Document:

EXHIBIT 4.1

                                  July 1, 2003

Wegener Communications, Inc.
11350 Technology Circle
Duluth, Georgia  30155

     RE:  FIFTH AMENDMENT

Gentlemen:

     WEGENER  COMMUNICATIONS,  INC.,  a  Georgia  corporation  ("Borrower")  and
LaSalle Bank National Association,  a national banking association ("Bank") have
entered into that certain  Loan and Security  Agreement  dated June 5, 1996 (the
"Security Agreement"). From time to time thereafter,  Borrower and Bank may have
executed   various   amendments   (each  an  "Amendment"  and  collectively  the
"Amendments")  to  the  Security  Agreement  (the  Security  Agreement  and  the
Amendments  hereinafter  are referred  to,  collectively,  as the  "Agreement").
Borrower and Bank now desire to further amend the Agreement as provided  herein,
subject to the terms and conditions hereinafter set forth.

     NOW,  THEREFORE,  in  consideration of the foregoing  recitals,  the mutual
covenants  and   agreements  set  forth  herein  and  other  good  and  valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:

          1.   The Agreement hereby is amended as follows:

     (a) Paragraph (11) of Exhibit A of the Agreement is deleted in its entirety
and the following is substituted in its place:

          (11) RESTRICTION  OF PAYMENT  OF  EXPENSE  OF PARENT:  Notwithstanding
               anything contained in the Agreement to the contrary, Borrower may
               pay various administrative expenses of Borrower's Parent, Wegener
               Corporation,  provided that: (i) such payment is permitted  under
               all applicable laws, (ii) no Event of Default shall have occurred
               prior to the time,  or would  occur as a result of such  payment,
               (iii) the amount of  expenses  paid does not  exceed One  Million
               Four Hundred Thousand and No/100 Dollars  ($1,400,000.00) for the
               Fiscal year ending as of August 31, 2003,  and (iv) the amount of
               expenses  paid does not exceed Six  Hundred  Thousand  and No/100
               Dollars ($600,000.00) for each Fiscal year thereafter.

<PAGE>

WEGENER COMMUNICATIONS, INC.
JULY 8, 2003
PAGE 2

     (b)  Subparagraph  (7)(b) of Exhibit A of the  Agreement  is deleted in its
entirety and the following is substituted in its place:

          (b)  TRANSACTION   FEE:   Borrower   shall  pay  to  Bank  a  one-time
               transaction  fee in the amount of Five Hundred and No/100 Dollars
               ($500.00), which fee shall be fully earned by Bank on the date of
               this Amendment and payable on July 31, 2003.

          2.   This Amendment shall not become effective until fully executed by
all parties hereto.

          3.   Except as expressly amended hereby and by any other  supplemental
documents or instruments  executed by either party hereto in order to effectuate
the transactions contemplated hereby, the Agreement and Exhibit A thereto hereby
are  ratified and  confirmed by the parties  hereto and remain in full force and
effect in accordance with the terms thereof.

                                        LASALLE BANK NATIONAL ASSOCIATION,
                                        A NATIONAL BANKING ASSOCIATION

                                        By: /s/ Mitchell Rasky

                                        Title: Vice President

Accepted and agreed to this 1st day of July, 2003.

WEGENER COMMUNICATIONS, INC.

By: /s/ Troy Woodbury
    TROY WOODBURY, JR.

Title: Treasurer and CFO
Consented  and agreed to by the  following
guarantor  of the  obligations  of WEGENER
COMMUNICATIONS,  INC. to LaSalle  National
Bank.

<PAGE>

WEGENER COMMUNICATIONS, INC.
JULY 8, 2003
PAGE 3

WEGENER CORPORATION

By: /s/ Robert A. Placek
    ROBERT A. PLACEK

Title: President and CEO

Date: July 1, 2003

<PAGE>Exhibit

4.1

 

FORM

OF WARRANT

 

[THE FOLLOWING PARAGRAPH

SHALL APPEAR ON THE FACE OF EACH RESTRICTED WARRANT:]

 

THE SECURITIES

REPRESENTED BY THIS WARRANT 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

STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR

APPLICABLE STATE SECURITIES LAWS OR AN APPLICABLE 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 PARAGRAPH ON THE FACE OF EACH WARRANT 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 A VALID EXEMPTION FROM

REGISTRATION UNDER THE SECURITIES ACT.

 

MANUFACTURERS’

SERVICES LIMITED

 

WARRANT TO

PURCHASE COMMON STOCK

 

	

  Warrant No.:

  	

  [         ]

  	

   

  	

  Number of

  Shares:

  	

  [         ]

  
	

  CUSIP No.:

  	

  565005 147

  	

   

  	

  (subject to adjustment)

  

 

Date of Issuance:  July 3, 2003

 

MANUFACTURERS’ SERVICES LIMITED, a Delaware corporation

(the “Company”), hereby certifies that, for good and valuable consideration,

the receipt and sufficiency of which are hereby acknowledged,

[                          ],

the registered holder hereof or its permitted assigns, is entitled, subject to

the terms and conditions set forth below, to purchase from the Company upon

surrender of this Warrant (as defined below), at any time or times on or after

the date hereof, but not after 5:00 p.m., Eastern Standard Time, on the

Expiration Date (as defined below),

[                          ]

fully paid nonassessable shares of Common Stock (as defined below) of the

 

 

Company at the Exercise Price per share provided in Section 1(d) of

this Warrant, subject to adjustment as provided below.  Capitalized terms used herein but not

defined shall have the same meanings assigned to them in the Securities

Purchase Agreement dated as of July 1, 2003, by and between the Company and the

parties listed on the Schedule of Buyers attached thereto as Exhibit A (as

such agreement may be amended, supplemented and modified from time to time as

provided in such agreement, the “Securities Purchase Agreement”).

 

This Warrant (as defined below) is one of a series of

Warrants issued in connection with the transactions described in that certain

(i) Securities Purchase Agreement and (ii) certain other related

documents and agreements including, without limitation, the Transaction

Documents (as defined in the Securities Purchase Agreement).  The Warrant Shares (as defined below) issued

upon exercise of this Warrant and the holder hereof and thereof shall be

entitled to all of the rights and privileges set forth in the Transaction

Documents.

 

Section 1.                  Definitions.  The following terms as used in this Warrant

shall have the following meanings:

 

(a)                 “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.

 

(b)                “Common Stock”

means (i) the common stock, $.001 par value per share, of the Company, and

(ii) any capital stock into which such Common Stock shall have been

changed or any capital stock resulting from a reclassification of such Common

Stock.

 

(c)                 “Exercise Price”

shall be equal to $6.275, subject to further adjustment as hereinafter provided.

 

(d)                “Expiration Date”

means July 3, 2008 or, if such date does not fall on a Business Day or on a

Trading Day, then the next Business Day.

 

(e)                  “Person” means

an individual, a limited liability company, a partnership, a joint venture, a

corporation, a trust, an unincorporated organization or association and a

government or any department or agency thereof.

 

(f)                   “Principal

Market” means The New York Stock Exchange (the “NYSE”) or, if the Common Stock

is not traded on the NYSE, then the principal securities exchange or trading

market for the Common Stock.

 

(g)                “Registration

Rights Agreement” means that certain Registration Rights Agreement, dated as of

July 1, 2003, among the Company, the Placement Agents and certain of the

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

amended, supplemented and modified from time to time in a writing signed by all

of the signatories thereto.

 

(h)                “Securities Act”

means the Securities Act of 1933, as amended, and the rules and regulations promulgated

thereunder.

 

2

 

(i)                    “Trading Day”

shall mean (x) a day on which the Principal Market is open for business or

(y) if the applicable security is not so listed on a Principal Market or

admitted for trading or quotation, a Business Day.

 

(j)                    “Warrant”

means this Warrant and the other warrants to purchase shares of Common Stock

issued pursuant to the Securities Purchase Agreement and all warrants issued in

exchange, transfer or replacement thereof.

 

(k)                 “Warrant Shares”

means all shares of Common Stock issuable upon exercise of the Warrants.

 

Section 2.                  Exercise

of Warrant.

 

(a)                 Subject to the

terms and conditions hereof, including the early termination of this Warrant

pursuant to Section 3(b) of this Warrant, this Warrant may be

exercised by the holder hereof then registered on the books of the Company, in

whole or in part, at any time on any Business Day on or after the opening of

business on the date hereof and prior to 5:00 p.m., Eastern Standard Time, on

the Expiration Date by (i) delivery of a written notice, in the form of

the subscription notice attached as Exhibit A hereto or a reasonable

facsimile thereof (the “Exercise Notice”), to the Company and the Company’s

designated transfer agent (the “Transfer Agent”), of such holder’s election to

exercise all or a portion of this Warrant, which notice shall specify the

number of Warrant Shares to be purchased, (ii) (A) payment to the

Company of an amount equal to the Exercise Price multiplied by the number of

Warrant Shares as to which this Warrant is being exercised (the “Aggregate

Exercise Price”) in cash or delivery of a certified check or bank draft payable

to the order of the Company or wire transfer of immediately available funds or

(B) notification to the Company that this Warrant is being exercised

pursuant to a Cashless Exercise (as defined in Section 2(e) of this

Warrant), and (iii) the surrender of this Warrant to a common carrier for

overnight delivery to the Company as soon as practicable following such date

(or an indemnification undertaking or other form of security reasonably

satisfactory to the Company with respect to this Warrant in the case of its

loss, theft or destruction); provided, however, that if such Warrant Shares are

to be issued in any name other than that of the registered holder of this

Warrant, such issuance shall be deemed a transfer and the provisions of

Section 8 of this Warrant shall be applicable.  In the event of any exercise of the rights represented by this

Warrant in compliance with this Section 2(a), the Company shall on or

before the fifth Business Day (the “Warrant Share Delivery Date”) following the

date of its receipt of the Exercise Notice, the Aggregate Exercise Price (or

notice of Cashless Exercise) and this Warrant (or an indemnification

undertaking or other form of security reasonably satisfactory to the Company

with respect to this Warrant in the case of its loss, theft or destruction)

(the “Exercise Delivery Documents”), (A) in the case of a public resale of

such Warrant Shares, 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 or (B) issue and

deliver to the address as specified in the Exercise Notice, a certificate or

certificates in such denominations as may be requested by the holder in the

Exercise Notice, registered in the name of the holder or its designee, for the

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

 

3

 

entitled upon such exercise.  Upon delivery of the Exercise Notice, this Warrant and Aggregate

Exercise Price referred to in clause (ii)(A) above or notification to the

Company of a Cashless Exercise referred to in Section 2(e) of this

Warrant, the holder of this Warrant shall be deemed for all corporate purposes

to have become the holder of record of the Warrant Shares with respect to which

this Warrant has been exercised, irrespective of the date of delivery of this

Warrant as required by clause (iii) above or the certificates evidencing

such Warrant Shares.  In the case of a

dispute as to the determination of (x) the Exercise Price or the Closing Sale

Price (as defined in Section 9) or (y) the arithmetic calculation of the number

of Warrant Shares, the Company shall promptly issue to the holder the number of

shares of Common Stock that is not disputed and shall submit the disputed

determination or arithmetic calculation to the holder via facsimile within two

(2) Business Days after receipt of the holder’s Exercise Notice.  If the holder and the Company are unable to

agree upon the determination of the Exercise Price or arithmetic calculation of

the number of Warrant Shares within two (2) Business Days of such disputed

determination or arithmetic calculation being submitted to the holder, then the

Company shall immediately submit via facsimile (i) the disputed determination

of the Exercise Price or the Closing Sale Price to an independent, reputable

investment banking firm selected jointly by the Company and the holder or

(ii) the disputed arithmetic calculation of the number of Warrant Shares

to its independent, outside auditor. 

The Company shall cause the investment banking firm or the auditor, as

the case may be, to perform the determination or calculation and notify the

Company and the holder of the results no later than ten (10) Business Days from

the time it receives the disputed determination or calculation.  Such investment banking firm’s or auditor’s

determination or calculation, as the case may be, shall be deemed conclusive

absent manifest error.  All fees and

expenses of such determinations shall be borne solely by the Company.

 

(b)                Unless the rights

represented by this Warrant shall have expired or shall have been fully

exercised, the Company shall, as soon as practicable but in no event later than

five (5) Business Days after any exercise (the “Warrant Delivery Date”) and at

its own expense, issue a new Warrant identical in all respects to this Warrant

exercised except it shall represent rights to purchase the number of Warrant

Shares purchasable immediately prior to such exercise under this Warrant, less

the number of Warrant Shares with respect to which this Warrant is exercised.

 

(c)                 Notwithstanding

anything contained in this Warrant to the contrary, the Company shall not be

required to issue fractions of shares of Common Stock upon exercise of this

Warrant or to distribute certificate which evidence such fractional

shares.  If more than one Warrant shall

be presented for exercise in full at the same time by the same holder, the

number of full shares of Common Stock which shall be issuable upon the exercise

thereof shall be computed on the basis of the aggregate number of shares of

Common Stock purchasable on exercise of all Warrants so presented.  In lieu of any fractional shares, any

fraction of a share of Common Stock shall be rounded up or down to the nearest

whole share.

 

(d)                If the Company

shall fail for any reason or for no reason (except in the case of a dispute as

to the Exercise Price or the Closing Sale Price which is being resolved in

accordance with Section 2(a) of this Warrant) to issue to the holder within

five (5) Business Days of receipt of the Exercise Delivery Documents, a

certificate for the number of shares of Common Stock to which the holder is

 

4

 

entitled or to credit the holder’s designee’s balance

account with DTC, in accordance with Section 2 of this Warrant, for such

number of shares of Common Stock to which the holder is entitled upon the

holder’s exercise of this Warrant or a new Warrant for the number of shares of

Common Stock to which such holder is entitled pursuant to

Section 2(b) of this Warrant, the Company shall, in addition to any

other remedies under this Warrant or the Securities Purchase Agreement 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 Warrant Share Delivery Date such exercise is not

timely effected and/or each day after the Warrant Delivery Date such Warrant is

not delivered, as the case may be, 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 not issued to the holder on or prior to the Warrant

Share Delivery Date and to which such holder is entitled and, in the event the

Company has failed to deliver a Warrant to the holder on or prior to the

Warrant Delivery Date, the number of shares of Common Stock issuable upon

exercise of the Warrant as of the Warrant Delivery Date and (II) the

Closing Sale Price of the Common Stock on the Warrant Share Delivery Date, in

the case of the failure to deliver Common Stock, or the Warrant Delivery Date,

in the case of failure to deliver a Warrant, as the case may be, provided that

if the Common Stock is not listed on a Principal Market, then the Closing Sale

Price shall be as determined in good faith by a majority of the Company’s Board

of Directors, whose determination shall be final, binding and conclusive.

 

(e)                 Notwithstanding

anything contained herein to the contrary, the holder of this Warrant may, at

its election exercised in its sole discretion, exercise this Warrant as to all

or a portion of the Warrant Shares and, in lieu of making the cash payment

otherwise contemplated to be made to the Company upon such exercise in payment

of the Aggregate Exercise Price, elect instead to receive upon such exercise

the “Net Number” of shares of Common Stock determined according to the

following formula (a “Cashless Exercise”):

 

	

  Net Number =

  	

  (A x B) - (A x

  C)

  	

   

  
	

   

  	

  B

  	

   

  

 

For purposes of the foregoing formula:

 

A=                               the

total number of shares with respect to which this Warrant is then being

exercised.

 

B=                                 the

Closing Sale Price of the Common Stock on the Trading Day immediately preceding

the date of the Exercise Notice.

 

C=                                 the

Exercise Price then in effect for the applicable Warrant Shares at the time of

such exercise.

 

(f)              [INCLUDE EITHER OF

THE FOLLOWING 2 PARAGRAPHS ONLY BASED UPON HOLDER’S ELECTION UNDER SECTION 2(k)

OF PURCHASE AGREEMENT]

 

[The registered holder hereby agrees that in no event

will it exercise any of the Warrants

 

5

 

in excess of the number of such Warrants upon the exercise of which (x)

the number of shares of Common Stock beneficially owned by such holder (other

than the shares which would otherwise be deemed beneficially owned except for

being subject to a limitation on exercise analogous to the limitation contained

in this Section 2(f)) plus (y) the number of shares of Common Stock issuable

upon the 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 exercise), it being the intent of the Company and the holder

that the holder not 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(f) applies (and without limiting any rights the Company may

otherwise have), the Company may rely on the registered holder’s determination

of whether the Warrants are 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 the Exercise Notice by the holder

shall be deemed to be the holder’s representation that the Warrants specified

therein are exercisable pursuant to the terms hereof. Nothing contained herein

shall be deemed to restrict the right of a Holder to exercise the Warrants at

such time as the exercise thereof will not violate the provisions of this

Section 2(f).  This Section 2(f) shall

not restrict the number of shares of Common Stock which the registered holder

my receive or beneficially own in order to determine the amount of securities

or other consideration that such holder may receive in the event of a merger or

other business combination or reclassification involving the Company as

contemplated in Section 10 of this Warrant.]

 

[The registered holder hereby agrees that in no event

will it exercise any of the Warrants in excess of the number of such Warrants

upon the exercise of which (x) the number of shares of Common Stock

beneficially owned by such holder (other than the shares which would otherwise

be deemed beneficially owned except for being subject to a limitation on

exercise analogous to the limitation contained in this Section 2(f)) plus (y)

the number of shares of Common Stock issuable upon the 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 exercise), it

being the intent of the Company and the holder of Warrants that the holder not

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 3(j) applies (and

without limiting any rights the Company may otherwise have), the Company may

rely on the registered holder’s determination of whether the Warrants are

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 the Exercise Notice by the holder shall be deemed to be the

holder’s representation that the Warrants specified therein are exercisable

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

the right of a Holder to exercise the Warrants at such time as the exercise

thereof will not violate the provisions of this Section 2(f).  This Section 2(f) shall not restrict the

number of shares of Common Stock which the registered holder my receive or

beneficially own in order to determine the amount of securities or other

consideration that such holder may receive in the event

 

6

 

of a merger or other business combination or reclassification involving

the Company as contemplated in Section 10 of this Warrant.]

 

Section 3.                  Date;

Duration; Early Termination of Warrants.

 

(a)            The date of this

Warrant is July 3, 2003 (the “Warrant Date”). 

This Warrant, in all events, shall be wholly void and of no effect at

5:00 pm Eastern Standard Time on the Expiration Date, or the Termination Date

(as defined below), if applicable, as the case may be, except that

notwithstanding any other provisions hereof, the provisions of

Section 8(c) of this Warrant shall continue in full force and effect

after such date as to any Warrant Shares or other securities issued upon the

exercise of this Warrant.

 

(b)           If at any time after

July 3, 2004 (1) the Closing Sale Price per share of the Common Stock has

exceeded 175% of the Exercise Price then in effect for any fifteen (15) Trading

Days within a period of twenty (20) consecutive Trading Days (the

“Determination Period”) and (2) either (x) a shelf registration statement

covering resales of the Common Stock issuable upon exercise of the Warrants is

effective and available for use at all times during the period beginning thirty

(30) days prior to the Notice Date (as defined below) and ending on the

Termination Date, and is expected to remain effective and available for use

until at least the earlier of thirty (30) days following the Termination 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 or (y) the

Warrant Shares issuable upon a Cashless Exercise may be sold pursuant to Rule

144 under the Securities Act, then the Company may, at its option, terminate

the Warrants.  By following the

procedures set forth below, the Company may exercise this right of termination

only if, within ten (10) days following the Determination Period, the Company

shall mail or cause to be mailed a notice of such termination (the “Termination

Notice,” and the date such Termination Notice is mailed, the “Notice Date”) to

the holders of the Warrant at the address set forth for such holder in

Section 12 of this Warrant.  Such

mailing shall be by first class mail and the Company shall contemporaneously

issue a press release through PRNewswire or Bloomberg Financial Markets containing

substantially the same information as the notice of termination described

below.  Each such notice of termination

shall specify the CUSIP number of the Warrant, the Termination Date, that the

Warrants may not be exercised after 5:00 p.m., Eastern Standard Time, on the

Termination Date and the current Exercise Price.

 

If all of the conditions described in the preceding

paragraph have been met, any Warrant not exercised before the close of business

on the ninetieth (90th) day after the mailing date of the notice of termination

(such ninetieth (90th) day, the “Termination Date”) shall automatically be

deemed exercised in a Cashless Exercise in accordance with Section 2(e)

and the Company will deliver the number of Warrant Shares issuable to the

holder upon receipt of a completed Exercise Notice along with the original copy

of the Warrant for cancellation (or an affidavit of lost Warrant in accordance

with Section 12).

 

Section 4.                  Covenants

as to Common Stock.  The Company

hereby covenants and agrees as follows:

 

7

 

(a)                 Issuance of

Warrants and Warrant Shares.  This

Warrant is, and any Warrants issued in substitution for or replacement of this

Warrant will upon issuance be, validly issued, fully paid and non-assessable

and free from all taxes, liens and charges with respect to the issuance

thereof, and shall not be subject to preemptive rights or other similar rights

of shareholders of the Company.  All

Warrant Shares which may be issued upon the exercise of the rights represented

by this Warrant will, upon issuance and payment hereof or Cashless Exercise in

accordance with the terms hereof, be validly issued, fully paid and

nonassessable and free from all taxes, liens and charges created by or through

the Company with respect to the issue thereof, with the holders being entitled

to all rights accorded to a holder of Common Stock.

 

(b)                Reservation of

Shares.  During the period within

which the rights represented by this Warrant may be exercised, the Company will

take all action reasonably necessary to at all times have authorized, and

reserved for the purpose of issuance, no less than the number of shares of

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

exercise of all of the Warrants without regard to any limitations on conversions

or exercise.

 

(c)                 Listing.  The Company shall promptly use its best

efforts to secure the listing of the shares of Common Stock issuable upon

exercise of this Warrant 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 upon exercise of this Warrant) and

shall use its best efforts to maintain, so long as any other shares of Common

Stock shall be so listed, such listing of all shares of Common Stock from time

to time issuable upon the exercise of this Warrant; and the Company shall use

its best efforts to list on the Principal Market or automated quotation system,

as the case may be, and shall use its best efforts to maintain such listing of,

any other shares of capital stock of the Company issuable upon the exercise of

this Warrant if and so long as any shares of the same class shall be listed on

such Principal Market or automated quotation system.  The Company shall pay all fees and expenses in connection with

satisfying its obligations under this Section 4(c).

 

(d)                Certain Actions.  The Company will not, by amendment of its

articles of incorporation or through any reorganization, transfer of 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 by it hereunder.  Without limiting the generality of the foregoing,

the Company (i) will not increase the par value of any shares of Common

Stock issuable upon the exercise of this Warrant above the Exercise Price then

in effect, (ii) will take all such actions as may be reasonably necessary

or appropriate in order that the Company may validly and legally issue fully

paid and nonassessable shares of Common Stock upon the exercise of this Warrant

and (iii) will not take any action which results in any adjustment of the

Exercise Price if the total number of shares of Common Stock issuable after the

action upon the exercise of all of the Warrants would exceed the total number

of shares of Common Stock then authorized by the Company’s article of

incorporation and available for the purpose of issue upon such exercise.

 

(e)                 Obligations

Binding on Successors.  This Warrant

will be binding upon any entity succeeding to the Company in one or a series of

transactions by merger, consolidation or acquisition of all or substantially

all of the Company’s assets or other similar transactions.

 

8

 

Section 5.                  Taxes.

 

(a)                 The Company shall

pay any and all documentary, stamp, transfer and other similar taxes which may

be payable with respect to the issuance and delivery of Warrant Shares upon

exercise of this Warrant.

 

(b)                Notwithstanding

any other provision of this Warrant or any other Transaction Document, for

income tax purposes, any assignee or transferee shall agree that the Company

and the Company’s Transfer Agent shall be permitted to withhold from any

amounts payable to such assignee or transferee any taxes required by law to be

withheld from such amounts.  Unless

exempt from the obligation to do so, each assignee or transferee shall execute

and deliver to the Company or the Company’s transfer agent, as applicable,

properly completed Form W-8 or W-9, indicating that such assignee or transferee

is not subject to back-up withholding for United States Federal income tax

purposes.  Each assignee or transferee

that does not deliver such a form pursuant to the preceding sentence shall have

the burden of proving to the Company’s reasonable satisfaction that it is

exempt from such requirement.

 

Section 6.                  Warrant

Holder Not Deemed a Shareholder; Issuance of Rights or Warrants.

 

(a)                 Except as

otherwise specifically provided herein, prior to the exercise of the Warrants

represented hereby, the holder of this Warrant shall not be entitled, as such,

to any rights of a shareholder of the Company, including, without limitation,

the right to vote or to consent to any action of the shareholders of the

Company, to receive dividends or other distributions, to exercise any

preemptive right or to receive dividends or other distributions, to exercise

any preemptive right or to receive any notice of meetings of shareholders of

the Company, and shall not be entitled to receive any notice of any proceedings

of the Company.  In addition, nothing

contained in this Warrant shall be construed as imposing any liabilities on

such holder to purchase any securities (upon exercise of this Warrant or

otherwise) or as a shareholder of the Company, whether such liabilities are

asserted by the Company or by creditors of the Company.

 

(b)           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 in

Section 9(e) of this Warrant) on the Record Date fixed for the

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

Company shall distribute to the holder of this Warrant, the rights or warrants

that would have been issued with respect to the Warrant Shares then issuable

upon exercise of this Warrant if this Warrant had been exercised in full as of

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

such rights or warrants.

 

Section 7.                  Compliance

with Securities Laws.

 

(a)            The holder of this

Warrant, by the acceptance hereof, represents and warrants that (i) it is

acquiring this Warrant and (ii) upon exercise of this Warrant will acquire

the Warrant Shares then issuable upon exercise thereof 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

 

9

 

registered or exempted from registration under the

Securities Act; provided, however, that by making the representations herein,

the holder does not agree to hold this Warrant or any of the Warrant Shares for

any minimum or other specific term and reserves the right to dispose of this

Warrant and the Warrant Shares at any time in accordance with or pursuant to a

registration statement or an exemption under the Securities Act.  The holder of this Warrant further

represents, by acceptance hereof, that, as of this date, such holder is an

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

D promulgated by the Securities and Exchange Commission under the Securities

Act and was not organized for the specific purpose of acquiring the Warrants or

Warrant Shares.

 

(b)           This Warrant and all

the Warrant Shares issued upon exercise hereof shall be stamped or imprinted

with a legend in substantially the following form (in addition to any legend

required by state securities laws or any securities exchange upon which such

Warrant Shares may, at the time of such exercise, be listed) on the face

thereof unless with respect to any Warrant Shares issued upon exercise of the

Warrant at the time of exercise such Warrant Shares are freely salable pursuant

to Rule 144(k) under the Securities Act:

 

THE SECURITIES

REPRESENTED BY THIS WARRANT 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

STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR

APPLICABLE STATE SECURITIES LAWS OR AN APPLICABLE EXEMPTION THEREFROM. THE

SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR

OTHER LOAN SECURED BY THE SECURITIES.

 

In addition, any Warrants or Warrant Shares held by or

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

under the Securities Act) of the Company shall be stamped or imprinted with a

legend substantially in the following form:

 

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 A VALID EXEMPTION FROM

REGISTRATION UNDER THE SECURITIES ACT.

 

The legends set forth above shall be removed and the

Company (in the case of Warrants) or the transfer agent (in the case of Warrant

Shares) shall issue a new Warrant or Warrant(s) of like

 

10

 

tenor and aggregate principal amount, or a new certificate or

certificates representing Warrant Shares, as appropriate, without such legends

to the holder of the Warrant(s) or Warrant Shares upon which they are stamped,

(i) if such Warrant(s) or Warrant Shares are registered for resale under

the Securities Act and are transferred or sold pursuant to such registration,

(ii) if, pursuant to 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 Warrant(s) or Warrant Shares

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- (2) year period under Rule 144(k)

promulgated under the Securities Act (or any successor rule).  In the event Rule 144(k) (or any

successor rule) is amended to change the two- (2) year or three- (3) month

periods, the reference(s) in the preceding sentence shall be deemed to be a

reference to such changed period(s), provided that such change shall not become

effective if it is otherwise prohibited by, or would otherwise cause a

violation of, the then applicable federal securities laws.  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.

 

Section 8.                  Ownership

and Transfer.

 

(a)                 The Company shall

maintain at its principal executive offices (or such other office or agency of

the Company as it may designate by notice to the holder hereof), a register for

this Warrant (the “Warrant Register”), in which the Company shall record the

name and address of the Person in whose name this Warrant has been issued, as

well as the name and address of each transferee.  The Company may treat the Person in whose name any Warrant is

registered on the Warrant Register as the owner and holder thereof for all

purposes, notwithstanding any notice to the contrary, but in all events recognizing

any transfers made in accordance with the terms of this Warrant.

 

(b)                Subject to

compliance with applicable securities laws, this Warrant and all rights

hereunder shall be assignable and transferable by the holder hereof without the

consent of the Company upon surrender of this Warrant with a properly executed

assignment (in the form of Exhibit B hereto) at the principal

executive offices of the Company (or such other office or agency of the Company

as it may designate in writing to the holder hereof).

 

(c)                 The Company is

obligated to register the Warrant Shares for resale under the Securities Act

pursuant to the Registration Rights Agreement. 

The shares of Common Stock issuable upon exercise of this Warrant shall

constitute Registrable Securities (as such term is defined in the Registration

Rights Agreement).  Each holder of this

Warrant shall be entitled to all of the benefits afforded to a holder of any

such Registrable Securities under the Registration Rights Agreement and such

holder, by its acceptance of this Warrant, agrees and shall agree to be bound

by and to comply with the terms and conditions of the Registration Rights

Agreement applicable to such holder as a holder of such Registrable Securities.

 

11

 

Section 9.                  Adjustment

of Exercise Price and Number of Shares Issuable.  The Exercise Price, the number of Shares issuable upon the

exercise of each Warrant and the number of Warrants outstanding are subject to

adjustment from time to time upon the occurrence of the events enumerated in

this Section 9.

 

(a)                 In case the

Company shall hereafter pay a dividend or make a distribution to all holders of

the outstanding Common Stock in shares of Common Stock, the Exercise 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 Exercise Price by a fraction

of which (i) the numerator shall be the number of shares of Common Stock

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

Section 9(f)) of this Warrant fixed for such determination and

(ii) 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 Exercise 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 9(a) of this Warrant is declared but not so

paid or made, the Exercise Price shall again be adjusted to the Exercise Price

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

declared.

 

(b)                In case the

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

shares of Common Stock, the Exercise 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 Exercise 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.

 

(c)                 In case the

Company 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 9(a) of this Warrant

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

securities, but excluding (1) any rights or warrants referred to in

Section 6(b) of this Warrant and (2) dividends and distributions

paid exclusively in cash (except as set forth in Section 9(d) and (e) of

this Warrant, (the foregoing hereinafter in this Section 9(c) called the

“Securities”)), unless the Company elects to reserve such Securities for

distribution to the holders upon exercise of the Warrants so that any such

holder exercising Warrants will receive upon such exercise, in addition to the

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

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

exercised its Warrants immediately prior to the Record Date (as defined in

Section 9(e) of this Warrant) for such distribution of the Securities

then, in each such case, the Exercise Price shall be reduced so that the same

shall be equal to the price determined by multiplying the Exercise Price in

effect immediately prior to the close of business on the Record Date with

respect to such distribution by a fraction of which the numerator shall be the

Current Market Price (as defined in Section 9(e) of this Warrant) on such

date less the fair market value (as determined in good faith by the Company’s

Board of

 

12

 

Directors, whose determination shall be conclusive) on

such date of the portion of the Securities so distributed applicable to one

share of Common Stock and 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 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 shall have the right to receive

upon conversion of a Warrant (or any portion thereof) the amount of Securities

such holder would have received had such holder converted such Warrant (or

portion thereof) immediately prior to such Record Date.

 

In the event that such dividend or distribution is not

so paid or made, the Exercise Price shall again be adjusted to be the Exercise

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

been declared.  If a majority of the

independent members of the Company’s Board of Directors determines the fair

market value of any distribution for purposes of this Section 9(c) 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 9(e) of this

Warrant to the extent possible, unless a majority of the independent members of

the Company’s Board of Directors determines in good faith that determining the

fair market value during the Reference Period would not be in the best interest

of the holders.

 

In the event that the Company implements a new

shareholder rights plan, such rights plan shall provide that upon exercise of

the Warrants the holders will receive, in addition to the Common Stock issuable

upon such exercise, the rights issued under such rights plan (as if the holder

had exercised the Warrant 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 exercise).  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 9(c).

 

Rights or warrants distributed by the Company to all

holders of Common Stock entitling the holders thereof to subscribe for or

purchase shares of the Company’s capital stock (either initially or under

certain circumstances), which rights or warrants, until the occurrence of a

specified event or events (“Trigger Event”), (i) are deemed to be

transferred with such shares of Common Stock, (ii) are not exercisable,

and (iii) are also issued in respect of future issuances of Common Stock,

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

Section 9(c) (and no adjustment to the Exercise Price under this

Section 9(c) 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

 

13

 

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

Exercise Price under this Section 9(c), (1) in the case of any such

rights or warrants that shall all have been redeemed or repurchased without

exercise by any holders thereof, the Exercise 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 (2) in the case of such

rights or warrants all of which shall have expired or been terminated without

exercise, the Exercise Price shall be readjusted as if such rights and warrants

had never been issued.

 

For purposes of this Section 9(c) and Sections

6(b) and 9(a) of this Warrant, any dividend or distribution to which this

Section 9(c) 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(b) or 9(a)  of this Warrant apply, shall be deemed instead to

be (1) 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(b) of this Warrant applies (and

any Exercise Price reduction required by this Section 9(e) with respect to

such dividend or distribution shall then be made) immediately followed by (2) a

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

warrants (and any further Exercise Price reduction required by Section

9(a) and/or distribution of such rights and warrants to the holder hereof

required by Section 6(b) with respect to such dividend or distribution shall

then be made, except (A) 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 9(a) of this Warrant 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(b) of this Warrant and (B) 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 9(a) of this Warrant.

 

(d)                In case the

Company 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 10 of this Warrant applies or as part of a

distribution referred to in Section 9(d) of this Warrant), in an aggregate

amount that, combined together with (1) the aggregate amount of any other

such distributions to all holders of its Common Stock made exclusively 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 9(d) has been made, and (2) the aggregate of any cash plus

the fair market value (as determined in good faith by the Company’s Board of

Directors, whose determination shall be final, binding and conclusive) of

consideration payable in respect of any tender offer by the Company 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

 

14

 

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

Price (determined as provided in Section 9(e) of this Warrant) 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 Exercise Price shall be reduced

so that the same shall equal the price determined by multiplying the Exercise

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

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

Price on the Record Date less an amount equal to the quotient of (x) such

combined amount and (y) the number of shares of Common Stock outstanding on the

Record Date and (ii) 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 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 exercise of a

Warrant (or any portion thereof) the amount of cash such holder would have

received had such holder exercised such Warrant (or portion thereof) immediately

prior to such Record Date.  In the event

that such dividend or distribution is not so paid or made, the Exercise Price

shall again be adjusted to be the Exercise Price that would then be in effect

if such dividend or distribution had not been declared.

 

(e)            For purposes of this

Warrant, the following terms shall have the meaning indicated:

 

(1)           “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 Principal Market, 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 Company’s Board of Directors for that purpose, whose

determination shall be conclusive.

 

(2)           “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 (1) 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 Exercise Price pursuant to

Section 9(a), (b), (c) or (d) of this Warrant 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 Exercise Price is so

required to be adjusted as a result of such other event, (2) if the “ex”

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

that requires an adjustment to the Exercise Price pursuant to

Section 9(a), (b), (c) or (d) of this Warrant 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 Exercise

Price is so required to be adjusted as a result of such other event, and

(3) if the

 

15

 

“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 (1) or (2) 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 Company’s Board of Directors in a manner consistent with

any determination of such value for purposes of Section 9(c) of this

Warrant, 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.

 

(3)           “‘ex’ date” shall mean

the first trading date following the event for which an adjustment to the

Conversion Price is required pursuant to Section 9 of this Warrant.

 

(4)           “fair market value” shall

mean the amount which a willing buyer would pay a willing seller in an arm’s

length transaction.

 

(5)           “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).

 

(f)                   The Company may

make such reductions in the Exercise Price, in addition to those required by

Sections 9(a), (b), (c) or (d) of this Warrant, as the Board of Directors

considers to be advisable to avoid or diminish any income tax to holders of

Common Stock or rights to purchase Common Stock resulting from any dividend or

distribution of stock (or rights to acquire stock) or from any event treated as

such for income tax purposes.

 

(g)                To the extent

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

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

twenty (20) days, the reduction is irrevocable during such period and the Board

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

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

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

sentence, the Company shall mail to the holder of each Warrant at his last

address in the Warrant Register a notice of the reduction at least fifteen (15)

days prior to the date the reduced Exercise Price is to take effect, and such

notice shall state the reduced Exercise Price and the period during which it

will be in effect.

 

(h)                No adjustment in

the Exercise Price shall be required under this Section 9 unless such adjustment

would require an increase or decrease of at least one percent (1%) in the

Exercise Price; provided, however, that any adjustments which by reason of this

Section 9(i) are not required to be made shall be carried forward and

taken into account in any subsequent adjustment.  All calculations under this Section 9 shall be made by the

Company 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 of the Common Stock.

 

16

 

(i)                    Notice to

Holders of Warrants Prior to Certain Actions.  In case:

 

(1)           the Company shall

declare a dividend (or any other distribution) on its Common Stock that would

require an adjustment in the Exercise Price pursuant to this Section 9; or

 

(2)           the Company shall

authorize the granting to the holders of its Common Stock of rights or warrants

to subscribe for or purchase any share of any class or any other rights or

warrants; or

 

(3)           of any reclassification

of the Common Stock of the Company (other than a subdivision or combination of

its outstanding Common Stock, or a change from no par value to par value), or

of any consolidation or merger to which the Company is a party and for which

approval of any shareholders of the Company is required, or of the sale and

transfer of all or substantially all of the assets of the Company; or

 

(4)           of the voluntary or

involuntary dissolution, liquidation or winding-up of the Company;

 

the Company shall mail to the holder at such address

appearing in the Warrant Register as promptly as possible but in any event at

least fifteen (15) days prior to the applicable date hereinafter specified, a

notice stating (x) the date on which a record is to be taken for the purpose of

such dividend, distribution or rights are to be determined, or (y) the date on

which such reclassification, consolidation, merger, sale, transfer,

dissolution, liquidation or winding-up is expected to become effective or

occur, and the date as of which it is expected that holders of Common Stock of

record shall be entitled to exchange their Common Stock for securities or other

property deliverable upon such reclassification, consolidation, merger, sale,

transfer, dissolution, liquidation or winding-up.  Failure to give such notice, or any defect therein, shall not

affect the legality or validity of such dividend, distribution,

reclassification, consolidation, merger, sale, transfer, dissolution, liquidation

or winding-up.  In addition, whenever

the Exercise Price is adjusted as provided in this Section 9, the Company

shall prepare a notice of such adjustment of the Exercise Price setting forth

the adjusted Exercise Price and the date on which each adjustment becomes

effective and shall mail such notice of such adjustment of the Exercise Price

to the holder of each Warrant at his last address in the Warrant Register

within twenty (20) days of the effective date of such adjustment.  Failure to deliver such notice shall not

effect the legality or validity of any such adjustment.

 

(j)                    In any case in

which this Section 9 provides that an adjustment shall become effective

immediately after a Record Date for an event, the Company may defer until the

occurrence of such event by issuing to the holder of any Warrant exercised

after such Record Date and before the occurrence of such event the additional

shares of Common Stock issuable upon such exercise 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.

 

(k)                 For purposes of

this Section 9, the number of shares of Common Stock at any time

outstanding shall not include shares held in the treasury of the Company but

shall include shares issuable in respect of scrip certificates issued in lieu

of fractions of shares of Common Stock. 

The

 

17

 

Company will not pay any dividend or make any

distribution on shares of Common Stock held in the treasury of the Company.

 

(l)                    Upon each

adjustment of the Exercise Price pursuant to this Section 9, each Warrant

shall thereupon evidence the right to purchase that number of shares of Common

Stock (calculated to the nearest hundredth of a share) obtained by multiplying

the number of shares of Common Stock purchasable immediately prior to such

adjustment upon exercise of the Warrant by the Exercise Price in effect

immediately prior to such adjustment and dividing the product so obtained by

the Exercise Price in effect immediately after such adjustment.   The adjustment pursuant to this

Section 9(l) to the number of shares of Common Stock purchasable upon

exercise of a Warrant shall be made each time an adjustment of the Exercise

Price is made pursuant to this Section 9 (or would be made but for

Section 9(j) of this Warrant).

 

Section

10.                Effect of

Reclassification, Consolidation, Merger or Sale.  If any of the following events occur, namely (i) any

reclassification or change of the outstanding shares of Common Stock (other

than a change in par value, or from par value to no par value, or from no par

value to par value, or as a result of a subdivision or combination),

(ii) any consolidation, merger or combination of the Company with another

person as a result of which holders of Common Stock shall be entitled to

receive stock, securities or other property or assets (including cash) with

respect to or in exchange for such Common Stock (other than as a result of a

change in name, a change in par value or a change in the jurisdiction of

incorporation), (iii) any statutory exchange, as a result of which holders

of Common Stock generally shall be entitled to receive stock, securities or

other property or assets (including cash) with respect to or in exchange for

such Common Stock (such transaction, a “Statutory Exchange”), (iv) any

sale or conveyance of the properties and assets of the Company as, or

substantially as, an entirety to any other person as a result of which holders

of Common Stock shall be entitled to receive stock, securities or other

property or assets (including cash) with respect to or in exchange for such

Common Stock, then the Company or the successor or purchasing person, as the

case may be, shall issue a replacement Warrant providing that such Warrant

shall be exercisable for the kind and amount of shares of stock and other

securities or property or assets (including cash) receivable upon such

reclassification, change, consolidation, merger, combination, Statutory

Exchange, sale or conveyance by a holder of a number of shares of Common Stock

issuable upon exercise of such Warrants (assuming, for such purposes, a

sufficient number of authorized shares of Common Stock available for issuance

upon exercise of all such Warrants) immediately prior to such reclassification,

change, consolidation, merger, combination, Statutory Exchange, sale or

conveyance assuming such holder of Common Stock did not exercise his rights of

election, if any, that holders of Common Stock who were entitled to vote or

consent to such transaction had as to the kind or amount of securities, cash or

other property receivable upon such consolidation, merger, combination,

Statutory Exchange, sale or conveyance (provided that, if the kind or amount of

securities, cash or other property receivable upon such consolidation, merger,

combination, Statutory Exchange, sale or conveyance is not the same for each

share of Common Stock in respect of which such rights of election shall not

have been exercised (“non-electing share”), then for the purposes of this

Section 10 the kind and amount of securities, cash or other property

receivable upon such consolidation, merger, combination, Statutory Exchange,

sale or conveyance for each non-electing share shall be deemed to be the kind

and amount so receivable per

 

18

 

share by a plurality of the non-electing shares).  Such replacement Warrant shall provide for

adjustments which shall be as nearly equivalent as may be practicable to the

adjustments provided for in Section 9 of this Warrant.  If, in the case of any such

reclassification, change, consolidation, merger, combination, Statutory

Exchange, sale or conveyance, the stock or other securities and assets

receivable thereupon by a holder of shares of Common Stock shall include shares

of stock or other securities and assets of a corporation other than the

successor or purchasing person, as the case may be, in such reclassification,

change, consolidate, merger, combination, Statutory Exchange, sale or

conveyance, then such replacement Warrant shall also be executed by such other

person and shall contain such additional provisions to protect the interests of

the holder of the Warrants as the Company’s Board of Directors shall reasonably

consider necessary by reason of the foregoing. 

The Exercise Price for the stock and other securities, property and

assets (including cash) so receivable upon such event shall be an amount equal

to the Exercise Price immediately prior to such event.

 

The Company shall mail such replacement Warrant to

each holder of Warrants, at such holder’s address appearing in the Warrant

Register within twenty (20) days after execution thereof.  Failure to deliver such notice shall not

affect the legality or validity of such replacement Warrant.

 

The above provisions of this Section 10 shall

similarly apply to successive reclassifications, changes, consolidations,

mergers, combinations, sales and conveyances.

 

If this Section 10 applies to any event or

occurrence, Section 9 of this Warrant shall not apply.

 

Section 11.           Notice

to Holders Prior to Certain Actions. 

In case:

 

(a)                 the Company shall

declare a dividend (or any other distribution) on its Common Stock; or

 

(b)                the Company shall

authorize the granting to the holders of its Common Stock of rights or warrants

to subscribe for or purchase any share of any class or any other rights or

warrants; or

 

(c)                 of any

reclassification of the Common Stock of the Company (other than a subdivision

or combination of its outstanding Common Stock or a change from no par value to

par value), or of any consolidation or merger to which the Company is a party

and for which approval of any shareholders of the Company is required, or of

the sale or transfer of all or substantially all of the assets of the Company;

or

 

(d)                of the voluntary

or involuntary dissolution, liquidation or winding-up of the Company;

 

the Company shall mail to each holder of Warrants at

its address appearing on the Warrant Register as promptly as possible but in

any event at least ten (10) days prior to the applicable date hereinafter

specified, a notice stating (x) the date on which a record is to be taken for

the purpose of such dividend, distribution or rights or warrants, or, if a

record is not to be taken, the date as of which the holders of Common Stock of record

to be entitled to such dividend, distribution or rights are to be determined,

or (y) the date on which such reclassification, consolidation, merger, sale,

transfer, dissolution, liquidation or winding-up is expected to become

effective or occur, and the date

 

19

 

as of which it is expected that holders of Common Stock of record shall

be entitled to exchange their Common Stock for securities or other property

deliverable upon such reclassification, consolidation, merger, sale, transfer,

dissolution, liquidation or winding-up. 

Failure to give such notice, or any defect therein, shall not affect the

legality or validity of such dividend, distribution, reclassification,

consolidation, merger, sale, transfer, dissolution, liquidation or winding-up.

 

Section 12.           Lost,

Stolen, Mutilated or Destroyed Warrants. 

If this Warrant is lost, stolen, mutilated or destroyed, the Company

shall promptly, on receipt of an indemnification undertaking or other form of

security reasonably acceptable to the Company (or in the case of a mutilated

Warrant, the Warrant), issue a new Warrant of like denomination and tenor as

this Warrant so lost, stolen, mutilated or destroyed.  Notwithstanding the foregoing, if this Warrant is lost by, stolen

from or destroyed by the original holder hereof, the affidavit of such original

holder setting forth the circumstances of such loss, theft or destruction shall

be accepted as satisfactory evidence thereof, and no indemnification bond or

other security shall be required by the Company as a condition to the execution

and delivery by the Company of a new Warrant to such original holder other than

such original holder’s unsecured written agreement to indemnify the Company

solely for losses actually incurred by the Company as a direct consequence of

the loss, theft or destruction of the Warrant.

 

Section 13.           Notice.  Any notices, consents, waivers or other

communications required or permitted to be given under the terms of this

Warrant 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. 

If notice is to be sent to the Company, the holder shall use its

reasonable best efforts to provide additional copies to the individuals listed

below; provided, however, that the failure of such holder to send such

additional copies shall in no way limit the effectiveness of any notice sent to

the Company to the attention of Chief Financial Officer as provided for

below.  The addresses and facsimile

numbers for such communications shall be:

 

20

 

	

  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

  
	

   

  
	

  with a copy to:

  
	

   

  	

  Hale and Dorr LLP

  
	

   

  	

  60 State Street

  
	

   

  	

  Boston, Massachusetts

  
	

   

  	

  Telephone:

  	

  (617) 526-6000

  
	

   

  	

  Facsimile:

  	

  (617) 526-5000

  
	

   

  	

  Attention:

  	

  John A. Burgess, Esq.

  
	

   

  
	

  If to the Transfer

  Agent:

  
	

   

  	

  American Stock Transfer

  & Trust Company

  
	

   

  	

  59 Maiden Lane

  
	

   

  	

  New York, NY  10038

  
	

   

  	

  Telephone:  (718) 921-8293

  
	

   

  	

  Facsimile:  (718) 921-8334

  
	

   

  	

  Attention:  Isaac Kagan

  

 

If to a holder of this Warrant, to it at the address

and facsimile number set forth on the Schedule of Buyers to the Securities

Purchase Agreement, with copies to such holder’s representatives as set forth

on such Schedule of Buyers, or at such other address and facsimile as shall be

delivered to the Company upon the issuance or transfer of this Warrant.  Each party shall provide five days’ prior

written notice to the other party of any change in address or facsimile

number.  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

nationally recognized overnight delivery service shall be rebuttable 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.

 

Section 14.           Amendments.  This Warrant and any term hereof may be

amended, changed, waived, discharged, or terminated only by an instrument in

writing signed by the Company and holders of a majority of Warrant Shares

represented by all Warrants.  Such

amendment, change, waiver, discharge or termination shall be binding on the

Company and all of the Warrant holder’s assignees and transferees; provided,

however, that no such action may increase the Exercise Price or decrease the

number of shares or class of stock issuable upon exercise of any Warrants

without the written consent of the holder of such Warrant.  No waivers of any term, condition or

provision of this

 

21

 

Warrant in any one or more instances shall be deemed to be or construed

as a further or continuing waiver of any such term, condition or provision.

 

Section 15.           Governing

Law; Jurisdiction; Jury Trial.  The

corporate laws of the State of Delaware shall govern all issues concerning the

relative rights of the Company and its shareholders.  All other questions concerning the construction, validity, enforcement

and interpretation of this Warrant 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 Warrant 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 Warrant shall be invalid or unenforceable in any jurisdiction, such

invalidity or unenforceability shall not affect the validity or enforceability

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

enforceability of any provision of this Warrant 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.

 

Section 16.           Descriptive

Headings.  The headings of this Warrant

are for convenience of reference only and shall not limit or otherwise affect

the meaning hereof.

 

22

 

IN WITNESS WHEREOF, the Company has caused

this Warrant to be duly executed as of day and year first above written.

 

	

   

  	

  “COMPANY”

  
	

   

  	

   

  
	

   

  	

  MANUFACTURERS’ SERVICES LIMITED

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

  By:

  	

   

  
	

   

  	

  Its:

  	

   

  

 

S-1

 

EXHIBIT A

TO WARRANT

 

FORM

OF EXERCISE NOTICE

 

The undersigned holder hereby exercises the right to

purchase

                              

of the shares of Common Stock (“Warrant Shares”) of MANUFACTURERS’ SERVICES

LIMITED, a Delaware corporation (the “Company”), evidenced by the attached

Warrant (the “Warrant”).  Capitalized

terms used herein and not otherwise defined shall have the respective meanings

set forth in the Warrant.

 

1.               Form of Exercise

Price.  The Holder intends that

payment of the Exercise Price shall be made as:

 

o                                  “Cash Exercise” with

respect to

                  

Warrant Shares; and/or

 

o                                  “Cashless Exercise”

with respect to

            

Warrant Shares (to the extent permitted by the terms of the Warrant).

 

2.               Payment of

Exercise Price.  In the event that

the holder has elected a Cash Exercise with respect to some or all of the

Warrant Shares to be issued pursuant hereto, the holder shall pay the sum of

$                      

to the Company in accordance with the terms of the Warrant.

 

3.               Delivery of

Warrant Shares.  The holder of this

warrant has sold or will sell the shares of common stock issuable pursuant to

this Notice pursuant to a registration statement or an exemption from

registration under the Securities Act of 1933, as amended.

 

4.               Private

Placement Representations.  The

holder of this Warrant confirms the continuing validity of, and reaffirms as of

the date hereof, its representations and warranties set forth in Section 7

of the Warrant.

 

	

  Date:                               ,

  	

   

  	

   

  
	

   

  	

   

  
	

   

  	

   

  	

   

  
	

  Name of Registered

  Holder

  	

  Tax ID of Registered

  Holder

  
	

   

  	

  (if applicable)

  
	

   

  	

   

  
	

   

  	

   

  
	

  By:

  	

   

  	

   

  	

   

  
	

  Its:

  	

   

  	

   

  	

   

  
					

 

A-1

 

ACKNOWLEDGMENT

 

The Company hereby acknowledges this Exercise Notice

and hereby directs American Stock Transfer & Trust Company to issue the

above indicated number of shares of Common Stock in accordance with the

Irrevocable Transfer Agent Instructions dated July 3, 2003 from the Company and

acknowledged and agreed to by

[                           ].

 

	

   

  	

  MANUFACTURERS’ SERVICES LIMITED

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

  By:

  	

   

  
	

   

  	

  Its:

  	

   

  

 

A-2

 

EXHIBIT B

TO WARRANT

 

FORM

OF ASSIGNMENT

 

FOR VALUE RECEIVED, the undersigned does hereby assign

and transfer to

                                  ,

Federal Identification No.

                      ,

a warrant to purchase                        

shares of the capital stock of MANUFACTURERS’ SERVICES LIMITED, a Delaware

corporation, represented by warrant certificate no.

            ,

standing in the name of the undersigned on the books of said corporation.  The undersigned does hereby irrevocably

constitute and appoint

                                ,

attorney to transfer the warrants of said corporation, with full power of

substitution in the premises.

 

	

  Dated:                           , 200

  	

   

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

  By:

  	

   

  
	

   

  	

  Its:

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