Document:

<PAGE>

                                                                    EXHIBIT 10.8

                             FIRST AMENDMENT TO THE
                                  PEMSTAR INC.
                   SERIES A PREFERRED STOCK PURCHASE AGREEMENT
                             dated February 12, 1998

     This First Amendment ("Amendment") to the Series A Preferred Stock Purchase
Agreement dated February 12, 1998 (the "Agreement") is made as of March 27, 1998
by and among Pemstar Inc., a Minnesota corporation and the investors listed on
Schedule A hereto, each of which is herein referred to as an "Investor" and
collectively as the "Investors." Capitalized terms used herein which are not
defined herein shall have the definition ascribed to them in the Agreement.

                                    RECITALS
                                    --------

     WHEREAS, the Company and the Investors have previously entered into the
Agreement pursuant to which, among other things, LB I Group Inc., a Delaware
corporation ("LBI") purchased Five Hundred Twenty Thousand (520,000) shares of
the Company's Series A Preferred Stock.

     WHEREAS, the Company and the Investors desire to amend the number of shares
of the Company's Series A Preferred Stock purchased by the Investors so that LBI
shall purchase an additional Thirty Six-Thousand Six Hundred Thirty Three
(36,633) shares of the Company's Series A Preferred Stock at the Second Closing
(as defined below); and

     WHEREAS, Section 6.10 of the Agreement provides that the Agreement may be
amended with the written consent of the Company and the holders of a majority of
the Common Stock issued or issuable upon conversion of the Series A Preferred
Stock issued pursuant to the Agreement.

     NOW, THEREFORE, the parties hereto agree as follows:

1.   AMENDMENTS TO AGREEMENT.

          1.1 Section 1 of the Agreement is hereby amended in its entirety as
     follows:

               "1. Purchase and Sale of Stock.

                    1.1 Sale and Issuance of Series A Preferred Stock.

                         (a) The Company shall adopt and file with the Secretary
                    of State of the State of Minnesota on or before the First
                    Closing (as defined below) the Certificate of Designation in
                    the form attached hereto as Exhibit A (the "Certificate of
                    Designation").

                         (b) Subject to the terms and conditions of this
                    Agreement, each Investor agrees, severally and not jointly,
                    to purchase at each Closing (as defined below) and the
                    Company agrees to sell and issue to each Investor, severally
                    and not jointly, at each Closing
<PAGE>

                    that number of shares of the Company's Series A Preferred
                    Stock set forth opposite each Investor's name on Schedule A
                    hereto under the headings "First Closing" and "Second
                    Closing," respectively, for the purchase price set forth
                    thereon.

                    1.2 Closings.

                         (a) The first purchase and sale of the Series A
                    Preferred Stock will take place at the offices of Dorsey &
                    Whitney LLP at 10:00 A.M., on February 12, 1998, or at such
                    other time and place as the Company and Investors acquiring
                    in the aggregate more than half the shares of Series A
                    Preferred Stock sold pursuant hereto shall mutually agree in
                    writing (the "First Closing").

                         (b) The second purchase and sale of the Series A
                    Preferred Stock will take place at the offices of Dorsey &
                    Whitney LLP at 10:00 A.M., on March __, 1998, or at such
                    other time and place as the Company and Investors acquiring
                    in the aggregate more than half the shares of Series A
                    Preferred Stock sold pursuant hereto shall mutually agree in
                    writing (the "Second Closing"; each of the First Closing and
                    the Second Closing is sometimes individually referred to
                    herein as a "Closing").

                         (c) At each Closing, the Company shall deliver to each
                    Investor a certificate representing the shares of Series A
                    Preferred Stock that such Investor is purchasing against
                    payment of the purchase price therefor by check, wire
                    transfer, cancellation of indebtedness or such other form of
                    payment as shall be mutually agreed upon by such Investor
                    and the Company."

          1.2 The lead-in paragraph to Section 4 of the Agreement is hereby
     amended in its entirety as follows:

               "4. Conditions of Investor's Obligations at each Closing. The
          obligations of each Investor under subsection 1.1 (b) of this
          Agreement are subject to the fulfillment on or before each Closing of
          each of the following conditions, the waiver of which shall not be
          effective against any Investor who does not consent in writing
          thereto:"

          1.3 Section 4.3 of the Agreement is hereby amended in its entirety as
     follows:

               "4.3 Compliance Certificate. The President of the Company, or his
          designee, shall deliver to each Investor at the Closing a certificate
          certifying that the conditions specified in Sections 4.1 and 4.2 have
          been fulfilled and stating that there shall have been no adverse
          change in the business, affairs, prospects, operations, properties,
          assets or condition of the Company since December 31, 1997."

                                       -2-
<PAGE>

          1.4 The lead-in paragraph to Section 5 of the Agreement is hereby
     amended in its entirety as follows:

               "5. Conditions of the Company's Obligations at each Closing. The
          obligations of the Company to each Investor under this Agreement are
          subject to the fulfillment on or before each Closing of each of the
          following conditions by that Investor:"

          1.5 Section 6.9 of the Agreement is hereby amended in its entirety as
     follows:

               "6.9 Expenses. Irrespective of whether either Closing is
          effected, the Company shall pay all costs and expenses that it incurs
          with respect to the negotiation, execution, delivery and performance
          of this Agreement. If the First Closing is effected, the Company
          shall, at the First Closing, reimburse the reasonable fees and
          expenses of special counsel for the Investors (not to exceed $10,000).
          If any action at law or in equity is necessary to enforce or interpret
          the terms of this Agreement or the Articles of Incorporation, the
          prevailing party shall be entitled to reasonable attorney's fees,
          costs and necessary disbursements in addition to any other relief to
          which such party may be entitled."

     2. AMENDED SCHEDULE A.

     Schedule A to the Agreement is amended to read as the Schedule A attached
hereto.

     3. Representations and Warranties. Except for Section 2.3 as modified below
the Company hereby represents that the representations and warranties of the
Company contained in Section 2 of the Agreement and LBI hereby represents that
the representations and warranties of LBI contained in Section 3 of the
Agreement, are true and correct on and as of the date hereof.

     Section 2.3 of the Agreement is modified in its entirety to read as
follows:

          "2.3 Capitalization and Voting Rights.

               (a) The authorized capital of the Company consists, or will
          consist prior to the Second Closing, of

                    (i) Preferred Stock. 1,000,000 shares of Preferred Stock, of
               which 666,667 shares have been designated Series A Preferred
               Stock (the "Series A Preferred Stock") of which 533,333 are
               currently issued and outstanding and 36,633 will be sold pursuant
               to this Agreement in the Second Closing. The rights, privileges
               and preferences of the Series A Preferred Stock will be as stated
               in the Certificate of Designation.

                                       -3-
<PAGE>

                    (ii) Common Stock. 10,000,000 shares of common stock
               ("Common Stock"), of which 3,459,578 are currently issued and
               outstanding. All of the issued shares of Common Stock have been
               duly authorized and validly issued, are fully paid and
               nonassessable, and have been issued in compliance with applicable
               federal and state securities laws and are free and clear of all
               liens, security interests, pledges, charges, encumbrances,
               defects, shareholder agreements, equities or claims of any nature
               whatsoever. None of the issued shares of Common Stock has been
               issued or is owned or held in violation of any statutory
               preemptive rights of shareholders.

                    (iii) Except for the conversion privileges of the Series A
               Preferred Stock to be issued under this Agreement, there are not
               outstanding any options, warrants, rights (including conversion
               or preemptive rights) or agreements for the purchase or
               acquisition from the Company of any shares of its capital stock;
               provided that the Company has reserved 1,000,000 shares, of which
               options to acquire up to 846,350 shares have been granted, for
               issuance to employees, consultants or directors of the Company
               pursuant to equity incentive agreements approved by the Board of
               Directors. The Company is not a party or subject to any agreement
               or understanding, and there is no agreement or understanding
               between any persons and/or entities, which affects or relates to
               the voting or giving of written consents with respect to any
               security or by a director of the Company."

     4. Effect of Amendment. Except as expressly modified by this Amendment the
Agreement shall remain unmodified and in full force and effect.

     5. Further Assurances. The parties agree to execute such further
instruments, agreements and documents and to take such further action as may
reasonably be necessary to carry out the intent of this Amendment.

     6. Governing Law. This Amendment will be governed by and construed under
the laws of the State of New York as applied to agreements among New York
residents entered into and to be performed entirely within New York.

     7. Counterparts. This Amendment may be executed in any number of
counterparts, each of which counterparts, when so executed and delivered, shall
be deemed to be an original, and all of which counterparts, taken together,
shall constitute one and the same instrument.

                [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

                                       -4-
<PAGE>

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

                                 PEMSTAR INC., a Minnesota corporation

                                 By: / s / Al Berning     CEO
                                    --------------------------------------------
                                    Allen J. Berning, Chief Executive Officer

                      Address:   2535 Highway 14 West
                                 Rochester, Minnesota  55057

                                 INVESTORS:
                                 LB I Group Inc.

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

                      Address:   3 World Financial Center
                                 New York, NY  10285

                                 -----------------------------------------------
                                 Jeffrey M. Drazan

                      Address:
                               -------------------------------------------------

                               -------------------------------------------------

                 [SIGNATURE, PAGE TO FIRST AMENDMENT TO SERIES A
               PREFERRED STOCK PURCHASE AGREEMENT OF PEMSTAR INC.]

                                       -5-
<PAGE>

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

                                PEMSTAR INC., a Minnesota corporation

                                 By:
                                    --------------------------------------------
                                    Allen J. Berning, Chief Executive Officer

                      Address:   2535 Highway 14 West
                                 Rochester, Minnesota  55057

                                 INVESTORS:
                                 LB I Group Inc.

                                 By: /s/
                                     -------------------------------------------
                                 Title: Senior Vice President
                                        ----------------------------------------

                      Address:   3 World Financial Center
                                 New York, NY  10285

                                 -----------------------------------------------
                                 Jeffrey M. Drazan

                      Address:
                               -------------------------------------------------

                               -------------------------------------------------

                 [SIGNATURE, PAGE TO FIRST AMENDMENT TO SERIES A
               PREFERRED STOCK PURCHASE AGREEMENT OF PEMSTAR INC.]

                                       -6-
<PAGE>

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

                                PEMSTAR INC., a Minnesota corporation

                                 By:
                                    --------------------------------------------
                                    Allen J. Berning, Chief Executive Officer

                      Address:   2535 Highway 14 West
                                 Rochester, Minnesota  55057

                                 INVESTORS:
                                 LB I Group Inc.

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

                      Address:   3 World Financial Center
                                 New York, NY  10285

                                 /s/ Jeffrey M. Drazan
                                 -----------------------------------------------
                                 Jeffrey M. Drazan

                      Address: 3000 Sand Hill Road #4 - 210
                               -------------------------------------------------
                               Menlo Park, CA 94025
                               -------------------------------------------------

                 [SIGNATURE, PAGE TO FIRST AMENDMENT TO SERIES A
               PREFERRED STOCK PURCHASE AGREEMENT OF PEMSTAR INC.]

                                       -7-
<PAGE>

                                   SCHEDULE A
                                   ----------

                              SCHEDULE OF INVESTORS
                              ---------------------

                                      Cash Purchase          No. of
            Name                          Price              Shares
            ----                      -------------          -------
FIRST CLOSING:

         LB I Group Inc.               $7,800,000.00         520,000

         Jeffrey M. Drazan                199,995.00          13,333

         Subtotals:                    $7,999,995.00         533,333

SECOND CLOSING:

         LB I Group Inc.                  549,495.00          36,633

         Subtotals:                    $  549,495.00          36,633

         TOTALS:                       $8,549,490.00         569,966

                                       -8-<PAGE>

                                                                    EXHIBIT 10.9

                                  PEMSTAR INC.

                   SERIES B PREFERRED STOCK PURCHASE AGREEMENT

                                   ----------

                                  June 7, 1999
<PAGE>

                                TABLE OF CONTENTS

                                                                            Page
                                                                            ----
1.   Purchase and Sale of Stock..............................................  1
     1.1      Sale and Issuance of Series B Preferred Stock..................  1
     1.2      Closing........................................................  1

2.   Representations and Warranties of the Company...........................  1
     2.1      Organization...................................................  1
     2.2      Good Standing and Qualification................................  2
     2.3      Capitalization and Voting Rights...............................  2
     2.4      Subsidiaries...................................................  3
     2.5      Authorization..................................................  3
     2.6      Valid Issuance of Preferred and Common Stock...................  3
     2.7      Governmental Consents..........................................  4
     2.8      Litigation.....................................................  4
     2.9      Compliance with Other Instruments..............................  4
     2.10     Agreements; Action.............................................  5
     2.11     Related-Party Transactions.....................................  6
     2.12     Permits........................................................  6
     2.13     Disclosure.....................................................  6
     2.14     Minute Books...................................................  7
     2.15     Labor Agreements and Actions...................................  7
     2.16     Registration Rights............................................  7
     2.17     Returns and Complaints.........................................  7
     2.18     Offering.......................................................  7
     2.19     Title to Property and Assets; Leases...........................  7
     2.20     Financial Statements...........................................  8
     2.21     Changes........................................................  8
     2.22     Patents and Trademarks.........................................  9
     2.23     Manufacturing and Marketing Rights............................. 10
     2.24     Proprietary Information and Inventions Agreement............... 10
     2.25     Tax Returns, Payments, and Elections........................... 10
     2.26     Insurance...................................................... 11
     2.27     Environmental and Safety Laws.................................. 11
     2.28     Foreign Corrupt Practices Act.................................. 11
     2.29     Employee Benefit Plans......................................... 12

3.   Representations and Warranties of the Investor.......................... 12
     3.1      Authorization.................................................. 12
     3.2      Purchase Entirely for Own Account.............................. 12

                                       (i)
<PAGE>

     3.3      Disclosure of Information...................................... 13
     3.4      Investment Experience.......................................... 13
     3.5      Accredited Investor............................................ 13
     3.6      Restricted Securities.......................................... 13
     3.7      Further Limitations on Disposition............................. 13
     3.8      Legends........................................................ 14

4.   Conditions of Investor's Obligations at Closing......................... 14
     4.1      Representations and Warranties................................. 14
     4.2      Performance.................................................... 14
     4.3      Compliance Certificate......................................... 14
     4.4      Proceedings and Documents...................................... 14
     4.5      Opinion of Company Counsel..................................... 15
     4.6      Investors' Rights Agreement.................................... 15
     4.7      Shareholders' Agreement........................................ 15

5.   Conditions of the Company's Obligations at Closing...................... 15
     5.1      Representations and Warranties................................. 15
     5.2      Payment of Purchase Price...................................... 15

6.   Miscellaneous........................................................... 15
     6.1      Exculpation Among Investors.................................... 15
     6.2      Survival of Warranties......................................... 15
     6.3      Successors and Assigns......................................... 16
     6.4      Governing Law.................................................. 16
     6.5      Counterparts................................................... 16
     6.6      Titles and Subtitles........................................... 16
     6.7      Notices........................................................ 16
     6.8      Finder's Fee................................................... 16
     6.9      Expenses....................................................... 16
     6.10     Amendments and Waivers......................................... 17
     6.11     Severability................................................... 17
     6.12     Entire Agreement............................................... 17

 SCHEDULE A                -   Schedule of Investors
 EXHIBIT A                 -   Certificate of Designation
 EXHIBIT B                 -   Investors' Rights Agreement
 EXHIBIT C                 -   Shareholders' Agreement
 SCHEDULE OF EXCEPTIONS

                                      (ii)
<PAGE>

                   SERIES B PREFERRED STOCK PURCHASE AGREEMENT
                   -------------------------------------------

     THIS SERIES B PREFERRED STOCK PURCHASE AGREEMENT (this "Agreement") is made
as of the 7th day of June 1999, by and between PEMSTAR INC., a Minnesota
corporation (the "Company"), and the investors listed on Schedule A hereto, each
of which is herein referred to as an "Investor."

     THE PARTIES HEREBY AGREE AS FOLLOWS:

     1. Purchase and Sale of Stock.

          1.1 Sale and Issuance of Series B Preferred Stock.

               (a) The Company shall adopt and file with the Secretary of State
          of Minnesota on or before the Closing (as defined below) the
          Certificate of Designation in the form attached hereto as Exhibit A
          (the "Certificate of Designation").

               (b) Subject to the terms and conditions of this Agreement, each
          Investor agrees, severally, to purchase at the Closing and the Company
          agrees to sell and issue to each Investor at the Closing, that number
          of shares of the Company's Series B Preferred Stock set forth opposite
          each Investor's name on Schedule A hereto for the purchase price set
          forth thereon. Such purchase price shall be payable by Investor by
          delivery to Company by Investor of a check in the amount of the
          purchase price set forth opposite such Investor's name on Schedule A
          payable to the Company's order or by wire transfer of funds in such
          amount to the Company's designated bank account.

          1.2 Closing. The purchase and sale of the Series B Preferred Stock
     shall take place at Dorsey & Whitney LLP at 10:00 A.M., on June , 1999, or
     at such other time and place as the Company and Investors acquiring in the
     aggregate more than half the shares of Series B Preferred Stock sold
     pursuant hereto mutually agree upon orally or in writing (which time and
     place are designated as the "Closing"). At the Closing the Company shall
     deliver to each Investor a certificate representing the number of shares of
     Series B Preferred Stock which such Investor is purchasing against delivery
     to the Company by such Investor of the purchase price in the form as set
     forth above in Section 1.1(b).

     2. Representations and Warranties of the Company. The Company hereby
represents and warrants to each Investor that, except as set forth on a Schedule
of Exceptions attached hereto, which exceptions shall be deemed to be
representations and warranties as if made hereunder:

          2.1 Organization. The Company is a corporation duly organized, validly
     existing and in good standing under the laws of the State of Minnesota and
     has all requisite corporate power and authority to carry on its business as
     now conducted. Each of PEMSTAR de Mexico S.A. de
<PAGE>

     C.V., a Mexican corporation and a wholly-owned subsidiary of the Company,
     PEMSTAR B.V., a Dutch corporation and a wholly-owned subsidiary of the
     Company, PEMSTAR (Tianjin) Enterprise Co., Ltd., a Chinese corporation and
     a wholly-owned subsidiary of the Company, ITALADE- PEMSTAR LIMITED, a
     Thailand corporation and a 75%-owned subsidiary of the Company, and
     PEMSTAR-HONG GUAN PTE LTD, a Singapore private company and a 51%-owned
     subsidiary of the Company (each, a "Subsidiary" and collectively, the
     "Subsidiaries"), is a corporation duly organized, validly existing and in
     good standing under the laws of their respective jurisdictions, and has all
     requisite corporate power and authority to carry on its business as now
     conducted.

          2.2 Good Standing and Qualification. The Company and each of its
     Subsidiaries are duly qualified or licensed by and are in good standing in
     each jurisdiction in which they conduct their respective businesses and in
     which the failure, individually or in the aggregate, to be so licensed or
     qualified could have a material adverse effect on the assets, properties,
     condition (financial or otherwise), operating results, prospects or
     business (as such business is presently conducted and as it is proposed to
     be conducted) of the Company or its Subsidiaries (a "Material Adverse
     Effect"); and the Company and each of its Subsidiaries are in compliance in
     all material respects with the laws, orders, rules, regulations and
     directives issued or administered by such jurisdictions.

          2.3 Capitalization and Voting Rights.

               (a) The authorized capital of the Company consists, or will
          consist prior to the Closing, of:

                    (i) Preferred Stock. 5,000,000 shares of Preferred Stock, of
               which 666,667 shares have been designated Series A Preferred
               Stock (the "Series A Preferred Stock") of which 569,966 are
               issued and outstanding and 1,000,000 shares have been designated
               Series B Preferred Stock (the "Series B Preferred Stock"), up to
               all of which will be sold pursuant to this Agreement. The rights,
               privileges and preferences of the Series A Preferred Stock and
               the Series B Preferred Stock will be as stated in their
               respective Certificate of Designation.

                    (ii) Common Stock. 50,000,000 shares of common stock
               ("Common Stock"), of which 3,756,635 are currently issued and
               outstanding.

                    (iii) The outstanding shares of Series A Preferred Stock and
               Common Stock have been duly authorized and validly issued, are
               fully paid and nonassessable, and have been issued in compliance
               with applicable federal and state securities laws and are free
               and clear of all liens, security interests, pledges, charges,
               encumbrances, defects, shareholder agreements, equities or claims
               of any nature whatsoever. None of the issued shares of Series A
               Preferred Stock or Common Stock has been issued or held in
               violation of any statutory preemptive rights of shareholders.

                    (iv) Except for the conversion privileges of the Series A
               Preferred Stock and the Series B Preferred Stock, there are not
               outstanding any options, warrants, rights

                                      -2-
<PAGE>

               (including conversion or preemptive rights) or agreements for the
               purchase or acquisition from the Company of any shares of its
               capital stock; provided that the Company has reserved 1,000,000
               shares, of which options to acquire up to 1,000,000 shares have
               been granted, for issuance to employees, consultants or directors
               of the Company pursuant to equity incentive agreements approved
               by the Board of Directors. The Company is not a party or subject
               to any agreement or understanding, and there is no agreement or
               understanding between any persons and/or entities, which affects
               or relates to the voting or giving of written consents with
               respect to any security or by a director of the Company.

          2.4 Subsidiaries.

               (a) The Company does not presently own or control, directly or
          indirectly, any interest in any other corporation, association, or
          other business entity other than its Subsidiaries. The Company is not
          a participant in any joint venture, partnership, or similar
          arrangement.

               (b) All of the issued shares of capital stock of each of the
          Subsidiaries have been duly authorized and validly issued, are fully
          paid and nonassessable and are beneficially used by the Company free
          and clear of all liens, security interests, pledges, charges,
          encumbrances, defects, shareholders' agreements, voting agreements,
          proxies, voting trusts, equities or claims of any nature whatsoever.

          2.5 Authorization. All corporate action on the part of the Company or
     its Subsidiaries, their officers, directors and stockholders necessary for
     the authorization, execution and delivery of this Agreement, the First
     Amended and Restated Investors' Rights Agreement (the "Investors' Rights
     Agreement"), the First Amended and Restated Shareholders' Agreement (the
     "Shareholders' Agreement") and any other agreement to which the Company is
     a party, the execution and delivery of which is contemplated hereby (the
     "Ancillary Agreements"), the performance of all obligations of the Company
     hereunder and thereunder, and the authorization, issuance (or reservation
     for issuance), sale and delivery of the Series B Preferred Stock being sold
     hereunder and the Common Stock issuable upon conversion of the Series B
     Preferred Stock has been taken or will be taken prior to the Closing, and
     this Agreement, the Investors' Rights Agreement, the Shareholders'
     Agreement and any Ancillary Agreements constitute valid and legally binding
     obligations of the Company, enforceable in accordance with their respective
     terms, except (i) as limited by applicable bankruptcy, insolvency,
     reorganization, moratorium, and other laws of general application affecting
     enforcement of creditors' rights generally, (ii) as limited by laws
     relating to the availability of specific performance, injunctive relief, or
     other equitable remedies, and (iii) to the extent the indemnification
     provisions contained in the Investors' Rights Agreement may be limited by
     applicable federal or state securities laws.

          2.6 Valid Issuance of Preferred and Common Stock. The Series B
     Preferred Stock which is being purchased by the Investors hereunder, when
     issued, sold and delivered in accordance with the terms hereof for the
     consideration expressed herein, will be duly and validly issued, fully paid
     and nonassessable, will be free of restrictions on transfer other than
     restrictions on transfer under this Agreement and the Investors' Rights
     Agreement and Shareholders' Agreement and under

                                      -3-
<PAGE>

     applicable state and federal securities laws and, based in part upon the
     representations of the Investors in this Agreement, will be issued in
     compliance with all applicable federal and state securities laws. The
     Common Stock issuable upon conversion of the Series B Preferred Stock
     purchased under this Agreement has been duly and validly reserved for
     issuance and, upon issuance in accordance with the terms of the Articles of
     Incorporation, shall be duly and validly issued, fully paid and
     nonassessable, will be free of restrictions on transfer other than
     restrictions on transfer under this Agreement, the Investors' Rights
     Agreement, the Shareholders' Agreement and under applicable state and
     federal securities laws, and issued in compliance with all applicable
     securities laws, as presently in effect, of the United States and each of
     the states whose securities laws govern the issuance of any of the Series B
     Preferred Stock hereunder.

          2.7 Governmental Consents. No consent, approval, order or
     authorization of, or registration, qualification, designation, declaration
     or filing with, any federal, state, local or provincial governmental
     authority on the part of the Company is required in connection with the
     consummation of the transactions contemplated by this Agreement, except for
     (i) the filing of the Certificate of Designation with the Secretary of
     State of the State of Minnesota and (ii) such filings as have been made
     prior to the Closing, or such post-closing filings as may be required under
     applicable state securities laws, which will be timely filed within the
     applicable periods therefor.

          2.8 Litigation. There is no action, suit, proceeding or investigation
     pending or currently threatened against the Company or its Subsidiaries or
     any of their respective properties, at law or in equity, or before or by
     any federal, state, local or foreign governmental or regulatory commission,
     board, body, authority or agency which could result in a judgment, decree
     or order having a Material Adverse Effect or which questions the validity
     of this Agreement, the Investors' Rights Agreement, the Shareholders'
     Agreement or any Ancillary Agreements, or the right of the Company to enter
     into any of them, or to consummate the transactions contemplated hereby or
     thereby, nor is the Company aware that there is any basis for the
     foregoing. Neither the Company nor any of its Subsidiaries is a party or
     subject to the provisions of any order, writ, injunction, judgment or
     decree of any court or government agency or instrumentality. There is no
     action, suit, proceeding or investigation by or involving the Company or
     any its Subsidiaries currently pending or which the Company or any of its
     Subsidiaries intend to initiate.

          2.9 Compliance with Other Instruments. Neither the Company nor any of
     its Subsidiaries is in breach of, in violation of or in default under (nor
     has any event occurred which with notice, lapse of time, or both would
     constitute a breach of, or default under), its respective charter or
     by-laws or in the performance or observance of any obligation, agreement,
     covenant or condition contained in any license, indenture, mortgage, deed
     of trust, bank loan or credit agreement or other agreement or instrument to
     which the Company or any of its Subsidiaries is a party or by which any of
     them or their respective properties may be bound or affected, or, to the
     Company's knowledge, of any provision of federal, state, local or foreign
     law, regulation or rule or any decree, judgment, writ or order applicable
     to the Company or any of its Subsidiaries. Neither the execution, delivery
     and performance of this Agreement, the Investors' Rights Agreement, the
     Shareholders' Agreement or any Ancillary

                                       -4-
<PAGE>

     Agreement nor the consummation of the transactions contemplated hereby and
     thereby will conflict with, or result in any breach of, violation of or
     constitute a default under (or constitute any event which with notice,
     lapse of time, or both would constitute a breach of, violation of or
     default under), any provisions of the charter or by-laws, of the Company or
     any of its Subsidiaries or under any provision of any license, indenture,
     mortgage, deed of trust, bank loan or credit agreement or other agreement
     or instrument to which the Company or any of its Subsidiaries is a party or
     by which any of them or their respective properties may be bound or
     affected, or to the Company's knowledge, of any provision of federal,
     state, local or foreign law, regulation or rule or any decree, judgment,
     writ or order applicable to the Company or any of its Subsidiaries.

          2.10 Agreements; Action.

               (a) Except for agreements explicitly contemplated hereby and by
          the Investors' Rights Agreement, the Shareholders' Agreement and any
          Ancillary Agreements, there are no agreements, understandings or
          proposed transactions between the Company or its Subsidiaries and any
          of the Company's officers, directors, affiliates, or any affiliate
          thereof.

               (b) Neither the Company nor any one of its Subsidiaries is a
          party to any contract, agreement, lease, commitment or proposed
          transaction, written or oral, absolute or contingent, other than (i)
          contracts for the purchase of supplies and services that were entered
          into in the ordinary course of business and that do not extend for
          more than six (6) months beyond the date hereof, (ii) sales contracts
          entered into in the ordinary course of business, and (iii) contracts
          terminable at will by the Company on no more than thirty (30) days
          notice without cost or liability to the Company and that do not
          involve any employment or consulting arrangement and are not material
          to the conduct of the Company's business. For the purpose of this
          paragraph, employment and consulting contracts and contracts with
          labor unions, and license agreements and any other agreements relating
          to the acquisition or disposition of the Company's or its
          Subsidiaries' technology, shall not be considered to be contracts
          entered into in the ordinary course of business.

               (c) Neither the Company nor any of its Subsidiaries has (i)
          declared or paid any dividends, or authorized or made any distribution
          upon or with respect to any class or series of its capital stock, (ii)
          incurred any indebtedness for money borrowed or any other liabilities
          (other than payments due for the purchase of supplies and services
          that are due under agreements entered into in the ordinary course of
          business) individually in excess of $50,000 or, in the case of
          indebtedness and/or liabilities individually less than $50,000 in
          excess of $100,000 in the aggregate, (iii) made any loans or advances
          to any person, other than ordinary advances for travel expenses, or
          (iv) sold, exchanged or otherwise disposed of any of its assets or
          rights, other than the sale of its inventory in the ordinary course of
          business.

               (d) For the purposes of subsections (b) and (c) above, all
          indebtedness, liabilities, agreements, understandings, instruments,
          contracts and proposed transactions involving the same person or
          entity (including persons or entities the Company or any of its
          Subsidiaries has reason

                                       -5-
<PAGE>

          to believe are affiliated therewith) shall be aggregated for the
          purpose of meeting the individual minimum dollar amounts of such
          subsections.

               (e) The Company is not a party to and is not bound by any
          contract, agreement or instrument, or subject to any restriction under
          its Articles of Incorporation or Bylaws that would have a Material
          Adverse Effect.

               (f) The Company has not pursued in the past three (3) months in
          any substantive discussion (i) with any representative of any
          corporation or corporations regarding the consolidation or merger of
          the Company in which the Company is not the surviving corporation,
          (ii) with any corporation, partnership, association or other business
          entity or any individual regarding the sale, conveyance or disposition
          of all or substantially all of the assets of the Company or a
          transaction or series of related transactions in which more than fifty
          percent (50%) of the voting power of the Company is disposed of, or
          (iii) regarding any other form of acquisition, liquidation,
          dissolution or winding up of the Company.

          2.11 Related-Party Transactions. No employee, officer or director of
     the Company or any of its Subsidiaries and no member of the immediate
     family of such employee, officer or director is indebted to the Company or
     any of its Subsidiaries, nor is the Company or any of its Subsidiaries
     indebted (or committed to make loans or extend or guarantee credit) to any
     such employee, officer or director. To the best of the Company's knowledge,
     none of such persons has any direct or indirect ownership interest in any
     firm or corporation with which the Company or any of its Subsidiaries is
     affiliated or with which the Company or any of its Subsidiaries has a
     business relationship, or any firm or corporation that competes with the
     Company or any of its Subsidiaries, except that employees, officers, or
     directors of the Company and its Subsidiaries and the members of the
     immediate families of such employees, officers or directors may own stock
     in publicly traded companies (not to exceed 5% of the issued and
     outstanding shares of such publicly traded companies) that may have a
     business relationship with or compete with the Company or any of its
     Subsidiaries. No member of the immediate family of any employee, officer or
     director of the Company or any of its Subsidiaries is directly or
     indirectly interested in any material contract with the Company or any of
     its Subsidiaries.

          2.12 Permits. Each of the Company and its Subsidiaries has all
     necessary licenses, authorizations, consents and approvals and has made all
     necessary filings required under any federal, state, local or foreign law,
     regulation or rule, and has obtained all necessary authorizations, consents
     and approvals from other persons, in order to conduct its respective
     business; neither the Company nor any of its Subsidiaries is in violation
     of, or in default under, any such license, authorization, consent or
     approval or any federal, state, local or foreign law, regulation or rule or
     any decree, order or judgment applicable to the Company or any of its
     Subsidiaries the effect of which could have a Material Adverse Effect.

          2.13 Disclosure. The Company has fully provided each Investor with all
     the information which such Investor has requested in connection with the
     purchase of the Series B

                                       -6-
<PAGE>

     Preferred Stock hereunder and all information which the Company believes is
     reasonably necessary to enable such Investor to make such decision. Neither
     this Agreement, the Investors' Rights Agreement, the Shareholders'
     Agreement, nor any Ancillary Agreements, nor any other statements,
     certificates or documents made or delivered in connection herewith or
     therewith, contains any untrue statement of a material fact or omits to
     state a material fact necessary to make the statements herein or therein
     not misleading in light of the circumstances under which they were made.

          2.14 Minute Books. The minute books of the Company and its
     Subsidiaries provided to the Investors contain a complete summary of all
     meetings of directors and stockholders since the time of incorporation and
     reflect all transactions referred to in such minutes accurately in all
     material respects.

          2.15 Labor Agreements and Actions. Neither the Company nor any one of
     its Subsidiaries is bound by or subject to (and none of its assets or
     properties is bound by or subject to) any written or oral, express or
     implied, contract, commitment or arrangement with any labor union, and no
     labor union has requested or, to the knowledge of the Company, has sought
     to represent any of the employees, representatives or agents of the Company
     or its Subsidiaries. There is no strike or other labor dispute involving
     the Company or its Subsidiaries pending, or to the knowledge of the Company
     threatened, which could have a Material Adverse Effect nor is the Company
     aware of any labor organization activity involving its employees. The
     Company is not aware that any officer or key employee, or that any group of
     key employees, intends to terminate their employment with the Company or
     its Subsidiaries, nor does the Company or any of its Subsidiaries have a
     present intention to terminate the employment of any of the foregoing.
     Subject to general principles related to wrongful termination of employees,
     the employment of each officer and employee of the Company or its
     Subsidiaries is terminable at the will of the Company or its Subsidiaries.

          2.16 Registration Rights. Except as provided in the Investors' Rights
     Agreement, the Company is not obligated to register under the Securities
     Act of 1933, as amended (the "Securities Act") any of its presently
     outstanding securities or any of its securities that may subsequently be
     issued.

          2.17 Returns and Complaints. Neither the Company nor any one of its
     Subsidiaries has received customer complaints concerning alleged defects in
     the design of its products that, if true, would have a Material Adverse
     Effect.

          2.18 Offering. Subject in part to the truth and accuracy of each
     Investor's representations set forth in this Agreement, the offer, sale and
     issuance of the Series B Preferred Stock as contemplated by this Agreement
     is exempt from the registration requirements of the Securities Act, and
     neither the Company nor any authorized agent acting on its behalf will take
     any action hereafter that would cause the loss of such exemption.

          2.19 Title to Property and Assets; Leases. Each of the Company and its
     Subsidiaries has good title to all properties and assets owned by such
     entity and has good leasehold

                                       -7-
<PAGE>

     interests in each property and asset leased by such entity, in each case
     free and clear of all pledges, liens, encumbrances, security interests,
     charges, mortgages and defects, except such as do not materially affect the
     value of such property and such as do not interfere with the use made and
     proposed to be made of such properties by each of the Company and its
     Subsidiaries.

          2.20 Financial Statements. The Company has delivered to each Investor
     its audited financial statements (balance sheet and profit and loss
     statement including notes thereto) as at and for the year ended March 31,
     1998 and its unaudited financial statements (balance sheet and profit and
     loss statement) as at and for the year ended March 31, 1999 (the "Financial
     Statements"). Except as set forth in the Financial Statements, each of the
     Company and its Subsidiaries has no material liabilities, contingent or
     otherwise, other than (i) liabilities incurred in the ordinary course of
     business subsequent to March 31, 1999 and (ii) obligations under contracts
     and commitments incurred in the ordinary course of business and not
     required under generally accepted accounting principles to be reflected in
     the Financial Statements, which, in both cases, individually or in the
     aggregate, are not material to the financial condition, operating results
     or prospects of the Company. Except as disclosed in the Financial
     Statements, neither the Company nor any of its Subsidiaries is a guarantor
     or indemnitor of any indebtedness of any other person, firm or corporation.
     The Company and its Subsidiaries maintain and will continue to maintain a
     standard system of accounting established and administered in accordance
     with generally accepted accounting principles.

          2.21 Changes. Since March 31, 1999, there has not been:

               (a) Any change in the assets, liabilities, financial condition,
          operating results or prospects of the Company or any of its
          Subsidiaries from that reflected in the Financial Statements, except
          changes in the ordinary course of business that have not had, in the
          aggregate, a Material Adverse Effect;

               (b) Any damage, destruction or loss, whether or not covered by
          insurance, which would have a Material Adverse Effect;

               (c) Any waiver or compromise by the Company or any of its
          Subsidiaries of a valuable right or of a material debt owed to it;

               (d) Any satisfaction or discharge of any lien, claim or
          encumbrance or payment of any obligation by the Company or any of its
          Subsidiaries, except in the ordinary course of business and which is
          not material to the business, properties, prospects or financial
          condition of the Company and its Subsidiaries (as such business is
          presently conducted and as it is proposed to be conducted);

               (e) Any material change to a material contract or arrangement by
          which the Company or any of its Subsidiaries, or any of their assets,
          are bound or subject;

                                       -8-
<PAGE>

               (f) Any material change in any compensation arrangement or
          agreement with any employee, officer, director, or stockholder of the
          Company or any of its Subsidiaries;

               (g) Any sale, assignment or transfer of any patents, trademarks,
          copyrights, trade secrets or other intangible assets of the Company or
          any of its Subsidiaries;

               (h) Any resignation or termination of employment of any key
          officer of the Company or any of its Subsidiaries; and the Company, to
          its knowledge, does not know of the impending resignation or
          termination of employment of any such officer;

               (i) Receipt of notice that there has been a loss of, or material
          order cancellation by, any major customer of the Company or any of its
          Subsidiaries;

               (j) Any mortgage, pledge, transfer of a security interest in, or
          lien, created by the Company or any of its Subsidiaries, with respect
          to any of its material properties or assets, except liens for taxes
          not yet due or payable;

               (k) Any loans or guarantees made by the Company or its
          Subsidiaries to or for the benefit of its employees, officers or
          directors, or any members of their immediate families, other than
          travel advances and other advances made in the ordinary course of
          their business;

               (l) Any declaration, setting aside or payment or other
          distribution in respect of the Company's or any of its Subsidiaries'
          capital stock, or any direct or indirect redemption, purchase or other
          acquisition of any of such stock by the Company or any of its
          Subsidiaries;

               (m) Any other event or condition of any character that might have
          a Material Adverse Effect; or

               (n) Any agreement or commitment by the Company or any of its
          Subsidiaries to do any of the things described in this Section 2.21.

          2.22 Patents and Trademarks. Each of the Company and its Subsidiaries
     owns or possesses sufficient legal rights to all patents, trademarks,
     servicemarks, trade names, copyrights, trade secrets, licenses,
     information, proprietary rights and processes necessary for its business as
     now conducted and as proposed to be conducted without any conflict with or
     infringement of the rights of others. The Schedule of Exceptions contains a
     complete list of patents and pending patent applications of each of the
     Company and its Subsidiaries. Except for agreements with its own employees
     or consultants, substantially in the form referenced in Section 2.24 below,
     there are no outstanding options, licenses, or agreements of any kind
     relating to the foregoing, nor is the Company or any of its Subsidiaries
     bound by or a party to any options, licenses or agreements of any kind with
     respect to the patents, trademarks, service marks, trade names, copyrights,
     trade secrets, licenses, information, proprietary rights and processes of
     any other person or entity. Neither the Company nor any of its

                                       -9-
<PAGE>

     Subsidiaries has received any communications alleging that the Company or
     any of its Subsidiaries has violated or, by conducting its business as
     proposed, would violate any of the patents, trademarks, service marks,
     trade names, copyrights, trade secrets or other proprietary rights of any
     other person or entity nor is the Company or any of its Subsidiaries aware
     of any basis therefor. The Company is not aware that any of its employees
     is obligated under any contract (including licenses, covenants or
     commitments of any nature) or other agreement, or subject to any judgment,
     decree or order of any court or administrative agency, that would interfere
     with the use of such employee's best efforts to promote the interests of
     the Company and its Subsidiaries or that would conflict with the Company's
     or any Subsidiary's business as proposed to be conducted. Neither the
     execution nor delivery of this Agreement, nor the carrying on of the
     Company's or any Subsidiary's business by the employees of the Company or
     such Subsidiary, nor the conduct of the Company's or such Subsidiary's
     business as proposed, will, to the best of the Company's knowledge,
     conflict with or result in a breach of the terms, conditions or provisions
     of, or constitute a default under, any contract, covenant or instrument
     under which any of such employees is now obligated. The Company does not
     believe it is or will be necessary to use any inventions of any of its
     employees (or persons it currently intends to hire) made prior to the
     employment of such employees by the Company or any of its Subsidiaries.

          2.23 Manufacturing and Marketing Rights. Neither the Company nor any
     of its Subsidiaries has granted rights to manufacture, produce, assemble,
     license, market, or sell its products to any other person, and is not bound
     by any agreement that affects the Company's or any of its Subsidiaries'
     exclusive right to develop, manufacture, assemble, distribute, market, or
     sell its products.

          2.24 Proprietary Information and Inventions Agreement. Each employee,
     officer and director of the Company has executed an agreement to be bound
     by the terms of the Company's Employee Handbook; the Company's Employee
     Handbook has been previously delivered to special counsel for the Investors
     and contains restrictions on the use of the Company's proprietary
     information by its employees and the ownership of inventions. Each of the
     Subsidiaries have similar protective measures in place relating to their
     respective proprietary information and inventions.

          2.25 Tax Returns, Payments, and Elections. The Company and its
     Subsidiaries have filed all tax returns and reports as required by law.
     These returns and reports are true and correct in all material respects.
     The Company and its Subsidiaries have paid all taxes and other assessments
     due, except those contested by it in good faith. The provision for taxes of
     the Company as shown in the Financial Statements is adequate for taxes due
     or accrued as of the date thereof. The Company has not elected pursuant to
     the Internal Revenue Code of 1986, as amended ("Code"), to be treated as an
     S corporation or a collapsible corporation pursuant to Section 341(f) of
     Section 1362(a) of the Code, nor has it made any other elections pursuant
     to the Code (other than elections which relate solely to methods of
     accounting, depreciation or amortization) which would have a Material
     Adverse Effect. The Company has never had any tax deficiency proposed or
     assessed against it or any of its Subsidiaries and has not executed any
     waiver of any statute of limitations on the assessment or collection of any
     tax or governmental charge. None of the Company's federal income tax
     returns and none of its state income or franchise tax or sales or use tax
     returns has ever been audited by

                                      -10-
<PAGE>

     governmental authorities. Since the date of the Financial Statements, the
     Company has made adequate provisions on its books of account for all taxes,
     assessments and governmental charges with respect to its business,
     properties and operations for such period. The Company has withheld or
     collected from each payment made to each of its employees, the amount of
     all taxes (including, but not limited to, federal income taxes, Federal
     Insurance Contribution Act taxes and Federal Unemployment Tax Act taxes)
     required to be withheld or collected therefrom, and has paid the same to
     the proper tax receiving officers or authorized depositaries.

          2.26 Insurance. The Company and its Subsidiaries have in effect, with
     financially sound insurers, insurance with respect to their businesses and
     properties against liability, loss or damage of the kind customarily
     insured against by corporations engaged in the same or similar businesses
     and similarly situated, or such types and in such amounts as are
     customarily carried under similar circumstances by such other corporations.

          2.27 Environmental and Safety Laws. To the best of the Company's
     knowledge, the business, operations and facilities of the Company and each
     of its Subsidiaries have been and are being conducted in compliance with
     all applicable laws, ordinances, rules, regulations, licenses, permits,
     approvals, plans, authorizations or requirements relating to occupational
     safety and health, pollution, protection of health or the environment, or
     reclamation (including, without limitation, those relating to emissions,
     discharges, releases or threatened releases of pollutants, contaminants or
     hazardous or toxic substances, materials or wastes into ambient air,
     surface water, groundwater or land, or relating to the manufacture,
     processing, distribution, use, treatment, storage, disposal, transport or
     handling of chemical substances, pollutants, contaminants or hazardous or
     toxic substances, materials or wastes, whether solid, gaseous or liquid in
     nature) or otherwise relating to remediating real property in which the
     Company or any of its Subsidiaries has any interest, whether owned or
     leased, of any governmental department, commission, board, bureau, agency
     or instrumentality of the United States, any state or political subdivision
     thereof or any foreign jurisdiction and all applicable judicial or
     administrative agency or regulatory decrees, awards, judgments and orders
     relating thereto (collectively "Environmental Regulations"); and neither
     the Company nor any of its Subsidiaries has received any notice from a
     governmental instrumentality or any third party alleging any violation of
     any Environmental Regulation or liability thereunder (including, without
     limitation, liability for costs of investigating or remediating sites
     containing hazardous substances or damages to natural resources).

          2.28 Foreign Corrupt Practices Act. Neither the Company nor any of its
     Subsidiaries, nor any director, officer, agent, employee, or other person
     acting, with actual or apparent authority, on behalf of the Company or any
     of its Subsidiaries has, at any relevant time, directly or indirectly: (i)
     knowingly, unlawfully and corruptly made contributions, gifts, expenditures
     for entertainment, or other unlawful expenditures relating to political
     activity for the purpose of obtaining or retaining business; (ii)
     knowingly, unlawfully and corruptly made payments to government officials
     or employees or to political parties or campaigns for the purpose of
     obtaining or retaining business; (iii) violated any applicable provision of
     the U.S. Foreign Corrupt Practices Act of 1977, as amended (the "FCPA");
     (iv) violated any applicable provision of U.S. "fraud and abuse
     legislation" or U.S. "anti-

                                      -11-
<PAGE>

     kickback law"; or (v) made any other material payment in the nature of a
     bribe, rebate, kickback, payoff or influence payment which was unlawful
     under applicable law at the relevant time, and the Company's internal
     accounting controls and procedures are sufficient to provide reasonable
     assurance that the Company's transactions are executed and recorded in
     accordance with the requirements of the FCPA.

          2.29 Employee Benefit Plans. The Company and its Subsidiaries do not
     maintain, contribute to or have any material liability with respect to any
     employee benefit plan, profit sharing plan, employee pension benefit plan,
     employee welfare benefit plan, equity-based plan or deferred compensation
     plan or arrangements (collectively, "Plans") that are subject to the
     provisions of the Employee Retirement Income Security Act of 1974, as
     amended, and the rules and regulations thereunder ("ERISA"). All Plans are
     in compliance in all material respects with all applicable laws, including
     but not limited to ERISA and the Internal Revenue Code of 1986, as amended
     (the "Code"), and have been operated and administered in all material
     respects in accordance with their terms. No Plan is a defined benefit plan
     or multiemployer plan. The Company does not provide retiree life and/or
     retiree health benefits or coverage for any employee or any beneficiary of
     any employee after such employee's termination of employment, except as
     required by Section 4980B of the Code or under a Plan which is intended to
     be "qualified" under Section 401(a) of the Code. No Plan has been involved
     in any prohibited transaction under Section 406 of ERISA or Section 4975 of
     the Code. Full payment has been made of all amounts which the Company or
     any of its Subsidiaries were required under the terms of the Plans to have
     paid as contributions to such Plans on or prior to the date hereof
     (excluding any amounts not yet due). No material liability, claim, action
     or litigation has been incurred, made commenced or, to the knowledge of the
     Company, threatened, by or against the Company or any of its Subsidiaries
     with respect to any Plan (other than for benefits payable in the ordinary
     course). No material liability has been, or could reasonably be expected to
     be, incurred under Title IV of ERISA or Section 4001(b) of ERISA and/or
     Section 414(b) of (c) of the Code (and the regulations promulgated
     thereunder) with respect to any "employee pension benefit plan" which is
     not a Plan. As used in this subsection, the terms "defined benefit plan,"
     "employee benefit plan," "employee pension benefit plan," "employee welfare
     benefit plan" and "multiemployer plan" shall have the respective meanings
     assigned to such terms in Section 3 of ERISA.

     3. Representations and Warranties of the Investor. Each Investor hereby
represents and warrants that:

          3.1 Authorization. This Agreement constitutes its valid and legally
     binding obligation, enforceable in accordance with its terms.

          3.2 Purchase Entirely for Own Account. This Agreement is made with
     each Investor in reliance upon such Investor's representation to the
     Company, which by such Investor's execution of this Agreement such Investor
     hereby confirms, that the Series B Preferred Stock to be received by such
     Investor and the Common Stock issuable upon conversion thereof
     (collectively, the "Securities") will be acquired for investment for such
     Investor's own account, not as a nominee or agent,

                                      -12-
<PAGE>

     and not with a view to the resale or distribution of any part thereof, and
     that such Investor has no present intention of selling, granting any
     participation in, or otherwise distributing the same. By executing this
     Agreement, each Investor further represents that such Investor does not
     have any contract, undertaking, agreement or arrangement with any person to
     sell, transfer or grant participations to such person or to any third
     person, with respect to any of the Securities. Each Investor represents
     that it has full power and authority to enter into this Agreement.

          3.3 Disclosure of Information. Such Investor believes it has received
     all of the information it considers necessary or appropriate for deciding
     whether to purchase the Series B Preferred Stock. Each Investor further
     represents that it has had an opportunity to ask questions and receive
     answers from the Company regarding the terms and conditions of the offering
     of the Series B Preferred Stock. The foregoing, however, does not limit or
     modify the representations and warranties of the Company in Section 2 of
     this Agreement or the right of the Investors to rely thereon.

          3.4 Investment Experience. Such Investor is an investor in securities
     of companies in the development stage and acknowledges that it is able to
     fend for itself, can bear the economic risk of its investment and has such
     knowledge and experience in financial or business matters that it is
     capable of evaluating the merits and risks of the investment in the Series
     B Preferred Stock.

          3.5 Accredited Investor. Such Investor is an "accredited investor"
     within the meaning of the Securities and Exchange Commission's (the "SEC")
     Rule 501 of Regulation D, as presently in effect. If other than an
     individual, Investor also represents that it has not been organized for the
     purpose of acquiring the Series B Preferred Stock.

          3.6 Restricted Securities. Such Investor understands that the shares
     of Series B Preferred Stock it is purchasing are characterized as
     "restricted securities" under the federal securities laws inasmuch as they
     are being acquired from the Company in a transaction not involving a public
     offering and that under such laws and applicable regulations such
     securities may be resold without registration under the Securities Act,
     only in certain limited circumstances. In this connection, each Investor
     represents that it is familiar with SEC Rule 144, as presently in effect,
     and understands the resale limitations imposed thereby and by the
     Securities Act.

          3.7 Further Limitations on Disposition. Without in any way limiting
     the representations set forth above, each Investor further agrees not to
     make any disposition of all or any portion of the Series B Preferred Stock
     (or the Common Stock issuable upon the conversion thereof) unless and until
     the transferee has agreed in writing for the benefit of the Company to be
     bound by this Section 3.7, to the extent such section is then applicable,
     the Investors' Rights Agreement, the Shareholders' Agreement and any
     applicable Ancillary Agreement and:

               (a) there is then in effect a Registration Statement under the
          Securities Act covering such proposed disposition and such disposition
          is made in accordance with such Registration Statement; or

                                      -13-
<PAGE>

               (b) (i) such Investor shall have notified the Company of the
          proposed disposition and shall have furnished the Company with a
          detailed statement of the circumstances surrounding the proposed
          disposition, and (ii) if reasonably requested by the Company, such
          Investor shall have furnished the Company with an opinion of counsel,
          reasonably satisfactory to the Company, that such disposition will not
          require registration of such shares under the Securities Act. It is
          agreed that the Company will not require opinions of counsel for
          transactions made pursuant to Rule 144 under the Securities Act except
          in unusual circumstances.

               (c) notwithstanding the provisions of paragraphs (a) and (b)
          above, no such registration statement or opinion of counsel shall be
          necessary for a transfer without value by an Investor which is a
          partnership to a partner of such partnership or a retired partner of
          such partnership who retires after the date hereof, or to the estate
          of any such partner or retired partner or the transfer by gift, will
          or intestate succession of any partner to his spouse or to the
          siblings, lineal descendants or ancestors of such partner or his
          spouse, or to an affiliate (as such term is defined in Rule 405 under
          the Securities Act) of such Investor, if the transferee agrees in
          writing to be subject to the terms hereof to the same extent as if he
          were an original Investor hereunder.

          3.8 Legends. It is understood that the certificates evidencing the
     Series B Preferred Stock (and the Common Stock issuable upon conversion
     thereof) may bear one or all of the following legends:

               (a) "These securities have not been registered under the
          Securities Act of 1933. They may not be sold, offered for sale,
          pledged or hypothecated in the absence of a registration statement in
          effect with respect to the securities under such Act or an opinion of
          counsel satisfactory to the Company that such registration is not
          required or unless sold pursuant to Rule 144 of such Act."

               (b) Any legend required to be placed thereon by applicable state
          securities laws.

     4. Conditions of Investor's Obligations at Closing. The obligations of each
Investor under subsection 1.1(b) of this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions, the
waiver of which shall not be effective against any Investor who does not consent
in writing thereto:

          4.1 Representations and Warranties. The representations and warranties
     of the Company contained in Section 2 shall be true on and as of the
     Closing with the same effect as though such representations and warranties
     had been made on and as of the date of such Closing.

          4.2 Performance. The Company shall have performed and complied with
     all agreements, obligations and conditions contained in this Agreement that
     are required to be performed or complied with by it on or before the
     Closing.

                                      -14-
<PAGE>

          4.3 Compliance Certificate. The President, or a Vice President and the
     Chief Financial Officer, of the Company shall deliver to each Investor at
     the Closing a certificate certifying that the conditions specified in
     Sections 4.1 and 4.2 have been fulfilled and stating that there shall have
     been no adverse change in the business, affairs, prospects, operations,
     properties, assets or condition of the Company since March 31, 1999.

          4.4 Proceedings and Documents. All corporate and other proceedings in
     connection with the transactions contemplated at the Closing and all
     documents incident thereto shall be reasonably satisfactory in form and
     substance to Investors' special counsel, and they shall have received all
     such counterpart original and certified or other copies of such documents
     as they may reasonably request. All corporate and other proceedings to be
     taken and all waivers, consents and permits necessary or appropriate for
     the consummation of the transactions contemplated by this Agreement shall
     have been taken or obtained.

          4.5 Opinion of Company Counsel. Each Investor shall have received from
     Dorsey & Whitney LLP, counsel for the Company, an opinion, dated as of the
     Closing, in form and substance satisfactory to special counsel to the
     Investors.

          4.6 Investors' Rights Agreement. The Company and all other Investors
     shall have entered into the Investors' Rights Agreement, in the form
     attached hereto as Exhibit C.

          4.7 Shareholders' Agreement. The Company, all other Investors and the
     shareholders of the Company party thereto shall have entered into the
     Pemstar Inc. Shareholders' Agreement (the "Shareholders' Agreement"), in
     the form attached hereto as Exhibit D.

          4.8. Quadrus Manufacturing Acquisition. The Company, prior to or
     simultaneous with the Closing, shall have closed the acquisition of assets
     of the Quadrus Manufacturing division of Bell Microproducts Inc. pursuant
     to the Asset Purchase Agreement between the Company and Bell Microproducts
     Inc. dated April 30, 1999.

          4.9. U.S. Bank Financing. The Company, prior to or simultaneous with
     the Closing, shall have closed the $40 million Credit Agreement with U.S.
     Bank currently being negotiated, on substantially the same terms as
     outlined in the summary term sheet dated May 11, 1999 that was provided to
     the Investors.

     5. Conditions of the Company's Obligations at Closing. The obligations of
the Company to each Investor under this Agreement are subject to the fulfillment
on or before the Closing of each of the following conditions by that Investor:

          5.1 Representations and Warranties. The representations and warranties
     of the Investor contained in Section 3 shall be true on and as of the
     Closing with the same effect as though such representations and warranties
     had been made on and as of the Closing.

                                      -15-
<PAGE>

          5.2 Payment of Purchase Price. The Investor shall have delivered the
     purchase price specified in Section 1.2.

     6. Miscellaneous.

          6.1 Exculpation Among Investors. Each Investor acknowledges that it is
     not relying upon any person, firm or corporation (including without
     limitation any other Investor), other than the Company and its officers and
     directors (acting in their capacity as representatives of the Company), in
     deciding to invest and in making its investment in the Company. Each
     Investor agrees that no other Investor nor the respective controlling
     persons, officers, directors, partners, agents or employees of any other
     Investor shall be liable to such Investor for any losses incurred by such
     Investor in connection with its investment in the Company.

          6.2 Survival of Warranties. The warranties, representations and
     covenants of the Company and Investors contained in or made pursuant to
     this Agreement shall survive the execution and delivery of this Agreement
     and the Closing and shall in no way be affected by any investigation of the
     subject matter thereof made by or on behalf of the Investors or the
     Company.

          6.3 Successors and Assigns. Except as otherwise provided herein, the
     terms and conditions of this Agreement shall inure to the benefit of and be
     binding upon the respective successors and assigns of the parties
     (including transferees of any shares of Series B Preferred Stock or any
     Common Stock issued upon conversion thereof). Nothing in this Agreement,
     express or implied, is intended to confer upon any party other than the
     parties hereto or their respective successors and assigns any rights,
     remedies, obligations, or liabilities under or by reason of this Agreement,
     except as expressly provided in this Agreement.

          6.4 Governing Law. This Agreement shall be governed by and construed
     under the laws of the State of New York as applied to agreements among New
     York residents entered into and to be performed entirely within New York.

          6.5 Counterparts. This Agreement may be executed in two or more
     counterparts, each of which shall be deemed an original, but all of which
     together shall constitute one and the same instrument.

          6.6 Titles and Subtitles. The titles and subtitles used in this
     Agreement are used for convenience only and are not to be considered in
     construing or interpreting this Agreement.

          6.7 Notices. Unless otherwise provided, any notice required or
     permitted under this Agreement shall be given in writing and shall be
     deemed effectively given upon (a) personal delivery to the party to be
     notified, (b) upon telefacsimile transmission to the party to be notified
     at the telefacsimile number indicated for such party on the signature page
     hereof, if any, or (c) upon deposit with an overnight courier service or
     the United States Post Office, by registered or certified mail,

                                      -16-
<PAGE>

     postage prepaid and addressed to the party to be notified at the
     address(es) indicated for such party on the signature page hereof, or at
     such other address as such party may designate by ten (10) days' advance
     written notice to the other parties.

          6.8 Finder's Fee. Each party represents that it neither is nor will be
     obligated for any finder's fee or commission in connection with this
     transaction. Each Investor agrees to indemnify and to hold harmless the
     Company from any liability for any commission or compensation in the nature
     of a finder's fee (and the costs and expenses of defending against such
     liability or asserted liability) for which the Investor or any of its
     officers, partners, employees, or representatives is responsible. The
     Company agrees to indemnify and hold harmless each Investor from any
     liability for any commission or compensation in the nature of a finder's
     fee (and the costs and expenses of defending against such liability or
     asserted liability) for which the Company or any of its officers, employees
     or representatives is responsible.

          6.9 Expenses. Irrespective of whether the Closing is effected, the
     Company shall pay all costs and expenses that it incurs with respect to the
     negotiation, execution, delivery and performance of this Agreement. If the
     Closing is effected, the Company shall, at the Closing, reimburse the
     reasonable fees and expenses of special counsel for the Investors (not to
     exceed $20,000). If any action at law or in equity is necessary to enforce
     or interpret the terms of this Agreement or the Articles of Incorporation,
     the prevailing party shall be entitled to reasonable attorneys' fees, costs
     and necessary disbursements in addition to any other relief to which such
     party may be entitled.

          6.10 Amendments and Waivers. Any term of this Agreement may be amended
     and the observance of any term of this Agreement may be waived (either
     generally or in a particular instance and either retroactively or
     prospectively), only with the written consent of the Company and the
     holders of a majority of the Common Stock issued or issuable upon
     conversion of the Series B Preferred Stock issued pursuant hereto. Any
     amendment or waiver effected in accordance with this paragraph shall be
     binding upon each holder of any securities purchased under this Agreement
     at the time outstanding (including securities into which such securities
     are convertible), each future holder of all such securities, and the
     Company; provided, however, that no condition set forth in Section 5 hereof
     may be waived with respect to any Investor who does not consent thereto.

          6.11 Severability. If one or more provisions of this Agreement are
     held to be unenforceable under applicable law, such provision shall be
     excluded from this Agreement and the balance of the Agreement shall be
     interpreted as if such provision were so excluded and shall be enforceable
     in accordance with its terms.

          6.12 Entire Agreement. This Agreement and the documents referred to
     herein constitute the entire agreement among the parties and no party shall
     be liable or bound to any other party in any manner by any warranties,
     representations, or covenants except as specifically set forth herein or
     therein.

                                      -17-
<PAGE>

          6.13. Like Treatment of Holders. Neither the Company nor any of its
     affiliates shall, directly or indirectly, pay or cause to be paid any
     consideration, whether by way of interest, fee, payment for the redemptions
     or exchange of Preferred Stock, or otherwise, to any holder of Preferred
     Stock for or as an inducement to, or in connection with the solicitation
     of, any consent, waiver of or amendment of any terms or provisions of the
     Preferred Stock or this Agreement, the Investors' Rights Agreement, the
     Shareholders' Agreement or any Ancillary Agreement, unless such
     consideration is paid to all holders of Preferred Stock bound by such
     consent, waiver or amendment, whether or not such holders so consent, waive
     or agree to amend and whether or not such holders tender their Preferred
     Stock for redemption or exchange.

                                   PEMSTAR INC., a Minnesota corporation

                                   By:
                                       -----------------------------------------
                                       Robert R. Murphy, Chief Financial Officer

                         Address:  3535 Technology Drive N.W.
                                   Rochester, Minnesota 55901

                                   INVESTORS:

                                   LEHMAN BROTHERS VENTURE
                                   PARTNERS L.P.

                                   By: Lehman Brothers Venture Associates Inc.
                                   Its: General Partner

                                   ---------------------------------------------
                                   (Signature)

                                   ---------------------------------------------
                                   (Name)

                                   ---------------------------------------------
                                   (Title)

                         Address:  3 World Financial Center
                                   New York, NY  10285
<PAGE>

                    [SIGNATURE PAGE TO THE SERIES B PREFERRED
                            STOCK PURCHASE AGREEMENT]
<PAGE>

                                              LEHMAN BROTHERS VENTURE
                                              CAPITAL PARTNERS I, L.P.

                                              By: LB I Group Inc.
                                              Its: General Partner

                                              ----------------------------------
                                              (Signature)

                                              ----------------------------------
                                              (Name)

                                              ----------------------------------
                                              (Title)

                                    Address:  3 World Financial Center
                                              New York, NY  10285

                                              LEHMAN BROTHERS VC
                                              PARTNERS L.P.

                                              By: LB I Group Inc.
                                              Its: General Partner

                                              ----------------------------------
                                              (Signature)

                                              ----------------------------------
                                              (Name)

                                              ----------------------------------
                                              (Title)

                                    Address:  3 World Financial Center
                                              New York, NY  10285
<PAGE>

                   [SIGNATURE PAGE TO THE SERIES B PREFERRED
                            STOCK PURCHASE AGREEMENT]

                                   SCHEDULE A

                              SCHEDULE OF INVESTORS
                              ---------------------

                                                  Cash Purchase     No. of
        Name                                         Price           Shares
------------------------------------------------  -------------    ---------
Lehman Brothers Venture Partners L.P.               $3,678,948      204,386
Lehman Brothers Venture Capital Partners I, L.P.    $2,201,436      122,302
Lehman Brothers VC Partners L.P.                   $12,119,616      673,312
                  CLOSING TOTALS:

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