AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 24, 1997
REGISTRATION NO. 333-30135
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
AMENDMENT NO. 1
TO
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
(732) 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
(732) 842-4700
------------------------------------------------------------
(Name and address, including zip code, and telephone number,
including area code, of agent for service)
----------
With copies to:
VICTOR J. DiGIOIA, ESQ.
GOLDSTEIN & DiGIOIA, LLP
369 LEXINGTON AVENUE
NEW YORK, NEW YORK 10017
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. [ ]
<PAGE>
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------
Proposed Proposed
Maximum Maximum
Title of Each Class Amount Offering Aggregate Amount of
of Securities Being Price per Offering Registration
Being Registered Registered Unit(1) Price(1) Fee(1)
- --------------------------------------------------------------------------------
Units (2) ................. 3,200,000 $ .45 $ 1,440,000 $ 436
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).................. 3,200,000 $3.00 $ 9,600,000 $ 2,909
- --------------------------------------------------------------------------------
Common Stock, no par
value(4).................. 3,200,000 $5.00 $16,000,000 $ 4,848
- --------------------------------------------------------------------------------
Common Stock, no par
value(5).................. 3,200,000 $7.00 $22,400,000 $ 6,787
- --------------------------------------------------------------------------------
Total ..................... $12,800,000 $49,440,000 $14,980
================================================================================
Total amount previously paid $13,947.
Total amount currently due $1,033.
(1) Estimated solely for the purpose of determining the registration fee.
(2) An aggregate of up to 3,200,000 Class A Redeemable Common Stock Purchase
Warrants, 3,200,000 Class B Redeemable Common Stock Purchase Warrants and
3,200,000 Class C Redeemable Common Stock Purchase Warrants ("Warrants")
will be offered to the public in up to 3,200,000 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. Includes additional Units to accommodate additional
shares of Common Stock which may be issued prior to the record date year
the exercise of Outstanding Warrants and Options.
(3) Shares of Common Stock issuable upon exercise of Class A Redeemable Common
Stock Purchase Warrants. Pursuant to Rule 416 there are also 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.
================================================================================
ii
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. OFFERS TO BUY THESE SECURITIES MAY NOT BE
ACCEPTED WITHOUT THE DELIVERY OF A FINAL PROSPECTUS. THIS PROSPECTUS SHALL NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL
THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER,
SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION
UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED NOVEMBER 24, 1997
P R O S P E C T U S
- -------------------
3,072,779 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 3,072,779 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 Shareholder 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. Each Class A Redeemable Common Stock Purchase
Warrant (the "Class A Warrants"), entitles 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. Each Class B
Redeemable Common Stock Purchase Warrant (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. Each 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 Class A, B
and C Warrants are collectively referred to as the "Warrants." The Warrants will
be separately transferable immediately. No separate securities for the Units
will be issued.
The Company may redeem all of the Warrants or a portion thereof on a
pro-rata basis, 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. See "Potential Adverse Effects of Redemption of Warrants."
Upon completion of the Rights Offering, and after the exercise of any
Warrants, Shareholders who do not fully exercise their Rights will own a smaller
proportional interest in the Company than would otherwise be the case.
<PAGE>
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 November __,
1997 the bid and asked prices of the Company's Common Stock as reported by a
market maker were $_____ and $____, respectively. 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 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
Subscription Price Company (1)(2)(3)
- --------------------------------------------------------------------------------
Per Unit......................... $0.45 $0.45
- --------------------------------------------------------------------------------
Total (1)........................ $1,382,751 $1,382,751
================================================================================
1. The total Subscription Price and the total Proceeds to the Company assume
the purchase of 3,072,779 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 November __, 1997
2
<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 nine months ended
September 30, 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 (732) 842-4700.
3
<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 1995, FMSC became a registered advisor under the
Investment Advisors Act of 1940 and began offering investment advisory services
on a limited basis.
FMSC is currently licensed to conduct its broker-dealer business in 49
states and the District of Columbia. FMSC maintains approximately 125 branch
and/or satellite offices, all of which are maintained by affiliates. FMSC has
approximately 400 registered representatives, and services approximately 30,000
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 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
Company's affiliate establishes his own office and is solely responsible for the
payment of all expenses associated with the operation of the
4
<PAGE>
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 (the "SEC") 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. In August 1997, as a result of
the National Securities Markets Improvement Act ("NSMIA"), FMSC voluntarily
withdrew this registration since it was no longer required. 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 received
minimal revenues from its advisory services, management's goal is to derive
revenue by providing investment advisory services to FMSC's existing client base
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 (732) 842-4700. MISI maintains its
principal offices at One Mack Centre Drive, Paramus, New Jersey.
5
<PAGE>
RECENT DEVELOPMENTS
RECENT LOANS
Montauk Advisors, Inc. ("MAI") has made various loans totaling $374,293.09
to Global Financial Corp., the financing company which packages and sells
leasing contracts through MAI. These loans were made for the purpose of
assisting Global with its short-term cash flow requirements. The loans carry 8%
per annum interest and are due to be paid in full on April 1, 1998. Global may
seek additional loans from MAI in the short-term which will be evaluated on a
case by case basis.
FEDERAL ADMINISTRATIVE ORDER
In June 1997, without admitting or denying the findings of the SEC, FMSC
consented to the issuance of an order making findings and imposing remedial
sanctions and a Cease-and-Desist Order in the Matter of First Montauk Securities
Corp., Admin. Proc. File No. 3-9342, Release No. 34-38775 (June 25, 1997)
("Order").
In the Order, FMSC was ordered to cease and desist from present or future
violations of Sections (15)(c) and 17(a) of the Securities Exchange Act of 1934
("Exchange Act") and Rules 15c3-1, 17a-3, 17a-5 and 17a-11 thereunder. FMSC was
also censured and required to pay disgorgement in the amount of $175,458,
prejudgment interest in the amount of $51,584 and a civil money penalty in the
amount of $50,000. In addition, FMSC was required to retain an independent
consultant to conduct a review of, and to report and make recommendations as to,
FMSC's supervisory and compliance policies and procedures, particularly as they
relate to the firm's affiliate program and the supervision of the firm's branch
offices by the main office.
There can be no assurance whether the Order will have a material adverse
effect on the business of the Company, or result in the institution of other
proceedings by State Securities Administrators.
In February 1997, FMSC entered into a Consent Decree with the State of
Florida, without admitting or denying the findings, relating to the alledged
failure to supervise a former affiliate office in Houston. FMSC agreed to pay a
fine of $15,000 and engage an independent consultant, as well as other
provisions temporarily limiting brokerage activities in the State of Florida.
There can be no assurance this decree will not have a material adverse effect
on the business of the Company.
The Rights Offering
Rights............................ Each record holder of Common Stock as of the
close of business on the Record Date will
receive one nontransferable 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 9,214,354 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."
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
6
<PAGE>
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................. 9,218,338
Shares of Common Stock
Outstanding After Rights
Offering........................ 9,218,338
Shares of Common Stock to be
Issued Assuming the Exercise
of all of the Rights ........... 9,218,338
Shares of Common Stock to be
Outstanding Assuming the
Exercise of All of the
Warrants......................... 18,436,676
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
7
<PAGE>
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."
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 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.
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 be delivered
to subscribers
8
<PAGE>
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.
9
<PAGE>
SUMMARY FINANCIAL DATA
================================================================================
Nine Months Ended
Years Ended December 31, September 30,
------------------------- ----------------------------
1996 1995 1997 1996
- --------------------------------------------------------------------------------
Statement of
Operations Data:
- ----------------
Revenues ............... $35,089,688 $28,342,203 $26,623,733 $27,181,779
- --------------------------------------------------------------------------------
Net income ............. $ 32,789 $ 768,088 $ 1,082,662 $ 705,671
- --------------------------------------------------------------------------------
Per Share:
- ----------
Net income ............. $ .01 $ .09 $ 0.11 $ 0.08
- --------------------------------------------------------------------------------
Number of shares ....... 8,623,538 8,422,365 10,241,383 8,553,032
- --------------------------------------------------------------------------------
Balance Sheet Data:
- -------------------
- --------------------------------------------------------------------------------
Total assets ........... $ 8,742,039 $10,486,967 $10,398,683 $ 9,061,786
- --------------------------------------------------------------------------------
Total liabilities ...... $ 4,625,260 $ 6,886,021 $ 3,776,207 $ 4,538,454
- --------------------------------------------------------------------------------
Common stock issued
with guaranteed
resale price ........... $ 421,500 $ 346,500 $ 335,000
- --------------------------------------------------------------------------------
Stockholders' equity ... $ 3,695,279 $ 3,600,946 $ 6,275,976 $ 4,188,332
================================================================================
10
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RISK FACTORS
The Units 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
Shareholders 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
volatility of the securities markets, as well as other risks which may be
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 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".
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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 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
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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 AND RELATED LOSSES
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. During
the year ended December 31, 1996, the Company incurred $2,731,997 in costs
and expenses related to customer claims. See "Legal Proceedings" in Form 10-KSB
and 10-Q.
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 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 $500,000 and $250,000, 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.
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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 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. As a result of this Offering the Company will have 9,214,354
Warrants to purchase 9,214,354 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 9,218,338 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
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months. A person who is a "non-affiliate" of the Company and who has held
restricted securities for over two 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 144 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 intends to apply for inclusion of its Common
Stock in the Nasdaq SmallCap Market, it does not currently satisfy the minimum
listing requirements. Accordingly, there an be no assurance that the Company
will be successful in obtaining listing on Nasdaq, or if obtained, that the
Company will be able to maintain its Nasdaq listing . Further, there has been no
trading market in the Company's Warrants.
The exercise prices of the Rights and the Warrants have been arbitrarily
determined by the Company, and do not relate to price quotations for the
Company's Common Stock or other established criteria of value.
14. POTENTIAL ADVERSE EFFECT OF REDEMPTION OF WARRANTS
All of the Warrants or a portion thereof on a pro-rata basis may be
redeemed by the Company at any time at a redemption price of $.05 per Warrant
provided that 30 days prior written notice is given to the holders of the
Warrants, and if the closing bid price of the Company's Common Stock reported on
NASDAQ for the ten consecutive trading days ending within ten days of the date
of notice of redemption is not less then: (a) for Class A Warrants, $5.00 per
share; (b) for Class B Warrants $7.00 per share; and (c) for Class C Warrants
$12.00 per share and (d) 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 AND STATE QUALIFICATION 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
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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 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
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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 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 Shareholder 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. RECENT FEDERAL AND STATE ADMINISTRATIVE PROCEEDINGS
In February 1997, FMSC entered into a consent decree with the State of
Florida relating to an alleged failure to supervise a former affiliate office.
Similarly, in June 1997, FMSC entered into a consent decree with the Securities
and Exchange Commission relating to similar allegations. The consent decree
required the Company to pay certain fines and adopt remedial actions to prevent
further violations in the future. These proceedings may have a material adverse
effect on the Company's business, and there can be no assurance that the
proceedings may not result in additional proceedings being commenced by state
securities administrators. (See "Recent Developments.")
19. 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.
20. POTENTIAL ANTI-TAKEOVER EFFECT OF CERTAIN PROVISIONS IN CERTIFICATE OF
INCORPORATION AND BY-LAWS
The Company's Certificate of Incorporation and By-laws contain provisions
which may discourage certain transactions which involve an actual or threatened
change in control of the Company. These provisions include a "classified" or
"staggered" board of directors. As permitted by the New Jersey Corporation Law,
the Company's Certificate of Incorporation provides that a director or officer
of the Company will not be personally liable to the Company or its stockholders
for monetary damages for breach of the fiduciary duty of care as a director,
except under certain circumstances including a breach of the director's duty of
loyalty to the Company or its stockholders or any transaction from which the
director derived an improper personal benefit.
The Provisions referred to above may make the Company a less attractive
acquisition candidate. They may also discourage or impede offers to acquire the
Company not approved by the Board of Directors, including offers for some or all
of the shares of any class or series of the Company's capital stock at
substantial premiums above the then current market value of such shares. See
"Description of the Securities."
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 September 30, 1997. 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.......................... $2.78125 $2.4375
Third Quarter .......................... $2.65625 $2.59375
Fourth Quarter
(Through December __, 1997)...........
1996
First Quarter .......................... $1.0625 $ .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 September 30, 1997 was 9,218,338.
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THE RIGHTS OFFERING
THE RIGHTS
The Company is issuing to each record holder of Common Stock 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 close of business on the Record Date.
Rights will be evidenced by Rights Certificates. An aggregate of up to
9,218,338 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.
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Banks, brokers and other nominee holders who exercise the Basic
Subscription Privilege and the Oversubscription Privilege on 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".
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
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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 third 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 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 practicable.
The Estimated Subscription Price will be deemed to have been received by
the
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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 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
22
<PAGE>
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 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, or that, following the issuance of the Rights
and of the Warrants upon exercise of Rights, 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
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<PAGE>
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.
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.
24
<PAGE>
ISSUANCE OF THE RIGHTS
The Company's 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 basis in the
Rights received pursuant to the Rights Offering will be zero. If (a) the fair
market value of the Rights on the date of issuance is $.45 or more or (b) the
Holder elects, in a statement attached to his or her federal income tax return
for the taxable year in which he or she receives the Rights, to allocate part of
his or her basis in the Units to such Rights then, upon exercise of the Rights,
the Holder's basis in his or her Unit as of the date of issuance will be
allocated between the Units and the Rights in proportion to their relative fair
market values on the date of issuance.
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 9,218,338 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
25
<PAGE>
for each share held at all shareholders' meetings for all purposes, including
the election of directors. The Board of Directors is divided into three classes
with the members of one class (one-third of the Board) elected each year at the
Company's annual meeting of stockholders to serve for a period of three years
and until their respective successors have been duly elected and qualified. This
provision may make the Company a less attractive take-over target.
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.
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. Each Class A Redeemable Common Stock Purchase
Warrant (the "Class A Warrants"), entitles 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. Each Class B
Warrant entitles 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. The Class C Warrant entitles the holder
26
<PAGE>
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.
The Company may redeem all of the Warrants or a portion thereof on a
pro-rata basis, at any time at $.05 per Warrant, upon not less than thirty (30)
days nor more than (60) sixty 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"), between 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,
27
<PAGE>
in all likelihood, be able to obtain any needed capital by a new offering 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
Shareholder 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 Rights will be passed upon for the
Company by Goldstein & DiGioia, LLP, 369 Lexington Avenue, New York, New York
10017.
EXPERTS
The financial statements of the Company as of and for the years ended
December 31, 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, 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.
28
<PAGE>
No dealer, salesman, or any other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus, and if given or made, such information or representations must not
be relied upon as having been authorized by the 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 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 been no change in the
affairs of the Company since the date hereof.
3,072,779 Units
FIRST MONTAUK FINANCIAL CORP.
Units
------------------------------
PROSPECTUS
-------------------------------
_______________, 1997
<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................. $14,980
Printing and Engraving Expenses..................................... $15,000
Accounting Fees and Expenses........................................ $ 5,000
Legal Fees and Expenses.............................................
Blue Sky Fees and Expense..........................................
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
II-1
<PAGE>
Company's Certificate of Incorporation 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 17 C.F.R. Sections 201.24 and
240.12b-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
1989 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 securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
II-3
<PAGE>
(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.
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<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 24th day of
November, 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 , Chief November 24, 1997
Herbert Kurinsky Executive Officer
and Director
/s/ WILLIAM J. KURINSKY
- ------------------------ Vice President, Chief November 24, 1997
William J. Kurinsky Operating and Chief
Financial Officer,
Secretary and Director
*
- ---------------------- Director November 24, 1997
Norma Doxey
*
- ---------------------- Director November 24, 1997
Ward R. Jones, Jr.
*
- ---------------------- Director November 24, 1997
David I. Portman
By: /s/ HERBERT KURINSKY
-----------------------
Herbert Kurinsky
/s/ WILLIAM J. KURINSKY
-----------------------
William J. Kurinsky
II-5
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
- ---------- -----------
3.l* 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.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
<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.
- ----------
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 17 C.F.R. Sections 201.24 and
240.12b-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 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 ___________ / 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)
/ 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
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AMERICAN BANKNOTE COMPANY
680 BLAIR MILL ROAD
HORSHAM, PA 19044
215-557-3480
- --------------------------------------------------------------------------------
SALESPERSON G. BEEHLER / J. NAPOLITANO 212-557-9100
- --------------------------------------------------------------------------------
/home/larry/home12/FIRST50920
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- --------------------------------------------------------------------------------
PRODUCTION COORDINATOR PAT STATES 215-830-2198
PROOF OF JUNE 16, 1997
FIRST MONTAUK FINANCIAL CORP.
H50920face1
- --------------------------------------------------------------------------------
Opr. lr/koshy Rev. 1
- --------------------------------------------------------------------------------
/net/bank/note/home
- --------------------------------------------------------------------------------
Number
FMW
THIS WARRANT IS VOID AFTER 5:00 P.M. NEW YORK CITY TIME ON
WARRANTS
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SEE REVERSE FOR
CERTAIN DEFINITIONS
CUSIP 321006 11 6
FIRST MONTAUK FINANCIAL CORP.
CLASS A REDEEMABLE COMMON STOCK PURCHASE WARRANT
INCORPORATED UNDER THE LAWS OF THE STATE OF NEW JERSEY
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| This certifies that, for value received, |
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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: FIRST MONTAUK FINANCIAL CORP.
/s/
------------------------------
Secretary
/s/
------------------------------
President
Countersigned:
NORTH AMERICAN TRANSFER CO.
(Freeport, N.Y.)
Warrant Agent
By:
Authorized Officer
FIRST MONTAUK FINANCIAL CORP.
INCORPORATED
1963
NEW JERSEY
<PAGE>
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 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 exericse 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 shall 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, duly 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 is 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
- --------------------------------------------------
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- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(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 remaing of such
Warrants shall be registered in the name of and delivered to:
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER
- --------------------------------------------------
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- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(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
------------------------------------------------------------
AMERICAN BANKNOTE COMPANY
880 BLAIR MILL ROAD
HORSHAM, PA 19044
215-667-3480
------------------------------------------------------------
SALES PERSON G. BEEHLER/J. NAPOLITANO 212-557-8100
------------------------------------------------------------
/home/larry/home12/FIRST50920
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------------------------------------------------------------
PRODUCTION COORDINATOR PAT STATES 215-830-2198
PROOF OF JUNE 16, 1997
FIRST MANTAUK FINANCIAL CORP.
H50920bk (Lot 1, 2 & 3)
------------------------------------------------------------
Opr. koshy Rev. 1
------------------------------------------------------------
/net/banknote/home
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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
215-557-3480
- --------------------------------------------------------------------------------
SALESPERSON G. BEEHLER / J. NAPOLITANO 212-557-9100
- --------------------------------------------------------------------------------
/home/larry/home12/FIRST50920
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PRODUCTION COORDINATOR PAT STATES 215-830-2198
PROOF OF JUNE 16, 1997
FIRST MONTAUK FINANCIAL CORP.
H50920face2
- --------------------------------------------------------------------------------
Opr. lr/koshy Rev. 1
- --------------------------------------------------------------------------------
/net/bank/note/home
- --------------------------------------------------------------------------------
Number
FMW
THIS WARRANT IS VOID AFTER 5:00 P.M. NEW YORK CITY TIME ON
WARRANTS
---------------------
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SEE REVERSE FOR
CERTAIN DEFINITIONS
CUSIP 321006 11 6
FIRST MONTAUK FINANCIAL CORP.
CLASS B REDEEMABLE COMMON STOCK PURCHASE WARRANT
INCORPORATED UNDER THE LAWS OF THE STATE OF NEW JERSEY
- --------------------------------------------------------------------------------
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| This certifies that, for value received, |
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- --------------------------------------------------------------------------------
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: FIRST MONTAUK FINANCIAL CORP.
/s/
------------------------------
Secretary
/s/
------------------------------
President
Countersigned:
NORTH AMERICAN TRANSFER CO.
(Freeport, N.Y.)
Warrant Agent
By:
Authorized Officer
FIRST MONTAUK FINANCIAL CORP.
INCORPORATED
1963
NEW JERSEY
<PAGE>
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 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 exericse 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 shall 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, duly 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 is 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
- --------------------------------------------------
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- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(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 remaing of such
Warrants shall be registered in the name of and delivered to:
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER
- --------------------------------------------------
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- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(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
------------------------------------------------------------
AMERICAN BANKNOTE COMPANY
880 BLAIR MILL ROAD
HORSHAM, PA 19044
215-667-3480
------------------------------------------------------------
SALES PERSON G. BEEHLER/J. NAPOLITANO 212-557-8100
------------------------------------------------------------
/home/larry/home12/FIRST50920
------------------------------------------------------------
------------------------------------------------------------
PRODUCTION COORDINATOR PAT STATES 215-830-2198
PROOF OF JUNE 16, 1997
FIRST MANTAUK FINANCIAL CORP.
H50920bk (Lot 1, 2 & 3)
------------------------------------------------------------
Opr. koshy Rev. 1
------------------------------------------------------------
/net/banknote/home
------------------------------------------------------------
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
215-557-3480
- --------------------------------------------------------------------------------
SALESPERSON G. BEEHLER / J. NAPOLITANO 212-557-9100
- --------------------------------------------------------------------------------
/home/larry/home12/FIRST50920
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PRODUCTION COORDINATOR PAT STATES 215-830-2198
PROOF OF JUNE 16, 1997
FIRST MONTAUK FINANCIAL CORP.
H50920face3
- --------------------------------------------------------------------------------
Opr. lr/koshy Rev. 1
- --------------------------------------------------------------------------------
/net/bank/note/home
- --------------------------------------------------------------------------------
Number
FMW
THIS WARRANT IS VOID AFTER 5:00 P.M. NEW YORK CITY TIME ON
WARRANTS
---------------------
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---------------------
SEE REVERSE FOR
CERTAIN DEFINITIONS
CUSIP 321006 11 6
FIRST MONTAUK FINANCIAL CORP.
CLASS C REDEEMABLE COMMON STOCK PURCHASE WARRANT
INCORPORATED UNDER THE LAWS OF THE STATE OF NEW JERSEY
- --------------------------------------------------------------------------------
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| This certifies that, for value received, |
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- --------------------------------------------------------------------------------
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: FIRST MONTAUK FINANCIAL CORP.
/s/
------------------------------
Secretary
/s/
------------------------------
President
Countersigned:
NORTH AMERICAN TRANSFER CO.
(Freeport, N.Y.)
Warrant Agent
By:
Authorized Officer
FIRST MONTAUK FINANCIAL CORP.
INCORPORATED
1963
NEW JERSEY
<PAGE>
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 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 exericse 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 shall 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, duly 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 is 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
- --------------------------------------------------
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(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 remaing of such
Warrants shall be registered in the name of and delivered to:
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER
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(Please print name and address)
Dated:_____________________________________________________________________ 19__
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Signature
(Signature must conform in all respects to name of holder as specified on the
face of this Warrant Certificate)
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Signature Guaranteed
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AMERICAN BANKNOTE COMPANY
880 BLAIR MILL ROAD
HORSHAM, PA 19044
215-667-3480
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SALES PERSON G. BEEHLER/J. NAPOLITANO 212-557-8100
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/home/larry/home12/FIRST50920
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PRODUCTION COORDINATOR PAT STATES 215-830-2198
PROOF OF JUNE 16, 1997
FIRST MANTAUK FINANCIAL CORP.
H50920bk (Lot 1, 2 & 3)
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Opr. koshy Rev. 1
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/net/banknote/home
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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
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(Please print name and address of transferee)
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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_____
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Signature
(Signature must conform in all respects to name of holder as specified on the
face of this Warrant Certificate)
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Signature Guaranteed
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
3,072,779 (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 of 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 Stock,
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(the "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 replaced 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
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and non-assessable shares of Common Stock, as that term is defined in Section
1.05 of this Agreement, stated therein, free of 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
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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 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
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Warrant Certificate or shares of Common Stock in a name other than that of the
Warrant Holder until the Company has notified the 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, or a portion thereof on a pro-rata basis, the
Warrants and 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,
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the closing bid price for the Common Stock as reported by the Nasdaq National
Market or Nasdaq Small Cap Market of the Nasdaq 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
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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 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
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date for such issuance plus the number of shares of Common Stock which the
aggregate offering price of the total number of shares of 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
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determined in good faith by the board of directors of the Company, whose
determination shall be conclusive absent manifest error) of 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
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such adjustment.
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
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obligations of the Company under this Agreement.
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
11
<PAGE>
or destroyed.
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. 333-30135) 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
12
<PAGE>
and regulations of the Commission thereunder; or (ii) a Registration Statement
under the Act with respect to said shares of 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.
13
<PAGE>
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 a 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 Freeport, 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
LETTERHEAD OF
GOLDSTEIN & DIGIOIA, LLP
369 Lexington Avenue
New York, New York 10017
Telephone 212.599.3322
Telecopier 212.557.0295
November 24, 1997
First Montauk Financial Corp.
Parkway 109 Office Center
328 Newman Springs Road
Red Bank, New Jersey 07701
Re: Rights Offering
Registration Statement on Form S-3
SEC File No. 333-30135
----------------------
Ladies/Gentlemen:
We have reviewed Amendment No. 1 to the Registration Statement on Form
S-3, filed on November 24, 1997 (File No. 333- 30135)(the "Registration
Statement"), under the Securities Act of l933, as amended (the "Act") by First
Montauk Financial Corp, a New Jersey corporation (the "Company"). The
Registration Statement has been filed for the purpose of registering the
securities described therein for offer and sale under the Act. All capitalized
terms not defined herein have the meanings ascribed to them in the Registration
Statement.
This opinion has been rendered with respect to: (i)3,072,779 units
(the "Units"), each of which consists of one Class A, one Class B, and one Class
C Redeemable Common Stock Purchase Warrant (the "Warrants") and (ii) 9,218,338
shares (the "Shares") of Common Stock, no par value per share, issuable upon
exercise of the Warrants which in turn are issuable upon purchase of the Units.
In connection with the opinions rendered herein, we have examined
the Registration Statement, the Certificate of Incorporation as amended of the
Company, its By-Laws, and such other documents, corporate records and questions
of law as we have deemed necessary solely for the purpose of enabling us to
render the opinions contained herein. On the basis of such examination, we are
of the opinion that:
l. The Company is a corporation duly organized and validly existing
and in good standing under the laws of the State of New Jersey, with corporate
power to conduct the business which it conducts as described in the Registration
Statement.
2. The Company has an authorized capitalization of
<PAGE>
30,000,000 shares of Common Stock, no par value per share and 5,000,000 shares
of Preferred Stock, $.l0 par value per share.
3. The Units, the Warrants, upon exercise of the Rights and the
Shares, upon exercise of the Warrants have been duly authorized and when issued
sold and paid for, as described in the Registration Statement, will be validly
issued, fully paid and non-assessable.
We hereby consent to the use of this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the caption "Legal
Matters" in the Prospectus forming a part of the Registration Statement.
Very truly yours,
--------------------------
GOLDSTEIN & DiGIOIA 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
(the "Warrants"). 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,
if any of the Warrants are exercised.
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
<PAGE>
approvals, including those for federal and state securities laws.
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 516-379-8501, 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"). 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 3,072,779 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").
The number of Rights to which you are entitled pursuant to the Basic
Subscription
<PAGE>
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 the extent available, that number of
whole Excess Shares equal to the quotient obtained by
<PAGE>
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 three 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 three 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:
General Information:
(516) 379-8501
<PAGE>
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 FINANCIAL 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 three 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 must be clearly
indicated above.)
Subscription Rights Certificate
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 ADDRESSES 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 your 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.]
3,072,779 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 3,072,779 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.
Number of Rights Number of Units Number of Units
Exercised Subscribed for Pursuant Subscribed for Pursuant
Pursuant to Basic to Basic Subscription to Over Subcription
Privilege Privilege Privilege
- ----------------- ---------------------- -----------------------
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. ______________________
- ---------------------------------------
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
3,072,779 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 3,072,779 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 rata 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 enclose = $ (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 a 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.
Number of Rights Number of Units Number of Units
Exercised Subscribed for Pursuant Subscribed for Pursuant
Pursuant to Basic to Basic Subscription to Over Subcription
Privilege Privilege Privilege
- ----------------- ---------------------- -----------------------
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. ______________________
- ---------------------------------------
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 99.7
SUBSCRIPTION AGENT AGREEMENT
This SUBSCRIPTION AGENT AGREEMENT (the "Agreement") is made and entered
into as of ______ , 1997, by and between FIRST MONTAUK FINANCIAL CORP., a New
Jersey corporation (the "Company"), and NORTH AMERICAN TRANSFER COMPANY, a New
York corporation (the "Subscription Agent"), with reference to the following:
A. The Company has filed with the Securities and Exchange Commission (the
"Commission"), under the Securities Act of 1933, as amended, and the rules and
regulations of the commission thereunder (collectively, the "1933 Act"), a
Registration Statement on Form S-3, No. 333-30135 (in the form in which it first
becomes effective under the 1933 Act, and as it may thereafter be amended, the
"Registration Statement"), relating to the proposed distribution and offering
(the "Rights Offering") by the Company of non-transferable subscription rights
(the Rights") to holders of record ("Record Date Holders") of shares of common
stock, no par value, of the Company (the "Common Stock") as of the close of
business on ____________, 1997 (the "Record Date"), at a rate of one right for
each share of Common Stock held on the Record Date.
B. Holders of Rights ("Rights Holders") will be entitled to subscribe for
one unit (a "Unit") for every three Rights (the "Basic Subscription Privilege")
at a per Unit price of $0.45 (the "Subscription Price"),which price is set forth
in the prospectus which forms a part of the Registration Statement (in the form
in which the Registration Statement first becomes effective, and as thereafter
amended or supplemented, the "Prospectus") by post-effective amendment to the
Registration Statement. 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.
C. Subject to allocation and possible reduction as set forth herein,
Rights Holders will also be entitled (the "Oversubscription Privilege") to
subscribe at the Subscription Price to purchase additional Units, if any,
remaining after satisfaction of all subscriptions pursuant to the Basic
Subscription Privilege (the "Excess Shares").
D. The Company wishes the Subscription Agent to act on its behalf in
connection with the Offering as set forth herein, and the Subscription Agent is
willing so to act.
<PAGE>
NOW THEREFORE, the parties hereby agree as follows:
SECTION 1. APPOINTMENT OF SUBSCRIPTION AGENT. The Company hereby appoints
the Subscription Agent to act as agent in accordance with the instructions set
forth in this Agreement, and the Subscription Agent hereby accepts such
appointment and agrees to take such actions as may be necessary to effectuate
the terms of this Agreement.
SECTION 2. DISTRIBUTION OF RIGHTS. The Company has authorized the
distribution of the Rights and, following the effectiveness of the Registration
Statement and the Record Date, will issue such Rights to Record Date Holders as
contemplated by the Registration Statement and the Prospectus. The Company will
promptly notify the Subscription Agent upon the effectiveness of the
Registration Statement. The Subscription Agent in its capacity as transfer agent
and registrar for the Common Stock (the "Transfer Agent"), will provide such
assistance as the Company may require in order to effect the distribution of the
Rights to Record Date Holders, including assistance in determining the number of
rights to be distributed to each such Record Date Holder. The Subscription Agent
will distribute the Prospectus, the subscription rights Certificates evidencing
the Rights (the "Subscription rights Certificates"), the Instructions As to Use
of Subscription rights Certificates (the "Instructions") and all other ancillary
documents relating to the Offering to Record Date Holders. The subscription
rights Certificates and the Instructions will be substantially in the forms
attached hereto as Exhibits A and B, respectively.
SECTION 3. OVERSUBSCRIPTION PRIVILEGE. If there are insufficient Excess
Shares to satisfy all exercised Oversubscription Privileges, Excess Shares will
be allocated among Rights Holders. Excess Shares will be allocated pro rata
among those Rights Holders exercising the Oversubscription Privilege in
proportion to the number of Units subscribed for pursuant to each such Rights
Holders exercising the Oversubscription Privilege. To the extent that such pro
rata allocation results in any Rights Holder being allocated a lesser number of
Excess Shares than such Rights Holder subscribed for pursuant to 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.
SECTION 4. SIGNATURE AND REGISTRATION.
(a) The Subscription Rights Certificates will be executed on behalf
of the Company by its President, Chairman of the Board or Chief Executive
Officer and by its Secretary or an Assistant Secretary by facsimile signature.
Any Subscription Rights Certificate may be signed on behalf of the Company by
any person who, at the actual date of execution of such facsimile signature, is
a proper officer of the Company to sign such Subscription Rights Certificate,
even if at the date of the execution of this Agreement or the date of actual
issuance of such certificate such person is not such an officer.
(b) The Subscription Agent will keep or cause to be kept, at its
principal offices in the State of New York, books for registration of the Rights
issued hereunder. Such books will show the names and addresses of the respective
Rights Holders and the number of
2
<PAGE>
Rights evidenced by each outstanding Subscription Rights Certificate.
SECTION 5. DIVISION, COMBINATION AND EXCHANGE OF SUBSCRIPTION RIGHTS
CERTIFICATES; MUTILATED, DESTROYED, LOST OR STOLEN
SUBSCRIPTION RIGHTS CERTIFICATES.
(a) Subject to the provisions of Section 9 hereof, any Subscription
Rights Certificate, or any two or more Subscription Rights Certificates may be
divided, combined or exchanged for any number of Subscription Rights
Certificates or for a single Subscription Rights Certificate of different
denominations; provided however, that the aggregate number of Rights evidenced
by the Subscription Rights Certificates so issued does not exceed the aggregate
number of Rights evidenced by the Subscription Rights Certificate or
Certificates surrendered in exchange therefor. No Subscription Rights
Certificates evidencing fractional Rights will be issued upon division,
combination or exchange of other Subscription Rights Certificates, and any
instructions to divide, combine or exchange Subscription Rights Certificates
that would result in the issuance of Subscription Rights Certificates evidencing
fractional Rights are to be rejected.
(b) Any Rights Holder desiring to divide, combine or exchange any
Subscription Rights Certificate or Certificates must make such requests in
writing to the Subscription Agent and surrender the Subscription Rights
Certificate or Certificates to be divided, combined or exchanged to the
Subscription Agent. Thereupon the Subscription Agent will deliver to the person
entitled thereto a Subscription Rights Certificate or Certificates, as the case
may be, as so requested. In all cases of requests by an attorney-in-fact, the
original power of attorney duly approved, or a copy thereof, duly certified,
must be deposited and remain with the Subscription Agent. In case of requests by
executors, administrators, guardians or other legal representatives, duly
authenticated evidence of their authority satisfactory to the Subscription Agent
must be produced and may be required to be deposited and to remain with the
Subscription Agent in its discretion. The Company may require payment of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any division, combination or exchange of Subscription Rights
Certificates.
(c) Upon receipt by the Company and the Subscription Agent of
evidence reasonably satisfactory to them of the loss, theft, destruction or
mutilation of a Subscription Rights Certificate, and in case of loss, theft or
destruction, of indemnity and/or security satisfactory to them, in their sole
discretion, and reimbursement to the Company and the Subscription Agent of all
reasonable expenses incidental thereto, and upon surrender and cancellation of
the Subscription Rights Certificate, if mutilated, the Subscription Agent will
make and deliver a new Subscription Rights Certificate of like tenor to the
registered Rights Holder in lieu of the Subscription Rights Certificate so lost,
stolen, destroyed or mutilated. If required by the Company or the Subscription
Agent, an indemnity bond must be sufficient in the judgment of each party to
protect the Company, the Subscription Agent of any agent thereof from any loss
which any of them may suffer if a lost, stolen, destroyed or mutilated
Subscription Rights Certificate is replaced.
3
<PAGE>
SECTION 6. SUBSEQUENT ISSUE OF SUBSCRIPTION RIGHTS CERTIFICATES.
Subsequent to the original issuance of the Subscription Rights Certificates, no
Subscription Rights Certificates will be issued except as provided herein.
SECTION 7. EXERCISE OF RIGHTS; EXERCISE PRICE; EXPIRATION DATE.
(a) A Rights Holder may exercise Rights held by such Rights Holder
by properly completing, signing and delivering the Subscription Rights
Certificate representing such Rights, with any required signature guarantees,
together with payment in full of the Subscription Price for the aggregate number
of Units subscribed for pursuant to such Rights Holder's exercise of the Basic
Subscription Privilege and the Oversubscription Privilege, before any proration
or reduction with respect to the Oversubscription Privilege. A Rights Holder may
also exercise Basic Subscription Privileges by complying with the procedures
described in Section 7(f), below, with respect to DTC Exercised Rights (as
hereinafter defined). Except as provided in Sections 7(d) and 7(f), below, and
subject to Section 12(b), below, Subscription Rights Certificates and payment of
the Subscription Price must be received by the Subscription Agent before 5:00
p.m. New York City time, on __________, 1997, or such later time and date to
which the Rights may be extended by the Company at its option (the "Expiration
Time"), and a Right will not be deemed exercised until the Subscription Agent
receives both payment of the Subscription Price and a duly executed Subscription
Rights Certificate (or until the Guaranteed Delivery Procedures set forth in
Section 7(d), below, have been complied with). A Rights Holder's
Oversubscription Privilege must be exercised concurrently with such Rights
Holder's Basic Subscription Privilege, except for DTC Exercised Rights, as
described in Section 7(f), below. Once a Rights Holder has exercised a Right,
such exercise may not be revoked. The Rights will expire at the Expiration Time.
The Company may notify the Subscription Agent either orally or in writing of any
extension of the Expiration Time. If the Company gives an oral notice of an
extension, it will confirm such extension in writing.
(b) Unless a Subscription Rights Certificate (i) provides that the
Units to be issued pursuant to the exercise of Rights represented thereby are to
be registered in the name of and delivered to the registered holder of such
Subscription Rights Certificate, or (ii) is submitted for the account of a
member firm of a registered national securities exchange or a member of the
National Association of Securities Dealers, Inc. (the "NASD"), or a commercial
bank or trust company having an office or correspondent in the United States
(each, an "Eligible Institution"), signatures on such Subscription Rights
Certificate must be guaranteed by an Eligible Guarantor Institution, as defined
in Rule 17Ad-15(a)(2) of the 1933 Act.
(c) The Subscription Price will be payable in United States dollars
(i) by personal check, certified check or cashier's check drawn upon a United
States bank, or postal, telegraphic or express money order, payable to the order
of the Subscription Agent, or (ii) by wire transfer of funds to the 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 United States bank, or of any
postal, telegraphic
4
<PAGE>
or express money order, or (iii) receipt of collected funds in the Subscription
Agent's account designated above, in payment of the Subscription Price.
(d) If a Rights Holder wishes to exercise Rights, but time will not
permit such Rights Holder to cause the Subscription Rights Certificate or
Certificates evidencing such Rights to reach the Subscription Agent at or prior
to the Expiration Time, such Rights may nevertheless be exercised if all of the
following conditions (the "Guaranteed Delivery Procedures") are met:
(i) Such Rights Holder has caused payment in full of the
Subscription Price for the aggregate number of Units subscribed for
pursuant to such Rights Holder's exercise of the Basic Subscription
Privilege and the Oversubscription Privilege, before any proration or
reduction with respect to the Oversubscription Privilege, to be received
as set forth in Section 7(c), above, by the Subscription Agent at or
before the Expiration Time:
(ii) The Subscription Agent receives, at or prior to the
Expiration Time, a guarantee notice (the "Notice of Guaranteed Delivery"),
substantially in the form distributed with the Subscription Rights
Certificates, from an Eligible Institution, stating the name of the
exercising Rights Holder, the number or Rights represented by the
Subscription Rights Certificate or Certificates held by such exercising
Rights Holder, the number of Units being subscribed for pursuant to Basic
Subscription privilege and the number of Units, if any, being subscribed
for pursuant to the Oversubscription Privilege, and guaranteeing the
delivery to the Subscription Agent of the Subscription Rights Certificate
or Certificates evidencing such Rights within three trading days following
the date of the Notice of Guaranteed Delivery; and
(iii) The properly completed Subscription Rights Certificate
or Certificates evidencing the Rights being exercised, with any required
signatures guarantee, are received by the Subscription Agent within three
trading days following the date of the Notice of Guaranteed Delivery
relating thereto. The Notice of Guaranteed Delivery may be delivered to
the Subscription Agent in the same manner as Subscription Rights
Certificates, or may be transmitted to the Subscription Agent by facsimile
transmission (telecopy No. (516) 379-8525).
(e) If a Subscription Rights Certificate does not indicate the
number of Units subscribed for or if the Subscription Price payment forwarded to
the Subscription Agent is insufficient to purchase the number of Units
subscribed for, the Rights Holder will be deemed to have exercised the Basic
Subscription Privilege with respect to the maximum number of whole Units that
may be subscribed for based on the Subscription Price delivered to the
Subscription Agent and, to the extent that the payment delivered by such Rights
Holder exceeds the product of the Subscription Price multiplied by the number of
Rights evidenced by the Subscription Rights Certificates delivered by the Rights
Holder (such excess being the "Subscription Excess"), the Rights Holder will be
deemed to have exercised the Oversubscription Privilege to purchase, to the
extent available, that number of whole Excess Shares equal to the quotient
obtained by
5
<PAGE>
dividing the Subscription Excess by the Subscription Price. If a Rights Holder
(other than a Qualified Financial Institution) exercises an Oversubscription
Privilege without exercising its Basic Subscription Privilege in full, such
Rights Holder will be deemed to have exercised such Basic Subscription Privilege
to the fullest possible extent, and the Oversubscription Privilege will be
deemed exercised only to the extent of payments received from such Rights Holder
in excess of the aggregate Subscription Price applicable to such deemed Basic
Subscription Privilege exercise.
(f) The exercise of the Basis Subscription Privilege (but not the
Oversubscription Privilege) may be effected through the facilities of the
Depository Trust Company, (Rights so exercised are referred to as "DTC Exercised
Rights"). A holder of DTC Exercised Rights may exercise the Oversubscription
Privilege in respect thereof by properly executing and delivering to the
Subscription Agent, at or before the Expiration Time, a DTC Participant
Oversubscription Exercise Form (substantially in the form attached hereto as
Exhibit C), together with payment of the appropriate Subscription Price for the
number of Units for which the Oversubscription Privilege is to be exercised,
before any proration or reduction.
(g) The Subscription Agent will pay to credit to the account of, or
otherwise transfer to the Company all funds received by the Subscription Agent
in payment of the Subscription Price for Units subscribed for pursuant to the
Basic Subscription Privilege as soon as practicable following receipt thereof
and of all related documents.
(h) Funds received by the Subscription Agent in payment of the
Subscription Price for Excess Shares subscribed for pursuant to the
Oversubscription Privilege will be held in a segregated account pending issuance
of such Excess Shares. The Subscription Agent will pay to, credit to the account
of, or otherwise, transfer to the Company all funds received in payment of the
Subscription Price pursuant to the Oversubscription Privilege, as soon as
practicable following the Expiration Time and allocation of Excess Shares for
purchase pursuant to the Oversubscription Privilege.
SECTION 8. DELIVERY OF STOCK CERTIFICATES; REFUNDS.
The Subscription Agent will, on each business day commencing
_________________, 1997, and ending on the second business day immediately
following the Expiration Time, furnish the Transfer Agent with such information
as the Transfer Agent may reasonably require, and in such form as the Transfer
Agent may reasonably request, to allow the Transfer Agent to issue certificates
representing all Units to be issued pursuant to Basic Subscription Privileges
exercised on the previous business day and will, as soon as practicable
following the Expiration Time and allocation of Excess Shares for purchase
pursuant to the Oversubscription Privilege and as requested by the Transfer
Agent, furnish the Transfer Agent, to allow the Transfer Agent with such
information as the Transfer Agent may reasonably require, and in such form as
the Transfer Agent may reasonably request, to allow the Transfer Agent to issue
certificates evidencing any Excess Shares purchased pursuant to Oversubscription
Privileges. Unless the Subscription Rights Certificate provides otherwise,
certificates for Units purchased pursuant to
6
<PAGE>
the exercise of Rights will be registered in the name of the Rights Holder
exercising such Rights. Any refund, without interest, of the Subscription Price
for Excess Shares subscribed for but not sold due to proration or otherwise will
be mailed or delivered by the Subscription Agent to the Rights Holder to whom
such refund is due as soon as practicable after the Expiration Time.
SECTION 9. FRACTIONAL RIGHTS AND SHARES. No fractional Rights or cash in
lieu thereof will be issued or paid. All questions as to the validity and
eligibility of any rounding of fractional Rights (including, without limitation,
in connection with the surrender by Qualified Financial Institution of a
Subscription Rights Certificate, as set forth in Section 5(a) hereof) will be
determined by the Company in its sole discretion and its determination will be
final and binding.
SECTION 10. NON-TRANSFERABILITY OF RIGHTS. No Rights Holder may transfer
any Rights.
SECTION 11. FOREIGN AND CERTAIN OTHER STOCKHOLDERS. Subscription Rights
Certificates will not be mailed to Rights Holders whose registered addresses are
outside the United States (collectively, "Foreign Record Date Holders").
Subscription Rights Certificates evidencing Rights otherwise distributable to
Foreign Record Date Holders will be delivered to the Subscription Agent, which
will hold such Subscription Rights Certificates for the account of such Foreign
Record Date Holders and upon notice from such Foreign Record Date Holders and
the written consent of the Company will allow the exercise of the Rights by such
Foreign Record Date Holders. To so exercise their Rights, Foreign Record Date
Holders must notify the Subscription Agent not later than 11:00 a.m., New York
City time, ________________, 1997.
SECTION 12. AMENDMENT AND WAIVERS; TERMINATION.
(a) The Company reserves the right to extend the Expiration Time,
and to amend the terms and conditions of the Offering, whether the amended terms
are more or less favorable to Rights Holders.
(b) All questions as to the validity, form, eligibility (including
time of receipt and record ownership) and acceptance of any exercise of Rights
will be determined by the Company, in its sole discretion, and Company reserves
the right to reject any exercise that is not in accordance with the terms of the
Rights Offering or is not in proper form, or if the acceptance thereof or the
issuance of Units pursuant thereto could be deemed unlawful. The Company also
reserves the right to waive any deficiency or irregularity (including, without
limitation, any deficiency with respect to time of receipt of a Subscription
Rights Certificate or the Subscription Price for all Units subscribed for
pursuant thereto) or to permit a defect or irregularity to be corrected within
such time as it may determine. Subscriptions 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.
7
<PAGE>
(c) The Subscription Agent is hereby authorized and directed to
accept instructions with respect to the performance of its duties hereunder from
the Chairman of the board, President an Chief Executive Officer. any Vice
President (including any Senior or Executive Vice President), the Treasurer, any
Assistant Treasurer, the Secretary or any Assistant Secretary of the Company, or
any other person designated by any of them and to apply to such officers for
advice or instructions in connection with its duties and it will not be liable
for any action taken or suffered to be taken by it in good faith in accordance
with the instructions of any such officer.
SECTION 12. AMENDMENTS AND WAIVERS; TERMINATION.
(a) The Company reserves the right to extend the Expiration Time,
and to amend the terms and conditions of the Offering, whether the amended terms
are more or less favorable to Rights Holders.
(b) All questions as to the validity, form, eligibility (including
time of receipt and record ownership) and acceptance of any exercise of Rights
will be determined by the Company, in its sole discretion, and company reserves
the right to reject any exercise that is not in accordance with the terms of the
Rights Offering or is not in proper form, or if the acceptance thereof or the
issuance of Units pursuant thereto could be deemed unlawful. The Company also
reserves the right to waive any deficiency or irregularity (including, without
limitation, any deficiency with respect to time of receipt of a Subscription
Rights Certificate or the Subscription Price for all Units subscribed for
pursuant thereto) or to permit a defect or irregularity to be corrected within
such time as it may determine. Subscriptions 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.
(c) The Subscription Agent is hereby authorized and directed to
accept instructions with respect to the performance of its duties hereunder from
the Chairman of the Board, President and Chief Executive Officer, any Vice
President (including any Senior or Executive Vice President), the Treasurer, any
Assistant Treasurer, the Secretary of any Assistant Secretary of the Company, or
any other person designated by any of them and to apply to such officers for
advice or instructions in connection with its duties and it will not be liable
for any action taken or suffered to be taken by it in good faith in accordance
with the instructions of any such officer.
SECTION 13. REPORTS. The Subscription Agent will notify the Company and
its designated representatives by telephone each business day during the period
commencing on __________, 1997 and ending at the Expiration Time (and in the
case of deliveries pursuant to the Guaranteed Delivery Procedure, the period
ending three trading days after the Expiration Time), which notice will
thereafter be confirmed in writing of (i) the number of rights exercised
8
<PAGE>
each day, (ii) the number of Units subscribed for pursuant to the Basic
Subscription Privilege each day and the number of Units for which payment has
been received, (iii) the number of Units subscribed for pursuant to the
Oversubscription Privilege each day and the number of such Units for which
payment has been received, (iv) the number of Rights exercised pursuant to the
Guaranteed Delivery Procedure each day, (v) the number of Rights for which
defective Subscription Rights Certificates have been received each day, (vi) the
number of Units subscribed for in respect of which Rights Holders have
designated a broker-dealer as a soliciting Dealer (a "Soliciting Dealer") and
(vii) cumulative totals with respect to the information set forth in each of the
clauses (i) through (vi) above. At or before 5:00 p.m., New York City time, on
the first trading day following the Expiration Time the Subscription Agent will
certify in writing to the Company the cumulative totals through the Expiration
Time with respect to the information set forth in clauses (i) through (vi)
above. The Subscription Agent will provide the Company and its designated
representatives which the information compiled pursuant to this Section 13 and
any Subscription Rights Certificates or other documents or date from which such
information derived, as any of them may request. The Subscription Agent hereby
represents, warrants and agrees that the information contained in each
notification referred to in this Section 13 will be accurate in all material
respects.
SECTION 14. PAYMENT OF TAXES. The Company will pay when due all
documentary, stamp and other taxes, if any, that may be payable with respect to
the issuance or delivery of any Rights or the issuance of any Units upon the
exercise of Rights.
SECTION 15. CANCELLATION AND DESTRUCTION OF SUBSCRIPTION RIGHTS
CERTIFICATES. All Subscription Rights Certificates surrendered for the purpose
of exercise, exchange or substitution will be canceled by the Subscription
Agent, and no Subscription Rights Certificates will be issued in lieu thereof,
except as expressly permitted by this Agreement. The Subscription Agent will
either deliver all canceled Subscription Rights Certificates to the Company or,
at the written request of the Company, destroy such canceled Subscription Rights
Certificates, and in such case will deliver a certificate of destruction thereof
to the Company.
SECTION 16. NO SOLICITING DEALER FEES The Company will not pay any fees to
any dealer in connection with this Rights Offering.
SECTION 17. FEES OF THE SUBSCRIPTION AGENT: INDEMNIFICATION.
(a) The Company agrees to pay to the Subscription Agent compensation
in accordance with the fee schedule attached hereto as Exhibit A for all
services rendered by it hereunder and, from time to time its reasonable expenses
and other disbursements incurred in the administration and execution of this
Agreement and the exercise and performance of its duties hereunder.
(b) The Company hereby covenants and agrees to indemnify and to hold
the Subscription Agent harmless against any losses, claims, damages,
liabilities, costs and expenses (including reasonable fees and disbursements of
legal counsel) which the Subscription Agent may
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incur or become subject to arising from or out of any claims or liability
resulting from actions taken as Subscription Agent pursuant to this Agreement;
provided, however, that such covenant and agreement does not extend to, and the
Subscription Agent will not be indemnified or held harmless with respect to such
losses, claims, damages, liabilities, costs and expenses incurred or suffered by
the Subscription Agent as a result, or arising out, of the Subscription Agent's
negligence, misconduct, bad faith or breach of this Agreement. In connection
therewith, (i) in no case will the Company be liable with respect to any claim
against the Subscription Agent unless the Subscription Agent notifies the
Company in writing of the assertion of a claim against it or of any action
commenced against it promptly after the Subscription Agent has notice of any
such assertion of a claim or has been served with the summons or other first
legal process giving information as to the nature and basis of the claim; (ii)
the Company will be entitled to participate at its own expense in the defense of
any suit brought to enforce any such claim and if the Company so elects, it will
assume the defense of any such suits, in which event the Company will not
thereafter be liable for the fees and expenses of any additional counsel that
the Subscription Agent may retain so long as the Company retains counsel
satisfactory to the Subscription Agent, in the exercise of the Subscription
Agent's reasonable judgment, to defend such suit; and (iii) the Subscription
Agent agrees not to settle any litigation in connection with any claim or
liability with respect to which it may seek indemnification from the Company
without the prior written consent of the Company.
(c) The Subscription Agent will be protected and will incur no
liability for or with respect to any action taken, suffered or omitted by it
without negligence and in good faith in connection with its administration of
this Agreement in reliance upon any Subscription Rights Certificate, instrument
of assignment or transfer, power of attorney, endorsement, affidavit letter,
notice, direction, consent, certificate, statement or other paper or document
reasonably believed by it to be genuine and to be signed, executed and, where
necessary, verified or acknowledged by the proper person or persons.
SECTION 18. CONCERNING THE SUBSCRIPTION AGENT. The Subscription Agent
undertakes the duties and obligations imposed by this Agreement upon the
following terms and conditions:
(a) The Subscription Agent will have no responsibility with respect
to the validity of this Agreement or the execution and delivery hereof (except
the due execution and delivery hereof by the Subscription Agent), or with
respect to the validity or execution of any Subscription Rights Certificate.
(b) Nothing herein precludes the Subscription Agent from acting in
any other capacity for the Company.
(c) From the date hereof to the Expiration Time, the Subscription
Agent agrees not to and not permit any affiliate to, sell or purchase any Common
Stock, or establish any short or long position with respect thereto, for its own
account or the account of any affiliate of the Subscription Agent.
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SECTION 19. CERTAIN TAX MATTERS.
(a) The Subscription Agent will comply with the information
reporting and backup withholding requirements of the Internal Revenue Code of
1986, as amended (the "Code"), including without limitation, where appropriate,
on a timely basis filing with the Internal Revenue Service and furnishing to
Rights Holder duly completed Forms 1099B. The Subscription Agent will also
collect and duly preserve Forms W-8 and W-9 and other forms or information
necessary to comply with the backup withholding requirement of the Code.
(b) The Subscription Agent will withhold from payments made to
Rights Holders amounts sufficient to comply with the backup withholding
requirements of the Code.
SECTION 20. NOTICES TO THE COMPANY, RIGHTS HOLDERS AND SUBSCRIPTION AGENT.
All notices and other communication provided for or permitted hereunder are to
be made by hand delivery prepaid first-class mail, telex or telecopier:
(a) If to the Company, to:
First Montauk Financial Corp.
Parkway 109 Office Center
328 Newman Springs Road
Red Bank, New Jersey 07701
Attention: Robert I. Rabinowitz, Esq.
Telephone: (908) 842-4700
Telecopy: (908) 842-9047
(b) If to the Subscription Agent, to:
North American Transfer Company
147 West Merrick Road
Freeport, New York 11520
Attention: Ms. Mildred Rostolder
Telephone: (516) 379-8501
Telecopy: (516) 379-8525
(c) if to a Rights Holder, to the address shown on the registry
books of the Company.
All such notices and communications will be deemed to have been duly given
when delivered by hand, if personally delivered; two business days after being
deposited in the mail, postage prepaid, if mailed as aforesaid; when answered
back, it telexed; and when receipt is acknowledged, if telecopied.
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SECTION 21. SUPPLEMENTS AND AMENDMENTS. The Company and the Subscription
Agent may from time to time supplement or amend this Agreement without the
approval of any Rights Holders.
SECTION 22. SUCCESSORS. All the covenants and provisions of the Agreement
by or for the benefit of the Company or the Subscription Agent will bind and
inure to the benefit of their respective successors and assigns hereunder.
SECTION 23. GOVERNING LAW. This Agreement will be deemed to be a contract
made under the laws of the State of New York and for all purposes is to be
construed in accordance with the internal laws of said State.
SECTION 24. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement is to be
construed to give any person or corporation other than the Company, the
Subscription Agent and the Rights Holders any legal or equitable right, remedy
or claim under this Agreement; but this Agreement is for the sole and exclusive
benefit of the Company, the Subscription Agent an the Rights Holders.
SECTION 25. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and each of such counterparts will for all purposes be deemed to be
an original but all such counterparts will together constitute one and the same
instrument.
SECTION 26. DESCRIPTIVE HEADINGS. Descriptive headings of the several
Sections of this Agreement are inserted for convenience only and do not control
or affect the meaning or construction of any of the provision hereof.
IN WITNESS WHEREOF each of the parties hereto has caused this Agreement to
be duly executed as of the date first above written.
FIRST MONTAUK FINANCIAL CORP.
By:_____________________________
Name:
Title:
NORTH AMERICAN TRANSFER COMPANY
By:_____________________________
Name:
Title:
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Exhibit A
The company will pay a fee of $5,000 to the Subscription Agent, such fee to be
payable within 30 days following the Expiration Time.
CONSENT OF INDEPENDENT AUDITORS
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 the use of our name under the heading "Experts" in this
Amendment No. 1 to Form S-3 of the First Montauk Financial Corp.
Schneider Ehrlich & Wengrover, LLP
Woodbury, New York
November 24, 1997
