**Exhibit 10.39**

 

***Final ExecutionCopy***

**SALE OFMAGNETEK, INC.**

**POWERELECTRONICS GROUP**

to

**POWER-ONEINC.,**

a Delaware corporation;

As of September 28, 2006

 

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**TABLE OFCONTENTS**
| ** **                                          | ** ** | ** **                                                | ** ** | Page   |
|-----------------------------------------------------|------------|-----------------------------------------------------------|------------|--------|
|                                                |       |                                                      |
| ARTICLE I THE ACQUISITION                           |       | 1                                                         |
|                                                |       |                                                      |
| 1.1                                                 |       | Purchase and Sale of Acquired Shares and Purchase  Assets |       | 1      |
|                                                |       |                                                      |       |   |
| 1.2                                                 |       | Assumption of Liabilities                                 |       | 2      |
|                                                |       |                                                      |       |   |
| 1.3                                                 |       | Retained Assets                                           |       | 2      |
|                                                |       |                                                      |       |   |
| 1.4                                                 |       | Retained Liabilities                                      |       | 2      |
|                                                |       |                                                      |       |   |
| 1.5                                                 |       | Consideration                                             |       | 3      |
|                                                |       |                                                      |       |   |
| 1.6                                                 |       | Initial Closing Indebtedness Amount                       |       | 4      |
|                                                |       |                                                      |       |   |
| 1.7                                                 |       | Post-Closing Adjustment to Purchase Price                 |       | 4      |
|                                                |       |                                                      |       |   |
| 1.8                                                 |       | Closing                                                   |       | 6      |
|                                                |       |                                                      |       |   |
| 1.9                                                 |       | Closing Deliveries                                        |       | 6      |
|                                                |       |                                                      |       |   |
| 1.10                                                |       | Purchase Price Allocation                                 |       | 8      |
|                                                |       |                                                      |       |   |
| ARTICLE II REPRESENTATIONS AND WARRANTIES OF SELLER |       | 8                                                         |
|                                                |       |                                                      |
| 2.1                                                 |       | Organization                                              |       | 8      |
|                                                |       |                                                      |       |   |
| 2.2                                                 |       | Organizational Documents                                  |       | 9      |
|                                                |       |                                                      |       |   |
| 2.3                                                 |       | Subsidiaries; Ownership of Shares                         |       | 9      |
|                                                |       |                                                      |       |   |
| 2.4                                                 |       | Authority                                                 |       | 9      |
|                                                |       |                                                      |       |   |
| 2.5                                                 |       | Non-Contravention; Required Consents                      |       | 10     |
|                                                |       |                                                      |       |   |
| 2.6                                                 |       | Capitalization                                            |       | 10     |
|                                                |       |                                                      |       |   |
| 2.7                                                 |       | Financial Statements; Accounting Controls                 |       | 10     |
|                                                |       |                                                      |       |   |
| 2.8                                                 |       | Absence of Changes                                        |       | 11     |
|                                                |       |                                                      |       |   |
| 2.9                                                 |       | Suppliers and Customers                                   |       | 12     |
|                                                |       |                                                      |       |   |
| 2.10                                                |       | Intellectual Property                                     |       | 12     |
|                                                |       |                                                      |       |   |
| 2.11                                                |       | Real Property; Title  to Assets; Equipment                |       | 14     |
|                                                |       |                                                      |       |   |
| 2.12                                                |       | Related Party Transactions                                |       | 15     |
|                                                |       |                                                      |       |   |

 

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| ** **                                          | ** ** | ** **                                    | ** ** | Page   |
|-----------------------------------------------------|------------|-----------------------------------------------|------------|--------|
|                                                |       |                                          |
| 2.13                                                |       | Contracts                                     |       | 15     |
|                                                |       |                                          |       |   |
| 2.14                                                |       | Legal Proceedings                             |       | 17     |
|                                                |       |                                          |       |   |
| 2.15                                                |       | Governmental Authorizations; Legal Compliance |       | 17     |
|                                                |       |                                          |       |   |
| 2.16                                                |       | Tax Matters                                   |       | 18     |
|                                                |       |                                          |       |   |
| 2.17                                                |       | Employee Benefit Matters                      |       | 19     |
|                                                |       |                                          |       |   |
| 2.18                                                |       | Environmental Matters                         |       | 20     |
|                                                |       |                                          |       |   |
| 2.19                                                |       | Labor Relations                               |       | 21     |
|                                                |       |                                          |       |   |
| 2.20                                                |       | Product Warranty and Product Liability        |       | 22     |
|                                                |       |                                          |       |   |
| 2.21                                                |       | Brokers                                       |       | 23     |
|                                                |       |                                          |       |   |
| 2.22                                                |       | Insurance                                     |       | 23     |
|                                                |       |                                          |       |   |
| 2.23                                                |       | Bank Accounts; Powers of Attorney             |       | 23     |
|                                                |       |                                          |       |   |
| 2.24                                                |       | Sarbanes Oxley Certifications                 |       | 23     |
|                                                |       |                                          |       |   |
| 2.25                                                |       | Export Control                                |       | 23     |
|                                                |       |                                          |       |   |
| 2.26                                                |       | HSR Act                                       |       | 24     |
|                                                |       |                                          |       |   |
| 2.27                                                |       | Disclaimer of Representations and Warranties  |       | 24     |
|                                                |       |                                          |       |   |
| ARTICLE III REPRESENTATIONS AND WARRANTIES OF BUYER |       | 24                                            |
|                                                |       |                                          |
| 3.1                                                 |       | Due Organization                              |       | 24     |
|                                                |       |                                          |       |   |
| 3.2                                                 |       | Authority; Binding Nature                     |       | 24     |
|                                                |       |                                          |       |   |
| 3.3                                                 |       | Non-Contravention; Consents                   |       | 24     |
|                                                |       |                                          |       |   |
| 3.4                                                 |       | Brokers                                       |       | 25     |
|                                                |       |                                          |       |   |
| 3.5                                                 |       | Litigation                                    |       | 25     |
|                                                |       |                                          |       |   |
| 3.6                                                 |       | Sufficient Funds                              |       | 25     |
|                                                |       |                                          |       |   |
| 3.6                                                 |       | Sufficient Funds                              |       | 25     |
|                                                |       |                                          |       |   |
| 3.8                                                 |       | Acknowledgment Regarding Transaction          |       | 25     |

 

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| ** **                                  | ** ** | ** **                                               | ** ** | Page   |
|---------------------------------------------|------------|----------------------------------------------------------|------------|--------|
|                                        |       |                                                     |
| ARTICLE IV CERTAIN COVENANTS OF THE PARTIES |       | 25                                                       |
|                                        |       |                                                     |
| 4.1                                         |       | Access to Information                                    |       | 25     |
|                                        |       |                                                     |       |   |
| 4.2                                         |       | Operation of the Group                                   |       | 25     |
|                                        |       |                                                     |       |   |
| 4.3                                         |       | No Solicitation                                          |       | 27     |
|                                        |       |                                                     |       |   |
| 4.4                                         |       | Confidentiality                                          |       | 27     |
|                                        |       |                                                     |       |   |
| 4.5                                         |       | Filings; Consents                                        |       | 28     |
|                                        |       |                                                     |       |   |
| 4.6                                         |       | Further Assurances                                       |       | 28     |
|                                        |       |                                                     |       |   |
| 4.7                                         |       | Public Disclosure                                        |       | 28     |
|                                        |       |                                                     |       |   |
| 4.8                                         |       | Notification of Certain Matters; Effect of  Notification |       | 29     |
|                                        |       |                                                     |       |   |
| 4.9                                         |       | Tax Returns                                              |       | 29     |
|                                        |       |                                                     |       |   |
| 4.10                                        |       | Expenses                                                 |       | 31     |
|                                        |       |                                                     |       |   |
| 4.11                                        |       | Pending Litigation                                       |       | 32     |
|                                        |       |                                                     |       |   |
| 4.12                                        |       | [Intentionally Omitted]                                  |       | 32     |
|                                        |       |                                                     |       |   |
| 4.13                                        |       | Limitations                                              |       | 32     |
|                                        |       |                                                     |       |   |
| 4.14                                        |       | Approvals                                                |       | 34     |
|                                        |       |                                                     |       |   |
| 4.15                                        |       | Notices and Cooperation                                  |       | 34     |
|                                        |       |                                                     |       |   |
| 4.16                                        |       | Accounts Receivable                                      |       | 34     |
|                                        |       |                                                     |       |   |
| 4.17                                        |       | Disclosure Schedule  Updates                             |       | 35     |
|                                        |       |                                                     |       |   |
| 4.18                                        |       | Delivery of Monthly  Financial Statements                |       | 35     |
|                                        |       |                                                     |       |   |
| 4.19                                        |       | Employees                                                |       | 35     |
|                                        |       |                                                     |       |   |
| 4.20                                        |       | Intellectual Property Licenses                           |       | 36     |
|                                        |       |                                                     |       |   |
| ARTICLE V CLOSING CONDITIONS                |       | 36                                                       |
|                                        |       |                                                     |
| 5.1                                         |       | Conditions to Each Party’s Obligations              |       | 36     |
|                                        |       |                                                     |       |   |
| 5.2                                         |       | Conditions to Buyer’s Obligations                   |       | 37     |

 

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| ** **                            | ** ** | ** **                                             | ** ** | Page   |
|---------------------------------------|------------|--------------------------------------------------------|------------|--------|
|                                  |       |                                                   |
| 5.3                                   |       | Conditions to Obligations of Seller                    |       | 38     |
|                                  |       |                                                   |       |   |
| ARTICLE VI TERMINATION                |       | 38                                                     |
|                                  |       |                                                   |
| 6.1                                   |       | Termination                                            |       | 38     |
|                                  |       |                                                   |       |   |
| 6.2                                   |       | Effect of Termination                                  |       | 39     |
|                                  |       |                                                   |       |   |
| 6.3                                   |       | Procedure Upon Termination                             |       | 39     |
|                                  |       |                                                   |       |   |
| ARTICLE VII INDEMNIFICATION           |       | 39                                                     |
|                                  |       |                                                   |
| 7.1                                   |       | Survival of Representations, Warranties and  Covenants |       | 39     |
|                                  |       |                                                   |       |   |
| 7.2                                   |       | Indemnification by  Seller                             |       | 40     |
|                                  |       |                                                   |       |   |
| 7.3                                   |       | Limitations on Seller’s Indemnification Liability |       | 40     |
|                                  |       |                                                   |       |   |
| 7.4                                   |       | Indemnification by Buyer                               |       | 42     |
|                                  |       |                                                   |       |   |
| 7.5                                   |       | Notice of Claim                                        |       | 43     |
|                                  |       |                                                   |       |   |
| 7.6                                   |       | Defense of Third-Party Claims                          |       | 43     |
|                                  |       |                                                   |       |   |
| 7.7                                   |       | Resolution of Claims                                   |       | 43     |
|                                  |       |                                                   |       |   |
| 7.8                                   |       | Purchase Price Adjustment                              |       | 43     |
|                                  |       |                                                   |       |   |
| 7.9                                   |       | Exclusive Remedy; Limitation on Damages                |       | 44     |
|                                  |       |                                                   |       |   |
| 7.10                                  |       | Damages Net of Insurance; Taxes                        |       | 44     |
|                                  |       |                                                   |       |   |
| 7.11                                  |       | Environmental Indemnity Procedures                     |       | 44     |
|                                  |       |                                                   |       |   |
| ARTICLE VIII MISCELLANEOUS PROVISIONS |       | 45                                                     |
|                                  |       |                                                   |
| 8.1                                   |       | Amendment; Waiver                                      |       | 45     |
|                                  |       |                                                   |       |   |
| 8.2                                   |       | Applicable Law; Severability                           |       | 45     |
|                                  |       |                                                   |       |   |
| 8.3                                   |       | Attorneys’ Fees                                   |       | 45     |
|                                  |       |                                                   |       |   |
| 8.4                                   |       | Venue for Dispute Resolution                           |       | 45     |
|                                  |       |                                                   |       |   |
| 8.5                                   |       | Assignability; Third Party Beneficiary                 |       | 46     |
|                                  |       |                                                   |       |   |
| 8.6                                   |       | Notices                                                |       | 46     |

 

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| ** **             | ** ** | ** **                            | ** ** | Page   |
|------------------------|------------|---------------------------------------|------------|--------|
|                   |       |                                  |
| 8.7                    |       | Construction                          |       | 47     |
|                   |       |                                  |       |   |
| 8.8                    |       | Interpretation                        |       | 48     |
|                   |       |                                  |       |   |
| 8.9                    |       | Counterparts                          |       | 48     |
|                   |       |                                  |       |   |
| 8.10                   |       | Telecopy Execution and Delivery       |       | 48     |
|                   |       |                                  |       |   |
| 8.11                   |       | Entire Agreement                      |       | 48     |
|                   |       |                                  |       |   |
| 8.12                   |       | Equitable Relief; Cumulative Remedies |       | 48     |
|                   |       |                                  |       |   |
| ARTICLE IX DEFINITIONS |       | 48                                    |

 

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**PURCHASE AND SALE AGREEMENT**

THIS PURCHASE AND SALEAGREEMENT (this “***Agreement***”),dated as of September 28, 2006, is made by and among Magnetek, Inc., a Delawarecorporation (“***Seller***”)and Power-One Inc, a Delaware corporation (“***Buyer***”). Except as otherwise indicated,capitalized terms have the meanings set forth in Article IX.

**BACKGROUND**

WHEREAS,Seller, Magnetek, S.p.A.,a *società per azioni* organizedand existing under the laws of Italy, with registered office in TerranuovaBracciolini (Arezzo, Italy) at Via San Giorgio 642, fiscal code/Register ofEnterprises of Arezzo no. 09286180154, fully paid-in corporate capital of Euro22,000,000.00 (“***MagnetekItaly***”), Magnetek kFT, a Hungarian corporation andwholly-owned subsidiary of Magnetek Italy (“***Magnetek Hungary***”), MagnetekVetriebsgesellschaft GmbH, a German corporation and wholly-owned subsidiary ofMagnetek Italy (“***MagnetekGermany***”), andMagnetek Electronics (Shenzhen) Co. Ltd., a Chinese corporation andwholly-owned subsidiary of Magnetek Italy (“***Magnetek China***”, and together withMagnetek Italy, Magnetek Germany and Magnetek Hungary, the “***Companies***”, and eacha “***Company***”)haveheretofore collectively and individually engaged (including through theoperations of Seller currently conducted in Chatsworth, California), *inter alia*, in the business of designing,manufacturing and selling digital and analog power electronic products,including custom and standard power components and alternative energy powerconversion products, as well as integrated power and control systems (includingmotor control systems of appliances and white goods) used in a variety ofindustries, through Seller’s Power Electronics group (the “***Group***”) (hereinafter,the above-referenced business of the Group is referred to as the “***Business***”, and theBusiness conducted by Seller at its facility in Chatsworth, California isreferred to as the “***US Business***”);

WHEREAS,Seller owns all of the issued and outstanding stock of Magnetek Italy,consisting of 22,000,000 shares of common stock, par value 1 Euro each(collectively, the “***AcquiredShares***”); and

WHEREAS,Seller desires to sell to Buyer, and Buyer desires to purchase from Seller, theGroup, such sale to be effected by the conveyance to Buyer of (i) all of theAcquired Shares and (ii) all of the rights, properties and other assets ofevery kind and nature, tangible and intangible, absolute or contingent, ofSeller used primarily in or relating to the US Business (including but notlimited to those set forth on Schedule 1.1, but excluding the RetainedAssets (collectively, the items described in this clause (ii) arereferred to herein as the *“**PurchaseAssets**”*)), subject to the liabilities of Seller primarilyrelating to the Business (excluding the Indemnified Liabilities), for theconsideration and on the terms set forth in this Agreement (the “***Acquisition***”).

NOW, THEREFORE, for good andvaluable consideration, the receipt and sufficiency of which is herebyacknowledged, the parties hereto agree as follows:

# **ARTICLE ITHE ACQUISITION**

1.1                                 Purchase and Sale of Acquired Shares andPurchase Assets.  Subject to the terms and conditions of thisAgreement, at the Closing, Seller will sell, convey, transfer and deliver toBuyer, and Buyer will acquire and accept from Seller, all right, title andinterest of Seller in and to the Acquired Shares and the Purchase Assets.

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1.2                                 Assumption of Liabilities.  Onthe terms and subject to the conditions of this Agreement, Buyer agrees toassume, effective as of the Closing, and thereafter to pay, perform ordischarge the Assumed Liabilities.  The “***Assumed Liabilities***”shall mean only the Liabilities of Seller primarily arising out of theoperations of the US Business, absolute or contingent, whether arising beforeor after the Closing, including the following but in any case excluding theIndemnified Liabilities:

(a)                                  all Liabilities under the Assigned Contracts;and

(b)                                 all accrued and unpaid payables of the USBusiness to the extent accrued as a liability on the Final Closing BalanceSheet, to the extent not paid prior to Closing.

1.3                                 Retained Assets. Notwithstanding anything herein to the contrary, the assets listed on Schedule1.3 are not included in the Purchase Assets and shall be retained by Seller(the “***Retained Assets***”).

1.4                                 Indemnified Liabilities. Except as expressly assumed by Buyer pursuant to Section 1.2,none of Buyer or any of its Affiliates will assume or be liable for anyLiabilities of Seller, whether arising before or after the Closing, and whetherrelating to periods before or after the Closing (collectively, the “***Retained Seller Liabilities***”). Inaddition to and without limiting the generality of the prior sentence, each ofthe following Liabilities, whether arising before or after the Closing andwhether relating to periods before or after the Closing are collectivelyreferred to in this Agreement as the “***Indemnified GroupLiabilities***” and, together with the Retained Seller Liabilities,are collectively referred to in this Agreement as the “***Indemnified Liabilities***”:

(a)                                  all Liabilities under the Non-AssignedContracts;

(b)                                 all Liabilities of Seller under or arising orresulting from any Employee Benefit Plan whether or not set forth on Schedule2.17(a), whether relating to periods before or after the Closing Date, andincluding all Liabilities disclosed on Schedule 2.17(c) and Schedule2.17(d) or arising with respect to the matters identified on Schedule2.17(e);

(c)                                  all Liabilities for Taxes of Seller, exceptto the extent provided in Section 4.10;

(d)                                 all Indebtedness of Seller, other thanobligations under capitalized leases to the extent accrued as a liability onthe Final Closing Balance Sheet

(e)                                  all Liabilities arising or resulting from theRetained Assets;

(f)                                    all Liabilities for fees and expenses (exceptto the extent provided in Section 4.10) incurred by or on behalf ofSeller or its Affiliates prior to or at the Closing in connection with thisAgreement, any Transaction Document or the Acquisition, including any finder’sfee or similar charge or commission due to any Person who has acted for Selleror its Affiliates in connection with the transactions contemplated by thisAgreement;

(g)                                 all Liabilities arising or resulting fromLegal Proceedings relating to the Business that are pending as of the Closing(regardless of whether the Liabilities are known or alleged as of the Closing,and regardless of whether the Liabilities arise before or after the Closing butonly to the extent that such Liabilities arise or result from such LegalProceedings), including those Legal Proceedings set forth on Schedule2.14(a);

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(h)                                 all Liabilities arising or resulting from anyPending Claims and all Liabilities arising or resulting from the mattersdescribed in the letter set forth on Schedule 2.10(b)(1)(B), or anycounterclaims arising or resulting therefrom;

(i)                                     all Liabilities arising or resulting fromEnvironmental Claims, subject to Section 7.11;

(j)                                     all Liabilities arising or resulting from anythird-party claim of infringement, violation, or misappropriation of anyIntellectual Property Rights of any Person related to or arising from anylighting product that is or was included in any Product of Seller;

(k)                                  all Liabilities owing by any Company toSeller or any Affiliate of Seller (other than a Company);

(l)                                     all Liabilities owing by Magnetek Italy tothe directors of Magnetek Italy in their capacity as director before theClosing, to the extent that a release therefor for the benefit of MagnetekItaly is not obtained from such director as of the Closing;

(m)                               all Liabilities arising or resulting fromclaims under any Warranty provided by the Business prior to the Closing Datemade within eighteen (18) months following the Closing Date (provided thatBuyer notifies Seller within 30 days of the expiration of such period) forservice, repair, replacement or similar work with respect to any Productsmanufactured or sold or services provided by the Business on or before theClosing Date, the aggregate costs and expenses of which, at shop level cost(direct materials, direct labor and factory overhead) as well as out-of-pocketcosts and expenses in connection with servicing such claims (including sitevisit and field support), exceed the warranty reserve on the Final ClosingBalance Sheet.  To the extent Warrantyclaims are made after the Closing Date in respect of Products manufacturedprior to the Closing Date but sold thereafter, Seller’s liability shall belimited to the terms of its Warranty provided for such product prior to theClosing Date; and

(n)                                 all reasonable out-of-pocket costs andexpenses up to but not exceeding $250,000 incurred by any Buyer Indemnitee inconnection with moving the facility referenced on Schedule 2.11(d) toanother location as a result of circumstances disclosed in the last twosentences on Schedule 2.11(d) and consisting solely of the costs andexpenses of (i) moving the facility, (ii) tenant improvements at a new locationand (iii) any Damages imposed by a Governmental Entity arising from suchdisclosed circumstances.

Inaddition to the foregoing, and notwithstanding any other provision of thisAgreement to the contrary, on the Closing Date Seller will repay the receivableof Magnetek Italy in an amount (the “***Euro Dollar Amount***”)calculated as set forth on Schedule 1.4.

1.5                                 Consideration;Payments.

(a)                                Subject to the terms and conditions of this Agreement, the totalconsideration (the “***Purchase Price***”) for thepurchase of the Acquired Shares and the Purchase Assets will be (a)$71,700,000, plus the Euro Dollar Amount, plus or minusthe further adjustments at the Closing set forth in Section 1.6, minusthe Escrow Amount (such amount, after making such additions or subtractions,the “***Closing Payment***”), and (b) theassumption of the Assumed Liabilities.

(b)                                 The Closing Payment shall be paid by Buyer toSeller in cash, by wire transfer of immediately available funds in U.S.dollars, to an account designated by the Seller to the Buyer in writing atleast two Business Days in advance.

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(c)                                  The Purchase Price is based on the BalanceSheet (as defined in Section 2.7(a)) and the principles, methods andpractices used by Seller in the preparation thereof. The Purchase Price issubject to further adjustments pursuant to Section 1.7 after theClosing.  For purposes of anycalculations made pursuant to Section 1.6 or 1.7for amounts expressed in any currency other than U.S. Dollars, suchamounts shall be converted into U.S. dollars at the applicable foreigncurrency-to-U.S. Dollar exchange rate (based upon the arithmetic average of theclosing exchange rates for the five (5) Business Days ending two (2) BusinessDays prior to the Closing Date) as reported at www.oanda.com.

1.6                                 Adjustment toPurchase Price at Closing.

(a)                                Initial Closing Balance Sheet.  Forpurposes of determining the Closing Payment, Seller shall prepare and deliverto Buyer, at least five (5) Business Days before the Closing Date, Seller’sgood faith best estimate of the combined unaudited balance sheet of theBusiness as of the Closing Date (the “***Initial Closing BalanceSheet***”) together with a schedule setting forth the AdjustedTangible Net Worth based on the Initial Closing Balance Sheet (the “***Initial Adjusted Tangible Net Worth***”)and a schedule setting forth the Closing Net Indebtedness Amount based on theInitial Closing Balance Sheet (the “***Initial Closing Net Indebtedness Amount***”).  The Initial Closing Balance Sheet and suchschedules shall be accompanied by reasonable supportingdocumentation.  The Initial ClosingBalance Sheet shall fairly present Seller’s best estimate of the financial conditionof the Business (excluding the Retained Assets and the Indemnified Liabilities)as of the Closing Date in accordance with GAAP, consistently applied inaccordance with those principles, methods and practices used in the preparationof the Balance Sheet.

(b)                                 Right of Review. Buyer shall have the right to review the Initial ClosingBalance Sheet, such schedules and such supporting documentation or otherdata as Buyer may reasonably request from Seller.  If Buyer does not agree with the Initial ClosingBalance Sheet, the Initial Adjusted Tangible Net Worth, or the Initial ClosingNet Indebtedness Amount, Buyer and Seller shall negotiate in good faithto mutually agree on an acceptable Initial Closing Balance Sheet, the Initial AdjustedTangible Net Worth, or the Initial Closing Net Indebtedness Amount, andthe Seller shall consider in good faith any proposed comments or changes thatBuyer may reasonably suggest; provided, however, that the failureto include in the Initial Closing Balance Sheet or the calculation of the InitialAdjusted Tangible Net Worth or the Initial Closing Net Indebtedness Amountany changes proposed by Buyer, or the acceptance by Buyer of any the foregoing,shall not (i) limit or otherwise affect Buyer’s remedies under this Agreement,including Buyer’s right to include such changes or other changes in the Final Closing BalanceSheet, or (ii) constitute an acknowledgment by Buyer of the accuracy ofthe InitialClosing Balance Sheet or the Initial Adjusted Tangible Net Worth or the InitialClosing Net Indebtedness Amount.

(c)                                  Purchase Price Adjustment. The Closing Payment and the Purchase Priceshall be increased or decreased by the amount (the “***Initial******Net Worth Adjustment***”)by which the Initial Adjusted Tangible Net Worth exceeds (expressed as a positivenumber) or is exceeded by (expressed as a negative number) $48,780,000 (the “***Target***”).  In addition, the Closing Payment and thePurchase Price shall be decreased by the amount that the Initial Closing NetIndebtedness Amount exceeds $16,676,000. There will be no change in the Closing Payment or Purchase Price if theInitial Closing Net Indebtedness Amount is equal to or less than$16,676,000.  The Target has beencalculated as set forth on Schedule 1.6(c).

1.7                                 Post-Closing Adjustment to Purchase Price.

(a)                                  Final Closing Balance Sheet. Within sixty (60) days after the Closing Date, Buyer, at Buyer’sexpense, shall prepare and deliver to Seller a combined unaudited balance sheetof the Business as of the close of business on the Closing Date, including onlythe Group Assets and the Group

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Liabilities and excludingthe Retained Assets and the Indemnified Liabilities (the “***Final Closing Balance Sheet***”),together with a schedule setting forth the Adjusted Tangible Net Worth based onthe Final Closing Balance Sheet (the “***Final******Adjusted Tangible NetWorth***”) and a schedule setting forth the Closing NetIndebtedness Amount based on the Final Closing Balance Sheet (the “***Final Closing Net IndebtednessAmount***”).  The FinalClosing Balance Sheet shall fairly present the financial condition of theBusiness (excluding the Retained Assets and the Indemnified Liabilities) as ofthe Closing Date in accordance with GAAP, consistently applied in accordancewith those principles used in the preparation of the Balance Sheet, except thatit is agreed and acknowledged that the inventory reserve set forth on the FinalClosing Balance Sheet shall equal the inventory reserve set forth on theBalance Sheet, other than reductions in the reserve that may have occurredsince the Balance Sheet date for the disposal of inventory to which the reserverelated as of the Balance Sheet date. The Final Closing Balance Sheet shall become final and binding accordingto Section 1.7(b).  The sum of (i)amount by which the Final Adjusted Tangible Net Worth exceeds (expressed as apositive number) or is exceeded by (expressed as a negative number) the InitialAdjusted Tangible Net Worth, minus (ii) the amount by which the FinalClosing Net Indebtedness Amount exceeds the greater of (1) the Initial ClosingNet Indebtedness Amount and (2) $16,676,000, shall be referred to as the “***Purchase Price Adjustment****.*”

(b)                                 Disagreements as to Final Closing BalanceSheet.  During the 30 days immediately followingSeller’s receipt of the Final Closing Balance Sheet, Seller shall be entitledto review at its own expense the Final Closing Balance Sheet and Buyer’sworking papers relating to the Final Closing Balance Sheet, and Buyer shallprovide Seller reasonable access to its personnel, properties, books andrecords to the extent relevant to such audit and/or review.  The Final Closing Balance Sheet shall becomefinal and binding upon the parties on the thirtieth day following deliverythereof unless Seller gives written notice to Buyer of its disagreement withthe method of presentation of the Final Closing Balance Sheet (a “***Notice of Disagreement***”)prior to such date.  Any Notice ofDisagreement shall specify in reasonable detail the nature of any disagreementso asserted.  If a timely Notice ofDisagreement is received by Buyer with respect to the Final Closing BalanceSheet, then the Final Closing Balance Sheet (as revised in accordance with clauses(x) or (y) below), shall become final and binding upon the partieson the earlier of (x) the date the parties hereto resolve in writing alldifferences they have with respect to all matters specified in a Notice ofDisagreement or (y) the date all matters properly in dispute are finallyresolved in writing by the Accounting Firm (as defined below).  During the thirty (30) days immediatelyfollowing the delivery of any Notice of Disagreement, Seller and Buyer shallseek in good faith to resolve in writing all differences which they may havewith respect to any matter specified in such Notice of Disagreement.  During such period, Seller and Buyer shall eachhave reasonable access to the other party’s working papers relating to suchparty’s preparation or review of the Final Closing Balance Sheet or the Noticeof Disagreement, as applicable.  At theend of such 30-day period, Seller and Buyer shall submit to an independentaccounting firm (the “***AccountingFirm***”) for review and resolution of any and all matters whichremain in dispute and which were properly included in any Notice ofDisagreement, and the Accounting Firm shall reach a final, binding resolutionof all matters which remain in dispute. The Final Closing Balance Sheet, with such adjustments necessary toreflect the Accounting Firm’s resolution of the matters in dispute, shallbecome final and binding on Buyer and Seller on the date the Accounting Firmdelivers its final resolution to the parties. The Accounting Firm shall be PricewaterhouseCoopers, or if such firm isunable or unwilling to act, such other nationally recognized independent publicaccounting firm as shall be agreed upon by the parties hereto in writing within10 Business Days of the end of such 30-day period; provided that if theycannot so agree, then each of the Buyer and the Seller shall select oneaccounting firm within such 10 Business Day period, and both accounting firmsso selected shall then choose a third accounting firm (which shall beindependent from both Buyer and Seller) within 10 Business Days, which shallthen be the Accounting Firm for purposes of this Section.  The Accounting Firm’s sole authority will beto resolve amounts in disagreement related to the Final Closing Balance Sheet,and the Accounting Firm will have no authority over any other disagreement(including but not limited to questions of law, interpretation of contract, and

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fraud). The Accounting Firmshall be instructed to provide a written report of its findings anddetermination to Buyer and Seller within 30 days of its appointment. The feesand expenses of the Accounting Firm in connection with the procedurescontemplated pursuant to this Section 1.7(b) shall be borne 50% by Buyerand 50% by Seller.

(c)                                  Purchase Price Adjustment. Based on the Final Closing Balance Sheet and the Purchase PriceAdjustment as determined under subsections (a) and (b) above, thePurchase Price will be adjusted as provided herein.  In the event that a timely Notice ofDisagreement has been given, the Purchase Price Adjustment shall be calculated(x) by the parties pursuant to the resolution in writing of any differencesbetween them, or (y) by the Accounting Firm, in writing, as part of its finalresolution of disputes.  In the eventthat no Notice of Disagreement has been given, the Purchase Price Adjustmentwill be calculated by Buyer and delivered to Seller within three (3) BusinessDays following the date on which the Final Closing Balance Sheet becomes finaland binding.  The Purchase PriceAdjustment shall represent an increase (if a positive number) or decrease (if anegative number) in the Purchase Price. In the event the Purchase Price Adjustment is a positive number, thenBuyer shall pay to Seller (as additional Purchase Price) an amount equal to thePurchase Price Adjustment plus an additional amount equal to interest thereoncalculated at the Applicable Rate for the period from (and including) theClosing Date to (but not including) the date such payment is made (the “***Interest Period***”),and in the event the Purchase Price Adjustment is a negative number, thenSeller shall pay to Buyer (as a refund of Purchase Price) an amount equal tothe Purchase Price Adjustment (expressed as if a positive number) plus anadditional amount equal to interest thereon calculated at the Applicable Ratefor the Interest Period.  Within three(3) Business Days following determination of the Purchase Price Adjustment,such payment shall be made in cash, via wire transfer to an account designatedin writing at least 48 hours in advance by the party to receive such payment,by Buyer or Seller, as the case may be, to the other party.

1.8                                 Closing.  The consummation of thepurchase and sale of the Acquired Shares and the Purchase Assets (the “***Closing***”) providedfor in this Agreement will take place at the offices of counsel to Seller at333 S. Grand Avenue, 47th Floor, Los Angeles, California 90071 at 9:00 a.m. on(i) the third Business Day following the date on which all conditions toClosing specified in Article V of this Agreement (except for theconditions that will only be satisfied on the Closing Date) have been satisfiedor waived, or (ii) at such other time and place as the parties may agree inwriting (the “***ClosingDate***”).  Subject to theprovisions of Section 6.1, failure to consummate the Acquisitionprovided for in this Agreement on the date and time and at the place determinedpursuant to this Section 1.8 alone will not result in the termination ofthis Agreement and will not relieve any party of any obligation under thisAgreement.  Once consummated, the Closingshall be deemed effective at 12:01 a.m. on the day of the Closing.

1.9                                 Closing Deliveries.

(a)                                  Seller Deliveries.  Atthe Closing, Seller will deliver to Buyer:

(i)                                  a certificate or certificates representingthe Acquired Shares, duly endorsed (or accompanied by duly executed stockpowers or the equivalent under foreign Legal Requirements) by Seller fortransfer to Buyer;

(ii)                               certificates from appropriate authorities asto the good standing (or equivalent status under foreign Legal Requirements) ofMagnetek Italy in Italy and each jurisdiction in which Magnetek Italy isqualified to do business as a foreign corporation, each dated not earlier thanthirty (30) days prior to the Closing Date;

(iii)                            a cross-receipt for receipt of the PurchasePrice signed by Seller;

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(iv)                            certificates from appropriate authorities asto the good standing (or equivalent status under foreign Legal Requirements) ofeach other Company in its jurisdiction of formation, each dated not earlierthan thirty (30) days prior to the Closing Date; provided, that withrespect to Magnetek China, such delivery shall be deemed satisfied upondelivery of (1) a certified copy of Magnetek China’s current business licensewith an annual inspection stamp thereon indicating that Magnetek China haspassed the latest annual inspection (2) a copy of the search result (dated notearlier than thirty (30) days prior to the Closing Date) of the records of therelevant office of the Administration for Industry and Commerce, which shallindicate that Magnetek China remains duly registered as a wholly foreign ownedenterprise in China and remains a wholly-owned subsidiary of Seller, each as ofthe date of the search, and (3) investment certificate or certificates issuedby Magnetek China representing all of its registered capital;

(v)                                 copies of minutes of the shareholders’meetings of Magnetek Italy, duly recorded in Magnetek Italy’s relevantcorporate book, held pursuant to Section 5.2(g);

(vi)                              a Bill of Sale and Assumption Agreement insubstantially the form attached hereto as **Exhibit A**,a Patent Assignment in substantially the form attached hereto as **Exhibit B**, and a Trademark Assignmentin substantially the form attached hereto as **Exhibit C**(collectively, the “***Ancillary Agreements***”), eachduly executed by Seller, and all other assignments, endorsements andinstruments of transfer as shall be necessary or appropriate to carry out theintent of this Agreement and as shall be sufficient to vest in Buyer all ofSeller’s right, title and interest in the Purchase Assets;

(vii)                           letters of resignation dated as of theClosing and in substantially the form attached hereto as **Exhibit D**from each director of each Company or evidence of prior termination of any suchdirectors;

(viii)                     all original shareholders’ ledger and minutebooks of the meetings of the board of directors and shareholders, and all othercorporate records of each Company and all of the Business Records of the Group(provided that this obligation will be deemed satisfied to the extentlocated at a facility of the Business at one of the Real Properties); and

(ix)                             the additional documents described in Section5.2 of this Agreement.

(b)                                 Buyer Closing Deliveries.  Atthe Closing, Buyer will make the following deliveries:

(i)                                  Buyer will deliver to Seller, by wiretransfer of immediately available funds in U.S. dollars to an account(s)designated by Seller, the Closing Payment;

(ii)                               Buyer will deliver to Seller a cross-receiptfor receipt of the Acquired Shares;

(iii)                               Buyer will execute and deliver theinstruments described in clause (vi) of Section 1.9(a) above, asapplicable;

(iv)                              Buyer will deliver to Seller a Californiaresale certificate, providing that the inventory held in Seller’s Chatsworthfacility is being purchased for resale, in form and substance reasonablysatisfactory to Seller; and

(v)                              Buyer will deliver the additional documentsdescribed in Section 5.3 of this Agreement.

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1.10                           Purchase Price Allocation.  Schedule1.10 sets forth an initial allocation of the Purchase Price (to the extenttreated as purchase price paid for the Purchase Assets and Acquired Shares forU.S. federal income tax purposes) as between the Purchase Assets, on the onehand, and the Acquired Shares, on the other hand, subject to adjustmentpursuant to the next sentence.  Within 60calendar days after the determination of the Final Closing Balance Sheet, theBuyer will prepare and deliver to Seller a schedule setting forth a proposedfinal allocation of the Purchase Price and the Assumed Liabilities (to theextent taken into account as purchase price for U.S. federal income taxpurposes) among the Purchase Assets and the Acquired Shares.  During the 30 calendar days following such 60calendar day period, Buyer and Seller will use their reasonable efforts tocollectively determine whether the Buyer’s proposed final allocation will beused as the basis for an asset allocation for purposes of Section 1060 of theCode and to determine if any adjustments are appropriate and, regardless, willuse reasonable efforts to allocate the Purchase Price and such AssumedLiabilities among the Purchase Assets and the Acquired Shares in accordancewith Section 1060 of the Code.  If theparties agree to an allocation within such 30-day period, such allocation willbe reflected on each party’s Form 8594, and each party will prepare and fileits respective federal, state and local Tax Returns, as applicable, consistent withsuch allocation.  If the parties areunable to agree to an allocation within such period, each party will prepareand file its own Form 8594.  Whether ornot the parties agree upon an allocation, each party shall provide to the othera copy of the Form 8594 that was actually filed by such other party for federalincome tax purposes with respect to the transaction described herein uponrequest from the other party.  Similartiming and procedures shall apply with respect to any Form 8883 to be filed inconnection with a Section 338 Election, except that the 60-day periodreferred to above shall commence five calendar months following the month inwhich the Closing occurs.  Regardless ofthe foregoing, Buyer and Seller agree that neither the portion of the PurchasePrice allocable to the Purchase Assets nor the “fair market value” (determinedunder the procedures specified in 16 CFR 801.10(c)(3)) of the Purchase Assetsis equal to, or in excess of, $56.7 million.

# **ARTICLE IIREPRESENTATIONS AND WARRANTIES OF SELLER**

Except as set forth in thedisclosure schedule delivered by Seller to Buyer on the date of this Agreementand attached hereto as **Exhibit E**and incorporated herein (the “***Disclosure Schedule***”),Seller represents and warrants to Buyer that the statements contained in this ArticleII are true, correct and complete as of the date of this Agreement and asof the Closing Date (or, if made as of a specified date, as of such date).

2.1                                 Organization.** **Each of Seller and Magnetek Italy is a corporation (or similar organization under foreign LegalRequirements) duly organized, validly existing and in good standing (orequivalent status under foreign Legal Requirements) under the laws of thejurisdiction of its organization, and has the necessary corporate (or comparablepower under foreign Legal Requirements) power and authority to conduct itsbusiness in the manner in which its business is currently being conducted andto own or lease such of the Group Assets as it owns or leases.  Magnetek Italy is qualified to do business ineach jurisdiction listed on Schedule 2.1, and Magnetek Italy isqualified and in good standing (or equivalent status under foreign LegalRequirements) under the laws of each jurisdiction where the nature of itsbusiness requires such qualification, except where the failure to so qualifywould not have a Material Adverse Effect. Seller is qualified and in good standing (or equivalent status underforeign Legal Requirements) under the laws of each jurisdiction where thenature of its business requires such qualification, except where the failure toso qualify would not have a Material Adverse Effect.  There is no pending or threatened proceedingfor the dissolution or liquidation of Magnetek Italy.  No Company operates (nor has operated in thepast five years) under any name other than the respective names set forth intheir respective charter. Seller does not, with respect to the Business,operate (and has not operated in the past five years) under any name other thanthe name set forth in its charter

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2.2                                 OrganizationalDocuments.** **Magnetek Italy has delivered to Buyer or its counsel complete and accurate copies ofthe following: (a) the *atto costitutivo*and *statuto* of Magnetek Italy, ascurrently in effect, and (b) minutes and other records of the meetings andother proceedings of the board of directors and shareholders of MagnetekItaly.  Magnetek Italy is not inviolation of any provisions of its *attocostitutivo* or *statuto*.

2.3                                 Subsidiaries; Ownership of Shares.

(a)                                  Schedule 2.3(a) sets forth, foreach Company (i) the jurisdiction of its incorporation or organization, (ii)the number and type of authorized and outstanding equity securities orregistered capital of such Company and a list of the holders thereof, (iii) thenames of its officers and directors, and (iv) the jurisdiction in which it isqualified or holds licenses to do business or otherwise conducts business.  Except for the Companies, Magnetek Italy doesnot own or have any right or obligation to acquire, directly or through a Company,any equity, participation, or ownership interest in any other Person orotherwise Control any Person.  There isno pending or threatened proceeding for the dissolution or liquidation of anyCompany.

(b)                                 Each Company is duly organized, validlyexisting and in good standing (or equivalent status under foreign LegalRequirements) under the laws of the jurisdiction of its organization.  Each Company has the necessary corporate (orcomparable power under foreign Legal Requirements) power and authority to conductits business in the manner in which its business is currently being conductedand to own or lease such of the Group Assets as it owns or leases.  Each Company is qualified to do business ineach jurisdiction where the nature of its business requires such qualification,except where the failure to so qualify would not have a Material AdverseEffect.  Seller has delivered to Buyer orits counsel complete and accurate copies of the organizational documents of eachCompany, as currently in effect, and has made available to Buyer the minutes ofthe board of directors and shareholders of each Company.  No Company is in violation of any provisionsof its organizational documents.

(c)                                  Except as set forth in Schedule 2.3(c),no Company is a general or limited partner of any general partnership, limitedpartnership or other Person.

(d)                                 Seller is the sole record and beneficialowner of the Acquired Shares, which represent all of the outstanding shares ofMagnetek Italy, and has no other equity, participation, or ownership interestin Magnetek Italy or any right to acquire any of the foregoing.  Magnetek Italy or a Company is the solerecord and beneficial owner of all outstanding shares of capital stock or, asthe case may be, the entire registered capital, of each Company (collectively,the “***Company Shares***”).  Except as set forth in Schedule 2.3(d),the Acquired Shares and the Company Shares are not subject to any Encumbranceor any rights of first refusal of any kind. Seller has good and valid title to and has the right to transfer andsell the Acquired Shares to Buyer in accordance with the terms of thisAgreement.

2.4                                 Authority.  Seller has the corporate (or comparable power under foreign LegalRequirements) power and authority to execute, deliver and perform itsobligations under this Agreement and each of the Transaction Documents requiredto be delivered by it pursuant to the terms of this Agreement and to consummatethe transactions contemplated hereby and thereby.  The execution, delivery and performance ofthis Agreement by Seller, and of the Transaction Documents it is party to, andthe consummation of the Acquisition and the transactions contemplated by thisAgreement and by the Transaction Documents it is party to, have been dulyauthorized and approved by all necessary corporate action on the part ofSeller.  This Agreement and each of theTransaction Documents that Seller is party to have been duly and validlyexecuted and delivered by such party and constitute the legal, valid andbinding obligation of such party, enforceable against such party in accordancewith their terms, subject to the effect, if any, of (a) applicable bankruptcyand other similar laws affecting the rights of creditors

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generally and (b) rules oflaw and equity governing specific performance, injunctive relief and otherequitable remedies.

2.5                                 Non-Contravention; Required Consents.  Theexecution and delivery of this Agreement by Seller and of the TransactionDocuments it is party to do not, and the consummation by Seller of the Acquisitionand the transactions contemplated by this Agreement and the TransactionDocuments it is party to will not (a) conflict with or violate any provisionsof the Certificate of Incorporation or Bylaws (or similar governing documents)of Seller or any Company; (b) violate any Legal Requirement applicable toSeller or any Company; (c) result in a breach, cause a default under, or giverise to a right of payment under or the right to terminate, amend, modify,abandon or accelerate or increase obligations under (in any case with duenotice or lapse of time or both), any Material Contract; (d) result in theimposition of any Encumbrance against any material Group Asset; or (e) requireany Approval, including any filings or notifications that may be required underthe HSR Act, except for the third party consents or notices set forth on Schedule2.5 (the “***Required Consents***”).  No consent or approval of the stockholders ofSeller is required in connection with the transactions contemplated hereby.

2.6                                 Capitalization.

(a)                                  Schedule 2.6 sets forth the number of shares of capitalstock (or the total registered capital) of each Company authorized, issued andoutstanding as of the date hereof.  There are no options, warrants,convertible securities, subscription rights, conversion rights, preemptiverights, exchange rights, or other Contracts to which Seller or any Company is aparty relating to the issuance or saleof any securities or other equity or ownership interest in any Company.  All of the outstanding shares of capitalstock and, where applicable, the registered capital of each Company are dulyauthorized, validly issued, fully paid and nonassessable.

(b)                                 All of the shares of capital stock of theCompanies were issued in conformity with applicable Legal Requirements andwithout violating any preemptive rights.  There are no voting agreements with respectto any securities of any Company.

(c)                               There are no obligations, contingent orotherwise, of any Company to repurchase, redeem or otherwise acquire any sharesof capital stock or any of the registered capital of such Company or to providefunds to or make any investment (in the form of a loan, capital contribution orotherwise) in any other entity.  Anyshares of capital stock and any amount of registered capital of a Company thatwere issued and reacquired by such Person were so reacquired (and, if reissued,so reissued) in compliance with all applicable Legal Requirements, and noCompany has any outstanding Liability with respect thereto.  There are no accrued and unpaid dividendswith respect to any outstanding shares or registered capital of any Company.

2.7                                 FinancialStatements; Accounting Controls.

(a)                                  Attached hereto as Schedule 2.7(a)(1)are complete copies of the unaudited consolidated balance sheet of the Group asof July 2, 2006 (the “***Balance Sheet***”),the unaudited consolidated balance sheet of the Group as of July 3, 2005, andthe unaudited consolidated statements of operations, stockholders’ equity andcash flows of the Group for the fiscal years ended July 2, 2006, July 3, 2005and June 27, 2004, together with notes thereto (collectively, the “***Financial Statements***”).The material principles, methods and practices used by Seller in preparation ofthe Balance Sheet are set forth on Schedule 2.7(a)(2).  Except as set forth therein or as disclosedin Schedule 2.7(a)(2), the Financial Statements (1) were prepared inaccordance with GAAP consistently applied in accordance with past practice and(2) present fairly the financial position of the Group as of the date thereofand the results of its operations for the periods then ended in all materialrespects.

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(b)                                 The inventories on the balance sheetsincluded within the Financial Statements were valued in accordance with GAAPconsistently applied in accordance with past practice and in accordance withSeller’s inventory policy attached as Schedule 2.7(b).  All inventory classified as such in theBalance Sheet which is on hand and all additions to inventory since the date ofthe Balance Sheet consist of items of a quantity and quality usable or salablein the ordinary course of the business consistent with past practice, subjectto any reserves set forth on the Final Closing Balance Sheet.

(c)                                  All accounts receivable reflected on theFinancial Statements and all accounts receivable to be reflected on the FinalClosing Balance Sheet arise from sales actually made in the ordinary course ofbusiness consistent with past practice and are not subject to any dispute,defense, setoff or similar claim.  Nofurther goods or services are required to be provided by the Seller or Companyto which any such account receivable is owing in order to entitle such Person(or its assignee, as the case may be) to collect such account receivable infull, and no receivable to be reflected on the Final Closing Balance Sheet willbe pledged or assigned to any Person other than Buyer.  Schedule 2.7(c) sets forth a list ofthe accounts receivable of the Business as of the date set forth thereon,showing the aging thereof.

(d)                                 The Group has no Liabilities (other thanIndemnified Liabilities), either direct or indirect, matured or unmatured, orabsolute, contingent or otherwise, except for (i) those Liabilities set forthon the Balance Sheet, (ii) Liabilities arising in the ordinary course of businessconsistent with past practices since the date of the Balance Sheet, (iii)Liabilities incurred after the date hereof in compliance with this Agreement,and (iv) Liabilities that are not in excess of $200,000, individually or in theaggregate.

(e)                                  None of the Seller (with respect to theBusiness) or any Company has identified or been made aware of (i) anysignificant deficiency or material weakness in its system of internalaccounting controls, policies or procedures, (ii) any fraud, whether or notmaterial, that involves the management or other employees, contractors orconsultants who have a role in the preparation of financial statements or theinternal accounting controls utilized by it or (iii) any claim or allegationregarding any of the foregoing.

(f)                                    The Group maintains records in reasonable detail to accurately andfairly reflect the transactions involving the assets and liabilities of theBusiness and to maintainaccountability therefor.

2.8                                 Absence of Changes.  Exceptas contemplated by this Agreement, since the date of the Balance Sheet, Sellerand each Company have operated the Business and the Group only in the ordinaryand normal course, consistent with past practice, and since the date of theBalance Sheet, neither Seller (with respect to the Business) nor any Companyhas:

(a)                                  suffered any Material Adverse Effect;

(b)                                 incurred any material obligations orLiabilities other than in the ordinary course consistent with past practices;

(c)                                  permitted or allowed any of the Group’smaterial properties or assets to be mortgaged, pledged or subject to anyEncumbrance, except liens for Permitted Encumbrances;

(d)                                 entered into any Contract (including but notlimited to any Contract for the purchase, sale, transfer, license, lease, ordisposition of any assets), other than (i) the sale of inventory in theordinary course of business consistent with past practices, (ii) customer,distributor or supplier agreements entered into in the ordinary course ofbusiness consistent with past practices, and (iii)

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Contracts (other than thosedescribed in the immediately preceding clause (ii)) providing for payments byor to either Seller or Magnetek Italy in the aggregate of less than $100,000;

(e)                                  caused or experienced the acceleration,termination, modification, or cancellation of any Material Contract, orreceived written notice that any other Person intends to accelerate, terminate,modify or cancel any Material Contract;

(f)                                    made or committed to any capital expenditure(or series of related capital expenditures) for additions to property, plant orequipment except for expenditures made in the ordinary course of businessconsistent with past practices and involving no more than $50,000 individuallyor $100,000 in the aggregate;

(g)                                 made any capital investment in, loan to oracquisition of the securities, equity interests or assets of, any other Person;

(h)                                 granted any increase in compensation orbenefits of employees (including any increase pursuant to any new or presentlyexisting Employee Benefit Plan), or any increase in any such compensationpayable or to become payable to any officer or employee except in the ordinarycourse of business consistent with past practices;

(i)                                     issued any securities or registered capitalof any Company or any right to acquire any securities or registered capital ofany Company;

(j)                                     waived any right of material value, orinitiated, settled or compromised any material claim;

(k)                                  engaged in channel loading (e.g. pre-sellingto customers or distributors) or otherwise accelerated sales or collections ofreceivables (other than factoring of receivables), or delayed the payment ofpayables (other than in the ordinary course of business consistent with pastpractice).

(l)                                     made any capital contributions to any Companyto the extent such contributions reduced the outstanding Indebtedness of theGroup; or

(m)                               authorized, approved or committed to do anyof the foregoing.

2.9                                 Suppliers andCustomers.  Schedule 2.9 sets forth a list of each supplier to whomthe Group collectively made payments aggregating $100,000 or more (each, a “***Key Supplier***”) and each customer(including distributors and resellers) from whom the Group collectivelyreceived payments aggregating $1,000,000 or more (each, a “***KeyCustomer***”), in each case for the fiscal year ended July 2, 2006,together with a list of each sole source supplier to whom the Groupcollectively made payments aggregating at least $50,000 during such fiscal year(each, a “***Key Sole Source Supplier***”).  Schedule 2.9 shows, with respect toeach Key Customer, Key Supplier and Key Sole Source Supplier, the name anddollar volume involved.  To the Seller’sKnowledge, since January 1, 2005 no Key Supplier, Key Sole Source Supplier, orKey Customer has given written notice to Seller or any Company of such Person’sintention to terminate or substantially reduce the extent of its businessrelationship with the Group.  SinceJanuary 1, 2005, to the Knowledge of Seller, neither the Seller nor any Companyhas experienced or been notified of any shortage in goods or services that arematerial to the Business.

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2.10                           Intellectual Property.

(a)                                  Schedule 2.10(a) lists all United States or foreign patents,applications for patent, copyright, mask work, trademark or service markregistrations, domain name registrations, and applications for any suchregistrations included in the Group Intellectual Property owned by Seller orany of the Companies, indicating for each, the patent number, registration orapplication number, filing jurisdiction, date of issue or filing, and currentowner of record (the “***GroupRegistered Intellectual Property***”).  The Group Registered Intellectual Property isowned exclusively by Seller and the Companies free and clear of all jointownership, assignments and Encumbrances (other than Permitted Encumbrances)(except for any of the foregoing arising under any licenses or relatedagreements that are disclosed on Schedule 2.13).  All of the issued Group RegisteredIntellectual Property (*i.e.*, excludingany applications for patent or for registration of any copyright, mask work,domain name, trademark or service mark) that have not expired are valid,subsisting, have not expired and, except as noted on Schedule 2.10(a),have not been abandoned (except that such representation and warranty as tovalidity with respect to patents is to the Knowledge of Seller).  Seller has Made Available To Buyer true andcorrect copies of each of the foregoing applications, registrations, filings,and any unprivileged related correspondence in the possession of Seller or anyof the Companies.

(b)                                 Except as set forth on Schedule 2.10(b)(1),(i) the Group is not misappropriating, infringing or violating, and has notsince January 1, 2004 misappropriated, infringed or violated, any mask works,copyrights or trade secrets of any other Person or, to the Knowledge of Seller,any other Intellectual Property Rights of any other Person and (ii) the Grouphas not received any notice or claim alleging that the Group or theBusiness infringes, misappropriates or otherwise violates the IntellectualProperty Rights of any other Person. Except as set forth on Schedule2.10(b)(2), to the Knowledge of Seller, no third party currently isinfringing, violating, misappropriating, or has, since January 1, 2004,infringed, misappropriated or violated, any rights in the Intellectual PropertyRights included in the Group Assets. Neither Seller nor any Company has enteredinto any Contract granting any Person the right to bring infringement actionswith respect to, or otherwise to enforce, against third parties any of thematerial Group Intellectual Property owned by or exclusively licensed to Selleror any Company, other than such rights arising by operation of law under or asa result of any exclusive license of any such Group Intellectual Property.

(c)                                  Seller and the Companies own or have validlicense rights to use all Intellectual Property Rights necessary for the Groupto conduct its Business as presently conducted, including without limitationthe right to make, have made, use, offer for sale, sell, import, reproduce,create derivative works based on, translate, distribute, transmit, display,perform, license, sublicense, assign, transfer, sell and otherwise exploit theProducts to the extent currently done by the Seller and the Companies inconducting the Business, without any misappropriation, infringement, orviolation of any mask works, copyrights or trade secrets of any other Personor, to the Knowledge of Seller, any other Intellectual Property Rights of anyother Person.

(d)                                 All Intellectual Property Rights in and toall material inventions, know-how and works of authorship developed byemployees, consultants or independent contractors of the Business in the courseof their employment or engagement have been validly transferred and assigned bysuch employees, consultants and independent contractors to Seller or a Companyby a written “work made for hire” or assignment agreement. Seller and theCompanies have taken reasonable steps (including entering into confidentialityand nondisclosure agreements with employees, consultants and other Persons withaccess to or knowledge of confidential and proprietary information of theBusiness) to safeguard and maintain the secrecy and confidentiality of theGroup’s material confidential and proprietary information.

(e)                                  Except as provided in Schedule 2.10(e),neither Seller nor any Company has transferred any ownership or joint ownershipof, or granted any exclusive license of, any material Group

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Intellectual Property to anyPerson or authorized any Person to modify, improve or create derivative worksof any material Group Intellectual Property.

(f)                                    Except as provided in Schedule 2.10(f),no Product or portion thereof constituting computer software and no othercomputer software in which Seller or any of the Companies owns the IntellectualProperty Rights (“Proprietary Software”) has been or is beingdistributed, in whole or in part, or was used, or is being used by Seller orany Company in conjunction with any Public Software in a manner which wouldrequire that source code for such Product or Proprietary Software be disclosedor distributed under terms that permit disclosure of such source code in theabsence of a binding obligation of confidentiality. “***PublicSoftware***” means any software that is distributed as freesoftware, open source software (e.g., Linux) or under similar licensing ordistribution models, including but not limited to any software licensed ordistributed under the following: (i) GNU’s General Public License (GPL) orLesser/Library GPL (LGPL), (ii) the Artistic License (e.g., PERL), (iii) theMozilla Public License, (iv) the Netscape Public License, (v) the Sun CommunitySource License (SCSL), (vi) the Sun Industry Standards License (SISL), (vii)the BSD License, and (viii) the Apache License.

2.11                           Real Property; Title to Assets; Equipment.

(a)                                  Schedule 2.11(a) sets forth a complete list of all of thereal property owned by Seller (as it relates to the Business or the Group) orany Company (the “***OwnedProperties***”).  Each ofSeller and each Company has good, valid and marketable title to each parcel ofOwned Property, free and clear of any Encumbrance (other than PermittedEncumbrances).

(b)                                 Schedule 2.11(b) sets forth a complete list of (i) all of theleases, subleases or other similar agreements (the “***Leases***”)under which Seller (as it relates to the Business or the Group)or any Companyuses or occupies or has the right to use or occupy any real property (the “***Leased Properties***”and, with the Owned Properties and the Ownership Rights (as defined below), the“***Real Properties***”), and (ii) allmaterial licenses, easements, rights of way, access and other similararrangements under which Seller (as it relates to the Business or the Group) orany Company otherwise uses or occupies or has the right to use or occupy anyreal property (the “***Ownership Rights***”).  Seller and each Company is, and to Seller’sKnowledge, all other parties under the Leases are in compliance in all materialrespects with the terms of all Leases, and all such Leases are valid,subsisting and in full force and effect, and free and clear of any Encumbrance(other than Permitted Encumbrances). Seller has Made Available To Buyer true and correct copies of allOwnership Rights.

(c)                                  The Purchase Assets constitute all of theassets and properties reasonably required to conduct the US Business of Sellerin the manner in which and to the extent to which such Business was conductedduring the periods reflected in the Financial Statements and is currently beingconducted.  Seller does not provide anymaterial services to any Company, except as set forth on Schedule 2.11(c).

(d)                                 Except as set forth in Schedule 2.11(d),the items of equipment, buildings, structures, improvements and other tangibleassets owned or leased by Seller (with respect to the Business) or owned orleased by a Company are reasonably adequate for their current uses, are in goodcondition and repair (ordinary wear and tear excepted), and, to the Knowledgeof Seller, are free from material defect.

(e)                                  Neither Seller nor any Company has receivedwritten notice of any condemnation or eminent domain Legal Proceedings orwritten notice of any threat thereof with respect to any interest in any of theReal Properties and is not in negotiations with any Governmental Entity withrespect to

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condemnation of, or theexercise by such Governmental Entity of the right of eminent domain in respectof, any Real Properties.

(f)                                    Each Company has good and marketable titleto, or a valid leasehold interest in, all of the Group Assets that it owns orleases, and has a valid right to use all other Group Assets that it uses, ineach case free and clear of all Encumbrances (other than PermittedEncumbrances).  Schedule 2.11(f)lists individually all fixed assets (within the meaning of GAAP) included inthe Group Assets having a book value greater than $1,000 indicating the cost,accumulated book depreciation (if any) and the net book value of each suchfixed asset as of the date of such list.

(g)                                 Seller has good and marketable title to, or avalid leasehold interest in, all of the Purchase Assets, in each case free andclear of all Encumbrances (other than Permitted Encumbrances).

2.12                           Related Party Transactions. Except as disclosed in Schedule 2.12, no Person who is an officeror director of Seller or any Company, or any Affiliate of Seller or anyCompany, or any officer or director of any such Affiliate, or to the Knowledgeof Seller, any family member of any of the foregoing, (i) is an officer,director or Affiliate of, or has any direct or indirect interest in, any Personthat purchases from or sells or furnishes to the Group, any goods or services,or (ii) is a party to any Contract to which the Group is a party, exceptinsofar as is disclosed or reflected in the Financial Statements or in whichthe amount involved is less than $60,000; provided, however, thatownership of no more than one percent (1%) of the outstanding voting stock of apublicly traded corporation shall not be deemed to be an “interest in anyPerson” for purposes of this Section.

2.13                           Contracts.

(a)                                  Except as set forth in Schedule 2.13,neither the Seller in respect of the Group or the Business, nor any of theCompanies is party to or bound by any Contract of any of the following types(collectively, the “***MaterialContracts***”):

(i)                                     any Contract providing guaranty orsuretyship, providing for the issuance of letters of credit, or any pledge,bond or similar arrangement given by or running to the account of a Company;

(ii)                                  any Contract relating to the purchase, lease,license, maintenance, management, acquisition, sale, use, disposition orfurnishing of assets properties, goods, products, materials, supplies,merchandise, machinery, equipment, parts or any other property or services,excluding, however, (1) any purchase orders or other customer contracts enteredinto in the ordinary course of business consistent with past practice, (2)supplier or vendor contracts entered into in the ordinary course of businessconsistent with past practice, and (3) any Contract not described in (1) or (2)above that is made in the ordinary course of business consistent with pastpractice that involves revenues or expenditures equal to or less than $25,000in the aggregate;

(iii)                               any Contract obligating Seller or any Companyto refrain from (1) competing with or engaging in any business, or (2)conducting the Business in any particular jurisdiction;

(iv)                              any employment or consulting Contract otherthan employment or consulting Contracts that can be terminated without penalty,severance, liability or premium upon notice of 90 days or less;

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(v)                                 any Contract relating to Indebtedness orunder which the Seller or any Company has created, incurred, assumed orguaranteed (or may create, incur, assume or guarantee) Indebtedness or anymaterial Encumbrance;

(vi)                              any Contract set forth on Schedule 2.12;

(vii)                           any Contract (excluding any purchase orders)with any Person set forth on Schedule 2.9;

(viii)                        any Contract involving annual payments to orfrom the Seller (in respect of the Business) and the Companies, taken as awhole, of more than $100,000;

(ix)                                any Contract (1) for the cleanup, abatementor other actions in connection with any hazardous material, the remediation ofany existing environmental Liabilities, violation of any Environmental Laws orrelating to the performance of any environmental audit or study, or (2)containing any undertaking, term or condition under which a seller under theContract assumes or agrees to perform, be responsible for, or indemnify thebuyer against, any of the buyer’s responsibilities under Waste Electrical andElectronic Equipment regulations (e.g., Directive 2002/96/EC of the EuropeanParliament, amendments thereto, or any comparable national or regionalsupplements or enabling legislation);

(x)                                   any Contract related to any materialIntellectual Property Rights or that is set forth on Schedule 2.13(e);

(xi)                                any instrument set forth on Schedule2.11(b);

(xii)                             any Contract not listed above which is orwould reasonably be expected to be material to the Group;

(xiii)                          any Contract containing “non-cancelablenon-returnable” provisions relating to the ordering and purchasing of inventoryor materials of any nature in excess of $50,000;

(xiv)                         any Contract which transfers to a KeyCustomer (either immediately, or upon the occurrence of events specified therein)any Intellectual Property Rights necessary to manufacture a Group product, forthe purpose of enabling such Key Customer to take over such manufacture fromSeller or a Company, as the case may be;

(xv)                            any Contract concerning the establishment oroperation of a partnership, joint venture or other Person or any capitalinvestment in, loan to or acquisition of the securities, equity interests orassets of, any Person or the acquisition of a business or Person; or

(xvi)                         any Contract with any union or any collectivebargaining agreement.

(b)                                 Each Material Contract, as amended to date,has been Made Available To Buyer, is a bona fide, valid and binding obligationof Seller or the Company party to such Contract, as applicable, is enforceableagainst such party and, to the Knowledge of Seller, the other parties thereto,in accordance with its terms, and does not violate in any material respect anyLegal Requirement applicable to Seller or any Company, as the case may be.  Neither Seller nor any Company that is partyto a Material Contract is in material default under any such Material Contractnor has any event or omission occurred, which through the passage of time orthe giving of notice, or both, would constitute a material default thereunderor cause the acceleration of any of Sellers’ or the Companies’ obligationsthereunder, and, to

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the Knowledge of Seller,neither Seller nor any Company is alleged to be in breach or default in anymaterial respect thereunder.  NeitherSeller nor any Company has given written notice to any other Person that suchPerson has breached, violated or defaulted in any material respect under anyGroup Material Contract (which breach, violation or default has not beenresolved or cured).

(c)                                  The Material Contracts that are included withinthe Assigned Contracts are denoted with an asterisk (*) on Schedule 2.13.

2.14                           Legal Proceedings. Except as set forth on Schedule 2.14(a), there are no materialLegal Proceedings pending, or to the Knowledge of Seller, threatened againstSeller (relating to the Group or the Business) or any Company. Furthermore, (a)neither Seller (as relates to the Group or the Business) nor any Company issubject to any judgment, decree, injunction or order of any GovernmentalEntity, (b) no Legal Proceeding has been instituted against Seller or anyCompany before any Governmental Entity by any Person seeking to restrain orprohibit the execution and delivery of this Agreement or the consummation ofthe transactions contemplated hereby, and (c) neither Seller nor any Companyhas received any written notice of any investigation or review by anyGovernmental Entity with respect to the Group and, to the Knowledge of Seller,no investigation or review by any Governmental Entity with respect to the Groupis pending or threatened.  Neither Seller(as relates to the Group or the Business) nor any Company has given writtennotice threatening to initiate any Legal Proceeding against any Person.  Except as set forth on Schedule 2.14(b),there are no Legal Proceedings related to the Group or the Business in whichSeller or any Company is plaintiff or claimant (the “***PendingClaims***”).

2.15                           Governmental Authorizations; LegalCompliance.

(a)                                  Seller and each Company has all materialGovernmental Authorizations to enable it to conduct the Business in the mannerin which the Business is currently being conducted or has been conducted duringthe period reflected in the Financial Statements, and Seller and each Companyis in compliance in all material respects with the terms and requirements ofsuch Governmental Authorizations.  Schedule2.15(a) sets forth each such material Governmental Authorization.  Since January 1, 2004, neither Seller (asrelates to the Group or the Business) nor any Company has received any writtennotice or other written communication from any Governmental Entity (i)asserting any material violation of or failure to comply with any LegalRequirement of any Governmental Authorization or (ii) notifying such party ofthe revocation or withdrawal of any Governmental Authorization relating to theGroup.

(b)                                 Each of Seller (as relates to the Group orthe Business) and the Companies is in material compliance with all applicableLegal Requirements.  None of Seller (asit relates to the Business) nor any Company is subject to any material judicialorder, decree, decision, award, injunction, stipulation, holding, judgment orwrit that by its terms expressly applies to such Person.  Since January 1, 2004, neither Seller (asrelates to the Group and the Business) nor any Company has been cited, fined orotherwise notified in writing of any failure to comply with any material LegalRequirement and no Legal Proceeding with respect to any such violation ispending or, to the Knowledge of Seller, threatened.

(c)                                  Since January 1, 2004, none of Seller or anyCompany, or any director, officer, employee or shareholder thereof, nor, to theKnowledge of Seller, any agent, representative, or any Person acting for or onbehalf of any of them, has directly or indirectly (i) made any contribution,gift, bribe, rebate, payoff, influence payment, kickback, or other payment oritem of value to any Person, private or public, regardless of what form,whether or not in money, property, or services (A) to obtain or pay forfavorable treatment or special concessions or to secure Contracts, or pay forfavorable treatment, special concessions or Contracts already obtained or (B)in violation of any applicable Legal Requirement, or (ii) 

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established or maintainedany fund or asset that has not been recorded in the books and records of theGroup.

2.16                           Tax Matters.

(a)                                  Except as set forth on Schedule 2.16(a),all Tax Returns required to be filed with any Governmental Entity by anyCompany have been filed.  All Tax Returnsfiled by or on behalf of any Company were, in all material respects, properlyand timely filed when due (taking into account extension of time validlyobtained), and in all material respects, accurately reflect the Taxes of suchCompany for the periods covered thereby in all material respects.  Except as set forth on Schedule 2.16,each Company has paid or has had paid on its behalf all Taxes required to havebeen paid by such Company.

(b)                                 None of the Companies has executed any waiverof any statute of limitations on or extending the period for the assessment orcollection of any tax that remains outstanding.

(c)                                  All jurisdictions where any Company wasrequired to or has filed income Tax Returns for which the applicable statute oflimitations applicable to the Taxes reportable on such Tax Returns remains openare set forth on Schedule 2.16(c).

(d)                                 Except as set forth on Schedule 2.16(d),no Tax deficiency or delinquency is being asserted in writing or, to theKnowledge of Seller, threatened against any Company and no audit, action orsimilar Legal Proceeding relating to Tax matters is pending or, to theKnowledge of Seller, threatened by any Governmental Entity against anyCompany.  No outstanding adjustmentrelating to any Tax Return of any Company has been proposed in writing or, tothe Knowledge of the Company, otherwise, by any Governmental Entity.

(e)                                  Except as set forth on Schedule 2.16(e),there are no Encumbrances for Taxes (except Encumbrances for current Taxes notyet delinquent) upon any of the Group Assets or the Acquired Stock.

(f)                                    Seller or each Company has Made Available ToBuyer, copies of all Tax Returns filed by or on behalf of such Company for theapplicable statute of limitations applicable to the Taxes reported on such TaxReturns remains open.

(g)                              None of the Companies has assets that aretreated as “tax-exempt use property” for United States Tax purposes.

(h)                                 None of the Companies has (i) ever beena party to any Tax sharing, indemnification, allocation or other similaragreement that will remain in effect following the Closing, other than suchagreements with lessors regarding payment of property Taxes, vendors andservice providers regarding payment of sales/use Taxes and the like arising inthe ordinary course of business of the Companies (“***OrdinaryCourse Tax Agreements***”), (ii) any liability for the Taxesof any person (other than the Companies), under any provision of applicablelaw, as a transferee or successor, by contract or agreement, or otherwise(other than Ordinary Course Tax Agreements), (iii) ever been a party to anyjoint venture, partnership or other arrangement that could be treated as apartnership for Tax purposes that will continue following the Closing, or (iv)is treated as other than an association taxable as a corporation for UnitedStates federal income Tax purposes.

(i)                                     Neither Seller nor any of the Companies hasbeen deemed to be either a “distributing corporation” or a “controlledcorporation” in (i) a distribution of stock intended to qualify for tax-freetreatment under Section 355 of the Code in the two years prior to the dateof this Agreement

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or (ii) a distribution ofstock which would otherwise constitute part of a “plan” or “series of relatedtransactions” (within the meaning of Section 355(e) of the Code) inconjunction with the Acquisition.

(j)                                     None of the Companies is subject to Tax inany jurisdiction other than its place of incorporation or formation by virtueof having a permanent establishment or other place of business or by virtue ofhaving a source of income in that jurisdiction. None of the Companies is liable for any Tax as the agent of any otherperson or business nor constitutes a permanent establishment or other place ofbusiness of any other person, business or enterprise for any Tax purposes.

(k)                                  None of the Companies will be required toinclude any material income or gain or exclude any deduction or loss fromtaxable income as a result of (i) any change in method of accounting,closing agreement, deferred intercompany gain or excess loss account or anysimilar provision under any applicable law arising prior to Closing,(ii) installment sale or open transaction disposition consummated prior toClosing or (iii) prepaid amount received prior to Closing, except in eachcase to the extent the Tax liability from such event has been properlyreflected in the Financial Statements in accordance with GAAP.

2.17                           Employee Benefit Matters.

(a)                                  Schedule 2.17(a) sets forth a true and complete list of alloral and written plans, trust agreements, Contracts, policies or arrangementsrelating to any pension, thrift, savings, profit sharing, retirement, bonus,incentive, medical, dental, death, accident, disability, stock purchase, stockoption, phantom stock or phantom stock option, stock appreciation, deferredcompensation, hospitalization, “parachute,” severance, vacation, sick leave orpersonal leave or any other direct or indirect form of compensation maintainedby Seller and the Companies or to which Seller or any Company contributes, isliable for, or may become liable for in the future, for the benefit of anycurrent or former Group Employee or independent contractor or consultant,including all “employee benefit plans” (as defined in Section 3(3) of theEmployee Retirement Income Security Act of 1974, as amended (“***ERISA***”)), whether ornot subject to ERISA.  The itemsdescribed in the foregoing sentence are referred to collectively as “***Employee Benefit Plans***.”

(b)                                 True and correct copies of the writtenEmployee Benefit Plans, including all amendments thereto, along with a writtendescription of any Employee Benefit Plan that is not set forth in a writtendocument will be provided to Buyer at or before the Closing Date.  In addition, at or before the Closing Date,Buyer will also be provided with the following documentation regarding anyEmployee Benefit Plan maintained, contributed to or with respect to which, anyone or more of the Companies may now or in the future have any liability withrespect to (collectively, the “***Company Benefit Plans***”):(i) the most recent annual actuarial valuation, if any, (ii) all InternalRevenue Service or Department of Labor determination, opinion, notification andadvisory letters or similar correspondence from non-U.S. Governmental Entities,(iii) the most recent annual report (including all schedules and financial statementsattached thereto), if any, (iv) all material correspondence to or from anyGovernmental Entity received in the last three years, (v) any discriminationtests for the most recent plan year, and (vi) all material written agreementsand contracts currently in effect, including (without limitation)administrative service agreements, group annuity Contracts, and group insuranceContracts.  No Employee Benefit Plan is a“multiemployer plan” (as defined in Section 3(37) of ERISA), and Seller and theCompanies have not ever contributed or been obligated to contribute to anymultiemployer plan.  Except as set forthon Schedule 2.17(b), no Employee Benefit Plan is an “employee pensionbenefit plan” (as defined in Section 3(2) of ERISA) subject to the provisionsof Title IV of ERISA, nor has Seller (in any capacity which could result inLiability to Buyer) nor any Company ever contributed or been obligated tocontribute to any such employee pension benefit plan.  Except as set forth on Schedule 2.17(b),no Employee Benefit Plan is (i) a plan described in Section 413 of the Code,(ii) a plan subject to the minimum funding

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standards of Section 412 ofthe Code or Section 302 of ERISA, or (iii) a defined-benefit pension planmaintained outside of the U.S. (other than plans sponsored by a GovernmentalEntity), nor has Seller (in respect of the Business or in any other capacitywhich could result in Liability to Buyer) or any Company ever contributed orbeen obligated to contribute to any such plans. Schedule 2.17(b) contains a list of each defined-benefit pensionplan or similar plan maintained outside of the U.S. by (i) any one or more ofthe Companies or (ii) the Seller (but only with respect to any Seller plansthat could result in Liability to Buyer), other than any such plans that arerequired to be maintained by Seller or one or more of the Companies under theapplicable Legal Requirements, and for each such plan listed on Schedule2.17(b), sets forth the plan’s “projected benefit obligation” and fairvalue of plan assets (each, calculated in accordance with GAAP) as of July 2,2006.  Except as set forth on Schedule2.17(b), Seller and the Companies have complied with, and each EmployeeBenefit Plan conforms in form and operation to, all applicable Laws, including,but not limited, to ERISA and the “Prohibited Transactions” rules thereunder,and those provisions of the Code or similar non-U.S. Law, with which complianceis required to obtain any intended favorable Tax treatment, in all materialrespects.  All contributions required tobe made with respect to any Employee Benefit Plan have been made.

(c)                                  There are no actions, suits or claims pending(other than routine claims for benefits) or, to Seller’s Knowledge, threatenedwith respect to any Employee Benefit Plan or against the assets of any EmployeeBenefit Plan.  Except as set forth in Schedule2.17(c), each Employee Benefit Plan is in compliance with any legallyapplicable minimum funding standard.

(d)                                 Except as provided on Schedule 2.17(d),no Employee Benefit Plan provides, or reflects or represents any Liability toprovide, benefits (including, without limitation, death or medical benefits),whether or not insured, with respect to any former or current employee, or anyspouse or dependent of any such employee, beyond the employee’s retirement orother termination of employment, other than any such benefits required to beprovided under applicable Law.

(e)                                  Except as set forth on Schedule 2.17(e),as of the Closing Date, no Group Employee will be a “disqualified individual”within the meaning of Section 280G of the Code and the regulationsthereunder.  The execution of thisAgreement and the consummation of the transactions contemplated by thisAgreement (alone or together with any other event which, standing alone, wouldnot by itself trigger such entitlement or acceleration) will not (1) entitleany Group Employee to any payment, forgiveness of indebtedness, vesting,distribution, or increase in benefits under or with respect to any EmployeeBenefit Plan or (2) solely with respect to the Companies, otherwise trigger anyacceleration (of vesting, funding or payment of benefits or otherwise) under orwith respect to any Company Benefit Plan.

2.18                           EnvironmentalMatters.

(a)                                  Compliance.  Seller (in respect of the USBusiness) and each Company are in compliance with all applicable EnvironmentalLaws.  Since January 1, 2004, neitherSeller nor any Company has received any written notice or other communicationfrom a Governmental Entity or any other Person that alleges that the Businessis not in compliance with any Environmental Law.

(b)                                 Claims.  There is no EnvironmentalClaim pending or, to the Knowledge of the Seller, threatened against (i) Selleror any Company with respect to the Business or (ii) any Person whose Liabilityfor any Environmental Claim the Seller or any Company has or may have retainedor assumed either contractually or by operation of law.

(c)                                  Hazardous Materials. Neither Seller or any Company nor, to the Knowledge of Seller, any otherPerson, has treated, stored, disposed of, arranged for the disposal of,transported to, or Released in reportable quantities any Hazardous Materialsfrom, on, at or under any Real Property, or, to

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the Knowledge of the Seller,any property formerly owned or occupied by the Business, or any third partylocation to which Hazardous Materials were sent, or caused to be sent, from aReal Property except (A) in compliance with applicable Environmental Laws, and(B) in a manner that has not resulted in and is not reasonably likely to resultin an Environmental Claim or required remediation under any Environmental Law.

(d)                                 Reports.  The Seller and the Companieshave provided to Buyer copies of all material written environmental reports,assessments, audits or investigations in their possession or control relatingto the Real Properties.

2.19                           Labor Relations.

(a)                                  Employees.  Schedule 2.19(a)(1)****includes a complete and correct list, as of the datehereof, of all Group Employees as well as all independent contractors andconsultants of the Seller (as it relates to the Group or the Business) or aCompany. Opposite the name of each individual on Schedule 2.19(a)(1) is(i) solely with respect to each Group Employee in the United States, a notationclassifying each as regular employee, leased employee, temporary employee,part-time employee, independent contractor or consultant; (ii) such person’scurrent compensation rate; (iii) such individual’s employer, (iv) the currentaccrual of vacation pay for each such individual; and (v) to the extentallowable by applicable law, a notation as to whether such individual is amember of a union related to the Business and, if a member of a union, the nameof the union to which they are a member. No bonus, severance or other payments or benefits of any kind are due toany Group Employee, consultant or independent contractor as a result of thetransactions contemplated by this Agreement. To the Knowledge of the Seller,all Group Employees (other than leased employees, temporary employees, and part-timeemployees) that were hired to devote all or substantially all of their businesstime to the conduct of the Business are so devoting all or substantially all oftheir business time to the conduct of the Business.  Except as set forth on Schedule 2.19(a)(2),no Group Employee is on leave for any reason. All Group Employees, consultants and independent contractors areproperly classified in accordance with applicable Legal Requirements and havehad appropriate withholdings from income reported and severance indemnityamounts accrued as required by applicable Legal Requirements.  To the Knowledge of the Seller, no GroupEmployee with the title of manager or higher, or with a position comparablethereto, has, within the past 3 months, expressed an intent to terminate his orher employment within the next 3 months. Except as set forth on Schedule 2.19(a)(2)(3), neither Seller norany Company has, within the past 3 months, terminated or given notice oftermination to any Group Employee with a title of manager or higher, or with aposition comparable thereto.

(b)                                 Labor Relations. Except as set forth in Schedule 2.19(b), (i) no collectivebargaining agent has been certified as a representative of any of the GroupEmployees, (ii) there is no request before Seller or any Company for unionrepresentation with respect to any Group Employee, and there are no pendinglabor negotiations with respect to the Group or the Business, and (iii) to theKnowledge of Seller, no organizing activity or representation campaign or electionis now in progress with respect to any Group Employee. There are no unfairlabor practice complaints, or to the Knowledge of Seller, threatened, relatingto or affecting the Group or the Business, except as would not reasonably beexpected to result in any material liability. Since June 30, 2004, there has not been any material labor strike, laborslowdown, work stoppage, labor picketing or lockout involving employees of theGroup or the Business.

(c)                                  Complaints.  Except as set forth in Schedule2.19(c), (i) there are no Legal Proceedings, pending or, to the Knowledgeof Seller, threatened, (ii) there have been no writtenclaims given to Seller or any Company since January 1, 2006, and (iii) there are no internalinvestigations currently pending, in any case regarding harassment, discrimination, wages, hours, equal opportunity,

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occupational safety andhealth, or the payment of social security and other taxes, in any case relatingto or affecting the Group or the Business. Seller (as relates to the Group orthe Business) and each Company have complied with all applicable LegalRequirements relating to the hiring and retention of all Group Employeesrelating to wages, hours, equal opportunity, collective bargaining, immigrationand naturalization, the payment of social security and other taxes, and anyother employment-related Legal Requirements.

(d)                                 Compensation. Neither Seller nor any Company is delinquent in any payment to any GroupEmployee for any wages, salaries, commissions, bonuses or other directcompensation for any services performed by them or amounts required to bereimbursed to such employees including but not limited to amounts for regulartime and overtime and compensatory time. Any accruals for incentive bonuses toGroup Employees for the current fiscal year are accurately reflected on theBalance Sheet.

2.20                           Product Warrantyand Product Liability.

(a)                                  Schedule 2.20(a) lists the standard forms of terms andconditions regarding Warranties that have not lapsed or expired.  No Product has been manufactured, leased orsold by or on behalf of Seller or any Company with any Warranty that ismaterially less favorable to Seller or any Company than the terms andconditions described on Schedule 2.20(a).

(b)                                 Schedule 2.20(b) describes in reasonable detail all Productrecalls since January 1, 2004. No recall or post-sale notice or warning ispending or, to the Knowledge of Seller, threatened in connection with anyProduct and, to the Knowledge of Seller, no basis exists for any such recall,notice or warning.

(c)                                  Each Product is free of any design defect(including bugs, errors, viruses, “Trojan horses” or other disabling softwarecode) or failure to warn and complies in all material respects with allapplicable (i) Legal Requirement and (ii) binding customer-mandatedspecifications and Contract commitments therefor as agreed to and accepted bySeller or any Company (including but not limited to those customer-mandatedspecifications or requirements that explicitly require or specify that aProduct be designed, developed, manufactured, or sold in compliance with theRestriction of Hazardous Substances Directive (RoHS) 2002/95/EC (the “***RoHS Directive***”).  Schedule 2.20(c) lists, to theKnowledge of Seller, any claims for any injury, damage, loss or failure arisingin connection with a Product that, since January 1, 2004, have been alleged inwriting in amounts exceeding $100,000, other than claims arising solely out ofany warranty.

(d)                                 Except as set forth on Schedule 2.20(d),there are no pending material disputes with respect to the Warranties.

(e)                                  Except as set forth on Schedule 2.20(e),(i) no aggregate returns of any Product during any 12-month period sinceJanuary 1, 2004 have exceeded 1% of the aggregate unit sales of such Productduring such 12-month period, (ii) to the Knowledge of the Seller, no customerof the Business experienced failures or serious product performance defects ingreater than 1% of the units purchased by such customer during any 12-monthperiod since January 1, 2004, (iii) to the Knowledge of the Seller, there hasbeen no Liability as a result of, or based upon or arising from or out of, orin connection with any injury to any individual or property as a result of theownership, possession or use of the Products, and (iv) to the Knowledge ofSeller, there have been no investigations by any Governmental Entity into anydefects or alleged defects of the Products. To the Knowledge of the Seller, none of the foregoing has occurred withrespect to components, products, parts or other supplies provided to the Groupby suppliers of the Business.

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(f)                                    Except as set forth in Schedule 2.20(f), orunless otherwise directed by customer specifications, contractualunderstandings or customer acknowledgements regarding the acceptability to saidcustomer of RoHS Directive non-compliance for a particular product, eachproduct of the Business for which development commenced after January 1, 2006has been designed and developed to be compliant with the RoHS Directive, as ofthe time when such product is or will be released for production and offeredfor sale.

2.21                           Brokers.  Except for commissions, feesand costs payable to Stephens Inc. in connection with the Acquisition (whichcommissions, fees and costs shall be borne exclusively by Seller), no broker,finder or investment banker is entitled to any brokerage, finder’s or othercost, fee or commission in connection with the Acquisition based uponarrangements made by or on behalf of Seller or any Company.  Notwithstanding anything to the contrarycontained in this Agreement, Seller is not responsible for any fees or costsincurred by Buyer in obtaining financing in connection with the Acquisition,including any financing fees and costs payable by Buyer to Stephens Inc. (whichfees and costs shall be borne exclusively by Buyer).

2.22                           Insurance.  Schedule 2.22 lists all insurancepolicies relating primarily to the Group (the “***Insurance Policies***”). Neither Seller nor any Company is in material default under anyInsurance Policy, and none has received any notice or other indication from anyinsurer or agent of any intent to cancel or not renew any of such InsurancePolicy.

2.23                           Bank Accounts;Powers of Attorney.  Schedule 2.23 sets fortha true and complete list of all bank accounts, safe deposit boxes and lockboxes of the Group, including, with respect to each such account and lock box,the names in which such accounts or boxes are held and identification of allPersons authorized to draw thereon or have access thereto.  Schedule 2.23 also sets forth the nameof each Person holding a general or special power of attorney from the Groupand a description of the terms of such power.

2.24                           Sarbanes OxleyCertifications.  Each Company has executed anddelivered to Seller a compliance checklist in the form attached hereto as Schedule2.24(a) in connection with the Sarbanes-Oxley Act for each fiscal quarterof Seller during the past three fiscal years. Attached hereto as Schedule 2.24(b) is a list of each signatoryto each such executed checklist. Attached hereto as Schedule 2.24(c) is a list of all exceptionsidentified in each such executed checklist. Seller hereby confirms that the certifications contained in its filingsunder the Securities Exchange Act of 1934, as amended, pursuant to Sections302, 404 and 906 of the Sarbanes-Oxley Act, are true and correct as of the datehereof.  None of Seller (in respect ofthe Business) or any Company has identified or been made aware of (i) anysignificant deficiency or material weakness in its system of internalaccounting controls, policies or procedures, (ii) any fraud, whether or notmaterial, that involves the management or other employees, contractors orconsultants who have a role in the preparation of financial statements or theinternal accounting controls utilized by it or (iii) to the Knowledge orSeller, any claim or allegation regarding any of the foregoing.

2.25                           Export Control. Seller (in respect of the Business) and each Company has complied in allmaterial respects with the export control laws of the United States, includingbut not limited to the export control laws administered by the Bureau ofIndustry and Security of the U.S. Department of Commerce and the InternationalTraffic in Arms Regulations administered by the U.S. Department of State, withrespect to the export of goods, services and technology from the United Statesand the re-export of U.S. origin goods, services and technology from thirdcountries, as well as with the export control laws of any other jurisdiction,to the extent such U.S. and other laws were or are applicable to the Seller (inrespect of the Business or the Group) and each of the Companies.  The Group has no Liability for materialnon-compliance with Legal Requirements imposing economic sanctions uponcountries, Governmental

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Entities or other Persons,including, without limitation, any Legal Requirement administered by the U.S.Department of the Treasury’s Office of Foreign Assets Control.

2.26                           HSR Act; Turnover in Italy.  TheCompanies (a) do not, in the aggregate, hold assets located in the UnitedStates with a fair market value of $56.7 million or more and (b) did not, inthe aggregate, make sales in or into the United States of $56.7 million or morein the most recent fiscal year, as calculated under the rules and regulationsof the HSR Act. Seller’s aggregate turnover in Italy did not exceed Euro40,000,000 for its fiscal year ending July 2, 2006.

2.27                           Disclaimer of Representations and Warranties. EXCEPT AS EXPRESSLY SET FORTH HEREIN, SELLER DOES NOT MAKE, AND SELLEREXPRESSLY DISCLAIMS, ANY REPRESENTATION OR WARRANTY, WHETHER EXPRESS ORIMPLIED, AND WHETHER BY COMMON LAW, STATUTE, FOREIGN LAW OR OTHERWISE,REGARDING ANY EXPECTED YIELD OR RETURN FROM ANY INVESTMENT HEREUNDER, INCLUDINGTHE QUALITY, CONDITION, OR OPERABILITY OF THE BUSINESS, THE GROUP, THE ACQUIREDSHARES, THE PURCHASE ASSETS OR THE GROUP ASSETS, INCLUDING, WITHOUT LIMITATION,ANY BUSINESS, ASSETS, IMPROVEMENTS, PERSONAL PROPERTY, EQUIPMENT, OR FIXTURESOF THE PURCHASE ASSETS OR GROUP ASSETS.

# **ARTICLE IIIREPRESENTATIONS AND WARRANTIES OF BUYER**

Buyer represents andwarrants to Seller that the statements contained in this Article III aretrue, correct and complete as of the date of this Agreement (or, if made as ofa specified date, as of such date).

3.1                                 Due Organization.**                                               **Buyer is a corporation duly organized, validlyexisting and in good standing under the laws of State of Delaware and has thenecessary corporate power and authority to own or lease its properties andconduct its business as currently conducted.

3.2                                 Authority; BindingNature.** **Buyer has the corporate power and authority to execute, deliver and performits obligations under this Agreement and each of the Transaction Documentsrequired to be delivered by Buyer pursuant to the terms of this Agreement andto consummate the transactions contemplated hereby and thereby.  The execution, delivery and performance ofthis Agreement by Buyer and the Transaction Documents to which Buyer is aparty, and the consummation of the Acquisition and the transactionscontemplated by this Agreement and the Transaction Documents to which Buyer isa party, have been duly authorized and approved by all necessary corporateaction on the part of Buyer.  ThisAgreement and the Transaction Documents to which Buyer is a party have beenduly and validly executed and delivered by Buyer and constitute the legal,valid and binding obligations of Buyer, enforceable against it in accordancewith their terms, subject to the effect, if any, of (a) applicable bankruptcyand other similar laws affecting the rights of creditors generally and (b)rules of law and equity governing specific performance, injunctive relief andother equitable remedies.

3.3                                 Non-Contravention;Consents.** **The execution and delivery of this Agreement by Buyer and each of theTransaction Documents to which Buyer is a party, and the consummation of theAcquisition and the transactions contemplated by this Agreement and theTransaction Documents to which Buyer is a party, will not (a) conflict with orviolate any provisions of the Certificate of Incorporation or Bylaws (orsimilar governing documents) of Buyer, (b) violate any Legal Requirementapplicable to Buyer; or (c) require any Approval, except for (i) any filings ornotifications that may be required under the HSR Act or the competition law ofany applicable jurisdiction and (ii) third party Approvals set forth on Schedule3.3.

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3.4                                 Brokers.  Except for commissions, fees and costspayable to Needham & Company in connection with the Acquisition (whichcommissions, fees and costs shall be borne exclusively by Buyer), no broker,finder or investment banker is entitled to any brokerage, finder’s or othercost, fee or commission in connection with the Acquisition based uponarrangements made by or on behalf of Buyer. Buyer is responsible for all fees or costs incurred by Buyer in connectionwith obtaining financing for the Acquisition, including any fees or costspayable by Buyer to Stephens Inc. (which fees and costs shall be borneexclusively by Buyer).

3.5                                 Litigation.  There is no litigation pendingor threatened in writing against Buyer in any court or any proceeding beforeany Governmental Entity that would prevent or materially hinder theconsummation of the Transactions by Buyer.

3.6                                 Sufficient Funds. Immediately prior to the Closing Buyer will have sufficient funds toenable Buyer to pay the Closing Payment and all other fees and expenses payableby it at the Closing related to the Acquisition.

3.7                                 Turnover in Italy. Buyer’s aggregate turnover in Italy did not exceed Euro 100,000,000 forits fiscal year ending December 31, 2005.

3.8                                 Acknowledgment Regarding Transaction. Buyer represents that in making the decision to enter into thisAgreement, it has relied solely on its own independent investigation, theexpress, representations, warranties, and covenants set forth in this Agreement,and Buyer’s own assessment of the past, current, and future businessrequirements of the Group.  Accordingly,Buyer acknowledges, represents and warrants that, except as expressly set forthin this Agreement, neither Seller nor any Company nor any Representative hasmade, and Buyer has not relied upon, any representations and warranties of anynature whatsoever.  Specifically (but without limitation) Buyeracknowledges that Seller makes no representation or warranty with respect toany projections or forecasts Made Available To Buyer or any of its Representatives.

# **ARTICLE IVCERTAIN COVENANTS OF THE PARTIES**

4.1                                 Access toInformation.** **During the period from the date of this Agreement through the ClosingDate, Seller shall, and shall cause the Companies and their respectiveRepresentatives to, provide Buyer and Buyer’s Representatives with reasonableaccess to Representatives of such party, and to all personnel, properties,Contracts, assets, Business Records, Tax Returns, work papers and other documentsand information relating to the Group or the Business.  Following the Closing, Buyer and Seller agreeto use commercially reasonable efforts to promptly furnish to the other partyinformation in its possession to enable the other party to properly preparefinancial statements and tax and other documents required to be filed with anyGovernmental Entity, regulatory authority or stock exchange.  Buyer will maintain copies of all materialBusiness Records of the Group delivered to Buyer at the Closing (which shall bedeemed to include such records as are at offices of any Company as of theClosing), in particular those pertaining to Taxes, for such period as isconsistent with Buyer’s record-retention policies and practices (but in anyevent, with respect to Taxes, for the period specified in Section 4.9(a))and will permit the Seller to have reasonable access (at Seller’s expense)thereto to enable Seller to prepare financial statements or Tax Returns ordefend any Tax Proceedings.

4.2                                 Operation of theGroup.** **Except as contemplated or permitted by this Agreement, or approved in writingby Buyer, and save as otherwise required by applicable Legal Requirements, atall times from and after the date of this Agreement until the Closing Date,Seller will conduct, and shall cause the Companies to conduct, the operationsof the Group in the ordinary course consistent with past

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practices and will usecommercially reasonable efforts to preserve intact the Group’s businessorganization, to keep available the services of the Group’s current officersand employees, to maintain insurance with respect to the Business consistentwith past practice and to preserve the goodwill of and maintain satisfactoryrelationships with those Persons and entities having business relationshipswith the Group. Without limiting the generality of the foregoing, at all timesfrom and after the date of this Agreement until the Closing Date, Seller shallnot, and shall not permit any Company to (without Buyer’s prior writtenconsent, which consent will not be unreasonably withheld or delayed):

(a)                                  sell, dispose of, grant, assign, lease, ortransfer an interest in any Group Asset (including Real Property and GroupIntellectual Property), or subject any Group Asset (including Real Property andGroup Intellectual Property) to any Encumbrance, other than (i) a PermittedEncumbrance, (ii) non-exclusive licenses of Group Intellectual Property in theordinary course of business consistent with past practice, and (iii) inventory in the ordinary course of business consistent with past practice;

(b)                              acquire or purchase assets, properties orrights (other than inventory in the ordinarycourse of business consistentwith past practice) with a book or fair market value in excess of $50,000individually or in the aggregate;

(c)                                  amend or terminate any Material Contract, orenter into any new Contract that would be a Material Contract if it had beeneffect on the date hereof, except for purchase orders in the ordinary course of business consistent with past practice; providedthat without limiting the foregoing, in no event shall the Company enter intoany real property lease;

(d)                                 adopt, or amend or modify in an material respect, anEmployee Benefit Plan, or make any material change with respect to thecompensation or other benefits payable to any Group Employee except, in eachcase, in the ordinary course of business consistent with past practice;

(e)                                  terminate, amend, or fail to renew anymaterial Governmental Authorization;

(f)                                    materially change the nature or operation ofthe Business;

(g)                                 grant, issue, or sell any securities of anyCompany or any option, warrant or other right to acquire any securities of anyCompany;

(h)                                 engage in channel loading (e.g. pre-sellingto customers or distributors) or otherwise accelerate sales or collections ofreceivables (but excluding factoring of receivables), or delay the payment ofpayables (other than in the ordinary course of business consistent with pastpractice);

(i)                                     incur any Liabilities other than in the ordinary course of business consistent with past practice;

(j)                                     initiate, settle or compromise any materialLegal Proceeding or waive or compromise any material right, claim or debt(including account receivables), other than any Pending Claim if such waiver,settlement or compromise does not impose any injunction, order or otherequitable remedy on the Business or any Company;

(k)                                  fire any Group Employee with the title ofmanager or higher, or with a position comparable thereto, or otherwisematerially decrease the workforce of the Business;

(l)                                     hire any Group Employee with the title ofmanager or higher, or with a position comparable thereto, or otherwisematerially increase the workforce of the Business;

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(m)                             incur any Indebtedness except under existingcredit facilities as currently in effect, or guaranty any obligation of anyPerson other than a Company;

(n)                                 make any capital contributions to any Companyif such contributions have the effect of reducing the outstanding Indebtednessof the Group;

(o)                                 take any action that could reasonably beexpected to cause the conditions set forth in Article V not to besatisfied as of the Closing Date; or

(p)                                 authorize, agree to or commit to any of theforegoing.

4.3                                 No Solicitation.  Priorto the Closing or termination of this Agreement, Seller will not, directly orindirectly, and will not authorize, encourage, permit or instruct any of itsRepresentatives or any of the Companies to, directly or indirectly:

(a)                                  solicit, initiate or encourage the making,submission or announcement of, or take any action that could reasonably beexpected to lead to any proposal by a third party (other than Buyer) todirectly or indirectly (i) acquire the Group, the Business or any materialportion thereof through a merger or consolidation or otherwise, (ii) acquire amaterial portion of the Group Assets, (iii) acquire any shares of MagnetekItaly or any Company; or (iv) engage in any other transaction designed toacquire the Group or the Business (each, an “***Acquisition Proposal***”);

(b)                                 participate in any discussions ornegotiations or provide any information regarding any Acquisition Proposal byany Person; or

(c)                                  authorize, approve, adopt, execute, enterinto or become bound by any letter of intent or other Contract or understandingthat is related to or provides for any Acquisition Proposal.

Seller shall, and shall cause its Representatives and the Companies to,immediately discontinue and not resume or otherwise continue any discussionswith respect to any Acquisition Proposal (other than with the Buyer and itsRepresentatives).  Seller agrees topromptly inform Buyer of the nature and terms and offeror of any proposal orinquiry received by Seller or by any Company or any Representative of any ofthem regarding any Acquisition Proposal.

4.4                                 Confidentiality. Subject to any obligation to comply with (a) any Legal Requirement, (b)any rule or regulation of any Governmental Entity, (c) obligations under anylisting agreement with or rules of any security exchange applicable to Buyer(including financial reporting obligations), or (d) any subpoena or other legalprocess to make information available to the Persons entitled thereto, whetheror not the transactions contemplated hereby are consummated, all non-publicinformation obtained by any party about any other party, and all of the termsand conditions of this Agreement, shall be kept in confidence by each party,and each party shall cause its Representatives to hold such informationconfidential.  Each party shall maintainsuch confidentiality to the same degree as it maintains its own confidentialinformation until such time, if any, as any such data or information either is,or becomes, published or a matter of public knowledge; provided, however, that the foregoing willnot apply to any information received by a party from a third party not underany obligation to keep such information confidential, nor to any informationobtained by a party that is generally known to the public, nor to anydisclosure by any party to its Representatives. If this Agreement is terminated for any reason, each party must returnor cause to be returned to the other, or certify as to the destruction of, allwritten data, information, files, records and copies of documents, worksheetsand other materials obtained by that party in connection herewith, except asrequired by applicable Legal Requirements. The provisions of this Section 4.4 shall supersede theobligations of the parties pursuant to the confidentiality agreement, dated

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February 8, 2006, betweenBuyer and Seller (through Stephens Inc., as representative of Seller).  Notwithstanding any provision of this Section4.4, from and after the Closing, neither this Section nor theConfidentiality Agreement shall apply to or restrict in any manner (i) Buyer’suse or disclosure of any such information relating to the Group or the Business(ii) Seller’s use or disclosure of any such information as permitted under Section4.11(b), or (iii) the inclusion of such confidential information in a courtfiling in connection with the prosecution or defense of any Pending Claim solong as such filing is maintained under court-ordered seal.  Except for the foregoing, Seller shall keepstrictly confidential all confidential or proprietary information relating tothe Purchase Assets and the Business, except as otherwise agreed by Buyer or aspermitted in clauses (a), (b), (c) or (d) of this Section4.4 or as necessary to perform its obligations under this Agreement(including under Article VII).

4.5                                 Filings; Consents.

(a)                                  Seller and Buyer will: (i) promptly make andeffect all registrations, filings and submissions required to be made oreffected by them under the HSR Act and other applicable Legal Requirements withrespect to this Agreement and the transactions contemplated under thisAgreement; and (ii) use reasonable efforts to cause to be taken on a timelybasis, all other actions necessary or appropriate for the purpose ofconsummating and effectuating the Acquisition, including the obtaining beforethe Closing of all necessary Approvals from third parties including, withoutlimitation, all Required Consents (notwithstanding that fewer than all RequiredConsents are set forth on Schedule 5.2(d)).  Buyer will reasonably cooperate in efforts toobtain such consents, waivers and approvals.

(b)                                 Seller shall (and shall cause the Companiesto) and Buyer shall (i) promptly provide all information requested by anyGovernmental Entity in connection with this Agreement or the Acquisition, and(ii) promptly take, and cause its Representatives to take, all actions andsteps reasonably necessary to obtain (1) any **merger or other competition orregulatory notification required by law or any Governmental Entity and (2) anyantitrust or similar clearance or approval required by applicable LegalRequirements, if any, on terms reasonably satisfactory to Buyer and Seller.**

(c)                                  Seller and Buyer shall: (i) give the otherparty prompt notice of the commencement of any investigation, action or LegalProceeding by or before any Governmental Entity with respect to this Agreementor the Acquisition, (ii) keep the other party informed as to the status of anysuch investigation, action or Legal Proceeding, and (iii) promptly inform theother party of any communication to or from the Federal Trade Commission, theAntitrust Group of the Department of Justice or any other Governmental Entityregarding this Agreement or the Acquisition. The parties agree to use theirreasonable efforts to defend any Legal Proceedings challenging this Agreementor the consummation of the transactions contemplated hereby, including seekingto have any stay or temporary restraining order entered by any court or otherGovernmental Entity vacated or reversed.

4.6                                 Further Assurances. Subject to the terms and conditions of this Agreement, each of theparties agrees to use commercially reasonable efforts to take, or cause to betaken, all actions and to do, or cause to be done, all things necessary, properor advisable under applicable Legal Requirements to cause the conditionsprecedent set forth in Article V to be satisfied and to consummate andmake effective the Acquisition.  Theparties shall from time to time after the Closing, at the request of the otherand without further consideration, execute and deliver further instruments anddocuments as may be reasonably necessary to effectuate the provisions hereof,including such instruments of transfer and assignment and take such otheraction as Buyer may reasonably require to more effectively transfer and assignto Buyer the Acquired Shares and the Purchase Assets.

4.7                                 Public Disclosure.** **Buyer and Seller shallconsult with each other before issuing, and give each other a reasonableopportunity to review and comment upon, any press release or other public

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statements with respect tothe Acquisition and shall not issue any such press release or make any suchpublic statement prior to such consultation, except as may be required byapplicable Legal Requirements or obligations under any listing agreement withany securities exchange, in which case the disclosing party shall use itscommercially reasonable efforts to limit the disclosure and to provide a copyof the disclosure to the other party in advance of such disclosure and toconfer with such other party with respect thereto.  The parties agree that the initial pressrelease to be issued with respect to the Acquisition will be in a form agreedupon by the parties.

4.8                                 Notification ofCertain Matters; Effect of Notification. Between the date hereof and the Closing, each party (as such, the “***Disclosing Party***”) shall give prompt notice to the other partyof the discovery by the Disclosing Party of (a) any material inaccuracy in anyrepresentation or warranty of the Disclosing Party, (b) any material failure bythe Disclosing Party to comply with any of such party’s covenants contained inthis Agreement, or (c) the occurrence of any event or the existence of anycircumstances that would make satisfaction of any of the conditions to theother party’s obligation to consummate the Closing set forth in Article Vimpossible or unlikely.  Regardless ofthe foregoing and regardless of Section 4.1, all information orknowledge obtained by either party under Article IV is informationalonly and shall not in any manner constitute or cause a waiver by such party ofany of the conditions precedent to the Closing hereunder or an amendment to anyrepresentation, warranty or covenant contained herein, unless they areincorporated into this Agreement by a written amendment signed by the partieshereto or as otherwise provided in Section 4.17.  After the Closing, Seller shall hold in trustfor the Buyer and promptly deliver to Buyer all payments received by Sellerwith respect to the Purchase Assets or the Business, and shall use itscommercially reasonable efforts to promptly deliver to Buyer all mail, faxes,e-mails, deliveries and correspondence received by Seller with respect to thePurchase Assets or the Business.

4.9                                 Tax Returns.

(a)                                  Cooperation as to Tax Matters.  Fromand after the Closing, Seller and Buyer will cooperate with each other inconnection with the preparation and filing of all Tax Returns required to befiled by the Companies and Seller with respect to taxable periods ending on orbefore the Closing Date, and for periods beginning before and ending after theClosing Date (“***Straddle Period***”), and in theconduct of any audit, examination of other proceeding with respect to Taxes (“***Tax Proceedings***”).  Seller shall control any and all TaxProceedings pertaining to the Companies for all periods ending on or before theClosing Date.  With respect to anyStraddle Period, the party that owned (directly or indirectly) the Company forthe greatest number of days during such Straddle Period shall control the TaxProceedings with respect to such Straddle Period.  Buyer shall control all other TaxProceedings.  Buyer may assume controlover any Tax Proceedings that otherwise would be controlled by Seller if Sellerfails, upon written request from Buyer, to (i) affirm its obligation toindemnify Buyer for pre-Closing Taxes arising from such Tax Proceeding, to theextent such Taxes are within the indemnification obligations of Seller pursuantto this Agreement, and (ii) demonstrate to Buyer’s reasonable satisfaction thatit has the wherewithal to satisfy such indemnification obligation (and ifSeller fails to satisfy clause (i) or (ii) and Buyer assumes control over a TaxProceeding, Seller shall reimburse Buyer for its reasonable out-of-pocket costsincurred as a result of assuming such control). The party in control of a Tax Proceeding shall keep the other partyinformed and cooperate with such other party with respect thereto if such otherparty could be adversely affected thereby. Notwithstanding the foregoing, if the results of a Tax Proceedingcontrolled by either party could reasonably be expected to have a materialadverse effect on the other party, then there shall be no settlement or closingor other agreement with respect thereto without the consent of the other party,which consent shall not be unreasonably withheld or delayed.  Furthermore, if the results of a TaxProceeding controlled either party could reasonably be expected to have amaterial adverse effect on the other party, then at the request of the partynot in control of such Tax Proceeding, such party shall be given reasonablenotice of and an opportunity to participate at its expense in any

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meetings or telephone callswith Tax authorities pertaining to such Tax Proceeding, and shall be given areasonable opportunity to review and provide input on material correspondencesubmitted to such Tax authority prior to submission thereof to such Taxauthority.  Each party shall reasonablypromptly provide to the other party notice of any Tax Proceeding with respectto Taxes for which such other party could be liable as well as copies of allwritten correspondence with the Tax authority with respect thereto.  Buyer shallretain in its possession or cause the Companies to retain in their possession,and shall provide Seller reasonable access to (including the right to make copiesof), such Business Records and any other materials that Seller may reasonablyspecify with respect to matters relating to Taxes for any taxable period endingon or prior to or which includes the Closing Date until the expiration of therelevant statute of limitations.  Aftersuch time, Buyer may dispose of such material unless Seller has made a requesttherefor.

(b)                                 Preparation of Tax Returns.  Fromand after the Closing, Buyer shall prepare or cause to be prepared all TaxReturns for the Companies for all periods required to be filed following the ClosingDate, including such Tax Returns for periods ending on or prior to the ClosingDate and for the Straddle Period.  AllTax Returns described in this Section 4.9(b), with respect to periodsending prior to the Closing Date, shall be prepared in a manner consistent withpast practices, unless such past practices are not in accordance withapplicable law.  With respect to each incomeTax Return or other material Tax Return described in Section 4.9(b),Buyer will provide to Seller a draft of such Tax Return at least thirty (30) Business Days prior to the filing date (taking into account extensions of time tofile).  Seller shall be provided anopportunity to review such Tax Returns and all supporting workpapers, schedulesand information, and to propose changes, not later than fifteen (15) BusinessDays prior to the filing date of such Tax Returns.  If Seller fails to propose changes to Buyerwith respect to such Tax Returns before five (5) Business Days prior to filingdate of such Tax Returns, Seller shall be deemed to have approved such TaxReturns. Seller and Buyer shall attemptin good faith mutually to resolve any disagreements regarding Tax Returnsdescribed in Section 4.9(b) prior to the due date for filingthereof.  If the parties are unable toresolve such dispute within such fifteen (15) day period, the dispute shall be resolved by independentaccountants acceptable to the Buyer and Seller, and the filing date shall beextended to the extent any such extension is available under applicablelaw.  The independent accountants shallfinally and conclusively resolve any dispute relating to matters set forth inthis Section 4.9(b) within thirty (30) days of receipt of the submission.  Theindependent accountants shall determine, only with respect to the specificdisagreements submitted in writing by Seller and Buyer, the manner in whichsuch item or items in dispute should be resolved; provided, however,that the dollar amount of any such item or items shall be determined within therange of dollar amounts proposed by Seller and Buyer.  Any finding by the independent accountantsshall be a reasoned award stating the findings of fact and conclusions of law(if any) on which it is based, shall be final and binding upon the partiesabsent manifest error and shall be the sole and exclusive remedy between theparties regarding the disputed items so presented.  The fees and expenses of the independentaccountants shall be shared 50% by Buyer and 50% by Seller, unless theindependent account determines that based on the positions taken by the partiesanother method for allocating its fees and expenses would be more equitable,and the parties shall otherwise bear their own expenses incurred in any disputeresolution pursuant to this Section 4.9(a).

(c)                                  Payment of Taxes.  Seller shall pay allTaxes with respect to any taxable periods ending prior to the Closing Dateunless and to the extent such Taxes appear as an accrual on the Final ClosingBalance Sheet, in which case Buyer shall be responsible entirely for and shallpromptly pay any such Taxes up to the amount of such accrual.  Taxesattributable to Straddle Periods (including any Taxes resulting from a Taxaudit or administrative or court proceeding) shall be apportioned to the periodending on the Closing Date and to the period beginning on the day after theClosing Date by means of a closing of the books and records of the Companies asof the close of business on the Closing Date and, to the extent not susceptibleto such allocation, by apportionment on the basis of elapsed days.  Seller shall pay that portion of suchStraddle Period Taxes attributable to the portion of the Straddle Period endingon the

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Closing Date, other than (i)such Taxes that arise on the Closing Date outside of the ordinary course ofbusiness of the Companies and at the request of Buyer, and (ii) Taxes that appear asan accrual on the Final Closing Balance Sheet, in which case Buyer shall beresponsible entirely for and shall promptly pay any such Taxes up to the amountof such accrual.  Taxes that are theresponsibility of Seller shall be paid by Seller to Buyer no later than three(3) days before the later of (i) the date such Taxes are payable by the Companies,or (ii) written notice from Buyer as to the amount due from Seller, and shallbe paid by Buyer to the applicable Tax authority promptly following receiptfrom Seller except to the extent such Taxes already were paid by Buyer.  Notwithstandingthe foregoing, (i) Seller’s liability for any Taxes with respect to periodsending prior to the Closing Date, and with respect to Taxes for the pre-Closingportion of any Straddle Period, shall be reduced as provided in Section7.3(d); and (ii) Seller shall not be liable for any penalties or interest attributable to(A) the late payment of Taxes if Seller pays such Taxes within the time periodsspecified in this Section 4.9(c), or (B) the late filing of Tax Returnsor late payments of Taxes resulting from a failure of Buyer to follow theprocedures specified in Section 4.9(b) with respect to the related TaxReturn.

(d)                              Amended Tax Returns.  Neither Buyer nor Seller nor any of their respectiveAffiliates or successors shall (or shall cause or permit the Companies to)amend, refile or otherwise modify any Tax Return relating in whole or in partto the Companies with respect to any taxable year or period ending on or beforeor including the Closing Date, without the prior written consent of the Seller,or Buyer, as applicable, not to be unreasonably withheld or delayed.

(e)                                  Refunds or Credits ofTaxes.  Any refunds or credits of Taxes ofthe Companies paid with respect to periods ending before the Closing Date thatare not otherwise accrued as assets on the Final Closing Balance Sheet shall befor the account of Seller and shall be promptly paid to Seller uponreceipt.  Any refunds or credits of Taxesof the Companies paid with respect to any Straddle Period shall be apportionedto the period ending on the Closing Date and to the period beginning on the dayafter the Closing Date by means of a closing of the books and records of theCompanies as of the close of business on the Closing Date, and Buyer willpromptly remit to Seller the portion due to it. Buyer and Seller shall cooperate to effect the purposes of the foregoingprovisions.

(f)                                    Buyer shall have the right to cause theCompanies to make an election under Section 338 with respect to the Companies,provided that no such election shall be made unless (i) Buyer notifies Sellerof such election on or prior to June 30, 2007, and (ii) Buyer makes such anelection for all of the Companies. Except as otherwise required by law, Buyer shall not make or permit tobe made any other election with respect to the Companies that would increasethe liability of Seller for Taxes under Section 4.9(c) above theliability that would have been incurred by Seller but for such election.

(g)                                 In the event of an inconsistency between theprovisions of this Section 4.9 and the provisions of Article VII(other than Sections 7.3(d) and 7.3(e)), this Section 4.9shall control, and in no event shall any indemnification for Taxes under Section4.9(c) be subject to the limitations of Section 7.3(a), Section7.3(b) or Section 7.3(c).  Theobligations of the parties set forth in this Section 4.9 shall remain in effectuntil the expiration of the applicable statute of limitations, including anyextensions of the statute, plus 60 days.

4.10                           Expenses.

(a)                                  Each party will pay the out-of-pocket fees, expensesand disbursements it incurs in connection with the execution, delivery andperformance of this Agreement and the transactions contemplated by theAgreement, except that Seller shall bear all such out-of-pocket fees andexpenses incurred by the Companies before the Closing.  Buyer and Seller shall share equally all ofthe filing fees in connection with any filings required under the HSR Act orother competition or investment laws, if

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any.  Except as aforesaid or in Section 4.10(b),the parties shall pay their own fees and expenses incurred in connection withthe Acquisition.

(b)                                 All sales and use, stamp, documentary,filing, recording, transfer, real estate transfer, stock transfer, grossreceipts, registration, duty, securities, transactions or similar fees or Taxes(together with any interest or penalty, addition to tax or additional amountimposed), if any, due under applicable laws as a result of the purchase andsale of the Purchase Assets and the Acquired Shares (collectively, “***Transfer Taxes***”) shall be borne 50%by Seller and 50% by Buyer, until the aggregate of such Transfer Taxes paid byeach party is $200,000 ($400,000 total), and thereafter shall be borne bySeller.  The parties shall cooperate anduse reasonable efforts to pay any such Taxes, and file any such forms orreports related thereto, in a timely manner. The fees and expenses incurred by Seller and the Companies in connectionwith the completion of the audit contemplated by Section 5.2(j) shall be borne50% by Seller and 50% by Buyer, until the aggregate of such fees and expensespaid by each party is $50,000 ($100,000 total), and thereafter shall be borneby Seller.

4.11                           Pending Litigation.  Fromand after the Closing:

(a)                                  Payments. Any monetary Damages awarded to a Company after the final resolutionof any Pending Claim, after deducting therefrom all Damages reasonably incurredby Buyer, the Companies, or their Affiliates in connection with theprosecution, defense, settlement, or final judgment of the Pending Claims orany counterclaims arising in connection therewith, will be paid over to Sellerpromptly after receipt thereof by Buyer or such Company, and will be consideredRetained Assets for purposes of this Agreement.

(b)                                 Cooperation.  At Seller’s expense (limited,however, to Buyer’s reasonable out-of-pocket expenditures), Buyer shallreasonably cooperate with Seller in Seller’s defense and prosecution of thePending Claims and will provide or make available to Seller, during normalbusiness hours, with reasonable prior notice, in a manner so as not tointerfere with the normal operations of Buyer and the Companies, subject tocustomary confidentiality obligations reasonably satisfactory to Buyer, (i) anyBusiness Records existing as of the Closing to the extent related to thePending Claims, subject to execution and delivery to Buyer by Seller of areasonable and appropriate confidentiality agreement, and (ii) such employeesof the Companies employed by the Business as of the Closing who have materialinformation related to the Pending Claims. At Seller’s expense (limited,however, to Buyer’s reasonable out-of-pocket expenditures), Buyer shall makereasonably available to Seller with reasonable prior notice, in a manner so asnot to interfere with the normal operations of Buyer and the Companies, subjectto customary confidentiality obligations reasonably satisfactory to Buyer, theindividuals set forth on Schedule 4.11(b) (collectively, the “***Key Witnesses***”) totestify as witnesses in the Pending Litigation (with all of Buyer’s reasonableout-of-pocket expenditures in connection therewith to be borne by Seller).  Buyer will have the right to receive fromSeller copies of all pleadings, notices and communications with respect to thePending Claims, shall have the right to participate in, but not control (exceptas otherwise provided herein), settlement negotiations with respect to thePending Claims, and shall otherwise be entitled to receive from Seller suchinformation related to the Pending Claims as it may reasonable request.  Seller shall coordinate all requests under thisSection 4.11(b) only through Buyer’s General Counsel.

4.12                           [Intentionally Omitted]

4.13                           Limitations.

(a)                                  From and after theClosing, Seller agrees not todirectly or indirectly use (or permit, agree to or cause any Person to use) forcommercial purposes the name of any product of the

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Business, or any variationthereof, or any trade name, trade mark, service mark, slogan, logo or likeproperty of the Buyer other than “Magnetek”. Buyer will change the legal nameof each Company as soon as reasonably practical after the Closing so as not tocontain the name “Magnetek”. Except as provided in the preceding sentence, fromand after the Closing, Buyer agrees not to use, and to cause the Companies notto use, the name “Magnetek” and related trade names, trade marks, service marksand corporate names incorporating “Magnetek” and the stylized “Magnetek” logos;provided, however, Buyer may continue to use such names, marksand logos (i) in displays, signage and postings for a period of not more thanfour (4) months after the Closing Date or such shorter time as may be requiredto permit the reasonably prompt removal of such name and logos, but only to theextent such displays, signage or postings exist on the Closing Date; (ii) for aperiod of six (6) months after the Closing Date, to state the Companies’ formeraffiliation with Seller (e.g., “formerly a division of Magnetek, Inc.”); and(iii) to the extent any such trade names, trade marks, service marks or logosappear on stationary, packaging materials, or supplies on hand as of theClosing Date or on order at the time of the Closing, until such is exhausted; provided,however, that in respect of all such items in this clause (iii),such continued use will cease on the first anniversary of the Closing Date.Regardless, the preceding sentence shall not apply with respect to, or limit inany way the disposition of (including by incorporation of components in aProduct) inventory of the Business existing as of the Closing, exceptthat Buyer shall use its commercially reasonable efforts to deplete first anysuch inventory that contains external markings with any such trade names, trademarks, service marks or logos.

(b)                                 For a period of three (3) years after theClosing Date (the “***RestrictionPeriod***”), Seller will not (and will not permit, agree to orcause any Controlled Affiliate to), directly or indirectly, whether for its ownbenefit or as an owner, proprietor, shareholder, partner, employee, officer,director, advisor, creditor, or otherwise as agent for another, engage in anyCompeting Business.  “***Competing Business***” meansdesigning, manufacturing, developing, marketing, promoting, distributing orselling (i) digital or analog power electronic products for use in AC/DC orBoard Mounted DC/DC embedded power supplies, railway applications, streetlightmonitoring systems, or consumer products, including but not limited to washingmachines, heating, ventilating and air-conditioning products (HVAC),refrigerators and high-powered tools, anywhere in the world or (ii) alternative energy powerconversion products under 10 kW anywhere in the world.

(c)                                  Regardless of****Section 4.13(b), Seller may engage in a Competing Businessafter the Closing only if such Competing Business is acquired by Seller afterthe Closing as part of the acquisition of a larger business by Seller if (i)the total revenues from the Competing Business so acquired by Seller in each ofthe two fiscal years immediately prior to the closing of such acquisition areless than 10% of the total revenues attributable to the larger business soacquired in each such fiscal year and (ii) Seller uses reasonable efforts toexit such acquired Competing Business as soon as commercially practicablefollowing the closing of such acquisition of such Competing Business and, in connectiontherewith, in good faith reasonably provides Buyer with the first opportunityto negotiate in good-faith for the purchase of such Competing Business.

(d)                                 To protect Buyer against interference withthe Business, for a period of three (3) years after the Closing Date, Sellerwill not (and will not permit, agree to or cause any Controlled Affiliate to),directly or indirectly, whether for its own benefit or as an owner, proprietor,shareholder, partner, employee, officer, director, advisor, creditor, orotherwise as agent for another, (i) divert or attempt to divert from theBusiness any Competing Business of any customer, supplier, or business partnerof the Business or (ii) solicit the employment or consulting services of anyemployee or consultant of the Business. Nothing herein shall be deemed to prevent Seller from hiring any Personsolely in response to the general announcement, advertisement or solicitationof an employment opportunity that are not specifically targeted to theBusiness, Buyer, or any Company.

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(e)                                  The parties agree that a breach of anycovenant set forth in this Sectionwould cause irreparable harm to Buyer, that Buyer’s remedies at law upon anysuch breach would be inadequate, and that, accordingly, to the extent such aremedy is available under applicable law, upon any such breach a restrainingorder or injunction or both may be issued, in addition to any other rights andremedies which are available to Buyer. The parties agree that the restrictions set forth in this Section are reasonable and appropriatebut that if a court of competent jurisdiction finds this Section more restrictive thanpermitted by applicable Legal Requirements of any jurisdiction in which Buyerseeks enforcement hereof, this Sectionwill be limited to the extent required to permit enforcement under such LegalRequirements. In particular, the parties intend that the covenants contained inthis Section will be construedas a series of separate covenants, including one for each county in each statein each country. Except for geographic coverage, each such separate covenantwill be deemed identical in terms. If, in any judicial proceeding, a courtrefuses to enforce any of the separate covenants deemed included in this Section, then only such unenforceablecovenant will be deemed eliminated from these provisions for the purpose ofthose proceedings to the extent necessary to permit the remaining separatecovenants to be enforced.  In addition,if a court refuses to enforce any of the covenants throughout the full lengthof the Restriction Period, the parties agree that the Restriction Period willbe deemed amended to the longest period (not to exceed three (3) years) that ispermissible.

4.14                           Approvals.  To the extent that the Approval with respectto any Contract or Governmental Authorization included within the PurchaseAssets is required in connection with the Transactions, the parties will usetheir reasonable efforts to obtain such Approval between the date hereof andthe Closing, and if any such Approval is not obtained before the Closing (butwithout limiting Buyer’s rights under Article V), (a) the parties hereto acknowledge and agree thatat the Closing Seller will not assign to Buyer any such Contract orGovernmental Authorization that by its terms requires, before such assignment,the Approval of any third Person, unless such Approval is obtained, (b) Sellerwill cooperate with Buyer to maintain each such Contract or GovernmentalAuthorization in full force and effect for the benefit of Buyer until such Approvalis obtained, and (c) Seller will use reasonable efforts to obtain each suchApproval as promptly as practicable and will assign such Contract orGovernmental Authorization to Buyer as soon as such Approval is obtained.

4.15                           Notices and Cooperation.  During the period from the date of thisAgreement through the Closing Date, each partywill (a) promptly provide the other parties with copies of all correspondenceand inquiries to and from, and all filings made with, any Governmental Entity(including any Governmental Entity with responsibility, oversight or regulatoryauthority with respect to Environmental Laws) or any union and to review anyand all filings or written correspondence before they are made or sent, (b)keep the other party apprised as to all discussions or negotiations with anyGovernmental Entity and with any union and permit such other party toparticipate therein and (c) reasonably cooperate with such other party withrespect to the foregoing.

4.16                           Accounts Receivable.  From and after the Closing, Seller agrees toforward to Buyer, within three Business Days after receipt thereof, any and allproceeds from accounts receivable that are received by Seller after the ClosingDate.  Notwithstanding the foregoing, if,after the Closing Date, Seller receives any payment from any Person who at thetime of such payment has outstanding accounts payable to Seller, on the onehand (“***Seller Accounts Receivable***”)and to Buyer, the Business or a Company, on the other hand (“***Buyer Accounts Receivable***”), and thepayment (a) does not indicate whether it is in respect of Seller AccountsReceivable or Buyer Accounts Receivable or (b) indicates that it is in paymentof both Seller Accounts Receivable and Buyer Accounts Receivable withoutspecifying the portion to be allocated to each, Seller will first contact thepayor to determine the payor’s intended allocation of the payment and suchallocation will govern, and if the payor does not provide the intendedallocation, then Seller and Buyer shall consult with one another to determinethe proper allocation of such payment; and, if they are unable to reachagreement on the proper allocation, such payment shall be 

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applied so as to retire Seller Accounts Receivable andBuyer Accounts Receivable in chronological order based upon the period of timesuch accounts receivable have existed.

4.17                           DisclosureSchedule Updates.** **Sellershall have the right to deliver to the Buyer, at any time prior to the 3rd Business Day prior to the Closing Date,updated Disclosure Schedules that are revised only (i) to reflect any eventthat occurs after the date hereof outside of the reasonable control of theSeller or (ii) to reflect the listing of additional Contracts on Schedule 2.13and that in each case causes Section 2.13(a) to be untrue or inaccurate as ofthe date hereof.  If Seller updates theDisclosure Schedule pursuant to clause (i) of the immediately precedingsentence, Buyer will have the right, in its sole discretion, to terminate thisAgreement at any time prior to the Closing if the condition set forth in Section5.2(a) would not be satisfied if Seller had not made any updates to theDisclosure Schedule.  If Seller updatesthe Disclosure Schedule pursuant to clause (ii) of the first sentence ofthis Section 4.17, Buyer will have the right, in its reasonablediscretion, to terminate this Agreement if the Buyer determines in good faiththat such disclosure adversely affects the Business in a material manner.  If Buyer elects to close the transactionscontemplated hereby notwithstanding such updates to the Disclosure Schedule,absent fraud by Seller or any of its Representatives, Buyer shall not have anyclaim under Section 7.2(a)(i) as a result of such updates to theDisclosure Schedule except for abreach of the representation and warranty as so revised.

4.18                           Delivery ofMonthly Financial Statements. Sellershall deliver to Buyer, within 21 calendar days of the end of each month duringthe period between the date hereof and Closing, unaudited financial statements(including balance sheet and statements of income and cash flows) for suchmonth in a form consistent with the Financial Statements, which monthlyfinancial statements shall be prepared in accordance with GAAP applied on aconsistent basis with past practice and presenting fairly the financialposition and the results of operations of the Group for the month then ended.

4.19                           Employees.

(a)                                  At the Closing, Buyer shall offer employment tocommence as of the Closing Date to all employees of Seller primarily employedin the Business as of the Closing at the same initial base salaries and wages(but excluding any bonus and incentive programs) as those in effect on orimmediately prior to the Closing Date and shall offer such employees the sameinitial benefits as Buyer offers its own similarly-situated employees.  Sellerwill (i) use commercially reasonable efforts to assist Buyer in hiring suchemployees, (ii) consult with Buyer on all material oral or writtencommunications or meetings regarding future employment with Buyer of any suchemployees, (iii) release from employment, effective no later than the ClosingDate, each such employee who accepts such offer (each a “***TransferredEmployee***”) and shall not enforce against any such employee anynon-compete or similar contractual obligations or otherwise assert with respectto any such employee claims that would otherwise prohibit, restrict or placeconditions on such employee’s acceptance of the Buyer’s offer or thereaftersuch employee’s continuing employment by the Buyer, and (iv) pay to suchTransferred Employees on the date of such termination all salaries, wages,accrued vacation and other compensation required to be paid by applicable LegalRequirements. Regardless of anything else contained in this Agreement, theparties do not intend to, and no provision of this Agreement shall, create orconfer any rights or obligations except as between the parties, and no past,present or future employee or consultant of Seller or Buyer will be treated asthird-party beneficiaries of this Agreement.

(b)                                 With respect to participation in Buyer’s401(k) plan and with respect to the rate of accrual under Buyer’s vacationpolicy, Buyer shall grant all Transferred Employees from and after the ClosingDate credit for all service with Seller and its Affiliates and their respectivepredecessors prior to the Closing Date for all purposes for which such servicewas recognized by Seller and its Affiliates.

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(c)                                  Buyer shall cause its 401(k) plan to acceptdirect rollovers of cash from Seller’s 401(k) plans for those TransferredEmployees who elect such direct rollovers.

4.20                           Intellectual Property Licenses.  Prior to the Closing, Seller shall usecommercially reasonable efforts to obtain licenses and pay all license feesowed to any third party with respect to the use by the Group on or before theClosing of any software or other Intellectual Property Rights of such thirdparty without a fully-paid license therefor. After the Closing, Buyer andSeller shall cooperate to obtain, for the benefit of the Business, licensesfrom third parties with respect to all software or other Intellectual PropertyRights used by the Group on or before the Closing without a fully-paid licensetherefor; provided that Buyer shall control the negotiations withrespect thereto and Seller shall pay all of the license fees and relatedexpenses (including interest and penalties with respect thereto, if any) tosuch third parties in connection therewith; provided further that if any suchlicense is time-bound, Seller shall only be obligated to pay the portion of thelicense fee (including interest and penalties with respect thereto, if any)applicable to the period of time before the Closing. Seller shall indemnify andhold harmless the Buyer Indemnitees from (a) the failure to make any suchpayment described in the preceding sentence and (b) any and all Damagesresulting from third party claims related to the use before the Closing by theGroup of software or other Intellectual Property Rights without a fully-paidlicense therefor. In connection with Seller’s obligation under this Section4.20, at Closing, Buyer will subtract from the Purchase Price and depositin escrow, pursuant to an escrow agreement reasonably acceptable to Buyer,Seller and the Escrow Agent to be entered into at the Closing (the “***Escrow Agreement***”),by wire transfer of immediately available funds to an account established atthe escrow agent identified in the Escrow Agreement (the “***Escrow Agent”***), anamount equal to $500,000 (the “***Escrow Amount***”). Any amounts owed to the Buyer Indemnitees under this Section 4.20shall first be satisfied out of the escrow account to the extent of the EscrowAmount and thereafter by Seller. Any portion of the Escrow Amount remaining inthe escrow account on the twelve-month anniversary of the Closing shall be paidto the Seller; provided, however, that if any claims are thenpending under this Section 4.20, then an amount equal to the aggregatedollar amount of such claims shall remain in the escrow account pendingresolution of such claims.

# **ARTICLE VCLOSING CONDITIONS**

5.1                                 Conditions to Each Party’s Obligations.  Eachparty’s obligation to consummate the Acquisition is subject to the satisfactionor waiver at or prior to the Closing, of each of the following conditions:

(a)                                  HSR Act and OtherRegulatory Compliance.** **To the extent that a filing or Approval isrequired under the HSR Act or the antitrust or competition laws of anotherjurisdiction outside the United States of America, all waiting periods (and any extensions thereof)applicable to the Acquisition under the HSR Act, or the antitrust orcompetition laws of another jurisdiction outside of the United States ofAmerica, shall have expired or early termination of such waiting periods shallhave been granted by the Federal Trade Commission or the Antitrust Group of theDepartment of Justice, or other competent authorities of another jurisdictionoutside of the United States of America, and all such Approvals shall have beengranted, received or satisfied, in each case without condition or requirementfor the disposition or divestiture of any product or other asset of Seller orBuyer.

(b)                                 No Injunctions orRestraints.  No temporary restraining order, preliminary or permanent injunction(nor any equivalent under applicable foreign Legal Requirements) or other orderissued by any Governmental Entity or other material legal restraint orprohibition issued or promulgated by a Governmental Entity preventing theconsummation of the Acquisition shall be in effect or shall be

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threatened, and there shallnot be any Legal Requirement enacted or deemed applicable by such aGovernmental Authority to the Acquisition that makes consummation of suchtransaction illegal.

5.2                                 Conditions to Buyer’s Obligations.  Theobligation of Buyer to consummate the Acquisition and complete the Closing aresubject to the satisfaction or waiver by Buyer in its sole discretion, at orprior to the Closing, of each of the following conditions:

(a)                                  Accuracy ofRepresentations and Warranties; Closing Certificate.** **Each of the representationsand warranties of Seller set forth in this Agreement (i) that are not qualifiedby materiality must be true and correct in all material respects as of theClosing Date, and (ii) that are qualified by materiality must be true and correctin all respects as of the Closing Date.

(b)                                 Performance.  Allof the obligations, covenants and agreements of Seller to be performed underthis Agreement at or prior to the Closing shall have been complied with andperformed in all material respects as of the Closing Date.

(c)                                  CorporateCertificate.** **Seller shall have delivered to Buyer an attestation certifying that theconditions set forth in clauses (a), (b), (d), (e) and (f) of this Section5.2 have been satisfied at the Closing, certified in each case as of theClosing Date by the President and Chief Financial Officer of Seller as beingcorrect and complete, and attaching thereto copies of all resolutions approvedby Seller’s Board of Directors related to the transactions contemplated hereby(or an attestation by such individuals regarding the substance of same).

(d)                                 Consents.  Sellershall have received and furnished to Buyer all Required Consents listed on Schedule5.2(d) in form and substance reasonably acceptable to Buyer, and each such Required Consent will be in effect as of the Closing Date.

(e)                                  Material Adverse Effect. There shall not have been a Material Adverse Effect since the date ofthis Agreement.

(f)                                    Encumbrances. Provision reasonably satisfactory to Buyer shall have been made for the releaseas of the Closing Date of any and all Encumbrances on any and all of thePurchase Assets, Owned Properties and Acquired Shares (except, in the case ofPurchase Assets and Owned Properties, for Encumbrances described in clauses(i) — (iv) of the definition of Permitted Encumbrances and, in thecase of Owned Properties, for the Encumbrances identified as remainingpost-Closing on Schedule 2.11(a)).

(g)                                 Shareholders Meetings of Magnetek Italy. Seller shall have caused to have occurredas of the Closing Date (i) an extraordinary shareholders’ meeting of MagnetekItaly to resolve to modify the current by-laws of Magnetek Italy in the form of**Exhibit F** hereto or as otherwiserequested in writing by Buyer and (ii) an ordinary shareholders’ meeting ofMagnetek Italy to resolve upon the appointment as members of the board ofdirector of Magnetek Italy the individuals set forth on Schedule 5.2(g)(i),as members of the panel of statutory auditors of Magnetek Italy the individualsset forth on Schedule 5.2(g)(ii), and as statutory auditing company (“*società di revisione addetta al controllo contabile*”) ofMagnetek Italy, Deloitte & Touche or an Affiliate thereof designated byBuyer, or in each case as otherwise requested in writing by Buyer.

(h)                                 Audited Financial Statements.  By no later than five (5) Business Days prior to theClosing Date, the Buyer shall have received the combined audited balance sheetof the Group for each of the fiscal years ended July 3, 2005 and July 2, 2006,together with the combined audited related statements of income and of cashflows for each of the three fiscal years ended June 27, 2004, July 3,

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2005 and July 2, 2006, including notes thereto,together with the report thereon of Ernst & Young LLP, independentcertified public accountants of the Seller.

(i)                                     Withdrawal from Consortium.  As of the Closing, Seller and each Companyshall have withdrawn its membership with the PMBus consortium without anypost-Closing liability on behalf of Buyer or any Company, and Seller shall haveprovided Buyer evidence thereof.

(j)                                     Transitional Agreement. Seller shall have executed and delivered to Buyer a transition servicesagreement in substantially the form as set forth in **Exhibit I**attached hereto.

5.3                                 Conditions to Obligations of Seller.  Theobligation of Seller to consummate the Acquisition and complete the Closing issubject to the satisfaction or waiver by Seller in its sole discretion, at orprior to the Closing, of the following conditions:

(a)                                  Closing Certificate.  Each of the representations andwarranties of Buyer set forth in this Agreement shall be true and correct inall material respects as of the Closing Date. At the Closing, Buyer shall have delivered to Seller an attestationcertifying that the conditions set forth in this clause (a) and in clause(b) of this Section 5.3 have been satisfied at the Closing,certified in each case as of the Closing Date by an officer of Buyer as beingcorrect and complete.

(b)                                 Performance ofCovenants.  All of the obligations, covenants and agreements of Buyer to beperformed under this Agreement at or prior to the Closing shall have beencomplied with and performed in all material respects.

(c)                                  Alternative Energy Agreement. Buyer shall have executed and delivered to Seller the Alternative EnergyAgreement in substantially the form as set forth in **Exhibit G**attached hereto.

(d)                                 Supply Agreement. Buyer shall have executed and delivered to Seller the Supply Agreementin substantially the form as set forth in **Exhibit H**.

(e)                                  Transitional Agreement. Buyer shall have executed and delivered to Seller a transition servicesagreement in substantially the form as set forth in **Exhibit I**attached hereto.

# **ARTICLE VITERMINATION**

6.1                                 Termination. ** **This Agreement may be terminated prior to the Closing Date:

(a)                                  by mutual written consent of Buyer andSeller; or

(b)                                 by either Buyer or Seller, if the Acquisitionhas not been consummated by December 31, 2006 (the “***Termination Date***”),provided that the right so to terminate shall not be available to either partyif it is then in material breach of this Agreement;

(c)                               by Buyer or Seller, if a final,non-appealable injunction, restraining order or decree of any nature of anyGovernmental Authority of competent jurisdiction is issued that prohibits theconsummation of the Acquisition; provided,however, that the partyseeking to terminate this Agreement pursuant to this clause (c) shallhave used its commercially reasonable efforts to have such injunction, order ordecree vacated or denied; or

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(d)                                 by either Buyer or Seller by written noticeto the other party if there has been a material misrepresentation or materialbreach of a covenant or agreement contained in this Agreement on the part ofthe other and such breach, if curable, has not been cured within 30 days ofsuch notice and the terminating party is not on the date of termination inmaterial breach of any material provision of this Agreement.

6.2                                 Effect ofTermination.** **If this Agreement is terminated as provided in Section 6.1, thisAgreement will be of no further force or effect; provided, however*,*that:

(a)                                  Sections 4.4 (Confidentiality) and 4.7 (PublicDisclosure), this Section 6.2 (Effect of Termination) and ArticleVIII (Miscellaneous) will survive the termination of this Agreement andremain in full force and effect, and

(b)                                 the termination of this Agreement will notrelieve any party from any liability for any breach of this Agreement; provided, however, in the event that thisAgreement is terminated prior to Closing, no party will have any liability toanother party under Article VII of this Agreement or otherwise as aresult of any breach or inaccuracy of any representation or warranty containedin this Agreement, other than in the case of fraud.

6.3                                 Procedure Upon Termination.  Subjectto the provisions of Section 6.2 above, in the event of the terminationand abandonment of this Agreement, written notice thereof shall promptly begiven by the terminating party to the other party, and this Agreement shallterminate and the transactions contemplated hereby shall be abandoned withoutfurther action by any of the parties hereto.

# **ARTICLE VII**

# **INDEMNIFICATION**

7.1                                 Survival of Representations, Warranties andCovenants. Subject to Section7.3(c):

(a)                                  Representations and Warranties of Seller. The representations and warranties ofSeller in Article II will survive the Closing and will terminate uponthe 18-month anniversary of the Closing Date, except for (i) therepresentations and warranties in Sections 2.3(d), 2.4, 2.6(a),and 2.11(g), each of which shall have no expiration, (ii) therepresentations and warranties in Sections 2.16, 2.18, 2.21,and 2.25, each of which will survive until the expiration of theapplicable statute of limitations with respect to the subject matter thereof,and (iii) the representations and warranties in Section 2.17 to theextent the underlying claim arising from a breach thereof is for Taxes, each ofwhich will survive until the expiration of the applicable statute oflimitations with respect to the subject matter thereof.

(b)                                 Buyer’s Representations and Warranties.  Therepresentations and warranties of Buyer in Article III will survivethe Closing and will terminate upon the 18-month anniversary of the ClosingDate, except for the representations and warranties contained in Section 3.2,which shall have no expiration, and the representations and warrantiescontained in Section 3.4, which will survive until the expiration of theapplicable statute of limitations with respect to the subject matter thereof.

(c)                                  Covenants.  All covenants of the partieswill survive according to their respective terms.

(d)                                 Certain Definitions. Subject to reduction in accordance with Section 7.10 below, theterm “***Damages***”means any and all Liabilities, losses, claims, expenses, costs, fines, fees,penalties, settlement payments, obligations or injuries, including thoseresulting from claims, actions, suits, 

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demands, assessments,investigations, judgments, penalties, fines, awards, arbitrations or otherproceedings, together with reasonable costs and expenses, including thereasonable attorneys’ fees and expenses (including those incurred in theinvestigation, prosecution and defense of third party Claims).  The term “***Claim***”means a claim for indemnification for Damages brought by a Buyer Indemnitee orSeller Indemnitee under Article VII. The term “***BuyerIndemnitees***” means Buyer and any present or future officer,director, employee, Representative, Affiliate, subsidiary, successor orpermitted assign of Buyer.  The term “***Seller Indemnitees***”means Seller, and any present or future officer, director, Representative,employee, successor or permitted assign of Seller.  “***Indemnified Party***” means any Buyer Indemniteeor Seller Indemnitee, as applicable.  “***Indemnifying Party***”means Seller, with respect to any Claim brought by a Buyer Indemnitee, orBuyer, with respect to any Claim brought by a Seller Indemnitee.

7.2                                 Indemnification by Seller.

(a)                                  Subject to the provisions of Section 7.3below, Seller will indemnify, defend and hold harmless the Buyer Indemniteesfrom and against any and all Damages directly or indirectly incurred, paid oraccrued in connection with or resulting from or arising out of:

(i)                                     the breach or inaccuracy of anyrepresentation or warranty of Seller contained in Article II of thisAgreement;

(ii)                                  the breach or violation of any covenant orother obligation of Seller under this Agreement; and

(iii)                               each Indemnified Liability.

(b)                              Notwithstanding anything to the contrarycontained in this Section 7.2 or elsewhere in this Agreement, Sellershall not be obligated under this Agreement to indemnify, defend and holdharmless any Buyer Indemnitee against any Damage resulting from a breach orinaccuracy of any representation or warranty, covenant or agreement to theextent an adjustment reducing the Purchase Price is made in respect thereof inaccordance with the provisions of Section 1.6 or Section 1.7 ofthis Agreement.

7.3                                 Limitations on Seller’s IndemnificationLiability.

(a)                                  Threshold for Bringing Claims Against Seller.  If aBuyer Indemnitee seeks indemnification for matters identified in Section7.2(a)(i), Seller will not have any obligation to indemnify the BuyerIndemnitee unless and until the aggregate Damages for all Claims giving rise toDamages under Section 7.2(a)(i) exceeds $500,000 (the “***Indemnification******Threshold****”*)at which time (and subject to the limitation set forth in Section 7.3(b)below) Seller must indemnify the Buyer Indemnitee for the full amount ofDamages incurred to date, including the Damages included in determining thatthe Indemnification Threshold has been met. The foregoing threshold shall not apply to any Claim for Damages arisingfrom fraud by Seller or its Representatives.

(b)                                 Limitation of Aggregate Amount of SellerLiability.  Except in the case of fraud by Seller or itsRepresentatives, in no event will the total cumulative amount of Damages forwhich Seller may be liable to Buyer Indemnitees under Section 7.2(a)(i)exceed $5,744,375 (the “***Cap***”),except in respect of Claims for the breach by Seller of the representations andwarranties described in Section 7.1(a)(i) and (ii) and (iii)(collectively, the “***Fundamental Representations***”).Regardless of the foregoing, Damages owing under Section 7.2(a)(ii), 7.2(a)(iii)and under Section 7.2(a)(i) with respect to the FundamentalRepresentations shall not count towards the Cap.

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(c)                                  Time Limit for Claims against Seller. Except in the case of fraud by Seller or its Representatives, no Claimsfor Damages arising from or relating to a breach of the representations andwarranties of Seller referred to in Section 7.1 of this Agreement may bebrought at any time after the expiration of such representations andwarranties. Regardless of the foregoing, any Claim for Damages that is broughtat any time prior to the expiration of the applicable expiration date set forthin Section 7.1 will not expire on such expiration date and instead maybe prosecuted by the Buyer Indemnitee until its conclusion (which may be aftersuch expiration date).

(d)                                 No Liability for Post-Closing Taxes. Notwithstanding anything in this Article VII or elsewhere in thisAgreement to the contrary, Seller shall not be liable for and shall notindemnify Buyer for any Taxes of or relating to the Companies for taxableperiods ending after the Closing Date, other than (i) for Seller’s obligationwith respect to the pre-Closing portion of a Straddle Period as and to theextent provided in Section 4.9(c), (ii) any Tax liability incurred byany Buyer Indemnitee resulting from receipt of any indemnification paymenthereunder that is not treated as an adjustment to Purchase Price, net of theTax benefit of the underlying claim giving rise to such payment and only to theextent such liability exceeds the additional Tax liability that would haveresulted from treating the indemnification payment as a reduction in PurchasePrice and only to the extent Buyer and its Affiliates complied with Section7.8, and (iii) as provided in Section 7.3(e).

(e)                                  Credit for Tax Attributes. Subject to Section 7.3(f), the amount of Taxes for which Selleris responsible with respect to any taxable period ending prior to the ClosingDate, and with respect to any pre-Closing portion of a Straddle Period, shallbe determined by providing Seller with the benefit of any net operating lossesor other deferred tax assets of the Companies as of the Closing Date asdetermined as of the Closing Date prior to any adjustments resulting thereto byany taxing authority following the Closing Date (collectively, “Deferred TaxAssets”), without any reduction for income accruing or other eventsoccurring following the Closing.  By wayof example and not limitation, if there is an adjustment increasing the taxableincome of Magnetek Italy for a pre-Closing period and a net operating lossarising in a pre-Closing period would have been available to offset such incomebut for taxable income earned in a post-Closing period, Seller’s obligation forsuch pre-Closing Taxes shall be determined as if such net operating loss werenot reduced by such post-Closing income and were fully available to offset suchincome and, to the extent of such offset, Seller’s obligation shall be reduced,except to the extent provided in the last sentence in this Section 7.3(e)and in Section 7.3(f).  Inaddition, if there is an adjustment increasing the taxable income of MagnetekItaly for a pre-Closing period but such adjustment has the effect of reducing apreviously reported net operating loss and does not giving rise to a taxliability with respect to a pre-Closing period, Seller shall not be liable forthe utilization of such net operating loss, except to the extent provided inthe last sentence in this Section 7.3(e) and in Section 7.3(f).  Notwithstanding the foregoing, if Seller’sindemnity obligation was reduced by reason of this Section 7.3(e) on theassumption that a Deferred Tax Asset was available, and it later is determinedby a final decision that such Deferred Tax Asset was not available, and ifBuyer complied in all material respects with the provisions of Section 4.9that pertain to such Deferred Tax Asset, then Seller shall be required to payto Buyer the amount of any indemnity payment that would have been payable bySeller had such final determination occurred prior to the time the initialindemnity claim was resolved.  Forpurposes of the preceding sentence, “final determination” shall mean a TaxProceeding concluded, with no further right to appeal to a Tax authority or acourt of competent jurisdiction, in accordance with Section 4.9(a)hereof.

(f)                                    Limitation on Credit for Tax Attributes. Notwithstanding Section 7.3(d) or Section 7.3(e), themaximum benefit of the Deferred Tax Asset (which Deferred Tax Asset, in thecase of a net operating or other loss or deduction, shall equal the amount ofsuch loss or deduction multiplied by the tax rate applicable in thejurisdiction in which such loss is available as a tax benefit) that may be usedto offset Seller’s indemnity obligations hereunder for Taxes attributable toperiods prior to the Closing Date 

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as provided in Section7.3(e) shall be 3 Million Euros.  If,as a result of an audit or other action by a taxing authority, an adjustment totaxable income of the Companies during any Tax period ending prior to theClosing Date, or the Straddle Period prior to the Closing Date, results in theutilization of more than 3 Million Euros of Deferred Tax Assets againstliabilities for Taxes arising in periods prior to the Closing (the excess ofsuch Deferred Tax Assets utilized to offset such pre-Closing Taxes in excess of3 Million Euros, the “Excess Utilization”), then Seller shall pay (orreimburse Buyer for) any Taxes paid or accrued by Buyer or the Companies thatthe Buyer or the Companies would not have paid or accrued had the ExcessUtilization not occurred.  By way of clarification,the parties agree that the utilization of Deferred Tax Assets to offset incomein periods following the Closing Date shall not be taken into account indetermining the Excess Utilization.  Inno event shall Seller’s liability under this Article VII be increased by reasonof this Section 7.3(f) in an amount greater than the Excess Utilization,and there shall be no duplicate recovery by Buyer of amounts described in thepenultimate sentence of Section 7.3(e) and amounts described in this Section7.3(f).

7.4                                 Indemnification by Buyer.

(a)                                  Subject to the provisions of this Section7.4 below, Buyer will indemnify, defend and hold harmless the SellerIndemnitees from and against any and all Damages directly or indirectlyincurred, paid or accrued in connection with or resulting from or arising outof:

(i)                                     the breach or inaccuracy of anyrepresentation or warranty of Buyer contained in Article III of thisAgreement;

(ii)                                  the breach or violation of any covenant orother obligation of Buyer under this Agreement; and

(iii)                               each Assumed Liability, except to the extentthat the Buyer Indemnitees are entitled to indemnification pursuant to Section7.2 by virtue of the circumstances relating to or giving rise to the matterresulting in such Damages.

(b)                                 Time Limit for Claims against Buyer. Except in the case of fraud by Buyer or its Representatives, no Claimsfor Damages arising from or relating to a breach of the representations andwarranties of Buyer referred to in Section 7.1 of this Agreement may bebrought at any time after the expiration of such representations andwarranties; provided, however, that any Claim for Damages that isbrought at any time prior to the expiration of the applicable expiration dateset forth in Section 7.1 will not expire on such expiration date andinstead may be prosecuted by the Seller Indemnitee until its conclusion (whichmay be after such expiration date).

(c)                               Threshold for Bringing Claims Against Buyer.  If aSeller Indemnitee seeks indemnification for matters identified in Section7.4(a)(i), Buyer will not have any obligation to indemnify the SellerIndemnitee unless and until the aggregate Damages for all Claims giving rise toDamages under Section 7.4(a)(i) exceeds $500,000 (the “***Buyer Indemnification******Threshold***’*”*)at which time (and subject to the limitation set forth in Section 7.4(d)below) Buyer must indemnify the Seller Indemnitee for the full amount ofDamages incurred to date, including the Damages included in determining thatthe Buyer Indemnification Threshold has been met.  The foregoing threshold shall not apply toany Claim for Damages arising from fraud by Buyer or its Representatives.

(d)                              Limitation of Aggregate Amount of BuyerLiability.  Except in the case of fraud by Buyer or itsRepresentatives, in no event will the total cumulative amount of Damages forwhich Buyer may be liable to Seller Indemnitees under Section 7.4(a)(i)exceed $5,744,375 (the “***Buyer Cap***”),except in respect of Claims for the breach by Buyer of the representations andwarranties described in 

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Section 3.2 or Section 3.4. Regardless of theforegoing, Damages owing under Section 7.4(a)(ii), 7.4(a)(iii)and under Section 7.4(a)(i) with respect to the representations andwarranties described in Section 3.2 or Section 3.4 shall notcount towards the Buyer Cap.

7.5                                 Notice of Claim.

(a)                                  Notice Requirement. Promptly after becoming aware of the existence of a potential Claim, theIndemnified Party will give to the Indemnifying Party a written notice of theClaim executed by an officer of such Indemnified Party (a “***Noticeof Claim***”).  No delay onthe part of the Indemnified Party in giving a Notice of Claim will relieve theIndemnifying Party from any of its obligations unless and only to the extentthat the Indemnifying Party is materially prejudiced by the delay.  The written assertion of a claim, demand,suit, action, arbitration, investigation, inquiry or proceeding brought by athird party against an Indemnified Party that is based upon, or includes assertionsrelating to any item listed in Section 7.2 or Section 7.4, asapplicable, is referred to in this Agreement as a “***ThirdParty Claim****.*”

(b)                                 Contents of Notice of Claim.  EachNotice of Claim will contain (i) the good faith estimate (if an estimate canreasonably be made) of the Indemnified Party of the reasonably foreseeableamount of the alleged Damages arising from the Claim, and (ii) a briefdescription of the material facts, circumstances or events giving rise to thealleged Damages based on information reasonably available to the IndemnifiedParty, and copies of any formal demand or complaint.

7.6                                 Defense of Third Party Claims.  TheIndemnifying Party will have 14 days after receipt of a Notice of Claim relatedto a Third Party Claim to notify the Indemnified Party whether or not it desiresto defend the Indemnified Party (with counsel reasonably acceptable to theIndemnified Party) against such Third-Party Claim.  If the Indemnifying Party so elects to defendsuch claim, the Indemnifying Party shall not be liable to the Indemnified Partyfor legal expenses subsequently incurred by the Indemnified Party in connectionwith the defense thereof unless (a) the Indemnifying Party does not promptlydefend or settle any such claims, in which case the Indemnified Party will havethe right to control any defense or settlement, at the expense of theIndemnifying Party, or (b) a conflict of interest prevents the counselappointed by the Indemnifying Party from representing the IndemnifiedParty.  The Indemnifying Party shallobtain the prior written consent of the Indemnified Party (which consent shallnot be unreasonably withheld or delayed) before entering into any settlement ofa claim or ceasing to defend such claim if, pursuant to or as a result of suchsettlement or cessation, injunctive or other equitable relief will be imposedagainst the Indemnified Party or if such settlement does not expressly andunconditionally release the Indemnified Party from all liabilities andobligations with respect to such claim, except for payments that would be requiredto be paid by the Indemnifying Party hereunder. The Indemnified Party will at all times also have the right toparticipate in, but not control (except as otherwise provided herein), thedefense at its own expense.  The partieswill cooperate in the defense of all Third-Party Claims that may give rise toIndemnifiable Claims hereunder.  Inconnection with the defense of any claim, each party will make available to theparty controlling such defense any books, records or other documents within itscontrol that are reasonably requested in the course of such defense duringnormal business hours and in such a manner so as not to interfere with theIndemnified Party’s operations.

7.7                                 Claims Between theParties.  If the Indemnified Party has a claim againstthe Indemnifying Party that does not involve a Third Party Claim, then theterms of Section 8.4 will apply.

7.8                                 Purchase Price Adjustment.  Anypayment made by Seller under this Article VII will be paid to Buyer andtreated by the parties and their Affiliates as a reduction of the PurchasePrice.

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7.9                                 Exclusive Remedy; Limitation on Damages. From and after the Closing, other than asprovided in Section 1.7, Section 8.12 and except for fraud by theother party or its Representatives, this Article VII shall be the soleand exclusive remedy for any claim or controversy arising out of or relating to(i) any breach or inaccuracy of any representation or warranty made by Buyer orSeller in connection with the Acquisition (including, without limitation, anyclaims based upon any violation of state or federal securities laws inconnection with the sale of the Acquired Shares to Buyer), or (ii) any breachor violation of any covenant (including all covenants for indemnification,wherever set forth in this Agreement) or other obligation of Buyer or Seller or(iii) any claim of Buyer or Seller arising under this Agreement.  Without limiting the foregoing, the partiesacknowledge and agree that no Buyer Indemnitee or Seller Indemnitee shall beentitled to indemnification for punitive, special, or consequential Damages,including, but not limited to, loss of revenue or income, cost of capital,diminution in value or loss of business reputation or opportunity (other thanany of the foregoing representing Damages payable by an Indemnified Partypursuant to a Third Party Claim).  Fromand after the Closing, other than as provided in Section 1.7, this ArticleVII, Section 8.12 and except for fraud by the other party or itsRepresentatives, Buyer and Seller, on their own behalf and on behalf of allBuyer Indemnitees and Seller Indemnitees, respectively, waive any and alladditional rights they may have by operation of applicable law arising from theAcquisition including, without limitation, any such rights in respect of CERCLAand other Environmental Law, under Italian law in respect of affiliatedPersons, and under any other law which may give rise to any recourse againstany director, officer, shareholder, employee or agent of the other party.

7.10                           Damages Net of Insurance; Taxes.

(a)                                  The amount of any Damages for whichindemnification is provided under this Article VII with respect to aparticular Claim for Damages shall be net of (i) any amounts actually recoveredby the Person entitled to indemnification under insurance policies (but withoutany obligation of such Person to actually seek recovery under such insurancepolicy) with respect to such Claim and (ii) the amount of any reduction orrefund of Taxes actually realized by the Indemnified Party during or prior tothe year an indemnity payment is paid with respect to such Claim.

(b)                                 If any party makes any payment under this ArticleVII in respect of any Claim for Damages, such Indemnifying Party shall besubrogated, to the extent of such payment and to the extent that such subrogationis permitted by applicable law and any applicable Contract related to theclaim, to the rights of indemnification (but not the rights of insurance) ofsuch Indemnified Party against any applicable third party (other than aprovider of insurance) with respect to such Damages.

7.11                           Environmental Indemnity Procedures.

(a)                                  Seller’s indemnity with respect toEnvironmental Claims pursuant to Sections 1.4(g) and 7.2(a) shallbe subject to this Section 7.11. Seller shall have the right to controland investigate and/or remediate any condition giving rise to a claim or demandfor indemnification by Buyer under this Agreement with respect to anyEnvironmental Claims relating to the presence or Release of HazardousMaterials; provided, however, that in such circumstances, Sellershall (i) not unreasonably interfere with or disrupt Buyer’s operationsand (ii) subject to Buyer’s consent not to be unreasonably withheld, bepermitted to place title or use restrictions on any affected property, providedsuch restrictions do not materially interfere with the current industrial usethereof or violate the terms of any Leased Real Property; provided, further*,*that if after written notice and a reasonable opportunityto cure Seller does not exercise such right to control, investigate orremediate within a reasonable period, or in any case fails to promptly commenceor diligently continue to control, investigate and remediate, Buyer mayexercise such right and Seller will indemnify Buyer pursuant to Article VIIhereof.

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(b)                                 Seller shall not have any obligation toindemnify any Buyer Indemnitee from and against (i) any EnvironmentalClaims arising from or related to any material change in the use of any RealProperties from their current industrial use; (ii) any EnvironmentalClaims to the extent arising from or related to any amendment to or change inany Environmental Law from that which is in effect on the date hereof or(iii) any remediation or other liability arising as a result of thepresence of non-friable asbestos in or upon any of the improvements located onany Owned Real Property or Leased Real Property at any time.  Seller will not have any obligation toindemnify Buyer Indemnitees from any Environmental Claims arising with respectto any release of Hazardous Materials resulting solely from Buyer’s or any ofits Affiliate’s activities or omissions. Seller will not have any obligation to indemnify Buyer with respect toBuyer’s supervision or oversight costs in connection with any remediation orother activities performed by Seller. Seller’s obligation with respect to indemnification for EnvironmentalClaims pursuant to Sections 1.4(g) and 7.2(a) shall be limitedsolely to the extent necessary to satisfy the requirements of the GovernmentalEntity or other third party asserting such Environmental Claim; provided,however, that Buyer shall be permitted to participate in (but notcontrol except as otherwise provided herein) any discussions with suchGovernmental Entity or third party in respect of such Environmental Claim.

# **ARTICLE VIIIMISCELLANEOUS PROVISIONS**

8.1                                 Amendment; Waiver.  This Agreement may not be amended except byan instrument in writing signed by Seller and Buyer.  At any time prior to the Closing, any partyhereto may (a) extend the time for the performance of any of the obligations orother acts of the other parties hereto, (b) waive any inaccuracies in therepresentations and warranties contained herein or in any document deliveredpursuant hereto, or (c) waive compliance with any of the agreements or conditionscontained in this Agreement.  Waiver ofany term or condition of this Agreement will only be effective if and to theextent documented in a writing signed by the party making or granting suchwaiver and will not be construed as a waiver of any subsequent breach or waiverof the same term or condition, or a waiver of any other term or condition ofthis Agreement.  Upon the request of Buyer, the parties agreeto amend this Agreement to substitute in place of Buyer any other wholly-owneddirect or indirect Affiliate of Buyer; provided, however,notwithstanding such substitution, Buyer shall remain jointly and severallyliable for any breaches by Buyer or its substituted Affiliate of the terms andprovisions of this Agreement.

8.2                                 Applicable Law; Severability.  ThisAgreement shall be governed by and construed under the laws of the State of NewYork, exclusive of the body of law known as conflicts of law.  Should a court or other body of competentjurisdiction determine that any term or provision of this Agreement isexcessive in scope or duration or is illegal, invalid or unenforceable, thenthe parties agree that such term or provision shall not be voided or madeunenforceable, but rather shall be modified so as to be valid, legal andenforceable to the maximum extent possible, under the purposes stated in thepreceding sentence and with applicable law, and all other terms and provisionsof this Agreement shall remain valid and fully enforceable.

8.3                                 Attorneys’ Fees.  Ifany action at law or in equity is necessary to enforce or interpret the termsof this Agreement, including any proceeding under Section 8.4, theprevailing party shall be entitled to reasonable attorneys’ fees, costs andnecessary disbursements in addition to any other relief to which such party maybe entitled.

8.4                                 Venue for Dispute Resolution. Except as set forth in Section 1.7 of this Agreement, any Claim,potential Claim, or other controversy, claim or dispute relating thereto orotherwise arising out of or relating to this Agreement or the transactionscontemplated hereby, whether based on contract, tort, statute or any otherlegal or equitable theory (“***Dispute***”),unless resolved by the parties, shall be brought in the state or federal courtsin the Central District of the State of California.  Each of the parties hereto 

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consents to and expresslysubmits to the exclusive jurisdiction of such courts and waives any claim ofimproper jurisdiction or lack of venue in connection with any claim orcontroversy that may be brought in connection with this Agreement.  Each party hereby agrees that such courts, asapplicable, shall have *in personam*jurisdiction with respect to such party, and such party hereby submits to thepersonal jurisdiction of such courts.

8.5                                 Assignability;Third Party Beneficiary.** **This Agreement will be binding upon, enforceable by and inure solely tothe benefit of, the parties and their respective permitted successors andassigns.  This Agreement shall not beassigned by any party hereto without the prior written consent of thenon-assigning party, provided that Buyer may assign its rights and/orits obligations hereunder to any Affiliate of Buyer so long as Buyer remains aguarantor of the obligations assumed by any such Affiliate, and provided,further, that Buyer may assign its rights and obligations under thisAgreement without the consent of Seller (a) by operation of law in connectionwith the merger, consolidation or similar reorganization of Buyer, (b) inconnection with a sale of all or substantially all of the Business, and (c) aspart of a pledge in connection with a financing.  Exceptas otherwise expressly provided in this Agreement, nothing in this Agreement(except for the indemnification of Buyer Indemnitees is intended to or willconfer upon any Person, other than the parties to the Agreement, any right,benefit or remedy of any nature whatsoever under or by reason of thisAgreement.

8.6                                 Notices.  Allnotices and other communications under this Agreement must be in writing andwill be deemed given if delivered personally, faxed, sent by internationallyrecognized overnight courier, or mailed by registered or certified mail (returnreceipt requested), postage prepaid, to the parties at the following addresses(or at such other address for a party as such party specifies by like notice):

To Buyer:

Power-One, Inc.740 Calle PlanoCamarillo, CA 93012Attention:  General CounselTelephone: (805) 987-8741Fax: (805) 383-5898Email: randy.holliday@power-one.com

with a copy, which shall notconstitute notice, to:

O’Melveny& Myers LLP1999 Avenue of the Stars, Suite 700Los Angeles, CA 90067Attention: Allison Keller, Esq.Telephone: (310) 553-6700Fax: (310) 246-6779Email: akeller@omm.com

To Seller, prior to the Closing:

Magnetek,Inc.8966 Mason AvenueChatsworth, California 91311Attention:  Tina D. McKnight

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Telephone:(818) 727-2216Fax: (818) 886-1523Email: tmcknight@magnetek.com

To Seller, following the Closing:

Magnetek,Inc.N49 W13650 Campbell DriveMenomenee Falls, Wisconsin 53051Attention:  General CounselFax: (262) 783-3510

in each case, with a copy, which shall notconstitute notice, to:

Gibson, Dunn & CrutcherLLP

333 South Grand Avenue

Los Angeles, California90071

Attention:  Jennifer Bellah Maguire, Esq.

Telephone: (213) 229-7986

Fax: (213) 229-6986

Email: JBellah@gibsondunn.com

Allsuch notices and other communications will be deemed to have been received (a)in the case of personal delivery, on the date of such delivery, (b) in the caseof a facsimile, when the party sending such facsimile has a writtenconfirmation that the transmission was received by the receiver’s facsimilemachine, (c) in the case of delivery by internationally recognized overnightcourier, on the next Business Day following dispatch, (d) in the case ofmailing, on the fifth (5th) Business Day following such mailing, and(e) in the case of instant electronic communication, on the date of actualreceipt.

8.7                                 Construction.

(a)                                  For purposes of this Agreement, whenever thecontext requires: the singular number includes the plural, and vice versa; themasculine gender includes the feminine and neuter genders; the feminine genderincludes the masculine and neuter genders; and the neuter gender includes themasculine and feminine genders.

(b)                                 As used in this Agreement, the words “include”and “including,” and variations thereof, will not be deemed to be terms oflimitation, but rather will be deemed to be followed by the words “withoutlimitation.”

(c)                                  The titles and captions of the Sections ofthis Agreement are included for convenience of reference only and will have noeffect on the construction or meaning of this Agreement.

(d)                                 Except as otherwise indicated, all referencesin this Agreement to “Sections” and “Exhibits” are intended to refer toSections of this Agreement and Exhibits to this Agreement, and all referencesto “Schedules” refer to the Schedules attached to or delivered with thisAgreement, as appropriate.

(e)                                  As used in this Agreement, (i) the word “or”shall be inclusive and not exclusive, (ii) each reference to “herein”means a reference to “in this Agreement,” (iii) each reference to “$” or “dollars”shall be to United States dollars, (iv) each reference to “days” shall be tocalendar days unless 

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“Business Day” is used, (v)each reference to any Contract shall be to such Contract as amended,supplemented, waived or otherwise modified from time to time, and(vi) accounting terms which are not otherwise defined in this Agreementshall have the meanings given to them under GAAP; provided, that to theextent that a definition of a term in this Agreement is inconsistent with themeaning of such term under GAAP, the definition set forth in this Agreementwill control.

8.8                                 Interpretation.  The parties hereto have participated jointlyin the negotiation and drafting of this Agreement.  In the event an ambiguity or question ofintent or interpretation arises, this Agreement shall be construed as ifdrafted jointly by the parties hereto and no presumption or burden of proofshall arise favoring or disfavoring any party by virtue of the authorship ofany of the provisions of this Agreement. Any reference to any federal, state, local or foreign statute or lawshall be deemed also to refer to all rules and regulations promulgatedthereunder, unless the context requires otherwise.

8.9                                 Counterparts.  This Agreement may be executed in one or morecounterparts, and by the different parties hereto in separate counterparts,each of which when executed shall be deemed to be an original but all of whichtaken together shall constitute one and the same agreement.

8.10                           Telecopy Execution and Delivery.  The parties may execute and deliver thisAgreement by facsimile or similar electronic transmission device under whichthe signature of or on behalf of such party can be seen, and such execution anddelivery will be considered valid, binding and effective for all purposes.

8.11                           Entire Agreement.** **This Agreement andthe other agreements referred to in this Agreement constitute the entireagreement and supersede all prior agreements and understandings, both writtenand oral, among or between any of the parties with respect to the subjectmatter hereof and thereof.

8.12                           Equitable Relief;Cumulative Remedies.** **Each of the parties acknowledges and agrees that the other party wouldbe damaged irreparably in the event any of the provisions of this Agreement arenote performed in accordance with their specific terms or otherwise arebreached.  Accordingly, each of theparties agrees that the other party will be entitled to an injunction orinjunctions to prevent breaches of the provisions of this Agreement and toenforce specifically this Agreement and the terms and provisions hereof, inaddition to any other remedy to which they may be entitled, at law or inequity.  Except only as otherwiseprovided herein, any and all remedies herein expressly conferred upon a partywill be deemed cumulative with and not exclusive of any other remedy conferredhereby, or by law or equity upon such party, and the exercise by a party of anyone remedy will not preclude the exercise of any other remedy.

# **ARTICLE IX**

# **DEFINITIONS**

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

“***Accounting Firm***” isdefined in Section 1.7(b).

“***Acquired Shares***” isdefined in the background.

“***Ancillary Agreements***” is defined in Section 1.9(a).

“***Acquisition***” isdefined in the background.

“***AcquisitionProposal***” is defined in Section 5.3(a).

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“***Adjusted Tangible Net Worth***” means (a) totalassets, excluding (1) goodwill and (2) all deferred Tax assets, minus(b) total liabilities, in each case calculated as of the Closing Date from theapplicable balance sheet.

“***Affiliate***”means a Person who, with respect to another Person, Controls, is Controlled byor is under common Control with such other Person.

“***Agreement***”is defined in the preamble.

“***Applicable Rate***”means the “prime rate” as set forth in the *WallStreet Journal, Western Edition* on the Closing Date, and if suchpublication shall contain more than one “prime rate” on such date, then theaverage of such rates.

“***Approval***” means anyapproval, authorization, consent, qualification or registration required to beobtained from, or any notice, statement, application or other filing requiredto be made with, any Governmental Entity or any other Person, or any waiver ofany of the foregoing.

“***Assigned Contracts***”means Contracts, bids, quotations and proposals of Seller as of the ClosingDate primarily related to the US Business and all Contracts entered into in theordinary course of business between the date hereof and Closing (subject to ArticleIV), but in any event excluding those identified as “Non-Assigned Contracts”on Schedule 1.3.

“***Assumed Liabilities***”is defined in Section 1.2.

“***Business***” is definedin the background.

“***Business Day***” means aday other than a Saturday or Sunday or other day on which commercial banks inNew York are authorized or required by law to close.

“***Business Records***”means all correspondence, marketing and sales information, pricing, marketingplans, business plans, financial statements, financial and businessprojections, customer lists, financial books and records and ledgers, salesorder files, purchase order files, engineering order files, production andquality control records, warranty and repair files, supplier and distributorlists, studies, surveys, analyses, designs, specifications, and other files andrecords of any Company and, to the extent related to the Business or the Group,Seller, but excluding, to the extent exclusion is required by applicable stateor federal law, (i) any personnel files of any former employee of MagnetekItaly, and (ii) any personnel files of any employee who does not consent to thedisclosure of his or her personnel file to Buyer.

“***Buyer***”is defined in the preamble.

“***BuyerAccounts Receivable***” is defined in Section 4.16.

“***Buyer Indemnitee***” isdefined in Section 7.1(d).

“***Claim***” is defined in Section7.1(d).

“***Closing***”is defined in Section 1.8.

“***ClosingDate***” is defined in Section 1.8.

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“***Closing Net Indebtedness Amount***” means (a)the aggregate Indebtedness of the Companies, together with the aggregateIndebtedness of Seller to the extent included in the Assumed Liabilities,including all long-term debt and the current portion of long-term debt, minus(b) cash and cash equivalents of the Companies, in each case calculated as of theClosing from the applicable balance sheet.

“***Code***”means the Internal Revenue Code of 1986, as amended, and therulings and regulations promulgated thereunder.

“***Company***” is definedin the Background.

“***Contract***”means any written or oral agreement, contract, subcontract, lease, instrument,note, option, purchase order, license, sublicense, insurance policy, benefitplan or legally binding commitment or undertaking of any nature.

“***Control***” means thepossession, directly or indirectly, of the power to direct or cause thedirection of the management policies of a Person, whether through the ownershipof stock or other equity interests, as an officer, director, trustee orexecutor, by contract or otherwise.

“***Damages***”is defined in Section 7.1(d).

“***DisclosureSchedule***” is defined in the preamble to Article II.

“***Dispute***” is definedin Section 8.4(a).

“***EmployeeBenefit Plans***” is defined in Section 2.17(a).

“***Encumbrance***”means any option, easement, license, sublicense, deed of trust, covenant, lien,pledge, collateral assignment, hypothecation, charge, mortgage, securityinterest, title retention, conditional sale or other security arrangement, orany charge, adverse claim of title, ownership or right to use, or any otherencumbrance of any kind whatsoever.

“***EnvironmentalClaim***” means any claim, action, litigation, notice of violation,cause of action, consent order, consent decree, investigation or written noticeby any Person alleging potential liability arising out of, based on orresulting from (a) the presence or Release of any Hazardous Materials in, on,from or under any of the Real Properties, any property formerly owned oroccupied by the Business, or any third party location to which Seller or anyCompany sent, or caused to be sent, Hazardous Materials or (b) any violation oralleged violation of any Environmental Law, in each case (a) or (b), occurringprior to the Closing Date.

“***EnvironmentalLaw***” means any Legal Requirement relating to pollution orprotection of the environment (including ambient air, surface water, groundwater, land surface or subsurface strata) or natural resources, including anylaw or regulation relating to emissions, discharges or releases of HazardousMaterials or otherwise relating to the manufacture, processing, distribution,importation, use, treatment, storage, disposal, transport or handling ofHazardous Materials.

“***ERISA***”is defined in Section 2.17(a).

“***EscrowAmount***” is defined in Section 4.20.

“***EscrowAgent***” is defined in Section 4.20.

“***EscrowAgreement***” is defined in Section 4.20.

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“***Final Adjusted Tangible Net Worth***” is definedin Section 1.7(a).

“***Final Closing Balance Sheet***”is defined in Section 1.7(a).

“***Final Closing Net IndebtednessAmount***” is defined in Section 1.7(a).

“***FinancialStatements***” is defined in Section 2.7.

“***GAAP***”means generally accepted accounting principles in the United States applied ona consistent basis in accordance with Seller’s written policies.

“***GovernmentalAuthorization***” means any permit, registration, qualification orauthorization granted or issued by a Governmental Entity.

“***GovernmentalEntity***” means any government or any agency, district, bureau,board, commission, court, department, official, office, political subdivision,tribunal or other instrumentality of any government, whether federal, state orlocal, domestic or foreign.

“***Group***” is defined inthe Background.

“***Group Assets***” meansall rights, properties and assets of every kind and nature, tangible andintangible, absolute or contingent, currently used primarily (and not merelyincidentally) by Seller or any Company in the operations of the Business.

“***Group Employee***” meansany Person employed by Seller with respect to the Group, or any Company,including, without limitation, all regular employees, leased employees,temporary employees, and part-time employees, and any such person on lay-off,leave of absence, sick or short-term disability leave.

“***Group Intellectual Property***”means all Intellectual Property Rights that are primarily used by Seller or anyCompany in connection with the Business.

“***Group Liabilities***”means the Liabilities primarily arising out of the operations of the Business.

“***Hazardous Materials***”means all materials, wastes or substances defined by, or regulated under, anyEnvironmental Law as a hazardous waste, hazardous material, hazardoussubstance, extremely hazardous waste, restricted hazardous waste, contaminant,pollutant, toxic waste, or toxic substance, including petroleum, petroleumproducts, asbestos, urea, formaldehyde, radioactive materials andpolychlorinated biphenyls.

“***HSR Act***”means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, asamended, and the rules and regulations thereunder.

“***Indebtedness***” of anyPerson means, as of any date, the amount equal to the sum (without anydouble-counting) of the following obligations (whether or not then due andpayable, but not including all prepayment premiums, penalties, breakage costs,costs, expenses and other payment obligations that would arise if suchobligations were prepaid in full on such date) to the extent they are of suchPerson or guaranteed by such Person: (A) all outstanding indebtedness forborrowed money owed to third parties, (B) accrued interest payable with respectto Indebtedness referred to in clause (A), (C) all obligations for thedeferred purchase price of property or services, (D) all obligations evidencedby notes (including all prepayment penalties), bonds, debentures (including allprepayment penalties) or other similar 

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instruments, (E) allobligations arising out of any financial hedging arrangements, (F) obligationsunder conditional sale or other title retention agreements related to purchased property, and (G) all obligations under capitalized leases.  For the avoidance of doubt, “Indebtedness”shall not include any obligations under any operating leases.

“***Indemnification******Threshold***” is defined in Section7.3(a).

“***IndemnifiedLiabilities***” is defined in Section 1.4.

“***Indemnified Party***” isdefined in Section 7.1(d).

“***Indemnifying Party***”is defined in Section 7.1(d).

“***Initial Closing Indebtedness Amount***”is defined in Section 1.6.

“***IntellectualProperty Rights***” means all rights in trademarks and servicemarks (including any trade names, brand names, corporate names, d/b/a’s,assumed names, fictitious names, slogans, logos, trade dress, and businessnames in any jurisdiction), whether registered or unregistered, and allregistrations and applications for registration of the foregoing; Internetdomain names and addresses; patents and patent applications (includingprovisional patent applications) in any jurisdiction and all reissues,divisions, continuations, continuations in part, and extensions thereof;copyrights, copyright registrations and applications for copyright registrationin any jurisdiction and all extensions and renewals thereof; rights ininventions and invention disclosures; rights in databases, works of authorship,mask works, trade secrets and confidential information; moral rights; and allclaims for the past or present infringement or misappropriation of theforegoing.

“***Interest Period***” isdefined in Section 1.7(c).

“***Key Witnesses***” isdefined in Section 4.12.

“***Knowledge***,” means,with respect to (i) Seller, the actual knowledge that each person set forth on Schedule2 has, combined with the knowledge that each such person has or wouldreasonably be expected to have after performing a reasonable internalinvestigation, or (ii) Buyer, the actual knowledge of any of the officers,directors or other managing personnel of Buyer.

“***Leases***” is defined inSection 2.11(b).

“***LegalProceeding***” means any action, suit, litigation, arbitration,proceeding or hearing, whether administrative, civil or criminal, and whetherat law or in equity, conducted or heard by or before any court or otherGovernmental Entity or any arbitrator or arbitration panel.

“***LegalRequirement***” means laws, statutes, ordinances, rules,regulations, decrees, writs, injunctions, judgments, rulings or orders adoptedor promulgated by any Governmental Entity or any treaty or other requirementhaving the force of law.

“***Liabilities***” meansliabilities, Indebtedness, guarantees, obligations or other commitments of anynature, absolute, accrued, contingent, or otherwise, whether matured orunmatured, and whether material or not material.

“***MadeAvailable To Buyer***” means delivered to Buyer or its counsel ormade available in Seller’s electronic data room.

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“***Magnetek Italy***” is defined in the Background.

“***Material Adverse Change***”or “***Material AdverseEffect***,” means any fact, event, change, violation, inaccuracy,circumstance or effect that is or is reasonably likely to (1) be, individuallyor in the aggregate, materially adverse to the business, condition (financialor otherwise) or results of operations of the Business or the Group, taken as awhole, (2) materially adversely affect Seller’s ability to perform itsobligations under this Agreement or in connection with the transactionscontemplated hereby or (3) materially adversely affect the enforceability ofthis Agreement.  Notwithstanding anythingto the contrary contained in this paragraph, none of the following shall bedeemed, singly or in the aggregate, to constitute a Material Adverse Effect orMaterial Adverse Change:  (a) anyfailure by the Group to meet projections or forecasts for any period ending onor after the date of this Agreement; or (b) any adverse change, effect,event, violation, inaccuracy, circumstance, state of facts or developmentresulting from or relating to (directly or indirectly) any of thefollowing:  (i) the announcement orpendency of the Acquisition (including any cancellations of or delays inorders, any reduction in sales, any disruption in supplier, distributor,partner or similar relationships or any loss of employees); (ii) conditionsaffecting the industries in which the Group participate, the U.S. economy as awhole or foreign economies in any locations where the Group has materialoperations or sales, including, without limitation, war or acts of terrorism,except to the extent that such conditions described in this clause (ii)disproportionately affects the Business or the Group; (iii) out-of-pocket feesand expenses (including legal, accounting, investment banking and other feesand expenses) incurred in connection with the Acquisition; (iv) compliance bythe parties with the terms of, or the taking of any action required by, thisAgreement or (v) any change in accounting requirements or principles or anychange in applicable laws, rules or regulations or the interpretation thereof,except to the extent that such change in accounting requirements or principlesdisproportionately affects the Business or the Group.

“***Material Contracts***”is defined in Section 2.13(a).

“***Non-Assigned Contract***”means any Contract designated as such on Schedule 1.3.

“***Notice of Claim***” isdefined in Section 7.5(a).

“***Notice of Disagreement***”is defined in Section 1.6(b).

“***Owned Properties***” isdefined in Section 2.11(a).

“***PermittedEncumbrances***” means (i) Encumbrances for Taxes not yet due andpayable, (ii) mechanics’, carriers’, workmen’s, repairmen’s or other likeEncumbrances arising or incurred in the ordinary course of business consistentwith past practice for monies not yet due and payable, (iii) Encumbrancesarising under original purchase price conditional sales contracts and equipmentleases with third parties entered into in the ordinary course of businessconsistent with past practice, (iv) other imperfections of title,restrictions or other Encumbrances, if any, which imperfections of title,restrictions or other Encumbrances do not, individually or in the aggregate, materiallyimpair the continued use and operation of or materially detract from the valueof the specific assets to which they relate, and (v) Encumbrances disclosed inthe Financial Statements.

“***PendingClaims***” is defined in Section 2.14.

“***Person***”means any individual, or any U.S. or non-U.S. corporation, partnership, jointventure, estate, trust, company (including limited liability company and jointstock company), association, organization, firm, enterprise or other entity orany Governmental Entity.

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“***Product***” means any product manufactured,leased or sold by or on behalf of Seller or any Company in connection with theBusiness.

“***Public Software***” isdefined in Section 2.10(f).

“***Purchase Assets***” isdefined in the Background.

“***Purchase Price***” isdefined in Section 1.5.

“***Purchase Price Adjustment***”is defined in Section 1.8(c).

“***Real Properties***” isdefined in Section 2.11(b).

“***Release***”means any release, spill, emission, discharge, leaking, pumping, pouring,dumping, injection, deposit, disposal, dispersal, leaching or migration ofHazardous Materials into the environment (including, ambient air, surfacewater, groundwater and surface or subsurface strata)/

“***Representatives***”of a Person means the officers, directors, employees, agents, attorneys,accountants, investment bankers, advisors Controlled Affiliates and otherrepresentatives of that Person.

“***Required Consents***” isdefined in Section 2.5.

“***Retained Assets***” isdefined in Section 1.3.

“***Indemnified Liabilities***”is defined in Section 1.4.

“***Seller***” is defined inthe preamble.

“***Seller Accounts Receivable***”is defined in Section 4.16.

“***Seller Indemnitees***”is defined in Section 7.1(d).

“***Tax***” means, withrespect to Seller and any Company, (i) any and all taxes under all lawsapplicable to such Person, including Taxes based upon or measured by grossreceipts, income, profits, sales, use and occupation, and value added,ad valorem, transfer, franchise, withholding, payroll, recapture,employment, excise and property Taxes, together with all interest, penalties andadditions imposed with respect to such amounts, (ii) any liability for thepayment of any amounts of the type described in clause (i) as a result ofbeing a member of an affiliated, consolidated, combined or unitary group forany period, and (iii) any liability for the payment of any amounts of thetype described in clauses (i) or (ii) as a result of any express orimplied obligation to indemnify any other person or as a result of anyobligation under any agreement or arrangement with any other person with respectto such amounts and including any liability for Taxes of a predecessor entity.

“***TaxReturn***” means any return (including any information return) andany schedule, exhibit or attachment thereto, filed with or submitted to, orrequired to be filed with or submitted to, any Governmental Entity inconnection with the determination, assessment, collection, claim for refund orpayment of any Tax or in connection with the administration, implementation orenforcement of or compliance with any Legal Requirement relating to any Tax.

“***Termination Date***” isdefined in Section 6.1(a).

“***Third Party Claim***” isdefined in Section 7.5(a).

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“***Transaction Documents***”means (i) the Supply Agreement referenced in Section 5.3(d), (ii) theAlternative Energy Agreement referenced in Section 5.3(c), (iii) theTransitional Agreement referenced in Section 5.3(e), (iv) the AncillaryAgreements, and (v) any other certificate, document or agreement delivered orexecuted pursuant to this Agreement or any of the foregoing.

“***Transferred Employee***” has themeaning set forth in Section 4.19(a).

“***Warranty***” means any guaranty,warranty, remedy (including repair or replacement), liability, limitation,indemnification matters or similar obligation provided in connection with anyProduct.

[***Remainderof page left intentionally blank***]

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IN WITNESS WHEREOF, the parties have causedthis Agreement to be executed as of the date first above written.

 
|   | BUYER:                  |
|--------|-------------------------|
|   |                    |
|   | POWER-ONE, INC.,        |
|   | a Delaware  corporation |
|   |                    |
|   |                    |
|   | By:                     | /s/ William T. Yeates |   |
|   | Name:                   | William T. Yeates |
|   | Title:                  | Chief Executive Officer |
|   |                    |   |
|   | SELLER:                 |
|   |                    |
|   | MAGNETEK, INC.,         |
|   | a Delaware  corporation |
|   |                    |
|   |                    |
|   | By:                     | /s/ David P.  Reiland |   |
|   | Name:                   | David P. Reiland |
|   | Title:                  | Executive Vice President and |
|   |                    | Chief Financial Officer |
|        |                         |  |  |  |

 

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