As filed with the Securities and Exchange Commission on June 26, 1997
Registration No. __________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
-----------------
FIRST MONTAUK FINANCIAL CORP.
(Exact name of Registrant as specified in charter)
New Jersey 22-1737915
(State of Incorporation) (I.R.S. Employer
Identification Number)
Parkway 109 Office Center
328 Newman Springs Road
Red Bank, New Jersey 07701
(908) 842-4700
(Address, including zip code, and
telephone number, including area code, of
registrant's principal executive offices)
-----------------
Herbert Kurinsky, President
Parkway 109 Office Center
328 Newman Springs Road
Red Bank, New Jersey 07701
(908) 842-4700
(Name and address, including zip code, and telephone number,
including area code, of agent for service)
-----------------
With copies to:
GUY P. LANDER, ESQ.
GOLDSTEIN & DiGIOIA, LLP
369 Lexington Avenue
New York, New York 10017
================================================================================
<PAGE>
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box. [x]
If the registrant elects to deliver its latest report to security holders,
or a complete and legible facsimile thereof, pursuant to 11(a)(1) of this Form,
check the following box. [ ]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
========================================================================================
Proposed
Maximum Proposed
Offering Maximum Amount of
Title of Each Class of Price Aggregate Registra-
Securities Being Amount Being per Offering tion
Registered Registered Unit(1) Price(1) Fee(1)
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Units (2) ................... 2,979,060 $.45 $ 1,340,577 $ 406
Class A Redeemable Common
Stock Purchase Warrants
Class B Redeemable Common
Stock Purchase Warrants
Class C Redeemable Common
Stock Purchase Warrants
- ----------------------------------------------------------------------------------------
Common Stock, no par
value(3).................... 2,979,060 $3.00 $ 8,937,180 $ 2,708
- ----------------------------------------------------------------------------------------
Common Stock, no par
value (4)................... 2,979,060 $5.00 $14,895,300 $ 4,514
- ----------------------------------------------------------------------------------------
Common Stock, no par
value (5)................... 2,979,060 $7.00 $20,853,420 $ 6,319
- ---------------------------------------------------------------------------------------
Total........................ $11,916,240 $46,026,477 $13,947
========================================================================================
</TABLE>
(1) Estimated solely for the purpose of determining the registration fee.
(2) An aggregate of 2,979,060 Class A Redeemable Common Stock Purchase
Warrants 2,979,060 Class B Redeemable Common Stock Purchase Warrants
and 2,979,060 Class C Redeemable Common Stock Purchase Warrants
("Warrants") will be offered to the public in up to 2,979,060 Units.
Unit consists of one Class A Redeemable Common Stock Purchase
Warrant, one Class B Redeemable Common Stock Purchase Warrant and One
Class C Redeemable Common Stock Purchase Warrant.
(3) Shares of Common Stock issuable upon exercise of Class A Redeemable
Common Stock Purchase Warrants. Pursuant to Rule 416 there are also
ii
<PAGE>
being registered such additional number of shares of Common Stock as
may become issuable pursuant to the anti-dilution provisions of the
Warrants. Upon exercise of each Warrant, the holder will receive one
share of Common Stock, subject to adjustment in certain
circumstances.
(4) Shares of Common Stock issuable upon exercise of Class B Redeemable
Common Stock Purchase Warrants. Pursuant to Rule 416 there are also
being registered such additional numbers of shares of Common Stock as
may become issuable pursuant to the anti-dilution provisions of the
Warrants.
(5) Shares of Common Stock issuable, upon exercise of Class C Redeemable
Common Stock Purchase Warrants. Pursuant to Rule 416 there are also
being registered such additional numbers of shares of Common Stock as
may become issuable pursuant to the anti-dilution provisions of the
Warrants.
---------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION ACTING PURSUANT TO SECTION 8(A) MAY
DETERMINE.
================================================================================
iii
<PAGE>
Subject to Completion, dated ______, 1997
P R O S P E C T U S
2,979,060 Units
Each Unit consists of one Class A Redeemable Common Stock Purchase Warrant,
one Class B Redeemable Common Stock Purchase Warrant and one Class C Redeemable
Common Stock Purchase Warrant.
FIRST MONTAUK FINANCIAL CORP.
First Montauk Financial Corp. (the "Company") is offering (the
"Rights Offering") up to 2,979,060 units (the "Units"), to holders
("Shareholders") of record of its common stock, no par value (the "Common
Stock") at the close of business on __________, 1997 (the "Record Date"),
pursuant to non-transferable rights (the "Rights") to purchase Units at a price
of $.45 per Unit (the "Subscription Price"). Holders of Rights ("Rights
Holders") will not be required to pay any brokerage fees for the subscription of
Units under the Rights Offering. Rights Holders will be able to exercise their
Rights until 5:00 p.m. Eastern time on __________, 1997 (the "Expiration Time").
Each Stockholder is receiving one Right for each share of Common
Stock held of record at the close of business on the Record Date. Three Rights
will entitle the Rights Holder (the "Basic Subscription Privilege") to subscribe
for one Unit. Any rights not duly subscribed for prior to the Expiration Time
will expire. Each Rights Holder will also be entitled to purchase at the
Subscription Price additional Units that are not otherwise subscribed for
pursuant to the exercise of the Basic Subscription Privilege, subject to
proration and reduction by the Company under certain circumstances (the
"Oversubscription Privilege"). Once a Rights Holder has exercised the Basic
Subscription Privilege or the Oversubscription Privilege, such exercise may not
be revoked. The Rights will be evidenced by non-transferable certificates (the
"Subscription Rights Certificates"). See "Rights Offering Procedures."
Each Unit consists of one Class A Redeemable Common Stock Purchase
Warrant, one Class B Redeemable Common Stock Purchase Warrant and one Class C
Redeemable Common Stock Purchase Warrant. First, the Class A Redeemable Common
Stock Purchase Warrants (the "Class A Warrants"), entitle the holder thereof to
purchase during the three years commencing on __ [the date of initial issuance]
one share of Common Stock of the Company (the "Class A Warrant Shares"), at an
exercise price of $3.00 per share, subject to
1
<PAGE>
adjustment in certain circumstances. Second, the Class B Redeemable Common Stock
Purchase Warrants (the "Class B Warrants"), entitle the holder thereof to
purchase during the five years commencing on __ [the date of initial issuance]
one share of Common Stock of the Company (the "Class B Warrant Shares"), at an
exercise price of $5.00 per share, subject to adjustment in certain
circumstances. Last, the Class C Redeemable Common Stock Purchase Warrants (the
"Class C Warrants"), entitle the holder thereof to purchase during the seven
years commencing on __ [the date of initial issuance] one share of Common Stock
of the Company (the "Class C Warrant Shares"), at an exercise price of $7.00 per
share, subject to adjustment in certain circumstances. The Warrants will be
separately transferable immediately. No separate securities for the Units will
be issued.
The Company may redeem the Warrants, at any time at $.05 per Warrant,
upon thirty (30) days' prior written notice, if the closing bid price of the
Company's Common Stock for the ten consecutive trading days ending within ten
days of the date of the notice of redemption is not less than: (a) for the Class
A Warrants, $5.00 per share, (b) for the Class B Warrants $7.00 per share, and
(c) for the Class C Warrants, $12.00 per share.
Upon completion of the Rights Offering, Shareholders who do not fully
exercise their Rights will own a smaller proportional interest in the Company
than would otherwise be the case.
The Company's Common Stock is traded in the over-the-counter market
and reported on the NASD OTC Bulletin Board System and by the National Daily
Quotation Service published by the National Quotation Bureau. On June 16, 1997
the bid and asked prices of the Company's Common Stock as reported by a market
maker were $2.50 and $2.53125, respectively. The Company intends to apply for
inclusion of the Common Stock in the Nasdaq Smallcap Market. There can be no
assurance that the Company's application will be accepted or if accepted, that
the market for the securities will increase or even be sustained. See "Risk
Factors" "NASDAQ Listing." See "Price Range of Common Stock and Certain Market
Information."
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK AND SHOULD BE
PURCHASED ONLY BY THOSE PERSONS WHO CAN AFFORD THE LOSS OF THEIR
ENTIRE INVESTMENT. SEE "RISK FACTORS."
Rights are exercisable by properly completing a Subscription Rights
Certificate and returning it to the Company with full payment for the subscribed
Units. Payment may be made by personal check, certified check, cashier's check,
money order or wire transfer and must be received prior to the Expiration Time.
No interest will be paid to subscribers on any funds used to subscribe for the
Units. See "Rights Offering Procedures." The Company's Board of Directors makes
no recommendation as to whether any Rights
2
<PAGE>
Holder should subscribe for the Units.
---------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------------------------
PROCEEDS TO THE COMPANY
SUBSCRIPTION PRICE (1)(2)(3)
------------------ -----------------------
Per Unit.............. $0.45 $0.45
Total (1)............. $1,340,577.00 $1,340,577.00
1. The total Subscription Price and the total Proceeds to the
Company assume the purchase of 2,979,060 Units pursuant to the
exercise of Rights.
2. Before deducting offering expenses estimated at $___________
payable by the Company.
3. The Company has not employed any brokers, dealers or underwriters in
connection with the solicitation of exercises of Rights in the Rights
Offering and no underwriting commissions, fees or discounts will be
paid in connection with the Rights Offering.
---------------------------------
The Units offered hereby are offered by the Company subject to
withdrawal, cancellation or modification of the offer without notice. It is
expected that delivery of the Units will be made as soon as practicable
following the Expiration Time.
The date of this Prospectus is _____________, 1997
3
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company may be inspected and
copied at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549 and at the following Regional Offices
of the Commission: New York Regional Office, 7 World Trade Center, New York, New
York 10048; and Chicago Regional Office, Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois, 60661. Copies of such material may be
obtained from the public reference section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. The Commission
maintains a Website that contains reports, proxy statements and other
information regarding issuers that file electronically with the Commission. The
address of that Website is: http://www.sec.gov.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, heretofore filed by the Company with the
Commission pursuant to the Exchange Act, are hereby incorporated by reference,
except as superseded or modified herein:
1. The Company's Annual Report on Form 10-KSB for the fiscal
year ended December 31, 1996; and
2. The Company's Quarterly Report on Form 10-Q for the three
months ended March 31, 1997.
3. The Company's Proxy Statement for its Annual Meeting of
Shareholders held on June 27, 1997.
Each document filed subsequent to the date of this Prospectus
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the
termination of this Offering shall be deemed to be incorporated by reference in
this Prospectus and shall be part hereof from the date of filing of such
document.
The Company will provide without charge to each person to whom a
copy of this Prospectus is delivered, upon the written or oral request of any
such person, a copy of any document described above (other than exhibits).
Requests for such copies should be directed to Robert Rabinowitz, Esq., First
Montauk Financial Corp., Parkway 109 Office Center, 328 Newman Springs Road, Red
Bank, New Jersey 07701, telephone (908) 842-4700.
4
<PAGE>
PROSPECTUS SUMMARY
The following summary is intended to set forth certain pertinent facts and
highlights from material contained in the body of this Prospectus. The summary
is qualified in its entirety by the detailed information and financial
statements appearing elsewhere in this Prospectus.
THE COMPANY
First Montauk Financial Corp. ("FMFC") is a holding company, which,
through its principal wholly-owned subsidiary, First Montauk Securities Corp.
("FMSC"), is primarily engaged in the operation of an investment banking and
securities brokerage firm. FMFC also sells insurance products through its
subsidiary Montauk Insurance Services, Inc., ("MISI") and equipment leases
through Montauk Advisors, Inc. ("MAI"). FMFC, FMSC, MISI and MAI are sometimes
collectively referred to herein as the "Company". FMSC is a broker-dealer
registered with the Securities and Exchange Commission ("SEC"), a member of the
National Association of Securities Dealers Regulation, Inc. ("NASDR"), the
Municipal Securities Rulemaking Board ("MSRB"), and the Securities Investor
Protection Corporation ("SIPC"). FMSC's business activities consist primarily of
retail sales and trading of listed and unlisted equity and fixed-income
securities; sales of government, municipal and corporate securities; options;
commissions earned from individual and institutional securities transactions;
and market making activities. FMSC also provides investment banking activities
such as private and public securities offerings. In fiscal 1995, FMSC became a
registered advisor under the Investment Advisors Act of 1940 and began offering
investment advisory services.
FMSC is currently licensed to conduct its broker-dealer business in
49 states and the District of Columbia. FMSC maintains approximately 117 branch
and/or satellite offices, all of which are maintained by affiliates. FMSC has
approximately 356 registered representatives, and services approximately 25,000
retail customer accounts.
FMSC's primary method of operation is through its affiliate program.
The affiliate program is designed to attract experienced brokers with existing
clientele who desire to operate their own office. It is through this affiliate
program that FMSC has expanded its customer base and retail activities by adding
brokers with established clientele. In order to become an affiliate of FMSC, the
registered representative must enter into an affiliate agreement with FMSC. The
Company believes that one of the primary reasons its affiliate program is
attractive to such individuals is because the affiliate arrangement entitles the
affiliate representative to obtain a significantly higher percentage of the
commissions generated by his sales than a registered representative
5
<PAGE>
would normally receive. Based on the experience of FMSC's management, and
information derived from professional associations, FMSC believes that the range
of standard commission payout rates for registered representatives of retail
forms is approximately 40%-50%, whereas the Company's affiliates receive
commissions of approximately 80%-85%. The terms of the affiliate agreement
provide that the the Company's affiliate establishes his own office and is
solely responsible for the payment of all expenses associated with the operation
of the branch office, including rent, utilities, furniture, equipment, stock
quotation machines, and general office supplies. All securities transactions are
cleared through FMSC's clearing firm on a fully disclosed basis. FMSC receives a
percentage (generally 15%-20% after deduction of clearing costs) of the
affiliates' commissions with no operating expenses directly attributable to the
maintenance of the specific affiliate office.
FMSC has also expanded its general securities business by adding
registered representatives to its main corporate office. FMSC is continuously
seeking to establish additional branch offices at sites and locations to be
selected, the timing and location of which will be based upon prevailing
business and economic conditions.
In 1991, MISI was formed for the purpose of offering and selling
variable annuity, variable life as well as traditional life and health insurance
products. Currently, MISI is licensed in the states of Alabama, Alaska, Arizona,
California, Connecticut, Delaware, Florida, Georgia, Illinois, Indiana,
Kentucky, Maine, Maryland, New Jersey, New York, North Carolina, Pennsylvania,
Rhode Island, South Carolina, Virginia, Washington and Wisconsin. MISI derives
revenue from insurance-related products and services from the existing base of
FMSC's Registered Representatives who are insurance licensed. In fiscal year
1996 MISI earned $523,868 in gross commissions from the sale of insurance.
In 1993, the Company formed Montauk Advisors, Inc., ("MAI") as a
wholly-owned subsidiary. MAI engages in the sale of equipment leasing contracts
on an agency basis. The equipment financed to date includes copiers, facsimile
machines and other business machines. These leases are sold to various customers
from which MAI derives a commission. In fiscal year 1996 MAI earned $373,216 in
gross commissions from the sale of leases.
In early 1995, FMSC became registered with the Securities and
Exchange Commission as an Investment Advisor under the Investment Advisors Act
of 1940 for the purpose of providing investment advisory services and fee-based
managed accounts to clients of FMSC. Currently, FMSC is licensed as an
Investment Advisor in the States of Alaska, Arizona, California, Connecticut,
Florida, Hawaii, Indiana, New Jersey, New York, North Carolina, Pennsylvania,
Texas, and West Virginia. Although to date FMSC has
6
<PAGE>
received minimal revenues from its advisory services, management's goal is to
derive revenue by providing investment advisory services to FMSC's existing
client based as well as to additional clientele seeking fee-based managed
accounts.
FMFC and its subsidiaries (with the exception of MISI) each maintain
their principal executive offices at Parkway 109 Office Center, 328 Newman
Springs Road, Red Bank, New Jersey 07701, telephone (908) 842-4700. MISI
maintains its principal offices at One Mack Centre Drive, Paramus, New Jersey.
THE RIGHTS OFFERING
Rights....................................... Each record holder of Common
Stock as of the close of
business on the Record Date
will receive one nontrans-
ferable Right for every share
of Common Stock held of record
as of the close of business on
the Record Date. An aggregate
of up to 8,937,179 Rights will
be distributed. See "The
Rights Offering - The Rights".
Basic Subscription Privilege................. Holders will be entitled to
subscribe, up to the Expiration
Time and at the Subscription
Price, for one Unit for every
three Rights held. The
election of a Holder to
exercise Rights in the Rights
Offering is irrevocable.
Certificates representing
Warrants purchased pursuant to
both the Basic Subscription
Privilege and the
Oversubscription Privilege will
be delivered to subscribers as
soon as practicable after the
Expiration Time. Accordingly,
until certificates are
delivered, subscribing Holders
may not be able to sell the
Warrants that they have
purchased in the Rights
Offering. See "The Rights
Offering-Subscription
Privileges-Basic Subscription
Privilege."
7
<PAGE>
Oversubscription Privilege................... Each record holder of Common
Stock as of the close of
business on the Record Date who
exercises all of his or her
Rights pursuant to the Basic
Subscription Privilege will be
entitled to subscribe, up to
the Expiration Time and at the
Subscription Price, for
additional Units, that are
available after satisfaction of
all subscriptions pursuant to
the Basic Subscription
Privilege (the "Excess Units").
The Oversubscription Privilege
is not transferable. A Holder
may, at the time of exercising
the Basic Subscription
Privilege, exercise the
Oversubscription Privilege for
up to the total number of
Units to be issued in the
Rights offering. If an
insufficient number of Excess
Units is available to satisfy
fully all elections to exercise
the Oversubscription Privilege,
then the Excess Units will be
prorated in proportion to the
number of shares of Common
Stock owned by such Holder as
of the close of business on the
Record Date. See "The Rights
Offering--Subscription
Privileges Oversubscription
Privilege."
Subscription Price of Units.................. The Subscription Price will be
$.45 per Unit. Each Holder
will be deemed to have
exercised first, the Basic
Subscription Privilege and
second, the Oversubscription
Privilege.
Shares outstanding Before
Rights Offering............................. 8,937,179
Shares of Common Stock
Outstanding After Rights
Offering.................................... 8,937,179
8
<PAGE>
Shares of Common Stock to be
Issued Assuming the Exercise
of all of the Warrants...................... 8,937,179
Shares of Common Stock to be
Outstanding Assuming the
Exercise of All of
the Warrants................................ 17,874,358
Nontransferrability of Rights................ The Rights are not transferable
Procedure for Exercising Rights.............. Rights will be evidenced by
Rights Certificates ("Rights
Certificates") that will be
mailed to holders of Common
Stock as of the close of
business on the Record Date or,
if such shares are held by any
nominee or depository, to such
nominee or depository. The
Basic Subscription Privilege
and the Oversubscription
Privilege may be exercised by
properly completing the Rights
Certificates evidencing those
Rights and forwarding them (or
following the guaranteed
delivery procedures), with
payment of the Subscription
Price (as hereinafter defined)
of $.45 for each Unit or Excess
Unit subscribed for pursuant to
the Basic Subscription
Privilege and the
Oversubscription Privilege to
the Subscription Agent (as
hereinafter defined) prior to
the Expiration Time. If Rights
Certificates are sent by mail,
Holders are urged to use
insured, registered mail,
return receipt requested. Once
a Holder has exercised the
Basic Subscription Privilege
and the Oversubscription
Privilege, such exercise may
not be revoked. Any Rights
not duly exercised prior to the
Expiration Time will expire.
See "The Rights Offering--
Exercise of Rights."
9
<PAGE>
Persons Holding Common Stock
Through Others.............................. Persons holding shares of
Common Stock and receiving the
Rights distributable with
respect thereto through a
broker, dealer, commercial
bank, trust company or other
nominee should contact the
appropriate institution or
nominee and request it to
effect such transactions on
their behalf. See "The Rights
Offering--Exercise of Rights."
Procedure for Exercising Rights
by Foreign Shareholders..................... Rights Certificates will not be
mailed to record holders of
Common Stock who addresses are
outside the United States and
Canada, but will be held by the
Subscription Agent for such
holders' accounts until the
Subscription Agent receives
instructions to exercise the
Rights. If no instructions are
received by the Expiration
Time, the Rights will be null
and void.
Certain Federal Income Tax
Consequences................................ For U. S. federal income tax
purposes, shareholders will not
recognize taxable income upon
receipt of the Rights, nor will
they recognize gain or loss
upon exercise or expiration of
the Rights. See "Certain
Federal Income Tax
Consequences."
Conditions................................... The Company reserves the right
at any time prior to the
Expiration Time to terminate
the Rights Offering if
consummation is prohibited by
law or applicable regulation.
Issuance of Units............................ Certificates representing
Warrants purchased pursuant to
the exercise of the Basic
Subscription Privilege and the
Oversubscription Privilege will
10
<PAGE>
be delivered to subscribers and
the Standby Purchasers in a
single delivery as soon as
practicable after the
Expiration Time and after all
prorations contemplated by the
terms of the Rights Offering
have been affected. See "the
Rights Offering--Subscription
Privileges."
Expiration................................... The Rights Offering will expire
at 5:00 p.m., New York City
time on _______________, 1997,
subject to extension at the
sole discretion of the
Company's Board of Directors,
but not beyond 5:00 p.m., New
York City time, on ___________,
1997. Any Rights not duly
exercised prior to the
Expiration Time will expire.
Subscription Agent........................... North American Transfer Company
OTC Bulletin Board Symbol.................... FMFK
Important Dates for the Rights Offering
Event Date
----- ----
Record Date _______, 1997
Subscription Period Commences _______, 1997
Expiration Time _______, 1997(1)
- --------
(1)Unless the Rights Offering is extended to a date not later than
________________________, 1997.
11
<PAGE>
SUMMARY FINANCIAL DATA
Quarters Ended
Years Ended December 31, March 31,
------------------------ ------------------------
1996 1995 1997 1996
---- ---- ---- ----
STATEMENT OF
OPERATIONS DATA:
Revenues .......... $35,089,688 $28,342,203 $ 8,992,579 $ 8,633,479
Net income
(loss) ............ $ 32,789 $ 768,088 $ 257,314 $ 442,121
Per Share:
Primary Net
income ............ $ .01 $ .09 $ .03 $ .05
Number of
shares ........... 8,623,538 8,422,365 9,845,255 8,776,799
BALANCE SHEET DATA:
Total assets ...... $ 8,742,039 $10,486,967 $ 8,277,809 $ 8,341,328
Total
liabilities ....... $ 4,625,260 $ 6,886,021 $ 3,418,404 $ 4,298,261
Common Stock
issued with
guaranteed
selling price ..... $ 421,500 $ 459,000
Stockholders'
Equity ...... ..... $ 3,695,279 $ 3,600,946 $ 4,400,405 $ 4,043,067
12
<PAGE>
RISK FACTORS
The Shares offered hereby are speculative and involve a high degree
of risk. Prospective investors should carefully consider, among other things,
the following risk factors and speculative factors inherent in and affecting the
business of the Company and this offering.
SAFE HARBOR STATEMENT
Certain statements in this Prospectus constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995 (the "Reform Act"). The Company desires to avail itself of certain "safe
harbor" provisions of the Reform Act and is therefore including this special
note to enable the Company to do so. Forward-looking statements in this
Prospectus or hereafter included in other publicly available documents filed
with the Securities and Exchange Commission, reports to the Company's
stockholders and other publicly available statements issued or released by the
Company involve known and unknown risks, uncertainties and other factors which
could cause the Company's actual results, performance (financial or operating)
or achievements to differ from the future results, performance (financial or
operating) or achievements expressed or implied by such forward looking
statements. Such future results are based upon management's best estimates based
upon current conditions and the most recent results of operations. These risks
include, but are not limited to risks associated with the intense competition in
the brokerage industry, potential litigation, regulatory matters and the
volitility of the securities markets as well as other risks which may detailed
in the Company's Securities and Exchange Commission filings, including its
Annual Report on Form 10-KSB for the year ended December 31, 1996, each of which
could adversely affect the Company's business and the accuracy of the
forward-looking statements contained herein.
1. ORGANIZATIONAL AND OPERATING HISTORY
For the years ended December 31, 1996 and 1995, the Company had
revenues of $35,089,688, and $28,342,203, respectively and had net income of
$32,789 and $768,088 for the years ended December 31, 1996 and 1995,
respectively. No assurance is given that the Company will not incur losses in
the future, and such losses would necessarily affect the nature, scope and level
of the Company's future operations. The results of operations to date are not
necessarily indicative of the result of future operations. The Company's
securities business, by its very nature, is subject to various risks and
contingencies, many of which are beyond the ability of the Company to control.
These include economic conditions generally and in particular those affecting
securities markets, interest rates, discretionary income available for
investment; losses which may be incurred from underwriting and
13
<PAGE>
trading activities; customer inability to meet commitments (such as margin
obligations); customer fraud; and employee misconduct and errors. Further, the
nature and extent of the Company's underwriting, trading and market activities,
and hence the volume and scope of its business is directly affected by its
available "Net Capital".
2. FLUCTUATING SECURITIES VOLUME AND PRICES
The Company and the securities industry in general are directly
affected by national and international economic and political conditions, broad
trends in business and finance, the level and volatility of interest rates,
changes in and uncertainty regarding tax laws and substantial fluctuations in
the volume and price levels of securities transactions. The Company and the
securities industry in general are subject to other risks, including risks of
loss from the underwriting of securities, counterparty (a party to which the
Company has credit or performance exposure) failures to meet commitments,
customer fraud, employee errors or misconduct and litigation. In addition, price
fluctuations may cause losses on securities positions. As the Company expands
its investment banking activities and more frequently serves as manager or
co-manager of public offerings of securities, it expects to make increased
commitments of capital to market-making activities in securities of those
issuers. The expected additional concentration of capital in the securities of
those issuers held in inventory will increase the risk of loss from reductions
in the market price. Low trading volume or declining prices generally result in
reduced revenues. Under these conditions, profitability is adversely affected
since many costs, other than commission compensation and bonuses, are fixed.
Heavy trading volume has caused serious operating problems, including delays in
clearing and processing, for many securities firms in the past and may do so in
the future.
3. COMPETITION AND OTHER DEVELOPMENTS
The Company encounters intense competition in all aspects of its
business and competes directly with many other securities firms, a significant
number of which offer their customers a broader range of financial services,
have substantially greater resources and may have greater operating
efficiencies. In addition, a number of firm offer discount brokerage services to
individual retail customers and generally effect transactions at lower
commission rates on an "execution only" basis without offering other services
such as investment recommendations and research. The further expansion of
discount brokerage firms could adversely affect the Company's retail business.
Moreover, there is substantial commission discounting by full-service
broker-dealers competing for institutional and individual brokerage business.
The possible increase of this discounting could adversely affect the
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Company. Other financial institutions, notably commercial banks and savings and
loan associations, offer customers some of the services and products presently
provided by securities firms. In addition, certain large corporations have
entered the securities industry by acquiring securities firms. While it is not
possible to predict the type and extent of competitive services which banks and
other institutions ultimately may offer to customers, the Company may be
adversely affected to the extent those services are offered on a large scale.
4. RISKS OF PRINCIPAL AND BROKERAGE TRANSACTIONS AND LENDING
ACTIVITIES
The Company's trading, market making and underwriting activities
involve the purchase, sale or short sale of securities as a principal and,
accordingly, involve the risk of changes in the market prices of those
securities and the risk of a decrease in the liquidity of markets which would
limit the Company's ability to resell securities purchased or to repurchase
securities sold in principal transactions. The Company's brokerage activities
and its principal transactions are subject to credit risks. For example a
customer may not respond to a margin call, and since the securities being held
as collateral have diminished in value, there is a risk that the Company may not
recover the funds it loaned to the customer.
5. LITIGATION
Many aspects of the Company's business involve substantial risk of
liability, including exposure to substantial liability under federal and state
securities laws in connection with the activity of its sales people as well the
underwriting and distribution of securities. In recent years, there has been an
increasing incidence of litigation involving the securities industry, including
class actions which generally seek rescission and substantial damages. See
"Legal Proceedings" in Form 10-KSB.
6. PERSONNEL; DEPENDENCE UPON REGISTERED REPRESENTATIVES
Most aspects of the Company's business are dependent on highly
skilled and experienced individuals. The Company has devoted considerable
efforts to recruiting and compensating those individuals and provides incentives
to encourage them to remain with the Company. Individuals associated with the
Company may in the future leave the Company at any time to pursue other
opportunities.
7. DEPENDENCE UPON FOUNDERS
For the foreseeable future, the Company will be substantially
dependent upon the personal efforts and abilities of its President,
Mr. Herbert Kurinsky and its Vice-President, Mr. William Kurinsky
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to coordinate, implement and manage its business plans and programs. The loss or
unavailability of the services of either of them would likely have a material
adverse affect on the business, operations and prospects of the Company. The
Company has obtained, for its benefit, a policy of life insurance on the lives
of Messrs. Herbert Kurinsky and William Kurinsky in the amount of $250,000 and
$500,000, respectively. The Company has entered into a three year Employment
Agreement with each of these employees.
8. REGULATION
The Company's business, and the securities industry generally, are
subject to extensive regulation at both the federal and state levels. In
addition, self-regulatory organizations such as the NASD require strict
compliance with their rules and regulations. Failure to comply with any of these
laws, rules or regulations could result in fines, suspension or expulsion, which
could have a material adverse affect upon the Company.
9. NET CAPITAL REQUIREMENTS
The Company's business, like that of other securities firms, is
capital intensive. The SEC and the NASD have stringent provisions with respect
to net capital requirements applicable to the operation of securities firms. A
significant operating loss or any charge against net capital that could
adversely affect the ability of the Company to expand or, depending upon the
magnitude of the loss or charge, to maintain its present level of business.
10. RISKS ASSOCIATED WITH INVESTMENT BANKING ACTIVITIES
Participation in an underwriting syndicate or a selling group
involves both economic and regulatory risks. An underwriter may incur losses if
it is unable to resell the securities it is committed to purchase, or if it is
forced to liquidate its commitment at less than the purchase price. In addition,
under federal securities laws, other laws and court decisions with respect to
underwriters' liabilities and limitations on the indemnification of underwriters
by issuers, an underwriter is subject to substantial potential liability for
misstatements or omissions of material facts in Prospectuses and other
communications with respect to such offerings. Acting as a managing underwriter
increases these risks. Underwriting commitments constitute a charge against net
capital and the Company's ability to make underwriting commitments may be
limited by the requirement that it must at all times be in compliance with the
Net Capital Rule.
11. DIVIDEND POLICY
Anticipated capital requirements of the Company make it unlikely that
any dividends will be declared in the foreseeable
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future on the Shares. Further, applicable statutory regulations under the
Securities Act of 1933, as amended, as well as regulations of the NASDR may
affect the ability of the Company to declare and pay dividends. See "Dividend
Policy".
12. POTENTIAL ADVERSE IMPACT ON MARKET PRICE OF WARRANTS
UNDERLYING COMMON STOCK AND RULE 144 SALES
Sales of substantial amounts of the Company's Common Stock in the
public market after this Offering, or the perception that such sales may occur,
could adversely affect the market prices of the Company's Common Stock and may
impair the Company's ability to raise additional capital by the sale of its
equity securities. Upon completion of this Offering the Company will have
8,937,179 Warrants to purchase 8,937,179 shares of Common Stock. Holders of
those Warrants are likely to exercise them when, in all likelihood the Company
could obtain additional capital on terms more favorable than those provided by
the Warrants. Further, while the Warrants are outstanding, the Company's ability
to obtain additional financing on favorable terms may be adversely affected.
Of the 8,937,179 issued and outstanding shares of the Company's
Common Stock, approximately 2,092,941 shares may be deemed "restricted shares"
and, in the future, may be sold in compliance with Rule 144 under the Securities
Act of 1933, as amended. Rule 144 provides that a person holding restricted
securities for a period of one year may sell in brokerage transactions an amount
equal to 1% of the Company's outstanding Common Stock every three months. A
person who is a "non-affiliate" of the Company and who has held restricted
securities for over three years is not subject to the aforesaid volume
limitations as long as the other conditions of the Rule are met. Possible or
actual sales of the Company's Common Stock by certain of the Company's present
shareholders under Rule l44 may, in the future, have a depressive effect on the
price of the Company's Common Stock in any market which may develop for such
shares. Such sales at that time may have a depressive effect on the price of the
Company's Common Stock in the open market. See "Certain Transactions" and
"Description of Capital Stock--Shares Eligible for Future Sale".
13. LIMITED PUBLIC MARKET AND ARBITRARY DETERMINATION OF OFFERING
PRICE
The Company's Common Stock is traded in the over-the-counter market
and reported by the National Daily Quotation Service ("Pink Sheets") published
by the National Quotation Bureau, Inc and the Electronic Bulletin Board
maintained by the NASD. Although the Company is applying for inclusion of its
Common Stock in the Nasdaq SmallCap Market, there an be no assurance that the
Company's application will be accepted. Additionally, there can be no assurance
that the Company will be able to maintain its Nasdaq listing nor be delisted in
the future as Nasdaq has the authority
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to delist companies for various reasons. Further, there has been no trading
market in the Company's Warrants. Last, the exercise prices of the Units and
Warrants have been determined by the Company, arbitrarily and do not relate to
price quotations for the Company's Common Stock.
14. POTENTIAL ADVERSE EFFECT OF REDEMPTION OF WARRANTS
The Warrants may be redeemed by the Company at a redemption price of
$.05 per Warrant provided that (a) 30 days prior written notice is given to the
holders of the Warrants, (b) the closing bid price per share of Common Stock as
reported on Nasdaq has been at least $5.00 for the ten consecutive trading days
ending within ten days of the date of the notice of redemption and (c) a valid
registration statement for the shares of Common Stock underlying such Warrants
is then in effect. Redemption of the Warrants could force the holders (i) to
exercise the Warrants and pay the exercise price therefore when it may be
disadvantageous for the holders to do so, (ii) to sell the Warrants at the then
current market price when they might otherwise wish to hold the Warrants or
(iii) to accept the nominal redemption price which, at the time the Warrants are
called for redemption, is likely to be substantially less than the market value
of the Warrants. See "Description of Securities -- Units and Warrants."
15. CURRENT PROSPECTUS REQUIRED TO EXERCISE WARRANTS
Holders of Warrants will be able to exercise the Warrants only if (i)
a current prospectus under the Securities Act for the Shares of Common Stock
underlying the Warrants (the "Warrants Shares") is then in effect and (ii) such
securities are qualified for sales or exempt from qualifications under the
applicable securities laws of the states in which the various holders of
Warrants reside. Although the Company has undertaken and intends to use its best
efforts to maintain a current prospectus covering the Warrant Shares following
completion of the Offering to the extent required by federal securities law,
there can be no assurance that the Company will be able to do so. The value of
the Warrants may be greatly reduced if a prospectus covering the Warrants Shares
is not kept current or if the Warrant Shares are not qualified, or exempt from
qualification, in the state in which the holders of Warrants reside. Persons
holding Warrants who reside in jurisdictions in which such securities are not
qualified and in which there is no exemption will be unable to exercise their
Warrants and would either have to sell their Warrants in the open market or
allow them to expire unexercised. If and when the Warrants become redeemable by
the terms thereof, the Company may exercise its redemption right even if it is
unable to qualify the Warrant Shares for sale under all applicable state
securities laws. See "Description of
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Securities -- Units and Warrants."
16. LIMITATIONS ON TRADING AND MARKET-MAKING ACTIVITIES ON THE
COMPANY'S BROKER-DEALER SUBSIDIARY IN THE COMPANY'S SECURITIES
Due to regulatory positions and requirements of both the SEC and the
NASDR relating to the circumstances and extent to which a registered
broker-dealer and NASDR member may engage in market-making transactions in the
securities of its parent company, FMSC does not engage in trading or
market-making activities relating to the Company's Common Stock, Units or
Warrants where it would speculate in, purchase or sell the Company's securities
for its own account. The purpose and effect of such limitation restrict FMSC
from being a factor in the determination of the market or price of the Company's
securities. FMSC does, however, execute transactions for its customers on an
"agency basis" where it does not acquire the Company's securities for its own
trading account. FMSC will, however, earn usual and customary brokerage
commissions in connection with the execution of such brokerage transactions. If,
under current or future regulations of both the SEC and NASDR, the Company is
permitted to participate as a market-maker, it may do so on the basis of showing
a bid and offer for the Company's securities at specified prices representing
customer interest.
17. LIMITATION OF DIRECTOR LIABILITY; INDEMNIFICATION
The Company has amended its Certificate of Incorporation to include
provisions eliminating the personal liability of directors, except for breach of
a director's duty of loyalty to the Company or to its shareholders, acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of the law, and in respect of any transaction in which a director
receives an improper personal benefit. These provisions pertain only to breaches
of duty by directors as such, and not in any other corporate capacity, e.g., as
an officer. As a result of the inclusion of such provisions, if adopted, neither
the Company nor shareholders may be able to recover monetary damages against
directors for actions taken by them which are ultimately found to have
constituted negligence or gross negligence, or which are ultimately found to
have been in violation of their fiduciary duties, although it may be possible to
obtain injunctive or other equitable relief with respect to such actions. If
equitable remedies are found not to be available to shareholders in any
particular case, shareholders may not have an effective remedy against the
challenged conduct.
The Company believes that, based upon recent developments in the
market for directors' and officers' liability insurance, such provisions are
necessary to attract and retain qualified
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individuals to serve as directors. In addition, such provisions will allow
directors to perform their duties in good faith without concern for the
application of monetary liability on a retroactive basis in the event that a
court determines their conduct to have been negligent or grossly negligent. On
the other hand, the potential remedies available to the Company or a Company
stockholder are significantly limited by such provisions, and it is possible
that the protection afforded by such provisions may reduce the level of
diligence or care demonstrated by such directors.
18. TAX CONSIDERATIONS
There are various applicable income tax consequences associated with
an investment in the Common Stock. Each investor is urged to consult with his
own tax advisor concerning the effects of applicable income tax laws and
regulations on an investment by him in the Company's securities and his
individual tax situation. The Company will not seek or receive a ruling from the
Internal Revenue Service or a tax opinion as to the tax consequences of the
distribution of the Rights or an investment in the Common Stock. See "Certain
Federal Income Tax Considerations" for a summary of certain federal income tax
aspects of the Rights and the Common Stock offered hereby.
USE OF PROCEEDS
The net proceeds from the sale of the Shares offered hereby, after
deduction of other estimated expenses of the offering, are estimated to be
approximately $____________ if the maximum number of Rights are exercised.
The Company expects to use the net proceeds for general corporate
purposes, primarily for use in the Company's retail, institutional, trading and
investment banking and underwriting activities. The amount of the net proceeds
that will be invested in particular areas of the Company's business will depend
upon future economic conditions and business opportunities. To the extent that
the Company may incur a loss from operations, such loss will be funded from the
Company's general funds, including the net proceeds of this offering. In such
event the amount available for use in the expansion of the various aspects of
the Company's business will be reduced by the amounts expended in the course of
day-to-day operations, including working capital requirements and by any
operating losses.
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MARKET FOR COMPANY'S COMMON STOCK
The Common Stock is traded in The NASD's Over-the-Counter Bulletin
Board, trading symbol "FMFK". Although the Company is applying for inclusion of
its Common Stock in the Nasdaq Small Cap Market, there can be no assurance that
the Company's application will be accepted.
The following table presents, on a quarterly basis, the high and low
bid quotations for the Common Stock as reported by the Nasdaq National Market
for the period from January 1, 1995 through December 31, 1996. Such quotations
reflect inter-dealer prices, without retail markup, markdown or commission and
do not necessarily represent actual transactions.
Period High Low
- ------ ---- ---
1997
First Quarter ................. $3.125 $ .96
Second Quarter
(through June 8, 1997) ........ $2.78125 $2.5625
1996:
First Quarter ................. $1.06 $ .84375
Second Quarter ................ $2.1875 $ .8125
Third Quarter ................. $1.53 $1.03125
Fourth Quarter ................ $1.13 $ .80
1995:
First Quarter ................. $ .56 $ .22
Second Quarter ................ $ .91 $ .19
Third Quarter ................. $1.06 $ .50
Fourth Quarter ................ $1.19 $ .50
The number of shares of Common Stock of the Company held of record as
of the close of business on May 23, 1997 was 8,937,179.
THE RIGHTS OFFERING
THE RIGHTS
The Company is issuing to each record holder of Common Stock
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as of the close of business on the Record Date one nontransferable Right for
every share of Common Stock held of record as of the class of business on the
Record Date. The Rights will be evidenced by Rights Certificates. An aggregate
of up to 8,937,179 Rights will be distributed.
EXPIRATION TIME
The Rights Offering will expire at the Expiration Time, 5:00 p.m. New
York City time on __________, 1997, subject to extension at the sole discretion
of the Company's Board of Directors, but not beyond 5:00 p.m. New York City time
on _________, 1997. After the Expiration Time, unexercised Rights will be null
and void. The Company will not be obligated to honor any purported exercise of
Rights received by the Subscription Agent after the Expiration Time, regardless
of when the documents relating to that exercise were sent except pursuant to the
guaranteed delivery procedures described under "Payment for Shares."
SUBSCRIPTION PRIVILEGES
Basic Subscription Privilege. These Rights will entitle the Holder to
subscribe up to the Expiration Time and at the Subscription Price for one Unit.
Certificates representing Units purchased pursuant to the exercise of the Basic
Subscription Privilege will be delivered to subscribers as soon as practicable
after the Expiration Time and after all prorations contemplated by the terms of
the Rights offering have been effected.
Oversubscription Privilege. Subject to allocation described below
each Right also carries the right to subscribe up to the Expiration Time and at
the Subscription Price for an unlimited number of additional Units up to the
total number of Units to be issued in the Rights Offering. Only Holders who
exercise all their Rights pursuant to the Basic Subscription Privilege will be
entitled to exercise the Oversubscription Privilege.
Units. Will be available for subscription pursuant to the
Oversubscription Privilege only to the extent that any Units remain available
for purchase after the exercise of the Basic Subscription Privilege. The
Oversubscription Privilege is not transferable. A Holder may at the time of
exercising the Basic Subscription Privilege exercise the Oversubscription
Privilege for up to the total number of Units to be issued in the Rights
Offering. If an insufficient number of Excess Units is available to satisfy
fully all elections to exercise the Oversubscription Privilege, then the Excess
Units will be prorated in proportion to the number of shares of Common Stock
owned by such Holder as of the close of business on the Record Date.
Banks, brokers and other nominee holders who exercise the
Basic Subscription Privilege and the Oversubscription Privilege on
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behalf of beneficial owners of Rights will be required to certify to the
Subscription Agent and the Company in connection with the exercise of the
Oversubscription Privilege as to the aggregated number of Rights that have been
exercised and the number of Units thereby subscribed for pursuant to the
Oversubscription Privilege by each beneficial owner of Rights on whose behalf
such nominee holder is acting.
SUBSCRIPTION PRICE
The Subscription Price will be $.45 per Unit. If the aggregate
Estimated Subscription Price paid by an exercising Holder exceeds the amount
necessary to purchase at the Subscription Price the number of Units for which
the Holder has indicated an intention to subscribe, then the holder will be
deemed to have exercised, first, the Basic Subscription Privilege (if not
already fully exercised) and, second, the Oversubscription privilege to purchase
shares at the Subscription Price to the full extent of the excess payment
tendered. The Subscription Price is payable in cash, by check, money order or
wire transfer, all as more completely set forth under "Exercise of Rights."
EXERCISE OF RIGHTS
Holders may exercise their Rights by delivering to the Subscription
Agent, at or prior to the Expiration Time, the properly completed and executed
Rights Certificates evidencing those Rights, with any signatures guaranteed as
required, together with payment in full of the Estimated Subscription Price for
each Unit subscribed for pursuant to the Basic Subscription Privilege and the
Oversubscription Privilege. Rights may also be exercised by contacting the
holder's broker, banker or trust company, which can arrange, on the Holder's
behalf, to guarantee delivery of payment and of a properly completed and
executed Rights Certificate. A fee may be charged for this service. Completed
Rights Certificates must be received by the Subscription Agent prior to the
Expiration Time (unless the guaranteed delivery procedures are complied with as
described under "Payment for Shares") at the offices of the Subscription Agent
at the address set forth in "Subscription Agent".
Holders Who Are Record Owners. Holders who are record owners can
choose either option set forth under "Payment for Shares". If time is of the
essence, option (2) will permit delivery of the Rights Certificate and payment
after the Expiration Time.
Holders Whose Shares Are Held by a Nominee. Holders whose shares are
held by a nominee, such as a broker or trustee, must contact that nominee to
exercise their Rights. In that case, the nominee will complete the Rights
Certificate on behalf of the Holder and arrange for proper payment by one of the
methods set forth under "Payment for Shares".
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Nominees. Nominees who hold shares for the account of others should
notify the beneficial owners of such shares as soon as possible to ascertain
such beneficial owners' intentions and to obtain instructions with respect to
the Rights. If the beneficial owner so instructs, the nominee should complete
the Rights Certificate and submit it to the Subscription Agent along with the
proper payment described under "Payment for Shares".
PAYMENT FOR SHARES
Holders who acquire Units by exercising the Basic Subscription
Privilege and the Oversubscription Privilege may choose between the following
methods of payment.
(1) A Holder can send the Rights Certificate, together with payment
for the Units subscribed for pursuant to the Basic Subscription Privilege and
for Excess Shares subscribed for pursuant to the Oversubscription Privilege, to
the Subscription Agent, calculating the total payment on the basis of the
subscription price of $.45 per Unit (the "Subscription Price"). To be accepted,
such payment, together with the executed Rights Certificate, must be received by
the Subscription Agent at one of its offices at the addresses set forth under
"Subscription Agent" prior to the Expiration Time. The Subscription Agent will
deposit all checks and money orders received by it prior to the final payment
date into a segregated interest-bearing account(which interest will be paid to
the Company) pending proration and distribution of Units or Excess Units. A
PAYMENT PURSUANT TO THIS METHOD MUST BE IN UNITED STATES DOLLARS BY MONEY ORDER
OR CHECK DRAWN ON A BANK LOCATED IN THE UNITED STATES, MUST BE PAYABLE TO "FMFC
RIGHTS OFFERING" AND MUST ACCOMPANY AN EXECUTED RIGHTS CERTIFICATE FOR SUCH
RIGHTS CERTIFICATE TO BE ACCEPTED.
(2) Alternatively, a subscription will be accepted by the
Subscription Agent if, prior to the Expiration Time, the Subscription Agent has
received a notice of guaranteed delivery by facsimile (telecopy) or otherwise
from a bank, a trust company or a New York stock Exchange member guaranteeing
delivery of (a) payment of the Estimated Subscription Price for the Underlying
Shares subscribed for pursuant to the Basic Subscription Privilege and for any
Excess Units subscribed for pursuant to the Oversubscription Privilege and (b) a
properly completed and executed Rights Certificate. The Subscription Agent will
not honor a notice of guaranteed delivery unless a properly completed and
executed Rights Certificate is received by the Subscription Agent by the close
of business on the fifth business day after the Expiration Time (______, 1997)
and full payment of the Estimated Subscription Price is received by the
Subscription Agent by the close of business on such date.
Within 10 business days following the Expiration Time (____, 1997), a
confirmation will be sent by the Subscription Agent to
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each subscribing Holder (or, if the Holder's shares are held by a depository or
nominee, to such depository or nominee), showing (a) the number of Units and the
number of Excess Units, if any, acquired, (b) the per share and total purchase
price for such Units or Excess Units, and (c) any excess payment that would
otherwise result in a fractional share that is to be refunded by the Company to
such Holder. Any excess payment to be refunded by the Company to a Holder will
be mailed by the Subscription Agent to such Holder as promptly as possible.
The Estimated Subscription Price will be deemed to have been received
by the Subscription Agent only upon (a) clearance of any uncertified check, (b)
receipt by the Subscription Agent of any certified check or cashier's check or
of any postal, telegraphic or express money order, or (c) receipt of notice of
guaranteed delivery. If paying by uncertified personal check, please note that
the funds paid thereby may take at least five business days to clear.
Accordingly, Holders who wish to pay the Subscription Price by means of an
uncertified personal check are urged to make payment sufficiently in advance of
the Expiration Time to ensure that such payment is received and clears by such
time and are urged to consider in the alternative payment by means of certified
or cashiers check, money order or wire transfer of funds. All funds received in
payment of the Subscription Price made by the Subscription Agent and invested at
the direction of the Company in short-term certificates of deposit, short-term
obligations of the United States, or any state or agency thereof, or money
market mutual funds invested in the foregoing instruments. The account in which
such funds will be held will not be insured by the Federal Deposit Insurance
Corporation. Earnings on such funds will be retained by the Company whether or
not the Rights Offering is consummated.
Whichever of the two methods described above are used, issuance and
delivery of certificates for the shares of common Stock purchased are subject to
collection of checks and actual payment pursuant to any notice of guaranteed
delivery.
The instructions accompanying the Rights Certificates should be read
carefully and followed in detail RIGHTS CERTIFICATES SHOULD BE SENT WITH PAYMENT
TO THE SUBSCRIPTION AGENT. DO NOT SEND RIGHTS CERTIFICATES TO THE COMPANY.
THE METHOD OF DELIVERY OF RIGHTS CERTIFICATES AND PAYMENT OF THE
ESTIMATED SUBSCRIPTION PRICE TO THE SUBSCRIPTION AGENT WILL BE AT THE ELECTION
AND RISK OF THE HOLDERS. IF SENT BY MAIL, HOLDERS ARE URGED TO SEND RIGHTS
CERTIFICATE AND PAYMENTS BY REGISTERED MAIL, PROPERLY INSURED, WITH RETURN
RECEIPT REQUESTED, AND ARE URGED TO ALLOW A SUFFICIENT NUMBER OF DAYS TO ENSURE
DELIVERY TO THE SUBSCRIPTION AGENT AND CLEARANCE OF PAYMENT PRIOR TO THE
EXPIRATION TIME. BECAUSE UNCERTIFIED PERSONAL CHECKS MAY TAKE AT LEAST FIVE
BUSINESS DAYS TO CLEAR, HOLDERS ARE STRONGLY URGED TO
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<PAGE>
PAY, OR ARRANGE FOR PAYMENT, BY MEANS OF CERTIFIED OR CASHIER'S CHECK, MONEY
ORDER, WIRE TRANSFER OF FUNDS OR NOTICE OF GUARANTEED DELIVERY.
All questions concerning the timeliness, validity, form and
eligibility of any exercise of Rights will be determined by the Company, whose
determinations will be final and binding. The Company, in its sole discretion,
may waive any defect or irregularity, or permit a defect or irregularity to be
corrected within such time as it may determine or reject the purported exercise
of any Right. Rights Certificates will not be deemed to have been received or
accepted until all irregularities have been waived or cured within such time as
the company, in its sole discretion, determines. Neither the Company nor the
Subscription Agent will be under any duty to give notification of any defect or
irregularity in connection with the submission of Rights Certificates or incur
any liability for failure to give such notification.
Any questions or requests for assistance concerning the method of
exercising Rights or requests for additional copies of this Prospectus, the
instructions or the notice of guaranteed delivery should be directed to the
Information Agent at the address and telephone numbers set forth under
"Information."
NO REVOCATION
ONCE A HOLDER HAS PROPERLY EXERCISED HIS OR HER BASIC
SUBSCRIPTION PRIVILEGE AND OVERSUBSCRIPTION PRIVILEGE, SUCH
EXERCISE MAY NOT BE REVOKED.
NONTRANSFERRABILITY OF RIGHTS
RIGHTS MAY NOT BE PURCHASED, SOLD OR OTHERWISE TRANSFERRED.
ANY PURPORTED TRANSFER OF RIGHTS WILL BE DEEMED NULL AND VOID.
DETERMINATION OF SUBSCRIPTION PRICE AND TERMS OF THE RIGHTS OFFERING.
The Company's objective in establishing the Subscription Price was
the achievement of the targeted net proceeds from the Rights Offering while
providing Shareholders with an opportunity to make an additional investment in
the Company, and thus avoid an excessive dilution of their proportionate
ownership position in the Company.
In approving the Subscription Price, the Board of Directors of the
Company considered such factors as the alternative available to the Company for
raising capital, the market price of the common
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Stock, the business prospects for the Company and the general condition of the
securities markets. There can be no assurance, however, that the market price of
the common Stock will not decline during the subscription period to a level
equal to or below the Subscription Price, or that, following the issuance of the
Rights and of the Warrants upon exercise of Units, a subscribing Rights Holder
will be able to sell Warrants purchased in the Rights Offering at a price equal
to or greater than the Subscription Price.
SUBSCRIPTION AGENT
The Company has appointed North American Transfer Company as
Subscription Agent for the Rights Offering. The Subscription Agent's address,
which is the address to which the Rights Certificates and payment of the
Subscription Price should be delivered, as well as the address to which a notice
of guaranteed delivery must be delivered, is:
North American Transfer Company
147 West Merrick Road
Freeport, NY 11521
The Subscription Agent's telephone number is (516) 379-8501, an its
facsimile number is (516) 379-8525.
The Company will pay the Subscription Agent's fees and expenses, and
has also agreed to indemnify the Subscription Agent against certain liabilities
it may incur in connection with the Rights Offering.
INFORMATION
Any questions or requests for assistance concerning the method of
exercising Rights or requests for additional copies of this Prospectus, the
instructions or the notice of guaranteed delivery should be directed to: Robert
I. Rabinowitz, Esq. at the Company.
FOREIGN SHAREHOLDERS
Due to the requirements and restrictions of securities laws of
foreign countries, Rights Certificates will not be mailed to record holders of
common Stock whose addresses are outside the United States and Canada, but will
be held by the Subscription Agent for such holders' accounts until the
Subscription Agent receives instructions to exercise the Rights. If no
instructions are received by the Expiration Time, the Rights will be null and
void.
27
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes certain federal income tax
consequences applicable to the Company's shareholders upon the issuance of the
Rights, and to Holders upon the exercise of the Rights. This summary provides
only a general discussion and does not represent a complete analysis of the
consequences that may occur for a particular Holder based on his or her
individual circumstances, or of the provisions of the Internal Revenue code of
1986, as amended (the "Code"), that may subject certain Holders to special
treatment (for example, banks, dealers in securities, life insurance companies
and tax-exempt organizations). Moreover, this summary does not address any
aspects of state, local or foreign tax laws or of any federal laws other than
those pertaining to income tax.
This summary is based on the Code, Treasury Regulations promulgated
thereunder and their judicial and administrative interpretations as of the date
of this Prospectus. There can be no assurance that further legislation,
regulations, administrative pronouncements or court decisions will not
significantly change the law and materially affect the conclusions expressed
herein. Any such change, even though made after the distribution of the Rights,
could be applied retroactively.
The Company has not requested a ruling from the Internal Revenue
Service (the "Service") with respect to the matters discussed in this summary.
This summary does not in any way bind the Service or the courts or in any way
constitute an assurance that the federal income tax consequences discussed
herein will be accepted by the Service or the courts.
ISSUANCE OF THE RIGHTS
The Company shareholders will not recognize taxable income upon
receipt of the Rights.
BASIS OF THE RIGHTS
Except as provided in the following sentence, a Holder's adjusted
basis in the Common Stock with respect to which the distribution was made will
be allocated between the Common Stock and the Rights in proportion to the fair
market value of each on the date on which the Rights are received. If the fair
market value of the Rights on the date of receipt is less than 15% of the fair
market value of the Common Stock upon which the distribution is made, the
adjusted basis of the Rights will be zero. The Holder may elect, however, to
allocate the adjusted basis between the Common Stock and the Rights based on
relative fair market value, as described above. Such an election is to be made
by a statement attached to the Holder's return for the year in which the Rights
are received, and is irrevocable.
28
<PAGE>
EXERCISE OF THE RIGHTS; BASIS AND HOLDING PERIOD OF UNDERLYING SHARES
Holders will not recognize gain or loss upon exercise of their
Rights. The holding period for common stock underlying the Warrants will begin
on the date the Warrants are exercised.
EXPIRATION OF THE RIGHTS
Holders who allow the Rights received by them to expire unexercised
will not recognize gain or loss and the basis (if any) allocable to such Rights
will revert to the Common Stock with respect to which the Rights were received.
THE FOREGOING SUMMARY IS INCLUDED FOR GENERAL INFORMATION ONLY.
ACCORDINGLY, EACH HOLDER IS URGED TO CONSULT WITH HIS OR HER OWN TAX ADVISOR
WITH RESPECT TO THE TAX CONSEQUENCES OF THE RIGHTS OFFERING ON SUCH HOLDER'S OWN
PARTICULAR TAX SITUATION, INCLUDING THE APPLICATION AND EFFECT OF STATE, LOCAL
AND FOREIGN INCOME AND OTHER TAX LAWS.
DESCRIPTION OF SECURITIES
The Company is authorized to issue 30,000,000 shares of Common Stock,
no par value, and 5,000,000 shares of Preferred Stock, par value $.10 per share.
As of the date hereof, there were 8,937,179 shares of Common Stock issued and
outstanding, and no shares of Preferred Stock issued and outstanding.
COMMON STOCK
Subject to the rights of the holders of any shares of Preferred Stock
which may be issued in the future, holders of shares of Common Stock of the
Company are entitled to cast one vote for each share held at all shareholders'
meetings for all purposes, including the election of directors. Directors are
elected each year at the Company's annual meeting of shareholders to serve for a
period of one year and until their respective successors have been duly elected
and qualified.
Common shareholders have the right to share ratably in such dividends
on shares of Common Stock as may be declared by the Board of Directors out of
funds legally available therefor. Upon liquidation or dissolution, each
outstanding share of Common Stock will be entitled to share equally in the
assets of the Company legally available for distribution to shareholders after
the payment of all debts and other liabilities, subject to any superior rights
of any future holders of Preferred Stock.
29
<PAGE>
Common shareholders have no pre-emptive rights. There are no
conversion or redemption privileges or sinking fund provisions with respect to
the Common Stock. All of the outstanding shares of Common Stock are, and all of
the shares of Common Stock offered hereby will be, validly issued, fully paid
and nonassessable. The common Stock does not have cumulative voting rights so
holders of more than 50% of the outstanding Common Stock can elect 100% of the
Directors of the Company if they choose to do so.
PREFERRED STOCK
The Board of Directors is authorized to issue 5,000,000 shares of
Preferred Stock, $.10 par value per share, from time to time in one or more
series. The Board may issue a series of Preferred Stock having the right to vote
on any matter submitted to shareholders, including, without limitation, the
right to vote by itself as a series, or as a class together with any other or
all series of Preferred Stock. The Board of Directors may determine that the
holder of Preferred Stock voting as a class will have the right to elect one or
more additional members of the Board of Directors, or the majority of the
members of the Board of Directors.
UNITS AND WARRANTS
THE FOLLOWING DISCUSSION IS SUBJECT TO THE TERMS AND CONDITIONS OF
THE WARRANTS, AND SUBSCRIBERS ARE REFERRED TO THE WARRANTS FOR MORE DETAILED
INFORMATION.
Each Unit consists of one Class A Redeemable Common Stock Purchase
Warrant, one Class B Redeemable Common Stock purchase Warrant and one Class C
Redeemable Common Stock Purchase Warrant. First, the Class A Redeemable Common
Stock Purchase Warrants (the "Class A Warrants"), entitle the holder thereof to
purchase during the three years commencing on __ [the date of initial issuance]
one share of Common Stock of the Company (the "Class A Warrant Shares"), at an
exercise price of $3.00 per share, subject to adjustment in certain
circumstances. Second, the Class B Redeemable Common Stock Purchase Warrants
(the "Class B Warrants"), entitle the holder thereof to purchase during the five
years commencing on __ [the date of initial issuance] one share of Common Stock
of the Company (the "Class B Warrant Shares"), at an exercise price of $5.00 per
share, subject to adjustment in certain circumstances. Last, the Class C
Redeemable Common Stock Purchase Warrants (the "Class C Warrants"), entitle to
holder thereof to purchase during the seven years commencing on __ [the date of
the initial issuance] one share of Common Stock of the Company (the "Class C
Warrant Shares"), at an exercise price of $7.00 per share, subject to adjustment
in certain circumstances. The Warrants may be exercised in whole or in part.
Unless exercised within the applicable exercise period, the Warrants will
automatically expire in the last day of the applicable exercise period.
30
<PAGE>
The Company may redeem the Warrants, at any time at $.05 per
Warrant, upon and within thirty (30) days prior notice, if the closing bid price
of the Company's common stock for the ten consecutive trading days ending within
ten days of the date of the notice of redemption is not less than: (a) for the
Class A Warrants, $5.00 per share, (b) for the Class B Warrants $7.00 per share,
and (c) for the Class C Warrants, $12.00.
The Warrants will be issued pursuant to a warrant agreement (the
"Warrant Agreement"), among the Company and North American Transfer Company, as
warrant agent ("Warrant Agent"), and will be evidenced by warrant certificates
in registered form. The warrants provide for adjustment of the exercise price
and for a change in the number of shares issuable upon exercise to protect
holders against dilution in the event of a stock dividend, stock split,
combination or reclassification of the Common Stock.
The exercise price of the Warrants was determined arbitrarily by the
Company and should not be construed to be predictive of or to imply that any
price increases in the Company's securities will occur.
The Company has reserved from its authorized but unissued shares a
sufficient number of shares of Common Stock for issuance upon the exercise of
the Warrants. A Warrant may be exercised upon surrender of the Warrant
certificate on or before its expiration date (or earlier redemption date) at the
offices of the Warrant Agent, with the form of "Election to Purchase" on the
reverse side of the Warrant certificate completed and executed as indicated,
accompanied by payment of the full exercise price (by certified or bank check
payable to the order of the Company) for the number of shares with respect to
which the Warrant is being exercised. The holders of the Warrants may exercise
the Warrants at any time up to the business day prior to the date of redemption,
provided that (i) a current registration statement relating to the shares of
Common Stock underlying the Warrants is on file with the Commission and then in
effect and (ii) such securities are qualified for sale or exempt from
qualification under the securities laws of the state in which the particular
holder of the Warrants resides. The Warrant Agreement requires the Company to
endeavor to maintain a registration statement current and effective for these
purposes. However, there can be no assurance that the Company will be able to do
so. (See "Risk Factors -- Current Prospectus Required to Exercise Warrants.")
Shares issued upon exercise of Warrants and payment in accordance with the terms
of the Warrants will be validly issued, fully paid and non-assessable. For the
life of the Warrants, the holders thereof have the opportunity to profit from a
rise in the market value of the Common Stock, with a resulting dilution in the
interest of all other shareholders. So long as the Warrants are outstanding, the
terms on which the Company could obtain additional capital may be adversely
affected. The holders of the Warrants might be expected to exercise them at a
time when the Company would, in all likelihood, be able to obtain any needed
capital by a new offering
31
<PAGE>
of securities on terms more favorable than those provided for by the Warrants.
The Warrants do not confer upon the Warrant holder any voting or other rights of
a stockholder of the Company.
TRANSFER AND WARRANT AGENT
The transfer and Warrant agent for the Company's Common Stock
is North American Transfer Company, 47 West Merrick Road, Freeport,
New York 11521.
LEGAL MATTERS
The legality of the offering of the Shares will be passed upon for
the Company by Goldstein & DiGioia, 369 Lexington Avenue, New York, New York
l00l7.
EXPERTS
The financial statements of the Company as of and for the years ended
December 3l, 1995 and 1996 have been incorporated by reference herein and in the
Registration Statement in reliance upon the report of Schneider Ehrlich &
Wengrover LLP, independent certified public accountants, appearing elsewhere
herein, and upon the authority of said firm as experts in accounting and
auditing.
ADDITIONAL INFORMATION
The Company has filed a Registration Statement under the Act with the
Securities and Exchange Commission (the "Commission"), with respect to the
securities offered by this Prospectus. This Prospectus does not contain all of
the information set forth in the Registration Statement. For further information
with respect to the Company and such securities, reference is made to the
Registration Statement and to the exhibits and schedules filed therewith. Each
statement made in this Prospectus referring to a document filed as an exhibit to
the Registration Statement is qualified by reference to the exhibit for a
complete statement of its terms and conditions. The Registration Statement,
including exhibits thereto, may be inspected without charge to anyone at the
office of the Commission, and copies of all or any part thereof may be obtained
from the Commission's principal office in Washington, D.C. upon payment of the
Commission's charge for copying.
32
<PAGE>
No dealer, salesman, or any other person
has been authorized to give any 2,979,060 Units
information or to make any
representations other than those
contained in this Prospectus, and if FIRST MONTAUK FINANCIAL CORP.
given or made, such information or
representations must not be relied upon
as having been authorized by the Units
Company. This Prospectus does not
constitute an offer to sell or a
solicitation of an offer to buy, by
anyone in any jurisdiction in which such ------------------------------
offer or solicitation is not authorized,
or in which the person making such offer PROSPECTUS
or solicitation is not qualified to do
so, or to any person to whom it is ------------------------------
unlawful to make such offer or
solicitation. Neither the delivery of
this Prospectus nor any sale made
hereunder shall under any circumstances,
create an implication that there has _______________, 1997
been no change in the affairs of the
Company since the date hereof.
33
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Expenses in connection with the issuance and distribution of the
securities being registered herein are estimated.
Amount
-------
Securities and Exchange Commission Registration Fee.................. $13,947
Printing and Engraving Expenses...................................... $15,000
Accounting Fees and Expenses......................................... $ 5,000
Legal Fees and Expenses..............................................
Blue Sky Fees and Expenses...........................................
Transfer Agent and Registrar Fees.................................... $ 5,000
Miscellaneous Fees and Expenses...................................... $ 5,000
-------
Total............................................ $
=======
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's By-Laws require the Company to indemnify, to the full
extent authorized by Section 14A:3-5 of the New Jersey Business Corporation Act,
any person with respect to any civil, criminal, administrative or investigative
action or proceeding instituted or threatened by reason of the fact that he, his
testator or intestate is or was a director, officer or employee of the Company
or any predecessor of the Company is or was serving at the request of the
Company or a predecessor of the Company as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise.
Section 14A:3-5 of the New Jersey Business Corporation Act authorized
the indemnification of directors and officers against liability incurred by
reason of being a director or officer and against expenses (including attorneys
fees) in connection with defending any action seeking to establish such
liability, in the case of third-party claims, if the officer or director acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the corporation and if such officer or director shall not
have been adjudged liable for negligence or misconduct, unless a court otherwise
determines. Indemnification is also authorized with respect to any criminal
action or proceeding where the officer or director had no reasonable cause to
believe his conduct was unlawful.
In accordance with Section 14A:2-7 of the New Jersey Business
Corporation Act, the Company's Certificate of Incorporation
II-1
<PAGE>
eliminates the personal liability of officers and directors to the Company and
to shareholders for monetary damage for violation of a director's duty owed to
the Company or its Shareholders, under certain circumstances.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers, or persons
controlling the Company pursuant to the foregoing provisions, or otherwise, the
Company has been informed that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in such
Act and is therefore unenforceable.
ITEM 16. EXHIBITS
The exhibits designated with an asterisk (*) have previously been
filed with the Commission in connection with the Company's Registration
Statement on Form S-l, File No. 33-24696, and pursuant to l7 C.F.R. Sections
20l.24 and 240.l2b-32, are incorporated by reference to the document referenced
in brackets following the description of such exhibits. (**) denotes exhibits
filed herewith. (***) denotes exhibits to be filed by Amendment to this
Registration Statement.
Exhibit No. Description
- ---------- -----------
3.l* Amended and Restated Certificate of
Incorporation adopted at l989 Special Meeting
in lieu of Annual Meeting of Shareholders
3.2* Amended and Restated By-Laws
4.l* Form of Common Stock Certificate
4.2** Form of Subscription Rights Certificate
4.3** Form of Class A Redeemable Common Stock
Purchase Warrant Certificate
4.4** Form of Class B Redeemable Common Stock
Purchase Warrant Certificate
4.5** Form of Class C Redeemable Common Stock
Purchase Warrant Certificate
4.6** Form of Warrant Agent Agreement
5*** Opinion of Goldstein & DiGioia
23** Consent of Schneider Ehrlich & Wengrover, LLP
II-2
<PAGE>
99.1** Letter to Rights Holders
99.2** Instructions for Use of the Subscription
Rights Certificate including Notice of
Guaranteed Delivery
99.3** Letter to Rights Holders with addresses
outside the United States
99.4** Letter to Securities Dealers, Commercial
Banks, Brokers, Trust Companies, and other
Nominees, including Nominee Holder
Oversubscription Certification
99.5** Letter from Nominees to Beneficial Owners,
including Letter of Instruction from
Beneficial Owners of Nominees.
99.6** DTC Participant Oversubscription Exercise
Form, including Nominee Holder Subscription
Certificate
99.7*** Subscription Agent Agreement between the
Registrant and North American Transfer
Company.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement (a) to include
any prospectus required by Section 10(a)(3) of the Securities Act of 1933, (b)
to reflect in the prospectus any fact or events arising after the effective date
of the registration statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a fundamental change
in the information set forth in the registration statement, and (c) to include
any material information with respect to the plan of distribution not previously
disclosed in the registration statement, or any material change to such
information in the registration statement; provided, however, that paragraphs
(a) and (b) do not apply if the information required to be included in a
post-effective amendment by those paragraphs is contained in periodic reports
filed by the registrant pursuant to Section 13, or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) For purpose of determining any liability under the Securities Act
of 1933, each post effective amendment shall be deemed to be a new Registration
Statement relating to the
II-3
<PAGE>
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
(4) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the following provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against pubic policy as expressed in
the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities begin registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
(5) The undersigned registrant hereby undertakes that
(1) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each posteffective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of
1933, the Registrant certifies that it has reasonable grounds to believe that it
meets all the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the Borough of Red Bank, State of Jersey, on the 23rd day of
June, 1997.
FIRST MONTAUK FINANCIAL CORP.
By: /s/Herbert Kurinsky
----------------------------
Herbert Kurinsky, President
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below substitutes and appoints Herbert Kurinsky and William J. Kurinsky,
and each of them, his true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Registration Statement, and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or their or his substitute or substitute, may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated:
Signature Capacity Date
--------- -------- ----
/s/ Herbert Kurinsky
- ---------------------------- President June 23, 1997
Herbert Kurinsky Chief Executive Officer
and Director
/s/ William J. Kurinsky
- ---------------------------- Vice President, Chief June 23, 1997
William J. Kurinsky Operating and Chief
Financial Officer,
Secretary and Director
/s/ Norma Doxey
- ---------------------------- Director June 23, 1997
Norma Doxey
- ---------------------------- Director , 1997
Ward R. Jones, Jr.
- ---------------------------- Director , 1997
David I. Portman
II-5
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We hereby consent to the use of our report dated March 10, 1997 on the
financial statements of First Montauk Financial Corp. for the years ended
December 31, 1996 and 1995, and the use of our name under the heading "Experts"
in this Form S-3 of First Montauk Financial Corp.
__________________, 1997 Schneider Ehrlich & Wengrover LLP
II-6
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- ----------- -----------
3.1* Amended and Restated Certificate of Incorporation adopted at 1989
Special Meeting in lieu of Annual Meeting of Shareholders
3.2* Amended and Restated By-Laws
4.1* Form of Common Stock Certificate
4.2** Form of Subscription Rights Certificate
4.3** Form of Class A Redeemable Common Stock Purchase Warrant Certificate
4.4** Form of Class B Redeemable Common Stock Purchase Warrant Certificate
4.5** Form of Class C Redeemable Common Stock Purchase Warrant Certificate
4.6** Form of Warrant Agreement
5*** Opinion of Goldstein & DiGioia
23** Consent of Schneider Ehrlich & Wengrover, LLP
99.1** Letter to Rights Holders
99.2** Instructions for Use of the Subscription Rights Certificate including
Notice of Guaranteed Delivery
99.3** Letter to Rights Holders with addresses outside the United States
99.4** Letter to Securities Dealers, Commercial Banks, Brokers, Trust
Companies, and other Nominees, including Nominee Holder
Oversubscription Certification
99.5** Letter from Nominees to Beneficial Owners, including Letter of
Instruction from Beneficial Owners of Nominees
99.6** DTC Participant Oversubscription Exercise Form, including Nominee
Holder Subscription Certificate
99.7*** Subscription Agent Agreement between the Registrant and North
American Transfer Company.
- ----------
* Previously filed.
** Filed herewith.
*** To be filed by amendment.
EXHIBIT 4.2
[FORM OF SUBSCRIPTION RIGHTS CERTIFICATE]
[FRONT OF CERTIFICATE]
FIRST MONTAUK FINANCIAL CORP.
SUBSCRIPTION RIGHTS CERTIFICATE FOR COMMON STOCK
VOID IF NOT RECEIVED BY THE COMPANY BEFORE 5:00 P.M.
NEW YORK CITY TIME ON __________ (UNLESS OFFERING IS EXTENDED)
CONTROL NO.______ SHARES OWNED ______ UNITS AVAILABLE FOR SUBSCRIPTION ______
REGISTERED OWNER:
IN ORDER TO EXERCISE YOUR RIGHTS, YOU MUST COMPLETE THE REVERSE SIDE OF THIS
SUBSCRIPTION RIGHTS CERTIFICATE.
As the registered owner of this Subscription Rights Certificate, you are
entitled to subscribe for Units consisting of three Warrants (as described in
the Prospectus) of First Montauk Financial Corp. as shown above, pursuant to the
Basic Subscription Privilege and upon terms and conditions and at the
Subscription Price of $.45 for each Unit. The Rights represented hereby include
an Oversubscription Privilege, as described in the Prospectus. Under the
Oversubscription Privilege, any number of additional Units may be purchased by
Rights Holders if such Units are available.
Warrant certificates for the Units subscribed to pursuant to the Basic
Subscription Privilege and Oversubscription Privilege will be delivered as soon
as practicable after the expiration date. Any refund in connection with your
subscription will be delivered as soon as practicable after the expiration of
the offering.
- --------------------------------------------------------------------------------
How to Calculate the Full Basic Subscription Privilege
No. of Rights = No. of shares owned _________ (div.symbol) 3 = __________* Units
(*round down to nearest whole number)
- --------------------------------------------------------------------------------
Full Payment for Units for both the Basic Subscription Privilege and the
Oversubscription Privilege must accompany this Subscription Certificate and must
be made payable in United States dollars by wire transfer or by money order or
check drawn on a bank located in the United States payable to The Subscription
Agent. Alternatively, a notice of guaranteed delivery must accompany this
Subscription Rights Certificate.
Date:
Herbert Kurinsky William J. Kurinsky
President Secretary
<PAGE>
[Reverse of Certificate]
FIRST MONTAUK FINANCIAL CORP.
SECTION 1: DETAILS OF SUBSCRIPTION - PLEASE PRINT ALL INFORMATION
CLEARLY AND LEGIBLY
IF YOU WISH TO SUBSCRIBE FOR YOUR FULL ENTITLEMENT, fill in the blanks below and
enclose the amount due for the shares for which you apply:
A. Basic Subscription Privilege. I hereby irrevocably subscribe
for all of the Units for which I am entitled to apply and
enclose payment therefor, as follows:
________________(number of shares)
(div symbol)3= ____________ (number of Units)
x $.45 (price per Unit) = _______________(Amount due for Basic
Subscription Privilege)
Amount due for Basic
Subscription Privilege Units for $_____________.
B. Over-Subscription Privilege. I hereby irrevocably subscribe
for additional Units under the Over-Subscription Privilege
extended to me and enclose payment therefor, as follows:
__________________(number of additional Units)
$_________________ x .45 (price per share) = ______________
Amount due for
Over-Subscription
Privilege for Units $______________.
IF YOU DO NOT WISH TO APPLY FOR YOUR FULL ENTITLEMENT, but want to subscribe for
some of the Units, fill in the blanks below and enclose the amount due for the
Units for which you apply.
I hereby subscribe for the following number of Units and
enclose payment therefor, as follows:
__________________________ (number of Units)
x $.45 (price of Units) ____________________
Amount due for
Units applied for $____________________________.
<PAGE>
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
Control No._______________
Account No._______________
SECTION 2: TO SUBSCRIBE: I acknowledged that I have received the Prospectus for
this Rights Offering, and I hereby irrevocably subscribe for the number of Units
indicated in Section 1 on the terms and conditions set out in the Prospectus.
Signature of Subscriber(s) __________________________
__________________________
Please give your telephone # ( )__________________
Tax I.D. Number or Social Security No. __________________________
If you wish to have your Units delivered to an address other than
listed on this card you must have your signature guaranteed by an Eligible
Guarantor Institution (as defined in the Prospectus). Please provide the
delivery address below and note if it is a permanent change.
___________________________
___________________________
___________________________
Signature ______________________________
Guaranteed Name of Bank or Firm
By
______________________________
Signature of Officer and Title
- --------------------------------------------------------------------------------
NUMBER
------------------
FMW
------------------
- --------------------------------------------------------------------------------
(C) SECURITY COLUMBIAN UNITED STATES BANKNOTE CORPORATION
WARRANTS
THIS WARRANT IS VOID AFTER 5:00 P.M. NEW YORK CITY TIME ON ---------------
---------------
FIRST MONTAUK FINANCIAL CORP. SEE REVERSE FOR
CERTAIN DEFINITIONS
CLASS A REDEEMABLE COMMON STOCK PURCHASE WARRANT
INCORPORATED UNDER THE LAWS OF THE STATE OF NEW JERSEY CUSIP 321006 11 6
- --------------------------------------------------------------------------------
This certifies that, for value received,
- --------------------------------------------------------------------------------
or registered assigns, is the owner of the number of Common Stock Purchase
Warrants (hereinafter referred to as "Warrants") set forth above. Each Warrant
entitles the owner thereof to purchase at any time commencing on the date hereof
at North American Transfer Co. or its successor as Warrant Agent, one fully paid
and nonassessable share of the Common Stock, no par value (the "Common Stock"),
of First Montauk Financial Corp., a New Jersey corporation (the "Company"), at a
purchase price of $3.00 per share until 5:00 P.M., New York City Time on _____
upon presentation and surrender of this Warrant Certificate with the Form of
Election To Purchase duly executed. The number of Warrants evidenced by this
Warrant Certificate (and the number of shares which may be purchased upon
exercise hereof) set forth above, and the purchase price set forth above, are
the number and purchase price as of the date hereof based on the shares of
Common Stock of the Company as constituted at such date.
The provisions of this Warrant are continued on the reverse hereof and
such continued provisions shall for all purposes have the same effect as though
fully set forth in this place. This Warrant may be redeemed at the election of
the Company at $.05 per Warrant at the time, in the manner, and on the
conditions provided for in the Warrant Agreement between the Company and the
Warrant Agent.
This Warrant Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Warrant Agent.
WITNESS the facsimile signatures of the proper officers of the Company and
its corporate seal.
Dated:
Countersigned:
NORTH AMERICAN TRANSFER CO. [Seal]
(Freeport, N.Y.)
By Warrant Agent
Authorized Officer
FIRST MONTAUK FINANCIAL CORP.
/s/ WILLIAM J. KURINSKY
Secretary
/s/ HERBERT KURINSKY
President
- --------------------------------------------------------------------------------
AMERICAN BANKNOTE COMPANY
680 BLAIR MILL ROAD
HORSHAM, PA 19044
215-657-3480
- --------------------------------------------------------------------------------
SALES PERSON - G. BEEHLER / J. NAPOLITANO 212-557-9100
- --------------------------------------------------------------------------------
/home/larry/home12/FIRST50920
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PRODUCTION COORDINATOR PAT STATES 215-830-2196
PROOF OF JUNE 18, 1997
FIRST MONTAUK FINANCIAL CORP.
H50920face1
- --------------------------------------------------------------------------------
Opr. Ir/koshy Rev. 1
- --------------------------------------------------------------------------------
/net/banknote/home
- --------------------------------------------------------------------------------
<PAGE>
FIRST MONTAUK FINANCIAL CORP.
WARRANT CERTIFICATE
This Warrant Certificate is subject to all of the terms, provisions and
conditions of an agreement dated as of _______ ("Warrant Agreement") between the
Company and the Warrant Agent, which Warrant Agreement is hereby incorporated
herein by reference and made a part hereof and to which Warrant Agreement
reference is hereby made for a full description of the rights, limitations of
rights, obligations, duties and immunities hereunder of the Warrant Agent, the
Company and the holders of the Warrant Certificates. Copies of the Warrant
Agreement are on file at the above mentioned office of the Warrant Agent and may
be obtained on request of any warrant holder from either the Company or the
Warrant Agent.
As provided In the Warrant Agreement, the purchase price and the number of
shares of Common Stock which may be purchased upon the exercise of the Warrants
evidenced by this Warrant Certificate are, upon the happening of certain events,
subject to modification and adjustment.
This Warrant Certificate, with or without other Warrant Certificates,
upon surrender to the Warrant Agent at the address on the reverse hereof may be
exchanged for another Warrant Certificate or Warrant Certificates of like tenor
and date evidencing Warrants entitling the holder to purchase a like aggregate
number of shares of Common Stock as the Warrants evidenced by the Warrant
Certificate or Warrant Certificates surrendered shall have entitled such holder
to purchase. If this Warrant Certificate shall be exercised in part, the holder
hereof shall be entitled to receive upon surrender hereof another Warrant
Certificate or Warrant Certificates for the number of whole Warrants
unexercised.
No fractional shares of Common Stock will be issued upon the exercise of
any Warrant or Warrants evidenced hereby; upon the exercise of such Warrant or
Warrants, the Company shall issue the largest number of whole shares of Common
Stock purchasable upon exercise. The Company shall not be required to make any
cash or other adjustment in respect to any such fraction of a share to which the
holder hereof would otherwise be entitled. By his acceptance of the Warrant
Certificate, the holder hereof expressly waives any right he may have to receive
a certificate for any fraction of a share upon exercise hereof.
No holder of this Warrant Certificate shall be entitled to vote or
receive dividends or subscription rights or be deemed the holder of shares of
Common Stock for any purpose, nor shall anything contained in the Warrant
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a shareholder of the Company or any right to vote, give or
withhold consent to any action by the Company (whether upon any
recapitalization, issue of shares, reclassification of shares, consolidation,
merger, conveyance or otherwise), receive notice of meetings or other action
affecting shareholders (except for notices provided for in the Warrant
Agreement), until the Warrants evidenced by this Warrant Certificate shall have
been exercised and the Common Stock purchasable upon the exercise hereof shall
have become deliverable as provided in the Warrant Agreement, at which time the
person or persons in whose name or names the certificate or certificates for
such Common Stock shall be issued stall be deemed the holder or holders of
record of such shares of Common Stock for all purposes.
Every holder of this Warrant Certificate by accepting the same consents
and agrees with the Company, the Warrant Agent, and with every other holder of a
Warrant Certificate that:
(a) the Warrant Certificates are transferable only on the registry
books of the Warrant Agent if surrendered to the Warrant Agent at the
address on the reverse hereof, duty endorsed, or accompanied by a proper
instrument of transfer; and
(b) the Company and the Warrant Agent may deem and treat the person
in whose name the Warrant Certificate to registered as the absolute owner
thereof and of the Warrants evidenced thereby (notwithstanding any
notation of ownership or other writing on the Warrant Certificate made by
anyone other than the Company or the Warrant Agent) for all purposes
whatsoever, and neither the Company nor the Warrant Agent shall be
affected by any notice to the contrary.
ELECTION TO PURCHASE
(To be executed if holder desires to
exercise Warrant Certificate)
North American Transfer Co.
147 West Merrick Road
Freeport, New York 11520
The undersigned hereby irrevocably elects to exercise
______________________________________________________________________ Warrants
represented by this Warrant Certificate to purchase the shares of Common Stock
issuable upon the exercise of such Warrants and requests that certificates for
such shares be issued in the name of:
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER
- --------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Please print name and address)
If such number of Warrants shall not be all the Warrants evidenced by this
Warrant Certificate, a new Warrant Certificate for the balance remaining of such
Warrants shall be registered in the name of and delivered to:
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER
- --------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Please print name and address)
Dated: ___________________________________________________________________ 19___
- --------------------------------------------------------------------------------
Signature
(Signature must conform in all respects to name of holder as specified on the
face of this Warrant Certificate)
- --------------------------------------------------------------------------------
Signature Guaranteed
ASSIGNMENT
(To be executed by the registered holder if such holder
desires to transfer the Warrant Certificate)
FOR VALUE RECEIVED _____________________________________________________________
hereby sells, assigns and transfers unto
- --------------------------------------------------------------------------------
(Please print name and address of transferee)
- --------------------------------------------------------------------------------
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint
_______________________________________________________________________Attorney,
to transfer the within Warrant Certificate on the books of the within-named
Company, with full power of substitution.
Dated: __________________________________________________________________,19___
- --------------------------------------------------------------------------------
Signature
(Signature must conform in all respects to name of holder as specified on the
face of this Warrant Certificate)
- --------------------------------------------------------------------------------
Signature Guaranteed
- --------------------------------------------------------------------------------
AMERICAN BANKNOTE COMPANY
680 BLAIR MILL ROAD
HORSHAM, PA 19044
215-657-3480
- --------------------------------------------------------------------------------
SALES PERSON - G. BEEHLER / J. NAPOLITANO 212-557-9100
- --------------------------------------------------------------------------------
/home/larry/home12/FIRST50920
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PRODUCTION COORDINATOR PAT STATES 215-830-2196
PROOF OF JUNE 18, 1997
FIRST MONTAUK FINANCIAL CORP.
H50920bk (Lot 1, 2 & 3)
- --------------------------------------------------------------------------------
Opr. koshy Rev. 1
- --------------------------------------------------------------------------------
/net/banknote/home
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NUMBER
------------------
FMW
------------------
- --------------------------------------------------------------------------------
(C) SECURITY COLUMBIAN UNITED STATES BANKNOTE CORPORATION
WARRANTS
THIS WARRANT IS VOID AFTER 5:00 P.M. NEW YORK CITY TIME ON ---------------
---------------
FIRST MONTAUK FINANCIAL CORP. SEE REVERSE FOR
CERTAIN DEFINITIONS
CLASS B REDEEMABLE COMMON STOCK PURCHASE WARRANT
INCORPORATED UNDER THE LAWS OF THE STATE OF NEW JERSEY CUSIP 321006 11 6
- --------------------------------------------------------------------------------
This certifies that, for value received,
- --------------------------------------------------------------------------------
or registered assigns, is the owner of the number of Common Stock Purchase
Warrants (hereinafter referred to as "Warrants") set forth above. Each Warrant
entitles the owner thereof to purchase at any time commencing on the date hereof
at North American Transfer Co. or its successor as Warrant Agent, one fully paid
and nonassessable share of the Common Stock, no par value (the "Common Stock"),
of First Montauk Financial Corp., a New Jersey corporation (the "Company"), at a
purchase price of $5.00 per share until 5:00 P.M., New York City Time on _____
upon presentation and surrender of this Warrant Certificate with the Form of
Election To Purchase duly executed. The number of Warrants evidenced by this
Warrant Certificate (and the number of shares which may be purchased upon
exercise hereof) set forth above, and the purchase price set forth above, are
the number and purchase price as of the date hereof based on the shares of
Common Stock of the Company as constituted at such date.
The provisions of this Warrant are continued on the reverse hereof and
such continued provisions shall for all purposes have the same effect as though
fully set forth in this place. This Warrant may be redeemed at the election of
the Company at $.05 per Warrant at the time, in the manner, and on the
conditions provided for in the Warrant Agreement between the Company and the
Warrant Agent.
This Warrant Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Warrant Agent.
WITNESS the facsimile signatures of the proper officers of the Company and
its corporate seal.
Dated:
Countersigned:
NORTH AMERICAN TRANSFER CO. [Seal]
(Freeport, N.Y.)
By Warrant Agent
Authorized Officer
FIRST MONTAUK FINANCIAL CORP.
/s/ WILLIAM J. KURINSKY
Secretary
/s/ HERBERT KURINSKY
President
- --------------------------------------------------------------------------------
AMERICAN BANKNOTE COMPANY
680 BLAIR MILL ROAD
HORSHAM, PA 19044
215-657-3480
- --------------------------------------------------------------------------------
SALES PERSON - G. BEEHLER / J. NAPOLITANO 212-557-9100
- --------------------------------------------------------------------------------
/home/larry/home12/FIRST50920
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PRODUCTION COORDINATOR PAT STATES 215-830-2196
PROOF OF JUNE 18, 1997
FIRST MONTAUK FINANCIAL CORP.
H50920face2
- --------------------------------------------------------------------------------
Opr. Ir/koshy Rev. 1
- --------------------------------------------------------------------------------
/net/banknote/home
- --------------------------------------------------------------------------------
<PAGE>
FIRST MONTAUK FINANCIAL CORP.
WARRANT CERTIFICATE
This Warrant Certificate is subject to all of the terms, provisions and
conditions of an agreement dated as of _______ ("Warrant Agreement") between the
Company and the Warrant Agent, which Warrant Agreement is hereby incorporated
herein by reference and made a part hereof and to which Warrant Agreement
reference is hereby made for a full description of the rights, limitations of
rights, obligations, duties and immunities hereunder of the Warrant Agent, the
Company and the holders of the Warrant Certificates. Copies of the Warrant
Agreement are on file at the above mentioned office of the Warrant Agent and may
be obtained on request of any warrant holder from either the Company or the
Warrant Agent.
As provided In the Warrant Agreement, the purchase price and the number of
shares of Common Stock which may be purchased upon the exercise of the Warrants
evidenced by this Warrant Certificate are, upon the happening of certain events,
subject to modification and adjustment.
This Warrant Certificate, with or without other Warrant Certificates,
upon surrender to the Warrant Agent at the address on the reverse hereof may be
exchanged for another Warrant Certificate or Warrant Certificates of like tenor
and date evidencing Warrants entitling the holder to purchase a like aggregate
number of shares of Common Stock as the Warrants evidenced by the Warrant
Certificate or Warrant Certificates surrendered shall have entitled such holder
to purchase. If this Warrant Certificate shall be exercised in part, the holder
hereof shall be entitled to receive upon surrender hereof another Warrant
Certificate or Warrant Certificates for the number of whole Warrants
unexercised.
No fractional shares of Common Stock will be issued upon the exercise of
any Warrant or Warrants evidenced hereby; upon the exercise of such Warrant or
Warrants, the Company shall issue the largest number of whole shares of Common
Stock purchasable upon exercise. The Company shall not be required to make any
cash or other adjustment in respect to any such fraction of a share to which the
holder hereof would otherwise be entitled. By his acceptance of the Warrant
Certificate, the holder hereof expressly waives any right he may have to receive
a certificate for any fraction of a share upon exercise hereof.
No holder of this Warrant Certificate shall be entitled to vote or
receive dividends or subscription rights or be deemed the holder of shares of
Common Stock for any purpose, nor shall anything contained in the Warrant
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a shareholder of the Company or any right to vote, give or
withhold consent to any action by the Company (whether upon any
recapitalization, issue of shares, reclassification of shares, consolidation,
merger, conveyance or otherwise), receive notice of meetings or other action
affecting shareholders (except for notices provided for in the Warrant
Agreement), until the Warrants evidenced by this Warrant Certificate shall have
been exercised and the Common Stock purchasable upon the exercise hereof shall
have become deliverable as provided in the Warrant Agreement, at which time the
person or persons in whose name or names the certificate or certificates for
such Common Stock shall be issued stall be deemed the holder or holders of
record of such shares of Common Stock for all purposes.
Every holder of this Warrant Certificate by accepting the same consents
and agrees with the Company, the Warrant Agent, and with every other holder of a
Warrant Certificate that:
(a) the Warrant Certificates are transferable only on the registry
books of the Warrant Agent if surrendered to the Warrant Agent at the
address on the reverse hereof, duty endorsed, or accompanied by a proper
instrument of transfer; and
(b) the Company and the Warrant Agent may deem and treat the person
in whose name the Warrant Certificate to registered as the absolute owner
thereof and of the Warrants evidenced thereby (notwithstanding any
notation of ownership or other writing on the Warrant Certificate made by
anyone other than the Company or the Warrant Agent) for all purposes
whatsoever, and neither the Company nor the Warrant Agent shall be
affected by any notice to the contrary.
ELECTION TO PURCHASE
(To be executed if holder desires to
exercise Warrant Certificate)
North American Transfer Co.
147 West Merrick Road
Freeport, New York 11520
The undersigned hereby irrevocably elects to exercise
______________________________________________________________________ Warrants
represented by this Warrant Certificate to purchase the shares of Common Stock
issuable upon the exercise of such Warrants and requests that certificates for
such shares be issued in the name of:
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER
- --------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Please print name and address)
If such number of Warrants shall not be all the Warrants evidenced by this
Warrant Certificate, a new Warrant Certificate for the balance remaining of such
Warrants shall be registered in the name of and delivered to:
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER
- --------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Please print name and address)
Dated: ___________________________________________________________________ 19___
- --------------------------------------------------------------------------------
Signature
(Signature must conform in all respects to name of holder as specified on the
face of this Warrant Certificate)
- --------------------------------------------------------------------------------
Signature Guaranteed
ASSIGNMENT
(To be executed by the registered holder if such holder
desires to transfer the Warrant Certificate)
FOR VALUE RECEIVED _____________________________________________________________
hereby sells, assigns and transfers unto
- --------------------------------------------------------------------------------
(Please print name and address of transferee)
- --------------------------------------------------------------------------------
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint
_______________________________________________________________________Attorney,
to transfer the within Warrant Certificate on the books of the within-named
Company, with full power of substitution.
Dated: __________________________________________________________________,19___
- --------------------------------------------------------------------------------
Signature
(Signature must conform in all respects to name of holder as specified on the
face of this Warrant Certificate)
- --------------------------------------------------------------------------------
Signature Guaranteed
- --------------------------------------------------------------------------------
AMERICAN BANKNOTE COMPANY
680 BLAIR MILL ROAD
HORSHAM, PA 19044
215-657-3480
- --------------------------------------------------------------------------------
SALES PERSON - G. BEEHLER / J. NAPOLITANO 212-557-9100
- --------------------------------------------------------------------------------
/home/larry/home12/FIRST50920
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PRODUCTION COORDINATOR PAT STATES 215-830-2196
PROOF OF JUNE 18, 1997
FIRST MONTAUK FINANCIAL CORP.
H50920bk (Lot 1, 2 & 3)
- --------------------------------------------------------------------------------
Opr. koshy Rev. 1
- --------------------------------------------------------------------------------
/net/banknote/home
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NUMBER
------------------
FMW
------------------
- --------------------------------------------------------------------------------
(C) SECURITY COLUMBIAN UNITED STATES BANKNOTE CORPORATION
WARRANTS
THIS WARRANT IS VOID AFTER 5:00 P.M. NEW YORK CITY TIME ON ---------------
---------------
FIRST MONTAUK FINANCIAL CORP. SEE REVERSE FOR
CERTAIN DEFINITIONS
CLASS C REDEEMABLE COMMON STOCK PURCHASE WARRANT
INCORPORATED UNDER THE LAWS OF THE STATE OF NEW JERSEY CUSIP 321006 11 6
- --------------------------------------------------------------------------------
This certifies that, for value received,
- --------------------------------------------------------------------------------
or registered assigns, is the owner of the number of Common Stock Purchase
Warrants (hereinafter referred to as "Warrants") set forth above. Each Warrant
entitles the owner thereof to purchase at any time commencing on the date hereof
at North American Transfer Co. or its successor as Warrant Agent, one fully paid
and nonassessable share of the Common Stock, no par value (the "Common Stock"),
of First Montauk Financial Corp., a New Jersey corporation (the "Company"), at a
purchase price of $7.00 per share until 5:00 P.M., New York City Time on _____
upon presentation and surrender of this Warrant Certificate with the Form of
Election To Purchase duly executed. The number of Warrants evidenced by this
Warrant Certificate (and the number of shares which may be purchased upon
exercise hereof) set forth above, and the purchase price set forth above, are
the number and purchase price as of the date hereof based on the shares of
Common Stock of the Company as constituted at such date.
The provisions of this Warrant are continued on the reverse hereof and
such continued provisions shall for all purposes have the same effect as though
fully set forth in this place. This Warrant may be redeemed at the election of
the Company at $.05 per Warrant at the time, in the manner, and on the
conditions provided for in the Warrant Agreement between the Company and the
Warrant Agent.
This Warrant Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Warrant Agent.
WITNESS the facsimile signatures of the proper officers of the Company and
its corporate seal.
Dated:
Countersigned:
NORTH AMERICAN TRANSFER CO. [Seal]
(Freeport, N.Y.)
By Warrant Agent
Authorized Officer
FIRST MONTAUK FINANCIAL CORP.
/s/ WILLIAM J. KURINSKY
Secretary
/s/ HERBERT KURINSKY
President
- --------------------------------------------------------------------------------
AMERICAN BANKNOTE COMPANY
680 BLAIR MILL ROAD
HORSHAM, PA 19044
215-657-3480
- --------------------------------------------------------------------------------
SALES PERSON - G. BEEHLER / J. NAPOLITANO 212-557-9100
- --------------------------------------------------------------------------------
/home/larry/home12/FIRST50920
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PRODUCTION COORDINATOR PAT STATES 215-830-2196
PROOF OF JUNE 18, 1997
FIRST MONTAUK FINANCIAL CORP.
H50920face3
- --------------------------------------------------------------------------------
Opr. Ir/koshy Rev. 1
- --------------------------------------------------------------------------------
/net/banknote/home
- --------------------------------------------------------------------------------
<PAGE>
FIRST MONTAUK FINANCIAL CORP.
WARRANT CERTIFICATE
This Warrant Certificate is subject to all of the terms, provisions and
conditions of an agreement dated as of _______ ("Warrant Agreement") between the
Company and the Warrant Agent, which Warrant Agreement is hereby incorporated
herein by reference and made a part hereof and to which Warrant Agreement
reference is hereby made for a full description of the rights, limitations of
rights, obligations, duties and immunities hereunder of the Warrant Agent, the
Company and the holders of the Warrant Certificates. Copies of the Warrant
Agreement are on file at the above mentioned office of the Warrant Agent and may
be obtained on request of any warrant holder from either the Company or the
Warrant Agent.
As provided In the Warrant Agreement, the purchase price and the number of
shares of Common Stock which may be purchased upon the exercise of the Warrants
evidenced by this Warrant Certificate are, upon the happening of certain events,
subject to modification and adjustment.
This Warrant Certificate, with or without other Warrant Certificates,
upon surrender to the Warrant Agent at the address on the reverse hereof may be
exchanged for another Warrant Certificate or Warrant Certificates of like tenor
and date evidencing Warrants entitling the holder to purchase a like aggregate
number of shares of Common Stock as the Warrants evidenced by the Warrant
Certificate or Warrant Certificates surrendered shall have entitled such holder
to purchase. If this Warrant Certificate shall be exercised in part, the holder
hereof shall be entitled to receive upon surrender hereof another Warrant
Certificate or Warrant Certificates for the number of whole Warrants
unexercised.
No fractional shares of Common Stock will be issued upon the exercise of
any Warrant or Warrants evidenced hereby; upon the exercise of such Warrant or
Warrants, the Company shall issue the largest number of whole shares of Common
Stock purchasable upon exercise. The Company shall not be required to make any
cash or other adjustment in respect to any such fraction of a share to which the
holder hereof would otherwise be entitled. By his acceptance of the Warrant
Certificate, the holder hereof expressly waives any right he may have to receive
a certificate for any fraction of a share upon exercise hereof.
No holder of this Warrant Certificate shall be entitled to vote or
receive dividends or subscription rights or be deemed the holder of shares of
Common Stock for any purpose, nor shall anything contained in the Warrant
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a shareholder of the Company or any right to vote, give or
withhold consent to any action by the Company (whether upon any
recapitalization, issue of shares, reclassification of shares, consolidation,
merger, conveyance or otherwise), receive notice of meetings or other action
affecting shareholders (except for notices provided for in the Warrant
Agreement), until the Warrants evidenced by this Warrant Certificate shall have
been exercised and the Common Stock purchasable upon the exercise hereof shall
have become deliverable as provided in the Warrant Agreement, at which time the
person or persons in whose name or names the certificate or certificates for
such Common Stock shall be issued stall be deemed the holder or holders of
record of such shares of Common Stock for all purposes.
Every holder of this Warrant Certificate by accepting the same consents
and agrees with the Company, the Warrant Agent, and with every other holder of a
Warrant Certificate that:
(a) the Warrant Certificates are transferable only on the registry
books of the Warrant Agent if surrendered to the Warrant Agent at the
address on the reverse hereof, duty endorsed, or accompanied by a proper
instrument of transfer; and
(b) the Company and the Warrant Agent may deem and treat the person
in whose name the Warrant Certificate to registered as the absolute owner
thereof and of the Warrants evidenced thereby (notwithstanding any
notation of ownership or other writing on the Warrant Certificate made by
anyone other than the Company or the Warrant Agent) for all purposes
whatsoever, and neither the Company nor the Warrant Agent shall be
affected by any notice to the contrary.
ELECTION TO PURCHASE
(To be executed if holder desires to
exercise Warrant Certificate)
North American Transfer Co.
147 West Merrick Road
Freeport, New York 11520
The undersigned hereby irrevocably elects to exercise
______________________________________________________________________ Warrants
represented by this Warrant Certificate to purchase the shares of Common Stock
issuable upon the exercise of such Warrants and requests that certificates for
such shares be issued in the name of:
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER
- --------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Please print name and address)
If such number of Warrants shall not be all the Warrants evidenced by this
Warrant Certificate, a new Warrant Certificate for the balance remaining of such
Warrants shall be registered in the name of and delivered to:
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER
- --------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Please print name and address)
Dated: ___________________________________________________________________ 19___
- --------------------------------------------------------------------------------
Signature
(Signature must conform in all respects to name of holder as specified on the
face of this Warrant Certificate)
- --------------------------------------------------------------------------------
Signature Guaranteed
ASSIGNMENT
(To be executed by the registered holder if such holder
desires to transfer the Warrant Certificate)
FOR VALUE RECEIVED _____________________________________________________________
hereby sells, assigns and transfers unto
- --------------------------------------------------------------------------------
(Please print name and address of transferee)
- --------------------------------------------------------------------------------
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint
_______________________________________________________________________Attorney,
to transfer the within Warrant Certificate on the books of the within-named
Company, with full power of substitution.
Dated: __________________________________________________________________,19___
- --------------------------------------------------------------------------------
Signature
(Signature must conform in all respects to name of holder as specified on the
face of this Warrant Certificate)
- --------------------------------------------------------------------------------
Signature Guaranteed
- --------------------------------------------------------------------------------
AMERICAN BANKNOTE COMPANY
680 BLAIR MILL ROAD
HORSHAM, PA 19044
215-657-3480
- --------------------------------------------------------------------------------
SALES PERSON - G. BEEHLER / J. NAPOLITANO 212-557-9100
- --------------------------------------------------------------------------------
/home/larry/home12/FIRST50920
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PRODUCTION COORDINATOR PAT STATES 215-830-2196
PROOF OF JUNE 18, 1997
FIRST MONTAUK FINANCIAL CORP.
H50920bk (Lot 1, 2 & 3)
- --------------------------------------------------------------------------------
Opr. koshy Rev. 1
- --------------------------------------------------------------------------------
/net/banknote/home
- --------------------------------------------------------------------------------
WARRANT AGREEMENT dated as of __________, 1997 between First Montauk
Financial Corp., a New Jersey corporation, having its principal place of
business at Parkway 109 Office Center, 328 Newman Springs Road, Red Bank, New
Jersey 07701 (the "Company") and North American Transfer Company, a New York
corporation, having its principal place of business at 47 West Merrick Road,
Freeport, New York 11521 (the "Warrant Agent").
W I T N E S S E T H :
WHEREAS, the Company proposes to offer (the "Rights Offering") up to
2,979,060 (the "Units") to holders ("Stockholders") of record if its common
stock, no par value (the "Common Stock") at the close of business on ________,
1997 (the "Record Date"), pursuant to non-transferable rights (the "Rights") to
purchase Units at a price of $.45 per Unit (the "Subscription Price"). Each
Stockholder is receiving one right for each share of Common Stock held or record
at the close of business on the Record Date. Every three Rights entitles the
Rights Holder (the "Basic Subscription Privilege") to subscribe for one Unit.
Each Rights Holder will also be entitled to purchase at the Subscription Price
additional Units that are not otherwise subscribed for pursuant to the exercise
of the Basic Subscription Privilege (the "Oversubscription Privilege").
WHEREAS, each Unit consists of one Class A Redeemable Common Stock Purchase
Warrant, one Class B Redeemable Common Stock Purchase Warrant, and one Class C
Redeemable Common Stock Purchase Warrant (collectively, the "Warrants").
WHEREAS, the Warrants shall be evidenced by certificates substantially in
the form of Exhibits A, B and C annexed hereto (the "Warrant Certificate"), each
Warrant entitling the holder thereof to purchase one share of Common Stock at
the exercise price set forth herein;
WHEREAS, the Class A Redeemable Common Stock Purchase Warrants (the "Class
A Warrants"), entitle the holder thereof to purchase during the three years
commencing on ___ [the date of initial issuance] one share of Common Stock of
the Company (the "Class A Warrant Shares"), at an exercise price of $3.00 per
share, subject to adjustment in certain circumstances; the Class B Redeemable
Common Stock Purchase Warrants (the "Class B Warrants"), entitle the holder
thereof to purchase during the five years commencing on ___ [the date of initial
issuance] one share of Common Stock of the Company (the "Class B Warrant
Shares"), at an exercise price of $5.00 per share, subject to adjustment in
certain circumstances; and the Class C Redeemable Common Stock Purchase Warrants
(the "Class C Warrants"), entitle the holder thereof to purchase during the
seven years commencing on __ [the date of initial issuance] one share of Common
Stock of the Company (the
1
<PAGE>
"Class C Warrant Shares"), at an exercise price of $7.00 per share, subject to
adjustment in certain circumstances. The $3.00, $5.00 and $7.00 exercise price
per share of Common Stock, subject to certain adjustments may hereinafter be
referred to, in each case respectively, as the "Warrant Price", and except for
the Underwriters' Warrants, will be exercisable commencing on the date hereof
("First Exercise Date") until each date specified above ("Last Exercise Date"),
unless extended by the Company, and, will be exercisable during any period of
time fixed for that Warrant's redemption in a Redemption Notice (hereinafter
defined in Section 2.03), which period of time will terminate on a stated
Redemption Date (hereinafter defined in Section 2.03);
WHEREAS, the Company desires the Warrant Agent to act on behalf of the
Company, and the Warrant Agent is willing to so act in connection with the
issuance, registration, transfer, exchange and replacement of the Warrant
Certificates and exercise of the Warrants; and
WHEREAS, the Company and the Warrant Agent desire to set forth in this
Agreement the terms and conditions upon which the Warrant Certificates shall be
issued, transferred, exchanged and placed and the Warrants exercised, and to
provide for the rights of the holders of the Warrants;
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt of which is hereby acknowledged, and the
respective undertakings herein below set forth, the Company and the Warrant
Agent agree as follows:
ARTICLE I
ISSUANCE AND EXECUTION OF WARRANTS
SECTION 1.01. The Company hereby appoints the Warrant Agent to act on
behalf of the Company in accordance with the terms and conditions herein set
forth, and the Warrant Agent hereby accepts such appointment and agrees to
perform the same in accordance with such provisions.
SECTION 1.02. The Warrant Certificates for the Warrants shall be issued in
registered form only. The text of the Warrant Certificate, including the form of
assignment and subscription printed on the reverse side thereof, shall be
substantially in the form of Exhibit A annexed hereto, which text is hereby
incorporated in this Agreement by reference as though fully set forth herein and
to whose terms and conditions the Company and the Warrant Agent hereby agree.
Each Warrant Certificate shall evidence the right, subject to the provisions of
this Agreement and of such Warrant Certificate, to purchase the number of
validly issued, fully paid and non-assessable shares of Common Stock, as that
term is defined in Section 1.05 of this Agreement, stated therein, free of
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preemptive rights, subject to adjustment as provided in Article III of this
Agreement.
SECTION 1.03. Upon the written order of the Company, signed by the
President or any Vice President, and the Secretary, Treasurer, Assistant
Secretary or Assistant Treasurer of the Company, the Warrant Agent shall issue
and register Warrants in the names and denominations specified in that order,
and will countersign and deliver Warrant Certificates evidencing the same in
accordance with that order. Each Warrant Certificate shall be dated the date of
its countersignature. Each Warrant Certificate shall be executed on behalf of
the Company by the manual or facsimile signature of the President of the
Company, under its corporate seal, affixed or facsimile, attested by the manual
or facsimile signature of the Secretary of the Company and shall be
countersigned manually by the Warrant Agent. The Warrant Certificates shall not
be valid for any purpose unless so countersigned. In case any officer whose
facsimile signature has been placed upon any Warrant Certificate shall have
ceased to be such before such Warrant Certificate is issued, it may be issued
with the same effect as if such officer had not ceased to be such on the date of
issuance.
SECTION l.04. Except as otherwise expressly stated herein, all terms used
in the Warrant Certificate have the meanings provided in this Agreement.
SECTION l.05. As used herein, the term "Common Stock" shall mean the
aggregate number of shares that the Company, by its Certificate of
Incorporation, as from time to time amended, is authorized to issue, which are
not limited by its Certificate of Incorporation to a fixed sum or percentage of
the book value in respect of the rights of the holders thereof to participate in
dividends or in distribution of assets upon the voluntary or involuntary
liquidation, dissolution, or winding up the Company.
SECTION 1.06. The Warrant Agent understands and agrees that the Warrants
are being issued together as constituting Units in the Rights Offering and that
the Warrants are detachable and may be traded separately, immediately upon the
Effective Date.
ARTICLE II
WARRANT PRICE, DURATION AND EXERCISE OF WARRANTS,
CALL OF WARRANTS AND TRADING OF WARRANT
SECTION 2.01. (a) Each Warrant shall entitle the person in whose name at
the time the Warrant shall be registered upon the books to be maintained by the
Warrant Agent for that purpose (the Warrant Holder"), subject to the provisions
of the Warrant Certificates and of this Agreement, to purchase from the Company
any time on or after the First Exercise Date but at or before the Last Exercise
Date, the number of shares of Common Stock stated
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therein, as adjusted, at the Warrant Price in effect at such date, payable in
full at the time of purchase in the manner provided in Section 2.02 of this
agreement.
(b) Each Warrant shall be exercisable in accordance with the terms herein
and in the Warrant Certificate which, among other things, contains certain terms
as to the Warrant Price.
SECTION 2.02. (a) The Warrant Holder may exercise a Warrant, in whole or in
part, by surrender of the Warrant Certificate, with the form of subscription
thereon duly executed by the Warrant Agent at its corporate office, together
with the Warrant Price for each share of Common Stock to be purchased in lawful
money of the United States, or by certified check, bank draft, or postal or
express money order payable in United States Dollars to the order of the
Company.
(b) Upon receipt of a Warrant Certificate with the form of election to
purchase thereon duly executed and accompanied by payment of the aggregate
Warrant Price for the shares of Common Stock for which the Warrant is then being
exercised, the Warrant Agent shall requisition from the transfer agent
certificates for the total number of the shares of Common Stock, for which the
Warrant is being exercised in such names and denominations as are required for
delivery to the Warrant Holder, and the Warrant Agent shall thereupon deliver
such certificates to or in accordance with the instructions of the Warrant
Holder. The Company covenants and agrees that it has duly authorized and
directed its transfer agent (and will authorize and direct all its future
transfer agents) to comply with all such requests of the Warrant Agent.
(c) In case any Warrant Holder shall exercise his Warrant with respect to
less than all of the shares of Common Stock that may be purchased under the
Warrant, a new Warrant Certificate for the balance shall be countersigned and
delivered to or upon the order of the Warrant Holder.
(d) The Company covenants and agrees that it will pay when due and payable
any and all issue, transfer and other taxes which may be payable in respect to
the issuance of Warrants, or the issuance of any shares of Common Stock upon the
exercise of Warrants. However, neither the Company nor the Warrant Agent shall
be required to issue or deliver any Warrant Certificate or shares of Common
Stock in a name other than that of the Warrant Holder at the time of surrender
if any tax is payable in respect of such transfer until the person requesting
the same has paid to the Company the amount of such tax or has established to
the Company's satisfaction that such tax has been paid or shall not be due and
payable. In the event that any transfer tax is due and payable, the Warrant
Agent shall be under no obligation to issue or deliver any Warrant Certificate
or shares of Common Stock in a name other than that of the Warrant Holder until
the Company has notified the
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Warrant Agent that the transfer tax, if any, has been paid, or in the
alternative, that no transfer tax is due and payable by reason of an exemption.
(e) The Warrant Agent shall account promptly to the Company with respect to
Warrants exercised and concurrently account to the Company for all moneys
received by the Warrant Agent for the purchase of shares of Common Stock upon
the exercise of Warrants.
(f) The Warrant Agent covenants and agrees that upon the exercise of any of
the Warrants, the Warrant Agent shall provide written notice to the Company at
its office at Parkway 109 Office Center, 328 Newman Springs Road, Red Bank, New
Jersey 07701, the expense of which notice shall be borne by the Company. Each
notice shall contain the name of the exercising Warrant Holder, the number of
shares of Common Stock that the Warrant Holder has elected to purchase, the
purchase price paid on a per share basis and the cumulative number of Warrants
exercised by all of the Warrant Holders as of the date of the transaction which
is the subject of the aforesaid notice. Such notice shall be made on the date of
the exercise of the Warrant. Nothing contained herein shall be construed so as
to prevent the Warrant Agent from providing the information required in this
Section 2.02 (f) in a consolidated or tabular form, provided that all other
provisions of this Section are complied with.
(g) The Warrant Agent covenants and agrees that it shall provide a list of
each and every holder of the Warrants to the Company at such time or from time
to time as shall be required by the Company, but in no event shall such a list
be provided less frequently than once per annum at a date as shall be determined
by the Company.
SECTION 2.03. (a) The Company may at any time, subject to the conditions
set forth herein, redeem all, but not less than all, the Warrants and Bridge
Warrants then outstanding at a redemption price of $.05 per Warrant upon not
less than thirty (30) days prior written notice (the "Redemption Notice") to the
holders thereof provided that the closing bid price of the Common Stock for the
10 consecutive trading days ending ten (10) days prior to the date of the
Redemption Notice is not less than: (a) for the Class A Warrants, $5.00 per
share, (b) for the Class B Warrants, $7.00 per share, and (c) for the Class C
Warrants, $12.00 per share, subject to adjustment for stock dividends, stock
splits and other anti-dilution provisions as provided for under Article III
herein. For purposes of this Section 2.03, "closing bid price" at any date shall
be deemed to be: (i) the last bid price as reported on the principal national
securities exchange on which the Common Stock is listed or admitted to trading,
or (ii) if the Common Stock is not listed or admitted to trading on any national
securities exchange, the closing bid price for the Common Stock as reported by
the Nasdaq National Market or Nasdaq Small Cap Market of the Nasdaq
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Stock Market, Inc. ("NASDAQ") or (iii) if the Common Stock is not listed or
admitted for trading on any national securities exchange, and is not reported by
NASDAQ, the closing bid price in the over-the-counter market as furnished by the
National Quotation Bureau, Inc. or if no such quotation is available, the fair
market value of the Common Stock as determined in good faith by the Board of
Directors of the Company. The Redemption Notice shall be deemed effective upon
mailing by first class mail and the time of mailing is the "Effective Date of
The Notice". The Redemption Notice shall state a redemption date not less than
thirty (30) days from the Effective Date of the Notice (the "Redemption Date").
No Redemption Notice shall be mailed unless all funds necessary to pay for
redemption of all Warrants then outstanding shall have first been set aside by
the Company in trust with the Warrant Agent for the benefit of all holders of
Warrants so as to be and continue to be available therefor. The redemption price
to be paid to the holders of the Warrants will be $.05 for each share of the
Common Stock of the Company to which the Warrant Holder would then be entitled
upon exercise of the Warrant being redeemed, as adjusted from time to time as
provided herein (the "Redemption Price"). If the number of shares of Common
Stock issuable upon exercise of the Warrant being redeemed is adjusted pursuant
to Article III hereof, then upon each such adjustment the Redemption Price will
be adjusted by multiplying the Redemption Price in effect immediately prior to
such adjustment by a fraction, the numerator of which is the number of shares of
Common Stock issuable upon exercise of the Warrant being redeemed immediately
prior to such adjustment and the denominator of which is the number of shares of
Common Stock issuable upon exercise of such Warrant being redeemed immediately
after such adjustment. The Warrants may only be redeemed if the Company has in
effect a current Registration Statement or post-effective amendment covering the
shares underlying the Warrants. The holders of the Warrants may exercise their
Warrants between the Effective Date of The Notice and the Redemption Date, such
exercise being effective if done in accordance with Section 2.02 (a), and if the
Warrant Certificate, with form of election to purchase duly executed and the
Warrant Price, as applicable for such Warrant subject to redemption for each
share of Common Stock to be purchased is actually received by the Warrant Agent
at its office located at 47 West Merrick Road, Freeport, New York 11521, no
later than 5:00 P.M. New York Time on the Redemption Date.
(b) If any holder of Warrants does not wish to exercise any Warrant being
redeemed, the Warrant Holder should mail such Public Warrant to the Warrant
Agent at its office located at 47 West Merrick Road, Freeport, New York 11521,
after receiving the Redemption Notice required by this Section. If such
Redemption Notice shall have been so mailed, and if on or before the Effective
Date of the Notice all funds necessary to pay for redemption of all Warrants
then outstanding shall have been set aside by the Company in trust with the
Warrant Agent for the benefit of all Warrant holders so as to be and continue to
be available therefor, then, on
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and after said Redemption Date, notwithstanding that any Warrant subject to
redemption shall not have been surrendered for redemption, the obligation
evidenced by all Warrants not surrendered for redemption or effectively
exercised shall be deemed no longer outstanding, and all rights with respect
thereto shall forthwith cease and terminate, except only the right of the holder
of each Warrant subject to redemption to receive the Redemption Price for each
share of Common Stock to which he would be entitled if he exercised the Warrant
upon receiving the Redemption Notice of the Warrant subject to redemption held
by the Holder hereof.
ARTICLE III
ADJUSTMENT OF SHARES OF COMMON STOCK PURCHASABLE
AND OF WARRANT PRICE
SECTION 3.01. In case the Company shall at any time after the date of this
Agreement (i) declare a dividend on the outstanding Common Stock in shares of
its capital stock, (ii) subdivide the outstanding Common Stock, (iii) combine
the outstanding Common Stock into a smaller number of shares, or (iv) issue any
shares of its capital stock by reclassification of the Common Stock (including
any such reclassification in connection with a consolidation or merger in which
the Company is the continuing corporation), then, in each case, the Warrant
Price, and the number and kind of shares of Common Stock receivable upon
exercise, in effect at the time of the record date for such dividend or of the
effective date of such subdivision, combination, or reclassification shall be
proportionately adjusted so that the holder of any Warrant exercised after such
time shall be entitled to receive the aggregate number and kind of shares which
if such warrant had been exercised immediately prior to such time, he would have
owned upon such exercise and been entitled to receive by virtue of such
dividend, subdivision, combination, or reclassification. Such adjustment shall
be made successively whenever any event listed above shall occur.
SECTION 3.02. In case the Company shall issue rights, options, or warrants
to holders of Common Stock entitling them to subscribe for or purchase Common
Stock (or securities convertible into or exchangeable for Common Stock) at a
price per share (or having a conversion price per share, if a security
convertible into or exchangeable for Common Stock) less than the "current market
price" (as defined in Section 3.04 hereof) per share of Common Stock on the
record date established for the issuance of such rights, options or warrants,
then, in such case, the Warrant Price shall be adjusted by multiplying the
Warrant Price in effect on the record date of such issuance by a fraction, of
which the numerator shall be the number of shares of Common Stock outstanding on
the record date for such issuance plus the number of shares of Common Stock
which the aggregate offering price of the total number of shares of
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Common Stock so to be issued (or the aggregate initial conversion price of the
convertible securities to be issued or sold) would purchase at such "current
market price" and of which the denominator shall be the number of shares of
Common Stock outstanding on the record date for such issuance plus the number of
additional shares of Common Stock to be issued (or into which the convertible or
exchangeable securities to be issued or sold are initially convertible or
exchangeable). Such adjustment shall become effective at the close of business
on such record date; provided, however, that, to the extent the shares of Common
Stock (or securities convertible to or exchangeable for shares of Common Stock)
are not delivered, the Warrant Price shall be readjusted after the expiration of
such rights, options, or warrants (but only with respect to Warrants exercised
after such expiration), to the Warrant Price which would then be in effect had
the adjustments made upon the issuance of such rights or warrants been made upon
the basis of delivery of only the number of shares of Common Stock or securities
convertible into or exchangeable for shares of Common Stock) actually issued. In
case any subscription price may be paid in a consideration part or all of which
shall be in a form other than cash, the value of such consideration shall be as
determined in good faith by the board of directors of the Company, whose
determination shall be conclusive absent manifest error. Shares of Common Stock
owned by or held for the account of the Company or any majority-owned subsidiary
shall not be deemed outstanding for the purpose of any such computation.
Notwithstanding the foregoing, no adjustment in the Warrant Price or the
number of shares of Common Stock issuable upon exercise of the Warrants shall be
made upon (i) the issuance of options (or upon exercise thereof) by the Company
pursuant to options currently outstanding or which would hereafter be issued to
directors, officers, employees, agents, representatives or consultants of the
Company.
SECTION 3.03. In case the Company shall distribute to holders of Common
Stock (including any such distribution made to the stockholders of the Company
in connection with a consolidation or merger in which the Company is the
continuing corporation) evidences of its indebtedness or assets (other then cash
dividends distributions and dividends payable in shares of Common Stock),
subscription rights, options, or warrants or convertible or exchangeable
securities containing the right to subscribe for or purchase shares of Common
Stock (excluding those referred to in Section 3.02 hereof), then, in each case,
the Warrant price shall be adjusted by multiplying the Warrant Price in effect
immediately prior to the record date for the determination of stockholders
entitled to receive such distribution by a fraction of which the numerator shall
be the "current market price" per share of Common Stock on such record date,
less the fair market value (as determined in good faith by the board of
directors of the Company, whose determination shall be conclusive absent
manifest error) of
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the portion of the evidences of indebtedness or assets so to be distributed, or
of such subscription rights, options, or warrants, convertible or exchangeable
securities containing the right to subscribe for or purchase shares of Common
Stock, applicable to the share, and of which the denominator shall be such
"current market price" per share of Common Stock. Such adjustment shall be made
whenever any such distribution is made, and shall become effective on the date
of such distribution retroactive to the record date for the determination of
stockholders entitled to receive such distribution.
SECTION 3.04. For the purpose of any computation under sections 3.02 and
3.03 hereof, the "current market price" per share of Common Stock on any date
shall be deemed to be the average of the daily closing prices for the 20
consecutive trading days ending three (3) days prior to such date. The closing
price for each day shall be the last reported sales price regular way or, in
case no such reported sale takes place on such day, the closing bid price
regular way, in either case on the principal national securities exchange on
which the Common Stock is listed or admitted to trading or, if the Common Stock
is not listed or admitted to trading on any national securities exchange, the
highest reported bid price as furnished by NASDAQ. If on any such date the
Common Stock is not quoted on NASDAQ or any such organization, the closing price
shall be deemed to be the average of the closing bid and asked prices in the
over-the-counter market as reported by the National Quotation Bureau or if no
such quotation is available, the fair value of the Common Stock on such date, as
determined in good faith by the board of directors of the Company, whose
determination shall be conclusive absent manifest error.
SECTION 3.05. No adjustment in the Warrant Price shall be required if such
adjustment is less than $.05; provided, however, that any adjustments which by
reason of this Section 3.05 are not required to be made shall be carried forward
and taken into account in any subsequent adjustment. All calculations under this
Article III shall be made to the nearest cent or to the nearest one-hundredth of
a share, as the case may be.
SECTION 3.06. In any case in which this Article III shall require that an
adjustment in the Warrant Price be made effective as of a record date for a
specified event, the Company may elect to defer, until the occurrence of such
event, issuing to the holder of any Warrant exercised after such record date,
the shares, if any, issuable upon such exercise over and above the shares, if
any, issuable upon such exercise on the basis of the Warrant Price in effect
prior to such adjustment; provided, however, that the Company shall deliver to
such holder a due bill or other appropriate instrument evidencing such holder's
right to receive such additional shares upon the occurrence of the event
requiring such adjustment.
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SECTION 3.07. Upon each adjustment of the Warrant Price as a result of the
calculations made in Section 3.01, 3.02, or 3.03 hereof, each Warrant
outstanding prior to the making of the adjustment in the Warrant Price shall
thereafter evidence the right to purchase, at the adjusted Warrant Price, that
number of shares (calculated to the nearest thousandth) obtained by dividing (A)
the product obtained by multiplying the number of shares purchasable upon
exercise of a Warrant prior to adjustment of the number of shares by the Warrant
Price in effect prior to adjustment of the Warrant Price by (B) the Warrant
Price in effect after such adjustment of the Warrant Price.
SECTION 3.08. In case of any capital reorganization of the Company, or of
any reclassification of the Common Stock (other than a reclassification of the
Common Stock referred to in Section 3.01 hereof), or in the case of the
consolidation of the Company with or the merger of the Company into any other
corporation or of the sale, transfer, or lease of the properties and assets of
the Company as, or substantially as, an entirety to any other corporation or
other entity, each Warrant shall after such capital reorganization,
reclassification of Common Stock, consolidation, merger, sale, transfer, or
lease, be exercisable, on the same terms and conditions specified in this
Agreement, for the number of shares of stock or other securities, assets, or
cash to which a holder of the number of shares purchasable (at the time of such
capital reorganization, reclassification of Common Stock, consolidation, merger,
sale, transfer, or lease) upon exercise of such Warrant would have been entitled
upon such capital reorganization, reclassification of Common Stock,
consolidation, merger, sale, transfer, or lease; and in any such case, if
necessary, the provisions set forth in this Article III with respect to the
rights and interests thereafter of the holders of the Warrants shall be
appropriately adjusted so as to be applicable, as nearly as may reasonably be,
to any shares of stock other securities, assets, or cash thereafter deliverable
on the exercise of the Warrants. The subdivision or combination of shares of
Common Stock at any time outstanding into a greater or lesser number of shares
shall not be deemed to be a reclassification of the Common Stock for the
purposes of this subsection. The Company shall not effect any such
consolidation, merger, transfer, or lease, unless prior to or simultaneously
with the consummation thereof, the successor corporation (if other than the
Company) resulting from such consolidation or merger or the Corporation
purchasing, receiving, or leasing such assets or other appropriate corporation
or entity shall expressly assume, by written instrument in form satisfactory to
the Underwriter and duly executed and delivered to each holder of a Warrant, the
obligation to deliver to the holder of each Warrant such shares of stock,
securities, or assets as, in accordance with the foregoing provisions, such
holders may be entitled to purchase and to perform the other obligations of the
Company under this Agreement.
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SECTION 3.09. The Company may make such reductions in the Warrant Price, in
addition to those required by this Article III, as it shall, in it sole
discretion, determine to be advisable.
ARTICLE IV
OTHER PROVISIONS RELATING TO RIGHTS OF
WARRANT HOLDERS
SECTION 4.01. No Warrant Holder, as such shall be entitled to vote or
receive dividends or be deemed the holder of shares of Common Stock for any
purposes, nor shall anything contained in any Warrant Certificate be construed
to confer upon any Warrant holder, as such, any of the rights of a shareholder
of the Company or any right to vote, give or withhold consent to any action by
the Company, whether upon any recapitalization, issue of stock, reclassification
of stock, consolidation, merger, conveyance or otherwise, receive dividends or
subscription rights, or otherwise, until in connection with the exercise of any
Warrant, such Warrant shall have been surrendered and the purchase price or the
shares of Common Stock for which such Warrant is being exercised shall have been
received by the Warrant Agent; provided, however, that any such surrender and
payment on any date when the stock transfer books of the Company shall be closed
shall constitute the person or persons in whose name or names the certificate or
certificates for those shares of Common Stock are to be issued as the record
holder or holders thereof for all purposes at the opening of business on the
next succeeding day on which such stock transfer books are open and the Warrant
surrendered shall not be deemed to have been exercised, in whole or in part, as
the case maybe, until such next succeeding day on which stock transfer books are
open.
SECTION 4.02. The Company covenants and agrees that it shall
contemporaneously provide to all Warrant Holders of record any publication,
mailing or notice of an event which it shall provide to all of its shareholders
of record and which event shall result in the adjustment to the Warrant Price as
provided in Article III hereof. For purposes of this Section 4.02, the Warrant
Holders of record shall be those Warrant Holders who are of record on a date
even with the date chosen by the Company for the purpose of determining the
shareholders of record who shall be entitled to receive such publication,
mailing or notice.
SECTION 4.03. If any Warrant Certificate is lost, stolen, mutilated or
destroyed, the Company and the Warrant Agent may, on such terms as to indemnity
or otherwise as they may in their discretion reasonably impose, which shall, in
the case of a mutilated Warrant Certificate, include the surrender thereof,
issue a new Warrant Certificate of like denomination and tenor as, and in
substitution for, the Warrant Certificate so lost, stolen mutilated or
destroyed.
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SECTION 4.04. (a) The Company covenants and agrees that at all times it
shall reserve and keep available for the exercise of outstanding Warrants such
number of authorized shares of Common Stock and the aggregate number and kind of
any other securities which the Warrants are exercisable for, pursuant to the
provisions of Article III hereof, as are sufficient to permit the exercise in
full of such Warrants and that it will make available to the Warrant Agent from
time to time a number of duly executed certificates representing shares of
Common Stock and other securities, sufficient therefor.
(b) The Company shall use its best efforts to secure the listing, upon
official notice of issuance, of the shares of Common Stock issuable upon
exercise of Warrants upon any securities exchange or NASDAQ upon which the
Common Stock becomes listed.
(c) The Company covenants that all shares of Common Stock issued on
exercise of Warrants shall be validly issued, fully paid, non-assessable and
free of preemptive rights.
(d) The Company has filed a Registration Statement on Form S-3
(Registration No. 333-___) for the registration of, among other things, the sale
of the Warrants and the shares of Common Stock issuable upon exercise thereof
under the Securities Act of 1933, as amended (the "Act"). The Company shall use
its best efforts to secure the effectiveness of the Registration Statement under
the Act, and to register or qualify such Warrants and shares of Common Stock
under the laws of any states in which the sale of the Warrants and shares of
Common Stock was registered or qualified at the time of the Rights Offering and
shall use its reasonable good faith efforts to register and qualify such
Warrants and shares of Common Stock in such additional states and jurisdictions
as may be appropriate. The Company further agrees to use its best efforts
maintain the effectiveness of such Registration Statement and such state
qualifications, as aforesaid, by the filing of any and all amendments to the
Registration Statement and such state qualifications as may be required from
time to time under the Act or the laws of the various states until the
expiration or termination of all the Warrants in accordance herewith.
(e) The Company will furnish to the Warrant Agent, upon request, an opinion
of counsel satisfactory to the Warrant Agent the effect that (i) a Registration
Statement under the Act is then in effect with respect to the Warrants and
shares of Common Stock issuable upon the exercise of the Warrants and that the
prospectus included therein complies as to form in all material respects,
(except as to financial statements, including schedules, and other accounting
and financial data, as to which such counsel need express no opinion), with the
requirements of the Act and the rules and regulations of the Commission
thereunder; or (ii) a Registration Statement under the Act with respect to said
shares of
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Common Stock is not required. In the event that said opinion states that such a
Registration Statement is in effect, the Company will from time to time furnish
the Warrant Agent with current prospectuses meeting the requirements of the Act
and such rules and regulations in sufficient quantity to permit the Warrant
Agent to deliver a prospectus ("Prospectus") to each Warrant Holder upon
exercise thereof. The Company further agrees to pay all fees, costs and expenses
in connection with the preparation and delivery to the Warrant Agent of the
foregoing opinions and Prospectuses and the above mentioned registrations and
other actions, and to immediately notify the Warrant Agent in the event that (i)
the Commission shall have issued or threatened to issue any order preventing or
suspending the use of any Prospectus; (ii) at any time any Prospectus shall
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading; or (iii) for any reason it shall be necessary to amend or
supplement any Prospectus in order to comply with the Act.
SECTION 4.05. If the number of shares purchasable upon the exercise of each
Warrant is adjusted pursuant to Section 3.07 hereof, the Company shall not be
required to issue fractions of shares upon exercise of the Warrants or to
distribute share certificates which evidence fractional shares. In lieu of
fractional shares, there shall be paid to the registered holders of Warrant
Certificates at the time such Warrants are exercised as herein provided an
amount in cash equal to the same fraction of the current market value of a
share. For purposes of this Section 4.05, the current market value of a share
issuable upon the exercise of a Warrant shall be the closing price of a share of
Common Stock, as determined pursuant to the second and third sentences of
Section 3.04, for the trading day immediately prior to the date of such
exercise.
ARTICLE V
TREATMENT OF WARRANT HOLDERS
SECTION 5.01. Prior to due presentment for registration of transfer of any
Warrant, the Company and the Warrant Agent may deem and treat the Warrant Holder
as the absolute owner of such warrant, notwithstanding any notation of ownership
or other writing thereon, for the purpose of any exercise thereof and for all
other purposes, and neither the Company nor the Warrant Agent shall be affected
by any notice to the contrary.
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ARTICLE VI
CONCERNING THE WARRANT AGENT
AND OTHER MATTERS
SECTION 6.01. The Company will from time to time promptly pay, subject to
the provisions of Section 2.02 (d) of this Agreement, all taxes and charges that
may be imposed upon the Company or the Warrant Agent in respect of the issuance
or delivery of shares of Common Stock upon the exercise of Warrants.
SECTION 6.02. (a) The Warrant Agent may resign and be discharged from its
duties under this Agreement upon sixty (60) days notice in writing, mailed to
the Company by registered or certified mail, and to each Warrant Holder. The
Company may remove the Warrant Agent or any successor warrant agent upon sixty
(60) days notice in writing, mailed to the Warrant Agent or successor Warrant
Agent, as the case may be, by registered or certified mail, and to each Warrant
Holder; provided, however, the Company shall appoint a new Warrant Agent as
hereinafter provided and such removal shall not become effective until a
successor Warrant Agent has been appointed and has accepted such appointment. If
the Warrant Agent shall resign or shall otherwise become capable of acting, the
Company shall appoint a successor to the Warrant Agent. If the Company shall
fail to make such appointment within a period of sixty (60) days after it has
been notified in writing of such resignation or incapability by the Warrant
Agent by a Warrant Holder, who shall, with such notice, submit his Warrant
Certificate for inspection by the Company, then any Warrant Holder may apply to
any court of competent jurisdiction or the appointment of a successor to the
Warrant Agent. Any successor Warrant Agent, whether appointed by the Company or
by such a court shall be a registered transfer agent, bank or trust company,
subject to the terms and conditions of this Section 6.02, in good standing and
incorporated under the laws of any State of the United States, having its
principal office in the United States of America. After appointment, the
successor Warrant Agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named as Warrant Agent without
further act or deed. The former Warrant Agent shall deliver and transfer to the
successor Warrant Agent any property at the time held by it hereunder and
execute and deliver any further assurance, conveyance, act or deed necessary for
the purpose. Failure to give any notice provided for in this Section, however,
or any defect therein, shall not affect the legality or validity of the
resignation or removal of the Warrant Agent or the appointment of the successor
Warrant Agent, as the case may be.
(b) Any corporation into which the Warrant Agent may be merged or with
which it may be consolidated, or any corporation resulting from any merger or
consolidation to which the Warrant Agent shall be a party, or any corporation
succeeding to the
14
<PAGE>
corporate trust business of the Warrant Agent, shall be the successor to the
Warrant Agent hereunder without the execution or filing of any paper or any
further act on the part of any of the parties hereto. In case at the time such
successor to the Warrant Agent shall succeed to the agency created by this
Agreement, any of the Warrant Certificates shall have been countersigned but not
delivered, any such successor to the Warrant Agent may adopt the
countersignature of the original Warrant Agent and deliver such Warrant
Certificates so countersigned, and in case at that time any of the Warrant
Certificates shall not have been countersigned, any successor to the Warrant
Agent may countersign such Warrant Certificate in its own name or in the name of
the successor Warrant Agent; and in all such cases such Warrant Certificates
shall have the full force provided in the Warrant Certificates and this
Agreement.
In case at any time the name of the Warrant Agent shall be changed and at
such time any of the Warrant Certificates shall have been countersigned but not
delivered, the Warrant Agent may adopt the countersignature under this prior
name and deliver Warrant Certificates so countersigned; and in case at that time
any of the Warrant Certificates shall not have been countersigned, the Warrant
Agent may countersign such Warrant Certificates either in its prior name or in
its changed name; and in all such cases such Warrant Certificates shall have the
full force provided in the Warrant Certificates and in this Agreement.
SECTION 6.03. The Company agrees to pay the Warrant Agent the sum of $___
plus an monthly fee $___ of for all services rendered by it hereunder. The
Company also agrees to indemnify the Warrant Agent for, and to hold it harmless
against, any loss, liability or expense, incurred without gross negligence,
willful misconduct or bad faith on the part of the Warrant Agent, arising out of
or in connection with the acceptance and administration of this Agreement,
including the costs and expenses of defending against any claim of liability in
the premises.
SECTION 6.04. The Company covenants and agrees that it shall, at the
Company's expense, provide to the Warrant Agent copies of its current
prospectus, if any, in such quantity as to enable the Warrant Agent to deliver
one copy of such current prospectus to such Warrant Holder who shall exercise
his rights under a Warrant. Notwithstanding anything else contained in this
Section 6.04, the Company shall not be obligated to provide copies of its
current prospectus for the purpose of allowing the Warrant Agent to deliver such
copies to any Warrant Holder who delivers all of his redeemable warrants for
redemption pursuant to Section 2.03 or who shall notice the Company of his
intent to permit redemption of all of his Warrants pursuant to Section 2.03
herein or to any person who shall hold any Warrant subject to the terms of this
Agreement after the earlier of the Redemption Date or the Last Exercise Date of
the Warrants.
15
<PAGE>
SECTION 6.05. The Warrant Agent undertakes the duties and obligations
imposed by this Agreement upon the following terms and conditions, by all of
which the Company and the holders of Warrant certificates, by their acceptance
thereof, shall be bound:
(a) Whenever in the performance of its duties under this Agreement the
Warrant Agent shall deem it necessary or desirable that any fact or matter be
proved or established by the Company prior to taking or suffering any action
hereunder, that fact or matter, unless other evidence in respect thereof be
herein specifically prescribed, may be deemed to be conclusively proved and
established by a certificate signed by the President or the Secretary of the
Company and delivered to the Warrant Agent. That certificate shall be full
authorization to the Warrant Agent for any action taken or suffered in good
faith by it under the provisions of this Agreement in reliance upon that
certificate.
(b) The Warrant Agent shall be liable hereunder only for its own
negligence, willful misconduct or bad faith.
(c) The Warrant Agent shall not be liable for or by reason of any of the
statements of fact or recitals contained in this agreement or in the Warrant
Certificates, except its countersignature thereof, or be required to verify the
same, but all such statements and recitals are and shall be deemed to have been
made by the Company only.
(d) The Warrant Agent shall not be under any responsibility in respect of
the validity of this Agreement or the execution and delivery hereof, except the
due execution hereof by the Warrant Agent, or in respect of the validity or
execution of any Warrant Certificate, except its countersignature thereof; nor
shall it be responsible for any Warrant Certificate; nor shall it be responsible
for the adjustment of the Warrant Price or the making of any change in the
number of shares of Common Stock required under the provisions of Article III of
this Agreement or responsible for the manner, method or amount of any such
change or the ascertaining of the existence of facts that would require any such
adjustment or change except with respect to the exercise of Warrant Certificates
after actual notice of any adjustment of the Warrant Price; nor shall it by any
act under this Agreement be deemed to make any representation or warranty as to
the authorization or reservation of any shares of Common Stock to be issued
pursuant to this Agreement or any Warrant Certificate or as to whether any share
of Common Stock will when issued be validly issued, fully paid, non-assessable
and free of preemptive rights.
(e) The Warrant Agent and any shareholder, director, officer or employee of
the Warrant Agent may buy, sell or deal in any of the Warrant Certificates or
other securities of the Company to retain a pecuniary interest in any
transaction in which the Company may be interested or contract with or lend
money to or
16
<PAGE>
otherwise act as fully and freely as though it was not Warrant Agent or subject
to this Agreement. Nothing herein shall preclude the Warrant Agent from acting
in any other capacity for the Company or for any other legal entity.
(f) The Warrant Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from any
officer or assistant officer of the Company, and to apply to any such officer or
assistant officer for advice or instructions in connection with its duties, and
shall not be liable for any action taken or suffered to be taken by it in good
faith in accordance with instructions of any such officer or assistant officer.
(g) The Warrant Agent may consult with its counsel or other counsel
satisfactory to it, including counsel for the Company, and the opinion of such
counsel shall be full and complete authorization and protection in respect of
any action taken, offered, or omitted by it hereunder in good faith and in
accordance with the opinion of such counsel.
(h) The Warrant Agent shall incur no liability to the Company or to any
holder of any Warrant for any action taken by it in reliance upon any Warrant
Certificate or certificate for Common Stock, instrument of assignment or
transfer, power of attorney, endorsement, affidavit, letter, notice, direction,
consent, certificate, statement, or other paper or document believed by it to be
genuine and to be signed, executed, and where necessary, certified or
acknowledged, by the proper person or persons.
SECTION 6.06. The Warrant Agent may, without the consent or concurrence of
the Warrant Holders, by supplemental agreement or otherwise, concur with the
Company in making any changes or corrections in this Agreement that (i) it shall
have been advised by counsel, who may be counsel for the Company, are required
to cure any ambiguity or to correct any defective or inconsistent provision or
clerical omission or mistake or manifest error herein contained, or (ii) as
provided in Section 3.09, the Company deems necessary of advisable and which
shall not be inconsistent with the provisions of the Warrant Certificates,
provided such changes or corrections do not adversely affect the privileges or
immunities of the Warrant Holders.
SECTION 6.07. All the covenants and provisions of this Agreement by or for
the benefit of the Company or the Warrant Agent shall bind and inure to the
benefit of their respective successors and assigns hereunder.
SECTION 6.08. Forthwith upon the appointment after the date thereof of any
transfer agent for the Common Stock, or of any subsequent transfer agent for the
Common Stock, the Company will file with the Warrant Agent a statement setting
forth the name and
17
<PAGE>
address of such transfer agent.
SECTION 6.09. Notice or demand pursuant to this Agreement to be given or
made by the Warrant Agent or by any Warrant Holder to or on the Company shall be
sufficiently given or made and effective on the third business day after posting
thereof, unless otherwise provided in this Agreement, if sent by first-class
mail, postage prepaid, addressed (until another address is filed in writing by
the Company with the Warrant Agent) as follows:
First Montauk Financial Corp.
Parkway 109 Office Center
328 Newman Springs Road
Red Bank, New Jersey 07701
Attn: Herbert Kurinsky, President
notice or demand pursuant to this Agreement to be given or made by the Company
or any Warrant Holder to or on the Warrant Agent shall be sufficiently given or
made and effective on the third business day after posting thereof, unless
otherwise provided in this Agreement, if sent by first-class mail, postage
prepaid, addressed until another address is filed in writing by the Warrant
Agent with the Company) as follows:
North American Transfer Company
47 West Merrick Road
Freeport, New York 11521
Attn: Compliance Department
notice or demand pursuant to this Agreement to be given or made by the Company
or the Warrant Agent to or on any Warrant Holder shall be sufficiently given or
made and effective on the third business day after posting thereof, unless
otherwise provided in this Agreement, if sent by first-class mail, postage
prepaid, addressed to such Warrant Holder at his last known address as it shall
appear in the records of the Company, if such notice shall be given by the
Company, or, if such notice shall be given by the Warrant Agent, as it shall
appear on the register maintained by the Warrant Agent.
A copy of any Notice or demand given or made pursuant to this Agreement on
the Warrant Agent, Company or Underwriter shall be promptly forwarded by the
recipient thereof to each of the Company, Warrant Agent or Underwriter who shall
not have received or made such demand or notice.
SECTION 6.10. The validity, interpretation and performance of this
Agreement and the Warrants shall be governed by the law of the State of New
York.
SECTION 6.11. Nothing in this Agreement shall be construed to give to any
person or corporation other than the parties hereto and the Warrant Holders any
right, remedy or claim under promise or
18
<PAGE>
agreement hereof. All covenants, conditions, stipulations, promises and
agreements contained in this Agreement shall be for the sole and exclusive
benefit of the Company and the Warrant Agent and their successors and of the
Warrant Holders, and their heirs, representatives, successors, assigns and
transferees.
SECTION 6.12. A copy of this Agreement shall be available for inspection by
any Warrant Holder during the regular business hours and at the corporate office
of the Warrant Agent in New York, New York, at which time the Warrant Agent may
require any Warrant Holder to submit his Warrant Certificate for inspection by
it.
SECTION 6.13. This Agreement shall terminate on the Last Exercise Date, or
such earlier date upon which all Warrants have been exercised or redeemed,
except that the Warrant Agent shall account to the Company pursuant to Section
2.02 (e) of this Agreement for all cash held by it. The provisions of Section
6.03 and 6.04 of this Agreement shall survive such termination.
SECTION 6.14. The Article headings in this Agreement are for convenience
only and are not part of this Agreement and shall not affect the interpretation
thereof.
SECTION 6.15. This Agreement may be executed in any number counterparts,
each of which is so executed shall be deemed to be an original, and all such
counterparts shall together constitute but one and the same agreement.
ATTEST: First Montauk Financial Corp.
BY: ____________________________
Herbert Kurinksy
President
North American Transfer Company
BY: ___________________________
Name:
Title:
19
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We hereby consent to the use of our report dated March 20, 1997 to the
financial statements of First Montauk Financial Corp. for the years ended
December 31, 1996 and 1995 and the use of our name under the heading "Experts"
in this Form S-3 of First Montauk Financial Corp.
June 25, 1997 Schneider Ehrlich & Management LLP
EXHIBIT 99.1
[Letterhead of First Montauk Financial Corp.]
IMPORTANT INFORMATION
FIRST MONTAUK FINANCIAL CORP.
RIGHTS OFFERING
TIME SENSITIVE - THIS OFFER EXPIRES ON
___________, UNLESS EXTENDED
Dear Stockholder,
Enclosed with this letter is a Prospectus explaining the Company's Rights
Offering which gives you the opportunity to purchase Units of the Company at a
price of $.45 per Unit (the "Subscription Price"). Each Unit consists of one
Class A Redeemable Common Stock Purchase Warrant, one Class B Redeemable Common
Stock Purchase Warrant and one Class C Redeemable Common Stock Purchase Warrant.
You will not be required to pay any brokerage fees in connection with any
subscription of Units pursuant to the Rights Offering.
SUMMARY OF THE TERMS OF RIGHTS OFFERING
o Effectively, you have one non-transferable right for every
share you own at the close of business on _________, 1997 (the
"Record Date").
o Three whole rights plus the Subscription Price will be
required to purchase one Unit of the Company (Basic
Subscription Privilege). If your shareholding is not exactly
divisible by three, the fraction will be rounded down to the
nearest whole number.
o In addition, there is an Oversubscription Privilege. This
allows you to subscribe for more Units, at the Subscription
Price. The available Units will be allocated in proportion to
the number of shares you own on the Record Date.
o As a result of the terms of the Rights Offering, Rights
Holders who do not fully exercise their rights will own a
smaller proportional interest in the Company than they owned
prior to the Rights Offering.
o The Rights Offering expires at 5 P.M., Eastern Time, on
_________, 1997, unless extended.
o The Rights Offering is conditioned upon the receipt of all
necessary regulatory approvals, including those for federal
and state securities laws.
<PAGE>
A Subscription Rights Certificate is enclosed evidencing your Rights,
together with a postage-paid, return envelope. You may exercise your Rights and
pay for the purchase of additional shares in two ways:
o If you wish to subscribe for Units pursuant to the Rights `
Offering, you must send the Subscription Rights Certificate
together with payment for the Units you wish to acquire
pursuant to the Basic Subscription Privilege and additional
Units you wish to subscribe for pursuant to the
Oversubscription Privilege to the Subscription Agent. To be
accepted, such payment, together with the executed
Subscription Rights Certificate, must be received by the
Subscription Agent, North American Transfer Company 47 West
Merrick Road, Freeport, New York 11521, prior to 5 p.m., New
York City time, on _________, unless the Rights Offering is
extended. The Subscription Agent will deposit all Unit
purchase checks received prior to the final due date into a
segregated interest bearing account (which interest will
accrue to the benefit of the Company) pending proration and
distribution of the shares. PAYMENT MUST BE IN UNITED STATES
DOLLARS BY WIRE TRANSFER OR BY MONEY ORDER OR CHECK DRAWN ON A
U.S. BANK, MUST BE PAYABLE TO THE SUBSCRIPTION AGENT, MUST
ACCOMPANY AN EXECUTED SUBSCRIPTION RIGHTS CERTIFICATE AND MUST
BE DELIVERED TO THE LOCATION SPECIFIED.
o If you wish to subscribe for Units pursuant to the Rights
Offering, but time will not permit you to cause the
Subscription Rights Certificate to reach the Subscription
Agent prior to the expiration of the Rights Offering, you must
provide the Subscription Agent with a notice of guaranteed
delivery through your bank or broker in accordance with the
procedures which appear in the Prospectus.
The Rights Offering is being made pursuant to the Prospectus
which sets forth detailed information about the Company and the Rights Offering.
Please read these materials carefully.
If you have any questions regarding the offering, please call
the Subscription Agent at ___________, or your broker or bank. We thank you for
your continued support of the Company.
- --------------------------- ---------------------------
Herbert Kurinsky, President William J. Kurinsky,
Secretary
<PAGE>
IMPORTANT DATES TO REMEMBER
Event Date
----- ----
Record Date ________________
Subscription Period ________________ - ________________
(unless extended)
Expiration of Offer ________________ (unless extended)
EXHIBIT 99.2
FIRST MONTAUK FINANCIAL CORP.
INSTRUCTIONS FOR USE OF
SUBSCRIPTION RIGHTS CERTIFICATES
----------
CONSULT THE SUBSCRIPTION AGENT, OR YOUR BANK OR BROKER,
IF YOU HAVE ANY QUESTIONS AFTER READING THESE INSTRUCTIONS
----------
The following instructions relate to the rights offering (the "Rights
Offering") by First Montauk Financial Corp. (the "Company"), to the holders of
its Common Stock, no par value (the "Common Stock"), as described in the
Company's Prospectus dated __________, 1997 (the "Prospectus"). Holders of
record (the "Record Date Holders") of Common Stock at the close of business on
__________, 1997 (the "Record Date") are receiving one non-transferable
subscription right (a "Right") for each share of Common Stock held on the Record
Date. Every three Rights entitle the holder thereof (the"Rights Holder") to
subscribe for and purchase from the Company one unit (the "Unit") at the
subscription price (the "Subscription Price") of $.45 (the "Basic Subscription
Privilege"). In lieu of fractional Rights, the aggregate number of Rights issued
to a Record Date Holder will be rounded down to the next whole number. Each Unit
consists of one Class A Redeemable Common Stock Purchase Warrant, one Class B
Redeemable Common Stock Purchase Warrant and one Class C Redeemable Common Stock
Purchase Warrant as described in the Prospectus. An aggregate of up to 2,979,060
Units will be distributed in connection with the Offering. Subject to the
proration and possible reduction described below, each Right also entitles any
Rights Holder to subscribe for additional Units which may be available after
satisfaction of all subscriptions pursuant to the Basic Subscription Privilege
(the "Oversubscription Privilege"). Units will be available for purchase
pursuant to the Oversubscription Privilege only to the extent that any Units are
not subscribed for through the Basic Subscription Privilege. If the Units not
subscribed for through the Basic Subscription Privilege (the "Excess Units") are
not sufficient to satisfy all subscriptions pursuant to the Oversubscription
Privilege, the Excess Units will be allocated pro rata (subject to the
elimination of fractional shares) among those Rights Holders exercising the
Oversubscription Privilege in proportion to the number of Units a Rights Holder
has subscribed for pursuant to the Basic Subscription Privilege. However, if
such pro rata allocation results in any Rights Holder being allocated a greater
number of Excess Units than such Rights Holder subscribed for pursuant to the
exercise of the Oversubscription Privilege, then the excess funds paid by that
Rights Holder as the Subscription Price for shares not issued will be returned
without interest or deduction. The Subscription Price is payable in cash. See
"Rights Offering Procedures" in the Prospectus.
The Rights will expire at 5:00 p.m. Eastern time on _________, 1997,
unless extended by the Company to a time not later than 5:00 p.m., Eastern time,
on _________, 1997 (in either case, the "Expiration Time").
<PAGE>
The number of Rights to which you are entitled pursuant to the Basic
Subscription Privilege is printed on the face of your Subscription Rights
Certificate. You should indicate your wishes with regard to the exercise of your
Rights by completing the appropriate form or forms on the reverse side of your
Subscription Rights Certificate and returning the Subscription Rights
Certificate to the Subscription Agent in the envelope provided.
YOUR SUBSCRIPTION RIGHTS CERTIFICATE OR NOTICE OF GUARANTEED DELIVERY
MUST BE RECEIVED BY NORTH AMERICAN TRANSFER COMPANY, (THE "SUBSCRIPTION AGENT")
AND PAYMENT OF THE SUBSCRIPTION PRICE, INCLUDING FINAL CLEARANCE OF ANY
UNCERTIFIED CHECKS, MUST BE RECEIVED BY THE SUBSCRIPTION AGENT, AT OR BEFORE
5:00 P.M. EASTERN TIME, ON __________, 1997. YOU MAY NOT REVOKE ANY EXERCISE OF
A RIGHT.
1. SUBSCRIPTION PRIVILEGES.
TO EXERCISE RIGHTS. To exercise your Rights, complete your Subscription
Rights Certificate and send to the Subscription Agent your properly completed
and executed Subscription Rights Certificate together with payment in full of
the Subscription Price for each Unit subscribed for pursuant to the Basic
Subscription Privilege and the Oversubscription Privilege. Payment of the
Subscription price must be made for the full number of Units being subscribed
for (a) by check drawn upon a U.S. bank, or postal, telegraphic or express money
order, in each case, payable to North American Transfer Company, as Subscription
Agent for such purpose of accepting subscriptions at Bank, ABA No. __________,
Account No. __________. The Subscription Price will be deemed to have been
received by the Subscription Agent only upon (i) clearance of any uncertified
check, (ii) receipt by the Subscription Agent of any certified check or
cashier's check drawn upon a U.S. bank, or of any postal, telegraphic or express
money order or (iii) receipt of collected funds in the Subscription Agent's
account designated above. IF PAYING BY UNCERTIFIED CHECK, PLEASE NOTE THAT THE
FUNDS PAID THEREBY MAY TAKE FIVE BUSINESS DAYS OR MORE TO CLEAR. ACCORDINGLY,
RIGHTS HOLDERS WHO WISH TO PAY THE SUBSCRIPTION PRICE BY MEANS OF UNCERTIFIED
CHECK ARE URGED TO MAKE PAYMENT SUFFICIENTLY IN ADVANCE OF THE EXPIRATION TIME
TO ENSURE THAT SUCH PAYMENT IS RECEIVED AND CLEARS BEFORE THE EXPIRATION TIME
AND ARE URGED TO CONSIDER, IN THE ALTERNATIVE, PAYMENT BY MEANS OF CERTIFIED OR,
CASHIER'S CHECK, MONEY ORDER OR WIRE TRANSFER OF FUNDS.
If you have not indicated the number of Rights being exercised, or if
you have not forwarded full payment of the aggregate Subscription Price for the
number of Rights that you have indicated are being exercised, then you will be
deemed to have exercised the Basic Subscription Privilege for the maximum number
of Rights which may be exercised for the aggregate payment delivered by you and,
to the extent that the aggregate payment delivered by you exceeds the product of
the Subscription Price multiplied by the number of Rights evidenced by the
Subscription Rights Certificates delivered by you (such excess being the
"Subscription Excess"), you will be deemed to have exercised the
Oversubscription Privilege to purchase, to
<PAGE>
the extent available, that number of whole Excess Shares equal to the quotient
obtained by dividing the Subscription Excess by the Subscription Price and any
amount remaining after such division shall be returned to you without interest
or deduction.
TO EXERCISE RIGHTS THROUGH A NOMINEE. If you wish to have your bank,
broker or other nominee exercise some or all of your Rights, you must complete
the instructions accompanying the letter from nominee holders, providing clear
direction as to how many Rights are to be exercised. Banks, brokers and other
nominees who exercise the Oversubscription Privilege on behalf of the beneficial
owners of Rights will be required to certify to the Subscription Agent and the
Company, by delivery to the Subscription Agent of a Nominee Holder
Oversubscription Certification in the form available from the Subscription
Agent, the aggregate number of Rights as to which the Oversubscription Privilege
are being exercised and the number of Units thereby subscribed for by each
beneficial owner of Rights on whose behalf such nominee holder is acting.
TO EXERCISE RIGHTS IF SUBSCRIPTIONS RIGHTS CERTIFICATE MIGHT NOT
PROPERLY REACH THE SUBSCRIPTION AGENT PRIOR TO THE EXPIRATION TIME. You may
cause a written guarantee substantially in the form of Exhibit A to these
Instructions (the "Notice of Guaranteed Delivery") from a member firm of a
registered national securities exchange or a member of the National Association
of Securities Dealers, Inc. or from a commercial bank or trust company having an
office or correspondent in the United States (each, an "Eligible Institution"),
to be received by the Subscription Agent at or prior to the Expiration Time;
payment in full of the applicable Subscription Price may be made separately as
long as said payment is also received by the Subscription Agent at or before the
Expiration Time. Such Notice of Guaranteed Delivery must state your name, the
number of Rights represented by your Subscription Rights Certificate and the
number of Units being subscribed for pursuant to the Basic Subscription
Privilege and being subscribed for, if any, pursuant to the Oversubscription
Privilege, and the Eligible Institution must guarantee the delivery to the
Subscription Agent of your properly completed and executed Subscription Rights
Certificates evidencing those Rights within five trading days following the date
of the Notice of Guaranteed Delivery. If this procedure is followed, your
Subscription Rights Certificates must be received by the Subscription Agent
within five trading days following the date of the Notice of Guaranteed Delivery
relating thereto. Additional copies of the Notice of Guaranteed Delivery may be
obtained upon request from the Subscription Agent.
LIMITATION ON SUBSCRIPTION PRIVILEGES. The Company will not be required
to issue Units pursuant to the Rights Offering to any Rights Holder that in the
Company's judgment is required to obtain prior clearance or approval from any
regulatory authority to own or control such shares unless prior to the
Expiration Time, evidence of such clearance or approval has been provided to the
Company. If the Company elects not to issue shares in such case, such shares
will become available to satisfy subscriptions pursuant to the Oversubscription
Privilege.
2. THE SUBSCRIPTION AGENT.
The address and telephone and telecopier numbers of the Subscription
Agent are as follows:
<PAGE>
General Information:
(516) 379-8501
By Mail or By Hand or Overnight Courier:
North American Transfer Company
47 West Merrick Road
Freeport, New York 11521
Facsimile Transmission, Copy Number:(516) 379-8525
3. ISSUANCE AND DELIVERY OF STOCK CERTIFICATES, ETC.
The following issuances, deliveries, and payments will be made to you
at the address shown on the face of your Subscription Rights Certificate unless
you provide special payment, issuance or delivery instructions to the contrary
by completing the applicable part of Section 2 of your Subscription Rights
Certificate. See "Rights Offering Procedures - Exercise of Rights" in the
Prospectus.
BASIC SUBSCRIPTION PRIVILEGE. As soon as practicable after the
corresponding Rights have been validly exercised and payment has been received,
the Subscription Agent will issue and mail in accordance with your instructions
three certificates representing Warrants purchased pursuant to the Basic
Subscription Privilege. See "Rights Offering Procedures - Exercise of Rights" on
the Prospectus.
OVERSUBSCRIPTION PRIVILEGE. If you validly exercise the
Oversubscription Privilege, as soon as practicable after the Expiration Time and
after all prorations and reductions contemplated by the terms of the Rights
Offering have been effected, the Subscription Agent will issue and mail to you,
if you validly exercise the Oversubscription Privilege, three certificates
representing Warrants purchased pursuant to the Oversubscription Privilege. See
"Rights Offering Procedures - Exercise of Rights" in the Prospectus.
REFUNDING OF EXCESS PAYMENTS. If you exercise the Oversubscription
Privilege, as soon as practicable after the Expiration Time and after all
prorations and reductions contemplated by the terms of the Rights Offering have
been effected, the Subscription Agent will return by mail, without interest or
deduction to you, any excess funds received in payment of the Subscription Price
for Units that were subscribed by you but not allocated to you pursuant to the
Oversubscription Privilege.
4. SIGNATURES.
EXECUTION BY RIGHTS HOLDER. The signature on the Subscription Rights
Certificate must correspond with the name of the Rights Holder exactly as it
appears on the face of the Subscriptions Rights Certificate without any
alteration or change whatsoever. Persons who sign the Subscription Rights
Certificate in a representative or other fiduciary capacity must indicate their
capacity when signing and, unless waived by the Company in its sole and absolute
discretion, must present to the Subscription Agent satisfactory evidence of
their authority to so act.
<PAGE>
EXECUTION BY PERSON OTHER THAN RIGHTS HOLDER. If the Subscription
Rights Certificate is executed by a person other than the Rights Holder named on
the face of the Subscription Rights Certificate, proper evidence of authority of
the person executing the Subscription Rights Certificate must accompany the same
unless, for good cause, the Company dispenses with proof of authority.
SIGNATURE GUARANTEES. As the Rights are non-transferable, unless your
Subscription Rights Certificate (i) provides that the Units to be issued
pursuant to the exercise of the Rights represented thereby are to be issued to
you and sent to your registered address or (ii) is submitted for the account of
an Eligible Institution (as defined in paragraph 1), your signature on each
Subscription Rights Certificate must be guaranteed by a bank, broker, dealer,
credit union, national securities exchange, registered securities association,
clearing agency or savings association (an "Eligible Guarantor Institution").
5. METHOD OF DELIVERY.
The method of delivery of Subscription Rights Certificates and payment
of the Subscription Price to the Subscription Agent will be at your election and
risk, but, if sent by mail, you are urged to send such materials by registered
or certified mail, properly insured, with return receipt requested, and are
urged to allow a sufficient number of days to ensure delivery to the
Subscription Agent and, if you are paying by uncertified check, the clearance of
payment of the Subscription Price prior to the Expiration Time. BECAUSE
UNCERTIFIED CHECKS MAY TAKE FIVE BUSINESS DAYS OR MORE TO CLEAR, YOU ARE
STRONGLY URGED TO CONSIDER, IN THE ALTERNATIVE, PAYMENT BY MEANS OF CERTIFIED OR
CASHIER'S CHECK, MONEY ORDER OR WIRE TRANSFER OF FUNDS.
6. SPECIAL PROVISIONS RELATING TO THE DELIVERY OF RIGHTS THROUGH THE
DEPOSITORY TRUST COMPANY.
In the case of Rights that are held of record through The Depository
Trust Company ("DTC"), exercises of the Basic Subscription Privilege (but not
the Oversubscription Privilege) may be effected by instructing DTC to transfer
Rights (such Rights being "DTC Rights") from the DTC account in which the Rights
are held to the DTC account of the Subscription Agent, together with payment of
the Subscription Price for each Unit subscribed for pursuant to the Basic
Subscription Privilege. THE OVERSUBSCRIPTION PRIVILEGE IN RESPECT OF DTC RIGHTS
MAY NOT BE EXERCISED THROUGH DTC. The holder of DTC Rights may exercise the
Oversubscription Privilege in respect thereof by properly executing and
delivering to the Subscription Agent, at or prior to the Expiration Time, a DTC
Participant Oversubscription Exercise Form, in the form available from the
Subscription Agent, together with payment of the appropriate Subscription Price
for the number of Excess Shares for which the Oversubscription Privilege is
exercised.
If a Notice of Guaranteed Delivery relates to Rights for to which
exercise of the Basic Subscription Privilege will be made through DTC and such
Notice of Guaranteed Delivery also relates to the exercise of the
Oversubscription Privilege, a DTC Participant Oversubscription
<PAGE>
Exercise Form must also be received by the Subscription Agent for such exercise
of the Oversubscription Privilege at or prior to the Expiration Time.
7. FORM W-9.
If you have not previously provided the Subscription Agent with a Form
W-9, you should provide the Subscription Agent with a correct Taxpayer
Identification Number on a Form W-9 which may be obtained upon request from the
Subscription Agent. Failure to provide the information on the Form W-9 may
subject you to penalties and to withholding for dividends that may be paid by
the Company on shares of Common Stock purchased upon the exercise of Warrants.
8. TRANSFER TAXES.
All commissions, fees and other expenses (including brokerage
commissions and transfer taxes) incurred in connection with the exercise of
Rights will be for the account of the Company.
9. IRREGULARITIES.
All questions concerning the timeliness, validity, form and eligibility
of any exercise of Rights will be determined by the Company, whose
determinations will be final and binding. The Company, in its sole discretion,
may waive any defect or irregularity, or permit a defect or irregularity to be
corrected within such time as it may determine, or reject the purported exercise
of any Right. Subscription Rights Certificates will not be deemed to have been
received or accepted until all irregularities have been waived or cured within
such time as the Company determines, in its sole discretion. Neither the Company
nor the Subscription Agent will be under any duty to give notification of any
defect or irregularity in connection with the submission of Subscription Rights
Certificates or incur any liability for failure to give such notification. The
Company reserves the right to reject any exercise if such exercise is not in
accordance with the terms of the Rights Offering or not in proper form or if the
acceptance thereof or the issuance of shares of Common Stock pursuant thereto
could be deemed unlawful.
<PAGE>
EXHIBIT A TO INSTRUCTIONS
NOTICE OF GUARANTEED DELIVERY
FOR
SUBSCRIPTION RIGHTS CERTIFICATES
ISSUED BY
FIRST MONTAUK FINACIAL CORP.
This form, or one substantially equivalent hereto, must be used to
exercise Rights pursuant to the Rights Offering described in the Prospectus
dated ____________ (the "Prospectus") of First Montauk Financial Corp. (the
"Company"), if a holder of Rights cannot deliver the Subscription Rights
Certificates evidencing Rights (the "Subscription Rights Certificate(s)'), to
the Subscription Agent listed below (the "Subscription Agent") at or before 5:00
p.m. Eastern time on ____________, 1997, unless extended by the Company to a
time not later than 5:00 p.m., Eastern time, on ____________, 1997, (in either
case, the "Expiration Time"). This form must be delivered by hand or sent by
facsimile transmission, overnight courier or mail to the Subscription Agent, and
must be received by the Subscription Agent at or prior to the Expiration Time.
Properly completed and executed Subscription Rights Certificates relating to
this Notice of Guaranteed Delivery must be received by the Subscription Agent
within five trading days following the date of this Notice of Guaranteed
Delivery. See "Rights Offering Procedures - Exercise of Rights" in the
Prospectus. Payment of the Subscription Price of $.45 per Unit (as defined in
the Prospectus) subscribed for pursuant to the Basic Subscription Privilege (as
defined in the Prospectus) and the Oversubscription Privilege (as defined in the
Prospectus) must be received by the Subscription Agent in the manner specified
in the Instructions for Use of Subscription Rights Certificates (the
"Instructions") at or before the Expiration Time even if the Subscription Rights
Certificate evidencing such Rights is being delivered pursuant to the procedure
for guaranteed delivery thereof.
THE SUBSCRIPTION AGENT IS:
NORTH AMERICAN TRANSFER COMPANY
BY MAIL OR GENERAL INFORMATION:
BY HAND OR (516) 379-8501
OVERNIGHT COURIER:
NORTH AMERICAN TRANSFER COMPANY FACSIMILE TRANSMISSION:
47 WEST MERRICK ROAD (516) 379-8525
FREEPORT, NEW YORK 11521
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE
OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE OTHER THAN THAT SET FORTH ABOVE
DOES NOT CONSTITUTE A VALID DELIVERY.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby represents that he or she is the holder of
Subscription Rights Certificates(s) representing ________ Rights and that such
Subscription Rights Certificate(s) cannot be delivered to the Subscription Agent
at or before 5:00 p.m., Eastern time on _________, 1997 unless extended by the
Company to a time not later than 5:00 p.m. Eastern time, on _________, 1997 (in
either case, the "Expiration Time"). Upon the terms and subject to the
conditions set forth in the Prospectus, receipt of which is hereby acknowledged,
the undersigned hereby elects to exercise (i) the Basic Subscription Privilege
to subscribe for one Unit for every three Rights for ______ Units represented by
such Subscription Rights Certificate and (ii) the Oversubscription Privilege, to
the extent that Excess Units (as defined in the Prospectus) are available
therefor, for an aggregate of up to ______ Excess Units. The undersigned
understands that payment of the Subscription Price of $.45 for each Unit
subscribed for pursuant to the Basic Subscription Privilege and the
Oversubscription Privilege must be received by the Subscription Agent at or
before the Expiration Time, and represents that such payment, in the aggregate
amount of $______, either (check appropriate box(es)):
|_| is being delivered to the Subscription Agent; or |_| has been
delivered separately to the Subscription Agent; and is being
or was delivered in the manner set forth below (check
appropriate box and complete information relating thereto):
|_| Wire transfer of funds directed to _______ Bank, ABA No.
________, Account No. ________.
Name of transferor institution_______________________________
Date of transfer_____________________________________________
Confirmation number (if available)___________________________
|_| Uncertified check payable to North American Transfer Company
(Payment by uncertified check will not be deemed to have been
received by the Subscription Agent until such check has
cleared. Rights Holders paying by such means are urged to make
payment sufficiently in advance of the Expiration Time to
ensure that such payment clears by such date.)
Name of maker________________________________________________
Date of check________________________________________________
Bank on which check is drawn_________________________________
|_| Certified check payable to North American Transfer Company
<PAGE>
Name of maker________________________________________________
Date of check________________________________________________
Bank on which check is drawn
|_| Cashier's check payable to North American Transfer Company
Name of maker________________________________________________
Date of draft________________________________________________
|_| Money order payable to North American Transfer Company
Issuer of money order________________________________________
Date of money order__________________________________________
Signature(s)_____________________________________ Address_____________________
_________________________________________________ _____________________________
Name(s)__________________________________________ _____________________________
Please Type or Print (Include Zip Code)
_________________________________________________ _____________________________
______________________________ Area Code and Tel. No.(s)______________________
(If signature is by a trustee(s),
executor(s), administrator(s),
guardian(s), attorney(s)-in-fact,
agent(s), officer(s), of a corporation
or another acting in a fiduciary or
representative capacity, such capacity Subscription Rights Certificate
must be clearly indicated above.) No(s). (if available)________________
<PAGE>
GUARANTEE OF DELIVERY
(Not to be used for Subscription Rights Certificate Signature Guarantee)
The undersigned, a member firm or a registered national securities
exchange or number of the National Association of Securities Dealers, Inc. or a
commercial bank or trust company having an office or correspondent in the United
States, guarantees that the undersigned will deliver to the Subscription Agent
the Subscription Rights Certificate(s) representing the Rights being exercised
hereby, with any required signature guarantees and any other required documents,
all within five trading days after the date hereof.
_______________________________________Dated:___________________________________
(Name of Firm)
_______________________________________Address:_________________________________
(Authorized Signature)
______________________________________ ________________________________________
(Name) (Include Zip Code)
______________________________________ ________________________________________
(Title) (Area Code and Telephone Number)
The institution which completes this form must communicate the
guarantee to the Subscription Agent and must deliver the Subscription Rights
Certificate(s) to the Subscription Agent within the time period shown herein.
Failure to do so could result in a financial loss to such institution.
EXHIBIT 99.3
[LETTERHEAD OF FIRST MONTAUK FINANCIAL CORP.]
SPECIAL NOTICE TO HOLDERS OF
FIRST MONTAUK FINANCIAL CORP.
COMMON STOCK (NO PAR VALUE)
WHOSE ADDRESSED ARE OUTSIDE THE UNITED STATES
SUBSCRIPTION PRICE: $.45 ______ RIGHTS TO PURCHASE
______ UNITS
[INSERT NAME AND ADDRESS]
Enclosed you will find materials relating to the rights offering (the
"Rights Offering") of First Montauk Financial Corp. (the "Company"). A
Subscription Rights Certificate representing ________ Rights to subscribe for
_______ Units at $.45 per Unit is not included in this mailing, but instead is
being held on your behalf by the Subscription Agent, North American Transfer
Company. The number of Rights that are being held for you is indicated above.
If the exercise by you of the Rights can be made in accordance with applicable
law, and you wish to exercise any or all of these Rights, you must contact the
Company and you must so instruct the Subscription Agent in the manner described
in the accompanying Prospectus and Instructions for Use of Subscription Rights
Certificates by 11:00 a.m., Eastern time, on _______________, 1997. If the
exercise by you of the Subscription Agent does not receive your instructions by
such time, the Rights will expire valueless.
ANY QUESTIONS OR REQUESTS FOR ASSISTANCE CONCERNING THE RIGHTS OFFERING SHOULD
BE DIRECTED TO NORTH AMERICAN TRANSFER COMPANY, THE SUBSCRIPTION AGENT IN THE
UNITED STATES, AT (516) 379-8501.
Very truly yours,
FIRST MONTAUK FINANCIAL CORP.
By:___________________________
Name: Herbert Kurinksy
Title: President
EXHIBIT 99.4
[Letterhead of First Montauk Financial Corp.]
2,979,060 Units
FIRST MONTAUK FINANCIAL CORP.
Offered Pursuant to Rights
Distributed to Stockholders
To Securities Dealers, Commercial Banks,
Brokers, Trust Companies and Other Nominees:
Enclosed are a Prospectus, dated ________________, 1997 (the
"Prospectus"), and Instructions for Use of Subscription Rights Certificates (the
"Instructions"), relating to the offering of 2,979,060 units ("Units"), of First
Montauk Financial Corp. (the "Company"), at a subscription price of $.45 Unit,
in cash, pursuant to non-transferable subscription rights ("Rights") distributed
to holders of record of shares of Common Stock as of the close of business on
___________________, 1997 (the "Record Date"). The Rights are described in the
Prospectus and evidenced by a Subscription Rights Certificate (a "Subscription
Rights Certificate") registered in your name or the name of your nominee.
Each beneficial owner of Common Stock registered in your name or the
name of your nominee is entitled to one Right for each share of Common Stock so
owned by such beneficial owner at the close of business on the Record Date.
Every three Rights entitles the Holder to purchase one Unit. In lieu of
fractional Units, the aggregate number of Units issued in respect of each
beneficial owner will be rounded down to the next whole number.
Each Unit consists of one Class A Redeemable Common Stock Purchase
Warrant, one Class B Redeemable Common Stock Purchase Warrant and one Class C
Redeemable Common Stock Purchase Warrant.
We are asking you to contact your clients for whom you hold shares of
Common Stock registered in your name or in the name of your nominee to obtain
instructions for the Rights. You will be reimbursed for customary mailing and
handling expenses incurred by you in forwarding any of the enclosed materials to
your clients. The Company will pay all transfer taxes, if any, applicable to the
sale of Units to a Rights holder upon exercise of Rights.
Enclosed are copies of the following documents:
1. The Prospectus;
2. The Instructions;
<PAGE>
3. A form of letter which may be sent to your clients for whose
accounts you hold shares of Common Stock registered in your
name or the name of your nominee, with space provided for
obtaining such clients' instructions for the Rights;
4. A Nominee Holder Oversubscription Certification;
5. A Notice of Guaranteed Delivery; and
6. A return envelope addressed to North American Transfer
Company, the Subscription Agent.
Your prompt action is requested. The Rights will expire at 5:00 p.m.,
Eastern time, on _________________, 1997, unless extended by the Company to a
time not later than 5:00 p.m. Eastern time, on _________________, 1997 (in
either case, the "Expiration Time").
TO EXERCISE RIGHTS, PROPERLY COMPLETED AND EXECUTED SUBSCRIPTION RIGHTS
CERTIFICATES (UNLESS THE GUARANTEED DELIVERY PROCEDURES ARE COMPLIED WITH) AND
PAYMENT IN FULL FOR ALL RIGHTS EXERCISED MUST BE DELIVERED TO THE SUBSCRIPTION
AGENT AS INDICATED IN THE PROSPECTUS PRIOR TO THE EXPIRATION TIME. EXERCISE OF
OVERSUBSCRIPTION PRIVILEGES (AS DEFINED IN THE PROSPECTUS) MUST BE ACCOMPANIED
BY A COMPLETE NOMINEE HOLDER OVERSUBSCRIPTION CERTIFICATION.
Additional copies of the enclosed materials may be obtained from the
Subscription Agent, by calling (516) 379-8501.
Very truly yours,
FIRST MONTAUK FINANCIAL CORP.
By:___________________________
Name: Herbert Kurinksy
Title: President
NOTHING HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY
PERSON AS AN AGENT OF THE COMPANY, THE SUBSCRIPTION AGENT OR ANY OTHER PERSON
MAKING OR DEEMED TO BE MAKING OFFERS OF THE COMMON STOCK, OR AUTHORIZE YOU OR
ANY OTHER PERSON TO MAKE ANY STATEMENTS ON BEHALF OF ANY OF THEM WITH RESPECT TO
THE RIGHTS OFFERING, EXCEPT FOR STATEMENTS EXPRESSLY MADE IN THE PROSPECTUS OR
THE SUBSCRIPTION DOCUMENTS.
<PAGE>
EXHIBIT A TO LETTER TO NOMINEES
FIRST MONTAUK FINANCIAL CORP.
NOMINEE HOLDER OVERSUBSCRIPTION CERTIFICATION
The undersigned, a bank, broker or other nominee holder of Rights
("Rights") to purchase units ("Units"), of First Montauk Financial Corp. (the
"Company") pursuant to the offering (the "Rights Offering") described and
provided for in the Company's Prospectus dated ________________________ (the
"Prospectus"), hereby certifies to the Company and to Northern American Transfer
Company, as Subscription Agent for the Rights Offering, that for each numbered
line filled in below the undersigned has exercised, on behalf of the beneficial
owner thereof (which may be the undersigned), the number of Rights specified on
such line pursuant to the Basic Subscription Privilege (as defined in the
Prospectus) and such beneficial owner wishes to subscribe for the purchase of
additional Units pursuant to the Oversubscription Privilege (as defined in the
Prospectus), in the amount set forth in the second column of such line.
<TABLE>
<CAPTION>
Number of Rights Exercised Number of Units Subscribed Number of Units Subscribed
Pursuant to Basic Subscrip- for Pursuant to Basic Subscrip- for Pursuant to Over Subscrip-
tion Privilege tion Privilege tion Privilege
- --------------------------- ------------------------------- ------------------------------
<S> <C> <C>
1. _____________________________ 1. ______________________________ 1. _______________________
2. _____________________________ 2. ______________________________ 2. _______________________
3. _____________________________ 3. ______________________________ 3. _______________________
4. _____________________________ 4. ______________________________ 4. _______________________
5. _____________________________ 5. ______________________________ 5. _______________________
6. _____________________________ 6. ______________________________ 6. _______________________
7. _____________________________ 7. ______________________________ 7. _______________________
8. _____________________________ 8. ______________________________ 8. _______________________
9. _____________________________ 9. ______________________________ 9. _______________________
10. _____________________________ 10. ______________________________ 10._______________________
</TABLE>
_________________________________________
Name of Nominee Holder
By:______________________________________
Name:
Title:
Dated: __________________________________
Provide the following information, if applicable:
_________________________________________
Depositary Trust Company ("DTC")
Participant Number
_________________________________________
DTC Basic Subscription
Confirmation Number(s)
EXHIBIT 99.5
2,979,060 UNITS
FIRST MONTAUK FINANCIAL CORP.
EACH UNIT CONSISTS OF ONE CLASS A REDEEMABLE COMMON STOCK PURCHASE WARRANT,
ONE CLASS B REDEEMABLE COMMON STOCK PURCHASE WARRANT, AND
ONE CLASS C REDEEMABLE COMMON STOCK PURCHASE WARRANT
OFFERED PURSUANT TO RIGHTS
DISTRIBUTED TO STOCKHOLDERS
To Our Clients:
Enclosed for your consideration are a Prospectus, dated ______________,
1997, (the "Prospectus"), and the Instructions for Use of Subscription Rights
Certificates (the "Instructions") relating to the offering (the "Rights
Offering") of up to 2,979,060 units (the "Units"), of First Montauk Financial
Corp. (the "Company"), at a price of $.45 per Unit (the "Subscription Price")
pursuant to non-transferable subscription rights ("Rights") initially
distributed to holders of record of Common Stock, at the close of business on
_______________, 1997 (the "Record Date"). The Rights are non-transferable.
As described in the accompanying Prospectus, you will receive one Right
for each share of Common Stock carried by us in your account as of the Record
Date. Every three Rights will entitle you to subscribe for and purchase from the
Company one Unit (the "Basic Subscription Privilege") at the Subscription Price,
as described in the Prospectus. You will also have the right (the
"Oversubscription Privilege") to subscribe, at the Subscription Price, for
additional Units available after satisfaction of all subscriptions pursuant to
the Basic Subscription Privilege (the "Excess Units"), subject to proration and
reduction as described in the Prospectus. If the number of Excess Units is not
sufficient to satisfy all subscriptions pursuant to the Oversubscription
Privilege, the Excess Units will be allocated pro rata (subject to the
elimination of fractional Units) among those Rights Holders exercising the
Oversubscription Privilege in proportion to the number of Units a Rights Holder
has subscribed for pursuant to the Basic Subscription Privilege relative to the
aggregate Units Rights Holders exercising the Oversubscription Privilege;
provided, however, that if such pro rate allocation results in any Rights Holder
being allocated a lesser number of Excess Units than such Rights Holder
subscribed for pursuant to the exercise of the Oversubscription Privilege, then
the excess funds paid by the Rights Holder as the Subscription Price for Units
not issued will be returned without interest or deduction.
The materials enclosed are being forwarded to you as the beneficial
owner of shares of Common Stock carried by us in your account but not registered
in your name. Exercises of Rights may only be made by us as the registered
holder of Rights and pursuant to your instructions. Accordingly, we request
instructions as to whether you wish us to elect to subscribe
<PAGE>
for any Units pursuant to the terms and subject to the conditions set forth in
the enclosed Prospectus and Instructions.
Your instructions to us should be forwarded as promptly as possible to
permit us to exercise Rights on your behalf in accordance with the provisions of
the Rights Offering. The Offering will expire at 5:00 p.m. Eastern time on
________________, 1997, unless extended by the Company, to a time not later than
5:00 p.m., Eastern time, __________________, 1997 (in either case, the
"Expiration Time"). Once a Rights Holder has properly exercised the Basic
Subscription Privilege or the Oversubscription Privilege, such exercise may not
be revoked.
If you wish to have us, on your behalf, exercise Rights to purchase any
Units to which you are entitled, please so instruct us by completing, executing
and returning to us the instruction form attached to this letter.
IF WE DO NOT RECEIVE COMPLETE WRITTEN INSTRUCTIONS IN ACCORDANCE WITH
THE PROCEDURES OUTLINED IN THE PROSPECTUS, WE WILL NOT EXERCISE YOUR RIGHTS, AND
YOUR RIGHTS WILL EXPIRE VALUELESS.
ANY QUESTIONS OR REQUESTS FOR ASSISTANCE CONCERNING THE OFFERING SHOULD
BE DIRECTED TO THE SUBSCRIPTION AGENT, NORTH AMERICAN TRANSFER COMPANY, AT
(516) 379-8501.
Very truly yours,
<PAGE>
EXHIBIT A TO LETTER FROM NOMINEES
FIRST MONTAUK FINANCIAL CORP.
INSTRUCTIONS TO NOMINEE HOLDER
The undersigned acknowledge(s) receipt of your letter and the enclosed
materials referred to therein relating to the offering of shares of Common
Stock.
This will instruct you whether to exercise Rights to purchase Units
distributed with respect to the Common Stock held by you for the account of the
undersigned, pursuant to the terms and subject to the conditions set forth in
the Prospectus and the related Instructions.
1. |_| Please DO NOT EXERCISE RIGHTS for Units.
2. |_| Please EXERCISE RIGHTS for Units set forth below:
Number of Shares Owned: __________ / 3 = __________ Units (a).
Basic Subscription Privilege: ____________ X $.45 = $__________ (b).
(no. of Units)
Oversubscription Privilege:____________ X $.45 = $__________ (c).
(no. of Units)
Total Payment Required = $__________ (d).
|_| Payment in the following amount is enclosed = $__________ (e).
|_| Please deduct payment from the following account maintained by
you as follows:
________________________ ____________________
Type of Account Account No.
Amount to be deducted: $__________ (f).
___________________________________________
___________________________________________
___________________________________________
Signature(s)
Please type or print name(s) below
___________________________________________ Date:_________________________
___________________________________________
EXHIBIT 99.6
FIRST MONTAUK FINANCIAL CORP.
DTC PARTICIPANT SUBSCRIPTION EXERCISE FORM
The terms and conditions of the Rights Offering are set forth in the
Prospectus dated _______________, 1997 (the "Prospectus") of First Montauk
Financial Corp. (the "Company") and are available upon request from North
American Transfer Company, the Subscription Agent. Terms used but not defined
herein have the meaning ascribed to them in the Prospectus.
This form is to be used only by a Depository Trust Company ("DTC")
participant to exercise the Oversubscription Privilege in respect of Rights for
which the Basic Subscription Privilege was exercised and delivered through the
facilities of DTC. All other exercises of Oversubscription Privileges must be
effected by delivery of Subscription Rights Certificates.
VOID UNLESS RECEIVED BY THE SUBSCRIPTION AGENT WITH PAYMENT IN FULL BY
5:00 P.M., EASTERN TIME, ON ______________, 1997, UNLESS EXTENDED BY THE COMPANY
TO A TIME NOT LATER THAN 5:00 P.M., EASTERN TIME, ON _______________, 1997 (IN
EITHER CASE, THE "EXPIRATION TIME").
----------
1. The undersigned hereby certifies to the Company and North American
Transfer Company, as the Subscription Agent, that it is a participant in DTC and
that it has either (i) exercised the Basic Subscription Privilege in respect of
Rights and delivered such exercised Rights to the Subscription Agent by means of
transfer to the DTC account of the Subscription Agent designated in the
Prospectus or (ii) delivered to the Subscription Agent a Notice of Guaranteed
Delivery in respect of the exercise of the Basic Subscription Privilege and will
deliver the Rights called for in such Notice of Guaranteed Delivery to the
Subscription Agent by means of transfer to such DTC account of the Subscription
Agent.
2. The undersigned hereby exercises the Oversubscription Privilege to
purchase, to the extent available, ______________ Units. A true and correct
Nominee Holder Oversubscription Certification is attached as Exhibit A hereto.
3. The undersigned understands that payment of the Subscription Price
of $.45 per Unit subscribed for pursuant to the Oversubscription Privilege must
be received by the Subscription Agent before the Expiration Time and represents
that such payment, in the aggregate amount of $______________, either (check
appropriate box):
|_| has been or is being delivered to the Subscription Agent
pursuant to the Notice of
<PAGE>
Guaranteed Delivery referred to above
or
|_| is being delivered to the Subscription Agent herewith
or
|_| has been delivered separately to the Subscription Agent;
and, in the case of funds not delivered pursuant to a Notice of Guaranteed
Delivery, is or was delivered in the manner set forth below (check appropriate
box and complete information relating thereto):
|_| Wire transfer of funds directed to __________ Bank, ABA
No.__________, Account No.__________.
Name of transferor institution________________________________
Date of transfer______________________________________________
Confirmation number (if available)____________________________
|_| Uncertified check payable to North American Transfer Company
(Payment by uncertified check will not be deemed to have been
received by the Subscription Agent until such check has
cleared. Rights holders paying such means are urged to make
payment sufficiently in advance of the Expiration Time to
ensure that such payment clears by such date.)
Name of maker_________________________________________________
Date of check_________________________________________________
Bank on which check is drawn__________________________________
|_| Certified check payable to North American Transfer Company
Name of maker_________________________________________________
Date of check_________________________________________________
Bank on which check is drawn__________________________________
|_| Cashier's check payable to North American Transfer Company
<PAGE>
Name of maker_________________________________________________
Date of check_________________________________________________
|_| Money order payable to North American Transfer Company
Issuer of money order_________________________________________
Date of money order___________________________________________
DATE AND SIGN HERE:
By:___________________________________ _______________________________________
Name: DTC Basic Subscription
Title: Confirmation Number
Dated:________________________________ _______________________________________
Name: DTC Participant Number
_______________________________________
Name of DTC Participant
PARTICIPANTS EXERCISING THE OVERSUBSCRIPTION PRIVILEGE PURSUANT HERETO MUST ALSO
SUBMIT TO THE SUBSCRIPTION AGENT THE NOMINEE HOLDER OVERSUBSCRIPTION
CERTIFICATION ATTACHED HERETO AS EXHIBIT A.
<PAGE>
EXHIBIT A TO DTC PARTICIPATION OVERSUBSCRIPTION EXERCISE FORM
FIRST MONTAUK FINANCIAL CORP.
NOMINEE HOLDER OVERSUBSCRIPTION CERTIFICATION
The undersigned, a bank, broker or other nominee holder of Rights
("Rights") to purchase units ("Units"), of First Montauk Financial Corp. (the
"Company") pursuant to the offering (the "Rights Offering") described in the
Company's Prospectus dated _______________________ (the "Prospectus"), hereby
certifies to the Company and to Northern American Transfer Company, as
Subscription Agent for the Rights Offering, that for each numbered line filled
in below the undersigned has exercised, on behalf of the beneficial owner
thereof (which may be the undersigned), the number of Rights specified on such
line pursuant to the Basic Subscription Privilege (as defined in the Prospectus)
and such beneficial owner wishes to subscribe for the purchase of additional
Units pursuant to the Oversubscription Privilege (as defined in the Prospectus),
in the amount set forth in the second column of such line.
<TABLE>
<CAPTION>
Number of Rights Exercised Number of Units Subscribed Number of Units Subscribed
Pursuant to Basic Subscrip- for Pursuant to Basic Subscrip- for Pursuant to Over Sub-
tion Privilege tion Privilege scription Privilege
- --------------------------- ------------------------------- -------------------------
<S> <C> <C>
1. _____________________________ 1. ______________________________ 1_______________________
2. _____________________________ 2. ______________________________ 2 ______________________
3. _____________________________ 3. ______________________________ 3.______________________
4. _____________________________ 4. ______________________________ 4.______________________
5. _____________________________ 5. ______________________________ 5.______________________
6. _____________________________ 6. ______________________________ 6.______________________
7. _____________________________ 7. ______________________________ 7.______________________
8. _____________________________ 8. ______________________________ 8.______________________
9. _____________________________ 9. ______________________________ 9.______________________
10. _____________________________ 10. ______________________________ 10._____________________
</TABLE>
_________________________________________
Name of Nominee Holder
By:______________________________________
Name:
Title:
Dated: __________________________________
Provide the following information, if applicable:
_________________________________________
Depositary Trust Company ("DTC")
Participant Number
_________________________________________
DTC Basic Subscription
Confirmation Number(s)
