UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): July 9, 2008
FIRST MONTAUK FINANCIAL CORP.
(Exact name of registrant as specified in its charter)
COMMISSION FILE NUMBER: 0-6729
NEW JERSEY 22-1737915
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
Parkway 109 Office Center
328 Newman Springs Road
Red Bank, NJ 07701
(Address and zip code of principal executive offices)
(732) 842-4700
(Registrant's telephone number, including area code
CHECK THE APPROPRIATE BOX BELOW IF THE FORM 8-K FILING IS INTENDED TO
SIMULTANEOUSLY SATISFY THE FILING OBLIGATION OF THE REGISTRANT UNDER ANY OF THE
FOLLOWING PROVISIONS:
|_| Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
|_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
CFR 240.14a-12)
|_| Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
|_| Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 1.01 Entry into a Material Definitive Agreement
On July 9, 2008, First Montauk Financial Corp. (the "Registrant")
and its wholly-owned broker-dealer subsidiary, First Montauk
Securities Corp. ("FMSC" and together with the Registrant, "First
Montauk") signed a definitive asset purchase agreement (the
"Purchase Agreement") with First Allied Securities, Inc., an
Advanced Equities Financial Corp. company ("Buyer"), providing for
the sale of certain assets of First Montauk to Buyer.
Under the Purchase Agreement, First Montauk's independent
registered representatives will be given the opportunity to join
Buyer, and Buyer will acquire the right to service the customer
accounts of those registered representatives that join Buyer. The
aggregate purchase price for the purchased assets ("Purchase Price")
is equal to 30% of the aggregate commission and fee income for the
trailing twelve (12) month period ended on June 30, 2008 (the
"Production") which was generated by the Closing Date
Representatives and credited to the Closing Date Representatives for
the purpose of computing their commission payout. The term "Closing
Date Representative" means any and all registered representatives
currently affiliated with FMSC, and (i) any registered
representative who is accepted by Buyer to join Buyer and who
becomes licensed with (or otherwise engaged by) Buyer prior to or
upon the closing of the transactions contemplated by the Purchase
Agreement and have not voluntarily resigned or terminated their
relationship with Buyer prior to the Second Payment Date (as defined
below) of the Purchase Price, or (ii) any registered representative
who becomes licensed and affiliated with buyer or any affiliate of
Buyer after the date of execution of the Purchase Agreement and
prior to the closing date and has not been terminated for cause or
voluntarily resigned or terminated his or her relationship with
Buyer prior to the second payment date of the Purchase Price;
provided that Buyer did not take or fail to take any action
(including reducing his or her commission payout rate) which
directly caused or resulted in the resignation or termination of the
Closing Date Representative with Buyer.
The Purchase Price will be payable in several parts as follows: (1)
Within two business days of execution of the Purchase Agreement,
Buyer will pay $250,000 to First Montauk; (2) On the closing date,
Buyer will pay an amount equal to the outstanding balance, including
principal and interest through the closing date, due under a secured
convertible promissory note, dated December 7, 2007 (the "Note")
made by the Registrant in favor of an affiliate of Buyer, by
cancelling the Note and applying the sums due thereunder towards the
Purchase Price; (3) On the 30th day following the closing date,
Buyer will pay an amount equal to the lesser of $2,000,000 or the
balance of the Purchase Price; and (4) On the 90th day (but in no
event earlier than January 15, 2009) after the closing date, Buyer
will pay the balance of the Purchase Price, if any. The total value
of the transaction is dependent on the amount of commissions and fee
income to be acquired by Buyer. First Montauk's current annual
commissions and fee income is estimated at $24 million.
The Purchase Agreement is subject to usual and customary conditions
for transactions of this nature, including, among other things, the
approval and adoption of the Purchase Agreement and the transactions
contemplated by it by the shareholders of the Registrant, the
regulatory consent of the Financial Industry Regulatory Authority,
the acceptance and transfer of customer accounts accepted by Buyer
to Buyer's clearing firm, and that the estimated aggregate
Production of the Closing Date Representatives is greater than
$12,250,000. The Purchase Agreement also contains customary
representations, warranties, covenants and indemnities for breach.
The parties expect that the Registrant will file a proxy statement
for shareholders with the Securities and Exchange Commission in the
next few weeks and the transaction, subject to the conditions set
forth in the Purchase Agreement, is expected to close by the end of
the year, however, as a result of the foregoing uncertainties, there
can be no assurances that the transaction will be completed. If the
closing is not consummated by December 31, 2008, the parties have
the option to terminate the Purchase Agreement and not consummate
the transaction.
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The Purchase Agreement provides that in the event First Montauk is
not in breach of any representation or warranty and has performed or
observed in all material respects the covenants and agreements to be
performed or observed by it and First Montauk terminates the
Purchase Agreement because Buyer is in breach of the Purchase
Agreement and which breach has not been cured within 20 days after
giving of written notice, then $500,000 of the Note and interest
thereon will be forgiven and the maturity date of the Note with
respect to the remaining outstanding principal amount of the Note
will be extended from December 31, 2008 to December 31, 2009.
In the event that Buyer is not in breach of any representation or
warranty and has performed or observed in all material respects the
covenants and agreements to be performed or observed by it and Buyer
terminates the Purchase Agreement because First Montauk is in breach
of the Purchase Agreement which breach has not been cured within 20
days after the giving of written notice, or because at any time
prior to approval by the shareholders of the Registrant, the Board
of Directors of the Registrant acts or fails to act in a manner
consistent with the oompleting the transaction with the Buyer, then
First Montauk will pay Buyer a termination fee equal to $250,000
plus the amount of certain expenses incurred by Buyer related to a
transition meeting up to maximum of $100,000.
In the event that either party terminates under certain other
circumstances, the Registrant agrees that the Note shall become due
and payable on the later of 30 days thereafter or December 31, 2008.
In the event of such termination by either party other than due to a
breach by Buyer, First Montauk shall refund the Prepayment Amount to
Buyer.
The foregoing description of the Purchase Agreement does not purport
to be complete and is qualified in its entirety by reference to the
full text of the Purchase Agreement, a copy of which is filed as
Exhibit 10.1 to this Current Report on Form 8-K and incorporated by
reference herein.
This material is not a substitute for the proxy statement that the
Registrant will file with the Securities and Exchange Commission
("SEC"). Investors are urged to read the document when it is
available because it will contain important information. The proxy
statement with other important documents to be filed by the
Registrant will be available free of charge at the SEC's website,
www.sec.gov or from the Registrant. The Registrant's directors and
certain other executive officers may be considered participants in
the solicitation of proxies in connection with the Purchase
Agreement. Information concerning the Registrant's directors and
executive officers can be found in the documents filed by the
Registrant with the SEC. As shareholders of the Registrant, certain
directors and executive officers of the Registrant may have direct
or indirect interest in Rhe transactions contemplated by the
Purchase Agreement. Additional information about the participants
will be contained in the proxy statement.
Item 7.01
Regulation FD Disclosure
On July 14, 2008, the Registrant issued a press release regarding
certain of the matters described in this Current Report. A copy of
the press release is attached as Exhibit 99.1. Exhibit 99.1 is
being "furnished" and shall not be deemed "filed" for purposes of
Section 18 of the Securities Exchange Act of 1934, nor shall it be
deemed incorporated by reference in any filing under the
Securities Act of 1933 or the Securities Exchange Act of 1934,
except as shall be expressly set forth by specific reference in
such filing.
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Item 9.01
Financial Statements and Exhibits.
(d) Exhibit Exhibit Title or Description
Number
10.1 Asset Purchase Agreement, dated as of July 9, 2008,
by and among First Allied Securities, Inc., First
Montauk Securities Corp. and First Montauk Financial
Corp.
99.1 Press Release, dated July 14, 2008
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned, hereunto duly authorized.
FIRST MONTAUK FINANCIAL CORP.
By: /s/ Victor K. Kurylak
--------------------------------------
Name: Victor K. Kurylak
Title: Chief Executive Officer
Date: July 14, 2008
EXHIBIT INDEX
Exhibit Description
Number
10.1 Asset Purchase Agreement, dated as of July 9, 2008, by and
among First Allied Securities, Inc., First Montauk Securities
Corp. and First Montauk Financial Corp.
99.1 Press Release dated July 14, 2008
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