SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
______________________
FORM 8-K
______________________
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: June 1, 1999
________________________
JWGenesis Financial Corp.
------------------------------------------------
(Exact name of Registrant as Specified in Charter)
Florida 001-14205 65-0811010
------- --------- ----------
(State or other (Commission File (IRS Employer
Jurisdiction of Number) Identification No.)
Incorporation or
Organization)
980 North Federal Highway, Suite 210
Boca Raton, Florida 33432
---------------------------------------- -----
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code:(561) 338-2600
Not Applicable
----------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On June 1, 1999, JWGenesis Financial Corp. (the "Company") consummated
the previously announced sale of its subsidiary JWGenesis Clearing Corp.,
an Iowa corporation ("JWG Clearing"), pursuant to the Stock Purchase Agreement
dated April 16, 1999 (the "Agreement") with Fiserv, Inc. ("Fiserv") and its
wholly owned subsidiary Fiserv Clearing, Inc. ("Fiserv Clearing"). The Company
received $59 million in cash for the sale. The Company realized approximately
$25 million of pre-tax gain on the sale and will record on its books an
additional $15 million of deferred pre-tax gain that will be recognized over
the ten-year period described in the next paragraph. JWG Clearing functioned
primarily as the Company's securities clearing, execution, and back office
services unit, and only those operations comprised JWG Clearing at the time
the sale was consummated. All other activities previously conducted by JWG
Clearing were transferred to other operating subsidiaries of the Company
before the sale.
In connection with the sale, (i) the Company and its subsidiary JW
Genesis Financial Services, Inc. ("JWFGS") entered into a Transition
Services Agreement pursuant to which they will continue to provide certain
assistance and services to JWG Clearing and Fiserv Clearing, and will permit
JWG Clearing and Fiserv Clearing to use certain facilities during a
transition period for a monthly fee approximating the Company's costs; (ii)
the Company and JWGFS agreed not to compete for ten years in the securities
clearing and execution business and not to solicit personnel of JWG Clearing
or Fiserv and its affiliates; and (iii) the Company and JWGFS agreed,
subject to certain limitations and exclusions (primarily related to the
Company's independent contractor registered representatives, possible future
acquisitions, and a one-year phase-in period), to use and cause their
subsidiaries and affiliates to use the clearing services of designated
Fiserv affiliates for at least 90% of their securities brokerage
transactions, and, in the case of the Company's independent contractor
registered representatives, to impose a surcharge on certain such
transactions that are not cleared through a Fiserv affiliate, during the 10-
year period following the sale. The Company and its affiliates have the
right, however, to be released from the above obligations to use Fiserv
affiliates or to impose a surcharge by repaying to Fiserv a portion of the
sales price based on a prescribed formula that takes into account the price
paid in the sale and the amount of clearing services business then being
generated by the Company or its affiliate seeking the release. In such
event, the amount of deferred gain to the Company from the sale would be
reduced.
$19 million of the sales price was based on the estimated stockholder's
equity of JWG Clearing as of May 31, 1999 and is subject to final
confirmation by the parties by July 16, 1999 and possible adjustment to that
portion of the sales price. The Company does not believe the amount of such
possible adjustment to be significant.
As a result of the sale and the above agreements, the Company ceased
providing clearing services, both to third party correspondents (such as
broker dealers, banks, and other financial institutions) and for its own
securities brokerage transactions. In deciding to proceed with the sale and
to cease providing clearing services, management concluded that for the
Company to remain competitive in the clearing services business would
require (i) large capital expenditures and resource concentration to
maintain the technology and infrastructure necessary to service the
securities clearing requirements of the more desirable clients, (ii) higher
levels of capital to satisfy increasing regulatory capital requirements
resulting from margin transactions in certain securities that experience
rapid increases in trading prices, and (iii) a significant amount of
management time and other Company resources to meet the challenge of
increasing competition in the securities clearing business, including from
2
<PAGE>
<PAGE>
firms with substantially greater financial resources. In addition, the
Company's future profit margins on its clearing business would likely
decline as competitive pricing pressures increase.
While the Company's clearing services operations have been profitable
historically, management believes the sale of JWG Clearing in these
circumstances was in the long-term best interests of the Company. Not only
is the impact on the Company's future profitability from its remaining
overall operations not expected to be material beyond the near-term, but the
net proceeds from the sale provide a substantial infusion of capital that
can be used to fund expanded levels of operations in the Company's other
business units. The interim reinvestment of such net proceeds, pending
longer term capital applications, will also offset in part earnings that
might have continued to be realized from the Company's clearing service
business before the factors described above began to significantly erode
such earnings. Most importantly, however, the sale permits the Company to
focus more management time and other resources on its retail brokerage and
investment banking businesses, as well as to use the newly available capital
to pursue possible new opportunities that management believes have greater
potential to enhance value for all shareholders.
A copy of the Stock Purchase Agreement is included as Exhibit 2 to the
Company's Current Report on Form 8-K filed with the Commission on April 30,
1999 to announce the transaction, which was consummated consistent
therewith. Copies of the Transition Services Agreement and form of Fully
Disclosed Correspondent Services Agreement (the latter having been entered
into with Fiserv Correspondent Services, Inc. by four of the Company's
securities brokerage subsidiaries for the receipt of securities clearing
services from Fiserv affiliates for the next ten years) are included herewith
as Exhibits 10(a) and 10(b). Such Exhibits are incorporated by reference
into this Item 2 and the foregoing descriptions are qualified in its entirety
by reference to such Exhibits.
CERTAIN STATEMENTS INCLUDED IN THIS FORM 8-K, INCLUDING WITHOUT
LIMITATION STATEMENTS CONTAINING THE WORDS "BELIEVES," "ANTICIPATES,"
"INTENDS," "EXPECTS" AND WORDS OF SIMILAR IMPORT, CONSTITUTE "FORWARD-
LOOKING STATEMENTS" WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995. SUCH FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND
UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS THAT MAY CAUSE THE ACTUAL
RESULTS, PERFORMANCE OR ACHIEVEMENTS OF THE COMPANY TO BE MATERIALLY
DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR
IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. SUCH FACTORS INCLUDE, AMONG
OTHERS, THE FOLLOWING: THE IMPACT OF GENERAL ECONOMIC CONDITIONS ON THE
CAPITAL MARKETS; CHANGES IN OR AMENDMENTS TO REGULATORY AUTHORITIES' CAPITAL
REQUIREMENTS OR OTHER REGULATIONS APPLICABLE TO THE COMPANY OR ITS
SUBSIDIARIES; FLUCTUATIONS IN INTEREST RATES; INCREASED LEVELS OF
COMPETITION; AND OTHER FACTORS REFERRED TO IN THE COMPANY'S ANNUAL REPORT ON
FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998, UNDER "ITEM 1.
BUSINESS - CERTAIN MATTERS REGARDING FORWARD LOOKING STATEMENTS," WHICH IS
INCORPORATED HEREIN BY THIS REFERENCE. GIVEN SUCH UNCERTAINTIES, UNDUE
RELIANCE SHOULD NOT BE PLACED ON SUCH FORWARD-LOOKING STATEMENTS. THE
COMPANY DISCLAIMS ANY OBLIGATION TO UPDATE ANY SUCH FACTORS OR TO PUBLICLY
3
<PAGE>
<PAGE>
ANNOUNCE THE RESULTS OF ANY REVISIONS TO ANY OF THE FORWARD-LOOKING
STATEMENTS INCLUDED HEREIN TO REFLECT FUTURE EVENTS OR DEVELOPMENTS.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS.
(a) Not applicable.
(b) The following unaudited pro forma financial information will be
filed by amendment within 60 days after the date that this report on Form 8-K
is required to be filed:
Pro Forma Statement of Operations for the period ended December 31,
1998
Pro Forma Statement of Operations for the three months ended
March 31, 1999
Pro Forma Balance Sheet at March 31, 1999
Notes to Pro Forma Financial Information
(c) Exhibits
10(a) Transition Services Agreement, dated April 16, 1999 by and
among the Company, JWGFS, JWG Clearing, and Fiserv.
10(b) Form of Fully Disclosed Correspondent Agreement dated June 1,
1999.
Pursuant to the requirements of the Securities and Exchange Act of
1934, the Registrant has duly caused this Report to be signed on its behalf
by the undersigned hereunto duly authorized.
JWGENESIS FINANCIAL CORP.
By: /s/ Gregg S. Glaser
---------------------------------------
Gregg S. Glaser
Chief Financial Officer
Dated: June 15, 1999
4
TRANSITION SERVICES AGREEMENT
-----------------------------
This TRANSITION SERVICES AGREEMENT ("AGREEMENT") is made
this 16th day of April 1999, and is by, between and among FISERV,
INC., a Wisconsin corporation ("FISERV"), FISERV CLEARING, INC., a
Delaware corporation and a wholly owned subsidiary of Fiserv
("BUYER"), JWGENESIS FINANCIAL CORP., a Florida corporation ("JWGFC"),
JWGENESIS FINANCIAL SERVICES, INC., a Florida corporation and a wholly
owned subsidiary of JWGFC ("SELLER"), and JWGENESIS CLEARING CORP., an
Iowa corporation ("COMPANY").
WHEREAS, Fiserv, Buyer, JWGFC, Seller and the Company have
entered into that certain Stock Purchase Agreement dated as of April
16, 1999 (the "SPA"). Capitalized terms used herein and not defined
are used as defined in the SPA.
WHEREAS, pursuant to the SPA, Seller has agreed to sell to
Buyer and Buyer has agreed to purchase from Seller all of the Shares
of the Company.
WHEREAS, in order for Buyer to fully, efficiently and
effectively operate the Company immediately following the Closing
Date, it will be necessary for the Company to continue to receive
certain assistance and services, and use certain facilities,
(collectively, the "Services"), as more fully described herein, from
or through JWGFC and/or Seller, in the same manner and at the same
service quality levels as the Company received such Services on and
prior to the Closing Date.
WHEREAS, for the period beginning immediately after the
Closing and continuing until the earlier of the date on which all of
the Company's records and processing shall be transferred and/or
converted to Buyer's subsidiary Fiserv Correspondent Services, Inc.
("FCS") or September 1, 1999, or for such other period as may be
specified herein or as otherwise may be agreed in writing by the
parties, JWGFC and Seller desire and agree, jointly and severally, to
provide or cause to provide to Buyer all of the Services, and Buyer is
willing to receive such Services, upon and subject to the terms and
conditions set forth herein
NOW THEREFORE, for good and valuable consideration, and
intending to be legally bound, the parties agree as follows:
1
<PAGE>
<PAGE>
ARTICLE I
General Agreements
------------------
Section 1.01. Recitals. The Recitals set forth above are
--------
incorporated as if fully set forth herein.
Section 1.02. "Pass Through" of Costs. Whenever reference
-----------------------
is made herein to the "pass through" (or any variations of said term)
of certain allocated costs, that shall mean that said costs shall be
charged and billed at the actual cost of same as incurred under the
applicable contractual arrangements and proportionate with the agreed
allocation, with no additional mark-ups, service charges or processing
fees of any kind.
Section 1.03. Laws, Rules and Regulations. The parties
---------------------------
shall implement this Agreement in accordance with all laws, rules and
regulations applicable to the Company and to each of them.
ARTICLE II
Services Arrangements
Section 2.01. Employees, Contractors and Agents. From and
---------------------------------
after the date hereof and prior to Closing, JWGFC and Seller shall
remove from the Company's employ or service all employees, contractors
or agents other than the forty-one individuals specified in EXHIBIT
2.01 hereto (the "WORKERS"). JWGFC and Seller shall use all
commercially reasonable efforts to insure that all the Workers remain
in the Company's employ or service consistent with and to carry out
this Agreement and the SPA. Exhibit 2.01 lists the position and
compensation of each of the Workers. Upon and after Closing, all of
the Workers, plus the Company's NYSE representatives Frank Chester and
Fred Buldrini, shall become employees, contractors or agents of Buyer
or FCS.
Section 2.02. Fixed Assets and Leasehold Improvements. From
---------------------------------------
and after the date hereof and prior to Closing, JWGFC and Seller shall
remove from the Company and/or its use all fixed assets and leasehold
improvements not associated with the direct support of the Workers.
Set forth in EXHIBIT 2.02 hereto are all fixed assets and leasehold
improvements of or relating to the Company and/or the direct support
of the Workers which the Buyer will purchase pursuant to the SPA,
including the book value of each of same. In addition, from and after
the date of Closing and until of the date on which all of the
Company's records and processing shall be transferred and/or converted
to FCS, Buyer shall use (but not purchase) certain fixed assets and
leasehold improvements of JWGFC or Seller as mutually agreed; JWGFC
shall provide directly or otherwise make available the same to Buyer
and the Company, and for same Buyer shall pay to JWGFC a flat fee of
$1,512 per calendar month.
Section 2.03. Office Space. All leasing and other
------------
obligations respecting the office space used in Boca Raton, Florida as
of the date hereof by JWGFC, Seller and/or Company shall be the sole
2
<PAGE>
<PAGE>
responsibility of JWGFC. However, and as specified in EXHIBIT 2.03
hereto, a reasonable amount of square feet of said office space shall
be designated and allocated for the Company's continued operations and
the direct usage of the Workers. From and after the Closing and for
such time as Buyer uses said square feet of office space, Buyer shall
pay to JWGFC a flat monthly fee of $6,062.16 for the said allocated
square feet. Buyer shall use said square feet of office space for all
time periods during which JWGFC or any of its subsidiaries or
affiliates leases the office space used as of the date hereof by
JWGFC, Seller and/or Company. As soon as practicable following
execution of this Agreement, the parties shall mutually designate and
agree to the separate and distinct area(s) and square footage within
the said office space where, post-Closing, the physical operations of
the Company will be housed (including the physical location of the
Workers and the fixed assets and leasehold improvements referenced in
Section 2.02) and from which the business of the Company will be
carried out.
Section 2.04. Telephone and Facsimile System. All
------------------------------
obligations respecting the telephone and facsimile system used as of
the date hereof by JWGFC, Seller and/or Company shall be the sole
responsibility of JWGFC. However, from and after the Closing, and for
such time as Buyer elects to use all or part of said system, JWGFC
shall provide directly or otherwise make available the same to Buyer
and the Company. Buyer shall pay to JWGFC the "pass through" costs of
same allocated based on the direct usage of the Workers.
Section 2.05. Utilities. All obligations respecting the
---------
utilities used as of the date hereof by JWGFC, Seller and/or Company
shall be the sole responsibility of JWGFC. However, from and after
the Closing, and for such time as Buyer elects to use all or part of
office space described in Section 2.03, JWGFC shall provide directly
or otherwise make available the same to Buyer and the Company. Buyer
shall pay to JWGFC the "pass through" costs for same based on the
square footage used directly by the Workers.
Section 2.06. Quotation Services. All obligations respecting
------------------
the quotation services used as of the date hereof by JWGFC, Seller
and/or Company, including leases and quotation services, shall be the
sole responsibility of JWGFC. However, from and after the Closing,
and for such time as Buyer elects to use all or part of said services,
JWGFC shall provide directly or otherwise make available the same to
Buyer and the Company. Buyer shall pay to JWGFC the "pass through"
costs for the actual equipment (number of devices) and features as are
used directly by the Workers. Set forth in EXHIBIT 2.06 hereto are
the number and location of the quotation equipment of or relating to
the Company which will continue to be used for Company business from
and after the Closing.
Section 2.07. Information Systems and Information
-----------------------------------
Technology. From and after the Closing, and for such time as Buyer
- ----------
elects to use all or part of the information systems and information
technology systems and services currently provided by or through JWGFC
or Seller for or relating to the Company, JWGFC shall provide or
otherwise make available the same to Buyer and the Company, and Buyer
shall pay the "pass through" costs for same as are used directly by
3
<PAGE>
<PAGE>
the Workers. The said information systems and information technology
systems and services include, but are not limited to, incorporating
new correspondent requirements as well as expanding internet
capabilities as needed, and providing service concerning all present
and newly installed devices (including but not limited to voice and
data communications) used by or for the Company. JWGFC's and/or the
Company's ADP/SIS contract for or relating to the Company shall be the
sole responsibility of JWGFC. However, for the period beginning
immediately after the Closing and continuing until the end of the
month of the date on which all of the Company's records and processing
shall be transferred and/or converted to FCS, or such later time as
Buyer or FCS requests, JWGFC shall provide or otherwise make available
the same to Buyer and the Company, and Buyer shall pay the "pass
through" costs for same as are used for the Company's business.
For the Services described below in Sections 2.08, 2.09,
--------------------------------------------------------
2.10, 2.11 and 2.12, Buyer shall pay to JWGFC a flat fee of $230,000
- --------------------------------------------------------------------
per calendar month.
- ------------------
Section 2.08. Operations. From and after the Closing, and
----------
for such time as Buyer elects to use the operations, securities
handling, dividends, reorganizations, ACAT, mail room and back office
services currently provided by or through JWGFC or Seller for or
relating to the Company, JWGFC shall provide directly or otherwise
make available the same to Buyer and the Company. The said cash
management services include, but are not limited to, receipt and
delivery of securities and the handling of cash instruments to and
from clients, banks and depositaries. With respect to mail room and
related services, Buyer shall cause the Company, at such times as are
reasonable to implement this Agreement and the SPA, to acquire (by
lease or purchase) and use such mail systems and post office boxes as
may be necessary to operate the Company as a separate and independent
business.
Section 2.09. Regulatory Reporting; Preparation of Financial
----------------------------------------------
and Tax Statements, and Reports. From and after the Closing, and for
- -------------------------------
such time as Buyer elects to use the regulatory reporting, financial
statement, tax, ledger, register, log, blotter, reporting and working
paper preparation and related services currently provided by or
through JWGFC or Seller for or relating to the Company, JWGFC shall
provide directly or otherwise make available the same to Buyer and the
Company.
Section 2.10. Execution Services. From and after the
------------------
Closing, and for such time as Buyer elects to use the execution and
trading desk services (including listed, agency OTC and NASDAQ
transactions, equities and options block trading, and related clerical
functions) currently provided by or through JWGFC or Seller for or
relating to the Company, JWGFC shall provide directly or otherwise
make available the same to Buyer and the Company.
Section 2.11. Securities Compliance. From and after the
---------------------
Closing, and for such time as Buyer elects to use the securities
compliance services currently provided by or through JWGFC or Seller
for or relating to the Company, JWGFC shall provide directly or otherwise
4
<PAGE>
<PAGE>
make available the same to Buyer and the Company. The said securities
compliance services include, but are not limited to:
receiving, acknowledging and recommending to Buyer and the Company
responses to customer complaints; receiving, processing and
recommending to Buyer and the Company responses to regulatory reviews
and inquiries; processing restricted and other Rule 144 certificates;
preparing and filing all registrations and applications required for
the Company to conduct its business; enforcing and implementing the
Company's present policies and procedures; consistent with present
policies and procedures; and providing standard risk management
reports for Buyer's and/or FCS's review. It is understood and agreed,
however, that Buyer and the Company shall be responsible for all
compliance-related decisions made by Buyer and/or the Company, whether
in response to recommendations made pursuant to this Section 2.10 or
otherwise.
Section 2.12. Warehouse Facilities. From and after the
--------------------
Closing, and for such time as Buyer elects to use the warehouse
facilities currently used by JWGFC, Seller or the Company, JWGFC shall
continue to staff, support and provide such facilities to store and
retain, per regulatory retention rules, and make available for
reasonable access and retrieval, all documents and records of or
relating to the Company. JWGFC shall provide to Fiserv and Buyer at
least six months prior written notice before the termination or
material alteration of any arrangements respecting said warehouse
facilities. The parties shall cooperate in good faith and take
reasonable actions concerning the proper handling of both past and
future documents and records of or relating to the Company.
Section 2.13. Standard of Performance. JWGFC shall perform
-----------------------
or cause the performance of all of the Services competently,
accurately, timely and professionally, and in compliance with all
applicable laws, rules, regulations and orders, at all times of a
quality level consistent with same as performed and provided
previously.
Section 2.14. Billing and Payment. JWGFC shall invoice
-------------------
Buyer monthly in arrears for the Services provided hereunder. Such
invoices shall set forth such detail as reasonably requested by Buyer.
Buyer shall pay the undisputed portion of such invoices within 30 days
of receipt thereof. Buyer and JWGFC shall work diligently to resolve
promptly (within no more than five business days) any disputed portion
of such invoices.
Section 2.15. Audit. For purposes of implementing this
-----
Agreement, Fiserv and Buyer (themselves or via their authorized
representatives) shall have the right, at reasonable times and upon
reasonable notice, to review and audit the books, records, documents
and accounts of the other parties relating to the Services and/or all
billings hereunder.
5
<PAGE>
<PAGE>
ARTICLE III
Indemnification
---------------
Section 3.01. Indemnification of Buyer by Seller. JWGFC
shall defend, indemnify and hold harmless Buyer, Fiserv and their
subsidiaries and affiliates, along with their respective officers,
directors, employees, agents, representatives, successors and assigns
(collectively the "BUYER INDEMNIFIED PERSONS") from and against any
losses, damages, claims, suits, proceedings, liabilities, costs and
expenses (including without limitation reasonable attorneys fees and
related expenses) which may be imposed on, sustained, incurred or
suffered by or asserted against any Buyer Indemnified Person, directly
or indirectly, as a result of or relating to or arising out of any
failure by JWGFC and/or Seller to perform or cause the performance of
the Services in accordance with the terms hereof.
Section 3.02. Procedures for Indemnification. (a) If any
------------------------------
Buyer Indemnified Person who is entitled to assert a claim for
indemnification under this Agreement shall receive notice of the
assertion by any person or entity of any claim or of the commencement
by any such person or entity of any action or proceeding (a "THIRD
PARTY CLAIM") with respect to which JWGFC is obligated to provide
indemnification to the Buyer Indemnified Person, the said Buyer
Indemnified Person shall give prompt notice thereof to JWGFC. Such
notice shall describe the Third Party Claim in reasonable detail.
(b) JWGFC may elect to compromise or defend, at JWGFC's
own expense and effort, and by JWGFC's own counsel, any Third Party
Claims provided, however, that JWGFC shall not settle or compromise,
or enter into a commitment with respect to settlement or compromise
of, such Third Party Claim without the prior written consent of Buyer.
If JWGFC elects to defend a Third Party Claim it shall, within 30 days
of receipt of the notice referred to in Section 3.02(a) above (or
sooner, if the nature of such Third Party Claim so requires), notify
the Buyer Indemnified Person of its intent to do so, and the Buyer
Indemnified Person shall reasonably cooperate in the compromise of, or
defense against, such Third Party Claim. JWGFC shall pay such Buyer
Indemnified Person all actual and reasonable out-of-pocket expenses
incurred in connection with such cooperation. After notice from JWGFC
to such Buyer Indemnified Person of its election to assume the defense
of a Third Party Claim, JWGFC shall not be liable to such Buyer
Indemnified Person for any legal expenses subsequently incurred by
such Buyer Indemnified in connection with the defense thereof
provided, that such Buyer Indemnified Person shall have the right to
employ one counsel for each Third Party Claim to represent such Buyer
Indemnified Person if, in such Buyer Indemnified Person's good faith
judgment, (i) a conflict of interest between such Buyer Indemnified
Person and JWGFC exists in respect of such Third Party Claim or (ii)
where JWGFC is also a party to such Third Party Claim, different or
conflicting expenses of such separate counsel shall be paid by JWGFC.
If JWGFC elects not to defend against a Third Party Claim, or fails to
notify a Buyer Indemnified Person of its election not to defend, such
Buyer Indemnified Person may, without advance notice to JWGFC, pay,
compromise or defend such Third Party Claim reasonably and in good
6
<PAGE>
<PAGE>
faith on behalf of and for the account and risk of JWGFC to the extent
that the Buyer Indemnified Person is entitled to receive
indemnification from JWGFC hereunder. JWGFC shall not consent to
entry of any judgment or entry into any settlement against or with
respect to any Buyer Indemnified Person without the written consent of
such Buyer Indemnified Person, unless such judgment or settlement (A)
provides solely for money damages or other payments for which such
Buyer Indemnified Person is entitled to indemnification hereunder and
(B) includes as an unconditional term thereof the giving by the
claimant or plaintiff to such Buyer Indemnified Person of a full and
unconditional release for all liability in respect of such Third Party
Claim.
Section 3.03. Applicability. For the avoidance of doubt,
-------------
no Buyer Indemnified Person shall be entitled to assert a claim for
indemnification under this Article III based on any matter(s) that
was/were expressly and in writing directed or approved by said Buyer
Indemnified Person.
Section 3.04. Limitation. Unless the indemnity obligations
----------
specified in Section 3.01 are triggered by actions or inactions which
rise to the level of gross negligence or intentional misconduct,
JWGFC's indemnity payments pursuant to this Article III shall not
exceed the amount of money it receives from Buyer for payment of the
Services as provided herein. No such dollar limitation shall apply if
the indemnity obligations specified in Section 3.01 are triggered by
actions or inactions that rise to the level of gross negligence or
intentional misconduct.
ARTICLE IV
Miscellaneous
-------------
Section 4.01. Further Assurances. On and after the
------------------
Closing Date, the parties shall execute all documents, instruments or
conveyances of any kind which may be necessary or advisable to carry
out any of the provisions hereof and to consummate the transactions
contemplated hereby.
Section 4.02. Notices. All notices hereunder shall be
-------
given in accordance with Section 7.05 of the SPA.
Section 4.03. Assignment. This Agreement shall not be
----------
assignable by any party hereto without the prior written consent of
the other parties, which consent shall not be unreasonably withheld
except that Buyer may without such consent assign its rights (or a
portion of its rights) hereunder to a wholly-owned subsidiary or
subsidiaries of Buyer.
Section 4.04. Entire Agreement. With respect to the
----------------
subject matter hereof, this Agreement constitutes the entire agreement
7
<PAGE>
<PAGE>
between or among the parties, and supersedes and cancels any and all
other agreements between or among the parties relating thereto.
Section 4.05. Invalidity. If any one or more of the
----------
provisions contained in this Agreement, or in any other instrument
referred to herein, shall for any reason be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality
or unenforceability shall not affect any other provision of this
Agreement or any such other instrument.
Section 4.06. Counterparts. This Agreement may be
------------
executed simultaneously in two or more counterparts, each of which
shall be deemed an original, and it shall not be necessary in making
proof of this Agreement to produce or account for more than one such
counterpart.
Section 4.07. Governing Law and Dispute Resolution.
------------------------------------
These matters shall be as provided in Section 7.09 and Section 7.10 of
the SPA.
Section 4.08. Amendments. This Agreement may be
----------
modified or amended only if all parties hereto sign a written
agreement which specifies all said modifications or amendments.
Section 4.09. Successors and Assigns. This Agreement
----------------------
shall be binding upon, and shall inure to the benefit of, the parties
hereto and their respective successors and permitted assigns. No
person or entity other than the parties hereto is a beneficiary
hereunder.
WITNESS the due execution of this Agreement as of the day
and year first above written.
FISERV, INC.
By /s/ Robert H. Beriault
--------------------------------------
Robert H. Beriault, Executive Vice
President
FISERV CLEARING, INC.
By /s/ Lawrence E. Donato
--------------------------------------
Lawrence E. Donato, Senior Vice
President
8
<PAGE>
<PAGE>
JWGENESIS FINANCIAL CORP.
By /s/ Joel E. Marks
--------------------------------------
Joel E. Marks, Vice Chairman and
Chief Operating Officer
JWGENESIS FINANCIAL SERVICES, INC.
By /s/ Joel E. Marks
--------------------------------------
Joel E. Marks, Executive Vice
President
JWGENESIS CLEARING CORP.
By /s/ Joel E. Marks
--------------------------------------
Joel E. Marks, Executive Vice
President
9
AGREED FORM OF
--------------
FULLY DISCLOSED CORRESPONDENT AGREEMENT
---------------------------------------
JWGenesis Clearing Corp. and Fiserv Correspondent Services, Inc.
(collectively referred to herein as "FCSI") and [fill in name of Broker-
Dealer] ("Correspondent") mutually agree as follows:
1. Purpose
--------
The purpose of this Agreement is to set forth the terms and conditions under
which FCSI will provide clearing, execution and other securities services on
a fully disclosed basis.
FCSI is registered as a broker/dealer with the Securities and Exchange
Commission ("SEC") and is a member of the New York Stock Exchange, Inc.
("NYSE"), the American Stock Exchange, Inc. ("ASE") (Associate), and the
National Association of Securities Dealers, Inc. ("NASD").
Correspondent represents that it is a broker/dealer registered with the SEC
and is a member in good standing of the NASD.
FCSI represents that it meets all requirements of the SEC to function as a
clearing broker/dealer and desires to enter into such an Agreement and to
maintain customer accounts on behalf of Correspondent.
2. Relationship Between the Parties
--------------------------------
Correspondent shall not hold itself out to the public as an employee,
partner, or agent of FCSI either orally or in writing. Further, this
Agreement shall not be construed as creating a partnership or joint
venture. Correspondent shall inform each of its customers, in writing,
of the general nature of the services to be performed by FCSI as more
specifically set forth herein, and of the nature of the relationship
with FCSI created hereby. Said writing shall be in the form set forth
in Exhibit A, attached hereto and incorporated herein by reference.
The format or content of Exhibit A may be revised at the sole
discretion of FCSI from time to time to insure compliance with the
various laws and regulations currently in effect at the time of said
revision. In addition, the parties intend to discuss and possibly
substitute another form of Customer Agreement, which form shall be
mutually acceptable to the parties. For the purposes of SIPA and the
SEC's financial responsibility rules, customers are customers of FCSI
and not the Correspondent. Nothing herein shall cause Correspondent
customers to be construed or interpreted as customers of FCSI's for
any other purpose, or to negate the intent of any other section of
this Agreement, including, but not limited to, the delineation of
responsibilities as set forth elsewhere in this Agreement.
Furthermore, FCSI reiterates its responsibility of distributing
account statements directly to your customers. Each statement will
contain the name and telephone number of an FCSI representative who a
customer may contact regarding the customer's account. The account
statement will indicate that assets are held with FCSI and not the
Correspondent.
As long as Correspondent maintains its headquarters in South Florida
and during the term of this Agreement, FCSI agrees to maintain a
presence in the same city as Correspondent's headquarters. For the
purposes of this Agreement, the term "presence" shall mean that Fiserv
shall maintain at a minimum a Liaison Correspondent Service Desk
staffed with a minimum of 2.5 persons for each 100,000 of trades (on
an annual basis calculated on the total combined transactions of all
of the affiliates and subsidiaries during the prior twelve months).
1
<PAGE>
<PAGE>
For a period of two years from the date on which Correspondent is
fully converted to the systems of FCSI, FCSI will not effect any
other such conversion(s) (the term "any other conversion(s)" as used
here shall mean a change that requires a change of customer account
numbers and/or a change of customer account forms and agreements,
excluding any customer account agreement changes that apply to all
broker-dealers as a result of a regulatory rule change and excluding
any changes described in paragraph 2 above). In the event any other
non-permitted conversion(s) is effected within said two year period,
FCSI shall provide Correspondent with the clearing services under this
Agreement at a 50% reduction of the then in effect clearance services
fee per transaction for the three month period following the
conversion in issue.
In the event that it is necessary for FCSI to effect a conversion of
Correspondent's business within two years form the date on which
Correspondent is fully converted to the systems of FCSI, the fee
reduction specified in the paragraph just above shall not apply if
such conversion results from failures related to Y2K issues beyond its
control.
3. Services to be Performed by FCSI
--------------------------------
FCSI hereby agrees to perform the following services for
Correspondent:
a) Clear transactions for Correspondent involving OTC securities,
listed securities, mutual funds, annuities, bonds and options (no
commodities);
b) Execute orders for Correspondent's customers, but only insofar as
such orders are transmitted to FCSI;
c) Prepare and mail at FCSI's expense confirmations of transactions
to customers of Correspondent on forms designed by FCSI in its
reasonable discretion;
d) Prepare and mail at FCSI's expense monthly statements of customer
accounts directly to Correspondent's customers. The customer
monthly statements will disclose the relationship of the parties
and the name and phone number of an individual at FCSI that
clients may contact regarding their account;
e) Confirmations, statements, and notices relating to the accounts
of Correspondent and its customers will be prepared by FCSI with
Correspondent's logo prominently displayed and FCSI in small print
as clearing broker. Copies of all customer statements, confirms,
notices, and other documents will be provided to Correspondent in
electronic or in hard copy form, at Correspondent's option, at
Correspondent's principal place of business.
f) Settle contracts and transactions in securities (i) between
Correspondent and its customers, and (ii) between Correspondent
and third person;
g) Engage in all cashiering functions for Correspondent's customer
accounts including receipt and delivery of securities purchased,
sold, borrowed and loaned, making and receiving payment therefore,
holding in custody and safekeeping all securities and cash so
received in a manner determined by FCSI, handling of margin and
option accounts, receipt of dividends and the processing of
exchange offers, rights offerings and tender offers;
h) Correspondent (when Correspondent is JW Genesis Securities, Inc.
or a successor) shall have check writing privileges, and checks
for JW Genesis Securities, Inc.'s customers shall be drawn on a
Florida bank, which bank shall be mutually agreeable to FCSI and
Correspondent.
i) Construct and maintain books and records of all transactions
executed and cleared through FCSI as may from time to time be
2
<PAGE>
<PAGE>
required by the SEC and NASD. However, FCSI shall not maintain
those books and records specifically charged to Correspondent as
set forth in Section 4 hereinafter;
j) Provide Correspondent with a Summary of Compliance and
Operational Procedures which shall establish the specific manner
in which transactions will be executed and cleared by FCSI. The
procedures currently in effect at the time of execution of this
Agreement are attached hereto as Exhibit B, and are incorporated
herein by reference. From time to time, FCSI may, in its
reasonable discretion, revise the said procedures to comply with
and conform to the various laws and regulations in effect at the
time of revision. Correspondent agrees to abide by the said
procedures that may be promulgated;
k) Provide the Correspondent with a daily requirement report for its
customers' accounts and FCSI will provide the Correspondent with a
commission summary for each account executive on a daily basis in
electronic media or in hard copy form, at Correspondent's option;
l) Process and transfer all securities and accounts upon request
from Correspondent;
m) Notify, handle and process exchange/tender offers, rights,
warrants and redemptions;
n) Recognize that compliance with Regulation T is the responsibility
of the customer, and ultimately the Correspondent, and in the
event both parties fail to act, FCSI bears ultimate responsibility
for compliance with Regulation T. Any cost associated with
compliance with Regulation T on behalf of the Correspondent, or
the customer, will be paid by Correspondent;
o) Provide mutually agreeable and acceptable Internet access and
services to Correspondent and its customers and registered
representatives, related to the matters described herein. Any
custom or additional development required by Correspondent of FCSI
shall be charged to Correspondent at a cost as mutually agreed
upon between FCSI and Correspondent. The Internet access shall be
provided at no cost until FSCI implements a charge on internet
access to all of its correspondents, in which case, the charge to
Correspondent shall be no higher than the lowest such charge and
competitive in the industry.
FSCI will subscribe to and provide a data feed to Correspondent
for the ADP Prospectus Plus service, or a service of equal or
better quality, for the furnishing of prospectuses to
Correspondent's customers when Correspondent participates in an
underwriting or registered secondary offering or handles options
transactions or other transactions which require a disclosure
document.
FSCI shall provide Correspondent such additional data feeds as may
be reasonably necessary for Correspondent's business and mutually
agreed upon by FCSI and Correspondent.
p) FSCI shall perform a computation for proprietary accounts of
introducing brokers (PAIB) assets for the proprietary accounts of
all of its introducing brokers and maintain a separate special PAIB
reserve account in accordance with the customer reserve computation
set forth in SEC Rule 15c3-3 and the modifications and exclusions
thereto as set forth in the SEC's No Action Letter thereon.
4. Services Not to be Performed by FCSI
------------------------------------
Unless otherwise agreed in writing executed by the parties, FCSI will
not engage in any of the following services on behalf of
Correspondent:
3
<PAGE>
<PAGE>
a) Accounting, bookkeeping, record keeping, cashiering or other services
for any transaction not involving a security including, but not
limited to commodities;
b) Preparation of Correspondent's payroll records, financial statements
or any analysis thereof;
c) Preparation or issuance of checks in payment of expenses of the
Correspondent, other than expenses incurred by FCSI on behalf of
Correspondent pursuant to the terms of this Agreement;
d) Payment of commissions to Correspondent's salesmen;
e) Making or filing of reports to the SEC, NASD, state securities
commission or any securities exchange on behalf of Correspondent.
Notwithstanding the foregoing, FCSI will, at Correspondent's
request, furnish information from FCSI's records not otherwise
available for use by Correspondent;
f) Supervision of Correspondent's activities to insure that Correspondent
is complying with the rules and regulations enacted and/or
promulgated from time to time by the Federal Government, various
state governments, NASD and the various securities exchanges.
Further, Correspondent will be responsible for, will pay, and will
fully indemnify and hold FCSI harmless from all losses, claims,
actions and expenses, including attorney's fees and costs, which
arise by reason of Correspondent's failure to comply with any of
the foregoing statutes, regulations or rules;
g) Furnishing of prospectus to Correspondent's customers when
Correspondent participates in an underwriting or registered
secondary offering or handles options transactions which require a
disclosure document;
h) Investigation of the facts surrounding any transactions FCSI may have
with Correspondent on a principal or agency basis or that
Correspondent may have with its customers or third parties;
i) Accept responsibility for the approval and monitoring of customer
accounts and/or orders;
j) Accept responsibility for the supervision of the Correspondent's
customer accounts and customer orders;
k) Offer investment advice to Correspondent's customers. Research
reports generated by FCSI and/or third party providers are
available under separate contract.
5. Information to be Provided by Correspondent
-------------------------------------------
The following information will be promptly provided to FCSI by
Correspondent:
a) Notification in writing of the commencement of any investigation,
administrative proceeding, civil action, or criminal action
relating to Correspondent's securities business filed against
Correspondent, its agents or employees, including a copy of all
subpoenas, complaints or petitions pertaining thereto, provided
however that no private civil action or arbitration must be
disclosed unless the same asserts claims totaling at least
$100,000, to the extent that such claims are not covered by
Correspondent's errors and omissions insurance policies.
b) Notification in writing of any instance in which Correspondent's
net capital drops below the minimum then required by SEC Rule
15c3-1;
c) Basic data and records, including but not limited to, copies of
records of any receipts of customer's funds and securities
received directly by Correspondent, as shall be necessary to
4
<PAGE>
<PAGE>
permit FCSI to discharge its service obligations hereunder and
which will be compatible with the requirements of FCSI's
bookkeeping system;
d) Notification in writing of any discretionary account, either full
or partial, established by Correspondent. Further, Correspondent
will, prior to executing transactions in the account, provide FCSI
with copies of documents satisfactory to FCSI and executed by the
customer which establish the discretionary authority. Correspondent
represents and warrants that its procedures require
that all orders executed through FCSI will be in accordance with
its customer's instructions unless notification required by this
section has been made by Correspondent, and Correspondent shall
maintain in effect and follow such procedures.
6. Establishment of New Customer Accounts
--------------------------------------
FCSI and the Correspondent agree that new customer accounts will be
established in accordance with guidelines as follows:
a) Cash Accounts
Correspondent will furnish to FCSI, for each new account opened
through FCSI's New Accounts Department services, a New Account Data
Sheet on a form acceptable to FCSI and which contains all information
required thereon at the time submitted. Said sheets
will be submitted to FCSI within five (5) days from the date that a
new account number is assigned.
Correspondent will be responsible for obtaining from the customer,
within thirty (30) days from the date the account is opened, all
documents required due to the nature or type of the account. If the
required documents are not submitted, the account will be restricted
for trading purposes until they are received.
New accounts opened through FCSI's New Accounts Department services
will not be processed by FCSI for the purpose of this Agreement
until the required New Account Data Sheet is properly completed and
signed by the salesman and principal of Correspondent. Prior to
such receipt by FCSI, transactions executed in said new accounts may
be terminated by FCSI for any reason and any loss incurred thereby
will be borne by Correspondent, and any credit balance shall inure
to Correspondent.
Subsequent to receipt of the New Account Data Sheet (if applicable)
and applicable documents, transactions may be terminated by FCSI for
an apparent violation of any law, regulation or rule then in effect,
either by the customer or the Correspondent, with any loss incurred
borne by Correspondent, and any resulting credit balance inuring to
Correspondent.
Correspondent has ultimate responsibility for obtaining account
documentation and all documents received by FCSI will be maintained
by FCSI. FCSI will make available to Correspondent all new account
documents and account statements, at on microfiche, electronically,
or in hard copy form, at Correspondent's principal place of
business.
b) Margin Accounts
Correspondent will comply with the requirements set forth in
Paragraph 6 (a) when establishing a margin account. The
Correspondent's customer is responsible for the maintenance of
proper margin. FCSI is responsible to give proper and timely notice
of initial margin and maintenance requirements pursuant to the margin
Agreement with the customer. If the Correspondent's client
fails to maintain proper margin, the Correspondent is responsible
for the sellout and any deficit that may remain in the account.
FCSI charges the Correspondent's customers applicable margin
interest on debit balances and the Correspondent's customers are
responsible for payment of the interest. FCSI is responsible for
5
<PAGE>
<PAGE>
and maintains the right to hypothecate the Correspondent's
customers' securities.
c) Option Accounts
Correspondent will comply with the requirements set forth in
Paragraph 6(a) when establishing an option account.
7. Receipt and Delivery of Money and Securities
--------------------------------------------
The parties agree that Correspondent shall have the following duties
and responsibilities regarding its receipt and delivery of money and
securities:
a) Correspondent agrees to promptly deliver to FCSI, or to a
designated account of FCSI, any and all cash remittances and/or
securities received from customers;
b) Concurrently with the delivery of funds or securities,
Correspondent will provide FCSI with such information as may be
relevant and necessary to enable FCSI to record said
funds/securities in the appropriate accounts;
c) Correspondent agrees to make payment to FCSI, or to a designated
account of FCSI, for securities purchased, and to make delivery of
securities sold both for its account and for the accounts of its
customers, on or before settlement date. For this purpose,
payment and delivery by settlement date shall mean payment and
delivery in accordance with the requirements of the various
regulatory authorities, including but not limited to, the Federal
Reserve Board, SEC and NASD.
d) Correspondent will insure that securities delivered by it and/or
by its customers are in good deliverable form, and FCSI reserves
the right to refuse securities not in good deliverable form. If
monetary loss results from the failure of Correspondent, or from
its customers, to either make prompt payment or deliver securities
in good deliverable form, Correspondent will promptly pay to FCSI
the amount of such loss, as more fully set forth in Exhibit B,
attached hereto;
e) Correspondent agrees to comply with provisions of Rule 144 for
the sale of restricted stock. FCSI will assist the Correspondent
in clearing Rule 144 restricted stock for an agreed-upon fee.
8. Duties of Correspondent with Respect to Customer Accounts
---------------------------------------------------------
The parties agree that Correspondent shall have the following duties
and responsibilities regarding its dealing with its customers:
a) Correspondent will learn all of the essential facts relative to
every customer, order, cash or initial margin account, and every
person holding power of attorney over any customer account
processed by Correspondent;
Correspondent will adopt and follow due procedures to determine all
of the facts necessary to comply with all rules, regulations and
laws governing transactions effected in customer accounts,
including but not limited to the suitability of all transactions,
the authenticity of all orders, and the genuineness of all
certificates, documents, papers and signatures submitted by
Correspondent, its employees, agents or customers;
c) Correspondent will adopt and follow due procedures to assure
compliance with all federal, exchange, NASD and state rules,
regulations and laws pertaining to customers and customer accounts
by itself, its agents and employees. This shall include, but not
be limited to the NASD Rules of Fair Practice and the attendant
Policies and Interpretations of the Board of Governors. It is
6
<PAGE>
<PAGE>
specifically the responsibility of the Correspondent to comply
with the terms of NYSE Rule 407. The approval or rejection of a
customer account is the responsibility of the Correspondent;
d) In the event this Agreement is terminated for any reason,
Correspondent will pay to FCSI such reasonable amounts as FCSI may
determine are necessary to ship securities and credit balances to
customers or otherwise dispose of said funds and securities. FCSI
may, at its option, withhold such sums from any monies owing
Correspondent at the time this Agreement is terminated.
9. Acceptance and Execution of Orders
----------------------------------
FCSI and the Correspondent agree that the acceptance and execution of
orders will be in accordance with the following guidelines:
a) It is the responsibility of the Correspondent to assure itself
that the order is correct prior to entry;
b) It is the option of FCSI in its reasonable discretion to accept
or reject the order.
c) Any errors in execution of the order shall be the responsibility
of the party at fault;
d) The procedure for proper transmission of an order to FCSI is as
follows:
1) Correspondent's trading desk accepts the order;
2) Correspondent's trading desk telephones the order to the
FCSI trading desk;
3) FCSI's trading desk repeats the details of the order to
Correspondent's trading desk for approval;
4) FCSI's trading desk enters the order;
5) FCSI's trading desk notifies Correspondent's trading desk
upon execution of the order or receipt of a "nothing done".
e) The procedure for trades "done away" is as follows:
1) Correspondent executes order designating Correspondent as
executing (minor) broker and FCSI (symbol FSRV) as clearing
(major) broker.
2) Correspondent bills the executed order by entering the order
into an SIS terminal, and entering the transaction into the
Automatic Confirmation Transaction system (A.C.T.), or;
3) Correspondent transmits the executed order with all pertinent
details, via facsimile or physical ticket, to FCSI for billing
by the Operations Department.
f) FCSI reserves the right to rescind or DK (Don't Know) any
transaction which is inconsistent with the credit policies as
established for the Correspondent.
10. Access to Customer Information
------------------------------
The parties agree that FCSI may furnish customer information regarding
Correspondent, its operations and affairs as follows:
7
<PAGE>
<PAGE>
a) Customer records in possession of FCSI and relating to
Correspondent may be inspected and copied by any and all of the
following entities and/or individuals:
1) Any officer or employee designated by Correspondent and any
officer or employee designated by FCSI; and
2) Representatives of a governmental agency, exchange, or
self-regulatory association which may have jurisdiction over
Correspondent and its business practices; and
3) Any governmental agency or court of competent jurisdiction
pursuant to a subpoena or civil investigative demand; and
4) The authorized representative of any registered "clearing
agency", as used in Section 3(a)(23)(A) of the Securities and
Exchange Act of 1934.
b) FCSI will exercise reasonable care to prevent access by persons
other than those set forth in this section to information
confidential to Correspondent. FCSI further agrees that in no way
will this confidential information be used in competition or to
the financial or other commercial detriment of the Correspondent.
c) Correspondent will exercise reasonable care to prevent access by
any person not an employee to any material, including but not
limited to the terms of this Agreement, provided by FCSI.
11. Access to Corporate Information
-------------------------------
The parties agree that FCSI may furnish corporate information
regarding Correspondent, its operations and affairs as follows:
a) Corporate records in possession of FCSI and relating to
Correspondent may be inspected and copied by any and all of the
following entities and/or individuals:
1) A designated officer or employee of Correspondent;
2) Representatives of a governmental agency, exchange, or
self-regulatory association with jurisdiction over Correspondent
and its business practices;
3) Any governmental agency or court of competent jurisdiction
pursuant to a subpoena or civil investigative demand;
4) The authorized representative of any registered "clearing
agency" as used in Section 3(a)(23)(A) of the Securities and
Exchange Act of 1934.
b) FCSI will exercise reasonable care to prevent access by persons
other than those set forth in this section to information
confidential to Correspondent. FCSI further agrees that in no way
will this confidential information be used in competition to the
financial or other commercial detriment of the Correspondent.
c) Correspondent will exercise reasonable care to prevent access by
any person not an employee to any material, including but not
limited to the terms of this Agreement, provided by FCSI.
12. Exchange of Financial Information
---------------------------------
Correspondent agrees to provide FCSI, and FCSI agrees to provide to
Correspondent, with copies of the monthly and quarterly Focus reports
within five (5) business days after the due date of the reports.
8
<PAGE>
<PAGE>
13. Interest Charges
----------------
Correspondent agrees to pay the interest and/or service charges
incurred by FCSI, and not collected directly from the customer, for
the following transactions: a) Customer debits delinquent beyond
settlement date; b) Draft charges for delivery versus payment
accounts; c) Accounts with payment due prior to settlement date.
Unless otherwise provided by law or FCSI policy, the interest charged
in the above transactions shall be one quarter (1/4) point over the
broker call rate in effect at the time the charges are incurred.
14. Debts, Errors, Lawsuits and Customer Complaints
-----------------------------------------------
Correspondent, its agents, successors and assigns, will be responsible
for, will pay, and will fully indemnify FCSI and hold FCSI harmless
from all losses, claims, actions and expenses, including reasonable
attorney fees and costs, which are incurred by FCSI and arise by
reason of Correspondent's failure to comply with the following:
a) the provisions of Paragraph 4 (f) herein;
b) the provisions of Paragraph 5 (d) herein;
c) the provisions of Paragraph 8 herein;
d) the provisions of Exhibit B, attached hereto;
e) any provision of any applicable law, rule, or regulation or any
other provision of this Agreement not specifically set forth in
this section;
f) option and/or margin Agreements executed with FCSI by
Correspondent's customers;
g) the provisions of Paragraph 9;
h) Any debit balances in any Correspondent's accounts, including but
not limited to, customer or inventory accounts which result from
buy-ins, sell-outs, trade cancellations, or any other reason; FCSI
will notify Correspondent immediately when any such losses,
claims, actions and expenses are accruing or are about to accrue,
so that Correspondent may cure, limit or reduce such expenses.
FCSI shall in all instances, where possible, seek to mitigate all
such losses, claims, actions and expenses.
All customer inquiries and complaints received by FCSI will be
forwarded to the Correspondent for disposition. FCSI will respond
only to those inquiries and complaints addressing duties or procedures
for which FCSI is responsible under this Agreement. Correspondent is
responsible for responding to every complaint received, including but
not limited to, books or records maintenance, journal entry errors,
receipts, disbursements and sales practices.
15. Clearing Charges
----------------
Correspondent agrees to fees for execution and clearing services as
set forth in Exhibit C attached hereto and incorporated herein by
reference to the Agreement.
16. Clearing Deposit
----------------
The obligations of the Correspondent under this Agreement shall be
secured by a minimum equity deposit with FCSI of $100,000.00.
9
<PAGE>
<PAGE>
17. Trading Activity
----------------
Trading activity of the Correspondent shall be secured by an equity
deposit equal to the greater of $100,000.00 or 100% of the cost of all
securities owned (long) and the margin required of all securities sold
but not owned (short). Additionally FCSI reserves the right in its
reasonable discretion to increase the required deposit of the
Correspondent by the greater of 50% of the aggregate introduced
customer cash account trade date debit balances, or 50% of the
aggregate introduced customer cash account settlement date debit
balances.
18. Commissions
-----------
Correspondent shall, where appropriate, charge commissions on
transactions cleared through FCSI in accordance with the FCSI
standard agency commission schedule. Correspondent may at its option
substitute its own commission schedule. Trail commissions on mutual
funds cleared through FCSI will be credited to the Correspondent, and
whenever possible, will be paid directly to Correspondent.
19. Compensation
------------
FCSI shall promptly forward to Correspondent a statement of account at
the settlement date close of each month setting forth the commissions
earned by the Correspondent and any other amounts due the respective
parties hereunder.
20. Representations and Warranties
a) Correspondent represents and warrants as follows:
1) Correspondent is and during the term of this Agreement will
remain a member in good standing of the National Association of
Securities Dealers, Inc.
2) Correspondent is, and during the term of this Agreement will
remain, duly registered or licensed and in good standing as a
Broker/Dealer under all applicable federal and state securities
laws;
3) Correspondent shall, concurrent with the execution of this
Agreement, provide FCSI with a list of those states in which
Correspondent is registered and will update said list from time
to time as necessary. Correspondent shall further provide FCSI
with its most recent Form B/D;
4) Correspondent has all requisite authority, whether arising
under applicable federal or state laws, rules and regulations or
the rules and regulations of any securities exchange or
association to which Correspondent is subject, to enter into
this Agreement and to retain the services of FCSI in accordance
with the terms hereof;
5) Correspondent is, and during the term of this Agreement will
remain, in compliance with (i) the capital and financial
reporting requirements of every securities exchange and/or
association of which Correspondent is a member, (ii) the capital
requirements of the Securities and Exchange Commission and (iii )
the capital requirements of every state in which Correspondent
is licensed as a broker/dealer. If Correspondent fails to
remain in compliance with such requirements, it will notify FCSI
in writing within twenty-four hours of said failure;
6) Correspondent has a Financial and Operational Principal as
required by the By-Laws of the NASD. Correspondent shall notify
FCSI in writing within twenty-four hours from the time it fails
to comply with this requirement.
10
<PAGE>
<PAGE>
7) Correspondent agrees to abide by the procedures in Exhibit B
as may be reasonably revised by FCSI from time to time and at
FCSI's discretion.
b) FCSI represents and warrants as follows:
1) FCSI is a member in good standing of the New York Stock
Exchange, the American Stock Exchange (Associate); and the
National Association of Securities Dealers;
2) FCSI is duly licensed and in good standing as a Broker/Dealer
under applicable federal and state securities laws;
3) FCSI has all requisite authority, whether arising under applicable
federal and state laws, rules and regulations or the laws and
regulations of any securities exchange to which FCSI is
subject, to enter into this Agreement.
4) The essential equipment, software and hardware, the title of
which is owned by FCSI and used for this Agreement, will
consistently function in the same manner after December 31,
1999, as they function prior to said date. FCSI has a
comprehensive Year 2000 project designed to achieve Y2K
readiness. Although FCSI has received certification of Y2K
readiness from its vendors and has conducted extensive Y2K
testing regarding such vendors, products and services, it
cannot warrant the Y2K readiness of same.
21. Exclusivity
-----------
Subject to the terms and conditions of Section 3.05 of the April 16,
1999, Stock Purchase Agreement for the purchase and sale of the stock
of JW Genesis Clearing Corp. (the "SPA"), this Agreement constitutes
an exclusive clearing arrangement between the Correspondent and FCSI.
During the term of this Agreement, FCSI will be the sole agent for the
Correspondent in all transactions for which FCSI is an active clearing
broker.
22. Term
----
a) The term of this Agreement shall be ten years beginning on
the Closing Date as defined in the SPA, and in accordance
with the provisions of Paragraph 23 hereinafter;
b) Following the term specified in Paragraph 22 a) above this
Agreement shall continue in effect thereafter, provided that
either FCSI or Correspondent may during such period terminate
this Agreement by providing to the other at least 120 days prior
written notice of termination.
23. Termination
-----------
This Agreement shall be terminated upon the following terms:
a) Notwithstanding the provisions of Paragraph 22 (a) above, this
Agreement shall terminate in the event any material
representations, warranties, duties, responsibilities or
obligations of Correspondent or FCSI, as the case may be, as set
forth herein cease to be true or duly performed; provided that the
non-performing or breaching party is given notice of such breach
or purported breach, and given an opportunity to explain, cure or
correct such breach or purported breach to the reasonable
11
<PAGE>
<PAGE>
satisfaction of the performing or non-breaching party. If any
such material breach is not explained, corrected or cured within a
reasonable time, the performing or non-breaching party may
immediately terminate this Agreement effective upon written notice
thereof to the non-performing or breaching party. Said
termination, and payment of any termination fee, shall not be
deemed a waiver by the performing or non-breaching party of its
legal or equitable remedies for the breach of the above
undertakings by the non-performing or breaching party or its right
to seek indemnification from the non-performing or breaching party
for its failure to perform the said undertakings. FCSI or
Correspondent, as the case may be, shall take all reasonable steps
to cure all breaches in a timely manner. The termination fee
schedule provided in paragraph 23 e) shall apply to any
termination under this paragraph 23 a) and will be paid upon
termination without regard to the circumstances surrounding the
breach.
b) The Parties agree that if this Agreement is terminated (i) all
revenues, costs and expenses incurred by FCSI prior to the date of
notice of termination will be paid by Correspondent within five
(5) days from the date of the event causing the termination or, at
FCSI's option, be deducted by FCSI from any monies then owing
Correspondent and (ii) such termination, for whatever reason,
shall have no effect upon any amounts then due to FCSI under the
terms and conditions of the Agreement;
c) The parties agree that FCSI will be reimbursed for the reasonable
automated de-conversion and related termination costs if the
Agreement is terminated by Correspondent.
d) At any time during this Agreement and at the discretion of FCSI, the
parties agree that FCSI may terminate this Agreement for any
reason upon the serving of 120 days prior written notice.
e) At any time during this Agreement and at the discretion of
Correspondent, the parties agree that Correspondent may terminate
this Agreement for any reason upon the serving of 120 days prior
written notice and the payment by Correspondent of a termination
fee calculated by multiplying the then existing Aggregate
Termination Amount by a fraction, the numerator which is (i) the
total number of Correspondent's transactions over the twelve
months prior to termination and the denominator which is (ii) the
total number of transactions over the twelve months prior to
termination from all subsidiaries or affiliates of JWGenesis
Financial Corp. as defined in the SPA which have not previously
terminated (hereinafter, the "Termination Factor").
Based upon the contract year in which such termination
notification is given, the Aggregate Termination Amount shall be
as follows:
Year of
Termination Aggregate
Notification Termination Amount
============ ==================
Year 1 $15,000,000
Year 2 $13,500,000
Year 3 $12,000,000
Year 4 $10,500,000
Year 5 $ 9,000,000
Year 6 $ 7,500,000
Year 7 $ 6,000,000
Year 8 $ 4,500,000
Year 9 $ 3,000,000
Year 10 $ 1,500,000
12
<PAGE>
<PAGE>
For purposes of this Section 23, each of the annual Aggregate
Termination Amounts in the above schedule shall be reduced by the
relevant Termination Factor calculated as a result of any
termination pursuant to Section 23 by all subsidiaries or
affiliates of JWGenesis Financial Corp. as defined in the SPA and
such amounts shall be substituted in the above schedule (the "Then
Existing Aggregate Termination Amount"). In the event of more
than one termination by any subsidiaries or affiliates of
JWGenesis Financial Corp. as defined in the SPA within a twelve
month period, the denominators in Section 23 shall reduced by the
total number of transactions related to prior terminations
occurring within said twelve month period.
By way of example, assume that JWGenesis Securities, Inc.; GSG
Securities, Inc. and Corporate Securities Group, Inc. annually do
190,200; 115,000; and 84,370 trades, respectively. JWGenesis
Securities, Inc. elects to terminate its clearing agreement in the
middle of Year 1. The termination fee would be $7,320,000 (which is
calculated as $15,000,000 multiplied by the Termination Factor of
48.8% which is 190,200 divided by the sum of 190,200 plus 115,000 plus
84,370). As a result, the Aggregate Termination Amount in chart above
will be reduced by 48.8% for each year. Accordingly, the adjusted
Aggregate Termination Amount for Years 1, 2 and 3 will be $7,680,000;
$6,912,000 and $6,144,000, respectively, and would be reduced
similarly for years 4 through 10. If GSG Securities, Inc. were to
terminate its clearing agreement in the balance of Year 1, it would be
subject to a termination fee in the amount of $4,431,360 (which is
calculated as $7,680,000 multiplied by the Termination Factor of 57.7%
which is 115,000 divided the sum of 115,000 plus 84,370).
Accordingly, the adjusted Aggregate Termination Amount in the chart
above for Years 1, 2, and 3 will be $3,248,640; $2,923,776 and
$2,598,912, respectively, and would be reduced similarly for years 4
through 10.
f) At any time during this Agreement, if Correspondent sells all of
its business which is subject to this Agreement, Correspondent
shall pay to FCSI a termination fee calculated by multiplying the
Then Existing Aggregate Termination Amount by a fraction, the
numerator which is (i) the total number of Correspondent's
transactions processed by FCSI over the prior twelve months and
the denominator which is (ii) the total number of transactions
processed by FCSI over the prior twelve months from all
subsidiaries or affiliates of JWGenesis Financial Corp. as defined
in the SPA (hereinafter, the "Termination Factor"); provided,
however, that no termination fee shall be due to FCSI if FCSI
consents to the sale and if the sale does not directly result in a
loss of transactional revenue to FCSI. Such consent shall not
unreasonably be withheld and in the event of a direct loss of
transactional revenue to FCSI, for purposes of determining the
termination fee pursuant this paragraph 23 (f), the numerator
above shall only consist of those transactions lost as a direct
result of the sale.
g) At any time during this Agreement, if Correspondent sells any
part of its business which is subject to this Agreement,
Correspondent shall pay to FCSI a termination fee calculated by
multiplying the Then Existing Aggregate Termination Amount by a
fraction, the numerator which is (i) the total number of
Correspondent's transactions processed by FCSI over the prior
twelve months which were caused by the portion of Correspondent's
business being sold, and the denominator which is (ii) the total
number of transactions processed by FCSI over the prior twelve
from all subsidiaries or affiliates of JWGenesis Financial Corp.
13
<PAGE>
<PAGE>
as defined in the SPA (hereinafter, the "Termination Factor");
provided, however, that no termination fee shall be due to FCSI if
FCSI consents to the sale and if the sale does not directly result
in a loss of transactional revenue to FCSI. Such consent shall
not unreasonably be withheld and in the event of a direct loss of
transactional revenue to FCSI, for purposes of determining the
termination fee pursuant this paragraph, 23 (f), the numerator
above shall only consist of those transactions lost as a direct
result of the sale.
In addition, if Correspondent acquires all or part of a broker-
dealer ("Relevant Acquisition"), and divests itself of the same
within two years of the date of the closing of the Relevant
Acquisition, Correspondent shall not be required to pay any
termination fee, or proportionate part of a termination fee, under
this paragraph 23 g) related to the divestment of the Relevant
Aquisition.
h) FCSI and Correspondent agree that if, within three years of the
date on which this Agreement is signed, FCSI is acquired by a
financial services company which has at least fifty percent of its
revenues derived from the retail securities brokerage business,
Correspondent will have an option to terminate all or part of the
business covered by this Agreement by providing 30 days prior
written notice to FCSI and by paying the termination fee in
accordance with 23 e) or 23 f) or 23 g) above, as applicable,
discounted in such applicable case by a factor of twenty-five
percent.
24. Arbitration
-----------
All disputes arising hereunder or related hereto shall be arbitrated
by the NASD
25. Notice
------
For the purpose of providing notice hereunder, said notice shall be
deemed provided when placed in the United States mail, postage prepaid
and addressed as follows:
Fiserv Correspondent Services, Inc.
1125 17th Street,
Suite 1700
Denver, Colorado 80202
Attn: President
and
[Name of Correspondent]
980 N. Federal Highway
Boca Raton, FL 33432
Attn: President
26. Miscellaneous
-------------
This Agreement shall be construed in accordance with the laws of the
State of Colorado. Headings are included solely for convenience and
are neither to be considered as part of this Agreement nor intended to
be accurate descriptions of the covenants hereof.
This Agreement shall be binding upon and inure to the benefit of the
Parties hereto and their respective successors, assigns and transfers
of every kind. Fiserv Correspondent Services, Inc. reserves the right
to assign this Agreement to its successor corporation at its
discretion.
If any clause or provision of this Agreement is illegal, invalid or
unenforceable under present or future laws effective during the term
hereof, then it is the intention of the Parties that the remainder of
this Agreement shall not be affected hereby, and it is also the
intention of the Parties that in lieu of each clause or provision of
this Agreement that is illegal, invalid or unenforceable, there shall
be added as a part of this Agreement a clause or provision as similar
in terms to such illegal, invalid or unenforceable as may be possible
and be legal, valid and enforceable.
14
<PAGE>
<PAGE>
Notwithstanding anything to the contrary contained herein, FCSI's
liability under this Agreement shall be limited to the total proceeds
of the transactions from which the liability arises.
15
<PAGE>
<PAGE>
SIGNATURES & SEALS
------------------
This Agreement constitutes the entire Agreement of the Parties and may
not be changed terminated or discharged orally.
DATED: _____________________ DATED: _____________________
FISERV CORRESPONDENT SERVICES, INC., _____________________________)
A COLORADO CORPORATION Correspondent, a _______
Corporation
BY: ________________________________ BY: ____________________________
APPROPRIATE SIGNATURE APPROPRIATE SIGNATURE
ATTEST: ____________________________ ATTEST: _________________________
SECRETARY SECRETARY
(SEAL) (SEAL)
16
