AMENDED AND RESTATED
FINANCIAL AGREEMENT
This Amended Financial Agreement made as of this 1st day of February,
2001 between Fiserv Securities, Inc., ("Clearing Agent"), with offices at One
Commerce Square, 0000 Xxxxxx Xxxxxx, Xxxxxxxxxxxx, XX 00000-0000, First Montauk
Securities Corp. ("Introducing Firm"), with offices at Parkway 109 Office
Center, 000 Xxxxxx Xxxxxxx Xxxx, Xxx Xxxx, XX 00000, and First Montauk Financial
Corp. ("Holding Corp."), with offices at Parkway 109 Office Center, 000 Xxxxxx
Xxxxxxx Xxxx, Xxx Xxxx, XX 00000.
WHEREAS, the Clearing Agent and the Introducing Firm entered into a
clearing agreement (the "Clearing Agreement") and a financial agreement (the
"Financial Agreement") each of which was dated May 8, 2000;
WHEREAS, the Financial Agreement was co-terminous with the Clearing
Agreement and provided financial and lending considerations separate from the
Clearing Agreement;
WHEREAS, Introducing Firm is a wholly owned subsidiary of Holding
Corp.;
WHEREAS, the Financial Agreement was intended to provide funds to the
Introducing Firm to assist in the mitigation of costs related to conversion of
the Introducing Firm's Introduced Accounts, defined below, to the Clearing
Agent;
WHEREAS, the parties desire to amend the Financial Agreement to
effectuate the original intent of the parties and have agreed that the terms of
this Amended Financial Agreement shall amend and supersede the terms of the
Financial Agreement;
NOW THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
1. Definitions.
a. Introduced Account. Accounts of the customer of Introducing Firm and
proprietary accounts and any approved subclearing accounts of
the Introducing Firm carried or to be carried by Clearing Agent.
b. Trades. Brokerage transactions cleared through the Clearing Agent
excluding those related to Periodic Investment Plans (P.I.P.s), Systematic
Withdrawal Plan (S.W.P.s), or any other transactions which do not generate a fee
for Clearing Agent.
c. LIBOR rate. London Interbank Offered Rate
2. Term of Agreement.
a. Term. This Agreement shall be co-terminus with the Clearing Agreement
between these parties dated May 8, 2000.
3. Cash Payments by the Clearing Agent.
a. Payment. In consideration of the Introducing Firm entering into the
Clearing Agreement, and for other good and valuable consideration, the Clearing
Agent shall pay, as set forth below, an aggregate amount of seven million, seven
hundred fifty thousand dollars ($7,750,000) comprised of an initial payment and
three subsequent payments (together, the "Cash Payments"), payable as follows:
i. Initial Payment: The payment of four million dollars ($4,000,000) to the
Introducing Firm upon completion of the conversion, receipt of which is hereby
acknowledged, shall be deemed full satisfaction of the initial payment due under
this Amended Financial Agreement; and
ii. Subsequent Payments: Three million seven hundred fifty thousand dollars
($3,750,000) shall be payable to Holding Corp. in three equal installments of
one million two hundred fifty thousand dollars ($1,250,000) upon the anniversary
of the conversion date in each of the first three years of the term of this
Agreement, provided the Clearing Agent receives an average of 900 Trades per day
from the Introducing Firm for the twelve months ending on that anniversary date.
In any year where an installment payment might otherwise be payable pursuant to
this section but for the Introducing Firm's failure to achieve such an average,
the full value of that installment will be withheld until the subsequent twelve
month period in which the Clearing Agent receives an average of 900 trades a day
from the Introducing Firm for that period.
b. Use of Cash Payments. The Cash Payments, as set forth in Section 3(a),
above, received from the Clearing Agent, less any amount payable on account of
Federal, State and Local taxes attributable to the receipt of the cash payments,
shall be used by Holding Corp. and Introducing Firm as set forth in this Section
3(b). The use of the cash payments received by Introducing Firm from Holding
Corp., or received directly from Clearing Agent prior to the date of this
Amended Financial Agreement, shall be limited to (i) payment of conversion
costs; (ii) advertising, marketing and technology investments to build name
brand recognition; (iii) building trading volume and expansion of business; (iv)
the payment of Federal, State and Local taxes attributable to the receipt of the
cash payments directly from Clearing Agent prior to the date of this Amended
Financial Agreement; and (v) any other purpose as mutually agreed in writing by
the parties hereto.
c. Amortization of Cash Payments. The aggregate of Cash Payments, as set
forth in Section 3(a), above, made to the Holding Corp. and the Introducing Firm
will be amortized annually at the greater of the straight line basis remaining
on the contract term or the annual aggregate Trade volume valued at $1.94 per
Trade.
d. Early Termination of Agreement. If the Introducing Firm terminates the
Clearing Agreement prior to the Termination Date of the Clearing Agreement,
other than for an Event of Default by Clearing Agent, Holding Corp. shall pay to
Clearing Agent a base early termination penalty in the amount of one million
dollars ($1,000,000) plus the unamortized portion of the Cash Payments at the
time of the termination as calculated pursuant to Section 3(c), above. The base
early termination penalty of one million dollars ($1,000,000) shall be reduced
beginning in the fifth year of the term of the Clearing Agreement as
incorporated by reference hereto.
i. To Secure the full and timely payment of any and all amounts payable by
Holding Corp. under Section 3(d), Holding Corp. hereby grants a first priority
lien in all of the outstanding shares of Introducing Firm held by Holding Corp.
pursuant to a Security Agreement of same date and annexed hereto as Exhibit "A."
Introducing firm shall not be liable to Clearing Agent for the amounts due
pursuant to this Amended Financial Agreement.
4. Performance of the Introducing Firm.
a. Trade Volume of Introducing Firm. The Introducing Firm shall clear
through the Clearing Agent a minimum of: (i) the aggregate amount of 252,000
Trades per year, or (ii) the aggregate amount of 2,520,000 Trades over ten
years.
b. Penalty for Underperformance. If at the end of ten years the aggregate
Trading volume is less than 2,520,000 Trades cleared, the Holding Corp. shall
pay the Clearing Agent an amount equal to the difference between the actual
aggregate Trades cleared and the minimum number of Trades set forth in Section
4(a) above multiplied by the clearing fee which shall be equal to the aggregate
amount of the Cash Payments actually made to the Holding Corp. by the Clearing
Agent divided by the minimum number of Trades set forth in Section 4(a) above.
5. Lending. The Clearing Agent agrees to consider and evaluate potential lending
for acquisitions if value exists, in the Clearing Agent's sole subjective
opinion, for both Clearing Agent and Introducing Firm. Clearing Agent will lend
an amount not to exceed two million five hundred thousand dollars ($2,500,000)
to the Introducing Firm, subject to the terms of a separate agreement to be
instituted at that time between the parties, under the following conditions:
a. Interest shall accrue and be paid quarterly at the 6 month LIBOR rate
plus 2% and the rate shall adjust quarterly with principal reductions being made
quarterly;
b. The term of the financing shall be coterminous with the Clearing
Agreement;
c. The Clearing Agent shall perform a due diligence on any deal prior to
financing;
d. The Clearing Agent must find the economics of the deal viable and
justifiable in its sole subjective judgement in light of risk factors to both
the Clearing Agent and the Introducing Firm;
e. The Introducing Firm shall provide to the Clearing Agent acceptable
security for the loan amount;
f. Both the Introducing Firm and the acquisition candidate shall have to
demonstrate to the Clearing Agent, in a manner satisfactory to the Clearing
Agent, on-going and future profitability;
g. The Introducing Firm shall contribute a portion in an amount acceptable
to the Clearing Agent of its capital to fund the acquisition;
h. Financing by the Clearing Agent must be approved by its Board of
Directors.
6. Miscellaneous.
a. Modification of Agreement. Except as otherwise provided herein, this
Agreement may be modified only in writing signed by both parties to this
Agreement. Such modification shall not be deemed a cancellation of this
Agreement.
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 of or the personnel of the Introducing Firm, Holding Corp or the
Clearing Agent. No assignment of this Agreement shall be valid unless the
non-assigning party consents to such an assignment in writing, such consent,
however, shall not be unreasonably withheld by 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 the Introducing Firm, Holding Corp.
and the Clearing Agent.
c. Change of Control. In the event of a change in control of the ownership
of the Introducing Firm, which shall be defined as (i) a sale or merger of the
Introducing Firm, where the Introducing Firm is not the surviving entity, or
(ii.) a sale and/or transfer of all or substantially all of the assets of
Introducing Firm such sale and/or transfer being outside of the ordinary course
of business of Introducing Firm, the Clearing Firm shall have, in its sole
subjective discretion, the option to consider such event an early termination of
the Clearing Agreement by the Introducing Firm governed by Section 3(d), above,
which option will expire thirty (30) days following the effective date of such
change in control.
In the event of a change in control of the ownership of the Clearing Agent,
which shall be defined a sale or merger of the Clearing Agent, where Clearing
Agent is not the surviving entity, or in the event that Clearing Agent ceases to
perform clearing services, the Introducing Firm shall have, in its sole
subjective discretion, the option to consider such event an early termination of
the Clearing Agreement by the Clearing Firm which option will expire thirty (30)
days following the effective date of such change in control or ceasing of
clearing services. Upon the exercise of such option by the Introducing Firm,
Holding Corp. will pay to the Clearing Agent the unamortized portion of the Cash
Payments at the time of the termination as calculated pursuant to Section 3(c),
above.
d. 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
this Agreement, shall be subject to the statutory and common law of the
Commonwealth of Pennsylvania.
e. Headings. The headings preceding the sections hereof have been inserted
for convenience and reference only and shall not be construed to affect the
meaning, construction or effect of this Agreement.
f. Validity. If any provision or condition of this Agreement shall be held
to be invalid or unenforceable by any court, 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
was not contained herein.
g. 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
or to limit the exercise of such right, power, remedy or privilege. No single,
partial or other exercise of any such right, power, remedy or privilege shall
preclude the further exercise thereof or the exercise of any other right, power
remedy or privilege.
h. Notices. Any notice or request required or permitted to be given under
this Agreement shall be sufficient if in writing and sent by hand or by
certified mail, in either case, return receipt requested, to the parties at the
following addresses:
As to the Introducing Firm:
Xx. Xxxxxxx Xxxxxxxx, CFO and COO
First Montauk Securities Corp.
000 Xxxxxx Xxxxxxx Xxxx
Parkway 000 Xxxxxx Xxxxxx
Xxx Xxxx, XX 00000
As to the Clearing Agent:
Xx. Xxxxxxxx X. Xxxxxx, President
Fiserv Securities, Inc.
One Commerce Square
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000-0000
As to the Holding Corp.:
Xx. Xxxxxxx Xxxxxxxx, CFO and COO
First Montauk Financial Corp.
000 Xxxxxx Xxxxxxx Xxxx
Parkway 000 Xxxxxx Xxxxxx
Xxx Xxxx, XX 00000
With a copy to:
Xx. Xxxxx X. Xxxxxxx, VP, General Counsel & Secretary
Fiserv Securities, Inc.
One Commerce Square
0000 Xxxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000-0000
Xx. Xxxx X. Xxxxxxxxx-General Counsel
First Montauk Securities Corp.
Parkway 109 Office Center
000 Xxxxxx Xxxxxxx Xxxx
Xxx Xxxx, XX 00000
Xxxxxx X. XxXxxxx
Xxxxxxxxx & XxXxxxx, LLP
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
IN WITNESS WHEREOF, the parties hereto have made and executed this
Agreement as of the date first herein above set forth.
First Montauk Securities Corp. Fiserv Securities, Inc.
By: ____________________________ By: _______________________________
Title: _________________________ Title: ____________________________
First Montauk Financial Corp.
By: ____________________________
Title: _________________________
EXHIBIT "A"
February 1, 2001
Xx. Xxxxxxx Xxxxxxxx, CFO and COO
First Montauk Securities Corp.
000 Xxxxxx Xxxxxxx Xxxx
Parkway 000 Xxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Re: Amendment to the Clearing Agreement
Dear Xx. Xxxxxxxx:
Pursuant to the terms of paragraph 14(b) of the Clearing Agreement
entered into between Fiserv Securities, Inc. and First Montauk Securities Corp.
dated May 8, 2001 (the "Agreement"), this letter shall serve to amend the
Agreement as follows, effective February 1, 2001:
i. replace the reference to "Financial Agreement" in Section 11(b)(iv) and
11(c) of the Agreement, and any other reference to "Financial Agreement" in the
Agreement, with "Amended Financial Agreement."
ii. replace the reference to "Introducing Firm" in Section 11(b)(vi) of the
Agreement with "Holding Corp."; and
iii. change the word "it" in Section 11(c) of the Agreement to "Holding
Corp."
If the terms of this amendment meet with your approval, please sign
both copies of this letter where indicated and return them to my attention in
the enclosed self-addressed stamped envelope. Upon my receipt, I will execute
and return one copy to you for your records.
Any questions you may have regarding this matter can be directed to my
attention at 000-000-0000.
Very truly yours,
Xxxxxxxx X. Xxxxxx
Accepted this 1st day of February, 2001
First Montauk Securities Corp.
By:
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