NEITHER THE WARRANTS REPRESENTED BY THIS WARRANT CERTIFICATE NOR THE SHARES OF
COMMON STOCK OR ANY OTHER SECURITIES ISSUABLE UPON EXERCISE OF SUCH WARRANTS
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. SUCH WARRANTS
HAVE BEEN ACQUIRED, AND ANY SHARES OF COMMON STOCK OR ANY OTHER SECURITIES
ISSUABLE UPON EXERCISE OF SUCH WARRANTS ARE REQUIRED TO BE ACQUIRED, FOR
INVESTMENT PURPOSES AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE, AND MAY NOT
BE SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT FOR SUCH WARRANTS AND/OR SUCH SHARES OR OTHER
SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE
SECURITIES LAWS OR AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER OF SUCH
WARRANTS AND SUCH SHARES OR OTHER SECURITIES TO THE EFFECT THAT REGISTRATION IS
NOT REQUIRED UNDER SUCH ACT AND SUCH STATE SECURITIES LAWS.
VOID AFTER 5:00 P.M. ON NOVEMBER 24, 2005
SURGE COMPONENTS, INC.
WARRANT CERTIFICATE
2,000,000 Common Stock Purchase Warrants
Deer Park, New York
Warrant Certificate No. ECP- 01 November 24, 2000
THIS IS TO CERTIFY THAT, for value received, Equilink Capital
Partners, LLC (the "Warrantholder") is the registered owner of the number of
Common Stock Purchase Warrants (each, a "Warrant") set forth above, each Warrant
entitling the owner thereof to purchase from Surge Components, Inc., a New York
corporation (the "Company"), one duly authorized, validly issued, fully paid and
non-assessable share (each, a "Warrant Share") of the common stock, par value
$.001 per share ("Common Stock"), of the Company, at a purchase price of $3.00
per share (the "Purchase Price"), at any time on or after the period commencing
on the date (the "Approval Date") on which the shareholders of the Company shall
have approved, in accordance with Nasdaq Marketplace Rule 4310(c)(25)(G), the
issuance of the Warrant Shares upon due exercise(s) of the Warrants and
terminating at 5:00 p.m., New York City time, on November 24, 2005 (the
"Expiration Date"), all subject to the terms and conditions contained herein.
The number of Warrants evidenced by this Warrant Certificate (and the number and
kind of securities which may be purchased upon exercise hereof) set forth above,
and the Purchase Price per share set forth above, are as of the date hereof. As
provided herein, the Purchase Price and the number of shares of Common Stock or
other securities which may be purchased upon the exercise of the Warrants
evidenced by this Warrant Certificate are, upon the happening of certain events,
subject to modification and adjustment.
This Warrant Certificate, together with any warrant
certificate(s) issued in replacement or substitution hereof (as provided for
herein) evidencing all or part of the Warrants evidenced hereby, are sometimes
collectively referred to herein as the "Warrant Certificates."
The rights of the registered holder of this Warrant
Certificate shall be subject to the following further terms and conditions:
1. Exercise of Warrants.
(a) The Warrants may be exercised, in whole or in part, on or
prior to the Expiration Time by surrendering this Warrant Certificate, with the
purchase form provided for herein duly executed by the Warrantholder or by the
Warrantholder's duly authorized attorney-in-fact, at the principal office of the
Company, presently located at 1016 Grand Boulevard, Deer Park, New York 11729,
or at such other office or agency in the United States as the Company may
designate by notice in writing to the Warrantholder (in either event, the
"Company Offices"), accompanied by payment in full, either in the form of cash,
bank cashier's check or certified check payable to the order of the Company, of
the Exercise Price payable in respect of the Warrants being exercised. If fewer
than all of the Warrants are exercised, the Company shall, upon each exercise
prior to the Expiration Time, execute and deliver to the Warrantholder a new
Warrant Certificate (dated as of the date hereof) evidencing the balance of the
Warrants that remain exercisable.
(b) On the date of exercise of the Warrants, the Warrantholder
exercising same shall be deemed to have become the holder of record for all
purposes of the Warrant Shares to which the exercise relates.
(c) As soon as practicable, but not in excess of ten days,
after the exercise of all or part of the Warrants evidenced by this Warrant
Certificate, the Company, at its expense (including the payment by it of any
applicable issue taxes), will cause to be issued in the name of and delivered to
the Warrantholder a certificate or certificates evidencing the number of duly
authorized, validly issued, fully paid and nonassessable Warrant Shares to which
the Warrantholder shall be entitled upon such exercise.
(d) No certificates for fractional Warrant Shares shall be
issued upon the exercise of any of the Warrants but, in lieu thereof, the
Company shall, upon exercise of all the Warrants, round up any fractional
Warrant Share to the nearest whole share of Common Stock.
2. Issuance of Common Stock; Reservation of Shares.
(a) The Company covenants and agrees that all Warrant Shares
which may be issued upon the exercise of all or part of the Warrants will, upon
issuance in accordance with the terms hereof, be validly issued, fully paid and
nonassessable and free from all taxes, liens and charges with respect to the
issue thereof.
(b) The Company further covenants and agrees that if any
shares of Common Stock to be reserved for the purpose of the issuance of Warrant
Shares upon the exercise of Warrants
2
require registration with, or approval of, any governmental authority under any
federal or state law before such shares may be validly issued or delivered upon
exercise, then the Company will promptly use its best efforts to effect such
registration or obtain such approval, as the case may be.
3. Adjustments of Exercise Price, Number and Character of Warrant Shares, and
Number of Warrants.
The Exercise Price the number and kind of securities
purchasable upon the exercise of each Warrant shall be subject to adjustment
from time to time upon the happening of the events enumerated in this Section 3.
(a) Stock Dividends, Subdivisions and Combinations. In case
the Company shall at any time on or before the Expiration Time:
(i) pay a dividend in shares of Common Stock or make
a distribution in shares of Common Stock or such other stock to holders
of all its outstanding shares of Common Stock;
(ii) subdivide or reclassify the outstanding shares of
Common Stock into a greater number of shares;
(iii) combine the outstanding shares of Common Stock into
a smaller number of shares of Common Stock; or
(iv) issue by reclassification of its shares of Common
Stock other securities of the Company (including any such
reclassification in connection with a consolidation or merger in which
the Company is the continuing corporation);
then the number and kind of Warrant Shares purchasable upon exercise of each
Warrant outstanding immediately prior thereto shall be adjusted so that the
Warrantholder shall be entitled to receive the kind and number of shares of
Common Stock or other securities of the Company which the Warrantholder would
have owned or have been entitled to receive after the happening of any of the
events described above had such Warrant been exercised in full immediately prior
to the earlier of the happening of such event or any record date in respect
thereto. In the event of any adjustment of the number of Warrant Shares
purchasable upon the exercise of each then outstanding Warrants pursuant to this
Paragraph 3(a), the Exercise Price shall be adjusted to be the amount resulting
from dividing the number of shares of Common Stock (including fractional shares
of Common Stock) covered by such Warrant immediately after such adjustment into
the total amount payable upon exercise of such Warrant in full immediately prior
to such adjustment. An adjustment made pursuant to this Paragraph 3(a) shall
become effective immediately after the effective date of such event retroactive
to the record date for any such event. Such adjustment shall be made
successively whenever any event listed above shall occur.
(b) Extraordinary Dividends. In case the Company shall at any
time on or before the Expiration Time fix a record date for the issuance of
rights, options, or warrants to all holders
3
of its outstanding shares of Common Stock, entitling them (for a period expiring
within 45 days after such record date) to subscribe for or purchase shares of
Common Stock (or securities exchangeable for or convertible into shares of
Common Stock) at a price per share of Common Stock (or having an exchange or
conversion price per share of Common Stock, with respect to a security
exchangeable for or convertible into shares of Common Stock) which is lower than
the current Market Price per share of Common Stock (as defined in Paragraph 3(d)
below) on such record date, then the Exercise Price shall be adjusted by
multiplying the Exercise Price in effect immediately prior to such record date
by a fraction, of which (i) the numerator shall be the number of shares of
Common Stock outstanding on such record date plus the number of shares of Common
Stock which the aggregate offering price of the total number of shares of Common
Stock so to be offered (or the aggregate initial exchange or conversion price of
the exchangeable or convertible securities so to be offered) would purchase at
such current Market Price and (ii) the denominator shall be the number of shares
of Common Stock outstanding on such record date plus the number of additional
shares of Common Stock to be offered for subscription or purchase (or into which
the exchangeable or convertible securities so to be offered are initially
exchangeable or convertible). Such adjustment shall become effective at the
close of business on such record date; however, to the extent that shares of
Common Stock (or securities exchangeable for or convertible into shares of
Common Stock) are not delivered after the expiration of such rights, options, or
warrants, the Exercise Price shall be readjusted (but only with respect to
Warrants exercised after such expiration) to the Exercise Price which would then
be in effect had the adjustments made upon the issuance of such rights, options,
or warrants been made upon the basis of delivery of only the number of shares of
Common Stock (or securities exchangeable for or convertible into shares of
Common Stock) actually issued. In case any subscription price may be paid in a
consideration part or all of which shall be in a form other than cash, the value
of such consideration shall be as determined in good faith by the Board of
Directors of the Company and shall be described in a statement mailed to the
Warrantholder. Shares of Common Stock owned by or held for the account of the
Company shall not be deemed outstanding for the purpose of any such computation.
(c) Extraordinary Distributions. In case the Company shall at
any time after the original date of issuance of the Warrants (the "Date of
Issuance") distribute to all holders of its shares of Common Stock (including
any such distribution made in connection with a consolidation or merger in which
the Company is the surviving corporation) evidences of its indebtedness or
assets (excluding cash dividends and distributions payable out of consolidated
net income or earned surplus in accordance with Delaware law and dividends or
distributions payable in shares of stock described in Paragraph 3(a) above) or
rights, options, or warrants or exchangeable or convertible securities
containing the right to subscribe for or purchase shares of Common Stock (or
securities exchangeable for or convertible into shares of Common Stock), then
the Exercise Price shall be adjusted by multiplying the Exercise Price in effect
immediately prior to the record date for such distribution by a fraction, of
which (i) the numerator shall be the current Market Price per share of Common
Stock (as defined in Paragraph 3(d)) on such record date, less the fair market
value (as ---- determined by the Board of Directors of the Company, whose
determination shall be conclusive, and described in a notice to the
Warrantholders) of the portion of the evidences of indebtedness or assets so to
be distributed or of such rights, options or warrants applicable to one share of
Common Stock and (ii) the denominator shall be such current Market Price per
share of Common Stock. Such adjustment shall be made whenever any such
4
distribution is made, and shall become effective on the date of distribution
retroactive to the record date for such transaction.
(d) Current Market Price Defined. For the purpose of any
computation under Paragraphs 3(b) and/or 3(c), the current Market Price per
share of Common Stock at any date shall be deemed to be the average daily
Closing Price of the shares of Common Stock for twenty consecutive trading days
ending within fifteen days before the date in question. The term "Closing Price"
of the shares of Common Stock for a day or days shall mean (i) if the shares of
Common Stock are listed or admitted for trading on a national securities
exchange, the last reported sales price regular way, or, in case no such
reported sale takes place on such day or days, the average of the reported
closing bid and asked prices regular way, in either case on the principal
national securities exchange on which the shares of the Common Stock are listed
or admitted for trading, or (ii) if the shares of Common Stock are not listed or
admitted for trading on a national securities exchange, (A) the last transaction
price for the Common Stock on The Nasdaq Stock Market ("Nasdaq") or, in the case
no such reported transaction takes place on such day or days, the average of the
reported closing bid and asked prices thereof quoted on Nasdaq, or (B) if the
shares of Common Stock are not quoted on Nasdaq, the average of the closing bid
and asked prices of the Common Stock as quoted on the Over-The-Counter Bulletin
Board maintained by the National Association of Securities Dealers, Inc. (the
"Bulletin Board"), or (C) if the shares of Common Stock are not quoted on Nasdaq
nor on the Bulletin Board, the average of the closing bid and asked prices of
the common stock in the over-the-counter market, as reported by The Pink
Sheets, LLC, or an equivalent generally accepted reporting service, or (iii) if
on any such trading day or days the shares of Common Stock are not quoted by any
such organization, the fair market value of the shares of Common Stock on such
day or days, as determined in good faith by the Board of Directors of the
Company, shall be used.
(e) Minimum Adjustment. Except as hereinafter provided, no
adjustment of the Exercise Price hereunder shall be made if such adjustment
results in a change of the Exercise Price then in effect of less than five cents
($.05) per share. Any adjustment of less than five cents ($.05) per share of any
Exercise Price shall be carried forward and shall be made at the time of and
together with any subsequent adjustment which, together with adjustment or
adjustments so carried forward, amounts to five cents ($.05) per share or more.
However, upon exercise of this Warrant Certificate, the Company shall make all
necessary adjustments (to the nearest cent) not theretofore made to the Exercise
Price up to and including the effective date upon which this Warrant Certificate
is exercised.
(f) Notice of Adjustments. Whenever the Exercise Price shall
be adjusted pursuant to this Section 3, the Company shall promptly deliver a
certificate signed by the President or a Vice President and by the Chief
Financial Officer, Treasurer or an Assistant Treasurer or the Secretary or an
Assistant Secretary of the Company, setting forth, in reasonable detail, the
event requiring the adjustment, the amount of the adjustment, the method by
which such adjustment was calculated (including a description of the basis on
which the Board of Directors of the Company made any determination hereunder),
by first class mail postage prepaid to each Warrantholder.
(g) Capital Reorganizations and Other Reclassifications. In
case of any capital reorganization of the Company, or of any reclassification of
the shares of Common Stock (other than a reclassification, subdivision or
5
combination of shares of Common Stock referred to in Paragraph 3(a)), or in case
of the consolidation of the Company with, or the merger of the Company with, or
merger of the Company into, any other corporation (other than a reclassification
of the shares of Common Stock referred to in Paragraph 3(a) or a consolidation
or merger which does not result in any reclassification or change of the
outstanding shares of Common Stock) or of the sale of the properties and assets
of the Company as, or substantially as, an entirety to any other corporation or
entity, each Warrant shall, after such capital reorganization, reclassification
of shares of Common Stock, consolidation, merger, or sale, be exercisable, upon
the terms and conditions specified in this Warrant Certificate, for the kind,
amount and number of shares or other securities, assets, or cash to which a
holder of the number of shares of Common Stock purchasable (at the time of such
capital reorganization, reclassification of shares of Common Stock,
consolidation, merger or sale) upon exercise of such Warrant would have been
entitled to receive upon such capital reorganization, reclassification of shares
of Common Stock, consolidation, merger, or sale; and in any such case, if
necessary, the provisions set forth in this Section 3 with respect to the rights
and interests thereafter of the Warrantholder shall be appropriately adjusted so
as to be applicable, as nearly equivalent as possible, to any shares or other
securities, assets, or cash thereafter deliverable on the exercise of the
Warrants. The Company shall not effect any such consolidation, merger, or sale,
unless prior to or simultaneously with the consummation thereof the successor
corporation or entity (if other than the Company) resulting from such
consolidation or merger or the corporation or entity purchasing such assets or
other appropriate corporation or entity shall assume, by written instrument, the
obligation to deliver to the Warrantholder such shares, securities, assets, or
cash as, in accordance with the foregoing provisions, such holders may be
entitled to purchase and the other obligations hereunder. The subdivision or
combination of shares of Common Stock at any time outstanding into a greater or
lesser number of shares shall not be deemed to be a reclassification of the
shares of Common Stock for purposes of this Paragraph 3(g).
(h) Adjustments to Other Securities. In the event that at any
time, as a result of an adjustment made pursuant to this Section 3, the
Warrantholder shall become entitled to purchase any shares or securities of the
Company other than the shares of Common Stock, thereafter the number of such
other shares or securities so purchasable upon exercise of each Warrant and the
exercise price for such shares or securities shall be subject to adjustment from
time to time in a manner and on terms as nearly equivalent as possible to the
provisions with respect to the shares of Common Stock contained in Paragraphs
3(a) through (e), inclusive.
(i) Deferral of Issuance of Additional Shares in Certain
Circumstances. In any case in which this Section 3 shall require that an
adjustment in the Exercise Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event issuing to the Warrantholder exercised after such record date the shares
of Common Stock, if any, issuable upon such exercise over and above the Warrant
Shares, if any, issuable upon such exercise on the basis of the Exercise Price
in effect prior to such adjustment; provided, however, that the Company shall
deliver as soon as practicable to such holder a due bill or other appropriate
instrument provided by the Company evidencing such holder's right to receive
such additional shares of Common Stock upon the occurrence of the event
requiring such adjustment.
6
4. Definition of Common Stock.
The Common Stock issuable upon exercise of the Warrants shall
be the Common Stock as constituted on the date hereof except as otherwise
provided in Section 3.
5. Replacement of Securities.
If this Warrant Certificate shall be lost, stolen, mutilated
or destroyed, the Company shall, on such terms as to indemnity or otherwise as
the Company may in its discretion reasonably impose, issue a new certificate of
like tenor or date representing in the aggregate the right to subscribe for and
purchase the number of shares of Common Stock which may be subscribed for and
purchased hereunder. Any such new certificate shall constitute an original
contractual obligation of the Company, whether or not the allegedly lost,
stolen, mutilated or destroyed Warrant Certificate shall be at any time
enforceable by anyone.
6. Registration.
This Warrant Certificate, as well as all other warrant
certificates representing Warrants shall be numbered and shall be registered in
a register (the "Warrant Register") maintained at the Company Offices as they
are issued. The Warrant Register shall list the name, address and Social
Security or other Federal Identification Number, if any, of all Warrantholders.
The Company shall be entitled to treat the Warrantholder as set forth in the
Warrant Register as the owner in fact of the Warrants as set forth therein for
all purposes and shall not be bound to recognize any equitable or other claim to
or interest in such Warrants on the part of any other person, and shall not be
liable for any registration of transfer of Warrants that are registered or to be
registered in the name of a fiduciary or the nominee of a fiduciary unless made
with the actual knowledge that a fiduciary or nominee is committing a breach of
trust in requesting such registration of transfer, or with such knowledge of
such facts that its participation therein amounts to bad faith.
7. Transfer.
NEITHER THE WARRANTS REPRESENTED BY THIS WARRANT CERTIFICATE
NOR THE SHARES OF COMMON STOCK OR ANY OTHER SECURITIES ISSUABLE UPON EXERCISE OF
SUCH WARRANTS HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
SUCH WARRANTS HAVE BEEN ACQUIRED, AND ANY SHARES OF COMMON STOCK OR ANY OTHER
SECURITIES ISSUABLE UPON EXERCISE OF SUCH WARRANTS ARE REQUIRED TO BE ACQUIRED,
FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE, AND MAY
NOT BE SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT FOR SUCH WARRANTS AND/OR SUCH SHARES OR OTHER
SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND APPLICABLE STATE
SECURITIES LAWS OR AN OPINION OF COUNSEL SATISFACTORY TO THE ISSUER OF SUCH
7
WARRANTS AND SUCH SHARES OR OTHER SECURITIES TO THE EFFECT THAT REGISTRATION IS
NOT REQUIRED UNDER SUCH ACT AND SUCH STATE SECURITIES LAWS.
8. Exchange of Warrant Certificates.
This Warrant Certificate may be exchanged for another
certificate or certificates entitling the Warrantholder thereof to purchase a
like aggregate number of Warrant Shares as this Warrant Certificate entitles
such Warrantholder to purchase. A Warrantholder desiring to so exchange this
Warrant Certificate shall make such request in writing delivered to the Company,
and shall surrender this Warrant Certificate therewith. Thereupon, the Company
shall execute and deliver to the person entitled thereto a new certificate or
certificates, as the case may be, as so requested.
9. Notices.
All notices and other communications hereunder shall be in
writing and shall be deemed given when delivered in person, against written
receipt therefor, or two days after being sent, by registered or certified mail,
postage prepaid, return receipt requested, and, if to the Warrantholder, at such
address as is shown on the Warrant Register or as may otherwise may have been
furnished to the Company in writing in accordance with this Section 9 by the
Warrantholder and, if to the Company, at the Company Offices or such other
address as the Company shall give notice thereof to the Warrantholder in
accordance with this Section 9.
10. Registration Rights.
(a) Defined Terms. As used in this Section 10, terms defined
elsewhere herein shall have their assigned meanings and each of the following
terms shall have the following meanings (such definitions to be applicable to
both the plural and singular of the terms defined):
(i) Registerable Securities. The term "Registerable
Securities" shall mean any of the Warrant Shares issuable upon exercise
of any of the Warrants or any shares of Common Stock or other
securities received in connection with any stock split, stock dividend,
merger, reorganization, recapitalization, reclassification or other
distribution payable or issuable upon shares of Common Stock. For the
purposes of this Section 10, securities will cease to be Registerable
Securities when (A) a registration statement under the Securities Act
covering such Registerable Securities has been declared effective and
(1) such Registerable Securities have been disposed of pursuant to such
effective registration statement or (2) such registration statement has
remained effective for 270 consecutive days, (B) such Registerable
Securities are distributed to the public pursuant to the Securities Act
or pursuant to an exemption from the registration requirements of the
Securities Act, including, without limitation, Rules 144 and 144A
promulgated under the Securities Act or (C) such Registerable
Securities have been otherwise transferred and the Company, in
accordance with applicable law and regulations, has delivered new
certificates or other evidences of ownership for such securities which
are not subject to any stop transfer order or other restriction on
transfer.
8
(ii) Rightsholders. The term "Rightsholders" shall include
the Warrantholder, all successors and assigns of the Warrantholders and
all transferees of Registerable Securities where such transfer
affirmatively includes the transfer and assignment of the rights of the
transferor-Warrantholder under this Agreement with respect to the
transferred Registerable Securities and such transferee agrees in
writing to assume all of the transferor-Warrantholder's agreements,
obligations and liabilities under this Article 10 with respect to the
transferred Registerable Securities.
(iii) Initiating Holders. The term "Initiating Holders"
shall include those Rightsholders owning of record over 50% of the then
outstanding Registerable Securities which, for the purposes of this
Subparagraph 10(a)(iii) only, shall assume that all Warrant Shares
issuable upon exercise of the Warrants pursuant to this Warrant
Certificate have been exercised.
(iv) Interpretations of Terms. The words "hereof,"
"herein" and "hereunder" and words of similar import when used in this
Section 10 shall refer to this Section 10 as a whole and not to any
particular provision of this Section 10, and subsection, paragraph,
clause, schedule and exhibit references are to this Section 10 unless
otherwise specified.
(b) Demand Registration.
(i) Right to Demand. Subject to Subparagraph 10(b)(ii)
hereof, at any time on or after the Approval Date and on or prior to
seven years from the Approval Date, the Initiating Holders may make a
written request (each, a "Demand Request") to the Company for
registration under the Securities Act of all or part of their
Registerable Securities (a "Demand Registration"). Within ten days
after receipt of a Demand Request, the Company shall deliver a written
notice (the "Notice") of such Demand Request to all other
Rightsholders. The Company will include in such Demand Registration all
Registerable Securities with respect to which the Company has been
given written requests (each, "Tag-Along Request") for inclusion
therein within twenty days after the giving of the Notice. Each and
every Demand Request shall be required to specify the aggregate amount
of the Registerable Securities to be included in such Demand
Registration, the amount of Registerable Securities to be registered
for each of the Initiating Holders and the intended method(s) of
disposition thereof, including whether or not such Demand Registration
or portion thereof is to relate to an underwritten offering, the name
of the managing underwriter(s), if any, and the terms of any such
underwriting. Each and every Tag-Along Request shall be required to
specify the amount of Registerable Securities to be registered in the
Demand Registration and the intended method(s) of disposition thereof,
including whether or not the Registerable Securities subject to such
Tag-Along Request or portion thereof is to relate to an underwritten
offering, the name of the managing underwriter(s), if any, and the
terms of any such underwriting.
(ii) Number of Demand Registrations; Expenses. Subject to
the provisions of Subparagraph 10(b)(iii) hereof, the holders of
9
Registerable Securities shall be entitled, in the aggregate, to one
Demand Registration, the Registration Expenses (as defined in Paragraph
10(e) hereof) of which, subject to the provisions of Paragraph 10(e),
shall be borne by the Company, but the Company shall not be responsible
for the payment of any underwriter's discount, commission or selling
concession in connection with any of the Registerable Securities. The
Company shall not be deemed to have effected a Demand Registration
unless and until such Demand Registration is declared effective.
(iii) Priority on Demand Registrations.
(A) Whenever the Company shall effect a Demand
Registration in connection with an underwritten offering by
one or more Initiating Holders, no other securities, including
other Registerable Securities, shall be included in such
Demand Registration, unless (1) the managing underwriter(s)
with respect to such Demand Registration shall have advised
the Company and each Initiating Holder whose Registerable
Securities were included in the Demand Request, in writing,
that the inclusion of such other securities would not
adversely affect such underwritten offering or (2) each of the
Initiating Holders shall each have consented in writing to the
inclusion of such other securities. In the event of such
written advice of the managing underwriter(s) or unanimous
consent of such Initiating Holders, the Company will include
in such Demand Registration securities in the following order
of priority until the maximum number of securities included in
the written advice of the managing underwriter(s) or unanimous
consent of such Initiating Holders shall be reached: (1)
first, pro rata (based upon the amount of Registerable
Securities) among the Registerable Securities included in the
Demand Request which are subject to the underwritten offering,
(2) second, pro rata (based upon the amount of Registerable
Securities) among the Registerable Securities of the other
holders (each, a "Rightsholder") of registration rights
granted by the Company in connection with the sale of the
Shares who have given a Tag-Along Request with respect to such
Demand Registration where the method of distribution shall be
pursuant to an underwritten offering, (3) third, pro rata
(based upon the amount of Registerable Securities) among all
other Registerable Securities included in the Demand Request
and Tag-Along Request(s) and (4) fourth, pro rata (based upon
the amount of securities owned which carry registration
rights) among all other securities to which the Company has
granted registration rights and for which a request for
inclusion in the Demand Registration shall have been made.
(B) Whenever the Company shall effect a Demand
Registration in connection with an offering of Registerable
Securities of Initiating Holders for which the intended
method(s) of distribution shall not include an underwritten
offering, and the holders of a majority of the Registerable
Securities which were subject to the Demand Request shall
advise the Company in writing that, in the opinion of such
Initiating Holders, the number of securities proposed to be
sold in such Demand Registration would adversely affect such
offering and the Board of Directors of the Company concurs
with such conclusion, the Company will include in such Demand
Registration securities in the following order of priority
10
until the maximum number of securities included in the written
advice of such Initiating Holders shall be reached: (1) first,
pro rata (based upon the amount of Registerable Securities)
among the Registerable Securities included in the Demand
Request, (2) second, pro rata (based upon the amount of
Registerable Securities) among the Registerable Securities of
the Rightsholders who have given a Tag-Along Request with
respect to such Demand Registration where the method of
distribution shall be pursuant to an underwritten offering,
(3) third, pro rata (based upon the amount of Registerable
Securities) among all other Registerable Securities included
in the Demand Request and Tag-Along Request(s) and (4) fourth,
pro rata (based upon the amount of securities owned which
carry registration rights) among all other securities to which
the Company has granted registration rights and for which a
request for inclusion in the Demand Registration shall have
been made.
(C) In the event that Initiating Holders and other
Rightsholders who have given a Tag-Along Request are unable to
have registered the full amount of Registerable Securities
which they requested to be registered pursuant to a Demand
Request or Tag-Along Request, pursuant to the provisions of
this Paragraph 10(b), such Initiating Holders and other
Rightsholders shall retain the right to one Demand
Registration with respect to such unregistered Registerable
Securities subject to such Demand Request and Tag-Along
Request.
(iv) Delay in Effecting Demand Registration.
Notwithstanding anything in the foregoing to the contrary, the Company
shall not be obligated to effect a Demand Registration at any time when
the Company, in the good faith judgment of the Board of Directors of
the Company made no later than 30 days after the giving of the Demand
Request with respect to such Demand Registration, reasonably believes
that the filing thereof at the time requested, or the offering of
securities pursuant thereto, would be materially detrimental to the
interests of the Company or the Company's shareholders. The
effectuation of a Demand Registration cannot be suspended, pursuant to
the provisions of the preceding sentence, on more than one occasion in
any twelve-month period or for more than 120 days after the date of the
Board's determination referenced in the preceding sentence.
(v) Approval of Underwriter by the Company. If the Demand
Registration is to involve an underwritten offering, the managing
underwriter(s) and each selling agent selected by those Rightsholders
participating in each such underwritten offering shall be subject to
the written approval of the Company, which approval may not be
unreasonably withheld.
(c) Piggy-Back Registration.
(i) If, at any time on or after the Approval Date and on
or prior to seven years from the Approval Date, the Company proposes to
file a registration statement under the Securities Act with respect to
an offering by the Company or any other party of any class of equity
security similar to any Registerable Securities (other than a
registration statement on Form S-4 or S-8 or any successor form or a
registration statement filed solely in
11
connection with an exchange offer, a business combination transaction
or an offering of securities solely to the existing stockholders or
employees of the Company), then the Company, on each such occasion,
shall give written notice (each, a "Company Piggy-Back Notice") of such
proposed filing to all of the Rightsholders owning Registerable
Securities at least fifteen days before the anticipated filing date of
such registration statement, and such Company Piggy-Back Notice also
shall be required to offer to such Rightsholders the opportunity to
register such aggregate number of Registerable Securities as each such
Rightsholder may request. Each such Rightsholder shall have the right,
exercisable for the five days immediately following the giving of a
Company Piggy-Back Notice, to request, by written notice (each, a
"Holder Notice") to the Company, the inclusion of all or any portion of
the Registerable Securities of such Rightsholders in such registration
statement. The Company shall use reasonable efforts to cause the
managing underwriter(s) of a proposed underwritten offering to permit
the inclusion of the Registerable Securities which were the subject of
all Holder Notices in such underwritten offering on the same terms and
conditions as any similar securities of the Company included therein.
Notwithstanding anything to the contrary contained in this Subparagraph
10(c)(i), if the managing underwriter(s) of such underwritten offering
or any proposed underwritten offering delivers a written opinion to the
Rightsholders of Registerable Securities which were the subject of all
Holder Notices that the total amount and kind of securities which they,
the Company and any other person intend to include in such offering is
such as to materially and adversely affect the success of such
offering, then the amount of securities to be offered for the accounts
of such Rightsholders and persons other than the Company shall be
eliminated or reduced pro rata (based on the amount of securities owned
by such Rightsholders and other persons which carry registration
rights) to the extent necessary to reduce the total amount of
securities to be included in such offering to the amount recommended by
such managing underwriter(s) in the managing underwriter's written
opinion.
(ii) Number of Piggy-Back Registrations; Expenses. The
obligations of the Company under this Paragraph 10(c) shall be
unlimited with respect to each Rightsholder. Subject to the provisions
of Paragraph 10(e) hereof, the Company will pay all Registration
Expenses in connection with any registration of Registerable Securities
effected pursuant to this Paragraph 10(c), but the Company shall not be
responsible for the payment of any underwriter's discount, commission
or selling concession in connection therewith.
(iii) Withdrawal or Suspension of Registration Statement.
Notwithstanding anything contained to the contrary in this Paragraph
10(c), the Company shall have the absolute right, whether before or
after the giving of a Company Piggy-Back Notice or Holder Notice, to
determine not to file a registration statement to which the
Rightsholders shall have the right to include their Registerable
Securities therein pursuant to this Paragraph 10(c), to withdraw such
registration statement or to delay or suspend pursuing the
effectiveness of such registration statement. In the event of such a
determination after the giving of a Company Piggy-Back Notice, the
Company shall give notice of such determination to all Rightsholders
and, thereupon, (A) in the case of a determination not to register or
to withdraw such registration statement, the Company shall be relieved
of its obligation under this Paragraph 10(c) to register any of the
Registerable
12
Securities in connection with such registration and (B) in the case of
a determination to delay the registration, the Company shall be
permitted to delay or suspend the registration of Registerable
Securities pursuant to this Paragraph 10(c) for the same period as the
delay in the registration of such other securities. No registration
effected under this Paragraph 10(c) shall relieve the Company of its
obligation to effect any registration upon demand otherwise granted to
a Rightsholder under Paragraph 10(b) hereof or any other agreement with
the Company.
(d) Registration Procedures.
(i) Obligations of the Company. The Company will, in
connection with any registration pursuant to Paragraph 10(b) or (c)
hereof, as expeditiously as possible:
(A) prepare and file with the Commission a
registration statement under the Securities Act on any
appropriate form chosen by the Company, in the Company's sole
discretion, which shall be available for the sale of all
Registerable Securities in accordance with the intended
method(s) of distribution thereof set forth in all applicable
Demand Requests, Tag-Along Requests and Holder Notices, and
use the Company's commercially reasonable best efforts to
cause such registration statement to become effective as soon
thereafter as reasonably practicable but in no event more than
100 days after receipt of such notices or requests; provided,
that, at least five business days before filing with the
Commission of such registration statement, the Company shall
furnish to each Rightsholder whose Registerable Securities are
included therein draft copies of such registration statement,
including all exhibits thereto and documents incorporated by
reference therein, and, upon the reasonable request of any
such Rightsholder, shall continue to provide drafts of such
registration statement until filed, and, after such filing,
the Company shall, as diligently as practicable, provide to
each such Rightsholders such number of copies of such
registration statement, each amendment and supplement thereto,
the prospectus included in such registration statement
(including each preliminary prospectus), all exhibits thereto
and documents incorporated by reference therein and such other
documents as such Rightsholder may reasonably request in order
to facilitate the disposition of the Registerable Securities
owned by such Rightsholder and included in such registration
statement; provided, further, the Company shall modify or
amend the registration statement as it relates to such
Rightsholder as reasonably requested by such Rightsholder on a
timely basis, and shall reasonably consider other changes to
the registration statement (but not including any exhibit or
document incorporated therein by reference) reasonably
requested by such Rightsholder on a timely basis, in light of
the requirements of the Securities Act and any other
applicable laws and regulations; and provided, further, that
the obligation of the Company to effect such registration
and/or cause such registration statement to become effective,
may be postponed for (1) such period of time when the
financial statements of the Company required to be included in
such registration statement are not available (due solely to
the fact that such financial statements have not been
13
prepared in the regular course of business of the Company) or
(2) any other bona fide corporate purpose, but then only for a
period not to exceed 90 days;
(B) prepare and file with the Commission such
amendments and post-effective amendments to a registration
statement as may be necessary to keep such registration
statement effective for up to nine months; and cause the
related prospectus to be supplemented by any required
prospectus supplement, and as so supplemented to be filed to
the extent required pursuant to Rule 424 promulgated under the
Securities Act, during such nine-month period; and otherwise
comply with the provisions of the Securities Act with respect
to the disposition of all Registerable Securities covered by
such registration statement during the applicable period in
accordance with the intended method(s) of disposition of such
Registerable Securities set forth in such registration
statement, prospectus or supplement to such prospectus;
(C) notify the Rightsholders whose Registerable
Securities are included in such registration statement and the
managing underwriter(s), if any, of an underwritten offering
of any of the Registerable Securities included in such
registration statement, and confirm such advice in writing,
(1) when a prospectus or any prospectus supplement or
post-effective amendment has been filed, and, with respect to
a registration statement or any post-effective amendment, when
the same has become effective, (2) of any request by the
Commission for amendments or supplements to a registration
statement or related prospectus or for additional information,
(3) of the issuance by the Commission of any stop order
suspending the effectiveness of a registration statement or
the initiation of any proceedings for that purpose, (4) if at
any time the representations and warranties of the Company
contemplated by subclause (1) of clause 10(d)(i)(J) hereof
cease to be true and correct, (5) of the receipt by the
Company of any notification with respect to the suspension of
the qualification of any of the Registerable Securities for
sale in any jurisdiction or the initiation or threatening of
any proceeding for such purpose and (6) of the happening of
any event which makes any statement made in the registration
statement, the prospectus or any document incorporated therein
by reference untrue or which requires the making of any
changes in the registration statement or prospectus so that
such registration statement, prospectus or document
incorporated by reference will not contain any untrue
statement of material fact or omit to state any material fact
required to be stated therein or necessary to make the
statements therein not misleading;
(D) make reasonable efforts to obtain the withdrawal
of any order suspending the effectiveness of such registration
statement at the earliest possible moment and to prevent the
entry of such an order;
(E) use reasonable efforts to register or qualify the
Registerable Securities included in such registration
statement under such other securities or blue sky laws of such
jurisdictions as any Rightsholder whose Registerable
Securities are included in such registration statement
14
reasonably requests in writing and do any and all other acts
and things which may be necessary or advisable to enable such
Rightsholder to consummate the disposition in such
jurisdictions of such Registerable Securities; provided, that
the Company will not be required to (1) qualify generally to
do business in any jurisdiction where it would not otherwise
be required to qualify but for this clause 10(d)(i)(E), (2)
subject itself to taxation in any such jurisdiction or (3)
take any action which would subject it to general service of
process in any such jurisdiction;
(F) make available for inspection by each Rightsholder
whose Registerable Securities are included in such
registration, any underwriter(s) participating in any
disposition pursuant to such registration statement, and any
representative, agent or employee of or attorney or accountant
retained by any such Rightsholder or underwriter(s)
(collectively, the "Inspectors"), all financial and other
records, pertinent corporate documents and properties of the
Company (collectively, the "Records") as shall be reasonably
necessary to enable them to exercise their due diligence
responsibility (or establish a due diligence defense), and
cause the officers, directors and employees of the Company to
supply all information reasonably requested by any such
Inspector in connection with such registration statement;
provided, that records which the Company determines, in good
faith, to be confidential and which it notifies the Inspectors
are confidential shall not be disclosed by the Inspectors,
unless (1) the release of such Records is ordered pursuant to
a subpoena or other order from a court of competent
jurisdiction or (2) the disclosure of such Records is required
by any applicable law or regulation or any governmental
regulatory body with jurisdiction over such Rightsholder or
underwriter; provided, further, that such Rightsholder or
underwriter(s) agree that such Rightsholder or underwriter(s)
will, upon learning the disclosure of such Records is sought
in a court of competent jurisdiction, give notice to the
Company and allow the Company, at the Company's expense, to
undertake appropriate action to prevent disclosure of the
Records deemed confidential;
(G) cooperate with the Rightsholder whose Registerable
Securities are included in such registration statement and the
managing underwriter(s), if any, to facilitate the timely
preparation and delivery of certificates representing
Registerable Securities to be sold thereunder, not bearing any
restrictive legends, and enable such Registerable Securities
to be in such denominations and registered in such names as
such Rightsholder or any managing underwriter(s) may
reasonably request at least two business days prior to any
sale of Registerable Securities;
(H) comply with all applicable rules and regulations
of the Commission and promptly make generally available to its
security holders an earnings statement covering a period of
twelve months commencing, (1) in an underwritten offering, at
the end of any fiscal quarter in which Registerable Securities
are sold to underwriter(s), or (2) in a non-underwritten
offering, with the first month of the Company's first fiscal
15
quarter beginning after the effective date of such
registration statement, which earnings statement in each case
shall satisfy the provisions of Section 11(a) of the
Securities Act;
(I) provide a CUSIP number for all Registerable
Securities not later than the effective date of the
registration statement relating to the first public offering
of Registerable Securities of the Company pursuant hereto;
(J) enter into such customary agreements (including an
underwriting agreement in customary form) and take all such
other actions reasonably requested by the Rightsholders
holding a majority of the Registerable Securities included in
such registration statement or the managing underwriter(s) in
order to expedite and facilitate the disposition of such
Registerable Securities and in such connection, whether or not
an underwriting agreement is entered into and whether or not
the registration is an underwritten registration, (1) make
such representations and warranties, if any, to the holders of
such Registerable Securities and any underwriter(s) with
respect to the registration statement, prospectus and
documents incorporated by reference, if any, in form,
substance and scope as are customarily made by issuers to
underwriter(s) in underwritten offerings and confirm the same
if and when requested, (2) obtain opinions of counsel to the
Company and updates thereof addressed to each such
Rightsholder and the underwriter(s), if any, with respect to
the registration statement, prospectus and documents
incorporated by reference, if any, covering the matters
customarily covered in opinions requested in underwritten
offerings and such other matters as may be reasonably
requested by such Rightsholders and underwriter(s), (3) obtain
a "cold comfort" letter and updates thereof from the Company's
independent certified public accountants addressed to such
Rightsholders and to the underwriter(s), if any, which letters
shall be in customary form and cover matters of the type
customarily covered in "cold comfort" letters by accountants
in connection with underwritten offerings, and (4) deliver
such documents and certificates as may be reasonably requested
by the Rightsholders holding a majority of such Registerable
Securities and managing underwriter(s), if any, to evidence
compliance with any customary conditions contained in the
underwriting agreement or other agreement entered into by the
Company; each such action required by this clause 10(d)(i)(J)
shall be done at each closing under such underwriting or
similar agreement or as and to the extent required thereunder;
and
(K) if requested by the holders of a majority of the
Registerable Securities included in such registration
statement, use its best efforts to cause all Registerable
Securities which are included in such registration statement
to be listed, subject to notice of issuance, by the date of
the first sale of such Registerable Securities pursuant to
such registration statement, on each securities exchange, if
any, on which securities similar to the Registered Securities
are listed.
(ii) Obligations of Rightsholders. In connection with any
registration of Registerable Securities of a Rightsholder pursuant to
Paragraph 10(b) or (c) hereof:
16
(A) The Company may require that each Rightsholder
whose Registerable Securities are included in such
registration statement furnish to the Company such information
regarding the distribution of such Registerable Securities and
such Rightsholder as the Company may from time to time
reasonably request in writing; and
(B) Each Rightsholder, upon receipt of any notice from
the Company of the happening of any event of the kind
described in subclauses (2), (3), (5) and (6) of clause
10(d)(i)(C) hereof, shall forthwith discontinue disposition of
Registerable Securities pursuant to the registration statement
covering such Registerable Securities until such
Rightsholder's receipt of the copies of the supplemented or
amended prospectus contemplated by subclause (1) of clause
10(d)(i)(C) hereof, or until such Rightsholder is advised in
writing (the "Advice") by the Company that the use of the
applicable prospectus may be resumed, and until such
Rightsholder has received copies of any additional or
supplemental filings which are incorporated by reference in or
to be attached to or included with such prospectus, and, if so
directed by the Company, such Rightsholder will deliver to the
Company (at the expense of the Company) all copies, other than
permanent file copies then in the possession of such
Rightsholder, of the current prospectus covering such
Registerable Securities at the time of receipt of such notice;
the Company shall have the right to demand that such
Rightsholder or other holder verify its agreement to the
provisions of this clause 10(d)(ii)(B) in any Demand Request,
Tag-Along Request or Holder Notice of the Rightsholder or in a
separate document executed by the Rightsholder.
(e) Registration Expenses. All expenses incident to the
performance of or compliance with this Agreement by the Company, including,
without imitation, all registration and filing fees of the Commission, National
Association of Securities Dealers, Inc. and other agencies, fees and expenses of
compliance with securities or blue sky laws (including reasonable fees and
disbursements of counsel in connection with blue sky qualifications of the
Registerable Securities), rating agency fees, printing expenses, messenger and
delivery expenses, internal expenses (including, without limitation, all
salaries and expenses of its officers and employees performing legal or
accounting duties), the fees and expenses incurred in connection with the
listing, if any, of the Registerable Securities on any securities exchange and
fees and disbursements of counsel for the Company and the Company's independent
certified public accountants (including the expenses of any special audit or
"cold comfort" letters required by or incidental to such performance),
Securities Act or other liability insurance (if the Company elects to obtain
such insurance), the fees and expenses of any special experts retained by the
Company in connection with such registration and the fees and expenses of any
other person retained by the Company (but not including any underwriting
discounts or commissions attributable to the sale of Registerable Securities or
other out-of-pocket expenses of the Rightsholders, or the agents who act on
their behalf, unless reimbursement is specifically approved by the Company) will
be borne by the Company. All such expenses are herein referred to as
"Registration Expenses." Notwithstanding the foregoing, the Company shall not be
required to pay for any Registration Expenses of any Demand Registration if such
Demand Request is subsequently withdrawn at the request of the holders of a
17
majority of the Registerable Securities included in such Demand Registration (in
which case all Rightsholders which requested the withdrawal of the Demand
Registration shall bear such expenses pro rata); provided that, if, at the time
of such withdrawal, such Rightsholders have learned of a material adverse change
in the condition, business or prospects of the Company from that known to such
Rightsholders at the time of their Demand Request, such Rightsholders shall not
be required to pay any of such expenses. In either event, if such Rightsholders
pay in full the expenses of such withdrawn Demand Registration, such
Rightsholders shall retain the right to one Demand Registration.
(f) Indemnification: Contribution.
(i) Indemnification by the Company. The Company agrees to
indemnify and hold harmless, to the full extent permitted by law, each
Rightsholder, its officers and directors and each person who controls
such Rightsholder (within the meaning of the Securities Act), if any,
and any agent thereof against all losses, claims, damages, liabilities
and expenses incurred by such party pursuant to any actual or
threatened suit, action, proceeding or investigation (including
reasonable attorney's fees and expenses of investigation) arising out
of or based upon any untrue or alleged untrue statement of a material
fact contained in any registration statement, prospectus or preliminary
prospectus or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein (in the case of a prospectus, in the light of the
circumstances under which they were made) not misleading, except
insofar as the same arise out of or are based upon, any such untrue
statement or omission based upon information with respect to such
Rightsholder furnished in writing to the Company by such Rightsholder
expressly for use therein.
(ii) Indemnification by Rightsholder. In connection with
any registration statement in which a Rightsholder is participating,
each such Rightsholder will be required to furnish to the Company in
writing such information with respect to such Rightsholder as the
Company reasonably requests for use in connection with any such
registration statement or prospectus, and each Rightsholder agrees to
the extent it is such a holder of Registerable Securities included in
such registration statement, and each other such holder of Registerable
Securities included in such Registration Statement will be required to
agree, to indemnify, to the full extent permitted by law, the Company,
the directors and officers of the Company and each person who controls
the Company (within the meaning of the Securities Act) and any agent
thereof, against any losses, claims, damages, liabilities and expenses
(including reasonable attorney's fees and expenses of investigation
incurred by such party pursuant to any actual or threatened suit,
action, proceeding or investigation arising out of or based upon any
untrue or alleged untrue statement of a material fact or any omission
or alleged omission of a material fact necessary, to make the
statements therein (in the case of a prospectus, in the light of the
circumstances under which they are made) not misleading, to the extent,
but only to the extent, that such untrue statement or omission is based
upon information relating to such Rightsholder or other holder
furnished in writing to the Company expressly for use therein.
18
(iii) Conduct of Indemnification Proceedings. Promptly
after receipt by an indemnified party under this Paragraph 10(f) of
written notice of the commencement of any action, proceeding, suit or
investigation or threat thereof made in writing for which such
indemnified party may claim indemnification or contribution pursuant to
this Agreement, such indemnified party shall notify in writing the
indemnifying party of such commencement or threat; but the omission so
to notify the indemnifying party shall not relieve the indemnifying
party from any liability which the indemnifying party may have to any
indemnified party (A) hereunder, unless the indemnifying party is
actually prejudiced thereby, or (B) otherwise than under this Paragraph
10(f). In case any such action, suit or proceeding shall be brought
against any indemnified party, and the indemnified party shall notify
the indemnifying party of the commencement thereof, the indemnifying
party shall be entitled to participate therein and the indemnifying
party shall assume the defense thereof, with counsel reasonably
satisfactory to the indemnified party, and the obligation to pay all
expenses relating thereto. The indemnified party shall have the right
to employ separate counsel in any such action, suit or proceeding and
to participate in the defense thereof, but the fees and expenses of
such counsel shall be at the expense of such indemnified party unless
(A) the indemnifying party has agreed to pay such fees and expenses,
(B) the indemnifying party shall have failed to assume the defense of
such action, suit or proceeding or to employ counsel reasonably
satisfactory to the indemnified party therein or to pay all expenses
relating thereto or (C) the named parties to any such action or
proceeding (including any impleaded parties) include both the
indemnified party and the indemnifying party and the indemnified party
shall have been advised by counsel that there may be one or more legal
defenses available to the indemnified party which are different from or
additional to those available to the indemnifying party and which may
result in a conflict between the indemnifying party and such
indemnified party (in which case, if the indemnified party notifies the
indemnifying party in writing that the indemnified party elects to
employ separate counsel at the expense of the indemnifying party, the
indemnifying party shall not have the right to assume the defense of
such action or proceeding on behalf of the indemnified party; it being
understood, however, that the indemnifying party shall not, in
connection with any one such action, suit or proceeding or separate but
substantially similar or related actions, suits or proceedings in the
same jurisdiction arising out of the same general allegations or
circumstances, be liable for the fees and expenses of more than one
separate firm of attorneys at any time for the indemnified party, which
firm shall be designated in writing by the indemnified party).
(iv) Contribution. If the indemnification provided for in
this Paragraph 10(f) from the indemnifying party is unavailable to an
indemnified party hereunder in respect of any losses, claims, damages,
liabilities or expenses referred to therein, then the indemnifying
party, in lieu of indemnifying such indemnified party, shall contribute
to the amount paid or payable by such indemnified party as a result of
such losses, claims, damages, liabilities or expenses (A) in such
proportion as is appropriate to reflect the relative benefits received
by the indemnifying party on the one hand and the indemnified party on
the other or (B) if the allocation provided by clause (A) above is not
permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits received by the indemnifying
party on the one hand and the indemnified party on the other but also
19
the relative fault of the indemnifying party and indemnified party, as
well as any other relevant equitable considerations. The relative fault
of such indemnifying party and the indemnified parties shall be
determined by reference to, among other things, whether any action in
question, including any untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact,
has been made by, or relates to information supplied by, such
indemnifying party or indemnified parties, and the parties' relative
intent, knowledge, access to information and opportunity to correct or
prevent such action. The amount paid or payable by a party as a result
of the losses, claims, damages. liabilities and expenses referred to
above shall be deemed to include, subject to the limitation set forth
in Subparagraph 10(f)(v), any legal or other fees or expenses
reasonably incurred by such party in connection with any investigation
or proceeding.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Subparagraph 10(f)(iv) were
determined by pro rata allocation or by any other method of allocation
which does not take into account the equitable considerations referred
to in clauses (A) and (B) of the immediately preceding paragraph. No
person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution
from any person who was not guilty of such fraudulent
misrepresentation.
(v) Limitation. Anything to the contrary contained in this
Paragraph 10(f) or in Paragraph 10(g) notwithstanding, no holder of
Registerable Securities shall be liable for indemnification and
contribution payments aggregating an amount in excess of the maximum
amount received by such holder in connection with any sale of
Registerable Securities as contemplated herein.
(g) Participation in Underwritten Registration. No
Rightsholder may participate in any underwritten registration hereunder unless
such Rightsholder (i) agrees to sell such holder's securities on the basis
provided in any underwriting arrangements approved by the persons entitled
hereunder to approve such arrangements and to comply with Regulation M under the
Exchange Act and (ii) completes and executes all questionnaires, appropriate and
limited powers of attorney, escrow agreements, indemnities, underwriting
agreements and other documents reasonably required under the terms of such
underwriting arrangement; provided, that all such documents shall be consistent
with the provisions of Paragraph 10(e).
11. Miscellaneous.
This Warrant Certificate and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought. This certificate is deemed to have been delivered in the State of New
York and shall be construed and enforced in accordance with and governed by the
laws of such State. The headings in this Warrant Certificate are for purposes of
reference only, and shall not limit or otherwise affect any of the terms hereof.
20
11. Expiration.
Unless as hereinafter provided, the right to exercise these
Warrants shall expire at the Expiration Date.
Dated: ________________________, 2000
SURGE COMPONENTS, INC.
By: /s/ Ira Levy
-------------------------------
Ira Levy, President
ATTEST:
/s/ Steven J. Lubman
- ----------------------------------------
Steven J. Lubman, Secretary
21
EXERCISE FORM
Dated:_______________, ____
TO: SURGE COMPONENTS, INC.:
The undersigned hereby irrevocably elects to exercise the
within Warrant, to the extent of purchasing _________________ shares of Common
Stock, and hereby makes payment of _____________ in payment of the actual
Exercise Price thereof.
_____________________________________________
INSTRUCTIONS FOR REGISTRATION OF STOCK
Name: _____________________________________________________
(Please type or print in block letters)
Taxpayer
Identification
Number: ___________________________________________________________
Address: ___________________________________________________________
___________________________________________________________
___________________________________________________________
_____________________________________________
Signature: ____________________________________________________________
(Signature must conform in all respects to the name of the
Warrantholder as set forth on the face of this
Warrant Certificate.)
22
ASSIGNMENT FORM
FOR VALUE RECEIVED, _______________________________________
(Please type or print in block letters)
hereby sells, assigns and transfers unto:
Name: _____________________________________________________
(Please type or print in block letters)
Taxpayer
Identification
Number: ___________________________________________________________
Address: ___________________________________________________________
___________________________________________________________
___________________________________________________________
this Warrant Certificate and the Warrants represented by this Warrant
Certificate to the extent of ________________ Warrants and does hereby
irrevocably constitute and appoint ___________________________ Attorney-in-Fact,
to transfer the same on the books of the Company with full power of substitution
in the premises.
Dated: ______________________________
Signature: ____________________________________________________________
(Signature must conform in all respects to the name of the
Warrantholder as set forth on the face of this
Warrant Certificate.)
23