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) July 17, 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
On July 17, 2003, First Montauk Financial Corp. and its subsidiary, First
Montauk Securities Corp., entered into a settlement agreement with certain
claimants in order to settle pending arbitration proceedings which were brought
against them within the last eighteen months. The covered proceedings arose out
of customer purchases of certain high-yield corporate bonds which declined in
market value and subsequently defaulted. The settlement agreement covers eleven
separate claims and sought an aggregate of approximately $12.3 million in
damages. In exchange for the consideration provided by First Montauk, each
claimant granted a general release of claims in favor of First Montauk and all
individual respondents, with the exception of the registered representative who
had handled the claimants' accounts. In consideration for the release granted by
the claimants, First Montauk agreed to pay to the claimants an aggregate of
$1,000,000 cash and to issue to the claimants warrants to purchase an aggregate
of 750,000 shares of common stock of First Montauk Financial Corp. and 500,000
shares of common stock of First Montauk Financial Corp. First Montauk Financial
Corp. has agreed to file a registration statement with the Securities and
Exchange Commission covering the resale of the shares of common stock underlying
the warrants and fifty percent of the shares of common stock issued in
connection with the settlement agreement.
In addition, the settlement agreement provides that First Montauk may be
obligated to make additional payments of up to $600,000, in the event that
claimants elect to exercise the warrants on certain dates. Specifically, upon
the election of the majority of then existing warrant holders to exercise up to
a maximum of 250,000 warrants, respectively during the months of June 2004, June
2005 and June 2006, the claimants, upon exercising their warrants, will be
required to sell the shares in the open market. Thereafter, First Montauk would
pay to the claimants up to an aggregate amount of $200,000 less the amount
received by the claimants from the sale of their shares net of commissions. In
the event that warrant holders do not elect to exercise the warrants during a
particular period, First Montauk will not be required to make a payment for that
period.
Notwithstanding the foregoing, several proceedings, which arose from
similar allegations, have not been settled, and it is possible that new claims
may be asserted in the future. Pending matters are being vigorously defended and
First Montauk believes that it has meritorious defenses in each case and that
actual damages, if any, will be substantially below the alleged amounts.
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.
Dated: July 24, 2003 First Montauk Financial Corp.
(Registrant)
By /s/ William J. Kurinsky
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William J. Kurinsky
Chief Financial Officer