Exhibit 4.2




 




CERTIFICATE OF DESIGNATIONS




 




OF




 




4.5% SERIES B CONVERTIBLE PREFERRED STOCK




 




OF




 




MANUFACTURERS’ SERVICES LIMITED




 




****




 




Manufacturers’ Services

Limited, a corporation duly organized and existing under the General

Corporation Law of the State of Delaware (the “Corporation”), does hereby

certify as that pursuant to authority conferred upon the Board of Directors of

the Corporation by the Second Restated Certificate of Incorporation of the

Corporation and pursuant to the Section 151 of the General Corporation Law of

the State of Delaware, the Board of Directors at a meeting duly held adopted

the following resolution on July 1, 2003:




 




RESOLVED, that the

Corporation is authorized to issue 500,000 shares of 4.5% Series B Convertible

Preferred Stock, par value $0.001 per share (“Series B Preferred Stock”), with

the powers, designations, preferences and relative, participating, optional and

other special rights, and the qualifications, limitations and restrictions as

set forth on Annex II.




 




Annex II




 




Section

1.                                            Ranking.  Each share (a “Share”) of Series B Preferred

Stock shall have preferences, limitations and relative rights identical with

each other; and all Shares of Series B Preferred Stock shall have such

preferences and relative rights expressly provided in this Annex II.  The Series B Preferred Stock shall rank pari

passu with the 5.25% Series A Convertible Preferred Stock, par value $0.001 per

share, of the Corporation (the “Series A Preferred Stock”) and prior to the

Senior Preferred Stock of the Corporation.




 




Section

2.                                            Designation of

the Number of Shares. 

There shall be a series of Preferred Stock consisting of 500,000 shares

that shall be designated as “4.5% Series B Convertible Preferred Stock”.  The Series B Preferred Stock shall be

entitled to dividends when, as and if declared pursuant to Section 3

hereof, shall be entitled to a preference in liquidation as provided in Section 4

hereof, shall be redeemable as provided in Section 5, shall be

convertible as provided in Section 6 hereof, and shall be entitled

to vote as provided in Section 7 hereof.




 




Section

3.                                            Dividends.




 




(a)                                  To the extent

permitted under the Delaware General Corporation Law, the Corporation will pay

preferential dividends to the holders of the Series B Preferred Stock, pari passu

with the Series A Preferred Stock, as provided in this Section 3.  Except as otherwise provided herein,

dividends on each Share will accrue at a rate of 4.5% per annum (the “Dividend

Rate”) of the Liquidation Value (as defined) thereof from and including the

Date of Issuance (as defined) of such Share to and including the date on which

the Liquidation Value (plus all accrued and unpaid dividends thereon) of such

Share is paid in full.  Such dividends

will accrue whether or not they have been declared and whether or not there are

profits, surplus or other funds of the Corporation legally available for the

payment of dividends.  Such dividends

shall accrue on a daily basis and shall be computed on the basis of a 360 day

year comprised on twelve 30-day months. 

The date on which the Corporation initially issues any Share shall be

deemed to be its “Date of Issuance” regardless of the number of times a

transfer of such Share is made on the stock records maintained by or for the

Corporation and regardless of the number of certificates which may be issued to

evidence such Share.




 





























 




(b)                                 All

accrued and unpaid dividends on each Share shall be paid on each Dividend

Reference Date (as defined), and shall be paid, at the election of the

Corporation, in cash or in shares of the common stock, par value $.001 per

share, of the Corporation (the “Common Stock”) and except to the extent paid in

cash or shares of Common Stock, such dividends will accumulate on each such

Dividend Reference Date. The Corporation shall only have the right to elect to

pay a dividend in shares of Common Stock if, on the applicable Dividend

Reference Date, (i) the sale of the shares of Common Stock issuable in

connection with such payment by the holders is covered by an effective

registration statement or such shares may be sold pursuant to Rule 144(k) under

the Securities Act and (ii) the shares of Common Stock to be issued in

connection with such payment have been approved for listing, subject to

official notice of issuance, on a national securities exchange, the Nasdaq

National Market or the Nasdaq Small Cap Market. If the Corporation elects to

pay a dividend in shares of Common Stock, each share of Common Stock will be

valued at 95% of Market Value (as defined) as of the Dividend Reference Date for

purposes of determining the number of shares of Common Stock issuable in

connection with such payment. If the Corporation elects to pay a dividend in

shares of Common Stock, the Corporation shall mail written notice of such

election to the record holders of Series B Preferred Stock at least 20 business

days prior to each Dividend Reference Date. 

Notwithstanding the foregoing, the Company may elect not to pay a

quarterly dividend due under this Section 3, no more than two times in any 24

month period and such dividends will accumulate instead.  If and whenever, at any time or times,

dividends on the outstanding Shares shall not have been paid in an aggregate

amount equal to two full quarterly dividends thereon in accordance with the

provisions of Section 3(a) the Corporation shall pay such accumulated dividends

in shares of Common Stock, and each share of Common Stock will be valued at 95%

of Market Value as of the Dividend Reference Date for the third such quarterly

dividend.  No fractional shares of Common

Stock shall be issued upon payment of a dividend in shares of Common Stock, and

in lieu of any fractional shares to which the holder would otherwise be

entitled, such fraction shall be rounded up or down to the nearest whole share.  The Corporation covenants that all shares of

Common Stock that may be issued upon payment of a dividend on the Series B

Preferred Stock will upon issue be fully paid and nonassessable and free of all

taxes, liens and charges for the issue thereof. As used herein, “Market Value”

as of any date means the average closing price of the Common Stock for the ten

consecutive trading days ending two business days prior to such date on the

principal national securities exchange on which the Common Stock is listed or

admitted to trading, or, if the Common Stock is not so listed or admitted to

trading, the average of the per share closing bid price and per share closing

asked price for the ten trading days preceding such date as quoted on the

National Association of Securities Dealers Automated Quotation System,

including without limitation the OTC Bulletin Board (“NASDAQ”), or such other

market in which such prices are regularly quoted, or, if the Common Stock is

not then quoted by NASDAQ, the Market Price shall be determined by agreement between

the Corporation and holders of Series B Preferred Stock outstanding at the time

of such determination representing more than 50% of the number of shares of

Common Stock into which each share of Series B Preferred Stock is then

convertible in accordance with Section 6.




 




(c)                                  Dividend

Reference Date.  The

accrued dividends will be payable March 31, June 30, September 30 and December

31 of each year commencing on September 30, 2003 (the “Dividend Reference

Dates”) to the record holders of Series B Preferred Stock at the close of

business on the date that is 10 business days immediately preceding the

applicable Dividend Reference Dates of each year.  To the extent all accrued dividends are not paid on the Dividend Reference

Dates, all dividends which have accrued on each Share outstanding during the

three-month period (or other period in the case of the initial Dividend

Reference Date) ending upon each such Dividend Reference Date will be

accumulated and shall remain accumulated dividends with respect to such Share

until paid.




 




(d)                                 If at any time

the Corporation elects to pay less than the total amount of dividends then

accrued with respect to the Series A Preferred Stock and the Series B Preferred

Stock, such payment will be distributed among the holders of the Series A

Preferred Stock and the Series B Preferred Stock based upon the aggregate

accrued but unpaid dividends on the Share of Series A Preferred Stock or the

Share of Series B Preferred Stock held by each such holder, and any amounts of

such dividends remaining thereafter shall be accumulated and shall remain

accumulated dividends with respect to such Share until paid.




 




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Section

4.                                            Liquidation

Preference.




 




(a)                                  In the event of

a dissolution, liquidation or winding up of the Corporation (whether voluntary

or involuntary), but before any distribution to the holders of Common Stock or

any other class or series of the Corporation’s then outstanding capital stock

ranking in any such event junior to the Series B Preferred Stock, the holders

of the Series B Preferred Stock then outstanding shall be entitled to receive,

pari passu with the holders of the Series A Preferred Stock, and the

Corporation shall pay, the following amounts out of assets of the Corporation

legally available for distribution to the stockholders, whether such assets are

capital, surplus or earnings:




 




The

holders of the Series B Preferred Stock shall receive an amount per Share equal

to the Liquidation Value (plus all accrued andunpaid dividends thereon, it being understood that such amount shall

be calculated by including dividends accruing to the actual date of such

dissolution, liquidation or winding up, as the case may be, rather than the

most recent Dividend Reference Date); provided

however, that if the assets to be distributed to the holders of the

Series A Preferred Stock and the Series B Preferred Stock shall be insufficient

to permit the payment to such holders of the full Liquidation Value (plus all

such accrued and  unpaid dividends

thereon), then all of the assets of the Corporation to be distributed to the

holders of the Series A Preferred Stock and the Series B Preferred Stock shall

be distributed ratably to the holders of the Series A Preferred Stock and the

Series B Preferred Stock.




 




As used herein, the term

“Liquidation Value”

means an amount initially equal to $50.00 per Share, subject to appropriate

adjustment for any stock dividend, stock split, recapitalization or

consolidation of or on the Series B Preferred Stock.




 




(b)                                 Notwithstanding

the foregoing, each holder of Series B Preferred Stock may elect to receive, in

the event of a dissolution, liquidation or winding up of the Corporation

(whether voluntary or involuntary), in lieu of the amount described in Section

4(a) above, the amount that would be distributed to such holder if such

holder’s Shares had been converted into shares of Common Stock in accordance

with Section 6 immediately prior to such distribution.




 




(c)                                  After the

payment of the amounts required to be paid to the holders of Series B Preferred

Stock upon the liquidation, dissolution or winding up of the Corporation

pursuant to this Section 4, the outstanding Shares shall be deemed to

have been redeemed and shall be cancelled and shall no longer be deemed to be

issued and outstanding and the holders of the Series B Preferred Stock shall

not be entitled to any further right or claim.




 




(d)                                 A Change in

Control (as defined) of the Corporation will be deemed to be a liquidation,

dissolution or winding up of the Corporation for purposes of this Section 4

and in the event there is a Change of Control on or before July 3, 2005, the

amount to which a holder would be entitled under Section 4(a) above

shall be deemed to be an amount equal to (i) 105% of the Liquidation Value plus

(ii) all accrued and  unpaid

dividends thereon, it being understood that such amount shall be calculated by

including dividends accruing to the actual date of such dissolution,

liquidation or winding up, as the case may be, rather than the most recent

Dividend Reference Date.  As used

herein, “Change in Control” means (A) the sale, transfer or other disposition

of all or substantially all of the assets of the Corporation (other than to a

wholly-owned subsidiary as a result of which the Company becomes a holding

company) or (B) the acquisition of the Corporation by another entity by means

of any transaction or series of related transactions (including without

limitation, any reorganization, merger or consolidation of the Corporation with

any other person (other than a wholly-owned subsidiary of the Corporation))

unless the Corporation’s stockholders of record immediately prior to such

transaction will immediately after such transaction hold at least 50% of the

voting power of the Corporation.




 




Section

5.                                            Redemption.




 




(a)                                  On

July 3, 2008 (the “Scheduled Redemption Date”) the Corporation will redeem all

issued and outstanding Shares, at a price per Share equal to the Liquidation

Value thereof plus all accrued and unpaid dividends thereon, including dividends

accruing to the Scheduled Redemption Date (the “Redemption Price”), which

amount shall be payable, at the election of the Corporation, in cash or shares

of




 




3





























 




Common Stock. The Corporation shall only have

the right to elect to pay the Redemption Price in shares of Common Stock if, on

the Scheduled Redemption Date, (i) the sale of the shares of Common Stock

issuable in connection with such redemption by the holders is covered by an

effective registration statement or such shares may be sold pursuant to

Rule 144(k) under the Securities Act and (ii) the shares of Common Stock

to be issued in connection with such redemption have been approved for listing,

subject to official notice of issuance, on a national securities exchange, the

Nasdaq National Market or the Nasdaq Small Cap Market.  If the Corporation elects to pay the

Redemption Price in shares of Common Stock, each share of Common Stock will be

valued at 95% of Market Value as of the Scheduled Redemption Date for purposes

of determining the number of shares issuable in connection with such payment.

If the Corporation elects to pay the Redemption Price in shares of Common

Stock, the Corporation shall mail written notice of such election to the record

holders of Series B Preferred Stock at least 20 business days prior to the

Scheduled Reference Date.  No fractional

shares of Common Stock shall be issued upon payment of the Redemption Price,

and in lieu of any fractional shares to which the holder would otherwise be

entitled, such fraction shall be rounded up or down to the nearest whole share.

The Corporation covenants that all shares of Common Stock that may be issued

upon a redemption of the Series B Preferred Stock will upon issue be fully paid

and nonassessable and free of all taxes, liens and charges for the issue

thereof.




 




(b)                                 If

at any time after July 3, 2006 and prior to the Scheduled Redemption Date, (i)

a shelf registration statement covering resales of the Common Stock issuable

upon conversion of the Series B Preferred Stock is effective and available for

use at all times during the period beginning on the Early Redemption Notice

Date (as defined below) and ending on the Early Redemption Date (as defined

below), and is expected to remain effective and available for use until at

least the earlier of thirty (30) days following the Early Redemption Date or

the last date on which the shelf registration statement is required to be kept

effective under the terms of the Registration Rights Agreement (as defined

below) or (ii) such shares may be sold pursuant to Rule 144(k) under the

Securities Act, then the Corporation may elect to redeem some or all of the

then issued and outstanding Shares at the Redemption Price.  If the Corporation elects to redeem less than

all of the then issued and outstanding Shares, a pro rata portion of the Shares

held by each record holder of the Series B Preferred Stock shall be redeemed

based upon the number of Shares held by such holder and the number of Shares

the Corporation has elected to redeem. The “Registration Rights Agreement”

means that certain Registration Rights Agreement, dated as of July 1, 2003,

among the Corporation, U.S. Bancorp Piper Jaffray, RBC Dain Rauscher, Inc. and

the initial purchasers of the Series B Preferred Stock as such agreement may be

amended, supplemented and modified from time to time.




 




(c)                                  The

Corporation will mail written notice of each redemption of Series B Preferred

Stock pursuant to Section 5(b) to each record holder at least 30 days

prior to the date on which such redemption is to be made (the “Early Redemption

Date”).  The date on which such notice

is mailed is the “Early Redemption Notice Date.”  Each such notice of redemption shall specify the number of Shares

to be redeemed, the date fixed for redemption, the place or places of payment,

that payment will be made upon presentation and surrender of such Shares and

the current Conversion Price.  If fewer

than all the outstanding Shares are to be redeemed, the notice of redemption

shall identify the number of Shares to be redeemed.   Each Share shall be convertible into Common Stock at the option

of the holder thereof in accordance with the provisions of Section 6 at

any time prior to the Early Redemption Date.




 




(d)                                 No Share is

entitled to any dividends accruing after the date on which the Redemption Price

of such Share is paid in full (the “Redemption Date”).  On such Redemption Date all rights of the

holder of such Share as a holder will cease (including the conversion rights

set forth in Section 6) , and such Share will be canceled and will not

be reissued, sold or transferred.




 




Section 6.                                            Conversion.




 




(a)                                  Each Share

shall be convertible into Common Stock, at the then applicable Conversion Price

(as hereinafter defined), at any time and from time to time, at the option of

the holder thereof in accordance with this Section 6(a) without the need

for the payment of any additional cash consideration.  Before any holder of Series B Preferred Stock shall be entitled

to convert such stock into shares of Common Stock, the holder thereof shall

surrender the certificate or certificates therefor (or in the case of




 




4





























 




any lost, stolen or

destroyed certificate or certificates the delivery of an affidavit to that

effect accompanied by any indemnity bond, in each case, reasonably required by

the Corporation), duly endorsed, to the Corporation and shall give written

notice, duly executed, to the Corporation of such election to convert the same

and shall state the number of shares of Series B Preferred Stock being

converted.  Such conversion shall be

deemed to have been made immediately prior to the close of business on the date

of the surrender of the certificate or certificates representing the Shares to

be converted, and the holder of such Shares shall be treated for all purposes

as the record holder of such shares of Common Stock on such date (such date,

the “Conversion Date”). If a holder of Series B Preferred Stock elects to

convert any of such holder’s Shares into Common Stock on or before July 3,

2005, such holder shall also be entitled to receive, and the Corporation shall

pay, upon conversion of such holder’s Shares, an amount equal to four quarterly

dividends to be paid pursuant to Section 3 per Share (the “Optional Make Whole

Payment”).  The Optional Make Whole

Payment may be paid, at the Corporation’s election, in cash or shares of Common

Stock. The Corporation shall only have the right to elect to pay the Optional

Make Whole Payment in shares of Common Stock if, on the Conversion Date, (i)

the sale of the shares of Common Stock issuable in connection with such

Optional Make Whole Payment by the holders is covered by an effective

registration statement or such shares may be sold pursuant to Rule 144(k) under

the Securities Act and (ii) the shares of Common Stock to be issued in

connection with such Optional Make Whole Payment have been approved for

listing, subject to official notice of issuance, on a national securities

exchange, the Nasdaq National Market or the Nasdaq Small Cap Market.  If the Corporation elects to pay the

Optional Make Whole Payment in shares of Common Stock, each share of Common

Stock will be valued at 95% of Market Value as of the Notice Date for purposes

of determining the number of shares issuable in connection with such

payment.  The Corporation shall deliver

a notice within five (5) business days of receiving written notice from such

holder of Series B Preferred stock of its election to convert such Shares

specifying whether the Optional Make Whole Payment, if any, is to be paid in

cash or in shares of Common Stock.




 




(b)                                 The

price at which shares of Common Stock shall be deliverable upon conversion of

the Series B Preferred Stock is referred to herein as the “Conversion Price,”

and shall be determined in accordance with this Section 6.  Each Share shall be convertible into such

number of fully paid and non-assessable shares of Common Stock as is determined

by dividing the “Original Price” of each Share by the Conversion Price applicable

to such series in effect at the time of conversion without the payment of

additional cash consideration.  The

“Original Price”  of

each Share shall be $50.00.  The initial

Conversion Price for each Share shall be $5.90, subject to adjustment as set

forth at Section 6(d) below.




 




(c)                                  No

fractional shares of Common Stock shall be issued upon conversion of the Series

B Preferred Stock or payment of the Optional Make Whole Payment, if any, and in

lieu of any fractional shares to which the holder would otherwise be entitled,

such fraction shall be rounded up or down to the nearest whole share.




 




(d)                                 The

Conversion Price shall be subject to adjustment at any time or from time to

time as provided herein:




 




(i)                                     In case the

Corporation shall hereafter pay a dividend or make a distribution to all

holders of the outstanding Common Stock in shares of Common Stock, the

Conversion Price in effect at the opening of business on the date following the

date fixed for the determination of shareholders entitled to receive such dividend

or other distribution shall be reduced by multiplying such Conversion Price by

a fraction of which (A) the numerator shall be the number of shares of Common

Stock outstanding at the close of business on the Record Date (as defined)

fixed for such determination and (B) the denominator shall be the sum of such

number of shares and the total number of shares constituting such dividend or

other distribution, such reduction in the Conversion Price to become effective

immediately after the opening of business on the day following the Record

Date.  If any dividend or distribution

of the type described in this Section 6(d)(i) is declared but not so paid or

made, the Conversion Price shall again be adjusted to the Conversion Price

which would then be in effect if such dividend or distribution had not been

declared.




 




5





























 




(ii)                                  In case the

outstanding shares of Common Stock shall be subdivided into a greater number of

shares of Common Stock, the Conversion Price in effect at the opening of

business on the day following the day upon which such subdivision becomes

effective shall be proportionately reduced, and conversely, in case outstanding

shares of Common Stock shall be combined into a smaller number of shares of Common

Stock, the Conversion Price in effect at the opening of business on the day

following the day upon which such combination becomes effective shall be

proportionately increased, such reduction or increase, as the case may be, to

become effective immediately after the opening of business on the day following

the day upon which such subdivision or combination becomes effective.




 




(iii)                               In case the

Company shall issue rights or warrants to all holders of its outstanding shares

of Common Stock entitling them to subscribe for or purchase shares of Common

Stock at a price per share less than the Current Market Price (as defined) on

the Record Date fixed for the determination of shareholders entitled to receive

such rights or warrants, the Conversion Price shall be adjusted so that the

same shall equal the price determined by multiplying the Conversion Price in

effect at the opening of business on the date after such Record Date by a

fraction of which (A) the numerator shall be the sum of the number of shares of

Common Stock outstanding at the close of business on the Record Date plus the

number of shares that the aggregate offering price of the total number of

shares so offered for subscription or purchase would purchase at such Current

Market Price, and of which (B) the denominator shall be the sum of the

number of shares of Common Stock outstanding at the close of business on the

Record Date plus the total number of additional shares of Common Stock so

offered for subscription or purchase. 

Such adjustment shall become effective immediately after the opening of

business on the day following the Record Date fixed for determination of

shareholders entitled to receive such rights or warrants.  To the extent that shares of Common Stock

are not delivered pursuant to such rights or warrants, upon the expiration or

termination of such rights or warrants the Conversion Price shall be readjusted

to the Conversion Price that would then be in effect had the adjustments made

upon the issuance of such rights or warrants been made on the basis of delivery

of only the number of shares of Common Stock actually delivered.  In the event that such rights or warrants

are not so issued, the Conversion Price shall again be adjusted to be the Conversion

Price that would then be in effect if such date fixed for the determination of

shareholders entitled to receive such rights or warrants had not been

fixed.  In determining whether any

rights or warrants entitle the holders to subscribe for or purchase shares of

Common Stock at less than such Current Market Price, and in determining the

aggregate offering price of such shares of Common Stock, there shall be taken

into account any consideration received for such rights or warrants, the value

of such consideration, if other than cash, to be determined in good faith by

the Corporation’s Board of Directors.




 




(iv)                              In case the

Corporation shall, by dividend or otherwise, distribute to all holders of its

Common Stock shares of any class of capital stock of the Company (other than

any dividends or distributions to which Section 6(d)(i) hereof

applies) or evidences of its indebtedness or other assets (including

securities, but excluding (A) any rights or warrants referred to in Section

6(d)(iii) hereof and (B) dividends and distributions paid exclusively in

cash (except as set forth in Section 6(d)(v) and (vi) hereof,

(the foregoing hereinafter in this Section 6(d)(iv) called the

“Additional Securities”)), unless the Corporation elects to reserve such

Additional Securities for distribution to the holders of Series B Preferred

Stock upon conversion thereof so that any such holder converting shares of

Series B Preferred Stock will receive upon such conversion, in addition to the

shares of Common Stock to which such holder is entitled, the amount and kind of

such Additional Securities which such holder would have received if such holder

had converted its shares of Series B Preferred Stock into Common Stock

immediately prior to the Record Date for such distribution, in each such case,

the Conversion Price shall be reduced so that the same shall be equal to the

price determined by multiplying the Conversion Price in effect immediately

prior to the close of business on the Record Date with respect to such

distribution by a fraction of which (x) the numerator shall be the Current

Market Price on such date less the fair market value (as determined in good

faith by the Corporation’s Board of Directors, whose determination shall be

conclusive) on such date of the portion of the Additional Securities so

distributed applicable to one




 




6





























 




share of Common Stock and

(y) the denominator shall be such Current Market Price, such reduction to

become effective immediately prior to the opening of business on the day

following the Record Date; provided, however, that in the event the then fair

market value (as so determined) of the portion of the Additional Securities so

distributed applicable to one share of Common Stock is equal to or greater than

the Current Market Price on the Record Date, in lieu of the foregoing

adjustment, adequate provision shall be made so that each holder of Series B

Preferred Stock shall have the right to receive upon conversion of a share of

Series B Preferred Stock, the amount of Common Stock such holder would have

received had such holder converted such share immediately prior to such Record

Date.  In the event that such dividend

or distribution is not so paid or made, the Conversion Price shall again be

adjusted to be the Conversion Price which would then be in effect if such

dividend or distribution had not been declared.  If the Corporation’s Board of Directors determines the fair

market value of any distribution for purposes of this Section 6(d)(iv)

by reference to the actual or when issued trading market for any securities

comprising all or part of such distribution, it must in doing so consider the

prices in such market over the same period (the “Reference Period”) used in

computing the Current Market Price pursuant to Section 6(d)(vi) hereof

to the extent possible, unless the Corporation’s Board of Directors determines

in good faith that consideration of the fair market value during the Reference

Period would not be in the best interest of the holders of Series B Preferred

Stock.




 




In the event that the

Corporation implements a new shareholder rights plan, such rights plan shall

provide that, upon conversion of the Series B Preferred Stock, the holders of

Series B Preferred Stock will receive, in addition to the Common Stock issuable

upon such conversion, the rights issued under such rights plan (as if the

holder had converted the Series B Preferred Stock prior to implementing the

rights plan and notwithstanding the occurrence of an event causing such rights

to separate from the Common Stock at or prior to the time of conversion).  Any distribution of rights or warrants

pursuant to a shareholder rights plan complying with the requirements set forth

in the immediately preceding sentence of this paragraph shall not constitute a

distribution of rights or warrants for the purposes of this Section 6(d)(iv).




 




Rights or warrants

distributed by the Corporation to all holders of Common Stock entitling the

holders thereof to subscribe for or purchase shares of the Corporation’s

capital stock (either initially or under certain circumstances), which rights

or warrants, until the occurrence of a specified event or events (“Trigger

Event”): (A) are deemed to be transferred with such shares of Common Stock; (B)

are not exercisable; and (C) are also issued in respect of future issuances of

Common Stock, shall be deemed not to have been distributed for purposes of this

Section 6(d)(iv) (and no adjustment to the Conversion Price under this Section

6(d)(iv) will be required) until the occurrence of the earliest Trigger

Event.  If such right or warrant is

subject to subsequent events, upon the occurrence of which such right or

warrant shall become exercisable to purchase different securities, evidences of

indebtedness or other assets or entitle the holder to purchase a different

number or amount of the foregoing or to purchase any of the foregoing at a

different purchase price, then the occurrence of each such event shall be

deemed to be the date of issuance and record date with respect to a new right

or warrant (and a termination or expiration of the existing right or warrant

without exercise by the holder thereof). 

In addition, in the event of any distribution (or deemed distribution)

of rights or warrants, or any Trigger Event or other event (of the type

described in the preceding sentence) with respect thereto, that resulted in an

adjustment to the Conversion Price under this Section 6(d)(iv), (x) in

the case of any such rights or warrants that shall all have been redeemed or

repurchased without exercise by any holders thereof, the Conversion Price shall

be readjusted upon such final redemption or repurchase to give effect to such

distribution or Trigger Event, as the case may be, as though it were a cash

distribution, equal to the per share redemption or repurchase price received by

a holder of Common Stock with respect to such rights or warrants (assuming such

holder had retained such rights or warrants), made to all holders of Common

Stock as of the date of such redemption or repurchase, and (y) in the case of

such rights or warrants all of which shall have expired or been terminated

without exercise, the Conversion Price shall be readjusted as if such rights

and warrants had never been issued.




 




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For purposes of this Section

6(d)(iv) and Sections 6(d)(i) and (iii) hereof, any dividend

or distribution to which this Section 6(d)(iv) is applicable that also

includes shares of Common Stock, or rights or warrants to subscribe for or

purchase shares of Common Stock to which Sections 6(d)(i) or 6(d)(iii)

hereof applies (or both), shall be deemed instead to be (A) a dividend or

distribution of the evidences of indebtedness, assets, shares of capital stock,

rights or warrants other than such shares of Common Stock or rights or warrants

to which Section 6(d)(iii) hereof applies (and any Conversion Price

reduction required by this Section 6(d)(iv) with respect to such

dividend or distribution shall then be made) immediately followed by (B) a

dividend or distribution of such shares of Common Stock or such rights or

warrants (and any further Conversion Price reduction required by Sections

6(d)(i) and (iii) hereof with respect to such dividend or

distribution shall then be made, except (x) the Record Date of such dividend or

distribution shall be substituted as “the date fixed for the determination of

shareholders entitled to receive such dividend or other distribution,” “Record

Date fixed for such determination” and “Record Date” within the meaning of Section

6(d)(i) hereof and as “the date fixed for the determination of shareholders

entitled to receive such rights or warrants,” “the Record Date fixed for the

determination of the shareholders entitled to receive such rights or warrants”

and “such Record Date” within the meaning of Section 6(d)(iii) hereof

and (y) any shares of Common Stock included in such dividend or distribution

shall not be deemed “outstanding at the close of business on the date fixed for

such determination” within the meaning of Section 6(d)(i) hereof.




 




(v)                                 In case the

Corporation shall, by dividend or otherwise, distribute to all holders of its

Common Stock cash (excluding any cash that is distributed upon a merger or

consolidation to which Section 6(e) hereof applies or as part of a

distribution referred to in Section 6(d)(iv) hereof), in an aggregate

amount that, combined together with (A) the aggregate amount of any other such

distributions to all holders of its Common Stock made in cash within the twelve

(12) months preceding the date of payment of such distribution, and in respect

of which no adjustment pursuant to this Section 6(d)(v) has been made,

and (B) the aggregate of any cash plus the fair market value (as determined by

the Corporation’s Board of Directors, whose determination shall be conclusive)

of consideration payable in respect of any tender offer by the Corporation or

any of its Subsidiaries for all or any portion of the Common Stock concluded

within the twelve (12) months preceding the date of payment of such

distribution exceeds ten percent (10%) of the product of the Current Market

Price (determined as provided in Section 6(d)(vi) hereof) on the Record

Date with respect to such distribution times the number of shares of Common

Stock outstanding on such date, then, and in each such case, immediately after

the close of business on such date, the Conversion Price shall be reduced so

that the same shall equal the price determined by multiplying the Conversion

Price in effect immediately prior to the close of business on such Record Date

by a fraction of which (x) the numerator of which shall be equal to the Current

Market Price on the Record Date less an amount equal to the quotient of (1) such combined amount and (2) the number of shares of Common Stock

outstanding on the Record Date and (y) the denominator of which shall be equal

to the Current Market Price on such date; provided, however, that in the event

the portion of the cash so distributed applicable to one (1) share of Common

Stock is equal to or greater than the Current Market Price of the Common Stock

on the Record Date, in lieu of the foregoing adjustment, adequate provision

shall be made so that each holder shall have the right to receive upon

conversion of a share of Series B Preferred Stock, the amount of cash such

holder would have received had such holder converted such share immediately

prior to such Record Date. In the event that such dividend or distribution is

not so paid or made, the Conversion Price shall again be adjusted to be the

Conversion Price that would then be in effect if such dividend or distribution

had not been declared.




 




(vi)                              For purposes of

this Section 6(d), the following terms shall have the meaning indicated:




 




“Closing

Sale Price” with respect to any securities on any day shall mean the closing

sale price regular way on such day or, in case no such sale takes place on such

day, the average of the reported closing bid and asked prices, regular way, in

each case on the Nasdaq National Market or New York Stock Exchange, as

applicable,




 




8





























 




or, if such security is not

listed or admitted to trading on such National Market or Exchange, on the

principal national security exchange or quotation system on which such security

is quoted or listed or admitted to trading, or, if not quoted or listed or

admitted to trading on any national securities exchange or quotation system,

the average of the closing bid and asked prices of such security on the

over-the-counter market on the day in question as reported by the National

Quotation Bureau Incorporated, or a similar generally accepted reporting

service, or if not so available, in such manner as furnished by any New York

Stock Exchange member firm selected from time to time by the Board of Directors

for that purpose, whose determination shall be conclusive.




 




“Current

Market Price” shall mean the average of the daily Closing Sale Prices per share

of Common Stock for the ten (10) consecutive trading days immediately prior to

the date in question; provided, however, that (A) if the “ex” date (as hereinafter

defined) for any event (other than the issuance or distribution requiring such

computation) that requires an adjustment to the Conversion Price pursuant to

Section 6(d)(i), (ii), (iii), (iv) or (v) hereof occurs during such ten (10)

consecutive trading days, the Closing Sale Price for each trading day prior to

the “ex” date for such other event shall be adjusted by multiplying such

Closing Sale Price by the same fraction by which the Conversion Price is so

required to be adjusted as a result of such other event, (B) if the “ex”

date for any event (other than the issuance or distribution requiring such

computation) that requires an adjustment to the Conversion Price pursuant to

Section 6(d)(i), (ii), (iii), (iv) or (v) hereof occurs on or after the “ex” date

for the issuance or distribution requiring such computation and prior to the

day in question, the Closing Sale Price for each trading day on and after the

“ex” date for such other event shall be adjusted by multiplying such Closing

Sale Price by the reciprocal of the fraction by which the Conversion Price is

so required to be adjusted as a result of such other event, and (C) if the “ex”

date for the issuance or distribution requiring such computation is prior to

the day in question, after taking into account any adjustment required pursuant

to clause (A) or (B) of this proviso, the Closing Sale Price for each trading

day on or after such “ex” date shall be adjusted by adding thereto the amount

of any cash and the fair market value (as determined in good faith by the

Corporation’s Board of Directors in a manner consistent with any determination

of such value for purposes of Section 6(d)(iv) hereof, whose determination

shall be conclusive) of the evidences of indebtedness, shares of capital stock

or assets being distributed applicable to one share of Common Stock as of the

close of business on the day before such “ex” date.  The “ex” date shall be the first trading date following the event

for which an adjustment to the Conversion Price is required pursuant to Section

6(d).




 




“Fair

market value” shall mean the amount which a willing buyer would pay a willing

seller in an arm’s length transaction.




 




“Record

Date” shall mean, with respect to any dividend, distribution or other

transaction or event in which the holders of Common Stock have the right to

receive any cash, securities or other property or in which the Common Stock (or

other applicable security) is exchanged for or converted into any combination

of cash, securities or other property, the date fixed for determination of

shareholders entitled to receive such cash, securities or other property

(whether such date is fixed by the Board of Directors or by statute, contract

or otherwise).




 




(vii)                           No adjustment

in the Conversion Price shall be required unless such adjustment would require

a decrease of at least one percent (1%) in such price (and no adjustment shall

increase the Conversion Price except in the case of reverse stock splits or

other transactions involving a combination of shares of Common Stock); provided, that any adjustments which by

reason of this Section 6(d)(vii) are not required to be made shall be

carried forward and then taken into account in any subsequent adjustment;

provided, further, that adjustment in the Conversion Price shall be required

and made in accordance with the provisions of this Certificate of




 




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Designations, other than

this Section 6(d)(vii), not later than such time as may be required in

order to preserve the tax-free nature of a distribution (within the meaning of

Section 305 of the United States Internal Revenue Code of 1986, as amended) to

the holders of Series B Preferred Stock and/or Common Stock.  All calculations under this Section 6

shall be made by the Corporation and shall be made to the nearest cent or to

the nearest one hundredth of a share, as the case may be. No adjustment need be

made for a change in the par value or no par value of the Common Stock.




 




(viii)                        Anything in

this Section 6 to the contrary notwithstanding, the Corporation shall be

entitled (but shall not be required) to make such reductions in the Conversion

Price, in addition to those required by this Section 6, as the

Corporation, in its discretion, shall determine in good faith to be advisable

in order that any stock dividend, subdivision of shares, distribution of rights

to purchase stock or securities or distribution of securities convertible into

or exchangeable for stock hereafter made by the Corporation to its stockholders

shall not be taxable.




 




(ix)                                To the extent

permitted by applicable law, the Corporation from time to time may reduce the

Conversion Price by any amount for any period of time if the period is at least

20 days, the reduction is irrevocable during the period and the Board of

Directors shall have made a determination that such reduction would be in the

best interests of the Corporation, which determination shall be conclusive and

described in a resolution of the Board of Directors.  Whenever the Conversion Price is reduced pursuant to the

preceding sentence, the Corporation shall mail to each record holder of Series

B Preferred Stock a notice of the reduction at least 15 days prior to the date

the reduced Conversion Price takes effect, and such notice shall state the

reduced Conversion Price and the period during which it will be in effect.




 




(x)                                   In any case in

which this Section 6(d) provides that an adjustment shall become

effective immediately after a Record Date for an event, the Corporation may

defer until the occurrence of such event (i) issuing to the holder of any

shares of Series B Preferred Stock converted after such Record Date and before

the occurrence of such event the additional shares of Common Stock issuable

upon such conversion by reason of the adjustment required by such event over

and above the Common Stock issuable upon such conversion before giving effect

to such adjustment and (ii) paying to such holder any amount in cash in lieu of

any fraction pursuant to Section 6(c) hereof.




 




(e)                                  Any

recapitalization, reorganization, reclassification, consolidation, merger, sale

of all or substantially all of the Corporation’s assets or other transactions,

in each case ((i) which is effected in such a manner that the holders of Common

Stock are entitled to receive (either directly or upon subsequent liquidation)

stock, securities or assets with respect to or in exchange for Common Stock and

(ii) is not a Change in Control, is referred to herein as an “Organic

Change.”  Prior to the consummation of

any Organic Change, the Corporation shall make appropriate provisions (in form

and substance reasonably satisfactory to the holders of a majority of the

Series B Preferred Stock then outstanding) to insure that each of the holders

of Series B Preferred Stock shall thereafter have the right to acquire and

receive, such shares of stock, securities or other assets as such holder would

have received in connection with such Organic Change if such holder had

converted its Series B Preferred Stock immediately prior to such Organic

Change. In each such case where the Series B Preferred Stock would remain

outstanding after the Organic Change, the Corporation shall also make

appropriate provisions (in form and substance satisfactory to the holders of a

majority of the Series B Preferred Stock then outstanding) to insure that the

provisions of Section 6(d) hereof shall thereafter be applicable to the Series

B Preferred Stock.  The Corporation

shall not effect any such consolidation, merger or sale, unless prior to the

consummation thereof, the successor entity (if other than the Corporation)

resulting from the consolidation or merger or the entity purchasing such assets

assumes by written instrument (in form and substance satisfactory to the

holders of a majority of the Series B Preferred Stock then outstanding), the

obligation to deliver to each such holder such shares of stock, securities or

other assets as, in accordance with the foregoing provisions, such holder may

be entitled to acquire.  The provisions

of this Section 6(e) shall similarly apply to successive reorganizations,

reclassifications, mergers, consolidations or sales.




 




(f)                                    If any date

shall be fixed by the Corporation as the date as of which holders of Common




 




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Stock (i) shall be

entitled to receive any dividend or any distribution upon the Common Stock of

the Corporation, (ii) shall be offered any subscription or other rights,

or (iii) shall be entitled to participate in any capital reorganization,

reclassification of Common Stock, consolidation, or merger, or in any

liquidation, dissolution or winding up of the Corporation, the Corporation

shall cause notice thereof (specifying such date) to be mailed to the holders

of the Series B Preferred Stock, at the address or such holder as appears on

the Corporations stock transfer ledger of receiving notice, at least 30 days

prior to the date of consummation of the transaction described in the notice.




 




(g)                                 The

issuance of stock certificates representing shares of Common Stock upon

conversion of the Series B Preferred Stock shall be made without charge to the

exercising holder of Series B Preferred Stock for any tax for the issuance

thereof.  The Corporation shall not,

however, be required to pay any tax that may be payable on any transfer

involved in the issue and delivery of stock in any name other than that of the

registered holders of Series B Preferred Stock, and the Corporation shall not

be required to issue or deliver any such stock certificate unless and until the

person or persons requesting the issue thereof shall have paid to the

Corporation the amount of such tax or shall have established to the

satisfaction of the Corporation that such tax has been paid.




 




(h)                                 The

Corporation shall at all times reserve and keep available out of its authorized

but unissued stock for the purpose of effecting the conversion of the Series B

Preferred Stock, such number of its duly authorized shares of Common Stock as

shall from time to time be sufficient to effect the conversion of the Series B

Preferred Stock; and if at any time the number of authorized but unissued

shares of Common Stock shall not be sufficient to effect the conversion of the

Series B Preferred Stock at the Conversion Price then in effect, the

Corporation will take such corporate action as may, in the opinion of its

counsel, be necessary to increase its authorized but unissued shares of Common

Stock to such number of shares as shall be sufficient for this purpose.




 




(i)                                     The

Corporation covenants that all shares of Common Stock that may be issued upon

conversion of the Series B Preferred Stock will upon issue be fully paid and

nonassessable and free of all taxes, liens and charges for the issue thereof.




 




(j)                                     In

each case of an adjustment or readjustment of the Conversion Price for the

number of shares of Common Stock or other securities issuable upon conversion

of the Series B Preferred Stock, the Corporation shall compute such adjustment

or readjustment in accordance herewith and prepare a certificate showing such

adjustment or readjustment and shall mail such certificate, by first class

mail, postage prepaid, to each registered holder of Series B Preferred Stock at

the address last provided by such holder as it appears on the Corporation’s

stock transfer ledger.  The certificate

shall set forth such adjustment or readjustment showing in detail the facts

upon which such adjustment or readjustment is based including a statement of:




 




(i)                                     The adjusted or

readjusted Conversion Price for the Series B Preferred Stock; and




 




(ii)                                  The number of

additional shares of Common Stock and the type and amount, if any, of other

property which would be received upon conversion of the adjusted or readjusted

Conversion Price for the Series B Preferred Stock.




 




(k)                                  Except

with the consent of the holders of two-thirds of the then outstanding shares of

Series B Preferred Stock, the Corporation will not, by amendment of its

Certificate of Incorporation or through any reorganization, transfer of all or

substantially all of its assets, consolidation, merger, dissolution, issue or sale

of securities or any other voluntary action, avoid or seek to avoid the

observance or performance of any of the terms to be observed or performed under

this Section 6 by the Corporation, but the Corporation will at all times

and in good faith assist in the carrying out of all of the provisions of this Section

6.




 




(l)                                     As

soon as possible after a conversion has been effected pursuant to this Section

6 (but in any event within 5 business days after the applicable Conversion

Date), the Corporation shall deliver to the




 




11





























 




converting holder:




 




(i)                                     a certificate

or certificates representing the number of shares of Common Stock issuable by

reason of such conversion in such name or names and such denomination or denominations

as the converting holder has specified, or, at the holder’s request, credit

such aggregate number of shares of Common Stock to which the holder shall be

entitled to the holder’s or its designee’s balance account with the Depositary

Trust Company (“DTC”) through its Deposit Withdrawal Agent Commission system;




 




(ii)                                  payment in cash

or Common Stock of an amount equal to all accrued dividends with respect to

each Share converted which have not been paid thereto;




 




(iii)                               a certificate

representing any Shares which were represented by the certificate or

certificates delivered to the Corporation in connection with such conversion

but which were not converted; and




 




(iv)                              the Optional

Make Whole Payment, if any,

required pursuant to Section 6(a).




 




(m)                               If

the Corporation shall fail for any reason to deliver to the holder any or all

of the item(s) described in Section 6(l) above within 5 business days

after the Conversion Date (such 5th business day, the “Delivery Date”), the

Corporation shall, in addition to any other remedies under the Securities

Purchase Agreement (as defined below) or otherwise available to such holder,

including any indemnification under Section 8 of the Securities Purchase

Agreement, pay as additional damages in cash to such holder on each day after

the Delivery Date such item(s) are not delivered in an amount equal to one-half

percent (0.5%) per month multiplied by the product of (i) the sum of the

number of shares of Common Stock into which the Shares converted were converted

and (ii) the Closing Sale Price (as defined in Section 6(d)(vi) of

the Common Stock on the Delivery Date. The “Securities Purchase Agreement”

means that certain Securities Purchase Agreement, dated as of July 1, 2003,

among the Corporation, U.S. Bancorp Piper Jaffray and the initial purchasers of

the Series B Preferred Stock as such agreement may be amended, supplemented and

modified from time to time.




 




Section

7.                                            Voting.  Except as otherwise expressly provided

herein or as required by law, the holder of each Share shall be entitled to

vote on all matters as shall be submitted to a vote of the holders of the

Common Stock and shall be entitled to such number of votes as is equal to the

largest number of full shares of Common Stock into which such holder’s Shares

are then convertible.  Except as

required by law or otherwise expressly provided herein, the Series B Preferred

Stock and the Common Stock and shares of all other classes or series of stock

entitled to vote with the Common Stock shall be voted together as a single

class and not as separate classes.




 




Section

8.                                            Restrictions

and Limitations.  (a) Except

as otherwise required by law, so long as any Share is outstanding, the vote or

written consent by the holders of at least a majority of the outstanding

Shares, voting or consenting as a separate class, shall be required for the

Corporation to:




 




(i)                                     authorize

or issue any other class or series of Preferred Stock ranking senior to the

Series B Preferred Stock as to the priority of payment of amounts distributable

upon dissolution, liquidation or winding up of the Corporation, or increase the

number of authorized shares of Series B Preferred Stock. Nothing herein shall

prevent the Corporation from (A) authorizing or issuing a new or existing

series of Preferred Stock that ranks junior to or pari passu with the Series B Preferred Stock as to the

priority of payment of amounts distributable upon dissolution, liquidation or

winding up of the Corporation or (B) from issuing shares of Series B Preferred

Stock pursuant to the Securities Purchase Agreement; or




 




(ii)                                  pay

or declare any dividend or distribution on any shares of Common Stock or of any

security ranking junior to the Series B Preferred Stock as to payment of

dividends other than a distribution or other payment made upon dissolution,

liquidation or winding up of the




 




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Corporation in accordance with the provisions

of Section 4 hereof and other than dividends payable solely in shares of

Common Stock; or




 




(iii)                               reclassify

any Common Stock or other class or series of capital stock of the Corporation

into shares having any preference or priority, or ranking senior to the Series

B Preferred Stock, as to the payment of amounts distributable upon dissolution,

liquidation or winding up of the Corporation.




 




(b)                                 Except

as otherwise required by law, so long as any Share is outstanding, the vote or

written consent by holders of two-thirds of the outstanding Shares, voting or

consenting as a separate class, shall be required for the Corporation to amend

or repeal (by merger, consolidation or otherwise) any provision of, or add any

provision to, the Corporation’s Certificate of Incorporation, including this

Certificate of Designations, in a manner which would adversely affect the preferences,

special rights or other powers of the Series B Preferred Stock; provided,

however, that the vote or written consent of holders of all the outstanding

Shares, voting or consenting as a separate class, shall be required for the

Corporation to amend or repeal (by merger, consolidation or otherwise) any

provision of the Corporation’s Certificate of Incorporation, including this

Certificate of Designations, with respect to the Dividend Rate, Liquidation

Preference, Redemption Price, Scheduled Redemption Date, Conversion Price or

Optional Make Whole Payment in a manner which would adversely affect the

preferences, special rights or other powers of the Series B Preferred Stock set

forth in such provisions, or reduce the aforesaid percentage of outstanding Shares,

the holders of which are required to consent to any amendment or repeal of the

Corporation’s Certificate of Incorporation.




 




(c)                                  The Corporation

will not, through any reorganization, transfer of assets, consolidation,

merger, dissolution, issue or sale of securities or any other voluntary action,

avoid the observance or performance of any of the terms to be observed or

performed hereunder by the Corporation.




 




IN WITNESS WHEREOF, Manufacturers’ Services Limited has caused this

Certificate of Designations to be duly executed on July 2, 2003.




 




	

   


  	

  MANUFACTURERS’

  SERVICES LIMITED


  
	

   


  	

   


  
	

   


  	

  By:


  	

    /s/ Alan R. Cormier


  	

   


  
	

   


  	

   


  	

  Name: 


  	

  Alan R. Cormier


  	

   


  
	

   


  	

   


  	

  Title:


  	

  Vice President and General

  Counsel


  	

   


  
							





 




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