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) January 5, 2004
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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 and Required FD Disclosure.
First Montauk Financial Corp. (OTC BB: FMFK.OB), has completed a private
offering of its securities as of December 31, 2003. In the offering, First
Montauk sold an aggregate of $1,895,000 of convertible debentures to certain
"accredited investors" only. The offering consisted of up to $3,000,000
principal amount of 6% convertible debentures. 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 its registered
representatives were issued warrants to purchase shares of common stock at the
rate of 10% of the principal amount of debentures sold. These warrants are
exercisable for a period of five years at an exercise price of $.50 per share.
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: January 5, 2004 By /s/ William J. Kurinsky
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William J. Kurinsky
Chief Executive 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
- -------------, 2003 $_________
FIRST MONTAUK FINANCIAL CORP., a New Jersey corporation (the "Company" or
the "Maker") hereby promises to pay to ________________ (the "Holder") the sum
of ____________________ ($_______) (the "Principal") on the earlier of (i)
_____, 2008 (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,
2004, 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, (i) 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 and (ii) the shares of Common Stock
issuable upon conversion have been included in a registration statement declared
effective by the U.S. Securities and Exchange Commission, than 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 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;
(i) 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;
(j) 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
__ day of _________, 2003.
[SEAL] FIRST MONTAUK FINANCIAL CORP.
By:_______________________________
Name: Herbert Kurinsky
Title: President
Exhibit 1
NOTICE OF CONVERSION
OF CONVERTIBLE DEBENTURE
TO: [______________________]
(2) 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.
(3) 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
(4) In the event of partial exercise, please reissue an appropriate
Debenture(s) for the balance that shall not have been converted.
(5) 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. ____ ________, 2003
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 ___________,
2008 (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: _______________, 2003
Red Bank, New Jersey
FIRST MONTAUK FINANCIAL CORP.
By:_____________________________
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 herewith 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