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EXHIBIT 10.1
JOINT VENTURE AGREEMENT
THIS JOINT VENTURE AGREEMENT is made as of this __________ day of
___________________, 1998 by and between PEMSTAR INC. ("PEMSTAR"), a corporation
organized under the laws of the State of Minnesota with its principal offices at
2535 Highway 14 West, Rochester, Minnesota 55901, U.S.A. and HONGGUAN
TECHNOLOGIES (S) PTE LTD. ("HongGuan"), a company incorporated under the laws of
Singapore with its registered office at 39 Joo Koon Circle, Singapore 629105.
WHEREAS, PEMSTAR is in the business of precision electro-mechanical
manufacturing, assembling and testing on a contract basis in Rochester,
Minnesota and other locations around the world; and
WHEREAS, HongGuan is in the business of designing and building factory
automation and precision assembly systems, tool and die, and manufacturing of
key modules and devices;
WHEREAS, PEMSTAR and HongGuan desire to incorporate a new private limited
company to be called PEMSTAR-HONGGUAN PTE LTD., or such other name as the
parties may agree and the Registrar of Companies may approve (the "Company") in
Singapore that will initially engage in the business of manufacturing equipment
for the disk drive industry, providing support services for such equipment and
providing engineering and design services for the disk drive industry;
WHEREAS, HongGuan will own 49% of the Company and PEMSTAR will own 51% of the
Company; and
WHEREAS, PEMSTAR and HongGuan desire to set forth in this Agreement the terms
and conditions of the joint ownership of the Company.
NOW, THEREFORE, in consideration of the premises and the respective agreements
herein set forth, the Parties hereto agree as follows:
1. DEFINITIONS
1.1 Defined Terms. The following terms, when used in capitalized form in this
Agreement, shall have the meanings set forth below:
(a) "Affiliate" shall mean a company controlled by, under common control
with, or controlling a Party, where "control" means either (i) the
ownership, either directly or indirectly, of more than 50% of the voting
shares or (ii) the right to elect the majority of the directors of a
company and, in either case, where such control may be exercised without
the consent of any third party.
(b) "Agreement" and "this Agreement" shall mean this Joint Venture
Agreement, including all Exhibits hereto and, except where the context
otherwise clearly requires, all certificates, documents and instruments
executed and/or delivered at or prior to Closing.
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(c) "Ancillary Agreements" shall mean the License Agreement, the Trademark
Agreement and the Services Agreement, to be entered into at the Closing
with respect to the Company.
(d) "Board" or "Board of Directors" shall mean the Company's board of
directors.
(e) "Closing" shall mean the completion of the transactions contemplated by
this Agreement as more fully set forth in Article 12.
(f) "Closing Date" shall mean the date of the Closing as set forth in
Section 12.1.
(g) "Confidential Information" shall have the meaning set forth in Section
9.1.
(h) "Corporate Articles" shall mean the Memorandum and Articles of
Association of the Company.
(i) "Effective Date" shall mean the date of this Agreement as first written
above.
(j) "Fiscal Year" shall mean the financial year of the Company ending in
each year on the 31st of March.
(k) "Parties" shall mean PEMSTAR and HongGuan (or such other party who
becomes a party pursuant to the terms of this Agreement), and "Party" shall
mean either of them.
(l) "Scope" of the Company shall mean the agreed scope of activities of the
Company as defined in Section 2.1, as it may be modified from time to time
pursuant to Section 2.2.
(m) "Shareholders" shall mean PEMSTAR and HongGuan, and any Affiliate(s)
that either may designate to hold some or all of its shares in the Company,
and "Shareholder" shall mean any of them.
(n) "Singapore Dollars" or "S$" shall mean units of the lawful currency of
Singapore.
(o) "Territory" shall mean the continent of Asia, as indicated on the map
attached hereto as Exhibit A; provided, however, that the Territory under
this Agreement shall exclude the Philippines.
(p) "U.S. Dollars" or "U.S.$" shall mean units of the lawful currency of
the United States of America.
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1.2 Terms Defined in Ancillary Agreements. All terms, other than those which are
defined in Section 1.1, which are defined in any of the Ancillary Agreements and
are used in capitalized form in this Agreement shall have the meanings set forth
in the relevant Ancillary Agreement.
1.3 Other Rules of Interpretation. Unless the context clearly indicates
otherwise, the following rules shall govern the interpretation of this
Agreement:
(a) The definitions of all terms defined herein shall apply equally to the
singular, plural, and possessive forms of such terms;
(b) All references herein to "days" shall mean calendar days;
(c) All references to "Exhibits" shall mean the corresponding Exhibits of
this Agreement;
(d) All references to "Sections" shall mean the corresponding Section to
this Agreement.
2. PURPOSE AND SCOPE
2.1 General Purpose and Initial Scope. Subject to and upon the terms and
conditions hereinafter set forth, the Parties hereby agree to establish a joint
venture. Notwithstanding the generality of the corporate objectives enumerated
in the Corporate Articles, the activities of the Company shall be limited to its
Scope. The initial Scope of the Company shall consist of providing research and
development, engineering design services and manufacturing of process and test
equipment for the disk drive industry in the Territory, and providing technical
support services for such equipment.
2.2 Future Scope. Subject to Section 6.4, the Scope of the Company may be
expanded, reduced or otherwise altered upon approval of the Board. On or after
September 30, 2002, the Parties shall request the Board to assess the viability
of a public offering of shares of the Company.
2.3 Non-Competition. Each Party agrees that, from and after the Closing Date and
during the term of this Agreement and for two years thereafter if the Company
has not been liquidated, it will not, within the Territory, either directly or
indirectly or through any of its Affiliates (other than the Company), engage in
any business which is within the Scope of the Company, from time to time, or
competitive with any such business without the consent of the Board of Directors
of the Company during the term of this Agreement and without the consent of the
other Party thereafter. If either Party engages in business that may be in
competition with a customer of the Company, the Parties agree to discuss in good
faith such business and its impact on the Company. During the term of this
Agreement, the decision by the Board of Directors of the Company of whether a
Party is competing, and the decision on whether to consent to any potential
competition, shall be made by the directors not appointed by the Party competing
or seeking to compete. A decision by the Board of Directors of the Company that
a Party is
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competing shall not be conclusive that the Party is in fact competing; it simply
authorizes the Company to pursue an action against such Party who is in breach
of this Section.
2.4 Sales and Marketing. Each of the Parties agrees that, in connection with
disk drive customers in the Territory, it and its Affiliates will represent the
Company as the primary contact for the disk drive business. Each Party agrees
that it and its Affiliates will not act independently with disk drive customers
in the Territory. Any such potential business to be generated by the Parties or
its Affiliates shall be offered to the Company unless (i) the business is "tools
and fixtures" (not related to equipment supplied by the Company), which will be
performed by HongGuan or its Affiliates or (ii) the business is "systems design
and prototype services" (not within the capabilities of the Company), which will
be performed by PEMSTAR or its Affiliates. The Parties agree to keep informed
the managing director of the Company, in a timely manner, of all customer
contacts. All service agreements and agreements and provisions for spare parts
relative to equipment supplied by the Company shall also be first offered to the
Company.
2.5 Right of First Refusal on Expanded Business. If one of the Parties to this
Agreement desires to enter into a partnership or joint venture with a third
party to manufacture equipment for the manufacturing and testing process in
non-disk drive industries, and if such partnership or joint venture would cover
North America with respect to HongGuan, or Asia with respect to PEMSTAR, then
the Parties agree to negotiate in good faith with each other regarding such a
partnership or joint venture before entering into such a partnership or joint
venture with a third party. If the Parties cannot agree on terms for such a
partnership or joint venture, then the Party desiring to enter into a
partnership or joint venture with a third party shall be free to do so..
3. FORMATION AND CAPITALIZATION
3.1 Formation. Prior to the Closing, PEMSTAR shall incorporate the Company as a
private limited company under the laws of Singapore. In the event of any
inconsistency or conflict between the Corporate Articles and the provisions of
this Agreement, the terms of this Agreement shall as between the Parties prevail
and the Parties shall cause such necessary alterations to be made to the
Corporate Articles as are required to remove such conflict. The Corporate
Articles shall be subscribed as to one share by Mr. Robert D. Ahmann, a duly
appointed nominee of PEMSTAR and as to one share by Mr. James Teo, a duly
appointed nominee of HongGuan. Forthwith on the incorporation of the Company,
PEMSTAR shall procure the transfer to it of the one share subscribed by Mr.
Robert D. Ahmann and HongGuan shall procure the transfer to it of the one share
subscribed by Mr. James Teo.
3.2 Authorized Capital and Subscriptions.
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(a) The authorized share capital of the Company shall be S$5,000,000,
divided into 5,000,000 ordinary shares, having a nominal value of S$1.00
each. All ordinary shares shall have equal rights.
(b) A total of 509,999 shares (representing 51% of the outstanding share
capital) shall be subscribed by PEMSTAR in exchange for Five Hundred Nine
Thousand Nine Hundred Ninety-nine Singapore Dollars (S$509,999). A total of
489,999 shares (representing 49% of the outstanding share capital) shall be
subscribed by HongGuan in exchange for Four Hundred Eighty-nine Thousand
Nine Hundred Ninety-nine Singapore Dollars (S$489,999).
3.3 Substitution of Affiliates as Shareholders. Neither Party may transfer all
or any portion of its shares in the Company to a third party, except as provided
in Section 13.1 or as provided in this Section 3.3. A party may transfer all or
any portion of its shares in the Company to any of its respective Affiliates,
provided that:
(a) the ownership of such shares by any Affiliate shall be subject to all
the conditions set forth in this Agreement and the Corporate Articles;
(b) the Parties shall each procure the performance of their respective
obligations under this Agreement, and under the Corporate Articles, by
their respective Affiliates, and shall cause such Affiliate to execute a
Deed of Adherence pursuant to which that Affiliate shall agree to be bound
by the terms and conditions of this Agreement; and
(c) the shares in the Company held by any Affiliate of a Party shall be
transferred to such Party prior to the completion of any transaction as a
result of which such Affiliate will cease to be an Affiliate of such Party.
4. FINANCING
4.1 Initial Financing. Subject to Section 6.4, if and when necessary, the
Parties shall use their best efforts to arrange a credit or overdraft facility
on behalf of the Company with a bank in Singapore acceptable to the Board.
4.2 Debt Financing. Subject to Section 6.4, the Company's future additional
financing may be obtained through external loans or other financial
arrangements, whenever possible without any additional security by way of
guarantee or otherwise from the Parties, and such financing shall in all cases
be subject to the approval of the Board in accordance with the provisions of
this Agreement. In the event that any guarantees, securities, indemnities or
other undertakings are required to be given for such loans or other financial
arrangements, the Parties shall provide the same in the same proportion as their
respective shareholding percentages at the relevant date.
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5. DIVIDENDS
5.1 Dividends. Subject to Section 6.4(d) and to the approval of the Company in
general meeting, the Board may pay some or all of the Company's profits to the
Parties as dividends. Dividends shall be remitted to the Parties in proportion
to their shareholdings.
5.2 Time of Payment. All dividends required to be paid by the Company at the end
of any Fiscal Year pursuant to this Article 5 shall, unless otherwise determined
by the Board, be paid within thirty (30) days after the date of the annual
general meeting at which the financial statements for the Fiscal Year shall have
been approved.
6. MANAGEMENT
6.1 Board of Directors. The Board shall be comprised of five (5) members, (i)
three (3) directors nominated by PEMSTAR, and (ii) two (2) directors nominated
by HongGuan, one of whom nominated by HongGuan shall be James Teo and one of
whom nominated by HongGuan must be a resident in Singapore (i.e., a citizen of
Singapore, a permanent resident or a foreign national holding an employment
pass). When a Managing Director other than James Teo is appointed, the Parties
shall agree on whether the appointment counts as one of PEMSTAR's three
nominations or one of HongGuan's two nominations. If the Parties agree that the
new Managing Director shall count as one of HongGuan's nominations, then the
Board shall be comprised of seven members, four directors nominated by PEMSTAR
and three directors nominated by HongGuan. If the Parties agree that the new
Managing Director shall count as one of PEMSTAR's nominations, PEMSTAR shall
determine whether the Board shall be comprised of seven members, four directors
nominated by PEMSTAR and three directors nominated by HongGuan, or whether the
number of directors on the Board shall remain as five members, three directors
nominated by PEMSTAR and two directors nominated by HongGuan. Subject to Section
6.4(t), each Party agrees to vote its shares in favor of the other Party's
nominees and replacements thereof. The term of office of each of the directors
shall be one year and they may be reappointed for any number of terms. The
Company shall indemnify any director against any claims that may be brought
against such director except for such claims arising out of or in relation to
any acts not performed in good faith or any acts which are performed in a manner
not in the best interests of the Company, or any acts resulting in violation of
Singapore law. Members of the Board shall serve without compensation, but all
reasonable costs incurred by the directors in performing their duties as members
of the Board (including international travel, hotel expenses and other related
expenses for attending Board meetings) shall be borne by the Company.
6.2 (a) Nomination and Removal of Directors. The right of nomination conferred
on a Party under Section 6.1 shall include a right to remove at any time
from office such person so nominated by that party as a director. Whenever
for any reason a person ceases to be a director, the Party which had
nominated him or would be entitled to nominate him under Section 6.1 shall
nominate forthwith a substitute director. Each nomination or removal of a
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director pursuant to Section 6.1 shall be in writing and signed on behalf
of the Party nominating or removing such director and shall be delivered to
the registered office for the time being of the Company. The rights of
nomination and removal of each director shall be exercised by the Parties
in accordance with the Corporate Articles.
(b) Each Party's Power to Appoint Board Members. Any transfer or assignment
of the shares in the Company by one Party to the other Party or to any
third party pursuant to Sections 3.3 or 13.1 may result in an adjustment of
each Party's power and ability to appoint directors to the Board and such
adjustment shall be made in accordance with the principle that the
Shareholders are entitled to appoint director(s) to the Board in proportion
to their respective shareholdings, provided, however, that any equity owner
of less than ten (10) percent of the shares of the Company shall not be
entitled to a seat on the Board unless it is agreed to by all the other
Shareholders.
6.3 Board Meetings. Meetings of the Board shall be conducted as follows:
(a) The Board shall meet at least twice every year at a location determined
by the Chairman of the Board. At any meetings of the Board, a quorum shall
be one director nominated by PEMSTAR and one director nominated by
HongGuan. A Board meeting shall be called by the Chairman and presided over
by the Chairman. The Chairman shall give each director a written notice
thirty (30) days before a Board meeting and such notice shall include the
agenda, time and location of the meeting to be held.
(b) A special Board meeting shall be called by the Chairman of the Board if
it is so requested by at least two (2) directors. The Chairman shall give
each director a written notice at least seven (7) days before a special
Board meeting and such notice shall include the agenda, time and location
of the meeting to be held. In the event that the Chairman does not convene
a meeting within seven (7) days of the request of at least two (2)
directors, the other directors may convene a meeting by giving notice as
described above.
(c) A director shall be entitled at any time and from time to time to
appoint any person to act as his alternate and to terminate the appointment
of such person. Such appointment shall require the prior written consent of
the Parties unless such alternate is currently a director. Any such
alternate director shall be entitled while holding office as such to
receive notices of meetings of the Board and to attend and vote as a
director at any such meetings at which the director appointing him is not
present and generally to exercise all the powers, rights, duties and
authorities and to perform all functions of the director appointing him.
Further, that alternate director shall be entitled to exercise the vote of
the director appointing him at any meetings of the Board and if such
alternate director represents more than one director, such alternate
director shall be entitled to one vote for every director he represents.
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(d) A meeting of the directors at which a quorum is present shall not
transact any business other than the business stated in the agenda
specified in the notice of that meeting unless the directors present
unanimously agree otherwise. A meeting of the directors at which a quorum
is present shall be competent to exercise all the powers and discretions
for the time being exercisable by the Board. If within 30 minutes from the
time appointed for such meeting a quorum is not present, the meeting shall
stand adjourned to the seventh (7th) working day (or such other date as may
be mutually agreed by the Parties) at the same time and place and if at
such adjourned meeting a quorum shall not be present, then the meeting
shall be dissolved and the deadlock provisions set forth in Section 16.5
may be invoked by either Party.
(e) Upon the request of the Chairman, any meeting of the Board may be
conducted by telephone or video conference. Any action to be taken by the
Board may be taken without a meeting if all members of the Board consent in
writing to such action and such resolution in writing shall be as effective
as a resolution passed at a meeting of the Board duly convened and held,
and may consist of several documents in the like form each signed by one or
more of the directors. In the event that there is a deadlock on the voting
of a proposed action, such action shall be deemed rejected by the Board.
Notwithstanding the timing provisions of Section 6.3(a) or (b), all the
directors present at a meeting of the Board validly convened in accordance
with Section 6.3(a) or (b) may unanimously waive or agree to shorter notice
thereof.
(f) Minutes and resolutions of each meeting shall be kept in the English
language and shall be signed by the Chairman of the Board. In the event
that any Board member proposes any modification or addition to the minutes
for a Board meeting, such director shall submit the same in writing to the
Chairman of the Board within two (2) weeks after receipt by such director
of the minutes and resolutions. The Chairman shall make decisions on such
proposed modifications and additions within four (4) weeks from the receipt
thereof. Copies shall be provided to each of the Parties and the originals
shall be retained at the registered office of the Company.
6.4 Actions Requiring Consent of Both Parties. Subject to the Singapore
Companies Act, Cap. 50, the Parties agree and undertake to exercise all rights
available to them in relation to the Company to ensure that the Company shall
not, except with the prior written consent of both Parties, so long as either
Party owns at least 33% of the outstanding ordinary shares of the Company:
(a) acquire, dispose, or suffer a dilution of any interest in any other
company or partnership (other than the acquisition of the joint venture
referred to in Section 18.10 below);
(b) purchase, sell, mortgage or charge any property or any interest therein
(other than in the ordinary course of business or operation and other than
the acquisition of the joint venture referred to in Section 18.10 below);
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(c) sell or dispose of the whole or a substantial part of its undertaking,
goodwill or assets;
(d) make any distribution of profits amongst its shareholders by way of
dividend, capitalization of reserves or otherwise;
(e) incur any capital commitment in excess of S$200,000 in respect of any
one transaction, except those approved in the annual operating plan and
other than as necessary for the acquisition of the joint venture referred
to in Section 18.10 below;
(f) dispose of any asset with a book value in excess of S$200,000, except
as approved in the annual operating plan;
(g) increase, reduce or cancel its authorized or issued share capital, or
grant any option over its unissued share capital;
(h) issue any shares of any class;
(i) create, allow to arise or issue any debenture;
(j) adopt any policy for managerial staff salary scales, staff benefit
schemes or staff development programs exceeding S$150,000 per person per
annum;
(k) adopt any policy on the payment of directors' fees;
(l) adopt any policy on accounting practices, depreciation practices or
other financial matter which differs substantially from usual Singapore
accounting, depreciation, commercial or financial practices;
(m) borrow, raise, guarantee or lend (excluding suppliers' credit) more
than S$200,000 in any one transaction or more than S$1,000,000 when
aggregated with other similar transactions in the same calendar year other
than as necessary for the acquisition of the joint venture referred to in
Section 18.10 below;
(n) appoint, dismiss or settle the terms of appointment or dismissal of any
managing director or general manager;
(o) change or diversify the scope of its business or undertaking;
(p) amend its Corporate Articles;
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(q) except as provided in Section 2.3, institute, withdraw or settle any
legal action or proceeding in excess or anticipated to be in excess of
S$200,000;
(r) approve financial audits;
(s) take any step for its dissolution or financial reorganization or for
the appointment of a liquidator (including a provisional liquidator),
receiver, judicial manager, trustee, administrator, agent or similar
officer of or over any part of its assets or business.
(t) accept the nomination or election of a director;
(u) increase the number of directors other than as contemplated by Section
6.1;
(v) proceed with a public offering of shares of the Company.
6.5 Managing Director. The Parties agree that the Managing Director shall
initially be James Teo, who shall be appointed for a term of three (3) years,
unless terminated earlier by the Board. HongGuan shall assume all costs of
employing James Teo as the Managing Director until March 31, 1999, or, if
earlier, until such time that the Board appoints his successor. After March 31,
1999, or such earlier date that a successor is appointed, the Company shall bear
the costs of employing the Managing Director, which remuneration shall be
decided by the Board. The Managing Director shall have the full powers and
executive authority, subject to such limitations, conditions and guidelines as
the Shareholders or the Board shall from time to time establish, to act on
behalf of the Company. The Managing Director shall formulate and implement an
annual business plan, subject to the approval of the Board. The Managing
Director shall not take any of the actions listed in Section 6.4 without the
required approval from both Parties.
6.6 General Manager. The Parties shall advertise for and mutually agree on the
hiring of a General Manager who will assist the Managing Director and shall
perform such other roles as designated from time to time by the Managing
Director or the Board.
6.7 Program Manager. PEMSTAR shall assist in appointing the Program Manager, who
shall serve for twenty-four (24) months unless otherwise agreed to by the Board.
The Program Manager shall have such duties and responsibilities as designated by
the General Manager.
6.8 Audits. The company shall keep complete and accurate books and records. An
internationally recognized accounting firm based in Singapore and approved by
the Board shall conduct a formal audit of the financial affairs of the Company
each year and shall provide a report of such formal audit to the Board.
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6.9 Access to Properties, Records. During the term of this Agreement, each Party
(as well as its designated representatives) shall be afforded access, at its
sole expense, during normal business hours and subject to the Company's normal
security procedures, to the facilities, properties, books, records and files of
the Company, as may be available from time to time and requested for purposes
reasonably related to this Agreement, including the audit of the profit and loss
statements, balance sheets and other financial and tax records of the Company by
independent auditors for the Company or, at the option of the Party requesting
any such audit, by the independent auditors for such Party.
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7. GENERAL MEETINGS
7.1 General Meetings. A general meeting of the Shareholders shall be convened by
the Board in accordance with the Corporate Articles and held at least once a
year on a date to be fixed by the agreement of the Parties. An extraordinary
general meeting of the Shareholders may, however, be convened by the Board
whenever deemed necessary.
7.2 Proceedings at General Meeting. The quorum for any general meeting of the
Company shall be two Shareholders, one of whom shall be PEMSTAR and the other
shall be HongGuan. If within 30 minutes of the time appointed for the convening
of the meeting of the Shareholders of the Company the quorum specified above is
not present, the meeting shall stand adjourned to the fifteenth (15th) working
day (or such other date as may be mutually agreed by the Parties) at the same
time and place. If at such adjourned meeting a quorum shall not be present, the
meeting shall be dissolved and the deadlock provisions set forth in Section 16.5
may be invoked by either Party. All resolutions of the Shareholders of the
Company shall be adopted by voting. A Party shall have one vote for each share
which is held by that Party in the capital of the Company. Any general meeting
of the Shareholders may be conducted by telephone or video conference. Any
action to be taken by the Shareholders may be taken without a meeting if all
Shareholders consent in writing to such action and such resolution in writing
shall be as effective as a resolution passed at a general meeting of the
Shareholders duly convened and held, and may consist of several documents in the
like form each signed by one or more Shareholders. In the event that there is a
deadlock on the voting of a proposed action, such action shall be deemed
rejected by the Shareholders.
8. EMPLOYEES.
8.1 Source. The initial employees of the Company shall include, but not be
limited to, management and technical employees of HongGuan and employees of
PEMSTAR, each to be hired by the Company under new terms and conditions which
shall not include any benefits carried over from such employee's prior
employment with either HongGuan or PEMSTAR unless specifically agreed by the
Company or required by Singapore law. Such employees are anticipated to be those
listed in Exhibit B hereto. For two years after the Effective Date, HongGuan
will assist the Company fulfill its staffing requirements on the terms and
subject to the conditions provided in Section 5 of the Services Agreement
referred to in Section 12.2(b)(iii) of this Agreement.
8.2 Non-compete. Each of the Company's employees who are designated as
"managers" or "senior engineers" shall agree as a condition of employment to not
compete with the Company, which will be documented in the employee's employment
agreement or another separate agreement.
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9. CONFIDENTIALITY
9.1 Confidential Information. "Confidential Information" shall mean all
information which is disclosed by either Party or the Company to the other
Party, either directly or through Affiliates of either or both, in written, oral
or physical form, which relates in any way to markets, customers, products,
patents, inventions, procedures, methods, designs, strategies, plans, assets,
liabilities, costs, revenues, profits, organization, employees, agents,
distributors or business in general; provided, however, that the following shall
not be deemed Confidential Information:
(a) information which is or becomes available to the public or to the
industry without the fault or negligence of the Party receiving the same;
(b) information which was already in the possession of the Party receiving
the same, provided that Party is able to prove such prior possession;
(c) information which is subsequently received from a third party without
notice of restriction on further disclosure; or
(d) information which is independently developed by the Party receiving the
same, provided the said Party is able to prove such independent
development.
9.2 Non-Disclosure. Each of the Parties agrees (a) during the term of this
Agreement and for a period of one (1) year after termination thereof not to (i)
use any Confidential Information for any purpose other than as permitted or
required for performance by such Party under this Agreement or any Ancillary
Agreement or (ii) disclose or provide any of such Confidential Information to
any third party and (b) to take all necessary measures to prevent any such
disclosure by its present and future directors, officers, employees and
contractors during the said period. Each Party further agrees to cause its
Affiliates to comply with these provisions in the same manner as if each of them
were a Party.
9.3 Limitation of Prohibition. Nothing herein shall prohibit either of the
following:
(a) the use by the Company at any time after termination of this Agreement
of Confidential Information in the manner in which it had been utilized by
the Company from time to time in the ordinary course of its business and in
compliance with the terms hereof prior to termination; or
(b) the disclosure of Confidential Information to any governmental
authority if and to the extent required by applicable law, provided that
such disclosure is made on a basis providing the maximum confidentiality
permitted by law.
9.4 Solicitation of Employees. During the term of this Agreement and for a
period of one (l) year thereafter, no Party or Affiliate thereof shall employ or
contract for the services of any person, other
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than a person previously employed by such Party or Affiliate, who at the Closing
Date or at any time thereafter is an employee of the Company or of the other
Party or any Affiliate thereof, without the approval of the other Party.
10. REPRESENTATIONS AND WARRANTIES
In order to induce the other Party to enter into and perform this Agreement,
each of the Parties hereby represents and warrants to the other Party as
follows:
10.1 Organization and Standing. Such Party is a corporation duly organized and
validly existing under the laws of the jurisdiction of its organization and has
all requisite corporate authority to carry on its business as now being
conducted by it.
10.2 Authority. Such Party has full power and authority to execute and deliver
this Agreement and the Ancillary Agreements and the other instruments to be
executed and delivered by such Party pursuant hereto and to consummate the
transactions contemplated hereby and thereby. All corporate acts and other
proceedings required to be taken by or on the part of such Party to authorize it
to perform its obligations under this Agreement and the Ancillary Agreements
have been duly and properly taken. This Agreement has been duly executed and
delivered by such Party and constitutes, and the Ancillary Agreements when duly
executed and delivered by such Party will constitute, legal, valid and binding
obligations of such Party enforceable in accordance with their respective terms.
Such Party agrees to use its best efforts to obtain the necessary consent of any
third party to the transactions contemplated hereby.
10.3 Approvals. No approval, authorization, consent or other order or action of
or filing with any court, administrative agency or other governmental authority
is required for the execution and delivery by such Party of this Agreement and
the Ancillary Agreements or its consummation of the transactions contemplated
hereby or thereby.
10.4 Litigation. Such Party has no actual knowledge of any material and adverse
actions, suits, proceedings or investigations pending or threatened against, by
or affecting it in any court or by or before any governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, or
before any arbitrator of any kind, with respect to, or which may have a material
effect upon, the transactions contemplated by this Agreement or the Ancillary
Agreements. Such Party is not in default with respect to any order, writ,
injunction or decree of any court or governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign, affecting or relating to
it or any of the transactions contemplated by this Agreement or the Ancillary
Agreements; nor has such Party received notice of any material violation of any
laws, ordinances, regulations or orders applicable to it or any of the
transactions contemplated hereby or thereby; nor to the knowledge of such Party
is it in violation of any such laws, ordinances, regulations or orders.
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10.5 Absence of Conflict.
(a) The execution and delivery of this Agreement by each Party does not
violate any law or conflict with such Party's, or any of such Party's
Affiliate's, constitutive corporate documents or result in a breach of,
constitute a default under or conflict with any material contract,
agreement or instrument to which such Party or any Affiliate is a party or
by which it or its properties or any Affiliate is a party or by which it or
its Affiliate or any of its Affiliates' properties are bound.
(b) Subject to clause (d) of this Section 10.5, all actions to be taken by
either Party or its Affiliates in furtherance of this Agreement for the
period of time from the date of execution and delivery of this Agreement to
the Closing Date will not violate any law or conflict with such Party's, or
any of such Party's Affiliate's, constitutive corporate documents or result
in a breach of, constitute a default under or conflict with any material
contract, agreement or instrument to which such Party or any Affiliate is a
party or by which it or its properties or any Affiliate or any of its
Affiliates' properties are bound.
(c) The consummation of the transactions contemplated in this Agreement
from and after the Closing Date, and the fulfillment of and compliance with
the terms and conditions hereof and thereof from and after the Closing Date
will not violate any law or conflict with such Party's, or any of such
Party's Affiliate's, constitutive corporate documents or result in a breach
of, constitute a default under or conflict with any material contract,
agreement or instrument to which such Party or any Affiliate is a party or
by which it or its properties or any Affiliate or any of its Affiliates'
properties are bound.
(d) With respect to clause (b) of this Section 10.5, neither Party hereto
(nor any of its Affiliates) nor any of its agents shall take any action in
furtherance of this Agreement from the date of execution and delivery of
this Agreement to the Closing Date until and unless either (a) the consent
of any third party referred to in Section 12.3(e) which is required to take
such action shall have been received by the Party or its Affiliate having
an obligation to obtain such consent, or (b) such Party shall have received
the consent to such action from the other Party together with a
representation (which shall be deemed a modification of this Section 10.5)
to the effect that such action will not result in a breach of, constitute a
default under or conflict with any material contract, agreement or
instrument to which such other Party or any of its Affiliates is a party or
by which such other Party or its properties or any of such other Party's
Affiliates or any of such other Party's Affiliate's properties are bound.
10.6 Financial Statements. Each Party has provided to the other their respective
balance sheets and statements of income and expenditures for the most recent
fiscal period then ended. Such financial statements, together with the notes
thereto, (i) are in accordance with the books and records of such party, (ii)
present fairly and accurately in all material respects the financial condition
of such party as of the dates of the balance sheets, (iii) present fairly and
accurately in all material respects the results of
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operations of the business for the periods covered by such statements, (iv) have
been prepared in all material respects on a basis consistent with the
preparations of such party's prior years' financial statements, and (v) include
all adjustments (consisting only of normal recurring accruals) which are
necessary for a fair presentation of the financial condition of such party and
of the results of operations of its business for the periods covered by such
statements.
10.7 Brokers. Neither such Party nor any third party acting on its behalf has
incurred any liability, either express or implied, to any broker or finder or
similar person in connection with this Agreement or any of the transactions
contemplated hereby or thereby. Such Party shall indemnify the other Party
against, and hold it harmless from, any liability, cost or expense (including,
without limitation, fees and disbursements of counsel) resulting from any
agreement, arrangement or understanding made by such Party with any third party
for brokerage or finders' fees or other commissions in connection with this
Agreement or the Ancillary Agreements or any of the transactions contemplated
hereby or thereby.
11. INDEMNITIES
11.1 Indemnification. Subject to the other provisions of this Article 11,
including Section 11.4, each Party agrees as to its respective representations,
warranties, covenants and agreements set forth in this Agreement and in the
Ancillary Agreements to indemnify and hold harmless the other Party from and
against any and all losses, liabilities, damages, expenses (including, without
limitation, fees and disbursements of counsel), claims, liens or other
obligations whatsoever which
(a) may be payable by virtue of or result from the material inaccuracy of
any representation or the breach of any warranty, covenant or agreement
made in this Agreement, the Ancillary Agreements or any certificate or
other instrument delivered pursuant hereto or thereto; or
(b) may be incurred as a result of the assertion of any claim by any third
party based on allegations which, if true, would constitute such material
inaccuracy or breach.
11.2 Notice and Legal Action. Each Party agrees to give the other Party prompt
written notice of any event or assertion of which it has knowledge concerning
any such loss, liability, expense, claim, lien or other obligation and as to
which it may request indemnification hereunder. Each Party will cooperate with
the other Party in determining the validity of any such claim or assertion.
11.3 Actions by Third Parties.
(a) If and to the extent that any claim is made or any litigation is
instituted against either PEMSTAR or one of its Affiliates or HongGuan or
one of its Affiliates (herein referred to as the "Initial Defendant") by
any third party in any competent court, tribunal or other forum in any
country, which claim or litigation asserts or is based in whole or in part
upon a fact, circumstance, premise or allegation which, if true, would be
subject to indemnification by the
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other Party pursuant to Section 11.1, then (i) the Initial Defendant shall
be permitted to implead, or cross-claim against, or otherwise include as a
defendant, such other Party hereunder, (ii) such other Party hereby
consents to the jurisdiction of any such competent court, tribunal or
forum, (iii) such other Party shall assume the Initial Defendant's defense
of any such claim or litigation and pay the costs thereof, and (iv) if and
to the extent that such claim of, or litigation instituted by, such third
party is successful, and damages are awarded or injunctive relief or other
equitable remedy is granted against the Initial Defendant, then (as between
the Parties hereto) such other Party shall be liable for the payment of
such damages to such third party or shall reimburse the Initial Defendant
for the payment of such damages immediately following the making of such
payment or (to the extent injunctive relief or other equitable remedy is
granted) shall be liable for any damages suffered by the Initial Defendant;
provided that if the claim by the third party is not successful, the
Initial Defendant shall immediately reimburse or indemnify such other Party
in such amount as shall be necessary such that, following such payment,
both Parties shall have shared equally in the costs and expenses incurred
to defend such claim or litigation.
(b) The provisions of clause (a) of this Section 11.3 shall operate
separate and independently of the other provisions of this Article 11
(other than Section 11.4 ). Any dispute relating to liability of either
Party to the other under this Section 11.3 shall be determined only upon
the conclusion of the litigation or other contest referred to in clause
11.3(a), and such dispute shall be settled in accordance with Section 17.2,
provided that in such event the arbitrator shall limit his decision solely
to the question of whether the provisions of such clause (a) are applicable
to the claim or other litigation which was instituted by such third party.
11.4 Conflict with Ancillary Agreements. The provisions of Article 11, as the
same would apply in the case of a breach of or default under any provision of
any Ancillary Agreement, shall not be applicable if and to the extent that such
Ancillary Agreement provides for a specific remedy or specific damages in the
case of a breach or default thereunder or to the extent that such Ancillary
Agreement contains a provision which conflicts with this Article 11.
11.5 Survival. The provisions of this Article 11 shall survive termination of
this Agreement for any reason whatsoever.
12. CLOSING AND CONDITIONS THEREOF
12.1 Closing. The Closing of the transactions contemplated by this Agreement
shall, subject to all conditions precedent set forth in Section 12.3 having been
fulfilled, take place on October 15, 1998 (or such earlier date as the Parties
may agree in writing), at the offices of Lee & Lee, Singapore in person or by
delivery of the appropriate documents.
12.2 Events of Closing. The Parties shall at the Closing take the following
actions:
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(a) The organization of the Company shall be completed as follows to the
extent that it shall not have been completed prior to Closing:
(i) The Corporate Articles referred to in Section 3.1 shall be adopted
in a form which conforms to the requirements of this Agreement;
(ii) The Shareholders of the Company shall each pay for and be issued
their respective shares of the Company as provided in Section 3.2; and
(iii) The Shareholders of the Company shall elect the members of the
Board in accordance with Section 6.1.
(b) The Parties shall execute and deliver the following agreements to the
extent that they have not done so prior to Closing, it being the intention
of the Parties that such agreements when so executed and delivered shall
effect the transactions contemplated therein on and from the date of this
Agreement:
(i) PEMSTAR and the Company shall execute and deliver the License
Agreement in substantially the form attached hereto as Exhibit C;
(ii) PEMSTAR, HongGuan and the Company shall execute and deliver the
respective Trademark Agreements in substantially the form attached
hereto as Exhibit D;
(iii) PEMSTAR, HongGuan and the Company shall execute and deliver the
Services Agreement in substantially the form attached hereto as
Exhibit E;
(iv) HongGuan shall assign its disk drive equipment manufacturing
contracts to the Company identified on Exhibit F attached hereto; and
(v) PEMSTAR shall assign those engineering contracts to the Company
identified on Exhibit G attached hereto.
12.3 Conditions Precedent to Parties' Obligations. All obligations of each Party
hereunder to execute the agreements referred to in Section 12.2 and otherwise
take the action necessary to consummate the Closing, are subject to the
pertinent fulfillment, prior to or at the Closing, of each of the following
conditions:
(a) All actions, proceedings, instruments, opinions and documents required
to carry out this Agreement and the Ancillary Agreements or incidental
hereto or thereto, and all other related legal matters, shall be reasonably
satisfactory to legal counsel to the Parties respectively.
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(b) All the terms, covenants and conditions of this Agreement and the
Ancillary Agreements to be complied with and performed by the other Party
prior to or at the Closing shall have been complied with and performed in
all material respects (with the right of the Party in compliance with such
terms, covenants and conditions to waive the non-compliance by the other
Party).
(c) No action, suit, proceeding or investigation by or before any court,
administrative agency or other governmental authority shall have been
instituted or threatened to restrain, prohibit or invalidate any of the
transactions contemplated by this Agreement or any Ancillary Agreements.
(d) All governmental approvals, permits, licenses, authorizations and
clearances required for the performance by each Party of this Agreement,
including the execution and delivery of the Ancillary Agreements, the
consummation of the transactions herein or therein contemplated and the
fulfillment of and compliance with the terms and conditions hereof and
thereof, by either Party shall have been obtained, and all filings and
other formalities in connection therewith shall have been completed.
(e) All consents and approvals of third parties required for the
performance by each Party of this Agreement, including the execution and
delivery of the Ancillary Agreements, assignment of contracts to the
Company, the consummation of the transactions herein or therein
contemplated and the fulfillment of and compliance with the terms and
conditions hereof and thereof, shall have been obtained.
Neither Party shall deliberately cause any condition set forth in this Section
12.3 not to be satisfied, and each Party shall, as to events, causes and
circumstances within its control, take such action as shall be reasonably
necessary to cause such condition to be satisfied and shall keep the other Party
currently informed as to the status of such actions. In the event the Closing
takes place, each Party shall be deemed to have represented and warranted to the
other Party as of the Closing Date that all the aforementioned conditions
precedent to such Party's obligations hereunder shall have been fulfilled prior
to or as of the Closing Date.
13. TRANSFER OF SHARES
13.1 Right of First Refusal. If a Party receives an offer to purchase its shares
from a third party after January 31, 2002 and desires to accept such offer, that
Party shall first give the other Party written notice of the receipt of such
offer, which notice shall set forth the name of the third party, the price that
such third party offered to pay for such shares, and the terms and conditions
pursuant to which such purchase and sale would be effected. At any time within
thirty (30) days from and after receipt of such notice, the other Party shall
have the option to purchase all (but not less than all) of the shares referred
to therein at the price and upon the terms described therein, which option shall
be exercised by giving
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written notice to the Party within such thirty (30) day period of its election
to exercise such option. If the other Party does not exercise such option, the
shares may be sold to the third party within sixty (60) days after expiration of
the option.
If PEMSTAR receives an offer to purchase any of its shares from a third
party after January 31, 2002, and if PEMSTAR desires to accept such offer, then
HongGuan shall have the option, at any time within thirty (30) days from and
after receipt of the notice described above, to purchase from PEMSTAR 2% of the
shares of the Company at the per share price and upon the terms described in the
notice, which option shall be exercised by giving written notice to PEMSTAR
within such thirty (30) day period of HongGuan's election to exercise such
option. This option is in addition to the option described above, under which
HongGuan would also have the option to purchase all of the PEMSTAR shares
referred to in the notice. If HongGuan does not exercise such option, the shares
may be sold to the third party within sixty (60) days after expiration of the
option. If HongGuan does exercise the option, all but the 2% acquired by
HongGuan may be sold to the third party within sixty (60) days after expiration
of the option.
Before any transfer shall be made under this Section, the third party shall
execute a Deed of Adherence pursuant to which the third party shall agree to be
bound by the terms and conditions of this Agreement.
13.2 Prohibited Alienation. Except as provided in Section 3.3 and 13.1, neither
Party nor any of its Affiliates which are Shareholders shall sell, convey,
assign or otherwise transfer, pledge or hypothecate its shares in the Company or
any beneficial interest therein at any time during the term of this Agreement
without the prior written consent of the other Party; it is agreed the other
Party may attach conditions to this consent. The Company shall refuse to
transfer or register any transfer on its books any shares attempted to be
transferred in violation of this Agreement. If shares of the Company owned by
either Party or its Affiliates are offered to be or are in fact sold,
transferred, assigned, taken in execution, pledged or hypothecated, in any
manner and under any circumstances in which Section 13.1 is not complied with,
including but not limited to any bankruptcy, insolvency or other legal
proceeding, in violation of this Article 13, then the other Party shall,
immediately upon becoming aware thereof, and for a period ending ninety (90)
days after its receipt of written notice thereof from the offering or
transferring Party, be entitled to purchase such shares from the offeror or
transferee, or to require the transferee to purchase its own shares, upon the
same terms and conditions (mutatis mutandis) as the offeror has offered the same
or the transferee has taken a transfer of the same, and the transferring Party
shall indemnify the other Party against all costs reasonably incurred by the
latter in removing any prohibited liens or encumbrances from the said shares, it
being the intent that the latter Party be left in no worse position than if the
provisions of this Section 13.2 had been complied with.
13.3 Continuing Obligations. Notwithstanding anything contained herein, no sale,
conveyance, assignment or other transfer of the shares of the Company or any
beneficial interest therein shall relieve either Party of those obligations and
duties arising prior to the date thereof which by the terms of the applicable
agreement or by operation of law would survive the termination of this
Agreement.
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13.4 Legend. All certificates evidencing shares of the Company shall bear a
reference to the restrictions herein provided clearly marked thereon, including
specifically a notice that the acquiring party shall be fully bound by the terms
and conditions of this Agreement.
14. FORCE MAJEURE
14.1 Definition. As used in this Agreement the term "Force Majeure" shall mean
any event or condition, not existing as of the date of this Agreement, not
reasonably foreseeable as of such date and not reasonably within the control of
either Party, as the case may be, which prevents or renders so difficult or
costly as to be commercially impracticable performance by either Party of their
respective obligations under this Agreement. Without limiting the generality of
the foregoing, events or conditions of Force Majeure shall include acts of State
or governmental action, including the non-issuance or revocation of any
approvals of any governmental authority that are required for the execution of
this Agreement, riots, war, acts of terrorism, sabotage, strikes, lockouts,
prolonged shortage of energy supplies, fire, flood, hurricane, earthquake,
lightning and explosion.
14.2 Notice. If either Party is thus prevented from performing its obligations
under this Agreement or the Ancillary Agreements or if such performance is
rendered impracticable by an event or condition of Force Majeure, that Party
shall, upon providing prompt written notice to the other Party, be excused from
performance to the extent such event or condition prevents or renders
impracticable such performance, provided that the Party whose performance is so
affected shall use reasonable efforts to avoid or remove the cause of
non-performance and shall continue performance hereunder immediately upon the
removal of such causes. The other Party to this Agreement shall have the right,
for so long as such event or condition of Force Majeure shall continue, to
suspend its own performance and to the extent and for so long as shall be
commercially reasonable.
14.3 Termination. If the event or condition of Force Majeure causing
non-performance shall continue for more than one-hundred eighty (180)
consecutive days and the non-performance shall be material in relation to this
Agreement or the Ancillary Agreements taken as a whole, either Party may, upon
the expiration of the above period and at any time thereafter for so long as the
event or condition of Force Majeure shall continue, terminate this Agreement in
accordance with Section 16.2.
15. DEFAULT
15.1 Definition. Except where otherwise indicated by the context or where the
term is otherwise defined for a specific purpose, the term "Default" shall mean
any of the following described events involving or affecting either Party, such
Party being considered the Party in Default for purposes hereof:
(a) failure of such Party to perform or observe any material obligation
under or pursuant to this Agreement or the Ancillary Agreements for any
reason other than Force Majeure;
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(b) (i) the filing by such Party of a petition in voluntary bankruptcy or
liquidation or the making of a general assignment for the benefit of its
creditors, or the consenting to the appointment of one or more receivers,
trustees or liquidators with respect to all or any substantial part of its
property under any applicable law or statute; (ii) the filing by such Party
of a petition or answer seeking reorganization, readjustment, arrangement,
composition or similar relief under the applicable bankruptcy laws or any
other applicable law or statute; (iii) such Party's becoming unable to pay
its debts generally as they become due; or (iv) the filing of an
involuntary petition in bankruptcy against such Party, or for the
appointment of one or more trustees, liquidators or receivers of such
Party, which petition shall remain unstayed and in effect for a period of
thirty (30) days;
(c) the occurrence of: (i) a sale, transfer, pledge or other encumbrance of
shares, an issuance of shares or any other event, including, without
limitation, merger or consolidation, which gives effective control of such
Party to any third party not a controlling shareholder of such Party as of
the Closing Date hereof; or (ii) a sale, transfer, pledge or other
encumbrance or issue of shares of any Affiliate of such Party or of any
substantial asset of such Party or Affiliate of such Party, which is
directly related to the joint venture described in this Agreement or the
Ancillary Agreements, or any like event which gives effective control of
such shares or assets to any third party who is not a controlling
shareholder of such Party or Affiliate as to the Closing Date hereof,
provided that such a change in control shall not constitute a Default if
prior written notice shall have been given by the Party affected to the
other Party and such other Party shall have given its consent in writing
thereto, which consent shall not be withheld without good commercial
reason.
15.2 Notice. No Default under Section 15.1(a) hereof shall be deemed to have
occurred until the Party not in Default shall first have given written notice of
such Default to the Party in Default and the Party in Default shall have failed
to cure such Default through specific performance within sixty (60) days after
dispatch of such written notice. In the event of Default under Sections 15.l(b)
or (c) hereof, no such notice need be dispatched and remedies in respect thereof
as provided in Section 15.3 hereof shall be available from and after the time
such events occur.
15.3 Rights Upon Default. If a Default shall occur, the Party not in Default
shall have the right, at any time for so long as such Default shall continue, to
do any one or more of the following:
(a) terminate this Agreement in accordance with Section 16.2(b) hereof and
exercise the other rights set forth in Section 16.3(c) hereof;
(b) with respect to a Default under Section 15.1(a) only, obtain injunctive
relief or such other equitable remedies as are reasonably necessary to
specifically enforce this Agreement in accordance with its terms; and/or
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(c) exercise any other legal or equitable remedy such Party may have as a
result of such Default.
16. TERM AND TERMINATION; DEADLOCK
16.1 Term. Except as provided in Section 16.2, this Agreement shall remain in
full force and effect and shall continue to be binding on the Parties so long as
each Party holds any shares in the Company.
16.2 Events Permitting Termination. Notwithstanding anything to the contrary
contained herein, this Agreement may be terminated:
(a) by either Party upon written notice in the event that performance by
either Party of its respective obligations under this Agreement is
prevented or rendered impracticable by reason of the occurrence of an event
of Force Majeure and the entitlement to terminate exists under Section
14.3;
(b) by either Party upon written notice to the other in the event that the
other Party is at the time of such notice in Default and the entitlement to
terminate exists under Section 15.3;
(c) by either Party upon written notice to the other in the event that the
Closing shall not have occurred on or before October 15, 1998;
(d) by written agreement of the Parties.
16.3 Rights Upon Termination. If termination is called for under this Agreement,
the Parties shall have the following rights:
(a) If this Agreement shall be terminated due to Force Majeure pursuant to
Section 16.2(a), the Parties shall have the following rights:
(i) The Party whose performance of its obligations under this
Agreement or the Ancillary Agreements is not prevented or rendered
impractical by an event or condition of Force Majeure shall have the
option for thirty (30) days from the date of written notice to
terminate this Agreement delivered under Section 16.2, to acquire from
the Party whose performance is prevented or rendered impractical all
of that Party's shares in the Company for their Fair Market Value (as
defined in Section 16.4); and
(ii) If the Party whose performance of its obligations under this
Agreement or the Ancillary Agreements is not prevented or rendered
impractical by an event or condition of Force Majeure does not
exercise its option to acquire from the Party whose performance is so
prevented or rendered impractical all of that Party's shares, then the
Parties shall take all steps necessary to liquidate and dissolve the
Company.
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(b) Upon a Default, the non-defaulting Party shall have the following
rights, without prejudice to the rights of either Party by reason of any
breach of the Agreement:
(i) The non-defaulting Party shall have the option for thirty (30)
days from the notice described in Section 16.2 to acquire from the
defaulting Party all of the defaulting Party's shares in the Company
at a price which shall be equal to seventy-five percent (75%) of the
Fair Market Value of such shares;
(ii) If the non-defaulting Party does not acquire the defaulting
Party's shares in the Company, then it shall have the right for thirty
(30) days from the expiration of the non-defaulting Party's option
(or, if earlier, notice from the non-defaulting Party that it elects
not to exercise the option) to require dissolution of the Company, in
which case the Parties shall take all steps necessary to liquidate and
dissolve the Company.
(c) If this Agreement is terminated pursuant to Section 16.2(c) or (d),
neither Party shall have any liability to the other except as provided in
Article 11.
16.4 Fair Market Value. The term Fair Market Value as used in this Agreement
shall be defined and determined as follows: The Fair Market Value of any share
in the Company shall be equal to the book value per share of the Company, as
determined by the Company's independent auditors as of the end of the month
immediately preceding the event causing the right to acquire shares (Force
Majeure or Default).
16.5 Purchase Procedure upon Deadlock. In the event (1) a quorum is not present
at an adjourned Board meeting or general meeting and the adjourned Board meeting
or, as the case may be, general meeting is dissolved; (2) unanimous approval of
the Parties cannot be obtained for any of the actions specified in Section 6.4;
or (3) that the relationship between the Parties has deteriorated to the extent
that they cannot continue to manage the Company together, either Party may force
a deadlock buy-out. The mechanics of such a buy-out shall be as follows:
(a) If one Party wishes to trigger a deadlock buy-out, it shall furnish
written notice (the "Deadlock Notice") to the other Party that a deadlock
has arisen and the two shall meet to discuss the issues and to attempt to
resolve their differences to each Party's satisfaction.
(b) If the meeting does not satisfactorily resolve the differences within
forty- five (45) days from the date of service of the Deadlock Notice (or
if no meeting is held within ten (10) days of the date of service of the
Deadlock Notice), then either Party (the "offeror Party") may initiate a
purchase buy-out by delivering to the other Party (the "offeree Party") an
irrevocable written offer (the "Cross-Purchase Notice") to purchase all of
the shares in the Company owned by the offeree Party, and the
Cross-Purchase Notice shall specify the purchase price per share which the
offeror Party is willing to pay for the shares. Such Cross-Purchase Notice
shall also be deemed to constitute an irrevocable offer by the offeror
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Party to sell all of its shares in the Company to the offeree Party at a
price equal to the purchase price per share specified in the Cross-Purchase
Notice. If both Parties shall deliver a Cross-Purchase Notice, then the
Party which is the first to deliver a Cross-Purchase Notice shall be deemed
to be the offeror Party on the terms stated in its Cross-Purchase Notice,
and the other Party's Cross-Purchase Notice shall be of no effect. If both
Cross-Purchase Notices are delivered on the same day, then the Party which
has offered the higher purchase price shall be deemed to be the offeror
Party on the terms stated in its Cross-Purchase Notice, and the other
Party's Cross-Purchase Notice shall be of no effect.
(c) Within thirty (30) days after receipt of the Cross-Purchase Notice, the
offeree Party shall either (i) accept such offer to sell all of the offeree
Party's shares in the Company to the offeror Party; or (ii) accept the
offer to acquire all of the shares in the Company owned by the offeror
Party. Failure of the offeree Party to deliver to the offeror Party a
written notice electing to accept either of the offers of the offeror Party
shall be deemed to constitute an offer by the offeree Party to sell all of
its shares in the Company to the offeror Party.
(d) The closing of the purchase and sale of the shares shall take place at
the registered office of the Company within five days after the acceptance
or deemed acceptance of the offer. On closing, the selling Party shall,
against cash payment of the purchase price by the other Party, be obliged
to transfer all of its shares to the other Party by the delivery of a duly
executed share transfer together with the relative share certificate(s) in
respect of the shares to be sold, and the written resignations of its
appointees as directors to take effect immediately subsequent to a meeting
of the Board at which the transfer of the said shares shall be approved by
the Board. The selling Party shall furnish all necessary documents as are
required by the Stamp Office for purpose of assessing stamp duty payable on
the share transfer.
(e) Notwithstanding any other provision of this Agreement, upon the
transfer of the shares as hereinbefore provided, the selling Party shall
cease to be bound by the provisions of this Agreement save and except for
the due discharge, performance and observance of all its liabilities and
obligations whether actual or contingent arising out of or on or in respect
of or any antecedent breach of the terms of this Agreement at any time up
to and including the date of the transfer of its shares.
16.6. Name Change. In the event that either Party no longer has any shares in
the Company, the other Party shall, as soon as practical and no later than six
months from the date the first mentioned Party ceases to be a shareholder, cause
the name of the Company to be changed to one which does not contain a reference
to the name of the first mentioned Party.
25
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17. SETTLEMENT OF DISPUTES AND APPLICABLE LAW.
17.1 Consultations. The Parties acknowledge that the expeditious and equitable
settlement of disputes arising under this Agreement or in connection herewith is
to their mutual advantage and in the best interest of the Company. To this end,
the Parties therefore agree to use their best endeavors to resolve all
differences of opinion and to settle all disputes through cooperation and
consultation between a senior executive officer of PEMSTAR and a senior
executive officer of HongGuan.
17.2 Disputes. Any controversy or claim arising out of or relating to this
Agreement that the Parties are unable to settle within thirty (30) days as set
forth under Section 17.1 above shall be determined by arbitration in accordance
with the Arbitration Rules of the Singapore International Arbitration Centre for
the time being in force, which rules are deemed to be incorporated by reference
into this Section 17.2, by one arbitrator, unless otherwise agreed, appointed in
accordance with the said Rules. The place of arbitration shall be Singapore and
the arbitration shall be conducted in the English language. The Party against
whom an arbitration award is made shall be responsible for all fees and expenses
of the arbitration as well as the legal fees of the prevailing Party. If an
award is made to both Parties, then each Party shall pay one-half of the fees
and expenses of the arbitration and shall be responsible for its own legal fees.
17.3 Governing Law. This Agreement shall be governed in all respects by, and
shall be interpreted and construed in accordance with, the laws of Singapore,
which shall be the proper law of this Agreement notwithstanding any rule or
principle therein contained under which any other law or rule would be made
applicable.
18. MISCELLANEOUS
18.1 Notices. Any notice or demand provided for hereunder shall be deemed
sufficiently given if sent by telex, telefax (facsimile), courier or receipted
mail (in each case prepaid) to the address specified in writing by the Party to
which it is sent and shall be deemed effective on the date of delivery specified
in the telex, telefax (facsimile) or the courier or mail receipt. Unless and
until a Party receives written notice to the contrary from another Party, it
shall be entitled to consider the following proper addresses of the other
Parties respectively:
As to PEMSTAR: PEMSTAR INC.
2535 Highway 4 West
Rochester, Minnesota 55901, U.S.A.
Attention: Allen J. Berning
Telefax: (507) 280-0838
with a copy to: DORSEY & WHITNEY LLP
201 First Avenue S.W., Suite 340
26
<PAGE>
Rochester, MN 55902
Attention: William A. Jonason
Telefax: (507) 288-6190
As to HONGGUAN: HONGGUAN TECHNOLOGIES (S) PTE
LTD.
39 Joo Koon Circle
Singapore 629105
Attention: Chief Executive Officer
Telefax: ________________
with a copy to: BIH, LI & LEE
79 Robinson Road
#24-01 CPF Building
Singapore 068897
Telefax: (65) 2240003
18.2 Amendment. Any and all agreements by the Parties to amend, change, extend,
review or discharge this Agreement, in whole or in part, shall be binding on the
Parties so long as such agreements shall be in writing and executed by both
Parties.
18.3 Headings. The various headings in this Agreement are inserted for
convenience only and shall not affect the meaning or interpretation of this
Agreement or any Section or provision hereof.
18.4 Successors. All covenants, stipulations and promises in this Agreement
shall be binding upon and inure to the benefit of the Parties and their
respective successors, and permitted assigns. No Party shall have the right to
assign or otherwise transfer its rights or obligations under this Agreement
except with the written consent of the other Party hereto, and having procured
from the assignee a deed of adherence agreeing to be bound by the terms of this
Agreement.
18.5 Counterparts. This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original, and all of which shall
constitute together one and the same agreement. The Parties may each execute
this Agreement by signing any such counterpart.
18.6 Invalidity. In case any provision of this Agreement shall be deemed or
declared to be unenforceable, invalid or void, the same shall not impair any
other provision of this Agreement but the Parties agree to negotiate a
substitute provision or amend the other provisions of this Agreement so as to
produce a result which preserves as nearly as possible the economic balance of
the Agreement, provided that neither Party shall be obligated to accept an
amendment which substantially departs from the essential intent or effect of
this Agreement or any Ancillary Agreement.
18.7 Waivers. No failure on the part of either Party to exercise, and no delay
in exercising, any right or remedy hereunder shall operate as a waiver thereof;
nor shall any single or partial exercise of any
27
<PAGE>
right or remedy hereunder preclude any other or further exercise thereof or the
exercise of any other right or remedy granted hereby or by any related document
or at law or in equity.
18.8 Entire Agreement. Except as provided herein, this Agreement and the
Ancillary Agreements constitute and express the entire agreement of the Parties
as to all the matters herein and therein referred to, all previous discussions,
promises, representations and understandings relative thereto among the Parties
being herein and therein merged and superseded.
18.9 Publicity. Neither Party shall make any disclosure of or concerning the
contents of this Agreement or any Ancillary Agreement without the prior written
consent of the other Party except to comply with mandatory disclosure
requirements imposed under any applicable law or jurisdiction or under the terms
and conditions of any loan or credit agreement to which a Party is bound
contractually.
18.10 Joint Venture in Philippines. The Parties agree to negotiate a joint
venture agreement similar in scope to this Agreement regarding the business in
the Philippines as soon as possible, with the intent that it be entered into by
December 31, 1998. In the event that the Parties have not entered into such
joint venture by December 31, 1998, neither Party shall have any claim against
the other for costs, damages, compensation or otherwise and both Parties shall
be free to compete in the Philippines. The Parties agree that the Company shall
have the right to acquire this joint venture company by December 31, 2001.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
PEMSTAR INC. HONGGUAN TECHNOLOGIES (S) PTE LTD.
By: /s/ Al Berning By: /s/ James Teo
--------------------------------- ----------------------------------
Title: CEO Title: M.D.
------------------------------ -------------------------------
28
<PAGE>
LIST OF EXHIBITS
A Territory
B List of Employees
C License Agreement
D Trademark Agreements
E Services Agreement
F Contracts Assigned by HongGuan
G Contracts Assigned by PEMSTAR
29
<PAGE>
LIST OF EXHIBITS
A Territory
B List of Employees
C License Agreement
D Trademark Agreements
E Services Agreement
F Contracts Assigned by HongGuan
G Contracts Assigned by PEMSTAR
<PAGE>
Exhibit A: Territory
--------------------
[Map of Southeast Asia]
<PAGE>
Exhibit B : List of Employees
-----------------------------
--------------------------------------------------------------------------------
S/N Names Appointment
--------------------------------------------------------------------------------
1 Pay Eng Hong AGM
--------------------------------------------------------------------------------
2 Patrick Pang Sales Manager
--------------------------------------------------------------------------------
3 Suneail Mech. Assist. Engr. (Design)
--------------------------------------------------------------------------------
4 Ong Keng Yap Mech. Engr (Assy. Group)
--------------------------------------------------------------------------------
5 Alvin Ong Mech. Assist. Engr. (Assy.)
--------------------------------------------------------------------------------
6 Kasavan Mech. Assist. Engr. (Assy.)
--------------------------------------------------------------------------------
7 Tan KC Electrical Engr (Elect. Group)
--------------------------------------------------------------------------------
8 Tony Chiu R&D Electronic Engr.
--------------------------------------------------------------------------------
9 Hibeeb R&D Assist.
--------------------------------------------------------------------------------
<PAGE>
Exhibit C
Patent and Technical Information License Agreement
This Agreement is entered into by Pemstar, Inc., a Minnesota corporation,
having its principal place of business at 2535 Highway 14 West, Rochester,
Minnesota ("LICENSOR"), and by Pemstar-HongGuan PTE LTD., a private limited
company (the "COMPANY"), which results from the Joint Venture between LICENSOR
and HongGuan Technologies (S) PTE LTD ("HongGuan")., a company incorporated
under the laws of Singapore.
I. Background of Agreement
1.00 LICENSOR is the owner of certain PATENTS and TECHNICAL
INFORMATION.
1.01 The COMPANY wishes to acquire the right to use the PATENTS and
the TECHNICAL INFORMATION to make, use, offer for sale, and sell products
within the scope of such PATENTS and TECHNICAL INFORMATION.
II. Definitions
As used herein, the following terms shall have the meanings set forth
below:
2.00 CONFIDENTIAL TECHNICAL INFORMATION means TECHNICAL INFORMATION
that has been identified by LICENSOR as "Confidential".
2.01 LICENSED PRODUCTS mean products and services relating to the disk
drive industry as defined per PROJECT in Schedule C # (as defined in
Section 2.04). LICENSED PRODUCTS will be (1) covered by at least one claim
of a PATENT and/or (2) made or performed, at least in part, using TECHNICAL
INFORMATION.
2.02 LICENSED TERRITORY means for a PATENT the territory coextensive
with the territory within which the PATENT is enforceable. LICENSED
TERRITORY means for TECHNICAL INFORMATION the continent of Asia, as
indicated on the map attached to the JOINT VENTURE AGREEMENT as Exhibit A,
provided, however, that the LICENSED TERRITORY shall exclude the
Phillippines.
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2.03 NET SALES PRICE for the purpose of computing royalties, means the
COMPANY'S invoice price of a LICENSED PRODUCT, f.o.b. factory, after
deduction of regular trade and quantity discounts, but before deduction of
any other items, including, but not limited to, freight allowances, cash
discounts, and agents' commissions. Any applicable goods and services tax,
imposition, duty and levy whatsoever, which from time to time may be
imposed or charged by any government, statutory or tax authority on the
LICENSED PRODUCT shall not be included in the NET SALES PRICE for the
purpose of computing royalties.
2.04 PATENT or PATENTS mean LICENSOR'S U.S. and other patents and
patent applications that are identified in attached Schedule A. The parties
agree that when agreed upon by both the LICENSOR and the COMPANY, Schedule
A may be amended to remove patents and patent applications, and to add
preexisting and newly acquired patents and patent applications.
2.05 PROJECT means a specified project as identified and described in
Schedule C, which comprises one or more PROJECT Schedules, as may be
augmented by the parties from time to time. Each of these PROJECT Schedules
will be numbered sequentially C1, C2, C3, etc. (herein referred to as "C #
"). Each Schedule C # PROJECT must be agreed upon and executed by both the
LICENSOR and the COMPANY. Moreover, each Schedule C # PROJECT shall
identify for a particular project (1) the LICENSED PRODUCTS produced and/or
performed under the PROJECT, (2) the PATENTS and./or TECHNICAL INFORMATION
covering the PROJECT and thus the LICENSED PRODUCTS under the PROJECT, and
(3) the overall royalty for each LICENSED PRODUCT under the PROJECT
including that royalty portion attributable to PATENTS and/or that portion
attributable to TECHNICAL INFORMATION.
2.06 PROJECT EFFECTIVE DATE means the effective date for a particular
PROJECT, as identified in Schedule C #.
2.07 TECHNICAL INFORMATION means unpublished research and development
information, unpatented inventions, knowhow, trade secrets, source code,
technical data, and other such information of LICENSOR that may be used by
the COMPANY to produce LICENSED PRODUCTS and which LICENSOR has the right
to provide to the COMPANY. A list of items and documents containing
TECHNICAL INFORMATION is attached hereto as Schedule B. The parties agree
that when agreed upon by both the LICENSOR and the COMPANY, Schedule B may
be amended to remove existing items, and to add preexisting and newly
acquired items.
III. Patent License
3.00 LICENSOR hereby grants to the COMPANY, to the extent of the
LICENSED TERRITORY for PATENTS, a nonexclusive and nontransferable license
under the PATENTS to make, use, offer for sale, and sell LICENSED PRODUCTS,
as identified on a per PROJECT basis in Schedule C #. This AGREEMENT shall
not preclude the COMPANY from making, using, selling, or
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offering for sale LICENSED PRODUCTS, which royalties shall have been paid
as provided in Section 5.01 of this Agreement, outside of the LICENSED
TERRITORY. However, no rights are granted or implied with respect to such
activity under any patent of LICENSOR except as specifically set forth on a
per PROJECT basis in Schedule C #.
3.01 LICENSOR shall offer no license under any PATENTS to any
competitive third party (i.e., a party providing products or services in
the disk drive industry) without the COMPANY'S written permission.
IV. Technical Information License
4.00 LICENSOR hereby grants to the COMPANY, to the extent of LICENSED
TERRITORY, a non-exclusive license to use the TECHNICAL INFORMATION, as
identified on a per PROJECT basis in Schedule C, in making and providing
LICENSED PRODUCTS.
4.01 LICENSOR shall, as soon as practical after the execution of
Schedule C and in any event within sixty (60) days of a PROJECT EFFECTIVE
DATE make available to the COMPANY for its use TECHNICAL INFORMATION
identified in Schedule C #. LICENSOR agrees to disclose to the COMPANY,
upon execution of Schedule C #, LICENSOR'S pending United States and
foreign patent applications identified in Schedule C # of this Agreement.
4.02 The COMPANY shall not disclose any TECHNICAL INFORMATION
furnished by LICENSOR pursuant to Section 4.01 above to third parties
during the term of this Agreement, or any time thereafter, provided,
however, that disclosure may be made of TECHNICAL INFORMATION that is not
CONFIDENTIAL TECHNICAL INFORMATION: (1) with the prior written consent of
LICENSOR, or (2) to the extent necessary to purchasers of The COMPANY'S
LICENSED PRODUCTS, or (3) after the same shall have become public through
no fault of The COMPANY.
4.03 The COMPANY shall not disclose any CONFIDENTIAL TECHNICAL
INFORMATION furnished by LICENSOR pursuant to Section 4.01 above to third
parties during the term of this Agreement, or any time thereafter,
provided, however, that disclosure may be made of CONFIDENTIAL TECHNICAL
INFORMATION: (1) with the prior written consent of LICENSOR, or (2) after
the same shall have become public through no fault of The COMPANY.
4.04 The COMPANY shall not use any TECHNICAL INFORMATION furnished by
LICENSOR other than in the making and providing of LICENSED PRODUCTS and
subject to Section 9.03 only during the term of this Agreement, provided,
however, that other use of such TECHNICAL INFORMATION may be made: ( 1)
with the prior written consent of LICENSOR, or (2) after the same shall
have become public through no fault of The COMPANY.
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<PAGE>
4.05 LICENSOR shall offer no license under any TECHNICAL INFORMATION
to any competitive third party (i.e., a party providing products or
services in the disk drive industry) without the COMPANY'S written
permission.
V. Royalties
5.00 LICENSOR and the COMPANY agree that for each PROJECT, a portion
of the overall royalty for a LICENSED PRODUCT under the PROJECT may apply
to rights granted under PATENT(S) and a portion may apply to rights granted
under TECHNICAL INFORMATION.
5.01 Patent Royalties.
In consideration for the licenses granted by LICENSOR under the
PATENTS for the LICENSED PRODUCTS of the PROJECT identified in Schedule C
#, the COMPANY shall pay to LICENSOR in U.S. dollars the PATENT royalty,
which is a percentage specified in Schedule C #, of the NET SALES PRICE of
the LICENSED PRODUCTS covered by such PATENTS.
5.02 Technical Information Royalties.
In consideration for the licenses granted by LICENSOR to use the
TECHNICAL INFORMATION identified in Schedule C #, the COMPANY shall pay to
LICENSOR in U.S. dollars the TECHNICAL INFORMATION royalty, which is a
percentage specified in Schedule C #, of the NET SALES PRICE of the
LICENSED PRODUCTS that result from the COMPANY'S use of such TECHNICAL
INFORMATION.
5.03 Withholding Tax
(a) If the COMPANY is required by law to make a deduction or
withholding for our on account of any tax on royalties imposed by the
Republic of Singapore from any amount of royalties payable by the
COMPANY to LICENSOR under this agreement, the COMPANY shall make such
deduction or withholding in the manner and within the period
prescribed in accordance with the applicable laws and regulations; and
the COMPANY shall pay to LICENSOR the net sum after making such
deduction or withholding.
(b) The COMPANY shall ensure that the amount so deducted or
withheld does not exceed the maximum legally required to be so
deducted or withheld by the appropriate authorities.
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<PAGE>
VI. Sublicensing
6.00 The COMPANY shall not have the right to sublicense under both the
PATENT and TECHNICAL INFORMATION licenses.
VII. Payments
7.00 Not later than January 31 and July 31 of each year, the COMPANY
shall furnish to LICENSOR a written statement in such detail as LICENSOR
may reasonably require of all amounts due pursuant to Article V. for the
semiannual periods ended the last days of the preceding December and June,
respectively, and shall pay to LICENSOR all amounts in U.S. dollars due to
LICENSOR. If no amount is accrued during any semiannual period, a written
statement to that effect shall be furnished.
7.01 Payments provided for in this Agreement, when overdue, shall bear
interest at a rate per annum equal to one percent (1%) in excess of the
"Prime Rate" published by "The Wall Street Journal" at the time such
payment is due, and for the time period until payment is received by
LICENSOR.
7.02 If this Agreement is for any reason terminated before all of the
payments herein provided for have been made, the COMPANY shall immediately
submit a terminal report and pay to LICENSOR any remaining unpaid balance
even though the due date as above provided has not been reached.
VIII. Representations and Disclaimer of Warranties
8.00 LICENSOR warrants and represents that it has the right to grant
the licenses granted in this Agreement.
8.01 LICENSOR warrants and represents that it is the proprietor of and
that it has all right, title, and interest in the PATENTS and TECHNICAL
INFORMATION licensed in this Agreement.
8.02 LICENSOR represents that the documentation and other elements of
TECHNICAL INFORMATION identified in Schedule B have been used by it in the
research, manufacture, and/or servicing of products relating to the disk
drive industry.
8.03 LICENSOR warrants to the best of its knowledge that (1) the
PATENTS, which are licensed under this Agreement, are valid, and (2)
TECHNICAL INFORMATION disclosed or to be disclosed by LICENSOR will be
accurate and up-to-date.
8.04 LICENSOR warrants to the best of its knowledge that the exercise
of the PATENT rights granted or to be granted by LICENSOR to the COMPANY
will not result in infringement of
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<PAGE>
valid patents of third parties. However, LICENSOR shall not be liable to
the COMPANY for the COMPANY'S infringement of third-party rights, as a
result of the COMPANY'S exercise of rights granted under a PATENT, in
excess of royalties received by the LICENSOR from the COMPANY for the
PATENT.
8.05 LICENSOR warrants to the best of its knowledge that the exercise
of the TECHNICAL INFORMATION rights granted or to be granted by LICENSOR to
the COMPANY will not result in infringement of intellectual property of
third parties. However, LICENSOR shall not be liable to the COMPANY for the
COMPANY'S infringement of such third-party intellectual property, as a
result of the COMPANY'S exercise of rights granted under TECHNICAL
INFORMATION, in excess of royalties received by the LICENSOR from the
COMPANY for such TECHNICAL INFORMATION.
8.06 EXCEPT AS PROVIDED IN THIS ARTICLE VIII, LICENSOR MAKES NO
REPRESENTATIONS OR WARRANTIES AND SHALL HAVE NO LIABILITY WHATSOEVER TO
COMPANY OR ANY OTHER PERSON FOR OR ON ACCOUNT OF ANY INJURY, LOSS, OR
DAMAGE, OF ANY KIND OR NATURE SUSTAINED BY, OR ANY DAMAGE ASSESSED OR
ASSERTED AGAINST, OR ANY OTHER LIABILITY INCURRED BY OR IMPOSED UPON
COMPANY OR ANY OTHER PERSON ARISING OUT OF OR IN CONNECTION WITH OR
RESULTING FROM (a) THE PRODUCTION, USE, OR SALE OF ANY APPARATUS OR
PRODUCT, OR THE PRACTICE OF THE PATENTS, (b) THE USE OF ANY TECHNICAL
INFORMATION, TECHNIQUES, OR PRACTICES DISCLOSED BY LICENSOR; OR (c) ANY
ADVERTISING OR OTHER PROMOTIONAL ACTIVITIES WITH RESPECT TO ANY OF THE
FOREGOING, AND COMPANY SHALL HOLD LICENSOR, ITS OFFICERS, EMPLOYEES, OR
AGENTS, HARMLESS IN THE EVENT LICENSOR, OR ITS OFFICERS, EMPLOYEES, OR
AGENTS, IS HELD LIABLE. LICENSOR, EXCEPT AS PROVIDED IN THIS ARTICLE VIII,
SHALL NOT BE LIABLE FOR DAMAGES ARISING OUT OF OR RESULTING FROM ANYTHING
MADE AVAILABLE HEREUNDER OR THE USE THEREOF NOR BE LIABLE TO COMPANY FOR
CONSEQUENTIAL DAMAGES UNDER ANY CIRCUMSTANCE.
IX. Termination
9.00 This Agreement shall terminate contemporaneously with the JOINT
VENTURE AGREEMENT. However, LICENSOR shall have the right to terminate this
agreement upon six (6) months written notice to the COMPANY in the event
that LICENSOR no longer has any ownership interest in the capital stock of
the COMPANY.
9.01 The COMPANY'S obligations arising from a particular PATENT
including the obligation to pay royalties under Section 5.01 for the
practice of an invention under the patent shall end upon the expiration of
the PATENT, unless the Agreement is sooner terminated.
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<PAGE>
9.02 The COMPANY'S obligations under certain Sections of this
Agreement relating to the TECHNICAL INFORMATION including the obligation to
pay royalties for the use of the TECHNICAL INFORMATION as specified in
Sections 5.02 shall continue so long as the COMPANY is using or benefitting
from the TECHNICAL INFORMATION, unless this Agreement is sooner terminated,
but obligations under Sections 4.02, 4.03, and 4.04 of this Agreement shall
survive termination and continue until such time that LICENSOR elects to
abandon such terms.
9.03 In the event the JOINT VENTURE AGREEMENT is terminated, the
COMPANY shall continue to have the rights as granted under Sections 3 and 4
under this Agreement to the PATENTS and TECHNICAL INFORMATION for PROJECTS
having executed PROJECT Schedules before the date of termination and for
other projects (whether or not a PROJECT Schedule has been executed before
the date of termination) involving the manufacture of equipment identical
or similar to that undertaken under any PROJECT before the date of
termination, and utilizing the PATENTS and TECHNICAL INFORMATION licensed
to the COMPANY before the date of termination, provided that the COMPANY
(1) pays to LICENSOR the royalties as identified in the PROJECT Schedules;
and (2) abides by the other terms and conditions set forth in this
Agreement. In the event that COMPANY fails to pay any royalties due or
otherwise breaches a material term of this Agreement, LICENSOR has the
right to terminate the licenses granted under this section, immediately.
X. Litigation
10.00 The COMPANY shall notify LICENSOR of any suspected infringement
of the PATENTS in the LICENSED TERRITORY of which COMPANY has actual
notice. The sole right to institute a suit for infringement rests with
LICENSOR. COMPANY agrees to cooperate with LICENSOR in all respects, to
have any of COMPANY'S employees testify when requested by LICENSOR, and to
make available any records, papers, information, specimens, and the like.
The LICENSOR shall bear the cost of instituting any such proceedings and
any recovery received pursuant to such suit shall be retained by LICENSOR.
10.01 During the term of this Agreement, the COMPANY shall bring to
LICENSOR'S attention any prior art or other information of which COMPANY
has actual notice and which is relevant to the patentability or validity of
any of the PATENTS and which might cause a court to deem any of the PATENTS
wholly or partly inoperative or invalid. COMPANY shall particularly specify
such prior art or other information to LICENSOR at the time it learns
thereof and not less than ninety (90) days prior to bringing any action
against LICENSOR asserting the invalidity of any of the PATENTS.
10.02 LICENSOR agrees that should it choose not to pursue litigation
against an alleged infringer of a PATENT, LICENSOR shall grant in writing
to the COMPANY the right to pursue the litigation. However, the COMPANY
shall cover any costs and expenses associated with pursuing such
litigation. Any recovery received pursuant to such litigation shall be
retained by the COMPANY.
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XI. Licensor's Patents and Technology
11.00 LICENSOR agrees to make known to the COMPANY any of LICENSOR'S
patents and technology, including updates to PATENTS and TECHNICAL
INFORMATION, developed by LICENSOR that are relevant to the scope of this
Agreement.
11.01 LICENSOR shall have the sole right to file, prosecute, and
maintain all of the PATENTS that are the property of LICENSOR and shall
have the right to determine whether or not, and where, to file a PATENT
application, to abandon the prosecution of any PATENT or PATENT
application, or to discontinue the maintenance of any PATENT or PATENT
applications that are owned by LICENSOR.
XII. Improvements
12.00 The COMPANY shall be the owner of any and all technical
developments it makes including (1) improvements in a PATENT or TECHNICAL
INFORMATION, and (2) independently developed technology. The COMPANY agrees
to disclose these technical developments to the LICENSOR and to HongGuan.
The COMPANY has the right to license these technical developments to both
the LICENSOR and HongGuan under equivalent terms; however, for any licensed
technical development, the COMPANY shall not receive aggregate royalties
from the LICENSOR and HongGuan in excess of the costs incurred by the
COMPANY in developing the licensed technical development and costs
associated with acquiring/maintaining intellectual property for the
licensed technical development. If the LICENSOR elects to take a license
under a technical development that results from an improvement to a PATENT,
the COMPANY shall have a royalty-free license under the PATENT. That is,
the COMPANY'S obligation to pay royalties to the LICENSOR on the underlying
PATENT shall cease, even after the termination of this Agreement.
12.01 The COMPANY may jointly develop, with either or both the
LICENSOR and HongGuan, technical developments including (1) improvements in
a PATENT or TECHNICAL INFORMATION, and (2) independently developed
technology. Such joint technical developments shall be owned by the COMPANY
and the "participating party", which is the party (either or both the
LICENSOR and HongGuan) that assists the COMPANY in developing the joint
technical development. The COMPANY and the participating party (or parties)
may acquire a patent for the joint technical development. A party not
involved in a joint technical development will have the right to a license
under the joint technical development for aggregate royalties that do not
exceed the development and any associated intellectual property
acquisition/maintenance costs for the joint technical development.
12.02 No technical developments under this Article XII may be licensed
to any competitive third party (i.e., a party providing products or
services in the disk drive industry) without the written consent of both
the LICENSOR and HongGuan.
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XIII. Records
13.00 The COMPANY shall keep accurate records of all operations
affecting payments hereunder, and shall permit LICENSOR or its duly
authorized agent to inspect all such records and to make copies of or
extracts from such records during regular business hours throughout the
term of this Agreement.
XIV. Nonassignability
14.00 This Agreement imposes personal obligations on the COMPANY. The
COMPANY shall not assign any rights under this Agreement not specifically
transferable by its terms without the written consent of LICENSOR. LICENSOR
may assign its rights hereunder.
XV. Severability
15.00 The parties agree that if any part, term, or provision of this
Agreement shall be found illegal or in conflict with any valid controlling
law, the validity of the remaining provisions shall not be affected
thereby.
15.01 In the event the legality of any provision of this Agreement is
brought into question because of a decision by a court of competent
jurisdiction of any country in which this Agreement applies, the parties
may, in writing, revise the provision in question or may delete it entirely
so as to comply with the decision of said court.
XVI. Waiver, Integration, Alteration
16.00 The waiver of a breach hereunder may be effected only by a
writing signed by the waiving party and shall not constitute a waiver of
any other breach.
16.01 This Agreement, including the Schedules hereto, represents the
entire understanding between the parties regarding PATENTS and TECHNICAL
INFORMATION, and supersedes all other agreements, express or implied,
between the parties concerning the PATENTS and TECHNICAL INFORMATION .
16.02 A provision of this Agreement may be altered only by a writing
signed by both parties.
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XVII. Marking
17.00 The COMPANY shall place in a conspicuous location on any product
made or sold under any PATENT, a patent notice in accordance with 35 U.S.C.
ss.287. The COMPANY agrees to mark any products made using a process
covered by any PATENT with the number of each such patent and, with respect
to PATENTS, to respond to any request for disclosure under 35 U.S.C.
ss.287(b)(4)(B) by only notifying LICENSOR of the request for disclosure.
XVIII. Cooperation
18.00 Each party shall execute any instruments reasonably believed by
the other party to be necessary to implement the provisions of this
Agreement.
XIX. Construction
19.00 This Agreement shall be construed in accordance with the
substantive laws of the United States and the United States State of
Minnesota.
XX. Exportation of Technical Information
20.00 The COMPANY shall comply with the U.S. Export Administration
Regulations, as amended from time to time (collectively, "the EAR"), if and
to the extent any of the TECHNICAL INFORMATION licensed hereunder is deemed
"technical data" under the EAR. LICENSOR shall inform COMPANY of any such
legal duty with respect to each material disclosure of such TECHNICAL
INFORMATION to COMPANY, and the parties shall render reasonable cooperation
to one another to assure compliance with the EAR in the execution and
performance of this Agreement.
XXI. Notices Under the Agreement
21.00 For the purpose of all written communications and notices
between the parties, their addresses shall be:
LICENSOR: Pemstar, Inc.
Attn:
2535 Highway 14 West
Rochester, Minnesota 55109
and
The COMPANY: Pemstar-HongGuan PTE LTD.
or any other addresses of which either party shall notify the other party
in writing.
-10-
<PAGE>
IN WITNESS WHEREOF the parties have caused this Agreement to be executed by
their duly authorized officers on the respective dates and at the respective
places hereinafter set forth.
LICENSOR
PEMSTAR, INC.
ATTEST:
By: By:
------------------------------ -------------------------------------
Title:
----------------------------------
Signed at: Date:
----------------------- -----------------------------------
and
The COMPANY
Pemstar-HongGuan PTE LTD.
ATTEST:
By: By:
------------------------------ -------------------------------------
Title:
----------------------------------
Signed at: Date:
----------------------- -----------------------------------
-11-
<PAGE>
EXHIBIT D
Trademark License Agreement
---------------------------
This is an Agreement, by and between PEMSTAR-HONGGUAN PTE LTD , a private
limited company organized and existing under the laws of Singapore
("PEMSTAR-HONGGUAN"), and PEMSTAR Inc., a corporation organized and existing
under the laws of Minnesota ("PEMSTAR");
Whereas, PEMSTAR is the exclusive owner of the trademark and service mark
listed on Schedule A (collectively "Trademark") attached hereto; and
Whereas, PEMSTAR and HONGGUAN TECHNOLOGIES (S) PTE LTD, a Singapore
corporation, (PEMSTAR and HONGGUAN TECHNOLOGIES are collectively referred to as
the "Parties") have entered into a joint venture agreement dated September __,
1998 under which they have caused the incorporation of PEMSTAR-HONGGUAN, which
will initially engage in the business of manufacturing equipment for the disk
drive industry, providing support services for such equipment and providing
engineering and design services for the disk drive industry; and
Whereas, PEMSTAR owns 51% of PEMSTAR-HONGGUAN; and
Whereas, PEMSTAR has agreed to grant PEMSTAR-HONGGUAN the right to use the
mark listed on Schedule A pursuant to the terms of this Agreement.
Now, therefore, in consideration of the foregoing and of the mutual
promises hereinafter set forth, the parties agree as follows:
1. Grant of License. PEMSTAR grants to PEMSTAR-HONGGUAN a nonexclusive,
royalty-free, nontransferable license to use the Trademark in its name
conjointly with the mark HONGGUAN in the form of a composite mark
PEMSTAR-HONGGUAN and in connection with the corresponding goods and services set
forth in Schedule A and PEMSTAR-HONGGUAN accepts the license subject to the
following terms and conditions.
2. Ownership of Trademark. PEMSTAR represents that, to the best of its
knowledge, no other party has prior rights in the Trademark. PEMSTAR-HONGGUAN
acknowledges the ownership of the Trademark in PEMSTAR, agrees that it will do
nothing inconsistent with such ownership and that all use of the Trademark by
PEMSTAR-HONGGUAN shall inure to the benefit of and be on behalf of PEMSTAR, and
agrees to assist PEMSTAR in recording this Agreement with any appropriate
government authorities. PEMSTAR-HONGGUAN agrees that nothing in this Agreement
shall give PEMSTAR-HONGGUAN any right, title, or interest in the Trademark other
than the right to use the Trademark in accordance with this Agreement and
PEMSTAR-HONGGUAN agrees that it will not attack the title of PEMSTAR to the
Trademark or attack the validity of this Agreement.
<PAGE>
3. Quality Standards. PEMSTAR-HONGGUAN agrees that the nature and quality
of all goods sold or services rendered by PEMSTAR-HONGGUAN in connection with
the Trademark and all related advertising, promotional, and other related uses
of the Trademark by PEMSTAR-HONGGUAN shall conform to standards set by and be
under the joint control of the Parties.
4. Quality Maintenance. PEMSTAR-HONGGUAN agrees to cooperate with the
Parties in facilitating the Parties' joint control of such nature and quality,
to permit reasonable inspection of PEMSTAR-HONGGUAN's operation, and to supply
the Parties with specimens of all uses of the Trademark upon request.
PEMSTAR-HONGGUAN shall comply with all applicable laws and regulations and
obtain all appropriate government approvals pertaining to the sale,
distribution, and advertising of services covered by the license in this
Agreement.
5. Form of Use. PEMSTAR-HONGGUAN agrees that it shall not use the
Trademark, whether in its original or modified form or conjointly with any other
word, term, symbol or device, save in accordance with this Agreement.
6. Infringement Proceedings. PEMSTAR-HONGGUAN agrees to notify PEMSTAR of
any unauthorized use of the Trademark by others promptly as it comes to
PEMSTAR-HONGGUAN's attention. PEMSTAR shall have the sole right and discretion
to bring infringement, dilution, or unfair competition proceedings involving the
Trademark.
7. Term. This Agreement shall continue in force and effect unless sooner
terminated as provided for herein.
8. Termination. PEMSTAR shall have the right to terminate this Agreement
forthwith upon written notice to PEMSTAR-HONGGUAN in the event of any
affirmative act of insolvency by PEMSTAR-HONGGUAN, or upon the appointment of
any receiver or trustee to take possession of the properties of PEMSTAR-HONGGUAN
or upon the winding-up, sale, consolidation, merger or any sequestration by
governmental authority of PEMSTAR-HONGGUAN, or upon breach of any of the
provisions hereof by PEMSTAR-HONGGUAN, or upon the termination of the Joint
Venture Agreement. In addition, PEMSTAR shall have the right to terminate this
Agreement upon six (6) months written notice to PEMSTAR-HONGGUAN in the event
that PEMSTAR no longer has any ownership interest in the share capital of
PEMSTAR-HONGGUAN.
9. Effect of Termination. Upon termination of this Agreement
PEMSTAR-HONGGUAN agrees to immediately discontinue all use of the Trademark and
any term or symbol confusingly similar thereto, and to delete the same from its
corporate or business name, to cooperate with PEMSTAR or its appointed agent to
apply to the appropriate authorities to cancel recording of this Agreement from
all government records, to destroy all printed materials bearing the Trademark,
and that all rights in the Trademark and the goodwill connected therewith shall
remain the exclusive property of PEMSTAR.
2
<PAGE>
10. Interpretation of Agreement. It is agreed that this Agreement shall be
interpreted according to the laws of the State of Minnesota.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date(s) set forth below.
Dated: Dated:
--------------------------
PEMSTAR-HONGGUAN PTE LTD PEMSTAR INC.
By: By:
----------------------------- -------------------------------------
Its: Its:
----------------------- ------------------------------------
Subscribed and sworn to before me
this day of , 1998.
-------- --------------
----------------------------------
Notary Public
3
<PAGE>
Schedule A
----------
Mark Service
---- -------
PEMSTAR Manufacturing equipment for the disk
drive industry, providing support
services for such equipment and
providing engineering and design services
for the disk drive industry
4
<PAGE>
EXHIBIT D
Trademark License Agreement
---------------------------
This is an Agreement, by and between PEMSTAR-HONGGUAN PTE LTD , a private
limited company organized and existing under the laws of Singapore
("PEMSTAR-HONGGUAN"), and HONGGUAN TECHNOLOGIES (S) PTE LTD., a company
incorporated under the laws of Singapore ("HONGGUAN");
Whereas, HONGGUAN is the owner of the mark listed on Schedule A (
"Trademark") attached hereto; and
Whereas, HONGGUAN and PEMSTAR INC., a Minnesota corporation, (HONGGUAN and
PEMSTAR are collectively referred to as the "Parties") have entered into a joint
venture agreement dated September __, 1998 under which they have caused the
incorporation of PEMSTAR-HONGGUAN, which will initially engage in the business
of manufacturing equipment for the disk drive industry, providing support
services for such equipment and providing engineering and design services for
the disk drive industry; and
Whereas, HONGGUAN owns 49% of PEMSTAR-HONGGUAN; and
Whereas, HONGGUAN has agreed to grant PEMSTAR-HONGGUAN the right to use the
mark listed on Schedule A pursuant to the terms of this Agreement.
Now, therefore, in consideration of the foregoing and of the mutual
promises hereinafter set forth, the parties agree as follows:
1. Grant of License. HONGGUAN grants to PEMSTAR-HONGGUAN a nonexclusive,
royalty-free, nontransferable license to use the Trademark conjointly with the
mark PEMSTAR in the form of a composite mark PEMSTAR-HONGGUAN in its name and in
connection with the corresponding goods and services set forth in Schedule A and
PEMSTAR-HONGGUAN accepts the license subject to the following terms and
conditions.
2. Ownership of Trademark. HONGGUAN represents that, to the best of its
knowledge, no other party has prior rights in the Trademark. HONGGUAN
specifically disclaims any warranty that the Trademark is registered in any
jurisdiction. PEMSTAR-HONGGUAN acknowledges the ownership of the Trademark in
HONGGUAN, agrees that it will do nothing inconsistent with such ownership and
that all use of the Trademark by PEMSTAR-HONGGUAN shall inure to the benefit of
and be on behalf of HONGGUAN, and agrees to assist HONGGUAN in recording this
Agreement with any appropriate government authorities. PEMSTAR-HONGGUAN agrees
that nothing in this Agreement shall give PEMSTAR-HONGGUAN any right, title, or
interest in the Trademark other than the right to use the Trademark in
accordance with this Agreement and PEMSTAR-HONGGUAN agrees that it will not
attack the title of HONGGUAN to the Trademark or attack the validity of this
<PAGE>
Agreement.
3. Quality Standards. PEMSTAR-HONGGUAN agrees that the nature and quality
of all goods sold or services rendered by PEMSTAR-HONGGUAN in connection with
the Trademark and all related advertising, promotional, and other related uses
of the Trademark by PEMSTAR-HONGGUAN shall conform to standards set by and be
under the joint control of the Parties.
4. Quality Maintenance. PEMSTAR-HONGGUAN agrees to cooperate with the
Parties in facilitating the Parties' joint control of such nature and quality,
to permit reasonable inspection of PEMSTAR-HONGGUAN's operation, and to supply
the Parties with specimens of all uses of the Trademark upon request.
PEMSTAR-HONGGUAN shall comply with all applicable laws and regulations and
obtain all appropriate government approvals pertaining to the sale,
distribution, and advertising of services covered by the license in this
Agreement.
5. Form of Use. PEMSTAR-HONGGUAN agrees that it shall not use the
Trademark, whether in its original or modified form or conjointly with any other
word, term, symbol or device, save in accordance with this Agreement.
6. Infringement Proceedings. PEMSTAR-HONGGUAN agrees to notify HONGGUAN of
any unauthorized use of the Trademark by others promptly as it comes to
PEMSTAR-HONGGUAN's attention. HONGGUAN shall have the sole right and discretion
to bring infringement, dilution, or unfair competition proceedings involving the
Trademark.
7. Term. This Agreement shall continue in force and effect until terminated
as provided for herein.
8. Termination. HONGGUAN shall have the right to terminate this Agreement
forthwith upon written notice to PEMSTAR-HONGGUAN in the event of any
affirmative act of insolvency by PEMSTAR-HONGGUAN, or upon the appointment of
any receiver or trustee to take possession of the properties of PEMSTAR-HONGGUAN
or upon the winding-up, sale, consolidation, merger or any sequestration by
governmental authority of PEMSTAR-HONGGUAN, or upon breach of any of the
provisions hereof by PEMSTAR-HONGGUAN, or upon the termination of the Joint
Venture Agreement. In addition, HONGGUAN shall have the right to terminate this
Agreement upon six (6) months written notice to PEMSTAR-HONGGUAN in the event
that HONGGUAN no longer has any ownership interest in the share capital of
PEMSTAR-HONGGUAN.
9. Effect of Termination. Upon termination of this Agreement
PEMSTAR-HONGGUAN agrees to immediately discontinue all use of the Trademark and
any term or symbol confusingly similar thereto, and to delete the same from its
corporate or business name, to cooperate with HONGGUAN or its appointed agent to
apply to the appropriate authorities to cancel recording of this Agreement from
all government records, to destroy all printed materials bearing the Trademark,
and that all rights in the
2
<PAGE>
Trademark and the goodwill connected therewith shall remain the exclusive
property of HONGGUAN.
10. Interpretation of Agreement. It is agreed that this Agreement shall be
interpreted according to the laws of Singapore.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date(s) set forth below.
Dated: Dated:
-------------------------- ----------------------------------
PEMSTAR-HONGGUAN PTE LTD HONGGUAN TECHNOLOGIES (S) PTE LTD.
By: By:
----------------------------- -------------------------------------
Its: Its:
------------------------ --------------------------------
Subscribed and sworn to before me
this day of , 1998.
-------- -------------
----------------------------------
Notary Public
3
<PAGE>
Schedule A
----------
Mark Services
---- --------
HONGGUAN Manufacturing equipment for the disk
drive industry, providing support
services for such equipment and
providing engineering and design services
for the disk drive industry
4
<PAGE>
EXHIBIT E
SERVICES AGREEMENT
THIS SERVICES AGREEMENT is made as of this ____ day of __________, 1998 by
and between PEMSTAR INC. ("PEMSTAR"), a corporation organized under the laws of
the State of Minnesota with its principal offices at 2535 Highway 14 West,
Rochester, Minnesota 55901, U.S.A. and HONGGUAN TECHNOLOGIES (S) PTE LTD.
("HongGuan"), a company incorporated under the laws of Singapore with its
registered office at 39 Joo Koon Circle, Singapore 629105 and PEMSTAR-HONGGUAN
PTE LTD., a company incorporated under the laws of Singapore.
WHEREAS, PEMSTAR and HongGuan have entered into a Joint Venture Agreement
of even date herewith under which they have incorporated a new private limited
company called PEMSTAR-HONGGUAN PTE LTD. (the "Company") in Singapore that will
initially engage in the business of manufacturing equipment for the disk drive
industry, providing support services for such equipment and providing
engineering and design services for the disk drive industry; and
WHEREAS, PEMSTAR and HongGuan desire to set forth in this Agreement the
terms and conditions for the services that each of them will provide to the
Company.
NOW, THEREFORE, in consideration of the premises and the respective
agreements herein set forth, the parties hereto agree as follows:
1. Engineering Design and Prototype Services.
PEMSTAR will provide design and prototype services to the Company on a
project contract or time and material basis at PEMSTAR's transfer price
(burdened labor and material cost plus 10%). Projects will be negotiated in
advance with objectives, specifications, schedules, and costs provided in a
purchase order requesting this service. PEMSTAR will bill monthly for services.
Outlined below are the current labor costs, which may be updated semiannually by
PEMSTAR by written notice to the Company:
Program Manager US$52.45/hr
Engineer/Programmer US$41.25/hr
Designer/Technician US$30.85/hr
Assembler US$19.40/hr
2. Contract Personnel.
HongGuan will contract engineering and manufacturing personnel to the
Company on a project contract or time and material basis at a price not to
exceed burdened labor cost plus 10%. The price may be negotiated on a project by
project basis. The Company will provide HongGuan on a monthly basis a 30/60/90
day outlook of requirements by skill. The Company will also provide HongGuan on
a
<PAGE>
weekly basis the contract skills required for the following
week. HongGuan will provide a 30 day notice if projected skills are not
available. HongGuan will bill monthly for services. Outlined below are the
current labor costs, which may be updated semiannually by HongGuan by written
notice to the Company:
Program Manager S$62.90/hr
Engineer/Programmer S$39.90/hr
Designer/Technician S$32.30/hr
Assembler S$21.30/hr
3. Procurement Services.
HongGuan will purchase parts and provide procurement services to the
Company at parts cost plus 3%. The Company will have primary sourcing
responsibility and will provide bill of material, prints, source and required
schedule with the purchase order to HongGuan. HongGuan will assist in sourcing,
procure parts to specifications, manage all interfaces to vendors and bill the
Company weekly on parts received. The Company will pay HongGuan within 25 days
of the date of HongGuan's invoice. If procurement or sourcing support is
required from PEMSTAR for US vendors, it will be billed to HongGuan at a price
equal to PEMSTAR's burdened labor cost plus 10% and PEMSTAR's actual parts cost.
4. Equipment Assembly and Integration Services.
HongGuan will be the Company's sole subcontractor for a period of two
years, providing they are competitive with internal or other outside sources,
for providing equipment assembly, integrations services and fabricated parts to
the Company. The Company may request HongGuan to provide competitive quotes or
price audits to assure competitiveness. After the two-year period, the Company
may source such services and parts as it chooses.
5. Human Resource Services.
HongGuan will provide recruitment, hiring, benefit support, etc. for the
employees listed on Exhibit B to the Joint Venture Agreement without charge. If
the Company has more than the number of employees listed on such Exhibit and
does not have its own human resources department, HongGuan agrees to provide
these services at a price not to exceed its cost plus 10%.
2
<PAGE>
6. Accounting Services.
HongGuan will provide general ledger, accounts payable, accounts
receivable, payroll, cash management, banking, capital assets, order management
services and provide monthly financial reports to the Company for S$4,500 per
month until December 31, 1998. After December 31, 1998, the provision of these
services and the terms and conditions thereof may be re-negotiated or staffed
internally. There will be a one time charge of S$2,100 to set up an accounting
system and for training on MAPICS. The chart of accounts to be used is attached.
The following reports will be provided on the 7th business day of each month to
the Managing Director and forwarded by 8th business day to PEMSTAR and HongGuan
financial controllers:
Income and Expense Statement: Month and YTD/by project and summary
Balance Sheet
Trial Balance
Cash Flow Statement
Aged Receivables
Aged Payables
90 day Cash Outlook
Inventory Status (if any)
Capital Asset additions
The Company will hire an auditor approved by the Board to audit its
financial books.
7. Information Systems ("I/S") Services.
PEMSTAR shall provide the I/S services at its burdened cost plus 10% at
agreed-to service levels. The I/S Service requirements will be determined based
on MAPICS timetable and project management requirements.
8. Facilities Services.
Facilities services (janitorial, security, etc) are to be included in the
lease agreement with HongGuan.
9. Miscellaneous.
9.1 Amendment. Any and all agreements by the parties to amend, change,
extend, review or discharge this Agreement, in whole or in part, shall
be binding on the parties so long as such agreements shall be in
writing and executed by PEMSTAR and HongGuan.
3
<PAGE>
9.2 Headings. The various headings in this Agreement are inserted for
convenience only and shall not affect the meaning or interpretation of
this Agreement or any Section or provision hereof.
9.3 Successors. All covenants, stipulations and promises in this Agreement
shall be binding upon and inure to the benefit of the parties and
their respective successors, and permitted assigns. No party shall
have the right to assign or otherwise transfer its rights or
obligations under this Agreement except with the written consent of
the other party hereto, and having procured from the assignee a deed
of adherence agreeing to be bound by the terms of this Agreement.
9.4 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, and all
of which shall constitute together one and the same agreement. The
parties may each execute this Agreement by signing any such
counterpart.
9.5 Invalidity. In case any provision of this Agreement shall be deemed or
declared to be unenforceable, invalid or void, the same shall not
impair any other provision of this Agreement but the parties agree to
negotiate a substitute provision or amend the other provisions of this
Agreement so as to produce a result which preserves as nearly as
possible the economic balance of the Agreement, provided that neither
party shall be obligated to accept an amendment which substantially
departs from the essential intent or effect of this Agreement.
9.6 Waivers. No failure on the part of either party to exercise, and no
delay in exercising, any right or remedy hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any right
or remedy hereunder preclude any other or further exercise thereof or
the exercise of any other right or remedy granted hereby or by any
related document or at law or in equity.
9.7 Entire Agreement. Except as provided herein, this Agreement and the
Ancillary Agreements constitute and express the entire agreement of
the parties as to all the matters herein and therein referred to, all
previous discussions, promises, representations and understandings
relative thereto among the parties being herein and therein merged and
superseded.
9.8 Governing Law; Disputes. This Agreement shall be governed in all
respects by, and shall be interpreted and construed in accordance
with, the laws of Singapore, which shall be the proper law of this
Agreement notwithstanding any rule or principle therein
4
<PAGE>
contained under which any other law or rule would be made applicable.
Any controversy or claim arising out of or relating to this Agreement
that the parties are unable to settle shall be determined by
arbitration in accordance with the dispute provisions of the Joint
Venture Agreement of even date herewith between PEMSTAR and HongGuan.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
PEMSTAR INC. HONGGUAN TECHNOLOGIES (S) PTE LTD.
By: By
------------------------------- --------------------------------------
Title: Title:
--------------------------- ----------------------------------
6
<PAGE>
Thursday, June 14, 2000
Energy/General 2.0
Intraoffice conference regarding the first draft of the specific Confidentiality
Agreement for Energy United and All Star Gas, and the first draft of the general
Confidentiality Agreement for other members; draft second draft of the specific
Confidentiality Agreement and second draft of the general Confidentiality
Agreement to reflect the results of the intraoffice conference; draft
memorandum of explanation to S. Huske.
MCP/LSI 6.75
Completed drafting the first draft of the Action in Writing for the LSI Board of
Directors in connection with the approval of the LSI Reorganization; reviewed
the pertinent California statutory materials; drafted the first draft of the
Action in Writing for LSI's shareholder approval of the LSI Reorganization;
drafted memorandum of explanation to J. Bennett and D. Stacken regarding MCP
and LSI corporate approval documents; drafted the third draft of the United
States Asset Transfer Agreement; drafted a memorandum of explanation to J.
Bennett regarding the United States Asset Transfer Agreement; prepared a
redlined draft of the United States Asset Transfer Agreement; drafted a
memorandum to legal counsel for Harris Bank regarding the United States Asset
Transfer Agreement; intraoffice meeting regarding the status and handling of
numerous aspects of the LSI Reorganization
Ostrander/Ag Center .25
Telephone conference with N. Frana regarding the first draft of the first group
of Closing Documents, and regarding the status and handling of numerous issues
related to the Ag Center Reorganization; intraoffice calls regarding real estate
issues
Friday, June 16, 2000
Vacation
<PAGE>
Exhibit F: Contracts Assigned by HongGuan
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
Priority Project Name Prog. Status % Bid Rev. Report Pot'l Win % Del. Remarks
Mgr Complete S$(K) Rev. Rev. Date
S$(K) S$(K)
-----------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C> <C> <C> <C> <C>
IBM Singapore
-----------------------------------------------------------------------------------------------------------------------------------
A IBM Disk Stack Stn. for Mako/ Danny 100 195 389 99 1/11/98 Pot'l rev. base on 2 lines
-----------------------------------------------------------------------------------------------------------------------------------
Hammerhead Line #6&7
-----------------------------------------------------------------------------------------------------------------------------------
A IBM Deflection Stn. for Mako/ Danny 100 25 50 99 1/11/98 Pot'l rev. base on 2 lines
-----------------------------------------------------------------------------------------------------------------------------------
Hammerhead Line #6&7
-----------------------------------------------------------------------------------------------------------------------------------
<PAGE>
Exhibit G: Contracts Assigned by PEMSTAR 09-Sep-98
Potential
Project Probability Revenue (K$)
----------------------------------------- ------------------ ------------------
IBM Manta/SRay New Balance Tester 90% 1,000
----------------------------------------- ------------------ ------------------
IBM Mako/HHead Balance Retrofit 50% 300
----------------------------------------- ------------------ ------------------
IBM Manta/SRay Pack Line Integration 75% 100
----------------------------------------- ------------------ ------------------
Kaifa HSA Tester 50% 600
----------------------------------------- ------------------ ------------------
Sony Slider Magnetic Tester 25% 1,000
----------------------------------------- ------------------ ------------------
Sony Balance Tester 25% 500
----------------------------------------- ------------------ ------------------
Sony Final Tester 25% 2,000
----------------------------------------- ------------------ ------------------
ReadRite Static HSA Tester 75% 600
----------------------------------------- ------------------ ------------------
ReadRite HGA FOS Automation 25% 2,000
----------------------------------------- ------------------ ------------------
ReadRite HGA Pitch Static Attitude 25% 200
----------------------------------------- ------------------ ------------------
ReadRite HSA GLA 75% 500
----------------------------------------- ------------------ ------------------
Conner Tech Final Tester 25% 5,000
----------------------------------------- ------------------ ------------------
</TABLE>
