FINANCIAL AGREEMENT
This Agreement made this 8th day of May, 2000 between Fiserv
Securities, Inc., ("Clearing Agent"), with offices at One Commerce Square, 2005
Market Street, Philadelphia, PA 19103-3212 and First Montauk Securities Corp.
("Introducing Firm"), with offices at Parkway 109 Office Center, 328 Newman
Springs Road, Red Bank, NJ 07701.
WHEREAS, the Clearing Agent and the Introducing Firm desire to enter into
an agreement coterminous with the Clearing Agreement which provides financial
and lending considerations separate from the Clearing Agreement;
WHEREAS, the Clearing Agent desires to enter into a Clearing Agreement with
the Introducing Firm;
WHEREAS, the Introducing Firm desires to engage the Clearing Agent to
execute transactions, extend margin credit, and have custody and possession of
customer securities and to provide the services contemplated under the Clearing
Agreement;
WHEREAS, the Clearing Agent desires 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;
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. 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. The Clearing Agent shall pay the Introducing Firm 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: Once the Clearing Agreement is
executed, four million dollars ($4,000,000) shall be
payable on the conversion date of the accounts
introduced by the Introducing Firm; and
ii. Subsequent Payments: Three million seven hundred fifty
thousand dollars ($3,750,000) shall be payable 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 trade a day from the
Introducing Firm for that period.
b. Use of Cash Payments. Use of the Cash Payments, as set forth
in Section 3(a), above, from the Clearing Agent to the
Introducing Firm 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; and (iv) any other purpose as mutually
agreed in writing by the parties hereto.
c. Amortization of Cash Payments. Cash Payments to 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,
Introducing Firm 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 set forth in Schedule
"A" attached and incorporated by reference hereto.
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 Introducing Firm 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
Introducing Firm 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 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 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 a sale or merger of the
Introducing Firm, where the Introducing Firm is not the surviving entity, 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,
Introducing Firm 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:
Mr. William Kurinsky, CFO and COO
First Montauk Securities Corp.
328 Newman Springs Road
Parkway 109 Office Center
Red Bank, NJ 07701
As to the Clearing Agent:
Mr. Lawrence E. Donato, President
Fiserv Securities, Inc.
One Commerce Square
2005 Market Street
Philadelphia, PA 19103-3212
With a copy to:
Mr. Scott M. Donnini, VP, General Counsel & Secretary
Fiserv Securities, Inc.
One Commerce Square
2005 Market Street
Philadelphia, PA 19103-3212
Mr. Paul A. Lieberman-General Counsel
First Montauk Securities Corp.
Parkway 109 Office Center
328 Newman Springs Road
Red Bank, NJ 07701
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: ____________________________