Exhibit 4.1
RIGHTS AGREEMENT
Dated as of August 8, 2007
Between
FIRST MONTAUK FINANCIAL CORP.
and
CONTINENTAL STOCK TRANSFER & TRUST COMPANY,
as Rights Agent
CONTENTS
SECTION 1. CERTAIN DEFINITIONS 1
SECTION 2. APPOINTMENT OF RIGHTS AGENT 8
SECTION 3. ISSUANCE OF RIGHTS AND RIGHTS CERTIFICATES 8
SECTION 4. FORM OF RIGHTS CERTIFICATES 10
SECTION 5. EXECUTION, COUNTERSIGNATURE AND REGISTRATION 10
SECTION 6. TRANSFER, SPLIT-UP, COMBINATION AND EXCHANGE OF RIGHTS CERTIFICATES; 11
LOST, STOLEN, DESTROYED OR MUTILATED RIGHTS CERTIFICATES; UNCERTIFICATED RIGHTS
SECTION 7. EXERCISE OF RIGHTS; EXPIRATION DATE OF RIGHTS 12
SECTION 8. CANCELLATION AND DESTRUCTION OF RIGHTS CERTIFICATES 14
SECTION 9. RESERVATION AND AVAILABILITY OF PREFERRED SHARES 15
SECTION 10. PREFERRED SHARES RECORD DATE 16
SECTION 11. ADJUSTMENTS IN RIGHTS AFTER THERE IS AN ACQUIRING PERSON; EXCHANGE 16
OF RIGHTS FOR SHARES; BUSINESS COMBINATIONS
SECTION 12. CERTAIN ADJUSTMENTS 20
SECTION 13. CERTIFICATE OF ADJUSTMENT 21
SECTION 14. ADDITIONAL COVENANTS 22
SECTION 15. FRACTIONAL RIGHTS AND FRACTIONAL SHARES 22
SECTION 16. RIGHTS OF ACTION 23
SECTION 17. AGREEMENT OF RIGHTS HOLDERS 24
SECTION 18. RIGHTS CERTIFICATE HOLDER NOT DEEMED A SHAREHOLDER 25
SECTION 19. CONCERNING THE RIGHTS AGENT 25
SECTION 20. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS AGENT 26
SECTION 21. RIGHTS AND DUTIES OF RIGHTS AGENT 27
SECTION 22. CHANGE OF RIGHTS AGENT 29
SECTION 23. ISSUANCE OF ADDITIONAL RIGHTS AND RIGHTS CERTIFICATES 30
SECTION 24. REDEMPTION AND TERMINATION 31
SECTION 25. NOTICES 31
SECTION 26. SUPPLEMENTS AND AMENDMENTS 32
SECTION 27. SUCCESSORS 33
SECTION 28. BENEFITS OF THIS RIGHTS AGREEMENT; DETERMINATIONS AND ACTIONS BY THE 33
COMPANY'S BOARD OF DIRECTORS
SECTION 29. SEVERABILITY 34
SECTION 30. GOVERNING LAW 34
SECTION 31. COUNTERPARTS; EFFECTIVENESS 34
SECTION 32. DESCRIPTIVE HEADINGS 34
EXHIBIT INDEX 28
ii
RIGHTS AGREEMENT
RIGHTS AGREEMENT, dated as of August 8, 2007, ("Rights Agreement") between
First Montauk Financial Corp., a New Jersey corporation (the "Company"), and
Continental Stock Transfer & Trust Company, as Rights Agent (the "Rights
Agent").
The Board of Directors of the Company (the "Board of Directors") has
authorized and declared a dividend of one Right (as hereinafter defined) for
each share of common stock, no par value per share, of the Company (the "Common
Stock") outstanding at the Close of Business (as hereinafter defined) on August
8, 2007 (the "Record Date"). The Board of Directors has further authorized the
issuance of one Right (as such number may be hereinafter adjusted pursuant to
the provisions of this Rights Agreement) with respect to each share of Common
Stock that shall become outstanding between the Record Date and the earliest of
the Distribution Date, the Redemption Date and the Expiration Date (as such
terms are hereinafter defined); provided, however, that the Company may issue
Rights with respect to shares of Common Stock that shall become outstanding
after the Distribution Date and prior to the earlier of the Redemption Date and
the Expiration Date in accordance with the provisions of Section 23 hereof. Each
Right shall initially represent the right to purchase one one-hundredth (1/100)
of a share of Series C Participating Cumulative Preferred Stock, $.10 par value
per share, of the Company (the "Preferred Shares"), having the powers, rights
and preferences set forth in the Certificate of Amendment (as hereinafter
defined) attached as Exhibit A hereto.
Accordingly, in consideration of the premises and the mutual agreements
set forth in this Rights Agreement, the Company and the Rights Agent hereby
agree as follows:
SECTION 1. CERTAIN DEFINITIONS
For purposes of this Rights Agreement, the following terms have the
meanings indicated:
"Acquiring Person" shall mean any Person (as hereinafter defined) who or
which, alone or together with all Affiliates and Associates (as such terms are
hereinafter defined) of such Person, shall be the Beneficial Owner (as
hereinafter defined) of 10% (the "Requisite Percentage") or more of the Common
Shares (as hereinafter defined) then outstanding, but shall not include (a)
▇▇▇▇▇▇ ▇. ▇▇▇▇, FMFG Ownership Inc. and FMFG Ownership II, Inc. and any of their
respective Affiliates and Associates (collectively, the "▇▇▇▇ Parties") and
their respective successors and assigns as long as the ▇▇▇▇ Parties and their
respective successors and assigns do not own more than an aggregate of 3,300,308
Common Shares at any one time outstanding, (b) the Company, any Subsidiary (as
hereinafter defined) of the Company, any employee benefit or compensation plan
of the Company or of any of its Subsidiaries, or any Person holding Common
Shares for or pursuant to the terms of any such employee benefit or compensation
plan or (c) any Person who has become and is the Beneficial Owner of the
Requisite Percentage, or more of the Common Shares outstanding at the time
solely as the result of (i) a change in the aggregate number of Common Shares
outstanding since the last date on which such Person acquired Beneficial
Ownership of any Common Shares, (ii) the acquisition by such Person or one or
more of its Affiliates or Associates of Beneficial Ownership of additional
Common Shares if such acquisition was made in the good faith belief that such
acquisition would not (A) cause the Beneficial Ownership by such Person,
together with its Affiliates and Associates, to equal or exceed the Requisite
Percentage of the Common Shares outstanding at the time of such acquisition and
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such good faith belief was based on the good faith reliance on information
contained in publicly filed reports or documents of the Company that are
inaccurate or out-of-date or (B) otherwise cause a Distribution Date or the
adjustment provided for in Section 11(a) hereof to occur or (iii) the
acquisition by such Person or one or more of its Affiliates or Associates of
Beneficial Ownership of additional Common Shares if the Board of Directors
determines that such acquisition was made in good faith without the knowledge by
such Person or Affiliates or Associates that such Person would thereby become an
Acquiring Person (which determination of the Board of Directors of the Company
shall be conclusive and binding on such Person, the Rights Agent, the holders of
the Rights and all other Persons). Notwithstanding clause (c)(ii) or (c)(iii) of
the prior sentence, if any Person that is not an Acquiring Person due to such
clause (c)(ii) or (c)(iii) does not reduce its percentage of Beneficial
Ownership of Common Shares to less than the Requisite Percentage by the Close of
Business on the tenth (10th) calendar day after notice from the Company (the
date of notice being the first day) that such Person's Beneficial Ownership of
Common Shares would make it an Acquiring Person, such Person shall, at the end
of such ten (10) calendar day period, become an Acquiring Person (and such
clause (c)(ii) or (c)(iii) shall no longer apply to such Person). For purposes
of this definition, the determination whether any Person acted in "good faith"
shall be conclusively determined by the Board of Directors.
"Affiliate" and "Associate," when used with reference to any Person, shall
have the respective meanings ascribed to such terms in Rule 12b-2 of the General
Rules and Regulations under the Exchange Act (as hereinafter defined), as in
effect on the date of this Rights Agreement.
A Person shall be deemed to be the "Beneficial Owner" of, to "Beneficially
Own," and to have "Beneficial Ownership" of, any securities:
(a) that such Person or any of such Person's Affiliates or
Associates is deemed to "Beneficially Own" within the meaning of Rule 13d-3 of
the General Rules and Regulations under the Exchange Act, as in effect on the
date of this Rights Agreement;
(b) that such Person or any of such Person's Affiliates or
Associates has (i) the right to acquire (whether such right is exercisable
immediately or only after the passage of time) pursuant to any agreement,
arrangement or understanding (written or oral), or upon the exercise of
conversion rights, exchange rights, rights (other than the Rights), warrants or
options, or otherwise; provided, however, that a Person shall not be deemed to
be the Beneficial Owner of, to Beneficially Own, or to have Beneficial Ownership
of, any securities tendered pursuant to a tender or exchange offer made by or on
behalf of such Person or any of such Person's Affiliates or Associates until
such tendered securities are accepted for purchase or exchange thereunder or
(ii) the right to vote pursuant to any agreement, arrangement or understanding
(written or oral); provided, however, that a Person shall not be deemed to be
the Beneficial Owner of, to Beneficially Own, or to have Beneficial Ownership
of, any security if (A) the agreement, arrangement or understanding (written or
oral) to vote such security arises solely from a revocable proxy or consent
given to such Person in response to a public proxy or consent solicitation made
pursuant to, and in accordance with, the applicable rules and regulations under
the Exchange Act and (B) the beneficial ownership of such security is not also
then reportable on Schedule 13D under the Exchange Act (or any comparable or
successor report); or
(c) that are Beneficially Owned, directly or indirectly, by any
other Person with which such Person or any of such Person's Affiliates or
Associates has any agreement, arrangement or understanding (written or oral) for
the purpose of acquiring, holding, voting (except pursuant to a revocable proxy
as described in clause (b)(ii) of this definition) or disposing of any
securities of the Company.
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Notwithstanding the foregoing, nothing contained in this definition shall
cause a Person ordinarily engaged in business as an underwriter of securities to
be the "Beneficial Owner" of, or to "Beneficially Own," any securities acquired
in a bona fide firm commitment underwriting pursuant to an underwriting
agreement with the Company.
Notwithstanding anything in this definition to the contrary, the phrase
"then outstanding," when used with reference to a Person's Beneficial Ownership
of securities of the Company, shall mean the number of such securities then
issued and outstanding, together with the number of such securities not then
actually issued and outstanding which such Person would be deemed to own
beneficially hereunder.
"Book Value," when used with reference to Common Shares issued by any
Person, shall mean the amount of such Person's equity applicable to each Common
Share, determined (a) in accordance with generally accepted accounting
principles in effect on the date as of which such Book Value is to be
determined, (b) using all the consolidated assets and all the consolidated
liabilities of such Person on the date as of which such Book Value is to be
determined, except that no value shall be included in such assets for goodwill
arising from consummation of a business combination, and (c) after giving effect
to (i) the exercise of all rights, options and warrants to purchase such Common
Shares (other than the Rights), and the conversion of all securities convertible
into such Common Shares, at an exercise or conversion price per Common Share
that is less than such Book Value before the exercise or conversion (whether or
not exercisability or convertibility is conditioned upon occurrence of a future
event), (ii) all dividends and other distributions on the capital stock of such
Person declared prior to the date as of which such Book Value is to be
determined and to be paid or made after such date, and (iii) any other
agreement, arrangement or understanding (written or oral), transaction or other
action prior to the date as of which such Book Value is to be determined that
would have the effect of thereafter reducing such Book Value.
"Business Combination" shall have the meaning set forth in Section
11(c)(i) hereof.
"Business Day" shall mean any day other than a Saturday, Sunday or a day
on which banking institutions in the state of New York or New Jersey, are
authorized or obligated by law or executive order to close.
"Certificate of Amendment" shall mean the Certificate of Amendment to
Designate Relative Rights, Preferences and Limitations and Number of Share of
Series C Participating Cumulative Preferred Stock setting forth the powers,
preferences, rights, qualifications, limitations and restrictions of such series
of Preferred Stock of the Company, a form of which is attached to this Rights
Agreement as Exhibit A.
"Close of Business" on any given date shall mean 5:00 p.m., New Jersey
time, on such date; provided, however, that if such date is not a Business Day,
"Close of Business" shall mean 5:00 p.m., New Jersey time, on the next
succeeding Business Day.
"Common Shares," when used with reference to the Company prior to a
Business Combination, shall mean the shares of Common Stock of the Company or
any other shares of capital stock of the Company into which the Common Stock
shall be reclassified or changed. "Common Shares," when used with reference to
any Person (other than the Company prior to a Business Combination), shall mean
shares of capital stock of such Person (if such Person is a corporation) of any
class or series, or units of equity interests in such Person (if such Person is
not a corporation) of any class or series, the terms of which (i) do not limit
(as a maximum amount and not merely in proportional terms) the amount of
dividends or income payable or distributable on such class or series or the
amount of assets distributable on such class or series upon any voluntary or
involuntary liquidation, dissolution or winding up of such Person and (ii) do
not provide that such class or series is subject to redemption at the option of
such Person, or any shares of capital stock or units of equity interests into
which the foregoing shall be reclassified or changed; provided, however, that,
if at any time there shall be more than one such class or series of capital
stock or equity interests of such Person, "Common Shares" of such Person shall
include all such classes and series substantially in the proportion of the total
number of shares or other units of each such class or series outstanding at such
time.
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"Common Stock" shall have the meaning set forth in the second paragraph of
this Rights Agreement.
"Company" shall have the meaning set forth in the introductory paragraph
of this Rights Agreement; provided, however, that if there is a Business
Combination, "Company" shall have the meaning set forth in Section 11(c)(iii)
hereof.
"Continuing Director" shall mean any member of the Board of Directors who
either (i) is a member of the Board of Directors as of the close of business on
August 9, 2007 (following the Company's 2007 Annual Meeting of Shareholders), or
(ii) was nominated for election to the Board by, or on the recommendation of or
with the approval of, at least two-thirds of the directors who then qualified as
Continuing Directors.
"Control" with respect to any Person shall mean the power to direct the
management and policies of such Person, directly or indirectly, by or through
stock ownership, agency or otherwise, or pursuant to or in connection with an
agreement, arrangement or understanding (written or oral) with one or more other
Persons by or through stock ownership, agency or otherwise. The term
"controlled" shall have meaning correlative to the foregoing.
"Distribution Date" shall have the meaning set forth in Section 3(b).
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended
and in effect on the date in question, unless otherwise specifically provided in
this Rights Agreement.
"Exchange Consideration" shall have the meaning set forth in Section
11(b)(i).
"Expiration Date" shall have the meaning set forth in Section 7(a) hereof.
"Formula Number" shall have the meaning set forth in the Certificate of
Amendment.
"Major Part," when used with reference to the assets of the Company and
its Subsidiaries as of any date, shall mean assets (a) having a fair market
value aggregating 50% or more of the total fair market value of all the assets
of the Company and its Subsidiaries (taken as a whole) as of the date in
question, (b) accounting for 50% or more of the total value (net of depreciation
and amortization) of all the assets of the Company and its Subsidiaries (taken
as a whole) as would be shown on a consolidated or combined balance sheet of the
Company and its Subsidiaries as of the date in question, prepared in accordance
with generally accepted accounting principles then in effect, or (c) accounting
for 50% or more of the total amount of net income or revenues of the Company and
its Subsidiaries (taken as a whole) as would be shown on or derived from a
consolidated or combined statement of income of the Company and its Subsidiaries
for the period of 12 months ending on the last day of the Company's monthly
accounting period next preceding the date in question, prepared in accordance
with generally accepted accounting principles then in effect.
"Market Value," when used with reference to any securities on any date,
shall mean the average of the daily per share closing prices of such securities
for the period that is the shorter of (a) 30 consecutive Trading Days (as
hereinafter defined) immediately prior to (but not including) the date in
question and (b) the number of consecutive Trading Days beginning on the Trading
Day immediately after the date of the first public announcement of the event
requiring a determination of the Market Value and ending on the Trading Day
immediately prior to but not including the record date of such event; provided,
however, that, in the event that the Market Value of such securities is to be
determined in whole or in part during a period following the announcement by the
issuer of such securities of any action of the type described in Section 12(a)
hereof that would require an adjustment thereunder, then, and in each such case,
the Market Value of such securities shall be appropriately adjusted to reflect
the effect of such action on the market price of such securities. The closing
price for each Trading Day shall be the closing price quoted on the principal
United States securities exchange registered under the Exchange Act (or any
recognized foreign stock exchange) on which such securities are listed, or if
such securities are not listed on any such exchange, the average of the closing
bid and asked quotations with respect to a share of such securities on the
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Nasdaq Stock Market or such other system then in use or, if no such quotations
are available, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in such securities selected by the
Company's Board of Directors. If on any such Trading Day no market maker is
making a market in such securities, the closing price of such securities on such
Trading Day shall be deemed to be the fair value of such securities as
determined in good faith by the Company's Board of Directors (whose
determination shall be described in a statement filed with the Rights Agent and
shall be binding on the Rights Agent, the holders of Rights and all other
Persons); provided, however, that for the purpose of determining the closing
price of the Preferred Shares for any Trading Day on which there is no public
market for the Preferred Shares or there is no such market maker for the
Preferred Shares, the closing price on such Trading Day shall be deemed to be
the Formula Number times the closing price of the Common Stock on such Trading
Day.
"Person" shall mean an individual, firm, corporation, partnership, limited
liability company, joint venture, association, trust, unincorporated
organization or other entity and shall include any successor (by merger or
otherwise) thereof or thereto.
"Preferred Shares" shall have the meaning set forth in the second
paragraph of this Rights Agreement. Any reference in this Rights Agreement to
Preferred Shares shall be deemed to include any authorized fraction of a
Preferred Share, unless the context otherwise requires.
"Principal Party" shall mean the Surviving Person (as hereinafter defined)
in a Business Combination; provided, however, that if such Surviving Person is a
direct or indirect Subsidiary of any other Person, "Principal Party" shall mean
the Person which is the ultimate parent of such Surviving Person and which is
not itself a Subsidiary of another Person. In the event ultimate control of such
Surviving Person is shared by two or more Persons, "Principal Party" shall mean
that Person which is immediately controlled by such two or more Persons.
"Purchase Price" with respect to each Right shall mean $2.00, subject to
adjustment as provided herein, and shall be payable in lawful money of the
United States of America. All references herein to the Purchase Price shall mean
the Purchase Price as in effect at the time in question.
"Record Date" shall have the meaning set forth in the second paragraph of
this Rights Agreement.
"Redemption Date" shall have the meaning set forth in Section 24(a)
hereof.
"Redemption Price" with respect to each Right shall mean $0.0001, as such
amount may from time to time be adjusted in accordance with Section 12 hereof.
All references in this Rights Agreement to the Redemption Price shall mean the
Redemption Price as in effect at the time in question.
"Registered Common Shares" shall mean Common Shares that are, as of the
date of consummation of a Business Combination, and have continuously been for
the 12 months immediately preceding such date, registered under Section 12 of
the Exchange Act.
"Right" shall mean the right to purchase Preferred Shares (or other
securities) as provided in this Rights Agreement.
"Rights Agent" shall (a) have the meaning set forth in the introductory
paragraph of this Rights Agreement, (b) mean any successor or replacement to
Continental Stock Transfer & Trust Company as provided in Sections 20 and 22, or
(c) mean any additional Person appointed pursuant to Section 2.
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"Rights Certificate" shall mean a certificate evidencing a Right in
substantially the form attached to this Rights Agreement as Exhibit B.
"Securities Act" shall mean the Securities Act of 1933, as amended and in
effect on the date in question, unless otherwise specifically provided in this
Rights Agreement.
"Shares Acquisition Date" shall mean the first date of public announcement
by the Company or an Acquiring Person that an Acquiring Person has become such.
"Subsidiary" shall mean a Person, at least a majority of the total
outstanding voting power (being the power under ordinary circumstances and not
merely upon the happening of a contingency) to vote in the election of directors
of such Person (if such Person is a corporation) or to participate in the
management and control of such Person (if such Person is not a corporation) of
which is owned, directly or indirectly, by another Person or by one or more
other subsidiaries of such other Person or by such other Person or by one or
more other subsidiaries of such other Person.
"Summary of Rights" shall mean the Summary of Rights to Purchase Preferred
Shares in substantially the form of Exhibit C attached hereto.
"Surviving Person" shall mean (a) the Person which is the continuing or
surviving Person in a consolidation or merger specified in Section 11(c)(i)(A)
or 11(c)(i)(B) hereof or (b) the Person to which the Major Part of the assets of
the Company and its Subsidiaries is sold, leased, exchanged or otherwise
transferred or disposed of in a transaction specified in Section 11(c)(i)(C)
hereof; provided, however, that if the Major Part of the assets of the Company
and its Subsidiaries is sold, leased, exchanged or otherwise transferred or
disposed of in one or more related transactions specified in Section 11(c)(i)(C)
hereof to more than one Person, the "Surviving Person" in such case shall mean
the Person that acquired assets of the Company and/or its Subsidiaries with the
greatest fair market value in such transaction or transactions.
"Trading Day" shall mean a day on which the principal national securities
exchange (or principal recognized foreign stock exchange, as the case may be) on
which any securities or Rights, as the case may be, are listed or admitted to
trading is open for the transaction of business or, if the securities or Rights
in question are not listed or admitted to trading on any national securities
exchange (or recognized foreign stock exchange, as the case may be), a Business
Day.
SECTION 2. APPOINTMENT OF RIGHTS AGENT
The Company hereby appoints the Rights Agent to act as agent for the
Company in accordance with the terms and conditions of this Rights Agreement,
and the Rights Agent hereby accepts such appointment. The Company may from time
to time appoint one or more co-Rights Agents as it may deem necessary or
desirable upon ten (10) days' prior written notice thereof to the Rights Agent.
Notwithstanding the foregoing, the Rights Agent shall have no duty to supervise,
and in no event shall be liable for, the acts or omissions of any such co-Rights
Agent.
SECTION 3. ISSUANCE OF RIGHTS AND RIGHTS CERTIFICATES
(a) One Right shall be associated with each share of Common Stock
outstanding on the Record Date, each additional share of Common Stock that shall
become outstanding between the Record Date and the earliest of the Distribution
Date, the Redemption Date and the Expiration Date and each additional share of
Common Stock with which Rights are issued after the Distribution Date but prior
to the earlier of the Redemption Date and the Expiration Date as provided in
Section 23 hereof; provided, however, that if the number of outstanding Rights
are combined into a smaller number of outstanding Rights pursuant to Section
12(a) hereof, the appropriate fractional Right determined pursuant to such
Section shall thereafter be associated with each such share of Common Stock.
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(b) Until the earlier of (i) the Close of Business on the tenth (10th)
Business Day after the Shares Acquisition Date (unless further extended by a
resolution adopted by a majority of the Continuing Directors of the Company's
Board of Directors prior to the tenth (10th) Business Day or such extended date)
and (ii) the Close of Business on such date, if any, as may be designated by the
Company's Board of Directors following the commencement of, or first public
disclosure of an intent to commence, a tender or exchange offer by any Person
(other than the Company, any Subsidiary of the Company, any employee benefit
plan of the Company or of any of its Subsidiaries, or any Person holding Common
Stock for or pursuant to the terms of any such employee benefit plan) for
outstanding Common Stock, if upon consummation of such tender or exchange offer
such Person could be the Beneficial Owner of 10% or more of the outstanding
Common Stock (the Close of Business on the earlier of the dates set forth in (i)
and (ii) being the "Distribution Date"), (x) the Rights will be evidenced by the
certificates for Common Stock registered in the names of the holders thereof and
not by separate Rights Certificates and (y) the Rights, including the right to
receive Rights Certificates, will be transferable only in connection with the
transfer of Common Stock. The Company will notify the Rights Agent in writing as
promptly as practicable that a Distribution Date has occurred and, if such
notification is given orally, the Company shall confirm the same in writing on
or prior to the next Business Day. Until such notice is received by the Rights
Agent, the Rights Agent may presume conclusively for all purposes that the
Distribution Date has not occurred. As soon as practicable after the
Distribution Date, the Company will prepare and execute, the Rights Agent will
countersign, and the Company will deliver or cause to be sent by first-class,
postage-prepaid mail, to each record holder of Common Stock as of the
Distribution Date, at the address of such holder shown on the records of the
Company, a Rights Certificate evidencing one whole Right for each share of
Common Stock (or for the number of shares of Common Stock with which one whole
Right is then associated if the number of Rights per share of Common Stock held
by such record holder has been adjusted in accordance with the proviso in
Section 3(a) hereof). If the number of Rights associated with each share of
Common Stock has been adjusted in accordance with the proviso in Section 3(a)
hereof, at the time of distributing the Rights Certificates the Company may make
any necessary and appropriate rounding adjustments so that Rights Certificates
representing only whole numbers of Rights are distributed and cash is paid in
lieu of any fractional Right in accordance with Section 15(a) hereof. The
Company will notify the Rights Agent in writing as promptly as practicable of
any such adjustments. As of and after the Distribution Date, the Rights will be
evidenced solely by such Rights Certificates.
(c) As soon as practicable, and in any event no later than 30 days after
the Record Date, the Company will send a copy of a Summary of Rights, by
first-class, postage-prepaid mail, to each record holder of Common Stock as of
the Close of Business on the Record Date at the address of such holder shown on
the records of the Company. With respect to certificates for Common Stock
outstanding as of the Record Date, until the earliest of the Distribution Date,
the Redemption Date and the Expiration Date, (i) the Rights will be evidenced by
such certificates registered in the names of the holders thereof, together with
a copy of the Summary of Rights attached thereto, and the registered holders of
the Common Stock shall also be the registered holders of the associated Rights,
and (ii) the surrender for transfer of any such certificate, even without a copy
of the Summary of Rights attached thereto, shall also constitute the transfer of
the Rights associated with the Common Stock represented thereby.
(d) Certificates representing Common Stock issued after the Record Date
(including, without limitation, upon transfer or exchange of outstanding Common
Stock), but prior to the earliest of the Distribution Date, the Redemption Date
and the Expiration Date, shall have printed on, written on or otherwise affixed
to them substantially the following legend:
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This certificate also evidences and entitles the holder hereof to
certain rights as set forth in the Rights Agreement dated as of August 8,
2007 as it may be amended or supplemented from time to time (the "Rights
Agreement"), between First Montauk Financial Corp. ("First Montauk") and
Continental Stock Transfer & Trust Company (or any successor thereto), as
Rights Agent (or between First Montauk and any successor Rights Agent under
the Rights Agreement), the terms of which are hereby incorporated herein by
reference and a copy of which is on file at the principal executive offices
of First Montauk. Under certain circumstances, as set forth in the Rights
Agreement, such Rights will be evidenced by separate certificates and will
no longer be evidenced by this certificate. First Montauk will mail to the
holder of this certificate a copy of the Rights Agreement without charge
after receipt of a written request therefor. Rights Beneficially Owned by
Acquiring Persons or their Affiliates or Associates (as such terms are
defined in the Rights Agreement) and by any subsequent holder of such
Rights are null and void and nontransferable.
Notwithstanding the requirements of this paragraph (d), neither the omission of
this legend nor the inclusion of a legend that refers to a rights agreement
other than the Rights Agreement shall affect the enforceability of any part of
this Rights Agreement or the rights of any holder of Rights.
SECTION 4. FORM OF RIGHTS CERTIFICATES
The Rights Certificates (and the form of election to purchase and form of
assignment to be printed on the reverse side thereof) shall be in substantially
the form set forth as Exhibit B and may have such marks of identification or
designation and such legends, summaries or endorsements printed thereon as the
Company may deem appropriate and as are not inconsistent with the provisions of
this Rights Agreement and which do not affect the rights, duties or
responsibilities of the Rights Agent, or as may be required to comply with any
applicable law or with any rule or regulation made pursuant thereto or with any
rule or regulation of any stock exchange on which the Rights may from time to
time be listed, or to conform to usage. Subject to the provisions of Sections 7,
11 and 23 hereof, the Rights Certificates, whenever issued, shall be dated as of
the Distribution Date, and on their face shall entitle the holders thereof to
purchase such number of Preferred Shares as shall be set forth therein for the
Purchase Price set forth therein, subject to adjustment from time to time as
herein provided.
SECTION 5. EXECUTION, COUNTERSIGNATURE AND REGISTRATION
(a) The Rights Certificates shall be executed on behalf of the Company by
the Chief Executive Officer, the President, the Chief Financial Officer, the
Treasurer or a Vice President (whether preceded by any additional title) of the
Company, either manually or by facsimile signature, and shall have affixed
thereon the Company's seal or a facsimile thereof, if any, which shall be
attested by the Secretary, an Assistant Secretary or a Vice President (whether
preceded by any additional title, provided that such Vice President shall not
have also executed the Rights Certificates) of the Company, either manually or
by facsimile signature. The Rights Certificates shall be manually countersigned
by the Rights Agent and shall not be valid for any purpose unless so
countersigned. In case any officer of the Company who shall have signed any of
the Rights Certificates shall cease to be such an officer of the Company before
countersignature by the Rights Agent and issuance and delivery by the Company,
such Rights Certificates may nevertheless be countersigned by the Rights Agent
and issued and delivered by the Company with the same force and effect as though
the person who signed such Rights Certificates had not ceased to be such an
officer of the Company; and any Rights Certificate may be signed on behalf of
the Company by any person who, at the actual date of execution of such Rights
Certificate, shall be a proper officer of the Company to sign such Rights
Certificate, although at the date of execution of this Rights Agreement any such
person was not such an officer of the Company.
(b) Following the Distribution Date and receipt by the Rights Agent of (i)
written notice of the occurrence of the Distribution Date pursuant to Section
3(b), and (ii) all necessary information requested by the Rights Agent pursuant
to Section 3(b), the Rights Agent will keep or cause to be kept, at its office
designated for such purpose, books for registration and transfer of the Rights
Certificates issued under this Rights Agreement. Such books shall show the names
and addresses of the respective holders of the Rights Certificates, the number
of Rights evidenced by each Rights Certificate, the certificate number of each
Rights Certificate and the date of each Rights Certificate.
8
SECTION 6. TRANSFER, SPLIT-UP, COMBINATION AND EXCHANGE OF RIGHTS
CERTIFICATES; LOST, STOLEN, DESTROYED OR MUTILATED RIGHTS CERTIFICATES;
UNCERTIFICATED RIGHTS
(a) Subject to the provisions of Sections 7(e), 11 and 15 hereof, at any
time after the Distribution Date, and at or prior to the Close of Business on
the earlier of the Redemption Date and the Expiration Date, any Rights
Certificate or Rights Certificates (other than Rights Certificates representing
Rights that have become null and void pursuant to Section 7(e) hereof or that
have been exchanged pursuant to Section 11(b) hereof) may be transferred, split
up, combined or exchanged for another Rights Certificate or Rights Certificates
entitling the registered holder to purchase a like number of one one-hundredths
of a Preferred Share as the Rights Certificate or Rights Certificates
surrendered then entitled such holder to purchase. Any registered holder
desiring to transfer, split up, combine or exchange any Rights Certificate or
Rights Certificates shall make such request in writing delivered to the Rights
Agent and shall surrender the Rights Certificate or Rights Certificates to be
transferred, split up, combined or exchanged at the office of the Rights Agent
designated for such purpose. The Rights Certificates are transferable only on
the registry books of the Rights Agent. Neither the Rights Agent nor the Company
shall be obligated to take any action whatsoever with respect to the transfer of
any Rights Certificate surrendered for transfer until the registered holder
shall have properly completed and signed the certification contained in the form
of assignment on the reverse side of such Rights Certificate and shall have
provided such additional evidence of the identity of the Beneficial Owner (or
former Beneficial Owner) or Affiliates or Associates thereof as the Company or
the Rights Agent shall reasonably request. Thereupon the Rights Agent shall,
subject to the provisions of Sections 7(e), 11 and 15 hereof, countersign and
deliver to the Person entitled thereto a Rights Certificate or Rights
Certificates, as the case may be, as so requested. The Company or the Rights
Agent may require payment from a Rights holder of a sum sufficient to cover any
tax or governmental charge that may be imposed in connection with any transfer,
split-up, combination or exchange of Rights Certificates.
The Rights Agent shall have no duty or obligation to take any action under
this Section 6 or under any Section of this Rights Agreement which requires the
payment by a Rights holder of applicable taxes or governmental charges unless
and until it is satisfied that all such taxes and/or charges have been paid in
full.
(b) Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
a valid Rights Certificate, and, in case of such loss, theft or destruction, of
indemnity or security satisfactory to them, and, at the Company's or Rights
Agent's request, reimbursement to the Company and the Rights Agent of all
reasonable expenses incidental thereto, and upon surrender to the Rights Agent
and cancellation of the Rights Certificate if mutilated, the Company will make a
new Rights Certificate of like tenor and deliver such new Rights Certificate to
the Rights Agent for countersignature and delivery to the registered holder in
lieu of the Rights Certificate so lost, stolen, destroyed or mutilated.
(c) Notwithstanding any other provision of this Rights Agreement to the
contrary, the Company and the Rights Agent may amend this Rights Agreement to
provide for uncertificated Rights in addition to or in place of Rights evidenced
by Rights Certificates.
SECTION 7. EXERCISE OF RIGHTS; EXPIRATION DATE OF RIGHTS
(a) Subject to Section 7(e) hereof and except as otherwise provided in
this Rights Agreement (including Section 11 hereof), each Right shall entitle
the registered holder thereof, upon exercise thereof as provided in this Rights
Agreement, to purchase for the Purchase Price, at any time after the
Distribution Date and at or prior to the earlier of (i) the Close of Business on
the 10th anniversary of the date of this Rights Agreement (the Close of Business
on such date being the "Expiration Date") and (ii) the Redemption Date, one
one-hundredth (1/100) of a Preferred Share, subject to adjustment from time to
time as provided in Sections 11 and 12 hereof.
(b) The registered holder of any Rights Certificate may exercise the
Rights evidenced thereby (except as otherwise provided in this Rights Agreement)
in whole or in part at any time after the Distribution Date, upon surrender of
the Rights Certificate with the form of election to purchase on the reverse side
thereof duly executed, to the Rights Agent at the office of the Rights Agent
designated for such purpose, together with payment of the Purchase Price for
each one one-hundredth (1/100) of a Preferred Share as to which the Rights are
exercised, at or prior to the earliest of (i) the Expiration Date, (ii) the
Redemption Date, and (iii) the time at which such Rights are exchanged as
provided in Section 11(b) hereof.
9
(c) Upon receipt of a Rights Certificate representing exercisable Rights,
with the form of election to purchase duly executed, accompanied by payment of
the Purchase Price for the Preferred Shares to be purchased, together with an
amount equal to any applicable tax or charge, by certified check, cashier's
check or money order payable to the order of the Company, the Rights Agent shall
thereupon (i) either (A) promptly requisition from any transfer agent of the
Preferred Shares (or make available, if the Rights Agent is the transfer agent)
certificates for the number of Preferred Shares to be purchased, and the Company
hereby irrevocably authorizes its transfer agent to comply with all such
requests, or (B) if the Company shall have elected to deposit the Preferred
Shares with a depositary agent under a depositary arrangement, promptly
requisition from the depositary agent depositary receipts representing the
number of one one-hundredths (1/100) of a Preferred Share to be purchased (in
which case certificates for the Preferred Shares to be represented by such
receipts shall be deposited by the transfer agent with the depositary agent) and
the Company will direct the depositary agent to comply with all such requests,
(ii) when necessary to comply with this Agreement, promptly requisition from the
Company the amount of cash to be paid in lieu of the issuance of fractional
shares in accordance with Section 15 hereof, (iii) promptly after receipt of
such certificates or depositary receipts, cause the same to be delivered to or
upon the order of the registered holder of such Rights Certificate, registered
in such name or names as may be designated by such holder, and (iv) when
necessary to comply with this Agreement, after receipt, promptly deliver such
cash to or upon the order of the registered holder of such Rights Certificate.
In the event that the Company is obligated to issue other securities (including
Common Stock) of the Company, pay cash and/or distribute other property pursuant
to Section 11(a) hereof, the Company shall make all arrangements necessary so
that such other securities, cash and/or other property are available for
distribution by the Rights Agent, if and when necessary to comply with this
Agreement.
(d) In case the registered holder of any Rights Certificate shall exercise
fewer than all the Rights evidenced thereby, a new Rights Certificate evidencing
Rights equivalent to the Rights remaining unexercised shall be issued by the
Rights Agent and delivered to the registered holder of such Rights Certificate
or to his or her duly authorized assigns, subject to the provisions of Section 6
and Section 15 hereof.
(e) Notwithstanding anything in this Rights Agreement to the contrary, if
the Rights are at any time Beneficially Owned by (i) an Acquiring Person or an
Affiliate or Associate of an Acquiring Person, (ii) a transferee of an Acquiring
Person (or of any such Associate or Affiliate) who becomes a transferee after
the Acquiring Person becomes such, or (iii) a transferee of an Acquiring Person
(or of any such Associate or Affiliate) who becomes a transferee prior to or
concurrently with the Acquiring Persons becoming such and receives such Rights
pursuant to either (A) a transfer (whether or not for consideration) from the
Acquiring Person to holders of equity interests in such Acquiring Person or to
any Person with whom the Acquiring Person has any continuing agreement,
arrangement or understanding regarding the transferred rights or (B) a transfer
which the Board of Directors of the Company has determined is part of an
agreement, arrangement or understanding which has as a primary purpose or effect
the avoidance of this Section 7(e), such Rights shall be null and void and
nontransferable and no holder of any such Right (including any purported
transferee or subsequent holder) shall have any rights whatsoever with respect
to such Rights, whether under any provision of this Rights Agreement or
otherwise. No Rights Certificate shall be issued at any time upon the transfer
of any Rights to an Acquiring Person whose Rights would be null and void
pursuant to the preceding sentence or any Associate or Affiliate thereof or to
any nominee of such Acquiring Person, Associate or Affiliate; and any Rights
Certificate delivered to the Rights Agent for transfer to an Acquiring Person
whose Rights would be null and void pursuant to the preceding sentence shall be
canceled. The Company shall notify the Rights Agent in writing when this Section
7(e) applies and shall use all reasonable efforts to ensure that the provisions
of this Section 7(e) are complied with, but neither the Company nor the Rights
Agent shall have any liability to any holder of any Rights Certificate or any
other Person as a result of the Company's failure to make any determinations
with respect to an Acquiring Person or its Affiliate or Associate, or any
transferee thereof, hereunder. The Company shall give the Rights Agent written
notice of the identity of any such Acquiring Person, Associate or Affiliate, or
the nominee of any of the foregoing, and the Rights Agent may rely on such
notice in carrying out its duties under this Agreement and shall be deemed not
to have any knowledge of the identity of any such Acquiring Person, Associate or
Affiliate, or the nominee of any of the foregoing unless and until it shall have
received such notice.
10
(f) Notwithstanding anything in this Rights Agreement to the contrary,
neither the Rights Agent nor the Company shall be obligated to undertake any
action with respect to a registered holder of any Rights Certificates upon the
occurrence of any purported exercise as set forth in this Section 7 unless such
registered holder shall have (i) properly completed and signed the certificate
contained in the form of election to purchase set forth on the reverse side of
the Rights Certificate surrendered for such exercise and (ii) provided such
additional evidence of the identity of the Beneficial Owner (or former
Beneficial Owner) or Affiliates or Associates thereof as the Company or the
Rights Agent shall reasonably request.
(g) The Company may temporarily suspend, for a period of time not to
exceed 90 calendar days after the Distribution Date, the exercisability of the
Rights in order to prepare and file a registration statement under the
Securities Act, on an appropriate form, with respect to the Preferred Shares
purchasable upon exercise of the Rights and permit such registration statement
to become effective; provided, however, that no such suspension shall remain
effective after, and the Rights shall without any further action by the Company
or any other Person become exercisable immediately upon, the effectiveness of
such registration statement. Upon any such suspension, the Company shall notify
the Rights Agent in writing thereof and issue a public announcement stating that
the exercisability of the Rights has been temporarily suspended and shall issue
a further public announcement at such time as the suspension is no longer in
effect (with prompt notice thereof to the Rights Agent including copies of such
announcements). Notwithstanding any provision in this Rights Agreement to the
contrary, the Rights shall not be exercisable in any jurisdiction if the
requisite qualification under the blue sky or securities laws of such
jurisdiction shall not have been obtained or the exercise of the Rights shall
not be permitted under applicable law.
SECTION 8. CANCELLATION AND DESTRUCTION OF RIGHTS CERTIFICATES
All Rights Certificates surrendered or presented for the purpose of
exercise, transfer, split-up, combination or exchange shall, and any Rights
Certificate surrendered or presented for any purpose that represents Rights that
have become null and void and nontransferable pursuant to Section 7(e) hereof
shall, if surrendered or presented to the Company or to any of its agents, be
delivered to the Rights Agent for cancellation or in canceled form, or, if
surrendered or presented to the Rights Agent, shall be canceled by it, and no
Rights Certificates shall be issued in lieu thereof except as expressly
permitted by this Rights Agreement. The Company shall deliver to the Rights
Agent for cancellation and retirement, and the Rights Agent shall so cancel and
retire, any Rights Certificate purchased or acquired by the Company. The Rights
Agent shall deliver all canceled Rights Certificates to the Company, or shall,
at the Company's written request, destroy such canceled Rights Certificates, and
in such case shall deliver a certificate of destruction thereof to the Company.
SECTION 9. RESERVATION AND AVAILABILITY OF PREFERRED SHARES
(a) The Company shall cause to be reserved and kept available out of its
authorized and unissued Preferred Shares or any authorized and issued Preferred
Shares held in its treasury, free from preemptive rights or any right of first
refusal, a number of Preferred Shares sufficient to permit the exercise in full
of all outstanding Rights.
(b) In the event that there shall not be sufficient Preferred Shares
authorized but unissued to permit the exercise or exchange of Rights in
accordance with Section 11 hereof, the Company shall take all such action as may
be necessary to authorize additional Preferred Shares for issuance upon the
exercise or exchange of Rights pursuant to Section 11 hereof; provided, however,
that if the Company is unable to cause the authorization of additional Preferred
Shares, then the Company shall, or if action by the Company's shareholders is
necessary to cause such authorization in lieu of seeking any such authorization,
the Company may, to the extent necessary and permitted by applicable law and any
agreements or instruments in effect prior to the Distribution Date to which it
is a party, (i) upon surrender of a Right, pay cash equal to the Purchase Price
in lieu of issuing Preferred Shares and requiring payment therefor, (ii) upon
due exercise of a Right and payment of the Purchase Price for each Preferred
Share as to which such Right is exercised, issue equity securities having a
value equal to the value of the Preferred Shares that otherwise would have been
issuable pursuant to Section 11 hereof, which value shall be determined by a
nationally recognized investment banking firm selected by the Board of Directors
11
of the Company, or (iii) upon due exercise of a Right and payment of the
Purchase Price for each Preferred Share as to which such Right is exercised,
distribute a combination of Preferred Shares, cash and/or other equity and/or
debt securities having an aggregate value equal to the value of the Preferred
Shares that otherwise would have been issuable pursuant to Section 11 hereof,
which value shall be determined by a nationally recognized investment banking
firm selected by the Board of Directors of the Company. To the extent that any
legal or contractual restrictions (pursuant to agreements or instruments in
effect prior to the Distribution Date to which it is party) prevent the Company
from paying the full amount payable in accordance with the foregoing sentence,
the Company shall pay to holders of the Rights as to which such payments are
being made all amounts that are not then restricted on a pro rata basis as such
payments become permissible under such legal or contractual restrictions until
such payments have been paid in full.
(c) The Company shall take all such action as may be necessary to ensure
that all Preferred Shares delivered upon exercise or exchange of Rights shall,
at the time of delivery of the certificates for such Preferred Shares (subject
to payment of the Purchase Price), be duly and validly authorized and issued and
fully paid and nonassessable shares.
(d) So long as the Preferred Shares issuable upon the exercise or
exchange of Rights are to be listed on the New York Stock Exchange, the Nasdaq
Stock Market or any national securities exchange, the Company shall use its
commercially reasonable best efforts to cause, from and after such time as the
Rights become exercisable or exchangeable, all Preferred Shares reserved for
such issuance to be listed on the New York Stock Exchange, the Nasdaq Stock
Market or such securities exchange upon official notice of issuance.
(e) The Company shall pay when due and payable any and all taxes and
governmental charges that may be payable in respect of the issuance or delivery
of Rights Certificates or of any Preferred Shares upon the exercise or exchange
of Rights. The Company shall not, however, be required to pay any tax or charge
that may be payable in respect of any transfer or delivery of Rights
Certificates to a Person other than, or in respect of the issuance or delivery
of certificates representing the Preferred Shares in a name other than that of,
the registered holder of the Rights Certificate evidencing Rights surrendered
for exercise or exchange or to issue or deliver any certificates representing
Preferred Shares upon the exercise or exchange of any Rights until any such tax
or charge shall have been paid (any such tax or charge being payable by the
holder of such Rights Certificate at the time of surrender) or until it has been
established to the Company's and the Rights Agent's satisfaction that no such
tax or charge is due.
SECTION 10. PREFERRED SHARES RECORD DATE
Each Person in whose name any certificate for Preferred Shares is issued
upon the exercise or exchange of Rights shall for all purposes be deemed to have
become the holder of record of the Preferred Shares represented thereby on, and
such certificate shall be dated, the date on which the Rights Certificate
evidencing such Rights was duly surrendered and payment of any Purchase Price
(and any applicable taxes and governmental charges ) was made; provided,
however, that if the date of such surrender and payment is a date on which the
Preferred Shares transfer books of the Company are closed, such Person shall be
deemed to have become the record holder of such Preferred Shares on, and such
certificate shall be dated, the next succeeding Business Day on which the
Preferred Shares transfer books of the Company are open. Prior to the exercise
of the Rights evidenced thereby, the holder of a Rights Certificate shall not be
entitled to any rights of a holder of Preferred Shares for which the Rights
shall be exercisable, including, without limitation, the right to vote, to
receive dividends or other distributions or to exercise any preemptive rights,
and shall not be entitled to receive any notice of any proceedings of the
Company, except as provided herein.
12
SECTION 11. ADJUSTMENTS IN RIGHTS AFTER THERE IS AN ACQUIRING PERSON;
EXCHANGE OF RIGHTS FOR SHARES; BUSINESS COMBINATIONS
(a) Upon a Person becoming an Acquiring Person, each holder of a Right,
except as provided in Section 7(e) hereof, shall thereafter have a right to
receive, upon exercise thereof for the Purchase Price in accordance with the
terms of this Rights Agreement, such number of shares of Common Stock as shall
equal the result obtained by multiplying the Purchase Price by a fraction, the
numerator of which is the number of one one-hundredths of a Preferred Share for
which a Right is then exercisable and the denominator of which is 50% of the
Market Value of the Common Stock on the date on which a Person becomes an
Acquiring Person. As soon as practicable after a Person becomes an Acquiring
Person (provided the Company shall not have elected to make the exchange
permitted by Section 11(b)(i) hereof for all outstanding Rights), the Company
shall use its commercially reasonable efforts to:
(i) prepare and file a registration statement under the Securities
Act, on an appropriate form, with respect to the securities purchasable upon
exercise of the Rights;
(ii) cause such registration statement to become effective as soon
as practicable after such filing;
(iii) cause such registration statement to remain effective (with a
prospectus at all times meeting the requirements of the Securities Act) until
the Expiration Date; and
(iv) qualify or register the securities purchasable upon exercise of
the Rights under the blue sky or securities laws of such jurisdictions as may be
necessary or appropriate.
(b) (i) The Company's Board of Directors may, at its option, at any time
after a Person becomes an Acquiring Person, mandatorily exchange all or part of
the then outstanding and exercisable Rights (which shall not include Rights that
shall have become null and void and nontransferable pursuant to the provisions
of Section 7(e) hereof) for consideration per Right consisting of either (A)
one-half of the securities that would be issuable at such time upon the exercise
of one Right in accordance with Section 11(a) hereof, or, if applicable, Section
9(b)(ii) or 9(b)(iii) hereof or (B) if applicable, the cash consideration
specified in Section 9(b)(i) hereof (the consideration issuable per Right
pursuant to this Section 11(b)(i) being the "Exchange Consideration"). The
Company's Board of Directors may, at its option, issue, in substitution for
Preferred Shares, Common Shares in an amount per Preferred Share equal to the
Formula Number if there are sufficient Common Shares issued but not outstanding
or authorized but unissued. If the Company's Board of Directors elects to
exchange all the Rights for the Exchange Consideration pursuant to this Section
11(b)(i) prior to the physical distribution of the Rights Certificates, the
Company may distribute the Exchange Consideration in lieu of distributing Rights
Certificates, in which case for purposes of this Rights Agreement holders of
Rights shall be deemed to have simultaneously received and surrendered for
exchange Rights Certificates on the date of such distribution. Notwithstanding
the foregoing, the Board of Directors shall not be empowered to effect such
exchange at any time after any Person (other than the Company, any Subsidiary of
the Company, any employee benefit plan of the Company or any such Subsidiary, or
any Person holding Common Shares for or pursuant to the terms of any such plan),
together with all Affiliates and Associates of such Person, becomes the
Beneficial Owner of more than 50% of the Common Shares then outstanding.
(ii) Any action of the Company's Board of Directors ordering the
exchange of any Rights pursuant to Section 11(b)(i) hereof shall be irrevocable
and, immediately upon the taking of such action and without any further action
and without any notice, the right to exercise any such Right pursuant to Section
11(a) hereof shall terminate and the only right thereafter of a holder of such
Right shall be to receive the Exchange Consideration in exchange for each such
Right held by such holder or, if the Exchange Consideration shall not have been
13
paid or issued, to exercise any such Right pursuant to Section 11(c)(i) hereof.
The Company shall promptly notify the Rights Agent in writing whenever it makes
a public announcement pursuant to this Section 11(b)(ii) and give the Rights
Agent a copy of such announcement; provided, however, that the failure to give,
or any defect in, such notice shall not affect the validity of such exchange.
The Company promptly shall mail a notice of any such exchange to the Rights
Agent and to all holders of such Rights at their last addresses as they appear
on the registry books of the Rights Agent. Any notice that is mailed in the
manner provided in this Rights Agreement shall be deemed given, whether or not
the holder receives the notice. Each such notice of exchange shall state the
method by which the exchange of the Rights for the Exchange Consideration will
be effected and, in the event of any partial exchange, the number of Rights that
will be exchanged. Any partial exchange shall be effected pro rata based on the
number of Rights (other than Rights that shall have become null and void and
nontransferable pursuant to the provisions of Section 7(e) hereof) held by each
holder of Rights.
(c) (i) In the event that, following a Distribution Date, any transactions
specified in the following clause (A), (B) or (C) of this Section 11(c)(i) (each
such transaction being a "Business Combination") shall be consummated, directly
or indirectly:
(A) the Company shall consolidate with, or merge with and into, any
Acquiring Person or any Affiliate or Associate of an Acquiring Person;
(B) any Acquiring Person or any Affiliate or Associate of an
Acquiring Person shall merge with and into the Company and, in connection with
such merger, all or part of the Common Shares shall be changed into or exchanged
for capital stock or other securities of the Company or of an Acquiring Person
or any Affiliate or Associate of an Acquiring Person or cash or any other
property; or
(C) the Company shall sell, lease, exchange or otherwise transfer or
dispose of (or one or more of its Subsidiaries shall sell, lease, exchange or
otherwise transfer or dispose of), in one or more transactions, the Major Part
of the assets of the Company and its Subsidiaries (taken as a whole) to an
Acquiring Person or any Affiliate or Associate of an Acquiring Person;
then, in each such case, proper provision shall be made so that each holder of a
Right, except as provided in Section 7(e) hereof, shall thereafter have the
right to receive, upon the exercise thereof for the Purchase Price in accordance
with the terms of this Rights Agreement, the securities specified below (or, at
such holder's option, the securities specified in Section 11(a) hereof if the
Company is the surviving corporation in such Business Combination):
(1) If the Principal Party in such Business Combination has
Registered Common Shares outstanding, each Right shall thereafter represent the
right to receive, upon the exercise thereof for the Purchase Price in accordance
with the terms of this Rights Agreement, such number of Registered Common Shares
of such Principal Party, free and clear of all liens, encumbrances or other
adverse claims, as shall have an aggregate Market Value equal to the result
obtained by multiplying the Purchase Price by two; or
(2) If the Principal Party in such Business Combination does
not have Registered Common Shares outstanding, each Right shall thereafter
represent the right to receive, upon the exercise thereof for the Purchase Price
in accordance with the terms of this Rights Agreement, at the election of the
holder of such Right at the time of the exercise thereof, any of:
(x) such number of Common Shares of the Surviving Person
in such Business Combination as shall have an aggregate Book Value immediately
after giving effect to such Business Combination equal to the result obtained by
multiplying the Purchase Price by two;
14
(y) such number of Common Shares of the Principal Party
in such Business Combination (if the Principal Party is not also the Surviving
Person in such Business Combination) as shall have an aggregate Book Value
immediately after giving effect to such Business Combination equal to the result
obtained by multiplying the Purchase Price by two; or
(z) if the Principal Party in such Business Combination
is an Affiliate of one or more Persons which has Registered Common Shares
outstanding, such number of Registered Common Shares of whichever of such
Affiliates of the Principal Party has Registered Common Shares with the
greatest aggregate Market Value on the date of consummation of such Business
Combination as shall have an aggregate Market Value on the date of such
Business Combination equal to the result obtained by multiplying the Purchase
Price by two.
(ii) The Company shall not consummate any Business Combination
unless each issuer of Common Shares for which Rights may be exercised, as set
forth in this Section 11(c), shall have sufficient authorized Common Shares that
have not been issued or reserved for issuance (and that shall, when issued upon
exercise thereof in accordance with this Rights Agreement, be validly issued,
fully paid and nonassessable and free of preemptive rights, rights of first
refusal or any other restrictions or limitations on the transfer or ownership
thereof) to permit the exercise in full of the Rights in accordance with this
Section 11(c) and unless prior thereto:
(A) a registration statement under the Securities Act, on an
appropriate form, with respect to the Rights and the Common Shares of such
issuer purchasable upon exercise of the Rights, shall be effective; and
(B) the Company and each such issuer shall have:
(1) executed and delivered to the Rights Agent a supplemental
agreement providing for the assumption by such issuer of the obligations set
forth in this Section 11(c) (including the obligation of such issuer to issue
Common Shares upon the exercise of Rights in accordance with the terms set forth
in Sections 11(c)(i) and 11(c)(iii)) and further providing that such issuer, at
its own expense, will use its best efforts to:
(x) cause a registration statement under the Securities
Act, on an appropriate form, with respect to the Rights and the Common Shares of
such issuer purchasable upon exercise of the Rights, to remain effective (with a
prospectus at all times meeting the requirements of the Securities Act) until
the Expiration Date;
(y) qualify or register the Rights and the Common Shares
of such issuer purchasable upon exercise of the Rights under the blue sky or
securities laws of such jurisdictions as may be necessary or appropriate; and
(z) list the Rights and the Common Shares of such issuer
purchasable upon exercise of the Rights on each national securities exchange on
which the Common Shares were listed prior to the consummation of the Business
Combination or, if the Common Shares were not listed on a national securities
exchange prior to the consummation of the Business Combination, on a national
securities exchange;
(2) furnished to the Rights Agent a written opinion of
independent counsel stating that such supplemental agreement is a valid, binding
and enforceable agreement of such issuer; and
(3) filed with the Rights Agent a certificate of a nationally
recognized firm of independent accountants setting forth the number of Common
Shares of such issuer that may be purchased upon the exercise of each Right
after the consummation of such Business Combination.
(iii) After consummation of any Business Combination and subject to
the provisions of Section 11(c)(ii) hereof, (A) each issuer of Common Shares for
which Rights may be exercised as set forth in this Section 11(c) shall be liable
for, and shall assume, by virtue of such Business Combination, all the
obligations and duties of the Company pursuant to this Rights Agreement, (B) the
term "Company" shall thereafter be deemed to refer to such issuer, (C) each such
issuer shall take such steps in connection with such consummation as may be
necessary to ensure that the provisions of this Rights Agreement (including the
provisions of Sections 11(a) and 11(c) hereof) shall thereafter apply, as nearly
as reasonably may be, in relation to its Common Shares thereafter deliverable
upon the exercise of the Rights, and (D) the number of Common Shares of each
such issuer thereafter receivable upon exercise of any Right shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions of Sections 11 and 12 hereof, and the provisions
of Sections 7, 9 and 10 hereof with respect to the Preferred Shares shall apply,
as nearly as reasonably may be, on like terms to any such Common Shares.
15
SECTION 12. CERTAIN ADJUSTMENTS
(a) To preserve the actual or potential economic value of the Rights, if
at any time after the date of this Rights Agreement there shall be any change in
the Common Stock or the Preferred Shares, whether by reason of stock dividends,
stock splits, recapitalizations, mergers, consolidations, combinations or
exchanges of securities, split-ups, split-offs, spin-offs, liquidations, other
similar changes in capitalization, any distribution or issuance of cash, assets,
evidences of indebtedness or subscription rights, options or warrants to holders
of Common Stock or Preferred Shares, as the case may be (other than distribution
of the Rights or regular quarterly cash dividends), or otherwise, then, in each
such event the Company's Board of Directors shall make such appropriate
adjustments in the number of Preferred Shares (or the number and kind of other
securities) issuable upon exercise of each Right, the Purchase Price and
Redemption Price in effect at such time and the number of Rights outstanding at
such time (including the number of Rights or fractional Rights associated with
each share of Common Stock) such that following such adjustment such event shall
not have had the effect of reducing or limiting the benefits the holders of the
Rights would have had absent such event.
(b) If, as a result of an adjustment made pursuant to Section 12(a)
hereof, the holder of any Right thereafter exercised shall become entitled to
receive any securities other than Preferred Shares, then the number of such
securities so receivable upon exercise of any Right thereafter shall be subject
to adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions of Sections 11 and 12 hereof, and the provisions
of Sections 7, 9 and 10 hereof with respect to the Preferred Shares shall apply,
as nearly as reasonably may be possible, on like terms to any such other
securities.
(c) All Rights originally issued by the Company subsequent to any
adjustment made to the amount of Preferred Shares or other securities relating
to a Right shall evidence the right to purchase, for the Purchase Price, the
adjusted number and kind of securities purchasable from time to time under this
Rights Agreement upon exercise of the Rights, all subject to further adjustment
as provided in this Rights Agreement.
(d) Irrespective of any adjustment or change in the Purchase Price or the
number of Preferred Shares or number or kind of other securities issuable upon
the exercise of the Rights, the Rights Certificates theretofore and thereafter
issued may continue to express the terms that were expressed in the initial
Rights Certificates issued under this Rights Agreement.
(e) In any case in which action taken pursuant to Section 12(a) hereof
requires that an adjustment be made effective as of a record date for a
specified event, the Company may elect to defer (and shall give prompt written
notice of such election to the Rights Agent), until the occurrence of such
event, issuing to the holder of any Right exercised after such record date the
Preferred Shares and/or other securities, if any, issuable upon such exercise
over and above the Preferred Shares and/or other securities, if any, issuable
before giving effect to such adjustment; provided, however, that the Company
shall deliver to such holder a due ▇▇▇▇ or other appropriate instrument
evidencing such holder's right to receive such additional securities upon the
occurrence of the event requiring such adjustment.
SECTION 13. CERTIFICATE OF ADJUSTMENT
Whenever an adjustment is made or any event affecting the Rights or their
exercisability (including without limitation an event that causes Rights to
become null and void) occurs as provided in Section 11 or 12 hereof, the Company
shall (a) promptly prepare a certificate setting forth such adjustment and a
brief, reasonably detailed statement of the facts and computations accounting
for such adjustment, (b) promptly file with the Rights Agent and with each
transfer agent for the Preferred Shares a copy of such certificate, and (c) mail
a brief summary thereof to each holder of a Rights Certificate (or, prior to the
Distribution Date, of Common Stock) in accordance with Section 25 hereof. The
Rights Agent shall be fully protected in relying on any such certificate and on
any adjustment or statements contained therein, and shall have no duty or
liability with respect to, and shall not be deemed to have knowledge of, any
such adjustment or any such event unless and until it shall have received such a
certificate.
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SECTION 14. ADDITIONAL COVENANTS
(a) Notwithstanding any other provision of this Rights Agreement, no
adjustment to the number of Preferred Shares (or fraction of a share) or other
securities for which a Right is exercisable or the number of Rights outstanding
or associated with each Common Share or any similar or other adjustment shall be
made or be effective if such adjustment would have the effect of reducing or
limiting the benefits the holders of the Rights would have had absent such
adjustment, including, without limitation, the benefits under Sections 11 and 12
hereof, unless the terms of this Rights Agreement are amended so as to preserve
such benefits.
(b) The Company shall not, after the Distribution Date, except as
permitted by Section 26 hereof, take (or permit any Subsidiary of the Company to
take) any action if at the time such action is taken it is reasonably
foreseeable that such action will reduce or otherwise limit the benefits the
holders of the Rights would have had absent such action, including, without
limitation, the benefits under Sections 11 and 12 hereof. Any action taken by
the Company during any period after any Person becomes an Acquiring Person but
prior to the Distribution Date shall be null and void unless such action could
be taken under this Section 14(b) from and after the Distribution Date. The
Company shall not consummate any Business Combination if any issuer of Common
Shares for which Rights may be exercised after such Business Combination in
accordance with Section 11(c) hereof shall have taken any action that reduces or
otherwise limits the benefits the holders of the Rights would have had absent
such action, including the benefits under Sections 11 and 12 hereof.
SECTION 15. FRACTIONAL RIGHTS AND FRACTIONAL SHARES
(a) The Company may, but shall not be required to, issue fractional Rights
or distribute Rights Certificates that evidence fractional Rights. In lieu of
such fractional Rights, the Company may pay to the registered holders of the
Rights Certificates with regard to which such fractional Rights would otherwise
be issuable an amount in cash equal to the same fraction of the current market
value of a whole Right. For purposes of this Section 15(a), the current market
value of a whole Right shall be the closing price of the Rights (as determined
pursuant to the second and third sentences of the definition of Market Value
contained in Section 1 hereof) for the Trading Day immediately prior to the date
on which such fractional Rights would have been otherwise issuable.
(b) The Company may, but shall not be required to, issue fractional
Preferred Shares upon exercise of the Rights or distribute certificates that
evidence fractional Preferred Shares. In lieu of fractional Preferred Shares,
the Company may elect to (i) utilize a depository arrangement as provided by the
terms of the Preferred Shares or (ii) in the case of a fractional Preferred
Share (other than one one-hundredth (1/100th) of a Preferred Share or any
integral multiple thereof), pay to the registered holders of Rights Certificates
at the time such Rights are exercised as provided in this Rights Agreement an
amount in cash equal to the same fraction of the current market value of one
Preferred Share, if any are outstanding and publicly traded (or the Formula
Number times the current market value of one share of Common Stock if the
Preferred Shares are not outstanding and publicly traded). For purposes of this
Section 15(b), the current market value of a Preferred Share (or share of Common
Stock) shall be the closing price of a Preferred Share (or share of Common
Stock) (as determined pursuant to the second and third sentences of the
definition of Market Value contained in Section 1 hereof) for the Trading Day
immediately prior to the date of such exercise. If, as a result of an adjustment
made pursuant to Section 12(a) hereof, the holder of any Right thereafter
exercised shall become entitled to receive any securities other than Preferred
Shares, the provisions of this Section 15(b) shall apply, as nearly as
reasonably may be, on like terms to such other securities.
(c) The Company may, but shall not be required to, issue fractional Common
Shares upon exchange of Rights pursuant to Section 11(b) hereof, or to
distribute certificates that evidence fractional Common Shares. In lieu of such
fractional Common Shares, the Company may pay to the registered holders of
Rights Certificates with regard to which such fractional Common Shares would
otherwise be issuable an amount in cash equal to the same fraction of the
current Market Value of one Common Share as of the date on which a Person became
an Acquiring Person.
17
(d) Each holder of Rights, by accepting the Rights, expressly waives his,
her or its right to receive any fractional Rights or any fractional shares upon
exercise of a Right, except as provided in this Section 15.
(e) Whenever a payment for fractional Rights or fractional shares is to be
made by the Rights Agent, the Company shall (i) promptly prepare and deliver to
the Rights Agent a certificate setting forth in reasonable detail the facts
related to such payment and the prices and/or formulas utilized in calculating
such payments, and (ii) provide sufficient monies to the Rights Agent in the
form of fully collected funds to make such payments. The Rights Agent shall be
fully protected in relying upon such a certificate and shall have no duty with
respect to, and shall not be deemed to have knowledge of any payment for
fractional Rights or fractional shares under any Section of this Rights
Agreement relating to the payment of fractional Rights or fractional shares
unless and until the Rights Agent shall have received such a certificate and
sufficient monies.
SECTION 16. RIGHTS OF ACTION
(a) All rights of action in respect of this Rights Agreement, excepting
the rights of action given to the Rights Agent under Sections 19 and 21 hereof,
are vested in the respective registered holders of the Rights Certificates (and,
prior to the Distribution Date, the registered holders of the Common Stock), and
any registered holder of any Rights Certificate (or, prior to the Distribution
Date, of the Common Stock), without the consent of the Rights Agent or of the
holder of any other Rights Certificate (or, prior to the Distribution Date, of
the Common Stock), may, in his, her or its own behalf and for his, her or its
own benefit, enforce, and may institute and maintain any suit, action or
proceeding against the Company to enforce, or otherwise act in respect of, his,
her or its right to exercise the Rights evidenced by such Rights Certificate in
the manner provided in such Rights Certificate and in the Rights Agreement.
Without limiting the foregoing or any remedies available to the holders of
Rights, it is specifically acknowledged that the holders of Rights would not
have an adequate remedy at law for any breach by the Company of this Rights
Agreement and shall be entitled to specific performance of the obligations of
any Person under, and injunctive relief against actual or threatened violations
by the Company of the obligations of any Person subject to, this Rights
Agreement.
(b) Any holder of Rights who prevails in an action to enforce the
provisions of this Rights Agreement against the Company shall be entitled to
recover the reasonable costs and expenses, including attorneys' fees, incurred
in such action.
(c) Notwithstanding anything in this Agreement to the contrary, neither
the Company nor the Rights Agent shall have any liability to any holder of a
Right or other Person as a result of its inability to perform any of its
obligations under this Rights Agreement by reason of any preliminary or
permanent injunction or other order, judgment, decree or ruling (whether
interlocutory or final) issued by a court or by a governmental, regulatory, self
regulatory or administrative agency or commission, or any statute, rule,
regulation or executive order promulgated or enacted by any governmental
authority, prohibiting or otherwise restraining performance of such obligation;
provided, however, that the Company must use all reasonable efforts to have any
such injunction, order, judgment, decree or ruling lifted or otherwise
overturned as soon as possible.
SECTION 17. AGREEMENT OF RIGHTS HOLDERS
Every holder of a Right, by accepting the same, consents and agrees with
the Company and the Rights Agent and with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable only
in connection with the transfer of the Common Stock, and the Rights associated
with each share of Common Stock shall be automatically transferred upon the
transfer of each share of Common Stock;
(b) after the Distribution Date, the Rights Certificates will be
transferable, subject to Section 7(e) hereof, only on the registry books of the
Rights Agent if surrendered at the office of the Rights Agent designated for
such purpose, duly endorsed or accompanied by a proper instrument of transfer
with all required certifications completed; and
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(c) the Company and the Rights Agent may deem and treat the Person in
which name a Rights Certificate (or, prior to the Distribution Date, the
associated Common Stock certificate) is registered as the absolute owner thereof
and of the Rights evidenced thereby (notwithstanding any notations of ownership
or writing on the Rights Certificates or the associated Common Stock certificate
made by anyone other than the Company or the Rights Agent) for all purposes
whatsoever, and neither the Company nor the Rights Agent shall be affected by
any notice to the contrary.
SECTION 18. RIGHTS CERTIFICATE HOLDER NOT DEEMED A SHAREHOLDER
No holder, as such, of any Rights Certificate shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of the Preferred
Shares or of any other securities of the Company that may at any time be
issuable on the exercise of the Rights represented thereby, nor shall anything
contained in this Rights Agreement or in any Rights Certificate be construed to
confer upon the holder of any Rights Certificate, as such, any of the rights of
a shareholder of the Company, including, without limitation, any right to vote
for the election of directors or on any matter submitted to shareholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting shareholders, or to
receive dividends or other distributions or subscription rights, or otherwise,
until the Right or Rights evidenced by such Rights Certificate shall have been
exercised in accordance with the provisions of this Rights Agreement.
SECTION 19. CONCERNING THE RIGHTS AGENT
(a) The Company agrees to pay to the Rights Agent reasonable compensation
for all services rendered by it under this Rights Agreement and, from time to
time, on demand of the Rights Agent, its reasonable expenses and counsel fees
and disbursements and other disbursements incurred in preparing, negotiating,
delivering, amending, administering and executing this Rights Agreement and
exercising and performing its duties under this Rights Agreement, including any
taxes or governmental charges imposed as a result of any action taken by it
hereunder (other than taxes on the fees payable to it). The Company also agrees
to indemnify the Rights Agent for, and to hold it harmless against, any loss,
liability, damage, judgment, fine, penalty, claim, demand, settlement, cost or
expense (including without limitation, the reasonable fees and expenses of legal
counsel) incurred without gross negligence, bad faith or willful misconduct on
the part of the Rights Agent (which gross negligence, bad faith or willful
misconduct must be determined by final, non-appealable order, judgment, decree
or ruling of a court of competent jurisdiction) on the part of the Rights Agent
for any action taken, suffered or omitted by the Rights Agent in connection with
the execution, acceptance, administration, exercise or performance of its duties
under this Rights Agreement, including, without limitation, the costs and
expenses of defending against any claim of liability arising therefrom, directly
or indirectly. The provisions of this Section 19 and Section 21 below shall
survive the termination of this Rights Agreement, the exercise or expiration of
the Rights and the resignation or removal of the Rights Agent. The costs and
expenses incurred in enforcing this right of indemnification by the Rights Agent
shall be paid by the Company.
(b) The Rights Agent shall be authorized to rely on, shall be protected
and shall incur no liability for or in respect of any action taken, suffered or
omitted by it in connection with its acceptance and administration of this
Rights Agreement or the exercise or performance of its duties hereunder, in
reliance on any Rights Certificate or certificate for the Preferred Shares or
Common Stock or for other securities of the Company, instrument of assignment or
transfer, power of attorney, endorsement, affidavit, letter, notice, direction,
consent, certificate, statement or other paper or document believed by it to be
genuine and to be signed, executed and, where necessary, verified or
acknowledged by the proper Person or Persons, or otherwise upon the advice of
counsel as set forth in Section 21. The Rights Agent shall not be deemed to have
knowledge of any event of which it was supposed to receive notice thereof
hereunder, and the Rights Agent shall be fully protected and shall incur no
liability for failing to take any action in connection therewith unless and
until it has received such notice in writing.
SECTION 20. MERGER OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS AGENT
(a) Any Person into which the Rights Agent or any successor Rights Agent
may be merged or with which it may be consolidated, or any Person resulting from
any merger or consolidation to which the Rights Agent or any successor Rights
Agent shall be a party, or any Person succeeding to the business of the Rights
Agent or any successor Rights Agent, shall be the successor to the Rights Agent
under this Rights Agreement without the execution or filing of any paper or any
further act on the part of any of the parties to this Rights Agreement;
provided, however, that such Person would be eligible for appointment as a
successor Rights Agent under the provisions of Section 22 hereof. In case at the
time such successor Rights Agent shall succeed to the agency created by this
Rights Agreement, any of the Rights Certificates shall have been countersigned
19
but not delivered, any such successor Rights Agent may adopt the
countersignature of the predecessor Rights Agent and deliver such Rights
Certificates so countersigned; and, in case at that time any of the Rights
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Rights Certificates either in the name of the predecessor
Rights Agent or in the name of the successor Rights Agent; and, in all such
cases, such Rights Certificates shall have the full force provided in the Rights
Certificates and in this Rights Agreement.
(b) In case at any time the name of the Rights Agent shall be changed and
at such time any of the Rights Certificates shall have been countersigned but
not delivered, the Rights Agent may adopt the countersignature under its prior
name and deliver Rights Certificates so countersigned; and, in case at that time
any of the Rights Certificates shall not have been countersigned, the Rights
Agent may countersign such Rights Certificates either in its prior name or in
its changed name; and, in all such cases, such Rights Certificates shall have
the full force provided in the Rights Certificates and in this Rights Agreement.
SECTION 21. RIGHTS AND DUTIES OF RIGHTS AGENT
The Rights Agent undertakes to perform only the duties and obligations,
expressly imposed by this Rights Agreement (and no implied duties or
obligations) upon the following terms and conditions, by all of which the
Company and the holders of the Rights Certificates (or, prior to the
Distribution Date, of the Common Stock), by their acceptance thereof, shall be
bound:
(a) The Rights Agent may consult with legal counsel of its choice (who may
be legal counsel for the Company, or may be an employee of the Rights Agent),
and the advice or opinion of such counsel shall be full and complete
authorization and protection to the Rights Agent, and the Rights Agent shall
incur no liability for or in respect of any action taken, suffered or omitted by
it in accordance with such advice or opinion.
(b) Whenever in the performance of its duties under this Rights Agreement
the Rights Agent shall deem it necessary or desirable that any fact or matter
(including, without limitation, the identity of any Acquiring Person and the
determination of "current market price") be proved or established by the Company
prior to taking, suffering or omitting any action under this Rights Agreement,
such fact or matter (unless other evidence in respect thereof be specifically
prescribed in this Rights Agreement) may be deemed to be conclusively proved and
established by a certificate signed by any one of the Chairman of the Board, the
Chief Executive Officer, the President, the Chief Financial Officer, a Vice
President (whether preceded by any additional title), the Treasurer or the
Secretary of the Company and delivered to the Rights Agent, and such certificate
shall be full and complete authorization and protection to the Rights Agent, and
the Rights Agent shall incur no liability for or in respect of any action taken
or suffered or omitted to be taken by it under the provisions of this Rights
Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable under this Rights Agreement to the
Company and any other Person only for its own gross negligence, bad faith or
willful misconduct (which gross negligence, bad faith or willful misconduct must
be determined by a final, non-appealable order, judgment, decree or ruling of a
court of competent jurisdiction). Anything in this Rights Agreement to the
contrary notwithstanding, in no event shall the Rights Agent be liable for
special, punitive, indirect, incidental or consequential loss or damage of any
kind whatsoever (including, but not limited to, lost profits), even if the
Rights Agent has been advised of the possibility or likelihood of such loss or
damage. Any liability of the Rights Agent under this Agreement will be limited
to the amount of annual fees paid by the Company to the Rights Agent.
(d) The Rights Agent shall not have any liability for, nor be liable for
or by reason of any of the statements of fact or recitals contained in this
Rights Agreement or in the Rights Certificates (except as to its
countersignature thereof) or be required to verify the same, but all such
statements and recitals are and shall be deemed to have been made by the Company
only.
(e) The Rights Agent shall not have any liability for, nor be under any
responsibility in respect of the validity of this Rights Agreement or the
execution and delivery hereof (except the due execution of this Rights Agreement
by the Rights Agent) or in respect of the validity or execution of any Rights
Certificate (except its countersignature thereof); it shall not be responsible
for any breach by the Company of any covenant or condition contained in this
Rights Agreement or in any Rights Certificate; it shall not be responsible for
any change or adjustment in the terms of the Rights including any adjustment
20
required under the provisions of Section 11 or 12 hereof or for the manner,
method or amount of any such adjustment or the ascertaining of the existence of
facts that would require any such adjustment (except with respect to the
exercise of Rights evidenced by Rights Certificates after actual notice of any
such adjustment, upon which the Rights Agent may rely); it shall not by any act
under this Rights Agreement be deemed to make any representation or warranty as
to the authorization or reservation of any Preferred Shares or Common Stock to
be issued pursuant to this Rights Agreement or any Rights Certificate or as to
whether any Preferred Shares or Common Stock will, when so issued, be validly
authorized and issued, fully paid and nonassessable; and it shall not be
responsible for any change in the exercisability of the Rights (including the
Rights becoming null and void hereunder).
(f) The Company agrees that it shall perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all such
further and other acts, instruments and assurances as may reasonably be required
by the Rights Agent for the carrying out or performing by the Rights Agent of
the provisions of this Rights Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties under this Rights
Agreement from any one of the Chairman of the Board, the Chief Executive
Officer, the President, the Chief Financial Officer, a Vice President (whether
preceded by any additional title), the Treasurer or the Secretary of the
Company, and to apply to such officers for advice or instructions in connection
with its duties, and such advice or instructions shall be full authorization and
protection to the Rights Agent and the Rights Agent shall incur no liability (i)
for or in respect of any action taken, suffered or omitted by it, in accordance
with the advice or instructions of any such officer or (ii) in failing to take
action prior to receiving such advice or instruction. The Rights Agent shall be
fully authorized and protected in relying upon the most recent instructions
received by any such officer. Any application by the Rights Agent for written
instructions from the Company may, at the option of the Rights Agent, set forth
in writing any action proposed to be taken, suffered or omitted by the Rights
Agent under this Rights Agreement and the date on and/or after which such action
shall be taken or suffered or such omission shall be effective. The Rights Agent
shall not be liable for any action taken or suffered by, or omission or, the
Rights Agent in accordance with a proposal included in any such application on
or after the date specified therein (which date shall not be less than five
Business Days after the date any such officer of the Company actually receives
such application, unless any such officer shall have consented in writing to an
earlier date) unless, prior to taking, suffering or omitting any such action (or
the effective date in case of an omission), the Rights Agent has received
written instructions in response to such application specifying the action to be
taken, suffered or omitted.
(h) The Rights Agent and any shareholder, Affiliate, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Company or become pecuniarily interested in any transaction in
which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though the Rights Agent were not
the Rights Agent under this Rights Agreement. Nothing in this Rights Agreement
shall preclude the Rights Agent or any such shareholder, Affiliate, director,
officer or employee from acting in any other capacity for the Company or for any
other Person.
(i) The Rights Agent may execute and exercise any of the rights or powers
hereby vested in it or perform any duty under this Rights Agreement either
itself (through its directors, officers and employees) or by or through its
attorneys or agents, and the Rights Agent shall not be answerable or accountable
for any act, omission, default, neglect or misconduct of any such attorneys or
agents or for any loss to the Company or any other Person resulting from any
such act, omission, default, neglect or misconduct absent any gross negligence,
bad faith or willful misconduct (which gross negligence, bad faith or willful
misconduct must be determined by a final, non-appealable order, judgment, decree
or ruling of a court of competent jurisdiction) in the selection and continued
employment thereof.
21
(j) No provision of this Rights Agreement shall require the Rights Agent
to expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder or in the exercise of its rights
if it believes that repayment of such funds or adequate indemnification against
such risk or liability is not reasonably assured to it.
(k) If, with respect to any Rights Certificate surrendered to the Rights
Agent for exercise or transfer, the certificate attached to the form of
assignment or form of election to purchase, as the case may be, has not been
completed, the Company and the Rights Agent will deem the beneficial owner of
the rights evidenced by such Rights Certificate to be an Acquiring Person or an
Affiliate or Associate thereof and such assignment or election to purchase will
not be honored.
SECTION 22. CHANGE OF RIGHTS AGENT
The Rights Agent or any successor Rights Agent may resign and be
discharged from its duties under this Rights Agreement upon thirty (30) days'
notice in writing mailed to the Company and to each transfer agent of the Common
Stock or the Preferred Shares known to the Rights Agent by registered or
certified mail, and to the holders of the Rights Certificates (or, prior to the
Distribution Date, of the Common Stock) by first-class mail. The Company may
remove the Rights Agent or any successor Rights Agent upon thirty (30) days'
notice in writing mailed to the Rights Agent or successor Rights Agent, as the
case may be, and to each transfer agent of the Common Stock or the Preferred
Shares by registered or certified mail, and to the holders of the Rights
Certificates (or, prior to the Distribution Date, of the Common Stock) by
first-class mail. If the Rights Agent shall resign or be removed or shall
otherwise become incapable of acting, the Company shall appoint a successor to
the Rights Agent. If the Company shall fail to make such appointment within a
period of thirty (30) days after giving notice of such removal or after it has
been notified in writing of such resignation or incapacity by the resigning or
incapacitated Rights Agent or by the holder of a Rights Certificate (or, prior
to the Distribution Date, of Common Stock) (who shall, with such notice, submit
his, her or its Rights Certificate or, prior to the Distribution Date, the
certificate representing his, her or its Common Stock, for inspection by the
Company), then the registered holder of any Rights Certificate (or, prior to the
Distribution Date, of the Common Stock) may apply to any court of competent
jurisdiction for the appointment of a new Rights Agent. Any successor Rights
Agent, whether appointed by the Company or by such a court, shall be either (A)
a Person in good standing organized and doing business under the laws of the
United States or of any state of the United States so long as such Person is
subject to supervision or examination by federal or state authority and which
has at the time of its appointment as Rights Agent a combined capital and
surplus of at least fifty million dollars ($50,000,000), or (B) an Affiliate of
a Person described in clause (A) of this sentence. After appointment, the
successor Rights Agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named as Rights Agent without
further act or deed; provided, however, that the predecessor Rights Agent shall
deliver and transfer to the successor Rights Agent any property at the time held
by it under this Rights Agreement, and execute and deliver any further
assurance, conveyance, act or deed necessary for the purpose. Not later than the
effective date of any such appointment, the Company shall file notice thereof in
writing with the predecessor Rights Agent and each transfer agent of the Common
Stock and the Preferred Shares, and mail a notice thereof in writing to the
registered holders of the Rights Certificates (or, prior to the Distribution
Date, of the Common Stock). Failure to give any notice provided for in this
Section 22, however, or any defect therein shall not affect the legality or
validity of the resignation or removal of the Rights Agent or the appointment of
the successor Rights Agent, as the case may be.
SECTION 23. ISSUANCE OF ADDITIONAL RIGHTS AND RIGHTS CERTIFICATES
Notwithstanding any of the provisions of this Rights Agreement or of the
Rights to the contrary, the Company may, at its option, issue new Rights
Certificates evidencing Rights in such form as may be approved by its Board of
Directors to reflect any adjustment or change made in accordance with the
provisions of this Rights Agreement. In addition, in connection with the
issuance or sale of Common Stock following the Distribution Date and prior to
22
the earlier of the Redemption Date and the Expiration Date, the Company (a)
shall issue, with respect to Common Stock so issued or sold pursuant to the
exercise of stock options or under any employee plan or arrangement, or upon the
exercise, conversion or exchange of securities, notes or debentures issued by
the Company, and (b) may issue, in any other case, if deemed necessary or
appropriate by the Company's Board of Directors, Rights Certificates
representing the appropriate number of Rights in connection with such issuance
or sale; provided, however, that (i) no such Rights Certificate shall be issued
if, and to the extent that, the Company shall be advised by counsel that such
issuance would create a significant risk of material adverse tax consequences to
the Company or the Person to whom such Rights Certificate would be issued, (ii)
no such Rights Certificate shall be issued if, and to the extent that,
appropriate adjustment shall otherwise have been made in lieu of the issuance
thereof, and (iii) no such Rights Certificate shall be issued to an Acquiring
Person or an Affiliate or Associate of any Acquiring Person.
SECTION 24. REDEMPTION AND TERMINATION
(a) The Company's Board of Directors may, at its option, at any time prior
to the earlier of (i) such time as any Person becomes an Acquiring Person and
(ii) the Close of Business on the Expiration Date, order the redemption of all,
but not fewer than all, the then outstanding Rights at the Redemption Price (the
date of such redemption being the "Redemption Date"), and the Company, at its
option, may pay the Redemption Price either in cash or in Common Shares or other
securities of the Company deemed by the Board of Directors, in the exercise of
its sole discretion, to be at least equivalent in value to the Redemption Price.
The redemption of the Rights by the Board of Directors may be made effective at
such time, on such basis and with such conditions as the Board of Directors in
its sole discretion may establish.
(b) Immediately upon the action of the Company's Board of Directors
ordering the redemption of the Rights, and without any further action and
without any notice, the right to exercise the Rights will terminate and the only
right thereafter of the holders of Rights shall be to receive the Redemption
Price. Within ten (10) Business Days after the action of the Company's Board of
Directors ordering the redemption of the Rights, the Company shall give notice
of such redemption to the Rights Agent and to the holders of the then
outstanding Rights by mailing such notice to all such holders at their last
addresses as they appear upon the registry books of the Rights Agent or, prior
to the Distribution Date, on the registry books of the transfer agent for the
Common Stock. Each such notice of redemption will state the method by which
payment of the Redemption Price will be made. The notice, if mailed in the
manner provided in this Rights Agreement, shall be conclusively presumed to have
been duly given, whether or not the holder of Rights receives such notice. In
any case, failure to give such notice by mail, or any defect in the notice, to
any particular holder of Rights shall not affect the sufficiency of the notice
to other holders of Rights.
SECTION 25. NOTICES
Notices or demands authorized by this Rights Agreement to be given or made
by the Rights Agent or by the holder of a Rights Certificate (or, prior to the
Distribution Date, of Common Stock) to or on the Company shall be sufficiently
given or made if delivered by facsimile transmission (provided confirmation of
23
receipt is received immediately thereafter) or sent by first-class mail, postage
prepaid, addressed (until another address is filed in writing with the Rights
Agent) as follows:
First Montauk Financial Corp.
Parkway 109 Office Center
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: President and Chief Executive Officer
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Subject to the provisions of Section 22 hereof, notices or demands authorized by
this Rights Agreement to be given or made by the Company or by the holder of a
Rights Certificate (or, prior to the Distribution Date, of Common Stock) to or
on the Rights Agent shall be sufficiently given or made if delivered by
facsimile transmission (provided confirmation of receipt is received immediately
thereafter) or sent by first-class mail, postage prepaid, addressed (until
another address is filed in writing with the Company) as follows:
Continental Stock Transfer & Trust Company
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Compliance Department
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Notices or demands authorized by this Rights Agreement to be given or made by
the Company or the Rights Agent to any holder of a Rights Certificate (or, prior
to the Distribution Date, of Common Stock) shall be sufficiently given or made
if sent by first-class mail, postage prepaid, addressed to such holder at such
holder's address as shown on the registry books of the Rights Agent or, prior to
the Distribution Date, on the registry books of the transfer agent for the
Common Stock.
SECTION 26. SUPPLEMENTS AND AMENDMENTS
At any time prior to the time any Person becomes an Acquiring Person and
subject to the last two sentences of this Section 26, the Company may, subject
to the other terms and conditions of this Rights Agreement, and the Rights Agent
shall if the Company so directs, supplement or amend any provision of this
Rights Agreement (including, without limitation, the date on which the
Distribution Date or the Expiration Date shall occur, the amount of the Purchase
Price, the definition of "Acquiring Person," the time during which the Rights
may be redeemed pursuant to Section 24 hereof or any provision of the
Certificate of Designation) without the approval of any holder of the Rights.
From and after the time any Person becomes an Acquiring Person and subject to
applicable law and the last two sentences of this Section 26, the Company may,
24
and the Rights Agent shall if the Company so directs, amend this Rights
Agreement without the approval of any holder of Rights Certificates to (a) cure
any ambiguity or correct or supplement any provision contained in this Rights
Agreement that may be defective or inconsistent with any other provision of this
Rights Agreement or (b) make any other provision in regard to matters or
questions arising under this Rights Agreement that the Company may deem
necessary or desirable and that shall not adversely affect the interests of the
Rights Agent or the holders of Rights Certificates (other than an Acquiring
Person or an Affiliate or Associate of an Acquiring Person). Any supplement or
amendment adopted during any period after any Person has become an Acquiring
Person but prior to the Distribution Date shall be null and void unless such
supplement or amendment could have been adopted under the prior sentence from
and after the Distribution Date. Upon the receipt of a certificate from an
appropriate officer of the Company which states that the proposed supplement or
amendment is in compliance with the terms of this Section 26 and, provided such
supplement or amendment does not change or affect the Rights Agent's rights,
duties, liabilities, obligations or immunities hereunder, the Rights Agent shall
execute such supplement or amendment. In addition, notwithstanding anything to
the contrary contained in this Rights Agreement, no supplement or amendment to
this Rights Agreement shall be made which reduces the Redemption Price (except
as required by Section 12(a) hereof) and the Rights Agent may, but shall not be
obligated to, enter into any supplement or amendment that affects the Rights
Agent's own rights, duties, obligations or immunities under this Rights
Agreement.
SECTION 27. SUCCESSORS
All the covenants and provisions of this Rights Agreement by or for the
benefit of the Company or the Rights Agent shall bind and inure to the benefit
of their respective successors and assigns under this Rights Agreement.
SECTION 28. BENEFITS OF THIS RIGHTS AGREEMENT; DETERMINATIONS AND ACTIONS
BY THE COMPANY'S BOARD OF DIRECTORS
(a) Nothing in this Rights Agreement shall be construed to give to any
Person other than the Company, the Rights Agent and the registered holders of
the Rights Certificates (and, prior to the Distribution Date, of the Common
Stock) any legal or equitable right, remedy or claim under this Rights
Agreement; provided, however, that this Rights Agreement shall be for the sole
and exclusive benefit of the Company, the Rights Agent and the registered
holders of the Rights Certificates (and, prior to the Distribution Date, of the
Common Stock).
(b) Except as explicitly otherwise provided in this Rights Agreement, the
Company's Board of Directors shall have the exclusive power and authority to
administer this Rights Agreement and to exercise all rights and powers
specifically granted to the Company's Board of Directors or to the Company, or
as may be necessary or advisable in the administration of this Rights Agreement,
including, without limitation, the right and power to (i) interpret the
provisions of this Rights Agreement and (ii) make all determinations or
calculations deemed necessary or advisable for the administration of this Rights
Agreement (including, without limitation, a determination to redeem or not
redeem the Rights or to amend this Rights Agreement and a determination of
whether there is an Acquiring Person). All such actions, calculations,
interpretations and determinations (including, for purposes of clause (y) below,
all omissions with respect to the foregoing) that are done or made by the Board
of Directors in good faith, shall (x) be final, conclusive and binding on the
Company, the Rights Agent, the holders of the Rights, as such, and all other
Persons, and (y) not subject the Board of Directors to any liability to the
holders of the Rights. The Rights Agent shall always be entitled to assume that
the Board of Directors acted in good faith and shall be fully protected and
incur no liability in reliance thereon.
(c) Nothing contained in this Rights Agreement shall be deemed to be in
derogation of the obligation of the Board of Directors to exercise its fiduciary
duty. Without limiting the foregoing, nothing contained herein shall be
construed to suggest or imply that the Board of Directors shall not be entitled
to reject any tender offer or other acquisition proposal, or to recommend that
holders of Common Stock reject any tender offer, or to take any other action
(including the commencement, prosecution, defense or settlement of any
litigation and the submission of additional or alternative offers or other
proposals) with respect to any tender offer or other acquisition proposal that
the Board of Directors believes is necessary or appropriate in the exercise of
such fiduciary duty.
25
SECTION 29. SEVERABILITY
If any term, provision, covenant or restriction of this Rights Agreement
is held by a court of competent jurisdiction or other authority to be invalid,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Rights Agreement shall remain in full force and effect and
shall in no way be affected, impaired or invalidated.
SECTION 30. GOVERNING LAW
This Rights Agreement and each Rights Certificate issued under this Rights
Agreement shall be deemed to be a contract made under the laws of the State of
New Jersey and for all purposes shall be governed by and construed in accordance
with the law of such State applicable to contracts to be made and performed
entirely within such State; provided, however, that all provisions regarding the
rights, duties and obligations of the Rights Agent shall be governed by and
construed in accordance with the laws of the State of New York applicable to
contracts made and to be performed entirely within such state, without regard to
the principles or rules concerning conflicts of laws which might otherwise
require application of the substantive laws of another jurisdiction.
SECTION 31. COUNTERPARTS; EFFECTIVENESS
This Rights Agreement may be executed in any number of counterparts, each
of which shall for all purposes be deemed to be an original, and all of which
shall together constitute but one and the same instrument. This Rights Agreement
shall be effective as of the Close of Business on the date of this Rights
Agreement first set forth above.
SECTION 32. DESCRIPTIVE HEADINGS
Descriptive headings of the several Sections of this Rights Agreement are
inserted for convenience only and shall not control or affect the meaning or
construction of any of the provisions of this Rights Agreement.
26
IN WITNESS WHEREOF, the parties hereto have caused this Rights Agreement
to be duly executed as of the day and year first above written.
FIRST MONTAUK FINANCIAL CORP.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------
Name:▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Its: President and Chief Executive Officer
CONTINENTAL STOCK TRANSFER & TRUST
COMPANY, as Rights Agent
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Its: Vice President
27
EXHIBIT INDEX
Exhibit Description
A Certificate of Amendment to Designate the Relative Rights, Preference
and Limitations and Number of Shares of Series C Participating
Cumulative Preferred Stock
B Form of Rights Certificate
C Summary of Rights to Purchase Preferred Shares
--------------------------------------------------------------------------------
28
EXHIBIT A
FIRST MONTAUK FINANCIAL CORP.
CERTIFICATE OF AMENDMENT TO DESIGNATE THE
RELATIVE RIGHTS, PREFERENCES AND
LIMITATIONS AND NUMBER OF SHARES
OF
SERIES C PARTICIPATING CUMULATIVE PREFERRED STOCK
(Pursuant to Section l4A:7-2 of the General
Corporations Law of the State of New Jersey)
First Montauk Financial Corp., a corporation organized and existing
under the laws of the State of New Jersey, DOES HEREBY CERTIFY THAT:
FIRST: The name of the Corporation is First Montauk
Financial Corp.
SECOND: Pursuant to authority conferred upon the Board of
Directors by the Amended and Restated Certificate of Incorporation ("Certificate
of Incorporation") of the Corporation under the provisions of l4A:7-2(2) of the
General Corporations Law of the State of New Jersey ("NJGCL"), all of the
Directors of the Corporation, duly adopted, the following resolution:
RESOLVED, that pursuant to the authority vested in the Board
of Directors of this Corporation by Section l4A:7-2 of the NJGCL and in
accordance with the provisions of the Certificate of Incorporation, a class of
preferred stock of this Corporation to be known as Series C Participating
Cumulative Preferred Stock, is hereby created and provided for, to be limited in
amount to 200,000 shares and this Board of Directors hereby fixes, states and
expresses the terms, designation, relative rights, preferences and limitations
of such Class in the particulars required by but not specifically set forth in
said Certificate of Incorporation, or any amendment thereto, as follows:
The following series of Preferred Stock is hereby designated, which
series shall have the rights, preferences and privileges and limitations set
forth below:
1. Designation of Series C Participating Cumulative Preferred Stock.
The shares of such series shall be designated the "Series C
Participating Cumulative Preferred Stock" (the "Series C Preferred Stock"), par
value $.10 per share. The number of shares initially constituting the Series C
Preferred Stock shall be 200,000; provided, however, if more than a total of
200,000 shares of Series C Preferred Stock shall be issuable upon the exercise
of Rights (the "Rights") issued pursuant to the Rights Agreement dated as of
August 8, 2007 between the Corporation and Continental Stock Transfer & Trust
Company, as Rights Agent (the "Rights Agreement"), the Corporation's Board of
Directors, shall direct by resolution or resolutions that a Certificate of
Amendment be properly executed and filed with the New Jersey Secretary of State
providing for the total number of shares of Series C Preferred Stock authorized
for issuance to be increased (to the extent that the Restated Certificate of
Incorporation then permits) to the largest number of whole shares (rounded up to
the nearest whole number) issuable upon exercise of such Rights. In addition,
such number of shares may be decreased by resolution of the Board of Directors;
provided, however, that no decrease shall reduce the number of shares of Series
C Preferred Stock to a number less than the number of shares then outstanding
plus the number of shares reserved for issuance upon the exercise of outstanding
options, rights or warrants or upon the conversion of any outstanding securities
issued by the Corporation convertible into Series C Preferred Stock.
A-1
2. Dividends and Distributions.
(a) Subject to the prior and superior rights of the holders of
shares of any other series of Preferred Stock or other class of capital stock of
the Corporation ranking prior and superior to the shares of Series C Preferred
Stock with respect to dividends, the holders of shares of Series C Preferred
Stock shall be entitled to receive, when, as, and if declared by the Board of
Directors, out of the assets of the Corporation legally available therefor,
quarterly dividends payable in cash on the last day of each fiscal quarter in
each year, or such other dates as the Corporation's Board of Directors shall
approve (each such date being referred to in this Designation as a "Quarterly
Dividend Payment Date"), commencing on the first Quarterly Dividend Payment Date
after the first issuance of a share or a fraction of a share of Series C
Preferred Stock, in an amount per share (rounded to the nearest cent) equal to
the greater of (i) $0.01 and (ii) the Formula Number (as hereinafter defined)
then in effect times the cash dividends then to be paid on each share of Common
Stock. In addition, if the Corporation shall pay any dividend or make any
distribution on the Common Stock payable in assets, securities or other forms of
noncash consideration (other than dividends or distributions solely in shares of
Common Stock), then, in each such case, the Corporation shall simultaneously pay
or make on each outstanding whole share of Series C Preferred Stock a dividend
or distribution in like kind equal to the Formula Number then in effect times
such dividend or distribution on each share of Common Stock. As used in this
Certificate of Amendment and in the Rights Agreement, the "Formula Number" shall
be 100; provided, however, that if at any time after August 8, 2007 the
Corporation shall (i) declare or pay any dividend on the Common Stock payable in
shares of Common Stock or make any distribution on the Common Stock in shares of
Common Stock, (ii) subdivide (by a stock split or otherwise) the outstanding
shares of Common Stock into a larger number of shares of Common Stock, or (iii)
combine (by a reverse stock split or otherwise) the outstanding shares of Common
Stock into a smaller number of shares of Common Stock, then in each such event
the Formula Number shall be adjusted to a number determined by multiplying the
Formula Number in effect immediately prior to such event by a fraction, the
numerator of which is the number of shares of Common Stock that are outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that are outstanding immediately prior to such event (and
rounding the result to the nearest whole number); and provided further, that if
at any time after August 8, 2007 the Corporation shall issue any shares of its
capital stock in a merger, reclassification or change of the outstanding shares
of Common Stock, then in each such event the Formula Number shall be
appropriately adjusted to reflect such merger, reclassification or change so
that each share of Preferred Stock continues to be the economic equivalent of a
Formula Number of shares of Common Stock prior to such merger, reclassification
or change.
(b) The Corporation shall declare a dividend or distribution on the
Series C Preferred Stock as provided in Section 2(a) immediately prior to or at
the same time it declares a dividend or distribution on the Common Stock (other
than a dividend or distribution solely in shares of Common Stock); provided,
however, that in the event no dividend or distribution (other than a dividend or
distribution in shares of Common Stock) shall have been declared on the Common
Stock during the period between any Quarterly Dividend Payment Date and the next
subsequent Quarterly Dividend Payment Date, a dividend of $0.01 per share on the
Series C Preferred Stock shall nevertheless be payable on such subsequent
Quarterly Dividend Payment Date. The Corporation's Board of Directors may fix a
record date for the determination of holders of shares of Series C Preferred
Stock entitled to receive a dividend or distribution declared thereon, which
record date shall be the same as the record date for any corresponding dividend
or distribution on the Common Stock and which shall not be more than 60 days
prior to the date fixed for payment thereof.
A-2
(c) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series C Preferred Stock from and after the Quarterly Dividend Payment
Date next preceding the date of original issue of such shares of Series C
Preferred Stock; provided, however, that dividends on such shares that are
originally issued after the record date for the determination of holders of
shares of Series C Preferred Stock entitled to receive a quarterly dividend on
or prior to the next succeeding Quarterly Dividend Payment Date shall begin to
accrue and be cumulative from and after such Quarterly Dividend Payment Date.
Notwithstanding the foregoing, dividends on shares of Series C Preferred Stock
that are originally issued prior to the record date for the determination of
holders of shares of Series C Preferred Stock entitled to receive a quarterly
dividend on or prior to the first Quarterly Dividend Payment Date shall be
calculated as if cumulative from and after the last day of the fiscal quarter
(or such other Quarterly Dividend Payment Date as the Corporation's Board of
Directors shall approve) next preceding the date of original issuance of such
shares. Accrued but unpaid dividends shall not bear interest. Dividends paid on
the shares of Series C Preferred Stock in an amount less than the total amount
of such dividends at the time accrued and payable on such shares shall be
allocated pro rata on a share-by-share basis among all such shares at the time
outstanding.
(d) So long as any shares of Series C Preferred Stock are
outstanding, no dividends or other distributions shall be declared, paid or
distributed, or set aside for payment or distribution, on the Common Stock
unless, in each case, the dividend required by this Section 2 to be declared on
the Series C Preferred Stock shall have been declared.
(e) The holders of shares of Series C Preferred Stock shall not be
entitled to receive any dividends or other distributions except as provided in
this Certificate of Amendment.
3. Voting Rights
The holders of shares of Series C Preferred Stock shall have the following
voting rights:
(a) Each holder of Series C Preferred Stock shall be entitled to a
number of votes equal to the Formula Number then in effect for each share of
Series C Preferred Stock held of record on each matter on which holders of the
Common Stock or shareholders generally are entitled to vote, multiplied by the
maximum number of votes per share that any holders of the Common Stock or
shareholders generally then have with respect to such matter (assuming any
holding period or other requirement to vote a greater number of shares is
satisfied).
(b) Except as otherwise provided in this Certificate of Amendment or
by applicable law, the holders of shares of Series C Preferred Stock and the
holders of shares of Common Stock and any other capital stock of the Corporation
having general voting rights shall vote together as one class for the election
of directors of the Corporation and on all other matters submitted to a vote of
shareholders of the Corporation.
(c) Except as provided in this Certificate of Amendment or by
applicable law, holders of Series C Preferred Stock shall have no special voting
rights and their consent shall not be required (except to the extent they are
entitled to vote with holders of Common Stock as set forth in this Certificate
of Amendment) for authorizing or taking any corporate action.
4. Certain Restrictions.
(a) Whenever quarterly dividends or other dividends or distributions
payable on the Series C Preferred Stock as provided in Section 2 are in arrears,
thereafter and until all accrued and unpaid dividends and distributions, whether
or not declared, on shares of Series C Preferred Stock outstanding shall have
been paid in full, the Corporation shall not:
A-3
(i) declare or pay dividends on, make any other distributions
on, or redeem or purchase or otherwise acquire for consideration any shares
of stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series C Preferred Stock;
(ii) declare or pay dividends on or make any other
distributions on any shares of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the Series C
Preferred Stock, except dividends paid ratably on the Series C Preferred
Stock and all such parity stock on which dividends are payable or in
arrears in proportion to the total amounts to which the holders of all such
shares are then entitled;
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking junior (either as to dividends or
upon liquidation, dissolution or winding up) with the Series C Preferred
Stock; provided, however, that the Corporation may at any time redeem,
purchase or otherwise acquire shares of any such junior stock in exchange
for shares of any stock of the Corporation ranking junior (either as to
dividends or upon dissolution, liquidation or winding up) to the Series C
Preferred Stock; or
(iv) redeem or purchase or otherwise acquire for
consideration any shares of Series C Preferred Stock, or any shares of
stock ranking on a parity with the Series C Preferred Stock, except in
accordance with a purchase offer made in writing or by publication (as
determined by the Corporation's Board of Directors) to all holders of such
shares upon such terms as the Corporation's Board of Directors, after
consideration of the respective annual dividend rates and other relative
rights and preferences of the respective Preferred Stock classes, shall
determine in good faith will result in fair and equitable treatment among
the respective series or classes.
(b) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares of
stock of the Corporation unless the Corporation could, under paragraph (a) of
this Section 4, purchase or otherwise acquire such shares at such time and in
such manner.
5. Liquidation Rights.
Upon the liquidation, dissolution or winding up of the Corporation,
whether voluntary or involuntary, no distribution shall be made to (a) the
holders of shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series C Preferred Stock unless,
prior thereto, the holders of shares of Series C Preferred Stock shall have
received an amount equal to the greater of (i) $.01 per share and (ii) the
accrued and unpaid dividends and distributions thereon, whether or not declared,
to the date of such payment, plus an aggregate amount per share equal to the
Formula Number then in effect times the aggregate amount to be distributed per
share to holders of Common Stock or (b) the holders of shares of stock ranking
on a parity (either as to dividends or upon liquidation, dissolution or winding
up) with the Series C Preferred Stock, except distributions made ratably on the
Series C Preferred Stock and all other such parity stock in proportion to the
total amounts to which the holders of all such shares are entitled upon such
liquidation, dissolution or winding up.
6. Consolidation, Merger, etc.
In case the Corporation shall enter into any consolidation, merger,
combination or other transaction in which the shares of Common Stock are
exchanged for or changed into other stock or securities, cash and/or any other
property, then in any such case the then outstanding shares of Series C
Preferred Stock shall at the same time be similarly exchanged or changed into an
amount per share equal to the Formula Number then in effect times the aggregate
amount of stock, securities, cash and/or any other property (payable in kind),
as the case may be, into which or for which each share of Common Stock is
exchanged or changed. In the event both this Section 6 and Section 2 appear to
apply to a transaction, this Section will control.
A-4
7. No Redemption; No Sinking Fund.
(a) The shares of Series C Preferred Stock shall not be subject to
redemption by the Corporation or at the option of any holder of Series C
Preferred Stock; provided, however, that the Corporation may purchase or
otherwise acquire outstanding shares of Series C Preferred Stock in the open
market or by offer to any holder or holders of shares of Series C Preferred
Stock.
(b) The shares of Series C Preferred Stock shall not be subject to
or entitled to the operation of a retirement or sinking fund.
8. Ranking.
The Series C Preferred Stock shall rank junior to all other series of
Preferred Stock of the Corporation, unless the Corporation's Board of Directors
shall specifically determine otherwise in fixing the powers, preferences and
relative, participating, optional and other special rights of the shares of such
Preferred Stock and the qualifications, limitations and restrictions thereof.
9. Fractional Shares.
The Series C Preferred Stock shall be issuable upon exercise of the Rights
issued pursuant to the Rights Agreement in whole shares or in any fractional
share that is one one-hundredth (1/100th) of a share or any integral multiple of
such fraction, and shall entitle the holder, in proportion to such holder's
fractional shares, to receive dividends, exercise voting rights, participate in
distributions and have the benefit of all other rights of holders of Series C
Preferred Stock. In lieu of fractional shares, the Corporation, prior to the
first issuance of a share or a fractional share of Series C Preferred Stock, may
elect to (a) make a cash payment as provided in the Rights Agreement for a
fractional share other than one one-hundredth (1/100th) of a share or any
integral multiple thereof or (b) issue depository receipts evidencing such
authorized fractional share of Series C Preferred Stock pursuant to an
appropriate agreement between the Corporation and a depository selected by the
Corporation; provided, however, that such agreement shall provide that the
holders of such depository receipts shall have all the rights, privileges and
preferences to which they are entitled as holders of the Series C Preferred
Stock.
10. Reacquired Shares.
Any shares of Series C Preferred Stock purchased or otherwise acquired by
the Corporation in any manner whatsoever shall be retired and canceled promptly
after the acquisition thereof. All such shares shall upon their cancellation
become authorized but unissued shares of Preferred Stock, without designation as
to series until such shares are once more designated as part of a particular
series by the Corporation's Board of Directors pursuant to the provisions of
Article 3 of the Certificate of Incorporation.
11. Amendment.
None of the powers, preferences and relative, participating, optional and
other special rights of the Series C Preferred Stock as provided in this
Certificate of Amendment or in the Certificate of Incorporation shall be amended
in any manner that would alter or change the powers, preferences, rights or
privileges of the holders of Series C Preferred Stock so as to affect them
adversely without the affirmative vote of the holders of at least two-thirds of
the outstanding shares of Series C Preferred Stock, voting as a separate class.
IN WITNESS WHEREOF, First Montauk Financial Corp. has caused this
Certificate to be signed by ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President and Chief Executive
Officer, as of this 8st day of August, 2007.
By: __________________________________
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President and Chief Executive Officer
A-5
EXHIBIT B
Certificate No. C- Form of Rights Certificate
NOT EXERCISABLE AFTER AUGUST 8, 2017 OR EARLIER IF REDEMPTION OR EXCHANGE
OCCURS. THE RIGHTS ARE SUBJECT TO REDEMPTION AT THE OPTION OF THE COMPANY
AT $0.0001 PER RIGHT AND TO EXCHANGE ON THE TERMS SET FORTH IN THE RIGHTS
AGREEMENT.
RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR AN AFFILIATE OR
ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS
AGREEMENT) AND BY ANY SUBSEQUENT HOLDER, SUCCESSOR OR ASSIGN OF SUCH RIGHTS
ARE NULL AND VOID AND NONTRANSFERABLE.
RIGHTS CERTIFICATE
FIRST MONTAUK FINANCIAL CORP.
This certifies that ________________, or registered assigns, is the
registered owner of the number of Rights set forth above, each of which entitles
the owner thereof, subject to the terms, provisions and conditions of the Rights
Agreement, dated as of August 8, 2007 (the "Rights Agreement"), between FIRST
MONTAUK FINANCIAL CORP., a New Jersey corporation (the "Company"), and
Continental Stock Transfer & Trust Company, as Rights Agent (the "Rights
Agent"), unless the Rights evidenced hereby have been previously redeemed by the
Company, to purchase from the Company at any time after the Distribution Date
(as such term is defined in the Rights Agreement) and prior to 5:00 P.M., New
Jersey time, on August 8, 2017 at the office of the Rights Agent designated for
such purpose, or at the office of its successor as Rights Agent, one
one-hundredth (1/100) of a fully paid non-assessable share of Series C
Participating Cumulative Preferred Stock, par value $.10 per share (the
"Preferred Shares"), of the Company, at a purchase price of $2.00 per one
one-hundredth of a Preferred Share (the "Purchase Price"), upon presentation and
surrender of this Rights Certificate with the Form of Election to Purchase duly
executed. The number of Rights evidenced by this Rights Certificate (and the
number of one-hundredths of a Preferred Share that may be purchased upon
exercise hereof) set forth above, and the Purchase Price set forth above, are
the number and Purchase Price as of August 8, 2007, based on the Preferred
Shares as constituted at such date. As provided in the Rights Agreement, the
Purchase Price and the number of one one-hundredths of a Preferred Share that
may be purchased upon the exercise of the Rights evidenced by this Rights
Certificate are subject to modification and adjustment upon the happening of
certain events.
If the Rights evidenced by this Rights Certificate are at any time
beneficially owned by an Acquiring Person or an Affiliate or Associate of an
Acquiring Person (as such terms are defined in the Rights Agreement), such
Rights shall be null and void and nontransferable and the holder of any such
Right (including any purported transferee or subsequent holder) shall not have
any right to exercise or transfer any such Right.
This Rights Certificate is subject to all the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Rights Certificates. Copies of
the Rights Agreement are on file at the principal executive offices of the
Company.
B-1
This Rights Certificate, with or without other Rights Certificates, upon
surrender at the office of the Rights Agent designated for such purpose, may be
exchanged for another Rights Certificate or Rights Certificates of like tenor
and date evidencing rights entitling the holder to purchase a like aggregate
number of Preferred Shares as the Rights evidenced by the Rights Certificate or
Rights Certificates surrendered shall have entitled such holder to purchase. If
this Rights Certificate shall be exercised in part, the holder shall be entitled
to receive upon surrender hereof another Rights Certificate or Rights
Certificates for the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced by
this Certificate (i) may be redeemed by the Company at a redemption price (in
cash or shares of Common Stock or other securities of the Company deemed by the
Company's Board of Directors to be at least equivalent in value) of $0.0001 per
Right (subject to adjustment, as provided in the Rights Agreement) or (ii) may
be exchanged in whole or in part for shares of the Company's Common Stock, no
par value, or for Preferred Shares.
The Company may, but shall not be required to, issue fractions of
Preferred Shares or distribute certificates that evidence fractions of Preferred
Shares upon the exercise of any Right or Rights evidenced hereby. In lieu of
issuing fractional shares, the Company may elect to make a cash payment as
provided in the Rights Agreement for fractions of a share other than one
one-hundredth (1/100) of a share or any integral multiple thereof or to issue
certificates or utilize a depository arrangement as provided in the terms of the
Rights Agreement and the Preferred Shares.
No holder of this Rights Certificate shall be entitled to vote or receive
dividends or be deemed for any purpose the holder of the Preferred Shares or of
any other securities of the Company that may at any time be issuable on the
exercise hereof, nor shall anything contained in the Rights Agreement or herein
be construed to confer upon the holder hereof, as such, any of the rights of a
shareholder of the Company or any right to vote for the election of directors or
upon any matter submitted to shareholders at any meeting thereof, or to give or
withhold consent to any corporate action, or to receive notice of meetings or
other actions affecting, shareholders (except as provided in the Rights
Agreement), or to receive dividends or subscriptions rights, or otherwise, until
the Right or Rights evidenced by this Rights Certificate shall have been
exercised as provided in the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the Company and
its corporate seal, if any.
Dated as of .
------------------
FIRST MONTAUK FINANCIAL CORP.
-----------------------------------
By: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Its: President and Chief Executive Officer
COUNTERSIGNED:
Continental Stock Transfer & Trust Company
By:
Its:
Its:
B-2
--Form of Reverse Side of Rights Certificate--
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to
transfer the Rights Certificate) FOR VALUE RECEIVED __________________________
___________________ hereby sells, assigns and transfer unto __________________
____________________________________________________ (Please print name and
address of transferee) this Rights Certificate, together with all right, title
and interest therein, and does hereby irrevocably constitute and appoint
_____________ as attorney, to transfer this Rights Certificate on the books of
the within-named Company, with full power of substitution.
The undersigned hereby certifies that (1) the Rights evidenced by this
Rights Certificate are not being sold, assigned or transferred by or on behalf
of a Person who is or was an Acquiring Person or an Affiliate or Associate
thereof (as such terms are defined in the Rights Agreement), (2) this Rights
Certificate is not being sold, assigned or transferred to or on behalf of any
such Acquiring Person, Affiliate or Associate, and (3) after inquiry and to the
best knowledge of the undersigned, the undersigned did not acquire the Rights
evidenced by this Rights Certificate from any Person who is or was an Acquiring
Person or an Affiliate or Associate thereof (as such terms are defined in the
Rights Agreement).
Dated: ____________, 20___
Signature :
Signature Guaranteed*
---------------------------
*Signatures must be guaranteed by a participant in the Securities Transfer
Agent Medallion Program, the Stock Exchanges Medallion Program or the New York
Stock Exchange, Inc. Medallion Signature Program.
B-3
--Form of Reverse Side of Rights Certificate--
(continued)
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise Rights represented
by the Rights Certificate)
To: FIRST MONTAUK FINANCIAL CORP.
The undersigned hereby irrevocably elects to exercise (or such other securities
of the Company or of any other person which may be issuable upon the exercise of
the Rights) Rights represented by this Rights Certificate to purchase the
Preferred Shares issuable upon the exercise of such Rights and requests that
certificates for such Preferred Shares be issued in the name of:
Please insert social security or other identifying number: ____________________
--------------------------------------------------------------------------------
(Please print name and address)
--------------------------------------------------------------------------------
If such number of Rights shall not be all the Rights evidenced by this Rights
Certificate, a new Rights Certificate for the balance remaining of such Rights
shall be registered in the name of and delivered to:
Please insert social security or other identifying number: ____________________
--------------------------------------------------------------------------------
(Please print name and address)
The undersigned hereby certifies that (1) the Rights evidenced by this
Rights Certificate are not beneficially owned by an Acquiring Person or an
Affiliate or Associate thereof (as such terms are defined in the Rights
Agreement), and (2) after inquiry and to the best knowledge of the undersigned,
the undersigned did not acquire the Rights evidenced by this Rights Certificate
from any Person who is or was an Acquiring Person or an Affiliate or Associate
thereof (as such terms are defined in the Rights Agreement).
Dated: ______________, 20___ Signature : ________________________________
Signature Guaranteed*
---------------------------------------
*Signatures must be guaranteed by a participant in the Securities
Transfer Agent Medallion Program, the Stock Exchanges Medallion Program or the
New York Stock Exchange, Inc. Medallion Signature Program.
B-4
--Form of Reverse Side of Rights Certificate--
(continued)
NOTICE
The signature in the Form of Assignment or Form of Election to Purchase, as the
case may be, must conform to the name as written on the face of this Rights
Certificate in every particular, without alteration or enlargement or any change
whatsoever.
In the event the certification set forth above in the Form of Assignment or the
Form of Election to Purchase, as the case may be, is not completed, the Company
and the Rights Agent will deem the beneficial owner of the Rights evidenced by
this Rights Certificate to be an Acquiring Person or an Affiliate or Associate
thereof (as defined in the Rights Agreement) and such Assignment or Election to
Purchase will not be honored.
B-5
EXHIBIT C
FIRST MONTAUK FINANCIAL CORP.
SHAREHOLDER RIGHTS PLAN
SUMMARY OF RIGHTS TO PURCHASE PREFERRED SHARES
Distribution and On August 8, 2007, the Board of Directors (the "Board of Directors") of First
Transfer of Montauk Financial Corp. (the "Company") authorized the implementation of a
Rights; Rights Shareholder Rights Plan and declared a dividend of one preferred share
Certificates: purchase right (a "Right") for each outstanding share of common stock, no par
value, of the Company (the "Common Shares") to shareholders of record on
August 8, 2007. Prior to the Distribution Date referred to below, if any, the
Rights will be evidenced by and trade with the certificates for the Common
Shares. After the Distribution Date, if any, the Company will cause
rights certificates to be delivered to the Company's shareholders and the
Rights will become transferable apart from the Common Shares.
Distribution Date: The Rights will separate from the Common Shares and become exercisable
following the earlier of (i) the close of business on the tenth (10th)
business day (unless extended by resolution of a majority of the Continuing
Directors of the Board of Directors as of the close of business as of August
9, 2007 (the date of the Company's 2007 Annual Meeting) after a public
announcement that a person or group (including any affiliate or associate of
such person or group) has acquired beneficial ownership of 10% or more of the
outstanding Common Shares (or in the case of ▇▇▇▇▇▇ ▇. ▇▇▇▇, FMFG Ownership
Inc., FMFG Ownership II, Inc. and any of their respective Affiliates and
Associates (collectively, the "▇▇▇▇ Parties") and their respective successors
and assigns acquires more than 3,300,308 Common Shares collectively and
beneficially owned on August 8, 2007) (such person or group being an
"Acquiring Person") and (ii) the close of business on such date, if any, as
may be designated by the Board of Directors following the commencement of, or
first public disclosure of an intent to commence, a tender or exchange offer
for outstanding Common Shares which could result in the offeror becoming the
beneficial owner of 10% or more of the outstanding Common Shares (the earlier
of such dates being the "Distribution Date").
Preferred Shares After the Distribution Date, each Right will entitle the holder to purchase, for
Purchasable upon for $2.00 (the "Purchase Price"), one one-hundredth (1/100) of a share of Series C
Exercise of Rights: Participating Cumulative Preferred Stock of the Company (a "Preferred Share") with
economic terms similar to that of one Common Share.
Flip-In Provision: In the event a person or group becomes an Acquiring Person, the Rights will
entitle each holder of a Right (other than an Acquiring Person (or any
affiliate or associate of such Acquiring Person)) to purchase, for the
Purchase Price, that number of Common Shares equivalent to the number of
Common Shares which at the time of the transaction would have a market value
of twice the Purchase Price. Any Rights that are at any time beneficially
owned by an Acquiring Person (or any affiliate or associate of an Acquiring
Person) will be null and void and nontransferable and any holder of any such
Right (including any purported transferee or subsequent holder) will be
unable to exercise or transfer any such Right.
Flip-Over Provision. If, at any time after any person or group becomes an Acquiring Person,
the Company is acquired in a merger or other business combination with
another entity, or if 50% or more of its assets or assets accounting for
50% or more of its net income or revenues are transferred (in one or more
transactions), each Right will entitle its holder to purchase, for the
Purchase Price, that number of shares of common stock of the person or group
engaging in the transaction having a then current market value of twice
the Purchase Price.
Exchange Provisions: At any time after any person or group becomes an Acquiring Person,
but before a person or group becomes the beneficial owner of more than 50%
of the Common Shares, the Board of Directors may elect to exchange each Right
(other than Rights that have become null and void and nontransferable as
described above) for consideration per Right consisting of one-half of the
number of Common Shares that would be issuable at such time on the
exercise of one Right and without payment of the Purchase Price.
C-1
Redemption of Rights: At any time prior to any person or group becoming an Acquiring Person,
the Board of Directors may redeem the Rights in whole, but not in part, at
a price of $0.0001 per Right, subject to adjustment as provided in the
Rights Agreement (the "Redemption Price").
Expiration of Rights: The Rights are not exercisable until the Distribution Date and will expire
on August 8, 2017, unless earlier redeemed or exchanged by the Company.
Amendment of Terms of The terms of the Rights and the Rights Agreement may be amended without the
Rights: approval of any holder of the Rights, at any time prior to the Distribution
Date.
Voting Rights: Until a Right is exercised, the holder thereof, as such, will have no rights
as a shareholder of the Company, including, without limitation, the right to
vote or receive dividends.
Antidilution In order to preserve the actual or potential economic value of the Rights, the
Provisions: number of Preferred Shares or other securities issuable upon exercise of the
Right, the Purchase Price, the Redemption Price and the number of Rights
associated with each outstanding Common Share are all subject to adjustment
by the Board of Directors pursuant to certain customary antidilution provisions.
Taxes: The Rights distribution should not be taxable for federal income tax
purposes. Following an event that renders the Rights exercisable or upon
redemption of the Rights, shareholders may recognize taxable income.
The foregoing is a summary of certain principal terms of the Shareholder
Rights Plan and is qualified in its entirety by reference to the detailed terms
of the Rights Agreement. A copy of the Rights Agreement has been filed with the
Securities and Exchange Commission as an exhibit to a Registration Statement on
Form 8-A and is available free of charge from the Company by writing to: First
Montauk Financial Corp., Parkway 109 Office Center, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇, Attention: Executive Vice President, General Counsel and
Secretary.
C-2