SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) March 27, 2003
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FIRST MONTAUK FINANCIAL CORP.
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(Exact name of Registrant as specified in charter)
New Jersey 0-6729 22-1737915
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(State or other jurisdic- (Commission (IRS Employer
tion of incorporation) File Number) Identification No.)
Parkway 109 Office Center, 328 Newman Springs Road, Red Bank, N.J. 07701
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (732) 842-4700
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(Former name or former address, if changed since last report.)
Item 5. Other Events.
Item 9. Regulation FD Disclosure.
First Montauk Financial Corp. (OTC BB: FMFK.OB), has completed a private
offering of its securities as of March 1, 2003. In the offering, First Montauk
sold an aggregate of $1,240,000 of convertible debentures to certain "accredited
investors" only. The offering consisted of up to $3,000,000 principal amount of
6% convertible debentures. First Montauk issued $1,030,000 of debentures on
December 12, 2002 and an additional $210,000 of debentures on January 7, 2003.
The proceeds of the financing will be used to satisfy the general working
capital needs of the Company.
Each debenture earns interest at the rate of 6% per annum, payable
semi-annually, and is convertible at an initial conversion price of $0.50 per
share, subject to adjustment for stock dividends, combinations, splits,
recapitalizations, and like events. Each holder shall have the right to convert
its debentures, at the option of such holder, at any time, into shares of First
Montauk common stock at the then applicable conversion price. In addition, First
Montauk at its option, may demand the holders convert some or all of the
debentures into shares of common stock in the event that the closing bid price
of its common stock is 200% of the conversion price for the twenty consecutive
trading days prior to the date of the notice of conversion.
Further, First Montauk, at its option, may prepay some or all of the
debentures in the event that the closing bid price of its common stock is 200%
of the conversion price for the twenty consecutive trading days prior to the
date of the notice of prepayment. The prepayment amount shall be 130% of the
principal amount of the debentures from the date of issuance until the first
anniversary of the date of issuance, together with accrued and unpaid interest.
Thereafter, the prepayment amount shall be equal to 120% of the principal amount
of the debentures, together with accrued and unpaid interest through the date of
prepayment.
Holders of debentures shall have notice of and the right to include the
shares of common stock issuable upon conversion of the debentures in a
registration statement filed by the First Montauk other than a registration
statement on Form S-4 or S-8, or a successor form.
First Montauk Securities Corp. served as the exclusive agent for the sale
of the debentures. The Placement Agent received commissions of 10% of the
principal amount of debentures sold in the Offering and warrants to purchase
such number of shares of common stock as equals 10% of the principal amount of
debentures sold. These warrants are exercisable for a period of five years at
an exercise price of equal to the conversion price of the debentures.
The debentures have not been registered for offer or sale under the
Securities Act; such securities are being issued on the basis of the statutory
exemption provided by Section 4(2) of the Securities Act, as amended, and/or
Rule 506 of Regulation D, promulgated thereunder relating to transactions by an
issuer not involving any public offering; and the transaction has not been
reviewed by, passed on or submitted to any Federal or state agency or
self-regulatory organization where an exemption is being relied upon. The
securities may not be sold, assigned or transferred unless (i) the sale,
assignment or transfer of such securities is registered under the Securities
Act, or (ii) the securities are sold, assigned or transferred in accordance with
all the requirements and limitations of Rule 144 under the Securities Act.
Item 7. Financial Statements, Pro Forma Financial Statements and Exhibits.
(c) Exhibits. The exhibits designated with an asterisk (*) are filed
herewith. All other exhibits have been previously filed with the Commission and,
pursuant to 17 C.F.R. Secs. 20l.24 and 240.12b-32, are incorporated by reference
to the document referenced in brackets following the descriptions of such
exhibits.
*4.1 Form of Debenture.
*4.2 Form of Warrant.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report on Form 8-K to be signed on its behalf by
the undersigned hereunto duly authorized.
First Montauk Financial Corp.
(Registrant)
Dated: March 27, 2003 By /s/ William J. Kurinsky
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William J. Kurinsky
Chief Financial Officer
EXHIBIT 4.1 - Form of Debenture
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT"). THE SECURITIES REPRESENTED HEREBY
MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED UNLESS THEY ARE
REGISTERED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS, OR SUCH
OFFERS, SALES AND TRANSFERS ARE MADE PURSUANT TO AN AVAILABLE EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THOSE LAWS.
6% CONVERTIBLE DEBENTURE
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No.:--------
FIRST MONTAUK FINANCIAL CORP., a New Jersey corporation (the "Company"
or the "Maker") hereby promises to pay to [name] (the "Holder") the sum of
[dollar amt written] ($[dollar amt figure]) (the "Principal") on the earlier of
(i) [date], 2007 (the "Maturity Date"), and (ii) the date on which there is an
acceleration pursuant to the terms of this Convertible Debenture (the
"Debenture"), and to pay interest on the Principal and accrued and unpaid
interest, which shall accrue at the rate of 6% per annum (except as provided in
Section 1.4), calculated for the actual number of days the Principal is
outstanding and interest is accrued and unpaid based on a 360-day year, in
accordance with the terms hereof. Such payment shall be made in lawful money of
the United States of America at such address as the Holder shall hereafter give
to the Maker by written notice made in accordance with the provisions hereof.
The following terms apply to this Debenture:
ARTICLE I
SUBSCRIPTION AGREEMENT; PREPAYMENT; PAYMENT OF INTEREST
1.1 Subscription Agreement. This Debenture is one of a duly authorized
issue of 6% Convertible Debentures, sold or to be sold, by the Company, in
original authorized principal amount, similar in terms except for dates,
principal amounts and named payees and is issued in connection with a certain
Subscription Agreement of even date, between the Maker and the Holder and other
signatories thereto (the "Subscription Agreement"), all terms of which are
incorporated herein by this reference and hereby made a part of this Debenture.
By its acceptance of this Debenture, each Holder agrees to be bound by the terms
of the Subscription Agreement. All capitalized terms not otherwise defined
herein shall have the meanings ascribed to such terms in the Subscription
Agreement.
1.2 Acceleration of Maturity Date. The Principal and accrued and unpaid
Interest shall become immediately due and payable upon the occurrence of an
Event of Default (as defined herein), which event shall be deemed an
Acceleration Date.
1.3. Prepayment. The Company shall have the option to prepay some or
all of this Debenture, pursuant to the provisions of this Section 1.3, in the
event that the closing bid price of the Company's Common Stock is 200% of the
then current Conversion Price for the twenty (20) consecutive trading days prior
to the date of the notice of prepayment, required to be delivered pursuant to
this Section 1.3.
(a) From the date of issuance of this Debenture and until the
first anniversary of the date of issuance, the prepayment price shall be 130% of
the Principal amount of such Debenture to be prepaid, together with accrued and
unpaid Interest through the date of prepayment (the "Prepayment Date").
Thereafter, the prepayment price shall be an amount equal to 120% of the
Principal of this Debenture, together with accrued and unpaid Interest through
the Prepayment Date.
(b) If this Debenture is called for prepayment pursuant this
subsection 1.3, the Company shall give written notice to the Holder 30 days
prior to the Prepayment Date, setting forth the prepayment price to be paid,
instructions for presentation of the Debentures for prepayment and the
Prepayment Date.
(c) Upon notice of any prepayment as provided in subsection
1.3(b), the Company covenants and agrees that upon presentation of the
Debentures, it will pay on the Prepayment Date, the Principal to be prepaid as
specified in such notice, together with accrued and unpaid Interest to the
Prepayment Date in cash (the "Prepayment Payment").
(d) Provided the Company tenders the Prepayment Payment on the
Prepayment Date, all Debentures noticed for prepayment in full shall, after the
Prepayment Date, represent only the right to receive the Prepayment Payment and
shall not be considered outstanding for any other purposes.
1.4. Payment of Interest. Payment of accrued Interest on the Principal
shall be paid semi-annually commencing six months from the first sale of the
Debentures by the Company and shall be paid in full on the Maturity Date or such
earlier date on which the Principal is paid to the Holder or on which the
Debenture is converted or exchanged pursuant to the terms hereof.
(a) The Holder shall be entitled to receive Interest in cash
at the annual rate of 6% per annum in semi-annual payments in arrears commencing
on April 1, 2003, pro rata, and on each six-month anniversary thereafter (each
of such dates being a "Interest Payment Date"). Such Interest shall be paid to
the Holders of record at the close of business on the date ten business days
prior to the Interest Payment Date. Each of such semi-annual Interest payments
shall accrue, without Interest, from the first day of the six month period in
which such Interest may be payable as herein provided, except that with respect
to the first semi-annual Interest payment, such Interest with respect to any
outstanding Debenture shall accrue from the date of issuance of such Debenture.
(b) All payments made by the Maker on this Debenture shall be
applied first to the payment of accrued and unpaid Interest on this Debenture
and then to the reduction of the unpaid principal balance of this Debenture.
Payments of Principal and Interest shall be deemed made on the date such payment
is deposited or, if mailed, on the date deposited in the mail with proper
postage and addressed to the Holder and the address as shown on the records of
the Company, or such other address as provided to the Maker in writing by the
Holder.
(c) In the event that the date for the payment of any amount
payable under this Debenture falls due on a Saturday, Sunday or public holiday
under the laws of the State of New Jersey, the time for payment of such amount
shall be extended to the next succeeding business day and Interest shall
continue to accrue on any principal amount so effected until the payment thereof
on such extended due date.
ARTICLE II
CONVERSION RIGHTS; CONVERSION PRICE
2.1 Voluntary Conversion by Holder. The Holder shall have the right
prior to the date on which this Debenture is paid in full, to convert at any
time, or from time to time, any part of the outstanding Principal amount of this
Debenture into fully paid and non-assessable shares of Common Stock of the Maker
(the "Conversion Rights") at the Conversion Price (as defined below) determined
as provided herein. Promptly after the surrender of this Debenture, accompanied
by a Notice of Conversion of Convertible Debenture in the form attached hereto
as Exhibit 1, properly completed and duly executed by the Holder (a "Conversion
Notice"), the Maker shall issue and deliver to or upon the order of the Holder
that number of shares of Common Stock for the balance of this Debenture
converted as shall be determined in accordance herewith.
2.2 Mandatory Conversion. In the event that, prior to the Maturity
Date, the closing bid price of the Company's Common Stock is 200% of the then
current Conversion Price for the twenty (20) consecutive trading days prior to
the date of the notice of conversion, the Company may, at its option, require
the Holder to convert some or all of the Principal, into Common Stock at the
Conversion Price (a "Mandatory Conversion"). In the event that the Company
exercises this Mandatory Conversion option, the Company shall give written
notice to the Holder 30 days prior to the Conversion Date, setting forth the
applicable Conversion Price, instructions for presentation of the Debentures for
conversion and the Conversion Date.
2.3 The number of shares of Common Stock to be issued upon each
conversion of this Debenture shall be determined by dividing (i) the amount of
Principal to be converted by (ii) the Conversion Price in effect on the either
the date (a) the Conversion Notice is delivered to the Maker by the Holder or
(b) the Maker delivers its Mandatory Conversion notice to the Holder.
2.4 Conversion Price. Upon any conversion of this Debenture, the
conversion price shall be $0.50, subject to adjustment from time to time upon
the happening of certain events (the "Conversion Price") as set forth below.
(a) Subdivision. If the Company, at any time while Debentures
remain outstanding, shall (i) subdivide the Common Stock (or effect a
similar transaction), the Conversion Price shall be proportionately
reduced or (ii) effect a reverse stock split or similar transaction,
the Conversion Price shall be proportionately increased, as the case
may be, as of the effective date of such subdivision, reverse stock
split or similar transaction, or, if the Company shall take a record of
holders of its Common Stock for the purpose of any such transaction, as
of such record date, whichever is earlier (provided if such transaction
does not actually occur, such adjustment shall not be made).
(b) Stock Dividends. If the Company at any time while any
Debentures are outstanding shall pay a dividend in shares of, or make
other distribution of shares of, the Common Stock, then the Conversion
Price shall be adjusted, as of the date the Company shall take a record
of the holders of its Common Stock for the purpose of receiving such
dividend or other distribution (or if no such record is taken, as at
the date of such payment or other distribution), to that price
determined by multiplying the Conversion Price in effect immediately
prior to such payment or other distribution by a fraction (a) the
numerator of which shall be the total number of shares of Common Stock
outstanding immediately prior to such dividend or distribution, and (b)
the denominator of which shall be the total number of shares of Common
Stock outstanding immediately after such dividend or distribution.
2.5 Reclassification, Consolidation or Merger. At any time while this
Debenture remains outstanding, in case of any reclassification or change of
Common Stock (other than a change in par value, or from par value to no par
value per share, or from no par value per share to par value or as a result of a
subdivision or combination of Common Stock) or in case of any consolidation or
merger of the Company with or into another corporation (other than a merger with
another corporation in which the Company is a continuing corporation and which
does not result in any reclassification or change, other than a change in par
value, or from par value to no par value per share, or from no par value per
share to par value, or as a result of a subdivision or combination Common
Stock), or in the case of any sale or transfer to another corporation of the
property of the Company as an entirety or substantially as an entirety, the
Company, or such successor or purchasing corporation, as the case may be, shall,
without payment of any additional consideration therefor, execute new debentures
providing that the holders of the Debentures shall have the right to exercise
such new debentures (upon terms not less favorable to the holders than those
then applicable to the Debentures) and to receive upon such exercise, in lieu of
each share of Common Stock theretofore issuable upon exercise of the Debentures,
the kind and amount of shares of stock, other securities, money or property
receivable upon such reclassification, change, consolidation, merger, sale or
transfer by the Holder of one share of Common Stock issuable upon exercise of
the Debentures had the Debentures been converted immediately prior to such
reclassification, change, consolidation, merger, sale or transfer. Such new
debentures shall provide for adjustments which shall be as nearly equivalent as
may be practicable to the adjustments provided for in this Article II. The
provisions of this Section 2.5 shall similarly apply to successive
reclassifications, changes, consolidations, mergers, sales and transfers.
2.6 Method of Conversion. Except as otherwise provided in this
Debenture or agreed to by the Holder, this Debenture (a) may be converted by the
Holder pursuant to its Conversion Rights set forth in Section 2.1 in whole at
any time or in part (provided such partial conversion is at least $10,000) from
time to time or (b) shall be converted by the Holder upon and in accordance with
a demand by the Maker pursuant to the Mandatory Conversion provisions of Section
2.2 by:
(i) in the event of a Holder electing to exercise its Conversion
Rights, submitting to the Maker a Conversion Notice (by
facsimile dispatched on the Conversion Date and confirmed by
U.S. mail or overnight mail service sent within two business
days thereafter) and surrendering this Debenture with the
mailed confirmation of the Conversion Notice at the principal
office of the Maker; or
(ii) in the event of a Mandatory Conversion event, the Holder
surrendering to the Maker this Debenture at the principal
office of the Maker.
Upon a partial conversion of this Debenture, a new debenture containing the same
date and provisions as this Debenture shall be issued by the Maker to the Holder
for the balance due hereunder which shall not have been converted. By its
acceptance of this Debenture, each Holder agrees to be bound by the terms of the
Subscription Agreement.
2.7 Restrictions on Shares. This Debenture has been issued by the Maker
pursuant to the exemption from registration under the Securities Act of 1933
(the "Act"). The shares of Common Stock issuable upon conversion of this
Debenture may not be offered, sold or otherwise transferred unless (i) they
first shall have been registered under the Act and applicable state securities
laws or (ii) the Maker shall have been furnished with an opinion of legal
counsel (in form, substance and scope reasonably acceptable to Maker) to the
effect that such sale or transfer is exempt from the registration requirements
of the Act. Each certificate for shares of Common Stock issuable upon conversion
of this Debenture that have not been so registered and that have not been sold
pursuant to an exemption that permits removal of the applicable legend, shall
bear a legend substantially in the following form, as appropriate:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "ACT"). THE SECURITIES
REPRESENTED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED UNLESS THEY ARE REGISTERED UNDER THE ACT AND
APPLICABLE STATE SECURITIES LAWS, OR SUCH OFFERS, SALES AND
TRANSFERS ARE MADE PURSUANT TO AN AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THOSE LAWS.
Upon the request of a holder of a certificate representing any shares of Common
Stock issuable upon conversion of this Debenture, the Maker shall remove the
foregoing legend from the certificate or issue to such Holder a new certificate
therefor free of any transfer legend, if (i) with such request, the Maker shall
have received an opinion of counsel, reasonably satisfactory to the Maker in
form, substance and scope, to the effect that any such legend may be removed
from such certificate or (ii) a registration statement under the Act covering
such securities is in effect.
2.8 Reservation of Shares. The Company shall at all times have
authorized and reserved, for the purpose of issuance, a sufficient number of
shares of Common Stock to provide for the issuance of shares of Common Stock
underlying the then outstanding aggregate Principal amount of the Debentures.
ARTICLE III
COVENANTS
3.1 Covenants of Maker. Maker covenants and agrees that, so long as this
Debenture remains outstanding and unpaid, in whole or in
part:
(a) Maker will not, and will not permit any of its
Subsidiaries to, sell, transfer or in any other manner alienate or dispose of
all or substantially all of its assets; provided, however, that Maker or any of
its Subsidiaries may effect such a transaction if the payment of this Debenture
is duly provided for from such sale proceeds;
(b) Maker will, and will cause each of its Subsidiaries to,
promptly pay and discharge all lawful taxes, assessments and governmental
charges or levies imposed upon it, its income and profits, or any of its
property, before the same shall become in default, as well as all lawful claims
for labor, materials and supplies which, if unpaid, might become a lien or
charge upon such properties or any part thereof. However, Maker or such
Subsidiary shall not be required to pay and discharge any such tax, assessment,
charge, levy or claim so long as the validity thereof shall be contested in good
faith by appropriate proceedings and Maker or such Subsidiary, as the case may
be, shall set aside on its books adequate reserves with respect to any such tax,
assessment, charge, levy or claim so contested;
(c) Maker will, and will cause each of its Subsidiaries to, do
or cause to be done all things necessary to preserve and keep in full force and
effect its corporate existence, rights and franchises and comply with all laws
applicable to Maker as its counsel may advise;
(d) Maker will, and will cause each of its Subsidiaries to, at
all times maintain, preserve, protect and keep its property used or useful in
the conduct of its business in good repair, working order and condition and
will, from time to time, make all necessary and proper repairs, renewals,
replacements, betterments and improvements thereto;
(e) Maker will, and will cause each of its Subsidiaries to,
keep adequately insured, by financially sound reputable insurers, all property
of a character usually insured by similar corporations and carry such other
insurance as is usually carried by similar corporations;
(f) Maker will, promptly following the occurrence of an Event
of Default or of any condition or event which, with the giving of notice or the
lapse of time or both, would constitute an Event of Default, furnish a statement
of Maker's President or Chief Financial Officer to Payee setting forth the
details of such Event of Default or condition or event and the action which
Maker intends to take with respect thereto;
(g) Maker will, and will cause each of its Subsidiaries to, at
all times maintain books of account in which all of its financial transactions
are duly recorded in conformance with generally accepted accounting principles;
(h) Maker, until payment in full of all Principal and Interest
due on the Debentures, will not pay or declare any cash or in kind dividends or
other distributions with respect to its capital stock, except for dividends
consisting solely of additional shares of stock;
(i) Maker covenants and agrees that it will at all times
reserve and keep available out of its authorized capital stock such number of
shares of Common Stock and Conversion Shares of Maker as may be required for
issuance upon conversion of the Debentures;
(j) Maker will not, and will not permit any of its
Subsidiaries to, make any loan to any executive officer or any person who is or
becomes a holder of 5% of the capital stock of Maker, other than for reasonable
advances for expenses in the ordinary course of business or as compensation for
services, not to exceed $100,000 in any calendar year;
(k) The Company shall cause any Subsidiary organized after the
date of this Debenture to be bound by the terms hereof to the same extent as the
Company.
ARTICLE IV
EVENTS OF DEFAULT
4.1 Default. If one or more of the following events shall occur for any
reason whatsoever (and whether such occurrence shall be voluntary or involuntary
or come about or be effected by operation of law or pursuant to or in compliance
with any judgment, decree or order of any court or any order, rule or regulation
of any administrative or governmental body), and the Holder shall have given
fifteen (15) days prior written notice to the Company (except no notice is
required for events in subsection 4.1(e) through 4.1(i)) by certified or
registered mail, return receipt requested, and the Company shall not have cured
the default within such period (herein called, after such notice, if applicable,
"Events of Default"):
(a) default in the due and punctual payment of the Principal
of, or Interest on this Debenture or any other Debenture when and as the same
shall become due and payable, whether at the Maturity Date, the Acceleration
Date or at a date fixed for prepayment or otherwise;
(b) breach by the Company of any covenant contained in this
Debenture or any provision of the Subscription Agreement executed in connection
with the sale and purchase of the Debentures;
(c) Default by the Company in the conversion of any of the
Debentures, which default continues for a period of 30 days;
(d) The Company makes, or consents to, an assignment for the
benefit of creditors or admits in writing its inability to pay its debts
generally as they become due;
(e) An order, judgment or decree is entered adjudicating the
Company or any Subsidiary bankrupt or insolvent;
(f) The Company or any Subsidiary, petitions or applies to any
tribunal for the appointment of a trustee or receiver of the Company or any
Subsidiary, or of any substantial part of the assets of the Company or any
Subsidiary, or commences any proceedings (other than proceedings for the
voluntary liquidation and dissolution of a Subsidiary) relating to the Company
or a Subsidiary under any bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, dissolution or liquidation law of any jurisdiction whether
now or hereafter in effect;
(g) Any such petition or application is filed, or any such
proceedings are commenced, against the Company or any Subsidiary, and the
Company or any Subsidiary by any act indicates its approval thereof, consent or
acquiescence therein, or an order, judgment or decree is entered appointing any
such trustee or receiver, or approving the petition in any such proceedings, and
such order, judgment or decree remains unstayed and in effect for more than 60
days;
(h) Any order, judgment or decree is entered in any
proceedings against the Company or any Subsidiary decreeing the dissolution of
the Company and such order, judgment or decree remains unstayed and in effect
for more than 60 days;
(i) Any order, judgment or decree is entered in any
proceedings against the Company or any Subsidiary decreeing a split-up of the
Company which requires the divestiture of in excess of 25% of the consolidated
assets of the Company and its Subsidiaries, or the divestiture of the stock of a
Subsidiary and such order, judgment or decree remains unstayed and in effect for
more than 60 days,
(j) The dissolution of Maker or any material Subsidiary of
Maker or any vote in favor thereof by the board of directors and shareholders of
Maker or any material Subsidiary of Maker;
(k) Maker or any of its Subsidiaries sells all or
substantially all of its assets or merges or is consolidated with another
corporation in which Maker or such Subsidiary, as the case may be, is not the
surviving corporation and the full amount of all Principal and accrued and
unpaid Interest is not fully paid upon consummation of such merger or sale;
(l) Maker or any material Subsidiary defaults on any material
covenant contained in agreements currently enforceable against the Maker and
which default has or with the passage of time, will have a material adverse
effect on the Company or its business;
(m) Any representation or warranty made by the Company or any
of its Subsidiaries to the Holders under any of the Subscription Agreements and
any documents delivered, in connection therewith was, when made, untrue or
misleading and such breach has a material adverse effect on the Company and its
Subsidiaries, taken as whole.
4.2 Upon the occurrence of any Event of Default described in
subsections 4.1(e) through (i), the unpaid principal amount of all this
Debenture, together with the Interest accrued thereon (which Interest shall be
deemed matured) shall become immediately due and payable, without declaration by
the Holder, demand or notice to Maker or other requirements of any kind, all of
which are hereby expressly waived by Maker. Upon the occurrence of, any Event of
Default, other than pursuant to subsections 4.1(e) through 4.1(i), the Holder,
by notice in writing to the Company, may declare the unpaid Principal amount of
this Debenture and such accrued Interest to be, and the same shall forthwith
become, due and payable, without presentment, demand, protest or other notice or
other requirements of any kind all of which are hereby expressly waived by
Maker.
ARTICLE V
MISCELLANEOUS
5.1 Failure or Indulgency Not Waiver. No failure or delay on the part
of the Holder in the exercise of any power, right or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such power, right or privilege preclude other or further exercise thereof or of
any other right, power or privilege. All rights and remedies existing hereunder
are cumulative to, and not exclusive of, any rights or remedies otherwise
available.
5.2 Notices. Any notice herein required or permitted to be given shall
be in writing and may be personally served or delivered by courier or sent by
United States mail and shall be deemed to have been given upon receipt if
personally served (which shall include telephone line facsimile transmission) or
sent by courier or three (3) days after being deposited in the United States
mail, certified, with postage pre-paid and properly addressed, if sent by mail.
For the purposes hereof, the address of the Holder shall be as shown on the
records of the Maker; and the address of the Maker shall be 328 Newman Springs
Road, Red Bank, New Jersey 07701; facsimile Number: (732) 842-9047. Both the
Holder and the Maker may change the address for service by service of written
notice to the other as herein provided.
5.3 Amendment Provision. This Debenture and any provision hereof may be
amended only by an instrument in writing signed by the Maker and the Holder.
5.4 Assignability. This Debenture shall be binding upon the Maker and
its successors and assigns and shall inure to be the benefit of the Holder and
its successors and assigns; provided, however, that so long as no Event of
Default has occurred, this Debenture shall only be transferable in whole or in
increments of $10,000 subject to the restrictions contained in the restrictive
legend on the first page of this Debenture.
5.5 No Recourse. Each Debenture is issued upon the express condition,
to which each successive holder expressly assents and by receiving the same
agrees, that no recourse under or upon any obligation, covenant or agreement of
the Debentures, or for the payment of the Principal of, or premium, if any, or
the Interest on, a Debenture, or for any claim based on a Debenture, or
otherwise in respect hereof, shall be had against any incorporator or any past,
present or future stockholder, officer or director, as such, of the Company or
of any successor corporation, whether by virtue of the constitution, statute or
rule of law or by any assessment or penalty or otherwise howsoever, all such
individual liability being hereby expressly waived and released as a condition
of and as a part of the consideration for the execution and issue of the
Debentures; provided, however, that nothing herein shall prevent enforcement of
the liability, if any, of any stockholder or subscriber to capital stock upon or
in respect of capital stock not fully paid.
5.6 Waiver of Demand. Maker hereby expressly waives demand and
presentment for payment notice of nonpayment, notice of dishonor, protest,
notice of protest, bringing of suit, and diligence in taking any legal action or
remedy to collect amounts called for hereunder.
5.7 Cost of Collection. If default is made in the payment of this
Debenture, the Maker shall pay the Holder hereof costs of collection, including
reasonable attorneys' fees.
5.8 Governing Law. This Debenture shall be governed by the internal
laws of the State of New Jersey, without regard to conflicts of laws principles.
The parties hereto hereby submit to the exclusive jurisdiction of the State of
New Jersey with respect to any dispute arising under this Debenture.
5.9 Suits for Enforcement and Remedies. If any one or more Events of
Default shall occur, the Holder may proceed to (i) protect and enforce Holder's
rights either by suit in equity or by action at law, or both, whether for the
specific performance of any covenant, condition or agreement contained in this
Debenture or in any agreement or document referred to herein or in aid of the
exercise of any power granted in this Debenture or in any agreement or document
referred to herein, (ii) enforce the payment of this Debenture, or (iii) enforce
any other legal or equitable right of the Holder. No right or remedy herein or
in any other agreement or instrument conferred upon the Holder of this Debenture
is intended to be exclusive of any other right or remedy, and each and every
such right or remedy shall be cumulative and shall be in addition to every right
and remedy given hereunder or now or hereafter existing at law or in equity or
by statute or otherwise.
5.10 Denominations. At the request of the Holder, upon surrender of
this Debenture, the Maker shall promptly issue new Debentures in the aggregate
outstanding principal amount hereof, in the form hereof, in such denominations
of at least $10,000 as the Holder shall request.
5.11 Replacement of Debenture. Upon receipt of evidence reasonably
satisfactory to the Maker of the loss, theft, destruction or mutilation of this
Debenture and, in the case of any such loss, theft or destruction, upon delivery
of an indemnity agreement reasonably satisfactory in form and amount to the
Maker, or, in the case of any such mutilation, upon surrender and cancellation
of this Debenture, the Maker, at its expense, will execute and deliver, in lieu
thereof, a new Debenture of like tenor.
5.12 Withholding Tax. The Holder of this Debenture agrees to bear the
cost of any U.S. withholding tax on interest payable under this Debenture.
5.13 Investment Purpose. The Holder of this Debenture, by acceptance
hereof, agrees that this Debenture is being acquired for investment and that
such Holder will not offer, sell or otherwise dispose of this Debenture or the
Common Stock issuable upon conversion hereof except under circumstances that
will not result in a violation of the Act or any applicable state securities
laws or similar laws relating to the sale of securities.
5.14 Severability. In case any provision of this Debenture is held by a
court of competent jurisdiction to be excessive in scope or otherwise invalid or
unenforceable, such provision shall be adjusted rather than voided, if possible,
so that it is enforceable to the maximum extent possible, and the validity and
enforceability of the remaining provisions of this Debenture will not in any way
be affected or impaired thereby.
5.15 Interest Rate. If any interest rate specified herein is held to be
impermissible, then the rate charged on the indebtedness represented hereby
shall be reduced to the highest rate then permitted by law.
5.16 Headings. The headings of the sections of this Debenture are
inserted for convenience only and do not affect the meaning of such section.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the Maker has caused this Debenture to be executed
this 12th day of December, 2002.
[SEAL] FIRST MONTAUK FINANCIAL CORP.
By:----------------------------
Name: Herbert Kurinsky
Title: President
Exhibit 1
NOTICE OF CONVERSION
OF CONVERTIBLE DEBENTURE
TO: [name]
(1) Pursuant to the terms of the attached Convertible Debenture (the
"Debenture"), the undersigned hereby elects to convert $-------- principal
amount of the Debenture into shares of Common Stock of First Montauk Financial
Corp. (the "Maker"). Capitalized terms used herein and not otherwise defined
herein have the respective meanings provided in the Debenture.
(2) Please issue a certificate or certificates for the number of shares of
Common Stock into which such principal amount of the Debenture is convertible in
the name(s) specified immediately below or, if additional space is necessary, on
an attachment hereto:
Name Name
Address Address
SS or Tax ID Number SS or Tax ID Number
(3) In the event of partial exercise, please reissue an appropriate
Debenture(s) for the balance that shall not have been converted.
(4) The undersigned represents and warrants that (i) all of the
requirements of the Securities Act of 1933, as amended (the "Act"), applicable
to the undersigned have been complied with by the undersigned and (ii) the
undersigned has not engaged in any transaction or series of transactions that is
a part of or a plan or scheme to evade the registration requirements of the Act.
Date
--------------------- -----------------------------------
Signature of Registered Holder
(Must be signed exactly as name
appears in the Debenture.
The signature must be notarized.)
EXHIBIT 4.2 - Form of Warrant
NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF
THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.
THE TRANSFERABILITY OF THIS WARRANT IS
RESTRICTED AS PROVIDED IN SECTION 2
No. ------ December __, 2002
FIRST MONTAUK FINANCIAL CORP.
COMMON STOCK PURCHASE WARRANT
For good and valuable consideration, the receipt of which is hereby
acknowledged by FIRST MONTAUK FINANCIAL CORP., a New Jersey corporation (the
"Company"), __________________ is hereby granted the right to purchase, at any
time from the date hereof until 5:00 P.M., New York City time, on ___________,
2007 (the "Warrant Exercise Term"), up to ________________ (_____) fully-paid
and non-assessable shares of the Company's Common Stock, no par value per share
("Common Stock").
This Warrant is exercisable at a per share price of $0.50 (the
"Exercise Price"), subject to adjustment as provided in Section l hereof,
payable in cash or by certified or official bank check in New York Clearing
House funds. Upon surrender of this warrant certificate with the annexed
Subscription Form duly executed, together with payment of the Exercise Price for
the shares of Common Stock purchased at the Company's principal executive
offices (presently located at 328 Newman Springs Road, Red Bank, New Jersey
07701) the registered Holder of the Warrant ("Holder") shall be entitled to
receive a certificate or certificates for the shares of Common Stock so
purchased (the "Warrant Shares").
l. Exercise of Warrant
1.1 The purchase rights represented by this Warrant are exercisable at the
option of the Holder hereof, in whole or in part (but not as to fractional
shares of the Common Stock) during any period in which this Warrant may be
exercised as set forth above. In the case of the purchase of less than all the
shares of Common Stock purchasable under this Warrant, the Company shall cancel
this Warrant upon the surrender thereof and, upon the written request of the
Holder, the Company shall execute and deliver a new Warrant of like tenor for
the balance of the shares of Common Stock purchasable hereunder.
1.2 The issuance of certificates for shares of Common Stock upon the
exercise of this Warrant shall be made without charge to the Holder hereof
including, without limitation, any tax which may be payable in respect of the
issuance thereof, and such certificates shall be issued in the name of, or in
such names as may be directed by, the Holder hereof; provided, however, that the
Company shall not be required to pay any tax which may be payable in respect of
any transfer involved in the issuance and delivery of such certificate in a name
other than that of the Holder and the Company shall not be required to issue or
deliver such certificates unless or until the person or persons requesting the
issuance thereof shall have paid to the Company the amount of such tax or shall
have established to the satisfaction of the Company that such tax has been paid.
1.3 Stock Dividends, Subdivisions, Reclassifications or Combinations. If
the Corporation shall (A) declare a dividend or make a distribution on its
Common Stock in shares of its Common Stock, (B) subdivide or reclassify the
outstanding shares of Common Stock into a greater number of shares, or (C)
combine or reclassify the outstanding Common Stock into a smaller number of
shares, the Exercise Price in effect at the time of the record date for such
dividend or distribution or the effective date of such subdivision, combination
or reclassification shall be proportionately adjusted so that the Holder after
such date shall be entitled to receive the number of shares of Common Stock
which he would have owned or been entitled to receive had this Warrant been
exercised immediately prior to such date. Successive adjustments in the Exercise
Price shall be made whenever any event specified above shall occur.
1.4 Consolidation, Merger, Sale or Conveyance. In case of any consolidation
or merger of the Company with any other corporation (other than a wholly owned
subsidiary), or in case of sale or transfer of all or substantially all of the
assets of the Company, or in the case of any share exchange whereby the Common
Stock is converted into other securities or property, the Company will be
required to make appropriate provision so that the Holder will have the right
thereafter to exercise this Warrant into the kind and amount of shares of stock
and other securities and property receivable upon such consolidation, merger,
sale, transfer or share exchange by a holder of the number of shares of Common
Stock for which this Warrant was exercisable immediately prior to such
consolidation, merger, sale, transfer or share exchange.
1.5 The Company covenants that it will at all times reserve and keep
available out of its authorized Common Stock, solely for the purpose of issuance
upon exercise of this Warrant as herein provided, such number of shares of
Common Stock as shall then be issuable upon the exercise of this Warrant. The
Company covenants that all shares of Common Stock which shall be so issuable
shall be duly and validly issued and fully-paid and non-assessable.
2. Restrictions on Transfer
The Holder acknowledges that he has been advised by the
Company that this Warrant and the shares of Common Stock (the "Warrant Shares")
issuable upon exercise thereof (collectively the "Securities") have not been
registered under the Securities Act of l933, as amended (the "Securities Act"),
that the Warrant is being issued, and the shares issuable upon exercise of the
Warrant will be issued, on the basis of the statutory exemption provided by
section 4(2) of the Securities Act relating to transactions by an issuer not
involving any public offering, and that the Company's reliance upon this
statutory exemption is based in part upon the representations made by the Holder
contained herein. The Holder acknowledges that he has been informed by the
Company of, or is otherwise familiar with, the nature of the limitations imposed
by the Securities Act and the rules and regulations thereunder on the transfer
of securities. In particular, the Holder agrees that no sale, assignment or
transfer of the Securities shall be valid or effective, and the Company shall
not be required to give any effect to any such sale, assignment or transfer,
unless (i) the sale, assignment or transfer of the Securities is registered
under the Securities Act, and the Company has no obligations or intention to so
register the Securities except as may otherwise be provided herein, or (ii) the
Securities are sold, assigned or transferred in accordance with all the
requirements and limitations of Rule 144 under the Securities Act or such sale,
assignment, or transfer is otherwise exempt from registration under the
Securities Act. The Holder represents and warrants that he has acquired this
Warrant and will acquire the Securities for his own account for investment and
not with a view to the sale or distribution thereof or the granting of any
participation therein, and that he has no present intention of distributing or
selling to others any of such interest or granting any participation therein.
The Holder acknowledges that the securities shall bear the following legend:
"These securities have not been registered under the Securities Act of
l933. Such securities may not be sold or offered for sale, transferred,
hypothecated or otherwise assigned in the absence of an effective
registration statement with respect thereto under such Act or an
opinion of counsel to the Company that an exemption from registration
for such sale, offer, transfer, hypothecation or other assignment is
available under such Act."
3. Registration Rights
3.1 Commencing on the date hereof and for a period of five (5) years
thereafter, the Company shall advise the Holder of this Warrant or of the
Warrant Shares or any then Holder of Warrants or Warrant Shares (such persons
being collectively referred to herein as "Holders") by written notice at least
30 days prior to the filing by the Company with the Securities and Exchange
Commission of any registration statement under the Securities Act of l933 (the
"Act") covering securities of the Company, except on Forms S-4 or S-8 (or
similar successor form), and upon the request of any such Holder within ten days
after the date of such notice, include in any such registration statement such
information as may be required to permit a public offering of the Warrant
Shares. The Company shall supply such number of prospectuses and other documents
as the Holder may reasonably request in order to facilitate the public sale or
other disposition of the Warrant Shares, qualify the Warrant Shares for sale in
such states as any such Holder reasonably designates and do any and all other
acts and things which may be necessary or desirable to enable such Holders to
consummate the public sale or other disposition of the Warrant Shares, and
furnish indemnification in the manner as set forth in Subsection 3.2 of this
Section 3. Such Holders shall furnish information and indemnification as set
forth in Subsection 3.2 of this Section 3. For the purpose of the foregoing,
inclusion of the Warrant Shares by the Holder in a Registration Statement
pursuant to this sub-paragraph 3.l under a condition that the offer and/or sale
of such Warrant Shares not commence until a date not to exceed 90 days from the
effective date of such registration statement shall be deemed to be in
compliance with this sub-paragraph 3.l.
3.2 The following provisions of this Section 3 shall also be applicable to
the exercise of the registration rights granted under this Section 3.l:
(A) The foregoing registration rights shall be contingent on the
Holders furnishing the Company with such appropriate information (relating to
the intentions of such Holders) as the Company shall reasonably request in
writing. Following the effective date of such registration, the Company shall
upon the request of any owner of Warrants and/or Warrant Shares forthwith supply
such number of prospectuses meeting the requirements of the Act as shall be
requested by such owner to permit such Holder to make a public offering of all
Warrant Shares from time to time offered or sold to such Holder, provided that
such Holder shall from time to time furnish the Company with such appropriate
information (relating to the intentions of such Holder) as the Company shall
request in writing. The Company shall also use its best efforts to qualify the
Warrant Shares for sale in such states as such Holder shall reasonably
designate.
(B) The Company shall bear the entire cost and expense of any
registration of securities initiated by it under Subsection 3.l of this Section
3 notwithstanding that Warrant Shares subject to this Warrant may be included in
any such registration. Any Holder whose Warrant Shares are included in any such
registration statement pursuant to this Section 3 shall, however, bear the fees
of his own counsel and any registration fees, transfer taxes or underwriting
discounts or commissions applicable to the Warrant Shares sold by him pursuant
thereto.
(C) The Company shall indemnify and hold harmless each such Holder and
each underwriter, if any, within the meaning of the Act, who may purchase from
or sell for any such Holder any Warrant Shares from and against any and all
losses, claims, damages and liabilities caused by any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement or any post-effective amendment thereto or any registration statement
under the Act or any prospectus included therein required to be filed or
furnished by reason of this Section 3 or caused by any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading except insofar as such
losses, claims, damages or liabilities are caused by any such untrue statement
or alleged untrue statement or omission or alleged omission based upon
information furnished or required to be furnished in writing to the Company by
such Holder or underwriter expressly for use therein, which indemnification
shall include each person, if any, who controls any such underwriter within the
meaning of such Act; provided, however, that the Company shall not be obliged so
to indemnify any such Holder or underwriter or controlling person unless such
Holder or underwriter shall at the same time agree to indemnify the Company, its
directors, each officer signing the related registration statement and each
person, if any, who controls the Company within the meaning of such Act, from
and against any and all losses, claims, damages and liabilities caused by any
untrue statement or alleged untrue statement of a material fact contained in any
registration statement or any prospectus required to be filed or furnished by
reason of this Section 3 or caused by any omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading insofar as such losses, claims, damages or liabilities are caused
by any untrue statement or alleged untrue statement or omission based upon
information furnished in writing to the Company by any such Holder or
underwriter expressly for use therein.
(D) The Company may withdraw the registration at any time.
4. Exchange and Replacement of Warrant Certificates.
This Warrant Certificate is exchangeable without expense, upon
the surrender hereof by the registered Holder at the principal executive office
of the Company, for a new Warrant Certificate of like tenor and date
representing in the aggregate the right to purchase the same number of Warrant
Shares in such denominations as shall be designated by the Holder thereof at the
time of such surrender.
Upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this Warrant
Certificate, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to it, and reimbursement to the Company of all
reasonable expenses incidental thereto, and upon surrender and cancellation of
the Warrants, if mutilated, the Company will make and deliver a new Warrant of
like tenor, in lieu thereof and any such lost, stolen, destroyed or mutilated
warrant shall thereupon become void.
5. Elimination of Fractional Interests.
The Company shall not be required to issue certificates
representing fractions of the shares of Common Stock and shall not be required
to issue scrip or pay cash in lieu of fractional interests, it being the intent
of the parties that all fractional interests shall be eliminated by rounding any
fraction up or down to the nearest whole number of shares of Common Stock.
6. Rights of Warrant Holders.
Nothing contained in this Agreement shall be construed as
conferring upon the Holder any rights whatsoever as a stockholder of the
Company, either at law or in equity, including without limitation, or Holders
the right to vote or to consent or to receive notice as a stockholder in respect
of any meetings of stockholders for the election of directors the right to
receive dividends or any other matter.
7. Miscellaneous
7.l All the covenants and agreements made by the Company in this Warrant
shall bind its successors and assigns.
7.2 No recourse shall be had for any claim based hereon or otherwise in any
manner in respect hereof, against any incorporator, stockholder, officer or
director, past, present or future, of the Company or of any predecessor
corporation, whether by virtue of any constitutional provision or statute or
rule of law, or by the enforcement of any assessment or penalty or in any other
manner, all such liability being expressly waived and released by the acceptance
hereof and as part of the consideration for the issue hereof.
7.3 No course of dealing between the Company and the Holder hereof shall
operate as a waiver of any right of any Holder hereof, and no delay on the part
of the Holder in exercising any right hereunder shall so operate.
7.4 This Warrant may be amended only by a written instrument executed by
the Company and the Holder hereof. Any amendment shall be endorsed upon this
Warrant, and all future Holders shall be bound thereby.
7.5 All communications provided for herein shall be sent, except as may be
otherwise specifically provided, by registered or certified mail: if to the
Holder of this Warrant, to the address shown on the books of the Company; and if
to the Company, to 328 Newman Springs Road, Red Bank, New Jersey 07701,
attention: Office of the President, or to such other address as the Company may
advise the Holder of this Warrant in writing. Notices shall be deemed given when
mailed.
7.6 The provisions of this Warrant shall in all respects be constructed
according to, and the rights and liabilities of the parties hereto shall in all
respects be governed by, the laws of the State of New Jersey. This Warrant shall
be deemed a contract made under the laws of the State of New Jersey and the
validity of this Warrant and all rights and liabilities hereunder shall be
determined under the laws of said State.
7.7 The headings of the Sections of this Warrant are inserted for
convenience only and shall not be deemed to constitute a part of this Warrant.
Signature page follows.
IN WITNESS WHEREOF, FIRST MONTAUK FINANCIAL CORP. has caused this Warrant
to be executed in its corporate name by its officer, and its seal to be affixed
hereto.
Dated: December --, 2002
Red Bank, New Jersey
FIRST MONTAUK FINANCIAL CORP.
By:-----------------------------
Herbert Kurinsky
President
ATTEST:
- -------------------------------
Secretary
SUBSCRIPTION FORM
TO: First Montauk Financial Corp.
328 Newman Springs Road
Red Bank, New Jersey 07701
The undersigned Holder hereby irrevocably elects to exercise the right
to purchase shares of Common Stock covered by this Warrant according to the
conditions hereof and erewith makes full payment of the Exercise Price of such
shares.
Kindly deliver to the undersigned a certificate representing the
Shares.
INSTRUCTIONS FOR DELIVERY
Name: ____________________________________________________________
(please typewrite or print in block letters)
Address: __________________________________________________________
Tax I.D. No. or Social Security No.: ____________________________________
Dated: _________________________
Signature ________________________________
STATE OF ___________)
COUNTY OF _________) ss:
On this __ day of ___________, before me personally came ________, to
me known, who being by me duly sworn, did depose and say that he resides at
__________________, that he is the holder of the foregoing instrument and that
he executed such instrument and duly acknowledged to me that he executed the
same.
-----------------------------
Notary Public
[FORM OF 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 FIRST
MONTAUK FINANCIAL CORP., with full power of substitution.
Dated:
------------------------- Signature:
-----------------------------------
(signature must conform in all
respects to name of holder as
specified on the face of
the Warrant Certificate)
(Insert Social Security or Other
Identifying Number of Assignee)
STATE OF ----------)
COUNTY OF ---------) ss:
On this ---- day of ----------------, before me personally came
- -------------------, to me known, who being by me duly sworn, did depose and say
that he resides at ------------------, that he is the holder of the foregoing
instrument and that he executed such instrument and duly acknowledged to me that
he executed the same.
-----------------------------
Notary Public