Document:

Exhibit
10.3

 

EXECUTION
COPY

 

SECURITY
AGREEMENT

 

This SECURITY AGREEMENT (this “Agreement”)
is dated as of March 6, 2008 and entered into by and among POWER-ONE, INC., a Delaware corporation (“Company”), each of THE UNDERSIGNED DIRECT AND
INDIRECT SUBSIDIARIES of Company (each of such undersigned
Subsidiaries being a “Subsidiary Pledgor”
and collectively “Subsidiary Pledgors,”)
and each Additional Pledgor that may become a party hereto after the date
hereof in accordance with Section 17 hereof (each of Company, Subsidiary
Pledgors and each Additional Pledgor being a “Pledgor”
and collectively “Pledgors”), and
PWER BRIDGE, LLC, a Nevada limited
liability company (in such capacity herein called “Secured
Party”).

 

PRELIMINARY
STATEMENTS

 

A.            Company and Secured Party are
parties to a Term Loan Agreement dated as of September 28, 2006 (said loan
agreement, as it may hereafter be amended, supplemented, amended and restated
or otherwise modified from time to time, being the “Loan
Agreement”, the terms defined therein and not otherwise defined
herein being used herein as therein defined) and a Promissory Note dated as of October 23,
2006 (said note, as it may hereafter be amended, supplemented, amended and
restated or otherwise modified from time to time, being the “Note”, and together with the Loan Agreement, the “Loan Documents”). 
The Loan Documents evidence a loan from Secured Party to Borrower in the
original principal amount of Fifty Million Dollars ($50,000,000).

 

B.            The maturity date of the Loan
pursuant to the Note is April 30, 2008. 
Company has requested Secured Party to extend the maturity date to April 30,
2010.

 

C.            As a condition to extending the
maturity date of the Loan, Secured Party has required Company to grant the
security interests and undertake the obligations  contemplated by this Agreement.

 

D.            Each Pledgor is the legal and
beneficial owner of certain shares of stock, partnership interests, interests
in joint ventures, limited liability company interests and other equity
interests (“Equity Interests”) in
one or more Persons and/or certain other assets and property described herein.

 

NOW,
THEREFORE, in
consideration of the agreements set forth herein and in order to induce Secured
Party to extend the Loan, each Pledgor hereby agrees with Secured Party as
follows:

 

SECTION 1.         Certain Definitions.  The following terms used in this Agreement
shall have the following meanings:

 

“Bankruptcy Code” means Title 11 of the United States Code, as now or
hereafter in effect.

 

 

“Contractual
Obligation”, as
applied to any Person, means any provision of any security issued by that
Person or of any material indenture, mortgage, deed of trust, contract,
undertaking, agreement or other instrument to which that Person is a party or
by which it or any of its properties is bound or to which it or any of its
properties is subject.

 

                “Copyrights” means all items
under copyright in
various published and unpublished works of authorship including, without
limitation, computer programs, computer data bases, other computer software
layouts, trade dress, drawings, designs, writings, and formulas.

 

                “Copyright Registrations” means all copyright registrations issued to any
Pledgor and applications for copyright registration that have been or may
hereafter be issued or applied for thereon in the United States and any state
thereof and in foreign countries.

 

                “Copyright Rights” means all common law and other rights in and to
the Copyrights in the United States and any state thereof and in foreign
countries including all copyright licenses (but with respect to such copyright
licenses, only to the extent permitted by such licensing arrangements), the
right (but not the obligation) to renew and extend Copyright Registrations and
any such rights and to register works protectable by copyright and the right
(but not the obligation) to sue in the name of any Pledgor or in the name of
Secured Party for past, present and future infringements of the Copyrights and
any such rights.

 

 “Counterpart” means a counterpart to this Agreement entered into by
the Company or a subsidiary of Company pursuant to Section 17 hereof.

 

“Domestic
Subsidiary” means
any subsidiary of Company that is incorporated or organized under the laws of
the United States of America, any state thereof or in the District of Columbia.

 

“Foreign
Subsidiary” means
any subsidiary of Company that is not a Domestic Subsidiary.

 

                “Grant” means a Grant of Trademark Security
Interest, substantially in the form of Exhibit I annexed hereto,
and a Grant of Patent Security Interest, substantially in the form of Exhibit II
annexed hereto, and a Grant of Copyright Security Interest, substantially in
the form of Exhibit III annexed hereto.

 

                “Intellectual
Property Collateral”
means, with respect to any Pledgor all right, title and interest (including
rights acquired pursuant to a license or otherwise but only to the extent
permitted by agreements governing such license or other use) in and to all

 

(a)           Copyrights,
Copyright Registrations and Copyright Rights, including, without limitation,
each of the Copyrights, rights, titles and interests in and to the Copyrights,
all derivative works and other works protectable by copyright, which are
presently, or in the future may be, owned, created (as a work for hire for the
benefit of such Pledgor), authored (as a work for hire for the benefit of such
Pledgor), or acquired by such Pledgor, in whole or in part, and all Copyright
Rights with respect thereto and all Copyright Registrations therefor, 

 

2

 

heretofore or hereafter granted or applied for, and all renewals and
extensions thereof, throughout the world;

 

(b)           Patents;

 

(c)           Trademarks,
Trademark Registrations, the Trademark Rights and goodwill of such Pledgor’s
business symbolized by the Trademarks and associated therewith;

 

(d)           all
trade secrets, trade secret rights, know-how, customer lists, processes of
production, ideas, confidential business information, techniques, processes,
formulas, and all other proprietary information;

 

                (e)           all proceeds thereof (such as, by way of example and not
by limitation, license royalties and proceeds of infringement suits).

 

                “IP Supplement” means an IP Supplement, substantially in
the form of Exhibit IV annexed hereto.

 

“Lien” means any lien, mortgage, pledge,
assignment, security interest, charge or encumbrance of any kind (including any
conditional sale or other title retention agreement, any lease in the nature
thereof, and any agreement to give any security interest) and any option, trust
or other preferential arrangement having the practical effect of any of the
foregoing.

 

                “Patents” means all patents and patent applications and
rights and interests in patents and patent applications under any domestic or
foreign law that are presently, or in the future may be, owned or held by a
Pledgor and all patents and patent applications and rights, title and interests
in patents and patent applications under any domestic or foreign law that are
presently, or in the future may be, owned by such Pledgor in whole or in part,
all rights (but not obligations) corresponding thereto to sue for past, present
and future infringements and all re-issues, divisions, continuations, renewals,
extensions and continuations-in-part thereof.

 

 “Permitted Liens”
means (i) Liens for taxes, fees, assessments or other governmental charges
or levies, either not delinquent or currently payable without penalty or being
contested in good faith by appropriate proceedings; (ii) any attachment or
judgment Lien not constituting an Event of Default under Section 6.1(g) of
the Loan Agreement; and (iii) landlords’, carriers’, warehousemen’s,
mechanics’, materialmen’s, repairmen’s or other like Liens, and vendors’ Liens
imposed by statute or common law not securing the repayment of indebtedness,
arising in the ordinary course of business which are not overdue for a period
of more than 60 days or which are being contested in good faith and by
appropriate proceedings.

 

“Permitted
Securities” means
(i) any security issued under any Company employee, officer and/or director
stock or option plan reflected in the financial statements contained in Company’s
September 30, 2007 Form 10-Q, whether directly or upon exercise of
any option or other security issued thereunder and (ii) warrants for
shares of Company’s common stock or securities issued in connection with the
exercise thereof.

 

3

 

“Person” means and includes natural persons,
corporations, limited liability companies, limited partnerships, general
partnerships, joint stock companies, joint ventures, associations, companies,
trusts, banks, trust companies, land trusts, business trusts or other
organizations, whether or not legal entities, and governments and agencies and
political subdivisions thereof.

 

                “Trademarks” means all trademarks, service marks, designs,
logos, indicia, tradenames, trade dress, corporate names, company names,
business names, fictitious business names, trade styles and/or other source
and/or business identifiers and applications pertaining thereto, owned by a
Pledgor, or hereafter adopted and used, in its business.

 

                “Trademark
Registrations” means
all registrations that have been or may hereafter be issued or applied for
thereon in the United States and any state thereof and in foreign countries (including,
without limitation, the registrations and applications set forth on Schedule VII
annexed hereto).

 

                “Trademark Rights” means all common law and other rights (but in no
event any of the obligations) in and to the Trademarks in the United States and
any state thereof and in foreign countries.

 

“UCC” means the Uniform Commercial Code, as it exists on that date of the
Agreement or as it may hereafter be amended in the State of California.

 

SECTION 2.         Pledge of Security.  Each
Pledgor hereby pledges and assigns to Secured Party, and hereby grants
to Secured Party a security interest in, all of such Pledgor’s right, title and
interest in and to the following (the “Pledged Collateral”):

 

(a)           (i)            with respect to Company, all of
Company’s Equity Interests now or hereafter owned in:

 

                                                                (A)          any Domestic Subsidiary that is or
subsequently becomes a first tier subsidiary of Company (other than PAI Capital
LLC), and

 

                                                                (B)           any Foreign Subsidiary that is
currently a first tier subsidiary of Company (other than Power-One I/S);

 

                                                (ii)           with respect to P-O Nevada Corp., all
of P-O Nevada Corp.’s Equity Interests now or hereafter owned in Power-One I/S;
and

 

                                                (ii)           with respect to PAI Capital LLC, all
of PAI Capital LLC’s Equity Interests now or hereafter owned in Power-One Asia
Pacific Electronics (Shenzhen) Co, Ltd.;

 

in each case, whether such Equity Interests are classified as
investment property or general intangibles under the UCC, and shall include all
securities convertible into, and rights, warrants, options and other rights to
purchase or otherwise acquire, any Equity Interest, and shall include those
owned on the date hereof and described in Schedule I for such Pledgor,
the certificates or other instruments representing any of the foregoing and any
interest of such 

 

4

 

Pledgor, and all such interests hereafter acquired by Pledgors (or any
of them) and in the entries on the books of any securities intermediary
pertaining thereto (the “Pledged Equity”),
and all distributions, dividends, and other property received, receivable or
otherwise distributed in respect of or in exchange therefore;

 

provided, that, if the issuer of any such Pledged
Equity is a controlled foreign corporation (as such term is defined in Section 957(a) of
the Internal Revenue Code of 1986, as amended), the Pledged Equity shall not
include any Equity Interests of such issuer to the extent that creation of a
security interest by Pledgor in such Equity Interests could reasonably be
expected to result in material adverse tax consequences to Company, it being
acknowledged and agreed that the creation of a security interest in Equity
Interests possessing up to 66% of the voting power of all classes of Equity
Interests of such issuer entitled to vote will not result in such adverse tax
consequences;

 

(b)   the assets and property described in Schedule
II for such Pledgor, whether now owned or hereafter acquired by such
Pledgor and howsoever its interest therein may arise or appear (whether by
ownership, security interest, claim or otherwise (the “Pledged
Assets”);

 

(c)   all books, records, ledger cards, files,
correspondence, computer programs, tapes, disks and related data processing
software that at any time evidence or contain information relating to any of
the Pledged Collateral or are otherwise necessary or helpful in the collection
thereof or realization thereupon; and

 

(d)   to the extent not covered by clauses (a) and
(b) above, all proceeds of any or all of the foregoing Pledged
Collateral.  For purposes of this
Agreement, the term “proceeds”
includes whatever is receivable or received when Pledged Collateral or proceeds
are sold, exchanged, collected or otherwise disposed of, whether such
disposition is voluntary or involuntary, and includes, without
limitation, proceeds of any indemnity or guaranty payable to Pledgors or
Secured Party from time to time with respect to any of the Pledged Collateral.

 

SECTION 3.         Security for Obligations.  This
Agreement secures, and the Pledged Collateral is collateral security
for, the prompt payment or performance in full when due, whether at stated
maturity, by required prepayment, declaration, acceleration, demand or
otherwise (including the payment of amounts that would become due but for the
operation of the automatic stay under Section 362(a) of the
Bankruptcy Code, 11 U.S.C. §362(a)), of all obligations and liabilities of
every nature of Company now or hereafter existing under or arising out of or in
connection with this Agreement or any of the Loan Documents, together with all
extensions or renewals thereof, whether for principal, interest (including
without limitation interest that, but for the filing of a petition in
bankruptcy with respect to any Pledgor, would accrue on such obligations,
whether or not a claim is allowed against such Pledgor for such interest in the
related bankruptcy proceeding), fees, expenses, indemnities or otherwise,
whether voluntary or involuntary, direct or indirect, absolute or contingent,
liquidated or unliquidated, whether or not jointly owed with others, and
whether or not from time to time decreased or extinguished and later increased,
created or incurred, and all or any portion of such obligations or liabilities
that are paid, to the extent all or any part of such 

 

5

 

payment is avoided or recovered directly or indirectly
from Secured Party as a preference, fraudulent transfer or otherwise; all other
loans and future advances made by Secured Party to any Pledgor and all other
debts, obligations and liabilities of each Pledgor or every kind and character
now or hereafter existing in favor of Secured Party, whether direct or
indirect, primary or secondary, joint or several, fixed or contingent, secured
or unsecured, and whether originally payable to Secured Party or to a third
party and subsequently acquired by Secured Party, it being contemplated that
any Pledgor may hereafter become indebted to Secured Party for such further
debts, obligations and liabilities; and all obligations of every nature of
Pledgors now or hereafter existing under this Agreement (all such obligations
of Pledgors being the “Secured Obligations”).

 

SECTION 4.         Delivery of Pledged Equity.  In
the case of Pledged Equity consisting of certificated securities or instruments,
all such certificates or instruments representing or evidencing such
Pledged Equity shall be delivered to and held by or on behalf of Secured Party
pursuant hereto and shall be in suitable form for transfer by delivery or, as
applicable, shall be accompanied by the applicable Pledgor’s endorsement, where
necessary, or duly executed instruments of transfer or assignment in blank, all
in form and substance satisfactory to Secured Party.  Upon the occurrence and during the
continuation of an Event of Default, Secured Party shall have the right,
without notice to Pledgors, to transfer to or to register in the name of
Secured Party or any of its nominees any or all of the Pledged Equity.

 

SECTION 5.         Representations and Warranties.  Each Pledgor represents and warrants as
follows:

 

(a)   Organization and Powers.  Such Pledgor is duly organized, validly
existing and in good standing (solely in the case of an entity incorporated or
organized under the laws of the United States of America or any state thereof
or in any other jurisdiction in which an entity may be in good standing) and
has all requisite power and authority to own and operate its properties, to
carry on its business as now conducted and proposed to be conducted and to
enter into this Agreement and carry out the transactions contemplated hereby.

 

(b)   Good Standing.  Such Pledgor is qualified to do business and
in good standing (solely in the case of an entity incorporated or
organized under the laws of the United States of America or any state thereof
or in any other jurisdiction in which an entity may be in good standing) wherever necessary to carry on its
present business and operations, except in jurisdictions in which the failure
to be so qualified or in good standing has not had and will not have a material
adverse effect on the business, operations, properties, assets or condition
(financial or otherwise) of such Pledgor and its subsidiaries, taken as a
whole.

 

(c)   Binding Obligation.  This Agreement is the legally valid and
binding obligation of such Pledgor, enforceable against it in accordance with
its terms, except as enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws or equitable principles relating to
or limiting creditors’ rights generally.

 

(d)   Due Authorization, etc. of Pledged
Collateral.  All of the Pledged
Equity described on Schedule I for such Pledgor has been duly authorized
and validly issued and is fully paid and non-assessable.

 

6

 

(e)   Description of Pledged Collateral.  Except as set forth in Section 2(a)(i)(C) and
on Schedule I, the Pledged Equity constitutes all of the issued and
outstanding Equity Interests in each issuer thereof (subject to the proviso to Section 2(a)),
and there are no outstanding warrants, options or other rights to purchase, or
other agreements outstanding with respect to, or property that is now or
hereafter convertible into, or that requires the issuance or sale of, any
securities, or rights or interest in any securities, of any of the issuers of
any of the Pledged Equity or any of the properties or assets of any of such
issuers.  Schedule I for such
Pledgor sets forth all of the Pledged Equity owned by such Pledgor.

 

(f)    Ownership of Pledged Collateral.  Such Pledgor is the legal, record and
beneficial owner of the Pledged Collateral and its interests in the Pledged
Collateral are free and clear of any Lien except for the security interest
created by this Agreement.

 

(g)   Governmental Authorizations.  No authorization, approval or other action
by, and no notice to or filing with, any governmental authority or regulatory
body is required for either (i) the pledge by such Pledgor of the Pledged
Collateral pursuant to this Agreement and the grant by such Pledgor of the
security interest granted hereby, (ii) the execution, delivery or
performance of this Agreement by such Pledgor, or (iii) the exercise by
Secured Party of the voting or other rights, or the remedies in respect of the
Pledged Collateral, provided for in this Agreement (except as may be required
in connection with a disposition of Pledged Collateral by laws affecting the
offering and sale of securities generally).

 

(h)   Perfection.  Upon (i) the filing of UCC financing
statements naming such Pledgor as “debtor,” naming Secured Party as “secured
party” and describing the Pledged Collateral in the filing offices set forth on
Schedule III, (ii) in the case of Pledged Collateral
consisting of certificated securities or evidenced by instruments, in addition
to filing such financing statements, delivery of the certificates representing
such certificated securities and delivery of such instruments to Secured Party,
in each case duly endorsed or accompanied by duly executed instruments of
assignment or transfer in blank (and in the case of Pledged Collateral issued
by a foreign issuer, any actions required under foreign law to perfect a
security interest in such Pledged Collateral), and (iii) in the case of
the Intellectual Property Collateral, in addition to the filing of such UCC
financing statements, the recordation of a Grant with the applicable IP Filing
Office, the security
interests in the Pledged Collateral, granted to Secured Party, will constitute
perfected security interests in the Pledged Collateral prior to all other
Liens, securing the payment of the Secured Obligations

 

(i)    Office
Locations; Type and Jurisdiction of Organization.  Such Pledgor’s name as it appears in official
filings in its jurisdiction of organization, type of organization (i.e.
corporation, limited liability company, etc.), jurisdiction of organization,
principal place of business, chief executive office, office where such Pledgor
keeps its records regarding the Pledged Collateral, and organization number
provided by the applicable government authority of the jurisdiction of
organization are set forth on Schedule IV annexed hereto or the
applicable Counterpart.

 

7

 

(j)    Names.  No Pledgor (or predecessor by merger or
otherwise of such Pledgor) has, within the five-year period preceding the date
hereof, or, in the case of an Additional Pledgor, the date of the applicable
Counterpart, had a different name from the name of such Pledgor listed on the
signature pages hereof, except the names set forth on Schedule IV
annexed hereto or the applicable Counterpart.

 

(k)   Margin Regulations.  The pledge of the Pledged Collateral pursuant
to this Agreement does not violate Regulation T, U or X of the Board of
Governors of the Federal Reserve System.

 

(l)    Other Information.  All information heretofore, herein or
hereafter supplied to Secured Party by or on behalf of such Pledgor with
respect to the Pledged Collateral is accurate and complete in all respects.

 

(m)  Account Debtors.  None of the account debtors or other persons
obligated on any of the portions of the Pledged Assets consisting of accounts
receivable is a governmental authority covered by the Federal Assignment of
Claims Act or like federal, state or local statute or rule in respect of
such Pledged Collateral.

 

                                The representations and warranties as
to the information set forth in Schedules referred to herein are made, as to
each Pledgor as of the date hereof and, as to each Additional Pledgor, as of
the date of the applicable Counterpart, that, in the case of a Pledge
Amendment, such representations and warranties are made as of the date of such
Pledge Amendment.

 

                                Company shall cause its legal counsel
to deliver a legal opinion regarding certain of the representations and
warranties set forth in this Section 5 and such other matters as may be
reasonably requested by Secured Party.

 

SECTION 6.         Covenants.  Each Pledgor shall:

 

(a)   not, except as expressly permitted by the
Loan Documents, (i) sell, assign (by operation of law or otherwise) or
otherwise dispose of, or grant any option with respect to, any of the Pledged
Collateral, (ii) create or suffer to exist any Lien upon or with respect
to any of the Pledged Collateral, except for the security interest under this
Agreement or any other Loan Document, or (iii) permit any issuer of
Pledged Equity to merge or consolidate unless all the outstanding Equity
Interests of the surviving or resulting Person are, upon such merger or
consolidation, pledged hereunder (subject to the proviso to Section 2(a))
and no cash, securities or other property is distributed in respect of the
outstanding shares of any other constituent Person;

 

(b)   not, except as expressly permitted by the
Loan Documents, (i) sell, assign (by operation of law or otherwise),
exchange, relocate or otherwise dispose of any of its property or assets,
except in the ordinary course of such Pledgor’s business, (ii) create or
suffer to exist any Lien upon or with respect to any of the property or assets
of Pledgor (or any of its direct or indirect subsidiaries), except for
Permitted Liens;

 

8

 

(c)   cause each issuer of Pledged Equity not to
issue Equity Interests in addition to or in substitution for the Pledged Equity
issued by such issuer, except to such Pledgor, (ii) subject to the proviso
to Section 2(a), pledge hereunder, immediately upon its acquisition
(directly or indirectly) thereof, any and all additional Equity Interests of
each issuer of Pledged Equity, and (iii) subject to the proviso to Section 2(a),
pledge hereunder, immediately upon its acquisition (directly or indirectly)
thereof, any and all Equity Interests of any Person that, after the date of
this Agreement, becomes, as a result of any occurrence, a direct Domestic
Subsidiary or a first tier Foreign Subsidiary of Company;

 

(d)   at its expense (i) perform and comply in
all material respects with all terms and provisions of any agreement related to
the Pledged Collateral required to be performed or complied with by it, (ii) maintain
all such agreements in full force and effect, and (iii) enforce all such
agreements in accordance with their terms;

 

(e)   give Secured Party at least 30 days’
prior written notice of any (i) change in such Pledgor’s name, identity or
corporate structure and (ii) reincorporation, reorganization or other
action that results in a change of the jurisdiction or organization of such
Pledgor;

 

(f)    promptly deliver to Secured Party all
written notices received by it with respect to the Pledged Collateral;

 

(g)   pay promptly when due all taxes, assessments
and governmental charges or levies imposed upon, and all claims against, the
Pledged Collateral, except to the extent the validity thereof is being
contested in good faith; provided that such Pledgor shall in any event
pay such taxes, assessments, charges, levies or claims not later than five days
prior to the date of any proposed sale under any judgement, writ or warrant of
attachment entered or filed against such Pledgor or any of the Pledged
Collateral as a result of the failure to make such payment;

 

(h)   keep adequate records concerning the Pledged
Collateral and permit Secured Party or its representatives or designees from
time to time to examine and make copies of and abstracts from such records;

 

(i)    at its expense, defend Secured Party’s right, title
and security interest in and to the Pledged Collateral against the claims of
any person;

 

(j)    at its expense, at any time and from time to time,
promptly execute and deliver all further instruments and documents and take all
further action that may be necessary or desirable or that Secured Party may
reasonably request in order to (i) perfect and protect the security
interests created or purported to be created hereby, (ii) enable Secured
Party to exercise and enforce its rights and remedies hereunder in respect of
the Pledged Collateral or (iii) otherwise effect the purposes of this
Agreement;

 

(k)   not make or consent to any amendment or other
modification or waiver with respect to any Pledged Collateral or enter into any
agreement except as permitted by the Loan Documents and this Agreement; not
take or fail to take any action that could reasonably be expected to result in
any one or more of the representations and warranties set forth in 

 

9

 

Section 5 of this Agreement being or becoming
incorrect or inaccurate as of a time at or after the time of such action or
failure to act;

 

(l)    not take or fail to take any action which would in any
manner impair the enforceability of Secured Party’s security interest in any
Pledged Collateral;

 

(m)  keep the Pledged Collateral in good order and repair
and not use the same in violation of law or any policy of insurance thereon;

 

(n)   permit Secured Party, or its designee, to inspect the
Pledged Collateral at any reasonable time, wherever located;

 

(o)   pay promptly when due all taxes, assessments,
governmental charges and levies upon the Pledged Collateral or incurred in
connection with the use or operation of such Pledged Collateral or incurred in
connection with this Agreement;

 

(p)   at its expense, promptly execute and deliver all
further instruments and documents, and take all further action that may be
necessary or reasonably desirable, or that Secured Party may request, in order
to perfect and protect any security interest granted or purported to be granted
hereby or to enable Secured Party to exercise and enforce its rights and
remedies hereunder with respect to any Pledged Collateral;

 

(q)   not incur any material indebtedness other than the
Loan without Secured Party’s prior written approval, which approval shall not
be unreasonably withheld or delayed, other than (i) borrowings under
agreements existing as of the date hereof and (ii) borrowings otherwise
permitted under the Loan Agreement;

 

(r)    not pledge any assets of Company or its
direct or indirect subsidiaries, other than Permitted Liens, without Secured
Party’s prior written approval, which approval shall not be unreasonably
withheld or delayed; and

 

(s)   not issue any securities or other ownership
interests, other than Permitted Securities, without Secured Party’s prior
written approval, which approval shall not be unreasonably withheld or delayed.

 

SECTION 7.         Further Assurances.

 

(a)   Each Pledgor agrees that from time to time,
at the expense of such Pledgor, such Pledgor will promptly execute and deliver,
and cause to be executed and delivered, at request of Secured Party, agreements
establishing that Secured Party has control over all Pledged Collateral and all
further instruments and documents, and take all further action, that may be
necessary or desirable, or that Secured Party may request, in order to perfect
and protect any security interest granted or purported to be granted hereby or
to enable Secured Party to exercise and enforce its rights and remedies
hereunder with respect to any Pledged Collateral.  Without limiting the generality of the
foregoing, each Pledgor will:  (i) execute
(if necessary) and file such financing or continuation statements, or
amendments thereto, and such other instruments or notices, as may be necessary
or desirable, or as Secured Party may request, in order to perfect and preserve
the security interests granted or purported to be 

 

10

 

granted hereby and (ii) at Secured Party’s
request, appear in and defend any action or proceeding that may affect such
Pledgor’s title to or Secured Party’s security interest in all or any part of
the Pledged Collateral.  Each Pledgor
hereby authorizes Secured Party to file one or more financing or continuation
statements, and amendments thereto, relative to all or any part of the Pledged
Collateral without the signature of such Pledgor.

 

(b)           Each
Pledgor further agrees that it will, upon obtaining any additional Equity Interest
(including any additional Equity Interest hereafter owned in a Domestic
Subsidiary that is a direct subsidiary of Company or a Foreign Subsidiary that
is a first tier subsidiary of Company (in each case, formed or acquired after
the date of this Agreement)), promptly (and in any event within five Business
Days) deliver to Secured Party a Pledge Amendment, duly executed by such
Pledgor, in substantially the form of Schedule V annexed hereto (a “Pledge Amendment”), in respect of the additional Pledged Equity
to be pledged pursuant to this Agreement; provided that the failure of
such Pledgor to execute a Pledge Amendment with respect to any additional
Pledged Equity shall not impair the security interest of Secured Party therein
or otherwise adversely affect the rights and remedies of Secured Party
hereunder with respect thereto.  Upon
each such acquisition, the representations and warranties contained in Section 5
hereof shall be deemed to have been made by such Pledgor as to the Pledged
Equity described in such Pledge Amendment.

 

(c)           Each
Pledgor shall promptly notify Secured Party in writing of any rights to
Intellectual Property Collateral acquired by such Pledgor after the date
hereof.  Promptly after the filing of an
application for any Trademark Registration, Patent or Copyright Registration,
each Pledgor shall execute and deliver to Secured Party an IP Supplement, and
submit a Grant for recordation with respect thereto in the applicable IP Filing
Office; provided, the failure of any Pledgor to execute an IP Supplement
or submit a Grant for recordation with respect to any additional Intellectual
Property Collateral shall not impair the security interest of Secured Party
therein or otherwise adversely affect the rights and remedies of Secured Party
hereunder with respect thereto.  Upon
delivery to Secured Party of an IP Supplement, Schedules VII, VIII, IX
annexed hereto and Schedule A to each Grant, as applicable, shall be
deemed modified to include a reference to any right, title or interest in any
existing Intellectual Property Collateral or any Intellectual Property
Collateral set forth on Schedule A to such IP Supplement.  Upon each such acquisition, the
representations and warranties contained in Section 5(h) hereof shall
be deemed to have been made by such Pledgor as to such Intellectual Property
Collateral, whether or not such IP Supplement is delivered.

 

SECTION 8.         Voting Rights; Dividends; Etc.

 

(a)   So long as no Event of Default shall have
occurred and be continuing:

 

(i)            each Pledgor shall be entitled to
exercise any and all voting and other consensual rights pertaining to the
Pledged Collateral or any part thereof for any purpose not inconsistent with
the terms of this Agreement or the Loan Documents; provided, however,
that such Pledgor shall not exercise or refrain from exercising any such right
if Secured Party shall have notified such Pledgor that, in Secured Party’s

 

11

 

judgment, such action
would have a material adverse effect on the value of the Pledged Collateral or
any part thereof; and

 

(ii)           each Pledgor shall be entitled to
receive and retain any and all dividends, other distributions and interest paid
in respect of the Pledged Collateral; provided, however, that any
and all

 

(A)          dividends, other distributions and
interest paid or payable other than in cash in respect of, and instruments and
other property received, receivable or otherwise distributed in respect of, or
in exchange for, any Pledged Collateral,

 

(B)           dividends and other distributions
paid or payable in cash in respect of any Pledged Collateral in connection with
a partial or total liquidation or dissolution or in connection with a reduction
of capital, capital surplus or paid-in-surplus, and

 

(C)           cash paid, payable or otherwise
distributed in respect of principal or in redemption of or in exchange for any
Pledged Collateral,

 

shall be, and shall
forthwith be delivered to Secured Party to hold as, Pledged Collateral and
shall, if received by such Pledgor, be received in trust for the benefit of
Secured Party, be segregated from the other property or funds of such Pledgor
and be forthwith delivered to Secured Party as Pledged Collateral in the same
form as so received (with all necessary endorsements).

 

(b)   Upon the occurrence and during the
continuation of an Event of Default:

 

(i)            upon written notice from Secured
Party to Pledgors, all rights of Pledgors to exercise the voting and other
consensual rights that they would otherwise be entitled to exercise pursuant to
Section 8(a)(i) shall cease, and all such rights shall thereupon
become vested in Secured Party who shall thereupon have the sole right to
exercise such voting and other consensual rights;

 

(ii)           all rights of Pledgors to receive the
dividends, other distributions and interest payments that they would otherwise
be authorized to receive and retain pursuant to Section 8(a)(ii) shall
cease, and all such rights shall thereupon become vested in Secured Party who
shall thereupon have the sole right to receive and hold as Pledged Collateral
such dividends, other distributions and interest payments; and

 

(iii)          all dividends, principal, interest
payments and other distributions that are received by Pledgors contrary to the
provisions of paragraph (ii) of this Section 8(b) shall be
received in trust for the benefit of Secured Party, shall be segregated from
other funds of Pledgors and shall forthwith be paid over to Secured Party as
Pledged Collateral in the same form as so received (with any necessary
endorsements).

 

12

 

(c)   In order to permit Secured Party to exercise
the voting and other consensual rights that it may be entitled to exercise
pursuant to Section 8(b)(i) and to receive all dividends and other
distributions which it may be entitled to receive under Section 8(a)(ii) or
Section 8(b)(ii), (i) each Pledgor shall promptly execute and deliver
(or cause to be executed and delivered) to Secured Party all such proxies,
dividend payment orders and other instruments as Secured Party may from time to
time reasonably request and (ii) without limiting the effect of the
immediately preceding clause (i), each Pledgor hereby grants to Secured Party
an irrevocable proxy to vote the Pledged Equity and to exercise all other
rights, powers, privileges and remedies to which a holder of the Pledged Equity
would be entitled (including, without limitation, giving or withholding written
consents of holders of Equity Interests, calling special meetings of holders of
Equity Interests and voting at such meetings), which proxy shall be effective,
automatically and without the necessity of any action (including any transfer
of any Pledged Equity on the record books of the issuer thereof) by any other
Person (including the issuer of the Pledged Equity or any officer or agent
thereof), upon the occurrence of an Event of Default and which proxy shall only
terminate upon the payment in full of the Secured Obligations.

 

SECTION 9.         Secured Party Appointed Attorney-in-Fact.  Each
Pledgor hereby irrevocably appoints Secured Party as such Pledgor’s
attorney-in-fact, with full authority in the place and stead of Pledgor and in
the name of such Pledgor, Secured Party or otherwise, from time to time in
Secured Party’s discretion to take any action and to execute any instrument
that Secured Party may deem necessary or advisable to accomplish the purposes
of this Agreement, including without limitation:

 

(a)   to file one or more financing or continuation
statements, or amendments thereto, relative to all or any part of the Pledged
Collateral without the signature of such Pledgor;

 

(b)   upon the occurrence and during the
continuance of an Event of Default, to ask, demand, collect, sue for, recover,
compound, receive and give acquittance and receipts for moneys due and to
become due under or in respect of any of the Pledged Collateral;

 

(c)   upon the occurrence and during the
continuance of an Event of Default, to receive, endorse and collect any instruments
made payable to such Pledgor representing any dividend, principal or interest
payment or other distribution in respect of the Pledged Collateral or any part
thereof and to give full discharge for the same;

 

(d)   upon the occurrence and during the continuance
of an Event of Default, to file any claims or take any action or institute any
proceedings that Secured Party may deem necessary or desirable for the
collection of any of the Pledged Collateral or otherwise to enforce the rights
of Secured Party with respect to any of the Pledged Collateral;

 

(e)   to pay or discharge taxes or Liens levied or
placed upon or threatened against the Pledged Collateral, the legality or
validity thereof and the amounts necessary to discharge the same to be
determined by Secured Party in its sole discretion, any such payments made by
Secured Party to become obligations of such Pledgor to Secured Party, due and
payable immediately without demand;

 

13

 

(f)    upon the occurrence and during the
continuance of an Event of Default, generally to sell, transfer, pledge, make
any agreement with respect to or otherwise deal with any of the Pledged
Collateral as fully and completely as though Secured Party were the absolute
owner thereof for all purposes, and to do, at Secured Party’s option and such
Pledgor’s expense, at any time or from time to time, all acts and things that
Secured Party deems necessary to protect, preserve or realize upon the Pledged
Collateral and Secured Party’s security interest therein in order to effect the
intent of this Agreement, all as fully and effectively as such Pledgor might
do; and

 

(g)   upon the occurrence and during the
continuance of an Event of Default, to obtain and adjusted insurance required
to be maintained by such Pledgor.

 

                However, Secured Party shall
have no obligation to do any of the foregoing or to take any actions relating
to the Pledged Collateral, and Secured Party may, without liability to any
Pledgor or any other Person, take or refrain from taking any such actions, as
Secured Party in its sole discretion deems to be in the interest of Secured
Party.

 

SECTION 10.       Secured Party May Perform; No Assumption.

 

(a)   If
any Pledgor fails to perform any agreement contained herein, Secured
Party may itself perform, or cause performance of, such agreement, and the
expenses of Secured Party incurred in connection therewith shall be payable by
such Pledgor under Section 15(b).

 

(b)   Anything contained herein to the contrary
notwithstanding, (i) each Pledgor shall remain liable under any agreements
included in or related to the Pledged Collateral, to the extent set forth
therein, to perform all of its duties and obligations thereunder to the same
extent as if this Agreement had not been executed, (ii) the exercise by
Secured Party of any of its rights hereunder shall not release any Pledgor from
any of its duties or obligations under any such agreements, and (iii) Secured
Party shall not have any obligation or liability under any such agreements by
reason of this Agreement, nor shall Secured Party be obligated to perform any
of the obligations or duties of any Pledgor thereunder or to take any action to
collect or enforce any claim for payment assigned hereunder.

 

SECTION 11.       Standard of Care.  The
powers conferred on Secured Party under this Agreement are solely to
protect the interests of Secured Party in the Pledged Collateral and shall not
impose any duty upon the Secured Party to exercise any such powers.  Except for the exercise of reasonable care in
the custody of any Pledged Collateral in its possession and the accounting for
moneys actually received by it hereunder, Secured Party shall have no duty as
to any Pledged Collateral, it being understood that Secured Party shall have no
responsibility for (a) ascertaining or taking action with respect to
calls, conversions, exchanges, maturities, tenders or other matters relating to
any Pledged Collateral, whether or not Secured Party has or is deemed to have
knowledge of such matters, (b) taking any necessary steps (other than
steps taken in accordance with the standard of care set forth above to maintain
possession of the Pledged Collateral) to preserve rights against any prior
parties or any other rights pertaining to any Pledged Collateral, (c) taking
any necessary steps to 

 

14

 

collect or realize upon the Secured Obligations or any
guarantee therefor, or any part thereof, or any of the Pledged Collateral, or (d) initiating
any action to protect the Pledged Collateral against the possibility of a
decline in market value.  Secured Party
shall be deemed to have exercised reasonable care in the custody and
preservation of Pledged Collateral in its possession if such Pledged Collateral
is accorded treatment substantially equal to that which Secured Party accords
its own property consisting of negotiable securities.

 

SECTION 12.             Insurance Matters.

 

(a)   Each Pledgor will maintain with financially sound and
reputable insurers insurance with respect to its inventory insured with
casualty or physical hazard insurance on an “all risks” basis, with a full
replacement cost endorsement and an “agreed amount” clause in an amount equal
to 100% of the full replacement cost of such Inventory.  Such insurance shall be in such minimum
amounts that such Pledgor will not be deemed a co-insurer under applicable
insurance laws, regulations and policies and otherwise shall be in such
amounts, contain such terms, be in such forms and be for such periods as may be
reasonably satisfactory to Secured Party. 
In addition, within thirty (30) days of the date of this Agreement, all
such insurance shall name Secured Party as an additional insured.

 

(b)   The proceeds of any casualty insurance in respect of
any casualty loss of any of the Pledged Collateral shall be held by Secured
Party as cash collateral for the Secured Obligations.  Secured Party may, at its sole option,
disburse from time to time all or any part of such proceeds so held as cash
collateral, upon such terms and conditions as Secured Party may reasonably
prescribe, for direct application by such Pledgor solely to the repair or
replacement of the inventory property so damaged or destroyed, or Secured Party
may apply all or any part of such proceeds to the Secured Obligations.

 

(c)   All policies of insurance shall provide for at least
thirty (30) days’ prior written cancellation notice to Secured Party.  In the event of failure by any Pledgor to
provide and maintain insurance as herein provided, Secured Party may, at its
option, provide such insurance and charge the amount thereof to such
Pledgor.  Within thirty (30) days of the
date of this Agreement, Company shall furnish Secured Party with certificates
of insurance and policies evidencing compliance with the foregoing insurance
provision.

 

SECTION 13.       Remedies.

 

(a)   If any Event of Default shall have occurred
and be continuing, Secured Party may exercise in respect of the Pledged
Collateral, in addition to all other rights and remedies provided for herein or
otherwise available to it, all the rights and remedies of a secured party on
default under the UCC (whether or not the UCC applies to the affected Pledged
Collateral), and Secured Party may also in its sole discretion, without notice
except as specified below, sell the Pledged Collateral or any part thereof in
one or more parcels at public or private sale, at any exchange or broker’s
board or at any of Secured Party’s offices or elsewhere, for cash, on credit or
for future delivery, at such time or times and at such price or prices and upon
such other terms as Secured Party may deem commercially reasonable,
irrespective of the impact of any such sales on the market price of the Pledged
Collateral.  Secured Party may be the
purchaser of any or all of the Pledged Collateral at any such sale, 

 

15

 

and shall be entitled, for the purpose of bidding and
making settlement or payment of the purchase price for all or any portion of
the Pledged Collateral sold at any such public sale, to use and apply any of
the Secured Obligations as a credit on account of the purchase price for any
Pledged Collateral payable by Secured Party at such sale.  Each purchaser at any such sale shall hold
the property sold absolutely free from any claim or right on the part of
Pledgors, and each Pledgor hereby waives (to the extent permitted by applicable
law) all rights of redemption, stay and/or appraisal which it now has or may at
any time in the future have under any rule of law or statute now existing
or hereafter enacted.  Each Pledgor
agrees that, to the extent notice of sale shall be required by law, at least
ten days’ notice to such Pledgor of the time and place of any public sale or
the time after which any private sale is to be made shall constitute reasonable
notification.  Secured Party shall not be
obligated to make any sale of Pledged Collateral regardless of notice of sale
having been given.  Secured Party may
adjourn any public or private sale from time to time by announcement at the
time and place fixed therefor, and such sale may, without further notice, be
made at the time and place to which it was so adjourned.  Each Pledgor hereby waives any claims against
Secured Party arising by reason of the fact that the price at which any Pledged
Collateral may have been sold at such a private sale was less than the price
which might have been obtained at a public sale, even if Secured Party accepts
the first offer received and does not offer such Pledged Collateral to more
than one offeree.  If the proceeds of any
sale or other disposition of the Pledged Collateral are insufficient to pay all
the Secured Obligations, Pledgors shall be jointly and severally liable for the
deficiency and the fees of any attorneys employed by Secured Party to collect
such deficiency.

 

(b)   Each Pledgor recognizes that, by reason of
certain prohibitions contained in the Securities Act of 1933, as from time to
time amended (the “Securities Act”),
and applicable state securities laws, Secured Party may be compelled, with
respect to any sale of all or any part of the Pledged Equity conducted without
prior registration or qualification of such Pledged Equity under the Securities
Act and/or such state or other applicable securities laws, to limit purchasers
to those who will agree, among other things, to acquire the Pledged Equity for
their own account, for investment and not with a view to the distribution or
resale thereof.  Each Pledgor
acknowledges that any such private placement may be at prices and on terms less
favorable than those obtainable through a sale without such restrictions
(including, without limitation, an offering made pursuant to a registration
statement under the Securities Act) and, notwithstanding such circumstances,
such Pledgor agrees that any such private placement shall, in and of itself,
not be deemed to be commercially unreasonable and that Secured Party shall have
no obligation to delay the sale of any Pledged Equity for the period of time
necessary to permit the issuer thereof to register it for a form of sale requiring
registration under the Securities Act or under applicable state or other
securities laws, even if such issuer would, or should, agree to so register it.

 

(c)   If Secured Party determines to exercise its
right to sell any or all of the Pledged Equity, upon written request, each
Pledgor shall and shall cause each issuer of any Pledged Equity to be sold
hereunder from time to time to furnish to Secured Party all such information as
Secured Party may request in order to determine the amount of Pledged Equity that
may be sold by Secured Party in exempt transactions under the Securities Act
and the rules and regulations of the Securities and Exchange Commission
thereunder, as the same are from time to time in effect.

 

16

 

SECTION 14.       Application of Proceeds. 
Except as expressly provided elsewhere in this Agreement, all
proceeds received by Secured Party in respect of any sale of, collection from,
or other realization upon all or any part of the Collateral shall be applied in
the following order of priority:

 

FIRST:  To the payment of all costs and expenses of
such sale, collection or other realization, including reasonable compensation
to Secured Party and its agents and counsel, and all other expenses,
liabilities and advances made or incurred by Secured Party in connection
therewith, and all amounts for which Secured Party is entitled to
indemnification hereunder and all advances made by Secured Party hereunder for
the account of Pledgors, and to the payment of all costs and expenses paid or
incurred by Secured Party in connection with the exercise of any right or
remedy hereunder;

 

SECOND:  To the payment of all other Secured
Obligations and, as to obligations arising under the Loan Documents, as
provided in the Loan Documents; and

 

THIRD:  To the payment to or upon the order of
Company, or to whosoever may be lawfully entitled to receive the same or as a
court of competent jurisdiction may direct, of any surplus then remaining from
such proceeds.

 

SECTION 15.       Indemnity and Expenses.

 

(a)   Pledgors jointly and severally agree to
indemnify Secured Party from and against any and all claims, losses and
liabilities in any way relating to, growing out of or resulting from this
Agreement and the transactions contemplated hereby (including, without
limitation, enforcement of this Agreement), except to the extent such claims,
losses or liabilities result solely from Secured Party’s gross negligence or
willful misconduct as finally determined by a court of competent jurisdiction.

 

(b)   Pledgors jointly and severally agree to pay
to Secured Party upon demand the amount of any and all costs and expenses,
including the reasonable fees and expenses of its counsel and of any experts
and agents, that Secured Party may incur in connection with (i) the
administration of this Agreement, (ii) the custody or preservation of, or
the sale of, collection from, or other realization upon, any of the Pledged
Collateral, (iii) the exercise or enforcement of any of the rights of
Secured Party hereunder, or (iv) the failure by any Pledgor to perform or
observe any of the provisions hereof.

 

(c)   The obligations of Pledgors in this Section 15
shall survive the termination of this Agreement and the discharge of Pledgors’
other obligations under this Agreement and the Loan Documents, as the case may
be.

 

SECTION 16.       Continuing Security Interest; Assigns.  This
Agreement shall create a continuing security interest in the Pledged
Collateral and shall (a) remain in full force and effect until the payment
in full of all Secured Obligations, (b) be binding upon each Pledgor, its
successors and assigns, and (c) inure, together with the rights and
remedies of Secured Party hereunder, to the benefit of Secured Party and its
successors, transferees and 

 

17

 

assigns; provided, however, that neither
Secured party nor any Pledgor may assign this Agreement without the prior
written consent of the other.  Upon the
payment in full of all Secured Obligations, the security interest granted
hereby shall terminate and all rights to the Pledged Collateral shall revert to
Pledgors.  Upon any such termination
Secured Party will, at Pledgors’ expense, execute and deliver to Pledgors such
documents as Pledgors shall reasonably request to evidence such termination.

 

SECTION 17.             Additional Pledgors.  From
time to time subsequent to the date hereof, additional Subsidiaries of Company
may become parties hereto as additional Pledgors (each an “Additional
Pledgor”), by executing a counterpart of this Agreement
substantially in the form of Schedule VI annexed hereto.  Upon delivery of any such counterpart to
Secured Party, notice of which is hereby waived by Pledgors, each such
Additional Pledgor shall be a Pledgor and shall be as fully a party hereto as
if such Additional Pledgor were an original signatory hereto.  Each Pledgor expressly agrees that its
obligations arising hereunder shall not be affected or diminished by the
addition or release of any other Pledgor hereunder, nor by any election of
Secured Party not to cause any Subsidiary of Company to become an Additional
Pledgor hereunder.  This Agreement shall
be fully effective as to any Pledgor that is or becomes a party hereto
regardless of whether any other Person becomes or fails to become or ceases to
be a Pledgor hereunder.

 

SECTION 18.       Amendments; Etc.  No
amendment, modification, termination or waiver of any provision of this
Agreement, and no consent to any departure by any Pledgor therefrom, shall in
any event be effective unless the same shall be in writing and signed by
Secured Party and, in the case of any such amendment or modification, by
Pledgors.  Any such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which it was given.

 

SECTION 19.       Notices.  Any notice or other
communication herein required or permitted to be given shall be in
writing and may be personally served or sent by telefacsimile or United States
mail or courier service and shall be deemed to have been given when delivered
in person or by courier service, upon receipt of telefacsimile, or three
Business Days after depositing it in the United States mail with postage
prepaid and properly addressed; provided that notices to Secured Party shall
not be effective until received.  For the
purposes hereof, the address of each party hereto shall be as set forth under
such party’s name on the signature pages hereof or such other address as
shall be designated by such party in a written notice delivered to the other
party hereto.

 

SECTION 20.       Failure or Indulgence Not Waiver; Remedies
Cumulative.  No failure or delay on the part of
Secured Party in the exercise of any power, right or privilege hereunder shall
impair such power, right or privilege or be construed to be a waiver of any
default or acquiescence therein, nor shall any single or partial exercise of
any such power, right or privilege preclude any other or further exercise
thereof or of any other power, right or privilege.  All rights and remedies existing under this Agreement
are cumulative to, and not exclusive of, any rights or remedies otherwise
available.

 

SECTION 21.       Severability.  In case any provision in or
obligation under this Agreement shall be invalid, illegal or
unenforceable in any jurisdiction, the validity, legality 

 

18

 

and enforceability of the remaining provisions or
obligations, or of such provision or obligation in any other jurisdiction,
shall not in any way be affected or impaired thereby.

 

SECTION 22.       Headings.  Section and subsection
headings in this Agreement are included herein for convenience of
reference only and shall not constitute a part of this Agreement for any other
purpose or be given any substantive effect.

 

SECTION 23.       Governing Law; Terms.  THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS
OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF CALIFORNIA
(INCLUDING WITHOUT LIMITATION SECTION 1646.5 OF THE CIVIL CODE OF THE
STATE OF CALIFORNIA), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES, EXCEPT TO
THE EXTENT THAT THE UCC PROVIDES THAT THE PERFECTION OF THE SECURITY INTEREST
HEREUNDER, OR REMEDIES HEREUNDER, IN RESPECT OF ANY PARTICULAR PLEDGED
COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF
CALIFORNIA.  Unless otherwise defined
herein or in the Loan Documents, terms used in Articles 8 and 9 of the UCC are
used herein as therein defined.

 

SECTION 24.       Consent to Jurisdiction and Service
of Process.  ALL JUDICIAL PROCEEDINGS BROUGHT AGAINST ANY
PLEDGOR ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR ANY OBLIGATIONS
HEREUNDER, MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT
JURISDICTION IN THE STATE OF CALIFORNIA. 
BY EXECUTING AND DELIVERING THIS AGREEMENT, EACH PLEDGOR, FOR ITSELF AND
IN CONNECTION WITH ITS PROPERTIES, IRREVOCABLY (I) ACCEPTS GENERALLY AND
UNCONDITIONALLY THE NONEXCLUSIVE JURISDICTION AND VENUE OF SUCH COURTS; (II) WAIVES
ANY DEFENSE OF FORUM NON CONVENIENS; (III) AGREES THAT SERVICE OF ALL
PROCESS IN ANY SUCH PROCEEDING IN ANY SUCH COURT MAY BE MADE BY REGISTERED
OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO SUCH PLEDGOR AT ITS ADDRESS
PROVIDED IN ACCORDANCE WITH SECTION 19; (IV) AGREES
THAT SERVICE AS PROVIDED IN CLAUSE (III) ABOVE IS SUFFICIENT TO CONFER
PERSONAL JURISDICTION OVER SUCH PLEDGOR IN ANY SUCH PROCEEDING IN ANY SUCH
COURT, AND OTHERWISE CONSTITUTES EFFECTIVE AND BINDING SERVICE IN EVERY
RESPECT; (V) AGREES THAT SECURED PARTY RETAINS
THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO BRING
PROCEEDINGS AGAINST SUCH PLEDGOR IN THE COURTS OF ANY OTHER JURISDICTION; AND (VI) AGREES THAT THE PROVISIONS OF THIS SECTION 24
RELATING TO JURISDICTION AND VENUE SHALL BE BINDING AND ENFORCEABLE TO THE
FULLEST EXTENT PERMISSIBLE UNDER CALIFORNIA CODE OF CIVIL PROCEDURE SECTION 410.40
OR OTHERWISE.  NOTWITHSTANDING THE
FOREGOING, NOTHING IN THIS SECTION 24 SHALL LIMIT THE RIGHT OF SECURED PARTY
TO TAKE PROCEEDINGS AGAINST ANY PLEDGOR IN ANY OTHER COURT OF COMPETENT
JURISDICTION, NOR SHALL THE TAKING OF PROCEEDINGS IN ANY ONE OR MORE
JURISDICTIONS 

 

19

 

PRECLUDE THE TAKING OF
PROCEEDINGS IN ANY OTHER JURISDICTIONS, WHETHER CONCURRENTLY OR NOT, TO THE
EXTENT PERMITTED BY THE LAW OF SUCH OTHER JURISDICTION.

 

SECTION 25.       Waiver of Jury Trial.  PLEDGORS AND SECURED PARTY HEREBY AGREE TO
WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION
BASED UPON OR ARISING OUT OF THIS AGREEMENT. 
THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL-ENCOMPASSING OF ANY AND
ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO THE SUBJECT
MATTER OF THIS TRANSACTION, INCLUDING WITHOUT LIMITATION CONTRACT CLAIMS, TORT
CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW AND STATUTORY
CLAIMS.  EACH PLEDGOR AND SECURED PARTY
ACKNOWLEDGE THAT THIS WAIVER IS A MATERIAL INDUCEMENT FOR SUCH PLEDGOR AND
SECURED PARTY TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH PLEDGOR AND
SECURED PARTY HAVE ALREADY RELIED ON THIS WAIVER IN ENTERING INTO THIS
AGREEMENT AND THAT EACH WILL CONTINUE TO RELY ON THIS WAIVER IN THEIR RELATED
FUTURE DEALINGS.  EACH PLEDGOR AND
SECURED PARTY FURTHER WARRANT AND REPRESENT THAT EACH HAS REVIEWED THIS WAIVER
WITH ITS LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY
TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.  THIS WAIVER IS IRREVOCABLE, MEANING THAT IT MAY NOT
BE MODIFIED EITHER ORALLY OR IN WRITING (OTHER THAN BY A MUTUAL WRITTEN WAIVER
SPECIFICALLY REFERRING TO THIS SECTION 25 AND EXECUTED BY EACH OF THE
PARTIES HERETO), AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT.  In the event of litigation, this Agreement
may be filed as a written consent to a trial by the court.

 

SECTION 26.       Counterparts.  This Agreement may be executed
in one or more counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed an
original, but all such counterparts together shall constitute but one and the
same instrument; signature pages may be detached from multiple separate
counterparts and attached to a single counterpart so that all signature pages are
physically attached to the same document.

 

SECTION 27.       Suretyship Waivers by Pledgors, etc.

 

(a)   Each Pledgor jointly and severally agrees
that its obligations hereunder are irrevocable, absolute, independent and
unconditional and shall not be affected by any circumstance which constitutes a
legal or equitable discharge of a guarantor or surety other than payment in
full of the Secured Obligations.  In
furtherance of the foregoing and without limiting the generality thereof, each
Pledgor agrees as follows:  (i) Secured
Party may from time to time, without notice or demand and without affecting the
validity or enforceability of this Agreement or giving rise to any limitation,
impairment or discharge of such Pledgor’s liability hereunder, (A) renew,
extend, accelerate or otherwise change the time, place, manner 

 

20

 

or terms of payment of the Secured Obligations, (B) settle,
compromise, release or discharge, or accept or refuse any offer of performance
with respect to, or substitutions for, the Secured Obligations or any agreement
relating thereto and/or subordinate the payment of the same to the payment of
any other obligations, (C) request and accept guaranties of the Secured
Obligations and take and hold other security for the payment of the Secured
Obligations, (D) release, exchange, compromise, subordinate or modify,
with or without consideration, any other security for payment of the Secured
Obligations, any guaranties of the Secured Obligations, or any other obligation
of any Person with respect to the Secured Obligations, (E) enforce and
apply any other security now or hereafter held by or for the benefit of Secured
Party in respect of the Secured Obligations and direct the order or manner of
sale thereof, or exercise any other right or remedy that Secured Party may have
against any such security, as Secured Party in its discretion may determine
consistent with the Note and any applicable security agreement, including
foreclosure on any such security pursuant to one or more judicial or
nonjudicial sales, whether or not every aspect of any such sale is commercially
reasonable, and (F) exercise any other rights available to Secured Party
under the Note, at law or in equity; and (ii) this Agreement and the
obligations of such Pledgor hereunder shall be valid and enforceable and shall
not be subject to any limitation, impairment or discharge for any reason (other
than payment in full of the Secured Obligations), including without limitation
the occurrence of any of the following, whether or not such Pledgor shall have
had notice or knowledge of any of them:  (A) any
failure to assert or enforce or agreement not to assert or enforce, or the stay
or enjoining, by order of court, by operation of law or otherwise, of the
exercise or enforcement of, any claim or demand or any right, power or remedy
with respect to the Secured Obligations or any agreement relating thereto, or
with respect to any guaranty of or other security for the payment of the
Secured Obligations, (B) any waiver, amendment or modification of, or any
consent to departure from, any of the terms or provisions of the Note or any
agreement or instrument executed pursuant thereto, or of any guaranty or other
security for the Secured Obligations, (C) the Secured Obligations, or any
agreement relating thereto, at any time being found to be illegal, invalid or
unenforceable in any respect, (D) the application of payments received
from any source to the payment of indebtedness other than the Secured
Obligations, even though Secured Party might have elected to apply such payment
to any part or all of the Secured Obligations, (E) any failure to perfect
or continue perfection of a security interest in any collateral which secures
any of the Secured Obligations, (F) any defenses, set-offs or
counterclaims which Company may allege or assert against Secured Party in
respect of the Secured Obligations, including but not limited to failure of
consideration, breach of warranty, payment, statute of frauds, statute of
limitations, accord and satisfaction and usury, and (G) any other act or
thing or omission, or delay to do any other act or thing, which may or might in
any manner or to any extent vary the risk of such Pledgor as an obligor in
respect of the Secured Obligations.

 

(b)   Each Pledgor hereby waives, for the benefit
of Secured Party:  (i) any right to
require Secured Party, as a condition of payment or performance by such
Pledgor, to (A) proceed against Company, any guarantor of the Secured
Obligations or any other Person, (B) proceed against or exhaust any other
security held from Company, any guarantor of the Secured Obligations or any
other Person, (C) proceed against or have resort to any balance of any
deposit account or credit on the books of Secured Party in favor of Company or
any other Person, or (D) pursue any other remedy in the power of Secured
Party whatsoever; (ii) any

 

21

 

defense arising by reason of the incapacity, lack of
authority or any disability or other defense of Company including, without
limitation, any defense based on or arising out of the lack of validity or the
unenforceability of the Secured Obligations or any agreement or instrument
relating thereto or by reason of the cessation of the liability of Company from
any cause other than payment in full of the Secured Obligations; (iii) any
defense based upon any statute or rule of law which provides that the
obligation of a surety must be neither larger in amount nor in other respects
more burdensome than that of the principal; (iv) any defense based upon
Secured Party’s errors or omissions in the administration of the Secured
Obligations, except behavior which amounts to bad faith; (v) (A) any
principles or provisions of law, statutory or otherwise, which are or might be
in conflict with the terms of this Agreement and any legal or equitable
discharge of such Pledgor’s obligations hereunder, (B) the benefit of any statute
of limitations affecting such Pledgor’s liability hereunder or the enforcement
hereof, (C) any rights to set-offs, recoupments and counterclaims, and (D) promptness,
diligence and any requirement that Secured Party protect, secure, perfect or
insure any other security interest or lien or any property subject thereto; (vi) notices,
demands, presentments, protests, notices of protest, notices of dishonor and
notices of any action or inaction, notices of default under the Note or any
agreement or instrument related thereto, notices of any renewal, extension or
modification of the Secured Obligations or any agreement related thereto,
notices of any extension of credit to Company and notices of any of the matters
referred to in Section 27(a) and any right to consent to any thereof;
and (vii) to the fullest extent permitted by law, any defenses or benefits
that may be derived from or afforded by law which limit the liability of or
exonerate guarantors or sureties, or which may conflict with the terms of this
Agreement.

 

(c)   As used in this Section 27(c), any
reference to “the principal” includes Company, and any reference to “the
creditor” includes Secured Party.  In
accordance with Section 2856 of the California Civil Code (a) each
Pledgor waives any and all rights and defenses available to such Pledgor by
reason of Sections 2787 to 2855, inclusive, 2899 and 3433 of the California
Civil Code.  No other provision of this
Agreement shall be construed as limiting the generality of any of the covenants
and waivers set forth in this Section 27(c).  This Section 27(c) is included
solely out of an abundance of caution, and shall not be construed to mean that
any of the above-referenced provisions of California law are in any way
applicable to this Agreement or to any of the Secured Obligations.

 

(d)   Until the Secured Obligations shall have been
paid in full, each Pledgor shall withhold exercise of (i) any claim, right
or remedy, direct or indirect, that such Pledgor now has or may hereafter have
against Company or any of its assets in connection with this Agreement or the
performance by such Pledgor of its obligations hereunder, in each case whether
such claim, right or remedy arises in equity, under contract, by statute
(including without limitation under California Civil Code Section 2847,
2848 or 2849), under common law or otherwise and including without limitation (A) any
right of subrogation, reimbursement or indemnification that such Pledgor now
has or may hereafter have against Company, (B) any right to enforce, or to
participate in, any claim, right or remedy that Secured Party now has or may
hereafter have against Company, and (C) any benefit of, and any right to
participate in, any other collateral or security now or hereafter held by
Secured Party, and (ii) any right of contribution such Pledgor now has or
may hereafter have against any guarantor of any of the Secured
Obligations.  Each Pledgor further agrees
that, to the extent the agreement to withhold exercise of its rights of
subrogation, reimbursement, 

 

22

 

indemnification and contribution as set forth herein
is found by a court of competent jurisdiction to be void or voidable for any
reason, any rights of subrogation, reimbursement or indemnification such
Pledgor may have against Company or against any other collateral or security,
and any rights of contribution such Pledgor may have against any such
guarantor, shall be junior and subordinate to any rights Secured Party may have
against Company, to all right, title and interest Secured Party may have in any
such other collateral or security, and to any right Secured Party may have
against any such guarantor.

 

(e)   Secured Party shall have no obligation to
disclose or discuss with Pledgors its assessment, or any Pledgor’s assessment,
of the financial condition of Company. 
Each Pledgor has adequate means to obtain information from Company on a
continuing basis concerning the financial condition of Company and its ability
to perform its obligations under the Note, and each Pledgor assumes the
responsibility for being and keeping informed of the financial condition of
Company and of all circumstances bearing upon the risk of nonpayment of the
Secured Obligations.  Each Pledgor hereby
waives and relinquishes any duty on the part of Secured Party to disclose any
matter, fact or thing relating to the business, operations or condition of
Company now known or hereafter known by Secured Party.

 

[Remainder
of page intentionally left blank]

 

23

 

IN
WITNESS WHEREOF,
Pledgors and Secured Party have caused this Agreement to be duly executed and
delivered by their respective officers thereunto duly authorized as of the date
first written above.

 

	
   

  	
  PLEDGORS:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  POWER-ONE, INC., a Delaware corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/
  R. HOLLIDAY

  
	
   

  	
   

  	
  Title: Secretary

  
	
   

  	
   

  
	
   

  	
  Notice Address: 

  	
  740 Calle Plano

  
	
   

  	
   

  	
  Camarillo, CA 93012

  
	
   

  	
   

  	
  Attn: Randy Holliday

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  P-O DELAWARE, INC., a Delaware corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/
  R. HOLLIDAY

  
	
   

  	
   

  	
  Title: Secretary

  
	
   

  	
   

  
	
   

  	
  Notice Address: 

  	
  740 Calle Plano

  
	
   

  	
   

  	
  Camarillo, CA 93012

  
	
   

  	
   

  	
  Attn: Randy Holliday

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  PAI CAPITAL LLC, a Delaware limited liability company

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/
  R. HOLLIDAY

  
	
   

  	
   

  	
  Title: Member

  
	
   

  	
   

  
	
   

  	
  Notice Address: 

  	
  740 Calle Plano

  
	
   

  	
   

  	
  Camarillo, CA 93012

  
	
   

  	
   

  	
  Attn: Randy Holliday

  
				

 

 

S-1

 

	
   

  	
  PLEDGORS:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  HC POWER, INC., a California corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  R. HOLLIDAY

  
	
   

  	
   

  	
  Title: Secretary

  
	
   

  
	
   

  	
  Notice Address: 

  	
  740 Calle Plano

  
	
   

  	
   

  	
  Camarillo, CA 93012

  
	
   

  	
   

  	
  Attn: Randy Holliday

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  P-O NEVADA CORP., a Nevada corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  R. HOLLIDAY

  
	
   

  	
   

  	
  Title: Secretary

  
	
   

  
	
   

  	
  Notice Address:

  	
  740 Calle Plano

  
	
   

  	
   

  	
  Camarillo, CA 93012

  
	
   

  	
   

  	
  Attn: Randy Holliday

  
				

 

 

S-2

 

	
   

  	
  SECURED PARTY:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  PWER BRIDGE, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ WILLIAM B. KEISLER

  
	
   

  	
   

  	
  Title: Authorized
  Representative

  
	
   

  
	
   

  	
  Notice Address:

  	
  c/o Stephens Inc.

  
	
   

  	
   

  	
  111 Center Street

  
	
   

  	
   

  	
  Little Rock, AK 72201

  
				

 

 

S-3

 

 

SCHEDULE
I

 

Pledged
Equity

 

	
  Issuer

  	
   

  	
  Class of

  Equity Interest

  	
   

  	
  Certificate 

  Nos.

  	
   

  	
  Amount of

  Equity Interests

  	
   

  	
  Percentage

  Pledged

  
	
  DOMESTIC SUBSIDIARIES (OTHER THAN PAI CAPITAL
  LLC)

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  HC
  Power, Inc. (California)

  	
   

  	
  Common Stock

  	
   

  	
  40

  	
   

  	
  100%

  	
   

  	
  100%

  
	
  P-O
  Delaware, Inc. (Delaware)

  	
   

  	
  Common Stock

  	
   

  	
  1

  	
   

  	
  100%

  	
   

  	
  100%

  
	
  P-O Nevada Corp. (Nevada)

  	
   

  	
  Common Stock

  	
   

  	
  1

  	
   

  	
  100%

  	
   

  	
  100%

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  FOREIGN SUBSIDIARIES THAT ARE FIRST-TIER
  SUBSIDIARIES

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Power-One
  Energy Solutions Pty Ltd. (Australia)

  	
   

  	
  Ordinary

  	
   

  	
  Share certificates not
  required

  	
   

  	
  100%

  	
   

  	
  Up to
  66%

  
	
  Power-One
  Limited (Cayman Islands)

  	
   

  	
  Ordinary

  	
   

  	
  1

  	
   

  	
  100%

  	
   

  	
  Up to
  66%

  
	
  Power-One
  Co. Ltd. (China)

  	
   

  	
  Not applicable

  	
   

  	
  Not applicable

  	
   

  	
  100%

  	
   

  	
  Up to
  66%

  
	
  Power-One
  Asia Pacific Electronics (Shenzhen) Co. (China)

  	
   

  	
  Not applicable

  	
   

  	
  Not applicable

  	
   

  	
  100%

  	
   

  	
  Up to
  66%

  
	
  Power-One
  I/S (Denmark)

  	
   

  	
  Not applicable

  	
   

  	
  Not applicable

  	
   

  	
  100%*

  	
   

  	
  Up to
  66%

  
	
  Power-One
  OY (Finland)

  	
   

  	
  Normal

  	
   

  	
  Share certificates not
  required

  	
   

  	
  100%

  	
   

  	
  Up to
  66%

  

* Including Company’s
25% Equity Interest in Power-One I/S and P-O Nevada’s 75% Equity Interest in
Power-One I/S.

 

 

Schedule I-1

 

 

	
  Power-One
  Ltd. (Hong Kong)

  	
   

  	
  Ordinary

  	
   

  	
  3 and 6

  	
   

  	
  100%

  	
   

  	
  Up to
  66%

  
	
  Power-One
  Hungary Holdings Kft. (Hungary)

  	
   

  	
  Registered Capital

  	
   

  	
  Not applicable

  	
   

  	
  100%

  	
   

  	
  Up to
  66%

  
	
  Power-One
  Italy Holdings S.p.A. (Italy)

  	
   

  	
  Ordinary

  	
   

  	
  Certificate to be
  issued

  	
   

  	
  100%

  	
   

  	
  Up to
  66%

  
	
  Power-One
  Energy Solutions SDN BHD (Malaysia)

  	
   

  	
  Ordinary

  	
   

  	
  4

  	
   

  	
  100%

  	
   

  	
  Up to
  66%

  
	
  Power-One
  LLC (Russia)

  	
   

  	
  Participatory Share

  	
   

  	
  Not applicable

  	
   

  	
  100%

  	
   

  	
  Up to
  66%

  
	
  Power-One
  Pte. Ltd. (Singapore)

  	
   

  	
  Ordinary

  	
   

  	
  5

  	
   

  	
  100%

  	
   

  	
  Up to
  66%

  
	
  Power-One
  Power Solutions AB (Sweden)

  	
   

  	
  Common

  	
   

  	
  Not required

  	
   

  	
  100%

  	
   

  	
  Up to
  66%

  
	
  Power-One
  AG (Switzerland)

  	
   

  	
  Common

  	
   

  	
  TBD

  	
   

  	
  100%

  	
   

  	
  Up to
  66%

  
	
  Power-One
  Limited (UK)

  	
   

  	
  Ordinary

  	
   

  	
  TBD

  	
   

  	
  100%

  	
   

  	
  Up to
  66%

  

 

 

Schedule I-2

 

SCHEDULE
II

 

Property
and Assets

 

                All of the property and assets (other than leased or
owned real property) of the entities listed below as Pledgors, including all
such property and assets that are now owned and all such property and assets
that may hereafter be acquired, and including, but not limited to, inventory,
accounts, equipment, chattel paper, documents, instruments, copyrights,
trademarks, service marks, patents and related rights, general intangibles,
deposit accounts, cash and cash equivalents, investment property (including,
but not limited to, interests in subsidiaries) and any and all proceeds and
products of any of the foregoing and any of the proceeds or products thereof:

 

                The Pledgors of the collateral described herein shall
include the following:  Power-One, Inc.;
P-O Delaware, Inc., PAI Capital LLC, HC Power, Inc. and P-O Nevada
Corp.

 

 

Schedule II-1

 

SCHEDULE
III

 

Filing
Offices

 

	
  Pledgor

  	
   

  	
  Filing Offices

  
	
   

  	
   

  	
   

  
	
  Power-One, Inc.

  	
   

  	
  Delaware

  
	
  P-O Delaware, Inc.

  	
   

  	
  Delaware

  
	
  PAI Capital LLC

  	
   

  	
  Delaware

  
	
  HC Power, Inc.

  	
   

  	
  California

  
	
  P-O Nevada Corp.

  	
   

  	
  Nevada

  

 

 

Schedule III-1

 

SCHEDULE
IV

 

Office
Locations, Type and Jurisdiction of Organization

 

	
  Name
  of 

  Pledgor

  	
   

  	
  Type of 

  Organization

  	
   

  	
  Office 

  Locations

  	
   

  	
  Jurisdiction of 

  Organization

  	
   

  	
  Organization 

  Number

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Power-One, Inc.

  	
   

  	
  Corporation

  	
   

  	
  Camarillo, CA

  	
   

  	
  Delaware

  	
   

  	
  77-0420182

  
	
  P-O Delaware, Inc.

  	
   

  	
  Corporation

  	
   

  	
  Camarillo, CA

  	
   

  	
  Delaware

  	
   

  	
  3621936

  
	
  PAI Capital LLC

  	
   

  	
  Limited liability
  company

  	
   

  	
  Camarillo, CA

  	
   

  	
  Delaware

  	
   

  	
  20-8164367

  
	
  HC Power, Inc.

  	
   

  	
  Corporation

  	
   

  	
  Camarillo, CA

  	
   

  	
  California

  	
   

  	
  1260082

  
	
  P-O Nevada Corp.

  	
   

  	
  Corporation

  	
   

  	
  Camarillo, CA

  	
   

  	
  Nevada

  	
   

  	
  C18404-00

  

 

Names of
Pledgors Used in Past Five Years

 

Not applicable

 

 

Schedule IV-1

 

SCHEDULE
V

 

Pledge
Amendment

 

This
Pledge Amendment, dated
                        ,
    , is delivered pursuant to Section 7(b) of
the Security Agreement referred to below. 
The undersigned hereby agrees that this Pledge Amendment may be attached
to the Security Agreement dated
                    ,
        , among
                            ,
as Company, the other Pledgors named therein, and
                              ,
as Secured Party (the “Security Agreement,”
capitalized terms defined therein being used herein as therein defined) and
that the Pledged Equity listed on this Pledge Amendment shall be deemed to be
part of the Pledged Equity and shall become part of the Pledged Collateral and
shall secure all Secured Obligations.

 

	
   

  	
  [NAME
  OF PLEDGOR]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Title:

  

 

 

	
  Issuer

  	
   

  	
  Class of

  Equity Interests

  	
   

  	
  Certificate

   Nos.

  	
   

  	
  Amount of

  Equity 

  Interests

  	
   

  	
  Percentage

  Ownership

  Interest

  	
   

  	
  Percentage

  Pledged

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

 

Schedule V-1

 

 

SCHEDULE
VI

 

Form of
Counterpart

 

COUNTERPART (this
“Counterpart”), dated
                          ,
is delivered pursuant to Section 17 of the Security Agreement referred to
below.  The undersigned hereby agrees
that this Counterpart may be attached to the Security Agreement, dated as of
                          ,
              
(as it may be from time to time amended, modified or supplemented, the “Security Agreement”; capitalized terms
used herein not otherwise defined herein shall have the meanings ascribed
therein), among Power-One, Inc., PAI Capital LLC and PWER Bridge, LLC, as
Secured Party.  The undersigned, by
executing and delivering this Counterpart, hereby becomes a Pledgor under the
Security Agreement in accordance with Section 17 thereof and agrees to be
bound by all of the terms thereof. 
Without limiting the generality of the foregoing, the items of property
described in the schedule attached hereto shall be deemed to be part of the and
shall become part of the Pledged Collateral and shall secure all Secured
Obligations.

 

	
   

  	
  [NAME
  OF ADDITIONAL PLEDGOR]

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

 

Schedule VI-1

 

EXHIBIT I TO

SECURITY AGREEMENT

 

[FORM OF
GRANT OF TRADEMARK SECURITY INTEREST]

 

GRANT OF
TRADEMARK SECURITY INTEREST

 

WHEREAS, [NAME OF PLEDGOR],
a
                      
corporation (“Pledgor”), owns and uses in its
business, and will in the future adopt and so use, various intangible assets,
including the Trademark Collateral (as defined below); and

 

WHEREAS, Company and Secured Party are parties to
a Term Loan Agreement dated as of September 28, 2006 (said loan agreement,
as it may hereafter be amended, supplemented or otherwise modified from time to
time, being the “Loan Agreement”, the terms
defined therein and not otherwise defined herein being used herein as therein
defined) and a Promissory Note dated as of October 23, 2006 (the “Note”, and together with the Loan Agreement, the “Loan Documents”). 
The Loan Documents evidence a loan from Secured Party to Borrower in the
original principal amount of Fifty Million Dollars ($50,000,000); and

 

WHEREAS, the maturity date of the Loan pursuant
to the Note is April 30, 2008. 
Company has requested Secured Party to extend the maturity date to April 30,
2010; and

 

WHEREAS, as a condition to extending the maturity
date of the Loan, Pledgor has created in favor of Secured Party a security
interest in, and Secured Party has become a secured creditor with respect to,
the Trademark Collateral;

 

NOW,
THEREFORE, for
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, subject to the terms and conditions of the Security Agreement, to
evidence further the security interest granted by Pledgor to Secured Party
pursuant to the Security Agreement, Pledgor hereby grants to Secured Party a
security interest in all of Pledgor’s right, title and interest in and to the
following, in each case whether now or hereafter existing or in which Pledgor
now has or hereafter acquires an interest and wherever the same may be located
(the “Trademark Collateral”):

 

(i)            all rights, title and interest
(including rights acquired pursuant to a license or otherwise) in and to all
trademarks, service marks, designs, logos, indicia, tradenames, trade dress,
corporate names, company names, business names, fictitious business names,
trade styles and/or other source and/or business identifiers and applications
pertaining thereto, owned by such Pledgor, or hereafter adopted and used, in
its business (including, without limitation, the trademarks set forth on Schedule A
annexed hereto) (collectively, the “Trademarks”),
all registrations that have been or may hereafter be issued or applied for
thereon in the United States and any state thereof and in foreign countries
(including, without limitation, the registrations and applications set forth on
Schedule A annexed hereto), all common law and other rights (but in
no event any of the obligations) in and to the Trademarks in the United States
and any state thereof and in foreign countries, and all goodwill of such
Pledgor’s business symbolized by the Trademarks and associated therewith; and

 

I-1

 

(ii)           all proceeds, products, rents and
profits of or from any and all of the foregoing Trademark Collateral and, to
the extent not otherwise included, all payments under insurance (whether or not
Secured Party is the loss payee thereof), or any indemnity, warranty or
guaranty, payable by reason of loss or damage to or otherwise with respect to
any of the foregoing Trademark Collateral. 
For purposes of this Grant of Trademark Security Interest, the term “proceeds” includes whatever is receivable or received when
Trademark Collateral or proceeds are sold, licensed, exchanged, collected or
otherwise disposed of, whether such disposition is voluntary or involuntary.

 

Pledgor
does hereby further acknowledge and affirm that the rights and remedies of
Secured Party with respect to the security interest in the Trademark Collateral
granted hereby are more fully set forth in the Security Agreement, the terms
and provisions of which are incorporated by reference herein as if fully set
forth herein.

 

[The remainder of
this page is intentionally left blank.]

 

I-2

 

IN WITNESS WHEREOF, Pledgor has caused this Grant of Trademark Security
Interest to be duly executed and delivered by its officer thereunto duly
authorized as of the      day of
              ,
          .

 

 

	
   

  	
  [NAME OF PLEDGOR]

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  

 

I-3

 

SCHEDULE
A

 

TO

 

GRANT OF
TRADEMARK SECURITY INTEREST

 

	
  Owner

  	
   

  	
  Trademark

  Description

  	
   

  	
  Registration/Appl.

  Number

  	
   

  	
  Registration/Appl.

  Date

  	
   

  

 

 

 

I-A-1

 

EXHIBIT II TO

SECURITY AGREEMENT

 

[FORM OF
GRANT OF PATENT SECURITY INTEREST]

 

GRANT OF
PATENT SECURITY INTEREST

 

WHEREAS, [NAME OF PLEDGOR],
a
                      
corporation (“Pledgor”), owns and uses in its
business, and will in the future adopt and so use, various intangible assets,
including the Patent Collateral (as defined below); and

 

WHEREAS, Company and Secured Party are parties to
a Term Loan Agreement dated as of September 28, 2006 (said loan agreement,
as it may hereafter be amended, supplemented or otherwise modified from time to
time, being the “Loan Agreement”, the terms
defined therein and not otherwise defined herein being used herein as therein
defined) and a Promissory Note dated as of October 23, 2006 (the “Note”, and together with the Loan Agreement, the “Loan Documents”). 
The Loan Documents evidence a loan from Secured Party to Borrower in the
original principal amount of Fifty Million Dollars ($50,000,000); and

 

WHEREAS, the maturity date of the Loan pursuant
to the Note is April 30, 2008. 
Company has requested Secured Party to extend the maturity date to April 30,
2010; and

 

WHEREAS, as a condition to extending the maturity
date of the Loan, Pledgor has created in favor of Secured Party a security
interest in, and Secured Party has become a secured creditor with respect to,
the Patent Collateral;

 

NOW,
THEREFORE, for
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, subject to the terms and conditions of the Security Agreement, to
evidence further the security interest granted by Pledgor to Secured Party
pursuant to the Security Agreement, Pledgor hereby grants to Secured Party a
security interest in all of Pledgor’s right, title and interest in and to the
following, in each case whether now or hereafter existing or in which Pledgor
now has or hereafter acquires an interest and wherever the same may be located
(the “Patent Collateral”):

 

(i)            all rights, title and interest
(including rights acquired pursuant to a license or otherwise) in and to all
patents and patent applications and rights and interests in patents and patent
applications under any domestic or foreign law that are presently, or in the
future may be, owned or held by such Pledgor and all patents and patent
applications and rights, title and interests in patents and patent applications
under any domestic or foreign law that are presently, or in the future may be,
owned by such Pledgor in whole or in part (including, without limitation, the
patents and patent applications set forth on Schedule A annexed hereto),
all rights (but not obligations) corresponding thereto to sue for past, present
and future infringements and all re-issues, divisions, continuations, renewals,
extensions and continuations-in-part thereof; and

 

(ii)             all proceeds, products, rents and
profits of or from any and all of the foregoing Patent Collateral and, to the
extent not otherwise included, all payments under insurance (whether or not
Secured Party is the loss payee thereof), or any indemnity, warranty or
guaranty, 

 

II-1

 

payable by reason of loss
or damage to or otherwise with respect to any of the foregoing Patent
Collateral.  For purposes of this Grant
of Patent Security Interest, the term “proceeds”
includes whatever is receivable or received when Patent Collateral or proceeds
are sold, licensed, exchanged, collected or otherwise disposed of, whether such
disposition is voluntary or involuntary.

 

Pledgor
does hereby further acknowledge and affirm that the rights and remedies of
Secured Party with respect to the security interest in the Patent Collateral
granted hereby are more fully set forth in the Security Agreement, the terms
and provisions of which are incorporated by reference herein as if fully set
forth herein.

 

[The remainder of
this page intentionally left blank.]

 

II-2

 

IN WITNESS WHEREOF, Pledgor has caused this Grant of Patent Security
Interest to be duly executed and delivered by its officer thereunto duly
authorized as of the        day of
                        ,
          .

 

	
   

  	
  [NAME OF PLEDGOR]

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  

 

II-3

 

SCHEDULE
A

TO

GRANT OF
PATENT SECURITY INTEREST

 

Patents Issued:

 

	
  Patent No.

  	
   

  	
  Issue Date

  	
   

  	
  Invention

  	
   

  	
  Inventor

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

Patents Pending:

 

	
  Applicant’s

  Name

  	
   

  	
  Date

  Filed

  	
   

  	
  Application

  Number

  	
   

  	
  

  Invention

  	
   

  	
  

  Inventor

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

II-A-1

 

EXHIBIT III TO

SECURITY AGREEMENT

 

[FORM OF
GRANT OF COPYRIGHT SECURITY INTEREST]

 

GRANT OF
COPYRIGHT SECURITY INTEREST

 

WHEREAS, [NAME OF PLEDGOR],
a
                      
corporation (“Pledgor”), owns and uses in its
business, and will in the future adopt and so use, various intangible assets,
including the Copyright Collateral (as defined below); and

 

WHEREAS, Company and Secured Party are parties to
a Term Loan Agreement dated as of September 28, 2006 (said loan agreement,
as it may hereafter be amended, supplemented or otherwise modified from time to
time, being the “Loan Agreement”, the terms
defined therein and not otherwise defined herein being used herein as therein
defined) and a Promissory Note dated as of October 23, 2006 (the “Note”, and together with the Loan Agreement, the “Loan Documents”). 
The Loan Documents evidence a loan from Secured Party to Borrower in the
original principal amount of Fifty Million Dollars ($50,000,000); and

 

WHEREAS, the maturity date of the Loan pursuant
to the Note is April 30, 2008. 
Company has requested Secured Party to extend the maturity date to April 30,
2010; and

 

WHEREAS, as a condition to extending the maturity
date of the Loan, Pledgor has created in favor of Secured Party a security
interest in, and Secured Party has become a secured creditor with respect to,
the Copyright Collateral;

 

NOW,
THEREFORE, for
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, subject to the terms and conditions of the Security Agreement, to
evidence further the security interest granted by Pledgor to Secured Party
pursuant to the Security Agreement, Pledgor hereby grants to Secured Party a
security interest in all of Pledgor’s right, title and interest in and to the
following, in each case whether now or hereafter existing or in which Pledgor
now has or hereafter acquires an interest and wherever the same may be located
(the “Copyright Collateral”):

 

(i)                                     all rights, title and interest (including
rights acquired pursuant to a license or otherwise) under copyright in various
published and unpublished works of authorship including, without limitation,
computer programs, computer data bases, other computer software layouts, trade
dress, drawings, designs, writings, and formulas (including, without
limitation, the works set forth on Schedule A annexed hereto, as
the same may be amended pursuant hereto from time to time) (collectively, the “Copyrights”), all copyright registrations issued to Pledgor
and applications for copyright registration that have been or may hereafter be
issued or applied for thereon in the United States and any state thereof and in
foreign countries (including, without limitation, the registrations set forth
on Schedule A annexed hereto, as the same may be amended pursuant hereto
from time to time) (collectively, the “Copyright Registrations”),
all common law and other rights in and to the Copyrights in the United States
and any state thereof and in foreign countries including all copyright licenses
(but with respect to such copyright licenses, only to the extent permitted by
such licensing arrangements) (the “Copyright Rights”),

 

III-1

 

including, without
limitation, each of the Copyrights, rights, titles and interests in and to the
Copyrights, all derivative works and other works protectable by copyright,
which are presently, or in the future may be, owned, created (as a work for
hire for the benefit of Pledgor), authored (as a work for hire for the benefit
of Pledgor), or acquired by Pledgor, in whole or in part, and all Copyright
Rights with respect thereto and all Copyright Registrations therefor,
heretofore or hereafter granted or applied for, and all renewals and extensions
thereof, throughout the world, including all proceeds thereof (such as, by way
of example and not by limitation, license royalties and proceeds of
infringement suits), the right (but not the obligation) to renew and extend
such Copyright Registrations and Copyright Rights and to register works protectable
by copyright and the right (but not the obligation) to sue in the name of such
Pledgor or in the name of Secured Party or Lenders for past, present and future
infringements of the Copyrights and Copyright Rights; and

 

(ii)                                  all proceeds, products, rents and profits
of or from any and all of the foregoing Copyright Collateral and, to the extent
not otherwise included, all payments under insurance (whether or not Secured
Party is the loss payee thereof), or any indemnity, warranty or guaranty,
payable by reason of loss or damage to or otherwise with respect to any of the
foregoing Copyright Collateral.  For
purposes of this Grant of Copyright Security Interest, the term “proceeds” includes whatever is receivable or received when
Copyright Collateral or proceeds are sold, licensed, exchanged, collected or
otherwise disposed of, whether such disposition is voluntary or involuntary.

 

Pledgor
does hereby further acknowledge and affirm that the rights and remedies of
Secured Party with respect to the security interest in the Copyright Collateral
granted hereby are more fully set forth in the Security Agreement, the terms
and provisions of which are incorporated by reference herein as if fully set
forth herein.

 

III-2

 

IN WITNESS WHEREOF, Pledgor has caused this Grant of Copyright Security
Interest to be duly executed and delivered by its officer thereunto duly
authorized as of the        day of
                      ,
          .

 

[NAME OF
PLEDGOR]

 

	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  	 

	
   

  	
  Title:

  	
   

  	
   

  	 

 

III-3

 

SCHEDULE
A

TO

GRANT OF
COPYRIGHT SECURITY INTEREST

 

	
  U.S. Copyright Registrations:

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Title

  	
   

  	
  Registration No.

  	
   

  	
  Date of Issue

  	
   

  	
  Registered Owner

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Foreign Copyright Registrations:

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Country

  	
   

  	
  Title

  	
   

  	
  Registration No.

  	
   

  	
  Date of Issue

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pending U.S. Copyright
  Registration Applications:

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Title

  	
   

  	
  Appl. No.

  	
   

  	
  Date of Application

  	
   

  	
  Copyright Claimant

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Pending Foreign Copyright
  Registration Applications:

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Country

  	
   

  	
  Title

  	
   

  	
  Appl. No.

  	
   

  	
  Date of Application

  
								

 

 

 

III-A-1

 

EXHIBIT IV TO

SECURITY AGREEMENT

 

IP
SUPPLEMENT

 

This
IP SUPPLEMENT, dated as of
              ,
is delivered pursuant to and supplements (i) the Security Agreement, dated
as of
                              ,
           (said Security
Agreement, as it may heretofore have been and as it may hereafter be further
amended, restated, supplemented or otherwise modified from time to time, being
the “Security Agreement”), among
                                  
[Insert Company name], [Insert Name of Pledgor] (“Pledgor”),
the other Pledgors named therein, and [Insert name of Lender], as Secured
Party, and (ii) the [Grant of Trademark Security Interest] [Grant of
Patent Security Interest] [Grant of Copyright Security Interest] dated as of
                      ,
           (the “Grant”) executed by Pledgor. 
Capitalized terms used herein not otherwise defined herein shall have
the meanings ascribed thereto in the Grant.

 

Pledgor
grants to Secured Party a security interest in all of Pledgor’s right, title
and interest in and to the [Trademark Collateral] [Patent Collateral]
[Copyright Collateral] set forth on Schedule A annexed hereto.  All such [Trademark Collateral] [Patent
Collateral] [Copyright Collateral] shall be deemed to be part of the [Trademark
Collateral] [Patent Collateral] [Copyright Collateral] and shall be hereafter
subject to each of the terms and conditions of the Security Agreement and the
Grant.

 

IN
WITNESS WHEREOF, Pledgor has caused this IP Supplement to be duly executed and
delivered by its duly authorized officer as of
                            .

 

[PLEDGOR]

 

	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  	 

	
   

  	
  Title:

  	
   

  	
   

  	 

 

V-1Exhibit
10.4

 

EXECUTION
COPY

 

WARRANT
AGREEMENT

 

WARRANT
AGREEMENT (“Agreement”), dated as of March 6, 2008, by and between
POWER-ONE, INC., a Delaware corporation (the “Company”) and PWER BRIDGE, LLC, a
Nevada limited liability company (“PB”), the “Initial Registered Holder,” and,
collectively, with its permitted assignees, the “Registered Holder”).

 

WHEREAS,
the Company and PB have agreed to amend and restate the terms of that certain
Loan Agreement, dated as of September 28, 2006 in order to, among other
things, extend the term of the related Note (the “Loan”); and

 

WHEREAS,
in connection with such amendment, the Company has agreed to grant to the
Registered Holder a warrant (together with any replacement or substitute
warrant hereunder, the “Warrant”) on the date hereof (the “Issue Date”) to
purchase in the aggregate for the Registered Holder 2,000,000 shares (as
adjusted pursuant to Section 6.1) of the fully paid and nonassessable
Common Stock of the Company (each such term as defined herein) (the “Shares”)
at a purchase price equal to the Warrant Exercise Price (as defined herein) and
on the terms and subject to the conditions set forth in this Agreement.

 

NOW,
THEREFORE, in consideration of the premises and the mutual agreements set forth
herein and for other good and valuable consideration, the receipt and adequacy
of which are hereby acknowledged, the parties hereto agree as follows:

 

SECTION 1

 

.1            Certain Definitions. 
As used in this Agreement, the following terms have the meanings
specified below:

 

“Affiliate” means, when used with respect to a
specified Person, another Person that directly or indirectly through one or
more intermediaries, controls or is controlled by or is under common control
with the Person specified. For purposes of the foregoing, the term “controls”
(including the correlative meanings “controlled by” or under “common
control with”) means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise.

 

“Close of
Business” means 5:00 p.m. in the City of New York, New York.

 

“Closing Price” of a share of Common Stock on
any Trading Day means (i) the last reported sales price, regular way, for
such Trading Day as reported on the principal national securities exchange on
which the Common Stock is listed or admitted for trading or (ii) if the
Common Stock is not listed or admitted for trading on any national securities
exchange, the last reported sales price, regular way, for such Trading Day as
reported on the National Market tier of The Nasdaq Global Market or, if the
Common Stock is not quoted on such National Market tier, the average of the
highest bid and lowest asked prices on such Trading Day as reported on The
Nasdaq Global Market, or (iii) if the Common  Stock is not listed or admitted to trading on
any 

 

 

 

national securities exchange or The Nasdaq Global
Market, the average of the highest bid and lowest asked prices on such Trading
Day in the domestic over-the-counter market as reported by the National
Quotation Bureau Incorporated, or any similar successor organization.

 

“Common Stock”
means the common stock par value $0.001 per share, of the Company as they exist
on the date of this Agreement, any capital stock of the Company into or for
which such Common Stock may hereafter be changed, converted or exchanged, and,
where appropriate, the other securities or property (including cash) acquirable
upon exercise of a Warrant following the happening of certain events as
provided in Section 6.1 relating to fractional shares, or mergers,
consolidations or similar events contemplated herein. “

 

“Company”
means Power-One, Inc., a Delaware corporation, and any successor (by
merger, consolidation, transfer or otherwise) to all, or substantially all, of
its business and assets.

 

“Convertible Securities” means any or all
options, warrants, securities and rights which are convertible into or
exercisable or exchangeable for Common Stock at the option of the holder
thereof, or which otherwise entitle the holder thereof to subscribe for,
purchase or otherwise acquire Common Stock.

 

“Current Market Price”, on the Determination
Date for any issuance of rights or warrants or any distribution in respect of
which the Current Market Price is being calculated, shall mean the average of
the daily Closing Prices of the Common Stock for the shortest of:

 

the period of 30 consecutive Trading Days commencing
45 Trading Days before such Determination Date;

 

the period commencing on the date next succeeding the
first public announcement of the issuance of rights or warrants or the
distribution in respect of which the Current Market price is being calculated
and ending on the last full Trading Day before such Determination Date; and

 

the period, if any, commencing on the date next
succeeding the Ex- Dividend Date with respect to the next preceding issuance of
rights or warrants or distribution for which an adjustment is required by the
provisions of clause (iv) of the first sentence of Section 6.1(a), Section 6.1(b) or
Section 6.1(c), and ending on the last full Trading Day before such
Determination Date.

 

If the record date for an issuance of rights or
warrants or a distribution for which an adjustment is required by the provisions
of clause (iv) of the first sentence of Section 6.1(a), Section 6.1(b) or
Section 6.1(c) (the “preceding adjustment event”) precedes the record
date for the issuance or distribution in respect of which the Current Market
Price is being calculated and the Ex-Dividend Date for such preceding
adjustment event is on or after the Determination Date for the issuance or
distribution in respect of which the Current Market Price is being calculated,
then the Current Market Price shall be adjusted by deducting therefrom the fair
market value (on the record date for the issuance or distribution in respect of
which the Current Market Price is 

 

2

 

being calculated), as determined in good faith by the
Board of Directors, of the capital stock, rights, warrants, assets or evidences
of indebtedness issued or distributed in respect of each share of Common Stock
in such preceding adjustment event. 
Further, in the event that the Ex-Dividend Date (or in the case of a
subdivision, combination or reclassification, the effective date with respect
thereto) with respect to a dividend, subdivision, combination or
reclassification to which clauses (i), (ii), (iii) or (v) of the
first sentence of Section 6.1(a) applies occurs during the period
applicable for calculating the Current Market Price, then the Current Market
Price shall be calculated for such period in a manner determined in good faith
by the Board of Directors to reflect the impact of such dividend, subdivision,
combination or reclassification on the Closing Prices of the Common Stock
during such period.

 

“Determination Date” for any issuance of rights
or warrants or any distribution to which Section 6.1(b) or Section 6.1(c) applies
shall mean the earlier of (i) the record date for the determination of
stockholders entitled to receive the rights or warrants or the distribution to
which such Section applies and (ii) the Ex-Dividend Date for such
right, warrants or distribution.

 

“Ex-Dividend Date” shall mean the date on which
“ex-dividend” trading commences for a dividend, an issuance of rights or
warrants or a distribution to which any of Section 6.1(a), Section 6.1(b) or
Section 6.1(c) applies in the over-the-counter market or on the
principal exchange on which the Common Stock is then quoted or listed.

 

“Exercise Date” means, in connection with any
exercise of a Warrant, the date as of which all of the requirements of the
first sentence of Section 3.2(a), as modified by the provisions of Section 3.2(b),
have first been satisfied with respect to such Warrant exercise.

 

“HSR Act and
Rules” means the Hart-Scott-Rodino Antitrust Improvement Act of 1976, as
amended, and the rules and regulations thereunder.

 

“Person” means any individual, firm,
corporation, partnership, limited liability company, trust, joint venture,
governmental agency or authority or other entity and shall include any
successor (by merger or otherwise) of such entity.

 

“SEC” means the Securities and Exchange
Commission and any successor to the functions of the Securities and Exchange
Commission.

 

“Trading Day” means a day on which the
principal national securities exchange on which the Common Stock is listed or
admitted to trading, or The Nasdaq Global Market, as applicable, if the Common
Stock is not listed or admitted to trading on any national securities exchange,
is open for the transaction of business (unless such trading shall have been
suspended for the entire day) or, if the Common Stock is not listed or admitted
to trading on any national securities exchange or The Nasdaq Global Market, any
Business Day.

 

3

 

.2             Additional Definitions.

 

	
  Agreement

  	
   

  	
  Preamble

  
	
  Change Event

  	
   

  	
  6.1(h)

  
	
  Company SEC Documents

  	
   

  	
  4.1(a)(v)

  
	
  Exchange Act

  	
   

  	
  4.1(a)(i)

  
	
  Exercise Period

  	
   

  	
  3.1

  
	
  Expiration Date

  	
   

  	
  3.1

  
	
  Extraordinary Cash
  Dividend

  	
   

  	
  6.1(c)

  
	
  Initial Registered
  Holder

  	
   

  	
  Preamble

  
	
   

  	
   

  	
   

  
	
  Issue Date

  	
   

  	
  Preamble

  
	
  Loan

  	
   

  	
  Preamble

  
	
  Preference Shares

  	
   

  	
  4.1(a)(ii)

  
	
  Registered Holder

  	
   

  	
  4.1(a)(v)

  
	
  Remaining Warrants

  	
   

  	
  2.1(a)

  
	
  Securities Act

  	
   

  	
  4.1(a)(v)

  
	
  Shares

  	
   

  	
  4.1(a)(v)

  
	
  PB

  	
   

  	
  Preamble

  
	
  Vesting Date

  	
   

  	
  2.1(b)

  
	
  Warrant

  	
   

  	
  Preamble

  
	
  Warrant Exercise Price

  	
   

  	
  3.2(b)

  

 

.1            Terms Generally. 
The definitions in Sections 1.1 and 1.2 shall apply equally to both the
singular and plural forms of the terms defined. 
Whenever the context may require, any pronoun shall include the
corresponding masculine, feminine and neuter forms.  The words “include”, “includes” and “including”
shall be deemed to be followed by the phrase “without limitation”.  All references herein to Sections and
Exhibits shall be deemed references to Sections of, and Exhibits to, this
Agreement unless the context shall otherwise require.  Unless the context shall otherwise require,
any references to any agreement or other instrument or statute or regulation
are to it as amended and supplemented from time to time (and, in the case of a
statute or regulation, to any successor provisions).  Any reference in this Agreement to a “day” or
number of “days” (without the explicit qualification of “Business”) shall be
interpreted as a reference to a calendar day or number of calendar days.  If any action or notice is to be taken or
given on or by a particular calendar day, and such calendar day is not a
Business Day, then such action or notice shall be deferred until, or may be
taken or given on, the next Business Day. 
All references to “dollar”, “$” or any variant thereof in this Agreement
means United States dollars.

 

SECTION 2

 

.1            Issuance of Warrant; Form of Warrant.

 

(a)           On
the date hereof, the Company will issue and deliver to the Initial Registered
Holder its Warrant, which shall be in the form of Exhibit A (the “Warrant”).

 

4

 

(b)           The
Warrant of the Registered Holder will vest and first become exercisable in
accordance with the following schedule (each such date of vesting, herein a “Vesting
Date”):

 

i.                Warrants for 500,000 shares will be
immediately vested and exercisable and during the Exercise Period, will not be
subject to relinquishment or termination upon repayment of the Loan or any
other subsequent event;

 

ii.             In the event the Loan has not been paid
in full by the Close of Business on September 30, 2008, Warrants for an
additional 750,000 shares will become vested and exercisable immediately after
the Close of Business on such date and during the Exercise Period, will not be
subject to relinquishment or termination upon repayment of the Loan or any
other subsequent event; and

 

iii.          In the event the Loan has not been paid
in full by the Close of Business on March 31, 2009, Warrants for an
additional 750,000 shares will become vested and exercisable immediately after
the Close of Business on such date and during the Exercise Period, will not be
subject to relinquishment or termination upon repayment of the Loan or any
other subsequent event.

 

For the avoidance of
doubt, and solely as an example, to the extent the Loan is paid in full after September 30,
2008 but on or before the Close of Business on March 30, 2009, Warrants
for a total of 1,250,000 shares (consisting of Warrants for the original
500,000 shares plus 750,000 shares that vest on September 30, 2008) shall
be vested and remain outstanding and shall be exercisable in accordance with
the terms of this Agreement, until the Close of Business on the Expiration
Date.

 

Notwithstanding anything
to the contrary contained herein, upon the occurrence of a Change Event, if
any, the Warrants shall immediately vest and during the Exercise Period, will
not be subject to relinquishment or termination upon repayment of the Loan or
any other subsequent event.

 

(c)           The
Warrant shall be executed on behalf of the Company by the manual or facsimile
signature of the President or other authorized officer of the Company, under
its corporate seal, affixed or in facsimile, attested by the manual or
facsimile signature of the Secretary or an Assistant Secretary of the Company.

 

SECTION 3

 

.1            Exercise Period. 
Vested Warrants shall be exercisable, in whole or in part, at any time
and from time to time, during the period beginning on the respective Vesting
Dates and ending, at the Close of Business on the fifth (5th)
anniversary of the Issue Date (or, if such day is not a Business Day, the
immediately succeeding Business Day) (such period, an “Exercise Period” and the
date on which the Exercise Period expires, the “Expiration Date”).

 

5

 

.2            Method of Exercise; Payment; Issuance of
New Warrant.

 

(a)           Any
vested Warrant may be exercised by the Registered Holder, in whole or in part,
by the surrender of the Warrant (with the notice of exercise in the form of Exhibit 1
thereto duly executed) at the principal office of the Company and by the
payment to the Company of an amount, in cash (by wire transfer, certified or
bank cashier’s check), equal to the Warrant Exercise Price multiplied by the
number of Shares then being purchased. Subject to Section 7.5, within ten (10) days
after the Exercise Date, the Company shall cause to be issued and delivered to
or upon the written order of the Registered Holder, and in such name or names
as the Registered Holder may designate, a certificate for the Shares so
purchased and, unless such Warrant has been fully exercised or has expired, a
new Warrant representing the portion of the Shares, if any, with respect to
which such Warrant shall not then have been exercised.  Such certificates shall be deemed to have
been issued and any Person so designated to be named therein shall be deemed to
have become the holder of record of such Shares, and shall possess all rights
of a stockholder with respect to such Shares, as of the Exercise Date.

 

(b)           In lieu of payment of the Warrant Exercise Price by cash  (by wire transfer, certified or bank cashier’s
check), the Registered Holder may elect to exchange all or some of the vested
Warrant for shares of Common Stock equal to the value of the amount of the
Warrant being exchanged on the date of exchange.  If the Registered Holder elects to exchange
this Warrant as provided in this Section 3.2(b),
the Registered Holder will tender to the Company the vested Warrant for the
amount being exchanged, along with written notice of the Registered Holder’s
election to exchange some or all of the vested Warrant, and the Company will
issue to the Registered Holder the number of shares of the Common Stock
computed using the following formula:

 

X = Y (A-B)

A

 

Where X = the number of shares of Common Stock to be issued to the
Registered Holder;

 

Y = the number of shares of Common Stock purchasable
under the amount of the Warrant being exchanged (as adjusted to the date of
such calculation);

 

A = the Current Market Price of one share of the
Common Stock; and

 

B = Warrant Exercise Price (as adjusted to the date of
such calculation).

 

All references herein to an “exercise” of the Warrant will include an
exchange pursuant to this Section 3.2(b)

 

(c)           The
initial exercise price of the Warrant (as the same may be adjusted from time to
time pursuant to Section 6.1, the “Warrant Exercise Price”) with respect
to each share of Common Stock shall be equal to $2.50.

 

6

 

SECTION 4

 

.1            Representations and Warranties of the Company; Certain
Covenants.

 

(a)           The
Company represents and warrants to the Registered Holder that:

 

Organization and Standing. 
The Company (x) is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its organization and
is duly qualified or licensed to do business and in good standing in each
jurisdiction in which the failure to be so qualified or licensed and in good
standing (individually or in the aggregate) would have a material adverse
effect on the Company, and (y) has all requisite corporate power and
authority necessary to enable it to carry on its business as now conducted, to
enter into this Agreement, to issue the Warrant and to carry out the
transactions contemplated hereby and thereby. 
True and accurate copies of the Company’s Amended and Restated
Certificate of Incorporation and Bylaws, each as amended and as currently in
effect, have been made available to the Initial Registered Holder through the
Company’s filings with the SEC pursuant to the Securities Exchange Act of 1934,
as amended (the “Exchange Act”) prior to December 31, 2007, and such
documents constitute all of the constitutive or governing documents of the
Company.

 

Authorization. 
All corporate action on the part of the Company and its officers,
directors and shareholders necessary for the authorization, execution and
delivery of, and the performance of  all
obligations of the Company under, this Agreement and, upon issuance in
accordance with the terms of this Agreement, the Warrant, and for the
authorization, issuance and delivery of the Warrant and of the Shares issuable
upon exercise of the Warrant has been taken. 
This Agreement has been duly executed and delivered by the Company, and
this Agreement constitutes, and the Warrant when issued and delivered in
accordance with the terms of this Agreement shall constitute, the legal, valid
and binding obligations of the Company, enforceable against the Company in
accordance with their respective terms, subject to:  (x) judicial principles respecting
election of remedies or limiting the availability of specific performance,
injunctive relief and other equitable remedies; and (y) bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter
in effect generally relating to or affecting creditors’ rights.

 

No Conflicts. 
The execution and delivery by the Company of this Agreement and the
Warrant and the performance by the Company of its obligations hereunder and
thereunder and the consummation of the transactions contemplated hereby and
thereby do not and  will not conflict
with, result in any violation of or default (with or without notice or lapse of
time or both) under, give rise to a right of termination, cancellation or
acceleration or any material obligation or to the loss of any material benefit
under or result in or require the creation, imposition or extension of any
lien, security interest, restriction or other encumbrance upon any of the
Company’s properties or assets (other than those imposed under this Agreement
or the Warrant) under (i) any oral or written contract, indenture,
mortgage, lease, deed, commitment, agreement, arrangement or legally binding
understanding or instrument, (ii) any provision of its 

 

7

 

constitutive or governing
documents or (iii) any law, statute, ordinance, rule, regulation,
judgment, order, decree or arbitral award, except for any such conflicts,
violations, defaults, rights, obligations or losses that, individually or in
the aggregate, would not have a material adverse effect on the Company or its
ability to consummate the transactions contemplated under this Agreement or the
Warrant.

 

(b)           Reservation
of Shares; Stock Fully Paid; Validity of Stock and Warrant.  The Shares, when issued upon exercise of the
Warrant, shall be duly authorized, validly issued, fully paid, nonassessable,
and free from all taxes (other than income taxes with respect to dividends or
distributions thereon and taxes arising from the disposition thereof), liens,
charges, security interests, restrictions and other encumbrances (except
restrictions set forth in this Agreement or otherwise imposed under applicable
securities laws).  The Company will at
all times during the Exercise Period 
reserve and keep available, free from preemptive rights, out of the
aggregate of its authorized but unissued Common Stock, or its authorized and
issued Common Stock held in treasury, for the purpose of enabling it to satisfy
any obligation to issue Shares upon exercise of Warrant, the full number of
Shares deliverable upon the exercise of the outstanding Warrant.  Before taking any action which would cause an
adjustment pursuant to Section 6 reducing the Warrant Exercise Price below
the then par value (if any) of the Shares issuable upon exercise of the
Warrant, the Company will take any corporate action that may, in the opinion of
its counsel (which may be counsel employed by the Company), be necessary in
order that the Company may validly and legally issue fully paid and
nonassessable Shares at the Warrant Exercise Price as so adjusted.

 

(c)           Taxes.  The Company shall pay any and all issue,
documentary stamp or other taxes (other than applicable income taxes) that may
be payable in respect of any issuance or delivery of Shares.  The Company shall not, however, be required
to pay any tax which may be payable in respect of any transfer involved in the
issuance and delivery of Shares in a name other than that of a Registered
Holder, and no such issuance or delivery shall be made unless and until the
Person to which issuance and delivery is to be made has paid to the Company the
amount of any such tax, or has established, to the satisfaction of the Company,
that such tax has been paid.

 

(d)           Registration Rights Agreement.  [On the date hereof,] the Borrower shall
deliver a Registration Rights Agreement to the Initial Registered Holder, in a
form reasonably satisfactory to the Initial Registered Holder, which shall
provide for the filing with the SEC and continued effectiveness of a
registration statement on Form S-3 to provide for the sale, from time to
time, by the Registered Holder of the Shares into which any of the Warrants
have been exercised.

 

SECTION 5

 

.1            Representations and Warranties of the
Registered Holder.  The Initial Registered Holder hereby makes
the following representations and warranties for the benefit of the Company:

 

(a)           Authorization.  All corporate action on the part of the
Initial Registered Holder that is necessary for the execution, delivery and
performance by the Initial Registered 

 

8

 

Holder of its obligations
under this Agreement has been taken. 
This Agreement has been duly executed and delivered by the Initial
Registered Holder, and this Agreement constitutes the legal, valid and binding
obligation of the Initial Registered Holder, enforceable against it in
accordance with its terms, subject to:  (i) judicial
principles respecting election of remedies or limiting the availability of
specific performance, injunctive relief and other equitable remedies; and (ii) bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter
in effect generally relating to or affecting creditors’ rights.

 

(b)           Restrictions
under Securities Laws.   The Initial
Registered Holder is an “accredited investor” within the meaning of Regulation
D promulgated under the Securities Act. 
The Warrant and, if exercised, the Shares are being acquired by the
Initial Registered Holder for its own account for investment and not with a
view to the public distribution or resale thereof.  The Initial Registered Holder understands
that the Warrant and Shares have not been registered under the Securities Act
or any state securities or blue sky laws, by reason of their issuance in a
transaction exempt from the registration requirements thereunder and may not be
resold unless the subsequent disposition thereof is registered thereunder or is
exempt from registration thereunder.

 

SECTION 6

 

.1            Adjustment of Warrant Exercise Price and
Number of Shares Purchasable.  The Warrant
Exercise Price of the Warrant and the number of Shares purchasable upon the
exercise of the Warrant are subject to adjustment from time to time as set
forth in this Section 6.1.

 

(a)           In
case the Company shall at any time after the date of this Agreement: (i) pay
a dividend to all the holders of the Common Stock in shares of Common Stock, (ii) subdivide
the outstanding shares of Common Stock into a greater number of shares,  (iii) combine the outstanding shares of
Common Stock into a smaller number of shares, (iv) pay a dividend to all
the holders of the Common Stock in shares of its capital stock (other than
Common Stock), or (v) issue any shares of its capital stock by
reclassification of the shares of Common Stock (other than any reclassification
by way of merger or binding share exchange that is subject to Section 6.1(h)),
the Warrant Exercise Price, and the number and kind of Shares receivable upon
exercise, in effect at the time of the record date for such dividend or of the
effective date of such subdivision, combination or reclassification shall be
proportionately adjusted so that the holder of the Warrant exercised after such
time shall be entitled to receive the aggregate number and kind of Shares
which, if such Warrant had been exercised immediately prior to such time, he
would have owned upon such exercise and been entitled to receive by virtue of
such dividend, subdivision, combination or reclassification.  Such adjustment shall be made successively
whenever any event listed above shall occur. 
Subject to Section 6.1(f), for a dividend or distribution, the
adjustment shall become effective immediately after the record date for the
dividend or distribution, and for a subdivision, combination or
reclassification, the adjustment shall become effective immediately after the
effective date of the subdivision, combination or reclassification.

 

(b)           In
case the Company shall issue rights or warrants to all holders of Common Stock
entitling them (for a period expiring within 45 days after the record date for
the 

 

9

 

determination of
stockholders entitled to receive such rights or warrants) to subscribe for or
purchase shares of Common Stock (or Convertible Securities) at a price per
share (or having a conversion price per share, after adding thereto an
allocable portion of the exercise price of the right or warrant to purchase
such Convertible Securities, computed on the basis of the maximum number of
shares of Common Stock issuable upon conversion of such Convertible Securities)
less than the Current Market Price per share on the Determination Date, the
Warrant Exercise Price shall be adjusted by multiplying the Warrant Exercise
Price in effect immediately prior to such record date by a fraction, of which
the numerator shall be the number of shares of Common Stock outstanding on such
record date plus the number of shares which the aggregate offering price of the
total number of shares of Common Stock so offered (or the aggregate initial
conversion price of the Convertible Securities so offered, after adding thereto
the aggregate exercise price of the rights or warrants to purchase such
Convertible Securities) to holders of Common Stock (and to holders of
Convertible Securities referred to in the following paragraph if the
distribution to which this Section 6.1(b) applies is also being made
to such holders) would purchase at such Current Market Price, and of which the
denominator shall be the number of shares of Common Stock outstanding on such
record date plus the number of additional shares of Common Stock so offered for
subscription or purchase (or into which the Convertible Securities so offered
are initially convertible).  The
adjustment contemplated by this Section 6.1(b) shall be made
successively whenever any such rights or warrants are issued and shall become
effective immediately after the Close of Business on such record date; however,
to the extent that shares of Common Stock (or Convertible Securities) have not
been issued when such rights or warrants expire (or, in the case of rights or
warrants to purchase Convertible Securities which have been exercised, if all
of the shares of Common Stock issuable upon conversion of such Convertible
Securities have not been issued prior to the expiration of the conversion right
thereof), the Warrant Exercise Price shall be readjusted (but only with respect
to Warrant exercised after such expiration) to the Warrant Exercise Price which
would then be in effect had the adjustments made upon the issuance of such
rights or warrants been made upon the basis of delivery of only the number of
shares (or Convertible Securities) actually issued upon the exercise of such
rights or warrants (or the conversion of such Convertible Securities).

 

For purposes of this Section 6.1(b) the
number of shares of Common Stock outstanding on any record date shall be deemed
to include the maximum number of shares of Common Stock the issuance of which
would be necessary to effect the full exercise, exchange or conversion of all
Convertible Securities outstanding on such record date which are then
exercisable, exchangeable or convertible at a price (before giving effect to
any adjustment to such price for the distribution to which this Section 6.1(b) is
being applied) equal to or less than the Current Market Price per share of
Common Stock on the applicable Determination Date, if all of such Convertible
Securities were deemed to have been exercised, exchanged or converted
immediately prior to the opening of business on such record date.  In case any subscription price may be paid in
a consideration part or all of which shall be in a form other than cash, the
value of such consideration shall be as determined by the Board of Directors of
the Company.  Shares of Common Stock
owned by or held for the account of the Company or any majority owned
subsidiary shall not be deemed outstanding for the purpose of any computation
under this Section 6.1(b).

 

10

 

 

(c)           In
case the Company shall distribute to all holders of Common Stock evidences of
its indebtedness or assets or subscription rights or warrants (excluding (x) dividends
or distributions referred to in Section 6.1(a) and distributions of
rights or warrants referred to in Section 6.1(b) and (y) cash
dividends or other cash distributions, unless such cash dividends or cash
distributions are Extraordinary Cash Dividends), the Warrant Exercise Price
shall be adjusted by multiplying the Warrant Exercise Price in effect
immediately prior to the record date for the determination of stockholders
entitled to receive such distribution by a fraction, of which the numerator
shall be the number of shares of Common Stock outstanding on such record date
multiplied by the Current Market Price on the Determination Date, less the fair
market value (as determined by the Board of Directors of the Company) on such
record date of the evidences of indebtedness, assets, subscription rights or
warrants to be distributed to the holders of Common Stock (and to the holders
of Convertible Securities referred to below if the distribution to which this Section 6.1(c) applies
is also being made to such holders), and of which the denominator shall be the
number of shares of Common Stock outstanding on such record date multiplied by
such Current Market Price.  For purposes
of this Section 6.1(c), the number of shares of Common Stock outstanding
on any record date shall be deemed to include the maximum number of shares of
Common Stock the issuance of which would be necessary to effect the full
exercise, exchange or conversion of all Convertible Securities outstanding on
such record date which are then exercisable, exchangeable or convertible at a
price (before giving effect to any adjustment to such price for the
distribution to which this Section 6.1(c) is being applied) equal to
or less than the Current Market Price per share of Common Stock on the
applicable Determination Date, if all of such Convertible Securities were
deemed to have been exercised, exchanged or converted immediately prior to the
opening of business on such record date.

 

For purposes of this Section 6.1(c), the term “Extraordinary
Cash Dividend” shall mean any cash dividend with respect to the Common Stock
the amount of which, together with the aggregate amount of cash dividends on
the Common Stock to be aggregated with such cash dividend in accordance with
the following provisions of this paragraph, equals or exceeds the threshold
percentage set forth below in the following sentence.  If, upon the date prior to the Ex-Dividend
Date with respect to a cash dividend on Common Stock, the aggregate of the
amount of such cash dividend together with the amounts of all cash dividends on
the Common Stock with Ex-Dividend Dates occurring in the 365 consecutive day
period ending on the date prior to the Ex-Dividend Date with respect to the
cash dividend to which this provision is being applied (other than any such
other cash dividends with Ex-Dividend Dates occurring in such period for which
a prior adjustment to the Warrant Exercise Price was previously made under this
Section 6.1(c)) equals or exceeds on a per share basis 50% of the average
of the Closing Prices during the period beginning on the date after the first
such Ex-Dividend Date in such period and ending on the date prior to the
Ex-Dividend Date with respect to the cash dividend to which this provision is
being applied (except that if no other cash dividend has had an Ex-Dividend
Date occurring in such period, the period for calculating the average of the
Closing Prices shall be the period commencing 365 days prior to the date
immediately prior to the Ex-Dividend Date with respect to the cash dividend to
which this provision is being applied), such cash dividend together with each
other cash dividend with an Ex-Dividend Date occurring in such 365-day period
that is aggregated with such cash dividend in accordance with this paragraph
shall be deemed to be an Extraordinary Cash Dividend.

 

11

 

The adjustment pursuant to the foregoing provisions of
this Section 6.1(c) shall be made successively whenever any
distribution to which this Section 6.1(c) applies is made, and shall
become effective immediately after the record date for the determination of
stockholders entitled to receive the distribution.  Shares of Common Stock owned by or held for
the account of the Company or any majority owned subsidiary shall not be deemed
outstanding for the purposes of any such adjustment.

 

(d)           In
the event that this Section 6.1 requires adjustments to the Warrant
Exercise Price and number of Shares purchasable under more than one of clause (iv) of
the first sentence of Section 6.1(a), Section 6.1(b) or Section 6.1(c),
and the record dates for the distribution giving rise to such adjustments shall
occur on the same date, then such adjustments shall be made by applying, first,
the provisions of Section 6.1(a), second the provisions of Section 6.1(c) and,
third, the provisions of Section 6.1(b).

 

(e)           No adjustment
in the Warrant Exercise Price shall be required if the amount of such
adjustment shall be less than 25 cents per Share; provided, however,
that any adjustments which by reason of this subsection (e) are not
required to be made shall be carried forward and taken into account in any
subsequent adjustment.  All calculations
under this Section 6.1 shall be made to the nearest cent or to the nearest
one-hundredth of a Share, as the case may be.

 

(f)            In
any case in which this Section 6.1 shall require that an adjustment in the
Warrant Exercise Price be made effective as of the record date for a specified
event, the Company may elect to defer until the occurrence of such event (x) issuing
to the holder of the Warrant exercised after such record date the Shares, if
any, issuable upon such exercise over and above the Shares, if any, issuable
upon such exercise on the basis of the Warrant Exercise Price in effect prior
to such adjustment and (y) paying to such holder cash or its check in lieu
of any fractional interest to which such holder would be entitled pursuant to Section 6.2;
provided, however, that the Company shall deliver to such holder
a due bill or other appropriate instrument evidencing such holder’s right to
receive such additional Shares and such cash upon the occurrence of the event
requiring such adjustment.

 

(g)           Upon
each adjustment of the Warrant Exercise Price as a result of the calculations
made in subsections (a), (b), (c) or (i) of this Section 6.1,
each Warrant outstanding prior to the making of the adjustment in the Warrant
Exercise Price shall thereafter evidence the right to purchase, at the adjusted
Warrant Exercise Price, that number of Shares (calculated to the nearest
hundredth) obtained by (A) multiplying the number of Shares purchasable
upon exercise of a Warrant prior to adjustment of the number of Shares by the
Warrant Exercise Price in effect prior to adjustment of the Warrant Exercise
Price and (B) dividing the product so obtained by the Warrant Exercise
Price in effect after such adjustment of the Warrant Exercise Price.

 

(h)           If
the Company consolidates with or merges into, or transfers (other than by
mortgage or pledge) its properties and assets substantially as an entirety to,
another Person or the Company is a party to a merger or binding share exchange
which reclassifies or changes its outstanding Common Stock (any such event a “Change
Event”), the Company (or its successor in such transaction) or the
transferee  of such properties and assets
shall make appropriate provision 

 

12

 

so that the Warrant then
outstanding shall thereafter be exercisable, upon the terms and conditions
specified in this Agreement, for the kind and amount of securities, cash or
other assets receivable upon such transaction by a holder of the number of
Shares purchasable upon exercise of such Warrant immediately before the
effective date of such transaction (assuming, to the extent applicable, that
such holder failed to exercise any rights of election with respect thereto, and
received per Share the kind and amount of securities, cash or other assets
received per share of Common Stock by a plurality of the nonelecting shares of
Common Stock); and in any such case, if necessary, the provisions set forth in
this Section 6.1 with respect to the rights and interests thereafter of
the holders of the Warrant shall be appropriately adjusted so as to be
applicable, as nearly as may reasonably be, to any such other securities or
assets thereafter deliverable on the exercise of the Warrant.  The subdivision or combination of the Common
Stock at any time outstanding into a greater or lesser number of shares of
Common Stock shall not be deemed to be a reclassification of the Common Stock
for the purposes of this subsection.  The
Company shall not effect any such consolidation, merger, transfer or binding
share exchange unless prior to or simultaneously with the consummation thereof
the successor (if other than the Company) resulting from such consolidation or
merger or the Person purchasing such assets or other appropriate Person shall
assume, by written instrument, the obligation to deliver to the holder of the
Warrant such securities, cash or other assets as, in accordance with the
foregoing provisions, such holders may be entitled to purchase and the other
obligations under this Agreement.

 

(i)            The
Company may make such reductions in the Warrant Exercise Price, in addition to
those required by subsections (a), (b) and (c) of this Section 6.1,
as it shall in its sole discretion determine to be advisable.

 

.2            Fractional Shares. 
If the number of Shares purchasable upon the exercise of the Warrant is
adjusted pursuant to of Section 6.1(g), the Company shall nonetheless not
be required to issue fractions of Shares upon exercise of the Warrant or to
distribute share certificates which evidence fractional Shares.  In lieu of fractional Shares, there shall be
paid to the Registered Holder at the time the Warrant is exercised as herein
provided an amount in cash equal to the same fraction of the current market
value of a Share.  For purposes of this Section 6.2,
the current market value of a Share shall be the Closing Price of a Share for
the Trading Day immediately prior to the date of such exercise.

 

.3            Notices to Warrantholder.

 

(a)           Upon
any adjustment of the Warrant Exercise Price pursuant to Section 6.1, the
Company within 20 days thereafter shall cause to be given to the Registered
Holder written notice of such adjustment setting forth the Warrant Exercise
Price after such adjustment and setting forth in reasonable detail the method
of calculation and the facts upon which such calculations are based and setting
forth the number of Shares (or portion thereof) purchasable upon exercise of a
Warrant after such adjustment in the Warrant Exercise Price.  Where appropriate, such notice may be given
in advance and included as a part of the notice required to be mailed under the
provisions of Section 6.3(b).

 

13

 

(b)           In case:

 

the Company shall
authorize the issuance to all holders of Common Stock of rights or warrants to
subscribe for or purchase shares of Common Stock or of any other subscription
rights or warrants; or

 

the Company shall
authorize the distribution to all holders of Common Stock of evidences of its
indebtedness or assets (other than dividends payable in Common Stock); or

 

of any consolidation,
merger or binding share exchange to which the Company is a party and for which
approval of any shareholders of the Company is required, or of the conveyance
or transfer of the properties and assets of the Company as, or substantially
as, an entirety, or of any reclassification or change of outstanding Shares
issuable upon exercise of the Warrant (other than a change in par value, or from
par value to no par value, or from no par value to par value, or as a result of
a subdivision or combination); or

 

of the voluntary or
involuntary dissolution, liquidation or winding up of the Company; or

 

the Company proposes to
take any action (other than actions of the character described in Section 6.1(a),
except as required under (iii) above) which would require an adjustment of
the Warrant Exercise Price pursuant to Section 6.1;

 

then the Company shall cause to be given to the
Registered Holder at least 20 days (or 10 days in any case specified in clauses
(i) or (ii) above) prior to the applicable record or effective date
hereinafter specified, a written notice stating (x) the date as of which
the holders of record of Common Stock to be entitled to receive any such
rights, warrants or distribution are to be determined, or (y) the date on
which any such consolidation, merger, binding share exchange, conveyance,
transfer, dissolution, liquidation or winding up is expected to become
effective, and the date as of which it is expected that holders of record of
Common Stock shall be entitled to exchange their shares of Common Stock for
securities or other property, if any, deliverable upon such reclassification,
consolidation, merger, binding share exchange, conveyance, transfer,
dissolution, liquidation or winding up. 
The failure to give the notice required by this Section 6.3(b) or
any defect therein shall not affect the legality or validity of any
distribution, right, warrant, consolidation, merger, binding share exchange,
conveyance, transfer, dissolution, liquidation or winding up, or the vote upon
any such action.

 

SECTION 7

 

.1            Loss or Mutilation. Upon receipt by the Company of evidence
reasonably satisfactory to it of the ownership, and the loss, theft,
destruction or mutilation, of a certificate representing a Warrant, and of
indemnity reasonably satisfactory to it, and (in the case of mutilation) upon
surrender and cancellation of such Warrant, the Company will execute and
deliver in lieu thereof a new certificate representing such Warrant of like
tenor.

 

14

 

.2            No Rights or Liabilities as Stockholder. Nothing contained in this Agreement or
in the Warrant shall be construed as conferring upon the holders thereof the
right to vote or to consent or to receive notice as shareholders in respect of
the meetings of shareholders for the election of directors of the Company or
any other matter or any rights whatsoever as shareholders of the Company.

 

.3            Governmental Approvals; Regulatory
Compliance; Standstill Period.

 

(a)           The
Company shall from time to time take all action that may be necessary to obtain
and keep effective any and all permits, consents and approvals of governmental
agencies and authorities and filings under federal and state laws or with any
securities exchange or association on which the Common Stock is listed, which
may be or become requisite in connection with the issuance, sale, transfer and
delivery of the Warrant, the exercise of the Warrant and the issuance, sale,
transfer and delivery of the Shares issued upon exercise of the Warrant; provided,
however, the foregoing shall not be construed to impose upon the Company
any obligation to register the issuance to or resale by the Registered Holder
of the Shares under the Securities Act or any state securities laws.

 

(b)           Without
limiting the generality of the foregoing, in the event that the Company or the
Registered Holder reasonably believes that the exercise of a Warrant and
issuance of Shares acquirable upon such exercise requires prior compliance with
the HSR Act and Rules, then any such exercise shall be contingent upon such
prior compliance and shall, subject to effecting such compliance, be effective
as of the Exercise Date.  In the event
that compliance with the HSR Act and Rules with respect to a Warrant
exercise is effected after the Expiration Date, such expiration of the Warrant
shall not affect the Registered Holder’s right to exercise in accordance with a
notice of exercise delivered to the Company in compliance with Section 3.2
prior to such Expiration Date.  To effect
such compliance, the Company and the Registered Holder will, promptly following
receipt by the Company of such Registered Holder’s notice of exercise or other
written request, use their respective commercially reasonable efforts to make
all filings necessary to cause the expiration or termination of any applicable
waiting period under the HSR Act and Rules. 
Each of the Company and the Registered Holder shall bear and pay the
costs or expenses that it incurs in complying with this Section 7.3,
except that the Registered Holder shall pay any fee payable to the Federal
Trade Commission or the Department of Justice (or any other governmental body
then having jurisdiction with respect to the HSR Act and Rules) in connection
with the filing of any reports under the HSR Act and Rules.

 

.4            Mechanics and Effects of Transfer. 
An assignment, conveyance or other transfer of the Warrant or the rights
hereunder shall be made on the books of the Company maintained for such purpose
at the principal office of the Company upon surrender of any the Warrant
together with a properly completed assignment in the form of Exhibit 2 to
the form of Warrant attached hereto duly executed by the Registered
Holder.  Upon any such registration of
transfer, a new Warrant shall be issued to the transferee and the surrendered
Warrant shall be canceled. 
Notwithstanding the foregoing, the Warrant and the rights under this
Agreement may not be assigned, conveyed or transferred unless (i) such
assignment, conveyance or transfer complies with all applicable securities laws
and the provisions of this Agreement, including Section 7.5, 

 

15

 

and (ii) the
transferee agrees in writing to be bound by the terms of this Agreement,
including  the restrictions set forth in Section 7.5.

 

.5            Legends; Notations.

 

(a)           The
certificates evidencing the Warrant and the Shares shall be imprinted with
conspicuously noted legends substantially in the form of the legends set forth
on the form of Warrant annexed as Exhibit A and any legend required by any
applicable state securities law.

 

(b)           The
Company shall make a notation on its stock books regarding the restrictions on
transfer of the Warrant and Shares required by applicable securities and other
laws and imposed pursuant to this Agreement and will transfer securities on the
books of the Company only to the extent not inconsistent therewith. Without
limiting the generality of the foregoing, the Company shall refuse to register
any transfer of the Warrant or Shares not made in accordance with the
registration requirements of the Securities Act or pursuant to an applicable
exemption from registration under the Securities Act.

 

SECTION 8

 

.1            Notices.  Any notice
required or permitted under this Agreement shall be in writing and shall be
delivered by hand or overnight courier service or by certified or registered
mail, postage prepaid, return receipt requested, or by telecopier (answer back
received), to the applicable party at its address set forth below (or to such
other address or attention of such other Person as any party shall advise the
other parties in writing).  Notice shall
be deemed given upon actual receipt thereof.

 

	
  To the Company:

  	
   

  	
  Power-One, Inc.

  
	
   

  	
   

  	
  740 Calle Plano

  
	
   

  	
   

  	
  Camarillo, California
  93012-8583

  
	
   

  	
   

  	
  Telecopier No.:
  805-383-5898

  
	
   

  	
   

  	
  Attention: Randy
  Holliday, General Counsel

  
	
   

  	
   

  	
   

  
	
  With a copy to:

  	
   

  	
  O’Melveny &
  Myers LLP

  
	
   

  	
   

  	
  1999 Avenue of the
  Stars

  
	
   

  	
   

  	
  Los Angeles, California
  90067

  
	
   

  	
   

  	
  Telecopier No.: (310)
  246-6779

  
	
   

  	
   

  	
  Attention: David J.
  Johnson, Jr.

  
	
   

  	
   

  	
   

  
	
  To PB:

  	
   

  	
  PWER Bridge, LLC

  
	
   

  	
   

  	
  c/o Stephens Inc.

  
	
   

  	
   

  	
  111 Center Street

  
	
   

  	
   

  	
  Little Rock, AR 72201

  
	
   

  	
   

  	
  Telecopier No:
  501-377-2677

  
	
   

  	
   

  	
  Attention: Bill
  Keisler, Associate General Counsel

  

 

16

 

	
  With a copy to:

  	
   

  	
  Lionel
  Sawyer & Collins

  
	
   

  	
   

  	
  300 South Fourth
  Street, Suite 1700

  
	
   

  	
   

  	
  Las Vegas, Nevada 89101

  
	
   

  	
   

  	
  Telecopier No:
  702-383-8845

  
	
   

  	
   

  	
  Attention: Matthew
  Watson

  

 

.2            Severability. 
If any provision of this Agreement is held by a court of competent
jurisdiction to be invalid, illegal or unenforceable, that provision will be
enforced to the maximum extent permissible so as to effect the intent of the
parties, and the validity, legality and enforceability of the remaining
provisions shall in no way be affected, impaired or invalidated.

 

.3            Headings. The headings set forth in this Agreement are for
convenience of reference only and shall not be deemed to constitute a part
hereof.

 

.4            Governing Law. 
This Agreement and the Warrant shall be construed and enforced in
accordance with, and governed by, the internal laws of the State of Delaware,
notwithstanding any otherwise applicable conflicts of laws principles.

 

.5            Successors and Assigns; No Third Party Beneficiaries. 
This Agreement and the rights and obligations set forth herein shall
inure to, and shall be binding upon, the Company and the Registered Holder and
each of their respective successors and permitted assigns.  Nothing in this Agreement, express or
implied, is intended to confer upon any third party any rights, remedies,
obligations or liabilities under, or by reason of, this Agreement, except as
expressly provided in this Agreement.

 

.6            Counterparts. 
This Agreement may be executed in one or more counterparts, each of
which shall be an original and all of which together shall constitute one and
the same agreement.

 

17

 

IN
WITNESS WHEREOF, the Company and the Registered Holder have executed this Agreement
as of March 6, 2008.

 

	
   

  	
  POWER-ONE, INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  R. HOLLIDAY

  
	
   

  	
   

  	
  Name:

  	
  Randall H. Holliday

  
	
   

  	
   

  	
  Title:

  	
  Secretary

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  PWER BRIDGE, LLC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  WILLIAM B. KEISLER

  
	
   

  	
   

  	
  Name:

  	
  William B. Keisler

  
	
   

  	
   

  	
  Title:

  	
  Authorized
  Representative

  

 

18

 

EXHIBIT A

 

(FORM OF
WARRANT CERTIFICATE)

 

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR UNDER
THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE TRANSFERRED OR SOLD EXCEPT
AS PERMITTED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS, PURSUANT TO
REGISTRATION OR EXEMPTION THEREFROM.  THE
ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION OF COUNSEL IN FORM AND
SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER
OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES
LAWS.

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO COVENANTS IN THAT CERTAIN WARRANT AGREEMENT (THE “WARRANT AGREEMENT”)
DATED AS OF MARCH 6, 2008 BY AND BETWEEN THE COMPANY AND THE CERTAIN
INITIAL REGISTERED HOLDER NAMED THEREIN CONTAINING, AMONG OTHER THINGS,
RESTRICTIONS ON THE SALE, TRANSFER OR OTHER DISPOSITION OF SUCH
SECURITIES.  A COPY OF THE WARRANT
AGREEMENT MAY BE OBTAINED FROM THE SECRETARY OF THE COMPANY WITHOUT CHARGE
UPON WRITTEN REQUEST.

 

VOID AFTER 5:00 P.M.
NEW YORK CITY TIME

ON THE EXPIRATION DATE

 

SEE TERMS OF THE
WARRANT AGREEMENT REFERRED TO HEREIN

FOR OTHER TERMS RELATING TO THE VESTING SCHEDULE AND THE

TERMINATION OF THE WARRANTS

 

Warrant No.:         1

Issue Date:            March 6, 2008

 

19

 

WARRANT TO PURCHASE COMMON STOCK

OF

POWER-ONE, INC.

 

THIS CERTIFIES THAT for good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,
PWER BRIDGE, LLC., a Nevada limited liability company, or its permitted
registered assigns (the “Registered Holder”), is entitled,
subject to the terms and conditions of the Warrant Agreement (as defined
below), to purchase from Power-One, Inc., a Delaware corporation (the “Company”),
at any time and from time to time, subject to the terms and conditions relating
to vesting and termination contained in the Warrant Agreement referred to
below, on or prior to the Expiration Date, 2,000,000 shares of the Company at
the Warrant Exercise Price, upon
surrender of this Warrant at the principal office of the Company, together with
a duly completed and executed notice of exercise in the form attached hereto
and payment in cash (by wire transfer or by certified or bank cashier’s check),
or on a cashless basis as provided in Section 3.2(b) of the Warrant
Agreement, of the Warrant Exercise Price for each Share then being so purchased
and any applicable transfer taxes. The Warrant Exercise Price and the number
and kind of Shares purchasable upon exercise of this Warrant are subject to
adjustment as provided in the Warrant Agreement.

 

This
Warrant is subject to, and entitled to the benefits of, all of the terms,
provisions and conditions of a Warrant Agreement dated as of March 6, 2008
(the “Warrant Agreement”) by and between the Company and PWER Bridge, LLC,
which Warrant Agreement is hereby incorporated herein by reference and made a
part hereof and to which Warrant Agreement reference is hereby made for a full
description of the rights, limitations of rights, obligations, duties and
immunities hereunder of the Company and the Registered Holder of this Warrant,
including without limitation the terms and conditions relating to vesting and
termination of the Warrants contained in the Warrant Agreement.  All capitalized terms used herein and not
otherwise defined herein shall have the meanings ascribed thereto in the
Warrant Agreement.  Copies of the Warrant
Agreement are on file at the principal office of the Company and may be
obtained from the Secretary of the Company, without charge, upon written
request by the Registered Holder.

 

The
Registered Holder may be treated by the Company and all other Persons dealing
with this Warrant as the absolute owner hereof for any purpose and as the
Person entitled to exercise the rights represented hereby, or to the transfer
hereof on the books of the Company in accordance with the terms and conditions
set forth in the Warrant Agreement, any notice to the contrary notwithstanding,
and until such transfer on such books, the Company may treat the Registered
Holder hereof as the owner for all purposes.

 

If
this Warrant shall be exercised in part, the Registered Holder shall be
entitled to receive upon surrender hereof, another Warrant or Warrants
representing the unexercised portion of this Warrant.

 

20

 

No
fractional shares of Common Stock will be issued upon the exercise of the
Warrant, but in lieu thereof a cash payment will be made, as provided in the
Warrant Agreement.

 

The
Registered Holder shall not be entitled to vote with respect to or receive
dividends on the Shares purchasable upon exercise of this Warrant or be deemed
the holder of Shares or any other securities of the Company which may at any
time be issuable on the exercise hereof for any purpose, nor shall anything
contained in the Warrant Agreement or herein be construed to confer upon such
Registered Holder, as such, any of the rights of a shareholder of the Company
or any right to vote for the election of directors or upon any matter submitted
to shareholders at any meeting thereof, or to give or withhold consent to any
corporate action, until this Warrant shall have been exercised and the Shares
issuable upon the exercise hereof shall have become deliverable as provided in
the Warrant Agreement.

 

21

 

IN
WITNESS WHEREOF, Power-One, Inc. has caused this Warrant to be executed by
an authorized officer of the Company and attested by its Secretary or an
Assistant Secretary.

 

	
   

  	
  POWER-ONE, INC.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  R. THOMPSON

  	
   

  
	
   

  	
   

  	
  Name: Richard J.
  Thompson

  	
   

  
	
   

  	
   

  	
  Title: Authorized
  Officer

  	
   

  

 

 

	
  Attest:

  	
  /s/
  R. HOLLIDAY

  	
   

  
	
   

  	
  Name: Randall H.
  Holliday

  	
   

  
	
   

  	
  Title: Secretary or
  Assistant Secretary

  	
   

  
	
   

  	
   

  	
   

  
	
  Dated:

  	
   

  	
   

  

 

22

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00138-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00138-of-00352.parquet"}]]