-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PcZE5RyJr76LBFFkpoocwvvHU85F3IAGbLZxHrCEs3UQ2JnLYLnW3lINrFk+ki1J 8UXUuoAV8acru5mKrR3rtQ== 0000950124-96-005283.txt : 19961202 0000950124-96-005283.hdr.sgml : 19961202 ACCESSION NUMBER: 0000950124-96-005283 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 19 CONFORMED PERIOD OF REPORT: 19960831 FILED AS OF DATE: 19961127 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: NORAND CORP /DE/ CENTRAL INDEX KEY: 0000886034 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER COMMUNICATIONS EQUIPMENT [3576] IRS NUMBER: 421323151 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-20060 FILM NUMBER: 96674120 BUSINESS ADDRESS: STREET 1: 550 SECOND ST S E CITY: CEDAR RAPIDS STATE: IA ZIP: 52401 BUSINESS PHONE: 3193693100 10-K 1 FORM 10-K DATED AUGUST 31, 1996 1 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------------ FORM 10-K
(MARK ONE) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED AUGUST 31, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 COMMISSION FILE NUMBER 0-20060
NORAND CORPORATION (Exact name of registrant as specified in its charter) DELAWARE 42-1323151 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 550 SECOND STREET S.E. CEDAR RAPIDS, IOWA 52401 (Address of principal executive offices) (Zip Code)
(319) 369-3100 (Registrant's telephone number including area code) Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: COMMON STOCK, $.01 PAR VALUE (Title of Class) Indicate by check mark whether the registrant(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes X No ___ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] The aggregate market value of the voting stock held by non-affiliates of the registrant as of November 8, 1996, based on the last reported sale price on that date on the Nasdaq National Market of $17.75 per share: COMMON STOCK-$.01 PAR VALUE-$132,611,777* Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of November 8, 1996. COMMON STOCK-$.01 PAR VALUE-7,664,621 SHARES * Based on reported beneficial ownership by all directors and executive officers of the registrant; however, this determination does not constitute an admission of affiliate status for any of these individual stockholders. Page 1 of . Exhibit index at page . - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 PART I ITEM 1. BUSINESS COMPANY OVERVIEW Norand Corporation, a Delaware corporation, was organized in 1988 as the successor to a business established in 1968. In February 1993 Norand completed an initial public offering of 4,025,000 shares of its common stock. Norand's principal executive office is located at 550 Second Street Southeast, Cedar Rapids, Iowa 52401. Norand's telephone number is (319) 369-3100. Unless the context indicates or requires otherwise, references in this Form 10-K to "Norand" or the "Company" are to Norand Corporation and its subsidiaries. Norand designs, develops, manufactures, markets and services mobile computing systems and wireless data communication networks using radio frequency technology. These systems automate the collection, processing and communication of information related to product sales and distribution, inventory control and warehouse data management. Norand systems include hand-held computers and radio frequency terminals as well as a variety of other hardware devices; application-specific software; communication networks; systems integration and support services; and related peripheral items including portable printers and bar code scanning devices. Norand has continued to invest in a variety of enabling technologies (such as application software and network communications systems) that support its systems solution approach. Norand has spent over $120 million on product development and engineering expenses since October 1988 to transform the Company from a hardware product-oriented company to an integrated systems solutions provider. MARKETS Mobile Computing Systems The mobile computing systems market consists of several applications, such as: route accounting, sales merchandising, remote delivery and field service. These applications are used in the consumer products, food, beverage, wholesale, parcel delivery, freight, field service and home service industries. Route accounting involves concurrent order taking, product delivery and inventory tracking. Salespeople use Norand's systems to enter customer orders into hand-held computers which use Norand portable printers to generate invoices that are left with the customers' orders at their retail locations. At the end of a route delivery day, information stored in hand-held computers is electronically transferred to host information systems, and instructional and control information for the next day's routes is downloaded back to the hand- held computers. Field service applications are similar to route accounting applications. A service is delivered instead of products. For example, Norand computers are used as productivity tools in the pest control industry to keep track of sales activity and service delivery. Sales merchandising applications pertain to suppliers, primarily in the food and consumer product industries, who gather information regarding comparative sales and administer sales promotions at the retail level. Information gathered is also used to reconcile inventory and product deliveries with cash collections. Remote delivery applications are similar to route accounting applications; however, products are not immediately delivered to customers as they are in route accounting applications. Rather, order information is entered into portable hand-held computers and later transferred to host information systems. This information is used to produce master schedules, pick lists, shipping instructions and invoices. Radio Frequency Systems The radio frequency ("RF") systems market is comprised of manufacturing, warehousing and distribution center and retail applications. Norand focuses on the use of RF technology and bar code scanning in its 2 3 systems targeted for this market which requires real-time information exchange and processing. Manufacturing applications include the collection and communication of information related to receipt of materials, work-in-progress, finished goods inventory and other functions throughout the manufacturing process. Warehousing and distribution center applications involve the collection and communication of information related to receiving materials to be stored, storage locations, materials retrieval and shipping. Retail applications include the automation of price verification, shelf label maintenance and product receiving functions. International International sales opportunities exist in countries where mobile computing systems market practices and other applications are similar to the U.S. Opportunities within the food and beverage industries exist in Canada, Mexico, South America, Australia and Europe. Additional opportunities exist to service the international operations of Norand's multi-national U.S. customers. The extent of RF systems opportunities in any particular country is based on the level of industrialization, the status of bar coding implementation and the RF regulatory environment. PRODUCTS AND SYSTEMS Norand has developed a broad line of products and systems for the mobile computing systems and RF systems markets. Norand systems generally combine applications-specific software, data communication networks, portable and mobile key-pad and pen-based hand-held computers, portable and mobile printers, bar code scanning devices and related peripheral equipment. Norand's current product development efforts include advanced communication networks, further integration of RF technology, application software development technologies, advances in portable computers and automatic identification technology integration. Mobile Computing Systems The principal components of a typical Norand mobile computing system incorporate industry application-specific software such as Route-commander(R) programs for automating route accounting, data communication networks with integrated battery charging docks, hand-held computers, portable and mobile printers for printing invoices at the delivery location and related peripheral equipment. Remote delivery, sales merchandising and field service systems typically include applications-specific software, remote communications components, such as modems, hand-held computers and receipt or label printers. Applications-Specific Software. Applications-specific software modules are designed for salespeople or specific operations. Remote user applications, such as the Route-commander(R) application, include complex unit pricing, promotion schedules, invoice printing, inventory tracking and reallocation, truck routing, sales histories, cash reconciliation, exception reporting, load control, product forecasting and route control functions. Remote site applications include file and data management, communications control and consolidated results reporting. Many of Norand's application software programs are industry specific as well as customer specific. Data Communications Networks. A sophisticated communication controller with an integrated battery charging dock provides network interfaces, communication control and the overnight charging of hand-held computer batteries. Communications sessions may be run simultaneously with each docked computer, multiple depots and the customer's host information systems. Hand-Held Computers. Each system typically includes hand-held computers that incorporate microprocessors, memory (SRAM, DRAM, and ROM), displays, keyboards, battery packs and power management circuitry. The system also includes operating system programs and software that tailor the data collection, retrieval and mobile computing capabilities to the specific application. The computer is contained 3 4 in a rugged, ergonomically designed case which fits conveniently in the user's hand and is designed to withstand heavy industrial use. Portable and Mobile Printers and Peripheral Equipment. Portable and mobile printers are an integral part of Norand's system configurations and include a variety of technologies. Norand printers are designed to accommodate special applications and environmental demands, such as vehicular power surges and exposure to moisture and extreme temperatures. Other peripheral equipment includes sophisticated two-way controllers, modems and unique, applications-specific packaging. Radio Frequency Systems Typical RF systems include data communication networks using wireless system networks, host and distributed network links, rugged hand-held and mobile computers and applications-specific peripheral equipment. Customers in the RF systems market use Norand systems in manufacturing, warehousing and distribution center and retail applications, each of which typically requires real-time interactive information exchange. The information flow facilitated through such networks can help improve workforce allocation, inventory accounting, order filling and process management by automating order processing, materials movement, and logistics. Data Communication Networks. Norand's data communication and wireless networking expertise allows for the design and implementation of expandable and scaleable systems that seamlessly integrate with customers' existing host information networks. Norand designs wireless networks that maximize data throughput and performance, and emphasize fault tolerance and data integrity. These capabilities are accomplished through sophisticated protocols, communication software layers, industry standard interfaces, communications hardware and integrated RF data radios. The requirements and sophistication of Norand networks increase with greater demand for data transfer speed, reliability, mobility and fault tolerance of these increasingly mission critical applications. Host and Distributed Network Links. The wireless communications link with hand-held computers uses radio base stations/access points and controllers, which, for smaller systems, may be integrated into a single unit. A base station converts the radio signals received from terminals to digital signals recognizable by the host information system. A base station also converts data generated by the host information system to radio signals for transmission to the hand-held computers. Norand offers a range of base station radio hardware that may be distributed throughout a facility to enable communications with a large number of hand-held computers. These products enable Norand to provide reliable radio coverage of both small and very large areas and/or multiple buildings. Norand radio products include products used in wide area communication network applications such as field sales automation. Norand base stations and hand-held computers incorporate radios designed or selected by Norand to meet its specifications. The radio component is either purchased from external sources or manufactured by Norand. Because Norand designs its own radios, it is able to produce radios with low power usage and size configurations that permit the radios to be physically integrated into terminal units rather than being separately packaged. This is important for customers who require special radio designs to meet applicable country regulatory requirements. Norand communications controllers provide RF network management in addition to offering an interface to various customer host computer networks. Norand networks are designed to provide connectivity to all industry standard host information system architectures, including IBM's 3270 and 5250 terminal emulation protocols, DEC's VT 220 and Ethernet connections employing TCP/IP protocols used in non-IBM host networks. Through multiple layers of communications protocol support, Norand network controllers handle numerous linkages with intelligent base stations, communication docks, portable computers and additional system nodes creating an advanced network that maximizes speed, coverage and network availability. Norand systems communicate and interface with multiple host information systems and provide for remote diagnostics access. Norand's RF systems utilize both UHF and spread spectrum radio technologies ("SST"). Narrow- 4 5 band UHF systems have system cost and coverage range advantages. SST-based systems offer faster data transfer speed advantages and do not require special site licensing. Hand-Held and Mobile Computers and Application-Specific Peripheral Equipment. Norand systems include rugged hand-held and vehicle-mounted computers that incorporate microprocessors, integrated RF data radios, memory, displays, keyboards, integrated bar code scanners and power management circuitry. Mobile terminals typically draw their power from forklifts, high lifts, or other mobile materials handling equipment on which they are mounted. Cases and mounting hardware are designed for extremely harsh environments including forklift and other mobile platform vibrations. Hand-held computers contain their own rechargeable, replaceable battery. Applications-specific peripheral equipment includes industrial bar code scanners, bar code printers, battery pack chargers and large displays for forklift operations. CUSTOMERS Norand markets its mobile computing and RF systems primarily to medium-size and large corporations worldwide. No single customer accounted for 10% or more of Norand's product revenues in any of the last three fiscal years. SALES AND MARKETING Norand sells and distributes its systems and products worldwide through multiple channels. Norand uses three sales and distribution channels: a direct field sales force which concentrates on large, complex systems sales; value added resellers ("VARs") that offer applications-specific solutions; and major systems integrators, such as IBM, that market Norand's products. Each channel adds value to the sales and installation process by assisting in the design and integration of Norand systems at the end user level. Regardless of the channel, the integration of a successful system requires definition of end user requirements, specification of interfacing and system connections, network integration and radio network coverage considerations, careful project management and, in many mobile applications, development of application software. The direct sales force manages the activities of all distribution channels, typically on both a geographic and an application-specific vertical market basis. Direct Field Sales Force As of October 31, 1996, Norand had 197 employees in its worldwide field sales group. The direct sales organization focuses on selling to major accounts and supporting systems integrators and VARs. Included in this organization are sales executives, systems engineers and major account project managers, who work in teams to define customer requirements and install and implement systems that are customer specific. The sales force is organized into segments that correspond to Norand's major target markets. Field sales force responsibilities include pre-sales efforts, system installation and implementation, and post-sales support. In North America, Norand has field sales offices in 14 cities in the United States, Canada, and Mexico. Additionally, Norand has field sales and support offices in the United Kingdom, Germany, Spain, Italy, the Netherlands, Denmark, Sweden and Australia. Value Added Resellers and System Integrators Norand products are distributed through a select group of VARs and system integrators that provide value to sales, system integration, installation and software support. Norand selects VARs based on their application knowledge, systems and technical expertise, financial resources, support capabilities, ability to provide complete systems to a specific market segment, reputation and dedication to customer satisfaction. Norand sells through approximately 240 active VARs. No single VAR accounted for more than 5% of Norand's sales in 1996. 5 6 International Sales Channels International sales channels include a direct sales force with offices in Australia, Canada, Denmark, Germany, Italy, Mexico, Netherlands, Spain, Sweden and the United Kingdom, and VARs in Argentina, Australia, Finland, Greece, Hong Kong, Japan, Spain, Venezuela and the Benelux countries. Norand is continuing to invest in international markets by expanding sales channels, modifying products to fit country requirements and providing local service and support. In 1996, approximately 28% of Norand's revenues were attributable to international sales (including export sales) compared with 31% of revenues attributable to such sales in 1995. See Note 14 of Notes to Consolidated Financial Statements. SERVICE AND SUPPORT Norand emphasizes quality customer service and support with approximately 231 employees dedicated to these functions at Norand's thirteen service facilities. Norand maintains an extensive field service organization, as well as an internal support staff in Cedar Rapids, Iowa. Assistance is available to Norand customers 24 hours a day, seven days a week. Norand typically offers industry-standard 90 day to one year warranties and offers several flexible service arrangements to meet customer needs. The majority of Norand's service agreements are one-year renewable contracts. In addition to technical support of installed systems, Norand's Systems Integration and Support Services Group provides pre-installation site surveys, installation services, user training, technical training, application software support and host information system integration services under a variety of billing options. Significant, on-going investment is directed toward improving customer support capabilities and responsiveness. Norand has implemented an automated call response center (i.e., help desk) that features direct and remote diagnostic access capabilities. QUARTERLY TREND IN OPERATING RESULTS Historically, Norand has experienced a trend in its operating results in which the fourth quarter contributes the highest total revenues and operating income. In the fiscal years ended August 31, 1994, 1995 and 1996 the fourth quarter represented approximately 32%, 27% and 29% of revenues, respectively. In the fiscal year ended August 31, 1994, fourth quarter operating income amounted to approximately 45% of operating income for the year. See Management's Discussion and Analysis of Financial Condition and Results of Operations and Notes 2 and 15 of Notes to Consolidated Financial Statements regarding the operating loss in the fourth quarter of 1995, and operating income in the fourth quarter of 1996. Norand believes that the above trend of sales and earnings, which shows the importance of the fourth quarter, results mainly from the historical structure of Norand's sales programs combined with the timing of new product introductions and resulting customer orders. Norand can provide no assurance that this trend will improve in the future. Norand believes that quarterly, period to period comparisons of its financial results are not necessarily meaningful and should not be relied upon as an indication of future performance. Product and System Development Norand believes that its future results depend, in part, on its ability to develop new products and enhance the capabilities and features of its existing products. Norand has spent $17.0 million, $19.5 million and $18.5 million in fiscal years 1994, 1995 and 1996, respectively, on research and development. Norand's current development efforts include projects related to advanced wired and wireless network and communication systems, object-oriented software libraries, modular terminal devices, and innovative peripheral devices. It is not certain, however, that any particular development project will result in products or product improvements that achieve commercial acceptance. Norand continues to emphasize new product and system development as a key element of its business strategy. Norand was one of the first companies to develop and market the following systems and products: bar code scanning with hand-held batch terminals (mid-1970s); two-way programmable hand-held computers (late 1970s); route accounting systems (late 1970s); charged coupled device ("CCD") hand-held scanners 6 7 (early 1980s); integrated hand-held RF systems (mid-1980s); rugged, portable, AC/DC powered printers (late 1980s); rugged "pick and run" RF systems (late 1980s); pocket RF systems (early 1990s); pen-based portable systems (1994); and full VGA screen, rugged portable systems (1995). Norand emphasizes concurrent engineering practices in product development by involving all aspects of the product development and manufacturing processes, including engineering, manufacturing, suppliers and marketing. MANUFACTURING AND SUPPLIERS Norand's manufacturing operation is responsible for final assembly of products, subassembly of certain components, system level quality assurance and materials movement and product logistics. The production workforce is organized into multi-skilled, product specific, self-directed work teams. Just-in-time manufacturing methodologies are utilized throughout the operation to build product to specific customer orders as received. Norand's internal information systems track and plan the availability of materials and manpower. In addition, Norand utilizes bar code and scanner technology and Norand's own RF networks and terminals to stage and track customer shipments. Norand also tracks all phases of the production process from supplier defects to product defects at the customer site. This information helps Norand systematically identify and eliminate such defects. In addition, Norand is in the process of strengthening its internal information systems through the implementation of the SAP business systems software package. The SAP system will provide a worldwide, integrated set of business applications including customer order entry, manufacturing and financial systems. Configuration of the SAP system began in the first quarter of fiscal year 1996. During the fourth quarter of 1996, the financial and procurement functions of the Company began processing information and transactions in the new system. The Company expects to complete its world-wide implementation of SAP in fiscal 1997. Norand has developed relationships with high quality suppliers which enable the Company to route many incoming components directly to stock without inspection, thereby reducing cost and cycle time. Currently about 20 suppliers provide approximately 45% of the dollar volume of components purchased. Single source subassembly manufacturers are used for such components as printed circuit boards and molded outer case parts. EMD Associates, Inc., Electronic Assembly Corporation, and Celestica, Inc. are the Company's principal suppliers of printed circuit boards and other electronic components. PSC, Inc. and Symbol Technologies, Inc. ("Symbol") are the Company's principal bar code scanner suppliers. Epson America, Inc. is a primary supplier to the Company of printer mechanisms, liquid crystal displays, and PCMCIA products. Symbol owns certain patents relating to integrated laser scanning terminals and has licensed several companies, including Norand, to produce and sell integrated laser scanning terminals covered by the licensed patents in a certain field of use as defined in the license agreement. Norand's license agreement with Symbol permits Symbol to terminate Norand's license upon a change of control of Norand unless (1) Norand pays a transfer fee to Symbol equal to the higher of 10% of that portion of the consideration received in the sale of control of Norand that is attributable to technology covered by the license agreement or $500,000 and (2) Norand and each entity having beneficial ownership of more than 50% of Norand's voting securities or otherwise actually controlling Norand, maintains its headquarters and base operations and organizations in North America or Western Europe. For purposes of this license agreement, a change of control occurs when an entity that was not a shareholder on the date of the license agreement becomes the beneficial owner of 20% or more of Norand's voting securities outstanding on the date of the change in control or otherwise acquires control of Norand's operations. Unless earlier terminated, the agreement continues until the last to expire of the licensed patents. Symbol may terminate the agreement if Norand materially breaches the agreement or a change of control of Norand occurs. The license agreement is non-transferable (except in certain limited situations) and non-exclusive. Certain of Norand's key suppliers are linked electronically with Norand's materials resource planning system for immediate access to forecast information. Norand believes that by forming long-term relationships with suppliers that share Norand's commitment to quality, it has been able to increase product quality and 7 8 improve order response time and reduce inventory carrying costs. Norand does not believe that the loss of any one supplier or subassembly manufacturer would have a material long-term adverse effect on its business, although set-up costs and delays would occur if Norand changed any single source supplier. Norand has not experienced any substantial delays in product shipments due to delays in receipt of components. BACKLOG Norand generally operates without a significant backlog of firm orders and it does not consider backlog to be a significant measure of future sales. COMPETITION The market for Norand's products is highly competitive and rapidly changing. Some firms manufacture and market hand-held systems for route accounting applications, including Telxon Corporation and Fujitsu Systems of America. In addition, a number of firms manufacture and market radio-linked data communication products, including LXE Inc., Teklogix Corporation, Symbol Technologies, Inc., Telxon Corporation and Intermec (a division of Western Atlas). Some of these firms have greater financial, marketing and technical resources than Norand. In addition, larger corporations could enter these markets. Norand competes on the basis of its open modular systems approach, network and communications expertise, applications software, level of sales and support services, and product functionality, performance, ruggedness and overall quality. INTELLECTUAL PROPERTY Norand regards some of its product offerings as proprietary and relies on a combination of patent, trade secret, copyright and trademark law to establish and protect its proprietary rights. While some proprietary rights are protected in various foreign countries, primary emphasis has been placed on protection in the United States. The laws of some foreign countries do not protect Norand's proprietary rights to the same extent as do the laws of the United States. As of August 31, 1996, Norand has in force 124 U.S. patents and 22 foreign patents. The expiration dates of the U.S. patents range from June 1998 to September 2014. The expiration dates of the foreign patents range from April 2000 to February 2013. Norand is of the opinion that, in view of the rapid pace of technological change in the industry, the combination of trade secrets and the technical experience and innovative skills of its engineers may be as important to its business as the legal protection of its patents and other intellectual property rights. Norand believes that its products and trademarks do not infringe on the rights of third parties. There can be no assurance, however, that third parties will not assert infringement claims in the future. Norand holds certain patents relating to CCD technology. CCD technology is an important alternative to laser scanning technology in some bar code reading applications. Norand does not presently manufacture CCD or laser bar code scanning devices, but purchases such devices for resale from unrelated third parties. Sales of CCD bar code scanning devices have not been material to Norand's operations. Norand continues to invest in its portfolio of intellectual properties. During fiscal years 1996, 1995 and 1994 expenditures capitalized for software, patents and intellectual properties were approximately $2.9 million, $5.4 million and $2.8 million, respectively. As part of its activities to enforce its intellectual property rights, Norand has licensed third parties in exchange for license payments and is in discussions with others regarding similar licenses under Norand's intellectual property rights. EMC Corporation ("EMC"), a manufacturer of RAID removable disk storage systems, brought suit in January 1995 in the United States District Court for the District of Massachusetts, seeking declaratory judgment that EMC did not infringe upon Norand's patents on removable hard-drives. The District Court in August 1995 declined to hear the case on jurisdictional grounds, and in September 1995 EMC appealed the judgment to the United States Court of Appeals for the Federal Circuit (CAFC). In July, 1996, the CAFC affirmed the District Court decision. EMC has filed a Writ of Certiorari with United States Supreme Court seeking review of the CAFC decision. 8 9 EMPLOYEES As of October 31, 1996, Norand had 931 full-time employees. Of these employees, 230 are engaged in sales and marketing, 231 in service and customer support, 59 in applications software development, 122 in engineering, 169 in manufacturing and 120 in administrative functions. Norand, on occasion, employs part-time personnel for production, technical and clerical positions. Norand believes that its relationship with its employees is good. GOVERNMENTAL REGULATION Radio emissions are the subject of governmental regulation in all countries in which Norand currently conducts business. In North America, both the Canadian and the United States governments publish relevant regulations, and changes to these regulations are made only after public discussion. In some countries regulatory changes can be introduced with little or no grace period for implementing the specified changes. Furthermore, there is little consistency among the regulations of various countries outside North America, and future regulatory changes in North America are possible. These conditions introduce uncertainty into the product planning process and could have an adverse effect on Norand. The European Community ("EC") has passed a directive requiring members of the EC to adopt laws relating to electro-magnetic compatibility and emissions standards. EC directives do not instantly become law in member countries, rather member countries introduce new laws, or amend existing laws in order to be in compliance with directive objectives. These standards will apply to Norand products sold in EC member countries as those countries adopt the EC standards into law. Currently, Norand believes that its products are in material compliance with the regulations in force in each of the EC member countries. ITEM 2. PROPERTIES Norand's principal administrative, marketing, engineering and manufacturing facilities consist of approximately 232,000 square feet in Cedar Rapids, Iowa. Norand owns its corporate office (approximately 88,000 square feet) and leases its manufacturing facility (96,000 square feet), its new product development center (32,000 square feet) and additional office space (16,000 square feet). These lease agreements expire in 1999, 2001 and 1998, respectively. The annual base rent for the Cedar Rapids area leased facilities is approximately $1.1 million. Norand leases sales offices in 13 U.S. cities. These offices are located in the metropolitan areas of Atlanta, Baltimore, Charlotte, Chicago, Dallas, Denver, Detroit, Los Angeles, Minneapolis, Pittsburgh, San Francisco, Seattle, and Tucson. Norand operates ten wholly-owned subsidiaries internationally, located in Sydney, Australia; Toronto, Ontario, Canada; Reading, England; Milan, Italy; Dusseldorf, Germany; Madrid, Spain; Copenhagen, Denmark; the Netherlands; Stockholm, Sweden; and Mexico City, Mexico. Each of the subsidiaries occupies leased office and service maintenance space. Norand's five service and repair centers are located in Cedar Rapids, Iowa; Charlotte, North Carolina; Dallas, Texas; Los Angeles, California; and Toronto, Ontario, Canada. Norand also leases engineering and development offices in Boulder, Colorado and San Jose, California. Annual rental expense for such offices and service centers is approximately $1.8 million. Norand believes that its facilities are adequate for its current needs and that additional space would be available if required. ITEM 3. LEGAL PROCEEDINGS In October 1995, two class action complaints were filed against the Company and certain of its officers in United States District Court in Cedar Rapids, Iowa, seeking unspecified damages on behalf of a purported class of purchasers of Norand stock on the ground that the defendants violated the federal securities laws by allegedly making materially false and misleading statements concerning the Company's results of operations and future prospects during the period from March 20, 1995 until September 25, 1995. On November 24, 9 10 1995, a third lawsuit was filed in the same court raising substantially the same claims on behalf of a broader purported class of purchasers of Norand stock. All three lawsuits were consolidated under the caption In re Norand Corporation Securities Litigation (Master File No. C 95-323). On December 23, 1995, a single amended and consolidated complaint was filed in the consolidated action, superseding all previous pleadings. The complaint was filed on behalf of a purported class consisting of purchasers of Norand stock from September 26, 1994 through November 17, 1995, and named as defendants the Company, five of its present or former senior officers, and Arthur Andersen LLP, the Company's independent public accountant. The consolidated complaint alleged, among other things, that the Norand defendants materially overstated the Company's revenues and earnings by improperly recording sales in its Italian subsidiary and misled the market by failing to disclose alleged problems with certain of its products that affected its revenues in the fourth quarter of fiscal 1995. On August 28, 1996, the Company announced that it had signed an agreement to settle the consolidated complaint and secure releases for all of the defendants with the exception of Arthur Andersen. The Company believes its officers and directors acted properly regarding this matter and denies any wrongdoing. Nevertheless, the Company feels it is in the best interest of the Company and its shareholders to settle the matter and devote management time and energy to running the business. The settlement, which calls for the payment of $4.5 million in cash and $4.5 million worth of Norand stock, is subject to approval by the District Court, following notice to the class and a hearing on the fairness of the settlement. That hearing is scheduled for December 19, 1996. The cash portion of the settlement is covered by insurance. The Company has the option to pay $4.5 million in cash instead of issuing the stock. The settlement resulted in a fourth quarter charge of $4.8 million including additional legal costs related to the portion of the settlement not covered by insurance. The Company had previously accrued $0.3 million in the first quarter for related legal costs. The Company is also subject to certain legal proceedings and claims which have arisen in the ordinary course of its business and have not been finally adjudicated. In management's opinion, the ultimate resolution of these matters will not be material to the Company's consolidated financial position or results of operations. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS There were no matters submitted to a vote of Norand's security holders during the fourth quarter of 1996. 10 11 PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Norand common stock is traded on the Nasdaq Stock Market National Market under the symbol NRND. The following table sets forth the reported high and low sale prices per share of the common stock for each quarter during each of the two most recent fiscal years.
FISCAL 1996 FISCAL 1995 ---------------- ---------------- HIGH LOW HIGH LOW ------ ------ ------ ------ First Quarter................................. $43.25 $13.25 $40.75 $32.75 Second Quarter................................ 19.00 11.13 41.00 33.00 Third Quarter................................. 21.00 15.50 42.75 27.00 Fourth Quarter................................ 23.00 15.75 48.25 32.25
As of November 8, 1996, there were approximately 8,000 shareholders of the Company. The Company has never declared or paid cash dividends on the common stock. 11 12 ITEM 6. SELECTED FINANCIAL DATA The selected financial data concerning Norand have been derived from the consolidated financial statements of Norand and should be read in conjunction with the consolidated financial statements, including the notes thereto, and Management's Discussion and Analysis of Financial Condition and Results of Operations, each of which is included in this Form 10-K. NORAND CORPORATION SELECTED FINANCIAL DATA (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
YEAR ENDED AUGUST 31 ------------------------------------------------------------------------------- 1996 1995 1994 1993 1992 1991 1990 -------- -------- -------- -------- -------- -------- ------- STATEMENT OF OPERATIONS DATA: Revenues: Product sales revenue................. $193,249 $179,266 $153,653 $129,239 $ 91,205 $ 81,238 $72,032 Customer service revenue.............. 42,251 38,648 33,816 27,966 23,434 20,256 18,029 -------- -------- -------- -------- ------- ------- ------- Total revenues.................... 235,500 217,914 187,469 157,205 114,639 101,494 90,061 Cost of products and services(2)........ 141,744 127,816 96,139 83,342 57,380 50,310 45,161 -------- -------- -------- -------- ------- ------- ------- Gross profit...................... 93,756 90,098 91,330 73,863 57,259 51,184 44,900 Operating Expenses: Product development and engineering expenses............................ 22,898 22,408 20,554 16,242 12,221 11,955 10,018 Selling expenses...................... 58,347 55,160 44,503 32,811 27,035 22,994 19,767 General and administrative expenses... 17,006 15,006 12,868 11,606 9,678 8,272 6,960 Restructuring charge.................. 4,392 -- -- -- -- -- -- Amortization of intangible assets(3).... -- -- -- -- -- 19,148 5,925 Other income............................ -- -- -- -- -- (1,083) -- -------- -------- -------- -------- ------- ------- ------- 102,643 92,574 77,925 60,659 48,934 61,286 42,670 -------- -------- -------- -------- ------- ------- ------- Income from operations.................. (8,887) (2,476) 13,405 13,204 8,325 (10,102) 2,230 Interest and other expenses............. 6,256 3,482 1,437 3,666 4,846 5,463 5,233 Litigation settlement................... 5,100 -- -- -- -- -- -- -------- -------- -------- -------- ------- ------- ------- Income (loss) before income taxes....... (20,243) (5,958) 11,968 9,538 3,479 (15,565) (3,003) Provision (benefit) for income taxes.... (6,073) (2,252) 5,594 1,207 81 19 73 -------- -------- -------- -------- ------- ------- ------- Net income (loss)....................... $(14,170) $ (3,706) $ 6,374 $ 8,331 $ 3,398 $(15,584) $(3,076) ======== ======== ======== ======== ======= ======= ======= Net income (loss) per common share...... $(1.87) $(0.50) $0.86 $1.50 $0.51 $(25.67) $(6.95) ======== ======== ======== ======== ======= ======= ======= Weighted average number of common and common equivalent shares outstanding(4)........................ 7,573 7,458 7,445 5,652 3,436 669 666 ======== ======== ======== ======== ======= ======= ======= Balance Sheet Data: Working capital......................... $ (5,787) $ 14,777 $ 29,574 $ 28,283 $ 4,824 $ 9,234 $10,213 Total assets............................ 172,065 160,588 133,431 103,434 76,648 67,799 79,577 Long-term debt, net of current portion............................... -- -- -- 2,000 24,046 28,720 32,458 Series A preferred stock................ -- -- -- -- 15,534 13,891 12,295 Series B preferred stock................ -- -- -- -- 10,135 10,135 10,135 Stockholders' equity (deficit).......... 42,734 55,271 56,977 49,768 (23,858) (25,713) (8,539) YEAR ENDED AUGUST 31 ---------- PRO FORMA 1989(1)(2) ---------- STATEMENT OF OPERATIONS DATA: Revenues: Product sales revenue................. $ 68,278 Customer service revenue.............. 15,837 ------- Total revenues.................... 84,115 Cost of products and services(2)........ 46,267 ------- Gross profit...................... 37,848 Operating Expenses: Product development and engineering expenses............................ 9,608 Selling expenses...................... 16,785 General and administrative expenses... 6,450 Restructuring charge.................. -- Amortization of intangible assets(3).... 6,125 Other income............................ 1,428 ------- 40,396 ------- Income from operations.................. (2,548) Interest and other expenses............. 5,400 Litigation settlement................... -- ------- Income (loss) before income taxes....... (7,948) Provision (benefit) for income taxes.... 62 ------- Net income (loss)....................... $ (8,010) ======= Net income (loss) per common share...... $(14.79) ======= Weighted average number of common and common equivalent shares outstanding(4)........................ 628 ======= Balance Sheet Data: Working capital......................... $ 9,348 Total assets............................ 75,027 Long-term debt, net of current portion............................... 36,199 Series A preferred stock................ 12,020 Series B preferred stock................ 10,135 Stockholders' equity (deficit).......... (3,912)
- ------------------------- (1) Information for the year ended August 31, 1989 is a pro forma presentation of two months of predecessor operation and ten months of operations as Norand. (2) Cost of products and services for 1989 includes acquisition-related, non-recurring charges of $3.3 million representing the amount of fair market value over historical cost of beginning inventories. (3) In fiscal 1991, Norand revised its estimates of the remaining useful lives of certain intangible assets capitalized at the time of the acquisitions. These revisions had the effect of increasing amortization of intangible assets by $12.5 million for the fiscal year ended August 31, 1991. (4) Net income (loss) per share is calculated after deducting Series A preferred stock dividends and accretion from reported net income (loss) for fiscal years through 1993. For the years 1989 through 1991, primary earnings per share have been presented. For fiscal years 1992 through 1996, fully diluted earnings per share have been presented. For fiscal years 1992 and 1993, primary earnings per share were $1.56 and $1.81, respectively. For the loss periods, common stock equivalents that are anti-dilutive are not included in the computation of earnings per share. See Note 3 to Consolidated Financial Statements for a discussion of the calculation of net income per share. 12 13 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS SAFE HARBOR STATEMENT Except for the historical information contained herein, certain of the matters discussed in this annual report are "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995, which involve risks and uncertainties. Potential risks and uncertainties include, without limitation, continued pressures in the marketplace, the Company's ability to realize the benefits of the implemented restructuring of the Company, the future need for restructuring, the Company's ability to achieve increased revenues from new products and achieve lower operating expenses as a percentage of revenues, the Company's ability to obtain debt financing and maintain liquidity, and other factors that may effect future results as described below. Product shipments made during any particular quarter generally represent orders received either during that quarter or shortly before the beginning of that quarter. Shipments for orders received in a fiscal quarter are generally from products manufactured in that quarter. It is the Company's objective to maintain sufficient levels of inventories to facilitate meeting delivery requirements of its customers. However, there can be no assurance that during any given quarter, the Company has or can procure the appropriate mix of raw materials in order to accommodate any given order. The Company's financial performance in any quarter is dependent to a significant degree upon obtaining orders in that quarter which can be manufactured and delivered to its customers near the end of that quarter. As such, financial performance for any given quarter cannot be known or fully assessed until near the end of that quarter. A substantial portion of the Company's total revenues is from customers located outside of the United States. Foreign sales are subject to the normal risk of foreign operations such as global and regional economic conditions, trade protection measures, regulatory acceptance of the Company's products, longer accounts receivable collection patterns and other considerations peculiar to the conduct of international business. Additionally, the majority of the Company's foreign sales are billed in foreign currencies which are subject to fluctuations. The Company is subject to similar risks in its procurement of certain of its materials and components from foreign sources. Traditionally, the selling price of the Company's products decreases over the life of the product. The Company endeavors to reduce manufacturing costs of existing products and to introduce new products, functions and other price/performance-enhancing features in order to mitigate the effect of such decreases. To the extent that such cost reductions, product enhancements and new product introductions do not occur in a timely manner or do not achieve market acceptance, the Company's operating results could be materially, adversely affected. The business in which the Company is engaged is highly competitive and influenced by advances in technology, product improvements and new product introduction, and price competition. Failure to keep pace with product and technological advances could adversely affect the Company's competitive position and prospects for growth. There can be no assurance that the Company's research and development activities will lead to the successful introduction of new or improved products or that the Company will not encounter delays or problems in connection therewith. The cost of completing new technologies to satisfy customer design, quality and delivery expectations may exceed original estimates and could adversely effect operating profits during any financial period. There can be no assurance that newly designed technologies and products will ever result in volume production and shipments. In addition, products under development are frequently announced before introduction and such announcements may cause customers to delay purchases of existing products in anticipation of new or improved versions of those products. The Company seeks to protect its proprietary information and technology through reliance on contractual confidentiality provisions and the application of patent, trademark and copyright laws. There can be no assurance that such applications will result in the issuance of patents, trademarks or copyrights or that third parties will not seek to challenge, invalidate or circumvent such applications or resulting patents, trademarks 13 14 or copyrights. Moreover, competitors may independently develop equivalent or superior, non-infringing technologies which could adversely effect the Company's ability to market it's products and deliver revenue growth. Many of the Company's products incorporate technologies licensed from third parties. There can be no assurance that the Company will be able to license needed technologies in the future. Additionally, the Company believes that its products, processes and trademarks do not infringe on the rights of third parties, however, there can be no assurance that third parties will not assert claims of infringement of intellectual property rights against the Company and that such claims will not lead to litigation and/or require the Company to significantly modify or even discontinue sales of certain of its products. The Company has in the past, and may in the future, encounter shortages of supplies and delays in deliveries of necessary components from both domestic and foreign suppliers. While past shortages and delays have not had a material adverse effect on the Company, shortages and delays could have such effect in the future. Certain components, subassemblies and products are sourced from a single supplier or a limited number of suppliers. The loss of any such supplier may cause the Company to incur additional set-up costs and delays in manufacturing and delivery of products. Certain of the Company's products operate through the transmission of radio signals. These products are subject the regulation by the Federal Communications Commission of the United States and corresponding authorities in other countries. Currently, operation of such products in specified frequency bands does not require licensing by such regulatory authorities. Regulatory changes restricting the use of such bands or allocating frequencies could have a materially adverse effect on the Company's business and its results of operations. The Company procures certain components and subassemblies subject to long lead times and extended sales forecasts that may be affected by rapid technological obsolescence. The effect of technological obsolescence has resulted in previous material inventory writedowns and may result in future writedowns which could adversely effect results of operations. It is the Company's policy to depreciate specialized manufacturing equipment over its remaining useful life using the units of productions method and to evaluate the remaining life and recoverability of such equipment based on unit sales projections of underlying products. Given the rapid changes in technology, there can be no assurance that the Company's estimate that it will recover the carrying amount of this equipment from future operations will not change in the near term. The Company has recorded deferred tax assets totaling $17.8 million at August 31, 1996, which include $7.6 million of domestic net operating loss (NOL) carryforwards. Realization of the benefit of the NOL carryforwards is dependent on generating sufficient taxable income prior to the expiration of the loss carryforwards. Although realization is not assured, management believes it is more likely than not that all of the deferred assets will be realized. The amount of the deferred tax asset considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carryforward period are reduced. As a result of losses in fiscal 1995, the Company was not in compliance with certain covenants under its credit facility. Additionally, in November 1996, as a result of noncompliance with certain covenants due to losses recorded in fiscal 1996, the Company and its lenders amended its credit facility (see Note 7 to Consolidated Financial Statements). Although management believes that the Company will comply with the covenants under the amended facility, there can be no assurance that the Company will comply with any or all of the covenants under the amended credit facility in future periods. Future noncompliance with covenants under the amended credit facility could adversely impact the Company's ability to secure adequate borrowings at a reasonable cost to fund future operations and working capital requirements. As discussed in Note 2 to Consolidated Financial Statements, the Company recorded charges in its 1995 and 1994 financial statements related to irregularities discovered at its Italian subsidiary. Although management believes that the aggregate charges relating to the irregularities will not exceed the amounts already recorded, there can be no assurance that additional third party claims against the Italian subsidiary will not be 14 15 discovered in future periods which will result in further losses which could have an adverse financial impact on the Company. The Company has in the past and may in the future acquire businesses as a way of expanding its product offerings and acquiring new technology. Failure of the Company to identify future acquisition opportunities and/or to integrate effectively businesses that it may acquire could have a material adverse effect on the Company's growth. The Company's future depends in large part on the continued recruitment and retention of key technical, marketing and management personnel, particularly those highly skilled design, process and test engineers involved in the manufacture of existing products and the development of new products and processes. The competition for such personnel is intense, and the loss of key employees could have a materially adverse effect on the Company's business, financial condition and results of operations. In addition to factors described above, the Company's future financial results are subject to possible adverse effects of certain pending litigation as discussed in Note 13 of the Consolidated Financial Statements. OVERALL SUMMARY The Company had revenues of $235.5 million in 1996 compared to revenues of $217.9 million in 1995 and $187.5 million in 1994. Gross profit increased to $93.8 million in 1996 compared to $90.1 million in 1995 and $91.3 million in 1994. The Company recorded an operating loss of $8.9 million in 1996 compared to an operating loss of $2.5 million in 1995 and operating income of $13.4 million in 1994. The Company recorded a net loss of $14.2 million in 1996 compared to a net loss of $3.7 million in 1995 and net income of $6.4 million in 1994. The net loss in 1996 resulted primarily from the following factors: Decline in Gross Profit Percentages -- Gross profit percentages were 39.8% in 1996 compared to 41.3% in 1995 and 48.7% in 1994. The decrease in margin percentages in 1996 resulted from the Company's continued transition to its new products which carry lower margins than the products they replaced, combined with $2.4 million of inventory writedowns and $1.8 million of increased costs to enhance new and existing products. Restructuring Charge -- During fiscal 1996, the Company implemented a company-wide restructuring of its operations designed to improve its financial performance in the short and long-term. The restructuring resulted in a net pretax charge of $4.4 million. The charge has been partially offset by reduced core operating expense rates in the second half of fiscal 1996. Litigation Settlement -- During the fourth quarter of 1996, the Company signed a preliminary agreement to settle litigation brought against the Company and a number of present and former officers and directors. The settlement resulted in a $4.8 million pretax charge in the fourth quarter and a total $5.1 million pretax charge for the year. Other Operating Charges -- During fiscal 1996, the Company recorded provisions for bad debt losses of $3.8 million, additional professional fees of $0.7 million related to the Italian irregularities discovered during the fiscal 1995 audit and $0.7 million for post shipment costs relative to supporting customer installations of Norand products and systems. Increased Interest and Other Expenses -- Interest and other expenses were $6.3 million in 1996 compared to $3.5 million in 1995 as a result of higher average debt levels and higher interest rates. 15 16 RESULTS OF OPERATIONS The following table sets forth for the years indicated (i) certain revenue and expense items expressed as a percentage of revenues and (ii) the percentage increase or decrease of such items as compared to the corresponding prior year.
YEAR TO YEAR CHANGES PERCENTAGE OF REVENUE ---------------------- --------------------------- 1996 VS. 1995 VS. YEAR ENDED AUGUST 31 1996 1995 1994 1995 1994 - ---------------------------------------------- ----- ----- ----- -------- -------- STATEMENT OF OPERATIONS DATA: Revenues: Product sales revenue....................... 82.1% 82.3% 82.0% 7.8% 16.7% Customer service revenue.................... 17.9% 17.7% 18.0% 9.3% 14.3% ----- ----- ----- ----- ----- Total revenues........................... 100.0% 100.0% 100.0% 8.1% 16.2% Cost of products and services................. 60.2% 58.7% 51.3% 10.9% 32.9% ----- ----- ----- ----- ----- Gross profit............................. 39.8% 41.3% 48.7% 4.1% (1.3)% Operating expenses: Product development and engineering expenses................................. 9.7% 10.3% 10.9% 2.2% 9.0% Selling expenses............................ 24.8% 25.3% 23.7% 5.8% 23.9% General and administrative expenses......... 7.2% 6.8% 6.9% 13.3% 16.6% Restructuring charge........................ 1.9% -- -- -- -- ----- ----- ----- ----- ----- Total operating expenses................. 43.6% 42.4% 41.5% 10.9% 18.8% Income (loss) from operations............... (3.8)% (1.1)% 7.2% (258.8)% (118.5)% Interest and other expenses................... 2.7% 1.6% 0.8% 79.7% 142.3% Litigation settlement......................... 2.2% -- -- -- -- ----- ----- ----- ----- ----- Income (loss) before income taxes........... (8.6)% (2.7)% 6.4% (239.7)% (149.8)% Provision (benefit) for income taxes.......... 2.6% (1.0)% 3.0% 169.7% (140.3)% ----- ----- ----- ----- ----- Net income (loss)............................. (6.0)% (1.7)% 3.4% (282.2)% (158.1)% ===== ===== ===== ===== =====
REVENUES Revenues increased $17.6 million (8.1%) from 1995 to 1996 and $30.4 million (16.2%) from 1994 to 1995. Product revenues increased $14.0 million (7.8%) from 1995 to 1996 and $25.6 million (16.7%) from 1994 to 1995. The 1995 and 1996 increases in product revenues are primarily due to continued growth in established domestic and international markets supported by increased shipments of the Company's pen-based and wireless families of products. There were no material price increases in any year. Customer service revenue increased $3.6 million (9.3%) from 1995 to 1996 compared to an increase of $4.8 million (14.3%) from 1994 to 1995. Customer service revenue was 17.9%, 17.7% and 18.0% of total revenues for the fiscal years ended 1996, 1995 and 1994, respectively. Customer service revenue is relatively stable as a percent of total revenues and has increased each year due to continued growth in the Company's installed domestic and international customer base. International revenue, including exports, as a percent of total revenues, was 27.9% in 1996, 30.9% in 1995 and 22.1% in 1994. International revenue decreased 2.5% from 1995 to 1996, and increased 62.3% 1994 to 1995, respectively. The decrease in 1996 is due to decreased revenues in Canada offset by increased revenues in Europe, Mexico and Australia. GROSS PROFIT Gross profit as a percent of total revenues was 39.8% in 1996, 41.3% in 1995 and 48.7% in 1994. The decreases in gross profits in 1996 and 1995 are primarily due to lower margins in all markets due to competitive pricing pressures, combined with a continued shift in product mix to the new PEN*KEY family 16 17 of products which carry a lower margin than the products they replace. Additionally, margins in 1996 were adversely effected by inventory writedowns of $2.4 million, and $1.8 million of increased costs to enhance new and existing products. Margins in 1995 were affected by $3.8 million of charges related to the Company's Italian subsidiary, and additional provisions for sales returns and inventory obsolescence. OPERATING EXPENSES Product Development and Engineering. Norand increased its expenditures on product development and engineering by $0.5 million (2.2%) in 1996 and $1.9 million (9.0%) in 1995. Product development and engineering expenses were 9.7%, 10.3% and 10.9% of total revenues for fiscal years 1996, 1995 and 1994, respectively. The increases in expenditures are due primarily to continued development/enhancement of the PEN*KEY family of products as well as the open systems wired and wireless local area networks. The Company intends to continue making a significant investment in product development and engineering in the future. Selling. Selling expenses increased $3.2 million (5.8%) in 1996 and $10.7 million (23.9%) in 1995. The increase in 1996 is primarily due to increased domestic sales volume and increased post shipment costs relative to supporting customer installations of Norand's products and systems, offset by a $1.2 million decrease in provisions for bad debt losses. Provisions for bad debt losses in 1996 amounted to $3.8 million compared to $5.0 million in 1995. The decrease results primarily from a $3.5 million decrease in bad debt provisions recorded at the Company's Italian subsidiary offset by a $2.3 million increase in domestic bad debt provisions. The increase in 1995 selling expenses is primarily due to increased domestic and international sales volume, $3.5 million of increased provisions for bad debt losses recorded at the Company's Italian subsidiary, of which $3.0 million related to irregularities, and $1.0 million of increased domestic provisions for bad debt losses. Selling expenses as a percent of revenues were 24.8%, 25.3% and 23.7% in 1996, 1995 and 1994, respectively. General and Administrative. General and administrative expenses increased $2.0 million (13.3%) in 1996 and $2.1 million (16.6%) in 1995. The 1996 increase is primarily due to $0.7 million of additional professional fees related to the completion of the Company's Italian investigation, $1.2 million of increased costs relative to the development, amortization, maintenance and defense of the Company's intellectual properties, and $1.6 million of increased depreciation, personnel related and other expenses, offset by the 1995 costs recorded for irregularities in Italy. The 1995 increase is primarily due to $1.5 million of charges for severance costs, third party claims, and investigation costs applicable to the Company's Italian subsidiary. General and administrative expenses as a percent of revenues were 7.2%, 6.8% and 6.9% in 1996, 1995, and 1994, respectively. RESTRUCTURING During the second quarter of 1996, the Company initiated a company-wide restructuring of its operations and implemented actions designed to improve its financial performance in the short and long term. These actions were targeted at improving gross margins, significantly reducing operating expenses, enhancing the capability of launching and supporting new products and systems and improving financial controls. The actions that the Company undertook resulted in a second quarter restructuring charge of $5.2 million ($3.6 million after-tax). The restructuring charge was reduced by $0.8 million in the fourth quarter as a result of favorable experience compared to previous cost estimates. The restructuring charge included $3.7 million for severance and other costs related to reductions in the Company's domestic and international workforce and $0.7 million for lease exit costs associated with the closing or consolidating of certain facilities. As of August 31, 1996, approximately $1.6 million of the charge has not yet been expended. The Company expects to expend the remaining balance, comprised primarily of amounts due in installments under severance and lease agreements, in fiscal 1997. While this charge reduced net income, the Company believes that annual cost savings resulting from the restructuring will be in excess of these charges. The Company believes that the combination of increasing revenues along with the potential savings of the restructuring initiatives will continue to result in improved 17 18 financial results. However, no assurances can be given as to the actual extent of any savings or improvements that might be realized or that additional actions and additional charges against earnings might not occur in the future. The restructuring of the Company's operations will aid its transition to an open systems mobile computing company delivering local wireless and remote business solutions. The transition has required changes in the organization's size, structure and skill sets required to profitably operate in this new environment. The Company will continue to make critical sales channel and R&D investments to support its vertical market solutions strategy. The Company's actions have resulted in the achievement of the following objectives: - Reduction of core operating expense run rates - Increased efficiencies and coordination of development activities - Strengthened product and systems integration support through consolidation of resources - Strengthened procurement and logistics functions - Completion of the consolidation of the Company's world-wide sales and marketing organization - Improved financial controls. The actions were taken to improve both the short and long term performance of the business by creating a more effective marketing, sales and support organization, with ongoing investment in new products and more efficient manufacturing, procurement and logistics capabilities. INTEREST AND OTHER EXPENSES Interest and other expenses were $6.3 million in 1996, $3.5 million in 1995, and $1.4 million in 1994. The increases are due primarily to increased borrowings for financing the continued growth of the Company's foreign and domestic operations, borrowings resulting from the 1994 and 1995 losses in Italy and borrowings to finance the 1996 company-wide restructuring, combined with higher average interest rates. PROVISION FOR INCOME TAXES The Company recorded income tax benefits of $6.1 million in 1996 and $2.3 million in 1995 and an income tax provision of $5.6 million in 1994. The effective tax rate was 30.0% in 1996, 37.8% in 1995 and 46.7% in 1994. The income tax benefit for 1996 included a $2.3 million refund resulting from the Company's write-off, for tax purposes, of its net investment in its Italian subsidiary offset by a $2.8 million increase in the deferred tax asset valuation allowance and $1.2 million of additional reserves for taxes related to open years subject to examination. The income tax benefit for 1995 included a $1.9 million reduction of the deferred tax asset valuation allowance partially offset by a $1.3 million provision for additional reserves (primarily international) related to 1995. The Company has recorded a valuation allowance for certain foreign net operating losses and research and development tax credit carryforwards as it is uncertain that the Company will realize such benefits. NET INCOME The net loss of $14.2 million for 1996 was primarily due to restructuring, litigation, other operating charges and increased interest expenses offset by a net deferred tax benefit. The net loss of $3.7 million for 1995 was due primarily to fourth quarter domestic operating shortfalls, losses associated with the Company's Italian subsidiary and increased interest and other expenses, offset by a net deferred tax benefit. LIQUIDITY AND CAPITAL RESOURCES Cash provided by (used in) operations for 1996 was $(0.6) million compared to $(2.9) million and $1.6 million in 1995 and 1994, respectively. The 1996 improvement as compared to 1995 is due to a decrease in net income combined with an increase in accounts receivable of $8.2 million offset by a decrease in 18 19 inventories of $3.3 million and an increase in other current liabilities of $13.8 million. The 1995 decline compared to 1994 is due primarily to a decrease in net income combined with an increase in accounts receivable of $6.2 million and an increase in inventories of $6.6 million. The 1996 and 1995 increases in receivables are due to higher third and fourth quarter gross sales compared to the same periods of 1995 and 1994, respectively. The 1996 decrease in inventories compared to 1995 is due to certain orders not being shipped as expected at the end of 1995. The average number of days sales outstanding in receivables was approximately 91 days in 1996, 104 days in 1995 and 120 days in 1994. The average inventory turnover rate was 3.9 in 1996, 3.5 in 1995 and 3.2 in 1994. At August 31, 1995, the Company had $39.5 million of borrowings outstanding under a credit facility (the "Agreement") with a domestic bank which allowed for $60.0 million in maximum borrowings. In October 1995, as a result of non-compliance with the Agreement, the Company amended and recollateralized the Agreement resulting in an increase in the effective interest rate by 1.0 percent on LIBOR borrowings and 0.5 percent on prime rate borrowings. As a result of the losses for the year ended August 31, 1995 and losses for the quarter ended December 2, 1995, the Company was not in compliance with certain covenants under the amended Agreement. Borrowings under the amended Agreement to fund operations and capital additions had increased to $57.4 million in early December, 1995. Due to covenant violations, in December 1995, available borrowings under the amended Agreement were frozen at $57.4 million. On January 25, 1996, the Company amended and restated the Agreement (the "Restated Agreement") with its lending group wherein the lending group agreed to waive any defaults under or violations of the Agreement occurring on or before January 25, 1996. The Restated Agreement provided for an amortizing term loan beginning at $52.0 million and amortizing by $1.0 million per month beginning September 15, 1996 to $48.0 million on December 15, 1996, and up to $11.5 million in borrowing base revolving loans. The Restated Agreement was limited to $63.5 million in aggregate borrowings. Borrowings under the Restated Agreement were to mature on December 31, 1996. The Company's obligations under the Restated Agreement were secured by substantially all of the assets of the Company. The effective interest rate, effective January 25, 1996, under the Restated Agreement was the agent's alternate base rate (ABR) plus 1.75% for all borrowings up to $57.4 million and ABR plus 2.75% for borrowings above $57.4 million. The Restated Agreement contained financial covenants, measured at varying dates, including covenants relating to tangible net worth, capital additions and cash flows. The Company paid a commitment fee at closing amounting to 0.5% of the total facility. At August 31, 1996, the Company had $52.0 million of borrowings outstanding under the Restated Agreement. In November 1996, as a result of noncompliance with certain covenants under the Restated Agreement due to losses incurred for the year ended August 31, 1996, the Company and its lenders amended the Restated Agreement (the "Amended and Restated Agreement") wherein the lending group has agreed to waive any defaults under or violations of the Restated Agreement occurring on or before August 31, 1996. The Amended and Restated Agreement provides for maximum borrowings of $60.5 million. Maximum allowable borrowings decline to $59.5 million on December 16, 1996 and then decline periodically over the period to $48.25 million on September 15, 1997. Obligations under the Amended and Restated Agreement will mature on September 30, 1997. Obligations under the Amended and Restated Agreement will continue to be secured by substantially all of the assets of the Company. No foreign currency borrowings are permitted under the Amended and Restated Agreement. The effective interest rate increases periodically from September 15, 1996 to ABR plus 4% on December 31, 1996 for all borrowings. The Amended and Restated Agreement will continue to contain financial covenants relating to tangible net worth, capital additions, earnings and cash flows. In addition to a fee amounting to $0.3 million which was paid on September 15, 1996 to maintain the aggregate borrowing capacity under the Restated Agreement, the Company will be required to pay additional fees to maintain aggregate borrowings under the Amended and Restated Agreement amounting to 0.1% of the total facility due at closing, 0.1% of the total facility due monthly from January 31, 1997 to April 30, 1997, and 0.25% of the total facility due June 30, 1997. 19 20 Concurrently with entering into the Amended and Restated Agreement, the Company issued to its lending group Series A Warrants exercisable for an aggregate of 250,000 shares of the Company's common stock (the "Series A Warrants") and Series B Warrants exercisable for an aggregate of 300,000 shares of the Company's common stock (the "Series B Warrants"), in each case at an exercise price of $21.15. The Series A Warrants and Series B Warrants are not exercisable until May 31, 1997 and August 31, 1997, respectively, and may be repurchased by the Company for an aggregate of one dollar ($1) for the Series A Warrants and an aggregate of one dollar ($1) for the Series B Warrants in the event that, with respect to each of the Series A Warrants and Series B Warrants, prior to such dates, all indebtedness under the Amended and Restated Agreement has been repaid in full. Additionally, with respect to the Series B Warrants, the Company may repurchase such Warrants before August 31, 1997, for an aggregate of one dollar ($1) if it has received at least $20 million in net cash proceeds from additional equity. The Company is currently seeking alternative sources of capital which will be more advantageous to the Company. Management believes that they will be able to replace the Amended and Restated Agreement with such sources during fiscal 1997. On August 8, 1995, the Company acquired all of the outstanding stock of Infolink Group Limited, a distributor in Australia, for 9,817 shares of the Company's common stock valued at $0.4 million. The acquisition resulted in the recording of goodwill of $1.3 million. See Note 6 to Consolidated Financial Statements for further information. In June 1995, the Company committed to implement the SAP business systems software package, expected to cost approximately $6 million, of which substantially all has been expended for software and consulting costs as of August 31, 1996. SAP is recognized as a leading provider of client/server based enterprise-wide software. SAP is replacing the Company's current order fulfillment, manufacturing and financial systems. Additions to property, plant and equipment totaled $10.2 million in 1996, $10.9 million in 1995 and $8.3 million in 1994. Capital additions relate to production machinery, tooling and equipment, internal information systems development, sales and product development equipment and expansion and renovation of research and development facilities. Capital additions are expected to be approximately $9 million to $12 million in fiscal 1997. The Company believes that fiscal 1997 capital equipment and system additions as well as working capital requirements can be funded from operations or by existing borrowing capacity. NEW ACCOUNTING PRONOUNCEMENTS In March 1995, the Financial Accounting Standards Board issued Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of." The statement becomes effective in fiscal 1997. The Company does not believe that the adoption of this statement will be material to the Company's consolidated financial statements. In October 1995, the Financial Accounting Standards Board, issued Statement No. 123, "Accounting for Stock Based Compensation." This statement becomes effective in fiscal 1997 and will require the Company to change its disclosures relating to stock options. The Company currently does not intend to change its accounting for stock options. 20 21 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA NORAND CORPORATION REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS TO THE STOCKHOLDERS OF NORAND CORPORATION We have audited the accompanying consolidated balance sheets of Norand Corporation (a Delaware corporation) and Subsidiaries as of August 31, 1996 and 1995, and the related consolidated statements of operations, stockholders' equity and cash flows for each of the three years in the period ended August 31, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Norand Corporation and Subsidiaries as of August 31, 1996 and 1995, and the results of operations and cash flows for each of the three years in the period ended August 31, 1996, in conformity with generally accepted accounting principles. Arthur Andersen LLP Chicago, Illinois October 15, 1996 (except with respect to the matter discussed in Note 7, as to which the date is November 20, 1996). 21 22 NORAND CORPORATION CONSOLIDATED BALANCE SHEETS (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
AUGUST 31 -------------------- 1996 1995 -------- -------- ASSETS Current assets: Cash and cash equivalents............................................. $ 3,604 $ 3,809 Accounts receivable, net of allowances for doubtful accounts and estimated sales returns of $9,278 in 1996 and $6,423 in 1995....... 69,841 68,609 Inventories........................................................... 33,565 36,678 Deferred tax assets................................................... 8,523 6,355 Prepaid expenses and other current assets............................. 8,011 4,643 -------- -------- Total current assets............................................. 123,544 120,094 Noncurrent assets: Property, plant and equipment, net.................................... 25,601 23,138 Deferred tax assets................................................... 9,318 3,266 Patents and intellectual properties, net.............................. 6,157 6,981 Goodwill, net......................................................... 3,112 2,731 Other noncurrent assets............................................... 4,333 4,378 -------- -------- Total assets..................................................... $172,065 $160,588 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Short-term debt....................................................... $ 52,460 $ 39,876 Accounts payable...................................................... 23,195 25,517 Accrued payroll and employee benefits................................. 9,809 10,959 Other accrued liabilities............................................. 33,449 19,370 Deferred income....................................................... 10,418 9,595 -------- -------- Total current liabilities........................................ 129,331 105,317 -------- -------- Stockholders' equity: Common stock, $.01 par value: Authorized 15,000,000 shares; issued and outstanding 7,664,535 shares in 1996 and 7,534,846 shares in 1995............................................................... 77 75 Additional paid-in capital............................................ 75,237 73,150 Accumulated deficit................................................... (28,482) (14,312) Equity adjustment from foreign currency translation................... (4,098) (3,642) -------- -------- Total stockholders' equity....................................... 42,734 55,271 -------- -------- Total liabilities and stockholders' equity....................... $172,065 $160,588 ======== ========
See accompanying notes to the consolidated financial statements. 22 23 NORAND CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
FISCAL YEAR ENDED AUGUST 31 -------------------------------------- 1996 1995 1994 ---------- ---------- ---------- REVENUES: Product sales revenue.................................. $193,249 $179,266 $153,653 Customer service revenue............................... 42,251 38,648 33,816 --------- --------- --------- Total revenues.................................... 235,500 217,914 187,469 Cost of products and services............................ 141,744 127,816 96,139 --------- --------- --------- Gross profit...................................... 93,756 90,098 91,330 OPERATING EXPENSES: Product development and engineering expenses............. 22,898 22,408 20,554 Selling expenses....................................... 58,347 55,160 44,503 General and administrative expenses.................... 17,006 15,006 12,868 Restructuring charge................................... 4,392 -- -- --------- --------- --------- Total operating expenses.......................... 102,643 92,574 77,925 --------- --------- --------- Income (loss) from operations..................... (8,887) (2,476) 13,405 Interest and other expenses.............................. 6,256 3,482 1,437 Litigation settlement.................................... 5,100 -- -- --------- --------- --------- Income (loss) before income taxes................. (20,243) (5,958) 11,968 Provision (benefit) for income taxes..................... (6,073) (2,252) 5,594 --------- --------- --------- Net income (loss)................................... $(14,170) $ (3,706) $ 6,374 ========= ========= ========= Net income (loss) per common share....................... $(1.87) $(0.50) $0.86 Average number of common and common equivalent shares outstanding............................................ 7,573,017 7,457,923 7,410,618
See accompanying notes to the consolidated financial statements. 23 24 NORAND CORPORATION CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
EQUITY ADJUSTMENT COMMON STOCK ADDITIONAL FROM FOREIGN ------------------- PAID-IN ACCUMULATED CURRENCY SHARES AMOUNT CAPITAL DEFICIT TRANSLATION --------- ------ ---------- ----------- ------------ Balances, August 31, 1993...................... 7,000,984 $ 70 $ 68,542 $ (16,980) $ (1,864) Exercises of stock options..................... 349,590 3 573 -- -- Additional expenses of initial public offering..................................... -- -- (37) -- -- Tax benefit from exercise of stock options..... -- -- 516 -- -- Foreign currency translation................... -- -- -- -- (220) Net income..................................... -- -- -- 6,374 -- --------- --- ------- -------- ------- Balances, August 31, 1994...................... 7,350,574 73 69,594 (10,606) (2,084) Exercises of stock options..................... 174,455 2 2,737 -- -- Tax benefit from exercise of stock options..... -- -- 382 -- -- Acquisition of subsidiary...................... 9,817 -- 437 -- -- Foreign currency translation................... -- -- -- -- (1,558) Net loss....................................... -- -- -- (3,706) -- --------- --- ------- -------- ------- Balances, August 31, 1995...................... 7,534,846 75 73,150 (14,312) (3,642) Exercises of stock options..................... 129,689 2 2,087 -- -- Foreign currency translation................... -- -- -- -- (456) Net loss....................................... -- -- -- (14,170) -- --------- --- ------- -------- ------- Balances, August 31, 1996...................... 7,664,535 $ 77 $ 75,237 $ (28,482) $ (4,098) ========= === ======= ======== =======
See accompanying notes to the consolidated financial statements. 24 25 NORAND CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
FISCAL YEAR ENDED AUGUST 31 -------------------------------- 1996 1995 1994 -------- -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss)........................................... $(14,170) $ (3,706) $ 6,374 -------- ------- -------- Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation............................................. 7,792 5,259 5,620 Amortization............................................. 4,282 2,328 1,472 Amortization of deferred royalty income.................. (1,877) (2,232) (1,337) Deferred tax benefit..................................... (8,220) (9,621) 0 Provision for doubtful accounts and sales returns........ 7,216 8,802 4,140 Changes in assets and liabilities, excluding effect of net assets acquired in business acquisition: Accounts receivable.................................... (8,171) (6,242) (12,864) Inventories............................................ 3,323 (6,636) (14,555) Prepaid expenses and other assets...................... (3,101) (1,481) (1,775) Deferred maintenance contract income................... 2,699 2,211 2,502 Accounts payable and accrued liabilities............... 8,018 8,406 12,005 Accrued restructuring, net............................. 1,596 0 0 -------- ------- -------- Total adjustments................................. 13,557 794 (4,792) -------- ------- -------- Net cash provided by (used in) operating activities..................................... (613) (2,912) 1,582 -------- ------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Additions to property, plant and equipment.................. (10,183) (10,907) (8,264) Additions to software, patents, and intellectual properties............................................... (3,296) (5,382) (2,769) Cash paid for acquisition of business....................... -- -- (85) -------- ------- -------- Net cash used in investing activities............. (13,479) (16,289) (11,118) -------- ------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Payments of long-term debt.................................. -- -- (2,000) Net borrowings under line of credit agreement............... 12,565 16,803 10,945 Issuances of common stock................................... 2,089 3,391 1,057 Payments of refinancing expenses............................ (680) (150) -- -------- ------- -------- Net cash provided by financing activities......... 13,974 20,044 10,002 -------- ------- -------- Effect of exchange rate changes on cash....................... (87) (21) 2 -------- ------- -------- Net increase (decrease) in cash and cash equivalents.......... (205) 822 468 CASH: Beginning of period......................................... 3,809 2,987 2,519 -------- ------- -------- End of period............................................... $ 3,604 $ 3,809 $ 2,987 ======== ======= ======== Supplemental disclosures of cash flow information: Interest paid on all debt obligations....................... $ 5,281 $ 2,863 $ 1,431 Net income taxes paid (refunded)............................ (1,591) 5,559 2,682 Supplemental schedule of noncash financing activities: Debt incurred in connection with acquisition................ -- 376 -- Accounts receivable obtained as a result of acquisition..... -- 905 -- Liabilities assumed as a result of acquisition.............. -- 561 --
See accompanying notes to the consolidated financial statements. 25 26 NORAND CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA) 1. DESCRIPTION OF BUSINESS Norand designs, manufactures and markets mobile computing systems and wireless data communications networks using radio frequency technology. Norand systems allow businesses worldwide to apply information technology to industrial and field automation settings. Typical applications include route accounting, field sales automation, and inventory database management in manufacturing, warehouse and retail settings. Norand provides hardware, application software, systems integration and support to thousands of customers in dozens of industries to improve accountability, productivity and management control. 2. ITALIAN SUBSIDIARY IRREGULARITIES On September 25, 1995, the Company announced that it had discovered irregularities during the course of the year-end audit at its Italian subsidiary. At that time the managing director of the Italian subsidiary was removed. The Company's investigation of the irregularities in its Italian subsidiary continued following the initial announcement. The investigation revealed a complex set of irregularities, which took place over a period of time. The irregularities were facilitated by third parties, certain of which were associated with the former managing director. As a result of the investigation attributable to the Italian subsidiary, the Company recorded in its 1995 and 1994 financial statements pretax charges and costs related to sales returns, inventory losses, certain local taxes which may not be recoverable, professional costs for the investigation, and the settlement or anticipated settlement of numerous third party claims against the Italian subsidiary. In total, after restatement for irregular sales and costs, pretax charges and costs related to the irregularities included in the financial statements amounted to $8.3 million in 1995 and $1.5 million in 1994. The Company believes that a thorough investigation has been completed in order to determine the aggregate losses due to the irregularities. The Company has continued to pursue potential further recoveries from third parties and insurance. Such potential recoveries have not been reflected in the accompanying financial statements. During 1996, the Company settled numerous previously identified third party claims for costs which approximated previous estimates. No new claims have been presented that would have a material adverse financial impact on the Company. Based upon the results of its investigation and the claim settlements, the Company does not believe that the aggregate charges and operating losses relating to these known facts and circumstances will materially exceed the amount of recorded losses and costs already recorded. However, there can be no assurances that additional third party claims will not be discovered in future periods which will result in further losses related to this matter. Such losses could be material to the consolidated results of operations in any future period. Management does not believe that any such losses will be material to the Company's consolidated financial position. 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION The accompanying financial statements have been prepared on a consolidated basis to include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany amounts and transactions have been eliminated in consolidation. INVENTORIES Inventories are stated at the lower of cost or market with cost determined on a first-in, first-out basis. 26 27 PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are stated at cost. Depreciation of plant and equipment is provided over the estimated useful lives of the assets. Production machinery and equipment (including molds and dies) is depreciated using the units of production method. All other property, plant and equipment is depreciated using the straight-line method. The ranges of the estimated useful lives are as follows: buildings, ten to thirty years; machinery and equipment and office furniture and equipment, three to ten years; computer equipment and software purchased to support the Company's business processes, two to five years; and leasehold improvements, the shorter of the useful lives of the assets or the term of the leases. Costs of renewals and betterments are capitalized; repairs and maintenance are expensed as incurred. SOFTWARE DEVELOPMENT COSTS The Company capitalizes internal software development costs and qualifying purchased product software, both of which are developed or acquired for sale to the Company's customer. The Company capitalized internal software development costs of $1,500 and $2,098 in 1996 and 1995, respectively. As of August 31, 1996 and 1995, capitalized software development costs, net of amortization were $3,719 and $3,360, respectively. The capitalization of these costs begins when a product's economic and technological feasibility has been established and ends when the product is available for general release to customers. Amortization is computed on an individual product basis over a three year period. Capitalized software development costs are included in other noncurrent assets. PATENTS AND INTELLECTUAL PROPERTIES Patents include the direct costs of the patents and costs to maintain and protect the patents. Patents are being amortized over the remaining lives of the patents, a weighted average of approximately four years. Intellectual properties include the direct costs of acquisition and are amortized over the useful lives of the underlying technology, generally three to five years. GOODWILL Goodwill from the acquisition of Infolink Group Limited in August 1995, the acquisition of the Company in October 1988, and other acquisitions, represents the excess of cost over the fair value of net assets acquired and is being amortized over 15 and 40 years, respectively, using the straight-line method. The Company periodically reviews the value of its goodwill to determine if an impairment has occurred. The Company bases its determination on the performance, on an undiscounted basis, of the underlying businesses. Based on its review, the Company does not believe that an impairment of its goodwill has occurred. In March 1995, the Financial Accounting Standards Board issued Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of". The statement becomes effective in fiscal 1997. The Company does not believe that the adoption of this statement will be material to the Company's consolidated financial statements. INCOME TAXES The Company accounts for income taxes in accordance with Statement of Financial Accounting Standards No. 109. Deferred income taxes are recorded to reflect the tax consequences on future years of differences between the basis of assets and liabilities for income tax and for financial reporting purposes. In addition, the amount of any future tax benefits are reduced by a valuation allowance until it is more likely than not that such benefits will be realized. Deferred income taxes have not been provided for any income tax liability which could be incurred upon the repatriation of undistributed earnings of the Company's consolidated foreign subsidiaries as the Company expects to indefinitely reinvest these earnings outside the U.S. However, if the Company were to repatriate the undistributed earnings of the consolidated foreign subsidiaries, the potential income tax liability would not be material. 27 28 INCOME PER COMMON SHARE The computation of primary and fully diluted earnings per share is based on the weighted average number of common stock and common stock equivalent shares outstanding during each period. Common stock equivalents consist primarily of options outstanding under the Company's stock option plans and shares to be purchased under the employee stock purchase plan. FOREIGN CURRENCY TRANSLATION The financial statements of foreign operations are translated into U.S. dollars in accordance with Statement of Financial Accounting Standard No. 52. Accordingly, all assets and liabilities are translated at year-end exchange rates. The gains and losses that result from this process are shown in the accumulated translation adjustment account in the shareholders' equity section of the balance sheet. Operating transactions are translated at weighted average rates during the year. Transaction gains and losses are reflected in net income. During 1996, the Company did not enter into foreign exchange forward contracts or foreign exchange option contracts to hedge the effect of foreign currency fluctuations on the financial statements. REVENUE RECOGNITION Revenues from product sales are generally recognized at the time of shipment of the product. Revenues from customer service sales are recognized ratably over the maintenance contract period or as the services are performed for repairs not under warranty or maintenance contracts. Included in deferred income at August 31, 1996 and 1995, is deferred maintenance revenue of $10,181 and $7,947, respectively. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. RISKS AND UNCERTAINTIES The Company is subject to various potential risks and uncertainties which include, without limitation, continued pressures in the marketplace, the Company's ability to realize the benefits of the implemented restructuring, the future need for restructuring (see Note 11), the Company's ability to achieve increased revenues from new products and achieve lower operating expenses as a percent of revenues, the Company's ability to obtain debt financing, remain in compliance with debt covenants and maintain liquidity (see Note 7). Additionally, the Company is subject to potential risks and uncertainties related to foreign operations, the effect of technological changes on the carrying value of inventories and specialized manufacturing equipment, the estimated realization of deferred tax assets (see Note 8), the potential for additional third party claims against the Company's Italian subsidiary (see Note 2) and the possible adverse effects of certain pending litigation (see Note 13). A summary discussion of risks and uncertainties is included in Management's Discussion and Analysis of Financial Condition and Results of Operations under the caption "Safe Harbor Statement." RESEARCH AND DEVELOPMENT EXPENSES Research and development expenses included in the caption "Product development and engineering expenses" in the consolidated statements of operations in the fiscal years ended are $18,474 in 1996, $19,462 in 1995 and $16,969 in 1994. RECLASSIFICATIONS Certain reclassifications were made to the 1995 and 1994 financial statements to conform to the 1996 presentation. 28 29 4. INVENTORIES Inventories are stated at the lower of cost (first-in, first-out) or market, and consist of the following:
AUGUST 31 ------------------ 1996 1995 ------- ------- Parts and materials........................................ $16,383 $13,572 Work in process............................................ 8,246 1,799 Finished goods............................................. 5,382 15,808 Field service and sales supplies........................... 3,554 5,499 ------- ------- Total.................................................... $33,565 $36,678 ======= =======
5. NONCURRENT ASSETS Noncurrent assets include the following:
AUGUST 31 ------------------ 1996 1995 ------- ------- Property, plant and equipment: Land....................................................... $ 225 $ 225 Buildings.................................................. 3,394 3,362 Machinery and equipment.................................... 30,132 26,872 Office furniture and equipment............................. 26,690 21,757 Leasehold improvements..................................... 703 702 ------- ------- Subtotal, at cost.......................................... 61,144 52,918 Less accumulated depreciation.............................. 35,543 29,780 ------- ------- Total, net............................................... $25,601 $23,138 ======= ======= Patents and intellectual properties........................ $10,786 $10,670 Less accumulated depreciation and amortization............. 4,629 3,689 ------- ------- Total, net............................................... $ 6,157 $ 6,981 ======= ======= Goodwill................................................... $ 3,588 $ 3,088 Less accumulated amortization.............................. 476 357 ------- ------- Total, net............................................... $ 3,112 $ 2,731 ======= =======
6. ACQUISITION On August 8, 1995, the Company acquired all the outstanding stock of Infolink Group Limited (Infolink), a distributor in Australia, for 9,817 shares of the Company's common stock valued at $0.4 million. The acquisition was accounted for using the purchase method. Accordingly, the purchase price was allocated to the assets and liabilities acquired based on their estimated fair values. This treatment resulted in approximately $1.3 million of estimated goodwill. The goodwill is being amortized over fifteen years. The prior operations and financial position of Infolink were not material. 7. SHORT-TERM DEBT At August 31, 1995, the Company had $39.5 million of borrowings outstanding under a credit facility (the "Agreement") with a group of lending banks. The Agreement allowed for $60 million of maximum borrowings. In October 1995, as a result of anticipated non-compliance with the Agreement, the Company and the lending group amended and recollateralized the Agreement resulting in an increase in the effective interest rate by 1.0 percent on LIBOR borrowings and 0.5 percent on prime rate borrowings. 29 30 As a result of the losses for the year ended August 31, 1995 and losses for the quarter ended December 2, 1995, the Company was not in compliance with certain covenants under the amended Agreement. Borrowings under the amended Agreement to fund operations and capital additions had increased to $57.4 million in early December, 1995. Due to covenant violations, in December 1995, available borrowings under the amended Agreement were frozen at $57.4 million. On January 25, 1996, the Company and the lending group amended and restated the Agreement (the "Restated Agreement") wherein the lending group agreed to waive any defaults under or violations of the Agreement occurring on or before January 25, 1996. The Restated Agreement provided for an amortizing term loan beginning at $52.0 million and amortizing by $1.0 million per month beginning September 15, 1996 to $48.0 million on December 15, 1996, and up to $11.5 million in borrowing base revolving loans. The Restated Agreement was limited to $63.5 million in aggregate borrowings. Obligations under the Restated Agreement were to mature on December 31, 1996. The Company's obligations under the Restated Agreement were secured by substantially all of the assets of the Company. The effective interest rate, effective January 25, 1996, under the Restated Agreement was the agent's alternate base rate (ABR) plus 1.75% for all borrowings up to $57.4 million and ABR + 2.75% for borrowings above $57.4 million. The Restated Agreement contained financial covenants, measured at varying dates, including covenants relating to tangible net worth, capital additions and cash flows. The Company paid a commitment fee at closing amounting to 0.5% of the total facility. At August 31, 1996, the Company had $52.0 million of borrowings outstanding under the Restated Agreement. In November 1996, as a result of noncompliance with certain covenants under the Restated Agreement due to losses incurred for the year ended August 31, 1996, the Company and its lenders amended the Restated Agreement (the "Amended and Restated Agreement") wherein the lending group has agreed to waive any defaults under or violations of the Restated Agreement occurring on or before August 31, 1996. The Amended and Restated Agreement provides for maximum borrowings of $60.5 million. Maximum allowable borrowings decline to $59.5 million on December 16, 1996 and then decline periodically over the period to $48.25 million on September 15, 1997. Obligations under the Amended and Restated Agreement will mature on September 30, 1997. Obligations under the Amended and Restated Agreement will continue to be secured by substantially all of the assets of the Company. No foreign currency borrowings are permitted under the Amended and Restated Agreement. The effective interest rate increases periodically September 15, 1996 to ABR plus 4% on December 31, 1996 for all borrowings. The Amended and Restated Agreement will continue to contain financial covenants relating to tangible net worth, capital additions, earnings and cash flows. In addition to a fee amounting to $0.3 million which was paid on September 15, 1996 to maintain the aggregate borrowing capacity under the Restated Agreement, the Company will be required to pay additional fees to maintain aggregate borrowings under the Amended and Restated Agreement amounting to 0.1% of the total facility due at closing, 0.1% of the total facility due monthly from January 31, 1997 to April 30, 1997, and 0.25% of the total facility due June 30, 1997. Concurrently with entering into the Amended and Restated Agreement, the Company issued to its lending group Series A Warrants exercisable for an aggregate of 250,000 shares of the Company's common stock (the "Series A Warrants") and Series B Warrants exercisable for an aggregate of 300,000 shares of the Company's common stock (the "Series B Warrants"), in each case at an exercise price of $21.15. The Series A Warrants and Series B Warrants are not exercisable until May 31, 1997 and August 31, 1997, respectively, and may be repurchased by the Company for an aggregate of one dollar ($1) for the Series A Warrants and an aggregate of one dollar ($1) for the Series B Warrants in the event that, with respect to each of the Class A Warrants and Class B Warrants, prior to such dates, all indebtedness under the Amended and Restated Agreement has been repaid in full. Additionally, with respect to the Series B Warrants, the Company may repurchase such Warrants before August 31, 1997, for an aggregate of one dollar ($1) if it has received at least $20 million in net cash proceeds from additional equity. The Company is currently seeking alternative sources of capital which will be more advantageous to the Company. Management believes that they will be able to replace the Amended and Restated Agreement with such sources during fiscal 1997. 30 31 As of August 31, 1996 and 1995, the Company had borrowings outstanding at its Australian subsidiary which amounted to $0.5 million and $0.4 million, respectively. The carrying amount for the short-term borrowing recorded in the financial statements approximates fair value. The weighted average interest rates paid under the above agreements were 11.57% (1996), 7.68% (1995) and 6.94% (1994). The average month-end balance outstanding was $53,716 (1996), $38,400 (1995) and $14,780 (1994). The maximum amount outstanding in each fiscal year was $63,000 (1996), $52,400 (1995) and $27,500 (1994). 8. INCOME TAXES The components of income (loss) before income taxes are:
AUGUST 31 ------------------------------ 1996 1995 1994 -------- ------- ------- Domestic........................................................ $(19,748) $ 3,188 $12,491 International................................................... (495) (9,146) (523) -------- ------- ------- $(20,243) $(5,958) $11,968 ======== ======= =======
The provision (benefit) for income taxes consisted of the following:
AUGUST 31 ---------------------------- 1996 1995 1994 ------- ------- ------ Current: Federal......................................................... $ -- $ 2,990 $2,237 State........................................................... 87 321 488 Foreign......................................................... 2,060 4,058 2,869 ------- ------- ------ 2,147 7,369 5,594 Deferred.......................................................... (8,220) (9,621) -- ------- ------- ------ Total........................................................... $(6,073) $(2,252) $5,594 ======= ======= ======
The income tax provision differs from a provision computed at the U.S. statutory rate as follows:
AUGUST 31 ---------------------------- 1996 1995 1994 ------- ------- ------ Statutory rate provision.......................................... $(6,883) $(2,026) $4,069 State income taxes (net of Federal benefit)....................... 57 212 322 Foreign income taxes.............................................. 688 118 454 Increase (decrease) in valuation allowance........................ 2,792 (1,948) 766 Research and development tax credit carryforwards................. (2,615) -- -- Refund from NOL carryback......................................... (2,323) -- -- Additional reserves............................................... 1,213 1,303 -- Deemed dividend from subsidiary................................... 820 -- -- Other............................................................. 178 89 (17) ------- ------- ------ $(6,073) $(2,252) $5,594 ======= ======= ======
31 32 The consolidated balance sheet includes the following:
AUGUST 31 ---------------- 1996 1995 ------ ------ Current income tax payable: Federal................................................................... $2,716 $2,312 State and local........................................................... 86 82 Foreign................................................................... 5,201 4,405 ------ ------ $8,003 $6,799 ====== ======
AUGUST 31 ------------------ 1996 1995 ------- ------- Net deferred tax assets (liabilities): Capitalized software.................................................... $ 2,874 $ 3,275 Noncompete covenant..................................................... 2,121 2,417 Domestic net operating loss............................................. 7,559 -- Foreign net operating losses............................................ 5,913 5,022 Depreciation and amortization........................................... (3,081) (2,304) Inventory obsolescence reserve and capitalization....................... 1,832 1,294 Vacation accruals....................................................... 1,154 1,127 Research and development tax credit carryforwards....................... 3,827 1,213 AMT tax credit carryforwards............................................ 1,365 -- Deferred maintenance revenue............................................ 1,126 563 Other................................................................... 2,177 3,249 ------- ------- Subtotal.................................................................. 26,867 15,856 Valuation allowance....................................................... (9,026) (6,235) ------- ------- Net deferred tax assets................................................. $17,841 $ 9,621 ======= =======
In March 1996, the Company effectively wrote off its investment in its Italian subsidiary, for tax purposes, resulting in a net operating loss (NOL) which was carried back to prior years. The NOL carryback generated a $2.3 million refund. The Company has determined that based on its domestic profitability, that it is more likely than not (except for certain foreign NOLs which expire in the years 2000 and 2001 and remaining R&D tax credits) that recorded deferred tax assets will be realized in future periods. In 1996, the Company increased the deferred tax asset valuation allowance to offset the increase in certain foreign NOLs and R&D tax credits. The Company also provided additional reserves for income taxes related to fiscal years which remain subject to potential examination of respective taxing jurisdictions. Income taxes payable are included in other current liabilities. 9. EMPLOYEE BENEFIT PLANS Employees of the Company who meet certain eligibility requirements can participate in the Company's 401(k) Savings and Investment Plan. Under the Plan, the Company may, at its discretion, match the employee contributions. The Company recorded expenses related to its matching contributions for fiscal years ended of $1,197 (1996), $1,230 (1995) and $1,140 (1994). In 1994, the Company established the Norand Employee Stock Purchase Plan (the Plan) which enables eligible employees to purchase the Company's common stock at 85% of its fair market value. The fair market value of the common stock used to determine the purchase price is based on the lower of the closing price of the stock on the first or last business day of the Plan year which ends on December 31. Employee contributions, which are made through payroll deductions throughout the Plan year, are limited to 10 percent of total compensation. In March 1996, and January 1995, 77,984 shares and 81,734 shares, respectively were 32 33 purchased under the Plan. The Company has an additional 440,282 shares reserved for future issuance under its Employee Stock Purchase Plan. 10. LEASE COMMITMENTS The Company is obligated as lessee under certain noncancelable operating leases for office space and its manufacturing facility, and is also obligated to pay insurance, maintenance and other operating costs associated with the leases. The leases have various renewable options and terms. Rent expense under these operating leases was $2,887 in 1996, $2,833 in 1995 and $2,431 in 1994. Future minimum annual lease payments as of August 31, 1996, under agreements classified as operating leases with noncancelable terms in excess of one year are as follows: 1997................................................... $2,503 1998................................................... 1,752 1999................................................... 1,083 2000................................................... 670 2001 and thereafter.................................... 510 ------ Total............................................. $6,518 ======
11. RESTRUCTURING During the second quarter of 1996, the Company recorded a charge of $5.2 million ($3.6 million after-tax) related to a company-wide restructuring of operations. The restructuring charge was reduced by $0.8 million in the fourth quarter as a result of favorable experience compared to previous cost estimates. The restructuring charge included $3.7 million for severance and other costs related to reductions in the Company's domestic and international workforce and $0.7 million for lease exit costs associated with the closing or consolidating of certain facilities. The Company believes that annual cost savings resulting from the restructuring charge will be in excess of these charges. However, no assurances can be given as to the actual extent of any savings or improvements that might be realized or that additional actions and additional charges against earnings might not occur in the future. As of August 31, 1996, approximately $1.6 million of the charge has not yet been expended. The Company expects to expend the remaining balance, comprised primarily of amounts due in installments under severance and lease agreements, in fiscal 1997. 12. STOCK OPTIONS The Company has three stock option plans for its officers, directors and other key employees. The options under the plans generally become exercisable in equal installments over a three-to five-year period commencing on the first anniversary date after the date of grant and quarterly thereafter. Options canceled due to terminations or expiration of exercise period are returned to the pool of options available to be granted. The exercise price is equal to the market price for the Company's common stock on the date of grant and ranges from $1.10 to $45.25. 33 34 The following is a summary of the activity in the Company's common stock option plans for the years ended August 31, 1994, 1995 and 1996 and the outstanding balance of options issued:
AVERAGE PRICE PER SHARES SHARE --------- --------- August 31, 1993........................................... 686,726 $ 7.67 Granted................................................. 281,970 28.72 Exercised............................................... (313,885) 1.69 Canceled................................................ (13,651) 20.32 --------- ------ August 31, 1994........................................... 641,160 19.93 Granted................................................. 241,825 31.44 Exercised............................................... (92,721) 9.12 Canceled................................................ (66,807) 17.27 --------- ------ August 31, 1995........................................... 723,457 25.41 Granted................................................. 556,215 16.63 Exercised............................................... (43,785) 16.34 Canceled................................................ (171,447) 25.75 --------- ------ August 31, 1996........................................... 1,064,440 $ 21.19 ========= ======
At August 31, 1996, there were 297,319 shares exercisable and 1,552,278 shares reserved for issuance under the above option plans. In October 1995, the Financial Accounting Standards Board issued Statement No. 123, "Accounting for Stock Based Compensation." This statement becomes effective in fiscal 1997 and will require the Company to change its disclosures relating to stock options. The Company currently does not intend to change its accounting for stock options. 13. LITIGATION In October 1995, two class action complaints were filed against the Company and certain of its officers in United States District Court in Cedar Rapids, Iowa, seeking unspecified damages on behalf of a purported class of purchasers of Norand stock on the ground that the defendants violated the federal securities laws by allegedly making materially false and misleading statements concerning the Company's results of operations and future prospects during the period from March 20, 1995 until September 25, 1995. On November 24, 1995, a third lawsuit was filed in the same court raising substantially the same claims on behalf of a broader purported class of purchasers of Norand stock. All three lawsuits were consolidated under the caption In re Norand Corporation Securities Litigation (Master File No. C 95-323). On December 23, 1995, a single amended and consolidated complaint was filed in the consolidated action, superseding all previous pleadings. The complaint was filed on behalf of a purported class consisting of purchasers of Norand stock from September 26, 1994 through November 17, 1995, and named as defendants the Company, five of its present or former senior officers, and Arthur Andersen LLP, the Company's independent public accountant. The consolidated complaint alleged, among other things, that the Norand defendants materially overstated the Company's revenues and earnings by improperly recording sales in its Italian subsidiary and misled the market by failing to disclose alleged problems with certain of its products that affected its revenues in the fourth quarter of fiscal 1995. On August 28, 1996, the Company announced that it had signed an agreement to settle the consolidated complaint and secure releases for all of the defendants with the exception of Arthur Andersen. The Company believes its officers and directors acted properly regarding this matter and denies any wrongdoing. Nevertheless, the Company feels it is in the best interest of the Company and its shareholders to settle the matter and devote management time and energy to running the business. 34 35 The settlement, which calls for the payment of $4.5 million in cash and $4.5 million worth of Norand stock, is subject to approval by the District Court, following notice to the class and a hearing on the fairness of the settlement. That hearing is scheduled for December 19, 1996. The cash portion of the settlement is covered by insurance. The Company has the option to pay $4.5 million in cash instead of issuing the stock. The settlement resulted in a fourth quarter charge of $4.8 million including additional legal costs related to the portion of the settlement not covered by insurance. The Company had previously accrued $0.3 million in the first quarter for related legal costs. The Company is also subject to certain legal proceedings and claims which have arisen in the ordinary course of its business and have not been finally adjudicated. In management's opinion, the ultimate resolution of these matters will not be material to the Company's consolidated financial position or results of operations. 14. BUSINESS SEGMENT DATA The Company's operations consist of a single business segment which designs, develops, manufactures, markets and services hand-held data communication computer systems. The Company does not believe it is dependent upon any one customer or group of customers. Transfers between geographic areas were at cost plus a negotiated mark-up. Sales and selected financial information by geographic area for the fiscal years ended August 31, 1996, 1995 and 1994 were as follows:
1996 UNITED STATES INTERNATIONAL ELIMINATIONS CONSOLIDATED - ---------------------------------------------- ------------- ------------- ------------ ------------ Revenues...................................... $ 203,282 $57,397 $(25,179) $235,500 Income (loss) from operations................. (8,008) (809) (70) (8,887) Interest and other expenses................... (6,256) Litigation settlement......................... (5,100) Loss before income taxes...................... (20,243) Identifiable assets........................... 138,058 34,007 172,065 1995 UNITED STATES INTERNATIONAL ELIMINATIONS CONSOLIDATED - ---------------------------------------------- ------------- ------------- ------------ ------------ Revenues...................................... $ 190,260 $56,156 $(28,502) $217,914 Income (loss) from operations................. 6,240 (8,543) (173) (2,476) Interest and other expenses................... (3,482) Loss before income taxes...................... (5,958) Identifiable assets........................... 120,919 39,669 160,588 1994 UNITED STATES INTERNATIONAL ELIMINATIONS CONSOLIDATED - ---------------------------------------------- ------------- ------------- ------------ ------------ Revenues...................................... $ 168,849 $35,463 $(16,843) $187,469 Income (loss) from operations................. 14,306 (418) (483) 13,405 Interest and other expenses................... (1,437) Loss before income taxes...................... 11,968 Identifiable assets........................... 98,157 35,274 133,431
A substantial portion of the Company's international operations are in Europe. Other geographic areas of operations include Canada, Mexico, Australia and Japan. International operating income does not include the expenses of corporate administration. International identifiable assets are principally trade receivables and inventories. United States revenue includes export sales of $8,217 in 1996, $11,120 in 1995 and $5,981 in 1994, and also includes transfers between geographic areas which are eliminated. 35 36 15. SELECTED QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) The following tables set forth unaudited quarterly financial information for the years ended August 31, 1996 and 1995:
FIRST SECOND THIRD FOURTH YEAR ENDED AUGUST 31, 1996 QUARTER QUARTER QUARTER QUARTER - -------------------------------------------------------- ------- ------- ------- ------- Total revenues.......................................... $49,806 $56,032 $60,216 $69,446 Gross profit............................................ 18,840 20,943 25,901 28,072 Income (loss) from operations........................... (5,507) (9,351) 2,823 3,148 Net income (loss)....................................... (4,843) (7,721) 789 (2,395) Primary earnings per share.............................. (0.63) (1.02) 0.10 (0.32) Fully diluted earnings per share........................ (0.63) (1.02) 0.10 (0.32)
FIRST SECOND THIRD FOURTH YEAR ENDED AUGUST 31, 1995 QUARTER QUARTER QUARTER QUARTER - -------------------------------------------------------- ------- ------- ------- ------- Total revenues.......................................... $47,130 $53,920 $57,696 $59,168 Gross profit............................................ 20,975 24,670 27,052 17,401 Income (loss) from operations........................... 687 3,059 5,729 (11,951) Net income (loss)....................................... (442) 1,324 3,278 (7,866) Primary earnings per share(1)........................... (0.06) 0.17 0.43 (1.05) Fully diluted earnings per share(1)..................... (0.06) 0.17 0.43 (1.05)
- ------------------------- (1) The sum of earnings per share for the four quarters does not equal the related net income per share for the full year due to quarterly variations in shares resulting from stock options 16. VALUATION AND QUALIFYING ACCOUNTS AND RESERVES The analysis of the allowance for doubtful accounts and estimated sales returns is as follows:
ADDITIONS ----------------------------------------------------------------- BALANCE AT CHARGED TO CHARGED TO BALANCE BEGINNING COSTS AND OTHER AT END DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS OF PERIOD - ------------------------------------- ---------- ---------- ---------- ---------- --------- Allowance for doubtful accounts and estimated sales returns: Year ended August 31, 1996......... $6,423 $7,216 $0 $4,361 $ 9,278 Year ended August 31, 1995......... 1,973 8,802 0 4,352 6,423 Year ended August 31, 1994......... 1,451 4,140 0 3,618 1,973
- ------------------------- Deductions include doubtful accounts charged off, net of recoveries, including recoverable cost of returned equipment. 36 37 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The following sets forth the names and ages of Norand's directors and executive officers and the positions they hold with Norand:
NAME AGE POSITION WITH NORAND - ------------------------------ --- ----------------------------------------------------- N. Robert Hammer.............. 54 Chairman, President and Chief Executive Officer Keith B. Geeslin.............. 43 Director Charles G. Moore III.......... 53 Senior Director Fred W. Wenninger............. 57 Director Hatim A. Tyabji............... 51 Director Thomas O. Miller.............. 45 Senior Vice President, Worldwide Sales and Marketing Alan G. Bunte................. 43 Vice President, Strategic Planning John A. Niemzyk............... 45 Vice President, Operations and Informations Technology and Chief Information Officer Scott D. Mercer............... 30 Vice President, Norand International Corporation, European Operations Glenn J. Lundgren............. 49 Vice President, Americas Sales and Systems Robert A. Hurd................ 49 Controller and Assistant Treasurer
N. Robert Hammer has been Chairman, President and Chief Executive Officer of Norand since October 1988. Mr. Hammer received a Bachelor of Science degree from Columbia University in 1965, and a Master of Business Administration degree from Columbia University in 1967. Keith B. Geeslin has been a director of the Company since 1988. Mr. Geeslin is a General Partner of the Sprout Group, a division of DLJ Capital Corporation, where he has been employed since 1984. In addition, he is a General Partner of the general partner of a series of investment funds managed by the Sprout Group. In addition to the Company, Mr. Geeslin is a director of Actel Corporation, SDL, Inc., and several privately-held companies. Mr. Geeslin received a Bachelor of Science, Electrical Engineering degree from Stanford University in 1975, a Master of Arts, Philosophy, Politics and Economics degree from Oxford University in 1977 and a Master of Science, Engineering-Economic Systems degree from Stanford University in 1978. Charles G. Moore III has been a director of the Company since 1988 and Senior Director since January 1996. Since March 1994, Mr. Moore has been president of Little Diamond Island Enterprises, a venture capital investment firm. Mr. Moore was Chairman and Chief Executive Officer of Digital Communications Associates, Inc., a manufacturer of hardware and software products for the personal computer networking environment, from November 1993 to March 1994. From January 1982 to June 1993 Mr. Moore was a General Partner of Welsh, Carson, Anderson & Stowe, a venture capital investment firm. Mr. Moore serves on the board of directors of one privately-held company. Mr. Moore received a Bachelor of Arts, Mathematics degree from Dartmouth College in 1965 and Master of Science and Ph.D., Computer and Communications degrees from the University of Michigan in 1967 and 1971, respectively. From 1972 to 1975, Mr. Moore served on the faculty of Cornell University in the Department of Computer Science. Fred W. Wenninger has been a director of the Company since 1989. Since August 1995, Mr. Wenninger has served as President and Chief Executive Officer of Keytronic Corp., a manufacturer of computer keyboards. From May 1989 to December 1993, Mr. Wenninger was President and from May 1989 to October 1993 he was also Chief Executive Officer of Iomega Corporation, a computer disk drive manufacturer. Mr. Wenninger is also a director of Keytronic Corp. and Hach Company. Mr. Wenninger received a Bachelor of Science, Physics degree and Master of Science and Ph.D., Engineering degrees from Oklahoma State University in 1959, 1962 and 1964, respectively. 37 38 Hatim A. Tyabji has been a director of the Company since March 1995. Mr. Tyabji is Chairman, President and Chief Executive Officer of VeriFone, Inc., a global provider of transaction automation solutions for the delivery of electronic payment services; he has been President and CEO since 1986 and Chairman since 1992. Mr. Tyabji earned a Bachelor of Science, Electrical Engineering degree from the College of Engineering in Porrna, India, in 1967, a Master of Science, Electrical Engineering degree from the State University of New York at Buffalo in 1969, and a Master of Business Administration from Syracuse University in 1975. Mr. Tyabji is also a graduate of the Stanford Executive Program. Thomas O. Miller has been Senior Vice President of Norand since August 1995. From September 1992 until August 1995, Mr. Miller served as Vice President, Mobile Systems Division of Norand. From April 1991 to August 1992, Mr. Miller was Vice President of Marketing and Customer Service of Norand. Mr. Miller joined Norand in 1982. Mr. Miller became Vice President of Norand with responsibility for product sales and distribution marketing in April 1987. Marketing and customer service were added to his responsibilities in April 1988. Mr. Miller is a director of Eagle Point Software. Mr. Miller received a Bachelor of Science degree from Western Illinois University in 1973, and a Master of Business Administration degree from Western Illinois University in 1974. Alan G. Bunte has been Vice President, Strategic Planning of Norand since June 1993. Mr. Bunte joined Norand in 1981 and has held a variety of posts including Director of Strategic Planning from 1989 until June 1993, and Director of Marketing from 1988 to 1989. Mr. Bunte received a Bachelor of Business Administration degree from the University of Iowa in 1975, and a Master of Business Administration degree from the University of Iowa in 1977. John A. Niemzyk has been Vice President, Operations and Information Systems since January 1996. Mr. Niemzyk joined Norand in 1988 as Chief Information Officer. Mr. Niemzyk received his Bachelor of Business Administration degree from the University of Wisconsin in 1973 and a Master of Business Administration degree from the University of Wisconsin in 1975. Scott D. Mercer has been Vice President of Norand International Corporation, European Operations, since March 1996. From May 1995 to March 1996, Mr. Mercer served as Managing Director, European Operations. From June 1993 to May 1995, Mr. Mercer was Director of Marketing -- Europe. Mr. Mercer joined Norand in June 1993. Prior to joining Norand, Mr. Mercer was Vice President of Sales and Marketing for Tandy Grid UK. Glenn J. Lundgren has been Vice President, Sales & Systems Americas since September 1996. From April 1995 to September 1996, Mr. Lundgren was Director of Sales and Systems for the Americas. He joined Norand in 1985 as a Sales Manager. Mr. Lundgren received his Bachelor of Science degree in Marketing from the University of North Dakota in 1972. Robert A. Hurd has been Controller of Norand since September 1991 and Assistant Treasurer of Norand since June 1989. Mr. Hurd received a Bachelor of Business Administration degree from Western Illinois University in 1968, and a Master of Business Administration degree from the University of Illinois in 1971. Each director holds office until his or her successor is elected and qualified or until his or her earlier death, resignation, retirement, disqualification or removal. The executive officers of the Company serve at the discretion of the board of directors. Section 16(a) of the Exchange Act requires the Company's directors and executive officers, and persons who own more than ten percent of a registered class of the Company's equity securities, to file with the Commission initial reports of ownership and reports of changes in ownership of Common Stock and other equity securities of the Company. Officers, directors and greater than ten-percent stockholders are required by Commission regulation to furnish the Company with copies of all Section 16(a) forms they file. To the Company's knowledge, based solely on a review of the copies of such reports furnished to the Company and written representations that no other reports were required, during the Company's 1996 fiscal year all Section 16(a) filing requirements applicable to its officers, directors and greater than ten-percent beneficial owners were complied with except that Mr. John A. Niemzyk and Mr. Scott D. Mercer each filed one report late. 38 39 ITEM 11. EXECUTIVE COMPENSATION SUMMARY COMPENSATION TABLE The following table sets forth a summary of the annual, long-term and other compensation for services rendered to the Company for the fiscal year ended August 31, 1996 and the prior two fiscal years paid or awarded to those persons who were, at August 31, 1996, (i) the Company's chief executive officer, and (ii) the Company's four most highly compensated executive officers other than the chief executive officer (collectively, including the Company's chief executive officer, the "Named Executive Officers").
LONG-TERM COMPENSATION ----------------------------------- AWARDS ANNUAL COMPENSATION ----------------------- PAYOUTS -------------------------------- RESTRICTED -------- OTHER ANNUAL STOCK OPTIONS/ LTIP ALL OTHER NAME AND SALARY BONUS COMPENSATION AWARDS SARS PAYOUTS COMPENSATION PRINCIPAL POSITION YEAR ($) ($) ($)(1) ($) (#) ($) ($) - --------------------- ---- ------- ------- ------------ ---------- -------- -------- ------------ N. Robert Hammer..... 1996 340,000 -- -- 0 35,100 0 8,269(3) Chief Executive 1995 313,333 -- -- 0 20,000(2) 0 7,540(3) Officer 1994 300,000 143,000 -- 0 12,000 0 6,924(3) Thomas O. Miller..... 1996 200,000 -- -- 0 22,975 0 5,592(5) Senior Vice 1995 160,113 17,341 -- 0 8,500(4) 0 5,588(5) President 1994 141,251 80,000 -- 0 8,800 0 5,546(5) Scott D. Mercer...... 1996 152,838 50,760 -- 0 16,760 0 0 Vice President, 1995 93,684 61,260 -- 0 4,700(6) 0 0 Norand International 1994 74,448 18,485 -- 0 500 0 0 Corporation Alan G. Bunte........ 1996 139,833 -- -- 0 14,285 0 4,635(8) Vice President, 1995 129,833 20,000 -- 0 7,000(7) 0 5,465(8) Strategic Planning 1994 121,500 41,000 -- 0 -- 0 3,657(8) John A. Niemzyk...... 1996 133,752 -- -- 0 25,415 0 5,491(10) Vice President, 1995 117,153 28,000 -- 0 4,400(9) 0 4,883(10) Operations and 1994 98,208 26,000 -- 0 1,300 0 4,820(10) Information Technology and Chief Information Officer
- ------------------------- (1) During the fiscal years covered, no Named Executive Officer received any other annual compensation in an aggregate amount exceeding the lesser of either $50,000 or 10% of his total annual salary and bonus reported in the preceding two columns. (2) Represents 20,000 options originally authorized pursuant to the Company's Long-Term Performance Program on March 31, 1995, at an exercise price of $35.00, and subsequently canceled and reissued on May 3, 1995, at a repriced exercise price of $30.25. (3) Represents the Company's matching contribution to the Company's Section 401(k) deferred compensation plan of $4,750 in 1996, $4,620 in 1995, and $4,620 in 1994, and represents the value of term life insurance provided in excess of $50,000 of $3,519 in 1996, $2,920 in 1995, and $2,304 in 1994. (4) Represents 8,500 options originally authorized pursuant to the Company's Long-Term Performance Program on March 31, 1995, at an exercise price of $35.00, and subsequently canceled and reissued on May 3, 1995, at a repriced exercise price of $30.25. (5) Represents the Company's matching contribution to the Company's Section 401(k) deferred compensation plan of $4,724 in 1996, $5,058 in 1995, and $5,171 in 1994, and represents the value of term life insurance provided in excess of $50,000 of $867 in 1996, $530 in 1995, and $375 in 1994. 39 40 (6) Represents 700 options originally authorized pursuant to the Company's Long-Term Performance Program on March 31, 1995, at an exercise price of $35.00, and subsequently canceled and reissued on May 3, 1995, at a repriced exercise price of $30.25 plus an additional 4,000 options issued on May 17, 1995, at an exercise price of $33.00. (7) Represents 7,000 options originally authorized pursuant to the Company's Long-Term Performance Program on March 31, 1995, at an exercise price of $35.00, and subsequently canceled and reissued on May 3, 1995, at a repriced exercise price of $30.25. (8) Represents the Company's matching contribution to the Company's 401(k) deferred compensation plan of $4,219 in 1996, $5,142 in 1995, and $3,453 in 1994, and represents the value of term life insurance provided in excess of $50,000 of $416 in 1996, $322 in 1995, and $204 in 1994. (9) Represents 1,400 options originally authorized pursuant to the Company's Long-Term Performance Program on March 31, 1995, at an exercise price of $35.00, and subsequently canceled and reissued on May 3, 1995, at a repriced exercise price of $30.25 plus an additional 3,000 options issued on June 12, 1995, at an exercise price of $36.13. (10) Represents the Company's matching contribution to the Company's 401(k) deferred compensation plan of $5,198 in 1996, $4,620 in 1995, and $4,620 in 1994 and represents the value of term life insurance provided in excess of $50,000 of $293 in 1996, $263 in 1995, and $200 in 1994. OPTION/SAR GRANTS IN LAST FISCAL YEAR The following table summarizes the grants of stock options awarded to the Named Executive Officers during the fiscal year ended August 31, 1996 under the Company's 1989 Stock Option Plan and the Company's Long-Term Performance Program.
POTENTIAL INDIVIDUAL GRANTS REALIZABLE VALUE ----------------------------------------------- AT ASSUMED ANNUAL % OF RATES OF STOCK OPTIONS/ TOTAL PRICE APPRECIATION SAR OPTIONS/ EXERCISE FOR OPTION TERM(2) GRANTED SAR PRICE EXPIRATION ------------------ NAME (#) GRANTED ($/SH)(1) DATE 5% ($) 10% ($) - ------------------------------------- -------- -------- --------- ---------- ------- ------- N. Robert Hammer..................... 35,100 6.31% 16.50 03/28/06 364,224 923,016 Thomas O. Miller..................... 7,500 1.35% 18.00 02/05/06 84,901 215,155 Thomas O. Miller..................... 15,475 2.78% 16.50 03/28/06 160,580 406,943 Alan G. Bunte........................ 5,000 0.90% 18.00 02/05/06 56,600 143,437 Alan G. Bunte........................ 9,285 1.67% 16.50 03/28/06 96,348 244,165 Scott D. Mercer...................... 10,000 1.80% 18.00 02/05/06 113,201 286,874 Scott D. Mercer...................... 6,760 1.22% 16.50 03/28/06 70,147 177,766 John A. Niemzyk...................... 20,000 3.60% 13.25 01/24/06 166,657 422,342 John A. Niemzyk...................... 5,415 0.97% 16.50 03/28/06 56,190 142,397
- ------------------------- (1) The exercise price equals the last reported sale price of the Common Stock on the NASDAQ National Market System on the date of grant of the options. (2) The potential realizable dollar value of a grant is the product of: (a) the difference between (i) the product of the per-share market price at the time of the grant and the sum of 1 plus the stock appreciation rate compounded annually over the term of the option (here, 5% and 10%), and (ii) the per-share exercise price of the option, and (b) the number of securities underlying the grant at fiscal year-end. 40 41 AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION/SAR VALUES The following table provides information concerning options exercised by the Named Executive Officers during the fiscal year ended August 31, 1996 and the value at August 31, 1996 of unexercised options.
VALUE ($) OF NUMBER OF UNEXERCISED UNEXERCISED IN-THE-MONEY SHARES OPTIONS AT OPTIONS AT ACQUIRED AUGUST 31, 1996 AUGUST 31, 1996 ON VALUE --------------- --------------- EXERCISE REALIZED EXERCISABLE/ EXERCISABLE/ NAME (#) ($) UNEXERCISABLE UNEXERCISABLE - --------------------------------------------- -------- -------- --------------- --------------- N. Robert Hammer............................. 0 0 112,629/69,971 658/12,504 Thomas O. Miller............................. 0 0 23,422/39,153 290/ 5,513 Alan G. Bunte................................ 0 0 19,193/20,014 10,033/ 3,308 Scott D. Mercer.............................. 0 0 3,996/19,484 127/ 2,408 John A. Niemzyk.............................. 0 0 5,914/27,245 39,595/67,179
COMPENSATION OF DIRECTORS Non-employee members of the Board of Directors, except Mr. Moore, receive an annual fee of $12,000 (payable $3,000 per quarter) as compensation for their services as directors, a fee of $1,000 for each board meeting attended in person and $750 for each committee meeting attended in person. Mr. Moore serves as Lead Director of the Board of Directors. Mr. Moore receives an annual fee of $24,000 (payable $6,000 per quarter) as compensation for his services as Lead Director, a fee of $2,000 for each board meeting attended in person and $750 for each committee meeting attended in person. Directors are also reimbursed for reasonable costs associated with attendance at board and committee meetings. Non-employee members of the Board of Directors also participate in the Company's Stock Option Plan for Non-Employee Directors (the "Plan"), which was adopted by the Board of Directors effective March 16, 1994 (the "Effective Date"), and approved by the stockholders as of December 16, 1994. Pursuant to the Plan, each individual who was a non-employee director as of the Effective Date (Messrs. Geeslin, Moore, and Wenninger) was granted an option to purchase 6,000 shares of Common Stock as of the Effective Date, and each individual who became a non-employee director after the Effective Date was granted an option to purchase 5,000 shares of Common Stock as of the date of his initial appointment as a non-employee director (in each case, the "Initial Grant"). Each non-employee director who continues as a director is automatically granted an option to purchase 2,000 shares of Common Stock on each anniversary of his Initial Grant. In addition, Mr. Moore is automatically granted an additional option to purchase 2,000 shares of Common Stock on each anniversary of his Initial Grant. Options awarded under the Plan become exercisable with respect to one-twentieth of the total shares as of the last day of each quarter anniversary of the date of the award, with the exception of the options awarded in the Initial Grant to non-employee directors who became directors after the Effective Date, which become exercisable with respect to one-fifth of the shares on the first anniversary of the date of the award and thereafter as to one-twentieth of the total shares as of the last day of each quarter anniversary. Each such option awarded under the Plan bears an exercise price per share of Common Stock equal to the greater of par value or the fair market value of Common Stock on the date the option is granted. EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL ARRANGEMENTS The Company's employment policy provides that upon termination, with certain exceptions, each of the Company's vice presidents is entitled to severance pay in the amount of six months pay plus one additional month's pay for each year of service to the Company, not to exceed a combined total of 18 months. In the event of a change in control, enhanced severance may be payable in the event of termination following a change in control on account of certain events, such as elimination of a position, adverse change in duties or compensation, or change in job location. The enhanced severance for vice-presidents is generally equal to two times the employee's annual salary plus bonus, continuation of employee benefits and outplacement services. 41 42 The Company has entered into an employment agreement with each Named Executive Officer. Each of the agreements contain provisions for payment of a base salary plus bonus, an automobile allowance and reimbursement of certain expenses relating to relocating to Cedar Rapids, Iowa. In addition, pursuant to his employment agreement, Mr. Hammer was granted options for 129,156 shares of Common Stock vesting over a 55-month period beginning April 18, 1989. Mr. Hammer is also entitled pursuant to his employment agreement to termination payments of six months' salary, subject to certain exceptions. The Company and Mr. Hammer are also parties to a Change in Control Benefit Agreement pursuant to which Mr. Hammer is entitled to certain benefits in the event of a change in control. Mr. Hammer may be entitled to accelerate up to 100,000 options upon the occurrence of a change in control, if such acceleration does not have an adverse effect on the pooling-of-interest method of accounting. The agreement provides that if it is determined that the accelerated vesting upon a change in control of a stock option awarded to Mr. Hammer on September 24, 1996 would be subject to the excise tax imposed by section 4999 of the Code, Mr. Hammer will be entitled to a tax-gross up payment in an amount equal to the amount of the excise tax attributable to the accelerated vesting of the option, taxes incurred by Mr. Hammer on the excise tax and any interest or penalties incurred by Mr. Hammer with respect to such excise tax. Pursuant to the Company's Long-Term Performance Program, Mr. Hammer was awarded 100,000 options at an exercise price of $16.00 on September 24, 1996. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth information with respect to the number of shares of common stock beneficially owned by (i) each director of the Company, (ii) the five executive officers of the Company named in the table under "Compensation of Directors and Executive Officers -- Summary Compensation Table," (iii) all directors and executive officers of the Company as a group and (iv) based on information available to the Company and a review of statements filed with the Commission pursuant to Section 13(d) and 13(g) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), each person that owns beneficially (directly or together with affiliates) more than 5% of the Common Stock, in each case as of November 8, 1996 (unless otherwise noted). The Company believes that each individual or entity named has sole investment and voting power with respect to shares of Common Stock indicated as beneficially owned by them, except as otherwise noted.
COMMON STOCK BENEFICIALLY PERCENTAGE NAME OWNED(1) OWNERSHIP(1) - --------------------------------------------------------------------- ------------ ------------ N. Robert Hammer(2).................................................. 286,509 3.74% Keith B. Geeslin(3).................................................. 9,600 * Charles G. Moore III(4).............................................. 18,382 * Fred W. Wenninger(5)................................................. 7,665 * Hatim A. Tyabji(6)................................................... 1,700 * Scott D. Mercer(7)................................................... 5,139 * Alan G. Bunte(8)..................................................... 25,842 * John A. Niemzyk(9)................................................... 8,048 * Thomas O. Miller(10)................................................. 36,880 * All directors and executive officers as a group (11 persons)(11)..... 407,671 5.32% Kopp Investment Advisors, Inc.(12)................................... 2,265,014 29.55%
- ------------------------- * Represents less than 1% of the outstanding shares of Common Stock. (1) Calculated pursuant to Rule 13d-3(d) under the Exchange Act. Under Rule 13d-3(d), shares not outstanding which are subject to options, warrants, rights or conversion privileges exercisable within 60 days are deemed outstanding for the purpose of calculating the number and percentage owned by such 42 43 person, but not deemed outstanding for the purpose of calculating the percentage owned by each other person listed. (2) Includes 125,010 shares of Common Stock issuable upon exercise of options. Also includes 1,566 shares of Common Stock owned by members of Mr. Hammer's immediate family that may be deemed to be beneficially owned by Mr. Hammer. (3) Includes 3,800 shares of Common Stock issuable upon exercise of options. (4) Includes 8,800 shares of Common Stock issuable upon exercise of options. (5) Includes 6,065 shares of Common Stock issuable upon exercise of options. Also includes 100 shares of Common Stock held by Mr. Wenninger's wife that may be deemed to be beneficially owned by Mr. Wenninger. (6) Includes 1,700 shares of Common Stock issuable upon exercise of options. (7) Includes 5,139 shares of Common Stock issuable upon exercise of options. (8) Includes 21,700 shares of Common Stock issuable upon exercise of options. (9) Includes 7,470 shares of Common Stock issuable upon exercise of options. (10) Includes 26,748 shares of Common Stock issuable upon exercise of options. (11) Includes 218,136 shares of Common Stock issuable upon exercise of options. (12) Kopp Investment Advisors, Inc. ("Kopp") filed a Schedule 13G indicating beneficial ownership of shares of Common Stock. According to the Schedule 13G and to information supplied to the Company by Kopp, (i) Kopp has shared dispositive power with respect to 2,215,014 shares of Common Stock it beneficially owns and sole dispositive power with respect to 50,000 shares of Common Stock it beneficially owns and (ii) Kopp has sole voting power with respect to 181,500 shares of Common Stock beneficially owned. The number of shares beneficially owned by Kopp is indicated as of October 24, 1996. The address of Kopp is 6600 France Ave. S., #672, Edina, MN 55435. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Not applicable. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a)(1) Financial Statements The following consolidated financial statements of Norand and report are included on pages 21 to 36 of this Form 10-K: Report of Independent Public Accountants Consolidated Balance Sheets -- August 31, 1996 and August 31, 1995 Consolidated Statements of Operations -- Fiscal Years ended August 31, 1996, August 31, 1995, and August 31, 1994 Consolidated Statements of Stockholders' Equity -- Fiscal Years ended August 31, 1996, August 31, 1995, and August 31, 1994 Consolidated Statements of Cash Flows -- Fiscal Years ended August 31, 1996, August 31, 1995, and August 31, 1994 Notes to Consolidated Financial Statements (a)(2) Financial Statement Schedules 43 44 The remaining statement schedules for which provision is made in Regulation S-X are not required under the instructions contained therein, are inapplicable, or the information is set forth in the consolidated financial statements or the notes related thereto. (a)(3) Exhibits A list of the exhibits included as part of this Form 10-K is set forth in the Exhibit Index that immediately precedes such exhibits, which is incorporated herein by reference. (b) Reports on Form 8-K Norand did not file any Current Reports on Form 8-K in the fourth quarter of its 1996 fiscal year. 44 45 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Date: November 27, 1996 NORAND CORPORATION /s/ N. ROBERT HAMMER -------------------------------------- N. Robert Hammer Chairman, President, Chief Executive Officer and Director Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons in the capacities and on the dates indicated.
TITLE DATE ----------------------------------- ----------------- /s/ N. ROBERT HAMMER Chairman, President, Chief November 27, 1996 - ----------------------------------- Executive Officer and Director N. Robert Hammer /s/ ROBERT A. HURD Controller and Chief Accounting November 27, 1996 - ----------------------------------- Officer Robert A. Hurd /s/ KEITH B. GEESLIN Director November 27, 1996 - ----------------------------------- Keith B. Geeslin /s/ CHARLES G. MOORE III Director November 27, 1996 - ----------------------------------- Charles G. Moore III /s/ FRED W. WENNINGER Director November 27, 1996 - ----------------------------------- Fred W. Wenninger /s/ HATIM A. TYABJI Director November 27, 1996 - ----------------------------------- Hatim A. Tyabji
45 46 INDEX TO EXHIBITS
SEQUENTIALLY NUMBERED NUMBER EXHIBIT PAGE - ----------- ------------------------------------------------------------------- ------------ 2 Agreement of Merger, dated as of November 29, 1988, by and between Norand Corporation, an Iowa corporation, and Norand Acquisition Corporation (incorporated by reference to Exhibit 2 to the Registrant's registration statement on Form S-1 dated April 10, 1992, File No. 33-47114)........................................... 3(a) Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3(b) to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended February 27, 1993, File No. 0-20060)........................................ 3(b) Amended and Restated By-Laws of the Registrant (incorporated by reference to Exhibit 3(d) to the Registrant's registration statement on Form S-1 dated April 10, 1992, File No. 33-47114)..... 4(a) Credit Agreement, dated as of February 1, 1993 by and among the Registrant, certain financial institutions and The First National Bank of Chicago (incorporated by reference to Exhibit 4(a) to the Registrant's Annual Report on Form 10-K for the fiscal year ended August 31, 1993, File No. 0-20060)................................. 4(b) Amendment No. 1 to Credit Agreement, dated as of March 11, 1993, by and among the Registrant, certain financial institutions and The First National Bank of Chicago (incorporated by reference to Exhibit 4(b) to the Registrant's Annual Report on Form 10-K for the fiscal year ended August 31, 1993, File No. 0-20060)............... 4(c) Amendment No. 2 to Credit Agreement, dated as of May 19, 1993, by and among the Registrant, certain financial institutions and The First National Bank of Chicago (incorporated by reference to Exhibit 4(c) to the Registrant's Annual Report on Form 10-K for the fiscal year ended August 31, 1993, File No. 0-20060)............... 4(d) Amendment No. 3 to Credit Agreement, dated as of July 19, 1993, by and among the Registrant, certain financial institutions and The First National Bank of Chicago (incorporated by reference to Exhibit 4(d) to the Registrant's Annual Report on Form 10-K for the fiscal year ended August 31, 1993, File No. 0-20060)............... 4(e) Amendment No. 4 to Credit Agreement, dated as of August 1, 1993, by and among the Registrant, certain financial institutions and The First National Bank of Chicago (incorporated by reference to Exhibit 4(e) to the Registrant's Annual Report on Form 10-K for the fiscal year ended August 31, 1993, File No. 0-20060)............... 4(f) Amendment No. 5 to Credit Agreement, dated as of November 29, 1993, by and among the Registrant, certain financial institutions and The First National Bank of Chicago..................................... 4(g) Amendment No. 5 to Credit Agreement, dated as of November 29, 1993, by and among the Registrant, certain financial institutions and The First National Bank of Chicago (incorporated by reference to Exhibit 4(c) to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended November 27, 1993, File No. 0-20060)...... 4(h) Amended and Restated Credit Agreement (incorporated by reference to Exhibit 4(h) to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended December 3, 1994, File No. 0-20060).......
46 47
SEQUENTIALLY NUMBERED NUMBER EXHIBIT PAGE - ----------- ------------------------------------------------------------------- ------------ 4(i) Amendment No. 1 to the Amended and Restated Credit Agreement (incorporated by reference to Exhibit 4(i) to the Registrant's quarterly Report on Form 10-Q for the fiscal quarter ended June 3, 1995, File No. 0-20060)............................................ 4(j) Amendment No. 2 to the Amended and Restated Credit Agreement....... 4(k) Amendment No. 3 to the Amended and Restated Credit Agreement....... 4(l) Second Amended and Restated Credit Agreement....................... 4(m) Amendment No. 1 to the Second Amended and Restated Credit Agreement dated as of January 25, 1996....................................... 4(n)(1) Series A Warrant to Purchase Common Stock of Norand Corporation. Warrant No. A-1, dated November 20, 1996........................... 4(n)(2) Series A Warrant to Purchase Common Stock of Norand Corporation. Warrant No. A-2, dated November 20, 1996........................... 4(n)(3) Series A Warrant to Purchase Common Stock of Norand Corporation. Warrant No. A-3, dated November 20, 1996........................... 4(n)(4) Series A Warrant to Purchase Common Stock of Norand Corporation. Warrant No. A-4, dated November 20, 1996........................... 4(n)(5) Series A Warrant to Purchase Common Stock of Norand Corporation. Warrant No. A-5, dated November 20, 1996........................... 4(n)(6) Series B Warrant to Purchase Common Stock of Norand Corporation. Warrant No. B-1, dated November 20, 1996........................... 4(n)(7) Series B Warrant to Purchase Common Stock of Norand Corporation. Warrant No. B-2, dated November 20, 1996........................... 4(n)(8) Series B Warrant to Purchase Common Stock of Norand Corporation. Warrant No. B-3, dated November 20, 1996........................... 4(n)(9) Series B Warrant to Purchase Common Stock of Norand Corporation. Warrant No. B-4, dated November 20, 1996........................... 4(n)(10) Series B Warrant to Purchase Common Stock of Norand Corporation. Warrant No. B-5, dated November 20, 1996........................... 9 Voting Trust Agreement, dated as of June 7, 1993, by and among Sprout Capital V, Sprout Growth L.P., Sprout Growth Ltd., DLJ Capital Corporation, DLJ Venture Capital Fund II, L.P., The Bank of New York, as trustee, Donaldson, Lufkin & Jenrette, Inc. and The Equitable Life Assurance Society of the United States (incorporated by reference to Exhibit 9 to the Registrant's Annual Report on Form 10-K for the fiscal year ended August 31, 1994, File No. 0-20060)........................................................... 10(a) Nontransferable Option Agreement, dated as of April 1, 1992, by and between the Registrant and N. Robert Hammer (incorporated by reference to Exhibit 10(a) to the Registrant's registration statement on Form S-1 dated April 10, 1992, File No. 33-47114)..... 10(b) Nontransferable Incentive Stock Option Agreement, dated as of April 18, 1989, by and between the Registrant and N. Robert Hammer (incorporated by reference to Exhibit 10(b) to the Registrant's registration statement on Form S-1 dated April 10, 1992, File No. 33-47114).......................................................... 10(c) Nontransferable Non-Qualified Stock Option Agreement, dated as of April 18, 1989, by and between the Registrant and Fred Wenninger (incorporated by reference to Exhibit 10(c) to the Registrant's registration statement on Form S-1 dated April 10, 1992, File No. 33-47114)..........................................................
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SEQUENTIALLY NUMBERED NUMBER EXHIBIT PAGE - ----------- ------------------------------------------------------------------- ------------ 10(d) Nontransferable Incentive Stock Option Agreement, dated as of April 12, 1989, by and between the Registrant and Robert F. Warn (incorporated by reference to Exhibit 10(d) to the Registrant's registration statement on Form S-1 dated April 10, 1992, File No. 33-47114).......................................................... 10(e) Nontransferable Incentive Stock Option Agreement, dated as of April 12, 1989, by and between the Registrant and Thomas O. Miller (incorporated by reference to Exhibit 10(e) to the Registrant's registration statement on Form S-1 dated April 10, 1992, File No. 33-47114).......................................................... 10(f) Nontransferable Incentive Stock Option Agreement, dated as of April 12, 1989, by and between the Registrant and Robert L. Koenig (incorporated by reference to Exhibit 10(f) to the Registrant's registration statement on Form S-1 dated April 10, 1992, File No. 33-47114).......................................................... 10(g) Nontransferable Incentive Stock Option Agreement, dated as of January 1, 1992, by and between the Registrant and Greg L. Reyes (incorporated by reference to Exhibit 10(g) to the Registrant's registration statement on Form S-1 dated April 10, 1992, File No. 33-47114).......................................................... 10(h) Nontransferable Incentive Stock Option Agreement, dated as of April 12, 1989, by and between the Registrant and Gerald J. Sweas (incorporated by reference to Exhibit 10(h) to the Registrant's registration statement on Form S-1 dated April 10, 1992, File No. 33-47114).......................................................... 10(i) Nontransferable Incentive Stock Option Agreement, dated as of January 20, 1992, by and between the Registrant and Gerald J. Sweas (incorporated by reference to Exhibit 10(i) to the Registrant's registration statement on Form S-1 dated April 10, 1992, File No. 33-47114).......................................................... 10(j) Nontransferable Incentive Stock Option Agreement, dated as of April 8, 1991, by and between the Registrant and Steven P. Flannery (incorporated by reference to Exhibit 10(j) to the Registrant's registration statement on Form S-1 dated April 10, 1992, File No. 33-47114).......................................................... 10(k) Registrant's Long-Term Performance Program (incorporated by reference to Exhibit 10(k) to the Registrant's registration statement on Form S-1 dated April 10, 1992, File No. 33-47114)..... 10(l) Registrant's Employee Stock Purchase Plan (incorporated by reference to Exhibit 10(l) to the Registrant's registration statement on Form S-1 dated April 10, 1992, File No. 33-47114)..... 10(m) Registrant's Executive Bonus Plan (incorporated by reference to Exhibit 10(m) to the Registrant's registration statement on Form S-1 dated April 10, 1992, File No. 33-47114)....................... 10(n) Registrant's 1989 Stock Option Plan (incorporated by reference to Exhibit 10(n) to the Registrant's registration statement on Form S-1 dated April 10, 1992, File No. 33-47114)....................... *10(o) License Agreement, dated December 1, 1991, by and between the Registrant and Symbol Technologies, Inc. (incorporated by reference to Exhibit 10(p) to the Registrant's registration statement on Form S-1 dated April 10, 1992, File No. 33-47114).......................
48 49
SEQUENTIALLY NUMBERED NUMBER EXHIBIT PAGE - ----------- ------------------------------------------------------------------- ------------ *10(p) Development Agreement, dated as of November 30, 1990, by and between the Registrant and Omni-Point Data Company, Inc. (incorporated by reference to Exhibit 10(q) to the Registrant's registration statement on Form S-1 dated April 10, 1992, File No. 33-47114).......................................................... *10(q) Original Equipment Manufacturer Agreement--ASICS, dated February 10, 1992, between the Registrant and Omnipoint Corporation (incorporated by reference to Exhibit 10(r) to the Registrant's registration statement on Form S-1 dated April 10, 1992, File No. 33-47114).......................................................... *10(r) Norand Vendor Agreement, dated June 15, 1989, by and between the Registrant and EMD Associates, Inc. (incorporated by reference to Exhibit 10(s) to the Registrant's registration statement on Form S-1 dated April 10, 1992, File No. 33-47114)....................... *10(s) Motorola Product Sales Agreement, dated as of June 3, 1991, by and between the Registrant and Motorola, Inc. (incorporated by reference to Exhibit 10(u) to the Registrant's registration statement on Form S-1 dated April 10, 1992, File No. 33-47114)..... 10(t) Employment Letter Agreement, dated February 1, 1989, between the Registrant and Gerald J. Sweas (incorporated by reference to Exhibit 10(v) to the Registrant's registration statement on Form S-1 dated April 10, 1992, File No. 33-47114)....................... 10(u) Employment Letter Agreement, dated July 29, 1991, between the Registrant and Robert Warn (incorporated by reference to Exhibit 10(w) to the Registrant's registration statement on Form S-1 dated April 10, 1992, File No. 33-47114)................................. 10(v) Employment Letter Agreement, dated November 3, 1986, between Norand Corporation and Tom Miller (incorporated by reference to Exhibit 10(x) to the Registrant's registration statement on Form S-1 dated April 10, 1992, File No. 33-47114)................................. 10(w) Employment Letter Agreement, dated September 30, 1987, between Norand Corporation and Robert Koenig (incorporated by reference to Exhibit 10(y) to the Registrant's registration statement on Form S-1 dated April 10, 1992, File No. 33-47114)....................... 10(x) Employment Letter Agreement, dated April 1, 1989, between the Registrant and N. Robert Hammer (incorporated by reference to Exhibit 10(z) to the Registrant's registration statement on Form S-1 dated April 10, 1992, File No. 33-47114)....................... 10(y) Employment Letter Agreement, dated December 13, 1991, between the Registrant and N. Robert Hammer (incorporated by reference to Exhibit 10(aa) to the Registrant's registration statement on Form S-1 dated April 10, 1992, File No. 33-47114)....................... 10(z) Cedar Rapids Manufacturing Building Lease Agreement, dated October 13, 1983, by and between Norand Corporation and Alpha Development Company (incorporated by reference to Exhibit 10(bb) to the Registrant's registration statement on Form S-1 dated April 10, 1992, File No. 33-47114)...........................................
49 50
SEQUENTIALLY NUMBERED NUMBER EXHIBIT PAGE - ----------- ------------------------------------------------------------------- ------------ 10(aa) Letter Agreement, dated October 27, 1983, between Norand Corporation and Alpha Development Company regarding the Cedar Rapids Manufacturing Building Lease Agreement (incorporated by reference to Exhibit 10(cc) to the Registrant's registration statement on Form S-1 dated April 10, 1992, File No. 33-47114)..... 10(bb) Amended and Substituted First Amendment to Cedar Rapids Manufacturing Building Lease Agreement, dated as of August , 1984, by and between Norand Corporation and Alpha Development Company (incorporated by reference to Exhibit 10(dd) to the Registrant's registration statement on Form S-1 dated April 10, 1992, File No. 33-47114)........................................... 10(cc) Second Amendment to Cedar Rapids Manufacturing Building Lease Agreement, dated as of June 20, 1986, by and between Norand Corporation and Alpha Development Company (incorporated by reference to Exhibit 10(ee) to the Registrant's registration statement on Form S-1 dated April 10, 1992, File No. 33-47114)..... 10(dd) Third Amendment to Cedar Rapids Manufacturing Building Lease Agreement, dated as of December 26, 1990, by and between the Registrant and Alpha Development Company (incorporated by reference to Exhibit 10(ff) to the Registrant's registration statement on Form S-1 dated April 10, 1992, File No. 33-47114).................. 10(ee) Cedar Rapids Service Center Lease Agreement, dated February 21, 1986, by and between Norand Corporation and Delta Partners (incorporated by reference to Exhibit 10(gg) to the Registrant's registration statement on Form S-1 dated April 10, 1992, File No. 33-47114).......................................................... 10(ff) Cedar Rapids Service Center Assignment of Lease, dated March 25, 1986, by and between the Norand Corporation, Delta Partners and United States Bank (incorporated by reference to Exhibit 10(hh) to the Registrant's registration statement on Form S-1 dated April 10, 1992, File No. 33-47114)........................................... 10(gg) Cedar Rapids Service Center Lease Modification and Extension Agreement, dated May 7, 1991, by and between the Registrant and Delta Partners (incorporated by reference to Exhibit 10(ii) to the Registrant's registration statement on Form S-1 dated April 10, 1992, File No. 33-47114)........................................... 10(hh) Hiawatha, Iowa Warehouse Lease Agreement, dated June 21, 1991, by and between the Registrant and Neprah Associates (incorporated by reference to Exhibit 10(jj) to the Registrant's registration statement on Form S-1 dated April 10, 1992, File No. 33-47114)..... *10(ii) Reseller Agreement, dated December 6, 1991, by and between the Registrant and Epic Data, Inc. (incorporated by reference to Exhibit 10(ll) to the Registrant's registration statement on Form S-1 dated April 10, 1992, File No. 33-47114)....................... *10(jj) Letter of Intent, dated April 19, 1991, between the Registrant and Seiko Epson Corporation (incorporated by reference to Exhibit 10(mm) to the Registrant's registration statement on Form S-1 dated April 10, 1992, File No. 33-47114)................................. 10(kk) Amendment No. 1 to Registrant's 1989 Stock Option Plan (incorporated by reference to Exhibit 10(nn) to the Registrant's registration statement on Form S-1 dated April 10, 1992, File No. 33-47114)..........................................................
50 51
SEQUENTIALLY NUMBERED NUMBER EXHIBIT PAGE - ----------- ------------------------------------------------------------------- ------------ *10(ll) International Distributor Agreement, dated September 1, 1992, between the Registrant and Epson Hanbai Co., Ltd. (incorporated by reference to Exhibit 10(oo) to the Registrant's registration statement on Form S-1 dated April 10, 1992, File No. 33-47114)..... 10(mm) Agreement, dated as of September 28, 1992, between the Registrant and Pioneer Hi-Bred International, Inc. (incorporated by reference to Exhibit 10(pp) to the Registrant's registration statement on Form S-1 dated April 10, 1992, File No. 33-47114).................. 10(nn) Agreement, dated as of December 31, 1992, among the Registrant and certain of its shareholders (incorporated by reference to Exhibit 10(rr) to the Registrant's registration statement on Form S-1 dated April 10, 1992, File No. 33-47114)................................. 10(oo) Amendment No. 2 to Registrant's 1989 Stock Option Plan (incorporated by reference to Exhibit 10(ss) to the Registrant's registration statement on Form S-1 dated April 10, 1992, File No. 33-47114).......................................................... 10(pp) Amendment No. 3 to Registrant's 1989 Stock Option Plan (incorporated by reference to Exhibit 10(pp) to the Registrant's Annual Report on Form 10-K for the fiscal year ended August 31, 1993, File No. 0-20060)............................................ 10(qq) Nontransferable Incentive Stock Option Agreement, dated as of March 1, 1993, by and between the Registrant and N. Robert Hammer (incorporated by reference to Exhibit 10(qq) to the Registrant's Annual Report on Form 10-K for the fiscal year ended August 31, 1993, File No. 0-20060)............................................ 10(rr) Incentive Stock Option Agreement, dated as of March 1, 1993, by and between the Registrant and N. Robert Hammer (incorporated by reference to Exhibit 10(rr) to the Registrant's Annual Report on Form 10-K for the fiscal year ended August 31, 1993, File No. 0-20060)........................................................... 10(ss) Nontransferable Incentive Stock Option Agreement, dated as of March 1, 1993, by and between the Registrant and Gerald J. Sweas (incorporated by reference to Exhibit 10(ss) to the Registrant's Annual Report on Form 10-K for the fiscal year ended August 31, 1993, File No. 0-20060)............................................ 10(tt) Incentive Stock Option Agreement, dated as of March 1, 1993, by and between the Registrant and Gerald J. Sweas (incorporated by reference to Exhibit 10(tt) to the Registrant's Annual Report on Form 10-K for the fiscal year ended August 31, 1993, File No. 0-20060)........................................................... 10(uu) Nontransferable Incentive Stock Option Agreement, dated as of March 1, 1993, by and between the Registrant and Robert F. Warn (incorporated by reference to Exhibit 10(uu) to the Registrant's Annual Report on Form 10-K for the fiscal year ended August 31, 1993, File No. 0-20060)............................................ 10(vv) Incentive Stock Option Agreement, dated as of March 1, 1993, by and between the Registrant and Robert F. Warn (incorporated by reference to Exhibit 10(vv) to the Registrant's Annual Report on Form 10-K for the fiscal year ended August 31, 1993, File No. 0-20060)........................................................... 10(ww) Nontransferable Incentive Stock Option Agreement, dated as of March 1, 1993, by and between the Registrant and Robert L. Koenig (incorporated by reference to Exhibit 10(ww) to the Registrant's Annual Report on Form 10-K for the fiscal year ended August 31, 1993, File No. 0-20060)............................................
51 52
SEQUENTIALLY NUMBERED NUMBER EXHIBIT PAGE - ----------- ------------------------------------------------------------------- ------------ 10(xx) Incentive Stock Option Agreement, dated as of March 1, 1993, by and between the Registrant and Robert L. Koenig (incorporated by reference to Exhibit 10(xx) to the Registrant's Annual Report on Form 10-K for the fiscal year ended August 31, 1993, File No. 0-20060)........................................................... 10(yy) Nontransferable Incentive Stock Option Agreement, dated as of March 1, 1993, by and between the Registrant and Thomas O. Miller (incorporated by reference to Exhibit 10(yy) to the Registrant's Annual Report on Form 10-K for the fiscal year ended August 31, 1993, File No. 0-20060)............................................ 10(zz) Incentive Stock Option Agreement, dated as of March 1, 1993, by and between the Registrant and Thomas O. Miller (incorporated by reference to Exhibit 10(zz) to the Registrant's Annual Report on Form 10-K for the fiscal year ended August 31, 1993, File No. 0-20060)........................................................... 10(aaa) Employment Letter Agreement, dated December 3, 1991, between the Registrant and Gregory L. Reyes (incorporated by reference to Exhibit 10(aaa) to the Registrant's Annual Report on Form 10-K for the fiscal year ended August 31, 1993, File No. 0-20060)........... 10(bbb) Executive Retention Bonus Agreement, dated December 11, 1991, between the Registrant and Gregory L. Reyes (incorporated by reference to Exhibit 10(bbb) to the Registrant's Annual Report on Form 10-K for the fiscal year ended August 31, 1993, File No. 0-20060)........................................................... 10(ccc) Promissory Note, dated December 12, 1991, of Gregory L. Reyes, payable to the Registrant (incorporated by reference to Exhibit 10(ccc) to the Registrant's Annual Report on Form 10-K for the fiscal year ended August 31, 1993, File No. 0-20060)............... 10(ddd) Stockholders' Agreement, dated as of October 1, 1992, between the Registrant and certain of its stockholders (incorporated by reference to Exhibit 10(ddd) to the Registrant's Annual Report on Form 10-K for the fiscal year ended August 31, 1993, File No. 0-20060)........................................................... 10(eee) Waiver, Termination and Restriction Agreement, dated as of October 1, 1992, between the Registrant and certain of its stockholders (incorporated by reference to Exhibit 9(b) to the Registrant's registration statement on Form S-1 dated April 10, 1992, File No. 33-47114).......................................................... 10(fff) Amendment No. 1 to Registrant's Long-Term Performance Program (incorporated by reference to Exhibit 10(fff) to the Registrant's Annual Report on Form 10-K for the fiscal year ended August 31, 1993, File No. 0-20060)............................................ 10(ggg) Letter Agreement, dated November 15, 1993, between the Registrant and Epic Data, Inc., regarding the Reseller Agreement, dated December 6, 1991, by and between the Registrant and Epic Data, Inc. (incorporated by reference to Exhibit 10(ggg) to the Registrant's Annual Report on Form 10-K for the fiscal year ended August 31, 1993, File No. 0-20060)............................................ 10(hhh) Cedar Rapids Manufacturing Building Amended and Restated Lease Agreement, dated January 31, 1994, between Norand Corporation and Alpha Development Company (incorporated by reference to Exhibit 10(hhh) to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended February 26, 1994, File No. 0-20060)..........
52 53
SEQUENTIALLY NUMBERED NUMBER EXHIBIT PAGE - ----------- ------------------------------------------------------------------- ------------ 0-20060)...10(jjj) Incentive Stock Option Award Agreement dated December 15, 1993, between Norand Corporation and Steven P. Flannery (incorporated by reference to Exhibit 10(jjj) to the Registrant's Annual Report on Form 10-K for the fiscal year ended August 31, 1994, File No. 0-20060)........................................................... 10(kkk) Incentive Stock Option Award Agreement dated January 6, 1994, between Norand Corporation and N. Robert Hammer (incorporated by reference to Exhibit 10(kkk) to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended May 28, 1994, File No. 0-20060)........................................................... 10(lll) Incentive Stock Option Award Agreement dated January 6, 1994, between Norand Corporation and Gerald J. Sweas (incorporated by reference to Exhibit 10(lll) to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended May 28, 1994, File No. 0-20060)........................................................... 10(mmm) Incentive Stock Option Award Agreement dated January 6, 1994, between Norand Corporation and Thomas O. Miller (incorporated by reference to Exhibit 10(mmm) to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended May 28, 1994, File No. 0-20060)........................................................... 10(nnn) Incentive Stock Option Award Agreement dated January 6, 1994, between Norand Corporation and Greg L. Reyes (incorporated by reference to Exhibit 10(nnn) to the Registrant's Annual Report on Form 10-K for the fiscal year ended August 31, 1994, File No. 0-20060)........................................................... 10(ooo) Incentive Stock Option Award Agreement dated January 6, 1994, between Norand Corporation and Robert F. Warn (incorporated by reference to Exhibit 10(ooo) to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended May 28, 1994, File No. 0-20060)........................................................... 10(ppp) Incentive Stock Option Award Agreement dated January 6, 1994, between Norand Corporation and Steven P. Flannery (incorporated by reference to Exhibit 10(ppp) to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended May 28, 1994, File No. 0-20060)........................................................... 10(qqq) Incentive Stock Option Award Agreement dated January 6, 1994, between Norand Corporation and Robert L. Koenig (incorporated by reference to Exhibit 10(qqq) to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended May 28, 1994, File No. 0-20060)........................................................... 10(rrr) Incentive Stock Option Award Agreement dated January 6, 1994, between Norand Corporation and Robert A. Hurd (incorporated by reference to Exhibit 10(rrr) to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended May 28, 1994, File No. 0-20060)........................................................... 10(sss) Incentive Stock Option Award Agreement dated February 24, 1994, between Norand Corporation and Robert A. Hurd (incorporated by reference to Exhibit 10(sss) to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended May 28, 1994, File No. 0-20060)........................................................... 10(ttt) Amendment No. 1 to Registrant's Employee Stock Purchase Plan (incorporated by reference to Exhibit 4(a) to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended November 27, 1993, File No. 0-20060)........................................
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SEQUENTIALLY NUMBERED NUMBER EXHIBIT PAGE - ----------- ------------------------------------------------------------------- ------------ 10(uuu) Amendment No. 2 to Registrant's Long-Term Performance Program (incorporated by reference to Exhibit 4(b) to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended November 27, 1993, File No. 0-20060)........................................ 10(vvv) Hiawatha, Iowa Warehouse Lease Agreement dated May 16, 1994, between the Registrant and Neprah Associates (incorporated by reference to Exhibit 10(jj) to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended May 28, 1994, File No. 0-20060)........................................................... 10(www) Employment Letter Agreement, dated February 18, 1991, between the Registrant and Steven P. Flannery (incorporated by reference to Exhibit 10(www) to the Registrant's Annual Report on Form 10-K for the fiscal year ended August 31, 1994, File No. 0-20060)........... 10(xxx) Employment Letter Agreement, dated June 13, 1989, between the Registrant and Robert A. Hurd (incorporated by reference to Exhibit 10(xxx) to the Registrant's Annual Report on Form 10-K for the fiscal year ended August 31, 1994, File No. 0-20060)............... 10(yyy) Cedar Rapids Product Development Center Lease Agreement, dated as of April 6, 1994, between the Registrant and RYAN/D&S, L.C. (incorporated by reference to Exhibit 10(yyy) to the Registrant's Annual Report on Form 10-K for the fiscal year ended August 31, 1994, File No. 0-20060)............................................ 10(zzz) First Amendment to Cedar Rapids Product Development Center Lease, dated as of July 6, 1994, between the Registrant and RYAN/D&S, L.C. (incorporated by reference to Exhibit 10(zzz) to the Registrant's Annual Report on Form 10-K for the fiscal year ended August 31, 1994, File No. 0-20060)............................................ 10(aaaa) Registrants 1994 Stock Option Plan for Non-Employee Directors (incorporated by reference to Exhibit 10(ttt) to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended December 3, 1994, File No. 0-20060)......................................... 10(bbbb) Non-Employee Director Stock Option Agreement between Norand Corporation and Charles G. Moore, III dated March 15, 1995 (incorporated by reference to Exhibit 10(bbbb) to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended March 4, 1955, File No. 0-20060)............................................ 10(cccc) Non-Employee Director Stock Option Agreement between Norand Corporation and Morton L. Topfer dated March 15, 1995 (incorporated by reference to Exhibit 10(cccc) to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended March 4, 1995, File No. 0-20060).................................................. 10(dddd) Non-Employee Director Stock Option Agreement between Norand Corporation and Hatim Tyabji dated March 15, 1995 (incorporated by reference to Exhibit 10(dddd) to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended March 4, 1995, File No. 0-20060)........................................................... 10(eeee) Non-Employee Director Stock Option Agreement between Norand Corporation and Fred W. Wenninger dated March 15, 1995 (incorporated by reference to Exhibit 10(eeee) to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended March 4, 1995, File No. 0-20060)............................................ 10(ffff) Non-Employee Director Stock Option Agreement between Norand Corporation and Keith B. Geeslin dated March 15, 1995(incorporated by reference to Exhibit 10(ffff) to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended March 4, 1995, File No. 0-20060)..................................................
54 55
SEQUENTIALLY NUMBERED NUMBER EXHIBIT PAGE - ----------- ------------------------------------------------------------------- ------------ 10(gggg) Incentive Stock Option Agreement between Norand Corporation and Neil R. Hammer dated May 3, 1995 (incorporated by reference to Exhibit 10(gggg) to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended June 3, 1995, File No. 0-20060)....... 10(hhhh) Incentive Stock Option Agreement between Norand Corporation and Gerald S. Sweas dated May 3, 1995 (incorporated by reference to Exhibit 10(hhhhh) to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended June 3, 1995, File No. 0-20060)....... 10(iiii) Incentive Stock Option Agreement between Norand Corporation and Thomas O. Miller dated May 3, 1995 (incorporated by reference to Exhibit 10(iiii) to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended June 3, 1995, File No. 0-20060)....... 10(jjjj) Form of Incentive Stock Option Agreement between Norand Corporation and Robert F. Warn dated May 3, 1995 (incorporated by reference to Exhibit 10(jjjj) to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended June 3, 1995, File No. 0-20060)....... 10(kkkk) Incentive Stock Option Agreement between Norand Corporation and Steven P. Flannery dated May 3, 1995 (incorporated by reference to Exhibit 10(kkkk) to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended June 3, 1995, File No. 0-20060)....... 10(llll) Incentive Stock Option Agreement between Norand Corporation and Robert L. Koenig dated May 3, 1995 (incorporated by reference to Exhibit 10(llll) to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter end June 3, 1995, File No. 0-20060)......... 10(mmmm) Incentive Stock Option Agreement between Norand Corporation and Alan G. Bunte dated May 3, 1995 (incorporated by reference to Exhibit 10(mmmm) to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended June 3, 1995, File No. 0-20060)....... 10(nnnn) Incentive Stock Option Agreement between Norand Corporation and Robert A. Hurd dated May 3, 1995 (incorporated by reference to Exhibit 10(nnnn) to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended June 3, 1995, File No. 0-20060)....... 10(oooo) Incentive Stock Option Agreement between Norand Corporation and Robert F. Warn dated May 3, 1995 (incorporated by reference to Exhibit 10(oooo) to the Registrant's Annual Report on Form 10-K for the fiscal year ended August 31, 1996, File No. 0-20060)........... 10(pppp) Non-Employee Director Stock Option Agreement between Norand Corporation and Charles G. Moore, III dated January 18, 1996 (incorporated by reference to Exhibit 10(pppp) to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended March 2, 1996, File No. 0-20060)............................................ 10(qqqq) Non-Employee Director Stock Option Agreement between Norand Corporation and Charles G. Moore, III dated March 16, 1996 (incorporated by reference to Exhibit 10(qqqq) to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended March 2, 1996, File No. 0-20060)............................................
55 56
SEQUENTIALLY NUMBERED NUMBER EXHIBIT PAGE - ----------- ------------------------------------------------------------------- ------------ 10(rrrr) Non-Employee Director Stock Option Agreement between Norand Corporation and Hatim Tyabji dated March 16, 1996 (incorporated by reference to Exhibit 10(rrrr) to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended March 2, 1996, File No. 0-20060)........................................................... 10(ssss) Non-Employee Director Stock Option Agreement between Norand Corporation and Fred W. Wenninger dated March 16, 1996 (incorporated by reference to Exhibit 10(ssss) to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended March 2, 1996, File No. 0-20060)............................................ 10(tttt) Non-Employee Director Stock Option Agreement between Norand Corporation and Keith B. Geeslin dated March 16, 1996 (incorporated by reference to Exhibit 10(tttt) to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended March 2, 1996, File No. 0-20060).................................................. 10(uuuu) Incentive Stock Option Agreement dated March 29, 1996, between Norand Corporation and Thomas O. Miller (incorporated by reference to Exhibit 10(uuuu) to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended June 1, 1996, File No. 0-20060)........................................................... 10(vvvv) Incentive Stock Option Agreement dated February 6, 1996, between Norand Corporation and Thomas O. Miller (incorporated by reference to Exhibit 10(vvvv) to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended June 1, 1996, File No. 0-20060)........................................................... 10(wwww) Incentive Stock Option Agreement dated March 29, 1996, between Norand Corporation and Robert A. Hurd (incorporated by reference to Exhibit 10(wwww) to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended June 1, 1996, File No. 0-20060)....... 10(xxxx) Incentive Stock Option Agreement dated February 6, 1996, between Norand Corporation and Robert A. Hurd (incorporated by reference to Exhibit 10(xxxx) to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended June 1, 1996, File No. 0-20060)....... 10(yyyy) Incentive Stock Option Agreement dated January 25, 1996, between Norand Corporation and John A. Niemzyk (incorporated by reference to Exhibit 10(yyyy) to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended June 1, 1996, File No. 0-20060)........................................................... 10(zzzz) Incentive Stock Option Agreement dated March 29, 1996, between Norand Corporation and John A. Niemzyk (incorporated by reference to Exhibit 10(zzzz) to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended June 1, 1996, File No. 0-20060)........................................................... 10(aaaaa) Incentive Stock Option Agreement dated March 29, 1996, between Norand Corporation and N. Robert Hammer (incorporated by reference to Exhibit 10(aaaaa) to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended June 1, 1996, File No. 0-20060)........................................................... 10(bbbbb) Incentive Stock Option Agreement dated March 29, 1996, between Norand Corporation and Alan G. Bunte (incorporated by reference to Exhibit 10(bbbbb) to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended June 1, 1996, File No. 0-20060).......
56 57
SEQUENTIALLY NUMBERED NUMBER EXHIBIT PAGE - ----------- ------------------------------------------------------------------- ------------ 10(ccccc) Incentive Stock Option Agreement dated February 6, 1996, between Norand Corporation and Alan G. Bunte (incorporated by reference to Exhibit 10(ccccc) to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended June 1, 1996, File No. 0-20060)....... **10(ddddd) Incentive Stock Option Agreement dated September 24, 1996, between Norand Corporation and N. Robert Hammer. **10(eeeee) Norand Corporation Change in Control Severance Policy. **10(fffff) Change in Control Benefit Agreement dated October 11, 1996 between Norand Corporation and N. Robert Hammer. 11 Statement regarding computation of per share earnings.............. 21 Subsidiaries of Norand............................................. 23 Consent of Arthur Andersen LLP..................................... 27 Financial data schedule............................................
- ------------------------- * Confidential treatment has been obtained for portions of this exhibit ** Management contract or compensatory plan or arrangement required to be filed as an exhibit to the Company's Annual Report on Form 10-K. 57 EX-4.(M) 2 AMEND. NO. 1 TO THE 2ND AMEND & RST. CREDIT AGREE. 1 EXHIBIT 4M AMENDMENT NO. 1 TO THE SECOND AMENDED AND RESTATED CREDIT AGREEMENT Dated as of January 25, 1996 THIS AMENDMENT NO. 1 TO THE SECOND AMENDED AND RESTATED CREDIT AGREEMENT ("Amendment") is delivered on November 20, 1996, to be effective as of August 31, 1996, by and among NORAND CORPORATION (the "Borrower"), the financial institutions listed on the signature pages hereof (the "Lenders") and THE FIRST NATIONAL BANK OF CHICAGO, in its individual capacity as a Lender and as contractual representative of the Lenders (the "Agent") under that certain Second Amended and Restated Credit Agreement dated as of January 25, 1996 by and among the Borrower, the Lenders and the Agent (the "Credit Agreement"). Defined terms used herein and not otherwise defined herein shall have the meaning given to them in the Credit Agreement. WITNESSETH WHEREAS, the Borrower, the Lenders and the Agent are parties to the Credit Agreement; and WHEREAS, the Borrower, the Lenders and the Agent have agreed to amend the Credit Agreement on the terms and conditions set forth herein. NOW, THEREFORE, in consideration of the premises set forth above, the terms and conditions contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Borrower, the Lenders and the Agent have agreed to the following amendments to the Credit Agreement. 1. Amendments to Credit Agreement. Effective as of August 31, 1996 and subject to the satisfaction of the conditions precedent set forth in Section 2 below, the Credit Agreement is hereby amended as follows: 1.1. Article I of the Credit Agreement is hereby amended as follows: 1.1.1. The definition of "Aggregate Commitment" is hereby amended to delete the phrase ", and (v) for the period beginning on December 16, 1996 through the Facility Termination Date will be an amount equal to $59,500,000" now occurring therein and to substitute the following therefor: ", (v) for the period beginning on December 16, 1996 through March 30, 1997 will be an amount equal to $59,500,000, (vi) for the period beginning on March 31, 1997 through May 30, 1997 will be an amount equal to $57,000,000, (vii) for the period beginning on May 31, 1997 through June 29, 1997 will be an amount equal to $54,250,000, (viii) for the period beginning on June 30, 1997 through July 30, 1997 will be an amount equal to $53,250,000, (ix) for the period beginning on July 2 31, 1997 through August 30, 1997 will be an amount equal to $52,250,000, (x) for the period beginning on August 31, 1997 through September 14, 1997 will be an amount equal to $49,000,000, and (xi) for the period beginning on September 15, 1997 through the Facility Termination Date will be an amount equal to $48,250,000"; and to delete the phrase "(i), (ii), (iii), (iv) and (v)" now occurring therein and substituting the following therefor: "(i) through (xi)". 1.1.2. The definition of "Aggregate Super Super Senior Commitment" is hereby amended to insert at the end thereof, the following: "; provided, that the Aggregate Super Super Senior Commitment shall be permanently reduced to $0 on December 31, 1996" 1.1.3. The definition of "Alternate Base Rate" is hereby deleted in its entirety and the following is substituted therefor: "Alternate Base Rate" means, for any day, a rate of interest per annum equal to the higher of (a) the Corporate Base Rate for such day and (b) the sum of Federal Funds Effective Rate for such day plus 1/2% per annum. 1.1.4. The definition of "Facility Termination Date" is hereby deleted in its entirety and the following is substituted therefor: "Facility Termination Date" means September 30, 1997. 1.1.5. The definition of "Tangible Net Worth" is hereby deleted in its entirety and the following is substituted therefor: "Tangible Net Worth" means for any Person, at any date of determination the consolidated stockholders' equity of such Person and its Subsidiaries determined in accordance with Agreement Accounting Principles, less their consolidated Intangible Assets, all determined as of such date; provided, however, that prior to May 31, 1997 the calculation of Tangible Net Worth with respect to the Borrower and its Subsidiaries shall exclude $4,500,000 of stockholders' equity arising from the issuance of the Settlement Stock. 1.1.6. The following definitions shall be added in alphabetical order: "ABR Margin" means, with respect to any Loan, a rate per annum determined for any day in accordance with the following table: -2- 3
Revolving Super Super Super Date Term Loans Loans Senior Loans Senior Loans ---------------------- ---------- --------- ------------ ------------ Prior to 9/15/96 1.75% 1.75% 2.75% 2.75% 9/15/96 thru 10/14/96 2.25% 1.75% 2.75% 2.75% 10/15/96 thru 11/14/96 2.75% 1.75% 2.75% 2.75% 11/15/96 thru 12/14/96 3.25% 1.75% 2.75% 2.75% 12/15/96 thru 12/30/96 3.75% 1.75% 2.75% 2.75% After 12/30/96 4.00% 4.00% 4.00% 4.00%
"Amendment Delivery Date" means November 20, 1996. "Settlement Stock" means the common stock of the Borrower contemplated to be issued in settlement of pending shareholders' claims against the Borrower with respect to the litigation styled In re Norand Corporation Securities Litigation, Master File No. C95-323, pending in the United States District Court for the Northern District of Iowa, Cedar Rapids Division. 1.2. Section 2.2(b) of the Credit Agreement is hereby amended to delete the first sentence thereof in its entirety and to substitute the following therefor: "The Borrower shall make ten (10) monthly amortization payments reducing the principal balance of the Term Loans by $1,000,000 on September 15, 1996, by $1,000,000 on October 15, 1996, by $1,000,000 on November 15, 1996, by $1,000,000 on December 15, 1996, by $2,500,000 on March 31, 1997, by $2,750,000 on May 31, 1997, by $1,000,000 on June 30, 1997, by $1,000,000 on July 31, 1997, by $3,250,000 on August 31, 1997, and by $750,000 on September 15, 1997." 1.3. Section 2.3 of the Credit Agreement is hereby amended to insert the following at the end thereof: "(v) Restructuring Fees. (a) For the account of each Lender, a restructuring fee equal to one-tenth of one percent (.10%) of such Lender's Commitments payable on the Amendment Delivery Date. Such fee shall be fully earned when due and shall be non-refundable when paid. (b) For the account of each Lender, a restructuring fee equal to (x) one-tenth of one percent (.10%) of such Lender's Commitments then in effect on each of January 31, 1997, February 28, 1997, March 31, 1997, and April 30, 1997, and (y) one-quarter of one percent (.25%) of such Lender's Commitments then in effect on June 30, 1997. Such fees shall be fully earned on such dates and shall be due and payable on the earlier of (A) June 30, 1997 or (B) the date on which the Aggregate Commitment is terminated and all of the Obligations are repaid in full. Such fees shall be non-refundable when paid." -3- 4 1.4. Section 2.14 of the Credit Agreement is hereby amended to delete the last sentence thereof in its entirety and to substitute the following therefor: "The Borrower shall pay interest on each Loan at a rate per annum equal to the sum of the Alternate Base Rate plus the ABR Margin applicable to such Loan." 1.5. Section 6.4.1 of the Credit Agreement is hereby amended to delete the phrase "or (iv) $1,000,000 during the period beginning December 1, 1996 and ending December 31, 1996" now contained therein, and to substitute the following therefor: "or (iv) $3,000,000 during the period beginning December 1, 1996 and ending February 28, 1997 or (v) $3,000,000 during the period beginning March 1, 1997 and ending May 31, 1997 or (vi) $2,000,000 during the period beginning June 1, 1997 and ending August 31, 1997 or (vii) $500,000 during the period beginning September 1, 1997 and ending September 30, 1997; provided, however, that in the event that the Borrower shall have received no less than $20,000,000 in net cash proceeds of new equity capital (not including the equity capital attributable to the Settlement Stock, and any mandatory redemption terms of which equity capital shall be acceptable to the Required Lenders) raised by and/or contributed to the Borrower subsequent to the Amendment Delivery Date or of new Indebtedness subordinated to the Obligations (all of the terms of which Indebtedness, including, without limitation, maturity, amortization, covenants, defaults, remedies and subordination provisions, shall be acceptable to the Required Lenders) raised by the Borrower subsequent to the Amendment Delivery Date, the amounts in subsections (v), (vi) and (vii) above shall be increased to $3,750,000, $4,250,000 and $1,250,000, respectively" 1.6. Section 6.4.2 of the Credit Agreement is hereby deleted in its entirety and the following is substituted therefor: "6.4.2. Tangible Net Worth. The Borrower will maintain, as at the last day of each fiscal quarter, (i) with respect to the fiscal quarter ending August 31, 1996, a Tangible Net Worth of not less than $28,000,000, (ii) with respect to the fiscal quarter ending November 30, 1996, a Tangible Net Worth of not less than $27,000,000, (iii) with respect to the fiscal quarter ending February 28, 1997, a Tangible Net Worth of not less than $28,000,000, (iv) with respect to the fiscal quarter ending May 31, 1997, a Tangible Net Worth of not less than $33,665,000, and (v) with respect to the fiscal quarter ending August 31, 1997, a Tangible Net Worth of not less than $36,549,000." 1.7. Section 6.4.3 of the Credit Agreement is hereby deleted in its entirety and the following is substituted therefor: "6.4.3. Minimum EBITDA. The Borrower on a consolidated basis with its Subsidiaries shall have EBITDA (i) for the period beginning February 1, 1996 and -4- 5 ending May 31, 1996 of not less than $15,988,000, (ii) for the period beginning February 1, 1996 and ending August 31, 1996 of not less than $17,000,000, (iii) for the fiscal quarter ending on November 30, 1996 of not less than $3,705,000, (iv) for the fiscal quarter ending on February 28, 1997 of not less than $5,044,000, (v) for the fiscal quarter ending on May 31, 1997 of not less than $7,073,000, and (vi) for the fiscal quarter ending August 31, 1997 of not less than $8,564,000. Each of the amounts prescribed above in this Section 6.4.3 will be automatically reduced by the amount of any additional restructuring charge or other expenses related to the Borrower's restructuring over and above the restructuring charge or other expenses related to the Borrower's restructuring of $5,121,000 (on a pre-tax basis) currently budgeted for January, 1996 which additional charge or expense is actually incurred or accrued subsequent to January 1, 1996 but before February 29, 1996 and during the applicable period in accordance with generally accepted accounting principles to the extent such charges or other expenses related to the Borrower's restructuring do not exceed in the aggregate for the period beginning January 1, 1996 $2,800,000 (on an after-tax basis)." 1.8. Section 6.26 of the Credit Agreement is hereby amended to insert at the end thereof, the following: "The Borrower shall cause the consultant to issue monthly written reports to the Agent and the Lenders, within 30 days after the end of each month, describing in summary the Borrower's actions with respect to refinancing the facilities hereunder, except to the extent any information otherwise to be included in such report is prohibited pursuant to a confidentiality agreement. On or before December 15, 1996, the Borrower shall cause the consultant to issue to the Agent and the Lenders (i) a written report reviewing and reporting on the Borrower's 1997 business plan as delivered to the Agent and the Lenders on October 15, 1996, and (ii) a written report reviewing and reporting on the Borrower's implementation of the consultant's recommendations based on the consultant's review of the Borrower's operations and controls in connection with the original execution and delivery of this Agreement, including, without limitation, changes in internal controls, changes in accounting controls and modifications and restructuring of the Borrower's business. The Borrower shall cause the consultant to issue to the Agent and the Lenders within thirty (30) days after the close of each of the Borrower's fiscal quarters a written report describing any differences of opinion between the Borrower and the Borrower's independent certified public accountants regarding the financial reporting of the Borrower, including, without limitation, reporting of non-cash reserves." 1.9. Article VI of the Credit Agreement is hereby amended to add at the end thereof a new Section 6.28 as follows: "6.28. Norand Technology Corporation. The Borrower will not permit Norand Technology Corporation (i) to engage in any operations other than the ownership and licensing (as licensor) of patents and other intellectual property in -5- 6 the ordinary course of business or (ii) to incur any Indebtedness or liabilities, other than liabilities as licensor incidental to its licensing agreements, liabilities incidental to its separate corporate existence, and liabilities under the Loan Documents, provided that Norand Technology Corporation may pay dividends and make distributions to the Borrower." 1.10. Article VII of the Credit Agreement is hereby amended to add immediately after the first sentence thereof the following: "The Lenders and the Agent specifically waive any Defaults and Unmatured Defaults resulting from the violation prior to the Amendment Delivery Date of any provisions of Sections 6.4.1, 6.4.2 and 6.4.3 with respect to calculations made as of the end of Fiscal Year 1996." 2. Conditions of Effectiveness. This Amendment shall become effective as of August 31, 1996, if, and only if, the Agent has received each of the following: (a) duly executed originals of this Amendment from the Borrower, the Agent and each of the Lenders, (b) duly executed originals of a Warrant Purchase Agreement from the Borrower and the Lenders in form and substance acceptable to the Lenders, (c) duly executed originals of warrants (the "Warrants") for the purchase of an aggregate amount of 550,000 shares of common stock of the Borrower in form and substance acceptable to the Lenders, (d) a reaffirmation from Norand Technology Corporation, a Delaware corporation, in form and substance acceptable to the Lenders, (e) a certificate, signed by the Secretary or Assistant Secretary of the Borrower, stating that there has been no change in the articles of incorporation and by-laws of the Borrower since those delivered in connection with the Credit Agreement or if there have been changes, setting forth such changes, (f) a certificate of good standing or qualification to do business of recent date for the Borrower from the States of Iowa, Minnesota and Delaware, (g) copies, certified by the Secretary or Assistant Secretary of the Borrower, of its Board of Directors' resolutions (and resolutions of other bodies, if any are deemed necessary by counsel for any Lender) authorizing the execution of this Amendment, the Notes and the Warrants and related Warrant Purchase Agreement, (h) an incumbency certificate, executed by the Secretary or Assistant Secretary of the Borrower, which shall identify by name and title and bear the signature of the officers of the Borrower authorized to sign the Amendment, the Notes and the Warrants and to -6- 7 make borrowings hereunder, upon which certificate the Lenders shall be entitled to rely until informed of any change in writing by the Borrower, (i) written opinions of Mayer Brown & Platt, special counsel to the Borrower and its Subsidiaries, and of James I. Johnson, General Counsel of the Borrower, addressed to the Lenders in form and substance reasonably acceptable to the Lenders, (j) for the account of each Lender, a restructuring fee equal to one-tenth of one percent (.10%) of such Lender's Commitments as in effect on the date of delivery hereof, and (k) such other documents, instruments and agreements as any Lender or Sidley & Austin may reasonably request. 3. Representations and Warranties of the Borrower. The Borrower hereby represents and warrants as follows: (a) This Amendment and the Credit Agreement, as amended hereby, constitute legal, valid and binding obligations of the Borrower and are enforceable against the Borrower in accordance with their terms. (b) Upon the effectiveness of this Amendment, the Borrower hereby reaffirms all representations and warranties made in the Credit Agreement, and to the extent the same are not amended hereby, agrees that all such representations and warranties shall be deemed to have been remade as of the date of delivery of this Amendment, unless and to the extent that any such representation and warranty is stated to relate solely to an earlier date, in which case such representation and warranty shall be true and correct as of such earlier date. 4. Reference to and Effect on the Credit Agreement. (a) Upon the effectiveness of Section 1 hereof, on and after the date hereof, each reference in the Credit Agreement to "this Credit Agreement," "hereunder," "hereof," "herein" or words of like import shall mean and be a reference to the Credit Agreement as amended hereby. (b) The Credit Agreement, as amended hereby, and all other documents, instruments and agreements executed and/or delivered in connection therewith, shall remain in full force and effect, and are hereby ratified and confirmed. (c) Except as expressly provided herein, the execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy of the Agent or the Lenders, nor constitute a waiver of any provision of the Credit Agreement or any other documents, instruments and agreements executed and/or delivered in connection therewith. 5. Governing Law. This Amendment shall be governed by and construed in accordance with the internal laws (as opposed to the conflict of law provisions) of the State of Illinois. -7- 8 6. Headings. Section headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose. 7. Counterparts. This Amendment may be executed by one or more of the parties to the Amendment on any number of separate counterparts and all of said counterparts taken together shall be deemed to constitute one and the same instrument. -8- 9 IN WITNESS WHEREOF, this Amendment has been duly executed and delivered on the date first above written. NORAND CORPORATION By: N. Robert Hammer -------------------------------- Name: N. Robert Hammer Title: Chairman, President & Chief Executive Officer THE FIRST NATIONAL BANK OF CHICAGO, as Agent By: Dennis Saletta -------------------------------- Name: Dennis Saletta Title: Vice President LENDERS: THE FIRST NATIONAL BANK OF CHICAGO By: Dennis Saletta -------------------------------- Name: Dennis Saletta Title: Vice President CAISSE NATIONALE DE CREDIT AGRICOLE By: David Bouhl -------------------------------- Name: David Bouhl, FVP Title: Head of Corporate Banking, Chicago -9- 10 FLEET NATIONAL BANK (f/k/a Fleet Bank of Massachusetts, N.A.) By: Bret Bokelkamp ------------------------------- Name: Bret Bokelkamp Title: Vice President THE DAIWA BANK, LIMITED By: Sumitomo Bank By: Jun Okuda ------------------------------- Name: Jun Okuda Title: Attorney-In-Fact NORWEST BANK IOWA, NATIONAL ASSOCIATION By: Robert A. Lawler ------------------------------- Name: Robert A.Lawler Title: Vice President -10- EX-4.(N)(1) 3 SERIES A WARRANT A-1 1 EXHIBIT 4.N.1 ================================================================================ SERIES A WARRANT to Purchase Common Stock of NORAND CORPORATION ================================================================================ Warrant No. A - 1 Original Issue Date: November 20, 1996 2 NEITHER THE WARRANTS REPRESENTED BY THIS CERTIFICATE NOR ANY OF THE SECURITIES ISSUABLE UPON EXERCISE THEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAW. NO TRANSFER OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE OR OF THE SECURITIES ISSUABLE UPON EXERCISE THEREOF SHALL BE VALID OR EFFECTIVE UNLESS (A) SUCH TRANSFER IS MADE PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR (B) THE HOLDER OF THE SECURITIES PROPOSED TO BE TRANSFERRED SHALL HAVE DELIVERED TO THE COMPANY EITHER A NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION OR AN OPINION OF COUNSEL EXPERIENCED IN SECURITIES MATTERS AND REASONABLY ACCEPTABLE TO THE COMPANY TO THE EFFECT THAT SUCH PROPOSED TRANSFER IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE ACT OR (C) SUCH TRANSFER IS PURSUANT TO RULE 144 OR RULE 144A UNDER THE ACT AND SUCH HOLDER(S) SHALL HAVE DELIVERED TO THE COMPANY A CERTIFICATE SETTING FORTH THE BASIS FOR APPLYING SUCH RULE TO THE PROPOSED TRANSFER. Warrant No. A - 1 SERIES A WARRANT NORAND CORPORATION THIS IS TO CERTIFY THAT THE FIRST NATIONAL BANK OF CHICAGO, or registered assigns, is entitled, at any time after May 31, 1997 and prior to the Expiration Date (such term, and certain other capitalized terms used herein being hereinafter defined), to purchase from NORAND CORPORATION, a Delaware corporation (the "Company"), Eighty-eight Thousand Eight Hundred Fifty-seven (88,857) shares of the Common Stock of the Company (subject to adjustment as provided herein), at a purchase price of $21.15 per share (the initial "Exercise Price", subject to adjustment as provided herein), all on the terms and conditions and pursuant to the provisions hereinafter set forth. 3 1. DEFINITIONS As used in this Warrant, the following terms have the respective meanings set forth below: "Affiliate" of any Person means a Person (a) which directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with such Person, (b) which beneficially owns or holds more than ten percent of the outstanding shares of any class of voting stock of such Person and has the power to vote such shares or (c) more than ten percent of the outstanding shares of any class of voting stock (or, in the case of a Person which is not a corporation, more than ten percent of the equity interest) of which is beneficially owned or held by such Person and such Person has the power to vote such shares or equity interest. The term "control" as used with respect to any Person means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise. "After-Tax Basis", when referring to a payment that is required hereunder (the "target amount"), shall mean a total payment (the "total amount") that, after deduction of all federal, state and local taxes that are required to be paid by the recipient in respect of the receipt or accrual of such total amount, is equal to the target amount. "Agreed Rate" shall mean a rate per annum equal to the corporate base rate of interest announced by The First National Bank of Chicago from time to time, changing when and as said corporate base rate changes. "Appraised Value" per share of Common Stock as of a date specified herein shall mean the value of such share as of such date as determined by an investment bank of nationally recognized standing selected by the Majority Warrant Holders from Schedule B (or any successor of any such entity), it being understood that the Majority Warrant Holders shall use commercially reasonable efforts to select one of the first three listed entities subject to arriving at reasonably acceptable terms and conditions for the -2- 4 appraisal. The Company shall pay the costs and fees of such investment bank, and the decision of the investment bank making such determination of Appraised Value shall be final and binding on the Company and all affected holders of Warrants or Warrant Stock. Such Appraised Value shall be determined as a pro rata portion of the value of the Company taken as a whole, based on the higher of (A) the value derived from a hypothetical sale of the entire Company as a going concern by a willing seller to a willing buyer (neither acting under any compulsion) and (B) the liquidation value of the entire Company. No discount shall be applied on account of (i) any Warrants or Warrant Stock representing a minority interest, (ii) any lack of liquidity of the Common Stock or the Warrants, (iii) the fact that the Warrants or Warrant Stock may constitute "restricted securities" for securities law purposes or (iv) the existence of any call option. "Bank Holding Company Act" shall mean the Bank Holding Company Act of 1956, as amended. "Business Day" shall mean any day that is not a Saturday or Sunday or a day on which banks are required or permitted to be closed in the State of Illinois. "Call" shall have the meaning set forth in Section 13 hereof. "Call Notice" shall have the meaning set forth in Section 13 hereof. "Commission" shall mean the Securities and Exchange Commission or any other federal agency then administering the Securities Act and other federal securities laws. "Common Stock" shall mean (except where the context otherwise indicates) the Common Stock of the Company, par value $.01 per share, as constituted on the Original Issue Date, and any capital stock into which such Common Stock may thereafter be changed, and shall also include (i) capital stock of the Company of any other class (regardless of how denominated) issued to the holders of shares of any Common Stock upon any reclassification thereof which is also not preferred as to dividends or liquidation over any other -3- 5 class of stock of the Company and which is not subject to redemption and (ii) shares of common stock of any successor or acquiring corporation (as defined in Section 4.5 hereof) received by or distributed to the holders of Common Stock of the Company in the circumstances contemplated by Section 4.5 hereof. "Company" means Norand Corporation, a Delaware corporation, and any successor corporation. "Company Default" means (a) the breach of any warranty or the inaccuracy in any material respect at the time when made of any representation made by the Company herein or (b) the failure by the Company to comply in any material respect with any covenant of the Company contained herein. "Continuously Effective", with respect to a specified registration statement, shall mean that it shall not cease to be effective and available for Transfers of Warrant Stock thereunder for the longer of either (i) any ten consecutive Business Days, or (ii) an aggregate of fifteen Business Days during the period specified in the relevant provision of Section 9 hereof. "Convertible Securities" shall mean evidences of indebtedness, shares of stock or other securities that are convertible into or exchangeable for, with or without payment of additional consideration in cash or property, shares of Common Stock, either immediately or upon the occurrence of a specified date or a specified event. "Credit Agreement" means the Second Amended and Restated Credit Agreement dated as of January 25, 1996, as thereafter from time to time amended, supplemented, restated or modified, among the Company, the Lenders party thereto and The First National Bank of Chicago, as agent. "Current Market Price" shall mean as of any specified date the average of the daily market prices of the Common Stock of the Company for the shorter of (x) the twenty consecutive Business Days immediately preceding such date or (y) the period commencing on the Business Day next following the first public announcement of any event giving rise to an adjustment of the Exercise Price pursuant to Section 4 below -4- 6 and ending on such date. The "daily market price" for each such Business Day shall be: (i) if the Common Stock is then listed on a national securities exchange or is listed on NASDAQ and is designated as a National Market System security, the last sale price, regular way, on such day on the principal stock exchange or market system on which such Common Stock is then listed or admitted to trading, or, if no such sale takes place on such day, the average of the closing bid and asked prices for the Common Stock on such day as reported on such stock exchange or market system or (ii) if the Common Stock is not then listed or admitted to trading on any national securities exchange or designated as a National Market System security on NASDAQ but is traded over-the-counter, the average of the closing bid and asked prices for the Common Stock as reported on NASDAQ or the Electronic Bulletin Board or in the National Daily Quotation Sheets, as applicable. "Demand Registration" shall have the meaning set forth in Section 9.2(a) hereof. "Demanding Holders" shall have the meaning set forth in Section 9.2(a) hereof. "Designated Office" shall have the meaning set forth in Section 11 hereof. "Equity" shall mean equity capital (not including the equity capital attributable to the Settlement Stock, and any mandatory redemption terms of which equity capital are acceptable to the Majority Warrant Holders) raised by and/or contributed to the Company subsequent to the Original Issue Date or new Indebtedness (as defined in the Credit Agreement) subordinated to the Obligations (as defined in the Credit Agreement), provided the terms of such Indebtedness (including, without limitation, maturity, amortization, covenants, defaults, remedies and subordination provisions) are acceptable to the Majority Warrant Holders. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect from time to time. -5- 7 "Exercise Notice" shall have the meaning set forth in Section 2.1 hereof. "Exercise Period" shall mean the period during which this Warrant is exercisable pursuant to Section 2.1 hereof. "Exercise Price" shall mean, in respect of a share of Common Stock at any date herein specified, the initial Exercise Price set forth in the preamble of this Warrant as adjusted from time to time pursuant to Section 4 hereof. "Expiration Date" shall mean August 31, 2002, unless extended under the circumstances contemplated by Section 9.2(d) hereof. "Fair Value" per share of Common Stock as of any specified date shall mean (A) if the Common Stock is publicly traded on such date, the Current Market Price per share or (B) if the Common Stock is not publicly traded on such date, (1) the fair market value per share of Common Stock as determined in good faith by the Board of Directors of the Company and set forth in a written notice to each Holder or (2) if the Majority Warrant Holders object in writing to such price as determined by the Board of Directors within thirty days after receiving notice of same, the Appraised Value per share as of such date. "Fully Diluted Outstanding" shall mean, when used with reference to Common Stock, at any date as of which the number of shares thereof is to be determined, all shares of Common Stock Outstanding on such date and all shares of Common Stock issuable in respect of (x) the Warrants outstanding on such date, (y) any Convertible Securities outstanding on such date and (z) any other Stock Purchase Rights outstanding on such date, in each case regardless of whether or not the conversion, exchange, subscription or purchase rights associated with such Convertible Securities or Stock Purchase Rights are presently exercisable. "GAAP" shall mean generally accepted accounting principles in the United States of America as from time to time in effect. -6- 8 "Glass-Steagall Act" shall mean Section 24 (Seventh), Section 78, Section 377 and Section 378 of Title 12 (12 U.S.C. Section Section 24 (Seventh) 78, 377, 378), or any similar federal legislation. "Holder" shall mean (a) with respect to this Warrant, the Person in whose name the Warrant set forth herein is registered on the books of the Company maintained for such purpose and (b) with respect to any other Warrant or shares of Warrant Stock, the Person in whose name such Warrant or Warrant Stock is registered on the books of the Company maintained for such purpose. "Insolvency Event" shall mean any proceeding being instituted by or against the Company seeking a declaration or order for relief, or entailing a finding, that the Company is insolvent or bankrupt, or seeking reorganization, liquidation, dissolution, winding-up, charter revocation or other similar relief with respect to the Company or any of its properties, assets or debts, or seeking the appointment of a receiver, trustee, custodian, liquidator, sequestrator or similar official for the Company or any of its properties or assets, or the Company becoming insolvent or bankrupt or generally unable to pay its debts as they become due, or the Company voluntarily suspending its business or making a general assignment for the benefit of creditors; provided that an Insolvency Event shall not be deemed to have occurred on account of any such proceeding which is involuntary on the part of the Company unless same shall not have been dismissed or stayed within 60 days. "Lien" shall mean any mortgage or deed of trust, pledge, hypothecation, assignment, deposit arrangement, lien, charge, claim, security interest, easement or encumbrance, or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, any lease or title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, and the filing of, or agreement to give, any financing statement perfecting a security interest under the Uniform Commercial Code or comparable law of any jurisdiction). -7- 9 "Majority Warrant Holders", with respect to a given determination, shall mean the Holders of Warrants and/or Warrant Stock representing at least seventy-six percent (76%) of all Warrants and/or Warrant Stock (with any such Warrants being deemed to represent, for the purposes of such calculation, the shares of Warrant Stock then issuable upon exercise thereof) directly affected by such determination. "Majority Selling Holders" shall mean those Selling Holders whose Warrants and/or Warrant Stock included in a registration under Section 9 hereof represents a majority of the Warrants and/or Warrant Stock (with any such Warrants being deemed to represent, for the purposes of such calculation, the shares of Warrant Stock then issuable upon exercise thereof) included therein by all Selling Holders. "NASD" shall mean the National Association of Securities Dealers, Inc., or any successor corporation thereto. "NASDAQ" shall mean the NASDAQ quotation system, or any successor reporting system. "Notes" shall mean any of the promissory notes issued by the Company under the Credit Agreement. "Opinion of Counsel" means a written opinion of counsel experienced in Securities Act or bank regulatory matters, as the case may be, chosen by the Holder of this Warrant or Warrant Stock issued upon the exercise hereof and reasonably acceptable to the Company. "Original Issue Date" shall mean the date on which the Original Warrants were issued, as set forth on the cover page of this Warrant. "Original Warrants" shall mean the Warrants originally issued by the Company on the Original Issue Date to each of The First National Bank of Chicago, Fleet Bank of Massachusetts, N.A., The Daiwa Bank, Limited, Norwest Bank Iowa, National Association and Caisse Nationale de Credit Agricole. "Other Property" shall have the meaning set forth in Section 4.5 hereof. -8- 10 "Outstanding" shall mean, when used with reference to Common Stock, at any date as of which the number of shares thereof is to be determined, all issued shares of Common Stock, except shares then owned or held by or for the account of the Company or any Subsidiary thereof, and shall include all shares issuable in respect of outstanding scrip or any certificates representing fractional interests in shares of Common Stock. "Outstanding", when used with respect to Warrant Stock for the purposes of Section 9 hereof shall have the meaning set forth in Section 9.1(d) hereof. "Person" shall mean any individual, sole proprietorship, partnership, limited liability company, joint venture, trust, incorporated organization, association, corporation, institution, public benefit corporation, entity or government (whether federal, state, county, city, municipal or otherwise, including, without limitation, any instrumentality, division, agency, body or department thereof). "Piggyback Registration" shall have the meaning set forth in Section 9.3(a) hereof. "Register", "registered" and "registration" shall refer to a registration effected by preparing and filing a registration statement or similar document in compliance with the Securities Act, and the declaration or ordering by the Commission of effectiveness of such registration statement or document. "Registration Expenses" shall have the meaning set forth in Section 9.6(a) hereof. "Restricted Common Stock" shall mean shares of Common Stock which are, or which upon their issuance on the exercise of this Warrant would be, evidenced by a certificate bearing the restrictive legend set forth in Section 8.2(a) hereof. "Securities Act" shall mean the Securities Act of 1933, as amended, or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. -9- 11 "Selling Holders" shall mean, with respect to a specified registration under Section 9 hereof, WS Holders whose Registrable Securities are included in such registration. "Series A Warrants" shall mean all of the Series A Warrants to Purchase Common Stock of Norand Corporation, issued concurrently with, and having the same terms (other than the number of shares purchasable upon the exercise thereof) as, this Warrant. "Series B Warrants" shall mean all of the Series B Warrants to Purchase Common Stock of Norand Corporation issued concurrently with this Warrant. "Settlement Stock" shall mean the shares of Common Stock contemplated to be issued in settlement of the pending shareholders' claims against the Company with respect to the litigation styled In re Norand Corporation Securities Litigation, Master File No. C95-323, pending in the United States District Court for the Northern District of Iowa, Cedar Rapids Division. "Share Withholding Option" has the meaning set forth in Section 2.1(c) hereof. "Shelf Registration" shall have the meaning set forth in Section 9.2(a) hereof. "Stock Purchase Rights" shall mean any options, warrants or other securities or rights to subscribe to or exercisable for the purchase of shares of Common Stock or Convertible Securities, whether or not immediately exercisable, other than the options, warrants or other rights described in Schedule A hereto. "Subsequent Issuance" shall mean any sale or issuance by the Company of Common Stock, Convertible Securities or Stock Purchase Rights after the Original Issue Date other than: (i) Any issuance of Warrant Stock upon exercise of the Warrants and any issuance of Common Stock, Convertible Securities or Stock Purchase Rights (and -10- 12 any issuance of Common Stock pursuant to the conversion, exchange or exercise of any such Convertible Securities or Stock Purchase Rights) deemed to have been issued as of the Original Issue Date pursuant to the definition of Fully Diluted Outstanding. (ii) Any issuance of Common Stock pursuant to the exercise of the options and warrants described in Schedule A hereto, provided, however, that the exercise price of any such option or warrant (other than warrants granted to Jay Alix and Associates and to Donald W. Rowley for up to the respective number of shares set forth on Schedule A) granted or issued after the Original Issue Date shall not be less than the "daily market price" (as that term is defined in the definition of Current Market Price) of the Common Stock on the date of grant or issue of the option or warrant. (iii) The issuance of the Settlement Stock. (iv) The issuance of Common Stock or Convertible Securities directly related to the Company's receipt of Equity if, and only if, the aggregate Equity actually received by the Company between the Original Issue Date and August 31, 1997 equals or exceeds $20 million (otherwise, after August 31, 1997, all such issuances, both prior to and after August 31, 1996, shall be considered a Subsequent Issuance for purposes of Section 4 hereof). (v) Any other issuance of Common Stock, Convertible Securities or Stock Purchase Rights with respect to which the Majority Warrant Holders shall have waived application of the provisions of Section 4 below. "Subsidiary" means any corporation or association (a) more than 50% (by number of votes) of the voting stock of which is at the time owned by the Company or by one or more Subsidiaries or by the Company and one or more Subsidiaries, or any other business entity in which the Company or one or more Subsidiaries or the Company and one or more Subsidiaries own more than a 50% interest either in the -11- 13 profits or capital of such business entity or (b) whose net earnings, or portions thereof, are consolidated with the net earnings of the Company and are recorded on the books of the Company for financial reporting purposes in accordance with GAAP. "Transfer" shall mean any disposition of any Warrant or Warrant Stock or of any interest in either thereof, which would constitute a "sale" thereof within the meaning of the Securities Act. "Triggering Event" shall mean the repayment in full of all indebtedness under the Credit Agreement. "Violation" has the meaning set forth in Section 9.7(a) hereof. "Warrant Price" shall mean an amount equal to (i) the number of shares of Common Stock being purchased upon exercise of this Warrant pursuant to Section 2.1 hereof, multiplied by (ii) the Exercise Price as of the date of such exercise. "Warrants" shall mean the Original Warrants and all warrants issued upon transfer, division or combination of, or in substitution for, such Original Warrants or any other such Warrant. All Warrants shall at all times be identical as to terms and conditions and date, except as to the number of shares of Common Stock for which they may be exercised. "Warrant Stock" generally shall mean the shares of Common Stock issued, issuable or both (as the context may require) upon the exercise of Warrants until such time as such shares of Common Stock have either been (i) Transferred in a public offering pursuant to a registration statement filed under the Securities Act or (ii) Transferred in a transaction exempt from the registration and prospectus delivery requirements of the Securities Act under Section 4(1) thereof with all transfer restrictions and restrictive legends with respect to such Common Stock being removed in connection with such transaction. "Warrant Stock", for the purposes of Section 9 hereof, shall have the meaning set forth in Section 9.1(b) hereof. -12- 14 "WS Holder" shall have the meaning set forth in Section 9.1(a) hereof. 2. EXERCISE OF WARRANT 2.1. Manner of Exercise. (a) From and after May 31, 1997 and until 5:00 P.M., Chicago time, on the Expiration Date, the Holder of this Warrant may from time to time exercise this Warrant, on any Business Day, for all or any part of the number of shares of Common Stock purchasable hereunder (as determined pursuant to Section 2.2 below). In order to exercise this Warrant, in whole or in part, the Holder shall (i) deliver to the Company at the Designated Office a written notice of the Holder's election to exercise this Warrant (an "Exercise Notice"), which Exercise Notice shall be irrevocable and specify the number of shares of Common Stock to be purchased, together with this Warrant and (ii) pay to the Company the Warrant Price (the date on which both such delivery and payment shall have first taken place being hereinafter sometimes referred to as the "Exercise Date"). Such Exercise Notice shall be in the form of the subscription form appearing at the end of this Warrant as Annex A, duly executed by the Holder or its duly authorized agent or attorney. (b) Upon receipt of such Exercise Notice, Warrant and payment, the Company shall, as promptly as practicable, and in any event within five Business Days thereafter, execute (or cause to be executed) and deliver (or cause to be delivered) to the Holder a certificate or certificates representing the aggregate number of full shares of Common Stock issuable upon such exercise, together with cash in lieu of any fraction of a share, as hereafter provided. The stock certificate or certificates so delivered shall be, to the extent possible, in such denomination or denominations as the exercising Holder shall reasonably request in the Exercise Notice and shall be registered in the name of the Holder or such other name as shall be designated in the Exercise Notice. This Warrant shall be deemed to have been exercised and such certificate or certificates shall be deemed to have been issued, and the Holder or any other Person so designated to be named therein shall be deemed to have become a holder of record of such shares for all purposes, as of the Exercise Date. -13- 15 (c) Payment of the Warrant Price shall be made at the option of the Holder by one or more of the following methods: (i) by delivery of a certified or official bank check in the amount of such Warrant Price, (ii) by instructing the Company to withhold a number of shares of Warrant Stock then issuable upon exercise of this Warrant with an aggregate Current Market Price equal to such Warrant Price (the "Share Withholding Option"), (iii) by surrendering to the Company shares of Common Stock previously acquired by the Holder with an aggregate Current Market Price equal to such Warrant Price or(iv) by delivery of a Note, duly endorsed by or accompanied by appropriate instruments of transfer duly executed by the Holder or by the Holder's attorney duly authorized in writing. In the event of any withholding of Warrant Stock or surrender of Common Stock pursuant to clause (ii) or (iii) above where the number of shares whose Current Market Price is equal to the Warrant Price is not a whole number, the number of shares withheld by or surrendered to the Company shall be rounded up to the nearest whole share and the Company shall make a cash payment to the Holder based on the incremental fraction of a share being so withheld by or surrendered to the Company in an amount determined in accordance with Section 2.3 hereof. For the purpose of making payment of the Warrant Price, any Note surrendered to the Company shall be deemed to have a value equal to 100% of the principal amount thereof plus any interest accrued but unpaid thereon. If the Holder delivers a Note with a deemed value that exceeds the Warrant Price, the Company shall reissue to the Holder a new Note identical in all respects to the surrendered Note except that the principal amount of such new Note shall be equal to the principal amount that, together with any interest accrued but unpaid thereon, is equal to the deemed value of the surrendered Note less the Warrant Price. (d) If this Warrant shall have been exercised in part, the Company shall, at the time of delivery of the certificate or certificates representing the shares of Common Stock being issued, deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the unpurchased shares of Common Stock called for by this Warrant. Such new Warrant shall in all other respects be identical with this Warrant. 2.2. Payment of Transfer Taxes. All shares of Common Stock issuable upon the exercise of this Warrant pursuant to the terms hereof shall be validly issued, fully paid and nonassess- -14- 16 able, issued without violation of any preemptive rights and free and clear of all Liens (other than any created by actions of the Holder). The Company shall pay all expenses in connection with, and all taxes and other governmental charges that may be imposed with respect to, the issue or delivery thereof, unless such tax or charge is imposed by law upon the Holder, in which case such taxes or charges shall be paid by the Holder and the Company shall reimburse the Holder therefor on an After-Tax Basis. 2.3. Fractional Shares. The Company shall not be required to issue a fractional share of Common Stock upon exercise of any Warrant. As to any fraction of a share that the Holder of one or more Warrants, the rights under which are exercised in the same transaction, would otherwise be entitled to purchase upon such exercise, the Company shall pay a cash adjustment in respect of such final fraction in an amount equal to the same fraction of the Current Market Price of one share of Common Stock on the Exercise Date, if the Common Stock is then publicly traded. 2.4. Continued Validity and Application. (a) A Holder of shares of Warrant Stock issued upon the exercise of this Warrant, in whole or in part, including any transferee of such shares (other than a transferee in whose hands such shares no longer constitute Warrant Stock as defined herein), shall continue, with respect to such shares, to be entitled to all rights and to be subject to all obligations that are applicable to such Holder by the terms of this Warrant under Section 9 hereof. The Company shall, at the time of any exercise of this Warrant or any transfer of Warrant Stock, upon the request of the Holder of the shares of Warrant Stock issued in connection with such exercise or transfer, acknowledge in writing, in a form reasonably satisfactory to such Holder, its continuing obligation to afford to such Holder such rights referred to in this Section 2.4; provided, however, that if such Holder shall fail to make any such request, such failure shall not affect the continuing obligation of the Company to afford to such Holder all such rights. -15- 17 2.5. Limitation on Regulated Holder's Exercise. Notwithstanding anything in this Warrant to the contrary, the Holder of this Warrant, if subject to the Bank Holding Company Act or any provision of the Glass-Steagall Act, may exercise this Warrant only if the Notice of Exercise is accompanied by an Opinion of Counsel of such Holder to the effect that, as of the date of delivery of such opinion, no federal or state regulatory clearances are required for such Holder to exercise this Warrant or, in the event any such federal or state regulatory clearances are required prior to the exercise of this Warrant, to the effect that all such clearances have been obtained or, if not then obtained, that no statute or regulation or regulatory policy or guidelines known to such counsel would by their terms preclude the obtaining of such clearances or make it unlikely that such clearances would be obtained or make it likely that such clearances would, if obtained, contain material conditions adverse to such Holder. In the event that federal or state regulatory clearances are required prior to the exercise of this Warrant by the Holder hereof, the Company shall reasonably cooperate with such Holder in providing such information to any regulatory agency as such agency may reasonably require. In the event any such regulatory clearance is withheld or denied, such Holder may continue to hold this Warrant until its expiration or may sell or otherwise transfer this Warrant in accordance with the terms hereof. 3. TRANSFER, DIVISION AND COMBINATION 3.1. Transfer. Subject to compliance with Section 8 hereof, each transfer of this Warrant and all rights hereunder, in whole or in part, shall be registered on the books of the Company to be maintained for such purpose, upon surrender of this Warrant at the Designated Office, together with a written assignment of this Warrant in the form of Annex B hereto duly executed by the Holder or its agent or attorney. Upon such surrender and delivery, the Company shall, subject to Section 8, execute and deliver a new Warrant or Warrants in the name of the assignee or assignees and in the denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned and this Warrant shall promptly be canceled. A Warrant, if properly assigned in compliance with Section 8, may be exercised by the new Holder for the purchase of shares of Common Stock without having a new Warrant issued. -16- 18 3.2. Division and Combination. Subject to compliance with the applicable provisions of this Warrant, this Warrant may be divided or combined with other Warrants upon presentation hereof at the Designated Office, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney. Subject to compliance with the applicable provisions of this Warrant as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. 3.3. Expenses. The Company shall prepare, issue and deliver at its own expense any new Warrant or Warrants required to be issued under this Section 3. 3.4. Maintenance of Books. The Company agrees to maintain, at the Designated Office, books for the registration and transfer of the Warrants. 4. ANTIDILUTION PROVISIONS The number of shares of Common Stock for which this Warrant is exercisable and the Exercise Price shall be subject to adjustment from time to time as set forth in this Section 4. 4.1. Stock Dividends, Subdivisions and Combinations. If at any time the Company shall: (i) take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend payable in, or other distribution of, additional shares of Common Stock, (ii) subdivide its outstanding shares of Common Stock into a larger number of shares of such Common Stock, or (iii) combine its outstanding shares of Common Stock into a smaller number of shares of such Common Stock, then the Exercise Price shall be adjusted to equal the product of the Exercise Price in effect immediately prior to such event multiplied by a fraction the numerator of which is equal to the -17- 19 number of shares of Common Stock Outstanding immediately prior to the adjustment and the denominator of which is equal to the number of shares of Common Stock Outstanding immediately after such adjustment. 4.2. Issuance of Additional Shares of Common Stock. (a) If at any time the Company shall issue or sell any shares of Common Stock in a Subsequent Issuance for a consideration per share that is less than the Exercise Price in effect immediately prior to such issuance or sale, then, forthwith upon such issuance or sale, the Exercise Price shall be reduced to a price calculated by dividing (1) an amount equal to the sum of (x) the number of shares of Common Stock Outstanding immediately prior to such Subsequent Issuance multiplied by the then existing Exercise Price, plus (y) the aggregate consideration (determined in accordance with the provisions of Section 4.6 hereof), if any, received by the Company in connection with such Subsequent Issuance, by (2) the total number of shares of Common Stock Outstanding immediately after such Subsequent Issuance. (b) The provisions of this Section 4.2 shall not apply to (i) any issuance of Common Stock for which an adjustment is provided for under Section 4.1 or (ii) any issuance or sale of Common Stock pursuant to the exercise of any Stock Purchase Rights or Convertible Securities to the extent that an adjustment shall have been previously made hereunder in connection with the issuance of such Stock Purchase Rights or Convertible Securities pursuant to the provisions of Section 4.3 hereof. 4.3. Issuances of Stock Purchase Rights and Convertible Securities. (a) In the event that the Company shall at any time issue, sell or grant any Stock Purchase Rights to any Person in a Subsequent Issuance, then, for the purpose of Section 4.2 above, the Company shall be deemed to have issued at that time a number of shares of Common Stock equal to the maximum number of shares of Common Stock (without giving effect to any antidilution provisions in such Stock Purchase Rights) that are or may become issuable upon exercise of such Stock Purchase Rights (or upon exercise of any Convertible Securities issuable upon exercise of such Stock Purchase Rights) for a consideration per share equal to (i) the aggregate consideration per share (determined in accordance with the provisions of Section 4.6 hereof) received by the Company in connection with the issuance, sale or grant of such Stock Purchase Rights plus (ii) the minimum -18- 20 amount of such consideration per share receivable by the Company in connection with the exercise of such Stock Purchase Rights (and the exercise of any Convertible Securities issuable upon exercise of such Stock Purchase Rights). (b) In the event that the Company shall at any time issue or sell any Convertible Securities to any Person in a Subsequent Issuance, then, for the purposes of Section 4.2 above, the Company shall be deemed to have issued at that time a number of shares of Common Stock equal to the maximum number of shares of Common Stock that are or may become issuable upon the exercise of the conversion or exchange rights associated with such Convertible Securities for a consideration per share equal to (i) the aggregate consideration per share (determined in accordance with the provisions of Section 4.6 hereof) received by the Company in connection with the issuance or sale of such Convertible Securities plus (ii) the minimum amount of such consideration per share receivable by the Company in connection with the exercise of such conversion or exchange rights. (c) If, at any time after any adjustment of the Exercise Price shall have been made hereunder as the result of any issuance, sale or grant of any Stock Purchase Rights or Convertible Securities, the maximum number of shares issuable upon exercise of such Stock Purchase Rights or of the rights of conversion or exchange associated with such Convertible Securities shall increase, or the minimum amount of consideration per share receivable in connection with such exercise shall decrease, whether by operation of any antidilution rights pertaining to such Stock Purchase Rights or Convertible Securities, by agreement of the parties or otherwise, the Exercise Price then in effect shall first be readjusted to eliminate the effects of the original issuance, sale or grant of such Stock Purchase Rights or Convertible Securities on such Exercise Price and then readjusted as if such Stock Purchase Rights or Convertible Securities had been issued on the effective date of such increase in number of shares or decrease in consideration, but only if the effect of such two-step readjustment is to reduce the Exercise Price below the Exercise Price in effect immediately prior to such increase or decrease. (d) If, at any time after any adjustment of the Exercise Price shall have been made hereunder as the result of any issuance, sale or grant of any Stock Purchase Rights or -19- 21 Convertible Securities, any of such Stock Purchase Rights or the rights of conversion or exchange associated with such Convertible Securities shall expire by their terms or any of such Stock Purchase Rights or Convertible Securities shall be repurchased by the Company or a Subsidiary thereof for a consideration per underlying share of Common Stock not exceeding the amount of such consideration received by the Company in connection with the issuance, sale or grant of such Stock Purchase Rights or Convertible Securities, the Exercise Price then in effect shall forthwith be increased to the Exercise Price that would have been in effect if such expiring Stock Purchase Rights or rights of conversion or exchange or such repurchased Stock Purchase Rights or Convertible Securities had never been issued. Similarly, if at any time after any such adjustment of the Exercise Price shall have been made pursuant to Section 4.2 (i) any additional consideration is received or becomes receivable by the Company in connection with the issuance or exercise of such Stock Purchase Rights or Convertible Securities or (ii) there is a reduction in the conversion ratio applicable to such Convertible Securities so that fewer shares of Common Stock will be issuable upon the conversion or exchange thereof or there is a decrease in the number of shares of Common Stock issuable upon exercise of such Stock Purchase Rights, the Exercise Price then in effect shall be forthwith readjusted to the Exercise Price that would have been in effect had such changes taken place at the time that such Stock Purchase Rights or Convertible Securities were initially issued, granted or sold. In no event shall any readjustment under this Section 4.3(d) affect the validity of any shares of Warrant Stock issued upon any exercise of this Warrant prior to such readjustment, nor shall any such readjustment have the effect of increasing the Exercise Price above the Exercise Price that would have been in effect if the related Stock Purchase Rights or Convertible Securities had never been issued. 4.4. Adjustment of Number of Shares Purchasable. Upon any adjustment of the Exercise Price as provided in Section 4.1, 4.2 or 4.3 hereof, the Holder hereof shall thereafter be entitled to purchase upon the exercise of this Warrant, at the Exercise Price resulting from such adjustment, the number of shares of Common Stock (calculated to the nearest 1/100th of a share) obtained by multiplying the Exercise Price in effect immediately prior to such adjustment by the number of shares of Common Stock issuable on the exercise hereof immediately prior to such -20- 22 adjustment and dividing the product thereof by the Exercise Price resulting from such adjustment. 4.5. Reorganization, Reclassification, Merger, Consolidation or Disposition of Assets. In case the Company shall reorganize its capital, reclassify its capital stock, consolidate or merge with or into another corporation (where the Company is not the surviving corporation or where there is any change whatsoever in, or distribution with respect to, the Outstanding Common Stock of the Company), or sell, transfer or otherwise dispose of all or substantially all of its property, assets or business to another corporation and, pursuant to the terms of such reorganization, reclassification, merger, consolidation or disposition of assets, (i) shares of common stock of the successor or acquiring corporation or of the Company (if it is the surviving corporation) or (ii) any cash, shares of stock or other securities or property of any nature whatsoever (including warrants or other subscription or purchase rights) in addition to or in lieu of common stock of the successor or acquiring corporation ("Other Property") are to be received by or distributed to the holders of Common Stock of the Company who are holders immediately prior to such transaction, then the Holder of this Warrant shall have the right thereafter to receive, upon exercise of this Warrant, the number of shares of common stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and Other Property receivable upon or as a result of such reorganization, reclassification, merger, consolidation or disposition of assets by a holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such event. In such event, the aggregate Exercise Price otherwise payable for the shares of Common Stock issuable upon exercise of this Warrant shall be allocated among the shares of common stock and Other Property receivable as a result of such reorganization, reclassification, merger, consolidation or disposition of assets in proportion to the respective fair market values of such shares of common stock and Other Property as determined in good faith by the Board of Directors of the Company. In case of any such reorganization, reclassification, merger, consolidation or disposition of assets, the successor or acquiring corporation (if other than the Company) shall expressly assume the due and punctual observance and performance of each and every covenant and condition of this Warrant to be performed and observed by the Company and all the obligations and liabilities hereunder, subject to such modi- -21- 23 -21- fications as may be reasonably deemed appropriate (as determined by resolution of the Board of Directors of the Company) in order to provide for adjustments of any shares of the common stock of such successor or acquiring corporation for which this Warrant thus becomes exercisable, which modifications shall be as equivalent as practicable to the adjustments provided for in this Section 4. For purposes of this Section 4.5, "common stock of the successor or acquiring corporation" shall include stock of such corporation of any class that is not preferred as to dividends or assets over any other class of stock of such corporation and that is not subject to redemption and shall also include any evidences of indebtedness, shares of stock or other securities that are convertible into or exchangeable for any such stock, either immediately or upon the arrival of a specified date or the happening of a specified event and any warrants or other rights to subscribe for or purchase any such stock. The foregoing provisions of this Section 4.5 shall similarly apply to successive reorganizations, reclassifications, mergers, consolidations or disposition of assets. 4.6. Determination of Consideration. For purposes of Sections 4.2, 4.3 and 4.4 hereof, the consideration received and/or receivable by the Company in connection with the issuance, sale, grant or exercise of additional shares of Common Stock, Stock Purchase Rights or Convertible Securities, irrespective of the accounting treatment of such consideration, shall be valued as follows: (1) Cash Payment. In the case of cash, the net amount received by the Company after deduction of any accrued interest or dividends, expenses incurred or any underwriting commissions or concessions paid or allowed by the Company. (2) Securities or Other Property. In the case of securities or other property, the fair market value thereof as of the date immediately preceding such issuance, sale, grant or exercise as determined in good faith by the Board of Directors of the Company. (3) Allocation Related to Common Stock. In the event shares of Common Stock are issued or sold together with other securities or other assets of the Company for a consideration which covers both, the -22- 24 consideration received (computed as provided in (1) and (2) above) shall be allocable to such shares of Common Stock as determined in good faith by the Board of Directors of the Company. (4) Allocation Related to Stock Purchase Rights and Convertible Securities. In case any Stock Purchase Rights or Convertible Securities shall be issued or sold together with other securities or other assets of the Company, together comprising one integral transaction in which no specific consideration is allocated to the Stock Purchase Rights or Convertible Securities, the consideration allocable to such Stock Purchase Rights or Convertible Securities shall be determined in good faith by the Board of Directors of the Company. (5) Dividends in Securities. In case the Company shall declare a dividend or make any other distribution upon any stock of the Company payable in either case in Common Stock or Convertible Securities, such Common Stock or Convertible Securities, as the case may be, issuable in payment of such dividend or distribution shall be deemed to have been issued or sold without consideration. (6) Merger, Consolidation or Sale of Assets. In case any shares of Common Stock, Stock Purchase Rights or Convertible Securities shall be issued in connection with any merger or consolidation in which the Company is the surviving corporation, the amount of consideration therefor shall be deemed to be the fair value on the date of issuance of such security of such portion of the assets and business of the non-surviving corporation attributable to such Common Stock, Stock Purchase Rights or Convertible Securities, as is determined in good faith by the Company's Board of Directors. (7) Challenge to Good Faith Determination. Whenever the Board of Directors of the Company shall be required to make a determination in good faith of the fair value of any item under this Section 4, such determination may be challenged in good faith by the -23- 25 Majority Warrant Holders, and any dispute shall be resolved by an investment banking or appraisal firm of recognized national standing selected by the Company and reasonably acceptable to the Majority Warrant Holders and whose decision shall be binding on the Company and all holders of Warrants. The fees and expenses of such firm shall be paid by the party or parties whose position is not chosen by such firm. 4.7. Other Dilutive Events. In case any event shall occur as to which the other provisions of this Section 4 are not strictly applicable but as to which the failure to make any adjustment would not fairly protect the purchase rights represented by this Warrant in accordance with the essential intent and principles hereof (including, without limitation, the issuance of securities other than Common Stock which have the right to participate in distributions to the holders of Common Stock, the granting of "phantom stock" rights or "stock appreciation rights" or the repurchase of outstanding shares of Common Stock, Convertible Securities or Stock Purchase Rights for a purchase price exceeding the fair market value thereof), then, in each such case, the Majority Warrant Holders may select an independent investment banking firm of nationally recognized standing and reasonably acceptable to the Company to make a determination as to the adjustment, if any, required to be made on a basis consistent with the essential intent and principles established herein as a result of such event in order to preserve the purchase rights represented by the Warrants. If the investment bank selected by the Majority Warrant Holders is not reasonably acceptable to the Company, and the Company and the Majority Warrant Holders cannot agree on a mutually acceptable investment bank, then the Company and the Majority Warrant Holders shall each choose one such investment bank and the respective chosen firms shall jointly select a third investment bank, which shall make the determination. The Company shall pay the costs and fees of each such investment bank (including any such investment bank selected by the Majority Warrant Holders), and the decision of the investment bank making such determination shall be final and binding on the Company and all affected holders of Warrants or Warrant Stock. Promptly after receipt of the opinion of such investment bank as to any such required adjustments, the Company shall take any actions necessary to implement same. -24- 26 4.8. Other Provisions Applicable to Adjustments Under this Section. The following provisions shall be applicable to the adjustments provided for pursuant to this Section 4: (a) When Adjustments To Be Made. The adjustments required by this Section 4 shall be made whenever and as often as any specified event requiring such an adjustment shall occur. For the purpose of any such adjustment, any specified event shall be deemed to have occurred at the close of business on the date of its occurrence. (b) Record Date. In case the Company shall take a record of the holders of the Common Stock for the purpose of entitling them (i) to receive a dividend or other distribution payable in Common Stock, Convertible Securities or Stock Purchase Rights or (ii) to subscribe for or purchase Common Stock, Convertible Securities or Stock Purchase Rights, then all references in this Section 4 to the date of the issuance or sale of such shares of Common Stock, Convertible Securities or Stock Purchase Rights shall be deemed to be references to such record date. (c) Fractional Interests. In computing adjustments under this Section 4, fractional interests in Common Stock shall be taken into account to the nearest 1/100th of a share. (d) When Adjustment Not Required. If the Company shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend or distribution to which the provisions of Section 4.1 would apply, but shall, thereafter and before the distribution to stockholders thereof, legally abandon its plan to pay or deliver such dividend or distribution, then thereafter no adjustment shall be required by reason of the taking of such record and any such adjustment previously made in respect thereof shall be rescinded and annulled. (e) Maximum Exercise Price. Except as provided in Section 4.1 above, at no time shall the Exercise Price per share of Common Stock exceed the amount set forth in the first paragraph of the preamble of this Warrant. -25- 27 (f) Certain Limitations. Notwithstanding anything herein to the contrary, the Company agrees not to enter into any transaction that, by reason of any adjustment under Section 4.1, 4.2 or 4.3 above, would cause the Exercise Price to be less than the par value of the Common Stock, if any, unless the Company first reduces the par value of the Common Stock to be less than the Exercise Price that would result from such transaction. (g) Notice of Adjustments. Whenever the number of shares of Common Stock for which this Warrant is exercisable or the Exercise Price shall be adjusted pursuant to this Section 4, the Company shall forthwith prepare a certificate to be executed by the President or chief financial officer of the Company setting forth, in reasonable detail, the event requiring the adjustment and the method by which such adjustment was calculated, specifying the number of shares of Common Stock for which this Warrant is exercisable and (if such adjustment was made pursuant to Section 4.5) describing the number and kind of any other shares of stock or Other Property for which this Warrant is exercisable, and any related change in the Exercise Price, after giving effect to such adjustment or change. The Company shall promptly cause a signed copy of such certificate to be delivered to each Holder in accordance with Section 15.2. The Company shall keep at its principal office or at the Designated Office, if different, copies of all such certificates and cause the same to be available for inspection at said office during normal business hours by any Holder or any prospective transferee of a Warrant designated by a Holder thereof. (h) Independent Application. Except as otherwise provided herein, all subsections of this Section 4 are intended to operate independently of one another (but without duplication). If an event occurs that requires the application of more than one subsection, all applicable subsections shall be given independent effect without duplication. 5. NO IMPAIRMENT -26- 28 The Company shall not by any action, including, without limitation, amending its charter documents or through any reorganization, reclassification, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other similar voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or reasonably appropriate to protect the rights of the Holder against impairment. Without limiting the generality of the foregoing, the Company shall take all such action as may be necessary or reasonably 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, free and clear of all Liens, and shall use all commercially reasonably efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof as may be necessary to enable the Company to perform its obligations under this Warrant. 6. RESERVATION AND AUTHORIZATION OF COMMON STOCK From and after the Original Issue Date, the Company shall at all times reserve and keep available for issuance upon the exercise of the Warrants such number of its authorized but unissued shares of Common Stock as will be sufficient to permit the exercise in full of all outstanding Warrants. All shares of Common Stock issuable pursuant to the terms hereof, when issued upon exercise of this Warrant with payment therefor in accordance with the terms hereof, shall be duly and validly issued and fully paid and nonassessable, not subject to preemptive rights and shall be free and clear of all Liens. 7. NOTICE OF CORPORATE ACTIONS; TAKING OF RECORD; TRANSFER BOOKS 7.1. Notices of Corporate Actions. In the event of: (a) any capital reorganization of the Company, any reclassification or recapitalization of the capital stock of the Company or any consolidation or merger involving the Company and any other Person or any transfer or other disposition of all or substantially all the assets of the Company to another Person or -27- 29 (b) any amendment of the Certificate of Incorporation of the Company, the Company shall mail to each Holder of a Warrant in accordance with the provisions of Section 14.2 hereof a notice specifying the date or expected date on which any such reorganization, reclassification, recapitalization, consolidation, merger, transfer or disposition is to take place, the time, if any such time is to be fixed, as of which the holders of record of Common Stock shall be entitled to exchange their shares of Common Stock for the securities or Other Property deliverable upon such reorganization, reclassification, recapitalization, consolidation, merger, transfer or disposition, and a description in reasonable detail of the transaction. Such notice shall be mailed to the extent practicable at least thirty, but not more than ninety, days prior to the date therein specified; provided, that, in no event shall the Company be required to give the Holders notice of material non-public information prior to the time such information is made available to the holders of its Common Stock. In the event that the Company at any time sends any other notice to the holders of its Common Stock, it shall concurrently send a copy of such notice to each Holder of a Warrant. 7.2 Closing of Transfer Books. The Company shall not at any time, exceptupon dissolution, liquidation or winding up of the Company, close its stock transfer books or Warrant transfer books so as to result in preventing or delaying the exercise or transfer of any Warrant. 8. TRANSFER RESTRICTIONS The Holder, by acceptance of this Warrant, agrees to be bound by the provisions of this Section 8. 8.1. Restrictions on Transfers. Neither this Warrant nor any shares of Restricted Common Stock issued upon the exercise hereof shall be Transferred other than pursuant to an effective registration statement under the Securities Act or an exemption from the registration provisions thereof. No Transfer of this Warrant or any such shares of Restricted Stock, other than pursuant to such an effective registration statement, shall be valid or effective unless (a) the holder of the securities proposed to be transferred shall have delivered to the Company either a no-action letter from the Commission or an Opinion of -28- 30 Counsel to the effect that such proposed Transfer is exempt from the registration requirements of the Securities Act or (b) such Transfer is being made pursuant to Rule 144 or Rule 144A under the Securities Act and such holder shall have delivered to the Company a certificate setting forth the basis for applying such Rule to the proposed Transfer. Each certificate, if any, evidencing such shares of Restricted Common Stock issued upon any such Transfer, other than in a public offering pursuant to an effective registration statement, shall bear the restrictive legend set forth in Section 8.2(a), and each Warrant issued upon such Transfer shall bear the restrictive legend set forth in Section 8.2(b), unless the Holder delivers to the Company an Opinion of Counsel to the effect that such legend is not required for the purposes of compliance with the Securities Act. Holders of the Warrants or the Restricted Common Stock, as the case may be, shall not be entitled to Transfer such Warrants or such Restricted Common Stock except in accordance with this Section 8.1. 8.2. Restrictive Legends. (a) Except as otherwise provided in this Section 8, each certificate for Warrant Stock initially issued upon the exercise of this Warrant, and each certificate for Warrant Stock issued to any subsequent transferee of any such certificate, shall be stamped or otherwise imprinted with two legends in substantially the following forms: "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAW. NO TRANSFER OF THE SHARES REPRESENTED BY THIS CERTIFICATE SHALL BE VALID OR EFFECTIVE UNLESS (A) SUCH TRANSFER IS MADE PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR (B) THE HOLDER OF THE SECURITIES PROPOSED TO BE TRANSFERRED SHALL HAVE DELIVERED TO THE COMPANY AN OPINION OF COUNSEL EXPERIENCED IN SECURITIES MATTERS AND REASONABLY ACCEPTABLE TO THE COMPANY TO THE EFFECT THAT SUCH PROPOSED TRANSFER IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE ACT OR (C) SUCH TRANSFER IS PURSUANT TO RULE 144 OR RULE 144A UNDER THE ACT AND SUCH HOLDER(S) SHALL HAVE DELIVERED TO THE COMPANY A CERTIFICATE SETTING FORTH THE BASIS FOR APPLYING SUCH RULE TO THE PROPOSED TRANSFER." -29- 31 "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE ENTITLED TO THE BENEFIT OF AND ARE SUBJECT TO CERTAIN OBLIGATIONS SET FORTH IN THE WARRANT PURSUANT TO THE EXERCISE OF WHICH SUCH SHARES WERE ISSUED. A COPY OF SUCH WARRANT IS AVAILABLE AT THE EXECUTIVE OFFICES OF THE COMPANY." (b) Except as otherwise provided in this Section 8, each Warrant shall be stamped or otherwise imprinted with a legend in substantially the following form: "NEITHER THE WARRANTS REPRESENTED BY THIS CERTIFICATE NOR ANY OF THE SECURITIES ISSUABLE UPON EXERCISE THEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAW. NO TRANSFER OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE OR OF THE STOCK ISSUABLE UPON EXERCISE THEREOF SHALL BE VALID OR EFFECTIVE UNLESS (A) SUCH TRANSFER IS MADE PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR (B) THE HOLDER OF THE SECURITIES PROPOSED TO BE TRANSFERRED SHALL HAVE DELIVERED TO THE COMPANY EITHER A NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION OR AN OPINION OF COUNSEL EXPERIENCED IN SECURITIES MATTERS AND REASONABLY ACCEPTABLE TO THE COMPANY TO THE EFFECT THAT SUCH PROPOSED TRANSFER IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE ACT OR (C) SUCH TRANSFER IS PURSUANT TO RULE 144 OR RULE 144A UNDER THE ACT AND SUCH HOLDER SHALL HAVE DELIVERED TO THE COMPANY A CERTIFICATE SETTING FORTH THE BASIS FOR APPLYING SUCH RULE TO THE PROPOSED TRANSFER." 8.3. Termination of Securities Law Restrictions. Notwithstanding the foregoing provisions of this Section 8, the restrictions imposed by Section 8.1(b) upon the transferability of the Warrants and the Restricted Common Stock and the legend requirements of Section 8.2 shall terminate as to any particular Warrant or shares of Restricted Common Stock when the Company shall have received from the Holder thereof an Opinion of Counsel to the effect that such legend is not required in order to ensure compliance with the Securities Act. Whenever the restrictions imposed by Sections 8.1(b) and 8.2 shall terminate as to this Warrant, as hereinabove provided, the Holder hereof shall be entitled to receive from the Company, at the expense of the -30- 32 Company, a new Warrant bearing the following legend in place of the restrictive legend set forth hereon: "THE RESTRICTIONS ON TRANSFERABILITY OF THE WITHIN WARRANT CONTAINED IN SECTIONS 8.1(b) AND 8.2 HEREOF TERMINATED ON ______________, 19__, AND ARE OF NO FURTHER FORCE AND EFFECT." All Warrants issued upon registration of transfer, division or combination of, or in substitution for, any Warrant or Warrants entitled to bear such legend shall have a similar legend endorsed thereon. Wherever the restrictions imposed by this Section shall terminate as to any share of Restricted Common Stock, as hereinabove provided, the Holder thereof shall be entitled to receive from the Company, at the Company's expense, a new certificate representing such Common Stock not bearing the restrictive legend set forth in Section 8.2(a). 9. REGISTRATION RIGHTS 9.1. Certain Definitions. For the purposes of this Section 9: (a) The Holders of Warrants and the Series B Warrants and the holders of Warrant Stock (as defined in Section 9.1(b)) are collectively referred to as "WS Holders". (b) "Warrant Stock" shall deemed to include (i) the shares of Common Stock issued, issuable or both (as the context may require) upon the exercise of Warrants and the Series B Warrants until such time as such shares of Common Stock have either been (a) Transferred in a public offering pursuant to a registration statement filed under the Securities Act or (b) Transferred in a transaction exempt from the registration and prospectus delivery requirements of the Securities Act under Section 4(1) thereof with all transfer restrictions and restrictive legends with respect to such Common Stock being removed in connection with such transaction,(ii) any other securities issued as (or issuable upon the conversion or exercise of any warrant, right or other security which is issued as) a dividend or other distribution with respect to, or in exchange by the Company generally for, or in replacement by the Company generally -31- 33 of, any shares of Warrant Stock and (iii) any securities issued in exchange for any such Warrant Stock in any merger or reorganization of the Company, but in the cases of clauses (ii) and (iii) only so long as such securities have not been registered and Transferred pursuant to the Securities Act or Transferred in a transaction exempt from the registration and prospectus delivery requirements of the Securities Act under Section 4(1) thereof so that all transfer restrictions and restrictive legends with respect to such securities are removed in connection with such Transfer. (c) Each WS Holder shall be deemed to "hold", as of any specified date, the aggregate of (i) the number of shares of Warrant Stock held by such WS Holder as of such date plus (ii) the number of shares of Warrant Stock issuable upon exercise of any Warrants and Series B Warrants held by such WS Holder as of such date. (d) The total number of shares of Warrant Stock deemed "outstanding" as of a specified date will be equal to (i) the total number of shares of Warrant Stock Outstanding as of such date plus (ii) the number of shares of Warrant Stock issuable upon exercise of all outstanding Warrants and Series B Warrants as of such date. (e) "Registrable Securities" shall mean any Warrants, any Series B Warrants and/or any shares of Warrant Stock. 9.2. Demand Registration. (a) In the event the Company receives at any time after August 31, 1997 a written request from one or more WS Holders holding in the aggregate at least seventy-six percent of the number of shares of Warrant Stock then outstanding (the "Demanding Holders") that the Company file a registration statement under the Securities Act for the sale or other disposition of at least a majority of the Registrable Securities (a "Demand Registration"), the Company shall promptly give written notice of such request to each other WS Holder and each such WS Holder may elect, by giving written notice of such election to the Company within ten (10) Business Days after receipt of the Company's notice, to have some or all of the Registrable Securities held by it included in such registration. At the option of the Demanding Holders, such request may specify that the requested registration will be for -32- 34 an offering on a delayed or continual basis pursuant to Rule 415 under the Securities Act (a "Shelf Registration"). (b) Following receipt of such a request for a Demand Registration, the Company shall: (1) File the requested registration statement with the Commission as promptly as practicable, and shall use all commercially reasonable efforts to have the registration declared effective under the Securities Act as soon as reasonably practicable, in each instance giving due regard to the need to prepare and file current financial statements, conduct due diligence and complete other actions that are reasonably necessary to effect a registered public offering; and (2) Use all commercially reasonable efforts to keep the such registration statement Continuously Effective (x) if a Demand Registration, for up to 90 days or until such earlier date as of which all Registrable Securities covered by such registration statement shall have been disposed of in the manner described in the registration statement, and (y) if a Shelf Registration, for 270 days. Notwithstanding the foregoing, if for any reason the effectiveness of a Demand Registration is suspended or postponed as permitted by Subsection (d) below, the foregoing period shall be extended by the aggregate number of days of such suspension or postponement. (c) The Company shall not be required to effect a registration of Registrable Securities pursuant to a Demand Registration on more than one occasion. For purposes of this Subsection (c), registration shall not be deemed to have been effected (i) unless a registration statement with respect thereto has become effective, (ii) if after such registration statement has become effective, such registration or the related offer, sale or distribution of Registrable Securities thereunder is interfered with by any stop order, injunction or other order or requirement of the Commission or other governmental agency or court for any reason not attributable to the Selling Holders and such interference is not thereafter eliminated or (iii) if the conditions to closing specified in the underwriting agreement, if any, entered into in connection with such registration are not -33- 35 satisfied or waived, other than by reason of a failure on the part of the Selling Holders. If the Company shall have complied with its obligations under this Section 9, a right to demand a registration pursuant to this Section 9.2 shall be deemed to have been satisfied (i) if a Demand Registration other than a Shelf Registration, upon the earlier of (x) the date as of which all of the Registrable Securities included therein shall have been disposed of pursuant to the registration statement and (y) the date as of which such Demand Registration shall have been Continuously Effective for a period of 90 days, and (ii) if a Shelf Registration, upon the effective date of a Shelf Registration, provided no stop order or similar order, or proceedings for such an order, is thereafter entered or initiated. (d) The Company shall be entitled to postpone for up to 90 days the filing of any Demand Registration statement otherwise required to be prepared and filed pursuant to this Section 9.2 or suspend any such Demand Registration for up to 90 days, if the Board of Directors of the Company determines, in its good faith reasonable judgment that such registration and the Transfer of Warrant Stock contemplated thereby would materially interfere with, or require premature disclosure of, any financing, acquisition or reorganization involving the Company or any of its wholly owned subsidiaries and the Company promptly gives the Demanding Holders notice of such determination; provided, however, that the Company shall not have postponed pursuant to this Subsection (d) the filing of any other Demand Registration statement otherwise required to be prepared and filed pursuant to this Section 9.2, or suspended any such Demand Registration, during the 12 month period ended on the date of the relevant request pursuant to Subsection (a) above and provided further, that the Expiration Date shall be extended by the period of any such postponement or suspension. (e) A registration pursuant to this Section 9.2 shall be on such appropriate registration form of the Commission available to the Company as shall (i) be selected by the Company and be reasonably acceptable to the Majority Selling Holders and (ii) permit the disposition of the Warrant Stock in accordance with the intended method or methods of disposition specified in the request made pursuant to Subsection (a) above. If any registration pursuant to this Section 9.2 involves an underwritten offering (whether on a "firm", "best efforts" or -34- 36 "all reasonable efforts" basis or otherwise), or an agented offering, the Majority Selling Holders shall have the right to select the underwriter or underwriters and manager or managers to administer such underwritten offering or the placement agent or agents for such agented offering from among the entities listed in Schedule B hereto (or any successors of any such entities), it being understood that the Majority Selling Holders shall use commercially reasonable efforts to select one or more of the first three listed entities subject to arriving at reasonably acceptable terms and conditions for the offering. (f) The Company may elect to include shares of Common Stock to be sold for its account in any such Demand Registration (including a Shelf Registration); provided, however, if the managing underwriter shall advise the Demanding Holders in writing (with a copy to the Company) that, in its opinion, the number of shares of Common Stock requested to be included in such Demand Registration would adversely affect such offering or the price to be realized therefor, or the timing thereof, then the number of shares proposed to be included in such Demand Registration by the Company shall be reduced, to such number that the Demanding Holders are advised can be sold without such effect in such Demand Registration. 9.3. Piggyback Registration. (a) If at any time the Company proposes to register (including for this purpose a registration effected by the Company for shareholders of the Company other than the WS Holders) equity securities under the Securities Act in connection with the public offering solely for cash on Form S-1, S-2 or S-3 (or any replacement or successor forms), the Company shall promptly give each WS Holder written notice of such registration (a "Piggyback Registration"). Upon the written request of each WS Holder given within 20 days following the date of such notice, the Company shall cause to be included in such registration statement and use its best efforts to be registered under the Securities Act all the Registrable Securities that each such WS Holder shall have requested to be registered. The Company shall have the absolute right to withdraw or cease to prepare or file any registration statement for any offering referred to in this Section 9.3 without any obligation or liability to any WS Holder. -35- 37 (b) If the managing underwriter shall advise the Company in writing (with a copy to each Selling Holder) that, in its opinion, the amount of Registrable Securities requested to be included in such registration would materially adversely affect such offering, or the timing thereof, then the Company will include in such registration, to the extent of the amount and class which the Company is so advised can be sold without such material adverse effect in such offering: first, all securities proposed to be sold by the Company for its own account; and second, the Warrant Stock requested to be included in such registration by WS Holders and all other securities requested to be included in such registration by Persons other than the Company and WS Holders, the securities covered by this clause second to be included pro rata based on the estimated gross proceeds from the sale thereof. (c) Each WS Holder shall be entitled to have its Registrable Securities included in an unlimited number of Piggyback Registrations pursuant to this Section 9.3. 9.4. Registration Procedures. Whenever required under Section 9.2 or Section 9.3 hereof to effect the registration of any Registrable Securities, the Company shall, as expeditiously as practicable: (a) Prepare and file with the Commission a registration statement with respect to such Warrant Stock and use the Company's best efforts to cause such registration statement to become effective; provided, however, that before filing a registration statement or prospectus or any amendments or supplements thereto, including documents incorporated by reference after the initial filing of the registration statement and prior to effectiveness thereof, the Company shall furnish to one firm of counsel for the Selling Holders (selected by Majority Selling Holders) copies of all such documents in the form substantially as proposed to be filed with the Commission at least four Business Days prior to filing for review and comment by such counsel, which opportunity to comment shall include an absolute right to control or contest disclosure if the applicable Selling Holder reasonably believes that it may be subject to controlling person liability under applicable securities laws with respect thereto. -36- 38 (b) Prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Securities Act and rules thereunder with respect to the disposition of all securities covered by such registration statement. If the registration is for an underwritten offering, the Company shall amend the registration statement or supplement the prospectus whenever required by the terms of the underwriting agreement entered into pursuant to Section 9.4(e). Subject to Rule 415 under the Securities Act, if the registration statement is a Shelf Registration, the Company shall amend the registration statement or supplement the prospectus so that it will remain current and in compliance with the requirements of the Securities Act for 270 days or after its effective date, and if during such period any event or development occurs as a result of which the registration statement or prospectus contains a misstatement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading, the Company shall promptly notify each Selling Holder, amend the registration statement or supplement the prospectus so that each will thereafter comply with the Securities Act and furnish to each Selling Holder of Registrable Securities such amended or supplemented prospectus, which each such Holder shall thereafter use in the Transfer of Warrant Stock covered by such registration statement. Pending such amendment or supplement each such Selling Holder shall cease making offers or Transfers of Registerable Securities pursuant to the prior prospectus. In the event that any Registrable Securities included in a registration statement subject to, or required by, this Warrant remain unsold at the end of the period during which the Company is obligated to use its best efforts to maintain the effectiveness of such registration statement, the Company may file a post-effective amendment to the registration statement for the purpose of removing such Registrable Securities from registered status. (c) Furnish to each Selling Holder of Registrable Securities, without charge, such number of copies of the registration statement, any pre-effective or post-effective amendment thereto, the prospectus, including each -37- 39 preliminary prospectus and any amendments or supplements thereto, in each case in conformity with the requirements of the Securities Act and the rules thereunder, and such other related documents as any such Selling Holder may reasonably request in order to facilitate the disposition of Registrable Securities owned by such Selling Holder. (d) Use all commercially reasonable efforts (i) to register and qualify the securities covered by such registration statement under such other securities or Blue Sky laws of such states or jurisdictions as shall be reasonably requested by the managing underwriter (as applicable, or if inapplicable, the Majority Selling Holders), and (ii) to obtain the withdrawal of any order suspending the effectiveness of a registration statement, or the lifting of any suspension of the qualification (or exemption from qualification) of the offer and transfer of any of the Registrable Securities in any jurisdiction, at the earliest possible moment; provided, however, that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions. (e) In the event of any underwritten or agented offering, enter into and perform the Company's obligations under an underwriting or agency agreement (including indemnification and contribution obligations of underwriters or agents), in usual and customary form, with the managing underwriter or underwriters of or agents for such offering. The Company shall also cooperate with the Majority Selling Holders and the managing underwriter for such offering in the marketing of the Warrant Stock, including making available the Company's officers, accountants, counsel, premises, books and records for such purpose, but the Company shall not be required to incur any material out-of-pocket expense pursuant to this sentence. (f) Promptly notify each Selling Holder of any stop order issued or threatened to be issued by the Commission in connection therewith (and take all reasonable actions required to prevent the entry of such stop order or to remove it if entered. -38- 40 (g) Make generally available to the Company's security holders copies of all periodic reports, proxy statements, and other information referred to in Section 9.9(a) and an earnings statement satisfying the provisions of Section 11(a) of the Securities Act no later than 90 days following the end of the 12-month period beginning with the first month of the Company's first fiscal quarter commencing after the effective date of each registration statement filed pursuant to this Section 9. (h) Make available for inspection by any Selling Holder, any underwriter participating in such offering and the representatives of such Selling Holder and underwriter (but not more than one firm of counsel to such Selling Holders), all financial and other information as shall be reasonably requested by them, and provide the Selling Holder, any underwriter participating in such offering and the representatives of such Selling Holder and underwriter the opportunity to discuss the business affairs of the Company with its principal executives and independent public accountants who have certified the audited financial statements included in such registration statement, in each case all as necessary to enable them to exercise their due diligence responsibility under the Securities Act; provided, however, that information that the Company determines, in good faith, to be confidential and which the Company advises such Person in writing, is confidential shall not be disclosed unless such Person signs a confidentiality agreement reasonably satisfactory to the Company or the related Selling Holder of Registrable Securities agrees to be responsible for such Person's breach of confidentiality on terms reasonably satisfactory to the Company. (i) Use the Company's best efforts to obtain a so-called "comfort letter" from its independent public accountants, and legal opinions of counsel to the Company, in customary form and covering such matters of the type customarily covered by such letters, and in a form that shall be reasonably satisfactory to the Majority Selling Holders. The Company shall furnish to each Selling Holder a signed counterpart of any such comfort letter or legal opinion. Delivery of any such opinion or comfort letter shall be subject to the recipient furnishing such written representations or acknowledgments as are customarily -39- 41 provided by selling shareholders who receive such comfort letters or opinions. (j) Provide and cause to be maintained a transfer agent and registrar for all Registrable Securities covered by such registration statement from and after a date not later than the effective date of such registration statement. (k) Use all reasonable efforts to cause the Registrable Securities covered by such registration statement (i) if the Common Stock is then listed on a securities exchange or included for quotation in a recognized trading market, to continue to be so listed or included for a reasonable period of time after the offering, and (ii) to be registered with or approved by such other United States or state governmental agencies or authorities as may be necessary by virtue of the business and operations of the Company to enable the Selling Holders of Registrable Securities to consummate the disposition of such Registrable Securities. (l) Use the Company's reasonable efforts to provide a CUSIP number for the Common Stock prior to the effective date of the first registration statement including Registrable Securities. (m) Take such other actions as are reasonably required in order to expedite or facilitate the disposition of Registrable Securities included in each such registration. 9.5. Selling Holders' Obligations. (a) It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Section 9 with respect to the Registrable Securities of any Selling Holder that such Selling Holder shall: (i) Furnish to the Company such information regarding such Selling Holder, the number of Registrable Securities owned by it, and the intended method of disposition of such securities as shall be required to effect the registration of such Selling Holder's Registrable Securities, and to cooperate with the Company in preparing such registration; and -40- 42 (ii) Agree to sell their Registrable Securities to the underwriters at the same price and on substantially the same terms and conditions as the Company or the other Persons on whose behalf the registration statement was being filed have agreed to sell their securities, and to execute the underwriting agreement agreed to by the Majority Selling Holders (in the case of a registration under Section 9.2) or the Company and the Majority Selling Holders (in the case of a registration under Section 9.3). (b) Each Selling Holder shall notify the Company of any sales of such Selling Holder's shares registered for sale pursuant to this Section 9; provided, however, it is understood that any failure so to notify the Company shall not be deemed a default hereunder or to subject any Selling Holder to any claim for damages or expenses whatsoever. 9.6. Expenses of Registration. Expenses incurred in connection with registrations under this Section 9 shall be allocated and paid as follows: (a) With respect to each Demand Registration (including any Shelf Registration), the Company shall bear and pay all reasonable expenses incurred in connection with any registration, filing, or qualification of Registrable Securities with respect to such Demand Registration for each Selling Holder, including all registration, filing and NASD fees, all fees and expenses of complying with securities or blue sky laws, all word processing, duplicating and printing expenses, messenger and delivery expenses, the reasonable fees and disbursements of counsel for the Company, and of the Company's independent public accountants, including the expenses of "cold comfort" letters required by or incident to such performance and compliance, and the reasonable fees and disbursements of one firm of counsel for the Selling Holders of Registrable Securities (the "Registration Expenses"), but excluding underwriting discounts and commissions relating to Registrable Securities (which shall be paid on a pro rata basis by the Selling Holders) provided, however, that the Company shall not be required to pay for any expenses of any registration proceeding begun pursuant to Section 9.2 if the registration is subsequently withdrawn at the request of the Majority Selling Holders (in which case all Selling Holders shall bear such expense), -41- 43 unless WS Holders whose Registrable Securities constitutes a majority of the Registrable Securities then outstanding agree that such withdrawn registration shall constitute the exercise of their one demand registration under Section 9.2 hereof. The counsel for the Selling Holders shall be selected by Demanding Holders owning a majority of the Registrable Securities owned by Demanding Holders to be included in a Demand Registration and, in the case of a Piggyback Registration, by Selling Holders owning a majority of the Registrable Securities to be included in such registration; provided that in the case of a Piggyback Registration, the Selling Holders shall use one firm of counsel to represent all such holders and shall endeavor in good faith, with any other holders of securities to be included in such registration, to select one firm of counsel to represent all such selling securities holders. (b) The Company shall bear and pay all Registration Expenses incurred in connection with any Piggyback Registrations pursuant to Section 9.3 for each Selling Holder, but excluding underwriting discounts and commissions relating to Registrable Securities (which shall be paid on a pro rata basis by the Selling Holders of Registrable Securities). (c) Any failure of the Company to pay any Registration Expenses as required by this Section 9.6 shall not relieve the Company of its obligations under this Section 9. 9.7. Indemnification; Contribution. If any Registrable Securities are included in a registration statement under this Section 9: (a) To the extent permitted by applicable law, the Company shall indemnify and hold harmless each Selling Holder, each Person, if any, who controls such Selling Holder within the meaning of the Securities Act, and each officer, director, partner, and employee of such Selling Holder and such controlling Person, against any and all losses, claims, damages, liabilities and expenses (joint or several), including attorneys' fees and disbursements and expenses of investigation, incurred by such party pursuant to any actual or threatened action, suit, proceeding or investigation, or to which any of the foregoing Persons may -42- 44 become subject under the Securities Act, the Exchange Act or other federal or state laws, insofar as such losses, claims, damages, liabilities and expenses arise out of or are based upon any of the following statements, omissions or violations pursuant to a final non-appealable order (collectively a "Violation"): (i) any untrue statement or alleged untrue statement of a material fact contained in such registration statement, including any preliminary prospectus or final prospectus contained therein, or any amendments or supplements thereto; (ii) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading; or (iii) any violation or alleged violation by the Company of the Securities Act, the Exchange Act, any applicable state securities law or any rule or regulation promulgated under the Securities Act, the Exchange Act or any applicable state securities law; provided, however, that the indemnification required by this Section 9.7(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or expense if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld), nor shall the Company be liable in any such case for any such loss, claim, damage, liability or expense to the extent that it is determined by a court of competent jurisdiction by a final non-appealable order to have solely arisen out of or be based upon a Violation which occurred in reliance upon and in conformity with written information furnished to the Company by the indemnified party expressly for use in connection with such registration; provided, further, that the indemnity agreement contained in this Section 9.7(a) shall not apply to any underwriter to the extent that any such loss is based on or arises out of an untrue statement or alleged untrue statement of a material fact, or an omission or alleged omission to state a material fact, contained in or omitted from any preliminary prospectus if the final prospectus shall correct such untrue statement or -43- 45 alleged untrue statement, or such omission or alleged omission, and a copy of the final prospectus has not been sent or given to such person at or prior to the confirmation of sale to such person if such underwriter was under an obligation to deliver such final prospectus and failed to do so. The Company shall also indemnify underwriters, selling brokers, dealer managers and similar securities industry professionals participating in the distribution, their officers, directors, agents and employees and each person who controls such persons (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) to the same extent as provided above with respect to the indemnification of the Selling Holders. (b) To the extent permitted by applicable law, each Selling Holder shall indemnify and hold harmless the Company, each of its directors, each of its officers and employees, each Person, if any, who controls the Company within the meaning of the Securities Act, any other Selling Holder, any controlling Person of any such other Selling Holder and each officer, director, partner, and employee of such other Selling Holder and such controlling Person, against any and all losses, claims, damages, liabilities and expenses (joint and several), including attorneys' fees and disbursements and expenses of investigation, incurred by such party pursuant to any actual or threatened action, suit, proceeding or investigation, or to which any of the foregoing Persons may otherwise become subject under the Securities Act, the Exchange Act or other federal or state laws, insofar as such losses, claims, damages, liabilities and expenses are determined by a court of competent jurisdiction by a final non-appealable order to have solely arisen out of or be based upon a Violation that occurred in reliance upon and in conformity with written information furnished by such Selling Holder expressly for use in connection with such registration; provided, however, that (x) the indemnification required by this Section 9.7(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or expense if settlement is effected without the consent of the relevant Selling Holder of Registrable Securities, which consent shall not be unreasonably withheld, and (y) in no event shall the amount of any indemnity under this Section 9.7(b) exceed the net -44- 46 proceeds from the applicable offering received by such Selling Holder. (c) Promptly after receipt by an indemnified party under this Section 9.7 of notice of the commencement of any action, suit, proceeding, investigation or threat thereof made in writing for which such indemnified party may make a claim under this Section 9.7, such indemnified party shall deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party shall have the right to retain its own counsel, with the fees and disbursements and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding. The failure to deliver written notice to the indemnifying party within a reasonable time following the commencement of any such action, if prejudicial to its ability to defend such action, shall relieve such indemnifying party of any liability to the indemnified party under this Section 9.7 but shall not relieve the indemnifying party of any liability that it may have to any indemnified party otherwise than pursuant to this Section 9.7. Any reasonable fees and expenses incurred by the indemnified party (including any fees and expenses incurred in connection with investigating or preparing to defend such action or proceeding) shall be paid to the indemnified party, as incurred, within thirty (30) days of written notice thereof to the indemnifying party (regardless of whether it is ultimately determined that an indemnified party is not entitled to indemnification hereunder). Any such indemnified party shall have the right to employ separate counsel in any such action, claim or proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be the expenses of such indemnified party unless (i) the indemnifying party has agreed to pay such fees and expenses or (ii) the indemnifying party shall have failed to promptly assume the -45- 47 defense of such action, claim or proceeding or (iii) the named parties to any such action, claim or proceeding (including any impleaded parties) include both such indemnified party and the indemnifying party, and such indemnified party shall have been advised by counsel that there may be one or more legal defenses available to it which are different from or in addition to those available to the indemnifying party and that the assertion of such defenses would create a conflict of interest such that counsel employed by the indemnifying party could not faithfully represent the indemnified party (in which case, if such indemnified party notifies the indemnifying party in writing that it elects to employ separate counsel at the expense of the indemnifying party, the indemnifying party shall not have the right to assume the defense of such action, claim or proceeding on behalf of such indemnified party, it being understood, however, that the indemnifying party shall not, in connection with any one such action, claim or proceeding or separate but substantially similar or related actions, claims or proceedings in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the reasonable fees and expenses of more than one separate firm of attorneys (together with appropriate local counsel) at any time for all such indemnified parties, unless in the reasonable judgment of such indemnified party a conflict of interest may exist between such indemnified party and any other of such indemnified parties with respect to such action, claim or proceeding, in which event the indemnifying party shall be obligated to pay the fees and expenses of such additional counsel or counsels). No indemnifying party shall be liable to an indemnified party for any settlement of any action, proceeding or claim without the written consent of the indemnifying party, which consent shall not be unreasonably withheld. (d) If the indemnification required by this Section 9.7 from the indemnifying party is unavailable to an indemnified party hereunder in respect of any losses, claims, damages, liabilities or expenses referred to in this Section 9.7: (i) The indemnifying party, in lieu of indemnifying such indemnified party, shall contribute -46- 48 to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities or expenses in such proportion as is appropriate to reflect the relative fault of the indemnifying party and indemnified parties in connection with the actions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative fault of such indemnifying party and indemnified parties shall be determined by reference to, among other things, whether any Violation has been committed by, or relates to information supplied by, such indemnifying party or indemnified parties, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such Violation. The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and expenses referred to above shall be deemed to include, subject to the limitations set forth in Section 9.7(a) and Section 9.7(b), any reasonable legal or other fees or expenses reasonably incurred by such party in connection with any investigation or proceeding. (ii) The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 9.7(d) were determined by pro rata allocation or by any other method of allocation which does not take into account the equitable considerations referred to in Section 9.7(d)(i) above. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. (e) If indemnification is available under this Section 9.7, the indemnifying parties shall indemnify each indemnified party to the full extent provided in this Section 9.7 without regard to the relative fault of such indemnifying party or indemnified party or any other equitable consideration referred to in Section 9.7(d) above. (f) The indemnification required by this Section 9.7 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and -47- 49 when bills are received or expense, loss, damage or liability is incurred. In the event that it shall be subsequently determined that the recipient of any such periodic payment shall not be entitled to indemnification hereunder, such recipient promptly shall repay such payments, together with interest thereon at the Agreed Rate from the date of original receipt to the date of repayment. (g) The obligations of the Company and the Selling Holders of Registrable Securities under this Section 9.7 shall survive the completion of any offering of Registrable Securities pursuant to a registration statement under this Section 9, and otherwise. 9.8. Holdback. Each WS Holder entitled pursuant to this Section 9 to have Registrable Securities included in a registration statement prepared pursuant to this Section 9, if so requested by the managing underwriter in connection with an offering of any Registrable Securities, shall not effect any public sale or distribution of shares of Common Stock, Convertible Securities or Stock Purchase Rights (excluding any sale pursuant to Rule 144 or Rule 144A under the Securities Act and any sale as part of such underwritten or agented registration), during the 5-day period prior to, and during the 45-day period beginning on, the date such registration statement is declared effective under the Securities Act by the Commission, provided that such WS Holder is timely notified of such effective date in writing by the Company or such managing underwriter. 9.9. Additional Covenants of the Company. The Company hereby agrees and covenants as follows: (a) The Company shall file as and when applicable, on a timely basis, all reports required to be filed by it under the Exchange Act. If the Company is not required to file reports pursuant to the Exchange Act, upon the request of any WS Holder, the Company shall make publicly available the information specified in subparagraph (c)(2) of Rule 144 of the Securities Act, and take such further action as may be reasonably required from time to time and as may be within the reasonable control of the Company, to enable the WS Holders to Transfer Warrants or Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by Rule 144 under the -48- 50 Securities Act or any similar rule or regulation hereafter adopted by the Commission. In addition, promptly upon the request of any WS Holder, the Company shall provide such WS Holder with such publicly available financial statements, reports and other information as may be required to permit such WS Holder to Transfer shares of Registrable Securities to Qualified Institutional Investors pursuant to Rule 144A of the Securities Act. (b) The Company shall not, and shall not permit its majority owned subsidiaries to, effect any public sale or distribution of any shares of Common Stock, Convertible Securities or Stock Purchase Rights during the 5 Business Days prior to, and during the 90-day period beginning on, the commencement of a public distribution of Registrable Securities pursuant to any registration statement prepared pursuant to this Section 9 (other than by the Company pursuant to such registration if the registration is pursuant to Section 9.3 or by the Company pursuant to any dividend reinvestment plan offered by it to its stockholders). The Company shall not effect any registration of its securities (other than on Form S-4, Form S-8, or any successor forms to such forms or pursuant to such other registration rights agreements as may be approved in writing by the Majority Selling Holders) or effect any public or private sale or distribution of any of its securities, including a sale pursuant to Regulation D under the Securities Act, whether on its own behalf or at the request of any holder or holders of such securities from the date of a request for a Demand Registration pursuant to Section 9.2 until 90 days following the effective date of such Demand Registration statement, unless the Company shall have previously notified in writing all Selling Holders of the Company's desire to do so, and the Majority Selling Holders or the managing underwriter, if any, shall have consented thereto in writing. (c) Any agreement entered into on or after August 31, 1997 pursuant to which the Company or any of its majority owned subsidiaries issues or agrees to issue any Common Stock (including, without limitation, any employee stock option, stock purchase agreement, merger agreement or other agreement) shall contain a provision whereby any holder receiving such Common Stock who will hold more than one -49- 51 percent (1%) of the amount of such Common Stock then outstanding shall agree not to effect any public sale or distribution of any such Common Stock during the periods described in the second sentence of Section 9.9(b), in each case including a sale pursuant to Rule 144 under the Securities Act (unless such Person is prevented by applicable statute or regulation from entering into such an agreement). (d) Subject to Section 13, the Company shall not, directly or indirectly, (x) enter into any merger, consolidation or reorganization in which the Company shall not be the surviving corporation or (y) Transfer or agree to Transfer all or substantially all the Company's assets, unless prior to such merger, consolidation, reorganization or asset Transfer, the surviving corporation or the Transferee, respectively, shall have agreed in writing to assume the obligations of the Company under this Agreement, and for that purpose references hereunder to "Registrable Securities" shall be deemed to include the securities which the WS Holders would be entitled to receive in exchange for Registrable Securities pursuant to any such merger, consolidation or reorganization. 10. LOSS OR MUTILATION Upon receipt by the Company from any Holder of evidence reasonably satisfactory to it of the ownership of and the loss, theft, destruction or mutilation of this Warrant and an indemnity reasonably satisfactory to it (it being understood that the written indemnification agreement of or affidavit of loss of The First National Bank of Chicago shall be a sufficient indemnity) and, in case of mutilation, upon surrender and cancellation hereof, the Company will execute and deliver in lieu hereof a new Warrant of like tenor to such Holder; provided, however, in the case of mutilation, no indemnity shall be required if this Warrant in identifiable form is surrendered to the Company for cancellation. 11. OFFICE OF THE COMPANY -50- 52 As long as any of the Warrants remain outstanding, the Company shall maintain an office or agency, which may be the principal executive offices of the Company (the "Designated Office"), where the Warrants may be presented for exercise, registration of transfer, division or combination as provided in this Warrant. Such Designated Office shall initially be the office of the Company at Cedar Rapids, Iowa. The Company may from time to time change the Designated Office to another office of the Company or its agent within the United States by notice given to all registered holders of Warrants at least ten Business Days prior to the effective date of such change. 12. FINANCIAL AND BUSINESS INFORMATION Until the Expiration Date, the Company shall deliver to each Holder of Warrants or of Warrant Stock one copy of each of the following items: (i) promptly after filing thereof, copies of all regular and periodic reports, proxy statements (other than preliminary) and registration statements (other than registration statements on Forms S-3 (relating to debt securities) and S-8) which the Company may file with the Securities and Exchange Commission or any governmental agency substituted therefor. (ii) promptly upon their becoming available, copies of all financial statements, reports, notices and proxy statements sent or made available by the Company to the holders of any class of its securities generally or by any Subsidiary of the Company to the holders of any class of its securities generally; and (iii) with reasonable promptness, such other public information relating to the Company and its Subsidiaries as the Holder may, from time to time, reasonably request. -51- 53 13. REPURCHASE BY THE COMPANY OF WARRANTS The Company shall have the right (the "Call"), upon written notice (the "Call Notice") to the Holders of all outstanding Warrants given at any time on or after the date of the occurrence of the Triggering Event and before May 31, 1997, to repurchase on the date specified in the notice from each Holder of a Warrant all of such Warrant for an amount equal to the result (rounded to the nearest cent) obtained by multiplying One Dollar ($1.00) by a fraction, the numerator of which shall be the aggregate number of shares for which this Warrant may be exercised and the denominator of which shall be the aggregate number of shares for which all outstanding Series A Warrants may be exercised, and in all events not more than One Dollar ($1.00) for all Series A Warrants. On the date of any repurchase of this Warrant pursuant to this Section 13, the Holder shall assign to the Company such Warrant without any representation or warranty (except as to title and the absence of Liens), by the surrender of this Warrant at the Designated Office against payment of the repurchase price therefor. 14. MISCELLANEOUS 14.1. Nonwaiver. No course of dealing or any delay or failure to exercise any right hereunder on the part of the Company or the Holder shall operate as a waiver of such right or otherwise prejudice the rights, powers or remedies of such Person. 14.2. Notice Generally. Any notice, demand, request, consent, approval, declaration, delivery or communication hereunder to be made pursuant to the provisions of this Warrant shall be sufficiently given or made if in writing and either delivered in person with receipt acknowledged or sent by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: (a) if to any Holder of this Warrant or of Warrant Stock issued upon the exercise hereof, at its last known address appearing on the books of the Company maintained for such purpose; (b) if to the Company, at its Designated Office; -52- 54 or at such other address as may be substituted by notice given as herein provided. The giving of any notice required hereunder may be waived in writing by the party entitled to receive such notice. Every notice, demand, request, consent, approval, declaration, delivery or other communication hereunder shall be deemed to have been duly given or served on the date on which personally delivered, with receipt acknowledged, or three Business Days after the same shall have been deposited in the United States mail, or one Business Day after the same shall have been delivered to Federal Express or another overnight courier service. 14.3. Indemnification. If the Company fails to make, when due, any payments provided for in this Warrant, the Company shall pay to the Holder hereof (a) interest at the Agreed Rate on any amounts due and owing to such Holder from the date due until the date of payment and (b) such further amounts as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys' fees and expenses incurred by such Holder in collecting any amounts due hereunder. The Company shall indemnify, save and hold harmless the Holder hereof and the Holders of any Warrant Stock issued upon the exercise hereof from and against any and all liability, loss, cost, damage, reasonable attorneys' and accountants' fees and expenses, court costs and all other out-of-pocket expenses incurred in connection with or arising from a Company Default. This indemnification provision shall be in addition to the rights of such Holder or Holders to bring an action against the Company for breach of contract based on such Company Default. 14.4. Limitation of Liability. No provision hereof, in the absence of affirmative action by the Holder to purchase shares of Common Stock, and no enumeration herein of the rights or privileges of the Holder hereof, shall give rise to any liability of such Holder to pay the Exercise Price for any Warrant Stock other than pursuant to an exercise of this Warrant or any liability as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company. 14.5. Remedies. Each Holder of Warrants and/or Warrant Stock, in addition to being entitled to exercise its rights granted by law, including recovery of damages, shall be entitled to specific performance of its rights provided under this War- -53- 55 rant. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees, in an action for specific performance, to waive the defense that a remedy at law would be adequate. 14.6. Successors and Assigns. Subject to the provisions of Sections 3.1, 8.1 and 8.2, this Warrant and the rights evidenced hereby shall inure to the benefit of and be binding upon the successors of the Company and the permitted successors and assigns of the Holder hereof. The provisions of this Warrant are intended to be for the benefit of all Holders from time to time of this Warrant and, in the case of Section 9, all Holders of shares of Warrant Stock issued upon the exercise hereof (including transferees), and shall be enforceable by any such Holder. 14.7. Amendment. This Warrant and all other Warrants may be modified or amended or the provisions hereof waived with the written consent of the Company and the Majority Warrant Holders, provided that no such Warrant may be modified or amended to reduce the number of shares of Common Stock for which such Warrant is exercisable or to increase the price at which such shares may be purchased upon exercise of such Warrant (before giving effect to any adjustment as provided therein) without the written consent of the Holder thereof. 14.8. Severability. Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Warrant. 14.9. Headings. The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant. 14.10. GOVERNING LAW; JURISDICTION. IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS WARRANT AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF ILLINOIS APPLICABLE TO CONTRACTS MADE AND -54- 56 PERFORMED IN SUCH STATE, EXCEPT WITH RESPECT TO THE VALIDITY OF THIS WARRANT, THE ISSUANCE OF WARRANT STOCK UPON EXERCISE HEREOF AND THE RIGHTS AND DUTIES OF THE COMPANY WITH RESPECT TO REGISTRATION OF TRANSFER, WHICH SHALL BE GOVERNED BY THE LAWS OF DELAWARE. THE COMPANY HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED IN CHICAGO, ILLINOIS, SHALL HAVE, EXCEPT AS SET FORTH BELOW, EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THE COMPANY AND THE HOLDER OF THIS WARRANT PERTAINING TO THIS WARRANT OR TO ANY MATTER ARISING OUT OF OR RELATING TO THIS AGREEMENT, PROVIDED, THAT IT IS ACKNOWLEDGED THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF CHICAGO, ILLINOIS. -55- 57 IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed and its corporate seal to be impressed hereon and attested by its Secretary or an Assistant Secretary. NORAND CORPORATION By: N. Robert Hammer -------------------------------- Name: N. Robert Hammer Title: Chairman, President and Chief Executive Officer [SEAL] Attest: By: James I. Johnson -------------------------------------- Name: James I. Johnson Title: Secretary and General Counsel -56- 58 ANNEX A SUBSCRIPTION FORM [To be executed only upon exercise of Warrant] The undersigned registered owner of this Warrant irrevocably exercises this Warrant for the purchase of ______ shares Common Stock of Norand Corporation and herewith makes payment therefor, all at the price and on the terms and conditions specified in this Warrant and requests that certificates for the shares of Common Stock hereby purchased (and any securities or other property issuable upon such exercise) be issued in the name of and delivered to _________________ whose address is ___________________________________________________ and, if such shares of Common Stock shall not include all of the shares of Common Stock issuable as provided in this Warrant, that a new Warrant of like tenor and date for the balance of the shares of Common Stock issuable hereunder be delivered to the undersigned. _______________________________ (Name of Registered Owner) _______________________________ (Signature of Registered Owner) _______________________________ (Street Address) _______________________________ (City) (State) (Zip Code) NOTICE: The signature on this subscription must correspond with the name as written upon the face of the within Warrant in every particular, without alteration or enlargement or any change whatsoever. 59 ANNEX B ASSIGNMENT FORM FOR VALUE RECEIVED the undersigned registered owner of this Warrant hereby sells, assigns and transfers unto the Assignee named below all of the rights of the undersigned under this Warrant, with respect to the number of shares of Common Stock set forth below: No. of Shares of Name and Address of Assignee Common Stock and does hereby irrevocably constitute and appoint ________ _____________ attorney-in-fact to register such transfer onto the books of Norand Corporation maintained for the purpose, with full power of substitution in the premises. Dated:___________________ Print Name:___________________ Signature:____________________ Witness:______________________ NOTICE: The signature on this assignment must correspond with the name as written upon the face of the within Warrant in every particular, without alteration or enlargement or any change whatsoever. 60 TABLE OF CONTENTS 1. DEFINITIONS 1 2. EXERCISE OF WARRANT 11 2.1. Manner of Exercise 11 2.2. Payment of Transfer Taxes 12 2.3. Fractional Shares 12 2.4. Continued Validity and Application 13 2.5. Limitation on Regulated Holder's Exercise 13 3. TRANSFER, DIVISION AND COMBINATION 14 3.1. Transfer14 3.2. Division and Combination. 14 3.3. Expenses. 14 3.4. Maintenance of Books 14 4. ANTIDILUTION PROVISIONS 14 4.1. Stock Dividends, Subdivisions and Combinations 14 4.2. Issuance of Additional Shares of Common Stock 15 4.3. Issuances of Stock Purchase Rights and Convertible Securities 15 4.4. Adjustment of Number of Shares Purchasable. 17 4.5. Reorganization, Reclassification, Merger, Consolidation or Disposition of Assets 17 4.6. Determination of Consideration. 18 4.7. Other Dilutive Events 20 4.8. Other Provisions Applicable to Adjustments Under this Section 21 5. NO IMPAIRMENT 22 6. RESERVATION AND AUTHORIZATION OF COMMON STOCK 23 7. NOTICE OF CORPORATE ACTIONS; TAKING OF RECORD; TRANSFER BOOKS 23 7.1. Notices of Corporate Actions 23 7.2 Closing of Transfer Books 23 8. TRANSFER RESTRICTIONS 24 8.1. Restrictions on Transfers 24 8.2. Restrictive Legends 24 -i- 61 8.3. Termination of Securities Law Restrictions 25 9. REGISTRATION RIGHTS 26 9.1. Certain Definitions 26 9.2. Demand Registration 27 9.3. Piggyback Registration 29 9.4. Registration Procedures 30 9.5. Selling Holders' Obligations 34 9.6. Expenses of Registration 34 9.7. Indemnification; Contribution 35 9.8. Holdback. 40 9.9. Additional Covenants of the Company 40 10. LOSS OR MUTILATION 42 11. OFFICE OF THE COMPANY 42 12. FINANCIAL AND BUSINESS INFORMATION 43 13. REPURCHASE BY THE COMPANY OF WARRANTS 43 14. MISCELLANEOUS 43 14.1. Nonwaiver 43 14.2. Notice Generally 44 14.3. Indemnification 44 14.4. Limitation of Liability 44 14.5. Remedies 45 14.6. Successors and Assigns 45 14.7. Amendment. 45 14.8. Severability 45 14.9. Headings. 45 14.10. GOVERNING LAW; JURISDICTION 45 ANNEX A SUBSCRIPTION FORM 48 ANNEX B ASSIGNMENT FORM 49 SCHEDULE A RESERVED SHARES OF COMMON STOCK SCHEDULE B UNDERWRITERS AND AGENTS -ii- 62 -iii- EX-4.(N)(2) 4 SERIES A WARRANT A-2 1 EXHIBIT 4.N.2 SERIES A WARRANT to Purchase Common Stock of NORAND CORPORATION Warrant No. A - 2 Original Issue Date: November 20, 1996 2 TABLE OF CONTENTS 1. DEFINITIONS 1 2. EXERCISE OF WARRANT 11 2.1. Manner of Exercise 11 2.2. Payment of Transfer Taxes 12 2.3. Fractional Shares 12 2.4. Continued Validity and Application 13 2.5. Limitation on Regulated Holder's Exercise 13 3. TRANSFER, DIVISION AND COMBINATION 14 3.1. Transfer 14 3.2. Division and Combination 14 3.3. Expenses 14 3.4. Maintenance of Books 14 4. ANTIDILUTION PROVISIONS 14 4.1. Stock Dividends, Subdivisions and Combinations 14 4.2. Issuance of Additional Shares of Common Stock 15 4.3. Issuances of Stock Purchase Rights and Convertible Securities 15 4.4. Adjustment of Number of Shares Purchasable. 17 4.5. Reorganization, Reclassification, Merger, Consolidation or Disposition of Assets 17 4.6. Determination of Consideration. 18 4.7. Other Dilutive Events 20 4.8. Other Provisions Applicable to Adjustments Under this Section 21 5. NO IMPAIRMENT 22 6. RESERVATION AND AUTHORIZATION OF COMMON STOCK 23 7. NOTICE OF CORPORATE ACTIONS; TAKING OF RECORD; TRANSFER BOOKS 23 7.1. Notices of Corporate Actions 23 7.2 Closing of Transfer Books 23 8. TRANSFER RESTRICTIONS 24 8.1. Restrictions on Transfers 24 8.2. Restrictive Legends 24 -i- 3 8.3. Termination of Securities Law Restrictions 25 9. REGISTRATION RIGHTS 26 9.1. Certain Definitions 26 9.2. Demand Registration 27 9.3. Piggyback Registration 29 9.4. Registration Procedures 30 9.5. Selling Holders' Obligations 34 9.6. Expenses of Registration 34 9.7. Indemnification; Contribution 35 9.8. Holdback 40 9.9. Additional Covenants of the Company 40 10. LOSS OR MUTILATION 42 11. OFFICE OF THE COMPANY 42 12. FINANCIAL AND BUSINESS INFORMATION 43 13. REPURCHASE BY THE COMPANY OF WARRANTS 43 14. MISCELLANEOUS 43 14.1. Nonwaiver 43 14.2. Notice Generally 44 14.3. Indemnification 44 14.4. Limitation of Liability 44 14.5. Remedies 45 14.6. Successors and Assigns 45 14.7. Amendment 45 14.8. Severability 45 14.9. Headings 45 14.10. GOVERNING LAW; JURISDICTION 45 ANNEX A SUBSCRIPTION FORM 48 ANNEX B ASSIGNMENT FORM 49 SCHEDULE A RESERVED SHARES OF COMMON STOCK SCHEDULE B UNDERWRITERS AND AGENTS -ii- 4 NEITHER THE WARRANTS REPRESENTED BY THIS CERTIFICATE NOR ANY OF THE SECURITIES ISSUABLE UPON EXERCISE THEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAW. NO TRANSFER OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE OR OF THE SECURITIES ISSUABLE UPON EXERCISE THEREOF SHALL BE VALID OR EFFECTIVE UNLESS (A) SUCH TRANSFER IS MADE PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR (B) THE HOLDER OF THE SECURITIES PROPOSED TO BE TRANSFERRED SHALL HAVE DELIVERED TO THE COMPANY EITHER A NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION OR AN OPINION OF COUNSEL EXPERIENCED IN SECURITIES MATTERS AND REASONABLY ACCEPTABLE TO THE COMPANY TO THE EFFECT THAT SUCH PROPOSED TRANSFER IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE ACT OR (C) SUCH TRANSFER IS PURSUANT TO RULE 144 OR RULE 144A UNDER THE ACT AND SUCH HOLDER(S) SHALL HAVE DELIVERED TO THE COMPANY A CERTIFICATE SETTING FORTH THE BASIS FOR APPLYING SUCH RULE TO THE PROPOSED TRANSFER. Warrant No. A - 2 SERIES A WARRANT NORAND CORPORATION THIS IS TO CERTIFY THAT CAISSE NATIONALE DE CREDIT AGRICOLE, or registered assigns, is entitled, at any time after May 31, 1997 and prior to the Expiration Date (such term, and certain other capitalized terms used herein being hereinafter defined), to purchase from NORAND CORPORATION, a Delaware corporation (the "Company"), Fifty-Seven Thousand Five Hundred Ninety-seven (57,597) shares of the Common Stock of the Company (subject to adjustment as provided herein), at a purchase price of $21.15 per share (the initial "Exercise Price", subject to adjustment as provided herein), all on the terms and conditions and pursuant to the provisions hereinafter set forth. 5 1. DEFINITIONS As used in this Warrant, the following terms have the respective meanings set forth below: "Affiliate" of any Person means a Person (a) which directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with such Person, (b) which beneficially owns or holds more than ten percent of the outstanding shares of any class of voting stock of such Person and has the power to vote such shares or (c) more than ten percent of the outstanding shares of any class of voting stock (or, in the case of a Person which is not a corporation, more than ten percent of the equity interest) of which is beneficially owned or held by such Person and such Person has the power to vote such shares or equity interest. The term "control" as used with respect to any Person means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise. "After-Tax Basis", when referring to a payment that is required hereunder (the "target amount"), shall mean a total payment (the "total amount") that, after deduction of all federal, state and local taxes that are required to be paid by the recipient in respect of the receipt or accrual of such total amount, is equal to the target amount. "Agreed Rate" shall mean a rate per annum equal to the corporate base rate of interest announced by The First National Bank of Chicago from time to time, changing when and as said corporate base rate changes. "Appraised Value" per share of Common Stock as of a date specified herein shall mean the value of such share as of such date as determined by an investment bank of nationally recognized standing selected by the Majority Warrant Holders from Schedule B (or any successor of any such entity), it being understood that the Majority Warrant Holders shall use commercially reasonable efforts to select one of the first three listed entities subject to arriving at reasonably acceptable terms and conditions for the -2- 6 appraisal. The Company shall pay the costs and fees of such investment bank, and the decision of the investment bank making such determination of Appraised Value shall be final and binding on the Company and all affected holders of Warrants or Warrant Stock. Such Appraised Value shall be determined as a pro rata portion of the value of the Company taken as a whole, based on the higher of (A) the value derived from a hypothetical sale of the entire Company as a going concern by a willing seller to a willing buyer (neither acting under any compulsion) and (B) the liquidation value of the entire Company. No discount shall be applied on account of (i) any Warrants or Warrant Stock representing a minority interest, (ii) any lack of liquidity of the Common Stock or the Warrants, (iii) the fact that the Warrants or Warrant Stock may constitute "restricted securities" for securities law purposes or (iv) the existence of any call option. "Bank Holding Company Act" shall mean the Bank Holding Company Act of 1956, as amended. "Business Day" shall mean any day that is not a Saturday or Sunday or a day on which banks are required or permitted to be closed in the State of Illinois. "Call" shall have the meaning set forth in Section 13 hereof. "Call Notice" shall have the meaning set forth in Section 13 hereof. "Commission" shall mean the Securities and Exchange Commission or any other federal agency then administering the Securities Act and other federal securities laws. "Common Stock" shall mean (except where the context otherwise indicates) the Common Stock of the Company, par value $.01 per share, as constituted on the Original Issue Date, and any capital stock into which such Common Stock may thereafter be changed, and shall also include (i) capital stock of the Company of any other class (regardless of how denominated) issued to the holders of shares of any Common Stock upon any reclassification thereof which is also not preferred as to dividends or liquidation over any other -3- 7 class of stock of the Company and which is not subject to redemption and (ii) shares of common stock of any successor or acquiring corporation (as defined in Section 4.5 hereof) received by or distributed to the holders of Common Stock of the Company in the circumstances contemplated by Section 4.5 hereof. "Company" means Norand Corporation, a Delaware corporation, and any successor corporation. "Company Default" means (a) the breach of any warranty or the inaccuracy in any material respect at the time when made of any representation made by the Company herein or (b) the failure by the Company to comply in any material respect with any covenant of the Company contained herein. "Continuously Effective", with respect to a specified registration statement, shall mean that it shall not cease to be effective and available for Transfers of Warrant Stock thereunder for the longer of either (i) any ten consecutive Business Days, or (ii) an aggregate of fifteen Business Days during the period specified in the relevant provision of Section 9 hereof. "Convertible Securities" shall mean evidences of indebtedness, shares of stock or other securities that are convertible into or exchangeable for, with or without payment of additional consideration in cash or property, shares of Common Stock, either immediately or upon the occurrence of a specified date or a specified event. "Credit Agreement" means the Second Amended and Restated Credit Agreement dated as of January 25, 1996, as thereafter from time to time amended, supplemented, restated or modified, among the Company, the Lenders party thereto and The First National Bank of Chicago, as agent. "Current Market Price" shall mean as of any specified date the average of the daily market prices of the Common Stock of the Company for the shorter of (x) the twenty consecutive Business Days immediately preceding such date or (y) the period commencing on the Business Day next following the first public announcement of any event giving rise to an adjustment of the Exercise Price pursuant to Section 4 below -4- 8 and ending on such date. The "daily market price" for each such Business Day shall be: (i) if the Common Stock is then listed on a national securities exchange or is listed on NASDAQ and is designated as a National Market System security, the last sale price, regular way, on such day on the principal stock exchange or market system on which such Common Stock is then listed or admitted to trading, or, if no such sale takes place on such day, the average of the closing bid and asked prices for the Common Stock on such day as reported on such stock exchange or market system or (ii) if the Common Stock is not then listed or admitted to trading on any national securities exchange or designated as a National Market System security on NASDAQ but is traded over-the-counter, the average of the closing bid and asked prices for the Common Stock as reported on NASDAQ or the Electronic Bulletin Board or in the National Daily Quotation Sheets, as applicable. "Demand Registration" shall have the meaning set forth in Section 9.2(a) hereof. "Demanding Holders" shall have the meaning set forth in Section 9.2(a) hereof. "Designated Office" shall have the meaning set forth in Section 11 hereof. "Equity" shall mean equity capital (not including the equity capital attributable to the Settlement Stock, and any mandatory redemption terms of which equity capital are acceptable to the Majority Warrant Holders) raised by and/or contributed to the Company subsequent to the Original Issue Date or new Indebtedness (as defined in the Credit Agreement) subordinated to the Obligations (as defined in the Credit Agreement), provided the terms of such Indebtedness (including, without limitation, maturity, amortization, covenants, defaults, remedies and subordination provisions) are acceptable to the Majority Warrant Holders. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect from time to time. -5- 9 "Exercise Notice" shall have the meaning set forth in Section 2.1 hereof. "Exercise Period" shall mean the period during which this Warrant is exercisable pursuant to Section 2.1 hereof. "Exercise Price" shall mean, in respect of a share of Common Stock at any date herein specified, the initial Exercise Price set forth in the preamble of this Warrant as adjusted from time to time pursuant to Section 4 hereof. "Expiration Date" shall mean August 31, 2002, unless extended under the circumstances contemplated by Section 9.2(d) hereof. "Fair Value" per share of Common Stock as of any specified date shall mean (A) if the Common Stock is publicly traded on such date, the Current Market Price per share or (B) if the Common Stock is not publicly traded on such date, (1) the fair market value per share of Common Stock as determined in good faith by the Board of Directors of the Company and set forth in a written notice to each Holder or (2) if the Majority Warrant Holders object in writing to such price as determined by the Board of Directors within thirty days after receiving notice of same, the Appraised Value per share as of such date. "Fully Diluted Outstanding" shall mean, when used with reference to Common Stock, at any date as of which the number of shares thereof is to be determined, all shares of Common Stock Outstanding on such date and all shares of Common Stock issuable in respect of (x) the Warrants outstanding on such date, (y) any Convertible Securities outstanding on such date and (z) any other Stock Purchase Rights outstanding on such date, in each case regardless of whether or not the conversion, exchange, subscription or purchase rights associated with such Convertible Securities or Stock Purchase Rights are presently exercisable. "GAAP" shall mean generally accepted accounting principles in the United States of America as from time to time in effect. -6- 10 "Glass-Steagall Act" shall mean Section 24 (Seventh), Section 78, Section 377 and Section 378 of Title 12 (12 U.S.C. Section Section 24 (Seventh) 78, 377, 378), or any similar federal legislation. "Holder" shall mean (a) with respect to this Warrant, the Person in whose name the Warrant set forth herein is registered on the books of the Company maintained for such purpose and (b) with respect to any other Warrant or shares of Warrant Stock, the Person in whose name such Warrant or Warrant Stock is registered on the books of the Company maintained for such purpose. "Insolvency Event" shall mean any proceeding being instituted by or against the Company seeking a declaration or order for relief, or entailing a finding, that the Company is insolvent or bankrupt, or seeking reorganization, liquidation, dissolution, winding-up, charter revocation or other similar relief with respect to the Company or any of its properties, assets or debts, or seeking the appointment of a receiver, trustee, custodian, liquidator, sequestrator or similar official for the Company or any of its properties or assets, or the Company becoming insolvent or bankrupt or generally unable to pay its debts as they become due, or the Company voluntarily suspending its business or making a general assignment for the benefit of creditors; provided that an Insolvency Event shall not be deemed to have occurred on account of any such proceeding which is involuntary on the part of the Company unless same shall not have been dismissed or stayed within 60 days. "Lien" shall mean any mortgage or deed of trust, pledge, hypothecation, assignment, deposit arrangement, lien, charge, claim, security interest, easement or encumbrance, or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, any lease or title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, and the filing of, or agreement to give, any financing statement perfecting a security interest under the Uniform Commercial Code or comparable law of any jurisdiction). -7- 11 "Majority Warrant Holders", with respect to a given determination, shall mean the Holders of Warrants and/or Warrant Stock representing at least seventy-six percent (76%) of all Warrants and/or Warrant Stock (with any such Warrants being deemed to represent, for the purposes of such calculation, the shares of Warrant Stock then issuable upon exercise thereof) directly affected by such determination. "Majority Selling Holders" shall mean those Selling Holders whose Warrants and/or Warrant Stock included in a registration under Section 9 hereof represents a majority of the Warrants and/or Warrant Stock (with any such Warrants being deemed to represent, for the purposes of such calculation, the shares of Warrant Stock then issuable upon exercise thereof) included therein by all Selling Holders. "NASD" shall mean the National Association of Securities Dealers, Inc., or any successor corporation thereto. "NASDAQ" shall mean the NASDAQ quotation system, or any successor reporting system. "Notes" shall mean any of the promissory notes issued by the Company under the Credit Agreement. "Opinion of Counsel" means a written opinion of counsel experienced in Securities Act or bank regulatory matters, as the case may be, chosen by the Holder of this Warrant or Warrant Stock issued upon the exercise hereof and reasonably acceptable to the Company. "Original Issue Date" shall mean the date on which the Original Warrants were issued, as set forth on the cover page of this Warrant. "Original Warrants" shall mean the Warrants originally issued by the Company on the Original Issue Date to each of The First National Bank of Chicago, Fleet Bank of Massachusetts, N.A., The Daiwa Bank, Limited, Norwest Bank Iowa, National Association and Caisse Nationale de Credit Agricole. "Other Property" shall have the meaning set forth in Section 4.5 hereof. -8- 12 "Outstanding" shall mean, when used with reference to Common Stock, at any date as of which the number of shares thereof is to be determined, all issued shares of Common Stock, except shares then owned or held by or for the account of the Company or any Subsidiary thereof, and shall include all shares issuable in respect of outstanding scrip or any certificates representing fractional interests in shares of Common Stock. "Outstanding", when used with respect to Warrant Stock for the purposes of Section 9 hereof shall have the meaning set forth in Section 9.1(d) hereof. "Person" shall mean any individual, sole proprietorship, partnership, limited liability company, joint venture, trust, incorporated organization, association, corporation, institution, public benefit corporation, entity or government (whether federal, state, county, city, municipal or otherwise, including, without limitation, any instrumentality, division, agency, body or department thereof). "Piggyback Registration" shall have the meaning set forth in Section 9.3(a) hereof. "Register", "registered" and "registration" shall refer to a registration effected by preparing and filing a registration statement or similar document in compliance with the Securities Act, and the declaration or ordering by the Commission of effectiveness of such registration statement or document. "Registration Expenses" shall have the meaning set forth in Section 9.6(a) hereof. "Restricted Common Stock" shall mean shares of Common Stock which are, or which upon their issuance on the exercise of this Warrant would be, evidenced by a certificate bearing the restrictive legend set forth in Section 8.2(a) hereof. "Securities Act" shall mean the Securities Act of 1933, as amended, or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. -9- 13 "Selling Holders" shall mean, with respect to a specified registration under Section 9 hereof, WS Holders whose Registrable Securities are included in such registration. "Series A Warrants" shall mean all of the Series A Warrants to Purchase Common Stock of Norand Corporation, issued concurrently with, and having the same terms (other than the number of shares purchasable upon the exercise thereof) as, this Warrant. "Series B Warrants" shall mean all of the Series B Warrants to Purchase Common Stock of Norand Corporation issued concurrently with this Warrant. "Settlement Stock" shall mean the shares of Common Stock contemplated to be issued in settlement of the pending shareholders' claims against the Company with respect to the litigation styled In re Norand Corporation Securities Litigation, Master File No. C95-323, pending in the United States District Court for the Northern District of Iowa, Cedar Rapids Division. "Share Withholding Option" has the meaning set forth in Section 2.1(c) hereof. "Shelf Registration" shall have the meaning set forth in Section 9.2(a) hereof. "Stock Purchase Rights" shall mean any options, warrants or other securities or rights to subscribe to or exercisable for the purchase of shares of Common Stock or Convertible Securities, whether or not immediately exercisable, other than the options, warrants or other rights described in Schedule A hereto. "Subsequent Issuance" shall mean any sale or issuance by the Company of Common Stock, Convertible Securities or Stock Purchase Rights after the Original Issue Date other than: (i) Any issuance of Warrant Stock upon exercise of the Warrants and any issuance of Common Stock, Convertible Securities or Stock Purchase Rights (and -10- 14 any issuance of Common Stock pursuant to the conversion, exchange or exercise of any such Convertible Securities or Stock Purchase Rights) deemed to have been issued as of the Original Issue Date pursuant to the definition of Fully Diluted Outstanding. (ii) Any issuance of Common Stock pursuant to the exercise of the options and warrants described in Schedule A hereto, provided, however, that the exercise price of any such option or warrant (other than warrants granted to Jay Alix and Associates and to Donald W. Rowley for up to the respective number of shares set forth on Schedule A) granted or issued after the Original Issue Date shall not be less than the "daily market price" (as that term is defined in the definition of Current Market Price) of the Common Stock on the date of grant or issue of the option or warrant. (iii) The issuance of the Settlement Stock. (iv) The issuance of Common Stock or Convertible Securities directly related to the Company's receipt of Equity if, and only if, the aggregate Equity actually received by the Company between the Original Issue Date and August 31, 1997 equals or exceeds $20 million (otherwise, after August 31, 1997, all such issuances, both prior to and after August 31, 1996, shall be considered a Subsequent Issuance for purposes of Section 4 hereof). (v) Any other issuance of Common Stock, Convertible Securities or Stock Purchase Rights with respect to which the Majority Warrant Holders shall have waived application of the provisions of Section 4 below. "Subsidiary" means any corporation or association (a) more than 50% (by number of votes) of the voting stock of which is at the time owned by the Company or by one or more Subsidiaries or by the Company and one or more Subsidiaries, or any other business entity in which the Company or one or more Subsidiaries or the Company and one or more Subsidiaries own more than a 50% interest either in the -11- 15 profits or capital of such business entity or (b) whose net earnings, or portions thereof, are consolidated with the net earnings of the Company and are recorded on the books of the Company for financial reporting purposes in accordance with GAAP. "Transfer" shall mean any disposition of any Warrant or Warrant Stock or of any interest in either thereof, which would constitute a "sale" thereof within the meaning of the Securities Act. "Triggering Event" shall mean the repayment in full of all indebtedness under the Credit Agreement. "Violation" has the meaning set forth in Section 9.7(a) hereof. "Warrant Price" shall mean an amount equal to (i) the number of shares of Common Stock being purchased upon exercise of this Warrant pursuant to Section 2.1 hereof, multiplied by (ii) the Exercise Price as of the date of such exercise. "Warrants" shall mean the Original Warrants and all warrants issued upon transfer, division or combination of, or in substitution for, such Original Warrants or any other such Warrant. All Warrants shall at all times be identical as to terms and conditions and date, except as to the number of shares of Common Stock for which they may be exercised. "Warrant Stock" generally shall mean the shares of Common Stock issued, issuable or both (as the context may require) upon the exercise of Warrants until such time as such shares of Common Stock have either been (i) Transferred in a public offering pursuant to a registration statement filed under the Securities Act or (ii) Transferred in a transaction exempt from the registration and prospectus delivery requirements of the Securities Act under Section 4(1) thereof with all transfer restrictions and restrictive legends with respect to such Common Stock being removed in connection with such transaction. "Warrant Stock" , for the purposes of Section 9 hereof, shall have the meaning set forth in Section 9.1(b) hereof. -12- 16 "WS Holder" shall have the meaning set forth in Section 9.1(a) hereof. 2. EXERCISE OF WARRANT 2.1. Manner of Exercise. (a) From and after May 31, 1997 and until 5:00 P.M., Chicago time, on the Expiration Date, the Holder of this Warrant may from time to time exercise this Warrant, on any Business Day, for all or any part of the number of shares of Common Stock purchasable hereunder (as determined pursuant to Section 2.2 below). In order to exercise this Warrant, in whole or in part, the Holder shall (i) deliver to the Company at the Designated Office a written notice of the Holder's election to exercise this Warrant (an "Exercise Notice"), which Exercise Notice shall be irrevocable and specify the number of shares of Common Stock to be purchased, together with this Warrant and (ii) pay to the Company the Warrant Price (the date on which both such delivery and payment shall have first taken place being hereinafter sometimes referred to as the "Exercise Date"). Such Exercise Notice shall be in the form of the subscription form appearing at the end of this Warrant as Annex A, duly executed by the Holder or its duly authorized agent or attorney. (b) Upon receipt of such Exercise Notice, Warrant and payment, the Company shall, as promptly as practicable, and in any event within five Business Days thereafter, execute (or cause to be executed) and deliver (or cause to be delivered) to the Holder a certificate or certificates representing the aggregate number of full shares of Common Stock issuable upon such exercise, together with cash in lieu of any fraction of a share, as hereafter provided. The stock certificate or certificates so delivered shall be, to the extent possible, in such denomination or denominations as the exercising Holder shall reasonably request in the Exercise Notice and shall be registered in the name of the Holder or such other name as shall be designated in the Exercise Notice. This Warrant shall be deemed to have been exercised and such certificate or certificates shall be deemed to have been issued, and the Holder or any other Person so designated to be named therein shall be deemed to have become a holder of record of such shares for all purposes, as of the Exercise Date. -13- 17 (c) Payment of the Warrant Price shall be made at the option of the Holder by one or more of the following methods: (i) by delivery of a certified or official bank check in the amount of such Warrant Price, (ii) by instructing the Company to withhold a number of shares of Warrant Stock then issuable upon exercise of this Warrant with an aggregate Current Market Price equal to such Warrant Price (the "Share Withholding Option"), (iii) by surrendering to the Company shares of Common Stock previously acquired by the Holder with an aggregate Current Market Price equal to such Warrant Price or(iv) by delivery of a Note, duly endorsed by or accompanied by appropriate instruments of transfer duly executed by the Holder or by the Holder's attorney duly authorized in writing. In the event of any withholding of Warrant Stock or surrender of Common Stock pursuant to clause (ii) or (iii) above where the number of shares whose Current Market Price is equal to the Warrant Price is not a whole number, the number of shares withheld by or surrendered to the Company shall be rounded up to the nearest whole share and the Company shall make a cash payment to the Holder based on the incremental fraction of a share being so withheld by or surrendered to the Company in an amount determined in accordance with Section 2.3 hereof. For the purpose of making payment of the Warrant Price, any Note surrendered to the Company shall be deemed to have a value equal to 100% of the principal amount thereof plus any interest accrued but unpaid thereon. If the Holder delivers a Note with a deemed value that exceeds the Warrant Price, the Company shall reissue to the Holder a new Note identical in all respects to the surrendered Note except that the principal amount of such new Note shall be equal to the principal amount that, together with any interest accrued but unpaid thereon, is equal to the deemed value of the surrendered Note less the Warrant Price. (d) If this Warrant shall have been exercised in part, the Company shall, at the time of delivery of the certificate or certificates representing the shares of Common Stock being issued, deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the unpurchased shares of Common Stock called for by this Warrant. Such new Warrant shall in all other respects be identical with this Warrant. 2.2. Payment of Transfer Taxes. All shares of Common Stock issuable upon the exercise of this Warrant pursuant to the terms hereof shall be validly issued, fully paid and nonassess- -14- 18 able, issued without violation of any preemptive rights and free and clear of all Liens (other than any created by actions of the Holder). The Company shall pay all expenses in connection with, and all taxes and other governmental charges that may be imposed with respect to, the issue or delivery thereof, unless such tax or charge is imposed by law upon the Holder, in which case such taxes or charges shall be paid by the Holder and the Company shall reimburse the Holder therefor on an After-Tax Basis. 2.3. Fractional Shares. The Company shall not be required to issue a fractional share of Common Stock upon exercise of any Warrant. As to any fraction of a share that the Holder of one or more Warrants, the rights under which are exercised in the same transaction, would otherwise be entitled to purchase upon such exercise, the Company shall pay a cash adjustment in respect of such final fraction in an amount equal to the same fraction of the Current Market Price of one share of Common Stock on the Exercise Date, if the Common Stock is then publicly traded. 2.4. Continued Validity and Application. (a) A Holder of shares of Warrant Stock issued upon the exercise of this Warrant, in whole or in part, including any transferee of such shares (other than a transferee in whose hands such shares no longer constitute Warrant Stock as defined herein), shall continue, with respect to such shares, to be entitled to all rights and to be subject to all obligations that are applicable to such Holder by the terms of this Warrant under Section 9 hereof. The Company shall, at the time of any exercise of this Warrant or any transfer of Warrant Stock, upon the request of the Holder of the shares of Warrant Stock issued in connection with such exercise or transfer, acknowledge in writing, in a form reasonably satisfactory to such Holder, its continuing obligation to afford to such Holder such rights referred to in this Section 2.4; provided, however, that if such Holder shall fail to make any such request, such failure shall not affect the continuing obligation of the Company to afford to such Holder all such rights. -15- 19 2.5. Limitation on Regulated Holder's Exercise. Notwithstanding anything in this Warrant to the contrary, the Holder of this Warrant, if subject to the Bank Holding Company Act or any provision of the Glass-Steagall Act, may exercise this Warrant only if the Notice of Exercise is accompanied by an Opinion of Counsel of such Holder to the effect that, as of the date of delivery of such opinion, no federal or state regulatory clearances are required for such Holder to exercise this Warrant or, in the event any such federal or state regulatory clearances are required prior to the exercise of this Warrant, to the effect that all such clearances have been obtained or, if not then obtained, that no statute or regulation or regulatory policy or guidelines known to such counsel would by their terms preclude the obtaining of such clearances or make it unlikely that such clearances would be obtained or make it likely that such clearances would, if obtained, contain material conditions adverse to such Holder. In the event that federal or state regulatory clearances are required prior to the exercise of this Warrant by the Holder hereof, the Company shall reasonably cooperate with such Holder in providing such information to any regulatory agency as such agency may reasonably require. In the event any such regulatory clearance is withheld or denied, such Holder may continue to hold this Warrant until its expiration or may sell or otherwise transfer this Warrant in accordance with the terms hereof. 3. TRANSFER, DIVISION AND COMBINATION 3.1. Transfer. Subject to compliance with Section 8 hereof, each transfer of this Warrant and all rights hereunder, in whole or in part, shall be registered on the books of the Company to be maintained for such purpose, upon surrender of this Warrant at the Designated Office, together with a written assignment of this Warrant in the form of Annex B hereto duly executed by the Holder or its agent or attorney. Upon such surrender and delivery, the Company shall, subject to Section 8, execute and deliver a new Warrant or Warrants in the name of the assignee or assignees and in the denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned and this Warrant shall promptly be canceled. A Warrant, if properly assigned in compliance with Section 8, may be exercised by the new Holder for the purchase of shares of Common Stock without having a new Warrant issued. -16- 20 3.2. Division and Combination. Subject to compliance with the applicable provisions of this Warrant, this Warrant may be divided or combined with other Warrants upon presentation hereof at the Designated Office, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney. Subject to compliance with the applicable provisions of this Warrant as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. 3.3. Expenses. The Company shall prepare, issue and deliver at its own expense any new Warrant or Warrants required to be issued under this Section 3. 3.4. Maintenance of Books. The Company agrees to maintain, at the Designated Office, books for the registration and transfer of the Warrants. 4. ANTIDILUTION PROVISIONS The number of shares of Common Stock for which this Warrant is exercisable and the Exercise Price shall be subject to adjustment from time to time as set forth in this Section 4. 4.1. Stock Dividends, Subdivisions and Combinations. If at any time the Company shall: (i) take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend payable in, or other distribution of, additional shares of Common Stock, (ii) subdivide its outstanding shares of Common Stock into a larger number of shares of such Common Stock, or (iii) combine its outstanding shares of Common Stock into a smaller number of shares of such Common Stock, then the Exercise Price shall be adjusted to equal the product of the Exercise Price in effect immediately prior to such event multiplied by a fraction the -17- 21 numerator of which is equal to the number of shares of Common Stock Outstanding immediately prior to the adjustment and the denominator of which is equal to the number of shares of Common Stock Outstanding immediately after such adjustment. 4.2. Issuance of Additional Shares of Common Stock. (a) If at any time the Company shall issue or sell any shares of Common Stock in a Subsequent Issuance for a consideration per share that is less than the Exercise Price in effect immediately prior to such issuance or sale, then, forthwith upon such issuance or sale, the Exercise Price shall be reduced to a price calculated by dividing (1) an amount equal to the sum of (x) the number of shares of Common Stock Outstanding immediately prior to such Subsequent Issuance multiplied by the then existing Exercise Price, plus (y) the aggregate consideration (determined in accordance with the provisions of Section 4.6 hereof), if any, received by the Company in connection with such Subsequent Issuance, by (2) the total number of shares of Common Stock Outstanding immediately after such Subsequent Issuance. (b) The provisions of this Section 4.2 shall not apply to (i) any issuance of Common Stock for which an adjustment is provided for under Section 4.1 or (ii) any issuance or sale of Common Stock pursuant to the exercise of any Stock Purchase Rights or Convertible Securities to the extent that an adjustment shall have been previously made hereunder in connection with the issuance of such Stock Purchase Rights or Convertible Securities pursuant to the provisions of Section 4.3 hereof. 4.3. Issuances of Stock Purchase Rights and Convertible Securities. (a) In the event that the Company shall at any time issue, sell or grant any Stock Purchase Rights to any Person in a Subsequent Issuance, then, for the purpose of Section 4.2 above, the Company shall be deemed to have issued at that time a number of shares of Common Stock equal to the maximum number of shares of Common Stock (without giving effect to any antidilution provisions in such Stock Purchase Rights) that are or may become issuable upon exercise of such Stock Purchase Rights (or upon exercise of any Convertible Securities issuable upon exercise of such Stock Purchase Rights) for a consideration per share equal to (i) the aggregate consideration per share (determined in accordance with the provisions of Section 4.6 hereof) received by the Company in connection with the issuance, sale or grant of such Stock Purchase Rights plus (ii) the minimum -18- 22 amount of such consideration per share receivable by the Company in connection with the exercise of such Stock Purchase Rights (and the exercise of any Convertible Securities issuable upon exercise of such Stock Purchase Rights). (b) In the event that the Company shall at any time issue or sell any Convertible Securities to any Person in a Subsequent Issuance, then, for the purposes of Section 4.2 above, the Company shall be deemed to have issued at that time a number of shares of Common Stock equal to the maximum number of shares of Common Stock that are or may become issuable upon the exercise of the conversion or exchange rights associated with such Convertible Securities for a consideration per share equal to (i) the aggregate consideration per share (determined in accordance with the provisions of Section 4.6 hereof) received by the Company in connection with the issuance or sale of such Convertible Securities plus (ii) the minimum amount of such consideration per share receivable by the Company in connection with the exercise of such conversion or exchange rights. (c) If, at any time after any adjustment of the Exercise Price shall have been made hereunder as the result of any issuance, sale or grant of any Stock Purchase Rights or Convertible Securities, the maximum number of shares issuable upon exercise of such Stock Purchase Rights or of the rights of conversion or exchange associated with such Convertible Securities shall increase, or the minimum amount of consideration per share receivable in connection with such exercise shall decrease, whether by operation of any antidilution rights pertaining to such Stock Purchase Rights or Convertible Securities, by agreement of the parties or otherwise, the Exercise Price then in effect shall first be readjusted to eliminate the effects of the original issuance, sale or grant of such Stock Purchase Rights or Convertible Securities on such Exercise Price and then readjusted as if such Stock Purchase Rights or Convertible Securities had been issued on the effective date of such increase in number of shares or decrease in consideration, but only if the effect of such two-step readjustment is to reduce the Exercise Price below the Exercise Price in effect immediately prior to such increase or decrease. (d) If, at any time after any adjustment of the Exercise Price shall have been made hereunder as the result of any issuance, sale or grant of any Stock Purchase Rights or -19- 23 Convertible Securities, any of such Stock Purchase Rights or the rights of conversion or exchange associated with such Convertible Securities shall expire by their terms or any of such Stock Purchase Rights or Convertible Securities shall be repurchased by the Company or a Subsidiary thereof for a consideration per underlying share of Common Stock not exceeding the amount of such consideration received by the Company in connection with the issuance, sale or grant of such Stock Purchase Rights or Convertible Securities, the Exercise Price then in effect shall forthwith be increased to the Exercise Price that would have been in effect if such expiring Stock Purchase Rights or rights of conversion or exchange or such repurchased Stock Purchase Rights or Convertible Securities had never been issued. Similarly, if at any time after any such adjustment of the Exercise Price shall have been made pursuant to Section 4.2 (i) any additional consideration is received or becomes receivable by the Company in connection with the issuance or exercise of such Stock Purchase Rights or Convertible Securities or (ii) there is a reduction in the conversion ratio applicable to such Convertible Securities so that fewer shares of Common Stock will be issuable upon the conversion or exchange thereof or there is a decrease in the number of shares of Common Stock issuable upon exercise of such Stock Purchase Rights, the Exercise Price then in effect shall be forthwith readjusted to the Exercise Price that would have been in effect had such changes taken place at the time that such Stock Purchase Rights or Convertible Securities were initially issued, granted or sold. In no event shall any readjustment under this Section 4.3(d) affect the validity of any shares of Warrant Stock issued upon any exercise of this Warrant prior to such readjustment, nor shall any such readjustment have the effect of increasing the Exercise Price above the Exercise Price that would have been in effect if the related Stock Purchase Rights or Convertible Securities had never been issued. 4.4. Adjustment of Number of Shares Purchasable. Upon any adjustment of the Exercise Price as provided in Section 4.1, 4.2 or 4.3 hereof, the Holder hereof shall thereafter be entitled to purchase upon the exercise of this Warrant, at the Exercise Price resulting from such adjustment, the number of shares of Common Stock (calculated to the nearest 1/100th of a share) obtained by multiplying the Exercise Price in effect immediately prior to such -20- 24 adjustment by the number of shares of Common Stock issuable on the exercise hereof immediately prior to such adjustment and dividing the product thereof by the Exercise Price resulting from such adjustment. 4.5. Reorganization, Reclassification, Merger, Consolidation or Disposition of Assets. In case the Company shall reorganize its capital, reclassify its capital stock, consolidate or merge with or into another corporation (where the Company is not the surviving corporation or where there is any change whatsoever in, or distribution with respect to, the Outstanding Common Stock of the Company), or sell, transfer or otherwise dispose of all or substantially all of its property, assets or business to another corporation and, pursuant to the terms of such reorganization, reclassification, merger, consolidation or disposition of assets, (i) shares of common stock of the successor or acquiring corporation or of the Company (if it is the surviving corporation) or (ii) any cash, shares of stock or other securities or property of any nature whatsoever (including warrants or other subscription or purchase rights) in addition to or in lieu of common stock of the successor or acquiring corporation ("Other Property") are to be received by or distributed to the holders of Common Stock of the Company who are holders immediately prior to such transaction, then the Holder of this Warrant shall have the right thereafter to receive, upon exercise of this Warrant, the number of shares of common stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and Other Property receivable upon or as a result of such reorganization, reclassification, merger, consolidation or disposition of assets by a holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such event. In such event, the aggregate Exercise Price otherwise payable for the shares of Common Stock issuable upon exercise of this Warrant shall be allocated among the shares of common stock and Other Property receivable as a result of such reorganization, reclassification, merger, consolidation or disposition of assets in proportion to the respective fair market values of such shares of common stock and Other Property as determined in good faith by the Board of Directors of the Company. In case of any such reorganization, reclassification, merger, consolidation or disposition of assets, the successor or acquiring corporation (if other than the Company) shall expressly assume the due and punctual observance and performance of each and every covenant and condition of this Warrant to be performed and observed by the Company and all the obligations and liabilities hereunder, subject to such modi- -21- 25 fications as may be reasonably deemed appropriate (as determined by resolution of the Board of Directors of the Company) in order to provide for adjustments of any shares of the common stock of such successor or acquiring corporation for which this Warrant thus becomes exercisable, which modifications shall be as equivalent as practicable to the adjustments provided for in this Section 4. For purposes of this Section 4.5, "common stock of the successor or acquiring corporation" shall include stock of such corporation of any class that is not preferred as to dividends or assets over any other class of stock of such corporation and that is not subject to redemption and shall also include any evidences of indebtedness, shares of stock or other securities that are convertible into or exchangeable for any such stock, either immediately or upon the arrival of a specified date or the happening of a specified event and any warrants or other rights to subscribe for or purchase any such stock. The foregoing provisions of this Section 4.5 shall similarly apply to successive reorganizations, reclassifications, mergers, consolidations or disposition of assets. 4.6. Determination of Consideration. For purposes of Sections 4.2, 4.3 and 4.4 hereof, the consideration received and/or receivable by the Company in connection with the issuance, sale, grant or exercise of additional shares of Common Stock, Stock Purchase Rights or Convertible Securities, irrespective of the accounting treatment of such consideration, shall be valued as follows: (1) Cash Payment. In the case of cash, the net amount received by the Company after deduction of any accrued interest or dividends, expenses incurred or any underwriting commissions or concessions paid or allowed by the Company. (2) Securities or Other Property. In the case of securities or other property, the fair market value thereof as of the date immediately preceding such issuance, sale, grant or exercise as determined in good faith by the Board of Directors of the Company. (3) Allocation Related to Common Stock. In the event shares of Common Stock are issued or sold together with other securities or other assets of the Company for a consideration which covers both, the -22- 26 consideration received (computed as provided in (1) and (2) above) shall be allocable to such shares of Common Stock as determined in good faith by the Board of Directors of the Company. (4) Allocation Related to Stock Purchase Rights and Convertible Securities. In case any Stock Purchase Rights or Convertible Securities shall be issued or sold together with other securities or other assets of the Company, together comprising one integral transaction in which no specific consideration is allocated to the Stock Purchase Rights or Convertible Securities, the consideration allocable to such Stock Purchase Rights or Convertible Securities shall be determined in good faith by the Board of Directors of the Company. (5) Dividends in Securities. In case the Company shall declare a dividend or make any other distribution upon any stock of the Company payable in either case in Common Stock or Convertible Securities, such Common Stock or Convertible Securities, as the case may be, issuable in payment of such dividend or distribution shall be deemed to have been issued or sold without consideration. (6) Merger, Consolidation or Sale of Assets. In case any shares of Common Stock, Stock Purchase Rights or Convertible Securities shall be issued in connection with any merger or consolidation in which the Company is the surviving corporation, the amount of consideration therefor shall be deemed to be the fair value on the date of issuance of such security of such portion of the assets and business of the non-surviving corporation attributable to such Common Stock, Stock Purchase Rights or Convertible Securities, as is determined in good faith by the Company's Board of Directors. (7) Challenge to Good Faith Determination. Whenever the Board of Directors of the Company shall be required to make a determination in good faith of the fair value of any item under this Section 4, such determination may be challenged in good faith by the -23- 27 Majority Warrant Holders, and any dispute shall be resolved by an investment banking or appraisal firm of recognized national standing selected by the Company and reasonably acceptable to the Majority Warrant Holders and whose decision shall be binding on the Company and all holders of Warrants. The fees and expenses of such firm shall be paid by the party or parties whose position is not chosen by such firm. 4.7. Other Dilutive Events. In case any event shall occur as to which the other provisions of this Section 4 are not strictly applicable but as to which the failure to make any adjustment would not fairly protect the purchase rights represented by this Warrant in accordance with the essential intent and principles hereof (including, without limitation, the issuance of securities other than Common Stock which have the right to participate in distributions to the holders of Common Stock, the granting of "phantom stock" rights or "stock appreciation rights" or the repurchase of outstanding shares of Common Stock, Convertible Securities or Stock Purchase Rights for a purchase price exceeding the fair market value thereof), then, in each such case, the Majority Warrant Holders may select an independent investment banking firm of nationally recognized standing and reasonably acceptable to the Company to make a determination as to the adjustment, if any, required to be made on a basis consistent with the essential intent and principles established herein as a result of such event in order to preserve the purchase rights represented by the Warrants. If the investment bank selected by the Majority Warrant Holders is not reasonably acceptable to the Company, and the Company and the Majority Warrant Holders cannot agree on a mutually acceptable investment bank, then the Company and the Majority Warrant Holders shall each choose one such investment bank and the respective chosen firms shall jointly select a third investment bank, which shall make the determination. The Company shall pay the costs and fees of each such investment bank (including any such investment bank selected by the Majority Warrant Holders), and the decision of the investment bank making such determination shall be final and binding on the Company and all affected holders of Warrants or Warrant Stock. Promptly after receipt of the opinion of such investment bank as to any such required adjustments, the Company shall take any actions necessary to implement same. -24- 28 4.8. Other Provisions Applicable to Adjustments Under this Section. The following provisions shall be applicable to the adjustments provided for pursuant to this Section 4: (a) When Adjustments To Be Made. The adjustments required by this Section 4 shall be made whenever and as often as any specified event requiring such an adjustment shall occur. For the purpose of any such adjustment, any specified event shall be deemed to have occurred at the close of business on the date of its occurrence. (b) Record Date. In case the Company shall take a record of the holders of the Common Stock for the purpose of entitling them (i) to receive a dividend or other distribution payable in Common Stock, Convertible Securities or Stock Purchase Rights or (ii) to subscribe for or purchase Common Stock, Convertible Securities or Stock Purchase Rights, then all references in this Section 4 to the date of the issuance or sale of such shares of Common Stock, Convertible Securities or Stock Purchase Rights shall be deemed to be references to such record date. (c) Fractional Interests. In computing adjustments under this Section 4, fractional interests in Common Stock shall be taken into account to the nearest 1/100th of a share. (d) When Adjustment Not Required. If the Company shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend or distribution to which the provisions of Section 4.1 would apply, but shall, thereafter and before the distribution to stockholders thereof, legally abandon its plan to pay or deliver such dividend or distribution, then thereafter no adjustment shall be required by reason of the taking of such record and any such adjustment previously made in respect thereof shall be rescinded and annulled. (e) Maximum Exercise Price. Except as provided in Section 4.1 above, at no time shall the Exercise Price per share of Common Stock exceed the amount set forth in the first paragraph of the preamble of this Warrant. -25- 29 (f) Certain Limitations. Notwithstanding anything herein to the contrary, the Company agrees not to enter into any transaction that, by reason of any adjustment under Section 4.1, 4.2 or 4.3 above, would cause the Exercise Price to be less than the par value of the Common Stock, if any, unless the Company first reduces the par value of the Common Stock to be less than the Exercise Price that would result from such transaction. (g) Notice of Adjustments. Whenever the number of shares of Common Stock for which this Warrant is exercisable or the Exercise Price shall be adjusted pursuant to this Section 4, the Company shall forthwith prepare a certificate to be executed by the President or chief financial officer of the Company setting forth, in reasonable detail, the event requiring the adjustment and the method by which such adjustment was calculated, specifying the number of shares of Common Stock for which this Warrant is exercisable and (if such adjustment was made pursuant to Section 4.5) describing the number and kind of any other shares of stock or Other Property for which this Warrant is exercisable, and any related change in the Exercise Price, after giving effect to such adjustment or change. The Company shall promptly cause a signed copy of such certificate to be delivered to each Holder in accordance with Section 15.2. The Company shall keep at its principal office or at the Designated Office, if different, copies of all such certificates and cause the same to be available for inspection at said office during normal business hours by any Holder or any prospective transferee of a Warrant designated by a Holder thereof. (h) Independent Application. Except as otherwise provided herein, all subsections of this Section 4 are intended to operate independently of one another (but without duplication). If an event occurs that requires the application of more than one subsection, all applicable subsections shall be given independent effect without duplication. 5. NO IMPAIRMENT -26- 30 The Company shall not by any action, including, without limitation, amending its charter documents or through any reorganization, reclassification, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other similar voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or reasonably appropriate to protect the rights of the Holder against impairment. Without limiting the generality of the foregoing, the Company shall take all such action as may be necessary or reasonably 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, free and clear of all Liens, and shall use all commercially reasonably efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof as may be necessary to enable the Company to perform its obligations under this Warrant. 6. RESERVATION AND AUTHORIZATION OF COMMON STOCK From and after the Original Issue Date, the Company shall at all times reserve and keep available for issuance upon the exercise of the Warrants such number of its authorized but unissued shares of Common Stock as will be sufficient to permit the exercise in full of all outstanding Warrants. All shares of Common Stock issuable pursuant to the terms hereof, when issued upon exercise of this Warrant with payment therefor in accordance with the terms hereof, shall be duly and validly issued and fully paid and nonassessable, not subject to preemptive rights and shall be free and clear of all Liens. 7. NOTICE OF CORPORATE ACTIONS; TAKING OF RECORD; TRANSFER BOOKS 7.1. Notices of Corporate Actions. In the event of: (a) any capital reorganization of the Company, any reclassification or recapitalization of the capital stock of the Company or any consolidation or merger involving the Company and any other Person or any transfer or other disposition of all or substantially all the assets of the Company to another Person or -27- 31 (b) any amendment of the Certificate of Incorporation of the Company, the Company shall mail to each Holder of a Warrant in accordance with the provisions of Section 14.2 hereof a notice specifying the date or expected date on which any such reorganization, reclassification, recapitalization, consolidation, merger, transfer or disposition is to take place, the time, if any such time is to be fixed, as of which the holders of record of Common Stock shall be entitled to exchange their shares of Common Stock for the securities or Other Property deliverable upon such reorganization, reclassification, recapitalization, consolidation, merger, transfer or disposition, and a description in reasonable detail of the transaction. Such notice shall be mailed to the extent practicable at least thirty, but not more than ninety, days prior to the date therein specified; provided, that, in no event shall the Company be required to give the Holders notice of material non-public information prior to the time such information is made available to the holders of its Common Stock. In the event that the Company at any time sends any other notice to the holders of its Common Stock, it shall concurrently send a copy of such notice to each Holder of a Warrant. 7.2 Closing of Transfer Books. The Company shall not at any time, except upon dissolution, liquidation or winding up of the Company, close its stock transfer books or Warrant transfer books so as to result in preventing or delaying the exercise or transfer of any Warrant. 8. TRANSFER RESTRICTIONS The Holder, by acceptance of this Warrant, agrees to be bound by the provisions of this Section 8. 8.1. Restrictions on Transfers. Neither this Warrant nor any shares of Restricted Common Stock issued upon the exercise hereof shall be Transferred other than pursuant to an effective registration statement under the Securities Act or an exemption from the registration provisions thereof. No Transfer of this Warrant or any such shares of Restricted Stock, other than pursuant to such an effective registration statement, shall be valid or effective unless (a) the holder of the securities proposed to be transferred shall have delivered to the Company either a no-action letter from the Commission or an Opinion of -28- 32 Counsel to the effect that such proposed Transfer is exempt from the registration requirements of the Securities Act or (b) such Transfer is being made pursuant to Rule 144 or Rule 144A under the Securities Act and such holder shall have delivered to the Company a certificate setting forth the basis for applying such Rule to the proposed Transfer. Each certificate, if any, evidencing such shares of Restricted Common Stock issued upon any such Transfer, other than in a public offering pursuant to an effective registration statement, shall bear the restrictive legend set forth in Section 8.2(a), and each Warrant issued upon such Transfer shall bear the restrictive legend set forth in Section 8.2(b), unless the Holder delivers to the Company an Opinion of Counsel to the effect that such legend is not required for the purposes of compliance with the Securities Act. Holders of the Warrants or the Restricted Common Stock, as the case may be, shall not be entitled to Transfer such Warrants or such Restricted Common Stock except in accordance with this Section 8.1. 8.2. Restrictive Legends. (a) Except as otherwise provided in this Section 8, each certificate for Warrant Stock initially issued upon the exercise of this Warrant, and each certificate for Warrant Stock issued to any subsequent transferee of any such certificate, shall be stamped or otherwise imprinted with two legends in substantially the following forms: "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAW. NO TRANSFER OF THE SHARES REPRESENTED BY THIS CERTIFICATE SHALL BE VALID OR EFFECTIVE UNLESS (A) SUCH TRANSFER IS MADE PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR (B) THE HOLDER OF THE SECURITIES PROPOSED TO BE TRANSFERRED SHALL HAVE DELIVERED TO THE COMPANY AN OPINION OF COUNSEL EXPERIENCED IN SECURITIES MATTERS AND REASONABLY ACCEPTABLE TO THE COMPANY TO THE EFFECT THAT SUCH PROPOSED TRANSFER IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE ACT OR (C) SUCH TRANSFER IS PURSUANT TO RULE 144 OR RULE 144A UNDER THE ACT AND SUCH HOLDER(S) SHALL HAVE DELIVERED TO THE COMPANY A CERTIFICATE SETTING FORTH THE BASIS FOR APPLYING SUCH RULE TO THE PROPOSED TRANSFER." -29- 33 "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE ENTITLED TO THE BENEFIT OF AND ARE SUBJECT TO CERTAIN OBLIGATIONS SET FORTH IN THE WARRANT PURSUANT TO THE EXERCISE OF WHICH SUCH SHARES WERE ISSUED. A COPY OF SUCH WARRANT IS AVAILABLE AT THE EXECUTIVE OFFICES OF THE COMPANY." (b) Except as otherwise provided in this Section 8, each Warrant shall be stamped or otherwise imprinted with a legend in substantially the following form: "NEITHER THE WARRANTS REPRESENTED BY THIS CERTIFICATE NOR ANY OF THE SECURITIES ISSUABLE UPON EXERCISE THEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAW. NO TRANSFER OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE OR OF THE STOCK ISSUABLE UPON EXERCISE THEREOF SHALL BE VALID OR EFFECTIVE UNLESS (A) SUCH TRANSFER IS MADE PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR (B) THE HOLDER OF THE SECURITIES PROPOSED TO BE TRANSFERRED SHALL HAVE DELIVERED TO THE COMPANY EITHER A NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION OR AN OPINION OF COUNSEL EXPERIENCED IN SECURITIES MATTERS AND REASONABLY ACCEPTABLE TO THE COMPANY TO THE EFFECT THAT SUCH PROPOSED TRANSFER IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE ACT OR (C) SUCH TRANSFER IS PURSUANT TO RULE 144 OR RULE 144A UNDER THE ACT AND SUCH HOLDER SHALL HAVE DELIVERED TO THE COMPANY A CERTIFICATE SETTING FORTH THE BASIS FOR APPLYING SUCH RULE TO THE PROPOSED TRANSFER." 8.3. Termination of Securities Law Restrictions. Notwithstanding the foregoing provisions of this Section 8, the restrictions imposed by Section 8.1(b) upon the transferability of the Warrants and the Restricted Common Stock and the legend requirements of Section 8.2 shall terminate as to any particular Warrant or shares of Restricted Common Stock when the Company shall have received from the Holder thereof an Opinion of Counsel to the effect that such legend is not required in order to ensure compliance with the Securities Act. Whenever the restrictions imposed by Sections 8.1(b) and 8.2 shall terminate as to this Warrant, as hereinabove provided, the Holder hereof shall be entitled to receive from the Company, at the expense of the -30- 34 Company, a new Warrant bearing the following legend in place of the restrictive legend set forth hereon: "THE RESTRICTIONS ON TRANSFERABILITY OF THE WITHIN WARRANT CONTAINED IN SECTIONS 8.1(b) AND 8.2 HEREOF TERMINATED ON ______________, 19__, AND ARE OF NO FURTHER FORCE AND EFFECT." All Warrants issued upon registration of transfer, division or combination of, or in substitution for, any Warrant or Warrants entitled to bear such legend shall have a similar legend endorsed thereon. Wherever the restrictions imposed by this Section shall terminate as to any share of Restricted Common Stock, as hereinabove provided, the Holder thereof shall be entitled to receive from the Company, at the Company's expense, a new certificate representing such Common Stock not bearing the restrictive legend set forth in Section 8.2(a). 9. REGISTRATION RIGHTS 9.1. Certain Definitions. For the purposes of this Section 9: (a) The Holders of Warrants and the Series B Warrants and the holders of Warrant Stock (as defined in Section 9.1(b)) are collectively referred to as "WS Holders". (b) "Warrant Stock" shall deemed to include (i) the shares of Common Stock issued, issuable or both (as the context may require) upon the exercise of Warrants and the Series B Warrants until such time as such shares of Common Stock have either been (a) Transferred in a public offering pursuant to a registration statement filed under the Securities Act or (b) Transferred in a transaction exempt from the registration and prospectus delivery requirements of the Securities Act under Section 4(1) thereof with all transfer restrictions and restrictive legends with respect to such Common Stock being removed in connection with such transaction,(ii) any other securities issued as (or issuable upon the conversion or exercise of any warrant, right or other security which is issued as) a dividend or other distribution with respect to, or in exchange by the Company generally for, or in replacement by the Company generally of, -31- 35 any shares of Warrant Stock and (iii) any securities issued in exchange for any such Warrant Stock in any merger or reorganization of the Company, but in the cases of clauses (ii) and (iii) only so long as such securities have not been registered and Transferred pursuant to the Securities Act or Transferred in a transaction exempt from the registration and prospectus delivery requirements of the Securities Act under Section 4(1) thereof so that all transfer restrictions and restrictive legends with respect to such securities are removed in connection with such Transfer. (c) Each WS Holder shall be deemed to "hold", as of any specified date, the aggregate of (i) the number of shares of Warrant Stock held by such WS Holder as of such date plus (ii) the number of shares of Warrant Stock issuable upon exercise of any Warrants and Series B Warrants held by such WS Holder as of such date. (d) The total number of shares of Warrant Stock deemed "outstanding" as of a specified date will be equal to (i) the total number of shares of Warrant Stock Outstanding as of such date plus (ii) the number of shares of Warrant Stock issuable upon exercise of all outstanding Warrants and Series B Warrants as of such date. (e) "Registrable Securities" shall mean any Warrants, any Series B Warrants and/or any shares of Warrant Stock. 9.2. Demand Registration. (a) In the event the Company receives at any time after August 31, 1997 a written request from one or more WS Holders holding in the aggregate at least seventy-six percent of the number of shares of Warrant Stock then outstanding (the "Demanding Holders") that the Company file a registration statement under the Securities Act for the sale or other disposition of at least a majority of the Registrable Securities (a "Demand Registration"), the Company shall promptly give written notice of such request to each other WS Holder and each such WS Holder may elect, by giving written notice of such election to the Company within ten (10) Business Days after receipt of the Company's notice, to have some or all of the Registrable Securities held by it included in such registration. At the option of the Demanding Holders, such request may specify that the requested registration will be for -32- 36 an offering on a delayed or continual basis pursuant to Rule 415 under the Securities Act (a "Shelf Registration"). (b) Following receipt of such a request for a Demand Registration, the Company shall: (1) File the requested registration statement with the Commission as promptly as practicable, and shall use all commercially reasonable efforts to have the registration declared effective under the Securities Act as soon as reasonably practicable, in each instance giving due regard to the need to prepare and file current financial statements, conduct due diligence and complete other actions that are reasonably necessary to effect a registered public offering; and (2) Use all commercially reasonable efforts to keep the such registration statement Continuously Effective (x) if a Demand Registration, for up to 90 days or until such earlier date as of which all Registrable Securities covered by such registration statement shall have been disposed of in the manner described in the registration statement, and (y) if a Shelf Registration, for 270 days. Notwithstanding the foregoing, if for any reason the effectiveness of a Demand Registration is suspended or postponed as permitted by Subsection (d) below, the foregoing period shall be extended by the aggregate number of days of such suspension or postponement. (c) The Company shall not be required to effect a registration of Registrable Securities pursuant to a Demand Registration on more than one occasion. For purposes of this Subsection (c), registration shall not be deemed to have been effected (i) unless a registration statement with respect thereto has become effective, (ii) if after such registration statement has become effective, such registration or the related offer, sale or distribution of Registrable Securities thereunder is interfered with by any stop order, injunction or other order or requirement of the Commission or other governmental agency or court for any reason not attributable to the Selling Holders and such interference is not thereafter eliminated or (iii) if the conditions to closing specified in the underwriting agreement, if any, entered into in connection with such registration are not -33- 37 satisfied or waived, other than by reason of a failure on the part of the Selling Holders. If the Company shall have complied with its obligations under this Section 9, a right to demand a registration pursuant to this Section 9.2 shall be deemed to have been satisfied (i) if a Demand Registration other than a Shelf Registration, upon the earlier of (x) the date as of which all of the Registrable Securities included therein shall have been disposed of pursuant to the registration statement and (y) the date as of which such Demand Registration shall have been Continuously Effective for a period of 90 days, and (ii) if a Shelf Registration, upon the effective date of a Shelf Registration, provided no stop order or similar order, or proceedings for such an order, is thereafter entered or initiated. (d) The Company shall be entitled to postpone for up to 90 days the filing of any Demand Registration statement otherwise required to be prepared and filed pursuant to this Section 9.2 or suspend any such Demand Registration for up to 90 days, if the Board of Directors of the Company determines, in its good faith reasonable judgment that such registration and the Transfer of Warrant Stock contemplated thereby would materially interfere with, or require premature disclosure of, any financing, acquisition or reorganization involving the Company or any of its wholly owned subsidiaries and the Company promptly gives the Demanding Holders notice of such determination; provided, however, that the Company shall not have postponed pursuant to this Subsection (d) the filing of any other Demand Registration statement otherwise required to be prepared and filed pursuant to this Section 9.2, or suspended any such Demand Registration, during the 12 month period ended on the date of the relevant request pursuant to Subsection (a) above and provided further, that the Expiration Date shall be extended by the period of any such postponement or suspension. (e) A registration pursuant to this Section 9.2 shall be on such appropriate registration form of the Commission available to the Company as shall (i) be selected by the Company and be reasonably acceptable to the Majority Selling Holders and (ii) permit the disposition of the Warrant Stock in accordance with the intended method or methods of disposition specified in the request made pursuant to Subsection (a) above. If any registration pursuant to this Section 9.2 involves an underwritten offering (whether on a "firm", "best efforts" or -34- 38 "all reasonable efforts" basis or otherwise), or an agented offering, the Majority Selling Holders shall have the right to select the underwriter or underwriters and manager or managers to administer such underwritten offering or the placement agent or agents for such agented offering from among the entities listed in Schedule B hereto (or any successors of any such entities), it being understood that the Majority Selling Holders shall use commercially reasonable efforts to select one or more of the first three listed entities subject to arriving at reasonably acceptable terms and conditions for the offering. (f) The Company may elect to include shares of Common Stock to be sold for its account in any such Demand Registration (including a Shelf Registration); provided, however, if the managing underwriter shall advise the Demanding Holders in writing (with a copy to the Company) that, in its opinion, the number of shares of Common Stock requested to be included in such Demand Registration would adversely affect such offering or the price to be realized therefor, or the timing thereof, then the number of shares proposed to be included in such Demand Registration by the Company shall be reduced, to such number that the Demanding Holders are advised can be sold without such effect in such Demand Registration. 9.3. Piggyback Registration. (a) If at any time the Company proposes to register (including for this purpose a registration effected by the Company for shareholders of the Company other than the WS Holders) equity securities under the Securities Act in connection with the public offering solely for cash on Form S-1, S-2 or S-3 (or any replacement or successor forms), the Company shall promptly give each WS Holder written notice of such registration (a "Piggyback Registration"). Upon the written request of each WS Holder given within 20 days following the date of such notice, the Company shall cause to be included in such registration statement and use its best efforts to be registered under the Securities Act all the Registrable Securities that each such WS Holder shall have requested to be registered. The Company shall have the absolute right to withdraw or cease to prepare or file any registration statement for any offering referred to in this Section 9.3 without any obligation or liability to any WS Holder. -35- 39 (b) If the managing underwriter shall advise the Company in writing (with a copy to each Selling Holder) that, in its opinion, the amount of Registrable Securities requested to be included in such registration would materially adversely affect such offering, or the timing thereof, then the Company will include in such registration, to the extent of the amount and class which the Company is so advised can be sold without such material adverse effect in such offering: first, all securities proposed to be sold by the Company for its own account; and second, the Warrant Stock requested to be included in such registration by WS Holders and all other securities requested to be included in such registration by Persons other than the Company and WS Holders, the securities covered by this clause second to be included pro rata based on the estimated gross proceeds from the sale thereof. (c) Each WS Holder shall be entitled to have its Registrable Securities included in an unlimited number of Piggyback Registrations pursuant to this Section 9.3. 9.4. Registration Procedures. Whenever required under Section 9.2 or Section 9.3 hereof to effect the registration of any Registrable Securities, the Company shall, as expeditiously as practicable: (a) Prepare and file with the Commission a registration statement with respect to such Warrant Stock and use the Company's best efforts to cause such registration statement to become effective; provided, however, that before filing a registration statement or prospectus or any amendments or supplements thereto, including documents incorporated by reference after the initial filing of the registration statement and prior to effectiveness thereof, the Company shall furnish to one firm of counsel for the Selling Holders (selected by Majority Selling Holders) copies of all such documents in the form substantially as proposed to be filed with the Commission at least four Business Days prior to filing for review and comment by such counsel, which opportunity to comment shall include an absolute right to control or contest disclosure if the applicable Selling Holder reasonably believes that it may be subject to controlling person liability under applicable securities laws with respect thereto. -36- 40 (b) Prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Securities Act and rules thereunder with respect to the disposition of all securities covered by such registration statement. If the registration is for an underwritten offering, the Company shall amend the registration statement or supplement the prospectus whenever required by the terms of the underwriting agreement entered into pursuant to Section 9.4(e). Subject to Rule 415 under the Securities Act, if the registration statement is a Shelf Registration, the Company shall amend the registration statement or supplement the prospectus so that it will remain current and in compliance with the requirements of the Securities Act for 270 days or after its effective date, and if during such period any event or development occurs as a result of which the registration statement or prospectus contains a misstatement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading, the Company shall promptly notify each Selling Holder, amend the registration statement or supplement the prospectus so that each will thereafter comply with the Securities Act and furnish to each Selling Holder of Registrable Securities such amended or supplemented prospectus, which each such Holder shall thereafter use in the Transfer of Warrant Stock covered by such registration statement. Pending such amendment or supplement each such Selling Holder shall cease making offers or Transfers of Registerable Securities pursuant to the prior prospectus. In the event that any Registrable Securities included in a registration statement subject to, or required by, this Warrant remain unsold at the end of the period during which the Company is obligated to use its best efforts to maintain the effectiveness of such registration statement, the Company may file a post-effective amendment to the registration statement for the purpose of removing such Registrable Securities from registered status. (c) Furnish to each Selling Holder of Registrable Securities, without charge, such number of copies of the registration statement, any pre-effective or post-effective amendment thereto, the prospectus, including each -37- 41 preliminary prospectus and any amendments or supplements thereto, in each case in conformity with the requirements of the Securities Act and the rules thereunder, and such other related documents as any such Selling Holder may reasonably request in order to facilitate the disposition of Registrable Securities owned by such Selling Holder. (d) Use all commercially reasonable efforts (i) to register and qualify the securities covered by such registration statement under such other securities or Blue Sky laws of such states or jurisdictions as shall be reasonably requested by the managing underwriter (as applicable, or if inapplicable, the Majority Selling Holders), and (ii) to obtain the withdrawal of any order suspending the effectiveness of a registration statement, or the lifting of any suspension of the qualification (or exemption from qualification) of the offer and transfer of any of the Registrable Securities in any jurisdiction, at the earliest possible moment; provided, however, that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions. (e) In the event of any underwritten or agented offering, enter into and perform the Company's obligations under an underwriting or agency agreement (including indemnification and contribution obligations of underwriters or agents), in usual and customary form, with the managing underwriter or underwriters of or agents for such offering. The Company shall also cooperate with the Majority Selling Holders and the managing underwriter for such offering in the marketing of the Warrant Stock, including making available the Company's officers, accountants, counsel, premises, books and records for such purpose, but the Company shall not be required to incur any material out-of-pocket expense pursuant to this sentence. (f) Promptly notify each Selling Holder of any stop order issued or threatened to be issued by the Commission in connection therewith (and take all reasonable actions required to prevent the entry of such stop order or to remove it if entered. -38- 42 (g) Make generally available to the Company's security holders copies of all periodic reports, proxy statements, and other information referred to in Section 9.9(a) and an earnings statement satisfying the provisions of Section 11(a) of the Securities Act no later than 90 days following the end of the 12-month period beginning with the first month of the Company's first fiscal quarter commencing after the effective date of each registration statement filed pursuant to this Section 9. (h) Make available for inspection by any Selling Holder, any underwriter participating in such offering and the representatives of such Selling Holder and underwriter (but not more than one firm of counsel to such Selling Holders), all financial and other information as shall be reasonably requested by them, and provide the Selling Holder, any underwriter participating in such offering and the representatives of such Selling Holder and underwriter the opportunity to discuss the business affairs of the Company with its principal executives and independent public accountants who have certified the audited financial statements included in such registration statement, in each case all as necessary to enable them to exercise their due diligence responsibility under the Securities Act; provided, however, that information that the Company determines, in good faith, to be confidential and which the Company advises such Person in writing, is confidential shall not be disclosed unless such Person signs a confidentiality agreement reasonably satisfactory to the Company or the related Selling Holder of Registrable Securities agrees to be responsible for such Person's breach of confidentiality on terms reasonably satisfactory to the Company. (i) Use the Company's best efforts to obtain a so-called "comfort letter" from its independent public accountants, and legal opinions of counsel to the Company, in customary form and covering such matters of the type customarily covered by such letters, and in a form that shall be reasonably satisfactory to the Majority Selling Holders. The Company shall furnish to each Selling Holder a signed counterpart of any such comfort letter or legal opinion. Delivery of any such opinion or comfort letter shall be subject to the recipient furnishing such written representations or acknowledgments as are customarily -39- 43 provided by selling shareholders who receive such comfort letters or opinions. (j) Provide and cause to be maintained a transfer agent and registrar for all Registrable Securities covered by such registration statement from and after a date not later than the effective date of such registration statement. (k) Use all reasonable efforts to cause the Registrable Securities covered by such registration statement (i) if the Common Stock is then listed on a securities exchange or included for quotation in a recognized trading market, to continue to be so listed or included for a reasonable period of time after the offering, and (ii) to be registered with or approved by such other United States or state governmental agencies or authorities as may be necessary by virtue of the business and operations of the Company to enable the Selling Holders of Registrable Securities to consummate the disposition of such Registrable Securities. (l) Use the Company's reasonable efforts to provide a CUSIP number for the Common Stock prior to the effective date of the first registration statement including Registrable Securities. (m) Take such other actions as are reasonably required in order to expedite or facilitate the disposition of Registrable Securities included in each such registration. 9.5. Selling Holders' Obligations. (a) It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Section 9 with respect to the Registrable Securities of any Selling Holder that such Selling Holder shall: (i) Furnish to the Company such information regarding such Selling Holder, the number of Registrable Securities owned by it, and the intended method of disposition of such securities as shall be required to effect the registration of such Selling Holder's Registrable Securities, and to cooperate with the Company in preparing such registration; and -40- 44 (ii) Agree to sell their Registrable Securities to the underwriters at the same price and on substantially the same terms and conditions as the Company or the other Persons on whose behalf the registration statement was being filed have agreed to sell their securities, and to execute the underwriting agreement agreed to by the Majority Selling Holders (in the case of a registration under Section 9.2) or the Company and the Majority Selling Holders (in the case of a registration under Section 9.3). (b) Each Selling Holder shall notify the Company of any sales of such Selling Holder's shares registered for sale pursuant to this Section 9; provided, however, it is understood that any failure so to notify the Company shall not be deemed a default hereunder or to subject any Selling Holder to any claim for damages or expenses whatsoever. 9.6. Expenses of Registration. Expenses incurred in connection with registrations under this Section 9 shall be allocated and paid as follows: (a) With respect to each Demand Registration (including any Shelf Registration), the Company shall bear and pay all reasonable expenses incurred in connection with any registration, filing, or qualification of Registrable Securities with respect to such Demand Registration for each Selling Holder, including all registration, filing and NASD fees, all fees and expenses of complying with securities or blue sky laws, all word processing, duplicating and printing expenses, messenger and delivery expenses, the reasonable fees and disbursements of counsel for the Company, and of the Company's independent public accountants, including the expenses of "cold comfort" letters required by or incident to such performance and compliance, and the reasonable fees and disbursements of one firm of counsel for the Selling Holders of Registrable Securities (the "Registration Expenses"), but excluding underwriting discounts and commissions relating to Registrable Securities (which shall be paid on a pro rata basis by the Selling Holders) provided, however, that the Company shall not be required to pay for any expenses of any registration proceeding begun pursuant to Section 9.2 if the registration is subsequently withdrawn at the request of the Majority Selling Holders (in which case all Selling Holders shall bear such expense), -41- 45 unless WS Holders whose Registrable Securities constitutes a majority of the Registrable Securities then outstanding agree that such withdrawn registration shall constitute the exercise of their one demand registration under Section 9.2 hereof. The counsel for the Selling Holders shall be selected by Demanding Holders owning a majority of the Registrable Securities owned by Demanding Holders to be included in a Demand Registration and, in the case of a Piggyback Registration, by Selling Holders owning a majority of the Registrable Securities to be included in such registration; provided that in the case of a Piggyback Registration, the Selling Holders shall use one firm of counsel to represent all such holders and shall endeavor in good faith, with any other holders of securities to be included in such registration, to select one firm of counsel to represent all such selling securities holders. (b) The Company shall bear and pay all Registration Expenses incurred in connection with any Piggyback Registrations pursuant to Section 9.3 for each Selling Holder, but excluding underwriting discounts and commissions relating to Registrable Securities (which shall be paid on a pro rata basis by the Selling Holders of Registrable Securities). (c) Any failure of the Company to pay any Registration Expenses as required by this Section 9.6 shall not relieve the Company of its obligations under this Section 9. 9.7. Indemnification; Contribution. If any Registrable Securities are included in a registration statement under this Section 9: (a) To the extent permitted by applicable law, the Company shall indemnify and hold harmless each Selling Holder, each Person, if any, who controls such Selling Holder within the meaning of the Securities Act, and each officer, director, partner, and employee of such Selling Holder and such controlling Person, against any and all losses, claims, damages, liabilities and expenses (joint or several), including attorneys' fees and disbursements and expenses of investigation, incurred by such party pursuant to any actual or threatened action, suit, proceeding or investigation, or to which any of the foregoing Persons may -42- 46 become subject under the Securities Act, the Exchange Act or other federal or state laws, insofar as such losses, claims, damages, liabilities and expenses arise out of or are based upon any of the following statements, omissions or violations pursuant to a final non-appealable order (collectively a "Violation"): (i) any untrue statement or alleged untrue statement of a material fact contained in such registration statement, including any preliminary prospectus or final prospectus contained therein, or any amendments or supplements thereto; (ii) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading; or (iii) any violation or alleged violation by the Company of the Securities Act, the Exchange Act, any applicable state securities law or any rule or regulation promulgated under the Securities Act, the Exchange Act or any applicable state securities law; provided, however, that the indemnification required by this Section 9.7(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or expense if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld), nor shall the Company be liable in any such case for any such loss, claim, damage, liability or expense to the extent that it is determined by a court of competent jurisdiction by a final non-appealable order to have solely arisen out of or be based upon a Violation which occurred in reliance upon and in conformity with written information furnished to the Company by the indemnified party expressly for use in connection with such registration; provided, further, that the indemnity agreement contained in this Section 9.7(a) shall not apply to any underwriter to the extent that any such loss is based on or arises out of an untrue statement or alleged untrue statement of a material fact, or an omission or alleged omission to state a material fact, contained in or omitted from any preliminary prospectus if the final prospectus shall correct such untrue statement or -43- 47 alleged untrue statement, or such omission or alleged omission, and a copy of the final prospectus has not been sent or given to such person at or prior to the confirmation of sale to such person if such underwriter was under an obligation to deliver such final prospectus and failed to do so. The Company shall also indemnify underwriters, selling brokers, dealer managers and similar securities industry professionals participating in the distribution, their officers, directors, agents and employees and each person who controls such persons (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) to the same extent as provided above with respect to the indemnification of the Selling Holders. (b) To the extent permitted by applicable law, each Selling Holder shall indemnify and hold harmless the Company, each of its directors, each of its officers and employees, each Person, if any, who controls the Company within the meaning of the Securities Act, any other Selling Holder, any controlling Person of any such other Selling Holder and each officer, director, partner, and employee of such other Selling Holder and such controlling Person, against any and all losses, claims, damages, liabilities and expenses (joint and several), including attorneys' fees and disbursements and expenses of investigation, incurred by such party pursuant to any actual or threatened action, suit, proceeding or investigation, or to which any of the foregoing Persons may otherwise become subject under the Securities Act, the Exchange Act or other federal or state laws, insofar as such losses, claims, damages, liabilities and expenses are determined by a court of competent jurisdiction by a final non-appealable order to have solely arisen out of or be based upon a Violation that occurred in reliance upon and in conformity with written information furnished by such Selling Holder expressly for use in connection with such registration; provided, however, that (x) the indemnification required by this Section 9.7(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or expense if settlement is effected without the consent of the relevant Selling Holder of Registrable Securities, which consent shall not be unreasonably withheld, and (y) in no event shall the amount of any indemnity under this Section 9.7(b) exceed the net -44- 48 proceeds from the applicable offering received by such Selling Holder. (c) Promptly after receipt by an indemnified party under this Section 9.7 of notice of the commencement of any action, suit, proceeding, investigation or threat thereof made in writing for which such indemnified party may make a claim under this Section 9.7, such indemnified party shall deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party shall have the right to retain its own counsel, with the fees and disbursements and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding. The failure to deliver written notice to the indemnifying party within a reasonable time following the commencement of any such action, if prejudicial to its ability to defend such action, shall relieve such indemnifying party of any liability to the indemnified party under this Section 9.7 but shall not relieve the indemnifying party of any liability that it may have to any indemnified party otherwise than pursuant to this Section 9.7. Any reasonable fees and expenses incurred by the indemnified party (including any fees and expenses incurred in connection with investigating or preparing to defend such action or proceeding) shall be paid to the indemnified party, as incurred, within thirty (30) days of written notice thereof to the indemnifying party (regardless of whether it is ultimately determined that an indemnified party is not entitled to indemnification hereunder). Any such indemnified party shall have the right to employ separate counsel in any such action, claim or proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be the expenses of such indemnified party unless (i) the indemnifying party has agreed to pay such fees and expenses or (ii) the indemnifying party shall have failed to promptly assume the -45- 49 defense of such action, claim or proceeding or (iii) the named parties to any such action, claim or proceeding (including any impleaded parties) include both such indemnified party and the indemnifying party, and such indemnified party shall have been advised by counsel that there may be one or more legal defenses available to it which are different from or in addition to those available to the indemnifying party and that the assertion of such defenses would create a conflict of interest such that counsel employed by the indemnifying party could not faithfully represent the indemnified party (in which case, if such indemnified party notifies the indemnifying party in writing that it elects to employ separate counsel at the expense of the indemnifying party, the indemnifying party shall not have the right to assume the defense of such action, claim or proceeding on behalf of such indemnified party, it being understood, however, that the indemnifying party shall not, in connection with any one such action, claim or proceeding or separate but substantially similar or related actions, claims or proceedings in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the reasonable fees and expenses of more than one separate firm of attorneys (together with appropriate local counsel) at any time for all such indemnified parties, unless in the reasonable judgment of such indemnified party a conflict of interest may exist between such indemnified party and any other of such indemnified parties with respect to such action, claim or proceeding, in which event the indemnifying party shall be obligated to pay the fees and expenses of such additional counsel or counsels). No indemnifying party shall be liable to an indemnified party for any settlement of any action, proceeding or claim without the written consent of the indemnifying party, which consent shall not be unreasonably withheld. (d) If the indemnification required by this Section 9.7 from the indemnifying party is unavailable to an indemnified party hereunder in respect of any losses, claims, damages, liabilities or expenses referred to in this Section 9.7: (i) The indemnifying party, in lieu of indemnifying such indemnified party, shall contribute -46- 50 to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities or expenses in such proportion as is appropriate to reflect the relative fault of the indemnifying party and indemnified parties in connection with the actions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative fault of such indemnifying party and indemnified parties shall be determined by reference to, among other things, whether any Violation has been committed by, or relates to information supplied by, such indemnifying party or indemnified parties, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such Violation. The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and expenses referred to above shall be deemed to include, subject to the limitations set forth in Section 9.7(a) and Section 9.7(b), any reasonable legal or other fees or expenses reasonably incurred by such party in connection with any investigation or proceeding. (ii) The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 9.7(d) were determined by pro rata allocation or by any other method of allocation which does not take into account the equitable considerations referred to in Section 9.7(d)(i) above. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. (e) If indemnification is available under this Section 9.7, the indemnifying parties shall indemnify each indemnified party to the full extent provided in this Section 9.7 without regard to the relative fault of such indemnifying party or indemnified party or any other equitable consideration referred to in Section 9.7(d) above. (f) The indemnification required by this Section 9.7 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and -47- 51 when bills are received or expense, loss, damage or liability is incurred. In the event that it shall be subsequently determined that the recipient of any such periodic payment shall not be entitled to indemnification hereunder, such recipient promptly shall repay such payments, together with interest thereon at the Agreed Rate from the date of original receipt to the date of repayment. (g) The obligations of the Company and the Selling Holders of Registrable Securities under this Section 9.7 shall survive the completion of any offering of Registrable Securities pursuant to a registration statement under this Section 9, and otherwise. 9.8. Holdback. Each WS Holder entitled pursuant to this Section 9 to have Registrable Securities included in a registration statement prepared pursuant to this Section 9, if so requested by the managing underwriter in connection with an offering of any Registrable Securities, shall not effect any public sale or distribution of shares of Common Stock, Convertible Securities or Stock Purchase Rights (excluding any sale pursuant to Rule 144 or Rule 144A under the Securities Act and any sale as part of such underwritten or agented registration), during the 5-day period prior to, and during the 45-day period beginning on, the date such registration statement is declared effective under the Securities Act by the Commission, provided that such WS Holder is timely notified of such effective date in writing by the Company or such managing underwriter. 9.9. Additional Covenants of the Company. The Company hereby agrees and covenants as follows: (a) The Company shall file as and when applicable, on a timely basis, all reports required to be filed by it under the Exchange Act. If the Company is not required to file reports pursuant to the Exchange Act, upon the request of any WS Holder, the Company shall make publicly available the information specified in subparagraph (c)(2) of Rule 144 of the Securities Act, and take such further action as may be reasonably required from time to time and as may be within the reasonable control of the Company, to enable the WS Holders to Transfer Warrants or Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by Rule 144 under the -48- 52 Securities Act or any similar rule or regulation hereafter adopted by the Commission. In addition, promptly upon the request of any WS Holder, the Company shall provide such WS Holder with such publicly available financial statements, reports and other information as may be required to permit such WS Holder to Transfer shares of Registrable Securities to Qualified Institutional Investors pursuant to Rule 144A of the Securities Act. (b) The Company shall not, and shall not permit its majority owned subsidiaries to, effect any public sale or distribution of any shares of Common Stock, Convertible Securities or Stock Purchase Rights during the 5 Business Days prior to, and during the 90-day period beginning on, the commencement of a public distribution of Registrable Securities pursuant to any registration statement prepared pursuant to this Section 9 (other than by the Company pursuant to such registration if the registration is pursuant to Section 9.3 or by the Company pursuant to any dividend reinvestment plan offered by it to its stockholders). The Company shall not effect any registration of its securities (other than on Form S-4, Form S-8, or any successor forms to such forms or pursuant to such other registration rights agreements as may be approved in writing by the Majority Selling Holders) or effect any public or private sale or distribution of any of its securities, including a sale pursuant to Regulation D under the Securities Act, whether on its own behalf or at the request of any holder or holders of such securities from the date of a request for a Demand Registration pursuant to Section 9.2 until 90 days following the effective date of such Demand Registration statement, unless the Company shall have previously notified in writing all Selling Holders of the Company's desire to do so, and the Majority Selling Holders or the managing underwriter, if any, shall have consented thereto in writing. (c) Any agreement entered into on or after August 31, 1997 pursuant to which the Company or any of its majority owned subsidiaries issues or agrees to issue any Common Stock (including, without limitation, any employee stock option, stock purchase agreement, merger agreement or other agreement) shall contain a provision whereby any holder receiving such Common Stock who will hold more than one -49- 53 percent (1%) of the amount of such Common Stock then outstanding shall agree not to effect any public sale or distribution of any such Common Stock during the periods described in the second sentence of Section 9.9(b), in each case including a sale pursuant to Rule 144 under the Securities Act (unless such Person is prevented by applicable statute or regulation from entering into such an agreement). (d) Subject to Section 13, the Company shall not, directly or indirectly, (x) enter into any merger, consolidation or reorganization in which the Company shall not be the surviving corporation or (y) Transfer or agree to Transfer all or substantially all the Company's assets, unless prior to such merger, consolidation, reorganization or asset Transfer, the surviving corporation or the Transferee, respectively, shall have agreed in writing to assume the obligations of the Company under this Agreement, and for that purpose references hereunder to "Registrable Securities" shall be deemed to include the securities which the WS Holders would be entitled to receive in exchange for Registrable Securities pursuant to any such merger, consolidation or reorganization. 10. LOSS OR MUTILATION Upon receipt by the Company from any Holder of evidence reasonably satisfactory to it of the ownership of and the loss, theft, destruction or mutilation of this Warrant and an indemnity reasonably satisfactory to it (it being understood that the written indemnification agreement of or affidavit of loss of Caisse Nationale de Credit Agricole shall be a sufficient indemnity) and, in case of mutilation, upon surrender and cancellation hereof, the Company will execute and deliver in lieu hereof a new Warrant of like tenor to such Holder; provided, however, in the case of mutilation, no indemnity shall be required if this Warrant in identifiable form is surrendered to the Company for cancellation. 11. OFFICE OF THE COMPANY -50- 54 As long as any of the Warrants remain outstanding, the Company shall maintain an office or agency, which may be the principal executive offices of the Company (the "Designated Office"), where the Warrants may be presented for exercise, registration of transfer, division or combination as provided in this Warrant. Such Designated Office shall initially be the office of the Company at Cedar Rapids, Iowa. The Company may from time to time change the Designated Office to another office of the Company or its agent within the United States by notice given to all registered holders of Warrants at least ten Business Days prior to the effective date of such change. 12. FINANCIAL AND BUSINESS INFORMATION Until the Expiration Date, the Company shall deliver to each Holder of Warrants or of Warrant Stock one copy of each of the following items: (i) promptly after filing thereof, copies of all regular and periodic reports, proxy statements (other than preliminary) and registration statements (other than registration statements on Forms S-3 (relating to debt securities) and S-8) which the Company may file with the Securities and Exchange Commission or any governmental agency substituted therefor. (ii) promptly upon their becoming available, copies of all financial statements, reports, notices and proxy statements sent or made available by the Company to the holders of any class of its securities generally or by any Subsidiary of the Company to the holders of any class of its securities generally; and (iii) with reasonable promptness, such other public information relating to the Company and its Subsidiaries as the Holder may, from time to time, reasonably request. -51- 55 13. REPURCHASE BY THE COMPANY OF WARRANTS The Company shall have the right (the "Call"), upon written notice (the "Call Notice") to the Holders of all outstanding Warrants given at any time on or after the date of the occurrence of the Triggering Event and before May 31, 1997, to repurchase on the date specified in the notice from each Holder of a Warrant all of such Warrant for an amount equal to the result (rounded to the nearest cent) obtained by multiplying One Dollar ($1.00) by a fraction, the numerator of which shall be the aggregate number of shares for which this Warrant may be exercised and the denominator of which shall be the aggregate number of shares for which all outstanding Series A Warrants may be exercised, and in all events not more than One Dollar ($1.00) for all Series A Warrants. On the date of any repurchase of this Warrant pursuant to this Section 13, the Holder shall assign to the Company such Warrant without any representation or warranty (except as to title and the absence of Liens), by the surrender of this Warrant at the Designated Office against payment of the repurchase price therefor. 14. MISCELLANEOUS 14.1. Nonwaiver. No course of dealing or any delay or failure to exercise any right hereunder on the part of the Company or the Holder shall operate as a waiver of such right or otherwise prejudice the rights, powers or remedies of such Person. 14.2. Notice Generally. Any notice, demand, request, consent, approval, declaration, delivery or communication hereunder to be made pursuant to the provisions of this Warrant shall be sufficiently given or made if in writing and either delivered in person with receipt acknowledged or sent by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: (a) if to any Holder of this Warrant or of Warrant Stock issued upon the exercise hereof, at its last known address appearing on the books of the Company maintained for such purpose; (b) if to the Company, at its Designated Office; -52- 56 or at such other address as may be substituted by notice given as herein provided. The giving of any notice required hereunder may be waived in writing by the party entitled to receive such notice. Every notice, demand, request, consent, approval, declaration, delivery or other communication hereunder shall be deemed to have been duly given or served on the date on which personally delivered, with receipt acknowledged, or three Business Days after the same shall have been deposited in the United States mail, or one Business Day after the same shall have been delivered to Federal Express or another overnight courier service. 14.3. Indemnification. If the Company fails to make, when due, any payments provided for in this Warrant, the Company shall pay to the Holder hereof (a) interest at the Agreed Rate on any amounts due and owing to such Holder from the date due until the date of payment and (b) such further amounts as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys' fees and expenses incurred by such Holder in collecting any amounts due hereunder. The Company shall indemnify, save and hold harmless the Holder hereof and the Holders of any Warrant Stock issued upon the exercise hereof from and against any and all liability, loss, cost, damage, reasonable attorneys' and accountants' fees and expenses, court costs and all other out-of-pocket expenses incurred in connection with or arising from a Company Default. This indemnification provision shall be in addition to the rights of such Holder or Holders to bring an action against the Company for breach of contract based on such Company Default. 14.4. Limitation of Liability. No provision hereof, in the absence of affirmative action by the Holder to purchase shares of Common Stock, and no enumeration herein of the rights or privileges of the Holder hereof, shall give rise to any liability of such Holder to pay the Exercise Price for any Warrant Stock other than pursuant to an exercise of this Warrant or any liability as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company. 14.5. Remedies. Each Holder of Warrants and/or Warrant Stock, in addition to being entitled to exercise its rights granted by law, including recovery of damages, shall be entitled to specific performance of its rights provided under this War- -53- 57 rant. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees, in an action for specific performance, to waive the defense that a remedy at law would be adequate. 14.6. Successors and Assigns. Subject to the provisions of Sections 3.1, 8.1 and 8.2, this Warrant and the rights evidenced hereby shall inure to the benefit of and be binding upon the successors of the Company and the permitted successors and assigns of the Holder hereof. The provisions of this Warrant are intended to be for the benefit of all Holders from time to time of this Warrant and, in the case of Section 9, all Holders of shares of Warrant Stock issued upon the exercise hereof (including transferees), and shall be enforceable by any such Holder. 14.7. Amendment. This Warrant and all other Warrants may be modified or amended or the provisions hereof waived with the written consent of the Company and the Majority Warrant Holders, provided that no such Warrant may be modified or amended to reduce the number of shares of Common Stock for which such Warrant is exercisable or to increase the price at which such shares may be purchased upon exercise of such Warrant (before giving effect to any adjustment as provided therein) without the written consent of the Holder thereof. 14.8. Severability. Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Warrant. 14.9. Headings. The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant. 14.10. GOVERNING LAW; JURISDICTION. IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS WARRANT AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF ILLINOIS APPLICABLE TO CONTRACTS MADE AND -54- 58 PERFORMED IN SUCH STATE, EXCEPT WITH RESPECT TO THE VALIDITY OF THIS WARRANT, THE ISSUANCE OF WARRANT STOCK UPON EXERCISE HEREOF AND THE RIGHTS AND DUTIES OF THE COMPANY WITH RESPECT TO REGISTRATION OF TRANSFER, WHICH SHALL BE GOVERNED BY THE LAWS OF DELAWARE. THE COMPANY HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED IN CHICAGO, ILLINOIS, SHALL HAVE, EXCEPT AS SET FORTH BELOW, EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THE COMPANY AND THE HOLDER OF THIS WARRANT PERTAINING TO THIS WARRANT OR TO ANY MATTER ARISING OUT OF OR RELATING TO THIS AGREEMENT, PROVIDED, THAT IT IS ACKNOWLEDGED THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF CHICAGO, ILLINOIS. -55- 59 IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed and its corporate seal to be impressed hereon and attested by its Secretary or an Assistant Secretary. NORAND CORPORATION By:_________________________ Name: Title: [SEAL] Attest: By:___________________________ Name: Title: -56- 60 ANNEX A SUBSCRIPTION FORM [To be executed only upon exercise of Warrant] The undersigned registered owner of this Warrant irrevocably exercises this Warrant for the purchase of ______ shares Common Stock of Norand Corporation and herewith makes payment therefor, all at the price and on the terms and conditions specified in this Warrant and requests that certificates for the shares of Common Stock hereby purchased (and any securities or other property issuable upon such exercise) be issued in the name of and delivered to _________________ whose address is ___________________________________________________ and, if such shares of Common Stock shall not include all of the shares of Common Stock issuable as provided in this Warrant, that a new Warrant of like tenor and date for the balance of the shares of Common Stock issuable hereunder be delivered to the undersigned. _______________________________ (Name of Registered Owner) _______________________________ (Signature of Registered Owner) _______________________________ (Street Address) _______________________________ (City) (State) (Zip Code) NOTICE: The signature on this subscription must correspond with the name as written upon the face of the within Warrant in every particular, without alteration or enlargement or any change whatsoever. 61 ANNEX B ASSIGNMENT FORM FOR VALUE RECEIVED the undersigned registered owner of this Warrant hereby sells, assigns and transfers unto the Assignee named below all of the rights of the undersigned under this Warrant, with respect to the number of shares of Common Stock set forth below: No. of Shares of Name and Address of Assignee Common Stock and does hereby irrevocably constitute and appoint _____________________ attorney-in-fact to register such transfer onto the books of Norand Corporation maintained for the purpose, with full power of substitution in the premises. Dated:___________________ Print Name:___________________ Signature:____________________ Witness:______________________ NOTICE: The signature on this assignment must correspond with the name as written upon the face of the within Warrant in every particular, without alteration or enlargement or any change whatsoever. EX-4.(N)(3) 5 SERIES A WARRANT A-3 1 EXHIBIT 4.N.3 ================================================================================ SERIES A WARRANT to Purchase Common Stock of NORAND CORPORATION ================================================================================ Warrant No. A - 3 Original Issue Date: November 20, 1996 2 TABLE OF CONTENTS 1. DEFINITIONS 1 2. EXERCISE OF WARRANT 11 2.1. Manner of Exercise 11 2.2. Payment of Transfer Taxes 12 2.3. Fractional Shares 12 2.4. Continued Validity and Application 13 2.5. Limitation on Regulated Holder's Exercise 13 3. TRANSFER, DIVISION AND COMBINATION 14 3.1. Transfer 14 3.2. Division and Combination. 14 3.3. Expenses. 14 3.4. Maintenance of Books 14 4. ANTIDILUTION PROVISIONS 14 4.1. Stock Dividends, Subdivisions and Combinations 14 4.2. Issuance of Additional Shares of Common Stock 15 4.3. Issuances of Stock Purchase Rights and Convertible Securities 15 4.4. Adjustment of Number of Shares Purchasable. 17 4.5. Reorganization, Reclassification, Merger, Consolidation or Disposition of Assets 17 4.6. Determination of Consideration. 18 4.7. Other Dilutive Events 20 4.8. Other Provisions Applicable to Adjustments Under this Section 21 5. NO IMPAIRMENT 22 6. RESERVATION AND AUTHORIZATION OF COMMON STOCK 23 7. NOTICE OF CORPORATE ACTIONS; TAKING OF RECORD; TRANSFER BOOKS 23 7.1. Notices of Corporate Actions. 23 7.2 Closing of Transfer Books. 23 8. TRANSFER RESTRICTIONS 24 8.1. Restrictions on Transfers 24 8.2. Restrictive Legends 24 -i- 3 8.3. Termination of Securities Law Restrictions 25 9. REGISTRATION RIGHTS 26 9.1. Certain Definitions 26 9.2. Demand Registration 27 9.3. Piggyback Registration 29 9.4. Registration Procedures. 30 9.5. Selling Holders' Obligations. 34 9.6. Expenses of Registration. 34 9.7. Indemnification; Contribution. 35 9.8. Holdback. 40 9.9. Additional Covenants of the Company 40 10. LOSS OR MUTILATION 42 11. OFFICE OF THE COMPANY 42 12. FINANCIAL AND BUSINESS INFORMATION 43 13. REPURCHASE BY THE COMPANY OF WARRANTS 43 14. MISCELLANEOUS 43 14.1. Nonwaiver. 43 14.2. Notice Generally 44 14.3. Indemnification 44 14.4. Limitation of Liability. 44 14.5. Remedies 45 14.6. Successors and Assigns 45 14.7. Amendment. 45 14.8. Severability 45 14.9. Headings. 45 14.10. GOVERNING LAW; JURISDICTION. 45 ANNEX A SUBSCRIPTION FORM 48 ANNEX B ASSIGNMENT FORM 49 SCHEDULE A RESERVED SHARES OF COMMON STOCK SCHEDULE B UNDERWRITERS AND AGENTS -ii- 4 NEITHER THE WARRANTS REPRESENTED BY THIS CERTIFICATE NOR ANY OF THE SECURITIES ISSUABLE UPON EXERCISE THEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAW. NO TRANSFER OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE OR OF THE SECURITIES ISSUABLE UPON EXERCISE THEREOF SHALL BE VALID OR EFFECTIVE UNLESS (A) SUCH TRANSFER IS MADE PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR (B) THE HOLDER OF THE SECURITIES PROPOSED TO BE TRANSFERRED SHALL HAVE DELIVERED TO THE COMPANY EITHER A NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION OR AN OPINION OF COUNSEL EXPERIENCED IN SECURITIES MATTERS AND REASONABLY ACCEPTABLE TO THE COMPANY TO THE EFFECT THAT SUCH PROPOSED TRANSFER IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE ACT OR (C) SUCH TRANSFER IS PURSUANT TO RULE 144 OR RULE 144A UNDER THE ACT AND SUCH HOLDER(S) SHALL HAVE DELIVERED TO THE COMPANY A CERTIFICATE SETTING FORTH THE BASIS FOR APPLYING SUCH RULE TO THE PROPOSED TRANSFER. Warrant No. A - 3 SERIES A WARRANT NORAND CORPORATION THIS IS TO CERTIFY THAT FLEET NATIONAL BANK, or registered assigns, is entitled, at any time after May 31, 1997 and prior to the Expiration Date (such term, and certain other capitalized terms used herein being hereinafter defined), to purchase from NORAND CORPORATION, a Delaware corporation (the "Company"), Forty-three Thousand Five Hundred Fifty-four (43,554) shares of the Common Stock of the Company (subject to adjustment as provided herein), at a purchase price of $21.15 per share (the initial "Exercise Price", subject to adjustment as provided herein), all on the terms and conditions and pursuant to the provisions hereinafter set forth. 5 1. DEFINITIONS As used in this Warrant, the following terms have the respective meanings set forth below: "Affiliate" of any Person means a Person (a) which directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with such Person, (b) which beneficially owns or holds more than ten percent of the outstanding shares of any class of voting stock of such Person and has the power to vote such shares or (c) more than ten percent of the outstanding shares of any class of voting stock (or, in the case of a Person which is not a corporation, more than ten percent of the equity interest) of which is beneficially owned or held by such Person and such Person has the power to vote such shares or equity interest. The term "control" as used with respect to any Person means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise. "After-Tax Basis", when referring to a payment that is required hereunder (the "target amount"), shall mean a total payment (the "total amount") that, after deduction of all federal, state and local taxes that are required to be paid by the recipient in respect of the receipt or accrual of such total amount, is equal to the target amount. "Agreed Rate" shall mean a rate per annum equal to the corporate base rate of interest announced by The First National Bank of Chicago from time to time, changing when and as said corporate base rate changes. "Appraised Value" per share of Common Stock as of a date specified herein shall mean the value of such share as of such date as determined by an investment bank of nationally recognized standing selected by the Majority Warrant Holders from Schedule B (or any successor of any such entity), it being understood that the Majority Warrant Holders shall use commercially reasonable efforts to select one of the first three listed entities subject to arriving at reasonably acceptable terms and conditions for the -2- 6 appraisal. The Company shall pay the costs and fees of such investment bank, and the decision of the investment bank making such determination of Appraised Value shall be final and binding on the Company and all affected holders of Warrants or Warrant Stock. Such Appraised Value shall be determined as a pro rata portion of the value of the Company taken as a whole, based on the higher of (A) the value derived from a hypothetical sale of the entire Company as a going concern by a willing seller to a willing buyer (neither acting under any compulsion) and (B) the liquidation value of the entire Company. No discount shall be applied on account of (i) any Warrants or Warrant Stock representing a minority interest, (ii) any lack of liquidity of the Common Stock or the Warrants, (iii) the fact that the Warrants or Warrant Stock may constitute "restricted securities" for securities law purposes or (iv) the existence of any call option. "Bank Holding Company Act" shall mean the Bank Holding Company Act of 1956, as amended. "Business Day" shall mean any day that is not a Saturday or Sunday or a day on which banks are required or permitted to be closed in the State of Illinois. "Call" shall have the meaning set forth in Section 13 hereof. "Call Notice" shall have the meaning set forth in Section 13 hereof. "Commission" shall mean the Securities and Exchange Commission or any other federal agency then administering the Securities Act and other federal securities laws. "Common Stock" shall mean (except where the context otherwise indicates) the Common Stock of the Company, par value $.01 per share, as constituted on the Original Issue Date, and any capital stock into which such Common Stock may thereafter be changed, and shall also include (i) capital stock of the Company of any other class (regardless of how denominated) issued to the holders of shares of any Common Stock upon any reclassification thereof which is also not preferred as to dividends or liquidation over any other -3- 7 class of stock of the Company and which is not subject to redemption and (ii) shares of common stock of any successor or acquiring corporation (as defined in Section 4.5 hereof) received by or distributed to the holders of Common Stock of the Company in the circumstances contemplated by Section 4.5 hereof. "Company" means Norand Corporation, a Delaware corporation, and any successor corporation. "Company Default" means (a) the breach of any warranty or the inaccuracy in any material respect at the time when made of any representation made by the Company herein or (b) the failure by the Company to comply in any material respect with any covenant of the Company contained herein. "Continuously Effective", with respect to a specified registration statement, shall mean that it shall not cease to be effective and available for Transfers of Warrant Stock thereunder for the longer of either (i) any ten consecutive Business Days, or (ii) an aggregate of fifteen Business Days during the period specified in the relevant provision of Section 9 hereof. "Convertible Securities" shall mean evidences of indebtedness, shares of stock or other securities that are convertible into or exchangeable for, with or without payment of additional consideration in cash or property, shares of Common Stock, either immediately or upon the occurrence of a specified date or a specified event. "Credit Agreement" means the Second Amended and Restated Credit Agreement dated as of January 25, 1996, as thereafter from time to time amended, supplemented, restated or modified, among the Company, the Lenders party thereto and The First National Bank of Chicago, as agent. "Current Market Price" shall mean as of any specified date the average of the daily market prices of the Common Stock of the Company for the shorter of (x) the twenty consecutive Business Days immediately preceding such date or (y) the period commencing on the Business Day next following the first public announcement of any event giving rise to an adjustment of the Exercise Price pursuant to Section 4 below -4- 8 and ending on such date. The "daily market price" for each such Business Day shall be: (i) if the Common Stock is then listed on a national securities exchange or is listed on NASDAQ and is designated as a National Market System security, the last sale price, regular way, on such day on the principal stock exchange or market system on which such Common Stock is then listed or admitted to trading, or, if no such sale takes place on such day, the average of the closing bid and asked prices for the Common Stock on such day as reported on such stock exchange or market system or (ii) if the Common Stock is not then listed or admitted to trading on any national securities exchange or designated as a National Market System security on NASDAQ but is traded over-the-counter, the average of the closing bid and asked prices for the Common Stock as reported on NASDAQ or the Electronic Bulletin Board or in the National Daily Quotation Sheets, as applicable. "Demand Registration" shall have the meaning set forth in Section 9.2(a) hereof. "Demanding Holders" shall have the meaning set forth in Section 9.2(a) hereof. "Designated Office" shall have the meaning set forth in Section 11 hereof. "Equity" shall mean equity capital (not including the equity capital attributable to the Settlement Stock, and any mandatory redemption terms of which equity capital are acceptable to the Majority Warrant Holders) raised by and/or contributed to the Company subsequent to the Original Issue Date or new Indebtedness (as defined in the Credit Agreement) subordinated to the Obligations (as defined in the Credit Agreement), provided the terms of such Indebtedness (including, without limitation, maturity, amortization, covenants, defaults, remedies and subordination provisions) are acceptable to the Majority Warrant Holders. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect from time to time. -5- 9 "Exercise Notice" shall have the meaning set forth in Section 2.1 hereof. "Exercise Period" shall mean the period during which this Warrant is exercisable pursuant to Section 2.1 hereof. "Exercise Price" shall mean, in respect of a share of Common Stock at any date herein specified, the initial Exercise Price set forth in the preamble of this Warrant as adjusted from time to time pursuant to Section 4 hereof. "Expiration Date" shall mean August 31, 2002, unless extended under the circumstances contemplated by Section 9.2(d) hereof. "Fair Value" per share of Common Stock as of any specified date shall mean (A) if the Common Stock is publicly traded on such date, the Current Market Price per share or (B) if the Common Stock is not publicly traded on such date, (1) the fair market value per share of Common Stock as determined in good faith by the Board of Directors of the Company and set forth in a written notice to each Holder or (2) if the Majority Warrant Holders object in writing to such price as determined by the Board of Directors within thirty days after receiving notice of same, the Appraised Value per share as of such date. "Fully Diluted Outstanding" shall mean, when used with reference to Common Stock, at any date as of which the number of shares thereof is to be determined, all shares of Common Stock Outstanding on such date and all shares of Common Stock issuable in respect of (x) the Warrants outstanding on such date, (y) any Convertible Securities outstanding on such date and (z) any other Stock Purchase Rights outstanding on such date, in each case regardless of whether or not the conversion, exchange, subscription or purchase rights associated with such Convertible Securities or Stock Purchase Rights are presently exercisable. "GAAP" shall mean generally accepted accounting principles in the United States of America as from time to time in effect. -6- 10 "Glass-Steagall Act" shall mean Section 24 (Seventh), Section 78, Section 377 and Section 378 of Title 12 (12 U.S.C. Section Section 24 (Seventh) 78, 377, 378), or any similar federal legislation. "Holder" shall mean (a) with respect to this Warrant, the Person in whose name the Warrant set forth herein is registered on the books of the Company maintained for such purpose and (b) with respect to any other Warrant or shares of Warrant Stock, the Person in whose name such Warrant or Warrant Stock is registered on the books of the Company maintained for such purpose. "Insolvency Event" shall mean any proceeding being instituted by or against the Company seeking a declaration or order for relief, or entailing a finding, that the Company is insolvent or bankrupt, or seeking reorganization, liquidation, dissolution, winding-up, charter revocation or other similar relief with respect to the Company or any of its properties, assets or debts, or seeking the appointment of a receiver, trustee, custodian, liquidator, sequestrator or similar official for the Company or any of its properties or assets, or the Company becoming insolvent or bankrupt or generally unable to pay its debts as they become due, or the Company voluntarily suspending its business or making a general assignment for the benefit of creditors; provided that an Insolvency Event shall not be deemed to have occurred on account of any such proceeding which is involuntary on the part of the Company unless same shall not have been dismissed or stayed within 60 days. "Lien" shall mean any mortgage or deed of trust, pledge, hypothecation, assignment, deposit arrangement, lien, charge, claim, security interest, easement or encumbrance, or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, any lease or title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, and the filing of, or agreement to give, any financing statement perfecting a security interest under the Uniform Commercial Code or comparable law of any jurisdiction). -7- 11 "Majority Warrant Holders", with respect to a given determination, shall mean the Holders of Warrants and/or Warrant Stock representing at least seventy-six percent (76%) of all Warrants and/or Warrant Stock (with any such Warrants being deemed to represent, for the purposes of such calculation, the shares of Warrant Stock then issuable upon exercise thereof) directly affected by such determination. "Majority Selling Holders" shall mean those Selling Holders whose Warrants and/or Warrant Stock included in a registration under Section 9 hereof represents a majority of the Warrants and/or Warrant Stock (with any such Warrants being deemed to represent, for the purposes of such calculation, the shares of Warrant Stock then issuable upon exercise thereof) included therein by all Selling Holders. "NASD" shall mean the National Association of Securities Dealers, Inc., or any successor corporation thereto. "NASDAQ" shall mean the NASDAQ quotation system, or any successor reporting system. "Notes" shall mean any of the promissory notes issued by the Company under the Credit Agreement. "Opinion of Counsel" means a written opinion of counsel experienced in Securities Act or bank regulatory matters, as the case may be, chosen by the Holder of this Warrant or Warrant Stock issued upon the exercise hereof and reasonably acceptable to the Company. "Original Issue Date" shall mean the date on which the Original Warrants were issued, as set forth on the cover page of this Warrant. "Original Warrants" shall mean the Warrants originally issued by the Company on the Original Issue Date to each of The First National Bank of Chicago, Fleet Bank of Massachusetts, N.A., The Daiwa Bank, Limited, Norwest Bank Iowa, National Association and Caisse Nationale de Credit Agricole. "Other Property" shall have the meaning set forth in Section 4.5 hereof. -8- 12 "Outstanding" shall mean, when used with reference to Common Stock, at any date as of which the number of shares thereof is to be determined, all issued shares of Common Stock, except shares then owned or held by or for the account of the Company or any Subsidiary thereof, and shall include all shares issuable in respect of outstanding scrip or any certificates representing fractional interests in shares of Common Stock. "Outstanding", when used with respect to Warrant Stock for the purposes of Section 9 hereof shall have the meaning set forth in Section 9.1(d) hereof. "Person" shall mean any individual, sole proprietorship, partnership, limited liability company, joint venture, trust, incorporated organization, association, corporation, institution, public benefit corporation, entity or government (whether federal, state, county, city, municipal or otherwise, including, without limitation, any instrumentality, division, agency, body or department thereof). "Piggyback Registration" shall have the meaning set forth in Section 9.3(a) hereof. "Register", "registered" and "registration" shall refer to a registration effected by preparing and filing a registration statement or similar document in compliance with the Securities Act, and the declaration or ordering by the Commission of effectiveness of such registration statement or document. "Registration Expenses" shall have the meaning set forth in Section 9.6(a) hereof. "Restricted Common Stock" shall mean shares of Common Stock which are, or which upon their issuance on the exercise of this Warrant would be, evidenced by a certificate bearing the restrictive legend set forth in Section 8.2(a) hereof. "Securities Act" shall mean the Securities Act of 1933, as amended, or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. -9- 13 "Selling Holders" shall mean, with respect to a specified registration under Section 9 hereof, WS Holders whose Registrable Securities are included in such registration. "Series A Warrants" shall mean all of the Series A Warrants to Purchase Common Stock of Norand Corporation, issued concurrently with, and having the same terms (other than the number of shares purchasable upon the exercise thereof) as, this Warrant. "Series B Warrants" shall mean all of the Series B Warrants to Purchase Common Stock of Norand Corporation issued concurrently with this Warrant. "Settlement Stock" shall mean the shares of Common Stock contemplated to be issued in settlement of the pending shareholders' claims against the Company with respect to the litigation styled In re Norand Corporation Securities Litigation, Master File No. C95-323, pending in the United States District Court for the Northern District of Iowa, Cedar Rapids Division. "Share Withholding Option" has the meaning set forth in Section 2.1(c) hereof. "Shelf Registration" shall have the meaning set forth in Section 9.2(a) hereof. "Stock Purchase Rights" shall mean any options, warrants or other securities or rights to subscribe to or exercisable for the purchase of shares of Common Stock or Convertible Securities, whether or not immediately exercisable, other than the options, warrants or other rights described in Schedule A hereto. "Subsequent Issuance" shall mean any sale or issuance by the Company of Common Stock, Convertible Securities or Stock Purchase Rights after the Original Issue Date other than: (i) Any issuance of Warrant Stock upon exercise of the Warrants and any issuance of Common Stock, Convertible Securities or Stock Purchase Rights (and -10- 14 any issuance of Common Stock pursuant to the conversion, exchange or exercise of any such Convertible Securities or Stock Purchase Rights) deemed to have been issued as of the Original Issue Date pursuant to the definition of Fully Diluted Outstanding. (ii) Any issuance of Common Stock pursuant to the exercise of the options and warrants described in Schedule A hereto, provided, however, that the exercise price of any such option or warrant (other than warrants granted to Jay Alix and Associates and to Donald W. Rowley for up to the respective number of shares set forth on Schedule A) granted or issued after the Original Issue Date shall not be less than the "daily market price" (as that term is defined in the definition of Current Market Price) of the Common Stock on the date of grant or issue of the option or warrant. (iii) The issuance of the Settlement Stock. (iv) The issuance of Common Stock or Convertible Securities directly related to the Company's receipt of Equity if, and only if, the aggregate Equity actually received by the Company between the Original Issue Date and August 31, 1997 equals or exceeds $20 million (otherwise, after August 31, 1997, all such issuances, both prior to and after August 31, 1996, shall be considered a Subsequent Issuance for purposes of Section 4 hereof). (v) Any other issuance of Common Stock, Convertible Securities or Stock Purchase Rights with respect to which the Majority Warrant Holders shall have waived application of the provisions of Section 4 below. "Subsidiary" means any corporation or association (a) more than 50% (by number of votes) of the voting stock of which is at the time owned by the Company or by one or more Subsidiaries or by the Company and one or more Subsidiaries, or any other business entity in which the Company or one or more Subsidiaries or the Company and one or more Subsidiaries own more than a 50% interest either in the -11- 15 profits or capital of such business entity or (b) whose net earnings, or portions thereof, are consolidated with the net earnings of the Company and are recorded on the books of the Company for financial reporting purposes in accordance with GAAP. "Transfer" shall mean any disposition of any Warrant or Warrant Stock or of any interest in either thereof, which would constitute a "sale" thereof within the meaning of the Securities Act. "Triggering Event" shall mean the repayment in full of all indebtedness under the Credit Agreement. "Violation" has the meaning set forth in Section 9.7(a) hereof. "Warrant Price" shall mean an amount equal to (i) the number of shares of Common Stock being purchased upon exercise of this Warrant pursuant to Section 2.1 hereof, multiplied by (ii) the Exercise Price as of the date of such exercise. "Warrants" shall mean the Original Warrants and all warrants issued upon transfer, division or combination of, or in substitution for, such Original Warrants or any other such Warrant. All Warrants shall at all times be identical as to terms and conditions and date, except as to the number of shares of Common Stock for which they may be exercised. "Warrant Stock" generally shall mean the shares of Common Stock issued, issuable or both (as the context may require) upon the exercise of Warrants until such time as such shares of Common Stock have either been (i) Transferred in a public offering pursuant to a registration statement filed under the Securities Act or (ii) Transferred in a transaction exempt from the registration and prospectus delivery requirements of the Securities Act under Section 4(1) thereof with all transfer restrictions and restrictive legends with respect to such Common Stock being removed in connection with such transaction. "Warrant Stock", for the purposes of Section 9 hereof, shall have the meaning set forth in Section 9.1(b) hereof. -12- 16 "WS Holder" shall have the meaning set forth in Section 9.1(a) hereof. 2. EXERCISE OF WARRANT 2.1. Manner of Exercise. (a) From and after May 31, 1997 and until 5:00 P.M., Chicago time, on the Expiration Date, the Holder of this Warrant may from time to time exercise this Warrant, on any Business Day, for all or any part of the number of shares of Common Stock purchasable hereunder (as determined pursuant to Section 2.2 below). In order to exercise this Warrant, in whole or in part, the Holder shall (i) deliver to the Company at the Designated Office a written notice of the Holder's election to exercise this Warrant (an "Exercise Notice"), which Exercise Notice shall be irrevocable and specify the number of shares of Common Stock to be purchased, together with this Warrant and (ii) pay to the Company the Warrant Price (the date on which both such delivery and payment shall have first taken place being hereinafter sometimes referred to as the "Exercise Date"). Such Exercise Notice shall be in the form of the subscription form appearing at the end of this Warrant as Annex A, duly executed by the Holder or its duly authorized agent or attorney. (b) Upon receipt of such Exercise Notice, Warrant and payment, the Company shall, as promptly as practicable, and in any event within five Business Days thereafter, execute (or cause to be executed) and deliver (or cause to be delivered) to the Holder a certificate or certificates representing the aggregate number of full shares of Common Stock issuable upon such exercise, together with cash in lieu of any fraction of a share, as hereafter provided. The stock certificate or certificates so delivered shall be, to the extent possible, in such denomination or denominations as the exercising Holder shall reasonably request in the Exercise Notice and shall be registered in the name of the Holder or such other name as shall be designated in the Exercise Notice. This Warrant shall be deemed to have been exercised and such certificate or certificates shall be deemed to have been issued, and the Holder or any other Person so designated to be named therein shall be deemed to have become a holder of record of such shares for all purposes, as of the Exercise Date. -13- 17 (c) Payment of the Warrant Price shall be made at the option of the Holder by one or more of the following methods: (i) by delivery of a certified or official bank check in the amount of such Warrant Price, (ii) by instructing the Company to withhold a number of shares of Warrant Stock then issuable upon exercise of this Warrant with an aggregate Current Market Price equal to such Warrant Price (the "Share Withholding Option"), (iii) by surrendering to the Company shares of Common Stock previously acquired by the Holder with an aggregate Current Market Price equal to such Warrant Price or(iv) by delivery of a Note, duly endorsed by or accompanied by appropriate instruments of transfer duly executed by the Holder or by the Holder's attorney duly authorized in writing. In the event of any withholding of Warrant Stock or surrender of Common Stock pursuant to clause (ii) or (iii) above where the number of shares whose Current Market Price is equal to the Warrant Price is not a whole number, the number of shares withheld by or surrendered to the Company shall be rounded up to the nearest whole share and the Company shall make a cash payment to the Holder based on the incremental fraction of a share being so withheld by or surrendered to the Company in an amount determined in accordance with Section 2.3 hereof. For the purpose of making payment of the Warrant Price, any Note surrendered to the Company shall be deemed to have a value equal to 100% of the principal amount thereof plus any interest accrued but unpaid thereon. If the Holder delivers a Note with a deemed value that exceeds the Warrant Price, the Company shall reissue to the Holder a new Note identical in all respects to the surrendered Note except that the principal amount of such new Note shall be equal to the principal amount that, together with any interest accrued but unpaid thereon, is equal to the deemed value of the surrendered Note less the Warrant Price. (d) If this Warrant shall have been exercised in part, the Company shall, at the time of delivery of the certificate or certificates representing the shares of Common Stock being issued, deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the unpurchased shares of Common Stock called for by this Warrant. Such new Warrant shall in all other respects be identical with this Warrant. 2.2. Payment of Transfer Taxes. All shares of Common Stock issuable upon the exercise of this Warrant pursuant to the terms hereof shall be validly issued, fully paid and nonassess- -14- 18 able, issued without violation of any preemptive rights and free and clear of all Liens (other than any created by actions of the Holder). The Company shall pay all expenses in connection with, and all taxes and other governmental charges that may be imposed with respect to, the issue or delivery thereof, unless such tax or charge is imposed by law upon the Holder, in which case such taxes or charges shall be paid by the Holder and the Company shall reimburse the Holder therefor on an After-Tax Basis. 2.3. Fractional Shares. The Company shall not be required to issue a fractional share of Common Stock upon exercise of any Warrant. As to any fraction of a share that the Holder of one or more Warrants, the rights under which are exercised in the same transaction, would otherwise be entitled to purchase upon such exercise, the Company shall pay a cash adjustment in respect of such final fraction in an amount equal to the same fraction of the Current Market Price of one share of Common Stock on the Exercise Date, if the Common Stock is then publicly traded. 2.4. Continued Validity and Application. (a) A Holder of shares of Warrant Stock issued upon the exercise of this Warrant, in whole or in part, including any transferee of such shares (other than a transferee in whose hands such shares no longer constitute Warrant Stock as defined herein), shall continue, with respect to such shares, to be entitled to all rights and to be subject to all obligations that are applicable to such Holder by the terms of this Warrant under Section 9 hereof. The Company shall, at the time of any exercise of this Warrant or any transfer of Warrant Stock, upon the request of the Holder of the shares of Warrant Stock issued in connection with such exercise or transfer, acknowledge in writing, in a form reasonably satisfactory to such Holder, its continuing obligation to afford to such Holder such rights referred to in this Section 2.4; provided, however, that if such Holder shall fail to make any such request, such failure shall not affect the continuing obligation of the Company to afford to such Holder all such rights. -15- 19 2.5. Limitation on Regulated Holder's Exercise. Notwithstanding anything in this Warrant to the contrary, the Holder of this Warrant, if subject to the Bank Holding Company Act or any provision of the Glass-Steagall Act, may exercise this Warrant only if the Notice of Exercise is accompanied by an Opinion of Counsel of such Holder to the effect that, as of the date of delivery of such opinion, no federal or state regulatory clearances are required for such Holder to exercise this Warrant or, in the event any such federal or state regulatory clearances are required prior to the exercise of this Warrant, to the effect that all such clearances have been obtained or, if not then obtained, that no statute or regulation or regulatory policy or guidelines known to such counsel would by their terms preclude the obtaining of such clearances or make it unlikely that such clearances would be obtained or make it likely that such clearances would, if obtained, contain material conditions adverse to such Holder. In the event that federal or state regulatory clearances are required prior to the exercise of this Warrant by the Holder hereof, the Company shall reasonably cooperate with such Holder in providing such information to any regulatory agency as such agency may reasonably require. In the event any such regulatory clearance is withheld or denied, such Holder may continue to hold this Warrant until its expiration or may sell or otherwise transfer this Warrant in accordance with the terms hereof. 3. TRANSFER, DIVISION AND COMBINATION 3.1. Transfer. Subject to compliance with Section 8 hereof, each transfer of this Warrant and all rights hereunder, in whole or in part, shall be registered on the books of the Company to be maintained for such purpose, upon surrender of this Warrant at the Designated Office, together with a written assignment of this Warrant in the form of Annex B hereto duly executed by the Holder or its agent or attorney. Upon such surrender and delivery, the Company shall, subject to Section 8, execute and deliver a new Warrant or Warrants in the name of the assignee or assignees and in the denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned and this Warrant shall promptly be canceled. A Warrant, if properly assigned in compliance with Section 8, may be exercised by the new Holder for the purchase of shares of Common Stock without having a new Warrant issued. -16- 20 3.2. Division and Combination. Subject to compliance with the applicable provisions of this Warrant, this Warrant may be divided or combined with other Warrants upon presentation hereof at the Designated Office, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney. Subject to compliance with the applicable provisions of this Warrant as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. 3.3. Expenses. The Company shall prepare, issue and deliver at its own expense any new Warrant or Warrants required to be issued under this Section 3. 3.4. Maintenance of Books. The Company agrees to maintain, at the Designated Office, books for the registration and transfer of the Warrants. 4. ANTIDILUTION PROVISIONS The number of shares of Common Stock for which this Warrant is exercisable and the Exercise Price shall be subject to adjustment from time to time as set forth in this Section 4. 4.1. Stock Dividends, Subdivisions and Combinations. If at any time the Company shall: (i) take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend payable in, or other distribution of, additional shares of Common Stock, (ii) subdivide its outstanding shares of Common Stock into a larger number of shares of such Common Stock, or (iii) combine its outstanding shares of Common Stock into a smaller number of shares of such Common Stock, then the Exercise Price shall be adjusted to equal the product of the Exercise Price in effect immediately prior to such event multiplied by a fraction the numerator of which is equal to -17- 21 the number of shares of Common Stock Outstanding immediately prior to the adjustment and the denominator of which is equal to the number of shares of Common Stock Outstanding immediately after such adjustment. 4.2. Issuance of Additional Shares of Common Stock. (a) If at any time the Company shall issue or sell any shares of Common Stock in a Subsequent Issuance for a consideration per share that is less than the Exercise Price in effect immediately prior to such issuance or sale, then, forthwith upon such issuance or sale, the Exercise Price shall be reduced to a price calculated by dividing (1) an amount equal to the sum of (x) the number of shares of Common Stock Outstanding immediately prior to such Subsequent Issuance multiplied by the then existing Exercise Price, plus (y) the aggregate consideration (determined in accordance with the provisions of Section 4.6 hereof), if any, received by the Company in connection with such Subsequent Issuance, by (2) the total number of shares of Common Stock Outstanding immediately after such Subsequent Issuance. (b) The provisions of this Section 4.2 shall not apply to (i) any issuance of Common Stock for which an adjustment is provided for under Section 4.1 or (ii) any issuance or sale of Common Stock pursuant to the exercise of any Stock Purchase Rights or Convertible Securities to the extent that an adjustment shall have been previously made hereunder in connection with the issuance of such Stock Purchase Rights or Convertible Securities pursuant to the provisions of Section 4.3 hereof. 4.3. Issuances of Stock Purchase Rights and Convertible Securities. (a) In the event that the Company shall at any time issue, sell or grant any Stock Purchase Rights to any Person in a Subsequent Issuance, then, for the purpose of Section 4.2 above, the Company shall be deemed to have issued at that time a number of shares of Common Stock equal to the maximum number of shares of Common Stock (without giving effect to any antidilution provisions in such Stock Purchase Rights) that are or may become issuable upon exercise of such Stock Purchase Rights (or upon exercise of any Convertible Securities issuable upon exercise of such Stock Purchase Rights) for a consideration per share equal to (i) the aggregate consideration per share (determined in accordance with the provisions of Section 4.6 hereof) received by the Company in connection with the issuance, sale or grant of such Stock Purchase Rights plus (ii) the minimum -18- 22 amount of such consideration per share receivable by the Company in connection with the exercise of such Stock Purchase Rights (and the exercise of any Convertible Securities issuable upon exercise of such Stock Purchase Rights). (b) In the event that the Company shall at any time issue or sell any Convertible Securities to any Person in a Subsequent Issuance, then, for the purposes of Section 4.2 above, the Company shall be deemed to have issued at that time a number of shares of Common Stock equal to the maximum number of shares of Common Stock that are or may become issuable upon the exercise of the conversion or exchange rights associated with such Convertible Securities for a consideration per share equal to (i) the aggregate consideration per share (determined in accordance with the provisions of Section 4.6 hereof) received by the Company in connection with the issuance or sale of such Convertible Securities plus (ii) the minimum amount of such consideration per share receivable by the Company in connection with the exercise of such conversion or exchange rights. (c) If, at any time after any adjustment of the Exercise Price shall have been made hereunder as the result of any issuance, sale or grant of any Stock Purchase Rights or Convertible Securities, the maximum number of shares issuable upon exercise of such Stock Purchase Rights or of the rights of conversion or exchange associated with such Convertible Securities shall increase, or the minimum amount of consideration per share receivable in connection with such exercise shall decrease, whether by operation of any antidilution rights pertaining to such Stock Purchase Rights or Convertible Securities, by agreement of the parties or otherwise, the Exercise Price then in effect shall first be readjusted to eliminate the effects of the original issuance, sale or grant of such Stock Purchase Rights or Convertible Securities on such Exercise Price and then readjusted as if such Stock Purchase Rights or Convertible Securities had been issued on the effective date of such increase in number of shares or decrease in consideration, but only if the effect of such two-step readjustment is to reduce the Exercise Price below the Exercise Price in effect immediately prior to such increase or decrease. (d) If, at any time after any adjustment of the Exercise Price shall have been made hereunder as the result of any issuance, sale or grant of any Stock Purchase Rights or -19- 23 Convertible Securities, any of such Stock Purchase Rights or the rights of conversion or exchange associated with such Convertible Securities shall expire by their terms or any of such Stock Purchase Rights or Convertible Securities shall be repurchased by the Company or a Subsidiary thereof for a consideration per underlying share of Common Stock not exceeding the amount of such consideration received by the Company in connection with the issuance, sale or grant of such Stock Purchase Rights or Convertible Securities, the Exercise Price then in effect shall forthwith be increased to the Exercise Price that would have been in effect if such expiring Stock Purchase Rights or rights of conversion or exchange or such repurchased Stock Purchase Rights or Convertible Securities had never been issued. Similarly, if at any time after any such adjustment of the Exercise Price shall have been made pursuant to Section 4.2 (i) any additional consideration is received or becomes receivable by the Company in connection with the issuance or exercise of such Stock Purchase Rights or Convertible Securities or (ii) there is a reduction in the conversion ratio applicable to such Convertible Securities so that fewer shares of Common Stock will be issuable upon the conversion or exchange thereof or there is a decrease in the number of shares of Common Stock issuable upon exercise of such Stock Purchase Rights, the Exercise Price then in effect shall be forthwith readjusted to the Exercise Price that would have been in effect had such changes taken place at the time that such Stock Purchase Rights or Convertible Securities were initially issued, granted or sold. In no event shall any readjustment under this Section 4.3(d) affect the validity of any shares of Warrant Stock issued upon any exercise of this Warrant prior to such readjustment, nor shall any such readjustment have the effect of increasing the Exercise Price above the Exercise Price that would have been in effect if the related Stock Purchase Rights or Convertible Securities had never been issued. 4.4. Adjustment of Number of Shares Purchasable. Upon any adjustment of the Exercise Price as provided in Section 4.1, 4.2 or 4.3 hereof, the Holder hereof shall thereafter be entitled to purchase upon the exercise of this Warrant, at the Exercise Price resulting from such adjustment, the number of shares of Common Stock (calculated to the nearest 1/100th of a share) obtained by multiplying the Exercise Price in effect immediately prior to such adjustment by the number of shares of Common Stock issuable on the exercise hereof immediately prior to such -20- 24 adjustment and dividing the product thereof by the Exercise Price resulting from such adjustment. 4.5. Reorganization, Reclassification, Merger, Consolidation or Disposition of Assets. In case the Company shall reorganize its capital, reclassify its capital stock, consolidate or merge with or into another corporation (where the Company is not the surviving corporation or where there is any change whatsoever in, or distribution with respect to, the Outstanding Common Stock of the Company), or sell, transfer or otherwise dispose of all or substantially all of its property, assets or business to another corporation and, pursuant to the terms of such reorganization, reclassification, merger, consolidation or disposition of assets, (i) shares of common stock of the successor or acquiring corporation or of the Company (if it is the surviving corporation) or (ii) any cash, shares of stock or other securities or property of any nature whatsoever (including warrants or other subscription or purchase rights) in addition to or in lieu of common stock of the successor or acquiring corporation ("Other Property") are to be received by or distributed to the holders of Common Stock of the Company who are holders immediately prior to such transaction, then the Holder of this Warrant shall have the right thereafter to receive, upon exercise of this Warrant, the number of shares of common stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and Other Property receivable upon or as a result of such reorganization, reclassification, merger, consolidation or disposition of assets by a holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such event. In such event, the aggregate Exercise Price otherwise payable for the shares of Common Stock issuable upon exercise of this Warrant shall be allocated among the shares of common stock and Other Property receivable as a result of such reorganization, reclassification, merger, consolidation or disposition of assets in proportion to the respective fair market values of such shares of common stock and Other Property as determined in good faith by the Board of Directors of the Company. In case of any such reorganization, reclassification, merger, consolidation or disposition of assets, the successor or acquiring corporation (if other than the Company) shall expressly assume the due and punctual observance and performance of each and every covenant and condition of this Warrant to be performed and observed by the Company and all the obligations and liabilities hereunder, subject to such modi- -21- 25 fications as may be reasonably deemed appropriate (as determined by resolution of the Board of Directors of the Company) in order to provide for adjustments of any shares of the common stock of such successor or acquiring corporation for which this Warrant thus becomes exercisable, which modifications shall be as equivalent as practicable to the adjustments provided for in this Section 4. For purposes of this Section 4.5, "common stock of the successor or acquiring corporation" shall include stock of such corporation of any class that is not preferred as to dividends or assets over any other class of stock of such corporation and that is not subject to redemption and shall also include any evidences of indebtedness, shares of stock or other securities that are convertible into or exchangeable for any such stock, either immediately or upon the arrival of a specified date or the happening of a specified event and any warrants or other rights to subscribe for or purchase any such stock. The foregoing provisions of this Section 4.5 shall similarly apply to successive reorganizations, reclassifications, mergers, consolidations or disposition of assets. 4.6. Determination of Consideration. For purposes of Sections 4.2, 4.3 and 4.4 hereof, the consideration received and/or receivable by the Company in connection with the issuance, sale, grant or exercise of additional shares of Common Stock, Stock Purchase Rights or Convertible Securities, irrespective of the accounting treatment of such consideration, shall be valued as follows: (1) Cash Payment. In the case of cash, the net amount received by the Company after deduction of any accrued interest or dividends, expenses incurred or any underwriting commissions or concessions paid or allowed by the Company. (2) Securities or Other Property. In the case of securities or other property, the fair market value thereof as of the date immediately preceding such issuance, sale, grant or exercise as determined in good faith by the Board of Directors of the Company. (3) Allocation Related to Common Stock. In the event shares of Common Stock are issued or sold together with other securities or other assets of the Company for a consideration which covers both, the -22- 26 consideration received (computed as provided in (1) and (2) above) shall be allocable to such shares of Common Stock as determined in good faith by the Board of Directors of the Company. (4) Allocation Related to Stock Purchase Rights and Convertible Securities. In case any Stock Purchase Rights or Convertible Securities shall be issued or sold together with other securities or other assets of the Company, together comprising one integral transaction in which no specific consideration is allocated to the Stock Purchase Rights or Convertible Securities, the consideration allocable to such Stock Purchase Rights or Convertible Securities shall be determined in good faith by the Board of Directors of the Company. (5) Dividends in Securities. In case the Company shall declare a dividend or make any other distribution upon any stock of the Company payable in either case in Common Stock or Convertible Securities, such Common Stock or Convertible Securities, as the case may be, issuable in payment of such dividend or distribution shall be deemed to have been issued or sold without consideration. (6) Merger, Consolidation or Sale of Assets. In case any shares of Common Stock, Stock Purchase Rights or Convertible Securities shall be issued in connection with any merger or consolidation in which the Company is the surviving corporation, the amount of consideration therefor shall be deemed to be the fair value on the date of issuance of such security of such portion of the assets and business of the non-surviving corporation attributable to such Common Stock, Stock Purchase Rights or Convertible Securities, as is determined in good faith by the Company's Board of Directors. (7) Challenge to Good Faith Determination. Whenever the Board of Directors of the Company shall be required to make a determination in good faith of the fair value of any item under this Section 4, such determination may be challenged in good faith by the -23- 27 Majority Warrant Holders, and any dispute shall be resolved by an investment banking or appraisal firm of recognized national standing selected by the Company and reasonably acceptable to the Majority Warrant Holders and whose decision shall be binding on the Company and all holders of Warrants. The fees and expenses of such firm shall be paid by the party or parties whose position is not chosen by such firm. 4.7. Other Dilutive Events. In case any event shall occur as to which the other provisions of this Section 4 are not strictly applicable but as to which the failure to make any adjustment would not fairly protect the purchase rights represented by this Warrant in accordance with the essential intent and principles hereof (including, without limitation, the issuance of securities other than Common Stock which have the right to participate in distributions to the holders of Common Stock, the granting of "phantom stock" rights or "stock appreciation rights" or the repurchase of outstanding shares of Common Stock, Convertible Securities or Stock Purchase Rights for a purchase price exceeding the fair market value thereof), then, in each such case, the Majority Warrant Holders may select an independent investment banking firm of nationally recognized standing and reasonably acceptable to the Company to make a determination as to the adjustment, if any, required to be made on a basis consistent with the essential intent and principles established herein as a result of such event in order to preserve the purchase rights represented by the Warrants. If the investment bank selected by the Majority Warrant Holders is not reasonably acceptable to the Company, and the Company and the Majority Warrant Holders cannot agree on a mutually acceptable investment bank, then the Company and the Majority Warrant Holders shall each choose one such investment bank and the respective chosen firms shall jointly select a third investment bank, which shall make the determination. The Company shall pay the costs and fees of each such investment bank (including any such investment bank selected by the Majority Warrant Holders), and the decision of the investment bank making such determination shall be final and binding on the Company and all affected holders of Warrants or Warrant Stock. Promptly after receipt of the opinion of such investment bank as to any such required adjustments, the Company shall take any actions necessary to implement same. -24- 28 4.8. Other Provisions Applicable to Adjustments Under this Section. The following provisions shall be applicable to the adjustments provided for pursuant to this Section 4: (a) When Adjustments To Be Made. The adjustments required by this Section 4 shall be made whenever and as often as any specified event requiring such an adjustment shall occur. For the purpose of any such adjustment, any specified event shall be deemed to have occurred at the close of business on the date of its occurrence. (b) Record Date. In case the Company shall take a record of the holders of the Common Stock for the purpose of entitling them (i) to receive a dividend or other distribution payable in Common Stock, Convertible Securities or Stock Purchase Rights or (ii) to subscribe for or purchase Common Stock, Convertible Securities or Stock Purchase Rights, then all references in this Section 4 to the date of the issuance or sale of such shares of Common Stock, Convertible Securities or Stock Purchase Rights shall be deemed to be references to such record date. (c) Fractional Interests. In computing adjustments under this Section 4, fractional interests in Common Stock shall be taken into account to the nearest 1/100th of a share. (d) When Adjustment Not Required. If the Company shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend or distribution to which the provisions of Section 4.1 would apply, but shall, thereafter and before the distribution to stockholders thereof, legally abandon its plan to pay or deliver such dividend or distribution, then thereafter no adjustment shall be required by reason of the taking of such record and any such adjustment previously made in respect thereof shall be rescinded and annulled. (e) Maximum Exercise Price. Except as provided in Section 4.1 above, at no time shall the Exercise Price per share of Common Stock exceed the amount set forth in the first paragraph of the preamble of this Warrant. -25- 29 (f) Certain Limitations. Notwithstanding anything herein to the contrary, the Company agrees not to enter into any transaction that, by reason of any adjustment under Section 4.1, 4.2 or 4.3 above, would cause the Exercise Price to be less than the par value of the Common Stock, if any, unless the Company first reduces the par value of the Common Stock to be less than the Exercise Price that would result from such transaction. (g) Notice of Adjustments. Whenever the number of shares of Common Stock for which this Warrant is exercisable or the Exercise Price shall be adjusted pursuant to this Section 4, the Company shall forthwith prepare a certificate to be executed by the President or chief financial officer of the Company setting forth, in reasonable detail, the event requiring the adjustment and the method by which such adjustment was calculated, specifying the number of shares of Common Stock for which this Warrant is exercisable and (if such adjustment was made pursuant to Section 4.5) describing the number and kind of any other shares of stock or Other Property for which this Warrant is exercisable, and any related change in the Exercise Price, after giving effect to such adjustment or change. The Company shall promptly cause a signed copy of such certificate to be delivered to each Holder in accordance with Section 15.2. The Company shall keep at its principal office or at the Designated Office, if different, copies of all such certificates and cause the same to be available for inspection at said office during normal business hours by any Holder or any prospective transferee of a Warrant designated by a Holder thereof. (h) Independent Application. Except as otherwise provided herein, all subsections of this Section 4 are intended to operate independently of one another (but without duplication). If an event occurs that requires the application of more than one subsection, all applicable subsections shall be given independent effect without duplication. 5. NO IMPAIRMENT -26- 30 The Company shall not by any action, including, without limitation, amending its charter documents or through any reorganization, reclassification, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other similar voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or reasonably appropriate to protect the rights of the Holder against impairment. Without limiting the generality of the foregoing, the Company shall take all such action as may be necessary or reasonably 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, free and clear of all Liens, and shall use all commercially reasonably efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof as may be necessary to enable the Company to perform its obligations under this Warrant. 6. RESERVATION AND AUTHORIZATION OF COMMON STOCK From and after the Original Issue Date, the Company shall at all times reserve and keep available for issuance upon the exercise of the Warrants such number of its authorized but unissued shares of Common Stock as will be sufficient to permit the exercise in full of all outstanding Warrants. All shares of Common Stock issuable pursuant to the terms hereof, when issued upon exercise of this Warrant with payment therefor in accordance with the terms hereof, shall be duly and validly issued and fully paid and nonassessable, not subject to preemptive rights and shall be free and clear of all Liens. 7. NOTICE OF CORPORATE ACTIONS; TAKING OF RECORD; TRANSFER BOOKS 7.1. Notices of Corporate Actions. In the event of: (a) any capital reorganization of the Company, any reclassification or recapitalization of the capital stock of the Company or any consolidation or merger involving the Company and any other Person or any transfer or other disposition of all or substantially all the assets of the Company to another Person or -27- 31 (b) any amendment of the Certificate of Incorporation of the Company, the Company shall mail to each Holder of a Warrant in accordance with the provisions of Section 14.2 hereof a notice specifying the date or expected date on which any such reorganization, reclassification, recapitalization, consolidation, merger, transfer or disposition is to take place, the time, if any such time is to be fixed, as of which the holders of record of Common Stock shall be entitled to exchange their shares of Common Stock for the securities or Other Property deliverable upon such reorganization, reclassification, recapitalization, consolidation, merger, transfer or disposition, and a description in reasonable detail of the transaction. Such notice shall be mailed to the extent practicable at least thirty, but not more than ninety, days prior to the date therein specified; provided, that, in no event shall the Company be required to give the Holders notice of material non-public information prior to the time such information is made available to the holders of its Common Stock. In the event that the Company at any time sends any other notice to the holders of its Common Stock, it shall concurrently send a copy of such notice to each Holder of a Warrant. 7.2 Closing of Transfer Books. The Company shall not at any time, except upon dissolution, liquidation or winding up of the Company, close its stock transfer books or Warrant transfer books so as to result in preventing or delaying the exercise or transfer of any Warrant. 8. TRANSFER RESTRICTIONS The Holder, by acceptance of this Warrant, agrees to be bound by the provisions of this Section 8. 8.1. Restrictions on Transfers. Neither this Warrant nor any shares of Restricted Common Stock issued upon the exercise hereof shall be Transferred other than pursuant to an effective registration statement under the Securities Act or an exemption from the registration provisions thereof. No Transfer of this Warrant or any such shares of Restricted Stock, other than pursuant to such an effective registration statement, shall be valid or effective unless (a) the holder of the securities proposed to be transferred shall have delivered to the Company either a no-action letter from the Commission or an Opinion of -28- 32 Counsel to the effect that such proposed Transfer is exempt from the registration requirements of the Securities Act or (b) such Transfer is being made pursuant to Rule 144 or Rule 144A under the Securities Act and such holder shall have delivered to the Company a certificate setting forth the basis for applying such Rule to the proposed Transfer. Each certificate, if any, evidencing such shares of Restricted Common Stock issued upon any such Transfer, other than in a public offering pursuant to an effective registration statement, shall bear the restrictive legend set forth in Section 8.2(a), and each Warrant issued upon such Transfer shall bear the restrictive legend set forth in Section 8.2(b), unless the Holder delivers to the Company an Opinion of Counsel to the effect that such legend is not required for the purposes of compliance with the Securities Act. Holders of the Warrants or the Restricted Common Stock, as the case may be, shall not be entitled to Transfer such Warrants or such Restricted Common Stock except in accordance with this Section 8.1. 8.2. Restrictive Legends. (a) Except as otherwise provided in this Section 8, each certificate for Warrant Stock initially issued upon the exercise of this Warrant, and each certificate for Warrant Stock issued to any subsequent transferee of any such certificate, shall be stamped or otherwise imprinted with two legends in substantially the following forms: "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAW. NO TRANSFER OF THE SHARES REPRESENTED BY THIS CERTIFICATE SHALL BE VALID OR EFFECTIVE UNLESS (A) SUCH TRANSFER IS MADE PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR (B) THE HOLDER OF THE SECURITIES PROPOSED TO BE TRANSFERRED SHALL HAVE DELIVERED TO THE COMPANY AN OPINION OF COUNSEL EXPERIENCED IN SECURITIES MATTERS AND REASONABLY ACCEPTABLE TO THE COMPANY TO THE EFFECT THAT SUCH PROPOSED TRANSFER IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE ACT OR (C) SUCH TRANSFER IS PURSUANT TO RULE 144 OR RULE 144A UNDER THE ACT AND SUCH HOLDER(S) SHALL HAVE DELIVERED TO THE COMPANY A CERTIFICATE SETTING FORTH THE BASIS FOR APPLYING SUCH RULE TO THE PROPOSED TRANSFER." -29- 33 "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE ENTITLED TO THE BENEFIT OF AND ARE SUBJECT TO CERTAIN OBLIGATIONS SET FORTH IN THE WARRANT PURSUANT TO THE EXERCISE OF WHICH SUCH SHARES WERE ISSUED. A COPY OF SUCH WARRANT IS AVAILABLE AT THE EXECUTIVE OFFICES OF THE COMPANY." (b) Except as otherwise provided in this Section 8, each Warrant shall be stamped or otherwise imprinted with a legend in substantially the following form: "NEITHER THE WARRANTS REPRESENTED BY THIS CERTIFICATE NOR ANY OF THE SECURITIES ISSUABLE UPON EXERCISE THEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAW. NO TRANSFER OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE OR OF THE STOCK ISSUABLE UPON EXERCISE THEREOF SHALL BE VALID OR EFFECTIVE UNLESS (A) SUCH TRANSFER IS MADE PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR (B) THE HOLDER OF THE SECURITIES PROPOSED TO BE TRANSFERRED SHALL HAVE DELIVERED TO THE COMPANY EITHER A NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION OR AN OPINION OF COUNSEL EXPERIENCED IN SECURITIES MATTERS AND REASONABLY ACCEPTABLE TO THE COMPANY TO THE EFFECT THAT SUCH PROPOSED TRANSFER IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE ACT OR (C) SUCH TRANSFER IS PURSUANT TO RULE 144 OR RULE 144A UNDER THE ACT AND SUCH HOLDER SHALL HAVE DELIVERED TO THE COMPANY A CERTIFICATE SETTING FORTH THE BASIS FOR APPLYING SUCH RULE TO THE PROPOSED TRANSFER." 8.3. Termination of Securities Law Restrictions. Notwithstanding the foregoing provisions of this Section 8, the restrictions imposed by Section 8.1(b) upon the transferability of the Warrants and the Restricted Common Stock and the legend requirements of Section 8.2 shall terminate as to any particular Warrant or shares of Restricted Common Stock when the Company shall have received from the Holder thereof an Opinion of Counsel to the effect that such legend is not required in order to ensure compliance with the Securities Act. Whenever the restrictions imposed by Sections 8.1(b) and 8.2 shall terminate as to this Warrant, as hereinabove provided, the Holder hereof shall be entitled to receive from the Company, at the expense of the -30- 34 Company, a new Warrant bearing the following legend in place of the restrictive legend set forth hereon: "THE RESTRICTIONS ON TRANSFERABILITY OF THE WITHIN WARRANT CONTAINED IN SECTIONS 8.1(b) AND 8.2 HEREOF TERMINATED ON ______________, 19__, AND ARE OF NO FURTHER FORCE AND EFFECT." All Warrants issued upon registration of transfer, division or combination of, or in substitution for, any Warrant or Warrants entitled to bear such legend shall have a similar legend endorsed thereon. Wherever the restrictions imposed by this Section shall terminate as to any share of Restricted Common Stock, as hereinabove provided, the Holder thereof shall be entitled to receive from the Company, at the Company's expense, a new certificate representing such Common Stock not bearing the restrictive legend set forth in Section 8.2(a). 9. REGISTRATION RIGHTS 9.1. Certain Definitions. For the purposes of this Section 9: (a) The Holders of Warrants and the Series B Warrants and the holders of Warrant Stock (as defined in Section 9.1(b)) are collectively referred to as "WS Holders". (b) "Warrant Stock" shall deemed to include (i) the shares of Common Stock issued, issuable or both (as the context may require) upon the exercise of Warrants and the Series B Warrants until such time as such shares of Common Stock have either been (a) Transferred in a public offering pursuant to a registration statement filed under the Securities Act or (b) Transferred in a transaction exempt from the registration and prospectus delivery requirements of the Securities Act under Section 4(1) thereof with all transfer restrictions and restrictive legends with respect to such Common Stock being removed in connection with such transaction,(ii) any other securities issued as (or issuable upon the conversion or exercise of any warrant, right or other security which is issued as) a dividend or other distribution with respect to, or in exchange by the Company generally for, or in replacement by the Company generally -31- 35 of, any shares of Warrant Stock and (iii) any securities issued in exchange for any such Warrant Stock in any merger or reorganization of the Company, but in the cases of clauses (ii) and (iii) only so long as such securities have not been registered and Transferred pursuant to the Securities Act or Transferred in a transaction exempt from the registration and prospectus delivery requirements of the Securities Act under Section 4(1) thereof so that all transfer restrictions and restrictive legends with respect to such securities are removed in connection with such Transfer. (c) Each WS Holder shall be deemed to "hold", as of any specified date, the aggregate of (i) the number of shares of Warrant Stock held by such WS Holder as of such date plus (ii) the number of shares of Warrant Stock issuable upon exercise of any Warrants and Series B Warrants held by such WS Holder as of such date. (d) The total number of shares of Warrant Stock deemed "outstanding" as of a specified date will be equal to (i) the total number of shares of Warrant Stock Outstanding as of such date plus (ii) the number of shares of Warrant Stock issuable upon exercise of all outstanding Warrants and Series B Warrants as of such date. (e) "Registrable Securities" shall mean any Warrants, any Series B Warrants and/or any shares of Warrant Stock. 9.2. Demand Registration. (a) In the event the Company receives at any time after August 31, 1997 a written request from one or more WS Holders holding in the aggregate at least seventy-six percent of the number of shares of Warrant Stock then outstanding (the "Demanding Holders") that the Company file a registration statement under the Securities Act for the sale or other disposition of at least a majority of the Registrable Securities (a "Demand Registration"), the Company shall promptly give written notice of such request to each other WS Holder and each such WS Holder may elect, by giving written notice of such election to the Company within ten (10) Business Days after receipt of the Company's notice, to have some or all of the Registrable Securities held by it included in such registration. At the option of the Demanding Holders, such request may specify that the requested registration will be for -32- 36 an offering on a delayed or continual basis pursuant to Rule 415 under the Securities Act (a "Shelf Registration"). (b) Following receipt of such a request for a Demand Registration, the Company shall: (1) File the requested registration statement with the Commission as promptly as practicable, and shall use all commercially reasonable efforts to have the registration declared effective under the Securities Act as soon as reasonably practicable, in each instance giving due regard to the need to prepare and file current financial statements, conduct due diligence and complete other actions that are reasonably necessary to effect a registered public offering; and (2) Use all commercially reasonable efforts to keep the such registration statement Continuously Effective (x) if a Demand Registration, for up to 90 days or until such earlier date as of which all Registrable Securities covered by such registration statement shall have been disposed of in the manner described in the registration statement, and (y) if a Shelf Registration, for 270 days. Notwithstanding the foregoing, if for any reason the effectiveness of a Demand Registration is suspended or postponed as permitted by Subsection (d) below, the foregoing period shall be extended by the aggregate number of days of such suspension or postponement. (c) The Company shall not be required to effect a registration of Registrable Securities pursuant to a Demand Registration on more than one occasion. For purposes of this Subsection (c), registration shall not be deemed to have been effected (i) unless a registration statement with respect thereto has become effective, (ii) if after such registration statement has become effective, such registration or the related offer, sale or distribution of Registrable Securities thereunder is interfered with by any stop order, injunction or other order or requirement of the Commission or other governmental agency or court for any reason not attributable to the Selling Holders and such interference is not thereafter eliminated or (iii) if the conditions to closing specified in the underwriting agreement, if any, entered into in connection with such registration are not -33- 37 satisfied or waived, other than by reason of a failure on the part of the Selling Holders. If the Company shall have complied with its obligations under this Section 9, a right to demand a registration pursuant to this Section 9.2 shall be deemed to have been satisfied (i) if a Demand Registration other than a Shelf Registration, upon the earlier of (x) the date as of which all of the Registrable Securities included therein shall have been disposed of pursuant to the registration statement and (y) the date as of which such Demand Registration shall have been Continuously Effective for a period of 90 days, and (ii) if a Shelf Registration, upon the effective date of a Shelf Registration, provided no stop order or similar order, or proceedings for such an order, is thereafter entered or initiated. (d) The Company shall be entitled to postpone for up to 90 days the filing of any Demand Registration statement otherwise required to be prepared and filed pursuant to this Section 9.2 or suspend any such Demand Registration for up to 90 days, if the Board of Directors of the Company determines, in its good faith reasonable judgment that such registration and the Transfer of Warrant Stock contemplated thereby would materially interfere with, or require premature disclosure of, any financing, acquisition or reorganization involving the Company or any of its wholly owned subsidiaries and the Company promptly gives the Demanding Holders notice of such determination; provided, however, that the Company shall not have postponed pursuant to this Subsection (d) the filing of any other Demand Registration statement otherwise required to be prepared and filed pursuant to this Section 9.2, or suspended any such Demand Registration, during the 12 month period ended on the date of the relevant request pursuant to Subsection (a) above and provided further, that the Expiration Date shall be extended by the period of any such postponement or suspension. (e) A registration pursuant to this Section 9.2 shall be on such appropriate registration form of the Commission available to the Company as shall (i) be selected by the Company and be reasonably acceptable to the Majority Selling Holders and (ii) permit the disposition of the Warrant Stock in accordance with the intended method or methods of disposition specified in the request made pursuant to Subsection (a) above. If any registration pursuant to this Section 9.2 involves an underwritten offering (whether on a "firm", "best efforts" or -34- 38 "all reasonable efforts" basis or otherwise), or an agented offering, the Majority Selling Holders shall have the right to select the underwriter or underwriters and manager or managers to administer such underwritten offering or the placement agent or agents for such agented offering from among the entities listed in Schedule B hereto (or any successors of any such entities), it being understood that the Majority Selling Holders shall use commercially reasonable efforts to select one or more of the first three listed entities subject to arriving at reasonably acceptable terms and conditions for the offering. (f) The Company may elect to include shares of Common Stock to be sold for its account in any such Demand Registration (including a Shelf Registration); provided, however, if the managing underwriter shall advise the Demanding Holders in writing (with a copy to the Company) that, in its opinion, the number of shares of Common Stock requested to be included in such Demand Registration would adversely affect such offering or the price to be realized therefor, or the timing thereof, then the number of shares proposed to be included in such Demand Registration by the Company shall be reduced, to such number that the Demanding Holders are advised can be sold without such effect in such Demand Registration. 9.3. Piggyback Registration. (a) If at any time the Company proposes to register (including for this purpose a registration effected by the Company for shareholders of the Company other than the WS Holders) equity securities under the Securities Act in connection with the public offering solely for cash on Form S-1, S-2 or S-3 (or any replacement or successor forms), the Company shall promptly give each WS Holder written notice of such registration (a "Piggyback Registration"). Upon the written request of each WS Holder given within 20 days following the date of such notice, the Company shall cause to be included in such registration statement and use its best efforts to be registered under the Securities Act all the Registrable Securities that each such WS Holder shall have requested to be registered. The Company shall have the absolute right to withdraw or cease to prepare or file any registration statement for any offering referred to in this Section 9.3 without any obligation or liability to any WS Holder. -35- 39 (b) If the managing underwriter shall advise the Company in writing (with a copy to each Selling Holder) that, in its opinion, the amount of Registrable Securities requested to be included in such registration would materially adversely affect such offering, or the timing thereof, then the Company will include in such registration, to the extent of the amount and class which the Company is so advised can be sold without such material adverse effect in such offering: first, all securities proposed to be sold by the Company for its own account; and second, the Warrant Stock requested to be included in such registration by WS Holders and all other securities requested to be included in such registration by Persons other than the Company and WS Holders, the securities covered by this clause second to be included pro rata based on the estimated gross proceeds from the sale thereof. (c) Each WS Holder shall be entitled to have its Registrable Securities included in an unlimited number of Piggyback Registrations pursuant to this Section 9.3. 9.4. Registration Procedures. Whenever required under Section 9.2 or Section 9.3 hereof to effect the registration of any Registrable Securities, the Company shall, as expeditiously as practicable: (a) Prepare and file with the Commission a registration statement with respect to such Warrant Stock and use the Company's best efforts to cause such registration statement to become effective; provided, however, that before filing a registration statement or prospectus or any amendments or supplements thereto, including documents incorporated by reference after the initial filing of the registration statement and prior to effectiveness thereof, the Company shall furnish to one firm of counsel for the Selling Holders (selected by Majority Selling Holders) copies of all such documents in the form substantially as proposed to be filed with the Commission at least four Business Days prior to filing for review and comment by such counsel, which opportunity to comment shall include an absolute right to control or contest disclosure if the applicable Selling Holder reasonably believes that it may be subject to controlling person liability under applicable securities laws with respect thereto. -36- 40 (b) Prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Securities Act and rules thereunder with respect to the disposition of all securities covered by such registration statement. If the registration is for an underwritten offering, the Company shall amend the registration statement or supplement the prospectus whenever required by the terms of the underwriting agreement entered into pursuant to Section 9.4(e). Subject to Rule 415 under the Securities Act, if the registration statement is a Shelf Registration, the Company shall amend the registration statement or supplement the prospectus so that it will remain current and in compliance with the requirements of the Securities Act for 270 days or after its effective date, and if during such period any event or development occurs as a result of which the registration statement or prospectus contains a misstatement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading, the Company shall promptly notify each Selling Holder, amend the registration statement or supplement the prospectus so that each will thereafter comply with the Securities Act and furnish to each Selling Holder of Registrable Securities such amended or supplemented prospectus, which each such Holder shall thereafter use in the Transfer of Warrant Stock covered by such registration statement. Pending such amendment or supplement each such Selling Holder shall cease making offers or Transfers of Registerable Securities pursuant to the prior prospectus. In the event that any Registrable Securities included in a registration statement subject to, or required by, this Warrant remain unsold at the end of the period during which the Company is obligated to use its best efforts to maintain the effectiveness of such registration statement, the Company may file a post-effective amendment to the registration statement for the purpose of removing such Registrable Securities from registered status. (c) Furnish to each Selling Holder of Registrable Securities, without charge, such number of copies of the registration statement, any pre-effective or post-effective amendment thereto, the prospectus, including each -37- 41 preliminary prospectus and any amendments or supplements thereto, in each case in conformity with the requirements of the Securities Act and the rules thereunder, and such other related documents as any such Selling Holder may reasonably request in order to facilitate the disposition of Registrable Securities owned by such Selling Holder. (d) Use all commercially reasonable efforts (i) to register and qualify the securities covered by such registration statement under such other securities or Blue Sky laws of such states or jurisdictions as shall be reasonably requested by the managing underwriter (as applicable, or if inapplicable, the Majority Selling Holders), and (ii) to obtain the withdrawal of any order suspending the effectiveness of a registration statement, or the lifting of any suspension of the qualification (or exemption from qualification) of the offer and transfer of any of the Registrable Securities in any jurisdiction, at the earliest possible moment; provided, however, that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions. (e) In the event of any underwritten or agented offering, enter into and perform the Company's obligations under an underwriting or agency agreement (including indemnification and contribution obligations of underwriters or agents), in usual and customary form, with the managing underwriter or underwriters of or agents for such offering. The Company shall also cooperate with the Majority Selling Holders and the managing underwriter for such offering in the marketing of the Warrant Stock, including making available the Company's officers, accountants, counsel, premises, books and records for such purpose, but the Company shall not be required to incur any material out-of-pocket expense pursuant to this sentence. (f) Promptly notify each Selling Holder of any stop order issued or threatened to be issued by the Commission in connection therewith (and take all reasonable actions required to prevent the entry of such stop order or to remove it if entered. -38- 42 (g) Make generally available to the Company's security holders copies of all periodic reports, proxy statements, and other information referred to in Section 9.9(a) and an earnings statement satisfying the provisions of Section 11(a) of the Securities Act no later than 90 days following the end of the 12-month period beginning with the first month of the Company's first fiscal quarter commencing after the effective date of each registration statement filed pursuant to this Section 9. (h) Make available for inspection by any Selling Holder, any underwriter participating in such offering and the representatives of such Selling Holder and underwriter (but not more than one firm of counsel to such Selling Holders), all financial and other information as shall be reasonably requested by them, and provide the Selling Holder, any underwriter participating in such offering and the representatives of such Selling Holder and underwriter the opportunity to discuss the business affairs of the Company with its principal executives and independent public accountants who have certified the audited financial statements included in such registration statement, in each case all as necessary to enable them to exercise their due diligence responsibility under the Securities Act; provided, however, that information that the Company determines, in good faith, to be confidential and which the Company advises such Person in writing, is confidential shall not be disclosed unless such Person signs a confidentiality agreement reasonably satisfactory to the Company or the related Selling Holder of Registrable Securities agrees to be responsible for such Person's breach of confidentiality on terms reasonably satisfactory to the Company. (i) Use the Company's best efforts to obtain a so-called "comfort letter" from its independent public accountants, and legal opinions of counsel to the Company, in customary form and covering such matters of the type customarily covered by such letters, and in a form that shall be reasonably satisfactory to the Majority Selling Holders. The Company shall furnish to each Selling Holder a signed counterpart of any such comfort letter or legal opinion. Delivery of any such opinion or comfort letter shall be subject to the recipient furnishing such written representations or acknowledgments as are customarily -39- 43 provided by selling shareholders who receive such comfort letters or opinions. (j) Provide and cause to be maintained a transfer agent and registrar for all Registrable Securities covered by such registration statement from and after a date not later than the effective date of such registration statement. (k) Use all reasonable efforts to cause the Registrable Securities covered by such registration statement (i) if the Common Stock is then listed on a securities exchange or included for quotation in a recognized trading market, to continue to be so listed or included for a reasonable period of time after the offering, and (ii) to be registered with or approved by such other United States or state governmental agencies or authorities as may be necessary by virtue of the business and operations of the Company to enable the Selling Holders of Registrable Securities to consummate the disposition of such Registrable Securities. (l) Use the Company's reasonable efforts to provide a CUSIP number for the Common Stock prior to the effective date of the first registration statement including Registrable Securities. (m) Take such other actions as are reasonably required in order to expedite or facilitate the disposition of Registrable Securities included in each such registration. 9.5. Selling Holders' Obligations. (a) It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Section 9 with respect to the Registrable Securities of any Selling Holder that such Selling Holder shall: (i) Furnish to the Company such information regarding such Selling Holder, the number of Registrable Securities owned by it, and the intended method of disposition of such securities as shall be required to effect the registration of such Selling Holder's Registrable Securities, and to cooperate with the Company in preparing such registration; and -40- 44 (ii) Agree to sell their Registrable Securities to the underwriters at the same price and on substantially the same terms and conditions as the Company or the other Persons on whose behalf the registration statement was being filed have agreed to sell their securities, and to execute the underwriting agreement agreed to by the Majority Selling Holders (in the case of a registration under Section 9.2) or the Company and the Majority Selling Holders (in the case of a registration under Section 9.3). (b) Each Selling Holder shall notify the Company of any sales of such Selling Holder's shares registered for sale pursuant to this Section 9; provided, however, it is understood that any failure so to notify the Company shall not be deemed a default hereunder or to subject any Selling Holder to any claim for damages or expenses whatsoever. 9.6. Expenses of Registration. Expenses incurred in connection with registrations under this Section 9 shall be allocated and paid as follows: (a) With respect to each Demand Registration (including any Shelf Registration), the Company shall bear and pay all reasonable expenses incurred in connection with any registration, filing, or qualification of Registrable Securities with respect to such Demand Registration for each Selling Holder, including all registration, filing and NASD fees, all fees and expenses of complying with securities or blue sky laws, all word processing, duplicating and printing expenses, messenger and delivery expenses, the reasonable fees and disbursements of counsel for the Company, and of the Company's independent public accountants, including the expenses of "cold comfort" letters required by or incident to such performance and compliance, and the reasonable fees and disbursements of one firm of counsel for the Selling Holders of Registrable Securities (the "Registration Expenses"), but excluding underwriting discounts and commissions relating to Registrable Securities (which shall be paid on a pro rata basis by the Selling Holders) provided, however, that the Company shall not be required to pay for any expenses of any registration proceeding begun pursuant to Section 9.2 if the registration is subsequently withdrawn at the request of the Majority Selling Holders (in which case all Selling Holders shall bear such expense), -41- 45 unless WS Holders whose Registrable Securities constitutes a majority of the Registrable Securities then outstanding agree that such withdrawn registration shall constitute the exercise of their one demand registration under Section 9.2 hereof. The counsel for the Selling Holders shall be selected by Demanding Holders owning a majority of the Registrable Securities owned by Demanding Holders to be included in a Demand Registration and, in the case of a Piggyback Registration, by Selling Holders owning a majority of the Registrable Securities to be included in such registration; provided that in the case of a Piggyback Registration, the Selling Holders shall use one firm of counsel to represent all such holders and shall endeavor in good faith, with any other holders of securities to be included in such registration, to select one firm of counsel to represent all such selling securities holders. (b) The Company shall bear and pay all Registration Expenses incurred in connection with any Piggyback Registrations pursuant to Section 9.3 for each Selling Holder, but excluding underwriting discounts and commissions relating to Registrable Securities (which shall be paid on a pro rata basis by the Selling Holders of Registrable Securities). (c) Any failure of the Company to pay any Registration Expenses as required by this Section 9.6 shall not relieve the Company of its obligations under this Section 9. 9.7. Indemnification; Contribution. If any Registrable Securities are included in a registration statement under this Section 9: (a) To the extent permitted by applicable law, the Company shall indemnify and hold harmless each Selling Holder, each Person, if any, who controls such Selling Holder within the meaning of the Securities Act, and each officer, director, partner, and employee of such Selling Holder and such controlling Person, against any and all losses, claims, damages, liabilities and expenses (joint or several), including attorneys' fees and disbursements and expenses of investigation, incurred by such party pursuant to any actual or threatened action, suit, proceeding or investigation, or to which any of the foregoing Persons may -42- 46 become subject under the Securities Act, the Exchange Act or other federal or state laws, insofar as such losses, claims, damages, liabilities and expenses arise out of or are based upon any of the following statements, omissions or violations pursuant to a final non-appealable order (collectively a "Violation"): (i) any untrue statement or alleged untrue statement of a material fact contained in such registration statement, including any preliminary prospectus or final prospectus contained therein, or any amendments or supplements thereto; (ii) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading; or (iii) any violation or alleged violation by the Company of the Securities Act, the Exchange Act, any applicable state securities law or any rule or regulation promulgated under the Securities Act, the Exchange Act or any applicable state securities law; provided, however, that the indemnification required by this Section 9.7(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or expense if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld), nor shall the Company be liable in any such case for any such loss, claim, damage, liability or expense to the extent that it is determined by a court of competent jurisdiction by a final non-appealable order to have solely arisen out of or be based upon a Violation which occurred in reliance upon and in conformity with written information furnished to the Company by the indemnified party expressly for use in connection with such registration; provided, further, that the indemnity agreement contained in this Section 9.7(a) shall not apply to any underwriter to the extent that any such loss is based on or arises out of an untrue statement or alleged untrue statement of a material fact, or an omission or alleged omission to state a material fact, contained in or omitted from any preliminary prospectus if the final prospectus shall correct such untrue statement or -43- 47 alleged untrue statement, or such omission or alleged omission, and a copy of the final prospectus has not been sent or given to such person at or prior to the confirmation of sale to such person if such underwriter was under an obligation to deliver such final prospectus and failed to do so. The Company shall also indemnify underwriters, selling brokers, dealer managers and similar securities industry professionals participating in the distribution, their officers, directors, agents and employees and each person who controls such persons (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) to the same extent as provided above with respect to the indemnification of the Selling Holders. (b) To the extent permitted by applicable law, each Selling Holder shall indemnify and hold harmless the Company, each of its directors, each of its officers and employees, each Person, if any, who controls the Company within the meaning of the Securities Act, any other Selling Holder, any controlling Person of any such other Selling Holder and each officer, director, partner, and employee of such other Selling Holder and such controlling Person, against any and all losses, claims, damages, liabilities and expenses (joint and several), including attorneys' fees and disbursements and expenses of investigation, incurred by such party pursuant to any actual or threatened action, suit, proceeding or investigation, or to which any of the foregoing Persons may otherwise become subject under the Securities Act, the Exchange Act or other federal or state laws, insofar as such losses, claims, damages, liabilities and expenses are determined by a court of competent jurisdiction by a final non-appealable order to have solely arisen out of or be based upon a Violation that occurred in reliance upon and in conformity with written information furnished by such Selling Holder expressly for use in connection with such registration; provided, however, that (x) the indemnification required by this Section 9.7(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or expense if settlement is effected without the consent of the relevant Selling Holder of Registrable Securities, which consent shall not be unreasonably withheld, and (y) in no event shall the amount of any indemnity under this Section 9.7(b) exceed the net -44- 48 proceeds from the applicable offering received by such Selling Holder. (c) Promptly after receipt by an indemnified party under this Section 9.7 of notice of the commencement of any action, suit, proceeding, investigation or threat thereof made in writing for which such indemnified party may make a claim under this Section 9.7, such indemnified party shall deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party shall have the right to retain its own counsel, with the fees and disbursements and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding. The failure to deliver written notice to the indemnifying party within a reasonable time following the commencement of any such action, if prejudicial to its ability to defend such action, shall relieve such indemnifying party of any liability to the indemnified party under this Section 9.7 but shall not relieve the indemnifying party of any liability that it may have to any indemnified party otherwise than pursuant to this Section 9.7. Any reasonable fees and expenses incurred by the indemnified party (including any fees and expenses incurred in connection with investigating or preparing to defend such action or proceeding) shall be paid to the indemnified party, as incurred, within thirty (30) days of written notice thereof to the indemnifying party (regardless of whether it is ultimately determined that an indemnified party is not entitled to indemnification hereunder). Any such indemnified party shall have the right to employ separate counsel in any such action, claim or proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be the expenses of such indemnified party unless (i) the indemnifying party has agreed to pay such fees and expenses or (ii) the indemnifying party shall have failed to promptly assume the -45- 49 defense of such action, claim or proceeding or (iii) the named parties to any such action, claim or proceeding (including any impleaded parties) include both such indemnified party and the indemnifying party, and such indemnified party shall have been advised by counsel that there may be one or more legal defenses available to it which are different from or in addition to those available to the indemnifying party and that the assertion of such defenses would create a conflict of interest such that counsel employed by the indemnifying party could not faithfully represent the indemnified party (in which case, if such indemnified party notifies the indemnifying party in writing that it elects to employ separate counsel at the expense of the indemnifying party, the indemnifying party shall not have the right to assume the defense of such action, claim or proceeding on behalf of such indemnified party, it being understood, however, that the indemnifying party shall not, in connection with any one such action, claim or proceeding or separate but substantially similar or related actions, claims or proceedings in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the reasonable fees and expenses of more than one separate firm of attorneys (together with appropriate local counsel) at any time for all such indemnified parties, unless in the reasonable judgment of such indemnified party a conflict of interest may exist between such indemnified party and any other of such indemnified parties with respect to such action, claim or proceeding, in which event the indemnifying party shall be obligated to pay the fees and expenses of such additional counsel or counsels). No indemnifying party shall be liable to an indemnified party for any settlement of any action, proceeding or claim without the written consent of the indemnifying party, which consent shall not be unreasonably withheld. (d) If the indemnification required by this Section 9.7 from the indemnifying party is unavailable to an indemnified party hereunder in respect of any losses, claims, damages, liabilities or expenses referred to in this Section 9.7: (i) The indemnifying party, in lieu of indemnifying such indemnified party, shall contribute -46- 50 to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities or expenses in such proportion as is appropriate to reflect the relative fault of the indemnifying party and indemnified parties in connection with the actions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative fault of such indemnifying party and indemnified parties shall be determined by reference to, among other things, whether any Violation has been committed by, or relates to information supplied by, such indemnifying party or indemnified parties, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such Violation. The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and expenses referred to above shall be deemed to include, subject to the limitations set forth in Section 9.7(a) and Section 9.7(b), any reasonable legal or other fees or expenses reasonably incurred by such party in connection with any investigation or proceeding. (ii) The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 9.7(d) were determined by pro rata allocation or by any other method of allocation which does not take into account the equitable considerations referred to in Section 9.7(d)(i) above. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. (e) If indemnification is available under this Section 9.7, the indemnifying parties shall indemnify each indemnified party to the full extent provided in this Section 9.7 without regard to the relative fault of such indemnifying party or indemnified party or any other equitable consideration referred to in Section 9.7(d) above. (f) The indemnification required by this Section 9.7 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and -47- 51 when bills are received or expense, loss, damage or liability is incurred. In the event that it shall be subsequently determined that the recipient of any such periodic payment shall not be entitled to indemnification hereunder, such recipient promptly shall repay such payments, together with interest thereon at the Agreed Rate from the date of original receipt to the date of repayment. (g) The obligations of the Company and the Selling Holders of Registrable Securities under this Section 9.7 shall survive the completion of any offering of Registrable Securities pursuant to a registration statement under this Section 9, and otherwise. 9.8. Holdback. Each WS Holder entitled pursuant to this Section 9 to have Registrable Securities included in a registration statement prepared pursuant to this Section 9, if so requested by the managing underwriter in connection with an offering of any Registrable Securities, shall not effect any public sale or distribution of shares of Common Stock, Convertible Securities or Stock Purchase Rights (excluding any sale pursuant to Rule 144 or Rule 144A under the Securities Act and any sale as part of such underwritten or agented registration), during the 5-day period prior to, and during the 45-day period beginning on, the date such registration statement is declared effective under the Securities Act by the Commission, provided that such WS Holder is timely notified of such effective date in writing by the Company or such managing underwriter. 9.9. Additional Covenants of the Company. The Company hereby agrees and covenants as follows: (a) The Company shall file as and when applicable, on a timely basis, all reports required to be filed by it under the Exchange Act. If the Company is not required to file reports pursuant to the Exchange Act, upon the request of any WS Holder, the Company shall make publicly available the information specified in subparagraph (c)(2) of Rule 144 of the Securities Act, and take such further action as may be reasonably required from time to time and as may be within the reasonable control of the Company, to enable the WS Holders to Transfer Warrants or Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by Rule 144 under the -48- 52 Securities Act or any similar rule or regulation hereafter adopted by the Commission. In addition, promptly upon the request of any WS Holder, the Company shall provide such WS Holder with such publicly available financial statements, reports and other information as may be required to permit such WS Holder to Transfer shares of Registrable Securities to Qualified Institutional Investors pursuant to Rule 144A of the Securities Act. (b) The Company shall not, and shall not permit its majority owned subsidiaries to, effect any public sale or distribution of any shares of Common Stock, Convertible Securities or Stock Purchase Rights during the 5 Business Days prior to, and during the 90-day period beginning on, the commencement of a public distribution of Registrable Securities pursuant to any registration statement prepared pursuant to this Section 9 (other than by the Company pursuant to such registration if the registration is pursuant to Section 9.3 or by the Company pursuant to any dividend reinvestment plan offered by it to its stockholders). The Company shall not effect any registration of its securities (other than on Form S-4, Form S-8, or any successor forms to such forms or pursuant to such other registration rights agreements as may be approved in writing by the Majority Selling Holders) or effect any public or private sale or distribution of any of its securities, including a sale pursuant to Regulation D under the Securities Act, whether on its own behalf or at the request of any holder or holders of such securities from the date of a request for a Demand Registration pursuant to Section 9.2 until 90 days following the effective date of such Demand Registration statement, unless the Company shall have previously notified in writing all Selling Holders of the Company's desire to do so, and the Majority Selling Holders or the managing underwriter, if any, shall have consented thereto in writing. (c) Any agreement entered into on or after August 31, 1997 pursuant to which the Company or any of its majority owned subsidiaries issues or agrees to issue any Common Stock (including, without limitation, any employee stock option, stock purchase agreement, merger agreement or other agreement) shall contain a provision whereby any holder receiving such Common Stock who will hold more than one -49- 53 percent (1%) of the amount of such Common Stock then outstanding shall agree not to effect any public sale or distribution of any such Common Stock during the periods described in the second sentence of Section 9.9(b), in each case including a sale pursuant to Rule 144 under the Securities Act (unless such Person is prevented by applicable statute or regulation from entering into such an agreement). (d) Subject to Section 13, the Company shall not, directly or indirectly, (x) enter into any merger, consolidation or reorganization in which the Company shall not be the surviving corporation or (y) Transfer or agree to Transfer all or substantially all the Company's assets, unless prior to such merger, consolidation, reorganization or asset Transfer, the surviving corporation or the Transferee, respectively, shall have agreed in writing to assume the obligations of the Company under this Agreement, and for that purpose references hereunder to "Registrable Securities" shall be deemed to include the securities which the WS Holders would be entitled to receive in exchange for Registrable Securities pursuant to any such merger, consolidation or reorganization. 10. LOSS OR MUTILATION Upon receipt by the Company from any Holder of evidence reasonably satisfactory to it of the ownership of and the loss, theft, destruction or mutilation of this Warrant and an indemnity reasonably satisfactory to it (it being understood that the written indemnification agreement of or affidavit of loss of Fleet National Bank shall be a sufficient indemnity) and, in case of mutilation, upon surrender and cancellation hereof, the Company will execute and deliver in lieu hereof a new Warrant of like tenor to such Holder; provided, however, in the case of mutilation, no indemnity shall be required if this Warrant in identifiable form is surrendered to the Company for cancellation. 11. OFFICE OF THE COMPANY -50- 54 As long as any of the Warrants remain outstanding, the Company shall maintain an office or agency, which may be the principal executive offices of the Company (the "Designated Office"), where the Warrants may be presented for exercise, registration of transfer, division or combination as provided in this Warrant. Such Designated Office shall initially be the office of the Company at Cedar Rapids, Iowa. The Company may from time to time change the Designated Office to another office of the Company or its agent within the United States by notice given to all registered holders of Warrants at least ten Business Days prior to the effective date of such change. 12. FINANCIAL AND BUSINESS INFORMATION Until the Expiration Date, the Company shall deliver to each Holder of Warrants or of Warrant Stock one copy of each of the following items: (i) promptly after filing thereof, copies of all regular and periodic reports, proxy statements (other than preliminary) and registration statements (other than registration statements on Forms S-3 (relating to debt securities) and S-8) which the Company may file with the Securities and Exchange Commission or any governmental agency substituted therefor. (ii) promptly upon their becoming available, copies of all financial statements, reports, notices and proxy statements sent or made available by the Company to the holders of any class of its securities generally or by any Subsidiary of the Company to the holders of any class of its securities generally; and (iii) with reasonable promptness, such other public information relating to the Company and its Subsidiaries as the Holder may, from time to time, reasonably request. -51- 55 13. REPURCHASE BY THE COMPANY OF WARRANTS The Company shall have the right (the "Call"), upon written notice (the "Call Notice") to the Holders of all outstanding Warrants given at any time on or after the date of the occurrence of the Triggering Event and before May 31, 1997, to repurchase on the date specified in the notice from each Holder of a Warrant all of such Warrant for an amount equal to the result (rounded to the nearest cent) obtained by multiplying One Dollar ($1.00) by a fraction, the numerator of which shall be the aggregate number of shares for which this Warrant may be exercised and the denominator of which shall be the aggregate number of shares for which all outstanding Series A Warrants may be exercised, and in all events not more than One Dollar ($1.00) for all Series A Warrants. On the date of any repurchase of this Warrant pursuant to this Section 13, the Holder shall assign to the Company such Warrant without any representation or warranty (except as to title and the absence of Liens), by the surrender of this Warrant at the Designated Office against payment of the repurchase price therefor. 14. MISCELLANEOUS 14.1. Nonwaiver. No course of dealing or any delay or failure to exercise any right hereunder on the part of the Company or the Holder shall operate as a waiver of such right or otherwise prejudice the rights, powers or remedies of such Person. 14.2. Notice Generally. Any notice, demand, request, consent, approval, declaration, delivery or communication hereunder to be made pursuant to the provisions of this Warrant shall be sufficiently given or made if in writing and either delivered in person with receipt acknowledged or sent by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: (a) if to any Holder of this Warrant or of Warrant Stock issued upon the exercise hereof, at its last known address appearing on the books of the Company maintained for such purpose; (b) if to the Company, at its Designated Office; -52- 56 or at such other address as may be substituted by notice given as herein provided. The giving of any notice required hereunder may be waived in writing by the party entitled to receive such notice. Every notice, demand, request, consent, approval, declaration, delivery or other communication hereunder shall be deemed to have been duly given or served on the date on which personally delivered, with receipt acknowledged, or three Business Days after the same shall have been deposited in the United States mail, or one Business Day after the same shall have been delivered to Federal Express or another overnight courier service. 14.3. Indemnification. If the Company fails to make, when due, any payments provided for in this Warrant, the Company shall pay to the Holder hereof (a) interest at the Agreed Rate on any amounts due and owing to such Holder from the date due until the date of payment and (b) such further amounts as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys' fees and expenses incurred by such Holder in collecting any amounts due hereunder. The Company shall indemnify, save and hold harmless the Holder hereof and the Holders of any Warrant Stock issued upon the exercise hereof from and against any and all liability, loss, cost, damage, reasonable attorneys' and accountants' fees and expenses, court costs and all other out-of-pocket expenses incurred in connection with or arising from a Company Default. This indemnification provision shall be in addition to the rights of such Holder or Holders to bring an action against the Company for breach of contract based on such Company Default. 14.4. Limitation of Liability. No provision hereof, in the absence of affirmative action by the Holder to purchase shares of Common Stock, and no enumeration herein of the rights or privileges of the Holder hereof, shall give rise to any liability of such Holder to pay the Exercise Price for any Warrant Stock other than pursuant to an exercise of this Warrant or any liability as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company. 14.5. Remedies. Each Holder of Warrants and/or Warrant Stock, in addition to being entitled to exercise its rights granted by law, including recovery of damages, shall be entitled to specific performance of its rights provided under this War- -53- 57 rant. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees, in an action for specific performance, to waive the defense that a remedy at law would be adequate. 14.6. Successors and Assigns. Subject to the provisions of Sections 3.1, 8.1 and 8.2, this Warrant and the rights evidenced hereby shall inure to the benefit of and be binding upon the successors of the Company and the permitted successors and assigns of the Holder hereof. The provisions of this Warrant are intended to be for the benefit of all Holders from time to time of this Warrant and, in the case of Section 9, all Holders of shares of Warrant Stock issued upon the exercise hereof (including transferees), and shall be enforceable by any such Holder. 14.7. Amendment. This Warrant and all other Warrants may be modified or amended or the provisions hereof waived with the written consent of the Company and the Majority Warrant Holders, provided that no such Warrant may be modified or amended to reduce the number of shares of Common Stock for which such Warrant is exercisable or to increase the price at which such shares may be purchased upon exercise of such Warrant (before giving effect to any adjustment as provided therein) without the written consent of the Holder thereof. 14.8. Severability. Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Warrant. 14.9. Headings. The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant. 14.10. GOVERNING LAW; JURISDICTION. IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS WARRANT AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF ILLINOIS APPLICABLE TO CONTRACTS MADE AND -54- 58 PERFORMED IN SUCH STATE, EXCEPT WITH RESPECT TO THE VALIDITY OF THIS WARRANT, THE ISSUANCE OF WARRANT STOCK UPON EXERCISE HEREOF AND THE RIGHTS AND DUTIES OF THE COMPANY WITH RESPECT TO REGISTRATION OF TRANSFER, WHICH SHALL BE GOVERNED BY THE LAWS OF DELAWARE. THE COMPANY HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED IN CHICAGO, ILLINOIS, SHALL HAVE, EXCEPT AS SET FORTH BELOW, EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THE COMPANY AND THE HOLDER OF THIS WARRANT PERTAINING TO THIS WARRANT OR TO ANY MATTER ARISING OUT OF OR RELATING TO THIS AGREEMENT, PROVIDED, THAT IT IS ACKNOWLEDGED THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF CHICAGO, ILLINOIS. -55- 59 IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed and its corporate seal to be impressed hereon and attested by its Secretary or an Assistant Secretary. NORAND CORPORATION By:_________________________ Name: Title: [SEAL] Attest: By:___________________________ Name: Title: -56- 60 ANNEX A SUBSCRIPTION FORM [To be executed only upon exercise of Warrant] The undersigned registered owner of this Warrant irrevocably exercises this Warrant for the purchase of ______ shares Common Stock of Norand Corporation and herewith makes payment therefor, all at the price and on the terms and conditions specified in this Warrant and requests that certificates for the shares of Common Stock hereby purchased (and any securities or other property issuable upon such exercise) be issued in the name of and delivered to _________________ whose address is ___________________________________________ and, if such shares of Common Stock shall not include all of the shares of Common Stock issuable as provided in this Warrant, that a new Warrant of like tenor and date for the balance of the shares of Common Stock issuable hereunder be delivered to the undersigned. _______________________________ (Name of Registered Owner) _______________________________ (Signature of Registered Owner) _______________________________ (Street Address) _______________________________ (City) (State) (Zip Code) NOTICE: The signature on this subscription must correspond with the name as written upon the face of the within Warrant in every particular, without alteration or enlargement or any change whatsoever. EX-4.(N)4 6 SERIES A WARRANT A-4 1 EXHIBIT 4.N.4 ================================================================= SERIES A WARRANT to Purchase Common Stock of NORAND CORPORATION ================================================================= Warrant No. A - 4 Original Issue Date: November 20, 1996 2 TABLE OF CONTENTS 1. DEFINITIONS 1 2. EXERCISE OF WARRANT 11 2.1. Manner of Exercise 11 2.2. Payment of Transfer Taxes 12 2.3. Fractional Shares 12 2.4. Continued Validity and Application 13 2.5. Limitation on Regulated Holder's Exercise 13 3. TRANSFER, DIVISION AND COMBINATION 14 3.1. Transfer 14 3.2. Division and Combination. 14 3.3. Expenses. 14 3.4. Maintenance of Books 14 4. ANTIDILUTION PROVISIONS 14 4.1. Stock Dividends, Subdivisions and Combinations 14 4.2. Issuance of Additional Shares of Common Stock 15 4.3. Issuances of Stock Purchase Rights and Convertible Securities 15 4.4. Adjustment of Number of Shares Purchasable. 17 4.5. Reorganization, Reclassification, Merger, Consolidation or Disposition of Assets 17 4.6. Determination of Consideration. 18 4.7. Other Dilutive Events 20 4.8. Other Provisions Applicable to Adjustments Under this Section 21 5. NO IMPAIRMENT 22 6. RESERVATION AND AUTHORIZATION OF COMMON STOCK 23 7. NOTICE OF CORPORATE ACTIONS; TAKING OF RECORD; TRANSFER BOOKS 23 7.1. Notices of Corporate Actions. 23 7.2 Closing of Transfer Books. 23 8. TRANSFER RESTRICTIONS 24 8.1. Restrictions on Transfers 24 8.2. Restrictive Legends 24 -i- 3 8.3. Termination of Securities Law Restrictions 25 9. REGISTRATION RIGHTS 26 9.1. Certain Definitions 26 9.2. Demand Registration 27 9.3. Piggyback Registration 29 9.4. Registration Procedures. 30 9.5. Selling Holders' Obligations. 34 9.6. Expenses of Registration. 34 9.7. Indemnification; Contribution. 35 9.8. Holdback. 40 9.9. Additional Covenants of the Company 40 10.LOSS OR MUTILATION 42 11.OFFICE OF THE COMPANY 42 12.FINANCIAL AND BUSINESS INFORMATION 43 13.REPURCHASE BY THE COMPANY OF WARRANTS 43 14. MISCELLANEOUS 43 14.1. Nonwaiver. 43 14.2. Notice Generally 44 14.3. Indemnification 44 14.4. Limitation of Liability. 44 14.5. Remedies 45 14.6. Successors and Assigns 45 14.7. Amendment. 45 14.8. Severability 45 14.9. Headings. 45 14.10. GOVERNING LAW; JURISDICTION. 45 ANNEX A SUBSCRIPTION FORM 48 ANNEX B ASSIGNMENT FORM 49 SCHEDULE A RESERVED SHARES OF COMMON STOCK SCHEDULE B UNDERWRITERS AND AGENTS -ii- 4 NEITHER THE WARRANTS REPRESENTED BY THIS CERTIFICATE NOR ANY OF THE SECURITIES ISSUABLE UPON EXERCISE THEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAW. NO TRANSFER OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE OR OF THE SECURITIES ISSUABLE UPON EXERCISE THEREOF SHALL BE VALID OR EFFECTIVE UNLESS (A) SUCH TRANSFER IS MADE PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR (B) THE HOLDER OF THE SECURITIES PROPOSED TO BE TRANSFERRED SHALL HAVE DELIVERED TO THE COMPANY EITHER A NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION OR AN OPINION OF COUNSEL EXPERIENCED IN SECURITIES MATTERS AND REASONABLY ACCEPTABLE TO THE COMPANY TO THE EFFECT THAT SUCH PROPOSED TRANSFER IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE ACT OR (C) SUCH TRANSFER IS PURSUANT TO RULE 144 OR RULE 144A UNDER THE ACT AND SUCH HOLDER(S) SHALL HAVE DELIVERED TO THE COMPANY A CERTIFICATE SETTING FORTH THE BASIS FOR APPLYING SUCH RULE TO THE PROPOSED TRANSFER. Warrant No. A - 4 SERIES A WARRANT NORAND CORPORATION THIS IS TO CERTIFY THAT THE DAIWA BANK, LIMITED, or registered assigns, is entitled, at any time after May 31, 1997 and prior to the Expiration Date (such term, and certain other capitalized terms used herein being hereinafter defined), to purchase from NORAND CORPORATION, a Delaware corporation (the "Company"), Thirty-eight Thousand Two Hundred Fifteen (38,215) shares of the Common Stock of the Company (subject to adjustment as provided herein), at a purchase price of $21.15 per share (the initial "Exercise Price", subject to adjustment as provided herein), all on the terms and conditions and pursuant to the provisions hereinafter set forth. 5 1. DEFINITIONS As used in this Warrant, the following terms have the respective meanings set forth below: "Affiliate" of any Person means a Person (a) which directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with such Person, (b) which beneficially owns or holds more than ten percent of the outstanding shares of any class of voting stock of such Person and has the power to vote such shares or (c) more than ten percent of the outstanding shares of any class of voting stock (or, in the case of a Person which is not a corporation, more than ten percent of the equity interest) of which is beneficially owned or held by such Person and such Person has the power to vote such shares or equity interest. The term "control" as used with respect to any Person means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise. "After-Tax Basis", when referring to a payment that is required hereunder (the "target amount"), shall mean a total payment (the "total amount") that, after deduction of all federal, state and local taxes that are required to be paid by the recipient in respect of the receipt or accrual of such total amount, is equal to the target amount. "Agreed Rate" shall mean a rate per annum equal to the corporate base rate of interest announced by The First National Bank of Chicago from time to time, changing when and as said corporate base rate changes. "Appraised Value" per share of Common Stock as of a date specified herein shall mean the value of such share as of such date as determined by an investment bank of nationally recognized standing selected by the Majority Warrant Holders from Schedule B (or any successor of any such entity), it being understood that the Majority Warrant Holders shall use commercially reasonable efforts to select one of the first three listed entities subject to arriving at reasonably acceptable terms and conditions for the -2- 6 appraisal. The Company shall pay the costs and fees of such investment bank, and the decision of the investment bank making such determination of Appraised Value shall be final and binding on the Company and all affected holders of Warrants or Warrant Stock. Such Appraised Value shall be determined as a pro rata portion of the value of the Company taken as a whole, based on the higher of (A) the value derived from a hypothetical sale of the entire Company as a going concern by a willing seller to a willing buyer (neither acting under any compulsion) and (B) the liquidation value of the entire Company. No discount shall be applied on account of (i) any Warrants or Warrant Stock representing a minority interest, (ii) any lack of liquidity of the Common Stock or the Warrants, (iii) the fact that the Warrants or Warrant Stock may constitute "restricted securities" for securities law purposes or (iv) the existence of any call option. "Bank Holding Company Act" shall mean the Bank Holding Company Act of 1956, as amended. "Business Day" shall mean any day that is not a Saturday or Sunday or a day on which banks are required or permitted to be closed in the State of Illinois. "Call" shall have the meaning set forth in Section 13 hereof. "Call Notice" shall have the meaning set forth in Section 13 hereof. "Commission" shall mean the Securities and Exchange Commission or any other federal agency then administering the Securities Act and other federal securities laws. "Common Stock" shall mean (except where the context otherwise indicates) the Common Stock of the Company, par value $.01 per share, as constituted on the Original Issue Date, and any capital stock into which such Common Stock may thereafter be changed, and shall also include (i) capital stock of the Company of any other class (regardless of how denominated) issued to the holders of shares of any Common Stock upon any reclassification thereof which is also not preferred as to dividends or liquidation over any other -3- 7 class of stock of the Company and which is not subject to redemption and (ii) shares of common stock of any successor or acquiring corporation (as defined in Section 4.5 hereof) received by or distributed to the holders of Common Stock of the Company in the circumstances contemplated by Section 4.5 hereof. "Company" means Norand Corporation, a Delaware corporation, and any successor corporation. "Company Default" means (a) the breach of any warranty or the inaccuracy in any material respect at the time when made of any representation made by the Company herein or (b) the failure by the Company to comply in any material respect with any covenant of the Company contained herein. "Continuously Effective", with respect to a specified registration statement, shall mean that it shall not cease to be effective and available for Transfers of Warrant Stock thereunder for the longer of either (i) any ten consecutive Business Days, or (ii) an aggregate of fifteen Business Days during the period specified in the relevant provision of Section 9 hereof. "Convertible Securities" shall mean evidences of indebtedness, shares of stock or other securities that are convertible into or exchangeable for, with or without payment of additional consideration in cash or property, shares of Common Stock, either immediately or upon the occurrence of a specified date or a specified event. "Credit Agreement" means the Second Amended and Restated Credit Agreement dated as of January 25, 1996, as thereafter from time to time amended, supplemented, restated or modified, among the Company, the Lenders party thereto and The First National Bank of Chicago, as agent. "Current Market Price" shall mean as of any specified date the average of the daily market prices of the Common Stock of the Company for the shorter of (x) the twenty consecutive Business Days immediately preceding such date or (y) the period commencing on the Business Day next following the first public announcement of any event giving rise to an adjustment of the Exercise Price pursuant to Section 4 below -4- 8 and ending on such date. The "daily market price" for each such Business Day shall be: (i) if the Common Stock is then listed on a national securities exchange or is listed on NASDAQ and is designated as a National Market System security, the last sale price, regular way, on such day on the principal stock exchange or market system on which such Common Stock is then listed or admitted to trading, or, if no such sale takes place on such day, the average of the closing bid and asked prices for the Common Stock on such day as reported on such stock exchange or market system or (ii) if the Common Stock is not then listed or admitted to trading on any national securities exchange or designated as a National Market System security on NASDAQ but is traded over-the-counter, the average of the closing bid and asked prices for the Common Stock as reported on NASDAQ or the Electronic Bulletin Board or in the National Daily Quotation Sheets, as applicable. "Demand Registration" shall have the meaning set forth in Section 9.2(a) hereof. "Demanding Holders" shall have the meaning set forth in Section 9.2(a) hereof. "Designated Office" shall have the meaning set forth in Section 11 hereof. "Equity" shall mean equity capital (not including the equity capital attributable to the Settlement Stock, and any mandatory redemption terms of which equity capital are acceptable to the Majority Warrant Holders) raised by and/or contributed to the Company subsequent to the Original Issue Date or new Indebtedness (as defined in the Credit Agreement) subordinated to the Obligations (as defined in the Credit Agreement), provided the terms of such Indebtedness (including, without limitation, maturity, amortization, covenants, defaults, remedies and subordination provisions) are acceptable to the Majority Warrant Holders. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect from time to time. -5- 9 "Exercise Notice" shall have the meaning set forth in Section 2.1 hereof. "Exercise Period" shall mean the period during which this Warrant is exercisable pursuant to Section 2.1 hereof. "Exercise Price" shall mean, in respect of a share of Common Stock at any date herein specified, the initial Exercise Price set forth in the preamble of this Warrant as adjusted from time to time pursuant to Section 4 hereof. "Expiration Date" shall mean August 31, 2002, unless extended under the circumstances contemplated by Section 9.2(d) hereof. "Fair Value" per share of Common Stock as of any specified date shall mean (A) if the Common Stock is publicly traded on such date, the Current Market Price per share or (B) if the Common Stock is not publicly traded on such date, (1) the fair market value per share of Common Stock as determined in good faith by the Board of Directors of the Company and set forth in a written notice to each Holder or (2) if the Majority Warrant Holders object in writing to such price as determined by the Board of Directors within thirty days after receiving notice of same, the Appraised Value per share as of such date. "Fully Diluted Outstanding" shall mean, when used with reference to Common Stock, at any date as of which the number of shares thereof is to be determined, all shares of Common Stock Outstanding on such date and all shares of Common Stock issuable in respect of (x) the Warrants outstanding on such date, (y) any Convertible Securities outstanding on such date and (z) any other Stock Purchase Rights outstanding on such date, in each case regardless of whether or not the conversion, exchange, subscription or purchase rights associated with such Convertible Securities or Stock Purchase Rights are presently exercisable. "GAAP" shall mean generally accepted accounting principles in the United States of America as from time to time in effect. -6- 10 "Glass-Steagall Act" shall mean Section 24 (Seventh), Section 78, Section 377 and Section 378 of Title 12 (12 U.S.C. Section Section 24 (Seventh) 78, 377, 378), or any similar federal legislation. "Holder" shall mean (a) with respect to this Warrant, the Person in whose name the Warrant set forth herein is registered on the books of the Company maintained for such purpose and (b) with respect to any other Warrant or shares of Warrant Stock, the Person in whose name such Warrant or Warrant Stock is registered on the books of the Company maintained for such purpose. "Insolvency Event" shall mean any proceeding being instituted by or against the Company seeking a declaration or order for relief, or entailing a finding, that the Company is insolvent or bankrupt, or seeking reorganization, liquidation, dissolution, winding-up, charter revocation or other similar relief with respect to the Company or any of its properties, assets or debts, or seeking the appointment of a receiver, trustee, custodian, liquidator, sequestrator or similar official for the Company or any of its properties or assets, or the Company becoming insolvent or bankrupt or generally unable to pay its debts as they become due, or the Company voluntarily suspending its business or making a general assignment for the benefit of creditors; provided that an Insolvency Event shall not be deemed to have occurred on account of any such proceeding which is involuntary on the part of the Company unless same shall not have been dismissed or stayed within 60 days. "Lien" shall mean any mortgage or deed of trust, pledge, hypothecation, assignment, deposit arrangement, lien, charge, claim, security interest, easement or encumbrance, or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, any lease or title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, and the filing of, or agreement to give, any financing statement perfecting a security interest under the Uniform Commercial Code or comparable law of any jurisdiction). -7- 11 "Majority Warrant Holders", with respect to a given determination, shall mean the Holders of Warrants and/or Warrant Stock representing at least seventy-six percent (76%) of all Warrants and/or Warrant Stock (with any such Warrants being deemed to represent, for the purposes of such calculation, the shares of Warrant Stock then issuable upon exercise thereof) directly affected by such determination. "Majority Selling Holders" shall mean those Selling Holders whose Warrants and/or Warrant Stock included in a registration under Section 9 hereof represents a majority of the Warrants and/or Warrant Stock (with any such Warrants being deemed to represent, for the purposes of such calculation, the shares of Warrant Stock then issuable upon exercise thereof) included therein by all Selling Holders. "NASD" shall mean the National Association of Securities Dealers, Inc., or any successor corporation thereto. "NASDAQ" shall mean the NASDAQ quotation system, or any successor reporting system. "Notes" shall mean any of the promissory notes issued by the Company under the Credit Agreement. "Opinion of Counsel" means a written opinion of counsel experienced in Securities Act or bank regulatory matters, as the case may be, chosen by the Holder of this Warrant or Warrant Stock issued upon the exercise hereof and reasonably acceptable to the Company. "Original Issue Date" shall mean the date on which the Original Warrants were issued, as set forth on the cover page of this Warrant. "Original Warrants" shall mean the Warrants originally issued by the Company on the Original Issue Date to each of The First National Bank of Chicago, Fleet Bank of Massachusetts, N.A., The Daiwa Bank, Limited, Norwest Bank Iowa, National Association and Caisse Nationale de Credit Agricole. "Other Property" shall have the meaning set forth in Section 4.5 hereof. -8- 12 "Outstanding" shall mean, when used with reference to Common Stock, at any date as of which the number of shares thereof is to be determined, all issued shares of Common Stock, except shares then owned or held by or for the account of the Company or any Subsidiary thereof, and shall include all shares issuable in respect of outstanding scrip or any certificates representing fractional interests in shares of Common Stock. "Outstanding", when used with respect to Warrant Stock for the purposes of Section 9 hereof shall have the meaning set forth in Section 9.1(d) hereof. "Person" shall mean any individual, sole proprietorship, partnership, limited liability company, joint venture, trust, incorporated organization, association, corporation, institution, public benefit corporation, entity or government (whether federal, state, county, city, municipal or otherwise, including, without limitation, any instrumentality, division, agency, body or department thereof). "Piggyback Registration" shall have the meaning set forth in Section 9.3(a) hereof. "Register", "registered" and "registration" shall refer to a registration effected by preparing and filing a registration statement or similar document in compliance with the Securities Act, and the declaration or ordering by the Commission of effectiveness of such registration statement or document. "Registration Expenses" shall have the meaning set forth in Section 9.6(a) hereof. "Restricted Common Stock" shall mean shares of Common Stock which are, or which upon their issuance on the exercise of this Warrant would be, evidenced by a certificate bearing the restrictive legend set forth in Section 8.2(a) hereof. "Securities Act" shall mean the Securities Act of 1933, as amended, or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. -9- 13 "Selling Holders" shall mean, with respect to a specified registration under Section 9 hereof, WS Holders whose Registrable Securities are included in such registration. "Series A Warrants" shall mean all of the Series A Warrants to Purchase Common Stock of Norand Corporation, issued concurrently with, and having the same terms (other than the number of shares purchasable upon the exercise thereof) as, this Warrant. "Series B Warrants" shall mean all of the Series B Warrants to Purchase Common Stock of Norand Corporation issued concurrently with this Warrant. "Settlement Stock" shall mean the shares of Common Stock contemplated to be issued in settlement of the pending shareholders' claims against the Company with respect to the litigation styled In re Norand Corporation Securities Litigation, Master File No. C95-323, pending in the United States District Court for the Northern District of Iowa, Cedar Rapids Division. "Share Withholding Option" has the meaning set forth in Section 2.1(c) hereof. "Shelf Registration" shall have the meaning set forth in Section 9.2(a) hereof. "Stock Purchase Rights" shall mean any options, warrants or other securities or rights to subscribe to or exercisable for the purchase of shares of Common Stock or Convertible Securities, whether or not immediately exercisable, other than the options, warrants or other rights described in Schedule A hereto. "Subsequent Issuance" shall mean any sale or issuance by the Company of Common Stock, Convertible Securities or Stock Purchase Rights after the Original Issue Date other than: (i) Any issuance of Warrant Stock upon exercise of the Warrants and any issuance of Common Stock, Convertible Securities or Stock Purchase Rights (and -10- 14 any issuance of Common Stock pursuant to the conversion, exchange or exercise of any such Convertible Securities or Stock Purchase Rights) deemed to have been issued as of the Original Issue Date pursuant to the definition of Fully Diluted Outstanding. (ii) Any issuance of Common Stock pursuant to the exercise of the options and warrants described in Schedule A hereto, provided, however, that the exercise price of any such option or warrant (other than warrants granted to Jay Alix and Associates and to Donald W. Rowley for up to the respective number of shares set forth on Schedule A) granted or issued after the Original Issue Date shall not be less than the "daily market price" (as that term is defined in the definition of Current Market Price) of the Common Stock on the date of grant or issue of the option or warrant. (iii) The issuance of the Settlement Stock. (iv) The issuance of Common Stock or Convertible Securities directly related to the Company's receipt of Equity if, and only if, the aggregate Equity actually received by the Company between the Original Issue Date and August 31, 1997 equals or exceeds $20 million (otherwise, after August 31, 1997, all such issuances, both prior to and after August 31, 1996, shall be considered a Subsequent Issuance for purposes of Section 4 hereof). (v) Any other issuance of Common Stock, Convertible Securities or Stock Purchase Rights with respect to which the Majority Warrant Holders shall have waived application of the provisions of Section 4 below. "Subsidiary" means any corporation or association (a) more than 50% (by number of votes) of the voting stock of which is at the time owned by the Company or by one or more Subsidiaries or by the Company and one or more Subsidiaries, or any other business entity in which the Company or one or more Subsidiaries or the Company and one or more Subsidiaries own more than a 50% interest either in the -11- 15 profits or capital of such business entity or (b) whose net earnings, or portions thereof, are consolidated with the net earnings of the Company and are recorded on the books of the Company for financial reporting purposes in accordance with GAAP. "Transfer" shall mean any disposition of any Warrant or Warrant Stock or of any interest in either thereof, which would constitute a "sale" thereof within the meaning of the Securities Act. "Triggering Event" shall mean the repayment in full of all indebtedness under the Credit Agreement. "Violation" has the meaning set forth in Section 9.7(a) hereof. "Warrant Price" shall mean an amount equal to (i) the number of shares of Common Stock being purchased upon exercise of this Warrant pursuant to Section 2.1 hereof, multiplied by (ii) the Exercise Price as of the date of such exercise. "Warrants" shall mean the Original Warrants and all warrants issued upon transfer, division or combination of, or in substitution for, such Original Warrants or any other such Warrant. All Warrants shall at all times be identical as to terms and conditions and date, except as to the number of shares of Common Stock for which they may be exercised. "Warrant Stock" generally shall mean the shares of Common Stock issued, issuable or both (as the context may require) upon the exercise of Warrants until such time as such shares of Common Stock have either been (i) Transferred in a public offering pursuant to a registration statement filed under the Securities Act or (ii) Transferred in a transaction exempt from the registration and prospectus delivery requirements of the Securities Act under Section 4(1) thereof with all transfer restrictions and restrictive legends with respect to such Common Stock being removed in connection with such transaction. "Warrant Stock", for the purposes of Section 9 hereof, shall have the meaning set forth in Section 9.1(b) hereof. -12- 16 "WS Holder" shall have the meaning set forth in Section 9.1(a) hereof. 2. EXERCISE OF WARRANT 2.1. Manner of Exercise. (a) From and after May 31, 1997 and until 5:00 P.M., Chicago time, on the Expiration Date, the Holder of this Warrant may from time to time exercise this Warrant, on any Business Day, for all or any part of the number of shares of Common Stock purchasable hereunder (as determined pursuant to Section 2.2 below). In order to exercise this Warrant, in whole or in part, the Holder shall (i) deliver to the Company at the Designated Office a written notice of the Holder's election to exercise this Warrant (an "Exercise Notice"), which Exercise Notice shall be irrevocable and specify the number of shares of Common Stock to be purchased, together with this Warrant and (ii) pay to the Company the Warrant Price (the date on which both such delivery and payment shall have first taken place being hereinafter sometimes referred to as the "Exercise Date"). Such Exercise Notice shall be in the form of the subscription form appearing at the end of this Warrant as Annex A, duly executed by the Holder or its duly authorized agent or attorney. (b) Upon receipt of such Exercise Notice, Warrant and payment, the Company shall, as promptly as practicable, and in any event within five Business Days thereafter, execute (or cause to be executed) and deliver (or cause to be delivered) to the Holder a certificate or certificates representing the aggregate number of full shares of Common Stock issuable upon such exercise, together with cash in lieu of any fraction of a share, as hereafter provided. The stock certificate or certificates so delivered shall be, to the extent possible, in such denomination or denominations as the exercising Holder shall reasonably request in the Exercise Notice and shall be registered in the name of the Holder or such other name as shall be designated in the Exercise Notice. This Warrant shall be deemed to have been exercised and such certificate or certificates shall be deemed to have been issued, and the Holder or any other Person so designated to be named therein shall be deemed to have become a holder of record of such shares for all purposes, as of the Exercise Date. -13- 17 (c) Payment of the Warrant Price shall be made at the option of the Holder by one or more of the following methods: (i) by delivery of a certified or official bank check in the amount of such Warrant Price, (ii) by instructing the Company to withhold a number of shares of Warrant Stock then issuable upon exercise of this Warrant with an aggregate Current Market Price equal to such Warrant Price (the "Share Withholding Option"), (iii) by surrendering to the Company shares of Common Stock previously acquired by the Holder with an aggregate Current Market Price equal to such Warrant Price or(iv) by delivery of a Note, duly endorsed by or accompanied by appropriate instruments of transfer duly executed by the Holder or by the Holder's attorney duly authorized in writing. In the event of any withholding of Warrant Stock or surrender of Common Stock pursuant to clause (ii) or (iii) above where the number of shares whose Current Market Price is equal to the Warrant Price is not a whole number, the number of shares withheld by or surrendered to the Company shall be rounded up to the nearest whole share and the Company shall make a cash payment to the Holder based on the incremental fraction of a share being so withheld by or surrendered to the Company in an amount determined in accordance with Section 2.3 hereof. For the purpose of making payment of the Warrant Price, any Note surrendered to the Company shall be deemed to have a value equal to 100% of the principal amount thereof plus any interest accrued but unpaid thereon. If the Holder delivers a Note with a deemed value that exceeds the Warrant Price, the Company shall reissue to the Holder a new Note identical in all respects to the surrendered Note except that the principal amount of such new Note shall be equal to the principal amount that, together with any interest accrued but unpaid thereon, is equal to the deemed value of the surrendered Note less the Warrant Price. (d) If this Warrant shall have been exercised in part, the Company shall, at the time of delivery of the certificate or certificates representing the shares of Common Stock being issued, deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the unpurchased shares of Common Stock called for by this Warrant. Such new Warrant shall in all other respects be identical with this Warrant. 2.2. Payment of Transfer Taxes. All shares of Common Stock issuable upon the exercise of this Warrant pursuant to the terms hereof shall be validly issued, fully paid and nonassess- -14- 18 able, issued without violation of any preemptive rights and free and clear of all Liens (other than any created by actions of the Holder). The Company shall pay all expenses in connection with, and all taxes and other governmental charges that may be imposed with respect to, the issue or delivery thereof, unless such tax or charge is imposed by law upon the Holder, in which case such taxes or charges shall be paid by the Holder and the Company shall reimburse the Holder therefor on an After-Tax Basis. 2.3. Fractional Shares. The Company shall not be required to issue a fractional share of Common Stock upon exercise of any Warrant. As to any fraction of a share that the Holder of one or more Warrants, the rights under which are exercised in the same transaction, would otherwise be entitled to purchase upon such exercise, the Company shall pay a cash adjustment in respect of such final fraction in an amount equal to the same fraction of the Current Market Price of one share of Common Stock on the Exercise Date, if the Common Stock is then publicly traded. 2.4. Continued Validity and Application. (a) A Holder of shares of Warrant Stock issued upon the exercise of this Warrant, in whole or in part, including any transferee of such shares (other than a transferee in whose hands such shares no longer constitute Warrant Stock as defined herein), shall continue, with respect to such shares, to be entitled to all rights and to be subject to all obligations that are applicable to such Holder by the terms of this Warrant under Section 9 hereof. The Company shall, at the time of any exercise of this Warrant or any transfer of Warrant Stock, upon the request of the Holder of the shares of Warrant Stock issued in connection with such exercise or transfer, acknowledge in writing, in a form reasonably satisfactory to such Holder, its continuing obligation to afford to such Holder such rights referred to in this Section 2.4; provided, however, that if such Holder shall fail to make any such request, such failure shall not affect the continuing obligation of the Company to afford to such Holder all such rights. -15- 19 2.5. Limitation on Regulated Holder's Exercise. Notwithstanding anything in this Warrant to the contrary, the Holder of this Warrant, if subject to the Bank Holding Company Act or any provision of the Glass-Steagall Act, may exercise this Warrant only if the Notice of Exercise is accompanied by an Opinion of Counsel of such Holder to the effect that, as of the date of delivery of such opinion, no federal or state regulatory clearances are required for such Holder to exercise this Warrant or, in the event any such federal or state regulatory clearances are required prior to the exercise of this Warrant, to the effect that all such clearances have been obtained or, if not then obtained, that no statute or regulation or regulatory policy or guidelines known to such counsel would by their terms preclude the obtaining of such clearances or make it unlikely that such clearances would be obtained or make it likely that such clearances would, if obtained, contain material conditions adverse to such Holder. In the event that federal or state regulatory clearances are required prior to the exercise of this Warrant by the Holder hereof, the Company shall reasonably cooperate with such Holder in providing such information to any regulatory agency as such agency may reasonably require. In the event any such regulatory clearance is withheld or denied, such Holder may continue to hold this Warrant until its expiration or may sell or otherwise transfer this Warrant in accordance with the terms hereof. 3. TRANSFER, DIVISION AND COMBINATION 3.1. Transfer. Subject to compliance with Section 8 hereof, each transfer of this Warrant and all rights hereunder, in whole or in part, shall be registered on the books of the Company to be maintained for such purpose, upon surrender of this Warrant at the Designated Office, together with a written assignment of this Warrant in the form of Annex B hereto duly executed by the Holder or its agent or attorney. Upon such surrender and delivery, the Company shall, subject to Section 8, execute and deliver a new Warrant or Warrants in the name of the assignee or assignees and in the denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned and this Warrant shall promptly be canceled. A Warrant, if properly assigned in compliance with Section 8, may be exercised by the new Holder for the purchase of shares of Common Stock without having a new Warrant issued. -16- 20 3.2. Division and Combination. Subject to compliance with the applicable provisions of this Warrant, this Warrant may be divided or combined with other Warrants upon presentation hereof at the Designated Office, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney. Subject to compliance with the applicable provisions of this Warrant as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. 3.3. Expenses. The Company shall prepare, issue and deliver at its own expense any new Warrant or Warrants required to be issued under this Section 3. 3.4. Maintenance of Books. The Company agrees to maintain, at the Designated Office, books for the registration and transfer of the Warrants. 4. ANTIDILUTION PROVISIONS The number of shares of Common Stock for which this Warrant is exercisable and the Exercise Price shall be subject to adjustment from time to time as set forth in this Section 4. 4.1. Stock Dividends, Subdivisions and Combinations. If at any time the Company shall: (i) take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend payable in, or other distribution of, additional shares of Common Stock, (ii) subdivide its outstanding shares of Common Stock into a larger number of shares of such Common Stock, or (iii) combine its outstanding shares of Common Stock into a smaller number of shares of such Common Stock, then the Exercise Price shall be adjusted to equal the product of the Exercise Price in effect immediately prior to such event multiplied by a fraction the numerator of which is equal to the -17- 21 number of shares of Common Stock Outstanding immediately prior to the adjustment and the denominator of which is equal to the number of shares of Common Stock Outstanding immediately after such adjustment. 4.2. Issuance of Additional Shares of Common Stock. (a) If at any time the Company shall issue or sell any shares of Common Stock in a Subsequent Issuance for a consideration per share that is less than the Exercise Price in effect immediately prior to such issuance or sale, then, forthwith upon such issuance or sale, the Exercise Price shall be reduced to a price calculated by dividing (1) an amount equal to the sum of (x) the number of shares of Common Stock Outstanding immediately prior to such Subsequent Issuance multiplied by the then existing Exercise Price, plus (y) the aggregate consideration (determined in accordance with the provisions of Section 4.6 hereof), if any, received by the Company in connection with such Subsequent Issuance, by (2) the total number of shares of Common Stock Outstanding immediately after such Subsequent Issuance. (b) The provisions of this Section 4.2 shall not apply to (i) any issuance of Common Stock for which an adjustment is provided for under Section 4.1 or (ii) any issuance or sale of Common Stock pursuant to the exercise of any Stock Purchase Rights or Convertible Securities to the extent that an adjustment shall have been previously made hereunder in connection with the issuance of such Stock Purchase Rights or Convertible Securities pursuant to the provisions of Section 4.3 hereof. 4.3. Issuances of Stock Purchase Rights and Convertible Securities. (a) In the event that the Company shall at any time issue, sell or grant any Stock Purchase Rights to any Person in a Subsequent Issuance, then, for the purpose of Section 4.2 above, the Company shall be deemed to have issued at that time a number of shares of Common Stock equal to the maximum number of shares of Common Stock (without giving effect to any antidilution provisions in such Stock Purchase Rights) that are or may become issuable upon exercise of such Stock Purchase Rights (or upon exercise of any Convertible Securities issuable upon exercise of such Stock Purchase Rights) for a consideration per share equal to (i) the aggregate consideration per share (determined in accordance with the provisions of Section 4.6 hereof) received by the Company in connection with the issuance, sale or grant of such Stock Purchase Rights plus (ii) the minimum -18- 22 amount of such consideration per share receivable by the Company in connection with the exercise of such Stock Purchase Rights (and the exercise of any Convertible Securities issuable upon exercise of such Stock Purchase Rights). (b) In the event that the Company shall at any time issue or sell any Convertible Securities to any Person in a Subsequent Issuance, then, for the purposes of Section 4.2 above, the Company shall be deemed to have issued at that time a number of shares of Common Stock equal to the maximum number of shares of Common Stock that are or may become issuable upon the exercise of the conversion or exchange rights associated with such Convertible Securities for a consideration per share equal to (i) the aggregate consideration per share (determined in accordance with the provisions of Section 4.6 hereof) received by the Company in connection with the issuance or sale of such Convertible Securities plus (ii) the minimum amount of such consideration per share receivable by the Company in connection with the exercise of such conversion or exchange rights. (c) If, at any time after any adjustment of the Exercise Price shall have been made hereunder as the result of any issuance, sale or grant of any Stock Purchase Rights or Convertible Securities, the maximum number of shares issuable upon exercise of such Stock Purchase Rights or of the rights of conversion or exchange associated with such Convertible Securities shall increase, or the minimum amount of consideration per share receivable in connection with such exercise shall decrease, whether by operation of any antidilution rights pertaining to such Stock Purchase Rights or Convertible Securities, by agreement of the parties or otherwise, the Exercise Price then in effect shall first be readjusted to eliminate the effects of the original issuance, sale or grant of such Stock Purchase Rights or Convertible Securities on such Exercise Price and then readjusted as if such Stock Purchase Rights or Convertible Securities had been issued on the effective date of such increase in number of shares or decrease in consideration, but only if the effect of such two-step readjustment is to reduce the Exercise Price below the Exercise Price in effect immediately prior to such increase or decrease. (d) If, at any time after any adjustment of the Exercise Price shall have been made hereunder as the result of any issuance, sale or grant of any Stock Purchase Rights or -19- 23 Convertible Securities, any of such Stock Purchase Rights or the rights of conversion or exchange associated with such Convertible Securities shall expire by their terms or any of such Stock Purchase Rights or Convertible Securities shall be repurchased by the Company or a Subsidiary thereof for a consideration per underlying share of Common Stock not exceeding the amount of such consideration received by the Company in connection with the issuance, sale or grant of such Stock Purchase Rights or Convertible Securities, the Exercise Price then in effect shall forthwith be increased to the Exercise Price that would have been in effect if such expiring Stock Purchase Rights or rights of conversion or exchange or such repurchased Stock Purchase Rights or Convertible Securities had never been issued. Similarly, if at any time after any such adjustment of the Exercise Price shall have been made pursuant to Section 4.2 (i) any additional consideration is received or becomes receivable by the Company in connection with the issuance or exercise of such Stock Purchase Rights or Convertible Securities or (ii) there is a reduction in the conversion ratio applicable to such Convertible Securities so that fewer shares of Common Stock will be issuable upon the conversion or exchange thereof or there is a decrease in the number of shares of Common Stock issuable upon exercise of such Stock Purchase Rights, the Exercise Price then in effect shall be forthwith readjusted to the Exercise Price that would have been in effect had such changes taken place at the time that such Stock Purchase Rights or Convertible Securities were initially issued, granted or sold. In no event shall any readjustment under this Section 4.3(d) affect the validity of any shares of Warrant Stock issued upon any exercise of this Warrant prior to such readjustment, nor shall any such readjustment have the effect of increasing the Exercise Price above the Exercise Price that would have been in effect if the related Stock Purchase Rights or Convertible Securities had never been issued. 4.4. Adjustment of Number of Shares Purchasable. Upon any adjustment of the Exercise Price as provided in Section 4.1, 4.2 or 4.3 hereof, the Holder hereof shall thereafter be entitled to purchase upon the exercise of this Warrant, at the Exercise Price resulting from such adjustment, the number of shares of Common Stock (calculated to the nearest 1/100th of a share) obtained by multiplying the Exercise Price in effect immediately prior to such adjustment by the number of shares of Common Stock issuable on the exercise hereof immediately prior to such -20- 24 adjustment and dividing the product thereof by the Exercise Price resulting from such adjustment. 4.5. Reorganization, Reclassification, Merger, Con solidation or Disposition of Assets. In case the Company shall reorganize its capital, reclassify its capital stock, consolidate or merge with or into another corporation (where the Company is not the surviving corporation or where there is any change whatsoever in, or distribution with respect to, the Outstanding Common Stock of the Company), or sell, transfer or otherwise dispose of all or substantially all of its property, assets or business to another corporation and, pursuant to the terms of such reorganization, reclassification, merger, consolidation or disposition of assets, (i) shares of common stock of the successor or acquiring corporation or of the Company (if it is the surviving corporation) or (ii) any cash, shares of stock or other securities or property of any nature whatsoever (including warrants or other subscription or purchase rights) in addition to or in lieu of common stock of the successor or acquiring corporation ("Other Property") are to be received by or distributed to the holders of Common Stock of the Company who are holders immediately prior to such transaction, then the Holder of this Warrant shall have the right thereafter to receive, upon exercise of this Warrant, the number of shares of common stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and Other Property receivable upon or as a result of such reorganization, reclassification, merger, consolidation or disposition of assets by a holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such event. In such event, the aggregate Exercise Price otherwise payable for the shares of Common Stock issuable upon exercise of this Warrant shall be allocated among the shares of common stock and Other Property receivable as a result of such reorganization, reclassification, merger, consolidation or disposition of assets in proportion to the respective fair market values of such shares of common stock and Other Property as determined in good faith by the Board of Directors of the Company. In case of any such reorganization, reclassification, merger, consolidation or disposition of assets, the successor or acquiring corporation (if other than the Company) shall expressly assume the due and punctual observance and performance of each and every covenant and condition of this Warrant to be performed and observed by the Company and all the obligations and liabilities hereunder, subject to such modi- -21- 25 fications as may be reasonably deemed appropriate (as determined by resolution of the Board of Directors of the Company) in order to provide for adjustments of any shares of the common stock of such successor or acquiring corporation for which this Warrant thus becomes exercisable, which modifications shall be as equivalent as practicable to the adjustments provided for in this Section 4. For purposes of this Section 4.5, "common stock of the successor or acquiring corporation" shall include stock of such corporation of any class that is not preferred as to dividends or assets over any other class of stock of such corporation and that is not subject to redemption and shall also include any evidences of indebtedness, shares of stock or other securities that are convertible into or exchangeable for any such stock, either immediately or upon the arrival of a specified date or the happening of a specified event and any warrants or other rights to subscribe for or purchase any such stock. The foregoing provisions of this Section 4.5 shall similarly apply to successive reorganizations, reclassifications, mergers, consolidations or disposition of assets. 4.6. Determination of Consideration. For purposes of Sections 4.2, 4.3 and 4.4 hereof, the consideration received and/or receivable by the Company in connection with the issuance, sale, grant or exercise of additional shares of Common Stock, Stock Purchase Rights or Convertible Securities, irrespective of the accounting treatment of such consideration, shall be valued as follows: (1) Cash Payment. In the case of cash, the net amount received by the Company after deduction of any accrued interest or dividends, expenses incurred or any underwriting commissions or concessions paid or allowed by the Company. (2) Securities or Other Property. In the case of securities or other property, the fair market value thereof as of the date immediately preceding such issuance, sale, grant or exercise as determined in good faith by the Board of Directors of the Company. (3) Allocation Related to Common Stock. In the event shares of Common Stock are issued or sold together with other securities or other assets of the Company for a consideration which covers both, the -22- 26 consideration received (computed as provided in (1) and (2) above) shall be allocable to such shares of Common Stock as determined in good faith by the Board of Directors of the Company. (4) Allocation Related to Stock Purchase Rights and Convertible Securities. In case any Stock Purchase Rights or Convertible Securities shall be issued or sold together with other securities or other assets of the Company, together comprising one integral transaction in which no specific consideration is allocated to the Stock Purchase Rights or Convertible Securities, the consideration allocable to such Stock Purchase Rights or Convertible Securities shall be determined in good faith by the Board of Directors of the Company. (5) Dividends in Securities. In case the Company shall declare a dividend or make any other distribution upon any stock of the Company payable in either case in Common Stock or Convertible Securities, such Common Stock or Convertible Securities, as the case may be, issuable in payment of such dividend or distribution shall be deemed to have been issued or sold without consideration. (6) Merger, Consolidation or Sale of Assets. In case any shares of Common Stock, Stock Purchase Rights or Convertible Securities shall be issued in connection with any merger or consolidation in which the Company is the surviving corporation, the amount of consideration therefor shall be deemed to be the fair value on the date of issuance of such security of such portion of the assets and business of the non-surviving corporation attributable to such Common Stock, Stock Purchase Rights or Convertible Securities, as is determined in good faith by the Company's Board of Directors. (7) Challenge to Good Faith Determination. Whenever the Board of Directors of the Company shall be required to make a determination in good faith of the fair value of any item under this Section 4, such determination may be challenged in good faith by the -23- 27 Majority Warrant Holders, and any dispute shall be resolved by an investment banking or appraisal firm of recognized national standing selected by the Company and reasonably acceptable to the Majority Warrant Holders and whose decision shall be binding on the Company and all holders of Warrants. The fees and expenses of such firm shall be paid by the party or parties whose position is not chosen by such firm. 4.7. Other Dilutive Events. In case any event shall occur as to which the other provisions of this Section 4 are not strictly applicable but as to which the failure to make any adjustment would not fairly protect the purchase rights represented by this Warrant in accordance with the essential intent and principles hereof (including, without limitation, the issuance of securities other than Common Stock which have the right to participate in distributions to the holders of Common Stock, the granting of "phantom stock" rights or "stock appreciation rights" or the repurchase of outstanding shares of Common Stock, Convertible Securities or Stock Purchase Rights for a purchase price exceeding the fair market value thereof), then, in each such case, the Majority Warrant Holders may select an independent investment banking firm of nationally recognized standing and reasonably acceptable to the Company to make a determination as to the adjustment, if any, required to be made on a basis consistent with the essential intent and principles established herein as a result of such event in order to preserve the purchase rights represented by the Warrants. If the investment bank selected by the Majority Warrant Holders is not reasonably acceptable to the Company, and the Company and the Majority Warrant Holders cannot agree on a mutually acceptable investment bank, then the Company and the Majority Warrant Holders shall each choose one such investment bank and the respective chosen firms shall jointly select a third investment bank, which shall make the determination. The Company shall pay the costs and fees of each such investment bank (including any such investment bank selected by the Majority Warrant Holders), and the decision of the investment bank making such determination shall be final and binding on the Company and all affected holders of Warrants or Warrant Stock. Promptly after receipt of the opinion of such investment bank as to any such required adjustments, the Company shall take any actions necessary to implement same. -24- 28 4.8. Other Provisions Applicable to Adjustments Under this Section. The following provisions shall be applicable to the adjustments provided for pursuant to this Section 4: (a) When Adjustments To Be Made. The adjustments required by this Section 4 shall be made whenever and as often as any specified event requiring such an adjustment shall occur. For the purpose of any such adjustment, any specified event shall be deemed to have occurred at the close of business on the date of its occurrence. (b) Record Date. In case the Company shall take a record of the holders of the Common Stock for the purpose of entitling them (i) to receive a dividend or other distribution payable in Common Stock, Convertible Securities or Stock Purchase Rights or (ii) to subscribe for or purchase Common Stock, Convertible Securities or Stock Purchase Rights, then all references in this Section 4 to the date of the issuance or sale of such shares of Common Stock, Convertible Securities or Stock Purchase Rights shall be deemed to be references to such record date. (c) Fractional Interests. In computing adjustments under this Section 4, fractional interests in Common Stock shall be taken into account to the nearest 1/100th of a share. (d) When Adjustment Not Required. If the Company shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend or distribution to which the provisions of Section 4.1 would apply, but shall, thereafter and before the distribution to stockholders thereof, legally abandon its plan to pay or deliver such dividend or distribution, then thereafter no adjustment shall be required by reason of the taking of such record and any such adjustment previously made in respect thereof shall be rescinded and annulled. (e) Maximum Exercise Price. Except as provided in Section 4.1 above, at no time shall the Exercise Price per share of Common Stock exceed the amount set forth in the first paragraph of the preamble of this Warrant. -25- 29 (f) Certain Limitations. Notwithstanding anything herein to the contrary, the Company agrees not to enter into any transaction that, by reason of any adjustment under Section 4.1, 4.2 or 4.3 above, would cause the Exercise Price to be less than the par value of the Common Stock, if any, unless the Company first reduces the par value of the Common Stock to be less than the Exercise Price that would result from such transaction. (g) Notice of Adjustments. Whenever the number of shares of Common Stock for which this Warrant is exercisable or the Exercise Price shall be adjusted pursuant to this Section 4, the Company shall forthwith prepare a certificate to be executed by the President or chief financial officer of the Company setting forth, in reasonable detail, the event requiring the adjustment and the method by which such adjustment was calculated, specifying the number of shares of Common Stock for which this Warrant is exercisable and (if such adjustment was made pursuant to Section 4.5) describing the number and kind of any other shares of stock or Other Property for which this Warrant is exercisable, and any related change in the Exercise Price, after giving effect to such adjustment or change. The Company shall promptly cause a signed copy of such certificate to be delivered to each Holder in accordance with Section 15.2. The Company shall keep at its principal office or at the Designated Office, if different, copies of all such certificates and cause the same to be available for inspection at said office during normal business hours by any Holder or any prospective transferee of a Warrant designated by a Holder thereof. (h) Independent Application. Except as otherwise provided herein, all subsections of this Section 4 are intended to operate independently of one another (but without duplication). If an event occurs that requires the application of more than one subsection, all applicable subsections shall be given independent effect without duplication. 5. NO IMPAIRMENT -26- 30 The Company shall not by any action, including, without limitation, amending its charter documents or through any reorganization, reclassification, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other similar voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or reasonably appropriate to protect the rights of the Holder against impairment. Without limiting the generality of the foregoing, the Company shall take all such action as may be necessary or reasonably 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, free and clear of all Liens, and shall use all commercially reasonably efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof as may be necessary to enable the Company to perform its obligations under this Warrant. 6. RESERVATION AND AUTHORIZATION OF COMMON STOCK From and after the Original Issue Date, the Company shall at all times reserve and keep available for issuance upon the exercise of the Warrants such number of its authorized but unissued shares of Common Stock as will be sufficient to permit the exercise in full of all outstanding Warrants. All shares of Common Stock issuable pursuant to the terms hereof, when issued upon exercise of this Warrant with payment therefor in accordance with the terms hereof, shall be duly and validly issued and fully paid and nonassessable, not subject to preemptive rights and shall be free and clear of all Liens. 7. NOTICE OF CORPORATE ACTIONS; TAKING OF RECORD; TRANSFER BOOKS 7.1. Notices of Corporate Actions. In the event of: (a) any capital reorganization of the Company, any reclassification or recapitalization of the capital stock of the Company or any consolidation or merger involving the Company and any other Person or any transfer or other disposition of all or substantially all the assets of the Company to another Person or -27- 31 (b) any amendment of the Certificate of Incorporation of the Company, the Company shall mail to each Holder of a Warrant in accordance with the provisions of Section 14.2 hereof a notice specifying the date or expected date on which any such reorganization, reclassification, recapitalization, consolidation, merger, transfer or disposition is to take place, the time, if any such time is to be fixed, as of which the holders of record of Common Stock shall be entitled to exchange their shares of Common Stock for the securities or Other Property deliverable upon such reorganization, reclassification, recapitalization, consolidation, merger, transfer or disposition, and a description in reasonable detail of the transaction. Such notice shall be mailed to the extent practicable at least thirty, but not more than ninety, days prior to the date therein specified; provided, that, in no event shall the Company be required to give the Holders notice of material non-public information prior to the time such information is made available to the holders of its Common Stock. In the event that the Company at any time sends any other notice to the holders of its Common Stock, it shall concurrently send a copy of such notice to each Holder of a Warrant. 7.2 Closing of Transfer Books. The Company shall not at any time, except upon dissolution, liquidation or winding up of the Company, close its stock transfer books or Warrant transfer books so as to result in preventing or delaying the exercise or transfer of any Warrant. 8. TRANSFER RESTRICTIONS The Holder, by acceptance of this Warrant, agrees to be bound by the provisions of this Section 8. 8.1. Restrictions on Transfers. Neither this Warrant nor any shares of Restricted Common Stock issued upon the exercise hereof shall be Transferred other than pursuant to an effective registration statement under the Securities Act or an exemption from the registration provisions thereof. No Transfer of this Warrant or any such shares of Restricted Stock, other than pursuant to such an effective registration statement, shall be valid or effective unless (a) the holder of the securities proposed to be transferred shall have delivered to the Company either a no-action letter from the Commission or an Opinion of -28- 32 Counsel to the effect that such proposed Transfer is exempt from the registration requirements of the Securities Act or (b) such Transfer is being made pursuant to Rule 144 or Rule 144A under the Securities Act and such holder shall have delivered to the Company a certificate setting forth the basis for applying such Rule to the proposed Transfer. Each certificate, if any, evidencing such shares of Restricted Common Stock issued upon any such Transfer, other than in a public offering pursuant to an effective registration statement, shall bear the restrictive legend set forth in Section 8.2(a), and each Warrant issued upon such Transfer shall bear the restrictive legend set forth in Section 8.2(b), unless the Holder delivers to the Company an Opinion of Counsel to the effect that such legend is not required for the purposes of compliance with the Securities Act. Holders of the Warrants or the Restricted Common Stock, as the case may be, shall not be entitled to Transfer such Warrants or such Restricted Common Stock except in accordance with this Section 8.1. 8.2. Restrictive Legends. (a) Except as otherwise provided in this Section 8, each certificate for Warrant Stock initially issued upon the exercise of this Warrant, and each certificate for Warrant Stock issued to any subsequent transferee of any such certificate, shall be stamped or otherwise imprinted with two legends in substantially the following forms: "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAW. NO TRANSFER OF THE SHARES REPRESENTED BY THIS CERTIFICATE SHALL BE VALID OR EFFECTIVE UNLESS (A) SUCH TRANSFER IS MADE PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR (B) THE HOLDER OF THE SECURITIES PROPOSED TO BE TRANSFERRED SHALL HAVE DELIVERED TO THE COMPANY AN OPINION OF COUNSEL EXPERIENCED IN SECURITIES MATTERS AND REASONABLY ACCEPTABLE TO THE COMPANY TO THE EFFECT THAT SUCH PROPOSED TRANSFER IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE ACT OR (C) SUCH TRANSFER IS PURSUANT TO RULE 144 OR RULE 144A UNDER THE ACT AND SUCH HOLDER(S) SHALL HAVE DELIVERED TO THE COMPANY A CERTIFICATE SETTING FORTH THE BASIS FOR APPLYING SUCH RULE TO THE PROPOSED TRANSFER." -29- 33 "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE ENTITLED TO THE BENEFIT OF AND ARE SUBJECT TO CERTAIN OBLIGATIONS SET FORTH IN THE WARRANT PURSUANT TO THE EXERCISE OF WHICH SUCH SHARES WERE ISSUED. A COPY OF SUCH WARRANT IS AVAILABLE AT THE EXECUTIVE OFFICES OF THE COMPANY." (b) Except as otherwise provided in this Section 8, each Warrant shall be stamped or otherwise imprinted with a legend in substantially the following form: "NEITHER THE WARRANTS REPRESENTED BY THIS CERTIFICATE NOR ANY OF THE SECURITIES ISSUABLE UPON EXERCISE THEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAW. NO TRANSFER OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE OR OF THE STOCK ISSUABLE UPON EXERCISE THEREOF SHALL BE VALID OR EFFECTIVE UNLESS (A) SUCH TRANSFER IS MADE PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR (B) THE HOLDER OF THE SECURITIES PROPOSED TO BE TRANSFERRED SHALL HAVE DELIVERED TO THE COMPANY EITHER A NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION OR AN OPINION OF COUNSEL EXPERIENCED IN SECURITIES MATTERS AND REASONABLY ACCEPTABLE TO THE COMPANY TO THE EFFECT THAT SUCH PROPOSED TRANSFER IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE ACT OR (C) SUCH TRANSFER IS PURSUANT TO RULE 144 OR RULE 144A UNDER THE ACT AND SUCH HOLDER SHALL HAVE DELIVERED TO THE COMPANY A CERTIFICATE SETTING FORTH THE BASIS FOR APPLYING SUCH RULE TO THE PROPOSED TRANSFER." 8.3. Termination of Securities Law Restrictions. Not withstanding the foregoing provisions of this Section 8, the restrictions imposed by Section 8.1(b) upon the transferability of the Warrants and the Restricted Common Stock and the legend requirements of Section 8.2 shall terminate as to any particular Warrant or shares of Restricted Common Stock when the Company shall have received from the Holder thereof an Opinion of Counsel to the effect that such legend is not required in order to ensure compliance with the Securities Act. Whenever the restrictions imposed by Sections 8.1(b) and 8.2 shall terminate as to this Warrant, as hereinabove provided, the Holder hereof shall be entitled to receive from the Company, at the expense of the -30- 34 Company, a new Warrant bearing the following legend in place of the restrictive legend set forth hereon: "THE RESTRICTIONS ON TRANSFERABILITY OF THE WITHIN WARRANT CONTAINED IN SECTIONS 8.1(b) AND 8.2 HEREOF TERMINATED ON ______________, 19__, AND ARE OF NO FURTHER FORCE AND EFFECT." All Warrants issued upon registration of transfer, division or combination of, or in substitution for, any Warrant or Warrants entitled to bear such legend shall have a similar legend endorsed thereon. Wherever the restrictions imposed by this Section shall terminate as to any share of Restricted Common Stock, as hereinabove provided, the Holder thereof shall be entitled to receive from the Company, at the Company's expense, a new certificate representing such Common Stock not bearing the restrictive legend set forth in Section 8.2(a). 9. REGISTRATION RIGHTS 9.1. Certain Definitions. For the purposes of this Section 9: (a) The Holders of Warrants and the Series B Warrants and the holders of Warrant Stock (as defined in Section 9.1(b)) are collectively referred to as "WS Holders". (b) "Warrant Stock" shall deemed to include (i) the shares of Common Stock issued, issuable or both (as the context may require) upon the exercise of Warrants and the Series B Warrants until such time as such shares of Common Stock have either been (a) Transferred in a public offering pursuant to a registration statement filed under the Securities Act or (b) Transferred in a transaction exempt from the registration and prospectus delivery requirements of the Securities Act under Section 4(1) thereof with all transfer restrictions and restrictive legends with respect to such Common Stock being removed in connection with such transaction,(ii) any other securities issued as (or issuable upon the conversion or exercise of any warrant, right or other security which is issued as) a dividend or other distribution with respect to, or in exchange by the Company generally for, or in replacement by the Company generally -31- 35 of, any shares of Warrant Stock and (iii) any securities issued in exchange for any such Warrant Stock in any merger or reorganization of the Company, but in the cases of clauses (ii) and (iii) only so long as such securities have not been registered and Transferred pursuant to the Securities Act or Transferred in a transaction exempt from the registration and prospectus delivery requirements of the Securities Act under Section 4(1) thereof so that all transfer restrictions and restrictive legends with respect to such securities are removed in connection with such Transfer. (c) Each WS Holder shall be deemed to "hold", as of any specified date, the aggregate of (i) the number of shares of Warrant Stock held by such WS Holder as of such date plus (ii) the number of shares of Warrant Stock issuable upon exercise of any Warrants and Series B Warrants held by such WS Holder as of such date. (d) The total number of shares of Warrant Stock deemed "outstanding" as of a specified date will be equal to (i) the total number of shares of Warrant Stock Outstanding as of such date plus (ii) the number of shares of Warrant Stock issuable upon exercise of all outstanding Warrants and Series B Warrants as of such date. (e) "Registrable Securities" shall mean any Warrants, any Series B Warrants and/or any shares of Warrant Stock. 9.2. Demand Registration. (a) In the event the Company receives at any time after August 31, 1997 a written request from one or more WS Holders holding in the aggregate at least seventy-six percent of the number of shares of Warrant Stock then outstanding (the "Demanding Holders") that the Company file a registration statement under the Securities Act for the sale or other disposition of at least a majority of the Registrable Securities (a "Demand Registration"), the Company shall promptly give written notice of such request to each other WS Holder and each such WS Holder may elect, by giving written notice of such election to the Company within ten (10) Business Days after receipt of the Company's notice, to have some or all of the Registrable Securities held by it included in such registration. At the option of the Demanding Holders, such request may specify that the requested registration will be for -32- 36 an offering on a delayed or continual basis pursuant to Rule 415 under the Securities Act (a "Shelf Registration"). (b) Following receipt of such a request for a Demand Registration, the Company shall: (1) File the requested registration statement with the Commission as promptly as practicable, and shall use all commercially reasonable efforts to have the registration declared effective under the Securities Act as soon as reasonably practicable, in each instance giving due regard to the need to prepare and file current financial statements, conduct due diligence and complete other actions that are reasonably necessary to effect a registered public offering; and (2) Use all commercially reasonable efforts to keep the such registration statement Continuously Effective (x) if a Demand Registration, for up to 90 days or until such earlier date as of which all Registrable Securities covered by such registration statement shall have been disposed of in the manner described in the registration statement, and (y) if a Shelf Registration, for 270 days. Notwithstanding the foregoing, if for any reason the effectiveness of a Demand Registration is suspended or postponed as permitted by Subsection (d) below, the foregoing period shall be extended by the aggregate number of days of such suspension or postponement. (c) The Company shall not be required to effect a registration of Registrable Securities pursuant to a Demand Registration on more than one occasion. For purposes of this Subsection (c), registration shall not be deemed to have been effected (i) unless a registration statement with respect thereto has become effective, (ii) if after such registration statement has become effective, such registration or the related offer, sale or distribution of Registrable Securities thereunder is interfered with by any stop order, injunction or other order or requirement of the Commission or other governmental agency or court for any reason not attributable to the Selling Holders and such interference is not thereafter eliminated or (iii) if the conditions to closing specified in the underwriting agreement, if any, entered into in connection with such registration are not -33- 37 satisfied or waived, other than by reason of a failure on the part of the Selling Holders. If the Company shall have complied with its obligations under this Section 9, a right to demand a registration pursuant to this Section 9.2 shall be deemed to have been satisfied (i) if a Demand Registration other than a Shelf Registration, upon the earlier of (x) the date as of which all of the Registrable Securities included therein shall have been disposed of pursuant to the registration statement and (y) the date as of which such Demand Registration shall have been Continuously Effective for a period of 90 days, and (ii) if a Shelf Registration, upon the effective date of a Shelf Registration, provided no stop order or similar order, or proceedings for such an order, is thereafter entered or initiated. (d) The Company shall be entitled to postpone for up to 90 days the filing of any Demand Registration statement otherwise required to be prepared and filed pursuant to this Section 9.2 or suspend any such Demand Registration for up to 90 days, if the Board of Directors of the Company determines, in its good faith reasonable judgment that such registration and the Transfer of Warrant Stock contemplated thereby would materially interfere with, or require premature disclosure of, any financing, acquisition or reorganization involving the Company or any of its wholly owned subsidiaries and the Company promptly gives the Demanding Holders notice of such determination; provided, however, that the Company shall not have postponed pursuant to this Subsection (d) the filing of any other Demand Registration statement otherwise required to be prepared and filed pursuant to this Section 9.2, or suspended any such Demand Registration, during the 12 month period ended on the date of the relevant request pursuant to Subsection (a) above and provided further, that the Expiration Date shall be extended by the period of any such postponement or suspension. (e) A registration pursuant to this Section 9.2 shall be on such appropriate registration form of the Commission available to the Company as shall (i) be selected by the Company and be reasonably acceptable to the Majority Selling Holders and (ii) permit the disposition of the Warrant Stock in accordance with the intended method or methods of disposition specified in the request made pursuant to Subsection (a) above. If any registration pursuant to this Section 9.2 involves an underwritten offering (whether on a "firm", "best efforts" or -34- 38 "all reasonable efforts" basis or otherwise), or an agented offering, the Majority Selling Holders shall have the right to select the underwriter or underwriters and manager or managers to administer such underwritten offering or the placement agent or agents for such agented offering from among the entities listed in Schedule B hereto (or any successors of any such entities), it being understood that the Majority Selling Holders shall use commercially reasonable efforts to select one or more of the first three listed entities subject to arriving at reasonably acceptable terms and conditions for the offering. (f) The Company may elect to include shares of Common Stock to be sold for its account in any such Demand Registration (including a Shelf Registration); provided, however, if the managing underwriter shall advise the Demanding Holders in writing (with a copy to the Company) that, in its opinion, the number of shares of Common Stock requested to be included in such Demand Registration would adversely affect such offering or the price to be realized therefor, or the timing thereof, then the number of shares proposed to be included in such Demand Registration by the Company shall be reduced, to such number that the Demanding Holders are advised can be sold without such effect in such Demand Registration. 9.3. Piggyback Registration. (a) If at any time the Company proposes to register (including for this purpose a registration effected by the Company for shareholders of the Company other than the WS Holders) equity securities under the Securities Act in connection with the public offering solely for cash on Form S-1, S-2 or S-3 (or any replacement or successor forms), the Company shall promptly give each WS Holder written notice of such registration (a "Piggyback Registration"). Upon the written request of each WS Holder given within 20 days following the date of such notice, the Company shall cause to be included in such registration statement and use its best efforts to be registered under the Securities Act all the Registrable Securities that each such WS Holder shall have requested to be registered. The Company shall have the absolute right to withdraw or cease to prepare or file any registration statement for any offering referred to in this Section 9.3 without any obligation or liability to any WS Holder. -35- 39 (b) If the managing underwriter shall advise the Company in writing (with a copy to each Selling Holder) that, in its opinion, the amount of Registrable Securities requested to be included in such registration would materially adversely affect such offering, or the timing thereof, then the Company will include in such registration, to the extent of the amount and class which the Company is so advised can be sold without such material adverse effect in such offering: first, all securities proposed to be sold by the Company for its own account; and second, the Warrant Stock requested to be included in such registration by WS Holders and all other securities requested to be included in such registration by Persons other than the Company and WS Holders, the securities covered by this clause second to be included pro rata based on the estimated gross proceeds from the sale thereof. (c) Each WS Holder shall be entitled to have its Registrable Securities included in an unlimited number of Piggyback Registrations pursuant to this Section 9.3. 9.4. Registration Procedures. Whenever required under Section 9.2 or Section 9.3 hereof to effect the registration of any Registrable Securities, the Company shall, as expeditiously as practicable: (a) Prepare and file with the Commission a registration statement with respect to such Warrant Stock and use the Company's best efforts to cause such registration statement to become effective; provided, however, that before filing a registration statement or prospectus or any amendments or supplements thereto, including documents incorporated by reference after the initial filing of the registration statement and prior to effectiveness thereof, the Company shall furnish to one firm of counsel for the Selling Holders (selected by Majority Selling Holders) copies of all such documents in the form substantially as proposed to be filed with the Commission at least four Business Days prior to filing for review and comment by such counsel, which opportunity to comment shall include an absolute right to control or contest disclosure if the applicable Selling Holder reasonably believes that it may be subject to controlling person liability under applicable securities laws with respect thereto. -36- 40 (b) Prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Securities Act and rules thereunder with respect to the disposition of all securities covered by such registration statement. If the registration is for an underwritten offering, the Company shall amend the registration statement or supplement the prospectus whenever required by the terms of the underwriting agreement entered into pursuant to Section 9.4(e). Subject to Rule 415 under the Securities Act, if the registration statement is a Shelf Registration, the Company shall amend the registration statement or supplement the prospectus so that it will remain current and in compliance with the requirements of the Securities Act for 270 days or after its effective date, and if during such period any event or development occurs as a result of which the registration statement or prospectus contains a misstatement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading, the Company shall promptly notify each Selling Holder, amend the registration statement or supplement the prospectus so that each will thereafter comply with the Securities Act and furnish to each Selling Holder of Registrable Securities such amended or supplemented prospectus, which each such Holder shall thereafter use in the Transfer of Warrant Stock covered by such registration statement. Pending such amendment or supplement each such Selling Holder shall cease making offers or Transfers of Registerable Securities pursuant to the prior prospectus. In the event that any Registrable Securities included in a registration statement subject to, or required by, this Warrant remain unsold at the end of the period during which the Company is obligated to use its best efforts to maintain the effectiveness of such registration statement, the Company may file a post-effective amendment to the registration statement for the purpose of removing such Registrable Securities from registered status. (c) Furnish to each Selling Holder of Registrable Securities, without charge, such number of copies of the registration statement, any pre-effective or post-effective amendment thereto, the prospectus, including each -37- 41 preliminary prospectus and any amendments or supplements thereto, in each case in conformity with the requirements of the Securities Act and the rules thereunder, and such other related documents as any such Selling Holder may reasonably request in order to facilitate the disposition of Registrable Securities owned by such Selling Holder. (d) Use all commercially reasonable efforts (i) to register and qualify the securities covered by such registration statement under such other securities or Blue Sky laws of such states or jurisdictions as shall be reasonably requested by the managing underwriter (as applicable, or if inapplicable, the Majority Selling Holders), and (ii) to obtain the withdrawal of any order suspending the effectiveness of a registration statement, or the lifting of any suspension of the qualification (or exemption from qualification) of the offer and transfer of any of the Registrable Securities in any jurisdiction, at the earliest possible moment; provided, however, that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions. (e) In the event of any underwritten or agented offering, enter into and perform the Company's obligations under an underwriting or agency agreement (including indemnification and contribution obligations of underwriters or agents), in usual and customary form, with the managing underwriter or underwriters of or agents for such offering. The Company shall also cooperate with the Majority Selling Holders and the managing underwriter for such offering in the marketing of the Warrant Stock, including making available the Company's officers, accountants, counsel, premises, books and records for such purpose, but the Company shall not be required to incur any material out-of-pocket expense pursuant to this sentence. (f) Promptly notify each Selling Holder of any stop order issued or threatened to be issued by the Commission in connection therewith (and take all reasonable actions required to prevent the entry of such stop order or to remove it if entered. -38- 42 (g) Make generally available to the Company's security holders copies of all periodic reports, proxy statements, and other information referred to in Section 9.9(a) and an earnings statement satisfying the provisions of Section 11(a) of the Securities Act no later than 90 days following the end of the 12-month period beginning with the first month of the Company's first fiscal quarter commencing after the effective date of each registration statement filed pursuant to this Section 9. (h) Make available for inspection by any Selling Holder, any underwriter participating in such offering and the representatives of such Selling Holder and underwriter (but not more than one firm of counsel to such Selling Holders), all financial and other information as shall be reasonably requested by them, and provide the Selling Holder, any underwriter participating in such offering and the representatives of such Selling Holder and underwriter the opportunity to discuss the business affairs of the Company with its principal executives and independent public accountants who have certified the audited financial statements included in such registration statement, in each case all as necessary to enable them to exercise their due diligence responsibility under the Securities Act; provided, however, that information that the Company determines, in good faith, to be confidential and which the Company advises such Person in writing, is confidential shall not be disclosed unless such Person signs a confidentiality agreement reasonably satisfactory to the Company or the related Selling Holder of Registrable Securities agrees to be responsible for such Person's breach of confidentiality on terms reasonably satisfactory to the Company. (i) Use the Company's best efforts to obtain a so-called "comfort letter" from its independent public accountants, and legal opinions of counsel to the Company, in customary form and covering such matters of the type customarily covered by such letters, and in a form that shall be reasonably satisfactory to the Majority Selling Holders. The Company shall furnish to each Selling Holder a signed counterpart of any such comfort letter or legal opinion. Delivery of any such opinion or comfort letter shall be subject to the recipient furnishing such written representations or acknowledgments as are customarily -39- 43 provided by selling shareholders who receive such comfort letters or opinions. (j) Provide and cause to be maintained a transfer agent and registrar for all Registrable Securities covered by such registration statement from and after a date not later than the effective date of such registration statement. (k) Use all reasonable efforts to cause the Registrable Securities covered by such registration statement (i) if the Common Stock is then listed on a securities exchange or included for quotation in a recognized trading market, to continue to be so listed or included for a reasonable period of time after the offering, and (ii) to be registered with or approved by such other United States or state governmental agencies or authorities as may be necessary by virtue of the business and operations of the Company to enable the Selling Holders of Registrable Securities to consummate the disposition of such Registrable Securities. (l) Use the Company's reasonable efforts to provide a CUSIP number for the Common Stock prior to the effective date of the first registration statement including Registrable Securities. (m) Take such other actions as are reasonably required in order to expedite or facilitate the disposition of Registrable Securities included in each such registration. 9.5. Selling Holders' Obligations. (a) It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Section 9 with respect to the Registrable Securities of any Selling Holder that such Selling Holder shall: (i) Furnish to the Company such information regarding such Selling Holder, the number of Registrable Securities owned by it, and the intended method of disposition of such securities as shall be required to effect the registration of such Selling Holder's Registrable Securities, and to cooperate with the Company in preparing such registration; and -40- 44 (ii) Agree to sell their Registrable Securities to the underwriters at the same price and on substantially the same terms and conditions as the Company or the other Persons on whose behalf the registration statement was being filed have agreed to sell their securities, and to execute the underwriting agreement agreed to by the Majority Selling Holders (in the case of a registration under Section 9.2) or the Company and the Majority Selling Holders (in the case of a registration under Section 9.3). (b) Each Selling Holder shall notify the Company of any sales of such Selling Holder's shares registered for sale pursuant to this Section 9; provided, however, it is understood that any failure so to notify the Company shall not be deemed a default hereunder or to subject any Selling Holder to any claim for damages or expenses whatsoever. 9.6. Expenses of Registration. Expenses incurred in connection with registrations under this Section 9 shall be allocated and paid as follows: (a) With respect to each Demand Registration (including any Shelf Registration), the Company shall bear and pay all reasonable expenses incurred in connection with any registration, filing, or qualification of Registrable Securities with respect to such Demand Registration for each Selling Holder, including all registration, filing and NASD fees, all fees and expenses of complying with securities or blue sky laws, all word processing, duplicating and printing expenses, messenger and delivery expenses, the reasonable fees and disbursements of counsel for the Company, and of the Company's independent public accountants, including the expenses of "cold comfort" letters required by or incident to such performance and compliance, and the reasonable fees and disbursements of one firm of counsel for the Selling Holders of Registrable Securities (the "Registration Expenses"), but excluding underwriting discounts and commissions relating to Registrable Securities (which shall be paid on a pro rata basis by the Selling Holders) provided, however, that the Company shall not be required to pay for any expenses of any registration proceeding begun pursuant to Section 9.2 if the registration is subsequently withdrawn at the request of the Majority Selling Holders (in which case all Selling Holders shall bear such expense), -41- 45 unless WS Holders whose Registrable Securities constitutes a majority of the Registrable Securities then outstanding agree that such withdrawn registration shall constitute the exercise of their one demand registration under Section 9.2 hereof. The counsel for the Selling Holders shall be selected by Demanding Holders owning a majority of the Registrable Securities owned by Demanding Holders to be included in a Demand Registration and, in the case of a Piggyback Registration, by Selling Holders owning a majority of the Registrable Securities to be included in such registration; provided that in the case of a Piggyback Registration, the Selling Holders shall use one firm of counsel to represent all such holders and shall endeavor in good faith, with any other holders of securities to be included in such registration, to select one firm of counsel to represent all such selling securities holders. (b) The Company shall bear and pay all Registration Expenses incurred in connection with any Piggyback Registrations pursuant to Section 9.3 for each Selling Holder, but excluding underwriting discounts and commissions relating to Registrable Securities (which shall be paid on a pro rata basis by the Selling Holders of Registrable Securities). (c) Any failure of the Company to pay any Registration Expenses as required by this Section 9.6 shall not relieve the Company of its obligations under this Section 9. 9.7. Indemnification; Contribution. If any Registrable Securities are included in a registration statement under this Section 9: (a) To the extent permitted by applicable law, the Company shall indemnify and hold harmless each Selling Holder, each Person, if any, who controls such Selling Holder within the meaning of the Securities Act, and each officer, director, partner, and employee of such Selling Holder and such controlling Person, against any and all losses, claims, damages, liabilities and expenses (joint or several), including attorneys' fees and disbursements and expenses of investigation, incurred by such party pursuant to any actual or threatened action, suit, proceeding or investigation, or to which any of the foregoing Persons may -42- 46 become subject under the Securities Act, the Exchange Act or other federal or state laws, insofar as such losses, claims, damages, liabilities and expenses arise out of or are based upon any of the following statements, omissions or violations pursuant to a final non-appealable order (collectively a "Violation"): (i) any untrue statement or alleged untrue statement of a material fact contained in such registration statement, including any preliminary prospectus or final prospectus contained therein, or any amendments or supplements thereto; (ii) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading; or (iii) any violation or alleged violation by the Company of the Securities Act, the Exchange Act, any applicable state securities law or any rule or regulation promulgated under the Securities Act, the Exchange Act or any applicable state securities law; provided, however, that the indemnification required by this Section 9.7(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or expense if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld), nor shall the Company be liable in any such case for any such loss, claim, damage, liability or expense to the extent that it is determined by a court of competent jurisdiction by a final non-appealable order to have solely arisen out of or be based upon a Violation which occurred in reliance upon and in conformity with written information furnished to the Company by the indemnified party expressly for use in connection with such registration; provided, further, that the indemnity agreement contained in this Section 9.7(a) shall not apply to any underwriter to the extent that any such loss is based on or arises out of an untrue statement or alleged untrue statement of a material fact, or an omission or alleged omission to state a material fact, contained in or omitted from any preliminary prospectus if the final prospectus shall correct such untrue statement or -43- 47 alleged untrue statement, or such omission or alleged omission, and a copy of the final prospectus has not been sent or given to such person at or prior to the confirmation of sale to such person if such underwriter was under an obligation to deliver such final prospectus and failed to do so. The Company shall also indemnify underwriters, selling brokers, dealer managers and similar securities industry professionals participating in the distribution, their officers, directors, agents and employees and each person who controls such persons (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) to the same extent as provided above with respect to the indemnification of the Selling Holders. (b) To the extent permitted by applicable law, each Selling Holder shall indemnify and hold harmless the Company, each of its directors, each of its officers and employees, each Person, if any, who controls the Company within the meaning of the Securities Act, any other Selling Holder, any controlling Person of any such other Selling Holder and each officer, director, partner, and employee of such other Selling Holder and such controlling Person, against any and all losses, claims, damages, liabilities and expenses (joint and several), including attorneys' fees and disbursements and expenses of investigation, incurred by such party pursuant to any actual or threatened action, suit, proceeding or investigation, or to which any of the foregoing Persons may otherwise become subject under the Securities Act, the Exchange Act or other federal or state laws, insofar as such losses, claims, damages, liabilities and expenses are determined by a court of competent jurisdiction by a final non-appealable order to have solely arisen out of or be based upon a Violation that occurred in reliance upon and in conformity with written information furnished by such Selling Holder expressly for use in connection with such registration; provided, however, that (x) the indemnification required by this Section 9.7(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or expense if settlement is effected without the consent of the relevant Selling Holder of Registrable Securities, which consent shall not be unreasonably withheld, and (y) in no event shall the amount of any indemnity under this Section 9.7(b) exceed the net -44- 48 proceeds from the applicable offering received by such Selling Holder. (c) Promptly after receipt by an indemnified party under this Section 9.7 of notice of the commencement of any action, suit, proceeding, investigation or threat thereof made in writing for which such indemnified party may make a claim under this Section 9.7, such indemnified party shall deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party shall have the right to retain its own counsel, with the fees and disbursements and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding. The failure to deliver written notice to the indemnifying party within a reasonable time following the commencement of any such action, if prejudicial to its ability to defend such action, shall relieve such indemnifying party of any liability to the indemnified party under this Section 9.7 but shall not relieve the indemnifying party of any liability that it may have to any indemnified party otherwise than pursuant to this Section 9.7. Any reasonable fees and expenses incurred by the indemnified party (including any fees and expenses incurred in connection with investigating or preparing to defend such action or proceeding) shall be paid to the indemnified party, as incurred, within thirty (30) days of written notice thereof to the indemnifying party (regardless of whether it is ultimately determined that an indemnified party is not entitled to indemnification hereunder). Any such indemnified party shall have the right to employ separate counsel in any such action, claim or proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be the expenses of such indemnified party unless (i) the indemnifying party has agreed to pay such fees and expenses or (ii) the indemnifying party shall have failed to promptly assume the -45- 49 defense of such action, claim or proceeding or (iii) the named parties to any such action, claim or proceeding (including any impleaded parties) include both such indemnified party and the indemnifying party, and such indemnified party shall have been advised by counsel that there may be one or more legal defenses available to it which are different from or in addition to those available to the indemnifying party and that the assertion of such defenses would create a conflict of interest such that counsel employed by the indemnifying party could not faithfully represent the indemnified party (in which case, if such indemnified party notifies the indemnifying party in writing that it elects to employ separate counsel at the expense of the indemnifying party, the indemnifying party shall not have the right to assume the defense of such action, claim or proceeding on behalf of such indemnified party, it being understood, however, that the indemnifying party shall not, in connection with any one such action, claim or proceeding or separate but substantially similar or related actions, claims or proceedings in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the reasonable fees and expenses of more than one separate firm of attorneys (together with appropriate local counsel) at any time for all such indemnified parties, unless in the reasonable judgment of such indemnified party a conflict of interest may exist between such indemnified party and any other of such indemnified parties with respect to such action, claim or proceeding, in which event the indemnifying party shall be obligated to pay the fees and expenses of such additional counsel or counsels). No indemnifying party shall be liable to an indemnified party for any settlement of any action, proceeding or claim without the written consent of the indemnifying party, which consent shall not be unreasonably withheld. (d) If the indemnification required by this Section 9.7 from the indemnifying party is unavailable to an indemnified party hereunder in respect of any losses, claims, damages, liabilities or expenses referred to in this Section 9.7: (i) The indemnifying party, in lieu of indemnifying such indemnified party, shall contribute -46- 50 to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities or expenses in such proportion as is appropriate to reflect the relative fault of the indemnifying party and indemnified parties in connection with the actions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative fault of such indemnifying party and indemnified parties shall be determined by reference to, among other things, whether any Violation has been committed by, or relates to information supplied by, such indemnifying party or indemnified parties, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such Violation. The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and expenses referred to above shall be deemed to include, subject to the limitations set forth in Section 9.7(a) and Section 9.7(b), any reasonable legal or other fees or expenses reasonably incurred by such party in connection with any investigation or proceeding. (ii) The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 9.7(d) were determined by pro rata allocation or by any other method of allocation which does not take into account the equitable considerations referred to in Section 9.7(d)(i) above. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. (e) If indemnification is available under this Section 9.7, the indemnifying parties shall indemnify each indemnified party to the full extent provided in this Section 9.7 without regard to the relative fault of such indemnifying party or indemnified party or any other equitable consideration referred to in Section 9.7(d) above. (f) The indemnification required by this Section 9.7 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and -47- 51 when bills are received or expense, loss, damage or liability is incurred. In the event that it shall be subsequently determined that the recipient of any such periodic payment shall not be entitled to indemnification hereunder, such recipient promptly shall repay such payments, together with interest thereon at the Agreed Rate from the date of original receipt to the date of repayment. (g) The obligations of the Company and the Selling Holders of Registrable Securities under this Section 9.7 shall survive the completion of any offering of Registrable Securities pursuant to a registration statement under this Section 9, and otherwise. 9.8. Holdback. Each WS Holder entitled pursuant to this Section 9 to have Registrable Securities included in a registration statement prepared pursuant to this Section 9, if so requested by the managing underwriter in connection with an offering of any Registrable Securities, shall not effect any public sale or distribution of shares of Common Stock, Convertible Securities or Stock Purchase Rights (excluding any sale pursuant to Rule 144 or Rule 144A under the Securities Act and any sale as part of such underwritten or agented registration), during the 5-day period prior to, and during the 45-day period beginning on, the date such registration statement is declared effective under the Securities Act by the Commission, provided that such WS Holder is timely notified of such effective date in writing by the Company or such managing underwriter. 9.9. Additional Covenants of the Company. The Company hereby agrees and covenants as follows: (a) The Company shall file as and when applicable, on a timely basis, all reports required to be filed by it under the Exchange Act. If the Company is not required to file reports pursuant to the Exchange Act, upon the request of any WS Holder, the Company shall make publicly available the information specified in subparagraph (c)(2) of Rule 144 of the Securities Act, and take such further action as may be reasonably required from time to time and as may be within the reasonable control of the Company, to enable the WS Holders to Transfer Warrants or Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by Rule 144 under the -48- 52 Securities Act or any similar rule or regulation hereafter adopted by the Commission. In addition, promptly upon the request of any WS Holder, the Company shall provide such WS Holder with such publicly available financial statements, reports and other information as may be required to permit such WS Holder to Transfer shares of Registrable Securities to Qualified Institutional Investors pursuant to Rule 144A of the Securities Act. (b) The Company shall not, and shall not permit its majority owned subsidiaries to, effect any public sale or distribution of any shares of Common Stock, Convertible Securities or Stock Purchase Rights during the 5 Business Days prior to, and during the 90-day period beginning on, the commencement of a public distribution of Registrable Securities pursuant to any registration statement prepared pursuant to this Section 9 (other than by the Company pursuant to such registration if the registration is pursuant to Section 9.3 or by the Company pursuant to any dividend reinvestment plan offered by it to its stockholders). The Company shall not effect any registration of its securities (other than on Form S-4, Form S-8, or any successor forms to such forms or pursuant to such other registration rights agreements as may be approved in writing by the Majority Selling Holders) or effect any public or private sale or distribution of any of its securities, including a sale pursuant to Regulation D under the Securities Act, whether on its own behalf or at the request of any holder or holders of such securities from the date of a request for a Demand Registration pursuant to Section 9.2 until 90 days following the effective date of such Demand Registration statement, unless the Company shall have previously notified in writing all Selling Holders of the Company's desire to do so, and the Majority Selling Holders or the managing underwriter, if any, shall have consented thereto in writing. (c) Any agreement entered into on or after August 31, 1997 pursuant to which the Company or any of its majority owned subsidiaries issues or agrees to issue any Common Stock (including, without limitation, any employee stock option, stock purchase agreement, merger agreement or other agreement) shall contain a provision whereby any holder receiving such Common Stock who will hold more than one -49- 53 percent (1%) of the amount of such Common Stock then outstanding shall agree not to effect any public sale or distribution of any such Common Stock during the periods described in the second sentence of Section 9.9(b), in each case including a sale pursuant to Rule 144 under the Securities Act (unless such Person is prevented by applicable statute or regulation from entering into such an agreement). (d) Subject to Section 13, the Company shall not, directly or indirectly, (x) enter into any merger, consolidation or reorganization in which the Company shall not be the surviving corporation or (y) Transfer or agree to Transfer all or substantially all the Company's assets, unless prior to such merger, consolidation, reorganization or asset Transfer, the surviving corporation or the Transferee, respectively, shall have agreed in writing to assume the obligations of the Company under this Agreement, and for that purpose references hereunder to "Registrable Securities" shall be deemed to include the securities which the WS Holders would be entitled to receive in exchange for Registrable Securities pursuant to any such merger, consolidation or reorganization. 10. LOSS OR MUTILATION Upon receipt by the Company from any Holder of evidence reasonably satisfactory to it of the ownership of and the loss, theft, destruction or mutilation of this Warrant and an indemnity reasonably satisfactory to it (it being understood that the written indemnification agreement of or affidavit of loss of The Daiwa Bank, Limited shall be a sufficient indemnity) and, in case of mutilation, upon surrender and cancellation hereof, the Company will execute and deliver in lieu hereof a new Warrant of like tenor to such Holder; provided, however, in the case of mutilation, no indemnity shall be required if this Warrant in identifiable form is surrendered to the Company for cancellation. 11. OFFICE OF THE COMPANY -50- 54 As long as any of the Warrants remain outstanding, the Company shall maintain an office or agency, which may be the principal executive offices of the Company (the "Designated Office"), where the Warrants may be presented for exercise, registration of transfer, division or combination as provided in this Warrant. Such Designated Office shall initially be the office of the Company at Cedar Rapids, Iowa. The Company may from time to time change the Designated Office to another office of the Company or its agent within the United States by notice given to all registered holders of Warrants at least ten Business Days prior to the effective date of such change. 12. FINANCIAL AND BUSINESS INFORMATION Until the Expiration Date, the Company shall deliver to each Holder of Warrants or of Warrant Stock one copy of each of the following items: (i) promptly after filing thereof, copies of all regular and periodic reports, proxy statements (other than preliminary) and registration statements (other than registration statements on Forms S-3 (relating to debt securities) and S-8) which the Company may file with the Securities and Exchange Commission or any governmental agency substituted therefor. (ii) promptly upon their becoming available, copies of all financial statements, reports, notices and proxy statements sent or made available by the Company to the holders of any class of its securities generally or by any Subsidiary of the Company to the holders of any class of its securities generally; and (iii) with reasonable promptness, such other public information relating to the Company and its Subsidiaries as the Holder may, from time to time, reasonably request. -51- 55 13. REPURCHASE BY THE COMPANY OF WARRANTS The Company shall have the right (the "Call"), upon written notice (the "Call Notice") to the Holders of all outstanding Warrants given at any time on or after the date of the occurrence of the Triggering Event and before May 31, 1997, to repurchase on the date specified in the notice from each Holder of a Warrant all of such Warrant for an amount equal to the result (rounded to the nearest cent) obtained by multiplying One Dollar ($1.00) by a fraction, the numerator of which shall be the aggregate number of shares for which this Warrant may be exercised and the denominator of which shall be the aggregate number of shares for which all outstanding Series A Warrants may be exercised, and in all events not more than One Dollar ($1.00) for all Series A Warrants. On the date of any repurchase of this Warrant pursuant to this Section 13, the Holder shall assign to the Company such Warrant without any representation or warranty (except as to title and the absence of Liens), by the surrender of this Warrant at the Designated Office against payment of the repurchase price therefor. 14. MISCELLANEOUS 14.1. Nonwaiver. No course of dealing or any delay or failure to exercise any right hereunder on the part of the Company or the Holder shall operate as a waiver of such right or otherwise prejudice the rights, powers or remedies of such Person. 14.2. Notice Generally. Any notice, demand, request, consent, approval, declaration, delivery or communication hereunder to be made pursuant to the provisions of this Warrant shall be sufficiently given or made if in writing and either delivered in person with receipt acknowledged or sent by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: (a) if to any Holder of this Warrant or of Warrant Stock issued upon the exercise hereof, at its last known address appearing on the books of the Company maintained for such purpose; (b) if to the Company, at its Designated Office; -52- 56 or at such other address as may be substituted by notice given as herein provided. The giving of any notice required hereunder may be waived in writing by the party entitled to receive such notice. Every notice, demand, request, consent, approval, declaration, delivery or other communication hereunder shall be deemed to have been duly given or served on the date on which personally delivered, with receipt acknowledged, or three Business Days after the same shall have been deposited in the United States mail, or one Business Day after the same shall have been delivered to Federal Express or another overnight courier service. 14.3. Indemnification. If the Company fails to make, when due, any payments provided for in this Warrant, the Company shall pay to the Holder hereof (a) interest at the Agreed Rate on any amounts due and owing to such Holder from the date due until the date of payment and (b) such further amounts as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys' fees and expenses incurred by such Holder in collecting any amounts due hereunder. The Company shall indemnify, save and hold harmless the Holder hereof and the Holders of any Warrant Stock issued upon the exercise hereof from and against any and all liability, loss, cost, damage, reasonable attorneys' and accountants' fees and expenses, court costs and all other out-of-pocket expenses incurred in connection with or arising from a Company Default. This indemnification provision shall be in addition to the rights of such Holder or Holders to bring an action against the Company for breach of contract based on such Company Default. 14.4. Limitation of Liability. No provision hereof, in the absence of affirmative action by the Holder to purchase shares of Common Stock, and no enumeration herein of the rights or privileges of the Holder hereof, shall give rise to any liability of such Holder to pay the Exercise Price for any Warrant Stock other than pursuant to an exercise of this Warrant or any liability as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company. 14.5. Remedies. Each Holder of Warrants and/or War rant Stock, in addition to being entitled to exercise its rights granted by law, including recovery of damages, shall be entitled to specific performance of its rights provided under this War- -53- 57 rant. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees, in an action for specific performance, to waive the defense that a remedy at law would be adequate. 14.6. Successors and Assigns. Subject to the provi sions of Sections 3.1, 8.1 and 8.2, this Warrant and the rights evidenced hereby shall inure to the benefit of and be binding upon the successors of the Company and the permitted successors and assigns of the Holder hereof. The provisions of this Warrant are intended to be for the benefit of all Holders from time to time of this Warrant and, in the case of Section 9, all Holders of shares of Warrant Stock issued upon the exercise hereof (including transferees), and shall be enforceable by any such Holder. 14.7. Amendment. This Warrant and all other Warrants may be modified or amended or the provisions hereof waived with the written consent of the Company and the Majority Warrant Holders, provided that no such Warrant may be modified or amended to reduce the number of shares of Common Stock for which such Warrant is exercisable or to increase the price at which such shares may be purchased upon exercise of such Warrant (before giving effect to any adjustment as provided therein) without the written consent of the Holder thereof. 14.8. Severability. Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Warrant. 14.9. Headings. The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant. 14.10. GOVERNING LAW; JURISDICTION. IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS WARRANT AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF ILLINOIS APPLICABLE TO CONTRACTS MADE AND -54- 58 PERFORMED IN SUCH STATE, EXCEPT WITH RESPECT TO THE VALIDITY OF THIS WARRANT, THE ISSUANCE OF WARRANT STOCK UPON EXERCISE HEREOF AND THE RIGHTS AND DUTIES OF THE COMPANY WITH RESPECT TO REGISTRATION OF TRANSFER, WHICH SHALL BE GOVERNED BY THE LAWS OF DELAWARE. THE COMPANY HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED IN CHICAGO, ILLINOIS, SHALL HAVE, EXCEPT AS SET FORTH BELOW, EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THE COMPANY AND THE HOLDER OF THIS WARRANT PERTAINING TO THIS WARRANT OR TO ANY MATTER ARISING OUT OF OR RELATING TO THIS AGREEMENT, PROVIDED, THAT IT IS ACKNOWLEDGED THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF CHICAGO, ILLINOIS. -55- 59 IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed and its corporate seal to be impressed hereon and attested by its Secretary or an Assistant Secretary. NORAND CORPORATION By:_________________________ Name: Title: [SEAL] Attest: By:___________________________ Name: Title: -56- 60 ANNEX A SUBSCRIPTION FORM [To be executed only upon exercise of Warrant] The undersigned registered owner of this Warrant irrevocably exercises this Warrant for the purchase of ______ shares Common Stock of Norand Corporation and herewith makes payment therefor, all at the price and on the terms and conditions specified in this Warrant and requests that certificates for the shares of Common Stock hereby purchased (and any securities or other property issuable upon such exercise) be issued in the name of and delivered to _________________ whose address is ___________________________________________________ and, if such shares of Common Stock shall not include all of the shares of Common Stock issuable as provided in this Warrant, that a new Warrant of like tenor and date for the balance of the shares of Common Stock issuable hereunder be delivered to the undersigned. _______________________________ (Name of Registered Owner) _______________________________ (Signature of Registered Owner) _______________________________ (Street Address) _______________________________ (City) (State) (Zip Code) NOTICE: The signature on this subscription must correspond with the name as written upon the face of the within Warrant in every particular, without alteration or enlargement or any change whatsoever. 61 ANNEX B ASSIGNMENT FORM FOR VALUE RECEIVED the undersigned registered owner of this Warrant hereby sells, assigns and transfers unto the Assignee named below all of the rights of the undersigned under this Warrant, with respect to the number of shares of Common Stock set forth below: No. of Shares of Name and Address of Assignee Common Stock and does hereby irrevocably constitute and appoint _________________________ attorney-in-fact to register such transfer onto the books of Norand Corporation maintained for the purpose, with full power of substitution in the premises. Dated:___________________ Print Name:___________________ Signature:____________________ Witness:______________________ NOTICE: The signature on this assignment must correspond with the name as written upon the face of the within Warrant in every particular, without alteration or enlargement or any change whatsoever. EX-4.(N)(5) 7 SERIES A WARRANT A-5 1 EXHIBIT 4.N.5 ================================================================= SERIES A WARRANT to Purchase Common Stock of NORAND CORPORATION ================================================================= Warrant No. A - 5 Original Issue Date: November 20, 1996 2 TABLE OF CONTENTS 1. DEFINITIONS 1 2. EXERCISE OF WARRANT 11 2.1. Manner of Exercise 11 2.2. Payment of Transfer Taxes 12 2.3. Fractional Shares 12 2.4. Continued Validity and Application 13 2.5. Limitation on Regulated Holder's Exercise 13 3. TRANSFER, DIVISION AND COMBINATION 14 3.1. Transfer 14 3.2. Division and Combination 14 3.3. Expenses 14 3.4. Maintenance of Books 14 4. ANTIDILUTION PROVISIONS 14 4.1. Stock Dividends, Subdivisions and Combinations 14 4.2. Issuance of Additional Shares of Common Stock 15 4.3. Issuances of Stock Purchase Rights and Convertible Securities 15 4.4. Adjustment of Number of Shares Purchasable 17 4.5. Reorganization, Reclassification, Merger, Consolidation or Disposition of Assets 17 4.6. Determination of Consideration 18 4.7. Other Dilutive Events 20 4.8. Other Provisions Applicable to Adjustments Under this Section 21 5. NO IMPAIRMENT 22 6. RESERVATION AND AUTHORIZATION OF COMMON STOCK 23 7. NOTICE OF CORPORATE ACTIONS; TAKING OF RECORD; TRANSFER BOOKS 23 7.1. Notices of Corporate Actions 23 7.2 Closing of Transfer Books 23 8. TRANSFER RESTRICTIONS 24 8.1. Restrictions on Transfers 24 8.2. Restrictive Legends 24 -i- 3 8.3. Termination of Securities Law Restrictions 25 9. REGISTRATION RIGHTS 26 9.1. Certain Definitions 26 9.2. Demand Registration 27 9.3. Piggyback Registration 29 9.4. Registration Procedures 30 9.5. Selling Holders' Obligations 34 9.6. Expenses of Registration 34 9.7. Indemnification; Contribution 35 9.8. Holdback 40 9.9. Additional Covenants of the Company 40 10. LOSS OR MUTILATION 42 11. OFFICE OF THE COMPANY 42 12. FINANCIAL AND BUSINESS INFORMATION 43 13. REPURCHASE BY THE COMPANY OF WARRANTS 43 14. MISCELLANEOUS 43 14.1. Nonwaiver 14.2. Notice Generally 43 14.3. Indemnification 44 14.4. Limitation of Liability 44 14.5. Remedies 44 14.6. Successors and Assigns 45 14.7. Amendment 45 14.8. Severability 45 14.9. Headings 45 14.10. GOVERNING LAW; JURISDICTION 45 45 ANNEX ASUBSCRIPTION FORM 48 ANNEX BASSIGNMENT FORM 49 SCHEDULE A RESERVED SHARES OF COMMON STOCK SCHEDULE B UNDERWRITERS AND AGENTS -ii- 4 NEITHER THE WARRANTS REPRESENTED BY THIS CERTIFICATE NOR ANY OF THE SECURITIES ISSUABLE UPON EXERCISE THEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAW. NO TRANSFER OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE OR OF THE SECURITIES ISSUABLE UPON EXERCISE THEREOF SHALL BE VALID OR EFFECTIVE UNLESS (A) SUCH TRANSFER IS MADE PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR (B) THE HOLDER OF THE SECURITIES PROPOSED TO BE TRANSFERRED SHALL HAVE DELIVERED TO THE COMPANY EITHER A NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION OR AN OPINION OF COUNSEL EXPERIENCED IN SECURITIES MATTERS AND REASONABLY ACCEPTABLE TO THE COMPANY TO THE EFFECT THAT SUCH PROPOSED TRANSFER IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE ACT OR (C) SUCH TRANSFER IS PURSUANT TO RULE 144 OR RULE 144A UNDER THE ACT AND SUCH HOLDER(S) SHALL HAVE DELIVERED TO THE COMPANY A CERTIFICATE SETTING FORTH THE BASIS FOR APPLYING SUCH RULE TO THE PROPOSED TRANSFER. Warrant No. A - 5 SERIES A WARRANT NORAND CORPORATION THIS IS TO CERTIFY THAT NORWEST BANK IOWA, NATIONAL ASSOCIATION, or registered assigns, is entitled, at any time after May 31, 1997 and prior to the Expiration Date (such term, and certain other capitalized terms used herein being hereinafter defined), to purchase from NORAND CORPORATION, a Delaware corporation (the "Company"), Twenty-one Thousand Seven Hundred Seventy-seven (21,777) shares of the Common Stock of the Company (subject to adjustment as provided herein), at a purchase price of $21.15 per share (the initial "Exercise Price", subject to adjustment as provided herein), all on the terms and conditions and pursuant to the provisions hereinafter set forth. 5 1. DEFINITIONS As used in this Warrant, the following terms have the respective meanings set forth below: "Affiliate" of any Person means a Person (a) which directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with such Person, (b) which beneficially owns or holds more than ten percent of the outstanding shares of any class of voting stock of such Person and has the power to vote such shares or (c) more than ten percent of the outstanding shares of any class of voting stock (or, in the case of a Person which is not a corporation, more than ten percent of the equity interest) of which is beneficially owned or held by such Person and such Person has the power to vote such shares or equity interest. The term "control" as used with respect to any Person means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise. "After-Tax Basis", when referring to a payment that is required hereunder (the "target amount"), shall mean a total payment (the "total amount") that, after deduction of all federal, state and local taxes that are required to be paid by the recipient in respect of the receipt or accrual of such total amount, is equal to the target amount. "Agreed Rate" shall mean a rate per annum equal to the corporate base rate of interest announced by The First National Bank of Chicago from time to time, changing when and as said corporate base rate changes. "Appraised Value" per share of Common Stock as of a date specified herein shall mean the value of such share as of such date as determined by an investment bank of nationally recognized standing selected by the Majority Warrant Holders from Schedule B (or any successor of any such entity), it being understood that the Majority Warrant Holders shall use commercially reasonable efforts to select one of the first three listed entities subject to arriving at reasonably acceptable terms and conditions for the -2- 6 appraisal. The Company shall pay the costs and fees of such investment bank, and the decision of the investment bank making such determination of Appraised Value shall be final and binding on the Company and all affected holders of Warrants or Warrant Stock. Such Appraised Value shall be determined as a pro rata portion of the value of the Company taken as a whole, based on the higher of (A) the value derived from a hypothetical sale of the entire Company as a going concern by a willing seller to a willing buyer (neither acting under any compulsion) and (B) the liquidation value of the entire Company. No discount shall be applied on account of (i) any Warrants or Warrant Stock representing a minority interest, (ii) any lack of liquidity of the Common Stock or the Warrants, (iii) the fact that the Warrants or Warrant Stock may constitute "restricted securities" for securities law purposes or (iv) the existence of any call option. "Bank Holding Company Act" shall mean the Bank Holding Company Act of 1956, as amended. "Business Day" shall mean any day that is not a Saturday or Sunday or a day on which banks are required or permitted to be closed in the State of Illinois. "Call" shall have the meaning set forth in Section 13 hereof. "Call Notice" shall have the meaning set forth in Section 13 hereof. "Commission" shall mean the Securities and Exchange Commission or any other federal agency then administering the Securities Act and other federal securities laws. "Common Stock" shall mean (except where the context otherwise indicates) the Common Stock of the Company, par value $.01 per share, as constituted on the Original Issue Date, and any capital stock into which such Common Stock may thereafter be changed, and shall also include (i) capital stock of the Company of any other class (regardless of how denominated) issued to the holders of shares of any Common Stock upon any reclassification thereof which is also not preferred as to dividends or liquidation over any other -3- 7 class of stock of the Company and which is not subject to redemption and (ii) shares of common stock of any successor or acquiring corporation (as defined in Section 4.5 hereof) received by or distributed to the holders of Common Stock of the Company in the circumstances contemplated by Section 4.5 hereof. "Company" means Norand Corporation, a Delaware corporation, and any successor corporation. "Company Default" means (a) the breach of any warranty or the inaccuracy in any material respect at the time when made of any representation made by the Company herein or (b) the failure by the Company to comply in any material respect with any covenant of the Company contained herein. "Continuously Effective", with respect to a specified registration statement, shall mean that it shall not cease to be effective and available for Transfers of Warrant Stock thereunder for the longer of either (i) any ten consecutive Business Days, or (ii) an aggregate of fifteen Business Days during the period specified in the relevant provision of Section 9 hereof. "Convertible Securities" shall mean evidences of indebtedness, shares of stock or other securities that are convertible into or exchangeable for, with or without payment of additional consideration in cash or property, shares of Common Stock, either immediately or upon the occurrence of a specified date or a specified event. "Credit Agreement" means the Second Amended and Restated Credit Agreement dated as of January 25, 1996, as thereafter from time to time amended, supplemented, restated or modified, among the Company, the Lenders party thereto and The First National Bank of Chicago, as agent. "Current Market Price" shall mean as of any specified date the average of the daily market prices of the Common Stock of the Company for the shorter of (x) the twenty consecutive Business Days immediately preceding such date or (y) the period commencing on the Business Day next following the first public announcement of any event giving rise to an adjustment of the Exercise Price pursuant to Section 4 below -4- 8 and ending on such date. The "daily market price" for each such Business Day shall be: (i) if the Common Stock is then listed on a national securities exchange or is listed on NASDAQ and is designated as a National Market System security, the last sale price, regular way, on such day on the principal stock exchange or market system on which such Common Stock is then listed or admitted to trading, or, if no such sale takes place on such day, the average of the closing bid and asked prices for the Common Stock on such day as reported on such stock exchange or market system or (ii) if the Common Stock is not then listed or admitted to trading on any national securities exchange or designated as a National Market System security on NASDAQ but is traded over-the-counter, the average of the closing bid and asked prices for the Common Stock as reported on NASDAQ or the Electronic Bulletin Board or in the National Daily Quotation Sheets, as applicable. "Demand Registration" shall have the meaning set forth in Section 9.2(a) hereof. "Demanding Holders" shall have the meaning set forth in Section 9.2(a) hereof. "Designated Office" shall have the meaning set forth in Section 11 hereof. "Equity" shall mean equity capital (not including the equity capital attributable to the Settlement Stock, and any mandatory redemption terms of which equity capital are acceptable to the Majority Warrant Holders) raised by and/or contributed to the Company subsequent to the Original Issue Date or new Indebtedness (as defined in the Credit Agreement) subordinated to the Obligations (as defined in the Credit Agreement), provided the terms of such Indebtedness (including, without limitation, maturity, amortization, covenants, defaults, remedies and subordination provisions) are acceptable to the Majority Warrant Holders. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect from time to time. -5- 9 "Exercise Notice" shall have the meaning set forth in Section 2.1 hereof. "Exercise Period" shall mean the period during which this Warrant is exercisable pursuant to Section 2.1 hereof. "Exercise Price" shall mean, in respect of a share of Common Stock at any date herein specified, the initial Exercise Price set forth in the preamble of this Warrant as adjusted from time to time pursuant to Section 4 hereof. "Expiration Date" shall mean August 31, 2002, unless extended under the circumstances contemplated by Section 9.2(d) hereof. "Fair Value" per share of Common Stock as of any specified date shall mean (A) if the Common Stock is publicly traded on such date, the Current Market Price per share or (B) if the Common Stock is not publicly traded on such date, (1) the fair market value per share of Common Stock as determined in good faith by the Board of Directors of the Company and set forth in a written notice to each Holder or (2) if the Majority Warrant Holders object in writing to such price as determined by the Board of Directors within thirty days after receiving notice of same, the Appraised Value per share as of such date. "Fully Diluted Outstanding" shall mean, when used with reference to Common Stock, at any date as of which the number of shares thereof is to be determined, all shares of Common Stock Outstanding on such date and all shares of Common Stock issuable in respect of (x) the Warrants outstanding on such date, (y) any Convertible Securities outstanding on such date and (z) any other Stock Purchase Rights outstanding on such date, in each case regardless of whether or not the conversion, exchange, subscription or purchase rights associated with such Convertible Securities or Stock Purchase Rights are presently exercisable. "GAAP" shall mean generally accepted accounting principles in the United States of America as from time to time in effect. -6- 10 "Glass-Steagall Act" shall mean Section 24 (Seventh), Section 78, Section 377 and Section 378 of Title 12 (12 U.S.C. Section Section 24 (Seventh) 78, 377, 378), or any similar federal legislation. "Holder" shall mean (a) with respect to this Warrant, the Person in whose name the Warrant set forth herein is registered on the books of the Company maintained for such purpose and (b) with respect to any other Warrant or shares of Warrant Stock, the Person in whose name such Warrant or Warrant Stock is registered on the books of the Company maintained for such purpose. "Insolvency Event" shall mean any proceeding being instituted by or against the Company seeking a declaration or order for relief, or entailing a finding, that the Company is insolvent or bankrupt, or seeking reorganization, liquidation, dissolution, winding-up, charter revocation or other similar relief with respect to the Company or any of its properties, assets or debts, or seeking the appointment of a receiver, trustee, custodian, liquidator, sequestrator or similar official for the Company or any of its properties or assets, or the Company becoming insolvent or bankrupt or generally unable to pay its debts as they become due, or the Company voluntarily suspending its business or making a general assignment for the benefit of creditors; provided that an Insolvency Event shall not be deemed to have occurred on account of any such proceeding which is involuntary on the part of the Company unless same shall not have been dismissed or stayed within 60 days. "Lien" shall mean any mortgage or deed of trust, pledge, hypothecation, assignment, deposit arrangement, lien, charge, claim, security interest, easement or encumbrance, or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, any lease or title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, and the filing of, or agreement to give, any financing statement perfecting a security interest under the Uniform Commercial Code or comparable law of any jurisdiction). -7- 11 "Majority Warrant Holders", with respect to a given determination, shall mean the Holders of Warrants and/or Warrant Stock representing at least seventy-six percent (76%) of all Warrants and/or Warrant Stock (with any such Warrants being deemed to represent, for the purposes of such calculation, the shares of Warrant Stock then issuable upon exercise thereof) directly affected by such determination. "Majority Selling Holders" shall mean those Selling Holders whose Warrants and/or Warrant Stock included in a registration under Section 9 hereof represents a majority of the Warrants and/or Warrant Stock (with any such Warrants being deemed to represent, for the purposes of such calculation, the shares of Warrant Stock then issuable upon exercise thereof) included therein by all Selling Holders. "NASD" shall mean the National Association of Securities Dealers, Inc., or any successor corporation thereto. "NASDAQ" shall mean the NASDAQ quotation system, or any successor reporting system. "Notes" shall mean any of the promissory notes issued by the Company under the Credit Agreement. "Opinion of Counsel" means a written opinion of counsel experienced in Securities Act or bank regulatory matters, as the case may be, chosen by the Holder of this Warrant or Warrant Stock issued upon the exercise hereof and reasonably acceptable to the Company. "Original Issue Date" shall mean the date on which the Original Warrants were issued, as set forth on the cover page of this Warrant. "Original Warrants" shall mean the Warrants originally issued by the Company on the Original Issue Date to each of The First National Bank of Chicago, Fleet Bank of Massachusetts, N.A., The Daiwa Bank, Limited, Norwest Bank Iowa, National Association and Caisse Nationale de Credit Agricole. "Other Property" shall have the meaning set forth in Section 4.5 hereof. -8- 12 "Outstanding" shall mean, when used with reference to Common Stock, at any date as of which the number of shares thereof is to be determined, all issued shares of Common Stock, except shares then owned or held by or for the account of the Company or any Subsidiary thereof, and shall include all shares issuable in respect of outstanding scrip or any certificates representing fractional interests in shares of Common Stock. "Outstanding", when used with respect to Warrant Stock for the purposes of Section 9 hereof shall have the meaning set forth in Section 9.1(d) hereof. "Person" shall mean any individual, sole proprietorship, partnership, limited liability company, joint venture, trust, incorporated organization, association, corporation, institution, public benefit corporation, entity or government (whether federal, state, county, city, municipal or otherwise, including, without limitation, any instrumentality, division, agency, body or department thereof). "Piggyback Registration" shall have the meaning set forth in Section 9.3(a) hereof. "Register", "registered" and "registration" shall refer to a registration effected by preparing and filing a registration statement or similar document in compliance with the Securities Act, and the declaration or ordering by the Commission of effectiveness of such registration statement or document. "Registration Expenses" shall have the meaning set forth in Section 9.6(a) hereof. "Restricted Common Stock" shall mean shares of Common Stock which are, or which upon their issuance on the exercise of this Warrant would be, evidenced by a certificate bearing the restrictive legend set forth in Section 8.2(a) hereof. "Securities Act" shall mean the Securities Act of 1933, as amended, or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. -9- 13 "Selling Holders" shall mean, with respect to a specified registration under Section 9 hereof, WS Holders whose Registrable Securities are included in such registration. "Series A Warrants" shall mean all of the Series A Warrants to Purchase Common Stock of Norand Corporation, issued concurrently with, and having the same terms (other than the number of shares purchasable upon the exercise thereof) as, this Warrant. "Series B Warrants" shall mean all of the Series B Warrants to Purchase Common Stock of Norand Corporation issued concurrently with this Warrant. "Settlement Stock" shall mean the shares of Common Stock contemplated to be issued in settlement of the pending shareholders' claims against the Company with respect to the litigation styled In re Norand Corporation Securities Litigation, Master File No. C95- 323, pending in the United States District Court for the Northern District of Iowa, Cedar Rapids Division. "Share Withholding Option" has the meaning set forth in Section 2.1(c) hereof. "Shelf Registration" shall have the meaning set forth in Section 9.2(a) hereof. "Stock Purchase Rights" shall mean any options, warrants or other securities or rights to subscribe to or exercisable for the purchase of shares of Common Stock or Convertible Securities, whether or not immediately exercisable, other than the options, warrants or other rights described in Schedule A hereto. "Subsequent Issuance" shall mean any sale or issuance by the Company of Common Stock, Convertible Securities or Stock Purchase Rights after the Original Issue Date other than: (i) Any issuance of Warrant Stock upon exercise of the Warrants and any issuance of Common Stock, Convertible Securities or Stock Purchase Rights (and - 10 - 14 any issuance of Common Stock pursuant to the conversion, exchange or exercise of any such Convertible Securities or Stock Purchase Rights) deemed to have been issued as of the Original Issue Date pursuant to the definition of Fully Diluted Outstanding. (ii) Any issuance of Common Stock pursuant to the exercise of the options and warrants described in Schedule A hereto, provided, however, that the exercise price of any such option or warrant (other than warrants granted to Jay Alix and Associates and to Donald W. Rowley for up to the respective number of shares set forth on Schedule A) granted or issued after the Original Issue Date shall not be less than the "daily market price" (as that term is defined in the definition of Current Market Price) of the Common Stock on the date of grant or issue of the option or warrant. (iii) The issuance of the Settlement Stock. (iv) The issuance of Common Stock or Convertible Securities directly related to the Company's receipt of Equity if, and only if, the aggregate Equity actually received by the Company between the Original Issue Date and August 31, 1997 equals or exceeds $20 million (otherwise, after August 31, 1997, all such issuances, both prior to and after August 31, 1996, shall be considered a Subsequent Issuance for purposes of Section 4 hereof). (v) Any other issuance of Common Stock, Convertible Securities or Stock Purchase Rights with respect to which the Majority Warrant Holders shall have waived application of the provisions of Section 4 below. "Subsidiary" means any corporation or association (a) more than 50% (by number of votes) of the voting stock of which is at the time owned by the Company or by one or more Subsidiaries or by the Company and one or more Subsidiaries, or any other business entity in which the Company or one or more Subsidiaries or the Company and one or more Subsidiaries own more than a 50% interest either in the -11- 15 profits or capital of such business entity or (b) whose net earnings, or portions thereof, are consolidated with the net earnings of the Company and are recorded on the books of the Company for financial reporting purposes in accordance with GAAP. "Transfer" shall mean any disposition of any Warrant or Warrant Stock or of any interest in either thereof, which would constitute a "sale" thereof within the meaning of the Securities Act. "Triggering Event" shall mean the repayment in full of all indebtedness under the Credit Agreement. "Violation" has the meaning set forth in Section 9.7(a) hereof. "Warrant Price" shall mean an amount equal to (i) the number of shares of Common Stock being purchased upon exercise of this Warrant pursuant to Section 2.1 hereof, multiplied by (ii) the Exercise Price as of the date of such exercise. "Warrants" shall mean the Original Warrants and all warrants issued upon transfer, division or combination of, or in substitution for, such Original Warrants or any other such Warrant. All Warrants shall at all times be identical as to terms and conditions and date, except as to the number of shares of Common Stock for which they may be exercised. "Warrant Stock" generally shall mean the shares of Common Stock issued, issuable or both (as the context may require) upon the exercise of Warrants until such time as such shares of Common Stock have either been (i) Transferred in a public offering pursuant to a registration statement filed under the Securities Act or (ii) Transferred in a transaction exempt from the registration and prospectus delivery requirements of the Securities Act under Section 4(1) thereof with all transfer restrictions and restrictive legends with respect to such Common Stock being removed in connection with such transaction. "Warrant Stock", for the purposes of Section 9 hereof, shall have the meaning set forth in Section 9.1(b) hereof. -12- 16 "WS Holder" shall have the meaning set forth in Section 9.1(a) hereof. 2. EXERCISE OF WARRANT 2.1. Manner of Exercise. (a) From and after May 31, 1997 and until 5:00 P.M., Chicago time, on the Expiration Date, the Holder of this Warrant may from time to time exercise this Warrant, on any Business Day, for all or any part of the number of shares of Common Stock purchasable hereunder (as determined pursuant to Section 2.2 below). In order to exercise this Warrant, in whole or in part, the Holder shall (i) deliver to the Company at the Designated Office a written notice of the Holder's election to exercise this Warrant (an "Exercise Notice"), which Exercise Notice shall be irrevocable and specify the number of shares of Common Stock to be purchased, together with this Warrant and (ii) pay to the Company the Warrant Price (the date on which both such delivery and payment shall have first taken place being hereinafter sometimes referred to as the "Exercise Date"). Such Exercise Notice shall be in the form of the subscription form appearing at the end of this Warrant as Annex A, duly executed by the Holder or its duly authorized agent or attorney. (b) Upon receipt of such Exercise Notice, Warrant and payment, the Company shall, as promptly as practicable, and in any event within five Business Days thereafter, execute (or cause to be executed) and deliver (or cause to be delivered) to the Holder a certificate or certificates representing the aggregate number of full shares of Common Stock issuable upon such exercise, together with cash in lieu of any fraction of a share, as hereafter provided. The stock certificate or certificates so delivered shall be, to the extent possible, in such denomination or denominations as the exercising Holder shall reasonably request in the Exercise Notice and shall be registered in the name of the Holder or such other name as shall be designated in the Exercise Notice. This Warrant shall be deemed to have been exercised and such certificate or certificates shall be deemed to have been issued, and the Holder or any other Person so designated to be named therein shall be deemed to have become a holder of record of such shares for all purposes, as of the Exercise Date. -13- 17 (c) Payment of the Warrant Price shall be made at the option of the Holder by one or more of the following methods: (i) by delivery of a certified or official bank check in the amount of such Warrant Price, (ii) by instructing the Company to withhold a number of shares of Warrant Stock then issuable upon exercise of this Warrant with an aggregate Current Market Price equal to such Warrant Price (the "Share Withholding Option"), (iii) by surrendering to the Company shares of Common Stock previously acquired by the Holder with an aggregate Current Market Price equal to such Warrant Price or(iv) by delivery of a Note, duly endorsed by or accompanied by appropriate instruments of transfer duly executed by the Holder or by the Holder's attorney duly authorized in writing. In the event of any withholding of Warrant Stock or surrender of Common Stock pursuant to clause (ii) or (iii) above where the number of shares whose Current Market Price is equal to the Warrant Price is not a whole number, the number of shares withheld by or surrendered to the Company shall be rounded up to the nearest whole share and the Company shall make a cash payment to the Holder based on the incremental fraction of a share being so withheld by or surrendered to the Company in an amount determined in accordance with Section 2.3 hereof. For the purpose of making payment of the Warrant Price, any Note surrendered to the Company shall be deemed to have a value equal to 100% of the principal amount thereof plus any interest accrued but unpaid thereon. If the Holder delivers a Note with a deemed value that exceeds the Warrant Price, the Company shall reissue to the Holder a new Note identical in all respects to the surrendered Note except that the principal amount of such new Note shall be equal to the principal amount that, together with any interest accrued but unpaid thereon, is equal to the deemed value of the surrendered Note less the Warrant Price. (d) If this Warrant shall have been exercised in part, the Company shall, at the time of delivery of the certificate or certificates representing the shares of Common Stock being issued, deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the unpurchased shares of Common Stock called for by this Warrant. Such new Warrant shall in all other respects be identical with this Warrant. 2.2. Payment of Transfer Taxes. All shares of Common Stock issuable upon the exercise of this Warrant pursuant to the terms hereof shall be validly issued, fully paid and nonassess- -14- 18 able, issued without violation of any preemptive rights and free and clear of all Liens (other than any created by actions of the Holder). The Company shall pay all expenses in connection with, and all taxes and other governmental charges that may be imposed with respect to, the issue or delivery thereof, unless such tax or charge is imposed by law upon the Holder, in which case such taxes or charges shall be paid by the Holder and the Company shall reimburse the Holder therefor on an After-Tax Basis. 2.3. Fractional Shares. The Company shall not be required to issue a fractional share of Common Stock upon exercise of any Warrant. As to any fraction of a share that the Holder of one or more Warrants, the rights under which are exercised in the same transaction, would otherwise be entitled to purchase upon such exercise, the Company shall pay a cash adjustment in respect of such final fraction in an amount equal to the same fraction of the Current Market Price of one share of Common Stock on the Exercise Date, if the Common Stock is then publicly traded. 2.4. Continued Validity and Application. (a) A Holder of shares of Warrant Stock issued upon the exercise of this Warrant, in whole or in part, including any transferee of such shares (other than a transferee in whose hands such shares no longer constitute Warrant Stock as defined herein), shall continue, with respect to such shares, to be entitled to all rights and to be subject to all obligations that are applicable to such Holder by the terms of this Warrant under Section 9 hereof. The Company shall, at the time of any exercise of this Warrant or any transfer of Warrant Stock, upon the request of the Holder of the shares of Warrant Stock issued in connection with such exercise or transfer, acknowledge in writing, in a form reasonably satisfactory to such Holder, its continuing obligation to afford to such Holder such rights referred to in this Section 2.4; provided, however, that if such Holder shall fail to make any such request, such failure shall not affect the continuing obligation of the Company to afford to such Holder all such rights. -15- 19 2.5. Limitation on Regulated Holder's Exercise. Notwithstanding anything in this Warrant to the contrary, the Holder of this Warrant, if subject to the Bank Holding Company Act or any provision of the Glass-Steagall Act, may exercise this Warrant only if the Notice of Exercise is accompanied by an Opinion of Counsel of such Holder to the effect that, as of the date of delivery of such opinion, no federal or state regulatory clearances are required for such Holder to exercise this Warrant or, in the event any such federal or state regulatory clearances are required prior to the exercise of this Warrant, to the effect that all such clearances have been obtained or, if not then obtained, that no statute or regulation or regulatory policy or guidelines known to such counsel would by their terms preclude the obtaining of such clearances or make it unlikely that such clearances would be obtained or make it likely that such clearances would, if obtained, contain material conditions adverse to such Holder. In the event that federal or state regulatory clearances are required prior to the exercise of this Warrant by the Holder hereof, the Company shall reasonably cooperate with such Holder in providing such information to any regulatory agency as such agency may reasonably require. In the event any such regulatory clearance is withheld or denied, such Holder may continue to hold this Warrant until its expiration or may sell or otherwise transfer this Warrant in accordance with the terms hereof. 3. TRANSFER, DIVISION AND COMBINATION 3.1. Transfer. Subject to compliance with Section 8 hereof, each transfer of this Warrant and all rights hereunder, in whole or in part, shall be registered on the books of the Company to be maintained for such purpose, upon surrender of this Warrant at the Designated Office, together with a written assignment of this Warrant in the form of Annex B hereto duly executed by the Holder or its agent or attorney. Upon such surrender and delivery, the Company shall, subject to Section 8, execute and deliver a new Warrant or Warrants in the name of the assignee or assignees and in the denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned and this Warrant shall promptly be canceled. A Warrant, if properly assigned in compliance with Section 8, may be exercised by the new Holder for the purchase of shares of Common Stock without having a new Warrant issued. -16- 20 3.2. Division and Combination. Subject to compliance with the applicable provisions of this Warrant, this Warrant may be divided or combined with other Warrants upon presentation hereof at the Designated Office, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney. Subject to compliance with the applicable provisions of this Warrant as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. 3.3. Expenses. The Company shall prepare, issue and deliver at its own expense any new Warrant or Warrants required to be issued under this Section 3. 3.4. Maintenance of Books. The Company agrees to maintain, at the Designated Office, books for the registration and transfer of the Warrants. 4. ANTIDILUTION PROVISIONS The number of shares of Common Stock for which this Warrant is exercisable and the Exercise Price shall be subject to adjustment from time to time as set forth in this Section 4. 4.1. Stock Dividends, Subdivisions and Combinations. If at any time the Company shall: (i) take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend payable in, or other distribution of, additional shares of Common Stock, (ii) subdivide its outstanding shares of Common Stock into a larger number of shares of such Common Stock, or (iii) combine its outstanding shares of Common Stock into a smaller number of shares of such Common Stock, then the Exercise Price shall be adjusted to equal the product of the Exercise Price in effect immediately prior to such event multiplied by a fraction the numerator of which is equal to the -17- 21 number of shares of Common Stock Outstanding immediately prior to the adjustment and the denominator of which is equal to the number of shares of Common Stock Outstanding immediately after such adjustment. 4.2. Issuance of Additional Shares of Common Stock. (a) If at any time the Company shall issue or sell any shares of Common Stock in a Subsequent Issuance for a consideration per share that is less than the Exercise Price in effect immediately prior to such issuance or sale, then, forthwith upon such issuance or sale, the Exercise Price shall be reduced to a price calculated by dividing (1) an amount equal to the sum of (x) the number of shares of Common Stock Outstanding immediately prior to such Subsequent Issuance multiplied by the then existing Exercise Price, plus (y) the aggregate consideration (determined in accordance with the provisions of Section 4.6 hereof), if any, received by the Company in connection with such Subsequent Issuance, by (2) the total number of shares of Common Stock Outstanding immediately after such Subsequent Issuance. (b) The provisions of this Section 4.2 shall not apply to (i) any issuance of Common Stock for which an adjustment is provided for under Section 4.1 or (ii) any issuance or sale of Common Stock pursuant to the exercise of any Stock Purchase Rights or Convertible Securities to the extent that an adjustment shall have been previously made hereunder in connection with the issuance of such Stock Purchase Rights or Convertible Securities pursuant to the provisions of Section 4.3 hereof. 4.3. Issuances of Stock Purchase Rights and Convertible Securities. (a) In the event that the Company shall at any time issue, sell or grant any Stock Purchase Rights to any Person in a Subsequent Issuance, then, for the purpose of Section 4.2 above, the Company shall be deemed to have issued at that time a number of shares of Common Stock equal to the maximum number of shares of Common Stock (without giving effect to any antidilution provisions in such Stock Purchase Rights) that are or may become issuable upon exercise of such Stock Purchase Rights (or upon exercise of any Convertible Securities issuable upon exercise of such Stock Purchase Rights) for a consideration per share equal to (i) the aggregate consideration per share (determined in accordance with the provisions of Section 4.6 hereof) received by the Company in connection with the issuance, sale or grant of such Stock Purchase Rights plus (ii) the minimum -18- 22 amount of such consideration per share receivable by the Company in connection with the exercise of such Stock Purchase Rights (and the exercise of any Convertible Securities issuable upon exercise of such Stock Purchase Rights). (b) In the event that the Company shall at any time issue or sell any Convertible Securities to any Person in a Subsequent Issuance, then, for the purposes of Section 4.2 above, the Company shall be deemed to have issued at that time a number of shares of Common Stock equal to the maximum number of shares of Common Stock that are or may become issuable upon the exercise of the conversion or exchange rights associated with such Convertible Securities for a consideration per share equal to (i) the aggregate consideration per share (determined in accordance with the provisions of Section 4.6 hereof) received by the Company in connection with the issuance or sale of such Convertible Securities plus (ii) the minimum amount of such consideration per share receivable by the Company in connection with the exercise of such conversion or exchange rights. (c) If, at any time after any adjustment of the Exercise Price shall have been made hereunder as the result of any issuance, sale or grant of any Stock Purchase Rights or Convertible Securities, the maximum number of shares issuable upon exercise of such Stock Purchase Rights or of the rights of conversion or exchange associated with such Convertible Securities shall increase, or the minimum amount of consideration per share receivable in connection with such exercise shall decrease, whether by operation of any antidilution rights pertaining to such Stock Purchase Rights or Convertible Securities, by agreement of the parties or otherwise, the Exercise Price then in effect shall first be readjusted to eliminate the effects of the original issuance, sale or grant of such Stock Purchase Rights or Convertible Securities on such Exercise Price and then readjusted as if such Stock Purchase Rights or Convertible Securities had been issued on the effective date of such increase in number of shares or decrease in consideration, but only if the effect of such two-step readjustment is to reduce the Exercise Price below the Exercise Price in effect immediately prior to such increase or decrease. (d) If, at any time after any adjustment of the Exercise Price shall have been made hereunder as the result of any issuance, sale or grant of any Stock Purchase Rights or -19- 23 Convertible Securities, any of such Stock Purchase Rights or the rights of conversion or exchange associated with such Convertible Securities shall expire by their terms or any of such Stock Purchase Rights or Convertible Securities shall be repurchased by the Company or a Subsidiary thereof for a consideration per underlying share of Common Stock not exceeding the amount of such consideration received by the Company in connection with the issuance, sale or grant of such Stock Purchase Rights or Convertible Securities, the Exercise Price then in effect shall forthwith be increased to the Exercise Price that would have been in effect if such expiring Stock Purchase Rights or rights of conversion or exchange or such repurchased Stock Purchase Rights or Convertible Securities had never been issued. Similarly, if at any time after any such adjustment of the Exercise Price shall have been made pursuant to Section 4.2 (i) any additional consideration is received or becomes receivable by the Company in connection with the issuance or exercise of such Stock Purchase Rights or Convertible Securities or (ii) there is a reduction in the conversion ratio applicable to such Convertible Securities so that fewer shares of Common Stock will be issuable upon the conversion or exchange thereof or there is a decrease in the number of shares of Common Stock issuable upon exercise of such Stock Purchase Rights, the Exercise Price then in effect shall be forthwith readjusted to the Exercise Price that would have been in effect had such changes taken place at the time that such Stock Purchase Rights or Convertible Securities were initially issued, granted or sold. In no event shall any readjustment under this Section 4.3(d) affect the validity of any shares of Warrant Stock issued upon any exercise of this Warrant prior to such readjustment, nor shall any such readjustment have the effect of increasing the Exercise Price above the Exercise Price that would have been in effect if the related Stock Purchase Rights or Convertible Securities had never been issued. 4.4. Adjustment of Number of Shares Purchasable. Upon any adjustment of the Exercise Price as provided in Section 4.1, 4.2 or 4.3 hereof, the Holder hereof shall thereafter be entitled to purchase upon the exercise of this Warrant, at the Exercise Price resulting from such adjustment, the number of shares of Common Stock (calculated to the nearest 1/100th of a share) obtained by multiplying the Exercise Price in effect immediately prior to such adjustment by the number of shares of Common Stock issuable on the exercise hereof immediately prior to such -20- 24 adjustment and dividing the product thereof by the Exercise Price resulting from such adjustment. 4.5. Reorganization, Reclassification, Merger, Consolidation or Disposition of Assets. In case the Company shall reorganize its capital, reclassify its capital stock, consolidate or merge with or into another corporation (where the Company is not the surviving corporation or where there is any change whatsoever in, or distribution with respect to, the Outstanding Common Stock of the Company), or sell, transfer or otherwise dispose of all or substantially all of its property, assets or business to another corporation and, pursuant to the terms of such reorganization, reclassification, merger, consolidation or disposition of assets, (i) shares of common stock of the successor or acquiring corporation or of the Company (if it is the surviving corporation) or (ii) any cash, shares of stock or other securities or property of any nature whatsoever (including warrants or other subscription or purchase rights) in addition to or in lieu of common stock of the successor or acquiring corporation ("Other Property") are to be received by or distributed to the holders of Common Stock of the Company who are holders immediately prior to such transaction, then the Holder of this Warrant shall have the right thereafter to receive, upon exercise of this Warrant, the number of shares of common stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and Other Property receivable upon or as a result of such reorganization, reclassification, merger, consolidation or disposition of assets by a holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such event. In such event, the aggregate Exercise Price otherwise payable for the shares of Common Stock issuable upon exercise of this Warrant shall be allocated among the shares of common stock and Other Property receivable as a result of such reorganization, reclassification, merger, consolidation or disposition of assets in proportion to the respective fair market values of such shares of common stock and Other Property as determined in good faith by the Board of Directors of the Company. In case of any such reorganization, reclassification, merger, consolidation or disposition of assets, the successor or acquiring corporation (if other than the Company) shall expressly assume the due and punctual observance and performance of each and every covenant and condition of this Warrant to be performed and observed by the Company and all the obligations and liabilities hereunder, subject to such modi- -21- 25 fications as may be reasonably deemed appropriate (as determined by resolution of the Board of Directors of the Company) in order to provide for adjustments of any shares of the common stock of such successor or acquiring corporation for which this Warrant thus becomes exercisable, which modifications shall be as equivalent as practicable to the adjustments provided for in this Section 4. For purposes of this Section 4.5, "common stock of the successor or acquiring corporation" shall include stock of such corporation of any class that is not preferred as to dividends or assets over any other class of stock of such corporation and that is not subject to redemption and shall also include any evidences of indebtedness, shares of stock or other securities that are convertible into or exchangeable for any such stock, either immediately or upon the arrival of a specified date or the happening of a specified event and any warrants or other rights to subscribe for or purchase any such stock. The foregoing provisions of this Section 4.5 shall similarly apply to successive reorganizations, reclassifications, mergers, consolidations or disposition of assets. 4.6. Determination of Consideration. For purposes of Sections 4.2, 4.3 and 4.4 hereof, the consideration received and/or receivable by the Company in connection with the issuance, sale, grant or exercise of additional shares of Common Stock, Stock Purchase Rights or Convertible Securities, irrespective of the accounting treatment of such consideration, shall be valued as follows: (1) Cash Payment. In the case of cash, the net amount received by the Company after deduction of any accrued interest or dividends, expenses incurred or any underwriting commissions or concessions paid or allowed by the Company. (2) Securities or Other Property. In the case of securities or other property, the fair market value thereof as of the date immediately preceding such issuance, sale, grant or exercise as determined in good faith by the Board of Directors of the Company. (3) Allocation Related to Common Stock. In the event shares of Common Stock are issued or sold together with other securities or other assets of the Company for a consideration which covers both, the -22- 26 consideration received (computed as provided in (1) and (2) above) shall be allocable to such shares of Common Stock as determined in good faith by the Board of Directors of the Company. (4) Allocation Related to Stock Purchase Rights and Convertible Securities. In case any Stock Purchase Rights or Convertible Securities shall be issued or sold together with other securities or other assets of the Company, together comprising one integral transaction in which no specific consideration is allocated to the Stock Purchase Rights or Convertible Securities, the consideration allocable to such Stock Purchase Rights or Convertible Securities shall be determined in good faith by the Board of Directors of the Company. (5) Dividends in Securities. In case the Company shall declare a dividend or make any other distribution upon any stock of the Company payable in either case in Common Stock or Convertible Securities, such Common Stock or Convertible Securities, as the case may be, issuable in payment of such dividend or distribution shall be deemed to have been issued or sold without consideration. (6) Merger, Consolidation or Sale of Assets. In case any shares of Common Stock, Stock Purchase Rights or Convertible Securities shall be issued in connection with any merger or consolidation in which the Company is the surviving corporation, the amount of consideration therefor shall be deemed to be the fair value on the date of issuance of such security of such portion of the assets and business of the non-surviving corporation attributable to such Common Stock, Stock Purchase Rights or Convertible Securities, as is determined in good faith by the Company's Board of Directors. (7) Challenge to Good Faith Determination. Whenever the Board of Directors of the Company shall be required to make a determination in good faith of the fair value of any item under this Section 4, such determination may be challenged in good faith by the -23- 27 Majority Warrant Holders, and any dispute shall be resolved by an investment banking or appraisal firm of recognized national standing selected by the Company and reasonably acceptable to the Majority Warrant Holders and whose decision shall be binding on the Company and all holders of Warrants. The fees and expenses of such firm shall be paid by the party or parties whose position is not chosen by such firm. 4.7. Other Dilutive Events. In case any event shall occur as to which the other provisions of this Section 4 are not strictly applicable but as to which the failure to make any adjustment would not fairly protect the purchase rights represented by this Warrant in accordance with the essential intent and principles hereof (including, without limitation, the issuance of securities other than Common Stock which have the right to participate in distributions to the holders of Common Stock, the granting of "phantom stock" rights or "stock appreciation rights" or the repurchase of outstanding shares of Common Stock, Convertible Securities or Stock Purchase Rights for a purchase price exceeding the fair market value thereof), then, in each such case, the Majority Warrant Holders may select an independent investment banking firm of nationally recognized standing and reasonably acceptable to the Company to make a determination as to the adjustment, if any, required to be made on a basis consistent with the essential intent and principles established herein as a result of such event in order to preserve the purchase rights represented by the Warrants. If the investment bank selected by the Majority Warrant Holders is not reasonably acceptable to the Company, and the Company and the Majority Warrant Holders cannot agree on a mutually acceptable investment bank, then the Company and the Majority Warrant Holders shall each choose one such investment bank and the respective chosen firms shall jointly select a third investment bank, which shall make the determination. The Company shall pay the costs and fees of each such investment bank (including any such investment bank selected by the Majority Warrant Holders), and the decision of the investment bank making such determination shall be final and binding on the Company and all affected holders of Warrants or Warrant Stock. Promptly after receipt of the opinion of such investment bank as to any such required adjustments, the Company shall take any actions necessary to implement same. -24- 28 4.8. Other Provisions Applicable to Adjustments Under this Section. The following provisions shall be applicable to the adjustments provided for pursuant to this Section 4: (a) When Adjustments To Be Made. The adjustments required by this Section 4 shall be made whenever and as often as any specified event requiring such an adjustment shall occur. For the purpose of any such adjustment, any specified event shall be deemed to have occurred at the close of business on the date of its occurrence. (b) Record Date. In case the Company shall take a record of the holders of the Common Stock for the purpose of entitling them (i) to receive a dividend or other distribution payable in Common Stock, Convertible Securities or Stock Purchase Rights or (ii) to subscribe for or purchase Common Stock, Convertible Securities or Stock Purchase Rights, then all references in this Section 4 to the date of the issuance or sale of such shares of Common Stock, Convertible Securities or Stock Purchase Rights shall be deemed to be references to such record date. (c) Fractional Interests. In computing adjustments under this Section 4, fractional interests in Common Stock shall be taken into account to the nearest 1/100th of a share. (d) When Adjustment Not Required. If the Company shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend or distribution to which the provisions of Section 4.1 would apply, but shall, thereafter and before the distribution to stockholders thereof, legally abandon its plan to pay or deliver such dividend or distribution, then thereafter no adjustment shall be required by reason of the taking of such record and any such adjustment previously made in respect thereof shall be rescinded and annulled. (e) Maximum Exercise Price. Except as provided in Section 4.1 above, at no time shall the Exercise Price per share of Common Stock exceed the amount set forth in the first paragraph of the preamble of this Warrant. -25- 29 (f) Certain Limitations. Notwithstanding anything herein to the contrary, the Company agrees not to enter into any transaction that, by reason of any adjustment under Section 4.1, 4.2 or 4.3 above, would cause the Exercise Price to be less than the par value of the Common Stock, if any, unless the Company first reduces the par value of the Common Stock to be less than the Exercise Price that would result from such transaction. (g) Notice of Adjustments. Whenever the number of shares of Common Stock for which this Warrant is exercisable or the Exercise Price shall be adjusted pursuant to this Section 4, the Company shall forthwith prepare a certificate to be executed by the President or chief financial officer of the Company setting forth, in reasonable detail, the event requiring the adjustment and the method by which such adjustment was calculated, specifying the number of shares of Common Stock for which this Warrant is exercisable and (if such adjustment was made pursuant to Section 4.5) describing the number and kind of any other shares of stock or Other Property for which this Warrant is exercisable, and any related change in the Exercise Price, after giving effect to such adjustment or change. The Company shall promptly cause a signed copy of such certificate to be delivered to each Holder in accordance with Section 15.2. The Company shall keep at its principal office or at the Designated Office, if different, copies of all such certificates and cause the same to be available for inspection at said office during normal business hours by any Holder or any prospective transferee of a Warrant designated by a Holder thereof. (h) Independent Application. Except as otherwise provided herein, all subsections of this Section 4 are intended to operate independently of one another (but without duplication). If an event occurs that requires the application of more than one subsection, all applicable subsections shall be given independent effect without duplication. 5. NO IMPAIRMENT -26- 30 The Company shall not by any action, including, without limitation, amending its charter documents or through any reorganization, reclassification, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other similar voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or reasonably appropriate to protect the rights of the Holder against impairment. Without limiting the generality of the foregoing, the Company shall take all such action as may be necessary or reasonably 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, free and clear of all Liens, and shall use all commercially reasonably efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof as may be necessary to enable the Company to perform its obligations under this Warrant. 6. RESERVATION AND AUTHORIZATION OF COMMON STOCK From and after the Original Issue Date, the Company shall at all times reserve and keep available for issuance upon the exercise of the Warrants such number of its authorized but unissued shares of Common Stock as will be sufficient to permit the exercise in full of all outstanding Warrants. All shares of Common Stock issuable pursuant to the terms hereof, when issued upon exercise of this Warrant with payment therefor in accordance with the terms hereof, shall be duly and validly issued and fully paid and nonassessable, not subject to preemptive rights and shall be free and clear of all Liens. 7. NOTICE OF CORPORATE ACTIONS; TAKING OF RECORD; TRANSFER BOOKS 7.1. Notices of Corporate Actions. In the event of: (a) any capital reorganization of the Company, any reclassification or recapitalization of the capital stock of the Company or any consolidation or merger involving the Company and any other Person or any transfer or other disposition of all or substantially all the assets of the Company to another Person or -27- 31 (b) any amendment of the Certificate of Incorporation of the Company, the Company shall mail to each Holder of a Warrant in accordance with the provisions of Section 14.2 hereof a notice specifying the date or expected date on which any such reorganization, reclassification, recapitalization, consolidation, merger, transfer or disposition is to take place, the time, if any such time is to be fixed, as of which the holders of record of Common Stock shall be entitled to exchange their shares of Common Stock for the securities or Other Property deliverable upon such reorganization, reclassification, recapitalization, consolidation, merger, transfer or disposition, and a description in reasonable detail of the transaction. Such notice shall be mailed to the extent practicable at least thirty, but not more than ninety, days prior to the date therein specified; provided, that, in no event shall the Company be required to give the Holders notice of material non-public information prior to the time such information is made available to the holders of its Common Stock. In the event that the Company at any time sends any other notice to the holders of its Common Stock, it shall concurrently send a copy of such notice to each Holder of a Warrant. 7.2 Closing of Transfer Books. The Company shall not at any time, except upon dissolution, liquidation or winding up of the Company, close its stock transfer books or Warrant transfer books so as to result in preventing or delaying the exercise or transfer of any Warrant. 8. TRANSFER RESTRICTIONS The Holder, by acceptance of this Warrant, agrees to be bound by the provisions of this Section 8. 8.1. Restrictions on Transfers. Neither this Warrant nor any shares of Restricted Common Stock issued upon the exercise hereof shall be Transferred other than pursuant to an effective registration statement under the Securities Act or an exemption from the registration provisions thereof. No Transfer of this Warrant or any such shares of Restricted Stock, other than pursuant to such an effective registration statement, shall be valid or effective unless (a) the holder of the securities proposed to be transferred shall have delivered to the Company either a no-action letter from the Commission or an Opinion of -28- 32 Counsel to the effect that such proposed Transfer is exempt from the registration requirements of the Securities Act or (b) such Transfer is being made pursuant to Rule 144 or Rule 144A under the Securities Act and such holder shall have delivered to the Company a certificate setting forth the basis for applying such Rule to the proposed Transfer. Each certificate, if any, evidencing such shares of Restricted Common Stock issued upon any such Transfer, other than in a public offering pursuant to an effective registration statement, shall bear the restrictive legend set forth in Section 8.2(a), and each Warrant issued upon such Transfer shall bear the restrictive legend set forth in Section 8.2(b), unless the Holder delivers to the Company an Opinion of Counsel to the effect that such legend is not required for the purposes of compliance with the Securities Act. Holders of the Warrants or the Restricted Common Stock, as the case may be, shall not be entitled to Transfer such Warrants or such Restricted Common Stock except in accordance with this Section 8.1. 8.2. Restrictive Legends. (a) Except as otherwise provided in this Section 8, each certificate for Warrant Stock initially issued upon the exercise of this Warrant, and each certificate for Warrant Stock issued to any subsequent transferee of any such certificate, shall be stamped or otherwise imprinted with two legends in substantially the following forms: "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAW. NO TRANSFER OF THE SHARES REPRESENTED BY THIS CERTIFICATE SHALL BE VALID OR EFFECTIVE UNLESS (A) SUCH TRANSFER IS MADE PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR (B) THE HOLDER OF THE SECURITIES PROPOSED TO BE TRANSFERRED SHALL HAVE DELIVERED TO THE COMPANY AN OPINION OF COUNSEL EXPERIENCED IN SECURITIES MATTERS AND REASONABLY ACCEPTABLE TO THE COMPANY TO THE EFFECT THAT SUCH PROPOSED TRANSFER IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE ACT OR (C) SUCH TRANSFER IS PURSUANT TO RULE 144 OR RULE 144A UNDER THE ACT AND SUCH HOLDER(S) SHALL HAVE DELIVERED TO THE COMPANY A CERTIFICATE SETTING FORTH THE BASIS FOR APPLYING SUCH RULE TO THE PROPOSED TRANSFER." -29- 33 "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE ENTITLED TO THE BENEFIT OF AND ARE SUBJECT TO CERTAIN OBLIGATIONS SET FORTH IN THE WARRANT PURSUANT TO THE EXERCISE OF WHICH SUCH SHARES WERE ISSUED. A COPY OF SUCH WARRANT IS AVAILABLE AT THE EXECUTIVE OFFICES OF THE COMPANY." (b) Except as otherwise provided in this Section 8, each Warrant shall be stamped or otherwise imprinted with a legend in substantially the following form: "NEITHER THE WARRANTS REPRESENTED BY THIS CERTIFICATE NOR ANY OF THE SECURITIES ISSUABLE UPON EXERCISE THEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAW. NO TRANSFER OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE OR OF THE STOCK ISSUABLE UPON EXERCISE THEREOF SHALL BE VALID OR EFFECTIVE UNLESS (A) SUCH TRANSFER IS MADE PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR (B) THE HOLDER OF THE SECURITIES PROPOSED TO BE TRANSFERRED SHALL HAVE DELIVERED TO THE COMPANY EITHER A NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION OR AN OPINION OF COUNSEL EXPERIENCED IN SECURITIES MATTERS AND REASONABLY ACCEPTABLE TO THE COMPANY TO THE EFFECT THAT SUCH PROPOSED TRANSFER IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE ACT OR (C) SUCH TRANSFER IS PURSUANT TO RULE 144 OR RULE 144A UNDER THE ACT AND SUCH HOLDER SHALL HAVE DELIVERED TO THE COMPANY A CERTIFICATE SETTING FORTH THE BASIS FOR APPLYING SUCH RULE TO THE PROPOSED TRANSFER." 8.3. Termination of Securities Law Restrictions. Notwithstanding the foregoing provisions of this Section 8, the restrictions imposed by Section 8.1(b) upon the transferability of the Warrants and the Restricted Common Stock and the legend requirements of Section 8.2 shall terminate as to any particular Warrant or shares of Restricted Common Stock when the Company shall have received from the Holder thereof an Opinion of Counsel to the effect that such legend is not required in order to ensure compliance with the Securities Act. Whenever the restrictions imposed by Sections 8.1(b) and 8.2 shall terminate as to this Warrant, as hereinabove provided, the Holder hereof shall be entitled to receive from the Company, at the expense of the -30- 34 Company, a new Warrant bearing the following legend in place of the restrictive legend set forth hereon: "THE RESTRICTIONS ON TRANSFERABILITY OF THE WITHIN WARRANT CONTAINED IN SECTIONS 8.1(b) AND 8.2 HEREOF TERMINATED ON ______________, 19__, AND ARE OF NO FURTHER FORCE AND EFFECT." All Warrants issued upon registration of transfer, division or combination of, or in substitution for, any Warrant or Warrants entitled to bear such legend shall have a similar legend endorsed thereon. Wherever the restrictions imposed by this Section shall terminate as to any share of Restricted Common Stock, as hereinabove provided, the Holder thereof shall be entitled to receive from the Company, at the Company's expense, a new certificate representing such Common Stock not bearing the restrictive legend set forth in Section 8.2(a). 9. REGISTRATION RIGHTS 9.1. Certain Definitions. For the purposes of this Section 9: (a) The Holders of Warrants and the Series B Warrants and the holders of Warrant Stock (as defined in Section 9.1(b)) are collectively referred to as "WS Holders". (b) "Warrant Stock" shall deemed to include (i) the shares of Common Stock issued, issuable or both (as the context may require) upon the exercise of Warrants and the Series B Warrants until such time as such shares of Common Stock have either been (a) Transferred in a public offering pursuant to a registration statement filed under the Securities Act or (b) Transferred in a transaction exempt from the registration and prospectus delivery requirements of the Securities Act under Section 4(1) thereof with all transfer restrictions and restrictive legends with respect to such Common Stock being removed in connection with such transaction,(ii) any other securities issued as (or issuable upon the conversion or exercise of any warrant, right or other security which is issued as) a dividend or other distribution with respect to, or in exchange by the Company generally for, or in replacement by the Company generally -31- 35 of, any shares of Warrant Stock and (iii) any securities issued in exchange for any such Warrant Stock in any merger or reorganization of the Company, but in the cases of clauses (ii) and (iii) only so long as such securities have not been registered and Transferred pursuant to the Securities Act or Transferred in a transaction exempt from the registration and prospectus delivery requirements of the Securities Act under Section 4(1) thereof so that all transfer restrictions and restrictive legends with respect to such securities are removed in connection with such Transfer. (c) Each WS Holder shall be deemed to "hold", as of any specified date, the aggregate of (i) the number of shares of Warrant Stock held by such WS Holder as of such date plus (ii) the number of shares of Warrant Stock issuable upon exercise of any Warrants and Series B Warrants held by such WS Holder as of such date. (d) The total number of shares of Warrant Stock deemed "outstanding" as of a specified date will be equal to (i) the total number of shares of Warrant Stock Outstanding as of such date plus (ii) the number of shares of Warrant Stock issuable upon exercise of all outstanding Warrants and Series B Warrants as of such date. (e) "Registrable Securities" shall mean any Warrants, any Series B Warrants and/or any shares of Warrant Stock. 9.2. Demand Registration. (a) In the event the Company receives at any time after August 31, 1997 a written request from one or more WS Holders holding in the aggregate at least seventy-six percent of the number of shares of Warrant Stock then outstanding (the "Demanding Holders") that the Company file a registration statement under the Securities Act for the sale or other disposition of at least a majority of the Registrable Securities (a "Demand Registration"), the Company shall promptly give written notice of such request to each other WS Holder and each such WS Holder may elect, by giving written notice of such election to the Company within ten (10) Business Days after receipt of the Company's notice, to have some or all of the Registrable Securities held by it included in such registration. At the option of the Demanding Holders, such request may specify that the requested registration will be for -32- 36 an offering on a delayed or continual basis pursuant to Rule 415 under the Securities Act (a "Shelf Registration"). (b) Following receipt of such a request for a Demand Registration, the Company shall: (1) File the requested registration statement with the Commission as promptly as practicable, and shall use all commercially reasonable efforts to have the registration declared effective under the Securities Act as soon as reasonably practicable, in each instance giving due regard to the need to prepare and file current financial statements, conduct due diligence and complete other actions that are reasonably necessary to effect a registered public offering; and (2) Use all commercially reasonable efforts to keep the such registration statement Continuously Effective (x) if a Demand Registration, for up to 90 days or until such earlier date as of which all Registrable Securities covered by such registration statement shall have been disposed of in the manner described in the registration statement, and (y) if a Shelf Registration, for 270 days. Notwithstanding the foregoing, if for any reason the effectiveness of a Demand Registration is suspended or postponed as permitted by Subsection (d) below, the foregoing period shall be extended by the aggregate number of days of such suspension or postponement. (c) The Company shall not be required to effect a registration of Registrable Securities pursuant to a Demand Registration on more than one occasion. For purposes of this Subsection (c), registration shall not be deemed to have been effected (i) unless a registration statement with respect thereto has become effective, (ii) if after such registration statement has become effective, such registration or the related offer, sale or distribution of Registrable Securities thereunder is interfered with by any stop order, injunction or other order or requirement of the Commission or other governmental agency or court for any reason not attributable to the Selling Holders and such interference is not thereafter eliminated or (iii) if the conditions to closing specified in the underwriting agreement, if any, entered into in connection with such registration are not -33- 37 satisfied or waived, other than by reason of a failure on the part of the Selling Holders. If the Company shall have complied with its obligations under this Section 9, a right to demand a registration pursuant to this Section 9.2 shall be deemed to have been satisfied (i) if a Demand Registration other than a Shelf Registration, upon the earlier of (x) the date as of which all of the Registrable Securities included therein shall have been disposed of pursuant to the registration statement and (y) the date as of which such Demand Registration shall have been Continuously Effective for a period of 90 days, and (ii) if a Shelf Registration, upon the effective date of a Shelf Registration, provided no stop order or similar order, or proceedings for such an order, is thereafter entered or initiated. (d) The Company shall be entitled to postpone for up to 90 days the filing of any Demand Registration statement otherwise required to be prepared and filed pursuant to this Section 9.2 or suspend any such Demand Registration for up to 90 days, if the Board of Directors of the Company determines, in its good faith reasonable judgment that such registration and the Transfer of Warrant Stock contemplated thereby would materially interfere with, or require premature disclosure of, any financing, acquisition or reorganization involving the Company or any of its wholly owned subsidiaries and the Company promptly gives the Demanding Holders notice of such determination; provided, however, that the Company shall not have postponed pursuant to this Subsection (d) the filing of any other Demand Registration statement otherwise required to be prepared and filed pursuant to this Section 9.2, or suspended any such Demand Registration, during the 12 month period ended on the date of the relevant request pursuant to Subsection (a) above and provided further, that the Expiration Date shall be extended by the period of any such postponement or suspension. (e) A registration pursuant to this Section 9.2 shall be on such appropriate registration form of the Commission available to the Company as shall (i) be selected by the Company and be reasonably acceptable to the Majority Selling Holders and (ii) permit the disposition of the Warrant Stock in accordance with the intended method or methods of disposition specified in the request made pursuant to Subsection (a) above. If any registration pursuant to this Section 9.2 involves an underwritten offering (whether on a "firm", "best efforts" or -34- 38 "all reasonable efforts" basis or otherwise), or an agented offering, the Majority Selling Holders shall have the right to select the underwriter or underwriters and manager or managers to administer such underwritten offering or the placement agent or agents for such agented offering from among the entities listed in Schedule B hereto (or any successors of any such entities), it being understood that the Majority Selling Holders shall use commercially reasonable efforts to select one or more of the first three listed entities subject to arriving at reasonably acceptable terms and conditions for the offering. (f) The Company may elect to include shares of Common Stock to be sold for its account in any such Demand Registration (including a Shelf Registration); provided, however, if the managing underwriter shall advise the Demanding Holders in writing (with a copy to the Company) that, in its opinion, the number of shares of Common Stock requested to be included in such Demand Registration would adversely affect such offering or the price to be realized therefor, or the timing thereof, then the number of shares proposed to be included in such Demand Registration by the Company shall be reduced, to such number that the Demanding Holders are advised can be sold without such effect in such Demand Registration. 9.3. Piggyback Registration. (a) If at any time the Company proposes to register (including for this purpose a registration effected by the Company for shareholders of the Company other than the WS Holders) equity securities under the Securities Act in connection with the public offering solely for cash on Form S-1, S-2 or S-3 (or any replacement or successor forms), the Company shall promptly give each WS Holder written notice of such registration (a "Piggyback Registration"). Upon the written request of each WS Holder given within 20 days following the date of such notice, the Company shall cause to be included in such registration statement and use its best efforts to be registered under the Securities Act all the Registrable Securities that each such WS Holder shall have requested to be registered. The Company shall have the absolute right to withdraw or cease to prepare or file any registration statement for any offering referred to in this Section 9.3 without any obligation or liability to any WS Holder. -35- 39 (b) If the managing underwriter shall advise the Company in writing (with a copy to each Selling Holder) that, in its opinion, the amount of Registrable Securities requested to be included in such registration would materially adversely affect such offering, or the timing thereof, then the Company will include in such registration, to the extent of the amount and class which the Company is so advised can be sold without such material adverse effect in such offering: first, all securities proposed to be sold by the Company for its own account; and second, the Warrant Stock requested to be included in such registration by WS Holders and all other securities requested to be included in such registration by Persons other than the Company and WS Holders, the securities covered by this clause second to be included pro rata based on the estimated gross proceeds from the sale thereof. (c) Each WS Holder shall be entitled to have its Registrable Securities included in an unlimited number of Piggyback Registrations pursuant to this Section 9.3. 9.4. Registration Procedures. Whenever required under Section 9.2 or Section 9.3 hereof to effect the registration of any Registrable Securities, the Company shall, as expeditiously as practicable: (a) Prepare and file with the Commission a registration statement with respect to such Warrant Stock and use the Company's best efforts to cause such registration statement to become effective; provided, however, that before filing a registration statement or prospectus or any amendments or supplements thereto, including documents incorporated by reference after the initial filing of the registration statement and prior to effectiveness thereof, the Company shall furnish to one firm of counsel for the Selling Holders (selected by Majority Selling Holders) copies of all such documents in the form substantially as proposed to be filed with the Commission at least four Business Days prior to filing for review and comment by such counsel, which opportunity to comment shall include an absolute right to control or contest disclosure if the applicable Selling Holder reasonably believes that it may be subject to controlling person liability under applicable securities laws with respect thereto. -36- 40 (b) Prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Securities Act and rules thereunder with respect to the disposition of all securities covered by such registration statement. If the registration is for an underwritten offering, the Company shall amend the registration statement or supplement the prospectus whenever required by the terms of the underwriting agreement entered into pursuant to Section 9.4(e). Subject to Rule 415 under the Securities Act, if the registration statement is a Shelf Registration, the Company shall amend the registration statement or supplement the prospectus so that it will remain current and in compliance with the requirements of the Securities Act for 270 days or after its effective date, and if during such period any event or development occurs as a result of which the registration statement or prospectus contains a misstatement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading, the Company shall promptly notify each Selling Holder, amend the registration statement or supplement the prospectus so that each will thereafter comply with the Securities Act and furnish to each Selling Holder of Registrable Securities such amended or supplemented prospectus, which each such Holder shall thereafter use in the Transfer of Warrant Stock covered by such registration statement. Pending such amendment or supplement each such Selling Holder shall cease making offers or Transfers of Registerable Securities pursuant to the prior prospectus. In the event that any Registrable Securities included in a registration statement subject to, or required by, this Warrant remain unsold at the end of the period during which the Company is obligated to use its best efforts to maintain the effectiveness of such registration statement, the Company may file a post-effective amendment to the registration statement for the purpose of removing such Registrable Securities from registered status. (c) Furnish to each Selling Holder of Registrable Securities, without charge, such number of copies of the registration statement, any pre-effective or post-effective amendment thereto, the prospectus, including each -37- 41 preliminary prospectus and any amendments or supplements thereto, in each case in conformity with the requirements of the Securities Act and the rules thereunder, and such other related documents as any such Selling Holder may reasonably request in order to facilitate the disposition of Registrable Securities owned by such Selling Holder. (d) Use all commercially reasonable efforts (i) to register and qualify the securities covered by such registration statement under such other securities or Blue Sky laws of such states or jurisdictions as shall be reasonably requested by the managing underwriter (as applicable, or if inapplicable, the Majority Selling Holders), and (ii) to obtain the withdrawal of any order suspending the effectiveness of a registration statement, or the lifting of any suspension of the qualification (or exemption from qualification) of the offer and transfer of any of the Registrable Securities in any jurisdiction, at the earliest possible moment; provided, however, that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions. (e) In the event of any underwritten or agented offering, enter into and perform the Company's obligations under an underwriting or agency agreement (including indemnification and contribution obligations of underwriters or agents), in usual and customary form, with the managing underwriter or underwriters of or agents for such offering. The Company shall also cooperate with the Majority Selling Holders and the managing underwriter for such offering in the marketing of the Warrant Stock, including making available the Company's officers, accountants, counsel, premises, books and records for such purpose, but the Company shall not be required to incur any material out-of-pocket expense pursuant to this sentence. (f) Promptly notify each Selling Holder of any stop order issued or threatened to be issued by the Commission in connection therewith (and take all reasonable actions required to prevent the entry of such stop order or to remove it if entered. -38- 42 (g) Make generally available to the Company's security holders copies of all periodic reports, proxy statements, and other information referred to in Section 9.9(a) and an earnings statement satisfying the provisions of Section 11(a) of the Securities Act no later than 90 days following the end of the 12-month period beginning with the first month of the Company's first fiscal quarter commencing after the effective date of each registration statement filed pursuant to this Section 9. (h) Make available for inspection by any Selling Holder, any underwriter participating in such offering and the representatives of such Selling Holder and underwriter (but not more than one firm of counsel to such Selling Holders), all financial and other information as shall be reasonably requested by them, and provide the Selling Holder, any underwriter participating in such offering and the representatives of such Selling Holder and underwriter the opportunity to discuss the business affairs of the Company with its principal executives and independent public accountants who have certified the audited financial statements included in such registration statement, in each case all as necessary to enable them to exercise their due diligence responsibility under the Securities Act; provided, however, that information that the Company determines, in good faith, to be confidential and which the Company advises such Person in writing, is confidential shall not be disclosed unless such Person signs a confidentiality agreement reasonably satisfactory to the Company or the related Selling Holder of Registrable Securities agrees to be responsible for such Person's breach of confidentiality on terms reasonably satisfactory to the Company. (i) Use the Company's best efforts to obtain a so-called "comfort letter" from its independent public accountants, and legal opinions of counsel to the Company, in customary form and covering such matters of the type customarily covered by such letters, and in a form that shall be reasonably satisfactory to the Majority Selling Holders. The Company shall furnish to each Selling Holder a signed counterpart of any such comfort letter or legal opinion. Delivery of any such opinion or comfort letter shall be subject to the recipient furnishing such written representations or acknowledgments as are customarily -39- 43 provided by selling shareholders who receive such comfort letters or opinions. (j) Provide and cause to be maintained a transfer agent and registrar for all Registrable Securities covered by such registration statement from and after a date not later than the effective date of such registration statement. (k) Use all reasonable efforts to cause the Registrable Securities covered by such registration statement (i) if the Common Stock is then listed on a securities exchange or included for quotation in a recognized trading market, to continue to be so listed or included for a reasonable period of time after the offering, and (ii) to be registered with or approved by such other United States or state governmental agencies or authorities as may be necessary by virtue of the business and operations of the Company to enable the Selling Holders of Registrable Securities to consummate the disposition of such Registrable Securities. (l) Use the Company's reasonable efforts to provide a CUSIP number for the Common Stock prior to the effective date of the first registration statement including Registrable Securities. (m) Take such other actions as are reasonably required in order to expedite or facilitate the disposition of Registrable Securities included in each such registration. 9.5. Selling Holders' Obligations. (a) It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Section 9 with respect to the Registrable Securities of any Selling Holder that such Selling Holder shall: (i) Furnish to the Company such information regarding such Selling Holder, the number of Registrable Securities owned by it, and the intended method of disposition of such securities as shall be required to effect the registration of such Selling Holder's Registrable Securities, and to cooperate with the Company in preparing such registration; and -40- 44 (ii) Agree to sell their Registrable Securities to the underwriters at the same price and on substantially the same terms and conditions as the Company or the other Persons on whose behalf the registration statement was being filed have agreed to sell their securities, and to execute the underwriting agreement agreed to by the Majority Selling Holders (in the case of a registration under Section 9.2) or the Company and the Majority Selling Holders (in the case of a registration under Section 9.3). (b) Each Selling Holder shall notify the Company of any sales of such Selling Holder's shares registered for sale pursuant to this Section 9; provided, however, it is understood that any failure so to notify the Company shall not be deemed a default hereunder or to subject any Selling Holder to any claim for damages or expenses whatsoever. 9.6. Expenses of Registration. Expenses incurred in connection with registrations under this Section 9 shall be allocated and paid as follows: (a) With respect to each Demand Registration (including any Shelf Registration), the Company shall bear and pay all reasonable expenses incurred in connection with any registration, filing, or qualification of Registrable Securities with respect to such Demand Registration for each Selling Holder, including all registration, filing and NASD fees, all fees and expenses of complying with securities or blue sky laws, all word processing, duplicating and printing expenses, messenger and delivery expenses, the reasonable fees and disbursements of counsel for the Company, and of the Company's independent public accountants, including the expenses of "cold comfort" letters required by or incident to such performance and compliance, and the reasonable fees and disbursements of one firm of counsel for the Selling Holders of Registrable Securities (the "Registration Expenses"), but excluding underwriting discounts and commissions relating to Registrable Securities (which shall be paid on a pro rata basis by the Selling Holders) provided, however, that the Company shall not be required to pay for any expenses of any registration proceeding begun pursuant to Section 9.2 if the registration is subsequently withdrawn at the request of the Majority Selling Holders (in which case all Selling Holders shall bear such expense), -41- 45 unless WS Holders whose Registrable Securities constitutes a majority of the Registrable Securities then outstanding agree that such withdrawn registration shall constitute the exercise of their one demand registration under Section 9.2 hereof. The counsel for the Selling Holders shall be selected by Demanding Holders owning a majority of the Registrable Securities owned by Demanding Holders to be included in a Demand Registration and, in the case of a Piggyback Registration, by Selling Holders owning a majority of the Registrable Securities to be included in such registration; provided that in the case of a Piggyback Registration, the Selling Holders shall use one firm of counsel to represent all such holders and shall endeavor in good faith, with any other holders of securities to be included in such registration, to select one firm of counsel to represent all such selling securities holders. (b) The Company shall bear and pay all Registration Expenses incurred in connection with any Piggyback Registrations pursuant to Section 9.3 for each Selling Holder, but excluding underwriting discounts and commissions relating to Registrable Securities (which shall be paid on a pro rata basis by the Selling Holders of Registrable Securities). (c) Any failure of the Company to pay any Registration Expenses as required by this Section 9.6 shall not relieve the Company of its obligations under this Section 9. 9.7. Indemnification; Contribution. If any Registrable Securities are included in a registration statement under this Section 9: (a) To the extent permitted by applicable law, the Company shall indemnify and hold harmless each Selling Holder, each Person, if any, who controls such Selling Holder within the meaning of the Securities Act, and each officer, director, partner, and employee of such Selling Holder and such controlling Person, against any and all losses, claims, damages, liabilities and expenses (joint or several), including attorneys' fees and disbursements and expenses of investigation, incurred by such party pursuant to any actual or threatened action, suit, proceeding or investigation, or to which any of the foregoing Persons may -42- 46 become subject under the Securities Act, the Exchange Act or other federal or state laws, insofar as such losses, claims, damages, liabilities and expenses arise out of or are based upon any of the following statements, omissions or violations pursuant to a final non-appealable order (collectively a "Violation"): (i) any untrue statement or alleged untrue statement of a material fact contained in such registration statement, including any preliminary prospectus or final prospectus contained therein, or any amendments or supplements thereto; (ii) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading; or (iii) any violation or alleged violation by the Company of the Securities Act, the Exchange Act, any applicable state securities law or any rule or regulation promulgated under the Securities Act, the Exchange Act or any applicable state securities law; provided, however, that the indemnification required by this Section 9.7(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or expense if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld), nor shall the Company be liable in any such case for any such loss, claim, damage, liability or expense to the extent that it is determined by a court of competent jurisdiction by a final non-appealable order to have solely arisen out of or be based upon a Violation which occurred in reliance upon and in conformity with written information furnished to the Company by the indemnified party expressly for use in connection with such registration; provided, further, that the indemnity agreement contained in this Section 9.7(a) shall not apply to any underwriter to the extent that any such loss is based on or arises out of an untrue statement or alleged untrue statement of a material fact, or an omission or alleged omission to state a material fact, contained in or omitted from any preliminary prospectus if the final prospectus shall correct such untrue statement or -43- 47 alleged untrue statement, or such omission or alleged omission, and a copy of the final prospectus has not been sent or given to such person at or prior to the confirmation of sale to such person if such underwriter was under an obligation to deliver such final prospectus and failed to do so. The Company shall also indemnify underwriters, selling brokers, dealer managers and similar securities industry professionals participating in the distribution, their officers, directors, agents and employees and each person who controls such persons (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) to the same extent as provided above with respect to the indemnification of the Selling Holders. (b) To the extent permitted by applicable law, each Selling Holder shall indemnify and hold harmless the Company, each of its directors, each of its officers and employees, each Person, if any, who controls the Company within the meaning of the Securities Act, any other Selling Holder, any controlling Person of any such other Selling Holder and each officer, director, partner, and employee of such other Selling Holder and such controlling Person, against any and all losses, claims, damages, liabilities and expenses (joint and several), including attorneys' fees and disbursements and expenses of investigation, incurred by such party pursuant to any actual or threatened action, suit, proceeding or investigation, or to which any of the foregoing Persons may otherwise become subject under the Securities Act, the Exchange Act or other federal or state laws, insofar as such losses, claims, damages, liabilities and expenses are determined by a court of competent jurisdiction by a final non-appealable order to have solely arisen out of or be based upon a Violation that occurred in reliance upon and in conformity with written information furnished by such Selling Holder expressly for use in connection with such registration; provided, however, that (x) the indemnification required by this Section 9.7(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or expense if settlement is effected without the consent of the relevant Selling Holder of Registrable Securities, which consent shall not be unreasonably withheld, and (y) in no event shall the amount of any indemnity under this Section 9.7(b) exceed the net -44- 48 proceeds from the applicable offering received by such Selling Holder. (c) Promptly after receipt by an indemnified party under this Section 9.7 of notice of the commencement of any action, suit, proceeding, investigation or threat thereof made in writing for which such indemnified party may make a claim under this Section 9.7, such indemnified party shall deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party shall have the right to retain its own counsel, with the fees and disbursements and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding. The failure to deliver written notice to the indemnifying party within a reasonable time following the commencement of any such action, if prejudicial to its ability to defend such action, shall relieve such indemnifying party of any liability to the indemnified party under this Section 9.7 but shall not relieve the indemnifying party of any liability that it may have to any indemnified party otherwise than pursuant to this Section 9.7. Any reasonable fees and expenses incurred by the indemnified party (including any fees and expenses incurred in connection with investigating or preparing to defend such action or proceeding) shall be paid to the indemnified party, as incurred, within thirty (30) days of written notice thereof to the indemnifying party (regardless of whether it is ultimately determined that an indemnified party is not entitled to indemnification hereunder). Any such indemnified party shall have the right to employ separate counsel in any such action, claim or proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be the expenses of such indemnified party unless (i) the indemnifying party has agreed to pay such fees and expenses or (ii) the indemnifying party shall have failed to promptly assume the -45- 49 defense of such action, claim or proceeding or (iii) the named parties to any such action, claim or proceeding (including any impleaded parties) include both such indemnified party and the indemnifying party, and such indemnified party shall have been advised by counsel that there may be one or more legal defenses available to it which are different from or in addition to those available to the indemnifying party and that the assertion of such defenses would create a conflict of interest such that counsel employed by the indemnifying party could not faithfully represent the indemnified party (in which case, if such indemnified party notifies the indemnifying party in writing that it elects to employ separate counsel at the expense of the indemnifying party, the indemnifying party shall not have the right to assume the defense of such action, claim or proceeding on behalf of such indemnified party, it being understood, however, that the indemnifying party shall not, in connection with any one such action, claim or proceeding or separate but substantially similar or related actions, claims or proceedings in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the reasonable fees and expenses of more than one separate firm of attorneys (together with appropriate local counsel) at any time for all such indemnified parties, unless in the reasonable judgment of such indemnified party a conflict of interest may exist between such indemnified party and any other of such indemnified parties with respect to such action, claim or proceeding, in which event the indemnifying party shall be obligated to pay the fees and expenses of such additional counsel or counsels). No indemnifying party shall be liable to an indemnified party for any settlement of any action, proceeding or claim without the written consent of the indemnifying party, which consent shall not be unreasonably withheld. (d) If the indemnification required by this Section 9.7 from the indemnifying party is unavailable to an indemnified party hereunder in respect of any losses, claims, damages, liabilities or expenses referred to in this Section 9.7: (i) The indemnifying party, in lieu of indemnifying such indemnified party, shall contribute -46- 50 to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities or expenses in such proportion as is appropriate to reflect the relative fault of the indemnifying party and indemnified parties in connection with the actions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative fault of such indemnifying party and indemnified parties shall be determined by reference to, among other things, whether any Violation has been committed by, or relates to information supplied by, such indemnifying party or indemnified parties, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such Violation. The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and expenses referred to above shall be deemed to include, subject to the limitations set forth in Section 9.7(a) and Section 9.7(b), any reasonable legal or other fees or expenses reasonably incurred by such party in connection with any investigation or proceeding. (ii) The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 9.7(d) were determined by pro rata allocation or by any other method of allocation which does not take into account the equitable considerations referred to in Section 9.7(d)(i) above. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. (e) If indemnification is available under this Section 9.7, the indemnifying parties shall indemnify each indemnified party to the full extent provided in this Section 9.7 without regard to the relative fault of such indemnifying party or indemnified party or any other equitable consideration referred to in Section 9.7(d) above. (f) The indemnification required by this Section 9.7 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and -47- 51 when bills are received or expense, loss, damage or liability is incurred. In the event that it shall be subsequently determined that the recipient of any such periodic payment shall not be entitled to indemnification hereunder, such recipient promptly shall repay such payments, together with interest thereon at the Agreed Rate from the date of original receipt to the date of repayment. (g) The obligations of the Company and the Selling Holders of Registrable Securities under this Section 9.7 shall survive the completion of any offering of Registrable Securities pursuant to a registration statement under this Section 9, and otherwise. 9.8. Holdback. Each WS Holder entitled pursuant to this Section 9 to have Registrable Securities included in a registration statement prepared pursuant to this Section 9, if so requested by the managing underwriter in connection with an offering of any Registrable Securities, shall not effect any public sale or distribution of shares of Common Stock, Convertible Securities or Stock Purchase Rights (excluding any sale pursuant to Rule 144 or Rule 144A under the Securities Act and any sale as part of such underwritten or agented registration), during the 5-day period prior to, and during the 45-day period beginning on, the date such registration statement is declared effective under the Securities Act by the Commission, provided that such WS Holder is timely notified of such effective date in writing by the Company or such managing underwriter. 9.9. Additional Covenants of the Company. The Company hereby agrees and covenants as follows: (a) The Company shall file as and when applicable, on a timely basis, all reports required to be filed by it under the Exchange Act. If the Company is not required to file reports pursuant to the Exchange Act, upon the request of any WS Holder, the Company shall make publicly available the information specified in subparagraph (c)(2) of Rule 144 of the Securities Act, and take such further action as may be reasonably required from time to time and as may be within the reasonable control of the Company, to enable the WS Holders to Transfer Warrants or Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by Rule 144 under the -48- 52 Securities Act or any similar rule or regulation hereafter adopted by the Commission. In addition, promptly upon the request of any WS Holder, the Company shall provide such WS Holder with such publicly available financial statements, reports and other information as may be required to permit such WS Holder to Transfer shares of Registrable Securities to Qualified Institutional Investors pursuant to Rule 144A of the Securities Act. (b) The Company shall not, and shall not permit its majority owned subsidiaries to, effect any public sale or distribution of any shares of Common Stock, Convertible Securities or Stock Purchase Rights during the 5 Business Days prior to, and during the 90-day period beginning on, the commencement of a public distribution of Registrable Securities pursuant to any registration statement prepared pursuant to this Section 9 (other than by the Company pursuant to such registration if the registration is pursuant to Section 9.3 or by the Company pursuant to any dividend reinvestment plan offered by it to its stockholders). The Company shall not effect any registration of its securities (other than on Form S-4, Form S-8, or any successor forms to such forms or pursuant to such other registration rights agreements as may be approved in writing by the Majority Selling Holders) or effect any public or private sale or distribution of any of its securities, including a sale pursuant to Regulation D under the Securities Act, whether on its own behalf or at the request of any holder or holders of such securities from the date of a request for a Demand Registration pursuant to Section 9.2 until 90 days following the effective date of such Demand Registration statement, unless the Company shall have previously notified in writing all Selling Holders of the Company's desire to do so, and the Majority Selling Holders or the managing underwriter, if any, shall have consented thereto in writing. (c) Any agreement entered into on or after August 31, 1997 pursuant to which the Company or any of its majority owned subsidiaries issues or agrees to issue any Common Stock (including, without limitation, any employee stock option, stock purchase agreement, merger agreement or other agreement) shall contain a provision whereby any holder receiving such Common Stock who will hold more than one -49- 53 percent (1%) of the amount of such Common Stock then outstanding shall agree not to effect any public sale or distribution of any such Common Stock during the periods described in the second sentence of Section 9.9(b), in each case including a sale pursuant to Rule 144 under the Securities Act (unless such Person is prevented by applicable statute or regulation from entering into such an agreement). (d) Subject to Section 13, the Company shall not, directly or indirectly, (x) enter into any merger, consolidation or reorganization in which the Company shall not be the surviving corporation or (y) Transfer or agree to Transfer all or substantially all the Company's assets, unless prior to such merger, consolidation, reorganization or asset Transfer, the surviving corporation or the Transferee, respectively, shall have agreed in writing to assume the obligations of the Company under this Agreement, and for that purpose references hereunder to "Registrable Securities" shall be deemed to include the securities which the WS Holders would be entitled to receive in exchange for Registrable Securities pursuant to any such merger, consolidation or reorganization. 10. LOSS OR MUTILATION Upon receipt by the Company from any Holder of evidence reasonably satisfactory to it of the ownership of and the loss, theft, destruction or mutilation of this Warrant and an indemnity reasonably satisfactory to it (it being understood that the written indemnification agreement of or affidavit of loss of Norwest Bank Iowa, National Association shall be a sufficient indemnity) and, in case of mutilation, upon surrender and cancellation hereof, the Company will execute and deliver in lieu hereof a new Warrant of like tenor to such Holder; provided, however, in the case of mutilation, no indemnity shall be required if this Warrant in identifiable form is surrendered to the Company for cancellation. 11. OFFICE OF THE COMPANY -50- 54 As long as any of the Warrants remain outstanding, the Company shall maintain an office or agency, which may be the principal executive offices of the Company (the "Designated Office"), where the Warrants may be presented for exercise, registration of transfer, division or combination as provided in this Warrant. Such Designated Office shall initially be the office of the Company at Cedar Rapids, Iowa. The Company may from time to time change the Designated Office to another office of the Company or its agent within the United States by notice given to all registered holders of Warrants at least ten Business Days prior to the effective date of such change. 12. FINANCIAL AND BUSINESS INFORMATION Until the Expiration Date, the Company shall deliver to each Holder of Warrants or of Warrant Stock one copy of each of the following items: (i) promptly after filing thereof, copies of all regular and periodic reports, proxy statements (other than preliminary) and registration statements (other than registration statements on Forms S-3 (relating to debt securities) and S-8) which the Company may file with the Securities and Exchange Commission or any governmental agency substituted therefor. (ii) promptly upon their becoming available, copies of all financial statements, reports, notices and proxy statements sent or made available by the Company to the holders of any class of its securities generally or by any Subsidiary of the Company to the holders of any class of its securities generally; and (iii) with reasonable promptness, such other public information relating to the Company and its Subsidiaries as the Holder may, from time to time, reasonably request. -51- 55 13. REPURCHASE BY THE COMPANY OF WARRANTS The Company shall have the right (the "Call"), upon written notice (the "Call Notice") to the Holders of all outstanding Warrants given at any time on or after the date of the occurrence of the Triggering Event and before May 31, 1997, to repurchase on the date specified in the notice from each Holder of a Warrant all of such Warrant for an amount equal to the result (rounded to the nearest cent) obtained by multiplying One Dollar ($1.00) by a fraction, the numerator of which shall be the aggregate number of shares for which this Warrant may be exercised and the denominator of which shall be the aggregate number of shares for which all outstanding Series A Warrants may be exercised, and in all events not more than One Dollar ($1.00) for all Series A Warrants. On the date of any repurchase of this Warrant pursuant to this Section 13, the Holder shall assign to the Company such Warrant without any representation or warranty (except as to title and the absence of Liens), by the surrender of this Warrant at the Designated Office against payment of the repurchase price therefor. 14. MISCELLANEOUS 14.1. Nonwaiver. No course of dealing or any delay or failure to exercise any right hereunder on the part of the Company or the Holder shall operate as a waiver of such right or otherwise prejudice the rights, powers or remedies of such Person. 14.2. Notice Generally. Any notice, demand, request, consent, approval, declaration, delivery or communication hereunder to be made pursuant to the provisions of this Warrant shall be sufficiently given or made if in writing and either delivered in person with receipt acknowledged or sent by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: (a) if to any Holder of this Warrant or of Warrant Stock issued upon the exercise hereof, at its last known address appearing on the books of the Company maintained for such purpose; (b) if to the Company, at its Designated Office; -52- 56 or at such other address as may be substituted by notice given as herein provided. The giving of any notice required hereunder may be waived in writing by the party entitled to receive such notice. Every notice, demand, request, consent, approval, declaration, delivery or other communication hereunder shall be deemed to have been duly given or served on the date on which personally delivered, with receipt acknowledged, or three Business Days after the same shall have been deposited in the United States mail, or one Business Day after the same shall have been delivered to Federal Express or another overnight courier service. 14.3. Indemnification. If the Company fails to make, when due, any payments provided for in this Warrant, the Company shall pay to the Holder hereof (a) interest at the Agreed Rate on any amounts due and owing to such Holder from the date due until the date of payment and (b) such further amounts as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys' fees and expenses incurred by such Holder in collecting any amounts due hereunder. The Company shall indemnify, save and hold harmless the Holder hereof and the Holders of any Warrant Stock issued upon the exercise hereof from and against any and all liability, loss, cost, damage, reasonable attorneys' and accountants' fees and expenses, court costs and all other out-of-pocket expenses incurred in connection with or arising from a Company Default. This indemnification provision shall be in addition to the rights of such Holder or Holders to bring an action against the Company for breach of contract based on such Company Default. 14.4. Limitation of Liability. No provision hereof, in the absence of affirmative action by the Holder to purchase shares of Common Stock, and no enumeration herein of the rights or privileges of the Holder hereof, shall give rise to any liability of such Holder to pay the Exercise Price for any Warrant Stock other than pursuant to an exercise of this Warrant or any liability as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company. 14.5. Remedies. Each Holder of Warrants and/or Warrant Stock, in addition to being entitled to exercise its rights granted by law, including recovery of damages, shall be entitled to specific performance of its rights provided under this War- -53- 57 rant. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees, in an action for specific performance, to waive the defense that a remedy at law would be adequate. 14.6. Successors and Assigns. Subject to the provisions of Sections 3.1, 8.1 and 8.2, this Warrant and the rights evidenced hereby shall inure to the benefit of and be binding upon the successors of the Company and the permitted successors and assigns of the Holder hereof. The provisions of this Warrant are intended to be for the benefit of all Holders from time to time of this Warrant and, in the case of Section 9, all Holders of shares of Warrant Stock issued upon the exercise hereof (including transferees), and shall be enforceable by any such Holder. 14.7. Amendment. This Warrant and all other Warrants may be modified or amended or the provisions hereof waived with the written consent of the Company and the Majority Warrant Holders, provided that no such Warrant may be modified or amended to reduce the number of shares of Common Stock for which such Warrant is exercisable or to increase the price at which such shares may be purchased upon exercise of such Warrant (before giving effect to any adjustment as provided therein) without the written consent of the Holder thereof. 14.8. Severability. Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Warrant. 14.9. Headings. The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant. 14.10. GOVERNING LAW; JURISDICTION. IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS WARRANT AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF ILLINOIS APPLICABLE TO CONTRACTS MADE AND -54- 58 PERFORMED IN SUCH STATE, EXCEPT WITH RESPECT TO THE VALIDITY OF THIS WARRANT, THE ISSUANCE OF WARRANT STOCK UPON EXERCISE HEREOF AND THE RIGHTS AND DUTIES OF THE COMPANY WITH RESPECT TO REGISTRATION OF TRANSFER, WHICH SHALL BE GOVERNED BY THE LAWS OF DELAWARE. THE COMPANY HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED IN CHICAGO, ILLINOIS, SHALL HAVE, EXCEPT AS SET FORTH BELOW, EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THE COMPANY AND THE HOLDER OF THIS WARRANT PERTAINING TO THIS WARRANT OR TO ANY MATTER ARISING OUT OF OR RELATING TO THIS AGREEMENT, PROVIDED, THAT IT IS ACKNOWLEDGED THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF CHICAGO, ILLINOIS. -55- 59 IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed and its corporate seal to be impressed hereon and attested by its Secretary or an Assistant Secretary. NORAND CORPORATION By:_________________________ Name: Title: [SEAL] Attest: By:___________________________ Name: Title: -56- 60 ANNEX A SUBSCRIPTION FORM [To be executed only upon exercise of Warrant] The undersigned registered owner of this Warrant irrevocably exercises this Warrant for the purchase of ______ shares Common Stock of Norand Corporation and herewith makes payment therefor, all at the price and on the terms and conditions specified in this Warrant and requests that certificates for the shares of Common Stock hereby purchased (and any securities or other property issuable upon such exercise) be issued in the name of and delivered to _________________ whose address is __________________________________________ and, if such shares of Common Stock shall not include all of the shares of Common Stock issuable as provided in this Warrant, that a new Warrant of like tenor and date for the balance of the shares of Common Stock issuable hereunder be delivered to the undersigned. _______________________________ (Name of Registered Owner) _______________________________ (Signature of Registered Owner) _______________________________ (Street Address) _______________________________ (City) (State) (Zip Code) NOTICE: The signature on this subscription must correspond with the name as written upon the face of the within Warrant in every particular, without alteration or enlargement or any change whatsoever. 61 ANNEX B ASSIGNMENT FORM FOR VALUE RECEIVED the undersigned registered owner of this Warrant hereby sells, assigns and transfers unto the Assignee named below all of the rights of the undersigned under this Warrant, with respect to the number of shares of Common Stock set forth below: No. of Shares of Name and Address of Assignee Common Stock and does hereby irrevocably constitute and appoint ________________________ attorney-in-fact to register such transfer onto the books of Norand Corporation maintained for the purpose, with full power of substitution in the premises. Dated:___________________ Print Name:___________________ Signature:____________________ Witness:______________________ NOTICE: The signature on this assignment must correspond with the name as written upon the face of the within Warrant in every particular, without alteration or enlargement or any change whatsoever. EX-4.(N)(6) 8 SERIES B WARRANT B-1 1 EXHIBIT 4.N.6 - -------------------------------------------------------------------------------- SERIES B WARRANT to Purchase Common Stock of NORAND CORPORATION - -------------------------------------------------------------------------------- Warrant No. B - 1 Original Issue Date: November 20, 1996 2 TABLE OF CONTENTS 1. DEFINITIONS 1 2. EXERCISE OF WARRANT 11 2.1. Manner of Exercise 11 2.2. Payment of Transfer Taxes 12 2.3. Fractional Shares 12 2.4. Continued Validity and Application 13 2.5. Limitation on Regulated Holder's Exercise 13 3. TRANSFER, DIVISION AND COMBINATION 13 3.1. Transfer 13 3.2. Division and Combination. 14 3.3. Expenses. 14 3.4. Maintenance of Books 14 4. ANTIDILUTION PROVISIONS 14 4.1. Stock Dividends, Subdivisions and Combinations 14 4.2. Issuance of Additional Shares of Common Stock 15 4.3. Issuances of Stock Purchase Rights and Convertible Securities 15 4.4. Adjustment of Number of Shares Purchasable. 17 4.5. Reorganization, Reclassification, Merger, Consolidation or Disposition of Assets 17 4.6. Determination of Consideration. 18 4.7. Other Dilutive Events 20 4.8. Other Provisions Applicable to Adjustments Under this Section 20 5. NO IMPAIRMENT 22 6. RESERVATION AND AUTHORIZATION OF COMMON STOCK 23 7. NOTICE OF CORPORATE ACTIONS; TAKING OF RECORD; TRANSFER BOOKS 23 7.1. Notices of Corporate Actions. 23 7.2. Closing of Transfer Books. 23 8. TRANSFER RESTRICTIONS 23 8.1. Restrictions on Transfers 24 8.2. Restrictive Legends 24 -i- 3 8.3. Termination of Securities Law Restrictions 25 9. REGISTRATION RIGHTS 26 9.1. Certain Definitions 26 9.2. Demand Registration 27 9.3. Piggyback Registration 29 9.4. Registration Procedures. 30 9.5. Selling Holders' Obligations. 34 9.6. Expenses of Registration. 34 9.7. Indemnification; Contribution. 35 9.8. Holdback. 40 9.9. Additional Covenants of the Company 40 10. LOSS OR MUTILATION 42 11. OFFICE OF THE COMPANY 42 12. FINANCIAL AND BUSINESS INFORMATION 43 13. REPURCHASE BY THE COMPANY OF WARRANTS 43 14. MISCELLANEOUS 43 14.1. Nonwaiver. 43 14.2. Notice Generally 44 14.3. Indemnification 44 14.4. Limitation of Liability. 44 14.5. Remedies 45 14.6. Successors and Assigns 45 14.7. Amendment. 45 14.8. Severability 45 14.9. Headings. 45 14.10. GOVERNING LAW; JURISDICTION. 45 ANNEX A SUBSCRIPTION FORM 48 ANNEX B ASSIGNMENT FORM 49 SCHEDULE A RESERVED SHARES OF COMMON STOCK SCHEDULE B UNDERWRITERS AND AGENTS -ii- 4 NEITHER THE WARRANTS REPRESENTED BY THIS CERTIFICATE NOR ANY OF THE SECURITIES ISSUABLE UPON EXERCISE THEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAW. NO TRANSFER OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE OR OF THE SECURITIES ISSUABLE UPON EXERCISE THEREOF SHALL BE VALID OR EFFECTIVE UNLESS (A) SUCH TRANSFER IS MADE PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR (B) THE HOLDER OF THE SECURITIES PROPOSED TO BE TRANSFERRED SHALL HAVE DELIVERED TO THE COMPANY EITHER A NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION OR AN OPINION OF COUNSEL EXPERIENCED IN SECURITIES MATTERS AND REASONABLY ACCEPTABLE TO THE COMPANY TO THE EFFECT THAT SUCH PROPOSED TRANSFER IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE ACT OR (C) SUCH TRANSFER IS PURSUANT TO RULE 144 OR RULE 144A UNDER THE ACT AND SUCH HOLDER(S) SHALL HAVE DELIVERED TO THE COMPANY A CERTIFICATE SETTING FORTH THE BASIS FOR APPLYING SUCH RULE TO THE PROPOSED TRANSFER. Warrant No. B - 1 SERIES B WARRANT NORAND CORPORATION THIS IS TO CERTIFY THAT THE FIRST NATIONAL BANK OF CHICAGO, or registered assigns, is entitled, at any time after August 31, 1997 and prior to the Expiration Date (such term, and certain other capitalized terms used herein being hereinafter defined), to purchase from NORAND CORPORATION, a Delaware corporation (the "Company"), One Hundred Six Thousand Six Hundred Twenty-nine (106,629) shares of the Common Stock of the Company (subject to adjustment as provided herein), at a purchase price of $21.15 per share (the initial "Exercise Price", subject to adjustment as provided herein), all on the terms and conditions and pursuant to the provisions hereinafter set forth. 5 1. DEFINITIONS As used in this Warrant, the following terms have the respective meanings set forth below: "Affiliate" of any Person means a Person (a) which directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with such Person, (b) which beneficially owns or holds more than ten percent of the outstanding shares of any class of voting stock of such Person and has the power to vote such shares or (c) more than ten percent of the outstanding shares of any class of voting stock (or, in the case of a Person which is not a corporation, more than ten percent of the equity interest) of which is beneficially owned or held by such Person and such Person has the power to vote such shares or equity interest. The term "control" as used with respect to any Person means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise. "After-Tax Basis", when referring to a payment that is required hereunder (the "target amount"), shall mean a total payment (the "total amount") that, after deduction of all federal, state and local taxes that are required to be paid by the recipient in respect of the receipt or accrual of such total amount, is equal to the target amount. "Agreed Rate" shall mean a rate per annum equal to the corporate base rate of interest announced by The First National Bank of Chicago from time to time, changing when and as said corporate base rate changes. "Appraised Value" per share of Common Stock as of a date specified herein shall mean the value of such share as of such date as determined by an investment bank of nationally recognized standing selected by the Majority Warrant Holders from Schedule B (or any successor of any such entity), it being understood that the Majority Warrant Holders shall use commercially reasonable efforts to select one of the first three listed entities subject to arriving at reasonably acceptable terms and conditions for the -2- 6 appraisal. The Company shall pay the costs and fees of such investment bank, and the decision of the investment bank making such determination of Appraised Value shall be final and binding on the Company and all affected holders of Warrants or Warrant Stock. Such Appraised Value shall be determined as a pro rata portion of the value of the Company taken as a whole, based on the higher of (A) the value derived from a hypothetical sale of the entire Company as a going concern by a willing seller to a willing buyer (neither acting under any compulsion) and (B) the liquidation value of the entire Company. No discount shall be applied on account of (i) any Warrants or Warrant Stock representing a minority interest, (ii) any lack of liquidity of the Common Stock or the Warrants, (iii) the fact that the Warrants or Warrant Stock may constitute "restricted securities" for securities law purposes or (iv) the existence of any call option. "Bank Holding Company Act" shall mean the Bank Holding Company Act of 1956, as amended. "Business Day" shall mean any day that is not a Saturday or Sunday or a day on which banks are required or permitted to be closed in the State of Illinois. "Call" shall have the meaning set forth in Section 13 hereof. "Call Notice" shall have the meaning set forth in Section 13 hereof. "Commission" shall mean the Securities and Exchange Commission or any other federal agency then administering the Securities Act and other federal securities laws. "Common Stock" shall mean (except where the context otherwise indicates) the Common Stock of the Company, par value $.01 per share, as constituted on the Original Issue Date, and any capital stock into which such Common Stock may thereafter be changed, and shall also include (i) capital stock of the Company of any other class (regardless of how denominated) issued to the holders of shares of any Common Stock upon any reclassification thereof which is also not preferred as to dividends or liquidation over any other -3- 7 class of stock of the Company and which is not subject to redemption and (ii) shares of common stock of any successor or acquiring corporation (as defined in Section 4.5 hereof) received by or distributed to the holders of Common Stock of the Company in the circumstances contemplated by Section 4.5 hereof. "Company" means Norand Corporation, a Delaware corporation, and any successor corporation. "Company Default" means (a) the breach of any warranty or the inaccuracy in any material respect at the time when made of any representation made by the Company herein or (b) the failure by the Company to comply in any material respect with any covenant of the Company contained herein. "Continuously Effective", with respect to a specified registration statement, shall mean that it shall not cease to be effective and available for Transfers of Warrant Stock thereunder for the longer of either (i) any ten consecutive Business Days, or (ii) an aggregate of fifteen Business Days during the period specified in the relevant provision of Section 9 hereof. "Convertible Securities" shall mean evidences of indebtedness, shares of stock or other securities that are convertible into or exchangeable for, with or without payment of additional consideration in cash or property, shares of Common Stock, either immediately or upon the occurrence of a specified date or a specified event. "Credit Agreement" means the Second Amended and Restated Credit Agreement dated as of January 25, 1996, as thereafter from time to time amended, supplemented, restated or modified, among the Company, the Lenders party thereto and The First National Bank of Chicago, as agent. "Current Market Price" shall mean as of any specified date the average of the daily market prices of the Common Stock of the Company for the shorter of (x) the twenty consecutive Business Days immediately preceding such date or (y) the period commencing on the Business Day next following the first public announcement of any event giving rise to an adjustment of the Exercise Price pursuant to Section 4 below -4- 8 and ending on such date. The "daily market price" for each such Business Day shall be: (i) if the Common Stock is then listed on a national securities exchange or is listed on NASDAQ and is designated as a National Market System security, the last sale price, regular way, on such day on the principal stock exchange or market system on which such Common Stock is then listed or admitted to trading, or, if no such sale takes place on such day, the average of the closing bid and asked prices for the Common Stock on such day as reported on such stock exchange or market system or (ii) if the Common Stock is not then listed or admitted to trading on any national securities exchange or designated as a National Market System security on NASDAQ but is traded over-the-counter, the average of the closing bid and asked prices for the Common Stock as reported on NASDAQ or the Electronic Bulletin Board or in the National Daily Quotation Sheets, as applicable. "Demand Registration" shall have the meaning set forth in Section 9.2(a) hereof. "Demanding Holders" shall have the meaning set forth in Section 9.2(a) hereof. "Designated Office" shall have the meaning set forth in Section 11 hereof. "Equity" shall mean equity capital (not including the equity capital attributable to the Settlement Stock, and any mandatory redemption terms of which equity capital are acceptable to the Majority Warrant Holders) raised by and/or contributed to the Company subsequent to the Original Issue Date or new Indebtedness (as defined in the Credit Agreement) subordinated to the Obligations (as defined in the Credit Agreement), provided the terms of such Indebtedness (including, without limitation, maturity, amortization, covenants, defaults, remedies and subordination provisions) are acceptable to the Majority Warrant Holders. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect from time to time. -5- 9 "Exercise Notice" shall have the meaning set forth in Section 2.1 hereof. "Exercise Period" shall mean the period during which this Warrant is exercisable pursuant to Section 2.1 hereof. "Exercise Price" shall mean, in respect of a share of Common Stock at any date herein specified, the initial Exercise Price set forth in the preamble of this Warrant as adjusted from time to time pursuant to Section 4 hereof. "Expiration Date" shall mean August 31, 2002, unless extended under the circumstances contemplated by Section 9.2(d) hereof. "Fair Value" per share of Common Stock as of any specified date shall mean (A) if the Common Stock is publicly traded on such date, the Current Market Price per share or (B) if the Common Stock is not publicly traded on such date, (1) the fair market value per share of Common Stock as determined in good faith by the Board of Directors of the Company and set forth in a written notice to each Holder or (2) if the Majority Warrant Holders object in writing to such price as determined by the Board of Directors within thirty days after receiving notice of same, the Appraised Value per share as of such date. "Fully Diluted Outstanding" shall mean, when used with reference to Common Stock, at any date as of which the number of shares thereof is to be determined, all shares of Common Stock Outstanding on such date and all shares of Common Stock issuable in respect of (x) the Warrants outstanding on such date, (y) any Convertible Securities outstanding on such date and (z) any other Stock Purchase Rights outstanding on such date, in each case regardless of whether or not the conversion, exchange, subscription or purchase rights associated with such Convertible Securities or Stock Purchase Rights are presently exercisable. "GAAP" shall mean generally accepted accounting principles in the United States of America as from time to time in effect. -6- 10 "Glass-Steagall Act" shall mean Section 24 (Seventh), Section 78, Section 377 and Section 378 of Title 12 (12 U.S.C. Section Section 24 (Seventh) 78, 377, 378), or any similar federal legislation. "Holder" shall mean (a) with respect to this Warrant, the Person in whose name the Warrant set forth herein is registered on the books of the Company maintained for such purpose and (b) with respect to any other Warrant or shares of Warrant Stock, the Person in whose name such Warrant or Warrant Stock is registered on the books of the Company maintained for such purpose. "Insolvency Event" shall mean any proceeding being instituted by or against the Company seeking a declaration or order for relief, or entailing a finding, that the Company is insolvent or bankrupt, or seeking reorganization, liquidation, dissolution, winding-up, charter revocation or other similar relief with respect to the Company or any of its properties, assets or debts, or seeking the appointment of a receiver, trustee, custodian, liquidator, sequestrator or similar official for the Company or any of its properties or assets, or the Company becoming insolvent or bankrupt or generally unable to pay its debts as they become due, or the Company voluntarily suspending its business or making a general assignment for the benefit of creditors; provided that an Insolvency Event shall not be deemed to have occurred on account of any such proceeding which is involuntary on the part of the Company unless same shall not have been dismissed or stayed within 60 days. "Lien" shall mean any mortgage or deed of trust, pledge, hypothecation, assignment, deposit arrangement, lien, charge, claim, security interest, easement or encumbrance, or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, any lease or title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, and the filing of, or agreement to give, any financing statement perfecting a security interest under the Uniform Commercial Code or comparable law of any jurisdiction). -7- 11 "Majority Warrant Holders", with respect to a given determination, shall mean the Holders of Warrants and/or Warrant Stock representing at least seventy-six percent (76%) of all Warrants and/or Warrant Stock (with any such Warrants being deemed to represent, for the purposes of such calculation, the shares of Warrant Stock then issuable upon exercise thereof) directly affected by such determination. "Majority Selling Holders" shall mean those Selling Holders whose Warrants and/or Warrant Stock included in a registration under Section 9 hereof represents a majority of the Warrants and/or Warrant Stock (with any such Warrants being deemed to represent, for the purposes of such calculation, the shares of Warrant Stock then issuable upon exercise thereof) included therein by all Selling Holders. "NASD" shall mean the National Association of Securities Dealers, Inc., or any successor corporation thereto. "NASDAQ" shall mean the NASDAQ quotation system, or any successor reporting system. "Notes" shall mean any of the promissory notes issued by the Company under the Credit Agreement. "Opinion of Counsel" means a written opinion of counsel experienced in Securities Act or bank regulatory matters, as the case may be, chosen by the Holder of this Warrant or Warrant Stock issued upon the exercise hereof and reasonably acceptable to the Company. "Original Issue Date" shall mean the date on which the Original Warrants were issued, as set forth on the cover page of this Warrant. "Original Warrants" shall mean the Warrants originally issued by the Company on the Original Issue Date to each of The First National Bank of Chicago, Fleet Bank of Massachusetts, N.A., The Daiwa Bank, Limited, Norwest Bank Iowa, National Association and Caisse Nationale de Credit Agricole. "Other Property" shall have the meaning set forth in Section 4.5 hereof. -8- 12 "Outstanding" shall mean, when used with reference to Common Stock, at any date as of which the number of shares thereof is to be determined, all issued shares of Common Stock, except shares then owned or held by or for the account of the Company or any Subsidiary thereof, and shall include all shares issuable in respect of outstanding scrip or any certificates representing fractional interests in shares of Common Stock. "Outstanding", when used with respect to Warrant Stock for the purposes of Section 9 hereof shall have the meaning set forth in Section 9.1(d) hereof. "Person" shall mean any individual, sole proprietorship, partnership, limited liability company, joint venture, trust, incorporated organization, association, corporation, institution, public benefit corporation, entity or government (whether federal, state, county, city, municipal or otherwise, including, without limitation, any instrumentality, division, agency, body or department thereof). "Piggyback Registration" shall have the meaning set forth in Section 9.3(a) hereof. "Register", "registered" and "registration" shall refer to a registration effected by preparing and filing a registration statement or similar document in compliance with the Securities Act, and the declaration or ordering by the Commission of effectiveness of such registration statement or document. "Registration Expenses" shall have the meaning set forth in Section 9.6(a) hereof. "Restricted Common Stock" shall mean shares of Common Stock which are, or which upon their issuance on the exercise of this Warrant would be, evidenced by a certificate bearing the restrictive legend set forth in Section 8.2(a) hereof. "Securities Act" shall mean the Securities Act of 1933, as amended, or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. -9- 13 "Selling Holders" shall mean, with respect to a specified registration under Section 9 hereof, WS Holders whose Registrable Securities are included in such registration. "Series A Warrants" shall mean all of the Series A Warrants to Purchase Common Stock of Norand Corporation issued concurrently with this Warrant. "Series B Warrants" shall mean all of the Series B Warrants to Purchase Common Stock of Norand Corporation, issued concurrently with, and having the same terms (other than the number of shares purchasable upon the exercise thereof) as, this Warrant. "Settlement Stock" shall mean the shares of Common Stock contemplated to be issued in settlement of the pending shareholders' claims against the Company with respect to the litigation styled In re Norand Corporation Securities Litigation, Master File No. C95-323, pending in the United States District Court for the Northern District of Iowa, Cedar Rapids Division. "Share Withholding Option" has the meaning set forth in Section 2.1(c) hereof. "Shelf Registration" shall have the meaning set forth in Section 9.2(a) hereof. "Stock Purchase Rights" shall mean any options, warrants or other securities or rights to subscribe to or exercisable for the purchase of shares of Common Stock or Convertible Securities, whether or not immediately exercisable, other than the options, warrants or other rights described in Schedule A hereto. "Subsequent Issuance" shall mean any sale or issuance by the Company of Common Stock, Convertible Securities or Stock Purchase Rights after the Original Issue Date other than: (i) Any issuance of Warrant Stock upon exercise of the Warrants and any issuance of Common Stock, Convertible Securities or Stock Purchase Rights (and -10- 14 any issuance of Common Stock pursuant to the conversion, exchange or exercise of any such Convertible Securities or Stock Purchase Rights) deemed to have been issued as of the Original Issue Date pursuant to the definition of Fully Diluted Outstanding. (ii) Any issuance of Common Stock pursuant to the exercise of the options and warrants described in Schedule A hereto, provided, however, that the exercise price of any such option or warrant (other than warrants granted to Jay Alix and Associates and to Donald W. Rowley for up to the respective number of shares set forth on Schedule A) granted or issued after the Original Issue Date shall not be less than the "daily market price" (as that term is defined in the definition of Current Market Price) of the Common Stock on the date of grant or issue of the option or warrant. (iii) The issuance of the Settlement Stock. (iv) Any other issuance of Common Stock, Convertible Securities or Stock Purchase Rights with respect to which the Majority Warrant Holders shall have waived application of the provisions of Section 4 below. "Subsidiary" means any corporation or association (a) more than 50% (by number of votes) of the voting stock of which is at the time owned by the Company or by one or more Subsidiaries or by the Company and one or more Subsidiaries, or any other business entity in which the Company or one or more Subsidiaries or the Company and one or more Subsidiaries own more than a 50% interest either in the profits or capital of such business entity or (b) whose net earnings, or portions thereof, are consolidated with the net earnings of the Company and are recorded on the books of the Company for financial reporting purposes in accordance with GAAP. "Transfer" shall mean any disposition of any Warrant or Warrant Stock or of any interest in either thereof, which would constitute a "sale" thereof within the meaning of the Securities Act. -11- 15 "Triggering Event" shall mean either the repayment in full of all indebtedness under the Credit Agreement or the receipt by the Company of at least $20 million in net cash proceeds from additional Equity. "Violation" has the meaning set forth in Section 9.7(a) hereof. "Warrant Price" shall mean an amount equal to (i) the number of shares of Common Stock being purchased upon exercise of this Warrant pursuant to Section 2.1 hereof, multiplied by (ii) the Exercise Price as of the date of such exercise. "Warrants" shall mean the Original Warrants and all warrants issued upon transfer, division or combination of, or in substitution for, such Original Warrants or any other such Warrant. All Warrants shall at all times be identical as to terms and conditions and date, except as to the number of shares of Common Stock for which they may be exercised. "Warrant Stock" generally shall mean the shares of Common Stock issued, issuable or both (as the context may require) upon the exercise of Warrants until such time as such shares of Common Stock have either been (i) Transferred in a public offering pursuant to a registration statement filed under the Securities Act or (ii) Transferred in a transaction exempt from the registration and prospectus delivery requirements of the Securities Act under Section 4(1) thereof with all transfer restrictions and restrictive legends with respect to such Common Stock being removed in connection with such transaction. "Warrant Stock", for the purposes of Section 9 hereof, shall have the meaning set forth in Section 9.1(b) hereof. "WS Holder" shall have the meaning set forth in Section 9.1(a) hereof. 2. EXERCISE OF WARRANT 2.1. Manner of Exercise. (a) From and after August 31, 1997 and until 5:00 P.M., Chicago time, on the Expiration Date, the Holder of this Warrant may from time to time exercise -12- 16 this Warrant, on any Business Day, for all or any part of the number of shares of Common Stock purchasable hereunder (as determined pursuant to Section 2.2 below). In order to exercise this Warrant, in whole or in part, the Holder shall (i) deliver to the Company at the Designated Office a written notice of the Holder's election to exercise this Warrant (an "Exercise Notice"), which Exercise Notice shall be irrevocable and specify the number of shares of Common Stock to be purchased, together with this Warrant and (ii) pay to the Company the Warrant Price (the date on which both such delivery and payment shall have first taken place being hereinafter sometimes referred to as the "Exercise Date"). Such Exercise Notice shall be in the form of the subscription form appearing at the end of this Warrant as Annex A, duly executed by the Holder or its duly authorized agent or attorney. (b) Upon receipt of such Exercise Notice, Warrant and payment, the Company shall, as promptly as practicable, and in any event within five Business Days thereafter, execute (or cause to be executed) and deliver (or cause to be delivered) to the Holder a certificate or certificates representing the aggregate number of full shares of Common Stock issuable upon such exercise, together with cash in lieu of any fraction of a share, as hereafter provided. The stock certificate or certificates so delivered shall be, to the extent possible, in such denomination or denominations as the exercising Holder shall reasonably request in the Exercise Notice and shall be registered in the name of the Holder or such other name as shall be designated in the Exercise Notice. This Warrant shall be deemed to have been exercised and such certificate or certificates shall be deemed to have been issued, and the Holder or any other Person so designated to be named therein shall be deemed to have become a holder of record of such shares for all purposes, as of the Exercise Date. (c) Payment of the Warrant Price shall be made at the option of the Holder by one or more of the following methods: (i) by delivery of a certified or official bank check in the amount of such Warrant Price, (ii) by instructing the Company to withhold a number of shares of Warrant Stock then issuable upon exercise of this Warrant with an aggregate Current Market Price equal to such Warrant Price (the "Share Withholding Option"), (iii) by surrendering to the Company shares of Common Stock previously acquired by the Holder with an aggregate Current -13- 17 Market Price equal to such Warrant Price or(iv) by delivery of a Note, duly endorsed by or accompanied by appropriate instruments of transfer duly executed by the Holder or by the Holder's attorney duly authorized in writing. In the event of any withholding of Warrant Stock or surrender of Common Stock pursuant to clause (ii) or (iii) above where the number of shares whose Current Market Price is equal to the Warrant Price is not a whole number, the number of shares withheld by or surrendered to the Company shall be rounded up to the nearest whole share and the Company shall make a cash payment to the Holder based on the incremental fraction of a share being so withheld by or surrendered to the Company in an amount determined in accordance with Section 2.3 hereof. For the purpose of making payment of the Warrant Price, any Note surrendered to the Company shall be deemed to have a value equal to 100% of the principal amount thereof plus any interest accrued but unpaid thereon. If the Holder delivers a Note with a deemed value that exceeds the Warrant Price, the Company shall reissue to the Holder a new Note identical in all respects to the surrendered Note except that the principal amount of such new Note shall be equal to the principal amount that, together with any interest accrued but unpaid thereon, is equal to the deemed value of the surrendered Note less the Warrant Price. (d) If this Warrant shall have been exercised in part, the Company shall, at the time of delivery of the certificate or certificates representing the shares of Common Stock being issued, deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the unpurchased shares of Common Stock called for by this Warrant. Such new Warrant shall in all other respects be identical with this Warrant. 2.2. Payment of Transfer Taxes. All shares of Common Stock issuable upon the exercise of this Warrant pursuant to the terms hereof shall be validly issued, fully paid and nonassessable, issued without violation of any preemptive rights and free and clear of all Liens (other than any created by actions of the Holder). The Company shall pay all expenses in connection with, and all taxes and other governmental charges that may be imposed with respect to, the issue or delivery thereof, unless such tax or charge is imposed by law upon the Holder, in which case such taxes or charges shall be paid by the Holder and the Company shall reimburse the Holder therefor on an After-Tax Basis. -14- 18 2.3. Fractional Shares. The Company shall not be required to issue a fractional share of Common Stock upon exercise of any Warrant. As to any fraction of a share that the Holder of one or more Warrants, the rights under which are exercised in the same transaction, would otherwise be entitled to purchase upon such exercise, the Company shall pay a cash adjustment in respect of such final fraction in an amount equal to the same fraction of the Current Market Price of one share of Common Stock on the Exercise Date, if the Common Stock is then publicly traded. 2.4. Continued Validity and Application. (a) A Holder of shares of Warrant Stock issued upon the exercise of this Warrant, in whole or in part, including any transferee of such shares (other than a transferee in whose hands such shares no longer constitute Warrant Stock as defined herein), shall continue, with respect to such shares, to be entitled to all rights and to be subject to all obligations that are applicable to such Holder by the terms of this Warrant under Section 9 hereof. The Company shall, at the time of any exercise of this Warrant or any transfer of Warrant Stock, upon the request of the Holder of the shares of Warrant Stock issued in connection with such exercise or transfer, acknowledge in writing, in a form reasonably satisfactory to such Holder, its continuing obligation to afford to such Holder such rights referred to in this Section 2.4; provided, however, that if such Holder shall fail to make any such request, such failure shall not affect the continuing obligation of the Company to afford to such Holder all such rights. 2.5. Limitation on Regulated Holder's Exercise. Notwithstanding anything in this Warrant to the contrary, the Holder of this Warrant, if subject to the Bank Holding Company Act or any provision of the Glass-Steagall Act, may exercise this Warrant only if the Notice of Exercise is accompanied by an Opinion of Counsel of such Holder to the effect that, as of the date of delivery of such opinion, no federal or state regulatory clearances are required for such Holder to exercise this Warrant or, in the event any such federal or state regulatory clearances are required prior to the exercise of this Warrant, to the effect that all such clearances have been obtained or, if not then obtained, that no statute or regulation or regulatory policy or guidelines known to such counsel would by their terms preclude the obtaining of such clearances or make it unlikely that such -15- 19 clearances would be obtained or make it likely that such clearances would, if obtained, contain material conditions adverse to such Holder. In the event that federal or state regulatory clearances are required prior to the exercise of this Warrant by the Holder hereof, the Company shall reasonably cooperate with such Holder in providing such information to any regulatory agency as such agency may reasonably require. In the event any such regulatory clearance is withheld or denied, such Holder may continue to hold this Warrant until its expiration or may sell or otherwise transfer this Warrant in accordance with the terms hereof. 3. TRANSFER, DIVISION AND COMBINATION 3.1. Transfer. Subject to compliance with Section 8 hereof, each transfer of this Warrant and all rights hereunder, in whole or in part, shall be registered on the books of the Company to be maintained for such purpose, upon surrender of this Warrant at the Designated Office, together with a written assignment of this Warrant in the form of Annex B hereto duly executed by the Holder or its agent or attorney. Upon such surrender and delivery, the Company shall, subject to Section 8, execute and deliver a new Warrant or Warrants in the name of the assignee or assignees and in the denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned and this Warrant shall promptly be canceled. A Warrant, if properly assigned in compliance with Section 8, may be exercised by the new Holder for the purchase of shares of Common Stock without having a new Warrant issued. 3.2. Division and Combination. Subject to compliance with the applicable provisions of this Warrant, this Warrant may be divided or combined with other Warrants upon presentation hereof at the Designated Office, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney. Subject to compliance with the applicable provisions of this Warrant as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. -16- 20 3.3. Expenses. The Company shall prepare, issue and deliver at its own expense any new Warrant or Warrants required to be issued under this Section 3. 3.4. Maintenance of Books. The Company agrees to maintain, at the Designated Office, books for the registration and transfer of the Warrants. 4. ANTIDILUTION PROVISIONS The number of shares of Common Stock for which this Warrant is exercisable and the Exercise Price shall be subject to adjustment from time to time as set forth in this Section 4. 4.1. Stock Dividends, Subdivisions and Combinations. If at any time the Company shall: (i) take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend payable in, or other distribution of, additional shares of Common Stock, (ii) subdivide its outstanding shares of Common Stock into a larger number of shares of such Common Stock, or (iii) combine its outstanding shares of Common Stock into a smaller number of shares of such Common Stock, then the Exercise Price shall be adjusted to equal the product of the Exercise Price in effect immediately prior to such event multiplied by a fraction the numerator of which is equal to the number of shares of Common Stock Outstanding immediately prior to the adjustment and the denominator of which is equal to the number of shares of Common Stock Outstanding immediately after such adjustment. 4.2. Issuance of Additional Shares of Common Stock. (a) If at any time the Company shall issue or sell any shares of Common Stock in a Subsequent Issuance for a consideration per share that is less than the Exercise Price in effect immediately prior to such issuance or sale, then, forthwith upon such issuance or sale, the Exercise Price shall be reduced to a price calculated by dividing (1) an amount equal to the sum of (x) the -17- 21 number of shares of Common Stock Outstanding immediately prior to such Subsequent Issuance multiplied by the then existing Exercise Price, plus (y) the aggregate consideration (determined in accordance with the provisions of Section 4.6 hereof), if any, received by the Company in connection with such Subsequent Issuance, by (2) the total number of shares of Common Stock Outstanding immediately after such Subsequent Issuance. (b) The provisions of this Section 4.2 shall not apply to (i) any issuance of Common Stock for which an adjustment is provided for under Section 4.1 or (ii) any issuance or sale of Common Stock pursuant to the exercise of any Stock Purchase Rights or Convertible Securities to the extent that an adjustment shall have been previously made hereunder in connection with the issuance of such Stock Purchase Rights or Convertible Securities pursuant to the provisions of Section 4.3 hereof. 4.3. Issuances of Stock Purchase Rights and Convertible Securities. (a) In the event that the Company shall at any time issue, sell or grant any Stock Purchase Rights to any Person in a Subsequent Issuance, then, for the purpose of Section 4.2 above, the Company shall be deemed to have issued at that time a number of shares of Common Stock equal to the maximum number of shares of Common Stock (without giving effect to any antidilution provisions in such Stock Purchase Rights) that are or may become issuable upon exercise of such Stock Purchase Rights (or upon exercise of any Convertible Securities issuable upon exercise of such Stock Purchase Rights) for a consideration per share equal to (i) the aggregate consideration per share (determined in accordance with the provisions of Section 4.6 hereof) received by the Company in connection with the issuance, sale or grant of such Stock Purchase Rights plus (ii) the minimum amount of such consideration per share receivable by the Company in connection with the exercise of such Stock Purchase Rights (and the exercise of any Convertible Securities issuable upon exercise of such Stock Purchase Rights). (b) In the event that the Company shall at any time issue or sell any Convertible Securities to any Person in a Subsequent Issuance, then, for the purposes of Section 4.2 above, the Company shall be deemed to have issued at that time a number of shares of Common Stock equal to the maximum number of shares of Common Stock that are or may become issuable upon the exercise of the conversion or exchange rights associated with such -18- 22 Convertible Securities for a consideration per share equal to (i) the aggregate consideration per share (determined in accordance with the provisions of Section 4.6 hereof) received by the Company in connection with the issuance or sale of such Convertible Securities plus (ii) the minimum amount of such consideration per share receivable by the Company in connection with the exercise of such conversion or exchange rights. (c) If, at any time after any adjustment of the Exercise Price shall have been made hereunder as the result of any issuance, sale or grant of any Stock Purchase Rights or Convertible Securities, the maximum number of shares issuable upon exercise of such Stock Purchase Rights or of the rights of conversion or exchange associated with such Convertible Securities shall increase, or the minimum amount of consideration per share receivable in connection with such exercise shall decrease, whether by operation of any antidilution rights pertaining to such Stock Purchase Rights or Convertible Securities, by agreement of the parties or otherwise, the Exercise Price then in effect shall first be readjusted to eliminate the effects of the original issuance, sale or grant of such Stock Purchase Rights or Convertible Securities on such Exercise Price and then readjusted as if such Stock Purchase Rights or Convertible Securities had been issued on the effective date of such increase in number of shares or decrease in consideration, but only if the effect of such two-step readjustment is to reduce the Exercise Price below the Exercise Price in effect immediately prior to such increase or decrease. (d) If, at any time after any adjustment of the Exercise Price shall have been made hereunder as the result of any issuance, sale or grant of any Stock Purchase Rights or Convertible Securities, any of such Stock Purchase Rights or the rights of conversion or exchange associated with such Convertible Securities shall expire by their terms or any of such Stock Purchase Rights or Convertible Securities shall be repurchased by the Company or a Subsidiary thereof for a consideration per underlying share of Common Stock not exceeding the amount of such consideration received by the Company in connection with the issuance, sale or grant of such Stock Purchase Rights or Convertible Securities, the Exercise Price then in effect shall forthwith be increased to the Exercise Price that would have been in effect if such expiring Stock Purchase Rights or rights of conversion or exchange or such repurchased Stock Purchase Rights -19- 23 or Convertible Securities had never been issued. Similarly, if at any time after any such adjustment of the Exercise Price shall have been made pursuant to Section 4.2 (i) any additional consideration is received or becomes receivable by the Company in connection with the issuance or exercise of such Stock Purchase Rights or Convertible Securities or (ii) there is a reduction in the conversion ratio applicable to such Convertible Securities so that fewer shares of Common Stock will be issuable upon the conversion or exchange thereof or there is a decrease in the number of shares of Common Stock issuable upon exercise of such Stock Purchase Rights, the Exercise Price then in effect shall be forthwith readjusted to the Exercise Price that would have been in effect had such changes taken place at the time that such Stock Purchase Rights or Convertible Securities were initially issued, granted or sold. In no event shall any readjustment under this Section 4.3(d) affect the validity of any shares of Warrant Stock issued upon any exercise of this Warrant prior to such readjustment, nor shall any such readjustment have the effect of increasing the Exercise Price above the Exercise Price that would have been in effect if the related Stock Purchase Rights or Convertible Securities had never been issued. 4.4. Adjustment of Number of Shares Purchasable. Upon any adjustment of the Exercise Price as provided in Section 4.1, 4.2 or 4.3 hereof, the Holder hereof shall thereafter be entitled to purchase upon the exercise of this Warrant, at the Exercise Price resulting from such adjustment, the number of shares of Common Stock (calculated to the nearest 1/100th of a share) obtained by multiplying the Exercise Price in effect immediately prior to such adjustment by the number of shares of Common Stock issuable on the exercise hereof immediately prior to such adjustment and dividing the product thereof by the Exercise Price resulting from such adjustment. 4.5. Reorganization, Reclassification, Merger, Con solidation or Disposition of Assets. In case the Company shall reorganize its capital, reclassify its capital stock, consolidate or merge with or into another corporation (where the Company is not the surviving corporation or where there is any change whatsoever in, or distribution with respect to, the Outstanding Common Stock of the Company), or sell, transfer or otherwise dispose of all or substantially all of its property, assets or business to another corporation and, pursuant to the terms of such reorganization, reclassification, merger, consolidation or -20- 24 disposition of assets, (i) shares of common stock of the successor or acquiring corporation or of the Company (if it is the surviving corporation) or (ii) any cash, shares of stock or other securities or property of any nature whatsoever (including warrants or other subscription or purchase rights) in addition to or in lieu of common stock of the successor or acquiring corporation ("Other Property") are to be received by or distributed to the holders of Common Stock of the Company who are holders immediately prior to such transaction, then the Holder of this Warrant shall have the right thereafter to receive, upon exercise of this Warrant, the number of shares of common stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and Other Property receivable upon or as a result of such reorganization, reclassification, merger, consolidation or disposition of assets by a holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such event. In such event, the aggregate Exercise Price otherwise payable for the shares of Common Stock issuable upon exercise of this Warrant shall be allocated among the shares of common stock and Other Property receivable as a result of such reorganization, reclassification, merger, consolidation or disposition of assets in proportion to the respective fair market values of such shares of common stock and Other Property as determined in good faith by the Board of Directors of the Company. In case of any such reorganization, reclassification, merger, consolidation or disposition of assets, the successor or acquiring corporation (if other than the Company) shall expressly assume the due and punctual observance and performance of each and every covenant and condition of this Warrant to be performed and observed by the Company and all the obligations and liabilities hereunder, subject to such modifications as may be reasonably deemed appropriate (as determined by resolution of the Board of Directors of the Company) in order to provide for adjustments of any shares of the common stock of such successor or acquiring corporation for which this Warrant thus becomes exercisable, which modifications shall be as equivalent as practicable to the adjustments provided for in this Section 4. For purposes of this Section 4.5, "common stock of the successor or acquiring corporation" shall include stock of such corporation of any class that is not preferred as to dividends or assets over any other class of stock of such corporation and that is not subject to redemption and shall also include any evidences of indebtedness, shares of stock or other securities that are convertible into or exchangeable for any such -21- 25 stock, either immediately or upon the arrival of a specified date or the happening of a specified event and any warrants or other rights to subscribe for or purchase any such stock. The foregoing provisions of this Section 4.5 shall similarly apply to successive reorganizations, reclassifications, mergers, consolidations or disposition of assets. 4.6. Determination of Consideration. For purposes of Sections 4.2, 4.3 and 4.4 hereof, the consideration received and/or receivable by the Company in connection with the issuance, sale, grant or exercise of additional shares of Common Stock, Stock Purchase Rights or Convertible Securities, irrespective of the accounting treatment of such consideration, shall be valued as follows: (1) Cash Payment. In the case of cash, the net amount received by the Company after deduction of any accrued interest or dividends, expenses incurred or any underwriting commissions or concessions paid or allowed by the Company. (2) Securities or Other Property. In the case of securities or other property, the fair market value thereof as of the date immediately preceding such issuance, sale, grant or exercise as determined in good faith by the Board of Directors of the Company. (3) Allocation Related to Common Stock. In the event shares of Common Stock are issued or sold together with other securities or other assets of the Company for a consideration which covers both, the consideration received (computed as provided in (1) and (2) above) shall be allocable to such shares of Common Stock as determined in good faith by the Board of Directors of the Company. (4) Allocation Related to Stock Purchase Rights and Convertible Securities. In case any Stock Purchase Rights or Convertible Securities shall be issued or sold together with other securities or other assets of the Company, together comprising one integral transaction in which no specific consideration is allocated to the Stock Purchase Rights or Convertible Securities, the consideration allocable to such Stock -22- 26 Purchase Rights or Convertible Securities shall be determined in good faith by the Board of Directors of the Company. (5) Dividends in Securities. In case the Company shall declare a dividend or make any other distribution upon any stock of the Company payable in either case in Common Stock or Convertible Securities, such Common Stock or Convertible Securities, as the case may be, issuable in payment of such dividend or distribution shall be deemed to have been issued or sold without consideration. (6) Merger, Consolidation or Sale of Assets. In case any shares of Common Stock, Stock Purchase Rights or Convertible Securities shall be issued in connection with any merger or consolidation in which the Company is the surviving corporation, the amount of consideration therefor shall be deemed to be the fair value on the date of issuance of such security of such portion of the assets and business of the non-surviving corporation attributable to such Common Stock, Stock Purchase Rights or Convertible Securities, as is determined in good faith by the Company's Board of Directors. (7) Challenge to Good Faith Determination. Whenever the Board of Directors of the Company shall be required to make a determination in good faith of the fair value of any item under this Section 4, such determination may be challenged in good faith by the Majority Warrant Holders, and any dispute shall be resolved by an investment banking or appraisal firm of recognized national standing selected by the Company and reasonably acceptable to the Majority Warrant Holders and whose decision shall be binding on the Company and all holders of Warrants. The fees and expenses of such firm shall be paid by the party or parties whose position is not chosen by such firm. 4.7. Other Dilutive Events. In case any event shall occur as to which the other provisions of this Section 4 are not strictly applicable but as to which the failure to make any adjustment would not fairly protect the purchase rights repre- -23- 27 sented by this Warrant in accordance with the essential intent and principles hereof (including, without limitation, the issuance of securities other than Common Stock which have the right to participate in distributions to the holders of Common Stock, the granting of "phantom stock" rights or "stock appreciation rights" or the repurchase of outstanding shares of Common Stock, Convertible Securities or Stock Purchase Rights for a purchase price exceeding the fair market value thereof), then, in each such case, the Majority Warrant Holders may select an independent investment banking firm of nationally recognized standing and reasonably acceptable to the Company to make a determination as to the adjustment, if any, required to be made on a basis consistent with the essential intent and principles established herein as a result of such event in order to preserve the purchase rights represented by the Warrants. If the investment bank selected by the Majority Warrant Holders is not reasonably acceptable to the Company, and the Company and the Majority Warrant Holders cannot agree on a mutually acceptable investment bank, then the Company and the Majority Warrant Holders shall each choose one such investment bank and the respective chosen firms shall jointly select a third investment bank, which shall make the determination. The Company shall pay the costs and fees of each such investment bank (including any such investment bank selected by the Majority Warrant Holders), and the decision of the investment bank making such determination shall be final and binding on the Company and all affected holders of Warrants or Warrant Stock. Promptly after receipt of the opinion of such investment bank as to any such required adjustments, the Company shall take any actions necessary to implement same. 4.8. Other Provisions Applicable to Adjustments Under this Section. The following provisions shall be applicable to the adjustments provided for pursuant to this Section 4: (a) When Adjustments To Be Made. The adjustments required by this Section 4 shall be made whenever and as often as any specified event requiring such an adjustment shall occur. For the purpose of any such adjustment, any specified event shall be deemed to have occurred at the close of business on the date of its occurrence. -24- 28 (b) Record Date. In case the Company shall take a record of the holders of the Common Stock for the purpose of entitling them (i) to receive a dividend or other distribution payable in Common Stock, Convertible Securities or Stock Purchase Rights or (ii) to subscribe for or purchase Common Stock, Convertible Securities or Stock Purchase Rights, then all references in this Section 4 to the date of the issuance or sale of such shares of Common Stock, Convertible Securities or Stock Purchase Rights shall be deemed to be references to such record date. (c) Fractional Interests. In computing adjustments under this Section 4, fractional interests in Common Stock shall be taken into account to the nearest 1/100th of a share. (d) When Adjustment Not Required. If the Company shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend or distribution to which the provisions of Section 4.1 would apply, but shall, thereafter and before the distribution to stockholders thereof, legally abandon its plan to pay or deliver such dividend or distribution, then thereafter no adjustment shall be required by reason of the taking of such record and any such adjustment previously made in respect thereof shall be rescinded and annulled. (e) Maximum Exercise Price. Except as provided in Section 4.1 above, at no time shall the Exercise Price per share of Common Stock exceed the amount set forth in the first paragraph of the preamble of this Warrant. (f) Certain Limitations. Notwithstanding anything herein to the contrary, the Company agrees not to enter into any transaction that, by reason of any adjustment under Section 4.1, 4.2 or 4.3 above, would cause the Exercise Price to be less than the par value of the Common Stock, if any, unless the Company first reduces the par value of the Common Stock to be less than the Exercise Price that would result from such transaction. (g) Notice of Adjustments. Whenever the number of shares of Common Stock for which this Warrant is -25- 29 exercisable or the Exercise Price shall be adjusted pursuant to this Section 4, the Company shall forthwith prepare a certificate to be executed by the President or chief financial officer of the Company setting forth, in reasonable detail, the event requiring the adjustment and the method by which such adjustment was calculated, specifying the number of shares of Common Stock for which this Warrant is exercisable and (if such adjustment was made pursuant to Section 4.5) describing the number and kind of any other shares of stock or Other Property for which this Warrant is exercisable, and any related change in the Exercise Price, after giving effect to such adjustment or change. The Company shall promptly cause a signed copy of such certificate to be delivered to each Holder in accordance with Section 15.2. The Company shall keep at its principal office or at the Designated Office, if different, copies of all such certificates and cause the same to be available for inspection at said office during normal business hours by any Holder or any prospective transferee of a Warrant designated by a Holder thereof. (h) Independent Application. Except as otherwise provided herein, all subsections of this Section 4 are intended to operate independently of one another (but without duplication). If an event occurs that requires the application of more than one subsection, all applicable subsections shall be given independent effect without duplication. 5. NO IMPAIRMENT The Company shall not by any action, including, without limitation, amending its charter documents or through any reorganization, reclassification, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other similar voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or reasonably appropriate to protect the rights of the Holder against impairment. Without limiting the generality of the foregoing, the Company shall take all such action as may be -26- 30 necessary or reasonably 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, free and clear of all Liens, and shall use all commercially reasonably efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof as may be necessary to enable the Company to perform its obligations under this Warrant. 6. RESERVATION AND AUTHORIZATION OF COMMON STOCK From and after the Original Issue Date, the Company shall at all times reserve and keep available for issuance upon the exercise of the Warrants such number of its authorized but unissued shares of Common Stock as will be sufficient to permit the exercise in full of all outstanding Warrants. All shares of Common Stock issuable pursuant to the terms hereof, when issued upon exercise of this Warrant with payment therefor in accordance with the terms hereof, shall be duly and validly issued and fully paid and nonassessable, not subject to preemptive rights and shall be free and clear of all Liens. 7. NOTICE OF CORPORATE ACTIONS; TAKING OF RECORD; TRANSFER BOOKS 7.1. Notices of Corporate Actions. In the event of: (a) any capital reorganization of the Company, any reclassification or recapitalization of the capital stock of the Company or any consolidation or merger involving the Company and any other Person or any transfer or other disposition of all or substantially all the assets of the Company to another Person or (b) any amendment of the Certificate of Incorporation of the Company, the Company shall mail to each Holder of a Warrant in accordance with the provisions of Section 14.2 hereof a notice specifying the date or expected date on which any such reorganization, reclassification, recapitalization, consolidation, merger, transfer or disposition is to take place, the time, if any such time is to be fixed, as of which the holders of record of Common Stock shall be entitled to exchange their shares of Common Stock for the securities or Other Property deliverable upon such reorganization, reclassification, recapitalization, consolidation, merger, transfer or disposition, -27- 31 and a description in reasonable detail of the transaction. Such notice shall be mailed to the extent practicable at least thirty, but not more than ninety, days prior to the date therein specified; provided, that, in no event shall the Company be required to give the Holders notice of material non-public information prior to the time such information is made available to the holders of its Common Stock. In the event that the Company at any time sends any other notice to the holders of its Common Stock, it shall concurrently send a copy of such notice to each Holder of a Warrant. 7.2 Closing of Transfer Books. The Company shall not at any time, except upon dissolution, liquidation or winding up of the Company, close its stock transfer books or Warrant transfer books so as to result in preventing or delaying the exercise or transfer of any Warrant. 8. TRANSFER RESTRICTIONS The Holder, by acceptance of this Warrant, agrees to be bound by the provisions of this Section 8. 8.1. Restrictions on Transfers. Neither this Warrant nor any shares of Restricted Common Stock issued upon the exercise hereof shall be Transferred other than pursuant to an effective registration statement under the Securities Act or an exemption from the registration provisions thereof. No Transfer of this Warrant or any such shares of Restricted Stock, other than pursuant to such an effective registration statement, shall be valid or effective unless (a) the holder of the securities proposed to be transferred shall have delivered to the Company either a no-action letter from the Commission or an Opinion of Counsel to the effect that such proposed Transfer is exempt from the registration requirements of the Securities Act or (b) such Transfer is being made pursuant to Rule 144 or Rule 144A under the Securities Act and such holder shall have delivered to the Company a certificate setting forth the basis for applying such Rule to the proposed Transfer. Each certificate, if any, evidencing such shares of Restricted Common Stock issued upon any such Transfer, other than in a public offering pursuant to an effective registration statement, shall bear the restrictive legend set forth in -28- 32 Section 8.2(a), and each Warrant issued upon such Transfer shall bear the restrictive legend set forth in Section 8.2(b), unless the Holder delivers to the Company an Opinion of Counsel to the effect that such legend is not required for the purposes of compliance with the Securities Act. Holders of the Warrants or the Restricted Common Stock, as the case may be, shall not be entitled to Transfer such Warrants or such Restricted Common Stock except in accordance with this Section 8.1. 8.2. Restrictive Legends. (a) Except as otherwise provided in this Section 8, each certificate for Warrant Stock initially issued upon the exercise of this Warrant, and each certificate for Warrant Stock issued to any subsequent transferee of any such certificate, shall be stamped or otherwise imprinted with two legends in substantially the following forms: "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAW. NO TRANSFER OF THE SHARES REPRESENTED BY THIS CERTIFICATE SHALL BE VALID OR EFFECTIVE UNLESS (A) SUCH TRANSFER IS MADE PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR (B) THE HOLDER OF THE SECURITIES PROPOSED TO BE TRANSFERRED SHALL HAVE DELIVERED TO THE COMPANY AN OPINION OF COUNSEL EXPERIENCED IN SECURITIES MATTERS AND REASONABLY ACCEPTABLE TO THE COMPANY TO THE EFFECT THAT SUCH PROPOSED TRANSFER IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE ACT OR (C) SUCH TRANSFER IS PURSUANT TO RULE 144 OR RULE 144A UNDER THE ACT AND SUCH HOLDER(S) SHALL HAVE DELIVERED TO THE COMPANY A CERTIFICATE SETTING FORTH THE BASIS FOR APPLYING SUCH RULE TO THE PROPOSED TRANSFER." "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE ENTITLED TO THE BENEFIT OF AND ARE SUBJECT TO CERTAIN OBLIGATIONS SET FORTH IN THE WARRANT PURSUANT TO THE EXERCISE OF WHICH SUCH SHARES WERE ISSUED. A COPY OF SUCH WARRANT IS AVAILABLE AT THE EXECUTIVE OFFICES OF THE COMPANY." (b) Except as otherwise provided in this Section 8, each Warrant shall be stamped or otherwise imprinted with a legend in substantially the following form: -29- 33 "NEITHER THE WARRANTS REPRESENTED BY THIS CERTIFICATE NOR ANY OF THE SECURITIES ISSUABLE UPON EXERCISE THEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAW. NO TRANSFER OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE OR OF THE STOCK ISSUABLE UPON EXERCISE THEREOF SHALL BE VALID OR EFFECTIVE UNLESS (A) SUCH TRANSFER IS MADE PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR (B) THE HOLDER OF THE SECURITIES PROPOSED TO BE TRANSFERRED SHALL HAVE DELIVERED TO THE COMPANY EITHER A NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION OR AN OPINION OF COUNSEL EXPERIENCED IN SECURITIES MATTERS AND REASONABLY ACCEPTABLE TO THE COMPANY TO THE EFFECT THAT SUCH PROPOSED TRANSFER IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE ACT OR (C) SUCH TRANSFER IS PURSUANT TO RULE 144 OR RULE 144A UNDER THE ACT AND SUCH HOLDER SHALL HAVE DELIVERED TO THE COMPANY A CERTIFICATE SETTING FORTH THE BASIS FOR APPLYING SUCH RULE TO THE PROPOSED TRANSFER." 8.3. Termination of Securities Law Restrictions. Not withstanding the foregoing provisions of this Section 8, the restrictions imposed by Section 8.1(b) upon the transferability of the Warrants and the Restricted Common Stock and the legend requirements of Section 8.2 shall terminate as to any particular Warrant or shares of Restricted Common Stock when the Company shall have received from the Holder thereof an Opinion of Counsel to the effect that such legend is not required in order to ensure compliance with the Securities Act. Whenever the restrictions imposed by Sections 8.1(b) and 8.2 shall terminate as to this Warrant, as hereinabove provided, the Holder hereof shall be entitled to receive from the Company, at the expense of the Company, a new Warrant bearing the following legend in place of the restrictive legend set forth hereon: "THE RESTRICTIONS ON TRANSFERABILITY OF THE WITHIN WARRANT CONTAINED IN SECTIONS 8.1(b) AND 8.2 HEREOF TERMINATED ON ______________, 19__, AND ARE OF NO FURTHER FORCE AND EFFECT." All Warrants issued upon registration of transfer, division or combination of, or in substitution for, any Warrant or Warrants entitled to bear such legend shall have a similar legend endorsed -30- 34 thereon. Wherever the restrictions imposed by this Section shall terminate as to any share of Restricted Common Stock, as hereinabove provided, the Holder thereof shall be entitled to receive from the Company, at the Company's expense, a new certificate representing such Common Stock not bearing the restrictive legend set forth in Section 8.2(a). 9. REGISTRATION RIGHTS 9.1. Certain Definitions. For the purposes of this Section 9: (a) The Holders of Warrants and the Series A Warrants and the holders of Warrant Stock (as defined in Section 9.1(b)) are collectively referred to as "WS Holders". (b) "Warrant Stock" shall deemed to include (i) the shares of Common Stock issued, issuable or both (as the context may require) upon the exercise of Warrants and the Series A Warrants until such time as such shares of Common Stock have either been (a) Transferred in a public offering pursuant to a registration statement filed under the Securities Act or (b) Transferred in a transaction exempt from the registration and prospectus delivery requirements of the Securities Act under Section 4(1) thereof with all transfer restrictions and restrictive legends with respect to such Common Stock being removed in connection with such transaction,(ii) any other securities issued as (or issuable upon the conversion or exercise of any warrant, right or other security which is issued as) a dividend or other distribution with respect to, or in exchange by the Company generally for, or in replacement by the Company generally of, any shares of Warrant Stock and (iii) any securities issued in exchange for any such Warrant Stock in any merger or reorganization of the Company, but in the cases of clauses (ii) and (iii) only so long as such securities have not been registered and Transferred pursuant to the Securities Act or Transferred in a transaction exempt from the registration and prospectus delivery requirements of the Securities Act under Section 4(1) thereof so that all transfer restrictions and restrictive legends with respect to such securities are removed in connection with such Transfer. -31- 35 (c) Each WS Holder shall be deemed to "hold", as of any specified date, the aggregate of (i) the number of shares of Warrant Stock held by such WS Holder as of such date plus (ii) the number of shares of Warrant Stock issuable upon exercise of any Warrants and Series A Warrants held by such WS Holder as of such date. (d) The total number of shares of Warrant Stock deemed "outstanding" as of a specified date will be equal to (i) the total number of shares of Warrant Stock Outstanding as of such date plus (ii) the number of shares of Warrant Stock issuable upon exercise of all outstanding Warrants and Series A Warrants as of such date. (e) "Registrable Securities" shall mean any Warrants, any Series A Warrants and/or any shares of Warrant Stock. 9.2. Demand Registration. (a) In the event the Company receives at any time after August 31, 1997 a written request from one or more WS Holders holding in the aggregate at least seventy-six percent of the number of shares of Warrant Stock then outstanding (the "Demanding Holders") that the Company file a registration statement under the Securities Act for the sale or other disposition of at least a majority of the Registrable Securities (a "Demand Registration"), the Company shall promptly give written notice of such request to each other WS Holder and each such WS Holder may elect, by giving written notice of such election to the Company within ten (10) Business Days after receipt of the Company's notice, to have some or all of the Registrable Securities held by it included in such registration. At the option of the Demanding Holders, such request may specify that the requested registration will be for an offering on a delayed or continual basis pursuant to Rule 415 under the Securities Act (a "Shelf Registration"). (b) Following receipt of such a request for a Demand Registration, the Company shall: (1) File the requested registration statement with the Commission as promptly as practicable, and shall use all commercially reasonable efforts to have the registration declared effective under the Securities Act as soon as reasonably practicable, in each instance giving due -32- 36 regard to the need to prepare and file current financial statements, conduct due diligence and complete other actions that are reasonably necessary to effect a registered public offering; and (2) Use all commercially reasonable efforts to keep the such registration statement Continuously Effective (x) if a Demand Registration, for up to 90 days or until such earlier date as of which all Registrable Securities covered by such registration statement shall have been disposed of in the manner described in the registration statement, and (y) if a Shelf Registration, for 270 days. Notwithstanding the foregoing, if for any reason the effectiveness of a Demand Registration is suspended or postponed as permitted by Subsection (d) below, the foregoing period shall be extended by the aggregate number of days of such suspension or postponement. (c) The Company shall not be required to effect a registration of Registrable Securities pursuant to a Demand Registration on more than one occasion. For purposes of this Subsection (c), registration shall not be deemed to have been effected (i) unless a registration statement with respect thereto has become effective, (ii) if after such registration statement has become effective, such registration or the related offer, sale or distribution of Registrable Securities thereunder is interfered with by any stop order, injunction or other order or requirement of the Commission or other governmental agency or court for any reason not attributable to the Selling Holders and such interference is not thereafter eliminated or (iii) if the conditions to closing specified in the underwriting agreement, if any, entered into in connection with such registration are not satisfied or waived, other than by reason of a failure on the part of the Selling Holders. If the Company shall have complied with its obligations under this Section 9, a right to demand a registration pursuant to this Section 9.2 shall be deemed to have been satisfied (i) if a Demand Registration other than a Shelf Registration, upon the earlier of (x) the date as of which all of the Registrable Securities included therein shall have been disposed of pursuant to the registration statement and (y) the date as of which such Demand Registration shall have been Continuously Effective for a period of 90 days, and (ii) if a Shelf Registration, upon the effective date of a Shelf Registration, provided no stop order or similar order, or -33- 37 proceedings for such an order, is thereafter entered or initiated. (d) The Company shall be entitled to postpone for up to 90 days the filing of any Demand Registration statement otherwise required to be prepared and filed pursuant to this Section 9.2 or suspend any such Demand Registration for up to 90 days, if the Board of Directors of the Company determines, in its good faith reasonable judgment that such registration and the Transfer of Warrant Stock contemplated thereby would materially interfere with, or require premature disclosure of, any financing, acquisition or reorganization involving the Company or any of its wholly owned subsidiaries and the Company promptly gives the Demanding Holders notice of such determination; provided, however, that the Company shall not have postponed pursuant to this Subsection (d) the filing of any other Demand Registration statement otherwise required to be prepared and filed pursuant to this Section 9.2, or suspended any such Demand Registration, during the 12 month period ended on the date of the relevant request pursuant to Subsection (a) above and provided further, that the Expiration Date shall be extended by the period of any such postponement or suspension. (e) A registration pursuant to this Section 9.2 shall be on such appropriate registration form of the Commission available to the Company as shall (i) be selected by the Company and be reasonably acceptable to the Majority Selling Holders and (ii) permit the disposition of the Warrant Stock in accordance with the intended method or methods of disposition specified in the request made pursuant to Subsection (a) above. If any registration pursuant to this Section 9.2 involves an underwritten offering (whether on a "firm", "best efforts" or "all reasonable efforts" basis or otherwise), or an agented offering, the Majority Selling Holders shall have the right to select the underwriter or underwriters and manager or managers to administer such underwritten offering or the placement agent or agents for such agented offering from among the entities listed in Schedule B hereto (or any successors of any such entities), it being understood that the Majority Selling Holders shall use commercially reasonable efforts to select one or more of the first three listed entities subject to arriving at reasonably acceptable terms and conditions for the offering. -34- 38 (f) The Company may elect to include shares of Common Stock to be sold for its account in any such Demand Registration (including a Shelf Registration); provided, however, if the managing underwriter shall advise the Demanding Holders in writing (with a copy to the Company) that, in its opinion, the number of shares of Common Stock requested to be included in such Demand Registration would adversely affect such offering or the price to be realized therefor, or the timing thereof, then the number of shares proposed to be included in such Demand Registration by the Company shall be reduced, to such number that the Demanding Holders are advised can be sold without such effect in such Demand Registration. 9.3. Piggyback Registration. (a) If at any time the Company proposes to register (including for this purpose a registration effected by the Company for shareholders of the Company other than the WS Holders) equity securities under the Securities Act in connection with the public offering solely for cash on Form S-1, S-2 or S-3 (or any replacement or successor forms), the Company shall promptly give each WS Holder written notice of such registration (a "Piggyback Registration"). Upon the written request of each WS Holder given within 20 days following the date of such notice, the Company shall cause to be included in such registration statement and use its best efforts to be registered under the Securities Act all the Registrable Securities that each such WS Holder shall have requested to be registered. The Company shall have the absolute right to withdraw or cease to prepare or file any registration statement for any offering referred to in this Section 9.3 without any obligation or liability to any WS Holder. (b) If the managing underwriter shall advise the Company in writing (with a copy to each Selling Holder) that, in its opinion, the amount of Registrable Securities requested to be included in such registration would materially adversely affect such offering, or the timing thereof, then the Company will include in such registration, to the extent of the amount and class which the Company is so advised can be sold without such material adverse effect in such offering: first, all securities proposed to be sold by the Company for its own account; and second, the Warrant Stock requested to be included in such registration by WS Holders and all other securities requested to be included in such registration by Persons other than the Company and WS Holders, the securities covered by this clause -35- 39 second to be included pro rata based on the estimated gross proceeds from the sale thereof. (c) Each WS Holder shall be entitled to have its Registrable Securities included in an unlimited number of Piggyback Registrations pursuant to this Section 9.3. 9.4. Registration Procedures. Whenever required under Section 9.2 or Section 9.3 hereof to effect the registration of any Registrable Securities, the Company shall, as expeditiously as practicable: (a) Prepare and file with the Commission a registration statement with respect to such Warrant Stock and use the Company's best efforts to cause such registration statement to become effective; provided, however, that before filing a registration statement or prospectus or any amendments or supplements thereto, including documents incorporated by reference after the initial filing of the registration statement and prior to effectiveness thereof, the Company shall furnish to one firm of counsel for the Selling Holders (selected by Majority Selling Holders) copies of all such documents in the form substantially as proposed to be filed with the Commission at least four Business Days prior to filing for review and comment by such counsel, which opportunity to comment shall include an absolute right to control or contest disclosure if the applicable Selling Holder reasonably believes that it may be subject to controlling person liability under applicable securities laws with respect thereto. (b) Prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Securities Act and rules thereunder with respect to the disposition of all securities covered by such registration statement. If the registration is for an underwritten offering, the Company shall amend the registration -36- 40 statement or supplement the prospectus whenever required by the terms of the underwriting agreement entered into pursuant to Section 9.4(e). Subject to Rule 415 under the Securities Act, if the registration statement is a Shelf Registration, the Company shall amend the registration statement or supplement the prospectus so that it will remain current and in compliance with the requirements of the Securities Act for 270 days or after its effective date, and if during such period any event or development occurs as a result of which the registration statement or prospectus contains a misstatement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading, the Company shall promptly notify each Selling Holder, amend the registration statement or supplement the prospectus so that each will thereafter comply with the Securities Act and furnish to each Selling Holder of Registrable Securities such amended or supplemented prospectus, which each such Holder shall thereafter use in the Transfer of Warrant Stock covered by such registration statement. Pending such amendment or supplement each such Selling Holder shall cease making offers or Transfers of Registerable Securities pursuant to the prior prospectus. In the event that any Registrable Securities included in a registration statement subject to, or required by, this Warrant remain unsold at the end of the period during which the Company is obligated to use its best efforts to maintain the effectiveness of such registration statement, the Company may file a post- effective amendment to the registration statement for the purpose of removing such Registrable Securities from registered status. (c) Furnish to each Selling Holder of Registrable Securities, without charge, such number of copies of the registration statement, any pre-effective or post-effective amendment thereto, the prospectus, including each preliminary prospectus and any amendments or supplements thereto, in each case in conformity with the requirements of the Securities Act and the rules thereunder, and such other related documents as any such Selling Holder may reasonably request in order to facilitate the disposition of Registrable Securities owned by such Selling Holder. (d) Use all commercially reasonable efforts (i) to register and qualify the securities covered by such registration statement under such other securities or Blue Sky laws of such states or jurisdictions as shall be reasonably requested by the managing underwriter (as applicable, or if inapplicable, the Majority Selling -37- 41 Holders), and (ii) to obtain the withdrawal of any order suspending the effectiveness of a registration statement, or the lifting of any suspension of the qualification (or exemption from qualification) of the offer and transfer of any of the Registrable Securities in any jurisdiction, at the earliest possible moment; provided, however, that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions. (e) In the event of any underwritten or agented offering, enter into and perform the Company's obligations under an underwriting or agency agreement (including indemnification and contribution obligations of underwriters or agents), in usual and customary form, with the managing underwriter or underwriters of or agents for such offering. The Company shall also cooperate with the Majority Selling Holders and the managing underwriter for such offering in the marketing of the Warrant Stock, including making available the Company's officers, accountants, counsel, premises, books and records for such purpose, but the Company shall not be required to incur any material out-of-pocket expense pursuant to this sentence. (f) Promptly notify each Selling Holder of any stop order issued or threatened to be issued by the Commission in connection therewith (and take all reasonable actions required to prevent the entry of such stop order or to remove it if entered. (g) Make generally available to the Company's security holders copies of all periodic reports, proxy statements, and other information referred to in Section 9.9(a) and an earnings statement satisfying the provisions of Section 11(a) of the Securities Act no later than 90 days following the end of the 12-month period beginning with the first month of the Company's first fiscal quarter commencing after the effective date of each registration statement filed pursuant to this Section 9. (h) Make available for inspection by any Selling Holder, any underwriter participating in such offering and the representatives of such Selling Holder and underwriter -38- 42 (but not more than one firm of counsel to such Selling Holders), all financial and other information as shall be reasonably requested by them, and provide the Selling Holder, any underwriter participating in such offering and the representatives of such Selling Holder and underwriter the opportunity to discuss the business affairs of the Company with its principal executives and independent public accountants who have certified the audited financial statements included in such registration statement, in each case all as necessary to enable them to exercise their due diligence responsibility under the Securities Act; provided, however, that information that the Company determines, in good faith, to be confidential and which the Company advises such Person in writing, is confidential shall not be disclosed unless such Person signs a confidentiality agreement reasonably satisfactory to the Company or the related Selling Holder of Registrable Securities agrees to be responsible for such Person's breach of confidentiality on terms reasonably satisfactory to the Company. (i) Use the Company's best efforts to obtain a so-called "comfort letter" from its independent public accountants, and legal opinions of counsel to the Company, in customary form and covering such matters of the type customarily covered by such letters, and in a form that shall be reasonably satisfactory to the Majority Selling Holders. The Company shall furnish to each Selling Holder a signed counterpart of any such comfort letter or legal opinion. Delivery of any such opinion or comfort letter shall be subject to the recipient furnishing such written representations or acknowledgments as are customarily provided by selling shareholders who receive such comfort letters or opinions. (j) Provide and cause to be maintained a transfer agent and registrar for all Registrable Securities covered by such registration statement from and after a date not later than the effective date of such registration statement. (k) Use all reasonable efforts to cause the Registrable Securities covered by such registration statement (i) if the Common Stock is then listed on a securities exchange or included for quotation in a -39- 43 recognized trading market, to continue to be so listed or included for a reasonable period of time after the offering, and (ii) to be registered with or approved by such other United States or state governmental agencies or authorities as may be necessary by virtue of the business and operations of the Company to enable the Selling Holders of Registrable Securities to consummate the disposition of such Registrable Securities. (l) Use the Company's reasonable efforts to provide a CUSIP number for the Common Stock prior to the effective date of the first registration statement including Registrable Securities. (m) Take such other actions as are reasonably required in order to expedite or facilitate the disposition of Registrable Securities included in each such registration. 9.5. Selling Holders' Obligations. (a) It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Section 9 with respect to the Registrable Securities of any Selling Holder that such Selling Holder shall: (i) Furnish to the Company such information regarding such Selling Holder, the number of Registrable Securities owned by it, and the intended method of disposition of such securities as shall be required to effect the registration of such Selling Holder's Registrable Securities, and to cooperate with the Company in preparing such registration; and (ii) Agree to sell their Registrable Securities to the underwriters at the same price and on substantially the same terms and conditions as the Company or the other Persons on whose behalf the registration statement was being filed have agreed to sell their securities, and to execute the underwriting agreement agreed to by the Majority Selling Holders (in the case of a registration under Section 9.2) or the Company and the Majority Selling Holders (in the case of a registration under Section 9.3). (b) Each Selling Holder shall notify the Company of any sales of such Selling Holder's shares registered for sale pursuant to this Section 9; provided, however, it is -40- 44 understood that any failure so to notify the Company shall not be deemed a default hereunder or to subject any Selling Holder to any claim for damages or expenses whatsoever. 9.6. Expenses of Registration. Expenses incurred in connection with registrations under this Section 9 shall be allocated and paid as follows: (a) With respect to each Demand Registration (including any Shelf Registration), the Company shall bear and pay all reasonable expenses incurred in connection with any registration, filing, or qualification of Registrable Securities with respect to such Demand Registration for each Selling Holder, including all registration, filing and NASD fees, all fees and expenses of complying with securities or blue sky laws, all word processing, duplicating and printing expenses, messenger and delivery expenses, the reasonable fees and disbursements of counsel for the Company, and of the Company's independent public accountants, including the expenses of "cold comfort" letters required by or incident to such performance and compliance, and the reasonable fees and disbursements of one firm of counsel for the Selling Holders of Registrable Securities (the "Registration Expenses"), but excluding underwriting discounts and commissions relating to Registrable Securities (which shall be paid on a pro rata basis by the Selling Holders) provided, however, that the Company shall not be required to pay for any expenses of any registration proceeding begun pursuant to Section 9.2 if the registration is subsequently withdrawn at the request of the Majority Selling Holders (in which case all Selling Holders shall bear such expense), unless WS Holders whose Registrable Securities constitutes a majority of the Registrable Securities then outstanding agree that such withdrawn registration shall constitute the exercise of their one demand registration under Section 9.2 hereof. The counsel for the Selling Holders shall be selected by Demanding Holders owning a majority of the Registrable Securities owned by Demanding Holders to be included in a Demand Registration and, in the case of a Piggyback Registration, by Selling Holders owning a majority of the Registrable Securities to be included in such registration; provided that in the case of a Piggyback Registration, the Selling Holders shall use one firm of counsel to represent all such holders and shall endeavor in -41- 45 good faith, with any other holders of securities to be included in such registration, to select one firm of counsel to represent all such selling securities holders. (b) The Company shall bear and pay all Registration Expenses incurred in connection with any Piggyback Registrations pursuant to Section 9.3 for each Selling Holder, but excluding underwriting discounts and commissions relating to Registrable Securities (which shall be paid on a pro rata basis by the Selling Holders of Registrable Securities). (c) Any failure of the Company to pay any Registration Expenses as required by this Section 9.6 shall not relieve the Company of its obligations under this Section 9. 9.7. Indemnification; Contribution. If any Registrable Securities are included in a registration statement under this Section 9: (a) To the extent permitted by applicable law, the Company shall indemnify and hold harmless each Selling Holder, each Person, if any, who controls such Selling Holder within the meaning of the Securities Act, and each officer, director, partner, and employee of such Selling Holder and such controlling Person, against any and all losses, claims, damages, liabilities and expenses (joint or several), including attorneys' fees and disbursements and expenses of investigation, incurred by such party pursuant to any actual or threatened action, suit, proceeding or investigation, or to which any of the foregoing Persons may become subject under the Securities Act, the Exchange Act or other federal or state laws, insofar as such losses, claims, damages, liabilities and expenses arise out of or are based upon any of the following statements, omissions or violations pursuant to a final non-appealable order (collectively a "Violation"): (i) any untrue statement or alleged untrue statement of a material fact contained in such registration statement, including any preliminary prospectus or final prospectus contained therein, or any amendments or supplements thereto; -42- 46 (ii) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading; or (iii) any violation or alleged violation by the Company of the Securities Act, the Exchange Act, any applicable state securities law or any rule or regulation promulgated under the Securities Act, the Exchange Act or any applicable state securities law; provided, however, that the indemnification required by this Section 9.7(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or expense if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld), nor shall the Company be liable in any such case for any such loss, claim, damage, liability or expense to the extent that it is determined by a court of competent jurisdiction by a final non-appealable order to have solely arisen out of or be based upon a Violation which occurred in reliance upon and in conformity with written information furnished to the Company by the indemnified party expressly for use in connection with such registration; provided, further, that the indemnity agreement contained in this Section 9.7(a) shall not apply to any underwriter to the extent that any such loss is based on or arises out of an untrue statement or alleged untrue statement of a material fact, or an omission or alleged omission to state a material fact, contained in or omitted from any preliminary prospectus if the final prospectus shall correct such untrue statement or alleged untrue statement, or such omission or alleged omission, and a copy of the final prospectus has not been sent or given to such person at or prior to the confirmation of sale to such person if such underwriter was under an obligation to deliver such final prospectus and failed to do so. The Company shall also indemnify underwriters, selling brokers, dealer managers and similar securities industry professionals participating in the distribution, their officers, directors, agents and employees and each person who controls such persons (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) to the same extent as provided above with respect to the indemnification of the Selling Holders. -43- 47 (b) To the extent permitted by applicable law, each Selling Holder shall indemnify and hold harmless the Company, each of its directors, each of its officers and employees, each Person, if any, who controls the Company within the meaning of the Securities Act, any other Selling Holder, any controlling Person of any such other Selling Holder and each officer, director, partner, and employee of such other Selling Holder and such controlling Person, against any and all losses, claims, damages, liabilities and expenses (joint and several), including attorneys' fees and disbursements and expenses of investigation, incurred by such party pursuant to any actual or threatened action, suit, proceeding or investigation, or to which any of the foregoing Persons may otherwise become subject under the Securities Act, the Exchange Act or other federal or state laws, insofar as such losses, claims, damages, liabilities and expenses are determined by a court of competent jurisdiction by a final non-appealable order to have solely arisen out of or be based upon a Violation that occurred in reliance upon and in conformity with written information furnished by such Selling Holder expressly for use in connection with such registration; provided, however, that (x) the indemnification required by this Section 9.7(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or expense if settlement is effected without the consent of the relevant Selling Holder of Registrable Securities, which consent shall not be unreasonably withheld, and (y) in no event shall the amount of any indemnity under this Section 9.7(b) exceed the net proceeds from the applicable offering received by such Selling Holder. (c) Promptly after receipt by an indemnified party under this Section 9.7 of notice of the commencement of any action, suit, proceeding, investigation or threat thereof made in writing for which such indemnified party may make a claim under this Section 9.7, such indemnified party shall deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party shall have the -44- 48 right to retain its own counsel, with the fees and disbursements and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding. The failure to deliver written notice to the indemnifying party within a reasonable time following the commencement of any such action, if prejudicial to its ability to defend such action, shall relieve such indemnifying party of any liability to the indemnified party under this Section 9.7 but shall not relieve the indemnifying party of any liability that it may have to any indemnified party otherwise than pursuant to this Section 9.7. Any reasonable fees and expenses incurred by the indemnified party (including any fees and expenses incurred in connection with investigating or preparing to defend such action or proceeding) shall be paid to the indemnified party, as incurred, within thirty (30) days of written notice thereof to the indemnifying party (regardless of whether it is ultimately determined that an indemnified party is not entitled to indemnification hereunder). Any such indemnified party shall have the right to employ separate counsel in any such action, claim or proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be the expenses of such indemnified party unless (i) the indemnifying party has agreed to pay such fees and expenses or (ii) the indemnifying party shall have failed to promptly assume the defense of such action, claim or proceeding or (iii) the named parties to any such action, claim or proceeding (including any impleaded parties) include both such indemnified party and the indemnifying party, and such indemnified party shall have been advised by counsel that there may be one or more legal defenses available to it which are different from or in addition to those available to the indemnifying party and that the assertion of such defenses would create a conflict of interest such that counsel employed by the indemnifying party could not faithfully represent the indemnified party (in which case, if such indemnified party notifies the indemnifying party in writing that it elects to employ separate counsel at the expense of the indemnifying party, the indemnifying party shall not have the right to assume the defense of such -45- 49 action, claim or proceeding on behalf of such indemnified party, it being understood, however, that the indemnifying party shall not, in connection with any one such action, claim or proceeding or separate but substantially similar or related actions, claims or proceedings in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the reasonable fees and expenses of more than one separate firm of attorneys (together with appropriate local counsel) at any time for all such indemnified parties, unless in the reasonable judgment of such indemnified party a conflict of interest may exist between such indemnified party and any other of such indemnified parties with respect to such action, claim or proceeding, in which event the indemnifying party shall be obligated to pay the fees and expenses of such additional counsel or counsels). No indemnifying party shall be liable to an indemnified party for any settlement of any action, proceeding or claim without the written consent of the indemnifying party, which consent shall not be unreasonably withheld. (d) If the indemnification required by this Section 9.7 from the indemnifying party is unavailable to an indemnified party hereunder in respect of any losses, claims, damages, liabilities or expenses referred to in this Section 9.7: (i) The indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities or expenses in such proportion as is appropriate to reflect the relative fault of the indemnifying party and indemnified parties in connection with the actions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative fault of such indemnifying party and indemnified parties shall be determined by reference to, among other things, whether any Violation has been committed by, or relates to information supplied by, such indemnifying party or indemnified parties, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such -46- 50 Violation. The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and expenses referred to above shall be deemed to include, subject to the limitations set forth in Section 9.7(a) and Section 9.7(b), any reasonable legal or other fees or expenses reasonably incurred by such party in connection with any investigation or proceeding. (ii) The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 9.7(d) were determined by pro rata allocation or by any other method of allocation which does not take into account the equitable considerations referred to in Section 9.7(d)(i) above. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. (e) If indemnification is available under this Section 9.7, the indemnifying parties shall indemnify each indemnified party to the full extent provided in this Section 9.7 without regard to the relative fault of such indemnifying party or indemnified party or any other equitable consideration referred to in Section 9.7(d) above. (f) The indemnification required by this Section 9.7 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or expense, loss, damage or liability is incurred. In the event that it shall be subsequently determined that the recipient of any such periodic payment shall not be entitled to indemnification hereunder, such recipient promptly shall repay such payments, together with interest thereon at the Agreed Rate from the date of original receipt to the date of repayment. (g) The obligations of the Company and the Selling Holders of Registrable Securities under this Section 9.7 shall survive the completion of any offering of Registrable Securities pursuant to a registration statement under this Section 9, and otherwise. -47- 51 9.8. Holdback. Each WS Holder entitled pursuant to this Section 9 to have Registrable Securities included in a registration statement prepared pursuant to this Section 9, if so requested by the managing underwriter in connection with an offering of any Registrable Securities, shall not effect any public sale or distribution of shares of Common Stock, Convertible Securities or Stock Purchase Rights (excluding any sale pursuant to Rule 144 or Rule 144A under the Securities Act and any sale as part of such underwritten or agented registration), during the 5-day period prior to, and during the 45-day period beginning on, the date such registration statement is declared effective under the Securities Act by the Commission, provided that such WS Holder is timely notified of such effective date in writing by the Company or such managing underwriter. 9.9. Additional Covenants of the Company. The Company hereby agrees and covenants as follows: (a) The Company shall file as and when applicable, on a timely basis, all reports required to be filed by it under the Exchange Act. If the Company is not required to file reports pursuant to the Exchange Act, upon the request of any WS Holder, the Company shall make publicly available the information specified in subparagraph (c)(2) of Rule 144 of the Securities Act, and take such further action as may be reasonably required from time to time and as may be within the reasonable control of the Company, to enable the WS Holders to Transfer Warrants or Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by Rule 144 under the Securities Act or any similar rule or regulation hereafter adopted by the Commission. In addition, promptly upon the request of any WS Holder, the Company shall provide such WS Holder with such publicly available financial statements, reports and other information as may be required to permit such WS Holder to Transfer shares of Registrable Securities to Qualified Institutional Investors pursuant to Rule 144A of the Securities Act. (b) The Company shall not, and shall not permit its majority owned subsidiaries to, effect any public sale or distribution of any shares of Common Stock, Convertible Securities or Stock Purchase Rights during the 5 Business Days prior to, and during the 90-day period beginning on, -48- 52 the commencement of a public distribution of Registrable Securities pursuant to any registration statement prepared pursuant to this Section 9 (other than by the Company pursuant to such registration if the registration is pursuant to Section 9.3 or by the Company pursuant to any dividend reinvestment plan offered by it to its stockholders). The Company shall not effect any registration of its securities (other than on Form S-4, Form S-8, or any successor forms to such forms or pursuant to such other registration rights agreements as may be approved in writing by the Majority Selling Holders) or effect any public or private sale or distribution of any of its securities, including a sale pursuant to Regulation D under the Securities Act, whether on its own behalf or at the request of any holder or holders of such securities from the date of a request for a Demand Registration pursuant to Section 9.2 until 90 days following the effective date of such Demand Registration statement, unless the Company shall have previously notified in writing all Selling Holders of the Company's desire to do so, and the Majority Selling Holders or the managing underwriter, if any, shall have consented thereto in writing. (c) Any agreement entered into on or after August 31, 1997 pursuant to which the Company or any of its majority owned subsidiaries issues or agrees to issue any Common Stock (including, without limitation, any employee stock option, stock purchase agreement, merger agreement or other agreement) shall contain a provision whereby any holder receiving such Common Stock who will hold more than one percent (1%) of the amount of such Common Stock then outstanding shall agree not to effect any public sale or distribution of any such Common Stock during the periods described in the second sentence of Section 9.9(b), in each case including a sale pursuant to Rule 144 under the Securities Act (unless such Person is prevented by applicable statute or regulation from entering into such an agreement). (d) Subject to Section 13, the Company shall not, directly or indirectly, (x) enter into any merger, consolidation or reorganization in which the Company shall not be the surviving corporation or (y) Transfer or agree to Transfer all or substantially all the Company's assets, -49- 53 unless prior to such merger, consolidation, reorganization or asset Transfer, the surviving corporation or the Transferee, respectively, shall have agreed in writing to assume the obligations of the Company under this Agreement, and for that purpose references hereunder to "Registrable Securities" shall be deemed to include the securities which the WS Holders would be entitled to receive in exchange for Registrable Securities pursuant to any such merger, consolidation or reorganization. 10. LOSS OR MUTILATION Upon receipt by the Company from any Holder of evidence reasonably satisfactory to it of the ownership of and the loss, theft, destruction or mutilation of this Warrant and an indemnity reasonably satisfactory to it (it being understood that the written indemnification agreement of or affidavit of loss of The First National Bank of Chicago shall be a sufficient indemnity) and, in case of mutilation, upon surrender and cancellation hereof, the Company will execute and deliver in lieu hereof a new Warrant of like tenor to such Holder; provided, however, in the case of mutilation, no indemnity shall be required if this Warrant in identifiable form is surrendered to the Company for cancellation. 11. OFFICE OF THE COMPANY As long as any of the Warrants remain outstanding, the Company shall maintain an office or agency, which may be the principal executive offices of the Company (the "Designated Office"), where the Warrants may be presented for exercise, registration of transfer, division or combination as provided in this Warrant. Such Designated Office shall initially be the office of the Company at Cedar Rapids, Iowa. The Company may from time to time change the Designated Office to another office of the Company or its agent within the United States by notice given to all registered holders of Warrants at least ten Business Days prior to the effective date of such change. -50- 54 12. FINANCIAL AND BUSINESS INFORMATION Until the Expiration Date, the Company shall deliver to each Holder of Warrants or of Warrant Stock one copy of each of the following items: (i) promptly after filing thereof, copies of all regular and periodic reports, proxy statements (other than preliminary) and registration statements (other than registration statements on Forms S-3 (relating to debt securities) and S-8) which the Company may file with the Securities and Exchange Commission or any governmental agency substituted therefor. (ii) promptly upon their becoming available, copies of all financial statements, reports, notices and proxy statements sent or made available by the Company to the holders of any class of its securities generally or by any Subsidiary of the Company to the holders of any class of its securities generally; and (iii) with reasonable promptness, such other public information relating to the Company and its Subsidiaries as the Holder may, from time to time, reasonably request. 13. REPURCHASE BY THE COMPANY OF WARRANTS The Company shall have the right (the "Call"), upon written notice (the "Call Notice") to the Holders of all outstanding Warrants given at any time on or after the date of the occurrence of the Triggering Event and before August 31, 1997, to repurchase on the date specified in the notice from each Holder of a Warrant all of such Warrant for an amount equal to the result (rounded to the nearest cent) obtained by multiplying One Dollar ($1.00) by a fraction, the numerator of which shall be the aggregate number of shares for which this Warrant may be exercised and the denominator of which shall be the aggregate number of shares for which all outstanding Series B Warrants may be exercised, and in all events not more than One Dollar ($1.00) for all Series B Warrants. On the date of any repurchase of this Warrant pursuant to this Section 13, the Holder shall assign to the Company such Warrant without any representation or warranty (except as to title and the absence of Liens), by the surrender -51- 55 of this Warrant at the Designated Office against payment of the repurchase price therefor. 14. MISCELLANEOUS 14.1. Nonwaiver. No course of dealing or any delay or failure to exercise any right hereunder on the part of the Company or the Holder shall operate as a waiver of such right or otherwise prejudice the rights, powers or remedies of such Person. 14.2. Notice Generally. Any notice, demand, request, consent, approval, declaration, delivery or communication hereunder to be made pursuant to the provisions of this Warrant shall be sufficiently given or made if in writing and either delivered in person with receipt acknowledged or sent by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: (a) if to any Holder of this Warrant or of Warrant Stock issued upon the exercise hereof, at its last known address appearing on the books of the Company maintained for such purpose; (b) if to the Company, at its Designated Office; or at such other address as may be substituted by notice given as herein provided. The giving of any notice required hereunder may be waived in writing by the party entitled to receive such notice. Every notice, demand, request, consent, approval, declaration, delivery or other communication hereunder shall be deemed to have been duly given or served on the date on which personally delivered, with receipt acknowledged, or three Business Days after the same shall have been deposited in the United States mail, or one Business Day after the same shall have been delivered to Federal Express or another overnight courier service. 14.3. Indemnification. If the Company fails to make, when due, any payments provided for in this Warrant, the Company shall pay to the Holder hereof (a) interest at the Agreed Rate on any amounts due and owing to such Holder from the date due until the date of payment and (b) such further amounts as shall be sufficient to cover any costs and expenses including, but not -52- 56 limited to, reasonable attorneys' fees and expenses incurred by such Holder in collecting any amounts due hereunder. The Company shall indemnify, save and hold harmless the Holder hereof and the Holders of any Warrant Stock issued upon the exercise hereof from and against any and all liability, loss, cost, damage, reasonable attorneys' and accountants' fees and expenses, court costs and all other out-of-pocket expenses incurred in connection with or arising from a Company Default. This indemnification provision shall be in addition to the rights of such Holder or Holders to bring an action against the Company for breach of contract based on such Company Default. 14.4. Limitation of Liability. No provision hereof, in the absence of affirmative action by the Holder to purchase shares of Common Stock, and no enumeration herein of the rights or privileges of the Holder hereof, shall give rise to any liability of such Holder to pay the Exercise Price for any Warrant Stock other than pursuant to an exercise of this Warrant or any liability as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company. 14.5. Remedies. Each Holder of Warrants and/or War rant Stock, in addition to being entitled to exercise its rights granted by law, including recovery of damages, shall be entitled to specific performance of its rights provided under this Warrant. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees, in an action for specific performance, to waive the defense that a remedy at law would be adequate. 14.6. Successors and Assigns. Subject to the provi sions of Sections 3.1, 8.1 and 8.2, this Warrant and the rights evidenced hereby shall inure to the benefit of and be binding upon the successors of the Company and the permitted successors and assigns of the Holder hereof. The provisions of this Warrant are intended to be for the benefit of all Holders from time to time of this Warrant and, in the case of Section 9, all Holders of shares of Warrant Stock issued upon the exercise hereof (including transferees), and shall be enforceable by any such Holder. -53- 57 14.7. Amendment. This Warrant and all other Warrants may be modified or amended or the provisions hereof waived with the written consent of the Company and the Majority Warrant Holders, provided that no such Warrant may be modified or amended to reduce the number of shares of Common Stock for which such Warrant is exercisable or to increase the price at which such shares may be purchased upon exercise of such Warrant (before giving effect to any adjustment as provided therein) without the written consent of the Holder thereof. 14.8. Severability. Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Warrant. 14.9. Headings. The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant. 14.10. GOVERNING LAW; JURISDICTION. IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS WARRANT AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF ILLINOIS APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE, EXCEPT WITH RESPECT TO THE VALIDITY OF THIS WARRANT, THE ISSUANCE OF WARRANT STOCK UPON EXERCISE HEREOF AND THE RIGHTS AND DUTIES OF THE COMPANY WITH RESPECT TO REGISTRATION OF TRANSFER, WHICH SHALL BE GOVERNED BY THE LAWS OF DELAWARE. THE COMPANY HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED IN CHICAGO, ILLINOIS, SHALL HAVE, EXCEPT AS SET FORTH BELOW, EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THE COMPANY AND THE HOLDER OF THIS WARRANT PERTAINING TO THIS WARRANT OR TO ANY MATTER ARISING OUT OF OR RELATING TO THIS AGREEMENT, PROVIDED, THAT IT IS ACKNOWLEDGED THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF CHICAGO, ILLINOIS. -54- 58 IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed and its corporate seal to be impressed hereon and attested by its Secretary or an Assistant Secretary. NORAND CORPORATION By:_________________________ Name: Title: [SEAL] Attest: By:___________________________ Name: Title: -55- 59 ANNEX A SUBSCRIPTION FORM [To be executed only upon exercise of Warrant] The undersigned registered owner of this Warrant irrevocably exercises this Warrant for the purchase of ______ shares Common Stock of Norand Corporation and herewith makes payment therefor, all at the price and on the terms and conditions specified in this Warrant and requests that certificates for the shares of Common Stock hereby purchased (and any securities or other property issuable upon such exercise) be issued in the name of and delivered to _________________ whose address is ___________________________________________________ and, if such shares of Common Stock shall not include all of the shares of Common Stock issuable as provided in this Warrant, that a new Warrant of like tenor and date for the balance of the shares of Common Stock issuable hereunder be delivered to the undersigned. _______________________________ (Name of Registered Owner) _______________________________ (Signature of Registered Owner) _______________________________ (Street Address) _______________________________ (City) (State) (Zip Code) NOTICE: The signature on this subscription must correspond with the name as written upon the face of the within Warrant in every particular, without alteration or enlargement or any change whatsoever. 60 ANNEX B ASSIGNMENT FORM FOR VALUE RECEIVED the undersigned registered owner of this Warrant hereby sells, assigns and transfers unto the Assignee named below all of the rights of the undersigned under this Warrant, with respect to the number of shares of Common Stock set forth below: No. of Shares of Name and Address of Assignee Common Stock and does hereby irrevocably constitute and appoint ________ _____________ attorney-in-fact to register such transfer onto the books of Norand Corporation maintained for the purpose, with full power of substitution in the premises. Dated:___________________ Print Name:___________________ Signature:____________________ Witness:______________________ NOTICE: The signature on this assignment must correspond with the name as written upon the face of the within Warrant in every particular, without alteration or enlargement or any change whatsoever. EX-4.(N)(7) 9 SERIES B WARRANT B-2 1 EXHIBIT 4.N.7 ================================================================================ SERIES B WARRANT to Purchase Common Stock of NORAND CORPORATION ================================================================================ Warrant No. B - 2 Original Issue Date: November 20, 1996 2 TABLE OF CONTENTS 1. DEFINITIONS 1 2. EXERCISE OF WARRANT 11 2.1. Manner of Exercise 11 2.2. Payment of Transfer Taxes 12 2.3. Fractional Shares 12 2.4. Continued Validity and Application 13 2.5. Limitation on Regulated Holder's Exercise 13 3. TRANSFER, DIVISION AND COMBINATION 13 3.1. Transfer 13 3.2. Division and Combination 14 3.3. Expenses 14 3.4. Maintenance of Books 14 4. ANTIDILUTION PROVISIONS 14 4.1. Stock Dividends, Subdivisions and Combinations 14 4.2. Issuance of Additional Shares of Common Stock 15 4.3. Issuances of Stock Purchase Rights and Convertible Securities 15 4.4. Adjustment of Number of Shares Purchasable 17 4.5. Reorganization, Reclassification, Merger, Consolidation or Disposition of Assets 17 4.6. Determination of Consideration 18 4.7. Other Dilutive Events 20 4.8. Other Provisions Applicable to Adjustments Under this Section 20 5. NO IMPAIRMENT 22 6. RESERVATION AND AUTHORIZATION OF COMMON STOCK 23 7. NOTICE OF CORPORATE ACTIONS; TAKING OF RECORD; TRANSFER BOOKS 23 7.1. Notices of Corporate Actions 23 7.2 Closing of Transfer Books 23 8. TRANSFER RESTRICTIONS 23 8.1. Restrictions on Transfers 24 8.2. Restrictive Legends 24 -i- 3 8.3. Termination of Securities Law Restrictions 25 9. REGISTRATION RIGHTS 26 9.1. Certain Definitions 26 9.2. Demand Registration 27 9.3. Piggyback Registration 29 9.4. Registration Procedures 30 9.5. Selling Holders' Obligations 34 9.6. Expenses of Registration 34 9.7. Indemnification; Contribution 35 9.8. Holdback 40 9.9. Additional Covenants of the Company 40 10. LOSS OR MUTILATION 42 11. OFFICE OF THE COMPANY 42 12. FINANCIAL AND BUSINESS INFORMATION 43 13. REPURCHASE BY THE COMPANY OF WARRANTS 43 14. MISCELLANEOUS 43 14.1. Nonwaiver 43 14.2. Notice Generally 44 14.3. Indemnification 44 14.4. Limitation of Liability 44 14.5. Remedies 45 14.6. Successors and Assigns 45 14.7. Amendment 45 14.8. Severability 45 14.9. Headings 45 14.10. GOVERNING LAW; JURISDICTION 45 ANNEX A SUBSCRIPTION FORM 48 ANNEX B ASSIGNMENT FORM 49 SCHEDULE A RESERVED SHARES OF COMMON STOCK -ii- 4 SCHEDULE B UNDERWRITERS AND AGENTS iii 5 NEITHER THE WARRANTS REPRESENTED BY THIS CERTIFICATE NOR ANY OF THE SECURITIES ISSUABLE UPON EXERCISE THEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAW. NO TRANSFER OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE OR OF THE SECURITIES ISSUABLE UPON EXERCISE THEREOF SHALL BE VALID OR EFFECTIVE UNLESS (A) SUCH TRANSFER IS MADE PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR (B) THE HOLDER OF THE SECURITIES PROPOSED TO BE TRANSFERRED SHALL HAVE DELIVERED TO THE COMPANY EITHER A NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION OR AN OPINION OF COUNSEL EXPERIENCED IN SECURITIES MATTERS AND REASONABLY ACCEPTABLE TO THE COMPANY TO THE EFFECT THAT SUCH PROPOSED TRANSFER IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE ACT OR (C) SUCH TRANSFER IS PURSUANT TO RULE 144 OR RULE 144A UNDER THE ACT AND SUCH HOLDER(S) SHALL HAVE DELIVERED TO THE COMPANY A CERTIFICATE SETTING FORTH THE BASIS FOR APPLYING SUCH RULE TO THE PROPOSED TRANSFER. Warrant No. B - 2 SERIES B WARRANT NORAND CORPORATION THIS IS TO CERTIFY THAT CAISSE NATIONALE DE CREDIT AGRICOLE, or registered assigns, is entitled, at any time after August 31, 1997 and prior to the Expiration Date (such term, and certain other capitalized terms used herein being hereinafter defined), to purchase from NORAND CORPORATION, a Delaware corporation (the "Company"), Sixty-nine Thousand One Hundred Sixteen (69,116) shares of the Common Stock of the Company (subject to adjustment as provided herein), at a purchase price of $21.15 per share (the initial "Exercise Price", subject to adjustment as provided herein), all on the terms and conditions and pursuant to the provisions hereinafter set forth. 6 1. DEFINITIONS As used in this Warrant, the following terms have the respective meanings set forth below: "Affiliate" of any Person means a Person (a) which directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with such Person, (b) which beneficially owns or holds more than ten percent of the outstanding shares of any class of voting stock of such Person and has the power to vote such shares or (c) more than ten percent of the outstanding shares of any class of voting stock (or, in the case of a Person which is not a corporation, more than ten percent of the equity interest) of which is beneficially owned or held by such Person and such Person has the power to vote such shares or equity interest. The term "control" as used with respect to any Person means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise. "After-Tax Basis", when referring to a payment that is required hereunder (the "target amount"), shall mean a total payment (the "total amount") that, after deduction of all federal, state and local taxes that are required to be paid by the recipient in respect of the receipt or accrual of such total amount, is equal to the target amount. "Agreed Rate" shall mean a rate per annum equal to the corporate base rate of interest announced by The First National Bank of Chicago from time to time, changing when and as said corporate base rate changes. "Appraised Value" per share of Common Stock as of a date specified herein shall mean the value of such share as of such date as determined by an investment bank of nationally recognized standing selected by the Majority Warrant Holders from Schedule B (or any successor of any such entity), it being understood that the Majority Warrant Holders shall use commercially reasonable efforts to select one of the first three listed entities subject to arriving at reasonably acceptable terms and conditions for the -2- 7 appraisal. The Company shall pay the costs and fees of such investment bank, and the decision of the investment bank making such determination of Appraised Value shall be final and binding on the Company and all affected holders of Warrants or Warrant Stock. Such Appraised Value shall be determined as a pro rata portion of the value of the Company taken as a whole, based on the higher of (A) the value derived from a hypothetical sale of the entire Company as a going concern by a willing seller to a willing buyer (neither acting under any compulsion) and (B) the liquidation value of the entire Company. No discount shall be applied on account of (i) any Warrants or Warrant Stock representing a minority interest, (ii) any lack of liquidity of the Common Stock or the Warrants, (iii) the fact that the Warrants or Warrant Stock may constitute "restricted securities" for securities law purposes or (iv) the existence of any call option. "Bank Holding Company Act" shall mean the Bank Holding Company Act of 1956, as amended. "Business Day" shall mean any day that is not a Saturday or Sunday or a day on which banks are required or permitted to be closed in the State of Illinois. "Call" shall have the meaning set forth in Section 13 hereof. "Call Notice" shall have the meaning set forth in Section 13 hereof. "Commission" shall mean the Securities and Exchange Commission or any other federal agency then administering the Securities Act and other federal securities laws. "Common Stock" shall mean (except where the context otherwise indicates) the Common Stock of the Company, par value $.01 per share, as constituted on the Original Issue Date, and any capital stock into which such Common Stock may thereafter be changed, and shall also include (i) capital stock of the Company of any other class (regardless of how denominated) issued to the holders of shares of any Common Stock upon any reclassification thereof which is also not preferred as to dividends or liquidation over any other -3- 8 class of stock of the Company and which is not subject to redemption and (ii) shares of common stock of any successor or acquiring corporation (as defined in Section 4.5 hereof) received by or distributed to the holders of Common Stock of the Company in the circumstances contemplated by Section 4.5 hereof. "Company" means Norand Corporation, a Delaware corporation, and any successor corporation. "Company Default" means (a) the breach of any warranty or the inaccuracy in any material respect at the time when made of any representation made by the Company herein or (b) the failure by the Company to comply in any material respect with any covenant of the Company contained herein. "Continuously Effective", with respect to a specified registration statement, shall mean that it shall not cease to be effective and available for Transfers of Warrant Stock thereunder for the longer of either (i) any ten consecutive Business Days, or (ii) an aggregate of fifteen Business Days during the period specified in the relevant provision of Section 9 hereof. "Convertible Securities" shall mean evidences of indebtedness, shares of stock or other securities that are convertible into or exchangeable for, with or without payment of additional consideration in cash or property, shares of Common Stock, either immediately or upon the occurrence of a specified date or a specified event. "Credit Agreement" means the Second Amended and Restated Credit Agreement dated as of January 25, 1996, as thereafter from time to time amended, supplemented, restated or modified, among the Company, the Lenders party thereto and The First National Bank of Chicago, as agent. "Current Market Price" shall mean as of any specified date the average of the daily market prices of the Common Stock of the Company for the shorter of (x) the twenty consecutive Business Days immediately preceding such date or (y) the period commencing on the Business Day next following the first public announcement of any event giving rise to an adjustment of the Exercise Price pursuant to Section 4 below -4- 9 and ending on such date. The "daily market price" for each such Business Day shall be: (i) if the Common Stock is then listed on a national securities exchange or is listed on NASDAQ and is designated as a National Market System security, the last sale price, regular way, on such day on the principal stock exchange or market system on which such Common Stock is then listed or admitted to trading, or, if no such sale takes place on such day, the average of the closing bid and asked prices for the Common Stock on such day as reported on such stock exchange or market system or (ii) if the Common Stock is not then listed or admitted to trading on any national securities exchange or designated as a National Market System security on NASDAQ but is traded over-the-counter, the average of the closing bid and asked prices for the Common Stock as reported on NASDAQ or the Electronic Bulletin Board or in the National Daily Quotation Sheets, as applicable. "Demand Registration" shall have the meaning set forth in Section 9.2(a) hereof. "Demanding Holders" shall have the meaning set forth in Section 9.2(a) hereof. "Designated Office" shall have the meaning set forth in Section 11 hereof. "Equity" shall mean equity capital (not including the equity capital attributable to the Settlement Stock, and any mandatory redemption terms of which equity capital are acceptable to the Majority Warrant Holders) raised by and/or contributed to the Company subsequent to the Original Issue Date or new Indebtedness (as defined in the Credit Agreement) subordinated to the Obligations (as defined in the Credit Agreement), provided the terms of such Indebtedness (including, without limitation, maturity, amortization, covenants, defaults, remedies and subordination provisions) are acceptable to the Majority Warrant Holders. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect from time to time. -5- 10 "Exercise Notice" shall have the meaning set forth in Section 2.1 hereof. "Exercise Period" shall mean the period during which this Warrant is exercisable pursuant to Section 2.1 hereof. "Exercise Price" shall mean, in respect of a share of Common Stock at any date herein specified, the initial Exercise Price set forth in the preamble of this Warrant as adjusted from time to time pursuant to Section 4 hereof. "Expiration Date" shall mean August 31, 2002, unless extended under the circumstances contemplated by Section 9.2(d) hereof. "Fair Value" per share of Common Stock as of any specified date shall mean (A) if the Common Stock is publicly traded on such date, the Current Market Price per share or (B) if the Common Stock is not publicly traded on such date, (1) the fair market value per share of Common Stock as determined in good faith by the Board of Directors of the Company and set forth in a written notice to each Holder or (2) if the Majority Warrant Holders object in writing to such price as determined by the Board of Directors within thirty days after receiving notice of same, the Appraised Value per share as of such date. "Fully Diluted Outstanding" shall mean, when used with reference to Common Stock, at any date as of which the number of shares thereof is to be determined, all shares of Common Stock Outstanding on such date and all shares of Common Stock issuable in respect of (x) the Warrants outstanding on such date, (y) any Convertible Securities outstanding on such date and (z) any other Stock Purchase Rights outstanding on such date, in each case regardless of whether or not the conversion, exchange, subscription or purchase rights associated with such Convertible Securities or Stock Purchase Rights are presently exercisable. "GAAP" shall mean generally accepted accounting principles in the United States of America as from time to time in effect. -6- 11 "Glass-Steagall Act" shall mean Section 24 (Seventh), Section 78, Section 377 and Section 378 of Title 12 (12 U.S.C. Section Section 24 (Seventh) 78, 377, 378), or any similar federal legislation. "Holder" shall mean (a) with respect to this Warrant, the Person in whose name the Warrant set forth herein is registered on the books of the Company maintained for such purpose and (b) with respect to any other Warrant or shares of Warrant Stock, the Person in whose name such Warrant or Warrant Stock is registered on the books of the Company maintained for such purpose. "Insolvency Event" shall mean any proceeding being instituted by or against the Company seeking a declaration or order for relief, or entailing a finding, that the Company is insolvent or bankrupt, or seeking reorganization, liquidation, dissolution, winding-up, charter revocation or other similar relief with respect to the Company or any of its properties, assets or debts, or seeking the appointment of a receiver, trustee, custodian, liquidator, sequestrator or similar official for the Company or any of its properties or assets, or the Company becoming insolvent or bankrupt or generally unable to pay its debts as they become due, or the Company voluntarily suspending its business or making a general assignment for the benefit of creditors; provided that an Insolvency Event shall not be deemed to have occurred on account of any such proceeding which is involuntary on the part of the Company unless same shall not have been dismissed or stayed within 60 days. "Lien" shall mean any mortgage or deed of trust, pledge, hypothecation, assignment, deposit arrangement, lien, charge, claim, security interest, easement or encumbrance, or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, any lease or title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, and the filing of, or agreement to give, any financing statement perfecting a security interest under the Uniform Commercial Code or comparable law of any jurisdiction). -7- 12 "Majority Warrant Holders", with respect to a given determination, shall mean the Holders of Warrants and/or Warrant Stock representing at least seventy-six percent (76%) of all Warrants and/or Warrant Stock (with any such Warrants being deemed to represent, for the purposes of such calculation, the shares of Warrant Stock then issuable upon exercise thereof) directly affected by such determination. "Majority Selling Holders" shall mean those Selling Holders whose Warrants and/or Warrant Stock included in a registration under Section 9 hereof represents a majority of the Warrants and/or Warrant Stock (with any such Warrants being deemed to represent, for the purposes of such calculation, the shares of Warrant Stock then issuable upon exercise thereof) included therein by all Selling Holders. "NASD" shall mean the National Association of Securities Dealers, Inc., or any successor corporation thereto. "NASDAQ" shall mean the NASDAQ quotation system, or any successor reporting system. "Notes" shall mean any of the promissory notes issued by the Company under the Credit Agreement. "Opinion of Counsel" means a written opinion of counsel experienced in Securities Act or bank regulatory matters, as the case may be, chosen by the Holder of this Warrant or Warrant Stock issued upon the exercise hereof and reasonably acceptable to the Company. "Original Issue Date" shall mean the date on which the Original Warrants were issued, as set forth on the cover page of this Warrant. "Original Warrants" shall mean the Warrants originally issued by the Company on the Original Issue Date to each of The First National Bank of Chicago, Fleet Bank of Massachusetts, N.A., The Daiwa Bank, Limited, Norwest Bank Iowa, National Association and Caisse Nationale de Credit Agricole. "Other Property" shall have the meaning set forth in Section 4.5 hereof. -8- 13 "Outstanding" shall mean, when used with reference to Common Stock, at any date as of which the number of shares thereof is to be determined, all issued shares of Common Stock, except shares then owned or held by or for the account of the Company or any Subsidiary thereof, and shall include all shares issuable in respect of outstanding scrip or any certificates representing fractional interests in shares of Common Stock. "Outstanding", when used with respect to Warrant Stock for the purposes of Section 9 hereof shall have the meaning set forth in Section 9.1(d) hereof. "Person" shall mean any individual, sole proprietorship, partnership, limited liability company, joint venture, trust, incorporated organization, association, corporation, institution, public benefit corporation, entity or government (whether federal, state, county, city, municipal or otherwise, including, without limitation, any instrumentality, division, agency, body or department thereof). "Piggyback Registration" shall have the meaning set forth in Section 9.3(a) hereof. "Register", "registered" and "registration" shall refer to a registration effected by preparing and filing a registration statement or similar document in compliance with the Securities Act, and the declaration or ordering by the Commission of effectiveness of such registration statement or document. "Registration Expenses" shall have the meaning set forth in Section 9.6(a) hereof. "Restricted Common Stock" shall mean shares of Common Stock which are, or which upon their issuance on the exercise of this Warrant would be, evidenced by a certificate bearing the restrictive legend set forth in Section 8.2(a) hereof. "Securities Act" shall mean the Securities Act of 1933, as amended, or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. -9- 14 "Selling Holders" shall mean, with respect to a specified registration under Section 9 hereof, WS Holders whose Registrable Securities are included in such registration. "Series A Warrants" shall mean all of the Series A Warrants to Purchase Common Stock of Norand Corporation issued concurrently with this Warrant. "Series B Warrants" shall mean all of the Series B Warrants to Purchase Common Stock of Norand Corporation, issued concurrently with, and having the same terms (other than the number of shares purchasable upon the exercise thereof) as, this Warrant. "Settlement Stock" shall mean the shares of Common Stock contemplated to be issued in settlement of the pending shareholders' claims against the Company with respect to the litigation styled In re Norand Corporation Securities Litigation, Master File No. C95-323, pending in the United States District Court for the Northern District of Iowa, Cedar Rapids Division. "Share Withholding Option" has the meaning set forth in Section 2.1(c) hereof. "Shelf Registration" shall have the meaning set forth in Section 9.2(a) hereof. "Stock Purchase Rights" shall mean any options, warrants or other securities or rights to subscribe to or exercisable for the purchase of shares of Common Stock or Convertible Securities, whether or not immediately exercisable, other than the options, warrants or other rights described in Schedule A hereto. "Subsequent Issuance" shall mean any sale or issuance by the Company of Common Stock, Convertible Securities or Stock Purchase Rights after the Original Issue Date other than: (i) Any issuance of Warrant Stock upon exercise of the Warrants and any issuance of Common Stock, Convertible Securities or Stock Purchase Rights (and -10- 15 any issuance of Common Stock pursuant to the conversion, exchange or exercise of any such Convertible Securities or Stock Purchase Rights) deemed to have been issued as of the Original Issue Date pursuant to the definition of Fully Diluted Outstanding. (ii) Any issuance of Common Stock pursuant to the exercise of the options and warrants described in Schedule A hereto, provided, however, that the exercise price of any such option or warrant (other than warrants granted to Jay Alix and Associates and to Donald W. Rowley for up to the respective number of shares set forth on Schedule A) granted or issued after the Original Issue Date shall not be less than the "daily market price" (as that term is defined in the definition of Current Market Price) of the Common Stock on the date of grant or issue of the option or warrant. (iii) The issuance of the Settlement Stock. (iv) Any other issuance of Common Stock, Convertible Securities or Stock Purchase Rights with respect to which the Majority Warrant Holders shall have waived application of the provisions of Section 4 below. "Subsidiary" means any corporation or association (a) more than 50% (by number of votes) of the voting stock of which is at the time owned by the Company or by one or more Subsidiaries or by the Company and one or more Subsidiaries, or any other business entity in which the Company or one or more Subsidiaries or the Company and one or more Subsidiaries own more than a 50% interest either in the profits or capital of such business entity or (b) whose net earnings, or portions thereof, are consolidated with the net earnings of the Company and are recorded on the books of the Company for financial reporting purposes in accordance with GAAP. "Transfer" shall mean any disposition of any Warrant or Warrant Stock or of any interest in either thereof, which would constitute a "sale" thereof within the meaning of the Securities Act. -11- 16 "Triggering Event" shall mean either the repayment in full of all indebtedness under the Credit Agreement or the receipt by the Company of at least $20 million in net cash proceeds from additional Equity. "Violation" has the meaning set forth in Section 9.7(a) hereof. "Warrant Price" shall mean an amount equal to (i) the number of shares of Common Stock being purchased upon exercise of this Warrant pursuant to Section 2.1 hereof, multiplied by (ii) the Exercise Price as of the date of such exercise. "Warrants" shall mean the Original Warrants and all warrants issued upon transfer, division or combination of, or in substitution for, such Original Warrants or any other such Warrant. All Warrants shall at all times be identical as to terms and conditions and date, except as to the number of shares of Common Stock for which they may be exercised. "Warrant Stock" generally shall mean the shares of Common Stock issued, issuable or both (as the context may require) upon the exercise of Warrants until such time as such shares of Common Stock have either been (i) Transferred in a public offering pursuant to a registration statement filed under the Securities Act or (ii) Transferred in a transaction exempt from the registration and prospectus delivery requirements of the Securities Act under Section 4(1) thereof with all transfer restrictions and restrictive legends with respect to such Common Stock being removed in connection with such transaction. "Warrant Stock", for the purposes of Section 9 hereof, shall have the meaning set forth in Section 9.1(b) hereof. "WS Holder" shall have the meaning set forth in Section 9.1(a) hereof. 2. EXERCISE OF WARRANT 2.1. Manner of Exercise. (a) From and after August 31, 1997 and until 5:00 P.M., Chicago time, on the Expiration Date, the Holder of this Warrant may from time to time exercise -12- 17 this Warrant, on any Business Day, for all or any part of the number of shares of Common Stock purchasable hereunder (as determined pursuant to Section 2.2 below). In order to exercise this Warrant, in whole or in part, the Holder shall (i) deliver to the Company at the Designated Office a written notice of the Holder's election to exercise this Warrant (an "Exercise Notice"), which Exercise Notice shall be irrevocable and specify the number of shares of Common Stock to be purchased, together with this Warrant and (ii) pay to the Company the Warrant Price (the date on which both such delivery and payment shall have first taken place being hereinafter sometimes referred to as the "Exercise Date"). Such Exercise Notice shall be in the form of the subscription form appearing at the end of this Warrant as Annex A, duly executed by the Holder or its duly authorized agent or attorney. (b) Upon receipt of such Exercise Notice, Warrant and payment, the Company shall, as promptly as practicable, and in any event within five Business Days thereafter, execute (or cause to be executed) and deliver (or cause to be delivered) to the Holder a certificate or certificates representing the aggregate number of full shares of Common Stock issuable upon such exercise, together with cash in lieu of any fraction of a share, as hereafter provided. The stock certificate or certificates so delivered shall be, to the extent possible, in such denomination or denominations as the exercising Holder shall reasonably request in the Exercise Notice and shall be registered in the name of the Holder or such other name as shall be designated in the Exercise Notice. This Warrant shall be deemed to have been exercised and such certificate or certificates shall be deemed to have been issued, and the Holder or any other Person so designated to be named therein shall be deemed to have become a holder of record of such shares for all purposes, as of the Exercise Date. (c) Payment of the Warrant Price shall be made at the option of the Holder by one or more of the following methods: (i) by delivery of a certified or official bank check in the amount of such Warrant Price, (ii) by instructing the Company to withhold a number of shares of Warrant Stock then issuable upon exercise of this Warrant with an aggregate Current Market Price equal to such Warrant Price (the "Share Withholding Option"), (iii) by surrendering to the Company shares of Common Stock previously acquired by the Holder with an aggregate Current -13- 18 Market Price equal to such Warrant Price or (iv) by delivery of a Note, duly endorsed by or accompanied by appropriate instruments of transfer duly executed by the Holder or by the Holder's attorney duly authorized in writing. In the event of any withholding of Warrant Stock or surrender of Common Stock pursuant to clause (ii) or (iii) above where the number of shares whose Current Market Price is equal to the Warrant Price is not a whole number, the number of shares withheld by or surrendered to the Company shall be rounded up to the nearest whole share and the Company shall make a cash payment to the Holder based on the incremental fraction of a share being so withheld by or surrendered to the Company in an amount determined in accordance with Section 2.3 hereof. For the purpose of making payment of the Warrant Price, any Note surrendered to the Company shall be deemed to have a value equal to 100% of the principal amount thereof plus any interest accrued but unpaid thereon. If the Holder delivers a Note with a deemed value that exceeds the Warrant Price, the Company shall reissue to the Holder a new Note identical in all respects to the surrendered Note except that the principal amount of such new Note shall be equal to the principal amount that, together with any interest accrued but unpaid thereon, is equal to the deemed value of the surrendered Note less the Warrant Price. (d) If this Warrant shall have been exercised in part, the Company shall, at the time of delivery of the certificate or certificates representing the shares of Common Stock being issued, deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the unpurchased shares of Common Stock called for by this Warrant. Such new Warrant shall in all other respects be identical with this Warrant. 2.2. Payment of Transfer Taxes. All shares of Common Stock issuable upon the exercise of this Warrant pursuant to the terms hereof shall be validly issued, fully paid and nonassessable, issued without violation of any preemptive rights and free and clear of all Liens (other than any created by actions of the Holder). The Company shall pay all expenses in connection with, and all taxes and other governmental charges that may be imposed with respect to, the issue or delivery thereof, unless such tax or charge is imposed by law upon the Holder, in which case such taxes or charges shall be paid by the Holder and the Company shall reimburse the Holder therefor on an After-Tax Basis. -14- 19 2.3. Fractional Shares. The Company shall not be required to issue a fractional share of Common Stock upon exercise of any Warrant. As to any fraction of a share that the Holder of one or more Warrants, the rights under which are exercised in the same transaction, would otherwise be entitled to purchase upon such exercise, the Company shall pay a cash adjustment in respect of such final fraction in an amount equal to the same fraction of the Current Market Price of one share of Common Stock on the Exercise Date, if the Common Stock is then publicly traded. 2.4. Continued Validity and Application. (a) A Holder of shares of Warrant Stock issued upon the exercise of this Warrant, in whole or in part, including any transferee of such shares (other than a transferee in whose hands such shares no longer constitute Warrant Stock as defined herein), shall continue, with respect to such shares, to be entitled to all rights and to be subject to all obligations that are applicable to such Holder by the terms of this Warrant under Section 9 hereof. The Company shall, at the time of any exercise of this Warrant or any transfer of Warrant Stock, upon the request of the Holder of the shares of Warrant Stock issued in connection with such exercise or transfer, acknowledge in writing, in a form reasonably satisfactory to such Holder, its continuing obligation to afford to such Holder such rights referred to in this Section 2.4; provided, however, that if such Holder shall fail to make any such request, such failure shall not affect the continuing obligation of the Company to afford to such Holder all such rights. 2.5. Limitation on Regulated Holder's Exercise. Notwithstanding anything in this Warrant to the contrary, the Holder of this Warrant, if subject to the Bank Holding Company Act or any provision of the Glass-Steagall Act, may exercise this Warrant only if the Notice of Exercise is accompanied by an Opinion of Counsel of such Holder to the effect that, as of the date of delivery of such opinion, no federal or state regulatory clearances are required for such Holder to exercise this Warrant or, in the event any such federal or state regulatory clearances are required prior to the exercise of this Warrant, to the effect that all such clearances have been obtained or, if not then obtained, that no statute or regulation or regulatory policy or guidelines known to such counsel would by their terms preclude the obtaining of such clearances or make it unlikely that such -15- 20 clearances would be obtained or make it likely that such clearances would, if obtained, contain material conditions adverse to such Holder. In the event that federal or state regulatory clearances are required prior to the exercise of this Warrant by the Holder hereof, the Company shall reasonably cooperate with such Holder in providing such information to any regulatory agency as such agency may reasonably require. In the event any such regulatory clearance is withheld or denied, such Holder may continue to hold this Warrant until its expiration or may sell or otherwise transfer this Warrant in accordance with the terms hereof. 3. TRANSFER, DIVISION AND COMBINATION 3.1. Transfer. Subject to compliance with Section 8 hereof, each transfer of this Warrant and all rights hereunder, in whole or in part, shall be registered on the books of the Company to be maintained for such purpose, upon surrender of this Warrant at the Designated Office, together with a written assignment of this Warrant in the form of Annex B hereto duly executed by the Holder or its agent or attorney. Upon such surrender and delivery, the Company shall, subject to Section 8, execute and deliver a new Warrant or Warrants in the name of the assignee or assignees and in the denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned and this Warrant shall promptly be canceled. A Warrant, if properly assigned in compliance with Section 8, may be exercised by the new Holder for the purchase of shares of Common Stock without having a new Warrant issued. 3.2. Division and Combination. Subject to compliance with the applicable provisions of this Warrant, this Warrant may be divided or combined with other Warrants upon presentation hereof at the Designated Office, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney. Subject to compliance with the applicable provisions of this Warrant as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. -16- 21 3.3. Expenses. The Company shall prepare, issue and deliver at its own expense any new Warrant or Warrants required to be issued under this Section 3. 3.4. Maintenance of Books. The Company agrees to maintain, at the Designated Office, books for the registration and transfer of the Warrants. 4. ANTIDILUTION PROVISIONS The number of shares of Common Stock for which this Warrant is exercisable and the Exercise Price shall be subject to adjustment from time to time as set forth in this Section 4. 4.1. Stock Dividends, Subdivisions and Combinations. If at any time the Company shall: (i) take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend payable in, or other distribution of, additional shares of Common Stock, (ii) subdivide its outstanding shares of Common Stock into a larger number of shares of such Common Stock, or (iii) combine its outstanding shares of Common Stock into a smaller number of shares of such Common Stock, then the Exercise Price shall be adjusted to equal the product of the Exercise Price in effect immediately prior to such event multiplied by a fraction the numerator of which is equal to the number of shares of Common Stock Outstanding immediately prior to the adjustment and the denominator of which is equal to the number of shares of Common Stock Outstanding immediately after such adjustment. 4.2. Issuance of Additional Shares of Common Stock. (a) If at any time the Company shall issue or sell any shares of Common Stock in a Subsequent Issuance for a consideration per share that is less than the Exercise Price in effect immediately prior to such issuance or sale, then, forthwith upon such issuance or sale, the Exercise Price shall be reduced to a price calculated by dividing (1) an amount equal to the sum of (x) the -17- 22 number of shares of Common Stock Outstanding immediately prior to such Subsequent Issuance multiplied by the then existing Exercise Price, plus (y) the aggregate consideration (determined in accordance with the provisions of Section 4.6 hereof), if any, received by the Company in connection with such Subsequent Issuance, by (2) the total number of shares of Common Stock Outstanding immediately after such Subsequent Issuance. (b) The provisions of this Section 4.2 shall not apply to (i) any issuance of Common Stock for which an adjustment is provided for under Section 4.1 or (ii) any issuance or sale of Common Stock pursuant to the exercise of any Stock Purchase Rights or Convertible Securities to the extent that an adjustment shall have been previously made hereunder in connection with the issuance of such Stock Purchase Rights or Convertible Securities pursuant to the provisions of Section 4.3 hereof. 4.3. Issuances of Stock Purchase Rights and Convertible Securities. (a) In the event that the Company shall at any time issue, sell or grant any Stock Purchase Rights to any Person in a Subsequent Issuance, then, for the purpose of Section 4.2 above, the Company shall be deemed to have issued at that time a number of shares of Common Stock equal to the maximum number of shares of Common Stock (without giving effect to any antidilution provisions in such Stock Purchase Rights) that are or may become issuable upon exercise of such Stock Purchase Rights (or upon exercise of any Convertible Securities issuable upon exercise of such Stock Purchase Rights) for a consideration per share equal to (i) the aggregate consideration per share (determined in accordance with the provisions of Section 4.6 hereof) received by the Company in connection with the issuance, sale or grant of such Stock Purchase Rights plus (ii) the minimum amount of such consideration per share receivable by the Company in connection with the exercise of such Stock Purchase Rights (and the exercise of any Convertible Securities issuable upon exercise of such Stock Purchase Rights). (b) In the event that the Company shall at any time issue or sell any Convertible Securities to any Person in a Subsequent Issuance, then, for the purposes of Section 4.2 above, the Company shall be deemed to have issued at that time a number of shares of Common Stock equal to the maximum number of shares of Common Stock that are or may become issuable upon the exercise of the conversion or exchange rights associated with such -18- 23 Convertible Securities for a consideration per share equal to (i) the aggregate consideration per share (determined in accordance with the provisions of Section 4.6 hereof) received by the Company in connection with the issuance or sale of such Convertible Securities plus (ii) the minimum amount of such consideration per share receivable by the Company in connection with the exercise of such conversion or exchange rights. (c) If, at any time after any adjustment of the Exercise Price shall have been made hereunder as the result of any issuance, sale or grant of any Stock Purchase Rights or Convertible Securities, the maximum number of shares issuable upon exercise of such Stock Purchase Rights or of the rights of conversion or exchange associated with such Convertible Securities shall increase, or the minimum amount of consideration per share receivable in connection with such exercise shall decrease, whether by operation of any antidilution rights pertaining to such Stock Purchase Rights or Convertible Securities, by agreement of the parties or otherwise, the Exercise Price then in effect shall first be readjusted to eliminate the effects of the original issuance, sale or grant of such Stock Purchase Rights or Convertible Securities on such Exercise Price and then readjusted as if such Stock Purchase Rights or Convertible Securities had been issued on the effective date of such increase in number of shares or decrease in consideration, but only if the effect of such two-step readjustment is to reduce the Exercise Price below the Exercise Price in effect immediately prior to such increase or decrease. (d) If, at any time after any adjustment of the Exercise Price shall have been made hereunder as the result of any issuance, sale or grant of any Stock Purchase Rights or Convertible Securities, any of such Stock Purchase Rights or the rights of conversion or exchange associated with such Convertible Securities shall expire by their terms or any of such Stock Purchase Rights -19- 24 or Convertible Securities shall be repurchased by the Company or a Subsidiary thereof for a consideration per underlying share of Common Stock not exceeding the amount of such consideration received by the Company in connection with the issuance, sale or grant of such Stock Purchase Rights or Convertible Securities, the Exercise Price then in effect shall forthwith be increased to the Exercise Price that would have been in effect if such expiring Stock Purchase Rights or rights of conversion or exchange or such repurchased Stock Purchase Rights or Convertible Securities had never been issued. Similarly, if at any time after any such adjustment of the Exercise Price shall have been made pursuant to Section 4.2 (i) any additional consideration is received or becomes receivable by the Company in connection with the issuance or exercise of such Stock Purchase Rights or Convertible Securities or (ii) there is a reduction in the conversion ratio applicable to such Convertible Securities so that fewer shares of Common Stock will be issuable upon the conversion or exchange thereof or there is a decrease in the number of shares of Common Stock issuable upon exercise of such Stock Purchase Rights, the Exercise Price then in effect shall be forthwith readjusted to the Exercise Price that would have been in effect had such changes taken place at the time that such Stock Purchase Rights or Convertible Securities were initially issued, granted or sold. In no event shall any readjustment under this Section 4.3(d) affect the validity of any shares of Warrant Stock issued upon any exercise of this Warrant prior to such readjustment, nor shall any such readjustment have the effect of increasing the Exercise Price above the Exercise Price that would have been in effect if the related Stock Purchase Rights or Convertible Securities had never been issued. 4.4. Adjustment of Number of Shares Purchasable. Upon any adjustment of the Exercise Price as provided in Section 4.1, 4.2 or 4.3 hereof, the Holder hereof shall thereafter be entitled to purchase upon the exercise of this Warrant, at the Exercise Price resulting from such adjustment, the number of shares of Common Stock (calculated to the nearest 1/100th of a share) obtained by multiplying the Exercise Price in effect immediately prior to such adjustment by the number of shares of Common Stock issuable on the exercise hereof immediately prior to such adjustment and dividing the product thereof by the Exercise Price resulting from such adjustment. 4.5. Reorganization, Reclassification, Merger, Con solidation or Disposition of Assets. In case the Company shall reorganize its capital, reclassify its capital stock, consolidate or merge with or into another corporation (where the Company is not the surviving corporation or where there is any change whatsoever in, or distribution with respect to, the Outstanding Common Stock of the Company), or sell, transfer or otherwise dispose of all or substantially all of its property, assets or business to another corporation and, pursuant to the terms of such reorganization, reclassification, merger, consolidation or -20- 25 disposition of assets, (i) shares of common stock of the successor or acquiring corporation or of the Company (if it is the surviving corporation) or (ii) any cash, shares of stock or other securities or property of any nature whatsoever (including warrants or other subscription or purchase rights) in addition to or in lieu of common stock of the successor or acquiring corporation ("Other Property") are to be received by or distributed to the holders of Common Stock of the Company who are holders immediately prior to such transaction, then the Holder of this Warrant shall have the right thereafter to receive, upon exercise of this Warrant, the number of shares of common stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and Other Property receivable upon or as a result of such reorganization, reclassification, merger, consolidation or disposition of assets by a holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such event. In such event, the aggregate Exercise Price otherwise payable for the shares of Common Stock issuable upon exercise of this Warrant shall be allocated among the shares of common stock and Other Property receivable as a result of such reorganization, reclassification, merger, consolidation or disposition of assets in proportion to the respective fair market values of such shares of common stock and Other Property as determined in good faith by the Board of Directors of the Company. In case of any such reorganization, reclassification, merger, consolidation or disposition of assets, the successor or acquiring corporation (if other than the Company) shall expressly assume the due and punctual observance and performance of each and every covenant and condition of this Warrant to be performed and observed by the Company and all the obligations and liabilities hereunder, subject to such modifications as may be reasonably deemed appropriate (as determined by resolution of the Board of Directors of the Company) in order to provide for adjustments of any shares of the common stock of such successor or acquiring corporation for which this Warrant thus becomes exercisable, which modifications shall be as equivalent as practicable to the adjustments provided for in this Section 4. For purposes of this Section 4.5, "common stock of the successor or acquiring corporation" shall include stock of such corporation of any class that is not preferred as to dividends or assets over any other class of stock of such corporation and that is not subject to redemption and shall also include any evidences of indebtedness, shares of stock or other securities that are convertible into or exchangeable for any such -21- 26 stock, either immediately or upon the arrival of a specified date or the happening of a specified event and any warrants or other rights to subscribe for or purchase any such stock. The foregoing provisions of this Section 4.5 shall similarly apply to successive reorganizations, reclassifications, mergers, consolidations or disposition of assets. 4.6. Determination of Consideration. For purposes of Sections 4.2, 4.3 and 4.4 hereof, the consideration received and/or receivable by the Company in connection with the issuance, sale, grant or exercise of additional shares of Common Stock, Stock Purchase Rights or Convertible Securities, irrespective of the accounting treatment of such consideration, shall be valued as follows: (1) Cash Payment. In the case of cash, the net amount received by the Company after deduction of any accrued interest or dividends, expenses incurred or any underwriting commissions or concessions paid or allowed by the Company. (2) Securities or Other Property. In the case of securities or other property, the fair market value thereof as of the date immediately preceding such issuance, sale, grant or exercise as determined in good faith by the Board of Directors of the Company. (3) Allocation Related to Common Stock. In the event shares of Common Stock are issued or sold together with other securities or other assets of the Company for a consideration which covers both, the consideration received (computed as provided in (1) and (2) above) shall be allocable to such shares of Common Stock as determined in good faith by the Board of Directors of the Company. (4) Allocation Related to Stock Purchase Rights and Convertible Securities. In case any Stock Purchase Rights or Convertible Securities shall be issued or sold together with other securities or other assets of the Company, together comprising one integral transaction in which no specific consideration is allocated to the Stock Purchase Rights or Convertible Securities, the consideration allocable to such Stock -22- 27 Purchase Rights or Convertible Securities shall be determined in good faith by the Board of Directors of the Company. (5) Dividends in Securities. In case the Company shall declare a dividend or make any other distribution upon any stock of the Company payable in either case in Common Stock or Convertible Securities, such Common Stock or Convertible Securities, as the case may be, issuable in payment of such dividend or distribution shall be deemed to have been issued or sold without consideration. (6) Merger, Consolidation or Sale of Assets. In case any shares of Common Stock, Stock Purchase Rights or Convertible Securities shall be issued in connection with any merger or consolidation in which the Company is the surviving corporation, the amount of consideration therefor shall be deemed to be the fair value on the date of issuance of such security of such portion of the assets and business of the non-surviving corporation attributable to such Common Stock, Stock Purchase Rights or Convertible Securities, as is determined in good faith by the Company's Board of Directors. (7) Challenge to Good Faith Determination. Whenever the Board of Directors of the Company shall be required to make a determination in good faith of the fair value of any item under this Section 4, such determination may be challenged in good faith by the Majority Warrant Holders, and any dispute shall be resolved by an investment banking or appraisal firm of recognized national standing selected by the Company and reasonably acceptable to the Majority Warrant Holders and whose decision shall be binding on the Company and all holders of Warrants. The fees and expenses of such firm shall be paid by the party or parties whose position is not chosen by such firm. 4.7. Other Dilutive Events. In case any event shall occur as to which the other provisions of this Section 4 are not strictly applicable but as to which the failure to make any adjustment would not fairly protect the purchase rights repre- -23- 28 sented by this Warrant in accordance with the essential intent and principles hereof (including, without limitation, the issuance of securities other than Common Stock which have the right to participate in distributions to the holders of Common Stock, the granting of "phantom stock" rights or "stock appreciation rights" or the repurchase of outstanding shares of Common Stock, Convertible Securities or Stock Purchase Rights for a purchase price exceeding the fair market value thereof), then, in each such case, the Majority Warrant Holders may select an independent investment banking firm of nationally recognized standing and reasonably acceptable to the Company to make a determination as to the adjustment, if any, required to be made on a basis consistent with the essential intent and principles established herein as a result of such event in order to preserve the purchase rights represented by the Warrants. If the investment bank selected by the Majority Warrant Holders is not reasonably acceptable to the Company, and the Company and the Majority Warrant Holders cannot agree on a mutually acceptable investment bank, then the Company and the Majority Warrant Holders shall each choose one such investment bank and the respective chosen firms shall jointly select a third investment bank, which shall make the determination. The Company shall pay the costs and fees of each such investment bank (including any such investment bank selected by the Majority Warrant Holders), and the decision of the investment bank making such determination shall be final and binding on the Company and all affected holders of Warrants or Warrant Stock. Promptly after receipt of the opinion of such investment bank as to any such required adjustments, the Company shall take any actions necessary to implement same. 4.8. Other Provisions Applicable to Adjustments Under this Section. The following provisions shall be applicable to the adjustments provided for pursuant to this Section 4: (a) When Adjustments To Be Made. The adjustments required by this Section 4 shall be made whenever and as often as any specified event requiring such an adjustment shall occur. For the purpose of any such adjustment, any specified event shall be deemed to have occurred at the close of business on the date of its occurrence. -24- 29 (b) Record Date. In case the Company shall take a record of the holders of the Common Stock for the purpose of entitling them (i) to receive a dividend or other distribution payable in Common Stock, Convertible Securities or Stock Purchase Rights or (ii) to subscribe for or purchase Common Stock, Convertible Securities or Stock Purchase Rights, then all references in this Section 4 to the date of the issuance or sale of such shares of Common Stock, Convertible Securities or Stock Purchase Rights shall be deemed to be references to such record date. (c) Fractional Interests. In computing adjustments under this Section 4, fractional interests in Common Stock shall be taken into account to the nearest 1/100th of a share. (d) When Adjustment Not Required. If the Company shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend or distribution to which the provisions of Section 4.1 would apply, but shall, thereafter and before the distribution to stockholders thereof, legally abandon its plan to pay or deliver such dividend or distribution, then thereafter no adjustment shall be required by reason of the taking of such record and any such adjustment previously made in respect thereof shall be rescinded and annulled. (e) Maximum Exercise Price. Except as provided in Section 4.1 above, at no time shall the Exercise Price per share of Common Stock exceed the amount set forth in the first paragraph of the preamble of this Warrant. (f) Certain Limitations. Notwithstanding anything herein to the contrary, the Company agrees not to enter into any transaction that, by reason of any adjustment under Section 4.1, 4.2 or 4.3 above, would cause the Exercise Price to be less than the par value of the Common Stock, if any, unless the Company first reduces the par value of the Common Stock to be less than the Exercise Price that would result from such transaction. (g) Notice of Adjustments. Whenever the number of shares of Common Stock for which this Warrant is -25- 30 exercisable or the Exercise Price shall be adjusted pursuant to this Section 4, the Company shall forthwith prepare a certificate to be executed by the President or chief financial officer of the Company setting forth, in reasonable detail, the event requiring the adjustment and the method by which such adjustment was calculated, specifying the number of shares of Common Stock for which this Warrant is exercisable and (if such adjustment was made pursuant to Section 4.5) describing the number and kind of any other shares of stock or Other Property for which this Warrant is exercisable, and any related change in the Exercise Price, after giving effect to such adjustment or change. The Company shall promptly cause a signed copy of such certificate to be delivered to each Holder in accordance with Section 15.2. The Company shall keep at its principal office or at the Designated Office, if different, copies of all such certificates and cause the same to be available for inspection at said office during normal business hours by any Holder or any prospective transferee of a Warrant designated by a Holder thereof. (h) Independent Application. Except as otherwise provided herein, all subsections of this Section 4 are intended to operate independently of one another (but without duplication). If an event occurs that requires the application of more than one subsection, all applicable subsections shall be given independent effect without duplication. 5. NO IMPAIRMENT The Company shall not by any action, including, without limitation, amending its charter documents or through any reorganization, reclassification, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other similar voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or reasonably appropriate to protect the rights of the Holder against impairment. Without limiting the generality of the foregoing, the Company shall take all such action as may be -26- 31 necessary or reasonably 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, free and clear of all Liens, and shall use all commercially reasonably efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof as may be necessary to enable the Company to perform its obligations under this Warrant. 6. RESERVATION AND AUTHORIZATION OF COMMON STOCK From and after the Original Issue Date, the Company shall at all times reserve and keep available for issuance upon the exercise of the Warrants such number of its authorized but unissued shares of Common Stock as will be sufficient to permit the exercise in full of all outstanding Warrants. All shares of Common Stock issuable pursuant to the terms hereof, when issued upon exercise of this Warrant with payment therefor in accordance with the terms hereof, shall be duly and validly issued and fully paid and nonassessable, not subject to preemptive rights and shall be free and clear of all Liens. 7. NOTICE OF CORPORATE ACTIONS; TAKING OF RECORD; TRANSFER BOOKS 7.1. Notices of Corporate Actions. In the event of: (a) any capital reorganization of the Company, any reclassification or recapitalization of the capital stock of the Company or any consolidation or merger involving the Company and any other Person or any transfer or other disposition of all or substantially all the assets of the Company to another Person or (b) any amendment of the Certificate of Incorporation of the Company, the Company shall mail to each Holder of a Warrant in accordance with the provisions of Section 14.2 hereof a notice specifying the date or expected date on which any such reorganization, reclassification, recapitalization, consolidation, merger, transfer or disposition is to take place, the time, if any such time is to be fixed, as of which the holders of record of Common Stock shall be entitled to exchange their shares of Common Stock for the securities or Other Property deliverable upon such reorganization, reclassification, recapitalization, consolidation, merger, transfer or disposition, -27- 32 and a description in reasonable detail of the transaction. Such notice shall be mailed to the extent practicable at least thirty, but not more than ninety, days prior to the date therein specified; provided, that, in no event shall the Company be required to give the Holders notice of material non-public information prior to the time such information is made available to the holders of its Common Stock. In the event that the Company at any time sends any other notice to the holders of its Common Stock, it shall concurrently send a copy of such notice to each Holder of a Warrant. 7.2 Closing of Transfer Books. The Company shall not at any time, except upon dissolution, liquidation or winding up of the Company, close its stock transfer books or Warrant transfer books so as to result in preventing or delaying the exercise or transfer of any Warrant. 8. TRANSFER RESTRICTIONS The Holder, by acceptance of this Warrant, agrees to be bound by the provisions of this Section 8. 8.1. Restrictions on Transfers. Neither this Warrant nor any shares of Restricted Common Stock issued upon the exercise hereof shall be Transferred other than pursuant to an effective registration statement under the Securities Act or an exemption from the registration provisions thereof. No Transfer of this Warrant or any such shares of Restricted Stock, other than pursuant to such an effective registration statement, shall be valid or effective unless (a) the holder of the securities proposed to be transferred shall have delivered to the Company either a no-action letter from the Commission or an Opinion of Counsel to the effect that such proposed Transfer is exempt from the registration requirements of the Securities Act or (b) such Transfer is being made pursuant to Rule 144 or Rule 144A under the Securities Act and such holder shall have delivered to the Company a certificate setting forth the basis for applying such Rule to the proposed Transfer. Each certificate, if any, evidencing such shares of Restricted Common Stock issued upon any such Transfer, other than in a public offering pursuant to an effective registration statement, shall bear the restrictive legend set forth in -28- 33 Section 8.2(a), and each Warrant issued upon such Transfer shall bear the restrictive legend set forth in Section 8.2(b), unless the Holder delivers to the Company an Opinion of Counsel to the effect that such legend is not required for the purposes of compliance with the Securities Act. Holders of the Warrants or the Restricted Common Stock, as the case may be, shall not be entitled to Transfer such Warrants or such Restricted Common Stock except in accordance with this Section 8.1. 8.2. Restrictive Legends. (a) Except as otherwise provided in this Section 8, each certificate for Warrant Stock initially issued upon the exercise of this Warrant, and each certificate for Warrant Stock issued to any subsequent transferee of any such certificate, shall be stamped or otherwise imprinted with two legends in substantially the following forms: "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAW. NO TRANSFER OF THE SHARES REPRESENTED BY THIS CERTIFICATE SHALL BE VALID OR EFFECTIVE UNLESS (A) SUCH TRANSFER IS MADE PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR (B) THE HOLDER OF THE SECURITIES PROPOSED TO BE TRANSFERRED SHALL HAVE DELIVERED TO THE COMPANY AN OPINION OF COUNSEL EXPERIENCED IN SECURITIES MATTERS AND REASONABLY ACCEPTABLE TO THE COMPANY TO THE EFFECT THAT SUCH PROPOSED TRANSFER IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE ACT OR (C) SUCH TRANSFER IS PURSUANT TO RULE 144 OR RULE 144A UNDER THE ACT AND SUCH HOLDER(S) SHALL HAVE DELIVERED TO THE COMPANY A CERTIFICATE SETTING FORTH THE BASIS FOR APPLYING SUCH RULE TO THE PROPOSED TRANSFER." "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE ENTITLED TO THE BENEFIT OF AND ARE SUBJECT TO CERTAIN OBLIGATIONS SET FORTH IN THE WARRANT PURSUANT TO THE EXERCISE OF WHICH SUCH SHARES WERE ISSUED. A COPY OF SUCH WARRANT IS AVAILABLE AT THE EXECUTIVE OFFICES OF THE COMPANY." (b) Except as otherwise provided in this Section 8, each Warrant shall be stamped or otherwise imprinted with a legend in substantially the following form: -29- 34 "NEITHER THE WARRANTS REPRESENTED BY THIS CERTIFICATE NOR ANY OF THE SECURITIES ISSUABLE UPON EXERCISE THEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAW. NO TRANSFER OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE OR OF THE STOCK ISSUABLE UPON EXERCISE THEREOF SHALL BE VALID OR EFFECTIVE UNLESS (A) SUCH TRANSFER IS MADE PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR (B) THE HOLDER OF THE SECURITIES PROPOSED TO BE TRANSFERRED SHALL HAVE DELIVERED TO THE COMPANY EITHER A NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION OR AN OPINION OF COUNSEL EXPERIENCED IN SECURITIES MATTERS AND REASONABLY ACCEPTABLE TO THE COMPANY TO THE EFFECT THAT SUCH PROPOSED TRANSFER IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE ACT OR (C) SUCH TRANSFER IS PURSUANT TO RULE 144 OR RULE 144A UNDER THE ACT AND SUCH HOLDER SHALL HAVE DELIVERED TO THE COMPANY A CERTIFICATE SETTING FORTH THE BASIS FOR APPLYING SUCH RULE TO THE PROPOSED TRANSFER." 8.3. Termination of Securities Law Restrictions. Not withstanding the foregoing provisions of this Section 8, the restrictions imposed by Section 8.1(b) upon the transferability of the Warrants and the Restricted Common Stock and the legend requirements of Section 8.2 shall terminate as to any particular Warrant or shares of Restricted Common Stock when the Company shall have received from the Holder thereof an Opinion of Counsel to the effect that such legend is not required in order to ensure compliance with the Securities Act. Whenever the restrictions imposed by Sections 8.1(b) and 8.2 shall terminate as to this Warrant, as hereinabove provided, the Holder hereof shall be entitled to receive from the Company, at the expense of the Company, a new Warrant bearing the following legend in place of the restrictive legend set forth hereon: "THE RESTRICTIONS ON TRANSFERABILITY OF THE WITHIN WARRANT CONTAINED IN SECTIONS 8.1(b) AND 8.2 HEREOF TERMINATED ON ______________, 19__, AND ARE OF NO FURTHER FORCE AND EFFECT." All Warrants issued upon registration of transfer, division or combination of, or in substitution for, any Warrant or Warrants entitled to bear such legend shall have a similar legend endorsed -30- 35 thereon. Wherever the restrictions imposed by this Section shall terminate as to any share of Restricted Common Stock, as hereinabove provided, the Holder thereof shall be entitled to receive from the Company, at the Company's expense, a new certificate representing such Common Stock not bearing the restrictive legend set forth in Section 8.2(a). 9. REGISTRATION RIGHTS 9.1. Certain Definitions. For the purposes of this Section 9: (a) The Holders of Warrants and the Series A Warrants and the holders of Warrant Stock (as defined in Section 9.1(b)) are collectively referred to as "WS Holders". (b) "Warrant Stock" shall deemed to include (i) the shares of Common Stock issued, issuable or both (as the context may require) upon the exercise of Warrants and the Series A Warrants until such time as such shares of Common Stock have either been (a) Transferred in a public offering pursuant to a registration statement filed under the Securities Act or (b) Transferred in a transaction exempt from the registration and prospectus delivery requirements of the Securities Act under Section 4(1) thereof with all transfer restrictions and restrictive legends with respect to such Common Stock being removed in connection with such transaction,(ii) any other securities issued as (or issuable upon the conversion or exercise of any warrant, right or other security which is issued as) a dividend or other distribution with respect to, or in exchange by the Company generally for, or in replacement by the Company generally of, any shares of Warrant Stock and (iii) any securities issued in exchange for any such Warrant Stock in any merger or reorganization of the Company, but in the cases of clauses (ii) and (iii) only so long as such securities have not been registered and Transferred pursuant to the Securities Act or Transferred in a transaction exempt from the registration and prospectus delivery requirements of the Securities Act under Section 4(1) thereof so that all transfer restrictions and restrictive legends with respect to such securities are removed in connection with such Transfer. -31- 36 (c) Each WS Holder shall be deemed to "hold", as of any specified date, the aggregate of (i) the number of shares of Warrant Stock held by such WS Holder as of such date plus (ii) the number of shares of Warrant Stock issuable upon exercise of any Warrants and Series A Warrants held by such WS Holder as of such date. (d) The total number of shares of Warrant Stock deemed "outstanding" as of a specified date will be equal to (i) the total number of shares of Warrant Stock Outstanding as of such date plus (ii) the number of shares of Warrant Stock issuable upon exercise of all outstanding Warrants and Series A Warrants as of such date. (e) "Registrable Securities" shall mean any Warrants, any Series A Warrants and/or any shares of Warrant Stock. 9.2. Demand Registration. (a) In the event the Company receives at any time after August 31, 1997 a written request from one or more WS Holders holding in the aggregate at least seventy-six percent of the number of shares of Warrant Stock then outstanding (the "Demanding Holders") that the Company file a registration statement under the Securities Act for the sale or other disposition of at least a majority of the Registrable Securities (a "Demand Registration"), the Company shall promptly give written notice of such request to each other WS Holder and each such WS Holder may elect, by giving written notice of such election to the Company within ten (10) Business Days after receipt of the Company's notice, to have some or all of the Registrable Securities held by it included in such registration. At the option of the Demanding Holders, such request may specify that the requested registration will be for an offering on a delayed or continual basis pursuant to Rule 415 under the Securities Act (a "Shelf Registration"). (b) Following receipt of such a request for a Demand Registration, the Company shall: (1) File the requested registration statement with the Commission as promptly as practicable, and shall use all commercially reasonable efforts to have the registration declared effective under the Securities Act as soon as reasonably practicable, in each instance giving due -32- 37 regard to the need to prepare and file current financial statements, conduct due diligence and complete other actions that are reasonably necessary to effect a registered public offering; and (2) Use all commercially reasonable efforts to keep the such registration statement Continuously Effective (x) if a Demand Registration, for up to 90 days or until such earlier date as of which all Registrable Securities covered by such registration statement shall have been disposed of in the manner described in the registration statement, and (y) if a Shelf Registration, for 270 days. Notwithstanding the foregoing, if for any reason the effectiveness of a Demand Registration is suspended or postponed as permitted by Subsection (d) below, the foregoing period shall be extended by the aggregate number of days of such suspension or postponement. (c) The Company shall not be required to effect a registration of Registrable Securities pursuant to a Demand Registration on more than one occasion. For purposes of this Subsection (c), registration shall not be deemed to have been effected (i) unless a registration statement with respect thereto has become effective, (ii) if after such registration statement has become effective, such registration or the related offer, sale or distribution of Registrable Securities thereunder is interfered with by any stop order, injunction or other order or requirement of the Commission or other governmental agency or court for any reason not attributable to the Selling Holders and such interference is not thereafter eliminated or (iii) if the conditions to closing specified in the underwriting agreement, if any, entered into in connection with such registration are not satisfied or waived, other than by reason of a failure on the part of the Selling Holders. If the Company shall have complied with its obligations under this Section 9, a right to demand a registration pursuant to this Section 9.2 shall be deemed to have been satisfied (i) if a Demand Registration other than a Shelf Registration, upon the earlier of (x) the date as of which all of the Registrable Securities included therein shall have been disposed of pursuant to the registration statement and (y) the date as of which such Demand Registration shall have been Continuously Effective for a period of 90 days, and (ii) if a Shelf Registration, upon the effective date of a Shelf Registration, provided no stop order or similar order, -33- 38 or proceedings for such an order, is thereafter entered or initiated. (d) The Company shall be entitled to postpone for up to 90 days the filing of any Demand Registration statement otherwise required to be prepared and filed pursuant to this Section 9.2 or suspend any such Demand Registration for up to 90 days, if the Board of Directors of the Company determines, in its good faith reasonable judgment that such registration and the Transfer of Warrant Stock contemplated thereby would materially interfere with, or require premature disclosure of, any financing, acquisition or reorganization involving the Company or any of its wholly owned subsidiaries and the Company promptly gives the Demanding Holders notice of such determination; provided, however, that the Company shall not have postponed pursuant to this Subsection (d) the filing of any other Demand Registration statement otherwise required to be prepared and filed pursuant to this Section 9.2, or suspended any such Demand Registration, during the 12 month period ended on the date of the relevant request pursuant to Subsection (a) above and provided further, that the Expiration Date shall be extended by the period of any such postponement or suspension. (e) A registration pursuant to this Section 9.2 shall be on such appropriate registration form of the Commission available to the Company as shall (i) be selected by the Company and be reasonably acceptable to the Majority Selling Holders and (ii) permit the disposition of the Warrant Stock in accordance with the intended method or methods of disposition specified in the request made pursuant to Subsection (a) above. If any registration pursuant to this Section 9.2 involves an underwritten offering (whether on a "firm", "best efforts" or "all reasonable efforts" basis or otherwise), or an agented offering, the Majority Selling Holders shall have the right to select the underwriter or underwriters and manager or managers to administer such underwritten offering or the placement agent or agents for such agented offering from among the entities listed in Schedule B hereto (or any successors of any such entities), it being understood that the Majority Selling Holders shall use commercially reasonable efforts to select one or more of the first three listed entities subject to arriving at reasonably acceptable terms and conditions for the offering. -34- 39 (f) The Company may elect to include shares of Common Stock to be sold for its account in any such Demand Registration (including a Shelf Registration); provided, however, if the managing underwriter shall advise the Demanding Holders in writing (with a copy to the Company) that, in its opinion, the number of shares of Common Stock requested to be included in such Demand Registration would adversely affect such offering or the price to be realized therefor, or the timing thereof, then the number of shares proposed to be included in such Demand Registration by the Company shall be reduced, to such number that the Demanding Holders are advised can be sold without such effect in such Demand Registration. 9.3. Piggyback Registration. (a) If at any time the Company proposes to register (including for this purpose a registration effected by the Company for shareholders of the Company other than the WS Holders) equity securities under the Securities Act in connection with the public offering solely for cash on Form S-1, S-2 or S-3 (or any replacement or successor forms), the Company shall promptly give each WS Holder written notice of such registration (a "Piggyback Registration"). Upon the written request of each WS Holder given within 20 days following the date of such notice, the Company shall cause to be included in such registration statement and use its best efforts to be registered under the Securities Act all the Registrable Securities that each such WS Holder shall have requested to be registered. The Company shall have the absolute right to withdraw or cease to prepare or file any registration statement for any offering referred to in this Section 9.3 without any obligation or liability to any WS Holder. (b) If the managing underwriter shall advise the Company in writing (with a copy to each Selling Holder) that, in its opinion, the amount of Registrable Securities requested to be included in such registration would materially adversely affect such offering, or the timing thereof, then the Company will include in such registration, to the extent of the amount and class which the Company is so advised can be sold without such material adverse effect in such offering: first, all securities proposed to be sold by the Company for its own account; and second, the Warrant Stock requested to be included in such registration by WS Holders and all other securities requested to be included in such registration by Persons other than the Company and WS Holders, the securities covered by this clause -35- 40 second to be included pro rata based on the estimated gross proceeds from the sale thereof. (c) Each WS Holder shall be entitled to have its Registrable Securities included in an unlimited number of Piggyback Registrations pursuant to this Section 9.3. 9.4. Registration Procedures. Whenever required under Section 9.2 or Section 9.3 hereof to effect the registration of any Registrable Securities, the Company shall, as expeditiously as practicable: (a) Prepare and file with the Commission a registration statement with respect to such Warrant Stock and use the Company's best efforts to cause such registration statement to become effective; provided, however, that before filing a registration statement or prospectus or any amendments or supplements thereto, including documents incorporated by reference after the initial filing of the registration statement and prior to effectiveness thereof, the Company shall furnish to one firm of counsel for the Selling Holders (selected by Majority Selling Holders) copies of all such documents in the form substantially as proposed to be filed with the Commission at least four Business Days prior to filing for review and comment by such counsel, which opportunity to comment shall include an absolute right to control or contest disclosure if the applicable Selling Holder reasonably believes that it may be subject to controlling person liability under applicable securities laws with respect thereto. (b) Prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Securities Act and rules thereunder with respect to the disposition of all securities covered by such registration statement. If is for an underwritten offering, the Company shall amend the registration -36- 41 statement or supplement the prospectus whenever required by the terms of the underwriting agreement entered into pursuant to Section 9.4(e). Subject to Rule 415 under the Securities Act, if the registration statement is a Shelf Registration, the Company shall amend the registration statement or supplement the prospectus so that it will remain current and in compliance with the requirements of the Securities Act for 270 days or after its effective date, and if during such period any event or development occurs as a result of which the registration statement or prospectus contains a misstatement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading, the Company shall promptly notify each Selling Holder, amend the registration statement or supplement the prospectus so that each will thereafter comply with the Securities Act and furnish to each Selling Holder of Registrable Securities such amended or supplemented prospectus, which each such Holder shall thereafter use in the Transfer of Warrant Stock covered by such registration statement. Pending such amendment or supplement each such Selling Holder shall cease making offers or Transfers of Registerable Securities pursuant to the prior prospectus. In the event that any Registrable Securities included in a registration statement subject to, or required by, this Warrant remain unsold at the end of the period during which the Company is obligated to use its best efforts to maintain the effectiveness of such registration statement, the Company may file a post- effective amendment to the registration statement for the purpose of removing such Registrable Securities from registered status. (c) Furnish to each Selling Holder of Registrable Securities, without charge, such number of copies of the registration statement, any pre-effective or post-effective amendment thereto, the prospectus, including each preliminary prospectus and any amendments or supplements thereto, in each case in conformity with the requirements of the Securities Act and the rules thereunder, and such other related documents as any such Selling Holder may reasonably request in order to facilitate the disposition of Registrable Securities owned by such Selling Holder. (d) Use all commercially reasonable efforts (i) to register and qualify the securities covered by such registration statement under such other securities or Blue Sky laws of such states or jurisdictions as shall be reasonably requested by the managing underwriter (as applicable, or if inapplicable, the Majority Selling -37- 42 Holders), and (ii) to obtain the withdrawal of any order suspending the effectiveness of a registration statement, or the lifting of any suspension of the qualification (or exemption from qualification) of the offer and transfer of any of the Registrable Securities in any jurisdiction, at the earliest possible moment; provided, however, that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions. (e) In the event of any underwritten or agented offering, enter into and perform the Company's obligations under an underwriting or agency agreement (including indemnification and contribution obligations of underwriters or agents), in usual and customary form, with the managing underwriter or underwriters of or agents for such offering. The Company shall also cooperate with the Majority Selling Holders and the managing underwriter for such offering in the marketing of the Warrant Stock, including making available the Company's officers, accountants, counsel, premises, books and records for such purpose, but the Company shall not be required to incur any material out-of-pocket expense pursuant to this sentence. (f) Promptly notify each Selling Holder of any stop order issued or threatened to be issued by the Commission in connection therewith (and take all reasonable actions required to prevent the entry of such stop order or to remove it if entered. (g) Make generally available to the Company's security holders copies of all periodic reports, proxy statements, and other information referred to in Section 9.9(a) and an earnings statement satisfying the provisions of Section 11(a) of the Securities Act no later than 90 days following the end of the 12-month period beginning with the first month of the Company's first fiscal quarter commencing after the effective date of each registration statement filed pursuant to this Section 9. (h) Make available for inspection by any Selling Holder, any underwriter participating in such offering and the representatives of such Selling Holder and underwriter -38- 43 (but not more than one firm of counsel to such Selling Holders), all financial and other information as shall be reasonably requested by them, and provide the Selling Holder, any underwriter participating in such offering and the representatives of such Selling Holder and underwriter the opportunity to discuss the business affairs of the Company with its principal executives and independent public accountants who have certified the audited financial statements included in such registration statement, in each case all as necessary to enable them to exercise their due diligence responsibility under the Securities Act; provided, however, that information that the Company determines, in good faith, to be confidential and which the Company advises such Person in writing, is confidential shall not be disclosed unless such Person signs a confidentiality agreement reasonably satisfactory to the Company or the related Selling Holder of Registrable Securities agrees to be responsible for such Person's breach of confidentiality on terms reasonably satisfactory to the Company. (i) Use the Company's best efforts to obtain a so-called "comfort letter" from its independent public accountants, and legal opinions of counsel to the Company, in customary form and covering such matters of the type customarily covered by such letters, and in a form that shall be reasonably satisfactory to the Majority Selling Holders. The Company shall furnish to each Selling Holder a signed counterpart of any such comfort letter or legal opinion. Delivery of any such opinion or comfort letter shall be subject to the recipient furnishing such written representations or acknowledgments as are customarily provided by selling shareholders who receive such comfort letters or opinions. (j) Provide and cause to be maintained a transfer agent and registrar for all Registrable Securities covered by such registration statement from and after a date not later than the effective date of such registration statement. (k) Use all reasonable efforts to cause the Registrable Securities covered by such registration statement (i) if the Common Stock is then listed on a securities exchange or included for quotation in a -39- 44 recognized trading market, to continue to be so listed or included for a reasonable period of time after the offering, and (ii) to be registered with or approved by such other United States or state governmental agencies or authorities as may be necessary by virtue of the business and operations of the Company to enable the Selling Holders of Registrable Securities to consummate the disposition of such Registrable Securities. (l) Use the Company's reasonable efforts to provide a CUSIP number for the Common Stock prior to the effective date of the first registration statement including Registrable Securities. (m) Take such other actions as are reasonably required in order to expedite or facilitate the disposition of Registrable Securities included in each such registration. 9.5. Selling Holders' Obligations. (a) It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Section 9 with respect to the Registrable Securities of any Selling Holder that such Selling Holder shall: (i) Furnish to the Company such information regarding such Selling Holder, the number of Registrable Securities owned by it, and the intended method of disposition of such securities as shall be required to effect the registration of such Selling Holder's Registrable Securities, and to cooperate with the Company in preparing such registration; and (ii) Agree to sell their Registrable Securities to the underwriters at the same price and on substantially the same terms and conditions as the Company or the other Persons on whose behalf the registration statement was being filed have agreed to sell their securities, and to execute the underwriting agreement agreed to by the Majority Selling Holders (in the case of a registration under Section 9.2) or the Company and the Majority Selling Holders (in the case of a registration under Section 9.3). (b) Each Selling Holder shall notify the Company of any sales of such Selling Holder's shares registered for sale pursuant to this Section 9; provided, however, it is -40- 45 understood that any failure so to notify the Company shall not be deemed a default hereunder or to subject any Selling Holder to any claim for damages or expenses whatsoever. 9.6. Expenses of Registration. Expenses incurred in connection with registrations under this Section 9 shall be allocated and paid as follows: (a) With respect to each Demand Registration (including any Shelf Registration), the Company shall bear and pay all reasonable expenses incurred in connection with any registration, filing, or qualification of Registrable Securities with respect to such Demand Registration for each Selling Holder, including all registration, filing and NASD fees, all fees and expenses of complying with securities or blue sky laws, all word processing, duplicating and printing expenses, messenger and delivery expenses, the reasonable fees and disbursements of counsel for the Company, and of the Company's independent public accountants, including the expenses of "cold comfort" letters required by or incident to such performance and compliance, and the reasonable fees and disbursements of one firm of counsel for the Selling Holders of Registrable Securities (the "Registration Expenses"), but excluding underwriting discounts and commissions relating to Registrable Securities (which shall be paid on a pro rata basis by the Selling Holders) provided, however, that the Company shall not be required to pay for any expenses of any registration proceeding begun pursuant to Section 9.2 if the registration is subsequently withdrawn at the request of the Majority Selling Holders (in which case all Selling Holders shall bear such expense), unless WS Holders whose Registrable Securities constitutes a majority of the Registrable Securities then outstanding agree that such withdrawn registration shall constitute the exercise of their one demand registration under Section 9.2 hereof. The counsel for the Selling Holders shall be selected by Demanding Holders owning a majority of the Registrable Securities owned by Demanding Holders to be included in a Demand Registration and, in the case of a Piggyback Registration, by Selling Holders owning a majority of the Registrable Securities to be included in such registration; provided that in the case of a Piggyback Registration, the Selling Holders shall use one firm of counsel to represent all such holders and shall endeavor in -41- 46 good faith, with any other holders of securities to be included in such registration, to select one firm of counsel to represent all such selling securities holders. (b) The Company shall bear and pay all Registration Expenses incurred in connection with any Piggyback Registrations pursuant to Section 9.3 for each Selling Holder, but excluding underwriting discounts and commissions relating to Registrable Securities (which shall be paid on a pro rata basis by the Selling Holders of Registrable Securities). (c) Any failure of the Company to pay any Registration Expenses as required by this Section 9.6 shall not relieve the Company of its obligations under this Section 9. 9.7. Indemnification; Contribution. If any Registrable Securities are included in a registration statement under this Section 9: (a) To the extent permitted by applicable law, the Company shall indemnify and hold harmless each Selling Holder, each Person, if any, who controls such Selling Holder within the meaning of the Securities Act, and each officer, director, partner, and employee of such Selling Holder and such controlling Person, against any and all losses, claims, damages, liabilities and expenses (joint or several), including attorneys' fees and disbursements and expenses of investigation, incurred by such party pursuant to any actual or threatened action, suit, proceeding or investigation, or to which any of the foregoing Persons may become subject under the Securities Act, the Exchange Act or other federal or state laws, insofar as such losses, claims, damages, liabilities and expenses arise out of or are based upon any of the following statements, omissions or violations pursuant to a final non-appealable order (collectively a "Violation"): (i) any untrue statement or alleged untrue statement of a material fact contained in such registration statement, including any preliminary prospectus or final prospectus contained therein, or any amendments or supplements thereto; -42- 47 (ii) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading; or (iii) any violation or alleged violation by the Company of the Securities Act, the Exchange Act, any applicable state securities law or any rule or regulation promulgated under the Securities Act, the Exchange Act or any applicable state securities law; provided, however, that the indemnification required by this Section 9.7(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or expense if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld), nor shall the Company be liable in any such case for any such loss, claim, damage, liability or expense to the extent that it is determined by a court of competent jurisdiction by a final non-appealable order to have solely arisen out of or be based upon a Violation which occurred in reliance upon and in conformity with written information furnished to the Company by the indemnified party expressly for use in connection with such registration; provided, further, that the indemnity agreement contained in this Section 9.7(a) shall not apply to any underwriter to the extent that any such loss is based on or arises out of an untrue statement or alleged untrue statement of a material fact, or an omission or alleged omission to state a material fact, contained in or omitted from any preliminary prospectus if the final prospectus shall correct such untrue statement or alleged untrue statement, or such omission or alleged omission, and a copy of the final prospectus has not been sent or given to such person at or prior to the confirmation of sale to such person if such underwriter was under an obligation to deliver such final prospectus and failed to do so. The Company shall also indemnify underwriters, selling brokers, dealer managers and similar securities industry professionals participating in the distribution, their officers, directors, agents and employees and each person who controls such persons (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) to the same extent as provided above with respect to the indemnification of the Selling Holders. -43- 48 (b) To the extent permitted by applicable law, each Selling Holder shall indemnify and hold harmless the Company, each of its directors, each of its officers and employees, each Person, if any, who controls the Company within the meaning of the Securities Act, any other Selling Holder, any controlling Person of any such other Selling Holder and each officer, director, partner, and employee of such other Selling Holder and such controlling Person, against any and all losses, claims, damages, liabilities and expenses (joint and several), including attorneys' fees and disbursements and expenses of investigation, incurred by such party pursuant to any actual or threatened action, suit, proceeding or investigation, or to which any of the foregoing Persons may otherwise become subject under the Securities Act, the Exchange Act or other federal or state laws, insofar as such losses, claims, damages, liabilities and expenses are determined by a court of competent jurisdiction by a final non-appealable order to have solely arisen out of or be based upon a Violation that occurred in reliance upon and in conformity with written information furnished by such Selling Holder expressly for use in connection with such registration; provided, however, that (x) the indemnification required by this Section 9.7(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or expense if settlement is effected without the consent of the relevant Selling Holder of Registrable Securities, which consent shall not be unreasonably withheld, and (y) in no event shall the amount of any indemnity under this Section 9.7(b) exceed the net proceeds from the applicable offering received by such Selling Holder. (c) Promptly after receipt by an indemnified party under this Section 9.7 of notice of the commencement of any action, suit, proceeding, investigation or threat thereof made in writing for which such indemnified party may make a claim under this Section 9.7, such indemnified party shall deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the -44- 49 right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party shall have the right to retain its own counsel, with the fees and disbursements and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding. The failure to deliver written notice to the indemnifying party within a reasonable time following the commencement of any such action, if prejudicial to its ability to defend such action, shall relieve such indemnifying party of any liability to the indemnified party under this Section 9.7 but shall not relieve the indemnifying party of any liability that it may have to any indemnified party otherwise than pursuant to this Section 9.7. Any reasonable fees and expenses incurred by the indemnified party (including any fees and expenses incurred in connection with investigating or preparing to defend such action or proceeding) shall be paid to the indemnified party, as incurred, within thirty (30) days of written notice thereof to the indemnifying party (regardless of whether it is ultimately determined that an indemnified party is not entitled to indemnification hereunder). Any such indemnified party shall have the right to employ separate counsel in any such action, claim or proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be the expenses of such indemnified party unless (i) the indemnifying party has agreed to pay such fees and expenses or (ii) the indemnifying party shall have failed to promptly assume the defense of such -45- 50 action, claim or proceeding or (iii) the named parties to any such action, claim or proceeding (including any impleaded parties) include both such indemnified party and the indemnifying party, and such indemnified party shall have been advised by counsel that there may be one or more legal defenses available to it which are different from or in addition to those available to the indemnifying party and that the assertion of such defenses would create a conflict of interest such that counsel employed by the indemnifying party could not faithfully represent the indemnified party (in which case, if such indemnified party notifies the indemnifying party in writing that it elects to employ separate counsel at the expense of the indemnifying party, the indemnifying party shall not have the right to assume the defense of such action, claim or proceeding on behalf of such indemnified party, it being understood, however, that the indemnifying party shall not, in connection with any one such action, claim or proceeding or separate but substantially similar or related actions, claims or proceedings in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the reasonable fees and expenses of more than one separate firm of attorneys (together with appropriate local counsel) at any time for all such indemnified parties, unless in the reasonable judgment of such indemnified party a conflict of interest may exist between such indemnified party and any other of such indemnified parties with respect to such action, claim or proceeding, in which event the indemnifying party shall be obligated to pay the fees and expenses of such additional counsel or counsels). No indemnifying party shall be liable to an indemnified party for any settlement of any action, proceeding or claim without the written consent of the indemnifying party, which consent shall not be unreasonably withheld. (d) If the indemnification required by this Section 9.7 from the indemnifying party is unavailable to an indemnified party hereunder in respect of any losses, claims, damages, liabilities or expenses referred to in this Section 9.7: (i) The indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities or expenses in such proportion as is appropriate to reflect the relative fault of the indemnifying party and indemnified parties in connection with the actions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative fault of such indemnifying party and indemnified parties shall be determined by reference to, among other things, whether any Violation has been committed by, or relates to information supplied by, such indemnifying party or indemnified parties, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such -46- 51 Violation. The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and expenses referred to above shall be deemed to include, subject to the limitations set forth in Section 9.7(a) and Section 9.7(b), any reasonable legal or other fees or expenses reasonably incurred by such party in connection with any investigation or proceeding. (ii) The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 9.7(d) were determined by pro rata allocation or by any other method of allocation which does not take into account the equitable considerations referred to in Section 9.7(d)(i) above. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. (e) If indemnification is available under this Section 9.7, the indemnifying parties shall indemnify each indemnified party to the full extent provided in this Section 9.7 without regard to the relative fault of such indemnifying party or indemnified party or any other equitable consideration referred to in Section 9.7(d) above. (f) The indemnification required by this Section 9.7 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or expense, loss, damage or liability is incurred. In the event that it shall be subsequently determined that the recipient of any such periodic payment shall not be entitled to indemnification hereunder, such recipient promptly shall repay such payments, together with interest thereon at the Agreed Rate from the date of original receipt to the date of repayment. (g) The obligations of the Company and the Selling Holders of Registrable Securities under this Section 9.7 shall survive the completion of any offering of Registrable Securities pursuant to a registration statement under this Section 9, and otherwise. -47- 52 9.8. Holdback. Each WS Holder entitled pursuant to this Section 9 to have Registrable Securities included in a registration statement prepared pursuant to this Section 9, if so requested by the managing underwriter in connection with an offering of any Registrable Securities, shall not effect any public sale or distribution of shares of Common Stock, Convertible Securities or Stock Purchase Rights (excluding any sale pursuant to Rule 144 or Rule 144A under the Securities Act and any sale as part of such underwritten or agented registration), during the 5-day period prior to, and during the 45-day period beginning on, the date such registration statement is declared effective under the Securities Act by the Commission, provided that such WS Holder is timely notified of such effective date in writing by the Company or such managing underwriter. 9.9. Additional Covenants of the Company. The Company hereby agrees and covenants as follows: (a) The Company shall file as and when applicable, on a timely basis, all reports required to be filed by it under the Exchange Act. If the Company is not required to file reports pursuant to the Exchange Act, upon the request of any WS Holder, the Company shall make publicly available the information specified in subparagraph (c)(2) of Rule 144 of the Securities Act, and take such further action as may be reasonably required from time to time and as may be within the reasonable control of the Company, to enable the WS Holders to Transfer Warrants or Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by Rule 144 under the Securities Act or any similar rule or regulation hereafter adopted by the Commission. In addition, promptly upon the request of any WS Holder, the Company shall provide such WS Holder with such publicly available financial statements, reports and other information as may be required to permit such WS Holder to Transfer shares of Registrable Securities to Qualified Institutional Investors pursuant to Rule 144A of the Securities Act. (b) The Company shall not, and shall not permit its majority owned subsidiaries to, effect any public sale or distribution of any shares of Stock Purchase Rights during the 5 Business Days prior to, and during the 90-day period beginning on, -48- 53 the commencement of a public distribution of Registrable Securities pursuant to any registration statement prepared pursuant to this Section 9 (other than by the Company pursuant to such registration if the registration is pursuant to Section 9.3 or by the Company pursuant to any dividend reinvestment plan offered by it to its stockholders). The Company shall not effect any registration of its securities (other than on Form S-4, Form S-8, or any successor forms to such forms or pursuant to such other registration rights agreements as may be approved in writing by the Majority Selling Holders) or effect any public or private sale or distribution of any of its securities, including a sale pursuant to Regulation D under the Securities Act, whether on its own behalf or at the request of any holder or holders of such securities from the date of a request for a Demand Registration pursuant to Section 9.2 until 90 days following the effective date of such Demand Registration statement, unless the Company shall have previously notified in writing all Selling Holders of the Company's desire to do so, and the Majority Selling Holders or the managing underwriter, if any, shall have consented thereto in writing. (c) Any agreement entered into on or after August 31, 1997 pursuant to which the Company or any of its majority owned subsidiaries issues or agrees to issue any Common Stock (including, without limitation, any employee stock option, stock purchase agreement, merger agreement or other agreement) shall contain a provision whereby any holder receiving such Common Stock who will hold more than one percent (1%) of the amount of such Common Stock then outstanding shall agree not to effect any public sale or distribution of any such Common Stock during the periods described in the second sentence of Section 9.9(b), in each case including a sale pursuant to Rule 144 under the Securities Act (unless such Person is prevented by applicable statute or regulation from entering into such an agreement). (d) Subject to Section 13, the Company shall not, directly or indirectly, (x) enter into any merger, consolidation or reorganization in which the Company shall not be the surviving corporation or (y) Transfer or agree to Transfer all or substantially all the Company's assets, -49- 54 unless prior to such merger, consolidation, reorganization or asset Transfer, the surviving corporation or the Transferee, respectively, shall have agreed in writing to assume the obligations of the Company under this Agreement, and for that purpose references hereunder to "Registrable Securities" shall be deemed to include the securities which the WS Holders would be entitled to receive in exchange for Registrable Securities pursuant to any such merger, consolidation or reorganization. 10. LOSS OR MUTILATION Upon receipt by the Company from any Holder of evidence reasonably satisfactory to it of the ownership of and the loss, theft, destruction or mutilation of this Warrant and an indemnity reasonably satisfactory to it (it being understood that the written indemnification agreement of or affidavit of loss of Caisse Nationale de Credit Agricole shall be a sufficient indemnity) and, in case of mutilation, upon surrender and cancellation hereof, the Company will execute and deliver in lieu hereof a new Warrant of like tenor to such Holder; provided, however, in the case of mutilation, no indemnity shall be required if this Warrant in identifiable form is surrendered to the Company for cancellation. 11. OFFICE OF THE COMPANY As long as any of the Warrants remain outstanding, the Company shall maintain an office or agency, which may be the principal executive offices of the Company (the "Designated Office"), where the Warrants may be presented for exercise, registration of transfer, division or combination as provided in this Warrant. Such Designated Office shall initially be the office of the Company at Cedar Rapids, Iowa. The Company may from time to time change the Designated Office to another office of the Company or its agent within the United States by notice given to all registered holders of Warrants at least ten Business Days prior to the effective date of such change. -50- 55 12. FINANCIAL AND BUSINESS INFORMATION Until the Expiration Date, the Company shall deliver to each Holder of Warrants or of Warrant Stock one copy of each of the following items: (i) promptly after filing thereof, copies of all regular and periodic reports, proxy statements (other than preliminary) and registration statements (other than registration statements on Forms S-3 (relating to debt securities) and S-8) which the Company may file with the Securities and Exchange Commission or any governmental agency substituted therefor. (ii) promptly upon their becoming available, copies of all financial statements, reports, notices and proxy statements sent or made available by the Company to the holders of any class of its securities generally or by any Subsidiary of the Company to the holders of any class of its securities generally; and (iii) with reasonable promptness, such other public information relating to the Company and its Subsidiaries as the Holder may, from time to time, reasonably request. 13. REPURCHASE BY THE COMPANY OF WARRANTS The Company shall have the right (the "Call"), upon written notice (the "Call Notice") to the Holders of all outstanding Warrants given at any time on or after the date of the occurrence of the Triggering Event and before August 31, 1997, to repurchase on the date specified in the notice from each Holder of a Warrant all of such Warrant for an amount equal to the result (rounded to the nearest cent) obtained by multiplying One Dollar ($1.00) by a fraction, the numerator of which shall be the aggregate number of shares for which this Warrant may be exercised and the denominator of which shall be the aggregate number of shares for which all outstanding Series B Warrants may be exercised, and in all events not more than One Dollar ($1.00) for all Series B Warrants. On the date of any repurchase of this Warrant pursuant to this Section 13, the Holder shall assign to the Company such Warrant without any representation or warranty (except as to title and the absence of Liens), by the surrender -51- 56 of this Warrant at the Designated Office against payment of the repurchase price therefor. 14. MISCELLANEOUS 14.1. Nonwaiver. No course of dealing or any delay or failure to exercise any right hereunder on the part of the Company or the Holder shall operate as a waiver of such right or otherwise prejudice the rights, powers or remedies of such Person. 14.2. Notice Generally. Any notice, demand, request, consent, approval, declaration, delivery or communication hereunder to be made pursuant to the provisions of this Warrant shall be sufficiently given or made if in writing and either delivered in person with receipt acknowledged or sent by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: (a) if to any Holder of this Warrant or of Warrant Stock issued upon the exercise hereof, at its last known address appearing on the books of the Company maintained for such purpose; (b) if to the Company, at its Designated Office; or at such other address as may be substituted by notice given as herein provided. The giving of any notice required hereunder may be waived in writing by the party entitled to receive such notice. Every notice, demand, request, consent, approval, declaration, delivery or other communication hereunder shall be deemed to have been duly given or served on the date on which personally delivered, with receipt acknowledged, or three Business Days after the same shall have been deposited in the United States mail, or one Business Day after the same shall have been delivered to Federal Express or another overnight courier service. 14.3. Indemnification. If the Company fails to make, when due, any payments provided for in this Warrant, the Company shall pay to the Holder hereof (a) interest at the Agreed Rate on any amounts due and owing to such Holder from the date due until the date of payment and (b) such further amounts as shall be sufficient to cover any costs and expenses including, but not -52- 57 limited to, reasonable attorneys' fees and expenses incurred by such Holder in collecting any amounts due hereunder. The Company shall indemnify, save and hold harmless the Holder hereof and the Holders of any Warrant Stock issued upon the exercise hereof from and against any and all liability, loss, cost, damage, reasonable attorneys' and accountants' fees and expenses, court costs and all other out-of-pocket expenses incurred in connection with or arising from a Company Default. This indemnification provision shall be in addition to the rights of such Holder or Holders to bring an action against the Company for breach of contract based on such Company Default. 14.4. Limitation of Liability. No provision hereof, in the absence of affirmative action by the Holder to purchase shares of Common Stock, and no enumeration herein of the rights or privileges of the Holder hereof, shall give rise to any liability of such Holder to pay the Exercise Price for any Warrant Stock other than pursuant to an exercise of this Warrant or any liability as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company. 14.5. Remedies. Each Holder of Warrants and/or War rant Stock, in addition to being entitled to exercise its rights granted by law, including recovery of damages, shall be entitled to specific performance of its rights provided under this Warrant. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees, in an action for specific performance, to waive the defense that a remedy at law would be adequate. 14.6. Successors and Assigns. Subject to the provi sions of Sections 3.1, 8.1 and 8.2, this Warrant and the rights evidenced hereby shall inure to the benefit of and be binding upon the successors of the Company and the permitted successors and assigns of the Holder hereof. The provisions of this Warrant are intended to be for the benefit of all Holders from time to time of this Warrant and, in the case of Section 9, all Holders of shares of Warrant Stock issued upon the exercise hereof (including transferees), and shall be enforceable by any such Holder. -53- 58 14.7. Amendment. This Warrant and all other Warrants may be modified or amended or the provisions hereof waived with the written consent of the Company and the Majority Warrant Holders, provided that no such Warrant may be modified or amended to reduce the number of shares of Common Stock for which such Warrant is exercisable or to increase the price at which such shares may be purchased upon exercise of such Warrant (before giving effect to any adjustment as provided therein) without the written consent of the Holder thereof. 14.8. Severability. Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Warrant. 14.9. Headings. The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant. 14.10. GOVERNING LAW; JURISDICTION. IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS WARRANT AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF ILLINOIS APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE, EXCEPT WITH RESPECT TO THE VALIDITY OF THIS WARRANT, THE ISSUANCE OF WARRANT STOCK UPON EXERCISE HEREOF AND THE RIGHTS AND DUTIES OF THE COMPANY WITH RESPECT TO REGISTRATION OF TRANSFER, WHICH SHALL BE GOVERNED BY THE LAWS OF DELAWARE. THE COMPANY HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED IN CHICAGO, ILLINOIS, SHALL HAVE, EXCEPT AS SET FORTH BELOW, EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THE COMPANY AND THE HOLDER OF THIS WARRANT PERTAINING TO THIS WARRANT OR TO ANY MATTER ARISING OUT OF OR RELATING TO THIS AGREEMENT, PROVIDED, THAT IT IS ACKNOWLEDGED THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF CHICAGO, ILLINOIS. -54- 59 IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed and its corporate seal to be impressed hereon and attested by its Secretary or an Assistant Secretary. NORAND CORPORATION By:_________________________ Name: Title: [SEAL] Attest: By:___________________________ Name: Title: -55- 60 ANNEX A SUBSCRIPTION FORM [To be executed only upon exercise of Warrant] The undersigned registered owner of this Warrant irrevocably exercises this Warrant for the purchase of ______ shares Common Stock of Norand Corporation and herewith makes payment therefor, all at the price and on the terms and conditions specified in this Warrant and requests that certificates for the shares of Common Stock hereby purchased (and any securities or other property issuable upon such exercise) be issued in the name of and delivered to _________________ whose address is ___________________________________________________ and, if such shares of Common Stock shall not include all of the shares of Common Stock issuable as provided in this Warrant, that a new Warrant of like tenor and date for the balance of the shares of Common Stock issuable hereunder be delivered to the undersigned. _______________________________ (Name of Registered Owner) _______________________________ (Signature of Registered Owner) _______________________________ (Street Address) _______________________________ (City) (State) (Zip Code) NOTICE: The signature on this subscription must correspond with the name as written upon the face of the within Warrant in every particular, without alteration or enlargement or any change whatsoever. 61 ANNEX B ASSIGNMENT FORM FOR VALUE RECEIVED the undersigned registered owner of this Warrant hereby sells, assigns and transfers unto the Assignee named below all of the rights of the undersigned under this Warrant, with respect to the number of shares of Common Stock set forth below: No. of Shares of Name and Address of Assignee Common Stock and does hereby irrevocably constitute and appoint _____________________ attorney-in-fact to register such transfer onto the books of Norand Corporation maintained for the purpose, with full power of substitution in the premises. Dated:___________________ Print Name:___________________ Signature:____________________ Witness:______________________ NOTICE: The signature on this assignment must correspond with the name as written upon the face of the within Warrant in every particular, without alteration or enlargement or any change whatsoever. EX-4.(N)8 10 SERIES B WARRANT B-3 1 EXHIBIT 4.N.8 SERIES B WARRANT to Purchase Common Stock of NORAND CORPORATION Warrant No. B - 3 Original Issue Date: November 20, 1996 2 TABLE OF CONTENTS 1. DEFINITIONS 1 2. EXERCISE OF WARRANT 11 2.1. Manner of Exercise 11 2.2. Payment of Transfer Taxes 12 2.3. Fractional Shares 12 2.4. Continued Validity and Application 13 2.5. Limitation on Regulated Holder's Exercise 13 3. TRANSFER, DIVISION AND COMBINATION 13 3.1. Transfer 13 3.2. Division and Combination. 14 3.3. Expenses. 14 3.4. Maintenance of Books 14 4. ANTIDILUTION PROVISIONS14 14 4.1. Stock Dividends, Subdivisions and Combinations 15 4.2. Issuance of Additional Shares of Common Stock 15 4.3. Issuances of Stock Purchase Rights and Convertible Securities 15 4.4. Adjustment of Number of Shares Purchasable. 17 4.5. Reorganization, Reclassification, Merger, Consolidation or Disposition of Assets 17 4.6. Determination of Consideration. 18 4.7. Other Dilutive Events 20 4.8. Other Provisions Applicable to Adjustments Under this Section 20 5. NO IMPAIRMENT 22 6. RESERVATION AND AUTHORIZATION OF COMMON STOCK 23 7. NOTICE OF CORPORATE ACTIONS; TAKING OF RECORD; TRANSFER BOOKS 23 7.1. Notices of Corporate Actions. 23 7.2 Closing of Transfer Books. 23 8. TRANSFER RESTRICTIONS23 8.1. Restrictions on Transfers 24 8.2. Restrictive Legends 24 -i- 3 8.3. Termination of Securities Law Restrictions 25 9. REGISTRATION RIGHTS 26 9.1. Certain Definitions 26 9.2. Demand Registration 27 9.3. Piggyback Registration 29 9.4. Registration Procedures. 30 9.5. Selling Holders' Obligations. 34 9.6. Expenses of Registration. 34 9.7. Indemnification; Contribution. 35 9.8. Holdback. 40 9.9. Additional Covenants of the Company 40 10. LOSS OR MUTILATION 42 11. OFFICE OF THE COMPANY 42 13. REPURCHASE BY THE COMPANY OF WARRANTS 43 14. MISCELLANEOUS 43 14.1. Nonwaiver. 43 14.2. Notice Generally 44 14.3. Indemnification 44 14.4. Limitation of Liability. 44 14.5. Remedies 45 14.6. Successors and Assigns 45 14.7. Amendment. 45 14.8. Severability 45 14.9. Headings. 45 14.10. GOVERNING LAW; JURISDICTION. 45 ANNEX A SUBSCRIPTION FORM 48 ANNEX B ASSIGNMENT FORM 49 SCHEDULE A RESERVED SHARES OF COMMON STOCK -ii- 4 SCHEDULE B UNDERWRITERS AND AGENTS -iii- 5 NEITHER THE WARRANTS REPRESENTED BY THIS CERTIFICATE NOR ANY OF THE SECURITIES ISSUABLE UPON EXERCISE THEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAW. NO TRANSFER OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE OR OF THE SECURITIES ISSUABLE UPON EXERCISE THEREOF SHALL BE VALID OR EFFECTIVE UNLESS (A) SUCH TRANSFER IS MADE PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR (B) THE HOLDER OF THE SECURITIES PROPOSED TO BE TRANSFERRED SHALL HAVE DELIVERED TO THE COMPANY EITHER A NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION OR AN OPINION OF COUNSEL EXPERIENCED IN SECURITIES MATTERS AND REASONABLY ACCEPTABLE TO THE COMPANY TO THE EFFECT THAT SUCH PROPOSED TRANSFER IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE ACT OR (C) SUCH TRANSFER IS PURSUANT TO RULE 144 OR RULE 144A UNDER THE ACT AND SUCH HOLDER(S) SHALL HAVE DELIVERED TO THE COMPANY A CERTIFICATE SETTING FORTH THE BASIS FOR APPLYING SUCH RULE TO THE PROPOSED TRANSFER. Warrant No. B - 3 SERIES B WARRANT NORAND CORPORATION THIS IS TO CERTIFY THAT FLEET NATIONAL BANK, or registered assigns, is entitled, at any time after August 31, 1997 and prior to the Expiration Date (such term, and certain other capitalized terms used herein being hereinafter defined), to purchase from NORAND CORPORATION, a Delaware corporation (the "Company"), Fifty-Two Thousand Two Hundred Sixty-five (52,265) shares of the Common Stock of the Company (subject to adjustment as provided herein), at a purchase price of $21.15 per share (the initial "Exercise Price", subject to adjustment as provided herein), all on the terms and conditions and pursuant to the provisions hereinafter set forth. 6 1. DEFINITIONS As used in this Warrant, the following terms have the respective meanings set forth below: "Affiliate" of any Person means a Person (a) which directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with such Person, (b) which beneficially owns or holds more than ten percent of the outstanding shares of any class of voting stock of such Person and has the power to vote such shares or (c) more than ten percent of the outstanding shares of any class of voting stock (or, in the case of a Person which is not a corporation, more than ten percent of the equity interest) of which is beneficially owned or held by such Person and such Person has the power to vote such shares or equity interest. The term "control" as used with respect to any Person means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise. "After-Tax Basis", when referring to a payment that is required hereunder (the "target amount"), shall mean a total payment (the "total amount") that, after deduction of all federal, state and local taxes that are required to be paid by the recipient in respect of the receipt or accrual of such total amount, is equal to the target amount. "Agreed Rate" shall mean a rate per annum equal to the corporate base rate of interest announced by The First National Bank of Chicago from time to time, changing when and as said corporate base rate changes. "Appraised Value" per share of Common Stock as of a date specified herein shall mean the value of such share as of such date as determined by an investment bank of nationally recognized standing selected by the Majority Warrant Holders from Schedule B (or any successor of any such entity), it being understood that the Majority Warrant Holders shall use commercially reasonable efforts to select one of the first three listed entities subject to arriving at reasonably acceptable terms and conditions for the -2- 7 appraisal. The Company shall pay the costs and fees of such investment bank, and the decision of the investment bank making such determination of Appraised Value shall be final and binding on the Company and all affected holders of Warrants or Warrant Stock. Such Appraised Value shall be determined as a pro rata portion of the value of the Company taken as a whole, based on the higher of (A) the value derived from a hypothetical sale of the entire Company as a going concern by a willing seller to a willing buyer (neither acting under any compulsion) and (B) the liquidation value of the entire Company. No discount shall be applied on account of (i) any Warrants or Warrant Stock representing a minority interest, (ii) any lack of liquidity of the Common Stock or the Warrants, (iii) the fact that the Warrants or Warrant Stock may constitute "restricted securities" for securities law purposes or (iv) the existence of any call option. "Bank Holding Company Act" shall mean the Bank Holding Company Act of 1956, as amended. "Business Day" shall mean any day that is not a Saturday or Sunday or a day on which banks are required or permitted to be closed in the State of Illinois. "Call" shall have the meaning set forth in Section 13 hereof. "Call Notice" shall have the meaning set forth in Section 13 hereof. "Commission" shall mean the Securities and Exchange Commission or any other federal agency then administering the Securities Act and other federal securities laws. "Common Stock" shall mean (except where the context otherwise indicates) the Common Stock of the Company, par value $.01 per share, as constituted on the Original Issue Date, and any capital stock into which such Common Stock may thereafter be changed, and shall also include (i) capital stock of the Company of any other class (regardless of how denominated) issued to the holders of shares of any Common Stock upon any reclassification thereof which is also not preferred as to dividends or liquidation over any other -3- 8 class of stock of the Company and which is not subject to redemption and (ii) shares of common stock of any successor or acquiring corporation (as defined in Section 4.5 hereof) received by or distributed to the holders of Common Stock of the Company in the circumstances contemplated by Section 4.5 hereof. "Company" means Norand Corporation, a Delaware corporation, and any successor corporation. "Company Default" means (a) the breach of any warranty or the inaccuracy in any material respect at the time when made of any representation made by the Company herein or (b) the failure by the Company to comply in any material respect with any covenant of the Company contained herein. "Continuously Effective", with respect to a specified registration statement, shall mean that it shall not cease to be effective and available for Transfers of Warrant Stock thereunder for the longer of either (i) any ten consecutive Business Days, or (ii) an aggregate of fifteen Business Days during the period specified in the relevant provision of Section 9 hereof. "Convertible Securities" shall mean evidences of indebtedness, shares of stock or other securities that are convertible into or exchangeable for, with or without payment of additional consideration in cash or property, shares of Common Stock, either immediately or upon the occurrence of a specified date or a specified event. "Credit Agreement" means the Second Amended and Restated Credit Agreement dated as of January 25, 1996, as thereafter from time to time amended, supplemented, restated or modified, among the Company, the Lenders party thereto and The First National Bank of Chicago, as agent. "Current Market Price" shall mean as of any specified date the average of the daily market prices of the Common Stock of the Company for the shorter of (x) the twenty consecutive Business Days immediately preceding such date or (y) the period commencing on the Business Day next following the first public announcement of any event giving rise to an adjustment of the Exercise Price pursuant to Section 4 below -4- 9 and ending on such date. The "daily market price" for each such Business Day shall be: (i) if the Common Stock is then listed on a national securities exchange or is listed on NASDAQ and is designated as a National Market System security, the last sale price, regular way, on such day on the principal stock exchange or market system on which such Common Stock is then listed or admitted to trading, or, if no such sale takes place on such day, the average of the closing bid and asked prices for the Common Stock on such day as reported on such stock exchange or market system or (ii) if the Common Stock is not then listed or admitted to trading on any national securities exchange or designated as a National Market System security on NASDAQ but is traded over-the-counter, the average of the closing bid and asked prices for the Common Stock as reported on NASDAQ or the Electronic Bulletin Board or in the National Daily Quotation Sheets, as applicable. "Demand Registration" shall have the meaning set forth in Section 9.2(a) hereof. "Demanding Holders" shall have the meaning set forth in Section 9.2(a) hereof. "Designated Office" shall have the meaning set forth in Section 11 hereof. "Equity" shall mean equity capital (not including the equity capital attributable to the Settlement Stock, and any mandatory redemption terms of which equity capital are acceptable to the Majority Warrant Holders) raised by and/or contributed to the Company subsequent to the Original Issue Date or new Indebtedness (as defined in the Credit Agreement) subordinated to the Obligations (as defined in the Credit Agreement), provided the terms of such Indebtedness (including, without limitation, maturity, amortization, covenants, defaults, remedies and subordination provisions) are acceptable to the Majority Warrant Holders. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect from time to time. -5- 10 "Exercise Notice" shall have the meaning set forth in Section 2.1 hereof. "Exercise Period" shall mean the period during which this Warrant is exercisable pursuant to Section 2.1 hereof. "Exercise Price" shall mean, in respect of a share of Common Stock at any date herein specified, the initial Exercise Price set forth in the preamble of this Warrant as adjusted from time to time pursuant to Section 4 hereof. "Expiration Date" shall mean August 31, 2002, unless extended under the circumstances contemplated by Section 9.2(d) hereof. "Fair Value" per share of Common Stock as of any specified date shall mean (A) if the Common Stock is publicly traded on such date, the Current Market Price per share or (B) if the Common Stock is not publicly traded on such date, (1) the fair market value per share of Common Stock as determined in good faith by the Board of Directors of the Company and set forth in a written notice to each Holder or (2) if the Majority Warrant Holders object in writing to such price as determined by the Board of Directors within thirty days after receiving notice of same, the Appraised Value per share as of such date. "Fully Diluted Outstanding" shall mean, when used with reference to Common Stock, at any date as of which the number of shares thereof is to be determined, all shares of Common Stock Outstanding on such date and all shares of Common Stock issuable in respect of (x) the Warrants outstanding on such date, (y) any Convertible Securities outstanding on such date and (z) any other Stock Purchase Rights outstanding on such date, in each case regardless of whether or not the conversion, exchange, subscription or purchase rights associated with such Convertible Securities or Stock Purchase Rights are presently exercisable. "GAAP" shall mean generally accepted accounting principles in the United States of America as from time to time in effect. -6- 11 "Glass-Steagall Act" shall mean Section 24 (Seventh), Section 78, Section 377 and Section 378 of Title 12 (12 U.S.C. Section Section 24 (Seventh) 78, 377, 378), or any similar federal legislation. "Holder" shall mean (a) with respect to this Warrant, the Person in whose name the Warrant set forth herein is registered on the books of the Company maintained for such purpose and (b) with respect to any other Warrant or shares of Warrant Stock, the Person in whose name such Warrant or Warrant Stock is registered on the books of the Company maintained for such purpose. "Insolvency Event" shall mean any proceeding being instituted by or against the Company seeking a declaration or order for relief, or entailing a finding, that the Company is insolvent or bankrupt, or seeking reorganization, liquidation, dissolution, winding-up, charter revocation or other similar relief with respect to the Company or any of its properties, assets or debts, or seeking the appointment of a receiver, trustee, custodian, liquidator, sequestrator or similar official for the Company or any of its properties or assets, or the Company becoming insolvent or bankrupt or generally unable to pay its debts as they become due, or the Company voluntarily suspending its business or making a general assignment for the benefit of creditors; provided that an Insolvency Event shall not be deemed to have occurred on account of any such proceeding which is involuntary on the part of the Company unless same shall not have been dismissed or stayed within 60 days. "Lien" shall mean any mortgage or deed of trust, pledge, hypothecation, assignment, deposit arrangement, lien, charge, claim, security interest, easement or encumbrance, or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, any lease or title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, and the filing of, or agreement to give, any financing statement perfecting a security interest under the Uniform Commercial Code or comparable law of any jurisdiction). -7- 12 "Majority Warrant Holders", with respect to a given determination, shall mean the Holders of Warrants and/or Warrant Stock representing at least seventy-six percent (76%) of all Warrants and/or Warrant Stock (with any such Warrants being deemed to represent, for the purposes of such calculation, the shares of Warrant Stock then issuable upon exercise thereof) directly affected by such determination. "Majority Selling Holders" shall mean those Selling Holders whose Warrants and/or Warrant Stock included in a registration under Section 9 hereof represents a majority of the Warrants and/or Warrant Stock (with any such Warrants being deemed to represent, for the purposes of such calculation, the shares of Warrant Stock then issuable upon exercise thereof) included therein by all Selling Holders. "NASD" shall mean the National Association of Securities Dealers, Inc., or any successor corporation thereto. "NASDAQ" shall mean the NASDAQ quotation system, or any successor reporting system. "Notes" shall mean any of the promissory notes issued by the Company under the Credit Agreement. "Opinion of Counsel" means a written opinion of counsel experienced in Securities Act or bank regulatory matters, as the case may be, chosen by the Holder of this Warrant or Warrant Stock issued upon the exercise hereof and reasonably acceptable to the Company. "Original Issue Date" shall mean the date on which the Original Warrants were issued, as set forth on the cover page of this Warrant. "Original Warrants" shall mean the Warrants originally issued by the Company on the Original Issue Date to each of The First National Bank of Chicago, Fleet Bank of Massachusetts, N.A., The Daiwa Bank, Limited, Norwest Bank Iowa, National Association and Caisse Nationale de Credit Agricole. "Other Property" shall have the meaning set forth in Section 4.5 hereof. -8- 13 "Outstanding" shall mean, when used with reference to Common Stock, at any date as of which the number of shares thereof is to be determined, all issued shares of Common Stock, except shares then owned or held by or for the account of the Company or any Subsidiary thereof, and shall include all shares issuable in respect of outstanding scrip or any certificates representing fractional interests in shares of Common Stock. "Outstanding", when used with respect to Warrant Stock for the purposes of Section 9 hereof shall have the meaning set forth in Section 9.1(d) hereof. "Person" shall mean any individual, sole proprietorship, partnership, limited liability company, joint venture, trust, incorporated organization, association, corporation, institution, public benefit corporation, entity or government (whether federal, state, county, city, municipal or otherwise, including, without limitation, any instrumentality, division, agency, body or department thereof). "Piggyback Registration" shall have the meaning set forth in Section 9.3(a) hereof. "Register", "registered" and "registration" shall refer to a registration effected by preparing and filing a registration statement or similar document in compliance with the Securities Act, and the declaration or ordering by the Commission of effectiveness of such registration statement or document. "Registration Expenses" shall have the meaning set forth in Section 9.6(a) hereof. "Restricted Common Stock" shall mean shares of Common Stock which are, or which upon their issuance on the exercise of this Warrant would be, evidenced by a certificate bearing the restrictive legend set forth in Section 8.2(a) hereof. "Securities Act" shall mean the Securities Act of 1933, as amended, or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. -9- 14 "Selling Holders" shall mean, with respect to a specified registration under Section 9 hereof, WS Holders whose Registrable Securities are included in such registration. "Series A Warrants" shall mean all of the Series A Warrants to Purchase Common Stock of Norand Corporation issued concurrently with this Warrant. "Series B Warrants" shall mean all of the Series B Warrants to Purchase Common Stock of Norand Corporation, issued concurrently with, and having the same terms (other than the number of shares purchasable upon the exercise thereof) as, this Warrant. "Settlement Stock" shall mean the shares of Common Stock contemplated to be issued in settlement of the pending shareholders' claims against the Company with respect to the litigation styled In re Norand Corporation Securities Litigation, Master File No. C95-323, pending in the United States District Court for the Northern District of Iowa, Cedar Rapids Division. "Share Withholding Option" has the meaning set forth in Section 2.1(c) hereof. "Shelf Registration" shall have the meaning set forth in Section 9.2(a) hereof. "Stock Purchase Rights" shall mean any options, warrants or other securities or rights to subscribe to or exercisable for the purchase of shares of Common Stock or Convertible Securities, whether or not immediately exercisable, other than the options, warrants or other rights described in Schedule A hereto. "Subsequent Issuance" shall mean any sale or issuance by the Company of Common Stock, Convertible Securities or Stock Purchase Rights after the Original Issue Date other than: (i) Any issuance of Warrant Stock upon exercise of the Warrants and any issuance of Common Stock, Convertible Securities or Stock Purchase Rights (and -10- 15 any issuance of Common Stock pursuant to the conversion, exchange or exercise of any such Convertible Securities or Stock Purchase Rights) deemed to have been issued as of the Original Issue Date pursuant to the definition of Fully Diluted Outstanding. (ii) Any issuance of Common Stock pursuant to the exercise of the options and warrants described in Schedule A hereto, provided, however, that the exercise price of any such option or warrant (other than warrants granted to Jay Alix and Associates and to Donald W. Rowley for up to the respective number of shares set forth on Schedule A) granted or issued after the Original Issue Date shall not be less than the "daily market price" (as that term is defined in the definition of Current Market Price) of the Common Stock on the date of grant or issue of the option or warrant. (iii) The issuance of the Settlement Stock. (iv) Any other issuance of Common Stock, Convertible Securities or Stock Purchase Rights with respect to which the Majority Warrant Holders shall have waived application of the provisions of Section 4 below. "Subsidiary" means any corporation or association (a) more than 50% (by number of votes) of the voting stock of which is at the time owned by the Company or by one or more Subsidiaries or by the Company and one or more Subsidiaries, or any other business entity in which the Company or one or more Subsidiaries or the Company and one or more Subsidiaries own more than a 50% interest either in the profits or capital of such business entity or (b) whose net earnings, or portions thereof, are consolidated with the net earnings of the Company and are recorded on the books of the Company for financial reporting purposes in accordance with GAAP. "Transfer" shall mean any disposition of any Warrant or Warrant Stock or of any interest in either thereof, which would constitute a "sale" thereof within the meaning of the Securities Act. -11- 16 "Triggering Event" shall mean either the repayment in full of all indebtedness under the Credit Agreement or the receipt by the Company of at least $20 million in net cash proceeds from additional Equity. "Violation" has the meaning set forth in Section 9.7(a) hereof. "Warrant Price" shall mean an amount equal to (i) the number of shares of Common Stock being purchased upon exercise of this Warrant pursuant to Section 2.1 hereof, multiplied by (ii) the Exercise Price as of the date of such exercise. "Warrants" shall mean the Original Warrants and all warrants issued upon transfer, division or combination of, or in substitution for, such Original Warrants or any other such Warrant. All Warrants shall at all times be identical as to terms and conditions and date, except as to the number of shares of Common Stock for which they may be exercised. "Warrant Stock" generally shall mean the shares of Common Stock issued, issuable or both (as the context may require) upon the exercise of Warrants until such time as such shares of Common Stock have either been (i) Transferred in a public offering pursuant to a registration statement filed under the Securities Act or (ii) Transferred in a transaction exempt from the registration and prospectus delivery requirements of the Securities Act under Section 4(1) thereof with all transfer restrictions and restrictive legends with respect to such Common Stock being removed in connection with such transaction. "Warrant Stock", for the purposes of Section 9 hereof, shall have the meaning set forth in Section 9.1(b) hereof. "WS Holder" shall have the meaning set forth in Section 9.1(a) hereof. 2. EXERCISE OF WARRANT 2.1. Manner of Exercise. (a) From and after August 31, 1997 and until 5:00 P.M., Chicago time, on the Expiration Date, the Holder of this Warrant may from time to time exercise -12- 17 this Warrant, on any Business Day, for all or any part of the number of shares of Common Stock purchasable hereunder (as determined pursuant to Section 2.2 below). In order to exercise this Warrant, in whole or in part, the Holder shall (i) deliver to the Company at the Designated Office a written notice of the Holder's election to exercise this Warrant (an "Exercise Notice"), which Exercise Notice shall be irrevocable and specify the number of shares of Common Stock to be purchased, together with this Warrant and (ii) pay to the Company the Warrant Price (the date on which both such delivery and payment shall have first taken place being hereinafter sometimes referred to as the "Exercise Date"). Such Exercise Notice shall be in the form of the subscription form appearing at the end of this Warrant as Annex A, duly executed by the Holder or its duly authorized agent or attorney. (b) Upon receipt of such Exercise Notice, Warrant and payment, the Company shall, as promptly as practicable, and in any event within five Business Days thereafter, execute (or cause to be executed) and deliver (or cause to be delivered) to the Holder a certificate or certificates representing the aggregate number of full shares of Common Stock issuable upon such exercise, together with cash in lieu of any fraction of a share, as hereafter provided. The stock certificate or certificates so delivered shall be, to the extent possible, in such denomination or denominations as the exercising Holder shall reasonably request in the Exercise Notice and shall be registered in the name of the Holder or such other name as shall be designated in the Exercise Notice. This Warrant shall be deemed to have been exercised and such certificate or certificates shall be deemed to have been issued, and the Holder or any other Person so designated to be named therein shall be deemed to have become a holder of record of such shares for all purposes, as of the Exercise Date. (c) Payment of the Warrant Price shall be made at the option of the Holder by one or more of the following methods: (i) by delivery of a certified or official bank check in the amount of such Warrant Price, (ii) by instructing the Company to withhold a number of shares of Warrant Stock then issuable upon exercise of this Warrant with an aggregate Current Market Price equal to such Warrant Price (the "Share Withholding Option"), (iii) by surrendering to the Company shares of Common Stock previously acquired by the Holder with an aggregate Current -13- 18 Market Price equal to such Warrant Price or(iv) by delivery of a Note, duly endorsed by or accompanied by appropriate instruments of transfer duly executed by the Holder or by the Holder's attorney duly authorized in writing. In the event of any withholding of Warrant Stock or surrender of Common Stock pursuant to clause (ii) or (iii) above where the number of shares whose Current Market Price is equal to the Warrant Price is not a whole number, the number of shares withheld by or surrendered to the Company shall be rounded up to the nearest whole share and the Company shall make a cash payment to the Holder based on the incremental fraction of a share being so withheld by or surrendered to the Company in an amount determined in accordance with Section 2.3 hereof. For the purpose of making payment of the Warrant Price, any Note surrendered to the Company shall be deemed to have a value equal to 100% of the principal amount thereof plus any interest accrued but unpaid thereon. If the Holder delivers a Note with a deemed value that exceeds the Warrant Price, the Company shall reissue to the Holder a new Note identical in all respects to the surrendered Note except that the principal amount of such new Note shall be equal to the principal amount that, together with any interest accrued but unpaid thereon, is equal to the deemed value of the surrendered Note less the Warrant Price. (d) If this Warrant shall have been exercised in part, the Company shall, at the time of delivery of the certificate or certificates representing the shares of Common Stock being issued, deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the unpurchased shares of Common Stock called for by this Warrant. Such new Warrant shall in all other respects be identical with this Warrant. 2.2. Payment of Transfer Taxes. All shares of Common Stock issuable upon the exercise of this Warrant pursuant to the terms hereof shall be validly issued, fully paid and nonassessable, issued without violation of any preemptive rights and free and clear of all Liens (other than any created by actions of the Holder). The Company shall pay all expenses in connection with, and all taxes and other governmental charges that may be imposed with respect to, the issue or delivery thereof, unless such tax or charge is imposed by law upon the Holder, in which case such taxes or charges shall be paid by the Holder and the Company shall reimburse the Holder therefor on an After-Tax Basis. -14- 19 2.3. Fractional Shares. The Company shall not be required to issue a fractional share of Common Stock upon exercise of any Warrant. As to any fraction of a share that the Holder of one or more Warrants, the rights under which are exercised in the same transaction, would otherwise be entitled to purchase upon such exercise, the Company shall pay a cash adjustment in respect of such final fraction in an amount equal to the same fraction of the Current Market Price of one share of Common Stock on the Exercise Date, if the Common Stock is then publicly traded. 2.4. Continued Validity and Application. (a) A Holder of shares of Warrant Stock issued upon the exercise of this Warrant, in whole or in part, including any transferee of such shares (other than a transferee in whose hands such shares no longer constitute Warrant Stock as defined herein), shall continue, with respect to such shares, to be entitled to all rights and to be subject to all obligations that are applicable to such Holder by the terms of this Warrant under Section 9 hereof. The Company shall, at the time of any exercise of this Warrant or any transfer of Warrant Stock, upon the request of the Holder of the shares of Warrant Stock issued in connection with such exercise or transfer, acknowledge in writing, in a form reasonably satisfactory to such Holder, its continuing obligation to afford to such Holder such rights referred to in this Section 2.4; provided, however, that if such Holder shall fail to make any such request, such failure shall not affect the continuing obligation of the Company to afford to such Holder all such rights. 2.5. Limitation on Regulated Holder's Exercise. Notwithstanding anything in this Warrant to the contrary, the Holder of this Warrant, if subject to the Bank Holding Company Act or any provision of the Glass-Steagall Act, may exercise this Warrant only if the Notice of Exercise is accompanied by an Opinion of Counsel of such Holder to the effect that, as of the date of delivery of such opinion, no federal or state regulatory clearances are required for such Holder to exercise this Warrant or, in the event any such federal or state regulatory clearances are required prior to the exercise of this Warrant, to the effect that all such clearances have been obtained or, if not then obtained, that no statute or regulation or regulatory policy or guidelines known to such counsel would by their terms preclude the obtaining of such clearances or make it unlikely that such -15- 20 clearances would be obtained or make it likely that such clearances would, if obtained, contain material conditions adverse to such Holder. In the event that federal or state regulatory clearances are required prior to the exercise of this Warrant by the Holder hereof, the Company shall reasonably cooperate with such Holder in providing such information to any regulatory agency as such agency may reasonably require. In the event any such regulatory clearance is withheld or denied, such Holder may continue to hold this Warrant until its expiration or may sell or otherwise transfer this Warrant in accordance with the terms hereof. 3. TRANSFER, DIVISION AND COMBINATION 3.1. Transfer. Subject to compliance with Section 8 hereof, each transfer of this Warrant and all rights hereunder, in whole or in part, shall be registered on the books of the Company to be maintained for such purpose, upon surrender of this Warrant at the Designated Office, together with a written assignment of this Warrant in the form of Annex B hereto duly executed by the Holder or its agent or attorney. Upon such surrender and delivery, the Company shall, subject to Section 8, execute and deliver a new Warrant or Warrants in the name of the assignee or assignees and in the denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned and this Warrant shall promptly be canceled. A Warrant, if properly assigned in compliance with Section 8, may be exercised by the new Holder for the purchase of shares of Common Stock without having a new Warrant issued. 3.2. Division and Combination. Subject to compliance with the applicable provisions of this Warrant, this Warrant may be divided or combined with other Warrants upon presentation hereof at the Designated Office, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney. Subject to compliance with the applicable provisions of this Warrant as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. -16- 21 3.3. Expenses. The Company shall prepare, issue and deliver at its own expense any new Warrant or Warrants required to be issued under this Section 3. 3.4. Maintenance of Books. The Company agrees to maintain, at the Designated Office, books for the registration and transfer of the Warrants. 4. ANTIDILUTION PROVISIONS The number of shares of Common Stock for which this Warrant is exercisable and the Exercise Price shall be subject to adjustment from time to time as set forth in this Section 4. 4.1. Stock Dividends, Subdivisions and Combinations. If at any time the Company shall: (i) take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend payable in, or other distribution of, additional shares of Common Stock, (ii) subdivide its outstanding shares of Common Stock into a larger number of shares of such Common Stock, or (iii) combine its outstanding shares of Common Stock into a smaller number of shares of such Common Stock, then the Exercise Price shall be adjusted to equal the product of the Exercise Price in effect immediately prior to such event multiplied by a fraction the numerator of which is equal to the number of shares of Common Stock Outstanding immediately prior to the adjustment and the denominator of which is equal to the number of shares of Common Stock Outstanding immediately after such adjustment. 4.2. Issuance of Additional Shares of Common Stock. (a) If at any time the Company shall issue or sell any shares of Common Stock in a Subsequent Issuance for a consideration per share that is less than the Exercise Price in effect immediately prior to such issuance or sale, then, forthwith upon such issuance or sale, the Exercise Price shall be reduced to a price calculated by dividing (1) an amount equal to the sum of (x) the -17- 22 number of shares of Common Stock Outstanding immediately prior to such Subsequent Issuance multiplied by the then existing Exercise Price, plus (y) the aggregate consideration (determined in accordance with the provisions of Section 4.6 hereof), if any, received by the Company in connection with such Subsequent Issuance, by (2) the total number of shares of Common Stock Outstanding immediately after such Subsequent Issuance. (b) The provisions of this Section 4.2 shall not apply to (i) any issuance of Common Stock for which an adjustment is provided for under Section 4.1 or (ii) any issuance or sale of Common Stock pursuant to the exercise of any Stock Purchase Rights or Convertible Securities to the extent that an adjustment shall have been previously made hereunder in connection with the issuance of such Stock Purchase Rights or Convertible Securities pursuant to the provisions of Section 4.3 hereof. 4.3. Issuances of Stock Purchase Rights and Convertible Securities. (a) In the event that the Company shall at any time issue, sell or grant any Stock Purchase Rights to any Person in a Subsequent Issuance, then, for the purpose of Section 4.2 above, the Company shall be deemed to have issued at that time a number of shares of Common Stock equal to the maximum number of shares of Common Stock (without giving effect to any antidilution provisions in such Stock Purchase Rights) that are or may become issuable upon exercise of such Stock Purchase Rights (or upon exercise of any Convertible Securities issuable upon exercise of such Stock Purchase Rights) for a consideration per share equal to (i) the aggregate consideration per share (determined in accordance with the provisions of Section 4.6 hereof) received by the Company in connection with the issuance, sale or grant of such Stock Purchase Rights plus (ii) the minimum amount of such consideration per share receivable by the Company in connection with the exercise of such Stock Purchase Rights (and the exercise of any Convertible Securities issuable upon exercise of such Stock Purchase Rights). (b) In the event that the Company shall at any time issue or sell any Convertible Securities to any Person in a Subsequent Issuance, then, for the purposes of Section 4.2 above, the Company shall be deemed to have issued at that time a number of shares of Common Stock equal to the maximum number of shares of Common Stock that are or may become issuable upon the exercise of the conversion or exchange rights associated with such -18- 23 Convertible Securities for a consideration per share equal to (i) the aggregate consideration per share (determined in accordance with the provisions of Section 4.6 hereof) received by the Company in connection with the issuance or sale of such Convertible Securities plus (ii) the minimum amount of such consideration per share receivable by the Company in connection with the exercise of such conversion or exchange rights. (c) If, at any time after any adjustment of the Exercise Price shall have been made hereunder as the result of any issuance, sale or grant of any Stock Purchase Rights or Convertible Securities, the maximum number of shares issuable upon exercise of such Stock Purchase Rights or of the rights of conversion or exchange associated with such Convertible Securities shall increase, or the minimum amount of consideration per share receivable in connection with such exercise shall decrease, whether by operation of any antidilution rights pertaining to such Stock Purchase Rights or Convertible Securities, by agreement of the parties or otherwise, the Exercise Price then in effect shall first be readjusted to eliminate the effects of the original issuance, sale or grant of such Stock Purchase Rights or Convertible Securities on such Exercise Price and then readjusted as if such Stock Purchase Rights or Convertible Securities had been issued on the effective date of such increase in number of shares or decrease in consideration, but only if the effect of such two-step readjustment is to reduce the Exercise Price below the Exercise Price in effect immediately prior to such increase or decrease. (d) If, at any time after any adjustment of the Exercise Price shall have been made hereunder as the result of any issuance, sale or grant of any Stock Purchase Rights or Convertible Securities, any of such Stock Purchase Rights or the rights of conversion or exchange associated with such Convertible Securities shall expire by their terms or any of such Stock Purchase Rights or Convertible Securities shall be repurchased by the Company or a Subsidiary thereof for a consideration per underlying share of Common Stock not exceeding the amount of such consideration received by the Company in connection with the issuance, sale or grant of such Stock Purchase Rights or Convertible Securities, the Exercise Price then in effect shall forthwith be increased to the Exercise Price that would have been in effect if such expiring Stock Purchase Rights or rights of conversion or exchange or such repurchased Stock Purchase Rights -19- 24 or Convertible Securities had never been issued. Similarly, if at any time after any such adjustment of the Exercise Price shall have been made pursuant to Section 4.2 (i) any additional consideration is received or becomes receivable by the Company in connection with the issuance or exercise of such Stock Purchase Rights or Convertible Securities or (ii) there is a reduction in the conversion ratio applicable to such Convertible Securities so that fewer shares of Common Stock will be issuable upon the conversion or exchange thereof or there is a decrease in the number of shares of Common Stock issuable upon exercise of such Stock Purchase Rights, the Exercise Price then in effect shall be forthwith readjusted to the Exercise Price that would have been in effect had such changes taken place at the time that such Stock Purchase Rights or Convertible Securities were initially issued, granted or sold. In no event shall any readjustment under this Section 4.3(d) affect the validity of any shares of Warrant Stock issued upon any exercise of this Warrant prior to such readjustment, nor shall any such readjustment have the effect of increasing the Exercise Price above the Exercise Price that would have been in effect if the related Stock Purchase Rights or Convertible Securities had never been issued. 4.4. Adjustment of Number of Shares Purchasable. Upon any adjustment of the Exercise Price as provided in Section 4.1, 4.2 or 4.3 hereof, the Holder hereof shall thereafter be entitled to purchase upon the exercise of this Warrant, at the Exercise Price resulting from such adjustment, the number of shares of Common Stock (calculated to the nearest 1/100th of a share) obtained by multiplying the Exercise Price in effect immediately prior to such adjustment by the number of shares of Common Stock issuable on the exercise hereof immediately prior to such adjustment and dividing the product thereof by the Exercise Price resulting from such adjustment. 4.5. Reorganization, Reclassification, Merger, Con solidation or Disposition of Assets. In case the Company shall reorganize its capital, reclassify its capital stock, consolidate or merge with or into another corporation (where the Company is not the surviving corporation or where there is any change whatsoever in, or distribution with respect to, the Outstanding Common Stock of the Company), or sell, transfer or otherwise dispose of all or substantially all of its property, assets or business to another corporation and, pursuant to the terms of such reorganization, reclassification, merger, consolidation or -20- 25 disposition of assets, (i) shares of common stock of the successor or acquiring corporation or of the Company (if it is the surviving corporation) or (ii) any cash, shares of stock or other securities or property of any nature whatsoever (including warrants or other subscription or purchase rights) in addition to or in lieu of common stock of the successor or acquiring corporation ("Other Property") are to be received by or distributed to the holders of Common Stock of the Company who are holders immediately prior to such transaction, then the Holder of this Warrant shall have the right thereafter to receive, upon exercise of this Warrant, the number of shares of common stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and Other Property receivable upon or as a result of such reorganization, reclassification, merger, consolidation or disposition of assets by a holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such event. In such event, the aggregate Exercise Price otherwise payable for the shares of Common Stock issuable upon exercise of this Warrant shall be allocated among the shares of common stock and Other Property receivable as a result of such reorganization, reclassification, merger, consolidation or disposition of assets in proportion to the respective fair market values of such shares of common stock and Other Property as determined in good faith by the Board of Directors of the Company. In case of any such reorganization, reclassification, merger, consolidation or disposition of assets, the successor or acquiring corporation (if other than the Company) shall expressly assume the due and punctual observance and performance of each and every covenant and condition of this Warrant to be performed and observed by the Company and all the obligations and liabilities hereunder, subject to such modifications as may be reasonably deemed appropriate (as determined by resolution of the Board of Directors of the Company) in order to provide for adjustments of any shares of the common stock of such successor or acquiring corporation for which this Warrant thus becomes exercisable, which modifications shall be as equivalent as practicable to the adjustments provided for in this Section 4. For purposes of this Section 4.5, "common stock of the successor or acquiring corporation" shall include stock of such corporation of any class that is not preferred as to dividends or assets over any other class of stock of such corporation and that is not subject to redemption and shall also include any evidences of indebtedness, shares of stock or other securities that are convertible into or exchangeable for any such -21- 26 stock, either immediately or upon the arrival of a specified date or the happening of a specified event and any warrants or other rights to subscribe for or purchase any such stock. The foregoing provisions of this Section 4.5 shall similarly apply to successive reorganizations, reclassifications, mergers, consolidations or disposition of assets. 4.6. Determination of Consideration. For purposes of Sections 4.2, 4.3 and 4.4 hereof, the consideration received and/or receivable by the Company in connection with the issuance, sale, grant or exercise of additional shares of Common Stock, Stock Purchase Rights or Convertible Securities, irrespective of the accounting treatment of such consideration, shall be valued as follows: (1) Cash Payment. In the case of cash, the net amount received by the Company after deduction of any accrued interest or dividends, expenses incurred or any underwriting commissions or concessions paid or allowed by the Company. (2) Securities or Other Property. In the case of securities or other property, the fair market value thereof as of the date immediately preceding such issuance, sale, grant or exercise as determined in good faith by the Board of Directors of the Company. (3) Allocation Related to Common Stock. In the event shares of Common Stock are issued or sold together with other securities or other assets of the Company for a consideration which covers both, the consideration received (computed as provided in (1) and (2) above) shall be allocable to such shares of Common Stock as determined in good faith by the Board of Directors of the Company. (4) Allocation Related to Stock Purchase Rights and Convertible Securities. In case any Stock Purchase Rights or Convertible Securities shall be issued or sold together with other securities or other assets of the Company, together comprising one integral transaction in which no specific consideration is allocated to the Stock -22- 27 Purchase Rights or Convertible Securities, the consideration allocable to such Stock Purchase Rights or Convertible Securities shall be determined in good faith by the Board of Directors of the Company. (5) Dividends in Securities. In case the Company shall declare a dividend or make any other distribution upon any stock of the Company payable in either case in Common Stock or Convertible Securities, such Common Stock or Convertible Securities, as the case may be, issuable in payment of such dividend or distribution shall be deemed to have been issued or sold without consideration. (6) Merger, Consolidation or Sale of Assets. In case any shares of Common Stock, Stock Purchase Rights or Convertible Securities shall be issued in connection with any merger or consolidation in which the Company is the surviving corporation, the amount of consideration therefor shall be deemed to be the fair value on the date of issuance of such security of such portion of the assets and business of the non-surviving corporation attributable to such Common Stock, Stock Purchase Rights or Convertible Securities, as is determined in good faith by the Company's Board of Directors. (7) Challenge to Good Faith Determination. Whenever the Board of Directors of the Company shall be required to make a determination in good faith of the fair value of any item under this Section 4, such determination may be challenged in good faith by the Majority Warrant Holders, and any dispute shall be resolved by an investment banking or appraisal firm of recognized national standing selected by the Company and reasonably acceptable to the Majority Warrant Holders and whose decision shall be binding on the Company and all holders of Warrants. The fees and expenses of such firm shall be paid by the party or parties whose position is not chosen by such firm. 4.7. Other Dilutive Events. In case any event shall occur as to which the other provisions of this Section 4 are not strictly applicable but as to which the failure to make any adjustment would not fairly protect the purchase rights repre- -23- 28 sented by this Warrant in accordance with the essential intent and principles hereof (including, without limitation, the issuance of securities other than Common Stock which have the right to participate in distributions to the holders of Common Stock, the granting of "phantom stock" rights or "stock appreciation rights" or the repurchase of outstanding shares of Common Stock, Convertible Securities or Stock Purchase Rights for a purchase price exceeding the fair market value thereof), then, in each such case, the Majority Warrant Holders may select an independent investment banking firm of nationally recognized standing and reasonably acceptable to the Company to make a determination as to the adjustment, if any, required to be made on a basis consistent with the essential intent and principles established herein as a result of such event in order to preserve the purchase rights represented by the Warrants. If the investment bank selected by the Majority Warrant Holders is not reasonably acceptable to the Company, and the Company and the Majority Warrant Holders cannot agree on a mutually acceptable investment bank, then the Company and the Majority Warrant Holders shall each choose one such investment bank and the respective chosen firms shall jointly select a third investment bank, which shall make the determination. The Company shall pay the costs and fees of each such investment bank (including any such investment bank selected by the Majority Warrant Holders), and the decision of the investment bank making such determination shall be final and binding on the Company and all affected holders of Warrants or Warrant Stock. Promptly after receipt of the opinion of such investment bank as to any such required adjustments, the Company shall take any actions necessary to implement same. 4.8. Other Provisions Applicable to Adjustments Under this Section. The following provisions shall be applicable to the adjustments provided for pursuant to this Section 4: (a) When Adjustments To Be Made. The adjustments required by this Section 4 shall be made whenever and as often as any specified event requiring such an adjustment shall occur. For the purpose of any such adjustment, any specified event shall be deemed to have occurred at the close of business on the date of its occurrence. -24- 29 (b) Record Date. In case the Company shall take a record of the holders of the Common Stock for the purpose of entitling them (i) to receive a dividend or other distribution payable in Common Stock, Convertible Securities or Stock Purchase Rights or (ii) to subscribe for or purchase Common Stock, Convertible Securities or Stock Purchase Rights, then all references in this Section 4 to the date of the issuance or sale of such shares of Common Stock, Convertible Securities or Stock Purchase Rights shall be deemed to be references to such record date. (c) Fractional Interests. In computing adjustments under this Section 4, fractional interests in Common Stock shall be taken into account to the nearest 1/100th of a share. (d) When Adjustment Not Required. If the Company shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend or distribution to which the provisions of Section 4.1 would apply, but shall, thereafter and before the distribution to stockholders thereof, legally abandon its plan to pay or deliver such dividend or distribution, then thereafter no adjustment shall be required by reason of the taking of such record and any such adjustment previously made in respect thereof shall be rescinded and annulled. (e) Maximum Exercise Price. Except as provided in Section 4.1 above, at no time shall the Exercise Price per share of Common Stock exceed the amount set forth in the first paragraph of the preamble of this Warrant. (f) Certain Limitations. Notwithstanding anything herein to the contrary, the Company agrees not to enter into any transaction that, by reason of any adjustment under Section 4.1, 4.2 or 4.3 above, would cause the Exercise Price to be less than the par value of the Common Stock, if any, unless the Company first reduces the par value of the Common Stock to be less than the Exercise Price that would result from such transaction. (g) Notice of Adjustments. Whenever the number of shares of Common Stock for which this Warrant is -25- 30 exercisable or the Exercise Price shall be adjusted pursuant to this Section 4, the Company shall forthwith prepare a certificate to be executed by the President or chief financial officer of the Company setting forth, in reasonable detail, the event requiring the adjustment and the method by which such adjustment was calculated, specifying the number of shares of Common Stock for which this Warrant is exercisable and (if such adjustment was made pursuant to Section 4.5) describing the number and kind of any other shares of stock or Other Property for which this Warrant is exercisable, and any related change in the Exercise Price, after giving effect to such adjustment or change. The Company shall promptly cause a signed copy of such certificate to be delivered to each Holder in accordance with Section 15.2. The Company shall keep at its principal office or at the Designated Office, if different, copies of all such certificates and cause the same to be available for inspection at said office during normal business hours by any Holder or any prospective transferee of a Warrant designated by a Holder thereof. (h) Independent Application. Except as otherwise provided herein, all subsections of this Section 4 are intended to operate independently of one another (but without duplication). If an event occurs that requires the application of more than one subsection, all applicable subsections shall be given independent effect without duplication. 5. NO IMPAIRMENT The Company shall not by any action, including, without limitation, amending its charter documents or through any reorganization, reclassification, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other similar voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be -26- 31 necessary or reasonably appropriate to protect the rights of the Holder against impairment. Without limiting the generality of the foregoing, the Company shall take all such action as may be necessary or reasonably 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, free and clear of all Liens, and shall use all commercially reasonably efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof as may be necessary to enable the Company to perform its obligations under this Warrant. 6. RESERVATION AND AUTHORIZATION OF COMMON STOCK From and after the Original Issue Date, the Company shall at all times reserve and keep available for issuance upon the exercise of the Warrants such number of its authorized but unissued shares of Common Stock as will be sufficient to permit the exercise in full of all outstanding Warrants. All shares of Common Stock issuable pursuant to the terms hereof, when issued upon exercise of this Warrant with payment therefor in accordance with the terms hereof, shall be duly and validly issued and fully paid and nonassessable, not subject to preemptive rights and shall be free and clear of all Liens. 7. NOTICE OF CORPORATE ACTIONS; TAKING OF RECORD; TRANSFER BOOKS 7.1. Notices of Corporate Actions. In the event of: (a) any capital reorganization of the Company, any reclassification or recapitalization of the capital stock of the Company or any consolidation or merger involving the Company and any other Person or any transfer or other disposition of all or substantially all the assets of the Company to another Person or (b) any amendment of the Certificate of Incorporation of the Company, the Company shall mail to each Holder of a Warrant in accordance with the provisions of Section 14.2 hereof a notice specifying the date or expected date on which any such reorganization, reclassification, recapitalization, consolidation, merger, transfer or disposition is to take place, the time, if any such time is to be fixed, as of which the holders of record of Common Stock shall be entitled to exchange their shares of Common Stock for the securities or Other Property deliverable upon such reorganization, reclassification, recapitalization, consolidation, merger, transfer or disposition, -27- 32 and a description in reasonable detail of the transaction. Such notice shall be mailed to the extent practicable at least thirty, but not more than ninety, days prior to the date therein specified; provided, that, in no event shall the Company be required to give the Holders notice of material non-public information prior to the time such information is made available to the holders of its Common Stock. In the event that the Company at any time sends any other notice to the holders of its Common Stock, it shall concurrently send a copy of such notice to each Holder of a Warrant. 7.2 Closing of Transfer Books. The Company shall not at any time, except upon dissolution, liquidation or winding up of the Company, close its stock transfer books or Warrant transfer books so as to result in preventing or delaying the exercise or transfer of any Warrant. 8. TRANSFER RESTRICTIONS The Holder, by acceptance of this Warrant, agrees to be bound by the provisions of this Section 8. 8.1. Restrictions on Transfers. Neither this Warrant nor any shares of Restricted Common Stock issued upon the exercise hereof shall be Transferred other than pursuant to an effective registration statement under the Securities Act or an exemption from the registration provisions thereof. No Transfer of this Warrant or any such shares of Restricted Stock, other than pursuant to such an effective registration statement, shall be valid or effective unless (a) the holder of the securities proposed to be transferred shall have delivered to the Company either a no-action letter from the Commission or an Opinion of Counsel to the effect that such proposed Transfer is exempt from the registration requirements of the Securities Act or (b) such Transfer is being made pursuant to Rule 144 or Rule 144A under the Securities Act and such holder shall have delivered to the Company a certificate setting forth the basis for applying such Rule to the proposed Transfer. Each certificate, if any, evidencing such shares of Restricted Common Stock issued upon any such Transfer, other than in a public offering pursuant to an effective registration statement, shall bear the restrictive legend set forth in Section 8.2(a), and each Warrant issued upon such Transfer shall bear the restrictive legend set forth in -28- 33 Section 8.2(b), unless the Holder delivers to the Company an Opinion of Counsel to the effect that such legend is not required for the purposes of compliance with the Securities Act. Holders of the Warrants or the Restricted Common Stock, as the case may be, shall not be entitled to Transfer such Warrants or such Restricted Common Stock except in accordance with this Section 8.1. 8.2. Restrictive Legends. (a) Except as otherwise provided in this Section 8, each certificate for Warrant Stock initially issued upon the exercise of this Warrant, and each certificate for Warrant Stock issued to any subsequent transferee of any such certificate, shall be stamped or otherwise imprinted with two legends in substantially the following forms: "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAW. NO TRANSFER OF THE SHARES REPRESENTED BY THIS CERTIFICATE SHALL BE VALID OR EFFECTIVE UNLESS (A) SUCH TRANSFER IS MADE PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR (B) THE HOLDER OF THE SECURITIES PROPOSED TO BE TRANSFERRED SHALL HAVE DELIVERED TO THE COMPANY AN OPINION OF COUNSEL EXPERIENCED IN SECURITIES MATTERS AND REASONABLY ACCEPTABLE TO THE COMPANY TO THE EFFECT THAT SUCH PROPOSED TRANSFER IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE ACT OR (C) SUCH TRANSFER IS PURSUANT TO RULE 144 OR RULE 144A UNDER THE ACT AND SUCH HOLDER(S) SHALL HAVE DELIVERED TO THE COMPANY A CERTIFICATE SETTING FORTH THE BASIS FOR APPLYING SUCH RULE TO THE PROPOSED TRANSFER." "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE ENTITLED TO THE BENEFIT OF AND ARE SUBJECT TO CERTAIN OBLIGATIONS SET FORTH IN THE WARRANT PURSUANT TO THE EXERCISE OF WHICH SUCH SHARES WERE ISSUED. A COPY OF SUCH WARRANT IS AVAILABLE AT THE EXECUTIVE OFFICES OF THE COMPANY." (b) Except as otherwise provided in this Section 8, each Warrant shall be stamped or otherwise imprinted with a legend in substantially the following form: -29- 34 "NEITHER THE WARRANTS REPRESENTED BY THIS CERTIFICATE NOR ANY OF THE SECURITIES ISSUABLE UPON EXERCISE THEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAW. NO TRANSFER OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE OR OF THE STOCK ISSUABLE UPON EXERCISE THEREOF SHALL BE VALID OR EFFECTIVE UNLESS (A) SUCH TRANSFER IS MADE PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR (B) THE HOLDER OF THE SECURITIES PROPOSED TO BE TRANSFERRED SHALL HAVE DELIVERED TO THE COMPANY EITHER A NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION OR AN OPINION OF COUNSEL EXPERIENCED IN SECURITIES MATTERS AND REASONABLY ACCEPTABLE TO THE COMPANY TO THE EFFECT THAT SUCH PROPOSED TRANSFER IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE ACT OR (C) SUCH TRANSFER IS PURSUANT TO RULE 144 OR RULE 144A UNDER THE ACT AND SUCH HOLDER SHALL HAVE DELIVERED TO THE COMPANY A CERTIFICATE SETTING FORTH THE BASIS FOR APPLYING SUCH RULE TO THE PROPOSED TRANSFER." 8.3. Termination of Securities Law Restrictions. Not withstanding the foregoing provisions of this Section 8, the restrictions imposed by Section 8.1(b) upon the transferability of the Warrants and the Restricted Common Stock and the legend requirements of Section 8.2 shall terminate as to any particular Warrant or shares of Restricted Common Stock when the Company shall have received from the Holder thereof an Opinion of Counsel to the effect that such legend is not required in order to ensure compliance with the Securities Act. Whenever the restrictions imposed by Sections 8.1(b) and 8.2 shall terminate as to this Warrant, as hereinabove provided, the Holder hereof shall be entitled to receive from the Company, at the expense of the Company, a new Warrant bearing the following legend in place of the restrictive legend set forth hereon: "THE RESTRICTIONS ON TRANSFERABILITY OF THE WITHIN WARRANT CONTAINED IN SECTIONS 8.1(b) AND 8.2 HEREOF TERMINATED ON ______________, 19__, AND ARE OF NO FURTHER FORCE AND EFFECT." All Warrants issued upon registration of transfer, division or combination of, or in substitution for, any Warrant or Warrants entitled to bear such legend shall have a similar legend endorsed -30- 35 thereon. Wherever the restrictions imposed by this Section shall terminate as to any share of Restricted Common Stock, as hereinabove provided, the Holder thereof shall be entitled to receive from the Company, at the Company's expense, a new certificate representing such Common Stock not bearing the restrictive legend set forth in Section 8.2(a). 9. REGISTRATION RIGHTS 9.1. Certain Definitions. For the purposes of this Section 9: (a) The Holders of Warrants and the Series A Warrants and the holders of Warrant Stock (as defined in Section 9.1(b)) are collectively referred to as "WS Holders". (b) "Warrant Stock" shall deemed to include (i) the shares of Common Stock issued, issuable or both (as the context may require) upon the exercise of Warrants and the Series A Warrants until such time as such shares of Common Stock have either been (a) Transferred in a public offering pursuant to a registration statement filed under the Securities Act or (b) Transferred in a transaction exempt from the registration and prospectus delivery requirements of the Securities Act under Section 4(1) thereof with all transfer restrictions and restrictive legends with respect to such Common Stock being removed in connection with such transaction,(ii) any other securities issued as (or issuable upon the conversion or exercise of any warrant, right or other security which is issued as) a dividend or other distribution with respect to, or in exchange by the Company generally for, or in replacement by the Company generally of, any shares of Warrant Stock and (iii) any securities issued in exchange for any such Warrant Stock in any merger or reorganization of the Company, but in the cases of clauses (ii) and (iii) only so long as such securities have not been registered and Transferred pursuant to the Securities Act or Transferred in a transaction exempt from the registration and prospectus delivery requirements of the Securities Act under Section 4(1) thereof so that all transfer restrictions and restrictive legends with respect to such securities are removed in connection with such Transfer. -31- 36 (c) Each WS Holder shall be deemed to "hold", as of any specified date, the aggregate of (i) the number of shares of Warrant Stock held by such WS Holder as of such date plus (ii) the number of shares of Warrant Stock issuable upon exercise of any Warrants and Series A Warrants held by such WS Holder as of such date. (d) The total number of shares of Warrant Stock deemed "outstanding" as of a specified date will be equal to (i) the total number of shares of Warrant Stock Outstanding as of such date plus (ii) the number of shares of Warrant Stock issuable upon exercise of all outstanding Warrants and Series A Warrants as of such date. (e) "Registrable Securities" shall mean any Warrants, any Series A Warrants and/or any shares of Warrant Stock. 9.2. Demand Registration. (a) In the event the Company receives at any time after August 31, 1997 a written request from one or more WS Holders holding in the aggregate at least seventy-six percent of the number of shares of Warrant Stock then outstanding (the "Demanding Holders") that the Company file a registration statement under the Securities Act for the sale or other disposition of at least a majority of the Registrable Securities (a "Demand Registration"), the Company shall promptly give written notice of such request to each other WS Holder and each such WS Holder may elect, by giving written notice of such election to the Company within ten (10) Business Days after receipt of the Company's notice, to have some or all of the Registrable Securities held by it included in such registration. At the option of the Demanding Holders, such request may specify that the requested registration will be for an offering on a delayed or continual basis pursuant to Rule 415 under the Securities Act (a "Shelf Registration"). (b) Following receipt of such a request for a Demand Registration, the Company shall: (1) File the requested registration statement with the Commission as promptly as practicable, and shall use all commercially reasonable efforts to have the registration declared effective under the Securities Act as soon as reasonably practicable, in each instance giving due -32- 37 regard to the need to prepare and file current financial statements, conduct due diligence and complete other actions that are reasonably necessary to effect a registered public offering; and (2) Use all commercially reasonable efforts to keep the such registration statement Continuously Effective (x) if a Demand Registration, for up to 90 days or until such earlier date as of which all Registrable Securities covered by such registration statement shall have been disposed of in the manner described in the registration statement, and (y) if a Shelf Registration, for 270 days. Notwithstanding the foregoing, if for any reason the effectiveness of a Demand Registration is suspended or postponed as permitted by Subsection (d) below, the foregoing period shall be extended by the aggregate number of days of such suspension or postponement. (c) The Company shall not be required to effect a registration of Registrable Securities pursuant to a Demand Registration on more than one occasion. For purposes of this Subsection (c), registration shall not be deemed to have been effected (i) unless a registration statement with respect thereto has become effective, (ii) if after such registration statement has become effective, such registration or the related offer, sale or distribution of Registrable Securities thereunder is interfered with by any stop order, injunction or other order or requirement of the Commission or other governmental agency or court for any reason not attributable to the Selling Holders and such interference is not thereafter eliminated or (iii) if the conditions to closing specified in the underwriting agreement, if any, entered into in connection with such registration are not satisfied or waived, other than by reason of a failure on the part of the Selling Holders. If the Company shall have complied with its obligations under this Section 9, a right to demand a registration pursuant to this Section 9.2 shall be deemed to have been satisfied (i) if a Demand Registration other than a Shelf Registration, upon the earlier of (x) the date as of which all of the Registrable Securities included therein shall have been disposed of pursuant to the registration statement and (y) the date as of which such Demand Registration shall have been Continuously Effective for a period of 90 days, and (ii) if a Shelf Registration, upon the effective date of a Shelf Registration, provided no stop order or similar order, or -33- 38 proceedings for such an order, is thereafter entered or initiated. (d) The Company shall be entitled to postpone for up to 90 days the filing of any Demand Registration statement otherwise required to be prepared and filed pursuant to this Section 9.2 or suspend any such Demand Registration for up to 90 days, if the Board of Directors of the Company determines, in its good faith reasonable judgment that such registration and the Transfer of Warrant Stock contemplated thereby would materially interfere with, or require premature disclosure of, any financing, acquisition or reorganization involving the Company or any of its wholly owned subsidiaries and the Company promptly gives the Demanding Holders notice of such determination; provided, however, that the Company shall not have postponed pursuant to this Subsection (d) the filing of any other Demand Registration statement otherwise required to be prepared and filed pursuant to this Section 9.2, or suspended any such Demand Registration, during the 12 month period ended on the date of the relevant request pursuant to Subsection (a) above and provided further, that the Expiration Date shall be extended by the period of any such postponement or suspension. (e) A registration pursuant to this Section 9.2 shall be on such appropriate registration form of the Commission available to the Company as shall (i) be selected by the Company and be reasonably acceptable to the Majority Selling Holders and (ii) permit the disposition of the Warrant Stock in accordance with the intended method or methods of disposition specified in the request made pursuant to Subsection (a) above. If any registration pursuant to this Section 9.2 involves an underwritten offering (whether on a "firm", "best efforts" or "all reasonable efforts" basis or otherwise), or an agented offering, the Majority Selling Holders shall have the right to select the underwriter or underwriters and manager or managers to administer such underwritten offering or the placement agent or agents for such agented offering from among the entities listed in Schedule B hereto (or any successors of any such entities), it being understood that the Majority Selling Holders shall use commercially reasonable efforts to select one or more of the first three listed entities subject to arriving at reasonably acceptable terms and conditions for the offering. -34- 39 (f) The Company may elect to include shares of Common Stock to be sold for its account in any such Demand Registration (including a Shelf Registration); provided, however, if the managing underwriter shall advise the Demanding Holders in writing (with a copy to the Company) that, in its opinion, the number of shares of Common Stock requested to be included in such Demand Registration would adversely affect such offering or the price to be realized therefor, or the timing thereof, then the number of shares proposed to be included in such Demand Registration by the Company shall be reduced, to such number that the Demanding Holders are advised can be sold without such effect in such Demand Registration. 9.3. Piggyback Registration. (a) If at any time the Company proposes to register (including for this purpose a registration effected by the Company for shareholders of the Company other than the WS Holders) equity securities under the Securities Act in connection with the public offering solely for cash on Form S-1, S-2 or S-3 (or any replacement or successor forms), the Company shall promptly give each WS Holder written notice of such registration (a "Piggyback Registration"). Upon the written request of each WS Holder given within 20 days following the date of such notice, the Company shall cause to be included in such registration statement and use its best efforts to be registered under the Securities Act all the Registrable Securities that each such WS Holder shall have requested to be registered. The Company shall have the absolute right to withdraw or cease to prepare or file any registration statement for any offering referred to in this Section 9.3 without any obligation or liability to any WS Holder. (b) If the managing underwriter shall advise the Company in writing (with a copy to each Selling Holder) that, in its opinion, the amount of Registrable Securities requested to be included in such registration would materially adversely affect such offering, or the timing thereof, then the Company will include in such registration, to the extent of the amount and class which the Company is so advised can be sold without such material adverse effect in such offering: first, all securities proposed to be sold by the Company for its own account; and second, the Warrant Stock requested to be included in such registration by WS Holders and all other securities requested to be included in such registration by Persons other than the Company and WS Holders, the securities covered by this clause -35- 40 second to be included pro rata based on the estimated gross proceeds from the sale thereof. (c) Each WS Holder shall be entitled to have its Registrable Securities included in an unlimited number of Piggyback Registrations pursuant to this Section 9.3. 9.4. Registration Procedures. Whenever required under Section 9.2 or Section 9.3 hereof to effect the registration of any Registrable Securities, the Company shall, as expeditiously as practicable: (a) Prepare and file with the Commission a registration statement with respect to such Warrant Stock and use the Company's best efforts to cause such registration statement to become effective; provided, however, that before filing a registration statement or prospectus or any amendments or supplements thereto, including documents incorporated by reference after the initial filing of the registration statement and prior to effectiveness thereof, the Company shall furnish to one firm of counsel for the Selling Holders (selected by Majority Selling Holders) copies of all such documents in the form substantially as proposed to be filed with the Commission at least four Business Days prior to filing for review and comment by such counsel, which opportunity to comment shall include an absolute right to control or contest disclosure if the applicable Selling Holder reasonably believes that it may be subject to controlling person liability under applicable securities laws with respect thereto. (b) Prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Securities Act and rules thereunder with respect to the disposition of all securities covered by such registration statement. If the registration is for an underwritten offering, the Company shall amend the registration statement or supplement the prospectus whenever required by the terms of the underwriting agreement entered into pursuant to Section 9.4(e). Subject to Rule 415 under the Securities Act, if the registration statement is a Shelf Registration, the Company shall amend the registration -36- 41 statement or supplement the prospectus so that it will remain current and in compliance with the requirements of the Securities Act for 270 days or after its effective date, and if during such period any event or development occurs as a result of which the registration statement or prospectus contains a misstatement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading, the Company shall promptly notify each Selling Holder, amend the registration statement or supplement the prospectus so that each will thereafter comply with the Securities Act and furnish to each Selling Holder of Registrable Securities such amended or supplemented prospectus, which each such Holder shall thereafter use in the Transfer of Warrant Stock covered by such registration statement. Pending such amendment or supplement each such Selling Holder shall cease making offers or Transfers of Registerable Securities pursuant to the prior prospectus. In the event that any Registrable Securities included in a registration statement subject to, or required by, this Warrant remain unsold at the end of the period during which the Company is obligated to use its best efforts to maintain the effectiveness of such registration statement, the Company may file a post-effective amendment to the registration statement for the purpose of removing such Registrable Securities from registered status. (c) Furnish to each Selling Holder of Registrable Securities, without charge, such number of copies of the registration statement, any pre-effective or post-effective amendment thereto, the prospectus, including each preliminary prospectus and any amendments or supplements thereto, in each case in conformity with the requirements of the Securities Act and the rules thereunder, and such other related documents as any such Selling Holder may reasonably request in order to facilitate the disposition of Registrable Securities owned by such Selling Holder. (d) Use all commercially reasonable efforts (i) to register and qualify the securities covered by such registration statement under such other securities or Blue Sky laws of such states or jurisdictions as shall be reasonably requested by the managing underwriter (as applicable, or if inapplicable, the Majority Selling -37- 42 Holders), and (ii) to obtain the withdrawal of any order suspending the effectiveness of a registration statement, or the lifting of any suspension of the qualification (or exemption from qualification) of the offer and transfer of any of the Registrable Securities in any jurisdiction, at the earliest possible moment; provided, however, that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions. (e) In the event of any underwritten or agented offering, enter into and perform the Company's obligations under an underwriting or agency agreement (including indemnification and contribution obligations of underwriters or agents), in usual and customary form, with the managing underwriter or underwriters of or agents for such offering. The Company shall also cooperate with the Majority Selling Holders and the managing underwriter for such offering in the marketing of the Warrant Stock, including making available the Company's officers, accountants, counsel, premises, books and records for such purpose, but the Company shall not be required to incur any material out-of-pocket expense pursuant to this sentence. (f) Promptly notify each Selling Holder of any stop order issued or threatened to be issued by the Commission in connection therewith (and take all reasonable actions required to prevent the entry of such stop order or to remove it if entered. (g) Make generally available to the Company's security holders copies of all periodic reports, proxy statements, and other information referred to in Section 9.9(a) and an earnings statement satisfying the provisions of Section 11(a) of the Securities Act no later than 90 days following the end of the 12-month period beginning with the first month of the Company's first fiscal quarter commencing after the effective date of each registration statement filed pursuant to this Section 9. (h) Make available for inspection by any Selling Holder, any underwriter participating in such offering and the representatives of such Selling Holder and underwriter -38- 43 (but not more than one firm of counsel to such Selling Holders), all financial and other information as shall be reasonably requested by them, and provide the Selling Holder, any underwriter participating in such offering and the representatives of such Selling Holder and underwriter the opportunity to discuss the business affairs of the Company with its principal executives and independent public accountants who have certified the audited financial statements included in such registration statement, in each case all as necessary to enable them to exercise their due diligence responsibility under the Securities Act; provided, however, that information that the Company determines, in good faith, to be confidential and which the Company advises such Person in writing, is confidential shall not be disclosed unless such Person signs a confidentiality agreement reasonably satisfactory to the Company or the related Selling Holder of Registrable Securities agrees to be responsible for such Person's breach of confidentiality on terms reasonably satisfactory to the Company. (i) Use the Company's best efforts to obtain a so-called "comfort letter" from its independent public accountants, and legal opinions of counsel to the Company, in customary form and covering such matters of the type customarily covered by such letters, and in a form that shall be reasonably satisfactory to the Majority Selling Holders. The Company shall furnish to each Selling Holder a signed counterpart of any such comfort letter or legal opinion. Delivery of any such opinion or comfort letter shall be subject to the recipient furnishing such written representations or acknowledgments as are customarily provided by selling shareholders who receive such comfort letters or opinions. (j) Provide and cause to be maintained a transfer agent and registrar for all Registrable Securities covered by such registration statement from and after a date not later than the effective date of such registration statement. (k) Use all reasonable efforts to cause the Registrable Securities covered by such registration statement (i) if the Common Stock is then listed on a securities exchange or included for quotation in a -39- 44 recognized trading market, to continue to be so listed or included for a reasonable period of time after the offering, and (ii) to be registered with or approved by such other United States or state governmental agencies or authorities as may be necessary by virtue of the business and operations of the Company to enable the Selling Holders of Registrable Securities to consummate the disposition of such Registrable Securities. (l) Use the Company's reasonable efforts to provide a CUSIP number for the Common Stock prior to the effective date of the first registration statement including Registrable Securities. (m) Take such other actions as are reasonably required in order to expedite or facilitate the disposition of Registrable Securities included in each such registration. 9.5. Selling Holders' Obligations. (a) It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Section 9 with respect to the Registrable Securities of any Selling Holder that such Selling Holder shall: (i) Furnish to the Company such information regarding such Selling Holder, the number of Registrable Securities owned by it, and the intended method of disposition of such securities as shall be required to effect the registration of such Selling Holder's Registrable Securities, and to cooperate with the Company in preparing such registration; and (ii) Agree to sell their Registrable Securities to the underwriters at the same price and on substantially the same terms and conditions as the Company or the other Persons on whose behalf the registration statement was being filed have agreed to sell their securities, and to execute the underwriting agreement agreed to by the Majority Selling Holders (in the case of a registration under Section 9.2) or the Company and the Majority Selling Holders (in the case of a registration under Section 9.3). (b) Each Selling Holder shall notify the Company of any sales of such Selling Holder's shares registered for sale pursuant to this Section 9; provided, however, it is -40- 45 understood that any failure so to notify theCompany shall not be deemed a default hereunder or to subject any Selling Holder to any claim for damages or expenses whatsoever. 9.6. Expenses of Registration. Expenses incurred in connection with registrations under this Section 9 shall be allocated and paid as follows: (a) With respect to each Demand Registration (including any Shelf Registration), the Company shall bear and pay all reasonable expenses incurred in connection with any registration, filing, or qualification of Registrable Securities with respect to such Demand Registration for each Selling Holder, including all registration, filing and NASD fees, all fees and expenses of complying with securities or blue sky laws, all word processing, duplicating and printing expenses, messenger and delivery expenses, the reasonable fees and disbursements of counsel for the Company, and of the Company's independent public accountants, including the expenses of "cold comfort" letters required by or incident to such performance and compliance, and the reasonable fees and disbursements of one firm of counsel for the Selling Holders of Registrable Securities (the "Registration Expenses"), but excluding underwriting discounts and commissions relating to Registrable Securities (which shall be paid on a pro rata basis by the Selling Holders) provided, however, that the Company shall not be required to pay for any expenses of any registration proceeding begun pursuant to Section 9.2 if the registration is subsequently withdrawn at the request of the Majority Selling Holders (in which case all Selling Holders shall bear such expense), unless WS Holders whose Registrable Securities constitutes a majority of the Registrable Securities then outstanding agree that such withdrawn registration shall constitute the exercise of their one demand registration under Section 9.2 hereof. The counsel for the Selling Holders shall be selected by Demanding Holders owning a majority of the Registrable Securities owned by Demanding Holders to be included in a Demand Registration and, in the case of a Piggyback Registration, by Selling Holders owning a majority of the Registrable Securities to be included in such registration; provided that in the case of a Piggyback Registration, the Selling Holders shall use one firm of counsel to represent all such holders and shall endeavor in -41- 46 good faith, with any other holders of securities to be included in such registration, to select one firm of counsel to represent all such selling securities holders. (b) The Company shall bear and pay all Registration Expenses incurred in connection with any Piggyback Registrations pursuant to Section 9.3 for each Selling Holder, but excluding underwriting discounts and commissions relating to Registrable Securities (which shall be paid on a pro rata basis by the Selling Holders of Registrable Securities). (c) Any failure of the Company to pay any Registration Expenses as required by this Section 9.6 shall not relieve the Company of its obligations under this Section 9. 9.7. Indemnification; Contribution. If any Registrable Securities are included in a registration statement under this Section 9: (a) To the extent permitted by applicable law, the Company shall indemnify and hold harmless each Selling Holder, each Person, if any, who controls such Selling Holder within the meaning of the Securities Act, and each officer, director, partner, and employee of such Selling Holder and such controlling Person, against any and all losses, claims, damages, liabilities and expenses (joint or several), including attorneys' fees and disbursements and expenses of investigation, incurred by such party pursuant to any actual or threatened action, suit, proceeding or investigation, or to which any of the foregoing Persons may become subject under the Securities Act, the Exchange Act or other federal or state laws, insofar as such losses, claims, damages, liabilities and expenses arise out of or are based upon any of the following statements, omissions or violations pursuant to a final non-appealable order (collectively a "Violation"): (i) any untrue statement or alleged untrue statement of a material fact contained in such registration statement, including any preliminary prospectus or final prospectus contained therein, or any amendments or supplements thereto; -42- 47 (ii) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading; or (iii) any violation or alleged violation by the Company of the Securities Act, the Exchange Act, any applicable state securities law or any rule or regulation promulgated under the Securities Act, the Exchange Act or any applicable state securities law; provided, however, that the indemnification required by this Section 9.7(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or expense if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld), nor shall the Company be liable in any such case for any such loss, claim, damage, liability or expense to the extent that it is determined by a court of competent jurisdiction by a final non-appealable order to have solely arisen out of or be based upon a Violation which occurred in reliance upon and in conformity with written information furnished to the Company by the indemnified party expressly for use in connection with such registration; provided, further, that the indemnity agreement contained in this Section 9.7(a) shall not apply to any underwriter to the extent that any such loss is based on or arises out of an untrue statement or alleged untrue statement of a material fact, or an omission or alleged omission to state a material fact, contained in or omitted from any preliminary prospectus if the final prospectus shall correct such untrue statement or alleged untrue statement, or such omission or alleged omission, and a copy of the final prospectus has not been sent or given to such person at or prior to the confirmation of sale to such person if such underwriter was under an obligation to deliver such final prospectus and failed to do so. The Company shall also indemnify underwriters, selling brokers, dealer managers and similar securities industry professionals participating in the distribution, their officers, directors, agents and employees and each person who controls such persons (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) to the same extent as provided above with respect to the indemnification of the Selling Holders. -43- 48 (b) To the extent permitted by applicable law, each Selling Holder shall indemnify and hold harmless the Company, each of its directors, each of its officers and employees, each Person, if any, who controls the Company within the meaning of the Securities Act, any other Selling Holder, any controlling Person of any such other Selling Holder and each officer, director, partner, and employee of such other Selling Holder and such controlling Person, against any and all losses, claims, damages, liabilities and expenses (joint and several), including attorneys' fees and disbursements and expenses of investigation, incurred by such party pursuant to any actual or threatened action, suit, proceeding or investigation, or to which any of the foregoing Persons may otherwise become subject under the Securities Act, the Exchange Act or other federal or state laws, insofar as such losses, claims, damages, liabilities and expenses are determined by a court of competent jurisdiction by a final non-appealable order to have solely arisen out of or be based upon a Violation that occurred in reliance upon and in conformity with written information furnished by such Selling Holder expressly for use in connection with such registration; provided, however, that (x) the indemnification required by this Section 9.7(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or expense if settlement is effected without the consent of the relevant Selling Holder of Registrable Securities, which consent shall not be unreasonably withheld, and (y) in no event shall the amount of any indemnity under this Section 9.7(b) exceed the net proceeds from the applicable offering received by such Selling Holder. (c) Promptly after receipt by an indemnified party under this Section 9.7 of notice of the commencement of any action, suit, proceeding, investigation or threat thereof made in writing for which such indemnified party may make a claim under this Section 9.7, such indemnified party shall deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party shall have the -44- 49 right to retain its own counsel, with the fees and disbursements and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding. The failure to deliver written notice to the indemnifying party within a reasonable time following the commencement of any such action, if prejudicial to its ability to defend such action, shall relieve such indemnifying party of any liability to the indemnified party under this Section 9.7 but shall not relieve the indemnifying party of any liability that it may have to any indemnified party otherwise than pursuant to this Section 9.7. Any reasonable fees and expenses incurred by the indemnified party (including any fees and expenses incurred in connection with investigating or preparing to defend such action or proceeding) shall be paid to the indemnified party, as incurred, within thirty (30) days of written notice thereof to the indemnifying party (regardless of whether it is ultimately determined that an indemnified party is not entitled to indemnification hereunder). Any such indemnified party shall have the right to employ separate counsel in any such action, claim or proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be the expenses of such indemnified party unless (i) the indemnifying party has agreed to pay such fees and expenses or (ii) the indemnifying party shall have failed to promptly assume the defense of such action, claim or proceeding or (iii) the named parties to any such action, claim or proceeding (including any impleaded parties) include both such indemnified party and the indemnifying party, and such indemnified party shall have been advised by counsel that there may be one or more legal defenses available to it which are different from or in addition to those available to the indemnifying party and that the assertion of such defenses would create a conflict of interest such that counsel employed by the indemnifying party could not faithfully represent the indemnified party (in which case, if such indemnified party notifies the indemnifying party in writing that it elects to employ separate counsel at the expense of the indemnifying party, the indemnifying party shall not have the right to assume the defense of such -45- 50 action, claim or proceeding on behalf of such indemnified party, it being understood, however, that the indemnifying party shall not, in connection with any one such action, claim or proceeding or separate but substantially similar or related actions, claims or proceedings in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the reasonable fees and expenses of more than one separate firm of attorneys (together with appropriate local counsel) at any time for all such indemnified parties, unless in the reasonable judgment of such indemnified party a conflict of interest may exist between such indemnified party and any other of such indemnified parties with respect to such action, claim or proceeding, in which event the indemnifying party shall be obligated to pay the fees and expenses of such additional counsel or counsels). No indemnifying party shall be liable to an indemnified party for any settlement of any action, proceeding or claim without the written consent of the indemnifying party, which consent shall not be unreasonably withheld. (d) If the indemnification required by this Section 9.7 from the indemnifying party is unavailable to an indemnified party hereunder in respect of any losses, claims, damages, liabilities or expenses referred to in this Section 9.7: (i) The indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities or expenses in such proportion as is appropriate to reflect the relative fault of the indemnifying party and indemnified parties in connection with the actions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative fault of such indemnifying party and indemnified parties shall be determined by reference to, among other things, whether any Violation has been committed by, or relates to information supplied by, such indemnifying party or indemnified parties, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such -46- 51 Violation. The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and expenses referred to above shall be deemed to include, subject to the limitations set forth in Section 9.7(a) and Section 9.7(b), any reasonable legal or other fees or expenses reasonably incurred by such party in connection with any investigation or proceeding. (ii) The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 9.7(d) were determined by pro rata allocation or by any other method of allocation which does not take into account the equitable considerations referred to in Section 9.7(d)(i) above. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. (e) If indemnification is available under this Section 9.7, the indemnifying parties shall indemnify each indemnified party to the full extent provided in this Section 9.7 without regard to the relative fault of such indemnifying party or indemnified party or any other equitable consideration referred to in Section 9.7(d) above. (f) The indemnification required by this Section 9.7 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or expense, loss, damage or liability is incurred. In the event that it shall be subsequently determined that the recipient of any such periodic payment shall not be entitled to indemnification hereunder, such recipient promptly shall repay such payments, together with interest thereon at the Agreed Rate from the date of original receipt to the date of repayment. (g) The obligations of the Company and the Selling Holders of Registrable Securities under this Section 9.7 shall survive the completion of any offering of Registrable Securities pursuant to a registration statement under this Section 9, and otherwise. -47- 52 9.8. Holdback. Each WS Holder entitled pursuant to this Section 9 to have Registrable Securities included in a registration statement prepared pursuant to this Section 9, if so requested by the managing underwriter in connection with an offering of any Registrable Securities, shall not effect any public sale or distribution of shares of Common Stock, Convertible Securities or Stock Purchase Rights (excluding any sale pursuant to Rule 144 or Rule 144A under the Securities Act and any sale as part of such underwritten or agented registration), during the 5-day period prior to, and during the 45-day period beginning on, the date such registration statement is declared effective under the Securities Act by the Commission, provided that such WS Holder is timely notified of such effective date in writing by the Company or such managing underwriter. 9.9. Additional Covenants of the Company. The Company hereby agrees and covenants as follows: (a) The Company shall file as and when applicable, on a timely basis, all reports required to be filed by it under the Exchange Act. If the Company is not required to file reports pursuant to the Exchange Act, upon the request of any WS Holder, the Company shall make publicly available the information specified in subparagraph (c)(2) of Rule 144 of the Securities Act, and take such further action as may be reasonably required from time to time and as may be within the reasonable control of the Company, to enable the WS Holders to Transfer Warrants or Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by Rule 144 under the Securities Act or any similar rule or regulation hereafter adopted by the Commission. In addition, promptly upon the request of any WS Holder, the Company shall provide such WS Holder with such publicly available financial statements, reports and other information as may be required to permit such WS Holder to Transfer shares of Registrable Securities to Qualified Institutional Investors pursuant to Rule 144A of the Securities Act. (b) The Company shall not, and shall not permit its majority owned subsidiaries to, effect any public sale or distribution of any shares of Common Stock, Convertible Securities or Stock Purchase Rights during the 5 Business Days prior to, and during the 90-day period beginning on, -48- 53 the commencement of a public distribution of Registrable Securities pursuant to any registration statement prepared pursuant to this Section 9 (other than by the Company pursuant to such registration if the registration is pursuant to Section 9.3 or by the Company pursuant to any dividend reinvestment plan offered by it to its stockholders). The Company shall not effect any registration of its securities (other than on Form S-4, Form S-8, or any successor forms to such forms or pursuant to such other registration rights agreements as may be approved in writing by the Majority Selling Holders) or effect any public or private sale or distribution of any of its securities, including a sale pursuant to Regulation D under the Securities Act, whether on its own behalf or at the request of any holder or holders of such securities from the date of a request for a Demand Registration pursuant to Section 9.2 until 90 days following the effective date of such Demand Registration statement, unless the Company shall have previously notified in writing all Selling Holders of the Company's desire to do so, and the Majority Selling Holders or the managing underwriter, if any, shall have consented thereto in writing. (c) Any agreement entered into on or after August 31, 1997 pursuant to which the Company or any of its majority owned subsidiaries issues or agrees to issue any Common Stock (including, without limitation, any employee stock option, stock purchase agreement, merger agreement or other agreement) shall contain a provision whereby any holder receiving such Common Stock who will hold more than one percent (1%) of the amount of such Common Stock then outstanding shall agree not to effect any public sale or distribution of any such Common Stock during the periods described in the second sentence of Section 9.9(b), in each case including a sale pursuant to Rule 144 under the Securities Act (unless such Person is prevented by applicable statute or regulation from entering into such an agreement). (d) Subject to Section 13, the Company shall not, directly or indirectly, (x) enter into any merger, consolidation or reorganization in which the Company shall not be the surviving corporation or (y) Transfer or agree to Transfer all or substantially all the Company's assets, -49- 54 unless prior to such merger, consolidation, reorganization or asset Transfer, the surviving corporation or the Transferee, respectively, shall have agreed in writing to assume the obligations of the Company under this Agreement, and for that purpose references hereunder to "Registrable Securities" shall be deemed to include the securities which the WS Holders would be entitled to receive in exchange for Registrable Securities pursuant to any such merger, consolidation or reorganization. 10. LOSS OR MUTILATION Upon receipt by the Company from any Holder of evidence reasonably satisfactory to it of the ownership of and the loss, theft, destruction or mutilation of this Warrant and an indemnity reasonably satisfactory to it (it being understood that the written indemnification agreement of or affidavit of loss of Fleet National Bank shall be a sufficient indemnity) and, in case of mutilation, upon surrender and cancellation hereof, the Company will execute and deliver in lieu hereof a new Warrant of like tenor to such Holder; provided, however, in the case of mutilation, no indemnity shall be required if this Warrant in identifiable form is surrendered to the Company for cancellation. 11. OFFICE OF THE COMPANY As long as any of the Warrants remain outstanding, the Company shall maintain an office or agency, which may be the principal executive offices of the Company (the "Designated Office"), where the Warrants may be presented for exercise, registration of transfer, division or combination as provided in this Warrant. Such Designated Office shall initially be the office of the Company at Cedar Rapids, Iowa. The Company may from time to time change the Designated Office to another office of the Company or its agent within the United States by notice given to all registered holders of Warrants at least ten Business Days prior to the effective date of such change. 12. FINANCIAL AND BUSINESS INFORMATION Until the Expiration Date, the Company shall deliver to each Holder of Warrants or of Warrant Stock one copy of each of the following items: -50- 55 (i) promptly after filing thereof, copies of all regular and periodic reports, proxy statements (other than preliminary) and registration statements (other than registration statements on Forms S-3 (relating to debt securities) and S-8) which the Company may file with the Securities and Exchange Commission or any governmental agency substituted therefor. (ii) promptly upon their becoming available, copies of all financial statements, reports, notices and proxy statements sent or made available by the Company to the holders of any class of its securities generally or by any Subsidiary of the Company to the holders of any class of its securities generally; and (iii) with reasonable promptness, such other public information relating to the Company and its Subsidiaries as the Holder may, from time to time, reasonably request. 13. REPURCHASE BY THE COMPANY OF WARRANTS The Company shall have the right (the "Call"), upon written notice (the "Call Notice") to the Holders of all outstanding Warrants given at any time on or after the date of the occurrence of the Triggering Event and before August 31, 1997, to repurchase on the date specified in the notice from each Holder of a Warrant all of such Warrant for an amount equal to the result (rounded to the nearest cent) obtained by multiplying One Dollar ($1.00) by a fraction, the numerator of which shall be the aggregate number of shares for which this Warrant may be exercised and the denominator of which shall be the aggregate number of shares for which all outstanding Series B Warrants may be exercised, and in all events not more than One Dollar ($1.00) for all Series B Warrants. On the date of any repurchase of this Warrant pursuant to this Section 13, the Holder shall assign to the Company such Warrant without any representation or warranty (except as to title and the absence of Liens), by the surrender of this Warrant at the Designated Office against payment of the repurchase price therefor. 14. MISCELLANEOUS -51- 56 14.1. Nonwaiver. No course of dealing or any delay or failure to exercise any right hereunder on the part of the Company or the Holder shall operate as a waiver of such right or otherwise prejudice the rights, powers or remedies of such Person. 14.2. Notice Generally. Any notice, demand, request, consent, approval, declaration, delivery or communication hereunder to be made pursuant to the provisions of this Warrant shall be sufficiently given or made if in writing and either delivered in person with receipt acknowledged or sent by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: (a) if to any Holder of this Warrant or of Warrant Stock issued upon the exercise hereof, at its last known address appearing on the books of the Company maintained for such purpose; (b) if to the Company, at its Designated Office; or at such other address as may be substituted by notice given as herein provided. The giving of any notice required hereunder may be waived in writing by the party entitled to receive such notice. Every notice, demand, request, consent, approval, declaration, delivery or other communication hereunder shall be deemed to have been duly given or served on the date on which personally delivered, with receipt acknowledged, or three Business Days after the same shall have been deposited in the United States mail, or one Business Day after the same shall have been delivered to Federal Express or another overnight courier service. 14.3. Indemnification. If the Company fails to make, when due, any payments provided for in this Warrant, the Company shall pay to the Holder hereof (a) interest at the Agreed Rate on any amounts due and owing to such Holder from the date due until the date of payment and (b) such further amounts as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys' fees and expenses incurred by such Holder in collecting any amounts due hereunder. The Company shall indemnify, save and hold harmless the Holder hereof and the Holders of any Warrant Stock issued upon the exercise hereof from and against any and all liability, loss, cost, damage, reasonable -52- 57 attorneys' and accountants' fees and expenses, court costs and all other out-of-pocket expenses incurred in connection with or arising from a Company Default. This indemnification provision shall be in addition to the rights of such Holder or Holders to bring an action against the Company for breach of contract based on such Company Default. 14.4. Limitation of Liability. No provision hereof, in the absence of affirmative action by the Holder to purchase shares of Common Stock, and no enumeration herein of the rights or privileges of the Holder hereof, shall give rise to any liability of such Holder to pay the Exercise Price for any Warrant Stock other than pursuant to an exercise of this Warrant or any liability as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company. 14.5. Remedies. Each Holder of Warrants and/or War rant Stock, in addition to being entitled to exercise its rights granted by law, including recovery of damages, shall be entitled to specific performance of its rights provided under this Warrant. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees, in an action for specific performance, to waive the defense that a remedy at law would be adequate. 14.6. Successors and Assigns. Subject to the provi sions of Sections 3.1, 8.1 and 8.2, this Warrant and the rights evidenced hereby shall inure to the benefit of and be binding upon the successors of the Company and the permitted successors and assigns of the Holder hereof. The provisions of this Warrant are intended to be for the benefit of all Holders from time to time of this Warrant and, in the case of Section 9, all Holders of shares of Warrant Stock issued upon the exercise hereof (including transferees), and shall be enforceable by any such Holder. 14.7. Amendment. This Warrant and all other Warrants may be modified or amended or the provisions hereof waived with the written consent of the Company and the Majority Warrant Holders, provided that no such Warrant may be modified or amended to reduce the number of shares of Common Stock for which such Warrant is exercisable or to increase the price at which such -53- 58 shares may be purchased upon exercise of such Warrant (before giving effect to any adjustment as provided therein) without the written consent of the Holder thereof. 14.8. Severability. Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Warrant. 14.9. Headings. The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant. 14.10. GOVERNING LAW; JURISDICTION. IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS WARRANT AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF ILLINOIS APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE, EXCEPT WITH RESPECT TO THE VALIDITY OF THIS WARRANT, THE ISSUANCE OF WARRANT STOCK UPON EXERCISE HEREOF AND THE RIGHTS AND DUTIES OF THE COMPANY WITH RESPECT TO REGISTRATION OF TRANSFER, WHICH SHALL BE GOVERNED BY THE LAWS OF DELAWARE. THE COMPANY HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED IN CHICAGO, ILLINOIS, SHALL HAVE, EXCEPT AS SET FORTH BELOW, EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THE COMPANY AND THE HOLDER OF THIS WARRANT PERTAINING TO THIS WARRANT OR TO ANY MATTER ARISING OUT OF OR RELATING TO THIS AGREEMENT, PROVIDED, THAT IT IS ACKNOWLEDGED THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF CHICAGO, ILLINOIS. -54- 59 IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed and its corporate seal to be impressed hereon and attested by its Secretary or an Assistant Secretary. NORAND CORPORATION By:_________________________ Name: Title: [SEAL] Attest: By:___________________________ Name: Title: -55- 60 ANNEX A SUBSCRIPTION FORM [To be executed only upon exercise of Warrant] The undersigned registered owner of this Warrant irrevocably exercises this Warrant for the purchase of ______ shares Common Stock of Norand Corporation and herewith makes payment therefor, all at the price and on the terms and conditions specified in this Warrant and requests that certificates for the shares of Common Stock hereby purchased (and any securities or other property issuable upon such exercise) be issued in the name of and delivered to _________________ whose address is ___________________________________________________ and, if such shares of Common Stock shall not include all of the shares of Common Stock issuable as provided in this Warrant, that a new Warrant of like tenor and date for the balance of the shares of Common Stock issuable hereunder be delivered to the undersigned. _______________________________ (Name of Registered Owner) _______________________________ (Signature of Registered Owner) _______________________________ (Street Address) _______________________________ (City) (State) (Zip Code) NOTICE: The signature on this subscription must correspond with the name as written upon the face of the within Warrant in every particular, without alteration or enlargement or any change whatsoever. 61 ANNEX B ASSIGNMENT FORM FOR VALUE RECEIVED the undersigned registered owner of this Warrant hereby sells, assigns and transfers unto the Assignee named below all of the rights of the undersigned under this Warrant, with respect to the number of shares of Common Stock set forth below: No. of Shares of Name and Address of Assignee Common Stock and does hereby irrevocably constitute and appoint ________ _____________ attorney-in-fact to register such transfer onto the books of Norand Corporation maintained for the purpose, with full power of substitution in the premises. Dated:___________________ Print Name:___________________ Signature:____________________ Witness:______________________ NOTICE: The signature on this assignment must correspond with the name as written upon the face of the within Warrant in every particular, without alteration or enlargement or any change whatsoever. EX-4.(N)(9) 11 SERIES B WARRANT B-4 1 EXHIBIT 4.N.9 ================================================================================ SERIES B WARRANT to Purchase Common Stock of NORAND CORPORATION ================================================================================ Warrant No. B - 4 Original Issue Date: November 20, 1996 2 TABLE OF CONTENTS 1. DEFINITIONS 1 2. EXERCISE OF WARRANT 11 2.1. Manner of Exercise 11 2.2. Payment of Transfer Taxes 12 2.3. Fractional Shares 12 2.4. Continued Validity and Application 13 2.5. Limitation on Regulated Holder's Exercise 13 3. TRANSFER, DIVISION AND COMBINATION 13 3.1. Transfer 13 3.2. Division and Combination. 14 3.3. Expenses. 14 3.4. Maintenance of Books 14 4. ANTIDILUTION PROVISIONS 14 4.1. Stock Dividends, Subdivisions and Combinations 14 4.2. Issuance of Additional Shares of Common Stock 15 4.3. Issuances of Stock Purchase Rights and Convertible securities 15 4.4. Adjustment of Number of Shares Purchasable. 17 4.5. Reorganization, Reclassification, Merger, Consolidation or Disposition of Assets 17 4.6. Determination of Consideration. 18 4.7. Other Dilutive Events 20 4.8. Other Provisions Applicable to Adjustments Under this Section 20 5. NO IMPAIRMENT 22 6. RESERVATION AND AUTHORIZATION OF COMMON STOCK 23 7. NOTICE OF CORPORATE ACTIONS; TAKING OF RECORD; TRANSFER BOOKS 23 7.1. Notices of Corporate Actions. 23 7.2 Closing of Transfer Books. 23 8. TRANSFER RESTRICTIONS 23 8.1. Restrictions on Transfers 24 8.2. Restrictive Legends 24 -i- 3 8.3. Termination of Securities Law Restrictions 25 9. REGISTRATION RIGHTS 26 9.1. Certain Definitions 26 9.2. Demand Registration 27 9.3. Piggyback Registration 29 9.4. Registration Procedures. 30 9.5. Selling Holders' Obligations. 34 9.6. Expenses of Registration. 34 9.7. Indemnification; Contribution. 35 9.8. Holdback. 40 9.9. Additional Covenants of the Company 40 10. LOSS OR MUTILATION 42 11. OFFICE OF THE COMPANY 42 12. FINANCIAL AND BUSINESS INFORMATION 43 13. REPURCHASE BY THE COMPANY OF WARRANTS 43 14. MISCELLANEOUS 43 14.1. Nonwaiver. 43 14.2. Notice Generally 44 14.3. Indemnification 44 14.4. Limitation of Liability. 44 14.5. Remedies 45 14.6. Successors and Assigns 45 14.7. Amendment. 45 14.8. Severability 45 14.9. Headings. 45 14.10. GOVERNING LAW; JURISDICTION. 45 ANNEX A SUBSCRIPTION FORM 48 ANNEX B ASSIGNMENT FORM 49 SCHEDULE A RESERVED SHARES OF COMMON STOCK -ii- 4 SCHEDULE B UNDERWRITERS AND AGENTS -iii- 5 NEITHER THE WARRANTS REPRESENTED BY THIS CERTIFICATE NOR ANY OF THE SECURITIES ISSUABLE UPON EXERCISE THEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAW. NO TRANSFER OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE OR OF THE SECURITIES ISSUABLE UPON EXERCISE THEREOF SHALL BE VALID OR EFFECTIVE UNLESS (A) SUCH TRANSFER IS MADE PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR (B) THE HOLDER OF THE SECURITIES PROPOSED TO BE TRANSFERRED SHALL HAVE DELIVERED TO THE COMPANY EITHER A NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION OR AN OPINION OF COUNSEL EXPERIENCED IN SECURITIES MATTERS AND REASONABLY ACCEPTABLE TO THE COMPANY TO THE EFFECT THAT SUCH PROPOSED TRANSFER IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE ACT OR (C) SUCH TRANSFER IS PURSUANT TO RULE 144 OR RULE 144A UNDER THE ACT AND SUCH HOLDER(S) SHALL HAVE DELIVERED TO THE COMPANY A CERTIFICATE SETTING FORTH THE BASIS FOR APPLYING SUCH RULE TO THE PROPOSED TRANSFER. Warrant No. B - 4 SERIES B WARRANT NORAND CORPORATION THIS IS TO CERTIFY THAT THE DAIWA BANK, LIMITED, or registered assigns, is entitled, at any time after August 31, 1997 and prior to the Expiration Date (such term, and certain other capitalized terms used herein being hereinafter defined), to purchase from NORAND CORPORATION, a Delaware corporation (the "Company"), Forty-five Thousand Eight Hundred Fifty-eight (45,858) shares of the Common Stock of the Company (subject to adjustment as provided herein), at a purchase price of $21.15 per share (the initial "Exercise Price", subject to adjustment as provided herein), all on the terms and conditions and pursuant to the provisions hereinafter set forth. 6 1. DEFINITIONS As used in this Warrant, the following terms have the respective meanings set forth below: "Affiliate" of any Person means a Person (a) which directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with such Person, (b) which beneficially owns or holds more than ten percent of the outstanding shares of any class of voting stock of such Person and has the power to vote such shares or (c) more than ten percent of the outstanding shares of any class of voting stock (or, in the case of a Person which is not a corporation, more than ten percent of the equity interest) of which is beneficially owned or held by such Person and such Person has the power to vote such shares or equity interest. The term "control" as used with respect to any Person means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise. "After-Tax Basis", when referring to a payment that is required hereunder (the "target amount"), shall mean a total payment (the "total amount") that, after deduction of all federal, state and local taxes that are required to be paid by the recipient in respect of the receipt or accrual of such total amount, is equal to the target amount. "Agreed Rate" shall mean a rate per annum equal to the corporate base rate of interest announced by The First National Bank of Chicago from time to time, changing when and as said corporate base rate changes. "Appraised Value" per share of Common Stock as of a date specified herein shall mean the value of such share as of such date as determined by an investment bank of nationally recognized standing selected by the Majority Warrant Holders from Schedule B (or any successor of any such entity), it being understood that the Majority Warrant Holders shall use commercially reasonable efforts to select one of the first three listed entities subject to arriving at reasonably acceptable terms and conditions for the -2- 7 appraisal. The Company shall pay the costs and fees of such investment bank, and the decision of the investment bank making such determination of Appraised Value shall be final and binding on the Company and all affected holders of Warrants or Warrant Stock. Such Appraised Value shall be determined as a pro rata portion of the value of the Company taken as a whole, based on the higher of (A) the value derived from a hypothetical sale of the entire Company as a going concern by a willing seller to a willing buyer (neither acting under any compulsion) and (B) the liquidation value of the entire Company. No discount shall be applied on account of (i) any Warrants or Warrant Stock representing a minority interest, (ii) any lack of liquidity of the Common Stock or the Warrants, (iii) the fact that the Warrants or Warrant Stock may constitute "restricted securities" for securities law purposes or (iv) the existence of any call option. "Bank Holding Company Act" shall mean the Bank Holding Company Act of 1956, as amended. "Business Day" shall mean any day that is not a Saturday or Sunday or a day on which banks are required or permitted to be closed in the State of Illinois. "Call" shall have the meaning set forth in Section 13 hereof. "Call Notice" shall have the meaning set forth in Section 13 hereof. "Commission" shall mean the Securities and Exchange Commission or any other federal agency then administering the Securities Act and other federal securities laws. "Common Stock" shall mean (except where the context otherwise indicates) the Common Stock of the Company, par value $.01 per share, as constituted on the Original Issue Date, and any capital stock into which such Common Stock may thereafter be changed, and shall also include (i) capital stock of the Company of any other class (regardless of how denominated) issued to the holders of shares of any Common Stock upon any reclassification thereof which is also not preferred as to dividends or liquidation over any other -3- 8 class of stock of the Company and which is not subject to redemption and (ii) shares of common stock of any successor or acquiring corporation (as defined in Section 4.5 hereof) received by or distributed to the holders of Common Stock of the Company in the circumstances contemplated by Section 4.5 hereof. "Company" means Norand Corporation, a Delaware corporation, and any successor corporation. "Company Default" means (a) the breach of any warranty or the inaccuracy in any material respect at the time when made of any representation made by the Company herein or (b) the failure by the Company to comply in any material respect with any covenant of the Company contained herein. "Continuously Effective", with respect to a specified registration statement, shall mean that it shall not cease to be effective and available for Transfers of Warrant Stock thereunder for the longer of either (i) any ten consecutive Business Days, or (ii) an aggregate of fifteen Business Days during the period specified in the relevant provision of Section 9 hereof. "Convertible Securities" shall mean evidences of indebtedness, shares of stock or other securities that are convertible into or exchangeable for, with or without payment of additional consideration in cash or property, shares of Common Stock, either immediately or upon the occurrence of a specified date or a specified event. "Credit Agreement" means the Second Amended and Restated Credit Agreement dated as of January 25, 1996, as thereafter from time to time amended, supplemented, restated or modified, among the Company, the Lenders party thereto and The First National Bank of Chicago, as agent. "Current Market Price" shall mean as of any specified date the average of the daily market prices of the Common Stock of the Company for the shorter of (x) the twenty consecutive Business Days immediately preceding such date or (y) the period commencing on the Business Day next following the first public announcement of any event giving rise to an adjustment of the Exercise Price pursuant to Section 4 below -4- 9 and ending on such date. The "daily market price" for each such Business Day shall be: (i) if the Common Stock is then listed on a national securities exchange or is listed on NASDAQ and is designated as a National Market System security, the last sale price, regular way, on such day on the principal stock exchange or market system on which such Common Stock is then listed or admitted to trading, or, if no such sale takes place on such day, the average of the closing bid and asked prices for the Common Stock on such day as reported on such stock exchange or market system or (ii) if the Common Stock is not then listed or admitted to trading on any national securities exchange or designated as a National Market System security on NASDAQ but is traded over-the-counter, the average of the closing bid and asked prices for the Common Stock as reported on NASDAQ or the Electronic Bulletin Board or in the National Daily Quotation Sheets, as applicable. "Demand Registration" shall have the meaning set forth in Section 9.2(a) hereof. "Demanding Holders" shall have the meaning set forth in Section 9.2(a) hereof. "Designated Office" shall have the meaning set forth in Section 11 hereof. "Equity" shall mean equity capital (not including the equity capital attributable to the Settlement Stock, and any mandatory redemption terms of which equity capital are acceptable to the Majority Warrant Holders) raised by and/or contributed to the Company subsequent to the Original Issue Date or new Indebtedness (as defined in the Credit Agreement) subordinated to the Obligations (as defined in the Credit Agreement), provided the terms of such Indebtedness (including, without limitation, maturity, amortization, covenants, defaults, remedies and subordination provisions) are acceptable to the Majority Warrant Holders. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect from time to time. -5- 10 "Exercise Notice" shall have the meaning set forth in Section 2.1 hereof. "Exercise Period" shall mean the period during which this Warrant is exercisable pursuant to Section 2.1 hereof. "Exercise Price" shall mean, in respect of a share of Common Stock at any date herein specified, the initial Exercise Price set forth in the preamble of this Warrant as adjusted from time to time pursuant to Section 4 hereof. "Expiration Date" shall mean August 31, 2002, unless extended under the circumstances contemplated by Section 9.2(d) hereof. "Fair Value" per share of Common Stock as of any specified date shall mean (A) if the Common Stock is publicly traded on such date, the Current Market Price per share or (B) if the Common Stock is not publicly traded on such date, (1) the fair market value per share of Common Stock as determined in good faith by the Board of Directors of the Company and set forth in a written notice to each Holder or (2) if the Majority Warrant Holders object in writing to such price as determined by the Board of Directors within thirty days after receiving notice of same, the Appraised Value per share as of such date. "Fully Diluted Outstanding" shall mean, when used with reference to Common Stock, at any date as of which the number of shares thereof is to be determined, all shares of Common Stock Outstanding on such date and all shares of Common Stock issuable in respect of (x) the Warrants outstanding on such date, (y) any Convertible Securities outstanding on such date and (z) any other Stock Purchase Rights outstanding on such date, in each case regardless of whether or not the conversion, exchange, subscription or purchase rights associated with such Convertible Securities or Stock Purchase Rights are presently exercisable. "GAAP" shall mean generally accepted accounting principles in the United States of America as from time to time in effect. -6- 11 "Glass-Steagall Act" shall mean Section 24 (Seventh), Section 78, Section 377 and Section 378 of Title 12 (12 U.S.C. Section Section 24 (Seventh) 78, 377, 378), or any similar federal legislation. "Holder" shall mean (a) with respect to this Warrant, the Person in whose name the Warrant set forth herein is registered on the books of the Company maintained for such purpose and (b) with respect to any other Warrant or shares of Warrant Stock, the Person in whose name such Warrant or Warrant Stock is registered on the books of the Company maintained for such purpose. "Insolvency Event" shall mean any proceeding being instituted by or against the Company seeking a declaration or order for relief, or entailing a finding, that the Company is insolvent or bankrupt, or seeking reorganization, liquidation, dissolution, winding-up, charter revocation or other similar relief with respect to the Company or any of its properties, assets or debts, or seeking the appointment of a receiver, trustee, custodian, liquidator, sequestrator or similar official for the Company or any of its properties or assets, or the Company becoming insolvent or bankrupt or generally unable to pay its debts as they become due, or the Company voluntarily suspending its business or making a general assignment for the benefit of creditors; provided that an Insolvency Event shall not be deemed to have occurred on account of any such proceeding which is involuntary on the part of the Company unless same shall not have been dismissed or stayed within 60 days. "Lien" shall mean any mortgage or deed of trust, pledge, hypothecation, assignment, deposit arrangement, lien, charge, claim, security interest, easement or encumbrance, or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, any lease or title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, and the filing of, or agreement to give, any financing statement perfecting a security interest under the Uniform Commercial Code or comparable law of any jurisdiction). -7- 12 "Majority Warrant Holders", with respect to a given determination, shall mean the Holders of Warrants and/or Warrant Stock representing at least seventy-six percent (76%) of all Warrants and/or Warrant Stock (with any such Warrants being deemed to represent, for the purposes of such calculation, the shares of Warrant Stock then issuable upon exercise thereof) directly affected by such determination. "Majority Selling Holders" shall mean those Selling Holders whose Warrants and/or Warrant Stock included in a registration under Section 9 hereof represents a majority of the Warrants and/or Warrant Stock (with any such Warrants being deemed to represent, for the purposes of such calculation, the shares of Warrant Stock then issuable upon exercise thereof) included therein by all Selling Holders. "NASD" shall mean the National Association of Securities Dealers, Inc., or any successor corporation thereto. "NASDAQ" shall mean the NASDAQ quotation system, or any successor reporting system. "Notes" shall mean any of the promissory notes issued by the Company under the Credit Agreement. "Opinion of Counsel" means a written opinion of counsel experienced in Securities Act or bank regulatory matters, as the case may be, chosen by the Holder of this Warrant or Warrant Stock issued upon the exercise hereof and reasonably acceptable to the Company. "Original Issue Date" shall mean the date on which the Original Warrants were issued, as set forth on the cover page of this Warrant. "Original Warrants" shall mean the Warrants originally issued by the Company on the Original Issue Date to each of The First National Bank of Chicago, Fleet Bank of Massachusetts, N.A., The Daiwa Bank, Limited, Norwest Bank Iowa, National Association and Caisse Nationale de Credit Agricole. "Other Property" shall have the meaning set forth in Section 4.5 hereof. -8- 13 "Outstanding" shall mean, when used with reference to Common Stock, at any date as of which the number of shares thereof is to be determined, all issued shares of Common Stock, except shares then owned or held by or for the account of the Company or any Subsidiary thereof, and shall include all shares issuable in respect of outstanding scrip or any certificates representing fractional interests in shares of Common Stock. "Outstanding", when used with respect to Warrant Stock for the purposes of Section 9 hereof shall have the meaning set forth in Section 9.1(d) hereof. "Person" shall mean any individual, sole proprietorship, partnership, limited liability company, joint venture, trust, incorporated organization, association, corporation, institution, public benefit corporation, entity or government (whether federal, state, county, city, municipal or otherwise, including, without limitation, any instrumentality, division, agency, body or department thereof). "Piggyback Registration" shall have the meaning set forth in Section 9.3(a) hereof. "Register", "registered" and "registration" shall refer to a registration effected by preparing and filing a registration statement or similar document in compliance with the Securities Act, and the declaration or ordering by the Commission of effectiveness of such registration statement or document. "Registration Expenses" shall have the meaning set forth in Section 9.6(a) hereof. "Restricted Common Stock" shall mean shares of Common Stock which are, or which upon their issuance on the exercise of this Warrant would be, evidenced by a certificate bearing the restrictive legend set forth in Section 8.2(a) hereof. "Securities Act" shall mean the Securities Act of 1933, as amended, or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. -9- 14 "Selling Holders" shall mean, with respect to a specified registration under Section 9 hereof, WS Holders whose Registrable Securities are included in such registration. "Series A Warrants" shall mean all of the Series A Warrants to Purchase Common Stock of Norand Corporation issued concurrently with this Warrant. "Series B Warrants" shall mean all of the Series B Warrants to Purchase Common Stock of Norand Corporation, issued concurrently with, and having the same terms (other than the number of shares purchasable upon the exercise thereof) as, this Warrant. "Settlement Stock" shall mean the shares of Common Stock contemplated to be issued in settlement of the pending shareholders' claims against the Company with respect to the litigation styled In re Norand Corporation Securities Litigation, Master File No. C95-323, pending in the United States District Court for the Northern District of Iowa, Cedar Rapids Division. "Share Withholding Option" has the meaning set forth in Section 2.1(c) hereof. "Shelf Registration" shall have the meaning set forth in Section 9.2(a) hereof. "Stock Purchase Rights" shall mean any options, warrants or other securities or rights to subscribe to or exercisable for the purchase of shares of Common Stock or Convertible Securities, whether or not immediately exercisable, other than the options, warrants or other rights described in Schedule A hereto. "Subsequent Issuance" shall mean any sale or issuance by the Company of Common Stock, Convertible Securities or Stock Purchase Rights after the Original Issue Date other than: (i) Any issuance of Warrant Stock upon exercise of the Warrants and any issuance of Common Stock, Convertible Securities or Stock Purchase Rights (and -10- 15 any issuance of Common Stock pursuant to the conversion, exchange or exercise of any such Convertible Securities or Stock Purchase Rights) deemed to have been issued as of the Original Issue Date pursuant to the definition of Fully Diluted Outstanding. (ii) Any issuance of Common Stock pursuant to the exercise of the options and warrants described in Schedule A hereto, provided, however, that the exercise price of any such option or warrant (other than warrants granted to Jay Alix and Associates and to Donald W. Rowley for up to the respective number of shares set forth on Schedule A) granted or issued after the Original Issue Date shall not be less than the "daily market price" (as that term is defined in the issue of the option or warrant. (iii) The issuance of the Settlement Stock. (iv) Any other issuance of Common Stock, Convertible Securities or Stock Purchase Rights with respect to which the Majority Warrant Holders shall have waived application of the provisions of Section 4 below. "Subsidiary" means any corporation or association (a) more than 50% (by number of votes) of the voting stock of which is at the time owned by the Company or by one or more Subsidiaries or by the Company and one or more Subsidiaries, or any other business entity in which the Company or one or more Subsidiaries or the Company and one or more Subsidiaries own more than a 50% interest either in the profits or capital of such business entity or (b) whose net earnings, or portions thereof, are consolidated with the net earnings of the Company and are recorded on the books of the Company for financial reporting purposes in accordance with GAAP. "Transfer" shall mean any disposition of any Warrant or Warrant Stock or of any interest in either thereof, which would constitute a "sale" thereof within the meaning of the Securities Act. -11- 16 "Triggering Event" shall mean either the repayment in full of all indebtedness under the Credit Agreement or the receipt by the Company of at least $20 million in net cash proceeds from additional Equity. "Violation" has the meaning set forth in Section 9.7(a) hereof. "Warrant Price" shall mean an amount equal to (i) the number of shares of Common Stock being purchased upon exercise of this Warrant pursuant to Section 2.1 hereof, multiplied by (ii) the Exercise Price as of the date of such exercise. "Warrants" shall mean the Original Warrants and all warrants issued upon transfer, division or combination of, or in substitution for, such Original Warrants or any other such Warrant. All Warrants shall at all times be identical as to terms and conditions and date, except as to the number of shares of Common Stock for which they may be exercised. "Warrant Stock" generally shall mean the shares of Common Stock issued, issuable or both (as the context may require) upon the exercise of Warrants until such time as such shares of Common Stock have either been (i) Transferred in a public offering pursuant to a registration statement filed under the Securities Act or (ii) Transferred in a transaction exempt from the registration and prospectus delivery requirements of the Securities Act under Section 4(1) thereof with all transfer restrictions and restrictive legends with respect to such Common Stock being removed in connection with such transaction. "Warrant Stock", for the purposes of Section 9 hereof, shall have the meaning set forth in Section 9.1(b) hereof. "WS Holder" shall have the meaning set forth in Section 9.1(a) hereof. 2. EXERCISE OF WARRANT 2.1. Manner of Exercise. (a) From and after August 31, 1997 and until 5:00 P.M., Chicago time, on the Expiration Date, the Holder of this Warrant may from time to time exercise -12- 17 this Warrant, on any Business Day, for all or any part of the number of shares of Common Stock purchasable hereunder (as determined pursuant to Section 2.2 below). In order to exercise this Warrant, in whole or in part, the Holder shall (i) deliver to the Company at the Designated Office a written notice of the Holder's election to exercise this Warrant (an "Exercise Notice"), which Exercise Notice shall be irrevocable and specify the number of shares of Common Stock to be purchased, together with this Warrant and (ii) pay to the Company the Warrant Price (the date on which both such delivery and payment shall have first taken place being hereinafter sometimes referred to as the "Exercise Date"). Such Exercise Notice shall be in the form of the subscription form appearing at the end of this Warrant as Annex A, duly executed by the Holder or its duly authorized agent or attorney. (b) Upon receipt of such Exercise Notice, Warrant and payment, the Company shall, as promptly as practicable, and in any event within five Business Days thereafter, execute (or cause to be executed) and deliver (or cause to be delivered to the Holder a certificate or certificates representing the aggregate number of full shares of Common Stock issuable upon such exercise, together with cash in lieu of any fraction of a share, as hereafter provided. The stock certificate or certificates so delivered shall be, to the extent possible, in such denomination or denominations as the exercising Holder shall reasonably request in the Exercise Notice and shall be registered in the name of the Holder or such other name as shall be designated in the Exercise Notice. This Warrant shall be deemed to have been exercised and such certificate or certificates shall be deemed to have been issued, and the Holder or any other Person so designated to be named therein shall be deemed to have become a holder of record of such shares for all purposes, as of the Exercise Date. (c) Payment of the Warrant Price shall be made at the option of the Holder by one or more of the following methods: (i) by delivery of a certified or official bank check in the amount of such Warrant Price, (ii) by instructing the Company to withhold a number of shares of Warrant Stock then issuable upon exercise of this Warrant with an aggregate Current Market Price equal to such Warrant Price (the "Share Withholding Option"), (iii) by surrendering to the Company shares of Common Stock previously acquired by the Holder with an aggregate Current -13- 18 Market Price equal to such Warrant Price or(iv) by delivery of a Note, duly endorsed by or accompanied by appropriate instruments of transfer duly executed by the Holder or by the Holder's attorney duly authorized in writing. In the event of any withholding of Warrant Stock or surrender of Common Stock pursuant to clause (ii) or (iii) above where the number of shares whose Current Market Price is equal to the Warrant Price is not a whole number, the number of shares withheld by or surrendered to the Company shall be rounded up to the nearest whole share and the Company shall make a cash payment to the Holder based on the incremental fraction of a share being so withheld by or surrendered to the Company in an amount determined in accordance with Section 2.3 hereof. For the purpose of making payment of the Warrant Price, any Note surrendered to the Company shall be deemed to have a value equal to 100% of the principal amount thereof plus any interest accrued but unpaid thereon. If the Holder delivers a Note with a deemed value that exceeds the Warrant Price, the Company shall reissue to the Holder a new Note identical in all respects to the surrendered Note except that the principal amount of such new Note shall be equal to the principal amount that, together with any interest accrued but unpaid thereon, is equal to the deemed value of the surrendered Note less the Warrant Price. (d) If this Warrant shall have been exercised in part, the Company shall, at the time of delivery of the certificate or certificates representing the shares of Common Stock being issued, deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the unpurchased shares of Common Stock called for by this Warrant. Such new Warrant shall in all other respects be identical with this Warrant. 2.2. Payment of Transfer Taxes. All shares of Common Stock issuable upon the exercise of this Warrant pursuant to the terms hereof shall be validly issued, fully paid and nonassessable, issued without violation of any preemptive rights and free and clear of all Liens (other than any created by actions of the Holder). The Company shall pay all expenses in connection with, and all taxes and other governmental charges that may be imposed with respect to, the issue or delivery thereof, unless such tax or charge is imposed by law upon the Holder, in which case such taxes or charges shall be paid by the Holder and the Company shall reimburse the Holder therefor on an After-Tax Basis. -14- 19 2.3. Fractional Shares. The Company shall not be required to issue a fractional share of Common Stock upon exercise of any Warrant. As to any fraction of a share that the Holder of one or more Warrants, the rights under which are exercised in the same transaction, would otherwise be entitled to purchase upon such exercise, the Company shall pay a cash adjustment in respect of such final fraction in an amount equal to the same fraction of the Current Market Price of one share of Common Stock on the Exercise Date, if the Common Stock is then publicly traded. 2.4. Continued Validity and Application. (a) A Holder of shares of Warrant Stock issued upon the exercise of this Warrant, in whole or in part, including any transferee of such shares (other than a transferee in whose hands such shares no longer constitute Warrant Stock as defined herein), shall continue, with respect to such shares, to be entitled to all rights and to be subject to all obligations that are applicable to such Holder by the terms of this Warrant under Section 9 hereof. The Company shall, at the time of any exercise of this Warrant or any transfer of Warrant Stock, upon the request of the Holder of the shares of Warrant Stock issued in connection with such exercise or transfer, acknowledge in writing, in a form reasonably satisfactory to such Holder, its continuing obligation to afford to such Holder such rights referred to in this Section 2.4; provided, however, that if such Holder shall fail to make any such request, such failure shall not affect the continuing obligation of the Company to afford to such Holder all such rights. 2.5. Limitation on Regulated Holder's Exercise. Notwithstanding anything in this Warrant to the contrary, the Holder of this Warrant, if subject to the Bank Holding Company Act or any provision of the Glass-Steagall Act, may exercise this Warrant only if the Notice of Exercise is accompanied by an Opinion of Counsel of such Holder to the effect that, as of the date of delivery of such opinion, no federal or state regulatory clearances are required for such Holder to exercise this Warrant or, in the event any such federal or state regulatory clearances are required prior to the exercise of this Warrant, to the effect that all such clearances have been obtained or, if not then obtained, that no statute or regulation or regulatory policy or guidelines known to such counsel would by their terms preclude the obtaining of such clearances or make it unlikely that such -15- 20 clearances would be obtained or make it likely that such clearances would, if obtained, contain material conditions adverse to such Holder. In the event that federal or state regulatory clearances are required prior to the exercise of this Warrant by the Holder hereof, the Company shall reasonably cooperate with such Holder in providing such information to any regulatory agency as such agency may reasonably require. In the event any such regulatory clearance is withheld or denied, such Holder may continue to hold this Warrant until its expiration or may sell or otherwise transfer this Warrant in accordance with the terms hereof. 3. TRANSFER, DIVISION AND COMBINATION 3.1. Transfer. Subject to compliance with Section 8 hereof, each transfer of this Warrant and all rights hereunder, in whole or in part, shall be registered on the books of the Company to be maintained for such purpose, upon surrender of this Warrant at the Designated Office, together with a written assignment of this Warrant in the form of Annex B hereto duly executed by the Holder or its agent or attorney. Upon such surrender and delivery, the Company shall, subject to Section 8, execute and deliver a new Warrant or Warrants in the name of the assignee or assignees and in the denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned and this Warrant shall promptly be canceled. A Warrant, if properly assigned in compliance with Section 8, may be exercised by the new Holder for the purchase of shares of Common Stock without having a new Warrant issued. 3.2. Division and Combination. Subject to compliance with the applicable provisions of this Warrant, this Warrant may be divided or combined with other Warrants upon presentation hereof at the Designated Office, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney. Subject to compliance with the applicable provisions of this Warrant as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. -16- 21 3.3. Expenses. The Company shall prepare, issue and deliver at its own expense any new Warrant or Warrants required to be issued under this Section 3. 3.4. Maintenance of Books. The Company agrees to maintain, at the Designated Office, books for the registration and transfer of the Warrants. 4. ANTIDILUTION PROVISIONS The number of shares of Common Stock for which this Warrant is exercisable and the Exercise Price shall be subject to adjustment from time to time as set forth in this Section 4. 4.1. Stock Dividends, Subdivisions and Combinations. If at any time the Company shall: (i) take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend payable in, or other distribution of, additional shares of Common Stock, (ii) subdivide its outstanding shares of Common Stock into a larger number of shares of such Common Stock, or (iii) combine its outstanding shares of Common Stock into a smaller number of shares of such Common Stock, then the Exercise Price shall be adjusted to equal the product of the Exercise Price in effect immediately prior to such event multiplied by a fraction the numerator of which is equal to the number of shares of Common Stock Outstanding immediately prior to the adjustment and the denominator of which is equal to the number of shares of Common Stock Outstanding immediately after such adjustment. 4.2. Issuance of Additional Shares of Common Stock. (a) If at any time the Company shall issue or sell any shares of Common Stock in a Subsequent Issuance for a consideration per share that is less than the Exercise Price in effect immediately prior to such issuance or sale, then, forthwith upon such issuance or sale, the Exercise Price shall be reduced to a price calculated by dividing (1) an amount equal to the sum of (x) the -17- 22 number of shares of Common Stock Outstanding immediately prior to such Subsequent Issuance multiplied by the then existing Exercise Price, plus (y) the aggregate consideration (determined in accordance with the provisions of Section 4.6 hereof), if any, received by the Company in connection with such Subsequent Issuance, by (2) the total number of shares of Common Stock Outstanding immediately after such Subsequent Issuance. (b) The provisions of this Section 4.2 shall not apply to (i) any issuance of Common Stock for which an adjustment is provided for under Section 4.1 or (ii) any issuance or sale of Common Stock pursuant to the exercise of any Stock Purchase Rights or Convertible Securities to the extent that an adjustment shall have been previously made hereunder in connection with the issuance of such Stock Purchase Rights or Convertible Securities pursuant to the provisions of Section 4.3 hereof. 4.3. Issuances of Stock Purchase Rights and Convertible Securities. (a) In the event that the Company shall at any time issue, sell or grant any Stock Purchase Rights to any Person in a Subsequent Issuance, then, for the purpose of Section 4.2 above, the Company shall be deemed to have issued at that time a number of shares of Common Stock equal to the maximum number of shares of Common Stock (without giving effect to any antidilution provisions in such Stock Purchase Rights) that are or may become issuable upon exercise of such Stock Purchase Rights (or upon exercise of any Convertible Securities issuable upon exercise of such Stock Purchase Rights) for a consideration per share equal to (i) the aggregate consideration per share (determined in accordance with the provisions of Section 4.6 hereof) received by the Company in connection with the issuance, sale or grant of such Stock Purchase Rights plus (ii) the minimum amount of such consideration per share receivable by the Company in connection with the exercise of such Stock Purchase Rights (and the exercise of any Convertible Securities issuable upon exercise of such Stock Purchase Rights). (b) In the event that the Company shall at any time issue or sell any Convertible Securities to any Person in a Subsequent Issuance, then, for the purposes of Section 4.2 above, the Company shall be deemed to have issued at that time a number of shares of Common Stock equal to the maximum number of shares of Common Stock that are or may become issuable upon the exercise of the conversion or exchange rights associated with such -18- 23 Convertible Securities for a consideration per share equal to (i) the aggregate consideration per share (determined in accordance with the provisions of Section 4.6 hereof) received by the Company in connection with the issuance or sale of such Convertible Securities plus (ii) the minimum amount of such consideration per share receivable by the Company in connection with the exercise of such conversion or exchange rights. (c) If, at any time after any adjustment of the Exercise Price shall have been made hereunder as the result of any issuance, sale or grant of any Stock Purchase Rights or Convertible Securities, the maximum number of shares issuable upon exercise of such Stock Purchase Rights or of the rights of conversion or exchange associated with such Convertible Securities shall increase, or the minimum amount of consideration per share receivable in connection with such exercise shall decrease, whether by operation of any antidilution rights pertaining to such Stock Purchase Rights or Convertible Securities, by agreement of the parties or otherwise, the Exercise Price then in effect shall first be readjusted to eliminate the effects of the original issuance, sale or grant of such Stock Purchase Rights or Convertible Securities on such Exercise Price and then readjusted as if such Stock Purchase Rights or Convertible Securities had been issued on the effective date of such increase in number of shares or decrease in consideration, but only if the effect of such two-step readjustment is to reduce the Exercise Price below the Exercise Price in effect immediately prior to such increase or decrease. (d) If, at any time after any adjustment of the Exercise Price shall have been made hereunder as the result of any issuance, sale or grant of any Stock Purchase Rights or Convertible Securities, any of such Stock Purchase Rights or the rights of conversion or exchange associated with such Convertible Securities shall expire by their terms or any of such Stock Purchase Rights or Convertible Securities shall be repurchased by the Company or a Subsidiary thereof for a consideration per underlying share of Common Stock not exceeding the amount of such consideration received by the Company in connection with the issuance, sale or grant of such Stock Purchase Rights or Convertible Securities, the Exercise Price then in effect shall forthwith be increased to the Exercise Price that would have been in effect if such expiring Stock Purchase Rights or rights of conversion or exchange or such repurchased Stock Purchase Rights -19- 24 or Convertible Securities had never been issued. Similarly, if at any time after any such adjustment of the Exercise Price shall have been made pursuant to Section 4.2 (i) any additional consideration is received or becomes receivable by the Company in connection with the issuance or exercise of such Stock Purchase Rights or Convertible Securities or (ii) there is a reduction in the conversion ratio applicable to such Convertible Securities so that fewer shares of Common Stock will be issuable upon the conversion or exchange thereof or there is a decrease in the number of shares of Common Stock issuable upon exercise of such Stock Purchase Rights, the Exercise Price then in effect shall be forthwith readjusted to the Exercise Price that would have been in effect had such changes taken place at the time that such Stock Purchase Rights or Convertible Securities were initially issued, granted or sold. In no event shall any readjustment under this Section 4.3(d) affect the validity of any shares of Warrant Stock issued upon any exercise of this Warrant prior to such readjustment, nor shall any such readjustmnt have the effect of increasing the Exercise Price above the Exercise Price that would have been in effect if the related Stock Purchase Rights or Convertible Securities had never been issued. 4.4. Adjustment of Number of Shares Purchasable. Upon any adjustment of the Exercise Price as provided in Section 4.1, 4.2 or 4.3 hereof, the Holder hereof shall thereafter be entitled to purchase upon the exercise of this Warrant, at the Exercise Price resulting from such adjustment, the number of shares of Common Stock (calculated to the nearest 1/100th of a share) obtained by multiplying the Exercise Price in effect immediately prior to such adjustment by the number of shares of Common Stock issuable on the exercise hereof immediately prior to such adjustment and dividing the product thereof by the Exercise Price resulting from such adjustment. 4.5. Reorganization, Reclassification, Merger, Con solidation or Disposition of Assets. In case the Company shall reorganize its capital, reclassify its capital stock, consolidate or merge with or into another corporation (where the Company is not the surviving corporation or where there is any change whatsoever in, or distribution with respect to, the Outstanding Common Stock of the Company), or sell, transfer or otherwise dispose of all or substantially all of its property, assets or business to another corporation and, pursuant to the terms of such reorganization, reclassification, merger, consolidation or -20- 25 disposition of assets, (i) shares of common stock of the successor or acquiring corporation or of the Company (if it is the surviving corporation) or (ii) any cash, shares of stock or other securities or property of any nature whatsoever (including warrants or other subscription or purchase rights) in addition to or in lieu of common stock of the successor or acquiring corporation ("Other Property") are to be received by or distributed to the holders of Common Stock of the Company who are holders immediately prior to such transaction, then the Holder of this Warrant shall have the right thereafter to receive, upon exercise of this Warrant, the number of shares of common stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and Other Property receivable upon or as a result of such reorganization, reclassification, merger, consolidation or disposition of assets by a holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such event. In such event, the aggregate Exercise Price otherwise payable for the shares of Common Stock issuable upon exercise of this Warrant shall be allocated among the shares of common stock and Other Property receivable as a result of such reorganization, reclassification, merger, consolidation or disposition of assets in proportion to the respective fair market values of such shares of common stock and Other Property as determined in good faith by the Board of Directors o the Company. In case of any such reorganization, reclassification, merger, consolidation or disposition of assets, the successor or acquiring corporation (if other than the Company) shall expressly assume the due and punctual observance and performance of each and every covenant and condition of this Warrant to be performed and observed by the Company and all the obligations and liabilities hereunder, subject to such modifications as may be reasonably deemed appropriate (as determined by resolution of the Board of Directors of the Company) in order to provide for adjustments of any shares of the common stock of such successor or acquiring corporation for which this Warrant thus becomes exercisable, which modifications shall be as equivalent as practicable to the adjustments provided for in this Section 4. For purposes of this Section 4.5, "common stock of the successor or acquiring corporation" shall include stock of such corporation of any class that is not preferred as to dividends or assets over any other class of stock of such corporation and that is not subject to redemption and shall also include any evidences of indebtedness, shares of stock or other securities that are convertible into or exchangeable for any such -21- 26 stock, either immediately or upon the arrival of a specified date or the happening of a specified event and any warrants or other rights to subscribe for or purchase any such stock. The foregoing provisions of this Section 4.5 shall similarly apply to successive reorganizations, reclassifications, mergers, consolidations or disposition of assets. 4.6. Determination of Consideration. For purposes of Sections 4.2, 4.3 and 4.4 hereof, the consideration received and/or receivable by the Company in connection with the issuance, sale, grant or exercise of additional shares of Common Stock, Stock Purchase Rights or Convertible Securities, irrespective of the accounting treatment of such consideration, shall be valued as follows: (1) Cash Payment. In the case of cash, the net amount received by the Company after deduction of any accrued interest or dividends, expenses incurred or any underwriting commissions or concessions paid or allowed by the Company. (2) Securities or Other Property. In the case of securities or other property, the fair market value thereof as of the date immediately preceding such issuance, sale, grant or exercise as determined in good faith by the Board of Directors of the Company. (3) Allocation Related to Common Stock. In the event shares of Common Stock are issued or sold together with other securities or other assets of the Company for a consideration which covers both, the consideration received (computed as provided in (1) and (2) above) shall be allocable to such shares of Common Stock as determined in good faith by the Board of Directors of the Company. (4) Allocation Related to Stock Purchase Rights and Convertible Securities. In case any Stock Purchase Rights or Convertible Securities shall be issued or sold together with other securities or other assets of the Company, together comprising one integral transaction in which no specific consideration is allocated to the Stock -22- 27 Purchase Rights or Convertible Securities, the consideration allocable to such Stock Purchase Rights or Convertible Securities shall be determined in good faith by the Board of Directors of the Company. (5) Dividends in Securities. In case the Company shall declare a dividend or make any other distribution upon any stock of the Company payable in either case in Common Stock or Convertible Securities, such Common Stock or Convertible Securities, as the case may be, issuable in payment of such dividend or distribution shall be deemed to have been issued or sold without consideration. (6) Merger, Consolidation or Sale of Assets. In case any shares of Common Stock, Stock Purchase Rights or Convertible Securities shall be issued in connection with any merger or consolidation in which the Company is the surviving corporation, the amount of consideration therefor shall be deemed to be the fair value on the date of issuance of such security of such portion of the assets and business of the non-surviving corporation attributable to such Common Stock, Stock Purchase Rights or Convertible Securities, as is determined in good faith by the Company's Board of Directors. (7) Challenge to Good Faith Determination. Whenever the Board of Directors of the Company shall be required to make a determination in good faith of the fair value of any item under this Section 4, such determination may be challenged in good faith by the Majority Warrant Holders, and any dispute shall be resolved by an investment banking or appraisal firm of recognized national standing selected by the Company and reasonably acceptable to the Majority Warrant Holders and whose decision shall be binding on the Company and all holders of Warrants. The fees and expenses of such firm shall be paid by the party or parties whose position is not chosen by such firm. 4.7. Other Dilutive Events. In case any event shall occur as to which the other provisions of this Section 4 are not strictly applicable but as to which the failure to make any adjustment would not fairly protect the purchase rights repre- -23- 28 sented by this Warrant in accordance with the essential intent and principles hereof (including, without limitation, the issuance of securities other than Common Stock which have the right to participate in distributions to the holders of Common Stock, the granting of "phantom stock" rights or "stock appreciation rights" or the repurchase of outstanding shares of Common Stock, Convertible Securities or Stock Purchase Rights for a purchase price exceeding the fair market value thereof), then, in each such case, the Majority Warrant Holders may select an independent investment banking firm of nationally recognized standing and reasonably acceptable to the Company to make a determination as to the adjustment, if any, required to be made on a basis consistent with the essential intent and principles established herein as a result of such event in order to preserve the purchase rights represented by the Warrants. If the investment bank selected by the Majority Warrant Holders is not reasonably acceptable to the Company, and the Company and the Majority Warrant Holders cannot agree on a mutually acceptable investment bank, then the Company and the Majority Warrant Holders shall each choose one such investment bank and the respective chosen firms shall jointly select a third investment bank, which shall make the determination. The Company shall pay the costs and fees of each such investment bank (including any such investment bank selected by the Majority Warrant Holders), and the decision of the investment bank making such determination shall be final and binding on the Company and all affected holders of Warrants or Warrant Stock. Promptly after receipt of the opinion of such investment bank as to any such required adjustments, the Company shall take any actions necessary to implement same. 4.8. Other Provisions Applicable to Adjustments Under this Section. The following provisions shall be applicable to the adjustments provided for pursuant to this Section 4: (a) When Adjustments To Be Made. The adjustments required by this Section 4 shall be made whenever and as often as any specified event requiring such an adjustment shall occur. For the purpose of any such adjustment, any specified event shall be deemed to have occurred at the close of business on the date of its occurrence. -24- 29 (b) Record Date. In case the Company shall take a record of the holders of the Common Stock for the purpose of entitling them (i) to receive a dividend or other distribution payable in Common Stock, Convertible Securities or Stock Purchase Rights or (ii) to subscribe for or purchase Common Stock, Convertible Securities or Stock Purchase Rights, then all references in this Section 4 to the date of the issuance or sale of such shares of Common Stock, Convertible Securities or Stock Purchase Rights shall be deemed to be references to such record date. (c) Fractional Interests. In computing adjustments under this Section 4, fractional interests in Common Stock shall be taken into account to the nearest 1/100th of a share. (d) When Adjustment Not Required. If the Company shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend or distribution to which the provisions of Section 4.1 would apply, but shall, thereafter and before the distribution to stockholders thereof, legally abandon its plan to pay or deliver such dividend or distribution, then thereafter no adjustment shall be required by reason of the taking of such record and any such adjustment previously made in respect thereof shall be rescinded and annulled. (e) Maximum Exercise Price. Except as provided in Section 4.1 above, at no time shall the Exercise Price per share of Common Stock exceed the amount set forth in the first paragraph of the preamble of this Warrant. (f) Certain Limitations. Notwithstanding anything herein to the contrary, the Company agrees not to enter into any transaction that, by reason of any adjustment under Section 4.1, 4.2 or 4.3 above, would cause the Exercise Price to be less than the par value of the Common Stock, if any, unless the Company first reduces the par value of the Common Stock to be less than the Exercise Price that would result from such transaction. (g) Notice of Adjustments. Whenever the number of shares of Common Stock for which this Warrant is -25- 30 exercisable or the Exercise Price shall be adjusted pursuant to this Section 4, the Company shall forthwith prepare a certificate to be executed by the President or chief financial officer of the Company setting forth, in reasonable detail, the event requiring the adjustment and the method by which such adjustment was calculated, specifying the number of shares of Common Stock for which this Warrant is exercisable and (if such adjustment was made pursuant to Section 4.5) describing the number and kind of any other shares of stock or Other Property for which this Warrant is exercisable, and any related change in the Exercise Price, after giving effect to such adjustment or change. The Company shall promptly cause a signed copy of such certificate to be delivered to each Holder in accordance with Section 15.2. The Company shall keep at its principal office or at the Designated Office, if different, copies of all such certificates and cause the same to be available for inspection at said office during normal business hours by any Holder or any prospective transferee of a Warrant designated by a Holder thereof. (h) Independent Application. Except as otherwise provided herein, all subsections of this Section 4 are intended to operate independently of one another (but without duplication). If an event occurs that requires the application of more than one subsection, all applicable subsections shall be given independent effect without duplication. 5. NO IMPAIRMENT The Company shall not by any action, including, without limitation, amending its charter documents or through any reorganization, reclassification, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other similar voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be -26- 31 necessary or reasonably appropriate to protect the rights of the Holder against impairment. Without limiting the generality of the foregoing, the Company shall take all such action as may be necessary or reasonably 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, free and clear of all Liens, and shall use all commercially reasonably efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof as may be necessary to enable the Company to perform its obligations under this Warrant. 6. RESERVATION AND AUTHORIZATION OF COMMON STOCK From and after the Original Issue Date, the Company shall at all times reserve and keep available for issuance upon the exercise of the Warrants such number of its authorized but unissued shares of Common Stock as will be sufficient to permit the exercise in full of all outstanding Warrants. All shares of Common Stock issuable pursuant to the terms hereof, when issued upon exercise of this Warrant with payment therefor in accordance with the terms hereof, shall be duly and validly issued and fully paid and nonassessable, not subject to preemptive rights and shall be free and clear of all Liens. 7. NOTICE OF CORPORATE ACTIONS; TAKING OF RECORD; TRANSFER BOOKS 7.1. Notices of Corporate Actions. In the event of: (a) any capital reorganization of the Company, any reclassification or recapitalization of the capital stock of the Company or any consolidation or merger involving the Company and any other Person or any transfer or other disposition of all or substantially all the assets of the Company to another Person or (b) any amendment of the Certificate of Incorporation of the Company, the Company shall mail to each Holder of a Warrant in accordance with the provisions of Section 14.2 hereof a notice specifying the date or expected date on which any such reorganization, reclassification, recapitalization, consolidation, merger, transfer or disposition is to take place, the time, if any such time is to be fixed, as of which the holders of record of Common Stock shall be entitled to exchange their shares of Common Stock for the securities or Other Property deliverable upon such reorganization, reclassification, recapitalization, consolidation, merger, transfer or disposition, -27- 32 and a description in reasonable detail of the transaction. Such notice shall be mailed to the extent practicable at least thirty, but not more than ninety, days prior to the date therein specified; provided, that, in no event shall the Company be required to give the Holders notice of material non-public information prior to the time such information is made available to the holders of its Common Stock. In the event that the Company at any time sends any other notice to the holders of its Common Stock, it shall concurrently send a copy of such notice to each Holder of a Warrant. 7.2 Closing of Transfer Books. The Company shall not at any time, except upon dissolution, liquidation or winding up of the Company, close its stock transfer books or Warrant transfer books so as to result in preventing or delaying the exercise or transfer of any Warrant. 8. TRANSFER RESTRICTIONS The Holder, by acceptance of this Warrant, agrees to be bound by the provisions of this Section 8. 8.1. Restrictions on Transfers. Neither this Warrant nor any shares of Restricted Common Stock issued upon the exercise hereof shall be Transferred other than pursuant to an effective registration statement under the Securities Act or an exemption from the registration provisions thereof. No Transfer of this Warrant or any such shares of Restricted Stock, other than pursuant to such an effective registration statement, shall be valid or effective unless (a) the holder of the securities proposed to be transferred shall have delivered to the Company either a no-action letter from the Commission or an Opinion of Counsel to the effect that such proposed Transfer is exempt from the registration requirements of the Securities Act or (b) such Transfer is being made pursuant to Rule 144 or Rule 144A under the Securities Act and such holder shall have delivered to the Company a certificate setting forth the basis for applying such Rule to the proposed Transfer. Each certificate, if any, evidencing such shares of Restricted Common Stock issued upon any such Transfer, other than in a public offering pursuant to an effective registration statement, shall bear the restrictive legend set forth in Section 8.2(a), and each Warrant issued upon such Transfer shall bear the restrictive legend set forth in -28- 33 Section 8.2(b), unless the Holder delivers to the Company an Opinion of Counsel to the effect that such legend is not required for the purposes of compliance with the Securities Act. Holders of the Warrants or the Restricted Common Stock, as the case may be, shall not be entitled to Transfer such Warrants or such Restricted Common Stock except in accordance with this Section 8.1. 8.2. Restrictive Legends. (a) Except as otherwise provided in this Section 8, each certificate for Warrant Stock initially issued upon the exercise of this Warrant, and each certificate for Warrant Stock issued to any subsequent transferee of any such certificate, shall be stamped or otherwise imprinted with two legends in substantially the following forms: "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAW. NO TRANSFER OF THE SHARES REPRESENTED BY THIS CERTIFICATE SHALL BE VALID OR EFFECTIVE UNLESS (A) SUCH TRANSFER IS MADE PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR (B) THE HOLDER OF THE SECURITIES PROPOSED TO BE TRANSFERRED SHALL HAVE DELIVERED TO THE COMPANY AN OPINION OF COUNSEL EXPERIENCED IN SECURITIES MATTERS AND REASONABLY ACCEPTABLE TO THE COMPANY TO THE EFFECT THAT SUCH PROPOSED TRANSFER IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE ACT OR (C) SUCH TRANSFER IS PURSUANT TO RULE 144 OR RULE 144A UNDER THE ACT AND SUCH HOLDER(S) SHALL HAVE DELIVERED TO THE COMPANY A CERTIFICATE SETTING FORTH THE BASIS FOR APPLYING SUCH RULE TO THE PROPOSED TRANSFER." "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE ENTITLED TO THE BENEFIT OF AND ARE SUBJECT TO CERTAIN OBLIGATIONS SET FORTH IN THE WARRANT PURSUANT TO THE EXERCISE OF WHICH SUCH SHARES WERE ISSUED. A COPY OF SUCH WARRANT IS AVAILABLE AT THE EXECUTIVE OFFICES OF THE COMPANY." (b) Except as otherwise provided in this Section 8, each Warrant shall be stamped or otherwise imprinted with a legend in substantially the following form: -29- 34 "NEITHER THE WARRANTS REPRESENTED BY THIS CERTIFICATE NOR ANY OF THE SECURITIES ISSUABLE UPON EXERCISE THEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAW. NO TRANSFER OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE OR OF THE STOCK ISSUABLE UPON EXERCISE THEREOF SHALL BE VALID OR EFFECTIVE UNLESS (A) SUCH TRANSFER IS MADE PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR (B) THE HOLDER OF THE SECURITIES PROPOSED TO BE TRANSFERRED SHALL HAVE DELIVERED TO THE COMPANY EITHER A NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION OR AN OPINION OF COUNSEL EXPERIENCED IN SECURITIES MATTERS AND REASONABLY ACCEPTABLE TO THE COMPANY TO THE EFFECT THAT SUCH PROPOSED TRANSFER IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE ACT OR (C) SUCH TRANSFER IS PURSUANT TO RULE 144 OR RULE 144A UNDER THE ACT AND SUCH HOLDER SHALL HAVE DELIVERED TO THE COMPANY A CERTIFICATE SETTING FORTH THE BASIS FOR APPLYING SUCH RULE TO THE PROPOSED TRANSFER." 8.3. Termination of Securities Law Restrictions. Not withstanding the foregoing provisions of this Section 8, the restrictions imposed by Section 8.1(b) upon the transferability of the Warrants and the Restricted Common Stock and the legend requirements of Section 8.2 shall terminate as to any particular Warrant or shares of Restricted Common Stock when the Company shall have received from the Holder thereof an Opinion of Counsel to the effect that such legend is not required in order to ensure compliance with the Securities Act. Whenever the restrictions imposed by Sections 8.1(b) and 8.2 shall terminate as to this Warrant, as hereinabove provided, the Holder hereof shall be entitled to receive from the Company, at the expense of the Company, a new Warrant bearing the following legend in place of the restrictive legend set forth hereon: "THE RESTRICTIONS ON TRANSFERABILITY OF THE WITHIN WARRANT CONTAINED IN SECTIONS 8.1(b) AND 8.2 HEREOF TERMINATED ON ______________, 19__, AND ARE OF NO FURTHER FORCE AND EFFECT." All Warrants issued upon registration of transfer, division or combination of, or in substitution for, any Warrant or Warrants entitled to bear such legend shall have a similar legend endorsed -30- 35 thereon. Wherever the restrictions imposed by this Section shall terminate as to any share of Restricted Common Stock, as hereinabove provided, the Holder thereof shall be entitled to receive from the Company, at the Company's expense, a new certificate representing such Common Stock not bearing the restrictive legend set forth in Section 8.2(a). 9. REGISTRATION RIGHTS 9.1. Certain Definitions. For the purposes of this Section 9: (a) The Holders of Warrants and the Series A Warrants and the holders of Warrant Stock (as defined in Section 9.1(b)) are collectively referred to as "WS Holders". (b) "Warrant Stock" shall deemed to include (i) the shares of Common Stock issued, issuable or both (as the context may require) upon the exercise of Warrants and the Series A Warrants until such time as such shares of Common Stock have either been (a) Transferred in a public offering pursuant to a registration statement filed under the Securities Act or (b) Transferred in a transaction exempt from the registration and prospectus delivery requirements of the Securities Act under Section 4(1) thereof with all transfer restrictions and restrictive legends with respect to such Common Stock being removed in connection with such transaction,(ii) any other securities issued as (or issuable upon the conversion or exercise of any warrant, right or other security which is issued as) a dividend or other distribution with respect to, or in exchange by the Company generally for, or in replacement by the Company generally of, any shares of Warrant Stock and (iii) any securities issued in exchange for any such Warrant Stock in any merger or reorganization of the Company, but in the cases of clauses (ii) and (iii) only so long as such securities have not been registered and Transferred pursuant to the Securities Act or Transferred in a transaction exempt from the registration and prospectus delivery requirements of the Securities Act under Section 4(1) thereof so that all transfer restrictions and restrictive legends with respect to such securities are removed in connection with such Transfer. -31- 36 (c) Each WS Holder shall be deemed to "hold", as of any specified date, the aggregate of (i) the number of shares of Warrant Stock held by such WS Holder as of such date plus (ii) the number of shares of Warrant Stock issuable upon exercise of any Warrants and Series A Warrants held by such WS Holder as of such date. (d) The total number of shares of Warrant Stock deemed "outstanding" as of a specified date will be equal to (i) the total number of shares of Warrant Stock Outstanding as of such date plus (ii) the number of shares of Warrant Stock issuable upon exercise of all outstanding Warrants and Series A Warrants as of such date. (e) "Registrable Securities" shall mean any Warrants, any Series A Warrants and/or any shares of Warrant Stock. 9.2. Demand Registration. (a) In the event the Company receives at any time after August 31, 1997 a written request from one or more WS Holders holding in the aggregate at least seventy-six percent of the number of shares of Warrant Stock then outstanding (the "Demanding Holders") that the Company file a registration statement under the Securities Act for the sale or other disposition of at least a majority of the Registrable Securities (a "Demand Registration"), the Company shall promptly give written notice of such request to each other WS Holder and each such WS Holder may elect, by giving written notice of such election to the Company within ten (10) Business Days after receipt of the Company's notice, to have some or all of the Registrable Securities held by it included in such registration. At the option of the Demanding Holders, such request may specify that the requested registration will be for an offering on a delayed or continual basis pursuant to Rule 415 under the Securities Act (a "Shelf Registration"). (b) Following receipt of such a request for a Demand Registration, the Company shall: (1) File the requested registration statement with the Commission as promptly as practicable, and shall use all commercially reasonable efforts to have the registration declared effective under the Securities Act as soon as reasonably practicable, in each instance giving due -32- 37 regard to the need to prepare and file current financial statements, conduct due diligence and complete other actions that are reasonably necessary to effect a registered public offering; and (2) Use all commercially reasonable efforts to keep the such registration statement Continuously Effective (x) if a Demand Registration, for up to 90 days or until such earlier date as of which all Registrable Securities covered by such registration statement shall have been disposed of in the manner described in the registration statement, and (y) if a Shelf Registration, for 270 days. Notwithstanding the foregoing, if for any reason the effectiveness of a Demand Registration is suspended or postponed as permitted by Subsection (d) below, the foregoing period shall be extended by the aggregate number of days of such suspension or postponement. (c) The Company shall not be required to effect a registration of Registrable Securities pursuant to a Demand Registration on more than one occasion. For purposes of this Subsection (c), registration shall not be deemed to have been effected (i) unless a registration statement with respect thereto has become effective, (ii) if after such registration statement has become effective, such registration or the related offer, sale or distribution of Registrable Securities thereunder is interfered with by any stop order, injunction or other order or requirement of the Commission or other governmental agency or court for any reason not attributable to the Selling Holders and such interference is not thereafter eliminated or (iii) if the conditions to closing specified in the underwriting agreement, if any, entered into in connection with such registration are not satisfied or waived, other than by reason of a failure on the part of the Selling Holders. If the Company shall have complied with its obligations under this Section 9, a right to demand a registration pursuant to this Section 9.2 shall be deemed to have been satisfied (i) if a Demand Registration other than a Shelf Registration, upon the earlier of (x) the date as of which all of the Registrable Securities included therein shall have been disposed of pursuant to the registration statement and (y) the date as of which such Demand Registration shall have been Continuously Effective for a period of 90 days, and (ii) if a Shelf Registration, upon the effective date of a Shelf Registration, provided no stop order or similar order, or -33- 38 proceedings for such an order, is thereafter entered or initiated. (d) The Company shall be entitled to postpone for up to 90 days the filing of any Demand Registration statement otherwise required to be prepared and filed pursuant to this Section 9.2 or suspend any such Demand Registration for up to 90 days, if the Board of Directors of the Company determines, in its good faith reasonable judgment that such registration and the Transfer of Warrant Stock contemplated thereby would materially interfere with, or require premature disclosure of, any financing, acquisition or reorganization involving the Company or any of its wholly owned subsidiaries and the Company promptly gives the Demanding Holders notice of such determination; provided, however, that the Company shall not have postponed pursuant to this Subsection (d) the filing of any other Demand Registration statement otherwise required to be prepared and filed pursuant to this Section 9.2, or suspended any such Demand Registration, during the 12 month period ended on the date of the relevant request pursuant to Subsection (a) above and provided further, that the Expiration Date shall be extended by the period of any such postponement or suspension. (e) A registration pursuant to this Section 9.2 shall be on such appropriate registration form of the Commission available to the Company as shall (i) be selected by the Company and be reasonably acceptable to the Majority Selling Holders and (ii) permit the disposition of the Warrant Stock in accordance with the intended method or methods of disposition specified in the request made pursuant to Subsection (a) above. If any registration pursuant to this Section 9.2 involves an underwritten offering (whether on a "firm", "best efforts" or "all reasonable efforts" basis or otherwise), or an agented offering, the Majority Selling Holders shall have the right to select the underwriter or underwriters and manager or managers to administer such underwritten offering or the placement agent or agents for such agented offering from among the entities listed in Schedule B hereto (or any successors of any such entities), it being understood that the Majority Selling Holders shall use commercially reasonable efforts to select one or more of the first three listed entities subject to arriving at reasonably acceptable terms and conditions for the offering. -34- 39 (f) The Company may elect to include shares of Common Stock to be sold for its account in any such Demand Registration (including a Shelf Registration); provided, however, if the managing underwriter shall advise the Demanding Holders in writing (with a copy to the Company) that, in its opinion, the number of shares of Common Stock requested to be included in such Demand Registration would adversely affect such offering or the price to be realized therefor, or the timing thereof, then the number of shares proposed to be included in such Demand Registration by the Company shall be reduced, to such number that the Demanding Holders are advised can be sold without such effect in such Demand Registration. 9.3. Piggyback Registration. (a) If at any time the Company proposes to register (including for this purpose a registration effected by the Company for shareholders of the Company other than the WS Holders) equity securities under the Securities Act in connection with the public offering solely for cash on Form S-1, S-2 or S-3 (or any replacement or successor forms), the Company shall promptly give each WS Holder written notice of such registration (a "Piggyback Registration"). Upon the written request of each WS Holder given within 20 days following the date of such notice, the Company shall cause to be included in such registration statement and use its best efforts to be registered under the Securities Act all the Registrable Securities that each such WS Holder shall have requested to be registered. The Company shall have the absolute right to withdraw or cease to prepare or file any registration statement for any offering referred to in this Section 9.3 without any obligation or liability to any WS Holder. (b) If the managing underwriter shall advise the Company in writing (with a copy to each Selling Holder) that, in its opinion, the amount of Registrable Securities requested to be included in such registration would materially adversely affect such offering, or the timing thereof, then the Company will include in such registration, to the extent of the amount and class which the Company is so advised can be sold without such material adverse effect in such offering: first, all securities proposed to be sold by the Company for its own account; and second, the Warrant Stock requested to be included in such registration by WS Holders and all other securities requested to be included in such registration by Persons other than the Company and WS Holders, the securities covered by this clause -35- 40 second to be included pro rata based on the estimated gross proceeds from the sale thereof. (c) Each WS Holder shall be entitled to have its Registrable Securities included in an unlimited number of Piggyback Registrations pursuant to this Section 9.3. 9.4. Registration Procedures. Whenever required under Section 9.2 or Section 9.3 hereof to effect the registration of any Registrable Securities, the Company shall, as expeditiously as practicable: (a) Prepare and file with the Commission a registration statement with respect to such Warrant Stock and use the Company's best efforts to cause such registration statement to become effective; provided, however, that before filing a registration statement or prospectus or any amendments or supplements thereto, including documents incorporated by reference after the initial filing of the registration statement and prior to effectiveness thereof, the Company shall furnish to one firm of counsel for the Selling Holders (selected by Majority Selling Holders) copies of all such documents in the form substantially as proposed to be filed with the Commission at least four Business Days prior to filing for review and comment by such counsel, which opportunity to comment shall include an absolute right to control or contest disclosure if the applicable Selling Holder reasonably believes that it may be subject to controlling person liability under applicable securities laws with respect thereto. (b) Prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Securities Act and rules thereunder with respect to the disposition of all securities covered by such registration statement. If the registration is for an underwritten offering, the Company shall amend the registration statement or supplement the prospectus whenever required by the terms of the underwriting agreement entered into pursuant to Section 9.4(e). Subject to Rule 415 under the Securities Act, if the registration statement is a Shelf Registration, the Company shall amend the registration statement or supplement the prospectus so that it will remain current and in compliance with the requirements of the Securities Act for 270 days or after its effective date, and if during such period any event or development occurs as a result of which the registration statement or prospectus contains a misstatement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading, the Company shall promptly notify each Selling Holder, amend the registration -36- 41 statement or supplement the prospectus so that each will thereafter comply with the Securities Act and furnish to each Selling Holder of Registrable Securities such amended or supplemented prospectus, which each such Holder shall thereafter use in the Transfer of Warrant Stock covered by such registration statement. Pending such amendment or supplement each such Selling Holder shall cease making offers or Transfers of Registerable Securities pursuant to the prior prospectus. In the event that any Registrable Securities included in a registration statement subject to, or required by, this Warrant remain unsold at the end of the period during which the Company is obligated to use its best efforts to maintain the effectiveness of such registration statement, theCompany may file a post-effective amendment to the registration statement for the purpose of removing such Registrable Securities from registered status. (c) Furnish to each Selling Holder of Registrable Securities, without charge, such number of copies of the registration statement, any pre-effective or post-effective amendment thereto, the prospectus, including each preliminary prospectus and any amendments or supplements thereto, in each case in conformity with the requirements of the Securities Act and the rules thereunder, and such other related documents as any such Selling Holder may reasonably request in order to facilitate the disposition of Registrable Securities owned by such Selling Holder. (d) Use all commercially reasonable efforts (i) to register and qualify the securities covered by such registration statement under such other securities or Blue Sky laws of such states or jurisdictions as shall be reasonably requested by the managing underwriter (as applicable, or if inapplicable, the Majority Selling -37- 42 Holders), and (ii) to obtain the withdrawal of any order suspending the effectiveness of a registration statement, or the lifting of any suspension of the qualification (or exemption from qualification) of the offer and transfer of any of the Registrable Securities in any jurisdiction, at the earliest possible moment; provided, however, that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions. (e) In the event of any underwritten or agented offering, enter into and perform the Company's obligations under an underwriting or agency agreement (including indemnification and contribution obligations of underwriters or agents), in usual and customary form, with the managing underwriter or underwriters of or agents for such offering. The Company shall also cooperate with the Majority Selling Holders and the managing underwriter for such offering in the marketing of the Warrant Stock, including making available the Company's officers, accountants, counsel, premises, books and records for such purpose, but the Company shall not be required to incur any material out-of-pocket expense pursuant to this sentence. (f) Promptly notify each Selling Holder of any stop order issued or threatened to be issued by the Commission in connection therewith (and take all reasonable actions required to prevent the entry of such stop order or to remove it if entered. (g) Make generally available to the Company's security holders copies of all periodic reports, proxy statements, and other information referred to in Section 9.9(a) and an earnings statement satisfying the provisions of Section 11(a) of the Securities Act no later than 90 days following the end of the 12-month period beginning with the first month of the Company's first fiscal quarter commencing after the effective date of each registration statement filed pursuant to this Section 9. (h) Make available for inspection by any Selling Holder, any underwriter participating in such offering and the representatives of such Selling Holder and underwriter -38- 43 (but not more than one firm of counsel to such Selling Holders), all financial and other information as shall be reasonably requested by them, and provide the Selling Holder, any underwriter participating in such offering and the representatives of such Selling Holder and underwriter the opportunity to discuss the business affairs of the Company with its principal executives and independent public accountants who have certified the audited financial statements included in such registration statement, in each case all as necessary to enable them to exercise their due diligence responsibility under the Securities Act; provided, however, that information that the Company determines, in good faith, to be confidential and which the Company advises such Person in writing, is confidential shall not be disclosed unless such Person signs a confidentiality agreement reasonably satisfactory to the Company or the related Selling Holder of Registrable Securities agrees to be responsible for such Person's breach of confidentiality on terms reasonably satisfactory to the Company. (i) Use the Company's best efforts to obtain a so-called "comfort letter" from its independent public accountants, and legal opinions of counsel to the Company, in customary form and covering such matters of the type customarily covered by such letters, and in a form that shall be reasonably satisfactory to the Majority Selling Holders. The Company shall furnish to each Selling Holder a signed counterpart of any such comfort letter or legal opinion. Delivery of any such opinion or comfort letter shall be subject to the recipient furnishing such written representations or acknowledgments as are customarily provided by selling shareholders who receive such comfort letters or opinions. (j) Provide and cause to be maintained a transfer agent and registrar for all Registrable Securities covered by such registration statement from and after a date not later than the effective date of such registration statement. (k) Use all reasonable efforts to cause the Registrable Securities covered by such registration statement (i) if the Common Stock is then listed on a securities exchange or included for quotation in a -39- 44 recognized trading market, to continue to be so listed or included for a reasonable period of time after the offering, and (ii) to be registered with or approved by such other United States or state governmental agencies or authorities as may be necessary by virtue of the business and operations of the Company to enable the Selling Holders of Registrable Securities to consummate the disposition of such Registrable Securities. (l) Use the Company's reasonable efforts to provide a CUSIP number for the Common Stock prior to the effective date of the first registration statement including Registrable Securities. (m) Take such other actions as are reasonably required in order to expedite or facilitate the disposition of Registrable Securities included in each such registration. 9.5. Selling Holders' Obligations. (a) It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Section 9 with respect to the Registrable Securities of any Selling Holder that such Selling Holder shall: (i) Furnish to the Company such information regarding such Selling Holder, the number of Registrable Securities owned by it, and the intended method of disposition of such securities as shall be required to effect the registration of such Selling Holder's Registrable Securities, and to cooperate with the Company in preparing such registration; and (ii) Agree to sell their Registrable Securities to the underwriters at the same price and on substantially the same terms and conditions as the Company or the other Persons on whose behalf the registration statement was being filed have agreed to sell their securities, and to execute the underwriting agreement agreed to by the Majority Selling Holders (in the case of a registration under Section 9.2) or the Company and the Majority Selling Holders (in the case of a registration under Section 9.3). (b) Each Selling Holder shall notify the Company of any sales of such Selling Holder's shares registered for sale pursuant to this Section 9; provided, however, it is -40- 45 understood that any failure so to notify the Company shall not be deemed a default hereunder or to subject any Selling Holder to any claim for damages or expenses whatsoever. 9.6. Expenses of Registration. Expenses incurred in connection with registrations under this Section 9 shall be allocated and paid as follows: (a) With respect to each Demand Registration (including any Shelf Registration), the Company shall bear and pay all reasonable expenses incurred in connection with any registration, filing, or qualification of Registrable Securities with respect to such Demand Registration for each Selling Holder, including all registration, filing and NASD fees, all fees and expenses of complying with securities or blue sky laws, all word processing, duplicating and printing expenses, messenger and delivery expenses, the reasonable fees and disbursements of counsel for the Company, and of the Company's independent public accountants, including the expenses of "cold comfort" letters required by or incident to such performance and compliance, and the reasonable fees and disbursements of one firm of counsel for the Selling Holders of Registrable Securities (the "Registration Expenses"), but excluding underwriting discounts and commissions relating to Registrable Securities (which shall be paid on a pro rata basis by the Selling Holders) provided, however, that the Company shall not be required to pay for any expenses of any registration proceeding begun pursuant to Section 9.2 if the registration is subsequently withdrawn at the request of the Majority Selling Holders (in which case all Selling Holders shall bear such expense), unless WS Holders whose Registrable Securities constitutes a majority of the Registrable Securities then outstanding agree that such withdrawn registration shall constitute the exercise of their one demand registration under Section 9.2 hereof. The counsel for the Selling Holders shall be selected by Demanding Holders owning a majority of the Registrable Securities owned by Demanding Holders to be included in a Demand Registration and, in the case of a Piggyback Registration, by Selling Holders owning a majority of the Registrable Securities to be included in such registration; provided that in the case of a Piggyback Registration, the Selling Holders shall use one firm of counsel to represent all such holders and shall endeavor in -41- 46 good faith, with any other holders of securities to be included in such registration, to select one firm of counsel to represent all such selling securities holders. (b) The Company shall bear and pay all Registration Expenses incurred in connection with any Piggyback Registrations pursuant to Section 9.3 for each Selling Holder, but excluding underwriting discounts and commissions relating to Registrable Securities (which shall be paid on a pro rata basis by the Selling Holders of Registrable Securities). (c) Any failure of the Company to pay any Registration Expenses as required by this Section 9.6 shall not relieve the Company of its obligations under this Section 9. 9.7. Indemnification; Contribution. If any Registrable Securities are included in a registration statement under this Section 9: (a) To the extent permitted by applicable law, the Company shall indemnify and hold harmless each Selling Holder, each Person, if any, who controls such Selling Holder within the meaning of the Securities Act, and each officer, director, partner, and employee of such Selling Holder and such controlling Person, against any and all losses, claims, damages, liabilities and expenses (joint or several), including attorneys' fees and disbursements and expenses of investigation, incurred by such party pursuant to any actual or threatened action, suit, proceeding or investigation, or to which any of the foregoing Persons may become subject under the Securities Act, the Exchange Act or other federal or state laws, insofar as such losses, claims, damages, liabilities and expenses arise out of or are based upon any of the following statements, omissions or violations pursuant to a final non-appealable order (collectively a "Violation"): (i) any untrue statement or alleged untrue statement of a material fact contained in such registration statement, including any preliminary prospectus or final prospectus contained therein, or any amendments or supplements thereto; -42- 47 (ii) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading; or (iii) any violation or alleged violation by the Company of the Securities Act, the Exchange Act, any applicable state securities law or any rule or regulation promulgated under the Securities Act, the Exchange Act or any applicable state securities law; provided, however, that the indemnification required by this Section 9.7(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or expense if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld), nor shall the Company be liable in any such case for any such loss, claim, damage, liability or expense to the extent that it is determined by a court of competent jurisdiction by a final non-appealable order to have solely arisen out of or be based upon a Violation which occurred in reliance upon and in conformity with written information furnished to the Company by the indemnified party expressly for use in connection with such registration; provided, further, that the indemnity agreement contained in this Section 9.7(a) shall not apply to any underwriter to the extent that any such loss is based on or arises out of an untrue statement or alleged untrue statement of a material fact, or an omission or alleged omission to state a material fact, contained in or omitted from any preliminary prospectus if the final prospectus shall correct such untrue statement or alleged untrue statement, or such omission or alleged omission, and a copy of the final prospectus has not been sent or given to such person at or prior to the confirmation of sale to such person if such underwriter was under an obligation to deliver such final prospectus and failed to do so. The Company shall also indemnify underwriters, selling brokers, dealer managers and similar securities industry professionals participating in the distribution, their officers, directors, agents and employees and each person who controls such persons (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) to the same extent as provided above with respect to the indemnification of the Selling Holders. -43- 48 (b) To the extent permitted by applicable law, each Selling Holder shall indemnify and hold harmless the Company, each of its directors, each of its officers and employees, each Person, if any, who controls the Company within the meaning of the Securities Act, any other Selling Holder, any controlling Person of any such other Selling Holder and each officer, director, partner, and employee of such other Selling Holder and such controlling Person, against any and all losses, claims, damages, liabilities and expenses (joint and several), including attorneys' fees and disbursements and expenses of investigation, incurred by such party pursuant to any actual or threatened action, suit, proceeding or investigation, or to which any of the foregoing Persons may otherwise become subject under the Securities Act, the Exchange Act or other federal or state laws, insofar as such losses, claims, damages, liabilities and expenses are determined by a court of competent jurisdiction by a final non-appealable order to have solely arisen out of or be based upon a Violation that occurred in reliance upon and in conformity with written information furnished by such Selling Holder expressly for use in connection with such registration; provided, however, that (x) the indemnification required by this Section 9.7(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or expense if settlement is effected without the consent of the relevant Selling Holder of Registrable Securities, which consent shall not be unreasonably withheld, and (y) in no event shall the amount of any indemnity under this Section 9.7(b) exceed the net proceeds from the applicable offering received by such Selling Holder. (c) Promptly after receipt by an indemnified party under this Section 9.7 of notice of the commencement of any action, suit, proceeding, investigation or threat thereof made in writing for which such indemnified party may make a claim under this Section 9.7, such indemnified party shall deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party shall have the -44- 49 right to retain its own counsel, with the fees and disbursements and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding. The failure to deliver written notice to the indemnifying party within a reasonable time following the commencement of any such action, if prejudicial to its ability to defend such action, shall relieve such indemnifying party of any liability to the indemnified party under this Section 9.7 but shall not relieve the indemnifying party of any liability that it may have to any indemnified party otherwise than pursuant to this Section 9.7. Any reasonable fees and expenses incurred by the indemnified party (including any fees and expenses incurred in connection with investigating or preparing to defend such action or proceeding) shall be paid to the indemnified party, as incurred, within thirty (30) days of written notice thereof to the indemnifying party (regardless of whether it is ultimately determined that an indemnified party is not entitled to indemnification hereunder). Any such indemnified party shall have the right to employ separate counsel in any such action, claim or proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be the expenses of such indemnified party unless (i) the indemnifying party has agreed to pay such fees and expenses or (ii) the indemnifying party shall have failed to promptly assume the defense of such action, claim or proceeding or (iii) the named parties to any such action, claim or proceeding (including any impleaded parties) include both such indemnified party and the indemnifying party, and such indemnified party shall have been advised by counsel that there may be one or more legal defenses available to it which are ifferent from or in addition to those available to the indemnifying party and that the assertion of such defenses would create a conflict of interest such that counsel employed by the indemnifying party could not faithfully represent the indemnified party (in which case, if such indemnified party notifies the indemnifying party in writing that it elects to employ separate counsel at the expense of the indemnifying party, the indemnifying party shall not have the right to assume the defense of such -45- 50 action, claim or proceeding on behalf of such indemnified party, it being understood, however, that the indemnifying party shall not, in connection with any one such action, claim or proceeding or separate but substantially similar or related actions, claims or proceedings in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the reasonable fees and expenses of more than one separate firm of attorneys (together with appropriate local counsel) at any time for all such indemnified parties, unless in the reasonable judgment of such indemnified party a conflict of interest may exist between such indemnified party and any other of such indemnified parties with respect to such action, claim or proceeding, in which event the indemnifying party shall be obligated to pay the fees and expenses of such additional counsel or counsels). No indemnifying party shall be liable to an indemnified party for any settlement of any action, proceeding or claim without the written consent of the indemnifying party, which consent shall not be unreasonably withheld. (d) If the indemnification required by this Section 9.7 from the indemnifying party is unavailable to an indemnified party hereunder in respect of any losses, claims, damages, liabilities or expenses referred to in this Section 9.7: (i) The indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities or expenses in such proportion as is appropriate to reflect the relative fault of the indemnifying party and indemnified parties in connection with the actions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative fault of such indemnifying party and indemnified parties shall be determined by reference to, among other things, whether any Violation has been committed by, or relates to information supplied by, such indemnifying party or indemnified parties, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such -46- 51 Violation. The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and expenses referred to above shall be deemed to include, subject to the limitations set forth in Section 9.7(a) and Section 9.7(b), any reasonable legal or other fees or expenses reasonably incurred by such party in connection with any investigation or proceeding. (ii) The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 9.7(d) were determined by pro rata allocation or by any other method of allocation which does not take into account the equitable considerations referred to in Section 9.7(d)(i) above. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. (e) If indemnification is available under this Section 9.7, the indemnifying parties shall indemnify each indemnified party to the full extent provided in this Section 9.7 without regard to the relative fault of such indemnifying party or indemnified party or any other equitable consideration referred to in Section 9.7(d) above. (f) The indemnification required by this Section 9.7 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or expense, loss, damage or liability is incurred. In the event that it shall be subsequently determined that the recipient of any such periodic payment shall not be entitled to indemnification hereunder, such recipient promptly shall repay such payments, together with interest thereon at the Agreed Rate from the date of original receipt to the date of repayment. (g) The obligations of the Company and the Selling Holders of Registrable Securities under this Section 9.7 shall survive the completion of any offering of Registrable Securities pursuant to a registration statement under this Section 9, and otherwise. -47- 52 9.8. Holdback. Each WS Holder entitled pursuant to this Section 9 to have Registrable Securities included in a registration statement prepared pursuant to this Section 9, if so requested by the managing underwriter in connection with an offering of any Registrable Securities, shall not effect any public sale or distribution of shares of Common Stock, Convertible Securities or Stock Purchase Rights (excluding any sale pursuant to Rule 144 or Rule 144A under the Securities Act and any sale as part of such underwritten or agented registration), during the 5-day period prior to, and during the 45-day period beginning on, the date such registration statement is declared effective under the Securities Act by the Commission, provided that such WS Holder is timely notified of such effective date in writing by the Company or such managing underwriter. 9.9. Additional Covenants of the Company. The Company hereby agrees and covenants as follows: (a) The Company shall file as and when applicable, on a timely basis, all reports required to be filed by it under the Exchange Act. If the Company is not required to file reports pursuant to the Exchange Act, upon the request of any WS Holder, the Company shall make publicly available the information specified in subparagraph (c)(2) of Rule 144 of the Securities Act, and take such further action as may be reasonably required from time to time and as may be within the reasonable control of the Company, to enable the WS Holders to Transfer Warrants or Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by Rule 144 under the Securities Act or any similar rule or regulation hereafter adopted by the Commission. In addition, promptly upon the request of any WS Holder, the Company shall provide such WS Holder with such publicly available financial statements, reports and other information as may be required to permit such WS Holder to Transfer shares of Registrable Securities to Qualified Institutional Investors pursuant to Rule 144A of the Securities Act. (b) The Company shall not, and shall not permit its majority owned subsidiaries to, effect any public sale or distribution of any shares of Common Stock, Convertible Securities or Stock Purchase Rights during the 5 Business Days prior to, and during the 90-day period beginning on, -48- 53 the commencement of a public distribution of Registrable Securities pursuant to any registration statement prepared pursuant to this Section 9 (other than by the Company pursuant to such registration if the registration is pursuant to Section 9.3 or by the Company pursuant to any dividend reinvestment plan offered by it to its stockholders). The Company shall not effect any registration of its securities (other than on Form S-4, Form S-8, or any successor forms to such forms or pursuant to such other registration rights agreements as may be approved in writing by the Majority Selling Holders) or effect any public or private sale or distribution of any of its securities, including a sale pursuant to Regulation D under the Securities Act, whether on its own behalf or at the request of any holder or holders of such securities from the date of a request for a Demand Registration pursuant to Section 9.2 until 90 days following the effective date of such Demand Registration statement, unless the Company shall have previously notified in writing all Selling Holders of the Company's desire to do so, and the Majority Selling Holders or the managing underwriter, if any, shall have consented thereto in writing. (c) Any agreement entered into on or after August 31, 1997 pursuant to which the Company or any of its majority owned subsidiaries issues or agrees to issue any Common Stock (including, without limitation, any employee stock option, stock purchase agreement, merger agreement or other agreement) shall contain a provision whereby any holder receiving such Common Stock who will hold more than one percent (1%) of the amount of such Common Stock then outstanding shall agree not to effect any public sale or distribution of any such Common Stock during the periods described in the second sentence of Section 9.9(b), in each case including a sale pursuant to Rule 144 under the Securities Act (unless such Person is prevented by applicable statute or regulation from entering into such an agreement). (d) Subject to Section 13, the Company shall not, directly or indirectly, (x) enter into any merger, consolidation or reorganization in which the Company shall not be the surviving corporation or (y) Transfer or agree to Transfer all or substantially all the Company's assets, -49- 54 unless prior to such merger, consolidation, reorganization or asset Transfer, the surviving corporation or the Transferee, respectively, shall have agreed in writing to assume the obligations of the Company under this Agreement, and for that purpose references hereunder to "Registrable Securities" shall be deemed to include the securities which the WS Holders would be entitled to receive in exchange for Registrable Securities pursuant to any such merger, consolidation or reorganization. 10. LOSS OR MUTILATION Upon receipt by the Company from any Holder of evidence reasonably satisfactory to it of the ownership of and the loss, theft, destruction or mutilation of this Warrant and an indemnity reasonably satisfactory to it (it being understood that the written indemnification agreement of or affidavit of loss of The Daiwa Bank, Limited shall be a sufficient indemnity) and, in case of mutilation, upon surrender and cancellation hereof, the Company will execute and deliver in lieu hereof a new Warrant of like tenor to such Holder; provided, however, in the case of mutilation, no indemnity shall be required if this Warrant in identifiable form is surrendered to the Company for cancellation. 11. OFFICE OF THE COMPANY As long as any of the Warrants remain outstanding, the Company shall maintain an office or agency, which may be the principal executive offices of the Company (the "Designated Office"), where the Warrants may be presented for exercise, registration of transfer, division or combination as provided in this Warrant. Such Designated Office shall initially be the office of the Company at Cedar Rapids, Iowa. The Company may from time to time change the Designated Office to another office of the Company or its agent within the United States by notice given to all registered holders of Warrants at least ten Business Days prior to the effective date of such change. 12. FINANCIAL AND BUSINESS INFORMATION Until the Expiration Date, the Company shall deliver to each Holder of Warrants or of Warrant Stock one copy of each of the following items: -50- 55 (i) promptly after filing thereof, copies of all regular and periodic reports, proxy statements (other than preliminary) and registration statements (other than registration statements on Forms S-3 (relating to debt securities) and S-8) which the Company may file with the Securities and Exchange Commission or any governmental agency substituted therefor. (ii) promptly upon their becoming available, copies of all financial statements, reports, notices and proxy statements sent or made available by the Company to the holders of any class of its securities generally or by any Subsidiary of the Company to the holders of any class of its securities generally; and (iii) with reasonable promptness, such other public information relating to the Company and its Subsidiaries as the Holder may, from time to time, reasonably request. 13. REPURCHASE BY THE COMPANY OF WARRANTS The Company shall have the right (the "Call"), upon written notice (the "Call Notice") to the Holders of all outstanding Warrants given at any time on or after the date of the occurrence of the Triggering Event and before August 31, 1997, to repurchase on the date specified in the notice from each Holder of a Warrant all of such Warrant for an amount equal to the result (rounded to the nearest cent) obtained by multiplying One Dollar ($1.00) by a fraction, the numerator of which shall be the aggregate number of shares for which this Warrant may be exercised and the denominator of which shall be the aggregate number of shares for which all outstanding Series B Warrants may be exercised, and in all events not more than One Dollar ($1.00) for all Series B Warrants. On the date of any repurchase of this Warrant pursuant to this Section 13, the Holder shall assign to the Company such Warrant without any representation or warranty (except as to title and the absence of Liens), by the surrender of this Warrant at the Designated Office against payment of the repurchase price therefor. 14. MISCELLANEOUS -51- 56 14.1. Nonwaiver. No course of dealing or any delay or failure to exercise any right hereunder on the part of the Company or the Holder shall operate as a waiver of such right or otherwise prejudice the rights, powers or remedies of such Person. 14.2. Notice Generally. Any notice, demand, request, consent, approval, declaration, delivery or communication hereunder to be made pursuant to the provisions of this Warrant shall be sufficiently given or made if in writing and either delivered in person with receipt acknowledged or sent by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: (a) if to any Holder of this Warrant or of Warrant Stock issued upon the exercise hereof, at its last known address appearing on the books of the Company maintained for such purpose; (b) if to the Company, at its Designated Office; or at such other address as may be substituted by notice given as herein provided. The giving of any notice required hereunder may be waived in writing by the party entitled to receive such notice. Every notice, demand, request, consent, approval, declaration, delivery or other communication hereunder shall be deemed to have been duly given or served on the date on which personally delivered, with receipt acknowledged, or three Business Days after the same shall have been deposited in the United States mail, or one Business Day after the same shall have been delivered to Federal Express or another overnight courier service. 14.3. Indemnification. If the Company fails to make, when due, any payments provided for in this Warrant, the Company shall pay to the Holder hereof (a) interest at the Agreed Rate on any amounts due and owing to such Holder from the date due until the date of payment and (b) such further amounts as shall be sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys' fees and expenses incurred by such Holder in collecting any amounts due hereunder. The Company shall indemnify, save and hold harmless the Holder hereof and the Holders of any Warrant Stock issued upon the exercise hereof from and against any and all liability, loss, cost, damage, reasonable -52- 57 attorneys' and accountants' fees and expenses, court costs and all other out-of-pocket expenses incurred in connection with or arising from a Company Default. This indemnification provision shall be in addition to the rights of such Holder or Holders to bring an action against the Company for breach of contract based on such Company Default. 14.4. Limitation of Liability. No provision hereof, in the absence of affirmative action by the Holder to purchase shares of Common Stock, and no enumeration herein of the rights or privileges of the Holder hereof, shall give rise to any liability of such Holder to pay the Exercise Price for any Warrant Stock other than pursuant to an exercise of this Warrant or any liability as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company. 14.5. Remedies. Each Holder of Warrants and/or War rant Stock, in addition to being entitled to exercise its rights granted by law, including recovery of damages, shall be entitled to specific performance of its rights provided under this Warrant. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees, in an action for specific performance, to waive the defense that a remedy at law would be adequate. 14.6. Successors and Assigns. Subject to the provi sions of Sections 3.1, 8.1 and 8.2, this Warrant and the rights evidenced hereby shall inure to the benefit of and be binding upon the successors of the Company and the permitted successors and assigns of the Holder hereof. The provisions of this Warrant are intended to be for the benefit of all Holders from time to time of this Warrant and, in the case of Section 9, all Holders of shares of Warrant Stock issued upon the exercise hereof (including transferees), and shall be enforceable by any such Holder. 14.7. Amendment. This Warrant and all other Warrants may be modified or amended or the provisions hereof waived with the written consent of the Company and the Majority Warrant Holders, provided that no such Warrant may be modified or amended to reduce the number of shares of Common Stock for which such Warrant is exercisable or to increase the price at which such -53- 58 shares may be purchased upon exercise of such Warrant (before giving effect to any adjustment as provided therein) without the written consent of the Holder thereof. 14.8. Severability. Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Warrant. 14.9. Headings. The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant. 14.10. GOVERNING LAW; JURISDICTION. IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS WARRANT AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF ILLINOIS APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE, EXCEPT WITH RESPECT TO THE VALIDITY OF THIS WARRANT, THE ISSUANCE OF WARRANT STOCK UPON EXERCISE HEREOF AND THE RIGHTS AND DUTIES OF THE COMPANY WITH RESPECT TO REGISTRATION OF TRANSFER, WHICH SHALL BE GOVERNED BY THE LAWS OF DELAWARE. THE COMPANY HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED IN CHICAGO, ILLINOIS, SHALL HAVE, EXCEPT AS SET FORTH BELOW, EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THE COMPANY AND THE HOLDER OF THIS WARRANT PERTAINING TO THIS WARRANT OR TO ANY MATTER ARISING OUT OF OR RELATING TO THIS AGREEMENT, PROVIDED, THAT IT IS ACKNOWLEDGED THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF CHICAGO, ILLINOIS. -54- 59 IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed and its corporate seal to be impressed hereon and attested by its Secretary or an Assistant Secretary. NORAND CORPORATION By:_________________________ Name: Title: [SEAL] Attest: By:___________________________ Name: Title: -55- 60 ANNEX A SUBSCRIPTION FORM [To be executed only upon exercise of Warrant] The undersigned registered owner of this Warrant irrevocably exercises this Warrant for the purchase of ______ shares Common Stock of Norand Corporation and herewith makes payment therefor, all at the price and on the terms and conditions specified in this Warrant and requests that certificates for the shares of Common Stock hereby purchased (and any securities or other property issuable upon such exercise) be issued in the name of and delivered to _________________ whose address is ___________________________________________________ and, if such shares of Common Stock shall not include all of the shares of Common Stock issuable as provided in this Warrant, that a new Warrant of like tenor and date for the balance of the shares of Common Stock issuable hereunder be delivered to the undersigned. _______________________________ (Name of Registered Owner) _______________________________ (Signature of Registered Owner) _______________________________ (Street Address) _______________________________ (City) (State) (Zip Code) NOTICE: The signature on this subscription must correspond with the name as written upon the face of the within Warrant in every particular, without alteration or enlargement or any change whatsoever. 61 ANNEX B ASSIGNMENT FORM FOR VALUE RECEIVED the undersigned registered owner of this Warrant hereby sells, assigns and transfers unto the Assignee named below all of the rights of the undersigned under this Warrant, with respect to the number of shares of Common Stock set forth below: No. of Shares of Name and Address of Assignee Common Stock and does hereby irrevocably constitute and appoint ________ _____________ attorney-in-fact to register such transfer onto the books of Norand Corporation maintained for the purpose, with full power of substitution in the premises. Dated:___________________ Print Name:___________________ Signature:____________________ Witness:______________________ NOTICE: The signature on this assignment must correspond with the name as written upon the face of the within Warrant in every particular, without alteration or enlargement or any change whatsoever. EX-4.(N)(10) 12 SERIES B WARRANT B-5 1 EXHIBIT 4.N.10 ================================================================================ SERIES B WARRANT to Purchase Common Stock of NORAND CORPORATION ================================================================================ Warrant No. B - 5 Original Issue Date: November 20, 1996 2 TABLE OF CONTENTS 1. DEFINITIONS 1 2. EXERCISE OF WARRANT 11 2.1. Manner of Exercise 11 2.2. Payment of Transfer Taxes 12 2.3. Fractional Shares 12 2.4. Continued Validity and Application 13 2.5. Limitation on Regulated Holder's Exercise 13 3. TRANSFER, DIVISION AND COMBINATION 13 3.1. Transfer 13 3.2. Division and Combination. 14 3.3. Expenses. 14 3.4. Maintenance of Books 14 4. ANTIDILUTION PROVISIONS 14 4.1. Stock Dividends, Subdivisions and Combinations 14 4.2. Issuance of Additional Shares of Common Stock 15 4.3. Issuances of Stock Purchase Rights and Convertible Securities 15 4.4. Adjustment of Number of Shares Purchasable. 17 4.5. Reorganization, Reclassification, Merger, Consolidation or Disposition of Assets 17 4.6. Determination of Consideration. 18 4.7. Other Dilutive Events 20 4.8. Other Provisions Applicable to Adjustments Under this Section 20 5. NO IMPAIRMENT 22 6. RESERVATION AND AUTHORIZATION OF COMMON STOCK 23 7. NOTICE OF CORPORATE ACTIONS; TAKING OF RECORD; TRANSFER BOOKS 23 7.1. Notices of Corporate Actions. 23 7.2 Closing of Transfer Books. 23 8. TRANSFER RESTRICTIONS 23 8.1. Restrictions on Transfers 24 8.2. Restrictive Legends 24 -i- 3 8.3. Termination of Securities Law Restrictions 25 9. REGISTRATION RIGHTS 26 9.1. Certain Definitions 26 9.2. Demand Registration 27 9.3. Piggyback Registration 29 9.4. Registration Procedures. 30 9.5. Selling Holders' Obligations. 34 9.6. Expenses of Registration. 34 9.7. Indemnification; Contribution. 35 9.8. Holdback. 40 9.9. Additional Covenants of the Company 40 10. LOSS OR MUTILATION 42 11. OFFICE OF THE COMPANY 42 12. FINANCIAL AND BUSINESS INFORMATION 43 13. REPURCHASE BY THE COMPANY OF WARRANTS 43 14. MISCELLANEOUS 43 14.1. Nonwaiver. 43 14.2. Notice Generally 44 14.3. Indemnification 44 14.4. Limitation of Liability. 44 14.5. Remedies 45 14.6. Successors and Assigns 45 14.7. Amendment. 45 14.8. Severability 45 14.9. Headings. 45 14.10. GOVERNING LAW; JURISDICTION. 45 ANNEX A SUBSCRIPTION FORM 48 ANNEX B ASSIGNMENT FORM 49 SCHEDULE A RESERVED SHARES OF COMMON STOCK ii 4 SCHEDULE B UNDERWRITERS AND AGENTS -iii- 5 NEITHER THE WARRANTS REPRESENTED BY THIS CERTIFICATE NOR ANY OF THE SECURITIES ISSUABLE UPON EXERCISE THEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAW. NO TRANSFER OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE OR OF THE SECURITIES ISSUABLE UPON EXERCISE THEREOF SHALL BE VALID OR EFFECTIVE UNLESS (A) SUCH TRANSFER IS MADE PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR (B) THE HOLDER OF THE SECURITIES PROPOSED TO BE TRANSFERRED SHALL HAVE DELIVERED TO THE COMPANY EITHER A NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION OR AN OPINION OF COUNSEL EXPERIENCED IN SECURITIES MATTERS AND REASONABLY ACCEPTABLE TO THE COMPANY TO THE EFFECT THAT SUCH PROPOSED TRANSFER IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE ACT OR (C) SUCH TRANSFER IS PURSUANT TO RULE 144 OR RULE 144A UNDER THE ACT AND SUCH HOLDER(S) SHALL HAVE DELIVERED TO THE COMPANY A CERTIFICATE SETTING FORTH THE BASIS FOR APPLYING SUCH RULE TO THE PROPOSED TRANSFER. Warrant No. B - 5 SERIES B WARRANT NORAND CORPORATION THIS IS TO CERTIFY THAT NORWEST BANK IOWA, NATIONAL ASSOCIATION, or registered assigns, is entitled, at any time after August 31, 1997 and prior to the Expiration Date (such term, and certain other capitalized terms used herein being hereinafter defined), to purchase from NORAND CORPORATION, a Delaware corporation (the "Company"), Twenty-six Thousand One Hundred Thirty-two (26,132) shares of the Common Stock of the Company (subject to adjustment as provided herein), at a purchase price of $21.15 per share (the initial "Exercise Price", subject to adjustment as provided herein), all on the terms and conditions and pursuant to the provisions hereinafter set forth. 6 1. DEFINITIONS As used in this Warrant, the following terms have the respective meanings set forth below: "Affiliate" of any Person means a Person (a) which directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with such Person, (b) which beneficially owns or holds more than ten percent of the outstanding shares of any class of voting stock of such Person and has the power to vote such shares or (c) more than ten percent of the outstanding shares of any class of voting stock (or, in the case of a Person which is not a corporation, more than ten percent of the equity interest) of which is beneficially owned or held by such Person and such Person has the power to vote such shares or equity interest. The term "control" as used with respect to any Person means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities, by contract or otherwise. "After-Tax Basis", when referring to a payment that is required hereunder (the "target amount"), shall mean a total payment (the "total amount") that, after deduction of all federal, state and local taxes that are required to be paid by the recipient in respect of the receipt or accrual of such total amount, is equal to the target amount. "Agreed Rate" shall mean a rate per annum equal to the corporate base rate of interest announced by The First National Bank of Chicago from time to time, changing when and as said corporate base rate changes. "Appraised Value" per share of Common Stock as of a date specified herein shall mean the value of such share as of such date as determined by an investment bank of nationally recognized standing selected by the Majority Warrant Holders from Schedule B (or any successor of any such entity), it being understood that the Majority Warrant Holders shall use commercially reasonable efforts to select one of the first three listed entities subject to arriving at reasonably acceptable terms and conditions for the -2- 7 appraisal. The Company shall pay the costs and fees of such investment bank, and the decision of the investment bank making such determination of Appraised Value shall be final and binding on the Company and all affected holders of Warrants or Warrant Stock. Such Appraised Value shall be determined as a pro rata portion of the value of the Company taken as a whole, based on the higher of (A) the value derived from a hypothetical sale of the entire Company as a going concern by a willing seller to a willing buyer (neither acting under any compulsion) and (B) the liquidation value of the entire Company. No discount shall be applied on account of (i) any Warrants or Warrant Stock representing a minority interest, (ii) any lack of liquidity of the Common Stock or the Warrants, (iii) the fact that the Warrants or Warrant Stock may constitute "restricted securities" for securities law purposes or (iv) the existence of any call option. "Bank Holding Company Act" shall mean the Bank Holding Company Act of 1956, as amended. "Business Day" shall mean any day that is not a Saturday or Sunday or a day on which banks are required or permitted to be closed in the State of Illinois. "Call" shall have the meaning set forth in Section 13 hereof. "Call Notice" shall have the meaning set forth in Section 13 hereof. "Commission" shall mean the Securities and Exchange Commission or any other federal agency then administering the Securities Act and other federal securities laws. "Common Stock" shall mean (except where the context otherwise indicates) the Common Stock of the Company, par value $.01 per share, as constituted on the Original Issue Date, and any capital stock into which such Common Stock may thereafter be changed, and shall also include (i) capital stock of the Company of any other class (regardless of how denominated) issued to the holders of shares of any Common Stock upon any reclassification thereof which is also not preferred as to dividends or liquidation over any other -3- 8 class of stock of the Company and which is not subject to redemption and (ii) shares of common stock of any successor or acquiring corporation (as defined in Section 4.5 hereof) received by or distributed to the holders of Common Stock of the Company in the circumstances contemplated by Section 4.5 hereof. "Company" means Norand Corporation, a Delaware corporation, and any successor corporation. "Company Default" means (a) the breach of any warranty or the inaccuracy in any material respect at the time when made of any representation made by the Company herein or (b) the failure by the Company to comply in any material respect with any covenant of the Company contained herein. "Continuously Effective", with respect to a specified registration statement, shall mean that it shall not cease to be effective and available for Transfers of Warrant Stock thereunder for the longer of either (i) any ten consecutive Business Days, or (ii) an aggregate of fifteen Business Days during the period specified in the relevant provision of Section 9 hereof. "Convertible Securities" shall mean evidences of indebtedness, shares of stock or other securities that are convertible into or exchangeable for, with or without payment of additional consideration in cash or property, shares of Common Stock, either immediately or upon the occurrence of a specified date or a specified event. "Credit Agreement" means the Second Amended and Restated Credit Agreement dated as of January 25, 1996, as thereafter from time to time amended, supplemented, restated or modified, among the Company, the Lenders party thereto and The First National Bank of Chicago, as agent. "Current Market Price" shall mean as of any specified date the average of the daily market prices of the Common Stock of the Company for the shorter of (x) the twenty consecutive Business Days immediately preceding such date or (y) the period commencing on the Business Day next following the first public announcement of any event giving rise to an adjustment of the Exercise Price pursuant to Section 4 below -4- 9 and ending on such date. The "daily market price" for each such Business Day shall be: (i) if the Common Stock is then listed on a national securities exchange or is listed on NASDAQ and is designated as a National Market System security, the last sale price, regular way, on such day on the principal stock exchange or market system on which such Common Stock is then listed or admitted to trading, or, if no such sale takes place on such day, the average of the closing bid and asked prices for the Common Stock on such day as reported on such stock exchange or market system or (ii) if the Common Stock is not then listed or admitted to trading on any national securities exchange or designated as a National Market System security on NASDAQ but is traded over-the-counter, the average of the closing bid and asked prices for the Common Stock as reported on NASDAQ or the Electronic Bulletin Board or in the National Daily Quotation Sheets, as applicable. "Demand Registration" shall have the meaning set forth in Section 9.2(a) hereof. "Demanding Holders" shall have the meaning set forth in Section 9.2(a) hereof. "Designated Office" shall have the meaning set forth in Section 11 hereof. "Equity" shall mean equity capital (not including the equity capital attributable to the Settlement Stock, and any mandatory redemption terms of which equity capital are acceptable to the Majority Warrant Holders) raised by and/or contributed to the Company subsequent to the Original Issue Date or new Indebtedness (as defined in the Credit Agreement) subordinated to the Obligations (as defined in the Credit Agreement), provided the terms of such Indebtedness (including, without limitation, maturity, amortization, covenants, defaults, remedies and subordination provisions) are acceptable to the Majority Warrant Holders. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect from time to time. -5- 10 "Exercise Notice" shall have the meaning set forth in Section 2.1 hereof. "Exercise Period" shall mean the period during which this Warrant is exercisable pursuant to Section 2.1 hereof. "Exercise Price" shall mean, in respect of a share of Common Stock at any date herein specified, the initial Exercise Price set forth in the preamble of this Warrant as adjusted from time to time pursuant to Section 4 hereof. "Expiration Date" shall mean August 31, 2002, unless extended under the circumstances contemplated by Section 9.2(d) hereof. "Fair Value" per share of Common Stock as of any specified date shall mean (A) if the Common Stock is publicly traded on such date, the Current Market Price per share or (B) if the Common Stock is not publicly traded on such date, (1) the fair market value per share of Common Stock as determined in good faith by the Board of Directors of the Company and set forth in a written notice to each Holder or (2) if the Majority Warrant Holders object in writing to such price as determined by the Board of Directors within thirty days after receiving notice of same, the Appraised Value per share as of such date. "Fully Diluted Outstanding" shall mean, when used with reference to Common Stock, at any date as of which the number of shares thereof is to be determined, all shares of Common Stock Outstanding on such date and all shares of Common Stock issuable in respect of (x) the Warrants outstanding on such date, (y) any Convertible Securities outstanding on such date and (z) any other Stock Purchase Rights outstanding on such date, in each case regardless of whether or not the conversion, exchange, subscription or purchase rights associated with such Convertible Securities or Stock Purchase Rights are presently exercisable. "GAAP" shall mean generally accepted accounting principles in the United States of America as from time to time in effect. -6- 11 "Glass-Steagall Act" shall mean Section 24 (Seventh), Section 78, Section 377 and Section 378 of Title 12 (12 U.S.C. Section Section 24 (Seventh) 78, 377, 378), or any similar federal legislation. "Holder" shall mean (a) with respect to this Warrant, the Person in whose name the Warrant set forth herein is registered on the books of the Company maintained for such purpose and (b) with respect to any other Warrant or shares of Warrant Stock, the Person in whose name such Warrant or Warrant Stock is registered on the books of the Company maintained for such purpose. "Insolvency Event" shall mean any proceeding being instituted by or against the Company seeking a declaration or order for relief, or entailing a finding, that the Company is insolvent or bankrupt, or seeking reorganization, liquidation, dissolution, winding-up, charter revocation or other similar relief with respect to the Company or any of its properties, assets or debts, or seeking the appointment of a receiver, trustee, custodian, liquidator, sequestrator or similar official for the Company or any of its properties or assets, or the Company becoming insolvent or bankrupt or generally unable to pay its debts as they become due, or the Company voluntarily suspending its business or making a general assignment for the benefit of creditors; provided that an Insolvency Event shall not be deemed to have occurred on account of any such proceeding which is involuntary on the part of the Company unless same shall not have been dismissed or stayed within 60 days. "Lien" shall mean any mortgage or deed of trust, pledge, hypothecation, assignment, deposit arrangement, lien, charge, claim, security interest, easement or encumbrance, or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, any lease or title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, and the filing of, or agreement to give, any financing statement perfecting a security interest under the Uniform Commercial Code or comparable law of any jurisdiction). -7- 12 "Majority Warrant Holders", with respect to a given determination, shall mean the Holders of Warrants and/or Warrant Stock representing at least seventy-six percent (76%) of all Warrants and/or Warrant Stock (with any such Warrants being deemed to represent, for the purposes of such calculation, the shares of Warrant Stock then issuable upon exercise thereof) directly affected by such determination. "Majority Selling Holders" shall mean those Selling Holders whose Warrants and/or Warrant Stock included in a registration under Section 9 hereof represents a majority of the Warrants and/or Warrant Stock (with any such Warrants being deemed to represent, for the purposes of such calculation, the shares of Warrant Stock then issuable upon exercise thereof) included therein by all Selling Holders. "NASD" shall mean the National Association of Securities Dealers, Inc., or any successor corporation thereto. "NASDAQ" shall mean the NASDAQ quotation system, or any successor reporting system. "Notes" shall mean any of the promissory notes issued by the Company under the Credit Agreement. "Opinion of Counsel" means a written opinion of counsel experienced in Securities Act or bank regulatory matters, as the case may be, chosen by the Holder of this Warrant or Warrant Stock issued upon the exercise hereof and reasonably acceptable to the Company. "Original Issue Date" shall mean the date on which the Original Warrants were issued, as set forth on the cover page of this Warrant. "Original Warrants" shall mean the Warrants originally issued by the Company on the Original Issue Date to each of The First National Bank of Chicago, Fleet Bank of Massachusetts, N.A., The Daiwa Bank, Limited, Norwest Bank Iowa, National Association and Caisse Nationale de Credit Agricole. "Other Property" shall have the meaning set forth in Section 4.5 hereof. -8- 13 "Outstanding" shall mean, when used with reference to Common Stock, at any date as of which the number of shares thereof is to be determined, all issued shares of Common Stock, except shares then owned or held by or for the account of the Company or any Subsidiary thereof, and shall include all shares issuable in respect of outstanding scrip or any certificates representing fractional interests in shares of Common Stock. "Outstanding", when used with respect to Warrant Stock for the purposes of Section 9 hereof shall have the meaning set forth in Section 9.1(d) hereof. "Person" shall mean any individual, sole proprietorship, partnership, limited liability company, joint venture, trust, incorporated organization, association, corporation, institution, public benefit corporation, entity or government (whether federal, state, county, city, municipal or otherwise, including, without limitation, any instrumentality, division, agency, body or department thereof). "Piggyback Registration" shall have the meaning set forth in Section 9.3(a) hereof. "Register", "registered" and "registration" shall refer to a registration effected by preparing and filing a registration statement or similar document in compliance with the Securities Act, and the declaration or ordering by the Commission of effectiveness of such registration statement or document. "Registration Expenses" shall have the meaning set forth in Section 9.6(a) hereof. "Restricted Common Stock" shall mean shares of Common Stock which are, or which upon their issuance on the exercise of this Warrant would be, evidenced by a certificate bearing the restrictive legend set forth in Section 8.2(a) hereof. "Securities Act" shall mean the Securities Act of 1933, as amended, or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect at the time. -9- 14 "Selling Holders" shall mean, with respect to a specified registration under Section 9 hereof, WS Holders whose Registrable Securities are included in such registration. "Series A Warrants" shall mean all of the Series A Warrants to Purchase Common Stock of Norand Corporation issued concurrently with this Warrant. "Series B Warrants" shall mean all of the Series B Warrants to Purchase Common Stock of Norand Corporation, issued concurrently with, and having the same terms (other than the number of shares purchasable upon the exercise thereof) as, this Warrant. "Settlement Stock" shall mean the shares of Common Stock contemplated to be issued in settlement of the pending shareholders' claims against the Company with respect to the litigation styled In re Norand Corporation Securities Litigation, Master File No. C95-323, pending in the United States District Court for the Northern District of Iowa, Cedar Rapids Division. "Share Withholding Option" has the meaning set forth in Section 2.1(c) hereof. "Shelf Registration" shall have the meaning set forth in Section 9.2(a) hereof. "Stock Purchase Rights" shall mean any options, warrants or other securities or rights to subscribe to or exercisable for the purchase of shares of Common Stock or Convertible Securities, whether or not immediately exercisable, other than the options, warrants or other rights described in Schedule A hereto. "Subsequent Issuance" shall mean any sale or issuance by the Company of Common Stock, Convertible Securities or Stock Purchase Rights after the Original Issue Date other than: (i) Any issuance of Warrant Stock upon exercise of the Warrants and any issuance of Common Stock, Convertible Securities or Stock Purchase Rights (and -10- 15 any issuance of Common Stock pursuant to the conversion, exchange or exercise of any such Convertible Securities or Stock Purchase Rights) deemed to have been issued as of the Original Issue Date pursuant to the definition of Fully Diluted Outstanding. (ii) Any issuance of Common Stock pursuant to the exercise of the options and warrants described in Schedule A hereto, provided, however, that the exercise price of any such option or warrant (other than warrants granted to Jay Alix and Associates and to Donald W. Rowley for up to the respective number of shares set forth on Schedule A) granted or issued after the Original Issue Date shall not be less than the "daily market price" (as that term is defined in the definition of Current Market Price) of the Common Stock on the date of grant or issue of the option or warrant. (iii) The issuance of the Settlement Stock. (iv) Any other issuance of Common Stock, Convertible Securities or Stock Purchase Rights with respect to which the Majority Warrant Holders shall have waived application of the provisions of Section 4 below. "Subsidiary" means any corporation or association (a) more than 50% (by number of votes) of the voting stock of which is at the time owned by the Company or by one or more Subsidiaries or by the Company and one or more Subsidiaries, or any other business entity in which the Company or one or more Subsidiaries or the Company and one or more Subsidiaries own more than a 50% interest either in the profits or capital of such business entity or (b) whose net earnings, or portions thereof, are consolidated with the net earnings of the Company and are recorded on the books of the Company for financial reporting purposes in accordance with GAAP. "Transfer" shall mean any disposition of any Warrant or Warrant Stock or of any interest in either thereof, which would constitute a "sale" thereof within the meaning of the Securities Act. -11- 16 "Triggering Event" shall mean either the repayment in full of all indebtedness under the Credit Agreement or the receipt by the Company of at least $20 million in net cash proceeds from additional Equity. "Violation" has the meaning set forth in Section 9.7(a) hereof. "Warrant Price" shall mean an amount equal to (i) the number of shares of Common Stock being purchased upon exercise of this Warrant pursuant to Section 2.1 hereof, multiplied by (ii) the Exercise Price as of the date of such exercise. "Warrants" shall mean the Original Warrants and all warrants issued upon transfer, division or combination of, or in substitution for, such Original Warrants or any other such Warrant. All Warrants shall at all times be identical as to terms and conditions and date, except as to the number of shares of Common Stock for which they may be exercised. "Warrant Stock" generally shall mean the shares of Common Stock issued, issuable or both (as the context may require) upon the exercise of Warrants until such time as such shares of Common Stock have either been (i) Transferred in a public offering pursuant to a registration statement filed under the Securities Act or (ii) Transferred in a transaction exempt from the registration and prospectus delivery requirements of the Securities Act under Section 4(1) thereof with all transfer restrictions and restrictive legends with respect to such Common Stock being removed in connection with such transaction. "Warrant Stock", for the purposes of Section 9 hereof, shall have the meaning set forth in Section 9.1(b) hereof. "WS Holder" shall have the meaning set forth in Section 9.1(a) hereof. 2. EXERCISE OF WARRANT 2.1. Manner of Exercise. (a) From and after August 31, 1997 and until 5:00 P.M., Chicago time, on the Expiration Date, the Holder of this Warrant may from time to time exercise -12- 17 this Warrant, on any Business Day, for all or any part of the number of shares of Common Stock purchasable hereunder (as determined pursuant to Section 2.2 below). In order to exercise this Warrant, in whole or in part, the Holder shall (i) deliver to the Company at the Designated Office a written notice of the Holder's election to exercise this Warrant (an "Exercise Notice"), which Exercise Notice shall be irrevocable and specify the number of shares of Common Stock to be purchased, together with this Warrant and (ii) pay to the Company the Warrant Price (the date on which both such delivery and payment shall have first taken place being hereinafter sometimes referred to as the "Exercise Date"). Such Exercise Notice shall be in the form of the subscription form appearing at the end of this Warrant as Annex A, duly executed by the Holder or its duly authorized agent or attorney. (b) Upon receipt of such Exercise Notice, Warrant and payment, the Company shall, as promptly as practicable, and in any event within five Business Days thereafter, execute (or cause to be executed) and deliver (or cause to be delivered) to the Holder a certificate or certificates representing the aggregate number of full shares of Common Stock issuable upon such exercise, together with cash in lieu of any fraction of a share, as hereafter provided. The stock certificate or certificates so delivered shall be, to the extent possible, in such denomination or denominations as the exercising Holder shall reasonably request in the Exercise Notice and shall be registered in the name of the Holder or such other name as shall be designated in the Exercise Notice. This Warrant shall be deemed to have been exercised and such certificate or certificates shall be deemed to have been issued, and the Holder or any other Person so designated to be named therein shall be deemed to have become a holder of record of such shares for all purposes, as of the Exercise Date. (c) Payment of the Warrant Price shall be made at the option of the Holder by one or more of the following methods: (i) by delivery of a certified or official bank check in the amount of such Warrant Price, (ii) by instructing the Company to withhold a number of shares of Warrant Stock then issuable upon exercise of this Warrant with an aggregate Current Market Price equal to such Warrant Price (the "Share Withholding Option"), (iii) by surrendering to the Company shares of Common Stock previously acquired by the Holder with an aggregate Current -13- 18 Market Price equal to such Warrant Price or(iv) by delivery of a Note, duly endorsed by or accompanied by appropriate instruments of transfer duly executed by the Holder or by the Holder's attorney duly authorized in writing. In the event of any withholding of Warrant Stock or surrender of Common Stock pursuant to clause (ii) or (iii) above where the number of shares whose Current Market Price is equal to the Warrant Price is not a whole number, the number of shares withheld by or surrendered to the Company shall be rounded up to the nearest whole share and the Company shall make a cash payment to the Holder based on the incremental fraction of a share being so withheld by or surrendered to the Company in an amount determined in accordance with Section 2.3 hereof. For the purpose of making payment of the Warrant Price, any Note surrendered to the Company shall be deemed to have a value equal to 100% of the principal amount thereof plus any interest accrued but unpaid thereon. If the Holder delivers a Note with a deemed value that exceeds the Warrant Price, the Company shall reissue to the Holder a new Note identical in all respects to the surrendered Note except that the principal amount of such new Note shall be equal to the principal amount that, together with any interest accrued but unpaid thereon, is equal to the deemed value of the surrendered Note less the Warrant Price. (d) If this Warrant shall have been exercised in part, the Company shall, at the time of delivery of the certificate or certificates representing the shares of Common Stock being issued, deliver to the Holder a new Warrant evidencing the rights of the Holder to purchase the unpurchased shares of Common Stock called for by this Warrant. Such new Warrant shall in all other respects be identical with this Warrant. 2.2. Payment of Transfer Taxes. All shares of Common Stock issuable upon the exercise of this Warrant pursuant to the terms hereof shall be validly issued, fully paid and nonassessable, issued without violation of any preemptive rights and free and clear of all Liens (other than any created by actions of the Holder). The Company shall pay all expenses in connection with, and all taxes and other governmental charges that may be imposed with respect to, the issue or delivery thereof, unless such tax or charge is imposed by law upon the Holder, in which case such taxes or charges shall be paid by the Holder and the Company shall reimburse the Holder therefor on an After-Tax Basis. -14- 19 2.3. Fractional Shares. The Company shall not be required to issue a fractional share of Common Stock upon exercise of any Warrant. As to any fraction of a share that the Holder of one or more Warrants, the rights under which are exercised in the same transaction, would otherwise be entitled to purchase upon such exercise, the Company shall pay a cash adjustment in respect of such final fraction in an amount equal to the same fraction of the Current Market Price of one share of Common Stock on the Exercise Date, if the Common Stock is then publicly traded. 2.4. Continued Validity and Application. (a) A Holder of shares of Warrant Stock issued upon the exercise of this Warrant, in whole or in part, including any transferee of such shares (other than a transferee in whose hands such shares no longer constitute Warrant Stock as defined herein), shall continue, with respect to such shares, to be entitled to all rights and to be subject to all obligations that are applicable to such Holder by the terms of this Warrant under Section 9 hereof. The Company shall, at the time of any exercise of this Warrant or any transfer of Warrant Stock, upon the request of the Holder of the shares of Warrant Stock issued in connection with such exercise or transfer, acknowledge in writing, in a form reasonably satisfactory to such Holder, its continuing obligation to afford to such Holder such rights referred to in this Section 2.4; provided, however, that if such Holder shall fail to make any such request, such failure shall not affect the continuing obligation of the Company to afford to such Holder all such rights. 2.5. Limitation on Regulated Holder's Exercise. Notwithstanding anything in this Warrant to the contrary, the Holder of this Warrant, if subject to the Bank Holding Company Act or any provision of the Glass-Steagall Act, may exercise this Warrant only if the Notice of Exercise is accompanied by an Opinion of Counsel of such Holder to the effect that, as of the date of delivery of such opinion, no federal or state regulatory clearances are required for such Holder to exercise this Warrant or, in the event any such federal or state regulatory clearances are required prior to the exercise of this Warrant, to the effect that all such clearances have been obtained or, if not then obtained, that no statute or regulation or regulatory policy or guidelines known to such counsel would by their terms preclude the obtaining of such clearances or make it unlikely that such -15- 20 clearances would be obtained or make it likely that such clearances would, if obtained, contain material conditions adverse to such Holder. In the event that federal or state regulatory clearances are required prior to the exercise of this Warrant by the Holder hereof, the Company shall reasonably cooperate with such Holder in providing such information to any regulatory agency as such agency may reasonably require. In the event any such regulatory clearance is withheld or denied, such Holder may continue to hold this Warrant until its expiration or may sell or otherwise transfer this Warrant in accordance with the terms hereof. 3. TRANSFER, DIVISION AND COMBINATION 3.1. Transfer. Subject to compliance with Section 8 hereof, each transfer of this Warrant and all rights hereunder, in whole or in part, shall be registered on the books of the Company to be maintained for such purpose, upon surrender of this Warrant at the Designated Office, together with a written assignment of this Warrant in the form of Annex B hereto duly executed by the Holder or its agent or attorney. Upon such surrender and delivery, the Company shall, subject to Section 8, execute and deliver a new Warrant or Warrants in the name of the assignee or assignees and in the denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned and this Warrant shall promptly be canceled. A Warrant, if properly assigned in compliance with Section 8, may be exercised by the new Holder for the purchase of shares of Common Stock without having a new Warrant issued. 3.2. Division and Combination. Subject to compliance with the applicable provisions of this Warrant, this Warrant may be divided or combined with other Warrants upon presentation hereof at the Designated Office, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney. Subject to compliance with the applicable provisions of this Warrant as to any transfer which may be involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such notice. -16- 21 3.3. Expenses. The Company shall prepare, issue and deliver at its own expense any new Warrant or Warrants required to be issued under this Section 3. 3.4. Maintenance of Books. The Company agrees to maintain, at the Designated Office, books for the registration and transfer of the Warrants. 4. ANTIDILUTION PROVISIONS The number of shares of Common Stock for which this Warrant is exercisable and the Exercise Price shall be subject to adjustment from time to time as set forth in this Section 4. 4.1. Stock Dividends, Subdivisions and Combinations. If at any time the Company shall: (i) take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend payable in, or other distribution of, additional shares of Common Stock, (ii) subdivide its outstanding shares of Common Stock into a larger number of shares of such Common Stock, or (iii) combine its outstanding shares of Common Stock into a smaller number of shares of such Common Stock, then the Exercise Price shall be adjusted to equal the product of the Exercise Price in effect immediately prior to such event multiplied by a fraction the numerator of which is equal to the number of shares of Common Stock Outstanding immediately prior to the adjustment and the denominator of which is equal to the number of shares of Common Stock Outstanding immediately after such adjustment. 4.2. Issuance of Additional Shares of Common Stock. (a) If at any time the Company shall issue or sell any shares of Common Stock in a Subsequent Issuance for a consideration per share that is less than the Exercise Price in effect immediately prior to such issuance or sale, then, forthwith upon such issuance or sale, the Exercise Price shall be reduced to a price calculated by dividing (1) an amount equal to the sum of (x) the -17- 22 number of shares of Common Stock Outstanding immediately prior to such Subsequent Issuance multiplied by the then existing Exercise Price, plus (y) the aggregate consideration (determined in accordance with the provisions of Section 4.6 hereof), if any, received by the Company in connection with such Subsequent Issuance, by (2) the total number of shares of Common Stock Outstanding immediately after such Subsequent Issuance. (b) The provisions of this Section 4.2 shall not apply to (i) any issuance of Common Stock for which an adjustment is provided for under Section 4.1 or (ii) any issuance or sale of Common Stock pursuant to the exercise of any Stock Purchase Rights or Convertible Securities to the extent that an adjustment shall have been previously made hereunder in connection with the issuance of such Stock Purchase Rights or Convertible Securities pursuant to the provisions of Section 4.3 hereof. 4.3. Issuances of Stock Purchase Rights and Convertible Securities. (a) In the event that the Company shall at any time issue, sell or grant any Stock Purchase Rights to any Person in a Subsequent Issuance, then, for the purpose of Section 4.2 above, the Company shall be deemed to have issued at that time a number of shares of Common Stock equal to the maximum number of shares of Common Stock (without giving effect to any antidilution provisions in such Stock Purchase Rights) that are or may become issuable upon exercise of such Stock Purchase Rights (or upon exercise of any Convertible Securities issuable upon exercise of such Stock Purchase Rights) for a consideration per share equal to (i) the aggregate consideration per share (determined in accordance with the provisions of Section 4.6 hereof) received by the Company in connection with the issuance, sale or grant of such Stock Purchase Rights plus (ii) the minimum amount of such consideration per share receivable by the Company in connection with the exercise of such Stock Purchase Rights (and the exercise of any Convertible Securities issuable upon exercise of such Stock Purchase Rights). (b) In the event that the Company shall at any time issue or sell any Convertible Securities to any Person in a Subsequent Issuance, then, for the purposes of Section 4.2 above, the Company shall be deemed to have issued at that time a number of shares of Common Stock equal to the maximum number of shares of Common Stock that are or may become issuable upon the exercise of the conversion or exchange rights associated with such -18- 23 Convertible Securities for a consideration per share equal to (i) the aggregate consideration per share (determined in accordance with the provisions of Section 4.6 hereof) received by the Company in connection with the issuance or sale of such Convertible Securities plus (ii) the minimum amount of such consideration per share receivable by the Company in connection with the exercise of such conversion or exchange rights. (c) If, at any time after any adjustment of the Exercise Price shall have been made hereunder as the result of any issuance, sale or grant of any Stock Purchase Rights or Convertible Securities, the maximum number of shares issuable upon exercise of such Stock Purchase Rights or of the rights of conversion or exchange associated with such Convertible Securities shall increase, or the minimum amount of consideration per share receivable in connection with such exercise shall decrease, whether by operation of any antidilution rights pertaining to such Stock Purchase Rights or Convertible Securities, by agreement of the parties or otherwise, the Exercise Price then in effect shall first be readjusted to eliminate the effects of the original issuance, sale or grant of such Stock Purchase Rights or Convertible Securities on such Exercise Price and then readjusted as if such Stock Purchase Rights or Convertible Securities had been issued on the effective date of such increase in number of shares or decrease in consideration, but only if the effect of such two-step readjustment is to reduce the Exercise Price below the Exercise Price in effect immediately prior to such increase or decrease. (d) If, at any time after any adjustment of the Exercise Price shall have been made hereunder as the result of any issuance, sale or grant of any Stock Purchase Rights or Convertible Securities, any of such Stock Purchase Rights or the rights of conversion or exchange associated with such Convertible Securities shall expire by their terms or any of such Stock Purchase Rights or Convertible Securities shall be repurchased by the Company or a Subsidiary thereof for a consideration per underlying share of Common Stock not exceeding the amount of such consideration received by the Company in connection with the issuance, sale or grant of such Stock Purchase Rights or Convertible Securities, the Exercise Price then in effect shall forthwith be increased to the Exercise Price that would have been in effect if such expiring Stock Purchase Rights or rights of conversion or exchange or such repurchased Stock Purchase Rights or Convertible Securities had never been issued. Similarly, if at any time after any such adjustment of the Exercise Price shall have been made pursuant to Section 4.2 (i) any additional consideration is received or becomes receivable by the Company in connection with the issuance or exercise of such Stock Purchase Rights -19- 24 or Convertible Securities or (ii) there is a reduction in the conversion ratio applicable to such Convertible Securities so that fewer shares of Common Stock will be issuable upon the conversion or exchange thereof or there is a decrease in the number of shares of Common Stock issuable upon exercise of such Stock Purchase Rights, the Exercise Price then in effect shall be forthwith readjusted to the Exercise Price that would have been in effect had such changes taken place at the time that such Stock Purchase Rights or Convertible Securities were initially issued, granted or sold. In no event shall any readjustment under this Section 4.3(d) affect the validity of any shares of Warrant Stock issued upon any exercise of this Warrant prior to such readjustment, nor shall any such readjustment have the effect of increasing the Exercise Price above the Exercise Price that would have been in effect if the related Stock Purchase Rights or Convertible Securities had never been issued. 4.4. Adjustment of Number of Shares Purchasable. Upon any adjustment of the Exercise Price as provided in Section 4.1, 4.2 or 4.3 hereof, the Holder hereof shall thereafter be entitled to purchase upon the exercise of this Warrant, at the Exercise Price resulting from such adjustment, the number of shares of Common Stock (calculated to the nearest 1/100th of a share) obtained by multiplying the Exercise Price in effect immediately prior to such adjustment by the number of shares of Common Stock issuable on the exercise hereof immediately prior to such adjustment and dividing the product thereof by the Exercise Price resulting from such adjustment. 4.5. Reorganization, Reclassification, Merger, Consolidation or Disposition of Assets. In case the Company shall reorganize its capital, reclassify its capital stock, consolidate or merge with or into another corporation (where the Company is not the surviving corporation or where there is any change whatsoever in, or distribution with respect to, the Outstanding Common Stock of the Company), or sell, transfer or otherwise dispose of all or substantially all of its property, assets or business to another corporation and, pursuant to the terms of such reorganization, reclassification, merger, consolidation or -20- 25 disposition of assets, (i) shares of common stock of the successor or acquiring corporation or of the Company (if it is the surviving corporation) or (ii) any cash, shares of stock or other securities or property of any nature whatsoever (including warrants or other subscription or purchase rights) in addition to or in lieu of common stock of the successor or acquiring corporation ("Other Property") are to be received by or distributed to the holders of Common Stock of the Company who are holders immediately prior to such transaction, then the Holder of this Warrant shall have the right thereafter to receive, upon exercise of this Warrant, the number of shares of common stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and Other Property receivable upon or as a result of such reorganization, reclassification, merger, consolidation or disposition of assets by a holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such event. In such event, the aggregate Exercise Price otherwise payable for the shares of Common Stock issuable upon exercise of this Warrant shall be allocated among the shares of common stock and Other Property receivable as a result of such reorganization, reclassification, merger, consolidation or disposition of assets in proportion to the respective fair market values of such shares of common stock and Other Property as determined in good faith by the Board of Directors of the Company. In case of any such reorganization, reclassification, merger, consolidation or disposition of assets, the successor or acquiring corporation (if other than the Company) shall expressly assume the due and punctual observance and performance of each and every covenant and condition of this Warrant to be performed and observed by the Company and all the obligations and liabilities hereunder, subject to such modifications as may be reasonably deemed appropriate (as determined by resolution of the Board of Directors of the Company) in order to provide for adjustments of any shares of the common stock of such successor or acquiring corporation for which this Warrant thus becomes exercisable, which modifications shall be as equivalent as practicable to the adjustments provided for in this Section 4. For purposes of this Section 4.5, "common stock of the successor or acquiring corporation" shall include stock of such corporation of any class that is not preferred as to dividends or assets over any other class of stock of such corporation and that is not subject to redemption and shall also include any evidences of indebtedness, shares of stock or other securities that are convertible into or exchangeable for any such -21- 26 stock, either immediately or upon the arrival of a specified date or the happening of a specified event and any warrants or other rights to subscribe for or purchase any such stock. The foregoing provisions of this Section 4.5 shall similarly apply to successive reorganizations, reclassifications, mergers, consolidations or disposition of assets. 4.6. Determination of Consideration. For purposes of Sections 4.2, 4.3 and 4.4 hereof, the consideration received and/or receivable by the Company in connection with the issuance, sale, grant or exercise of additional shares of Common Stock, Stock Purchase Rights or Convertible Securities, irrespective of the accounting treatment of such consideration, shall be valued as follows: (1) Cash Payment. In the case of cash, the net amount received by the Company after deduction of any accrued interest or dividends, expenses incurred or any underwriting commissions or concessions paid or allowed by the Company. (2) Securities or Other Property. In the case of securities or other property, the fair market value thereof as of the date immediately preceding such issuance, sale, grant or exercise as determined in good faith by the Board of Directors of the Company. (3) Allocation Related to Common Stock. In the event shares of Common Stock are issued or sold together with other securities or other assets of the Company for a consideration which covers both, the consideration received (computed as provided in (1) and (2) above) shall be allocable to such shares of Common Stock as determined in good faith by the Board of Directors of the Company. (4) Allocation Related to Stock Purchase Rights and Convertible Securities. In case any Stock Purchase Rights or Convertible Securities shall be issued or sold together with other securities or other assets of the Company, together comprising one integral transaction in which no specific consideration is allocated to the Stock Purchase Rights or Convertible Securities, the consideration allocable to such Stock -22- 27 Purchase Rights or Convertible Securities shall be determined in good faith by the Board of Directors of the Company. (5) Dividends in Securities. In case the Company shall declare a dividend or make any other distribution upon any stock of the Company payable in either case in Common Stock or Convertible Securities, such Common Stock or Convertible Securities, as the case may be, issuable in payment of such dividend or distribution shall be deemed to have been issued or sold without consideration. (6) Merger, Consolidation or Sale of Assets. In case any shares of Common Stock, Stock Purchase Rights or Convertible Securities shall be issued in connection with any merger or consolidation in which the Company is the surviving corporation, the amount of consideration therefor shall be deemed to be the fair value on the date of issuance of such security of such portion of the assets and business of the non-surviving corporation attributable to such Common Stock, Stock Purchase Rights or Convertible Securities, as is determined in good faith by the Company's Board of Directors. (7) Challenge to Good Faith Determination. Whenever the Board of Directors of the Company shall be required to make a determination in good faith of the fair value of any item under this Section 4, such determination may be challenged in good faith by the Majority Warrant Holders, and any dispute shall be resolved by an investment banking or appraisal firm of recognized national standing selected by the Company and reasonably acceptable to the Majority Warrant Holders and whose decision shall be binding on the Company and all holders of Warrants. The fees and expenses of such firm shall be paid by the party or parties whose position is not chosen by such firm. 4.7. Other Dilutive Events. In case any event shall occur as to which the other provisions of this Section 4 are not strictly applicable but as to which the failure to make any adjustment would not fairly protect the purchase rights repre- -23- 28 sented by this Warrant in accordance with the essential intent and principles hereof (including, without limitation, the issuance of securities other than Common Stock which have the right to participate in distributions to the holders of Common Stock, the granting of "phantom stock" rights or "stock appreciation rights" or the repurchase of outstanding shares of Common Stock, Convertible Securities or Stock Purchase Rights for a purchase price exceeding the fair market value thereof), then, in each such case, the Majority Warrant Holders may select an independent investment banking firm of nationally recognized standing and reasonably acceptable to the Company to make a determination as to the adjustment, if any, required to be made on a basis consistent with the essential intent and principles established herein as a result of such event in order to preserve the purchase rights represented by the Warrants. If the investment bank selected by the Majority Warrant Holders is not reasonably acceptable to the Company, and the Company and the Majority Warrant Holders cannot agree on a mutually acceptable investment bank, then the Company and the Majority Warrant Holders shall each choose one such investment bank and the respective chosen firms shall jointly select a third investment bank, which shall make the determination. The Company shall pay the costs and fees of each such investment bank (including any such investment bank selected by the Majority Warrant Holders), and the decision of the investment bank making such determination shall be final and binding on the Company and all affected holders of Warrants or Warrant Stock. Promptly after receipt of the opinion of such investment bank as to any such required adjustments, the Company shall take any actions necessary to implement same. 4.8. Other Provisions Applicable to Adjustments Under this Section. The following provisions shall be applicable to the adjustments provided for pursuant to this Section 4: (a) When Adjustments To Be Made. The adjustments required by this Section 4 shall be made whenever and as often as any specified event requiring such an adjustment shall occur. For the purpose of any such adjustment, any specified event shall be deemed to have occurred at the close of business on the date of its occurrence. -24- 29 (b) Record Date. In case the Company shall take a record of the holders of the Common Stock for the purpose of entitling them (i) to receive a dividend or other distribution payable in Common Stock, Convertible Securities or Stock Purchase Rights or (ii) to subscribe for or purchase Common Stock, Convertible Securities or Stock Purchase Rights, then all references in this Section 4 to the date of the issuance or sale of such shares of Common Stock, Convertible Securities or Stock Purchase Rights shall be deemed to be references to such record date. (c) Fractional Interests. In computing adjustments under this Section 4, fractional interests in Common Stock shall be taken into account to the nearest 1/100th of a share. (d) When Adjustment Not Required. If the Company shall take a record of the holders of its Common Stock for the purpose of entitling them to receive a dividend or distribution to which the provisions of Section 4.1 would apply, but shall, thereafter and before the distribution to stockholders thereof, legally abandon its plan to pay or deliver such dividend or distribution, then thereafter no adjustment shall be required by reason of the taking of such record and any such adjustment previously made in respect thereof shall be rescinded and annulled. (e) Maximum Exercise Price. Except as provided in Section 4.1 above, at no time shall the Exercise Price per share of Common Stock exceed the amount set forth in the first paragraph of the preamble of this Warrant. (f) Certain Limitations. Notwithstanding anything herein to the contrary, the Company agrees not to enter into any transaction that, by reason of any adjustment under Section 4.1, 4.2 or 4.3 above, would cause the Exercise Price to be less than the par value of the Common Stock, if any, unless the Company first reduces the par value of the Common Stock to be less than the Exercise Price that would result from such transaction. (g) Notice of Adjustments. Whenever the number of shares of Common Stock for which this Warrant is -25- 30 exercisable or the Exercise Price shall be adjusted pursuant to this Section 4, the Company shall forthwith prepare a certificate to be executed by the President or chief financial officer of the Company setting forth, in reasonable detail, the event requiring the adjustment and the method by which such adjustment was calculated, specifying the number of shares of Common Stock for which this Warrant is exercisable and (if such adjustment was made pursuant to Section 4.5) describing the number and kind of any other shares of stock or Other Property for which this Warrant is exercisable, and any related change in the Exercise Price, after giving effect to such adjustment or change. The Company shall promptly cause a signed copy of such certificate to be delivered to each Holder in accordance with Section 15.2. The Company shall keep at its principal office or at the Designated Office, if different, copies of all such certificates and cause the same to be available for inspection at said office during normal business hours by any Holder or any prospective transferee of a Warrant designated by a Holder thereof. (h) Independent Application. Except as otherwise provided herein, all subsections of this Section 4 are intended to operate independently of one another (but without duplication). If an event occurs that requires the application of more than one subsection, all applicable subsections shall be given independent effect without duplication. 5. NO IMPAIRMENT The Company shall not by any action, including, without limitation, amending its charter documents or through any reorganization, reclassification, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other similar voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or reasonably appropriate to protect the rights of the Holder against impairment. Without limiting the generality of the foregoing, the Company shall take all such action as may be -26- 31 necessary or reasonably 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, free and clear of all Liens, and shall use all commercially reasonably efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof as may be necessary to enable the Company to perform its obligations under this Warrant. 6. RESERVATION AND AUTHORIZATION OF COMMON STOCK From and after the Original Issue Date, the Company shall at all times reserve and keep available for issuance upon the exercise of the Warrants such number of its authorized but unissued shares of Common Stock as will be sufficient to permit the exercise in full of all outstanding Warrants. All shares of Common Stock issuable pursuant to the terms hereof, when issued upon exercise of this Warrant with payment therefor in accordance with the terms hereof, shall be duly and validly issued and fully paid and nonassessable, not subject to preemptive rights and shall be free and clear of all Liens. 7. NOTICE OF CORPORATE ACTIONS; TAKING OF RECORD; TRANSFER BOOKS 7.1. Notices of Corporate Actions. In the event of: (a) any capital reorganization of the Company, any reclassification or recapitalization of the capital stock of the Company or any consolidation or merger involving the Company and any other Person or any transfer or other disposition of all or substantially all the assets of the Company to another Person or (b) any amendment of the Certificate of Incorporation of the Company, the Company shall mail to each Holder of a Warrant in accordance with the provisions of Section 14.2 hereof a notice specifying the date or expected date on which any such reorganization, reclassification, recapitalization, consolidation, merger, transfer or disposition is to take place, the time, if any such time is to be fixed, as of which the holders of record of Common Stock shall be entitled to exchange their shares of Common Stock for the securities or Other Property deliverable upon such reorganization, reclassification, recapitalization, consolidation, merger, transfer or disposition, -27- 32 and a description in reasonable detail of the transaction. Such notice shall be mailed to the extent practicable at least thirty, but not more than ninety, days prior to the date therein specified; provided, that, in no event shall the Company be required to give the Holders notice of material non-public information prior to the time such information is made available to the holders of its Common Stock. In the event that the Company at any time sends any other notice to the holders of its Common Stock, it shall concurrently send a copy of such notice to each Holder of a Warrant. 7.2 Closing of Transfer Books. The Company shall not at any time, except upon dissolution, liquidation or winding up of the Company, close its stock transfer books or Warrant transfer books so as to result in preventing or delaying the exercise or transfer of any Warrant. 8. TRANSFER RESTRICTIONS The Holder, by acceptance of this Warrant, agrees to be bound by the provisions of this Section 8. 8.1. Restrictions on Transfers. Neither this Warrant nor any shares of Restricted Common Stock issued upon the exercise hereof shall be Transferred other than pursuant to an effective registration statement under the Securities Act or an exemption from the registration provisions thereof. No Transfer of this Warrant or any such shares of Restricted Stock, other than pursuant to such an effective registration statement, shall be valid or effective unless (a) the holder of the securities proposed to be transferred shall have delivered to the Company either a no-action letter from the Commission or an Opinion of Counsel to the effect that such proposed Transfer is exempt from the registration requirements of the Securities Act or (b) such Transfer is being made pursuant to Rule 144 or Rule 144A under the Securities Act and such holder shall have delivered to the Company a certificate setting forth the basis for applying such Rule to the proposed Transfer. Each certificate, if any, evidencing such shares of Restricted Common Stock issued upon any such Transfer, other than in a public offering pursuant to an effective registration statement, shall bear the restrictive legend set forth in Section 8.2(a), and each Warrant issued upon such Transfer shall bear the restrictive legend set forth in -28- 33 Section 8.2(b), unless the Holder delivers to the Company an Opinion of Counsel to the effect that such legend is not required for the purposes of compliance with the Securities Act. Holders of the Warrants or the Restricted Common Stock, as the case may be, shall not be entitled to Transfer such Warrants or such Restricted Common Stock except in accordance with this Section 8.1. 8.2. Restrictive Legends. (a) Except as otherwise provided in this Section 8, each certificate for Warrant Stock initially issued upon the exercise of this Warrant, and each certificate for Warrant Stock issued to any subsequent transferee of any such certificate, shall be stamped or otherwise imprinted with two legends in substantially the following forms: "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAW. NO TRANSFER OF THE SHARES REPRESENTED BY THIS CERTIFICATE SHALL BE VALID OR EFFECTIVE UNLESS (A) SUCH TRANSFER IS MADE PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR (B) THE HOLDER OF THE SECURITIES PROPOSED TO BE TRANSFERRED SHALL HAVE DELIVERED TO THE COMPANY AN OPINION OF COUNSEL EXPERIENCED IN SECURITIES MATTERS AND REASONABLY ACCEPTABLE TO THE COMPANY TO THE EFFECT THAT SUCH PROPOSED TRANSFER IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE ACT OR (C) SUCH TRANSFER IS PURSUANT TO RULE 144 OR RULE 144A UNDER THE ACT AND SUCH HOLDER(S) SHALL HAVE DELIVERED TO THE COMPANY A CERTIFICATE SETTING FORTH THE BASIS FOR APPLYING SUCH RULE TO THE PROPOSED TRANSFER." "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE ENTITLED TO THE BENEFIT OF AND ARE SUBJECT TO CERTAIN OBLIGATIONS SET FORTH IN THE WARRANT PURSUANT TO THE EXERCISE OF WHICH SUCH SHARES WERE ISSUED. A COPY OF SUCH WARRANT IS AVAILABLE AT THE EXECUTIVE OFFICES OF THE COMPANY." (b) Except as otherwise provided in this Section 8, each Warrant shall be stamped or otherwise imprinted with a legend in substantially the following form: -29- 34 "NEITHER THE WARRANTS REPRESENTED BY THIS CERTIFICATE NOR ANY OF THE SECURITIES ISSUABLE UPON EXERCISE THEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAW. NO TRANSFER OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE OR OF THE STOCK ISSUABLE UPON EXERCISE THEREOF SHALL BE VALID OR EFFECTIVE UNLESS (A) SUCH TRANSFER IS MADE PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR (B) THE HOLDER OF THE SECURITIES PROPOSED TO BE TRANSFERRED SHALL HAVE DELIVERED TO THE COMPANY EITHER A NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION OR AN OPINION OF COUNSEL EXPERIENCED IN SECURITIES MATTERS AND REASONABLY ACCEPTABLE TO THE COMPANY TO THE EFFECT THAT SUCH PROPOSED TRANSFER IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE ACT OR (C) SUCH TRANSFER IS PURSUANT TO RULE 144 OR RULE 144A UNDER THE ACT AND SUCH HOLDER SHALL HAVE DELIVERED TO THE COMPANY A CERTIFICATE SETTING FORTH THE BASIS FOR APPLYING SUCH RULE TO THE PROPOSED TRANSFER." 8.3. Termination of Securities Law Restrictions. Notwithstanding the foregoing provisions of this Section 8, the restrictions imposed by Section 8.1(b) upon the transferability of the Warrants and the Restricted Common Stock and the legend requirements of Section 8.2 shall terminate as to any particular Warrant or shares of Restricted Common Stock when the Company shall have received from the Holder thereof an Opinion of Counsel to the effect that such legend is not required in order to ensure compliance with the Securities Act. Whenever the restrictions imposed by Sections 8.1(b) and 8.2 shall terminate as to this Warrant, as hereinabove provided, the Holder hereof shall be entitled to receive from the Company, at the expense of the Company, a new Warrant bearing the following legend in place of the restrictive legend set forth hereon: "THE RESTRICTIONS ON TRANSFERABILITY OF THE WITHIN WARRANT CONTAINED IN SECTIONS 8.1(b) AND 8.2 HEREOF TERMINATED ON ______________, 19__, AND ARE OF NO FURTHER FORCE AND EFFECT." All Warrants issued upon registration of transfer, division or combination of, or in substitution for, any Warrant or Warrants entitled to bear such legend shall have a similar legend endorsed -30- 35 thereon. Wherever the restrictions imposed by this Section shall terminate as to any share of Restricted Common Stock, as hereinabove provided, the Holder thereof shall be entitled to receive from the Company, at the Company's expense, a new certificate representing such Common Stock not bearing the restrictive legend set forth in Section 8.2(a). 9. REGISTRATION RIGHTS 9.1. Certain Definitions. For the purposes of this Section 9: (a) The Holders of Warrants and the Series A Warrants and the holders of Warrant Stock (as defined in Section 9.1(b)) are collectively referred to as "WS Holders". (b) "Warrant Stock" shall deemed to include (i) the shares of Common Stock issued, issuable or both (as the context may require) upon the exercise of Warrants and the Series A Warrants until such time as such shares of Common Stock have either been (a) Transferred in a public offering pursuant to a registration statement filed under the Securities Act or (b) Transferred in a transaction exempt from the registration and prospectus delivery requirements of the Securities Act under Section 4(1) thereof with all transfer restrictions and restrictive legends with respect to such Common Stock being removed in connection with such transaction,(ii) any other securities issued as (or issuable upon the conversion or exercise of any warrant, right or other security which is issued as) a dividend or other distribution with respect to, or in exchange by the Company generally for, or in replacement by the Company generally of, any shares of Warrant Stock and (iii) any securities issued in exchange for any such Warrant Stock in any merger or reorganization of the Company, but in the cases of clauses (ii) and (iii) only so long as such securities have not been registered and Transferred pursuant to the Securities Act or Transferred in a transaction exempt from the registration and prospectus delivery requirements of the Securities Act under Section 4(1) thereof so that all transfer restrictions and restrictive legends with respect to such securities are removed in connection with such Transfer. -31- 36 (c) Each WS Holder shall be deemed to "hold", as of any specified date, the aggregate of (i) the number of shares of Warrant Stock held by such WS Holder as of such date plus (ii) the number of shares of Warrant Stock issuable upon exercise of any Warrants and Series A Warrants held by such WS Holder as of such date. (d) The total number of shares of Warrant Stock deemed "outstanding" as of a specified date will be equal to (i) the total number of shares of Warrant Stock Outstanding as of such date plus (ii) the number of shares of Warrant Stock issuable upon exercise of all outstanding Warrants and Series A Warrants as of such date. (e) "Registrable Securities" shall mean any Warrants, any Series A Warrants and/or any shares of Warrant Stock. 9.2. Demand Registration. (a) In the event the Company receives at any time after August 31, 1997 a written request from one or more WS Holders holding in the aggregate at least seventy-six percent of the number of shares of Warrant Stock then outstanding (the "Demanding Holders") that the Company file a registration statement under the Securities Act for the sale or other disposition of at least a majority of the Registrable Securities (a "Demand Registration"), the Company shall promptly give written notice of such request to each other WS Holder and each such WS Holder may elect, by giving written notice of such election to the Company within ten (10) Business Days after receipt of the Company's notice, to have some or all of the Registrable Securities held by it included in such registration. At the option of the Demanding Holders, such request may specify that the requested registration will be for an offering on a delayed or continual basis pursuant to Rule 415 under the Securities Act (a "Shelf Registration"). (b) Following receipt of such a request for a Demand Registration, the Company shall: (1) File the requested registration statement with the Commission as promptly as practicable, and shall use all commercially reasonable efforts to have the registration declared effective under the Securities Act as soon as reasonably practicable, in each instance giving due -32- 37 regard to the need to prepare and file current financial statements, conduct due diligence and complete other actions that are reasonably necessary to effect a registered public offering; and (2) Use all commercially reasonable efforts to keep the such registration statement Continuously Effective (x) if a Demand Registration, for up to 90 days or until such earlier date as of which all Registrable Securities covered by such registration statement shall have been disposed of in the manner described in the registration statement, and (y) if a Shelf Registration, for 270 days. Notwithstanding the foregoing, if for any reason the effectiveness of a Demand Registration is suspended or postponed as permitted by Subsection (d) below, the foregoing period shall be extended by the aggregate number of days of such suspension or postponement. (c) The Company shall not be required to effect a registration of Registrable Securities pursuant to a Demand Registration on more than one occasion. For purposes of this Subsection (c), registration shall not be deemed to have been effected (i) unless a registration statement with respect thereto has become effective, (ii) if after such registration statement has become effective, such registration or the related offer, sale or distribution of Registrable Securities thereunder is interfered with by any stop order, injunction or other order or requirement of the Commission or other governmental agency or court for any reason not attributable to the Selling Holders and such interference is not thereafter eliminated or (iii) if the conditions to closing specified in the underwriting agreement, if any, entered into in connection with such registration are not satisfied or waived, other than by reason of a failure on the part of the Selling Holders. If the Company shall have complied with its obligations under this Section 9, a right to demand a registration pursuant to this Section 9.2 shall be deemed to have been satisfied (i) if a Demand Registration other than a Shelf Registration, upon the earlier of (x) the date as of which all of the Registrable Securities included therein shall have been disposed of pursuant to the registration statement and (y) the date as of which such Demand Registration shall have been Continuously Effective for a period of 90 days, and (ii) if a Shelf Registration, upon the effective date of a Shelf Registration, provided no stop order or similar order, or -33- 38 proceedings for such an order, is thereafter entered or initiated. (d) The Company shall be entitled to postpone for up to 90 days the filing of any Demand Registration statement otherwise required to be prepared and filed pursuant to this Section 9.2 or suspend any such Demand Registration for up to 90 days, if the Board of Directors of the Company determines, in its good faith reasonable judgment that such registration and the Transfer of Warrant Stock contemplated thereby would materially interfere with, or require premature disclosure of, any financing, acquisition or reorganization involving the Company or any of its wholly owned subsidiaries and the Company promptly gives the Demanding Holders notice of such determination; provided, however, that the Company shall not have postponed pursuant to this Subsection (d) the filing of any other Demand Registration statement otherwise required to be prepared and filed pursuant to this Section 9.2, or suspended any such Demand Registration, during the 12 month period ended on the date of the relevant request pursuant to Subsection (a) above and provided further, that the Expiration Date shall be extended by the period of any such postponement or suspension. (e) A registration pursuant to this Section 9.2 shall be on such appropriate registration form of the Commission available to the Company as shall (i) be selected by the Company and be reasonably acceptable to the Majority Selling Holders and (ii) permit the disposition of the Warrant Stock in accordance with the intended method or methods of disposition specified in the request made pursuant to Subsection (a) above. If any registration pursuant to this Section 9.2 involves an underwritten offering (whether on a "firm", "best efforts" or "all reasonable efforts" basis or otherwise), or an agented offering, the Majority Selling Holders shall have the right to select the underwriter or underwriters and manager or managers to administer such underwritten offering or the placement agent or agents for such agented offering from among the entities listed in Schedule B hereto (or any successors of any such entities), it being understood that the Majority Selling Holders shall use commercially reasonable efforts to select one or more of the first three listed entities subject to arriving at reasonably acceptable terms and conditions for the offering. -34- 39 (f) The Company may elect to include shares of Common Stock to be sold for its account in any such Demand Registration (including a Shelf Registration); provided, however, if the managing underwriter shall advise the Demanding Holders in writing (with a copy to the Company) that, in its opinion, the number of shares of Common Stock requested to be included in such Demand Registration would adversely affect such offering or the price to be realized therefor, or the timing thereof, then the number of shares proposed to be included in such Demand Registration by the Company shall be reduced, to such number that the Demanding Holders are advised can be sold without such effect in such Demand Registration. 9.3. Piggyback Registration. (a) If at any time the Company proposes to register (including for this purpose a registration effected by the Company for shareholders of the Company other than the WS Holders) equity securities under the Securities Act in connection with the public offering solely for cash on Form S-1, S-2 or S-3 (or any replacement or successor forms), the Company shall promptly give each WS Holder written notice of such registration (a "Piggyback Registration"). Upon the written request of each WS Holder given within 20 days following the date of such notice, the Company shall cause to be included in such registration statement and use its best efforts to be registered under the Securities Act all the Registrable Securities that each such WS Holder shall have requested to be registered. The Company shall have the absolute right to withdraw or cease to prepare or file any registration statement for any offering referred to in this Section 9.3 without any obligation or liability to any WS Holder. (b) If the managing underwriter shall advise the Company in writing (with a copy to each Selling Holder) that, in its opinion, the amount of Registrable Securities requested to be included in such registration would materially adversely affect such offering, or the timing thereof, then the Company will include in such registration, to the extent of the amount and class which the Company is so advised can be sold without such material adverse effect in such offering: first, all securities proposed to be sold by the Company for its own account; and second, the Warrant Stock requested to be included in such registration by WS Holders and all other securities requested to be included in such registration by Persons other than the Company and WS Holders, the securities covered by this clause -35- 40 second to be included pro rata based on the estimated gross proceeds from the sale thereof. (c) Each WS Holder shall be entitled to have its Registrable Securities included in an unlimited number of Piggyback Registrations pursuant to this Section 9.3. 9.4. Registration Procedures. Whenever required under Section 9.2 or Section 9.3 hereof to effect the registration of any Registrable Securities, the Company shall, as expeditiously as practicable: (a) Prepare and file with the Commission a registration statement with respect to such Warrant Stock and use the Company's best efforts to cause such registration statement to become effective; provided, however, that before filing a registration statement or prospectus or any amendments or supplements thereto, including documents incorporated by reference after the initial filing of the registration statement and prior to effectiveness thereof, the Company shall furnish to one firm of counsel for the Selling Holders (selected by Majority Selling Holders) copies of all such documents in the form substantially as proposed to be filed with the Commission at least four Business Days prior to filing for review and comment by such counsel, which opportunity to comment shall include an absolute right to control or contest disclosure if the applicable Selling Holder reasonably believes that it may be subject to controlling person liability under applicable securities laws with respect thereto. (b) Prepare and file with the Commission such amendments and supplements to such registration statement and the prospectus used in connection with such registration statement as may be necessary to comply with the provisions of the Securities Act and rules thereunder with respect to the disposition of all securities covered by such registration statement. If the registration is for an underwritten offering, the Company shall amend the registration statement or supplement the prospectus whenever required by the terms of the underwriting agreement entered into pursuant to Section 9.4(e). Subject to Rule 415 under the Securities Act, if the registration statement is a Shelf Registration, the Company shall amend the registration -36- 41 statement or supplement the prospectus so that it will remain current and in compliance with the requirements of the Securities Act for 270 days or after its effective date, and if during such period any event or development occurs as a result of which the registration statement or prospectus contains a misstatement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading, the Company shall promptly notify each Selling Holder, amend the registration statement or supplement the prospectus so that each will thereafter comply with the Securities Act and furnish to each Selling Holder of Registrable Securities such amended or supplemented prospectus, which each such Holder shall thereafter use in the Transfer of Warrant Stock covered by such registration statement. Pending such amendment or supplement each such Selling Holder shall cease making offers or Transfers of Registerable Securities pursuant to the prior prospectus. In the event that any Registrable Securities included in a registration statement subject to, or required by, this Warrant remain unsold at the end of the period during which the Company is obligated to use its best efforts to maintain the effectiveness of such registration statement, the Company may file a post-effective amendment to the registration statement for the purpose of removing such Registrable Securities from registered status. (c) Furnish to each Selling Holder of Registrable Securities, without charge, such number of copies of the registration statement, any pre-effective or post-effective amendment thereto, the prospectus, including each preliminary prospectus and any amendments or supplements thereto, in each case in conformity with the requirements of the Securities Act and the rules thereunder, and such other related documents as any such Selling Holder may reasonably request in order to facilitate the disposition of Registrable Securities owned by such Selling Holder. (d) Use all commercially reasonable efforts (i) to register and qualify the securities covered by such registration statement under such other securities or Blue Sky laws of such states or jurisdictions as shall be reasonably requested by the managing underwriter (as applicable, or if inapplicable, the Majority Selling -37- 42 Holders), and (ii) to obtain the withdrawal of any order suspending the effectiveness of a registration statement, or the lifting of any suspension of the qualification (or exemption from qualification) of the offer and transfer of any of the Registrable Securities in any jurisdiction, at the earliest possible moment; provided, however, that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions. (e) In the event of any underwritten or agented offering, enter into and perform the Company's obligations under an underwriting or agency agreement (including indemnification and contribution obligations of underwriters or agents), in usual and customary form, with the managing underwriter or underwriters of or agents for such offering. The Company shall also cooperate with the Majority Selling Holders and the managing underwriter for such offering in the marketing of the Warrant Stock, including making available the Company's officers, accountants, counsel, premises, books and records for such purpose, but the Company shall not be required to incur any material out-of-pocket expense pursuant to this sentence. (f) Promptly notify each Selling Holder of any stop order issued or threatened to be issued by the Commission in connection therewith (and take all reasonable actions required to prevent the entry of such stop order or to remove it if entered. (g) Make generally available to the Company's security holders copies of all periodic reports, proxy statements, and other information referred to in Section 9.9(a) and an earnings statement satisfying the provisions of Section 11(a) of the Securities Act no later than 90 days following the end of the 12-month period beginning with the first month of the Company's first fiscal quarter commencing after the effective date of each registration statement filed pursuant to this Section 9. (h) Make available for inspection by any Selling Holder, any underwriter participating in such offering and the representatives of such Selling Holder and underwriter -38- 43 (but not more than one firm of counsel to such Selling Holders), all financial and other information as shall be reasonably requested by them, and provide the Selling Holder, any underwriter participating in such offering and the representatives of such Selling Holder and underwriter the opportunity to discuss the business affairs of the Company with its principal executives and independent public accountants who have certified the audited financial statements included in such registration statement, in each case all as necessary to enable them to exercise their due diligence responsibility under the Securities Act; provided, however, that information that the Company determines, in good faith, to be confidential and which the Company advises such Person in writing, is confidential shall not be disclosed unless such Person signs a confidentiality agreement reasonably satisfactory to the Company or the related Selling Holder of Registrable Securities agrees to be responsible for such Person's breach of confidentiality on terms reasonably satisfactory to the Company. (i) Use the Company's best efforts to obtain a so-called "comfort letter" from its independent public accountants, and legal opinions of counsel to the Company, in customary form and covering such matters of the type customarily covered by such letters, and in a form that shall be reasonably satisfactory to the Majority Selling Holders. The Company shall furnish to each Selling Holder a signed counterpart of any such comfort letter or legal opinion. Delivery of any such opinion or comfort letter shall be subject to the recipient furnishing such written representations or acknowledgments as are customarily provided by selling shareholders who receive such comfort letters or opinions. (j) Provide and cause to be maintained a transfer agent and registrar for all Registrable Securities covered by such registration statement from and after a date not later than the effective date of such registration statement. (k) Use all reasonable efforts to cause the Registrable Securities covered by such registration statement (i) if the Common Stock is then listed on a securities exchange or included for quotation in a -39- 44 recognized trading market, to continue to be so listed or included for a reasonable period of time after the offering, and (ii) to be registered with or approved by such other United States or state governmental agencies or authorities as may be necessary by virtue of the business and operations of the Company to enable the Selling Holders of Registrable Securities to consummate the disposition of such Registrable Securities. (l) Use the Company's reasonable efforts to provide a CUSIP number for the Common Stock prior to the effective date of the first registration statement including Registrable Securities. (m) Take such other actions as are reasonably required in order to expedite or facilitate the disposition of Registrable Securities included in each such registration. 9.5. Selling Holders' Obligations. (a) It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Section 9 with respect to the Registrable Securities of any Selling Holder that such Selling Holder shall: (i) Furnish to the Company such information regarding such Selling Holder, the number of Registrable Securities owned by it, and the intended method of disposition of such securities as shall be required to effect the registration of such Selling Holder's Registrable Securities, and to cooperate with the Company in preparing such registration; and (ii) Agree to sell their Registrable Securities to the underwriters at the same price and on substantially the same terms and conditions as the Company or the other Persons on whose behalf the registration statement was being filed have agreed to sell their securities, and to execute the underwriting agreement agreed to by the Majority Selling Holders (in the case of a registration under Section 9.2) or the Company and the Majority Selling Holders (in the case of a registration under Section 9.3). (b) Each Selling Holder shall notify the Company of any sales of such Selling Holder's shares registered for sale pursuant to this Section 9; provided, however, it is -40- 45 understood that any failure so to notify the Company shall not be deemed a default hereunder or to subject any Selling Holder to any claim for damages or expenses whatsoever. 9.6. Expenses of Registration. Expenses incurred in connection with registrations under this Section 9 shall be allocated and paid as follows: (a) With respect to each Demand Registration (including any Shelf Registration), the Company shall bear and pay all reasonable expenses incurred in connection with any registration, filing, or qualification of Registrable Securities with respect to such Demand Registration for each Selling Holder, including all registration, filing and NASD fees, all fees and expenses of complying with securities or blue sky laws, all word processing, duplicating and printing expenses, messenger and delivery expenses, the reasonable fees and disbursements of counsel for the Company, and of the Company's independent public accountants, including the expenses of "cold comfort" letters required by or incident to such performance and compliance, and the reasonable fees and disbursements of one firm of counsel for the Selling Holders of Registrable Securities (the "Registration Expenses"), but excluding underwriting discounts and commissions relating to Registrable Securities (which shall be paid on a pro rata basis by the Selling Holders) provided, however, that the Company shall not be required to pay for any expenses of any registration proceeding begun pursuant to Section 9.2 if the registration is subsequently withdrawn at the request of the Majority Selling Holders (in which case all Selling Holders shall bear such expense), unless WS Holders whose Registrable Securities constitutes a majority of the Registrable Securities then outstanding agree that such withdrawn registration shall constitute the exercise of their one demand registration under Section 9.2 hereof. The counsel for the Selling Holders shall be selected by Demanding Holders owning a majority of the Registrable Securities owned by Demanding Holders to be included in a Demand Registration and, in the case of a Piggyback Registration, by Selling Holders owning a majority of the Registrable Securities to be included in such registration; provided that in the case of a Piggyback Registration, the Selling Holders shall use one firm of counsel to represent all such holders and shall endeavor in -41- 46 good faith, with any other holders of securities to be included in such registration, to select one firm of counsel to represent all such selling securities holders. (b) The Company shall bear and pay all Registration Expenses incurred in connection with any Piggyback Registrations pursuant to Section 9.3 for each Selling Holder, but excluding underwriting discounts and commissions relating to Registrable Securities (which shall be paid on a pro rata basis by the Selling Holders of Registrable Securities). (c) Any failure of the Company to pay any Registration Expenses as required by this Section 9.6 shall not relieve the Company of its obligations under this Section 9. 9.7. Indemnification; Contribution. If any Registrable Securities are included in a registration statement under this Section 9: (a) To the extent permitted by applicable law, the Company shall indemnify and hold harmless each Selling Holder, each Person, if any, who controls such Selling Holder within the meaning of the Securities Act, and each officer, director, partner, and employee of such Selling Holder and such controlling Person, against any and all losses, claims, damages, liabilities and expenses (joint or several), including attorneys' fees and disbursements and expenses of investigation, incurred by such party pursuant to any actual or threatened action, suit, proceeding or investigation, or to which any of the foregoing Persons may become subject under the Securities Act, the Exchange Act or other federal or state laws, insofar as such losses, claims, damages, liabilities and expenses arise out of or are based upon any of the following statements, omissions or violations pursuant to a final non-appealable order (collectively a "Violation"): (i) any untrue statement or alleged untrue statement of a material fact contained in such registration statement, including any preliminary prospectus or final prospectus contained therein, or any amendments or supplements thereto; -42- 47 (ii) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein not misleading; or (iii) any violation or alleged violation by the Company of the Securities Act, the Exchange Act, any applicable state securities law or any rule or regulation promulgated under the Securities Act, the Exchange Act or any applicable state securities law; provided, however, that the indemnification required by this Section 9.7(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or expense if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld), nor shall the Company be liable in any such case for any such loss, claim, damage, liability or expense to the extent that it is determined by a court of competent jurisdiction by a final non-appealable order to have solely arisen out of or be based upon a Violation which occurred in reliance upon and in conformity with written information furnished to the Company by the indemnified party expressly for use in connection with such registration; provided, further, that the indemnity agreement contained in this Section 9.7(a) shall not apply to any underwriter to the extent that any such loss is based on or arises out of an untrue statement or alleged untrue statement of a material fact, or an omission or alleged omission to state a material fact, contained in or omitted from any preliminary prospectus if the final prospectus shall correct such untrue statement or alleged untrue statement, or such omission or alleged omission, and a copy of the final prospectus has not been sent or given to such person at or prior to the confirmation of sale to such person if such underwriter was under an obligation to deliver such final prospectus and failed to do so. The Company shall also indemnify underwriters, selling brokers, dealer managers and similar securities industry professionals participating in the distribution, their officers, directors, agents and employees and each person who controls such persons (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) to the same extent as provided above with respect to the indemnification of the Selling Holders. -43- 48 (b) To the extent permitted by applicable law, each Selling Holder shall indemnify and hold harmless the Company, each of its directors, each of its officers and employees, each Person, if any, who controls the Company within the meaning of the Securities Act, any other Selling Holder, any controlling Person of any such other Selling Holder and each officer, director, partner, and employee of such other Selling Holder and such controlling Person, against any and all losses, claims, damages, liabilities and expenses (joint and several), including attorneys' fees and disbursements and expenses of investigation, incurred by such party pursuant to any actual or threatened action, suit, proceeding or investigation, or to which any of the foregoing Persons may otherwise become subject under the Securities Act, the Exchange Act or other federal or state laws, insofar as such losses, claims, damages, liabilities and expenses are determined by a court of competent jurisdiction by a final non-appealable order to have solely arisen out of or be based upon a Violation that occurred in reliance upon and in conformity with written information furnished by such Selling Holder expressly for use in connection with such registration; provided, however, that (x) the indemnification required by this Section 9.7(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or expense if settlement is effected without the consent of the relevant Selling Holder of Registrable Securities, which consent shall not be unreasonably withheld, and (y) in no event shall the amount of any indemnity under this Section 9.7(b) exceed the net proceeds from the applicable offering received by such Selling Holder. (c) Promptly after receipt by an indemnified party under this Section 9.7 of notice of the commencement of any action, suit, proceeding, investigation or threat thereof made in writing for which such indemnified party may make a claim under this Section 9.7, such indemnified party shall deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party shall have the -44- 49 right to retain its own counsel, with the fees and disbursements and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding. The failure to deliver written notice to the indemnifying party within a reasonable time following the commencement of any such action, if prejudicial to its ability to defend such action, shall relieve such indemnifying party of any liability to the indemnified party under this Section 9.7 but shall not relieve the indemnifying party of any liability that it may have to any indemnified party otherwise than pursuant to this Section 9.7. Any reasonable fees and expenses incurred by the indemnified party (including any fees and expenses incurred in connection with investigating or preparing to defend such action or proceeding) shall be paid to the indemnified party, as incurred, within thirty (30) days of written notice thereof to the indemnifying party (regardless of whether it is ultimately determined that an indemnified party is not entitled to indemnification hereunder). Any such indemnified party shall have the right to employ separate counsel in any such action, claim or proceeding and to participate in the defense thereof, but the fees and expenses of such counsel shall be the expenses of such indemnified party unless (i) the indemnifying party has agreed to pay such fees and expenses or (ii) the indemnifying party shall have failed to promptly assume the defense of such action, claim or proceeding or (iii) the named parties to any such action, claim or proceeding (including any impleaded parties) include both such indemnified party and the indemnifying party, and such indemnified party shall have been advised by counsel that there may be one or more legal defenses available to it which are different from or in addition to those available to the indemnifying party and that the assertion of such defenses would create a conflict of interest such that counsel employed by the indemnifying party could not faithfully represent the indemnified party (in which case, if such indemnified party notifies the indemnifying party in writing that it elects to employ separate counsel at the expense of the indemnifying party, the indemnifying party shall not have the right to assume the defense of such -45- 50 action, claim or proceeding on behalf of such indemnified party, it being understood, however, that the indemnifying party shall not, in connection with any one such action, claim or proceeding or separate but substantially similar or related actions, claims or proceedings in the same jurisdiction arising out of the same general allegations or circumstances, be liable for the reasonable fees and expenses of more than one separate firm of attorneys (together with appropriate local counsel) at any time for all such indemnified parties, unless in the reasonable judgment of such indemnified party a conflict of interest may exist between such indemnified party and any other of such indemnified parties with respect to such action, claim or proceeding, in which event the indemnifying party shall be obligated to pay the fees and expenses of such additional counsel or counsels). No indemnifying party shall be liable to an indemnified party for any settlement of any action, proceeding or claim without the written consent of the indemnifying party, which consent shall not be unreasonably withheld. (d) If the indemnification required by this Section 9.7 from the indemnifying party is unavailable to an indemnified party hereunder in respect of any losses, claims, damages, liabilities or expenses referred to in this Section 9.7: (i) The indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages, liabilities or expenses in such proportion as is appropriate to reflect the relative fault of the indemnifying party and indemnified parties in connection with the actions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative fault of such indemnifying party and indemnified parties shall be determined by reference to, among other things, whether any Violation has been committed by, or relates to information supplied by, such indemnifying party or indemnified parties, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such -46- 51 Violation. The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and expenses referred to above shall be deemed to include, subject to the limitations set forth in Section 9.7(a) and Section 9.7(b), any reasonable legal or other fees or expenses reasonably incurred by such party in connection with any investigation or proceeding. (ii) The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 9.7(d) were determined by pro rata allocation or by any other method of allocation which does not take into account the equitable considerations referred to in Section 9.7(d)(i) above. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. (e) If indemnification is available under this Section 9.7, the indemnifying parties shall indemnify each indemnified party to the full extent provided in this Section 9.7 without regard to the relative fault of such indemnifying party or indemnified party or any other equitable consideration referred to in Section 9.7(d) above. (f) The indemnification required by this Section 9.7 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or expense, loss, damage or liability is incurred. In the event that it shall be subsequently determined that the recipient of any such periodic payment shall not be entitled to indemnification hereunder, such recipient promptly shall repay such payments, together with interest thereon at the Agreed Rate from the date of original receipt to the date of repayment. (g) The obligations of the Company and the Selling Holders of Registrable Securities under this Section 9.7 shall survive the completion of any offering of Registrable Securities pursuant to a registration statement under this Section 9, and otherwise. -47- 52 9.8. Holdback. Each WS Holder entitled pursuant to this Section 9 to have Registrable Securities included in a registration statement prepared pursuant to this Section 9, if so requested by the managing underwriter in connection with an offering of any Registrable Securities, shall not effect any public sale or distribution of shares of Common Stock, Convertible Securities or Stock Purchase Rights (excluding any sale pursuant to Rule 144 or Rule 144A under the Securities Act and any sale as part of such underwritten or agented registration), during the 5-day period prior to, and during the 45-day period beginning on, the date such registration statement is declared effective under the Securities Act by the Commission, provided that such WS Holder is timely notified of such effective date in writing by the Company or such managing underwriter. 9.9. Additional Covenants of the Company. The Company hereby agrees and covenants as follows: (a) The Company shall file as and when applicable, on a timely basis, all reports required to be filed by it under the Exchange Act. If the Company is not required to file reports pursuant to the Exchange Act, upon the request of any WS Holder, the Company shall make publicly available the information specified in subparagraph (c)(2) of Rule 144 of the Securities Act, and take such further action as may be reasonably required from time to time and as may be within the reasonable control of the Company, to enable the WS Holders to Transfer Warrants or Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by Rule 144 under the Securities Act or any similar rule or regulation hereafter adopted by the Commission. In addition, promptly upon the request of any WS Holder, the Company shall provide such WS Holder with such publicly available financial statements, reports and other information as may be required to permit such WS Holder to Transfer shares of Registrable Securities to Qualified Institutional Investors pursuant to Rule 144A of the Securities Act. (b) The Company shall not, and shall not permit its majority owned subsidiaries to, effect any public sale or distribution of any shares of Common Stock, Convertible Securities or Stock Purchase Rights during the 5 Business Days prior to, and during the 90-day period beginning on, -48- 53 the commencement of a public distribution of Registrable Securities pursuant to any registration statement prepared pursuant to this Section 9 (other than by the Company pursuant to such registration if the registration is pursuant to Section 9.3 or by the Company pursuant to any dividend reinvestment plan offered by it to its stockholders). The Company shall not effect any registration of its securities (other than on Form S-4, Form S-8, or any successor forms to such forms or pursuant to such other registration rights agreements as may be approved in writing by the Majority Selling Holders) or effect any public or private sale or distribution of any of its securities, including a sale pursuant to Regulation D under the Securities Act, whether on its own behalf or at the request of any holder or holders of such securities from the date of a request for a Demand Registration pursuant to Section 9.2 until 90 days following the effective date of such Demand Registration statement, unless the Company shall have previously notified in writing all Selling Holders of the Company's desire to do so, and the Majority Selling Holders or the managing underwriter, if any, shall have consented thereto in writing. (c) Any agreement entered into on or after August 31, 1997 pursuant to which the Company or any of its majority owned subsidiaries issues or agrees to issue any Common Stock (including, without limitation, any employee stock option, stock purchase agreement, merger agreement or other agreement) shall contain a provision whereby any holder receiving such Common Stock who will hold more than one percent (1%) of the amount of such Common Stock then outstanding shall agree not to effect any public sale or distribution of any such Common Stock during the periods described in the second sentence of Section 9.9(b), in each case including a sale pursuant to Rule 144 under the Securities Act (unless such Person is prevented by applicable statute or regulation from entering into such an agreement). (d) Subject to Section 13, the Company shall not, directly or indirectly, (x) enter into any merger, consolidation or reorganization in which the Company shall not be the surviving corporation or (y) Transfer or agree to Transfer all or substantially all the Company's assets, -49- 54 unless prior to such merger, consolidation, reorganization or asset Transfer, the surviving corporation or the Transferee, respectively, shall have agreed in writing to assume the obligations of the Company under this Agreement, and for that purpose references hereunder to "Registrable Securities" shall be deemed to include the securities which the WS Holders would be entitled to receive in exchange for Registrable Securities pursuant to any such merger, consolidation or reorganization. 10. LOSS OR MUTILATION Upon receipt by the Company from any Holder of evidence reasonably satisfactory to it of the ownership of and the loss, theft, destruction or mutilation of this Warrant and an indemnity reasonably satisfactory to it (it being understood that the written indemnification agreement of or affidavit of loss of Norwest Bank Iowa, National Association shall be a sufficient indemnity) and, in case of mutilation, upon surrender and cancellation hereof, the Company will execute and deliver in lieu hereof a new Warrant of like tenor to such Holder; provided, however, in the case of mutilation, no indemnity shall be required if this Warrant in identifiable form is surrendered to the Company for cancellation. 11. OFFICE OF THE COMPANY As long as any of the Warrants remain outstanding, the Company shall maintain an office or agency, which may be the principal executive offices of the Company (the "Designated Office"), where the Warrants may be presented for exercise, registration of transfer, division or combination as provided in this Warrant. Such Designated Office shall initially be the office of the Company at Cedar Rapids, Iowa. The Company may from time to time change the Designated Office to another office of the Company or its agent within the United States by notice given to all registered holders of Warrants at least ten Business Days prior to the effective date of such change. -50- 55 12. FINANCIAL AND BUSINESS INFORMATION Until the Expiration Date, the Company shall deliver to each Holder of Warrants or of Warrant Stock one copy of each of the following items: (i) promptly after filing thereof, copies of all regular and periodic reports, proxy statements (other than preliminary) and registration statements (other than registration statements on Forms S-3 (relating to debt securities) and S-8) which the Company may file with the Securities and Exchange Commission or any governmental agency substituted therefor. (ii) promptly upon their becoming available, copies of all financial statements, reports, notices and proxy statements sent or made available by the Company to the holders of any class of its securities generally or by any Subsidiary of the Company to the holders of any class of its securities generally; and (iii) with reasonable promptness, such other public information relating to the Company and its Subsidiaries as the Holder may, from time to time, reasonably request. 13. REPURCHASE BY THE COMPANY OF WARRANTS The Company shall have the right (the "Call"), upon written notice (the "Call Notice") to the Holders of all outstanding Warrants given at any time on or after the date of the occurrence of the Triggering Event and before August 31, 1997, to repurchase on the date specified in the notice from each Holder of a Warrant all of such Warrant for an amount equal to the result (rounded to the nearest cent) obtained by multiplying One Dollar ($1.00) by a fraction, the numerator of which shall be the aggregate number of shares for which this Warrant may be exercised and the denominator of which shall be the aggregate number of shares for which all outstanding Series B Warrants may be exercised, and in all events not more than One Dollar ($1.00) for all Series B Warrants. On the date of any repurchase of this Warrant pursuant to this Section 13, the Holder shall assign to the Company such Warrant without any representation or warranty (except as to title and the absence of Liens), by the surrender -51- 56 of this Warrant at the Designated Office against payment of the repurchase price therefor. 14. MISCELLANEOUS 14.1. Nonwaiver. No course of dealing or any delay or failure to exercise any right hereunder on the part of the Company or the Holder shall operate as a waiver of such right or otherwise prejudice the rights, powers or remedies of such Person. 14.2. Notice Generally. Any notice, demand, request, consent, approval, declaration, delivery or communication hereunder to be made pursuant to the provisions of this Warrant shall be sufficiently given or made if in writing and either delivered in person with receipt acknowledged or sent by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: (a) if to any Holder of this Warrant or of Warrant Stock issued upon the exercise hereof, at its last known address appearing on the books of the Company maintained for such purpose; (b) if to the Company, at its Designated Office; or at such other address as may be substituted by notice given as herein provided. The giving of any notice required hereunder may be waived in writing by the party entitled to receive such notice. Every notice, demand, request, consent, approval, declaration, delivery or other communication hereunder shall be deemed to have been duly given or served on the date on which personally delivered, with receipt acknowledged, or three Business Days after the same shall have been deposited in the United States mail, or one Business Day after the same shall have been delivered to Federal Express or another overnight courier service. 14.3. Indemnification. If the Company fails to make, when due, any payments provided for in this Warrant, the Company shall pay to the Holder hereof (a) interest at the Agreed Rate on any amounts due and owing to such Holder from the date due until the date of payment and (b) such further amounts as shall be sufficient to cover any costs and expenses including, but not -52- 57 limited to, reasonable attorneys' fees and expenses incurred by such Holder in collecting any amounts due hereunder. The Company shall indemnify, save and hold harmless the Holder hereof and the Holders of any Warrant Stock issued upon the exercise hereof from and against any and all liability, loss, cost, damage, reasonable attorneys' and accountants' fees and expenses, court costs and all other out-of-pocket expenses incurred in connection with or arising from a Company Default. This indemnification provision shall be in addition to the rights of such Holder or Holders to bring an action against the Company for breach of contract based on such Company Default. 14.4. Limitation of Liability. No provision hereof, in the absence of affirmative action by the Holder to purchase shares of Common Stock, and no enumeration herein of the rights or privileges of the Holder hereof, shall give rise to any liability of such Holder to pay the Exercise Price for any Warrant Stock other than pursuant to an exercise of this Warrant or any liability as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company. 14.5. Remedies. Each Holder of Warrants and/or Warrant Stock, in addition to being entitled to exercise its rights granted by law, including recovery of damages, shall be entitled to specific performance of its rights provided under this Warrant. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees, in an action for specific performance, to waive the defense that a remedy at law would be adequate. 14.6. Successors and Assigns. Subject to the provisions of Sections 3.1, 8.1 and 8.2, this Warrant and the rights evidenced hereby shall inure to the benefit of and be binding upon the successors of the Company and the permitted successors and assigns of the Holder hereof. The provisions of this Warrant are intended to be for the benefit of all Holders from time to time of this Warrant and, in the case of Section 9, all Holders of shares of Warrant Stock issued upon the exercise hereof (including transferees), and shall be enforceable by any such Holder. -53- 58 14.7. Amendment. This Warrant and all other Warrants may be modified or amended or the provisions hereof waived with the written consent of the Company and the Majority Warrant Holders, provided that no such Warrant may be modified or amended to reduce the number of shares of Common Stock for which such Warrant is exercisable or to increase the price at which such shares may be purchased upon exercise of such Warrant (before giving effect to any adjustment as provided therein) without the written consent of the Holder thereof. 14.8. Severability. Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Warrant. 14.9. Headings. The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of this Warrant. 14.10. GOVERNING LAW; JURISDICTION. IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS WARRANT AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF ILLINOIS APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE, EXCEPT WITH RESPECT TO THE VALIDITY OF THIS WARRANT, THE ISSUANCE OF WARRANT STOCK UPON EXERCISE HEREOF AND THE RIGHTS AND DUTIES OF THE COMPANY WITH RESPECT TO REGISTRATION OF TRANSFER, WHICH SHALL BE GOVERNED BY THE LAWS OF DELAWARE. THE COMPANY HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED IN CHICAGO, ILLINOIS, SHALL HAVE, EXCEPT AS SET FORTH BELOW, EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES BETWEEN THE COMPANY AND THE HOLDER OF THIS WARRANT PERTAINING TO THIS WARRANT OR TO ANY MATTER ARISING OUT OF OR RELATING TO THIS AGREEMENT, PROVIDED, THAT IT IS ACKNOWLEDGED THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF CHICAGO, ILLINOIS. -54- 59 IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed and its corporate seal to be impressed hereon and attested by its Secretary or an Assistant Secretary. NORAND CORPORATION By:_________________________ Name: Title: [SEAL] Attest: By:___________________________ Name: Title: -55- 60 ANNEX A SUBSCRIPTION FORM [To be executed only upon exercise of Warrant] The undersigned registered owner of this Warrant irrevocably exercises this Warrant for the purchase of ______ shares Common Stock of Norand Corporation and herewith makes payment therefor, all at the price and on the terms and conditions specified in this Warrant and requests that certificates for the shares of Common Stock hereby purchased (and any securities or other property issuable upon such exercise) be issued in the name of and delivered to _________________ whose address is ____________________________________________ and, if such shares of Common Stock shall not include all of the shares of Common Stock issuable as provided in this Warrant, that a new Warrant of like tenor and date for the balance of the shares of Common Stock issuable hereunder be delivered to the undersigned. _______________________________ (Name of Registered Owner) _______________________________ (Signature of Registered Owner) _______________________________ (Street Address) _______________________________ (City) (State) (Zip Code) NOTICE: The signature on this subscription must correspond with the name as written upon the face of the within Warrant in every particular, without alteration or enlargement or any change whatsoever. EX-10.(DDDDD) 13 INCENTIVE STOCK OPTION AGREEMENT 1 EXHIBIT 10 (ddddd) Norand Corporation Incentive Stock Option Agreement Name: N. Robert Hammer THIS AGREEMENT sets forth the terms of a stock option granted under the Norand Corporation Long-Term Performance Program (the "Plan"). In consideration of the continuing services of Optionee and the covenants set forth in this Agreement, the Company has granted to Optionee an option (the "Option") to purchase 100,000 shares of the Company's Common Stock, $.01 par value, subject to the restrictions and conditions of this Agreement and the terms of the Plan, which are hereby incorporated by reference herein. Each such share shall be purchased at a price equal to the closing price for a share of Common Stock on September 24, 1996, as reported by NASDAQ (the "Option Price"). The Option is intended to be an incentive stock option under Section 422 of the Internal Revenue Code; provided, however, that to the extent that the terms of this Option do not satisfy the requirements of Section 422, the Option shall be a non qualified option. Date of Grant: September 24, 1996 Per share Option: $16.00 Shares Granted: 100,000 Grant Number: Optionee hereby agrees that the Option to acquire shares of the Company's common stock is granted pursuant to and in accordance with the terms of the Company's Long-Term Performance Program and the Stock Option Grant Agreement (such Stock Option Grant Agreement being attached hereto as Exhibit A)(the "Agreement"), both of which are incorporated herein and made an integral part of this Agreement, and Optionee further acknowledges receipt of a copy of the Company's Long-Term Incentive Prospectus and the Company's Stock Option Agreement. This Agreement consists of the face page and the terms and conditions attached hereto. IN WITNESS WHEREOF, this Agreement has been executed by Optionee, and for the Company by its duly authorized officer, on the date indicated below. N. Robert Hammer - ------------------------- ------------------------------------- DATE OPTIONEE Norand Corporation By: James Harrington ---------------------------- 2 Norand Corporation Incentive Stock Option Agreement Appendix A THIS AGREEMENT sets forth the terms of a stock option granted under the Norand Corporation Long-Term Performance Program (the "Plan"). 1. Rights of Participant. The Option shall entitle Optionee to purchase shares of Common Stock if applicable conditions are satisfied prior to the cancellation, termination or surrender of the Option. The Option shall not entitle Optionee to any other rights, including but not limited to any rights as a stockholder of the Company. 2. Exercise of Option. Unless accelerated in the discretion of the Compensation Committee of the Board of Directors of the Company (the "Committee") or as otherwise provided herein or under the terms of the Plan, the Option shall first become exercisable on the last day of the 114th month following the Grant Date of the Option. Notwithstanding the preceding sentence: (a) the Option shall become exercisable in full upon the occurrence of a Change in Control (as defined below) of the Company upon a Change in Control (as defined below) of the Company which occurs prior to the tenth anniversary of the Date of Grant of the Option and prior to the expiration date of the Option, the Option shall immediately become fully exercisable; provided, however, that no such acceleration shall occur upon a Change in Control to the extent it is determined that such acceleration will adversely affect pooling-of-interest accounting method to be applied to any transaction constituting a Change in Control; and (b) the Option shall become exercisable in accordance with the terms and conditions described in and to the extent provided in that certain letter dated October 11, 1996 from the Committee to the Optionee, which letter is incorporated herein by reference. Notwithstanding any other provision of the Agreement or of the Plan, if the Option becomes exercisable for the first time during a calendar year under the foregoing provisions with respect to share with a fair market value in excess of $100,000 (determined by aggregating all plans of the Company and its subsidiaries), the Option shall be a non qualified stock option with respect to shares in excess of such limitation. For purposes of this Agreement, a "Change in Control" shall be deemed to have occurred for purposes of this Agreement if: 3 (1) any "Person", as such term is used in Section 13(d) and 14(d) of the Securities Exchange Act of 1934 (the "Exchange Act") (other than the Company, any corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company, and any trustee or other fiduciary holding securities under an employee benefit plan of the Company or such proportionately owned corporation), is or becomes the "beneficial owner" (as defined in Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, of securities of the Company representing 40% or more of the combined voting power of the Company's then outstanding securities having the right to vote for the election of directors; (2) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than (i) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 60% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or (ii) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no Person acquires more than 15% of the Company's then outstanding securities having the right to vote for the election of directors. or (3) the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets (or any transaction having a similar effect). Once a Change in Control has occurred for purposes of this Agreement, no future events will constitute a Change in Control for purposes of this Agreement. 3. Expiration of Option. The Option shall expire as to all shares on the earlier of (a) the tenth anniversary of the Date of Grant of the Option, (b) the date that is 90 days after the employment of Optionee with the Company and all subsidiaries terminates for any reason other than death or disability, or (c) the first anniversary of the date the employment of Optionee with the Company and all subsidiaries terminates by reason of disability or by reason of death. If the Optionee is an officer or director of the Company or an employee in Band E or higher, this grant will not be effective until a Norand Employee Confidentiality and Invention Assignment Agreement is signed and returned to the Norand Account Manager, Client Services, StockPlan, Inc. 4 4. Transferability. The Option may not be transferred other than by will or the applicable laws of descent or distribution. The Option shall not otherwise be transferred, assigned, pledged or hypothecated for any purpose whatsoever and is not subject, in whole or in part, to execution, attachment, or similar process. Any attempted assignment, transfer, pledge or hypothecation or other disposition of the Option, other than in accordance with the terms set forth herein, shall be void and of no effect. 5. Procedure for Exercise. Subject to the terms of paragraph 3, the Option may be exercised in whole or in part by filing a written notice in accordance with the prospectus prior to the date the Option expires. Such notice shall specify the number of shares of Common Stock that the Optionee elects to purchase and shall be accompanied by payment of the Option Price for each such share of Common Stock. Subject to the provisions of the following sentence, payment of the Option Price (including applicable withholding taxes in accordance with paragraph 7 next below) shall be by cash or by certified or cashier's check payable to the Company. At the Optionee's election, all or a portion of such Option Price may be paid by delivery of shares of Common Stock of the Company having an aggregate fair market value which is equal to the amount of cash which would otherwise be required. 6. Withholding Taxes. Upon the exercise of the Option, the Company shall have the right to require Optionee to remit to the Company an amount sufficient to satisfy all federal, state and local withholding tax requirements prior to the delivery of any certificate or certificates for shares of Common Stock. The Optionee may satisfy the obligations of this Section by surrendering shares of Common Stock to the Company or having shares withheld by the Company with an aggregate fair market value equal to the amount required to be withheld. 7. Administrative Rules. The Option shall be governed by such administrative regulations as the Committee shall from time to time adopt. 8. Miscellaneous. (a) Amendment and Termination. The Committee may from time to time alter, amend or suspend the Plan or the Option, or may at any time terminate the Plan. No action taken by the Committee may materially and adversely affect the Option without the consent of Optionee. (b) Applicable Law. All questions pertaining to the validity, construction and administration of the Plan, this Agreement, and the Option represented hereby shall be determined in conformity with the internal laws of the State of Iowa. 5 (c) Notices. Every direction, revocation or notice authorized or required hereunder shall be deemed delivered to the Company (i) on the date it is personally delivered to the Secretary of the Company at its principal executive offices, or (ii) three business days after it is sent by registered or certified mail, postage prepaid, addressed to the Secretary at such offices; and shall be deemed delivered to the Optionee (i) on the date it is personally delivered to him or her, or (ii) three business days after it is sent by registered or certified mail, postage prepaid, addressed to him or her at the last address shown for him or her on the records of the Company. EX-10.(EEEEE) 14 CHANGE IN CONTROL SEVERANCE POLICY 1 EXHIBIT 10 (eeeee) Change in Control Severance Policy Policy This policy shall become effective as of the date on which a change in control occurs and shall be applicable to eligible categories of individuals (as indicated in the Appendix hereto) whose employment is terminated in a covered termination following a change in control. An employee who receives severance benefits pursuant to this policy shall not be entitled to severance benefits under any other plan or policy of the company. The company (or its successor) may condition the receipt of severance benefits upon the return of a signed severance agreement. Covered Terminations For purposes of this policy, material benefits shall be medical, dental, life, disability, pension, profit sharing or stock option benefits and other material perquisites. Position An eligible employee's position may be eliminated Elimination coincident with or within 2 years following a change in control and, in such case, the employee's termination of employment in connection with such elimination shall be treated as a covered termination. Change in If, coincident with or within 2 years following a Duties change in control, there is a material adverse change in an eligible employee's level of duties or level of reporting relationships, without his consent, from those in effect immediately prior to the change in control (as the same may have been enhanced from time to time), the employee's termination of employment within 30 days of such change shall be treated as a covered termination. Change in If, coincident with or within 2 years following a Salary and/or change in control, there is (i) a reduction in Benefits an eligible employee's rate of base salary or bonus, or (ii) a material adverse change in the material benefits applicable to the employee, as compared to those applicable to the employee immediately prior to the change in control (as the same may have been enhanced from time to time), the employee's termination of employment within 30 days of such change shall be treated as a covered termination. 2 Change in If, coincident with or within 2 years following a Location change in control, an eligible employee is relocated to an office or job location that is more than thirty miles from his office or job location immediately prior to the change in control (except for required travel on business to an extent substantially consistent with his business travel obligations as in effect immediately prior to the change in control), the employee's termination of employment within 30 days of such change shall be treated as a covered termination. Notwithstanding the foregoing, none of the foregoing events shall constitute a covered termination for purposes of this policy if the eligible employee's employment is terminated on account of cause. For purposes of this policy, the term "cause" shall mean the eligible employee's willful violation of any policy, rule or procedure of the company, misconduct which represents a serious deviation from generally accepted norms of behavior or unsatisfactory performance of duties. Severance Benefits If an eligible employee is terminated in a covered termination, the severance payable pursuant to this policy shall be as follows: Level 1: (a) Lump sum cash payment equal to two times the greater of (i) the sum of the employee's annual base salary and annual bonus (determined as though all targets had been met in the year of termination) as in effect on the date of termination, or (ii) the sum of the employee's annual base salary and annual bonus (determined as though all targets had been met in the year of the change in control) as in effect immediately prior to the change in control, (b) continuation of material benefits (as in effect immediately prior to termination) for two years following termination; and (c) outplacement services. Level 2: Lump sum cash payment equal to the greater of (i) the sum of the employee's annual base salary and annual bonus (determined as though all targets had been met in the year of termination) as in effect on the date of termination, or (ii) the sum of the employee's annual base salary and annual bonus (determined as though all targets had been met in the year of the change in control) as in effect immediately prior to the change in control, (b) continuation of material benefits (as in effect immediately prior to termination) for one 3 year following termination; and (c) outplacement services. Pay or benefits in effect as of any date shall be determined without regard to any material adverse change in such pay or benefits in anticipation of a change in control or termination, as applicable. Final Paycheck Contingent upon the return of all company property, an eligible employee's final paycheck will be available on the usual pay day and will be mailed to the employee's home. Any outstanding account receivable or expense advances from the employee will be deducted from the final paycheck unless contrary to applicable federal, state, or Canadian laws. Amendments The severance policy may be modified at any time by the company; provided, however, that the policy may not be amended for 2 years following a change in control in a manner which reduces the amount of any severance benefit that may be provided pursuant to the policy, adversely modifies the types of events that will constitute covered terminations for purposes of this policy or limits the class of eligible employees. Definitions of Change in Control For purposes of this severance policy, a "change in control" shall be deemed to have occurred for purposes of this policy if: (1) any "Person", as such term is used in Section 13(d) and 14(d) of the Securities Exchange Act of 1934 (the "Exchange Act") (other than the Company, any corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company, and any trustee or other fiduciary holding securities under an employee benefit plan of the Company or such proportionately owned corporation), is or becomes the "beneficial owner" (as defined in Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, of securities of the Company representing 40% or more of the combined voting power of the Company's then outstanding securities having the right to vote for the election of directors; (2) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than (i) a merger or consolidation 4 which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 60% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or (ii) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no Person acquires more than 15% of the Company's then outstanding securities having the right to vote for the election of directors. or (3) the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets (or any transaction having a similar effect). Once a change in control has occurred for purposes of this policy, no future events will constitute a change in control for purposes of this policy. 5 APPENDIX TO SEVERANCE POLICY CATEGORIES OF ELIGIBLE EMPLOYEES LEVEL 1 General Counsel Director-Human Resources & Organizational Development Vice President-Sales & Systems, Americas Vice President-Systems Integration & Business Planning Vice President-Operations & Information Technology Sr. Vice President-Sales and Marketing Vice President-European Operations Vice President-Research & Development Chief Financial Officer LEVEL 2 Patent Attorney Director-Information Systems and Services Sr. Engineering Consultant (3) Chief Technical Officer Director-West Coast Operations Director-Systems & Communications Director-Product Line Development and Support Controller, Assistant Treasurer Director-Strategic Planning, Corporate Taxes & Systems Integration Director-Manufacturing Operations Director-New Products Introduction Director-Corporation Procurement & Materials Director-Corporate Quality Director-Marketing and Portable Products Director-Channel Sales, Marketing Director-Communications Products Director-Americas Systems Director-Industry Marketing Director-National Service EX-10.(FFFFF) 15 CHANGE IN CONTROL BENEFIT AGREEMENT 1 EXHIBIT 10 (fffff) Change in Control Benefit Agreement This Agreement, made this 11th day of October, 1996, by and between Norand Corporation (the "Company") and N. Robert Hammer (the "Executive"); WITNESSETH THAT: WHEREAS, the Executive has been awarded options the vesting of which may be accelerated upon a Change in Control and the Company has determined that it is appropriate to provide the Executive with certain additional benefits in the event of a Change in Control; NOW, THEREFORE, in consideration of the covenants and agreements hereinafter set forth, and for other good and valuable consideration receipt whereof is hereby acknowledged, the Company and the Executive hereby agree as follows: 1. Change in Control. For purposes of this Agreement, a "Change in Control" shall be deemed to have occurred if: (a) any "Person", as such term is used in Section 13(d) and 14(d) of the Securities Exchange Act of 1934 (the "Exchange Act") (other than the Company, any corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company, and any trustee or other fiduciary holding securities under an employee benefit plan of the Company or such proportionately owned corporation), is or becomes the "beneficial owner" (as defined in Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, of securities of the Company representing 40% or more of the combined voting power of the Company's then outstanding securities having the right to vote for the election of directors; (b) the stockholders of the Company approve a merger or consolidation of the Company with any other corporation, other than (i) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 60% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or (ii) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no Person acquires more than 15% of the Company's then outstanding securities having the right to vote for the election of directors; or 2 (c) the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets (or any transaction having a similar effect). Once a Change in Control has occurred for purposes of this Agreement, no future events will constitute a Change in Control for purposes of this Agreement. 2. Gross-up Payment. The following provisions shall apply in the event that it is determined that acceleration of the vesting of the stock option awarded to the Executive on September 24, 1996 (the "Stock Option") upon a Change in Control would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"): (a) In the event it shall be determined that acceleration of the vesting of the Stock Option upon a Change in Control would be subject to the excise tax imposed by Section 4999 of the Code, determined without regard to any other payment, benefit or distribution (or combination thereof) by the Company, any affiliates of the Company, or one or more trusts established by the Company or any of its affiliates for the benefit of its employees, to or for the benefit of the Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement, or otherwise), the Executive shall be entitled to receive a payment from the Company (a "Gross-Up Payment") in an amount equal to the sum of the following amounts: (i) the amount of the excise tax attributable solely to the accelerated vesting of the Stock Option (referred to as the "Excise Tax") and the amount of any additional excise tax under section 4999 of the Code imposed with respect to additional payments, if any, made pursuant to this paragraph (a); (ii) any interest or penalties incurred by the Executive with respect to the Excise Tax and other payments, if any, made pursuant to this paragraph (a); and (iii) any taxes, including income taxes, incurred by the Executive on the Excise Tax and other payments, if any, made pursuant to this paragraph (a). (b) Subject to the provisions of paragraph (c) below, all determinations required to be made under this Section 2, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by -2- 3 a nationally recognized certified public accounting firm as may be designated by the Company (the "Accounting Firm") which shall provide detailed supporting calculations both to the Company and the Executive within fifteen (15) business days of the acceleration of the vesting of the Stock Option, or such earlier time as is requested by the Company. All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 2, shall be paid by the Company to the Executive within five (5) days after the receipt of the Accounting Firm's determination. If the Accounting Firm determines that no Excise Tax is payable by the Executive, it shall so indicate to the Executive in writing. Any determination by the Accounting Firm shall be binding upon the Company and the Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies pursuant to paragraph (c) and the Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Executive. (c) The Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten (10) business days after the Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. The Executive shall not pay such claim prior to the expiration of the thirty (30) day period following the date on which it gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Executive in writing prior to the expiration of such period that it desires to contest such claim, the Executive shall: (i) give the Company any information requested by the Company relating to such claim; (ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company; -3- 4 (iii) cooperate with the Company in good faith in order to effectively contest such claim; and (iv) permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this paragraph (c), the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forego any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs the Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to the Executive, on an interest-free basis, and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and provided, further, that if the Executive is required to extend the statute of limitations to enable the Company to contest such claim, the Executive may limit this extension solely to such contested amount. The Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. (d) If, after the receipt by the Executive of an amount advanced by the Company pursuant to paragraph (c), the Executive becomes entitled to receive any refund with respect to such claim, the Executive shall (subject to the Company's complying with the requirements of paragraph (c)) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Executive of an amount advanced by the Company pursuant to paragraph (c), a determination is made that the Executive shall not be entitled to any refund with respect to such claim and the Company does not notify the Executive in writing of its intent to contest such denial of refund prior to the expiration of thirty (30) days after such determination, then such advance shall be forgiven -4- 5 EXHIBIT10 (fffff) and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. 3. Miscellaneous. (a) Amendment and Termination. This Agreement may be amended or modified at any time with the written consent of the Company and the Executive; provided, however, that prior to a Change in Control, the Company may modify the payments and benefits to be provided pursuant to this Agreement without the consent of the Executive; and provided further that, the payments and benefits provided pursuant to Section 1 may not be amended for 2 years following a Change in Control in a manner which reduces the amount of any benefit that may be payable or provided to the Executive or pursuant to this Agreement. (b) Applicable Law. All questions pertaining to the validity, construction and administration of this Agreement shall be determined in conformity with the internal laws of the State of Iowa. (c) Notices. Every notice authorized or required under this Agreement shall be deemed delivered to the Company (i) on the date it is personally delivered to the Secretary of the Company at its principal executive offices, or (ii) three -5- 6 EXHIBIT 10(fffff) business days after it is sent by registered or certified mail, postage prepaid, addressed to the Secretary at such offices; and shall be deemed delivered to the Executive (i) on the date it is personally delivered to him, or (ii) three business days after it is sent by registered or certified mail, postage prepaid, addressed to him at the last address shown for him on the records of the Company. (d) Withholding. All payments and benefits provided pursuant to this Agreement shall be subject to customary withholding taxes and other employment taxes as required with respect to compensation paid by an employer to an employee. (e) Executed Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be treated as the original. IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the date first set forth above. NORAND CORPORATION By James Harrington ------------------------------ Its Director, Human Resources and Organizational Development ------------------------------ EXECUTIVE N. Robert Hammer ------------------------------ N. Robert Hammer -6- EX-11 16 STATEMENT REGARDING COMPUTATION OF PER SHARE EARN. 1 EXHIBIT 11 NORAND CORPORATION COMPUTATION OF PER SHARE INCOME
Three Months Ended --------------------------------------------- August 31, 1996 August 31, 1995 --------------- --------------- Fully Fully Primary Diluted Primary Diluted ------- ------- ------- ------- Net income (loss) to common shareholders (in thousands) ($2,395) ($2,395) ($7,866) ($7,866) ========= ========= ========= ========= Earnings Per Share Pursuant to APB 15 Weighted average common shares outstanding 7,574,621 7,574,621 7,515,822 7,515,822 Incremental shares outstanding assuming exercise of weighted average common stock options granted pursuant to APB 1 0 0 0 0 --------- --------- --------- --------- Average common and common equivalent shares outstanding pursuant to APB 15 7,574,621 7,574,621 7,515,822 7,515,822 ========= ========= ========= ========= Earnings (loss) per common share pursuant to APB 15 ($0.32) ($0.32) ($1.05) ($1.05) ========= ========= ========= =========
Twelve Months Ended ------------------------------------------------- August 31, 1996 August 31, 1995 --------------- --------------- Fully Fully Primary Diluted Primary Diluted ------ ------- ------- ------- Net income (loss) to common shareholders (in thousands) ($14,170) ($14,170) ($3,706) ($3,706) ========= ========= ========= ========= Earnings Per Share Pursuant to APB 15 Weighted average common shares outstanding 7,573,017 7,573,017 7,457,923 7,457,923 Incremental shares outstanding assuming exercise of weighted average common stock options granted pursuant to APB 1 0 0 0 0 ---------- --------- --------- --------- Average common and common equivalent shares outstanding pursuant to APB 15 7,573,017 7,573,017 7,457,923 7,457,923 ========= ========= ========= ========= Earnings (loss) per common share pursuant to APB 15 ($1.87) ($1.87) ($0.50) ($0.50) ========= ========= ========= =========
61 EX-21 17 SUBSIDIARIES OF NORAND 1 EXHIBIT 21 Subsidiaries of Norand Corporation 1. Norand International Corporation Incorporated in Iowa 2. Norand Data Systems, Ltd. Incorporated in Iowa 3. NAL Corporation Incorporated in Iowa 4. Norand Japan Limited Incorporated in Iowa 5. Norand (Italia) S.r.l. Incorporated in Italy 6. Norand (UK) Limited Incorporated in the United Kingdom 7. Norand (Denmark) A/S Incorporated in Denmark 8. Norand Data (Espana) S.A. Incorporated in Spain 9. Norand GmbH Incorporated in Germany 10. Norand (Sweden) AB Incorporated in Sweden 11. Norand (Benelux) B.V. Incorporated in the Netherlands 12. Norand de Mexico S.A. de C.V. Incorporated in Mexico 13. NDS Foreign Sales Corporation Incorporated in Barbados 14. Norand Technology Corporation Incorporated in Delaware 15. Norand (Australia) Pty Ltd. Incorporated in Australia 16. Infolink Group Ltd. Incorporated in Australia 62 2 EXHIBIT 21 (Continued) 17. Infolink Software Pty. Ltd. Incorporated in Australia 18. Infolink Computer Services Pty. Ltd. Incorporated in Australia 63 EX-23 18 CONSENT OF ARTHUR ANDERSON 1 EXHIBIT 23 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation by reference of our reports dated October 15, 1996 (except with respect to the matter discussed in Note 7, as to which date is November 20, 1996) included in this Form 10-K into the Company's previously filed registration statements on Form S-8 (No. 33-74398, 33-89204, and 33-66848) and Form S-3 (No. 33-95610). Arthur Andersen LLP Chicago, Illinois November 26, 1996 EX-27 19 FINANCIAL DATA SCHEDULE
5 1,000 12-MOS AUG-31-1996 SEP-01-1995 AUG-31-1996 3,604 0 79,119 9,278 33,565 123,544 61,144 35,543 172,065 129,331 0 77 0 0 42,657 172,065 235,500 235,500 141,744 141,744 0 3,844 6,256 (20,243) (6,073) (14,170) 0 0 0 (14,170) (1.87) (1.87)
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