Document:

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                                                                    Exhibit 10.3

                          REGISTRATION RIGHTS AGREEMENT

         REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of May 3,
2002, by and among Pemstar Inc., a Minnesota corporation, with headquarters
located at 3535 Technology Drive N.W., Rochester, Minnesota 55901 (the
"Company"), and the undersigned buyers (each, a "Buyer" and collectively, the
"Buyers").

         WHEREAS:

         A. In connection with the Securities Purchase Agreement by and among
the parties hereto of even date herewith (the "Securities Purchase Agreement"),
the Company has agreed, upon the terms and subject to the conditions of the
Securities Purchase Agreement, to issue and sell to each Buyer (i) convertible
notes of the Company (the "Initial Notes"), which will be convertible into
shares of the Company's common stock, par value $0.01 per share (the "Common
Stock") (as converted, the "Initial Conversion Shares") in accordance with the
terms of the Initial Notes, and (ii) warrants (the "Initial Warrants") which
will be exercisable to purchase shares of Common Stock (the "Initial Warrant
Shares");

         B. In connection with the Securities Purchase Agreement, the Buyer may
be required to purchase and the Company may be required to sell, upon the terms
and subject to the conditions of the Securities Purchase Agreement, (i)
additional convertible notes of the Company (the "Subsequent Notes"), which will
be convertible into shares of Common Stock (as converted, the "Subsequent
Conversion Shares") in accordance with the terms of the Subsequent Notes, and
(ii) additional warrants (the "Subsequent Warrants"), which will be exercisable
to purchase shares of Common Stock (the "Subsequent Warrant Shares");

         C. In connection with the Securities Purchase Agreement, each Buyer has
the right, upon the terms and subject to the conditions of the Securities
Purchase Agreement, to require the Company to issue and sell to such Buyer (i)
additional convertible notes of the Company (the "Additional Notes" and,
collectively with the Initial Notes and the Subsequent Notes, the "Notes"),
which will be convertible into shares of Common Stock (as converted, the
"Additional Conversion Shares" and, collectively with the Initial Conversion
Shares and the Subsequent Conversions Shares, the "Conversion Shares") in
accordance with the terms of the Additional Notes, and (ii) additional warrants
(the "Additional Warrants" and, collectively with the Initial Warrants and the
Subsequent Warrants, the "Warrants"), which will be exercisable to purchase
shares of Common Stock (the "Additional Warrant Shares" and, collectively with
the Initial Warrant Shares and the Subsequent Warrant Shares, the "Warrant
Shares");

         D. The Notes will bear interest which, subject to certain conditions,
the Company has the option to pay in shares of Common Stock (the "Interest
Shares"); and

         E. To induce each Buyer to execute and deliver the Securities Purchase
Agreement, the Company has agreed to provide certain registration rights under
the Securities Act of 1933, as amended, and the rules and regulations
thereunder, or any similar successor statute (collectively, the "1933 Act"), and
applicable state securities laws.

         NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and each
Buyer hereby agree as follows:

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         1.       DEFINITIONS.

         As used in this Agreement, the following terms shall have the following
meanings:

         (a) "Additional Effectiveness Deadline" means March 10, 2003.

         (b) "Additional Registrable Securities" means (i) the Additional
Conversion Shares and the Additional Warrant Shares issued or issuable upon
conversion of the Additional Notes and exercise of the Additional Warrants,
respectively, (ii) the Interest Shares issued or issuable in relation to the
Additional Notes, (iii) any shares of capital stock issued or issuable with
respect to the Additional Conversion Shares, the Additional Warrant Shares, the
Additional Warrants, the Additional Notes or the Interest Shares issued in
relation to the Additional Notes as a result of any stock split, stock dividend,
recapitalization, exchange or similar event or otherwise, without regard to any
limitation on conversions of the Additional Notes or on exercises of the
Additional Warrants, and (iv) the General Registrable Securities relating to the
Initial Notes, the Subsequent Notes, the Initial Warrants and the Subsequent
Warrants issued on or after the date the Subsequent Registration Statement is
initially filed with the SEC (or, if the Subsequent Registration Statement is
not filed, on or after the date the Initial Registration Statement is initially
filed with the SEC).

         (c) "Additional Registration Statement" means a registration statement
or registration statements of the Company filed under the 1933 Act covering the
Additional Registrable Securities.

         (d) "Effectiveness Deadline" means the Initial Effectiveness Deadline,
the Subsequent Effectiveness Deadline and the Additional Effectiveness Deadline,
as applicable.

         (e) "General Registrable Securities" means (i) the Initial Conversion
Shares and the Initial Warrant Shares issued or issuable upon conversion of the
Initial Notes and exercise of the Initial Warrants, respectively, (ii) the
Subsequent Conversion Shares and the Subsequent Warrant Shares issued or
issuable upon conversion of the Subsequent Notes and exercise of the Subsequent
Warrants, respectively, (iii) the Interest Shares issued or issuable in relation
to the Initial Notes and Subsequent Notes and (iv) any shares of capital stock
issued or issuable with respect to the Initial Conversion Shares, the Initial
Warrant Shares, the Initial Warrants, the Initial Notes, the Subsequent
Conversion Shares, the Subsequent Warrant Shares, the Subsequent Warrants, the
Subsequent Notes, the Interest Shares issued in relation to the Initial Notes or
the Interest shares issued in relation to the Subsequent Notes as a result of
any stock split, stock dividend, recapitalization, exchange or similar event or
otherwise, without regard to any limitation on conversions of the Initial Notes
or the Subsequent Notes or on exercises of the Initial Warrants or the
Subsequent Warrants.

         (f) "Initial Effectiveness Deadline" means October 1, 2002.

         (i) "Initial Registrable Securities" means General Registrable
Securities relating to the Initial Notes, the Initial Warrants, the Subsequent
Notes and the Subsequent Warrants issued on or prior to the trading day
immediately preceding the date the Initial Registration Statement is initially
filed with the SEC.

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         (j) "Initial Registration Statement" means a registration statement or
registration statements of the Company filed under the 1933 Act covering the
Initial Registrable Securities.

         (k) "Investor" means a Buyer, any transferee or assignee thereof to
whom a Buyer assigns its rights under this Agreement and who agrees to become
bound by the provisions of this Agreement in accordance with Section 9 and any
transferee or assignee thereof to whom a transferee or assignee assigns its
rights under this Agreement and who agrees to become bound by the provisions of
this Agreement in accordance with Section 9.

         (l) "Mandatory Filing Date" means the Initial Mandatory Filing Date,
the Subsequent Mandatory Filing Date and the Additional Mandatory Filing Date
(each, as defined below), as applicable.

         (m) "Person" means a corporation, a limited liability company, an
association, a partnership, an organization, a business, an individual, a
governmental or political subdivision thereof or a governmental agency.

         (n) "Register," "registered," and "registration" refer to a
registration effected by preparing and filing one or more Registration
Statements (as defined below) in compliance with the 1933 Act and pursuant to
Rule 415, and the declaration or ordering of effectiveness of such Registration
Statement(s) by the SEC.

         (o) "Registrable Securities" means the Initial Registrable Securities,
the Subsequent Registrable Securities and the Additional Registrable Securities,
as applicable.

         (p) "Registration Statement" means the Initial Registration Statement,
the Subsequent Registration Statement and the Additional Registration Statement,
as applicable.

         (q) "Rule 415" means Rule 415 promulgated under the 1933 Act or any
successor rule providing for offering securities on a continuous basis.

         (r) "SEC" means the United States Securities and Exchange Commission.

         (s) "Subsequent Effectiveness Deadline" means January 10, 2003.

         (t) "Subsequent Registrable Securities" means General Registrable
Securities relating to the Initial Notes, the Initial Warrants, the Subsequent
Notes and the Subsequent Warrants issued during the period beginning on and
including the date the Initial Registration Statement is initially filed with
the SEC and ending on and including the trading day immediately preceding the
date the Subsequent Registration Statement is initially filed with the SEC.

         (u) "Subsequent Registration Statement" means a registration statement
or registration statements of the Company filed under the 1933 Act covering the
Subsequent Registrable Securities.

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

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meanings set forth in the Securities Purchase Agreement.

         2.       REGISTRATION.

                  (a)      Mandatory Registration.

                           (i) Initial Mandatory Registration. The Company shall
                  prepare, and, on a date during the period beginning on and
                  including July 20, 2002 and ending on and including August 1,
                  2002 (August 1, 2002 is referred to as the "Initial Mandatory
                  Filing Date"), file with the SEC an Initial Registration
                  Statement or Initial Registration Statements (as is necessary)
                  on Form S-3 covering the resale of all of the Initial
                  Registrable Securities. In the event that Form S-3 is
                  unavailable for such a registration, the Company shall use
                  such other form as is available for such a registration,
                  subject to the provisions of Section 2(d). The first Initial
                  Registration Statement prepared pursuant hereto shall register
                  for resale at least that number of shares of Common Stock
                  equal to the product of (x) 1.2 and (y) the number of Initial
                  Registrable Securities calculated as of the trading day
                  immediately preceding the date that the Initial Registration
                  Statement is initially filed with the SEC. The Company shall
                  use its best efforts to have the Initial Registration
                  Statement declared effective by the SEC as soon as
                  practicable, but in no event later than the earlier of (A)
                  December 1, 2002 and (B) the fifth (5th) Business Day
                  following the date on which the Company is notified by the SEC
                  that the Initial Registration Statement will not be reviewed
                  or is no longer subject to further review and comments.

                           (ii) Subsequent Mandatory Registration. The Company
                  shall prepare, and, on a date during the period beginning on
                  and including November 1, 2002 and ending on and including
                  November 10, 2002 (November 10, 2002 is referred to as the
                  "Subsequent Mandatory Filing Date"), file with the SEC a
                  Subsequent Registration Statement or Subsequent Registration
                  Statements (as is necessary) on Form S-3 covering the resale
                  of all of the Subsequent Registrable Securities. In the event
                  that Form S-3 is unavailable for such a registration, the
                  Company shall use such other form as is available for such a
                  registration, subject to the provisions of Section 2(d). The
                  Subsequent Registration Statement prepared pursuant hereto
                  shall register for resale at least that number of shares of
                  Common Stock equal to the product of (x) 1.2 and (y) the
                  number of Subsequent Registrable Securities as of the trading
                  day immediately preceding the date that the Subsequent
                  Registration Statement is initially filed with the SEC. The
                  Company shall use its best efforts to have such Subsequent
                  Registration Statement declared effective by the SEC as soon
                  as practicable, but in no event later than the earlier of (A)
                  March 10, 2003 and (B) the fifth (5th) Business Day following
                  the date on which the Company is notified by the SEC that the
                  Subsequent Registration Statement will not be reviewed or is
                  no longer subject to further review and comments.

                           (iii) Additional Mandatory Registration. The Company
                  shall prepare, and, on a date during the period beginning on
                  and including January 1, 2003 and ending on and including
                  January 10, 2003 (January 10, 2003 is referred to as the
                  "Additional Mandatory Filing Date"), file with the SEC an
                  Additional Registration Statement or Additional Registration
                  Statements (as is necessary) on Form S-3 covering the resale
                  of all of the Additional Registrable Securities. In the event
                  that Form S-3 is unavailable for such a registration, the
                  Company shall use such other form as is available for such a
                  registration, subject to the provisions of Section 2(d). The
                  Additional Registration Statement prepared pursuant hereto
                  shall register for resale at least that number of shares of
                  Common Stock equal to the product of (x) 1.2 and (y) the
                  number of Additional Registrable Securities, related to the
                  applicable Additional Closing Date, as of the

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                  trading day immediately preceding the date that the Additional
                  Registration Statement is initially filed with the SEC. The
                  Company shall use its best efforts to have such Additional
                  Registration Statement declared effective by the SEC as soon
                  as practicable, but in no event later than the earlier of (A)
                  May 10, 2003 and (B) the fifth (5th) Business Day following
                  the date on which the Company is notified by the SEC that the
                  Additional Registration Statement will not be reviewed or is
                  no longer subject to further review and comments.

                  (b) Allocation of Registrable Securities. The initial number
         of Registrable Securities included in any Registration Statement and
         each increase in the number of Registrable Securities included therein
         shall be allocated pro rata among the Investors based on the number of
         applicable Registrable Securities held by each Investor at the time the
         Registration Statement covering such initial number of Registrable
         Securities or increase thereof is last filed with the SEC. In the event
         that an Investor sells or otherwise transfers any of such Person's
         Registrable Securities included in any Registration Statement, each
         transferee shall be allocated a pro rata portion of the then remaining
         number of Registrable Securities included in such Registration
         Statement for such transferor. Any shares of Common Stock included in a
         Registration Statement and which remain allocated to any Person which
         ceases to hold any applicable Registrable Securities shall be allocated
         to the remaining Investors, pro rata based on the number of applicable
         Registrable Securities then held by such Investors.

                  (c) Legal Counsel. Subject to Section 5 hereof, the Buyers
holding a majority of the Registrable Securities shall have the right to select
one legal counsel to review and oversee any offering pursuant to this Section 2
("Legal Counsel"), which shall be Katten Muchin Zavis Rosenman or such other
counsel as thereafter designated by the holders of a majority of Registrable
Securities. The Company shall reasonably cooperate with Legal Counsel in
performing the Company's obligations under this Agreement.

                  (d) Eligibility for Form S-3. The Company represents and
warrants that it currently meets the requirements for use of Form S-3 for
registration of the resale of the Registrable Securities, and has no actual
knowledge of any facts which would reasonably cause the Company to fail to meet
such requirements. In the event that Form S-3 is not available for the
registration of the resale of Registrable Securities hereunder, the Company
shall (i) register the resale of the Registrable Securities on another
appropriate form and (ii) undertake to register the Registrable Securities on
Form S-3 as soon as such form is available, provided that the Company shall
maintain the effectiveness of the Registration Statement then in effect until
such time as a Registration Statement on Form S-3 covering the Registrable
Securities has been declared effective by the SEC.

                  (e) Sufficient Number of Shares Registered. In the event that
the number of shares available under (i) a Registration Statement filed pursuant
to Section 2(a) together with (ii) any Registration Statements filed pursuant to
this Section 2(e) is insufficient to cover the resale of 110% of the Registrable
Securities required to be covered by such Registration Statement or an
Investor's allocated portion of the registered shares pursuant to Section 2(b),
the Company shall amend any such Registration Statement, or file a new
Registration Statement (on the short form available therefor, if applicable), or
both, so as to cover at least 120% of the Registrable Securities calculated as
of the trading day immediately preceding the date of the filing of such
amendment or new Registration Statement), in each case, as soon as practicable,
but in any event not later than 15 days after the necessity therefor arises. The
Company shall use its best efforts to cause such amendment and/or new
Registration Statement to become effective

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as soon as practicable following the filing thereof.

         (f) Effect of Failure to File and Obtain and Maintain Effectiveness of
Registration Statement. If (i) a Registration Statement covering all the
applicable Registrable Securities and required to be filed by the Company
pursuant to this Agreement is not (A) filed with the SEC on or before the
applicable Mandatory Filing Date or (B) declared effective by the SEC on or
before the applicable Effectiveness Deadline or (ii) on any day after a
Registration Statement has been declared effective by the SEC sales of all the
applicable Registrable Securities required to be included on such Registration
Statement cannot be made (other than during an Allowable Grace Period (as
defined in Section 3(t))) pursuant to such Registration Statement (including,
without limitation, because of a failure to keep such Registration Statement
effective, to disclose such information as is necessary for sales to be made
pursuant to such Registration Statement or to register sufficient shares of
Common Stock), then, as partial relief for the damages to any holder by reason
of any such delay in or reduction of its ability to sell applicable Registrable
Securities (which remedy shall not be exclusive of any other remedies available
at law or in equity, but which shall be taken into account in determining such
other remedies), the Company shall pay to each holder of Notes an amount in cash
equal to the product of (i) the aggregate principal amount of the Notes
convertible into Conversion Shares included in such Registration Statement held
by such holder multiplied by (ii) the sum of (A) 0.02, if such Registration
Statement is not filed by the applicable Mandatory Filing Date, plus (B) 0.02,
if such Registration Statement is not declared effective by the applicable
Effectiveness Deadline, plus, (C) the product of (I) 0.0005 multiplied by (II)
the sum of (x) the number of days after the applicable Mandatory Filing Date
(but not including any days after the applicable Effectiveness Deadline) that
such Registration Statement is not filed with the SEC, plus (y) the number of
days after the applicable Effectiveness Deadline that such Registration
Statement is not declared effective by the SEC, plus (z) the number of days
after such Registration Statement has been declared effective by the SEC that
such Registration Statement is not available (other than during an Allowable
Grace Period) for the resale of all the applicable Registrable Securities
required to be included on such Registration Statement pursuant to Section 2(e).
The payments to which a holder shall be entitled pursuant to this Section 2(f)
are referred to herein as "Registration Delay Payments." Registration Delay
Payments shall be paid on the earlier of (I) the last day of the calendar month
during which such Registration Delay Payments are incurred and (II) the third
(3rd) Business Day after the event or failure giving rise to the Registration
Delay Payments is cured. In the event the Company fails to make Registration
Delay Payments in a timely manner, such Registration Delay Payments shall bear
interest at the rate of 1.5% per month (prorated for partial months) until paid
in full.

         3.       RELATED OBLIGATIONS.

         In connection with the Company's obligation to file a Registration
Statement with the SEC pursuant to Section 2(a) or 2(e), the Company shall have
the following obligations:

                  (a) The Company shall submit to the SEC, within three (3)
         Business Days after the Company learns that no review of a particular
         Registration Statement will be made by the staff of the SEC or that the
         staff has no further comments on a particular Registration Statement,
         as the case may be, a request for acceleration of effectiveness of such
         Registration Statement to a time and date not later than 48 hours after
         the submission of such request. The Company shall keep a particular
         Registration Statement effective pursuant to Rule 415 at all times
         until the earlier of (i) the date as of which all the Investors may
         sell all of the applicable

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         Registrable Securities pursuant to Rule 144(k) under the 1933 Act (or
         any successor thereto); provided, however, the Company may presume the
         Investors are not affiliates of the Company under Rule 144(k) for the
         purposes of calculating such date, or (ii) the date as of which none of
         the Notes or Warrants convertible or exercisable into Conversion Shares
         or Warrant Shares, respectively, included in such Registration
         Statement is outstanding and the Investors shall have sold all the
         applicable Registrable Securities (the "Registration Period"). The
         Company shall ensure that each Registration Statement (including any
         amendments or supplements thereto and prospectuses contained therein)
         shall not contain any untrue statement of a material fact or omit to
         state a material fact required to be stated therein, or necessary to
         make the statements therein, in the light of the circumstances in which
         they were made, not misleading.

                  (b) The Company shall prepare and file with the SEC such
         amendments (including post-effective amendments) and supplements to a
         Registration Statement and the prospectus used in connection with such
         Registration Statement, which prospectus is to be filed pursuant to
         Rule 424 promulgated under the 1933 Act, as may be necessary to keep
         such Registration Statement effective at all times during the
         Registration Period, and, during such period, comply with the
         provisions of the 1933 Act with respect to the disposition of all
         Registrable Securities of the Company covered by such Registration
         Statement until such time as all of such Registrable Securities shall
         have been disposed of in accordance with the intended methods of
         disposition by the seller or sellers thereof as set forth in such
         Registration Statement. In the case of amendments and supplements to a
         Registration Statement which are required to be filed pursuant to this
         Agreement (including pursuant to this Section 3(b)) by reason of the
         Company filing a report on Form 10-K, Form 10-Q or Form 8-K or any
         analogous report under the Securities Exchange Act of 1934, as amended
         (the "1934 Act"), the Company shall have incorporated such report by
         reference into the Registration Statement, if applicable, or shall file
         such amendments or supplements with the SEC on the same day on which
         the 1934 Act report is filed which created the requirement for the
         Company to amend or supplement the Registration Statement.

                  (c) The Company shall permit Legal Counsel to review and
         comment upon a Registration Statement and all amendments and
         supplements thereto at least five (5) Business Days prior to their
         filing with the SEC, and not file any document in a form to which Legal
         Counsel reasonably objects. The Company shall not submit a request for
         acceleration of the effectiveness of a Registration Statement or any
         amendment or supplement thereto without the prior approval of Legal
         Counsel, which consent shall not be unreasonably withheld. The Company
         shall furnish to Legal Counsel, without charge, (i) any correspondence
         from the SEC or the staff of the SEC to the Company or its
         representatives relating to any Registration Statement, (ii) promptly
         after the same is prepared and filed with the SEC, one copy of any
         Registration Statement and any amendment(s) thereto, including
         financial statements and schedules, all documents incorporated therein
         by reference and all exhibits and (iii) upon the effectiveness of any
         Registration Statement, one copy of the prospectus included in such
         Registration Statement and all amendments and supplements thereto.

                  (d) The Company shall furnish to each Investor whose
         Registrable Securities are included in any Registration Statement,
         without charge, (i) promptly after the same is prepared and filed with
         the SEC, at least one copy of such Registration Statement and any
         amendment(s) thereto, including financial statements and schedules, all
         documents incorporated therein by reference and all exhibits (ii) upon
         the effectiveness of any Registration Statement, ten copies of the
         prospectus included in such Registration Statement and all amendments
         and

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         supplements thereto (or such other number of copies as such Investor
         may reasonably request) and (iii) such other documents, including
         copies of any preliminary or final prospectus, as such Investor may
         reasonably request from time to time in order to facilitate the
         disposition of the Registrable Securities owned by such Investor.

                  (e) The Company shall use its best efforts to (i) register and
         qualify, unless an exemption from registration or qualification
         applies, all the Registrable Securities covered by a Registration
         Statement under all securities or "blue sky" laws of such jurisdictions
         in the United States, (ii) prepare and file in those jurisdictions,
         such amendments (including post-effective amendments) and supplements
         to such registrations and qualifications as may be necessary to
         maintain the effectiveness thereof during the Registration Period,
         (iii) take such other actions as may be necessary to maintain such
         registrations and qualifications in effect at all times during the
         Registration Period, and (iv) take all other actions reasonably
         necessary or advisable to qualify the Registrable Securities for sale
         in such jurisdictions; provided, however, that the Company shall not be
         required in connection therewith or as a condition thereto to (x)
         qualify to do business in any jurisdiction where it would not otherwise
         be required to qualify but for this Section 3(e), (y) subject itself to
         general taxation in any such jurisdiction, or (z) file a general
         consent to service of process in any such jurisdiction. The Company
         shall promptly notify Legal Counsel and each Investor who holds
         Registrable Securities of the receipt by the Company of any
         notification with respect to the suspension of the registration or
         qualification of any of the Registrable Securities for sale under the
         securities or "blue sky" laws of any jurisdiction in the United States
         or its receipt of actual notice of the initiation or threatening of any
         proceeding for such purpose.

                  (f) The Company shall (i) notify Legal Counsel and each
         Investor in writing (provided that in no event shall such notice
         include any material, nonpublic information) as promptly as practicable
         upon its discovery that the prospectus included in a Registration
         Statement, as then in effect, includes an untrue statement of a
         material fact or omission to state a material fact required to be
         stated therein or necessary to make the statements therein, in the
         light of the circumstances under which they were made, not misleading,
         (ii) promptly prepare a supplement or amendment to such Registration
         Statement to correct such untrue statement or omission, and (iii)
         deliver ten copies of such supplement or amendment to Legal Counsel and
         each Investor (or such other number of copies as Legal Counsel or such
         Investor may reasonably request). The Company shall also promptly
         notify Legal Counsel and each Investor in writing (provided that in no
         event shall such notice include any material, nonpublic information)
         (x) when a prospectus or any prospectus supplement or post-effective
         amendment has been filed, and when a Registration Statement or any
         post-effective amendment has become effective (notification of such
         effectiveness shall be delivered to Legal Counsel and each Investor by
         facsimile on the same day of such effectiveness and by overnight mail),
         (y) of any request by the SEC for amendments or supplements to a
         Registration Statement or related prospectus or related information,
         and (z) of the Company's reasonable determination that a post-effective
         amendment to a Registration Statement would be appropriate.

                  (g) The Company shall use its best efforts to prevent the
         issuance of any stop order or other suspension of effectiveness of a
         Registration Statement, or the suspension of the qualification of any
         of the Registrable Securities for sale in any jurisdiction and, if such
         an order or suspension is issued, to obtain the withdrawal of such
         order or suspension at the earliest possible moment and to notify
         (provided that in no event shall such notification include any
         material, nonpublic information) Legal Counsel and each Investor who
         holds Registrable

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         Securities being sold of the issuance of such order and the resolution
         thereof or its receipt of actual notice of the initiation or threat of
         any proceeding for such purpose.

                  (h) At the reasonable request of any Investor, the Company
         shall furnish to such Investor, on the date of the effectiveness of the
         Registration Statement and thereafter from time to time on such dates
         as an Investor may reasonably request (i) a letter, dated such date,
         from the Company's independent certified public accountants in form and
         substance as is customarily given by independent certified public
         accountants to underwriters in an underwritten public offering,
         addressed to the Investors, and (ii) an opinion, dated as of such date,
         of counsel representing the Company for purposes of such Registration
         Statement, in form, scope and substance as is customarily given in an
         underwritten public offering, addressed to the Investors.

                  (i) The Company shall make available for inspection by (i) any
         Investor, (ii) Legal Counsel and (iii) one firm of accountants or other
         agents retained by the Investors (collectively, the "Inspectors") all
         pertinent financial and other records, and pertinent corporate
         documents and properties of the Company (collectively, the "Records"),
         as shall be reasonably deemed necessary by each Inspector, and cause
         the Company's officers, directors and employees to supply all
         information which any Inspector may reasonably request; provided,
         however, that each Inspector shall hold in strict confidence and shall
         not make any disclosure (except to an Investor) or use of any Record or
         other information which the Company determines in good faith to be
         confidential, and of which determination the Inspectors are so
         notified, unless (a) the disclosure of such Records is necessary to
         avoid or correct a misstatement or omission in any Registration
         Statement or is otherwise required under the 1933 Act, (b) the release
         of such Records is ordered pursuant to a final, non-appealable subpoena
         or order from a court or government body of competent jurisdiction, or
         (c) the information in such Records has been made generally available
         to the public other than by disclosure in violation of this or any
         other agreement of which the Inspector has knowledge. Each Investor
         agrees that it shall, upon learning that disclosure of such Records is
         sought in or by a court or governmental body of competent jurisdiction
         or through other means, give prompt notice to the Company and allow the
         Company, at its expense, to undertake appropriate action to prevent
         disclosure of, or to obtain a protective order for, the Records deemed
         confidential.

                  (j) The Company shall hold in confidence and not make any
         disclosure of information concerning an Investor provided to the
         Company unless (i) disclosure of such information is necessary to
         comply with federal or state securities laws, (ii) the disclosure of
         such information is necessary to avoid or correct a misstatement or
         omission in any Registration Statement, (iii) the release of such
         information is ordered pursuant to a subpoena or other final,
         non-appealable order from a court or governmental body of competent
         jurisdiction, or (iv) such information has been made generally
         available to the public other than by disclosure in violation of this
         Agreement or any other agreement. The Company agrees that it shall,
         upon learning that disclosure of such information concerning an
         Investor is sought in or by a court or governmental body of competent
         jurisdiction or through other means, give prompt written notice to such
         Investor and allow such Investor, at the Investor's expense, to
         undertake appropriate action to prevent disclosure of, or to obtain a
         protective order for, such information.

                  (k) The Company shall use its best efforts either to (i) cause
         all the Registrable Securities covered by a Registration Statement to
         be listed on each securities exchange on which securities of the same
         class or series issued by the Company are then listed, if any, if the
         listing of such Registrable Securities is then permitted under the
         rules of such

                                       9

<PAGE>

         exchange, or (ii) secure designation and quotation of all the
         Registrable Securities covered by the Registration Statement on the
         Nasdaq National Market or, if, despite the Company's best efforts to
         satisfy the preceding clause (i) or (ii), the Company is unsuccessful
         in satisfying the preceding clause (i) or (ii), to secure the inclusion
         for quotation on The Nasdaq SmallCap Market for such Registrable
         Securities and, without limiting the generality of the foregoing, to
         arrange for at least two market makers to register with the National
         Association of Securities Dealers, Inc. as such with respect to such
         Registrable Securities. The Company shall pay all fees and expenses in
         connection with satisfying its obligation under this Section 3(k).

                  (l) The Company shall cooperate with the Investors who hold
         Registrable Securities being offered to facilitate the timely
         preparation and delivery of certificates (not bearing any restrictive
         legend) representing the Registrable Securities to be offered pursuant
         to a Registration Statement and enable such certificates to be in such
         denominations or amounts, as the case may be, as the Investors may
         reasonably request and registered in such names as the Investors may
         request.

                  (m) The Company shall provide a transfer agent and registrar
         of all such Registrable Securities not later than the effective date of
         such Registration Statement.

                  (n) If requested by an Investor, the Company as promptly as
         practicable shall: (i) incorporate in a prospectus supplement or
         post-effective amendment such information as an Investor requests to be
         included therein relating to the sale and distribution of Registrable
         Securities, including, without limitation, information with respect to
         the number of Registrable Securities being offered or sold, the
         purchase price being paid therefor, the persons selling the Registrable
         Securities and any other terms of the offering of the Registrable
         Securities; (ii) make all required filings of such prospectus
         supplement or post-effective amendment as soon as notified of the
         matters to be incorporated in such prospectus supplement or
         post-effective amendment; and (iii) supplement or make amendments to
         any Registration Statement if requested by a holder of such Registrable
         Securities.

                  (o) The Company shall use its best efforts to cause the
         Registrable Securities covered by the applicable Registration Statement
         to be registered with or approved by such other United States
         governmental agencies or authorities as may be necessary to consummate
         the disposition of such Registrable Securities.

                  (p) The Company shall make generally available to its security
         holders as soon as practical, but not later than 90 days after the
         close of the period covered thereby, an earnings statement (in form
         complying with the provisions of Rule 158 under the 1933 Act) covering
         a twelve-month period beginning not later than the first day of the
         Company's fiscal quarter next following the effective date of the
         Registration Statement.

                  (q) The Company shall otherwise use its best efforts to comply
         with all applicable rules and regulations of the SEC in connection with
         any registration hereunder.

                  (r) Within two (2) Business Days after any Registration
         Statement which includes the applicable Registrable Securities is
         ordered effective by the SEC, the Company shall deliver, and shall
         cause legal counsel for the Company to deliver, to the transfer agent
         for such Registrable Securities (with copies to the Investors whose
         Registrable Securities are included in such Registration Statement)
         confirmation that such Registration Statement has been declared

                                       10

<PAGE>

         effective by the SEC in the form attached hereto as Exhibit A.

                  (s) The Company shall take all other reasonable actions
         necessary to expedite and facilitate disposition by the Investors of
         Registrable Securities pursuant to a Registration Statement.

                  (t) Notwithstanding anything to the contrary in Section 3(f),
         at any time after the applicable Registration Statement has been
         declared effective by the SEC, the Company may delay the disclosure of
         material, nonpublic information concerning the Company, the disclosure
         of which at the time is not, in the good faith opinion of the Board of
         Directors of the Company and after receiving advice of counsel to the
         Company, in the best interest of the Company and, after receiving
         advice of counsel to the Company, otherwise required (a "Grace
         Period"); provided, that the Company shall promptly (i) notify each
         Investor in writing of the existence of material, nonpublic information
         giving rise to a Grace Period (provided that in no event shall such
         notice include any material, nonpublic information) and the date on
         which the Grace Period will begin, and (ii) notify each Investor in
         writing of the date on which the Grace Period ends; and, provided
         further, that no Grace Period shall exceed 15 consecutive days and
         during any consecutive 365-day period such Grace Periods shall not to
         exceed 45 days and the first day of any Grace Period must be at least
         three (3) Trading Days (as defined in the Notes) after the last day of
         any prior Grace Period (each, an "Allowable Grace Period"). For
         purposes of determining the length of a Grace Period above, the Grace
         Period shall begin on and include the date that each Investor receives
         the notice referred to in clause (i) above and shall end on the date
         for which the Company provides the notice referred to in clause (ii)
         above (not to exceed 15 days). The provisions of Sections 2(f) and 3(g)
         and the first sentence of Section 3(f) hereof shall not be applicable
         during the period of any Allowable Grace Period. Notwithstanding
         anything to the contrary, the Company shall cause its transfer agent to
         deliver unlegended shares of Common Stock to a transferee of an
         Investor in accordance with the terms of the Securities Purchase
         Agreement in connection with any sale of Registrable Securities with
         respect to which an Investor has entered into a contract for sale, and
         delivered a copy of the prospectus included as part of the applicable
         Registration Statement, prior to the Investor's receipt of the notice
         of a Grace Period and for which the Investor has not yet settled. Each
         Investor agrees not to publicly disclose the fact that such Investor
         has received a notice of a Grace Period, provided such notice is in
         accordance with the terms of this Section 3(t).

         4.       OBLIGATIONS OF THE INVESTORS.

                  (a) At least five (5) Business Days prior to the first
         anticipated filing date of a Registration Statement, the Company shall
         notify each Investor in writing of the information the Company requires
         from each such Investor if such Investor elects to have any of such
         Investor's Registrable Securities included in such Registration
         Statement. It shall be a condition precedent to the obligations of the
         Company to complete the registration pursuant to this Agreement with
         respect to the Registrable Securities of a particular Investor and for
         such Investor to receive any Registration Delay Payments that such
         Investor shall furnish to the Company such information regarding
         itself, the Registrable Securities held by it and the intended method
         of disposition of the Registrable Securities held by it as shall be
         reasonably required to effect the registration of such Registrable
         Securities and shall execute such documents in connection with such
         registration as the Company may reasonably request.

                  (b) Each Investor, by such Investor's acceptance of the
         Registrable Securities,

                                       11

<PAGE>

         agrees to cooperate with the Company as reasonably requested by the
         Company in connection with the preparation and filing of any
         Registration Statement hereunder, unless such Investor has notified the
         Company in writing of such Investor's election to exclude all of such
         Investor's Registrable Securities from such Registration Statement.

                  (c) Each Investor agrees that, upon receipt of any notice from
         the Company of the happening of any event of the kind described in
         Section 3(g) or the first sentence of 3(f), such Investor will
         immediately discontinue disposition of Registrable Securities pursuant
         to any Registration Statement(s) covering such Registrable Securities
         until such Investor's receipt of the copies of the supplemented or
         amended prospectus contemplated by Section 3(g) or the first sentence
         of 3(f) or receipt of notice that no supplement or amendment is
         required. Notwithstanding anything to the contrary, the Company shall
         cause its transfer agent to deliver unlegended shares of Common Stock
         to a transferee of an Investor in accordance with the terms of the
         Securities Purchase Agreement in connection with any sale of
         Registrable Securities with respect to which an Investor has entered
         into a contract for sale, and delivered a copy of the prospectus
         included as part of the applicable Registration Statement, prior to the
         Investor's receipt of a notice from the Company of the happening of any
         event of the kind described in Section 3(g) or the first sentence of
         3(f) and for which the Investor has not yet settled.

         5.       EXPENSES OF REGISTRATION.

                  All reasonable expenses, other than underwriting discounts and
         brokerage commissions, incurred in connection with registrations,
         filings or qualifications pursuant to Sections 2 and 3, including,
         without limitation, all registration, listing and qualifications fees,
         printers and accounting fees, and fees and disbursements of counsel for
         the Company shall be paid by the Company. The Company also shall
         reimburse the Investors for fees and disbursements of Legal Counsel in
         connection with registration filing or qualification pursuant to
         Sections 2 and 3 of this Agreement, provided that the Company shall
         only be required to reimburse the Investors for an amount up to or
         equal to $5,000.

         6.       INDEMNIFICATION.

                  In the event any Registrable Securities are included in a
         Registration Statement under this Agreement:

                  (a) To the fullest extent permitted by law, the Company will,
         and hereby does, indemnify, hold harmless and defend each Investor, the
         directors, officers, partners, employees, agents, representatives of,
         and each Person, if any, who controls any Investor within the meaning
         of the 1933 Act or the 1934 Act (each, an "Indemnified Person"),
         against any losses, claims, damages, liabilities, judgments, fines,
         penalties, charges, costs, reasonable attorneys' fees, amounts paid in
         settlement or expenses, joint or several, (collectively, "Claims")
         incurred in investigating, preparing or defending any action, claim,
         suit, inquiry, proceeding, investigation or appeal taken from the
         foregoing by or before any court or governmental, administrative or
         other regulatory agency, body or the SEC, whether pending or
         threatened, whether or not an indemnified party is or may be a party
         thereto ("Indemnified Damages"), to which any of them may become
         subject insofar as such Claims (or actions or proceedings, whether
         commenced or threatened, in respect thereof) arise out of or are based
         upon: (i) any untrue statement or alleged untrue statement of a
         material fact in a Registration Statement or any post-effective
         amendment thereto or in any filing made in connection with the
         qualification of the offering under the

                                       12

<PAGE>

         securities or other "blue sky" laws of any jurisdiction in which
         Registrable Securities are offered ("Blue Sky Filing"), or the omission
         or alleged omission to state a material fact required to be stated
         therein or necessary to make the statements therein not misleading,
         (ii) any untrue statement or alleged untrue statement of a material
         fact contained in any preliminary prospectus if used prior to the
         effective date of such Registration Statement, or contained in the
         final prospectus (as amended or supplemented, if the Company files any
         amendment thereof or supplement thereto with the SEC) or the omission
         or alleged omission to state therein any material fact necessary to
         make the statements made therein, in the light of the circumstances
         under which the statements therein were made, not misleading, (iii) any
         violation or alleged violation by the Company of the 1933 Act, the 1934
         Act, any other law, including, without limitation, any state securities
         law, or any rule or regulation thereunder relating to the offer or sale
         of the Registrable Securities pursuant to a Registration Statement or
         (iv) any material violation of this Agreement (the matters in the
         foregoing clauses (i) through (iv) being, collectively, "Violations").
         The Company shall reimburse the Indemnified Persons, promptly as such
         expenses are incurred and are due and payable, for any reasonable
         attorneys' fees or other reasonable expenses incurred by them in
         connection with investigating or defending any such Claim.
         Notwithstanding anything to the contrary contained herein, the
         indemnification agreement contained in this Section 6(a): (i) shall not
         apply to a Claim by an Indemnified Person arising out of or based upon
         a Violation which occurs in reliance upon and in conformity with
         information furnished in writing to the Company by such Indemnified
         Person expressly for use in connection with the preparation of the
         Registration Statement or any such amendment thereof or supplement
         thereto; (ii) shall not be available to the extent such Claim is based
         on a failure of the Investor to deliver or to cause to be delivered the
         prospectus made available by the Company, if such prospectus was timely
         made available by the Company pursuant to Section 3(d); (iii) shall not
         apply to amounts paid in settlement of any Claim if such settlement is
         effected without the prior written consent of the Company, which
         consent shall not be unreasonably withheld or delayed; and (iv) the
         indemnification agreement contained in this Section 6(a) with respect
         to any prospectus shall not inure to the benefit of any Indemnified
         Person if the untrue statement or omission of material fact contained
         in such prospectus was corrected on a timely basis in such prospectus,
         as then amended and supplemented, and such corrected prospectus was
         delivered to such Indemnified Person in a timely manner in accordance
         with this Agreement prior to the sale giving rise to such
         indemnification claim and such Investor failed to deliver such
         corrected prospectus prior to such sale. Such indemnity shall remain in
         full force and effect regardless of any investigation made by or on
         behalf of the Indemnified Person and shall survive the transfer of the
         Registrable Securities by the Investors pursuant to Section 9.

                  (b) In connection with any Registration Statement in which an
         Investor is participating, each such Investor agrees to severally and
         not jointly indemnify, hold harmless and defend, to the same extent and
         in the same manner as is set forth in Section 6(a), the Company, each
         of its directors, each of its officers who signs the Registration
         Statement, each Person, if any, who controls the Company within the
         meaning of the 1933 Act or the 1934 Act (each an "Indemnified Party")
         against any Claim or Indemnified Damages to which any of them may
         become subject, insofar as such Claim or Indemnified Damages arise out
         of or are based upon any Violation, in each case to the extent, and
         only to the extent, that such Violation occurs in reliance upon and in
         conformity with written information furnished to the Company by such
         Investor expressly for use in connection with such Registration
         Statement; and, subject to Section 6(d), such Investor will reimburse
         any reasonable attorneys' fees or other reasonable expenses incurred by
         them in connection with investigating or defending any such Claim;
         provided, however, that the indemnity agreement contained in this
         Section 6(b) and the

                                       13

<PAGE>

         agreement with respect to contribution contained in Section 7 shall not
         apply to amounts paid in settlement of any Claim if such settlement is
         effected without the prior written consent of such Investor, which
         consent shall not be unreasonably withheld or delayed; provided,
         further, however, that the Investor shall be liable under this Section
         6(b) for only that amount of a Claim or Indemnified Damages as does not
         exceed the net proceeds to such Investor as a result of the sale of
         Registrable Securities pursuant to such Registration Statement. Such
         indemnity shall remain in full force and effect regardless of any
         investigation made by or on behalf of such Indemnified Party and shall
         survive the transfer of the Registrable Securities by the Investors
         pursuant to Section 9. Notwithstanding anything to the contrary
         contained herein, the indemnification agreement contained in this
         Section 6(b) with respect to any prospectus shall not inure to the
         benefit of any Indemnified Party if the untrue statement or omission of
         material fact contained in the prospectus was corrected on a timely
         basis in the prospectus, as then amended or supplemented.

                  (c) Promptly after receipt by an Indemnified Person or
         Indemnified Party under this Section 6 of notice of the commencement of
         any action or proceeding (including any governmental action or
         proceeding) involving a Claim, such Indemnified Person or Indemnified
         Party shall, if a Claim in respect thereof is to be made against any
         indemnifying party under this Section 6, deliver to the indemnifying
         party a written notice of the commencement thereof, and the
         indemnifying party shall have the right to participate in, and, to the
         extent the indemnifying party so desires, jointly with any other
         indemnifying party similarly noticed, to assume control of the defense
         thereof with counsel mutually satisfactory to the indemnifying party
         and the Indemnified Person or the Indemnified Party, as the case may
         be; provided, however, that an Indemnified Person or Indemnified Party
         shall have the right to retain its own counsel with the fees and
         expenses to be paid by the indemnifying party, if, in the reasonable
         opinion of counsel retained by the indemnifying party, the
         representation by such counsel of the Indemnified Person or Indemnified
         Party and the indemnifying party would be inappropriate due to actual
         or potential differing interests between such Indemnified Person or
         Indemnified Party and any other party represented by such counsel in
         such proceeding. The Company shall pay reasonable fees for only one
         separate legal counsel for the Investors, and such legal counsel shall
         be selected by the Investors holding a majority in interest of the
         Registrable Securities included in the Registration Statement to which
         the Claim relates. The Indemnified Party or Indemnified Person shall
         cooperate fully with the indemnifying party in connection with any
         negotiation or defense of any such action or Claim by the indemnifying
         party and shall furnish to the indemnifying party all information
         reasonably available to the Indemnified Party or Indemnified Person
         which relates to such action or Claim. The indemnifying party shall
         keep the Indemnified Party or Indemnified Person fully apprised at all
         times as to the status of the defense or any settlement negotiations
         with respect thereto. No indemnifying party shall be liable for any
         settlement of any action, claim or proceeding effected without its
         prior written consent, provided, however, that the indemnifying party
         shall not unreasonably withhold, delay or condition its consent. No
         indemnifying party shall, without the prior written consent of the
         Indemnified Party or Indemnified Person, consent to entry of any
         judgment or enter into any settlement or other compromise which does
         not include as an unconditional term thereof the giving by the claimant
         or plaintiff to such Indemnified Party or Indemnified Person of a
         release from all liability in respect to such Claim or litigation.
         Following indemnification as provided for hereunder, the indemnifying
         party shall be subrogated to all rights of the Indemnified Party or
         Indemnified Person with respect to all third parties, firms or
         corporations relating to the matter for which indemnification has been
         made. The failure to deliver written notice to the indemnifying party
         within a reasonable time of the commencement of any such action shall
         not relieve such

                                       14

<PAGE>

         indemnifying party of any liability to the Indemnified Person or
         Indemnified Party under this Section 6, except to the extent that the
         indemnifying party is prejudiced in its ability to defend such action.

                  (d) The indemnification required by this Section 6 shall be
         made by periodic payments of the amount thereof during the course of
         the investigation or defense, as and when bills are received or
         Indemnified Damages are incurred.

                  (e) The indemnity agreements contained herein shall be in
         addition to (i) any cause of action or similar right of the Indemnified
         Party or Indemnified Person against the indemnifying party or others,
         and (ii) any liabilities the indemnifying party may be subject to
         pursuant to the law.

         7.       CONTRIBUTION.

                  To the extent any indemnification by an indemnifying party is
         prohibited or limited by law, the indemnifying party agrees to make the
         maximum contribution with respect to any amounts for which it would
         otherwise be liable under Section 6 to the fullest extent permitted by
         law; provided, however, that: (i) no person involved in the sale of
         Registrable Securities which person is guilty of fraudulent
         misrepresentation (within the meaning of Section 11(f) of the 1933 Act)
         shall be entitled to contribution from any person involved in such sale
         of Registrable Securities who was not guilty of fraudulent
         misrepresentation; and (ii) contribution by any seller of Registrable
         Securities shall be limited in amount to the net amount of proceeds
         received by such seller from the sale of such Registrable Securities
         pursuant to such Registration Statement.

         8.       REPORTS UNDER THE 1934 ACT.

                  With a view to making available to the Investors the benefits
         of Rule 144 promulgated under the 1933 Act or any other similar rule or
         regulation of the SEC that may at any time permit the Investors to sell
         securities of the Company to the public without registration ("Rule
         144"), the Company agrees to:

                  (a) cause to be available adequate current public information
         with respect to the Company, as those terms are understood and defined
         in Rule 144;

                  (b) file with the SEC in a timely manner all reports and other
         documents required of the Company under the 1933 Act and the 1934 Act
         so long as the Company remains subject to such requirements (it being
         understood that nothing herein shall limit the Company's obligations
         under Section 4(c) of the Securities Purchase Agreement) and the filing
         of such reports and other documents is required for the applicable
         provisions of Rule 144; and

                  (c) furnish to each Investor so long as such Investor owns
         Registrable Securities, promptly upon request, (i) a written statement
         by the Company that it has complied with the reporting requirements of
         Rule 144, the 1933 Act and the 1934 Act, (ii) a copy of the most recent
         annual or quarterly report of the Company and such other reports and
         documents so filed by the Company, and (iii) such other information as
         may be reasonably requested to permit the investors to sell such
         securities pursuant to Rule 144 without registration.

                                       15

<PAGE>

         9.       ASSIGNMENT OF REGISTRATION RIGHTS.

                  The rights under this Agreement shall be automatically
         assignable by the Investors to any transferee of all or any portion of
         Registrable Securities if: (i) the Investor agrees in writing with the
         transferee or assignee to assign such rights, and a copy of such
         agreement is furnished to the Company within a reasonable time after
         such assignment; (ii) the Company is, within a reasonable time after
         such transfer or assignment, furnished with written notice of (a) the
         name and address of such transferee or assignee, and (b) the securities
         with respect to which such registration rights are being transferred or
         assigned; (iii) immediately following such transfer or assignment the
         further disposition of such securities by the transferee or assignee is
         restricted under the 1933 Act and applicable state securities laws;
         (iv) at or before the time the Company receives the written notice
         contemplated by clause (ii) of this sentence the transferee or assignee
         provides the Company with a writing agreeing to be bound by all of the
         provisions contained herein; and (v) such transfer shall have been made
         in accordance with the applicable requirements of the Securities
         Purchase Agreement.

         10.      AMENDMENT OF REGISTRATION RIGHTS.

                  Provisions of this Agreement may be amended and the observance
         thereof may be waived (either generally or in a particular instance and
         either retroactively or prospectively), only with the written consent
         of the Company and Investors who then hold a majority of the
         Registrable Securities. Any amendment or waiver effected in accordance
         with this Section 10 shall be binding upon each Investor and the
         Company. No such amendment shall be effective to the extent that it
         applies to less than all of the holders of the Registrable Securities.
         No consideration shall be offered or paid to any Person to amend or
         consent to a waiver or modification of any provision of this Agreement
         unless the same consideration also is offered to all of the parties to
         this Agreement.

         11.      MISCELLANEOUS.

                  (a) A Person is deemed to be a holder of Registrable
         Securities whenever such Person owns or is deemed to own of record such
         Registrable Securities. If the Company receives conflicting
         instructions, notices or elections from two or more Persons with
         respect to the same Registrable Securities, the Company shall act upon
         the basis of instructions, notice or election received from the
         registered owner of such Registrable Securities.

                                       16

<PAGE>

                  (b) Any notices, consents, waivers or other communications
         required or permitted to be given under the terms of this Agreement
         must be in writing and will be deemed to have been delivered: (i) upon
         receipt, when delivered personally; (ii) upon receipt, when sent by
         facsimile (provided confirmation of transmission is mechanically or
         electronically generated and kept on file by the sending party); or
         (iii) one (1) Business Day after deposit with an overnight courier
         service, in each case properly addressed to the party to receive the
         same. The addresses and facsimile numbers for such communications shall
         be:

                  If to the Company:

                           Pemstar, Inc.
                           35353 Technology Drive N.W.
                           Rochester, Minnesota 55901
                           Telephone: (507) 292-6941
                           Facsimile: (507) 280-0838
                           Attention: William J. Kullback, Executive Vice
                                        President and Chief Financial Officer

                  With a copy to:

                           Dorsey & Whitney LLP
                           50 South Sixth Street, Suite 1500
                           Minneapolis, Minnesota 55402
                           Telephone: (612) 343-7962
                           Facsimile: (612) 340-8738
                           Attention: Jonathan B. Abram, Esq.

                  If to Legal Counsel:

                  Katten Muchin Zavis Rosenman
                  525 West Monroe Street, Suite 1600
                  Chicago, Illinois 60661-3693
                  Telephone:  312-902-5200
                  Facsimile:  312-902-1061
                  Attention:  Robert J. Brantman, Esq.

         If to a Buyer, to its address and facsimile number set forth on the
         Schedule of Buyers attached hereto, with copies to such Buyer's
         representatives as set forth on the Schedule of Buyers to the
         Securities Purchase Agreement, or to such other address and/or
         facsimile number and/or to the attention of such other person as the
         recipient party has specified by written notice given to each other
         party five days prior to the effectiveness of such change. Written
         confirmation of receipt (A) given by the recipient of such notice,
         consent, waiver or other communication, (B) mechanically or
         electronically generated by the sender's facsimile machine containing
         the time, date, recipient facsimile number and an image of the first
         page of such transmission or (C) provided by an overnight courier
         service shall be rebuttable evidence of personal service, receipt by
         facsimile or receipt from an overnight courier service in accordance
         with clause (i), (ii) or (iii) above, respectively.

                  (c) Failure of any party to exercise any right or remedy under
         this Agreement

                                       17

<PAGE>

         or otherwise, or delay by a party in exercising such right or remedy,
         shall not operate as a waiver thereof.

                  (d) All questions concerning the construction, validity,
         enforcement and interpretation of this Agreement shall be governed by
         the internal laws of the State of New York, without giving effect to
         any choice of law or conflict of law provision or rule (whether of the
         State of New York or any other jurisdictions) that would cause the
         application of the laws of any jurisdictions other than the State of
         New York. Each party hereby irrevocably submits to the non-exclusive
         jurisdiction of the state and federal courts sitting The City of New
         York, Borough of Manhattan, for the adjudication of any dispute
         hereunder or in connection herewith or with any transaction
         contemplated hereby or discussed herein, and hereby irrevocably waives,
         and agrees not to assert in any suit, action or proceeding, any claim
         that it is not personally subject to the jurisdiction of any such
         court, that such suit, action or proceeding is brought in an
         inconvenient forum or that the venue of such suit, action or proceeding
         is improper. Each party hereby irrevocably waives personal service of
         process and consents to process being served in any such suit, action
         or proceeding by mailing a copy thereof to such party at the address
         for such notices to it under this Agreement and agrees that such
         service shall constitute good and sufficient service of process and
         notice thereof. Nothing contained herein shall be deemed to limit in
         any way any right to serve process in any manner permitted by law. If
         any provision of this Agreement shall be invalid or unenforceable in
         any jurisdiction, such invalidity or unenforceability shall not affect
         the validity or enforceability of the remainder of this Agreement in
         that jurisdiction or the validity or enforceability of any provision of
         this Agreement in any other jurisdiction. Each party hereby irrevocably
         waives any right it may have, and agrees not to request, a jury trial
         for the adjudication of any dispute hereunder or in connection herewith
         or arising out of this Agreement or any transaction contemplated
         hereby.

                  (e) This Agreement, the Securities Purchase Agreement and the
         other Transaction Documents (as defined in the Securities Purchase
         Agreement) constitute the entire agreement among the parties hereto
         with respect to the subject matter hereof and thereof. There are no
         restrictions, promises, warranties or undertakings, other than those
         set forth or referred to herein and therein. This Agreement, the
         Securities Purchase Agreement and the other Transaction Documents
         supersede all prior agreements and understandings among the parties
         hereto with respect to the subject matter hereof and thereof.

                  (f) Subject to the requirements of Section 9, this Agreement
         shall inure to the benefit of and be binding upon the permitted
         successors and assigns of each of the parties hereto.

                  (g) The headings in this Agreement are for convenience of
         reference only and shall not limit or otherwise affect the meaning
         hereof.

                  (h) This Agreement may be executed in identical counterparts,
         each of which shall be deemed an original but all of which shall
         constitute one and the same agreement. This Agreement, once executed by
         a party, may be delivered to the other party hereto by facsimile
         transmission of a copy of this Agreement bearing the signature of the
         party so delivering this Agreement.

                  (i) Each party shall do and perform, or cause to be done and
         performed, all such further acts and things, and shall execute and
         deliver all such other agreements, certificates, instruments and
         documents, as the other party may reasonably request in order to carry
         out the

                                       18

<PAGE>

         intent and accomplish the purposes of this Agreement and the
         consummation of the transactions contemplated hereby.

                  (j) All consents and other determinations to be made by the
         Investors pursuant to this Agreement shall be made, unless otherwise
         specified in this Agreement, by Investors holding a majority of the
         Registrable Securities.

                  (k) The language used in this Agreement will be deemed to be
         the language chosen by the parties to express their mutual intent and
         no rules of strict construction will be applied against any party.

                  (l) Except for Sections 6 and 7, this Agreement is intended
         for the benefit of the parties hereto and their respective permitted
         successors and assigns, and is not for the benefit of, nor may any
         provision hereof be enforced by, any other Person.

                            [Signature Page Follows]

                                       19

<PAGE>

         IN WITNESS WHEREOF, each Buyer and the Company have caused this
Registration Rights Agreement to be duly executed as of day and year first above
written.

COMPANY:                                    BUYERS:

PEMSTAR INC.                                SMITHFIELD FIDUCIARY LLC

By: /s/ Al Berning                          By: /s/ Adam J. Chill
    ----------------------------------          --------------------------------
    Name:   Allen J. Berning                    Name:  Adam J. Chill
    Title:  Chairman, Chief Executive           Title: Authorized Signatory
    Officer and President

                                            CITADEL EQUITY FUND LTD.

                                            By: /s/ Kenneth A. Simpler
                                                --------------------------------
                                                Name:  Kenneth A. Simpler
                                                Title: Vice President

<PAGE>

                               SCHEDULE OF BUYERS

         Buyer                              Address and Facsimile Number
------------------------             ---------------------------------------

Smithfield Fiduciary LLC             c/o Highbridge Capital Management, LLC
                                     9 West 57th Street, 27th Floor
                                     New York, New York 10019
                                     Attention: Ari J. Storch
                                                Adam J. Chill
                                     Facsimile: (212) 751-0755
                                     Telephone: (212) 287-4720

                                     With a copy to:

                                     Schulte Roth & Zabel LLP
                                     919 Third Avenue
                                     New York, New York 10022
                                     Attention: Eleazer Klein, Esq.
                                     Facsimile: (212) 593-5955
                                     Telephone: (212) 756-2376

Fisher Capital Ltd.                  c/o Citadel Investment Group, L.L.C.
                                     225 West Washington Street
                                     Chicago, Illinois  60606
                                     Attention: Kenneth A. Simpler
                                     Facsimile: (312) 338-0780
                                     Telephone: (312) 696-2100

                                     With a copy to (if not the Legal
                                     Counsel)

                                     Katten Muchin Zavis Rosenman
                                     525 W. Monroe Street
                                     Chicago, Illinois 60661-3693
                                     Attention: Robert J. Brantman, Esq.
                                     Facsimile: (312) 902-1061
                                     Telephone: (312) 902-5200

Wingate Capital Ltd.                 c/o Citadel Investment Group, L.L.C.
                                     225 West Washington Street
                                     Chicago, Illinois  60606
                                     Attention: Kenneth A. Simpler
                                     Facsimile: (312) 338-0780
                                     Telephone: (312) 696-2100

                                     With a copy to (if not the Legal
                                     Counsel)

                                     Katten Muchin Zavis Rosenman
                                     525 W. Monroe Street
                                     Chicago, Illinois 60661-3693
                                     Attention: Robert J. Brantman, Esq.
                                     Facsimile: (312) 902-1061
                                     Telephone: (312) 902-5200

<PAGE>

                                                                       EXHIBIT A

                         FORM OF NOTICE OF EFFECTIVENESS
                            OF REGISTRATION STATEMENT

[TRANSFER AGENT]

Attn: ___________________________

        Re:  Pemstar Inc.
             ------------

Ladies and Gentlemen:

         We are counsel to Pemstar Inc., a Minnesota corporation (the
"Company"), and have represented the Company in connection with that certain
Securities Purchase Agreement (the "Purchase Agreement") entered into by and
among the Company and the buyers named therein (collectively, the "Holders")
pursuant to which on ______ __, 200_ the Company issued to the Holders
convertible notes of the Company (the "Notes") convertible into shares of the
Company's common stock, par value $0.01 per share (the "Common Stock"), and
warrants to purchase shares of Common Stock (the "Warrants"). The Notes bear
interest which the Company, subject to certain conditions, may pay in shares of
Common Stock (the "Interest Shares"). Pursuant to the Purchase Agreement, the
Company also has entered into a Registration Rights Agreement with the Holders
(the "Registration Rights Agreement") pursuant to which the Company agreed,
among other things, to register the Registrable Securities (as defined in the
Registration Rights Agreement), including the shares of Common Stock issuable
upon conversion of the Notes and exercise of the Warrants and the Interest
Shares, under the Securities Act of 1933, as amended (the "1933 Act"). In
connection with the Company's obligations under the Registration Rights
Agreement, on ____________ ___, 200_, the Company filed a Registration Statement
on Form S-3 (File No. 333-_____________) (the "Registration Statement") with the
Securities and Exchange Commission (the "SEC") relating to the Registrable
Securities which names each of the Holders as a selling stockholder thereunder.

         In connection with the foregoing, we advise you that a member of the
SEC's staff has advised us by telephone that the SEC has entered an order
declaring the Registration Statement effective under the 1933 Act at [ENTER TIME
OF EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and we have no knowledge,
after telephonic inquiry of a member of the SEC's staff, that any stop order
suspending its effectiveness has been issued or that any proceedings for that
purpose are pending before, or threatened by, the SEC and the Registrable
Securities are available for resale under the 1933 Act pursuant to the
Registration Statement.

                                        Very truly yours,

                                        [ISSUER'S COUNSEL]

                                        By:
                                            ----------------------------------
cc: [LIST HOLDERS]DISTRIBUTOR AGREEMENT

This Agreement is made as of the 1st day of January, 2002.

Between:

  NMC INC., a British Columbia company with offices at
  5760 Cambie St., Vancouver, British Columbia, Canada, V5Z 3A6
  (herein called the "NMC")
                                              Of the First Part
And:
     HOLMES HERBS INC. a Nevada company with offices at
     8275 South Eastern Ave., Scottsdale, Arizona, 89123
     (herein called the "Distributor")
                                             Of the Second Part
WHEREAS:
     1)   NMC owns a 100% interest in Solartherm;
     2)   NMC has agreed to grant Company the right to distribute
          Solartherm in the United States of America, on the terms and
          conditions hereinafter contained.

NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of ten dollars
($10) paid to Inventor, plus the representations, warranties, covenants and
agreements herein (the receipt and sufficiency of which is hereby
acknowledged by each of the parties), the parties agree as follows:

1.    Definitions

1.1   "Solartherm" means the intellectual property, designs and trade name
     of the fabric products manufactured by NMC that are made with ceramic
     insulating product and radiate far infra-red.

2.   Distribution Rights

2.1  NMC hereby grants to Company the non-exclusive right to sell and
     distribute Solartherm to customers in the United States of America,
     subject to the terms set forth herein.

2.2  Distributor can either purchase Solartherm products from NMC at
     wholesale prices set by NMC from time to time, or arrange to have NMC
     fill customer orders directly and earn a distribution fee equal to
     twenty percent (20%) of the retail price paid by the Distributor's
     customer.  Distribution fees will be paid to the Distributor by NMC
     once a month based on orders placed in the prior month.

3.   Use of Solartherm Name

3.1  NMC hereby authorizes Distributor to use the name and trademark
     "Solartherm" during the term of this Agreement.

<PAGE>

                                -2-

4.   Relationship of the Parties

4.1  The parties hereto agree that each is an independent contractor with
     respect to this Agreement.  Neither shall represent itself nor permit
     any party acting on its behalf to represent itself as a partner,
     franchisee, joint-venturer, agent, employee, or general representative
     of the other.  The parties further acknowledge that neither it nor any
     party acting on its behalf shall have any right, power or authority,
     implied or expressed, to obligate the other party in any way.

5.   Term and Termination

5.1  The term of this Agreement commences on the date set out at the top of
     the first page hereof and continues for a period of five (5) years.
     The parties may extend the term by mutual consent in writing.

6.   Confidentiality

6.1  The parties both recognize and acknowledge that during the term of
     this Agreement they will have access to certain information about each
     others products, services, data, sales or business to which they had
     no prior knowledge and was not generally know to the public (the
     "Confidential Information").

6.2  The parties both agree that they will not use or disclose the
     Confidential Information of each other to any outside person, firm or
     corporation.

7.   Intellectual Property Rights

7.1  Distributor acknowledges and agrees that Solartherm is the exclusive
     property of NMC.  Except to the extent use thereof is expressly
     permitted hereunder during the term of this Agreement, Distributor
     does not have any ownership interest in Solartherm.

8.   Warranty

8.1  NMC warrants that at the time of delivery to Distributor or its
     customers, Solartherm products will be in good working order, able to
     perform functions in accordance with the instructions set forth on
     Solartherm packaging.

8.2  Distributor's exclusive remedy and NMC' entire liability in contract,
     tort or otherwise for any claim arising from the use or performance of
     Solartherm products, shall be repair or replacement of Solartherm
     products in accordance with NMC' express Warranty above.  In no event
     shall NMC be liable to Distributor or any third party for direct,
     indirect, incidental, special or consequential damages arising out of
     the use of Solartherm products.

9.   General

9.1  This Agreement shall no be amended or waived, in whole or in part,
     except by written amendment signed by the parties hereto.

9.2  Any notice, direction or other communication required or permitted to
     be given under this Agreement shall be in writing and may be given by
     delivery to the address stated on the first page of this Agreement.
     Any notice, direction or other such communication will have

<PAGE>

                                 -3-

     been given and received on the day it was delivered.  Either party may
     at any time give notice in writing of any change of address, which
     will then be the address of such party for the purposes of filing
     notice.

9.3  Each of the parties acknowledges and confirms that it has been
     provided sufficient opportunity to obtain the recommended independent
     legal advice and understands the terms of, and its rights and
     obligations under this Agreement.

9.4  Time is of the essence with respect to the performance of obligations
     in this Agreement.

9.5  This Agreement shall inure to the benefit of and be binding on all of
     the parties hereto and their respective executors, administrators,
     successors and permitted assigns.

9.6  This Agreement shall be construed and governed by the laws of the
     Province of British Columbia, Canada.

9.7  The headings to the articles, paragraphs, parts or clauses of this
     Agreement and the table of contents are inserted for convenience only
     and shall not affect the construction hereof.

9.8  The parties hereto acknowledge that they have carefully read this
     Agreement and understand and agree to be bound by all of the terms and
     conditions found herein.

IN WITNESS WHEREOF the parties hereto have caused this Agreement to be duly
executed and delivered as of the day and year first above written.

SIGNED, SEALED AND DELIVERED by )
NMC INC.                        )
in the presence of:             )
                                )                           C/S
                                )
/s/ [SIGNATURE]                 )
------------------------------
Authorized Representative

SIGNED, SEALED AND DELIVERED by )
HOLMES HERBS INC.               )
in the presence of:             )
                                )                           C/S
                                )
/s/ [SIGNATURE]                 )
-------------------------------
Authorized Representative

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