FIRST MONTAUK FINANCIAL CORP.
Parkway 109 Office Center
328 Newman Springs Road, Red Bank, New Jersey 07701
PROXY STATEMENT
Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
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Preliminary Proxy Statement
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Soliciting Material pursuant to Rule 14a-11(c) or Rule 14a-12
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 Thursday, June 19, 2003
To the Shareholders of FIRST MONTAUK FINANCIAL CORP.
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of FIRST
MONTAUK FINANCIAL CORP. (the "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 Thursday, June 19, 2003 at 10:00 a.m., New
Jersey time, for the following purposes:
1. To elect one Class III Director to the Company's Board of Directors to
hold office for a period of three years or until his successor is duly elected
and qualified; and
2. To transact such other business as may properly be brought before the
meeting or any adjournment thereof.
The close of business on Friday, May 16, 2003 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 Company, in writing, prior to the Annual Meeting of Shareholders.
By Order of the Board of Directors
WILLIAM J. KURINSKY, Secretary
Dated: May 19, 2003
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.
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 THURSDAY, JUNE 19, 2003
This Proxy Statement and the accompanying form of proxy have been mailed on
or about May 19, 2003 to the holders of the Company's Common Stock of record on
Friday, May 16, 2003 (the "Record Date") of FIRST MONTAUK FINANCIAL CORP., a New
Jersey corporation (the "Company") in connection with the solicitation of
proxies by the Board of Directors of the Company for use at the Annual Meeting
of Shareholders to be held on Thursday, June 19, 2003 and at any adjournment
thereof.
SOLICITATION, VOTING AND REVOCABILITY OF PROXIES
Shares of the Company'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:
1. FOR the election of the person nominated by the Board of
Directors as a Class III Director; and
2. 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 Company 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. Broker non-votes and abstentions will be counted towards the
determination of a quorum which, according to the Company's Bylaws, will be the
presence, in person or by proxy, of a majority of the issued and outstanding
shares of Common Stock entitled to vote.
The Company 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 Company's Common Stock held of
record by such persons, and the Company 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,
2002, including financial statements, accompanies this Proxy Statement.
The principal executive offices of the Company are located at Parkway 109
Office Center, 328 Newman Springs Road, Red Bank, New Jersey 07701; the
Company's telephone number is (732) 842-4700.
Independent Public Accountants
The Board of Directors of the Company has selected Schneider & Associates,
LLP, Certified Public Accountants, as independent accountants of the Company for
the fiscal year ending December 31, 2003. Shareholders are not being asked to
approve such selection because such approval is not required under the Company's
Bylaws or the Business Corporation Act of the State of New Jersey. The audit
services provided by Schneider & 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 & 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.
Audit Fees
The aggregate fees billed by Schneider & Associates, LLP for professional
services rendered for the audit of the Company's annual financial statements for
the fiscal year ended December 31, 2002, and for the review of the financial
statements included in the Company's Quarterly Reports on Form 10-Q for that
fiscal year were $129,674.
Financial Information Systems Design and Implementation Fees
The Company did not incur any fees billed by Schneider & Associates, LLP
for professional services rendered for information technology services relating
to financial information systems design and implementation for the fiscal year
ended December 31, 2002.
All Other Fees
Fees billed to us by Schneider & Associates, LLP during the fiscal year
ended December 31, 2002 for all other non-audit services rendered, including tax
related services, totaled $26,501.
In the course of its meetings, the Audit Committee has determined that
Schneider & Associates, LLP's provision of these other services is compatible
with maintaining Schneider & Associates, LLP's independence.
VOTING SECURITIES AND SECURITY OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The securities entitled to vote at the Annual Meeting are the Company'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 16,
2003 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 16, 2003, there were 8,527,164 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 16, 2003, 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 Company to be the beneficial owner of more than five (5%)
percent of any class of the Company's voting securities.
Amount and Percentage
Directors, Officer of Beneficial Ownership (1)
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and 5% Shareholders(1) Number of Shares Percent
Herbert Kurinsky 511,518(2) 5.7 %
Parkway 109 Office Center
328 Newman Springs Road
Red Bank, NJ 07701
William J. Kurinsky 1,830,823(3) 20.5 %
Parkway 109 Office Center
328 Newman Springs Road
Red Bank, NJ 07701
Robert I. Rabinowitz, Esq. 236,583(4) 3.0 %
Parkway 109 Office Center
328 Newman Springs Road
Red Bank, NJ 07701
Ward R. Jones 110,000(5) 1.3 %
7 Leda Lane
Guilderland, NY 12084
Norma Doxey 54,900(6) *
Parkway 109 Office Center
328 Newman Springs Road
Red Bank, NJ 07701
Barry D. Shapiro 20,000(7) *
Parkway 109 Office Center
328 Newman Springs Road
Red Bank, NJ 07701
Kirlin Holdings Corp. 852,500(8) 10.0 %
6901 Jericho Turnpike
Syosset, NY 11791
All Directors, Officers and 5% 9,770,247 37.2 %
Shareholders as a group
(7 persons in number)
*Less than 1%
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(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 425,000 shares of Common Stock.
(3) Includes vested and presently exercisable options of Mr. William J.
Kurinsky to purchase 425,000 shares of Common Stock.
(4) Includes vested and presently exercisable options of Mr. Robert Rabinowitz
to purchase 228,750 shares of Common Stock; 25,000 of which are owned by
Mr. Rabinowitz's wife. Mr. Rabinowitz's children own 2,000 shares of Common
Stock. Mr. Rabinowitz also owns 5,833 Class C Warrants.
(5) Includes vested and presently exercisable options of Mr. Ward R. Jones to
purchase 100,000 shares of Common Stock.
(6) Includes vested and presently exercisable options of Ms. Norma Doxey to
purchase 36,500 shares of Common Stock and 6,000 non-vested stock options.
(7) Includes vested and presently exercisable options of Mr. Barry Shapiro to
purchase 20,000 shares of Common Stock.
(8) As reported under Schedule 13G filing made by Kirlin Holding Corp. dated
July 15, 2002.
NOTE:
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, 2002, was a
Director, officer or beneficial owner of more than ten percent of the Company's
Common Stock (which is the only class of securities of the Company 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 Company of Forms 3 and 4 during the most recent
fiscal year as furnished to the Company under Rule 16a-3(d) under the Act, and
Forms 5 and amendments thereto furnished to the Company with respect to its most
recent fiscal year, and any representation received by the Company 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 Company'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 Company'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 for Classes I
and II and one Director presently remaining in Class III. Until December 31,
2002, the Board of Directors consisted of six Directors dividend into the three
classes. However, as of December 31, 2002, Mr. David I. Portman, formerly a
Class III Director, resigned from the Company's Board of Directors. Although the
Class III Director is the class scheduled for election at this Annual Meeting,
we have not yet nominated any person to fill the vacancy on our Board of
Directors created by Mr. Portman's resignation. Until December 6, 2000 there was
a vacancy in Class II resulting from the resignation of Dr. Ross E. McRonald in
November 1994. This vacancy was filled by the remaining members of the Board on
December 6, 2000 with the appointment of Mr. Barry D. Shapiro.
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 Director. All proxies
received by the Board of Directors will be voted for the election as Class III
Director of the nominee listed below if no direction to the contrary is given.
In the event that the 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, the Company's General Counsel, is the brother-in-law
of Mr. William J. Kurinsky.
The term of the Class III Director expires at this Annual Meeting and the
Class III Director is the sole Directors nominated for election at this Annual
Meeting. The present Director of the Company nominated for reelection to the
Company's Board of Directors as the Class III Directors at the Annual Meeting is
Ward R. Jones, Jr.
The following table sets forth certain information as of the date hereof
with respect to each nominee, director and executive officer of the Company
whose term of office continues after the Annual Meeting.
Position with Director
Company; Principal Continually
Name Occupation and Age Since Term Expires
CLASS III - NOMINEE
Ward R. Jones, Jr. Director, Registered Representative
with First Montauk Securities Corp., 72 1991 Nominee
CLASS II
Norma L. Doxey Director, Vice-President of Operations
of First Montauk Securities Corp., 63 1988 2004
Barry D. Shapiro Director, 60 2000 2004
CLASS I
Herbert Kurinsky Director, President and Chief 1987 2005
Executive Officer of the Company
and Registered Options Principal of
First Montauk Securities Corp., 72
William J. Kurinsky Director, Vice President, Chief 1987 2005
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., 42
Herbert Kurinsky became a Director and President of the Company on November
16, 1987. Mr. Kurinsky is a co-founder of First Montauk Securities Corp. and has
been its President, one of its Directors and its Registered Options Principal
since September of 1986. From March 1984 to August 1986, Mr. Kurinsky was the
President of Homestead Securities, Inc., a New Jersey broker-dealer. From April
1983 to March 1984, Mr. Kurinsky was a branch office manager for Phillips, Appel
& Waldon, a securities broker-dealer. From February 1982 to March 1983, Mr.
Kurinsky was a branch office manager for Fittin, Cunningham and Lauzon, a
securities broker-dealer. From November 1977 to February 1982, he was a branch
office manager for Advest Inc., a securities broker-dealer. Mr. Kurinsky
received a B.S. degree in economics from the University of Miami, Florida in
1954.
William J. Kurinsky became Vice President, a Director and Financial and
Operations Principal of the Company on November 16, 1987. He is a co-founder of
First Montauk Securities Corp. and has been one of its Vice Presidents, a
Director and its Financial/Operations Principal since September of 1986. Prior
to that date, Mr. Kurinsky was Treasurer, Chief Financial Officer and Vice
President of Operations of Homestead Securities, Inc., a securities
broker-dealer. Mr. Kurinsky received a B.S. from Rutgers University in 1984. He
is the nephew of Herbert Kurinsky.
Norma L. Doxey has been a Director of the Company since December 6, 1988.
Ms. Doxey is the Vice President for Operations and a Registered Representative
with First Montauk Securities Corp. since September, 1986. From August through
September, 1986, she was operation's manager and a Registered Representative
with Homestead Securities, Inc. From July 1984 through August 1985 she held the
same position with Marvest Securities.
Ward R. Jones, Jr. has been a director of the Company since June, 1991.
From 1955 through 1990, Mr. Jones was employed by Shearson Lehman Brothers as a
registered representative, eventually achieving the position of Vice President.
Mr. Jones is currently a registered representative of First Montauk Securities
Corp., but does not engage in any securities business.
Barry D. Shapiro was appointed to the Board of Directors of the Company on
December 6, 2000. From October 2000 to the present, Mr. Shapiro is a shareholder
of the accounting firm, Withum, Smith & Brown in its Red Bank office. Mr.
Shapiro was a partner of Shapiro & Weisman C.P.A., P.A., from 1976 thru 1996
when he became a partner of Rudolf, Cinnamon & Calafato, P.A. until joining
Withum Smith & Brown. Mr. Shapiro was previously employed with the Internal
Revenue Service from 1965 thru 1971, where he was responsible for audit, review
and conference functions. Mr. Shapiro is a member of the New Jersey Society of
Certified Public Accountants, where he currently participates on the IRS Co-Op
and State Tax Committees. Mr. Shapiro is a past Trustee, Treasurer and Vice
President of the NJSCPA. He has been involved and is in many civic and community
activities, as well as charitable organizations, including the Monmouth County
New Jersey Chapter of the American Cancer Society and the Ronald McDonald House
of Long Branch, New Jersey. Mr. Shapiro received a B.S. in accounting from Rider
University in 1965.
Robert I. Rabinowitz, 46, 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 Principal.
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.
Significant Employees
Paul A. Lieberman, Esq., 54, has been the general counsel for First Montauk
Securities Corp. since January 1998, and special counsel from June 1997 to
January 1998. From 1990 to 1997, he was Senior Vice President and Associate
General Counsel at Tucker, Anthony, Inc. a securities broker/dealer. Prior to
that, Mr. Lieberman served as Vice President and Associate General Counsel for
Citicorp/Citibank. Prior to that, Mr. Lieberman served in various legal
capacities for Merrill, Lynch, Pierce, Fenner & Smith for approximately ten
years. Prior to that, Mr. Lieberman was special counsel to the Market
Surveillance Department of the New York Stock Exchange and also served with the
Securities and Exchange Commission. Mr. Lieberman is an attorney at law.
Mark D. Lowe, 44, 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, NJ. Mr. Lowe is the
Treasurer of the Estate and Financial Planning Council of Central New Jersey.
Mindy A. Horowitz, CPA, 45, has been Vice President of Finance for First
Montauk Securities Corp. since September 1995. Prior to that, Ms. Horowitz was a
tax partner with and held other positions at the accounting firm of Broza, Block
& Rubino from 1981 through 1995 when she joined First Montauk Securities Corp.
Ms. Horowitz is a Certified Public Accountant.
Compensation of Directors, Board Meetings and Committees
The Company pays directors, who are not employees of the Company, 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 Company's Non-Executive Director Stock
Option Plan. Directors employed by the Company 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 Company may from time to time
require. During fiscal year 2002, the Board of Directors met on four (4)
occasions and all directors were present, either in person or by telephonic
conference call.
Committees of the Board of Directors
The Board of Directors has two committees: Compensation and Audit. For the
fiscal year ended December 31, 2002, the members of the committees, and a
description of the duties of the Committees were as follows:
Compensation Committee. The compensation committee functions include
administration of the Company's 2002 Incentive Stock Option Plan, 2002
Non-Executive Director Stock Option Plan and 1996 Senior Management Option Plan
and the negotiation and review of all employment agreements of executive
officers of the Company. The compensation committees' members are Ward R. Jones
and Barry Shapiro. During the fiscal year ended December 31, 2002, the committee
met on 2 occasions.
Audit Committee. The Company's audit committee acts to:(i) review with
management the finances, financial condition and interim financial statements of
the Company; (ii) review with the Company's independent auditors the year-end
financial statements; (iii) review the Company's financial systems and controls;
(iv) review the scope and results of the audit performed by the Company's
independent auditor; and (v) review implementation with the independent auditors
and management any action recommended by the independent auditors and the
retention and termination of the Company's independent auditors. During the
fiscal year ended December 31, 2002, the audit committee met on one occasion.
The audit committee adopted a written charter governing its actions effective
June 23, 2000. The Charter of the Audit Committee of the Company was attached as
Exhibit 1 to the Company's Proxy Statement dated May 22, 2001.
During the fiscal year ended December 31, 2002, the members of the audit
committee were Ward R. Jones, Barry Shapiro and David Portman. All three of
these members of FMFC's audit committee were "independent" within the definition
of that term as provided by Rule 4200(a)(14) of the listing standards of the
National Association of Securities Dealers. As of December 31, 2002, Mr. Portman
resigned from the Board of Directors. The Board has not yet replaced Mr. Portman
on the audit committee. Accordingly, this report is being submitted by the
remaining two Directors serving on the Audit Committee at the time this report
was prepared. Members of the Audit Committee do not receive additional
compensation for such service.
Report of the Audit Committee:
The audit committee hereby states that it:
* has reviewed and discussed the audited financial statements with the
Company's management;
* has discussed with the Company's independent auditors the matters required
to be discussed by SAS 61, as may be modified or supplemented;
* has received the written disclosures and the letter from the independent
accountants required by Independence Standards Board Standard No. 1, as may
be modified or supplemented, and has discussed with the independent
accountants the independent accountant's independence; and
* has recommended to the Board of Directors of the Company that the audited
financial statements be included in the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 2002 for filing with the
Commission.
The Audit Committee of the Board of Directors of First Montauk Financial Corp.:
Ward R. Jones, Jr. Barry D. Shapiro
The Company does not have a standing nominating committee of the Board of
Directors.
Compensation Committee Report on Executive Compensation:
This report is submitted by the compensation committee of the Board of
Directors of the Company. During the fiscal year ended December 31, 2002, the
compensation committee was responsible for reviewing the Company's stock plans
and reviewing and approving compensation matters concerning the executive
officers and key employees of the Company.
Overview and Philosophy. The Company uses its compensation program to
achieve the following objectives:
* To provide compensation that attracts, motivates and retains the talented,
high caliber officers and employees necessary to achieve the Company's
strategic objectives, as determined by the compensation committee;
* To align the interest of officers with the success of the Company;
* To align the interest of officers with stockholders by including long-term
equity incentives; and
* To increase the long-term profitability of the Company and, accordingly,
increase stockholder value.
Compensation under the executive compensation program is comprised of cash
compensation in the form of base salary, bonus compensation and long-term
incentive awards, generally in the form of options to purchase common stock. In
addition, the compensation program includes various other benefits, including
medical and insurance plans and the employee stock option incentive plans and
company sponsored 401(k) plans, both of which plans are generally available to
all employees of the Company.
The principal factors which the compensation committee considered with
respect to each officer's compensation package for fiscal year ended December
31, 2002 are summarized below. The compensation committee may, however, in its
discretion, apply different or additional factors in making decisions with
respect to executive compensation in future years.
Base Salary. Compensation levels for each of the Company's officers, including
the Chief Executive Officer, are generally set within the range of salaries that
the compensation committee believes are paid to officers with comparable
qualifications, experience and responsibilities at similar companies. In setting
compensation levels, the compensation committee takes into account such factors
as (i) the Company's past performance and future expectations, (ii) individual
performance and experience and (iii) past salary levels. The compensation
committee does not assign relative weights or ranking to these factors, but
instead makes a determination based upon the consideration of all of these
factors as well as the progress made with respect to the Company's long-term
goals and strategies. Base salary, while reviewed annually, is only adjusted as
deemed necessary by the compensation committee in determining total compensation
for each officer. Additionally, certain executives, including Herbert Kurinsky,
the Chief Executive Officer and William Kurinsky, the Chief Operating Officer
have existing employment agreements with the Company which set forth certain
levels of base salary and bonus compensations. Shareholders are directed to the
discussion of these agreements under the heading "Employment Agreements"
appearing elsewhere in this Proxy Statement.
Equity Incentives. The compensation committee believes that stock
participation aligns officers' interests with those of the stockholders. In
addition, the compensation committee believes that equity ownership by officers
helps to balance the short term focus of annual incentive compensation with a
longer term view and may help to retain key executive officers. Long term
incentive compensation, generally granted in the form of stock options, allows
the officers to share in any appreciation in the value of the Company's common
stock.
In making stock option grants, the compensation committee considers general
corporate performance, individual contributions to the Company's financial,
operational and strategic objectives, level of seniority and experience,
existing levels of stock ownership, previous grants of restricted stock or
options, vesting schedules of outstanding restricted stock or options and the
current stock price. With respect to the compensation determination for the
fiscal year ended December 31, 2002, the compensation committee believes that
the current stock ownership positions of the executive officers was sufficient
to achieve the benefits intended by equity ownership. Accordingly, no additional
options were granted options to the Company's executive officers during the past
fiscal year.
Other Benefits. The Company also has various broad-based employee benefit
plans. Executive officers participate in these plans on the same terms as
eligible, non-executive employees, subject to any legal limits on the amounts
that may be contributed or paid to executive officers under these plans. The
Company offers a 401(k) savings plan, which allows employees to invest in a wide
array of funds on a pre-tax basis, as well as insurance and other benefit plans
for its employees, including executive officers.
Chief Executive Officer and Chief Operating Officer Compensation. During
the last fiscal year, neither the Chief Executive Officer nor the Chief
Operating Officer received any cash bonuses or compensation outside of a $2,500
automobile expense allowance for the Chief Executive Officer. Each of the Chief
Executive Officer and Chief Operating Officer received a base salary of $181,218
during the fiscal year ended December 31, 2002. Each officer voluntarily agreed
to reduce his base salary in fiscal 2002 by $51,922 as compared to 2001, rather
than accept an increase of 10%, as provided in each of their employment
agreements. The terms of the subject officers' employment compensation are
determined primarily pursuant to their employment agreements, which were entered
into in August, 2002. Shareholders are directed to the discussion of these
agreements under the heading "Employment Agreements" appearing elsewhere in this
Annual Report on Form 10-K.
New Employment Agreements. Additionally, in August 2002, the Committee
approved new employment agreements for each of Mr. Herbert Kurinsky and Mr.
William Kurinsky, our Chief Executive Officer Chief Operating Officer,
respectively. These new employment agreements were necessitated, in the view of
the Committee in order to include adequate provisions for these employees in the
event of a change of control. The Committee determined that these officers were
essential to the Company, and that their continued retention, especially in the
event of a threat of a change of control of the Company, necessitated that these
executives be eligible for added compensation under certain conditions. The
Committee believed that several factors out of the control of the Company and
management made a potential change of control possible. These factors included
the falling stock market generally, and the falling price of the Company's
stock. The new employment agreements also provide for additional financial and
employment security under other conditions, such as termination without cause.
Tax Deductibility of Executive Compensation. Section 162(m) of the Code
limits the tax deduction to the Company to $1 million for compensation paid to
any of the executive officers unless certain requirements are met. The
compensation committee has considered these requirements and the regulations. It
is the compensation committee's present intention that, so long as it is
consistent with its overall compensation objectives, substantially all executive
compensation be deductible for United States federal income tax purposes. The
compensation committee believes that any compensation deductions attributable to
options granted under the employee stock option plan currently qualify for an
exception to the disallowance under Section 162(m). Future option grants to
executive officers under each of the Company's employee stock option plans will
be granted by the compensation committee.
By the Compensation Committee of
the Board of Directors of First Montauk
Financial Corp.
Ward R. Jones, Jr.
Barry Shapiro
Compensation Committee Interlocks and Insider Participation
There are no compensation committee interlocks between the members of the
Company's compensation committee and any other entity. None of the members of
the Board's compensation committee are executive officers of the Company. Mr.
Jones is a registered representative of the Company's broker-dealer subsidiary,
First Montauk Securities Corp., but does not engage in any securities business.
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 the Class III Director.
THE BOARD OF DIRECTORS DEEMS THE NOMINEES FOR THE CLASS III DIRECTOR TO BE
IN THE BEST INTERESTS OF THE COMPANY AND ITS SHAREHOLDERS AND RECOMMENDS A VOTE
"FOR" APPROVAL THEREOF.
EXECUTIVE COMPENSATION AND RELATED INFORMATION
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,
2002, 2001 and 2000 to each of the named executive officers of the Company.
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term
Compensation
Awards
Securities
Other Annual Restricted Stock Underlying Options/
Name and Principal Position Salary Bonus Compensation Award(s) SARs
(a) Year ($) ($) ($) ($) (#)
(b) (c) (d) (e) (f) (g)
Herbert Kurinsky, 2002 $181,218 $- $ 2,500 (4) $ - 0
Chairman and Chief Executive 2001 $233,140 $- $ 2,000 (4) $ - 200,000(1)
Officer (7) 2000 $256,217 $29,306 $ 2,000 (4) $ - 125,000(1)
William Kurinsky, 2002 $181,218 $- $ 0 $ - 0
Vice President, Chief 2001 $233,140 $- $1,000 (5) $ - 200,000(2)
Operating and Financial 2000 $256,217 $- $2,000 (5) $ - 125,000(2)
Officer and Secretary (8)
Robert I. Rabinowitz, 2002 $150,000 $ - $ 2,500 (6) $ - 0
General Counsel (9) 2001 $146,154 $ - $ 2,000 (6) $ - 43,750(3)
2000 $150,000 $24,234 $ 2,000 (6) $ - 60,000(3)
- -----------------------------------
(Footnotes to Summary Compensation Table begin on next page)
(Footnotes to Summary Compensation Table)
(1) In 2002 the Compensation Committee of the Board of Directors (the
"Committee) did not authorize any option grants the named officer. In 2001,
the Committee authorized an option grant to Mr. Herbert Kurinsky to
purchase 200,000 shares of Common Stock at an exercise price of $.75 per
share for 5 years. In 2000, the Committee authorized an option grant to Mr.
Herbert Kurinsky to purchase 125,000 shares of Common Stock at an exercise
price of $2.00 per share. See "Aggregated Options/Sar Exercises in Last
Fiscal Year and Fy-End Option/Sar Values."
(2) In 2002 the Compensation Committee of the Board of Directors (the
"Committee) did not authorize any option grants the named officer. In 2001,
the Committee authorized an option grant to Mr. William J. Kurinsky to
purchase 200,000 shares of Common Stock at an exercise price of $.83 per
share for 5 years. In 2000 the Committee authorized an option grant to Mr.
William J. Kurinsky to purchase 125,000 shares of Common Stock at an
exercise price of $2.00 per share. See "Aggregated Options/Sar Exercises in
Last Fiscal Year and Fy-End Option/Sar Values."
(3) In 2002 the Compensation Committee of the Board of Directors (the
"Committee) did not authorize any option grants the named officer. In 2001,
the Committee authorized an option grant to Mr. Robert Rabinowitz to
purchase 43,750 shares of Common Stock at an exercise price of $1.50 per
share for 5 years. In 2000 the Committee authorized an option grant to Mr.
Robert Rabinowitz to purchase 60,000 shares of Common Stock at an exercise
price of $2.00 per share. See "Aggregated Options/Sar Exercises in Last
Fiscal Year and Fy-End Option/Sar Values."
(4) Includes: (i) for 2002, automobile allowance of $2,500; (ii) for 2001,
automobile allowance of $2,000 (iii) for 2000, auto allowance of $2,000.
(5) Includes: (i) for 2002 no automobile allowance was paid, (ii) for 2001,
automobile allowance of $1,000; and (iii) for 2000, automobile allowance of
$2,000.
(6) Includes (i) for 2002, automobile allowance of $2,500; (ii) for 2001,
automobile allowance of $2,000; (iii) for 2000, automobile allowance of
$2,000.
(7) Mr. Herbert Kurinsky is the beneficial owner of 56,518 shares of the
Company's Common Stock as of December 31, 2002, which shares had a market
value of $11,304 as of that date, without giving effect to the diminution
in value attributable to the restriction on said shares.
(8) Mr. William Kurinsky is the beneficial owner of 1,405,823 shares of the
Company's Common Stock as of December 31, 2002, which shares had a market
value of $281,165 as of that date, without giving effect to the diminution
in value attributable to the restriction on said shares.
(9) Mr. Robert I. Rabinowitz is the beneficial owner of 29,500 shares of the
Company's Common Stock as of December 31, 2002, which shares had a market
value of $5,900 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
There were no stock option grants to any executive officers granted
during the year ended December 31, 2002.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
Number of Unexercised Options Value of Unexercised
Shares Acquired on as of In-the-money Options at
---
Name Exercise Value Realized December 31, 2002 December 31, 2002 (1)
- ---- -------- -------------- ----------------- ---------------------
Exercisable/Unexercisable Exercisable/Unexercisable
Herbert Kurinsky - $0 425,000/0 $0/$0
William J. Kurinsky - $0 425,000/0 $0/$0
Robert I. Rabinowitz - $0 203,750/0 $0/$0
- -----------------
(1) Based upon the closing bid price of the Company's Common Stock on December
31, 2002 ($.20 per share), less the exercise price for the aggregate number of
shares subject to the options.
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".
Comparison of 5 Year Cumulative Total Return
Assumes Initial Investment of $100
1997 1998 1999 2000 2001 2002
First Montauk Financial Corp. Return % -49.50 -10.61 -44.75 -38.03 -54.54
Cum $ $100.00 $50.50 $45.14 $24.94 $15.46 $7.03
S & P 500 Return % 28.58 21.05 -9.10 -11.88 -22.10
Cum $ $100.00 $128.58 $155.64 $141.47 $124.66 $97.11
Peer Group Only Return % -39.06 186.80 -59.19 15.01 -49.14
Cum $ $100.00 $60.94 $174.78 $71.32 $82.03 $41.72
Peer Group + FMFK Return % -43.10 119.35 -57.28 6.67 -49.60
Cum $ $100.00 $56.90 $124.81 $53.32 $56.87 $28.66
NOTES: Industry composite includes Paulson Capital Corp., Olympic Cascade
Financial Corp. and Kirlin Holding 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.
Employment Agreements
In August 2002, 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. 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 that 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 agreement.
Incentive Stock Option Plan
In June 2002, the Company adopted the 2002 Incentive Stock Option Plan (the
"2002 Plan") which provides for the grant of options to purchase up to 5,000,000
shares of the Company's Common Stock by employees of the Company and
consultants. Under the terms of the 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 Plan is administered by the Board of Directors which 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 has full authority to interpret the
Plan and to establish and amend rules and regulations relating thereto.
Under the 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 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 Plan will expire in 2012.
Since the adoption of the 2002 Plan, the Company has issued 476,000 options
to registered representatives and employees of the Company. There remains
1,447,998 options outstanding from the 1992 Plan for a total of 1,923,998
options outstanding.
Director Plan
In June 2002, the Company adopted the Non-Executive Director Stock Option
Plan (the "Director Plan"). 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. A Non-Executive Director who has not
served as a director for an entire year prior to September 1st of each year
shall receive a pro rata number of options determined as follows:
Date of Membership Options Granted
September 1 through November 30 20,000
December 1 through February 28 15,000
March 1 through May 30 10,000
June 1 through August 31 5,000
Options are granted under the Director Plan until 2002 to non-executive
directors who are not full time employees of the Company or any of its
subsidiaries.
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 a combination of
both. 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 two persons who are officers of the Company
(the "Committee"). The Committee has no discretion to determine which
non-executive director 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 60,000 options have been granted to
the Company's Non-Executive members of the Board of Directors under the 2002
Plan. An additional 160,000 options remain outstanding from grants made pursuant
to the 1992 Non-Executive Director Stock Option Plan, which terminated in June
2002, and which was replaced by the 2002 Non-Executive Director Stock Option
Plan.
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 Plan or grants of restricted stock or incentive stock rights. The Board of
Directors or a committee of the board may grant awards under the Management Plan
to executive management employees, if one is appointed for this purpose. The
Management Plan provides for four types of awards: stock options, incentive
stock rights, stock appreciation rights ("SARs"), and restricted stock purchase
agreements. The stock options granted under the Management Plan can be either
ISOs or non-ISOs similar to the options granted under the Employee Stock Option
Plan, except that the exercise price of non-ISOs 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 that cause awards granted under the 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.
In June 2000 at the Company's Annual Meeting of Shareholders, a resolution
was passed amending the Senior Management Stock Option Plan to increase the
number of shares reserved for issuance from 2,000,000 to 4,000,000. Options to
purchase 1,452,500 shares of the Company's Common Stock are currently
outstanding under the Senior Management Plan.
CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS
For information concerning the terms of the employment agreements entered
into between the Company and Messrs. Herbert Kurinsky and William J. Kurinsky,
see "Executive Compensation".
FINANCIAL INFORMATION
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR
ENDED DECEMBER 31, 2002 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 COMPANY 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 16, 2003 the person making the request
was the beneficial owner of Common Shares of the Company entitled to vote at the
2003 Annual Meeting of Shareholders.
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 Company's 2004 Annual Meeting of
Shareholders must be received by the Company on or prior to January 20, 2004 to
be eligible for inclusion in the Company's proxy statement and form of proxy to
be used in connection with the 2004 Annual Meeting of Shareholders.
By Order of the Board of Directors
WILLIAM J. KURINSKY, Secretary
Dated: May 19, 2003
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.
FIRST MONTAUK FINANCIAL CORP.
Annual Meeting of Shareholders - June 19, 2003
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
Thursday, June 19, 2003 and at any adjournments thereof, hereby revoking any
proxy heretofore given. The undersigned instructs such proxies to vote:
I. Election of Class III Director:
FOR nominee listed WITHHOLD AUTHORITY
below (except as marked to vote for the nominee
to the contrary below) |_| listed below |_|
(Instruction: To withhold authority for any individual nominee, strike a line
through the nominee's name in the list below)
Nominee for Class III Director to Serve until the
2006 Annual Meeting:
Ward R. Jones, Jr.
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 19,
2003, 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 the
nominee for Class III Director. 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:_______________________________, 2003
___________________________________________
___________________________________________
(Please date and sign exactly as name appears
at left. For joint accounts, each joint
owner should sign. Executors,
administrators, trustees, etc., should also
so indicate when signing.)