EXHIBIT 10.3
SECURITY AGREEMENT
THIS SECURITY AGREEMENT, dated as of
September 21, 2004 (the “Agreement”), is made and given
by VIE FINANCIAL GROUP, INC, a Delaware corporation
(“Vie”), the “Grantor”), to PIPER JAFFRAY
COMPANIES, a Minnesota corporation (the “Secured
Party”).
RECITALS
A. On the date hereof, Vie and the
Secured Party are entering into that certain LLC Membership
Interest Purchase Agreement (the “Purchase Agreement”)
pursuant to which Vie will sell all of its issued and outstanding
membership interests in Vie Securities, LLC, a Delaware limited
liability company and wholly-owned subsidiary of Vie (“Vie
Securities”).
B. In connection with the
transactions contemplated by the Purchase Agreement, Vie will or
may become, or is now, indebted to the Secured Party under that
certain promissory note in the amount of $1,000,000, dated
September 21, 2004 (the “Note”), pursuant to which,
among other things, all indebtedness under the Note will be
forgiven upon consummation of the sale of Vie Securities to the
Secured Party (“Consummation of the
Transaction”).
B. The Secured Party has required
the Grantor to execute this Agreement and the Grantor has agreed to
do so.
C. The Grantor finds it
advantageous, desirable and in its best interests to comply with
the requirement that it execute and deliver this Agreement to the
Secured Party.
NOW, THEREFORE, in consideration of
the premises and in order to induce the Secured Party to extend
credit accommodations to Vie, the Grantor hereby agrees with the
Secured Party for the Secured Party’s benefit as
follows:
Section 1. Defined Terms
.
1(a) As used in this Agreement, the
following terms shall have the meanings indicated:
“ Collatera l”
shall mean all property and rights in property now owned or
hereafter at any time acquired by the Grantor in or upon which a
Security Interest is granted to the Secured Party by the Grantor
under this Agreement.
“ Event of Default
” shall have the meaning given to such term in Section
21.
“ Financing Statement
” shall have the meaning given to such term in Section
4.
“ General Intangibles
” shall mean any personal property arising with respect to
the Investment Property and the Toronto Stock Exchange Arbitration
Claim, including things in action, contract rights, payment
intangibles, software, corporate and other business
records, inventions, designs,
patents, patent applications, service marks, trademarks,
tradenames, trade secrets, internet domain names, engineering
drawings, good will, registrations, copyrights, licenses,
franchises, customer lists, tax refund claims, royalties, licensing
and product rights, rights to the retrieval from third parties of
electronically processed and recorded data and all rights to
payment resulting from an order of any court.
“ Investment Property
” shall mean a security, whether certificated or
uncertificated, a security entitlement, a securities account and
all financial assets therein, a commodity contract or a commodity
account held by Vie, except for (i) any equity interest in Vie
Securities, LLC; and (ii) any securities, whether certificated or
uncertificated, a security entitlements, a securities accounts and
all financial assets in Vie Securities, LLC.
“ Lien ” shall
mean any security interest, mortgage, pledge, lien, charge,
encumbrance, title retention agreement or analogous instrument or
device (including the interest of the lessors under capitalized
leases), in, of or on any assets or properties of the Person
referred to.
“ Note ” shall
have the meaning indicated in Recital A.
“ Obligations ”
shall mean (a) all principal of, and interest on, the Note and any
extension, renewal or replacement thereof, (b) all liabilities of
the Grantor under this Agreement, and (c) in all of the foregoing
cases whether due or to become due, and whether now existing or
hereafter arising or incurred.
“ Permitted Liens
” shall mean (i) Liens for current taxes not yet due and
payable or being contested in good faith in appropriate
proceedings, (ii) Liens in respect of pledges or deposits under
workers’ compensation laws.
“ Person ” shall
mean any individual, corporation, partnership, limited partnership,
limited liability company, joint venture, firm, association, trust,
unincorporated organization, government or governmental agency or
political subdivision or any other entity, whether acting in an
individual, fiduciary or other capacity.
“ Security Interest
” shall have the meaning given such term in Section
2.
“ Senior Creditors
” shall mean (a) RGC International Investors, LDC, and (b)
Optimark Innovations, Inc.
“ Senior Creditors’
Security Interests ” shall mean the Liens granted in
favor of the Senior Creditors by the Grantor.
“ Toronto Stock Exchange
Arbitration Claim ” shall mean that certain arbitration
claim filed by Ashton Technology Canada, Inc.
(“Ashton”), against the Toronto Stock Exchange on June
11, 2003, seeking damages of U.S. $30 million for breach of
contract
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relating to the written agreement
between Ashton and the Toronto Stock Exchange for the integration
of Ashton’s eVWAP trade match software, equipment and
communications facilities with the Toronto Stock Exchange’s
continuous auction market for securities.
1(b) All other terms used in this
Agreement which are not specifically defined herein shall have the
meaning assigned to such terms in Article 9 of the Uniform
Commercial Code as in effect in the State of Delaware.
1(c) Unless the context of this
Agreement otherwise clearly requires, references to the plural
include the singular, the singular, the plural and “or”
has the inclusive meaning represented by the phrase
“and/or.” The words “include,”
“includes” and “including” shall be deemed
to be followed by the phrase “without limitation.” The
words “hereof,” “herein,”
“hereunder” and similar terms in this Agreement refer
to this Agreement as a whole and not to any particular provision of
this Agreement. References to Sections are references to Sections
in this Security Agreement unless otherwise provided.
Section 2. Grant of Security
Interes t. As security for the payment and performance of all
of the Obligations, the Grantor hereby grants to the Secured Party
a security interest (the “Security Interest”) in all of
the Grantor’s right, title, and interest in and to the
following, whether now or hereafter owned, existing, arising or
acquired and wherever located:
2(a) All General
Intangibles.
2(b) All Investment
Property.
2(c) All proceeds received from
Ashton and interests in the Toronto Stock Exchange Arbitration
Claim.
2(d) To the extent not otherwise
included in the foregoing, (i) the proceeds of all insurance on any
of the foregoing; and (ii) all accessions and additions to, parts
and appurtenances of, substitutions for and replacements of any of
the foregoing.
Section 3. Secured Party Not
Liable . Anything herein to the contrary notwithstanding, the
Secured Party shall have no obligation or liability under General
Intangibles, the Toronto Stock Exchange Arbitration Claim and other
items included in the Collateral by reason of this Agreement, nor
shall the Secured Party be obligated to perform any of the
obligations or duties of the Grantor thereunder or to take any
action to collect or enforce any claim for payment assigned
hereunder.
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Section 4. Title to Toronto Stock
Exchange Arbitration Claim; Title to Collateral; Assets Available
for Security Interest . The Grantor will not, and will cause
Ashton not to, transfer its interest in the Toronto Stock Exchange
Arbitration Claim except to the Grantor, nor permit any Lien
against the Toronto Stock Exchange Arbitration Claim except in
favor of the Secured Party or the Senior Creditors. The Grantor has
title to 65% of the equity interests of Electronic Market Center,
Inc., 93% of the equity interests of Universal Trading Technologies
Corporation, and will have title to all other Collateral hereafter
acquired or arising at the time it acquires rights in such other
Collateral and, as long as the Security Interest may remain
outstanding, will maintain title to each item of Collateral in
which it has rights (including the proceeds and products thereof),
free and clear of all Liens except the Security Interest, the
Senior Creditors’ Security Interests and Permitted Liens. The
Grantor warrants and represents that after Consummation of the
Transaction (and excluding the proceeds thereof) the assets of Vie
shall consist of (i) the Toronto Stock Exchange Arbitration Claim,
(ii) equity interests in subsidiaries owned by Vie, (iii) an
interest in the Kingsway-Ashton Asia Ltd joint venture, (iv) a
$300,000 certificate of deposit collaterizing a letter of credit
relating to obligations in connection with the lease of real
property in Philadelphia, which lease has a current net obligation
of approximately $600,000, (v) cash of $150,000 to be received from
Vie Securities each month as allowed by the Purchase Agreement, and
(v) other property and assets (other than prepaid expenses) having,
an aggregate fair market value of less than $250,000. The Grantor
will defend its Collateral against all claims or demands of all
Persons (other than the Secured Party and the Senior Creditors)
claiming the Collateral or any interest therein. As of the date of
execution of this Security Agreement, no effective financing
statement or other similar document used to perfect and preserve a
security interest under the laws of the Commonwealth of
Pennsylvania, the State of New York or the State of Delaware (a
“Financing Statement”) covering all or any part of the
Collateral is on file in any recording office, except such as may
have been filed (a) in favor of the Secured Party relating to this
Agreement, or (b) disclosed on Schedule 1 attached
hereto.
Section 5. Disposition of
Collateral . The Grantor will not sell, lease or otherwise
dispose of, or discount or factor with or without recourse, any
Collateral.
Section 6. [Intentionally
omitted.]
Section 7. Names, Offices,
Locations, Jurisdiction of Organization . The Grantor’s
legal names (as set forth in its constituent documents filed with
the appropriate governmental official or agency) are as set forth
in the opening paragraph hereof. The jurisdiction of incorporation
of the Grantor is the state of Delaware, and the organizational
numbers of the Grantor is set forth on the signature page of this
Agreement. The Grantor will not change its name or its corporate
structure (including without limitation, its jurisdiction of
organization) unless the Secured Party has been given at least 30
days prior written notice thereof and the Grantor has executed and
delivered to the Secured Party such Financing Statements and other
instruments required or appropriate to continue the perfection of
the Security Interest.
Section 8. [Intentionally
omitted.]
Section 9. [Intentionally
omitted.]
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Section 10. Further Assurances;
Attorney-in-Fact .
10(a) The Grantor agrees that from
time to time, at its expense, it will promptly execute and deliver
all further instruments and documents, and take all further action,
that may be necessary or that the Secured Party may reasonably
request, in order to perfect and protect the Security Interest
granted or purported to be granted hereby or to enable the Secured
Party to exercise and enforce its rights and remedies hereunder
with respect to any Collateral (but any failure to request or
assure that the Grantor execute and deliver such instrument or
documents or to take such action shall not affect or impair the
validity, sufficiency or enforceability of this Agreement and the
Security Interest, regardless of whether any such item was or was
not executed and delivered or action taken in a similar context or
on a prior occasion).
10(b) The Grantor hereby authorizes
the Secured Party to file one or more Financing Statements or
continuation statements in respect thereof, and amendments thereto,
relating to all or any part of the Collateral without the signature
of the Grantor where permitted by law. The Grantor
irrevo
