FIRST MONTAUK FINANCIAL CORP.
Parkway 109 Office Center
328 Newman Springs Road, Red Bank, New Jersey 07701
PROXY STATEMENT
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Securities Exchange Act of 1934
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First Montauk Financial Corp.
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(Name of the Corporation as Specified in Charter)
William J. Kurinsky, Secretary
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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 23, 2000
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 23,
2000 at 10:00 a.m., New Jersey time, for the purpose of
1. Electing two Class III 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;
2. To consider and act upon a proposal to amend the Company's 1992
Incentive Stock Option Plan to increase the number of shares reserved for
issuance under the 1992 Incentive Stock Option Plan from 6,000,000 shares to
8,000,000 shares;
3. To consider and act upon a proposal to amend the Company's 1996 Senior
Management Plan to increase the number of shares reserved for issuance under the
Senior Management Plan from 2,000,000 shares to 4,000,000 shares; and
4. To transact such other business as may properly be brought before the
meeting or any adjournment thereof.
The close of business on May 22, 2000 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 23, 2000
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.
01
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 23, 2000
This Proxy Statement and the accompanying form of proxy have been
mailed on or about May 23, 2000 to the holders of the Corporation's Common Stock
of record ("Record Date") on May 22, 2000 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 23, 2000 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 III Directors; FOR the proposal to amend the
Company's 1992 Incentive Stock Option Plan; FOR the proposal to amend the
Company's Senior Management Plan; 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.
The Annual Report to Shareholders for the fiscal year ended December
31, 1999, 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.
02
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, 2000.
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 22, 2000 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 22, 2000, there were 9,888,627
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 22, 2000,
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.
Directors, Officers Amount and Percentage
and 5% Shareholders (1) of Beneficial Ownership (1)
- - - - - - - - ----------------------- ---------------------------
Number of Shares Percent
---------------- -------
Herbert Kurinsky 486,518(2) 4.9%
Parkway 109 Office Center
328 Newman Springs Road
Red Bank, NJ 07701
William J. Kurinsky 1,945,823(3) 19.6%
Parkway 109 Office Center
328 Newman Springs Road
Red Bank, NJ 07701
Robert I. Rabinowitz, Esq. 366,999(4) 3.7%
Parkway 109 Office Center
328 Newman Springs Road
Red Bank, NJ 07701
Ward R. Jones 110,000(5) 1.1%
7 Leda Lane
Guilderland, NY 12084
Norma Doxey 72,400(6) *
Parkway 109 Office Center
328 Newman Springs Road
Red Bank, NJ 07701
David I. Portman 199,800(7) 2.0%
19 Pal Drive
Wayside, NJ 07712
All Directors and 3,181,540 32.2%
Officers as a group
(6 persons in number)
*Less than 1%
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03
(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 475,000 shares of Common Stock.
(3) Includes vested and presently exercisable options of Mr. William J.
Kurinsky to purchase 500,000 shares of Common Stock, and 120,000 Class A
Warrants, 120,000 Class B Warrants and 120,000 Class C Warrants.
(4) Includes 270,000 shares of Common Stock reserved for issuance upon the
exercise of vested and presently exercisable stock options, 50,000 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 110,000 shares of Common Stock reserved for issuance upon the
exercise of vested and presently exercisable stock options.
(6) Includes 60,000 shares of Common Stock reserved for issuance upon the
exercise of 32,000 vested and presently exercisable stock options and 28,000
non-vested stock options.
(7) Includes 100,000 shares of Common Stock reserved for issuance upon the
exercise of vested and presentlyexercisable 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, 1999, 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.
The Board of Directors currently consists of five Directors divided into
three classes (Class I, II and III) consisting of two members each, except that
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 among the Class III Directors.
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 III Directors. All
proxies received by the Board of Directors will be voted for the election as
Class III 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.
04
The terms of the Class III 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 III Directors at the Annual
Meeting are Ward R. Jones, Jr. and David I. Portman.
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 III Directors are the Directors nominated for election at the Annual
Meeting.
Position with Director
Corporation; Principal Continually
Name Occupation and Age Since Term Expires
---- ---------------------- ----------- ------------
CLASS III - NOMINEES
Ward R. Jones, Jr. Director, Registered Representative
with First Montauk Securities Corp., 69 1991 Nominee
David I. Portman Director, President of Triad Property
Management, Inc., 59 1993 Nominee
CLASS II
Norma L. Doxey Director, Vice-President of Operations
of First Montauk Securities Corp., 60 1988 2001
CLASS I
Herbert Kurinsky Director, President and Chief 1987 2002
Executive Officer of the Company
and Registered Options Principal of
First Montauk Securities Corp., 69
William J. Kurinsky Director, Vice President, Chief 1987 2002
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., 39
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.
05
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, 43, 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.
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.
Board Meetings, Committees and Compensation of Directors
During the fiscal year ended December 31, 1999, three meetings of the Board
of Directors were held. Each Director of the Corporation was present at all
meetings of the Board of Directors, either in person or by telephone, held
during fiscal 1999.
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
1999.
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.
06
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 1999.
The compensation committee and the Board of Directors have established
the following ongoing principles and objectives for determining the
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.
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. Cash bonuses of $100,000 were awarded to
these executives during the last fiscal year, which is less than the amount to
which they were entitled under the terms of their employment agreements with the
Company.
The cash compensation of both Mr. Herbert Kurinsky and Mr. William
Kurinsky increased in fiscal 1999 as compared to 1998. The salary increases
realized by these officers were increases to which they were entitled under the
terms of their employment agreements with the Company, pursuant to which they
are entitled to receive an annual salary increase of 10%.
The compensation committee did not authorize the grant of any options
to either of Messrs. Herbert Kurinsky and William Kurinsky during the last
fiscal year.
The Compensation Committee
Ward R. Jones Jr. David I. Portman
Compensation Committee Interlocks and Insider Participation
There are no compensation committee interlocks between the members of the
Corporation's compensation committee and any other entity. None of the members
of the Board's compensation committee are executive officers of the Corporation.
Mr. Jones is a registered representative of the Corporation's broker-dealer
subsidiary, First Montauk Securities Corp., but does not engage in any
securities business.
07
Shareholder Return Performance Presentation
Set forth herein is a line graph comparing the total returns (assuming
reinvestment of dividends) of the Company's common stock, the Standard and Poor
Industrial Average, and an industry composite consisting of a group of two peer
issuers selected in good faith by the Company. The Company's common stock is
listed for trading in the over the counter market and is traded under the symbol
"FMFK".
STARTING BASIS
DESCRIPTION 1994 1995 1996 1997 1998 1999
FIRST MONTAUK FINANCIAL CORP. (%) 166.67 -4.00 199.48 -50.00 -10.61
FIRST MONTAUK FINANCIAL CORP. ($) $100.00 $266.67 $256.00 $766.68 $383.34 $ 342.67
S&P 500 (%) 37.54 22.94 33.36 28.58 21.04
S&P 500 ($) $100.00 $137.54 $169.09 $225.51 $289.95 $ 350.95
PEER GROUP ONLY (%) 26.06 174.73 63.98 -41.49 284.10
PEER GROUP ONLY ($) $100.00 $126.06 $346.33 $567.91 $332.30 $1,276.38
PEERS + YOUR COMPANY (%) 53.33 114.49 88.05 -43.98 216.56
PEERS + YOUR COMPANY ($) $100.00 $153.33 $328.87 $618.44 $346.43 $1,096.65
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 III Directors.
THE BOARD OF DIRECTORS DEEMS THE NOMINEES FOR THE CLASS III 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, 1999, 1998 and 1997 to each of the named executive officers of the Company.
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 1999 $232,925 $100,000 $ 925(2) 0
Chairman, Chief 1998 $175,000 $0 $10,096(2) 100,000
Executive Officer (3) 1997 $168,269 $0 $ 2,724(2) 50,000
William J. Kurinsky 1999 $232,925 $100,000 $ 1,925(4) 0
Vice President, 1998 $175,000 $0 $10,221(4) 100,000
Chief Operating and 1997 $158,173 $0 $ 1,534(4) 75,000
Financial Officer
and Secretary (5)
Robert I. Rabinowitz 1999 $125,000 $ 25,000 $ 1,200(6) 0
General Counsel, FMFC, 1998 $125,000 $ 15,000 $ 295(6) 100,000
Chief Administrative 1997 $111,154 $ 10,000 $ 5,676(6) 75,000
Officer, FMSC (7)
08
footnotes from previous page
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 1999, automobile allowance of $925; (ii) for 1998,
vacation pay of $10,096; and (iii) for 1997, commissions of $2,724.
3) Mr. Herbert Kurinsky is the beneficial owner of 11,518 shares of the
Company's Common Stock as of December 31, 1999, which shares had a market value
of approximately $14,628 as of that date, without giving effect to the
diminution in value attributable to the restriction on said shares.
4) Includes: (i) for 1999 an automobile allowance of $1,925; (ii) for 1998,
commissions of $125 and vacation pay of $10,096; and (ii) for 1997, commissions
of $1,534.
5) Mr. William Kurinsky is the beneficial owner of 1,085,823 shares of the
Company's Common Stock as of December 31, 1999, which shares had a market value
of approximately $1,378,995 as of that date, without giving effect to the
diminution in value attributable to the restriction on said shares.
6) Includes: (i) auto allowance of $1,200 for 1999; (ii) commissions of
$295 in 1998; and (ii) commissions of $5,676 for1997.
7) Mr. Robert I. Rabinowitz is the beneficial owner of 29,500 shares of the
Company's Common Stock as of December 31, 1999, which shares had a market value
of $73,654 as of that date, without giving effect to the diminution in value
attributable to the restriction on said shares.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table contains information with respect to the named
executive officers concerning options granted during the year ended December 31,
1999.
INDIVIDUAL GRANTS
Number of % of Total
Underlying Granted to Exercise
Options/SARs Employees in or Base Expiration
Name Granted(#) Fiscal Year Price ($Sh) Date
- - - - - - - - ---- ---------- ------------ ----------- ----
Herbert Kurinsky 0 0% N/A N/A
William J. Kurinsky 0 0% N/A N/A
Robert I. Rabinowitz 0 0% N/A N/A
There were no grants of options or Stock Appreciation Rights to the
executive officers listed above during the fiscal year ended December 31, 1999.
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(1) December 31,1999 December 31,1999(2)
Exercisable/Unexercisable Exercisable/Unexercisable
Herbert Kurinsky 40,000 $ 18,000 350,000/0 $139,500 /$0
William J. Kurinsky 40,000 $ 18,000 375,000/0 $104,000 /$0
Robert I. Rabinowitz 20,000 $ 9,000 210,000/0 $ 25,013 /$0
- - - - - - - - ---------------------------
(1) Based upon the closing bid price of the Company's Common Stock on
December 17, 1999 ($1.20 per share), the date that each of the options were
exercised, less the exercise price for the aggregate number of shares subject to
the options.
(2) Based upon the closing bid price of the Company's Common Stock on
December 31, 1999 ($1.27 per share), less the exercise price for the aggregate
number of shares subject to the options.
09
Employment Agreements
In March 2000, 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 $256,218
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. 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.
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. In June 1998, the Company's shareholders approved a
further amendment to the 1992 Incentive Stock Option Plan to increase the number
of shares reserved for issuance from 3,500,000 to 6,000,000 (as amended, the
"Incentive Plan"). Under the terms of the Incentive 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").
The Board of Directors has determined it necessary to increase the
number of shares reserved for issuance under the Incentive Plan from 6,000,000
shares to 8,000,000 shares. A discussion of the proposed amendment is set forth
below under the heading "Proposal to Amend the Incentive Stock Option Plan".
The Incentive 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 Incentive
Plan and to establish and amend rules and regulations relating thereto.
Under the Incentive 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 Incentive Plan will expire in 2002.
As of March 31, 2000 options to purchase a total of 4,231,000 shares of
the Company's Common Stock have been issued under the Incentive Plan.
10
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.
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 340,000 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.
The Board of Directors has determined it necessary to increase the number
of shares reserved for issuance under the Senior Management Plan from 2,000,000
shares to 4,000,000 shares. A discussion of the proposed amendment is set forth
below under the heading "Proposal to Amend the Senior Management Plan".
To date, the Company granted a total of 1,805,000 options under the
Senior Management Plan.
Each of the types of Awards that may be granted under the Management
Plan is discussed below.
11
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 maker 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.
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 ("SARs"). 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.
12
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.
13
II
PROPOSAL TO AMEND THE
INCENTIVE STOCK OPTION PLAN
Amendment Proposed by the Board of Directors
The Board of Directors has unanimously approved, and recommends
shareholder approval of, an amendment to the Corporation's Incentive Plan to
increase the number of shares of Common Stock under the Incentive Plan from
6,000,000 shares to 8,000,000 shares. Options issued prior to adoption of the
proposed amendment will not be affected by the amendment.
With 4,231,000 options outstanding against 6,000,000 shares reserved for
issuance under the Incentive Plan, the Corporation desires to increase the
number of shares reserved for issuance under the Incentive Plan to attract and
retain motivated employees and affiliated registered representatives. The
Corporation believes that awards granted under the Incentive Plan have a
positive effect on the Corporation's profits and growth potential by encouraging
and assisting those persons to acquire equity in the Corporation and thereby
align their long term interest with that of the Corporation. Frequently, these
awards are granted as bonuses for significant contributions to the Corporation's
business and as an inducement for high-producing registered representatives to
join the Corporation. The Corporation intends to continue this policy upon the
approval of the proposed amendment by the shareholders of the Corporation.
For a more complete discussion of the Incentive Plan, reference is made
to the section under the heading "Incentive Stock Option Plan". A complete copy
of the Incentive Plan, containing the proposed amendment, is annexed hereto as
Appendix A.
Vote Required
The affirmative vote of the holders of a majority of the shares of
Common Stock voting at the Annual Meeting is required for the approval of the
proposed amendment to the Incentive Plan.
THE BOARD OF DIRECTORS DEEMS THE PROPOSED AMENDMENT TO THE INCENTIVE
PLAN TO BE IN THE BEST INTERESTS OF THE CORPORATION AND ITS SHAREHOLDERS AND
RECOMMENDS A VOTE "FOR" APPROVAL THEREOF.
14
III
PROPOSAL TO AMEND THE
SENIOR MANAGEMENT PLAN
Amendment Proposed by the Board of Directors
The Board of Directors has unanimously approved, and recommends
shareholder approval of, an amendment to the Corporation's Senior Management
Plan to increase the number of shares of Common Stock under the Senior
Management Plan from 2,000,000 shares to 4,000,000 shares. Grants made prior to
adoption of the proposed amendment will not be affected by the amendment.
With 1,805,000 shares issued under to the Senior Management Plan
against 2,000,000 shares reserved for issuance under the Senior Management Plan,
the Corporation desires to increase the number of shares reserved for issuance
under the Senior Management Plan to continue to attract and retain key personnel
whose performance is expected to have a positive effect on the Corporation's
profits and growth potential. The Corporation believes that awards granted under
the Senior Management Plan have a positive effect on the Corporation's profits
and growth potential by encouraging and assisting those persons to acquire
equity in the Corporation and thereby align their long term interest with that
of the Corporation. Frequently, these awards are granted in recognition of
significant contributions to the Corporation's business and as an inducement for
senior managers to join the Corporation. The Corporation intends to continue
this policy upon the approval of the proposed amendment by the shareholders of
the Corporation.
For a more complete discussion of the Senior Management Plan,
reference is made to the section under the heading "Senior Management Plan". A
complete copy of the Senior Management Plan, containing the proposed amendment,
is annexed hereto as Appendix B.
Vote Required
The affirmative vote of the holders of a majority of the shares of
Common Stock voting at the Annual Meeting is required for the approval of the
proposed amendment to the Senior Management Plan.
THE BOARD OF DIRECTORS DEEMS THE PROPOSED AMENDMENT TO THE SENIOR
MANAGEMENT PLAN TO BE IN THE BEST INTERESTS OF THE CORPORATION AND ITS
SHAREHOLDERS AND RECOMMENDS A VOTE "FOR" APPROVAL THEREOF.
FINANCIAL INFORMATION
A COPY OF THE CORPORATION'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL
YEAR ENDED DECEMBER 31, 1999 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 22, 2000 the person making the request
was the beneficial owner of Common Shares of the Corporation entitled to vote at
the 2000 Annual Meeting of Shareholders.
15
IV. 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
2001 Annual Meeting of Shareholders must be received by the Corporation on or
prior to January 23, 2001 to be eligible for inclusion in the Corporation's
proxy statement and form of proxy to be used in connection with the 2001 Annual
Meeting of Shareholders.
By Order of the Board of Directors
WILLIAM J. KURINSKY, Secretary
Dated: May 23, 2000
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.
01
EXHIBIT A
SECOND AMENDED AND RESTATED
1992 INCENTIVE STOCK OPTION PLAN
OF
FIRST MONTAUK FINANCIAL CORP.
AMENDED AS OF JUNE 23, 2000
l. PURPOSE OF THE PLAN
The purpose of the 1992 Incentive Stock Option Plan (the "Plan"), as
previously amended, of First Montauk Financial Corp. (the "Company") is to
provide an incentive to employees, consultants and registered representatives
whose present and potential contributions to the Company and its Subsidiaries
(as such term is defined in Section 2 below) are or will be important to the
success of the Company by affording them an opportunity to acquire a proprietary
interest in the Company. It is intended that this purpose will be effected
through the issuance of stock options to purchase shares of Common Stock, no par
value per share, of the Company ("Common Stock") (such options are sometimes
referred to herein as "Awards"). Stock options may be granted under the Plan
which qualify as "Incentive Stock Options" under Section 422 of the Internal
Revenue Code of l986, as it may be hereafter amended (the "Code"). Such options
are sometimes referred to as an "ISO" or collectively as "ISOs."
2. ELIGIBILITY
Awards may be made or granted to employees, consultants and registered
representatives of the Company or its Subsidiaries, who are deemed to have the
potential to have a significant effect on the future success of the Company
(such eligible persons being referred to herein as "Eligible Participants"). The
term "employees" shall include officers of the Company or of a Subsidiary. A
director of the Company or of any Subsidiary who is not also an employee of the
Company or of one of its Subsidiaries will not be eligible to receive any Awards
under the Plan. Consultants and registered representatives who are not employees
of the Company or a subsidiary are not eligible to receive options which qualify
as ISO's. No ISO shall be granted to an employee who, at the time the option is
granted, owns stock possessing more than l0% of the total combined voting power
of all classes of capital stock of the employer corporation (as such term is
used in the Code) or any Parent or Subsidiary of the employer corporation,
provided, however, that an ISO may be granted to such an employee if at the time
such ISO is granted the option price is at least one hundred ten percent (ll0%)
of the fair market value of stock subject to the ISO on the date of grant (as
determined pursuant to Subsection 8(a) hereof) and such ISO is by its terms not
exercisable after the expiration of five (5) years from the date such option is
granted. The terms "Subsidiary" and "Parent") as used herein shall have the
meanings given them in Section 425 of the Code. Awards may be made to personnel
who hold or have held options or shares under the Plan or any other plans of the
Company.
3. STOCK SUBJECT TO THE PLAN
The shares that may be issued upon exercise of options under the Plan
shall not exceed in the aggregate 8,000,000 shares of the Common Stock, as
adjusted to give effect to the anti-dilution provisions contained in Section 7
hereof. Such shares may be authorized and unissued shares, or shares purchased
by the Company and reserved for issuance under the Plan. If a stock option for
any reason expires or is terminated without having been exercised in full, those
shares relating to an unexercised stock option shall again become available for
grant and/or sale under the Plan.
4. ADMINISTRATION
(a) Procedure. The Plan shall be administered by the Board of Directors
or by a Committee of the Board of Directors, if one is appointed for this
purpose (the "Committee"). Committee members shall serve for such term as the
Board of Directors may in each case determine, and shall be subject to removal
at any time by the Board of Directors. Members of the Board of Directors who are
either eligible for awards or have been granted awards may not vote on any
matters affecting the administration of the Plan or the grant of any Award
pursuant to the Plan.
02
(b) Powers of the Board or Committee. As used herein, except as the
Committee's powers are specifically limited in Sections 4, 5, 15 and 16 hereof,
reference to the Board of Directors shall mean such Board or the Committee,
whichever is then acting with respect to the Plan. Subject to the provisions of
the Plan, the Board of Directors shall have the authority in its discretion: (i)
to determine, upon review of relevant information, the fair market value of the
Common Stock; (ii) to determine the exercise price per share of stock options to
be granted; (iii) to determine the Eligible Participants to whom, and time or
times at which, Awards shall be granted and the number of shares to be issuable
upon exercise of each stock option; (iv) to construe and interpret the Plan; (v)
to prescribe, amend and rescind rules and regulations relating to the Plan; (vi)
to determine the terms and provisions of each Award (which need not be
identical); and (vii) to make all other determinations necessary to or advisable
for the administration of the Plan. Notwithstanding the foregoing, in the event
any employee of the Company or any of its Subsidiaries granted an Award under
the Plan is, at the time of such grant, a member of the Board of Directors of
the Company, the grant of such Award shall, in the event the Board of Directors
at the time such award is granted is not deemed to satisfy the requirement of
Rule l6b-3(c)(2) promulgated under the Securities Exchange Act of l934, as
amended (the "Exchange Act"), be subject to the approval of an auxiliary
committee consisting of not less than two persons all of whom qualify as
"disinterested persons" within the meaning of Rule l6b-3(c)(2) promulgated under
the Exchange Act. In the event the Board of Directors deems it impractical to
form a committee of disinterested persons, the Board of Directors is authorized
to approve any award under the Plan.
5. DURATION OF THE PLAN
The Plan shall become effective upon the approval of the requisite vote
of the stockholders of the Company, and upon the approvals, if required, of any
other public authorities. The Plan shall remain in effect for a term of ten (l0)
years from the date of adoption by the Board unless sooner terminated under
Section 15 hereof. Notwithstanding any of the foregoing to the contrary, the
Board of Directors (but not the Committee) shall have the authority to amend the
Plan pursuant to Section 15 hereof; provided, however, that Awards already made
shall remain in full force and effect as if the Plan had not been amended or
terminated.
6. OPTIONS
Options shall be evidenced by stock option agreements in such form, and
not inconsistent with the Plan, as the Board of Directors shall approve from
time to time, which agreements shall contain in substance the following terms
and conditions:
(a) Option Price; Number of Shares. The option price,which shall be
approved by the Board of Directors, shall in no event be less than one hundred
percent (l00%) in the case of ISOs, and eighty-five percent (85%) in the case of
other options, of the fair market value of the Company's Common Stock at the
time the option is granted. The fair market value of the Common Stock, for the
purposes of the Plan, shall mean: (i) if the Common Stock is traded on a
national securities exchange or on the NASDAQ National Market System ("NMS"),
the per share closing price of the Common Stock on the principal securities
exchange on which they are listed or on NMS, as the case may be, on the date of
grant (or if there is no closing price for such date of grant, then the last
preceding business day on which there was a closing price); or (ii) if the
Common Stock is traded in the over-the-counter market and quotations are
published on the NASDAQ quotation system (but not on NMS), the closing bid price
of the Common Stock on the date of grant as reported by NASDAQ (or if there are
no closing bid prices for such date of grant, then the last preceding business
day on which there was a closing bid price); or (iii) if the Common Stock is
traded in the over-the-counter market but bid quotations are not published on
NASDAQ, the closing bid price per share for the Common Stock as furnished by a
broker-dealer which regularly furnishes price quotations for the Common Stock.
The option agreement shall specify the total number of shares to which
it pertains and whether such options are ISOs or are not ISOs. With respect to
ISOs granted under the Plan, the aggregate fair market value (determined at the
time an ISO is granted) of the shares of Common Stock with respect to which ISOs
are exercisable for the first time by such employee during ay calendar year
shall not exceed $l00,000 under all plans of the employer corporation or its
Parent or Subsidiaries.
(b) Waiting Period and Exercise Dates. At the time an option is
granted, the Board of Directors will determine the terms and conditions to be
satisfied before shares may be purchased, including the dates on which shares
subject to the option may first be purchased. (The period from the date of grant
of an option until the date on which such option may first be exercised, if not
immediately exercisable, is referred to herein as the "waiting period. ") At the
time an option is granted, the Board of Directors shall fix the period within
which it may be exercised which shall not be less than one (l) year nor more
than ten (l0) years from the date of grant. (Any of such periods is referred to
herein as the "exercise period.")
03
(c) Form and Time of Payment. Stock purchased pursuant to an option
agreement shall be paid for at the time of purchase either in cash or by
certified check or, in the discretion of the Board of Directors, as set forth in
the stock option agreement (i) in a combination of cash and a promissory note,
(ii) through the delivery of shares of Common Stock, or (iii) in a combination
of the methods described above. Upon receipt of payment, the Company shall,
without transfer or issue tax to the option holder or other person entitled to
exercise the option, deliver to the option holder (or such other person) a
certificate or certificates for the shares so purchased.
(d) Effect of Termination or Death. In the event that an option holder
ceases to be an employee of the Company or of any Subsidiary for any reason
other than permanent disability (as determined by the Board of Directors) and
death, any option, including any unexercised portion thereof, which was
otherwise exercisable on the date of termination, shall expire unless exercised
within a period of three months from the date on which the option holder ceased
to be so employed, but in no event after the expiration of the exercise period.
In the event of the death of an option holder during this three month period,
the option shall be exercisable by his or her personal representatives, heirs or
legatees to the same extent that the option holder could have exercised the
option if he or she had not died, for the three months from the date of death,
but in no event after the expiration of the exercise period. In the event of the
permanent disability of an option holder while an employee of the Company or of
any Subsidiary, any option granted to such employee shall be exercisable for
twelve (l2) months after the date of permanent disability, but in no event after
the expiration of the exercise period. In the event of the death of an option
holder while an employee of the Company or any Subsidiary, or during the twelve
(l2) month period after the date of permanent disability of the option holder,
that portion of the option which had become exercisable on the date of death
shall be exercisable by his or her personal representatives, heirs or legatees
at any time prior to the expiration of one (l) year from the date of the death
of the option holder, but in no event after the expiration of the exercise
period. Except as the Board of Directors shall provide otherwise, in the event
an option holder ceases to be an employee of the Company or of any Subsidiary
for any reason, including death, prior to the lapse of the waiting period, his
or her option shall terminate and be null and void.
(e) Other Provisions. Each option granted under the Plan may contain such
other terms, provisions, and conditions not inconsistent with the Plan as may be
determined by the Board of Directors.
7. RECAPITALIZATION
In the event that dividends are payable in Common Stock or in the event
there are splits, subdivisions or combinations of shares of Common Stock, the
number of shares available under the Plan shall be increased or decreased
proportionately, as the case may be, and the number of shares delivered upon the
exercise thereafter of any stock option theretofore granted or issued shall be
increased or decreased proportionately, as the case may be, without change in
the aggregate purchase price.
8. ACCELERATION
(a) Notwithstanding any contrary waiting period in any stock option
agreement issued pursuant to the Plan, but subject to any determination by the
Board of Directors to provide otherwise at the time such Award is granted or
subsequent thereto, each outstanding option granted under the Plan shall, except
as otherwise provided in the stock option agreement, become exercisable in full
for the aggregate number of shares covered thereby unconditionally on the first
day following the occurrence of any of the following: (a) the approval by the
stockholders of the Company of an Approved Transaction; (b) a Control Purchase;
or (c) a Board Change.
(b) For purposes of this Section 8:
(i) An "Approved Transaction" shall mean (A) any consolidation
or merger of the Company in which the Company is not the continuing or surviving
corporation or pursuant to which shares of Common Stock would be converted into
cash, securities or other property, other than a merger of the Company in which
the holders of Common Stock immediately prior to the merger have the same
proportionate ownership of common stock of the surviving corporation immediately
after the merger, or (B) any sale, lease, exchange, or other transfer (in one
transaction or a series of related transactions) of all, or substantially all,
of the assets of the Company, or (C) the adoption of any plan or proposal for
the liquidation or dissolution of the Company.
04
(ii) A "Control Purchase" shall mean circumstances in which
any person (as such term is defined in Sections l3(d)(3) and l4(d)(2) of the
Exchange Act, corporation or other entity (other than the Company or any
employee benefit plan sponsored by the Company or any Subsidiary) (A) shall
purchase any Common Stock of the Company (or securities convertible into the
Company's Common Stock) for cash, securities or any other consideration pursuant
to a tender offer or exchange offer, without the prior consent of the Board of
Directors, or (B) shall become the "beneficial owner" (as such term is defined
in Rule l3d-3 under the Exchange Act), directly or indirectly, of securities of
the Company representing twenty-five percent (25%) or more of the combined
voting power of the then outstanding securities of the Company ordinarily (and
apart from rights accruing under special circumstances) having the right to vote
in the election of directors (calculated as provided in paragraph (d) of such
Rule l3d-3 in the case of rights to acquire the Company's securities).
(iii) A "Board Change" shall mean circumstances in which, during any
period of two consecutive years or less, individuals who at the beginning of
such period constitute the entire Board shall cease for any reason to constitute
a majority thereof unless the election, or the nomination for election by the
Company's stockholders, of each new director was approved by a vote of at least
a majority of the directors then still in office.
9. CONTINUATION OF RELATIONSHIP; LEAVE OF ABSENCE
(a) Nothing in the Plan or any Award made hereunder shall interfere
with or limit in any way, the right of the Company or of any Subsidiary to
terminate any Eligible Participant's employment at any time, nor confer upon any
Eligible Participant any right to continue any such relationship with the
Company or Subsidiary.
(b) For purposes of the Plan, a transfer of a recipient of options
hereunder from the Company to a Subsidiary or vice versa, or from one Subsidiary
to another, or a leave of absence duly authorized by the Company shall not be
deemed a termination of employment or a break in the incentive, waiting or
exercise period, as the case may be. In the case of any employee on an approved
leave of absence, the Board of Directors may make such provisions with respect
to continuance of stock rights, options or restricted shares previously granted
while on leave from the employ of the Company or a Subsidiary as it may deem
equitable.
l0. GENERAL RESTRICTION
Each Award made under the Plan shall be subject to the requirement
that, if at any time the Board of Directors shall determine, in its sole and
subjective discretion, that the registration, qualification or listing of the
shares subject to such Award upon a securities exchange or under any state or
federal law, or the consent or approval of any government regulatory body, is
necessary or desirable as a condition of, or in connection with, the granting or
exercise of such Award, the Company shall not be required to issue such shares
unless such registration, qualification, listing, consent or approval shall have
been effected or obtained free of any conditions not acceptable to the Board of
Directors. Nothing in the Plan or any agreement or grant hereunder shall
obligate the Company to effect any such registration, qualification or listing.
l1. RIGHTS AS A STOCKHOLDER
The holder of a stock option shall have no rights as a stockholder with
respect to any shares covered by the stock option, until the date of issuance of
a stock certificate to him for such shares related to the exercise thereof. No
adjustment shall be made for the dividends or other rights for which the record
date is prior to the date such stock certificate is issued.
l2. NONASSIGNABILITY OF AWARDS
No stock option shall be assignable or transferable by an Eligible
Participant except by will or by the laws of descent and distribution and during
the lifetime of an Eligible Participant may only be exercised by him.
l3. WITHHOLDING TAXES
Whenever under the Plan shares are to be issued in satisfaction of
stock options granted hereunder, the Company shall have the right to require the
Eligible Participant to remit to the Company an amount sufficient to satisfy
federal, state and local withholding tax requirements prior to the delivery of
any certificate or certificates for such shares or at such later time as when
the Company may determine that such taxes are due. Whenever under the Plan
payments are to be made in cash, such payment shall be net of an amount
sufficient to satisfy federal, state and local withholding tax requirements.
05
l4. NONEXCLUSIVITY OF THE PLAN
Neither the adoption of the Plan by the Board of Directors nor any
provision of the Plan shall be construed as creating any limitations on the
power of the Board (but not the Committee) to adopt such additional compensation
agreements as it may deem desirable, including, without limitation, the granting
of stock options otherwise than under the Plan, and such arrangements may be
either generally applicable or applicable only in specific cases.
15. AMENDMENT, SUSPENSION OR TERMINATION OF THE PLAN
The Board of Directors (but not the Committee) may at any time amend,
alter, suspend or discontinue the Plan, but no amendment, alteration, suspension
or discontinuation shall be made which would impair the rights of any recipient
of a stock option under any agreement theretofore entered into hereunder,
without his consent, or which, without the requisite vote of the stockholders of
the Company approving such action, would:
(a) except as is provided in Section 7 of the Plan, increase the total
number of shares of stock reserved for the purposes of the Plan; or
(b) extend the duration of the Plan; or
(c) materially increase the benefits accruing to participants under the
Plan; or
(d) change the category of persons who can be Eligible Participants under
the Plan. Without limiting the foregoing, the Board of Directors may, any time
or from time to time, authorize the Company, without the consent of the
respective recipients, to issue new options in exchange for the surrender and
cancellation of any or all outstanding options.
16. LIMITATIONS ON EXERCISE.
Notwithstanding anything to the contrary contained in the Plan, any
agreement evidencing any Award hereunder may contain such provisions as the
Board deems appropriate to ensure that the penalty provisions of Section 4999 of
the Code, or any successor thereto, will not apply to any stock received by the
holder from the Company.
17. GOVERNING LAW
The Plan shall be governed by, and construed in accordance with, the
laws of the State of New Jersey.
01
EXHIBIT B
1996 SENIOR MANAGEMENT INCENTIVE PLAN OF
FIRST MONTAUK FINANCIAL CORP.
AMENDED AS OF JUNE 23, 2000
l. PURPOSE OF THE PLAN
The purpose of the 1996 Senior Management Incentive Plan (the
"Management Plan") of First Montauk Financial Corp. (the "Company") is to
provide an incentive to key management employees whose present and potential
contributions to the Company and its Subsidiaries (as such term is defined in
Section 2 below) are or will be important to the success of the Company by
affording them an opportunity to acquire a proprietary interest in the Company.
It is intended that this purpose will be effected through the issuance of (i)
incentive stock rights, (ii) stock options, (iii) stock appreciation rights;
(iv) limited stock appreciation rights and (v) shares of Common Stock, no par
value per share, of the Company ("Common Stock") subject to restrictions on
disposition ("restricted shares") (collectively, such options, rights and
restricted shares are referred to herein as "Awards"). Stock options may be
granted under the Management Plan which qualify as "Incentive Stock Options"
under Section 422 of the Internal Revenue Code of l986, as amended (the "Code").
Such options are sometimes referred to as an "ISO" or collectively as "ISOs."
2. ELIGIBILITY
Awards may be made or granted to key management employees of the
Company or its Subsidiaries who are deemed to have the potential to have a
significant effect on the future success of the Company (such eligible persons
being referred to herein as "Eligible Participants"). The term "management
employees" shall include executive officers of the Company or of a Subsidiary. A
director of the Company or of any Subsidiary who is not also an employee of the
Company or of one of its Subsidiaries will not be eligible to receive any Awards
under the Management Plan. No ISO shall be granted to an employee who, at the
time the option is granted, owns stock possessing more than l0% of the total
combined voting power of all classes of capital stock of the employer
corporation (as such term is used in the Code) or any Parent or Subsidiary of
the employer corporation, provided, however, that an ISO may be granted to such
an employee if at the time such ISO is granted the option price is at least one
hundred ten percent (ll0%) of the fair market value of stock subject to the ISO
on the date of grant (as determined pursuant to Subsection 8(a) hereof) and such
ISO is by its terms not exercisable after the expiration of five (5) years from
the date such option is granted. The terms "Subsidiary" and "Parent" as used
herein shall have the meanings given them in Section 425 of the Code. Awards may
be made to executive personnel who hold or have held options, rights or shares
under the Management Plan or any other plans of the Company.
3. STOCK SUBJECT TO THE PLAN
The shares that may be issued upon exercise of options and rights and
which may be issued as restricted shares under the Management Plan shall not
exceed in the aggregate 4,000,000 shares of the Common Stock, as adjusted to
give effect to the anti-dilution provisions contained in Section l2 hereof. Such
shares may be authorized and unissued shares, or shares purchased by the Company
and reserved for issuance under the Management Plan. If a stock option or
incentive stock right for any reason expires or is terminated without having
been exercised in full, or if shares restricted are repurchased by the Company
in accordance with the terms thereof, those shares relating to an unexercised
stock option or incentive stock rights or shares which have been repurchased
shall again become available for grant and/or sale under the Management Plan.
4. AWARDS UNDER THE PLAN
Awards under the Management Plan may be of five types. They are:
"incentive stock rights," "stock options," "stock appreciation rights", "limited
stock appreciation rights" and "restricted shares. " "Incentive Stock rights"
are composed of incentive stock units which give the holder the right to
receive, without payment of cash or property to the Company, shares of Common
Stock, subject to the terms, conditions and restrictions described in Section 7
hereof. An option, including an ISO, is a right to purchase Common Stock in
accordance with Section 8 hereof. A "stock appreciation right" is a right given
to the holder of a stock option to receive, upon surrender of all or a portion
of his stock option without payment of cash or property to the Company, a number
of shares of Common Stock and/or cash determined pursuant to a formula in
accordance with Section 9 hereof. A "limited stock appreciation right" is a
right given to a holder of a stock option to receive, upon the occurrence of
certain events generally constituting a change in control of the Company, a
number of shares of Common Stock and/or cash upon surrender of all or a portion
of his stock option without the payment of cash or property to the Company, in
accordance with Section l0 hereof. "Restricted shares" are shares of Common
Stock which, following issuance, are nontransferable and subject to substantial
risk of forfeiture until specific conditions based on continuing employment or
achievement of preestablished performance objectives are met, in accordance with
Section ll hereof. All references to "cash" herein shall mean "cash or certified
check."
02
5. ADMINISTRATION
(a) Procedure. The Management Plan shall be administered by the Board
of Directors or by a Committee of the Board of Directors, if one is appointed
for this purpose (the "Committee"). Committee members shall serve for such term
as the Board of Directors may in each case determine, and shall be subject to
removal at any time by the Board of Directors. Members of the Board of Directors
who are either eligible for awards or have been granted awards may not vote on
any matters affecting the administration of the Management Plan or the grant of
any Award pursuant to the Management Plan.
(b) Powers of the Board or Committee. As used herein, except as the
Committee's powers are specifically limited in Sections 5, 6, 20 and 2l hereof,
reference to the Board of Directors shall mean such Board or the Committee,
whichever is then acting with respect to the Management Plan. Subject to the
provisions of the Management Plan, the Board of Directors shall have the
authority in its discretion: (i) to determine, upon review of relevant
information, the fair market value of the Common Stock; (ii) to determine the
exercise price per share of stock options to be granted; (iii) to determine the
Eligible Participants to whom, and time or times at which, Awards shall be
granted and the number of shares to be issuable upon exercise of each stock
option or right or sold pursuant to restricted stock purchase agreements; (iv)
to construe and interpret the Management Plan; (v) to prescribe, amend and
rescind rules and regulations relating to the Management Plan; (vi) to determine
the terms and provisions of each Award (which need not be identical); and (vii)
to make all other determinations necessary to or advisable for the
administration of the Management Plan. Notwithstanding the foregoing, in the
event any employee of the Company or any of its Subsidiaries granted an Award
under the Management Plan is, at the time of such grant, a member of the Board
of Directors of the Company, the grant of such Award shall, in the event the
Board of Directors at the time such award is granted is not deemed to satisfy
the requirement of Rule l6(b)-3(b)(2)(i) or (ii) promulgated under the
Securities Exchange Act of l934, as amended (the "Exchange Act"), be subject to
the approval of an auxiliary committee consisting of not less than three persons
all of whom qualify as "disinterested persons" within the meaning of Rule
l6(b)-3(d)(3) promulgated under the Exchange Act. In the event the Board of
Directors deems it impractical to form a committee of disinterested persons, the
Board of Directors is authorized to approve any award under the Management Plan.
6. DURATION OF THE PLAN
The Management Plan shall become effective upon the approval of the
requisite vote of the stockholders of the Company, and upon the approvals, if
required, of any other public authorities. The Management Plan shall remain in
effect for a term of ten (l0) years from the date of adoption by the Board
unless sooner terminated under Section 20 hereof. Notwithstanding any of the
foregoing to the contrary, the Board of Directors (but not the Committee) shall
have the authority to amend the Management Plan pursuant to Section 20 hereof;
provided, however, that Awards already made shall remain in full force and
effect as if the Management Plan had not been amended or terminated.
7. INCENTIVE STOCK RIGHTS
The Board of Directors, in its discretion, may grant to Eligible
Participants incentive stock rights composed of incentive stock units. Incentive
stock rights shall be granted pursuant to incentive stock rights agreements in
such form, and not inconsistent with the Management Plan, as the Board of
Directors shall approve from time to time and shall include substantially the
following terms and conditions as determined by the Board of Directors:
(a) Incentive Stock Units. An incentive stock rights agreement shall
specify the number of incentive stock units to which it pertains. Each incentive
stock unit shall be equivalent to one share of Common Stock. Each incentive
stock unit shall entitle the holder thereof to receive, without payment of cash
or property to the Company, one share of Common Stock in consideration for
services performed for the Company or any Subsidiary by the Eligible
Participant, subject to the lapse of the incentive periods (as hereinafter
defined).
(b) Incentive Period. The holder of incentive stock rights shall be
entitled to receive shares of Common Stock only after the lapse of such
incentive periods, and in such manner, as shall be fixed in the discretion of
the Board of Directors at the time of grant of such incentive stock rights.
(Such period or periods so fixed is or are herein referred to as an "incentive
period"). To the extent the holder of incentive stock rights receives shares of
Common Stock on the lapse of an incentive period, an equivalent number of
incentive stock units subject to such rights shall be deemed to have been
discharged.
03
(c) Termination by Reason of Death or Disability. In the event that the
recipient of incentive stock rights ceases to be employed by the Company or any
of its Subsidiaries during an incentive period due to death or permanent
disability (as determined by the Board of Directors), the holder of incentive
stock rights or, in the case of the death of the holder, the personal
representatives, heirs or legatees of such holder, shall be entitled to receive
a number of shares equal to an amount determined by multiplying the total number
of incentive stock units applicable to such incentive period by a fraction, the
numerator of which shall be the number of full calendar months between the date
of grant of the incentive stock rights and the date of such termination and the
denominator of which shall be the number of full calendar months between the
date of grant and the date such incentive period for such units would, but for
such termination, have lapsed. For purposes of this Subsection 7(c), this shall
constitute a lapse of the incentive period with respect to the number of
incentive stock units equal to the number of shares issued. Units upon which the
incentive period do not lapse pursuant to the foregoing sentence shall terminate
and be null and void on the date on which the recipient ceases to be employed by
the Company or any of its Subsidiaries.
(d) Termination for Any Other Reason. In the event that the employment
by the Company of the recipient to whom incentive stock rights have been issued
under the Management Plan terminates for any reason (including dismissal by the
Company with or without cause), other than death or permanent disability, such
rights as to which the incentive period has not lapsed shall terminate and be
null and void on termination of the relationship.
(e) Issuance of Shares. Upon the lapse of an incentive period, the
Company shall deliver to the holder of the related incentive stock unit a
certificate or certificates representing the number of shares of Common Stock
equal to the number of incentive stock units with respect to which an incentive
period has lapsed. The Company shall pay all applicable transfer or issue taxes.
8. OPTIONS
Options shall be evidenced by stock option agreements in such form, and
not inconsistent with the Management Plan, as the Board of Directors shall
approve from time to time, which agreements shall contain in substance the
following terms and conditions:
(a) Option Price; Number of Shares. The option price, which shall be
approved by the Board of Directors, shall in no event be less than one hundred
percent (l00%) in the case of ISOs, and eighty-five percent (85%) in the case of
other options, of the fair market value of the Company's Common Stock at the
time the option is granted. The fair market value of the Common Stock, for the
purposes of the Management Plan, shall mean: (i) if the Common Stock is traded
on a national securities exchange or on the NASDAQ National Market System
("NMS"), the per share closing price of the Common Stock on the principal
securities exchange on which they are listed or on NMS, as the case may be, on
the date of grant (or if there is no closing price for such date of grant, then
the last preceding business day on which there was a closing price); or (ii) if
the Common Stock is traded in the over-the-counter market and quotations are
published on the NASDAQ quotation system (but not on NMS), the closing bid price
of the Common Stock on the date of grant as reported by NASDAQ (or if there are
no closing bid prices for such date of grant, then the last preceding business
day on which there was a closing bid price); or (iii) if the Common Stock is
traded in the over-the-counter market but bid quotations are not published on
NASDAQ, the closing bid price per share for the Common Stock as furnished by a
broker-dealer which regularly furnishes price quotations for the Common Stock.
The option agreement shall specify the total number of shares to which
it pertains and whether such options are ISOs or are not ISOs. With respect to
ISOs granted under the Management Plan, the aggregate fair market value
(determined at the time an ISO is granted) of the shares of Common Stock with
respect to which ISOs are exercisable for the first time by such employee during
any calendar year shall not exceed $l00,000 under all plans of the Company or of
Subsidiaries.
(b) Waiting Period and Exercise Dates. At the time an option is
granted, the Board of Directors will determine the terms and conditions to be
satisfied before shares may be purchased, including the dates on which shares
subject to the option may first be purchased. (The period from the date of grant
of an option until the date on which such option may first be exercised is
referred to herein as the "waiting period. ") At the time an option is granted,
the Board of Directors shall fix the period within which it may be exercised
which shall not be less than one (l) year nor, for an ISO, more than ten (l0)
years from the date of grant or, for a non-ISO, for more than thirteen (l3)
years from the date of grant. (Any of such periods is referred to herein as the
"exercise period.")
04
(c) Form and Time of Payment. Stock purchased pursuant to an option
agreement shall be paid for at the time of purchase either in cash or by
certified check or, in the discretion of the Board of Directors, as set forth in
the stock option agreement (i) in a combination of cash and a promissory note,
(ii) through the delivery of shares of Common Stock, or (iii) in a combination
of the methods described above. Upon receipt of payment, the Company shall,
without transfer or issue tax to the option holder or other person entitled to
exercise the option, deliver to the option holder (or such other person) a
certificate or certificates for the shares so purchased.
(d) Effect of Termination or Death. In the event that an option holder
ceases to be an employee of the Company or of any Subsidiary for any reason
other than permanent disability (as determined by the Board of Directors) and
death, any option, including any unexercised portion thereof, which was
otherwise exercisable on the date of termination, shall expire unless exercised
within a period of three months from the date on which the option holder ceased
to be so employed, but in no event after the expiration of the exercise period;
provided, however, that, if the Board of Directors shall determine that an
option holder shall have been discharged for cause, options granted and not yet
exercised shall terminate immediately and be null and void as of the date of
discharge. In the event of the death of an option holder during this three month
period, the option shall be exercisable by his or her personal representatives,
heirs or legatees to the same extent that the option holder could have exercised
the option if he or she had not died, for the three months from the date of
death, but in no event after the expiration of the exercise period. In the event
of the permanent disability of an option holder while an employee of the Company
or of any Subsidiary, any option granted to such employee shall be exercisable
for twelve (l2) months after the date of permanent disability, but in no event
after the expiration of the exercise period. In the event of the death of an
option holder while an employee of the Company or any Subsidiary, or during the
twelve (l2) month period after the date of permanent disability of the option
holder, that portion of the option which had become exercisable on the date of
death shall be exercisable by his or her personal representatives, heirs or
legatees at any time prior to the expiration of one (l) year from the date of
the death of the option holder, but in no event after the expiration of the
exercise period. Except as the Board of Directors shall provide otherwise, in
the event an option holder ceases to be an employee of the Company or of any
Subsidiary for any reason, including death, prior to the lapse of the waiting
period, his or her option shall terminate and be null and void.
(e) Other Provisions. Each option granted under the Management Plan may
contain such other terms, provisions, and conditions not inconsistent with the
Management Plan as may be determined by the Board of Directors.
9. STOCK APPRECIATION RIGHTS
The Board of Directors may grant, in its discretion, stock appreciation
rights to the holder of any stock option under the Management Plan. Such rights
shall be granted pursuant to a stock appreciation rights agreement in such form,
and not inconsistent with the Management Plan, as the Board of Directors shall
approve from time to time (and which may be incorporated in the stock option
agreement governing the terms of the related option) and shall include
substantially the following terms and conditions as the Board of Directors shall
determine:
(a) Grant. Each right shall relate to a specific option granted under
the Management Plan and shall be granted to the option holder either
concurrently with the grant of such option, or at such later time as determined
by the Board of Directors.
(b) Exercise. A stock appreciation right shall entitle an option holder
to receive, without payment of cash or property to the Company, a number of
shares of Common Stock, cash, or a combination thereof in the amount determined
pursuant to Subsection 9(c) below. The Board of Directors shall determine
whether such payment shall be made in Common Stock, cash, or a combination
thereof. Unless otherwise determined by the Board of Directors, a right shall be
exercisable to no greater extent nor upon any more favorable conditions than its
related option is exercisable under Subsection 8(b) hereof. An option holder
wishing to exercise a right in accordance with this Subsection 9(b) shall give
written notice of such exercise to the Company, which notice shall state that
the holder of the right elects to exercise the right and the number of shares in
respect of which the right is being exercised. The effective date of exercise of
a right shall be the date on which the Company shall have received such notice.
Upon receipt of such notice, the Company shall: (i) deliver to the option holder
or other person entitled to exercise the right, a certificate or certificates
representing such shares; and/or (ii) pay cash. The Company shall pay all
applicable transfer or issue taxes. Notwithstanding the provisions of this
section, no stock appreciation right may be exercised within a period of six
months on the date of grant of such stock appreciation right and no stock
appreciation right 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.
05
(c) Number of Shares or Amount of Cash. The number of shares which
shall be issued pursuant to the exercise of a stock appreciation right shall be
determined by dividing (i) that portion, as elected by the option holder, of the
total number of shares which the option holder is eligible to purchase pursuant
to Subsection 8(b) hereof (and as adjusted pursuant to Section l2 hereof),
multiplied by the amount (if any) by which the fair market value (as determined
in accordance with Subsection 8(a) hereof) of a share of Common Stock on the
exercise date exceeds the option exercise price of the related option; by (ii)
the fair market value of a share of Common Stock on the exercise date. In lieu
of issuing shares of Common Stock on the exercise of a right, the Board of
Directors may elect to pay the cash equivalent of the fair market value on the
exercise date of any or all the shares which would otherwise be issuable on
exercise of the right. No fractional shares shall be issued under this
Subsection 9(c). In lieu of fractional shares, the option holder shall be
entitled to receive a cash adjustment equal to the same fraction of the fair
market value per share of Common Stock on the date of exercise.
(d) Effect of Exercise. Upon the exercise of stock appreciation rights,
the related option shall be considered to have been exercised to the extent of
the number of shares of Common Stock with respect to which such stock
appreciation rights are exercised, and shall be considered to have been
exercised to that extent for purposes of determining the number of shares of
Common Stock available for the grant of options under the Management Plan. Upon
the exercise or termination of the related option, the stock appreciation rights
with respect to such related option shall be considered to have been exercised
or terminated to the extent of the number of shares of Common Stock with respect
to which the related option was so exercised or terminated.
(e) Effect of Termination or Death. In the event that an option holder
ceases to be an employee or consultant of the Company or any of its Subsidiaries
for any reason, his stock appreciation rights shall be exercisable only to the
extent and upon the conditions that its related option is exercisable under
Subsection 8(d).
l0. LIMITED STOCK APPRECIATION RIGHTS
The Board of Directors may grant, in its discretion, limited stock
appreciation rights ("Limited Rights") to the holder of any option with respect
to all or a portion of the shares subject to such option. Such Limited Rights
shall be granted pursuant to an agreement in such form, and not inconsistent
with the Management Plan, as the Board of Directors shall approve from time to
time (and which may be incorporated in the stock option agreement governing the
terms of the related option) and shall include substantially the following terms
and conditions as the Board shall determine.
(a) Grants. A Limited Right may be granted concurrently with the grant
of the related option or at such later time as determined by the Board of
Directors.
(b) Exercise. Unless otherwise determined by the Board of Directors, a
Limited Right may be exercised only during the period (a) beginning on the first
day following any one of the following events (i) the date of approval by the
stockholders of the Company of an Approved Transaction (as defined in Subsection
l0(e) below), (ii) the date of a Control Purchase (as defined in Subsection
l0(e) below) or (iii) the date of a Board Change (as defined in Subsection l0(e)
below); and (b) ending on the thirtieth day (or such other date specified in the
stock option agreement) following such date (such period herein referred to as
the "Limited Right Exercise Period"). Each Limited Right shall be exercisable
during the Limited Right Exercise Period only to the extent the related option
is then exercisable, and in no event after the termination of the related
option. Limited Rights granted under the Management Plan shall be exercisable in
whole or in part by notice to the Company. Such notice shall state that the
holder of the Limited Rights elects to exercise the Limited Rights and the
number of shares in respect of which the Limited Rights are being exercised. The
effective date of exercise of a Limited Right shall be deemed to be the date on
which the Company shall have received such notice.
(c) Amount Paid Upon Exercise. Upon the exercise of Limited Rights, the
holder shall receive in cash an amount equal to the excess of the fair market
value (as determined pursuant to Subsection 8(a) above) on the date of exercise
of such Limited Rights of each share of Common Stock with respect to which such
Limited Right shall have been exercised over the exercise price per share of
Common Stock subject to the related option.
(d) Effect of Exercise. Upon the exercise of Limited Rights, the
related option shall be considered to have been exercised to the extent of the
number of shares of Common Stock with respect to which such Limited Rights are
exercised, and shall be considered to have been exercised to that extent for
purposes of determining the number of shares of Common Stock available for the
grant of options under the Management Plan. Upon the exercise or termination of
the related option, the Limited Rights with respect to such related option shall
be considered to have been exercised or terminated to the extent of the number
of shares of Common Stock with respect to which the related option was so
exercised or terminated.
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(e) Definitions. For purposes of this Section l0:
(i) An "Approved Transaction" shall mean (A) any consolidation
or merger of the Company in which the Company is not the continuing or surviving
corporation or pursuant to which shares of Common Stock would be converted into
cash, securities or other property, other than a merger of the Company in which
the holders of Common Stock immediately prior to the merger have the same
proportionate ownership of common stock of the surviving corporation immediately
after the merger, or (B) any sale, lease, exchange, or other transfer (in one
transaction or a series of related transactions) of all, or substantially all,
of the assets of the Company, or (C) the adoption of any plan or proposal for
the liquidation or dissolution of the Company.
(ii) A "Control Purchase" shall mean circumstances in which
any person (as such term is defined in Sections l3(d)(3) and l4(d)(2) of the
Exchange Act, corporation or other entity (other than the Company or any
employee benefit plan sponsored by the Company or any Subsidiary) (A) shall
purchase any Common Stock of the Company (or securities convertible into the
Company's Common Stock) for cash, securities or any other consideration pursuant
to a tender offer or exchange offer, without the prior consent of the Board of
Directors, or (B) shall become the "beneficial owner" (as such term is defined
in Rule l3d-3 under the Exchange Act), directly or indirectly, of securities of
the Company representing twenty-five percent (25%) or more of the combined
voting power of the then outstanding securities of the Company ordinarily (and
apart from rights accruing under special circumstances) having the right to vote
in the election of directors (calculated as provided in paragraph (d) of such
Rule l3d-3 in the case of rights to acquire the Company's securities).
(iii) A "Board Change" shall mean circumstances in which,
during any period of two consecutive years or less, individuals who at the
beginning of such period constitute the entire Board shall cease for any reason
to constitute a majority thereof unless the election, or the nomination for
election by the Company's stockholders, of each new director was approved by a
vote of at least a majority of the directors then still in office.
ll. RESTRICTED SHARES
The Board of Directors may authorize, in its discretion, the issuance
of restricted shares of Common Stock to Eligible Participants pursuant to
restricted share agreements in such form, and not inconsistent with the
Management Plan, as the Board of Directors shall approve from time to time. Any
amount of restricted shares issued shall be subject to the following terms:
(a) Restricted Period and Price. The Board of Directors shall prescribe
restrictions, terms and conditions, including but not limited to the period
("restricted period") during which the holder must continue to render services
to the Company in order to retain the restricted shares, in addition to those
provided in the Management Plan. The Board shall determine the price, if any, to
be paid by the holder for the restricted shares. Upon forfeiture of any
restricted shares; any amount paid by the holder shall be repaid in full by the
Company.
(b) Issuance of Restricted Shares. Restricted shares, when issued, will
be represented by a stock certificate or certificates registered in the name of
the holder to whom such restricted shares shall have been awarded. During the
restricted period, certificates representing the restricted shares and any
securities constituting retained distributions (as defined below in Subsection
ll(c)) shall bear a restrictive legend to the effect that ownership of the
restricted shares, and the enjoyment of all rights appurtenant thereto, are
subject to the restrictions, terms and conditions provided in the Management
Plan and the applicable restricted shares agreement. Such certificates shall be
deposited by such holder with the Company, together with stock powers or other
instruments of assignment, each endorsed in blank, which will permit transfer to
the Company of all or any portion of the restricted shares and any retained
distributions that shall be forfeited or that shall not become vested in
accordance with the Management Plan and the applicable restricted shares
agreement.
(c) Rights With Respect to Restricted Shares. Restricted shares shall
constitute issued and outstanding shares of Common Stock for all corporate
purposes. The holder will have the right to vote such restricted shares, to
receive and retain all regular cash dividends, and such other distributions as
the Board may in its sole discretion designate, pay, or distribute on such
restricted shares and to exercise all other rights, powers and privileges of a
holder of Common Stock with respect to such restricted shares, with the
exception that (i) the holder will not be entitled to delivery of the stock
certificate or certificates representing such restricted shares until the
restricted period shall have expired and unless all other vesting requirements
with respect thereto shall have been fulfilled; (ii) the Company will retain
custody of the stock certificate or certificates representing the restricted
shares during the restricted period; (iii) other than regular cash dividends and
such other distributions as the Board may in its sole discretion designate, the
Company will retain custody of all distributions ("retained distributions") made
07
or declared with respect to the restricted shares (and such retained
distributions will be subject to the same restrictions, terms and conditions as
are applicable to the restricted shares) until such time, if ever, as the
restricted shares with respect to which such retained distributions shall have
been made, paid or declared shall have become vested, and such retained
distributions shall not bear interest or be segregated in separate accounts;
(iv) the holder may not sell, assign, transfer, pledge, exchange, encumber of
dispose of the restricted shares or any retained distributions during the
restricted period; and (v) a breach of any restrictions, terms or conditions
provided in the Management Plan or established by the Board with respect to any
restricted shares or retained distributions will cause a forfeiture of such
restricted shares and any retained distributions with respect thereto.
(d) Completion of Restricted Period. On the last day of the restricted
period with respect to each Award of restricted shares, and the satisfaction of
any other applicable restrictions, terms and conditions (i) all or part of such
restricted shares shall become vested and (ii) any retained distributions with
respect to such restricted shares shall become vested. Unless the Administrator
determines otherwise, any such restricted shares and retained distributions that
shall not have become vested upon the termination of employment of the holder
shall be forfeited to the Company and the holder shall not thereafter have any
rights (including dividend and voting rights) with respect to such restricted
shares and retained distributions that shall have been so forfeited, provided,
however, that if a holder shall die, become totally disabled or is terminated by
the Company without cause during a restricted period with respect to any
restricted shares, then, unless the restricted share agreement relating to such
shares provide otherwise, the restricted period applicable to each award of
restricted shares to such holder shall be deemed to have expired and all such
restricted shares and retained distributions shall become vested.
l2. RECAPITALIZATION
In the event that dividends are payable in Common Stock or in the event
there are splits, subdivisions or combinations of shares of Common Stock, the
number of shares available under the Management Plan shall be increased or
decreased proportionately, as the case may be, and the number of shares
delivered upon the exercise thereafter of any stock option or stock appreciation
right, upon distribution pursuant to incentive stock rights theretofore granted
or issued pursuant to restricted share agreements theretofore entered into shall
be increased or decreased proportionately, as the case may be, without change in
the aggregate purchase price (where applicable).
l3. ACCELERATION
Notwithstanding any contrary waiting period in any stock option
agreement, any incentive period in any incentive stock rights agreement or any
restricted period with respect to any restricted shares issued pursuant to any
restricted shares agreement, or in the Management Plan, but subject to any
determination by the Board of Directors to provide otherwise at the time such
Award is granted or subsequent thereto, each outstanding option granted under
the Management Plan shall, except as otherwise provided in the stock option
agreement, become exercisable in full for the aggregate number of shares covered
thereby, and each share issuable upon lapse of an incentive period or each share
issued pursuant to a restricted share agreement, except as otherwise provided in
the incentive stock rights agreement or restricted share agreement, as the case
may be, shall vest unconditionally on the first day following the occurrence of
any of the following: (a) the approval by the stockholders of the Company of an
Approved Transaction; (b) a Control Purchase; or (c) a Board Change.
l4. CONTINUATION OF RELATIONSHIP; LEAVE OF ABSENCE
(a) Nothing in the Management Plan or any Award made hereunder shall
interfere with or limit in any way, the right of the Company or of any
Subsidiary to terminate any Eligible Participant's employment at any time, nor
confer upon any Eligible Participant any right to continue any such relationship
with the Company or Subsidiary.
(b) For purposes of the Management Plan, a transfer of a recipient of
options, rights or restricted shares hereunder from the Company to a Subsidiary
or vice versa, or from one Subsidiary to another, or a leave of absence duly
authorized by the Company shall not be deemed a termination of employment or a
break in the incentive, waiting, exercise or restricted period, as the case may
be. In the case of any employee on an approved leave of absence, the Board of
Directors may make such provisions with respect to continuance of stock rights,
options or restricted shares previously granted while on leave from the employ
of the Company or a Subsidiary as it may deem equitable.
08
l5. GENERAL RESTRICTION
Each Award made under the Management Plan shall be subject to the
requirement that, if at any time the Board of Directors shall determine, in its
sole and subjective discretion, that the registration, qualification or listing
of the shares subject to such Award upon a securities exchange or under any
state or federal law, or the consent or approval of any government regulatory
body, is necessary or desirable as a condition of, or in connection with, the
granting or exercise of such Award, the Company shall not be required to issue
such shares unless such registration, qualification, listing, consent or
approval shall have been effected or obtained free of any conditions not
acceptable to the Board of Directors. Nothing in the Management Plan or any
agreement or grant hereunder shall obligate the Company to effect any such
registration, qualification or listing.
l6. RIGHTS AS A STOCKHOLDER
The holder of a stock option, incentive stock right or limited stock
appreciation right shall have no rights as a stockholder with respect to any
shares covered by the stock option, incentive stock right, stock appreciation
right or limited stock appreciation right, as the case may be, until the date of
issuance of a stock certificate to him for such shares related to the exercise
or discharge thereof. No adjustment shall be made for the dividends or other
rights for which the record date is prior to the date such stock certificate is
issued.
l7. NONASSIGNABILITY OF AWARDS
No incentive stock right, stock option, stock appreciation right or
limited stock appreciation right shall be assignable or transferable by an
Eligible Participant except by will or by the laws of descent and distribution
and during the lifetime of an Eligible Participant may only be exercised by him.
l8. WITHHOLDING TAXES
Whenever under the Management Plan shares are to be issued in
satisfaction of stock options, incentive stock rights, stock appreciation right
or limited stock appreciation rights granted thereunder, or pursuant to
restricted share agreements, the Company shall have the right to require the
Eligible Participant to remit to the Company an amount sufficient to satisfy
federal, state and local withholding tax requirements prior to the delivery of
any certificate or certificates for such shares or at such later time as when
the Company may determine that such taxes are due. Whenever under the Management
Plan payments are to be made in cash, such payment shall be net of an amount
sufficient to satisfy federal, state and local withholding tax requirements.
l9. NONEXCLUSIVITY OF THE PLAN
Neither the adoption of the Management Plan by the Board of Directors
nor any provision of the Management Plan shall be construed as creating any
limitations on the power of the Board (but not the Committee) to adopt such
additional compensation agreements as it may deem desirable, including, without
limitation, the granting of stock options otherwise than under the Management
Plan, and such arrangements may be either generally applicable or applicable
only in specific cases.
20. AMENDMENT, SUSPENSION OR TERMINATION OF THE PLAN
The Board of Directors (but not the Committee) may at any time amend,
alter, suspend or discontinue the Management Plan, but no amendment, alteration,
suspension or discontinuation shall be made which would impair the rights of any
recipient of a stock option, incentive stock right, limited stock appreciation
right or restricted shares under any agreement theretofore entered into
hereunder, without his consent, or which, without the requisite vote of the
stockholders of the Company approving such action, would:
(a) except as is provided in Section l2 of the Management Plan, increase
the total number of shares of stock reserved for the purposes of the Management
Plan; or
09
(b) extend the duration of the Management Plan; or
(c) materially increase the benefits accruing to participants under the
Management Plan; or
(d) change the category of persons who can be Eligible Participants under
the Management Plan.
Without limiting the foregoing, the Board of Directors may, any time or
from time to time, authorize the Company, without the consent of the respective
recipients, to issue new options or rights in exchange for the surrender and
cancellation of any or all outstanding options or rights.
2l. LIMITATIONS ON EXERCISE.
Notwithstanding anything to the contrary contained in the Management
Plan, any agreement evidencing any Award hereunder may contain such provisions
as the Board deems appropriate to ensure that the penalty provisions of Section
4999 of the Code, or any successor thereto, will not apply to any stock or cash
received by the holder from the Company.
22. GOVERNING LAW
The Management Plan shall be governed by, and construed in accordance
with, the laws of the State of New Jersey.
01
FIRST MONTAUK FINANCIAL CORP.
Annual Meeting of Shareholders - June 23, 2000
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 23, 2000 and at any adjournments thereof, hereby revoking any proxy
heretofore given. The undersigned instructs such proxies to vote:
I. Election of Class III 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 III Directors to Serve until
year 2003 Annual Meeting: Ward R. Jones, Jr.
and David I. Portman
(Instruction: To withhold authority for any individual nominee, strike a
line through the nominee's name in the list below)
II. Adoption of Second Amended and Restated 1992 Incentive Stock
Option Plan
[ ] FOR [ ] AGAINST [ ] ABSTAIN
III. Adoption of Amended 1996 Senior Management Plan
Plan
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(Continued and to be signed on the reverse side)
_______________________________________________________________________________
02
(continued from other side)
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
23, 2000, receipt of which is hereby acknowledged.
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 III Directors, FOR the adoption of the Seconded
Amended and Restated 1992 Incentive Stock Option Plan, and FOR the adoption of
the Amended 1996 Senior Management Plan.
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:-------------------------------, 2000
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(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.)