AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 24, 1997
REGISTRATION NO. 333-30135
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
----------
FIRST MONTAUK FINANCIAL CORP.
--------------------------------------------------
(Exact name of Registrant as specified in charter)
NEW JERSEY 22-1737915
- ------------------------ ----------------------
(State of Incorporation) (I.R.S. Employer
Identification Number)
PARKWAY 109 OFFICE CENTER
328 NEWMAN SPRINGS ROAD
RED BANK, NEW JERSEY 07701
(732) 842-4700
------------------------------------------------------------------------
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
----------
HERBERT KURINSKY, PRESIDENT
PARKWAY 109 OFFICE CENTER
328 NEWMAN SPRINGS ROAD
RED BANK, NEW JERSEY 07701
(732) 842-4700
------------------------------------------------------------
(Name and address, including zip code, and telephone number,
including area code, of agent for service)
----------
With copies to:
VICTOR J. DiGIOIA, ESQ.
GOLDSTEIN & DiGIOIA, LLP
369 LEXINGTON AVENUE
NEW YORK, NEW YORK 10017
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box. [X]
If the registrant elects to deliver its latest report to security holders,
or a complete and legible facsimile thereof, pursuant to 11(a)(1) of this Form,
check the following box. [ ]
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------
Proposed Proposed
Maximum Maximum
Title of Each Class Amount Offering Aggregate Amount of
of Securities Being Price per Offering Registration
Being Registered Registered Unit(1) Price(1) Fee(1)
- --------------------------------------------------------------------------------
Units (2) ................. 3,200,000 $ .45 $ 1,440,000 $ 436
Class A Redeemable Common
Stock Purchase Warrants
Class B Redeemable Common
Stock Purchase Warrants
Class C Redeemable Common
Stock Purchase Warrants
- --------------------------------------------------------------------------------
Common Stock, no par
value(3).................. 3,200,000 $3.00 $ 9,600,000 $ 2,909
- --------------------------------------------------------------------------------
Common Stock, no par
value(4).................. 3,200,000 $5.00 $16,000,000 $ 4,848
- --------------------------------------------------------------------------------
Common Stock, no par
value(5).................. 3,200,000 $7.00 $22,400,000 $ 6,787
- --------------------------------------------------------------------------------
Total ..................... $12,800,000 $49,440,000 $14,980
================================================================================
Total amount previously paid $13,947.
Total amount currently due $1,033.
(1) Estimated solely for the purpose of determining the registration fee.
(2) An aggregate of up to 3,200,000 Class A Redeemable Common Stock Purchase
Warrants, 3,200,000 Class B Redeemable Common Stock Purchase Warrants and
3,200,000 Class C Redeemable Common Stock Purchase Warrants ("Warrants")
will be offered to the public in up to 3,200,000 Units. Each Unit consists
of one Class A Redeemable Common Stock Purchase Warrant, one Class B
Redeemable Common Stock Purchase Warrant and One Class C Redeemable Common
Stock Purchase Warrant. Includes additional Units to accommodate additional
shares of Common Stock which may be issued prior to the record date year
the exercise of Outstanding Warrants and Options.
(3) Shares of Common Stock issuable upon exercise of Class A Redeemable Common
Stock Purchase Warrants. Pursuant to Rule 416 there are also being
registered such additional number of shares of Common Stock as may become
issuable pursuant to the anti-dilution provisions of the Warrants. Upon
exercise of each Warrant, the holder will receive one share of Common
Stock, subject to adjustment in certain circumstances.
(4) Shares of Common Stock issuable upon exercise of Class B Redeemable Common
Stock Purchase Warrants. Pursuant to Rule 416 there are also being
registered such additional numbers of shares of Common Stock as may become
issuable pursuant to the anti-dilution provisions of the Warrants.
(5) Shares of Common Stock issuable, upon exercise of Class C Redeemable Common
Stock Purchase Warrants. Pursuant to Rule 416 there are also being
registered such additional numbers of shares of Common Stock as may become
issuable pursuant to the anti-dilution provisions of the Warrants.
----------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION ACTING PURSUANT TO SECTION 8(A) MAY
DETERMINE.
================================================================================
ii
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. OFFERS TO BUY THESE SECURITIES MAY NOT BE
ACCEPTED WITHOUT THE DELIVERY OF A FINAL PROSPECTUS. THIS PROSPECTUS SHALL NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL
THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER,
SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION
UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED NOVEMBER 24, 1997
P R O S P E C T U S
- -------------------
3,072,779 UNITS
Each Unit consists of one Class A Redeemable Common Stock Purchase Warrant,
one Class B Redeemable Common Stock Purchase Warrant and one Class C Redeemable
Common Stock Purchase Warrant.
FIRST MONTAUK FINANCIAL CORP.
First Montauk Financial Corp. (the "Company") is offering (the "Rights
Offering") up to 3,072,779 units (the "Units"), to holders ("Shareholders") of
record of its common stock, no par value (the "Common Stock") at the close of
business on __________, 1997 (the "Record Date"), pursuant to non-transferable
rights (the "Rights") to purchase Units at a price of $.45 per Unit (the
"Subscription Price"). Holders of Rights ("Rights Holders") will not be required
to pay any brokerage fees for the subscription of Units under the Rights
Offering. Rights Holders will be able to exercise their Rights until 5:00 p.m.
Eastern time on __________, 1997 (the "Expiration Time").
Each Shareholder is receiving one Right for each share of Common Stock held
of record at the close of business on the Record Date. Three Rights will entitle
the Rights Holder (the "Basic Subscription Privilege") to subscribe for one
Unit. Any rights not duly subscribed for prior to the Expiration Time will
expire. Each Rights Holder will also be entitled to purchase at the Subscription
Price additional Units that are not otherwise subscribed for pursuant to the
exercise of the Basic Subscription Privilege, subject to proration and reduction
by the Company under certain circumstances (the "Oversubscription Privilege").
Once a Rights Holder has exercised the Basic Subscription Privilege or the
Oversubscription Privilege, such exercise may not be revoked. The Rights will be
evidenced by non-transferable certificates (the "Subscription Rights
Certificates"). See "Rights Offering Procedures."
Each Unit consists of one Class A Redeemable Common Stock Purchase Warrant,
one Class B Redeemable Common Stock Purchase Warrant and one Class C Redeemable
Common Stock Purchase Warrant. Each Class A Redeemable Common Stock Purchase
Warrant (the "Class A Warrants"), entitles the holder thereof to purchase during
the three years commencing on __ [the date of initial issuance] one share of
Common Stock of the Company (the "Class A Warrant Shares"), at an exercise price
of $3.00 per share, subject to adjustment in certain circumstances. Each Class B
Redeemable Common Stock Purchase Warrant (the "Class B Warrants"), entitle the
holder thereof to purchase during the five years commencing on __ [the date of
initial issuance] one share of Common Stock of the Company (the "Class B Warrant
Shares"), at an exercise price of $5.00 per share, subject to adjustment in
certain circumstances. Each Class C Redeemable Common Stock Purchase Warrants
(the "Class C Warrants"), entitle the holder thereof to purchase during the
seven years commencing on __ [the date of initial issuance] one share of Common
Stock of the Company (the "Class C Warrant Shares"), at an exercise price of
$7.00 per share, subject to adjustment in certain circumstances. The Class A, B
and C Warrants are collectively referred to as the "Warrants." The Warrants will
be separately transferable immediately. No separate securities for the Units
will be issued.
The Company may redeem all of the Warrants or a portion thereof on a
pro-rata basis, at any time at $.05 per Warrant, upon thirty (30) days' prior
written notice, if the closing bid price of the Company's Common Stock for the
ten consecutive trading days ending within ten days of the date of the notice of
redemption is not less than: (a) for the Class A Warrants, $5.00 per share, (b)
for the Class B Warrants $7.00 per share, and (c) for the Class C Warrants,
$12.00 per share. See "Potential Adverse Effects of Redemption of Warrants."
Upon completion of the Rights Offering, and after the exercise of any
Warrants, Shareholders who do not fully exercise their Rights will own a smaller
proportional interest in the Company than would otherwise be the case.
The Company's Common Stock is traded in the over-the-counter market and
reported on the NASD OTC Bulletin Board System and by the National Daily
Quotation Service published by the National Quotation Bureau. On November __,
1997 the bid and asked prices of the Company's Common Stock as reported by a
market maker were $_____ and $____, respectively. See "Risk Factors" "NASDAQ
Listing." See "Price Range of Common Stock and Certain Market Information."
----------
THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK AND SHOULD BE
PURCHASED ONLY BY THOSE PERSONS WHO CAN AFFORD THE LOSS OF
THEIR ENTIRE INVESTMENT. SEE "RISK FACTORS."
----------
Rights are exercisable by properly completing a Subscription Rights
Certificate and returning it to the Company with full payment for the subscribed
Units. Payment may be made by personal check, certified check, cashier's check,
money order or wire transfer and must be received prior to the Expiration Time.
No interest will be paid to subscribers on any funds used to subscribe for the
Units. See "Rights Offering Procedures." The Company's Board of Directors makes
no recommendation as to whether any Rights Holder should subscribe for the
Units.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------
================================================================================
Proceeds to the
Subscription Price Company (1)(2)(3)
- --------------------------------------------------------------------------------
Per Unit......................... $0.45 $0.45
- --------------------------------------------------------------------------------
Total (1)........................ $1,382,751 $1,382,751
================================================================================
1. The total Subscription Price and the total Proceeds to the Company assume
the purchase of 3,072,779 Units pursuant to the exercise of Rights.
2. Before deducting offering expenses estimated at $___________ payable by the
Company.
3. The Company has not employed any brokers, dealers or underwriters in
connection with the solicitation of exercises of Rights in the Rights
Offering and no underwriting commissions, fees or discounts will be paid in
connection with the Rights Offering.
----------
The Units offered hereby are offered by the Company subject to withdrawal,
cancellation or modification of the offer without notice. It is expected that
delivery of the Units will be made as soon as practicable following the
Expiration Time.
The date of this Prospectus is November __, 1997
2
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company may be inspected and
copied at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549 and at the following Regional Offices
of the Commission: New York Regional Office, 7 World Trade Center, New York, New
York 10048; and Chicago Regional Office, Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois, 60661. Copies of such material may be
obtained from the public reference section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. The Commission
maintains a Website that contains reports, proxy statements and other
information regarding issuers that file electronically with the Commission. The
address of that Website is: http://www.sec.gov.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, heretofore filed by the Company with the
Commission pursuant to the Exchange Act, are hereby incorporated by reference,
except as superseded or modified herein:
1. The Company's Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1996; and
2. The Company's Quarterly Report on Form 10-Q for the nine months ended
September 30, 1997.
3. The Company's Proxy Statement for its Annual Meeting of Shareholders
held on June 27, 1997.
Each document filed subsequent to the date of this Prospectus pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the termination
of this Offering shall be deemed to be incorporated by reference in this
Prospectus and shall be part hereof from the date of filing of such document.
The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, upon the written or oral request of any such
person, a copy of any document described above (other than exhibits). Requests
for such copies should be directed to Robert Rabinowitz, Esq., First Montauk
Financial Corp., Parkway 109 Office Center, 328 Newman Springs Road, Red Bank,
New Jersey 07701, telephone (732) 842-4700.
3
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS INTENDED TO SET FORTH CERTAIN PERTINENT FACTS AND
HIGHLIGHTS FROM MATERIAL CONTAINED IN THE BODY OF THIS PROSPECTUS. THE SUMMARY
IS QUALIFIED IN ITS ENTIRETY BY THE DETAILED INFORMATION AND FINANCIAL
STATEMENTS APPEARING ELSEWHERE IN THIS PROSPECTUS.
THE COMPANY
First Montauk Financial Corp. ("FMFC") is a holding company, which, through
its principal wholly-owned subsidiary, First Montauk Securities Corp. ("FMSC"),
is primarily engaged in the operation of an investment banking and securities
brokerage firm. FMFC also sells insurance products through its subsidiary
Montauk Insurance Services, Inc., ("MISI") and equipment leases through Montauk
Advisors, Inc. ("MAI"). FMFC, FMSC, MISI and MAI are sometimes collectively
referred to herein as the "Company". FMSC is a broker-dealer registered with the
Securities and Exchange Commission ("SEC"), a member of the National Association
of Securities Dealers Regulation, Inc. ("NASDR"), the Municipal Securities
Rulemaking Board ("MSRB"), and the Securities Investor Protection Corporation
("SIPC"). FMSC's business activities consist primarily of retail sales and
trading of listed and unlisted equity and fixed-income securities; sales of
government, municipal and corporate securities; options; commissions earned from
individual and institutional securities transactions; and market making
activities. FMSC also provides investment banking activities such as private and
public securities offerings. In 1995, FMSC became a registered advisor under the
Investment Advisors Act of 1940 and began offering investment advisory services
on a limited basis.
FMSC is currently licensed to conduct its broker-dealer business in 49
states and the District of Columbia. FMSC maintains approximately 125 branch
and/or satellite offices, all of which are maintained by affiliates. FMSC has
approximately 400 registered representatives, and services approximately 30,000
retail customer accounts.
FMSC's primary method of operation is through its affiliate program. The
affiliate program is designed to attract experienced brokers with existing
clientele who desire to operate their own office. It is through this affiliate
program that FMSC has expanded its customer base and retail activities by adding
brokers with established clientele. In order to become an affiliate of FMSC, the
registered representative must enter into an affiliate agreement with FMSC. The
Company believes that one of the primary reasons its affiliate program is
attractive to such individuals is because the affiliate arrangement entitles the
affiliate representative to obtain a significantly higher percentage of the
commissions generated by his sales than a registered representative would
normally receive. Based on the experience of FMSC's management, and information
derived from professional associations, FMSC believes that the range of standard
commission payout rates for registered representatives of retail forms is
approximately 40%-50%, whereas the Company's affiliates receive commissions of
approximately 80%-85%. The terms of the affiliate agreement provide that the
Company's affiliate establishes his own office and is solely responsible for the
payment of all expenses associated with the operation of the
4
branch office, including rent, utilities, furniture, equipment, stock quotation
machines, and general office supplies. All securities transactions are cleared
through FMSC's clearing firm on a fully disclosed basis. FMSC receives a
percentage (generally 15%-20% after deduction of clearing costs) of the
affiliates' commissions with no operating expenses directly attributable to the
maintenance of the specific affiliate office.
FMSC has also expanded its general securities business by adding registered
representatives to its main corporate office. FMSC is continuously seeking to
establish additional branch offices at sites and locations to be selected, the
timing and location of which will be based upon prevailing business and economic
conditions.
In 1991, MISI was formed for the purpose of offering and selling variable
annuity, variable life as well as traditional life and health insurance
products. Currently, MISI is licensed in the states of Alabama, Alaska, Arizona,
California, Connecticut, Delaware, Florida, Georgia, Illinois, Indiana,
Kentucky, Maine, Maryland, New Jersey, New York, North Carolina, Pennsylvania,
Rhode Island, South Carolina, Virginia, Washington and Wisconsin. MISI derives
revenue from insurance-related products and services from the existing base of
FMSC's Registered Representatives who are insurance licensed. In fiscal year
1996 MISI earned $523,868 in gross commissions from the sale of insurance.
In 1993, the Company formed Montauk Advisors, Inc., ("MAI") as a
wholly-owned subsidiary. MAI engages in the sale of equipment leasing contracts
on an agency basis. The equipment financed to date includes copiers, facsimile
machines and other business machines. These leases are sold to various customers
from which MAI derives a commission. In fiscal year 1996 MAI earned $373,216 in
gross commissions from the sale of leases.
In early 1995, FMSC became registered with the Securities and Exchange
Commission (the "SEC") as an Investment Advisor under the Investment Advisors
Act of 1940 for the purpose of providing investment advisory services and
fee-based managed accounts to clients of FMSC. In August 1997, as a result of
the National Securities Markets Improvement Act ("NSMIA"), FMSC voluntarily
withdrew this registration since it was no longer required. Currently, FMSC is
licensed as an Investment Advisor in the States of Alaska, Arizona, California,
Connecticut, Florida, Hawaii, Indiana, New Jersey, New York, North Carolina,
Pennsylvania, Texas, and West Virginia. Although to date FMSC has received
minimal revenues from its advisory services, management's goal is to derive
revenue by providing investment advisory services to FMSC's existing client base
as well as to additional clientele seeking fee-based managed accounts.
FMFC and its subsidiaries (with the exception of MISI) each maintain their
principal executive offices at Parkway 109 Office Center, 328 Newman Springs
Road, Red Bank, New Jersey 07701, telephone (732) 842-4700. MISI maintains its
principal offices at One Mack Centre Drive, Paramus, New Jersey.
5
RECENT DEVELOPMENTS
RECENT LOANS
Montauk Advisors, Inc. ("MAI") has made various loans totaling $374,293.09
to Global Financial Corp., the financing company which packages and sells
leasing contracts through MAI. These loans were made for the purpose of
assisting Global with its short-term cash flow requirements. The loans carry 8%
per annum interest and are due to be paid in full on April 1, 1998. Global may
seek additional loans from MAI in the short-term which will be evaluated on a
case by case basis.
FEDERAL ADMINISTRATIVE ORDER
In June 1997, without admitting or denying the findings of the SEC, FMSC
consented to the issuance of an order making findings and imposing remedial
sanctions and a Cease-and-Desist Order in the Matter of First Montauk Securities
Corp., Admin. Proc. File No. 3-9342, Release No. 34-38775 (June 25, 1997)
("Order").
In the Order, FMSC was ordered to cease and desist from present or future
violations of Sections (15)(c) and 17(a) of the Securities Exchange Act of 1934
("Exchange Act") and Rules 15c3-1, 17a-3, 17a-5 and 17a-11 thereunder. FMSC was
also censured and required to pay disgorgement in the amount of $175,458,
prejudgment interest in the amount of $51,584 and a civil money penalty in the
amount of $50,000. In addition, FMSC was required to retain an independent
consultant to conduct a review of, and to report and make recommendations as to,
FMSC's supervisory and compliance policies and procedures, particularly as they
relate to the firm's affiliate program and the supervision of the firm's branch
offices by the main office.
There can be no assurance whether the Order will have a material adverse
effect on the business of the Company, or result in the institution of other
proceedings by State Securities Administrators.
In February 1997, FMSC entered into a Consent Decree with the State of
Florida, without admitting or denying the findings, relating to the alledged
failure to supervise a former affiliate office in Houston. FMSC agreed to pay a
fine of $15,000 and engage an independent consultant, as well as other
provisions temporarily limiting brokerage activities in the State of Florida.
There can be no assurance this decree will not have a material adverse effect
on the business of the Company.
The Rights Offering
Rights............................ Each record holder of Common Stock as of the
close of business on the Record Date will
receive one nontransferable Right for every
share of Common Stock held of record as of
the close of business on the Record Date. An
aggregate of up to 9,214,354 Rights will be
distributed. See "The Rights Offering -- The
Rights".
Basic Subscription Privilege...... Holders will be entitled to subscribe, up to
the Expiration Time and at the Subscription
Price, for one Unit for every three Rights
held. The election of a Holder to exercise
Rights in the Rights Offering is
irrevocable. Certificates representing
Warrants purchased pursuant to both the
Basic Subscription Privilege and the
Oversubscription Privilege will be delivered
to subscribers as soon as practicable after
the Expiration Time. Accordingly, until
certificates are delivered, subscribing
Holders may not be able to sell the Warrants
that they have purchased in the Rights
Offering. See "The Rights Offering-
Subscription Privileges-Basic Subscription
Privilege."
Oversubscription Privilege........ Each record holder of Common Stock as of the
close of business on the Record Date who
exercises all of his or her Rights pursuant
to the Basic Subscription Privilege will be
entitled to subscribe, up to the Expiration
Time and at the Subscription Price, for
additional Units, that are available after
satisfaction of all subscriptions pursuant
to the Basic Subscription Privilege (the
"Excess Units"). The Oversubscription
Privilege is not transferable. A Holder may,
at the time of exercising the Basic
Subscription
6
Privilege, exercise the Oversubscription
Privilege for up to the total number of
Units to be issued in the Rights offering.
If an insufficient number of Excess Units is
available to satisfy fully all elections to
exercise the Oversubscription Privilege,
then the Excess Units will be prorated in
proportion to the number of shares of Common
Stock owned by such Holder as of the close
of business on the Record Date. See "The
Rights Offering--Subscription Privileges
Oversubscription Privilege."
Subscription Price of Units....... The Subscription Price will be $.45 per
Unit. Each Holder will be deemed to have
exercised first, the Basic Subscription
Privilege and second, the Oversubscription
Privilege.
Shares outstanding Before
Rights Offering................. 9,218,338
Shares of Common Stock
Outstanding After Rights
Offering........................ 9,218,338
Shares of Common Stock to be
Issued Assuming the Exercise
of all of the Rights ........... 9,218,338
Shares of Common Stock to be
Outstanding Assuming the
Exercise of All of the
Warrants......................... 18,436,676
Nontransferrability of Rights..... The Rights are not transferable
Procedure for Exercising Rights... Rights will be evidenced by Rights
Certificates ("Rights Certificates") that
will be mailed to holders of Common Stock as
of the close of business on the Record Date
or, if such shares are held by any nominee
or depository, to such nominee or
depository. The Basic Subscription Privilege
and the Oversubscription Privilege may be
exercised by properly completing the Rights
Certificates evidencing those Rights and
forwarding them (or following the guaranteed
delivery procedures), with payment of the
Subscription Price (as hereinafter defined)
of $.45 for each
7
Unit or Excess Unit subscribed for pursuant
to the Basic Subscription Privilege and the
Oversubscription Privilege to the
Subscription Agent (as hereinafter defined)
prior to the Expiration Time. If Rights
Certificates are sent by mail, Holders are
urged to use insured, registered mail,
return receipt requested. Once a Holder has
exercised the Basic Subscription Privilege
and the Oversubscription Privilege, such
exercise may not be revoked. Any Rights not
duly exercised prior to the Expiration Time
will expire. See "The Rights
Offering--Exercise of Rights."
Persons Holding Common Stock
Through Others.................. Persons holding shares of Common Stock and
receiving the Rights distributable with
respect thereto through a broker, dealer,
commercial bank, trust company or other
nominee should contact the appropriate
institution or nominee and request it to
effect such transactions on their behalf.
See "The Rights Offering--Exercise of
Rights."
Procedure for Exercising Rights
by Foreign Shareholders......... Rights Certificates will not be mailed to
record holders of Common Stock whose
addresses are outside the United States and
Canada, but will be held by the Subscription
Agent for such holders' accounts until the
Subscription Agent receives instructions to
exercise the Rights. If no instructions are
received by the Expiration Time, the Rights
will be null and void.
Certain Federal Income Tax
Consequences.................... For U. S. federal income tax purposes,
shareholders will not recognize taxable
income upon receipt of the Rights, nor will
they recognize gain or loss upon exercise or
expiration of the Rights. See "Certain
Federal Income Tax Consequences."
Conditions........................ The Company reserves the right at any time
prior to the Expiration Time to terminate
the Rights Offering if consummation is
prohibited by law or applicable regulation.
Issuance of Units................. Certificates representing Warrants purchased
pursuant to the exercise of the Basic
Subscription Privilege and the
Oversubscription Privilege will be delivered
to subscribers
8
and the Standby Purchasers in a single
delivery as soon as practicable after the
Expiration Time and after all prorations
contemplated by the terms of the Rights
Offering have been affected. See "the Rights
Offering--Subscription Privileges."
Expiration...................... The Rights Offering will expire at 5:00 p.m.,
New York City time on _______________, 1997,
subject to extension at the sole discretion
of the Company's Board of Directors, but not
beyond 5:00 p.m., New York City time, on
___________, 1997. Any Rights not duly
exercised prior to the Expiration Time will
expire.
Subscription Agent............... North American Transfer Company
OTC Bulletin Board Symbol........ FMFK
Important Dates for the Rights Offering
Event Date
----- ----
Record Date ..................................... _______, 1997
Subscription Period Commences ................... _______, 1997
Expiration Time ................................. _______, 1997(1)
- --------
(1) Unless the Rights Offering is extended to a date not later than
________________________, 1997.
9
SUMMARY FINANCIAL DATA
================================================================================
Nine Months Ended
Years Ended December 31, September 30,
------------------------- ----------------------------
1996 1995 1997 1996
- --------------------------------------------------------------------------------
Statement of
Operations Data:
- ----------------
Revenues ............... $35,089,688 $28,342,203 $26,623,733 $27,181,779
- --------------------------------------------------------------------------------
Net income ............. $ 32,789 $ 768,088 $ 1,082,662 $ 705,671
- --------------------------------------------------------------------------------
Per Share:
- ----------
Net income ............. $ .01 $ .09 $ 0.11 $ 0.08
- --------------------------------------------------------------------------------
Number of shares ....... 8,623,538 8,422,365 10,241,383 8,553,032
- --------------------------------------------------------------------------------
Balance Sheet Data:
- -------------------
- --------------------------------------------------------------------------------
Total assets ........... $ 8,742,039 $10,486,967 $10,398,683 $ 9,061,786
- --------------------------------------------------------------------------------
Total liabilities ...... $ 4,625,260 $ 6,886,021 $ 3,776,207 $ 4,538,454
- --------------------------------------------------------------------------------
Common stock issued
with guaranteed
resale price ........... $ 421,500 $ 346,500 $ 335,000
- --------------------------------------------------------------------------------
Stockholders' equity ... $ 3,695,279 $ 3,600,946 $ 6,275,976 $ 4,188,332
================================================================================
10
RISK FACTORS
The Units offered hereby are speculative and involve a high degree of risk.
Prospective investors should carefully consider, among other things, the
following risk factors and speculative factors inherent in and affecting the
business of the Company and this offering.
SAFE HARBOR STATEMENT
Certain statements in this Prospectus constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995 (the "Reform Act"). The Company desires to avail itself of certain "safe
harbor" provisions of the Reform Act and is therefore including this special
note to enable the Company to do so. Forward-looking statements in this
Prospectus or hereafter included in other publicly available documents filed
with the Securities and Exchange Commission, reports to the Company's
Shareholders and other publicly available statements issued or released by the
Company involve known and unknown risks, uncertainties and other factors which
could cause the Company's actual results, performance (financial or operating)
or achievements to differ from the future results, performance (financial or
operating) or achievements expressed or implied by such forward looking
statements. Such future results are based upon management's best estimates based
upon current conditions and the most recent results of operations. These risks
include, but are not limited to risks associated with the intense competition in
the brokerage industry, potential litigation, regulatory matters and the
volatility of the securities markets, as well as other risks which may be
detailed in the Company's Securities and Exchange Commission filings, including
its Annual Report on Form 10-KSB for the year ended December 31, 1996, each of
which could adversely affect the Company's business and the accuracy of the
forward-looking statements contained herein.
1. ORGANIZATIONAL AND OPERATING HISTORY
For the years ended December 31, 1996 and 1995, the Company had revenues of
$35,089,688, and $28,342,203, respectively and had net income of $32,789 and
$768,088 for the years ended December 31, 1996 and 1995, respectively. No
assurance is given that the Company will not incur losses in the future, and
such losses would necessarily affect the nature, scope and level of the
Company's future operations. The results of operations to date are not
necessarily indicative of the result of future operations. The Company's
securities business, by its very nature, is subject to various risks and
contingencies, many of which are beyond the ability of the Company to control.
These include economic conditions generally and in particular those affecting
securities markets, interest rates, discretionary income available for
investment; losses which may be incurred from underwriting and trading
activities; customer inability to meet commitments (such as margin obligations);
customer fraud; and employee misconduct and errors. Further, the nature and
extent of the Company's underwriting, trading and market activities, and hence
the volume and scope of its business is directly affected by its available "Net
Capital".
11
2. FLUCTUATING SECURITIES VOLUME AND PRICES
The Company and the securities industry in general are directly affected by
national and international economic and political conditions, broad trends in
business and finance, the level and volatility of interest rates, changes in and
uncertainty regarding tax laws and substantial fluctuations in the volume and
price levels of securities transactions. The Company and the securities industry
in general are subject to other risks, including risks of loss from the
underwriting of securities, counterparty (a party to which the Company has
credit or performance exposure) failures to meet commitments, customer fraud,
employee errors or misconduct and litigation. In addition, price fluctuations
may cause losses on securities positions. As the Company expands its investment
banking activities and more frequently serves as manager or co-manager of public
offerings of securities, it expects to make increased commitments of capital to
market-making activities in securities of those issuers. The expected additional
concentration of capital in the securities of those issuers held in inventory
will increase the risk of loss from reductions in the market price. Low trading
volume or declining prices generally result in reduced revenues. Under these
conditions, profitability is adversely affected since many costs, other than
commission compensation and bonuses, are fixed. Heavy trading volume has caused
serious operating problems, including delays in clearing and processing, for
many securities firms in the past and may do so in the future.
3. COMPETITION AND OTHER DEVELOPMENTS
The Company encounters intense competition in all aspects of its business
and competes directly with many other securities firms, a significant number of
which offer their customers a broader range of financial services, have
substantially greater resources and may have greater operating efficiencies. In
addition, a number of firm offer discount brokerage services to individual
retail customers and generally effect transactions at lower commission rates on
an "execution only" basis without offering other services such as investment
recommendations and research. The further expansion of discount brokerage firms
could adversely affect the Company's retail business. Moreover, there is
substantial commission discounting by full-service broker-dealers competing for
institutional and individual brokerage business. The possible increase of this
discounting could adversely affect the Company. Other financial institutions,
notably commercial banks and savings and loan associations, offer customers some
of the services and products presently provided by securities firms. In
addition, certain large corporations have entered the securities industry by
acquiring securities firms. While it is not possible to predict the type and
extent of competitive services which banks and other institutions ultimately may
offer to customers, the Company may be adversely affected to the extent those
services are offered on a large scale.
4. RISKS OF PRINCIPAL AND BROKERAGE TRANSACTIONS AND LENDING ACTIVITIES
The Company's trading, market making and underwriting activities involve
the purchase, sale or short sale of securities as a principal and, accordingly,
involve the risk of changes in the market prices of those securities and the
risk of a decrease in the liquidity of markets which
12
would limit the Company's ability to resell securities purchased or to
repurchase securities sold in principal transactions. The Company's brokerage
activities and its principal transactions are subject to credit risks. For
example a customer may not respond to a margin call, and since the securities
being held as collateral have diminished in value, there is a risk that the
Company may not recover the funds it loaned to the customer.
5. LITIGATION AND RELATED LOSSES
Many aspects of the Company's business involve substantial risk of
liability, including exposure to substantial liability under federal and state
securities laws in connection with the activity of its sales people as well the
underwriting and distribution of securities. In recent years, there has been an
increasing incidence of litigation involving the securities industry, including
class actions which generally seek rescission and substantial damages. During
the year ended December 31, 1996, the Company incurred $2,731,997 in costs
and expenses related to customer claims. See "Legal Proceedings" in Form 10-KSB
and 10-Q.
6. PERSONNEL; DEPENDENCE UPON REGISTERED REPRESENTATIVES
Most aspects of the Company's business are dependent on highly skilled and
experienced individuals. The Company has devoted considerable efforts to
recruiting and compensating those individuals and provides incentives to
encourage them to remain with the Company. Individuals associated with the
Company may in the future leave the Company at any time to pursue other
opportunities.
7. DEPENDENCE UPON FOUNDERS
For the foreseeable future, the Company will be substantially dependent
upon the personal efforts and abilities of its President, Mr. Herbert Kurinsky
and its Vice-President, Mr. William Kurinsky to coordinate, implement and manage
its business plans and programs. The loss or unavailability of the services of
either of them would likely have a material adverse affect on the business,
operations and prospects of the Company. The Company has obtained, for its
benefit, a policy of life insurance on the lives of Messrs. Herbert Kurinsky and
William Kurinsky in the amount of $500,000 and $250,000, respectively. The
Company has entered into a three year Employment Agreement with each of these
employees.
8. REGULATION
The Company's business, and the securities industry generally, are subject
to extensive regulation at both the federal and state levels. In addition,
self-regulatory organizations such as the NASD require strict compliance with
their rules and regulations. Failure to comply with any of these laws, rules or
regulations could result in fines, suspension or expulsion, which could have a
material adverse affect upon the Company.
13
9. NET CAPITAL REQUIREMENTS
The Company's business, like that of other securities firms, is capital
intensive. The SEC and the NASD have stringent provisions with respect to net
capital requirements applicable to the operation of securities firms. A
significant operating loss or any charge against net capital that could
adversely affect the ability of the Company to expand or, depending upon the
magnitude of the loss or charge, to maintain its present level of business.
10. RISKS ASSOCIATED WITH INVESTMENT BANKING ACTIVITIES
Participation in an underwriting syndicate or a selling group involves both
economic and regulatory risks. An underwriter may incur losses if it is unable
to resell the securities it is committed to purchase, or if it is forced to
liquidate its commitment at less than the purchase price. In addition, under
federal securities laws, other laws and court decisions with respect to
underwriters' liabilities and limitations on the indemnification of underwriters
by issuers, an underwriter is subject to substantial potential liability for
misstatements or omissions of material facts in Prospectuses and other
communications with respect to such offerings. Acting as a managing underwriter
increases these risks. Underwriting commitments constitute a charge against net
capital and the Company's ability to make underwriting commitments may be
limited by the requirement that it must at all times be in compliance with the
Net Capital Rule.
11. DIVIDEND POLICY
Anticipated capital requirements of the Company make it unlikely that any
dividends will be declared in the foreseeable future on the Shares. Further,
applicable statutory regulations under the Securities Act of 1933, as amended,
as well as regulations of the NASDR may affect the ability of the Company to
declare and pay dividends. See "Dividend Policy".
12. POTENTIAL ADVERSE IMPACT ON MARKET PRICE OF WARRANTS UNDERLYING COMMON
STOCK AND RULE 144 SALES
Sales of substantial amounts of the Company's Common Stock in the public
market after this Offering, or the perception that such sales may occur, could
adversely affect the market prices of the Company's Common Stock and may impair
the Company's ability to raise additional capital by the sale of its equity
securities. As a result of this Offering the Company will have 9,214,354
Warrants to purchase 9,214,354 shares of Common Stock. Holders of those Warrants
are likely to exercise them when, in all likelihood the Company could obtain
additional capital on terms more favorable than those provided by the Warrants.
Further, while the Warrants are outstanding, the Company's ability to obtain
additional financing on favorable terms may be adversely affected.
Of the 9,218,338 issued and outstanding shares of the Company's Common
Stock, approximately 2,092,941 shares may be deemed "restricted shares" and, in
the future, may be sold in compliance with Rule 144 under the Securities Act of
1933, as amended. Rule 144 provides that a person holding restricted securities
for a period of one year may sell in brokerage transactions an amount equal to
1% of the Company's outstanding Common Stock every three
14
months. A person who is a "non-affiliate" of the Company and who has held
restricted securities for over two years is not subject to the aforesaid
volume limitations as long as the other conditions of the Rule are met. Possible
or actual sales of the Company's Common Stock by certain of the Company's
present shareholders under Rule 144 may, in the future, have a depressive effect
on the price of the Company's Common Stock in any market which may develop for
such shares. Such sales at that time may have a depressive effect on the price
of the Company's Common Stock in the open market. See "Certain Transactions" and
"Description of Capital Stock--Shares Eligible for Future Sale".
13. LIMITED PUBLIC MARKET AND ARBITRARY DETERMINATION OF OFFERING PRICE
The Company's Common Stock is traded in the over-the-counter market and
reported by the National Daily Quotation Service ("Pink Sheets") published by
the National Quotation Bureau, Inc and the Electronic Bulletin Board maintained
by the NASD. Although the Company intends to apply for inclusion of its Common
Stock in the Nasdaq SmallCap Market, it does not currently satisfy the minimum
listing requirements. Accordingly, there an be no assurance that the Company
will be successful in obtaining listing on Nasdaq, or if obtained, that the
Company will be able to maintain its Nasdaq listing . Further, there has been no
trading market in the Company's Warrants.
The exercise prices of the Rights and the Warrants have been arbitrarily
determined by the Company, and do not relate to price quotations for the
Company's Common Stock or other established criteria of value.
14. POTENTIAL ADVERSE EFFECT OF REDEMPTION OF WARRANTS
All of the Warrants or a portion thereof on a pro-rata basis may be
redeemed by the Company at any time at a redemption price of $.05 per Warrant
provided that 30 days prior written notice is given to the holders of the
Warrants, and if the closing bid price of the Company's Common Stock reported on
NASDAQ for the ten consecutive trading days ending within ten days of the date
of notice of redemption is not less then: (a) for Class A Warrants, $5.00 per
share; (b) for Class B Warrants $7.00 per share; and (c) for Class C Warrants
$12.00 per share and (d) a valid registration statement for the shares of Common
Stock underlying such Warrants is then in effect. Redemption of the Warrants
could force the holders: (i) to exercise the Warrants and pay the exercise price
therefore when it may be disadvantageous for the holders to do so, (ii) to sell
the Warrants at the then current market price when they might otherwise wish to
hold the Warrants or (iii) to accept the nominal redemption price which, at the
time the Warrants are called for redemption, is likely to be substantially less
than the market value of the Warrants. See "Description of Securities -- Units
and Warrants."
15. CURRENT PROSPECTUS AND STATE QUALIFICATION REQUIRED TO EXERCISE WARRANTS
Holders of Warrants will be able to exercise the Warrants only if: (i) a
current prospectus under the Securities Act for the Shares of Common Stock
underlying the Warrants (the "Warrants Shares") is then in effect and (ii) such
securities are qualified for sales or exempt from qualifications under the
applicable securities laws of the states in which the various holders
15
of Warrants reside. Although the Company has undertaken and intends to use its
best efforts to maintain a current prospectus covering the Warrant Shares
following completion of the Offering to the extent required by federal
securities law, there can be no assurance that the Company will be able to do
so. The value of the Warrants may be greatly reduced if a prospectus covering
the Warrants Shares is not kept current or if the Warrant Shares are not
qualified, or exempt from qualification, in the state in which the holders of
Warrants reside. Persons holding Warrants who reside in jurisdictions in which
such securities are not qualified and in which there is no exemption will be
unable to exercise their Warrants and would either have to sell their Warrants
in the open market or allow them to expire unexercised. If and when the Warrants
become redeemable by the terms thereof, the Company may exercise its redemption
right even if it is unable to qualify the Warrant Shares for sale under all
applicable state securities laws. See "Description of Securities -- Units and
Warrants."
16. LIMITATIONS ON TRADING AND MARKET-MAKING ACTIVITIES ON THE COMPANY'S
BROKER- DEALER SUBSIDIARY IN THE COMPANY'S SECURITIES
Due to regulatory positions and requirements of both the SEC and the NASDR
relating to the circumstances and extent to which a registered broker-dealer and
NASDR member may engage in market-making transactions in the securities of its
parent company, FMSC does not engage in trading or market-making activities
relating to the Company's Common Stock, Units or Warrants where it would
speculate in, purchase or sell the Company's securities for its own account. The
purpose and effect of such limitation restrict FMSC from being a factor in the
determination of the market or price of the Company's securities. FMSC does,
however, execute transactions for its customers on an "agency basis" where it
does not acquire the Company's securities for its own trading account. FMSC
will, however, earn usual and customary brokerage commissions in connection with
the execution of such brokerage transactions. If, under current or future
regulations of both the SEC and NASDR, the Company is permitted to participate
as a market-maker, it may do so on the basis of showing a bid and offer for the
Company's securities at specified prices representing customer interest.
17. LIMITATION OF DIRECTOR LIABILITY; INDEMNIFICATION
The Company has amended its Certificate of Incorporation to include
provisions eliminating the personal liability of directors, except for breach of
a director's duty of loyalty to the Company or to its shareholders, acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of the law, and in respect of any transaction in which a director
receives an improper personal benefit. These provisions pertain only to breaches
of duty by directors as such, and not in any other corporate capacity, e.g., as
an officer. As a result of the inclusion of such provisions, if adopted, neither
the Company nor shareholders may be able to recover monetary damages against
directors for actions taken by them which are ultimately found to have
constituted negligence or gross negligence, or which are ultimately found to
have been in violation of their fiduciary duties, although it may be possible to
obtain injunctive or other equitable relief with respect to such actions. If
equitable remedies are found not to be available to shareholders in any
particular case, shareholders may
16
not have an effective remedy against the challenged conduct.
The Company believes that, based upon recent developments in the market for
directors' and officers' liability insurance, such provisions are necessary to
attract and retain qualified individuals to serve as directors. In addition,
such provisions will allow directors to perform their duties in good faith
without concern for the application of monetary liability on a retroactive basis
in the event that a court determines their conduct to have been negligent or
grossly negligent. On the other hand, the potential remedies available to the
Company or a Company Shareholder are significantly limited by such provisions,
and it is possible that the protection afforded by such provisions may reduce
the level of diligence or care demonstrated by such directors.
18. RECENT FEDERAL AND STATE ADMINISTRATIVE PROCEEDINGS
In February 1997, FMSC entered into a consent decree with the State of
Florida relating to an alleged failure to supervise a former affiliate office.
Similarly, in June 1997, FMSC entered into a consent decree with the Securities
and Exchange Commission relating to similar allegations. The consent decree
required the Company to pay certain fines and adopt remedial actions to prevent
further violations in the future. These proceedings may have a material adverse
effect on the Company's business, and there can be no assurance that the
proceedings may not result in additional proceedings being commenced by state
securities administrators. (See "Recent Developments.")
19. TAX CONSIDERATIONS
There are various applicable income tax consequences associated with an
investment in the Common Stock. Each investor is urged to consult with his own
tax advisor concerning the effects of applicable income tax laws and regulations
on an investment by him in the Company's securities and his individual tax
situation. The Company will not seek or receive a ruling from the Internal
Revenue Service or a tax opinion as to the tax consequences of the distribution
of the Rights or an investment in the Common Stock. See "Certain Federal Income
Tax Considerations" for a summary of certain federal income tax aspects of the
Rights and the Common Stock offered hereby.
20. POTENTIAL ANTI-TAKEOVER EFFECT OF CERTAIN PROVISIONS IN CERTIFICATE OF
INCORPORATION AND BY-LAWS
The Company's Certificate of Incorporation and By-laws contain provisions
which may discourage certain transactions which involve an actual or threatened
change in control of the Company. These provisions include a "classified" or
"staggered" board of directors. As permitted by the New Jersey Corporation Law,
the Company's Certificate of Incorporation provides that a director or officer
of the Company will not be personally liable to the Company or its stockholders
for monetary damages for breach of the fiduciary duty of care as a director,
except under certain circumstances including a breach of the director's duty of
loyalty to the Company or its stockholders or any transaction from which the
director derived an improper personal benefit.
The Provisions referred to above may make the Company a less attractive
acquisition candidate. They may also discourage or impede offers to acquire the
Company not approved by the Board of Directors, including offers for some or all
of the shares of any class or series of the Company's capital stock at
substantial premiums above the then current market value of such shares. See
"Description of the Securities."
USE OF PROCEEDS
The net proceeds from the sale of the Shares offered hereby, after
deduction of other estimated expenses of the offering, are estimated to be
approximately $____________ if the maximum number of Rights are exercised.
The Company expects to use the net proceeds for general corporate purposes,
primarily for use in the Company's retail, institutional, trading and investment
banking and underwriting activities. The amount of the net proceeds that will be
invested in particular areas of the Company's business will depend upon future
economic conditions and business opportunities. To the extent that the Company
may incur a loss from operations, such loss will be funded from the Company's
general funds, including the net proceeds of this offering. In such event the
amount available for use in the expansion of the various aspects of the
Company's business will be reduced by the amounts expended in the course of
day-to-day operations, including working capital requirements and by any
operating losses.
17
MARKET FOR COMPANY'S COMMON STOCK
The Common Stock is traded in The NASD's Over-the-Counter Bulletin Board,
trading symbol "FMFK". Although the Company is applying for inclusion of its
Common Stock in the Nasdaq Small Cap Market, there can be no assurance that the
Company's application will be accepted.
The following table presents, on a quarterly basis, the high and low bid
quotations for the Common Stock as reported by the Nasdaq National Market for
the period from January 1, 1995 through September 30, 1997. Such quotations
reflect inter-dealer prices, without retail markup, markdown or commission and
do not necessarily represent actual transactions.
Period High Low
- ------ ---- ---
1997
First Quarter .......................... $3.125 $ .96
Second Quarter.......................... $2.78125 $2.4375
Third Quarter .......................... $2.65625 $2.59375
Fourth Quarter
(Through December __, 1997)...........
1996
First Quarter .......................... $1.0625 $ .84375
Second Quarter ......................... $2.1875 $ .8125
Third Quarter .......................... $1.53 $1.03125
Fourth Quarter ......................... $1.13 $ .80
1995
First Quarter .......................... $ .56 $ .22
Second Quarter ......................... $ .91 $ .19
Third Quarter .......................... $1.06 $ .50
Fourth Quarter ......................... $1.19 $ .50
The number of shares of Common Stock of the Company held of record as of
the close of business on September 30, 1997 was 9,218,338.
18
THE RIGHTS OFFERING
THE RIGHTS
The Company is issuing to each record holder of Common Stock as of the
close of business on the Record Date one nontransferable Right for every share
of Common Stock held of record as of the close of business on the Record Date.
Rights will be evidenced by Rights Certificates. An aggregate of up to
9,218,338 Rights will be distributed.
EXPIRATION TIME
The Rights Offering will expire at the Expiration Time, 5:00 p.m. New York
City time on __________, 1997, subject to extension at the sole discretion of
the Company's Board of Directors, but not beyond 5:00 p.m. New York City time on
_________, 1997. After the Expiration Time, unexercised Rights will be null and
void. The Company will not be obligated to honor any purported exercise of
Rights received by the Subscription Agent after the Expiration Time, regardless
of when the documents relating to that exercise were sent except pursuant to the
guaranteed delivery procedures described under "Payment for Shares."
SUBSCRIPTION PRIVILEGES
Basic Subscription Privilege. These Rights will entitle the Holder to
subscribe up to the Expiration Time and at the Subscription Price for one Unit.
Certificates representing Units purchased pursuant to the exercise of the Basic
Subscription Privilege will be delivered to subscribers as soon as practicable
after the Expiration Time and after all prorations contemplated by the terms of
the Rights offering have been effected.
Oversubscription Privilege. Subject to allocation described below, each
Right also carries the right to subscribe up to the Expiration Time and at the
Subscription Price for an unlimited number of additional Units up to the total
number of Units to be issued in the Rights Offering. Only Holders who exercise
all their Rights pursuant to the Basic Subscription Privilege will be entitled
to exercise the Oversubscription Privilege.
Units will be available for subscription pursuant to the Oversubscription
Privilege only to the extent that any Units remain available for purchase after
the exercise of the Basic Subscription Privilege. The Oversubscription Privilege
is not transferable. A Holder may at the time of exercising the Basic
Subscription Privilege exercise the Oversubscription Privilege for up to the
total number of Units to be issued in the Rights Offering. If an insufficient
number of Excess Units is available to satisfy fully all elections to exercise
the Oversubscription Privilege, then the Excess Units will be prorated in
proportion to the number of shares of Common Stock owned by such Holder as of
the close of business on the Record Date.
19
Banks, brokers and other nominee holders who exercise the Basic
Subscription Privilege and the Oversubscription Privilege on behalf of
beneficial owners of Rights will be required to certify to the Subscription
Agent and the Company in connection with the exercise of the Oversubscription
Privilege as to the aggregated number of Rights that have been exercised and the
number of Units thereby subscribed for pursuant to the Oversubscription
Privilege by each beneficial owner of Rights on whose behalf such nominee holder
is acting.
SUBSCRIPTION PRICE
The Subscription Price will be $.45 per Unit. If the aggregate Estimated
Subscription Price paid by an exercising Holder exceeds the amount necessary to
purchase at the Subscription Price the number of Units for which the Holder has
indicated an intention to subscribe, then the holder will be deemed to have
exercised, first, the Basic Subscription Privilege (if not already fully
exercised) and, second, the Oversubscription privilege to purchase shares at the
Subscription Price to the full extent of the excess payment tendered. The
Subscription Price is payable in cash, by check, money order or wire transfer,
all as more completely set forth under "Exercise of Rights."
EXERCISE OF RIGHTS
Holders may exercise their Rights by delivering to the Subscription Agent,
at or prior to the Expiration Time, the properly completed and executed Rights
Certificates evidencing those Rights, with any signatures guaranteed as
required, together with payment in full of the Estimated Subscription Price for
each Unit subscribed for pursuant to the Basic Subscription Privilege and the
Oversubscription Privilege. Rights may also be exercised by contacting the
holder's broker, banker or trust company, which can arrange, on the Holder's
behalf, to guarantee delivery of payment and of a properly completed and
executed Rights Certificate. A fee may be charged for this service. Completed
Rights Certificates must be received by the Subscription Agent prior to the
Expiration Time (unless the guaranteed delivery procedures are complied with as
described under "Payment for Shares") at the offices of the Subscription Agent
at the address set forth in "Subscription Agent".
Holders Who Are Record Owners. Holders who are record owners can choose
either option set forth under "Payment for Shares". If time is of the essence,
option (2) will permit delivery of the Rights Certificate and payment after the
Expiration Time.
Holders Whose Shares Are Held by a Nominee. Holders whose shares are held
by a nominee, such as a broker or trustee, must contact that nominee to exercise
their Rights. In that case, the nominee will complete the Rights Certificate on
behalf of the Holder and arrange for proper payment by one of the methods set
forth under "Payment for Shares".
Nominees. Nominees who hold shares for the account of others should notify
the beneficial owners of such shares as soon as possible to ascertain such
beneficial owners' intentions and to obtain instructions with respect to the
Rights. If the beneficial owner so instructs, the nominee should complete the
Rights Certificate and submit it to the Subscription
20
Agent along with the proper payment described under "Payment for Shares".
PAYMENT FOR SHARES
Holders who acquire Units by exercising the Basic Subscription Privilege
and the Oversubscription Privilege may choose between the following methods of
payment.
(1) A Holder can send the Rights Certificate, together with payment for the
Units subscribed for pursuant to the Basic Subscription Privilege and for Excess
Shares subscribed for pursuant to the Oversubscription Privilege, to the
Subscription Agent, calculating the total payment on the basis of the
subscription price of $.45 per Unit (the "Subscription Price"). To be accepted,
such payment, together with the executed Rights Certificate, must be received by
the Subscription Agent at one of its offices at the addresses set forth under
"Subscription Agent" prior to the Expiration Time. The Subscription Agent will
deposit all checks and money orders received by it prior to the final payment
date into a segregated interest-bearing account(which interest will be paid to
the Company) pending proration and distribution of Units or Excess Units. A
PAYMENT PURSUANT TO THIS METHOD MUST BE IN UNITED STATES DOLLARS BY MONEY ORDER
OR CHECK DRAWN ON A BANK LOCATED IN THE UNITED STATES, MUST BE PAYABLE TO "FMFC
RIGHTS OFFERING" AND MUST ACCOMPANY AN EXECUTED RIGHTS CERTIFICATE FOR SUCH
RIGHTS CERTIFICATE TO BE ACCEPTED.
(2) Alternatively, a subscription will be accepted by the Subscription
Agent if, prior to the Expiration Time, the Subscription Agent has received a
notice of guaranteed delivery by facsimile (telecopy) or otherwise from a bank,
a trust company or a New York stock Exchange member guaranteeing delivery of (a)
payment of the Estimated Subscription Price for the Underlying Shares subscribed
for pursuant to the Basic Subscription Privilege and for any Excess Units
subscribed for pursuant to the Oversubscription Privilege and (b) a properly
completed and executed Rights Certificate. The Subscription Agent will not honor
a notice of guaranteed delivery unless a properly completed and executed Rights
Certificate is received by the Subscription Agent by the close of business on
the third business day after the Expiration Time (______, 1997) and full payment
of the Estimated Subscription Price is received by the Subscription Agent by the
close of business on such date.
Within 10 business days following the Expiration Time (____, 1997), a
confirmation will be sent by the Subscription Agent to each subscribing Holder
(or, if the Holder's shares are held by a depository or nominee, to such
depository or nominee), showing (a) the number of Units and the number of Excess
Units, if any, acquired, (b) the per share and total purchase price for such
Units or Excess Units, and (c) any excess payment that would otherwise result in
a fractional share that is to be refunded by the Company to such Holder. Any
excess payment to be refunded by the Company to a Holder will be mailed by the
Subscription Agent to such Holder as promptly as practicable.
The Estimated Subscription Price will be deemed to have been received by
the
21
Subscription Agent only upon (a) clearance of any uncertified check, (b) receipt
by the Subscription Agent of any certified check or cashier's check or of any
postal, telegraphic or express money order, or (c) receipt of notice of
guaranteed delivery. If paying by uncertified personal check, please note that
the funds paid thereby may take at least five business days to clear.
Accordingly, Holders who wish to pay the Subscription Price by means of an
uncertified personal check are urged to make payment sufficiently in advance of
the Expiration Time to ensure that such payment is received and clears by such
time and are urged to consider in the alternative payment by means of certified
or cashiers check, money order or wire transfer of funds. All funds received in
payment of the Subscription Price made by the Subscription Agent and invested at
the direction of the Company in short-term certificates of deposit, short-term
obligations of the United States, or any state or agency thereof, or money
market mutual funds invested in the foregoing instruments. The account in which
such funds will be held will not be insured by the Federal Deposit Insurance
Corporation. Earnings on such funds will be retained by the Company whether or
not the Rights Offering is consummated.
Whichever of the two methods described above are used, issuance and
delivery of certificates for the shares of common Stock purchased are subject to
collection of checks and actual payment pursuant to any notice of guaranteed
delivery.
The instructions accompanying the Rights Certificates should be read
carefully and followed in detail RIGHTS CERTIFICATES SHOULD BE SENT WITH PAYMENT
TO THE SUBSCRIPTION AGENT. DO NOT SEND RIGHTS CERTIFICATES TO THE COMPANY.
THE METHOD OF DELIVERY OF RIGHTS CERTIFICATES AND PAYMENT OF THE ESTIMATED
SUBSCRIPTION PRICE TO THE SUBSCRIPTION AGENT WILL BE AT THE ELECTION AND RISK OF
THE HOLDERS. IF SENT BY MAIL, HOLDERS ARE URGED TO SEND RIGHTS CERTIFICATE AND
PAYMENTS BY REGISTERED MAIL, PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED,
AND ARE URGED TO ALLOW A SUFFICIENT NUMBER OF DAYS TO ENSURE DELIVERY TO THE
SUBSCRIPTION AGENT AND CLEARANCE OF PAYMENT PRIOR TO THE EXPIRATION TIME.
BECAUSE UNCERTIFIED PERSONAL CHECKS MAY TAKE AT LEAST FIVE BUSINESS DAYS TO
CLEAR, HOLDERS ARE STRONGLY URGED TO PAY, OR ARRANGE FOR PAYMENT, BY MEANS OF
CERTIFIED OR CASHIER'S CHECK, MONEY ORDER, WIRE TRANSFER OF FUNDS OR NOTICE OF
GUARANTEED DELIVERY.
All questions concerning the timeliness, validity, form and eligibility of
any exercise of Rights will be determined by the Company, whose determinations
will be final and binding. The Company, in its sole discretion, may waive any
defect or irregularity, or permit a defect or irregularity to be corrected
within such time as it may determine or reject the purported exercise of any
Right. Rights Certificates will not be deemed to have been received or accepted
until all irregularities have been waived or cured within such time as the
company, in its sole discretion, determines. Neither the Company nor the
Subscription Agent will be under any duty to give notification of any defect or
irregularity in connection with the submission of Rights Certificates
22
or incur any liability for failure to give such notification.
Any questions or requests for assistance concerning the method of
exercising Rights or requests for additional copies of this Prospectus, the
instructions or the notice of guaranteed delivery should be directed to the
Information Agent at the address and telephone numbers set forth under
"Information."
NO REVOCATION
ONCE A HOLDER HAS PROPERLY EXERCISED HIS OR HER BASIC SUBSCRIPTION
PRIVILEGE AND OVERSUBSCRIPTION PRIVILEGE, SUCH EXERCISE MAY NOT BE REVOKED.
NONTRANSFERRABILITY OF RIGHTS
RIGHTS MAY NOT BE PURCHASED, SOLD OR OTHERWISE TRANSFERRED. ANY PURPORTED
TRANSFER OF RIGHTS WILL BE DEEMED NULL AND VOID.
DETERMINATION OF SUBSCRIPTION PRICE AND TERMS OF THE RIGHTS OFFERING.
The Company's objective in establishing the Subscription Price was the
achievement of the targeted net proceeds from the Rights Offering while
providing Shareholders with an opportunity to make an additional investment in
the Company, and thus avoid an excessive dilution of their proportionate
ownership position in the Company.
In approving the Subscription Price, the Board of Directors of the Company
considered such factors as the alternative available to the Company for raising
capital, the market price of the common Stock, the business prospects for the
Company and the general condition of the securities markets. There can be no
assurance, however, that the market price of the common Stock will not decline
during the subscription period, or that, following the issuance of the Rights
and of the Warrants upon exercise of Rights, a subscribing Rights Holder will be
able to sell Warrants purchased in the Rights Offering at a price equal to or
greater than the Subscription Price.
SUBSCRIPTION AGENT
The Company has appointed North American Transfer Company as Subscription
Agent for the Rights Offering. The Subscription Agent's address, which is the
address to which the Rights Certificates and payment of the Subscription Price
should be delivered, as well as the address to which a notice of guaranteed
delivery must be delivered, is:
North American Transfer Company
147 West Merrick Road
Freeport, NY 11521
23
The Subscription Agent's telephone number is (516) 379-8501, an its
facsimile number is (516) 379-8525.
The Company will pay the Subscription Agent's fees and expenses, and has
also agreed to indemnify the Subscription Agent against certain liabilities it
may incur in connection with the Rights Offering.
INFORMATION
Any questions or requests for assistance concerning the method of
exercising Rights or requests for additional copies of this Prospectus, the
instructions or the notice of guaranteed delivery should be directed to: Robert
I. Rabinowitz, Esq. at the Company.
FOREIGN SHAREHOLDERS
Due to the requirements and restrictions of securities laws of foreign
countries, Rights Certificates will not be mailed to record holders of common
Stock whose addresses are outside the United States and Canada, but will be held
by the Subscription Agent for such holders' accounts until the Subscription
Agent receives instructions to exercise the Rights. If no instructions are
received by the Expiration Time, the Rights will be null and void.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes certain federal income tax consequences
applicable to the Company's shareholders upon the issuance of the Rights, and to
Holders upon the exercise of the Rights. This summary provides only a general
discussion and does not represent a complete analysis of the consequences that
may occur for a particular Holder based on his or her individual circumstances,
or of the provisions of the Internal Revenue code of 1986, as amended (the
"Code"), that may subject certain Holders to special treatment (for example,
banks, dealers in securities, life insurance companies and tax-exempt
organizations). Moreover, this summary does not address any aspects of state,
local or foreign tax laws or of any federal laws other than those pertaining to
income tax.
This summary is based on the Code, Treasury Regulations promulgated
thereunder and their judicial and administrative interpretations as of the date
of this Prospectus. There can be no assurance that further legislation,
regulations, administrative pronouncements or court decisions will not
significantly change the law and materially affect the conclusions expressed
herein. Any such change, even though made after the distribution of the Rights,
could be applied retroactively.
The Company has not requested a ruling from the Internal Revenue Service
(the "Service") with respect to the matters discussed in this summary. This
summary does not in any way bind the Service or the courts or in any way
constitute an assurance that the federal income tax consequences discussed
herein will be accepted by the Service or the courts.
24
ISSUANCE OF THE RIGHTS
The Company's shareholders will not recognize taxable income upon receipt
of the Rights.
BASIS OF THE RIGHTS
Except as provided in the following sentence, a Holder's basis in the
Rights received pursuant to the Rights Offering will be zero. If (a) the fair
market value of the Rights on the date of issuance is $.45 or more or (b) the
Holder elects, in a statement attached to his or her federal income tax return
for the taxable year in which he or she receives the Rights, to allocate part of
his or her basis in the Units to such Rights then, upon exercise of the Rights,
the Holder's basis in his or her Unit as of the date of issuance will be
allocated between the Units and the Rights in proportion to their relative fair
market values on the date of issuance.
EXERCISE OF THE RIGHTS; BASIS AND HOLDING PERIOD OF UNDERLYING SHARES
Holders will not recognize gain or loss upon exercise of their Rights. The
holding period for common stock underlying the Warrants will begin on the date
the Warrants are exercised.
EXPIRATION OF THE RIGHTS
Holders who allow the Rights received by them to expire unexercised will
not recognize gain or loss and the basis (if any) allocable to such Rights will
revert to the Common Stock with respect to which the Rights were received.
THE FOREGOING SUMMARY IS INCLUDED FOR GENERAL INFORMATION ONLY.
ACCORDINGLY, EACH HOLDER IS URGED TO CONSULT WITH HIS OR HER OWN TAX ADVISOR
WITH RESPECT TO THE TAX CONSEQUENCES OF THE RIGHTS OFFERING ON SUCH HOLDER'S OWN
PARTICULAR TAX SITUATION, INCLUDING THE APPLICATION AND EFFECT OF STATE, LOCAL
AND FOREIGN INCOME AND OTHER TAX LAWS.
DESCRIPTION OF SECURITIES
The Company is authorized to issue 30,000,000 shares of Common Stock, no
par value, and 5,000,000 shares of Preferred Stock, par value $.10 per share. As
of the date hereof, there were 9,218,338 shares of Common Stock issued and
outstanding, and no shares of Preferred Stock issued and outstanding.
COMMON STOCK
Subject to the rights of the holders of any shares of Preferred Stock which
may be issued in the future, holders of shares of Common Stock of the Company
are entitled to cast one vote
25
for each share held at all shareholders' meetings for all purposes, including
the election of directors. The Board of Directors is divided into three classes
with the members of one class (one-third of the Board) elected each year at the
Company's annual meeting of stockholders to serve for a period of three years
and until their respective successors have been duly elected and qualified. This
provision may make the Company a less attractive take-over target.
Common shareholders have the right to share ratably in such dividends on
shares of Common Stock as may be declared by the Board of Directors out of funds
legally available therefor. Upon liquidation or dissolution, each outstanding
share of Common Stock will be entitled to share equally in the assets of the
Company legally available for distribution to shareholders after the payment of
all debts and other liabilities, subject to any superior rights of any future
holders of Preferred Stock.
Common shareholders have no pre-emptive rights. There are no conversion or
redemption privileges or sinking fund provisions with respect to the Common
Stock. All of the outstanding shares of Common Stock are, and all of the shares
of Common Stock offered hereby will be, validly issued, fully paid and
nonassessable. The common Stock does not have cumulative voting rights so
holders of more than 50% of the outstanding Common Stock can elect 100% of the
Directors of the Company if they choose to do so.
PREFERRED STOCK
The Board of Directors is authorized to issue 5,000,000 shares of Preferred
Stock, $.10 par value per share, from time to time in one or more series. The
Board may issue a series of Preferred Stock having the right to vote on any
matter submitted to shareholders, including, without limitation, the right to
vote by itself as a series, or as a class together with any other or all series
of Preferred Stock. The Board of Directors may determine that the holder of
Preferred Stock voting as a class will have the right to elect one or more
additional members of the Board of Directors, or the majority of the members of
the Board of Directors.
UNITS AND WARRANTS
The following discussion is subject to the terms and conditions of the
Warrants, and subscribers are referred to the Warrants for more detailed
information.
Each Unit consists of one Class A Redeemable Common Stock Purchase Warrant,
one Class B Redeemable Common Stock purchase Warrant and one Class C Redeemable
Common Stock Purchase Warrant. Each Class A Redeemable Common Stock Purchase
Warrant (the "Class A Warrants"), entitles the holder thereof to purchase during
the three years commencing on __ [the date of initial issuance] one share of
Common Stock of the Company (the "Class A Warrant Shares"), at an exercise price
of $3.00 per share, subject to adjustment in certain circumstances. Each Class B
Warrant entitles the holder thereof to purchase during the five years commencing
on __ [the date of initial issuance] one share of Common Stock of the Company
(the "Class B Warrant Shares"), at an exercise price of $5.00 per share, subject
to adjustment in certain circumstances. The Class C Warrant entitles the holder
26
thereof to purchase during the seven years commencing on ______ [the date of the
initial issuance] one share of Common Stock of the Company (the "Class C Warrant
Shares"), at an exercise price of $7.00 per share, subject to adjustment in
certain circumstances. The Warrants may be exercised in whole or in part. Unless
exercised within the applicable exercise period, the Warrants will automatically
expire in the last day of the applicable exercise period.
The Company may redeem all of the Warrants or a portion thereof on a
pro-rata basis, at any time at $.05 per Warrant, upon not less than thirty (30)
days nor more than (60) sixty days' prior notice, if the closing bid price of
the Company's common stock for the ten consecutive trading days ending within
ten days of the date of the notice of redemption is not less than: (a) for the
Class A Warrants, $5.00 per share, (b) for the Class B Warrants $7.00 per share,
and (c) for the Class C Warrants, $12.00.
The Warrants will be issued pursuant to a warrant agreement (the "Warrant
Agreement"), between the Company and North American Transfer Company, as warrant
agent ("Warrant Agent"), and will be evidenced by warrant certificates in
registered form. The warrants provide for adjustment of the exercise price and
for a change in the number of shares issuable upon exercise to protect holders
against dilution in the event of a stock dividend, stock split, combination or
reclassification of the Common Stock.
The exercise price of the Warrants was determined arbitrarily by the
Company and should not be construed to be predictive of or to imply that any
price increases in the Company's securities will occur.
The Company has reserved from its authorized but unissued shares a
sufficient number of shares of Common Stock for issuance upon the exercise of
the Warrants. A Warrant may be exercised upon surrender of the Warrant
certificate on or before its expiration date (or earlier redemption date) at the
offices of the Warrant Agent, with the form of "Election to Purchase" on the
reverse side of the Warrant certificate completed and executed as indicated,
accompanied by payment of the full exercise price (by certified or bank check
payable to the order of the Company) for the number of shares with respect to
which the Warrant is being exercised. The holders of the Warrants may exercise
the Warrants at any time up to the business day prior to the date of redemption,
provided that (i) a current registration statement relating to the shares of
Common Stock underlying the Warrants is on file with the Commission and then in
effect and (ii) such securities are qualified for sale or exempt from
qualification under the securities laws of the state in which the particular
holder of the Warrants resides. The Warrant Agreement requires the Company to
endeavor to maintain a registration statement current and effective for these
purposes. However, there can be no assurance that the Company will be able to do
so. (See "Risk Factors -- Current Prospectus Required to Exercise Warrants.")
Shares issued upon exercise of Warrants and payment in accordance with the terms
of the Warrants will be validly issued, fully paid and non-assessable. For the
life of the Warrants, the holders thereof have the opportunity to profit from a
rise in the market value of the Common Stock, with a resulting dilution in the
interest of all other shareholders. So long as the Warrants are outstanding, the
terms on which the Company could obtain additional capital may be adversely
affected. The holders of the Warrants might be expected to exercise them at a
time when the Company would,
27
in all likelihood, be able to obtain any needed capital by a new offering of
securities on terms more favorable than those provided for by the Warrants. The
Warrants do not confer upon the Warrant holder any voting or other rights of a
Shareholder of the Company.
TRANSFER AND WARRANT AGENT
The transfer and Warrant agent for the Company's Common Stock is North
American Transfer Company, 47 West Merrick Road, Freeport, New York 11521.
LEGAL MATTERS
The legality of the offering of the Rights will be passed upon for the
Company by Goldstein & DiGioia, LLP, 369 Lexington Avenue, New York, New York
10017.
EXPERTS
The financial statements of the Company as of and for the years ended
December 31, 1995 and 1996 have been incorporated by reference herein and in the
Registration Statement in reliance upon the report of Schneider Ehrlich &
Wengrover LLP, independent certified public accountants, and upon the authority
of said firm as experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company has filed a Registration Statement under the Act with the
Securities and Exchange Commission (the "Commission"), with respect to the
securities offered by this Prospectus. This Prospectus does not contain all of
the information set forth in the Registration Statement. For further information
with respect to the Company and such securities, reference is made to the
Registration Statement and to the exhibits and schedules filed therewith. Each
statement made in this Prospectus referring to a document filed as an exhibit to
the Registration Statement is qualified by reference to the exhibit for a
complete statement of its terms and conditions. The Registration Statement,
including exhibits thereto, may be inspected without charge to anyone at the
office of the Commission, and copies of all or any part thereof may be obtained
from the Commission's principal office in Washington, D.C. upon payment of the
Commission's charge for copying.
28
No dealer, salesman, or any other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus, and if given or made, such information or representations must not
be relied upon as having been authorized by the Company. This Prospectus does
not constitute an offer to sell or a solicitation of an offer to buy, by anyone
in any jurisdiction in which such offer or solicitation is not authorized, or in
which the person making such offer or solicitation is not qualified to do so, or
to any person to whom it is unlawful to make such offer or solicitation. Neither
the delivery of this Prospectus nor any sale made hereunder shall under any
circumstances, create an implication that there has been no change in the
affairs of the Company since the date hereof.
3,072,779 Units
FIRST MONTAUK FINANCIAL CORP.
Units
------------------------------
PROSPECTUS
-------------------------------
_______________, 1997
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
Expenses in connection with the issuance and distribution of the securities
being registered herein are estimated.
Amount
-------
Securities and Exchange Commission Registration Fee................. $14,980
Printing and Engraving Expenses..................................... $15,000
Accounting Fees and Expenses........................................ $ 5,000
Legal Fees and Expenses.............................................
Blue Sky Fees and Expense..........................................
Transfer Agent and Registrar Fees................................... $ 5,000
Miscellaneous Fees and Expenses..................................... $ 5,000
-------
Total.......................................................... $
=======
Item 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company's By-Laws require the Company to indemnify, to the full extent
authorized by Section 14A:3-5 of the New Jersey Business Corporation Act, any
person with respect to any civil, criminal, administrative or investigative
action or proceeding instituted or threatened by reason of the fact that he, his
testator or intestate is or was a director, officer or employee of the Company
or any predecessor of the Company is or was serving at the request of the
Company or a predecessor of the Company as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise.
Section 14A:3-5 of the New Jersey Business Corporation Act authorized the
indemnification of directors and officers against liability incurred by reason
of being a director or officer and against expenses (including attorneys fees)
in connection with defending any action seeking to establish such liability, in
the case of third-party claims, if the officer or director acted in good faith
and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation and if such officer or director shall not have been
adjudged liable for negligence or misconduct, unless a court otherwise
determines. Indemnification is also authorized with respect to any criminal
action or proceeding where the officer or director had no reasonable cause to
believe his conduct was unlawful.
In accordance with Section 14A:2-7 of the New Jersey Business Corporation
Act, the
II-1
Company's Certificate of Incorporation eliminates the personal liability of
officers and directors to the Company and to shareholders for monetary damage
for violation of a director's duty owed to the Company or its Shareholders,
under certain circumstances.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers, or persons controlling the
Company pursuant to the foregoing provisions, or otherwise, the Company has been
informed that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in such Act and is
therefore unenforceable.
Item 16. EXHIBITS
The exhibits designated with an asterisk (*) have previously been filed
with the Commission in connection with the Company's Registration Statement on
Form S-l, File No. 33-24696, and pursuant to 17 C.F.R. Sections 201.24 and
240.12b-32, are incorporated by reference to the document referenced in brackets
following the description of such exhibits. (**) denotes exhibits filed
herewith. (***) denotes exhibits to be filed by Amendment to this Registration
Statement.
Exhibit No. Description
- ---------- -----------
3.l* Amended and Restated Certificate of Incorporation adopted at
1989 Special Meeting in lieu of Annual Meeting of
Shareholders
3.2* Amended and Restated By-Laws
4.l* Form of Common Stock Certificate
4.2** Form of Subscription Rights Certificate
4.3** Form of Class A Redeemable Common Stock Purchase Warrant
Certificate
4.4** Form of Class B Redeemable Common Stock Purchase Warrant
Certificate
4.5** Form of Class C Redeemable Common Stock Purchase Warrant
Certificate
4.6** Form of Warrant Agent Agreement
5*** Opinion of Goldstein & DiGioia
23** Consent of Schneider Ehrlich & Wengrover, LLP
II-2
99.1** Letter to Rights Holders
99.2** Instructions for Use of the Subscription Rights Certificate
including Notice of Guaranteed Delivery
99.3** Letter to Rights Holders with addresses outside the
United States
99.4** Letter to Securities Dealers, Commercial Banks, Brokers, Trust
Companies, and other Nominees, including Nominee Holder
Oversubscription Certification
99.5** Letter from Nominees to Beneficial Owners, including Letter of
Instruction from Beneficial Owners of Nominees.
99.6** DTC Participant Oversubscription Exercise Form, including
Nominee Holder Subscription Certificate
99.7** Subscription Agent Agreement between the Registrant and North
American Transfer Company.
Item 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement (a) to include any
prospectus required by Section 10(a)(3) of the Securities Act of 1933, (b) to
reflect in the prospectus any fact or events arising after the effective date of
the registration statement (or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a fundamental change in the
information set forth in the registration statement, and (c) to include any
material information with respect to the plan of distribution not previously
disclosed in the registration statement, or any material change to such
information in the registration statement; provided, however, that paragraphs
(a) and (b) do not apply if the information required to be included in a
post-effective amendment by those paragraphs is contained in periodic reports
filed by the registrant pursuant to Section 13, or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) For purpose of determining any liability under the Securities Act of
1933, each post effective amendment shall be deemed to be a new Registration
Statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
II-3
(3) To remove from registration by means of post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.
(4) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the following provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against pubic policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities begin
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(5) THE UNDERSIGNED REGISTRANT HEREBY UNDERTAKES THAT:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act,
each posteffective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the Borough of Red Bank, State of Jersey, on the 24th day of
November, 1997.
FIRST MONTAUK FINANCIAL CORP.
By: /s/ HERBERT KURINSKY
-----------------------------
Herbert Kurinsky, President
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below substitutes and appoints Herbert Kurinsky and William J. Kurinsky, and
each of them, his true and lawful attorneys-in-fact and agents, with full power
of substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or their or his substitute or substitute, may lawfully do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated:
Signature Capacity Date
--------- -------- -----
/s/ HERBERT KURINSKY
- ----------------------- President , Chief November 24, 1997
Herbert Kurinsky Executive Officer
and Director
/s/ WILLIAM J. KURINSKY
- ------------------------ Vice President, Chief November 24, 1997
William J. Kurinsky Operating and Chief
Financial Officer,
Secretary and Director
*
- ---------------------- Director November 24, 1997
Norma Doxey
*
- ---------------------- Director November 24, 1997
Ward R. Jones, Jr.
*
- ---------------------- Director November 24, 1997
David I. Portman
By: /s/ HERBERT KURINSKY
-----------------------
Herbert Kurinsky
/s/ WILLIAM J. KURINSKY
-----------------------
William J. Kurinsky
II-5
EXHIBIT INDEX
Exhibit No. Description
- ---------- -----------
3.l* Amended and Restated Certificate of Incorporation adopted at
1989 Special Meeting in lieu of Annual Meeting of
Shareholders
3.2* Amended and Restated By-Laws
4.l* Form of Common Stock Certificate
4.2** Form of Subscription Rights Certificate
4.3** Form of Class A Redeemable Common Stock Purchase Warrant
Certificate
4.4** Form of Class B Redeemable Common Stock Purchase Warrant
Certificate
4.5** Form of Class C Redeemable Common Stock Purchase Warrant
Certificate
4.6** Form of Warrant Agent Agreement
5*** Opinion of Goldstein & DiGioia
23** Consent of Schneider Ehrlich & Wengrover, LLP
99.1** Letter to Rights Holders
99.2** Instructions for Use of the Subscription Rights Certificate
including Notice of Guaranteed Delivery
99.3** Letter to Rights Holders with addresses outside the
United States
99.4** Letter to Securities Dealers, Commercial Banks, Brokers, Trust
Companies, and other Nominees, including Nominee Holder
Oversubscription Certification
99.5** Letter from Nominees to Beneficial Owners, including Letter of
Instruction from Beneficial Owners of Nominees.
99.6** DTC Participant Oversubscription Exercise Form, including
Nominee Holder Subscription Certificate
99.7** Subscription Agent Agreement between the Registrant and North
American Transfer Company.
- ----------
The exhibits designated with an asterisk (*) have previously been filed
with the Commission in connection with the Company's Registration Statement on
Form S-l, File No. 33-24696, and pursuant to 17 C.F.R. Sections 201.24 and
240.12b-32, are incorporated by reference to the document referenced in brackets
following the description of such exhibits. (**) denotes exhibits filed
herewith. (***) denotes exhibits to be filed by Amendment to this Registration
Statement.