<PAGE>
FIRST MONTAUK FINANCIAL CORP.
Parkway 109 Office Center
328 Newman Springs Road, Red Bank, New Jersey 07701
PROXY STATEMENT
Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the registrant: [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material pursuant to Rule 14a-11(c) or Rule 14a-12
First Montauk Financial Corp.
- - - - --------------------------------------------------------------------------------
(Name of the Corporation as Specified in Charter)
William J. Kurinsky, Secretary
- - - - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (check the appropriate box)
[X] No Fee Required
[ ] Fee computed on table below per Exchange Act
Rules 14a-6(i)(1) and 0-11
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
33 pursuant to Exchange Act Rule 0-11:
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(7) Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or form or schedule and the date of filing.
(1) Amount previously paid:
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<PAGE>
FIRST MONTAUK FINANCIAL CORP.
Parkway 109 Office Center
328 Newman Springs Road, Red Bank, New Jersey 07701
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held on June 25, 1999
To the Shareholders of
FIRST MONTAUK FINANCIAL CORP.
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of FIRST
MONTAUK FINANCIAL CORP. (the "Corporation" or "Company") will be held at the
principal executive offices of the Company, located at Parkway 109 Office
Center, 328 Newman Springs Road, Red Bank, New Jersey 07701 on Friday, June 25,
1999 at 10:00 a.m., New Jersey time, for the purpose of electing two Class I
Directors to the Corporation's Board of Directors to hold office for a period of
three years or until their successors are duly elected and qualified and to
transact such other business as may properly be brought before the meeting or
any adjournment thereof.
The close of business on May 21, 1999 has been fixed as the record date for
the determination of shareholders entitled to notice of, and to vote at, the
Annual Meeting and any adjournment thereof.
You are cordially invited to attend the Annual Meeting. Whether or not you
plan to attend, please complete, date and sign the accompanying proxy and return
it promptly in the enclosed envelope to assure that your shares are represented
at the Annual Meeting. If you do attend, you may revoke any prior proxy and vote
your shares in person if you wish to do so. Any prior proxy will automatically
be revoked if you execute the accompanying proxy or if you notify the Secretary
of the Corporation, in writing, prior to the Annual Meeting of Shareholders.
By Order of the Board of Directors
WILLIAM J. KURINSKY, Secretary
Dated: May 24, 1999
WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING, PLEASE COMPLETE,
DATE AND SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE
IN ORDER TO ASSURE REPRESENTATION OF YOUR SHARES. NO POSTAGE NEED BE AFFIXED IF
MAILED IN THE UNITED STATES.
<PAGE>
FIRST MONTAUK FINANCIAL CORP.
Parkway 109 Office Center
328 Newman Springs Road, Red Bank, New Jersey 07701
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 25, 1999
This Proxy Statement and the accompanying form of proxy have been mailed on
or about May 24, 1999 to the holders of the Corporation's Common Stock of record
("Record Date") on May 21, 1999 of FIRST MONTAUK FINANCIAL CORP., a New Jersey
corporation (the "Corporation" or "Company") in connection with the solicitation
of proxies by the Board of Directors of the Corporation for use at the Annual
Meeting of Shareholders to be held on June 25, 1999 and at any adjournment
thereof.
SOLICITATION, VOTING AND REVOCABILITY OF PROXIES
Shares of the Corporation's Common Stock represented by an effective proxy
in the accompanying form will, unless contrary instructions are specified in the
proxy, be voted as follows: FOR the election of the two persons nominated by the
Board of Directors as Class I Directors; and FOR such other matters as may be
properly brought before the meeting and for which the persons named on the
enclosed proxies determine, in their sole discretion to vote in favor.
Any such proxy may be revoked at any time before it is voted. A shareholder
may revoke his or her proxy by notifying the Secretary of the Corporation either
in writing prior to the Annual Meeting, in person at the Annual Meeting, by
submitting a proxy bearing a later date or by voting in person at the Annual
Meeting. Directors shall be elected by an affirmative vote of a plurality of the
votes cast at the meeting. A shareholder voting through a proxy who abstains
with respect to the election of Directors is considered to be present and
entitled to vote on the election of Directors at the meeting, and is in effect a
negative vote, but a shareholder (including a broker) who does not give
authority to a proxy to vote, or withholds authority to vote, on the election of
Directors shall not be considered present and entitled to vote on the election
of Directors.
The Corporation will bear the cost of the solicitation of proxies by the
Board of Directors. The Board of Directors may use the services of its executive
officers and certain directors to solicit proxies from shareholders in person
and by mail, telegram and telephone. Arrangements may also be made with brokers,
fiduciaries, custodians, and nominees to send proxies, proxy statements and
other material to the beneficial owners of the Corporation's Common Stock held
of record by such persons, and the Corporation may reimburse them for reasonable
out-of-pocket expenses incurred by them in so doing.
<PAGE>
2
The Annual Report to Shareholders for the fiscal year ended December 31,
1998, including financial statements, accompanies this Proxy Statement.
The principal executive offices of the Corporation are located at Parkway
109 Office Center, 328 Newman Springs Road, Red Bank, New Jersey 07701; the
Corporation's telephone number is (732) 842-4700.
Independent Public Accountants
The Board of Directors of the Corporation has selected Schneider, Ehrlich &
Associates, LLP, Certified Public Accountants, as independent accountants of the
Corporation for the fiscal year ending December 31, 1998. Shareholders are not
being asked to approve such selection because such approval is not required
under the Corporation's Bylaws or the Business Corporation Act of the State of
New Jersey. The audit services provided by Schneider, Ehrlich & Associates, LLP,
consists of examination of financial statements, services relative to filings
with the Securities and Exchange Commission, and consultation in regard to
various accounting matters. Representatives of Schneider, Ehrlich & Associates,
LLP, are expected to be present at the Annual Meeting, will have the opportunity
to make a statement if they so desire, and will be available to respond to
appropriate questions.
VOTING SECURITIES AND SECURITY OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The securities entitled to vote at the Annual Meeting are the Corporation's
common stock, no par value per share (the "Common Stock"). The presence, in
person or by proxy, of a majority of shares entitled to vote will constitute a
quorum for the meeting. Each share of Common Stock entitles its holder to one
vote on each matter submitted to shareholders. The close of business on May 21,
1999 has been fixed as the Record Date for the determination of the Common Stock
shareholders entitled to notice of and to vote at the meeting and any
adjournment thereof. As of May 21, 1999, there were 9,900,343 shares of Common
Stock issued and outstanding. Voting of the shares of Common Stock is on a
non-cumulative basis.
The following table sets forth certain information as of May 21, 1999, with
respect to each Director, each nominee for Director, each executive officer, all
Directors and Officers as a group and the persons (including any "group" as that
term is used in Section 13(d)(3) of the Securities Exchange Act of 1934, as
amended) known by the Corporation to be the beneficial owner of more than five
(5%) percent of any class of the Corporation's voting securities.
<PAGE>
3
Amount and Percentage
Directors, Officers of Beneficial Ownership (1)
and 5% Shareholders (1) Number of Shares Percent
- - - - ----------------------- ---------------- -------
Herbert Kurinsky 391,518(2) 3.8%
Parkway 109 Office Center
328 Newman Springs Road
Red Bank, NJ 07701
William J. Kurinsky 1,773,423(3) 16.6%
Parkway 109 Office Center
328 Newman Springs Road
Red Bank, NJ 07701
Robert I. Rabinowitz, Esq. 286,999(4) 2.8%
Parkway 109 Office Center
328 Newman Springs Road
Red Bank, NJ 07701
Ward R. Jones 90,000(5) *
7 Leda Lane
Guilderland, NY 12084
Norma Doxey 42,400(6) *
Parkway 109 Office Center
328 Newman Springs Road
Red Bank, NJ 07701
David I. Portman 179,800(7) 1.8%
300 Ocean Avenue
Apt. 6A
Long Branch, NJ 07740
Pal Drive
Wayside, NJ 07712
All Directors and 2,764,140 23.9%
Officers as a group
(6 persons in number)
*Less than 1%
_____________________
(1) Unless otherwise indicated below, each director, officer and 5%
shareholder has sole voting and sole investment power with respect to all shares
that he beneficially owns.
(2) Includes vested and presently exercisable options of Mr. Herbert
Kurinsky, to purchase 390,000 shares of Common Stock.
(3) Includes vested and presently exercisable options of Mr. William J.
Kurinsky to purchase 415,000 shares of Common Stock, and 120,000 Class A
Warrants, 120,000 Class B Warrants and 120,000 Class C Warrants.
<PAGE>
4
(4) Includes 365,000 shares of Common Stock reserved for issuance upon the
exercise of vested and presently exercisable stock options, 35,000 of which are
owned by Mr. Rabinowitz's wife, of which he disclaims beneficial ownership and
2,000 shares are owned by Mr. Rabinowitz's children. Mr. Rabinowitz also owns
5,833 Class A Warrants, 5,833 Class B Warrants and 5,833 Class C Warrants.
(5) Includes 90,000 shares of Common Stock reserved for issuance upon the
exercise of vested and presently exercisable stock options.
(6) Includes 35,000 shares of Common Stock reserved for issuance upon the
exercise of 25,000 vested and presently exercisable stock options and 10,000
shares non-vested stock options.
(7) Includes 80,000 shares of Common Stock reserved for issuance upon the
exercise of vested and presently exercisable stock options, 16,600 Class A
Warrants, 16,600 Class B Warrants and 16,600 Class C Warrants.
NOTE: All Class A Warrants are exercisable at $3.00 per share for a period
of three (3) years from February 17, 1998.
All Class B Warrants are exercisable at $5.00 per share for a period
of five (5) years from February 17, 1998.
All Class C Warrants are exercisable at $7.00 per share for a period
of seven (7) years from February 17, 1998.
Certain Reports
No person who, during the fiscal year ended December 31, 1998, was a
Director, officer or beneficial owner of more than ten percent of the
Corporation's Common Stock (which is the only class of securities of the
Corporation registered under Section 12 of the Securities Exchange Act of 1934
(the "Act") (a "Reporting Person") failed to file on a timely basis, reports
required by Section 16 of the Act during the most recent fiscal year. The
foregoing is based solely upon a review by the Corporation of Forms 3 and 4
during the most recent fiscal year as furnished to the Corporation under Rule
16a-3(d) under the Act, and Forms 5 and amendments thereto furnished to the
Corporation with respect to its most recent fiscal year, and any representation
received by the Corporation from any Reporting Person that no Form 5 is
required.
It is expected that the following will be considered at the Annual Meeting
and action taken thereon:
I. ELECTION OF DIRECTORS
The Corporation's Certificate of Incorporation provides for the
classification of the Board of Directors into three classes of Directors, each
class as nearly equal in number as possible but not less than one Director, each
to serve for a three-year term, staggered by class. The Certificate of
Incorporation further provides that a Director or the entire Board of Directors
may be removed only for cause and only by the affirmative vote of the holders of
at least 70% of the combined voting power of the Corporation's voting stock,
with vacancies on the Board being filled only by a majority vote of the
remaining Directors then in office.
<PAGE>
5
The Board of Directors currently consists of five Directors divided into
three classes (Class I, II and III) consisting of two members each. There is
currently a vacancy in Class II resulting from the resignation of Dr. Ross E.
McRonald in November 1994. This vacancy has not been filled by the remaining
members of the Board and shareholders are not being asked to elect any nominee
for this vacancy. There are no vacancies in Class I.
The affirmative vote of a plurality of the outstanding shares of Common
Stock entitled to vote thereon, voting together as a single class at the Annual
Meeting of shareholders is required to elect the Class I Directors. All proxies
received by the Board of Directors will be voted for the election as Class I
Directors of the nominees listed below if no direction to the contrary is given.
In the event that any nominee is unable to serve, the proxy solicited hereby may
be voted, in the discretion of the proxies, for the election of another person
in his stead. The Board of Directors knows of no reason to anticipate that this
will occur. Family relationships exist among the following executive officers
and directors: Mr. Herbert Kurinsky is the uncle of Mr. William J. Kurinsky and
Mr. Robert I. Rabinowitz is the brother-in-law of Mr. William J. Kurinsky.
The terms of the Class I Directors expire at this Annual Meeting. The
present Directors of the Corporation nominated for reelection to the
Corporation's Board of Directors as the Class I Directors at the Annual Meeting
are Mr. Herbert Kurinsky and Mr. William J. Kurinsky.
The following table sets forth certain information as of the date hereof
with respect to the Directors of the Corporation, including the nominees for
election to the Corporation's Board of Directors at the Annual Meeting. The
Class I Directors are the Directors nominated for election at the Annual
Meeting.
Position with Director
Corporation; Principal Continually Term
Name Occupation and Age Since Expires
CLASS I - NOMINEES
Herbert Kurinsky Director, President and Chief 1987 Nominee
Executive Officer of the Company
and Registered Options Principal of
First Montauk Securities Corp., 67
William J. Kurinsky Director, Vice President, Chief 1987 Nominee
Operating and Chief Financial Officer
and Secretary of the Company and of
First Montauk Securities Corp. and
Financial and Operations Principal
of First Montauk Securities Corp., 38
CLASS III
Ward R. Jones, Jr. Director, Registered Representative
with First Montauk Securities Corp., 68 1991 2000
David I. Portman Director, President of Triad Property
Management, Inc., 58 1993 2000
CLASS II
Norma L. Doxey Director, Vice-President of Operations
of First Montauk Securities Corp., 59 1988 2001
<PAGE>
6
Herbert Kurinsky became a Director and President of the Company on November
16, 1987. Mr. Kurinsky is a co-founder of First Montauk Securities Corp. and has
been its President, one of its Directors and its Registered Options Principal
since September of 1986. From March 1984 to August 1986, Mr. Kurinsky was the
President of Homestead Securities, Inc., a New Jersey broker-dealer. From April
1983 to March 1984, Mr. Kurinsky was a branch office manager for Phillips, Appel
& Waldon, a securities broker-dealer. From February 1982 to March 1983, Mr.
Kurinsky was a branch office manager for Fittin, Cunningham and Lauzon, a
securities broker-dealer. From November 1977 to February 1982, he was a branch
office manager for Advest Inc., a securities broker-dealer. Mr. Kurinsky
received a B.S. degree in economics from the University of Miami, Florida in
1954.
William J. Kurinsky became Vice President, a Director and Financial and
Operations Principal of the Company on November 16, 1987. He is a co-founder of
First Montauk Securities Corp. and has been one of its Vice Presidents, a
Director and its Financial/Operations Principal since September of 1986. Prior
to that date, Mr. Kurinsky was Treasurer, Chief Financial Officer and Vice
President of Operations of Homestead Securities, Inc., a securities
broker-dealer. Mr. Kurinsky received a B.S. from Rutgers University in 1984. He
is the nephew of Herbert Kurinsky.
Norma L. Doxey has been a Director of the Company since December 6, 1988.
Ms. Doxey is the Vice President for Operations and a Registered Representative
with First Montauk Securities Corp. since September, 1986. From August through
September, 1986, she was operation's manager and a Registered Representative
with Homestead Securities, Inc. From July 1984 through August 1985 she held the
same position with Marvest Securities.
Ward R. Jones, Jr. has been a director of the Company since June, 1991.
From 1955 through 1990, Mr. Jones was employed by Shearson Lehman Brothers as a
registered representative, eventually achieving the position of Vice President.
Mr. Jones is currently a registered representative of First Montauk Securities
Corp., but does not engage in any securities business.
David I. Portman has been a director of the Company since June 15, 1993.
From 1978 to the present, Mr. Portman served as the President of Triad Property
Management, Inc., a private corporation which builds, invests in and manages
real estate properties in the State of New Jersey. Mr. Portman was a Director of
Ultra Med, Inc. from 1986 to 1991, a high tech medical equipment manufacturer.
Mr. Portman also serves as a director and officer of Pacific Health
Laboratories, Inc., positions he has held since August 1995. FMSC underwrote an
initial public offering of the common stock of Pacific Health Laboratories,
Inc., and is currently a market maker in the stock.
Significant Employees
Robert I. Rabinowitz, 42, has been General Counsel of the Company since
1987. He concurrently served as General Counsel of First Montauk Securities from
1986 to 1998 when a new general counsel was named. Thereafter, he became the
Chief Administrative Officer of FMSC as well as General Securities Prinicipal.
From January 1986 until November 1986, he was as associate attorney for Brodsky,
Greenblatt & Renahan, a private practice law firm in Rockville, Maryland. Mr.
Rabinowitz is an attorney at law licensed to practice in New Jersey, Maryland
and the District of Columbia, and is a member of the Board of Arbitrators for
the National Association of Securities Dealers, Department of Arbitration. Mr.
Rabinowitz's wife is a niece of Mr. Herbert Kurinsky and a sister of Mr. William
Kurinsky.
<PAGE>
7
Mark D. Lowe, 40, has been President of Montauk Insurance Services, Inc.
since October 1998. From 1982 to 1998 Mr. Lowe was a Senior Consultant with
Congilose & Associates, a financial services firm specializing in insurance and
estate planning. Mr. Lowe became a Certified Financial Planner (CFP) in July
1991. Mr. Lowe attended Ocean County College in Toms River, N.J. Mr. Lowe is the
Treasurer of the Estate and Financial Planning Council of Central New Jersey.
Seth Rosen, 46, has been President of Century Discount Investments since
September 1998. From December 1997 to June 1998, Mr. Rosen served as an
executive consultant with Cowen & Co. From 1994 to 1997, Mr. Rosen served as a
Managing Director of National Discount Brokers, a division of Sherwood
Securities.
Board Meetings, Committees and Compensation of Directors
During the fiscal year ended December 31, 1998, three meetings of the Board
of Directors were held. Each Director of the Corporation was present at all
meetings of the Board of Directors held during fiscal 1998.
The Board of Directors has established an Audit Committee consisting of
three members, which includes a "public director" as that term is defined in
Schedule E of the NASD By-Laws. The Audit Committee reviews (i) the Company's
audit functions, (ii) the finances, financial condition, and interim financial
statements of the Company, and (iii) the year end financial statements of the
Company. Members of the Audit Committee do not receive additional compensation
for such service. At present, the committee is composed of Ward R. Jones, Jr.,
and David I. Portman. The Audit Committee met on one occasion during fiscal
1998.
The Corporation does not have a standing nominating committee of the Board
of Directors.
The Corporation pays Directors who are not employees of the Corporation a
retainer of $250 per meeting of the Board of Directors attended and for each
meeting of a committee of the Board of Directors not held in conjunction with a
Board of Directors meeting. Directors who are not employees of the Company are
also eligible to participate in the Director Plan. Directors employed by the
Corporation are not entitled to any additional compensation as such. The Board
of Directors generally meets on a quarterly basis in addition to such other
occasions as the business of the Corporation may from time to time require.
Compensation Committee Report on Executive Compensation
In fiscal 1995, the Corporation established a compensation committee,
composed of two non-executive directors, for the purpose of negotiating and
reviewing all employment agreements for executive officers of the Corporation
and for administering the Senior Management Plan and the Incentive Stock Option
Plan, as amended. At present, Ward R. Jones, Jr. and David I. Portman are the
members of the compensation committee. This committee met on 1 occasion during
fiscal 1998.
The compensation committee and the Board of Directors have established the
following ongoing principles and objectives for determining Corporation's
executive compensation:
o provide compensation opportunities that will help attract,
motivate and retain highly motivated qualified managers and
executives.
o link executive total compensation to the Corporation's performance
and individual job performance.
o provide a balance between incentives based upon annual business
achievements and longer term incentives linked to increases
in shareholder value.
<PAGE>
8
During the last fiscal year, except as discussed below, the cash
compensation portions of the Chief Executive Officer and the Chief Operating
Officer were not reviewed by the compensation committee as the terms of the
compensation were governed by the terms of their employment agreements which
were entered into in January 1996. Shareholders are directed to the discussion
of these agreements under the heading "Employment Agreements" appearing
elsewhere in this Proxy Statement. No cash bonuses were awarded to these
executives during the last fiscal year.
The cash compensation of both Mr. Herbert Kurinsky and Mr. William Kurinsky
increased in fiscal 1998 as compared to 1997 but remained constant relative to
their 1996 salaries. These increases reflect a determination by the executives
not to waive a portion of their base salaries under the terms of their
employment agreements. The executives' waiver of a portion of their 1997 base
salary is the sole reason that their cash compensation for fiscal 1998 increased
relative to fiscal 1997. In fiscal 1998, as in fiscal 1997, the executives
waived their right to certain additional moneys, including cash bonuses, to
which they would otherwise have been entitled under the terms of their
employment agreements.
The compensation committee authorized the grant of 100,000 options to both
Messrs. Herbert Kurinsky and William Kurinsky during the last fiscal year. The
committee determined that the Corporation's financial performance (among other
data, increases in revenues as compared to the 1997 fiscal year) and Mr. Herbert
Kurinsky and Mr. William Kurinsky's previous waiver of cash bonuses in the 1997
fiscal year warranted the grant of options to the executives.
The Compensation Committee
Ward R. Jones Jr. David I. Portman
Compensation Committee Interlocks and Insider Participation
There are no compensation committee interlocks between the members of the
Corporation's compensation committee and any other entity. None of the members
of the Board's compensation committee are executive officers of the Corporation.
Mr. Jones is a registered representative of the Corporation's broker-dealer
subsidiary, First Montauk Securities Corp.
<PAGE>
9
Shareholder Return Performance Presentation
Set forth herein is a line graph comparing the total returns (assuming
reinvestment of dividends) of the Company's common stock, the Standard and Poor
Industrial Average, and an industry composite consisting of a group of two peer
issuers selected in good faith by the Company. The Company's common stock is
listed for trading in the over the counter market and is traded under the symbol
"FMFK".
STARTING BASIS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
DESCRIPTION 1993 1994 1995 1996 1997 1998
FIRST MONTAUK FINANCIAL CORP. (%) -64.71 166.67 -4.00 199.48 -50.00
FIRST MONTAUK FINANCIAL CORP. ($) $100.00 $ 35.29 $ 94.11 $ 90.34 $270.56 $135.28
S&P 500 (%) 1.32 37.54 22.94 33.36 28.58
S&P 500 ($) $100.00 $101.32 $139.36 $171.32 $228.48 $293.78
PEER GROUP ONLY (%) -20.52 26.06 174.73 63.98 -41.49
PEER GROUP ONLY ($) $100.00 $ 79.48 $100.19 $275.25 $451.36 $264.10
PEERS + YOUR COMPANY (%) -38.94 53.33 114.49 88.05 -43.98
PEERS + YOUR COMPANY ($) $100.00 $ 61.06 $ 93.62 $200.80 $377.60 $211.52
</TABLE>
NOTES
(1) Industry composite includes Paulson Capital Corp. and JW Genesis
Financial Corp. The industry composite has been determined in good faith by
management to represent entities that compete with the Company in certain
of its significant business segments.
Vote Required for Election of Directors
The affirmative vote of the holders of a plurality of the shares of Common
Stock voting at the Annual Meeting is required for the approval of the nominees
for Class I Directors.
THE BOARD OF DIRECTORS DEEMS THE NOMINEES FOR THE CLASS I DIRECTORS TO BE
IN THE BEST INTERESTS OF THE CORPORATION AND ITS SHAREHOLDERS AND RECOMMENDS A
VOTE "FOR" APPROVAL THEREOF.
Executive Compensation
Summary of Cash and Certain Other Compensation
The following provides certain information concerning all Plan and Non-Plan
(as defined in Item 402 (a)(ii) of Regulation S-K) compensation awarded to,
earned by, paid or accrued by the Company during the years ended December 31,
1998, 1997 and 1996 to each of the named executive officers of the Company.
<PAGE>
10
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term
Compensation
Securities
Underlying
Name & Principal Other Annual Options/ SARs
Position Year Salary Bonus Compensation Granted(1)
Herbert Kurinsky 1998 $175,000 $0 $ 10,096(2) 100,000
Chairman, Chief 1997 $168,269 $0 $ 2,724(2) 50,000
Executive Officer (3) 1996 $175,000 $40,000 $ 41,070(2) 0
William J. Kurinsky 1998 $175,000 $0 $ 10,221(4) 100,000
Vice President, 1997 $158,173 $0 $ 1,534(4) 75,000
Chief Operating and 1996 $175,000 $0 $ 11,884(4) 0
Financial Officer
and Secretary (5)
Robert I. Rabinowitz 1998 $125,000 $15,000 $ 295(6) 100,000
General Counsel, FMFC, 1997 $111,154 $10,500 $ 5,676(6) 75,000
Chief Administrative 1996 $100,000 $ 5,000 $ 383(6) 0
Officer, FMSC(7)
1) In 1997, the Board of Directors authorized a grant to purchase 50,000,
75,000 and 75,000 shares of the Company=s Common Stock each to Herbert
Kurinsky, William J. Kurinsky and Robert I. Rabinowitz at exercise prices
of $.96, $1.05 and $1.0625, respectively. These options have vested and are
exercisable until January 14, 2002. In 1998, the Board of Directors
authorized an additional grant to purchase 100,000 shares at exercise
prices of $1.9375, $2.13 and $1.9375 to Herbert Kurinsky, William J.
Kurinsky and Robert I. Rabinowitz, respectively. See "Aggregated
Options/Sar Exercises in Last Fiscal Year and Fy-End Option/Sar Values."
2) Includes: (i) for 1998, vacation pay of $10,096; (ii) for 1997, commissions
of $2,724; and (iii) for 1996, an automobile allowance of $7,512,
commissions of $10,512, dues of $7,440 and loan forgiveness of $15,606.
3) Mr. Herbert Kurinsky is the beneficial owner of 1,518 shares of the
Company's Common Stock as of December 31, 1998, which shares had a market
value of approximately $2,3182 as of that date, without giving effect to
the diminution in value attributable to the restriction on said shares.
4) Includes: (i) for 1998, commissions of $125; (ii) for 1997, commissions of
$1,534; and (iii) for 1996, loan forgiveness in the amount of $11,884.
5) Mr. William Kurinsky is the beneficial owner of 1,348,423 shares of the
Company's Common Stock as of December 31, 1998, which shares had a market
value of approximately $1,938,358 as of that date, without giving effect to
the diminution in value attributable to the restriction on said shares.
6) Includes: (i) commissions of $295 in 1998; (ii) $5,676 for 1997; and (iii)
$383 for 1996.
7) Mr. Robert I. Rabinowitz is the beneficial owner of 2,500 shares of the
Company's Common Stock as of December 31, 1998, which shares had a market
value of $3,594 as of that date, without giving effect to the diminution in
value attributable to the restriction on said shares.
<PAGE>
11
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table contains information with respect to the named
executive officers concerning options granted during the year ended December 31,
1998.
INDIVIDUAL GRANTS
Number of % of Total
Underlying Granted to Exercise
Options/SARs Employees in or Base Expiration
Name Granted(#) Fiscal Year Price ($Sh) Date
- - - - ---- ------------ ------------ ----------- ----------
Herbert Kurinsky 100,000 7.2% $1.9375 8/02/03
William J. Kurinsky 100,000 7.2% $2.13 8/02/03
Robert I. Rabinowitz 100,000 7.2% $1.9375 8/02/03
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
Value of
Shares Number of Unexercised
Acquired Unexercised In-the-money
on Value Options as of Options at
Name Exercise Realized December 31,1997 December 31,1997(1)
- - - - ---- -------- -------- ---------------- -------------------
Exercisable/ Exercisable/
Unexercisable Unexercisable
Herbert Kurinsky -- $0 390,000/0 $560,625/$0
William J. Kurinsky 200,000 $550,000 415,000/0 $596,563/$0
Robert I. Rabinowitz -- $0 230,000/0 $330,625/$0
(1) Based upon the closing bid price of the Company's Common Stock on December
31, 1998 ($1.4375 per share), less the exercise price for the aggregate
number of shares subject to the options.
Employment Agreements
In January 1996, the Company entered into new three-year employment
contracts with Herbert Kurinsky, as President and William J. Kurinsky, as
Executive Vice President. The contracts provide for base salaries of $175,000
for the first year of the agreement for each, increasing in each case at the
rate of 10% per year. Each will also be entitled to receive a portion of a bonus
pool consisting of 10% of the pre-tax profits of the Company, to be determined
by the executive management (e.g. Herbert Kurinsky and William J. Kurinsky). The
bonus pool would require a minimum of $500,000 pretax profit per year in order
to become effective. In 1998, each formally waived his right to receive a cash
bonus for fiscal year 1998. The agreements have been renewed for an additional
year.
Each is also entitled to receive commissions at the same rate as paid to
other non-affiliate registered representatives of the Company. They are also
entitled to purchase from FMSC, up to 20% of all underwriters and/or placement
agent warrants or options which are granted to FMSC upon the same price, terms
and conditions afforded to FMSC as the underwriter or placement agent. Each
employee also receives health insurance benefits and life insurance as generally
made available to regular full-time employees of the Company, and reimbursement
for expenses incurred on behalf of the Company and the use of an automobile or
in the alternative an automobile allowance. The contracts also provide for
severance benefits equal to three times the previous year's salary in the event
either of the employees is terminated or their duties significantly changed
after a change in management of the Company as defined in the respective
agreements.
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12
Incentive Stock Option Plan
In September 1992, the Company adopted the 1992 Incentive Stock Option
Plan. The 1992 Incentive Stock Option Plan provided for the grant of options to
purchase up to 2,000,000 shares of the Company's Common Stock and is intended
for employees of the Company and consultants. In June 1996 the Company's Board
of Directors and shareholders approved an amendment to the 1992 Incentive Stock
Option Plan to increase the number of shares reserved for issuance from
2,000,000 to 3,500,000 (the "Incentive Plan"). In June 1998, the Company's
shareholders approved an amendment to the Incentive Plan to increase the number
of shares reserved for issuance from 3,500,000 to 6,000,000 (the "Amended
Plan"). Under the terms of the Amended Plan, options granted thereunder may be
designated as options which qualify for incentive stock option treatment
("ISOs") under Section 422A of the Code, or options which do not so qualify
("Non-ISOs").
Consistent with practice under the Incentive Plan, the Amended Plan is
administered by the Board of Directors or by a Stock Option Committee designated
by the Board of Directors. The Board or the Stock Option Committee, as the case
may be, has the discretion to determine the eligible employees to whom, and the
times and the price at which, options will be granted; whether such options
shall be ISOs or Non-ISOs; the periods during which each option will be
exercisable; and the number of shares subject to each option. The Board or
Committee has full authority to interpret the Amended Plan and to establish and
amend rules and regulations relating thereto.
Under the Amended Plan, the exercise price of an option designated as an
ISO shall not be less than the fair market value of the Common Stock on the date
the option is granted. However, in the event an option designated as an ISO is
granted to a ten percent stockholder (as defined in the Amended Plan) such
exercise price shall be at least 110% of such fair market value. Exercise prices
of Non-ISO options may be less than such fair market value. The aggregate fair
market value of shares subject to options granted to a participant which are
designated as ISOs which become exercisable in any calendar year may not exceed
$100,000.
The Board or the Stock Option Committee, as the case may be, may, in its
sole discretion, grant bonuses or authorize loans to or guarantee loans obtained
by an optionee to enable such optionee to pay any taxes that may arise in
connection with the exercise or cancellation of an option. Unless sooner
terminated, the Amended Plan will expire in 2006.
As of the date of this Proxy Statement options to purchase a total of
4,156,000 shares of the Company's Common Stock have been issued under the
Amended Plan.
Director Plan
In September 1992, the Company adopted the Non-Executive Director Stock
Option Plan (the "Director Plan"). The Director Plan provides for issuance of a
maximum of 1,000,000 shares of Common Stock upon the exercise of stock options
granted under the Director Plan. Options are granted under the Director Plan
until 2002 to (i) non-executive directors as defined and (ii) members of any
advisory board established by the Company who are not full time employees of the
Company or any of its subsidiaries. The Director Plan provides that each
non-executive director will automatically be granted an option to purchase
20,000 shares each September 1, provided such person has served as a director
for the 12 months immediately prior to such September 1st.
In June 1996, the Company's shareholders approved an amendment to the
Director Plan to provide for the elimination of non-discretionary stock grants
to members of any advisory board established by the Company. An eligible member
of an advisory board may receive an option to purchase shares of the Company's
Common Stock under the Director Plan as provided for in the discretion of the
Company's Board of Directors.
<PAGE>
13
The exercise price for options granted under the Director Plan shall be
100% of the fair market value of the Common Stock on the date of grant. Until
otherwise provided in the Stock Option Plan the exercise price of options
granted under the Director Plan must be paid at the time of exercise, either in
cash, by delivery of shares of Common Stock of the Company or by a combination
of each. The term of each option commenced on the date it is granted and unless
terminated sooner as provided in the Director Plan, expires five years from the
date of grant. The Director Plan is administered by a committee of the board of
directors composed of not fewer than three persons who are officers of the
Company (the "Committee"). The Committee has no discretion to determine which
non-executive director or advisory board member will receive options or the
number of shares subject to the option, the term of the option or the
exercisability of the option. However, the Committee will make all
determinations of the interpretation of the Director Plan. Options granted under
the Director Plan are not qualified for incentive stock option treatment. To
date, a total of 180,000 options have been granted to the Company=s
Non-Executive members of the Board of Directors.
Senior Management Plan
In 1996, the Company adopted the 1996 Senior Management Incentive Plan (the
"Management Plan"). The Management Plan provides for the issuance of up to
2,000,000 shares of Common Stock either upon issuance of options issued under
the Management Plan or grants of restricted stock or incentive stock rights.
Awards may be granted under the Management Plan to executive management
employees by the Board of Directors or a committee of the board, if one is
appointed for this purpose. The Management Plan provides for four types of
awards--stock options, incentive stock rights, stock appreciation rights, and
restricted stock purchase agreements. The stock options granted under the
Management Plan can be either ISOs or non-lSOs similar to the options granted
under the Incentive Stock Option Plan, except that the exercise price of
non-lSOs shall not be less than 85% of the fair market value of the Common Stock
on the date of grant. Incentive stock rights consist of incentive stock units
equivalent to one share of Common Stock in consideration for services performed
for the Company. If services of the holder terminate prior to the incentive
period, the rights become null and void unless termination is caused by death or
disability. Stock appreciation rights allow a grantee to receive an amount in
cash equal to the difference between the fair market value of the stock and the
exercise price, payable in cash or shares of Common Stock. The Board or
committee may grant limited SARs which become exercisable upon a "change of
control" of the Company. A change of control includes the purchase by any person
of 25% or more of the voting power of the Company's outstanding securities, or a
change in the majority of the Board of Directors.
Awards granted under the Management Plan are also entitled to certain
acceleration provisions which cause awards granted under the Management Plan to
immediately vest in the event of a change of control or sale of the Company.
Awards under the Management Plan may be made until 2006.
During the fiscal year ended December 31, 1998, the Company granted a total
of 1,185,000 options under the Senior Management Plan.
Each of the types of Awards that may be granted under the Management Plan
is discussed below.
Stock Options. Under the terms of the Management Plan, options granted
thereunder will be designated as options which qualify for incentive stock
option treatment ("ISO's") under Section 422 of the Internal Revenue Code of
1986, as amended (the "Code"), or options which do not so qualify ("Non-ISO's").
Under the Management Plan, the exercise price of an option designated as an
ISO shall not be less than the fair market value of the Common Stock on the date
the option is granted. However, in the event an option designated as an ISO is
granted to a ten percent Shareholder such exercise price shall be at least 110%
of such fair market value. Exercise prices of Non-ISO options may not be less
than 85% of such fair market value. The aggregate fair market value of shares
subject to an option designated as an ISO for which any participant may be
granted such an option in any calendar year, shall not exceed $100,000 plus any
unused carryovers (as defined in Section 422 of the Code) from a prior year. The
"fair market value" will be the price of the Corporation's Common Stock, the low
bid as reported by the National Quotation Bureau, Inc., or a market make of the
Corporation's Common Stock, or if the Common Stock is not quoted by any of the
above, by the Board of Directors acting in good faith.
<PAGE>
14
Options may be granted under the Management Plan for such periods as
determined by the Management Plan Administrator; provided however that no option
designated as an ISO granted under the Management Plan shall be exercisable over
a period in excess of ten years, or in the case of a ten percent Shareholder,
five years. Options may be exercised in whole at any time or in part from time
to time. Options are not transferable except to the estate of an option holder;
provided, however, in the case of a Non-ISO, and subject to Rule 16b-3
promulgated under Section 16 of the Exchange Act and prevailing interpretations
thereunder by the Staff of the Securities and Exchange Commission, a recipient
of a Non-ISO may, with the consent of the Management Plan Administrator,
designate a named beneficiary of the Non-ISO in the event of the death of such
recipient, or assign such Non-ISO.
Incentive Stock Rights. Incentive stock rights consists of incentive stock
units which give the holder the right to receive, without payment of cash or
property to the Corporation, shares of Common Stock. Each unit is equivalent to
one share of Common Stock and will be issued in consideration for services
performed for the Corporation. If the services of the senior manager with the
Corporation terminate prior to the end of the incentive period relating to the
units awarded, the rights shall thereupon be null and void, except that if
termination is caused by death or permanent disability, the senior manager or
his/her heirs, as the case may be, shall be entitled to receive a pro rata
portion of the shares represented by the units, based upon that portion of the
incentive period which shall have elapsed prior to the death or disability.
Stock Appreciation Rights (ASARs@). SARs may be granted to recipients of
options under the Management Plan. SARs may be granted simultaneously with, or
subsequent to, the grant of a related option and may be exercised to the extent
that the related option is exercisable, except that no general SAR (as
hereinafter defined) may be exercised within a period of six months of the date
of grant of such SAR and no SAR granted with respect to an ISO may be exercised
unless the fair market value of the Common Stock on the date of exercise exceeds
the exercise price of the ISO. A holder may be granted general SARs ("general
SARs") or limited SARs ("limited SARs"), or both. General SARs permit the holder
thereof to receive an amount (in cash, shares of Common Stock or a combination
of both) equal to the number of SARs exercised multiplied by the excess of the
fair market value of the Common Stock on the exercise date over the exercise
price of the related option. Limited SARs are similar to general SARs, except
that, unless the Administrator (as defined in the Plan) determines otherwise,
they may be exercised only during a prescribed period following the occurrence
of one or more of the following events: (i) the approval of the shareholders of
the Corporation of a consolidation or merger in which the Corporation is not the
surviving corporation, the sale of all or substantially all the assets of the
Corporation, or the liquidation or dissolution of the Corporation; (ii) the
commencement of a tender or exchange offer for the Corporation's Common Stock
(or securities convertible into Common Stock) without the prior consent of the
Board; (iii) the acquisition of beneficial ownership by any person or other
entity (other than the Corporation or any employee benefit plan sponsored by the
Corporation) of securities of the Corporation representing 25% or more of the
voting power of the Corporation's outstanding securities; or (iv) if during any
period of two years or less, individuals who at the beginning of such period
constitute the entire Board cease to constitute a majority of the Board, unless
the election, or the nomination for election, of each new director is approved
by at least a majority of the directors then still in office.
The exercise of any portion of either the related option or the tandem SARs
will cause a corresponding reduction in the number of shares remaining subject
to the option or the tandem SARs, thus maintaining a balance between outstanding
options and SARs.
<PAGE>
15
Restricted Stock Purchase Agreements. Restricted stock purchase agreements
provide for the sale by the Corporation of shares of Common Stock at prices to
be determined by the Board, which shares shall be subject to restrictions on
disposition for a stated period during which time the purchase must continue
employment with the Corporation to retain the shares.
Upon expiration of the applicable restricted period and the satisfaction of
any other applicable conditions, all or part of the restricted shares and any
dividends or other distributions not distributed to the holder (the "retained
distributions") thereon will become vested. Any restricted shares and any
retained distributions thereon which do not so vest will be forfeited to the
Corporation. If prior to the expiration of the restricted period a holder is
terminated without cause or because of a total disability (in each case as
defined in the Plan), or dies, then, unless otherwise determined by the
Administrator at the time of the grant, the restricted period applicable to each
award of restricted shares will thereupon be deemed to have expired. Unless the
Administrator determines otherwise, if a holder's employment terminates prior to
the expiration of the applicable restricted period for any reason other than as
set forth above, all restricted shares and any retained distributions thereon
will be forfeited.
FINANCIAL INFORMATION
A COPY OF THE CORPORATION'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR
ENDED DECEMBER 31, 1998 FILED WITH THE SECURITIES AND EXCHANGE COMMISSION WILL
BE FURNISHED WITHOUT THE ACCOMPANYING EXHIBITS, WHICH EXHIBITS SHALL BE
FURNISHED TO SHAREHOLDERS, IF REQUESTED, UPON PAYMENT TO THE CORPORATION OF
REASONABLE EXPENSES INCLUDING PHOTOCOPYING AND MAILING EXPENSES, TO SHAREHOLDERS
WITHOUT CHARGE UPON WRITTEN REQUEST THEREFOR SENT TO WILLIAM J. KURINSKY,
SECRETARY, FIRST MONTAUK FINANCIAL CORP., PARKWAY 109 OFFICE CENTER, 328 NEWMAN
SPRINGS ROAD, RED BANK, NEW JERSEY 07701. Each such request must set forth a
good faith representation that as of May 21, 1999 the person making the request
was the beneficial owner of Common Shares of the Corporation entitled to vote at
the 1999 Annual Meeting of Shareholders.
III. OTHER BUSINESS
As of the date of this Proxy Statement, the foregoing is the only business
which the Board of Directors intends to present, and is not aware of any other
matters which may come before the meeting. If any other matter or matters are
properly brought before the Annual Meeting, or any adjournments thereof, it is
the intention of the persons named in the accompanying form of proxy to vote the
proxy on such matters in accordance with their judgment.
Proposals of shareholders intended to be presented at the Corporation's
2000 Annual Meeting of Shareholders must be received by the Corporation on or
prior to January 25, 2000 to be eligible for inclusion in the Corporation's
proxy statement and form of proxy to be used in connection with the 2000 Annual
Meeting of Shareholders.
By Order of the Board of Directors
WILLIAM J. KURINSKY, Secretary
Dated: May 24, 1999
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE AND RETURN
YOUR PROXY PROMPTLY IN THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF IT IS
MAILED IN THE UNITED STATES OF AMERICA.
<PAGE>
FIRST MONTAUK FINANCIAL CORP.
Annual Meeting of Shareholders - June 25, 1999
PROXY SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints Herbert Kurinsky and William J. Kurinsky,
and each of them, proxies, with full power of substitution to each, to vote all
common shares of FIRST MONTAUK FINANCIAL CORP., owned by the undersigned at the
Annual Meeting of Shareholders of FIRST MONTAUK FINANCIAL CORP. to be held on
Friday, June 25, 1999 and at any adjournments thereof, hereby revoking any proxy
heretofore given. The undersigned instructs such proxies to vote:
I. Election of Class I Directors:
[ ] FOR all nominees listed [ ] WITHHOLD AUTHORITY
below (except as marked to vote for the nominee
to the contrary below) listed below
Nominee for Class I Directors to Serve until
year 2002 Annual Meeting: Herbert Kurinsky
and William J. Kurinsky
(Instruction: To withhold authority for any individual nominee, strike a
line through the nominee's name in the list below)
_______________________________________________________________________________
and to vote upon any other business as may properly come before the meeting
or any adjournment thereof, all as described in the Proxy Statement dated May
24, 1999, receipt of which is hereby acknowledged.
(Continued and to be signed on the reverse side)
<PAGE>
(Continued from reverse side)
Either of the proxies or their respective substitutes, who shall be present
and acting shall have and may exercise all the powers hereby granted.
The shares represented by this proxy will be voted FOR the election of both
of the nominees for Class I Directors.
Said proxies will use their discretion with respect to any other matters
which properly come before the meeting.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
PLEASE SIGN AND RETURN THE PROXY IN THE ENCLOSED ENVELOPE.
Dated:_______________________________, 1999
Signed ____________________________________
___________________________________________
(Please date and sign exactly as name
appears at left. For joint accounts,
each joint owner should sign. Executors,
administrators, trustees, etc., should sign
also so indicate when signing.)
