Exhibit 4.1
SHAREHOLDER PROTECTION RIGHTS
PLAN AGREEMENT
dated as of June 30, 1997 between SURGE COMPONENTS, INC.
and CONTINENTAL STOCK TRANSFER & COMPANY as Rights Agent
Table of Contents Page
ARTICLE 1- INTERPRETATION.........................................................................................1
1.1 Certain Definitions.............................................................................1
1.2 Currency.......................................................................................10
1.3 Headings.......................................................................................10
1.4 Grandfather Provisions.........................................................................10
ARTICLE 2 - THE RIGHTS...........................................................................................12
2.l Legend on Common Share Certificates............................................................12
2.2 Initial Exercise Price; Exercise of Rights; Detachment of Rights...............................12
2.3 Adjustments to Exercise Price; Number of Rights................................................15
2.4 Date on Which Exercise is Effective............................................................20
2.5 Execution, Authentication, Delivery and Dating of Rights Certificates..........................20
2.6 Registration, Registration of Transfer and Exchange ...........................................20
2.7 Mutilated, Destroyed, Lost and Stolen Rights Certificates......................................21
2.8 Persons Deemed Owners..........................................................................22
2.9 Delivery and Cancellation of Certificates......................................................22
2.10 Agreement of Rights Holders....................................................................22
2.11 Rights Certificate Holder not deemed a Shareholder.............................................23
ARTICLE 3 - FLIP-IN EVENT...............................................................................24
3.1 Flip-in Event..................................................................................24
3.2 Exchange Option................................................................................25
ARTICLE 4 - THE RIGHTS AGENT.....................................................................................26
4.1 General........................................................................................26
4.2 Merger or Consolidation or Change of Name of Rights Agent......................................26
4.3 Duties of Rights Agent.........................................................................27
4.4 Change of Rights Agent.........................................................................29
ARTICLE 5 - MISCELLANEOUS........................................................................................30
5.1 Redemption and Waiver..........................................................................30
5.2 Expiration.....................................................................................31
5.3 Issuance of New Rights Certificates............................................................31
5.4 Supplements and Amendments.....................................................................31
5.5 Fractional Rights and Fractional Shares........................................................33
5.6 Rights of Action...............................................................................33
5.7 Regulatory Approvals...........................................................................33
5.8 Declaration as to Non-U.S. Holders.............................................................33
5.9 Notices........................................................................................34
5.10 Costs of Enforcement...........................................................................35
5.11 Successors.....................................................................................35
5.12 Benefits of this Agreement.....................................................................35
5.13 Governing Law..................................................................................35
5.14 Severability...................................................................................35
5.15 Effective Date.................................................................................36
5.16 Determinations and Actions by the Board of Directors...........................................36
5.17 Time of the Essence............................................................................36
5.18 Execution in Counterparts......................................................................36
MEMORANDUM OF AGREEMENT, dated as of the 30 day of June, 1997, between
Surge Components, Inc., a New York corporation (the "Corporation"), and
Continental Stock Transfer & Trust Company, a New York corporation (the "Rights
Agent");
WHEREAS in order to implement the adoption of a shareholder protection
rights plan as established by this Agreement, the Board of Directors of the
Corporation (the "Board of Directors") has:
(a) authorized effective 5:00 p.m. (E.S.T. time) on July 18, 1997
the issuance of two Rights (as hereinafter defined) in respect
of each Common Share (as hereinafter defined) outstanding at
the Record Time (as hereinafter defined); and
(b) authorized the issuance of two Rights in respect of each
Common Share issued after the Record Time and prior to the
earlier of the Separation Time and the Expiration Time (as
hereinafter defined); and
WHEREAS each Right entitles the holder thereof, after the Separation
Time, to purchase securities or other assets of the Corporation pursuant to the
terms and subject to the conditions set forth herein; and
WHEREAS the Corporation desires to appoint the Rights Agent to act on
behalf of the Corporation, and the Rights Agent is willing to so act, in
connection with the issuance, transfer, exchange and replacement of Rights
Certificates (as hereinafter defined), the exercise of Rights and other matters
referred to herein;
NOW THEREFORE, in consideration of the premises and the respective
covenants and agreements set forth herein, subject to such covenants and
agreements, the parties hereby agree as follows:
ARTICLE 1- INTERPRETATION
1.1 Certain Definitions
For purposes of this Agreement, the following terms have the meanings
indicated:
"Acquiring Person" shall mean, subject to Section 1.4 hereof,
any Person who, at any time after the date hereof and prior to the Expiration
Time, is the Beneficial Owner of twenty (20) per cent or more of the outstanding
Voting Shares, specifically excluding the following Persons:
(i) the Corporation or any Subsidiary of the Corporation, any
employee benefit plan or trust for the benefit of employees of
the Corporation or any Subsidiary of the Corporation, or any
Person organized, appointed or established by the Corporation
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for or pursuant to the terms of any such plan or trust and
acting in such capacity; and
(ii) any Person who becomes the Beneficial Owner of twenty (20) per
cent or more of the outstanding Voting Shares as a result of
one or any combination of (A) an acquisition or redemption by
the Corporation of Voting Shares which, by reducing the number
of Voting Shares outstanding, increases the proportionate
number of Voting Shares Beneficially Owned by such Person to
twenty (20) per cent or more of the Voting Shares then
outstanding, (B) Permitted Bid Acquisitions, or (C) Exempt
Acquisitions; provided, however, that if a Person becomes the
Beneficial Owner of twenty (20) per cent or more of the
outstanding Voting Shares by reason of one or any combination
of the operation of parts (A), (B) or (C) above and, after so
becoming, becomes the Beneficial Owner of any additional
Voting Shares other than pursuant to Permitted Bid
Acquisitions or through Exempt Acquisitions or employee stock
option or purchase plans, or as a result of a stock dividend,
a stock split or other event pursuant to which such Person
receives or acquires Voting Shares on the same pro rata basis
as all other holders of Voting Shares of the same class ("Pro
Rata Acquisitions"), then as of the date of such additional
Beneficial Ownership such Person shall become an "Acquiring
Person";
"Affiliate" shall have the meaning ascribed to such term in Rule 405
under the Securities Act of 1933 (the "Securities Act");
"Agreement" shall mean this shareholder protection rights plan
agreement dated as of June 30,1997 between the Corporation and the Rights Agent,
as amended or supplemented from time to time; "hereof", "herein", "hereto" and
similar expressions mean and refer to this Agreement as a whole and not to any
particular part of this Agreement;
"Annual cash dividends" shall mean cash dividends paid in any fiscal
year of the Corporation on its Common Shares.
"Associate" shall have the meaning ascribed to such term in
Rule 405 under the Securities Act, provided that a Fiduciary is not an Associate
of a trust or trusts for which the Fiduciary is acting as trustee or in a
similar capacity and where the Fiduciary has no investment authority (including
none of the rights of control or direction) and no beneficial interest in the
securities owned by the other person and the trust or trusts are not otherwise
affiliated with or acting jointly or in concert with the Fiduciary or each
other;
A Person shall be deemed the "Beneficial Owner" of, and to
have "Beneficial Ownership" of, and to "Beneficially Own":
(i) any securities as to which such Person or any of such Person's
Affiliates or Associates is the direct or indirect beneficial
owner and for this purpose a Person
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shall be deemed to be a beneficial owner of all securities (A)
owned by a partnership of which the Person is a partner, (B)
owned by a trust of which the Person is a beneficiary, (C)
owned jointly or in common with others and (D) of which the
Person may be deemed to be the beneficial owner (whether or
not of record) pursuant to the provisions of Rule 13d-3 or
13d-5 under the Securities Exchange Act of 1934, as amended
(the "Exchange Act") (or pursuant to any comparable or
successor laws, regulations or rules or, if such laws,
regulations or rules shall be rescinded and there shall be no
comparable or successor laws, regulations or rules, pursuant
to the provisions of Rule 13d-3 or 13d-5 under the Exchange
Act as in effect on the date of this Agreement);
(ii) any securities as to which such Person or any of such Person's
Affiliates or Associates has either or both (A) the right to
acquire (whether such right is exercisable immediately or
after the lapse or passage of time and whether or not on
condition or the happening of any contingency or otherwise)
pursuant to any agreement, arrangement, pledge or
understanding, whether or not in writing (other than customary
agreements with and between underwriters and banking group or
selling group members with respect to a bona fide public
offering of securities and other than pledges of securities in
the ordinary course of business which meet all of the
conditions specified in Rule 13d3(d)(3) under the Exchange
Act), or upon the exercise of any convertible debentures,
conversion right, exchange right, share purchase right (other
than the Rights), warrant or option. or otherwise or (B) the
right to vote such security (whether such right is exercisable
immediately or after the lapse or passage of time and whether
or not on condition or the happening of any contingency or
otherwise), pursuant to any proxy agreement, arrangement or
understanding (whether or not in writing) or otherwise;
(iii) any securities which are Beneficially owned within the meaning
of clauses (i) or (ii) by any other Person with which a Person
or any of its Affiliates or Associates is acting in concert or
jointly on has any proxy agreement, arrangement or
understanding (whether or not in writing) with respect to or
for the purpose of acquiring, holding, voting or disposing of
any Voting Shares or acquiring, holding or disposing of a
significant portion of the property or assets of the
Corporation or any Subsidiary of the Corporation, other than
(A) customary agreements with and between underwriters and
banking group or selling group members with respect to a bona
fide public offering of securities or (B) agreements between a
Fiduciary acting as such, and another Person, where the
Fiduciary has no investment authority (including none of the
rights of control or direction) and no beneficial interest in
the securities owned by the other Person;
provided, however, that a Person shall not be deemed the "Beneficial Owner" or
to have "Beneficial Ownership" of, or to "Beneficially Own", any security:
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(A) solely because such security has been deposited or tendered
pursuant to any Take-over Bid made by such Person or made by
any of such Person's Affiliates or Associates until such
deposited or tendered security has been taken up or paid for,
whichever shall first occur; or
(B) solely because such Person or any of such Person's Affiliates
or Associates has or shares the power to vote or direct the
voting of such security pursuant to a revocable proxy given in
response to a public proxy solicitation made pursuant to and
in accordance with the applicable rules and regulations under
the Business Corporation Law, the Securities Act or the
Exchange Act; or
(C) solely because such Person or any of such Person's Affiliates
or Associates has or shares the power to vote or direct the
voting of such security in connection with or in order to
participate in a public proxy solicitation made or to be made
pursuant to and in accordance with the applicable rules and
regulations referred to in (B) above; or
(D) held for or pursuant to the terms of any employee stock
ownership or other employee benefit plan of the Corporation or
a wholly-owned Subsidiary of the Corporation.
For purposes of this Agreement, in determining the percentage of the
outstanding Voting Shares with respect to which a Person is or is deemed to be
the Beneficial Owner, all Voting Shares as to which such Person is deemed the
Beneficial Owner shall be deemed outstanding;
"Board of Directors" shall mean the board of directors of the
Corporation or any duly constituted and empowered committee thereof;
"Business Corporation Law" shall mean the Business Corporation Law of
the State of New York.
"Business Day" shall mean any day other than a Saturday, Sunday or a
day on which banking institutions in New York City are authorized or obligated
by law or executive order to close;
"Close of Business" on any given date shall mean the time on such date
(or, if such date is not a Business Day, the time on the next succeeding
Business Day) at which the principal transfer office in New York City of the
transfer agent for the Common Shares (or, after the Separation Time, the
principal transfer office in New York City of the Rights Agent) closes to the
public;
"Common Shares" shall mean the voting shares in the capital of the
Corporation and any other shares of the Corporation into which such shares may
be subdivided, consolidated,
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reclassified or changed, and so on from time to time, except in the case of
clauses 2.2 (a), (d), (e) and (g) where "Common Share" shall mean the voting
shares in the capital of the Corporation and any other shares of the Corporation
into which such shares may be subdivided, consolidated, reclassified or changed,
and so on from time to time:
"Co-Rights Agents" shall have the meaning ascribed thereto in clause
4.1 (a);
"Election to Exercise" shall have the meaning ascribed thereto in
clause 2.2(d);
"Exempt Acquisitions" shall mean share acquisitions in respect of which
the Board of Directors has waived the application of Section 3.1 pursuant to the
provisions of clause 5.1 (b) or clause 5.1 (c) or which were made on or prior to
the date of this Agreement;
"Exercise Price" shall mean, as of any date, the price at which a
holder may purchase the securities issuable upon exercise of one whole Right
which, until adjustment thereof in accordance with the terms hereof and in
particular in accordance with section 2.3 and 3.1 hereof, shall be $.01;
"Expansion Factor" shall have the meaning ascribed thereto in clause
2.3(a);
"Expiration Time" shall mean the earlier of:
(i) the Termination Time; or
(ii) the close of business on June 30, 2002 being the fifth year
after the date hereof;
"Fiduciary shall mean a trust company or State organized under the laws
of any state of the United States, or an investment adviser registered under the
United States or any state of the United States;
"Flip-in Event" shall mean a transaction in or pursuant to which any
Person becomes an Acquiring Person;
"Grandfathered Person", and "Grandfathered Bidder" shall have the
respective meanings ascribed thereto in Section 1.4;
"Holder" shall have the meaning ascribed thereto in Section 2.8;
"Market Price" per share of any securities on any date of determination
shall mean the average of the daily closing prices per share of such securities
(determined as described below) on each of the 20 consecutive Trading Days
through and including the Trading Day immediately preceding such date; provided,
however, that if an event of a type analogous to any of the events described in
Section 2.3 hereof shall have caused the closing prices used to determine the
Market
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Price on any Trading Days not to be fully comparable with the closing price on
such date of determination or, if the date of determination is not a Trading
Day, on the immediately preceding Trading Day, each such closing price so used
shall be appropriately adjusted in a manner analogous to the applicable
adjustment provided for in Section 2.3 hereof in order to make it fully
comparable with the closing price on such date of determination or, if the date
of determination is not a Trading Day, on the immediately preceding Trading Day.
The closing price per share of any securities on any date shall be (i) the
closing sale price or, if such price is not available, the average of the
closing bid and asked prices, for each share as reported by the stock exchange
on which the greater number of shares has been traded on such day or if the
shares are listed only on one stock exchange at that time, that stock exchange,
or (ii) if for any reason none of such prices is available on such day or the
securities are not listed or admitted to trading on any stock exchange, the
closing sale price or, if such price is not available, the average of the
closing bid and asked prices, for each share as reported in the principal
consolidated transaction reporting system with respect to securities listed or
admitted to trading on the securities exchange in the United States on which the
Common Shares are primarily traded, or (iii) if for any reason none of such
prices is available on such day or the securities are not listed or admitted to
trading on a securities exchange in the United States or on any consolidated
reporting system, the last quoted price, or if not so quoted, the average of the
high bid and low asked prices for each share of such securities in the
over-the-counter market, as reported by NASDAQ or, if the securities are not
quoted on NASDAQ, as reported by such other system then in use, or (iv) if on
any such date the securities are not quoted by any such organizations the
average of the closing bid and asked prices as furnished by a professional
market maker making a market in the securities selected in good faith by the
Board of Directors; provided however, that if on any such date the securities
are not traded in the over-the-counter market, the closing price per share of
such securities on such date shall mean the fair value per share of securities
on such date as determined in good faith by the Board of Directors, after
consultation with a nationally or internationally recognized investment banker.
Notwithstanding the foregoing, where the Board of Directors is satisfied that
the Market Price of securities as determined herein was affected by improper
manipulation, the Board of Directors may, acting in good faith, determine the
Market Price of securities, such determination to be based on a finding as to
the price of which a holder of securities of that class could reasonably have
expected to dispose of his securities immediately prior to the relevant date
excluding any change in price reasonably attributable to the improper
manipulation;
"Nasdaq" shall mean the National Association of Dealers, Inc. Automated
Quotation System;
"Securities Act" shall mean the Securities Act of 1933, as amended, and
the rules and regulations thereunder, and any successor laws or regulations
thereto;
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder, and any successor laws or
regulations thereto;
"Nominee" shall have the meaning ascribed thereto in clause 2.2(c);
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"Offer to Acquire" shall include:
(i) an offer to purchase, or a solicitation of an offer to sell,
Voting Shares; and
(ii) an acceptance of an offer to sell Voting Shares, whether or
not such offer to sell has been solicited;
or any combination thereof, and the Person accepting an offer to sell shall be
deemed to be making an Offer to Acquire to the to the Person that made the offer
to sell;
"Offeror" shall mean a Person who has announced an intention to make or
who has made a Take-over Bid;
"Offeror's Securities" means Voting Shares Beneficially Owned by an
Offeror;
"Permitted Bid" means a Take-over Bid made in compliance with, and not
on a basis which is exempt from or otherwise not subject to, the provisions of
Section 912 of the Business Corporation Law and the regulations thereunder, to
provisions of Section 14(d) under the Exchange Act and the regulations
thereunder (or such comparable or successor laws or regulations or, if such
provisions shall be repealed and there shall be no comparable or successor laws
or regulations, pursuant to such provisions as in effect on the date of this
Agreement) and in compliance with all other applicable securities laws and
regulations, subject to any exemptions ordered or granted for purposes of
uniformity, and which also complies with the following additional provisions:
(i) the Take-over Bid is made for all Voting Shares to all holders
of record of Voting Shares wherever resident as registered on
the books of the Corporation and the time of expiry of the
Take-over Bid does not occur prior to a date which is not less
than 20 business days following the Takeover Bid;
(ii) subject to clause 1.4(b) hereof, the Offeror does not at the
commencement of nor at any time during the currency of the
Take-over Bid Beneficially Own more than 5 per cent of the
outstanding Voting Shares;
(iii) the Take-over Bid contains, and the take up and payment for
securities tendered or deposited is subject to, an irrevocable
and unqualified provision that no Voting Shares will be taken
up or paid for pursuant to the Take-over Bid prior to the
close of business on a date which is not less than 60 business
days following the date of the Take-over Bid;
(iv) the Take-over Bid contains irrevocable and unqualified
provisions that all Voting Shares may be deposited pursuant to
the Take-over Bid at any time prior to the close of business
on the date referred to in clause (iii) hereof and that all
Voting
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Shares deposited pursuant to the Take-over Bid may be
withdrawn on behalf of the depositor at any time prior to the
close of business on a date which is not less than 60 days
following the date of the Take-over Bid;
(v) the Take-over Bid contains an irrevocable and unqualified
condition, which for greater certainty may not be waived by
the Offeror, and which may not be extended without the prior
written approval of the Corporation, that not less than 50 per
cent of the then outstanding Voting Shares, other than
Offeror's Securities, must be deposited to the Take-over Bid
and not withdrawn at the close of business on the 59th day
following the date of the Take-over Bid, and the Offeror shall
publicly announce and advise the Corporation forthwith and in
any event not more than one Business Day thereafter whether or
not such condition has been satisfied;
(vi) the Offeror shall provide the Rights Agent, within two
Business Days of the announcement of the Take-over Bid, with a
list of all the Offeror's Securities together with the
particulars of the registration of all such securities and an
undertaking to update such list on a daily basis during the
currency of the Take-over Bid to reflect any changes
occurring or to occur in such Beneficial Ownership, and shall
continually perform such obligation;
(vii) the Offeror or any of its Affiliates or Associates, or any
Person acting jointly or in concert with the Offeror or any of
its Affiliates or Associates in connection with the Take-over
Bid, shall not have entered into either prior to the
commencement of the Take-over Bid nor at any time during the
currency thereof any agreement, commitment or understanding,
whether formal or informal, with a person who Beneficially
Owns 20 per cent or more of the outstanding Voting Shares with
respect to the Voting Shares Beneficially Owned by such
Person; and
(viii) the Take-over Bid is made on terms and conditions that comply
with, and which do not and will not, upon its completion,
result in the Corporation or any Subsidiary of the Corporation
being in default under, or in contravention of, any applicable
laws;
provided that, for greater certainty, the Offeror shall be entitled to withdraw
its Take-over Bid at any time prior to the termination thereof should it be
otherwise entitled to do so under applicable law;
"Permitted Bid Acquisitions" shall mean share acquisitions made
pursuant to a Permitted Bid;
"Person" shall mean an individual, body corporate, partnership,
syndicate or other form of unincorporated association, government, government
agency or instrumentality, entity or group whether or not having legal
personality and any of the foregoing acting in any derivative, representative or
fiduciary capacity;
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"Pro Rata Acquisitions" shall have the meaning ascribed thereto in
paragraph (ii) of the definition of "Acquiring Person' in Section 1.1:
"Record Time" shall mean the close of business on July 10, 1997;
"Redemption Price" shall have the meaning ascribed thereto in clause
5.1 (a);
"Right" shall mean a right to purchase a Common Share, upon the terms
and subject to the conditions set forth in this Agreement;
"Rights Certificate" shall have the meaning ascribed thereto and be in
the form provided in clause 2.2(c);
"Rights Register" shall have the meaning ascribed thereto in clause
2.6(a);
"Rights Registrar" shall have the meaning ascribed thereto in clause
2.6(a);
"Securities Act" shall mean the Securities Act of 1993, as amended, and
the regulations thereunder, and any comparable or successor laws or regulations
thereto;
"Separation Time" shall mean the close of business on the eighth
Trading Day after the earliest of (i) the Stock Acquisition Date, (ii) the date
of the commencement of or first public announcement of the intent of any Person
(other than a Person referred to in clause (i) of the definition of "Acquiring
Person") to commence a Take-over Bid (other than a Permitted Bid) and (iii) the
date upon which a Take-over Bid that is a Permitted Bid ceases to be a Permitted
Bid, or such earlier or later time as may be determined by the Board of
Directors, provided that, if any Take-over Bid referred to in clause (ii) or
(iii) of this definition expires, is canceled, terminated or otherwise withdrawn
prior to the Separation Time, such Take-over Bid shall be deemed, for the
purposes of this definition, never to have been made;
"Stock Acquisition Date" shall mean the date of public announcement by
the Corporation that an Acquiring Person has become such;
"Subsidiary" of any Person shall mean any corporation or other entity
of which a majority of the voting power or a majority of the equity interest is
Beneficially Owned by such Person;
"Take-over Bid" means an Offer to Acquire Voting Shares where the
Voting Shares subject to the Offer to Acquire, together with the Offeror's
Securities, constitute in the aggregate 20 per cent or more of the outstanding
Voting Shares at the date of the Offer to Acquire;
"Termination Time" shall mean the time at which the right to exercise
Rights shall
9
terminate pursuant to Section 3.2 or 5.1 hereof;
"Trading Day", when used with respect to any securities, shall mean a
day on which the principal securities exchange on which such securities are
listed or admitted to trading is open for the transaction of business or, if the
securities are not listed or admitted to trading on any securities exchange, a
Business Day;
"Voting Shares" shall mean the Common Shares and any other shares in
the capital of or voting interests of the Corporation entitled to vote generally
in the election of all directors; the percentage of Voting Shares Beneficially
Owned by any Person, shall, for the purposes of this Agreement, be and be deemed
to be the product determined by the formula:
A
-
IOO x B
where
A = the number of votes for the election of all directors
generally attaching to the Voting Shares Beneficially Owned by
such Person, and
B = the number of votes for the election of all directors
generally attaching to all outstanding Voting Shares;
provided that where any Person is deemed to Beneficially Own unissued Voting
Shares, such Voting Shares shall be deemed to be outstanding for the purpose of
calculating the percentage of Voting Shares Beneficially Owned by such Person.
1.2 Currency
All sums of money which are referred to in this Agreement are expressed
in lawful money of the United States, unless otherwise specified.
1.3 Headings
The division of this Agreement into Articles, Sections, clauses and
subclauses and the insertion of headings, subheadings and a table of contents
are for convenience of reference only and shall not affect the construction or
interpretation of this Agreement.
1.4 Grandfather Provisions
(a) A Person shall not be and shall not be deemed to be an
Acquiring Person if such Person (a "Grandfathered Person") is
the Beneficial Owner of twenty (20%) percent or more of the
outstanding Voting Shares as at the Record Time; provided,
however, that the exception in this clause 1.4(a) shall cease
to be applicable to a
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Grandfathered Person who shall after the Record Time become,
pursuant to one or more transactions or events, the Beneficial
Owner of additional Voting Shares constituting in the
aggregate more than one per cent of the outstanding Voting
Shares determined as at the Record Time, other than pursuant
to Permitted Bid Acquisitions, Exempt Acquisitions or Pro Rata
Acquisitions.
(b) A Person shall not be and shall not be deemed to be an
Acquiring Person if such Person (a "Grandfathered Person
Transferee") becomes the Beneficial Owner of twenty (20%)
percent or more of the outstanding Voting Shares solely as a
result of the acquisition of all but not less than all of the
Voting Shares Beneficially Owned immediately prior thereto by
a Grandfathered Person or a Grandfathered Person Transferee
(the "Transferor") and such Person's Beneficial Ownership of
Voting Shares after giving effect to such acquisition does not
exceed the number of Voting Shares Beneficially Owned by the
Transferor and by such Person immediately prior to such
acquisition (the "Transfer Time"); provided, however, that the
exception in this clause 1.4(b) shall cease to be applicable
to a Grandfathered Person Transferee who becomes, pursuant to
one or more transactions or events, the Beneficial Owner of
additional Voting Shares constituting in the aggregate more
than 1% of the outstanding Voting Shares determined as at the
Record Time, other than pursuant to Permitted Bid
Acquisitions, Exempt Acquisitions or Pro Rata Acquisitions.
(c) For the purpose of determining whether a Person is entitled to
make a Permitted Bid, the provisions of paragraph (ii) of the
definition of "Permitted Bid" in Section 1.1 shall not apply
to a Person (a "Grandfathered Bidder") who is either:
(i) a Grandfathered Person or a Grandfathered Person
Transferee who Beneficially Owns at the time of the
commencement of and at all times while such Person's
Take-over Bid remains outstanding more than 5% of the
outstanding Voting Shares; or
(ii) the Beneficial Owner of more than 5% but less than
20% of the outstanding Voting Shares as at the Record
Time;
provided that the exceptions in this clause 1.4(c) shall cease
to be applicable to a Grandfathered Bidder (and a Take-over
Bid that would otherwise constitute a Permitted Bid shall
cease to be a Permitted Bid) if such Grandfathered Bidder
shall after the Record Time (or, in the case of a Grandfather
Person Transferee only, the Transfer Time) become, pursuant to
one or more transactions or events, the Beneficial Owner of
additional Voting Shares constituting in the aggregate more
than 1% of the outstanding Voting Shares determined as at the
Record Time, other than pursuant to Permitted Bid
Acquisitions, Exempt Acquisitions or Pro Rata Acquisitions.
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(d) For greater certainty, for the purposes of this Section 1.4, a
Person shall be deemed to have become the Beneficial Owner of
additional Voting Shares if the Person becomes the Beneficial
Owner of such Voting Shares pursuant to a transaction or event
and, as a result, such Person is the Beneficial Owner of a
greater number of Voting Shares than the number of Voting
Shares that such Person Beneficially Owned immediately prior
to such transaction or event.
ARTICLE 2 - THE RIGHTS
2.l Legend on Common Share Certificates
Certificates representing Common Shares which certificates are issued
after the Record Time but prior to the earlier of the Separation Time and the
Expiration Time shall also evidence one Right for each Common Share represented
thereby and shall have impressed on, printed on, written on or otherwise affixed
to them the following legend:
"Until the Separation Time (defined in the Rights Agreement referred to
below), this certificate also evidences and entitles the holder thereof
to certain rights described in a Shareholder Protection Rights Plan
Agreement, dated as of June 30, 1997, (the "Rights Agreement"), between
Surge Components, Inc. (the "Corporation) and Continental Stock
Transfer & Trust Company, a copy of which is on file at the principal
executive offices of the Corporation the terms of which are
incorporated herein by reference. Under certain circumstances set out
in the Rights Agreement, the rights may be redeemed, may expire, may
become null and void (if, in certain cases, they are "Beneficially
Owned" by an "Acquiring Person") or may be evidenced by separate
certificates and no longer evidenced by this certificate. Upon written
request, a copy of the Rights Agreement will be mailed within five days
to the holder of this Certificate."
Certificates representing Common Shares that are issued and outstanding
at the Record Time shall also evidence two Rights for each Common Share
evidenced thereby notwithstanding the absence of the foregoing legend until the
Separation Time.
2.2 Initial Exercise Price; Exercise of Rights; Detachment of Rights
(a) Subject to adjustment as herein set forth, each Right will
entitle the holder thereof, after the Separation Time and
prior to the Expiration Time, to purchase, for the Exercise
Price, one Common Share. Notwithstanding any other provision
of this Agreement, any Rights Beneficially Owned by the
Corporation or any of its Subsidiaries shall be void.
(b) Until the Separation Time, (i) the Rights shall not be
exercisable and no Right may be exercised, and (ii) for
administrative purposes each Right will be evidenced by
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the certificates for Common Shares registered in the names of
the holders thereof (which certificates shall also be deemed
to be Rights Certificates) and will be transferable only
together with, and will be transferred by a transfer of, such
Common Shares.
(c) From and after the Separation Time and prior to the Expiration
Time (i) the Rights shall be exercisable and (ii) the
registration and transfer of the Rights shall be separate from
and independent of Common Shares. Promptly following the
Separation Time, the Corporation will prepare and the Rights
Agent will mail to each holder of record of Common Shares as
of the Separation Time (other than an Acquiring Person and, in
respect of any Rights Beneficially Owned by such Acquiring
Person which are not held of record by such Acquiring Person,
the holder of record of such Rights (a "Nominee"), at such
holder's address as shown by the records of the Corporation
(the Corporation hereby agreeing to furnish copies of such
records to the Rights Agent for this purpose), (x) a Rights
Certificate in substantially the form of Exhibit A hereto
appropriately completed, representing the number of Rights
held by such holder at the Separation Time and having such
marks of identification or designation and such legends,
summaries or endorsements printed thereon as the Corporation
may deem appropriate and as are not inconsistent with the
provisions of this Agreement, or as may be required to comply
with any law, rule, regulation or judicial or administrative
order or with any rule or regulation made pursuant thereto or
with any rule or regulation of any self-regulatory
organization, stock exchange or quotation system on which the
Rights may from time to time be listed or traded, or to
conform to usage, and (y) a disclosure statement describing
the Rights! provided that a Nominee shall be sent the
materials provided for in (x) and (y) in respect of all Common
Shares held of record by it which are not Beneficially Owned
by an Acquiring Person.
(d) Rights may be exercised in whole or in part on any Business
Day after the Separation Time and prior to the Expiration Time
by submitting to the Rights Agent, at its principal stock
transfer office in New York City, the Rights Certificate
evidencing such Rights with an election to exercise such
Rights (an "Election to Exercise") substantially in the form
attached to the Rights Certificate duly completed, accompanied
by payment by certified check, bank draft, or money order
payable to the order of the Corporation of a sum equal to the
Exercise Price multiplied by the number of Rights being
exercised and a sum sufficient to cover any transfer tax or
charge which may be payable in respect of any transfer
involved in the transfer or delivery of Rights Certificates or
the issuance or delivery of certificates for Common Shares in
a name other than that of the holder of the Rights being
exercised.
(e) Upon receipt of a Rights Certificate, which is accompanied by
(x) a completed
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Election to Exercise that does not indicate that such Right is
null and void as provided by clause 2.2(a) or 3.1 (b) and (y)
payment as set forth in clause 2.2(d), the Rights Agent
(unless otherwise instructed by the Corporation as a result of
the Corporation being of the opinion that such Right is null
and void as provided in clause 2.2(a) or 3.1 (b) or that it
would be inappropriate to issue such Right where the
circumstances of clause 3.2 shall apply) will thereupon
promptly:
(i) requisition from a transfer agent for the Common
Shares certificates representing the number of such
Common Shares to be purchased (the Corporation hereby
irrevocably authorizing its transfer agents to comply
with all such requisitions); and
(ii) after receipt of such certificates, deliver the same
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.
(f) In case the holder of any Rights shall exercise less than all
the Rights evidenced by such holder's Rights Certificate, a
new Rights Certificate evidencing the Rights remaining
unexercised will be issued by the Rights Agent to such holder
or to such holder's duly authorized assigns.
(g) The Corporation covenants and agrees that it will:
(i) take all such action as may be necessary and within
its power to ensure that all securities delivered
upon exercise of Rights shall, at the time of
delivery of the certificates for such securities
(subject to payment of the Exercise Price), be duly
and validly authorized, executed, issued and
delivered and fully paid and non-assessable;
(ii) take all such action as may be necessary and within
its power to comply with the requirements of the
Business Corporation Law, the Securities Act, the
Exchange Act and any other applicable law, rule or
regulation applicable to the issuance and delivery of
the Rights Certificates and the issuance of any
securities upon exercise of Rights;
(iii) use reasonable efforts to cause all securities issued
upon exercise of Rights to be listed upon issuance on
the principal exchanges on which the Common Shares
were traded prior to the Stock Acquisition Date;
(iv) cause to be reserved and kept available out of its
authorized and unissued Common Shares, the number of
Common Shares that, as provided in this Agreement,
will from time to time be sufficient to permit the
exercise in full of all outstanding Rights;
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(v) pay when due and payable any and all United States,
federal, state and local transfer taxes and charges
(not including any income or capital gain taxes of
the holder or exercising holder or any liability of
the Corporation to withhold tax) which may be payable
in respect of the original issuance or delivery of
the Rights Certificates, provided that the
Corporation shall not be required to pay any transfer
tax or charge which may be payable in respect of any
transfer involved in the transfer or delivery of
Rights Certificates or the issuance or delivery of
certificates for securities in a name other than that
of the holder of the Rights being transferred or
exercised; and
(vi) after the Separation Time, except as permitted by
Section 5.1 or Section 5.4 hereof, not take (or
permit any Subsidiary to take) any action if at the
time such action is taken it is reasonably
foreseeable that such action will diminish
substantially or otherwise eliminate the benefits
intended to be afforded by the Rights.
2.3 Adjustments to Exercise Price; Number of Rights
The Exercise Price, the number and kind of securities subject to
purchase upon exercise of each Right and the number of Rights outstanding are
subject to adjustment from time to time as provided in this Section 2.3.
(a) In the event the Corporation shall at any time after the date
of this Agreement (i) declare or pay a dividend on its Common
Shares payable in Common Shares (or other capital stock or
securities exchangeable for or convertible into or giving a
right to acquire its Common Shares or other capital stock)
other than pursuant to any optional stock dividend program and
other than a dividend payable in Common Shares in lieu of
annual cash dividends, (ii) subdivide or change the
outstanding Common Shares into a greater number of Common
Shares, (iii) combine or change the outstanding Common Shares
into a smaller number of Common Shares or (iv) issue any
Common Shares (or other securities exchangeable for or
convertible into or giving a right to acquire Common Shares or
other securities) in respect of, in lieu of or in exchange for
existing Common Shares except as otherwise provided in this
Section 2.3, the Exercise Price and the number of Rights
outstanding, or, if the payment or effective date therefor
shall occur after the Separation Time, the securities
purchasable upon exercise of Rights shall be adjusted as of
the payment or effective date in the manner set forth below.
If the Exercise Price and number of Rights outstanding are to
be adjusted, (x) the Exercise Price in effect after such
adjustment will be equal to the Exercise Price in effect
immediately prior to such adjustment divided by the number of
Common Shares (or other capital stock) (the "Expansion
Factor") that a holder of one Common Share immediately prior
to such dividend, subdivision, change, combination or issuance
would hold thereafter as
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a result thereof and (y) each Right held prior to such
adjustment will become that number of Rights equal to the
Expansion Factor, and the adjusted number of Rights will be
deemed to be distributed among the Common Shares with respect
to which the original Rights were associated (if they remain
outstanding) and the shares issued in respect of such
dividend, subdivision, change, combination or issuance, so
that each such Common Share (or other capital stock) will have
exactly one Right associated with it. If the securities
purchasable upon exercise of Rights are to be adjusted, the
securities purchasable upon exercise of each Right after such
adjustment will be the securities that a holder of the
securities purchasable upon exercise of one Right immediately
prior to such dividend, subdivision, change, combination or
issuance would hold thereafter as a result thereof. If after
the Record Time and prior to the Expiration Time the
Corporation shall issue any shares of capital stock other than
Common Shares in a transaction of a type described in the
first sentence of this clause 2.3(a), shares of such capital
stock shall be treated herein as nearly equivalent to Common
Shares as may be practicable and appropriate under the
circumstances and the Corporation and the Rights Agent agree
to amend this Agreement in order to effect, and the
Corporation will not consolidate with, merge with or into or
enter into an arrangement with, any other Person unless such
Person agrees to be bound by the terms of an amendment
effecting, such treatment.
In the event the Corporation shall at any time after the
Record Time and prior to the Separation Time issue any Common
Shares otherwise than in a transaction referred to in the
preceding paragraph, each such Common Share so issued shall
automatically have one new Right associated with it, which
Right shall be evidenced by the certificate representing such
share.
(b) In the event the Corporation shall at any time after the
Record Time and prior to the Expiration Time fix a record date
for the issuance of rights, options or warrants to all or
substantially all of the holders of Common Shares entitling
them (for a period expiring within 45 calendar days after such
record date) to subscribe for or purchase Common Shares (or
securities convertible into or exchangeable for or carrying a
right to purchase Common Shares) at a price per Common Share
(or, if a security convertible into or exchangeable for or
carrying a right to purchase or subscribe for Common Shares
having a conversion, exchange or exercise price, including the
price required to be paid to purchase such convertible or
exchangeable security or right per share) of less than 80% of
the Market Price per Common Share on such record date, the
Exercise Price to be in effect after such record date shall be
determined by multiplying the Exercise Price in effect
immediately prior to such record date by a fraction, the
numerator of which shall be the number of Common Shares
outstanding on such record date plus the number of Common
Shares that the aggregate offering price of the total number
of Common Shares so to be offered (and/or the aggregate
initial conversion, exchange
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or exercise price of the convertible or exchangeable
securities or rights so to be offered, including the price
required to be paid to purchase such convertible or
exchangeable securities or rights) would purchase at such
Market Price per Common Share, and the denominator of which
shall be the number of Common Shares outstanding on such
record date plus the number of additional Common Shares to be
offered for subscription or purchase (or into which the
convertible or exchangeable securities or rights so to be
offered are initially convertible, exchangeable or
exercisable). In case such subscription price may be paid by
delivery of consideration, part or all of which may be in a
form other than cash, the value of such consideration shall be
as determined in good faith by the Board of Directors, whose
determination shall be described in a statement filed with the
Rights Agent and shall be binding on the Rights Agent and the
holders of the Rights. Such adjustment shall be made
successively whenever such a record date is fixed, and in the
event that such rights or warrants are not so issued, the
Exercise Price shall be adjusted to be the Exercise Price
which would then be in effect if such record date had not been
fixed.
For purposes of this Agreement, the granting of the right to
purchase Common Shares (whether from treasury shares or
otherwise) pursuant to any dividend or interest reinvestment
plan and/or any Common Share purchase plan providing for the
reinvestment of dividends or interest payable on securities of
the Corporation and/or the investment of periodic optional
payments and/or employee benefit, stock option or similar
plans (so long as such right to purchase is in no case
evidenced by the delivery of rights or warrants) shall not be
deemed to constitute an issue of rights, options or warrants
by the Corporation; provided, however, that, in the case of
any dividend or interest reinvestment plan, the right to
purchase Common Shares is at a price per share of not less
than 80% of the current market price per share (determined as
provided in such plans) of the Common Shares.
(c) In the event the Corporation shall at any time after the
Record Time and prior to the Expiration Time fix a record date
for a distribution to all or substantially all of the holders
of Common Shares (including any such distribution made in
connection with a merger or consolidation in which the
Corporation is the continuing corporation) of evidences of
indebtedness, cash (other than annual cash dividends), assets
(including securities, but except a dividend described in
subclause 2.3(a)(i) above), or rights, options or warrants
(excluding those referred to in clause 2.3(b) hereof), the
Exercise Price to be in effect after such record date shall be
determined by multiplying the Exercise Price in effect
immediately prior to such record date by a fraction, the
numerator of which shall be the Market Price per Common Share
on such record date, Less the fair market value (as determined
in good faith by the Board of Directors, whose determination
shall be described in a statement filed with the Rights Agent)
of the portion of the cash, assets or evidences of
indebtedness so to be distributed or of such rights or
warrants
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applicable to a Common Share and the denominator of which
shall be such Market Price per Common Share. Such adjustments
shall be made successively whenever such a record date is
fixed, and in the event that such distribution is not so made,
the Exercise Price shall be adjusted to be the Exercise Price
which would have been in effect if such record date had not
been fixed.
(d) Notwithstanding anything herein to the contrary, no adjustment
in the Exercise Price shall be required unless such adjustment
would require an increase or decrease of at least ten (10%)
percent in the Exercise Price; provided, however, that any
adjustments which by reason of this clause 2.3(d) are not
required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under
this Section 2.3 shall be made to the nearest tenth of a cent
or to the nearest hundredth of a share. Notwithstanding the
first sentence of this clause 2.3(d), any adjustment required
by this Section 2.3 shall be made no later than the earlier of
(i) three years from the date of the transaction which
mandates such adjustment or (ii) the Termination Date.
(e) In the event the Corporation shall at any time after the
Record Time and prior to the Separation Time issue any shares
of capital stock (other than Common Shares), or rights or
warrants to subscribe for or purchase any such capital stock,
or securities convertible into or exchangeable for any such
capital stock, in a transaction referred to in clause (a)(i)
or (a)(iv) above, or if the Corporation shall take any other
action (other than the issue of Common Shares) which might
have a negative effect on the holders of Rights, then, unless
the Board of Directors acting in good faith determines that
the adjustments contemplated by clauses (a). (b) and (c) above
in connection with such transaction will appropriately protect
the interests of the holders of Rights, the Corporation will
determine what other adjustments to the Exercise Price, number
of Rights and/or securities purchasable upon exercise of
Rights would be appropriate and, notwithstanding clauses (a),
(b) and (c) above, such adjustments, rather than the
adjustments contemplated by clauses (a), (b) and (c) above,
shall be made. The Corporation and the Rights Agent shall
amend this Agreement as appropriate to provide for such
adjustments.
(f) Each Right originally issued by the Corporation subsequent to
any adjustment made to the Exercise Price hereunder shall
evidence the right to purchase, at the adjusted Exercise
Price, the number of Common Shares purchasable from time to
time hereunder upon exercise of a Right immediately prior to
such issue, all subject to further adjustment as provided
herein.
(g) Irrespective of any adjustment or change in the Exercise Price
or the number of Common Shares issuable upon the exercise of
the Rights, the Rights Certificates theretofore and thereafter
issued may continue to express the Exercise Price per Common
Share and the number of Common Shares which were expressed in
the
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initial Rights Certificates issued hereunder.
(h) In any case in which this Section 2.3 shall require that an
adjustment in the Exercise Price be made effective as of a
record date for a specified event, the Corporation may elect
to defer until the occurrence of such event the issuance to
the holder of any Right exercised after such record date the
number of Common Shares and other securities of the
Corporation, if any, issuable upon such exercise over and
above the number of Common Shares and other securities of the
Corporation, if any, issuable upon such exercise on the basis
of the Exercise Price in effect prior to such adjustment;
provided, however, that the Corporation shall deliver to such
holder an appropriate instrument evidencing such holder's
right to receive such additional shares (fractional or
otherwise) or securities upon the occurrence of the event
requiring such adjustment.
(i) Notwithstanding anything in this Section 2.3 to the contrary,
the Corporation shall be entitled to make such reductions in
the Exercise Price, in addition to those adjustments expressly
required by this Section 2.3, as and to the extent that in
their good faith judgment the Board of Directors shall
determine to be advisable in order that any (i) consolidation
or subdivision of the Common Shares, (ii) issuance wholly or
in part for cash of Common Shares or securities that by their
terms are convertible into or exchangeable for Common Shares,
(iii) stock dividends or (iv) issuance of rights, options or
warrants referred to in this Section 2.3, hereafter made by
the Corporation to holders of its Common Shares, shall not be
taxable to such shareholders.
(j) In any case in which this Section 2.3 shall require any
adjustment, the Corporation shall deliver to the Rights Agent
a certificate duly executed by an officer of the Corporation
describing such adjustment, in addition to any other statement
or document required by this Section 2.3.
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2.4 Date on Which Exercise is Effective
Each Person in whose name any certificate for Common Shares or other
securities, if applicable, is issued upon the exercise of Rights shall for all
purposes be deemed to have become the holder of record of the Common Shares or
other securities, if applicable, represented thereby on, and such certificate
shall be dated, the date upon which the Rights Certificate evidencing such
Rights was duly surrendered (together with a duly completed Election to
Exercise) and payment of the Exercise Price for such Rights (and any applicable
transfer taxes and other governmental charges payable by the exercising holder
hereunder) was made; provided, however, that if the date of such surrender and
payment is a date upon which the relevant transfer books of the Corporation are
closed, such Person shall be deemed to have become the record holder of such
shares on, and such certificate shall be dated, the next succeeding Business Day
on which the relevant transfer books of the Corporation are open.
2.5 Execution, Authentication, Delivery and Dating of Rights Certificates
(a) The Rights Certificates shall be executed on behalf of the
Corporation by its Chairman, President or any of its Vice
Presidents and by its Secretary or one of its Assistant
Secretaries. The signature and attestation of any of these
officers on the Rights Certificates may be manual or
facsimile. Rights Certificates bearing the manual or facsimile
signatures of individuals who were at any time the proper
officers of the Corporation shall bind the Corporation,
notwithstanding that such individuals or any of them have
ceased to hold such offices prior to the countersignature and
delivery of such Rights Certificates.
(b) Promptly after the Corporation learns of the Separation Time,
the Corporation will notify the Rights Agent of such
Separation Time and will deliver Rights Certificates executed
by the Corporation to the Rights Agent for countersignature,
and the Rights Agent shall manually countersign and send such
Rights Certificates to the holders of the Rights pursuant to
clause 2.2(c) hereof. No Rights Certificate shall be valid for
any purpose until countersigned by the Rights Agent as
aforesaid.
(c) Each Rights Certificate shall be dated the date of
countersignature thereof.
2.6 Registration, Registration of Transfer and Exchange
(a) The Corporation will cause to be kept a register (the "Rights
Register") in which, subject to such reasonable regulations as
it may prescribe, the Corporation will provide for the
registration and transfer of Rights. The Rights Agent is
hereby appointed registrar for the Rights (the "Rights
Registrar") for the purpose of maintaining the Rights Register
for the Corporation and registering Rights and transfers of
Rights as herein provided and the Rights Agent hereby accepts
such appointment. In the event that the Rights Agent shall
cease to be the Rights
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Registrar, the Rights Agent will have the right to examine the
Rights Register at all reasonable times.
After the Separation Time and prior to the Expiration Time,
upon surrender for registration of transfer or exchange of any
Rights Certificate, and subject to the provisions of clause
2.6(c) below, the Corporation will execute, and the Rights
Agent will manually countersign and deliver, in the name of
the holder or the designated transferee or transferees, as
required pursuant to the holder's instructions one or more new
Rights certificates evidencing the same aggregate number of
Rights as did the Rights Certificates so surrendered.
(b) All Rights issued upon any registration of transfer or
exchange of Rights Certificates shall be the valid obligations
of the Corporation, and such Rights shall be entitled to the
same benefits under this Agreement as the Rights surrendered
upon such registration of transfer or exchange.
(c) Every Rights Certificate surrendered for registration of
transfer or exchange shall be duly endorsed, or be accompanied
by a written instrument of transfer in form satisfactory to
the Corporation or the Rights Agent, as the case may be, duly
executed by the holder thereof or such holder's attorney duly
authorized in writing. As a condition to the issuance of any
new Rights Certificate under this Section 2.6, the Corporation
may require the payment of a sum sufficient to cover any tax
or other governmental charge that may be imposed in relation
thereto and any other expenses (including the fees and
expenses of the Rights Agent) connected therewith.
2.7 Mutilated, Destroyed, Lost and Stolen Rights Certificates
(a) If any mutilated Rights Certificate is surrendered to the
Rights Agent prior to the Expiration Time, the Corporation
shall execute and the Rights Agent shall countersign and
deliver in exchange therefor a new Rights Certificate
evidencing the same number of Rights as did the Rights
Certificate so surrendered.
(b) If there shall be delivered to the Corporation and the Rights
Agent prior to the Expiration Time (i) evidence to their
reasonable satisfaction of the destruction, loss or theft of
any Rights Certificate and (ii) such security or indemnity as
may be reasonably required by them to save each of them and
any of their agents harmless, then, in the absence of notice
to the Corporation or the Rights Agent that such Rights
Certificate has been acquired by a bona fide purchaser, the
Corporation shall execute and upon the Corporation's request
the Rights Agent shall countersign and deliver, in lieu of any
such destroyed, lost or stolen Rights Certificate, a new
Rights Certificate evidencing the same number of Rights as did
the Rights Certificate so destroyed, lost or stolen.
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(c) As a condition to the issuance of any new Rights Certificate
under this Section 2.7, the Corporation may require the
payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto
and any other expenses (including the fees and expenses of the
Rights Agent) connected therewith
(d) Every new Rights Certificate issued pursuant to this Section
2.7 in lieu of any destroyed, lost or stolen Rights
Certificate shall evidence the contractual obligation of the
Corporation whether or not the destroyed, lost or stolen
Rights Certificate shall be at any time enforceable by anyone,
and shall be entitled to all the benefits of this Agreement
equally and proportionately with any and all other Rights duly
issued by the Corporation.
2.8 Persons Deemed Owners
The Corporation, the Rights Agent and any agent of the Corporation or
the Rights Agent may deem and treat the Person in whose name a Rights
Certificate (or, prior to the Separation Time, the associated Common Share
certificate) is registered as the absolute owner thereof and of the Rights
evidenced thereby for all purposes whatsoever. As used in this Agreement, unless
the context otherwise requires, the term "holder" of any Rights shall mean the
registered holder of such Rights (or, prior to the Separation Time, the
associated Common Share certificate).
2.9 Delivery and Cancellation of Certificates
All Rights Certificates surrendered upon exercise or for redemption,
registration of transfer or exchange shall, if surrendered to any Person other
than the Rights Agent, be delivered to the Rights Agent and, in any case, shall
be promptly canceled by the Rights Agent. The Corporation may at any time
deliver to the Rights Agent for cancellation any Rights Certificates previously
countersigned and delivered hereunder which the Corporation may have acquired in
any manner whatsoever, and all Rights Certificates so delivered shall be
promptly canceled by the Rights Agent. No Rights Certificate shall be
countersigned in lieu of or in exchange for any Rights Certificates canceled as
provided in this Section 2.9, except as expressly permitted by this Agreement.
The Rights Agent shall destroy all canceled Rights Certificates and deliver a
certificate of destruction to the Corporation.
2.10 Agreement of Rights Holders
Every holder of Rights, by accepting the same, consents and agrees with
the Corporation and the Rights Agent and with every other holder of Rights:
(a) to be bound by and subject to the provisions of this
Agreement, as amended from time to time in accordance with the
terms hereof, in respect of all Rights held;
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(b) that prior to the Separation Time, each Right will be
transferable only together with, and will be transferred by a
transfer of, the Common Share certificate representing such
Right;
(c) that prior to due presentment of a Rights Certificate (or,
prior to the Separation Time, the associated Common Share
certificate) for registration of transfer, the Corporation,
the Rights Agent and any agent of the Corporation or the
Rights Agent may deem and treat the Person in whose name the
Rights Certificate (or, prior to the Separation Time, the
associated Common Share certificate) is registered as the
absolute owner thereof and of the Rights evidenced thereby
(notwithstanding any notations of ownership or writing on such
Rights Certificate or the associated Common Share certificate
made by anyone other than the Corporation or the Rights Agent)
for all purposes whatsoever, and neither the Corporation nor
the Rights Agent shall be affected by any notice to the
contrary;
(d) that such holder of Rights has waived his right to receive any
fractional Rights or any fractional shares or other securities
upon exercise of a Right (except as provided herein); and
(e) that without the approval of any holder of Rights and upon the
sole authority of the Board of Directors acting in good faith
this Agreement may be supplemented or amended from time to
time pursuant to and as provided herein.
2.11 Rights Certificate Holder not deemed a Shareholder
No holder, as such, of any Rights or Rights Certificate shall be
entitled to vote, receive dividends or be deemed for any purpose whatsoever the
holder of any Common Share or any other share or security of the Corporation
which may at any time be issuable on the exercise of the Rights represented
thereby, nor shall any thing contained herein or in any Rights Certificate be
construed or deemed or confer upon the holder of any Right or Rights
Certificate, as such, any of the rights, titles, benefits or privileges of a
holder of Common Shares or any other shares or securities of the Corporation or
any right to vote at any meeting of shareholders of the Corporation whether for
the election of Directors or otherwise or upon any matter submitted to holders
of shares of the Corporation at any meeting thereof, or to give or withhold
consent to any action of the Corporation, or to receive notice of any meeting or
other action affecting any holder of Common Shares or any other shares or
securities of the Corporation except as expressly provided herein, or to receive
dividends, distributions or subscription rights, or otherwise, until the Right
or Rights evidenced by Rights Certificates shall have been duly exercised in
accordance with the terms and provisions hereof.
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ARTICLE 3 - FLIP-IN EVENT
3.1 Flip-in Event
(a) Subject to clause 3.1 (b), Section 3.2, clause 5.1 (b), clause
5.1 (c) and the second sentence of clause 2.2(a),in the event
that prior to the Expiration Time a Flip-in Event shall occur,
each Right shall constitute, effective on and after the Stock
Acquisition Date, the right to purchase from the Corporation,
upon payment of the Exercise Price and otherwise exercising
such Right in accordance with the terms hereof, that number of
Common Shares as shall equal the result obtained by
multiplying the then current Exercise Price by the number of
Common Shares for which each Right is exercisable immediately
prior to the Stock Acquisition Date (such Right to be
appropriately adjusted in a manner analogous to the applicable
adjustment provided for in Section 2.3 in the event that after
the Stock Acquisition Date an event of a type analogous to any
of the events described in Section 2.3 shall have occurred).
(b) Notwithstanding anything in this Agreement to the contrary,
upon the occurrence of any Flip-in Event, any Rights that are
Beneficially Owned by (i) an Acquiring Person (or any
Affiliate or Associate of an Acquiring Person or any Person
acting jointly or in concert with an Acquiring Person or any
Affiliate or Associate of an Acquiring Person) or (ii) a
transferee of Rights, directly or indirectly, of an Acquiring
Person (or of any Affiliate or Associate of an Acquiring
Person or of any Person acting jointly or in concert with an
Acquiring Person or any Associate or Affiliate of an Acquiring
Person) who becomes a transferee concurrently with or
subsequent to the Acquiring Person becoming such shall become
null and void without any further action, and any holder of
such Rights (including transferees) shall not have any rights
whatsoever ro exercise such Rights under any provision of his
Agreement and shall not have thereafter any other rights
whatsoever with respect to such Rights, whether under any
provision of this Agreement or otherwise.
(c) From and after the Separation Time, the Corporation shall do
all such acts and things as shall be necessary and within its
power to ensure compliance with the provisions of this Section
3.1, including without limitation, all such acts and things as
may be required to satisfy the requirements of the Securities
Act, the Exchange Act and the rules of the stock exchange(s)
where the Common Shares are listed at such time in respect of
the issue of Common Shares upon the exercise of Rights in
accordance with this Agreement.
24
3.2 Exchange Option
(a) In the event that the Board of Directors acting in good faith
shall determine that conditions exist which would eliminate or
otherwise materially diminish in any respect the benefits
intended to be afforded to the holders of Rights pursuant to
this Agreement, the Board of Directors, at its option, at any
time after a Flip-in Event has occurred, may authorize the
Corporation to issue or deliver in respect of each Right which
is not void pursuant to the second sentence of clause 2.2(a)
or clause 3.1(b), either (i) in return for the Exercise Price
and the Right, debt or equity securities or assets of the
Corporation (or a combination thereof) having a value equal to
twice the Exercise Price, or (ii) in return for the Right,
subject to any amounts that may be required to be paid under
applicable law, debt or equity securities or assets of the
Corporation (or a combination thereof) having a value equal to
the value of the Right, in full and final settlement of all
rights attaching to the Rights, where in either case the value
of such debt or equity securities or assets (or a combination
thereof) and, in the case of an issue of debt or equity
securities or assets (or a combination thereof) pursuant to
(ii), and the value of the Right shall be determined by the
Board of Directors who may rely upon the advice of a
nationally or internationally recognized firm of investment
bankers selected by the Board of Directors.
(b) If the Board of Directors authorizes the exchange of debt or
equity securities or assets of the Corporation (or a
combination thereof) for Rights pursuant to clause 3.2(a),
without any further action or notice the right to exercise the
Rights will terminate and the only right thereafter of a
holder of Rights shall be to receive the debt or equity
securities or assets of the Corporation (or a combination
thereof) in accordance with the exchange formula authorized by
the Board of Directors. Within 10 Business Days after the
Board of Directors has authorized an exchange for Rights
pursuant to clause 3.2(a), the Corporation shall give notice
of such exchange to the holders of such Rights by mailing such
notice to all such holders at their last addresses as they
appear upon the register of Rights holders maintained by the
Rights Agent. Each such notice of exchange will state the
method by which the exchange of debt or equity securities or
assets of the Corporation (or a combination thereof) for
Rights will be effected.
(c) In the event that there shall not be sufficient securities
authorized but unissued to permit the exchange in fill of such
Rights pursuant to this Section 3.2, the Corporation shall
take all such action as may be necessary and within its power
to authorize additional securities for issuance upon the
exchange of Rights.
(d) The Corporation shall not be required to issue fractions of
securities or to distribute certificates evidencing fractional
securities. In lieu of issuing such fractional securities,
there shall be paid to the registered holders of Rights to
whom such
25
fractional securities would otherwise be issuable an amount in
cash equal to the same fraction of the Market Price of a whole
security. Alternatively, fractional shares may, at the
election of the Corporation, be evidenced by scrip
certificates.
ARTICLE 4 - THE RIGHTS AGENT
4.1 General
(a) The Corporation hereby appoints the Rights Agent to act as
agent for the Corporation in accordance with the terms and
conditions hereof, and the Rights Agent hereby accepts such
appointment. The Corporation may from time to time appoint
such Co-Rights Agents ("Co-Rights Agents") as it may deem
necessary or desirable. In the event the Corporation appoints
one or more Co-Rights Agents, the respective duties of the
Rights Agent and Co-Rights Agents shall be as the Corporation
may determine. The Corporation also agrees to indemnify the
Rights Agent for, and to hold it harmless against, any loss,
liability, or expense, incurred without negligence, bad faith
or wilful misconduct on the part of the Rights Agent, for
anything done or omitted by the Rights Agent in connection
with the acceptance and administration of this Agreement,
including the costs and expenses of defending against any
claim of liability, which right to indemnification will
survive the termination of this Agreement.
The Corporation agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it hereunder and,
from time to time, on demand of the Rights Agent, its
reasonable expenses and counsel fees and other disbursements
incurred in the administration and execution of this Agreement
and the exercise and performance of its duties hereunder.
(b) The Rights Agent 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 administration of this
Agreement in reliance upon any certificate for Voting Shares
or Common Shares or any Rights Certificate or certificate for
other securities of the Corporation, 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.
4.2 Merger or Consolidation or Change of Name of Rights Agent
(a) Any corporation into which the Rights Agent or any successor
Rights Agent may be merged with or which it may be
consolidated, or any corporation resulting from any merger,
statutory arrangement or consolidation to which the Rights
Agent or any successor Rights Agent is a party, or any
corporation succeeding to the
26
shareholder or stockholder services business of the Rights
Agent or any successor Rights Agent, will be the successor to
the Rights Agent under this Agreement without the execution or
filing of any paper or any further act on the part of any of
the parties hereto, provided that such corporation would be
eligible for appointment as a successor Rights Agent under the
provisions of Section 4.4 hereof. In case at the time such
successor Rights Agent succeeds to the agency created by this
Agreement any of the Rights Certificates have been
countersigned 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 have
not 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
will have the full force provided in the Rights Certificates
and in this Agreement.
(b) In case at any time the name of the Rights Agent is 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 Right 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 Right Certificates shall have the
full force provided in the Right Certificates and in this
Agreement.
4.3 Duties of Rights Agent
The Rights Agent undertakes the duties and obligations imposed by this
Agreement upon the following terms and conditions, by all of which the
Corporation and the holders of Rights Certificates, by their acceptance thereof,
shall be bound:
(a) the Rights Agent may consult with legal counsel (who may be
legal counsel for the Corporation) and the opinion of such
counsel will be full and complete authorization and protection
to the Rights Agent as to any action taken or omitted by it in
good faith and in accordance with such opinion;
(b) whenever in the performance of its duties under this Agreement
the Rights Agent deems it necessary or desirable that any fact
or matter be proved or established by the Corporation prior to
taking or suffering any action hereunder, such fact or matter
(unless other evidence in respect thereof be herein
specifically prescribed) may be deemed to be conclusively
proved and established by a certificate signed by a Person
believed by the Rights Agent to be the Chairman of the Board,
the President or any Vice President of the Corporation and
delivered to the Rights Agent; and such certificate will be
full authorization to the Rights Agent for any
27
action taken or suffered in good faith by it under the
provisions of this Agreement in reliance upon such
certificate;
(c) the Rights Agent will be liable hereunder only for its own
negligence, bad faith or wilful misconduct;
(d) the Rights Agent will not be liable for or by reason of any of
the statements of fact or recitals contained in this Agreement
or in the certificates for Voting Shares or Common Shares or
the Rights Certificates (except its countersignature thereof)
or be required to verify the same, but all such statements and
recitals are and will be deemed to have been made by the
Corporation only;
(e) the Rights Agent will not be under any responsibility in
respect of the validity of this Agreement or the execution and
delivery hereof (except the due authorization, execution and
delivery hereof by the Rights Agent) or in respect of the
validity or execution of any Common Share certificate or
Rights Certificate (except its countersignature thereof); nor
will it be responsible for any breach by the Corporation of
any covenant or condition contained in this Agreement or in
any Rights Certificate; nor will it be responsible for any
change in the exercisability of the Rights (including the
Rights becoming void pursuant to clause 3.1 (b) hereof) or any
adjustment required under the provisions of Section 2.3 hereof
or responsible 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 after receipt of the certificate
contemplated by Section 2.3 describing any such adjustment);
nor will it by any act hereunder be deemed to make any
representation or warranty as to the authorization of any
Common Shares to be issued pursuant to this Agreement or any
Rights or as to whether any Common Shares will, when issued,
be duly and validly authorized, executed, issued and delivered
and fully paid and non-assessable:
(f) the Corporation agrees that it will 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 Agreement;
(g) the Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties
hereunder from any Person believed by the Rights Agent to be
the Chairman of the Board, the President. any Vice President,
or the Treasurer or the Controller of the Corporation, and to
apply to such Persons tor advice or instructions in connection
with its duties, and it shall not be liable for any action
taken or suffered by it in good faith in accordance with
instructions of
28
any such Person;
(h) the Rights Agent and any shareholder or stockholder, director,
officer or employee of the Rights Agent may buy, sell or deal
in Common Shares, Rights or other securities of the
Corporation or become pecuniarily interested in any
transaction in which the Corporation may be interested, or
contract with or lend money to the Corporation or otherwise
act as fully and freely as though it were not Rights Agent
under this Agreement. Nothing herein shall preclude the Rights
Agent from acting in any other capacity for the Corporation or
for any other legal entity; and
(i) the Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder
either itself or by or through its attorneys or agents, and
the Rights Agent will not be answerable or accountable for any
act, default, neglect or misconduct of any such attorneys or
agents or for any loss to the Corporation resulting from any
such act, default, neglect or misconduct, provided reasonable
care was exercised in the selection and continued employment
thereof.
4.4 Change of Rights Agent
The Rights Agent may resign and be discharged from its duties under
this Agreement upon 90 days' notice (or such lesser notice as is
acceptable to the Corporation) in writing mailed to the Corporation and
to each transfer agent of Common Shares by registered or certified
mail, and to the holders of the Rights in accordance with Section 5.9.
The Corporation may remove the Rights Agent upon 30 days' notice in
writing, mailed to the Rights Agent and ro each transfer agent of the
Common Shares by registered or certified mail, and to the holders of
the Rights in accordance with Section 5.9. If the Rights Agent should
resign or be removed or otherwise become incapable of acting, the
Corporation will appoint a successor to the Rights Agent. If the
Corporation fails to make such appointment within a period of 30 days
after 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 any Rights (which holder shall, with such
notice, submit such holder's Rights Certificate for inspection by the
Corporation), then the holder of any Rights may apply to any court of
competent jurisdiction for the appointment of a new Rights Agent. Any
successor Rights Agent, whether appointed by the Corporation or by such
a court, shall be a corporation incorporated under the laws of any
state of the United States authorized to carry on the business of a
trust company. After appointment, the successor Rights Agent will 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; but the predecessor Rights Agent shall deliver and transfer to
the successor Rights Agent any property at the time held by it
hereunder, 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 Corporation will file notice thereof
in writing with the predecessor Rights Agent and each transfer agent of
the Common Shares, and mail a notice thereof in writing
29
to the holders of the Rights. Failure to give any notice provided for
in his Section 4.4, 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.
ARTICLE 5 - MISCELLANEOUS
5.1 Redemption and Waiver
(a) The Board of Directors may, at its option, at any time prior
to the Separation Time, elect to redeem all but not less than
all of the then outstanding Rights at a redemption price of
$0.001 per Right appropriately adjusted in a manner analogous
to the applicable adjustment provided for in Section 2.3 in
the event that an event of the type analogous to any of the
events described in Section 2.3 shall have occurred (such
redemption price being herein referred to as the "Redemption
Price"). The redemption of the Rights by the Board of Director
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) The Board of Director may until the Separation Time determine,
upon prior written notice delivered to the Rights Agent, to
waive the application of Section 3.1 to any particular Flip-in
Event.
(c) The Board of Directors may prior to the Separation Time waive
the application of Section 3.1 to any particular Flip-in
Event, provided that both of the following conditions are
satisfied:
(i) the Board of Directors has determined that the
Acquiring Person became an Acquiring Person by
inadvertence and without any intent or knowledge that
he would become an Acquiring Person; and
(ii) such Acquiring Person has reduced his Beneficial
Ownership of Voting Shares such that at the time of
waiver pursuant to this clause he is no longer an
Acquiring Person.
(d) The Board of Directors shall, without further formality, be
deemed to have elected to redeem the Rights at the Redemption
Price on the date of expiry of a Permitted Bid, provided that
the Offeror takes up and pays for the Voting Shares pursuant
to the terms and conditions of the Permitted Bid.
(e) If the Board of Directors elects to redeem the Rights, the
right to exercise the Rights will thereupon, without further
action and without notice, terminate and the only right
thereafter of the holders of Rights shall be to receive the
Redemption
30
Price.
(f) Within 10 days after the Board of Directors electing to redeem
the Rights, the Corporation shall give notice of redemption to
the holders of the then outstanding Rights by mailing such
notice to all such holders at their last address as they
appear upon the registry books of the Rights Agent or, prior
to the Separation Time, on the registry books of the transfer
agent for the Common Shares. Any notice which is mailed in the
manner herein provided shall be deemed given, whether or not
the holder receives the notice. Each such notice of redemption
will state the method by which the payment of the Redemption
Price will be made. The Corporation shall not be required to
make any payment of the Redemption Price to a holder of Rights
if any such payment is less than $10. The Corporation may not
redeem, acquire or purchase for value any Rights at any time
in any manner other than that specifically set forth in this
Section 5.1, or other than in connection with the purchase of
Common Shares prior to the Separation Time.
5.2 Expiration
No Person shall have any rights whatsoever pursuant to or arising out
of this Agreement or in respect of any Right after the Expiration Time, except
the Rights Agent as specified in clause 4.1 (a) of this Agreement.
5.3 Issuance of New Rights Certificates
Notwithstanding any of the provisions of this Agreement or of the
Rights to the contrary, the Corporation may at its option, issue new Rights
Certificates evidencing Rights in such form as may be approved by the Board of
Directors to reflect any adjustment or change in the number or kind or class of
securities purchasable upon exercise of Rights made in accordance with the
provisions of this Agreement.
5.4 Supplements and Amendments
(a) Subject to prior written approval of the Nasdaq Stock Market
or any subsequent exchange on which the Corporation's
securities may then be listed, the Corporation may from time
to time supplement or amend this Agreement without the
approval of any holders of Rights:
(i) to make any changes which the Board of Directors
acting in good faith may deem necessary or desirable,
provided that no such supplement or amendment made on
or after the Separation Time shall materially
adversely affect the interests of the holders of
Rights generally and provided further that no
supplement or amendment shall be made to the
provisions of Article 4 except with the written
concurrence of the Rights Agent to such
31
supplement or amendment; or
(ii) in order to cure any ambiguity or to correct or
supplement any provision contained herein which may
be inconsistent with any other provisions herein or
otherwise defective.
(b) The Corporation may, with the consent of the holders of Rights
obtained as set forth below, at any time after the Separation
Time, amend, vary or rescind any of the provisions of this
Agreement and the Rights (whether or not such action would
materially adversely affect the interests of the holders of
Rights generally). Such consent shall be deemed to have been
given and be binding upon all holders of Rights if such action
is authorized by the affirmative votes of the holders of
Rights present or represented at and entitled to be voted at a
meeting of the holders and representing 50 per cent plus one
of the votes cast in respect thereof. For the purposes hereof,
each outstanding Right (other than Rights which are void
pursuant to the provisions hereof) shall be entitled to one
vote, and the procedures for the calling, holding and conduct
of the meeting shall be those, as nearly as may be, which are
provided in the Corporation's by-laws with respect to meetings
of its shareholders.
(c) Any supplement or amendment to this Agreement made by the
Board of Directors pursuant to subclause (a)(i) in connection
with the definitions of"Acquiring Person", "Exercise Price",
"Expiration Time", "Flip-in Event", "Grandfathered Person" or
"Permitted Bid" shall, if made prior to the Separation Time be
submitted to the shareholders of the Corporation at the next
meeting of shareholders and the shareholders may, by ordinary
resolution, confirm or reject such supplement or amendment; if
made at or after the Separation Time such supplement or
amendment shall be submitted to the holders of the Rights at a
meeting to be called for on a date not later than immediately
following the next meeting of shareholders and the holders of
Rights may, by ordinary resolution (on the same basis as
described in clause (b) hereof), confirm or reject such
supplement or amendment. A supplement or amendment to this
Agreement made by the Board of Directors as contemplated by
the previous sentence shall be effective from the date of the
relevant resolution of the Board of Directors until it is
confirmed or rejected or until it ceases to be effective (as
described in the next following sentence) and, where the
supplement or amendment is confirmed, it continues in effect
in the form in which it was so confirmed. If such supplement
or amendment to this Agreement made by the Board of Directors
is rejected by the shareholders or holders of Rights or is not
submitted to the shareholders or holders of Rights as
required, then such supplement or amendment shall cease to be
effective from and after the termination of the meeting at
which it was rejected or to which it should have been but was
not submitted, or from and after the last date on which a
meeting of holders of Rights should have been but was not
held, and no subsequent
32
resolution of the Board of Directors to supplement or amend
the Agreement to substantially the same effect shall be
effective until confirmed by the shareholders or holders of
Rights, as the case may be.
5.5 Fractional Rights and Fractional Shares
(a) Subject to clause 3.2(d) in respect of circumstances referred
to in clause 3.2(a), the Corporation shall not be required to
issue fractions of Rights or to distribute Rights Certificates
which evidence fractional Rights and no amount shall be paid
to the registered holders of the Rights Certificates with
regard to which such fractional Rights would otherwise be
issuable.
(b) The Corporation shall not be required to issue fractions of
Common Shares upon exercise of the Rights or to distribute
certificates which evidence factional Common Shares. Fractions
of Common Shares may, at the election of the Corporation, be
evidenced by scrip certificates. In lieu of issuing fractional
Common Shares, the Corporation may pay to the registered
holders of Rights Certificates, at the time such Rights are
exercised as herein provided, an amount in cash equal to the
same fraction of the Market Price of one Common Share.
5.6 Rights of Action
Subject to the terms of this Agreement, all rights of action in respect
of this Agreement, other than rights of action vested solely in the Rights
Agent, are vested in the respective registered holders of the Rights; and any
registered holder of any Rights, without the consent of the Rights Agent or of
the registered holder of any other Rights, may, on such holder's own behalf and
for such holder's own benefit, enforce, and may institute and maintain any suit,
action or proceeding against the Corporation to enforce such holder's right to
exercise such holder's Rights in the manner provided in such holder's Rights
Certificate and in this 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 of this Agreement and will be entitled to specific performance of the
obligations under, and injunctive relief against actual or threatened violations
of the obligations of any Person subject to, this Agreement.
5.7 Regulatory Approvals
Any obligation of the Corporation or action or event contemplated by
this Agreement shall be subject to the receipt of any requisite approval or
consent from any governmental or regulatory authority.
5.8 Declaration as to Non-U.S. Holders
If in the opinion of the Board of Directors (who may rely upon the
advice of counsel) any
33
action or event contemplated by this Agreement would require compliance with the
securities laws or comparable legislation of a jurisdiction outside the United
States, the Board of Directors acting in good faith may take such actions as ir
may deem appropriate to ensure that such compliance is not required, including
without limitation establishing procedures for the issuance to a United States
resident Fiduciary, of Rights or securities issuable on exercise of Rights. the
holding thereof in trust for the Persons entitled thereto (but reserving to the
Fiduciary or to the Fiduciary and the Corporation. as the Corporation may
determine, absolute discretion with respect thereto) and the sale thereof and
remittance of the proceeds of such sale, if any, to the persons entitled
thereto. In no event shall the Corporation or the Rights Agent be required to
issue or deliver Rights or securities issuable on exercise of Rights to persons
who are citizens, residents or nationals of any jurisdiction other than the
United States in which such issue or delivery would be unlawful without
registration of the relevant Persons or securities for such purposes.
5.9 Notices
Notices or demands authorized or required by this Agreement to be given
or made by the Rights Agent or by the holder of any Rights to or on the
Corporation shall be sufficiently given or made if delivered or sent by first
class mail, postage prepaid, by telecopier or by other similar means of
telecommunications addressed (until another address is filed in writing with the
Rights Agent) as follows:
SURGE COMPONENTS, INC.
0000 Xxxxx Xxxxxxxxx
Xxxx Xxxx, XX 00000
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
Attention: President and Chief Executive Officer
Any notice or demand authorized or required by this Agreement to be
given or made by the Corporation or by the holder of any Rights to or on the
Rights Agent shall be sufficiently given or made if delivered or sent by
first-class mail, postage prepaid, by telecopier or by other similar means of
telecommunications addressed (until another address is filed in writing with the
Corporation) as follows:
Continental Stock Transfer &
Trust Company
0 Xxxxxxxx
Xxx Xxxx, XX 00000
(000) 000-0000
(000) 000-0000 (fax)
Attention: Compliance Department
34
Notices or demands authorized or required by this Agreement to be given
or made by the Corporation or the Rights Agent to or on the holder of any Rights
shall be sufficiently given or made if delivered or sent by first-class mail,
postage prepaid, by telecopier or by other similar means of telecommunications
addressed to such holder at the address of such holder as it appears upon the
registry books of the Rights Agent or, prior to the Separation Time, on the
registry books of the Corporation for its Common Shares. Any notice which is
mailed or sent in the manner herein provided shall be deemed given, whether or
not the holder receives the notice.
5.10 Costs of Enforcement
The Corporation agrees that if the Corporation fails to fulfil any of
its obligations pursuant to this Agreement, then the Corporation will reimburse
the holder of any Rights for the costs and expenses (including legal fees)
incurred by such holder to enforce his rights pursuant thereto in any action,
suit or proceeding in which a court of competent jurisdiction in a final
non-appealable judgment has rendered judgment in favor of the holder.
5.11 Successors
All the covenants and provisions of this Agreement by or for the
benefit of the Corporation or the Rights Agent shall bind and inure to the
benefit of their respective successors and assigns hereunder.
5.12 Benefits of this Agreement
Nothing in this Agreement shall be construed to give to any Person
other than the Corporation, the Rights Agent and the holders of the Rights any
legal or equitable right, remedy or claim under this Agreement; but this
Agreement shall be for the sole and exclusive benefit of the Corporation, the
Rights Agent and the holders of the Rights.
5.13 Governing Law
This Agreement and each Right issued hereunder shall be deemed to be a
contract made under the laws of the state of New York and for all purposes shall
be governed by and construed in accordance with the laws of such state
applicable to contracts to be made and performed entirely within such state.
5.14 Severability
If any Section, clause, term or provision hereof or the application
thereof to any circumstance or any right hereunder shall, in any jurisdiction
and to any extent, be invalid or unenforceable, such Section, clause, term or
provision or such right shall be ineffective only as to such jurisdiction and to
the extent of such invalidity or unenforceability in such jurisdiction
35
without invalidating or rendering unenforceable or ineffective the remaining
Sections, clauses, terms and provisions hereof or rights hereunder in such
jurisdiction or the application of such Section, clause, term or provision or
rights hereunder in any other jurisdiction or to circumstances other than those
as to which it is specifically held invalid or unenforceable.
5.15 Effective Date
This Agreement is effective and in full force and effect in accordance
with its terms from the date hereof.
5.16 Determinations and Actions by the Board of Directors
The Board of Directors shall have the exclusive power and authority to
administer this Agreement and to exercise all rights and powers specifically
granted to the Board of Directors or the Corporation, or as may be necessary or
advisable in the administration of this Agreement, including, without
limitation, the right and power to (i) interpret the provisions of this
Agreement, (ii) make the public announcement referred to under "Stock
Acquisition Date" in section 1.1 hereof and (iii) make all determinations deemed
necessary or advisable for the administration of this Agreement (including a
determination to redeem or not to redeem the Rights or to amend the Agreement).
All such actions, calculations, interpretations and determinations (including,
for purposes of clause (y) below, all omissions with respect to the foregoing)
which are done or made by the Board of Directors, in good faith, shall (x) be
final, conclusive and binding on the Corporation, the Rights Agent, the holders
of the Rights Certificates (including Rights which are void pursuant to the
provisions hereof) and all other parties, and (y) not subject the Board of
Directors or any director of the Corporation to any liability to the holders of
the Rights Certificates (including Rights which are void pursuant to the
provisions hereof).
5.17 Time of the Essence
Time shall be of the essence in this Agreement.
5.18 Execution in Counterparts
This Agreement may be executed in any number of counterparts and each
of such counterparts shall for all purposes be deemed to be an original, and all
such counterparts shall together constitute one and the same instrument.
36
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
SURGE COMPONENTS, INC.
By: /s/ Xxx Xxxx
----------------------------------
Xxx Xxxx, President
By: /s/ Xxxxxx X. Xxxxxx
----------------------------------
Xxxxxx X. Xxxxxx, Secretary
CONTINENTAL STOCK TRANSFER
& TRUST COMPANY
By: /s/ Xxxxxxx Xxxxxxxxx
----------------------------------
Xxxxxxx Xxxxxxxxx, Authorized Officer
37
EXHIBIT "A"
FORM OF RIGHTS CERTIFICATE
Certificate No. ___________ ___________ Rights
THE RIGHTS ARE SUBJECT TO TERMINATION, AT THE OPTION OF THE CORPORATION, ON THE
TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES (SPECIFIED
IN SECTION 3.1(B) OF THE RIGHTS AGREEMENT), RIGHTS BENEFICIAL OWNED BY AN
ACQUIRING PERSON OR TRANSFEREE OF AN ACQUIRING PERSON OR ITS AFFILIATES OR,
ASSOCIATES (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) MAY BECOME VOID.
RIGHTS CERTIFICATE
This certifies that ________________________, or registered assigns, is
the registered holder of the number of Rights set forth above, each of which
entitles the registered holder thereof, subject to the terms, provisions and
conditions of the Shareholder Protection Rights Plan Agreement dated as of the
30th day of June, 1997 (the "Rights Agreement") between Surge Components, Inc.,
a corporation duly incorporated under the New York Business Corporation Law (the
"Corporation") and Continental Stock Transfer & Trust Company, a New York
corporation (the "Rights Agent") (which term shall include any successor Rights
Agent under the Rights Agreement), as amended, to purchase from the Corporation
at any time after the Separation Time (as such term is defined in the Rights
Agreement) and prior to the Expiration Time (defined in the Rights Agreement as
when the Rights earlier terminate or June 30, 2007), one fully paid common share
of the Corporation (a "Common Share") at the Exercise Price referred to below,
upon presentation and surrender of this Rights Certificate with the Form of
Election to Exercise duly executed and submitted to the Rights Agent at its
principal office in the City of New York. The Exercise Price shall initially be
$.01 per Right and shall be subject to adjustment in certain events as provided
in the Rights Agreement.
In certain circumstances described in the Rights Agreement, each Right
evidenced hereby may entitle the registered holder thereof to purchase or
receive assets, debt securities or shares in the capital stock of the
Corporation other than Common Shares or more or less than one Common Share (or a
combination thereof), all as provided in the Rights Agreement.
This Rights Certificate is subject to all of 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 thereunder of the
Rights Agent, the Corporation and the holders of the Rights Certificates. Copies
of the Rights Agreement are on file at the registered office of the Corporation.
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This Rights Certificate, with or without other Rights Certificates,
upon surrender at any of the offices of the Rights Agent designated for such
purpose, may be exchanged for another Rights Certificate or Rights Certificates
of like tenor and date evidencing an aggregate number of Rights equal to the
aggregate number of Rights evidenced by the Rights Certificate or Rights
Certificates surrendered. If this Rights Certificate shall be exercised in part,
the registered 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 may be terminated by the Corporation under certain
circumstances at its option.
No holder of this Rights Certificate, as such, shall be entitled to
vote or receive dividends or be deemed for any purpose the holder of Common
Shares or of any other securities which may at any time be issuable upon 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 Corporation 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 subscription rights, or otherwise,
until the 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
Corporation.
SURGE COMPONENTS, INC.
Date:________________________
By:__________________________ By:__________________________
Xxx Xxxx Xxxxxx X. Xxxxxx
Title: President Title: Secretary
Countersigned:
CONTINENTAL STOCK
TRANSFER & TRUST COMPANY
By:__________________________
Authorized Officer
39
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to transfer the
Rights Certificates.)
FOR VALUE RECEIVED _____________________________________________________________
________________________________________________________________________________
______________________________________ hereby sells, assigns and transfers 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 the within Rights Certificate on the books of the
within-named Corporation, with full power of substitution.
Dated:___________________
Signature Guaranteed: ________________________________
Signature
(Signature must correspond to
name as written upon the face of
this Rights Certificate in every
particular, without alteration
or enlargement or any change
whatsoever)
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(To be completed if true)
The undersigned hereby represents, for the benefit of all holders of
Rights and Common Shares, that the Rights evidenced by this Rights Certificate
are not, and, to the knowledge of the undersigned, have never been, Beneficially
Owned by an Acquiring Person or an Affiliate or Associate thereof (as defined in
the Rights Agreement).
-------------------------------
Signature
41
FORM OF ELECTION TO EXERCISE
[To be attached to each Rights Certificate]
TO: SURGE COMPONENTS, INC.
The undersigned hereby irrevocably elects to exercise
____________________________ whole Rights represented by the attached Rights
Certificate to purchase the Common Shares or other securities, if applicable,
issuable upon the exercise of such Rights and requests that certificates for
such securities be issued in the name of:
__________________________________ ____________________________________
Social Insurance, Social Security
__________________________________ or Other Taxpayer Identification Number
__________________________________
Address:
If such number of Rights not be all the Rights evidenced by this Rights
Certificate, a new Rights Certificate for the balance of such Rights shall be
registered in the name of and delivered to:
__________________________________ ____________________________________
Social Insurance, Social Security
__________________________________ or Other Taxpayer Identification Number
__________________________________
Address:
Dated:
Signature Guaranteed: ___________________________________
Signature
(Signature must correspond to name as
written upon the face of this Rights
Certificate in every particular,
without alteration or enlargement or
any change whatsoever)
42
(To be completed if true)
The undersigned hereby represents, for the benefit of all holders of
Rights and Common Shares, that the Rights evidenced by this Rights Certificate
are not, and, to the knowledge of the undersigned, have never been, Beneficially
Owned by an Acquiring Person or an Affiliate or Associate thereof (as defined in
the Rights Agreement).
__________________________________
Signature
In the event the certification set forth above in the Forms of
Assignment and Election is not completed, the Corporation 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). No Rights Certificates shall be issued in exchange for a Rights
Certificate owned or deemed to have been owned by an Acquiring Person or an
Affiliate or Associate thereof.
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