Exhibit 10.1


 


EXECUTION
COPY


 


$75,000,000  



Power-One, Inc.



Senior Secured Convertible Notes due 2013 



PURCHASE AGREEMENT


 


June 12, 2008


 


LEHMAN BROTHERS INC., 


As Representative of the several


Initial
Purchasers named in Schedule I attached hereto,


c/o Lehman Brothers Inc.


745 Seventh Avenue


New York, New York 10019


 


Ladies and Gentlemen:


 


Power-One, Inc., a Delaware corporation (the “Company”),
proposes, upon the terms and conditions set forth in this agreement (this “Agreement”), to issue and sell to you, as the initial
purchasers (the “Initial Purchasers”), $75,000,000
in aggregate principal amount of its Senior Secured Convertible Notes due 2013
(the “Firm  Securities”).  The Firm Securities will (i) have terms
and provisions that are summarized in the Pricing Disclosure Package (as
defined below) and Offering Memorandum (as defined below) and (ii) are to
be issued pursuant to an Indenture (the “Indenture”) to
be entered into between the Company and The Bank of New York Trust Company,
N.A., as trustee (the “Trustee”).  The Company also proposes to issue and sell
to the Initial Purchasers not more than an additional $5,000,000 principal
amount of Senior Secured Convertible Notes due 2013 (the “Option
Securities”) if and to the extent that you, as Representative of the
Initial Purchasers, shall have determined to exercise, on behalf of the Initial
Purchasers, the right to purchase such Senior Secured Convertible Notes due
2013 granted to the Initial Purchasers in Section 3(a) hereof.  The Firm Securities and the Option Securities
are hereinafter collectively referred to as the “Securities”.  The Securities will be convertible into
shares of common stock, par value $0.001 per share (“Common Stock”)
of the Company (the shares of Common Stock into which the Securities are
convertible, the “Conversion Shares”).  This is to confirm the agreement concerning
the purchase of the Securities from the Company by the Initial Purchasers.


 


The Securities
will be secured on a first priority basis by the security documents listed in
Schedule V hereto (collectively, the “Security Documents”).


 


1.             Purchase and Resale of the Securities.  The Securities will be offered and sold to
the Initial Purchasers without registration under the Securities Act of 1933,
as amended (the “Securities Act”), in reliance on
an exemption therefrom.  The Company has
prepared a


 

















 


preliminary offering
memorandum, dated June 11, 2008 (the “Preliminary Offering
Memorandum”), a pricing term sheet substantially in the form
attached hereto as Schedule II (the “Pricing Term Sheet”)
setting forth the terms of the Securities omitted from the Preliminary Offering
Memorandum and an offering memorandum, dated June 12, 2008 (the “Offering Memorandum”), setting forth information regarding
the Company and the Securities. The Preliminary Offering Memorandum, as
supplemented and amended as of the Applicable Time (as defined below), together
with the Pricing Term Sheet and any of the documents listed or information
presented on Schedule III hereto are collectively referred to as the “Pricing Disclosure Package.” The Company hereby confirms
that it has authorized the use of the Preliminary Offering Memorandum, the
Pricing Disclosure Package and the Offering Memorandum in connection with the
offering and resale of the Securities by the Initial Purchasers. “Applicable Time” means 8:30 a.m. (New York City time)
on the date of this Agreement.


 


Any reference to the Preliminary Offering Memorandum, the Pricing
Disclosure Package or the  Offering
Memorandum shall be deemed to refer to and include the Company’s most recent
Annual Report on Form 10-K and all other documents filed with the United
States Securities and Exchange Commission (the “Commission”)
pursuant to Section 13(a) or 15(d) of the United States
Securities Exchange Act of 1934, as amended (the “Exchange Act”),
subsequent to the end of the Company’s most recently completed fiscal year and
on or prior to the date of the Preliminary Offering Memorandum, the Pricing
Disclosure Package or the Offering Memorandum, as the case may be.  Any reference to the Preliminary Offering
Memorandum, Pricing Disclosure Package or the  Offering
Memorandum, as the case may be, as amended or supplemented, as of any specified
date, shall be deemed to include (i) any documents filed with the Commission
pursuant to Section 13(a) or 15(d) of the Exchange Act after the
date of the Preliminary Offering Memorandum, Pricing Disclosure Package or the
Offering Memorandum, as the case may be, and prior to such specified date.  All documents filed under the Exchange Act
and so deemed to be included in the Preliminary Offering Memorandum, Pricing
Disclosure Package or the Offering Memorandum, as the case may be, or any
amendment or supplement thereto are hereinafter called the “Exchange Act Reports.” 
The Exchange Act Reports, when they were or are filed with the
Commission, conformed or will conform in all material respects to the
applicable requirements of the Exchange Act and the applicable rules and
regulations of the Commission thereunder.


 


It is understood and acknowledged that upon original issuance thereof,
and until such time as the same is no longer required under the applicable
requirements of the Securities Act, the Securities (and all securities issued
in exchange therefor or in substitution thereof) shall bear the following
legend (along with such other legends as the Initial Purchasers and their
counsel deem necessary):


 


‘‘THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”).
NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE
REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS THE TRANSACTION IS
EXEMPT


 


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FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS NOTIFIED
THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM SECTION 5 OF THE
SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THIS SECURITY BY
ITS ACCEPTANCE HEREOF (1) REPRESENTS THAT IT IS A “QUALIFIED INSTITUTIONAL
BUYER” (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT),  (2) AGREES THAT IT WILL NOT PRIOR TO (X) THE
DATE WHICH IS ONE YEAR (OR SUCH SHORTER PERIOD OF TIME AS PERMITTED BY RULE
144(d)(i) UNDER THE SECURITIES ACT OR ANY SUCCESSOR PROVISION THEREUNDER)
AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF (OR OF ANY PREDECESSOR OF
THIS SECURITY) OR THE LAST DAY ON WHICH THE COMPANY OR ANY AFFILIATE OF THE
COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF THIS SECURITY)
AND (Y) SUCH LATER DATE, IF ANY, AS MAY BE REQUIRED BY APPLICABLE LAW
(THE “RESALE RESTRICTION TERMINATION DATE”), OFFER, SELL OR OTHERWISE TRANSFER
THIS SECURITY EXCEPT (A) TO THE COMPANY, (B) PURSUANT TO A
REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES
ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO
RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A “QUALIFIED INSTITUTIONAL
BUYER” AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS
OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM
NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A OR (D) 
PURSUANT TO ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM
THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND;
PROVIDED THAT THE COMPANY, THE TRUSTEE AND THE REGISTRAR SHALL HAVE THE RIGHT
PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSE (D) TO
REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/ OR OTHER
INFORMATION SATISFACTORY TO EACH OF THEM. THIS LEGEND WILL BE REMOVED UPON THE
REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.


 


You have advised the Company that you will make offers (the “Exempt Resales”) of the Securities purchased by you
hereunder on the terms set forth in each of the Pricing Disclosure Package and
the Offering Memorandum, as amended or supplemented, solely to persons (the “Eligible Purchasers”) whom you reasonably believe to be “qualified
institutional buyers” as defined in Rule 144A under the Securities Act (“QIBs”).  You have
advised the Company that you
will offer the Securities to Eligible Purchasers initially at a price equal to
100% of the


 


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principal amount thereof plus accrued
interest, if any.  Such price may be
changed at any time without notice.


 


2.             Representations,
Warranties and Agreements of the Company.  The Company represents, warrants and agrees
as follows:


(a)           When the Securities are
issued and delivered pursuant to this Agreement, the Securities will not be of
the same class (within the meaning of Rule 144A under the Securities Act)
as securities of the Company that are listed on a United States national
securities exchange registered or that are quoted in a United States automated
inter-dealer quotation system.


 


(b)           Neither
the Company nor any subsidiary is, nor after giving effect to the offer and
sale of the Securities and the application of the proceeds therefrom as
described under “Use of Proceeds” in each of the Pricing Disclosure Package and
the Offering Memorandum will be required to register as an “investment company”
under the Investment Company Act of 1940, as amended, and the rules and
regulations of the Commission thereunder.


 


(c)           Assuming
that your representations and warranties in Section 3(b) are true,
the purchase and resale of the Securities pursuant hereto (including pursuant
to the Exempt Resales), and the conversion of the Securities into the
Conversion Shares in the manner contemplated by this Agreement, the Indenture,
the Pricing Disclosure Package and the Offering Memorandum, is exempt from the
registration requirements of the Securities Act.  No form of general solicitation or general
advertising within the meaning of Regulation D (including, but not limited to,
advertisements, articles, notices or other communications published in any
newspaper, magazine or similar medium or broadcast over television or radio, or
any seminar or meeting whose attendees have been invited by any general
solicitation or general advertising) was used by the Company or any of its
representatives (other than you, as to whom the Company makes no
representation) in connection with the offer and sale of the Securities.


 


(d)           Each of the Preliminary Offering
Memorandum, the Pricing Disclosure Package and
the Offering Memorandum, each as of its respective date, contains all the
information specified in, and meeting the requirements of, Rule 144A(d)(4) under
the Securities Act.


 


(e)           The
Preliminary Offering Memorandum, the Pricing Disclosure Package and the
Offering Memorandum have been prepared by the Company for use by the Initial
Purchasers in connection with the Exempt Resales.  No order or decree preventing the use of the
Preliminary Offering Memorandum, the Pricing Disclosure Package or the Offering
Memorandum, or any order asserting that the transactions contemplated by this
Agreement are subject to the registration requirements of the Securities Act
has been issued, and no proceeding for that purpose has commenced or is pending
or, to the knowledge of the Company is contemplated.


 


(f)            The
Pricing Disclosure Package did not, as of the Applicable Time, and will not, as
of the Closing Date, contain an untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements made therein,
in the light of the


 


4

















 


circumstances under which they were
made, not misleading; provided that
no representation or warranty is made as to information contained in or omitted
from the Pricing Disclosure Package in reliance upon and in conformity with
written information furnished to the Company through the Representative by or
on behalf of any Initial Purchaser specifically for inclusion therein, which
information is specified in Section 8(e).


 


(g)           The
Offering Memorandum will not, as of its date and as of the Closing Date,
contain an untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading; provided
that no representation or warranty is made as to information contained in or
omitted from the Offering Memorandum in reliance upon and in conformity with
written information furnished to the Company through the Representative by or
on behalf of any Initial Purchaser specifically for inclusion therein, which
information is specified in Section 8(e).


 


(h)           The
Company has not made any offer to sell or solicitation of an offer to buy the
Securities that would constitute a “free writing prospectus” (if the offering
of the Securities was made pursuant to a registered offering under the
Securities Act), as defined in Rule 405 under the Securities Act (a “Free Writing Offering Document”) without the prior consent
of the Representative; any such Free Writing Offering Document the use of which
has been previously consented to by the Initial Purchasers is set forth
substantially in form and substance as attached hereto on Schedule III.


 


(i)            The
Exchange Act Reports did not, when filed with the Commission, contain an untrue
statement of material fact or omit to state a material fact necessary in order
to make the statements made therein, in the light of the circumstances under
which they were made, not misleading.


 


(j)            The
statistical and market-related data included in the Pricing Disclosure Package
are based on or derived from sources that the Company believes to be reliable
and accurate in all material respects.


 


(k)           Each
of the Company and its subsidiaries has been duly organized and is validly
existing and in good standing as a corporation or other business entity under
the laws of its jurisdiction of organization and is duly qualified to do
business and in good standing as a foreign corporation or other business entity
in each jurisdiction in which its ownership or lease of property or the conduct
of its businesses requires such qualification, except where the failure to be
so qualified or in good standing would not, in the aggregate, reasonably be expected
to have a material adverse effect on the condition (financial or otherwise),
results of operations, stockholders’ equity, properties, business or prospects
of the Company and its subsidiaries taken as a whole or a material adverse
effect on the performance by the Company of the performance of this Agreement,
the Indenture, the Securities, or the Security Documents or the consummation of
any of the transactions contemplated hereby or thereby (a “Material
Adverse Effect”); each of the Company and its subsidiaries has all
power and authority necessary to own or hold its properties and to conduct the
businesses in which it is engaged. The Company does not own or control,
directly or indirectly, any corporation, association or other entity other than
the subsidiaries listed in the Company’s Annual Report on Form 10-K for
the most recent fiscal


 


5

















 


year. None of the subsidiaries of
the Company (other than PAI Capital LLC (Delaware LLC), HC Power Inc.
(California corporation), Power One Limited (Cayman Islands), Power-One Italy
S.p.A. (Italy), Power-One AG (Swiss) (collectively, the “Significant
Subsidiaries”)) is a “significant subsidiary” (as defined in Rule 405
under the Securities Act).


 


(l)            The
Company has an authorized capitalization as set forth in each of the Pricing
Disclosure Package and the Offering Memorandum, and all of the issued shares of
capital stock of the Company have been duly authorized and validly issued and
are fully paid and non-assessable; and all of the issued shares of capital
stock of each subsidiary of the Company have been duly authorized and validly
issued, are fully paid and non-assessable and (except for directors’ qualifying
shares for foreign subsidiaries and except as set forth in each of the Pricing
Disclosure Package and the Offering Memorandum) are owned directly or
indirectly by the Company, free and clear of all liens, encumbrances, equities
or claims, except for such liens, encumbrances, equities or claims as would
not, in the aggregate, reasonably be expected to have a Material Adverse
Effect.


 


(m)          The
Company has all requisite corporate power and authority to execute, deliver and
perform its obligations under the Indenture. 
The Indenture has been duly and validly authorized by the Company, and
upon its execution and delivery and, assuming due authorization, execution and
delivery by the Trustee, will constitute the valid and binding agreement of the
Company, enforceable against the Company in accordance with its terms, except
as may be limited by bankruptcy, fraudulent conveyance, insolvency,
reorganization, moratorium, and other laws relating to or affecting creditors’
rights generally and by general equitable principles (regardless of whether
such enforceability is considered in a proceeding in equity or at law); no
qualification of the Indenture under the Trust Indenture Act of 1939 (the “1939 Act”) is required in connection with the offer and sale
of the Securities contemplated hereby or in connection with the Exempt Resales.  The Indenture will conform in all material
respects to the description thereof in each of the Pricing Disclosure Package
and the Offering Memorandum.


 


(n)           The
Company has all requisite corporate power and authority to execute, issue, sell
and perform its obligations under the Securities.  The Securities have been duly authorized by
the Company and, when duly executed by the Company in accordance with the terms
of the Indenture, assuming due authentication of the Securities by the Trustee,
upon delivery to the Initial Purchasers against payment therefor in accordance
with the terms hereof, will be validly issued and delivered and will constitute
valid and binding obligations of the Company entitled to the benefits of the
Indenture, enforceable against the Company in accordance with their terms,
except as may be limited by bankruptcy, fraudulent conveyance, insolvency,
reorganization, moratorium, and other laws relating to or affecting creditors’
rights generally and by general equitable principles (regardless of whether
such enforceability is considered in a proceeding in equity or at law).  The Securities will conform in all material
respects to the description thereof in each of the Pricing Disclosure Package
and the Offering Memorandum.


 


(o)           The
Company has all the requisite corporate power and authority to issue and
deliver the Conversion Shares issuable upon conversion of the Securities.  The Conversion Shares have been duly and
validly authorized by the Company and, and when issued upon


 


6

















 


conversion of the Securities in
accordance with the terms of the Indenture and Securities, will be validly
issued, fully paid and non-assessable, and the issuance of the Conversion
Shares will not be subject to any preemptive or similar rights under the
Company’s certificate of incorporation, by-laws or the Delaware General
Corporation Law, or under any agreement or instrument to which the Company or
any of its subsidiaries is a party, or of which the Company is otherwise
aware.  The Conversion Shares will
conform in all material respects to the description thereof in each of the
Pricing Disclosure Package and the Offering Memorandum.


 


(p)           The
Company and each of its subsidiaries party thereto has all requisite corporate
power to execute, deliver and perform its obligations under this
Agreement.  This Agreement has been duly
and validly authorized, executed and delivered by the Company.


 


(q)           The
Company has all requisite corporate power and authority to execute, deliver and
perform its obligations under the Security Documents.  The Security Documents have each been duly
and validly authorized by the Company and each of the Subsidiaries party
thereto, and, when duly executed and delivered in accordance with its terms by
each of the other parties thereto, will constitute the valid and binding
agreements of the Company and each such subsidiary, enforceable against the
Company and each such subsidiary, respectively, in accordance with their terms,
except as may be limited by bankruptcy, fraudulent conveyance, insolvency,
reorganization, moratorium, and other laws relating to or affecting creditors’
rights generally and by general equitable principles (regardless of whether
such enforceability is considered in a proceeding in equity or at law).  The Security Documents will conform in all
material respects to the description thereof in each of the Pricing Disclosure
Package and the Offering Memorandum.


 


(r)            Each applicable pledging
entity under each Security Document owns the relevant collateral covered by
such Security Document (collectively, the “Collateral”),
free and clear of any security interest, mortgage, pledge, lien, encumbrance or
claim (other than Permitted Liens (as defined in the Indenture) and, pending
release of such liens on the Closing Date, the liens of PWER Bridge LLC).  All filings and other actions necessary or desirable to perfect (to the extent
such concept is applicable under the relevant laws) and protect the security
interest in the Collateral to be created under the Security Documents that are
required to be made by the Company or its subsidiaries under the Security
Documents have been or will be at or prior to the Closing Date duly made or
taken and are or will be at or prior to the Closing Date in full force and
effect and, together with the execution and delivery of the Security Documents
by the Company (assuming due execution and delivery by the other parties
thereto), will on the Closing Date create a valid and perfected (to the extent
such concept is applicable under the relevant laws) first-priority security
interest in the Collateral (subject to customary permitted liens) securing the
obligations of the Company (except to the extent under applicable foreign law
such filings cannot be made until after the Closing Date, in which case such
filings shall be made as promptly as practicable thereafter).


 


(s)           The
issue and sale of the Securities, the issuance and delivery of any Conversion
Shares, the execution, delivery and performance by the Company of the Securities,
the Indenture, the Security Documents and this Agreement, the application of
the proceeds from the sale of the Securities as described under “Use of
Proceeds” in each of the Pricing Disclosure Package and the Offering Memorandum
and the consummation of the transactions contemplated


 


7

















 


hereby and thereby, will not (i) conflict
with or result in a breach or violation of any of the terms or provisions of,
impose any lien, charge or encumbrance upon any property or assets of the
Company or its subsidiaries, or constitute a default under, any indenture,
mortgage, deed of trust, loan agreement, license, lease or other agreement or
instrument to which the Company or any of its subsidiaries is a party or by
which the Company or any of its subsidiaries is bound or to which any of the
property or assets of the Company or any of its subsidiaries is subject (except
that this representation shall apply only with respect to the PWER Bridge Term
Loan Agreement as of the consummation of closing), (ii) result in any
violation of the provisions of the charter or by-laws or similar organizational
document of the Company or any of its subsidiaries, (iii) result
in any violation of any rule or regulation of the NASDAQ Global Market or (iv) result in
any violation of any statute or any judgment, order, decree, rule or
regulation of any court or governmental agency or body having jurisdiction over
the Company or any of its subsidiaries or any of their properties or assets, except,
with respect to clauses (i) and (iv), conflicts or violations that would
not reasonably be expected to have a Material Adverse Effect.


 


(t)            No
consent, approval, authorization or order of, or filing, registration or
qualification with any court or governmental agency or body having jurisdiction
over the Company or any of its subsidiaries is required for the issue and sale
of the Securities, the execution, delivery and performance by the Company of
the Securities, including the issuance and delivery of the Conversion Shares,
the Indenture, the Security Documents and this Agreement, the application of
the proceeds from the sale of the Securities as described under “Use of
Proceeds” in each of the Pricing Disclosure Package and the Offering Memorandum
and the consummation of the transactions contemplated hereby and thereby,
except for such consents, approvals, authorizations, orders, filings,
registrations or qualifications as may be required under state securities or
Blue Sky laws in connection with the purchase and distribution of the
Securities by the Initial Purchasers, and such filings that may be required
pursuant to the Security Documents.


 


(u)           Except
as identified in the Pricing Disclosure Package and the Offering Memorandum,
there are no contracts, agreements or understandings between the Company and
any person granting such person the right to require the Company to file a
registration statement under the Securities Act with respect to any securities
of the Company owned or to be owned by such person or to require the Company to
include such securities in the securities registered pursuant to any other
registration statement filed by the Company under the Securities Act.


 


(v)           Neither
the Company nor any other person acting on behalf of the Company has sold or
issued any securities that would be integrated with the offering of the
Securities contemplated by this Agreement pursuant to the Securities Act, the rules and
regulations thereunder or the interpretations thereof by the Commission. The
Company will take reasonable precautions designed to insure that any offer or
sale, direct or indirect, in the United States or to any U.S. person (as
defined in Rule 902 under the Securities Act), of any Securities or any
substantially similar security issued by the Company, within six months
subsequent to the date on which the distribution of the Securities has been
completed (as notified to the Company by the Initial Purchasers), is made under
restrictions and other circumstances reasonably designed not to affect the
status of the offer and sale of the Securities in the United States and to U.S.
persons contemplated by this Agreement as transactions exempt from the registration


 


8

















 


provisions of the Securities Act,
including any sales pursuant to Rule 144A under the Securities Act.


 


(w)          Except
as described in the each of the Pricing Disclosure Package and the Offering
Memorandum, neither the Company nor any of its subsidiaries has sustained,
since the date of the latest audited financial statements included in the
Pricing Disclosure Package, any loss or interference with its business from
fire, explosion, flood or other calamity, whether or not covered by insurance,
or from any labor dispute or court or governmental action, order or decree,
and, since such date, there has not been any change in the capital stock or
long-term debt of the Company or any of its subsidiaries or any adverse change,
or any development involving a prospective adverse change, in or affecting the
condition (financial or otherwise), results of operations, stockholders’
equity, properties, management, business or prospects of the Company and its
subsidiaries, taken as a whole, in each case except as would not, in the
aggregate, reasonably be expected to have a Material Adverse Effect.


 


(x)            The
historical financial statements (including the related notes and supporting
schedules) included in the Pricing Disclosure Package and the Offering
Memorandum present fairly in all material respects the financial condition,
results of operations and cash flows of the entities purported to be shown
thereby, at the dates and for the periods indicated, and have been prepared in
conformity with accounting principles generally accepted in the United States
applied on a consistent basis throughout the periods involved.  The other financial data included in the
Offering Memorandum is, in all material respects, accurately presented and has
been prepared on a basis consistent with such financial statements and the books
and records of the Company.


 


(y)           Deloitte &
Touche LLP, who have certified certain financial statements of the Company,
whose report appears in the Pricing Disclosure Package and who have delivered
the initial letter referred to in Section 7(e) hereof, are
independent public accountants as required by the Securities Act and the rules and
regulations thereunder.


 


(z)            The
Company and each of its subsidiaries has good and marketable title in fee
simple to all real property and good and marketable title to all personal
property owned by them, in each case free and clear of all liens, encumbrances
and defects, except such as are described in the Pricing Disclosure Package and
the Offering Memorandum and such as do not materially affect the value of such
property and do not materially interfere with the use made and proposed to be
made of such property by the Company or any of its subsidiaries; and all assets
held under lease by the Company or any of its subsidiaries are held by them
under valid, subsisting and enforceable leases, with such exceptions as do not
materially interfere with the use made and proposed to be made of such assets
by the Company or any of its subsidiaries.


 


(aa)         The
Company and each of its subsidiaries carry, or are covered by, insurance from
insurers of recognized financial responsibility in such amounts and covering
such risks as is adequate for the conduct of their respective businesses and
the value of their respective properties and as is customary for companies
engaged in similar businesses in similar industries.  All policies of insurance of the Company and
its subsidiaries are in full force and effect; the Company and its subsidiaries
are in compliance with the terms of such policies in all material respects; and
neither the Company nor any of its subsidiaries has received notice from any


 


9

















 


insurer or agent of such insurer
that capital improvements or other expenditures are required or necessary to be
made in order to continue such insurance; there are no claims by the Company or
any of its subsidiaries under any such policy or instrument as to which any
insurance company is denying liability or defending under a reservation of
rights clause; and neither the Company nor any such subsidiary has any reason
to believe that it will not be able to renew its existing insurance coverage as
and when such coverage expires or to obtain similar coverage from similar
insurers as may be necessary to continue its business at a cost that would not
reasonably be expected to have a Material Adverse Effect.


 


(bb)         The
Company and each of its subsidiaries have such permits, licenses, patents,
franchises, certificates of need and other approvals or authorizations of
governmental or regulatory authorities (“Permits”) as
are necessary under applicable law to own their properties and conduct their
businesses in the manner described in the Pricing Disclosure Package and the
Offering Memorandum, except for any of the foregoing that would not, in the
aggregate, reasonably be expected to have a Material Adverse Effect or except
as described in the Pricing Disclosure Package and the Offering Memorandum;
each of the Company and its subsidiaries has fulfilled and performed all of its
obligations with respect to the Permits, and no event has occurred that allows,
or after notice or lapse of time would allow, revocation or termination thereof
or results in any other impairment of the rights of the holder or any such
Permits, except for any of the foregoing that would not reasonably be expected
to have a Material Adverse Effect or except as described in the Pricing
Disclosure Package.


 


(cc)         The
Company and each of its subsidiaries own or possess adequate rights to use all
material patents, patent applications, trademarks, service marks, trade names,
trademark registrations, service mark registrations, copyrights, licenses,
know-how, software, systems and technology (including trade secrets and other
unpatented and/or unpatentable proprietary or confidential information, systems
or procedures) (collectively, the “Intellectual Property
Rights”) necessary for the conduct of their respective businesses
and have no reason to believe that the conduct of their respective businesses
will conflict with, and other than as disclosed in the Exchange Act Reports or
as would have a material adverse effect, have not received any notice of any
claim of conflict with, any such rights of others.


 


(dd)         Except as disclosed in the Pricing
Disclosure Package and the Offering Memorandum:


 


(i)            To the best
of the Company’s knowledge, none of the products manufactured, marketed, used,
sold or licensed by the Company and/or as anticipated to be manufactured,
marketed, used, sold or licensed by the Company or any subsidiary, and none of
the Intellectual Property Rights used by the Company or any subsidiary in the
conduct of the Company’s business as described in the Pricing Disclosure Package and the Offering Memorandum, infringes
upon, violates or constitutes the unauthorized use of any valid and enforceable
rights owned or controlled by any third party.


 


(ii)           No
litigation to which the Company or any subsidiary is a party is now pending and
no notice or other claim in writing has been received by the Company (A) alleging
that the Company or any subsidiary has engaged in any activity or conduct that
infringes upon, violates or constitutes the unauthorized use of the
Intellectual Property Rights of any third


 


10
















 


party or (ii) challenging
the ownership, use, validity or enforceability of any Intellectual Property
Rights owned by or exclusively licensed to or by the Company or any subsidiary.
No Intellectual Property Rights, used or is likely to be used in the business
of the Company as described in the Pricing
Disclosure Package and the Offering Memorandum (x) that is owned by
the Company or a subsidiary is subject to any outstanding order, judgment,
decree, stipulation or agreement materially restricting the use, sale,
transfer, assignment or licensing thereof by the Company or such subsidiary,
except as may be specifically provided in any license agreement, or (y) that
is the subject of an inbound license agreement is subject to any outstanding
judgment, decree, stipulation or agreement materially restricting the use,
sale, transfer, assignment or licensing thereof by the Company or any
subsidiary, except as provided in the inbound license agreements or other
licenses or agreements.


 


(iii)          To the Company’s knowledge, no third
party is misappropriating, infringing, diluting or violating any Intellectual
Property Rights of the Company or any subsidiary, that is used or is likely to
be used in the business of the Company as described in the Pricing Disclosure Package and the Offering
Memorandum, and no such claims have been brought against any third party
by the Company or any subsidiary.


 


(iv)          The Company and its subsidiaries have
taken reasonable security measures to protect the secrecy, confidentiality and
value of all of their intellectual properties.


 


(ee)         Except as described in the Pricing Disclosure Package
and the Offering Memorandum, there are no legal or governmental proceedings
pending to which the Company or any of its subsidiaries is a party or of which
any property or assets of the Company or any of its subsidiaries is the subject
that would, in the aggregate, reasonably be expected to have a Material Adverse
Effect or to have a material adverse effect on the performance by the Company
of the performance of this Agreement, the Indenture, the Securities, or the
Security Agreement or the consummation of any of the transactions contemplated
hereby; and to the Company’s knowledge, no such proceedings are threatened or
contemplated by governmental authorities or others.


 


(ff)           There are no legal or governmental proceedings or
contracts or other documents that would be required to be described in a
registration statement filed under the Securities Act or, in the case of
documents, would be required to be filed as exhibits to a registration
statement of the Company pursuant to Item 601(b)(10) of Regulation S-K
that have not been described in the Pricing Disclosure Package and the Offering
Memorandum.  Neither the Company nor any
of its subsidiaries has knowledge that any other party to any such contract,
agreement or arrangement has any intention not to render full performance as
contemplated by the terms thereof; and that statements made in the Pricing
Disclosure Package and the Offering Memorandum, insofar as they purport to
constitute summaries of the terms of statutes, rules or regulations, legal
or governmental proceedings or contracts and other documents, constitute
accurate summaries of the terms of such statutes, rules and regulations,
legal and governmental proceedings and contracts and other documents in all
material respects.


 


(gg)         No relationship, direct or indirect, that would be
required to be described in a registration statement of the Company pursuant to
Item 404 of Regulation S-K, exists between or among the Company, on the one
hand, and the directors, officers, stockholders, 


 


11

















 


customers, suppliers or affiliates
of the Company, on the other hand, that has not been described in the Pricing
Disclosure Package and the Offering Memorandum.


 


(hh)         Except as described in the Pricing Disclosure Package
and the Offering Memorandum, no labor disturbance by the employees of the
Company or any of its subsidiaries exists or, to the knowledge of the Company,
is imminent that would reasonably be expected to have a Material Adverse
Effect.


 


(ii)           (i) Each “employee benefit plan” (within the
meaning of Section 3(3) of the Employee Retirement Security Act of
1974, as amended (“ERISA”)) for
which the Company or any member of its “Controlled Group” (defined as any
organization which is a member of a controlled group of corporations within the
meaning of Section 414 of the Internal Revenue Code of 1986, as amended
(the “Code”)) would have any liability (each
a “Plan”) has been maintained in
compliance with its terms and with the requirements of all applicable statutes,
rules and regulations including ERISA and the Code; (ii) with respect
to each Plan subject to Title IV of ERISA (a) no “reportable event” (within
the meaning of Section 4043(c) of ERISA) has occurred or is
reasonably expected to occur, (b) no “accumulated funding deficiency”
(within the meaning of Section 302 of ERISA or Section 412 of the
Code), whether or not waived, has occurred or is reasonably expected to occur, (c) the
fair market value of the assets under each Plan exceeds the present value of
all benefits accrued under such Plan (determined based on those assumptions
used to fund such Plan) and (d) neither the Company or any member of its Controlled
Group has incurred, or reasonably expects to incur, any liability under Title
IV of ERISA (other than contributions to the Plan or premiums to the PBGC in
the ordinary course and without default) in respect of a Plan (including a “multiemployer
plan”, within the meaning of Section 4001(c)(3) of ERISA); and (iii) each
Plan that is intended to be qualified under Section 401(a) of the
Code is so qualified and nothing has occurred, whether by action or by failure
to act, which would cause the loss of such qualification.


 


(jj)           The Company and each of its subsidiaries has filed
all federal, state, local and foreign income and franchise tax returns required
to be filed through the date hereof, subject to permitted extensions, and has
paid all taxes due thereon, and no tax deficiency has been determined adversely
to the Company or any of its subsidiaries, nor does the Company have any
knowledge of any tax deficiencies except, in each case, as would not, in the
aggregate, reasonably be expected to have a Material Adverse Effect.


 


(kk)         There are no transfer taxes or other similar fees or
charges under Federal law or the laws of any state, or any political
subdivision thereof, required to be paid in connection with the execution and
delivery of this Agreement or the issuance by the Company or sale by the
Company of the Securities.


 


(ll)           Since the date as of which information is given in
the Pricing Disclosure Package and except as otherwise described in the Pricing
Disclosure Package and the Offering Memorandum, the Company has not (i) issued
or granted any securities other than issuances of common stock pursuant to
exercises of employee stock options disclosed as being outstanding in the
Pricing Disclosure Package and the Offering Memorandum, (ii) incurred any
liability or obligation, direct or contingent, other than liabilities and
obligations that were incurred in the 


 


12

















 


ordinary course of business, (iii) entered
into any material transaction not in the ordinary course of business or (iv) declared
or paid any dividend on its capital stock.


 


(mm)       The Company and each of its subsidiaries (i) makes
and keeps accurate books and records and (ii) maintains and has maintained
effective internal control over financial reporting as defined in Rule 13a-5
under the Exchange Act and a system of internal accounting controls sufficient
to provide reasonable assurance that (A) transactions are executed in
accordance with management’s general or specific authorization, (B) transactions
are recorded as necessary to permit preparation of its financial statements in
conformity with accounting principles generally accepted in the United States
and to maintain accountability for its assets, (C) access to its assets is
permitted only in accordance with management’s general or specific
authorization and (D) the reported accountability for its assets is
compared with existing assets at reasonable intervals and appropriate action is
taken with respect to any differences.


 


(nn)         Neither the Company nor any of its subsidiaries (i) is
in violation of its charter or by-laws (or similar organizational documents), (ii) is
in default, and no event has occurred that, with notice or lapse of time or
both, would constitute such a default, in the due performance or observance of
any term, covenant, condition or other obligation contained in any indenture,
mortgage, deed of trust, loan agreement, license or other agreement or
instrument to which it is a party or by which it is bound or to which any of
its properties or assets is subject or (iii) is in violation of any
statute or any order, rule or regulation of any court or governmental
agency or body having jurisdiction over it or its property or assets or has
failed to obtain any license, permit, certificate, franchise or other
governmental authorization or permit necessary to the ownership of its property
or to the conduct of its business, except in the case of clauses (ii) and
(iii), to the extent any such conflict, breach, violation or default would not,
in the aggregate, reasonably be expected to have a Material Adverse Effect.


 


(oo)         Neither the Company nor any of its subsidiaries, nor,
to the knowledge of the Company, any director, officer, agent, employee or
other person associated with or acting on behalf of the Company or any of its
subsidiaries, has (i) used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expense relating to
political activity; (ii) made any direct or indirect unlawful payment to
any foreign or domestic government official or employee from corporate funds; (iii) violated
or is in violation of any provision of the Foreign Corrupt Practices Act of
1977; or (iv) made any bribe, rebate, payoff, influence payment, kickback
or other unlawful payment.


 


(pp)         The Company and each of its subsidiaries (i) are,
and at all times prior hereto were, in compliance with all laws, regulations,
ordinances, rules, orders, judgments, decrees, permits or other legal
requirements of any governmental authority, including without limitation any
international, national, state, provincial, regional, or local authority,
relating to the protection of human health or safety, the environment, or
natural resources, or to hazardous or toxic substances or wastes, pollutants or
contaminants (“Environmental Laws”) applicable to
such entity, which compliance includes, without limitation, obtaining,
maintaining and complying with all permits and authorizations and approvals
required by Environmental Laws to conduct their respective businesses, and (ii) have
not received notice of any actual or alleged violation of Environmental Laws,
or of any potential liability for or other obligation concerning the presence,
disposal or release of hazardous or toxic substances or wastes, pollutants or 


 


13

















 


contaminants, except in the case of
clause (i) or (ii) where such non-compliance, violation, liability,
or other obligation would not, in the aggregate, reasonably be expected to have
a Material Adverse Effect.  Except as
described in the Pricing Disclosure Package and the Offering Memorandum, (A) there
are no proceedings that are pending, or known to be contemplated, against the
Company or any of its subsidiaries under Environmental Laws in which a
governmental authority is also a party, other than such proceedings regarding
which it is reasonably believed no monetary sanctions of $100,000 or more will
be imposed, (B) the Company and its subsidiaries are not aware of any
issues regarding compliance with Environmental Laws, or liabilities or other
obligations under Environmental Laws or concerning hazardous or toxic
substances or wastes, pollutants or contaminants, that would reasonably be
expected to have a material effect on the capital expenditures, earnings or
competitive position of the Company and its subsidiaries, and (C) none of
the Company and its subsidiaries anticipates material capital expenditures
relating to Environmental Laws.


 


(qq)         None of the transactions contemplated by this
Agreement (including, without limitation, the use of the proceeds from the sale
of the Securities), will violate or result in a violation on the part of the
Company or any of its subsidiaries of Section 7 of the Exchange Act, or
any regulation promulgated thereunder, including, without limitation,
Regulations T, U and X of the Board of Governors of the Federal Reserve System.


 


(rr)           The statements set forth in each of the Pricing
Disclosure Package and the Offering Memorandum under the caption “Description
of the Notes,” insofar as they purport to constitute a summary of the terms of
the Indenture, the Securities and the Security Documents, under the caption “Description
of Capital Stock,” insofar as they purport to constitute summaries of the terms
of the common stock of the Company, and under the caption “Certain Material
U.S. Federal Income Tax Consequences,” insofar as they purport to describe the
constitute summaries of matters of United States federal tax law and
regulations or legal conclusions with respect thereto, are accurate in all
material respects.


 


(ss)         The Company and its affiliates have not taken,
directly or indirectly, any action designed to or that has constituted or that
reasonably can be expected to cause or result in the stabilization or
manipulation of the price of any security of the Company in connection with the
offering of the Securities.


 


(tt)           (i) The Company and each of its subsidiaries
have established and maintain disclosure controls and procedures (as such term
is defined in Rule 13a-15 under the Exchange Act), (ii) such
disclosure controls and procedures are designed to ensure that the information
required to be disclosed by the Company in the reports they file or submit
under the Exchange Act is accumulated and communicated to management of the
Company and its subsidiaries, including their respective principal executive
officers and principal financial officers, as appropriate, to allow timely
decisions regarding required disclosure to be made; and (iii) such
disclosure controls and procedures are effective in all material respects to
perform the functions for which they were established.


 


(uu)         Since the date of the most recent balance sheet of
the Company and its consolidated subsidiaries reviewed or audited by Deloitte &
Touche LLP and the audit committee of the board of directors of the Company, (i) the
Company has not been advised of 


 


14

















 


(A) any significant
deficiencies or material weaknesses in the design or operation of internal
controls that would adversely affect the ability of the Company or any of its
subsidiaries to record, process, summarize and report financial data, or any
material weaknesses in internal controls or (B) any fraud, whether or not
material, that involves management or other employees who have a significant
role in the internal controls of the Company and each of its subsidiaries, and (ii) since
that date, there have been no significant changes in internal controls or in
other factors that would significantly affect internal controls, including any
corrective actions with regard to significant deficiencies and material
weaknesses.


 


(vv)         No subsidiary of the Company is currently prohibited,
directly or indirectly, from paying any dividends to the Company, from making
any other distribution on such subsidiary’s capital stock, from repaying to the
Company any loans or advances to such subsidiary from the Company or from
transferring any of such subsidiary’s property or assets to the Company or any
other subsidiary of the Company, except as described in the Pricing Disclosure
Package.


 


(ww)       There is and has been no failure on the part of the
Company and any of the Company’s directors or officers, in their capacities as
such, to comply with the provisions of the Sarbanes-Oxley Act of 2002 and the rules and
regulations promulgated in connection therewith.


 


(xx)          The section entitled “Management’s Discussion and
Analysis of Financial Condition and Results of Operations – Critical Accounting
Policies and Estimates” in the Company’s Annual Report on Form 10-K for
the year ended December 30, 2007 and the Company’s Quarterly Report on Form 10-Q
for the fiscal quarter ended March 30, 2008 contained in the Pricing
Disclosure Package accurately and fully describes (A) the accounting
policies that the Company believes are the most important in the portrayal of
the Company’s financial condition and results of operations and that require
management’s most difficult, subjective or complex judgments;  (B) the judgments and uncertainties affecting the
application of critical accounting policies; and (C) the likelihood that
materially different amounts would be reported under different conditions or
using different assumptions and an explanation thereof.


 


(yy)         Neither the Company nor any subsidiary is in
violation of or has received notice of any violation with respect to any
federal or state law relating to discrimination in the hiring, promotion or pay
of employees, nor any applicable federal or state wage and hour laws, nor any
state law precluding the denial of credit due to the neighborhood in which a
property is situated, the violation of any of which would reasonably be
expected to have a Material Adverse Affect.


 


(zz)          The operations of the Company and its subsidiaries
are and have been conducted at all times in compliance with applicable
financial recordkeeping and reporting requirements of the Currency and Foreign
Transactions Reporting Act of 1970, as amended, the money laundering statutes
of all jurisdictions, the rules and regulations thereunder and any related
or similar rules, regulations or guidelines, issued, administered or enforced
by any governmental agency (collectively, the “Money
Laundering Laws”) and no action, suit or proceeding by or before any
court or governmental agency, authority or body or any arbitrator involving the
Company or any of its subsidiaries with respect to the Money Laundering Laws is



 


15

















 


pending or, to the knowledge of the
Company, threatened, except, in each case, as would not reasonably be expected
to have a Material Adverse Effect.


 


(aaa)       Neither the Company nor any of its subsidiaries nor,
to the knowledge of the Company, any director, officer, agent, employee or
affiliate of the Company or any of its subsidiaries is currently subject to any
U.S. sanctions administered by the Office of Foreign Assets Control of the U.S.
Treasury Department (“OFAC”); and the
Company will not directly or indirectly use the proceeds of the offering, or
lend, contribute or otherwise make available such proceeds to any subsidiary,
joint venture partner or other person or entity, for the purpose of financing
the activities of any person currently subject to any U.S. sanctions administered
by OFAC.


 


Any certificate signed by any officer of the Company and
delivered to the Representative or counsel for the Initial Purchasers in
connection with the offering of the Securities shall be deemed a representation
and warranty by the Company, as to matters covered thereby, to each Initial
Purchaser.


 


3.             Purchase of the
Securities by the Initial Purchasers, Agreements to Sell, Purchase and Resell.  (a)  The Company hereby agrees, on the
basis of the representations, warranties and agreements of the Initial
Purchasers contained herein and subject to all the terms and conditions set
forth herein, to issue and sell to the Initial Purchasers and, upon the basis
of the representations, warranties and agreements of the Company herein contained
and subject to all the terms and conditions set forth herein, each Initial
Purchaser agrees, severally and not jointly, to purchase from the Company, at a
purchase price equal to 96% of the principal amount thereof, plus accrued
interest, if any, from June 17, 2008, the total principal amount of
Securities set forth opposite the name of such Initial Purchaser in Schedule I
hereto (it being understood that such amount satisfies the fee payable pursuant
to Section 4(a) of the Company’s engagement letter with Lehman
Brothers Inc. dated March 27, 2008). 
The Company shall not be obligated to deliver any of the Securities to
be delivered hereunder except upon payment for all of the securities to be
purchased as provided herein.


 


On the basis of the representations and warranties contained
in this Agreement, and subject to its terms and conditions, the Company agrees
to sell to the Initial Purchasers the Option Securities, and the Initial
Purchasers shall have the right to purchase, severally and not jointly, up to
$5,000,000 aggregate principal amount of Option Securities at a purchase price
equal to 96% of the principal amount thereof, plus accrued interest, if
any, from June 17,
2008. The Representative may exercise this right on behalf of the Initial
Purchasers to cover over-allotments in the sale of Firm Securities in whole or
from time to time in part by giving written notice not later than 30 days after
the date of this Agreement.  Any exercise
notice shall specify the principal amount of Option Securities to be purchased
by the Initial Purchasers and the date on which such Option Securities are to
be purchased.  Each purchase date must be
at least one business day after the written notice is given and may not be
earlier than the closing date for the Firm Securities nor later than ten
business days after the date of such notice. 
Option Securities may be purchased as provided in Section 4 solely
for the purpose of covering over allotments made in connection with the
offering of the Firm Securities.  On each
day, if any, that Option Securities are to be purchased (an “Option Closing Date”), each Initial Purchaser agrees,
severally and not jointly, to purchase the principal amount of Option
Securities (subject to such 


 


16

















 


adjustments to eliminate fractional Securities as you
may determine) that bears the same proportion to the total principal amount of
Option Securities to be purchased on such Option Closing Date as the principal
amount of Firm Securities set forth in Schedule I opposite the name of such
Initial Purchaser bears to the total principal amount of Firm Securities.


 


(b)           Each of the Initial
Purchasers, severally and not jointly hereby represents and warrants to the
Company that it will offer the Securities for sale upon the terms and
conditions set forth in this Agreement and in the Pricing Disclosure
Package.  Each of the Initial Purchasers,
severally and not jointly, hereby represents and warrants to, and agrees with,
the Company, on the basis of the representations, warranties and agreements of
the Company, that such Initial Purchaser: (i) is a QIB with such knowledge
and experience in financial and business matters as are necessary in order to
evaluate the merits and risks of an investment in the Securities; (ii) is
purchasing the Securities pursuant to a private sale exempt from registration
under the Securities Act; (iii) in connection with the Exempt Resales,
will solicit offers to buy the Securities only from, and will offer to sell the
Securities only to, the Eligible Purchasers in accordance with this Agreement
and on the terms contemplated by the Pricing Disclosure Package; and (iv) will
not offer or sell the Securities, nor has it offered or sold the Securities by,
or otherwise engaged in, any form of general solicitation or general
advertising (within the meaning of Regulation D, including, but not limited to,
advertisements, articles, notices or other communications published in any
newspaper, magazine, or similar medium or broadcast over television or radio,
or any seminar or meeting whose attendees have been invited by any general
solicitation or general advertising).


 


Each of the Initial Purchasers understands that the Company
and, for purposes of the opinions to be delivered to the Initial Purchasers
pursuant to Sections 7(c) and 7(d) hereof, counsel to the Company and
counsel to the Initial Purchasers, will rely upon the accuracy and truth of the
foregoing representations, warranties and agreements, and the Initial
Purchasers hereby consent to such reliance.


 


4.             Delivery of the
Securities and Payment Therefor.  Delivery to the
Initial Purchasers of and payment for the Firm Securities shall be made at the
office of Gibson, Dunn & Crutcher, 200 Park Avenue, New York, New
York, at 9:00 A.M., New York City time, on June 17, 2008 (the “Firm  Closing Date”).  The place of closing for the Securities and
the Firm Closing Date may be varied by agreement between the Initial Purchasers
and the Company.


 


Payment
for any Option Securities shall be made to the Company against delivery of such
Option Securities for the respective accounts of the several Initial Purchasers
at 9:00 A.M., New York City time, on the date specified in the
corresponding notice described in Section 3(a) or at such other time
on the same or on such other date, as may be varied by agreement between the
Initial Purchasers and the Company.  The
date for delivery of and payment for the Option Securities is herein referred
to as an “Option Closing Date,” which may be the
Firm Closing Date (the Firm Closing Date and each Option Closing Date, if any,
being referred to as a “Closing Date”).


 


The Securities will be delivered to
the Initial Purchasers, or the Trustee as custodian for The Depository Trust
Company (“DTC”), against payment by or on behalf
of the Initial Purchasers of the purchase price therefor by wire transfer in
immediately available funds, by 


 


17

















 


causing
DTC to credit the applicable Securities to the account of the Initial Purchasers
at DTC.  The Securities will be evidenced
by one or more global securities in definitive form (the “Global
Securities”) or by additional definitive securities, and will be
registered, in the case of the Global Securities, in the name of Cede &
Co. as nominee of DTC, and in the other cases, in such names and in such
denominations as the Initial Purchasers shall request prior to 9:30 A.M.,
New York City time, on the second business day preceding the Firm Closing Date
or the Option Closing Date, as the case may be. 
The Securities to be delivered to the Initial Purchasers shall be made
available to the Initial Purchasers in New York City for inspection and
packaging not later than 9:30 A.M., New York City time, on the business
day next preceding the Firm Closing Date or the Option Closing Date, as the
case may be.


 


5.             Agreements of
the Company.  The Company agrees with each of
the Initial Purchasers as follows:


 


(a)           The Company will furnish to
the Initial Purchasers, without charge, within one business day of the date of
the Offering Memorandum, such number of copies of the Offering Memorandum as
may then be amended or supplemented as they may reasonably request.


 


(b)           The Company will not make
any amendment or supplement to the Pricing Disclosure Package or to the
Offering Memorandum of which the Initial Purchasers shall not previously have
been advised or to which they shall reasonably object after being so advised.


 


(c)           The Company consents to the
use of the Pricing Disclosure Package and the Offering Memorandum in accordance
with the securities or Blue Sky laws of the jurisdictions in which the
Securities are offered by the Initial Purchasers and by all dealers to whom
Securities may be sold, in connection with the offering and sale of the Securities.


 


(d)           If, at any time prior to
completion of the distribution of the Securities by the Initial Purchasers to
Eligible Purchasers, any event occurs or information becomes known that, in the
judgment of the Company or in the opinion of counsel for the Initial
Purchasers, should be set forth in the Pricing Disclosure Package or the
Offering Memorandum so that the Pricing Disclosure Package or the Offering
Memorandum, as then amended or supplemented, does not include any untrue
statement of material fact or omit to state a material fact necessary in order
to make the statements therein, in the light of the circumstances under which
they were made, not misleading, or if it is necessary to supplement or amend
the Pricing Disclosure Package or the Offering Memorandum in order to comply
with any law, the Company will promptly prepare an appropriate supplement or
amendment thereto, and will promptly furnish to the Initial Purchasers and
dealers a reasonable number of copies thereof.


 


(e)           The Company will not make
any offer to sell or solicitation of an offer to buy the Securities that would
constitute a Free Writing Offering Document without the prior consent of the
Representative, which consent shall not be unreasonably withheld or delayed; if
at any time following issuance of a Free Writing Offering Document any event
occurred or occurs as a result of which such Free Writing Offering Document
conflicts with the information in the Preliminary Offering 


 


18

















 


Memorandum,
the Pricing Disclosure Package or the Offering Memorandum or, when taken
together with the information in the Preliminary Offering Memorandum, the
Pricing Disclosure Package or the Offering Memorandum, includes an untrue
statement of a material fact or omits to state any material fact necessary in
order to make the statements therein, in the light of the circumstances then
prevailing, not misleading, as promptly as practicable after becoming aware
thereof, the Company will give notice thereof to the Initial Purchasers through
the Representative and, if requested by the Representative, will prepare and
furnish without charge to each Initial Purchaser a Free Writing Offering
Document or other document which will correct such conflict, statement or
omission.


 


(f)            Promptly from time to time
to take such action as the Initial Purchasers may reasonably request to qualify
the Securities for offering and sale under the securities or Blue Sky laws of
such jurisdictions as the Initial Purchasers may request and to comply with
such laws so as to permit the continuance of sales and dealings therein in such
jurisdictions for as long as may be necessary to complete the distribution of
the Securities; provided that in connection
therewith the Company shall not be required to (i) qualify as a foreign
corporation in any jurisdiction in which it would not otherwise be required to
so qualify, (ii) file a general consent to service of process in any such
jurisdiction or (iii) subject itself to taxation in any jurisdiction in
which it would not otherwise be subject.


 


(g)           For a period commencing on
the date hereof and ending on the 90th day after the date of the Offering
Memorandum (the “Lock Up Period”), the Company
agrees not to, directly or indirectly, (1) offer for sale, sell, pledge or
otherwise dispose of (or enter into any transaction or device that is designed
to, or would be expected to, result in the disposition by any person at any
time in the future of) any Common Stock, securities of the Company that are
substantially similar to the Securities or securities convertible into or
exchangeable for or that represent the right to receive Common Stock, or sell
or grant options, rights or warrants with respect to the common stock of the
Company or securities convertible into or exchangeable for Common Stock (other
than the Securities), (2) enter into any swap or other derivatives
transaction that transfers to another, in whole or in part, any of the economic
benefits or risks of ownership of Common Stock, whether any such transaction
described in clause (1) or (2) above is to be settled by delivery of
Common Stock or other securities, in cash or otherwise, (3) file or cause
to be filed a registration statement, including any amendments, with respect to
the registration of Common Stock or securities convertible, exercisable or
exchangeable into shares of Common Stock or (3) publicly announce an
offering of any shares of Common Stock or securities convertible or
exchangeable into shares of Common Stock, in each case without the prior
written consent of Lehman Brothers Inc., on behalf of the Initial Purchasers;
and to cause each officer and director of the Company set forth on Schedule IV
hereto to furnish to the Initial Purchasers, prior to the Initial Delivery Date,
a letter or letters, substantially in the form of Exhibit A (the “Lock Up Letters”); provided that, nothing contained above
shall prevent the Company from issuing (i) securities required to be
issued pursuant to contractual obligations of the Company in effect as of the
date of this Agreement (or the filing of any amendment to the registration
statement for the common stock underlying the warrants held by PWER Bridge
LLC); (ii) securities issued under the Company’s Rights Plan as in effect
as of the date of this Agreement; and (iii) equity securities issued
pursuant to employee benefit or purchase plans in effect as of the date of this
Agreement.


 


Notwithstanding
the foregoing, if (1) during the last 17 days of the Lock-Up Period, the
Company issues an earnings release or material news or a material event
relating to 


 


19

















 


the Company occurs or (2) prior
to the expiration of the Lock-Up Period, the Company announces that it will
release earnings results during the 16-day period beginning on the last day of
the Lock-Up Period, then the restrictions imposed by the preceding paragraph
shall continue to apply until the expiration of the 18-day period beginning on
the issuance of the earnings release or the announcement of the material news
or the occurrence of the material event, unless Lehman Brothers Inc. waives
such extension in writing.


 


(h)           The Company will furnish to
the holders of the Securities as soon as practicable after the end of each
fiscal year an annual report (including a balance sheet and statements of
income, stockholders’ equity and cash flows of the Company and its consolidated
subsidiaries certified by independent public accountants) and, as soon as
practicable after the end of each of the first three quarters of each fiscal
year (beginning with the fiscal quarter ending after the date of the Offering
Memorandum), will make available to its securityholders consolidated summary
financial information of the Company and its subsidiaries for such quarter in
reasonable detail; provided that
so long as the Company files periodic reports pursuant to Section 13 or 15(d) of
the Exchange Act for the foregoing periods, the Company shall be deemed to
comply with this Section 5(h).


 


(i)            So long as any of the
Securities are outstanding, the Company will furnish to the Initial Purchasers (i) as
soon as available, a copy of each report of the Company mailed to stockholders
generally or filed with any stock exchange or regulatory body and (ii) from
time to time such other information concerning the Company as the Initial
Purchasers may reasonably request, provided that such reports and other
information need not be furnished to the Initial Purchasers if such report or
other information is filed with the Securities and Exchange Commission on
EDGAR.


 


(j)            The Company will apply the
net proceeds from the sale of the Securities to be sold by it hereunder
substantially in accordance with the description set forth in the Pricing
Disclosure Package and the Offering Memorandum under the caption “Use of
Proceeds.”


 


(k)           The Company and its
affiliates will not take, directly or indirectly, any action designed to or
that has constituted or that reasonably would be expected to cause or result in
the stabilization or manipulation of the price of any security of the Company
in connection with the offering of the Securities.


 


(l)            The Company will use its
reasonable commercial efforts to permit the Securities to be designated as
Private Offerings, Resales and Trading through Automated Linkages (PORTAL)
MarketSM (the “PORTAL MarketSM”)
securities in accordance with the rules and regulations adopted by the
National Association of Securities Dealers, Inc. relating to trading in
the PORTAL MarketSM and to permit the Securities to be eligible for
clearance and settlement through DTC.


 


(m)          The Company will not, and
will not permit any of its affiliates (as defined in Rule 144 under the
Securities Act) to, resell any of the Securities that have been acquired by any
of them, except for Securities purchased by the Company or any of its
affiliates and resold in a transaction registered under the Securities Act.


 


20
















 


(n)                           The Company agrees not to sell, offer for sale or
solicit offers to buy or otherwise negotiate in respect of any security (as
defined in the Securities Act) that would be integrated with the sale of the
Securities in a manner that would require the registration under the Securities
Act of the sale to the Initial Purchasers or the Eligible Purchasers of the
Securities.


 


(o)                           The Company agrees to comply in all material respects
with the agreements set forth in the representation letters of the Company to
DTC relating to the approval of the Securities by DTC for “book entry”
transfer.


 


(p)                           The Company will do and perform all things required
or necessary to be done and performed under this Agreement by it prior to the
Closing Date, and to satisfy all conditions precedent to the Initial Purchasers’
obligations hereunder to purchase the Securities.


 


(q)                           The Company (i) shall
complete on or prior to the Closing Date all filings and other similar actions
required in connection with the perfection (to the extent such concept is
applicable in the relevant jurisdictions) of the security interests as and to the extent required to be
made by the Company or its subsidiaries under the Security Documents (except to
the extent under applicable foreign law such filings cannot be made until after
the closing date, in which case such filings shall be made as promptly as
practicable thereafter) and (ii) shall take all actions necessary to
maintain such security interests and to create and perfect (to the extent such
concept is applicable in the relevant jurisdictions) security interests in any
collateral acquired after the Closing Date, in each case as and to the extent
required by the Security Documents.


 


(r)                              The Company shall provide
each stockholder entitled to vote at either (x) the next annual meeting of
stockholders of the Company or (y) a special meeting of stockholder of the
Company (the “Stockholder Meeting”), which shall
be promptly called and held not later than September 15, 2008 (the “Stockholder Meeting Deadline”), a proxy statement soliciting
each such stockholder’s affirmative vote at the Stockholder Meeting for
approval of resolutions (“Stockholder Resolutions”)
providing for the Company’s issuance of all of the Securities as contemplated
in the Indenture and in accordance with and the rules and regulations of
The NASDAQ Stock Market (such affirmative approval being referred to herein as
the “Stockholder Approval”), and the Company
shall use its reasonable best efforts to solicit its stockholders’ approval of
such resolutions and to cause the Board of Directors of the Company to
recommend to the stockholders that they approve such resolutions. The Company
shall be obligated to seek to obtain the Stockholder Approval by the
Stockholder Meeting Deadline. If, despite the Company’s reasonable best efforts
the Stockholder Approval is not obtained on or prior to the Stockholder Meeting
Deadline, the Company shall comply with the terms of the Indenture relating
thereto until such Stockholder Approval is obtained.


 


6.                               Expenses.  Whether or
not the transactions contemplated by this Agreement are consummated or this
Agreement becomes effective or is terminated, the Company agrees, to pay all
costs, expenses, fees and taxes incident to and in connection with: (i) the
preparation, printing, filing and distribution of the Preliminary Offering
Memorandum, the Pricing Disclosure Package and the Offering Memorandum
(including, without limitation, financial statements and exhibits) and all
amendments and supplements thereto (including the fees, disbursements and
expenses of the Company’s accountants and counsel and the reasonable fees,
disbursements and expenses of the Initial Purchasers’ counsel incurred in
connection therewith); (ii) the preparation,


 


21

















 


printing
(including, without limitation, word processing and duplication costs) and
delivery of this Agreement, the Indenture, the Security Documents, all Blue Sky
memoranda and all other agreements, memoranda, correspondence and other
documents printed and delivered in connection therewith and with the Exempt
Resales; (iii) the authorization, issuance, sale and delivery by the
Company of the Securities and any taxes payable in connection therewith; (iv) the
qualification of the Securities for offer and sale under the securities or Blue
Sky laws of the several states (including, without limitation, the reasonable
fees and disbursements of the Initial Purchasers’ counsel relating to such
registration or qualification, not to exceed $15,000); (v) the furnishing
of such copies of the Pricing Disclosure Package and the Offering Memorandum,
and all amendments and supplements thereto, as may be reasonably requested for
use in connection with the Exempt Resales; (vi) the preparation of
certificates for the Securities (including, without limitation, printing and
engraving thereof); (vii) the application for quotation of the Securities
in the PORTAL MarketSM (including all disbursements and listing
fees); (viii) the approval of the Securities by DTC for “book-entry”
transfer (including fees and expenses of counsel); (ix) the rating of the
Securities, if any; (x) the obligations of the Trustee, any agent of the
Trustee and the counsel for the Trustee in connection with the Indenture and
the Securities; (xi) the performance by the Company of their other obligations
under this Agreement; (xii) all reasonable travel expenses of each Initial
Purchaser and all such travel expenses of the Company’s officers and employees
and (xiii) any other reasonable expenses of each Initial Purchaser and any
expenses of the Company in connection with attending or hosting meetings with
prospective purchasers of the Securities, and expenses associated with any
electronic road show.


 


7.                               Conditions to Initial Purchasers’
Obligations.  The respective obligations of the
Initial Purchasers hereunder are subject to the accuracy, when made and on and
as of the Closing Date, of the representations and warranties of the Company
contained herein, to the performance by the Company of its obligations
hereunder, and to each of the following additional terms and conditions:


 


(a)                            The Initial Purchasers shall not have discovered and
disclosed to the Company on or prior to the Closing Date that the Pricing
Disclosure Package or the Offering Memorandum, or any amendment or supplement
thereto, contains an untrue statement of a fact which, in the opinion of
Gibson, Dunn & Crutcher LLP, counsel to the Initial Purchasers, is
material or omits to state a fact which, in the opinion of such counsel, is
material and is necessary to make the statements therein not misleading.


 


(b)                           All corporate proceedings and other legal matters
incident to the authorization, form and validity of this Agreement, the
Securities, the Conversion Shares, the Indenture, the Security Documents, the
Pricing Disclosure Package and the Offering Memorandum, and all other legal
matters relating to this Agreement and the transactions contemplated hereby
shall be reasonably satisfactory in all material respects to counsel for the
Initial Purchasers, and the Company shall have furnished to such counsel all
documents and information that they may reasonably request to enable them to
pass upon such matters.


 


(c)                            O’Melveny & Myers LLP shall have furnished
to the Initial Purchasers its written opinion, as counsel to the Company,
addressed to the Initial Purchasers and dated the Closing Date, substantially
in the form of Exhibit B hereto or otherwise in form and substance
reasonably satisfactory to the Initial Purchasers, and O’Melveny &
Myers LLP, the Company’s 


 


22

















 


local
Italian, Cayman Islands, and Chinese counsel shall have delivered the
respective opinions required to be delivered under the applicable Security
Document as to the corporate existence and good standing of the Company’s
subsidiary or subsidiaries in such jurisdiction, the validity and perfection
(to the extent such concept is applicable under the relevant laws) of the
security interest created thereunder, the effectiveness of the agreements,
documents and instruments described in Section 7(o), and such other
matters as the Initial Purchasers shall reasonably request, in each case in
form and substance reasonably satisfactory to the Initial Purchasers.


 


(d)                           The Initial Purchasers shall have received from
Gibson, Dunn & Crutcher LLP, counsel for the Initial Purchasers, such
opinion or opinions, dated the Closing Date, with respect to the issuance and
sale of the Securities, the Pricing Disclosure Package, the Offering Memorandum
and other related matters as the Initial Purchasers may reasonably require, and
the Company shall have furnished to such counsel such documents and information
as they reasonably request for the purpose of enabling them to pass upon such
matters.


 


(e)                            At the time of execution of this Agreement, the
Initial Purchasers shall have received from Deloitte & Touche LLP a letter, in form and substance satisfactory to the Initial
Purchasers, addressed to the Initial Purchasers and dated the date hereof (i) confirming
that they are independent public accountants within the meaning of the
Securities Act and are in compliance with the applicable requirements relating
to the qualification of accountants under Rule 2-01 of Regulation S-X of
the Commission and (ii) stating, as of the date hereof (or, with respect
to matters involving changes or developments since the respective dates as of
which specified financial information is given in the Pricing Disclosure
Package, as of a date not more than three days prior to the date hereof), the
conclusions and findings of such firm with respect to the financial information
and (iii) covering such other matters as are ordinarily covered by
accountants’ “comfort letters” to underwriters in connection with registered
public offerings.


 


(f)                              With respect to the letter of Deloitte & Touche LLP referred to in the
preceding paragraph and delivered to the Initial Purchasers concurrently with
the execution of this Agreement (the “initial letter”),
the Company shall have furnished to the Initial Purchasers a letter (the “bring-down letter”) of such accountants, addressed to the
Initial Purchasers and dated the Closing Date (i) confirming that they are
independent public accountants within the meaning of the Securities Act and are
in compliance with the applicable requirements relating to the qualification of
accountants under Rule 2-01 of Regulation S-X of the Commission, (ii) stating,
as of the Closing Date (or, with respect to matters involving changes or
developments since the respective dates as of which specified financial
information is given in each of the Pricing Disclosure Package or the Offering
Memorandum, as of a date not more than three days prior to the date of the
Closing Date), the conclusions and findings of such firm with respect to the
financial information and other matters covered by the initial letter and (iii) confirming
in all material respects the conclusions and findings set forth in the initial
letter.


 


(g)                           Except as described in the Pricing Disclosure
Package, (i) neither the Company nor any of its subsidiaries shall have
sustained, since the date of the latest audited financial statements included
in the Pricing Disclosure Package, any loss or interference with its business from
fire, explosion, flood or other calamity, whether or not covered by insurance,
or from any labor dispute or court or governmental action, order or decree or (ii) since
such date, there shall not have been any change in the capital stock or
long-term debt of the Company or 


 


23

















 


any of its
subsidiaries or any change, or any development involving a prospective change,
in or affecting the condition (financial or otherwise), results of operations,
stockholders’ equity, properties, management, business or prospects of the
Company and its subsidiaries, taken as a whole, the effect of which, in any
such case described in clause (i) or (ii), is, individually or in the
aggregate, in the judgment of the Representatives, so material and adverse as
to make it impracticable or inadvisable to proceed with the offering or the
delivery of the Securities being delivered on the Closing Date on the terms and
in the manner contemplated in the Offering Memorandum.


 


(h)                           The Company shall have furnished or caused to be
furnished to the Initial Purchasers on the Closing Date the following
certificates:


 


(i)                                     A
certificate of the
chief executive officer or chief financial officer of the Company to the effect
that:


 


a.               The representations,
warranties and agreements of the Company in Section 2 are true and correct
on and as of the Closing Date (except for representations and warranties that
speak as of a specific date which are true and correct as of such specific
date), and the Company has complied with all its agreements contained herein
and satisfied all the conditions on its part to be performed or satisfied
hereunder at or prior to the Closing Date; and


 


b.              He has carefully examined
the Pricing Disclosure Package and the Offering Memorandum, and, in his
opinion, (A) the Pricing Disclosure Package, as of the Applicable Time and
as of the Closing Date, and the Offering Memorandum, as of its date and as of
the Closing Date, did not and do not contain any untrue statement of a material
fact and did not and do not omit to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading and (B) since the date of the Pricing Disclosure
Package and the Offering Memorandum, no event has occurred which should have
been set forth in a supplement or amendment to the Pricing Disclosure Package
of the Offering Memorandum; and


 


(ii)                                  A
certificate of the secretary of the Company attaching true and correct copies
of (x) the Certificate of Incorporation of the Company, (y) the
Bylaws of the Company and (z) resolutions of the board of directors of the
Company authorizing the transactions contemplated by the Pricing Disclosure
Package and the Offering Memorandum.


 


The
Company shall provide any additional certificates of officers of the Company
satisfactory to the Initial Purchasers as to any such additional matters as the
Representative may reasonably request.


 


24

















 


(i)                               The Securities shall have been designated for trading
on the PORTAL MarketSM.


 


(j)                               The Company and the Trustee shall have executed and
delivered the Indenture, and the Initial Purchasers shall have received an
original copy thereof, duly executed by the Company and the Trustee.


 


(k)                            Subsequent to the execution and delivery of this
Agreement there shall not have occurred any of the following:  (i) trading in securities generally on
the New York Stock Exchange, The NASDAQ Global Market or the American Stock
Exchange or in the over-the-counter market, or trading in any securities of the
Company on any exchange or in the over-the-counter market, shall have been
suspended or materially limited or the settlement of such trading generally
shall have been materially disrupted or minimum prices shall have been
established on any such exchange or such market by the Commission, by such
exchange or by any other regulatory body or governmental authority having
jurisdiction, (ii) a banking moratorium shall have been declared by
federal or state authorities, (iii) the United States shall have become
engaged in hostilities, there shall have been an escalation in hostilities
involving the United States or there shall have been a declaration of a
national emergency or war by the United States or (iv) there shall have
occurred such a material adverse change in general economic, political or
financial conditions, including, without limitation, as a result of terrorist
activities after the date hereof (or the effect of international conditions on
the financial markets in the United States shall be such), as to make it, in
the judgment of the Representative, impracticable or inadvisable to proceed
with the offering or delivery of the Securities being delivered on the Closing
Date on the terms and in the manner contemplated in the Offering Memorandum or
that, in the judgment of the Representative, would materially and adversely
affect the financial markets or the markets for the Securities and other debt
securities.


 


(l)                               The Company shall have furnished to the Initial
Purchasers a certificate dated the Closing Date, of the Chief Financial Officer
of the Company as to the solvency of the Company following the consummation of
the transactions.


 


(m)                         The Security Documents shall have
been duly executed and delivered by each party thereto, the security interests
created pursuant thereto shall be effective promptly following payment in full
of the Existing Secured Indebtedness (as defined below) in accordance with
subparagraph (o) of this Section 7 and The Bank of New York Trust
Company, N.A., as collateral agent, shall hold a valid and perfected (to the
extent such concept is applicable in the relevant jurisdiction; and except to
the extent under applicable foreign law certain filings necessary for
perfection cannot be made until after the Closing Date, in which case
arrangements reasonably satisfactory to the Initial Purchasers shall have been
made to make such filings as promptly as practicable thereafter) first-priority
(after giving effect to the payment in full of the Existing Secured
Indebtedness (as defined below) in accordance with subparagraph (o) of
this Section 7) security interest in the Collateral (subject to any
Permitted Liens (as defined in the Indenture)) securing the obligations of the
Company for the benefit of the Trustee and the benefit of holders of the Securities on or prior to, and as of,
the Closing Date.


 


(n)                           The Initial Purchasers shall have received the results of a recent lien
search in each of the jurisdictions within the United States where assets of
the Company or its 


 


25

















 


domestic subsidiaries
covered by the Security Documents are located and any jurisdictions in which
valid filings with respect to such assets of the Company and its domestic
subsidiaries may be in effect, and such search shall reveal no liens on any of
the assets of the Company (other than Permitted Liens (as defined in the
Indenture) and as otherwise agreed in writing by the Initial Purchasers).


 


(o)                           Contemporaneously with the Closing, the collateral agent shall have
received (i) a duly executed copy of the payoff letter with respect to the
repayment of the promissory note issued by the Company in the principal amount
of $50,000,000 pursuant to the Term Loan Agreement, dated as of March 6,
2008, between the Company, PWER Bridge, LLC, a Nevada limited liability
company, and, with respect to Section 1.7, Stephens Investment Holdings,
LLC, an Arkansas limited liability company (the “Existing
Secured Indebtedness”); (ii) any and all related release,
cancellation and/or termination documents, duly executed by the Company and
PWER Bridge, LLC (the “Existing Secured Lender
Agent”), together with the termination statements for all financing
statements filed by the Existing Secured Lender Agent, covering any portion of
the Collateral and existing as of the Closing Date; and (iii) acknowledgement
filings of such termination statements, in each case in form and substance
reasonably satisfactory to the Initial Purchasers; or, in the case of clauses (ii) —
(iii) hereof arrangements satisfactory to the Initial Purchasers shall
have been made providing for the delivery of such items to the collateral agent
promptly following repayment in full of the Existing Secured Indebtedness.


 


All opinions, letters, evidence and certificates mentioned
above or elsewhere in this Agreement shall be deemed to be in compliance with
the provisions hereof only if they are in form and substance reasonably
satisfactory to counsel for the Initial Purchasers.


 


The several obligations of the Initial Purchasers to
purchase Option Securities hereunder are subject to the delivery to the
Representative on the applicable Option Closing Date of such documents as the
Representative may reasonably request with respect to the good standing of the
Company, the due authorization and issuance of the Option Securities to be sold
on such Option Closing Date and other matters related to the issuance of such
Option Securities.


 


8.                               Indemnification and Contribution.


 


(a)                            The Company hereby agrees to indemnify and hold
harmless each Initial Purchaser, its directors, officers and employees and each
person, if any, who controls any Initial Purchaser within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act, from and against
any loss, claim, damage or liability, joint or several, or any action in
respect thereof (including, but not limited to, any loss, claim, damage,
liability or action relating to purchases and sales of the Securities), to
which that Initial Purchaser, director, officer, employee or controlling person
may become subject, under the Securities Act, the Exchange Act or otherwise,
insofar as such loss, claim, damage, liability or action arises out of, or is based
upon, (i) any untrue statement or alleged untrue statement of a material
fact contained (A) in any Free Writing Offering Document, the Preliminary
Offering Memorandum, the Pricing Disclosure Package or the Offering Memorandum
or in any amendment or supplement thereto, (B) in any Blue Sky application
or other document prepared or executed by the Company (or based upon any
written information furnished by the Company) specifically for the purpose of
qualifying 


 


26

















 


any or all
of the Securities under the securities laws of any state or other jurisdiction
(any such application, document or information being hereinafter called a “Blue Sky Application”) or (C) in any materials or
information provided to investors by, or with the approval of, the Company in
connection with the marketing of the offering of the Securities (“Marketing Materials”), including any roadshow or investor
presentations made to investors by the Company (whether in person or
electronically), or (ii) the omission or alleged omission to state in any
Free Writing Offering Document, the Preliminary Offering Memorandum, the
Pricing Disclosure Package or the Offering Memorandum, or in any amendment or
supplement thereto, or in any Blue Sky Application or in any Marketing
Materials, any material fact necessary in order to make the statements therein,
in the light of the circumstances under which they were made, not misleading,
or (iii) any act or failure to act or any alleged act or failure to act by
any Initial Purchaser in connection with, or relating in any manner to, the
Securities or the offering contemplated hereby, and that is included as part of
or referred to in any loss, claim, damage, liability or action arising out of
or based upon matters covered by clause (i) or (ii) above (provided that the Company shall not be liable under this
clause (iii) to the extent that it is determined in a final judgment by a
court of competent jurisdiction that such loss, claim, damage, liability or
action resulted directly from any such acts or failures to act undertaken or
omitted to be taken by such Initial Purchaser through its gross negligence or
willful misconduct), and shall reimburse each Initial Purchaser and each such
director, officer, employee or controlling person promptly upon demand for any
legal or other expenses reasonably incurred by that Initial Purchaser,
director, officer, employee or controlling person in connection with
investigating or defending or preparing to defend against any such loss, claim,
damage, liability or action as such expenses are incurred; provided,
that the Company shall not be liable in any such case to the extent that any
such loss, claim, damage, liability or action arises out of, or is based upon,
any untrue statement or alleged untrue statement or omission or alleged
omission made in any Preliminary Offering Memorandum, the Pricing Disclosure
Package or Offering Memorandum, or in any such amendment or supplement thereto,
or in any Blue Sky Application or in any Marketing Materials, in reliance upon
and in conformity with written information concerning such Initial Purchaser
furnished to the Company through the Representative by or on behalf of any
Initial Purchaser specifically for inclusion therein, which information consists
solely of the information specified in Section 8(e).  The foregoing indemnity agreement is in
addition to any liability that the Company may otherwise have to any Initial
Purchaser or to any director, officer, employee or controlling person of that
Initial Purchaser.


 


(b)                           Each Initial Purchaser, severally and not jointly,
hereby agrees to indemnify and hold harmless the Company, its officers and
employees, each of its directors, and each person, if any, who controls the
Company within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act, from and against any loss, claim, damage or liability,
joint or several, or any action in respect thereof, to which the Company or any
such director, officer, employee or controlling person may become subject,
under the Securities Act, the Exchange Act or otherwise, insofar as such loss,
claim, damage, liability or action arises out of, or is based upon, (i) any
untrue statement or alleged untrue statement of a material fact contained (A) in
any Free Writing Offering Document, Preliminary Offering Memorandum, the
Pricing Disclosure Package or the Offering Memorandum or in any 


 


27

















 


amendment
or supplement thereto, (B) in any Blue Sky Application, or (C) in any
Marketing Materials or (ii) the omission or alleged omission to state in
any Free Writing Offering Document, Preliminary Offering Memorandum, the
Pricing Disclosure Package or the Offering Memorandum, or in any amendment or
supplement thereto, or in any Blue Sky Application or in any Marketing
Materials any material fact necessary to make the statements therein not
misleading, but in each case only to the extent that the untrue statement or
alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with written information concerning such Initial
Purchaser furnished to the Company through the Representative by or on behalf
of that Initial Purchaser specifically for inclusion therein, which information
is limited to the information set forth in Section 8(e).  The foregoing indemnity agreement is in
addition to any liability that any Initial Purchaser may otherwise have to the
Company or any such director, officer, employee or controlling person.


 


(c)                            Promptly after receipt by an indemnified party under
this Section 8 of notice of any claim or the commencement of any action,
the indemnified party shall, if a claim in respect thereof is to be made
against the indemnifying party under this Section 8, notify the
indemnifying party in writing of the claim or the commencement of that action; provided, that the failure to notify the indemnifying party
shall not relieve it from any liability that it may have under this Section 8
except to the extent it has been materially prejudiced by such failure and; provided, further, that
the failure to notify the indemnifying party shall not relieve it from any
liability that it may have to an indemnified party otherwise than under this Section 8.  If any such claim or action shall be brought
against an indemnified party, and it shall notify the indemnifying party
thereof, the indemnifying party shall be entitled to participate therein and,
to the extent that it wishes, jointly with any other similarly notified indemnifying
party, to assume the defense thereof with counsel reasonably satisfactory to
the indemnified party.  After notice from
the indemnifying party to the indemnified party of its election to assume the
defense of such claim or action, the indemnifying party shall not be liable to
the indemnified party under this Section 8 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof other than reasonable costs of investigation; provided,
that the Initial Purchasers shall have the right to employ counsel to represent
jointly the Initial Purchasers and their respective directors, officers,
employees and controlling persons who may be subject to liability arising out
of any claim in respect of which indemnity may be sought by the Initial
Purchasers against the Company under this Section 8, if (i) the
Company and the Initial Purchasers shall have so mutually agreed; (ii) the
Company has failed within a reasonable time to retain counsel reasonably
satisfactory to the Initial Purchasers; (iii) the Initial Purchasers and
their respective directors, officers, employees and controlling persons shall
have reasonably concluded, based on the advice of counsel, that there may be
legal defenses available to them that are different from or in addition to
those available to the Company; or (iv) the named parties in any such
proceeding (including any impleaded parties) include both the Initial
Purchasers or their respective directors, officers, employees or controlling
persons, on the one hand, and the Company, on the other hand, and
representation of both sets of parties by the same counsel would present a
conflict due to actual or potential differing interests between them, and in
any such event the fees and expenses of such separate counsel shall be paid by
the Company.  No indemnifying party shall
(i) without the prior written consent of the indemnified parties (which
consent shall not be unreasonably withheld), settle or compromise or consent to
the entry of any judgment with respect to any pending or threatened claim,
action, suit or proceeding in respect of which indemnification or contribution
may be sought hereunder (whether or not the indemnified parties are actual or
potential parties to such claim or action) unless such settlement, compromise
or consent includes an unconditional release of each indemnified party from all
liability arising out of such claim, action, suit or proceeding, or (ii) be
liable for any settlement of any such 


 


28

















 


action
effected without its written consent (which consent shall not be unreasonably
withheld), but if settled with the consent of the indemnifying party or if
there be a final judgment of the plaintiff in any such action, the indemnifying
party agrees to indemnify and hold harmless any indemnified party from and
against any loss or liability by reason of such settlement or judgment.


 


(d)                           If the indemnification provided for in this Section 8
shall for any reason be unavailable to or insufficient to hold harmless an
indemnified party under Section 8(a) or 8(b) in respect of any
loss, claim, damage or liability, or any action in respect thereof, referred to
therein, then each indemnifying party shall, in lieu of indemnifying such
indemnified party, contribute to the amount paid or payable by such indemnified
party as a result of such loss, claim, damage or liability, or action in
respect thereof, (i) in such proportion as shall be appropriate to reflect
the relative benefits received by the Company, on the one hand, and the Initial
Purchasers, on the other, from the offering of the Securities or (ii) if
the allocation provided by clause (i) above is not permitted by applicable
law, in such proportion as is appropriate to reflect not only the relative
benefits referred to in clause (i) above but also the relative fault of
the Company, on the one hand, and the Initial Purchasers, on the other, with
respect to the statements or omissions that resulted in such loss, claim,
damage or liability, or action in respect thereof, as well as any other
relevant equitable considerations.  The
relative benefits received by the Company, on the one hand, and the Initial
Purchasers, on the other, with respect to such offering shall be deemed to be
in the same proportion as the total net proceeds from the offering of the
Securities purchased under this Agreement (before deducting expenses) received
by the Company, on the one hand, and the total underwriting discounts and
commissions received by the Initial Purchasers with respect to the Securities
purchased under this Agreement, on the other hand, bear to the total gross
proceeds from the offering of the Securities under this Agreement as set forth
on the cover page of the Offering Memorandum.  The relative fault shall be determined by
reference to whether the untrue or alleged untrue statement of a material fact
or omission or alleged omission to state a material fact relates to information
supplied by the Company, or the Initial Purchasers, the intent of the parties
and their relative knowledge, access to information and opportunity to correct
or prevent such statement or omission. 
The Company and the Initial Purchasers agree that it would not be just
and equitable if contributions pursuant to this Section 8(d) were to
be determined by pro rata allocation (even if the Initial Purchasers were
treated as one entity for such purpose) or by any other method of allocation
that does not take into account the equitable considerations referred to
herein.  The amount paid or payable by an
indemnified party as a result of the loss, claim, damage or liability, or
action in respect thereof, referred to above in this Section 8(d) shall
be deemed to include, for purposes of this Section 8(d), any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim.  Notwithstanding the provisions of this Section 8(d),
no Initial Purchaser shall be required to contribute any amount in excess of
the amount by which the net proceeds from the sale to Eligible Purchasers of
the Securities initially purchased by it exceeds the amount of any damages that
such Initial Purchaser has otherwise paid or become liable to pay by reason of
any untrue or alleged untrue statement or omission or alleged omission.  No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. 
The Initial Purchasers’ obligations to contribute as provided in this Section 8(d) are
several in proportion to their respective underwriting obligations and not
joint.


 


29
















 


(e)                                  The Initial Purchasers severally confirm and the Company acknowledges and
agrees that the statements with respect to the offering of the Securities by
the Initial Purchasers set forth in the last sentence on the front cover of the
Offering Memorandum and in the third paragraph of the section entitled “Plan of
Distribution” in the Pricing Disclosure Package and the Offering Memorandum are
correct and constitute the only information concerning such Initial Purchasers
furnished in writing to the Company by or on behalf of the Initial Purchasers
specifically for inclusion in the Preliminary Offering Memorandum, the Pricing
Disclosure Package and the Offering Memorandum or in any amendment or
supplement thereto.


 


9.                                      Defaulting Initial Purchasers.  If on the Firm Closing Date, or on an Option
Closing Date, as the case may be, any Initial Purchaser defaults in the
performance of its obligations under this Agreement, the remaining
non-defaulting Initial Purchasers shall be obligated to purchase the Securities
that the defaulting Initial Purchaser agreed but failed to purchase on the Firm
Closing Date or the Option Closing Date, as the case may be, in the respective
proportions that the principal amount of Securities set opposite the name of
each remaining non-defaulting Initial Purchaser in Schedule I hereto bears to
the total principal amount of Securities set opposite the names of all the
remaining non-defaulting Initial Purchasers in Schedule I hereto; provided, that the remaining non-defaulting Initial Purchasers
shall not be obligated to purchase any of the Securities on the Firm Closing
Date or the Option Closing Date, as the case may be, if the aggregate principal
amount of Securities that the defaulting Initial Purchaser or Initial
Purchasers agreed but failed to purchase on such date exceeds 9.09% of the
aggregate principal amount of Securities to be purchased on the Firm Closing
Date, or on the Option Closing Date, as the case may be, and any remaining
non-defaulting Initial Purchasers shall not be obligated to purchase more than
110% of the aggregate principal amount of Securities that it agreed to purchase
on the Firm Closing Date, or on the Option Closing Date, as the case may be,
pursuant to the terms of Section 3. 
If the foregoing maximums are exceeded, the remaining non-defaulting
Initial Purchasers, or those other Initial Purchasers satisfactory to the
Initial Purchasers who so agree, shall have the right, but shall not be
obligated, to purchase, in such proportion as may be agreed upon among them, all
the Securities to be purchased on the Firm Closing Date, or on the Option
Closing Date, as the case may be.


 


If other Initial Purchasers are obligated or agree to
purchase the Securities of a defaulting or withdrawing Initial Purchaser,
either the remaining Initial Purchasers or the Company may postpone the Firm
Closing Date or the Option Closing Date, as the case may be, for up to seven
full business days in order to effect any changes that in the opinion of
counsel for the Company or counsel for the Initial Purchasers may be necessary
in the Pricing Disclosure Package, the Offering Memorandum or in any other
document or arrangement.


 


If the remaining Initial Purchasers or other Initial
Purchasers satisfactory to the Initial Purchasers do not elect to purchase:  (a) the Securities that the defaulting
Initial Purchaser or Initial Purchasers agreed but failed to purchase on the
Closing Date, this Agreement shall terminate without liability on the part of
any non-defaulting Initial Purchaser or the Company; or (b) the Option
Securities that the defaulting Initial Purchaser or Initial Purchasers agreed
but failed to purchase on the Option Closing Date, the non-defaulting Initial
Purchasers shall have, the option to either: (i) terminate their
obligation hereunder to purchase the Option Securities to


 


30

















 


be sold on such Option Closing Date; or (ii) purchase
not less than the principal amount of Option Securities that such
non-defaulting Initial Purchaser would have been obligated to purchase in the
absence of such default.


 


As used in this Agreement, the term “Initial Purchaser”
includes, for all purposes of this Agreement unless the context requires
otherwise, any party not listed in Schedule I hereto that, pursuant to this Section 9,
purchases Securities that a defaulting Initial Purchaser agreed but failed to
purchase.


 


Nothing contained herein shall relieve: (a) a
defaulting Initial Purchaser of any liability it may have to the Company for
damages caused by its default; or (b) the Company of any liability for the
payment of expenses to the extent set forth in Sections 8 and 11.


 


10.                                Termination. 
The obligations of the Initial Purchasers hereunder may be terminated by
the Initial Purchasers by notice given to and received by the Company prior to
delivery of and payment for the Securities if, prior to that time, any of the
events described in Sections 7(g) or (k) shall have occurred or if
the Initial Purchasers shall decline to purchase the Securities for any reason
permitted under this Agreement.


 


11.                                Reimbursement of Initial Purchasers’ Expenses.  The Company shall reimburse the
Initial Purchasers for all reasonable out-of-pocket expenses (including fees
and disbursements of counsel) incurred by the Initial Purchasers in connection
with this Agreement and the proposed purchase of the Securities, and upon
demand the Company shall pay the full amount thereof to the Initial Purchasers.


 


12.                                Notices, etc. 
All statements, requests, notices and agreements hereunder shall be in
writing, and:


 


(a)                                  if to any Initial Purchaser, shall be delivered or sent by hand delivery,
mail, telex, overnight courier or facsimile transmission to Lehman Brothers
Inc., 745 Seventh Avenue, New York, New York 10019, Attention:  Syndicate Registration (Fax:  646-834-8133) with a copy to Gibson, Dunn &
Crutcher LLP, Attention:  Glenn Pollner
(Fax:  212-351-6333), and with a copy, in
the case of any notice pursuant to Section 8(c), to the Director of
Litigation, Office of the General Counsel, Lehman Brothers Inc., 399 Park
Avenue, 10th Floor, New York, New York 10022 (Fax:  212-520-0421);


 


(b)                                 if to the Company, shall be delivered or sent by mail, telex, overnight
courier or facsimile transmission to Power-One, Inc., 740 Calle Plano,
Camarillo, CA 93012, Attention:  General
Counsel (Fax:  805-383-5898), with a copy
to O’Melveny & Myers LLP, 1999 Avenue of the Stars, Floor 7, Los
Angeles, CA 90067, Attention:  David J.
Johnson, Jr. (Fax:  310-246-6779);


 


 provided, that any notice to an Initial Purchaser pursuant to Section 8(c) shall
be delivered or sent by hand delivery, mail, telex or facsimile transmission to
such Initial Purchaser at its address set forth in its acceptance telex to
Lehman Brothers Inc., which address will be supplied to any other party hereto
by Lehman Brothers Inc. upon request. 
Any such statements, requests, notices or agreements shall take effect
at the time of receipt thereof.  The
Company shall be entitled to


 


31

















 


act and rely upon any request, consent, notice or
agreement given or made on behalf of the Initial Purchasers by Lehman Brothers
Inc.


 


13.                                Persons Entitled to Benefit of Agreement.  This Agreement shall inure to the benefit of
and be binding upon the Initial Purchasers, the Company, and their respective
successors.  This Agreement and the terms
and provisions hereof are for the sole benefit of only those persons, except
that the representations, warranties, indemnities and agreements of the Company
contained in this Agreement shall also be deemed to be for the benefit of
directors, officers and employees of the Initial Purchasers and each person or
persons, if any, controlling any Initial Purchaser within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act.  Nothing in this Agreement is intended or
shall be construed to give any person, other than the persons referred to in
this Section 13, any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision contained herein.


 


14.                                Survival. 
The respective indemnities, representations, warranties and agreements
of the Company and the Initial Purchasers contained in this Agreement or made
by or on behalf on them, respectively, pursuant to this Agreement, shall
survive the delivery of and payment for the Securities and shall remain in full
force and effect, regardless of any investigation made by or on behalf of any
of them or any person controlling any of them.


 


15.                                Definition of the Terms “Business Day,” “Affiliate” and “Subsidiary.”  For purposes of this Agreement, (a) “business
day” means any day on which the New York Stock Exchange, Inc. is open for
trading and (b) “affiliate” and “subsidiary” have the meanings set forth
in Rule 405 under the Securities Act.


 


16.                                Governing Law.  This Agreement shall be
governed by and construed in accordance with the laws of New York.


 


17.                                No Fiduciary Duty.  The Company acknowledges and agrees that in
connection with this offering, or any other services the Initial Purchasers may
be deemed to be providing hereunder, notwithstanding any preexisting
relationship, advisory or otherwise, between the parties or any oral
representations or assurances previously or subsequently made by the Initial
Purchasers: (i) no fiduciary or agency relationship between the Company,
and any other person, on the one hand, and the Initial Purchasers, on the
other, exists; (ii) the Initial Purchasers are not acting as advisors,
expert or otherwise, to the Company, including, without limitation, with
respect to the determination of the purchase price of the Securities, and such
relationship between the Company, and the Initial Purchasers is entirely and
solely commercial, based on arms-length negotiations; (iii) any duties and
obligations that the Initial Purchasers may have to the Company shall be
limited to those duties and obligations specifically stated herein; and (iv) the
Initial Purchasers and their respective affiliates may have interests that
differ from those of the Company.  The
Company hereby waive any claims that the Company may have against the Initial
Purchasers with respect to any breach of fiduciary duty in connection with the
Securities.


 


18.                                Research
Independence.  In addition, the
Company acknowledges that the Initial Purchasers’ research analysts and
research departments are required to be independent from their respective
investment banking divisions and are subject to certain regulations and
internal policies, and that such Initial Purchasers’ research analysts may hold
and make statements or


 


32

















 


investment recommendations and/or
publish research reports with respect to the offering that differ from the
views of its investment bankers.  The
Company hereby waives and releases, to the fullest extent permitted by law, any
claims that the Company may have against the Initial Purchasers with respect to
any conflict of interest that may arise from the fact that the views expressed
by their independent research analysts and research departments may be
different from or inconsistent with the views or advice communicated to the
Company by such Initial Purchasers’ investment banking divisions.  The Company acknowledges that each of the
Initial Purchasers is a full service securities firm and as such from time to
time, subject to applicable securities laws, may effect transactions for its
own account or the account of its customers and hold long or short positions in
debt or equity securities of the companies which may be the subject of the
transactions contemplated by this Agreement.


 


19.                                Counterparts.  This Agreement may be executed in one or more
counterparts and, if executed in more than one counterpart, the executed
counterparts shall each be deemed to be an original but all such counterparts shall
together constitute one and the same instrument.


 


20.                                Amendments.  No amendment or waiver of any provision of
this Agreement, nor any consent or approval to any departure therefrom, shall
in any event be effective unless the same shall be in writing and signed by the
parties hereto.


 


21.                                Headings.  The headings herein are inserted for
convenience of reference only and are not intended to be part of, or to affect
the meaning or interpretation of, this Agreement.


 


33

















 


If the foregoing correctly sets forth the agreement between
the Company and the Initial Purchasers, please indicate your acceptance in the
space provided for that purpose below.


 


	
   

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
  POWER-ONE, INC.

  
	
   

  	
   

  



 


	
   

  	
  By

  	
  /s/ Richard J. Thompson

  
	
   

  	
   

  	
  Name: Richard J. Thompson

  
	
   

  	
   

  	
  Title: Chief Executive Officer

  



 


	
  Accepted:

  	
   

  
	
   

  	
   

  
	
  LEHMAN BROTHERS INC.

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By

  	
  /s/ Alexis Lasser

  	
   

  
	
   

  	
  Name: Alexis Lasser

  	
   

  
	
   

  	
  Title: Managing Director

  	
   

  



 


34
















 


SCHEDULE I


 


	
  Initial Purchasers

  	
   

  	
  Principal

  Amount of

  Firm Securities

  to be

  Purchased

  	
   

  
	
  Lehman Brothers Inc.

  	
   

  	
  $

  	
  75,000,000

  	
   

  
	
  Total

  	
   

  	
  $

  	
  75,000,000

  	
   

  



 

















 


SCHEDULE II


 


Power-One, Inc.

8.0% Senior Secured Convertible Notes due 2013

Pricing Term Sheet


 


This pricing term sheet relates
only to the notes described below and should be read together with the
preliminary offering memorandum dated June 11, 2008 (including the
documents incorporated by reference therein) relating to the notes.


 


	
  Issuer:

  	
   

  	
  Power-One, Inc.

  
	
   

  	
   

  	
   

  
	
  Title
  of securities:

  	
   

  	
  8.0%
  Senior Secured Convertible Notes due 2013 (the “notes”)

  
	
   

  	
   

  	
   

  
	
  Issue
  price:

  	
   

  	
  100%

  
	
   

  	
   

  	
   

  
	
  Aggregate
  principal amount offered:

  	
   

  	
  $75
  million (plus an option to purchase up to $5 million of additional notes)

  
	
   

  	
   

  	
   

  
	
  Net
  proceeds after discounts, commissions and estimated expenses:

  	
   

  	
   

  $70.5
  million ($75.3 million if the option to purchase up to $5 million of
  additional notes is exercised in full)

  
	
   

  	
   

  	
   

  
	
  Maturity:

  	
   

  	
  June 17,
  2013

  
	
   

  	
   

  	
   

  
	
  Annual
  interest rate:

  	
   

  	
  8.0%
  per annum

  
	
   

  	
   

  	
   

  
	
  Interest payment dates:

  	
   

  	
  March 31,
  June 30, September 30 and December 31, commencing
  September 30, 2008

  
	
   

  	
   

  	
   

  
	
  Call dates:

  	
   

  	
  Issuer
  may, at its option, redeem for cash (i) all or a portion of the notes on
  or after June 17, 2010, if the last reported sale price of the Issuer’s
  common stock for 20 or more trading days in a period of 30 consecutive
  trading days ending on the trading day prior to the date the Issuer provides
  the relevant notice of redemption exceeds 175% of the conversion price in
  effect on each such trading day, and the Equity Conditions are in effect, or
  (ii) all the outstanding notes if at any time less than 10% of the
  aggregate principal of notes remain outstanding

  
	
   

  	
   

  	
   

  
	
  Put
  dates:

  	
   

  	
  Holders
  may require the issuer to repurchase all or a portion of their notes on or
  after June 17, 2011; such right is only exercisable during any three
  month period if, as of the last business day of the fiscal quarter preceding
  such three month period, the ratio of total net debt to LTM EBITDA (each as
  defined in the Preliminary Offering Memorandum dated June 11, 2008) was
  greater than 3.0x

  
	
   

  	
   

  	
   

  
	
  Conversion
  rate:

  	
   

  	
  304.8780
  shares of common stock per $1,000 aggregate principal amount of notes
  (subject to adjustment)

  
	
   

  	
   

  	
   

  
	
  Conversion price:

  	
   

  	
  Approximately
  $3.28 per share of common stock (subject to adjustment)

  



 


II-I

















 


	
  Trade
  Date:

  	
   

  	
  June 12, 2008

  
	
   

  	
   

  	
   

  
	
  Settlement
  Date:

  	
   

  	
  June 17, 2008

  
	
   

  	
   

  	
   

  
	
  CUSIP:

  	
   

  	
  739308 AA2

  
	
   

  	
   

  	
   

  
	
  Other
  Material Terms:

  	
   

  	
  See the Preliminary
  Offering Memorandum dated June 11, 2008 for a description of other
  material terms relating to the notes, including without limitation their
  ranking, the security package, adjustment of the conversion rate (including
  pursuant to a reset provision and pursuant to anti-dilution provisions, and possible
  limitations on these adjustments under Nasdaq Global Market Rules),
  limitations on beneficial ownership, fundamental change repurchase rights of
  holders, rights to participate in future equity offerings, certain covenants
  relating to the notes, events of default and circumstances under which
  additional interest may be paid on the notes

  
	
   

  	
   

  	
   

  
	
  Adjustment to Conversion Rate
  Upon a Make-Whole Fundamental Change:

  	
   

  	
   

  The following table sets forth
  the stock prices and the adjustments to the conversion rate, expressed as a
  number of additional shares to be received per $1,000 in principal amount of
  the notes, in the event of a make-whole fundamental change:

  



 


	
   

  	
   

  	
  Additional Make-Whole Shares Per $1,000 Bond

  	
   

  
	
   

  	
   

  	
  $2.85

  	
   

  	
  $3.00

  	
   

  	
  $3.50

  	
   

  	
  $4.00

  	
   

  	
  $4.50

  	
   

  	
  $5.00

  	
   

  	
  $5.50

  	
   

  	
  $6.00

  	
   

  	
  $6.50

  	
   

  	
  $7.00

  	
   

  	
  $7.50

  	
   

  	
  $8.00

  	
   

  	
  $8.50

  	
   

  	
  $9.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  06/17/08

  	
   

  	
  45.7890

  	
   

  	
  45.7890

  	
   

  	
  45.7890

  	
   

  	
  45.7890

  	
   

  	
  42.9355

  	
   

  	
  38.6706

  	
   

  	
  34.8122

  	
   

  	
  31.4588

  	
   

  	
  28.6223

  	
   

  	
  26.1919

  	
   

  	
  24.0853

  	
   

  	
  22.2430

  	
   

  	
  20.6171

  	
   

  	
  19.1719

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  06/17/09

  	
   

  	
  45.7890

  	
   

  	
  45.7890

  	
   

  	
  45.7890

  	
   

  	
  41.4171

  	
   

  	
  36.6654

  	
   

  	
  32.9101

  	
   

  	
  29.5303

  	
   

  	
  26.7163

  	
   

  	
  24.3365

  	
   

  	
  22.2970

  	
   

  	
  20.5300

  	
   

  	
  18.9841

  	
   

  	
  17.6204

  	
   

  	
  16.4090

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  06/17/10

  	
   

  	
  45.7890

  	
   

  	
  45.7890

  	
   

  	
  38.2078

  	
   

  	
  32.9358

  	
   

  	
  29.0957

  	
   

  	
  25.9373

  	
   

  	
  23.2974

  	
   

  	
  21.1021

  	
   

  	
  19.2464

  	
   

  	
  17.6560

  	
   

  	
  16.2782

  	
   

  	
  15.0729

  	
   

  	
  14.0100

  	
   

  	
  13.0646

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  06/17/11

  	
   

  	
  45.7890

  	
   

  	
  33.8167

  	
   

  	
  26.4344

  	
   

  	
  22.3345

  	
   

  	
  19.5645

  	
   

  	
  17.3857

  	
   

  	
  15.6300

  	
   

  	
  14.1737

  	
   

  	
  12.9430

  	
   

  	
  11.8890

  	
   

  	
  10.9757

  	
   

  	
  10.1766

  	
   

  	
  9.4716

  	
   

  	
  8.8453

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  06/17/12

  	
   

  	
  45.7890

  	
   

  	
  21.6497

  	
   

  	
  11.7127

  	
   

  	
  8.6576

  	
   

  	
  7.3677

  	
   

  	
  6.5346

  	
   

  	
  5.8812

  	
   

  	
  5.3400

  	
   

  	
  4.8825

  	
   

  	
  4.4905

  	
   

  	
  4.1507

  	
   

  	
  3.8534

  	
   

  	
  3.5911

  	
   

  	
  3.3582

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  06/17/13

  	
   

  	
  45.7890

  	
   

  	
  27.9190

  	
   

  	
  0.0000

  	
   

  	
  0.0000

  	
   

  	
  0.0000

  	
   

  	
  0.0000

  	
   

  	
  0.0000

  	
   

  	
  0.0000

  	
   

  	
  0.0000

  	
   

  	
  0.0000

  	
   

  	
  0.0000

  	
   

  	
  0.0000

  	
   

  	
  0.0000

  	
   

  	
  0.0000

  	
   

  



 


The exact stock prices and effective dates
may not be set forth in the table above, in which case:


 


·                  If the stock
price is between two stock prices in the table or the effective date is between
two effective dates in the table, the number of additional shares will be
determined by a straight-line interpolation between the number of additional
shares set forth for the higher and lower stock prices and the two effective
dates, as applicable, based on a 365-day year.


 


·                  If the stock
price is greater than $9.00 per
share (subject to adjustment in the same manner and at the same time as the
stock prices in the table above), no adjustments will be made in the conversion
rate.


 


·                  If the stock
price is less than $2.85 per share
(subject to adjustment in the same manner and at the same time as the stock
prices in the table above), no adjustments will be made in the conversion rate.


 


2

















 


Notwithstanding the foregoing, in no event
will the conversion rate exceed 350.6670 shares
of common stock (subject to adjustment and possible limitation as described in
the Preliminary Offering Memorandum dated June 11, 2008) per $1,000
principal amount of notes as a result of additional shares.


 


*     *     *     *     *


 


This communication is intended for the sole
use of the person to whom it is provided by the sender.


 


These securities have not been registered
under the Securities Act of 1933, as amended, and may only be sold to qualified
institutional buyers pursuant to Rule 144A or pursuant to another
applicable exemption.


 


ANY DISCLAIMER OR OTHER NOTICES THAT MAY APPEAR
BELOW ARE NOT APPLICABLE TO THIS COMMUNICATION AND SHOULD BE DISREGARDED.  SUCH DISCLAIMERS OR OTHER NOTICES WERE
AUTOMATICALLY GENERATED AS A RESULT OF THIS COMMUNICATION BEING SENT VIA
BLOOMBERG OR ANOTHER EMAIL SYSTEM.


 


3

















 


SCHEDULE III


 


Term
sheet containing the terms of the securities, substantially in the form of
Schedule II.


 


4

















 


SCHEDULE IV


 


PERSONS DELIVERING LOCK UP AGREEMENTS


 


Directors


 


Kendall R. Bishop


Gayla J. Delly


Steven J. Goldman


Jon E.M. Jacoby


Mark Melliar-Smith


Richard J. Thompson


Jay Walters


 


Officers


 


Richard J. Thompson


Jeffrey J. Kyle


Brad W. Godfrey


Randall H. Holliday


Alexander Levran


 


III-1

















 


SCHEDULE V


 


LIST OF SECURITY DOCUMENTS


 


	
  U.S. Security Documentation

  
	
   

  
	
  Security Agreement

  
	
   

  
	
  Grant of Trademark Security Interest

  
	
   

  
	
  Grant of Patent Security Interest

  
	
   

  
	
  Deposit Account Control Agreement

  
	
   

  
	
  Cayman Islands Documentation

  
	
   

  
	
  Charge Over Shares in Power-One Limited

  
	
   

  
	
  Italian Documentation

  
	
   

  
	
  Pledge Agreement

  
	
   

  
	
  U.K. Documentation

  
	
   

  
	
  Share Pledge - Power-One, Inc.

  
	
   

  
	
  China Documentation

  
	
   

  
	
  Pledge Agreement

  



 


2
















 


Exhibit A


 


LOCK-UP LETTER AGREEMENT


 


LEHMAN BROTHERS INC.


As Representative of the several


  Initial Purchasers named in Schedule I,


c/o Lehman Brothers Inc.


745 Seventh Avenue


New York, New York 10019


 


Ladies and Gentlemen:


 


The undersigned understands that you (the “Initial Purchasers”) propose to enter into a Purchase
Agreement (the “Purchase Agreement”) providing for
the purchase by the Initial Purchasers of Senior Secured Convertible Notes due
2013 (the “Securities”), of Power-One, Inc.,
a Delaware corporation (the “Company”), and
that the Initial Purchasers propose to reoffer and sell the Securities to “qualified
institutional buyers” as defined in Rule 144A under the Securities Act
(the “Offering”).


 


In consideration of the
execution of the Purchase Agreement by the Initial Purchasers, and for other
good and valuable consideration, the undersigned hereby irrevocably agrees
that, without the prior written consent of Lehman Brothers Inc., on behalf of
the Initial Purchasers, the undersigned will not, directly or indirectly, (1) offer
for sale, sell, pledge, or otherwise dispose of (or enter into any transaction
or device that is designed to, or could be expected to, result in the
disposition by any person at any time in the future of) any shares of common
stock of the Company (“Common Stock”)
(including, without limitation, shares of Common Stock that may be deemed to be
beneficially owned by the undersigned in accordance with the rules and
regulations of the Securities and Exchange Commission and shares of Common
Stock that may be issued upon exercise of any options or warrants) or
securities convertible into or exercisable or exchangeable for Common Stock
(other than the Securities), (2) enter into any swap or other derivatives
transaction that transfers to another, in whole or in part, any of the economic
benefits or risks of ownership of shares of Common Stock, whether any such
transaction described in clause (1) or (2) above is to be settled by
delivery of Common Stock or other securities, in cash or otherwise, (3) make
any demand for or exercise any right or cause to be filed a registration
statement (other than any registration statement relating solely to the resale
of any shares of Common Stock upon conversion of the Securities), including any
amendments thereto, with respect to the registration of any shares of Common
Stock or securities convertible into or exercisable or exchangeable for Common
Stock or any other securities of the Company or (4) publicly disclose the
intention to do any of the foregoing, for a period commencing on the date
hereof and ending on the 90th day after the date of the Offering Memorandum
relating to the Offering (such 90-day period, the “Lock-Up
Period”).


 


Notwithstanding the
foregoing, if (1) during the last 17 days of the Lock-Up Period, the
Company issues an earnings release or material news or a material event
relating to the Company occurs or (2) prior to the expiration of the
Lock-Up Period, the Company announces that it will release earnings results
during the 16-day period beginning on the last day of the Lock-Up Period, then
the restrictions imposed by this Lock-Up Letter Agreement shall continue to
apply 


 


3

















 


until
the expiration of the 18-day period beginning on the issuance of the earnings
release or the announcement of the material news or the occurrence of the
material event, unless such extension is waived in writing. The undersigned
hereby further agrees that, prior to engaging in any transaction or taking any
other action that is subject to the terms of this Lock-Up Letter Agreement
during the period from the date of this Lock-Up Letter Agreement to and
including the 34th day following the expiration of the Lock-Up Period, it will
give notice thereof to the Company and will not consummate such transaction or
take any such action unless it has received written confirmation from the
Company that the Lock-Up Period (as such may have been extended pursuant to
this paragraph) has expired.


 


Notwithstanding the foregoing, during the Lock-Up
Period the undersigned may, without the prior written consent of the Initial
Purchasers, transfer (or enter into any transaction or device which is designed
to, or could be expected to, result in the transfer by such person at any time
in the future) shares of Common Stock in connection with (i) bona fide
gifts, (ii) dispositions to any trust for the direct or indirect benefit
of the undersigned and/or the immediate family of the undersigned and/or a
charity, (iii) transfers of Common Stock or other securities convertible
into or exchangeable or exercisable for Common Stock by will or intestate
succession, (iv) a bona fide  pledge of Common Stock, made in
the ordinary course of business, for the sole purpose of obtaining financing
for the undersigned, (v) transactions relating to Common Stock or other
securities convertible into or exchangeable or exercisable for Common Stock
acquired in open market transactions after the Closing Date, provided no filing
is required to be made under the Exchange Act related to such transaction, (vi) sales
of Common Stock made pursuant to any bona fide pledge existing at the date
hereof in satisfaction of a “margin call” related thereto, or (vii) sales
of Common Stock made pursuant to any trading plan complying with Rule 10b5-1
under the Exchange Act in existence as of the date hereof; provided that in the
case of any gift, disposition, transfer, or pledge pursuant to clause (i),
(ii), (iii), (iv) or (v), such donee, trust, distributee, transferee,
pledgee or other recipient of such Common Stock or securities convertible into
or exchangeable or exercisable for Common Stock agrees in writing to be bound
by the terms of this Lock-Up Letter Agreement. For purposes of this paragraph, “immediate
family” shall mean the undersigned and the spouse, any lineal descendent,
father, mother, brother, sister, father-in-law, mother-in-law, brother-in-law
or sister-in-law of the undersigned.


 


Subject to clauses (i) through
(vii), inclusive, above, in furtherance of the foregoing, the Company and its
transfer agent are hereby authorized to decline to make any transfer of
securities if such transfer would constitute a violation or breach of this
Lock-Up Letter Agreement.


 


It is understood that, if
the Company notifies the Initial Purchasers that it does not intend to proceed
with the Offering, if the Purchase Agreement does not become effective, or if
the Purchase Agreement (other than the provisions thereof which survive
termination) shall terminate or be terminated prior to payment for and delivery
of the Common Stock, the undersigned will be released from its obligations
under this Lock-Up Letter Agreement.


 


The undersigned understands
that the Company and the Initial Purchasers will proceed with the Offering in
reliance on this Lock-Up Letter Agreement.


 


4

















 


Whether or not the Offering
actually occurs depends on a number of factors, including market conditions. Any
Offering will only be made pursuant to an Purchase Agreement, the terms of
which are subject to negotiation between the Company and the Initial
Purchasers.


 


[Signature page follows]


 


5

















 


The undersigned hereby
represents and warrants that the undersigned has full power and authority to
enter into this Lock-Up Letter Agreement and that, upon request, the
undersigned will execute any additional documents necessary in connection with
the enforcement hereof. Any obligations of the undersigned shall be binding
upon the heirs, personal representatives, successors and assigns of the
undersigned.


 


	
   

  	
  Very truly yours,

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
  Dated:

  	
   

  	
   

  



 


6
















 


Exhibit B


 


Company Counsel Opinion


 


June   , 2008


 


LEHMAN BROTHERS INC.


745 Seventh Avenue


New
York, New York 10019


 


Re: Power-One, Inc.
Senior Secured Convertible Notes due 2013


 


Ladies and Gentlemen:


 


We have acted as special
counsel to Power-One, Inc., a Delaware corporation (the “Company”), in
connection with the issuance and sale by the Company of $75,000,000 in
aggregate principal amount of Senior Secured Convertible Notes due 2013 (the “Notes”)
pursuant to the Purchase Agreement, dated as of June   , 2008
(the “Purchase Agreement”) by and between the Company and Lehman Brothers Inc.,
as initial purchaser (the “Initial Purchaser”). The Notes are being issued
pursuant to an Indenture dated as of June   , 2008 (the “Indenture”)
by and between the Company and The Bank of New York Trust Company, N.A., as
trustee (the “Trustee”). We are providing this opinion to you at the request of
the Company pursuant to Section 7(c) of the Purchase Agreement. Except
as otherwise indicated, capitalized terms used in this opinion and defined in
the Purchase Agreement will have the meanings given in the Purchase Agreement.


 


In our capacity as such
counsel, we have examined originals or copies of those corporate and other
records and documents we considered appropriate, including the following:


 


1.              the Indenture, including the forms of Notes
set forth therein;


 


2.              the Purchase Agreement;


 


3.              an officers’ certificate of the Company (the “Company
Certificate”);


 


4.              specimen certificate of a share of the
Company’s Common Stock;


 


5.              certified copy of the Company’s Restated
Certificate of Incorporation, as amended (the “Certificate of Incorporation”);


 


6.              certified copy of the Company’s Amended and
Restated Bylaws (the “Bylaws”);


 


7.              the preliminary offering memorandum marked “Subject
to Completion, dated June     , 2008”, including,
without limitation, the documents incorporated by reference therein (the “Incorporated
Documents”) as described under the heading 


 


III-1

















 


“Where You Can Find More
Information” contained therein (including the Incorporated Documents, the “Preliminary
Offering Memorandum”);


 


8.              the Pricing Term Sheet, dated June   ,
2008 (the “Pricing Term Sheet”, and together with the Preliminary Offering
Memorandum, the “Pricing Disclosure Package”); and


 


9.              the final offering memorandum, dated June   ,
2008 (including the Incorporated Documents, the “Offering Memorandum”).


 


As to relevant factual
matters, we have relied upon, among other things, the Company’s factual representations
in the Purchase Agreement, including as to the absence of any form of general
solicitation or general advertising in connection with the offer and sale of
the Notes by any person acting on the Company’s behalf, and the Company
Certificate dated as of the date hereof. In addition, we have obtained and
relied upon those certificates of public officials we considered appropriate. We
have assumed the genuineness of all signatures, the authenticity of all
documents submitted to us as originals and the conformity with originals of all
documents submitted to us as copies.


 


On the basis of such
examination, our reliance upon the assumptions in this opinion and our
consideration of those questions of law we considered relevant, and subject to
the limitations and qualifications in this opinion, we are of the opinion that:


 


(i)                                     The Company has been duly incorporated and is
validly existing as a corporation under the laws of the State of Delaware, in
good standing under the laws of the States of Delaware and California, with
corporate power and corporate authority to own its properties and assets, to
carry on its business as currently conducted as described in the Offering
Memorandum, and to enter into and perform its obligations under the Purchase
Agreement, the Indenture and the Notes. Each of the Company Subsidiaries (as
defined herein) is validly existing as a corporation or limited liability
company, as applicable, and in good standing under the laws of the state of its
formation and its principal place of business as set forth in the Company
Certificate. For purposes of this opinion, “Company Subsidiaries” shall mean
PAI Capital LLC, a Delaware limited liability company, and HC Power, Inc.,
a California corporation.


 


(ii)                                  The authorized capital stock of the Company
consists of three hundred million (300,000,000) shares of Common Stock, par
value $.001 per share, and thirty million (30,000,000) shares of Preferred
Stock, par value $.001 per share. The shares of Common Stock issuable upon
conversion of the Notes conform in all material respects to the description of
the Common Stock in the Offering Memorandum. Holders of the capital stock of
the Company are not entitled to any preemptive right to subscribe to any
additional shares of the Company’s capital stock under the Company’s
Certificate of Incorporation, Bylaws, the Delaware General Corporation Law or
any Other Agreement (as defined below), except such as may exist pursuant to
the Rights Agreement, dated as of July 27, 2000, between the Company and
American Stock Transfer & Trust Company.


 


(iii)                               The Indenture has been duly authorized by all
necessary corporate action on the part of the Company, executed and delivered
by the Company and constitutes a legally valid and 


 

















 


binding
obligation of the Company, enforceable against the Company in accordance with
its terms, except as may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws relating to or affecting creditors’ rights generally
(including, without limitation, fraudulent conveyance laws) and by general
principles of equity, including, without limitation, concepts of materiality,
reasonableness, good faith and fair dealing and the possible unavailability of
specific performance or injunctive relief, regardless of whether considered in
a proceeding in equity or at law.


 


(iv)                              The Notes have been duly authorized by all
necessary corporate action on the part of the Company and, upon payment for and
delivery of the Notes in accordance with the Purchase Agreement, the execution
of the Notes by the Company, and the authentication of the certificate or
certificates representing the Notes by a duly authorized signatory of the
Trustee, the Notes will be legally valid and binding obligations of the
Company, enforceable against the Company in accordance with their terms,
entitled to the benefits of the Indenture, in each case, except as may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
relating to or affecting creditors’ rights generally (including, without
limitation, fraudulent conveyance laws) and by general principles of equity,
including, without limitation, concepts of materiality, reasonableness, good
faith and fair dealing and the possible unavailability of specific performance
or injunctive relief, regardless of whether considered in a proceeding in
equity or at law.


 


(v)                                 The Purchase Agreement has been duly
authorized by all necessary corporate action on the part of the Company, and
executed and delivered by the Company.


 


(vi)                              No order, consent, permit, approval or
filing, of any California, New York or federal governmental authority that we
have, in the exercise of customary professional diligence, recognized as
applicable to the Company or to transactions of the type contemplated by the
Purchase Agreement and the Indenture, or under the Delaware General Corporation
Law (the “DGCL”), is required on the part of the Company for the execution and
delivery of the Purchase Agreement, the Indenture or the Notes, the performance
by the Company of its obligations thereunder, or the repayment of the PWER
Bridge Term Loan from the application of the proceeds from the sale of the
Notes as described under “Use of Proceeds” in the Pricing Disclosure Package
and the Offering Memorandum, except such as may be required under applicable
Blue Sky or state or foreign securities laws.


 


(vii)                           The execution and delivery by the Company of
the Purchase Agreement, the Indenture and the Notes and the performance by the
Company of its obligations thereunder, and the repayment of the PWER Bridge
Term Loan from the application of the proceeds from the sale of the Notes as
described under “Use of Proceeds” in the Pricing Disclosure Package and the
Offering Memorandum (A) does not violate the Company’s Certificate of
Incorporation or Bylaws, the DGCL, or any current statute, rule or
regulation of any California, New York or federal governmental authority that
we have, in the exercise of customary professional diligence, recognized as
applicable to the Company or to transactions of the type contemplated by the
Purchase Agreement and the Indenture, (B) violate, breach, or result in a
default under, or give to any other party thereto any rights of termination,
amendment, acceleration or cancellation of, any existing obligation of or restriction
on the Company or any of its Subsidiaries under any English language agreement
(the “Other Agreements”) identified in the Company Certificate, or


 

















 


(C) breach
or otherwise violate any existing obligation of or restriction on the Company
under any order, judgment or decree of any California, New York, Delaware
(solely to the extent brought under the DGCL), federal court or governmental
authority, binding on the Company identified in the Company Certificate. To the
extent any of the Other Agreements is governed by the laws of a jurisdiction
other than New York, we have assumed such Other Agreements would be interpreted
in accordance with its plain meaning, except that technical terms would mean
what lawyers generally understand them to mean for agreements governed by the
laws of the State of New York. We express no opinion with respect to any
provision of any Other Agreement to the extent an opinion with respect to such
provision would require making any financial, accounting or mathematical
calculation or determination. We express no opinion regarding any federal
securities laws, Blue Sky, state or foreign securities laws, or the
indemnification and contribution sections of the Purchase Agreement except as
otherwise expressly stated herein.


 


(viii)                        The shares of Common Stock issuable upon
conversion of the Notes have been duly authorized by all necessary corporate
action on the part of the Company, the Board of Directors of the Company has
reserved such number of shares of Common Stock as shall be necessary for
issuance upon the conversion of the Notes as required by the Indenture as of
the date hereof, and, when issued upon such conversion in accordance with the
terms of the Indenture, and upon the countersigning of the certificate or
certificates representing such shares by a duly authorized signatory of the
transfer agent and registrar for the Company’s Common Stock or the book-entry
of such shares by such transfer agent and registrar in the name of The
Depository Trust Company or its nominee, as applicable, such shares will be
validly issued and will be fully paid and non-assessable.


 


(ix)                                The statements included in the Offering
Memorandum (A) under the caption “Description of the Notes,” insofar as
they summarize provisions of the Indenture or the Notes, and (B) under the
caption “Description of Capital Stock,” insofar as they summarize provisions of
the Certificate of Incorporation and Bylaws of the Company, in each case fairly
summarize the matters therein described.


 


(x)                                   The statements set forth in the Offering
Memorandum under the caption “Certain Material U.S. Federal Income Tax
Consequences,” insofar as they purport to describe the material tax
consequences to a U.S. holder (as defined in the Offering Memorandum) of an
investment in the Notes, fairly summarize the matters therein described.


 


(xi)                                The
Company is not and, after giving effect to the offering and sale of the Notes
and the application of the net proceeds thereof as described under “Use of
Proceeds” in the Offering Memorandum, will not be an investment company
required to register under the Investment Company Act of 1940, as amended.


 


(xii)                             Each
of the Company’s (a) Annual Report on Form 10-K for the fiscal year
ended December 30, 2007, (b) Quarterly Report on Form 10-Q for
the fiscal quarter ended March 30, 2008, and (c) Definitive Proxy
Statement on Schedule 14A referring to the 2008 Annual Meeting of Stockholders
of the Company, on the date it was filed, appeared on its face to comply in all
material respects with the requirements as to form for annual reports on Form 10-K,
proxy statements on Schedule 14A and quarterly reports on Form 10-Q, under
the Securities Exchange Act of 1934, as amended, and related rules and
regulations in effect on the date of filing except 


 

















 


that we express no
opinion concerning the financial statements and the other financial data
contained or incorporated by reference therein.


 


(xiii)                          The outstanding shares of the capital
stock of each of the subsidiaries listed on Schedule I to the Pledge Agreement
are owned of record by the Company.


 


(xiv)                         Assuming the truth and accuracy of the
representations of the Initial Purchaser and the Company in the Purchase
Agreement, it is not necessary in connection with the offer, sale and delivery
of the Notes to the Initial Purchaser nor in connection with the Exempt Resales
under the circumstances contemplated by the Purchase Agreement and the Offering
Memorandum, to register the Notes under the Securities Act of 1933, as amended,
or to qualify the Indenture under the Trust Indenture Act of 1939. We express
no opinion as to the securities laws of any state or foreign jurisdiction.


 


Our opinions in
paragraphs (iii) and (iv) as to the enforceability of the Indenture
and the Notes are subject to:


 


(a)                                  public
policy considerations, statutes or court decisions that may limit the rights of
a party to obtain indemnification against its own gross negligence, willful
misconduct or unlawful conduct;


 


(b)                                 the
unenforceability under certain circumstances of broadly or vaguely stated waivers
or waivers of rights granted by law where the waivers are against public policy
or prohibited by law or terms that provide that assertion or employment of any
right or remedy shall not prevent the concurrent assertion or employment of any
other right or remedy, or that every right and remedy shall be cumulative and
in addition to every other right and remedy or that any delay or omission to
exercise any right or remedy shall not impair any other right or remedy or
constitute a waiver thereof; and


 


(c)                                  the
unenforceability under certain circumstances of provisions imposing penalties,
liquidated damages or other economic remedies.


 


Our opinions in
paragraphs (iii), (iv) and (viii) as to the enforceability of
the Indenture and the Notes and the issuance of the shares of Common Stock upon
conversion of the Notes are subject to the limitation that we express no
opinion as to the effect of subsequent issuances of securities of the Company
to the extent that such issuances may result in the Company not having enough
authorized but unissued shares of Common Stock for the conversion of the Notes.
We also advise you that, as a result of the operation of the antidilution or
adjustment provisions of the Notes, the Notes may become convertible into more
shares of Common Stock than remain authorized but unissued.


 


Our opinions in
paragraphs (ii) and (vii) are limited to the English language
agreements identified in the Company Certificate, and do not address any other
agreements or arrangements to which the Company may be a party or bound.


 


We express no opinion concerning (a) federal or
state securities laws or regulations (except for the opinion in paragraph
(xiv)), (b) compliance with fiduciary requirements or (c) the Trading
with the Enemy Act, as amended, the foreign assets control regulations of the
United 


 

















 


States Treasury Department,
the Uniting and Strengthening America by Providing Appropriate Tools Required
to Intercept and Obstruct Terrorism (USA PATRIOT Act) Act of 2001, as amended,
Executive Order No. 13,224 of September 24, 2001, Blocking Property
and Prohibiting Transactions with Persons Who Commit, Threaten to Commit or
Support Terrorism, as amended, and any enabling legislation, rules, regulations
or executive orders relating thereto.


 


For purposes of the
opinions expressed in paragraphs (vi) and (vii), we have assumed that
the Company will not in the future take any discretionary action (including a
decision not to act) permitted by the Indenture or the Notes that would cause
the performance of the Indenture or the Notes or the consummation of the
transactions contemplated in the Indenture to (a) violate the provisions
of the Company’s Certificate of Incorporation or Bylaws or any current statute,
rule or regulation of any California, New York, Delaware or federal
governmental authority, (b) violate, breach or result in a default under,
or give to any other party any rights of termination, amendment, acceleration
or cancellation of, any existing obligation of or restriction on the Company or
any of its Subsidiaries under any Other Agreement identified in the Company
Certificate, (c) breach or otherwise violate any order, judgment, or
decree of any California, New York, Delaware or federal court or governmental
authority binding on the Company identified in the Company Certificate, or (d) require
an order, consent, permit or approval to be obtained from a California, New
York, Delaware or federal governmental authority.


 


Except
for the matters described in the Offering Memorandum, we have not, since January 1,
2007 given substantive attention on behalf of the Company to, or represented
the Company in connection with, any actions, suits or proceedings pending or
overly threatened in writing against the Company before any court, arbitrator
or governmental agency which seek to affect the enforceability of the Indenture
or the Notes. We call to your attention to the fact that our engagement is
limited to specific matters as to which we are consulted by the Company.


 


We have participated in
conferences in connection with the preparation of the Offering Memorandum and
reviewed the Pricing Disclosure Package and the Offering Memorandum, in each
case including the Incorporated Documents, but we have not independently
verified the accuracy, completeness or fairness of the statements contained or
incorporated therein, and the limitations inherent in the examination made by
us and the knowledge available to us are such that we are unable to assume, and
we do not assume, any responsibility for such accuracy, completeness or
fairness (except for the statements described in paragraphs (ix) and (x) above).
However, on the basis of our review of the Offering Memorandum and the Pricing
Disclosure Package and our participation in conferences in connection with the
preparation thereof, nothing came to our attention that caused us to believe
that (A) the Pricing Disclosure Package considered as a whole as of the
Applicable Time, contained any untrue statement of a material fact or omitted
to state a material fact necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, or (B) the
Offering Memorandum, considered as a whole, as of the date thereof and the
Closing Date, contained or contains any untrue statement of a material fact or
omitted or omits to state a material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. However, we express no opinion or belief as to the financial
statements and schedules and other financial data contained or incorporated by
reference in or omitted from the Offering Memorandum or the Pricing Disclosure
Package, in each case, considered as a whole. As used herein, the “Applicable
Time” is the time and date as of which the Pricing Term Sheet 


 

















 


was first delivered to
the Initial Purchaser for delivery to investors in connection with the sale of
the Notes.


 


The law covered by this
opinion is limited to the federal law of the United States, the law of the
States of California and New York, and the Delaware General Corporation Law,
each as in effect on the date hereof. We express no opinion as to the laws of
any other jurisdiction and no opinion regarding the statutes, administrative
decisions, rules, regulations or requirements of any county, municipality,
subdivision or local authority of any jurisdiction. For purposes of the opinion
set forth in paragraph (i) above as to good standing of the Company and
the Company Subsidiaries, we have relied exclusively on the good standing certificates
issued by the Secretary of State of the State of Delaware and the Secretary of
State of the State of California.


 


This opinion is furnished
by us as counsel for the Company and may be relied upon by you only in
connection with the issuance and sale of the Notes. It may not be used or
relied upon by you for any other purpose or by any other person, nor may copies
be delivered to any other person, without in each instance our prior written
consent. This opinion is expressly limited to the matters set forth above, and
we render no opinion, whether by implication or otherwise, as to any other
matters. We assume no obligation to update or supplement this opinion to
reflect any facts or circumstances that arise after the date of this opinion
and come to our attention, or any future changes in laws.


 


Respectfully
submitted,


 

















 


Schedule I


 


CC1:786349.5