SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Agreement") made as of this 1st day of February,
2001 between Fiserv Securities, Inc., (the "Secured Party"), with offices at One
Commerce Square, 2005 Market Street, Philadelphia, PA 19103-3212 and First
Montauk Financial Corp., (the "Company") at Parkway 109 Office Center, 328
Newman Springs Road, Red Bank, NJ 07701.
The Amended Financial Agreement dated as of February 1, 2001 (the
"Amended Financial Agreement") executed by the Company and the Secured Party,
which is incorporated by reference hereto, provides, subject to its terms and
conditions, for an advance to the Company for which the Company granted the Lien
provided for in this Agreement,
To induce the Secured Party to enter into, and to make the advances
under, the Amended Financial Agreement and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Company has agreed to pledge, assign and grant a security interest in the
Collateral as security for the Secured Obligations. Accordingly, the Company
agrees with the Secured Party as follows:
1. Definitions and Interpretation.
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1.1 Certain Defined Terms. The following terms shall have the following
meanings under this Agreement:
"Basic Document" shall mean the Amended Financial Agreement and this
Agreement.
"Code" shall mean the Uniform Commercial Code as in effect in the
Commonwealth of Pennsylvania from time to time or, by reason of mandatory
application, any other applicable jurisdiction.
"Collateral" shall mean all right, title and interest of the Company in the
shares of capital stock (the "Stock") held by the Company in the following
subsidiary (the "Subsidiary") of the company: One Million (1,000,000) shares,
which represents all issued and outstanding shares of First Montauk Securities
Corp. (the "Stock").
"Default" shall mean any event requiring a payment by Holding Corp. as
provided in Sections 3, 4 and 6(c)of the Amended Financial Agreement.
"Lien" shall mean, with respect to any property, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of such
property or any agreement to give, or notice of, any of the foregoing.
"Secured Obligations" shall mean any and all obligations of the Company for
the payment of all amounts owed under the Amended Financial Agreement.
1.2 Interpretation. In this Agreement, unless otherwise indicated, the
singular includes the plural and plural the singular; words importing either
gender include the other gender; references to statutes or regulations are to be
construed as including all statutory or regulatory provisions consolidating,
amending or replacing the statute or regulation referred to; references to
"writing" include printing, typing, lithography and other means of reproducing
words in a tangible visible form; the words "including," "includes" and
"include" shall be deemed to be followed by the words "without limitation";
references to articles, sections (or subdivisions of sections), exhibits,
annexes or schedules are to this Agreement; references to agreements and other
contractual instruments shall be deemed to include all subsequent amendments,
extensions and other modifications to such instruments (without, however,
limiting any prohibition on any such amendments, extensions and other
modifications by the terms of any such document); and references to persons or
entities including their respective permitted successors and assigns.
2. Collateral.
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2.1 Grant. As collateral security for the prompt payment in
full when due (whether at stated maturity, by acceleration or otherwise) and
performance of the Secured Obligations, the Company hereby pledges, assigns and
grants to the Secured Party a security interest in all of the Company's right,
title and interest in and to the Collateral.
2.2 Perfection. Concurrently with the execution and delivery
of this Agreement, the Company shall (i) file such financing statements and
other documents in such offices as the Secured Party may reasonably request in
writing to perfect and establish the Lien granted by this Agreement, (ii)
deliver to the attorneys for the Secured Party and pledge to the Secured Party
certificates representing the Stock, and (iii) take all such other actions as
shall be necessary or as the Secured Party may request to perfect and establish
the priority of the Lien granted by this Agreement.
2.3 Rights and Obligations.
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(a) The exercise by the Secured Party of any right, remedy, power or
privilege in respect of this Agreement shall not release the Company from any of
its duties and obligations under the Amended Financial Agreement except to the
extent such obligations are discharged by any remedy under this agreement
utilized by the Secured Party.
(b) No Lien granted by this Agreement in the Company's right, title and
interest in any contract or agreement shall be deemed to be a consent by the
Secured Party to any such contract or agreement.
(c) No reference in this Agreement to proceeds or to the sale or other
disposition of Collateral shall authorize the Company to sell or otherwise
dispose of any Collateral.
(d) The Secured Party shall not be required to take steps necessary to
preserve any rights against prior parties to any part of the Collateral.
3. Representations, Warranties and Covenants. As of the date of this
Agreement, the Company represents, warrants and covenants to the Secured Party
as follows:
3.1 Title. The Company is the sole beneficial owner of the Collateral in
which it purports to grant a Lien pursuant to this Agreement, and such
Collateral is free and clear of all Liens. The Lien granted by this Agreement in
favor of the Secured Party has attached and constitutes a perfected security
interest in all of such Collateral prior to all other Liens.
3.2 Sales and Other Liens. The Company shall not dispose of any Collateral,
create, incur, assume or suffer to exist any Lien upon any Collateral or file or
suffer to be on file or authorize to be filed, in any jurisdiction, any
financing statement or like instrument with respect to all or any part of the
Collateral in which the Secured Party is not named as the sole secured party.
3.3 Principal Place of Business. The Company's chief executive office and
principal place of business is located at the address set forth below.
3.4 Further Assurances. The Company agrees that, from time to time upon the
written request of the Secured Party, the Company will execute and deliver such
further documents and do such other acts and things as the Secured Party may
reasonably request in order fully to effect the purposes of this Agreement.
3.5 Stock and Future Issuances. The Stock constitutes all of the issued and
outstanding shares of capital stock of the Subsidiary. No additional capital
stock of the Subsidiary may be issued, and no transfer of all, or substantially
all, of the assets of the Subsidiary shall be made for less than fair
consideration, until the satisfaction of all obligations of the Company under
the Amended Financial Agreement in full.
4. Remedies.
4.1 Events of Default, Etc. If any Default shall have occurred and be
continuing:
(a) The Secured Party in its discretion may, upon ten business days' prior
written notice to the Company of the time and place, with respect to all or any
part of the Collateral which shall then be or shall thereafter come into the
possession, custody or control of the Secured Party or any of its agents, sell,
or otherwise dispose of all or any part of such Collateral, at such place or
places as the Secured Party deems best, for cash, for credit or for future
delivery (without thereby assuming any credit risk) and at public or private
sale, without demand of performance or notice of intention to effect any such
disposition or of time or place of any such sale (except such notice as is
required above or by applicable statute and cannot be waived), and the Secured
Party or any other person or entity may be the purchaser, lessee or recipient of
any or all of the Collateral so disposed of at any public sale (or, to the
extent permitted by law, at any private sale) and thereafter hold the same
absolutely, free from any claim or right of whatsoever kind, including any right
or equity of redemption (statutory or otherwise), of the Company, any such
demand, notice and right or equity being hereby expressly waived and released.
The Secured Party may, without notice or publication, adjourn any public or
private sale or cause the same to be adjourned from time to time by announcement
at the time and place fixed for the sale, and such sale may be made at any time
or place to which the sale may be so adjourned; and
(b) The Secured Party shall have, and in its discretion may exercise, upon
ten business days' prior written notice to the Company, all of the rights,
remedies, powers and privileges with respect to the Collateral of a secured
party under the Code (whether or not the Code is in effect in the jurisdiction
where such rights, remedies, powers and privileges are asserted) and such
additional rights, remedies, powers and privileges to which a secured party is
entitled under the laws in effect in any jurisdiction where any rights,
remedies, powers and privileges in respect of this Agreement or the Collateral
may be asserted, including the right, to the maximum extent permitted by law, to
exercise all voting, consensual and other powers of ownership pertaining to the
Collateral as if the Secured Party were the sole and absolute owner of the
Collateral (and the Company agrees to take all such action as may be appropriate
to give effect to such right).
The proceeds of, and other realization upon, the Collateral by virtue of the
exercise of remedies under this Section 4.1 shall be applied in accordance with
Section 4.4.
4.2 Deficiency. If the proceeds of, or other realization upon, the
Collateral by virtue of the exercise of remedies under Section 4.1 are
insufficient to cover the costs and expenses of such exercise and the payment in
full of the other Secured Obligations, the Company shall remain liable for any
deficiency.
4.3 Private Sale.
(a) The Secured Party shall incur no liability as a result of the sale,
lease or other disposition of all or any part of the Collateral at any private
sale pursuant to Section 4.1 conducted in a commercially reasonable manner. The
Company hereby waives any claims against the Secured Party arising by reason of
the fact that the price at which the Collateral may have been sold at such a
private sale was less than the price which might have been obtained at a public
sale or was less than the aggregate amount of the Secured Obligations, even if
the Secured Party accepts the first offer received and does not offer the
Collateral to more than one offeree.
(b) The Company recognizes that, by reason of certain prohibitions
contained in the Securities Act of 1933 and applicable state securities laws,
the Secured Party may be compelled, with respect to any sale of all or any part
of the Collateral, to limit purchasers to those who will agree, among other
things, to acquire the Collateral for their own account, for investment and not
with a view to distribution or resale. The Company acknowledges that any such
private sales may be at prices and on terms less favorable to the Secured Party
than those obtainable through a public sale without such restrictions, and,
notwithstanding such circumstances, agree that any such private sale shall be
deemed to have been made in a commercially reasonable manner and that the
Secured Party shall have no obligation to engage in public sales and no
obligation to delay the sale of any Collateral for the period of time necessary
to permit the respective Issuer of such Collateral to register it for public
sale.
4.4 Application of Proceeds. Except as otherwise expressly provided in this
Agreement and except as provided below in this Section 4.4, the proceeds of, or
other realization upon, all or any part of the Collateral by virtue of the
exercise of remedies under Section 4.1 and any other cash at the time held by
the Secured Party under this Agreement, shall be applied by the Secured Party:
First, to the payment of the costs and expenses of such exercise of
remedies, including reasonable out-of-pocket costs and expenses of the Secured
Party, the fees and expenses of its agents and counsel and all other expenses
incurred and advances made by the Secured Party in that connection;
Next, to the payment in full of the remaining Secured Obligations in such
manner as the Secured Party may determine; and
Finally, to the payment to the Company, or its respective successors or
assigns, or as a court of competent jurisdiction may direct, of any surplus then
remaining.
As used in this Section 4, "proceeds" of Collateral shall mean cash,
securities and other property realized in respect of, and distributions in kind
of, Collateral, including any property received under any bankruptcy,
reorganization or other similar proceeding as to the Company or any issuer of,
or account debtor or other obligor on, any of the Collateral.
5. Miscellaneous.
5.1 Waiver. No failure on the part of the Secured Party to exercise and no
delay in exercising, and no course of dealing with respect to, any right,
remedy, power or privilege under this Agreement shall operate as a waiver of
such right, remedy, power or privilege, nor shall any single or partial exercise
of any right, remedy, power or privilege under this Agreement preclude any other
or further exercise of any such right, remedy, power or privilege or the
exercise of any other right, remedy, power or privilege. The rights, remedies,
powers and privileges provided in this Agreement are cumulative and not
exclusive of any rights, remedies, powers and privileges provided by law.
5.2 Notices. All notices and communications to be given under this
Agreement shall be given or made in writing to the intended recipient at the
address specified below or, as to any party, at such other address as shall be
designated by such party in a notice to each other party. Except as otherwise
provided in this Agreement, all such communications shall be deemed to have been
duly given when transmitted by telex or telecopier, delivered to the telegraph
or cable office or personally delivered or, in the case of a mailed notice, upon
receipt, in each case, given or addressed as provided in this Section 5.2:
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
As to the Holding Corp.:
Mr. William Kurinsky, CFO and COO
First Montauk Financial Corp.
328 Newman Springs Road
Parkway 109 Office Center
Red Bank, NJ 07701
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
Victor J. DiGioia
Goldstein & DiGioia, LLP
369 Lexington Avenue
New York, NY 10017
5.3 Expenses, Etc. The Company agrees to pay or to reimburse
the Secured Party for all costs and expenses (including reasonable attorney's
fees and expenses) that may be incurred by the Secured Party in any effort to
enforce any of the provisions of Section 4 or any of the obligations of the
Company in respect of the Collateral or in connection with (a) the preservation
of the Lien of, or the rights of the Secured Party under this Agreement or (b)
any actual or attempted sale, lease, disposition, exchange, collection,
compromise, settlement or other realization in respect of, or care of, the
Collateral, including all such costs and expenses (and reasonable attorney's
fees and expenses) incurred in any bankruptcy, reorganization, workout or other
similar proceeding relating to the Company.
5.4 Amendments, Etc. Any provision of this Agreement may be
modified, supplemented or waived only by an instrument in writing duly executed
by the Company and the Secured Party. Any such modification, supplement or
waiver shall be for such period and subject to such conditions as shall be
specified in the instrument effecting the same and shall be binding upon the
Secured Party, each holder of any of the Secured Obligations and the Company,
and any such waiver shall be effective only in the specific instance and for the
purposes for which given.
5.5 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the Company, the Secured Party and each holder
of any of the Secured Obligations and their respective successors and permitted
assigns. The Company shall not assign or transfer its rights under this
Agreement without the prior written consent of the Secured Party.
5.6 Survival. All representations and warranties made in this
Agreement or in any certificate or other document delivered pursuant to or in
connection with this Agreement shall survive the execution and delivery of this
Agreement or such certificate or other document (as the case may be) or any
deemed repetition of any such representation or warranty.
5.7 Agreements Superseded. This Agreement supersedes all prior
agreements and understandings, written or oral, among the parties with respect
to the subject matter of this Agreement, except for the Amended Financial
Agreement and the Clearing Agreement entered into and between the Secured Party
and the Subsidiary dated May 8, 2000, as amended February 1, 2001.
5.8 Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions of this Agreement, and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
5.9 GOVERNING LAW; SUBMISSION TO JURISDICTION. THIS AGREEMENT
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE
COMMONWEALTH OF PENNSYLVANIA. THE COMPANY HEREBY SUBMITS TO THE NONEXCLUSIVE
JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF
PENNSYLVANIA AND OF ANY PENNSYLVANIA STATE COURT SITTING IN PENNSYLVANIA FOR THE
PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT
OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. THE COMPANY IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION WHICH
IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING
BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A
COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the day and year first above written.
First Montauk Financial Corp. Fiserv Securities, Inc.
By: ____________________________ By: _______________________________
Title: _________________________ Title: ____________________________