NIPHIX SYSTEMS
TRADING PARTICIPANT AGREEMENT
TRADING PARTICIPANT AGREEMENT, dated as of August 30, 1997, by and between
NIPHIX INVESTMENTS INC., an Illinois corporation (the "Sponsor") and NICHI
CAPITAL LIMITED, a New York corporation (the "Customer").
The Sponsor is a broker-dealer registered with the Securities and
Exchange Commission ("SEC") under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), a member of the National Association of
Securities Dealers, Inc. ("NASD") and the Sponsor of Niphix Systems (the
"System").
The System is a proprietary electronic broker-dealer trading system
operated by the Sponsor and designed to facilitate trading of securities among
certain customers of the Sponsor, such as the Customer, and the purchase by such
customers of securities offered by issuers who have arranged with the Sponsor to
use the System in connection with offering their securities.
Customer wishes to use the System as a means to purchase and trade
securities offered through the System.
THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties, intending to be
legally bound, agree as follows:
ARTICLE I
Definitions and Rules of Construction
1.1 Certain Definitions. As used in this Agreement, the following terms
shall have the meanings set forth below:
(a) "Business Day" shall mean any day (other than a Saturday or Sunday)
on which (i) the New York Stock Exchange is open and (ii) banks are
not authorized or required to close in the City of New York.
(b) "Business Hours" shall mean the hours during which the System is
operated, which, unless changed by the Sponsor upon prior written
notice to issuers and Trading Participants, shall be from 8:00 a.m.
to 5:00 p.m. Central Time each Business Day.
(c) "Clearing Broker" shall mean the clearing broker-dealer with which
the Sponsor has an agreement pursuant to which the clearing
broker-dealer carries and provides clearing services for the
accounts of Trading Participants.
(d) "DTC" shall mean the Depository Trust Company, a registered clearing
agency under Section 17A(b)(1) of the Exchange Act, or any successor
thereto.
(e) "Issuers" shall mean those business entities that have entered into
agreements with the Sponsor providing for the posting on the System
of Issuer Information in connection with the offering of securities
to the issued by the business entity.
(f) "Issuer Information" shall mean the Offering Documents and any Other
Issuer Information posted by Issuers on the System.
(g) "Offering Documents" shall mean such documents as are posted by
Issuers on the System and relate to the offering of securities by
Issuers through the System, including, without limitation,
registration statements and Regulation A offering circulars filed by
Issuers with the SEC under the Securities Act, and any prospectus,
offering circular, offering memorandum, purchase or sales agreement
or subscription agreement or related documents, and any amendments
or supplements thereto.
(h) "Other Issuer Information" shall mean such information other than
the Offering Documents as is posted by Issuers on the System,
including, without limitation, reports, statements or other
documents filed or required to be filed by Issuers with the SEC
under the Securities Act or the Exchange Act or the rules and
regulations of the SEC thereunder and amendments or supplements
thereto, press, news or media releases disseminated by the Issuer,
and annual, quarterly or other reports or other communications of
the Issuer to holders of its securities.
(i) "Securities Act" shall mean the Securities Act of 1933, as amended.
(j) "System Book" shall mean, at any time during the Sponsor's operation
of the System, the listing of every order for the purchase or sale
of a security entered by a Trading Participant and accepted into the
System for potential matching and execution.
(k) "System Handbook" shall mean the compilation of the policies and
procedures applicable to use of the System by Issuers and Trading
Participants, as adopted and modified by the Sponsor from time to
time.
(l) "Trading Participants" shall mean those customers of the Sponsor,
including the Customer, who have entered into Trading Participant or
other agreements with the Sponsor similar to this Agreement
providing for access to and use of the System to purchase and sell
securities.
1.2 Rules of Construction. For all purposes of this Agreement except as
otherwise expressly provided or unless the context otherwise requires:
(a) Each use in this Agreement of a singular pronoun shall be deemed to
include references to the plural and vice versa.
(b) Article and Section headings are for convenience of reference only
and shall not affect the construction of this Agreement.
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limited to: (i) buying and selling securities comprising all or part
of the Customer's Account; (ii) receiving and transferring money,
securities and other property; (iii) making, giving and receiving
demands, statements, notices and other [illegible]
modifying, waiving and terminating this Agreement and other
agreements.
3.2 Purchase and Sale Orders.
(a) System Orders. All orders by the Customer for the purchase or sale
of securities shall be executed only through entry into and matching
[illegible] countervailing orders by the System. The Customer
acknowledges that the Sponsor provides no assurance that orders
entered into the System will be matched, executed or settled.
(b) Firm Orders. All orders entered by the Customer into the System
shall be firm orders with a set price and size and shall not be mere
indications of interest. The Customer may cancel or modify an order
previously placed in the System at any time before such order is
matched. The Customer may limit an order based on minimum trade
size, timed release and timed expiration; provided, however, all
orders must always have a set price and size. All unexecuted orders
will expire at the end of the seventh calendar day after the order
was accepted by the System.
(c) Order Entry and Acceptance. The Customer shall access the System and
enter all orders in compliance with the applicable provisions of the
System Handbook. No order will be accepted by the Sponsor for entry
into the System unless, at the time the order is entered, the
Customer's Account includes sufficient funds or securities to
immediately settle the purchase or sale transaction that would be
executed if the order is accepted into and matched through the
System.
(d) Order Execution. Orders of the Customer entered into and accepted by
the Sponsor through the System, will be accessible for viewing by
all Trading Participants as part of the System Book displayed by the
System during its operation. The Customer's orders included in the
System Book will be executed upon being matched by the entry into
and acceptance by the System of a countervailing order. Matching
orders that do not correspond as to the number of securities to be
purchased or sold will be executed to the extent of the greatest
number of securities possible (i.e., the order for the greater
number of securities will be partially filled). Matching orders will
not result in an executed transaction if, upon verification before
execution, the Customer's Account or the account of the counterparty
Trading Participant lacks sufficient funds or securities to
immediately settle the transaction.
(e) Confirmations. Upon matching and execution of an order, the Customer
will receive via electronic communication through the System an
anonymous confirmation of the transaction, disclosing, to the extent
required, the identity, price number of shares or units (or
principal amount) of the security purchase or sold and the date and
time of the transaction. If the transaction was a partial execution
of the Customer's Order, the confirmation will also describe the
Customer's order remaining in the System Book. The Sponsor shall
transmit to the Customer by facsimile a copy of the confirmation
delivered to the Customer electronically through the System.
3.3 Trade Settlement. Each transaction resulting from the execution of the
Customer's orders through the System shall be settled immediately
following confirmation of the transaction. The Customer agrees to have
sufficient funds available in the Customer's Account to settle all
purchase transactions by immediate payment for the securities purchased.
The Customer agrees to have sufficient securities available in the
Customer's Account to settle all sale transactions by immediate delivery
of the securities sold. Settlement will be effected by the Clearing
Broker through delivery of securities against payment of the purchase
price. Deliveries and payments will be effected through accounting
entries made in the Clearing Broker's records of the Customer's Account
and the account of the other Trading Participant who is the counterparty
to the transaction. The Customer acknowledges and agrees that any
failure by it to deliver securities in good, legal form or to make
timely payment in settlement of transactions executed through the System
may result in termination by the Sponsor of this Agreement and losses
for which the Customer shall be liable. The Customer shall receive
prompt notice by electronic delivery through the System of any nature in
the settlement of a transaction resulting from the execution by the
System of an order of the Customer. If the Sponsor is unable to settle a
purchase or sale transaction of the Customer by reason of the Customer's
failure to make payment or deliver securities in good form, the Customer
authorizes the Sponsor to take steps necessary to complete or cancel the
transaction to minimize any loss, and the Customer agrees to reimburse
the Sponsor for any and all costs, losses or liabilities incurred by the
Sponsor, including attorneys fees.
3.4 Ownership of Securities Through DTC Book Entry. The Customer
acknowledges and agrees that securities offered for purchase and sale
and purchased and sold through the System will be represented by global
securities in fully registered form, deposited with a custodian for and
registered in the name of nominee of DTC. Beneficial interests in these
securities will be shown on, and transfers thereof will be effected
through, records maintained by DTC and its participants, including the
Clearing Broker. The ownership interest and transfer of DTC are
recorded on the records of DTC's participants. All interests in
such securities will be subject to the procedures and requirements of
DTC. The laws of some states require that certain persons take physical
delivery in certificated form of securities that they own. Consequently,
the ability to transfer beneficial interests in global securities held
by or for DTC to such Persons will be limited to that extent. Because
DTC can only on behalf of its participants, which in turn act on behalf
of indirect participants and certain banks, the ability of a person
having beneficial interest in a global security to pledge such interests
to persons or entities that do not participate in the DTC system, or
otherwise take actions in respect of such interests, may be affected by
the lack of a physical certificate evidencing such interests. The
Customer acknowledges and agrees that care of securities in the
Customer's Account will be the sole responsibility of the Clearing
Broker, DTC and the Issuer, as applicable, and that the Sponsor shall
have no responsibility in this regard.
5.3 No Restricted Securities. The Customer shall not hold restricted
securities (as that term is defined in SEC Rule 144 under the Securities
Act) in the Customer's Account or offer to purchase or sell restricted
securities through the System.
[illegible] Notices to Sponsor. The Customer shall immediately notify the
Sponsor and shall immediately [illegible] through the System upon the
occurrence of any of the following:
(a) any administrative proceeding involving or investigation of the
Customer and relating to the Customer's use of the System (whether
public, private, formal or informal) is commenced or threatened; and
(b) Any representation or warranty made by the Customer in this
Agreement becomes untrue.
ARTICLE VI
Conditions to Sponsor's Obligations
The Obligations of the Sponsor under this Agreement are subject to the
following conditions:
6.1 Representation and Warranties. The Customer's representations and
warranties set forth in Article IV of this Agreement are and shall be true
and accurate at the time this Agreement is executed and during its entire
term.
6.2 No Adverse Regulatory Action. The Performance by the parties of their
respective obligations under this Agreement will not, in the reasonable
opinion of the Sponsor, result in any adverse action by any regulatory
authority with respect to the Sponsor.
6.3 Account with Clearing Broker. The Clearing Broker shall have approved the
Customer and agreed to carry the Customer's account.
6.4 No Breach of Covenants. The Customer shall not have breached any of its
covenants under this Agreement.
ARTICLE VII
Customer Acknowledgments
The Customer acknowledges and agrees with the Sponsor as follows:
7.1 Certain Information about the Sponsor and the System. Niphix Systems is
designed to facilitate the offering and sale of securities by Issuers and
the trading of securities among Trading Participants. Through its
agreements with Issuers, the Sponsor, as operator of the System, allows
Issuers to make available through the System information relating to them
and their securities [illegible] through the System. This information is
only that of the Issuer furnishing it. The Sponsor does not independently
verify the accuracy or adequacy of such information. Issuers and Trading
Participants are responsible for their own decisions to sell or purchase
or offer to sell or purchase securities through the System and for
compliance with applicable federal and state securities laws.
7.2 No Recommendation of Penny Stocks. The Sponsor is not required, by this
Agreement or otherwise, to recommend, and it [illegible] not make any
recommendation regarding, the purchase or sale of any security if the
security would, at the time of any such recommendation, constitute a
"penny stock" as defined in Section 3(51)(A) of the Exchange Act.
7.3 No Guarantee of Trades. The Sponsor does not guarantee or provide any
assurance of the development or liquidity of any market for securities
offered, sold or traded through the System or of the matching, execution
or settlement of any order for the purchase or sale of any security placed
through the System.
7.4 Suspension of Offering or Trading. The Sponsor may, in its discretion,
suspend the display of Issuer Information, the trading of securities among
Trading Participants, and/or any other aspect of operation of the System
if necessary or appropriate to comply with applicable laws and
regulations, to avoid potential liability of the Sponsor, to otherwise
preserve the integrity of the System or if such suspension is deemed
appropriate for any reason.
7.5 No Advice. The Sponsor does not provide the Customer with any tax, legal
or accounting advice.
7.6 Recorded Telephone Calls. The Customer consents to the Sponsor recording
telephone calls between the Customer and the Sponsor.
7.7 Receipt of Issuer Information. The Customer consents to the disclosure by
the Sponsor and the Clearing Broker of the Customer's name to issuers of
securities held in the Customer's account to facilitate the Customer's
direct receipt of information distributed by such issuers to their
security holders.
ARTICLE VIII
Representations and Warranties of the Sponsor
The Sponsor Represents and warrants to the Customer as follows:
8.1 Corporate Existence and Power. The Sponsor has been duly incorporated and
is validly existing as a corporation in good standing under the laws of
the State of Illinois with the corporate power and authority to execute,
deliver and perform its obligations under this Agreement.
8.2 Broker-Dealer Status. The Sponsor is a broker-dealer registered with the
SEC under the Exchange Act and with appropriate state securities
administrators under applicable state laws and is a member of the NASD.
8.3 Authorization and Enforceability. The execution, delivery and performance
by the Sponsor of this Agreement and the other agreements contemplated
hereby have been duly authorized by all requisite corporate action and
constitute the legal, valid and
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of any filings or papers served upon the Customer in connection with such
proceedings, it being understood that the Indemnified Party shall bear its
own costs incurred in connection with any participation by the Indemnified
Party or its counsel in the contests [illegible] Section 10.3.
ARTICLE XI
Term and Termination
11.1 Term. This Agreement shall remain in effect until terminated (i) by the
written agreement between the Customer and the Sponsor, (ii) upon ten
Business Days' prior written notice by the Sponsor to the Customer, or
(iii) immediately upon the giving of notice by the Sponsor to the Customer
following an Event of Termination as defined in Section 11.2.
11.2 Event of Termination. "Event of Termination" shall mean the occurrence of
any of the following:
(a) any representation or warranty made or deemed made by the Customer
in connection with this Agreement has been determined by the Sponsor
to have been false, incorrect or misleading in any material respect
when delivered;
(b) any breach by the Customer of any covenant, agreement, condition,
term or other provision of this Agreement not cured by the tenth
Business Day following notice of such breach by the Sponsor to the
Customer; or
(c)(i)a court having jurisdiction in the premises shall enter a decree or
order for relief in respect of the Customer in an involuntary case
under any applicable bankruptcy, insolvency or other similar law now
or hereafter in effect, or appointing a receiver, liquidator,
assignee, custodian, trustee, sequestrator (or similar official) of
the Customer or for any substantial party of its property, or
ordering the winding-up or liquidation of its affairs and such
decree or order shall remain unstayed and in effect for a period of
90 consecutive days, or (ii) the customer shall commence a voluntary
case under any applicable bankruptcy, insolvency or other similar
law now or hereafter in effect, shall consent to the entry of an
order for relief in an involuntary case under any such law, or shall
consent to the appointment of or taking possession by a receiver,
liquidator, assignee, trustee, custodian, sequestrator (or other
similar official) of the Customer or of any substantial part of its
property, or shall make any general assignment for the benefit of
creditors, or shall fail generally to pay its debts as they become
due.
ARTICLE XII
Miscellaneous
12.1 [illegible] Waiver; Modifications in Writing. No failure or delay on the
part of the Sponsor in exercising any right, power or remedy hereunder
shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right, power or remedy preclude any other or future
exercise thereof for the exercise of any other right, power or remedy. The
remedies provided for herein are cumulative and are not exclusive of any
remedies that may be available to the Sponsor, at law or in equity. No
amendment, modification, supplement, termination or waiver of this
Agreement, shall be effective unless the same shall be in writing and
signed by the Customer and the Sponsor. Any waiver of any provision of
this Agreement, and any consent to any departure by another party to this
Agreement from the terms of any provision of this Agreement, shall be
effective only in the specific instance
1. Arbitration is final and binding on the parties.
2. The parties are waiving their right to seek remedies in court,
including the right to jury trial.
3. Prearbitration discovery is generally more limited than and different
from court procedures.
4. The arbitrators' award is not required to include factual findings or
legal reasoning and any party's right to appeal or to seek
modification of rulings by the arbitrators is strictly limited.
5. The panel of arbitrators will typically include a minority of
arbitrators who were or are affiliated with the securities industry.
No person shall bring a punitive or certified class to arbitration, nor
seek to enforce any predispute arbitration agreement against any person who has
initiated in court a punitive class action; or who is a member of a punitive
class who has not opted out of the class with respect to any claims encompassed
by the punitive class action until: (i) the class certification is denied; or
(ii) the class is decertified; or (iii) the customer is excluded from the class
by the court. Such forbearance to enforce an agreement to arbitrator shall not
constitute a waiver of any rights under this Agreement except to the extent
stated herein.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the
date first above written.
NICHI CAPITAL LIMITED
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Customer
By: /s/ Wande Agunloye
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Its: President
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NIPHIX INVESTMENTS INC.
Sponsor
By: /s/ Nimish Gandhi
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Nimish Gandhi
Its: President
APPENDIX A
Niphix Systems
INVESTOR PARTICIPATION CHARGES: Institutional $3,500/Individual $1,000
INVESTOR ANNUAL FEE: $50
COMMISSION SCHEDULE:
Initial Offering Transactions: $18 per trade
After Market Transaction:
(all charges are per trade)
$24 within 7 days
$33 between 8 and 15 days
$38 between 16 and 30 days
$41 between 31 and 60 days
$43 between 61 and 90 days
$44 after 90 days