UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington , D.C. 20549
------------------------------
AMENDMENT NO. ONE TO
FORM SB-2
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
------------------------------
RUSHMORE FINANCIAL GROUP, INC.
(Name of small business issuer in its charter)
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TEXAS 6411 75-2375969
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
13355 Noel Road, Suite 650 D. M. Moore, Jr., Chief Executive Officer
Dallas, Texas 75240 Rushmore Financial Group, Inc.
(972) 450-6000 13355 Noel Road, Suite 650
Dallas, Texas 75240
(Address and telephone number, (972) 450-6000
including area code, of registrant's (Name, address and telephone number,
principal executive officer _________________________ of agent for service)
Copies To:
Ronald L. Brown, Esq. Peter A. Lodwick, Esq.
Glast, Phillips & Murray, P.C. Thompson & Knight, P.C.
13355 Noel Road, Suite 2200 1700 Pacific Avenue, Suite 3300
Dallas, Texas 75240 Dallas, Texas 75201
Telephone: (972) 419-8302 Telephone: (214) 969-1700
Facsimile: (972) 419-8329 _________________________ Facsimile: (214)969-1751
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Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If this Form is filed to registered additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. ...................
[ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. ...................
[ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. ...................
[ ]
If delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box. ................
[ ]
-------------------------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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<PAGE>
PART II
Item 27. Exhibits and Financial Statement Schedules
(a) Exhibits
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Exhibit No.
1.1 Form of Underwriting Agreement between Registrant and First Southwest Company
1.2 Form of Representative's Warrant Agreement
1.3 Form of Selected Dealer Agreement
1.4 Form of Agreement Among Underwriters
1.5 Form of Letter Agreement regarding restrictions on sales
2.1 Plan and Agreement of Merger with First Financial Life Companies, Inc.
3.1 Articles of Incorporation, as amended
3.2 Bylaws
* 4.1 Specimen certificate for shares of Common Stock of the Company
* 4.2 Specimen certificate for shares of Preferred Stock of the Company
5.1 Opinion of Glast, Phillips & Murray, P.C.
10.1.1 Employment Agreement with D. M. Moore, Jr.
* 10.1.2 Employment Agreement with Jim W. Clark
10.2.1 Modified Coinsurance Agreement with Massachusetts General Life Insurance Company
10.2.2 Administrative Service Agreement with Massachusetts General Life Insurance Company
10.2.3 Reinsurance Agreement with Massachusetts General Life Insurance Company
* 10.2.4 National Marketing Agreement with Massachusetts General Life Insurance Company
* 10.3.1 Modified Coinsurance Agreement with Southwestern Life Insurance Company
* 10.3.2 Reinsurance Agreement with Southwestern Life Insurance Company
* 10.3.3 Administrative Service Agreement with Facilities Management Installation
* 10.5 Administrative Services Agreement between Registrant and Rushmore Life
* 10.6.1 Option Agreement regarding Rushmore Insurance Services, Inc.
* 10.6.2 Overhead Services Agreement between Registrant and Rushmore Life
* 10.7 Form of Registered Representative Agreement
* 10.8 Form of Investment Advisory Agreement
* 10.9 Form of Affiliation Agreement with Agents
* 10.10.1 Fully Disclosed Clearing Agreement with Southwest Securities, Inc.
* 10.10.2 Fully Disclosed Clearing Agreement with First Southwest Company
* 10.11 Form of Indemnification Agreement signed with all officers and directors
11.1 Statement regarding computation of earnings per share
15.1 Letter on unaudited interim financial information
* 21.1 Subsidiaries of the Registrant
23.1 Consent of Glast, Phillips & Murray, P.C., included in Exhibit 5.1
23.2 Consent of Cheshier & Fuller, L.L.P.
23.3 Consent of Coopers & Lybrand
23.4 Consent of James Fehleison regarding appointment as director
23.5 Consent of Gayle Tinsley regarding appointment as director
24.1 Power of Attorney, set forth on signature page
27.1 Financial data schedule
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* Filed herewith
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(b) Financial Statement Schedules
None.
<PAGE>
Schedules not listed above have been omitted because they are not required,
are not applicable, or the information is included in the Financial Statements
or Notes thereto.
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorizes this Amendment No.
One to Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Dallas, State of Texas on January 12,
1998.
Rushmore Financial Group, Inc.
By: /s/ D. M. Moore, Jr.
------------------------------------
D. M. Moore, Jr. President and Chief
Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
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Signature Title Date
- --------- ----- ----
/s/ D. M. Moore, Jr. President, Chief Executive January 12, 1998
- ---------------------------
D. M. Moore, Jr. Officer and Director (Principal
Executive Officer)
/s/ Howard M. Stein Controller and Chief Financial January 12, 1998
- ---------------------------
Howard M. Stein Officer (Principal Financial
and Accounting Officer)
* /s/ Jim W. Clark Director and Secretary January 12, 1998
- ---------------------------
Jim W. Clark
* /s/ F. E. Mowrey Director January 12, 1998
--------------------------
F. E. Mowery
* /s/ Timothy J. Gardiner Director January 12, 1998
--------------------------
Timothy J. Gardiner
* /s/ H. Gary Curry Director January 12, 1998
--------------------------
H. Gary Curry
<PAGE>
* /s/ Mark S. Adler Director January 12, 1998
-------------------------
Mark S. Adler
* /s/ Harlan T. Cardwell Director January 12, 1998
Harlan T. Cardwell, III
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*By: /s/ D. M. Moore, Jr.
----------------------------------
D. M. Moore, Jr., Attorney-in-Fact
<PAGE>
Exhibit 4.1
INCORPORATED UNDER THE LAWS COMMON STOCK
OF THE STATE OF TEXAS
RUSHMORE FINANCIAL GROUP, INC
THIS CERTIFICATE IS TRANSFERABLE CUSIP 782055 10 7
IN NEW YORK, NY AND KANSAS CITY, MO
SEE REVERSE FOR CERTAIN RESTRICTIONS
THIS CERTIFIES THAT
is the owner of
FULLY PAID AND NONASSESSABLE COMMON SHARES, WITH A PAR VALUE OF $.01 PER
SHARE, OF RUSHMORE FINANCIAL GROUP, INC. transferable in person or by duly
authorized attorney on the books of the Corporation upon surrender of this
certificate properly endorsed.
This certificate is not valid unless countersigned and registered by the
Transfer Agent and Registrar.
WITNESS the facsimile seal of the Corporation and facsimile signature of
its duly authorized officers.
Dated:
Dated:
/s/ Dewey M. Moore, Jr. COUNTERSIGNED AND REGISTERED:
- --------------------------
PRESIDENT UMB Bank, n.a.
(Kansas City, Missouri)
[SEAL] TRANSFER AGENT AND REGISTRAR
/s/ Jim W. Clark
- -------------------------- BY
SECRETARY
AUTHORIZED SIGNATURE
<PAGE>
RUSHMORE FINANCIAL GROUP, INC.
The Articles of Incorporation of the Corporation on file in the office of
the Secretary of State of Texas set forth (a) the aggregate number of shares and
the par value of each class of capital shares which the Corporation is
authorized to issue together with the designations, preferences, limitations and
relative rights of each such class; (b) a statement of the authority vested in
the Board of Directors to establish series and to fix and determine the
variations in the relative rights and preferences between any such series of the
Preferred Stock so established; (c) a denial of preemptive rights of the
shareholders to acquire unissued or treasury shares of the Corporation; and (d)
a denial of cumulative voting at any meeting of the shareholders for electing
directors. The Corporation will furnish a copy of such statement to the record
holder of this certificate without charge upon written request to the
Corporation at its registration office.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM -- as tenants in common UNIF GIFT MIN ACT-- ____Custodian ___
TEN ENT -- as tenants by the entireties (Cust) (Minor)
JT TEN -- as joint tenants with right Under Uniform Gifts to Minors
of survivorship and not as Act_______________________
tenants in common (State)
Additional abbreviations may also be used though not in the above list.
For value received, ______________________________________ hereby sell, assign
and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
__________________________________________________________________________Shares
of the Common Stock Represented by the within Certificate, and do hereby
irrevocably constitute and appoint
- --------------------------------------------------------------------------------
Attorney to transfer the said stock on the books of the within-named Corporation
with Full power of substitution in the premises.
Dated ________________________________
NOTICE:
THE SIGNATURE(S) TO
THIS ASSIGNMENT MUST --------------------------------
CORRESPOND WITH THE (SIGNATURE)
NAME(S) AS WRITTEN
UPON THE FACE OF THE
CERTIFICATE IN EVERY
PARTICULAR WITHOUT
ALTERATION OR --------------------------------
ENLARGEMENT OR ANY (SIGNATURE)
CHANGE WHATEVER
<PAGE>
RUSHMORE FINANCIAL GROUP, INC.
The Articles of Incorporation of the Corporation on file in the office of
the Secretary of State of Texas set forth (a) the aggregate number of shares and
the par value of each class of capital shares which the Corporation is
authorized to issue together with the designations, preferences, limitations and
relative rights of each such class; (b) a statement of the authority vested in
the Board of Directors to establish series and to fix and determine the
variations in the relative rights and preferences between any such series of the
Preferred Stock so established; (c) a denial of preemptive rights of the
shareholders to acquire unissued or treasury shares of the Corporation; and (d)
a denial of cumulative voting at any meeting of the shareholders for electing
directors. The Corporation will furnish a copy of such statement to the record
holder of this certificate without charge upon written request to the
Corporation at its registration office.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
CONDITIONS AND RESTRICTIONS AS TO VOTING AND TRANSFER UNDER THE TERMS OF A
SHAREHOLDERS' AGREEMENT ENTERED INTO BY THIS CORPORATION AND ITS SHAREHOLDERS, A
TRUE AND CORRECT COPY OF WHICH IS ON FILE AT THE OFFICES OF THE CORPORATION, AND
SAID SHARES MAY NOT BE VOTED, SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR
OTHERWISE DISPOSED OF EXCEPT IN STRICT ACCORDANCE WITH THE TERMS OF THAT
AGREEMENT. A COPY OF SAID AGREEMENT WILL BE FURNISHED WITHOUT CHARGE TO THE
HOLDER OF THIS CERTIFICATE UPON RECEIPT BY THE CORPORATION AT ITS PRINCIPAL
PLACE OF BUSINESS OR REGISTERED OFFICE OF A WRITTEN REQUEST OF THE HOLDER
REQUESTING SUCH A COPY.
The following abbreviations, when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM -- as tenants in common UNIF GIFT MIN ACT-- ____Custodian ___
TEN ENT -- as tenants by the entireties (Cust) (Minor)
JT TEN -- as joint tenants with right Under Uniform Gifts to Minors
of survivorship and not as Act_______________________
tenants in common (State)
Additional abbreviations may also be used though not in the above list.
For value received, ______________________________________ hereby sell, assign
and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
__________________________________________________________________________Shares
of the Common Stock Represented by the within Certificate, and do hereby
irrevocably constitute and appoint
- --------------------------------------------------------------------------------
Attorney to transfer the said stock on the books of the within-named Corporation
with Full power of substitution in the premises.
Dated ________________________________
NOTICE:
THE SIGNATURE(S) TO
THIS ASSIGNMENT MUST --------------------------------
CORRESPOND WITH THE (SIGNATURE)
NAME(S) AS WRITTEN
UPON THE FACE OF THE
CERTIFICATE IN EVERY
PARTICULAR WITHOUT
ALTERATION OR --------------------------------
ENLARGEMENT OR ANY (SIGNATURE)
CHANGE WHATEVER
<PAGE>
NUMBER SHARES
INCORPORATED UNDER THE LAWS OF THE STATE OF TEXAS
RUSHMORE FINANCIAL GROUP, INC.
Preferred Stock -- Par Value $10.00 Per Share
SEE REVERSE SIDE
This Certifies that _________________________________________________________ is
the owner of
__________________________________________________________________________ fully
paid and non-assessable Shares of the above Corporation transferable only on the
books of the Corporation by the holder hereof in person or by duly authorized
Attorney upon surrender of this Certificate properly endorsed. In Witness
Whereof, the said Corporation has caused this Certificate to be signed by its
duly authorized officers and to be sealed with the Seal of the Corporation.
Dated_________________________________
- -------------------------------------- ----------------------------------
SECRETARY PRESIDENT
<PAGE>
Exhibit 10.1.2
EXECUTIVE COMPENSATION AGREEMENT
This Executive Compensation Agreement dated as of the 18th day of October,
1997, between Rushmore Financial Group, Inc., a Texas Corporation (hereinafter
referred to as "Rushmore") and Jim W. Clark, (hereinafter referred to as
"Officer").
WITNESSETH:
WHEREAS, Officer is President and Chief Operating Officer of Rushmore
Securities Corporation ("RSC"), a Texas corporation and licensed securities
brokerage, a wholly owned subsidiary of Rushmore, (Rushmore, its subsidiaries
and RSC are hereinafter collectively referred to as the "Companies"), and
Officer has other supervisory responsibilities for other functions of the
Companies; and
WHEREAS, Rushmore desires that Officer continue to use his experience and
abilities in the business of the Companies in a capacity similar to that in
which he has heretofore served; and
WHEREAS, Officer desires to accept such employment upon the terms and
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, it is hereby agreed as follows:
1. Employment. Rushmore hereby agrees to continue to employ Officer and
Officer hereby agrees to continue to serve Rushmore as President and Chief
Operating Officer of Rushmore Securities Corporation and in other
capacities similar to those in which he has heretofore served, for the term
and on the conditions hereinafter set forth. Officer shall have such
executive duties to Companies during the term of this Agreement as shall be
determined by the Board of Directors of Rushmore; however, Officer shall
not be assigned to a position which shall substantially diminish his
prestige or responsibility compared to that which he has heretofore enjoyed
with Rushmore. Subject to the foregoing, Officer hereby agrees to serve in
any comparable executive position in the State of Texas to which he shall
be directed by the Board of Directors of Rushmore, excluding service in the
insurance related businesses of Rushmore, and further agrees to use his
best efforts to promote the efficient and profitable operation of the
business of Rushmore.
2. Term of Employment. The term of Officer's employment shall continue subject
to the provisions of this Agreement, commencing as of the date hereof,
until December 31, 2000. Beginning January 1, 1998, and each January Ist
thereafter, the term shall annually be extended for a successive additional
one-year period unless either party notifies the other at least ninety (90)
days before any January 1st, or January 1st, of any later year
<PAGE>
immediately following the year terminating a thirty-six month renewal
period, that it intends to terminate. If such a notice is given, this
Agreement will terminate on December 31st following the date of the
notice.
3. Compensation.
a. Base Compensation. As base compensation for services provided pursuant
to this Agreement, Rushmore shall initially pay Officer compensation
at the rate of $96,000.00 per year, which amount shall be paid
beginning January 1, 1998. Within three months prior to each January
1st, the Board of Directors of Rushmore will evaluate the performance
of Officer and the compensation paid to executives in other companies
in the Financial Services Sector of similar size and scope of
operations, during the previous year and fix his Base Compensation for
the next following year at an amount which shall not be less than the
prior year's Base Compensation as determined by the Board of
Directors. When a new Base Compensation is fixed by the Board of
Directors of Rushmore under this paragraph, it shall become the new
Base Compensation and thereafter the Base Compensation shall not be
less than that amount, without regard to any elective deferral of
compensation by Officer. The Base Compensation provided for in this
Paragraph 3 shall be payable in equal semimonthly installments on the
first and fifteenth business day of each month.
b. Additional Compensation. Officer shall also earn commissions and
overrides for accounts serviced by him personally as broker for RSC,
and override commissions on commissions earned by persons introduced
by Officer to Rushmore and its subsidiaries or affiliates, in
accordance with the commission rates applicable to him, which shall be
paid semimonthly as provided above. The Board of Directors of Rushmore
reserves the right to pay to Officer compensation and any other bonus
or incentive compensation, in money, stock options, or any other form,
as the Board in its discretion deems appropriate. The total of the
Base Compensation and Additional Compensation shall be Combined
Compensation hereunder. In any year in which Officer shall elect to
defer a portion of the Base Compensation to which he is entitled, such
deferred amount shall be paid to Officer in the following year of this
Agreement or its termination.
c. Reimbursement. Rushmore shall provide Officer with an automobile, or
an allowance for such, for his business use and pay all expenses
of operating it. So long as Officer shall be employed by Rushmore, he
shall be entitled and authorized to incur reasonable and necessary
expenses in connection with or related to his business duties,
including without limitation, expenses for travel, entertainment,
maintaining membership in various clubs and similar expenses. Rushmore
will pay all such expenses directly or will reimburse Officer for
them.
<PAGE>
4. Participation in Employee Benefit Programs. Officer will be entitled to
participate on the same basis as other executive employees in any employee
benefit programs presently in force or subsequently adopted by Rushmore,
including such pension and profit-sharing plans, hospitalization, medical
and health and accident insurance programs, policies and benefits, life
insurance programs and pension and retirement benefit plans as may from
time to time be in effect.
5. Payments Upon Death or Disablilty.
a. In the event that Officer should die, Rushmore shall pay to the
beneficiary as may have been designated in writing by Officer or,
failing such designation, to Officer's estate, the sum of three (3)
years' Combined Compensation at the then existing rate. Such payment
shall be made either in cash within one hundred twenty (120) days
after Officer's death or disability, or in thirty-sixty (36) equal
monthly installments, as determined by Rushmore.
b. Rushmore shall acquire for the benefit of Officer, disability
insurance to pay to Officer a benefit of 75% of his Combined
Compensation for the last complete year of employment, in the event
Officer shall become totally disabled. Officer's occasional absence
from work for reasonable periods of time because of sickness (not
resulting in total disability) shall not result in any adjustment in
his compensation or rights under this Agreement. For the purpose of
this Agreement, the term "totally disabled" or "total disability" mean
Officer's inability on account of sickness or accident to regularly
engage or to adequately perform his assigned duties under this
Agreement.
6. Severance Pay Upon Termination. In the event Officer's employment is
terminated by Rushmore, except for "cause" and except for Officer's death
or total disability, Rushmore shall pay to Officer as severance pay the sum
of three years' Base Compensation at the then existing rate, plus any sums
due in respect of increases in Base Compensation pursuant to Paragraph 3(a)
hereof. Such payment shall be made in thirty-sixty (36) equal monthly
installments. Termination for "cause" shall mean termination by Rushmore
for any of the following reasons:
a. Willfully and significantly damaging Rushmore's property, business,
reputation or goodwill;
b. The commission of a felony;
c. Stealing, dishonesty, fraud or embezzlement;
d. Deliberate neglect of duty, or resignation.
<PAGE>
Notwithstanding any other provision of this Agreement, if during any period
of time, Officer receives severance pay pursuant to this Paragraph 6 and
concurrently therewith is paid any Combined Compensation (as defined in
Paragraph 3(b) hereof), then the amount of severance pay to which Officer
would otherwise be entitled hereunder shall be reduced during such period
by an amount equal to the Combined Compensation paid during such period.
7. Agreement not to Compete. Upon voluntary termination of Officer's
employment by Officer, or by termination by Rushmore, for "cause," and for
a period of one (1) year from the date of any such termination, Officer
hereby specifically agrees to refrain from:
a. Entering into any other employment contract, or other agreement or
understanding, whether written or oral, of like nature, to perform
services similar to those performed hereunder, either with or on
behalf of any person whose products, services, business, including
ownership of 75% or more of a competing company which its business or
other activities shall be determined exclusively by Rushmore, to be in
direct competition with any of the operations of either of the
Companies or inimical to their interests;
b. Hiring, attempting to hire or to assist any other person or entity in
hiring or attempting to hire an employee of Rushmore or one the
Companies, or any person who was an employee of Rushmore or one of the
Companies within the six-month period prior to the hire, attempted
hire or assistance in hiring or attempting to hire;
c. Soliciting, in competition with Rushmore or one of the Companies, the
business of any customer of Rushmore or one of the Companies, except
for those with which Executive had direct dealings during his
employment with Rushmore or one of the Companies.
This agreement not to compete shall extend throughout the State of Texas in
cities which Rushmore maintains a retail office.
8. Vacation/Sick Days. Officer shall be entitled to an annual vacation of
three (3) weeks each year at full compensation at a time mutually
satisfactory to Rushmore and Officer. Unused vacation and sick days may be
accrued indefinitely.
9. Approval by the Board of Directors. This Agreement has been approved by the
Board of Directors of Rushmore, at a meeting held on the day of ______,
1997.
10. Agreement is Personal. This Agreement is a personal agreement and the
rights and interests hereunder (except that of Rushmore) may not be sold,
transferred, assigned, pledged or hypothecated. This Agreement shall be
binding on the heirs, executors and administrators of Officer and on the
successors and assigns of Rushmore. During,
<PAGE>
Officer's lifetime, the parties hereto by mutual agreement may amend,
modify or rescind this Agreement without the consent of any other person.
11. Severability of Provisions. If any of the provisions of this Agreement
shall be held invalid, the remainder of this Agreement shall not be
affected thereby.
12. Governing Law. This instrument contains the entire agreement between the
parties and shall be govrned by the laws of the State of Texas. It may be
amended only by agreement in writing signed by each of the parties.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
RUSHMORE FINANCIAL GROUP, INC.
By: /s/ Dewey M. Moore, Jr
---------------------------------
Dewey M. (Rusty) Moore, Jr., President
/s/ Jim W. Clark
---------------------------------------
Jim W. Clark
<PAGE>
Exhibit 10.2.4
MARKETING AGREEMENT
This MARKETING AGREEMENT, made and entered into as of the 23rd day or
February, 1989, by and between MASSACHUSETTS GENERAL LIFE INSURANCE COMPANY
("MGLIC"), a Massachusetts stock life insurance corporation with principal
offices at 7887 East Belleview Avenue, Englewood, Colorado 80111, FACILITIES
MANAGEMENT INSTALLATION ("FMI"), a Delaware corporation with principal Colorado
offices at 7887 East Belleview Avenue, Englewood, Colorado 80111, FIRST
FINANCIAL LIFE INSURANCE COMPANY ("Life Company"), an Arizona stock life
insurance corporation with principal offices at Tampa, Florida, and FIRST
FINANCIAL MARKETING SERVICES, INC. ("Marketing Company"), a Florida corporation
with principal offices at 4830 Nest Kennedy Boulevard, One Urban Centre, Suite
595, Tampa, Florida 33609, and FIRST FINANCIAL LIFE COMPANIES. INC. ("Parent"),
a Texas corporation with principal offices in Tampa, Florida..
W-I-T-N-E-S-S-E-T-H
WHEREAS, MGLIC desires to increase their sale and issuance of life
insurance and similar products ("Insurance Business") and to maximize the
persistency thereof through the sale of such products by general agents of MGLIC
recruited by Marketing Company (hereinafter called "Agents"), and the
reinsurance by MGLIC to Life Company of part of such Insurance Business, all in
accordance with and subject to the following terms, conditions and provisions.
NOW, THEREFORE, in consideration of the premises and of the mutual promises
of the parties hereto, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
<PAGE>
1 Agents: Effective Date.
(a) Marketing Company will, from time to time in the future (i)
review lists supplied periodically by MGLIC that contain the identities of
all Agents recruited by or through Marketing Company or its down-line
agents and (ii)) promptly notify MGLIC In writing of any inaccuracy in, or
change to, such list.
(b) Marketing Company will provide to Life Company Agent recruiting,
training, and supervisory services in exchange for the payment by Life
Company to Marketing Company of a monthly service fee of $5,000. No other
party to this Agreement will be liable for the services and fees described
in this Section lCb).
(c) This Agreement shall not become effective until such time as Life
Company is issued a Certificate of Authority by Insurance Commissioner to
engage in the business of life Such agents are hereinafter Individually
referred to as and collectively referred to as "General Agents."
2. Reinsurance. Simultaneously with the execution of this Marketing
Agreement, MGLIC and Life Company shall enter into a reinsurance agreement
("Modified Coinsurance Agreement") on a modified coinsurance basis attached
hereto as Exhibit "B" and incorporated herein. Under the Modified Agreement
MGLIC will cede and Life Company will reinsure, on a quota share basis, certain
percentages of the Insurance Business produced as more specifically set forth in
Exhibit "B" hereto.
3. Administrative Services. Simultaneously with the execution of this
Marketing Agreement, Life Company and FMI shall enter into an Administrative
Services Agreement (herein so-called) In substantially the form attached hereto
as Exhibit "C" and Incorporated herein.
<PAGE>
4. Production Goals. Marketing Company agrees to use commercially
reasonable efforts to cause General Agents to solicit applications for Insurance
Business to be issued by MGLIC or its affiliates (including Southwestern Life
Insurance Company) for not less than the following aggregate cumulative First
Year Premiums ("Cumulative Production Goals") on or before the following Target
Dates (herein so-called):
TARGET DATES CUMULATIVE PRODUCTION GOALS
------------ --------------------------
By December 31, 1987 $2,000,O00.00
By December 31, 1988 4,000,000.00
By December 21, 1989 6,000,000.00
By December 31, 1990 8,000,000.00
By December 31, 1991 10,OOO,O00.0O
For the purposes of this Agreement the term "First-Year Premiums" shall mean the
aggregate life insurance premiums payable during the first year a policy or
contract of insurance is in effect, exclusive of (1) lump-sum cash deposits in
excess of published premium rates, (ii) premiums for flexible premium life
insurance contracts in excess of control premiums and (iii) premiums for single
pay contracts. All First-Year Premiums associated with any application for
Insurance Business submitted by a General Agent to MGLIC or any of its
affiliates (including Southwestern Life Insurance Company) shall be counted in
full unless and until such application is rejected by MGLIC or such affiliate.
All First-Year Premiums associated with any rejected application shall cease to
be counted as of the date of such rejection.
Insurance policies and contracts which have been issued prior hereof by
MGLIC or any of its affiliates (including Southwestern Company) as a result of
applications for Insurance Business or to the date Life Insurance solicited
<PAGE>
by General Agents after October 1, 1986, and meet the criteria as defined in
Schedule A, shall be deemed to have had been issued subsequent to the date
hereof but prior to December 31, 1997 for the purpose of calculating the
aggregate Cumulative First Year Premiums.
5. Termination. For the purpose of this Agreement, the term "Completion
Date" shall mean (1) December 31, 1991, or (ii) the date by which MGLIC has
issued Insurance Business as a result of applications solicited by General
Agents with aggregate cumulative First-Year Premiums in the aggregate amount of
$10,000,000, whichever occurs first.
(a) Prior to Completion Date. This Agreement prior to the Completion
Date, except:
(i) By the mutual consent of the parties hereto;
or
(ii) By MGLIC and FMI if any one or more of the Cumulative
Production Goals set forth herein are not achieved by their
respective Target Dates, and then only upon six (6) months' prior
written notice by MGLIC and FMI to Marketing Company and Life
Company;
or
(iii) By MGLIC and FMI in the event of a material breach on the
part of Marketing Company, Life Company or any General Agent of
this Agreement, the Administrative Services Agreement, any
Modified Coinsurance Agreement or any other Coinsurance Agreement
between MGLIC and Life Company or any General Agents'
Compensation Agreement and such breach is not cured or eliminated
within thirty (30) days after receipt of written
<PAGE>
notice thereof to Marketing Company and Life Company from MGLIC
and FMI;
or
(iv) By Marketing Company and Life Company in the event of a
material breach on the part of MGLIC or FMI of this Agreement,
the Administrative Services Agreement, the Coinsurance Agreement,
any Modified Coinsurance Agreement or any General~ Agents'
Compensation Agreement and such breach is not cured or eliminated
within thirty (30) days after receipt of written notice thereof
to MGLIC and FMI from Marketing Company and Life Company.
(b) After Completion Date. This Agreement may not be terminated
any time after the Completion Date except:
(1) By the mutual consent of the parties hereto; or
(ii) By MGLIC and FMI upon thirty (30) days' written notice to
Marketing Company and Life Company;
or
(iii) By Marketing Company and Life Company upon thirty (30)
days' written notice to MGLIC and FMI.
6. Recapture of Reinsured Business. If any Cumulative Production Goal is
not met by the Target Date applicable thereto, or if this Agreement is
terminated prior to the Completion Date pursuant to the provisions of Paragraph
5Ca)(i) or 5(a)(iii) above, MGLIC shall have the right, upon SIX months' prior
written notice to Marketing Company and Life Company, to recapture all of the
Insurance Business ceded by MGLIC to Life Company under the Modified Coinsurance
Agreements (and any other coinsurance agreement previously entered
<PAGE>
into between MGLIC and Life Company.) No consideration shall be paid by MGLIC or
FMI to Marketing Company or to Life Company for the recapture of such Insurance
Business.
7. Right of First Refusal. In the event that Life Company or one or more
stockholders (Including Parent) of Life Company (collectively the "Offerees")
receives an Offer (herein so-called) from an unaffiliated party ("Offeror") to
purchase all or part of the stock of Life Company or to reinsure all or part of
the Insurance Business previously assumed and reinsured by Life Company from
MGLIC, before Offerees accept such Offer they shall deliver a copy of the Offer
to MGLIC and FMI. During the thirty (30) day period following such delivery,
MGLIC and FMI shall have a right of first refusal for either MGLIC or FMI or any
of their affiliates to elect to purchase such stock or to reinsure such
Insurance Business, on the same terms and conditions contained in such Offer.
Upon the earlier of (i) the delivery by MGLIC AND FMI to Offerees of written
notification of their intent not to exercise such right of first refusal, or
(ii) the expiration of such thirty (30)day period without receipt by Offerees of
MGLIC's and FMI's written notice of intent not to accept the Offer.
If MGLIC and FMI exercise such right of first refusal but fail to
consummate the purchase within ninety (90) days after receiptby Offerees of
MGLIC's and FMI's written notice of exercise, and if such failure is for
any reason other than the refusal of Offerees to consummate the transaction
in accordance with terms of the offer or the failure of MGLIC and FMI,
despite diligent efforts, to obtain all necessary regulatory approval,
MGLIC's and FMI's right of first refusal shall terminate completely and
permanent. If, despite diligent efforts, MGLIC AND FMI fail to obtain all
necessary regulatory approvals within the ninety (90) day period specified
above, the right of
<PAGE>
refusal shall terminate on the earliest of (1) the date on which the receipt of
regulatory approvals is no longer possible or regulatory disapproval is
announced, (2) the date thirty days after the date on which regulatory approval
is granted if the purchase remains unconsummated (unless Offerees have refused
to consummate the transaction in accordance with the terms of the Offer), or (3)
the date on which MGLIC and FMI cease to make diligent efforts to obtain all
necessary regulatory approvals. Such ninety (90) day period may be extended by
mutual consent of MGLIC, FMI and Offerees.
Notwithstanding the foregoing, any right of first refusal which Parent may
now or subsequently have to purchase any shares of stock of Life Company or
Parent shall be superior to and shall pre-empt the aforesaid right of first
refusal in favor of MGLIC and FMI and their affiliates; provided, however, if
Parent fails to exercise any right of first refusal it may have, then the
Offerees shall promptly deliver a copy of the Offer to MGLIC and FMI, whIch
shall be entitled to exercise its right of first refusal in the manner described
above.
8. Miscellaneous.
(a) Assignments. This Agreement shall be binding on the parties hereto and
their respective successors and permitted assigns, but no party may assign
this Agreement without the prior written consent of the other parties.
(b) Counterparts. This Agreement may be executed In two or more
counterparts, each of which shall be deemed an original, but all of which
taken together shall constitute one and the same instrument.
(c) Section Headings. The headings set forth herein are for reference
purposes only and shall not In any way affect the meaning or interpretation
of this Agreement.
<PAGE>
(d) Waiver. No delay or omission by any party hereto to exercise any right
or power arising upon any noncompliance or default by any other party with
respect to any of the terms of this Agreement shall impair any such right
or power or be construed as a waiver thereof. A waiver by any of the
parties hereto of the fulfillment of any of the covenants, conditions or
agreements to be performed by any other shall not be construed to be a
waiver of any succeeding breach thereof or of any other covenant,
condition or agreement herein contained. All remedies provided for In this
Agreement shall be cumulative in addition to and not in hey of any other
remedies available to any party at law, in equity or otherwise.
(e) Amendments. (i) Except as provided In clause (11) below, this Agreement
may not be amended, nor shall any waiver, change, modification, consent or
discharge be effected, except by an Instrument in writing duly executed by
the parties hereto or their respective successors or permitted assigns.
(ii) Section 1(b) of this agreement may not be amended nor shall any
waiver, change, modification, consent, or discharge be effected, except by
an Instrument in writing duly executed by Marketing Company and Life
Company.
(f) Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Colorado.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed and delivered by their officers thereunto duly authorized, all as of the
date first hereinabove written
MASSACHUSETTS GENERAL LIFE INSURANCE COMPANY
By: /s/
Title
FACILITIES MANAGEMENT INSTALLATION
By: /s/
Title
FIRST FINANCIAL LIFE INSURANCE COMPANY
By: /s/
Title: President
FIRST FINANCIAL MARKETING SERVICES, INC.
By: /s/
Title: President
FIRST FINANCIAL LIFE COMPANIES, INC.
By: /s/
Title: President
Attest: /s/
Title: Vice President
<PAGE>
Exhibit 10.2.4
SCHEDULE A
Policy Criteria
Date Criteria: Po1cies Submitted Subsequent to October 1, 1986.
Policy inclusion Criteria:
a) Policies written directly by the General Agents
<PAGE>
Effective this day of ,19 .
(hereinafter referred to as Company. hereby appoints)
(General Agent's Name)
to act as the Company's General Agent (hereinafter referred to as
General Agent or You). for the solicitation of applications for
insurance. The title of the General Agent shall be
----------------------------------------------------------
The parties hereby agree as follows:
RELATIONSHIP OF THE PARTIES
1. The General Agent is an independent contractor. Nothing contained in this
contract or in any course of dealing between you and the Company whether in the
past or currently shah ha construed or interpreted to create an
employer~employet relationship between the Company md you.
You shall be free to exercise your own judgment as to the persons from whom
applications are solicited and as to the time, place and manner of solicitation:
however. the applicable statutes and governmental regulations pertaining to the
conduct of business covered hereby as well as the regulations from Ume to time
adopted by the Company respecting its methods of doing business shall be
observed and conformed to by you.
AUTHRITY
2.Your authority shall extend no further than is stated in this contract you are
hereby authorized to solicit applications for insurance and annuity contracts on
behalf of the Company. You are further authorized to collect in cash a
first-year premium on applications solicited or on policies forwarded to you for
delivery. You may not collect any deferred first-year or renewal premium uniess
a receipt is forwarded by the Company to you for that purpose. You shall not
collect any premiums past due except upon conditions specifically prescribed by
the Company. You shall not undertake to make. alter. or discharge any contract
or waive any forfeiture, or extend the time for payment of any premium or note,
or waive payments In cash. or contract debts or obligations in the name of the
Company or obligate it in any way. Except in cases where the first full premium
has been paid in advance. you shall not deliver any policy where you have
knowledge of any conditions suffered by the. applicant subsequent to the
application date which might affect insurability.
You have the authority to recruit insurance producers (Producers) to solicit
insurance and annuities under your supervision and recommend their licensing to
the Company. The Company reserves the right of refusal to license any such
proposed Producer. You shall contract directly with your Producers under
agreements suitable to you for solicitation of insurance a! authorized herein:
provided. however. that you agree to provide the Company with copies of all such
agreements.
LITIGATION
3.You shall not institute legal proceedings against any applicant policyholder
or any other person for any cause rising out of the business transacted under
this appointment unless the Company shall have been nottlied in writing of such
action or the proposed action simunaneously with the institution of such legal
proceedings. Should the Company be sued because of any alleged act by you. the
Company shall, upon receipt of notification of such suit notify you imrnediately
in order that you and the Company may mutually agree upon the appropriate
defense. the employment of counsel and a determination as to which party shall
be liable for the cost of such defense. The Company. at its sole discretion and
expense. may settle any claim or claims of applicants for insurance.
policyholders or others against the Company arising out of the business
transacted under this appointment. upon
<PAGE>
receipt of proof satisfactory to the Company of the justice of such claim or
claims. No settlement calling for payment by you in whole or in part (whether
directly or indirectly, or whether contributed to in whole or in pan by any
insurance carrier) shall be made without your consent
MODIFICATIONS
4. The Company shall not be bound by a promise. agreement understanding, or
representation heretofore or hereafter made unless made in writing and signed by
an officer of the Company expressing by its terms an intention to modity this
contract.
DISPUTES
5. If a claim to compensation is disputed by another General Agent or Producer,
the decision of the Company thereon shall be binding and conclusive.
RULES AND INSTRUCTIONS
6. This agreement shall be deemed to be supplemented by any provisions, rules
and instructions for the conduct of fla business which may be set forth in any
rate book, instruction manual, or other publication, or written directives
issued by the Company from time to time to the same extent as if such
provisions, rules and instructions were included herein.
REPLACEMENT
AND
REINSTATEMENTS
7. If a policy issued by Company is terminated and a new policy is issued on the
same life which, in tne judgment of the Company, is to take tne place of the
terminated policy, no compensation shall be allowed thereon. If any policy
obtained through you lapses and is then restored through the action of some
other person, the Company will not be liable for any further compensation
thereon.
ADVERTISING
8. You shall comply with the rules of the Company and any applicable statutes
and governmental regulations relating to advertising, publicity releases, and
the use of written or printed material pertaining to the Company policies,
plans, financial condition, or statements concerning production.
COMPENSATION
9. As compensation for the services to be rendered, you will be paid at the
rates and under the conditions set forth in the attached schedule(s) of
compensation on premiums paid in cash and accepted by the Company for first and
subsequent policy years on account of policies issued on applications generated
by you or your Producers, and only after the due date of the premium.
The Schedules may be changed upon written notice to you by the Company and any
applications sojicfled by you shall be affected by such change thirty (30) days
after the date of such written notice.
You hereby agree that any obligation due from you may be offset by the Company
against any money payable to you under this contract and that any such
indebtedness shall be a first lien upon any funds due to you under this contract
The Company may, moreover, require an immediate repayment of such an
indebtedness regardless of whether future compensation becoming payable to you
appears to be adequate to offset such indebtedness. In the event the Company is
required to pursue formal collection procedure in order to collect any
indebtedness under the terms of this contract you agree to be responsible for
any expense incurred, be it the fee of a collection agency, attorney, or other
cost, including court cost.
In the event you have been appointed by an affiliate of the Company any
indebted ness owing the Company may be onset by compensation due you from the
affiliate and any indebtedness owing the affiliate may be onset by compensation
due you under this appointment.
REJECTIONS
10.The Company may retect any application for insurance obtained by you or your
Producers without specifying the reason therefor and return the premium thereon.
RETURN OF
PREMIUM
11. Should the Company for any reason return a premium on a policy, you shall
repay to the Company on demand, the amount of compensation received on the
premium so returned.
<PAGE>
INDEBTEDNESS
12. Any indebtedness incurred by you or your Producers shall, in the absence of
any agreement in writing to the contrary, be loans payable upon demand. As
security for any such loans, the Company shatl have a first lien upon any
compensation payable to you under this or any other contract between you and the
Company and may at any time deduct from any such compensation any such
indebtedness.
ASSIGNMENT
13. No Assignment of compensation payable hereunder shall be valid unless
Accepted in writing by the Company.
INTENT NOT TO
WAIVE
14. The failure of the Company to enforce any provision in this contract or any
regulation it promulgates shall not constitute a waiver thereof.
TERMINATION
15.This contract shall terminate: (1) Upon your death or in the event you become
totally and permanently disabled: (2) Upon the giving of written notice by you
or the Company, said notice being delivered personally or mailed to the last
known address of the other party via United States mail.
In the event of termination as described above. you agree to deliver all Company
property to the Company and to repay any existing indebtedness to the Company.
11 tne contract terminates by reason of your health, or in the event you die
prior to receipt of all compensation due to you, compensation due, or thereafter
becoming due. shall be paid to your estate. In the event you are a corporation,
this contract shalt. automatically terminate in the event the corporation ceases
to do business as a corporation, in which case all compensation due and
thereafter becoming due to it shall be payable to its successor or duly
appointed representative.
PRIOR
AGREEMENTS
SUPERSEDED
16.This agreement supersedes all prior agreements between the Company and you
with respect to policies issued through you after the effective date hereof.
WITHDRRAWAL
17. Company retains the right to withdraw any policy form or withdraw from any
territory or jurisdiction.
IN WIThESS WHEREOF this appointment has been executed on this day of 19 .
Life Insurance Company Name of Agency
By:
Vice President Signature/Title
<PAGE>
LIFEINSURANCE COMPANY
Effective Date
GENERAL AGENT'S LIFE COMPENSATION SCHEDULE
This schedule, which is part of the Agreement to which it is attached, is
applicable to insurance policies issued by the Company as a result of
applications solicited by you and your Produces and payment of compensation
contemplated or collected by the Company. Payment of compensation is subject to
terms and conditions herein and as contained in the Agreement to which this
Schedule is attached. Payment hereunder shall be the percentage of premium
collected as stated herein if a policy is issued as a result of an application
solicited by you. Payment hereunder shall be the difference between the
compensation payable to you and the compensation payable to a Producer appointed
through you if a policy is issued as a result of an application submitted by
such Producer.
COMPENSATION PAYABLE
First year compensation is calculated on premiums collected during a first
policy year. First year compensation, except as specified below, is not payable
on premiums collected in excess of the control premium, as defined by the
Company, nor on premiums collected after the first policy year as a result of
policy increases, or otherwise.
Renewal compensation is calculated on all premiums in the second and
subsequent policy years, subject to the number of years payable contained
herein.
Service fees are payable on premiums collected so long as you satisfactorily
service the policies, you are duly licensed with the state regulatory authority
of the state of residence of the involved policy and the Agreement has not been
terminated.
Compension on supplementary benefits provided by riders attached to a policy
shall be at the same percentage and for the same period of time as is applicable
to the policy itself. No compensation shall be payable on fiat extra premiums,
amporary or permanent. Charged by the Company.
VESTING
Upon termination of the contract Payment of compensation shall be as follows:
1. You or your legal successor Shall be entitled to receive first-year
compensation.
2. In the event this contract is terminated, (i) having been in effect for
at least two (2) years, or (ii) after the combined cumumulalive firs.year
commissions earned by you and your Producers totals at least $21000, or (iii) as
a result of your death or permanent and total disability. insurance renewal
compensation shall continue to be payable to you or your legal successor for the
periods stated herein as though this contract had not been terminated. subject
to the conditions contained herein.
3.In the event your contract is terminated prior to meeting the conditions
as outlined in two (2) above, then no further renewal compensation will be paid.
4. Notwithstanding the foregoing, payment of such renewal compensation
shall cease when compensation amounts to less than $500 annually.
<PAGE>
<TABLE>
<CAPTION>
GENERAL AGENTS SCHEDULE OF COMPENSATION
<S> <C> <C>
Service Fee
First Year 11th Year &
Policy Description Compensation Years 2-10 Thereafter
Lifetrend Joint and Last Survivor (LS-83) (1) 75% 7% 3%
Lifetrend III (NP-WL-86) (1) 57% 5% 3%
Lifetrend IV (NP-END-SB) (1) 66% 5% 3%
Lifetrend V (NP-5-86) (1) 60% 5% (Years 2-5)
3% (Years 6-10) 3%
Lifetime II (UNF-86)(2) 71.5%* 5% 3%
Lifetime III (BRUNF-86) (2) 66*(a) 5% 3%
Lifestyle I (SUN-U) (2) 44%*(a) 2% 2%
Lifestyle II (SUNF-86) (2) 44% 2% 2%
Lifetime VIP I (VIP-84) (2) 60% 5% 5%
Guaranteed Issue Age 40 & Over 50%*(a) 5% 5%
Lifetime VIP II (VIP-85)(2) 40%*(a) 3% 3%
Lifefund (SP-86)
Age 0-69 4%** 0% 0%
Age 70-80 2.5%** 0% 0%
Annual Renewable and Convertibe Term (T-86) 40% 25% (2nd Year) 3%
10% (Years 3-10)
</TABLE>
*This percentage is applicable only to premium amounts not in excess of control
premium paid during the first policy year. compansation payable for premiums
paid in excess of the control premium shall be at the renewal rate as indicated
above.
(1)These products qualify for the Life Production Quality Bonus.
(2)These products qualify for the Life Production Accumulation Account Bonus.
**In the event of termination of a policy, issued on this policy farm, during
the first policy year, all compensation paid on such policy will be reversed and
charged to you.
(a) If premiums in exceas of the control premium paid the Company are returned
to the owner of a policy within the twelve month period immediately
following such payment by reason of termination of the policy or at the
owner's request all compensation paid you on such premiums, will be
reversed and charged back.
The above percentages are percentages of premiums received by the Company
and credited to a policy.
BONUSES
Lifefund, GP-21 and Annual Renewable and Convertible Term policies qualify only
for the Life Production Incentive Bonus.
All other policy forms qualify for all bonuses in accordance with the bonus
supplements attached to your General Agent's contract.
Page 2 of 2
<PAGE>
LIFE INSURANCE COMPANY ("Company")
Effective this___day of_____________________19_____
WAIVER AMENDMENT
LIFE PRODUCTION INCENTIVE BONUS
Thm Amendment modifies to the extent stated herein that certain Life Production
Incentive Bonus Amendment ("PIB Amendment") to the General Agent's Compensation
Agreement effective ___________________________
between the Company and ___________________________("General Agent").
In consideration of the General Agent's commitment for production of first year
premium applicable to life insurnace policies to be issued by the Company based
upon applications for insurance solicited by or through the General Agent, the
parties agree as follows: effective ___________________________ to Company and
("General Agent").
1. The Company will waive that provision of the RIB Amendment limiting
payment of any bonus due the General Agent to semi-annual payments to me
extent specilied in (2) below.
2. The Company will calculate and make payment each month to the General
Agent of the amount of Production Incentive Bonus urned during the
preceding month The Percentage of First Year Earned Commissions to be
waived will be _______%.
3. The General Agent agrees that the Company may reduce the Percentage of
First Year Earned Commissions to be waived or terminate this Amendment, at
its sate option, in the event the General Agent does not meet his
commitment for production of first year premium during any calendar year.
IN WTNESS WHEREOF, this Amendment has been executed as of the date first above
written.
____________________Life Insurance Company ____________________________
Name of General Agent
_________________________________________ By: _______________________
Vice President Title
<PAGE>
___________________________LIFE INSURANCE COMPANY
Effective Date _________________________________
LIFE PRODUCTION ACCUMULATION ACCOUNT BONUS
TO: ___________________________________________________________________________
(General Agent)
Your General Agent's Contract dated ____________________________ is hereby
amended to provide for additional compensation for you subject to the conditions
and qualifications contained herein. This amendment is not intended to change or
amend any other part or parts of mid General Agent's contract except as may be
set forth below.
LIFE PRODUCTION ACCUMULATION ACCOUNT BONUS
Eligibility shall be based upon the quality of the life insurance business
produced through your agency during time periods specified below, and the amount
of paid first year compensation earned through your agency. Such bonus shall
be determined and payable as follows:
(A) Initial qualification for a Life Production Accumulation Account Bonus
requires that (i)90% (minimum persistency) of the life insurance premium
resulting from applications produced through your Agency be in forces at
the end of a calendar year, and (ii) that the total paid first year
compensation during such year be equal to an amount shown below. The bonus
payable will be the product of the aggregate of the amount of the
unborrowed accumulation accounts of all policies in force at the end of the
calendar year which had been issued during such year multiplied by the
percentage specified in the Percentage of Unborrowed Accumulation Account
table for the appropriate policy duration.
<TABLE>
<S> <C> <C>
Policy Percentage of
Paid First Year Compensation Duration Unborrowed
In Calendar Year* Years Accumulation Account
- ----------------------------------------- --------------------- ------------------------
$250,000 - 499,999 1-5 .375%
$250,000 - 499,999 6-20 .125
$500,000 and Over 1-5 .750
$500,000 and Over 6-20 .250
</TABLE>
*Compensation as used herein does not include any compensation received in
the form of a bonus.
(B) During each subsequent calendar year after initial qualification pursuant
to Paragraph A above, provided that in such calendar year your agency has
not less than S250.000 of paid first year compensation, a determination as
to continued qualification shall be made by determinging (i) the aggregate
amount of annualized premium on policies, issued by the Company, based upon
applications received through your agency and, (ii) the persistency of such
premium at certain prescribed policy months.
1 of 2
<PAGE>
Persistency is defined as being a percentage wherein, (i) the numerator is
the aggregate control premium in force for all flexible premium (universal
life) policy forms, plus, the aggregate annualized premiums in force for
all other eligible policy forms in force, and (ii) the denominator is the
aggregate of control premium for all issued flexable premium (universal
life) policy forms, beginning with such policy forms issued in the calendar
year of initial qualification, plus, the aggregate annualized premiums for
all other eligible policy forms issued, beginning such policy forms issued
in the calendar year of initial qualification.
As set forth in the Compensation schedule attached to and made a part of your
contract, compensation derived from certain life policy forms is not taken into
consideration in determining the amount of the Life Production Accumulation
Account Quality Bonus payable, however, such compensation is utilized in
determining your eligibility for the Life Production Accumulation Account Bonus.
The bonus is based on a ten year rolling block of premium subject to paid first
year compensation and minimum persistency qualification as described.
The table below sets forth the prescribed policy months and the cumulative,
minimum persistency required in the determination of subsequent years
eligibility lot the Life Production Accumulation Account Quality Bonus.
Calendar Years Policy Month
Following Initial Following Initial Minimum
Qualification Qualification persistency
-------------------- -------------------- -----------
Year 2 25 85%
Year 3 37 80%
Year 4 49 75%
Year 5 61 70%
Year 6 73 67.5%
Year 7 85 65%
Year 8 97 62.5%
Year 9 109 60%
Year 10 121 57.5%
other than as herein provided, all provisions of your contract shall be
applicable hereto, however, no bonus shall be payable after termination at the
contract to which this amendment is attached.
Page 2 of 2
<PAGE>
___________________________________ LIFE INSURANCE COMPANY
Effective Date _________________________________________
LIFE PRODUCTION INCENTIVE BONUS
TO: ____________________________________________________________________
(General Agent)
Your General Agents Contract dated ____________________________ is hereby
amended to provide for additional compensation payable to you subject to the
conditions and qualifications contained herein. This amendment is not intended
to change or amend any other part or parts of said General Agent's contract
except as may be set forth below.
You shall be eligible to receive a Ufe Production Incentive Bonus, hereinafter
referred to as "bonus." The bonus shall be payable semi-annually during each
calendar year while this contract is in effect Eligibility will be determined by
reference to total first year life insurance compensation earned by your agency
(the aggregate compensation earned by you and your producers), during the
calendar year as a result of applications solicited by you and your producers on
policy forms eligible for this Life Production Incentive Bonus. Your eligibility
for this bonus will be determined as follows:
Production Incentive Bonus
Agency Paid First Year Percentage of Earned
Life Insurance Commissions First Year Commissions
----------------------------- --------------------------
$ 12,499 -0-
12,500- 24,999 12%
25,000- 49,999 17%
50,000- 124,999 21%
125,000- 249,999 26%
250,000- 374,999 27%
375,000- 499,999 28%
500,000- 749,999 29%
750,000- 999.999 30%
1,000,000-1,249,999 31%
1,250,000 1,499,999 33%
1,500,000-1,749,999 35%
1,750,000-1,999,999 36%
2,000,000+ 37%
Page 1 of 2
<PAGE>
If you become eligible for a Life Production Incentive Bonus, the amount of the
bonus shall be determined by multiplying the total earned first year
compensation earned during the accounting period by the production incentive
bonus percentage stated above. Accounting periods shall be for the six month
periods ending June 30 and December31 in each calendar year. A determination of
eligibility, and if eligible. the payment of a production Incentive bonus than
be made to you within forty-five days following the end of each accounting
period. A production incentive bonus will be payable for accounting periods
ending on June so if, during the accounting period. your agency has earned first
year compensation equal to one of the compensation levels set forth above. The
bonus payable will be calculated based upon the level reached. The bonus payable
for the December 31 accounting period will be calculated as me amount payable
for the full calendar year less the amount of bonus actually paid for the
accounting period ended June 30.
As as forth in the compensation schedule attached to and made a part of your
contract, compensation derived from certain life policy forms, is not taken into
consideration in determining the Life Production Incentive Bonus. However,
compensation on such forms is utilized in determining your eligibility for the
Life Production Incentive Bonus
No bonus shall be payable after termination of this contract.
Page 2 of 2
<PAGE>
Exhibit 10.3.1
MODIFIED
COINSURANCE AGREEMENT
THIS MODIFIED COINSURANCE AGREEMENT, made and entered into effective January
1,1987, by and between SOUTHWESTERN LIFE INSURANCE COMPANY ("Ceding Insurer"), a
Texas corporation, with principal offices located at 500 North Akard, Dallas,
Texas 75221, and FIRST FINANCIAL LIFE INSURANCE COMPANY ("Life Company"), an
Arizona, corporation with principal offices at 4830 West Kennedy Boulevard, One
Urban Center, Suite 595, Tampa, Florida 33609.
WITNESSETH:
In consideration of the premises and the mutual promises of the parties hereto,
and for good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereby agree as follows:
1. Definitions. The following terms shall mean:
1.1 "Abatement" means the termination of the provisions of this Modified
Coinsurance Agreement relating to the cession of additional Insurance
Business Modified Coinsurance Agreement.
1.2 "Accounting Period" means each calendar quarter ending on March 31, June
30, September 30, and December 31, of each year.
<PAGE>
1.3 "Beginning Calendar Year" means the period commencing with the effective
date of this Modified coinsurance Agreement and ending December 31,1987.
1.4 "Calculation Period" means the Beginning Calendar Year, the Ending Calendar
Year and each Calendar Year occurring in between them.
1.5 "Calendar Year" means the each twelve month period beginning January 1st
and ending December 3lth.
1.6 "Ending Calendar Year" means the period commencing on January 1st of the
year in which this Modified Coinsurance Agreement is Abated and ending on
the date of Abatement.
1.7 "First Year Paid Life Insurance Premiums" means the life insurance premiums
received by the Ceding Insurer on the Policies reinsured hereunder during
the first year each of such Policies is in effect, exclusive of (i)
lump-sum cash deposits in excess of published premium rates, (ii) premiums
and (iii) premiums for single pay contracts..
1.8 "Gross Rate of Interest" for any Accounting Period shall be the amount of
basis points over the effective annual rate of interest credited by Ceding
Insurer on interest-sensitive life insurance Policies (as hereinafter
defined) as dictated in Schedule A by product type as authorized by Ceding
Insurer's Board of Directors and in effect on the first day of each
Accounting Period.
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1.9 "Gross Investment Income" for any Accounting Period shall be an amount
equal to:
(a) The Gross Rate of Interest multiplied by an amount equal to (i)
Reinsurer's Quota Share of the Reserve Liability at the beginning of such
Accounting Period less (ii) an amount equal to Reinsurer's Quota Share of
the principal amount of all policy loans on the policies reinsured
hereunder ("Policy Loans") at the beginning of the Accounting Period less
(iii) any unpaid settlements due to the Ceding Insurer plus (iv) any unpaid
settlements due to the Reinsurer;
Plus
(b) An amount equal to Reinsurer's Quota Share of the interest receive by
Ceding Insurer during such Accounting Period on all Policy Loans.
1.10 "Gross Premium" means all of the paid premiums received by Ceding Insurer
on the Policies reinsured hereunder including (i) lump sum cash deposits in
excess of published premium rates, (ii) premiums for flexible premium life
insurance contracts in excess of control premiums and (iii) premiums for
single pay contracts..
1.11 "Insurance Business Produced" means one hundred percent (100%) of Ceding
Insurer's liability under all insurance policies and contracts ("Policies")
issued by Ceding Insurer on the basis of applications solicited by General
Agents included in the General Agents list, Exhibit A of the Marketing
Agreement. Only that business produced by General Agents while they are
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included in Exhibit A shall be reinsured hereunder. For example, if a
General Agent is terminated or otherwise removed from Exhibit A of the
Marketing Agreement, any insurance business produced by that General Agent
after the date of termination or removal will be excluded form this
agreement, but insurance business produced by that General Agent prior to
the date of termination or removal will remain in force under this
agreement.
1.12 "Quota Share" means for any given Calculation Period, a fifty percent (50%)
undivided interest in the Insurance Business Produced.
1.13 "Reserve Liability" means the actuarial reserves relating to the Policies
reinsured hereunder as reported in Exhibit 8 of Ceding Insurer's Annual
Statement prepared on forms prescribed by the National Association of
Insurance Commissioners ("NMC Statement"). Such reserves shall be
determined on the same basis as that used by the Ceding Insurer in
computing its Reserve Liability.
1.14 "Termination" means the termination of all of the provisions of this
Modified Coinsurance Agreement and includes the recapture by Ceding Insurer
of all Policies previously reinsured hereunder.
2. Reinsurance. Ceding Insurer agrees to cede to Reinsurer and Reinsurer
agrees to assume and reinsure from Ceding Insurer, on a modified
coinsurance basis, Reinsurer's Quota Share of the Insurance Business
Produced on the terms and conditions stated herein.
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2.1 This Modified Coinsurance Agreement is an indemnity reinsurance agreement
solely between the Ceding Insurer and the Reinsurer and, except as
otherwise provided herein, the performance of the obligation of each party
hereunder shall be rendered solely to the other party. Except as otherwise
provided herein, no person other than Ceding Insurer and Reinsurer shall
have any rights under this Modified Coinsurance Agreement and the Ceding
Insurer shall be and remain solely liable to any insured, policyowner, or
beneficiary under the Policies reinsured hereunder.
2.2 Reinsurer shall, except for Reserves, Policy Loans and Policy Issue
Expenses and Policy Maintenance Expenses, share with the Ceding Insurer, on
the basis of Reinsurer's Quota Share, in all transactions relating to
Policies reinsured hereunder, including, without limitation:
(a) All Premium transactions effected;
(b) All commissions, fees and bonuses paid to or for the benefit of the
General Agents.
(c) All policy benefits paid.
(d) All policyholder dividends paid.
(e) All premium taxes paid.
(f) All nonforfeiture benefits paid.
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2.3 Except as provided herein, the liability of Reinsurer with respect to the
Policies reinsured hereunder shall begin and end simultaneously with the
liability of the Ceding Insurer.
2.4 Reinsurer's Quote Share of reinsurance hereunder shall be maintained in
force as to the Policies reinsured hereunder without reduction so long as
the amount of insurance for which the Ceding Insurer is obligated under
such Policies remains in force without reduction.
3. Reserves. Ceding Insurer shall be solely responsible for furnishing all for
the assets necessary to satisfy the Reserve Liability on the Policies
reinsured hereunder ("Reserves").
3.1 Ceding Insurer shall retain ownership of all assets held as Reserves on the
Policies reinsured hereunder and Reinsurer shall have no legal, equitable
or security interest in such assets.
3.2 Reinsurer shall not participate in any long or short term capital gains or
losses incurred by Ceding Insurer with respect to such assets and no part
of any such gains and losses of Ceding Insurer from, or considered as being
from, the sale or exchange of any asset shall be treated as gains or losses
from the sale or exchange of assets owned by or belonging to the Reinsurer.
3.3 Reinsurer shall be solely responsible for paying all Federal, State by the
Ceding Insurer to the Reinsurer hereunder.
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4. Expenses. Except as otherwise provided herein, Ceding Insurer shall bear
all expenses relating to the issuance and maintenance of the Policies
reinsured hereunder.
4.1 For purposes of this Modified Coinsurance Agreement, Policy Issue Expenses
(herein so-called) for each new Policy reinsured hereunder and Policy
Maintenance Expenses (herein so-called) for each Policy reinsured hereunder
are detailed in Schedule A (attached). Reinsurer shall reimburse the Ceding
Insurer for Policy Issue Expenses and Policy Maintenance Expenses in an
amount equal to Reinsurer's Quote Share of the Policies reinsured
hereunder, expressed as a percentage of the Policy Issue Expenses and the
Policy Maintenance Expenses.
4.2 Service Fees shall be paid by the reinsurer as detailed in Exhibit B, the
Administrative Services Agreement, as long as the business described herein
remains in force.
5. Payments by Ceding Insurer. Within 60 days after the end of each Accounting
Period, Ceding Insurer shall deliver to Reinsurer an accounting with
respect to all Policies reinsured hereunder and Ceding Insurer shall pay to
Reinsurer the sum of:
(a) Reinsurer's Quota Share of Gross Premiums for such Accounting Period.
(b) The Gross Investment Income for such Accounting Period.
(c) Reinsurer's Quota Share of any decrease in Reserve Liability for such
Accounting Period.
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5.1 All sums due Reinsurer shall be offset, to the extent applicable, against
all sums due Ceding Insurer under Paragraph 6 below.
6. Payments by Reinsurer. Within 60 days after the end of each Accounting
Period, Reinsurer shall pay Ceding Insurer the sum of:
(a) Reinsurer's Quota Share of all disbursements made by Ceding Insurer
with respect to the Policies for such Accounting Period, (other than
disbursements relating to Policy Issue Expenses, Policy Maintenance
Expenses, Reserves and Policy Loans) including, without limitation,
all death benefits, nonforfeiture benefits, matured endowments,
disability waiver of premium benefits, policyholder dividend, premium
taxes, commissions and bonuses and Reinsurer agrees that it will pay
all costs and expenses incurred by it or on its behalf in connection
with the retrocession of any liability on the Policies reinsured
hereunder.
(b) Reinsurer's Quota Share of all Policy Issue Expenses and Policy
Maintenance Expenses for such Accounting Period.
(c) Reinsurer's Quota Share of all increases in Reserve Liability for such
Accounting Period.
6.1 All sums due ceding insurer shall be offset, to the extent applicable,
against all sums due Reinsurer under Paragraph 5 above.
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7. Retrocession. The Reinsurer's risk in excess of he Reinsurer's normal
retention should be addressed in Exhibit C, Reinsurance Agreement.
8. Oversight. It is understood and agreed that if failure to comply with any
terms of this Modified Coinsurance Agreement is shown to be unintentional
and the result of misunderstanding or oversight on the part of either the
Ceding Insurer or Reinsurer, both the Ceding Insurer and Reinsurer shall be
restored to the position they would have been in had no such
misunderstanding or oversight occurred.
9. Reinstatement. If a Policy reinsured hereunder lapses for non payment of
premium and is subsequently reinstated by the Ceding Insurer under its
regular rules, Reinsurer will automatically reinstate its reinsurance with
respect to such Policy. The Ceding Insurer will promptly notify Reinsurer
regarding any such reinstatement and will pay to reinsurer its share of
premiums in arrears, with interest at the same rate and in the same manner
as receive by the Ceding Insurer in connection with the reinstatement.
10. Misstatement of Age. If there is an increase or reduction in any Policy
reinsured hereunder because of an overstatement or understatement of age
being established either before or after the death of the life insured,
Ceding Insurer and Reinsurer shall share in such increase or reduction in
proportion to their respective liabilities under the Policy.
11. Settlement of Claims. The Ceding Insurer shall give Reinsurer prompt notice
of any claim submitted on a Policy reinsured hereunder and prompt notice of
any investigation conducted or any legal proceedings instituted
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in connection therewith. The Ceding shall keep Reinsurer advised of all
subsequent developments relating to any such claim. Copies of proofs or
other documents bearing on any such claim, investigation, or proceedings
shall be furnished to Reinsurer upon request. For life and accidental death
benefit claims, Reinsurer will pay its Quota Share in a lump sum to the
Ceding Insurer unless the benefit is to be paid to the beneficiary over a
period of time, in which case Reinsurer shall pay its Quota Share to the
Ceding Insurer form time to time as the Ceding Insurer makes payment to the
beneficiary. For a waiver of premium disability claim, Reinsurer will pay
its Quota Share of each year's premium waived by Ceding Insurer. Reinsurer
will accept the decision of the Ceding Insurer on payment of a claim or
settlement of a suit arising from Policies reinsured hereunder, provided
that with respect to any claim or settlement equal to or in excess of
$500,000 or relating to any Policy on which Reinsurer has reinsured 50
percent or more of the Ceding Insurer's liability, the Ceding Insurer shall
not accept or settle such claim without the prior consent of Reinsurer,
which consent shall not be unreasonably withheld or delayed.
11.1 The Ceding Insurer will give Reinsurer prior written notice of its
intention to contest, compromise, or litigate any claim involving
reinsurance hereunder. Reinsurer will pay its share of the expense of such
contest in addition to its share of the claim itself unless within twenty
days of receipt of such notice it advises the Ceding Insurer that it is
willing to pay its Quota Share of such claim in full. In the event that the
Ceding Insurer contests or litigates a claim with respect to which
Reinsurer has so advised the Ceding Insurer, Reinsurer shall not be
lesser of (a) its original Quota Share of such claim, not including
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associated expenses, of (b) its Quota Share of the amount for which such
claim is actually settled plus associated expenses.
11.2 Reinsurer will, at the request of the Ceding Insurer, advise and assist the
Ceding Insurer with respect to any claim in its determination of liability
and on suitable procedures to follow in order to contest or litigate a
claim of doubtful validity.
11.3 Reinsurer shall not be liable for any portion of any punitive or exemplary
damages, penalties, or fines imposed on the Ceding Insurer in connection
with any claims with respect to which Reinsurer has advised Ceding Insurer
as set forth in Section 11.1. Reinsurer shall not be liable for any damages
assessed against the Ceding Insurer arising out of its conduct in the
investigation, negotiation, defense, or handling of any such claims or
suits connected there with or for any loss arising from fraud or bad faith
on the part of the Ceding Insurer.
12. Inspection of Records. Each party shall have the right at any reasonable
time during normal business hours to inspect, at the office of the other
party all books and documents relating to reinsurance under this Modified
Coinsurance Agreement.
13. Arbitration. It is the intention of the parties hereto that customs and
usages of the business of reinsurance shall be given full effect in the
interpretation of this Agreement. The parties shall act in all matters with
the utmost good faith. All disputes, controversies, claims, and other
matters in question between the parties hereto arising in connection with
this Agreement or the breach thereof shall be submitted to arbitration
pursuant to the following procedure:
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(i) Any party hereto may make a written demand ("Demand") for arbitration,
which Demand shall include a statement of the matter in controversy and the
appointment of an arbitrator by the demanding party. Such Demand must be
served on all of the parties hereto and must be made within a reasonable
time after the controversy, claim, dispute, breach or other matter in
question has arisen, but no event after the time when institution for legal
or equitable proceedings based on such controversy, claim, dispute, breach
or other matter in question would be barred by the applicable statute of
limitations.
(ii) Within ten (10) days after such Demand, the responding party shall, by
written notice served on the demanding party, appoint a second arbitrator.
Should the responding party fail to appoint a second arbitrator as
aforesaid, the arbitrator appointed by the demanding party shall be the
sole arbitrator. Otherwise, a third arbitrator shall be appointed by such
two arbitrators within fourteen (14) days of the appointment of the second
arbitrator. Should the two arbitrators appointed by the parties not be able
to agree upon a choice of a third arbitrator, then such appointment shall
be made by the President of the American Council of Life Insurance. All
arbitrators shall be officers of life insurance companies; provided,
however, that no arbitrator shall be an officer, director, or stockholder
of the parties hereto.
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(iii)The arbitration proceeding shall be governed by and conducted in accordance
with the procedural rules of the American Arbitration Association
applicable to commercial arbitration except as expressly provided otherwise
herein. Ex parte communication between any party and any arbitrator
subsequent to the appointment of the third arbitrator shall be prohibited.
(iv) The arbitration hearing shall be held at a place selected by the
arbitrators. The award thereon shall be made within twenty (20) days after
conclusion of the hearing pursuant to a decision by majority vote. The
award rendered by the arbitrators shall be in writing, final, unappealable,
binding on all parties and enforceable in any court of competent
jurisdiction. The cost of such arbitration proceeding, including the fees
of arbitrators, shall be borne by the losing party unless the arbitrators
decide otherwise. The parties stipulate that the provisions hereof relating
to arbitration shall be a complete defense to any Suit, action, or
proceeding instituted in any federal, state or local court or before any
administrative tribunal with respect to any controversy or dispute which is
within the scope of this Paragraph 13. The arbitration provisions hereof
shall survive the termination of this Agreement.
14. Insolvency. In the event of the insolvency of the Ceding Insurer, all
reinsurance shall be payable directly to the liquidator, receiver, or
statutory successor of said Ceding Insurer, without diminution because of
the insolvency of the Ceding Insurer' provided, however, that any
obligations of the Ceding Insurer to Reinsurer shall be offset against the
obligations of Reinsurer to Ceding Insurer.
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14.1 In the event of the insolvency of the Ceding Insurer, the liquidator,
receiver, or statutory successor of the Ceding Insurer shall give the
Reinsurer written notice of the pendency of any claim on a Policy reinsured
within a reasonable time, to be less than thirty days after such claim is
filed in the insolvency proceeding. During the pendency of any such claim.
Reinsurer may investigate such claim and in the name of the Ceding Insurer
(or its liquidator, receiver, or statutory successor), but at its own
expense, interpose in the proceeding where such claim is to be adjudicated
any defense or defenses which it may deem available to the Ceding Insurer
or its liquidator, receiver, or statutory successor.
14.2 Any expense thus incurred by Reinsurer shall be chargeable, subject to
court approval, against the Ceding Insurer as part of the expense of
liquidation to the extent of a proportionate share of the benefit which may
accrue to the Ceding Insurer solely as a result of the defense undertaken
by Reinsurer. Where two or more reinsurers are participating in the same
claim and a majority in interest elect to interpose a defense or defenses
to any such claim, the resulting expense shall be apportioned in accordance
with the terms of the reinsurance agreement as though such expense had been
incurred by the Ceding Insurer.
15. Abatement. This Modified Coinsurance Agreement may be abated:
(a) By the mutual consent of the Ceding Insured and Reinsurer; or
(b) By Ceding Insurer upon thirty (30) days written notice to Reinsurer;
(c) By Reinsurer upon thirty (30) days written notice to Ceding Insurer.
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16. Termination. This Modified Coinsurance Agreement may only be terminated:
(a) By the mutual consent of the Ceding Insurer and the Reinsurer; or
(b) By Ceding Insurer in the event of a material breach hereof by
Reinsurer and such breach is not cured or eliminated within thirty
(30) days after receipt of written notice thereof to Reinsurer form
Ceding Insurer; or
(c) By Reinsurer in the event of a material breach hereof by Ceding
Insurer and such breach is not cured or eliminated within thirty (30)
days after receipt of written notice thereof to Ceding Insured from
Reinsurer.
17. Waiver. No delay or omission by any party hereto to exercise any right
or power arising upon any noncompliance or default by any other party
with respect to any of the terms of this Modified Coinsurance
Agreement shall impair any such right or power to be construed as a
waiver thereof. A waiver by any of the parties hereto for the
fulfillment of any of the covenants, conditions, or agreements to be
performed by any other shall not be construed to be a waiver of any
succeeding breach hereof or of any other covenant, condition or
agreement herein contained All remedies provided for in this Modified
Coinsurance Agreement shall be cumulative in addition to and not in
lieu of any other remedies available to any party at law, in equity or
otherwise.
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18. Amendments. This Modified Coinsurance Agreement may not be amended,
nor shall any waiver, change, modification, consent or discharge be
effected, except by an instrument in writing duly executed by the
parties hereto or their respective successors or permitted assigns.
19. Approvals, Consent, etc. In any instance where agreement, approval
acceptance or consent of any party is required by any provision of
this Modified Coinsurance Agreement, such action shall not be
unreasonably delayed or withheld.
20. Force Majeure. Ceding Insurer or Reinsurer shall be excused from
performance hereunder for any period when either is prevented from
performing any services to be provided hereunder, in whole or in part,
as a result of an Act of God, fire, war, civil disturbance, court
order, insurance department regulatory order, labor dispute, or other
cause beyond its reasonable control, and such nonperformance shall not
be a ground for Termination hereof or assertion of default hereunder.
In the event either party hereto shall be excused from performance
under this provision, said party shall use its best efforts to
provide, directly or indirectly, alternative and, to the extent
practicable, equivalent fulfillment of its obligations hereunder.
21. Severability. If any provision of this Modified Coinsurance Agreement
is declared or found to be illegal, unenforceable or void by any
administrative agency, regulatory body, or court of competent
jurisdiction, such finding shall not affect the remaining provisions
of this Modified Coinsurance Agreement, and all other provisions
hereof shall remain in full force and effect.
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22. Miscellaneous.
(a) Assignments. This Agreement shall be binding on the parties
hereto and their respective successors and permitted assigns, but
no party may assign this Agreement without the prior written
consent of the other parties.
(b) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all
of which taken together shall constitute one and the same
instrument.
(c) Section Headings. The headings set forth herein are for reference
purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
(d) Waiver. No delay or omission by any party hereto to exercise any
right or power arising upon any noncompliance or default by any
other party with respect to any of the terms of this Agreement
shall impair any such right or power or be construed as a waiver
thereof. A waiver by any of the parties hereto of the fulfillment
of any of the covenants, conditions or agreements to be performed
by any other shall not be construed to be a waiver of any
succeeding breach thereof or of any other covenant, condition or
agreement herein contained. All remedies provided for in this
Agreement shall be cumulative in addition to and not in lieu of
any other remedies available to any party at law, in equity or
otherwise.
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(e) Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with laws of the State of Texas.
IN WITNESS WHEREOF, the parties hereto have caused this Modified
Coinsurance Agreement to be signed and delivered by their respective
officers thereunto duly authorized, all as the date first hereinabove
written.
Attest: SOUTHWESTERN LIFE INSURANCE COMPANY
/s/ 6/12/91 By: /s/ 6/12/91
- --------------------------- ------------------------------
Sr. Vice President-Finance President
Attest: FIRST FINANCIAL LIFE INSURANCE
COMPANIES, INC.
By: /s/
- -------------------------- ---------------------------
Secretary President
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Exhibit 10.3.2
EXHIBIT C
REINSURANCE AGREEMENT
This REINSURANCE AGREEMENT, made and entered into by and between FIRST FINANCIAL
LIFE INSURANCE COMPANY ("Life Company"), an Arizona stock life insurance
corporation with principal offices at 4830 West Kennedy Boulevard, One Urban
Center, suite 595, Tampa, Florida 33609 and SOUTHWESTERN LIFE INSURANCE COMPANY
("SWLIC"), a Texas corporation, with principal offices located at 500 North
Akard, Dallas, Texas 75221.
WITNESSETH:
The Life Company and SWLIC mutually agree to reinsure on the terms and
conditions set out below. This agreement is solely between the Life Company and
SWLIC, and performance of the obligations of each party under this agreement
shall be rendered solely to the other party. In no instance shall anyone other
than the Life Company or SWLIC have any rights under this agreement.
ARTICLE I. AUTOMATIC REINSURANCE
1. Insurance. The Life Company will cede (retrocede) and SWLIC will accept
reinsurance under policies which are written by SWLIC and quota share
reinsured to the Life Company under a Modified Coinsurance Agreement whose
effective date is January 1, 1987. When the Life Company retains its
maximum limit of retention, as shown in Schedule A, attached, the Life
Company will retrocede (cede) and SWLIC will accept, automatically, amounts
in excess of the Life Company's retention.
<PAGE>
If SWLIC reinsures a portion of the mortality risk on any given individual
such that its total retained risk on that individual is less than its
maximum retention limit, then the remaining risk will be shared with the
Life Company in proportion to SWLIC respective maximum retention limits.
For example, if SWLIC has a maximum retention of $500,000 on any given life
and it issues a $521,000 policy, of which $500,000 is reinsured with a
third party reinsurer, the remaining mortality risk will be shared with the
Life Company in direct proportion to the companies' maximum retention
limits. The Life Company will keep 50,000/500,000 of the $21,000 retained
risk, or $2,100 and SWLIC will keep 450,000/500,000 of the $21,000 retained
risk, or $18,900.
2. Coverages. Life insurance, waiver of premium disability benefit for an
amount not greater than the corresponding life insurance, and benefits
under associated riders are exclusively the coverages or risks reinsured
automatically under Paragraph 1 (to the extent that limits are specified in
Schedule A, attached). The life insurance includes both basic policies and
term riders providing life insurance protection.
3. Regular Limits of Retention. The regular limits of retention detailed in
Schedule A and referred to in this agreement may be modified by the Life
Company by thirty (30) days' written notice to SWLIC. The amount of
reinsurance to be ceded and accepted automatically after the new limits
take effect will be determined by mutual agreement.
4. Procedures to Effect Reinsurance. SWLIC will notify the Life Company
quarterly of all new policies assumed by the Life Company where the Life
Company's quota share of the face amount exceeds the Life Company's
retention
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limit as detailed in Schedule A. These policies will be automatically ceded
(retroceded) to SWLIC.
1. Automatic Reinsurance Liability. The liability of SWLIC on any automatic
reinsurance under this agreement begins and ends at the same time as that
of the Life Company.
ARTICLE III. AMOUNT OF INSURANCE
1. Amounts. Life insurance under this agreement shall be on a Yearly Renewable
Term plan for the amount at risk under the policy reinsured. For the
purpose of this agreement, the amount at risk shall be defined at the
difference between the face amount of reinsurance and the corresponding
cash value (taken to the nearest dollar) as of the end of such policy year.
When the original policy is issued on a level term plan for twenty years or
less or on a reducing term plan for any period of years, the reinsurance
shall be for the face amount, and cash values, if any, shall be
disregarded. If desired, amount at risk may be determined by other methods
agreeable to the Life Company and SWLIC. Reinsurance amounts for waiver of
premium disability benefit, for additional indemnity for accidental death
or death by accidental means, and for benefits under associated riders are
on the same basis as the coverages assumed by the Life Company.
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2. Reductions and Terminations. Reinsurance amounts are calculated in terms of
coverages on the life of a person. If any of the Life Company's policies or
riders on the person are reduced or terminated, the reinsurance will be
reduced or terminated by the corresponding amount. The reduction will not
be applied, however, to force the Life Company to reassume more than its
regular retention limit at the time of the reduction for age at issue,
mortality rating and form of the policy or policies for which reinsurance
is being terminated.
3. Reinstatements. A policy which has been ceded to SWLIC on an automatic
basis, that was reduced, terminated or lapsed, if reinstated will be
reinstated automatically to the amount that would be in force had the
policy not been reduced, terminated or lapsed.
In connection with all such reinstatements, the Life Company shall pay
SWLIC all reinsurance premiums in arrears with interest at the same rate
and in like manner as the Life Company has been credited under its Modified
Coinsurance Agreement with SWLIC.
4. Nonforfeiture Benefits. Reduced paid-up will be treated as a reduction in
accordance with Paragraph 2 above. Extended term will be continued on a
basis proportionate to the reinsurance risk before the extended term option
was effected. Approximations and methods to simplify handling may be agreed
upon by the Life Company and SWLIC.
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ARTICLE IV. PREMIUMS
1. Life Insurance. Premiums per $1,000 for life insurance rated standard by
age and duration are given in Schedule B. The premiums per $1,000 are
applied to the amount of life reinsurance as outlined in Article 111.1.
When a flat extra premium is charged on a policy, whether alone or in
addition to a premium based on a multiple table, the Life Company will pay
this premium on the reinsurance amount in addition to the standard or
multiple table premium for the rating and plan of reinsurance.
2. Disability and Payor Benefits. Premiums for waiver of premium disability
benefit and for payor benefit will be paid at the same rate as the Life
Company has been credited for the benefit on which reinsurance in SWLIC is
based.
3. Preliminary Term Insurance. If the Life Company issues a policy with
preliminary term insurance, the reinsurance premium for the preliminary
term period will be paid to SWLIC at the same rate the Life Company has
been credited for the policies on which reinsurance in SWLIC is based. This
rule applies to all benefits under the preliminary term insurance. For the
first policy year after the preliminary term period, the premiums for all
benefits will be computed at first year rates.
4. Payments. Premiums are payable quarterly in advance The Policy fee will be
payable prorata each quarter. If reinsurance is reduced, terminated or
increased by reinstatement during the quarter, prorata adjustment will be
made by SWLIC and the Life Company on all premium items except policy fees.
5
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Exhibit 10.3.3
EXHIBIT B
ADMINISTRATIVE SERVICES AGREEMENT
This Administrative Services Agreement made and entered into effective January
1, 1987, by and between FACILITIES MANAGEMENT INSTALLATION (FMI), a Delaware
corporation, with its principal Texas offices located at 500 North Akard,
Dallas, Texas 75221, and FIRST FINANCIAL LIFE INSURANCE ("Life Company"), an
Arizona stock life insurance corporation with principal offices at 4830 West
Kennedy Boulevard, One Urban Centre, Suite 595, Tampa, Florida 33609.
WITNESSETH:
WHEREAS, Southwestern Life Insurance Company ("SWLIC") and Life Company entered
into a Modified Coinsurance Agreement (herein so-called) of even date herewith
under which, among other things, FMI and Life Company agreed to enter into this
Administrative Services Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual promises of the
parties hereto, and for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Definitions. All terms used in the Modified Coinsurance Agreement shall
have the same meaning in this Agreement unless otherwise indicated herein.
<PAGE>
2. Administrative Services. FMI agrees to provide to Life Company all
administrative services and to perform all functions necessary to fully
process, administer and account for all Insurance Business issued as a
result of applications solicited by General Agents which is insurance
business ceded by SWLIC to and reinsured by Life Company under the Modified
Coinsurance Agreement between Life Company and SWLIC (the "Reinsured
Business"). Such administrative services and functions shall include,
without limitation, all necessary actuarial, premium billing and
collections, accounting, financial reporting, regulatory compliance and
claims services required to fully process, administer and account for all
of the Reinsured Business. Notwithstanding any provision herein, FMI shall
not be obligated hereunder to process, administer or account for any
individual cession reinsurance.
3. Service Fee. As consideration for rendering the administrative services and
performing the functions specified in Paragraph 2 above, Life Company
agrees to pay to FMI a Service Fee (herein so-called) equal to five-tenths
of one percent (.5%) of premiums at the beginning of each accounting
period. For purposes of this calculation, premiums in force shall consist
of (i) annualized premiums for all fixed premium policies in force,
excluding single premium whole life and (ii) units in force multiplied by
the control premium at date of issue for all universal life policies. The
Service Fee shall be payable to FMI within sixty (60) days after the end of
each Accounting Period as defined in the Modified Coinsurance Agreement and
shall constitute full compensation to FMI for the rendition of such
administrative services and the performance of such functions, including
FMI's costs and expenses related to
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such services. Such Service Fee shall be payable to FMI in addition to any
fees, expenses or allowances payable by Life Company to SWLIC under the
Modified Coinsurance Agreement. In the event that such payment would be in
violation of applicable insurance or state laws, FMI shall not accept the
payment and shall be released from future obligations under this Agreement.
4. Investments. As part of the consideration for the Service Fee, and if
requested by Life Company's Board of Directors, FMI agrees to invest the
assets of Life Company in accordance with the directions of Life Company's
Board of Directors.
5. Supervision of Life Company. All services performed by FMI hereunder shall
at all times be subject to the review, control and supervision of Life
Company's Board of Directors, including, without limitation, such
reasonable budgetary restrictions as Life Company's Board of Directors may,
from time to time, establish. FMI shall at all times act in a fiduciary
capacity with respect to Life Company. FMI shall prepare and submit to Life
Company such reports as to services provided and costs incurred as Life
Company may reasonably request. FMI shall allow representatives of Life
Company to inspect and copy, at all reasonable times, FMI's financial and
other records pertaining to services provided to Life Company.
6. Third Party Agreements. Life Company acknowledges that FMI may, as a part
of its normal business, perform similar services and functions for its
affiliates and for other non-affiliated third parties ("Other Parties") and
that FMI may
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<PAGE>
utilize the same office space, equipment and personnel to perform such
services and functions for its affiliates and Other Parties as it utilizes
to perform such services and functions for Life Company.
7. Responsible Officer. Life Company shall designate an officer who shall be
authorized to direct FMI in the performance of its duties hereunder.
8. Other Business. Upon the written request of Life Company, FMI agrees to
enter into a separate agreement with Life Company to provide all
administrative services and to perform all functions necessary to fully
process, administer and account for other insurance business which may be
ceded to and reinsured by Life Company or written directly by Life Company;
provided, however, that FMI shall not be obligated to administer, process
or account for any individual cession reinsurance. As consideration for the
rendition of such services, Life Company shall agree to pay to FMI an
amount equal to FMI's actual cost of rendering such services plus an amount
equal to 25% of such actual costs.
9. Termination. This Agreement may not be terminated until such time as the
Modified Coinsurance Agreement between SWLIC and Life Company have been
terminated, after which this Agreement may only be terminated:
(a) By the mutual consent of the parties hereto;
or
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<PAGE>
(b) By FMI in the event of a material breach hereof by Life Company
and such breach is not cured or eliminated within thirty (30)
days after receipt of written notice thereof to Life Company from
FMI;
or
(c) By Life Company in the event of a material breach hereof by FMI
and such breach is not cured or eliminated within thirty (30)
days after receipt of written notice hereof to FMI from Life
Company.
10. Miscellaneous.
(a) Assignments. This Agreement shall be binding on the parties
hereto and their respective successors and permitted assigns, but
no party may assign this Agreement without the prior written
consent of the other parties.
(b) Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all
of which taken together shall constitute one and the same
instrument.
(c) Section Headings. The headings set forth herein are for reference
purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
5
<PAGE>
(d) Waiver. No delay or omission by any party hereto to exercise any
right or power arising upon any noncompliance or default by any
other party with respect to any of the terms of this Agreement
shall impair any such right or power to be construed as a waiver
thereof. A waiver by any of the parties hereto of the fulfillment
of any of the covenants, conditions, or agreements to be
performed by any other shall not be construed to be a waiver of
any succeeding breach thereof or of any other covenant,
condition, or agreement herein contained. All remedies provided
for in this Agreement shall be cumulative in addition to and not
in lieu of any other remedies available to any party at law, in
equity or otherwise.
(e) Amendments. This Agreement may not be amended, nor shall any
waiver, change, modification, consent or discharge be effected,
except by an instrument in writing duly executed by the parties
hereto or their respective successors or permitted assigns.
(f) Relationship of Parties. In furnishing services to Life Company,
FMI shall be deemed to be acting as an independent contractor.
FMI does not undertake by this Agreement or otherwise to perform
any obligation of Life Company, whether regulatory or
contractual, except as provided herein. FMI shall not be deemed
to be joint venturer with, or an employee of, Life Company.
6
<PAGE>
(g) Approvals. Consents. etc. In any instance where agreement,
approval, acceptance or consent or any party is required by any
provision of this Agreement, such action shall not be
unreasonably delayed or withheld.
(h) Force Majeure. FMI or Life Company shall be excused from
performance hereunder for any period when either is prevented
from performing any services to be provided hereunder, in whole
or in part, as a result of an Act of God, fire, war, civil
disturbance, court order, insurance department regulatory order,
labor dispute, and such nonperformance shall not be a ground for
termination hereof or assertion of default hereunder. In the
event FMI shall be excused from performance under this provision,
FMI shall use its best efforts to provide, directly or
indirectly, alternative and, to the extent practicable,
equivalent fulfillment of its obligations hereunder.
(i) Severability. If any provision of this Agreement is declared or
found to be illegal, unenforceable or void by any administrative
agency, regulatory body, or court of competent jurisdiction, such
finding shall not affect the remaining provisions of this
Agreement, and all other provisions hereof shall remain in full
force and effect.
(j) Arbitration. All disputes, controversies, claims, and other
matters in question between the parties hereto arising in
connection with this Agreement or the breach hereof shall be
submitted to arbitration pursuant to the procedure set forth in
Paragraph 8. of the Modified Coinsurance Agreement.
7
<PAGE>
(k) Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with laws of the State of Texas.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed and delivered by their respective officers thereunto duly
authorized, all as of the date first hereinabove written.
Attest: FACILITiES MANAGEMENT INSTALLATION
/s/ 6/12/91 By: /s/ 6/12/91
- -------------------------------- --------------------------------
Sr. Vice President Executive Vice President
Attest: FIRST FINANCIAL LIFE INSURANCE CO.
/s/ By: /s/
- ------------------------------- --------------------------------
Secretary Chairman
8
<PAGE>
Exhibit 10.5
MANAGEMENT SERVICE AGREEMENT
THIS AGREEMENT ("Agreement") entered into between First Financial Life Insurance
Company, an Arizona Corporation, and Rushmore Insurance Services, Inc., a Texas
Corporation, as follows:
WITNESSETH:
WHEREAS, First Financial Life Insurance Company has requested, and Rushmore
Insurance Services, Inc. has agreed to make available certain insurance
management expertise and marketing opportunities for First Financial Life
Insurance Company for consideration upon the terms and conditions herein set
forth:
NOW THEREFORE, in consideration of the premises and the mutual covenants and
agreements herein contained, Rushmore Insurance Services, Inc. and First
Financial Life Insurance Company agree as follows:
1. Management Services. At all times during the term of this Agreement, Rushmore
Insurance Services, Inc. agrees to provide to First Financial Life Insurance
Company, the management skills, advice, consideration, and expertise required to
conduct business on a daily basis (herein collectively called "Management
Services"). Rushmore Insurance Services, Inc. agrees to undertake to perform and
bear all costs relating to providing such Management Services, except as noted
in Paragraph 6 below.
2. Staff. At all times during the term of this Agreement, Rushmore Insurance
Services, Inc. shall provide First Financial Life Insurance Company personnel to
perform services as customarily are required in the managing and marketing of
life insurance as required by First Financial Life Insurance Company.
3. Marketing Support. At all times during the term of this Agreement, Rushmore
Insurance Services, Inc. shall make its best efforts to integrate the marketing
needs of First Financial Life Insurance Company into the general marketing
strategies used from time to time by Rushmore Insurance Services, Inc. Such
integration may include, but not be limited to, inclusion of First Financial
Life Insurance Company in any: (a) brochure, pamphlet, manual, audio tape, video
tape, or any other form of communication, (b) seminars or training conducted for
Rushmore Insurance Services, Inc. customers or agents, (c) sales contest, and
(d) sales award banquets or other forms of agent recognition.
4. Term: This Agreement shall be for a term of one year commencing on the
effective date hereof and shall thereafter automatically renew on a year-to-year
basis unless and until terminated by Rushmore Insurance Services, Inc. or First
Financial Life Insurance Company on written notice given not less than thirty
(30) days prior to expiration of an annual term hereof.
<PAGE>
5. Compensation: First Financial Life Insurance Company agrees to pay to
Rushmore Insurance Services, Inc. $ 5,000.00 plus out-of-pocket expenses, on a
monthly basis, for the services provided as a management and marketing
reimbursement expense. This amount may be increased to reflect Rushmore
Insurance Services, Inc.'s pro-rata share of all escalations in such costs.
Rushmore Insurance Services, Inc. and First Financial Life Insurance Company may
redetermine this amount, giving due consideration to any expansion, adjustment,
or change in the services provided hereunder, and to Rushmore Insurance
Services, Inc.'s actual experience in fulfilling its obligations hereunder. The
cost of any service provided under the terms of this Agreement may be paid
directly by First Financial Life Insurance Company, and such cost shall not be
considered in computing the fees due to Rushmore Insurance Services, Inc. under
the terms of this Agreement. Payments under the terms of this Agreement shall,
unless otherwise expressly stated, be made in cash on at least a monthly basis
during the term of this Agreement. All past-due sums shall bear interest at 10%
(ten percent) per annum from due date until paid.
6. Notices: Any notices permitted or required under the terms of this Agreement
shall be in writing and shall be deemed duly given if personally delivered or
mailed, United States Mail, first class, certified or registered, return receipt
requested, postage prepaid, addressed to the parties at the address either party
may hereafter communicate to the other by notice as herein provided.
7. Force and Effect: Each provision of this Agreement is effective only to the
extent that such provision has been approved by: (a) the Boards of Directors of
each party to this Agreement, and (b) any Regulatory body under whose rules and
regulations either party to this Agreement functions. Should any provision of
this Agreement be found to be ineffective, all remaining provisions of this
Agreement shall continue and not be affected thereby, unless such
ineffectiveness is, in the sole opinion of Rushmore Insurance Services, Inc.,
essential to the rights of both parties, in which event Rushmore Insurance
Services, Inc. has the right to terminate this Agreement upon written notice to
First Financial Life Insurance Company.
8. Miscellaneous: This represents the entire agreement between Rushmore
Insurance Services, Inc. and First Financial Life Insurance Company regarding
the subject matter hereof and supersedes all prior agreements and understandings
between the parties. This Agreement may not be amended except by written consent
of both parties, and shall be governed and construed in accordance with the laws
of the State of Texas.
WITNESS THE EXECUTION of this Agreement April 8, 1997 and EFFECTIVE FOR ALL
PURPOSES AS OF April 8, 1997:
First Financial Life Insurance Company Rushmore Insurance Services, Inc.
by: by:
-------------------------- -----------------------------
President President
<PAGE>
Exhibit 10.6.1
OPTION AGREEMENT
This Option Agreement (the "Agreement") is made and entered into as of
April 8, 1997, by and between D.M. Moore, Jr. ("Shareholder"), the holder of a
Texas Group I life insurance agent license and sole shareholder of Rushmore
Insurance Services, Inc. (the "Agency"), a Texas corporation which holds a Texas
Group I life insurance agent license, and Rushmore Capital Corporation ("RCC").
The parties hereto hereby agree as follows:
SECTION 1
GRANT OF OPTION AND GRANT OF SHAREHOLDER OPTION
1.1 Grant of Option and Shareholder Option: Consideration Therefor. In
consideration of the delivery by RCC of $10.00 to Shareholder, receipt of which
is acknowledged by him, Shareholder hereby grants to RCC, or to one or more
persons holding a Texas Group I life insurance agent license designated by RCC
(such person or persons being referred to hereinafter as the "Designee"), an
option (the "Option"), exercisable on one or more occasions to purchase any or
all of the shares of Agency Common Stock now held by Shareholder or held by
Shareholder at the time the Option is exercised (collectively, the "Agency
Shares"), subject to the terms and conditions of this Agreement. In
consideration of the delivery by Shareholder of$10.00 to RCC, receipt of which
is acknowledged by RCC, RCC hereby agrees that Shareholder shall have the option
(the "Shareholder Option"), exercisable on one or more occasions, to require RCC
to purchase all of the Agency Shares, subject to the terms and conditions of
this Agreement.
1.2 Exercise Price. The exercise price of the Option and the Shareholder
Option (the "Agency Exercise Price"), in full consideration of the sale,
conveyance, and delivery of the Agency Shares pursuant to which the Option or
the Shareholder Option has been exercised, may be paid in cash or by check and
shall be equal to the sum of the following amounts:
(i) One Thousand and No/100 Dollars ($1,000.00); and
(ii) The amount of all unreimbursed incorporation expenses, if any, with
respect to the Agency and paid personally by Shareholder.
The amount of the Agency Exercise Price shall be determined and fixed as of
the date on which (a) RCC or the RCC Designee sends the written notice specified
in Section 1.4 of this Agreement; (b) Shareholder sends the written notice
specified in Section 1.5 of this Agreement; or (c) any of the events occurs as
specified in Section 4.1 of this Agreement.
1.3 Term of Option and Shareholder Option. The Option granted hereby shall
be exercisable at any time after the date hereof and prior to the 21st
anniversary of the death of
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Shareholder. The Shareholder Option granted hereby shall be exercisable by
Shareholder at any time after the date hereof and prior to the death of
Shareholder.
1.4 Method of Exercising Option. RCC or the RCC Designee may exercise the
Option by sending the Shareholder one hundred eighty (180) days' prior written
notice of the exercise of the Option, which written notice shall contain (i) a
certificate of an officer of RCC designating the RCC Designee, if any; (ii) a
notice by or the RCC Designee that it is exercising the Option; and (iii)
confirmation of the date on which the transaction shall close (the "Closing
Date"), which shall be one hundred eighty (180) days after the date of such
written notice, or, if that date is a Saturday, Sunday or legal holiday, the
first business day thereafter. On the Closing Date, RCC or the RCC Designee
shall deliver to the Shareholder the Agency Exercise Price, and the Shareholder
shall deliver the Agency Shares to RCC or the RCC Designee, as the Shareholder
shall be instructed.
1.5 Method of Exercising~ Shareholder Option. Shareholder may exercise the
Shareholder Option by sending RCC one hundred eighty (180) days' prior written
notice of the exercise of the Shareholder Option, which written notice shall
contain (i) a notice by Shareholder that Shareholder is exercising the
Shareholder Option, and (ii) a confirmation of the Closing Date. On the Closing
Date, RCC or the RCC Designee shall deliver to the Shareholder the Agency
Exercise Price, and the Shareholder shall deliver the Agency shares to RCC or
the RCC Designee, as the Shareholder shall be instructed.
1.6 Acceleration of Closing Date. Upon the mutual written agreement of the
parties, the Closing Date may be designated as of any date contemporaneous with
or subsequent to the exercise of the Option or the Shareholder Option and prior
to the expiration of the one hundred eighty (180) day notice specified in
Section 1.4 and Section 1.5.
SECTION 2
REPRESENTATIONS AND WARRANTIES OF SHAREHOLDER
The Shareholder represents and warrants that:
2.1 Organization and Standing of Agency. Agency is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Texas; has the full corporate power and authority to conduct its business as now
being conducted; and holds or will hold a Texas Group I life insurance agent
license. To the extent that Agency may have business in jurisdictions other than
Texas, Shareholder, as the principal of Agency, holds the required agent
licenses in such jurisdictions.
2.2 Qualification of Shareholder. Shareholder is the holder of a Texas
Group I life insurance agent license.
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2.3 Binding Effect. The execution, delivery and performance by the
Shareholder of this Agreement constitutes the valid and binding agreement of
Shareholder and his spouse enforceable in accordance with its terms. The
execution, delivery and performance of this Agreement will not (i) violate any
provisions of; or result in the breach of, or constitute a default under, any
law the violation of which would result in a significant liability to the
Agency, or any order, writ, injunction or decree of any court, governmental
agency or arbitration tribunal; (ii) constitute a violation of or a default
under, or a conflict with, any term or provision of the Articles of
Incorporation or by-laws of the Agency or any contract, commitment, indenture,
lease or other agreement, or any other restriction of any kind to which the
Agency is a party or by which the Agency is bound; or (iii) cause, or give any
party grounds to cause (with or without notice, the passage of time or both) the
maturity of any liability or obligation of the Agency to be accelerated, or
increase any such liability or obligation.
SECTION 3
COVENANTS OF SHAREHOLDER
3.1 Restrictions on Disposition. Except as provided in this Agreement,
Shareholder shall not sell, mortgage, pledge or otherwise encumber or dispose of
or permit to be sold, mortgaged, pledged, transferred, encumbered or disposed
of, whether voluntarily or by operation of law, any of the Agency Shares or
other securities issued by the Agency now owned or hereafter acquired by
Shareholder.
3.2 Actions by the Agency. Shareholder hereby agrees not to take any action
as an officer or director of the Agency to authorize or participate in any of
the following actions unless consented to in writing in advance by RCC:
(a) Loans The Agency's making any loans directly or indirectly to any
person, firm or corporation.
(b) Securities. The Agency's issuance, sale, transfer or other
disposition of any stock, bonds, notes, debentures or other
securities issued by the Agency.
(c) Sale. Consolidation or Merger. The Agency's sale of any material
amount of its property or assets or its consolidation with, or
merger with or into, any other corporation.
3.3 Dividends. Shareholder shall pay over to RCC any cash dividends or
other distribution Shareholder receives in respect of the Agency Shares.
3
<PAGE>
SECTION 4
PROVISIONS RELATING TO THE SHAREHOLDER
4.1 Option and Shareholder Option Exercise Events. It is understood and
acknowledged by the parties that the Option granted in Section 1 of this
Agreement may be voluntarily exercised by RCC or the RCC Designee at any time in
its discretion. It is also understood and acknowledged by the parties that the
Shareholder Option granted in Section 1 of this Agreement may be voluntarily
exercised by Shareholder at any time in his discretion. The parties further
acknowledge that the exercise of the Option and the Shareholder Option shall be
deemed to have occurred simultaneously and automatically upon the happening of
any of the following events: (a) death of the Shareholder; (b) the filing by or
against Shareholder of a petition under any section or chapter of the National
Bankruptcy Act, as amended, or any similar law or statute of the United States
or any State thereof, or (c) any voluntary or involuntary termination of the
Shareholder's employment with RCC. The one hundred eighty (180) day period
specified in Section 1.4 and Section 1.5 shall commence to run as of the date of
any of such events. At the end of such one hundred eighty day (180) day period
(or such shorter time as may be mutually agreed upon), RCC or the RCC Designee
shall deliver the Agency Exercise Price to Shareholder; provided, however, that
if the death of the Shareholder is the event which has occurred, then the Agency
Exercise Price shall be delivered to the personal representative of the estate
of Shareholder.
4.2 No Restrictions on Shareholder. Upon any voluntary or involuntary
termination of the Shareholder's employment with RCC, the Shareholder shall
thereafter be free to pursue any business activities in which the Shareholder in
his absolute discretion may decide to engage, and the right and ability of the
Shareholder to engage in such activities shall not be abridged or restricted in
any manner as a result of the existence of this Agreement or the fact that the
Shareholder was a party thereto, or as a result of the fact that the Shareholder
served as shareholder, officer and/or director of the Agency. Subsequent to any
such termination of employment, the Shareholder shall be entitled to contact and
have business dealings with any and all insurance and/or annuity clients whom
the Shareholder developed or solicited prior to or during his employment with
RCC and shall be entitled to have business dealings with any of the independent
contractor insurance agents who are or were sub-agents of the Agency and who
shall institute contact with Shareholder.
SECTION 5
MISCELLANEOUS
5.1 Notice. All notices, demands and other communications hereunder shall
be in writing and shall be deemed to have been duly given if delivered or mailed
first class postage prepaid.
To Shareholder: D.M. Moore, Jr.
15851 Dallas Parkway, Suite 1155
Dallas, Texas 75248
4
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To RCC:
Rushmore Capital Corporation
15851 Dallas Parkway, Suite 1155
Dallas, Texas 75248
or to such other address as either Shareholder or RCC may designate by notice to
the other.
5.2 Entire Agreement. This Agreement and the Administrative Services
Agreement between the parties constitute the entire agreement between the
parties hereto pertaining to the subject matter hereof and supersede all other
prior and contemporaneous agreements, understandings, negotiations and
discussions, whether written or oral, of the parties.
5.3 GOVERNING LAW. THE VALIDITY AND CONSTRUCTION OF THIS AGREEMENT SHALL BE
GOVERNED BY THE LAWS OF THE STATE OF TEXAS INCLUDING WITHOUT LIMITATION, THE
TEXAS INSURANCE CODE AS AMENDED, AS WELL AS ALL RULES AND REGULATIONS ADOPTED BY
THE TEXAS DEPARTMENT OF INSURANCE, AS IT IS THE INTENT OF THE PARTIES TO COMPLY
IN ALL RESPECTS WITH SUCH INSURANCE LAWS AND ALL OTHER REGULATORY REQUIREMENTS.
IF, FOR ANY REASON, ANY PORTION OF THIS AGREEMENT MUST BE AMENDED TO COMPLY WITH
REGULATORY REQUIREMENTS, THE PARTIES HEREBY AGREE TO MAKE ALL REVISIONS
REASONABLY NECESSARY TO BE CONSISTENT WITH THE SUBSTANTIVE GOALS OF THIS
AGREEMENT.
5.4 Section Headings. The Section headings are for reference only and shall
not limit or control the meaning of any provision of this Agreement.
5.5 Assignment. Neither party hereto shall assign this Agreement without
first obtaining the written consent of the other party.
5.6 Binding on Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the respective parties hereto and their heirs,
successors and assigns.
5.7 Amendments. This Agreement may be amended at any time but only by an
instrument in writing, signed by the parties hereto; provided, however, that
either party proposing any amendment to this Agreement must provide written
notice of the proposed amendment not less than sixty (60) days prior to the
proposed effective date thereof.
5
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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date and year first above written.
/s/ D.M. MOORE, JR.
-----------------------------
D.M. MOORE, JR.
RUSHMORE CAPITAL CORPORATION
By: /s/ Jim W. Clark
JIM W. CLARK, Vice President
RUSHMORE INSURANCE SERVICES, INC.
By:
SPOUSAL ACKNOWLEDGMENT
----------------------
Jennifer Moore, the spouse of the Shareholder, is fully aware of, and
understands and fully consents to the terms and binding effect of the foregoing
Agreement by and between Shareholder and RCC dated as of the date hereof; upon
any community property interest she may have in the Agency Shares held by her
spouse as Shareholder. Jennifer Moore further agrees that though the marital
relationship may terminate for any reason, such termination shall not have the
effect of removing the Agency Shares which are covered by the Agreement from the
terms thereof, and acknowledges her consent and agreement thereto by her
signature below. Jennifer Moore hereby disclaims any interest whatsoever,
whether community property or otherwise, in the Agency Shares.
EXECUTED as of the 8th day of April, 1997.
/s/ Jennifer Moore
-------------------
JENNIFER MOORE
6
<PAGE>
Exhibit 10.6.2
OVERHEAD SERVICE AGREEMENT
THIS AGREEMENT ("Agreement") entered into between First Financial Life Insurance
Company, an Arizona Corporation, and Rushmore Capital Corporation, a Texas
Corporation, as follows:
WITNESSETH:
WHEREAS, First Financial Life Insurance Company has requested, and Rushmore
Capital Corporation has agreed to make available certain facilities and provide
for performance of certain services for First Financial Life Insurance Company
for consideration upon the terms and conditions herein set forth:
NOW THEREFORE, in consideration of the premises and the mutual covenants and
agreements herein contained, Rushmore Capital Corporation and First Financial
Life Insurance Company agree as follows:
1. Personal Property. At all times during the term of this Agreement, Rushmore
Capital Corporation agrees to provide and make available for use by First
Financial Life Insurance Company, at the leased premises referred to in Section
3 hereof those certain desks, tables, chairs, typewriters, copying machines,
computer equipment, dictating machines, calculators, telephone equipment,
facsimile machines, and all other items of personal property required to conduct
business on a daily basis (herein collectively called "Personal Property").
Rushmore Capital Corporation agrees to undertake to perform and bear all costs
relating to periodic maintenance and repairs for Personal Property in order that
same shall at all times be in good operating condition and repair and suitable
and adequate for the purpose intended. First Financial Life Insurance Company
agrees to utilize the Personal Property in the proper manner and for the purpose
intended, and promptly to notify Rushmore Capital Corporation of any defect or
malfunction in which event Rushmore Capital Corporation agrees promptly to
undertake to provide and diligently pursue effecting any needed repairs or
replacement of the Personal Property.
2. Staff. At all times during the term of this Agreement, Rushmore Capital
Corporation shall provide First Financial Life Insurance Company personnel to
perform services as receptionists, telephone answering, stenographic,
secretarial, accounting and bookkeeping, and such other support services as
customarily are required in the conduct of life insurance business as required
by First Financial Life Insurance Company.
3. Office Space. At all times during the term of this Agreement, Rushmore
Capital Corporation shall make available to First Financial Life Insurance
Company by means of assignment, subletting or such other means as Rushmore
Capital Corporation shall select, the leased premises commonly designated as
("Premises"); such utilization by First Financial Life
<PAGE>
Insurance Company to be upon, and subject to, the terms and conditions set forth
in that certain Lease Agreement executed ("Lease") between Rushmore Capital
Corporation and the therein stated Landlord, EXCEPT ONLY as such terms and
conditions may be altered or amended by the terms and conditions of this
Agreement. Rushmore Capital Corporation and First Financial Life Insurance
Company further agree as follows:
a. Rushmore Capital Corporation agrees to be solely responsible for
obligations of the lessee as set forth in the Lease with regard to repairs and
maintenance of the Premises as may be necessary at any time or from time to time
during the term of this Agreement, except only for any such repairs which may be
due to the negligence or willful misconduct of First Financial Life Insurance
Company or any of its partners, employees or agents.
b. Rushmore Capital Corporation and First Financial Life Insurance Company
acknowledge and agree that, if required by the Lease, Rushmore Capital
Corporation's making the Premises available to First Financial Life Insurance
Company as herein set forth shall be subject to, and require consent and
approval of Landlord, and Rushmore Capital Corporation and First Financial Life
Insurance Company covenant and agree promptly to request and to use their best
efforts to obtain such consent (provided, however that such consent shall not be
subject to any conditions or limitations imposed by Landlord not acceptable to
Rushmore Capital Corporation or First Financial Life Insurance Company).
4. General and Administrative Expenses: Rushmore Capital Corporation shall incur
the following general and administrative expenses for the benefit of First
Financial Life Insurance Company:
Rent Equipment Servicing and Maintenance
Payroll Office Utilities
Office Supplies Depreciation on Furniture & Equipment
Postage Depreciation on Capital Leases
Other Miscellaneous Expenses
5. Term: This Agreement shall be for a term of one year commencing on the
effective date hereof and shall thereafer automatically renew on a year-to-year
basis unless and until terminated by Rushmore Capital Corporation or First
Financial Life Insurance Company on written notice given not less than thirty
(30) days prior to expiration of an annual term hereof.
6. Compensation: First Financial Life Insurance Company agrees to pay to
Rushmore Capital Corporation $ 9,000.00 plus out-of-pocket expenses, on a
monthly basis, for the use of the Personal Property, services provided, general
and administrative expenses incurred, and for the use and occupancy of the
Premises, pursuant to Sections 1, 2, 3, and 4 as an overhead reimbursement
expense. This amount may be increased to reflect Rushmore Capital Corporation's
pro-rata share of all escalations in such rental or of the pass-through by
Landlord of increases in utility costs, taxes, and like, all determined as
provided in the Lease. Rushmore Capital Corporation and First Financial Life
Insurance Company may re-determine this amount, giving due consideration to any
expansion or adjustment of the service or any change in the
<PAGE>
Personal Property provided hereunder, and to Rushmore Capital Corporation's
actual experience in fulfilling its obligations hereunder. The cost of any
service provided under the terms of this Agreement may be paid directly by First
Financial Life Insurance Company, and such cost shall not be considered in
computing the fees due to Rushmore Capital Corporation under the terms of this
Agreement. Payments under the terms of this Agreement shall, unless otherwise
expressly stated, be made in cash on at ~east a monthly basis during the term of
this Agreement. All past-due sums shall bear interest at 10% (ten percent) per
annum from due date until paid.
7. Notices: Any notices permitted or required under the terms of this Agreement
shall be in writing and shall be deemed duly given if personally delivered or
mailed, United States Mail, first class, certified or registered, return receipt
requested, postage prepaid, addressed to the parties at the address either party
may hereafter communicate to the other by notice as herein provided.
8. Force and Effect: This Agreement is effective only to the extent that it has
been approved in advance by: (a) the Boards of Directors of each party to this
Agreement, and (b) any Regulatory body under whose rules and regulations either
party to this Agreement functions. Should any provision of this Agreement be
found to be ineffective, all remaining provisions of this Agreement shall
continue and not be affected thereby, unless such ineffectiveness is, in the
sole opinion of Rushmore Capital Corporation, essential to the rights of both
parties, in which event Rushmore Capital Corporation has the right to terminate
this Agreement upon written notice to First Financial Life Insurance Company.
9. Miscellaneous: This represents the entire agreement between Rushmore Capital
Corporation and First Financial Life Insurance Company regarding the subject
matter hereof and supersedes all prior agreements and understandings between the
parties. This Agreement may not be amended except by written consent of both
parties, and shall be governed and construed in accordance with the laws of the
State of Texas.
WITNESS THE EXECUTION of this Agreement April 8, 1997 and EFFECTIVE FOR ALL
PURPOSES AS OF April 8, 1997:
First Financial Life Insurance Company Rushmore Capital Corporation
by: --------------------------------- by: -----------------------
President President
<PAGE>
Exhibit 10.7
REPRESENTATIVE AGREEMENT
THIS REPRESENTATIVE AGREEMENT ("Agreement'1) is made and entered into this ____
day of ______________ 19 ___ by and between Rushmore Securities, Inc. (RSC). a
Texas Corporation, with its principal office located at 13355 Noel Road, Suite
300, Dallas, Texas 75240 and the undersigned __________________________
(Hereinafter referred to as "RR")
WHEREAS, RSC is a duly qualified broker-dealer; and
WHEREAS, Registered Representative "RR" desires to engage in the sale of
securities and the parties hereto agree that the RR conduct such sales
activities as an independent securities salesperson and not as an employee, as
provided by paragraph 6 of Mimeograph 6656, published by the office of the
Commissioner of Internal Revenue in Cumulative Bulletin 1951-1, page 108,
subject to such supervisory restrictions as are required by the SEC, NASD,
Securities Commission of the State of ____________ or other applicable states,
and other Regulatory Authorities and Associations as are necessary to properly
qualify the RR.
NOW, THEREFORE, it is agreed:
1. DEFINITIONS
(a.) The term "Registered Representative" shall have the meaning provided
by schedule C of Article II of the By-Laws of the NASD.
(b. The term SEC shall mean the Securities and Exchange Commission.
(c.) The term "NASD" shall mean the National Association of Securities
Dealers, Inc.
(d.) The term "Regulatory Authority" shall mean the SEC, NASD, Securities
Commission of the applicable state(s) and any other organization, association or
governmental authority having jurisdiction over securities engaged in by RSC or
the RR by reason of any statute, rule or regulation or by reason of membership
of RSC in such organization or association.
2. TERM
This agreement and the association between parties may be terminated at any
time, for any reason, by either party upon written notice to the other party.
Upon termination of this agreement and the association, regardless of how such
termination may be brought about, RR will promptly return to RSC all
instruments, documents and other materials which RSC may have provided to RR or
which may have been otherwise acquired by RR in connection with or as a result
of the association with RSC.
3. SERVICE OF REPRESENTATIVE
RR shall have the right to solicit, promote and encourage sales and
purchases of securities approved by RSC for the general public, as a Registered
Representative in accordance with the rules and regulations published by
Regulatory Authorities and governed by the specific securities license held by
the RR. However, RSC reserves the right to refuse any application, subscription
agreement or sale obtained by the RR. The RR status will be that of independent
contractor of RSC and nothing herein shall be construed to create the
relationship of employer and employee between RSC and RR. Subject to RR's strict
compliance with the requirements, terms, and conditions of this Agreement, RR
shall be free to exercise his or her own judgment and discretion as to: the
persons from whom the RR will solicit applications and orders for the purchase
and sale of Securities Products; the time, method and place of solicitation; the
location of, and all arrangements for, and all employees of, and all other
aspects of, RR's business.
<PAGE>
4. COMMISSIONS
Pursuant to paragraph 3 hereof, RSC agrees to pay RR commissions on the
sale of securities as provided for herein, such commission to be paid as set
forth in Exhibit "A" attached hereto, and incorporated herein by reference.
Commissions shall be considered earned only when commissions are received by RSC
from the issuer. RR specifically waives payment of any and all commissions due
them until such time as RSC is in receipt of the commission(s). All indebtedness
of RR to RSC shall be considered to be a prior lien against any commission due
RR and shall be deducted from proceeds payable to RR. If for whatever reason, a
charge-back is levied against RSC by an issuer or another broker-dealer who has
paid a dealer re allowance or commission to RSC a proportionate charge-back does
not constitute grounds for refusal to pay RSC such amount on demand whether RR
is currently registered with RSC or not. RR will not receive any continuing
commissions (whether for business solicited by RR or for Override Commissions or
otherwise) after termination of this Agreement. After termination of this
Agreement, RR will receive only such commissions: as were actually earned prior
to termination; and such that would have been earned prior to termination but
had not been earned only because they had not been received by RSC; and as to
the latter, RR will receive those commissions only when they are received by
RSC.
Any monies that may be paid by RSC to RR as an advance loan against RR's
commission or Override Commission, either or both of which are yet to be earned
are considered advance commissions and are a loan to RR that may be recovered by
RSC.
5. EXPENSES
RR further agrees that any and all expenses which may be incurred by RR
shall be the sole and exclusive obligation of the RR. including but not limited
to, the payment of all fees, regulatory assessments, bends, administrative
expenses of registration and license(s) maintenance incurred by RSC on behalf of
the RR; provided, however, that RSC will provide without charge standard
literature and other material relating to the securities being marketed at no
cost. It shall be the sole responsibility of the RR to pay overhead expenses
incident to his activities under the terms of this Agreement, including but not
limited to, secretarial, licensing, entertainment, education and transportation
expense, none of which shall be the responsibility of RSC. Neither shall RSC
provide to RR any other benefit or compensation other that the commissions
provided for in paragraph 4 above. As an independent contractor, RR shall be a
self employed-person and RSC shall not withhold or pay federal income or FICA
taxes, the payment of such taxes being the sole responsibility of RR.
6. OBLIGATIONS OF RSC
RSC agrees to maintain an effective and adequately capitalized
broker-dealership properly registered with all Regulatory Authorities. RSC
further agrees to furnish the RR facilities for execution and confirmation
services. RSC from time to time may choose to make reports or other services
available, but it is not obligated to do so. It may also agree from time to time
to provide additional services for an agreed upon fee to the RR.
7. OBSERVANCE OF REGULATORY REQUIREMENTS
RR agrees to maintain their operations in conformity with all
applicable laws, rules and regulations of Regulatory Authorities, including,
but not limited to those practices prescribed by the Manual of the NASD and the
currently effective RSC Supervisory Procedures Manual, the requirements of which
are incorporated herein by reference. RR will not conduct any business not
permitted under their license and shall be responsible for adherence to all
applicable securities regulations. In the event that any liability is asserted
against RR's actions or omissions, RR agrees to reimburse, indemnify~ and hold
2
<PAGE>
harmless RSC from any expense it may incur including attorney's fees by reason
of any breach of this paragraph 7 or paragraph 10 and of said laws, rules and
regulations. The PR shall observe such written procedures as are published by
RSC.
PR is prohibited from, and agrees that PR shall not: (a) collect from
Customers, in payment of the purchase of securities, cash, or checks made
payable other than to RSC or to the appropriate custodian bank or transfer agent
relating to such purchases, all as designated by RSC; (b) offer or sell any
security unless it is a Securities Product; (c) offer or sell any security
unless there exists at the time of such offer or sale an effective dealer
agreement between RSC and the issuer, underwriter custodian or transfer agent of
said security; (d) make, alter or discharge on behalf of RSC any contract or
investment, or waive any provision other than in strict compliance with the
terms and conditions of the securities laws and in accordance with this
Agreement and the procedures, manuals, rules and regulations with this Agreement
and the procedures, manuals, rules and regulations of RSC; or (e) make any
misrepresentation, or improperly induce a Customer to purchase or sell any
security or any Securities Product.
8. TRANSACTIONS WITH OTHER BROKER-DEALERS
During the Term of this Agreement, PR shall not: (a) be associated with or
be a registered representative of any other broker-dealer; maintain any NASD
registration other than with RSC; or (c) solicit or offer for purchase or sale
any securities, or investments except on behalf of RSC. PR agrees to immediately
notify RSC in writing if PR acquires or obtains any interest in or affiliation
with any other broker-dealer or engages in any employment relating to the sale
of securities or investments, either directly or indirectly. either alone or
with any person or entity other than RSC. PR shall immediately notify RSC if RR
becomes involved in any activity that would create the possibility of a conflict
of interest on the part of PR with respect to RSC or any Securities Product
offered by or on behalf of RSC. RR shall not execute a securities transaction
for the account of any RR or employee (or close relative of either) of any other
broker-dealer without the prior written approval of RSC.
9. BREACH OF REGULATORY DUTIES
Notwithstanding the provisions of paragraph 2 hereto as to notice to
termination of this Agreement. RSC shall have the right to require PR to suspend
transactions in a particular security to the extent that any such transaction,
or the actions of the PR with respect hereto, could, in the opinion of RSC, be
considered a breach of any law, rule or regulation of any Regulatory Authority.
Provided further, that said right to require suspension of any transaction or
transactions shall be enforceable by injunction by a court of competent
jurisdiction. Failure by RR to suspend transactions when notified by RSC shall
be deemed a material breach of this Agreement, and RSC may at its option
terminate this agreement on the occurrence of such breach.
10. USE OF RSC NAME; INDEMNIFICATION
The PR agrees to indemnify and save harmless RSC from any cost, expense or
damages, including reasonable attorney's fees to which RSC may become obligated
by reason of such grant of such status as a PR of RSC. If the PR operates under
any other name than RSC, he agrees not to advertise such name with respect to
the solicitation for or sale of securities. PR further agrees that his clients
will be made aware that he is acting in the capacity of a PR of RSC.
Any advertising for the sale of securities must be approved by RSC to insure
that it adheres to the guidelines of the Regulatory Authorities. Nothing
contained herein shall be construed as a grant of authority to the PR, which
authority is specifically disclaimed.
11. COVENANT NOT TO COMPETE
During the term of PR's relationship with RSC, PR shall not (a) directly or
indirectly, either as an employee, employer, consultant, manager, agent,
principal, partner, representative, stockholder, officer, director, or in any
other individual or representative capacity, invest, engage, or participate in
any
3
<PAGE>
business that is in competition in any manner whatsoever with the business of
RSC without the written consent of RSC or (1)) sell or deal in Securities on
behalf of any person other than RSC without first obtaining ~he prior written
consent of RSC.
12. CONSTRUCTION; SEVERABILITY
It is the intent of the parties hereto that the terms of this Agreement
shall be construed pursuant to the laws of the State of Texas, and in accordance
with the requirements of the SEC, NASD, and other Regulatory Authorities, to the
extent applicable hereto. To the extent that any of the provisions of this
agreement shall be invalid or unenforceable, then this Agreement shall be
construed in all respects as if such invalid or unenforceable provision were
omitted.
13. MODIFICATION
No change of this Agreement (including Exhibit A) shall be valid unless the
same be made in writing to PR by RSC.
14. ENTIRE AGREEMENT
This instrument is the entire Agreement of the parties, except to the
extent of any document incorporated herein by reference or any statutes rules
and regulations, clearing agreements or manuals referred to herein.
15. NON-ASSIGNABILITY; DEATH, DISABILITY
The services contracted hereunder are personal and dependent upon the
qualifications of the parties hereto and may not be assigned by either party
without the express consent of the other in writing. In the event of death,
disability or incapacity of the PR this agreement shall terminate.
IN WITNESS WHEREOF, THE PARTIES HERETO HAVE EXECUTED THIS AGREEMENT IN
DUPLICATE ORIGINALS THE DAY AND YEAR FIRST ABOVE WRITTEN.
REGISTERED REPRESENTATIVE RUSHMORE SECURITIES CORP.
------------------------ -------------------------
Signature Signature
-------------------------------
Print or Type Name of Signatory
EXHIBIT "A"
Commission payable to the PR will be _____ paid to RSC on the following types of
business:
% net of all clearing charges and/or the dealer allowance
4
<PAGE>
Mutual Funds General Securities
Variable Annuities
Variable Life Products
Unit Investment Trusts revised 10/96
5
<PAGE>
Exhibit 10.8
Rushmore Investment Advisors, Inc
Professional Advisory Agreement
-------------------------------
Rushmore Investment Advisors, Inc. (Advisor) and
enter into this Professional Services Agreement (the Agreement) on
1. Services Provided:
Advisor agrees to direct, implement, monitor and manage the investment and
reinvestment of certain assets of the Client and the proceeds thereof. The
listing of assets included in this agreement is provided in attachment "A"
hereto. The parties agree that, upon addition or deletion of any asset
covered under this Agreement, Advisor will maintain an updated listing of
all assets covered under this Agreement. The revised asset listing as
maintained by Advisor will be considered as the revised attachment "A" to
this agreement.
2. Program and Advisory Authority:
Advisor's authority with respect to the Client assets shall be one of the
following as indicated:
____ 1. Individual Managed Asset Program (IMAP) Discretionary -
Advisor shall have authority to purchase and/or sell assets on behalf
Client without obtaining approval for any transaction.
______ Rushmore Managed Account
______ Third-Party Managed
_____2. Mutual Fund Managed Asset Program (MFMAP)Discretionary-Advisor
shall have authority to purchase and/or sell assets on behalf of
client without obtaining approval for any transaction.
3. Account Restrictions:
Advisor agrees to observe any specific Client investment policy, guidelines
and/or restrictions as provided by Client.
4. Report To Client
Advisor shall provide Client with quarterly written statements regarding
assets managed by Advisor, including the market value of current holdings,
purchases and sales, and any income or expense items (including any
advisory fees to be paid to Advisor). Client will receive an annual report
including all quarterly statements, meeting notes, and copies of all
correspondents.
5. Proxy Voting:
Unless specifically directed by Client, Advisor shall not assume
responsibility for voting proxies on Client behalf.
6. Brokerage Services:
Subject to Client approval, Advisor will select brokerage firms to execute
transactions on Client's behalf. Criteria used in selection process shall
include commission costs and execution capabilities. Advisor assumes
responsibility recommending brokerage firm and for negotiating brokerage
rates on Client's behalf. All brokerage commissions, stock transfer fees
and other
15851 Dallas Parkway, Suite 1155 (214) 234-2829(Voice)
Dallas, TX 75248 (214) 234-8949 (FAX)
<PAGE>
similar charges relating to Client's investments shall be paid by Client.
Advisor shall not receive commissions for the sale or redemption of mutual
fund securities in Client's portfolio. Advisor may use an affiliated
broker/dealer to efficiently execute trades for Client's portfolio.
Transaction fees for mutual fund securities received by any affiliated
broker dealer shall not exceed the transaction charges on the Advisory Fee
Schedule in Exhibit A. In addition Advisor may receive administrative
service fees from various mutual fund sponsors for rendering specific
services to the mutual fund. This is separate from 12(b) 1 administrative
service fees paid on some mutual funds to the broker/dealer of record.
7. Custody of Assets:
Client acknowledges that Advisor will not have custody of Client's funds.
Client retains responsibility for custodianship of all Client assets.
Client acknowledges that Advisor is only providing advisory services
described in this Agreement and that Advisor retains no custody or
possession of the assets in the Client's account and performs no depository
services with respect to Client's account.
8. Confidentiality of Information:
All advice as provided by Advisor is to be confidential, and not publicized
or communicated to any outside third party without the written consent of
Advisor and Client, except as required by applicable state or federal law.
9. Fees:
Fees payable to Advisor for advisory services shall be calculated as a
percentage of the average daily market value of the assets managed,
according to the fee schedule shown below. Fees shall become due and
payable at the end of each calendar quarter in which the Client's assets
are managed by Advisor. A deposit, equal to the fees calculated according
to the fee schedule below, based on the balance at the beginning of each
quarter, will be retained by Advisor until the end of each quarter at which
time the fees are due and payable. Advisor shall notify Client in writing
of the amount of fees due, how the fees were calculated, and the value of
the assets on which the fees were computed. Client will provide for an
automatic draft to be established for payment of all fees. The base number
for fee calculation shall be the assets under management by Advisor as of
the end of each calendar quarter. Fees for a partial quarter shall be
calculated on a pro rata basis assuming 365 day year. Advisor does not
offer any fee schedule based on account performance. All Accounts are
subject to a minimum quarterly fee of $500.00.
<TABLE>
<S> <C> <C>
Fee Schedule
Assets Managed (average daily balance in quarter) Ann Rate Qtly Rate
Amounts equal to or less than $250,000 2.50% .6250%
Amounts greater than $250,000 or equal to $500,000 2.00% .5000%
Amounts greater than $500,000 but less than or equal to $1,000,000 1.75% .4375%
Amounts greater than $1,000,000 but less than or equal to $3,000,000 1.25% .3125%
Amounts greater than $3,000,000 negotiable
</TABLE>
15851 Dallas Parkway, Suite 1155 (214) 234-2829(Voice)
Dallas, TX 75248 (214) 234-8949 (FAX)
<PAGE>
All fees are payable monthly or quarterly and are negotiable with Client.
Where advanced retainers are deposited, and are not for more than three
months in advance, and if the engagement is subsequently terminated, any
unearned fees will be refunded to Client. Client agrees that the Advisor
may send bills for its fees for direct payment by the bank or firm holding
Client's securities and funds, provided that at the same time Advisor sends
a copy of its billing to Client showing the amount of the fee, the value of
the Client's assets on which the fee is based, and the specific manner in
which the fee is calculated.
10. Assignability:
This Agreement may not be assigned to any third party by without written
consent of Client. This agreement shall be binding upon and inure to the
benefit of the parties, and successors, heirs and assigns of Client.
11. Divisibility of Agreement:
If any provision of this Agreement is held by a court of competent
jurisdiction to be invalid, void, or unenforceable, the remaining
provisions shall nevertheless continue in full force and effect without
being impaired or invalidated in any way.
12. Term of Agreement:
This Agreement shall take effect as of the date of execution by both
parties, and shall continue in effect until terminated by either party, one
to the other, upon thirty days written notice.
13. Appointment of Rushmore as Attorney-in-Fact:
Subject to the elections in paragraph 2, Client agrees to appoint Advisor
its agent and attorney-in-fact in connection with assets managed by Advisor
for Client, including but not limited to, purchase and sale of securities,
clearance and settlement of securities transactions, transfer, receipt, and
delivery of securities or cash, and authorizes Advisor to give such
instructions and to act on behalf of the Client with respect to the managed
assets in the same manner and with the same force and effect as if the
Client acted directly. This Limited Power of Attorney shall remain in
effect until authority is revoked by Client upon receipt by Advisor of
written notice of such revocation. A copy of the Limited Power of Attorney,
once executed, will be attached hereto as exhibit B.
14. Entire Agreement:
This Agreement supersedes any and all other agreements, either oral or in
writing, between the parties hereto with respect to the subject matter and
contains all of the covenants and agreements between the parties with
respect to said matter. Each party to this Agreement acknowledges that no
representations, inducements, promises or agreements, orally or otherwise,
have been made by any party, or anyone acting on behalf of any party, which
are not embodied herein, and that no other agreement, statements, or
promises not contained in this Agreement shall be valid or binding.
15. Governing Law:
This agreement shall be governed by and construed in accordance with the
laws of the State of Texas 15851 Dallas Parkway, Suite 1155 (214)
234-2829(Voice) Dallas, TX 75248 (214) 234-8949 (FAX)
15851 Dallas Parkway, Suite 1155 (214) 234-2829(Voice)
Dallas, TX 75248 (214) 234-8949 (FAX)
<PAGE>
16. Notices:
Notices under this Agreement shall be in written form, and directed to the
designated representatives of Advisor and Client as shown below. Both
Advisor and Client warrant that the parties designated below and executing
this Agreement are duly authorized to enter into this Agreement on behalf
of their respective entities.
17. Recommendations:
The recommendations to be provided under this agreement are advisory in
nature, and Client expressly agrees that Advisor shall not be held liable
in any manner with reference to the investment performance of Advisor's
recommendations, provided those recommendations are duly provided by
Advisor in good faith, with reasonable care and consideration for Client's
circumstances.
18. Arbitration:
Any controversy or claim arising out of or related to this agreement, or
any breach thereof, shall be settled by arbitration, in accordance with the
Commercial Arbitration Rules of the American Arbitration Association, and
Judgment upon the award rendered by the Arbitrator(s) may be entered into
any Court having jurisdiction thereof.
19. Other Acknowledgments.
Client acknowledges that it has received at least 48 hours in advance of
signing this agreement, a disclosure statement from Advisor that includes
(i) any affiliations with any securities dealer or other investment advisor
and the nature of such affiliation, (ii) the Advisor's fee schedule and the
extent to which such fees are negotiable, (iii) the extent to which the
Advisor will also act as principal or as an agent to execute recommended
transactions in securities, and (iv) other information about Advisor. Such
disclosure may be satisfied by delivery to Client of Part II of the form
ADV of Advisor, as filed with the Securities and Exchange Commission.
Rushmore: Client: Please Print Name &
Address
Rushmore Investment Advisors, Inc.
18581 Dallas Parkway, Suite 1155
Dallas, TX 75248
ACCEPTED, this day of , 19
By: By:
Frederick E. Mowery, President Client
15851 Dallas Parkway, Suite 1155 (214) 234-2829(Voice)
Dallas, TX 75248 (214) 234-8949 (FAX)
<PAGE>
Exhibit 10.9
AFFILIATION AGREEMENT
This AFFILIATION AGREEMENT ("Agreement") is entered into and made effective on
the date set forth below, between ____________("Agent"), whose address is
indicated below, and Rushmore Insurance Services, Incorporated and/or, its
affiliates or assigns ("Rushmore"), whose address is 13355 Noel Road, Suite 650,
Dallas, Texas 75240.
RECITALS
--------
WHEREAS, Rushmore has entered into various National Marketing Agreements
with Insurance and Investment Companies, and has developed unique and
proprietary concepts, products, systems and agencies for the exclusive benefit
of Rushmore and its agents; and,
WHEREAS, Agent desires, individually and/or through other agents recruited
by Agent, to market insurance and other financial products and services, and to
utilize the concepts and systems provided through Rushmore and/or its
affiliates; and,
WHEREAS, Agent desires to receive loans or advances and is duly indebted to
Rushmore as a result of various Commission Advance, Cash Loan, or Annualization
Agreements which Rushmore may advance or guarantee from time to time at its
discretion (hereinafter referred to as the "Indebtedness"); and,
WHEREAS, In the event the Indebtedness or any portion thereof becomes
unrecoverable, Agent desires to assign any and all insurance commissions,
including first year and renewal, now due or which may become due to Agent from
each and every insurance company with whom the Agent is now licensed or becomes
licensed subsequent to the date of this Agreement hereinafter referred to as
"Companies").
Now, THEREFORE, in consideration of the mutual benefits to be derived,
Agent and Rushmore agree as follows:
1. Responsibility for License and Compliance with Applicable Laws. Agent shall
be solely responsible (i) for complying with all state, federal and local laws
applicable and (ii) for obtaining any permits or licenses required under
applicable state, federal and local laws necessary to become affiliated with
Rushmore and to receive a fee for soliciting insurance or other financial
products. Agent agrees to promptly furnish to Rushmore a copy of such license(s)
prior to commencement of Agent's solicitation of any customer; and Agent agrees
to maintain and keep current such license(s) and to promptly notify Rushmore of
any changes in the licensing requirements applicable to Agent.
2. Compliance. Agent agrees to comply fully with all program guidelines, and
other policies, procedures and criteria established from time to time by
Rushmore or Companies. Further, Agent agrees to use only solicitation or other
materials approved by Rushmore or Companies and shall use no other solicitation,
advertising or similar materials when communicating or dealing with potential
customers.
3. Use of Rushmore Name. Rushmore agrees to permit Agent the use of the Rushmore
name, Logo, Trademarks, Copyrights, Materials, Systems, Forms, and other
proprietary information. Agent agrees to use all due diligence to protect the
good name and image of Rushmore, to treat all such information confidentially,
and not to disclose or distribute such information by any means to unauthorized
third parties.
4. Confidential Information. Agent acknowledges that the concepts, products,
systems and other materials provided to Agent by Rushmore are the sole property
of Rushmore, and Agent agrees not to use any such materials, directly or
indirectly, for any purpose whatsoever during the term of this Agreement, other
than the solicitation and referral of customers, and further agrees not to use
such materials, directly or indirectly, in any manner whatsoever after the
termination of this Agreement. With the exception of his or her own downline
agents, Agent agrees not to solicit or recruit, for any purpose, other agents
within Rushmore and to treat such agents as confidential and proprietary.
5. Submission of Applications. Agent hereby covenants and agrees not to submit
any application for a customer to replace a policy of insurance issued by a
company represented by Rushmore, and not to submit any application which Agent
knows or should have known to contain false, fraudulent or misleading
information.
6. Fees to Agent. Agent shall be paid a commission in connection with the sale
of various products in accordance with the commission and override schedule in
effect. Agent acknowledges receipt of same for each company represented and
agrees to the commission, override and Advance Agreement currently in effect.
Rushmore may at any time change or amend the commission, override or advance
schedule.
<PAGE>
7. Management Responsibility. Agent agrees to supervise and oversee the
activities of all downline agents, if any, for and in consideration of the
various management, generational or bonus overrides received; including but not
limited to, marketing and sales support, administrative support, training,
compliance, education, dissemination of bulletins, etc. from Rushmore or
Companies regarding policies and procedures, etc. Agent understands and agrees
that Agent is responsible for all downline debit balances and quality of
business and agrees to use all due diligence in recruiting, managing and
motivating downline agents.
8. Setoff. If Agent has any indebtedness to Rushmore at any time, either as a
result of Agent's indemnification hereunder or under any other provision of this
Agreement or any provision of any other agreement with Companies or other
arrangement between Agent and Rushmore; Rushmore may setoff such indebtedness
against obligations of Rushmore to Agent under this Agreement.
9. Assignment to Offset Indebtedness. In the event any of the Indebtedness
remains unrecoverable after such setoff, Agent does hereby irrevocably assign,
transfer and set over to Rushmore all the Agent's right, title and interest in
and to any and all commissions now due or which may hereafter become due to
Agent from Companies due to any indebtedness to Rushmore. Commissions assigned
hereunder are those commissions payable to Agent pursuant to the terms of any
and all Commission Agreements for Agents or Brokers entered into by Agent and
Companies. Commissions shall also include any and all moneys to be received by
Agent from Companies as a result of Agent's insurance activities for and on
behalf of Companies.
10. Appointment of Rushmore. Agent hereby constitutes and appoints Rushmore its
true, lawful and irrevocable attorney-in-fact to demand, receive and enforce
payments and to give receipts, releases, satisfactions for and to sue for all
sums payable to Agent from Companies, and this may be done either in the name of
Agent or in the name of Rushmore with the same force and effect as the Agent
could do if this Agreement had not been made. Any and all sums of money subject
to this Agreement which may be received by Agent to which Rushmore is entitled,
will be received by Agent as trustee for Rushmore. This assignment shall be
effective from the date of this Agreement and shall remain in effect until all
the Indebtedness referred to herein is extinguished.
11. Crediting Commissions. All sums of money received by Rushmore pursuant to
this Agreement shall be credited by Rushmore against any Indebtedness. Any funds
received by Rushmore from Companies in excess of the Indebtedness outstanding as
of the date of receipt of such funds will become the property of Agent.
Companies are not a party to this Agreement. Their only obligation upon their
acceptance of a copy hereof, will be the payment to Rushmore of any and all
commissions now due or hereafter to become due to Agent.
12. No Prior Liens. Agent represents, warrants and agrees that no prior
assignment, security interest or lien, other than as contained herein has been
created or exists with respect to the commission payable, under any Commission
Agreement described above; and Agent will not create or suffer to exist any such
assignment, security interest or lien, other than this Agreement.
13. Indemnification, Agent hereby agrees to indemnify and hold Rushmore harmless
from all damages, losses, costs and expenses, including reasonable attorneys'
fees, which Rushmore may sustain as result of Agent's negligence, intentional
tort, or breach of any representation, covenant, agreement or warranty contained
herein.
14. Independent Contractors. In performing Agent's responsibilities under this
Agreement, Agent is an independent contractor paying his or her own expenses and
all taxes as a self-employed person. This Agreement does not create, and shall
not be construed to create, a relationship of partner or joint venture or an
association for profit or an employer/employee relationship between Rushmore and
Agent.
15. Survival. Each of the representations and warranties set forth in this
Agreement shall survive the execution, delivery and termination of this
Agreement.
16. Termination. This agreement may be terminated by Rushmore for cause or for
lack of production upon written notice to Agent. This Agreement may be
terminated by Agent for any reason upon 30 days written notice to Rushmore.
17. Governing Law. This Agreement shall be construed and interpreted in
accordance with the laws of the State of Texas. Venue for any dispute arising
from this Agreement shall be set in Dallas County, Texas.
<PAGE>
18. Entire Agreement. This Agreement represents the entire agreement between
Agent and Rushmore relating to the subject matter hereof and may not be amended,
other than provided in Paragraph 6, except by written instrument executed by
both parties. This Agreement and all rights and liabilities hereunder shall
inure to the benefit of Agent and Rushmore and its successors and assigns, and
shall be binding on the heirs, administrators, successors and assigns of each
party.
EXECUTED to be effective as of this ________day of ________ 19.
AGENT INFORMATION
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(please print clearly) AGENT
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- ---------------------------- --------------------------------
First Name MI Signature
- ----------------------------
Last Name
- ----------------------------
Mailing-Street Address RUSHMORE
--------
- ----------------------------
City State Zip
- ----------------------------
Business Phone
- ----------------------------
Fax#
- ----------------------------
Social Security Number
- ----------------------------
Upline Managing General Agent
<PAGE>
Exhibit 10.10.1
FULLY DISCLOSED CLEARING AGREEMENT
This Fully Disclosed Clearing Agreement (the Agreement") is executed and
entered into by and between Southwest Securities, Inc. ("Southwest"), a Delaware
corporation, and Rushmore Services Corp ("Correspondent"), a Dallas corporation.
---------------------- -------
WHEREAS, Correspondent is in the process of registering or is registered
with the Securities Exchange Commission ("SEC") as a broker-dealer of securities
in accordance with Section 15(b) of the Securities and Exchange Act of 1934
(the "Act") and is applying for membership or is a member of the National
Association of Securities Dealers, Inc. ("NASD"), and desires to enter into an
agreement with Southwest for Southwest to clear and maintain customer accounts
on behalf of Correspondent; and
WHEREAS, Southwest meets all requirements of the SEC to function as a
clearing broker or dealer, and desires to enter into an agreement to clear and
maintain cash, margin or other accounts ("Accounts") for Correspondent or
customers of Correspondent ("Customers"), (such Accounts of Correspondent and
Customers being hereinafter referred to as "Correspondent Accounts" and
"Customer Accounts," respectively).
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
and of guarantee of this Agreement by any guarantor(s), and for other good and
valuable consideration the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:
1. REPRESENTATIONS AND WARRANTIES; AGENCY RELATIONSHIP
(a) Representations and Warranties of Correspondent. Correspondent represents
and warrants to Southwest that:
(i) Correspondent is a corporation duly organized, validly existing and in
good standing under the laws of the state of its incorporation, and
authorized to conduct business in each state where such authorization
is required.
(ii) Correspondent has all the requisite authority in conformity with all
applicable laws and regulations to enter into this Agreement and to
retain the services of Southwest in accordance with the terms hereof.
(iii)Correspondent shall not conduct any securities business in accordance
with the terms of this Agreement unless or until it is accepted as a
member in good standing of the NASD, its registration with the SEC is
effective, and it is duly licensed in accordance with the provisions
of any applicable state securities laws.
<PAGE>
(iv) Correspondent shall not conduct any business in securities unless it
has all requisite authority, whether arising under applicable federal
or state laws. rules and regulations, or under the bylaws and rules of
any securities exchange or securities association to which
Correspondent is subject.
(v) Correspondent has no arrangement with any other firm for the provision
by such other firm of clearing services for any Customer Accounts or
Correspondent Accounts, or if any such arrangement exists
Correspondent has fully disclosed the nature of such arrangement to
Southwest in writing.
(b) Representations and Warranties of Southwest. Southwest represents and
warrants to Correspondent that:
(i) Southwest is a corporation duly organized, validly existing and in
good standing under the laws of the state of Delaware and authorized
to do business in each state where such authorization is required.
(ii) Southwest is registered as a broker-dealer with the SEC and is in
compliance with the rules and regulations thereof.
(iii)Southwest is a member corporation in good standing of the NASD and is
in compliance with the rules and regulations thereof.
(iv) Southwest is in compliance with the rules and regulations of each
national securities exchange of which it is a member.
2. CUSTOMER AND CORRESPONDENT ACCOUNTS
Responsibility for compliance with the provisions of the NASD Rules of Fair
Practice regarding opening, approving and monitoring Customer Accounts shall be
allocated between Southwest and Correspondent as set forth in this Section 2.
(a) Account Documentation. Correspondent will be responsible for obtaining and
verifying all required information and the identity of each potential
Customer. Correspondent will be responsible for obtaining and furnishing to
Southwest all customary and necessary documents related to Customer
Accounts and Correspondent Accounts, and such other documentation as
Southwest may reasonably require from time to time, all in such form as
shall be reasonably acceptable to Southwest. Correspondent also will be
responsible for the transmissions of all required documents to Southwest on
a timely basis, but in any event within seven (7) days after a request to
open an account is made to Southwest. Correspondent acknowledges its
obligations to retain all documents in an easily accessible place in
accordance with any applicable rules and regulations of regulatory or
self-regulatory agencies or bodies, and Correspondent agrees to provide
original documents by overnight delivery or a legible copy by facsimile
transmission of such
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documents within twenty-four (24) hours of a request from Southwest.
Correspondent will be responsible for complying with the requirement of SEC
Rule 15c2-5. if applicable.
(b) Knowledge of Customer and Customer's Investment Objectives.
Correspondent will be responsible for learning and documenting all the
facts relative to every Customer necessary to insure compliance by
Correspondent with applicable rules and regulations. Including the
information and instructions submitted to Southwest pursuant to
Section 2(a), any additional facts relative to the Customer's
investment objectives. and to the nature of every Customer Account,
every order and every person holding power of attorney over any
Customer Account. Correspondent shall be solely responsible for any
issues regarding the suitability of any investments for its Customers.
(c) Acceptance of Accounts. An authorized officer of Correspondent shall
accept and approve each Customer and Customer Account. Each Customer
and Customer Account approved by Correspondent and opened with
Southwest shall be subject to Southwest's acceptance. Southwest
reserves the right to withhold acceptance of or to reject. for any
reason, any Customer, Customer Account, Correspondent Account or any
transaction for any Account and to terminate any Account previously
accepted by Southwest. Acceptance of each Account shall be conditioned
upon Southwest's receipt of all required completed forms as required
by Section 2(a). Correspondent shall not submit such forms with
respect to any Customer Account unless Correspondent has in its
possession the documentation of all information required pursuant to
Section 2(b). Southwest shall be under no obligation to accept any
Account as to which any documentation required to be submitted to
Southwest or maintained by Correspondent pursuant to Sections 2(a) and
2(b) is incomplete. Prior to acceptance of any Account no action taken
by Southwest or any of its employees, including, without being limited
to clearing a trade in any Account shall be deemed to be or shall
constitute acceptance of such Account.
(d) Supervision of Transactions and Accounts. Correspondent will be
responsible for the review and supervision of, and the suitability of,
investments made by each and every one of its Customers and for the
supervision and monitoring of all discretionary Accounts maintained by
Correspondent, and Southwest shall have no responsibility for such. An
authorized officer of Correspondent shall approve each transaction in
each Customer Account accepted by Southwest. Correspondent shall be
responsible for insuring that all transactions in and activities
related to all Accounts opened by it with Southwest, including
discretionary Accounts, will be in compliance with all applicable
laws. rules and regulations of the United States, the states thereof,
and regulatory and self-regulatory agencies and bodies, including any
laws relating to Correspondent's fiduciary responsibilities to
Customers, either under the Employee Retirement Income Security Act of
1974 or otherwise; and in this connection, Correspondent shall
diligently supervise the activities of its officers, employees and
representatives with respect to such Accounts. Southwest will perform
clearing services provided for in this Agreement for Accounts accepted
by it in accordance with the terms of this Agreement, as it may be
amended from time to time, and otherwise in accordance with its
reasonable business judgment.
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To the extent, if any, that Southwest accepts from Correspondent
orders for execution in accordance with Section 7(a), Correspondent
shall be responsible for informing Southwest of the location of the
securities that are the subject of the order so that Southwest may
comply with the provisions of 3110 of the NASD Conduct Rules.
(e) Accounts of Associated Persons. In each case in which a Customer is an
employee or otherwise associated with a NASD member, Correspondent
shall be responsible for notifying such member in accordance with the
provisions of Article III, Section 28 of the NASD Rules of Fair
Practice.
(f) Account Responsibility for Certain Purposes. Notwithstanding anything
herein to the contrary, for purposes of the Securities Investment
Protection Act of 1970 and the financial responsibility rules of the
Securities and Exchange Commission only. the Customer Accounts are the
responsibility of Southwest. Nothing in this Section 2(f) will
otherwise change or affect the provisions of this Agreement or any
information provided to Customers (including the Customer Information
Brochure provided to Correspondent by Southwest), which provide that
each Customer remains a Customer of Correspondent for all other
purposes, including but not limited to sales practices, supervision,
suitability, etc. Further, it is understood that Correspondent is not
Southwest's agent for sales purposes and neither Correspondent nor any
of its employees or agents can bind Southwest or make representations
on Southwest's behalf to any Customers regarding any transaction
cleared by Southwest on Correspondent's behalf.
3. EXTENSION OF CREDIT
Responsibility for compliance with the provisions of Regulation T issued by
the Board of Governors of the Federal Reserve System pursuant to the Securities
Exchange Act of 1934 ("Regulation T") and all other applicable rules,
regulations and requirements of any exchange or regulatory agency affecting the
extension of credit shall be allocated between Southwest and Correspondent as
set forth in this Section 3.
(a) Margin Agreements. At the time of opening of each margin account,
Correspondent will furnish Southwest with a Southwest Margin and Short
Account Customer Agreement, executed by Customer, and on the form
furnished to Correspondent by Southwest.
(b) Margin and Margin Maintenance. Correspondent is responsible for
assuring Customer's payment of Customer's initial margin requirements
and of all amounts necessary to meet subsequent maintenance calls in
each Customer Account, to insure compliance with Regulation T and the
house rules of Southwest. Correspondent is responsible for the payment
of initial margin requirements and of all amounts necessary to meet
subsequent margin calls in each Correspondent Account.
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Southwest shall have the unlimited right to buy in or sell out
positions in Accounts whenever Southwest in its sole discretion deems
such action appropriate. and without regard to whether, if the Account
is a Margin Account, any such Account is then in compliance with
applicable margin maintenance requirement or has requested an
extension of time for any Account to make any payment required by
Regulation T. Correspondent acknowledges that Southwest has the right
to demand payment on any debit balance and that Correspondent is
responsible to Southwest for any unsecured debit balance resulting
from any failure of a Customer to make any such payments upon demand.
(c) Margin Requirements. Southwest will be responsible for setting minimum
margin requirements and advising Correspondent when calls are issued.
Southwest may change the margin requirements applicable to any Account
or class of accounts, as described in its house rules; Correspondent
shall be responsible for advising its Customer of the changed
requirements and for the payment by Customer of any additional margin
necessary to insure compliance with such increased requirements.
Correspondent may establish for any of its Customer Accounts higher
minimum margin requirements than those requirements established by
Southwest; however Southwest will not be responsible for monitoring
the higher minimum on behalf of Correspondent, unless the higher
standard is one that can be accommodated by the Southwest computer
system.
(d) Extensions. Correspondent will be responsible for advising Southwest
to obtain extensions under appropriate federal regulations. Only
Southwest shall perform the clerical function of obtaining requested
extensions from the applicable regulatory authorities.
(e) Losses. In addition to, and not in limitation of, Correspondent's
agreement to indemnify Southwest pursuant to the provisions of Section
10, Correspondent indemnifies and holds harmless Southwest from and
against any and all loss, cost, expense and liability (including legal
and accounting fees and expenses) sustained by Southwest arising Out
of any of the following events:
any failure by any Customer to comply with the terms of its Customer
Margin and Short Account Agreement with Southwest;
Southwest's re-booking of margin transactions as cash transactions;
Southwest's broker's execution of a transaction for the account of a
Customer,
the failure of Correspondent or any Customer, in a margin transaction,
to comply with Regulation T;
the failure of Correspondent: to satisfy its obligations under this
Section 3; or
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<PAGE>
in a cash transaction, the failure of delivery of securities sold or
failure of payment for securities purchased in accordance with the
provisions of Regulation T; the return to Southwest unpaid of any
check given to Southwest by Correspondent or any Customer; or the
payment for and/or delivery of all "when issued" transactions which
Southwest may accept or execute for the Accounts.
4. MAINTENANCE OF BOOKS AND RECORDS
(a) Southwest's Books and Records. Southwest will maintain stock records
and other records on a basis consistent with generally accepted
practices in the securities industry and will maintain copies of such
records as are produced by Southwest, in accordance with all
applicable rules and regulations of regulatory and self-regulatory
agencies and bodies, including the NASD and SEC guidelines for record
retention in effect from time to time. In connection with Customer
Accounts, Southwest will maintain and preserve such books and records
pertaining thereto, pursuant to the requirements of SEC Rule 17a-3, as
are customarily made and kept by Southwest.
(b) Correspondent's Books and Records. Notwithstanding the provisions of
Section 4(a), Correspondent shall maintain ledgers (or other records)
reflecting all assets and liabilities, income and expenses and capital
accounts; monies borrowed and monies loaned (together with a record of
the collateral therefor and any substitution in such collateral); a
record of the computation of aggregate indebtedness and net capital
pursuant to SEC Rule 15c3-l; and personnel files including
applications for employment executed by each "associated person".
Correspondent also shall maintain a memorandum of each brokerage
order, and of any other instruction, given or received for the
purchase or sale of securities, whether executed or unexecuted. Such
memorandum shall show the terms and conditions of the order or
instructions and of any modification or cancellation thereof, the
account for which entered, the time of entry, the price at which
executed and, to the extent feasible, the time of execution or
cancellation.
(c) Books and Records of Both Parties. Southwest and Correspondent shall
each be responsible for preparing and filing the reports required by
the regulatory and self-regulatory agencies and bodies that have
jurisdiction over each, and Southwest and Correspondent will each
provide the other with such information, if any, which is in the
control of one party but is required by the other to prepare any such
report.
5. RECEIPT, DELIVERY AND SAFEGUARDING OF FUNDS AND SECURITIES
(a) Receipt and Delivery in the Ordinary Course of Business. As between
Southwest and Correspondent, the party having possession of Customer
funds or securities shall be responsible for safeguarding such funds
and securities. Correspondent shall promptly transmit securities
and/or funds to Southwest when securities and/or funds are to be
delivered to Southwest. However, Southwest will not be responsible for
any funds or
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<PAGE>
securities delivered by a Customer or Correspondent, its agents or
employees, until such funds or securities are physically delivered to
Southwest's premises and accepted by an authorized representative of
Southwest or deposited in bank accounts maintained in Southwest's
name. Correspondent shall be responsible for the prompt payment to
Southwest for securities purchased and prompt delivery of securities
sold in Customer Accounts. Correspondent shall be responsible for the
authenticity of all certificates and delivery of certificates in good
form by Customers to Southwest.
With respect to all payments made or to be made to Southwest, by or
for a Customer of Correspondent, Correspondent shall immediately
forward all such funds to Southwest, either by U.S. Mail or mutually
acceptable courier service or by deposit to local depository bank, and
an officer of Correspondent shall verify and warrant that said funds
are credited to the proper Southwest Customer Account, and further
shall notify Southwest to enter on Southwest's books and records said
deposit of Customer funds.
With respect to any securities certificates delivered to Southwest for
a Customer of Correspondent, an officer of Correspondent shall verify
and warrant (i) that any securities not bearing a restricted legend
are fully paid for and freely tradable; (ii) that Correspondent has no
reason to suspect any defect or irregularity with respect to any
securities and any endorsements thereon; (iii) that the securities are
free of any liens and adverse claims, (iv) that the party transferring
the securities has legal title to them or the authority to effect the
proposed transfer: and (v) that the regulatory requirements
restricting the sale or transfer of securities that bear a restrictive
legend (pursuant to SEC Rules 144 or 145 or otherwise) have been
satisfied or will be satisfied within the appropriate time frames.
Correspondent acknowledges that it is solely responsible for
satisfying any loss or shortfall of a Customer Account, or for any
other event which causes the assets in a Customer Account to be
insufficient in amount or otherwise unavailable to timely meet the
obligations of Customer to Southwest.
(b) Custody Services. Whenever Southwest has been instructed to act as
custodian of the securities in any Correspondent or Customer Account,
or to hold such securities in "safekeeping," Southwest may hold the
securities in the Customer's name or may cause such securities to be
registered in the name of Southwest or its nominee or in the names of
nominees of any depository used by Southwest. Southwest will perform
the services required in connection with acting as custodian for
securities in Correspondent and Customer accounts, such as (i)
collection and payment of dividends; (ii) transmittal and handling
(through Correspondent) of tenders or exchanges pursuant to tender
offers and exchange offers; (iii) transmittal of proxy materials and
other shareholder communications; and (iv) handling of exercises or
expirations of rights and warrants, and of redemptions of securities.
(c) Receipt and Delivery Pursuant to Special Instruction. Upon instruction
from Correspondent and/or a Customer, Southwest will make such
transfers of securities or
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Accounts as may be requested. Correspondent shall be responsible for
determining if any securities held in Correspondent or Customer
Accounts are "restricted securities' or "control stock" as defined by
the rules of the SEC and that orders executed for such securities are
in compliance with the applicable laws, rules and regulations.
(d) Draft-Issuing Authority. At its discretion Southwest may authorize
certain of Correspondent's employees to sign drafts, with
Correspondent as the drawer, payable to Correspondent's Customers in
amounts and pursuant to conditions as may be determined by Southwest
from time to time. Correspondent agrees that it will not request
Southwest to authorize someone to sign drafts who is not an employee
of Correspondent. With respect to any drafts so issued by
Correspondent, an officer of Correspondent shall verify and warrant
before causing the draft to be issued (i) that the funds to be
transmitted are due payee and that payee has the authority to receive
those funds; (ii) that the funds are free of any liens or adverse
claims at the time of payment, and are not expected to become subject
to any such liens or claims within the foreseeable future; and (iii)
that the funds are not needed at the time of payment to satisfy margin
or other collateral requirements of the Customer.
Correspondent agrees to fully indemnify Southwest from the negligence,
fraud or mistakes of Correspondent, Correspondent's employees,
independent agents and contractors and Customers in connection with
any draft issuing authority granted hereunder. Southwest may in its
discretion require Correspondent to post a performance bond in such
amount and with such deductible as Southwest may determine in order to
protect Southwest against any such losses. Furthermore, Correspondent
authorizes Southwest to charge any Correspondent Account or other
assets of Correspondent held by Southwest with the amount of any such
losses.
Notwithstanding Section 5(a), Southwest will not be responsible for
the safeguarding of funds withdrawn by Correspondent or
Correspondent's employees pursuant to such draft issuing authority.
Southwest may withdraw this draft issuing privilege without notice at
any time during the term of this Agreement. Notwithstanding anything
herein to the contrary, Southwest may at any time, at its sole
discretion, despite any prior authorization, refuse payment on any
draft for which Correspondent is drawer and Southwest is drawee.
6. CONFIRMATIONS AND STATEMENTS
(a) Preparation and Transmissions. Southwest will prepare and send to
Customers monthly statements of account (or quarterly statements if no
activity occurs in an account during the calendar quarter covered by
such statement), which statements shall meet Southwest's requirements
as to format and quality and will indicate that Correspondent
introduced the Account. Unless otherwise agreed, Southwest will be
responsible for preparing and transmitting confirmations; provided,
however, that Correspondent may elect to prepare and transmit
confirmations, subject to prior approval by Southwest and
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compliance by Correspondent with the provisions of 2230 NASD Conduct
Rules. Correspondent shall not generate and/or prepare any statements,
billings or confirmations respecting any Account except as provided in
this Agreement or pursuant to an agreement executed between Southwest
and Correspondent that authorizes Correspondent to print and mail
statements to Accounts on behalf of Southwest. If such an agreement
has been executed, Correspondent covenants that it shall comply with
all requirements for statements imposed upon Southwest of which
Correspondent has notice or has been advised of by Southwest under all
applicable laws, rules and regulations, including, but not limited to,
the SEC, NASD, Federal Reserve Board and all other regulatory. and
self-regulatory agencies and bodies. Correspondent further covenants
that it shall not modify or amend the agreed upon statement form
provided without the prior written consent of Southwest.
(b) Examination and Notification of Errors. Correspondent shall examine
promptly all monthly statements of account, monthly statements of
clearing services and other reports provided to Correspondent by
Southwest. Correspondent shall notify Southwest of any error claimed
by Correspondent in any Account in connection with (i) any transaction
prior to the settlement date of such transaction, (ii) information
appearing on daily reports within seven (7) calendar days of such
report, and (iii) information appearing on monthly statements or
reports within thirty (30) calendar days of Correspondent's receipt of
any monthly statement or report. Any notice of error shall be
accompanied by such documentation as may be necessary to substantiate
Correspondent's claim. Correspondent shall provide promptly upon
Southwest's request any additional documentation which Southwest
reasonably believes is necessary or desirable to determine and correct
any such error.
7. ACCEPTANCE OF ORDERS, EXECUTION OF TRANSACTIONS, OTHER SERVICES
(a) Customer's Orders. Orders received by Correspondent can be executed by
Correspondent or forwarded to Southwest for execution. The party
executing the order shall be responsible for errors in execution.
Acceptance of orders from Customers shall be the responsibility of
Correspondent, and Correspondent shall be responsible for the
authenticity of all orders. Correspondent shall promptly transmit all
orders to Southwest, and Southwest shall have no responsibility for
orders not promptly transmitted. Correspondent shall advise each of
its Customers that its relationship with Southwest is solely that of
an introducing broker to a clearing broker and that, except as set
forth in Section 2(f) above, Correspondent bears all responsibility
for the Customer's Account. Southwest reserves the right to reject any
Customer order transmitted to Southwest for execution or any order
executed by Correspondent and reported to Southwest for clearance.
Correspondent assumes the risk of failure by any dealer with which
Correspondent executes an order in the event such dealer fails to
perform, and will reimburse Southwest for any loss and/or costs
incurred by it in the transaction.
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(b) Transaction Clearing. During the term of this Agreement, Southwest
will clear transactions on a fully disclosed basis for Accounts of
Correspondent and the Customers that Correspondent introduces and
Southwest accepts as provided in Section 2(c); provided that Southwest
reserves the right not to clear any transactions for Correspondent or
Correspondent's Customers.
(c) Other Services. Southwest will perform such other services, upon such
terms and at such prices, as Southwest and Correspondent shall agree
from time to time.
8. FEES AND SETTLEMENTS FOR SECURITIES TRANSACTIONS
(a) Commissions; Fees for Clearing Services
(i) Correspondent has provided to Southwest its basic commission
schedule and Southwest will charge each Customer the commission
shown on such schedule or which Correspondent otherwise directs
Southwest to charge on each transaction. Correspondent's basic
commission schedule may be amended from time to time by written
instructions to Southwest from Correspondent; provided, however,
that Southwest shall be required to implement such changes only
to the extent they are within the usual capabilities of
Southwest's data processing and operations systems and only over
such reasonable time as Southwest may deem necessary or desirable
to avoid disruption of Southwest's normal operational
capabilities. Southwest may charge Correspondent for changes in
the basic commission schedule. Correspondent's basic commission
schedule shall be within the format of Southwest's computer
system.
(ii) Southwest will charge Correspondent for clearing services
according to the fee schedule set forth in Schedule A attached
hereto and, if applicable, Schedule B.
(iii)Southwest may charge Correspondent expenses incurred by Southwest
on behalf of Correspondent pursuant to this Agreement. Expenses
incurred by Southwest on behalf of Correspondent that may be
deducted from any payments due to Correspondent from Southwest
include, but are not limited to, overlay of forms, system
equipment expenses, special programming, changes to commissions
schedules and financial report information related thereto,
installation of data communication lines and brokerage related
credit inquiries, legal transfers, Regulation T extensions,
Mailgrams (buy-in or sellout), microfiche of records, insurance
protection for Accounts in excess of the amounts provided by the
Security Investors Protection Corporation, third party vendor
fees and costs incurred in failure of Correspondent or Customers
to provide correct social security or tax identification numbers.
(b) Settlements. Southwest will collect commissions from Customers on
behalf of Correspondent and through Correspondent. As soon as
practicable after the end of each
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month, Southwest will forward to the Correspondent a statement showing
the amount of commission and other amounts collected by Southwest on
Correspondent's behalf, and all amounts due to Southwest from
Correspondent (including, without being limited to, clearing charges,
other charges, other fees and Customer's unsecured debit items,
however arising), together with the amount by which the total owed
Correspondent exceeds the total owed Southwest. If such statement
indicates that Correspondent owes monies to Southwest, Correspondent
shall promptly pay Southwest the amount by which the total owed
Southwest exceeds the total owed Correspondent. If Correspondent fails
to make such payment within the time period indicated on such
statement, or in any event within thirty (30) calendar days, Southwest
shall have the right to charge any other Account maintained by
Southwest for Correspondent or any other assets of Correspondent held
by Southwest (including the deposit required pursuant to Section 9 and
positions and balances in Correspondent Accounts) for the net amount
due Southwest. Any failure by Southwest to charge any Account or
assets of Correspondent held by Southwest shall not act as a waiver of
Southwest's right to demand payment of, or to charge Correspondent's
Accounts for, the full amount due at any time.
9. DEPOSIT
(a) Required Clearing Deposit. Contemporaneously with the signing of this
Agreement, Correspondent will deliver cash to Southwest, as specified
in Schedule A attached, for deposit in an account maintained by
Southwest. If at any subsequent time Southwest, in its sole
discretion, requires an additional deposit, Correspondent will deposit
additional cash in an amount specified by Southwest. Any failure by
Southwest to demand compliance with the requirement that Correspondent
deposit additional amounts shall not act as a waiver of Southwest's
right to demand compliance with such requirements at any time. If the
deposit is not adequately funded as required by Southwest. Southwest
may, in addition to all other rights under this Agreement, transfer
cash or securities of Correspondent held by Southwest to the deposit
account. Southwest shall be entitled to set-off against any deposit in
addition to any and all other rights or remedies Southwest may have
under this Agreement or otherwise.
(b) Return of Required Clearing Deposit. When this Agreement has been
terminated in accordance with the provisions hereof, and Southwest has
received payment in full of any and all amounts owing to Southwest
hereunder and Correspondent has satisfied each and every of
Correspondent's outstanding obligations to Southwest hereunder.
Southwest shall return the required clearing deposit to Correspondent
within thirty (30) calendar days of the date on which all of said
payments have been received and obligations satisfied. These
obligations include, but are not limited to, any open and unsettled
litigation matters between Correspondent or Customers and Southwest,
any unresolved unsecured Correspondent Account or Customer Account
debit balances, any open fails as a result of trades executed on
behalf of Correspondent Accounts or Customer Accounts, and any
failures to transfer to another broker any Customer Accounts
introduced by Correspondent.
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10. INDEMNIFICATION
(a)Indemnity. Correspondent agrees to indemnify and hold harmless Southwest
each person who controls Southwest within the meaning of the
Securities Exchange Act of 1934 and any directors, officers,
employees, agents and attorneys of Southwest ("Southwest Indemnified
Persons") for and against all claims, demands, proceedings, suits and
actions and all liabilities, losses, expenses and costs (including any
legal and accounting fees and expenses) relating to Southwest's
defense of any failure, for any reason, fraudulent or otherwise, by
Correspondent, Correspondent's employees, independent agents or
contractors, or Customers to comply with any obligation under this
Agreement or any other agreement executed and delivered to Southwest
in connection with Southwest's performance of services hereunder and
any act or failure to act by Southwest Indemnified Persons, except any
act or failure to act which is the result of gross negligence or
willful misconduct on the part of any such Southwest Indemnified
Person. Without limiting the generality of the foregoing, such failure
is explicitly intended by the parties to include failure resulting
from (i) suspension of trading or bankruptcy or insolvency of any
company, securities of which are held in Customer's Accounts; (ii)
failure by any Customer to maintain adequate margin; or (iii) breach
of any obligation existing between Correspondent and a customer of
Correspondent or any law, rule or regulation of the United States, a
state or territory thereof, or any regulatory or self-regulatory
agency or body, applicable to any transaction contemplated by this
Agreement.
Southwest shall indemnify and hold Correspondent harmless against any
losses, claims, damages, liabilities or expenses including without
limitation those asserted by Customers (which shall include, but not
be limited to, all costs of defense and investigation and all
attorney's fees) to which Correspondent may become subject, insofar as
such losses, claims, damages, liabilities or expenses arise out of, or
are based upon the gross negligence or willful misconduct of Southwest
or its employees in providing the services contemplated hereunder.
Promptly after receipt by any indemnified party under this Section of
notice of the commencement of any action, such indemnified party will,
if a claim in respect thereof is to be made against the indemnifying
party under this Section notify the indemnifying party of the
commencement thereof, but the omission so to notify the indemnifying
party will not relieve it from any liability that it may have to any
indemnified party otherwise than under this Section.
In case any such action is brought against any indemnified party, and
it notified the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate in and, to the
extent that it may wish, to assume the defense thereof, subject to the
provisions herein stated, with counsel satisfactory to such
indemnified party. After notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof,
the indemnifying party will not be liable to the indemnified party
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<PAGE>
under this Section for any legal or other expense subsequently
incurred by Such indemnified party in connection with the defense
thereof other than reasonable costs of investigation. The indemnified
party shall have the right to employ separate counsel in any such
action and to participate in the defense thereof, but the fees and
expenses of such counsel shall not be at the expense of the
indemnifying party if the indemnifying party has assumed the defense
of the action with counsel satisfaction to the indemnified party.
(b) Security Interest and Authorization to Charge. Correspondent grants to
Southwest a first lien and security interest in any Correspondent
Account maintained by Southwest and any other assets of Correspondent
now or hereafter held by Southwest and authorizes Southwest to
discharge such lien by charging such Account and assets with all
amounts owing to Southwest including, but not limited to, (i) any cost
or expense resulting from failures to deliver or failures to receive,
(ii) any losses resulting from unsecured debit balances in any
Customer or Correspondent Account, (iii) any losses resulting from the
failure by a Customer or Correspondent to promptly satisfy upon demand
by Southwest any indebtedness of Customer or Correspondent to
Southwest, including but not limited to any debit balances in any
Customer Account or Correspondent Account and (iv) any amounts to
which Southwest is otherwise entitled pursuant to the provisions of
Section 10(a). Southwest shall have discretion to liquidate or sell
any securities without notice to Correspondent, and to determine which
securities to sell. Such charge may be made against Correspondent
Accounts or assets at any time and in such amount as Southwest deems
appropriate. No delay in charging any Correspondent Account or asset
shall operate as a waiver of Southwest's right to do so at any time as
and when Southwest deems appropriate. Southwest shall have the
unlimited right to set-off any indebtedness or other obligations of
Correspondent under this Agreement or otherwise (absolute or
contingent, matured or unmatured) against any obligations of Southwest
to Correspondent, including from the required clearing deposit (as
described in Section 9) and/or any other money, securities, or other
property of Correspondent in Southwest's possession.
(c) Reserves. In connection with any claim that does or could give rise to
a claim for indemnification under this Section for Southwest or a
Southwest Indemnified Person, Southwest may, in its discretion, in
addition to any and all other rights and remedies under this
Agreement, reserve and retain any money, securities or other property
of Correspondent pending a determination of such claim. The money,
securities or other property of Correspondent set aside in such a
reserve shall be subject to Southwest's standard lien and security
interest described in Section 10(b) above.
11. UNDERTAKINGS OF CORRESPONDENT
(a) Financial Statements and Other Reports. Correspondent will furnish to
Southwest promptly upon request copies of Correspondent's balance
sheet and statement of earnings for the current fiscal year and for
each of Correspondent's previous fiscal years. Each
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<PAGE>
such balance sheet and statement of earnings shall be certified by
independent public accountants. Correspondent also shall furnish to
Southwest promptly upon request copies of Correspondent's monthly and
quarterly Focus filing, and the results and/or reports of all exams
from self-regulatory bodies, federal or state securities agencies.
(b) Exclusive Agreement. It is intended by the parties that Southwest will
be the exclusive provider of clearing services to Correspondent and
its Customers during the term of this Agreement. Correspondent will
not, without the express written consent of Southwest, retain any
other broker or other entity to provide clearing services during the
term of this Agreement.
(c) Disciplinary Action. In the event that Correspondent or any employee
of Correspondent shall become subject to any disciplinary action,
including but not limited to expulsion, suspension or restriction by
any regulatory or self-regulatory agency or body having jurisdiction
over Correspondent and Correspondent's securities business.
Correspondent will notify Southwest immediately and Correspondent
authorizes Southwest to take such steps as may be necessary for
Southwest to maintain compliance with the rules and regulations to
which Southwest is subject. Correspondent further authorizes
Southwest, in any event, to comply with directives or demands made
upon Southwest b\ any regulatory or self-regulatory agency or body
relative to Correspondent and Customers. In connection with such
directives or demands, Southwest may seek advice or legal counsel and
Correspondent will reimburse Southwest for reasonable fees and
expenses of such counsel. Correspondent shall, during the term of this
Agreement, notify Southwest if Correspondent fails to remain in
compliance with the net capital and financial reporting and record
keeping requirements of the SEC, any state which has jurisdiction over
Correspondent, or any regulatory or self-regulatory body which has
jurisdiction over Correspondent.
(d) Fixed Price Offerings. Correspondent agrees that in making sales of
securities, as part of a fixed price offering, it will comply with all
applicable rules of the NASD, including, without limitation, the
NASD's Interpretations with respect to Free-Riding and Withholding and
under 2740 of NASD Conduct Rules.
(e) Customer Transactions. Correspondent represents that all orders and
other transactions received by Southwest will be in accordance with
their Customers' instruction. The parties hereto expressly agree that
Southwest shall not be bound to any investigation into the facts
surrounding any transaction that Correspondent may have with its
Customers or other persons, nor shall Southwest be under any
responsibility for compliance by Correspondent with any laws or
regulations which may be applicable to Correspondent.
(f) Inquiries on Certificates. Southwest agrees to act as Correspondent's
direct inquirer under the Lost and Stolen Securities Program under SEC
Rule 17f-l. (~7 CFR 240.17f- 1).
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<PAGE>
(g) Compliance with Rules and Regulations. Correspondent shall comply
with, and shall be responsible for complying with, all laws, rules and
regulations to which it is subject, including but not limited to those
promulgated by the SEC. the NASD and securities exchanges of which
Correspondent is a member.
(h) Certain Expenses. Correspondent will not hold Southwest responsible
for any of Correspondent's office expenses or operating costs.
Correspondent will reimburse Southwest for any costs or expenses
Southwest may incur in complying with any request by a court, or
regulatory or self-regulatory agency or body for any documents, papers
or data in any form pertaining to any matters relating to this
Agreement. If Southwest deems it necessary to retain legal counsel to
advise Southwest in connection with any matter governed by this
Agreement, including but not limited to Southwest's manner of handling
any transaction on behalf of Correspondent or a Customer,
Correspondent will reimburse Southwest for the fees of such counsel.
(i) Option Transactions. Correspondent shall appoint a Registered Option
Principal before handling option transactions. Correspondent shall
comply with all requirements of the NASD and other regulatory bodies
regarding the handling of option transactions.
(j) Correspondent Accounts. Correspondent shall be required to pay for
securities purchased for its own Accounts on the settlement date.
Notwithstanding the foregoing, Correspondent may finance any portion
of the debit balance in a Correspondent Account under applicable stock
exchange and Federal Reserve regulations. If such financing is
extended by Southwest, Correspondent agrees to satisfy the debit
balance of such Account upon demand by Southwest. Southwest shall
charge interest on such debit balances at a rate set at the discretion
of Southwest. Interest will be calculated by multiplying the average
daily debit balance by the average interest rate (1/360 of the annual
interest rate) times the number of days in the interest period. The
rate of interest and method of calculation may be changed by Southwest
automatically and without notice from time to time.
Correspondent agrees to maintain in any Account which has a debit
balance such positions and margins as may be required by applicable
statutes, rules, regulations, procedures and customs, or as may be
requested by Southwest from time to time. Any financing described in
this Section 11(j) shall be subject to all other terms and provisions
of this Agreement relating to obligations of the Correspondent to
Southwest, including but not limited to being secured by the lien and
security interest granted by Correspondent pursuant to Section 10(b)
of this Agreement.
In the case of an Event of Default, as defined below, all debit
balances in any Correspondent Account, and interest thereon, shall
bear interest at the highest lawful rate. An Event of Default shall be
deemed to have occurred if (i) Correspondent fails to meet any call by
Southwest for additional collateral to be deposited in a Correspondent
Account; (ii) Correspondent fails to make payment of any debit balance
in a Correspondent Account upon demand by Southwest; (iii)
Correspondent becomes
15
<PAGE>
insolvent, makes an assignment for the benefit of creditors, applies
for or consents to the appointment of a receiver, or institutes or has
instituted against it any insolvency, reorganization, liquidation,
dissolution or similar proceeding; (iv) a petition naming
Correspondent as debtor shall be filed under the United States
Bankruptcy Code; or (v) an attachment is levied against any
Correspondent Account or Account in which Correspondent has an
interest.
Regardless of any provision of this Section 11(i), any other section
of this Agreement or any other agreement between Southwest and
Correspondent, all agreements between Southwest and Correspondent,
whether now existing or hereafter arising and whether written or oral,
are hereby expressly limited so that in no contingency or event
whatsoever, whether by reason of demand being made in respect of an
amount due from Correspondent to Southwest, shall the amount paid, or
agreed to be paid, for the use, forbearance or detention of money
loaned by Southwest to Correspondent exceed the maximum nonusurious
rate of interest permitted to be charged under applicable law (the
"Highest Lawful Rate"). If, as a result of any circumstance
whatsoever, fulfillment of or compliance with any provision hereof or
of any of such other agreements at the time performance of such
provisions shall be due or at any other time shall involve exceeding
the amount permitted to contracted for, taken, reserved, charged or
received by Southwest under applicable usury law. Then ipso facto the
obligation to be fulfilled or complied with shall be reduced to the
limit prescribed by such applicable usury law, and if. from any such
circumstance, Southwest shall ever receive interest or anything that
might be deemed interest under applicable law which would exceed the
Highest Lawful Rate, such amount which would be excess interest shall
be applied to the reduction of the principal amount owing on the
Correspondent Account in question or the amounts owing on other
obligations of Correspondent to Southwest, or if such excessive
interest exceeds the unpaid principal balance of any amount owing on
other obligations of Correspondent to Southwest, such excess shall be
refunded to Correspondent. All sums paid or agreed to be paid to
Southwest shall, to the extent permitted by applicable law, be
amortized, prorated, allocated, and spread throughout the full term of
such indebtedness until payment in full of the principal (including
the period of any renewal or extension thereof, so that the interest
on account of such indebtedness shall not exceed the Highest Lawful
Rate. Notwithstanding anything to the contrary contained in any
agreement between Correspondent and Southwest, it is understood and
agreed that if at any time the rate of interest which accrues on the
outstanding balance of any indebtedness of Correspondent to Southwest
shall exceed the Highest Lawful Rate, the rate of interest which
accrues on the outstanding principal balance of any such indebtedness
shall be limited to the Highest Lawful Rate, but any subsequent
reductions in the rate of interest which accrued on the outstanding
principal balance of any indebtedness shall not reduce the rate of
interest which accrues on the outstanding principal balance of any
indebtedness below the Highest Lawful Rate until the total amount of
interest accrued on the outstanding principal of any indebtedness
equals the amount of interest that would have accrued if such interest
rate had been in effect at all times.
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<PAGE>
In consideration for Southwest opening or maintaining one or more
inventory Accounts for Correspondent, Correspondent agrees to allow
Southwest at any time within the limitations imposed by applicable
laws, rules and regulations, to pledge, hypothecate, and/or make
deliveries with any and all securities in such Accounts, including
fully paid and excess margin securities, without notice to
Correspondent. Such securities will be segregated from other bona fide
customers of Southwest in the event that they are pledged as
collateral for bank loans. Without abrogating any of Southwest's
rights under this Agreement and subject to any indebtedness of
Correspondent to Southwest, Correspondent is entitled, upon demand, to
receive delivery of fully paid for securities in Correspondent's
inventory Accounts.
The provisions of this Section 11(i) shall be construed in conjunction
with the express terms and conditions of any separate applicable
Account agreement(s) between Southwest and Correspondent.
(k) Forms BD and U4. Within thirty (30) days after the execution of this
Agreement, Correspondent shall provide to Southwest a copy of
Correspondent's Form BD. and copies of the Forms U4 for the principals
and all registered employees of Correspondent, and copies of any other
documents relating to Correspondent, its principals or employees that
are available on the Central Registration Depository ("CRD").
Thereafter, within thirty (30) days after the hiring of any new
employee, Correspondent shall provide to Southwest a copy of such new
employee's Form U4 and other documents available on the CRD.
Additionally, throughout the term of this Agreement, Correspondent
shall promptly provide copies of any subsequent amendments of all
Forms and other documents described in this Section 11(k).
(l) Advertising. Correspondent shall obtain Southwest's prior written
consent before using Southwest's name or logo, or the name or logo of
any affiliate of Southwest in any advertising in print, broadcast,
electronic or any other media. Without the express written consent of
Southwest, Correspondent also shall not display the name or logo of
Southwest or any of its affiliates on any Internet web page or other
electronic advertising; nor shall Correspondent display on any such
web page or electronic advertising, a hyperlink to or the Internet
address of any web page or electronic advertising of Southwest or any
of its affiliates
12. TERMINATION OF AGREEMENT; TRANSFER OF ACCOUNTS
(a) Effectiveness. This Agreement shall commence to be effective on the
date set forth on the signature page hereof, subject to any required
approval by the NASD and other regulatory or self-regulatory agencies
or bodies, and shall remain in effect as more fully described in
Schedule A.
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(b) Automatic Termination. In addition to any other provision for
termination herein, this Agreement shall terminate immediately in the
event that either Correspondent or Southwest ceases to conduct its
business or that Southwest:
(i) is no longer registered as a broker/dealer with the SEC; or
(ii) is no longer a member in good standing of the NASD; or
(iii)is suspended by any national securities exchange of which
Southwest is a member for failure to comply with the rules and
regulations thereof.
(c) Survival. Termination of this Agreement shall not affect Southwest's
rights or liabilities relating to business transacted prior to the
effective date of such termination. From the date of termination until
transfer or delivery of all Customer and Correspondent Accounts,
Southwest's rights and liabilities relating to business transacted
after such termination shall be governed by the same terms as those
set forth in this Agreement.
(d) No Obligation to Release. Southwest shall not be required to release
to Correspondent any securities or cash held by Southwest for
Correspondent in one or more Correspondent Accounts until any and all
amounts owing to Southwest pursuant to the provisions of this
Agreement are paid; and Correspondent's outstanding obligations
hereunder to Southwest are determined, including determination of any
disputed amounts, and satisfied, and any property of Southwest in the
possession of Correspondent is returned to Southwest.
(e) Conversion of Accounts Upon Termination. In the event that this
Agreement is terminated for any reason, it shall be Correspondent's
responsibility to arrange for the conversion of Correspondent and
Customer Accounts to another clearing broker. Correspondent will give
Southwest notice (the "Conversion Notice") of;
(i) the name of the broker that will assume responsibility for
clearing services for Customers and Correspondent;
(ii) the date on which such broker will commence providing such
services;
(iii) Correspondent's undertaking, in form and substance satisfactory
to Southwest, that Correspondent's agreement with such broker
provides that such broker will accept on conversion all
Correspondent and Customer Accounts, then maintained by
Southwest, and all positions of such Accounts; and
(iv) the name of an individual within that organization who Southwest
can contact to coordinate the conversion. The Conversion Notice
shall accompany Correspondent's notice of termination or within
thirty (30) days of the occurrence of an event specified in
Section 12(b).
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<PAGE>
If Correspondent fails to give the Conversion Notice to
Southwest, Southwest may give to Customer such notice as
Southwest deems appropriate of the termination of this Agreement
and may make such arrangements as Southwest deems appropriate for
transfer or delivery of Customer and Correspondent Accounts. In
addition. Correspondent shall pay any costs incurred by Southwest
as billed by any third party vendors such as transfer agents,
etc.
(f) Other Transfers of Accounts. When Southwest receives a properly
executed authorization to transfer a Customer Account from the
receiving broker/dealer. Southwest shall promptly transfer the
Customer Account to such receiving broker/dealer. Correspondent shall
discontinue doing business in any Customer Account scheduled for
transfer.
13. CONFIDENTIALITY.
(a) Documents and Business Information. All agreements, documents, papers
and data in any form, supplied by either party hereto concerning the
disclosing party's business or any Customers shall be treated by the
receiving party as confidential. To the extent such documents or data
are retained by the receiving party. they shall be kept in a safe
place and shall be made available to third parties only as authorized
by the disclosing party in writing or pursuant to any order or request
of a court or regulatory body having appropriate jurisdiction. The
receiving party shall give the disclosing party prompt notice of the
receipt by the receiving party of any such order or subpoena, unless
prohibited from doing so by the issuing authority, which notice shall
be given prior to the receiving party's compliance therewith. Such
documents shall be made available by the receiving party for
inspection and examination by the disclosing party's auditors, by
properly authorized agents or employees of any regulatory bodies or
commissions or by such other persons as the disclosing party may
authorize in writing. Notwithstanding anything herein to the contrary,
the disclosing party expressly authorizes the receiving party to
supply any information requested relating to the disclosing party, its
business. or Customers to any regulatory body having appropriate
authority.
(b) Terms of Agreement. Correspondent agrees that it shall not disclose to
any third party the terms and conditions of this Agreement, including
but not limited to pricing information, except to the extent
Correspondent is required to do so by the provisions of any law, rule
or regulation, or in response to the order or request of a court or
regulatory body having appropriate jurisdiction.
14. EMPLOYEES
Neither party will solicit, engage in negotiations to employ, or
employ any person who is, or within the preceding twelve (12) months
has been, employed by the other party, without first obtaining such
other party's express written consent.
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15. NOTICE TO CUSTOMERS
Subject to the requirements of the NASD Rules of Fair Practice,
Correspondent shall provide to each Customer upon the opening of a Customer
Account, in a manner which is reasonably acceptable to Southwest, a written
notice which shall be furnished by Southwest describing the general nature
of the services being performed by Southwest in accordance with this
Agreement.
16. CUSTOMER COMPLAINT PROCEDURES
Correspondent will be responsible for the initial handling of all Customer
complaints. Any Customer who initiates a complaint with Southwest will be
referred by Southwest to Correspondent. If any such complaint is based upon
an alleged act or failure to act by Southwest, Correspondent will notify
Southwest promptly of such complaint and the basis therefor; and will
consult with Southwest. And the parties will cooperate in determining the
validity of such complaint and the appropriate action to be taken.
17. REMEDIES CUMULATIVE
The enumeration herein of specific remedies shall not be exclusive of any
other remedies. Any delay or failure by any party to this Agreement to
exercise any right, power, remedy or privilege herein contained, or now or
hereafter existing under any applicable statute or law. shall not be
construed to be a waiver of such right, power, remedy or privilege. nor to
limit the exercise of such right, power. remedy or privilege, nor shall it
preclude the further exercise thereof or the exercise of any other right,
power, remedy or privilege.
18. GUARANTEE
The corporation or individual(s) who guarantee the obligations of
Correspondent under this Agreement by executing the signature lines
designated for such purpose at the end of the Agreement (the
"Guarantor(s)"), in consideration of Southwest's entering into the
Agreement do(es) hereby personally guarantee(s) (jointly and severally, if
more than one) the performance by Correspondent of the provisions of this
Agreement (including without limitation the indemnification provisions of
Section 10) and shall promptly pay any amount that is not paid by
Correspondent to Southwest under this Agreement. This is an absolute,
unconditional and unlimited guarantee of payment and may be proceeded upon
by Southwest or a Southwest Indemnified Person before filing any action
against Correspondent or after any action against Correspondent has been
commenced. Guarantor(s) grant(s) to Southwest a first lien and security
interest in any and all money and securities of
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<PAGE>
Guarantor(s) held by Southwest. Southwest shall have the unlimited right to
set-off any amounts owed to it by Correspondent or a Guarantor(s) against
any obligation of Southwest to any Guarantor(s). Southwest also shall have
the absolute and unlimited right to sell, transfer, or liquidate any of the
assets in any of Guarantor(s)' accounts with Southwest for any amounts owed
to it by Correspondent or a Guarantor(s). The obligations of Guarantor(s)
shall not be discharged or impaired or otherwise affected by the failure of
Southwest or a Southwest Indemnified Person to assert, claim, demand or
enforce any remedy under this Agreement, nor by waiver, modification or
amendment of this Agreement or any compromise, settlement or discharge of
obligations of Correspondent under this Agreement, or any release or
impairment of any collateral by Southwest or a Southwest Indemnified
Person.
19. LIMIT ON LIABILITY; NO CONSEQUENTIAL DAMAGES
In any action by Correspondent against Southwest for any claim arising out
of the relationship created by this Agreement, Southwest shall only be
liable to Correspondent in cases of gross negligence or willful misconduct,
and in such cases Southwest shall only be liable for the amount or actual
monetary losses suffered by Correspondent. Correspondent shall not, in any
such action or proceeding or otherwise, assert any claim against Southwest
for consequential damages on account of any 1055, cost, damage or expense
which Correspondent may suffer or incur related to transactions in
connection with this Agreement or otherwise.
20. MISCELLANEOUS
(a) Modification. Except as otherwise expressly provided herein, this
Agreement may be modified only by a writing signed by both parties to
this Agreement. Such modification shall not be deemed as a
cancellation of this Agreement. Subject to the NASD Rules of Fair
Practice and other applicable rules and regulations, this Agreement
and all modifications may be required to be submitted to the NASD and
other regulatory or self-regulatory agencies or bodies prior to
effectiveness. It is expressly understood that services cannot be
provided under this Agreement until such approval, if required, is
received.
(b) Assignment. This Agreement shall be binding upon all successors,
assigns or transferees of both parties hereto irrespective of any
change with regard to the name or of the personnel of Correspondent or
Southwest. Any assignment of this Agreement shall be subject to the
requisite review and/or approval of any regulatory or self-regulatory
agency or body whose review and/or approval must be obtained prior to
the effectiveness and validity of such assignment. No assignment of
this Agreement shall be valid unless the non-assignment party, in its
sole discretion, consents to such an assignment in writing.
Notwithstanding the foregoing, Southwest, upon giving written notice
to Correspondent,
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may assign it rights and obligations under this Agreement to any
entity that purchases a majority of the stock or assets of Southwest
or of any of Southwest's subsidiaries or affiliates, to any
majority-owned subsidiary that Southwest may create or to any entity
directly or indirectly controlled by, controlling or under common
control with Southwest, and an assignment by Southwest to any such
party will be deemed valid and enforceable in the absence of any
consent from Correspondent. Neither this Agreement nor any operation
hereunder is intended to be, shall not be deemed to be, and shall not
be treated as a general or limited partnership, association, or joint
venture or agency relationship between Correspondent and Southwest.
(c) Choice of Law. The construction and effect of every provision of this
Agreement, the rights of the parties hereunder and any questions
arising out of the Agreement, shall be subject to the statutory and
common law of the State of Texas, without regard to the choice of law
provisions thereof;
(d) Severability. If any provision or condition of this Agreement shall be
held to be invalid or unenforceable by any court, or regulatory or
self-regulatory agency or body with appropriate jurisdiction, such
invalidity or unenforceability shall attach only to such provision or
condition. The validity of the remaining provisions and conditions
shall not be affected thereby and this Agreement shall be carried out
as if any such invalid or unenforceable provision or condition were
not contained herein.
(e) Notice. For the purposes of any and all notices, consents, directions,
approvals, restrictions, requests or other communications required or
permitted to be delivered hereunder, Southwest's address shall be:
Southwest Securities, Inc.
1201 Elm Street
Suite 3500
Dallas, Texas 75270
Attention: William D. Felder, Senior Executive Vice President
And Correspondent's address shall be:
Rushmore Securities Corp.
-------------------------
13355 Noel Rd. One Galleria Tower, Suite 300
-------------------------
Dallas TX 75240
-------------------------
Attention: Jim Clark
-------------------------
Either party may provide notice or change its address for notice
purposes by giving written notice pursuant to registered or certified
mail, return receipt requested, addressed to the other party at its
address for notice.
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<PAGE>
(f) Counterparts. This Agreement may be executed in one or more
counterparts all of which taken together shall constitute a single
agreement When each party has executed and delivered to the other a
counterpart, this Agreement will become binding on both parties,
subject only to any required approval by the NASD.
MADE AND EXECUTED THIS 27th DAY OF OCTOBER, 1997.
SOUTHWEST SECURITIES, INC.
By: /s/ William D. Felder
-------------------------------
William D. Felder
Senior Executive Vice President
Rushmore Securities Corp.
- -----------------------------------
CORRESPONDENT:
By: /s/ Jim Clarke
-------------------------------
Name: Jim Clark
----------------------------
Title: President
----------------------------
The undersigned, in consideration of Southwest Securities, Inc, entering into
the foregoing Agreement, does hereby agree to be bound personally by the terms
of Section 18 of this Agreement, which provides that the undersigned personally
guarantees the performance by Correspondent of the provisions of this Agreement.
By: Jim Clark
------------------------------
(Authorized Signature)
By: Jim Clark
-----------------------------
(Please Print Name)
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<PAGE>
SCHEDULE A
At the close of each month, SOUTHWEST shall promptly forward to the
CORRESPONDENT a statement which sets forth the commissions earned and amounts
due in accordance with this SCHEDULE.
VOLUME DISCOUNT - SOUTHWEST's clearing charges will be discounted for any month
in which total charges exceed prescribed levels. The levels and percentage
discounts are shown below:
Monthly Charges Percentage
--------------- ----------
$2,500 10%
5,000 15%
7,500 20%
10,000 25%
20,000 30%
MONTHLY TICKET COUNT REDUCTION - SOUTHWEST also reduces the charge per customer
ticket for any month in which the CORRESPONDENT's customer ticket count exceeds
prescribed levels. This reduction does not apply to Dealer transactions or
Mutual Fund transactions and exchanges. The levels and reductions are shown
below and will be credited to CORRESPONDENT'S settlement statement one month in
arrears:
Monthly Ticket Count Reduction
------------------------------
500 - 749 $2/Ticket
750 - 999 $4/Ticket
1,000 + $6/Ticket
EXCHANGE LISTED STOCKS - $27 per customer order. This charge is adjusted
depending on the market in which the trade is executed.
For NYSE listed securities executed by SOUTHWEST in the 3rd market,
SOUTHWEST will share equally any payment for order flow received from 3rd
market dealers. Payment will generally not be received on orders that incur
price improvement.
For Trades greater than 2,000 shares executed on the NYSE, AMEX or other
Regional Exchanges there will be a cents per share charge according to the
following schedule:
Market Orders .015 per share
Limit Orders .020 per share
For NYSE and AMEX listed securities executed by CORRESPONDENT in the third
market there will be no additional charges.
For trades executed by CORRESPONDENT on the NYSE, AMEX or other Regional
Exchanges there is an additional charge of .005 per share and CORRESPONDENT
will absorb all associated floor brokerage and specialist fees.
SOUTHWEST will calculate, collect and remit all applicable SEC fees.
<PAGE>
FOREIGN SECURITIES - All foreign securities, except Canadian $50 per
transaction
LISTED BONDS - SOUTHWEST charges $2 per bond with a minimum of $27.
INSTITUTIONAL TYPE LISTED ORDERS - If the gross commission is $350 or more,
and the commission charge is at least 5 cents per share, the clearing
charge will be no more than 33% of the gross. The clearing charge is also
subject to the volume discount.
LISTED OPTION TRANSACTIONS - The clearing charge is $27 plus $1.25 per
option.
NASDAQ STOCK TRANSACTIONS WHICH ARE NSCC ELIGIBLE - $27.00 per customer
order. SOUTHWEST will share equally any payment for order flow received
from market makers. Payment for order flow will generally not be received
for those orders executed under limit order protection Rule and/or executed
via any price improvement mechanism.
When the CORRESPONDENT directs SOUTHWEST to deliver orders to ancillary
Systems such as SelectNet, the base order charge is increased by the user's
fee associated with the system and 2 cents per share.
NASDAQ STOCK TRANSACTIONS WHICH ARE X-CLEARING ITEMS -$35 per customer
ticket.
DEALER TRANSACTIONS - Principal trades between a CORRESPONDENT's inventory
and another dealer incur a charge of $12.50 per dealer ticket. The monthly
ticket count reduction on page one of this schedule does not apply.
CASH TRADES - SOUTHWEST will pass a $50 charge through to the CORRESPONDENT
when the CORRESPONDENT reports a previously executed bond trade that has
the same settlement date and report or input date.
MUTUAL FUNDS - The following rate is limited to those funds that SOUTHWEST
processes via NSCC's Networking environment. For those funds that SOUTHWEST
does not process via NSCC's Networking Environment a charge of $75 per
customer ticket applies. Only the Monthly Volume discount WILL apply.
Principal Dollars Rate
0 to 2,000 $3.50
2,001 to 5,000 $6.50
5,001 to 25,000 $10.00
25,001 to 75,000 $15.00
75,001 up $20.00
All transactions for additional purchases of same fund, systematic
purchases and systematic withdrawals will be processed for $1.50
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MUTUAL FUND EXCHANGES WITHIN THE SAME FAMILY -$1.50 per exchange. This rate
is limited to those funds that SOUTHWEST process via NSCC's Networking
environment. For those funds that SOUTHWEST does not process via NSCC's
Networking Environment the exchange charge of $35 applies.
TRAILER COMMISSIONS - 10% of registered representative's gross per payment
with a maximum of $35 per trade blotter entry.
NON-LISTED FIXED INCOME ITEMS INCLUDING ALL BONDS AND UNIT TRUSTS - The
charge for these items is $36.50 per customer ticket and $12.50 per dealer
inventory ticket. The monthly ticket count reduction on page one of this
schedule does not apply to dealer inventory trades in non listed fixed
income transactions.
POSTAGE AND HANDLING CHARGE - The first confirmation produced by an order
will include a $5.00 charge which will be shared equally with the
CORRESPONDENT. Should the CORRESPONDENT elect to not charge the customer,
then Southwest's portion of this charge will be added to its applicable
clearing charge.
VISION CASH MANAGEMENT ACCOUNT - SOUTHWEST will share equally with
CORRESPONDENT the $50 fee collected for the VISA Gold Check Card.
TRANSFER FEE - $7.50 will be charged to the customer for issues on which
the transfer agent charges SOUTHWEST a transfer fee. This charge will
appear on all buy confirmations in addition to the postage and handling
fee. This charge does not apply to DVP accounts.
COURTESY TRANSFER FEE -$25 plus any charges imposed by the transfer agent
will be charged for each courtesy transfer. Courtesy transfers include
securities that were not purchased in the customer account, or for which an
additional transfer is requested or multiple certificates are ordered.
GOVERNMENT BOND FEE - A $15 miscellaneous fee will be charged to the
customer on all buy and sell transactions of government and government
backed securities other than treasury bills. A $5 fee will be charged to
the customer on all buy and sell transactions of treasury bills. In the
case of a DVP account these charges will be added to the applicable ticket
charge.
CERTIFIED POOLED SBA PRODUCTS AND NON-CERTIFIED UNPOOLED SBA AND FMHA
PRODUCTS - In addition to the fixed income clearing charge of $36.50 per
customer transaction, there will be a surcharge billed to each
CORRESPONDENT in the amount of 10% of the gross spread generated by each
SBA transaction cleared.
BOND MATURITY/CALL FEE - No Charge
CANCEL AND CORRECTS OF CUSTOMER OR DEALER TICKET AND COMMISSION ADJUSTMENTS
- SOUTHWEST charges $20 per cancellation and correction or adjustment
performed by SOUTHWEST personnel. There is no charge when these tasks are
performed by the CORRESPONDENT.
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EXTENSION REQUESTS- $10.00 per request.
CUSTOMER NAME SAFEKEEPING -$15 per security per year.
FIXED INCOME TRANSACTIONS - Those not executed by SOUTHWEST will be subject
to a $25 DK charge.
PROGRAMMING - Custom programming solely for the benefit of CORRESPONDENT
shall be billed at the standard rates then in effect for similar work.
COMPUTER RUN TIME - For request programs and custom programs that are
inserting into SOUTHWEST'S batch stream CORRESPONDENT shall be billed at
the standard rates then in effect for similar work.
RESEARCH OF RECORDS BY SOUTHWEST -$25 per hour with a minimum charge of 1
hour. This charge includes regulatory requests for information concerning
correspondent customer activity and requests from CORRESPONDENT's personnel
for duplication of previously transmitted data.
INTEREST PROFITS - CORRESPONDENTS who have margin account debit balances
exceeding $100,000 will receive 50 basis points as a share of the interest
profits. However, if the CORRESPONDENT discounts the SOUTHWEST margin
interest rate to its customer, the discount will be deducted from the
CORRESPONDENT's share. For example: If the SOUTHWEST margin rate is 7% and
the CORRESPONDENT elects to charge its customer only 6.75%, then the
CORRESPONDENT will receive credit for only 25 basis points. The
CORRESPONDENT could in fact forfeit its entire share by charging, in this
example, 6.5%
CREDIT BALANCES - CORRESPONDENTS will receive credit on the credit balances
of their customers left in interest accounts as follows:
SOUTHWEST credit interest account (type 6) showing customer credit in
excess of $100,000 -25 basis points, calculated annually, paid
monthly.
With AMR Money Market Fund showing customer credit in excess of
$1,000,000 - 25 basis points, calculated annually, paid monthly.
CORRESPONDENTS shall pay all interest costs not paid by the customer for
any customer account. Such costs may include draft charges and wired fund
charges for customer and dealer accounts which are delivery versus payment.
Interest cost may also be charged for any account which is to be paid out
prior to receipt of securities in good delivery form.
CORRESPONDENTS shall pay interest on their debit working balances less the
credit balances at the prevailing margin rate.
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IRA FEES - for accounts that utilize the Southwest Securities Inc.
Prototype and hold ONLY widely held securities i.e. Publicly Traded
Equities, Mutual Funds, Fixed Income Investments eligible for deposit in a
nationally recognized depository etc.
Initial set up fee no charge
Annual maintenance fee no charge
Annual maintenance fee/spousal no charge
Premature distribution fee no charge
Transfer or termination fee $25
OTHER SOUTHWEST SPONSORED RETIREMENT PLANS - for accounts that utilize
Southwest sponsored retirement plans:
Primary Account $45 annual fee
Individual Participant $10 annual fee
In addition to the above, should an IRA account utilizing ANY IRA prototype
including the Southwest Securities Inc sponsored retirement plans purchase,
liquidate, transfer and or hold assets that ARE NOT widely held, publicly
traded securities such as Limited Partnerships, closely held private
company investments etc. the follow fee schedule will be applicable:
Transfer in, Purchase or Sale $100 for first item $50 thereafter
Annual maintenance fee $100 for first item $50 thereafter
Re registration of any kind $100 for first item $50 thereafter
TENDER OF SECURITIES - CORRESPONDENT customers who ask SOUTHWEST to tender
their securities shall be charged $4 per 100 shares with a maximum charge
of $80.
EXECUTION OF SYNDICATE ORDERS THROUGH SOUTHWEST - 10% of the selling
group's gross shall be charged in addition to the ticket clearing charge.
Clearing and other charges as set forth in this agreement may be amended
from time to time by letter agreement between the parties.
TERMINATION BY SOUTHWEST - Southwest may terminate this Agreement at any
time by giving forty-five (45) days prior written notice to Correspondent.
Southwest may terminate this Agreement at any time on five (5) days written
notice to Correspondent in the event that Correspondent:
(i) fails to comply with the terms of this Agreement and upon
notification by Southwest fails to begin compliance within ten
(10) days from said notification; or
(ii) is enjoined, prohibited or suspended, as a result of an
administrative or judicial proceeding, from engaging in
securities business activities
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constituting all or portions of Correspondent's securities
business. which injunction, prohibition or suspension in
Southwest's judgment make impracticable the fully disclosed
clearing relationship established in this Agreement.
TERMINATION BY CORRESPONDENT - Correspondent may terminate this Agreement
in the event that Southwest materially defaults in the performance of its
duties or obligations hereunder and does not substantially cure such
default within sixty (60) days after Correspondent delivers written notice
to Southwest specifying the default, or, with respect to any default which
cannot reasonably be cured within sixty (60) days, if Southwest fails to
proceed within sixty (60) days to commence during said default and
thereafter to proceed to substantially cure the same.
REQUIRED CLEARING DEPOSIT - $10,000
----------------------
TERM - This Agreement shall be effective for a period of _______ years from
the effective date as defined in Section 12(a), subject to each party's
rights to terminate as
MADE AND EXECUTED THIS 7 th DAY OF October, l997.
----- -------- ----
SOUTHWEST SECURITIES, INC.
By: /s/ William D. Felder
-------------------------------
William D. Felder
Senior Executive Vice President
Rushmore Securities Corp
- -----------------------------------
CORRESPONDENT
By: /s/ Jim Clark
-------------------------------
Name: Jim Clark
------------------------------
Title: President
-----------------------------
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Exhibit 10.10.2
FULLY DISCLOSED CLEARING AGREEMENT
This Fully Disclosed Clearing Agreement (the 'Agreement") is executed and
entered into by and between First Southwest Company ("FSW"), a Texas
corporation, and Rushmore Financial Group. ("RUSH").
WHEREAS, RUSH is in the process of registering or is registered with the
Securities and Exchange Commission ("SEC") as a brokerdealer of securities in
accordance with Section 15(b) of the Securities Exchange Act of 1934 (the "Act")
and is applying for membership or is a member of the National Association of
Securities Dealers, Inc. ("NASD"), and desires to enter into an agreement with
FSW for FSW to clear and maintain customer accounts on behalf of RUSH; and
WHEREAS, FSW meets all requirements of the SEC to function as a clearing
broker or dealer, and desires to enter into an agreement to clear and maintain
cash, margin, option or other accounts ("Accounts") for RUSH or customers
("Customers") of RUSH.
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
and of the guarantee of this Agreement by any guarantor(s), and for other good
and valuable consideration the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:
1. REPRESENTATIONS AND WARRANTIES
RUSH represents and warrants to FSW that:
(a) RUSH is a corporation duly organized, validly existing and in good
standing under the laws of the state of its incorporation.
(b) RUSH has all the requisite authority in conformity with all applicable
laws and regulations to enter into this Agreement and to retain the
services of FSW in accordance with the terms hereof.
(c) RUSH shall employ as a manager of its brokerage operation only a
person who has all requisite licenses and experience in compliance
with applicable securities laws and regulations.
(d) RUSH shall duly employ personnel ("Registered Representatives") who
have the requisite licenses and experience in compliance with
applicable securities laws and regulations.
(e) RUSH has advised FSW of any arrangements that have been made or are
expected to be made with any other firm for the provision by such
other firm of clearing services for any Customer Accounts or RUSH
Accounts.
(f) RUSH has, if applicable, informed FSW of any independent agents or
independent contractors used in providing the services contemplated
hereunder.
FSW represents and warrants to RUSH that:
(a) FSW is a corporation duly organized, validly existing and in good
standing under the laws of the state of Texas.
(b) FSW is registered as a broker-dealer with the SEC and is in compliance
with the rules and regulations thereof.
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(c) FSW is a member corporation in good standing of the NASD and is in
compliance with the rules and regulations thereof.
(d) FSW is in compliance with the rules and regulations of each national
securities exchange of which it is a member.
2. CUSTOMER AM) RUSH ACCOUNTS
Responsibility for compliance with the provisions of the NASD Rules of Fair
Practice regarding Customer accounts shall be allocated between FSW and RUSH as
set forth below.
(a) Opening, Approving and Monitoring Customer Accounts.
(1) Account Documentation. RUSH will be responsible for obtaining and
verifying all required information and the identity of each
potential Customer. RUSH will be responsible for the maintenance
and retention of all documents relating to an account except New
Account Agreements and Customer Margin and Short Account
Agreements and RUSH hereby acknowledges its obligation to retain
said documents in an easily accessible place in accordance with
SEC rules and agrees to provide the original application by
overnight delivery or a legible copy by facsimile transmission of
it within 24 hours of a request from FSW. RUSH shall forward
completed margin applications, and copies of any other documents
as specified by FSW, to FSW in accordance with FSW's procedures.
The information required by FSW is necessary for the maintenance
of its accounting system and books and records and must be
submitted to FSW for utilization in FSW's computer programs. RUSH
will be responsible for complying with the requirements of SEC
Rule 15g2-6, if applicable.
(2) Knowledge of Customer and Customer's Investment Objectives. RUSH
will be responsible for learning and documenting all the facts
relative to every Customer necessary to insure compliance by RUSH
with applicable rules and regulations, including the information
and instructions submitted to FSW pursuant to Section 2(a)(l),
any additional facts relative to the Customer's investment
objectives, and to the nature of every Customer Account, every
order and every person holding power of attorney over any
Customer Account. It shall be the responsibility of RUSH to
ensure that those of its customers who become Accounts hereunder
shall not be minors and RUSH will not accept Accounts for such
persons as come within the express provisions of Art. II, Sec. 28
of the NASD Rules of Fair Practice unless RUSH has complied with
the provisions of said Rule and, if applicable, provided evidence
of employer approval as required by said Rule. RUSH shall be
solely responsible for any issues regarding the suitability of
any investments for its Customers.
(3) Acceptance of Accounts. FSW will execute orders for RUSH's
customers whose Accounts have been accepted by FSW through RUSH,
but only insofar as such orders are transmitted by RUSH to FSW
through the FSW on-line system or telephonically after RUSH's
appropriate principals have accepted and approved said Accounts.
Each Customer and RUSH Account approved by RUSH and opened with
FSW shall be subject to FSW's acceptance. RUSH will not submit
any Customer for FSW's acceptance unless FSW's standards have
been met.
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FSW reserves the right to withhold acceptance of or to reject, for
any reason, any Customer Account, RUSH Account or any transaction
for any Account and to terminate any Account previously accepted
by FSW. Initial acceptance of each Account shall be conditioned
upon FSW's receipt of completed forms as required by Section
2(a).RUSH shall not submit such forms with respect to any
Customer Account unless RUSH has in its possession the
documentation of all information required pursuant to Section
2(b). FSW shall be under no obligation to accept any Account as
to which any documentation required to be submitted to FSW or
maintained by RUSH pursuant to Sections 2(a) and 2(b) is
incomplete. Prior to acceptance of any Account, no action taken
by FSW or any of its employees, including, without being limited
to, clearing a trade in any Account, shall be deemed to be or
shall constitute acceptance of such Account.
(4) Supervision of Orders and Accounts. As between FSW and RUSH, RUSH
will be responsible for the review and supervision of, and the
suitability of, investments made by every Customer. RUSH shall be
responsible for insuring that all transactions in and activities
related to all Accounts opened by it with FSW, including
discretionary Accounts, will be in compliance with all applicable
laws, rules and regulations of the United States, the several
states, governmental agencies, securities exchanges and the NASD,
including any laws relating to RUSH's fiduciary responsibilities
to Customers, either under the Employee Retirement Income
Security Act of 1974 or otherwise; and in this connection, RUSH
shall diligently supervise the activities of its officers,
employees and representatives with respect to such Accounts. FSW
will perform the clearing services provided for in this Agreement
for Accounts accepted by it in accordance with the terms of this
Agreement, as it may be amended from time to time, and otherwise
in accordance with its judgment. To the extent, if any. that FSW
accepts from RUSH orders for execution in accordance with Section
7(a), RUSH shall be responsible for informing FSW of the location
of the securities that are the subject of the order so that FSW
may comply with the provisions of Art. III, Sec. 21 of the NASD
Rules of Fair Practice.
(b) Extension of Credit. The division of responsibilities with respect to
the extension of credit is set forth in Section 3 of this Agreement.
(c) Maintenance of Books and Records. The division of responsibilities
with respect to the maintenance of books and Records is set forth in
Section 4 of this Agreement.
(d) Receipt, Delivery and Safeguarding of Funds and Securities. The
division of responsibilities with respect to the receipt and delivery
of and safeguarding of funds and securities is set forth in Section 5
of this Agreement.
(e) Confirmations and Statements. The division of responsibilities with
respect to the confirmations and statements is set forth in Section 6
of this Agreement.
(f) Acceptance of Orders and Execution of Transaction. The division of
responsibilities with respect to the acceptance of orders and the
execution of transactions is set in Section 7 of this Agreement.
(g) Account Responsibility for Certain Purposes. Notwithstanding anything
herein to the contrary for purposes of the Securities Investment
Protection Act of 1970 and the Financial Responsibility Rules, the
Customer Accounts are the responsibility of FSW. For all other
purposes, the Customer Accounts shall be the full, total and sole
responsibility of RUSH.
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(h) Notice of Customers. Subject to the requirements of the NASD Rules of
Fair Practice, RUSH shall provide, or cause to be provided to every
Customer upon the opening of a Customer Account, notice of the
existence and general terms of this Agreement.
(i) Accounts of Associated Persons. In each case in which a Customer is an
employee or otherwise associated with an NASD member, RUSH shall be
responsible for notifying such member in accordance with the
provisions of Art. III, Sec. 28 of the NASD Rules of Fair Practice.
3. EXTENSION OF CREDIT
Responsibility for compliance with the provisions of Regulation T, issued
by the Board of Governors of the Federal Reserve System pursuant to the
Securities Exchange Act of ~934 ("Regulation T"), and all other applicable
rules, regulations and requirements of any exchange or regulatory agency
affecting the extension of credit shall be allocated between FSW and RUSH as set
forth in this Section 3.
(a) Margin Agreements. At the time of opening of each margin account, RUSH
will furnish FSW with an FSW Customer Margin and Short Account
Agreement, executed by the Customer, on the form furnished to RUSH by
FSW. As to any Account, until RUSH has furnished FSW with an executed
margin agreement, FSW may, at its discretion, re-book any transactions
cleared as a cash transaction, liquidate the Account or take any other
action FSW deems necessary.
(b) Margin and Margin Maintenance. RUSH is responsible for the collection
of initial margin and all amounts necessary to meet subsequent
maintenance calls in each Customer and RUSH Account to insure
compliance with Regulation T and the house rules of FSW. FSW shall
have the unlimited right to buy in or sell out positions in Accounts
whenever FSW, in its sole discretion, deems such action appropriate
and despite whether, if Account is a Margin Account, any such Account
is then in compliance with applicable margin maintenance requirements
or has requested an extension of time for any account to make any
payment required by Regulation T. RUSH acknowledges that FSW has the
right to demand payment on any debit balance and RUSH is responsible
to FSW for any failure of a Customer to make any such payments upon
demand.
(c) Margin Requirements. Initial margin and margin maintenance
requirements applicable to any margin account shall be in accordance
with the house rules of FSW, rather than in accordance with any lower
requirement of any law, any exchange or any regulatory agency. FSW may
change the margin requirements applicable to any Account or class of
accounts, as described in its house rules, RUSH shall be responsible
for advising its Customer of the changed requirements and for
collecting any additional margin necessary to insure compliance with
such increased requirements.
(d) Losses. In addition to, and not in limitation of, RUSH's agreement to
indemnify FSW pursuant to the provisions of Section 10, RUSH
indemnifies and holds harmless FSW from and against any and all loss,
cost, expense and liability (including legal and accounting fees and
expenses) sustained by FSW arising out of any of the following:
(i) any failure by any Customer to comply with the terms of its
Customer Margin and Short Account Agreement with FSW,
(ii) FSW's re-booking of margin transactions as cash transactions
pursuant to Section 3(a),
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(iii)FSW's broker's execution of a transaction for the account of a
Customer pursuant to Section 3-(b);
(iv) in a margin transaction, the failure of RUSH or any Customer to
comply with Regulation T;
(v) the failure of RUSH to satisfy its obligations under this Section
3; or
(vi) in a cash transaction, the failure of delivery of securities sold
or failure of payment for securities purchased in accordance with
the provisions of Regulation T, the return to FSW unpaid of any
check given to FSW by RUSH or any Customer or the payment and/or
delivery of all "when issued" transactions which FSW may accept
or execute for the Accounts.
4. MAINTENANCE OF BOOKS AND RECORDS
FSW will maintain stock records and other records on a basis consistent
with generally accepted practices in the securities industry and will maintain
copies of such records as are produced by FSW, in accordance with the NASD and
SEC guidelines for record retention, in effect from time to time. FSW and RUSH
shall each be responsible for preparing and filing the reports required by the
governmental and regulatory agencies that have jurisdiction over each and FSW
and RUSH will each provide the other with such information, if any which is in
the control of one party but is required by the other to prepare any such
report.
5. RECEIPT, DELIVERY AND SAFEGUARDING OF FUNDS AND SECURITIES
(a) Receipt and Delivery in the Ordinary Course of Business. FSW, through
RUSH, will receive and deliver all funds and securities in connection
with transactions for Customer Accounts in accordance with the
Customer's instructions to RUSH, provided that RUSH shall be
responsible for advising Customers of their obligations to deliver
funds or securities in connection with each such transaction and for
any failure of any Customer to fulfill such obligation. FSW shall be
responsible for the safeguarding of all funds and securities delivered
to and accepted by it, subject to count and verification by FSW.
However, FSW will not be responsible for any funds or securities
delivered by a Customer to RUSH, its agents or employees until such
funds or securities are physically delivered to FSW's premises and
accepted by FSW or deposited in bank accounts maintained in FSW's
name. It is expressly understood and agreed, however, that RUSH is
responsible for compliance with the Currency and Foreign Transactions
Reporting Act (31 U.S.C. Section 5311. et seq.) and the rules and
regulations promulgated thereunder (31 C.F.R. Section 103.11,
as amended, et seq.).
(b) Custody Services. Whenever FSW has been instructed to act as custodian
of the securities in any RUSH or Customer Account, or to hold such
securities in "safekeeping," FSW may bold the securities in the
Customer's name or may cause such securities to be registered in the
name of FSW or its nominee or in the names of nominees of any
depository used by FSW. FSW will perform the services required in
connection with acting as custodian for securities in RUSH and
Customer Accounts, such as: (i) collection and payment of dividends;
(ii) transmittal and handling (through RUSH) of tenders or exchanges
pursuant to tender offers and exchange offers; (iii) transmittal of
all proxy materials and other shareholder communications; and (iv)
handling of exercised or expirations of rights and warrants of
redemption's.
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(c) Receipt and Delivery Pursuant to Special Instruction. Upon instruction
from RUSH or a Customer, FSW will make such transfers of securities or
Accounts as may be requested. RUSH shall be responsible for
determining if any securities held in RUSH or Customer Accounts are
"restricted securities" or "control stock" as defined by the rules of
the SEC and that orders executed for such securities are in compliance
with applicable laws, rules and regulations.
(d) Draft-Issuing Authority. At its discretion FSW may authorize certain
of RUSH's employees to sign drafts as drawer payable to RUSH's
Customers in amounts and pursuant to conditions as may be determined
by FSW from time to time. RUSH agrees that it will not request FSW to
authorize someone to sign drafts who is not an employee of RUSH. RUSH
agrees to indemnify fully FSW from the negligence, fraud, or mistakes
of RUSH or RUSH's employees in connection with any draft issuing
authority granted to them and RUSH authorizes FSW to charge any RUSH
Account or any other assets of RUSH held by FSW with the amount of any
such losses. Notwithstanding Section 5(a), FSW will not be responsible
for the safeguarding of funds withdrawn by RUSH or RUSH's employees
pursuant to such draft issuing authority. FSW may withdraw this draft
issuing privilege without notice at any time during the term of this
Agreement. Notwithstanding anything herein to the contrary, FSW may at
any time, at its sole discretion, despite any prior authorization,
refuse payment on any draft for which RUSH is drawer and FSW is
drawee.
6. CONFIRMATIONS AND STATEMENTS
(a) Preparation and Transmission. FSW will prepare and send to Customers
monthly or quarterly statements of account, which statements shall
meet FSW's requirements as to format and quality and will indicate
that RUSH introduced the Account. Unless otherwise agreed, FSW will be
responsible for preparing and transmitting confirmations; provided,
however, that RUSH's right to prepare and transmit confirmations shall
be subject to prior approval by FSW and compliance by RUSH with the
provisions of Art. III, Sec. 12 of the NASD Rules of Fair Practice.
RUSH shall be responsible for notifying the Customer if it is
preparing and transmitting confirmations. RUSH shall not generate
and/or prepare any statements, billings or confirmation respecting any
Account except as provided in this Agreement or pursuant to an
agreement executed between FSW and RUSH that authorizes RUSH to print
and mail statements to Accounts on behalf of FSW. If such an agreement
has been executed, RUSH covenants that it shall comply with all
requirements for statements imposed upon FSW of which RUSH has notice
or has been advised of by FSW under all applicable laws, rules and
regulations, including, but not limited to, the SEC, NASD, Federal
Reserve Board and all other regulatory organizations. RUSH further
covenants that it shall not modify or amend the model statement form
provided without the prior written consent of FSW. Such consent will
not be unreasonably withheld if RUSH has represented to FSW that it
will comply with all said requirements. Copies of all monthly or
quarterly statements sent by FSW to Customers will be sent to RUSH.
FSW will also provide to RUSH monthly statements of clearing services
performed by FSW for RUSH and Customer Accounts showing the fees
charged for such services during the month, as provided in Section 8.
(b) Examination and Notification of Errors. RUSH shall examine
promptly all monthly statements of account, monthly statements of
clearing services and other reports provided to RUSH by FSW. RUSH
shall notify FSW of any error claimed by RUSH in any Account in
connection with (i) any transaction prior to the settlement date of
such transaction, (ii) information appearing on daily reports within
seven days of such report, and (iii) information appearing on monthly
statements or reports within 30 days of RUSH's receipt of any monthly
statement or report. Any notice of error shall be accompanied by such
documentation as may be necessary to substantiate RUSH's claim. RUSH
shall provide promptly upon FSW's
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request any additional documentation which FSW reasonably believes is
necessary or desirable to establish and correct any such error.
7. ACCEPTANCE OF ORDERS, EXECUTION OF TRANSACTIONS, OTHER SERVICES
(a) Customer's orders. Acceptance of Customers' orders shall be the
responsibility of RUSH. RUSH shall advise each of its Customers that
its relationship with FSW is solely that of an introducing broker to a
clearing broker and that, except as set forth in Section 2(f) above,
RUSH bears all responsibility for the Customer's Account. RUSH shall
be responsible for the authenticity of all orders. FSW is not
obligated to accept for execution any orders placed directly with FSW
by a Customer. In addition, FSW is not obligated to accept any orders
from RUSH if FSW determines in good faith that it should not. RUSH
assumes the risk of failure by an over-the-counter dealer with which
RUSH executes an order in the event such dealer fails to perform, and
will reimburse FSW for any loss incurred by it in the transaction.
(b) Transactions clearing. During the term of this Agreement, FSW will
clear transactions on a fully disclosed basis for Accounts of RUSH and
the Customers that RUSH introduces and FSW accepts as provided in
Section 2(b); provided, however, that FSW is not obligated to clear
any transactions for RUSH or RUSH's Customers if FSW determines in
good faith that it should not.
(c) Other Services. FSW will perform such other services, upon such terms
and at such prices, as FSW and RUSH may from time to time agree.
8. FEES AND SETTLEMENTS FOR SECURITIES TRANSACTIONS
(a) Commissions - Fees for Clearing Services.
(i) RUSH has provided to FSW its basic commission schedule and FSW
will charge each Customer the commission shown on such schedule
or which RUSH otherwise directs FSW to charge on each
transaction. RUSH's basic commission schedule may be amended from
time to time by written instructions to FSW from RUSH; provided,
however, that FSW shall be required to implement such changes
only to the extent that they are within the usual capabilities of
FSW's data processing and operations systems and only over such
reasonable time as FSW may deem necessary or desirable to avoid
disruption of FSW's normal operational capabilities. FSW may
charge RUSH for changes in the basic commission schedule. RUSH's
basic commission schedule shall be within the format of FSW's
computer system and must be expressly agreed to by FSW.
(ii) FSW will charge RUSH for clearing services according to the fee
schedule set forth in Schedule A attached hereto and incorporated
herein for all purposes. As of the close of each month, FSW shall
forward to RUSH a statement setting forth the commissions earned
in accordance with Schedule A and the amounts due thereunder.
These charges shall be promptly paid by RUSH. Charges may be
modified from time to time by FSW without re-execution of this
Agreement. To implement new charges, FSW will mail or telecopy a
new Schedule A to RUSH. If RUSH does not object to the new
charges within ten (10) days of such mailing or telecopying, as
provided below, the new charges shall become effective and the
new Schedule A shall become a part of and modify this Agreement
without any further action by the parties. Upon such event, FSW
and RUSH shall replace the previous Schedule A with the new
Schedule A. RUSH may
7
<PAGE>
object to new charges by giving notice canceling this Agreement
as provided under Sections 12 and 20(m). During the pendency of
such notice period, the previous charges shall continue to be
effective until termination. In addition, FSW will charge RUSH
expenses incurred by FSW on behalf of RUSH pursuant to this
Agreement. Expenses incurred by FSW on behalf of RUSH that shall
be deducted from any payments due to RUSH from FSW include, but
are not limited to, overlay of forms, system equipment expenses,
charges to commission schedules and financial report information
related thereto, installation of data communication lines and
brokerage related credit inquiries, legal transfers, Regulation T
extensions, Mailgrams (buy-in or sellout), microfiche of records,
excess Security Investors Protection Corporation protection for
Accounts and costs incurred in failure of RUSH to provide social
security or tax identification numbers.
(b) Settlements. FSW will collect all commissions from Customers on
behalf of RUSH and through RUSH. FSW may make payments to RUSH
against such commissions in advance of the monthly settlement
contemplated by this Section 8(b), the amount of such payments to
be determined in FSW's sole discretion based upon FSW's
experience with RUSH's clearance.
As soon as practicable after the end of each month, FSW will
credit RUSH with the amount of commissions and other amounts
collected by FSW on RUSH's behalf, and deduct all amounts due to
FSW from RUSH (including, without being limited to, Customer's
unsecured debit items, however arising). FSW shall pay RUSH the
amount that the total owed RUSH exceeds the total owed FSW, or
shall send a statement to RUSH and RUSH shall pay FSW the amount
that the total owed FSW exceeds the total owed RUSH. If RUSH
fails to make such payment, FSW shall have the right to charge
any other Account maintained by FSW for RUSH or any other assets
of RUSH held by FSW (including the deposit required pursuant to
Section 9 and positions and balances in RUSH Accounts) for the
net amount due FSW. Any failure by FSW to charge any Account or
assets of RUSH held by FSW shall not act as a waiver of FSW's
right to demand payment of, or to charge RUSH's Accounts for, the
full amount due at any time.
9. DEPOSIT
Contemporaneously with the signing of this Agreement, RUSH will deliver
cash or securities to FSW, as specified in Schedule A attached, for deposit in
an account maintained by FSW. If at any subsequent time FSW, in its sole
discretion, requires an additional deposit, RUSH will deposit additional cash or
securities in an amount specified by FSW. Instead of making such additional
deposit, RUSH may reduce RUSH's business volume or modify the nature of the
securities involved in the RUSH's transactions ("business mix") as specified by
FSW. Any failure by FSW to demand compliance with the requirement that RUSH
either deposit additional amounts or modify RUSH's business mix shall not act as
a waiver of FSW's right to demand compliance with such requirements at any time.
If the deposit is not adequately funded as required by FSW, FSW may, in addition
to all other rights under this Agreement, transfer cash or securities of RUSH
held by FSW to the deposit account. If RUSH fails to comply with a request by
FSW for an additional deposit, and FSW does not transfer other cash or
securities of RUSH to the deposit account, resulting in RUSH thereby electing to
reduce its business or to modify its business mix, RUSH agrees that if FSW
determines it to be necessary, FSW shall accept only liquidating transactions
for Customer Accounts and that RUSH will give notice of such fact to Customers.
If such notice is not given by RUSH to Customers, RUSH agrees that FSW may give
such notice to Customers. FSW shall be entitled to set-off against any deposit
in addition to any and all other rights or remedies FSW may have under this
Agreement or otherwise. RUSH agrees that if this Agreement is terminated for any
reason, FSW may liquidate securities deposited and deduct from such deposit any
amounts RUSH owes FSW because of failure to meet any of RUSH's obligations under
this Agreement.
10. INDEMNIFICATION
8
<PAGE>
(a) Indemnity. RUSH agrees to indemnify and hold harmless FSW, each person
who controls FSW within the meaning of the Securities Exchange Act of
1934 and any directors, officers, employees, agents and attorneys of
FSW ("FSW Indemnified Persons") from and against all claims, demands,
proceedings, suits and actions and all liabilities, losses, expenses
and costs (including any legal and accounting fees and expenses)
relating to FSW's defense of any failure, for any reason, fraudulent
or otherwise, by RUSH or RUSH's employees or Customers to comply with
any obligation under this agreement or any other agreement executed
and delivered to FSW in connection with FSW's performance of services
hereunder, and any act or failure to act by FSW Indemnified Persons,
except any act or failure to act which is the result of gross
negligence or willful misconduct on the part of any such FSW
Indemnified Person. It is expressly agreed and understood that RUSH
accepts full responsibility and liability for any act or failure to
act by, if applicable, an independent agent or independent contractor
used by RUSH in providing the services contemplated hereunder. Without
limiting the generality of the foregoing, such failure is explicitly
intended by the parties to include failure resulting from (i)
suspension of trading or bankruptcy or insolvency of any company,
securities of which are held in a Customer's Accounts; (ii) failure by
any Customer to maintain adequate margin; or (iii) breach of any
obligation existing between RUSH and a customer of RUSH or any law,
rule or regulation of the United States, a state or territory thereof,
the SEC, the Federal Reserve Board or other authority, applicable to
any transaction contemplated by this Agreement.
FSW shall indemnify and hold RUSH harmless against any losses, claims,
damages, liabilities or expenses including without limitation those
asserted by its customers (which shall include, but not be limited to,
all costs of defense and investigation and all attorney's fees) to
which RUSH may become subject, insofar as such losses, claims,
damages, liabilities or expenses arise out of, or are based upon the
gross negligence or willful misconduct of FSW or its employees in
providing the services contemplated hereunder.
Promptly after receipt by any indemnified party under this Section of
notice of the commencement of any action, such indemnified party will,
if a claim in respect thereof is to be made against the indemnifying
party under this Section, notify the indemnifying party of the
commencement thereof; but the omission so to notify the indemnifying
party will not relieve it from any liability that it may have to any
indemnified party otherwise than under this Section.
In case any such action is brought against any indemnified party, and
it notified the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate in and, to the
extent that it may wish, to assume the defense thereof, subject to the
provisions herein stated, with counsel satisfactory to such
indemnified party, and after notice from the indemnifying party to
such indemnified party of its election so to assume the defense
thereof, the indemnifying party will not be liable to such indemnified
party under this Section for any legal or other expense subsequently
incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation. The indemnified
party shall have the right to employ separate counsel in any such
action and to participate in the defense thereof, but the fees and
expenses of such counsel shall not be at the expense of the
indemnifying party if the indemnifying party has assumed the defense
of the action with counsel satisfactory to the indemnified party.
(b) Security Interest and Authorization to Charge. RUSH grants to FSW a
first lien and security interest in any RUSH Account maintained by FSW
and any other assets of RUSH now or hereafter held by FSW and
authorizes FSW to discharge such lien by charging such Account and
assets with all amounts owing to FSW including, but not limited to,
(i) any cost or expense resulting from failures to deliver or failures
to receive, (ii) any losses resulting from unsecured debit balances in
any Customer or RUSH Account and
9
<PAGE>
(iii)any amounts to which FSW is otherwise entitled pursuant to the
provisions of Section 10(a). FSW shall have discretion to liquidate or
sell any securities without notice to RUSH, and to determine which
securities to sell. Such charge may be made against RUSH Account or
assets at any time and in such amount as FSW deems appropriate. No
delay in charging any RUSH Account or asset shall operate as a waiver
of FSW's right to do so at any future time as and when FSW deems
appropriate. FSW shall have the unlimited right to set-off any
indebtedness or other obligations of RUSH under this Agreement or
otherwise (absolute or contingent, matured or unmatured) against any
obligations of FSW to RUSH, including from the Deposit (as described
in Section 9 and/or any other money, securities, or other property of
RUSH in FSW's possession.
(c) Reserves. In connection with any claim that does or could give rise to
a claim for indenmification under this Section 10 for FSW or an FSW
Indemnified Person, FSW may, in its discretion, in addition to any and
all other rights and remedies under this Agreement, reserve and retain
any money, securities or other property of RUSH pending a
determination of such claim. The money, securities or other property
of RUSH set aside in such a reserve shall be subject to FSW's standard
lien and security interest described in Section 10(1)) above.
11. UNDERTAKINGS OF RUSH
(a) Financial Statements and Other Reports. RUSH will furnish to FSW as
soon as possible a copy of RUSH's balance sheet and statement of
earnings for the current fiscal year and for each of RUSH's subsequent
fiscal years. Each such balance sheet and statement of earnings shall
be certified by independent public accountants. RUSH also shall
furnish FSW with copies of its monthly and quarterly Focus filings
promptly after filing.
(b) Other Clearing Services. During the term of this Agreement, FSW will
grant approval for RUSH to offer the services contemplated hereunder
to its Customers through Southwest Securities Corporation. However,
RUSH will not offer the services contemplated hereunder to its
Customers through a broker other than FSW or Southwest Securities
Corporation without prior written approval by FSW.
(c) Suspension or Restriction. In the event that RUSH or any employee of
RUSH shall become subject to suspension or restriction by any
regulatory body having jurisdiction over RUSH and RUSH's securities
business, RUSH will notify FSW immediately and RUSH authorizes FSW to
take such steps as may be necessary for FSW to maintain compliance
with the rules and regulations to which FSW is subject. RUSH further
authorizes FSW, in such event, to comply with directives or demands
made upon FSW by any exchange or regulatory body. In connection with
such directives or demands, FSW may seek advice or legal counsel and
RUSH will reimburse FSW for reasonable fees and expenses of such
counsel.
12. TERMINATION OF AGREEMENT: TRANSFER OF ACCOUNTS
(a) Effectiveness. Unless earlier terminated as provided herein, this
Agreement shall remain in force from the date hereof, subject to any
required approval by the NASD. Either party may terminate this
Agreement by giving forty-five (45) days prior written notice to the
other party.
(b) Termination by FSW. Notwithstanding Section 12(a), FSW may terminate
this Agreement at any time on five (5) days written notice to RUSH in
the event that RUSH:
10
<PAGE>
(i) fails to comply with the terms of this Agreement and upon
notification by FSW fails to begin compliance within 10 days from
said notification; or
(ii) is enjoined, prohibited or suspended, as a result of an
administrative or judicial proceeding, from engaging in
securities business activities constituting all or portions of
RUSH's securities business, which injunction, prohibition or
suspension in FSW's judgment makes impracticable the fully
disclosed clearing relationship established in this Agreement.
(c) Automatic Termination. In addition to any other provisions for
termination herein, this Agreement shall terminate immediately in the
event that, either RUSH or FSW ceases to conduct its business or that
FSW:
(i) is no longer registered as a broker/dealer with the SEC; or
(ii) is no longer a member in good standing of the NASD; or
(iii)is suspended by any national securities exchange of which FSW is
a member for failure to comply with the rules and regulations
thereof.
(d) Conversion of Accounts. In the event that this Agreement is terminated
for any reason, it shall be RUSH's responsibility to arrange for the
conversion of RUSH and Customer Accounts to another clearing broker.
RUSH will give FSW notice (the "Conversion Notice") of:
(i) the name of the broker that will assume responsibility for
clearing services for Customers and RUSH;
(ii) the date on which such broker will commence providing such
services;
(iii)RUSH's undertaking, in form and substance satisfactory to FSW,
that RUSH's agreement with such broker provides that such broker
will accept on conversion all RUSH and Customer Accounts, then
maintained by FSW; and
(iv) the name of an individual within that organization who FSW can
contact to coordinate the conversion. The Conversion Notice shall
accompany RUSH's notice of termination given pursuant to Section
12(a) or within thirty (30) days of the occurrence of an event
specified in Section 12(c).
If RUSH fails to give the Conversion Notice to FSW, FSW may give to
Customers such notice as FSW deems appropriate of the termination of
this Agreement and may make such arrangements as FSW deems appropriate
for transfer or delivery of Customer and RUSH Accounts. RUSH will pay
to FSW $3,000 in programming charges to process the conversion. In
addition, RUSH shall pay any costs incurred by FSW as billed by any
third party vendors such as transfer agents, etc.
(e) Survival. Termination of this Agreement shall not affect FSW's rights
or liabilities relating to business transacted prior to the effective
date of such termination. From the date of termination until transfer
or delivery of all Customer and RUSH Accounts, FSW's rights and
liabilities relating to business transacted after such termination
shall be governed by the same terms as those set forth in this
Agreement.
(f) No Obligation to Release. FSW shall not be required to release to RUSH
any securities or cash held by FSW for RUSH in one or more RUSH
Accounts until any amounts owing to FSW pursuant to the provisions of
this Agreement are paid; and RUSH's outstanding obligations hereunder
to FSW are
11
<PAGE>
determined, including determination of any disputed amounts, and
satisfied; and any Property of FSW in the Possession of RUSH is
returned to FSW.
13. CONFIDENTIAL NATURE OF DOCUMENTS
All agreements, documents and papers supplied by RUSH concerning RUSH's
business or Customers shall be treated by FSW as confidential. To the extent
such documents are retained by FSW, they shall be kept in a safe place and shall
be made available to third parties only as authorized by RUSH in writing or
pursuant to any order or request of a court or regulatory body having
appropriate jurisdiction. FSW shall give RUSH prompt notice of the receipt by
FSW of any such order or subpoena, which notice shall be given prior to FSW's
compliance therewith. Such documents shall be made available by FSW for
inspection and examination by RUSH's auditors, by properly authorized agents or
employees of any regulatory bodies or commissions or by such other persons as
RUSH may authorize in writing. Notwithstanding anything herein to the contrary,
RUSH expressly authorizes FSW to supply any information requested relating to
RUSH, its business, or its Customers to any regulatory body having appropriate
authority.
14. EMPLOYEES
Without FSW's prior written consent RUSH will not solicit, or engage in
negotiations with, any person who is, or within the preceding 12 months has
been, employed by FSW. In the event RUSH does hire said person, RUSH shall pay
to FSW the sum of $10,000.00 no later than thirty (30) days after said employee
begins employment with RUSH.
15. CUSTOMER COMPLAINT PROCEDURES
RUSH will be responsible for the initial handling of all Customer
complaints. Any Customer who initiates complaint with FSW will be referred by
FSW to RUSH. If any such complaint is based upon an alleged act or failure to
act by FSW, RUSH will notify FSW promptly of such complaint and the basis
therefore; and will consult with FSW; and the parties will cooperate in
determining the validity of such complaint and the appropriate action to be
taken.
16. REMEDIES CUMULATVE
The enumeration herein of specific remedies shall not be exclusive of any
other remedies. Any delay or failure by any party to this agreement to exercise
any right, power, remedy or privilege herein contained, or now or hereafter
existing under any applicable statute or law, shall not be construed to be a
waiver of such right power, remedy or privilege~ nor to limit the exercise of
such right, power, remedy or privilege, nor shall it preclude the further
exercise thereof or the exercise of any other right, power, remedy or privilege.
17. GUARANTEE
The corporation or individual(s) who guarantee the obligations of RUSH
under this Agreement by executing the signature lines designated for such
purpose at the end of this Agreement (the "Guarantor(s)"), in consideration of
FSW's entering into the Agreement, do(es) hereby personally guarantee(s)
(jointly and severally, if more than one) the performance by RUSH of the
provisions of the Agreement (including without limitation the indemnification
provisions of Section 10) and shall promptly pay any amount that is not paid by
RUSH to FSW under the Agreement. This is an absolute, unconditional and
unlimited guarantee of payment and may be proceeded upon by FSW or an FSW
Indemnified Person before filing any action against RUSH or after any action
against RUSH has been commenced. Guarantor(s) grants to FSW a first lien and
12
<PAGE>
security interest on any and all money and securities of a Guarantor(s) held by
FSW. FSW shall have the unlimited right to set-off any amounts owed to it by
Guarantor(s) against any obligation of FSW to Guarantor(s). FSW also shall have
the absolute and unlimited right to sell, transfer, or liquidate any of the
assets in any of Guarantor(s)' accounts with FSW for any amounts owed to it by
RUSH or Guarantor(s). The obligations of the Guarantor(s) shall not be
discharged or impaired or otherwise affected by the failure of FSW or an FSW
Indemnified Person to assert, claim, demand or enforce any remedy under this
Agreement, nor by waiver, modification or amendment of this Agreement or any
compromise, settlement or discharge of obligations of RUSH under this Agreement,
or any release or impairment of any collateral by FSW or an FSW Indemnified
Person.
18. LIMIT ON LIABILITY; NO CONSEQUENTIAL DAMAGES
In any action by RUSH against FSW for any claim arising out of the
relationship created by this Agreement, FSW shall only be liable to RUSH in
cases of gross negligence or willful misconduct, and in such cases FSW shall
only be liable for the amount of actual monetary losses suffered by RUSH. RUSH
shall not, in any such action or proceeding, or otherwise, assert any claim
against FSW for consequential damages on account of any loss, cost, damage or
expense which RUSH may suffer or incur related to transactions in connection
with this Agreement or otherwise, including, but not limited to, any lost
opportunity claims.
19. MISCELLANEOUS
(a) Tax Reporting. FSW shall be responsible for providing IRS form 1099
and other information required to be reported by federal, state or
local tax laws, rules or regulations, to Accounts solely with respect
to events subsequent to the effective date of this Agreement and for
the mailing of same at RUSH's expense.
(b) Scope of services. FSW shall limit its services pursuant to the terms
of this Agreement to those services expressly set forth herein and
related thereto. FSW shall perform such services as agent for RUSH.
(c) Modification. This Agreement may be modified only by a writing signed
by both parties to this Agreement. Such modification shall not be
deemed as a cancellation of this Agreement. Subject to the NASD Rules
of Fair Practice, this agreement and all modifications may be required
to be submitted to the NASD for approval prior to effectiveness. It is
expressly understood that brokerage services cannot be provided by
RUSH under this Agreement until such approval, if required, is
received.
(d) Assignment. This Agreement shall be binding upon all successors,
assigns or transferees of both parties hereto, irrespective of any
change with regard to the name of or the personnel of RUSH or FSW. Any
assignment of this Agreement shall be subject to the requisite review
and/or approval of any regulatory or self-regulatory agency or body
whose review and/or approval must be obtained prior to the
effectiveness and validity of such assignment. No assignment of this
Agreement shall be valid unless the non-assigning party consents to
such an assignment in writing. Any assignment by either FSW or RUSH to
any majority-owned subsidiary that they may create or to a company
affiliated with or controlled directly or indirectly by or under
common control with either of them will be deemed valid and
enforceable in the absence of any consent from either party. Neither
this Agreement nor any operation hereunder is intended to be, shall
not be deemed to be, and shall not be treated as a general or limited
partnership, association or joint venture or agency relationship
between RUSH and FSW.
(e) Account Documentation. Applicable laws and regulations require that
FSW must have a proper documentation to support any account opened on
its books. If, after reasonable requests therefor, the
13
<PAGE>
necessary documents to enable FSW to comply with such account
documentation requirements of the laws and regulations have not been
received by FSW, RUSH shall receive notification that no further
orders will be accepted for the Account involved. This Agreement is
not in any way intended to limit the responsibility of FSW under the
laws and regulations with respect to Accounts.
(f) Construction. The construction and effect of every provision of this
Agreement, the rights of the parties hereunder and any questions
arising out of the Agreement, shall be subject to the statutory and
common law of the state of Texas.
(g) Arbitration. In the event of a dispute between the parties, such
dispute shall be settled by arbitration before arbitrators sitting in
Dallas, Texas in accordance with the rules of the Arbitration
Committee of the NASD then in effect. The arbitrators may allocate
attorneys' fees and arbitration costs between parties, and such award
shall be final and binding between the parties and judgment thereon
may be entered in any court of competent jurisdiction.
(h) Headings. The headings preceding the text, articles and sections
hereof have been inserted for convenience and reference only and shall
not be clustered to affect the meaning, construction or effect of this
Agreement.
(i) Entire Agreement. This Agreement shall cover only the types of
services set forth herein and is in no way intended nor shall it be
construed to bestow upon RUSH or FSW any special treatment regarding
any other arrangements, agreements or understandings that presently
exist between RUSH and FSW or that may hereinafter exist. RUSH shall
be under no obligation whatsoever to deal with FSW or any of its
subsidiaries or any companies controlled directly or indirectly by or
affiliated with FSW, in any capacity other than as set forth in this
Agreement. Likewise, FSW shall be under no obligation whatsoever to
deal with RUSH or any of its affiliates in any capacity other than as
set forth in this Agreement.
(j) Severability. If any provision or condition of this Agreement shall be
held to be invalid or unenforceable by any court, or regulatory or
self-regulatory agency or body, such invalidity or unenforceability
shall attach only to such provision or condition. The validity of the
remaining provisions and conditions shall not be affected thereby and
this Agreement shall be carried out as if any such invalid or
unenforceable provision or condition were not contained herein.
(k) Force Majeure. In addition to any excuse provided by applicable law,
all parties hereto shall be excused for liability for non-performance
of this Agreement arising from any event beyond any party's control~
whether or not foreseeable by either party, including but not limited
to, labor disturbance, war, fire, accident, adverse weather, inability
to secure transportation, governmental act or regulation, inability to
obtain raw materials or other causes or events beyond either party's
control, whether or not similar to those enumerated above.
(l) Interpleader. If FSW receives conflicting claims from RUSH, a Customer
and other persons regarding money, securities or other property held
by FSW, FSW may, in its discretion, tender such money, securities or
other property to a court of competent jurisdiction and institute an
action in interpleader or other appropriate legal proceeding to
determine the rights of the respective claimants. FSW shall have no
liability to RUSH in connection with any such action, and shall be
entitled to reimbursement for its costs and expenses in connection
with such action from RUSH.
(m) Notice. For the purposes of any and all notices, consents, directions,
approvals, restrictions, requests or other communications required or
permitted to be delivered hereunder, FSW's address shall be:
14
<PAGE>
Attention: Rick Hall
First Southwest Company
1700 Pacific Avenue, Suite 500
Dallas, Texas 75201
and RUSH's address shall be:
Rushmore Financial Group
Attn: Jim Clark
15851 Dallas Parkway, Suite 1155
Dallas, Texas 75248
Either party may provide such notice or change its address for notice
purposes by giving written notice pursuant to registered or certified
mail, return receipt requested, of the new address to the other party.
(n) Counterparts: NASD Approval. This Agreement may be executed in one or
more counterparts, all of which taken together shall constitute a
single agreement When each party hereto has executed and delivered to
the other a counterpart, this Agreement shall become binding on both
parties, subject only to any required approval by the NASD. If
required by the NASD, FSW will submit this Agreement to the NASD
promptly following execution and will notify RUSH, or cause RUSH to be
notified, promptly upon receipt of such approval.
15
<PAGE>
MADE AND EXECUTED THIS 15th DAY OF July, 1996.
---- ---- -
FSW: FIRST SOUTHWEST COMPANY
By: /s/ Rick Hall
--------------------------------
Rick Hall, Director
1700 Pacific Avenue, Suite 500
Dallas, Texas 75201
RUSH:
INDIVIDUAL: ---------------------------------
[Signature]
---------------------------------
[Print name]
---------------------------------
[Address]
---------------------------------
---------------------------------
ENTITY: RUSHMORE SECURITIES CORP.
---------------------------------
[Name]
Corporation
---------------------------------
[Type of Entity, i.e.,corporation,
partnership, etc.]
By: /s/ Jim W. Clark
---------------------------------
Its: President
---------------------------------
15851 Dallas Parkway,
---------------------------------
[Address]
Suite 1155
--------------------------------
Dallas, TX 75248
--------------------------------
16
<PAGE>
GUARANTEE: The undersigned individual(s) or corporation hereby guarantee(s) the
obligations of RUSH under the Agreement as provided in Section 18 of the
Agreement.
INDIVIDUAL GUARANTOR(S):
---------------------------------
[Signature]
---------------------------------
[Print Name]
---------------------------------
[Signature]
---------------------------------
[Print name]
CORPORATE GUARANTOR: Rushmore Securities Corp.
---------------------------------
[Name of Corporation]
By: Jim W. Clark
--------------------------------
Its: President
--------------------------------
15851 Dallas Parkway
--------------------------------
[Address]
Suite 1155
--------------------------------
Dallas, TX 75248
--------------------------------
17
<PAGE>
SCHEDULE A
TO CLEARING AGREEMENT BETWEEN FIRST SOUTHWEST COMPANY ("FSW")
AM) RUSHMORE FINANCIAL GROUP ("RUSH")
This Schedule A shall be effective for transactions beginning July 15, 1996and
shall not be changed, except by prior written consent of both parties, until
after January 31, 2000. The required clearing deposit of RUSH as of the date of
adoption of this Schedule A pursuant to Section 10 of the Agreement shall be
$10,000.00.
The parties hereto agree that FSW's charges for services to RUSH and/or RUSH's
customers shall be as follows:
<TABLE>
<CAPTION>
Customer Transactions (Retail Tickets)
<S> <C>
Listed Equities: $25.00 per ticket plus floor brokerage
Floor Brokerage: 0-3000 shares executed on Midwest- no cents per share over
3000 shares executed on Midwest- 1.5 cents per share orders
on all other exchanges- 2.5 cents per share (10,000 shares
or greater -1.75 cents per share).
Third Market: $26.00
Listed Bonds: $28.00 per ticket plus $3 per bond
Listed Options: $25.00 per ticket plus $1.50 per contract
OTC Equities: Agency: $26.00 per ticket
Principle: $24.00 per ticket
Mutual Funds (includes UITS): $24.00 per ticket
Exchanges within the same family of funds $8.00 per ticket
(Exchanges do not count toward ticket count or qualify for rebates)
</TABLE>
Municipal Bonds: $30.00 per ticket
OTC Corporate Bonds: $30.00 per ticket
U.S. Treasuries & Agencies: $30.00 per ticket
Money Market Instruments: $35.00 per ticket
Clearing Charge reduction on customer trades (monthly count)
150 - 250 tickets $2.00 per ticket
251 - 350 tickets $4.00 per ticket
351 - 500 tickets $6.00 per ticket
Over 500 tickets $8.00 per ticket
18
<PAGE>
Inventory Transactions (Dealer Tickets)
All transactions between another broker dealer and a RUSH's inventory are
$15.00 per ticket, subject to the following monthly volume discounts:
500 - 999 tickets $2.50 per ticket
Over 1000 tickets $5.00 per ticket
*Note: Customer and dealer trades do not aggregate for discount purposes.
Transactions of syndicate orders through FSW:
With customers: 25% of the selling group's gross shall be charged,
with a minimum of 3 cents per share, in
addition to the ticket clearing charge.
Minimum clearing charges: $1,000.00 (waived for nine months)
<TABLE>
<CAPTION>
ADDITIONAL CHARGES WILL BE BILLED AS FOLLOWS:
<S> <C>
144 Sales: $35.00 surcharge.
Accommodation Transfers: $25.00 plus certificate fees.
Automated Customer Account Transfer (ACAT): $5.00 per account transferred from FSW.
"Blue Sheet" Reporting or any $15.00 per hour for research plus programming charges.
other Regulatory Inquiry: "Blue Sheet" reporting $100.00 per cusip request.
Bond Maturity/Redemption Fee (Exclude T-Bills): $25.00.
Cancels & Corrections: $10.00 per confirmation.
Certificate Charges: At cost.
Clearing Deposit minimum requirement: $l0.000.00
Conversion to FSW/Deconversion from FSW: To be determined by FSW on a case-by-case basis.
Credit interest on clearing deposit: Credit Interest Rate.
Data-line and equipment charges: At FSW cost.
DK Trades: $30.00 per DK plus interest (if applicable).
Draft Charges: Actual charges plus interest (if applicable~).
Ex-clearing Trades: $15.00 per ticket.
</TABLE>
19
<PAGE>
<TABLE>
<S> <C>
Forms: Available at cost. No
charge for new account,
margin option agreements.
Government Bond Fee: A $15.00 miscellaneous fee will be charged to the customer
on all purchase and sale transactions of government and
government backed securities, other than treasury bills. A
$5 fee will be charged on treasury bill transactions. DVP
accounts will have these charges added to the ticket
charges.
Interest Rebates: 50 basis points on average monthly margin balances. Any
increase/decrease in the base rate will be added to/reduced
from RUSH's 50 basis points.
20 basis points on Type 6, credit interest, accounts
Average monthly money market account balances will be
rebated as follows:
20 basis points for balances of $0.00 -2,000,000.00
25 basis points for balances of $2,000,000.01 -4,000,000.00
30 basis points for balances over $4,000,000.01
legal Deposits: $10.00 per item.
Postage & Handling: $3.00 per confirmation (charged to customer). This does not
apply to DVP accounts.
Reg "T" Extension: $10.00 per request plus interest from settlement date until paid.
Research & Statement Copies: $15.00 per hour with a minimum of one hour.
Returned Checks: $20.00 plus interest from the earlier of the settlement
date or date of deposit.
Safekeeping Charge: Customers' accounts which have generated clearing charges of
less than $50.00 during the calendar year but have
securities in safekeeping with FSW will be charged $25.00
annually.
Securities Purchase against Non-Cleared Funds: Interest on balance.
Tender Items (Courtesy): $0.03 per share even if tender is declined ($25.00 minimum
$100.00 maximum).
Wire Funds: $25.00.
/s/ Rick Hall July 15, 1996
- ---------------------------------- ------------------------------
First Southwest Company (date)
</TABLE>
20
<PAGE>
Exhibit 10-11
INDEMNIFICATION AGREEMENT
This Agreement, dated as of November 28 1997, is by and between Rushmore
Financial Group, Inc., a Texas corporation (the "Company"), and D.M. Rusty
Moore, Jr. ("Indemnitee").
WITNESSETH:
WHEREAS, the Company desires to have qualified directors serving on its
Board of Directors and executive officers, who are willing to make decisions
that in their judgment are in the Company's best interest without any undue
threat of personal liability;
WHEREAS, the Company's Articles of Incorporation ("Articles of
Incorporation") and the Company's Bylaws ("Bylaws") require indemnification of
each director or officer of the Company in his capacity as a director or officer
and, if serving at the request of the Company as a director, officer, partner,
venturer, proprietor, trustee, employee, agent, or similar functionary of
another foreign or domestic corporation, partnership, joint venture, sole
proprietorship, trust, employee benefit plan, or other enterprise, in each of
those capacities, against any and all liability and reasonable expense that may
be incurred by him in connection with or resulting from (a) any threatened,
pending, or completed action, suit, or proceeding whether civil, criminal,
administrative, arbitrative, or investigative (collectively, a "Proceeding"),
(b) an appeal in such a Proceeding, or (c) any inquiry or investigation that
could lead to such a Proceeding, to the fullest extent permitted by the Texas
Business Corporation Act ("Act"), as the same exists or may be hereafter
amended;
WHEREAS, the Company desires to grant to Indemnitee the maximum
indemnification for any Loss (hereinafter defined) permitted by the Articles of
Incorporation and Bylaws;
WHEREAS, developments with respect to the terms and availability of
directors' and officers liability insurance and with respect to the application,
amendment, and enforcement of statutory, charter, and bylaw indemnification
provisions generally have raised questions concerning the adequacy, and
reliability of the protection afforded to persons intended to be protected
thereunder; and
WHEREAS, in order to resolve such questions and thereby induce Indemnitee
to serve or to continue serving, as a director and/or executive officer of the
Company, the Company has agreed to enter into this Agreement with Indemnitee;
NOW, THEREFORE, in consideration of Indemnitee's consent to serve or
continuing to serve in the position of director and/or executive officer of the
Company, the parties hereto agree as follows:
-1-
<PAGE>
1. Indemnity of Indemnitee. The Company shall indemnify Indemnitee in his
capacity as director, director nominee, and/or officer of the Company, as the
case may be, and, if serving at the request of the Company as a director,
director nominee, officer, trustee, employee, agent, or similar functionary of
another foreign or domestic corporation, trust partnership, joint venture, sole
proprietorship, employee benefit plan, or other enterprise, in each of those
capacities, against any and all liability and reasonable expense that may be
incurred by Indemnitee in connection with or resulting from (a) any Proceeding,
(b) an appeal in such a Proceeding, or (c) any inquiry or investigation that
could lead to such a Proceeding, all to the fullest extent permitted by Article
2.02-1 of the Act.
2. Continuation of Indemnity. All agreements and obligations of the Company
contained herein shall continue during the period Indemnitee is a director,
director nominee or officer of the Company, shall be retroactive to the date
Indemnitee first became a director, director nominee or officer covering all
periods of service from time to time, and shall continue thereafter so long as
Indemnitee shall be subject to any possible claim or threatened, pending, or
completed Proceeding, any appeal in a Proceeding, and any inquiry or
investigation that could lead to a Proceeding, by reason of the fact that
Indemnitee was serving, or had consented to serve, in any capacity referred to
herein.
3. Notification and Defense to Claim. Promptly after receipt by Indemnitee
of notice of any claim against Indemnitee or the commencement of any Proceeding,
Indemnitee will, if a claim in respect thereof is to be made against the Company
under this Agreement, notify the Company of the assertion of any such claim or
the commencement thereof; but the omission so to notify the Company will not
relieve it from any liability under this Agreement unless such delay in
notification actually prejudiced the Company (and then only to the extent the
Company was actually prejudiced thereby) and in addition, the Company shall not
be relieved from any liability which it may have to Indemnitee otherwise than
under this Agreement. With respect to any such Proceeding as to which Indemnitee
notifies the Company of the commencement thereof:
(a) The Company will be entitled to participate therein at its own
expense.
(b) Except as otherwise provided below, to the extent that it may
wish, the Company jointly with any other indemnifying party similarly
notified will be entitled to assume the defense thereof with counsel
satisfactory to Indemnitee, provided that, notwithstanding the Company's
assumption of such defense, Indemnitee shall have the right to retain
separate counsel and the Company shall pay all reasonable fees and expenses
of such counsel and all other reasonable expenses of Indemnitee in
connection with such Proceeding. The Company shall not be entitled to
assume the defense of any Proceeding brought by or on behalf of the Company
or as to which Indemnitee shall have reasonably concluded that there may be
a conflict of interest between the Company and Indemnitee in the conduct of
the defense of such action.
-2-
<PAGE>
(c) The Company shall not be liable to indemnify Indemnitee under this
Agreement for any amounts paid in settlement of any action or claim
effected without its written consent. The Company shall not settle any
action or claim in any manner which would impose any penalty or limitation
on Indemnitee without Indemnitee's written consent. Neither the Company nor
Indemnitee will unreasonably withhold their consent to any proposed
settlement.
4. Advances of Expenses. Reasonable expenses (other than judgments,
penalties, fines and settlements) incurred by Indemnitee that are subject to
indemnification under this Agreement (and not paid, reimbursed or advanced by
others) shall be paid or reimbursed by the Company in advance of the final
disposition of the Proceeding within 30 days after the Company receives a
written request by Indemnitee accompanied by substantiating documentation of
such expenses, a written affirmation by Indemnitee of his good faith belief that
he has met the standard of conduct necessary for indemnification under this
Agreement, and a written undertaking by or on behalf of Indemnitee to repay the
amount paid or reimbursed if it is ultimately determined that he has not met
those standards or that such reasonable expenses do not constitute a Loss. The
written undertaking described above shall be an unlimited general obligation of
Indemnitee and shall not be secured. Such undertaking shall be without reference
to the financial ability of Indemnitee to make repayment.
5. Right of Indemnitee to Indemnification Upon Application: Procedure Upon
Application. Upon the written request of Indemnitee to be indemnified pursuant
to this Agreement (other than pursuant to Section 4 hereof), the Company shall
cause the Reviewing Party (hereinafter defined) to determine, within 45 days,
whether or not the Indemnitee has met the relevant standards for indemnification
required by this Agreement. The termination of a Proceeding by judgment, order,
settlement, or conviction, or on a plea of nolo contendere or its equivalent,
shall not of itself create a presumption that Indemnitee did not meet the
requirements for indemnification required by this Agreement. If a determination
of indemnification is to be made by Independent Legal Counsel (hereinafter
defined), such Independent Legal Counsel shall render its written opinion to the
Company and Indemnitee as to what extent Indemnitee will be permitted to be
indemnified. The Company shall pay the reasonable fees of Independent Legal
Counsel and indemnify and hold harmless such Indemnitee against any and all
expenses (including attorneys' fees), claims, liabilities and damages arising
out of or relating to the engagement of Independent Legal Counsel pursuant
hereto and the written opinion of such Independent Legal Counsel.
6 Definitions. The terms defined in this Section 6 shall, for purposes of
this Agreement have the indicated meanings:
(a) "Loss" shall mean any and all judgments, penalties (including
excise and similar taxes), fines, settlements, and reasonable expense
(including attorneys' fees) actually incurred by Indemnitee, after
realization of or giving effect to all insurance, bonding, indemnification
and other payments or recoveries actually received by or for the benefit of
Indemnitee, directly or indirectly.
-3-
<PAGE>
(b) "Reviewing Party" means, if a Change in Control (hereinafter
defined) has not occurred (or if a Change in Control has occurred and such
Change in Control has been approved by a majority of the Board of Directors
of the Company who were directors of the Company immediately prior to such
Change in Control), (i) a majority of a quorum of directors of the Company
who at the time of voting upon a determination of indemnification are
neither officers or employees of the Company or members of the immediate
family of an officer or employee of the Company ("Interested Parties") nor
parties to that particular Proceeding to which Indemnitee is seeking
indemnification; or (ii) Independent Legal Counsel selected by a majority
of a quorum of directors who at the time of selecting such Independent
Legal Counsel are neither Interested Parties nor parties to that particular
Proceeding to which Indemnitee is seeking indemnification, or if such a
quorum cannot be obtained, by a majority vote of a committee of the Board
of Directors of the Company designated to select such Independent Legal
Counsel by a majority vote of all directors of the Company, consisting
solely of two or more directors who at the time of such selection are
neither Interested Parties nor parties in that particular Proceeding to
which Indemnitee is seeking indemnification, or if such a quorum cannot be
obtained and such a committee cannot be established, by a majority vote of
all directors of the Company. "Reviewing Party" means if a Change in
Control has occurred, Independent Legal Counsel selected in the manner set
forth in (ii) above.
(c) "Change in Control" shall mean an event which shall be deemed to
have occurred if: (i) a merger or consolidation of the Company with or into
another corporation occurs in which the Company shall not be the surviving
corporation (for purposes of this definition, the Company shall not be
deemed the surviving corporation in any such transaction if; as the result
thereof, it becomes a wholly-owned subsidiary of another corporation); (ii)
a dissolution of the Company occurs; (iii) a transfer of all or
substantially all of the assets or shares of stock of the Company in one
transaction or a series of related transactions to one or more other
persons or entities occurs; (iv) if any "person" or "group" as those terms
are used in Sections 13(d) and 14(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), other than Excluded Persons, becomes
the "beneficial owner" (as defined in Rule 13d-3 of the Exchange Act),
directly or indirectly, of securities of the Company representing 50% or
more of the combined voting power of the Company's then outstanding
securities; or (v) during any period of two consecutive years commencing on
or after January 1, 1998, individuals who at the beginning of the period
constituted the Board cease for any reason to constitute at least a
majority, unless the election of each director who was not a director at
the beginning of the period has been approved in advance by directors
representing at least two-thirds (2/3) of the directors then in office who
were directors at the beginning of the period. The term "Excluded Persons"
means each of Jim W. Clark, F. E. Mowery, D. M. Moore, Jr. and Mark S.
Adler, and any person, entity, or group under the control of any of them,
or a trustee or other fiduciary holding securities under an employee
benefit plan of the Company.
(d) "Independent Legal Counsel" shall mean an attorney, selected in
accordance with the provisions of Section 6(b) hereof; who shall not have
otherwise performed services for Indemnitee, the Company, any person that
controls the Company or any of the directors of the Company, within five
years preceding the time of such selection (other
-4-
<PAGE>
than in connection with seeking indemnification under this Agreement).
Independent Legal Counsel shall not be any person who, under the applicable
standards of professional conduct then prevailing, would have a conflict of
interest in representing either the Company or Indemnitee in an action to
determine Indemnitee's rights under this Agreement, nor shall Independent
Legal Counsel be any person who has been sanctioned or censured for ethical
violations of applicable standards of professional conduct.
7. Enforceability. The right to indemnification or advances as provided by
this Agreement shall be enforceable by Indemnitee in any court of competent
jurisdiction. The burden of proof that indemnification is not appropriate shall
be on the Company. Neither the failure of the Company (including its Board of
Directors or Independent Legal Counsel) to have made a determination prior to
the commencement of such action that indemnification is proper in the
circumstances because Indemnitee has met the applicable standard of conduct, nor
an actual determination by the Company (including its Board of Directors or
Independent Legal Counsel) that Indemnitee has not met such an applicable
standard of conduct, shall be a defense to the action or create a presumption
that Indemnitee has not met the applicable standard of conduct.
8. Partial Indemnity: Expenses. If the Indemnitee is entitled under any
provision of this Agreement to indemnification by the Company for some or a
portion of the expenses, judgments, fines, and penalties, but not for the total
amount thereof; the Company shall indemnify Indemnitee for the portion thereof
to which Indemnitee is entitled. Notwithstanding any other provision of this
Agreement, to the extent that Indemnitee has been successful on the merits or
otherwise in defense of any or all Proceedings relating in whole or in part to
an event subject to indemnification hereunder or in defense of any issue or
matter therein, including dismissal without prejudice, Indemnitee shall be
indemnified against expenses incurred for any Loss in connection with such
Proceeding, issue or matter, as the case maybe.
9. Repayment of Expenses. Indemnitee shall reimburse the Company for all
reasonable expenses paid by the Company in defending any Proceeding against
Indemnitee in the event and only to the extent that it shall be ultimately
determined that Indemnitee is not entitled to be indemnified by the Company for
such expenses under the provisions of this Agreement.
10. Consideration. The Company expressly confirms and agrees that it has
entered into this Agreement and assumed the obligations imposed on the Company
hereby in order to induce Indemnitee to consent to serve, to serve, and/or to
continue serving as a director, and acknowledges that Indemnitee is relying upon
this Agreement in consenting to serve and serving in such capacity.
11. Indemnification Hereunder Not Exclusive. The indemnification and
advancement of expenses provided by this Agreement shall not be deemed exclusive
of any other rights to which Indemnitee may be entitled under any other
agreement, vote of shareholders, as a matter of law, or otherwise.
-5-
<PAGE>
12. Subrogation. If a payment is made under this Agreement, the Company
shall be subrogated to the extent of such payment to all of the right of
recovery of such Indemnitee, who shall execute all papers required and shall do
everything that may be necessary to secure such rights.
13. Severability. Each of the provisions of this Agreement is a separate
and distinct agreement and independent of the others, so that if any provision
thereof shall be held to be invalid or unenforceable for any reason such
invalidity or unenforceability shall not affect the validity or enforceability
of the other provisions hereto.
14. Notice. Any notice, consent, or other communication to be given under
this Agreement by any party to any other party shall be in writing and shall be
either (a) personally delivered, (b) mailed by registered or certified mail,
postage prepaid with return receipt requested, (c) delivered by overnight
express delivery service or same-day local courier service, or (d) delivered by
telex or facsimile transmission to the address set forth beneath the signature
of the parties below, or at such other address as may be designated by the
parties from time to time in accordance with this Section. Notices delivered
personally, by overnight express delivery service, or by local courier service
shall be deemed given as of actual receipt. Mailed notices shall be deemed given
three business days after mailing. Notices delivered by telex or facsimile
transmission shall be deemed upon receipt by the sender of the answer back (in
the case of a telex) or transmission confirmation (in the case of a facsimile
transmission).
15. Governing Law: Binding Effect: Amendment and Termination:Reimbursement.
(a) This Agreement shall be interpreted and enforced in accordance
with the laws of the State of Texas, without giving effect to Texas
principles of conflicts of laws.
(b) This Agreement shall be binding upon Indemnitee and upon the
Company, its successors, and assigns, and shall inure to the benefit of
Indemnitee, his heirs, executors, administrators, personal representation,
and assigns and to the benefit of the Company, its successors, and assigns.
(c) No amendment, modification, termination, or cancellation of this
Agreement shall be effective unless in writing signed by both parties
hereto.
(d) If Indemnitee is required to bring any action to enforce rights or
to collect moneys due under this Agreement and is successful in such
action, the Company shall reimburse Indemnitee for all of Indemnitee's
reasonable fees and expenses in bringing and pursuing such action.
-6-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first above written.
RUSHMORE FINANCIAL GROUP, INC.
By:
-------------------------------
Name:
Its:
Address of Rushmore Financial Group, Inc.
l3355 Noel Rd Ste 650
Dallas, TX 75240
Facsimile: 972-450-6001
/s/ D.M. Rusty Moore, Jr.
-----------------------------
D.M. Rusty Moore, Jr. INDEMNITEE:
Address of Indemnitee:
16231 Amberwood
Dallas, TX 75248
Facsimile: 972-450-6001
--------------------------------
-7-
<PAGE>
EXHIBIT 21
RUSHMORE FINANCIAL GROUP, INC.
SUBSIDIARIES OF THE REGISTRANT
Name of Subsidiary State of Organization
- ------------------ ---------------------
Rushmore Securities Corporation Texas
Rushmore Investment Advisors, Inc. Texas
Rushmore Life Insurance Company Arizona
- ------------------
All subsidiaries are wholly owned and conduct business in their legal
names.
Rushmore Insurance Services, Inc. is owned 100% by D.M. Moore, Jr. and is
treated as an affiliate of the Registrant. See "Business--Insurance Services."
