Paragraph FIRST hereof. In the event any
charge is made against the Deposit, Introducing Broker shall promptly deposit
additional funds with Cowen to restore the Deposit to the original amount.
Cowen reserves the right to require an increase in the amount of the Deposit
at any time upon ten (10) days' prior written notice, provided, however, for
good cause in Xxxxx'x sole discretion, Cowen may request an increase in the
amount of the Deposit on one (1) days' prior written notice.
Cowen agrees to pay interest on the Deposit at the Cowen Base Credit
Interest Rate prorated monthly. As used in this Agreement, Cowen Base Credit
Interest Rate" shall mean Xxxxx'x daily average cost of funds derived from
(i) banks, (ii) other broker-dealers and (iii) other sources that Cowen may
from time to time and in its sole discretion include in calculating its cost
of funds.
(C) Introducing Broker shall obtain a Stockbroker's Blanket Bond or a
Financial Institution Bond (the "Bond") in an amount not less than $250,000.
The Bond shall be effective no later than the date on which Introducing
Broker effects the first trade hereunder. Within thirty (30) days of the date
hereof Introducing Broker shall provide Cowen with written evidence
acceptable to Cowen demonstrating the coverage provided thereby. Thereafter,
such evidence shall be provided on an annual basis not later than November 30
of each year.
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FOURTEENTH: Cowen and Introducing Broker hereby warrant that as of the
date of this Agreement and until any termination hereof, their net capital
shall at all times exceed the requirement of Rule 15c3-l under the Securities
Exchange Act of 1934 and the applicable requirements of the New York Stock
Exchange or the NASD. You hereby agree to provide us with a statement of
financial condition of a date within 30 days prior to the date of this
Agreement and copies of such additional financial statements as are to be
filed with regulatory bodies including but not limited to all FOCUS Reports,
at the time of filing therewith. In any event, you agree to provide us with
financial statements at least once each calendar quarter and you agree to
make available to us any additional financial information we may request.
FIFTEENTH: Errors, misunderstandings or controversies, except those
specifically otherwise covered in this Agreement, between customers and
Introducing Broker and Introducing Broker or its employees or agents, and/or
Cowen or its employees or agents, which shall not arise in whole or in part
out of the acts or omissions of Cowen or its employees or agents, shall be
the responsibility and liability of Introducing Broker and are to be adjusted
accordingly. If any such error, misunderstanding or controversy shall result
in the bringing of an action or a proceeding against Cowen, we will notify
Introducing Broker, and if Cowen so requires, Introducing Broker agrees at
its own cost and expense to defend any action or proceeding brought against
Cowen by reason thereof, or Cowen may defend such action or proceeding, but
in either event Introducing Broker shall indemnify and hold Cowen harmless
from any loss, liability, damage and expense, including attorneys' fees
(including but not limited to those incurred by Cowen in utilizing its
inhouse counsel), which Cowen may incur or sustain in connection therewith or
under any settlement thereof and Introducing Broker shall satisfy of record
any arbitration awards or final judgements rendered in such action or
proceeding. It is the intention of the parties that Cowen shall be fully
indemnified by Introducing Broker hereunder provided that Cowen shall not
have acted negligently, recklessly, or fraudulently in connection with the
matter(s) which are the subject of such action or proceeding.
SIXTEENTH: Notwithstanding anything in this Agreement to the contrary,
Cowen may refuse on prompt notice to Introducing Broker, to accept or to
effect any transaction, which, at its sole discretion, Cowen believes will be
contrary to its obligations under law or regulations thereunder, or the
regulations of the New York Stock Exchange, or any other exchange of which it
is a member, or of the NASD or which, at its sole discretion, Cowen believes
will or may subject it to undue risk or create undue concentration in any
security. Cowen may also elect in its sole discretion to refuse to carry any
particular account(s) or position(s) introduced by Introducing Broker,
whether or not Cowen has previously accepted or agreed to accept such
account(s).
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SEVENTEENTH: It is agreed and understood that any controversy arising
between us in connection with this agreement which cannot be adjusted to our
satisfaction shall be submitted to arbitration and determination only before
the New York Stock Exchange or the National Association of Securities
Dealers, Inc. as Cowen may elect. All arbitration hearings are to be
conducted in New York City.
EIGHTEENTH: Introducing Broker will send a notice to all of the
Introducing Broker's customers whose accounts are initially delivered to
Cowen, advising those customers of the existence of this agreement and our
respective reSpOnsibiliti[]5 hereunder. Thereafter, Cowen shall send a notice
to all new accounts advising them of the existence of this agreement and the
respective responsibilities hereunder.
NINETEENTH: Cowen has obtained approval of the form of this Agreement from
the NYSE under Rule 382. The parties agree to amend this Agreement in the
event the NYSE requires amendment or the duties of the parties hereto change
materially.
TWENTIETH: It is agreed that no change will be made in this Agreement
without the consent of both parties. However, rates for services to be
provided by Cowen shall be reviewed on a regular basis, with adjustments made
to reflect changes in the cost of providing such service. Any price change
shall take place only after 30 days' written notice.
TWENTY-FIRST: Introducing Broker shall be responsible for providing the
disclosure documents provided to it by Cowen to each Introduced Account when
and as required to do so by applicable law, rules or regulations. Where
additional mailings are required due to revisions of the original documents
Cowen will at its option, either (i) provide the Account Information to
Introducing Broker or (ii) handle the mailing at the expense of Introducing
Broker. Such disclosure documents shall include, without limiting the
generality of the foregoing sentence, risk disclosure documents required when
opening an option account, and credit disclosure when opening a margin
account. Introducing Xxxxxx hereby agrees to indemnify and hold Cowen
harmless from and against any and all loss, liability, damage and expense,
including attorneys' fees, which Cowen may incur or sustain as a result of
the failure of Introducing Broker to provide such documents to Introduced
Accounts.
Introducing Xxxxxx agrees that a principal of the firm is/will
become registered as a Registered Option Principal at least five days prior
to placing any option orders or otherwise engaging in any options activity.
Introducing Xxxxxx agrees that it takes full responsibility for suitability
of its customers to trade on margin or in options and for approval of its
customers to trade options in particular
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strategies, and agrees to indemnify Cowen for any failure by the Introducing
Broker to properly approve such customers or to obtain and supply accurate
and complete information with respect to such clients.
Introducing Xxxxxx agrees that prior to allowing any customer to trade in
options, the customer will previously have been supplied with the Risk
Disclosure Document "Characteristics and Risks of Standardized Options" and
that a new option account form will have been satisfactorily filled out and
approved by a Registered Option Principal of the Introducing Broker.
Introducing Broker's branches shall maintain a log of all customer option
related complaints as well as a central file at its principal office.
The Introducing Xxxxxx agrees to take full responsibility for
communications on options between itself and clients. All advertisements,
letters, research material and options strategies shall adhere to guidelines
published by the appropriate Self Regulatory Organizations.
TWENTY-SECOND: You agree that without our prior written consent, you will
not hire or engage in negotiations with a view to hiring any person who is or
within the 12 months immediately preceding your hiring or commencement of
negotiations has been employed by us. We agree that without your prior
written consent, we will not hire or enter into negotiations with a view to
hiring any person who is or within the 12 months immediately preceding our
hiring or commencement of negotiations has been employed by you.
TWENTY-THIRD: Cowen and Introducing Broker shall each make available to
the other such information and documentation concerning its operation
procedures as shall be necessary or appropriate for the performance of the
other party's obligations under the Clearing Agreement.
APPROVED: ACCEPTED AND AGREED TO:
XXXXX & COMPANY XXXXX XXXX AND SHIRE
By: COWEN INCORPORATED
GENERAL PARTNER
By: By:
----------------------- --------------------
Xxxxxxx Xxxxx Xxxxxxxx Xxx Khan
Managing Director President
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ADDENDUM
WHEREAS, Xxxxx & Company and Xxxxx Xxxx and Shire are parties to a
clearing agreement ("the Clearing Agreement") which they wish to clarify and
amend in certain respects;
NOW, THEREFORE, in consideration of the mutual promises contained herein
and other good and valuable consideration each to the other, the receipt of
which is hereby acknowledged, the parties intending to be bound, hereby agree
as follows:
Introduced Accounts
1. It shall be the responsibility of Introducing Broker to obtain all
account agreements and documentation necessary, required or appropriate for
the proper maintenance of the Introduced Accounts, including, without
limitation, Account, Margin and Option Agreements, discretionary
authorizations, corporate resolutions, trust documents, xxxxx and similar
agreements and documents. Introducing Broker shall forward the originally
signed copies of the Account, Margin and Option Agreements to Xxxxx'x New
Accounts Department. All other documentation necessary or appropriate for the
maintenance of the Introduced Accounts shall be retained by the Introducing
Broker and shall not be forwarded to Cowen unless and until a specific
request is made therefor. Introducing Broker agrees that it shall make any or
all such additional documentation available to Cowen upon Xxxxx'x reasonable
request therefor, and such agreement shall survive any termination of the
Clearing Agreement. Anything herein to the contrary notwithstanding, Cowen
reserves the right to communicate with any Introduced Account directly in
order to obtain any necessary or appropriate documentation, but exercise of
such right by Cowen shall not affect Introducing Broker's obligations
hereunder. Introducing Broker hereby agrees to indemnify and hold Cowen
harmless from and against any and all claims, costs, liabilities, losses or
expenses (including reasonable attorneys' fees and expenses) arising out of
or relating to the failure of Introducing Broker to obtain or maintain such
necessary, required or appropriate agreements and documentation.
2. Introducing Broker shall provide Cowen with such new account
information as shall be required by Cowen to fulfill its service obligations
under the Clearing Agreement. Except for accounts opened by tape-to-tape
conversion, such information shall be provided through Xxxxx'x computer
system if direct input is available to Introducing Broker. If direct input is
not so available, such information shall be provided by telephone. In either
case (but not with respect to accounts opened by tape-totape conversion),
Introducing Broker shall provide Cowen with a
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hardcopy new account form on forms provided by Cowen. Introducing Broker
shall be fully responsible for providing proper addresses for the Introduced
Accounts and agrees that Cowen may rely for all purposes on such addresses as
are provided to it by Introducing Broker.
3. It shall be the sole responsibility of Introducing Broker to determine
that all orders or instructions given with respect to any Introduced Account
have been properly authorized and are within the legal capacity of its
customer. Introducing Broker hereby agrees to indemnify and hold Cowen
harmless from and against any and all claims, costs, liabilities, losses and
expenses (including attorneys' fees and expenses) arising out of or relating
to the execution of any transactions for any Introduced Account which were
unauthorized or beyond the legal capacity of its customers.
4. It is the sole responsibility of the Introducing Broker to "know its
customers" and to properly supervise its own employees and the Introduced
Accounts. Although Cowen may prepare or possess certain surveillance records
for its own benefit or purposes which may include data relating to the
Introduced Accounts, or may prepare or possess compliance or surveillance
records for use by Introducing Broker, Introducing Broker acknowledges and
agrees that the preparation or possession of such materials or of any new
account documentation shall not place any obligation on Cowen to review any
such document nor to know its contents.
Checkwritinq Privileges
5. For the sole purpose of disbursing customer funds as directed by its
customers, Introducing Broker is hereby authorized to sign checks on bank
accounts maintained by Cowen for such purpose, provided, however, that
Introducing Broker has received specific approval from the Margin Department
for each check to be issued prior to its execution. Introducing Broker's
authority to sign such checks is limited to the amount of $250,000.00 per
check.
6. Introducing Xxxxxx agrees to indemnify and hold Cowen harmless from any
claims, costs, liabilities or expenses (including reasonable attorneys' fees
and expenses) arising out of or relating to the use of such account(s) and/or
the execution of checks drawn thereon by or on behalf of the Introducing
Broker, its officers, directors, partners, employees or agents.
Net Capital Requirements
7. Introducing Broker intends to qualify under the net capital
requirements applicable to introducing firms under Paragraph (a) (2) (iv) of
the SEC's Rule 15c3-l as amended in SEC Release No. 34-31511 (the "Release").
Cowen and Introducing Broker hereby agree and acknowledge that, as required
by the Release, and
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solely for the purposes of the Securities Investor Protection Act and the
SEC's financial responsibility rules, the Introduced Accounts are customers
of Cowen and not Introducing Broker's customers. Except as expressly provided
herein, in all respects the obligations of each of Introducing Broker and
Cowen under the Clearing Agreement with respect to the Introduced Accounts
shall be unaffected by the terms of this Paragraph. Without limiting in any
way the generality of the foregoing, the terms of this Paragraph 7 shall not
affect Introducing Broker's obligation to "know its customers" and to
supervise fully its own employees and the Introduced Accounts and the
suitability of transactions therein.
ACT Rules
8. Introducing Broker warrants and represents that it shall, at all times,
comply with all applicable requirements of the Rules of Practice and
Procedure for the Automated Confirmation Transaction Service ("ACT Rules").
9. Introducing Broker acknowledges and agrees that Cowen shall have the
right, in its sole discretion, to establish a "Gross Dollar Threshold" (as
that term is defined in the ACT Rules) ("Threshold") applicable to
Introducing Broker, and to raise or lower such Threshold at any time and
from time to time.
10. Introducing Broker agrees to indemnify and hold Cowen harmless from
and against any and all losses, errors, claims, expenses, actions and
liabilities which arise from or relate to use of the ACT Service, including
but not limited to those arising from or related to the failure of
Introducing Broker to effect transactions in accordance with any Threshold
established by Cowen and those arising from the establishment, increase or
decrease of any such Threshold, unless due to Xxxxx'x xxxxx negligence or
willful misconduct.
11. Introducing Xxxxxx acknowledges and agrees that Cowen has the right
to immediately and unilaterally terminate the Clearing Agreement in the event
that Introducing Broker exceeds the Threshold established from time to time
by Cowen under the ACT Rules.
12. Introducing Xxxxxx agrees that it will, at all times, assign to each
office where it effects or facilitates transactions through the ACT Service,
an adequate number of employees who have been trained by the NASD to enter
transactions through the ACT Service, and that adequate staffing levels will
be maintained in each such office during business hours. Introducing Broker
shall indemnify Cowen from and against any losses, expenses or damages
resulting from its failure to maintain such personnel.
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13. Introducing Broker further agrees to release and discharge Cowen from
responsibility or liability for any loss or damage, including but not limited
to any direct, incidental, special or consequential damages such as lost
profits or other economic losses ("Damages") sustained by Introducing Broker
or in any customer or house account resulting from any act or omission of
Cowen in connection with use of the ACT Service, including but not limited to
establishment or modification of a Threshold, other than Damages directly
caused by Xxxxx'x willful misconduct or fraud.
Good Faith Deposit
14. The provisions of Paragraph Thirteenth of the Clearing Agreement
notwithstanding, Cowen may, at any time and in its sole discretion, increase
Introducing Broker's good faith deposit requirement. Such increase shall be
effective upon receipt of demand from Cowen, which demand may be oral or in
writing, and Introducing Xxxxxx agrees to make such additional good faith
deposit within twenty four (24) hours of receiving such demand. Failure by
Introducing Broker to make such additional deposit within such period shall
be grounds for immediate termination of the Clearing Agreement, which
termination shall be within Xxxxx'x sole discretion.
Prime Brokerage Services
15. In the event that Introducing Broker desires to act as a prime broker
and/or executing broker, as such terms are defined in a certain letter from
the Division of Market Regulation of the Securities and Exchange Commission,
dated January 25, 1994 (the "No-Action Letter"), which established certain
requirements for the maintenance of a prime brokerage arrangement, the
provisions of paragraphs 15-19 shall establish the respective obligations and
responsibilities of Cowen and Introducing Broker.
16. All terms used in paragraphs 15-19 of this Addendum which are defined
in the No-Action Letter shall have the meaning set forth therein.
17. Introducing Xxxxxx agrees as follows:
(a) Introducing Broker shall notify Cowen in writing of each account as to
which it intends to act as a prime broker or an executing broker in a prime
brokerage arrangement (individually, an "Account", and together, the
"Accounts") . The beneficial owner of an Account shall be referred to herein
as the "Customer". Introducing Xxxxxx agrees that no transactions may be
executed for an Account unless Cowen has entered into the required agreements
with the Customer and the prime or executing broker for the Customer as
appropriate.
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(b) Introducing Broker has sole responsibility to "know its customers" and
to properly supervise its own employees and the Accounts. Introducing Broker
shall obtain necessary documents with respect to the Accounts and shall
conduct its own credit checks.
(c) If Introducing Broker acts as an executing broker, prior to effecting
a short sale for any Account, Introducing Broker shall confirm with Cowen
that securities are available for borrowing, or shall advise Cowen of any
arrangements made for such borrowing by or on behalf of the customer, and
shall otherwise comply with all applicable requirements for effecting short
sales.
(d) If Introducing Broker acts as an executing broker, in the event of any
execution error or discrepancy between a trade as executed and as recorded in
the Customer's account with the prime broker, Introducing Broker shall be
responsible for correcting or resolving such error or discrepancy by such
time on the next business day after trade date as Cowen shall reasonably
require. Introducing Broker shall indemnify and hold Cowen harmless from and
against any and all loss, liability, damage, claim or expense (including
legal fees and expenses) arising out of or relating to any such error or
discrepancy unless such error was caused by the negligent, reckless, or
fraudulent actions of Cowen.
(e) Except as may be inconsistent with the prime brokerage arrangements,
each Account shall be treated in all respects as an Introduced Account under
the Clearing Agreement.
(f) If Introducing Broker acts as a prime broker, Introducing Broker shall
indemnify and hold Cowen harmless from and against any and all loss,
liability, damage, claim or expense (including legal fees and expenses)
arising out of or relating to the performance by Cowen of Introducing
Broker's responsibilities as prime broker unless such loss, liability,
damage, claim or expense was caused by the negligent, reckless or fraudulent
actions of Cowen.
(g) In all other respects Introducing Xxxxxx agrees to act in accordance
with the requirements of the No-Action Letter.
18. Cowen agrees as follows:
(a) If Introducing Broker acts as an executing broker, Cowen will report
all necessary trade information to the prime broker for an Account pursuant
to your instructions by the morning of the next business day after trade date
or by such later time and day as shall be permitted by any agreement between
Cowen and the prime broker for an Account.
(b) If Introducing Broker acts as an executing broker, Cowen will issue
confirmations of all transactions directly to the
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Customer or the investment adviser for the Customer, as appropriate, unless
it receives written instructions from the Customer or adviser requesting that
confirmations be sent to the Customer in care of the prime broker. In the
event a transaction is disaffirmed or "DK'd" by the prime broker, Cowen will
promptly send a confirmation of the transaction directly to the Customer or
adviser, as appropriate.
(c) If Introducing Broker acts as prime broker, Cowen will perform such
obligations and responsibilities of the prime broker as are necessary or
appropriate in its capacity as clearing firm for Introducing Broker.
(d) In all other respects, Cowen agrees to act in accordance with the
requirements of the No-Action Letter.
19. Introducing Xxxxxx agrees to obtain the execution by its Customers, or
the advisers therefor, of all agreements regarding the prime brokerage
arrangements as are required by the No-Action Letter. Introducing Xxxxxx
acknowledges and agrees that Cowen and Introducing Broker are not permitted
to participate in any prime brokerage arrangement, either as prime broker or
executing broker, unless and until all required agreements have been
executed.
General
20. Except as amended hereby, the Clearing Agreement shall remain in full
force and effect. To the extent that any provision hereof is inconsistent
with any provision of the Clearing Agreement, the provisions hereof shall
control. Except where the context clearly requires otherwise, all terms used
herein shall have the same meaning as set forth in the Clearing Agreement.
21. Paragraph headings used herein are for convenience only and shall not
affect the meaning or interpretation of any provision hereof.
New York, New York
February 13, 1997
AGREED AND ACCEPTED: XXXXX & COMPANY
XXXXX XXXX AND SHIRE By: COWEN INCORPORATED
GENERAL PARTNER
By: By:
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Xxxxxxxx Xxx Khan Xxxxxxx Xxxxx
President Managing Director
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