Exhibit

10.1




 








 




 









MANUFACTURERS’

SERVICES LIMITED,




 




as the Company




 




 




and




 




 




BUYERS,




 




as defined herein




 




 




SECURITIES

PURCHASE AGREEMENT




 




Dated as of July

1, 2003




 




 




4.5% Convertible

Preferred Stock


and Warrants to Purchase Common Stock




 




 








 


































 




TABLE

OF CONTENTS




 




	

  SECTION 1.


  	

  Purchase and Sale of Series B Preferred and

  Warrants


  
	

   


  	

   


  
	

  SECTION 2.


  	

  Buyer’s Representations and Warranties


  
	

   


  	

   


  
	

  SECTION 3.


  	

  Representations and Warranties of the Company


  
	

   


  	

   


  
	

  SECTION 4.


  	

  Covenants


  
	

   


  	

   


  
	

  SECTION 5.


  	

  Transfer Agent Instructions


  
	

   


  	

   


  
	

  SECTION 6.


  	

  Conditions to the Company’s Obligation to

  Close


  
	

   


  	

   


  
	

  SECTION 7.


  	

  Conditions to Each Buyer’s Obligation to

  Purchase


  
	

   


  	

   


  
	

  SECTION 8.


  	

  Indemnification


  
	

   


  	

   


  
	

  SECTION 9.


  	

  Miscellaneous


  
	

   


  
	

  EXHIBITS


  
	

   


  
	

  Exhibit A


  	

  Schedule of Buyers


  
	

  Exhibit B


  	

  Form of Warrant


  
	

  Exhibit C


  	

  Schedule of Fees


  
	

  Exhibit D


  	

  Form of Registration Rights Agreement


  
	

  Exhibit E


  	

  Certificate of Amendment of Certificate of

  Incorporation


  
	

  Exhibit F


  	

  Form of Irrevocable Transfer Agent

  Instructions


  
	

  Exhibit G


  	

  Form of Company Counsel Opinion


  
	

   


  
	

  SCHEDULES


  
	

   


  
	

  Schedule A


  	

  Wire Instructions


  
			





 






















 













 




SECURITIES

PURCHASE AGREEMENT




 




THIS

SECURITIES PURCHASE AGREEMENT (the “Agreement”), dated as of

July 1, 2003, by and among Manufacturers’ Services Limited, a Delaware

corporation (the “Company”), and the Buyers listed on the Schedule of Buyers

attached hereto as Exhibit A (individually, a “Buyer” and, collectively,

the “Buyers”).




 




THE

PARTIES TO THIS AGREEMENT enter into this Agreement on the

basis of the following facts, intentions and understandings:




 




A.                                    In

accordance with the terms and conditions of this Agreement, the Company has

agreed to issue and sell, and the Buyers have agreed to purchase in the

aggregate, (i) 500,000 shares, par value $.001 per share, of 4.5% Series B

Convertible Preferred Stock of the Company (the “Series B Preferred”) which

shall be convertible into shares of the common stock, par value $.001 per

share, (the “Common Stock”) of the Company (as converted, the “Conversion

Shares”) and (ii) Warrants (such Warrants, substantially in the form attached hereto

as Exhibit B, as the same may be amended, modified or supplemented

from time to time in accordance with the terms thereof, the “Buyer Warrants”)

to purchase 1,059,322 shares of Common Stock (as exercised, collectively, the

“Buyer Warrant Shares”).




 




B.                                    To

induce U.S. Bancorp Piper Jaffray (“Piper Jaffray”) and RBC Dain Rauscher Inc.

(“RBC” and together with Piper Jaffray, the “Placement Agents”) to act as

exclusive placement agents with respect to the offering of the Series B

Preferred and the Buyer Warrants (the “Offering”), the Company has agreed to

issue Warrants (such Warrants, substantially in the form attached hereto as Exhibit

B, as the same may be amended, modified or supplemented from time to time

in accordance with the terms thereof, the “Placement Agent Warrants” and,

together with the Buyer Warrants, the “Warrants”) to purchase 105,932 shares of

Common Stock (as exercised collectively, the “Placement Agent Warrant Shares”

and, together with the Buyer Warrant Shares, the “Warrant Shares”).




 




C.                                    Contemporaneously

with the execution and delivery of this Agreement, the parties hereto are

executing and delivering a Registration Rights Agreement substantially in the

form attached hereto as Exhibit D (as the same may be amended, modified

or supplemented from time to time in accordance with the terms thereof, the

“Registration Rights Agreement”) pursuant to which the Company has agreed to

provide certain of the Buyers and the Placement Agents with the benefit of

certain registration rights under the Securities Act of 1933, as amended, and

the rules and regulations promulgated thereunder (the “Securities Act”) and

applicable state securities laws, on the terms and subject to the conditions

set forth therein.




 




NOW

THEREFORE, in consideration of the promises and the mutual

covenants contained herein and other good and valuable consideration, the

receipt and sufficiency of which are hereby acknowledged, the Company and each

of the Buyers hereby agree as follows:




 




SECTION 1. Purchase and Sale of Series B Preferred and Warrants.




 




(a)  Purchase

of Series B Preferred and Warrants. 

Subject to the satisfaction (or waiver) of the conditions set forth in

Sections 6 and 7 of this Agreement, the Company shall issue and sell to each

Buyer, and each Buyer severally and not jointly agrees to purchase from the




 





























 




Company, such number of shares of Series B Preferred and the Buyer

Warrants to purchase the aggregate number of shares of Common Stock in the

respective amounts, set forth opposite such Buyer’s name on the Schedule of

Buyers attached hereto as Exhibit A (the “Closing”).  The Company shall issue to each Buyer one

share of Series B Preferred and Warrants to purchase 2.118644 Warrant Shares

for each Fifty United States Dollars ($50.00) tendered by each such Buyer.




 




(b)  The

Closing.  The date and time of the

Closing (the “Closing Date”) shall be 10:00 a.m., New York time, on July 3,

2003, subject to the satisfaction (or waiver) of the conditions set forth in

Sections 6 and 7 of this Agreement.  The

Closing shall occur on the Closing Date at the offices of Hale and Dorr LLP, 60

State Street, Boston, Massachusetts.




 




(c)  Form of

Payment.  On the Closing Date, (i)

each Buyer shall pay the Company for the shares of Series B Preferred and the

related Buyer Warrants to be issued and sold to such Buyer on the Closing Date,

by wire transfer of immediately available funds in accordance with the

Company’s written wire instructions attached hereto on Schedule A, (ii)

the Company shall reimburse each Buyer for its reasonable expenses to the

extent required by Section 4(i) of this Agreement, and (iii) the Company shall

deliver to each Buyer certificates in the name of each Buyer representing the

number of shares of Series B Preferred which such Buyer is then purchasing

hereunder, along with Warrants representing the related number of Warrant

Shares, duly executed on behalf of the Company and registered in the name of

such Buyer.




 




SECTION 2.  Buyer’s

Representations and Warranties. 

Each Buyer represents and warrants to the Company with respect to only

itself that as of the date hereof:




 




(a)  Investment

Purpose.  Such Buyer (i) is

acquiring the Series B Preferred and the Warrants, (ii) upon conversion of

the Series B Preferred owned by it, will acquire the Conversion Shares then

issuable upon conversion thereof, and (iii) upon exercise of the Warrants held

by it, will acquire the Warrant Shares then issuable upon exercise thereof (the

Series B Preferred, the Conversion Shares, the Warrants and the Warrant Shares

collectively are referred to herein as the “Securities”) for its own account

for investment only and not with a view towards, or for resale in connection

with, the public sale or distribution thereof, except pursuant to sales

registered or exempt from registration under the Securities Act; provided,

however, that by making the representations herein, such Buyer does not agree

to hold any of the Securities for any minimum or other specific term; provided,

further, that any disposition shall be in accordance with or pursuant to a registration

statement or an exemption under the Securities Act.




 




(b)  Accredited

Investor Status.  Such Buyer is an

“accredited investor” as that term is defined in Rule 501(a) of Regulation D

under the Securities Act and was not organized for the specific purpose of

acquiring the Securities.




 




(c)  Reliance

on Exemptions.  Such Buyer

understands that the Securities are being offered and sold to it in reliance on

specific exemptions from the registration requirements of the United States

federal and state securities laws and that the Company is relying upon the

truth and accuracy of, and such Buyer’s compliance with, the representations,

warranties, agreements, acknowledgments and understandings of such Buyer set

forth herein and in the applicable




 




2





























 




Warrant in order to determine the availability of such exemptions and

the eligibility of such Buyer to acquire the Securities.




 




(d)  Information.  Such Buyer (i) has been furnished with or

believes it has had full access to all of the information that it considers

necessary or appropriate for deciding whether to purchase the Series B

Preferred, the Warrants, the Conversion Shares and the Warrant Shares, (ii) has

had an opportunity to ask questions and receive answers from the Company

regarding the terms and conditions of the offering of the Securities, (iii) can

bear the economic risk of a total loss of its investment in the Series B

Preferred and the Warrants and (iv) has such knowledge and experience in

business and financial matters so as to enable it to understand the risks of

and form an investment decision with respect to its investment in the

Securities. Neither such inquiries nor any other due diligence investigations

conducted by such Buyer or its advisors, if any, or its representatives shall

limit, modify, amend or affect the Company’s representations and warranties

contained in this Agreement and such Buyer’s right to rely thereon.




 




(e)  No

Governmental Review.  Such Buyer

understands that no United States federal or state agency or any other

government or governmental agency has passed on or made any recommendation or

endorsement of the Securities or the fairness or suitability of the investment

in the Securities nor have such authorities passed upon or endorsed the merits

of the offering of the Securities.




 




(f)  Transfer

or Resale.  Such Buyer understands

that, except as provided in the Registration Rights Agreement, the Securities

have not been, and the Series B Preferred and the Warrants will not be, registered

under the Securities Act or any state securities laws, and may not be offered

for sale, sold, assigned or transferred without registration under the

Securities Act or an exemption therefrom and that, in the absence of an

effective registration statement under the Securities Act, such Securities may

only be sold under certain circumstances as set forth in the Securities Act. In

that connection, such Buyer is aware of Rule 144 under the Securities Act and

the restrictions imposed thereby.




 




(g)  Legends.




 




(1)  Such Buyer understands that any certificate

evidencing shares of Series B Preferred and any certificate evidencing such

Warrant (and all securities issued in exchange therefor or in substitution

thereof, other than Common Stock, if any, issued upon conversion thereof (in

the case of a share of Series B Preferred) or upon exercise thereof (in the

case of a Warrant), which shall bear the legend set forth in Section 2(g)(2) of

this Agreement, if applicable) shall bear a legend in substantially the following

form:




 




THE SECURITIES

REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,

AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE

OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE

REGISTRATION




 




3





























 




STATEMENT FOR THE

SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE

SECURITIES LAWS OR AN EXEMPTION THEREFROM. THE SECURITIES MAY BE PLEDGED IN

CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY THE

SECURITIES.




 




The

Company shall place the following legend on any Warrant or certificate

representing shares of Series B Preferred, as appropriate, held by or

transferred to an “affiliate” (as defined in Rule 501(b) of Regulation D

under the Securities Act) of the Company:




 




THE SECURITIES

REPRESENTED BY THIS CERTIFICATE ARE HELD BY A PERSON WHO MAY BE DEEMED TO BE AN

AFFILIATE OF THE ISSUER FOR PURPOSES OF RULE 144 PROMULGATED UNDER THE

SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND MAY BE SOLD ONLY

IN COMPLIANCE WITH RULE 144, PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT

UNDER THE SECURITIES ACT OR PURSUANT TO AN EXEMPTION THEREFROM.




 




The

legends set forth above shall be removed and the Company shall issue a new

certificate representing shares of Series B Preferred or Warrants, as

appropriate, of like tenor and number of shares, as appropriate, and which

shall not bear the restrictive legends required by this Section 2(g)(1), if the

holder of the Securities has not been an “affiliate” (as defined in Rule 501(b)

of Regulation D under the Securities Act) during the preceding three (3)

months, upon expiration of the two year holding period under Rule 144(k) of the

Securities Act (or any successor rule).




 




(2)  Such Buyer understands that any stock

certificate representing Conversion Shares or Warrant Shares shall bear a

legend in substantially the following form (unless (i) such Conversion Shares

or Warrant Shares have been transferred or sold pursuant to an effective

registration statement, (ii) such Conversion Shares or Warrant Shares, as

appropriate, have been transferred or sold pursuant to the exemption from

registration provided by Rule 144 under the Securities Act, (iii) such Conversion

Shares or Warrants Shares, as appropriate, may be transferred pursuant to Rule

144(k) under the Securities Act, or (iv) unless otherwise agreed by the Company

in writing with written notice to the transfer agent):




 




THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE

NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE

STATE LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR

ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION




 




4





























 




STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT

OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS OR AN EXEMPTION

THEREFROM. THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN

ACCOUNT OR OTHER LOAN SECURED BY THE SECURITIES.




 




The

Company shall instruct the transfer agent to place the following legend on any

certificate evidencing Conversion Shares or Warrant Shares held by or

transferred to an “affiliate” (as defined in Rule 144(a)(1) under the

Securities Act) of the Company:




 




THE SHARES REPRESENTED BY THIS CERTIFICATE ARE HELD BY

A PERSON WHO MAY BE DEEMED TO BE AN AFFILIATE OF THE ISSUER FOR PURPOSES OF

RULE 144 PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE

“SECURITIES ACT”), AND MAY BE SOLD ONLY IN COMPLIANCE WITH RULE 144, PURSUANT

TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO

A VALID EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT.




 




The

legend set forth above shall be removed and the Company shall issue the

relevant Securities without such legend to the holder of the Securities upon

which it is stamped, (i) if such Securities are registered for resale under the

Securities Act and have been transferred or sold pursuant to an effective

registration statement, (ii) if, in connection with a sale transaction, such

holder provides the Company with an opinion of counsel reasonably acceptable to

the Company to the effect that a public sale, assignment or transfer of the

Securities may be made without registration under the Securities Act, or

(iii) if the holder of the Securities has not been an “affiliate” (as

defined in Rule 501(b) of Regulation D under the Securities Act) during

the preceding three (3) months, upon expiration of the two-year period under

Rule 144(k) of the Securities Act (or any successor rule).  The Company shall not require such opinion

of counsel for the sale of Securities in accordance with Rule 144 of the

Securities Act, provided the Seller provides such representations that the

Company shall reasonably request confirming compliance with the requirements of

Rule 144.




 




(3)  Such Buyer understands that, in the event

Rule 144(k) as promulgated under the Securities Act (or any successor rule) is

amended to change the two-year or three-month periods under Rule 144(k) (or the

corresponding periods under any successor rule), (i) each reference in Sections

2(g)(1) and 2(g)(2) of this Agreement to “two (2) years” or the “two-year

period” and to “three (3) months” shall be deemed for all purposes of this

Agreement to be references to such changed period or periods, and (ii) all

corresponding references in the Series B Preferred and Warrants shall be deemed

for all purposes to be references to the changed




 




5





























 




period or periods,

provided that such changes shall not become effective if they are otherwise

prohibited by, or would otherwise cause a violation of, the then-applicable

federal securities laws.




 




(h)  Authorization;

Enforcement; Validity.  Each of this

Agreement and the Registration Rights Agreement have been duly and validly

authorized, executed and delivered on behalf of such Buyer and are a valid and

binding agreement of such Buyer enforceable against such Buyer in accordance

with its respective terms, subject as to enforceability to general principles

of equity and to applicable bankruptcy, insolvency, reorganization, moratorium,

liquidation and other similar laws relating to, or affecting generally, the

enforcement of applicable creditors’ rights and remedies.




 




(i)  Residency.  Such Buyer is a resident of that country or

state specified in its address on the Schedule of Buyers attached hereto as Exhibit

A.




 




(j)  No

Conflicts.  The execution and

performance of each of this Agreement and, to the extent such Buyer is a party

thereto, the Registration Rights Agreement do not conflict with any agreement

to which such Buyer is a party or is bound thereby, any court order or judgment

addressed to such Buyer, or the constituent documents of such Buyer.




 




(k)  Conversion/Exercise

Limitation. (A) Subject to Buyer’s election on the signature pages hereto,

each Buyer hereby agrees that in no event will it convert any of the Series B

Preferred or exercise any of the Warrants in excess of the number of such

shares of Series B Preferred or Warrants, upon the conversion or exercise of

which (x) the number of shares of Common Stock beneficially owned by such Buyer

(other than the shares which would otherwise be deemed beneficially owned

except for being subject to a limitation on conversion or exercise analogous to

the limitation contained in this Section 2(k)(A)) plus (y) the number of shares

of Common Stock issuable upon the conversion of such Series B Preferred and

exercise of such Warrants, would be equal to or exceed 4.99% of the number of

shares of Common Stock then issued and outstanding (after giving effect to such

conversion or exercise), it being the intent of the Company and the Buyers that

no Buyer be deemed at any time to have the power to vote or dispose of greater

than 4.99% of the number of shares of Common Stock issued and outstanding. As

used herein, beneficial ownership shall be determined in accordance with

Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange

Act”). To the extent that the limitation contained in this Section 2(k)(A)

applies (and without limiting any rights the Company may otherwise have), the

Company may rely on the Buyer’s determination of whether the Series B Preferred

are convertible or the Warrants exercisable pursuant to the terms hereof, the

Company having no obligation whatsoever to verify or confirm the accuracy of

such determination, and the submission of a notice of conversion for Series B

Preferred or the Exercise Notice (as that term is defined in the Warrant) by

the Buyer shall be deemed to be the Buyer’s representation that the Series B

Preferred or the Warrants specified therein are convertible or exercisable

pursuant to the terms hereof. Nothing contained herein shall be deemed to

restrict the right of a Buyer to convert the Series B Preferred at such time as

the conversion or exercise thereof will not violate the provisions of this

Section 2(k)(A).  Notwithstanding

anything to the contrary, this Section 2(k)(A) shall only apply to a Buyer who

has elected to be subject to this Section by so indicating in the signature

page.




 




6





























 




(B) Subject to Buyer’s election on the signature pages

hereto, each Buyer hereby agrees that in no event will it convert any of the

Series B Preferred or exercise any of the Warrants in excess of the number of

such shares of Series B Preferred or Warrants, upon the conversion or exercise

of which (x) the number of shares of Common Stock beneficially owned by such

Buyer (other than the shares which would otherwise be deemed beneficially owned

except for being subject to a limitation on conversion or exercise analogous to

the limitation contained in this Section 2(k)(B)) plus (y) the number of shares

of Common Stock issuable upon the conversion of such Series B Preferred and

exercise of such Warrants, would be equal to or exceed 9.99% of the number of

shares of Common Stock then issued and outstanding (after giving effect to such

conversion or exercise), it being the intent of the Company and the Buyers that

no Buyer be deemed at any time to have the power to vote or dispose of greater

than 9.99% of the number of shares of Common Stock issued and outstanding. As

used herein, beneficial ownership shall be determined in accordance with

Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange

Act”). To the extent that the limitation contained in this Section 2(k)(B)

applies (and without limiting any rights the Company may otherwise have), the

Company may rely on the Buyer’s determination of whether the Series B Preferred

are convertible or the Warrants exercisable pursuant to the terms hereof, the

Company having no obligation whatsoever to verify or confirm the accuracy of

such determination, and the submission of a notice of conversion for Series B

Preferred or the Exercise Notice (as that term is defined in the Warrant) by

the Buyer shall be deemed to be the Buyer’s representation that the Series B

Preferred or the Warrants specified therein are convertible or exercisable

pursuant to the terms hereof. Nothing contained herein shall be deemed to

restrict the right of a Buyer to convert the Series B Preferred at such time as

the conversion or exercise thereof will not violate the provisions of this

Section 2(k)(B).  Notwithstanding

anything to the contrary, this Section 2(k)(B) shall only apply to a Buyer who

has elected to be subject to this Section by so indicating in the signature

page.




 




SECTION

3.  Representations and Warranties of the

Company.  The Company represents

and warrants to the Placement Agents and each of the Buyers that as of the date

hereof subject to such exceptions as set forth in a Disclosure Schedule:




 




(a)  Organization

and Qualification.  The Company and

its “Subsidiaries” (which, for purposes of this Agreement, means any entity in

which the Company, directly or indirectly, owns a majority of the capital stock

or other equity or similar interests) are corporations, partnerships or limited

liability companies duly organized and validly existing in good standing under

the laws of the jurisdiction in which they are incorporated or organized, and

have the requisite corporate, limited liability company or partnership power

and authorization to own their properties and to carry on their business as now

being conducted.  Copies of the

Company’s Certificate of Incorporation and Bylaws, and all amendments thereto,

have been filed as exhibits to the Company’s SEC Documents, are in full effect

and have not been modified.  Each of the

Company and its Subsidiaries is duly qualified as a foreign corporation,

partnership or limited liability company to do business and is in good standing

in every jurisdiction in which its ownership of property or the nature of the

business conducted and proposed to be conducted by it makes such qualification

necessary, except to the extent that the failure to be so qualified or be in

good standing would not have a Material Adverse Effect.  As used in this Agreement, “Material




 




7





























 




Adverse Effect” means any material adverse effect on the business,

properties, assets, operations, results of operations or financial condition of

the Company and its Subsidiaries, taken as a whole, or on the transactions

contemplated hereby or by the agreements and instruments to be entered into in

connection herewith, or on the authority or ability of the Company to perform

its obligations under the Transaction Documents (as defined below). A complete

list of Subsidiaries is set forth on Schedule 3(a).




 




(b)  Authorization;

Enforcement; Validity.  The Company

has the requisite corporate power and authority to enter into and perform its

obligations under this Agreement, the Warrants, the Registration Rights

Agreement, the Irrevocable Transfer Agent Instructions (as defined in Section 5

of this Agreement) and each of the other agreements entered into by the parties

hereto in connection with the transactions contemplated by this Agreement

(collectively, the “Transaction Documents”), and to issue the Securities in

accordance with the terms hereof and thereof. 

On or before the Closing Date, the Company will have duly adopted,

executed and filed with the Secretary of State of the State of Delaware a

Certificate of Designations in the form set forth in Exhibit E hereto

(the “Certificate Amendment”) establishing the terms and the rights and

preferences of the Series B Preferred and the Company has not adopted or filed

any other document designating terms, rights or preferences of its preferred

stock, other than the Certificate of Designations for the 5.25% Series A

Convertible Preferred Stock of the Company. 

The execution and delivery of the Transaction Documents by the Company

and the consummation by it of the transactions contemplated hereby and thereby,

including, without limitation, the issuance of the Series B Preferred, the

reservation for issuance and the issuance of the Conversion Shares issuable

upon conversion thereof, the issuance of the Warrants and the reservation for

issuance and the issuance of the Warrant Shares issuable upon exercise of the

Warrants, have been duly authorized by the Company’s Board of Directors and no

further consent or authorization is required of the Company’s Board of

Directors or shareholders.  The

Transaction Documents have been duly executed and delivered by the Company. The

Transaction Documents constitute the valid and binding obligations of the

Company enforceable against the Company in accordance with their terms, except

as such enforceability may be limited by general principles of equity or

applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or

similar laws relating to, or affecting generally, the enforcement of creditors’

rights and remedies.




 




(c)  Capitalization.  Except for any shares issuable upon exercise

of options issued pursuant to employee benefit plans disclosed in the Company’s

SEC Documents, the capitalization of the Company is as described in the

Company’s SEC Documents. All of the Company’s outstanding shares have been, or

upon issuance will be, validly issued and are fully paid and nonassessable. The

Company’s Common Stock is registered pursuant to Section 12(b) of the Exchange

Act of 1934, and is listed for trading on the Principal Market (as defined

below).  Except as set forth in this

Agreement, the Registration Rights Agreement and as set forth in the SEC

Documents, (i) no shares of the Company’s capital stock are subject to

preemptive rights or any other similar rights or any liens or encumbrances;

(ii) there are no outstanding options, warrants, scrip, rights to subscribe to,

calls or commitments of any character whatsoever relating to, or securities or

rights convertible into, any shares of capital stock of the Company or any of

its Subsidiaries, or contracts, commitments, understandings or arrangements by

which the Company or any of its Subsidiaries is or may become bound to issue

additional shares of capital stock of the Company or any of its Subsidiaries or

options, warrants, scrip, rights to subscribe to, 




 




8





























 




calls or commitments of any character whatsoever relating to, or

securities or rights convertible into, any shares of capital stock of the

Company or any of its Subsidiaries (other than any such options, warrants,

scrip, rights, calls, commitments, securities, understandings and arrangement

outstanding under plans disclosed in the SEC Documents (as defined below));

(iii) there are no outstanding debt securities, notes, credit agreements,

credit facilities or other agreements, documents or instruments evidencing

indebtedness of the Company or any of its Subsidiaries or by which the Company

or any of its Subsidiaries is or may become bound; (iv) there are no

outstanding securities or instruments of the Company or any of its Subsidiaries

which contain any redemption or similar provisions, and there are no contracts,

commitments, understandings or arrangements by which the Company or any of its

Subsidiaries is or may become bound to redeem a security of the Company or any

of its Subsidiaries; (v) there are no securities or instruments containing

anti-dilution or similar provisions that will be triggered by the issuance of

the Securities as described in this Agreement; (vi) the Company does not have

any stock appreciation rights or “phantom” stock plans or agreements or any

similar plan or agreement; (vii) to the Company’s knowledge, (A) no current

officer or director who individually owns one percent (1%) or more of the

Company’s outstanding capital stock or (B) other beneficial owner of five

percent (5%) or more of the Company’s outstanding capital stock, has pledged

shares of the Company’s capital stock in connection with a margin account or

other loan secured by such capital stock; and (viii) to the Company’s

knowledge, the Company and its Subsidiaries have no liabilities or obligations

required to be disclosed in the SEC Documents but not so disclosed in the SEC

Documents, other than those incurred in the ordinary course of the Company’s or

its Subsidiaries’ respective businesses.




 




(d)  Issuance

of Securities.  The Securities are

duly authorized and, upon issuance in accordance with the terms of the

applicable Transaction Documents, shall be (i) validly issued, fully paid

and non-assessable and (ii) free from all taxes, liens and charges with respect

to the issuance thereof, other than any liens or encumbrances created by or

imposed by the Buyers, and shall not be subject to preemptive rights or other

similar rights of shareholders of the Company. As of the Closing, at least

6,057,277 shares of Common Stock (subject to adjustment pursuant to the

Company’s covenant set forth in Section 4(e) of this Agreement) will have been

duly authorized and reserved for issuance upon conversion of the Series B

Preferred and exercise of the Warrants. Upon conversion or issuance in

accordance with the terms of the Series B Preferred or upon exercise or

issuance in accordance with the terms of the Warrants, as applicable, the

Conversion Shares and the Warrant Shares, as the case may be, will be validly

issued, fully paid and non-assessable and free from all taxes, liens and

charges with respect to the issue thereof, other than any liens or encumbrances

created by or imposed by the Buyers, with the holders being entitled to all

rights accorded to a holder of Common Stock. 

Subject to the accuracy of the representations and warranties of each of

the Buyers in this Agreement, the issuance by the Company of the Securities is

exempt from registration under the Securities Act and state securities laws.




 




(e)  No

Conflicts.  The execution, delivery

and performance of the Transaction Documents by the Company and the

consummation by the Company of the transactions contemplated hereby and thereby

(including, without limitation, the reservation for issuance and issuance of the

Conversion Shares and the Warrant Shares) will not (i) result in a violation of

the Articles of Incorporation or the Bylaws; (ii) conflict with, or constitute

a default (or an event which with notice or lapse of time or both would become

a default) under, or give to others any




 




9





























 




rights of termination, amendment, acceleration or cancellation of, any

agreement, indenture or instrument to which the Company or any of its

Subsidiaries is a party, except for such conflicts, defaults, terminations,

amendments, accelerations, cancellations and violations as would not,

individually or in the aggregate, have a Material Adverse Effect; or (iii)

result in a violation of any law, rule, regulation, order, judgment or decree

(including federal and state securities laws and regulations and the rules and

regulations of the Principal Market (as defined below)) applicable to the

Company or any of its Subsidiaries or by which any property or asset of the

Company or any of its Subsidiaries is bound or affected. Neither the Company

nor its Subsidiaries is in violation of any material term of or in default

under its Articles of Incorporation, Bylaws or their organizational charter or

bylaws, respectively. Neither the Company nor any of its Subsidiaries is in

violation of any term of or in default under any contract, agreement, mortgage,

indebtedness, indenture, instrument, judgment, decree or order or any statute,

rule or regulation applicable to the Company or its Subsidiaries, except where

such violations and defaults would not result, either individually or in the

aggregate, in a Material Adverse Effect. The business of the Company and its

Subsidiaries is not being conducted in violation of any law, ordinance or

regulation of any governmental entity, except where such violations would not

result, either individually or in the aggregate, in a Material Adverse Effect.

Except as disclosed on Schedule 3(e) of this Agreement,

specifically contemplated by this Agreement, as required under the Securities

Act or as required by Blue Sky filings (but only to the extent that such

filings may be made after the Closing), the Company is not required to obtain

any consent, authorization or order of, or make any filing or registration

with, any court or governmental agency or any regulatory or self-regulatory

agency in order for it to execute, deliver or perform any of its obligations

under or contemplated by the Transaction Documents. Except as disclosed

in Schedule 3(e) of this Agreement, all consents,

authorizations, orders, filings and registrations which the Company is required

to obtain pursuant to the preceding sentence have been obtained or effected on

or prior to the date hereof and copies of such consents, authorizations,

orders, filings and registrations have been delivered to the Buyers.  The Company is not in violation of the

listing requirements of the Principal Market, and has no actual knowledge of

any facts which would reasonably lead to delisting or suspension of the Common

Stock by the Principal Market in the foreseeable future.  The Company and its Subsidiaries are

currently unaware of any facts or circumstances which might give rise to any of

the foregoing events set forth in this paragraph.




 




(f)  SEC

Documents; Financial Statements. 

Since June 1, 2001, the Company has filed all reports, schedules, forms,

statements and other documents required to be filed by it with the Securities

and Exchange Commission (the “Commission”) pursuant to the reporting

requirements of the Securities Exchange Act of 1934, as amended, and the rules

and regulations promulgated thereunder (the “Exchange Act”) (all of the

foregoing filed prior to or on the date hereof and all exhibits included

therein and financial statements and schedules thereto and documents

incorporated by reference therein being hereinafter referred to as the “SEC

Documents”). As of the date of filing of such SEC Documents, each such SEC

Document, as it may have been subsequently amended by filings made by the

Company with the SEC prior to the date hereof, complied in all material

respects with the requirements of the Exchange Act and the rules and

regulations of the Commission promulgated thereunder applicable to such SEC

Document. None of the SEC Documents, as of the date filed and as they may have

been subsequently amended by filings made by the Company with the Commission

prior to the date hereof, contained any untrue statement of a material fact or

omitted to state a material fact




 




10





























 




required to be stated therein or necessary in order to make the

statements therein, in the light of the circumstances under which they were

made, not misleading. As of their respective dates, the financial statements of

the Company included in the SEC Documents complied as to form in all material

respects with applicable accounting requirements and published rules and

regulations of the Commission with respect thereto. Such financial statements

have been prepared in accordance with generally accepted accounting principles,

consistently applied in the United States, during the periods involved (except

(i) as may be otherwise indicated in such financial statements or the notes

thereto, or (ii) in the case of unaudited interim statements, to the extent they

may exclude footnotes, may be condensed or summary statements and may be

subject to normal year end adjustments), corresponds to the books and records

of the Company and fairly present in all material respects the consolidated

financial position of the Company as of the dates thereof and the results of

its operations and cash flows for the periods then ended. The SEC Documents,

the Confidential Private Placement Memorandum dated as of July 2, 2003 (the

“Confidential Private Placement Memorandum”) and the other written information

provided by or on behalf of the Company to the Buyers, taken as a whole, do not

contain any untrue statement of a material fact or omit to state any material

fact necessary in order to make the statements therein, in the light of the

circumstances under which they are or were made, not misleading.  The Company satisfies the requirements for

use of Form S-3 for registration of the resale of Registrable Securities (as

defined in the Registration Rights Agreement) and does not have any knowledge

or reason to believe that it does not satisfy such requirements or any

knowledge of any fact which would reasonably result in its not satisfying such

requirements. The Company is not required to file and will not be required to

file any agreement, note, lease, mortgage, deed or other instrument entered

into prior to the date hereof and to which the Company is a party or by which

the Company is bound which has not been previously filed as an exhibit to its

reports filed with the Commission under the Exchange Act.




 




(g)  Absence

of Litigation.  Except as disclosed

in the section titled “Legal Proceedings” in the Company’s Annual Report on

Form 10-K for the period ended December 31, 2002, there is no material action,

suit, proceeding, inquiry or investigation before or by any court, public

board, government agency, self-regulatory organization or body pending or, to

the knowledge of the Company or any of its Subsidiaries, threatened in writing

against the Company or any of the Subsidiaries or any of the Company’s or the

Subsidiaries’ officers or directors in their capacities as such.




 




(h)  No

Integrated Offering.  Neither the

Company, nor any of its affiliates, nor any person acting on its or their

behalf has, directly or indirectly, made any offers or sales of any security or

solicited any offers to buy any security, under circumstances that would cause

the offering of the Securities contemplated by this Agreement to be integrated

with prior offerings by the Company for purposes of the Securities Act or any

applicable shareholder approval provisions, including, without limitation,

under the rules and regulations of any exchange or automated quotation system

on which any of the securities of the Company are listed or designated, nor

will the Company or any of its Subsidiaries take any action or steps that would

cause the offering of the Securities contemplated by this Agreement to be

integrated with other offerings




 




(i)  Intellectual

Property Rights.  To the knowledge

of the Company, the Company and its Subsidiaries own or possess adequate rights

or licenses to use all trademarks, trade names, trade




 




11





























 




dress, service marks, service mark registrations, service names,

patents, patent rights, copyrights, inventions, technology licenses, approvals,

governmental authorizations, trade secrets, and other intellectual property

rights (collectively, “Intellectual Property”) necessary to conduct their

respective businesses as now conducted and as currently contemplated to be

conducted by them as described in the SEC Documents, except where the failure

to currently own or possess would not have a Material Adverse Effect.  The Company does not have any knowledge of

any infringement by the Company or its Subsidiaries of Intellectual Property

rights of others.  There is no claim,

action or proceeding being made by the Company or its Subsidiaries regarding

the Intellectual Property rights of the Company or its Subsidiaries or, to the

Company’s knowledge, brought or currently threatened against the Company or its

Subsidiaries regarding the Intellectual Property rights of or the use of any

Intellectual Property by the Company or its Subsidiaries of any third party

that, if the subject of an unfavorable decision, ruling or finding would have a

Material Adverse Effect.




 




(j)  Insurance.  The Company and each of its Subsidiaries

have paid all premiums due under the insurance policies maintained by them and

such policies are in full force and effect.




 




(k)  Regulatory

Permits.  The Company and its

Subsidiaries possess all material certificates, authorizations and permits

issued by the appropriate federal, state, local or foreign regulatory

authorities necessary to conduct their respective businesses as currently

conducted (the “Permits”), and neither the Company nor any such Subsidiary has

received any written notice of proceedings relating to the revocation or

modification of any such Permit.




 




(l)  Tax

Status.  The Company and each of its

Subsidiaries (i) has made or filed all federal and state income and all other

tax returns, reports and declarations required by any jurisdiction to which it

is subject, (ii) has paid all taxes and other governmental assessments and

charges due with respect to the periods covered by such returns, reports and

declarations, except those being contested in good faith and for which the

Company has made appropriate reserves on its books, and (iii) has paid or set

aside on its books provisions reasonably adequate for the payment of all taxes

for periods subsequent to the periods to which such returns, reports or

declarations (referred to in clause (i) above) apply.  There are no unpaid taxes that are individually or in the

aggregate material in amount claimed to be due by the taxing authority of any

jurisdiction.




 




(m)  Application

of Takeover Protections.  The

Company and its board of directors have taken all necessary action, if any, in

order to render inapplicable any control share acquisition, business

combination, poison pill (including any distribution under a rights agreement)

or other similar anti-takeover provision under the Articles of Incorporation,

the laws of the state of its incorporation or the laws of any other state which

is or could become applicable to the Buyers as a result of the transactions contemplated

by this Agreement, including, without limitation, the Company’s issuance of the

Securities and the Buyers’ ownership of the Securities.




 




(n)  Foreign

Corrupt Practices.  Neither the

Company nor any of its Subsidiaries, nor, to the Company’s knowledge, any

director, officer, agent, employee or other person acting on behalf of the

Company or any Subsidiary has, in the course of his actions for, or on behalf

of, the Company or any Subsidiary used any corporate funds for any unlawful

contribution, gift, entertainment or other unlawful expenses relating to

political activity; made any direct or indirect




 




12





























 




unlawful payment to any foreign or domestic government official or

employee from corporate funds; violated or is in violation of any provision of

the United States Foreign Corrupt Practices Act of 1977, as amended; or made

any bribe, rebate, payoff, influence payment, kickback or other unlawful

payment to any foreign or domestic government official or employee.




 




(o)  Transactions

With Affiliates.  Except as

disclosed in the SEC Documents, and other than the grant of stock options

granted pursuant to the Company’s employee benefit plans or director stock

option plans, none of the officers, directors or employees of the Company is

presently a party to any transaction with the Company or any of its

Subsidiaries (other than in connection with the provision of services as

employees, officers and directors), including any contract, agreement or other

arrangement providing for the furnishing of services to or by, providing for

rental of real or personal property to or from, or otherwise requiring payments

to or from any such officer, director or employee or, to the knowledge of the

Company, any corporation, partnership, trust or other entity in which any such

officer, director, or employee has a substantial interest or is an officer,

director, trustee or partner, such that the transaction would be required to be

disclosed pursuant to Item 404 of Regulation S-K promulgated under the

Securities Act.




 




(p)  Brokers

and Finders.  Except for fees

payable to the Placement Agents as placement agents, no brokers, finders or

financial advisory fees or commissions will be payable by the Company with

respect to the transactions contemplated by this Agreement.




 




(q)  Absence

of Certain Changes.  Except as

disclosed in the SEC Documents available on the EDGAR system, since March 31,

2003, there has been no change or development that has had or could reasonably

be expected to have, either individually or in the aggregate, a Material

Adverse Effect.




 




(r)  No

Material Non-Public Information. 

Except for the issuance of the Securities and the transactions

contemplated by this Agreement, the Company has not provided the Buyers with material

non-public information.




 




SECTION 4.  Covenants.




 




(a)  Obligations.

Each party shall timely satisfy each of the conditions to be satisfied by it as

provided in Sections 6 and 7 of this Agreement.




 




(b)  Form D

and Blue Sky. The Company agrees to file timely a Form D with the

Commission with respect to the Securities as required under Regulation D and to

provide a copy thereof to each Buyer promptly after such filing. The Company

shall, on or before the Closing Date, take such action as the Company shall

reasonably determine is necessary in order to obtain an exemption for, or to

qualify the Securities for, sale to the Buyers at the Closing pursuant to this

Agreement under applicable securities or “Blue Sky” laws of the states of the

United States (or to obtain an exemption from such qualification), and shall

provide evidence of any such action so taken to the Buyers on or prior to the

Closing Date. The Company shall make all timely filings and reports relating to

the offer and sale of the Securities required under applicable securities or

“Blue Sky” laws of the states of the United States following the Closing Date.




 




13





























 




(c)  Reporting

Status. With a view to making available to the Investors (as that term is

defined in the Registration Rights Agreement) the benefits of Rule 144

promulgated under the Securities Act or any similar rule or regulation of the

Commission that may at any time permit the Investors to sell securities of the

Company to the public without registration (“Rule 144”), the Company shall: (i)

make and keep public information available, as those terms are understood and

defined in Rule 144; (2) file with the Commission in a timely manner all

reports and other documents required of the Company under the Securities Act

and the Exchange Act; and (3) furnish to each Investor, so long as such

Investor owns Registrable Securities (as that term is defined in the

Registration Rights Agreement) (the “Reporting Period”), promptly upon request,

(A) a written statement by the Company, if true, that it has complied with the

applicable reporting requirements of Rule 144, the Securities Act and the

Exchange Act and (B) such other information as may be reasonably requested to

permit the Investors to sell such securities pursuant to Rule 144 without

registration under the Securities Act.




 




(d)  Use of

Proceeds.  The Company intends to

use the net proceeds from the sale of the Series B Preferred and the Warrants

for working capital and general corporate purposes, which may include capital

expenditures, reduction of indebtedness and potential acquisitions.




 




(e)  Reservation

of Shares. The Company shall take all action necessary to at all times have

authorized, and reserved for the purpose of issuance, a number of shares of

Common Stock (the “Reservation Amount”) no less than (i) one hundred ten

percent (110%) of the number of shares of Common Stock needed to provide for

the issuance of the Conversion Shares upon conversion of all of the Series B

Preferred without regard to any limitations on conversions or exercise and the

issuance of four (4) quarterly dividend payments on the Series B Preferred

assuming the Market Value (as defined in the Certificate Amendment) of the

Common Stock is $5.13 and (ii) one hundred percent (100%) of the number of

shares of Common Stock needed to provide for the issuance of the Warrant Shares

upon exercise of all Warrants.




 




(f)  Listing.

The Company shall promptly use its best efforts to secure the listing of all of

the Conversion Shares and Warrant Shares upon each national securities exchange

and automated quotation system, if any, upon which shares of Common Stock are

then listed (subject to official notice of issuance) and, shall maintain, so

long as any other shares of Common Stock shall be so listed, such listing of

all Conversion Shares and Warrant Shares from time to time issuable under the

terms of the Transaction Documents. So long as any Securities are outstanding,

the Company shall maintain the Common Stock’s authorization for quotation or

listing on The New York Stock Exchange, Inc. (the “NYSE”), the American Stock

Exchange, Inc. (“AMEX”) or The Nasdaq National Market or SmallCap Market

(“NASDAQ”) (as applicable, the “Principal Market”). The Company shall pay all

fees and expenses in connection with satisfying its obligations under this

Section 4(f).




 




(g)  Filing

of Form 8-K. On or before the third Business Day following the Closing

Date, the Company shall file a Current Report on Form 8-K with the Commission

describing the terms of the transactions contemplated by the Transaction

Documents and including as exhibits to such Current Report on Form 8-K (i) this

Agreement, (ii) the form of Warrants and (iii) the Registration Rights

Agreement, each in the form required by the Exchange Act. “Business Day” means

any day other than Saturday, Sunday or other day on which commercial banks in

the City of New York are required by law to remain closed




 




14





























 




(h)  Stockholder

Approval.  If at anytime the Company

determines, or it receives written notice from the Principal Market, that it is

required pursuant to the listing rules of the Principal Market to

obtain stockholder approval of the issuance of all or a portion of

the Securities issued or issuable under this Agreement, then no later than the

120th day from the date of such determination or receipt of such notice the

Company shall submit a proposal to the annual meeting of shareholders or call a

special meeting of stockholders for that purpose.  The Company shall prepare and mail to each of its

stockholders entitled to vote at such meeting a proxy

statement soliciting each stockholder’s affirmative vote to approve such

matters as may be required under the listing rules of the Principal Market in

connection with the issuance of the Securities.




 




(i)  Expenses.

Subject to Section 9(o) of this Agreement, at the Closing, the Company shall

reimburse the Buyers for the Buyers’ reasonable out-of-pocket expenses incurred

in connection with the consummation of the transactions contemplated by this

Agreement, up to a maximum of $25,000 in the aggregate, which amount shall be

paid by the Company to the Buyers concurrently with the Company’s receipt of

the Purchase Price at the Closing.




 




(j)  Additional

Securities. For so long as any Buyer beneficially owns any Securities, the

Company will not issue any Series B Preferred or Warrants other than to the

Buyers as contemplated hereby.




 




(k)  Violation

of Laws.  The business of the

Company and its Subsidiaries shall not be conducted in violation of any law,

ordinance or regulation of any governmental entity, except where such

violations would not result, either individually or in the aggregate, in a

Material Adverse Effect.             .




 




(l)  CUSIP

Numbers. The Company in issuing the Securities shall use “CUSIP” numbers

(if then generally in use), and shall use such “CUSIP” numbers in notices to

holders as a convenience to holders thereof; provided that any such notice may

state that no representation is made as to the correctness of such numbers

either as printed on the Securities or as contained in any notice to such

holders and that reliance may be placed only on other identification numbers

printed on such Securities, and any such Company action referenced in such

notice (including, without limitation, redemption or automatic conversion of

Series B Preferred) shall not be affected by any defect in or omission of such

numbers.




 




(m)  Amendment

or Supplement to Confidential Private Placement Memorandum.  If, at any time prior to the Closing Date,

any event with respect to the Company shall occur which is required to be

described in the Confidential Private Placement, such event shall be so

described, and an appropriate amendment or supplement shall be prepared by the

Company.




 




(n)  Action

to Eliminate Conflicts. On or before the date on which a dividend or

Optional Make Whole Payment (as defined in the Certificate Amendment) is due

and payable pursuant to the Certificate Amendment, the Company shall have taken

such action so that the payment will not conflict with, or constitute a default

(or an event which with notice or lapse of time or both would become a default)

under, or give to others any rights of termination, amendment, acceleration or

cancellation of, any agreement, indenture or instrument to which the Company or

any of its Subsidiaries is a party, except for such conflicts, defaults,

terminations,




 




15





























 




amendments, accelerations, cancellations and violations as would not,

individually or in the aggregate, have a Material Adverse Effect.




 




SECTION 5.  Transfer

Agent Instructions.  The

Company shall issue irrevocable instructions to its transfer agents, and any

subsequent transfer agent, to issue certificates or credit shares to the

applicable balance accounts at the Depositary Trust Company (“DTC”), registered

in the name of each Placement Agent and each Buyer or their respective

nominee(s), for the Conversion Shares and Warrant Shares in such amounts as

specified from time to time by a Placement Agent or a Buyer to the Company upon

conversion of the Series B Preferred or exercise of the Warrants, as applicable

and in accordance with their respective terms (the “Irrevocable Transfer Agent

Instructions”), substantially in the form attached hereto as Exhibit F.

Prior to transfer or sale pursuant to a registration statement or Rule 144

under the Securities Act of the Conversion Shares and the Warrant Shares, all

such certificates shall bear the restrictive legend specified in Section 2(g)

of this Agreement. The Company represents and warrants that no instruction

inconsistent with the Irrevocable Transfer Agent Instructions referred to in

this Section 5 will be given by the Company to its transfer agent and that the

Securities shall be freely transferable on the books and records of the Company

as and to the extent provided in this Agreement, the Warrants and the

Registration Rights Agreement, except as may be required by law. If a Buyer

provides the Company with an opinion of counsel, in form reasonably acceptable

to the Company, to the effect that a public sale, assignment or transfer of

Securities has been made without registration under the Securities Act or that

the Securities can be sold pursuant to Rule 144(k), the Company shall permit

the transfer, and, in the case of the Conversion Shares and the Warrant Shares,

promptly instruct its transfer agent to issue one or more certificates, or

credit shares to one or more balance accounts at DTC, in such name and in such

denominations as specified by such Buyer and without any restrictive legend.

The Company acknowledges that a breach by it of its obligations hereunder will

cause irreparable harm to the Buyers by vitiating the intent and purpose of the

transaction contemplated hereby. Accordingly, the Company acknowledges that the

remedy at law for a breach of its obligations under this Section 5 will be

inadequate and agrees, in the event of a breach or threatened breach by the

Company of the provisions of this Section 5, that the Buyers shall be entitled,

in addition to all other available remedies, to an order and/or injunction

restraining any breach and requiring immediate issuance and transfer, without

the necessity of showing economic loss and without any bond or other security

being required.




 




SECTION

6.  Conditions to the Company’s Obligation to

Close.  The obligation of the

Company to issue and sell the Series B Preferred and the Warrants to each

respective Buyer at the Closing is subject to the satisfaction, at or before

the Closing Date, of each of the following conditions with respect to such

Buyer,  provided that these conditions

are for the Company’s sole benefit and may be waived by the Company at any time

in its sole discretion by providing such Buyer with prior written notice thereof:




 




(a)  Transaction

Documents.  Such Buyer shall have

executed each of the Transaction Documents to which it is a party and delivered

the same to the Company.




 




(b)  Payment

of Purchase Price. Such Buyer shall have delivered to the Company the

purchase price for the Series B Preferred and the Warrants being purchased by

such Buyer at the




 




16





























 




Closing, by wire transfer of immediately available funds pursuant to

the wire instructions attached hereto as Schedule A.




 




(c)  Representations

and Warranties; Covenants. The representations and warranties of such Buyer

shall be true, correct and complete in all material respects (except to the

extent that any of such representations and warranties is already qualified as

to materiality in Section 2 above, in which case such representations and

warranties shall be true, correct and complete without further qualification)

as of the date when made and as of the Closing Date as though made at that time

(except for representations and warranties that speak as of a specific date

(which shall be true, correct and complete as of such date)), and such Buyer

shall have performed, satisfied and complied with in all material respects the

covenants, agreements and conditions required by the Transaction Documents to

be performed, satisfied or complied with by such Buyer at or prior to the

Closing Date.




 




SECTION

7.  Conditions to Each Buyer’s Obligation to

Purchase.  The obligation of

each Buyer hereunder to purchase the Series B Preferred and the Warrants set

forth opposite such Buyer’s name on Exhibit A attached hereto from the

Company at the Closing is subject to the satisfaction, at or before the Closing

Date, of each of the following conditions, provided that these conditions are

for each Buyer’s sole benefit and may be waived by such Buyer at any time in

its sole discretion by providing the Company with prior written notice thereof:




 




(a)  Transaction

Documents. The Company shall have executed each of the Transaction

Documents and delivered the same to such Buyer.




 




(b)  No

Delisting of Common Stock. The Common Stock (i) shall be designated for

quotation or listed on the Principal Market and (ii) shall not have been

suspended by the Commission or the Principal Market from trading on the

Principal Market nor shall suspension by the Commission or the Principal Market

have been threatened either (A) in writing by the Commission or the Principal

Market or (B) by falling below the minimum listing maintenance requirements of

the Principal Market.




 




(c)  Representations

and Warranties; Covenants.  The

representations and warranties of the Company shall be true, correct and

complete in all material respects (except to the extent that any of such

representations and warranties is already qualified as to materiality in

Section 3 of this Agreement, in which case such representations and warranties

shall be true, correct and complete without further qualification) as of the

date when made and as of the Closing Date as though made at that time (except

for representations and warranties that speak as of a specific date (which

shall be true, correct and complete as of such date)) and the Company shall

have performed, satisfied and complied with in all material respects the

covenants, agreements and conditions required by the Transaction Documents to

be performed, satisfied or complied with by the Company at or prior to the

Closing Date. Such Buyer shall have received a certificate, executed by the

Chief Executive Officer of the Company, dated as of the Closing Date, to the

foregoing effect.




 




(d)  Opinion

of Counsel. The Company shall have delivered to such Buyer the opinion of

Hale and Dorr LLP, dated as of the Closing Date, in the form of Exhibit G,

attached hereto.




 




17





























 




(e)  Delivery

of Series B Preferred and Warrants. The Company shall have executed and

delivered to such Buyer certificates for the Series B Preferred and the

Warrants (in such denominations as such Buyer shall reasonably request) being

purchased by such Buyer at the Closing.




 




(f)  Reservation

of Common Stock. As of the Closing Date, the Company shall have reserved

out of its authorized and unissued Common Stock, the number of shares of Common

Stock equal to the Reservation Amount.




 




(g)  Irrevocable

Transfer Agent Instructions. The Company shall have delivered the

Irrevocable Transfer Agent Instructions, in the form of Exhibit F

attached hereto, to the Company’s transfer agent.




 




(h)  Good

Standing Certificates. The Company shall have delivered to such Buyer (i) a

certificate evidencing the incorporation and good standing of the Company in

Delaware issued by the Secretary of State of Delaware as of a recent date; and

(ii) a certificate of good standing (or appropriate counterpart) from the appropriate

governmental authority in each domestic jurisdictions in which Subsidiaries are

incorporated or organized as of a recent date.




 




(i)  Secretary’s

Certificate. The Company shall have delivered to such Buyer a secretary’s

certificate, dated as of the Closing Date, certifying as to (i) adoption

of the form of resolutions of the Board of Directors of the Company consistent

with Section 3(b) of this Agreement and in a form reasonably acceptable to such

Buyer, (ii) the Articles of Incorporation and (iii) the Bylaws, each as in

effect at the Closing.




 




(j)  Filings;

Authorizations. The Company shall have made all filings under all

applicable federal and state securities laws necessary to consummate the

issuance of the Securities pursuant to this Agreement in compliance with such

laws, and shall have obtained all authorizations, approvals and permits

necessary to consummate the transactions contemplated by the Transaction

Documents and such authorizations, approvals and permits shall be effective as

of the Closing Date.




 




(k)  No

Injunctions.  No temporary

restraining order, preliminary or permanent injunction or other order or

decree, and no other legal restraint or prohibition shall exist which prevents

or arguably prevents the consummation of the transactions contemplated by the

Transaction Documents, nor shall any proceeding have been commenced or

threatened with respect to the foregoing.




 




(l)  No

Material Adverse Effect.  Between

the time of execution of this Agreement and the Closing Date, (i) no Material Adverse

Effect shall occur or become known (whether or not arising in the ordinary

course of business) and (ii) no transaction which is material and unfavorable

to the Company shall have been entered into by the Company.




 




(m)  Payment

of Fees. The Company shall have satisfied its obligations under Section

9(p) of this Agreement.




 




18





























 




SECTION 8. 

Indemnification.




 




(a)  Indemnification

by the Company.  In consideration of

each Buyer’s execution and delivery of the Transaction Documents and acquiring

the Securities thereunder and each Placement Agent’s agreement to act as

exclusive placement agent and in addition to all of the Company’s other

obligations under the Transaction Documents, the Company shall defend, protect,

indemnify and hold harmless each Placement Agent and each Buyer and each other

holder of the Securities and all of their shareholders, partners, members,

officers, directors, employees and direct or indirect investors and any of the

foregoing persons’ agents or other representatives (including, without

limitation, those retained in connection with the transactions contemplated by

this Agreement) (collectively, the “Indemnitees”) from and against any and all

actions, causes of action, suits, claims, losses, costs, penalties, fees,

liabilities and damages, and expenses in connection therewith (irrespective of

whether any such Indemnitee is a party to the action for which indemnification

hereunder is sought), and including reasonable attorneys’ fees and

disbursements (collectively, “Claims”), incurred by any Indemnitee as a result

of, or arising out of, or relating to (a) any misrepresentation or breach of

any representation or warranty made by the Company in the Transaction

Documents, (b) any breach of any covenant, agreement or obligation of the

Company contained in the Transaction Documents, (c) any cause of action, suit

or claim brought or made against such Indemnitee and arising out of or

resulting from (i) the execution, delivery, performance or enforcement of the

Transaction Documents or any other certificate, instrument or document

contemplated hereby or thereby, (ii) any transaction financed or to be

financed in whole or in part, directly or indirectly, with the proceeds of the

issuance of the Securities or (iii) the status of such Buyer or holder of

the Securities as an investor in the Company. To the extent that the foregoing

undertaking by the Company may be unenforceable for any reason, the Company

shall make the maximum contribution to the payment and satisfaction of each of

the Indemnified Liabilities which is permissible under applicable law. Subject

to Section 8(b) of this Agreement, the Company shall reimburse the Indemnitees,

promptly as such expenses are incurred and are due and payable, for any legal

fees or other reasonable expenses incurred by them in connection with the

investigating or defending any such Claim.




 




(b)  Procedures for Indemnification.  Promptly after an Indemnitee has knowledge

of any Claim as to which such Indemnitee reasonably believes indemnity may be

sought or promptly after such Indemnitee receives notice of the commencement of

any action or proceeding (including any governmental action or proceeding)

involving a Claim, such Indemnitee shall, if a Claim in respect thereof is to

be made against any the Company under this Section 8, deliver to the Company a

written notice of such Claim, and the Company shall have the right to

participate in, and, to the extent the Company so desires, to assume control of

the defense thereof with counsel mutually satisfactory to the Company and the

Indemnitee; provided, however, that an Indemnitee shall have the right to

retain its own counsel if, in the reasonable opinion of counsel retained by the

Company, the representation by such counsel of the Indemnitee and the Company

would be inappropriate due to actual or potential differing interests between

such Indemnitee and the Company; provided, further, that the Company shall not

be responsible for the reasonable fees and expense of more than one (1)

separate legal counsel for such Indemnitee. 

In the case of an Indemnitee, the legal counsel referred to in the

immediately preceding sentence shall be selected by the Buyers holding at least

a majority in interest of the Securities to which the Claim relates.  The Indemnitee shall cooperate fully with




 




19





























 




the Company in connection with any negotiation or defense of any such

action or Claim by the Company and shall furnish to the Company all information

reasonably available to the Indemnitee which relates to such action or

Claim.  The Company shall keep the

Indemnitee fully apprised at all times as to the status of the defense or any

settlement negotiations with respect thereto. 

The Company shall not be liable for any settlement of any Claim effected

without its prior written consent; provided, however, that the Company shall

not unreasonably withhold, delay or condition its consent.  The Company shall not, without the prior

written consent of the Indemnitee, consent to entry of any judgment or enter

into any settlement or other compromise which does not include as an

unconditional term thereof the giving by the claimant or plaintiff to such

Indemnitee of a full release from all liability in respect to such Claim and

action and proceeding.  After

indemnification as provided for under this Agreement, the rights of the Company

shall be subrogated to all rights of the Indemnitee with respect to all third

parties, firms or corporations relating to the matter for which indemnification

has been made.  The failure to deliver

written notice to the Company as provided in this Agreement shall not relieve

the Company of any liability to the Indemnitee under this Section 8, except to

the extent that the Company is prejudiced in its ability to defend such action.




 




(c)  Survival

of Indemnification Obligations. The obligations of the Company under this

Section 8 shall survive the transfer of the Securities by the Indemnitees.




 




SECTION 9. 

Miscellaneous.




 




(a)  Governing

Law; Jurisdiction; Jury Trial. All questions concerning the construction,

validity, enforcement and interpretation of this Agreement shall be governed by

the internal laws of the State of New York, without giving effect to any choice

of law or conflict of law provision or rule (whether of the State of New York

or any other jurisdictions) that would cause the application of the laws of any

jurisdictions other than the State of New York.  Each party hereby irrevocably submits to the non-exclusive

jurisdiction of the state and federal courts sitting in the City of New York,

borough of Manhattan, for the adjudication of any dispute hereunder or in

connection herewith or with any transaction contemplated hereby or discussed

herein, and hereby irrevocably waives, and agrees not to assert in any suit,

action or proceeding, any claim that it is not personally subject to the

jurisdiction of any such court, that such suit, action or proceeding is brought

in an inconvenient forum or that the venue of such suit, action or proceeding

is improper.  Each party hereby

irrevocably waives personal service of process and consents to process being

served in any such suit, action or proceeding by mailing a copy thereof to such

party at the address for such notices to it under this Agreement and agrees

that such service shall constitute good and sufficient service of process and

notice thereof.  Nothing contained

herein shall be deemed to limit in any way any right to serve process in any

manner permitted by law.  If any provision

of this Agreement shall be invalid or unenforceable in any jurisdiction, such

invalidity or unenforceability shall not affect the validity or enforceability

of the remainder of this Agreement in that jurisdiction or the validity or

enforceability of any provision of this Agreement in any other

jurisdiction.  EACH PARTY HEREBY

IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY

TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH

OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.




 




20





























 




(b)  Counterparts.  This Agreement may be executed in identical

counterparts, each of which shall be deemed an original but all of which shall

constitute one and the same agreement. This Agreement, once executed by a

party, may be delivered to the other parties hereto by facsimile transmission

of a copy of this Agreement bearing the signature of the party so delivering

this Agreement.




 




(c)  Headings.

The headings of this Agreement are for convenience of reference only and shall

not limit or otherwise affect the meaning hereof.




 




(d)  Entire

Agreement.  This Agreement, the

Registration Rights Agreement, the Certificate Amendment and the Warrants and

the documents referenced herein and therein constitute the entire agreement

among the parties hereto with respect to the subject matter hereof and

thereof.  There are no restrictions,

promises, warranties or undertakings, other than those set forth or referred to

herein and therein.  This Agreement, the

Registration Rights Agreement, the Certificate Amendment and the Warrants

supersede all prior agreements and understandings among the parties hereto with

respect to the subject matter hereof and thereof.




 




(e)  Consents.

All consents and other determinations required to be made by Buyers pursuant to

this Agreement shall be made, unless otherwise specified in this Agreement, by

Buyers holding at least a majority of the Series B Preferred held by Buyers

then outstanding.




 




(f)  Waivers.  No provision of this Agreement may be

amended or waived other than by an instrument in writing signed by the Company

and by Investors holding at least a majority of the Series B Preferred held by

Buyers then outstanding. No such amendment shall be effective to the extent

that it applies to less than all of the holders of the Series B Preferred then

outstanding. No consideration shall be offered or paid to any person to amend

or consent to a waiver or modification of any provision of any of the

Transaction Documents unless the same consideration also is offered to all of

the parties to the Transaction Documents or holders of the Conversion Shares,

as the case may be.




 




(g)  Notices. Any notices,

consents, waivers or other communications required or permitted to be given

under the terms of this Agreement must be in writing and will be deemed to have

been delivered: (i) upon receipt, when delivered personally; (ii) upon receipt,

when sent by facsimile; or (iii) one (1) Business Day after deposit with a

nationally recognized overnight delivery service, in each case properly

addressed to the party to receive the same. The addresses and facsimile numbers

for such communications shall be:




 




If to the Company:




 




Manufacturers’ Services

Limited




300 Baker Avenue, Suite

106




Concord, Massachusetts

01742




Telephone:                  (978) 287-5630




Facsimile:                          (978)

287-5635




Attention:                       Chief

Executive Officer




                                                                              and

General Counsel




 




21





























 




with a copy to:




 




Hale and Dorr LLP




60 State Street




Boston, Massachusetts

02109




Telephone:                  (617) 526-6000




Facsimile:                          (617)

526-5000




Attention:                       John A.

Burgess, Esq.




 




If to the Placement

Agents:




 




U.S. Bancorp Piper

Jaffray




345 California Street,

Suite 2100




San Francisco,

California  94104




Telephone:                  (415) 984-5127




Facsimile:                          (415)

984-5121




Attention:                       Mr. David

Fullerton




 




with a copy to:




 




Gibson, Dunn &

Crutcher LLP




1050 Connecticut Avenue

NW




Washington, DC 20036




Telephone:                  (202) 955-8500




Facsimile:                          (202)

467-0539




Attention:                       Brian Lane,

Esq.




 




 




If to Legal Counsel:




 




Gibson, Dunn &

Crutcher LLP




1050 Connecticut Avenue

NW




Washington, DC 20036




Telephone:                  (202) 955-8500




Facsimile:                          (202)

467-0539




Attention:                       Brian Lane,

Esq.




 




If to a Buyer, to its address and facsimile number set

forth on the Schedule of Buyers attached hereto as Exhibit A, with

copies to such Buyer’s representatives as set forth on the Schedule of Buyers,

or at such other address and/or facsimile number and/or to the attention of

such other person as the recipient party has specified by written notice given

to each other party five (5) days prior to the effectiveness of such change.

Written confirmation of receipt (A) given by the recipient of such notice,

consent, waiver or other communication, (B) mechanically or electronically

generated by the sender’s facsimile machine containing the time, date,

recipient facsimile number and an image of the first page of such transmission,

or (C) provided by a courier or overnight courier service shall be rebuttal

evidence of personal service, receipt by facsimile or receipt from a nationally

recognized overnight delivery service in accordance with clause (i), (ii) or

(iii) above, respectively.




 




22





























 




(h)  No

Strict Construction. The language used in this Agreement will be deemed to

be the language chosen by the parties to express their mutual intent, and no

rules of strict construction will be applied against any party.




 




(i)  Further

Assurances. Each party shall do and perform, or cause to be done and

performed, all such further acts and things, and shall execute and deliver all

such other agreements, certificates, instruments and documents, as the other

party may reasonably request in order to carry out the intent and accomplish

the purposes of this Agreement and the consummation of the transactions

contemplated hereby.




 




(j)  Third-Party

Beneficiaries. This Agreement is intended for the benefit of the parties

hereto and their respective permitted successors and assigns, and is not for

the benefit of, nor may any provision hereof be enforced by, any other person

other than the Placement Agents.




 




(k)  Severability.

If any provision of this Agreement shall be invalid or unenforceable in any

jurisdiction, such invalidity or unenforceability shall not affect the validity

or enforceability of the remainder of this Agreement in that jurisdiction or

the validity or enforceability of any provision of this Agreement in any other

jurisdiction.




 




(l)  Successors

and Assigns. This Agreement shall be binding upon and inure to the benefit

of the parties and their respective successors and assigns, including any

purchasers of the Securities. The Company shall not assign this Agreement or

any rights or obligations hereunder without the prior written consent of the

holders of at least a majority of the Conversion Shares and Warrant Shares,

determined as if all of the Series B Preferred held by Buyers then outstanding

have been converted into Conversion Shares and all Warrants then outstanding

have been exercised for Warrant Shares without regard to any limitations on

conversion of the Series B Preferred or on the exercise of the Warrants. A

Buyer may assign some or all of its rights and obligations hereunder without

the consent of the Company; provided, however, that the transferee has agreed in

writing to be bound by the applicable provisions of this Agreement and

provided, further, that such assignment shall be in connection with a transfer

of all or a portion of the Series B Preferred and Warrants held by such Buyer

and subject to the terms and conditions of the Series B Preferred and Warrants,

as applicable.




 




(m)  Survival.

Unless this Agreement is terminated under Section 9(o) of this Agreement, the

representations and warranties of the Company and the Buyers contained in

Sections 2 and 3 of this Agreement, and the indemnification provisions set

forth in Section 8 of this Agreement, the agreements and covenants set forth in

Sections 4, 5 and 9 of this Agreement shall survive until such time as no

Series B Preferred, Conversion Shares, Warrants or Warrant Shares remain

outstanding. Each Buyer shall be responsible only for its own representations,

warranties, agreements and covenants hereunder.




 




(n)  Publicity.

The Company and the Placement Agents shall have the right to approve before

issuance any press releases or any other public statements with respect to the

transactions contemplated by the Transaction Documents.  Piper Jaffray has the right to describe its

services to the Company in connection with the Offering and to reproduce the

Company’s name and logo in Piper Jaffray’s advertisements, marketing materials

and equity research reports, if any, in the form previously approved by the

Company and subject to the prior approval of the Company,




 




23





























 




which shall not be unreasonably withheld, such additional uses as Piper

Jaffray may from time to time request. 

Neither the Company nor the Placement Agents may use the name of

Investor in any way, except as may be required by law and only to extent so

required.




 




(o)  Termination.

In the event that the Closing shall not have occurred with respect to a Buyer

on or before five (5) Business Days from the date hereof due to the Company’s

or such Buyer’s failure to satisfy the conditions set forth in Sections 6 and 7

of this Agreement (and the nonbreaching party’s failure to waive such

unsatisfied conditions), the nonbreaching party shall have the option to

terminate this Agreement with respect to such breaching party at the close of

business on such date without liability of any party to any other party;

provided, however, that if this Agreement is terminated pursuant to this

Section 9(o), the Company shall remain obligated to reimburse any nonbreaching

Buyer for the expenses described in Section 4(i) of this Agreement.




 




(p)  Placement

Agent. The Company acknowledges that it has engaged the Placement Agents as

placement agents in connection with the sale of the Series B Preferred and the

Warrants and that the compensation of such agent is as set forth on the Schedule

of Fees attached hereto as Exhibit C. The Company shall be responsible

for the payment of any placement agent’s fees, financial advisory fees, or

brokers’ commissions (other than for persons engaged by any Buyer or its

investment advisor) relating to or arising out of the transactions contemplated

hereby. The Company shall pay, and hold each Buyer harmless against, any

liability, loss or expense (including, without limitation, attorney’s fees and

out-of-pocket expenses) arising in connection with any such claim.




 




(q)  Remedies.

Each Buyer and each holder of the Securities shall have all rights and remedies

set forth in the Transaction Documents and all rights and remedies which such

holders have been granted at any time under any other agreement or contract and

all of the rights which such holders have under any law. Any person having any

rights under any provision of this Agreement shall be entitled to enforce such

rights to recover damages by reason of any breach of any provision of this

Agreement and to exercise all other rights granted by law. Furthermore, the

Company recognizes that in the event that it fails to perform, observe, or

discharge any or all of its obligations under this Agreement, any remedy at law

may prove to be inadequate relief to the Buyers. The Company therefore agrees

that the Buyers shall be entitled to seek temporary and permanent injunctive

relief in any such case without the necessity of proving actual damages and

without posting a bond or other security.




 




(r)  Payment

Set Aside. To the extent that the Company makes a payment or payments to

any Buyer hereunder or pursuant to any of the other Transaction Documents, or

the Buyers enforce or exercise their rights hereunder or thereunder, and such

payment or payments or the proceeds of such enforcement or exercise or any part

thereof are subsequently invalidated, declared to be fraudulent or

preferential, set aside, recovered from, disgorged by or are required to be

refunded, repaid or otherwise restored to the Company, a trustee, receiver or

any other person under any law (including, without limitation, any bankruptcy

law, state or federal law, common law or equitable cause of action), then to

the extent of any such restoration the obligation or part thereof originally

intended to be satisfied shall be revived and continued in full force and

effect as if such payment had not been made or such enforcement or setoff had

not occurred.




 




24





























 




(s)  Independent

Nature of Buyers’ Obligations and Rights. 

The obligations of each Buyer under this Agreement are several and not

joint with the obligations of any other Buyer, and no Buyer shall be

responsible in any way for the performance of the obligations of any other

Buyer under this Agreement.  Nothing

contained in this Agreement, and no action taken by any Buyer pursuant hereto,

shall be deemed to constitute the Buyers as a partnership, an association, a

joint venture or any other kind of entity, or create a presumption that the

Buyers are in any way acting in concert or as a group with respect to such

obligations or the transactions contemplated by this Agreement.  Subject to the provisions of Section 9(e)

and 9(f) of this Agreement, each Buyer shall be entitled to independently

protect and enforce its rights, including without limitation the rights arising

out of this Agreement, and it shall not be necessary for any other Buyer to be

joined as an additional party in any proceeding for such purpose.




 




25





























 




IN

WITNESS WHEREOF, the parties have caused this Securities

Purchase Agreement to be duly executed as of the date first written above.




 




	

   


  	

  “COMPANY”


  
	

   


  	

   


  
	

   


  	

  MANUFACTURERS’

  SERVICES


  LIMITED


  
	

   


  	

   


  
	

   


  	

   


  
	

   


  	

  By:


  	

   /s/ 

  Albert N. Notini


  	

   


  
	

   


  	

  Its:


  	

  Executive Vice President

  and Chief Financial Officer


  
					





 




 




ACKNOWLEDGED

AND AGREED:




 




 




“PIPER

JAFFRAY”




 




	

  U.S.

  BANCORP PIPER JAFFRAY


  
	

   


  
	

   


  
	

  By:


  	

   /s/ David J. Fullerton


  	

   


  	

   


  
	

   


  	

  Its:


  	

   Managing Director


  	

   


  
	

   


  
	

   


  
	

  “RBC”


  
	

   


  
	

  RBC

  DAIN RAUSCHER, INC.


  
	

   


  
	

   


  
	

  By:


  	

   /s/ John S. Kirks


  	

   


  	

   


  
	

   


  	

  Its:


  	

   Managing Director


  	

   


  
					





 




[Signatures of

Buyers on Following Page]




 




26