Exhibit 10.1
June 14, 2007
Xx. Xxxxxx X. Xxxx
Investment Properties of America, LLC
IPofA Water View, LLC
FMFG OWNERSHIP, INC.
FMFG OWNERSHIP II, INC.
FMFG ACQUISITIONCO, INC.
00000 Xxxxxxxxxx Xxxxxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxxxx 00000
Dear Xx. Xxxx:
The following will set forth the terms upon which First Montauk Financial
Corp., a New Jersey corporation ("Montauk"), Xxxxxx X. Xxxxxxx, Xxxx X. Xxxxx,
Xx., Xxxxx Xxxxxxx, Xxxxx X. Xxxxxxx, and Xxxxx Xxxxxxxx (collectively, the
"Montauk Parties") and Xxxxxx X. Xxxx, Investment Properties of America, LLC,
IPofA Water View, LLC ("Water View"), FMFG AcquisitionCo, Inc., a New Jersey
corporation ("AcquisitionCo"), FMFG Ownership, Inc. ("Ownership I"), a Delaware
corporation, and FMFG Ownership II, Inc., a Delaware corporation ("Ownership
II") (collectively, the "Xxxx Parties"), agree to settle all the disputes among
the Xxxx Parties and the Montauk Parties (collectively the "Parties"). This
letter shall constitute a final and binding obligation of the Parties.
1. On the Closing Date, as defined below, the parties shall direct the
escrow agent, Signature Bank New York, to pay to Ownership I all of
the funds on deposit by the Xxxx Parties under the Escrow Agreement
executed and delivered pursuant to the May 5, 2006 Merger Agreement by
and among Montauk, Ownership I and AcquisitionCo. The Parties shall
execute the instructions to the Escrow Agent annexed as Exhibit A.
2. Upon the Closing Date, the Xxxx Parties shall surrender for
cancellation all of the shares held by Ownership II and the Series A
Preferred Stock held by Ownership I on the date hereof, and such
additional shares, if any, as may be necessary to cause Xxxx'x
aggregate beneficial ownership of Montauk Common Stock to equal 24.9%
(3,300,308 shares) of the total outstanding shares of Montauk Common
Stock as determined in accordance with Section 13D of Securities and
Exchange Act of 1934, as amended (the "Closing Securities").
a. The Xxxx Parties hereby represent that:
i. The number of shares of each class of Montauk Securities owned by any
of the Xxxx Parties is as set forth in the Schedule 13D, and
amendments, filed by the Xxxx Parties with the Securities and Exchange
Commission;
ii. None of the shares previously held by any of the Xxxx Parties have
been sold, transferred, pledged or hypothecated, and no agreement for
the sale, transfer or hypothecation of such shares has been made;
iii. On the Closing Date, the shares will be delivered free and clear of
any lien or encumbrance, and will not be subject to any claims in
bankruptcy. The Xxxx Parties will notify Montauk immediately in
writing in the event that any lien or encumbrance, or legal claim, is
threatened or made against any the shares, and shall provide Montauk
with copies of all documents relating thereto.
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3. Upon the Closing Date, and for 60 days thereafter (the "Option
Period"), Montauk shall have the exclusive right to purchase the
balance of the shares held by Ownership I (the "Option Securities")
for the aggregate purchase price of $2,500,000 (the "Option"). During
the Option Period, Montauk shall be entitled to vote the Option
Securities on any matter before the Company's shareholders. The Option
may be exercised by Montauk pro rata from time to time during the
Option Period.
4. The Xxxx Parties will use best efforts to cooperate with Xx. Xxxxxxx
in expunging from the Central Registration Depository ("CRD") any
reference to any complaint by the Xxxx Parties against Xx. Xxxxxxx
that Xx. Xxxxxxx and/or the Company is the subject of an alleged
investment-related sales practice violation, forgery, theft,
misappropriation, conversion of funds or other wrongdoing. This
cooperation will include, without limitation, (i) filing or
participating in an arbitration before the National Association of the
Securities Dealers (the "NASD") and/or a court proceeding directing
the NASD to expunge from Xx. Xxxxxxx'x CRD the complaint of FMFG, and
(ii) executing a Stipulated Award or Consent Order recommending or
granting expungment. In connection therewith and to the extent
necessary to the obtain an expungment order, FMFG will also
acknowledge and consent to findings that, after further investigation,
its information, claim, or allegation is factually impossible or
clearly erroneous; that Xx. Xxxxxxx was not involved in the alleged
investment-related sales practice violation, forgery, theft,
misappropriation, conversion of funds or other wrong doing; or the
claim, allegation, or information is false.
5. Upon the Closing Date, the lease between Water View and Montauk shall
be deemed void ab initio.
6. Due to the confidential nature of this transaction, no party shall
make any announcement or disclosure regarding the transaction without
the prior consent of the others, unless and except as required by
applicable law. Notwithstanding this Paragraph 6, the Xxxx Parties
acknowledge and agree that Montauk may be required to disclose in a
public announcement and to file with the Securities and Exchange
Commission any material terms and conditions of this Agreement and
otherwise make proper disclosure under federal and state securities
laws, and consents to the same, subject to timely review by and
consultation with the Xxxx Parties. Upon the execution of this
Agreement, Montauk and the Xxxx parties may issue a mutually approved
press release. Thereafter the parties each agree that they will not
make public statements regarding the transactions contemplated by this
Agreement without first consulting the other party with a view toward
issuing joint public statements, except to the extent required by law.
7. The Parties shall not make any negative or derogatory statements in
verbal, written, electronic or any other form about each other, or the
officers, employees and directors of the Parties including, but not
limited to, a negative or derogatory statement made in, or in
connection with, any article or book, on a website, in a chat room or
via the internet. Nothing contained in this paragraph shall be
construed as requiring any party to provide untruthful sworn testimony
in any legal proceeding.
8. This Agreement shall be governed by and construed in accordance with
the domestic laws of the State of New Jersey without giving effect to
any choice or conflict of law provision or rule (whether of the State
of New Jersey or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of
New Jersey. The Parties (a) agree that any legal suit, action or
proceeding arising out of or relating to the agreement shall be
instituted exclusively in New Jersey State Superior Court, County of
Monmouth, or in the United States District Court for the District of
New Jersey, (b) waives any objection which any Party may have now or
hereafter to the venue of any such suit, action or proceeding, and (c)
irrevocably consent to the jurisdiction of the New Jersey State
Superior Court, County of Monmouth and the United States District
Court for the District of New Jersey in any such suit, action or
procedure.
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9. Upon the Closing Date, the actions (the "Actions") pending in (i) the
Superior Court of the State of New Jersey, Chancery Division, Monmouth
County Docket No. C-07-07 entitled First Montauk Financial Corp.,
against Xxxxxx X. Xxxx, et al.; (ii) the United States District Court,
District of New Jersey, Civil Action No. 07cv00725, entitled FMFG
Ownership, Inc. against Xxxxxx Xxxxxxx, et al. (the "Derivative
Action"); (iii) the United States District Court, Southern District of
Florida, Case No. 07-20482-Civ, entitled FMFG Ownership, Inc. against
Xxxxxx Xxxxxxx; and (iv) the United States District Court, District of
New Jersey, Civil Action No. 3:07-cv-02578 (MLC) (JJH), entitled First
Montauk Financial Corp. v. Xxxxxx X. Xxxx, et al., (collectively the
"Actions") shall be dismissed with prejudice against all Parties and
without costs; provided, however, if required, the dismissal of the
Derivative Action shall be subject to the approval of the court. The
parties agree to proceed in good faith and use best efforts to take
all such actions as are required to receive necessary court,
regulatory and self-regulatory approvals and negotiate, execute and
deliver the required documentation.
10. On the Closing Date, each and all of the Parties and each of their
respective past, present or future family members, spouses, heirs,
trusts, trustees, executors, estates, administrators, beneficiaries,
distributees, foundations, agents, present and former employees,
assigns, fiduciaries, partners, partnerships, general or limited
partners or partnerships, joint ventures, member firms, limited
liability companies, entities formed by them, corporations, parents,
subsidiaries, divisions, affiliates, portfolio companies, associates,
associated entities, present and former shareholders, principals,
officers, directors, managing directors, members, managing members,
managing agents, predecessors and predecessors in interest, successors
and successors in interest, assigns, financial or investment advisors,
advisors, consultants, investment bankers, investment funds,
underwriters, lenders, commercial bankers, personal or legal
representatives, accountants, attorneys, insurers, co-insurers,
reinsurers, and associates, whether or not such persons or entities
were named, served with process, or appeared in the Actions
(collectively, the "Released Parties") shall be deemed released from
any and all liability and damages under or based upon any and all
claims, rights, causes of action, suits, matters, demands,
transactions and issues, known or unknown, that have been, could have
been or might have been asserted in or that relate to the Actions, or
matters, transactions, occurrences, or claims alleged in the Actions
by the Parties on behalf of themselves or any other person or entity,
including all claims relating to the Merger Agreement or the Parties'
investment in Montauk or negotiations with respect to same, the
settlement negotiations, the resolution of the Actions and the terms
thereof, or any of the matters referenced in or the subject of any of
the pleadings, counterclaims and motions filed in the Actions, by any
of the Parties and/or any and all owners of any security (as defined
in Section 3(a)(10) of the Exchange Act) issued by Montauk, or any of
them, whether individually, directly, representatively, derivatively
or in any other capacity, against the Parties or any of their present,
future or former officers, directors, employees, agents, attorneys,
representatives, advisors and affiliates (as defined in Rule 12b-2,
promulgated pursuant to the Exchange Act), associates (as defined in
Rule 12b-2, promulgated pursuant to the Exchange Act), parents,
principals, subsidiaries, general or limited partners or partnerships,
investment advisory clients, and brokers, and each of their heirs,
executors, administrators, successors and assigns (the "Released
Claims").
11. The Closing shall occur on Friday, June 15, 2007 (the "Closing Date").
On the Closing Date:
a. The Xxxx Parties shall deliver the Closing Securities to
FMFC for cancellation.
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b. The Xxxx Parties shall deliver the Option Securities to
counsel for FMFC to be held in escrow pending exercise of the
option or the expiration of the Option Period.
c. Upon receipt of the Closing Securities and the Option
Securities, the Parties shall transmit the escrow
instructions to Signature Bank and take any and all action
necessary to cause the wire transfer of the balance of the
escrow account to:
First Capital Bank
Glen Allen, VA
ABA # 000000000
Servicer, LLC
Account # 980269013
12. From and after the date hereof, the Xxxx Parties shall not purchase or
sell, or enter into any agreement directly or indirectly to purchase
or sell, any securities of Montauk, directly or indirectly,
individually, or as part of a group.
13. The Xxxx Parties and Montauk shall bear their own costs and expenses
(including expenses of representatives) incurred in connection with
this transaction. Montauk expenses shall include the costs of
indemnification of officers and directors. The Xxxx parties shall not
request an award of legal fees or reimbursement of costs or expenses
in the derivative action pending in the United States District Court,
District of New Jersey, Civil Action No. 07cv00725, or any other
Action.
[Signatures appear on the following page]
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We look forward to concluding this transaction as promptly as
practicable. I would appreciate your countersigning this letter where indicated
as constituting your concurrence with the intent expressed herein. This letter
of intent may be executed in multiple counterparts which when taken together
shall be an original.
Very truly yours,
Dated: June 14, 2007 FIRST MONTAUK FINANCIAL CORP.
By: /s/ Xxxxxx X. Xxxxxxx
---------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: President and Chief Financial
Officer
CONCURRED IN AND ACCEPTED AS OF JUNE 14, 2007.
/s/ Xxxxxx X. Xxxx
------------------------------------
XXXXXX X. XXXX
Dated: June 14, 2007
INVESTMENT PROPERTIES OF AMERICA,
LLC
By: IPofA Fund Manager, LLC,
Manager
By: /s/ Xxxxxx X. Xxxx
------------------------------------
Xxxxxx X. Xxxx, Manager
Dated: June 14, 2007
IPofA WATER VIEW, LLC
By: IPofA Fund Manager, LLC,
Manager
By: /s/ Xxxxxx X. Xxxx
------------------------------------
Xxxxxx X. Xxxx, Manager
Dated: June 14, 2007
FMFG ACQUISITION, INC.
By: /s/ Xxxxxx X. Xxxx
------------------------------------
Xxxxxx X. Xxxx, President
Dated: June 14, 2007
FMFG OWNERSHIP I, INC.
By: /s/ Xxxxxx X. Xxxx
------------------------------------
Xxxxxx X. Xxxx, President
Dated: June 14, 2007
[Signatures appear on following page.]
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FMFG ACQUISITION OWNERSHIP II, INC.
By: Xxxxxx X. Xxxx
------------------------------------
Xxxxxx X. Xxxx, President
Dated: June 14, 2007
/s/ Xxxxxx Xxxxxxx
------------------------------------
XXXXXX XXXXXXX
Dated: June 14, 2007
Xxxx X. Xxxxx, Xx.
------------------------------------
XXXX X. XXXXX, XX.
Dated: June 14, 2007
Xxxxx Xxxxxxx
------------------------------------
XXXXX XXXXXXX
Dated: June 14, 2007
/s/ Xxxxx X. Xxxxxxx
------------------------------------
XXXXX X. XXXXXXX
Dated: June 14, 2007
/s/ Xxxxx Xxxxxxxx
------------------------------------
XXXXX XXXXXXXX
Dated: June 14, 2007
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Exhibit A
June 15, 2007
SIGNATURE BANK
000 Xxxxxxx Xxxxxx
Xxx Xxxx, X.X. 00000
Attn: Xxxxxx Xxxxxxx
Re: Escrow Agreement dated May 5, 2007 between SIGNATURE BANK;
FIRST MONTAUK FINANCIAL CORP. and FMFG OWNERSHIP, INC.
Ladies/Gentlemen:
Please distribute from the Escrow Account established under the Escrow Agreement
all Proceeds on deposit, less the costs, expenses and fees that Signature Bank
is entitled to deduct pursuant to the terms of the Escrow Agreement to:
First Capital Bank
Glen Allen, VA
ABA # 000000000
Servicer, LLC
Account # 980269013
All terms defined herein shall have the definitions ascribed
to them in the Escrow Agreement referred to above.
Very truly yours,
FMFG OWNERSHIP, INC. FIRST MONTAUK FINANCIAL CORP.
By: /s/ Xxxxxx X. Xxxx By: /s/ Xxxxxx X. Xxxxxxx
----------------------------------- ---------------------------------
Name: Xxxxxx X. Xxxx, President Xxxxxx X. Xxxxxxx
President President and Chief Executive
Officer
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