Document:

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                                                                    EXHIBIT 10.1

                             JOINT VENTURE AGREEMENT

THIS JOINT VENTURE AGREEMENT is made as of this __________ day of
___________________, 1998 by and between PEMSTAR INC. ("PEMSTAR"), a corporation
organized under the laws of the State of Minnesota with its principal offices at
2535 Highway 14 West, Rochester, Minnesota 55901, U.S.A. and HONGGUAN
TECHNOLOGIES (S) PTE LTD. ("HongGuan"), a company incorporated under the laws of
Singapore with its registered office at 39 Joo Koon Circle, Singapore 629105.

WHEREAS, PEMSTAR is in the business of precision electro-mechanical
manufacturing, assembling and testing on a contract basis in Rochester,
Minnesota and other locations around the world; and

WHEREAS, HongGuan is in the business of designing and building factory
automation and precision assembly systems, tool and die, and manufacturing of
key modules and devices;

WHEREAS, PEMSTAR and HongGuan desire to incorporate a new private limited
company to be called PEMSTAR-HONGGUAN PTE LTD., or such other name as the
parties may agree and the Registrar of Companies may approve (the "Company") in
Singapore that will initially engage in the business of manufacturing equipment
for the disk drive industry, providing support services for such equipment and
providing engineering and design services for the disk drive industry;

WHEREAS, HongGuan will own 49% of the Company and PEMSTAR will own 51% of the
Company; and

WHEREAS, PEMSTAR and HongGuan desire to set forth in this Agreement the terms
and conditions of the joint ownership of the Company.

NOW, THEREFORE, in consideration of the premises and the respective agreements
herein set forth, the Parties hereto agree as follows:

1.   DEFINITIONS

1.1 Defined Terms. The following terms, when used in capitalized form in this
Agreement, shall have the meanings set forth below:

     (a) "Affiliate" shall mean a company controlled by, under common control
     with, or controlling a Party, where "control" means either (i) the
     ownership, either directly or indirectly, of more than 50% of the voting
     shares or (ii) the right to elect the majority of the directors of a
     company and, in either case, where such control may be exercised without
     the consent of any third party.

     (b) "Agreement" and "this Agreement" shall mean this Joint Venture
     Agreement, including all Exhibits hereto and, except where the context
     otherwise clearly requires, all certificates, documents and instruments
     executed and/or delivered at or prior to Closing.
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     (c) "Ancillary Agreements" shall mean the License Agreement, the Trademark
     Agreement and the Services Agreement, to be entered into at the Closing
     with respect to the Company.

     (d) "Board" or "Board of Directors" shall mean the Company's board of
     directors.

     (e) "Closing" shall mean the completion of the transactions contemplated by
     this Agreement as more fully set forth in Article 12.

     (f) "Closing Date" shall mean the date of the Closing as set forth in
     Section 12.1.

     (g) "Confidential Information" shall have the meaning set forth in Section
     9.1.

     (h) "Corporate Articles" shall mean the Memorandum and Articles of
     Association of the Company.

     (i) "Effective Date" shall mean the date of this Agreement as first written
     above.

     (j) "Fiscal Year" shall mean the financial year of the Company ending in
     each year on the 31st of March.

     (k) "Parties" shall mean PEMSTAR and HongGuan (or such other party who
     becomes a party pursuant to the terms of this Agreement), and "Party" shall
     mean either of them.

     (l) "Scope" of the Company shall mean the agreed scope of activities of the
     Company as defined in Section 2.1, as it may be modified from time to time
     pursuant to Section 2.2.

     (m) "Shareholders" shall mean PEMSTAR and HongGuan, and any Affiliate(s)
     that either may designate to hold some or all of its shares in the Company,
     and "Shareholder" shall mean any of them.

     (n) "Singapore Dollars" or "S$" shall mean units of the lawful currency of
     Singapore.

     (o) "Territory" shall mean the continent of Asia, as indicated on the map
     attached hereto as Exhibit A; provided, however, that the Territory under
     this Agreement shall exclude the Philippines.

     (p) "U.S. Dollars" or "U.S.$" shall mean units of the lawful currency of
     the United States of America.

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1.2 Terms Defined in Ancillary Agreements. All terms, other than those which are
defined in Section 1.1, which are defined in any of the Ancillary Agreements and
are used in capitalized form in this Agreement shall have the meanings set forth
in the relevant Ancillary Agreement.

1.3 Other Rules of Interpretation. Unless the context clearly indicates
otherwise, the following rules shall govern the interpretation of this
Agreement:

     (a) The definitions of all terms defined herein shall apply equally to the
     singular, plural, and possessive forms of such terms;

     (b) All references herein to "days" shall mean calendar days;

     (c) All references to "Exhibits" shall mean the corresponding Exhibits of
     this Agreement;

     (d) All references to "Sections" shall mean the corresponding Section to
     this Agreement.

2.   PURPOSE AND SCOPE

2.1 General Purpose and Initial Scope. Subject to and upon the terms and
conditions hereinafter set forth, the Parties hereby agree to establish a joint
venture. Notwithstanding the generality of the corporate objectives enumerated
in the Corporate Articles, the activities of the Company shall be limited to its
Scope. The initial Scope of the Company shall consist of providing research and
development, engineering design services and manufacturing of process and test
equipment for the disk drive industry in the Territory, and providing technical
support services for such equipment.

2.2 Future Scope. Subject to Section 6.4, the Scope of the Company may be
expanded, reduced or otherwise altered upon approval of the Board. On or after
September 30, 2002, the Parties shall request the Board to assess the viability
of a public offering of shares of the Company.

2.3 Non-Competition. Each Party agrees that, from and after the Closing Date and
during the term of this Agreement and for two years thereafter if the Company
has not been liquidated, it will not, within the Territory, either directly or
indirectly or through any of its Affiliates (other than the Company), engage in
any business which is within the Scope of the Company, from time to time, or
competitive with any such business without the consent of the Board of Directors
of the Company during the term of this Agreement and without the consent of the
other Party thereafter. If either Party engages in business that may be in
competition with a customer of the Company, the Parties agree to discuss in good
faith such business and its impact on the Company. During the term of this
Agreement, the decision by the Board of Directors of the Company of whether a
Party is competing, and the decision on whether to consent to any potential
competition, shall be made by the directors not appointed by the Party competing
or seeking to compete. A decision by the Board of Directors of the Company that
a Party is

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competing shall not be conclusive that the Party is in fact competing; it simply
authorizes the Company to pursue an action against such Party who is in breach
of this Section.

2.4 Sales and Marketing. Each of the Parties agrees that, in connection with
disk drive customers in the Territory, it and its Affiliates will represent the
Company as the primary contact for the disk drive business. Each Party agrees
that it and its Affiliates will not act independently with disk drive customers
in the Territory. Any such potential business to be generated by the Parties or
its Affiliates shall be offered to the Company unless (i) the business is "tools
and fixtures" (not related to equipment supplied by the Company), which will be
performed by HongGuan or its Affiliates or (ii) the business is "systems design
and prototype services" (not within the capabilities of the Company), which will
be performed by PEMSTAR or its Affiliates. The Parties agree to keep informed
the managing director of the Company, in a timely manner, of all customer
contacts. All service agreements and agreements and provisions for spare parts
relative to equipment supplied by the Company shall also be first offered to the
Company.

2.5 Right of First Refusal on Expanded Business. If one of the Parties to this
Agreement desires to enter into a partnership or joint venture with a third
party to manufacture equipment for the manufacturing and testing process in
non-disk drive industries, and if such partnership or joint venture would cover
North America with respect to HongGuan, or Asia with respect to PEMSTAR, then
the Parties agree to negotiate in good faith with each other regarding such a
partnership or joint venture before entering into such a partnership or joint
venture with a third party. If the Parties cannot agree on terms for such a
partnership or joint venture, then the Party desiring to enter into a
partnership or joint venture with a third party shall be free to do so..

3. FORMATION AND CAPITALIZATION

3.1 Formation. Prior to the Closing, PEMSTAR shall incorporate the Company as a
private limited company under the laws of Singapore. In the event of any
inconsistency or conflict between the Corporate Articles and the provisions of
this Agreement, the terms of this Agreement shall as between the Parties prevail
and the Parties shall cause such necessary alterations to be made to the
Corporate Articles as are required to remove such conflict. The Corporate
Articles shall be subscribed as to one share by Mr. Robert D. Ahmann, a duly
appointed nominee of PEMSTAR and as to one share by Mr. James Teo, a duly
appointed nominee of HongGuan. Forthwith on the incorporation of the Company,
PEMSTAR shall procure the transfer to it of the one share subscribed by Mr.
Robert D. Ahmann and HongGuan shall procure the transfer to it of the one share
subscribed by Mr. James Teo.

3.2 Authorized Capital and Subscriptions.

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     (a) The authorized share capital of the Company shall be S$5,000,000,
     divided into 5,000,000 ordinary shares, having a nominal value of S$1.00
     each. All ordinary shares shall have equal rights.

     (b) A total of 509,999 shares (representing 51% of the outstanding share
     capital) shall be subscribed by PEMSTAR in exchange for Five Hundred Nine
     Thousand Nine Hundred Ninety-nine Singapore Dollars (S$509,999). A total of
     489,999 shares (representing 49% of the outstanding share capital) shall be
     subscribed by HongGuan in exchange for Four Hundred Eighty-nine Thousand
     Nine Hundred Ninety-nine Singapore Dollars (S$489,999).

3.3 Substitution of Affiliates as Shareholders. Neither Party may transfer all
or any portion of its shares in the Company to a third party, except as provided
in Section 13.1 or as provided in this Section 3.3. A party may transfer all or
any portion of its shares in the Company to any of its respective Affiliates,
provided that:

     (a) the ownership of such shares by any Affiliate shall be subject to all
     the conditions set forth in this Agreement and the Corporate Articles;

     (b) the Parties shall each procure the performance of their respective
     obligations under this Agreement, and under the Corporate Articles, by
     their respective Affiliates, and shall cause such Affiliate to execute a
     Deed of Adherence pursuant to which that Affiliate shall agree to be bound
     by the terms and conditions of this Agreement; and

     (c) the shares in the Company held by any Affiliate of a Party shall be
     transferred to such Party prior to the completion of any transaction as a
     result of which such Affiliate will cease to be an Affiliate of such Party.

4.   FINANCING

4.1 Initial Financing. Subject to Section 6.4, if and when necessary, the
Parties shall use their best efforts to arrange a credit or overdraft facility
on behalf of the Company with a bank in Singapore acceptable to the Board.

4.2 Debt Financing. Subject to Section 6.4, the Company's future additional
financing may be obtained through external loans or other financial
arrangements, whenever possible without any additional security by way of
guarantee or otherwise from the Parties, and such financing shall in all cases
be subject to the approval of the Board in accordance with the provisions of
this Agreement. In the event that any guarantees, securities, indemnities or
other undertakings are required to be given for such loans or other financial
arrangements, the Parties shall provide the same in the same proportion as their
respective shareholding percentages at the relevant date.

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5.   DIVIDENDS

5.1 Dividends. Subject to Section 6.4(d) and to the approval of the Company in
general meeting, the Board may pay some or all of the Company's profits to the
Parties as dividends. Dividends shall be remitted to the Parties in proportion
to their shareholdings.

5.2 Time of Payment. All dividends required to be paid by the Company at the end
of any Fiscal Year pursuant to this Article 5 shall, unless otherwise determined
by the Board, be paid within thirty (30) days after the date of the annual
general meeting at which the financial statements for the Fiscal Year shall have
been approved.

6.   MANAGEMENT

6.1 Board of Directors. The Board shall be comprised of five (5) members, (i)
three (3) directors nominated by PEMSTAR, and (ii) two (2) directors nominated
by HongGuan, one of whom nominated by HongGuan shall be James Teo and one of
whom nominated by HongGuan must be a resident in Singapore (i.e., a citizen of
Singapore, a permanent resident or a foreign national holding an employment
pass). When a Managing Director other than James Teo is appointed, the Parties
shall agree on whether the appointment counts as one of PEMSTAR's three
nominations or one of HongGuan's two nominations. If the Parties agree that the
new Managing Director shall count as one of HongGuan's nominations, then the
Board shall be comprised of seven members, four directors nominated by PEMSTAR
and three directors nominated by HongGuan. If the Parties agree that the new
Managing Director shall count as one of PEMSTAR's nominations, PEMSTAR shall
determine whether the Board shall be comprised of seven members, four directors
nominated by PEMSTAR and three directors nominated by HongGuan, or whether the
number of directors on the Board shall remain as five members, three directors
nominated by PEMSTAR and two directors nominated by HongGuan. Subject to Section
6.4(t), each Party agrees to vote its shares in favor of the other Party's
nominees and replacements thereof. The term of office of each of the directors
shall be one year and they may be reappointed for any number of terms. The
Company shall indemnify any director against any claims that may be brought
against such director except for such claims arising out of or in relation to
any acts not performed in good faith or any acts which are performed in a manner
not in the best interests of the Company, or any acts resulting in violation of
Singapore law. Members of the Board shall serve without compensation, but all
reasonable costs incurred by the directors in performing their duties as members
of the Board (including international travel, hotel expenses and other related
expenses for attending Board meetings) shall be borne by the Company.

6.2  (a) Nomination and Removal of Directors. The right of nomination conferred
     on a Party under Section 6.1 shall include a right to remove at any time
     from office such person so nominated by that party as a director. Whenever
     for any reason a person ceases to be a director, the Party which had
     nominated him or would be entitled to nominate him under Section 6.1 shall
     nominate forthwith a substitute director. Each nomination or removal of a

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     director pursuant to Section 6.1 shall be in writing and signed on behalf
     of the Party nominating or removing such director and shall be delivered to
     the registered office for the time being of the Company. The rights of
     nomination and removal of each director shall be exercised by the Parties
     in accordance with the Corporate Articles.

     (b) Each Party's Power to Appoint Board Members. Any transfer or assignment
     of the shares in the Company by one Party to the other Party or to any
     third party pursuant to Sections 3.3 or 13.1 may result in an adjustment of
     each Party's power and ability to appoint directors to the Board and such
     adjustment shall be made in accordance with the principle that the
     Shareholders are entitled to appoint director(s) to the Board in proportion
     to their respective shareholdings, provided, however, that any equity owner
     of less than ten (10) percent of the shares of the Company shall not be
     entitled to a seat on the Board unless it is agreed to by all the other
     Shareholders.

6.3 Board Meetings. Meetings of the Board shall be conducted as follows:

     (a) The Board shall meet at least twice every year at a location determined
     by the Chairman of the Board. At any meetings of the Board, a quorum shall
     be one director nominated by PEMSTAR and one director nominated by
     HongGuan. A Board meeting shall be called by the Chairman and presided over
     by the Chairman. The Chairman shall give each director a written notice
     thirty (30) days before a Board meeting and such notice shall include the
     agenda, time and location of the meeting to be held.

     (b) A special Board meeting shall be called by the Chairman of the Board if
     it is so requested by at least two (2) directors. The Chairman shall give
     each director a written notice at least seven (7) days before a special
     Board meeting and such notice shall include the agenda, time and location
     of the meeting to be held. In the event that the Chairman does not convene
     a meeting within seven (7) days of the request of at least two (2)
     directors, the other directors may convene a meeting by giving notice as
     described above.

     (c) A director shall be entitled at any time and from time to time to
     appoint any person to act as his alternate and to terminate the appointment
     of such person. Such appointment shall require the prior written consent of
     the Parties unless such alternate is currently a director. Any such
     alternate director shall be entitled while holding office as such to
     receive notices of meetings of the Board and to attend and vote as a
     director at any such meetings at which the director appointing him is not
     present and generally to exercise all the powers, rights, duties and
     authorities and to perform all functions of the director appointing him.
     Further, that alternate director shall be entitled to exercise the vote of
     the director appointing him at any meetings of the Board and if such
     alternate director represents more than one director, such alternate
     director shall be entitled to one vote for every director he represents.

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     (d) A meeting of the directors at which a quorum is present shall not
     transact any business other than the business stated in the agenda
     specified in the notice of that meeting unless the directors present
     unanimously agree otherwise. A meeting of the directors at which a quorum
     is present shall be competent to exercise all the powers and discretions
     for the time being exercisable by the Board. If within 30 minutes from the
     time appointed for such meeting a quorum is not present, the meeting shall
     stand adjourned to the seventh (7th) working day (or such other date as may
     be mutually agreed by the Parties) at the same time and place and if at
     such adjourned meeting a quorum shall not be present, then the meeting
     shall be dissolved and the deadlock provisions set forth in Section 16.5
     may be invoked by either Party.

     (e) Upon the request of the Chairman, any meeting of the Board may be
     conducted by telephone or video conference. Any action to be taken by the
     Board may be taken without a meeting if all members of the Board consent in
     writing to such action and such resolution in writing shall be as effective
     as a resolution passed at a meeting of the Board duly convened and held,
     and may consist of several documents in the like form each signed by one or
     more of the directors. In the event that there is a deadlock on the voting
     of a proposed action, such action shall be deemed rejected by the Board.
     Notwithstanding the timing provisions of Section 6.3(a) or (b), all the
     directors present at a meeting of the Board validly convened in accordance
     with Section 6.3(a) or (b) may unanimously waive or agree to shorter notice
     thereof.

     (f) Minutes and resolutions of each meeting shall be kept in the English
     language and shall be signed by the Chairman of the Board. In the event
     that any Board member proposes any modification or addition to the minutes
     for a Board meeting, such director shall submit the same in writing to the
     Chairman of the Board within two (2) weeks after receipt by such director
     of the minutes and resolutions. The Chairman shall make decisions on such
     proposed modifications and additions within four (4) weeks from the receipt
     thereof. Copies shall be provided to each of the Parties and the originals
     shall be retained at the registered office of the Company.

6.4 Actions Requiring Consent of Both Parties. Subject to the Singapore
Companies Act, Cap. 50, the Parties agree and undertake to exercise all rights
available to them in relation to the Company to ensure that the Company shall
not, except with the prior written consent of both Parties, so long as either
Party owns at least 33% of the outstanding ordinary shares of the Company:

     (a) acquire, dispose, or suffer a dilution of any interest in any other
     company or partnership (other than the acquisition of the joint venture
     referred to in Section 18.10 below);

     (b) purchase, sell, mortgage or charge any property or any interest therein
     (other than in the ordinary course of business or operation and other than
     the acquisition of the joint venture referred to in Section 18.10 below);

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     (c) sell or dispose of the whole or a substantial part of its undertaking,
     goodwill or assets;

     (d) make any distribution of profits amongst its shareholders by way of
     dividend, capitalization of reserves or otherwise;

     (e) incur any capital commitment in excess of S$200,000 in respect of any
     one transaction, except those approved in the annual operating plan and
     other than as necessary for the acquisition of the joint venture referred
     to in Section 18.10 below;

     (f) dispose of any asset with a book value in excess of S$200,000, except
     as approved in the annual operating plan;

     (g) increase, reduce or cancel its authorized or issued share capital, or
     grant any option over its unissued share capital;

     (h) issue any shares of any class;

     (i) create, allow to arise or issue any debenture;

     (j) adopt any policy for managerial staff salary scales, staff benefit
     schemes or staff development programs exceeding S$150,000 per person per
     annum;

     (k) adopt any policy on the payment of directors' fees;

     (l) adopt any policy on accounting practices, depreciation practices or
     other financial matter which differs substantially from usual Singapore
     accounting, depreciation, commercial or financial practices;

     (m) borrow, raise, guarantee or lend (excluding suppliers' credit) more
     than S$200,000 in any one transaction or more than S$1,000,000 when
     aggregated with other similar transactions in the same calendar year other
     than as necessary for the acquisition of the joint venture referred to in
     Section 18.10 below;

     (n) appoint, dismiss or settle the terms of appointment or dismissal of any
     managing director or general manager;

     (o) change or diversify the scope of its business or undertaking;

     (p) amend its Corporate Articles;

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     (q) except as provided in Section 2.3, institute, withdraw or settle any
     legal action or proceeding in excess or anticipated to be in excess of
     S$200,000;

     (r) approve financial audits;

     (s) take any step for its dissolution or financial reorganization or for
     the appointment of a liquidator (including a provisional liquidator),
     receiver, judicial manager, trustee, administrator, agent or similar
     officer of or over any part of its assets or business.

     (t) accept the nomination or election of a director;

     (u) increase the number of directors other than as contemplated by Section
     6.1;

     (v) proceed with a public offering of shares of the Company.

6.5 Managing Director. The Parties agree that the Managing Director shall
initially be James Teo, who shall be appointed for a term of three (3) years,
unless terminated earlier by the Board. HongGuan shall assume all costs of
employing James Teo as the Managing Director until March 31, 1999, or, if
earlier, until such time that the Board appoints his successor. After March 31,
1999, or such earlier date that a successor is appointed, the Company shall bear
the costs of employing the Managing Director, which remuneration shall be
decided by the Board. The Managing Director shall have the full powers and
executive authority, subject to such limitations, conditions and guidelines as
the Shareholders or the Board shall from time to time establish, to act on
behalf of the Company. The Managing Director shall formulate and implement an
annual business plan, subject to the approval of the Board. The Managing
Director shall not take any of the actions listed in Section 6.4 without the
required approval from both Parties.

6.6 General Manager. The Parties shall advertise for and mutually agree on the
hiring of a General Manager who will assist the Managing Director and shall
perform such other roles as designated from time to time by the Managing
Director or the Board.

6.7 Program Manager. PEMSTAR shall assist in appointing the Program Manager, who
shall serve for twenty-four (24) months unless otherwise agreed to by the Board.
The Program Manager shall have such duties and responsibilities as designated by
the General Manager.

6.8 Audits. The company shall keep complete and accurate books and records. An
internationally recognized accounting firm based in Singapore and approved by
the Board shall conduct a formal audit of the financial affairs of the Company
each year and shall provide a report of such formal audit to the Board.

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6.9 Access to Properties, Records. During the term of this Agreement, each Party
(as well as its designated representatives) shall be afforded access, at its
sole expense, during normal business hours and subject to the Company's normal
security procedures, to the facilities, properties, books, records and files of
the Company, as may be available from time to time and requested for purposes
reasonably related to this Agreement, including the audit of the profit and loss
statements, balance sheets and other financial and tax records of the Company by
independent auditors for the Company or, at the option of the Party requesting
any such audit, by the independent auditors for such Party.

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7.   GENERAL MEETINGS

7.1 General Meetings. A general meeting of the Shareholders shall be convened by
the Board in accordance with the Corporate Articles and held at least once a
year on a date to be fixed by the agreement of the Parties. An extraordinary
general meeting of the Shareholders may, however, be convened by the Board
whenever deemed necessary.

7.2 Proceedings at General Meeting. The quorum for any general meeting of the
Company shall be two Shareholders, one of whom shall be PEMSTAR and the other
shall be HongGuan. If within 30 minutes of the time appointed for the convening
of the meeting of the Shareholders of the Company the quorum specified above is
not present, the meeting shall stand adjourned to the fifteenth (15th) working
day (or such other date as may be mutually agreed by the Parties) at the same
time and place. If at such adjourned meeting a quorum shall not be present, the
meeting shall be dissolved and the deadlock provisions set forth in Section 16.5
may be invoked by either Party. All resolutions of the Shareholders of the
Company shall be adopted by voting. A Party shall have one vote for each share
which is held by that Party in the capital of the Company. Any general meeting
of the Shareholders may be conducted by telephone or video conference. Any
action to be taken by the Shareholders may be taken without a meeting if all
Shareholders consent in writing to such action and such resolution in writing
shall be as effective as a resolution passed at a general meeting of the
Shareholders duly convened and held, and may consist of several documents in the
like form each signed by one or more Shareholders. In the event that there is a
deadlock on the voting of a proposed action, such action shall be deemed
rejected by the Shareholders.

8.   EMPLOYEES.

8.1 Source. The initial employees of the Company shall include, but not be
limited to, management and technical employees of HongGuan and employees of
PEMSTAR, each to be hired by the Company under new terms and conditions which
shall not include any benefits carried over from such employee's prior
employment with either HongGuan or PEMSTAR unless specifically agreed by the
Company or required by Singapore law. Such employees are anticipated to be those
listed in Exhibit B hereto. For two years after the Effective Date, HongGuan
will assist the Company fulfill its staffing requirements on the terms and
subject to the conditions provided in Section 5 of the Services Agreement
referred to in Section 12.2(b)(iii) of this Agreement.

8.2 Non-compete. Each of the Company's employees who are designated as
"managers" or "senior engineers" shall agree as a condition of employment to not
compete with the Company, which will be documented in the employee's employment
agreement or another separate agreement.

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9.   CONFIDENTIALITY

9.1 Confidential Information. "Confidential Information" shall mean all
information which is disclosed by either Party or the Company to the other
Party, either directly or through Affiliates of either or both, in written, oral
or physical form, which relates in any way to markets, customers, products,
patents, inventions, procedures, methods, designs, strategies, plans, assets,
liabilities, costs, revenues, profits, organization, employees, agents,
distributors or business in general; provided, however, that the following shall
not be deemed Confidential Information:

     (a) information which is or becomes available to the public or to the
     industry without the fault or negligence of the Party receiving the same;

     (b) information which was already in the possession of the Party receiving
     the same, provided that Party is able to prove such prior possession;

     (c) information which is subsequently received from a third party without
     notice of restriction on further disclosure; or

     (d) information which is independently developed by the Party receiving the
     same, provided the said Party is able to prove such independent
     development.

9.2 Non-Disclosure. Each of the Parties agrees (a) during the term of this
Agreement and for a period of one (1) year after termination thereof not to (i)
use any Confidential Information for any purpose other than as permitted or
required for performance by such Party under this Agreement or any Ancillary
Agreement or (ii) disclose or provide any of such Confidential Information to
any third party and (b) to take all necessary measures to prevent any such
disclosure by its present and future directors, officers, employees and
contractors during the said period. Each Party further agrees to cause its
Affiliates to comply with these provisions in the same manner as if each of them
were a Party.

9.3 Limitation of Prohibition. Nothing herein shall prohibit either of the
following:

     (a) the use by the Company at any time after termination of this Agreement
     of Confidential Information in the manner in which it had been utilized by
     the Company from time to time in the ordinary course of its business and in
     compliance with the terms hereof prior to termination; or

     (b) the disclosure of Confidential Information to any governmental
     authority if and to the extent required by applicable law, provided that
     such disclosure is made on a basis providing the maximum confidentiality
     permitted by law.

9.4 Solicitation of Employees. During the term of this Agreement and for a
period of one (l) year thereafter, no Party or Affiliate thereof shall employ or
contract for the services of any person, other

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than a person previously employed by such Party or Affiliate, who at the Closing
Date or at any time thereafter is an employee of the Company or of the other
Party or any Affiliate thereof, without the approval of the other Party.

10.  REPRESENTATIONS AND WARRANTIES

In order to induce the other Party to enter into and perform this Agreement,
each of the Parties hereby represents and warrants to the other Party as
follows:

10.1 Organization and Standing. Such Party is a corporation duly organized and
validly existing under the laws of the jurisdiction of its organization and has
all requisite corporate authority to carry on its business as now being
conducted by it.

10.2 Authority. Such Party has full power and authority to execute and deliver
this Agreement and the Ancillary Agreements and the other instruments to be
executed and delivered by such Party pursuant hereto and to consummate the
transactions contemplated hereby and thereby. All corporate acts and other
proceedings required to be taken by or on the part of such Party to authorize it
to perform its obligations under this Agreement and the Ancillary Agreements
have been duly and properly taken. This Agreement has been duly executed and
delivered by such Party and constitutes, and the Ancillary Agreements when duly
executed and delivered by such Party will constitute, legal, valid and binding
obligations of such Party enforceable in accordance with their respective terms.
Such Party agrees to use its best efforts to obtain the necessary consent of any
third party to the transactions contemplated hereby.

10.3 Approvals. No approval, authorization, consent or other order or action of
or filing with any court, administrative agency or other governmental authority
is required for the execution and delivery by such Party of this Agreement and
the Ancillary Agreements or its consummation of the transactions contemplated
hereby or thereby.

10.4 Litigation. Such Party has no actual knowledge of any material and adverse
actions, suits, proceedings or investigations pending or threatened against, by
or affecting it in any court or by or before any governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, or
before any arbitrator of any kind, with respect to, or which may have a material
effect upon, the transactions contemplated by this Agreement or the Ancillary
Agreements. Such Party is not in default with respect to any order, writ,
injunction or decree of any court or governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, affecting or relating to
it or any of the transactions contemplated by this Agreement or the Ancillary
Agreements; nor has such Party received notice of any material violation of any
laws, ordinances, regulations or orders applicable to it or any of the
transactions contemplated hereby or thereby; nor to the knowledge of such Party
is it in violation of any such laws, ordinances, regulations or orders.

                                       14
<PAGE>

10.5 Absence of Conflict.

     (a) The execution and delivery of this Agreement by each Party does not
     violate any law or conflict with such Party's, or any of such Party's
     Affiliate's, constitutive corporate documents or result in a breach of,
     constitute a default under or conflict with any material contract,
     agreement or instrument to which such Party or any Affiliate is a party or
     by which it or its properties or any Affiliate is a party or by which it or
     its Affiliate or any of its Affiliates' properties are bound.

     (b) Subject to clause (d) of this Section 10.5, all actions to be taken by
     either Party or its Affiliates in furtherance of this Agreement for the
     period of time from the date of execution and delivery of this Agreement to
     the Closing Date will not violate any law or conflict with such Party's, or
     any of such Party's Affiliate's, constitutive corporate documents or result
     in a breach of, constitute a default under or conflict with any material
     contract, agreement or instrument to which such Party or any Affiliate is a
     party or by which it or its properties or any Affiliate or any of its
     Affiliates' properties are bound.

     (c) The consummation of the transactions contemplated in this Agreement
     from and after the Closing Date, and the fulfillment of and compliance with
     the terms and conditions hereof and thereof from and after the Closing Date
     will not violate any law or conflict with such Party's, or any of such
     Party's Affiliate's, constitutive corporate documents or result in a breach
     of, constitute a default under or conflict with any material contract,
     agreement or instrument to which such Party or any Affiliate is a party or
     by which it or its properties or any Affiliate or any of its Affiliates'
     properties are bound.

     (d) With respect to clause (b) of this Section 10.5, neither Party hereto
     (nor any of its Affiliates) nor any of its agents shall take any action in
     furtherance of this Agreement from the date of execution and delivery of
     this Agreement to the Closing Date until and unless either (a) the consent
     of any third party referred to in Section 12.3(e) which is required to take
     such action shall have been received by the Party or its Affiliate having
     an obligation to obtain such consent, or (b) such Party shall have received
     the consent to such action from the other Party together with a
     representation (which shall be deemed a modification of this Section 10.5)
     to the effect that such action will not result in a breach of, constitute a
     default under or conflict with any material contract, agreement or
     instrument to which such other Party or any of its Affiliates is a party or
     by which such other Party or its properties or any of such other Party's
     Affiliates or any of such other Party's Affiliate's properties are bound.

10.6 Financial Statements. Each Party has provided to the other their respective
balance sheets and statements of income and expenditures for the most recent
fiscal period then ended. Such financial statements, together with the notes
thereto, (i) are in accordance with the books and records of such party, (ii)
present fairly and accurately in all material respects the financial condition
of such party as of the dates of the balance sheets, (iii) present fairly and
accurately in all material respects the results of

                                       15
<PAGE>

operations of the business for the periods covered by such statements, (iv) have
been prepared in all material respects on a basis consistent with the
preparations of such party's prior years' financial statements, and (v) include
all adjustments (consisting only of normal recurring accruals) which are
necessary for a fair presentation of the financial condition of such party and
of the results of operations of its business for the periods covered by such
statements.

10.7 Brokers. Neither such Party nor any third party acting on its behalf has
incurred any liability, either express or implied, to any broker or finder or
similar person in connection with this Agreement or any of the transactions
contemplated hereby or thereby. Such Party shall indemnify the other Party
against, and hold it harmless from, any liability, cost or expense (including,
without limitation, fees and disbursements of counsel) resulting from any
agreement, arrangement or understanding made by such Party with any third party
for brokerage or finders' fees or other commissions in connection with this
Agreement or the Ancillary Agreements or any of the transactions contemplated
hereby or thereby.

11.  INDEMNITIES

11.1 Indemnification. Subject to the other provisions of this Article 11,
including Section 11.4, each Party agrees as to its respective representations,
warranties, covenants and agreements set forth in this Agreement and in the
Ancillary Agreements to indemnify and hold harmless the other Party from and
against any and all losses, liabilities, damages, expenses (including, without
limitation, fees and disbursements of counsel), claims, liens or other
obligations whatsoever which

     (a) may be payable by virtue of or result from the material inaccuracy of
     any representation or the breach of any warranty, covenant or agreement
     made in this Agreement, the Ancillary Agreements or any certificate or
     other instrument delivered pursuant hereto or thereto; or

     (b) may be incurred as a result of the assertion of any claim by any third
     party based on allegations which, if true, would constitute such material
     inaccuracy or breach.

11.2 Notice and Legal Action. Each Party agrees to give the other Party prompt
written notice of any event or assertion of which it has knowledge concerning
any such loss, liability, expense, claim, lien or other obligation and as to
which it may request indemnification hereunder. Each Party will cooperate with
the other Party in determining the validity of any such claim or assertion.

11.3 Actions by Third Parties.

     (a) If and to the extent that any claim is made or any litigation is
     instituted against either PEMSTAR or one of its Affiliates or HongGuan or
     one of its Affiliates (herein referred to as the "Initial Defendant") by
     any third party in any competent court, tribunal or other forum in any
     country, which claim or litigation asserts or is based in whole or in part
     upon a fact, circumstance, premise or allegation which, if true, would be
     subject to indemnification by the

                                       16
<PAGE>

     other Party pursuant to Section 11.1, then (i) the Initial Defendant shall
     be permitted to implead, or cross-claim against, or otherwise include as a
     defendant, such other Party hereunder, (ii) such other Party hereby
     consents to the jurisdiction of any such competent court, tribunal or
     forum, (iii) such other Party shall assume the Initial Defendant's defense
     of any such claim or litigation and pay the costs thereof, and (iv) if and
     to the extent that such claim of, or litigation instituted by, such third
     party is successful, and damages are awarded or injunctive relief or other
     equitable remedy is granted against the Initial Defendant, then (as between
     the Parties hereto) such other Party shall be liable for the payment of
     such damages to such third party or shall reimburse the Initial Defendant
     for the payment of such damages immediately following the making of such
     payment or (to the extent injunctive relief or other equitable remedy is
     granted) shall be liable for any damages suffered by the Initial Defendant;
     provided that if the claim by the third party is not successful, the
     Initial Defendant shall immediately reimburse or indemnify such other Party
     in such amount as shall be necessary such that, following such payment,
     both Parties shall have shared equally in the costs and expenses incurred
     to defend such claim or litigation.

     (b) The provisions of clause (a) of this Section 11.3 shall operate
     separate and independently of the other provisions of this Article 11
     (other than Section 11.4 ). Any dispute relating to liability of either
     Party to the other under this Section 11.3 shall be determined only upon
     the conclusion of the litigation or other contest referred to in clause
     11.3(a), and such dispute shall be settled in accordance with Section 17.2,
     provided that in such event the arbitrator shall limit his decision solely
     to the question of whether the provisions of such clause (a) are applicable
     to the claim or other litigation which was instituted by such third party.

11.4 Conflict with Ancillary Agreements. The provisions of Article 11, as the
same would apply in the case of a breach of or default under any provision of
any Ancillary Agreement, shall not be applicable if and to the extent that such
Ancillary Agreement provides for a specific remedy or specific damages in the
case of a breach or default thereunder or to the extent that such Ancillary
Agreement contains a provision which conflicts with this Article 11.

11.5 Survival. The provisions of this Article 11 shall survive termination of
this Agreement for any reason whatsoever.

12.  CLOSING AND CONDITIONS THEREOF

12.1 Closing. The Closing of the transactions contemplated by this Agreement
shall, subject to all conditions precedent set forth in Section 12.3 having been
fulfilled, take place on October 15, 1998 (or such earlier date as the Parties
may agree in writing), at the offices of Lee & Lee, Singapore in person or by
delivery of the appropriate documents.

12.2 Events of Closing. The Parties shall at the Closing take the following
actions:

                                       17
<PAGE>

     (a) The organization of the Company shall be completed as follows to the
     extent that it shall not have been completed prior to Closing:

          (i) The Corporate Articles referred to in Section 3.1 shall be adopted
          in a form which conforms to the requirements of this Agreement;

          (ii) The Shareholders of the Company shall each pay for and be issued
          their respective shares of the Company as provided in Section 3.2; and

          (iii) The Shareholders of the Company shall elect the members of the
          Board in accordance with Section 6.1.

     (b) The Parties shall execute and deliver the following agreements to the
     extent that they have not done so prior to Closing, it being the intention
     of the Parties that such agreements when so executed and delivered shall
     effect the transactions contemplated therein on and from the date of this
     Agreement:

          (i) PEMSTAR and the Company shall execute and deliver the License
          Agreement in substantially the form attached hereto as Exhibit C;

          (ii) PEMSTAR, HongGuan and the Company shall execute and deliver the
          respective Trademark Agreements in substantially the form attached
          hereto as Exhibit D;

          (iii) PEMSTAR, HongGuan and the Company shall execute and deliver the
          Services Agreement in substantially the form attached hereto as
          Exhibit E;

          (iv) HongGuan shall assign its disk drive equipment manufacturing
          contracts to the Company identified on Exhibit F attached hereto; and

          (v) PEMSTAR shall assign those engineering contracts to the Company
          identified on Exhibit G attached hereto.

12.3 Conditions Precedent to Parties' Obligations. All obligations of each Party
hereunder to execute the agreements referred to in Section 12.2 and otherwise
take the action necessary to consummate the Closing, are subject to the
pertinent fulfillment, prior to or at the Closing, of each of the following
conditions:

     (a) All actions, proceedings, instruments, opinions and documents required
     to carry out this Agreement and the Ancillary Agreements or incidental
     hereto or thereto, and all other related legal matters, shall be reasonably
     satisfactory to legal counsel to the Parties respectively.

                                       18
<PAGE>

     (b) All the terms, covenants and conditions of this Agreement and the
     Ancillary Agreements to be complied with and performed by the other Party
     prior to or at the Closing shall have been complied with and performed in
     all material respects (with the right of the Party in compliance with such
     terms, covenants and conditions to waive the non-compliance by the other
     Party).

     (c) No action, suit, proceeding or investigation by or before any court,
     administrative agency or other governmental authority shall have been
     instituted or threatened to restrain, prohibit or invalidate any of the
     transactions contemplated by this Agreement or any Ancillary Agreements.

     (d) All governmental approvals, permits, licenses, authorizations and
     clearances required for the performance by each Party of this Agreement,
     including the execution and delivery of the Ancillary Agreements, the
     consummation of the transactions herein or therein contemplated and the
     fulfillment of and compliance with the terms and conditions hereof and
     thereof, by either Party shall have been obtained, and all filings and
     other formalities in connection therewith shall have been completed.

     (e) All consents and approvals of third parties required for the
     performance by each Party of this Agreement, including the execution and
     delivery of the Ancillary Agreements, assignment of contracts to the
     Company, the consummation of the transactions herein or therein
     contemplated and the fulfillment of and compliance with the terms and
     conditions hereof and thereof, shall have been obtained.

Neither Party shall deliberately cause any condition set forth in this Section
12.3 not to be satisfied, and each Party shall, as to events, causes and
circumstances within its control, take such action as shall be reasonably
necessary to cause such condition to be satisfied and shall keep the other Party
currently informed as to the status of such actions. In the event the Closing
takes place, each Party shall be deemed to have represented and warranted to the
other Party as of the Closing Date that all the aforementioned conditions
precedent to such Party's obligations hereunder shall have been fulfilled prior
to or as of the Closing Date.

13.  TRANSFER OF SHARES

13.1 Right of First Refusal. If a Party receives an offer to purchase its shares
from a third party after January 31, 2002 and desires to accept such offer, that
Party shall first give the other Party written notice of the receipt of such
offer, which notice shall set forth the name of the third party, the price that
such third party offered to pay for such shares, and the terms and conditions
pursuant to which such purchase and sale would be effected. At any time within
thirty (30) days from and after receipt of such notice, the other Party shall
have the option to purchase all (but not less than all) of the shares referred
to therein at the price and upon the terms described therein, which option shall
be exercised by giving

                                       19
<PAGE>

written notice to the Party within such thirty (30) day period of its election
to exercise such option. If the other Party does not exercise such option, the
shares may be sold to the third party within sixty (60) days after expiration of
the option.

     If PEMSTAR receives an offer to purchase any of its shares from a third
party after January 31, 2002, and if PEMSTAR desires to accept such offer, then
HongGuan shall have the option, at any time within thirty (30) days from and
after receipt of the notice described above, to purchase from PEMSTAR 2% of the
shares of the Company at the per share price and upon the terms described in the
notice, which option shall be exercised by giving written notice to PEMSTAR
within such thirty (30) day period of HongGuan's election to exercise such
option. This option is in addition to the option described above, under which
HongGuan would also have the option to purchase all of the PEMSTAR shares
referred to in the notice. If HongGuan does not exercise such option, the shares
may be sold to the third party within sixty (60) days after expiration of the
option. If HongGuan does exercise the option, all but the 2% acquired by
HongGuan may be sold to the third party within sixty (60) days after expiration
of the option.

     Before any transfer shall be made under this Section, the third party shall
execute a Deed of Adherence pursuant to which the third party shall agree to be
bound by the terms and conditions of this Agreement.

13.2 Prohibited Alienation. Except as provided in Section 3.3 and 13.1, neither
Party nor any of its Affiliates which are Shareholders shall sell, convey,
assign or otherwise transfer, pledge or hypothecate its shares in the Company or
any beneficial interest therein at any time during the term of this Agreement
without the prior written consent of the other Party; it is agreed the other
Party may attach conditions to this consent. The Company shall refuse to
transfer or register any transfer on its books any shares attempted to be
transferred in violation of this Agreement. If shares of the Company owned by
either Party or its Affiliates are offered to be or are in fact sold,
transferred, assigned, taken in execution, pledged or hypothecated, in any
manner and under any circumstances in which Section 13.1 is not complied with,
including but not limited to any bankruptcy, insolvency or other legal
proceeding, in violation of this Article 13, then the other Party shall,
immediately upon becoming aware thereof, and for a period ending ninety (90)
days after its receipt of written notice thereof from the offering or
transferring Party, be entitled to purchase such shares from the offeror or
transferee, or to require the transferee to purchase its own shares, upon the
same terms and conditions (mutatis mutandis) as the offeror has offered the same
or the transferee has taken a transfer of the same, and the transferring Party
shall indemnify the other Party against all costs reasonably incurred by the
latter in removing any prohibited liens or encumbrances from the said shares, it
being the intent that the latter Party be left in no worse position than if the
provisions of this Section 13.2 had been complied with.

13.3 Continuing Obligations. Notwithstanding anything contained herein, no sale,
conveyance, assignment or other transfer of the shares of the Company or any
beneficial interest therein shall relieve either Party of those obligations and
duties arising prior to the date thereof which by the terms of the applicable
agreement or by operation of law would survive the termination of this
Agreement.

                                       20
<PAGE>

13.4 Legend. All certificates evidencing shares of the Company shall bear a
reference to the restrictions herein provided clearly marked thereon, including
specifically a notice that the acquiring party shall be fully bound by the terms
and conditions of this Agreement.

14.  FORCE MAJEURE

14.1 Definition. As used in this Agreement the term "Force Majeure" shall mean
any event or condition, not existing as of the date of this Agreement, not
reasonably foreseeable as of such date and not reasonably within the control of
either Party, as the case may be, which prevents or renders so difficult or
costly as to be commercially impracticable performance by either Party of their
respective obligations under this Agreement. Without limiting the generality of
the foregoing, events or conditions of Force Majeure shall include acts of State
or governmental action, including the non-issuance or revocation of any
approvals of any governmental authority that are required for the execution of
this Agreement, riots, war, acts of terrorism, sabotage, strikes, lockouts,
prolonged shortage of energy supplies, fire, flood, hurricane, earthquake,
lightning and explosion.

14.2 Notice. If either Party is thus prevented from performing its obligations
under this Agreement or the Ancillary Agreements or if such performance is
rendered impracticable by an event or condition of Force Majeure, that Party
shall, upon providing prompt written notice to the other Party, be excused from
performance to the extent such event or condition prevents or renders
impracticable such performance, provided that the Party whose performance is so
affected shall use reasonable efforts to avoid or remove the cause of
non-performance and shall continue performance hereunder immediately upon the
removal of such causes. The other Party to this Agreement shall have the right,
for so long as such event or condition of Force Majeure shall continue, to
suspend its own performance and to the extent and for so long as shall be
commercially reasonable.

14.3 Termination. If the event or condition of Force Majeure causing
non-performance shall continue for more than one-hundred eighty (180)
consecutive days and the non-performance shall be material in relation to this
Agreement or the Ancillary Agreements taken as a whole, either Party may, upon
the expiration of the above period and at any time thereafter for so long as the
event or condition of Force Majeure shall continue, terminate this Agreement in
accordance with Section 16.2.

15.  DEFAULT

15.1 Definition. Except where otherwise indicated by the context or where the
term is otherwise defined for a specific purpose, the term "Default" shall mean
any of the following described events involving or affecting either Party, such
Party being considered the Party in Default for purposes hereof:

     (a) failure of such Party to perform or observe any material obligation
     under or pursuant to this Agreement or the Ancillary Agreements for any
     reason other than Force Majeure;

                                       21
<PAGE>

     (b) (i) the filing by such Party of a petition in voluntary bankruptcy or
     liquidation or the making of a general assignment for the benefit of its
     creditors, or the consenting to the appointment of one or more receivers,
     trustees or liquidators with respect to all or any substantial part of its
     property under any applicable law or statute; (ii) the filing by such Party
     of a petition or answer seeking reorganization, readjustment, arrangement,
     composition or similar relief under the applicable bankruptcy laws or any
     other applicable law or statute; (iii) such Party's becoming unable to pay
     its debts generally as they become due; or (iv) the filing of an
     involuntary petition in bankruptcy against such Party, or for the
     appointment of one or more trustees, liquidators or receivers of such
     Party, which petition shall remain unstayed and in effect for a period of
     thirty (30) days;

     (c) the occurrence of: (i) a sale, transfer, pledge or other encumbrance of
     shares, an issuance of shares or any other event, including, without
     limitation, merger or consolidation, which gives effective control of such
     Party to any third party not a controlling shareholder of such Party as of
     the Closing Date hereof; or (ii) a sale, transfer, pledge or other
     encumbrance or issue of shares of any Affiliate of such Party or of any
     substantial asset of such Party or Affiliate of such Party, which is
     directly related to the joint venture described in this Agreement or the
     Ancillary Agreements, or any like event which gives effective control of
     such shares or assets to any third party who is not a controlling
     shareholder of such Party or Affiliate as to the Closing Date hereof,
     provided that such a change in control shall not constitute a Default if
     prior written notice shall have been given by the Party affected to the
     other Party and such other Party shall have given its consent in writing
     thereto, which consent shall not be withheld without good commercial
     reason.

15.2 Notice. No Default under Section 15.1(a) hereof shall be deemed to have
occurred until the Party not in Default shall first have given written notice of
such Default to the Party in Default and the Party in Default shall have failed
to cure such Default through specific performance within sixty (60) days after
dispatch of such written notice. In the event of Default under Sections 15.l(b)
or (c) hereof, no such notice need be dispatched and remedies in respect thereof
as provided in Section 15.3 hereof shall be available from and after the time
such events occur.

15.3 Rights Upon Default. If a Default shall occur, the Party not in Default
shall have the right, at any time for so long as such Default shall continue, to
do any one or more of the following:

     (a) terminate this Agreement in accordance with Section 16.2(b) hereof and
     exercise the other rights set forth in Section 16.3(c) hereof;

     (b) with respect to a Default under Section 15.1(a) only, obtain injunctive
     relief or such other equitable remedies as are reasonably necessary to
     specifically enforce this Agreement in accordance with its terms; and/or

                                       22
<PAGE>

     (c) exercise any other legal or equitable remedy such Party may have as a
     result of such Default.

16.  TERM AND TERMINATION; DEADLOCK

16.1 Term. Except as provided in Section 16.2, this Agreement shall remain in
full force and effect and shall continue to be binding on the Parties so long as
each Party holds any shares in the Company.

16.2 Events Permitting Termination. Notwithstanding anything to the contrary
contained herein, this Agreement may be terminated:

     (a) by either Party upon written notice in the event that performance by
     either Party of its respective obligations under this Agreement is
     prevented or rendered impracticable by reason of the occurrence of an event
     of Force Majeure and the entitlement to terminate exists under Section
     14.3;

     (b) by either Party upon written notice to the other in the event that the
     other Party is at the time of such notice in Default and the entitlement to
     terminate exists under Section 15.3;

     (c) by either Party upon written notice to the other in the event that the
     Closing shall not have occurred on or before October 15, 1998;

     (d) by written agreement of the Parties.

16.3 Rights Upon Termination. If termination is called for under this Agreement,
the Parties shall have the following rights:

     (a) If this Agreement shall be terminated due to Force Majeure pursuant to
     Section 16.2(a), the Parties shall have the following rights:

          (i) The Party whose performance of its obligations under this
          Agreement or the Ancillary Agreements is not prevented or rendered
          impractical by an event or condition of Force Majeure shall have the
          option for thirty (30) days from the date of written notice to
          terminate this Agreement delivered under Section 16.2, to acquire from
          the Party whose performance is prevented or rendered impractical all
          of that Party's shares in the Company for their Fair Market Value (as
          defined in Section 16.4); and

          (ii) If the Party whose performance of its obligations under this
          Agreement or the Ancillary Agreements is not prevented or rendered
          impractical by an event or condition of Force Majeure does not
          exercise its option to acquire from the Party whose performance is so
          prevented or rendered impractical all of that Party's shares, then the
          Parties shall take all steps necessary to liquidate and dissolve the
          Company.

                                       23
<PAGE>

     (b) Upon a Default, the non-defaulting Party shall have the following
     rights, without prejudice to the rights of either Party by reason of any
     breach of the Agreement:

          (i) The non-defaulting Party shall have the option for thirty (30)
          days from the notice described in Section 16.2 to acquire from the
          defaulting Party all of the defaulting Party's shares in the Company
          at a price which shall be equal to seventy-five percent (75%) of the
          Fair Market Value of such shares;

          (ii) If the non-defaulting Party does not acquire the defaulting
          Party's shares in the Company, then it shall have the right for thirty
          (30) days from the expiration of the non-defaulting Party's option
          (or, if earlier, notice from the non-defaulting Party that it elects
          not to exercise the option) to require dissolution of the Company, in
          which case the Parties shall take all steps necessary to liquidate and
          dissolve the Company.

     (c) If this Agreement is terminated pursuant to Section 16.2(c) or (d),
     neither Party shall have any liability to the other except as provided in
     Article 11.

16.4 Fair Market Value. The term Fair Market Value as used in this Agreement
shall be defined and determined as follows: The Fair Market Value of any share
in the Company shall be equal to the book value per share of the Company, as
determined by the Company's independent auditors as of the end of the month
immediately preceding the event causing the right to acquire shares (Force
Majeure or Default).

16.5 Purchase Procedure upon Deadlock. In the event (1) a quorum is not present
at an adjourned Board meeting or general meeting and the adjourned Board meeting
or, as the case may be, general meeting is dissolved; (2) unanimous approval of
the Parties cannot be obtained for any of the actions specified in Section 6.4;
or (3) that the relationship between the Parties has deteriorated to the extent
that they cannot continue to manage the Company together, either Party may force
a deadlock buy-out. The mechanics of such a buy-out shall be as follows:

     (a) If one Party wishes to trigger a deadlock buy-out, it shall furnish
     written notice (the "Deadlock Notice") to the other Party that a deadlock
     has arisen and the two shall meet to discuss the issues and to attempt to
     resolve their differences to each Party's satisfaction.

     (b) If the meeting does not satisfactorily resolve the differences within
     forty- five (45) days from the date of service of the Deadlock Notice (or
     if no meeting is held within ten (10) days of the date of service of the
     Deadlock Notice), then either Party (the "offeror Party") may initiate a
     purchase buy-out by delivering to the other Party (the "offeree Party") an
     irrevocable written offer (the "Cross-Purchase Notice") to purchase all of
     the shares in the Company owned by the offeree Party, and the
     Cross-Purchase Notice shall specify the purchase price per share which the
     offeror Party is willing to pay for the shares. Such Cross-Purchase Notice
     shall also be deemed to constitute an irrevocable offer by the offeror

                                       24
<PAGE>

     Party to sell all of its shares in the Company to the offeree Party at a
     price equal to the purchase price per share specified in the Cross-Purchase
     Notice. If both Parties shall deliver a Cross-Purchase Notice, then the
     Party which is the first to deliver a Cross-Purchase Notice shall be deemed
     to be the offeror Party on the terms stated in its Cross-Purchase Notice,
     and the other Party's Cross-Purchase Notice shall be of no effect. If both
     Cross-Purchase Notices are delivered on the same day, then the Party which
     has offered the higher purchase price shall be deemed to be the offeror
     Party on the terms stated in its Cross-Purchase Notice, and the other
     Party's Cross-Purchase Notice shall be of no effect.

     (c) Within thirty (30) days after receipt of the Cross-Purchase Notice, the
     offeree Party shall either (i) accept such offer to sell all of the offeree
     Party's shares in the Company to the offeror Party; or (ii) accept the
     offer to acquire all of the shares in the Company owned by the offeror
     Party. Failure of the offeree Party to deliver to the offeror Party a
     written notice electing to accept either of the offers of the offeror Party
     shall be deemed to constitute an offer by the offeree Party to sell all of
     its shares in the Company to the offeror Party.

     (d) The closing of the purchase and sale of the shares shall take place at
     the registered office of the Company within five days after the acceptance
     or deemed acceptance of the offer. On closing, the selling Party shall,
     against cash payment of the purchase price by the other Party, be obliged
     to transfer all of its shares to the other Party by the delivery of a duly
     executed share transfer together with the relative share certificate(s) in
     respect of the shares to be sold, and the written resignations of its
     appointees as directors to take effect immediately subsequent to a meeting
     of the Board at which the transfer of the said shares shall be approved by
     the Board. The selling Party shall furnish all necessary documents as are
     required by the Stamp Office for purpose of assessing stamp duty payable on
     the share transfer.

     (e) Notwithstanding any other provision of this Agreement, upon the
     transfer of the shares as hereinbefore provided, the selling Party shall
     cease to be bound by the provisions of this Agreement save and except for
     the due discharge, performance and observance of all its liabilities and
     obligations whether actual or contingent arising out of or on or in respect
     of or any antecedent breach of the terms of this Agreement at any time up
     to and including the date of the transfer of its shares.

16.6. Name Change. In the event that either Party no longer has any shares in
the Company, the other Party shall, as soon as practical and no later than six
months from the date the first mentioned Party ceases to be a shareholder, cause
the name of the Company to be changed to one which does not contain a reference
to the name of the first mentioned Party.

                                       25
<PAGE>

17.  SETTLEMENT OF DISPUTES AND APPLICABLE LAW.

17.1 Consultations. The Parties acknowledge that the expeditious and equitable
settlement of disputes arising under this Agreement or in connection herewith is
to their mutual advantage and in the best interest of the Company. To this end,
the Parties therefore agree to use their best endeavors to resolve all
differences of opinion and to settle all disputes through cooperation and
consultation between a senior executive officer of PEMSTAR and a senior
executive officer of HongGuan.

17.2 Disputes. Any controversy or claim arising out of or relating to this
Agreement that the Parties are unable to settle within thirty (30) days as set
forth under Section 17.1 above shall be determined by arbitration in accordance
with the Arbitration Rules of the Singapore International Arbitration Centre for
the time being in force, which rules are deemed to be incorporated by reference
into this Section 17.2, by one arbitrator, unless otherwise agreed, appointed in
accordance with the said Rules. The place of arbitration shall be Singapore and
the arbitration shall be conducted in the English language. The Party against
whom an arbitration award is made shall be responsible for all fees and expenses
of the arbitration as well as the legal fees of the prevailing Party. If an
award is made to both Parties, then each Party shall pay one-half of the fees
and expenses of the arbitration and shall be responsible for its own legal fees.

17.3 Governing Law. This Agreement shall be governed in all respects by, and
shall be interpreted and construed in accordance with, the laws of Singapore,
which shall be the proper law of this Agreement notwithstanding any rule or
principle therein contained under which any other law or rule would be made
applicable.

18.  MISCELLANEOUS

18.1 Notices. Any notice or demand provided for hereunder shall be deemed
sufficiently given if sent by telex, telefax (facsimile), courier or receipted
mail (in each case prepaid) to the address specified in writing by the Party to
which it is sent and shall be deemed effective on the date of delivery specified
in the telex, telefax (facsimile) or the courier or mail receipt. Unless and
until a Party receives written notice to the contrary from another Party, it
shall be entitled to consider the following proper addresses of the other
Parties respectively:

          As to PEMSTAR:     PEMSTAR INC.
                             2535 Highway 4 West
                             Rochester, Minnesota 55901, U.S.A.
                             Attention: Allen J. Berning
                             Telefax:  (507) 280-0838

          with a copy to:    DORSEY & WHITNEY LLP
                             201 First Avenue S.W., Suite 340

                                       26
<PAGE>

                             Rochester, MN 55902
                             Attention: William A. Jonason
                             Telefax:  (507) 288-6190

          As to HONGGUAN:    HONGGUAN TECHNOLOGIES (S) PTE
                             LTD.
                             39 Joo Koon Circle
                             Singapore 629105
                             Attention: Chief Executive Officer
                             Telefax: ________________

          with a copy to:    BIH, LI &  LEE
                             79 Robinson Road
                             #24-01 CPF Building
                             Singapore 068897
                             Telefax: (65) 2240003

18.2 Amendment. Any and all agreements by the Parties to amend, change, extend,
review or discharge this Agreement, in whole or in part, shall be binding on the
Parties so long as such agreements shall be in writing and executed by both
Parties.

18.3 Headings. The various headings in this Agreement are inserted for
convenience only and shall not affect the meaning or interpretation of this
Agreement or any Section or provision hereof.

18.4 Successors. All covenants, stipulations and promises in this Agreement
shall be binding upon and inure to the benefit of the Parties and their
respective successors, and permitted assigns. No Party shall have the right to
assign or otherwise transfer its rights or obligations under this Agreement
except with the written consent of the other Party hereto, and having procured
from the assignee a deed of adherence agreeing to be bound by the terms of this
Agreement.

18.5 Counterparts. This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original, and all of which shall
constitute together one and the same agreement. The Parties may each execute
this Agreement by signing any such counterpart.

18.6 Invalidity. In case any provision of this Agreement shall be deemed or
declared to be unenforceable, invalid or void, the same shall not impair any
other provision of this Agreement but the Parties agree to negotiate a
substitute provision or amend the other provisions of this Agreement so as to
produce a result which preserves as nearly as possible the economic balance of
the Agreement, provided that neither Party shall be obligated to accept an
amendment which substantially departs from the essential intent or effect of
this Agreement or any Ancillary Agreement.

18.7 Waivers. No failure on the part of either Party to exercise, and no delay
in exercising, any right or remedy hereunder shall operate as a waiver thereof;
nor shall any single or partial exercise of any

                                       27
<PAGE>

right or remedy hereunder preclude any other or further exercise thereof or the
exercise of any other right or remedy granted hereby or by any related document
or at law or in equity.

18.8 Entire Agreement. Except as provided herein, this Agreement and the
Ancillary Agreements constitute and express the entire agreement of the Parties
as to all the matters herein and therein referred to, all previous discussions,
promises, representations and understandings relative thereto among the Parties
being herein and therein merged and superseded.

18.9 Publicity. Neither Party shall make any disclosure of or concerning the
contents of this Agreement or any Ancillary Agreement without the prior written
consent of the other Party except to comply with mandatory disclosure
requirements imposed under any applicable law or jurisdiction or under the terms
and conditions of any loan or credit agreement to which a Party is bound
contractually.

18.10 Joint Venture in Philippines. The Parties agree to negotiate a joint
venture agreement similar in scope to this Agreement regarding the business in
the Philippines as soon as possible, with the intent that it be entered into by
December 31, 1998. In the event that the Parties have not entered into such
joint venture by December 31, 1998, neither Party shall have any claim against
the other for costs, damages, compensation or otherwise and both Parties shall
be free to compete in the Philippines. The Parties agree that the Company shall
have the right to acquire this joint venture company by December 31, 2001.

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.

PEMSTAR INC.                            HONGGUAN TECHNOLOGIES (S) PTE LTD.

By:                                     By:
   ---------------------------------       ----------------------------------
Title:                                  Title:
      ------------------------------          -------------------------------

                                       28
<PAGE>

         LIST OF EXHIBITS

         A        Territory
         B        List of Employees
         C        License Agreement
         D        Trademark Agreements
         E        Services Agreement
         F        Contracts Assigned by HongGuan
         G        Contracts Assigned by PEMSTAR

                                       29<PAGE>

                                                                    EXHIBIT 10.2

                            ASSET PURCHASE AGREEMENT

                                     between

                             BELL MICROPRODUCTS INC.

                                       and

                                  PEMSTAR INC.

                                 April 30, 1999
<PAGE>

                               TABLE OF CONTENTS

                                                                            Page
                                                                            ----

TABLE OF CONTENTS ............................................................i

Page .........................................................................i

INDEX OF EXHIBITS ...........................................................iv

INDEX OF SCHEDULES ...........................................................v

RECITALS .....................................................................1

ARTICLE I SALE AND PURCHASE OF ASSETS ........................................1

       1.1  Sale and Purchase of Assets ......................................1
       1.2  Assets to be Transferred .........................................1
       1.3  Assumption of Liabilities ........................................3
       1.4  All Other Liabilities Not Assumed ................................4

ARTICLE II PURCHASE PRICE; CLOSING ...........................................4

       2.1  Purchase Price ...................................................4
       2.2  Closing ..........................................................4
       2.3  Transaction Taxes ................................................5
       2.4  Allocation of Consideration ......................................5
       2.5  Post-Closing Adjustment ..........................................5

ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE SELLER .....................7

       3.1  Organization of the Seller .......................................7
       3.2  Authority ........................................................7
       3.3  Division Financial Statements ....................................8
       3.4  Absence of Changes ...............................................8
       3.5  Absence of Undisclosed Liabilities ..............................10
       3.6  Intellectual Property Rights ....................................10
       3.7  Affiliate Transactions ..........................................10
       3.8  Customers and Suppliers .........................................11
       3.9  Legal and Other Compliance ......................................11
      3.10  Restrictions on Business Activities .............................12
      3.11  Title to Properties; Absence of Liens; Condition of Equipment ...12
      3.12  Agreements, Contracts and Commitments ...........................13
      3.13  Powers of Attorney ..............................................14
      3.14  Litigation ......................................................14

                                       i
<PAGE>

      3.15  Environmental Matters ............................................14
      3.16  Employment Matters ...............................................16
      3.17  Insolvency .......................................................17
      3.18  Consents .........................................................17
      3.19  Books and Records ................................................17
      3.20  Product Warranties ...............................................18
      3.21  Inventory ........................................................18
      3.22  Accounts Receivable ..............................................18
      3.23  Tax Returns and Audits ...........................................18
      3.24  Employee Benefit Plans ...........................................18

ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER ...........................20

       4.1  Organization of Buyer ............................................20
       4.2  Authority ........................................................20
       4.3  No Conflicts .....................................................20
       4.4  Litigation .......................................................20

ARTICLE V CONDUCT PRIOR TO THE CLOSING DATE ..................................21

       5.1  Conduct of Business ..............................................21

ARTICLE VI ADDITIONAL AGREEMENTS .............................................22

       6.1  Approval .........................................................22
       6.2  Access to Information ............................................22
       6.3  Access to Records After Closing ..................................22
       6.4  Confidentiality ..................................................22
       6.5  Public Disclosure ................................................23
       6.6  Contractual Consents .............................................23
       6.7  Legal Conditions to Acquisition ..................................23
       6.8  Additional Documents and Further Assurances ......................23
       6.9  Notification of Certain Matters ..................................24
      6.10  Payment of Trade and Other Creditors .............................24
      6.11  No Solicitation ..................................................24
      6.12  Non-Competition ..................................................25
      6.13  Non-Solicitation of Employees ....................................25
      6.14  Continuing Customer Relationship .................................26
      6.15  Employment Matters ...............................................26
      6.16  Treatment of Other Matters .......................................27
      6.17  Profit Sharing ...................................................29

ARTICLE VII CONDITIONS TO OBLIGATIONS TO CLOSE ...............................30

       7.1  Conditions to Obligations of Each Party ..........................30
       7.2  Additional Conditions to Obligations of the Seller ...............30
       7.3  Additional Conditions to the Obligations of Buyer ................31

                                       ii
<PAGE>

ARTICLE VIII SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION .....31

       8.1  Indemnification ..................................................31
       8.2  Arbitration ......................................................35

ARTICLE IX TERMINATION, AMENDMENT AND WAIVER .................................36

       9.1  Termination ......................................................36
       9.2  Effect of Termination ............................................37
       9.3  Amendment ........................................................37
       9.4  Extension; Waiver ................................................37

ARTICLE X GENERAL PROVISIONS .................................................37

      10.1  Notices ..........................................................37
      10.2  Interpretation ...................................................39
      10.3  Expenses .........................................................39
      10.4  Counterparts .....................................................39
      10.5  Entire Agreement; Assignment .....................................39
      10.6  Severability .....................................................39
      10.7  Sole Remedy ......................................................39
      10.8  Governing Law; Arbitration .......................................39
      10.9  Rules of Construction ............................................40
     10.10  No Third Party Beneficiaries .....................................40
     10.11  Specific Performance .............................................40
     10.12  Publicity ........................................................40
     10.13  Assignment by Buyer ..............................................41
     10.14  Change in Control of Buyer .......................................41

BILL OF SALE AND GENERAL ASSIGNMENT ...........................................2

EXHIBIT C......................................................................6

UNAUDITED CONSOLIDATED STATEMENTS OF INCOME OF THE BUSINESS ...................6

EXHIBIT F......................................................................9

                                      iii
<PAGE>

                                INDEX OF EXHIBITS

     Exhibit    Description
     -------    -----------

     Exhibit A  December 31, 1998 Balance Sheet
     Exhibit B  Bill of Sale and General Assignment
     Exhibit C  Unaudited consolidated statements of income of the Business
                for the fiscal year ended December 31, 1998
     Exhibit D  Unaudited consolidated statements of income of the Business
                for the fiscal year ended December 31, 1997
     Exhibit E  Division Financial Statements
     Exhibit F  March 31, 1999 Balance Sheet
     Exhibit G  Form of Opinion of Buyer Counsel
     Exhibit H  Form of Opinion of Seller Counsel

                                       iv
<PAGE>

                               INDEX OF SCHEDULES

     Schedule     Description
     --------     -----------

     1.2(a)         Inventory
     1.2(b)         Accounts Receivable
     1.2(c)         Lease Agreements
     1.2(d)         Contracts
                       (i)  List of outstanding written customer orders,
                            purchase orders and other customer contracts
                      (ii)  List of customer names
     1.2(e)         Equipment and Tangible Assets
     1.2(g)         Prepaid Expenses
     1.2(i)         Telephone Numbers
     1.3(b)         Accounts Payable, Goods in Transit, Placed Orders
     2.4            Purchase Price Allocation
     3              Disclosure Schedule
                      3.3(b)     No Liability, Indebtedness, Etc.
                      3.3(c)     Division Financial Statements
                      3.4(c)     Absence of Changes: Agreements
                      3.4(f)     "       "    "      Discontinued Relationships
                      3.4(h)     "       "    "      Employment
                      3.4(i)     "       "    "      Key Employees
                      3.4(k)     "       "    "      Capital Commitments
                      3.5        Absence of Undisclosed Liabilities
                      3.6        Intellectual Property Rights
                      3.7        Affiliate Transactions
                      3.8        Customers and Suppliers
                      3.9(a)     Compliance with Applicable Laws, Regulations,
                                   etc.
                      3.9(b)     Non-Environmental Permits; Assignability
                      3.9(c)     Gifts of Money, Other Property or Similar
                                   Benefits
                      3.11(a)    Title to Properties: Absence of Liens
                      3.11(d)    Title to Properties: Assets
                      3.11(e)    Title to Properties: Custody and Control
                      3.12(ii)   Agreements: Asset Acquisitions
                      3.12(iii)  Agreements: Indemnification
                      3.12(iv)   Agreements: Purchase Orders
                      3.12(vi)   Agreements: Losses
                      3.12(vii)  Agreements: Capital Expenditures
                      3.12(viii) Agreements: Payments Received
                      3.12(x)    Agreements: Credit Agreements
                      3.12(xiii) Agreements: Distribution Agreements

                                       v
<PAGE>

                      3.14       Litigation
                      3.15       Environmental
                      3.16(c)    Employment:  No Liability
                      3.16(d)    Employee Matters
                      3.18       Consents
                      3.22       Accounts Receivable
     5.1            Conduct of Business Exceptions
     6.16(b)(i)(1)  Excess Inventory With MRP ($2,287,863)
     6.16(b)(i)(2)  Excess Inventory Without MRP ($2,433,579)
     6.16(d)        Excess Bone-Pile Inventory ($825,121)
     6.16(e)(i)     Amounts Paid in Prior Months Not Billed to Customers
     6.16(e)(ii)    Prior Months Billings Without Cost
     6.16(f)        90-Day A/R

                                       vi
<PAGE>

                            ASSET PURCHASE AGREEMENT

     This ASSET PURCHASE AGREEMENT (this "Agreement") is made and entered into
as of April 30, 1999 between Bell Microproducts Inc., a California corporation
(the "Seller"), and PEMSTAR INC., a Minnesota corporation (the "Buyer").

                                    RECITALS

     WHEREAS, Seller maintains a custom contract manufacturing division of its
corporation known as the Quadrus division (the "Business");

     WHEREAS, pursuant to this Agreement, the Buyer (directly or through one of
its wholly owned subsidiaries) wishes to purchase from the Seller, and the
Seller wishes to sell to the Buyer, all the Acquired Assets (as defined herein);

     WHEREAS, pursuant to this Agreement, the Buyer (directly or through one of
its wholly owned subsidiaries) wishes to assume from the Seller, and the Seller
wishes to transfer to the Buyer all the Assumed Liabilities;

     NOW, THEREFORE, in consideration of the covenants, promises, and
representations set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties agree
as follows:

                                   ARTICLE I

                          SALE AND PURCHASE OF ASSETS

     1.1 Sale and Purchase of Assets. Subject to the terms and conditions
contained in this Agreement, the Seller agrees to sell, assign, transfer, and
deliver to the Buyer all of the Seller's right, title, and interest in and to
each of the Acquired Assets (as defined below), and Buyer agrees to purchase
such assets on the Closing Date.

     1.2 Assets to be Transferred. At the Closing, the Seller shall sell and
deliver to Buyer (or a wholly owned subsidiary of Buyer to be designated by
Buyer), and Buyer (either directly or through a wholly owned subsidiary of Buyer
to be designated by Buyer) shall purchase and accept from the Seller, the
following assets used exclusively or primarily in the Business (the "Acquired
Assets"):

          (a) Inventory. Except as otherwise provided in Section 6.16 hereof,
     all of Seller's inventory relating to the Business identified in Schedule
     1.2(a) attached hereto subject to changes between December 31, 1998 and
     Closing in the ordinary course of business.
<PAGE>

          (b) Accounts Receivable. Except as otherwise provided in Section
     6.16(f) hereof, all of Seller's rights to receive payments currently owed
     to the Seller resulting from the sale of goods by the Business identified
     on Schedule 1.2(b) subject to changes between December 31, 1998 and Closing
     in the ordinary course of business.

          (c) Rights Under Leases. All of the Seller's rights under the real
     property lease agreements, as amended or supplemented to date, with respect
     to the Company's facility located at 2020 S. Tenth Street, San Jose,
     California 95112 (the "Real Property"), and the equipment lease agreements,
     as amended or supplemented to date, and relating primarily or exclusively
     to the Business identified in Schedule 1.2(c) (the "Assumed Leases")
     subject to changes between December 31, 1998 and Closing in the ordinary
     course of business.

          (d) Rights Under Contracts. Except as otherwise provided in Section
     6.16 hereof, all of Seller's rights under any contract, agreement, plan or
     arrangement relating primarily or exclusively to the Business identified in
     Schedule 1.2(d) subject to changes between December 31, 1998 and Closing in
     the ordinary course of business. It is the intent of the parties hereto
     that all of the Acquired Assets and all of Seller's backlog, if any,
     arising out of the operation of the Business be transferred to Buyer.
     Accordingly, the parties agree to use their reasonable best efforts to
     facilitate such transfer of customers to the extent transferable at the
     Closing. Included on Schedule 1.2(d) is (i) a list as of December 31, 1998
     of all outstanding written customer orders, purchase orders, and other
     customer commitments from Seller's current customers of the Business, and
     (ii) the names of all customers of the Business, which list will be updated
     as of the Closing Date and provided to Buyer.

          (e) Equipment; Tangible Assets. Except as otherwise provided in
     Section 6.16 hereof, all equipment and other tangible assets used
     exclusively or primarily in the Business or identified in Schedule 1.2(e)
     subject to changes between December 31, 1998 and Closing in the ordinary
     course of business.

          (f) Books and Records. Copies of all books and records related to any
     Acquired Assets, including, without limitation, all financial records,
     books, ledgers, supplier lists, customer and marketing lists or databases,
     marketing plans, management plans, distribution and reseller materials,
     advertising materials, manuals, and other materials of the Seller, in each
     case only insofar as such items relate exclusively or primarily to the
     Business.

          (g) Prepaid Expenses. The prepaid expenses for goods or services to be
     provided exclusively or primarily to the Business after the Closing Date
     (as defined below) identified in Schedule 1.2(g) subject to changes between
     December 31, 1998 and Closing in the ordinary course of business. The
     actual amount of prepaid inventory, expenses and supplies is to be
     determined during a physical inventory to be conducted by Seller and
     audited by Buyer between May 1, 1999 and the Closing and only such prepaid
     inventory and supplies as are physically identified will be purchased by
     Buyer.

                                       2
<PAGE>

          (h) Intellectual Property. All of Seller's right, title and interest
     in and to Seller's intellectual property used exclusively or primarily in
     the Business, including, without limitation, (i) the trademark "Quadrus,"
     (ii) the domain name and website of the Business, (iii) know-how, (iv)
     good- will, and (v) all rights under proprietary information agreements
     with respect to employees of Seller who become employees of Buyer from and
     after the Closing.

          (i) Phone Numbers. The phone numbers used exclusively or primarily in
     the Business identified in Schedule 1.2(i)

          (j) Other Assets. All of Seller's claims against any parties relating
     exclusively or primarily to any Acquired Asset, the Business or any
     contract rights assigned to Buyer, including without limitation,
     unliquidated rights under manufacturers' or vendors' warranties or
     guarantees subject to changes between December 31, 1998 and Closing in the
     ordinary course of business.

          (k) Balance Sheet Assets. All other assets reflected on the December
     31, 1998 balance sheet for Quadrus attached hereto as Exhibit A (the
     "December 31, 1998 Balance Sheet") subject to changes between December 31,
     1998 and Closing in the ordinary course of business.

     1.3 Assumption of Liabilities. On the terms and subject to the conditions
set forth herein, from and after the Closing, the Buyer will assume and satisfy
or perform when due the following liabilities of the Seller (the "Assumed
Liabilities"):

          (a) Obligations Under Leases. All of Seller's obligations after the
     Closing Date (as defined below) under each of the Assumed Leases identified
     in Schedule 1.2(c), and each of the contracts, agreements, plans and
     arrangements identified in Schedule 1.2(d).

          (b) Accounts Payable. The accounts payable, good in transit, placed
     orders as set forth on Schedule 1.3(b) as of December 31, 1998 subject to
     changes between December 31, 1998 and the Closing Date.

          (c) Warranty Liability. All warranty liability relating to warranty
     returns and replacements after the Closing relating exclusively or
     primarily to the Business.

          (d) Sales and Use Taxes. Any and all sales or use taxes imposed by the
     sale of the Acquired Assets or the assumption of the Assumed Liabilities.

          (e) Balance Sheet Liabilities. All other liabilities reflected on the
     December 31, 1998 Balance Sheet subject to changes between December 31,
     1998 and Closing in the ordinary course of business, other than liabilities
     in respect of (i) "401K Withholding" (shown thereon as $48,124) and (ii)
     accrued vacation in excess of 80 hours per person (shown in the books of
     Seller as $71,227 (subject to adjustment)). The liabilities in this
     subsection (i) and (ii), collectively, are referred to as the "Excluded
     Balance Sheet Liabilities."

                                       3
<PAGE>

          (f) Additional Assumed Liabilities. Except as may otherwise be
     provided in this Agreement, all of Seller's liabilities and obligations
     referred to with an asterisk (*) in the Disclosure Schedule attached
     hereto.

     1.4 All Other Liabilities Not Assumed. Other than the Assumed Liabilities
set forth in Section 1.3 above, it is agreed that Buyer shall not assume or
perform any other liabilities or obligations.

                                   ARTICLE II

                            PURCHASE PRICE; CLOSING

     2.1 Purchase Price. The purchase price payable by the Buyer to the Seller
as consideration for the sale, assignment, transfer, and delivery by the Seller
to the Buyer (or a wholly owned subsidiary of Buyer to be designated by Buyer)
of the Acquired Assets, and the assumption by Buyer of the Assumed Liabilities,
Buyer, on the terms and conditions set forth herein, shall be $40,500,000.00
(the "Purchase Price"). At the Closing, the Buyer shall deliver to the Seller by
wire transfer in immediately available funds $37,500,000.00 (the "Partial
Purchase Price Payment"). Subject to the Post-Closing Adjustment in Section 2.5,
Buyer will pay the balance of the Purchase Price at the time of the payment to
be made pursuant to Section 2.5(c)(1) or (2).

     2.2 Closing.

          (a) Delivery. The closing of the purchase and sale of the Acquired
     Assets and the consummation of the other transactions contemplated hereby
     shall be held at the offices of Wilson Sonsini Goodrich & Rosati, P.C., 650
     Page Mill Road, Palo Alto, California 94304-1050, at 1:00 p.m. (local
     time), on June 1, 1999 (the "Closing") or at such other date, time and
     place not to be later than June 30, 1999, unless Buyer and Seller shall
     have agreed in writing (the date of the Closing is hereinafter referred to
     herein as the "Closing Date").

          (b) Closing Deliveries. At the Closing, Buyer shall deliver the
     Partial Purchase Price Payment against delivery by the Seller of such
     transfer documents relating to the sale and transfer of the Acquired Assets
     as the Buyer shall reasonably request, including, without limitation, the
     Bill of Sale and General Assignment of Assets in the form attached hereto
     as Exhibit B. At the Closing, the Seller shall put Buyer into full
     possession and enjoyment of all the Acquired Assets and Buyer shall be
     fully and solely responsible for and perform when due or discharge all of
     the Assumed Liabilities.

          At any time and from time to time after the Closing, at the request of
     the Buyer and without further consideration, the Seller shall execute and
     deliver such further instruments of sale, transfer, conveyance, assignment,
     and confirmation and take such actions as Buyer may reasonably determine
     necessary to transfer, convey, and assign to the Buyer (or such wholly
     owned subsidiary as Buyer may designate), and to confirm Buyer's title to
     or interest in, the Acquired

                                       4
<PAGE>

     Assets, to put Buyer in actual possession and operating control thereof,
     and to assist Buyer in exercising all rights with respect thereto.

     2.3 Transaction Taxes.

          (a) Sales Tax. At the Closing, upon Seller's delivery to Buyer of an
     invoice therefor, Buyer shall remit to Seller, and Seller shall timely
     remit to the appropriate California state tax authorities, an amount which
     is equal to 8.25% of the Allocation(s) (as defined herein) shown on
     Schedule 2.4 as subject to collection of California State Sales Tax. Seller
     has already paid California State sales tax on the equipment leases.

          (b) Buyer will pay and promptly discharge when due (and indemnify
     Seller against) all taxes and recording fees imposed or levied by reason
     of, in connection with or attributable to the sale of Acquired Assets
     contemplated hereby, the transactions contemplated hereby, and the sale of
     the Acquired Assets to Buyer, except any income taxes payable by the Seller
     because of gain on the sale thereof.

     2.4 Allocation of Consideration. Buyer and Seller will allocate the
Purchase Price among the Assets (the "Allocation") in accordance with Schedule
2.4 to be attached to this Agreement at or prior to the Closing in a form
mutually agreeable to the parties. No party will take a position on any federal
or state tax return, before any governmental agency charged with the collection
of any income tax, or in any judicial proceeding that is in any way inconsistent
with the Allocation or prior to the final adjustment of the Purchase Price
pursuant to Section 2.5. To the extent required by Section 1060 of the Code and
any regulations promulgated thereunder, the Allocation will be revised for any
adjustment of the Purchase Price pursuant to Section 2.5.

     2.5 Post-Closing Adjustment. The Purchase Price shall be subject to
adjustment after the Closing Date as specified in this Section 2.5.

          (a) As soon as practicable, but in any event within fifteen (15)
     business days after the Closing Date, Seller, with the assistance of any
     necessary Buyer personnel at no cost to Seller, will prepare and deliver to
     Buyer a Draft Closing Date Schedule 2.5 (the "Draft Closing Date Schedule")
     for the Business as of the close of business on the Closing Date. The Draft
     Closing Date Schedule will be prepared and calculated in accordance with
     GAAP and consistent with Seller's accounting practices and policies and
     consistent with the December 31, 1998 Balance Sheet. For purposes of this
     calculation, (v) the Excluded Balance Sheet Liabilities, (w) the Excluded
     Excess Inventory (as defined herein), (x) the Excluded Bone-Pile Inventory
     (as defined herein), and (y) the Other Excluded Amounts (as defined herein)
     (the items described in (v) through (y), collectively, the "Exclusions")
     shall be excluded.

          (b) In the event Buyer disputes the accuracy or presentation of any
     information or determination contained in the Draft Closing Date Schedule,
     it will deliver a detailed statement describing its disagreement to Seller
     within fifteen (15) business days after receiving the Draft

                                       5
<PAGE>

     Closing Date Schedule. Buyer and Seller will use reasonable efforts to
     resolve any such disagreement themselves. If the parties are unable to
     reach a final resolution within ten calendar days from the delivery of
     Buyer's objections, the objections to the Draft Closing Date Schedule will
     be submitted for binding resolution to Arthur Andersen (the "Accounting
     Firm"), which firm is hereby acknowledged as independent of the parties,
     within seven days of the termination of the ten-day resolution period
     referred to above. Buyer will bear one-half of Accounting Firm's fees and
     expenses, and Seller will bear the other one-half of the fees. Both parties
     will make their work papers and other materials available to Accounting
     Firm. The determination of Accounting Firm shall be made within thirty (30)
     days after the submission of the objections for resolution, and the
     determination shall be conclusive, final, and binding on the parties,
     absent manifest error. Once the Draft Closing Date Schedule has been agreed
     upon or resolved or determined in the manner set forth in this Section 2.5,
     it shall be final, and used for the purposes of the Purchase Price
     adjustment set forth in Section 2.5(c) below. Such final Schedule shall be
     referred to as the "Closing Date Schedule."

          (c) The Purchase Price will be adjusted as follows:

               1. If the book value of the Business, as reflected on the agreed
          to (or resolved or determined) Closing Date Schedule is less than the
          book value of the Business as reflected on the unaudited December 31,
          1998 balance sheet, then Seller will pay to Buyer within three days of
          the agreement to the Closing Date Schedule (or within three days of
          resolution, or determination by Accounting Firm, of any objections
          thereto) an amount equal to the difference between the book value of
          the Business as reflected on the unaudited December 31, 1998 Balance
          Sheet minus the book value of the Business as reflected on the agreed
          to (or resolved or determined) Closing Date Schedule.

               2. If the book value of the Business, as reflected on the agreed
          to (or resolved or determined) Closing Date Schedule, is more than the
          book value of the Business as reflected on the unaudited December 31,
          1998 Balance Sheet, then Buyer will pay to Seller within three days of
          the agreement to the Closing Date Schedule (or within three days of
          resolution, or determination by the accounting firm, of any objections
          thereto) an amount equal to the difference between the book value of
          the Business as reflected on the unaudited December 31, 1998 balance
          sheet and the book value of the Business as reflected on the agreed to
          (or resolved or determined) Closing Date Schedule.

               3. If the book value of the Business as reflected on the agreed
          to (or resolved or determined) Closing Date Schedule is equal to the
          book value of the Business as reflected on the unaudited December 31,
          1998 Balance Sheet then there will be no adjustment to the Purchase
          Price.

          (d) Any amounts required to be paid pursuant to Sections 2.5(c) 1 or 2
     above shall bear interest from the Closing Date through the date of payment
     hereunder at the rate of interest

                                       6
<PAGE>

     announced publicly by Bank of America as its base lending rate calculated
     for those dates and shall be paid by wire transfer in immediately available
     funds.

          (e) During the preparation of the Closing Date Schedule by Seller and
     the period of any dispute referred to in Section 2.5(b), Buyer will provide
     Seller full access to the books, records, facilities and employees related
     to the Business and will cooperate fully with Seller in order to prepare
     the Closing Date Schedule and to investigate the basis for any such
     dispute; provided, however, that any such investigation will be conducted
     in a manner as not to interfere unreasonably with the operations of Buyer
     or the Business.

                                  ARTICLE III

                  REPRESENTATIONS AND WARRANTIES OF THE SELLER

     The Seller hereby represents and warrants to Buyer subject to the specific
exceptions disclosed in the disclosure schedule (the "Disclosure Schedule")
(each referencing the appropriate section numbers of this Article III as to
which an exception exists) delivered by the Seller to Buyer, and dated as of the
date hereof, as follows:

     3.1 Organization of the Seller. Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of California.
The Seller has the power and authority to own, lease, and operate its assets and
property and to carry on the Business as now being conducted and is duly
qualified or licensed to do business and is in good standing in each
jurisdiction where the character of the properties owned, leased, or operated by
it or the nature of its activities makes such qualification or licensing
necessary, except where the failure to be so qualified would not have a material
adverse effect on the Business. The Seller has made available to Buyer a true
and correct copy of the constituent documents of the Seller, each as amended to
date, and each such instrument is in full force and effect.

     3.2 Authority. The Seller has all requisite power and authority to enter
into this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Seller. This Agreement has been duly
executed and delivered by the Seller and constitutes the valid and binding
obligation of the Seller enforceable against the Seller in accordance with its
terms. The execution and delivery of this Agreement by the Seller does not, and,
as of the Closing Date, the consummation of the transactions contemplated hereby
and thereby will not, conflict with, or result in any violation of, or default
under (with or without notice or lapse of time, or both), or give rise to a
right of termination, cancellation or acceleration of any obligation or loss of
any benefit under (any such event, a "Conflict") (i) any provision of the
constituent documents of the Seller or (ii) any mortgage, indenture, lease,
contract or other agreement or instrument, permit, concession, franchise,
license, judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to the Business or any of its properties or assets. No consent,
waiver, approval, order, or authorization of, or registration, declaration or
filing with,

                                       7
<PAGE>

any court, administrative agency or commission or other federal, state, county
or local governmental authority, instrumentality, agency or commission (any of
the foregoing authorities, instrumentalities, agencies, or commissions, a
"Governmental Entity") (so as not to trigger any Conflict), is required by or
with respect to the Business in connection with the execution and delivery of
this Agreement or the consummation of the transactions contemplated hereby and
thereby, including any other assignment or instrument of transfer to be
delivered by the Seller at the Closing pursuant to Section 2.2(b).

     3.3 Division Financial Statements.

          (a) (i) The unaudited consolidated statements of income of the
     Business for each of the fiscal years ended December 31, 1998 and 1997
     (attached hereto as Exhibit C and Exhibit D, respectively) and (ii) the
     unaudited consolidated balance sheets of the Business for each such fiscal
     year are complete and correct in all material respects, have been prepared
     in accordance with GAAP applied on a consistent basis throughout the
     periods indicated (except that the unaudited financial statements do not
     have notes thereto and do not have a cash flow statement), and fairly
     present the consolidated financial position of the Business, as of the
     respective dates and for the respective periods indicated, subject, in the
     case of the unaudited financial statements, to normal year-end adjustments.
     The Business' unaudited balance sheet at December 31, 1998 is hereinafter
     referred to as the "Division Balance Sheet," and all such financial
     statements are hereinafter referred to as the "Division Financial
     Statements."

          (b) The Business has no liability, indebtedness, obligation, expense,
     claim, deficiency, guaranty or endorsement of any type, whether accrued,
     absolute, contingent, matured, unmatured or other (whether or not required
     to be reflected in the Division Financial Statements in accordance with
     GAAP) which (i) has not been reflected in the Division Balance Sheet or
     (ii) has not arisen in the ordinary course of business since December 31,
     1998 consistent in nature and amount with past practices.

          (c) A true and correct copy of the Division Financial Statements is
     attached hereto as Exhibit E.

     3.4 Absence of Changes. Since the date of the Division Balance Sheet (or
such other date specifically set forth herein), the Seller has conducted the
Business only in the ordinary course of business and, except to the extent the
following has occurred in the ordinary course of Business:

          (a) There has not been any material adverse change in the business,
     financial condition, operations, or results of operations of the Business;

          (b) The Seller has not sold, leased, licensed, or disposed of any of
     the assets relating to the Business (whether by way of merger, purchase, or
     otherwise);

                                       8
<PAGE>

          (c) The Seller has not accelerated, terminated, modified or cancelled
     any agreement, contract, lease, or license (or series of related
     agreements, contracts, leases, and licenses) which relates to the Acquired
     Assets;

          (d) The Seller has not delayed or postponed the payment of material
     accounts payable and other liabilities relating to the Acquired Assets
     beyond their due date outside the ordinary course of business, except with
     respect to accounts or liabilities that are subject to dispute in good
     faith by Seller;

          (e) The Seller has not cancelled, compromised, waived, or released any
     right or claim (or series of related rights and claims) relating to any
     Acquired Asset involving payments of more than $50,000 in the aggregate;

          (f) To the Seller's knowledge, Seller has no reason to believe that
     any vendors, licensors, licensees, distributors, or customers for any
     Acquired Asset intend to discontinue with the Buyer a material business
     relationship any such vendor licensor, licensee, distributor, or customer
     currently has with the Seller;

          (g) No Acquired Asset has been materially damaged, destroyed, or lost
     (whether or not covered by insurance), and no material customer of the
     Seller has been lost;

          (h) The Seller has not entered into any employment contract or
     collective bargaining agreement, or modified the terms of any existing
     employment contract or collective bargaining agreement, relating to the
     Acquired Assets, except in the ordinary course of business;

          (i) The Seller has not changed employment or compensation terms for
     any employee specified on Schedule 3.4(i) hereto ("Key Employees"), except
     in the ordinary course of business;

          (j) To Seller's knowledge, there has not been any other occurrence,
     event, incident, action, failure to act, or transaction outside the
     ordinary course of Seller's business involving the Acquired Assets which
     would have a material adverse effect on the Acquired Assets and the
     Business;

          (k) The Seller has not entered into any capital commitments in
     relation to any of the Acquired Assets or the Business which in the
     aggregate exceed $100,000;

          (l) The Seller has not accelerated the collection or conversion of
     accounts receivable or notes receivable relating to the Acquired Assets by
     offering any incentive for such acceleration, including but not limited to
     prepayment discounts, allowances, or enhancements, except in the ordinary
     course of business;

          (m) The Seller has not revalued any of the assets of the Business;

                                       9
<PAGE>

          (n) The Seller has not received notice of any claim or potential claim
     of ownership of a material Acquired Asset by any person, and to the
     knowledge of the Seller, no basis exists for any such claim of ownership;
     and

          (o) The Seller has not negotiated with respect to or otherwise
     committed or agreed to do any of the foregoing (other than negotiations
     with Buyer and its representatives regarding the transactions contemplated
     by this Agreement).

     3.5 Absence of Undisclosed Liabilities. With respect to the Assets or the
operations of the Business, Seller has no liabilities (whether accrued,
absolute, contingent, unliquidated or otherwise, whether known or unknown as of
or prior to the date hereof) arising out of transactions or events heretofore
entered into, or any action or inaction, or any state of facts existing, with
respect to or based upon transactions or events heretofore occurring, except (i)
as reflected in the March 31, 1999 Balance Sheet (attached hereto as Exhibit F),
(ii) liabilities which have arisen after the date of such Balance Sheet in the
ordinary course of business (none of which is a material uninsured liability for
breach of contract, breach of warranty, tort, infringement, claim or lawsuit),
or (iii) as otherwise set forth in the Disclosure Schedule under the caption
referencing this Section.

     3.6 Intellectual Property Rights. The Disclosure Schedule describes under
the caption referencing this Section all rights in patents, patent applications,
trademarks, service marks, trade names, corporate names, copyrights mask works,
trade secrets, know-how or other intellectual property rights owned by or
licensed to Seller in connection with the conduct of the Business or used in,
developed for use in or necessary to the conduct of the Business as now
conducted or planned to be conducted, except commercially available software and
hardware subject to standard or shrink-wrap license agreements. Seller owns and
possesses all right, title and interest, or holds a valid license, in and to the
rights set forth under such caption. The Disclosure Schedule describes under the
caption referencing this Section all intellectual property rights which have
been licensed to third parties and those intellectual property rights which are
licensed from third parties, except commercially available software and hardware
subject to standard or shrink-wrap license agreements. Seller has not received
any notice of any infringement or misappropriation by, or conflict from, any
third party with respect to the intellectual property rights listed in the
Disclosure Schedule; no claim by any third party contesting the validity of any
intellectual property rights listed under such caption has been made against the
Company, is currently outstanding or, to the knowledge of the Company, is
threatened against the Company; Seller has not received any notice of any
infringement, misappropriation or violation by Seller of any intellectual
property rights of any third parties and Seller has not infringed,
misappropriated or otherwise violated any such intellectual property rights.

     3.7 Affiliate Transactions. Except as disclosed in the Schedule 3.7, and
other than pursuant to this Agreement, no officer, director or employee of
Seller or any member of the immediate family of any such officer, director or
employee, or any entity in which any of such persons owns any beneficial
interest (other than any publicly- held corporation whose stock is traded on a
national securities exchange or in the over-the-counter market and less than one
percent of the

                                       10
<PAGE>

stock of which is beneficially owned by any of such persons) (collectively
"insiders"), has any agreement with Seller (other than normal employment
arrangements) or any interest in any property, real, personal or mixed, tangible
or intangible, used in or pertaining to the Business of Seller (other than
ownership of capital stock of Seller). None of the insiders has any direct or
indirect interest in any competitor, supplier or customer of Seller or in any
person, firm or entity from whom or to whom Seller leases any property, or in
any other person, firm or entity with whom Seller transacts business of any
nature.

     For purposes of this Section, the members of the immediate family of an
officer, director or employee shall consist of the spouse, parents, children,
siblings, mothers- and fathers-in-law, sons- and daughters-in-law, and brothers-
and sisters-in-law of such officer, director or employee.

     3.8 Customers and Suppliers. The Disclosure Schedule, under the caption
referencing this Section, lists the largest customers and suppliers of Seller
relating to the Business for the fiscal year ended and for the month period
ended and sets forth opposite the name of each such customer or supplier the
approximate percentage of net sales or purchases by Seller attributable to such
customer or supplier for each such period.

     3.9 Legal and Other Compliance.

          (a) Seller and its officers, directors, agents and employees have
     complied in all material respects with all applicable laws, regulations and
     other requirements, including, but not limited to, federal, state, local
     and foreign laws, ordinances, rules, regulations and other requirements
     pertaining to product labeling, consumer products safety, equal employment
     opportunity, employee retirement, affirmative action and other hiring
     practices, occupational safety and health, workers' compensation,
     unemployment and building and zoning codes, which materially affect the
     Business, the Assets or the Real Property and no claims have been filed
     against Seller alleging a material violation of any such laws, regulations
     or other requirements. Seller has no knowledge of any material action,
     pending or threatened, to change the zoning or building ordinances or any
     other laws, rules, regulations or ordinances affecting the Assets or the
     Real Property. Seller is not relying on any exemption from or deferral of
     any such applicable law, regulation or other requirement that would not be
     available to Buyer after it acquires the Assets, except, however, Seller
     does not make any representation with respect to the continuing
     availability to Buyer of any Enterprise Zone benefits.

          (b) To the knowledge of Seller, Seller has, in full force and effect,
     all material licenses, permits and certificates, from federal, state, local
     and foreign authorities (including, without limitation, federal and state
     agencies regulating occupational health and safety) necessary to conduct
     its Business and own and operate Assets (other than Environmental Permits,
     as such term is defined in Section 3.15(c) hereof) (collectively, the
     "Permits"). A true, correct and complete list of all the Permits is set
     forth under the caption referencing this Section in the Disclosure
     Schedule, with an

                                       11
<PAGE>

     indication as to whether the Permit is assignable to Buyer. Seller has
     conducted its business in compliance with all material terms and conditions
     of the Permits.

          (c) In connection with the Business, Seller has not made or agreed to
     make gifts of money, other property or similar benefits (other than
     incidental gifts or articles of nominal value) to any actual or potential
     customer, supplier, governmental employee or any other person in a position
     to assist or hinder Seller in connection with any actual or proposed
     transaction.

          (d) In particular, but without limiting the generality of the
     foregoing, Seller has not violated in any material respect and has no
     material liability, and has not received a notice or charge asserting any
     violation in any material respect of or material liability under, the
     federal Occupational Safety and Health Act of 1970 or any other federal or
     state acts (including rules and regulations thereunder) regulating or
     otherwise affecting employee health and safety in connection with the
     Business.

     3.10 Restrictions on Business Activities. There is no agreement
(noncompetition, field of use, or otherwise), judgment, injunction, order or
decree which has or reasonably could be expected to have the effect of
prohibiting or impairing any business practice utilizing any Acquired Asset.
Without limiting the foregoing, the Business is not subject to any agreement
which restricts the sale, license, or distribution of any product, service, or
technology to any class of customers, in any geographic area, during any period
of time or in any segment of the market.

     3.11 Title to Properties; Absence of Liens; Condition of Equipment.

          (a) The Seller does not own any real property that is used in the
     Business conducted with respect to any Acquired Asset. The Seller has
     delivered to the Buyer a true and correct copy of each Assumed Lease
     related to the Real Property. Such Assumed Leases are in full force and
     effect, are valid and effective in accordance with its terms, and there is
     not, under any of such leases, any material existing default or event of
     default (or event which with notice or lapse of time, or both, would
     constitute a material default). To the knowledge of the Seller, neither the
     business operations conducted on the Real Property, nor such Real Property,
     including improvements thereon, violate any applicable law, building code,
     zoning requirement, or classification, or pollution control ordinance or
     statute relating to the particular property or such operations, and such
     non- violation is not dependent, in any instance, on so-called
     non-conforming use exceptions. To the knowledge of the Seller, all
     approvals of governmental authorities (including licenses and permits)
     required in connection with the operation of the Business on such real
     property have been obtained.

          (b) The Seller has good and valid title to, or, in the case of leased
     properties and assets, valid leasehold interests in, each Acquired Asset
     being transferred to the Buyer, free and clear of any liens, except as
     reflected in the Division Financial Statements.

          (c) Each item of equipment is free from material defects and is
     reasonably fit and usable for the purposes for which it is presently being
     used.

                                       12
<PAGE>

          (d) The Acquired Assets comprise all of the assets, properties, and
     rights of every type and description, real, personal, tangible, and
     intangible used primarily or exclusively by the Seller in the Business as
     currently conducted.

          (e) The Seller is in custody and control of all the Acquired Assets
     being sold and transferred to the Buyer pursuant to this Agreement or any
     assignments or other instruments of transfer delivered or to be delivered
     to Buyer pursuant hereto or thereto.

     3.12 Agreements, Contracts and Commitments. Except as contemplated by this
Agreement, the Business does not currently have, is not a party to, nor is bound
by with respect to any Acquired Asset or Key Employee:

               (i) any collective bargaining agreements;

               (ii) any agreement, contract, or commitment relating to the
          disposition or acquisition of assets or any interest in any business
          enterprise;

               (iii) any agreement of indemnification or guaranty;

               (iv) any purchase order or contract for the purchase of materials
          in excess of $25,000;

               (v) any agreement entered otherwise than in the ordinary course
          of business;

               (vi) any agreement that is likely to result in a loss in excess
          of $100,000 on completion of performance;

               (vii) any agreement (or group of related agreements) relating to
          capital expenditures and involving future payments in excess of
          $100,000;

               (viii) any agreement (or group of related agreements) under which
          payment in excess of $50,000 has already been received by the Seller
          (whether in whole or in part) but which requires the performance of
          services after the Closing Date;

               (ix) any fidelity or surety bond or completion bond;

               (x) any mortgages, indentures, loans or credit agreements,
          security agreements or other agreements or instruments relating to the
          borrowing of money by the Seller or extension of credit to the Seller
          exclusive of routine trade payables, involving obligations in excess
          of $50,000 or under which the Seller has imposed any lien on any of
          the Acquired Assets;

               (xi) any purchase order or contract for the purchase of materials
          (excluding capital expenditures) involving $50,000 or more;

                                       13
<PAGE>

               (xii) any agreement concerning confidentiality, except in the
          ordinary course;

               (xiii) any distribution, joint marketing, development, or
          partnership or joint venture agreement; or

               (xiv) any other agreement, contract, lease, or license (or series
          of related agreements, contracts, leases, and licenses) that involves
          payment of $50,000 or more.

     The Seller has delivered to the Buyer a correct and complete copy of each
written agreement listed in the Disclosure Schedule referencing this Section 3.9
(any such agreement, contract, or commitment, a "Contract"). Each Contract is in
full force and effect and, except as otherwise disclosed, is not subject to any
default thereunder of which the Seller has knowledge by any party obligated to a
Seller pursuant thereto.

     3.13 Powers of Attorney. There are no outstanding powers of attorney
executed on behalf of the Seller in respect of any Acquired Asset.

     3.14 Litigation. There is no action, suit, proceeding, claim, arbitration,
or investigation pending before any court or administrative agency against the
Seller or any officer or director of the Seller in their capacity as such that
may result in any adverse change in the Business or to the Acquired Assets or
that questions the validity of this Agreement or of any action taken to or to be
taken pursuant to or in connection with this Agreement. To the knowledge of the
Seller, no such action, proceeding, claim, arbitration, or investigation has
been threatened, for any such action, suit, proceeding, claim, arbitration, or
investigation. There are no judgments, orders, decrees, citations, fines, or
penalties heretofore assessed against the Seller affecting the Business or the
Acquired Assets under any federal, state or local law. No governmental entity
has at any time challenged or questioned the legal right of the Seller to
manufacture, offer, or sell any product related to the Acquired Assets in the
present manner or style thereof.

     3.15 Environmental Matters.

          (a) As used in this Section, the following terms shall have the
     following meanings:

               (i) "Hazardous Materials" means any dangerous, toxic or hazardous
          pollutant, contaminant, chemical, waste, material or substance as
          defined in or governed by any federal, state or local law, statute,
          code, ordinance, regulation, rule or other requirement relating to
          such substance or otherwise relating to the environment or human
          health or safety, including without limitation any waste, material,
          substance, pollutant, or contaminant that might cause any injury to
          human health or safety or to the environment or might subject Seller
          to any imposition of costs or liability under any Environmental Law.

                                       14
<PAGE>

               (ii) "Environmental Laws" means all applicable federal, state,
          local and foreign laws, rules, regulations, codes, ordinances, orders,
          decrees, directives, permits, licenses and judgments relating to
          pollution, contamination or protection of the environment (including,
          without limitation, all applicable federal, state, local and foreign
          laws, rules, regulations, codes, ordinances, orders, decrees,
          directives, permits, licenses and judgments relating to Hazardous
          Materials in effect as of the date of this Agreement).

               (iii) "Release" shall mean the spilling, leaking, disposing,
          discharging, emitting, depositing, ejecting, leaching, escaping or any
          other release or threatened release, however defined, whether
          intentional or unintentional, of any Hazardous Material.

          (b) Seller, with respect to the Business and the Real Property, is in
     material compliance with all applicable Environmental Laws.

          (c) Seller has obtained, and maintained in full force and effect, all
     environmental permits, licenses, certificates of compliance, approvals and
     other authorizations necessary to conduct the Business and own or operate
     the Assets, including the Real Property (collectively, the "Environmental
     Permits"). A copy of each Environmental Permit shall be provided by Seller
     to Buyer at least 14 days prior to the Closing. Seller has conducted the
     Business in compliance with all terms and conditions of the Environmental
     Permits. Seller has filed all reports and notifications required to be
     filed under and pursuant to all applicable Environmental Laws with respect
     to the Business and the Assets.

          (d) Except as set forth in the Disclosure Schedule under the caption
     referencing this Section, to the best of Seller's knowledge, (i) no
     Hazardous Materials have been generated, treated, contained, handled,
     located, used, manufactured, processed, buried, incinerated, deposited,
     stored, or released on, under or about any part of the Real Property, (ii)
     the Real Property and any improvements thereon, contain no asbestos, urea,
     formaldehyde, radon at levels above natural background, polychlorinated
     biphenyls (PCBs) or pesticides, and (iii) no aboveground or underground
     storage tanks are located on, under or about the Real Property, or have
     been located on, under or about the Real Property and then subsequently
     been removed or filled.

          (e) Except as set forth in the Disclosure Schedule under the caption
     referencing this Section, Seller has not received notice alleging in any
     manner that Seller is, or might be potentially responsible for, any Release
     of Hazardous Materials, or any material costs arising out of any violation
     of Environmental Laws with respect to the Business or the Assets.

          (f) No expenditure in excess of $10,000 in the aggregate (and other
     than normal operating, repair, maintenance, and ongoing permitting
     expenses) will be required in order for Buyer to comply with any
     Environmental Law in effect at the time of the Closing in connection with
     the operation or continued operation of the Business or the Real Property
     in a manner consistent with the current operation thereof by Seller.

                                       15
<PAGE>

          (g) The Real Property is not and has not been listed on the United
     States Environmental Protection Agency National Priorities List of
     Hazardous Waste Sites, or any other list, schedule, law, inventory, or
     record of hazardous or solid waste sites maintained by any federal, state
     or local agency, except as set forth in the Disclosure Schedule under the
     caption referencing this Section and except as would not subject the
     Business or the Assets to any liability.

          (h) Seller has disclosed and delivered to Buyer all environmental
     reports and investigations which Seller has obtained or ordered with
     respect to the Business and the Assets, including the Real Property.

          (i) Except as set forth in the Disclosure Schedule under the caption
     referencing this Section, to the best of Seller's knowledge, no part of the
     Business or the Assets (including the Real Property) have been used as a
     landfill, dump or other disposal, storage, transfer, handling or treatment
     area for Hazardous Materials, or as a gasoline service station or a
     facility for selling, dispensing, storing, transferring, disposing or
     handling petroleum and/or petroleum products.

          (j) No lien has been attached or filed against Seller (with respect to
     the Business or the Assets) or the Assets or the Real Property in favor of
     any governmental or private entity for (i) any liability or imposition of
     costs under or violation of any applicable Environmental Law; or (ii) any
     Release of Hazardous Materials.

     3.16 Employment Matters.

          (a) Compliance with Applicable Laws. Seller (i) is in compliance in
     all material respects with all applicable foreign, federal, state and local
     laws, rules, and regulations respecting employment and employment
     practices, including without limitation, those relating to discrimination
     in employment, terms and conditions of employment, election of employee
     representatives (where applicable), obligations to consult with and inform
     employee representatives, calculations and accruals of vacations and of
     other accruals, seniority bonuses (if any), and wages and hours; (ii) has
     withheld all amounts required by law or by agreement to be withheld from
     the wages, salaries and other payments to employees or other persons who by
     virtue of their activities performed on behalf of the Seller may be deemed
     employees within the meaning of applicable law; (iii) is not liable for any
     arrears of wages or any taxes or any penalty for failure to comply with any
     of the foregoing; and (iv) is not liable for any payment to any trust or
     other fund or to any governmental or administrative authority, with respect
     to unemployment compensation benefits, social security or other benefits or
     obligations for employees or other persons who by virtue of their
     activities performed on behalf of the Seller may be deemed employees within
     the meaning of applicable law (other than routine payments to be made in
     the normal course of business and consistent with past practice).

          (b) Labor. No work stoppage or labor strike against the Seller is
     pending, nor to the best knowledge of the Seller, threatened or reasonably
     anticipated. The Seller is not involved in nor has been threatened with any
     labor dispute, grievance, or litigation relating to labor, safety or
     discrimination matters involving any employee, including, without
     limitation, charges of unfair labor

                                       16
<PAGE>

     practices or discrimination complaints, which, if adversely determined,
     would, individually or in the aggregate, result in Liability to the Seller
     or Buyer. The Seller has not engaged in any unfair labor practices which
     could, individually or in the aggregate, directly or indirectly result in a
     liability to the Seller. The Seller is not presently, nor has it in the
     past, been a party to, or bound by, any agreement negotiated with its
     employees and no collective bargaining agreement is being negotiated by the
     Seller.

          (c) No Liability. Except as otherwise provided in Section 6.15 hereof,
     unless Buyer shall make any independent agreements or arrangements with any
     employees or former employees of Seller, Buyer will not have any liability
     for making payments or providing benefits of any kind to any employee or
     former employee of the Seller including, without limitation, (A) any
     obligation to provide former employees of the Seller (including individuals
     who become former employees by reason of the consummation of the
     transactions contemplated by this Agreement) so-called COBRA continuation
     coverage (with respect to U.S. employees of Seller), (B) any liability in
     respect of medical and other benefits for existing and future retirees of
     the Seller and for claims made after Closing in respect of costs and
     expenses incurred prior to Closing, (C) any liability in respect of work-
     related employee injuries or worker's compensation claims by employees or
     former employees of the Seller occurring prior to the Closing Date, and (D)
     any liability in respect of employee bonuses payable to former employees of
     the Seller.

          (d) Key Employees. Schedule 3.16(d) sets forth the current job title
     and the annual base salary of certain employees identified by Buyer to whom
     Buyer expects to make an offer of either at-will or term employment.

     3.17 Insolvency. No insolvency proceedings of any character, including
bankruptcy, receivership, reorganization, winding up, or arrangement with
creditors, voluntary or involuntary, affecting any of the Acquired Assets are
pending or, to the knowledge of the Seller, are threatened, and the Seller has
not made any assignment for the benefit of creditors, nor taken any other action
which would constitute the basis for the institution of such insolvency
proceedings.

     3.18 Consents. Schedule 3.18 sets forth a true, correct, and complete list
of the identities of any person or entity whose consent or approval is required,
and the matter, agreement, or contract to which such consent relates, in
connection with the transfer, assignment or conveyance by the Seller of any
Acquired Asset.

     3.19 Books and Records. The books and records of the Seller related to the
Business (i) have been fully and accurately maintained in accordance with
applicable laws and with generally accepted practices and standards in the
jurisdiction(s) in which the Seller operates and (ii) are in the Seller's
possession or under its control. The Acquired Assets include the computer system
used in the Business, although Seller is not transferring to Buyer any rights to
continue to maintain such records on Seller's computer systems or databases.

                                       17
<PAGE>

     3.20 Product Warranties. Each product manufactured, sold, licensed, leased,
or delivered by the Seller in the Business has been in conformity with all
applicable contractual commitments. Except as reflected in the reserve for
warranty claims and the separate reserve for returns on the Division Balance
Sheet, to Seller's knowledge, the Seller has no liability.

     3.21 Inventory. The inventory of the Business as reflected on the Division
Balance Sheet consists of raw materials and supplies, manufactured and purchased
parts, goods in process, and finished goods, all of which is merchantable and
fit for the purpose for which it was procured or manufactured, all of which is
reflected on such balance sheet at the lower of cost or market value, subject
only to the reserve for inventory writedown to net realizable value set forth in
such Division Balance Sheet.

     3.22 Accounts Receivable. The Seller has delivered to Buyer a complete and
accurate aging of all accounts receivable of the Company as of December 31,
1998. No account receivable reflected on Schedule 1.2(b) and in the Division
Balance Sheet and no account receivable arising after the date of the Division
Balance Sheet and reflected on the books of the Company and the Closing Date
Balance Sheet is uncollectible, subject to counterclaim or offset, except to the
extent reserved against thereon. No such accounts receivable are subject to
discount on volume or rebate or any other reduction. All accounts receivable
have been generated in the ordinary course of business and reflect a bona fide
obligation for the payment of goods or services provided by the Company.

     3.23 Tax Returns and Audits. To the extent the failure to do so would
adversely affect Seller's ability to deliver free and clear title to the
Acquired Assets or Buyer's right to hold, own or use the Acquired Assets, Seller
has filed within the time period for filing or any extension granted with
respect thereto all federal, state, local, foreign and other returns, estimates
and reports ("Returns") which it is required to file relating or pertaining to
any and all Taxes attributable to, levied or imposed upon, or incurred in
connection with the Acquired Assets or the Business and each portion of any Tax
Return pertaining or related to the Acquired Assets or the Business is true and
correct and has been completed in accordance with applicable law. Seller has
paid all Taxes relating to all the Acquired Assets and the Business and has
withheld with respect to its employees and paid to the appropriate taxing
authority all federal, state and local income taxes, FICA, FUTA and any other
Taxes required to be withheld with respect to the Acquired Assets. There are
(and immediately following the Closing there will be) no Liens on the Acquired
Assets relating to or attributable to Taxes.

     3.24 Employee Benefit Plans. (a) With respect to all employees and former
employees of Seller who perform or performed functions in connection with the
Business and all dependents and beneficiaries of such employees and former
employees: (i) Seller does not maintain or contribute to any nonqualified
deferred compensation or retirement plans, contracts or arrangements; (ii)
Seller does not maintain or contribute to any qualified defined contribution
plans (as defined in Section 3(34) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), or Section 414(i) of the Code; (iii) Seller
does not maintain or contribute to any qualified defined benefit plans (as
defined in Section 3(35) of ERISA or Section 414(j) of the Code); and (iv)
Seller

                                       18
<PAGE>

does not maintain or contribute to any employee welfare benefit plans (as
defined in Section 3(1) of ERISA) other than general medical, dental and vision
plans (copies of which have been provided to Buyer).

          (b) To the extent required (either as a matter of law or to obtain the
     intended tax treatment and tax benefits), all employee benefit plans (as
     defined in Section 3(3) of ERISA) which Seller does maintain or to which it
     does contribute (collectively, the "Plans") comply in all material respects
     with the requirements of ERISA and the Code. With respect to the Plans, (i)
     all required contributions which are due have been made and a proper
     accrual has been made for all contributions due in the current fiscal year;
     (ii) there are no actions, suits or claims pending, other than routine
     uncontested claims for benefits; and (iii) there have been no prohibited
     transactions (as defined in Section 406 of ERISA or Section 4975 of the
     Code).

          (c) Buyer has received true and complete copies of (i) the most recent
     determination letter, if any, received by Seller from the Internal Revenue
     Service regarding the Plans which Seller maintains or to which it
     contributes and any amendment to any Plan made subsequent to any Plan
     amendments covered by any such determination letter; (ii) the most recent
     financial statements and annual report or return for the Plans; and (iii)
     the most recently prepared actuarial valuation reports.

          (d) Seller does not contribute (and has not ever contributed) to any
     multi-employer plan, as defined in Section 3(37) of ERISA. Seller has no
     actual or potential liabilities under Section 4201 of ERISA for any
     complete or partial withdrawal from a multi-employer plan. Seller has no
     actual or potential liability for death or medical benefits after
     separation from employment, other than (i) death benefits under the
     employee benefit plans or programs (whether or not subject to ERISA) set
     forth under the caption referencing this Section in the Disclosure Schedule
     and (ii) health care continuation benefits described in Section 4980B of
     the Code.

          (e) Neither Seller nor any of its directors, officers, employees or
     other "fiduciaries", as such term is defined in Section 3(21) of ERISA, has
     committed any breach of fiduciary responsibility imposed by ERISA or any
     other applicable law with respect to the Plans which would subject Seller,
     Buyer, Buyer's subsidiaries or any of their respective directors, officers
     or employees to any liability under ERISA or any applicable law.

          (f) Seller has not incurred any liability for any tax or civil penalty
     or any disqualification of any employee benefit plan (as defined in Section
     3(3) of ERISA) imposed by Sections 4980B and 4975 of the Code and Part 6 of
     Title I and Section 502(i) of ERISA.

                                       19
<PAGE>

                                   ARTICLE IV

                     REPRESENTATIONS AND WARRANTIES OF BUYER

     Buyer hereby represents and warrants to the Seller as follows:

     4.1 Organization of Buyer. Buyer is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Minnesota. Buyer
has the corporate power to own its properties and to carry on its business as
now being conducted.

     4.2 Authority. Buyer has all requisite corporate power and authority to
enter into this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Buyer. This Agreement has been duly executed and
delivered by Buyer and constitutes the valid and binding obligation of Buyer,
enforceable in accordance with its terms.

     4.3 No Conflicts. The execution and delivery of this Agreement by the Buyer
does not, and, as of the Closing Date, the consummation of the transactions
contemplated hereby and thereby will not, conflict with, or result in any
violation of, or default under (with or without notice or lapse of time, or
both), or give rise to a right of termination, cancellation or acceleration of
any obligation or loss of any benefit under (any such event, a "Conflict") (i)
any provision of the constituent documents of the Buyer or (ii) any mortgage,
indenture, lease, contract or other agreement or instrument, permit, concession,
franchise, license, judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to the Buyer or any of its properties or assets. No
consent, waiver, approval, order, or authorization of, or registration,
declaration or filing with, any court, administrative agency or commission or
other federal, state, county or local governmental authority, instrumentality,
agency or commission (any of the foregoing authorities, instrumentalities,
agencies, or commissions, a "Governmental Entity") or any third party (so as not
to trigger any Conflict), is required by or with respect to the Buyer in
connection with the execution and delivery of this Agreement or the consummation
of the transactions contemplated hereby and thereby, including any other
assignment or instrument of transfer to be delivered by the Buyer at the Closing
pursuant to Section 2.2(b).

     4.4 Litigation. There is no action, suit or proceeding of any nature
pending or, to Buyer's knowledge, threatened against Buyer that could reasonably
be expected to interfere with the consummation of the transactions contemplated
by this Agreement or that questions the validity of this Agreement or of any
action taken or to be taken pursuant to or in connection with the provisions of
this Agreement.

                                       20
<PAGE>

                                   ARTICLE V

                       CONDUCT PRIOR TO THE CLOSING DATE

     5.1 Conduct of Business. During the period from the date of this Agreement
and continuing until the earlier of the termination of this Agreement or the
Closing, the Seller agrees (except to the extent that Buyer shall otherwise
consent in writing) to use reasonable commercial efforts to carry on the
Business in the usual, regular and ordinary course in substantially the same
manner as heretofore conducted, to pay all debts and taxes when due, to pay or
perform other obligations when due, and, to the extent consistent with such
businesses, to use all reasonable efforts consistent with past practice and
policies to preserve intact its present business organizations, keep available
the services of Key Employees and preserve its relationships with customers,
suppliers, distributors, licensors, licensees, and others having business
dealings with it, all with the goal of preserving unimpaired the goodwill and
ongoing businesses associated with the Acquired Assets on the Closing Date. The
Seller shall promptly notify Buyer of any event which materially adversely
effects the Business or any Acquired Assets. Except as expressly contemplated by
this Agreement or disclosed in Schedule 5.1, the Seller will not cause the
Business to, without the prior written consent of Buyer:

          (a) Enter into any commitment or transaction related to any Acquired
     Asset not in the ordinary course of business;

          (b) Enter into or amend any agreements pursuant to which any other
     party is granted marketing, distribution, or similar rights of any type or
     scope with respect to any products, except in the ordinary course of
     business;

          (c) Amend or otherwise modify (or agree to do so), except in the
     ordinary course of business, or violate the terms of, any of the agreements
     set forth or described in the Seller schedules;

          (d) Commence or settle any litigation regarding the Business, except
     to enforce its rights under or to interpret this Agreement or any other
     agreement, obligation or arrangement contemplated hereby or entered into or
     established in connection herewith which affects the Business, except in
     the ordinary course of business;

          (e) Sell, lease, license, pledge, or otherwise dispose of any Acquired
     Asset other than in the ordinary course of business;

          (f) Revalue any of the Acquired Assets, including without limitation
     writing down the value of inventory or writing off notes and accounts
     receivable other than in the ordinary course of business;

          (g) Enter into any strategic alliance, joint development or joint
     marketing agreement affecting the Business or any Acquired Asset; or

                                       21
<PAGE>

          (h) Take, or agree in writing or otherwise to take, any of the actions
     described in Sections 5.1(a) through (g) above, or any other action that
     would prevent the Seller from performing or cause the Seller not to perform
     its covenants hereunder.

                                   ARTICLE VI

                              ADDITIONAL AGREEMENTS

     6.1 Approval. The Seller shall promptly after the date hereof take all
action necessary in accordance with applicable law and the constituent documents
of the Seller to obtain all requisite approvals, as the case may be, of this
Agreement and the transactions contemplated hereby.

     6.2 Access to Information. The Seller shall afford Buyer and its
accountants, legal counsel, and other representatives reasonable access during
normal business hours during the period prior to the Closing Date to (i) all of
the properties, books, inventory, contracts, commitments, and records of the
Seller relating to the Acquired Assets and (ii) all other information concerning
the Business, properties, and personnel of the Seller which are associated with
the Acquired Assets as Buyer may reasonably request. The Seller agrees to
provide Buyer and its accountants, legal counsel, and other representatives
copies of internal financial statements promptly upon request.

     6.3 Access to Records After Closing. For a period of one year after the
Closing Date, the Seller and its representatives, on the one hand, and the Buyer
and its representatives, on the other hand, shall have reasonable access to any
books, records, documents, files, and correspondence to the extent that such
access may reasonably be required in connection with matters relating to or
affected by the operation of the businesses conducted with the Acquired Assets,
in the case of the Seller prior to the Closing Date and, in the case of the
Buyer, after the Closing Date. Such access shall be afforded upon reasonable
advance written notice, during normal business hours and at the expense of the
party seeking access.

     6.4 Confidentiality. From the date hereof to and including the Closing
Date, the parties hereto shall maintain, and cause their directors, employees,
agents, and advisors to maintain, in confidence and not to disclose or use for
any purpose, except for the evaluation of the transactions contemplated hereby
and the accuracy of the respective representations and warranties of the parties
contained herein, information concerning the other parties hereto and obtained
directly or indirectly from such parties, or their directors, employees, agents,
or advisors, except such information as is or becomes (i) available to the non-
disclosing party from third parties not subject to an undertaking of
confidentiality; (ii) generally available to the public other than as a result
of a breach by the non-disclosing party hereunder; or (iii) required to be
disclosed under applicable law; and except such information as was in the
possession of such party prior to obtaining such information from such other
party as to which the fact of prior possession such possessing party shall have
the burden of proof. In the event that the transactions contemplated hereby
shall not be consummated, all such information which shall be in writing shall
be returned to the party furnishing the same, including to the extent reasonably
practicable, copies or reproductions thereof which may have been prepared.

                                       22
<PAGE>

     6.5 Public Disclosure. Unless otherwise required by law (including, without
limitation, applicable securities laws) or, as to Buyer, by the rules and
regulations of the Nasdaq National Market, prior to the Closing Date, no
disclosure (whether or not in response to an inquiry) of the subject matter of
this Agreement shall be made by any party hereto unless approved by both parties
prior to release, provided that such approval shall not be unreasonably
withheld.

     6.6 Contractual Consents.

          (a) The Seller will promptly apply for or otherwise seek and use its
     reasonable commercial efforts to obtain, all consents and approvals
     required to be obtained by it for the consummation of the transactions
     contemplated hereby, and the Seller shall use its reasonable commercial
     efforts to obtain all required consents, waivers, or approvals under any of
     the agreements, contracts, licenses, or leases of the Seller in order to
     preserve for the Buyer the benefits of the Business associated with the
     Acquired Assets. Seller will list all of the supplier and similar
     agreements that the Business currently has in force on the date of this
     Agreement, and Seller will use its reasonable commercial efforts to effect
     assignments of all such agreements, except those identified in writing by
     Buyer as not material to the Business.

          (b) Buyer will use its reasonable commercial efforts to obtain all
     consents and approvals required to be obtained it for the consummation of
     the transactions contemplated hereby.

     6.7 Legal Conditions to Acquisition. The Buyer and the Seller shall take
all reasonable actions necessary to comply promptly with all legal requirements
which may be imposed on such party with respect to this Agreement and the
transactions contemplated hereby and will promptly cooperate with and furnish
information to any other party hereto in connection with any such requirements
imposed upon such other party in connection herewith. Each party will take all
reasonable actions to obtain (and will cooperate with the other parties in
obtaining) any consent, authorization, order or approval of, or any
registration, declaration, or filing (including any filing required under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the
regulations promulgated thereunder (the "HSR Act")) with, or an exemption by,
any governmental entity, or other third party, required to be obtained or made
by such party or its subsidiaries in connection with this Agreement and
consummating the transactions contemplated hereby or the taking of any action
contemplated thereby or by this Agreement.

     6.8 Additional Documents and Further Assurances. Except to the extent
described otherwise, each of the parties to this Agreement shall use its
commercially reasonable efforts to effectuate the transactions contemplated
hereby and to fulfill and cause to be fulfilled the conditions to closing under
this Agreement. Each party hereto, at the request of another party hereto, shall
execute and deliver such other instruments and do and perform such other acts
and things as may be reasonably necessary or desirable for effecting completely
the consummation of the transactions contemplated by this Agreement.

                                       23
<PAGE>

     6.9 Notification of Certain Matters. The Seller shall give prompt notice to
Buyer, and Buyer shall give prompt notice to the Seller, of (i) the occurrence
or non-occurrence of any event, the occurrence or non-occurrence of which is
likely to cause any representation or warranty of the Seller or the Buyer, as
the case may be, contained in this Agreement to be untrue or inaccurate in any
material respect at or prior to the Closing Date except as contemplated by this
Agreement (including the Seller Schedules) and (ii) any failure of the Seller or
Buyer, as the case may be, to comply with or satisfy in any material respect any
covenant, condition or agreement to be complied with or satisfied by it
hereunder; provided, however, that the delivery of any notice pursuant to this
Section 6.9 shall not limit or otherwise affect any remedies available to the
party receiving such notice.

     6.10 Payment of Trade and Other Creditors. The Seller shall comply with its
obligation to satisfy amounts due to trade and other creditors of the Seller to
the extent required prior to closing. The Business shall continue to pay on a
current basis and shall be responsible for all obligations included in the
Assumed Liabilities up to the Closing Date.

     6.11 No Solicitation. From and after the date of this Agreement until the
earlier to occur of the Closing Date or termination of this Agreement pursuant
to its terms, (a) Seller will not, and the Seller will instruct its respective
directors, officers, employees, representatives, investment bankers, agents, and
affiliates not to, directly or indirectly (i) solicit or encourage submission of
any Acquisition Proposal (as defined herein) by any person, entity, or group
(other than Buyer and its Affiliates (as defined herein), agents, and
representatives) or (ii) participate in any discussions or negotiations with, or
disclose any non-public information concerning the Seller to, or afford access
to the properties, books, or records of the Seller to, or otherwise assist or
facilitate, or enter into any agreement or understanding with, any person,
entity, or group (other than Buyer and its Affiliates, agents, and
representatives) in connection with any Acquisition Proposal with respect to the
Seller. For purposes of this Section 6.11(a), an "Acquisition Proposal" means
any proposal or offer relating to any merger, consolidation, sale or license of
substantial assets or similar transactions involving the Business or the
Acquired Assets (other than sales or licenses of software in the ordinary course
of business or as permitted by this Agreement). The Seller will immediately
cease any and all existing activities, discussion, or negotiations with any
parties conducted heretofore with respect to the foregoing.

          (b) Buyer will not, and the Buyer will instruct its respective
     directors, officers, employees, representatives, investment bankers,
     agents, and affiliates not to, directly or indirectly (i) solicit or
     encourage submission of any Acquisition Proposal (as defined herein) by any
     person, entity, or group (other than Seller and its Affiliates (as defined
     herein), agents, and representatives) or (ii) participate in any
     discussions or negotiations with, or disclose any non-public information
     concerning Buyer to, or afford access to the properties, books, or records
     of Buyer to, or otherwise assist or facilitate, or enter into any agreement
     or understanding with, any person, entity, or group (other than Seller and
     its Affiliates, agents, and representatives) in connection with any
     Acquisition Proposal with respect to the Buyer. For purposes of this
     Agreement, an "Acquisition Proposal" means any proposal or offer relating
     to any merger, consolidation, sale or license of substantial assets or
     similar transactions involving any business similar to the Business or any
     assets similar to the

                                       24
<PAGE>

     Acquired Assets (other than sales or licenses of software in the ordinary
     course of business or as permitted by this Agreement). The Buyer will
     immediately cease any and all existing activities, discussion, or
     negotiations with any parties conducted heretofore with respect to the
     foregoing.

     For purposes of this Section, an "Affiliate" means any entity or person
that, directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with the particular party.

     6.12 Non-Competition.

          (a) For a period of three (3) years from and after the Closing Date
     ("Non- Competition Period"), Seller shall not directly or indirectly,
     without the prior written consent of Buyer, engage anywhere in the
     Restricted Territory, or have any ownership interest in (except for
     ownership of one percent (1%) or less of any entity whose securities have
     been registered under the Securities Act or the Exchange Act), or
     participate in the financing, operation, management or control of, any
     firm, partnership, corporation, entity or business that engages or
     participates in a "Seller Competing Business Purpose". The term,
     "Restricted Territory" shall mean each and every country, province, state,
     city or other political subdivision of the world. The term "Seller
     Competing Business Purpose" means the Business as conducted at the Closing
     Date and the manufacture of print circuit board assemblies. Notwithstanding
     the foregoing, it is expressly understood and agreed that nothing contained
     in this Section 6.12(a) shall operate so as to (i) prevent Seller from
     continuing to conduct its business as currently conducted and as currently
     proposed to be conducted related to (w) the sale and distribution of
     semiconductors and other electronic components, disk drives and other
     computer components, (x) the manufacture of personal computers, servers,
     memory storage systems, RAID systems, (y) value-added activities related to
     semiconductors and computer products, and (z) systems integration
     activities; or (ii) otherwise restrict the ability of Seller to contact and
     engage in business transactions with current customers of and supplier to
     the Business so long as such contacts or transactions are not related to
     the conduct of the Business by Buyer after the Closing.

          (b) Seller acknowledges and agrees that its covenants and obligations
     with respect to non-competition relate to special, unique and extraordinary
     matters and that a violation of any of the terms of such covenants and
     obligations will cause irreparable injury for which adequate remedies are
     not available at law. Therefore, Seller agrees that Buyer will be entitled
     to an injunction, restraining order or such other equitable relief as a
     court of competent jurisdiction may deem necessary or appropriate to
     restrain Seller from committing any violation of the covenants set forth in
     this Section 6.12.

     6.13 Non-Solicitation of Employees.

          (a) Neither party shall, for a period of two (2) years following the
     Closing Date, for its own account or jointly with another, directly or
     indirectly, for or on behalf of any individual, partnership, corporation or
     other legal entity, as principal, agent or otherwise solicit or induce, or
     in any manner attempt to solicit, any person employed by the other party to
     leave such employment,

                                       25
<PAGE>

     whether or not such employment is pursuant to a written contract and
     whether or not such employment is at will, or hire any person who has been
     employed by the other party at any time during the six (6) month period
     preceding such hiring.

          (b) Each party recognizes the importance of the covenant not to
     solicit contained in this subsection (a) above and acknowledges that the
     restrictions imposed herein are: (i) reasonable as to scope, time and area;
     (ii) necessary for the protection of its legitimate business interests,
     including without limitation, trade secrets, goodwill, and its relationship
     with customers and suppliers; (iii) not unduly restrictive of its rights;
     and (iv) supported by adequate consideration. Each party acknowledges and
     agrees that the covenants not to compete contained in this Section 6.13 are
     essential elements of this Agreement and that but for these covenants, the
     other party would not have agreed to enter into this Agreement. Such
     covenants shall be construed as agreements independent of any other
     provision of this Agreement.

     6.14 Continuing Customer Relationship. Except with respect to Excluded
Excess Inventory (as defined herein) and items identified as being treated like
Excluded Excess Inventory, all of which are subject to the treatment described
in Section 6.16(b)(ii) hereof, Buyer agrees, in good faith to consider Seller as
a preferred products and services provider and, to the extent that Buyer, in its
judgment deems it commercially reasonable to do so, agrees to offer Seller the
opportunity to satisfy Buyer's needs for such products and services as Seller
currently provides the Business.

     6.15 Employment Matters. Buyer hereby represents, covenants and warrants
that after the Closing Date, Buyer will not take any action to trigger liability
under the Worker Adjustment and Retraining Notification (hereinafter "WARN")
Act, 29 U.S.C. (S)(S) 2101-09, for the Seller. Buyer hereby further agrees to
indemnify and hold Seller harmless from any claims, demands, deficiencies,
penalties, assessments, executions, judgments, or recoveries for any and all
claims due to any actual or alleged violation of the WARN Act caused by Buyer's
actions or failures to act after the Closing Date. Except as provided
immediately above, Buyer shall be under no duty whatsoever to hire any employee
or group of employees of Seller. Effective as of the Closing Date, Buyer may
offer to hire such persons as are necessary and qualified to operate its
business. All terms, including benefits, of each offer to such person shall be
determined by Buyer in its sole discretion and nothing herein shall constitute
an agreement to assume or be bound by any previous or existing agreement between
Seller and any of Seller's employees or a guaranty that any employee of Seller,
to whom an offer of employment may be made, shall be entitled to remain in the
employment of Buyer for a specified period of time. An employee of the Business
to whom an offer of employment is made by Buyer and who accepts such offer shall
become an employee of Buyer on the day such person reports to work for the
Buyer. Such person who is unable to report to work for Buyer on the Closing Date
due to illness, injury or other reason shall remain an employee of Seller until
such person reports to work for Buyer. Seller shall remain solely responsible
for all salaries, wages, benefits (other than up to 80 hours of accrued vacation
per employee and other than accrued sick pay, which Buyer is assuming),
severance arrangements and all other terms of employment for (a) each person who
may become an

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<PAGE>

employee of Buyer accruing prior to the date such person becomes an employee of
Buyer and (b) each employee of the Business who does not become an employee of
Buyer accruing at any time.

     6.16 Treatment of Other Matters.

          (a) HSR Matters. Each party agrees to make the appropriate filing
     pursuant to the HSR Act with respect to the transactions contemplated by
     this Agreement as soon as reasonably possible after the date hereof, but in
     no case later than seven business days of the date hereof, and to remit
     one-half of the required filing fee with such filing. Each party further
     agrees to supply as promptly as practicable to the appropriate governmental
     authorities any additional information and documentary material that may be
     requested pursuant to the HSR Act.

          (b) Excluded Excess Inventory. (i) Schedules 6.16(b)(i)(1) and (2),
     respectively, set forth all of Sellers "Excess Inventory With MRP"
     ($2,287,863) and "Excess Inventory Without MRP" ($2,433,579), which,
     aggregated, are carried on the books of Seller at $4,721,442 as of April
     19, 1999, subject to changes between that date and the Closing in the
     ordinary course of business. After excluding amounts for Netro of $165,287
     (with MRP) and $565,154 (without MRP), the net amount of Excluded Excess
     Inventory is $3,991,001. If either party subsequently should believe that
     this net amount is incorrect, the parties agree to work together in good
     faith to reach an agreement with respect to the difference. If, between the
     date hereof and the Closing, Seller shall receive a purchase order with
     respect to such excess inventory, or execute a written contract with a
     customer pursuant to which such customer agrees to accept such excess
     inventory, then such excess inventory shall be an Acquired Asset for
     purposes of this Agreement and shall be transferred to Buyer at Closing,
     with a corresponding dollar-for-dollar reduction to appropriate amounts
     above. All other such excess inventory shall be considered "Excluded Excess
     Inventory" (and valued net of the reduction in the previous sentence) for
     purposes of this Agreement and shall not be transferred to Buyer at
     Closing.

               (ii) Notwithstanding the provisions of subsection (i) above,
          Buyer agrees (x) to store, maintain, insure, and protect the Excluded
          Excess Inventory in the same manner as it does its own inventory at
          the Quadrus facility and at its expense; (y) to use its commercially
          diligent efforts to sell such Excluded Excess Inventory; and (z)
          dedicate one regular employee whose primary function shall be to
          attend to the matters described in these subsections (x) and (y).
          Buyer agrees that, in the event it has a use for any of the Excluded
          Excess Inventory in any new or current product, it will use (or make a
          good faith effort to use) such inventory before procuring such
          inventory or substitutes from third parties and promptly (and, in no
          case, later than 30 days after receipt of such inventory) pay Seller
          the cost of such inventory. For the purposes of this Section 6.16,
          "the cost of such inventory" shall be the cost of such inventory to
          Seller, provided, however, that if Seller's cost is above market,
          Buyer will allow Seller two business days to agree to match the market
          price, in which case, "the cost of such inventory" shall be the market
          price. Buyer and Seller agree to review the Excluded Excess Inventory
          situation quarterly from the date of Closing and, upon the first
          anniversary of the Closing, Buyer will have the right to require
          Seller to remove any and all such remaining Excluded Excess Inventory
          (such inventory, the "Removed Excluded Excess Inventory").

                                       27
<PAGE>

          Upon the first anniversary of the Closing, Buyer and Seller will
          conduct a physical inventory of the Excluded Excess Inventory and if
          any of such Excluded Excess Inventory should be determined to be
          missing, Buyer will promptly pay Seller the cost of such inventory.

          (c) Litigation and Other Third-Party Disputes. (i) Netro Arbitration
     Matters. Seller's rights in and to any settlement with respect to the Netro
     Arbitration, as more fully described in Schedule 3.14 on the Disclosure
     Schedule, shall be transferred to Buyer. In the event that Buyer suffers
     any Damages (as defined in Section 8.1(c) hereof) or the final unappealable
     award is less than $956,000, subject to adjustment in such arbitration,
     Seller shall pay Buyer such difference and/or indemnify and hold Buyer
     harmless with respect thereto, in which case Seller's indemnification
     obligations contained in Article VIII of this Agreement are inapplicable.

               (ii) Fore Systems, Inc. Matters. The Fore Systems, Inc.
          litigation matter, as more fully described in Schedule 3.14 of the
          Disclosure Schedule, is not an Acquired Asset and shall not be an
          Account Receivable for purposes of the Draft Closing Date Schedule.
          Buyer agrees to render such assistance as Seller may reasonably
          request to prosecute this matter to conclusion, with reimbursement of
          time and expenses to be made at a fair rate to be agreed upon at the
          time.

               (iii) CoinWorld, Inc. The CoinWorld, Inc. dispute, as more fully
          described in Schedule 3.14 of the Disclosure Schedule, shall not be an
          Assumed Liability for purposes of this Agreement. Buyer agrees to
          render such assistance as Seller may reasonably request to prosecute
          this matter to conclusion, with reimbursement of time and expenses to
          be made at a fair rate to be agreed upon at the time.

               (iv) Capsco, Enhanced Cable, Advanced Hardware Technology, KBM,
          AlliedSPEC, DeltaPac, Jayco, Kalex, Landsburg, Meridan, Nanya,
          Paperpn, Prepro, and Wldwiser Inventory Disputes. The Capsco, Enhanced
          Cable, Advanced Hardware Technology, KBM, AlliedSPEC, DeltaPac, Jayco,
          Kalex, Landsburg, Meridan, Nanya, Paperpn, Prepro, and Wldwiser
          Inventory Disputes shall not be an Assumed Liability for purposes of
          this Agreement. Buyer agrees to render such assistance as Seller may
          reasonably require to resolve these supplier disputes, as more fully
          described in Schedule 3.3(b) of the Disclosure Schedule. In the event
          the supplier prevails, Seller agrees to purchase the inventory that
          was the subject of the dispute. Such inventory, when purchased and
          shipped by Seller to Buyer, shall be treated in the manner specified
          in Section 6.16(b)(ii) for Excluded Excess Inventory. In the event
          that Buyer suffers any Damages (as defined in Section 8.1(c) hereof),
          Seller shall indemnify and hold Buyer harmless with respect thereto,
          in which case Seller's indemnification obligations contained in
          Article VIII of this Agreement are inapplicable. Seller shall
          reimburse Buyer for its time and expenses at a fair rate to be agreed
          upon at the time.

          (d) Excluded Bone-Pile Inventory. Schedule 6.16(d) sets forth all of
     Seller's "Excess Bone-Pile Inventory" (carried on Seller's books as of as
     of April 19, 1999 at $825,121, subject to changes between that date and the
     Closing in the ordinary course of business). If, between the date hereof
     and the Closing,

                                       28
<PAGE>

     Seller shall recover, or Buyer, using its reasonable efforts shall debug,
     any of such Excess Bone-Pile Inventory, then such excess inventory shall be
     an Acquired Asset for purposes of this Agreement and shall be transferred
     to Buyer at Closing, with a corresponding dollar-for-dollar reduction to
     appropriate amounts above. All other such excess inventory shall be
     considered "Excluded Bone-Pile Inventory" (and valued net of the reduction
     in the previous sentence) and shall be treated in the manner specified in
     Section 6.16(b)(ii) for Excluded Excess Inventory.

          (e) Other Excluded Amounts. Schedule 6.16(e)(i) sets forth all of
     Seller's "Amounts Paid in Prior Months Not Billed to Customers" and
     Schedule 6.16(e)(ii) sets forth all of Seller's "Prior Month Billings
     Without Customers" (collectively carried on Seller's books as of March 31,
     1999 at $189,616, subject to changes between that date and the Closing in
     the ordinary course of business). If, between the date hereof and the
     Closing, Seller shall shall receive a purchase order with respect to such
     tools/fixtures, or execute a written contract with a customer pursuant to
     which such customer agrees to accept such tools/fixtures, then such excess
     tools/fixtures shall be an Acquired Asset for purposes of this Agreement
     and shall be transferred to Buyer at Closing, with a corresponding dollar-
     for-dollar reduction to appropriate amount above. All other such excess
     tools/fixtures shall be considered "Other Excluded Amounts" (and valued net
     of the reduction in the previous sentence) and shall be treated valued net
     of the reduction in the previous sentence) and shall be treated in the
     manner specified in Section 6.16(b)(ii) for Excluded Excess Inventory.

          (f) Excluded 90-Day A/R. Schedule 6.16(f) will set forth, as of the
     Closing, all of Seller's accounts receivable which have aged more than 90
     days from their respective invoice dates (the "90-Day A/R"), and all of
     which are transferred to Buyer at the Closing. To the extent that, between
     the Closing and the date which is 90 days later, Buyer shall not have
     collected any of the 90-Day A/R's, Buyer will have the right to require
     Seller to repurchase any and all such remaining 90-Day A/R's (the "Excluded
     90-Day A/R") and Seller shall repurchase the Excluded 90-Day A/R at face
     value (the "Repurchased 90-Day A/R"). This repurchase obligation shall not
     be subject to the limitation contained in Section 8.1(f) of this Agreement.

     6.17 Profit Sharing. To the extent that Buyer earns a profit on its
operations of the Business from the Closing Date through and including June 30,
1999, Buyer will reimburse Seller for any Operating Losses Seller may incur with
respect to its operations of the Business from April 1, 1999 through and
including the Closing Date. For purposes of this Section 6.17, "Operating
Income/Losses" will be calculated consistently with Seller's accounting
practices and policies employed prior to the Closing Date by Seller, and in the
event of any disagreement, the dispute

                                       29
<PAGE>

mechanisms provided in Section 2.5(b) will apply. Corporate overhead of Buyer
and Seller, for the respective periods, will not be taken into account in this
calculation, however, in the event Buyer and/or Seller has capital employed in
the Business during their respective operating periods, interest will be allowed
at the rate of 7.20%.

                                   ARTICLE VII

                       CONDITIONS TO OBLIGATIONS TO CLOSE

     7.1 Conditions to Obligations of Each Party. The respective obligations of
each party to this Agreement shall be subject to the satisfaction at or prior to
the Closing of the following conditions:

          (a) Government Approvals. All applicable waiting periods (and any
     extensions thereof) under the HSR Act shall have expired or otherwise been
     terminated, and all authorizations, consents, orders, or approvals of, or
     declarations or filings with, or expiration of waiting periods imposed by,
     any governmental entity necessary for the consummation of the transactions
     contemplated by this Agreement, shall have been obtained.

          (b) No Injunctions or Restraints; Illegality. No temporary restraining
     order, preliminary or permanent injunction or other order issued by any
     court of competent jurisdiction or other legal or regulatory restraint or
     prohibition preventing the consummation of the transactions contemplated
     hereby shall be in effect.

     7.2 Additional Conditions to Obligations of the Seller. The obligations of
the Seller to consummate the transactions contemplated by this Agreement shall
be subject to the satisfaction at or prior to the Closing of each of the
following conditions, any of which may be waived, in writing, exclusively by the
Seller:

          (a) Representations, Warranties, and Covenants. The representations
     and warranties of Buyer contained in this Agreement shall be true and
     correct in all material respects on the Closing Date except to the extent
     such representations and warranties address matters only as of a particular
     date (which shall remain true and correct as of such date), and the Buyer
     shall have performed and complied in all material respects with all
     covenants including the payment of the Consideration, obligations, and
     conditions of this Agreement required to be performed and complied with by
     it as of the Closing Date.

          (b) Certificate of Buyer. The Buyer shall have provided the Seller
     with a certificate executed on behalf of Buyer by its President, or any
     Vice President, and its Chief Financial Officer to the effect that as of
     the Closing Date:

               (i) all representations and warranties made by the Buyer under
          this Agreement are true and complete in all material respects; and

                                       30
<PAGE>

               (ii) all covenants, obligations, and conditions of this Agreement
          to be performed by the Buyer on or before such date have been so
          performed in all material respects.

          (c) Opinion of Counsel. Seller shall have received an opinion,
     addressed to it and dated the Closing Date, of Dorsey & Whitney, counsel to
     the Buyer, substantially in the form set forth in Exhibit D.

     7.3 Additional Conditions to the Obligations of Buyer. The obligations of
Buyer to consummate the transactions contemplated by this Agreement shall be
subject to the satisfaction at or prior to the Closing of each of the following
conditions, any of which may be waived, in writing, exclusively by Buyer:

          (a) Representations, Warranties, and Covenants. The representations
     and warranties of the Seller contained in this Agreement shall be true and
     correct in all material respects on the Closing Date, except to the extent
     such representations and warranties address matters only as of a particular
     date (which shall remain true and correct as of such date) and the Seller
     shall have performed and complied in all material respects with all
     covenants, obligations, and conditions of this Agreement required to be
     performed and complied with by it as of the Closing Date.

          (b) Certificate of the Seller. Buyer shall have been provided with
     certificates executed on behalf of the Seller by its respective President,
     or any Vice President, and Chief Financial Officer to the effect that as of
     the Closing Date:

               (i) all representations and warranties made by such entity under
          this Agreement are true and complete in all material respects; and

               (ii) all covenants, obligations, and conditions of this Agreement
          to be performed by such entity on or before such date have been so
          performed in all material respects.

          (c) Opinion of Counsel. Buyer shall have received an opinion,
     addressed to it and dated the Closing Date, of Wilson Sonsini Goodrich &
     Rosati, P.C., counsel to the Seller, substantially in the form set forth in
     Exhibit E.

          (d) Assignment of Facility, Equipment Lessors, Customer and Supplier
     Contracts. All consents necessary to assign the Assumed Leases, as well as
     the customer and material supplier contracts to Buyer shall have been
     obtained.

                                  ARTICLE VIII

           SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION

     8.1 Indemnification.

                                       31
<PAGE>

          (a) Indemnification by the Seller. Subject to the qualifications and
     limitations in this Section 8.1, if the Closing is consummated, Seller
     shall indemnify and defend and hold Buyer, its subsidiaries, directors,
     officers, agents, and other Affiliates harmless against and with respect
     to, any and all Damages (as defined in subsection 8.1(c) below) incurred by
     Buyer, its subsidiaries, directors, officers, agents or other Affiliates as
     a result of any of the following:

               (i) any inaccuracy or misrepresentation by Seller in, or breach
          of any warranty of Seller in, this Agreement or the related documents
          executed and delivered by Seller in connection with this Agreement
          (the "Operative Documents");

               (ii) any breach or failure by Seller to perform any of its
          covenants or agreements under this Agreement or any of the other
          Operative Documents; and

               (iii) any liability of the Business arising exclusively from
          events occurring prior to the Closing Date which are not expressly
          being assumed by Buyer hereunder.

          (b) Indemnification by Buyer. Subject to the qualifications and
     limitations in this Section 8.1, if the Closing is consummated, Buyer shall
     indemnify and defend and hold Seller and its directors, officers, agents,
     and other Affiliates harmless against and with respect to, any and all
     Damages (as defined in subsection 8.1(c) below) incurred by Seller or any
     of its directors, officers, agents or other Affiliates as a result of any
     of the following:

               (i) any inaccuracy or misrepresentation by Buyer in, or breach of
          any warranty of Buyer in, this Agreement or the other Operative
          Documents;

               (ii) any breach or failure by Buyer to perform any of its
          covenants or agreements under this Agreement or any of the other
          Operative Documents; and

               (iii) any Assumed Obligation.

          (c) Damages. For purposes of this Section 8.1, "Damages" means all
     demands, claims, claims for reimbursement, actions or causes of action,
     assessments, losses, damages, costs, expenses, liabilities, deficiencies,
     judgments, awards, fines, sanctions, penalties, charges and amounts paid in
     settlement, whether civil, criminal or administrative in nature, including
     the reasonable costs, fees and expenses of attorneys, experts, accountants,
     appraisers, consultants, witnesses, investigators and agents and all such
     costs, fees and expenses incurred in defending against any of the foregoing
     or in enforcing this Agreement or the Operative Documents. Notwithstanding
     the foregoing definition, when used with reference to amounts recoverable
     as the result of any breach of a representation, warranty or covenant
     contained in this Agreement or any other Operative Document, Damages shall
     not include amounts recoverable solely as lost profits, incidental damages,
     indirect damages, special damages, punitive damages or consequential
     damages unless such damages arise from a third-party claim.

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<PAGE>

          (d) Procedure for Indemnification. The procedure for indemnification
     shall be as follows:

               (i) The party claiming indemnification ("Claimant") shall, within
          thirty (30) days after its discovery of any claim for which
          indemnification will be sought as provided in this Agreement (the
          "Claim"), give notice to the party from whom indemnification is sought
          ("Indemnitor") of its Claim, specifying in reasonable detail the
          factual basis for the Claim and, to the extent known, the amount of
          the Claim. Notwithstanding the foregoing, the failure by Claimant to
          provide notice of any Claim within the period specified, or any delay
          in providing such notice, shall not affect or impair the obligations
          of Indemnitor hereunder, except and only to the extent that Indemnitor
          has been adversely affected by such failure or delay.

               (ii) With respect to Claims between the parties, following
          receipt of notice from Claimant of a Claim, Indemnitor shall have
          sixty (60) days to make any investigation of the Claim that Indemnitor
          deems necessary or desirable. For purposes of this investigation,
          Claimant agrees to make available to Indemnitor and its authorized
          representatives the information relied upon by Claimant to
          substantiate the Claim. If Claimant and Indemnitor cannot agree as to
          the validity and amount of the Claim within the sixty (60) day period
          (or any mutually agreed upon extension thereof), Claimant may seek
          appropriate legal remedy, subject to the provisions of Section 8.3.

               (iii) With respect to any Claim by a third party as to which
          Claimant is entitled to indemnification hereunder, Indemnitor shall
          have the right, exercisable by written notice to Claimant within 30
          days after receipt of written notice from Claimant of the commencement
          or assertion of any such Claim, at its own expense to participate in
          or assume control of the defense of the Claim, and Claimant shall
          cooperate fully with Indemnitor, with the right to reimbursement for
          actual out-of-pocket expenses incurred by Claimant as a result of any
          such request by the Indemnitor. If Indemnitor does not elect to assume
          control or otherwise participate in the defense of any third party
          Claim within thirty (30) days of its receipt of notice of the Claim
          (or any extended period mutually agreed upon in writing by the
          parties), Claimant shall have the right to undertake the defense,
          compromise or settlement of the Claim for the account of Indemnitor
          subject to the right of Indemnitor, at its expense, to assume the
          defense of the Claim at any time prior to final settlement, compromise
          or determination thereof. In no event shall Indemnitor be liable or
          otherwise have any obligation with respect to any settlement,
          compromise or determination of any Claim agreed to by Claimant without
          the prior written consent of Indemnitor (which consent will not be
          withheld unreasonably).

               (iv) The defending party shall have reasonable access to the
          books, records and personnel which are pertinent to the defense and
          which are in control of the other party. The parties agree to furnish
          such records, information and testimony, and attend such conferences,
          discovery proceedings, hearings, trials and appeals, as may be
          reasonably requested by the other party in connection with defending
          any third party Claim.

                                       33
<PAGE>

          (e) Limitations and Conditions Applicable to Buyer. The right of Buyer
     to obtain indemnification from Seller pursuant to Section 8.1(a) of this
     Agreement is subject to the following limitations:

               (i) Buyer shall not be entitled to indemnification from Seller
          pursuant to Section 8.1(a) until the aggregate Damages for which
          Seller is liable under Section 8.1(a) exceed $150,000, whereupon Buyer
          shall be entitled to indemnification by Seller for all such Damages
          thereafter, and for $75,000 of the first $150,000 of such Damages (and
          Buyer shall be responsible for the other $75,000 of the first $150,000
          of such Damages).

               (ii) Buyer shall not be entitled to indemnification from Seller
          pursuant to Section 8.1(a) for that amount in excess of 35% of the
          purchase price.

               (iii) No Claim shall be brought by Buyer against Seller under
          Section 8.1(a) unless notice in writing of such Claim shall have been
          given to Seller on or prior to 5:00 p.m. Pacific Standard Time on the
          second anniversary of the Closing Date, except for claims based on an
          inaccuracy or misrepresentation by Seller with respect to the
          representations or warranties made in (i) Section 3.8 hereof with
          respect to title to the Assets for which notice in writing of any such
          claim must be given to Seller on or prior to the expiration of the
          applicable statute of limitations period for any such claims, or (ii)
          in Section 3.12 with respect to environmental matters for which notice
          in writing of any such claim must be given to seller on or prior to
          5:00 p.m. Pacific Standard time on the fifth anniversary of the
          Closing Date. Claims may be brought against Seller as to any Damages
          (or a potential claim by an appropriate party) asserted in good faith
          prior to such dates.

               (iv) Buyer shall not be entitled to recover Damages in respect of
          any Claim or otherwise obtain reimbursement or restitution more than
          once with respect to any claim hereunder. For any matter for which an
          adjustment has been made subject to Section 2.5, there will be no
          indemnification for such matter for the amount of the adjustment.

               (v) In calculating the amount of any indemnifiable Damages, there
          shall be deducted any actual tax benefit realized by the Indemnified
          Person.

               (vi) The Buyer shall first seek recovery from any Damages from
          any applicable insurance.

          (f) Limitations and Conditions Applicable to Seller. The right of
     Seller to obtain indemnification from Buyer pursuant to Section 8.1(b) of
     this Agreement is subject to the following limitations:

               (i) Seller shall not be entitled to indemnification from Buyer
          pursuant to Section 8.1(b) until the aggregate Damages for which Buyer
          is liable under Section 8.1(b) exceed $150,000, whereupon Seller shall
          be entitled to indemnification by Buyer for all such Damages
          thereafter, and for $75,000 of the first $150,000 of such Damages (and
          Seller will be responsible for the other $75,000 of the first $150,000
          of such Damages).

                                       34
<PAGE>

               (ii) Seller shall not be entitled to indemnification from Buyer
          pursuant to Section 8.1(b) for that amount of its aggregate Damages
          for which Buyer is liable under Section 8.1(b) which is in excess of
          35% of the purchase price; provided, however, that the above
          limitation shall not apply as to Damages arising from failure by the
          Buyer to pay the Purchase Price or to pay or discharge of the Assume
          Liabilities.

               (iii) No Claim shall be brought by Seller against Buyer under
          Section 8.1(b) unless notice in writing of such Claim shall have been
          given to Buyer on or prior to 5:00 p.m. Pacific Standard Time on the
          second anniversary of the Closing Date, but Claims may be brought
          against Buyer as to any Damages (or a potential claim by an
          appropriate party) asserted in good faith prior to such date.

               (iv) Seller shall not be entitled to recover Damages in respect
          of any Claim or otherwise obtain reimbursement or restitution more
          than once with respect to any claim hereunder. For any matter which an
          adjustment has been made subject to Section 2.5, there will be no
          indemnification for such matter for the amount of the adjustment.

               (v) In calculating the amount of any indemnfiable Damages, there
          shall be deducted any actual tax benefit realized by the Indemnified
          Party.

               (vi) The Seller shall first seek recovery for any Damages from
          any applicable insurance.

          (g) Remedies Exclusive. Except for the remedies provided in Section
     6.16(c)(i) and (iv), the remedies provided in this Section 8.1 shall be
     exclusive as to any Claims by a party under this Agreement or any other
     Operative Document or arising out of the transactions provided for herein
     and therein and shall preclude assertion by any party of any other rights
     or the seeking of any other remedies against another party; provided,
     however, that nothing in this Section 8.1(g) shall limit rights or remedies
     expressly provided for in this Agreement in Section 6.12 (non-competition),
     rights or remedies for fraud, or rights or remedies which, as a matter of
     applicable law or public policy, cannot be limited or waived.

     8.2 Arbitration. Any controversy involving a claim by an indemnified party
pursuant to this Article VIII shall be finally settled by arbitration in the
County of Santa Clara, California in accordance with the then current Commercial
Arbitration Rules of the American Arbitration Association; and judgment upon the
award rendered by the arbitrator may be entered in any court having jurisdiction
thereof. Such arbitration shall be conducted by an arbitrator chosen by mutual
agreement of Buyer and Seller. Failing such agreement, the arbitration shall be
conducted by three independent arbitrators, none of whom shall have any
competitive interests with Buyer or Seller. Buyer shall choose one such
arbitrator, Seller shall choose one such arbitrator, and such two arbitrators
shall mutually select a third arbitrator. Any decision of two such arbitrators
shall be binding on Buyer and Seller. Each party shall pay its own costs and
expenses (including counsel

                                       35
<PAGE>

fees) of any such arbitration except that the arbitrator can compel one party to
pay all or a portion of the other party's costs and expenses.

                                   ARTICLE IX

                        TERMINATION, AMENDMENT AND WAIVER

     9.1 Termination. Except as provided in Section 9.2 below, this Agreement
may be terminated at any time prior to the Closing Date:

          (a) by mutual consent of Buyer and the Seller;

          (b) by Buyer or the Seller if (i) the Closing Date has not occurred by
     June 30, 1999 (provided that the right to terminate this Agreement under
     this clause 9.1(b)(i) shall not be available to any party whose willful
     failure to fulfill any obligation hereunder has been the cause of, or
     resulted in, the failure of the Closing Date to occur on or before such
     date); (ii) there shall be a final nonappealable order of a federal, state,
     or foreign court in effect preventing consummation of the transactions
     contemplated hereby; or (iii) there shall be any statute, rule, regulation
     or order enacted, promulgated or issued or deemed applicable hereto by any
     Governmental Entity that would make consummation of the transactions
     contemplated hereby illegal;

          (c) by Buyer if there shall be any action taken, or any statute, rule,
     regulation or order enacted, promulgated or issued or deemed applicable
     hereto, by any Governmental Entity, which would prohibit Buyer's ownership
     or operation of the Business, which prohibition cannot reasonably be
     addressed by allowing Seller to retain the affected portion of the
     Business;

          (d) by Buyer if it is not in material breach of its obligations under
     this Agreement and there has been a breach of any representation, warranty,
     covenant or agreement contained in this Agreement on the part of the Seller
     and as a result of such breach the conditions set forth in Section 7.3(a)
     would not be satisfied; provided, however, that if such breach is curable
     by the Seller within ten days through the exercise of its reasonable
     efforts, then for so long as the Seller continues to exercise such
     reasonable efforts Buyer may not terminate this Agreement under this
     Section 9.1(d) unless such breach is not cured within ten days (but no cure
     period shall be required for a breach which by its nature cannot be cured);

          (e) by Buyer if there has been a material adverse change in the
     Business that reduces the book value of the Business by more than 10% of
     the Purchase Price; or

          (f) by the Seller if neither Seller nor Buyer are in material breach
     of their obligations under this Agreement and there has been a breach of
     any representation, warranty, covenant or agreement contained in this
     Agreement on the part of Buyer and as a result of such breach the
     conditions set forth in Section 7.2(a), would not then be satisfied;
     provided, however, that if such breach is curable by Buyer within ten days
     through the exercise of its reasonable best efforts, then for so long as
     Buyer continues to exercise such reasonable best efforts

                                       36
<PAGE>

     the Seller may not terminate this Agreement under this Section 0 unless
     such breach is not cured within ten days (but no cure period shall be
     required for a breach which by its nature cannot be cured).

          (g) In the event that this Agreement is terminated by Buyer as a
     result of "force majeure" events that lead to Buyer's inability to obtain
     financing, Buyer shall pay Seller a termination fee in the amount of
     $500,000.00 in cash within ten (10) business days of such termination. If
     this Agreement is terminated by Buyer for any other reason other than those
     specified in subsections (a) through (d) above, Buyer shall pay Seller a
     termination fee in the amount of $2,500,000 in cash within ten (10)
     business days of such termination. This termination fee shall be the sole
     and exclusive remedy of Seller for such termination by Buyer. For the
     purposes of this subsection (g), the term "force majeure" shall mean an act
     of God, riot, war, civil unrest, flood, earthquake, or other cause beyond
     such party's reasonable control that results in significant adverse effects
     on the debt and equity capital markets.

     9.2 Effect of Termination. In the event of termination of this Agreement as
provided in Section 9, this Agreement shall forthwith become void and, there
shall be no liability or obligation on the part of Buyer or the Seller, or their
respective officers, directors or stockholders, provided that (i) the provisions
of Section 6.4 (Confidentiality) and this Article IX shall remain in full force
and effect and survive any termination of this Agreement, and (ii) the
termination of this Agreement shall not relieve any party from any liability for
any willful and knowing breach of this Agreement.

     9.3 Amendment. Except as is otherwise required by applicable law, prior to
the Closing, this Agreement may be amended by the parties hereto at any time by
execution of an instrument in writing signed by the Buyer and the Seller. Except
as is otherwise required by applicable law, after the Closing, this Agreement
may be amended by the parties hereto at any time by execution of an instrument
in writing signed by Buyer and the Seller.

     9.4 Extension; Waiver. At any time prior to the Closing, Buyer and the
Seller may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations of the other party hereto, (ii) waive any
inaccuracies in the representations and warranties made to such party contained
herein or in any document delivered pursuant hereto, and (iii) waive compliance
with any of the agreements or conditions for the benefit of such party contained
herein. Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party.

                                   ARTICLE X

                               GENERAL PROVISIONS

     10.1 Notices. Any request, communication, or other notice required or
permitted hereunder shall be in writing and shall be deemed to have been duly
given if sent by facsimile or delivered by recognized overnight or international
courier service or personal delivery (as the

                                       37
<PAGE>

situation may require) at the respective address or facsimile number of the
party receiving notice as set forth below. Any party hereto may by notice so
given change its address or facsimile number for future notice hereunder. All
such notices and other communications hereunder shall be deemed given (i) upon
confirmation of delivery, if sent by facsimile and (ii) upon delivery, if sent
by recognized overnight or international courier service or personal delivery.

     (a) if to Seller, to:

               Bell Microproducts Inc.
               1941 Ringwood Avenue
               San Jose, California 95131-1721
               Attn:  Bruce M. Jaffe, Senior Vice President
               Telephone No.:  (408) 451-1685

               with a copy (which shall not constitute notice) to:
               Wilson Sonsini Goodrich & Rosati, P.C.
               650 Page Mill Road
               Palo Alto, California 94304-1050
               Attn:  Larry W. Sonsini, Esq. and Thomas C. Klein, Esq.
               Telephone No.:  (650) 493-9300
               Facsimile No.:   (650) 493-6811

     (b) if to the Buyer, to:

               PEMSTAR INC.
               3535 Technology Drive
               Rochester, MN  55901
               Attn:  Al Berning
               Telephone No.:  (507) 288-6720
               Facsimile No.:    (507) 280-0838

               with a copy (which shall not constitute notice) to:

               Dorsey & Whitney LLC
               201 First Avenue, SW, Suite 340
               Rochester, MN 55902
               Attn:  Bill Jonason, Esq.
               Telephone No.: (507) 529-2207
               Facsimile No.:  (507) 288-6190

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<PAGE>

     10.2 Interpretation. The words "include," "includes" and "including" when
used herein shall be deemed in each case to be followed by the words "without
limitation." The word "agreement" when used herein shall be deemed in each case
to mean any contract, commitment or other agreement, whether oral or written,
that is legally binding. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.

     10.3 Expenses. All fees and expenses incurred in connection with this
Agreement including, without limitation, all legal, accounting, financial
advisory, consulting and all other fees and expenses of third parties incurred
by a party hereto, in connection with the negotiation and effectuation of the
terms and conditions of this Agreement and the transactions contemplated hereby,
shall be the obligation of the respective party incurring such fees and
expenses.

     10.4 Counterparts. This Agreement may be executed in counterparts, both of
which shall be considered one and the same agreement and shall become effective
when counterparts have been signed by each of the parties and delivered to the
other party.

     10.5 Entire Agreement; Assignment. This Agreement, the schedules and
exhibits hereto, and the documents and instruments and other agreements among
the parties hereto referenced herein: (a) constitute the entire agreement among
the parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof; (b) are not intended to confer upon any
other person any rights or remedies hereunder; and (c) shall not be assigned by
operation of law or otherwise except as otherwise specifically provided.

     10.6 Severability. In the event that any provision of this Agreement or the
application thereof, becomes or is declared by a court of competent jurisdiction
to be illegal, void or unenforceable, the remainder of this Agreement will
continue in full force and effect and the application of such provision to other
persons or circumstances will be interpreted so as reasonably to effect the
intent of the parties hereto. The parties further agree to replace such void or
unenforceable provision of this Agreement with a valid and enforceable provision
that will achieve, to the extent possible, the economic, business and other
purposes of such void or unenforceable provision.

     10.7 Sole Remedy. Except for the remedies provided in Section 6.16(c)(i)
and (iv), the indemnification provided by Section 8.1 is the sole remedy of the
parties hereto or any other person or entity claming a remedy for any and all
matters whatsoever arising under or related to the transactions contemplated by
this Agreement or the Operative Documents, except as set forth in Section
8.1(g).

     10.8 Governing Law; Arbitration. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of California,
regardless of the laws that might otherwise govern under applicable principles
of conflicts of laws thereof. Any claim or dispute

                                       39
<PAGE>

arising out of or related to this Agreement, or the interpretation, making,
performance, breach or termination thereof, shall be finally and exclusively
settled by binding arbitration in San Jose, California under the AAA Commercial
Arbitration Rules and Supplemental Procedures for Large Complex Disputes by a
single arbitrator mutually agreeable to the Buyer and the Seller. In the event
that within 45 days after the submission of any dispute to arbitration, the
Buyer and the Seller cannot mutually agree on a single arbitrator, the Buyer and
the Seller shall each select one arbitrator and the AAA shall select a third
arbitrator. The arbitrator(s) shall have the authority to grant any equitable
and legal remedies that would be available in any judicial proceeding instituted
under California substantive law to resolve a dispute. Judgment on the award
rendered by the arbitrators may be entered in any court having jurisdiction
thereof. The arbitrator(s) may award to the prevailing party, if any, as
determined by the arbitrator(s), all of its costs and fees, including, without
limitation, AAA administrative fees, arbitrator fees, attorneys' fees, expert
fees, witness fees, travel expenses and out-of- pocket expenses (including,
without limitation, such expenses as copying, telephone, facsimile, postage and
courier fees). The parties to the arbitration may apply to any court of
competent jurisdiction for a temporary restraining order, preliminary injunction
or other interim or conservatory relief, as necessary, without breach of this
arbitration provision and without any abridgement of the powers of the
arbitrator(s). The parties agree that, any provision of applicable law
notwithstanding, they will not request, and the arbitrator(s) shall have no
authority to award, punitive or exemplary damages against any party.

     10.9 Rules of Construction. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document.

     10.10 No Third Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any person or entity other than the parties hereto and
their respective successors and permitted assigns.

     10.11 Specific Performance. The parties hereto agree that irreparable
damage will occur in the event that any of the provisions of this Agreement are
not performed in accordance with their specific terms or are otherwise breached.
It is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof in any court of the United States or any state
having jurisdiction, this being in addition to any other remedy to which they
are entitled at law or in equity.

     10.12 Publicity. Buyer and Seller shall not, without the prior written
consent of the other party, make any public announcement in which the other
party is mentioned; provided that either party may make any public disclosure it
believes in good faith to be required by applicable law or stock exchange rule,
in which case the disclosing party will use reasonably commercial efforts to
advise the other party prior to making such disclosure.

                                       40
<PAGE>

     10.13 Assignment by Buyer. Buyer may assign this Agreement to any
subsidiary of Buyer, provided, however, that the indemnification obligations of
Buyer under this Agreement shall remain with Buyer.

     10.14 Change in Control of Buyer. In the event that there shall be a change
in control of Buyer, whether through merger, consolidation, or corporate
reorganization, or by acquisition of all or substantially all of the assets of
Buyer, this Agreement and all the rights and obligations hereunder, may be
transferred to the surviving or resulting entity so long as, (a) in the
reasonable opinion of Seller (i) such entity is not then engaged, or does not
then intend to become engaged, in any distribution business competitive with
that of Seller, or (ii) the acquisition by such entity of the Business as then
conducted by Buyer could not otherwise reasonably be expected to adversely
affect the legitimate business or strategic interests of Seller, and (b) such
person agrees to be bound by the provisions of this Agreement.

                  [Remainder of Page Intentionally Left Blank]

                                       41
<PAGE>

     IN WITNESS WHEREOF, the Buyer and the Seller have caused this Asset
Purchase Agreement to be signed as of the date first written above.

"BUYER"                                 PEMSTAR INC.
                                        a Minnesota Corporation

                                        By:
                                           ----------------------------------
                                        Name:
                                             --------------------------------
                                        Title:
                                              -------------------------------

"SELLER"                                BELL MICROPRODUCTS INC.
                                        a California Corporation

                                        By:
                                           ----------------------------------
                                        Name:
                                             --------------------------------
                                        Title:
                                              -------------------------------

                                        By:
                                           ----------------------------------
                                        Name:
                                             --------------------------------
                                        Title:
                                              -------------------------------

                  [Signature Page to Asset Purchase Agreement]

                                       42

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