-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, So/NQTfREStuEdiZWejc32VhRY+wW6i6wmNbl6a39dgRV1qacDS664oAnOjLTE2e q0DNiNKV2nSDlRYVGWYjhA== 0000083125-07-000015.txt : 20070511 0000083125-07-000015.hdr.sgml : 20070511 20070511121357 ACCESSION NUMBER: 0000083125-07-000015 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20070509 ITEM INFORMATION: Entry into a Material Definitive Agreement FILED AS OF DATE: 20070511 DATE AS OF CHANGE: 20070511 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRST MONTAUK FINANCIAL CORP CENTRAL INDEX KEY: 0000083125 STANDARD INDUSTRIAL CLASSIFICATION: SECURITY BROKERS, DEALERS & FLOTATION COMPANIES [6211] IRS NUMBER: 221737915 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-06729 FILM NUMBER: 07840967 BUSINESS ADDRESS: STREET 1: 328 NEWMAN SPRINGS RD STREET 2: PKWY 109 OFFICE CTR CITY: RED BANK STATE: NJ ZIP: 07701 BUSINESS PHONE: 7328424700 MAIL ADDRESS: STREET 1: 328 NEWMAN SPRINGS RD STREET 2: PKWY 109 OFFICE CTR CITY: RED BANK STATE: NJ ZIP: 07701 FORMER COMPANY: FORMER CONFORMED NAME: MCC PRESIDENTIAL INC DATE OF NAME CHANGE: 19871203 FORMER COMPANY: FORMER CONFORMED NAME: RENAULT WINERY INC DATE OF NAME CHANGE: 19740725 FORMER COMPANY: FORMER CONFORMED NAME: PRESIDENTIAL APARTMENTS INC DATE OF NAME CHANGE: 19740327 8-K 1 form8kmay92007.txt FORM 8-K - MAY 9, 2007 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): May 9, 2007 FIRST MONTAUK FINANCIAL CORP. (Exact name of registrant as specified in its charter) COMMISSION FILE NUMBER: 0-6729 NEW JERSEY 22-1737915 ---------- ---------- (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) Parkway 109 Office Center 328 Newman Springs Road Red Bank, NJ 07701 (Address and zip code of principal executive offices) (732) 842-4700 (Registrant's telephone number, including area code CHECK THE APPROPRIATE BOX BELOW IF THE FORM 8-K FILING IS INTENDED TO SIMULTANEOUSLY SATISFY THE FILING OBLIGATION OF THE REGISTRANT UNDER ANY OF THE FOLLOWING PROVISIONS: |_| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |_| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |_| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Item 1.01 Entry into Material Definitive Agreement On May 8, 2007 (the "Agreement Date"), First Montauk Financial Corp. (the "Registrant"), Victor Kurylak ("Kurylak"), Ward R. Jones, Jr., Barry Shapiro, David I. Portman and Mindy Horowitz ("collectively, the "Registrant Parties") and Edward H. Okun ("Okun"), Investment Properties of America, LLC ("IPofA"), IPofA Water View, LLC ("Water View"), FMFG AcquisitionCo, Inc. ("AcquisitionCo"), FMFG Ownership, Inc. ("Ownership I"), and FMFG Ownership II, Inc. ("Ownership II" and collectively with Okun, IPofA, Water View, AcquisitionCo, Ownership I, the "Okun Parties") executed a settlement agreement ("Settlement Agreement") pursuant to which all parties agreed to settle all disputes among the parties. Except as specifically provided for therein, the Settlement Agreement does not constitute a final and binding obligation on the part of any party unless and until approval is obtained by the federal and state courts in which the Actions (as defined below) are pending as well as federal, state and self-regulatory bodies as required. Upon receipt of all necessary approvals, the Settlement Agreement will become effective ("Effective Date"). Mr. Kurylak is the President, Chief Executive Officer and director of the Registrant. Messrs. Jones, Shapiro and Portman are independent directors of the Registrant and Ms. Horowitz is the Acting Chief Financial Officer of the Registrant. Mr. Okun is a private investor and the beneficial owner of 11,117,027 shares of Common Stock of the Registrant representing 52.8% of the outstanding voting power of the Registrant through two affiliated companies, Ownership I and Ownership II, according to Amendment No. 4 to Schedule 13D, dated February 23, 2007, filed with the Securities and Exchange Commission jointly by Mr. Okun, Ownership I and Ownership II, Inc. The disputes settled are the court actions (the "Actions") pending in (i) the Superior Court of the State of New Jersey, Chancery Division, Monmouth County Docket No. C-07-07 entitled First Montauk Financial Corp., against Edward H. Okun, et al; (ii) the United States District Court, District of New Jersey, Civil Action No. 07cv00725, entitled FMFG Ownership, Inc. against Victor Kurylak, et al; and (iii) the United States District Court, Southern District of Florida, Case No. 07-20482-Civ, entitled FMFG Ownership, Inc. against Victor Kurylak. The Settlement Agreement provides as follows: 1. Following the Effective Date, Ownership I will cause to be issued to the shareholders of the Registrant other than the Okun Parties (the "Holders"), the right (the "Put"), but not the obligation, to sell their shares of Registrant's Common Stock to a designated Okun Party for $1.00 per share in cash (the "Exercise Price") on the following terms and conditions: a. The Put shall be exercisable by the Holders during the period commencing on the 18th month anniversary date of the Effective Date (the "Commencement Date") and terminating sixty (60) days thereafter (the "Expiration Date"). Any Put not exercised prior to 5:00 p.m. (New York time) on the Expiration Date shall be deemed void without any further force or effect. 2 b. In the event the average closing price of the Registrant's Common Stock is less than the Exercise Price for the twenty (20) consecutive trading days ending within five (5) trading days of the Commencement Date, the Okun Parties shall cause to be deposited with Registrant's transfer agent (the "Transfer Agent") within forty-five (45) days from the Commencement Date, such amount of cash as shall be necessary to pay the aggregate Exercise Price to the Holders. The cash shall be deposited into an escrow account (the "Escrow Account") and subject to the terms of an escrow agreement among the Okun Parties, the Registrant and the Transfer Agent, which shall include provisions ensuring the availability of the escrowed funds for distribution to the Holders upon their exercise of the Put. All interest earned on the funds deposited in the Escrow Account shall be paid to the Okun Parties upon the fulfillment of all of the Put obligations. c. In the event the Okun Parties are not required to so deposit the Exercise Price under the terms of the Settlement Agreement, and the Holders nevertheless exercise Puts, the Okun Parties shall cause to be deposited with the Transfer Agent sufficient cash to pay the Exercise Price for each Put exercised within thirty (30) days of receipt of notice of such exercise. d. Within sixty (60) days of receipt of the notice of exercise of a Put properly verified by the Transfer Agent, and the accompanying stock certificate of the Holder duly endorsed for transfer to Ownership I or Ownership II, the Transfer Agent shall pay the Exercise Price in good funds to the exercising Holder. e. Other Conditions. i. The Put shall be redeemable by the Registrant, in its discretion, in the event of a default by the Okun Parties for $.001 per Put. Such redemption shall not relieve the Okun Parties of any liability for the default. ii. The Put shall be nontransferable and shall attach to the shares of Common Stock held by the Holders on the record date (the "Record Date") established for the distribution of the Put. In the event a Holder publicly sells his shares of Common Stock to which the Put is attached at any time after the Record Date except upon exercise of the Put, the Put shall be deemed cancelled with respect to such shares. Each Holder shall be required to represent upon exercise of the Put, that the shares delivered upon exercise of the Put have been continually held by the Holder from the Record Date. iii. In the event the average closing stock price of Registrant's Common Stock is at least $1.25 per share with a minimum daily volume of 75,000 shares for a period of forty-five (45) trading days, whether or not consecutive in any sixty (60) day trading day period at any time after the Effective Date but prior to the Commencement Date, the Put shall be deemed cancelled. f. Exemption from registration. i. The parties contemplate that the issuance of the Put will be exempt from registration pursuant to Section 3(a) (10) of the Securities Act of 1933, as amended (the "Securities Act") and applicable state securities laws and regulations. The parties agree to cooperate in the fulfillment of the conditions to the exemption including court approval and notice to shareholders. ii. In the event an exemption under Section 3(a) (10) of the Securities Act is not available, the parties agree to amend the Settlement Agreement to allow for Securities Act compliance, subject to their mutual agreement. The parties further agree that the issuer of the Put shall not be required to comply with the reporting obligations of the Exchange Act of 1934, as amended (the "Exchange Act"), and in the event Exchange Act compliance is required, the parties agree to deem the issuance of the Put not exempt for the purposes of the Settlement Agreement. 3 g. Security. i. The Okun Parties shall secure their timely obligation to pay the Exercise Price with all of the shares of Registrant securities held by Ownership I and Ownership II on the Agreement Date (the "Okun Securities"), and the Convertible Debenture or Convertible Preferred Stock, as defined below (collectively, the "Security"). Registrant shall have a first priority lien on the Security until the complete fulfillment of the Put obligations by the Okun Parties. ii. Ownership I and Ownership II shall be entitled to replace the Security at any time with cash or, an irrevocable letter of credit reasonably satisfactory to Registrant's board of directors equal to $1.00 times the number of Puts outstanding (the "Security Minimum"). Ownership I and Ownership II shall also be entitled to sell the Security for cash and deposit the cash in escrow as Security; provided however, in the event the cash plus the market value of the shares of Common Stock held as Security exceeds the Security Minimum, Ownership I and Ownership II shall be entitled to withdraw the amount of cash that exceeds the Security Minimum. In the event Ownership I and Ownership II withdraws cash from the Security and the value of the Security falls below the Security Minimum, Ownership I and Ownership II shall contribute such amount of cash to the Security as shall cause the value of the Security to equal the Security Minimum up to the amount of cash withdrawn The value of the Security for the purposes of determining the right to withdraw cash, or the obligation to contribute cash, shall be determined monthly. Payments or withdrawals shall be made within five business days. iii. In the event the Okun Parties fail to pay the Exercise Price upon exercise by the Holders as required by the Put, the Okun Securities (including the Convertible Preferred Stock if issued) shall be deemed surrendered for cancellation and the Convertible Debenture shall be deemed fully paid. 2. On the Effective Date, the parties shall direct the escrow agent, Signature Bank New York, to pay to Ownership I all of the funds on deposit by the Okun Parties under the Escrow Agreement executed and delivered pursuant to the May 5, 2006 Merger Agreement by and among Registrant, Ownership I and AcquisitionCo. Within ninety (90) days of the Effective Date, the Okun Parties shall invest $2.0 million in the Registrant to be used to fund the Registrant's broker-dealer operations in such manner as determined by the Registrant's board of directors. Registrant shall issue to the Okun Parties, at their sole option, either a convertible debenture (the "Convertible Debenture") in such principal amount or a new series of convertible preferred stock (the "Convertible Preferred Stock") with an aggregate par value equal to $2.0 million. a. The Convertible Debenture or Convertible Preferred Stock shall be convertible into shares of Common Stock at a conversion price equal to $.75 per share, commencing on the fulfillment, or cancellation, of all Put obligations by the Okun Parties, according to the terms of the Put. b. The Convertible Debenture or Convertible Preferred Stock shall accrue interest or cumulative dividends, as the case may be, commencing on the date of issuance at a rate equal to 12% per annum, payable, at the option of the Company, in cash or shares of the Company's Common Stock evaluated at the closing price of the Common Stock on the last trading day immediately preceding the date of payment. 4 c. In the event the Okun Parties fail to purchase the Convertible Debenture or Convertible Preferred Stock, the Okun Securities shall be deemed surrendered for cancellation and the Convertible Debenture shall be deemed fully paid. 3. Upon the Agreement Date, Louis J. Rogers ("Rogers") shall be appointed Chief Executive Officer and a director of the Registrant. Mr. Rogers shall enter into an employment agreement on mutually agreeable terms to serve as Chief Executive Officer of the Registrant, which agreement shall include negative and restrictive covenants for the period commencing on the date of employment and terminating one year after termination of employment for any reason. See Item 5.02(c) below. Mr. Rogers shall report to the board of directors of the Registrant. 4. Upon the Agreement Date, Mr. Kurylak shall enter into a modification of his existing employment agreement expiring December 31, 2007 with the Registrant. Such employment agreement shall be on the same terms and conditions of Mr. Kurylak's existing employment agreement except Mr. Kurylak's title and position shall be President of the Registrant and President and Chief Executive Officer of First Montauk Securities Corp., the Registrant's principal subsidiary, reporting jointly to Mr. Rogers and the board of directors of Registrant. The agreement shall include a one year severance provision for termination of Mr. Kurylak's employment, before or after the expiration of the term of his employment agreement for any reason, under which Mr. Kurylak shall receive base compensation and benefits for one year after the termination of employment. The Okun Parties agree to nominate Mr. Kurylak and vote the Okun Securities for Mr. Kurylak's election to the board of directors during the term of his employment. 5. Upon the purchase of the Convertible Debenture or Convertible Preferred Stock, the Okun Parties shall designate three additional nominees to Registrant's board of directors, who shall thereupon be appointed to the board. 6. Subsequent to the purchase of the Convertible Debenture or Convertible Preferred Stock by the Okun Parties, all of the independent members of Registrant's board of directors shall either resign from the board or agree not to stand for reelection at Registrant's next annual meeting of shareholders. 7. Upon the Effective Date, the lease between Water View and Registrant shall be deemed void. 8. Registrant shall agree to conduct a shareholders' meeting for the election of Registrant's Class II and Class III directors in a timely manner after the purchase of the Convertible Debenture or Convertible Preferred Stock contemplated under the Settlement Agreement. The nominees for directors shall include Mr. Okun's nominees and such other nominees as determined by the board on or after the Effective Date. 9. For a period of five (5) years after the Effective Date, Registrant shall agree to indemnify and hold harmless any and all former officers and directors of Registrant against any claims or liabilities arising out of their positions with Registrant, the execution of the Settlement Agreement or any other related matters arising during their affiliation with Registrant, to the extent they would otherwise be entitled to indemnification under Registrant's Certificate of Incorporation and By-Laws, as amended to date. 5 10. Upon the Effective Date, the Actions shall be dismissed with prejudice and the parties shall exchange general releases. 11. The Settlement Agreement and the general releases shall be subject to approval of the federal and state courts in which the Actions are pending, as well as federal, state and self regulatory bodies as required; and negotiation, execution and delivery of all documents necessary to effectuate the transaction. The parties agree to proceed in good faith to take all such actions as are required to receive necessary court approvals and negotiate, execute and deliver the required documentation. If one or more of the courts in which the Actions are pending, do not approve the Settlement Agreement or fail to rule thereon prior to August 31, 2007, the Settlement Agreement shall terminate ab initio. Until the purchase of the Convertible Debenture or Convertible Preferred Stock, neither the Okun Parties nor Registrant shall purchase or sell, or agree directly or indirectly to purchase or sell, any securities of Registrant. The Okun Parties and Registrant shall bear their own costs and expenses (including expenses of Representatives) incurred in connection with this transaction. Registrant's expenses shall include the costs of indemnification of officers and directors. The Okun Parties shall not request legal fees in the derivative action pending in the United States District Court, District of New Jersey, Civil Action No. 07cv00725. The Settlement Agreement has been approved by the New Jersey Superior Court. This foregoing summary of the Settlement Agreement is qualified in its entirety by reference to full text of The Settlement Agreement, which is filed as Exhibit 10.1 to this Current Report on Form 8-K. Item 5.02 Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers (b) As of May 9, 2007, Mr. Kurylak and Registrant executed an Amended and Restated Employment Agreement ("Amended Employment Agreement"). The Amended Employment Agreement was executed in connection with the execution of the Settlement Agreement. Pursuant to the Amended Employment Agreement, Mr. Kurylak will continue his employment by Registrant as President of Registrant and also President and Chief Executive Officer of First Montauk Securities Corp., the Registrant's broker-dealer subsidiary. Mr. Kurylak will resign, however, from the position of Chief Executive Officer of Registrant. In this modified capacity, Mr. Kurylak will report to the Chief Executive Officer of Registrant and Registrant's board of directors. In addition, Mr. Kurylak will continue to serve as a member of the board of directors of Registrant during the term of his employment. The Amended Employment Agreement will expire on December 31, 2007 ("Term"), subject to renewal for one additional period of one year unless Registrant provides written notice of its intention not to renew the Amended Employment Agreement at least 120 days prior to December 31, 2007. During the term of the Amended Employment Agreement, Mr. Kurylak will be compensated at the rate of $300,000 on an annualized basis. He is eligible for customary fringe benefits and to participate in Registrant's executive bonus pool. In the event of the termination of Mr. Kurylak's employment by Registrant without "cause" or by Mr. Kurylak for "good reason" as these terms are defined in the Amended Employment Agreement, he would be entitled to: (a) all compensation accrued but not paid as of the termination date; (b) base salary for the remainder of the Term; (c) a severance payment equal to $300,000 payable in a lump sum payment; (d) continued participation in Registrant's benefit plans (or comparable plans); and (e) any applicable bonus. If Mr. Kurylak's employment is terminated by Registrant for "cause" or by him without "good reason", he will be entitled only to accrued compensation. If termination of the Amended Employment Agreement occurs as a result of the expiration of such agreement without renewal by Registrant at the end of the Term, Mr. Kurylak will be entitled to the accrued compensation, any applicable bonus and the severance payment. 6 In the event Mr. Kurylak is a member of the board of directors of Registrant on the termination date, the payment of any and all compensation due under the Amended Employment Agreement, except the accrued compensation, is expressly conditioned on Mr. Kurylak's resignation from the board of directors of registrant within five (5) business of the termination date. The Amended Employment Agreement contains confidentiality obligations that survive indefinitely and non-solicitation and non-competition obligations that end on the first anniversary of the date of cessation of Mr. Kurylak's employment. The foregoing description of Mr. Kurylak's Amended Employment Agreement is qualified in its entirety by reference to the full text of the Amended Employment Agreement, which is filed as Exhibit 10.2 to this Current Report on Form 8-K (c) On May 8, 2007, Registrant entered into the Settlement Agreement pursuant to which Mr. Rogers is being appointed Chief Executive Officer and a director of Registrant. Registrant and Mr. Rogers shall enter into an employment agreement on mutually agreeable terms. Biographical Information: Mr. Rogers, age 50, is the former President, director and founding member of Triple Net Properties, LLC, a wholly-owned subsidiary of NNN Realty Advisors, Inc., a nationwide real estate asset firm. Triple Net offers a full range of commercial real estate investments, including tenant-in-common (TIC) programs for investors structuring tax-deferred (like-kind) exchanges under Section 1031 of the Internal Revenue Code, real estate investment trusts (REITs), funds, and institutional investments. As a partner with the Hirschler Fleischer law firm in Richmond, Virginia (1987-2004), Mr. Rogers structured real estate transactions as head of the firm's Real Estate Securities Practice Group. Mr. Rogers is experienced in REITs, Section 1031/TIC programs, funds and other alternative investment programs. He earned a J.D. from the University of Virginia (1984), a B.A. (with Honors) and M.A. in Jurisprudence from Wadham College, Oxford University (1981, 1985), and a B.A. in Political Science from Northeastern University (1979). Mr. Rogers is active in many real estate securities trade groups, having served as Chair of the Investment Program Association (direct placement trade association) Section 1031 Exchange Committee, founding and current Director and former Chair of the Legislative and Regulatory Committee of TICA (the TIC trade association), former member of the Board of Governors of the Real Property Section of the Virginia State Bar and former member of the Real Estate Committee of the American Bar Association's Tax Section. Mr. Rogers is a NASD - registered principal holding Series 7, 22, 24 and 63 licenses. Item 8.01 Other Events On May 9, 2007, the Registrant issued a press release announcing the Settlement Agreement with the Okun Parties. A copy of this press release is attached as Exhibit 99.1 to this Current Report. Exhibit 99.1 is being "furnished" and shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except as shall be expressly set forth by specific reference in such filing. 7 Item 9.01 Financial Statements and Exhibits (c) Exhibits The following exhibits are filed or furnished herewith: 10.1 Settlement Agreement, dated as of May 8, 2007, among the Registrant, Edward H. Okun, Investment Properties of America, LLC, IPofA Water View, LLC, FMFG Acquisition Co., FMFG Ownership I, FMFG Ownership II, Victor Kurylak, Ward R. Jones, Jr., Barry Shapiro, David Portman and Mindy Horowitz 10.2 Amended and Restated Employment Agreement dated as of May 9, 2007 between Victor Kurylak and the Registrant 99.1 Press Release dated May 9, 2007 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report on Form 8-K to be signed on its behalf by the undersigned hereunto duly authorized. FIRST MONTAUK FINANCIAL CORP. By: /s/ Victor K. Kurylak -------------------------------- Name: Victor K. Kurylak Title: President Date: May 11, 2007 EXHIBIT INDEX Exhibit Description Number 10.1 Settlement Agreement, dated as of May 8, 2007, among the Registrant, Edward H. Okun, Investment Properties of America, LLC, IPofA Water View, LLC, FMFG AcquisitionCo., FMFG Ownership I, FMFG Ownership II, Victor Kurylak, Ward R. Jones, Jr., Barry Shapiro, David Portman and Mindy Horowitz 10.2 Amended and Restated Employment Agreement dated as of May 9, 2007 between Victor Kurylak and the Registrant 99.1 Press Release dated May 9, 2007 8 EX-10 2 exhibit1.txt EXHIBIT TO FORM 8-K Exhibit 10.1 May 8, 2007 Mr. Edward H. Okun Investment Properties of America, LLC FMFG OWNERSHIP, INC. FMFG OWNERSHIP II, INC. FMFG ACQUISITIONCO, INC. 10800 Midlothian Turnpike, Suite 309 Richmond, Virginia 23235 Dear Mr. Okun: The following will set forth the terms upon which First Montauk Financial Corp., a New Jersey corporation ("Montauk"), Victor Kurylak, Ward R. Jones, Jr., Barry Shapiro, David I. Portman, and Mindy Horowitz (collectively, the "Montauk Parties") and Edward H. Okun, Investment Properties of America, LLC, IPofA Water View, LLC ("Water View"), FMFG AcquisitionCo, Inc., a New Jersey corporation ("AcquisitionCo"), FMFG Ownership, Inc. ("Ownership I"), a Delaware corporation, and FMFG Ownership II, Inc., a Delaware corporation ("Ownership II" and together with Ownership I, collectively, the "Okun Parties"), agree to settle all the disputes among the parties. This letter shall not constitute a final and binding obligation on the part of any party unless and until court approval is obtained as provided in Paragraph 14 hereof. 1. Upon the Effective Date, as defined in Paragraph 14 below, Ownership I will cause to be issued to the shareholders of Montauk other than the Okun Parties (the "Minority Shareholders" or the "Holders"), the right (the "Put"), but not the obligation, to sell their shares of Montauk Common Stock to a designated Okun Party for $1.00 per share in cash (the "Exercise Price") on the following terms and conditions: a. The Put shall be exercisable by the Holders during the period commencing on the 18th month anniversary date of the Effective Date (the "Commencement Date") and terminating sixty (60) days thereafter (the "Expiration Date"). Any Put not exercised prior to 5:00 p.m. (New York time) on the Expiration Date shall be deemed void without any further force or effect. b. In the event the average closing price of Montauk's Common Stock is less than the Exercise Price for the twenty (20) consecutive trading days ending within five (5) trading days of the Commencement Date, the Okun Parties shall cause to be deposited with Montauk's transfer agent (the "Transfer Agent") within forty-five (45) days from the Commencement Date, such amount of cash as shall be necessary to pay the aggregate Exercise Price to the Holders. The cash shall be deposited into an escrow account (the "Escrow Account") and subject to the terms of an escrow agreement among the Okun Parties, Montauk and the Transfer Agent, which shall include provisions ensuring the availability of the escrowed funds for distribution to the Holders upon their exercise of the Put. All interest earned on the funds deposited in the Escrow Account shall be paid to the Okun Parties upon the fulfillment of all of the Put obligations. Mr. Edward H. Okun May 8, 2007 Page 2 c. In the event the Okun Parties are not required to so deposit the Exercise Price under the terms of subparagraph 1b, and Holders nevertheless exercise Puts, the Okun Parties shall cause to be deposited with the Transfer Agent sufficient cash to pay the Exercise Price for each Put exercised within thirty (30) days of receipt of notice of such exercise. d. Within sixty (60) days of receipt of notice of exercise of a Put properly verified by the Transfer Agent, and the accompanying stock certificate of the Holder duly endorsed for transfer to FMFG, the Transfer Agent shall pay the Exercise Price in good funds to the exercising Holder. e. Other Conditions. i. The Put shall be redeemable by Montauk, in its discretion, in the event of a default by the Okun Parties for $.001 per Put. Such redemption shall not relieve the Okun Parties of any liability for the default. ii. The Put shall be nontransferable and shall attach to the shares held by the Holders on the record date (the "Record Date") established for the distribution of the Put. In the event a Holder publicly sells his shares of Common Stock to which the Put is attached at any time after the Record Date except upon exercise of the Put, the Put shall be deemed cancelled. Each Holder shall be required to represent upon exercise of the Put, that the shares delivered upon exercise of the Put have been continually held by the Holder from the Record Date. iii. In the event the average closing stock price of Montauk's Common Stock is at least $1.25 per share with a minimum daily volume of 75,000 shares for a period of forty-five (45) trading days, whether or not consecutive in any sixty (60) day trading day period at any time after the Effective Date but prior to the Commencement Date, the Put shall be deemed cancelled. f. Exemption from registration. i. The parties contemplate that the issuance of the Put will be exempt from registration pursuant to Section 3(a) (10) of the Securities Act of 1933, as amended (the "Securities Act") and applicable state securities laws and regulations. The parties agree to cooperate in the fulfillment of the conditions to the exemption including court approval and notice to shareholders. ii. In the event an exemption under Section 3(a) (10) is not available, the parties agree to amend this paragraph 1 to allow for Securities Act compliance, subject to their mutual agreement. The parties further agree that the issuer of the Put shall not be required to comply with the reporting obligations of the Exchange Act of 1934, as amended (the "Exchange Act"), and in the event Exchange Act compliance is required, the parties agree to deem the issuance of the Put not exempt for the purposes of this subparagraph f(i). Mr. Edward H. Okun May 8, 2007 Page 3 g. Security h. The Okun Parties shall secure their timely obligation to pay the Exercise Price with all of the shares of Montauk securities held by Ownership I and Ownership II on the date hereof (the "Okun Securities"), and the Convertible Debenture or Convertible Preferred Stock, as defined below (collectively, the "Security"). Montauk shall have a first priority lien on the Security until the complete fulfillment of the Put obligations by the Okun Parties. i. Notwithstanding the foregoing, Ownership I and Ownership II shall be entitled to replace the Security at any time with cash or, an irrevocable letter of credit reasonably satisfactory to Montauk's Board of Directors equal to $1.00 times the number of Puts outstanding (the "Security Minimum"). Ownership I and II shall also be entitled to sell the Security for cash and deposit the cash in escrow as Security; provided however, in the event the cash plus the market value of the shares of Common Stock held as Security exceeds the Security Minimum, Ownership I and II shall be entitled to withdraw the amount of cash that exceeds the Security Minimum. In the event Ownership I and II withdraws cash from the Security and the value of the Security falls below the Security Minimum, Ownership I and II shall contribute such amount of cash to the Security as shall cause the value of the Security to equal the Security Minimum up to the amount of cash withdrawn The value of the Security for the purposes of determining the right to withdraw cash, or the obligation to contribute cash, shall be determined monthly. Payments or withdrawals shall be made within five business days. ii. In the event the Okun Parties fail to pay the Exercise Price upon exercise by the Holders as required by the Put, the Okun Securities (including the Convertible Preferred Stock if issued) shall be deemed surrendered for cancellation and the Convertible Debenture shall be deemed fully paid. 2. On the Effective Date, the parties shall direct the escrow agent, Signature Bank New York, to pay to Ownership I all of the funds on deposit by the Okun Parties under the Escrow Agreement executed and delivered pursuant to the May 5, 2006 Merger Agreement by and among Montauk, Ownership I and AcquisitionCo. Within ninety (90) days of the Effective Date, the Okun Parties shall invest $2.0 million in Montauk, to be used to fund Montauk's broker-dealer operations in such manner as determined by the First Montauk board of directors. Montauk shall issue to the Okun Parties, at their sole option, either a convertible debenture (the "Convertible Debenture") in such principal amount or a new series of convertible preferred stock (the "Convertible Preferred Stock") with an aggregate par value equal to $2.0 million. a. The Convertible Debenture or Convertible Preferred Stock shall be convertible into shares of Common Stock at a conversion price equal to $.75 per share, commencing on the fulfillment, or cancellation, of all Put obligations by the Okun Parties, according to the terms of the Put Mr. Edward H. Okun May 8, 2007 Page 4 b. The Convertible Debenture or Convertible Preferred Stock shall accrue interest or cumulative dividends, as the case may be, commencing on the date of issuance at a rate equal to 12% per annum, payable, at the option of the Company, in cash or shares of the Company's Common Stock evaluated at the closing price of the Common Stock on the last trading day immediately preceding the date of payment. c. In the event the Okun Parties fail to purchase the Debenture or Perferred Stock as required by this paragraph 2, the Okun Securities shall be deemed surrendered for cancellation and the Convertible Debenture shall be deemed fully paid. 3. Upon the date hereof, Louis J. Rogers shall be appointed Chief Executive Officer and a director of First Montauk Financial Corp. a. Mr. Rogers shall enter into an employment agreement on mutually agreeable terms to serve as Chief Executive Officer of Montauk, which agreement shall include negative and restrictive covenants for the period commencing on the date of employment and terminating one year after termination of employment for any reason. b. Mr. Rogers shall complete a directors' and officers' questionnaire as reasonably requested by Montauk. c. Mr. Rogers shall report to the board of directors of Montauk. 4. Upon the date hereof, Victor K. Kurylak shall enter into a modification of his existing employment agreement expiring December 31, 2007 with Montauk. Such employment agreement shall be on the same terms and conditions of Mr. Kurylak's existing employment agreement except Mr. Kurylak's title and position shall be President of First Montauk Financial Corp. and President and Chief Executive Officer of First Montauk Securities Corp, reporting jointly to Mr. Rogers and the Board of Directors. The agreement shall include a one year severance provision for termination of employment, before or after the expiration of the term of his employment agreement for any reason, under which Mr. Kurylak shall receive base compensation and benefits for one year after the termination of employment. The Okun Parties agree to nominate Mr. Kurylak and vote the Okun Securities for Mr. Kurylak's election to the board of directors during the term of his employment. Mr. Edward H. Okun May 8, 2007 Page 5 a. The Okun Parties will cooperate with Mr. Kurylak in expunging from the Central Registration Depository ("CRD") any reference to any complaint by the Okun Parties against Mr. Kurylak that Mr. Kurylak and/or the Company is the subject of an alleged investment-related sales practice violation, forgery, theft, misappropriation, or conversion of funds. This cooperation will include, without limitation, (i) filing or participating in an arbitration before the National Association of the Securities Dealers (the "NASD") and/or a court proceeding directing the NASD to expunge from Mr. Kurylak's CRD the complaint of FMFG, and (ii) executing a Stipulated Award or Consent Order recommending or granting expungment. In connection therewith and to the extent necessary to the obtain an expungment order, FMFG will also acknowledge and consent to findings that, after further investigation, its information, claim, or allegation is factually impossible or clearly erroneous; that Mr. Kurylak was not involved in the alleged investment-related sales practice violation, forgery, theft, misappropriation, or conversion of funds; or the claim, allegation, or information is false. 5. Upon the Effective Date, Philip D'Ambrisi shall enter into an employment agreement on mutually agreeable terms to serve as Chief Operating Officer of Montauk, which agreement shall include negative and restrictive covenants for the period commencing on the date of employment and terminating one year after termination of employment for any reason. 6. Upon the purchase of the Convertible Debenture or Convertible Preferred Stock, the Okun Parties shall designate four nominees to Montauk's board of directors including Mr. Rogers who shall all thereupon take office. 7. Subsequent to the purchase of the Convertible Debenture or Convertible Preferred Stock under paragraph 2, all of the independent members of Montauk's board of directors shall either resign from the board or agree not to stand for reelection at Montauk's next annual meeting of shareholders. 8. Upon the Effective Date, the lease between Water View and Montauk shall be deemed void ab initio. 9. Montauk shall agree to conduct a shareholders' meeting for the election of the Class II and Class III directors in a timely manner after the purchase of the Debenture or Convertible Preferred Stock under paragraph 2. The nominees for directors shall include Mr. Okun's nominees and such other nominees as determined by the board on or after the Effective Date. Mr. Edward H. Okun May 8, 2007 Page 6 10. For a period of five (5) years after the Effective Date, Montauk shall agree to indemnify and hold harmless any and all former officers and directors of Montauk against any claims or liabilities arising out of their positions with Montauk, the execution of this Agreement or any other related matters arising during their affiliation with Montauk, to the extent they would otherwise be entitled to indemnification under Montauk's Certificate of Incorporation and By-Laws, as amended to date. 11. Due to the confidential nature of this transaction, no party shall make any announcement or disclosure regarding the transaction without the prior consent of the others, unless and except as required by applicable law. Notwithstanding this Paragraph 11, the Okun Parties acknowledge and agree that Montauk may be required to disclose in a public announcement and to file with the Securities and Exchange Commission any material terms and conditions of this Agreement and otherwise make proper disclosure under federal and state securities laws, and consents to the same, subject to timely review by and consultation with the Okun Parties. Upon the execution of this Agreement, Montauk and the Okun parties may issue a mutually approved press release. Thereafter the parties each agree that they will not make public statements regarding the transactions contemplated by this Agreement without first consulting the other party with a view toward issuing joint public statements, except to the extent required by law. 12. This Agreement shall be governed by and construed in accordance with the domestic laws of the State of New Jersey without giving effect to any choice or conflict of law provision or rule (whether of the State of New Jersey or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of New Jersey. The Parties (a) agree that any legal suit, action or proceeding arising out of or relating to the agreement shall be instituted exclusively in New Jersey State Superior Court, County of Monmouth, or in the United States District Court for the District of New Jersey, (b) waives any objection which any Party may have now or hereafter to the venue of any such suit, action or proceeding, and (c) irrevocably consent to the jurisdiction of the New Jersey State Superior Court, County of Monmouth and the United States District Court for the District of New Jersey in any such suit, action or procedure. Mr. Edward H. Okun May 8, 2007 Page 7 13. Upon the Effective Date, the actions (the "Actions") pending in (i) the Superior Court of the State of New Jersey, Chancery Division, Monmouth County Docket No. C-07-07 entitled First Montauk Financial Corp., against Edward H. Okun, et al; (ii) the United States District Court, District of New Jersey, Civil Action No. 07cv00725, entitled FMFG Ownership, Inc. against Victor Kurylak, et al; and (iii) the United States District Court, Southern District of Florida, Case No. 07-20482-Civ, entitled FMFG Ownership, Inc. against Victor Kurylak, shall be dismissed with prejudice and the parties shall exchange general releases. a. The parties shall use their best efforts and take all action reasonably necessary to cause the action against Mr. Kurylak to be expunged from his record with the CRD. 14. This Agreement and the general releases shall be subject to approval of the federal and state courts in which the Actions are pending, as well as federal, state and self regulatory bodies as required; and negotiation, execution and delivery of all documents necessary to effectuate the transaction. Upon receipt of all necessary approvals, this Agreement shall be deemed fully effective (the "Effective Date"). The parties agree to proceed in good faith to take all such actions as are required to receive necessary court approvals and negotiate, execute and deliver the required documentation. If one or more of the courts in which the Actions are pending, do not approve this Agreement or fail to rule thereon prior to August 31, 2007, this Agreement shall terminate ab initio. 15. Until the purchase of the Convertible Debenture and Convertible Preferred Stock under paragraph 2, neither the Okun Parties nor Montauk shall purchase or sell, or agree directly or indirectly to purchase or sell, any securities of Montauk. 16. The Okun Parties and Montauk shall bear their own costs and expenses (including expenses of representatives) incurred in connection with this transaction. Montauk expenses shall include the costs of indemnification of officers and directors. The Okun parties shall not request legal fees in the derivative action pending in the United States District Court, District of New Jersey, Civil Action No. 07cv00725. [Signatures appear on the following page] Mr. Edward H. Okun May 8, 2007 Page 8 We look forward to concluding this transaction as promptly as practicable. I would appreciate your countersigning this letter where indicated as constituting your concurrence with the intent expressed herein. This letter of intent may be executed in multiple counterparts which when taken together shall be an original. Very truly yours, Dated: May 8, 2007 FIRST MONTAUK FINANCIAL CORP. By: /s/ Victor K. Kurylak --------------------------------- Name: Victor K. Kurylak Title: President CONCURRED IN AND ACCEPTED AS OF MAY 8, 2007. /s/ Edward H. Okun ------------------------------------ EDWARD H. OKUN Dated: May 8, 2007 INVESTMENT PROPERTIES OF AMERICA, LLC By: IPofA Fund Manager, LLC, Manager By: /s/ Edward H. Okun ------------------------------------ Edward H. Okun, Manager Dated: May 8, 2007 IPofA WATER VIEW, LLC By: IPofA Fund Manager, LLC, Manager By: /s/ Edward H. Okun ------------------------------------ Edward H. Okun, Manager Dated: May 8, 2007 [Signatures appear on the following page] Mr. Edward H. Okun May 8, 2007 Page 9 FMFG ACQUISITION, INC. By: /s/ Edward H. Okun ------------------------------------- Edward H. Okun, President Dated: May 8, 2007 FMFG OWNERSHIP I, INC. By: /s/ Edward H. Okun -------------------------------------- Edward H. Okun, President Dated: May 8, 2007 FMFG ACQUISITION OWNERSHIP II, INC. By: /s/ Edward H. Okun --------------------------------------- Edward H. Okun, President Dated: May 8, 2007 /s/ Victor Kurylak ------------------------------------------ VICTOR KURYLAK Dated: May 8, 2007 /s/ Ward R. Jones, Jr. ------------------------------------------ WARD R. JONES, JR. Dated: May 8, 2007 /s/ Barry Shapiro ------------------------------------------ BARRY SHAPIRO Dated: May 8, 2007 [Signatures appear on the following page] Mr. Edward H. Okun May 8, 2007 Page 10 /s/ David I. Portman ------------------------------------------ DAVID I. PORTMAN Dated: May 8, 2007 /s/ Mindy Horowitz ------------------------------------------ MINDY HOROWITZ Dated: May 8, 2007 Louis J. Rogers, with respect to paragraph 3 only /s/ Louis J. Rogers ----------------------------------------- Louis J. Rogers Dated: May 8, 2007 EX-10 3 exhibit2.txt EXHIBIT TO FORM 8-K Exhibit 10.2 AMENDED AND RESTATED EMPLOYMENT AGREEMENT THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT made as of the 9th day of May, 2007 by and between Victor K. Kurylak, residing at 26 Meadow Lane, Lebanon, New Jersey 08833 (hereinafter referred to as the "Employee") and First Montauk Financial Corp., a New Jersey corporation with principal offices Parkway 109, Red Bank, New Jersey 07701 (hereinafter referred to as the "Company"). W I T N E S S E T H: WHEREAS, the Company, through its wholly owned subsidiary First Montauk Securities Corp ("FMSC"), is engaged in the investment banking and general securities business as a registered broker-dealer; and WHEREAS, the Company has employed the Employee since before February 2005 pursuant to an Employment Agreement dated as of February 1, 2005 and desires to continue to employ the Employee in a modified capacity as more fully described herein; and WHEREAS, the Employee desires to continue to be employed by the Company, pursuant to the terms and conditions herein set forth, superseding all prior oral and written employment agreements, and term sheets and letters between the Company, its subsidiaries and/or predecessors and Employee; NOW, THEREFORE, it is mutually agreed by and between the parties hereto as follows: ARTICLE I DEFINITIONS 1.1. Accrued Compensation. Accrued Compensation shall mean an amount which shall include all amounts earned or accrued through the "Termination Date" (as defined below) but not paid as of the Termination Date, including (i) Base Salary, (ii) reimbursement for business expenses incurred by the Employee on behalf of the Company, pursuant to the Company's expense reimbursement policy in effect at such time, (iii) vacation pay, and (iv) bonuses and incentive compensation earned and awarded prior to the Termination Date. 1.2. Cause. Cause shall mean: (i) willful disobedience by the Employee of a material and lawful instruction of the Board of Directors of the Company; (ii) formal charge, indictment or conviction of the Employee of any misdemeanor involving fraud or embezzlement or similar crime, or any felony; (iii) breach by the Employee of any material provision of this Agreement; (iv) conduct amounting to fraud, dishonesty, gross negligence, willful misconduct or recurring insubordination; (v) excessive absences from work, other than for illness or Disability; or (vi) unsatisfactory performance of duties; provided that the Company shall not have the right to terminate the employment of Employee pursuant to the foregoing clauses (i), (iii), (iv), (v) and (vi) above unless written notice specifying such breach shall have been given to the Employee and, in the case of breach which is capable of being cured, the Employee shall have failed to cure such breach within thirty (30) days after his receipt of such notice. 1.3. Continuation Benefits. Continuation Benefits shall be the continuation of the Benefits, as defined in Section 5.1, for the period from the Termination Date to the later of (i) one year from the Termination Date or (ii) the Expiration Date (as hereinafter defined) (the "Continuation Period") at the Company's expense on behalf of the Employee and his dependents. The Company's obligation hereunder with respect to the foregoing benefits shall be limited to the extent that if the Employee obtains any such benefits pursuant to a subsequent employer's benefit plans, the Company may reduce the coverage of any benefits it is required to provide the Employee hereunder as long as the aggregate coverages and benefits of the combined benefit plans is no less favorable to the Employee than the coverages and benefits required to be provided hereunder. This definition of Continuation Benefits shall not be interpreted so as to limit any benefits to which the Employee, his dependents or beneficiaries may be entitled under any of the Consolidated Omnibus Budget Reconciliation Act ("COBRA") or such other similar law, the Company's employee benefit plans, programs or practices following the Employee's termination of employment, including, without limitation, retiree medical and life insurance benefits. 1.4. Disability. Disability shall mean a physical or mental infirmity which impairs the Employee's ability to substantially perform his duties with the Company for a period of ninety (90) consecutive days. 1.5. Termination for Good Reason. Termination for Good Reason shall mean the Employee's termination of his employment with the Company within six months following the initial existence of one or more of the following conditions that arise without the Employee's consent: (i) A diminution in the Employee's base salary. (ii) A material diminution in the Employee's authority, duties or responsibilities. (iii) A material diminution in the authority, duties, or responsibilities of the supervisor to whom the Employee is required to report. (iv) A material diminution in the budget over which the Employee retains authority. (v) A material change in the geographic location at which the Employee must perform his duties. (vi) Any other action or inaction that constitutes a material breach by the Company of this Agreement. The Employee shall provide notice to the Company of the existence of the condition described above in this Section 1.5 within 90 days of the initial existence of the condition, and upon its receipt of such notice, the Company shall have a period of 30 days during which it may remedy the condition before the Employee shall be entitled to serve a Notice of Termination on the Company. 1.6. Notice of Termination. Notice of Termination shall mean a written notice from the Company or the Employee, of termination of the Employee's employment which indicates the provision in this Agreement relied upon, if any. A Notice of Termination served by the Company shall specify the effective date of termination. 1.7. Termination Date. Termination Date shall mean (i) in the case of the Employee's death, his date of death; (ii) in the case of the expiration of the Term (as hereinafter defined), the last day of the Term; and (iii) in all other cases, the date specified in the Notice of Termination. 2 1.8. Severance Benefit. Severance Benefit shall mean (i) the amount of Three Hundred Thousand Dollars ($300,000), which shall be paid in a lump sum payment as provided in Section 9.4 hereof (the "Severance Payment"), and (ii) the Continuation Benefits described in clauses (i) and (ii) of Section 5.1 hereof, which Continuation Benefits shall continue for one (1) year following the later of (A) the Termination Date, or (B) if the Termination Date results from the Employee's Disability, the termination by the Company without Cause or the Termination for Good Reason by the Employee, the Expiration Date, all at the Company's expense (the "Insurance Benefits"). ARTICLE II EMPLOYMENT 2.1. Subject to and upon the terms and conditions of this Agreement, the Company hereby employs and agrees to continue the employment of the Employee, and the Employee hereby accepts such continued employment in his capacity as President of the Company and Chief Executive Officer and President of FMSC, the Company's principal subsidiary. Employee shall immediately resign from the position of Chief Executive Officer of the Company. In this modified capacity, Employee will report to the Chief Executive Officer of the Company and the Company's Board of Directors. ARTICLE III DUTIES 3.1. The Employee shall, during the term of his employment with the Company, and subject to the direction and control of the Chief Executive Officer of the Company and the Company's Board of Directors, perform such duties and functions as he may be called upon to perform by the President and Chief Executive Officer of the Company during the term of this Agreement, consistent with his position as President of the Company and Chief Executive Officer and President of FMSC. 3.2. The Employee agrees to use his best efforts in the promotion and advancement of the Company and FMSC and its welfare and business. Employee agrees to devote his primary professional time to the business of the Company and FMSC as Employee deems reasonably necessary; provided, however, that the Company acknowledges that Employee shall be entitled to pursue unrelated personal business ventures that do not materially conflict with the performance of Employee's duties to the Company and FMSC. 3.3. Employee shall be based in the Red Bank, New Jersey area, and shall undertake such occasional travel, within or without the United States as is or may be reasonably necessary in the interests of the Company and FMSC. 3.4. Licenses and Registrations. During the term of this Agreement, Employee shall maintain in good standing all required licenses and registrations required for the proper performance of his duties and functions. 3 ARTICLE IV COMPENSATION 4.1. During the Term, Employee shall be compensated at the rate of $300,000 on an annualized basis (the "Base Salary"). The Base Salary shall be paid to the Employee in accordance with the Company's regular executive payroll periods. 4.2. Employee shall be entitled to receive a bonus (the "Bonus") during each year of this Agreement (inclusive of all of 2007), determined as follows: The amount to be paid as a Bonus shall be determined as of each December 31 by the Compensation Committee of the Board of Directors based upon the prior fiscal year end and shall consist of a portion of an "Executive Bonus Pool." The Executive Bonus Pool shall be equal to fifteen (15%) percent of the net pre-tax profit of the Company as determined by the Company's independent auditors, no later than 90 days following the end of the Company's fiscal year, excluding any expense deduction attributed to such Executive Bonus Pool (the "Net Pre-Tax Profit"); provided that, in the event the Net Pre-Tax Profit of the Company for any fiscal year is less than $500,000, no Executive Bonus Pool shall be established or Bonus paid by the Company to the Employee pursuant to this Section 4.2. Such determination, for purposes of this Section 4.2 only, shall be made in accordance with generally accepted accounting principles, as modified by these resolutions. If the Termination Date occurs on a date other than December 31, then under the applicable circumstances described in Section 9.3 hereof, the Employee shall be entitled to a proportionate share of the Bonus for the fiscal year in which the Termination Date occurs, based upon a fraction, the numerator of which is the number of complete months in the applicable fiscal year prior to the Termination Date and the denominator of which is 12 (the "Pro Rata Bonus"). Notwithstanding the foregoing, if the Termination Date occurs prior to the Expiration Date as a result of the termination by the Company without Cause or the Termination for Good Reason by the Employee, the Employee shall be entitled to the Bonus for the entire fiscal year and not just the Pro Rata Bonus. 4.3. Employee shall also be entitled to receive brokerage commissions in accordance with the commission schedule in effect for other non-affiliate brokers employed by the Company. 4.4. Employee shall be eligible to purchase from the Company, at Employee's sole discretion, a portion of the securities contributed to the "Corporate Finance Bonus Pool" upon the same price, terms and conditions afforded to FMSC. The Corporate Finance Bonus Pool shall consist of up to 20% of all underwriter's warrants, placement agent warrants and/or other securities granted to FMSC, in connection with its service as an underwriter, placement agent or investment banker; provided however, such amount shall not exceed 50% of the total securities retained by FMSC after any allocations to the registered representatives and the corporate finance staff in accordance with the corporate policies in effect from time to time. The amount Employee shall be entitled to purchase shall be determined by the Compensation Committee of the Board of Directors on a transaction-by-transaction basis. 4.5. The Company shall deduct from Employee's compensation all federal, state and local taxes which it may now or may hereafter be required to deduct. 4.6. Employee may receive such other additional compensation as may be determined from time to time by the Board of Directors including bonuses and other long-term compensation plans. Nothing herein shall be deemed or construed to require the Board to award any bonus or additional compensation. 4 ARTICLE V BENEFITS 5.1. During the term hereof, the Company shall provide Employee with the following benefits (the "Benefits"): (i) group health care and insurance benefits as generally made available to the Company's senior management; (ii) such other insurance benefits obtained by the Company and made generally available to the Company's senior management; (iii) the Company shall provide the Employee with an automobile suitable for his position, equipped with a mobile telephone, or at Employee's option, an appropriate automobile allowance, and reimburse reasonable automobile expenses including insurance, repairs, maintenance, gasoline charges, mobile phone, etc. via receipted expense reports; (iv) reimbursement, upon presentation of appropriate vouchers, for all reasonable business expenses (including fees for licenses and registrations) incurred by Employee on behalf of the Company upon presentation of suitable documentation and (v) payment of country club dues for one golf country club full family membership at Colonia Country Club or comparable club. 5.2. In the event the Company wishes to obtain Key Man life insurance on the life of Employee, Employee agrees to cooperate with the Company in completing any applications necessary to obtain such insurance and promptly submit to such physical examinations and furnish such information as any proposed insurance carrier may request. 5.3. For the term of this Agreement, Employee shall be entitled to paid vacation at the rate of four (4) weeks per annum. 5.4. Employee shall have continued use of a corporate credit card to be used for all reasonable business expenses incurred by Employee on behalf of the Company upon presentation of suitable documentation. ARTICLE VI NON-DISCLOSURE 6.1. The Employee shall not, at any time during or after the termination of his employment hereunder, except when acting on behalf of and with the authorization of the Company, make use of or disclose to any person, corporation, or other entity, for any purpose whatsoever, any trade secret or other confidential information concerning the Company's business, finances, marketing, brokerage accounts, corporate finance transactions and clients, products and services, accounting, insurance business and personnel of the Company and its subsidiaries, including information relating to any customer of the Company, or any other nonpublic business information of the Company and/or its subsidiaries learned as a consequence of Employee's employment with the Company (collectively referred to as the "Proprietary Information"). For the purposes of this Agreement, trade secrets and confidential information shall mean information disclosed to the Employee or known by him as a consequence of his employment by the Company, whether or not pursuant to this Agreement, and not generally known 5 in the industry. The Employee acknowledges that trade secrets and other items of confidential information, as they may exist from time to time, are valuable and unique assets of the Company, and that disclosure of any such information would cause substantial injury to the Company. Trade secrets and confidential information shall cease to be trade secrets or confidential information, as applicable, at such time as such information becomes public other than through disclosure, directly or indirectly, by Employee in violation of this Agreement. Notwithstanding the foregoing, information concerning a customer introduced to the Company by Employee, and known to Employee other than as a consequence of his employment by the Company, shall not be deemed Propriety Information within the contemplation of this Section 6.1. 6.2. If Employee is requested or required (by oral questions, interrogatories, requests for information or document subpoenas, civil investigative demands, or similar process) to disclose any Proprietary Information, Employee shall, unless prohibited by law, promptly notify the Company of such request(s) so that the Company may seek an appropriate protective order. ARTICLE VII RESTRICTIVE COVENANT 7.1. In the event of the voluntary termination of employment with the Company prior to the expiration of the Term hereof, or Employee's discharge in accordance with Article IX, or the expiration of the Term hereof without renewal, Employee agrees that he will not, for a period of one (1) year following such termination of employment, directly or indirectly, solicit brokers, or employees of the Company, or any sister or subsidiary of the Company for employment with any other entity, or (ii) solicit or accept (a) any corporate finance client of the Company or FMSC relating to a transaction, pending or proposed, involving a public offering, private placement, or merger and acquisition advisory services, (b) research project of the Company or FMSC which was under consideration or pending at the time of Employee's termination, or (c) any brokerage client of the Company, other than brokerage clients introduced to the Company by Employee, and known to Employee other than as a consequence of his employment by the Company. Notwithstanding the foregoing, in addition to any rights or remedies available to the Employee at law or in equity, all the restrictions contained in this Section 7.1 shall terminate and be of no further force or effect if the Company fails to make any of the payments it is required to make to the Employee pursuant to this Agreement. 7.2. If any court shall hold that the duration of non-competition or any other restriction contained in this Article VII is unenforceable, it is our intention that same shall not thereby be terminated but shall be deemed amended to delete therefrom such provision or portion adjudicated to be invalid or unenforceable or, in the alternative, such judicially substituted term may be substituted therefor. 6 ARTICLE VIII TERM 8.1. This Amended and Restated Agreement shall be for a term (the "Term") commencing on May 9, 2007 (the "Commencement Date") and terminating on December 31, 2007, subject to renewal for one additional period of one year unless the Company provides written notice of its intention not to renew this Agreement at least 120 days prior to December 31, 2007 (the last day of the Term, the "Expiration Date"). ARTICLE IX TERMINATION 9.1. The Company may terminate this Agreement by giving a Notice of Termination to the Employee in accordance with this Agreement: a. For Disability; b. For Cause; or c. Without Cause. 9.2. Employee may terminate this Agreement by giving (a) a Notice of Termination to the Company in the event of a Termination for Good Reason in accordance with Section 1.5 hereof, or (b) a Notice of Termination in accordance with this Agreement, at any time, without good reason. 9.3. If the Employee's employment with the Company shall terminate or be terminated, the Company shall pay and/or provide to the Employee, his designated beneficiary or his estate, the following compensation and benefits in lieu of any other compensation or benefits arising under this Agreement or otherwise: (a) if the Employee is terminated by the Company for Cause, or the Employee terminates his employment without good reason, the Accrued Compensation; (b) if the Employee is terminated by the Company for Disability, the Accrued Compensation, the Benefits and the Base Salary for the remainder of the Term, plus the Pro Rata Bonus and the Severance Benefit; or (c) if termination is due to the Employee's death, the Accrued Compensation, the Pro Rata Bonus and the Severance Benefit; or (d) if the Employee is terminated by the Company without Cause or there is a Termination for Good Reason by the Employee, the Accrued Compensation, the Benefits and the Base Salary for the remainder of the Term, plus the Bonus and the Severance Benefit; or (e) if the termination occurs as a result of the expiration of this Agreement without renewal by the Company at the end of the Term, the Accrued Compensation, the Bonus and the Severance Benefit. 9.4. The amounts payable under this Section 9 shall be paid as follows: (a) Accrued Compensation shall be paid within five (5) business days after the Employee's Termination Date (or earlier, if required by applicable law). (b) If the Benefits, Continuation Benefits and/or Insurance Benefits are paid in cash, the payments shall be made on the first day of each month during the balance of the applicable period described in this Agreement (or earlier, if required by applicable law), as applicable. (c) The Base Salary for the remainder of the Term shall be paid in accordance with the Company's regular pay periods (or earlier, if required by applicable law). (d) The Bonus or Pro Rata Bonus shall be paid in accordance with the Company's regular practice for the payments of the Bonus (or earlier, if required by applicable law). 7 (e) The Severance Payment shall be paid in one lump sum no later than fifteen (15) business days following the Termination Date. 9.5. Notwithstanding the foregoing, in the event Employee is a member of the Board of Directors on the Termination Date, the payment of any and all compensation due hereunder, except Accrued Compensation, is expressly conditioned on Employee's resignation from the Board of Directors within five (5) business days of the Termination Date. 9.6. The Employee shall not be required to mitigate the amount of any payment provided for in this Agreement by seeking other employment or otherwise and no such payment shall be offset or reduced by the amount of any compensation or benefits provided to the Employee in any subsequent employment except as provided in Section 1.3. 9.7. In the event the Termination Date occurs as a result of the Employee's death or if after the Termination Date, the Employee shall die prior to payment in full of all the amounts he is entitled to pursuant to this Agreement, the Company shall make all payments to the beneficiary designated by the Employee by written notice to the Company from time to time. If no such beneficiary is designated or if the designated beneficiary has predeceased the Employee, the payments shall be made pursuant to the Employee's Last Will and Testament or if there be none, the laws of intestate succession. ARTICLE X TERMINATION OF PRIOR AGREEMENTS 10.1. This Agreement sets forth the entire agreement between the parties and supersedes all prior agreements, letters and understandings between the parties, whether oral or written prior to the effective date of this Agreement. Employee expressly acknowledges that the Employment Agreements between Employee and the Company dated as of February 1, 2004 and February 1, 2005 shall be of no further force or effect, and that the Employee has fully performed all of his obligations under those Employment Agreements, and that the Employee has received all compensation and benefits under those prior Employment Agreements. ARTICLE XI STOCK OPTIONS 11.1. Employee has previously received and is fully vested in stock options to purchase 250,000 shares of the Company's Common Stock which are exercisable at $.50 per share. The terms of the award shall be deemed amended to provide that the award shall remain exercisable for the duration of their original term notwithstanding the occurrence of the Termination Date prior thereto. No further options are being granted to Employee under this Agreement. Employee shall be eligible to receive such further options as may be granted by the Board of Directors during the term hereof. 8 ARTICLE XII REPRESENTATION; ARBITRATION AND INDEMNIFICATION; FEES AND EXPENSES 12.1. The Company represents and warrants to the Employee that this Agreement complies with the provisions of Section 409A of the Internal Revenue Code of 1986, as amended. 12.2. Any dispute arising out of the interpretation, application, and/or performance of this Agreement with the sole exception of any claim, breach, or violation arising under Articles VI or VII hereof relating to a request to a court for immediate injunctive relief, shall be settled through final and binding arbitration before a panel of arbitrators in accordance with the rules of the National Association of Securities Dealers (the "NASD"). Any judgment upon any arbitration award may be entered in any court, federal or state, having competent jurisdiction of the parties before a single arbitrator in the State of New Jersey in accordance with the Rules of the American Arbitration Association. The NASD shall select the arbitrators. Any judgment upon any arbitration award may be entered in any court, federal or state, having competent jurisdiction of the parties. 12.3. The Company hereby agrees to indemnify, defend, and hold harmless the Employee for any and all claims arising from or related to (a) his employment by the Company at any time asserted, at any place asserted, to the fullest extent permitted by law, except for claims based on Employee's fraud, deceit or willfulness, or (b) any breach of the Company's obligations, covenants or representations in this Agreement. The Company shall maintain such insurance as is necessary and reasonable to protect the Employee from any and all claims arising from or in connection with his employment by the Company during the term of Employee's employment with the Company and for a period of six (6) years after the date of termination of employment for any reason, including errors and omissions insurance, broker-dealer blanket bond and directors and officers liability insurance. The Company shall be responsible for the payment of any and all costs and expenses of Employee arising from an indemnifiable claim, including, but not limited to his attorney's fees. The provisions of this Section 12.3 are in addition to and not in lieu of any indemnification, defense or other benefit to which Employee may be entitled by statute, regulation, common law or otherwise. 12.4. The Company shall pay all reasonable legal fees and related expenses (including the costs of arbitrators, experts, evidence and counsel) incurred by, the Employee as they become due as a result of (a) the Employee's termination of employment (including all such fees and expenses, if any, incurred in contesting or disputing any such termination of employment) in violation of this Agreement, or (b) the Employee seeking to obtain or enforce any right or benefit provided by this Agreement. 9 ARTICLE XIII SEVERABILITY 13.1. If any provision of this Agreement shall be held invalid and unenforceable, the remainder of this Agreement shall remain in full force and effect. If any provision is held invalid or unenforceable with respect to particular circumstances, it shall remain in full force and effect in all other circumstances. ARTICLE XIV NOTICE 14.1. For the purposes of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when personally delivered or sent by certified mail, return receipt requested, postage prepaid, addressed to the respective addresses as set forth below or to any such other address as the party to receive the notice shall advise by due notice given in accordance with this paragraph. All notices and communications shall be deemed to have been received on the date of delivery thereof or on the third business day after the mailing thereof, except that notice of change of address shall be effective only upon receipt. 14.2. The current addresses of the parties are as follows: IF TO THE COMPANY: First Montauk Financial Corp. Parkway 109 Office Center 328 Newman Springs Road Red Bank, New Jersey 07701 Att: General Counsel With a copy to: Victor J. DiGioia, Esq. Goldstein & DiGioia, LLP 45 Broadway New York, NY 10006 IF TO THE EMPLOYEE: Victor Kurylak 26 Meadow Lane Lebanon, New Jersey 08833 With a copy to: William E. Goydan, Esq. Wolff & Samson PC 1 Boland Drive West Orange, New Jersey 07052 10 ARTICLE XV WAIVER 15.1. The waiver by either party of any breach or violation of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach of construction and validity. ARTICLE XVI GOVERNING LAW 16.1. This Agreement has been negotiated and executed in the State of New Jersey which shall govern its construction and validity. ARTICLE XVII JURISDICTION 17.1. Any or all actions or proceedings which may be brought by the Company or Employee under this Agreement shall be brought in courts having a situs within the State of New Jersey, and Employee and the Company each hereby consent to the jurisdiction of any local, state, or federal court located within the State of New Jersey. ARTICLE XVIII ENTIRE AGREEMENT 18.1. This Agreement contains the entire agreement between the parties hereto. No change, addition, or amendment shall be made hereto, except by written agreement signed by the parties hereto. IN WITNESS WHEREOF, the parties hereto have executed this Agreement and affixed their hands and seals the day and year first above written. FIRST MONTAUK FINANCIAL CORP. By:/s/ Barry Shapiro -------------------------------------- Name: Barry Shapiro Title: Compensation Committee Chairman By:/s/ Victor K. Kurylak -------------------------------------- Name: Victor K. Kurylak Title: Employee By:/s/ Jeffrey J. Fahs -------------------------------------- Name: Jeffrey J. Fahs Title: Corporate Secretary 11 EX-99.1 4 exhibit3.txt EXHIBIT TO FORM 8-K Exhibit 99.1 First Montauk Announces Settlement with Edward H. Okun and Affiliates Providing for $1.00 Put Option to Shareholders and Management Changes May 9, 2007 -- Red Bank, NJ -- First Montauk Financial Corp. (OTCBB: FMFK) announced today that it had reached an agreement with Edward H. Okun and his affiliated companies to settle three separate lawsuits arising out of the termination of a merger agreement by Mr. Okun through an affiliated company in December 2006. Under the settlement, Louis J. Rogers, formerly of Triple Net Properties LLC, will become the Chief Executive Officer of First Montauk Financial Corp. and a director of the company. Victor K. Kurylak, First Montauk's current Chief Executive Officer, will remain as President of First Montauk Financial Corp. and also as President and Chief Executive Officer of First Montauk Securities Corp., the broker-dealer subsidiary of First Montauk. In addition, Mr. Okun, through affiliates, has agreed to invest an additional $2,000,000 in First Montauk through the purchase of preferred stock or convertible debt directly from First Montauk within 90 days after approval of this settlement by the Federal District Court. The parties originally executed a merger agreement on May 5, 2006 under which affiliates of Mr. Okun would purchase all of the outstanding shares of First Montauk for $1.00 per diluted share in cash. However, on December 29, 2006, First Montauk reported that the merger agreement had been terminated by the Okun affiliates and three separate lawsuits by the parties followed. In February 2007, Mr. Okun, through affiliates, purchased additional shares of common and preferred stock of First Montauk, which gave him voting control of the company. According to the terms of the settlement agreement, a Put Option will be issued to all First Montauk shareholders other than the Okun affiliates. The Put Option is designed to allow the remaining minority shareholders of First Montauk to sell their shares to an Okun affiliate for $1.00 per common share, the original purchase price, in 18 months. However, if the market price of First Montauk's shares exceeds $1.25 for 45 days in any 60 trading day period during the 18 months with daily volume greater than 75,000 shares, and certain other conditions are satisfied, the Put Options will terminate. The Put Options are nontransferable and subject to various other terms and conditions. The Put Options will be issued on a record date to be determined by the parties to the settlement. Upon Mr. Okun's investment of the $2,000,000 within 90 days, First Montauk's board of directors will increase the number of directors on the board by three members and fill these newly created directorships with three additional persons to be nominated by Mr. Okun. The existing independent directors of First Montauk will continue to serve until the next annual meeting but will not stand for reelection. The next annual meeting will be rescheduled from the previously announced date of June 22, 2007 to a date to be determined later in the year. Louis J. Rogers is the former President, director and founding member of Triple Net Properties, LLC, a wholly-owned subsidiary of NNN Realty Advisors, Inc., a nationwide real estate asset firm. Triple Net offers a full range of commercial real estate investments, including tenant-in-common (TIC) programs for investors structuring tax-deferred (like-kind) exchanges under Section 1031 of the Internal Revenue Code, real estate investment trusts (REITs), funds, and institutional investments. As a partner with the Hirschler Fleischer law firm in Richmond, Virginia (1987-2004), Mr. Rogers structured real estate transactions as head of the firm's Real Estate Securities Practice Group. Mr. Rogers is experienced in REITs, Section 1031/TIC programs, funds and other alternative investment programs. He earned a J.D. from the University of Virginia (1984), a B.A. (with Honors) and M.A. in Jurisprudence from Wadham College, Oxford University (1981, 1985), and a B.A. in Political Science from Northeastern University (1979). Mr. Rogers is active in many real estate securities trade groups, having served as Chair of the Investment Program Association (direct placement trade association) Section 1031 Exchange Committee, founding and current Director and former Chair of the Legislative and Regulatory Committee of TICA (the TIC trade association), former member of the Board of Governors of the Real Property Section of the Virginia State Bar and former member of the Real Estate Committee of the American Bar Association's Tax Section. In addition, Mr. Rogers is a NASD - registered principal. He has written and spoken regularly. The settlement is subject to the approval of the Federal District Court. The foregoing is only a summary of the settlement and is qualified in its entirety by the settlement agreement to be filed as an exhibit to Form 8-K. First Montauk Financial Corp. is the parent company of First Montauk Securities Corp., a registered securities broker/dealer headquartered in Red Bank, New Jersey. First Montauk conducts securities brokerage, insurance, investment banking and advisory business through its network of independent financial professionals. Montauk Financial Group is a service mark of First Montauk Securities Corp., Member NASD/SIPC. First Montauk Financial Corp. is the parent company of First Montauk Securities Corp., a registered securities broker/dealer headquartered in Red Bank, NJ. Additional information is available at the Company's website at www.montaukfinancial.com. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements. This press release may contain certain statements of a forward-looking nature relating to future events or future business performance. Any such statements that refer to the Company's estimated or anticipated future results or other non-historical facts are forward-looking and reflect the Company's current perspective of existing trends and information. These statements involve risks and uncertainties that cannot be predicted or quantified and, consequently, actual results may differ materially from those expressed or implied by such forward-looking statements. Such risks and uncertainties include, among others, risks and uncertainties detailed in each Company's Securities and Exchange Commission filings, including each Company's Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q. The forward-looking statements speak only as of the date of this release. Each of the Companies undertake no obligation to update publicly any forward-looking statement, whether as a result of new information, future events or otherwise. Contact: First Montauk Financial Corp. Victor K. Kurylak, President and Chief Executive Officer (800) 876-3672, ext. 4230 info@montaukfinancial.com -----END PRIVACY-ENHANCED MESSAGE-----