EXHIBIT 10.9
PEMSTAR INC.
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
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June 7, 1999
TABLE OF CONTENTS
Page
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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)
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)
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
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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 Xxxxxx & Xxxxxxx 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
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-XXXX XXXX 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
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(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
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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
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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
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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
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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
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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;
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(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
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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-
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-
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-
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-
(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-
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
Xxxxxx & Xxxxxxx 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 Xxxx Microproducts Inc. pursuant
to the Asset Purchase Agreement between the Company and Xxxx 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-
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-
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-
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:
-----------------------------------------
Xxxxxx X. Xxxxxx, Chief Financial Officer
Address: 0000 Xxxxxxxxxx Xxxxx X.X.
Xxxxxxxxx, Xxxxxxxxx 00000
INVESTORS:
XXXXXX BROTHERS VENTURE
PARTNERS L.P.
By: Xxxxxx Brothers Venture Associates Inc.
Its: General Partner
---------------------------------------------
(Signature)
---------------------------------------------
(Name)
---------------------------------------------
(Title)
Address: 0 Xxxxx Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
[SIGNATURE PAGE TO THE SERIES B PREFERRED
STOCK PURCHASE AGREEMENT]
XXXXXX BROTHERS VENTURE
CAPITAL PARTNERS I, L.P.
By: LB I Group Inc.
Its: General Partner
----------------------------------
(Signature)
----------------------------------
(Name)
----------------------------------
(Title)
Address: 0 Xxxxx Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
XXXXXX BROTHERS VC
PARTNERS L.P.
By: LB I Group Inc.
Its: General Partner
----------------------------------
(Signature)
----------------------------------
(Name)
----------------------------------
(Title)
Address: 0 Xxxxx Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
[SIGNATURE PAGE TO THE SERIES B PREFERRED
STOCK PURCHASE AGREEMENT]
SCHEDULE A
SCHEDULE OF INVESTORS
---------------------
Cash Purchase No. of
Name Price Shares
------------------------------------------------ ------------- ---------
Xxxxxx Brothers Venture Partners L.P. $3,678,948 204,386
Xxxxxx Brothers Venture Capital Partners I, L.P. $2,201,436 122,302
Xxxxxx Brothers VC Partners L.P. $12,119,616 673,312
CLOSING TOTALS:
