Exhibit
4.1


 


 


 


 


 


 


 


 


 


 


 


 


 


 


RIGHTS
AGREEMENT


 


dated
as of October 7, 2016


 


between


 


SURGE
COMPONENTS, INC.,


 


as
the Company


 


and


 


CONTINENTAL
STOCK TRANSFER & TRUST COMPANY,


 


as
Rights Agent


 


 


 


 


 


 


 


 


 


 


 


 


 





     

     

    

 


TABLE
OF CONTENTS


 


	 	 	Page
	 	 	 
	Section
    1.	Certain
    Definitions.	1
	Section
    2.	Appointment
    of Rights Agent.	13
	Section
    3.	Issue
    of Rights Certificates.	14
	Section
    4.	Form
    of Rights Certificate.	16
	Section
    5.	Countersignature
    and Registration.	17
	Section
    6.	Transfer,
    Split Up, Combination and Exchange of Rights Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates.	18
	Section
    7.	Exercise
    of Rights; Exercise Price; Expiration Date of Rights.	19
	Section
    8.	Cancellation
    and Destruction of Rights Certificates.	21
	Section
    9.	Reservation
    and Availability of Capital Stock.	21
	Section
    10.	Preferred
    Stock Record Date.	23
	Section
    11.	Adjustment
    of Exercise Price, Number and Kind of Shares or Number of Rights.	23
	Section
    12.	Certificate
    of Adjusted Exercise Price or Number of Shares.	30
	Section
    13.	Consolidation,
    Merger or Sale or Transfer of Assets or Earning Power.	31
	Section
    14.	Fractional
    Rights; Fractional Shares; Waiver.	34
	Section
    15.	Rights
    of Action.	35
	Section
    16.	Agreement
    of Rights Holders.	36
	Section
    17.	Rights
    Certificate Holder Not Deemed a Stockholder.	37
	Section
    18.	Duties
    of Rights Agent.	37
	Section
    19.	Concerning
    the Rights Agent.	39
	Section
    20.	Merger
    or Consolidation or Change of Name of Rights Agent.	41
	Section
    21.	Change
    of Rights Agent.	42
	Section
    22.	Issuance
    of New Rights Certificates.	42
	Section
    23.	Redemption.	43
	Section
    24.	Exchange.	45
	Section
    25.	Process
    to Seek Exemption	47
	Section
    26.	Notice
    of Certain Events.	48
	Section
    27.	Notices.	49
	Section
    28.	Supplements
    and Amendments.	49
	Section
    29.	Successors.	50
	Section
    30.	Determinations
    and Actions by the Board.	50
	Section
    31.	Benefits
    of this Agreement.	51
	Section
    32.	Tax
    Compliance and Withholding.	51
	Section
    33.	Severability.	51
	Section
    34.	Governing
    Law.	52
	Section
    35.	Counterparts.	52
	Section
    36.	Interpretation.	52
	Section
    37.	Force
    Majeure.	52


 


	Exhibit
    A	Certificate
    of Designation
	 	 
	Exhibit
    B	Summary
    of Rights
	 	 
	Exhibit
    C	Form
    of Rights Certificate





 






     

     

    

 


RIGHTS
AGREEMENT


 


RIGHTS
AGREEMENT, dated as of October 7, 2016, (this “Agreement”), by and between Surge Components, Inc., a
Nevada corporation (the “Company”), and Continental Stock Transfer & Trust Company, as rights agent
(the “Rights Agent”).


 


WHEREAS,
(a) the Company and certain of its Subsidiaries (as defined below) have certain net operating losses and certain other tax attributes
(collectively, “NOLs”) for United States federal income tax purposes, (b) the Company desires to avoid
an “ownership change” within the meaning of Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”),
and thereby preserve the Company’s ability to utilize such NOLs, and (c) in furtherance of such objective, the Company desires
to enter into this Agreement;


 


WHEREAS,
the board of directors of the Company (the “Board”) authorized and declared a dividend of one preferred
share purchase right (a “Right”) for each share of Common Stock of the Company outstanding at the Close
of Business on the Record Date, each Right initially representing the right to purchase one one-thousandth (subject to adjustment)
of one share of Preferred Stock, upon the terms and subject to the conditions herein set forth, and further authorized and directed
the issuance of one Right (subject to adjustment) with respect to each share of Common Stock of the Company that will become outstanding
between the Record Date and the earlier of the Distribution Date and the Expiration Date; provided, however, that
Rights may be issued with respect to shares of Common Stock that will become outstanding after the Distribution Date and prior
to the Expiration Date in accordance with Section 22 hereof.


 


NOW,
THEREFORE, in consideration of the premises and the mutual agreements herein set forth, the parties hereby agree as follows:


 


Section
1.Certain Definitions.


 


For
purposes of this Agreement, the following terms have the meanings indicated:


 


(a)“Acquiring
Person” shall mean any Person which, together with all of its Related Persons, is the Beneficial Owner of 4.99%
or more of the shares of Common Stock of the Company then outstanding, but shall exclude (i) the Excluded Persons, (ii) any
Exempt Persons and (iii) any Grandfathered Persons.


 


Notwithstanding
anything in Agreement to the contrary, no Person shall become an “Acquiring Person”:


 


(i)as
the result of an acquisition of shares of Common Stock by the Company which, by reducing the number of shares of Common Stock
outstanding, increases the percentage of the shares of Common Stock Beneficially Owned by such Person, together with all of its
Related Persons, to 4.99% or more of the shares of Common Stock of the Company then outstanding; provided, however,
that if a Person, together with all of its Related Persons, becomes the Beneficial Owner of 4.99% or more of the shares of Common
Stock of the Company then outstanding by reason of share acquisitions by the Company and, after such share acquisitions by the
Company, becomes the Beneficial Owner of any additional shares of Common Stock of the Company (other than pursuant to a dividend
or distribution paid or made by the Company on the outstanding Common Stock or pursuant to a split or subdivision of the outstanding
Common Stock), then such Person shall be deemed to be an “Acquiring Person” unless, upon becoming the Beneficial Owner
of such additional shares of Common Stock, such Person, together with all of its Related Persons, does not Beneficially Own 4.99%
or more of the Common Stock then outstanding;


 






    	 	- 1 -	 



     

    

 


(ii)if
(A) the Board determines that such Person has become an “Acquiring Person” inadvertently (including, without
limitation, because (1) such Person was unaware that it Beneficially Owned a percentage of the then outstanding Common Stock
that would otherwise cause such Person to be an “Acquiring Person”; or (2) such Person was aware of the extent
of its Beneficial Ownership of Common Stock but had no actual knowledge of the consequences of such Beneficial Ownership under
this Agreement); and (B) such Person divests as promptly as practicable (as determined by the Board) a sufficient number
of shares of Common Stock so that such Person would no longer be an “Acquiring Person”;


 


(iii)solely
as a result of any unilateral grant of any security by the Company, or through the exercise of any options, warrants, rights or
similar interests (including restricted stock) granted by the Company to its directors, officers and employees; provided,
however, that if a Person, together with all of its Related Persons, becomes the Beneficial Owner of 4.99% or more
of the shares of Common Stock of the Company then outstanding by reason of a unilateral grant of a security by the Company, or
through the exercise of any options, warrants, rights or similar interests (including restricted stock) granted by the Company
to its directors, officers and employees, then such Person shall nevertheless be deemed to be an “Acquiring Person”
if, subject to Section 1(a)(ii), such Person, together with all of its Related Persons, thereafter becomes the Beneficial Owner
of any additional shares of Common Stock (unless upon becoming the Beneficial Owner of additional shares of Common Stock, such
Person, together with all of its Related Persons, does not Beneficially Own 4.99% or more of the Common Stock then outstanding),
except as a result of (A) a dividend or distribution paid or made by the Company on the outstanding Common Stock or a split
or subdivision of the outstanding Common Stock; or (B) the unilateral grant of a security by the Company, or through the
exercise of any options, warrants, rights or similar interest (including restricted stock) granted by the Company to its directors,
officers and employees;


 


(iv)by
means of share purchases or issuances (including debt to equity exchanges), directly from the Company or indirectly through an
underwritten offering of the Company, in a transaction approved by the Board; provided, however, that a Person shall
be deemed to be an “Acquiring Person” if such Person (A) is or becomes the Beneficial Owner of 4.99% or more of the
shares of Common Stock then outstanding following such transaction and (B) following such transaction, becomes the Beneficial
Owner of any additional shares of Common Stock without the prior written consent of the Company and then Beneficially Owns 4.99%
or more of the shares of Common Stock then outstanding; or


 


(v)if
such Person is a bona fide swaps dealer who has become an “Acquiring Person” as a result of its actions in the ordinary
course of its business that the Board determines, in its sole discretion, were taken without the intent or effect of evading or
assisting any other Person to evade the purposes and intent of this Agreement, or otherwise seeking to control or influence the
management or policies of the Company.


 






    	 	- 2 -	 



     

    

 


(b)A
person shall be deemed to be “Acting in Concert” with another Person if such Person knowingly acts pursuant
to an express agreement, arrangement or understanding in concert or in parallel with such other Person, or towards a common goal
with such other Person, relating to (i) acquiring, holding, voting or disposing of voting securities of the Company or (ii) changing
or influencing the control of the Company or in connection with or as a participant in any transaction having that purpose or
effect where at least one additional factor supports a determination by the Board that such Persons intended to act in concert
or in parallel, which such additional factors may include, without limitation, exchanging information, attending meetings, conducting
discussions or making or soliciting invitations to act in concert or in parallel. In addition, a Person who is Acting in Concert
with another Person shall be deemed to be Acting in Concert with any third Person who is Acting in Concert with such other Person.


 


(c)“Adjustment
Shares” shall have the meaning set forth in Section 11(a)(ii) hereof.


 


(d)“Affiliate”
and “Associate” shall have the respective meanings ascribed to such terms in Rule 12b-2 of the Exchange
Act Regulations, as in effect on the date of this Agreement, and, to the extent not included within the foregoing, shall also
include with respect to any Person, any other Person whose shares of Common Stock would be deemed to be constructively owned by
such first Person, owned by a “single entity” with respect to such first Person as defined in Section 1.382-3(a)(1)
of the Treasury Regulations, or otherwise aggregated with shares owned by such first Person, pursuant to the provisions of Section
382 of the Code and the Treasury Regulations promulgated thereunder.


 


(e)“Agreement”
shall have the meaning set forth in the Preamble hereof.


 


(f)A
Person is the “Beneficial Owner” of (and “Beneficially Owns” and has “Beneficial
Ownership”) of any securities (that are as such “Beneficially Owned”):


 


(i)that
such Person or any of such Person’s Affiliates or Associates Beneficially Owns, directly or indirectly, as determined pursuant
to Rule 13d-3 of the Exchange Act Regulations as in effect on the date of this Agreement, including pursuant to any agreement,
arrangement, or understanding (whether or not in writing), but only if the effect of such agreement, arrangement or understanding
is to treat such Persons as an “entity” under Section 1.382-3(a)(1) of the Treasury Regulations;


 


(ii)that
such Person or any of such Person’s Affiliates or Associates, directly or indirectly, has (A) the right to acquire
(whether such right is exercisable immediately or only after the passage of time or satisfaction of other conditions) pursuant
to any agreement, arrangement or understanding (whether or not in writing), or upon the exercise of conversion rights, exchange
rights (other than the Rights), rights, warrants or options, or otherwise; provided, however, that a Person shall
not be deemed the “Beneficial Owner” of (1) securities (including rights, options or warrants) that are convertible
or exchangeable into or exercisable for Common Stock until such time as such securities are converted or exchanged into or exercised
for Common Stock except to the extent the acquisition or transfer of such rights, options or warrants would be treated as exercised
on the date of its acquisition or transfer under Section 1.382-4(d) of the Treasury Regulations; or (2) securities tendered pursuant
to a tender or exchange offer made in accordance with the Exchange Act Regulations by or on behalf of such Person or any of such
Person’s Affiliates or Associates until such tendered securities are accepted for purchase or exchange; or (B) the
right to vote or dispose of, pursuant to any agreement, arrangement, or understanding (whether or not in writing), but only if
the effect of such agreement, arrangement or understanding is to treat such Persons as an “entity” under Section 1.382-3(a)(1)
of the Treasury Regulations;


 






    	 	- 3 -	 



     

    

 


(iii)that
are Beneficially Owned, directly or indirectly, by any other Person (or any Affiliate or Associate of such Person) with which
such Person (or any of such Person’s Affiliates or Associates) is Acting in Concert or has any agreement, arrangement, or
understanding (whether or not in writing), for the purpose of acquiring, holding, voting or disposing of any such securities,
but only if the effect of such agreement, arrangement or understanding is to treat such Persons as an “entity” under
Section 1.382-3(a)(1) of the Treasury Regulations; or


 


(iv)which
are Beneficially Owned, directly or indirectly, by a Counterparty (or any of such Counterparty’s Affiliates or Associates)
under any Derivatives Contract (without regard to any short or similar position under the same or any other Derivatives Contract)
to which such Person or any of such Person’s Affiliates or Associates is a Receiving Party; provided, however,
that the number of shares of Common Stock that a Person is deemed to Beneficially Own pursuant to this clause (iv) in connection
with a particular Derivatives Contract shall not exceed the number of Notional Common Shares with respect to such Derivatives
Contract; provided, further, that the number of securities Beneficially Owned by each Counterparty (including its
Affiliates and Associates) under a Derivatives Contract shall for purposes of this clause (iv) include all securities that are
Beneficially Owned, directly or indirectly, by any other Counterparty (or any of such other Counterparty’s Affiliates or
Associates) under any Derivatives Contract to which such first Counterparty (or any of such first Counterparty’s Affiliates
or Associates) is a Receiving Party, with this proviso being applied to successive Counterparties as appropriate.


 


Notwithstanding
anything in this definition of “Beneficial Ownership” to the contrary, (x) no Person engaged in business as an
underwriter of securities shall be the “Beneficial Owner” of any securities acquired through such Person’s participation
in good faith in a firm commitment underwriting until the expiration of forty (40) days after the date of such acquisition; and
(y) no Person shall be deemed the “Beneficial Owner” of any security as a result of an agreement, arrangement
or understanding to vote such security that would otherwise render such Person the Beneficial Owner of such security if such agreement,
arrangement or understanding is not also then reportable on Schedule 13D and arises solely from a revocable proxy or consent given
to such Person in response to a public proxy or consent solicitation made pursuant to, and in accordance with, the applicable
provisions of the Exchange Act Regulations.


 


Notwithstanding
anything in this definition of “Beneficial Ownership” to the contrary, to the extent not within the foregoing provisions,
a Person shall be deemed the Beneficial Owner of, and shall be deemed to beneficially own or have Beneficial Ownership of, securities
which such Person would be deemed to constructively own or which otherwise would be aggregated with shares owned by such Person
pursuant to Section 382 of the Code, or any successor provision or replacement provision and the Treasury Regulations thereunder.


 






    	 	- 4 -	 



     

    

 


(g)“Board”
shall have the meaning set forth in the recitals of this Agreement.


 


(h)“Board
Evaluation Period” shall have the meaning set forth in Section 23(c)(i) hereof.


 


(i)“Book
Entry” shall mean an uncertificated book entry for the Common Stock.


 


(j)“Business
Day” shall mean any day other than a Saturday, a Sunday, or a day on which banking or trust institutions in the
State of New York or New Jersey are authorized or obligated by law or executive order to close.


 


(k)“Certificate
of Designation” shall have the meaning set forth in Section 1(l) hereof.


 


(l)“Certificate
of Incorporation” shall mean the Articles of Incorporation of the Company, as amended, as filed with the Office
of the Secretary of State of the State of Nevada, and together with the Certificate of Designation of the Preferred Stock of the
Company adopted contemporaneously with the approval of this Agreement and attached hereto as Exhibit A (the “Certificate
of Designation”), as the same may hereafter be amended or restated.


 


(m)“Close
of Business” on any given date shall mean 5:00 P.M., New York City time, on such date; provided, however,
that if such date is not a Business Day, it shall mean 5:00 P.M., Eastern time, on the next succeeding Business Day.


 


(n)“Closing
Price” shall mean in respect of any security for any day shall mean the last sale price, regular way, reported at
or prior to 4:00 P.M. Eastern time or, in case no such sale takes place on such day, the average of the bid and asked prices,
regular way, reported at or prior to 4:00 P.M. Eastern time, in either case as reported in the principal consolidated transaction
reporting system with respect to securities listed or admitted to trading on NASDAQ or the NYSE or, if the security is not listed
or admitted to trading on NASDAQ or the NYSE, as reported in the principal consolidated transaction reporting system with respect
to securities listed on the principal national securities exchange on which the security is listed or admitted to trading or,
if the security is not listed or admitted to trading on any national securities exchange, the last quoted price reported at or
prior to 4:00 P.M. Eastern time or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter
market, as reported by any system then in use reported as of 4:00 P.M. Eastern time or, if not so quoted, the average of the closing
bid and asked price furnished by a professional market maker making a market in the security selected by the Board or, if not
so quoted, as reported by the OTC Markets Group Inc. or similar organization.


 


(o)“Code”
shall have the meaning set forth in the recitals to this Agreement.


 


(p)“Common
Stock” shall mean (i) when used with reference to the Company, the Common Stock, par value $0.001 per share,
of the Company; and (ii) when used with reference to any Person other than the Company, the class or series of capital stock
or equity interest with the greatest voting power (in relation to any other classes or series of capital stock or equity interest)
of such other Person or if such other Person is a Subsidiary of another Person, the Person who ultimately controls such first
mentioned Person.


 






    	 	- 5 -	 



     

    

 


(q)“Common
Stock Equivalents” shall have the meaning set forth in Section 11(a)(iii) hereof.


 


(r)“Company”
shall have the meaning set forth in the Preamble hereof.


 


(s)“Counterparty”
shall have the meaning set forth in Section 1(x) hereof.


 


(t)“Current
Market Price” of any security on any date shall mean the average of the daily closing prices per share of such security
for the thirty (30) consecutive Trading Days immediately prior to, but not including, such date; provided, however,
that in the event that the “Current Market Price” of such security is determined during a period following the announcement
by the issuer of such security of (i) a dividend or distribution on such security payable in shares of such security or securities
convertible into such shares (other than the Rights); or (ii) any subdivision, combination or reclassification of such security,
and prior to the expiration of the requisite 30 Trading Day period after but not including the ex-dividend date for such dividend
or distribution or the record date for such subdivision, combination or reclassification, then, in each such case, the “Current
Market Price” shall be appropriately adjusted to take into account ex-dividend trading. If on any such date no market maker
is making a market in such security or such security is not publicly held or not listed or traded, the “Current Market Price”
shall mean the fair value per share as determined in good faith by the Board, whose determination shall be described in a written
statement filed with the Rights Agent and shall be conclusive for all purposes.


 


Except
as provided in this paragraph, the “Current Market Price” of the Preferred Stock shall be determined in accordance
with the method set forth above. If the Preferred Stock is not publicly traded, the “Current Market Price” of the
Preferred Stock shall be conclusively deemed to be the Current Market Price of the Common Stock of the Company as determined pursuant
to the paragraph above (appropriately adjusted to reflect any stock split, stock dividend or similar transaction occurring after
the date hereof), multiplied by one hundred. If neither the Common Stock nor the Preferred Stock is publicly held or so listed
or traded, the “Current Market Price” of the Preferred Stock shall mean the fair value per share as determined in
good faith by the Board, whose determination shall be described in a written statement filed with the Rights Agent and shall be
binding on the Rights Agent and the holders of the Rights. For all purposes of this Agreement, the “Current Market Price”
of one one-thousandth of a share of Preferred Stock shall be equal to the “Current Market Price” of one share of Preferred
Stock divided by 1,000.


 


(u)“Current
Value” shall have the meaning set forth in Section 11(a)(iii) hereof.


 


(v)“Definitive
Acquisition Agreement” shall mean any definitive written agreement entered into by the Company that is conditioned
on the approval by the holders of not less than a majority of the outstanding shares of Common Stock at a meeting of the stockholders
of the Company with respect to (i) a merger, consolidation, recapitalization, reorganization, share exchange, business combination
or similar transaction involving the Company or (ii) the acquisition in any manner, directly or indirectly, of more than
50% of the consolidated total assets (including, without limitation, equity securities of its subsidiaries) of the Company and
its Subsidiaries.


 






    	 	- 6 -	 



     

    

 


(w)
“Demanding Stockholders” shall have the meaning set forth in Section 23(c)(i) hereof.


 


(x)“Derivatives
Contract” shall mean a contract between two parties (the “Receiving Party” and the “Counterparty”)
that is designed to produce economic benefits and risks to the Receiving Party that correspond substantially to the ownership
by the Receiving Party of a number of shares of Common Stock specified or referenced in such contract (the number corresponding
to such economic benefits and risks, the “Notional Common Shares”), regardless of whether obligations
under such contract are required or permitted to be settled through the delivery of cash, Common Stock or other property, without
regard to any short position under the same or any other Derivatives Contract. For the avoidance of doubt, interests in broad-based
index options, broad-based index futures and broad-based publicly traded market baskets of stocks approved for trading by the
appropriate federal governmental authority shall not be deemed “Derivatives Contracts.”


 


(y)“Distribution
Date” shall mean the earlier of (i) the Close of Business on the tenth Business Day after the Stock Acquisition
Date (or, if the tenth Business Day after the Stock Acquisition Date occurs before the Record Date, the Close of Business on the
Record Date) and (ii) the Close of Business on the tenth Business Day (or, if such tenth Business Day occurs before the Record
Date, the Close of Business on the Record Date), or such later date as may be determined by the Board prior to such time any Person
becomes an Acquiring Person, after the date of the commencement by any Person (other than any Excluded Person) of, or of the first
public announcement of the intention of any Person (other than any Excluded Person) to commence, a tender or exchange offer the
consummation of which would result in such Person becoming the Beneficial Owner of 4.99% or more of the outstanding shares of
Common Stock.


 


(z)“Early
Expiration Date” shall have the meaning set forth in Section 7(a) hereof.


 


(aa)“Equivalent
Preferred Stock” shall have the meaning set forth in Section 11(b) hereof.


 


(bb)“Exchange
Act” shall mean the Securities Exchange Act of 1934, as amended.


 


(cc)“Exchange
Act Regulations” shall mean the General Rules and Regulations under the Exchange Act.


 


(dd)“Exchange
Date” shall have the meaning set forth in Section 7(a) hereof.


 


(ee)“Exchange
Ratio” shall have the meaning set forth in Section 24(a) hereof.


 


(ff)“Excess
Shares” shall have the meaning set forth in Section 11(a)(ii) hereof.


 


(gg)“Exempt
Person” shall mean any Person determined by the Board to be an “Exempt Person” in accordance with the
requirements set forth in Section 25 hereof for so long as such Person complies with any limitations or conditions required by
the Board in making such determination.


 






    	 	- 7 -	 



     

    

 


(hh)
“Exemption Date” shall have the meaning set forth in Section 23(c)(iii) hereof.


 


(ii)“Excluded
Person” shall mean (i) the Company or any of its Subsidiaries; (ii) any officers, directors and employees
or any of its Subsidiaries solely in respect of such Person’s status or authority as such (including, without limitation,
any fiduciary capacity); or (iii) any employee benefit plan of the Company or of any Subsidiary of the Company or any entity
or trustee holding (or acting in a fiduciary capacity in respect of) shares of capital stock of the Company for or pursuant to
the terms of any such plan, or for the purpose of funding other employee benefits for employees of the Company or any Subsidiary
of the Company.


 


(jj)“Exemption
Request” shall have the meaning set forth in Section 25(a) hereof.


 


(kk)“Exercise
Price” shall have the meaning set forth in Section 4(a), 11(a)(ii) and 13(a) hereof.


 


(ll)“Expiration
Date” shall have the meaning set forth in Section 7(a) hereof.


 


(mm)“Final
Expiration Date” shall have the meaning set forth in Section 7(a) hereof.


 


(nn)“Flip-In
Event” shall mean any event described in Section 11(a)(ii) hereof.


 


(oo)“Flip-In
Trigger Date” shall have the meaning set forth in Section 11(a)(iii) hereof.


 


(pp)“Flip-Over
Event” shall mean any event described in clause (x), (y) or (z) of Section 13(a) hereof.


 


(qq)“Grandfathered
Person” shall mean any Person which, together with all of its Related Persons, is, as of the date of this Agreement,
the Beneficial Owner of 4.99% or more of the shares of Common Stock of the Company then outstanding. A Person ceases to be a “Grandfathered
Person” if and when (i) such Person becomes the Beneficial Owner of less than 4.99% of the shares of Common Stock of
the Company then outstanding; or (ii) such Person increases its Beneficial Ownership of shares of Common Stock of the Company
to an amount equal to or greater than the greater of (A) 4.99% of the shares of Common Stock of the Company then outstanding
and (B) the sum of (1) the lowest Beneficial Ownership of such Person as a percentage of the shares of Common Stock
of the Company outstanding as of any time from and after the public announcement of this Agreement (other than as a result of
an acquisition of shares of Common Stock by the Company) plus (2) one share of Common Stock of the Company then outstanding.


 


(rr)“Independent
Directors” shall mean those members of the Board who meet the criteria for independent directors of
any applicable laws, rules and regulations regarding independence in effect from time to time.


 






    	 	- 8 -	 



     

    

 


(ss)“Minimum
Tender Condition” shall have the meaning set forth in Section 1(bbb)(v).


 


(tt)“NASDAQ”
shall mean The NASDAQ Stock Market.


 


(uu)“NOLs”
shall have the meaning set forth in the recitals of this Agreement.


 


(vv)“Notional
Common Shares” shall have the meaning set forth in Section 1(x) hereof.


 


(ww)“NYSE”
shall mean the New York Stock Exchange.


 


(xx)“Outside
Meeting Date” shall have the meaning set forth in Section 23(c)(iii) hereof.


 


(yy)“Person”
shall mean any individual, firm, corporation, partnership (general or limited), limited liability company, limited liability partnership,
association, unincorporated organization, trust or other legal entity, or group of persons making a “coordinated acquisition”
of Common Stock or otherwise treated as an “entity” within the meaning of Section 1.382-3(a)(1) of the Treasury Regulations
or otherwise, including (i) any syndicate or group deemed to be a Person under Section 13(d)(3) of the Exchange Act and Rule
13d-5(b) thereunder; and (ii) any successor (by merger or otherwise) of any such firm, corporation, partnership (general or limited),
limited liability company, limited liability partnership, association, unincorporated organization, trust, or other group or entity.


 


(zz)“Preferred
Stock” shall mean the Series D Preferred Stock, par value $0.001 per share, of the Company, having the voting rights,
powers, designations, preferences and relative, participating, optional or other special rights and qualifications, limitations
and restrictions set forth in the Certificate of Designation.


 


(aaa)“Principal
Party” shall have the meaning set forth in Section 13(b) hereof.


 


(bbb)“Qualifying
Offer” shall mean an offer determined by the Board in good faith to be:


 


(i)an
offer that has commenced within the meaning of Rule 14d-2(a) under the Exchange Act;


 


(ii)a
fully financed all-cash tender offer or an exchange offer offering shares of Common Stock of the offeror, or a combination thereof,
in each such case for any and all of the outstanding shares of Common Stock of the Company at the same per-share consideration;


 


(iii)an
offer whose offer price per share of Stock of the Company is greater than the highest reported market price for the Stock of the
Company in the twenty-four (24) months immediately preceding the commencement of such offer within the meaning of Rule 14d-2(a)
under the Exchange Act, with, in the case of an offer that includes shares of Common Stock of the offeror, such offer price per
share of Stock of the Company being determined using the lowest reported market price for Common Stock of the offeror during the
five trading days immediately preceding and the five trading days immediately following the commencement of such offer within
the meaning of Rule 14d-2(a) under the Exchange Act;


 


(iv)an
offer in respect of which, within twenty (20) Business Days after the commencement date of the offer (or within ten (10) Business
Days after any increase in the offer consideration), a nationally recognized financial advisor retained by the Board does not
render an opinion to the Board that the consideration being offered to the stockholders of the Company is either unfair or inadequate;


 






    	 	- 9 -	 



     

    

 


(v)an
offer that is conditioned on a minimum of at least a majority of (A) the shares of the Common Stock of the Company outstanding
on a fully-diluted basis; and (B) the outstanding shares of the Common Stock of the Company not held by the offeror (or such
offeror’s Related Persons) being tendered and not withdrawn as of the offer’s expiration date, which condition shall
not be waivable (the “Minimum Tender Condition”);


 


(vi)an
offer that is subject only to the Minimum Tender Condition and other customary terms and conditions, which conditions shall not
include any financing, funding or similar conditions or any requirements with respect to the offeror or its representatives being
permitted any due diligence with respect to the books, records, management, accountants or other outside advisers of the Company;



 


(vii)an
offer pursuant to which the Company has received an irrevocable written commitment by the offeror that the offer, if it is otherwise
to expire prior thereto, will be extended for at least twenty (20) Business Days after any increase in the consideration offered
or after any bona fide alternative offer is commenced;


 


(viii)an
offer pursuant to which the Company has received an irrevocable, legally binding written commitment of the offeror that the offer
will remain open until at least the later of (A) the date the Board redeems the outstanding Rights or exempts such offer
from the terms of this Agreement; (B) if no Special Meeting Demand has been received from the holders of a Requisite Percentage
with respect to such offer, ten (10) Business Days after the end of the Board Evaluation Period; and (C) if a Special Meeting
is duly requested in accordance with Section 23, ten (10) Business Days after the date of such Special Meeting or, if no Special
Meeting is held within the Special Meeting Period, ten (10) Business Days following the last day of such Special Meeting Period;



 


(ix)an
offer pursuant to which the Company has received an irrevocable, legally binding written commitment of the offeror to consummate,
as promptly as practicable upon successful completion of the offer, a second step transaction whereby all shares of the Common
Stock not tendered into the offer shall be acquired at the same consideration per share of Common Stock actually paid pursuant
to the offer, subject to stockholders’ statutory appraisal rights, if any;


 


(x)an
offer pursuant to which the Company has received an irrevocable, legally binding written commitment of the offeror that no amendments
shall be made to the offer to reduce the consideration being offered or to otherwise change the terms of the offer in a way that
is adverse to a tendering stockholder (other than extensions of the offer consistent with the terms thereof);


 






    	 	- 10 -	 



     

    

 


(xi)an
offer (other than an offer consisting solely of cash consideration) pursuant to which the Company has received the written representation
and certification of the offeror and the written representations and certifications of the offeror’s Chief Executive Officer
and Chief Financial Officer, acting in such capacities, that (A) all facts about the offeror that would be material to making
an investor’s decision to accept the offer have been fully and accurately disclosed as of the date of the commencement of
the offer within the meaning of Rule 14d-2(a) of the Exchange Act; (B) all such new facts shall be fully and accurately disclosed
on a prompt basis during the entire period during which the offer remains open; and (C) all required Exchange Act reports
shall be filed by the offeror in a timely manner during such period; and


 


(xii)if
the offer includes shares of Common Stock of the offeror, (A) the offeror is a publicly owned United States corporation and
its Common Stock is freely tradable and is listed or admitted to trading on either the NASDAQ or the NYSE; (B) no stockholder
approval of the offeror is required to issue such Common Stock, or, if required, such approval has already been obtained; (C) no
Person (including such Person’s Related Persons) Beneficially Owns more than 20% of the voting stock of the offeror at the
time of commencement of the offer or at any time during the term of the offer; (D) no other class of voting stock of the
offeror is outstanding; and (E) the offeror meets the registrant eligibility requirements for use of Form S-3 for registering
securities under the Securities Act, including, without limitation, the filing of all required Exchange Act reports in a timely
manner during the twelve calendar months prior to the date of commencement of such offer.


 


For
the purposes of the definition of Qualifying Offer, “fully financed” shall mean that the offeror has sufficient funds
for the offer and related expenses which shall be evidenced by (x) firm, unqualified, written commitments from responsible
financial institutions having the necessary financial capacity, accepted by the offeror, to provide funds for such offer subject
only to customary terms and conditions; (y) cash or cash equivalents then available to the offeror, set apart and maintained
solely for the purpose of funding the offer with an irrevocable, legally binding written commitment being provided by the offeror
to the Board to maintain such availability until the offer is consummated or withdrawn; or (z) a combination of the foregoing;
which evidence has been provided to the Company prior to, or upon, commencement of the offer. If an offer becomes a Qualifying
Offer in accordance with this definition, but subsequently ceases to be a Qualifying Offer as a result of the failure at a later
date to continue to satisfy any of the requirements of this definition, such offer shall cease to be a Qualifying Offer and the
provisions of Section 23 shall no longer be applicable to such offer.


 


(ccc)“Qualifying
Offer Resolution” shall have the meaning set forth in Section 23(c)(i) hereof.


 


(ddd)“Receiving
Party” shall have the meaning set forth in Section 1(x) hereof.


 


(eee)“Record
Date” shall mean the Close of Business on October 17, 2016.


 


(fff)“Redemption
Date” shall have the meaning set forth in Section 7(a) hereof.


 






    	 	- 11 -	 



     

    

 


(ggg)“Redemption
Period” shall have the meaning set forth in Section 23(a) hereof.


 


(hhh)“Redemption
Price” shall have the meaning set forth in Section 23(a) hereof.


 


(iii)“Related
Person” shall mean, as to any Person, any Affiliates or Associates of such Person.


 


(jjj)“Requesting
Person” shall have the meaning set forth in Section 25(a) hereof.


 


(kkk)“Requisite
Percentage” shall have the meaning set forth in Section 23(c)(i) hereof.


 


(lll)“Rights”
shall have the meaning set forth in the recitals of this Agreement.


 


(mmm)“Rights
Agent” shall have the meaning set forth in the Preamble hereof.


 


(nnn)“Rights
Certificate” shall have the meaning set forth in Section 3(d) hereof.


 


(ooo)“Schedule
13D” shall mean a statement on Schedule 13D pursuant to Rule 13d-1(a), 13d-1(e), 13d-1(f) or 13d-1(g) of the General
Rules and Regulations under the Exchange Act as in effect at the time of the public announcement of the declaration of the Rights
dividend with respect to the shares of Common Stock Beneficially Owned by the Person filing such statement.


 


(ppp)“Securities
Act” shall mean the Securities Act of 1933, as amended.


 


(qqq)“Special
Meeting” shall have the meaning set forth in Section 23(c)(i) hereof.


 


(rrr)
“Special Meeting Demand” shall have the meaning set forth in Section 23(c)(i) hereof.


 


(sss)“Special
Meeting Period” shall have the meaning set forth in Section 23(c)(ii) hereof.


 


(ttt)“Spread”
shall have the meaning set forth in Section 11(a)(iii) hereof.


 


(uuu)“Stock
Acquisition Date” shall mean the first date of public announcement (including, without limitation, the filing of
any report pursuant to Section 13(d) of the Exchange Act) by the Company or an Acquiring Person that a Person has become an Acquiring
Person, or such other date, as determined by the Board, on which a Person has become an Acquiring Person.


 


(vvv)“Stockholder
Approval” shall mean the approval or ratification by the stockholders of the Company of this Agreement (or
such Agreement as then in effect or as contemplated to be in effect following such Stockholder Approval) as demonstrated by the
votes cast in favor of any such approval or ratification proposal submitted to a stockholder vote by the Company exceeding the
votes cast against such proposal at a duly held meeting of stockholders of the Company.


 






    	 	- 12 -	 



     

    

 


(www)“Subsidiary”
shall mean, with reference to any Person, any other Person of which (i) a majority of the voting power of the voting securities
or equity interests is Beneficially Owned, directly or indirectly, by such first-mentioned Person or otherwise controlled by such
first-mentioned Person; or (ii) an amount of voting securities or equity interests sufficient to elect at least a majority
of the directors or equivalent governing body of such other Person is Beneficially Owned, directly or indirectly, by such first-mentioned
Person, or otherwise controlled by such first-mentioned Person.


 


(xxx)“Substitution
Period” shall have the meaning set forth in Section 11(a)(iii) hereof.


 


(yyy)“Summary
of Rights” shall have the meaning set forth in Section 3(a) hereof.


 


(zzz)“Tax
Benefits” shall mean the net operating loss carryovers, capital loss carryovers, general business credit carryovers,
alternative minimum tax credit carryovers and foreign tax credit carryovers, as well as any loss or deduction attributable to
a “net unrealized built-in loss” within the meaning of Section 382 of the Code and the Treasury Regulations promulgated
thereunder, of the Company or any of its Subsidiaries.


 


(aaaa)“Trading
Day” shall mean, in respect to any security, (i) if such security is listed or admitted to trading on any national
securities exchange, a day on which the principal national securities exchange on which such security is listed or admitted to
trading is open for the transaction of business; and (ii) if such security is not so listed or admitted, a Business Day.


 


(bbbb)“Treasury
Regulations” shall mean the U.S. Treasury Regulations promulgated under the Code, as may be amended from time to
time.


 


(cccc)“Triggering
Event” shall mean any Flip-In Event or any Flip-Over Event.


 


(dddd)“Trust”
shall have the meaning set forth in Section 24(d) hereof.


 


(eeee)“Trust
Agreement” shall have the meaning set forth in Section 24(d) hereof.


 


Section
2.Appointment of Rights Agent.


 


The
Company hereby appoints the Rights Agent to act as agent for the Company in accordance with the terms and conditions hereof, and
the Rights Agent hereby accepts such appointment. The Company may from time to time appoint such co-Rights Agents as it may deem
necessary or desirable; provided that the Company shall notify the Rights Agent in writing two Business Days prior to such appointment.
In the event the Company appoints one or more co-Rights Agents, the respective duties of the Rights Agent and any co-Rights Agents
under the provisions of this Agreement shall be as the Company reasonably determines, and the Company shall notify, in writing,
the Rights Agent and any co-Rights Agents of such duties. The Rights Agent shall have no duty to supervise, and shall in no event
be liable for, the acts or omissions of any such co-Rights Agents.


 






    	 	- 13 -	 



     

    

 


Section
3.Issue of Rights Certificates.


 


(a)On
the Record Date, or as soon as practicable thereafter, the Company will send (directly or, at the expense of the Company, through
the Rights Agent or its transfer agent if the Rights Agent or transfer agent is directed by the Company and provided with all
necessary information and documents) a copy of a Summary of Rights to Purchase Preferred Stock, in substantially the form attached
hereto as Exhibit B and which may be appended to certificates that represent shares of Common Stock (the “Summary
of Rights”), to each record holder of Common Stock as of the Close of Business on the Record Date (other than any
Acquiring Person or any Associate or Affiliate of any Acquiring Person), at the address of such holder shown on the records of
the Company or transfer agent or register for Common Stock. With respect to certificates representing shares of Common Stock (or
Book Entry shares of Common Stock) outstanding as of the Record Date, until the Distribution Date, the Rights shall be evidenced
by such shares of Common Stock registered in the names of the holders thereof together with the Summary of Rights, and not by
separate Rights Certificates. With respect to Book Entry shares of Common Stock outstanding as of the Record Date, until the Distribution
Date, the Rights shall be evidenced by the balances indicated in the Book Entry account system of the transfer agent for the Common
Stock together with the Summary of Rights. Until the earlier of the Distribution Date and the Expiration Date, the transfer of
any shares of Common Stock outstanding on the Record Date (whether represented by certificates or evidenced by the balances indicated
in the Book Entry account system of the transfer agent for the Common Stock, and, in either case, regardless of whether a copy
of the Summary of Rights is submitted with the surrender or request for transfer), shall also constitute the transfer of the Rights
associated with such shares of Common Stock.


 


(b)Rights
shall be issued, without any further action, in respect of all shares of Common Stock that become outstanding (whether originally
issued or delivered from the Company’s treasury) after the Record Date but prior to the earlier of the Distribution Date
and the Expiration Date; provided, however, that Rights also shall be issued to the extent provided in Section 21
hereof. Confirmation and account statements sent to holders of Common Stock for Book Entry form or, in the case of certificated
shares, certificates, representing such shares of Common Stock, issued after the Record Date shall bear a legend substantially
in the following form:


 


“[This
certificate] [These shares] also evidence[s] and entitle[s] the holder hereof to certain Rights as set forth in a Rights Agreement
between Surge Components, Inc., a Nevada corporation (the “Company”), and Continental Stock Transfer &
Trust Company or any successor Rights Agent (the “Rights Agent”) dated as of October 7, 2016, as the same may
be amended or supplemented from time to time (the “Rights Agreement”), the terms of which are hereby incorporated
herein by reference and a copy of which is on file at the principal executive offices of the Company. Under certain circumstances,
as set forth in the Rights Agreement, such Rights shall be evidenced by separate certificates and will no longer be evidenced
by [this certificate] [these shares]. The Company will mail to the holder of [this certificate] [these shares] a copy of the Rights
Agreement as in effect on the date of mailing without charge after receipt of a written request therefor.


 






    	 	- 14 -	 



     

    

 


Under
certain circumstances, as set forth in the Rights Agreement, Rights that are Beneficially Owned by any Person who is, was or becomes
an Acquiring Person or any Related Person thereof (as such capitalized terms are defined in the Rights Agreement), or specified
transferees of such Acquiring Person (or Related Person thereof) may become null and void and will no longer be transferable.”


 


With
respect to all certificates representing shares of Common Stock containing the foregoing legend, until the earliest of the Distribution
Date and the Expiration Date, the Rights associated with the Common Stock represented by such certificates shall be evidenced
by such certificates alone and registered holders of Common Stock shall also be the registered holders of the associated Rights,
and the transfer of any such certificate shall also constitute the transfer of the Rights associated with the shares of Common
Stock represented by such certificates.


 


With
respect to Common Stock in Book Entry form for which there has been sent a confirmation or account statement containing the foregoing
legend, until the earliest of the Distribution Date and the Expiration Date, the Rights associated with the Common Stock shall
be evidenced by such Common Stock alone and registered holders of Common Stock shall also be the registered holders of the associated
Rights, and the transfer of any such Common Stock shall also constitute the transfer of the Rights associated with such shares
of Common Stock.


 


Notwithstanding
this paragraph (b), the omission of the legend or the failure to send, deliver or provide the registered owner of shares of Common
Stock a copy of the Summary of Rights shall not affect the enforceability of any part of this Agreement or the rights of any holder
of the Rights.


 


In
the event that the Company purchases or otherwise acquires any shares of Common Stock after the Record Date but prior to the Distribution
Date, any Rights associated with such shares of Common Stock shall be cancelled and retired so that the Company is not entitled
to exercise any Rights associated with the shares of Common Stock that are no longer outstanding.


 


(c)Until
the Distribution Date, the Rights shall be transferable only in connection with the transfer of the underlying shares of Common
Stock (including a transfer to the Company).


 


(d)As
soon as practicable after the Distribution Date, the Company will prepare and execute, and the Rights Agent will countersign and
the Company will send or cause to be sent (and the Rights Agent will, if so requested and provided with all necessary information
and documents, at the expense of the Company, send) by first-class, insured, postage-prepaid mail, to each record holder of shares
of Common Stock as of the Close of Business on the Distribution Date (other than any Acquiring Person or any Related Person of
an Acquiring Person), at the address of such holder shown on the records of the Company, one or more rights certificates, in substantially
the form of Exhibit C hereto (the “Rights Certificate”), evidencing one Right for each share
of Common Stock so held, subject to adjustment as provided herein. In the event that an adjustment in the number of Rights per
share of Common Stock has been made pursuant to Section 11 hereof, at the time of distribution of the Rights Certificates, the
Company shall make the necessary and appropriate rounding adjustments (in accordance with Section 14(a) hereof) so that Rights
Certificates representing only whole numbers of Rights are distributed and cash is paid in lieu of any fractional Rights. As of
and after the Distribution Date, the Rights shall be evidenced solely by such Rights Certificates, and the Rights Certificates
and the Rights shall be transferable separately from the transfer of Common Stock. The Company shall promptly notify the Rights
Agent in writing upon the occurrence of the Distribution Date and, if such notification is given orally, the Company shall confirm
the same in writing on or prior to the Business Day next following. Until such written notice is received by the Rights Agent,
the Rights Agent may presume conclusively for all purposes that the Distribution Date has not occurred.


 






    	 	- 15 -	 



     

    

 


Section
4.Form of Rights Certificate.


 


(a)The
Rights Certificates (and the forms of election to purchase and of assignment and the certificate to be printed on the reverse
thereof) shall be substantially in the form set forth in Exhibit C hereto and may have such changes or marks of identification
or designation and such legends, summaries, or endorsements printed thereon as the Company may deem appropriate (but which do
not affect the rights, duties, liabilities, protections or responsibilities of the Rights Agent), and as are not inconsistent
with the provisions of this Agreement, or as may be required to comply with any applicable law or any rule or regulation thereunder
or with any applicable rule or regulation of any stock exchange upon which the Rights may from time to time be listed or the Financial
Industry Regulatory Authority, or to conform to customary usage. Subject to the provisions of this Agreement, the Rights Certificates,
whenever distributed, shall be dated as of the Distribution Date and on their face shall entitle the holders thereof to purchase
such number of one one-thousandths of a share of Preferred Stock as shall be set forth therein at the price set forth therein
(such price, the “Exercise Price”), but the amount and type of securities, cash, or other assets that
may be acquired upon the exercise of each Right and the Exercise Price thereof shall be subject to adjustment as provided herein.


 


(b)Any
Rights Certificate issued pursuant hereto that represents Rights Beneficially Owned by (i) an Acquiring Person or any Related
Person of an Acquiring Person; (ii) a transferee of an Acquiring Person (or of any such Related Person) that becomes a transferee
after the Acquiring Person becomes an Acquiring Person; or (iii) a transferee of an Acquiring Person (or of any such Related
Person) that becomes a transferee prior to or concurrently with the Acquiring Person becoming an Acquiring Person and that receives
such Rights pursuant to either (A) a transfer (whether or not for consideration) from the Acquiring Person (or any such Related
Person) to holders of equity interests in such Acquiring Person (or any such Related Person) or to any Person with whom such Acquiring
Person (or any such Related Person) has any continuing written or oral plan, agreement, arrangement, or understanding regarding
the transferred Rights, shares of Common Stock, or the Company; or (B) a transfer that the Board has determined in good faith
to be part of a plan, agreement, arrangement, or understanding that has as a primary purpose or effect the avoidance of Section
7(e) hereof (and any Rights Certificate issued pursuant to Section 6 or Section 11 hereof upon transfer, exchange, replacement
or adjustment of any other Rights Certificate referred to in this sentence), shall contain upon the direction of the Board a legend
substantially in the following form:


 


“The
Rights represented by this Rights Certificate are or were Beneficially Owned by a Person who was or became an Acquiring Person
or a Related Person of an Acquiring Person (as such terms are defined in the Rights Agreement dated as of October 7, 2016 by and
between Surge Components, Inc. and Continental Stock Transfer & Trust Company (the “Rights Agreement”)).
Accordingly, this Rights Certificate and the Rights represented hereby may become null and void in the circumstances specified
in Section 7(e) of the Rights Agreement.”


 






    	 	- 16 -	 



     

    

 


The
Company shall give written notice to the Rights Agent promptly after it becomes aware of the existence and identity of any Acquiring
Person or any Related Person thereof. Until such notice is received by the Rights Agent, the Rights Agent may presume conclusively
without independent verification thereof for all purposes that no Person has become an Acquiring Person or a Related Person of
an Acquiring Person. The Company shall instruct the Rights Agent in writing of the Rights which should be so legended.


 


Section
5.Countersignature and Registration.


 


(a)The
Rights Certificates shall be executed on behalf of the Company by its Chief Executive Officer, President, Secretary, Treasurer,
any Vice-President, any Assistant Secretary or any other officer of the Company, shall have affixed thereto the Company’s
corporate seal (or a facsimile thereof), and shall be attested by the Company’s Secretary or one of its Assistant Secretaries.
The signature of any of these officers on the Rights Certificates may be manual or by facsimile or other customary shall mean
of electronic transmission (e.g., “pdf”). Rights Certificates bearing the manual or facsimile signatures of the individuals
who were at the time of execution the proper officers of the Company shall bind the Company, notwithstanding that such individuals
or any of them have ceased to hold such offices prior to the countersigning of such Rights Certificates by the Rights Agent or
did not hold such offices at the date of such Rights Certificates. No Rights Certificate shall be entitled to any benefit under
this Agreement or shall be valid for any purpose unless there appears on such Rights Certificate a countersignature duly executed
by the Rights Agent by manual or facsimile or other customary shall mean of electronic transmission (e.g., “pdf”)
of an authorized officer, and such countersignature upon any Rights Certificate shall be conclusive evidence, and the only evidence,
that such Rights Certificate has been duly countersigned as required hereunder.


 


(b)Following
the Distribution Date, and receipt by the Rights Agent of written notice to that effect and all other relevant and necessary information
referred to in Section 3(d) hereof, the Rights Agent shall keep or cause to be kept, at its office designated for such purpose,
books for registration and transfer of the Rights Certificates issued hereunder. Such books shall show the name and address of
each holder of the Rights Certificates, the number of Rights evidenced on its face by each Rights Certificate and the date of
each Rights Certificate.


 






    	 	- 17 -	 



     

    

 


Section
6.Transfer, Split Up, Combination and Exchange
of Rights Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates.


 


(a)Subject
to the provisions of Sections 4(b), 7(e) and 14 hereof, at any time after the Close of Business on the Distribution Date and at
or prior to the Close of Business on the Expiration Date, any Rights Certificate (other than Rights Certificates representing
Rights that have become null and void pursuant to Section 7(e) hereof, that have been redeemed pursuant to Section 23 hereof,
or that have been exchanged pursuant to Section 24 hereof) may be transferred, split up, combined or exchanged for another Rights
Certificate, entitling the registered holder to purchase a like number of one one-thousandths of a share of Preferred Stock (or
following a Triggering Event, Common Stock, other securities, cash or other assets, as the case may be) as the Rights Certificate
or Certificates surrendered then entitled such holder to purchase. Any registered holder desiring to transfer, split up, combine
or exchange any Rights Certificate shall make such request in writing delivered to the Rights Agent, and shall surrender, together
with any required form of assignment duly executed and properly completed, the Rights Certificates to be transferred, split up,
combined or exchanged at the office of the Rights Agent designated for such purpose. The Rights Certificates are transferable
only on the books and records of the Rights Agent. Neither the Rights Agent nor the Company shall be obligated to take any action
whatsoever with respect to the transfer of any such surrendered Rights Certificate until the registered holder has properly completed
and executed the certificate set forth in the form of assignment on the reverse side of such Rights Certificate and has provided
such additional evidence of the identity of the Beneficial Owner (or former Beneficial Owner) of the Rights represented by such
Rights Certificate or Related Person thereof as the Company or the Rights Agent requests, whereupon the Rights Agent shall, subject
to the provisions of Sections 4(b), 7(e) and 14 hereof, countersign and deliver to the Person entitled thereto a Rights Certificate
or Rights Certificates, as the case may be, as so requested. The Company may require payment by the holder of the Rights of a
sum sufficient to cover any tax or governmental charge that may be imposed in connection with any transfer, split up, combination
or exchange of Rights Certificates. If and to the extent the Company does require payment of any such taxes or governmental charges,
the Company shall give the Rights Agent prompt written notice thereof and the Rights Agent shall not deliver any Rights Certificate
unless and until it is satisfied that all such payments have been made, and the Rights Agent shall forward any such sum collected
by it to the Company or to such Persons as the Company specifies by written notice. The Rights Agent shall have no duty or obligation
to take any action with respect to a Rights holder under any Section of this Agreement which requires the payment by such Rights
holder applicable taxes and/or governmental charges unless and until it is satisfied that all such taxes and/or governmental charges
have been paid.


 


(b)If
a Rights Certificate is mutilated, lost, stolen or destroyed, upon written request by the registered holder of the Rights represented
thereby and upon payment to the Company and the Rights Agent of all reasonable expenses incident thereto, there shall be issued,
in exchange for and upon cancellation of the mutilated Rights Certificate, or in substitution for the lost, stolen or destroyed
Rights Certificate, a new Rights Certificate, in substantially the form of the prior Rights Certificate, of like tenor and representing
the equivalent number of Rights, but, in the case of loss, theft, or destruction, only upon receipt of evidence satisfactory to
the Company and the Rights Agent of such loss, theft or destruction of such Rights Certificate and such additional evidence of
the identity of the Beneficial Owner (or former Beneficial Owner) or Related Persons thereof as the Company or the Rights Agent
requests, and, if requested by the Company or the Rights Agent, indemnity also satisfactory to it.


 


(c)Notwithstanding
any other provision hereof, the Company and the Rights Agent may amend this Agreement to provide for uncertificated Rights in
addition to or in lieu of Rights evidenced by Right Certificates, to the extent permitted by applicable law.


 






    	 	- 18 -	 



     

    

 


Section
7.Exercise of Rights; Exercise Price; Expiration
Date of Rights.


 


(a)Subject
to Section 7(e) hereof, the registered holder of any Rights Certificate may exercise the Rights evidenced thereby (except as otherwise
provided herein including, without limitation, in the restrictions on exercisability set forth in Sections 9(c), 11(a)(iii) and
23(a) hereof) in whole or in part at any time after the Distribution Date upon surrender of the Rights Certificate, with the form
of election to purchase and the certificate on the reverse side thereof properly completed and duly executed, to the Rights Agent
at the office of the Rights Agent designated for such purpose, together with payment of the Exercise Price for each one one-thousandth
of a share of Preferred Stock (or Common Stock, other securities, cash or other assets, as the case may be) as to which the Rights
are exercised prior to the earliest of (i) the Close of Business on October 7, 2019 or such later date as may be established
by the Board prior to the expiration of the Rights as long as the extension is submitted to the stockholders of the Company for
ratification at the next annual meeting of stockholders succeeding such extension (the “Final Expiration
Date”); (ii) the time at which the Rights are redeemed pursuant to Section 23 hereof (the “Redemption
Date”); (iii) the time at which the Rights are exchanged pursuant to Section 24 hereof (the “Exchange
Date”); (iv) the closing of any merger or other acquisition transaction involving the Company pursuant to an agreement
of the type described in Section 13(f) at which time the Rights are terminated; (v) the Close of Business on the first
day after the Company’s 2016 annual meeting of stockholders, if Stockholder Approval has not been obtained at the Company’s
2016 annual meeting of stockholders (the “Early Expiration Date”); (vi) the Close of Business on the
effective date of the repeal of Section 382 of the Code if the Board determines that this Agreement is no longer necessary or
desirable for the preservation of Tax Benefits; and (vii) the Close of Business on the first day of a taxable year of the Company
to which the Board determines that no Tax Benefits are available to be carried forward (the earliest of (i) – (vii) being
herein referred to as the “Expiration Date”).


 


(b)Each
Right shall entitle the registered holder thereof to purchase one one-thousandth of a share of Preferred Stock. The Exercise Price
for each one one-thousandth of a share of Preferred Stock pursuant to the exercise of a Right shall be initially $5.00,
and shall be subject to adjustment from time to time as provided in Sections 11 and 13 hereof and payable in lawful money of the
United States in accordance with paragraph (c) of this Section 7.


 


(c)Upon
receipt of a Rights Certificate representing exercisable Rights, with the form of election to purchase and the certificate properly
completed and duly executed, accompanied by payment, with respect to each Right so exercised, of the Exercise Price per one one-thousandth
of a share of Preferred Stock (or Common Stock, other securities, cash or other assets, as the case may be) to be purchased and
an amount equal to any applicable tax or governmental charge, then the Rights Agent shall, subject to Section 18(j) hereof, promptly
(i) (A) requisition from any transfer agent of the Preferred Stock certificates representing such number of one one-thousandths
of a share of Preferred Stock (or fractions of shares that are integral multiples of one one-thousandth of a share of Preferred
Stock) as are to be purchased and the Company shall direct its transfer agent to comply with all such requests; or (B) if
the Company has elected to deposit the total number of shares of Preferred Stock issuable upon exercise of the Rights hereunder
with a depositary agent, requisition from the depositary agent depositary receipts representing such number of one one-thousandths
of a share of Preferred Stock as are to be purchased (in which case certificates for the shares of Preferred Stock represented
by such receipts shall be deposited by the transfer agent with the depositary agent), and the Company shall direct the depositary
to comply with all such requests; (ii) if necessary to comply with this Agreement, requisition from the Company the amount
of cash, if any, to be paid in lieu of fractional shares in accordance with Section 14 hereof; (iii) after receipt
of such certificates or such depositary receipts, cause the same to be delivered to or upon the order of the registered holder
of such Rights Certificate, registered in such name or names as may be designated by such holder; and (iv) if necessary to
comply with this Agreement, after receipt thereof, deliver such cash, if any, to or upon the order of the registered holder of
such Rights Certificate. In the event that the Company is obligated to issue Common Stock or other securities of the Company,
pay cash and/or distribute other assets pursuant to Section 11(a) hereof, the Company shall make all arrangements necessary so
that such Common Stock, other securities, cash and/or other assets are available for distribution by the Rights Agent, if and
when necessary to comply with this Agreement, and until so received, the Rights Agent shall have no duties or obligations with
respect to such securities, cash and/or other assets. The payment of the Exercise Price (as such amount may be reduced pursuant
to Section 11(a)(iii) hereof) may be made in cash or by certified or bank check or money order payable to the order of the Company.


 






    	 	- 19 -	 



     

    

 


(d)In
the event a registered holder of any Rights Certificate exercises less than all the Rights evidenced thereby, a new Rights Certificate
evidencing the Rights remaining unexercised shall be issued by the Rights Agent and delivered to, or upon the order of, such holder,
registered in such name or names as designated by such holder, subject to the provisions of Sections 6 and 14 hereof.


 


(e)Notwithstanding
anything in this Agreement to the contrary, from and after the first occurrence of a Flip-In Event, any Rights Beneficially Owned
by (i) an Acquiring Person or a Related Person of an Acquiring Person; (ii) a transferee of an Acquiring Person (or
of any such Related Person) who becomes a transferee after the Acquiring Person becomes such; or (iii) a transferee of an
Acquiring Person (or of any such Related Person) who becomes a transferee prior to or concurrently with the Acquiring Person becoming
such and who receives such Rights pursuant to either (A) a transfer (whether or not for consideration) from the Acquiring
Person (or any such Related Person) to holders of equity interests in such Acquiring Person (or any such Related Person) or to
any Person with whom the Acquiring Person (or any such Related Person) has any continuing written or oral plan, agreement, arrangement
or understanding regarding the transferred Rights, shares of Common Stock or the Company; or (B) a transfer that the Board
has determined in good faith to be part of a plan, agreement, arrangement or understanding that has as a primary purpose or effect
the avoidance of this Section 7(e), shall be null and void without any further action, and any holder of such Rights thereafter
shall have no rights or preferences whatsoever with respect to such Rights, whether under any provision of this Agreement, the
Rights Certificates or otherwise (including, without limitation, rights and preferences pursuant to Sections 7, 11, 13, 23 and
24 hereof). The Company shall use commercially reasonable efforts to ensure compliance with the provisions of this Section 7(e)
and Section 4(b) hereof, but neither the Company nor the Rights Agent have any liability to any holder of Rights or any other
Person as a result of the Company’s failure to make any determination with respect to an Acquiring Person or its Related
Persons or transferees hereunder.


 






    	 	- 20 -	 



     

    

 


(f)Notwithstanding
anything in this Agreement or any Rights Certificate to the contrary, neither the Rights Agent nor the Company shall be obligated
to take any action with respect to a registered holder upon the occurrence of any purported transfer or exercise as set forth
in this Section 7 by such registered holder unless such registered holder has (i) properly completed and duly executed the
certificate following the form of election to purchase set forth on the reverse side of the Rights Certificate surrendered for
such exercise, and (ii) provided such additional evidence of the identity of the Beneficial Owner (or former Beneficial Owner)
of the Rights represented by such Rights Certificate or Related Persons thereof as the Company or the Rights Agent reasonably
requests.


 


(g)Except
for those provisions herein that expressly survive the termination of this Agreement, this Agreement shall terminate upon the
earlier of the Expiration Date and such time as all outstanding Rights have been exercised, redeemed or exchanged hereunder.


 


Section
8.Cancellation and Destruction of Rights
Certificates.


 


All
Rights Certificates surrendered for the purpose of exercise, transfer, split up, combination or exchange shall, if surrendered
to the Company or to any of its agents, be delivered to the Rights Agent for cancellation or in cancelled form, or, if surrendered
to the Rights Agent, shall be cancelled by it, and no Rights Certificates shall be issued in lieu thereof except as expressly
permitted by this Agreement. The Company shall deliver to the Rights Agent for cancellation and retirement, and the Rights Agent
shall so cancel and retire, any Rights Certificates acquired by the Company otherwise than upon the exercise thereof. The Rights
Agent shall deliver all cancelled Rights Certificates to the Company, or shall, at the written request of the Company, destroy
or cause to be destroyed such cancelled Rights Certificates, and in such case shall deliver a certificate of destruction thereof
to the Company.


 


Section
9.Reservation and Availability of Capital
Stock.


 


(a)The
Company shall cause to be reserved and kept available out of its authorized and unissued shares of Preferred Stock (and following
the occurrence of a Triggering Event, out of its authorized and unissued shares of Common Stock and/or other securities or out
of its authorized and issued shares held in its treasury), a number of shares of Preferred Stock (and, following the occurrence
of a Triggering Event, shares of Common Stock and/or other securities) that, as provided in this Agreement, including Section
11(a)(iii) hereof, shall be sufficient to permit the exercise in full of all outstanding Rights. Upon the occurrence of any events
resulting in an increase in the aggregate number of shares of Preferred Stock (or Common Stock and/or other equity securities
of the Company) issuable upon exercise of all outstanding Rights above the number then reserved, the Company shall make appropriate
increases in the number of shares so reserved.


 


(b)As
long as the shares of Preferred Stock (and following the occurrence of a Triggering Event, Common Stock and/or other securities)
issuable upon the exercise of the Rights may be listed or admitted to trading on any national securities exchange, the Company
shall use its commercially reasonable efforts to cause, from and after such time as the Rights become exercisable, all shares
reserved for such issuance to be listed or admitted to trading on such exchange upon official notice of issuance upon such exercise.


 






    	 	- 21 -	 



     

    

 


(c)If
the Company is required to file a registration statement pursuant to the Securities Act with respect to the securities purchasable
upon exercise of the Rights, the Company shall use its commercially reasonable efforts to (i) file, as soon as practicable
following the earliest date after the first occurrence of a Flip-In Event on which the consideration to be delivered by the Company
upon exercise of the Rights has been determined in accordance with this Agreement, or as soon as is required by law following
the Distribution Date, as the case may be, such registration statement; (ii) cause such registration statement to become
effective as soon as practicable after such filing; and (iii) cause such registration statement to remain effective (and
to include a prospectus at all times complying with the requirements of the Securities Act) until the earlier of (A) the
date as of which the Rights are no longer exercisable for the securities covered by such registration statement, and (B) the
Expiration Date. The Company shall also take such action as may be appropriate under, or to ensure compliance with, the securities
or “blue sky” laws of the various states in connection with the exercisability of the Rights. The Company may temporarily
suspend, with written notice thereof to the Rights Agent, for a period of time not to exceed ninety (90) days after the date set
forth in clause (i) of the first sentence of this Section 9(c), the exercisability of the Rights in order to prepare and file
such registration statement and permit it to become effective. Upon any such suspension, the Company shall issue a public announcement
stating that the exercisability of the Rights has been temporarily suspended, as well as a public announcement at such time as
the suspension is no longer in effect, in each case with simultaneous written notice to the Rights Agent. In addition, if the
Company shall determine that a registration statement is required following the Distribution Date, the Company may temporarily
suspend the exercisability of the Rights until such time as a registration statement has been declared effective. Notwithstanding
any provision of this Agreement to the contrary, the Rights shall not be exercisable in any jurisdiction if the requisite qualification
in such jurisdiction shall not have been obtained, the exercise thereof shall not be permitted under applicable law, or an effective
registration statement is required and shall not have been declared effective or has been suspended.


 


(d)The
Company shall take such action as may be necessary to ensure that each one one-thousandths of a share of Preferred Stock (and,
following the occurrence of a Triggering Event, Common Stock and/or other securities that may be delivered upon exercise of Rights)
shall be, at the time of delivery of the certificates or depositary receipts for such securities (subject to payment of the Exercise
Price), duly and validly authorized and issued, fully paid and non-assessable.


 


(e)The
Company shall pay when due and payable any and all documentary, stamp or transfer tax, or other tax or governmental charge, that
is payable in respect of the issuance and delivery of the Rights Certificates or the issuance and delivery of any certificates
or depository receipts or entries in the Book Entry account system of the transfer agent for the Preferred Stock for a number
of one one-thousandths of a share of Preferred Stock (or Common Stock and/or other equity securities of the Company that may be
delivered upon exercise of the Rights) upon the exercise of Rights; provided, however, the Company shall
not be required to pay any such tax or governmental charge that may be payable in connection with the issuance or delivery of
any of any certificates or depositary receipts or entries in the Book Entry account system of the transfer agent for the Preferred
Stock for a number of one one-thousandths of a share of Preferred Stock (or Common Stock and/or other equity securities of the
Company as the case may be) to any Person other than the registered holder of the Rights Certificates evidencing the Rights surrendered
for exercise. The Company shall not be required to issue or deliver any certificates or depositary receipts or entries in the
Book Entry account system of the transfer agent for the Preferred Stock (or Common Stock and/or other equity securities of the
Company as the case may be) to, or in a name other than that of, the registered holder upon the exercise of any Rights until any
such tax or governmental charge has been paid (any such tax or governmental charge being payable by the holder of such Rights
Certificate at the time of surrender) or until it has been established to the Company’s or Rights Agent’s satisfaction
that no such tax or governmental charge is due.


 






    	 	- 22 -	 



     

    

 


Section
10.Preferred Stock Record Date.


 


Each
Person in whose name any certificate or entry in the Book Entry account system of the transfer agent for the Preferred Stock for
a number of one one-thousandths of a share of Preferred Stock (or Common Stock and/or other securities, as the case may be) is
issued upon the exercise of Rights shall be for all purposes the holder of record of such fractional shares of Preferred Stock
(or Common Stock and/or other securities, as the case may be) represented thereby on, and such certificate or entry shall be dated
the date upon which the Rights Certificate evidencing such Rights was duly surrendered and payment of the Exercise Price (and
any applicable transfer taxes and governmental charges) was made; provided, however, that if the date of such surrender
and payment is a date upon which the applicable transfer books of the Company are closed, such Person shall be deemed to have
become the record holder of such securities (fractional or otherwise) on, and such certificate or entry shall be dated, the next
succeeding Business Day on which the applicable transfer books of the Company are open; provided, further, that
if delivery of a number of one one-thousandths of a share of Preferred Stock is delayed pursuant to Section 9(c) hereof, such
Persons shall be deemed to have become the record holders of such number of one one-thousandths of a share of Preferred Stock
only when such Preferred Stock first become deliverable. Prior to the exercise of the Rights evidenced thereby, the holder of
a Rights Certificate shall not be entitled to any rights of a stockholder of the Company with respect to the securities for which
the Rights are exercisable, including, without limitation, the right to vote, to receive dividends or other distributions or to
exercise any preemptive rights, and shall not be entitled to receive any notice of any proceedings of the Company, except as provided
herein.


 


Section
11.Adjustment of Exercise Price, Number and
Kind of Shares or Number of Rights.


 


The
Exercise Price, the number and kind of securities covered by each Right and the number of Rights outstanding are subject to adjustment
from time to time as provided in this Section 11.


 






    	 	- 23 -	 



     

    

 


(a)(i) In
the event the Company at any time after the date hereof (A) declares a dividend on the Preferred Stock payable
in shares of Preferred Stock; (B) subdivides the outstanding Preferred Stock; (C) combines the outstanding Preferred
Stock into a smaller number of shares; or (D) issues any shares of its capital stock in a reclassification of Preferred Stock
(including any such reclassification in connection with a consolidation or merger in which the Company is the continuing or surviving
corporation), except as otherwise provided in this Section 11(a), then the Exercise Price in effect at the time of the record
date for such dividend or of the effective date of such subdivision, combination or reclassification, and the number and kind
of shares (or fractions thereof) of Preferred Stock or capital stock, as the case may be, issuable on such date upon exercise
of the Rights, shall be proportionately adjusted so that the holder of any Right exercised after such time becomes entitled to
receive, upon payment of the Exercise Price then in effect, the aggregate number and kind of shares (or fractions thereof) of
Preferred Stock or capital stock, as the case may be, which, if such Right had been exercised immediately prior to such date,
such holder would have owned upon such exercise and been entitled to receive by virtue of such dividend, subdivision, combination
or reclassification; provided, however, that in no event may the consideration to be paid upon the exercise of one
Right be less than the aggregate par value of the shares (or fractions thereof) of capital stock of the Company issuable upon
exercise of one Right. If an event occurs that would require an adjustment under both this Section 11(a)(i) and Section 11(a)(ii)
hereof, the adjustment provided for in this Section 11(a)(i) shall be in addition to, and shall be made prior to, any adjustment
required pursuant to Section 11(a)(ii) hereof.


 


(ii)Subject
to Section 23 and Section 24 hereof, in the event that any Person (other than any Excluded Person), alone or together with its
Related Persons, becomes an Acquiring Person (the first occurrence of such event, the “Flip-In Event”),
unless the event causing such Person to become an Acquiring Person is a transaction set forth in Section 13(a) hereof, then proper
provision shall be made so that promptly following the Redemption Period, each holder of a Right (except as provided below and
in Section 7(e) hereof) shall thereafter have the right to receive, upon exercise thereof and payment of an amount equal to the
then current Exercise Price in accordance with the terms of this Agreement, in lieu of a number of one one-thousandths
of a share of Preferred Stock, a number of shares of Common Stock of the Company equal to the result obtained by (A) multiplying
the then current Exercise Price by the then number of one one-thousandths of a share of Preferred Stock for which a Right was
or would have been exercisable immediately prior to the first occurrence of a Flip-In Event, whether or not such Right was then
exercisable; and (B) dividing that product (which, following such first occurrence, shall be referred to as the “Exercise
Price” for each Right and for all purposes of this Agreement except to the extent set forth in Section 13 hereof)
by 50% of the Current Market Price of Common Stock on the date of such first occurrence (such number of shares, the “Adjustment
Shares”); provided, however, that in connection with any exercise effected pursuant to this Section 11(a)(ii), no
holder of Rights shall be entitled to receive Common Stock (or other shares of capital stock of the Company) that would result
in such holder, together with such holder’s Affiliates and Associates, becoming the Beneficial Owner of more than 4.99%
of the then-outstanding Common Stock. If a holder would, but for the immediately preceding sentence, be entitled to receive a
number of shares that would otherwise result in such holder, together with such holder’s Affiliates and Associates, becoming
the Beneficial Owner of in excess of 4.99% of the then-outstanding Common Stock (such shares, the “Excess Shares”),
then in lieu of receiving such Excess Shares and to the extent permitted by law or orders applicable to the Company, such holder
will only be entitled to receive an amount in cash or, at the election of the Company, a note or other evidence of indebtedness
maturing within nine months with a principal amount, equal to the current per share Current Market Price of a share of Common
Stock at the Close of Business on the Trading Day following the date of exercise multiplied by the number of Excess Shares that
would otherwise have been issuable to such holder. The Company shall provide the Rights Agent with written notice of the identity
of any such Acquiring Person, Related Person or the nominee or transferee of any of the foregoing, and the Rights Agent may rely
on such notice in carrying out its duties under this Agreement and shall be deemed not to have any knowledge of the identity of
any such Acquiring Person, Related Person or the nominee or transferee of any of the foregoing, unless and until it has received
such notice.


 






    	 	- 24 -	 



     

    

 


(iii)In
the event that the number of shares of Common Stock authorized by the Certificate of Incorporation, but not outstanding, or reserved
for issuance for purposes other than upon exercise of the Rights, is not sufficient to permit the exercise in full of the Rights
in accordance with the foregoing clause (ii), the Board shall, to the extent permitted by applicable law and by any agreements
or instruments then in effect to which the Company is a party, (A) determine the excess of (1) the value of the Adjustment
Shares issuable upon the exercise of a Right (the “Current Value”) over (2) the Exercise Price
(such excess being the “Spread”), and (B) with respect to each Right (subject to Section 7(e) hereof),
make adequate provision to substitute for some or all of the Adjustment Shares, upon exercise of a Right and payment of the applicable
Exercise Price, (1) cash; (2) a reduction in the Exercise Price; (3) shares or fractions of a share of Preferred
Stock or other equity securities of the Company (including, without limitation, shares, or units of shares, of Preferred Stock
which the Board has determined to have the same value as shares of Common Stock) (such shares of equity securities being herein
called “Common Stock Equivalents”); (4) debt securities of the Company; (5) other assets;
or (6) any combination of the foregoing, in each case having an aggregate value equal to the Current Value, as determined
by the Board based upon the advice of a financial advisor selected by the Board; provided, however, if the Company
has not made adequate provision to deliver value pursuant to clause (B) above within thirty (30) days following the later of (x) the
first occurrence of a Flip-In Event; and (y) the date on which the Redemption Period expires (the later of (x) and (y) being
referred to herein as the “Flip-In Trigger Date”), then the Company shall deliver, upon the surrender
for exercise of a Right and without requiring payment of the Exercise Price, shares of Common Stock (to the extent available),
and then, if necessary such number or fractions of shares of Preferred Stock (to the extent available) and then, if necessary,
cash, which shares and/or cash have an aggregate value equal to the Spread.


 


If,
upon the occurrence of a Flip-In Event, the Board determines in good faith that it is likely that sufficient additional shares
of Common Stock could be authorized for issuance upon exercise in full of the Rights, then if the Board so elects, the thirty-day
period set forth above may be extended to the extent necessary, but not more than ninety (90) days after the Flip-In Trigger Date,
in order that the Company may seek stockholder approval for the authorization of such additional shares (such period, as it may
be extended, the “Substitution Period”). To the extent that action is to be taken pursuant to the preceding
provisions of this Section 11(a)(iii), the Company (aa) shall provide, subject to Section 7(e) hereof, that such action shall
apply uniformly to all outstanding Rights; and (bb) may suspend the exercisability of the Rights until the expiration of
the Substitution Period in order to seek an authorization of additional shares and/or to decide the appropriate form of distribution
to be made pursuant to the second sentence of this Section 11(a)(iii) and to determine the value thereof. In the event of any
such suspension, the Company shall issue a public announcement (with prompt written notice thereof to the Rights Agent) stating
that the exercisability of the Rights has been temporarily suspended, as well as a public announcement (with prompt written notice
thereof to the Rights Agent) at such time as the suspension is no longer in effect. For purposes of this Section 11(a)(iii), the
value of the Common Stock shall be the Current Market Price of the Common Stock on the Flip-In Trigger Date and the value of any
Common Stock Equivalents shall have the same value as the Common Stock on such date. The Board may establish procedures to allocate
the right to receive shares of Common Stock upon the exercise of the Rights among holders of Rights pursuant to this Section 11(a)(iii).


 






    	 	- 25 -	 



     

    

 


(b)In
case the Company fixes a record date for the issuance of rights, options or warrants to all holders of Preferred Stock entitling
them (for a period expiring within forty-five (45) days after such record date) to subscribe for or purchase Preferred Stock (or
shares having the same rights, privileges and preferences as the shares of Preferred Stock (“Equivalent Preferred
Stock”)) or securities convertible into Preferred Stock or Equivalent Preferred Stock at a price per share of Preferred
Stock or per share of Equivalent Preferred Stock (or having a conversion price per share, if a security convertible into Preferred
Stock or Equivalent Preferred Stock) less than the Current Market Price of the Preferred Stock 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 shares of Preferred Stock or Equivalent Preferred
Stock outstanding on such record date, plus the number of shares of Preferred Stock or Equivalent Preferred Stock which the aggregate
offering price of the total number of shares of Preferred Stock and/or Equivalent Preferred Stock so to be offered (and/or the
aggregate initial conversion price of the convertible securities so to be offered) would purchase at such Current Market Price,
and the denominator of which shall be the number of shares of Preferred Stock or Equivalent Preferred Stock outstanding on such
record date, plus the number of additional shares of Preferred Stock and/or Equivalent Preferred Stock to be offered for subscription
or purchase (or into which the convertible securities so to be offered are initially convertible); provided, however,
that in no event may the consideration to be paid upon the exercise of one Right be less than the aggregate par value of the shares
of capital stock of the Company issuable upon exercise of one Right. In case such subscription price may be paid by delivery of
consideration all or part of which may be in a form other than cash, the value of such consideration shall be determined by the
Board, 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. Shares of Preferred Stock or Equivalent Preferred Stock owned by or held for the account of the
Company or any Subsidiary will not be deemed outstanding for the purpose of such computation. Such adjustment shall be made successively
whenever such a record date is fixed, and in the event that such rights, options or warrants are not so issued, the Exercise Price
shall be adjusted to be the Exercise Price that would then be in effect if such record date had not been fixed.


 


(c)In
case the Company fixes a record date for a distribution to all holders of shares of Preferred Stock (including any such distribution
made in connection with a consolidation or merger in which the Company is the continuing or surviving corporation), evidences
of indebtedness, cash (other than a regular quarterly cash dividend out of the earnings or retained earnings of the Company),
assets (other than a dividend payable in shares of Preferred Stock, but including any dividend payable in stock other than Preferred
Stock), or subscription rights, options or warrants (excluding those referred to in Section 11(b) hereof), then, in each case,
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 Current Market Price of the Preferred Stock on such
record date minus the fair market value (as determined in good faith by the Board, whose determination shall be described in a
statement filed with the Rights Agent and shall be binding and conclusive for all purposes on the Rights Agent and the holders
of the Rights) of the portion of the cash, assets or evidences of indebtedness so to be distributed or of such subscription rights
or warrants distributable in respect of a share of Preferred Stock, and the denominator of which shall be the Current Market Price
of the Preferred Stock on such record date; provided, however, that in no event shall the consideration to be paid
upon the exercise of one Right be less than the aggregate par value of the shares of capital stock of the Company issuable upon
exercise of one Right. 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 that would have been in effect
if such record date had not been fixed.


 






    	 	- 26 -	 



     

    

 


(d)Notwithstanding
anything herein to the contrary, no adjustment in the Exercise Price is required unless such adjustment would require an increase
or decrease of at least one percent (1%) in the Exercise Price; provided, however, that any adjustments that by
reason of this Section 11(d) are not required to be made shall be carried forward and taken into account in any subsequent adjustment.
All calculations under this Section 11 shall be made to the nearest cent or to the nearest ten-thousandth of a share of Common
Stock or other share or one-millionth of a share of Preferred Stock, as the case may be. Notwithstanding the first sentence of
this Section 11(d), no adjustment required by this Section 11 may be made after the earlier of (i) three years from the date
of the transaction that requires such adjustment and (ii) the Expiration Date.


 


(e)If,
as a result of an adjustment made pursuant to Sections 11(a)(ii) or 13(a) hereof, the holder of any Right thereafter exercised
becomes entitled to receive any shares of capital stock other than Preferred Stock, the number of such other shares shall be subject
to adjustment from time to time in a manner and on terms as nearly equivalent as practicable to the provisions with respect to
the Preferred Stock contained in Sections 11(a), (b), (c), (d), (f), (g), (h), (i), (j), (k) and (l) hereof, and the provisions
of Sections 7, 9, 10, 13 and 14 hereof with respect to the Preferred Stock shall apply on like terms to any such other shares.


 


(f)All
Rights originally issued by the Company subsequent to any adjustment made to the Exercise Price hereunder will evidence the right
to purchase, at the adjusted Exercise Price, the number of one one-thousandths of a share of Preferred Stock (or other securities
or amount of cash or combination thereof) that may be acquired from time to time hereunder upon exercise of the Rights, all subject
to further adjustment as provided herein.


 


(g)Unless
the Company has exercised its election pursuant to Section 11(h), upon each adjustment of the Exercise Price as a result of the
calculations made in Sections 11(b) and (c) hereof, each Right outstanding immediately prior to the making of such adjustment
will thereafter evidence the right to purchase, at the adjusted Exercise Price, a number of one one-thousandths of a share of
Preferred Stock (calculated to the nearest one-millionth of a share) obtained by (i) multiplying (A) the number of one
one-thousandths of a share covered by a Right immediately prior to this adjustment by (B) the Exercise Price in effect immediately
prior to such adjustment of the Exercise Price; and (ii) dividing the product so obtained by the Exercise Price in effect
immediately after such adjustment of the Exercise Price.


 






    	 	- 27 -	 



     

    

 


(h)The
Company may elect, on or after the date of any adjustment of the Exercise Price, to adjust the number of Rights, in lieu
of any adjustment in the number of one one-thousandths of a share of Preferred Stock that may be acquired upon the exercise of
a Right. Each of the Rights outstanding after the adjustment in the number of Rights shall be exercisable for the number of one
one-thousandths of a share of Preferred Stock for which a Right was exercisable immediately prior to such adjustment. Each Right
held of record prior to such adjustment of the number of Rights shall become a number of Rights (calculated to the nearest one
ten-thousandth of a Right) obtained by dividing the Exercise Price in effect immediately prior to adjustment of the Exercise Price
by the Exercise Price in effect immediately after adjustment of the Exercise Price. The Company shall make a public announcement
(with prompt written notice thereof to the Rights Agent) of its election to adjust the number of Rights, indicating the record
date for the adjustment, and, if known at the time, the amount of the adjustment to be made. Such record date may be the date
on which the Exercise Price is adjusted or any day thereafter, but, if the Rights Certificates have been issued, shall be at least
ten (10) days later than the date of such public announcement. If Rights Certificates have been issued, upon each adjustment of
the number of Rights pursuant to this Section 11(h), the Company shall, as promptly as practicable, at the option of the Company,
either (A) cause to be distributed to holders of record of Rights Certificates on such record date Rights Certificates evidencing,
subject to Section 14 hereof, the additional Rights to which such holders are entitled as a result of such adjustment, or (B) cause
to be distributed to such holders of record in substitution and replacement for the Rights Certificates held by such holders prior
to the date of adjustment, and upon surrender thereof, if required by the Company, new Rights Certificates evidencing all the
Rights to which such holders become entitled after such adjustment. Rights Certificates so to be distributed shall be issued,
executed and delivered by the Company, and countersigned and delivered by the Rights Agent, in the manner provided for herein
(and may bear, at the option of the Company, the adjusted Exercise Price) and shall be registered in the names of the holders
of record of Rights Certificates on the record date specified in the public announcement.


 


(i)Irrespective
of any adjustment or change in the Exercise Price or the number of one one-thousandths of a share of Preferred Stock issuable
upon the exercise of the Rights, the Rights Certificates theretofore and thereafter issued may continue to express the Exercise
Price per one one-thousandth of a share and the number of one one-thousandths of a share which were expressed in the initial Rights
Certificates issued hereunder.


 


(j)Before
taking any action that would cause an adjustment reducing the Exercise Price below the then par value, if any, of the number of
one one-thousandths of a share of Preferred Stock issuable upon exercise of the Rights, the Company shall take any corporate action
that may, in the opinion of its counsel, be necessary in order that the Company may validly and legally issue, such number of
fully paid and non-assessable of one one-thousandths of a share of Preferred Stock at such adjusted Exercise Price.


 






    	 	- 28 -	 



     

    

 


(k)In
any case in which this Section 11 requires 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 (with prompt written notice thereof to the Rights Agent) until the occurrence
of such event the issuance to the holder of any Right exercised after such record date of that number of one one-thousandths of
a share of Preferred Stock and shares of other capital stock or securities of the Company, if any, issuable upon such exercise
over and above the number of one one-thousandths of a share of Preferred Stock and shares of other capital stock or securities
of the Company, 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 to such holder a due bill or other 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.


 


(l)Notwithstanding
anything in this Section 11 to the contrary, prior to the Distribution Date, the Company is entitled to make such reductions in
the Exercise Price, in addition to those adjustments expressly required by this Section 11, to the extent that the Board determines
that any (i) consolidation or subdivision of the Preferred Stock; (ii) issuance wholly for cash of any shares of Preferred
Stock at less than the Current Market Price; (iii) issuance wholly for cash of shares of Preferred Stock or securities that
by their terms are convertible into or exchangeable for shares of Preferred Stock; (iv) stock dividends; or (v) issuance
of rights, options or warrants referred to in this Section 11, hereafter made by the Company to holders of its Preferred Stock
is taxable to such holders or reduces the taxes payable by such holders.


 


(m)The
Company may not, at any time after the Distribution Date, (i) consolidate with any other Person (other than a direct or indirect,
wholly-owned Subsidiary of the Company in a transaction that complies with Section 11(n) hereof); (ii) merge with or into
any other Person (other than a direct or indirect, wholly-owned Subsidiary of the Company in a transaction that complies with
Section 11(n) hereof); or (iii) sell or transfer (or permit any Subsidiary to sell or transfer), in one transaction, or a
series of transactions, assets or earning power aggregating more than 50% of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to any other Person or Persons (other than the Company and/or any of its direct or indirect, wholly-owned
Subsidiaries in one or more transactions, each of which complies with Section 11(n) hereof), if (A) at the time of or immediately
after such consolidation, merger or sale there are any rights, warrants or other instruments or securities outstanding or agreements
in effect that would substantially diminish or otherwise eliminate the benefits intended to be afforded by the Rights; or (B) prior
to, simultaneously with or immediately after such consolidation, merger or sale, the stockholders or other Persons holding an
equity interest in such Person that constitutes, or would constitute, the “Principal Party” for purposes of Section
13(a) hereof shall have received a distribution of, or otherwise have transferred to them, the Rights previously owned by such
Person or any of its Related Persons; provided, however, this Section 11(m) shall not affect the ability of any
Subsidiary of the Company to consolidate with, merge with or into, or sell or transfer assets or earning power to, any other Subsidiary
of the Company.


 


(n)After
the earlier of the Distribution Date and the Stock Acquisition Date and as long as any Rights are outstanding (other than Rights
that have become null and void pursuant to Section 7(e) hereof), the Company may not, except as permitted by Sections 23, 24,
and 27Section 27 hereof, take (or permit any Subsidiary of the Company to take) any action if at the time such action is taken
it is reasonably foreseeable that such action will diminish substantially or otherwise eliminate the benefits intended to be afforded
by the Rights.


 






    	 	- 29 -	 



     

    

 


(o)Notwithstanding
anything in this Agreement to the contrary, in the event that the Company, at any time after the date hereof and prior to the
Distribution Date, (i) declares a dividend on the outstanding shares of Common Stock payable in shares of Common Stock; (ii) subdivides
any outstanding shares of Common Stock; (iii) combines any of the outstanding shares of Common Stock into a smaller number
of shares; or (iv) issues any shares of its capital stock in a reclassification of the Common Stock (including any such reclassification
in connection with a consolidation or merger in which the Company is the continuing or surviving corporation), then the number
of Rights associated with each share of Common Stock then outstanding or issued or delivered thereafter but prior to the Distribution
Date shall be proportionately adjusted so that the number of Rights thereafter associated with each share of Common Stock following
any such event equals the result obtained by multiplying the number of Rights associated with each share of Common Stock immediately
prior to such event by a fraction the numerator of which shall be the total number of shares of Common Stock outstanding immediately
prior to the occurrence of the event and the denominator of which shall be the total number of shares of Common Stock outstanding
immediately following the occurrence of such event. The adjustments provided for in this Section 11(o) shall be made successively
whenever such a dividend is declared or paid or such a subdivision, combination, or reclassification is effected. If an event
occurs that would require an adjustment under Section 11(a)(ii) hereof and this Section 11(o), the adjustments provided for in
this Section 11(o) shall be in addition and prior to any adjustment required pursuant to Section 11(a)(ii) hereof.


 


Section
12.Certificate of Adjusted Exercise Price
or Number of Shares.


 


Whenever
an adjustment is made or any event affecting the Rights or their exercisability (including without limitation an event that causes
Rights to become null and void) occurs as provided in Section 11 or Section 13 hereof, the Company shall (a) promptly prepare
a certificate setting forth such adjustment or describing such event, and a brief reasonably detailed statement of the facts,
computations and methodology accounting for such adjustment; (b) promptly file with the Rights Agent, and with each transfer
agent for the Preferred Stock and the Common Stock, a copy of such certificate; and (c) mail a brief summary thereof to each
holder of a Rights Certificate (or, if prior to the Distribution Date, each registered holder of shares of Common Stock) in accordance
with Section 27 hereof. Notwithstanding the foregoing sentence, the failure of the Company to make such certification or give
such notice shall not affect the validity of or the force or effect of the requirement for such adjustment. Any adjustment to
be made pursuant to Section 11 or Section 13 hereof shall be effective as of the date of the event giving rise to such adjustment.
The Rights Agent shall be entitled to rely on any such certificate and on any adjustment or statement therein contained and shall
have no duty or liability with respect thereto, and shall not be deemed to have knowledge of any such adjustment or any such event
unless and until it shall have received such certificate.


 






    	 	- 30 -	 



     

    

 


Section
13.Consolidation, Merger or Sale or Transfer
of Assets or Earning Power.


 


(a)At
any time after a Person has become an Acquiring Person, in the event that, directly or indirectly,


 


(x) the
Company consolidates with, or merges with and into, any other Person (other than a direct or indirect, wholly-owned Subsidiary
of the Company in a transaction that complies with Section 11(n) hereof), and the Company is not the continuing or surviving entity
of such consolidation or merger;


 


(y) any
Person (other than a direct or indirect, wholly-owned Subsidiary of the Company in a transaction that complies with Section 11(n)
hereof) consolidates with, or merges with or into, the Company, and the Company is the continuing or surviving entity of such
consolidation or merger and, in connection with such consolidation or merger, all or part of the outstanding shares of Common
Stock is converted into or exchanged for stock or other securities of any other Person (or the Company) or cash or any other property;
or


 


(z) the
Company sells or otherwise transfers (or one or more of its Subsidiaries sells or otherwise transfers) to any Person or Persons
(other than the Company or any of its direct or indirect, wholly-owned Subsidiaries in one or more transactions, each of which
complies with Section 11(n) hereof), in one or more transactions, assets or earning power aggregating 50% or more of the assets
or earning power of the Company and its Subsidiaries, taken as a whole;


 


(any
such event described in (x), (y), or (z), a “Flip-Over Event”), then, in each such case, proper provision
shall be made so that:


 


(i)each
holder of a Right, except as provided in Section 7(e) hereof, upon the expiration of the Redemption Period, will have the right
to receive, upon the exercise of the Right at the then current Exercise Price in accordance with the terms of this Agreement,
and in lieu of a number of one one-thousandth shares of Preferred Stock, a number of validly authorized and issued, fully
paid, non-assessable and freely tradable shares of Common Stock of the Principal Party, free of any liens, encumbrances, rights
of first refusal, transfer restrictions or other adverse claims, equal to the result obtained by:


 


(A)multiplying
such then current Exercise Price by the number of one one-thousandths of a share of Preferred Stock for which such Right is exercisable
immediately prior to the first occurrence of a Flip-Over Event (or, if a Flip-In Event has occurred prior to the first occurrence
of a Flip-Over Event, multiplying the number of one one-thousandths of a share of Preferred Stock for which a Right would be exercisable
hereunder but for the first occurrence of such Flip-In Event by the Exercise Price that would be in effect hereunder but for such
first occurrence), and


 


(B)dividing
that product (which, following the first occurrence of a Flip-Over Event, shall be the “Exercise Price”
for each Right and for all purposes of this Agreement) by 50% of the then Current Market Price of the shares of Common Stock of
such Principal Party on the date of consummation of such Flip-Over Event (or the fair market value on such date of other securities
or property of the Principal Party, as provided for herein);


 


(ii)such
Principal Party shall be liable for, and shall assume, by virtue of such Flip-Over Event, all the obligations and duties of the
Company pursuant to this Agreement;


 






    	 	- 31 -	 



     

    

 


(iii)the
term “Company” will thereafter be deemed to refer to such Principal Party, it being specifically intended that the
provisions of Section 11 hereof shall apply only to such Principal Party following the first occurrence of a Flip-Over Event;


 


(iv)such
Principal Party will take such steps (including, but not limited to, the reservation of a sufficient number of shares of its Common
Stock) in connection with the consummation of any such transaction as may be necessary to ensure that the provisions hereof shall
be applicable, as nearly as reasonably may be possible, to its shares of Common Stock thereafter deliverable upon the exercise
of the Rights; and


 


(v)the
provisions of Section 11(a)(ii) hereof shall be of no further effect following the first occurrence of any Flip-Over Event, and
the Rights that have not theretofore been exercised shall thereafter become exercisable in the manner described in this Section
13.


 


(b)“Principal
Party” shall mean


 


(i)in
the case of any transaction described in clause (x) or (y) of the first sentence of Section 13(a) hereof, (A) the Person
(including the Company as successor thereto or as the surviving entity) that is the issuer of any securities or other equity interests
into which shares of Common Stock of the Company are converted in such merger or consolidation, or, if there is more than one
such issuer, the issuer of Common Stock that has the highest aggregate Current Market Price; and (B) if no securities or
other equity interests are so issued, (1) the Person that is the other constituent party to such merger, if such Person survives
the merger, or, if there is more than one such Person, the Person, the Common Stock of which has the highest aggregate Current
Market Price or (2) if the Person that is the other party to the merger does not survive the merger, the Person that does survive
the merger (including the Company if it survives) or (3) the Person resulting from the consolidation; and


 


(ii)in
the case of any transaction described in clause (z) of the first sentence of Section 13(a) hereof, the Person that is the party
receiving the largest portion of the assets or earning power transferred pursuant to such transaction or transactions, or, if
each Person that is a party to such transaction or transactions receives the same portion of the assets or earning power transferred
pursuant to such transaction or transactions or if the Person receiving the largest portion of the assets or earning power cannot
be determined, whichever Person that has received assets or earning power pursuant to such transaction or transactions, the Common
Stock of which has the highest aggregate Current Market Price; provided, however, that in any such case: (1) if
the Common Stock of such Person is not at such time and has not been continuously over the preceding twelve (12) month period
registered under Section 12 of the Exchange Act, and such Person is a direct or indirect Subsidiary of another Person the Common
Stock of which is and has been so registered, “Principal Party” will refer to such other Person; (2) if the Common
Stock of such Person is not and has not been so registered and such Person is a Subsidiary, directly or indirectly, of more than
one Person, the Common Stocks of two or more of which are and have been so registered, “Principal Party” will refer
to whichever of such Persons is the issuer of the Common Stock having the highest aggregate market value; and (3) if the
Common Stock of such Person is not and has not been so registered and such Person is owned, directly or indirectly, by a joint
venture formed by two or more Persons that are not owned, directly or indirectly, by the same Person, the rules set forth in (1)
and (2) above will apply to each of the chains of ownership having an interest in such joint venture as if such party were a Subsidiary
of both or all of such joint venturers, and the Principal Parties in each such chain shall bear the obligations set forth in this
Section 13 in the same ratio as their direct or indirect interests in such Person bear to the total of such interests.


 






    	 	- 32 -	 



     

    

 


(c)The
Company may not consummate any Flip-Over Event unless the Principal Party has a sufficient number of authorized shares of its
Common Stock that have not been issued (or reserved for issuance) or that are held in its treasury to permit the exercise in full
of the Rights in accordance with this Section 13 and unless prior thereto the Company and such Principal Party have executed and
delivered to the Rights Agent a supplemental agreement providing for the terms set forth in paragraphs (a) and (b) of this Section
13 and further providing that, as soon as practicable after the date of any such Flip-Over Event, the Principal Party, at its
own expense, shall:


 


(i)if
the Principal Party is required to file a registration statement pursuant to the Securities Act with respect to the Rights and
the securities purchasable upon exercise of the Rights, (A) prepare and file such registration statement; (B) use its
best efforts to cause such registration statement to become effective as soon as practicable after such filing and remain effective
(and to include a prospectus at all times complying with the requirements of the Securities Act) until the Expiration Date; and
(C) take such action as may be required to ensure that any acquisition of such securities that may be acquired upon exercise
of the Rights complies with any applicable state security or “blue sky” laws as soon as practicable following the
execution of such agreement;


 


(ii)deliver
to holders of the Rights historical financial statements for the Principal Party and each of its Affiliates that comply in all
respects with the requirements for registration on Form 10 (or any successor form) under the Exchange Act;


 


(iii)use
its best efforts to obtain any and all necessary regulatory approvals as may be required with respect to the securities that may
be acquired upon exercise of the Rights; and


 


(iv)use
its best efforts, if such Common Stock of the Principal Party is listed or admitted to trading on NASDAQ, the NYSE or on another
national securities exchange, to list or admit to trading (or continue the listing of) the Rights and the securities that may
be acquired upon exercise of the Rights on NASDAQ, the NYSE or on such securities exchange, or if the securities of the Principal
Party that may be acquired upon exercise of the Rights are not listed or admitted to trading on NASDAQ, the NYSE or a national
securities exchange, to cause the Rights and the securities that may be acquired upon exercise of the Rights to be authorized
for quotation on any other system then in use; and


 


(v)obtain
waivers of any rights of first refusal or preemptive rights in respect of the Common Stock of the Principal Party subject to purchase
upon exercise of outstanding Rights.


 






    	 	- 33 -	 



     

    

 


(d)In
case the Principal Party that is to be a party to a transaction referred to in this Section 13 has at the time of such transaction,
or immediately following such transaction has a provision in any of its authorized securities or in its certificate or articles
of incorporation or by-laws or other instrument governing its affairs, or any other agreements or arrangements, which provision
would have the effect of (i) causing such Principal Party to issue, in connection with, or as a consequence of, the consummation
of a transaction referred to in this Section 13, shares of Common Stock of such Principal Party at less than the then Current
Market Price or securities exercisable for, or convertible into, Common Stock of such Principal Party at less than such then Current
Market Price (other than to holders of Rights pursuant to this Section 13); (ii) providing for any special payment, tax or
similar provisions in connection with the issuance of the Common Stock of such Principal Party pursuant to the provisions of this
Section 13; or (iii) otherwise eliminating or substantially diminishing the benefits intended to be afforded by the Rights
in connection with, or as a consequence of, the consummation of a transaction referred to in this Section 13, then, in each such
case, the Company may not consummate any such transaction unless prior thereto the Company and such Principal Party have executed
and delivered to the Rights Agent a supplemental agreement providing that the provision in question of such Principal Party has
been cancelled, waived or amended, or that the authorized securities have been redeemed, so that the applicable provision will
have no effect in connection with, or as a consequence of, the consummation of such transaction.


 


(e)The
provisions of this Section 13 shall apply similarly to successive mergers or consolidations or sales or other transfers. In the
event that a Flip-Over Event occurs after the occurrence of a Flip-In Event, the Rights that have not theretofore been exercised
shall thereafter become exercisable in the manner described in Section 13(a) hereof.


 


(f)Notwithstanding
anything contained herein to the contrary, in the event of any merger or other acquisition transaction involving the Company pursuant
to a merger or other acquisition agreement between the Company and any Person (or one or more of such Person's Affiliates or Associates)
which agreement has been approved by the Board prior to any Person becoming an Acquiring Person, this Agreement and the rights
of holders of Rights hereunder shall be terminated in accordance with Section 7(a).


 


Section
14.Fractional Rights; Fractional Shares;
Waiver.


 


(a)The
Company is not required to issue fractions of Rights except prior to the Distribution Date as provided in Section 11(o) hereof,
or to distribute Rights Certificates that evidence fractional Rights. In lieu of such fractional Rights, the Company shall pay
to the Persons to which such fractional Rights would otherwise be issuable an amount in cash equal to such fraction of the market
value of a whole Right. For purposes of this Section 14(a), the market value of a whole Right is the Closing Price of the Rights
for the Trading Day immediately prior to the date that such fractional Rights would have been otherwise issuable.


 


(b)The
Company is not required to issue fractions of shares of Preferred Stock (other than fractions which are integral multiples of
one one-thousandth of a share of Preferred Stock) upon exercise of the Rights or to distribute certificates which evidence
fractional shares of Preferred Stock (other than fractions which are integral multiples of one one-thousandth of a share
of Preferred Stock). In lieu of fractional shares of Preferred Stock that are not integral multiples of one one-thousandth
of a share of Preferred Stock, the Company 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 current market value of one one-thousandth
of a share of Preferred Stock. For purposes of this Section 14(b), the current market value of one one-thousandth of a share of
Preferred Stock is one one-thousandth of the Closing Price of a share of Preferred Stock for the Trading Day immediately prior
to the date of such exercise.


 






    	 	- 34 -	 



     

    

 


(c)Following
the occurrence of one of the events specified in Section 11 hereof giving rise to the right to receive Common Stock, Common Stock
Equivalents or other securities upon the exercise of a Right, the Company will not be required to issue fractions of shares of
Common Stock, Common Stock Equivalents or other securities upon exercise of the Rights or to distribute certificates which evidence
fractional shares of Common Stock, Common Stock Equivalents or other securities. In lieu of fractional shares of Common Stock,
Common Stock Equivalents or other securities, the Company 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 current market value of one share
of Common Stock, Common Stock Equivalents or other securities. For purposes of this Section 14(c), the current market value of
one share of Common Stock is the Closing Price of one share of Common Stock for the Trading Day immediately prior to the date
of such exercise.


 


(d)The
holder of a Right, by the acceptance of the Right, expressly waives such holder’s right to receive any fractional Rights
or any fractional shares upon exercise of a Right, except as permitted by this Section 14.


 


(e)Whenever
a payment for fractional Rights or fractional shares is to be made by the Rights Agent under this Agreement, the Company shall
(i) promptly prepare and deliver to the Rights Agent a certificate setting forth in reasonable detail the facts related to
such payments and the prices and formulas utilized in calculating such payments; and (ii) provide sufficient monies to the
Rights Agent in the form of fully collected funds to make such payments. The Rights Agent may rely upon such a certificate and
has no duty with respect to, and will not be deemed to have knowledge of, any payment for fractional Rights or fractional shares
under any Section of this Agreement relating to the payment of fractional Rights or fractional shares unless and until the Rights
Agent has received such a certificate and sufficient monies.


 


Section
15.Rights of Action.


 


All
rights of action in respect of this Agreement, other than the rights of action vested in the Rights Agent hereunder, are vested
in the respective registered holders of the Rights Certificates (and, prior to the Distribution Date, the registered holders of
shares of the Common Stock); and any registered holder of a Rights Certificate (or, prior to the Distribution Date, any registered
holder of shares of the Common Stock), without the consent of the Rights Agent or of the holder of any other Rights Certificate
(or, prior to the Distribution Date, any registered holder of shares of the Common Stock), may, in 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 Company
or any other Person to enforce, or otherwise act in respect of, such holder’s right to exercise the Rights evidenced by
such Rights Certificate in the manner provided in such 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 by the Company and shall be entitled to specific performance of the
obligations hereunder, and injunctive relief against actual or threatened violations by the Company of the obligations hereunder
of any Person (including, without limitation, the Company) subject to this Agreement.


 






    	 	- 35 -	 



     

    

 


Section
16.Agreement of Rights Holders.


 


Every
holder of a Right, by accepting such Right, consents and agrees with the Company and the Rights Agent and with every other holder
of a Right that:


 


(a)prior
to the Distribution Date, the Rights shall be evidenced by the balances indicated in the Book Entry account system of the transfer
agent for the Common Stock registered in the names of the holders of Common Stock (which Common Stock shall also be deemed to
represent certificates for Rights) or, in the case of certificated shares, the certificates for the Common Stock registered in
the names of the holders of the Common Stock (which certificates for shares of Common Stock also constitute certificates for Rights)
and each Right is transferable only in connection with the transfer of the Common Stock;


 


(b)after
the Distribution Date, the Rights Certificates shall be transferable only on the registry books of the Rights Agent if surrendered
at the office of the Rights Agent designated for such purposes, duly endorsed or accompanied by a proper instrument of transfer
and with the appropriate forms and certificates properly completed and duly executed;


 


(c)subject
to Section 6(a) and Section 7(e) hereof, the Company and the Rights Agent may deem and treat the Person in whose name a Rights
Certificate (or, prior to the Distribution Date, the associated balance indicated in the Book Entry account system of the transfer
agent for the Common Stock, or in the case of certificated shares, by the associated Common Stock certificate) is registered as
the absolute owner thereof and of the Rights evidenced thereby (notwithstanding any notations of ownership or writing on the Rights
Certificates or the associated balance indicated in the Book Entry account system of the transfer agent for the Common Stock,
or in the case of certificated shares, by the associated Common Stock certificate made by anyone other than the Company or the
Rights Agent) for all purposes whatsoever, and neither the Company nor the Rights Agent, subject to the last sentence of Section
7(e) hereof, shall be affected by any notice to the contrary; and


 


(d)notwithstanding
anything in this Agreement to the contrary, neither the Company nor the Rights Agent has any liability to any holder of a Right
or any other Person as a result of the inability of the Company or the Rights Agent to perform any of its or their obligations
under this Agreement by reason of any preliminary or permanent injunction or other order, decree, judgment or ruling (whether
interlocutory or final) issued by a court of competent jurisdiction or by a governmental, regulatory, self-regulatory or administrative
agency or commission, or any statute, rule, regulation or executive order promulgated or enacted by any governmental authority,
prohibiting or otherwise restraining performance of such obligation; provided, however, the Company shall use its
commercially reasonable efforts to have any such injunction, order, decree, judgment or ruling lifted or otherwise overturned
as promptly as practicable.


 






    	 	- 36 -	 



     

    

 


Section
17.Rights Certificate Holder Not Deemed a
Stockholder.


 


No
holder, as such, of any Rights Certificate is entitled to vote, receive dividends or be deemed for any purpose the holder of the
shares of Preferred Stock or any other securities of the Company that may at any time be issuable on the exercise of the Rights
represented thereby, nor shall anything contained herein or in any Rights Certificate be construed to confer upon the holder of
any Rights Certificate, as such, any of the rights of a stockholder of the Company or any right to vote for the election of directors
or upon any matter submitted to stockholders at any meeting thereof, or to give or withhold consent to any corporate action, or,
except as provided in Section 26 hereof, to receive notice of meetings or other actions affecting stockholders, or to receive
dividends or subscription rights, or otherwise, until the Right evidenced by such Rights Certificate have been exercised in accordance
with the provisions hereof.


 


Section
18.Duties of Rights Agent.


 


The
Rights Agent undertakes to perform its duties and obligations imposed by this Agreement upon the following terms
and conditions, by all of which the Company and the holders of Rights Certificates, or, prior to the Distribution Date, Common
Stock, by their acceptance thereof, shall be bound:


 


(a)The
Rights Agent may consult with legal counsel selected by it (who may be legal counsel for the Rights Agent or the Company or an
employee of the Rights Agent), and the advice or opinion of such counsel shall be full and complete authorization and protection
to the Rights Agent, and the Rights Agent will have no liability for or in respect of, any action taken, suffered or omitted to
be taken by it in the absence of bad faith in accordance with such advice or opinion.


 


(b)Whenever
in the performance of its duties under this Agreement the Rights Agent shall deem it necessary or desirable that any fact or matter
(including the identity of any Acquiring Person and the determination of Current Market Price) be proved or established by the
Company prior to taking, suffering or omitting to take 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
the Chairman of the Board, the President, any Vice President, the Treasurer, any Assistant Treasurer, the Secretary or any Assistant
Secretary of the Company and delivered to the Rights Agent; and such certificate shall be full and complete authorization and
protection to the Rights Agent, and the Rights Agent shall incur no liability for or in respect of any action taken, suffered
or omitted to be taken by it, in the absence of bad faith, under the provisions of this Agreement in reliance upon such certificate.


 


(c)The
Rights Agent shall be liable hereunder to the Company and any other Person only for its own gross negligence, bad faith, or willful
misconduct (as determined by a court of competent jurisdiction in a final non-appealable judgment). Anything to the contrary notwithstanding,
in no event shall the Rights Agent be liable for special, punitive, indirect, consequential or incidental loss or damage of any
kind whatsoever (including but not limited to lost profits), even if the Rights Agent has been advised of the likelihood of such
loss or damage. Any liability of the Rights Agent under this Agreement will be limited to the amount of annual fees paid by the
Company to the Rights Agent.


 






    	 	- 37 -	 



     

    

 


(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 Rights Certificates or be required to verify the same (except as to its countersignature thereof), but all such statements
and recitals are deemed to have been made by the Company only.


 


(e)The
Rights Agent shall not have any liability for nor be under any responsibility in respect of the validity of this Agreement or
the execution and delivery hereof (except the due execution and delivery hereof by the Rights Agent) or for the validity or execution
of any Rights Certificate (except its countersignature thereon); nor will it be liable or responsible for any breach by the Company
of any covenant or failure by the Company to satisfy any condition contained in this Agreement or in any Rights Certificate; nor
will it be liable or responsible for any change in the exercisability of the Rights (including, but not limited to, the Rights
becoming null and void pursuant to Section 7(e) hereof) or any change or adjustment in the terms of the Rights including, but
not limited, to any adjustment required under the provisions of Sections 11, 13, 23 or 24 hereof or for the manner, method or
amount of any such change or adjustment or the ascertaining of the existence of facts that would require any such change or adjustment
(except with respect to the exercise of Rights evidenced by Rights Certificates after receipt by the Rights Agent of the certificate
describing any such adjustment contemplated by Section 12 hereof, upon which the Rights Agent may rely); nor will it by any act
hereunder be deemed to make any representation or warranty as to the authorization or reservation of any shares of the Common
Stock, the Preferred Stock or any other securities to be issued pursuant to this Agreement or any Rights Certificate or as to
whether any shares of Common Stock, Preferred Stock or any other securities will, when so issued, be validly authorized and issued,
fully paid and non-assessable.


 


(f)The
Company shall perform, execute, acknowledge and deliver or cause to be performed, executed, acknowledged and delivered all such
further acts, instruments and assurances as may reasonably be required by the Rights Agent for the performance by the Rights Agent
of its duties under this Agreement.


 


(g)The
Rights Agent is hereby authorized and directed to accept verbal or written instructions with respect to the performance of its
duties hereunder and certificates delivered pursuant to any provision hereof from the Chairman of the Board, the Chief Executive
Officer, the President, the Chief Financial Officer, any Vice President, the Secretary, any Assistant Secretary, the Treasurer
or any Assistant Treasurer of the Company, and to apply to such officers for advice or instructions in connection with its duties,
and such advice or instruction shall be full authorization and protection to the Rights Agent and the Rights Agent shall have
no duty to independently verify the accuracy or completeness of such instructions and shall incur no liability for or in respect
of any action taken or suffered or omitted to be taken by it by it, in the absence of bad faith, in accordance with advice or
instructions of any such officer or for any delay in acting while waiting for those instructions. Any application by the Rights
Agent for written instructions from the Company may, at the option of the Rights Agent, set forth in writing any action proposed
to be taken or omitted by the Rights Agent under this Agreement and the date on and/or after which such action shall be taken
or such omission shall be effective. The Rights Agent shall be fully authorized and protected in relying upon the most recent
verbal or written instructions received from any such officer, and shall not be liable for any action taken, suffered or omitted
to be taken by the Rights Agent in the absence of bad faith in accordance with a proposal included in any such application on
or after the date specified in such application (which date shall not be less than five (5) Business Days after the date any officer
of the Company actually receives such application unless any such officer shall have consented in writing to an earlier date)
unless, prior to taking any such action (or the effective date in the case of an omission), the Rights Agent shall have received
written instructions in response to such application specifying the action to be taken, suffered or omitted.


 






    	 	- 38 -	 



     

    

 


(h)The
Rights Agent and any stockholder, affiliate, director, officer or employee of the Rights Agent may buy, sell or deal in any of
the Rights or other securities of the Company or become pecuniarily interested in any transaction in which the Company may be
interested, or contract with or lend money to the Company or otherwise act as fully and freely as though it were not Rights Agent
under this Agreement. Nothing herein shall preclude the Rights Agent from acting in any other capacity for the Company or for
any other Person.


 


(i)The
Rights Agent may execute and exercise any of the rights or powers hereby vested in it or perform any duty hereunder either itself
(through its directors, officers and employees) or by or through its attorneys or agents, and the Rights Agent shall not be liable
for any act, default, neglect or misconduct of any such attorneys or agents or for any loss to the Company, any holder of Rights
or any other Person resulting from any such act, default, neglect or misconduct, absent gross negligence, bad faith or willful
misconduct in the selection and continued employment thereof.


 


(j)No
provision of this Agreement shall require the Rights Agent to expend or risk its own funds or otherwise incur any financial liability
in the performance of any of its duties hereunder or in the exercise of any of its rights or powers if there are reasonable grounds
for believing that repayment of such funds or adequate indemnification against such risk or liability is not reasonably assured
to it.


 


(k)If,
with respect to any Rights Certificate surrendered to the Rights Agent for exercise or transfer, either (i) the certificate attached
to the form of assignment or form of election to purchase, as the case may be, has either not been completed or indicates an affirmative
response to clause 1 and/or 2 thereof, or (ii) any other actual or suspected irregularity exists, the Rights Agent shall not take
any further action with respect to such requested exercise or transfer without first consulting with the Company.


 


Section
19.Concerning the Rights Agent.


 


(a)The
Company agrees to pay to the Rights Agent on demand compensation as agreed in writing between the Company and the Rights Agent
for all services rendered by it hereunder and from time to time, on demand of the Rights Agent, to reimburse the Rights Agent
for all of its reasonable and documented expenses incurred in the preparation, delivery, amendment, administration and execution
of this Agreement and the exercise and performance of its duties hereunder. The Company also agrees to indemnify the Rights Agent
,its employees, officers or directors for, and to hold it harmless against, any loss, liability, damage, demand, judgment, fine,
penalty, claim, settlement, cost or expense (including the reasonable fees and expenses of legal counsel), for any action taken,
suffered or omitted to be taken by the Rights Agent pursuant to this Agreement or in connection with the acceptance, administration,
exercise and performance of its duties under this Agreement, including the reasonable and documented costs and expenses of defending
against any claim of liability arising therefrom, directly or indirectly, or enforcing its rights hereunder; provided that the
Company shall not be required to indemnify the Rights Agent, its employees, officers or directors for any such loss, liability,
damage, demand, judgment, fine, penalty, claim, settlement cost or expense to the extent caused by the Right Agent’s gross
negligence, bad faith or willful misconduct (as determined by a court of competent jurisdiction in a final non-appealable judgment).


 






    	 	- 39 -	 



     

    

 


(b)The
Rights Agent shall be authorized and protected and shall incur no liability for or in respect of any action taken, suffered or
omitted to be taken by it in connection with its acceptance and administration of this Agreement and the exercise and performance
of its duties hereunder in reliance upon any Rights Certificate or Book Entry for Common Stock or other securities of the Company,
instrument of assignment or transfer, power of attorney, endorsement, affidavit, letter, notice, direction, consent, certificate,
statements or other paper or document believed by it to be genuine and to be signed, executed and shall not be obligated to verify
the accuracy or completeness of such instrument, power of attorney, endorsement, affidavit, letter, notice, direction, consent,
certificate, statements or other paper or document and, where necessary, guaranteed, verified or acknowledged, by the proper Person
or Persons. The Rights Agent shall not be deemed to have knowledge of any event of which it was supposed to receive notice thereof
hereunder, and the Rights Agent shall be fully protected and shall incur no liability for failing to take action in connection
therewith unless and until it has received such notice in writing.


 


(c)Notwithstanding
anything in this Agreement to the contrary, in no case shall the Company be liable with respect to any action, proceeding, suit
or claim against the Rights Agent unless the Rights Agent shall have notified the Company in accordance with Section 27 hereof
of the assertion of such action, proceeding, suit or claim against the Rights Agent, promptly after the Rights Agent shall have
notice of such assertion of an action, proceeding, suit or claim or have been served with the summons or other first legal process
giving information as to the nature and basis of the action, proceeding, suit or claim; provided that the failure to provide such
notice promptly shall not affect the rights of the Rights Agent hereunder except to the extent that such failure actually prejudices
the Company. The Company shall be entitled to participate at its own expense in the defense of any such action, proceeding, suit
or claim, and, if the Company so elects, the Company shall assume the defense of any such action, proceeding, suit or claim. In
the event that the Company assumes such defense, the Company shall not thereafter be liable for the fees and expenses of any counsel
retained by the Rights Agent, so long as the Company shall retain counsel satisfactory to the Rights Agent, in the exercise of
its reasonable judgment, to defend such action, proceeding, suit or claim, and provided that the Rights Agent does not have defenses
that are adverse to or different from any defenses of the Company. The Rights Agent agrees not to settle any litigation in connection
with any action, proceeding, suit or claim with respect to which it may seek indemnification from the Company without the prior
written consent of the Company, which shall not be unreasonably withheld.


 






    	 	- 40 -	 



     

    

 


(d)The
provisions of this Section 19 and Section 18 shall survive the termination of this Agreement, the resignation, replacement or
removal of the Rights Agent and the exercise, termination and the expiration of the Rights. Notwithstanding anything in this Agreement
to the contrary, in no event shall the Rights Agent be liable for special, punitive, incidental, indirect or consequential loss
or damage of any kind whatsoever (including but not limited to lost profits), even if the Rights Agent has been advised of the
likelihood of such loss or damage and regardless of the form of the action; and the Company agrees to indemnify the Rights Agent
and to hold it harmless to the fullest extent permitted by law against any loss, liability or expense incurred as a result of
claims for special, punitive, incidental, indirect or consequential loss or damages of any kind whatsoever provided in each case
that such claims are not based on the gross negligence, bad faith or willful misconduct of the Rights Agent (each as determined
by a final judgment of a court of competent jurisdiction). Any liability of the Rights Agent under this Agreement shall be limited
to the amount of annual fees paid by the Company to the Rights Agent.


 


Section
20.Merger or Consolidation or Change of Name
of Rights Agent.


 


(a)Any
Person into which the Rights Agent or any successor Rights Agent is merged or with which the Rights Agent or any successor Rights
Agent is consolidated, or any Person resulting from any merger or consolidation to which the Rights Agent or any successor Rights
Agent is a party, or any Person succeeding to the stockholder services business of the Rights Agent or any successor Rights Agent,
shall 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; but only if such Person would be eligible for appointment as a successor Rights
Agent under the provisions of Section 21 hereof. The purchase of all or substantially all of the Rights Agent’s assets employed
in the performance of transfer agent activities shall be deemed a merger or consolidation for purposes of this Section 20. In
case at the time such successor Rights Agent shall succeed 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 a 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
or in the name of the successor Rights Agent; and in all such cases such Rights Certificates shall have the full force provided
in the Rights Certificates and in this Agreement.


 


(b)In
case at any time the name of the Rights Agent shall be changed and at such time any of the Rights Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the countersignature under its prior name and deliver Rights Certificates
so countersigned; and in case at that time any of the Rights Certificates shall not have been countersigned, the Rights Agent
may countersign such Rights Certificates either in its prior name or in its changed name; and in all such cases such Rights Certificates
shall have the full force provided in the Rights Certificates and in this Agreement.


 






    	 	- 41 -	 



     

    

 


Section
21.Change of Rights Agent.


 


The
Rights Agent or any successor Rights Agent may resign and be discharged from its duties under this Agreement upon at least thirty
(30) days’ notice in writing to the Company, and to each transfer agent of the Preferred Stock and the Common Stock, by
registered or certified mail, in which case the Company will give or cause to be given written notice to the registered holders
of the Rights Certificates by first-class mail. The Company may remove the Rights Agent or any successor Rights Agent upon at
least thirty (30) days’ notice in writing, mailed to the Rights Agent or successor Rights Agent, as the case may be, and
to each transfer agent of the Common Stock and Preferred Stock, by registered or certified mail, and, if such removal occurs after
the Distribution Date, to the holders of the Rights Certificates by first-class mail. If the Rights Agent resigns or is removed
or otherwise becomes incapable of acting, the Company shall appoint a successor to the Rights Agent. If the Company fails to make
such appointment within a period of thirty (30) days after giving notice of such removal or after it has been notified in writing
of such resignation or incapacity by the resigning or incapacitated Rights Agent or by the holder of a Rights Certificate (such
holder shall, with such notice, submit its Rights Certificate for inspection by the Company), then the incumbent Rights Agent
or any registered holder of any Rights Certificate may apply to any court of competent jurisdiction for the appointment of a new
Rights Agent. Any successor Rights Agent, whether appointed by the Company or by such a court, shall be (a) a Person organized
and doing business under the laws of the United States or any State thereof, in good standing, which is authorized under such
laws to exercise corporate trust, stock transfer or stockholder services powers and which at the time of its appointment as Rights
Agent has, or with its parent has, a combined capital and surplus of at least $50,000,000 or (b) an affiliate of a Person described
in clause (a) of this sentence. After appointment, the successor Rights Agent shall be vested with the same powers, rights, duties
and responsibilities as if it had been originally named as Rights Agent under this Agreement 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 in each case at the sole expense
of the Company. Not later than the effective date of any such appointment, the Company shall file notice thereof in writing with
the predecessor Rights Agent and each transfer agent of the Common Stock and the Preferred Stock, and, if such appointment occurs
after the Distribution Date, mail a notice thereof in writing to the registered holders of the Rights Certificates. Failure to
give any notice provided for in this Section 21, or any defect therein, shall not affect the legality or validity of the resignation
or removal of the Rights Agent or the appointment of the successor Rights Agent, as the case may be.


 


Section
22.Issuance of New Rights Certificates.


 


Notwithstanding
any of the provisions of this Agreement or the Rights Certificates to the contrary, the Company may, at its option, issue new
Rights Certificates evidencing Rights in such form as may be approved by the Board to reflect any adjustment or change made in
accordance with the provisions of this Agreement in the Exercise Price or the number or kind or class of shares or other securities
or property that may be acquired under the Rights Certificates. In addition, in connection with the issuance or sale of shares
of Common Stock following the Distribution Date (other than upon exercise of a Right) and prior to the redemption or the Expiration
Date, the Company (a) shall, with respect to shares of Common Stock so issued or sold pursuant to the exercise of stock options
or under any employee plan or arrangement, or upon the exercise, conversion or exchange of securities hereinafter issued by the
Company, and (b) may, in any other case, if deemed necessary or appropriate by the Board, issue Rights Certificates representing
the appropriate number of Rights in connection with such issuance or sale; provided, however, that (i) no such
Rights Certificate may be issued if, and to the extent that, the Company has been advised by counsel that such issuance would
create a significant risk of material adverse tax consequences to the Company or the Person to whom such Rights Certificate would
be issued, and (ii) no such Rights Certificate may be issued if, and to the extent that, appropriate adjustment shall otherwise
have been made in lieu of the issuance thereof.


 






    	 	- 42 -	 



     

    

 


Section
23.Redemption.


 


(a)The
Board may, within its sole discretion, at any time before any Person becomes an Acquiring Person (the “Redemption
Period”) cause the Company to redeem all, but not less than all, of the then outstanding Rights at a redemption
price of $0.001 per Right, as such amount may be appropriately adjusted to reflect any stock split, reverse stock split, stock
dividend or similar transaction occurring after the date hereof (such redemption price, as adjusted, the “Redemption
Price”). Notwithstanding anything contained in this Agreement to the contrary, the Rights will not be exercisable
after the first occurrence of a Flip-In Event or Flip-Over Event until such time as the Company’s right of redemption hereunder
has expired. The redemption of the Rights by the Board pursuant to this paragraph (a) may be made effective at such time, on such
basis and with such conditions as the Board may establish, in its sole discretion. The Company may, at its option, pay the Redemption
Price in cash, shares of Common Stock based on the Current Market Price or any other form of consideration deemed appropriate
by the Board.


 


(b)Immediately
upon the action of the Board ordering the redemption of the Rights pursuant to paragraph (a) of this Section 23 (or such later
time as the Board may establish for the effectiveness of such redemption), and without any further action and without any notice,
the right to exercise the Rights will terminate and the only right thereafter of the holders of Rights shall be to receive the
Redemption Price for each Right held. The Company shall promptly give (i) written notice to the Rights Agent of any such
redemption; and (ii) public notice of any such redemption; provided, however, that the failure to give, or
any defect in, any such notice will not affect the validity of such redemption. Within ten (10) days after such action of the
Board ordering the redemption of the Rights, the Company shall mail a notice of redemption to all the holders of the then outstanding
Rights at their last addresses as they appear upon the registry books of the Rights Agent or, prior to the Distribution Date,
on the registry books of the transfer agent for the Common Stock. Any notice that 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 shall be made. Neither the Company nor any of its Related Persons may redeem, acquire or purchase
for value any Rights at any time in any manner other than that specifically set forth in this Section 23 or in Section 24 hereof,
or other than in connection with the purchase of shares of Common Stock or the conversion or redemption of shares of Common Stock
in accordance with the applicable provisions of the Certificate of Incorporation prior to the Distribution Date.


 






    	 	- 43 -	 



     

    

 


(c)(i) In
the event the Company receives a Qualifying Offer and the Board has not redeemed the outstanding Rights or exempted such Qualifying
Offer from the terms of this Agreement or called a special meeting of stockholders for the purpose of voting on whether or not
to exempt such Qualifying Offer from the terms of this Agreement, in each case, by the Close of Business on the date that is ninety
(90) days following the commencement of such Qualifying Offer within the meaning of Rule 14d-2(a) under the Exchange Act (the
“Board Evaluation Period”), the holders of record (or their duly authorized proxy) of twenty percent
(20%) or more of the shares of Common Stock of the Company then outstanding (excluding shares of Common Stock that are Beneficially
Owned by the Person making the Qualifying Offer) (the “Requisite Percentage”) may submit to the Board,
not later than ninety (90) days following the Board Evaluation Period a written demand complying with the terms of this Section
23(c) (the “Special Meeting Demand”) directing the Board to submit to a vote of stockholders at a special
meeting of the stockholders of the Company (a “Special Meeting”) a resolution exempting such Qualifying
Offer from the provisions of this Agreement (the “Qualifying Offer Resolution”). Any Special Meeting
Demand must be (A) delivered to the Secretary at the principal executive offices of the Company; and (B) signed by the
demanding stockholders (the “Demanding Stockholders”) or a duly authorized agent of the Demanding Stockholders.


 


(ii)After
receipt of Special Meeting Demands in proper form and in accordance with this Section 23(c) from Demanding Stockholders holding
the Requisite Percentage, the Board shall take such actions necessary or desirable to cause the Qualifying Offer Resolution to
be so submitted to a vote of stockholders at a Special Meeting to be convened within ninety (90) days following the last day of
the Board Evaluation Period (the “Special Meeting Period”) by including a proposal relating to adoption
of the Qualifying Offer Resolution in the proxy materials of the Company for the Special Meeting; provided, however,
that if the Company at any time during the Special Meeting Period and prior to a vote on the Qualifying Offer Resolution enters
into a Definitive Acquisition Agreement, the Special Meeting Period may be extended (and any Special Meeting called in connection
therewith may be cancelled) if the Qualifying Offer Resolution is separately submitted to a vote at the same meeting as the Definitive
Acquisition Agreement. Subject to the requirements of applicable law, the Board may take a position in favor of or opposed to
the adoption of the Qualifying Offer Resolution, or no position with respect to the Qualifying Offer Resolution, as it determines
to be appropriate in the exercise of its fiduciary duties.


 


(iii)In
the event that no Person has become an Acquiring Person prior to the Exemption Date and the Qualifying Offer continues to be a
Qualifying Offer and either (A) the Special Meeting has not been convened on or prior to the last day of the Special Meeting
Period (the “Outside Meeting Date”); or (B) if, at the Special Meeting at which a quorum is present,
a majority of the shares of Common Stock outstanding as of the record date for the Special Meeting selected by the Board (excluding
shares of Common Stock Beneficially Owned by the Person making the Qualified Offer and such Person’s Related Persons) shall
vote in favor of the Qualifying Offer Resolution, then the Qualifying Offer shall be exempt from the application of this Agreement
in all respects to such Qualifying Offer as long as it remains a Qualifying Offer, such exemption to be effective on the Close
of Business on (1) the Outside Meeting Date or (2) the date on which the results of the vote on the Qualifying Offer
Resolution at the Special Meeting are certified as official by the appointed inspectors of election for the Special Meeting, as
the case may be (the “Exemption Date”). Notwithstanding anything herein to the contrary, no action or
vote by stockholders not in compliance with the provisions of this Section 23(c) shall serve to exempt any offer from the terms
of this Agreement. Immediately upon the Close of Business on the Exemption Date, and without any further action and without any
notice, the right to exercise the Rights with respect to the Qualifying Offer will terminate and, notwithstanding anything in
this Agreement to the contrary, the consummation of the Qualifying Offer shall not cause the offeror (or its Related Persons)
to become an Acquiring Person; and the Rights shall immediately expire and have no further force and effect upon such consummation.


 






    	 	- 44 -	 



     

    

 


Section
24.Exchange.


 


(a)The
Board may, at its option, at any time after any Person becomes an Acquiring Person, exchange all or part of the then outstanding
and exercisable Rights (which shall not include Rights that have become null and void pursuant to the provisions of Section 7(e)
hereof) for shares of Common Stock at an exchange ratio of two shares of Common Stock per each outstanding Right, as appropriately
adjusted to reflect any stock split, reverse stock split, stock dividend or similar transaction occurring after the date hereof
(such exchange ratio being hereinafter referred to as the “Exchange Ratio”). Notwithstanding the foregoing,
the Board is not empowered to effect such exchange at any time after any Acquiring Person, together with all of its Related Persons,
becomes the Beneficial Owner of 50% or more of the shares of Common Stock then outstanding. The exchange of the Rights by the
Board may be made effective at such time, on such basis and with such conditions as the Board in its sole discretion may establish.
From and after the occurrence of a Flip-Over Event, any Rights that theretofore have not been exchanged pursuant to this Section
24(a) will thereafter be exercisable only in accordance with Section 13 hereof and may not be exchanged pursuant to this Section
24(a).


 


(b)Immediately
upon the action of the Board ordering the exchange of any Rights pursuant to paragraph (a) of this Section 24 and without any
further action or notice, the right to exercise such Rights will terminate and the only right thereafter of a holder of such Rights
shall be to receive a number of shares of Common Stock equal to the number of such Rights held by such holder multiplied by the
Exchange Ratio; provided, however, that in connection with any exchange effected pursuant to this Section 24(b), no holder of
Rights shall be entitled to receive Common Stock (or other shares of capital stock of the Company) that would result in such holder,
together with such holder’s Affiliates and Associates, becoming the Beneficial Owner of more than 4.99% of the then-outstanding
Common Stock. If a holder would, but for the immediately preceding sentence, be entitled to receive Excess Shares, in lieu of
receiving such Excess Shares and to the extent permitted by law or orders applicable to the Company, such holder will only be
entitled to receive an amount in cash or, at the election of the Company, a note or other evidence of indebtedness maturing within
nine months with a principal amount, equal to the current per share Current Market Price of a share of Common Stock at the Close
of Business on the Trading Day following the date the Board effects the forgoing exchange multiplied by the number of Excess Shares
that would otherwise have been issuable to such holder. The exchange of the Rights by the Board may be made effective at such
time, on such basis and with such conditions as the Board in its sole discretion may establish. The Company shall promptly give
(i) written notice to the Rights Agent of any such exchange; and (ii) public notice of any such exchange; provided,
however, that the failure to give, or any defect in, such notice will not affect the validity of such exchange. The Company
promptly shall mail a notice of any such exchange to all of the holders of such Rights at their last addresses as they appear
upon the registry books of the Rights Agent. Any notice that is mailed in the manner herein provided shall be deemed given, whether
or not the holder receives the notice. Each such notice of exchange will state the method by which the exchange of the shares
of Common Stock for Rights shall be effected and, in the event of any partial exchange, the number of Rights that shall be exchanged.
Any partial exchange shall be effected pro rata based on the number of Rights (other than Rights that have become null
and void pursuant to the provisions of Section 7(e) hereof) held by each holder of Rights.


 






    	 	- 45 -	 



     

    

 


(c)The
Company may at its option substitute, and, in the event that there shall not be sufficient shares of Common Stock issued but not
outstanding or authorized but unissued to permit an exchange of Rights for Common Stock as contemplated in accordance with this
Section 24, the Company shall substitute to the extent of such insufficiency, for each share of Common Stock that would otherwise
be issuable upon exchange of a Right, a number of shares of Preferred Stock or fraction thereof (or Equivalent Preferred Stock,
as such term is defined in Section 11(b)) such that the Current Market Price of one share of Preferred Stock (or Equivalent Preferred
Share) multiplied by such number or fraction is equal to the Current Market Price of one share of Common Stock as of the date
of such exchange.


 


(d)Upon
declaring an exchange pursuant to this Section 24, or as promptly as reasonably practicable thereafter, the Company may implement
such procedures as it deems appropriate, in its sole discretion, for the purpose of ensuring that the Common Stock (or such other
consideration) issuable upon an exchange pursuant to this Section 24 is not received by holders of Rights that have become null
and void pursuant to Section 7(e) hereof. Before effecting an exchange pursuant to this Section 24, the Board may direct the Company
to enter into a Trust Agreement in such form and with such terms as the Board shall then approve (the “Trust Agreement”).
If the Board so directs, the Company shall enter into the Trust Agreement and the Company shall issue to the trust created by
the Trust Agreement (the “Trust”) all or a portion (as designated by the Board) of the shares of Common
Stock and other securities, if any, distributable pursuant to the Exchange, and all stockholders entitled to distribution of such
shares or other securities (and any dividends or distributions made thereon after the date on which such shares or other securities
are deposited in the Trust) shall be entitled to receive a distribution of such shares or other securities (and any dividends
or distributions made thereon after the date on which such shares or other securities are deposited in the Trust) only from the
Trust and solely upon compliance with all relevant terms and provisions of the Trust Agreement. Prior to effecting an exchange
and registering shares of Common Stock (or other such securities) in any Person’s name, including any nominee or transferee
of a Person, the Company may require (or cause the trustee of the Trust to require), as a condition thereof, that any holder of
Rights provide evidence, including, without limitation, the identity of the Beneficial Owners thereof and their Related Persons
(or former Beneficial Owners thereof and their Related Persons) as the Company reasonably requests in order to determine if such
Rights are null and void. If any Person fails to comply with such request, the Company shall be entitled conclusively to deem
the Rights formerly held by such Person to be null and void pursuant to Section 7(e) hereof and not transferable or exercisable
or exchangeable in connection herewith. Any shares of Common Stock or other securities issued at the direction of the Board in
connection herewith shall be validly issued, fully paid and nonassessable shares of Common Stock or of such other securities (as
the case may be), and the Company shall be deemed to have received as consideration for such issuance a benefit having a value
that is at least equal to the aggregate par value of the shares so issued.


 






    	 	- 46 -	 



     

    

 


Section
25.Process to Seek Exemption


 


(a)Any
Person who desires to effect any acquisition of Common Stock that might, if consummated, result in such Person beneficially owning
4.99% or more of the then-outstanding Common Stock (or, in the case of a Grandfathered Person, additional shares of Common Stock)
(a “Requesting Person”) may request that the Board grant an exemption with respect to such acquisition
under this Agreement so that such Person would be deemed to be an “Exempt Person” for purposes of this
Agreement (an “Exemption Request”). An Exemption Request shall be in proper form and shall be delivered
by registered mail, return receipt requested, to the Secretary of the Company at the principal executive office of the Company.
The Exemption Request shall be deemed made upon receipt by the Secretary of the Company. To be in proper form, an Exemption Request
shall set forth (i) the name and address of the Requesting Person, (ii) the number and percentage of shares of Common Stock then
Beneficially Owned by the Requesting Person, together with all Affiliates and Associates of the Requesting Person, and (iii) a
reasonably detailed description of the transaction or transactions by which the Requesting Person would propose to acquire Beneficial
Ownership of Common Stock aggregating 4.99% or more of the then-outstanding Common Stock and the maximum number and percentage
of shares of Common Stock that the Requesting Person proposes to acquire. The Board shall endeavor to respond to an Exemption
Request within twenty (20) Business Days after receipt of such Exemption Request; provided, that the failure of the Board
to make a determination within such period shall be deemed to constitute the denial by the Board of the Exemption Request. The
Requesting Person shall respond promptly to reasonable and appropriate requests for additional information from the Company or
the Board and its advisors to assist the Board in making its determination. The Board shall only grant an exemption in response
to an Exemption Request if it receives, at the Board’s request, a report from the Company’s advisors to the effect
that the acquisition of Beneficial Ownership of Common Stock by the Requesting Person does not create a significant risk of material
adverse tax consequences to the Company or the Board otherwise determines in its sole discretion that the exemption is in the
best interests of the Company. Any exemption granted hereunder may be granted in whole or in part, and may be subject to limitations
or conditions (including a requirement that the Requesting Person agree that it will not acquire Beneficial Ownership of shares
of Common Stock in excess of the maximum number and percentage of shares approved by the Board), in each case as and to the extent
the Board shall determine necessary or desirable to provide for the protection of the Company’s NOLs. Any Exemption Request
may be submitted on a confidential basis and, except to the extent required by applicable law, the Company shall maintain the
confidentiality of such Exemption Request and determination of the Board with respect thereto, unless the information contained
in the Exemption Request or the determination of the Board with respect thereto otherwise becomes publicly available. The Exemption
Request shall be considered and evaluated by the Independent Directors who are also independent of the Requesting Person and disinterested
with respect to the Exemption Request, and the action of a majority of such Independent Directors shall be deemed to be the determination
of the Board for purposes of such Exemption Request.


 






    	 	- 47 -	 



     

    

 


Section
26.Notice of Certain Events.


 


(a)In
case the Company proposes, at any time after the earlier of the Distribution Date or the Stock Acquisition Date, (i) to pay
any dividend payable in stock of any class or series to the holders of Preferred Stock or to make any other distribution to the
holders of Preferred Stock (other than a regular quarterly cash dividend out of earnings or retained earnings of the Company);
(ii) to offer to the holders of Preferred Stock rights or warrants to subscribe for or to purchase any additional shares
of Preferred Stock or shares of stock of any class or any other securities, rights or options; (iii) to effect any reclassification
of Preferred Stock (other than a reclassification involving only the subdivision of outstanding shares of Preferred Stock); (iv) to
effect any consolidation or merger into or with any other Person (other than a Subsidiary of the Company in a transaction which
complies with Section 11(n) hereof) or to effect any sale or other transfer (or to permit one or more of its Subsidiaries to effect
any sale or other transfer), in one or more transactions, of more than 50% of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to any other Person or Persons (other than the Company and/or any of its Subsidiaries in one or
more transactions each of which complies with Section 11(n) hereof); or (v) to effect the liquidation, dissolution or winding
up of the Company, then, in each such case, the Company shall give to each registered holder of a Rights Certificate, to the extent
feasible, and to the Rights Agent in accordance with Section 27 hereof, a written notice of such proposed action, which shall
specify the record date for the purposes of such stock dividend, distribution of rights or warrants, or the date on which such
reclassification, consolidation, merger, sale, transfer, liquidation, dissolution or winding up is to take place and the date
of participation therein by the holders of the shares of Preferred Stock if any such date is to be fixed, and such notice shall
be so given in the case of any action covered by clause (i) or (ii) above at least ten (10) days prior to the record date for
determining holders of the shares of Preferred Stock for purposes of such action and, in the case of any such other action, at
least ten (10) days prior to the date of the taking of such proposed action or the date of participation therein by the holders
of the shares of Preferred Stock, whichever is earlier; provided, however, that no such action shall be taken pursuant
to this Section 26(a) that will or would conflict with any provision of the Certificate of Incorporation; provided, further,
that no such notice is required pursuant to this Section 26 if any Subsidiary of the Company effects a consolidation or merger
with or into, or effects a sale or other transfer of assets or earning power to, any other Subsidiary of the Company.


 


(b)In
case any Flip-In Event occurs, (i) the Company shall, as soon as practicable thereafter, give to each registered holder of
a Rights Certificate, to the extent feasible, and to the Rights Agent in accordance with Section 27 hereof, a written notice of
the occurrence of such event, which notice shall describe such event and the consequences of such event to holders of Rights under
Section 11(a)(ii) hereof; and (ii) all references in paragraph (a) of this Section 26 to Preferred Stock shall be deemed
thereafter to refer to Common Stock and/or, if appropriate, to any other securities that may be acquired upon exercise of a Right.


 


(c)In
case any Flip-Over Event occurs, then the Company shall, as soon as practicable thereafter, give to each registered holder of
a Rights Certificate, to the extent feasible, and to the Rights Agent in accordance with Section 27 hereof, a written notice of
the occurrence of such event, which notice shall describe such event and the consequences of such event to holders of Rights under
Section 13(a) hereof.


 






    	 	- 48 -	 



     

    

 


Section
27.Notices.


 


Notices
or demands authorized by this Agreement to be given or made by the Rights Agent or by the holder of any Rights Certificate to
or on the Company shall be sufficiently given or made if sent in writing by first-class or express United States mail, FedEx or
UPS, postage prepaid or overnight delivery service and properly addressed (until another address is filed in writing by the Rights
Agent with the Company) as follows:


 


If
to the Company, at its address at:


 


Surge
Components, Inc.


95
East Jefryn Blvd.


Deer
Park, NY 11729


Attention:
Ira Levy


  


Subject
to the provisions of Section 21 hereof, any notice or demand authorized by this Agreement to be given or made by the Company or
by the holder of any Rights Certificate to or on the Rights Agent shall be sufficiently given or made if sent in writing by first-class
or express United States mail, FedEx or UPS, postage prepaid or overnight delivery service and properly addressed (until another
address is filed in writing with the Rights Agent) as follows:


 


Continental
Stock Transfer & Trust Company


17
Battery Place


New
York, New York 10004 


Attention:
Margaret Villani & Steven Vacante


 


Notices
or demands authorized by this Agreement to be given or made by the Company or the Rights Agent to the holder of any Rights Certificate
(or, if prior to the Distribution Date, to the holder of shares of Common Stock) shall be sufficiently given or made if sent in
writing by first-class or express United States mail, FedEx or UPS, postage prepaid or overnight delivery service and properly
addressed, to such holder at the address of such holder as shown on the registry books of the Company.


 


Section
28.Supplements and Amendments.


 


Except
as otherwise provided in this Section 28, the Company, by action of the Board, may from time to time and in its sole and absolute
discretion, and the Rights Agent shall if the Company so directs, supplement or amend this Agreement in any respect without the
approval of any holders of Rights, including, without limitation, in order to (a) cure any ambiguity; (b) correct or
supplement any provision contained herein that may be defective or inconsistent with any other provisions herein; (c) shorten
or lengthen any time period hereunder; (d) otherwise change, amend, or supplement any provisions hereunder in any manner
that the Company may deem necessary or desirable; provided, however, that from and after any Person becomes an Acquiring
Person, this Agreement may not be supplemented or amended in any manner that would (a) adversely affect the interests of
the holders of Rights (other than Rights that have become null and void pursuant to Section 7(e) hereof) as such or (b) cause
this Agreement to become amendable other than in accordance with this Section 28. Without limiting the foregoing, the Company,
by action of the Board, may at any time before any Person becomes an Acquiring Person amend this Agreement to make the
provisions of this Agreement inapplicable to a particular transaction by which a Person might otherwise become an Acquiring Person
or to otherwise alter the terms and conditions of this Agreement as they may apply with respect to any such transaction. Upon
the delivery of a certificate from an appropriate officer of the Company that states that the proposed supplement or amendment
is in compliance with the terms of this Section 28, the Rights Agent shall execute such supplement or amendment; provided,
however, that any supplement or amendment that does not amend Sections 18, 19, 20, 21, or this Section 28 in a manner adverse
to the Rights Agent shall become effective immediately upon execution by the Company, whether or not also executed by the Rights
Agent. The Company shall provide within three (3) Business Days of the adoption of an amendment to the Agreement written notification
of such amendment to the Rights Agent.


 


Prior
to the Distribution Date, the interests of the holders of Rights shall be deemed coincident with the interests of the holders
of Common Stock.


 



    	 	- 49 -	 



     

    

  


Section
29.Successors.


 


All
the covenants and provisions of this Agreement by or for the benefit of the Company or the Rights Agent shall bind and inure to
the benefit of their respective successors and assigns hereunder.


 


Section
30.Determinations and Actions by the Board.


 


(a)For
all purposes of this Agreement, any calculation of the number of shares of Common Stock or any other class of capital stock outstanding
at any particular time, including for purposes of determining the particular percentage of such outstanding shares of Common Stock
of which any Person is the Beneficial Owner, shall be made in accordance with the last sentence of Rule 13d-3(d)(1)(i) of the
General Rules and Regulations under the Exchange Act or Section 382 of the Code and the Treasury Regulations promulgated thereunder,
as applicable. Except as otherwise specifically provided herein, the Board has the exclusive power and authority to administer
this Agreement and to exercise all rights and powers specifically granted to the Board or to the Company hereunder, or as may
be necessary or advisable in the administration of this Agreement, including, without limitation, the right and power (a) to
interpret the provisions of this Agreement, and (b) to make all determinations deemed necessary or advisable for the administration
of this Agreement (including, without limitation, a determination to redeem or not redeem the Rights in accordance with Section
23 hereof, to exchange or not exchange the rights in accordance with Section 24 hereof, to amend or not amend this Agreement in
accordance with Section 28 hereof). All such actions, calculations, interpretations and determinations (including, for purposes
of clause (ii) below, all omissions with respect to the foregoing) that are done or made by the Board shall be (i) be final,
conclusive, and binding on the Company, the Rights Agent, the holders of the Rights and all other parties; and (ii) not subject
the Board or any member thereof to any liability to the holders of the Rights. Without limiting the foregoing, nothing contained
herein shall be construed to suggest or imply that the Board shall not be entitled to reject any Qualifying Offer or any other
tender offer or other acquisition proposal, or to recommend that holders of Common Stock of the Company reject any Qualifying
Offer or any other tender offer or other acquisition proposal, or to take any other action (including, without limitation, the
commencement, prosecution, defense or settlement of any litigation and the submission of additional or alternative offers or other
proposals) with respect to any Qualifying Offer or any other tender offer or other acquisition proposal that the Board determines
in good faith is necessary or appropriate in the exercise of its fiduciary duties.


 






    	 	- 50 -	 



     

    

 


Section
31.Benefits of this Agreement.


 


Nothing
in this Agreement may be construed to give to any Person other than the Company, the Rights Agent and the registered holders of
the Rights Certificates (and, prior to the Distribution Date, the registered holders of shares of the Common Stock of the Company)
any legal or equitable right, remedy or claim under this Agreement; rather, this Agreement is for the sole and exclusive benefit
of the Company, the Rights Agent and the registered holders of the Rights Certificates (and, prior to the Distribution Date, the
registered holders of shares of Common Stock of the Company).


 


Section
32.Tax Compliance and Withholding.


 


(a)The
Rights Agent, on its own behalf and on behalf of the Company, will comply with all applicable certification, information reporting
and withholding (including “backup” withholding) requirements imposed by applicable tax laws, regulations or administrative
practice with respect to (i) any payments made hereunder and (ii) the issuance, delivery, holding, transfer, redemption or exercise
of Rights, Common Stock or Preferred Stock hereunder. Such compliance shall include, without limitation, the preparation and timely
filing of required returns and the timely payment of all amounts required to be withheld to the appropriate taxing authority or
its designated agent. The Rights Agent shall maintain all appropriate records documenting compliance with such requirements, and
shall make such records available, on written request, to the Company or its authorized representative within a reasonable period
of time after receipt of such request.


 


(b)In
the event that the Company, the Rights Agent or their agents determine that they are obligated to withhold or deduct any tax or
other governmental charge under any applicable law on actual or deemed payments or distributions hereunder to a holder of the
Rights, Common Stock or other cash, securities or other property, the Company, the Rights Agent or their agents shall be entitled
to (i) deduct and withhold such amount by withholding a portion or all of the cash, securities or other property otherwise deliverable
or by otherwise using any property (including, without limitation, Rights, Preferred Stock, Common Stock or cash) that is owned
by such holder, or (ii) in lieu of such withholding, require any holder to make a payment to the Company, the Rights Agent or
their agents, in each case in such amounts as they deem necessary to meet their withholding obligations, and in the case of (i)
above, shall also be entitled to sell all or a portion of such withheld securities or other property by public or private sale
in such amounts and in such manner as they deem necessary and practicable to pay such taxes and governmental charges.


 


Section
33.Severability.


 


If
any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other authority
to be invalid, null and void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement
will remain in full force and effect and will in no way be affected, impaired or invalidated; provided, however,
that notwithstanding anything in this Agreement to the contrary, if any such term, provision, covenant or restriction is held
by such court or authority to be invalid, null and void or unenforceable and the Board determines in good faith judgment that
severing the invalid language from this Agreement would materially and adversely affect the purpose or effect of this Agreement,
the right of redemption set forth in Section 23 hereof shall be reinstated and will not expire until the Close of Business on
the tenth (10th) Business Day following the date of such determination by the Board.


 






    	 	- 51 -	 



     

    

 


Section
34.Governing Law.


 


This
Agreement, each Right, and each Rights Certificate issued hereunder shall be deemed to be a contract made under the laws of the
State of Nevada 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.


 


Section
35.Counterparts.


 


This
Agreement may be executed in one or more counterparts, and by the different parties hereto in separate counterparts, each of which
when executed shall be deemed to be an original, but all of which taken together shall constitute one and the same instrument.
Delivery of an executed signature page of Agreement by facsimile or other customary shall mean of electronic transmission (e.g.,
“PDF”) shall be effective as delivery of a manually executed counterpart hereof.


 


Section
36.Interpretation.


 


The
headings contained in this Agreement are for descriptive purposes only and shall not affect in any way the meaning or interpretation
of this Agreement. For purposes of this Agreement, whenever a specific provision of the Code or a specific Treasury Regulation
is referenced, such reference shall also apply to any successor or replacement provision or Treasury Regulation, as applicable.


 


Section
37.Force Majeure.


 


Notwithstanding
anything to the contrary contained herein, the Rights Agent will not have any liability for not performing, or a delay in the
performance of, any act, duty, obligation or responsibility by reason of any occurrence beyond the reasonable control of the Rights
Agent (including, without limitation, any act or provision of any present or future law or regulation or governmental authority,
any act of God, war, civil or military disobedience or disorder, riot, rebellion, terrorism, insurrection, fire, earthquake, storm,
flood, strike, work stoppage, interruptions or malfunctions of computer facilities, loss of data due to power failures or mechanical
difficulties with information, labor dispute, accident or failure or malfunction of any utilities, communication or computer (software
or hardware) services or similar occurrence).


 


[Signature
Page To Follow On Next Page]


 




    	 	- 52 -	 



     

    


 


IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed, all as of the date first above written.


 


	 	SURGE
    COMPONENTS, INC.,
	 	as
    Company
	 	 	 
	 	By:	/s/
    Ira Levy
	 	Name:	Ira
    Levy
	 	Title:	Chief
    Executive Officer


 


[Signature
Page to Rights Agreement]


 




     

     

    

 


 


	 	CONTINENTAL
    STOCK TRANSFER & TRUST COMPANY,
	 	as
    Rights Agent,
	 	 	 
	 	By:	/s/
    Margaret Villani
	 	Name:	Margaret
    Villani
	 	Title:	Vice
    President


 


[Signature
Page to Rights Agreement]


 




     

     

    

 


Exhibit
A


 


CERTIFICATE
OF DESIGNATION


OF


SERIES
D PREFERRED STOCK


OF


SURGE
COMPONENTS, INC.


 


(Pursuant
to Chapter 78, Section 1955 of the Nevada Revised Statutes)


 


In
accordance with Chapter 78, Section 1955 of the Nevada Revised Statutes, the undersigned corporation, hereby certifies that the
following resolution was adopted by the Board of Directors of Surge Components, Inc., a Nevada corporation (the “Corporation”)
at a meeting duly called and held:


 


RESOLVED,
that pursuant to the authority granted to and vested in the Board of Directors of this Corporation (the “Board of Directors”)
in accordance with the provisions of the Articles of Incorporation of the Corporation, as amended (the “Certificate of
Incorporation”) the Board of Directors hereby creates a series of Preferred Stock, par value $0.001 per share,
of the Corporation (the “Preferred Stock”), and hereby states the designation and number of shares, and fixes
the relative rights, preferences, and limitations thereof as follows:


 


Series
D Preferred Stock:


 


(1)
Designation and Amount. The shares of such series shall be designated as “Series D Preferred Stock” (the “Series
D Preferred Stock”) and the number of shares constituting the Series D Preferred Stock shall be 75,000. Such number
of shares may be increased or decreased by resolution of the Board of Directors; provided, that no decrease shall reduce
the number of shares of Series D Preferred Stock to a number less than the number of shares then outstanding plus the number of
shares reserved for issuance upon the exercise of outstanding options, rights or warrants or upon the conversion of any outstanding
securities issued by the corporation convertible into Series D Preferred Stock.


 


(2)
Dividends and Distributions.


 


(a)
Subject to the rights of the holders of any shares of any series of Preferred Stock (or any similar stock) ranking prior and superior
to the Series D Preferred Stock with respect to dividends, the holders of shares of Series D Preferred Stock, in preference to
the holders of Common Stock, par value $0.001 per share (the “Common Stock”), of the corporation, and of any
other junior stock, shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available
for the purpose, quarterly dividends payable in cash on the first day of March, June, September and December in each year (each
such date being referred to herein as a “Quarterly Dividend Payment Date”), commencing on the first Quarterly
Dividend Payment Date after the first issuance of a share or fraction of a share of Series D Preferred Stock, in an amount per
share (rounded to the nearest cent) equal to the greater of (1) $1.00 or (2) subject to the provision for adjustment
hereinafter set forth, 1,000 times the aggregate per share amount of all cash dividends, and 1,000 times the aggregate per share
amount (payable in kind) of all non-cash dividends or other distributions, other than a dividend payable in shares of Common Stock
or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common Stock since
the immediately preceding Quarterly Dividend Payment Date or, with respect to the first Quarterly Dividend Payment Date, since
the first issuance of any share or fraction of a share of Series D Preferred Stock. In the event the corporation shall at any
time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or combination
or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a dividend in
shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the amount to which
holders of shares of Series D Preferred Stock were entitled immediately prior to such event under clause (2) of the preceding
sentence shall be adjusted by multiplying such amount by a fraction, the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.


 






    	 	- A-1 -	 



     

    

 


(b)
The corporation shall declare a dividend or distribution on the Series D Preferred Stock as provided in paragraph (a) of
this subsection immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in
shares of Common Stock); provided, that in the event no dividend or distribution shall have been declared on the Common
Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a
dividend of $1.00 per share on the Series D Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend
Payment Date.


 


(c)
Dividends shall begin to accrue and be cumulative on outstanding shares of Series D Preferred Stock from the Quarterly Dividend
Payment Date next preceding the date of issue of such shares, unless the date of issue of such shares is prior to the record date
for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue
of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination
of holders of shares of Series D Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment
Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date.
Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series D Preferred Stock in an amount less
than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share
basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders
of shares of Series D Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record
date shall be not more than sixty (60) days prior to the date fixed for the payment thereof.


 






    	 	- A-2 -	 



     

    

 


(3)
Voting Rights. The holders of shares of Series D Preferred Stock shall have the following voting rights:


 


(a)
Subject to the provision for adjustment hereinafter set forth, each share of Series D Preferred Stock shall entitle the holder
thereof to 1,000 votes on all matters submitted to a vote of the stockholders of the corporation. In the event the corporation
shall at any time declare or pay any dividend on the Common Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by reclassification or otherwise than by payment of a
dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock, then in each such case the number
of votes per share to which holders of shares of Series D Preferred Stock were entitled immediately prior to such event shall
be adjusted by multiplying such number by a fraction, the numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately
prior to such event.


 


(b)
Except as otherwise provided herein, in any other certificate of designation creating a series of Preferred Stock or any similar
stock, or by law, the holders of shares of Series D Preferred Stock and the holders of shares of Common Stock and any other capital
stock of the corporation having general voting rights shall vote together as one class on all matters submitted to a vote of stockholders
of the corporation.


 


(c)
Except as set forth herein, or as otherwise provided by law, holders of Series D Preferred Stock shall have no special voting
rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as
set forth herein) for taking any corporate action.


 


(4)
Certain Restrictions.


 


(a)
Whenever quarterly dividends or other dividends or distributions payable on the Series D Preferred Stock as provided in Section
(2) are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares
of Series D Preferred Stock outstanding shall have been paid in full, the corporation shall not:


 


(1)
declare or pay dividends, or make any other distributions, on any shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series D Preferred Stock;


 


(2)
declare or pay dividends, or make any other distributions, on any shares of stock ranking on a parity (either as to dividends
or upon liquidation, dissolution or winding up) with the Series D Preferred Stock, except dividends paid ratably on the Series
D Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to
which the holders of all such shares are then entitled;


 






    	 	- A-3 -	 



     

    

 


(3)
redeem or purchase or otherwise acquire for consideration shares of any stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series D Preferred Stock other than (A) such redemptions or purchases that may be deemed to
occur upon the exercise of stock options, warrants or similar rights or grant, vesting or lapse of restrictions on the grant of
any other performance shares, restricted stock, restricted stock units or other equity awards to the extent that such shares represent
all or a portion of (x) the exercise or purchase price of such options, warrants or similar rights or other equity awards and
(y) the amount of withholding taxes owed by the recipient of such award in respect of such grant, exercise, vesting or lapse of
restrictions; (B) the repurchase, redemption, or other acquisition or retirement for value of any such shares from employees,
former employees, directors, former directors, consultants or former consultants of the Corporation or their respective estate,
spouse, former spouse or family member, pursuant to the terms of the agreements pursuant to which such shares were acquired, provided
that the corporation may at any time redeem, purchase or otherwise acquire shares of any such junior stock in exchange for shares
of any stock of the corporation ranking junior (either as to dividends or upon dissolution, liquidation or winding up) to the
Series D Preferred Stock; or


 


(4)
redeem or purchase or otherwise acquire for consideration any shares of Series D Preferred Stock, or any shares of stock ranking
on a parity with the Series D Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as
determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration
of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall
determine in good faith will result in fair and equitable treatment among the respective series or classes.


 


(b)
The corporation shall not permit any subsidiary of the corporation to purchase or otherwise acquire for consideration any shares
of stock of the corporation unless the corporation could, under paragraph (a) of this Section (4), purchase or otherwise
acquire such shares at such time and in such manner.


 


(5)
Reacquired Shares. Any shares of Series D Preferred Stock purchased or otherwise acquired by the corporation in any manner
whatsoever shall be retired and cancelled promptly after the acquisition thereof. All such shares shall upon their cancellation
become authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock subject
to the conditions and restrictions on issuance set forth herein, in the Certificate of Incorporation, or in any other certificate
of designation creating a series of Preferred Stock or any similar stock or as otherwise required by law.


 


(6)
Liquidation, Dissolution or Winding Up. Upon any liquidation, dissolution or winding up of the corporation, voluntary or
otherwise, no distribution shall be made (1) to the holders of shares of stock ranking junior (either as to dividends or
upon liquidation, dissolution or winding up) to the Series D Preferred Stock unless, prior thereto, the holders of shares of Series
D Preferred Stock shall have received the greater of (A) $1,000 per share, plus an amount equal to accrued and unpaid dividends
and distributions thereon, whether or not declared, to the date of such payment, and (B) an amount, subject to the provision for
adjustment hereinafter set forth, equal to 1,000 times the aggregate amount to be distributed per share to holders of shares of
Common Stock, or (2) to the holders of shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution
or winding up) with the Series D Preferred Stock, except distributions made ratably on the Series D Preferred Stock and all such
parity stock in proportion to the total amounts to which the holders of all such shares are entitled upon such liquidation, dissolution
or winding up. In the event the corporation shall at any time declare or pay any dividend on the Common Stock payable in shares
of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of Common Stock (by reclassification
or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser number of shares of Common Stock,
then in each such case the aggregate amount to which holders of shares of Series D Preferred Stock were entitled immediately prior
to such event under the proviso in clause (1) of the preceding sentence shall be adjusted by multiplying such amount by a
fraction, the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator
of which is the number of shares of Common Stock that were outstanding immediately prior to such event.


 






    	 	- A-4 -	 



     

    

 


(7)
Consolidation, Merger, Etc. In case the corporation shall enter into any consolidation, merger, combination or other transaction
in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property,
then in any such case each share of Series D Preferred Stock shall at the same time be similarly exchanged or changed into an
amount per share, subject to the provision for adjustment hereinafter set forth, equal to 1,000 times the aggregate amount of
stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of
Common Stock is changed or exchanged. In the event the corporation shall at any time declare or pay any dividend on the Common
Stock payable in shares of Common Stock, or effect a subdivision or combination or consolidation of the outstanding shares of
Common Stock (by reclassification or otherwise than by payment of a dividend in shares of Common Stock) into a greater or lesser
number of shares of Common Stock, then in each such case the amount set forth in the preceding sentence with respect to the exchange
or change of shares of Series D Preferred Stock shall be adjusted by multiplying such amount by a fraction, the numerator of which
is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.


 


(8)
No Redemption. The shares of Series D Preferred Stock shall not be redeemable.


 


(9)
Rank. The Series D Preferred Stock shall rank, with respect to the payment of dividends and the distribution of assets,
junior to all series of any other class of the corporation’s Preferred Stock and shall rank senior to the Common Stock as
to such matters.


 


(10)
Amendment. The Certificate of Incorporation of the Corporation shall not be amended in any manner which would materially
alter or change the powers, preferences or special rights of the Series D Preferred Stock so as to affect them adversely without
the affirmative vote of the holders of at least two-thirds of the outstanding shares of Series D Preferred Stock, voting together
as a single class.


 


(11)
Fractional Shares. The Series D Preferred Stock may be issued in fractions of a share,
which fractions shall entitle the holder, in proportion to such holder’s fractional shares, to exercise voting rights, receive
dividends, participate in distributions, and to have the benefit of all other rights of
holders of Series D Preferred Stock.


 




    	 	- A-5 -	 



     

    


 


Exhibit
B


 


SUMMARY
OF RIGHTS


TO
PURCHASE SERIES D PREFERRED STOCK


 


Introduction


 


The
Board of Directors (the “Board”) of Surge Components, Inc., a Nevada corporation (the “Company”),
declared a dividend of one preferred share purchase right (a “Right”) for each outstanding share of common
stock, par value $0.001 per share, of the Company (the “Common Stock”). The dividend is payable on October
7, 2016 (the “Record Date”) to the stockholders of record on that date. Each Right entitles the registered
holder to purchase from the Company one one-thousandth of a share of Series D Preferred Stock, par value $0.001 per
share, of the Company (the “Preferred Stock”) at a price of $5.00 per one one-thousandth of a share
of Preferred Stock (the “Purchase Price”), subject to adjustment. The description and terms of the Rights are
set forth in a Rights Agreement dated as of October 7, 2016, as the same may be amended from time to time (the “Rights
Agreement”), between the Company and Continental Stock Transfer & Trust Company, as Rights Agent (the “Rights
Agent”).


 


Until
the earlier to occur of (i) the close of business on the tenth business day after a public announcement that a person or
group of affiliated or associated persons (with certain exceptions, an “Acquiring Person”) has acquired beneficial
ownership of 4.99% or more of the outstanding shares of Common Stock and (ii) the close of business on the tenth business day
after the commencement by any person of, or of the first public announcement of the intention of any Person to commence, a tender
or exchange offer the consummation of which would result in such Person becoming the Beneficial Owner of 4.99% or more of the
outstanding shares of Common Stock (the earlier of such dates being called the “Distribution Date”), the Rights
will be evidenced, with respect to any of the Common Stock certificates (or book entry shares) outstanding as of the Record Date,
by such Common Stock certificate (or book entry shares) together with this Summary of Rights.


 


The
Rights Agreement provides that, until the Distribution Date (or earlier expiration or redemption of the Rights), the Rights will
be transferred with and only with the Common Stock. Until the Distribution Date (or earlier expiration or redemption of the Rights),
new Common Stock certificates issued after the Record Date upon transfer or new issuances of Common Stock will contain a legend
incorporating the Rights Agreement by reference, and notice of such legend will be furnished to holders of book entry shares.
Until the Distribution Date (or earlier expiration or redemption of the Rights), the surrender for transfer of any certificates
for shares of Common Stock (or book entry shares of Common Stock) outstanding as of the Record Date, even without such legend
or a copy of this Summary of Rights, will also constitute the transfer of the Rights associated with the shares of Common Stock
represented by such certificate or registered in book entry form. As soon as practicable following the Distribution Date, separate
certificates evidencing the Rights (“Rights Certificates”) will be mailed to holders of record of the Common
Stock as of the Close of Business on the Distribution Date and such separate Right Certificates alone will evidence the Rights.


 






    	 	- B-1 -	 



     

    

 


The
Rights are not exercisable until the Distribution Date. The Rights will expire prior to the earliest of (i) October 7, 2019 or
such later date as may be established by the Board prior to the expiration of the Rights as long as the extension is submitted
to the stockholders of the Company for ratification at the next annual meeting of stockholders succeeding such extension (the
“Final Expiration Date”), (ii) the time at which the Rights are redeemed or exchanged by the Company, in each
case as described below, (iii) upon the occurrence of certain transactions, (iv) the first day after the Company’s 2017
annual meeting of stockholders, if stockholder approval has not been obtained on or prior to the first day after the Company’s
2017 annual meeting of stockholders, (v) the Close of Business on the effective date of the repeal of Section 382 of the Internal
Revenue Code of 1986, as amended, if the Board determines that this Agreement is no longer necessary or desirable for the preservation
of Tax Benefits, and (vi) the Close of Business on the first day of a taxable year of the Company to which the Board determines
that no Tax Benefits (as defined in the Rights Agreement) are available to be carried forward.


 


The
Purchase Price payable, and the number of shares of Preferred Stock or other securities or property issuable, upon exercise of
the Rights is subject to adjustment from time to time to prevent dilution (i) in the event of a stock dividend on, or a subdivision,
combination or reclassification of, the Preferred Stock, (ii) upon the grant to holders of the Preferred Stock of certain rights
or warrants to subscribe for or purchase Preferred Stock at a price, or securities convertible into Preferred Stock with a conversion
price, less than the then-current market price of the Preferred Stock or (iii) upon the distribution to holders of the Preferred
Stock of evidences of indebtedness or assets (excluding regular periodic cash dividends or dividends payable in Preferred Stock)
or of subscription rights or warrants (other than those referred to above).


 


The
number of outstanding Rights is subject to adjustment in the event of a stock dividend on the Common Stock payable in shares of
Common Stock or subdivisions, consolidations or combinations of the Common Stock occurring, in any such case, prior to the Distribution
Date.


 


Shares
of Preferred Stock purchasable upon exercise of the Rights will not be redeemable. Each share of Preferred Stock will be entitled,
when, as and if declared, to a minimum preferential quarterly dividend payment of the greater of (a) $1.00 per share, and (b)
an amount equal to 1,000 times the dividend declared per share of Common Stock. In the event of liquidation, dissolution or winding
up of the Company, the holders of the Preferred Stock will be entitled to a minimum preferential payment of the greater of (i)
$1,000.00 per share (plus any accrued but unpaid dividends), and (ii) an amount equal to 1,000 times the payment made per share
of Common Stock. Each share of Preferred Stock will have 1,000 votes, voting together with the Common Stock. Finally, in the event
of any merger, consolidation or other transaction in which outstanding shares of Common Stock are converted or exchanged, each
share of Preferred Stock will be entitled to receive 1,000 times the amount received per share of Common Stock. These rights are
protected by customary anti-dilution provisions.


 


Because
of the nature of the Preferred Stock’s dividend, liquidation and voting rights, the value of the one one-thousandth interest
in a share of Preferred Stock purchasable upon exercise of each Right should approximate the value of one share of Common Stock.


 






    	 	- B-2 -	 



     

    

 


In
the event that any person or group of affiliated or associated persons becomes an Acquiring Person, each holder of a Right, other
than Rights beneficially owned by the Acquiring Person, affiliates and associates of the Acquiring Person and certain transferees
thereof (which will thereupon become null and void), will thereafter have the right to receive upon exercise of a Right that number
of shares of Common Stock having a market value of two times the exercise price of the Right.


 


In
the event that, after a person or group has become an Acquiring Person, the Company is acquired in a merger or other business
combination transaction or 50% or more of its consolidated assets or earning power are sold, proper provisions will be made so
that each holder of a Right (other than Rights beneficially owned by an Acquiring Person, affiliates and associates of the Acquiring
Person and certain transferees thereof which will have become null and void) will thereafter have the right to receive upon the
exercise of a Right that number of shares of common stock of the person with whom the Company has engaged in the foregoing transaction
(or its parent) that at the time of such transaction have a market value of two times the exercise price of the Right.


 


At
any time after any person or group becomes an Acquiring Person and prior to the earlier of one of the events described in the
previous paragraph or the acquisition by such Acquiring Person of 50% or more of the outstanding shares of Common Stock, the Board
may exchange the Rights (other than Rights owned by such Acquiring Person and certain transferees thereof which will have become
null and void), in whole or in part, for shares of Common Stock or Preferred Stock (or a series of the Company’s preferred
stock having equivalent rights, preferences and privileges), at an exchange ratio of two shares of Common Stock, or a fractional
share of Preferred Stock (or other preferred stock) equivalent in value thereto, per Right.


 


With
certain exceptions, no adjustment in the Purchase Price will be required until cumulative adjustments require an adjustment of
at least 1% in such Purchase Price. No fractional shares of Preferred Stock or Common Stock will be issued (other than fractions
of shares of Preferred Stock which are integral multiples of one one-thousandth of a share of Preferred Stock, which may,
at the election of the Company, be evidenced by depositary receipts), and in lieu thereof an adjustment in cash will be made based
on the current market price of the Preferred Stock or the Common Stock.


 


At
any time prior to the time an Acquiring Person becomes such, the Board may redeem the Rights in whole, but not in part, at a price
of $0.001 per Right (the “Redemption Price”) payable, at the option of the Company, in cash, shares of Common
Stock or such other form of consideration as the Board shall determine. The redemption of the Rights may be made effective at
such time, on such basis and with such conditions as the Board in its sole discretion may establish. Immediately upon any redemption
of the Rights, the right to exercise the Rights will terminate and the only right of the holders of Rights will be to receive
the Redemption Price.


 






    	 	- B-3 -	 



     

    

 


For
so long as the Rights are then redeemable, the Company may, except with respect to the Redemption Price, amend the Rights Agreement
in any manner. After the Rights are no longer redeemable, the Company may, except with respect to the Redemption Price, amend
the Rights Agreement in any manner that does not adversely affect the interests of holders of the Rights (other than holders of
Rights owned by or transferred to any person who is or becomes an Acquiring Person or affiliates and associates of an Acquiring
Person and certain transferees thereof).


 


Until
a Right is exercised or exchanged, the holder thereof, as such, will have no rights as a stockholder of the Company, including,
without limitation, the right to vote or to receive dividends.


 


A
copy of the Rights Agreement has been filed with the Securities and Exchange Commission as an exhibit to a Registration Statement
on Form 8-A dated October 7, 2016. A copy of the Rights Agreement is available free of charge from the Company. This summary description
of the Rights does not purport to be complete and is qualified in its entirety by reference to the Rights Agreement, as the same
may be amended from time to time, which is hereby incorporated herein by reference.


 




    	 	- B-4 -	 



     

    


 


Exhibit
C


 


FORM
OF RIGHTS CERTIFICATE


 





	Certificate No. R-________	 	________
    Rights



 


NOT
EXERCISABLE AFTER OCTOBER 7, 2019 OR EARLIER IF REDEEMED OR EXCHANGED BY THE COMPANY. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT
THE OPTION OF THE COMPANY, AT $0.001 PER RIGHT AND TO EXCHANGE ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES,
RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF ANY SUCH PERSON (AS SUCH TERMS ARE DEFINED IN
THE RIGHTS AGREEMENT) AND ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID. THE RIGHTS SHALL NOT BE EXERCISABLE,
AND SHALL BE NULL AND VOID, AS LONG AS HELD BY A HOLDER IN ANY JURISDICTION WHERE THE REQUISITE QUALIFICATION TO THE ISSUANCE
TO SUCH HOLDER, OR THE EXERCISE BY SUCH HOLDER, OF THE RIGHTS IN SUCH JURISDICTION SHALL NOT HAVE BEEN OBTAINED OR BE OBTAINABLE.


 


[The
Rights represented by this Rights Certificate are or were Beneficially Owned by a Person who was or became an Acquiring Person
or a Related Person of an Acquiring Person (as such terms are defined in the Rights Agreement. Accordingly, this Rights Certificate
and the Rights represented hereby may become null and void in the circumstances specified in Section 7(e) of the Rights Agreement.]*


 





 



*
The portion of the legend in brackets shall be inserted only if applicable and shall replace the preceding sentence.


 






    	 	- C-1 -	 



     

    

 


Rights
Certificate


 


This
certifies that _________________, or its registered assigns, is the registered holder of the number of Rights set forth above,
each of which entitles the holder thereof, subject to the terms, provisions and conditions of the Rights Agreement dated as of
October 7, 2016, as amended from time to time (the “Rights Agreement”), between Surge Components, Inc.,
a Nevada corporation (the “Company”), and Continental Stock Transfer & Trust Company, as Rights
Agent (the “Rights Agent”), to purchase from the Company at any time after the Distribution Date and
prior to 5:00 p.m., New York City time, on October 7, 2019, at the office or offices of the Rights Agent designated for such purpose,
or its successors as Rights Agent, one one-thousandth of a fully paid, non-assessable share of Series D Preferred Stock,
par value $0.001 per share (the “Preferred Stock”), of the Company, at a purchase price of $5.00
per one one-thousandth share of Preferred Stock (the “Exercise Price”), upon presentation and surrender
of this Rights Certificate with the Election to Purchase and related Certificate duly executed. The number of Rights evidenced
by this Rights Certificate (and the number of shares that may be purchased upon exercise thereof) set forth above, and the Exercise
Price per share as set forth above, are the number and Exercise Price as of October 7, 2016, based on the Preferred Stock as constituted
at such date, and are subject to adjustment upon the happening of certain events as provided in the Rights Agreement. Capitalized
terms used and not defined herein shall have the meanings specified in the Rights Agreement.


 


From
and after the occurrence of a Flip-In Event or Flip-Over Event, the Rights evidenced by this Rights Certificate beneficially owned
by (i) an Acquiring Person or an Affiliate or Associate of any such Acquiring Person, (ii) a transferee of any such Acquiring
Person, Associate or Affiliate, or (iii) under certain circumstances specified in the Rights Agreement, a transferee of a person
who, concurrently with or after such transfer, became an Acquiring Person or an Affiliate or Associate of an Acquiring Person
shall become null and void and no holder hereof shall have any right with respect to such Rights from and after the occurrence
of such Flip-In Event or Flip-Over Event.


 


The
Rights evidenced by this Rights Certificate shall not be exercisable, and shall be null and void as long as held, by a holder
in any jurisdiction where the requisite qualification to the issuance to such holder, or the exercise by such holder, of the Rights
in such jurisdiction shall not have been obtained or be obtainable.


 


As
provided in the Rights Agreement, the Exercise Price and the number and kind of shares of Preferred Stock or other securities
which may be acquired upon the exercise of the Rights evidenced by this Rights Certificate are subject to modification and adjustment
upon the happening of certain events, including Triggering Events.


 


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 hereunder of the Rights Agent,
the Company and the holders of the Rights Certificates, which limitations of rights include the temporary suspension of the exercisability
of such Rights under the specific circumstances set forth in the Rights Agreement. Copies of the Rights Agreement are on file
at the above-mentioned office of the Rights Agent and are also available upon written request to the Rights Agent.


 






    	 	- C-2 -	 



     

    

 


This
Rights Certificate, with or without other Rights Certificates, upon surrender at the office or offices of the Rights Agent designated
for such purpose, may be exchanged for another Rights Certificate of like tenor and date evidencing Rights entitling the holder
to purchase a like aggregate number of one one-thousandths of a share of Preferred Stock as the Rights evidenced by the Rights
Certificate or Rights Certificates surrendered shall have entitled such holder to purchase. If this Rights Certificate shall be
exercised in part, the holder shall be entitled to receive upon surrender hereof another Rights Certificate or Rights Certificates
for the number of whole Rights not exercised.


 


Subject
to the provisions of the Rights Agreement, the Rights evidenced by this Certificate may be redeemed by the Company under certain
circumstances at its option at a redemption price of $0.001 per Right at any time prior to the earlier of the Close of Business
on (i) the Stock Acquisition Date and (ii) the Final Expiration Date.


 


At
any time after a person becomes an Acquiring Person and prior to the acquisition by such person of 50% or more of the outstanding
Common Stock, the Board may exchange the Rights (other than Rights owned by such Acquiring Person which have become null and void),
in whole or in part, at an exchange ratio of two shares of Common Stock per each outstanding Right or, in certain circumstances,
other equity securities of the Company which are deemed by the Board to have the same value as shares of Common Stock, subject
to adjustment.


 


No
fractional shares of Preferred Stock will be issued upon the exercise of any Right or Rights evidenced hereby (other than fractions
which are integral multiples of one one-thousandth of a share of Preferred Stock, which may, at the election of the Company, be
evidenced by depositary receipts), but in lieu thereof a cash payment will be made, as provided in the Rights Agreement.


 


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 shares of Preferred Stock or of any other securities of the Company which may at any time be issuable on the exercise hereof,
nor shall anything contained in the Rights Agreement or herein be construed to confer upon the holder hereof, as such, any of
the rights of a stockholder of the Company or any right to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any corporate action, or to receive notice of meetings
or other actions affecting stockholders (except as provided in the Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by this Rights Certificate shall have been exercised as provided in
the Rights Agreement.


 


This
Rights Certificate shall not be valid or obligatory for any purpose until it shall have been countersigned by an authorized signatory
of the Rights Agent.



 






    	 	- C-3 -	 



     

    

 


WITNESS
the facsimile signature of the proper officers of the Company.


 


Dated
as of _____________, ______.


 


	 	SURGE
    COMPONENTS, INC.
	 	 	 
	 	By:	             
	 	Name:	 
	 	Title:	 


 


Countersigned:


 


Dated
as of _____________, ______.


 


CONTINENTAL
STOCK TRANSFER & TRUST COMPANY,


as
Rights Agent


  


	By:	 	 
	 	Authorized
    Signatory	 


 




    	 	- C-4 -	 



     

    


 


[Form
of Reverse Side of Rights Certificate]


 


FORM
OF ASSIGNMENT


 


(To
be executed by the registered holder if


such
holder desires to transfer the


Rights
Certificate.)


 


FOR
VALUE RECEIVED                                                                      hereby sells, assigns and 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                               Attorney,
to transfer the within Rights Certificate on the books of the within-named Company, with full power of substitution.


 


Dated
_____________, ______.


 


	 	 
	 	Signature


 


Signature
Guaranteed:


 




    	 	- C-5 -	 



     

    


 


Certificate


 


The
undersigned hereby certifies by checking the appropriate boxes that:


 


(1)this
Rights Certificate [       ] is [       ] is not being sold, assigned and transferred by or on behalf of a Person who is or
was an Acquiring Person or an Affiliate or Associate of any such Person (as such terms are defined pursuant to the Rights Agreement);
and


 


(2)after
due inquiry and to the best knowledge of the undersigned, it [       ] did [       ] did not acquire the Rights evidenced by
this Rights Certificate from any Person who is, was or subsequently became an Acquiring Person or an Affiliate or Associate of
any such Person.


 


Dated
_____________, ______.


 





	 	 
	 	Signature


 


Signature
Guaranteed:


  




    	 	- C-6 -	 



     

    


 


NOTICE


 


The
signature to the foregoing Assignment and Certificate must correspond to the name as written upon the face of this Rights Certificate
in every particular, without alteration or enlargement or any change whatsoever.


 


Signatures
must be guaranteed by a participant in a Medallion Signature Guarantee Program at a level acceptable to the Rights Agent.


 


In
the event the certification set forth above is not completed, the Company will deem the beneficial owner of the Rights evidenced
by this Rights Certificate to be an Acquiring Person or an Affiliate or Associate thereof (as defined in the Rights Agreement)
and, in the case of an Assignment, will affix a legend to that effect on any Rights Certificates issued in exchange for this Rights
Certificate.


 




    	 	- C-7 -	 



     

    


 


FORM
OF ELECTION TO PURCHASE


 


(To
be executed if the registered holder


desires
to exercise Rights represented


by
the Rights Certificate.)


 


To:______________________


 


The
undersigned hereby irrevocably elects to exercise             Rights
represented by this Rights Certificate to purchase the shares of Preferred Stock issuable upon the exercise of the Rights (or
such other securities of the Company or of any other person or such other property which may be issuable upon the exercise of
the Rights) and requests that certificates for such shares (or such other securities of the Company or of any other person or
such other property as may be issuable upon the exercise of the Rights) be issued in the name of and delivered to:


 


 


(Please
print name and address)





 


 


 


	Please
    insert social security	 
	or
    other identifying number:	 


 


If
such number of Rights shall 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:


 


 


(Please
print name and address)


 


 


 


	Please
    insert social security	 
	or
    other identifying number:	 


 


Dated
_____________, ______.


 


	 	 
	 	Signature





 


Signature
Guaranteed:


 




    	 	- C-8 -	 



     

    


 


Certificate


 


The
undersigned hereby certifies by checking the appropriate boxes that:


 


(1)the
Rights evidenced by this Rights Certificate [      ] are [       ] are not being exercised by or on behalf of
a Person who is or was an Acquiring Person or an Affiliate or Associate of any such Person (as such terms are defined in the Rights
Agreement); and


 


(2)after
due inquiry and to the best knowledge of the undersigned, the undersigned [     ] did [      ] did
not acquire the Rights evidenced by this Rights Certificate from any Person who is, was or became an Acquiring Person or an
Affiliate or Associate of any such Person.


 


Dated
_____________, ______.


 





	 	 
	 	Signature


 


Signature
Guaranteed:


 




    	 	- C-9 -	 



     

    


 


NOTICE


 


The
signature to the foregoing Election to Purchase and Certificate must correspond to the name as written upon the face of this Rights
Certificate in every particular, without alteration or enlargement or any change whatsoever.


 


Signatures
must be guaranteed by a participant in a Medallion Signature Guarantee Program at a level acceptable to the Rights Agent.


 


In
the event the certification set forth above is not completed, the Company will deem the beneficial owner of the Rights evidenced
by this Rights Certificate to be an Acquiring Person or an Affiliate or Associate thereof (as defined in the Rights Agreement)
and, in the case of an Assignment, will affix a legend to that effect on any Rights Certificates issued in exchange for this Rights
Certificate.


 


 -
C-10 -