Document:

Exhibit 10.14

August 3, 2006

Veronica Tarrant

1933 Winterset Place

Simi Valley, CA  93065

Re:  Termination
of Employment—Agreement and Settlement of Claims

Dear Veronica,

This letter agreement supersedes and replaces the
letter agreement dated July 31, 2006 previously provided to you for your
consideration. Following further discussions between You and Power-One, this
letter agreement now presents the terms, conditions, understandings, and
agreements reached between You and Power-One regarding resolution, settlement
and release of any respective disputes and claims of each party arising from
the termination of Your employment by Power-One.

You acknowledge that You have the opportunity, and
Power One has advised you, to consult with an attorney of Your choice should
You desire prior to executing this Agreement. You also acknowledge and agree
that You are knowingly and voluntarily waiving and releasing claims in this
Agreement in exchange for valuable consideration to which You otherwise would
not be entitled. You have twenty-one (21) days from the date of this letter
within which to consider this Agreement.

You also acknowledge that if You execute this
agreement, You may revoke this agreement within seven (7) days following
its execution by You, and that, unless You revoke this agreement, it will
become binding and irrevocable on and after the date at which Your seven (7) day
revocation period expires. Notice of Your desire to revoke this agreement
should be made via telephone to the undersigned, and confirmed by written
notice addressed to the undersigned and either hand delivered or sent via
certified mail to Power-One at the address noted above.

In consideration of
the respective promises, releases, and commitments stated in this  agreement, You and Power-One (collectively
referred to as “the Parties” and individually referred to in this agreement as “You”
or “Power-One”) agree as follows:

1.     Compliance with and Breach of This Agreement.   You
acknowledge and agree that Your compliance with all terms and conditions of
this Agreement applicable to You is an ongoing responsibility. Any violation,
breach, or non-compliance with the terms and conditions of this Agreement will
represent grounds for termination of this Agreement by Power-One, the cessation
of all payments to You being made hereunder by Power-One, and the termination
of all rights, benefits and privileges of any nature or sort which arise from
or are related to this Agreement or your past active service with Power-One, to
include but not be limited to rights under the stock option grants noted below
in Paragraph 5.

2.     Release from Responsibilities/Termination.   You have
been relieved of Your responsibilities to and with Power-One as Acting Chief
Accounting Officer effective July 31, 2006 (Your “Change of Status” date).
Under this Agreement, you will remain “on the payroll” until February 14,
2007 at which time Your employment with Power-One will terminate.

3.     Section 16 Officer Status/SEC Reporting Requirements.   Power-One
and You acknowledge and agree that as of Your Change of Status date, You cease
to be considered an officer of Power-One who is subject to Section 16 of
the Securities Exchange Act of 1934. Power-One will arrange for necessary
public filings and reports, as applicable, which confirm and memorialize this Section 16
status change, and such other reports (e.g. 8-K, 10-Q) as are
required.  You may be subject to certain
additional filings and Section 16 considerations for a period of up to six
(6) months following your Change of Status, in the event you engage in any
transaction in Power-One common stock. You are encouraged to coordinate with
Randy Holliday, Power-One General Counsel, and/or Your own personal legal
advisor, as may be relevant for any post “Change of Status” transaction in
Power-One stock within a period of up to six (6) months following 

your Change of Status. Any
contact with Randy Holliday, however, must be coordinated and conducted with
and through Tisha Shokat pursuant to paragraph 14.(a) below.

4.     Compensation Considerations.

(a.)  Salary and Benefits Continuation.   For the period from August 1,
2006 to August 14, 2006, you will be paid in the same manner and amounts,
and be entitled to the same benefits and other entitlements, as had been in
effect up to your Change of Status date. Commencing August 15, 2006 Power-One
agrees to pay You at the rate of $3,828.85 per week, less applicable
withholding, for the time period from August 15, 2006 through February 14,
2007 (the “Payment Period”) per Power-One’s payroll practices. During this
Payment Period, Power-One will also continue Your coverage, under the same
terms, conditions, and amounts of Your contributions/payments (if any as
applicable) as in effect as of Your last day of employment with Power-One, for
medical, dental, life insurance, 401(k) plan participation and company
matching, and other standard benefits.

(b)   Other Entitlements.   During and after conclusion of the
Payment Period, You will not be entitled
to accrual or payment of any other compensation benefits, including, but not
limited to, allowances, incentive payments or bonuses.  The preceding sentence specifically extends to
and includes any claims under or entitlements under any Section 16 or
other officer bonus plan or program put in place or made applicable for FY2006,
notwithstanding any term, condition, or provision of any such plan to the
contrary. PTO accrual will cease as of August 14, 2006 (2 weeks from
change of status date). You will not be entitled
to accrue PTO after August 14, 2006.

(c)   Employee Stock Purchase Plan.   If You are currently
enrolled in the current Offering Period for the Power-One, Inc. Employee
Stock Purchase Plan, you will be eligible to continue making contributions
through the end of the current Offering Period and purchase stock for that
Offering Period. You will not be eligible to participate in the Offering Period
that commences on January 1, 2007.

(d)   Cell phone.   You will be allowed to retain the cell
phone handset you previously used as your personal property, and the phone
number assigned to that phone as your personal phone number for your personal
use. You will be responsible for making personal arrangements for any service
contracts at your own expense. Power-One will terminate the existing Company
service arrangements at the end of the current billing period.

5.     Stock Options/RSU’s.

You
and Power-One acknowledge that You have certain stock option and equity grant
rights under the Power-One grants noted in the following table:

	
  GRANT

  NO.

  	
   

  	
   

  	
   

  	
  DATE OF

  GRANT

  	
   

  	
  SHARES/UNITS

  GRANTED

  	
   

  	
  SHARES EXERCISABLE OR

  SELLABLE as of February 14, 2007

  (i.e. the end of the Payment Period)

  	
   

  
	
  00000966

  	
   

  	
  6/29/2000

  	
   

  	
  30,000

  	
   

  	
   

  	
  30,000

  	
   

  	
   

  
	
  00001464

  	
   

  	
  *10/1/2001

  	
   

  	
  15,000

  	
   

  	
   

  	
  15,000

  	
   

  	
   

  
	
  00001528

  	
   

  	
  10/1/2001

  	
   

  	
  11,000

  	
   

  	
   

  	
  11,000

  	
   

  	
   

  
	
  00002408

  	
   

  	
  1/8/2003

  	
   

  	
  11,000

  	
   

  	
   

  	
  11,000

  	
   

  	
   

  
	
  00002456

  	
   

  	
  1/17/2003

  	
   

  	
  4,000

  	
   

  	
   

  	
  4,000

  	
   

  	
   

  
	
  00002661

  	
   

  	
  7/21/2004

  	
   

  	
  30,000

  	
   

  	
   

  	
  30,000

  	
   

  	
   

  
	
  00002977

  	
   

  	
  5/17/2005

  	
   

  	
  40,000 stock units

  	
   

  	
   

  	
  0

  	
   

  	
   

  

                 * “collared” option, subject to special
conditions on timing of exercise

ALL RIGHTS OF VESTING IN AND TO STOCK OPTIONS OR
EQUITY GRANTS WILL CEASE AS OF FEBRUARY 14, 2007, I.E. THE END OF THE PAYMENT
PERIOD NOTED IN PARAGRAPH 2 ABOVE.  PURSUANT TO APPLICABLE TERMS OF YOUR STOCK
OPTION GRANT, YOU WILL 

 2
 

HAVE UNTIL MAY 15, 2007 (I.E. YOUR “LAST EXERCISE DATE”, WHICH IS 90 DAYS AFTER THE END OF THE PAYMENT
PERIOD) TO EXERCISE ANY VESTED OPTIONS, AFTER WHICH DATE ALL RIGHTS TO EXERCISE
VESTED OPTIONS WILL EXPIRE. YOU ARE NOT ENTITLED TO AND WILL NOT VEST IN ANY
RIGHTS OR RECEIVE ANY SHARES UNDER STOCK UNIT GRANT NO. 2977 UNDER OR AS A
RESULT OF YOUR CHANGE IN STATUS, THE TERMINATION OF YOUR EMPLOYMENT WITH
POWER-ONE, OR OTHERWISE UNDER THIS AGREEMENT.

THE SPECIAL CONDITIONS APPLICABLE TO THE DEADLINE
FOR EXERCISE OF VESTED OPTIONS UNDER GRANT NO. 00001464 WILL REMAIN IN EFFECT
DURING YOUR PAYMENT PERIOD. IN THE EVENT THE APPLICABLE TRIGGER DATE NOTED IN
GRANT NO. 00001464 IS ACHIEVED DURING YOUR PAYMENT PERIOD, THE DEADLINE FOR
YOUR EXERCISE OF OPTIONS VESTED UNDER GRANT NO. 00001464 WILL BE CONTROLLED BY
THE TERMS AND CONDITIONS OF GRANT NO. 00001464, AND MAY EXPIRE PRIOR TO
THE END OF THE PAYMENT PERIOD OR PRIOR TO YOUR LAST
EXERCISE DATE AS MAY BE APPLICABLE. YOU ARE RESPONSIBLE FOR
MONITORING OUR STOCK PRICE TO DETERMINE THE APPLICABLE END DATE FOR RIGHTS TO
EXERCISE UNDER GRANT NO. 00001464 IN THE EVENT THAT THE TRIGGER DATE OCCURS
DURING YOUR PAYMENT PERIOD.  HOWEVER, YOU
ACKNOWLEDGE AND AGREE THAT IF YOUR TRIGGER DATE OCCURS SUCH THAT THE OPTION
EXPIRATION DATE CALCULATED FROM YOUR TRIGGER DATE IS BEYOND YOUR LAST EXERCISE DATE, THAT YOUR LAST EXERCISE
DATE WILL BE THE LAST DATE UPON WHICH YOU MAY EXERCISE OPTIONS
UNDER GRANT NO. 00001464 NOTWITHSTANDING ANY OTHER DATE CALCULATED AS THE
OPTION EXPIRATION DATE UNDER GRANT NO. 00001464.

Nothing in this
agreement in any way supersedes, modifies, or amends any provision of the
Power-One, Inc. Stock Option Plan. Your election to exercise options, and
all aspects and procedures governing administration of options, will be subject
to and governed by the Plan. In the event of any inconsistency between this agreement
and the terms and conditions of the Plan, the Plan shall prevail.

6.     Confidential Information.   You agree to continue to
comply with the terms and conditions of any employee confidentiality agreement
previously entered into between You and Power-One.

7.     Access to Information.   You agree to provide Power-One,
or assist Power-One in retrieving, all information, records, or other materials
belonging or relating to Power-One or Your services with Power-One, in whatever
recorded or retrievable form and wherever located (e.g. home computer), which
are or have been in Your possession or control in connection with Your
employment by Power-One. Your agreement specifically includes transfer and
return of all keys to Power-One files, desks, etc., in Your possession, and
disclosure to Power-One of all computer or other electronic storage system
passwords, access codes, or other electronic “keys.”  You agree that You will not remove from
Power-One nor retain in any location any document, file, electronic record, or
other item containing, in whole or in part, any confidential or proprietary
information of Power-One of which You gained knowledge or to which You gained
access during Your employment. You further agree that You will not reveal or
disclose to any party or person any such confidential or proprietary
information. You agree to continue to comply with all third party nondisclosure
agreements and obligations which relate to or arise from any work or services
performed by You while employed by Power-One, which agreements relate to
proprietary or confidential information of others to which You had access or of
which You became knowledgeable during Your employment with Power-One.

Additionally, You
agree that You will not remove from Power-One nor retain under Your control,
directly or indirectly, in whole or in part, any software program, development
tool, design aid, or comparable item, asset, or property owned, licensed, or
utilized by Power-One. You acknowledge that You may be personally liable to the
applicable owner for any misuse or misappropriation by You of any such program,
tool, aid, or item, to the extent the owner claims for itself intellectual
property rights in the item. You acknowledge that You have returned to
Power-One any and all such items which may have been 

 3
 

previously
used by You in any off site or remote office or work location. The first
sentence of this paragraph in no way prohibits You from securing, in Your own
name and for Your own account, any such commercially available program, tool,
aid, or item directly from the owner for Your own use.

8.     Payment of Salary.   You agree that Power-One has paid
all salary, wages, compensation, accrued vacation, commissions and any and all
other benefits due to You for your prior service to Power-One other than those
items specifically noted in this agreement.

9.     Release of Claims/Exclusion From Release.

(a) You agree
that the terms and agreements of this letter agreement represent settlement in
full of all outstanding obligations which may be claimed to be owed to You by
Power-One. In consideration of Power-One’s payments and extension of other
benefits as outlined above, and of Your compliance with Your obligations under
this agreement, the Parties, on behalf of themselves, and their respective
heirs, executors, officers, directors, employees, investors, shareholders,
administrators, predecessor and successor corporations, and assigns, release
each other and their respective heirs, executors, officers, directors,
employees, investors, shareholders, administrators, predecessor and successor
corporations, and assigns, from, and agree not to sue concerning, any claim,
duty, obligation or cause of action relating to any matters of any kind,
whether presently known or unknown, suspected or unsuspected, that any of them
may possess arising from any omissions, acts or facts that have occurred up
until and including the Effective Date of this agreement including, without
limitation and by way of example:

(i)    any and
all claims relating to or arising from Your employment relationship with
Power-One and the termination of that relationship;

(ii)   any and
all claims relating to payment of wages, eligibility for and payment of any
overtime compensation, and any other related claims associated with your
compensation;

(iii)  any and
all claims relating to, or arising from, Your right to purchase, or actual
purchase of shares of stock of Power-One;

(iv)  any and all
claims for wrongful discharge of employment; breach of contract, both express
and implied; breach of a covenant of good faith and fair dealing, both express
and implied; negligent or intentional infliction of emotional distress;
negligent or intentional misrepresentation; negligent or intentional
interference with contract or prospective economic advantage; and defamation;

(iv)  any and all
claims for violation of  any federal,
state or municipal statute, including, but not limited to, Title VII of the
Civil Rights Act of  1964, the Civil
Rights Act of 1991, the Age Discrimination of Employment Act of 1967, the
Americans with Disabilities Act of 1990, and any comparable state statute or
regulation;

(v)    any and
all claims arising out of any other laws and regulations relating to employment
or employment discrimination; and

(vi)  any and all
claims for attorneys’ fees and costs.

Power-One and You
agree that the release set forth in this section shall be and remain in effect
in all respects as a complete general release as to the matters released.

(b)   This
release does not extend to any obligations
incurred by either party under this agreement, to specifically include, but not
be limited to, all Your obligations under paragraphs 14 and 15. below.

10.   Acknowledgment of Waiver of Claims under ADEA.   You
specifically acknowledge that You are waiving and releasing any rights You may
have under the Age Discrimination in Employment Act of 1967 (“ADEA”), as
amended from time to time, and  that this
waiver and release is knowing and voluntary. You acknowledge that Your waiver
and release of rights under this paragraph extends to Power-One and all 

 4
 

respective parties as
outlined in Paragraph 7, and includes Your specific agreement not to sue for
claims under the ADEA. You and Power-One agree that this waiver and release
does not apply to any rights or claims that may arise under ADEA after the
Effective Date of this agreement. You acknowledge that the consideration given
for this waiver and release agreement is in addition to anything of value to
which You were already entitled.

11.   Civil Code Section 1542.   The Parties represent
that they are not aware of any claim by either of them other than the claims
that are to be released by this Agreement. You and Power-One acknowledge that
each of Us have been advised by legal counsel and are familiar with the
provisions of California Civil Code Section 1542, which provides as
follows:

A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE
CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF
EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS
SETTLEMENT WITH THE DEBTOR.

You and Power-One,
being aware of this code section, agree to expressly waive any rights we each
may have under it, as well as under any other statute or common law principles
of similar effect as they pertain to the released matters as stated in
paragraph 7 above.

12.   Confidentiality.   We each agree to use our best efforts
to maintain in confidence the existence of this agreement, the contents and
terms of this agreement, and the consideration for this agreement (hereinafter
collectively referred to as “Settlement Information”). Each Party agrees to
take every reasonable precaution to prevent disclosure of any Settlement
Information to third parties, and each agrees that there will be no publicity,
directly or indirectly, concerning any Settlement Information. The Parties
agree to take every precaution to disclose Settlement Information only to those
employees, officers, directors, attorneys, accountants, governmental entities,
and family members who have a reasonable need to know of such Settlement
Information.

13.   Good Behavior.

a.      Each
party agrees that they will not engage in any form of criticism, defamation,
slander, or any other related “bad-mouthing” of the other, or of any employee,
officer, director or agent of either party.

b.     In
addition, each party agrees it will not engage in any conduct which seeks to
interfere illegally with, harass, annoy, disrupt, or otherwise wrongfully
impact adversely in any manner, the business, contracts and relationships of
the other. This includes by way of example and not as any limitation or
restriction on the generality of the foregoing, contact with customers,
employees, consultants, contractors, officers, directors, suppliers, etc., of
the other party to this Agreement which is made in contravention of the terms
and conditions of this Agreement, or which is made for the purpose of causing
disruption to, annoyance of, or interference with current or then existing
relationships between the contacted party and the other party to this
Agreement.

14.   On-going Communication and Cooperation With Power-One.

a.      In
furtherance of the requirements of Paragraph 13 above, and for the purposes of
coordinating and controlling any ongoing communications, contacts, or
interactions between You and Power-One following Your release from active
service with Power-One, Tisha Shokat, Vice President, Human Resources, is to be
the sole and exclusive point of contact by You with Power-One. Any and all
communications, contacts, questions, requests, or other interactions of any
nature by You or on Your behalf whatsoever must be directed to Ms. Shokat
as the exclusive point of contact with and “entry” to Power-One for any matter
dealing with Power-One, or for any matter which arises from or relates in any
way to your employment with Power-One. This arrangement includes, by way of
example and not as any limitation or restriction on the generality of the
foregoing, requests involving employee benefit questions, 

 5
 

matters involving any
transaction with Power-One stock (e.g. stock option exercise, sale of Power-One
stock You beneficially own from whatever source),  or matters of administration of any aspect of
this Agreement. Ms. Shokat will arrange for contact with, response by, or
communication with, the applicable personnel of Power-One on a case-by-case
basis. Ms. Shokat may be reached at office phone 805-383-5885,
or cell phone (to be called by You, as needed, only
during normal business hours of 8:00 a.m. - 5:00 p.m. Monday -
Friday) 805-469-0221.

b.     You agree
to provide Power-One in a timely manner with all necessary cooperation
following Your release from active service with Power-One, which cooperation is
required to wrap up any and all outstanding matters, debts, arrangements,
payables, etc., connected with Your prior full time service with Power-One. Such
cooperation as applicable will include, but not be limited to,

(i)            responding and
assisting as requested to and with specific inquiries, requests for assistance,
on-site service, or other services as reasonably requested by Power-One to
provide for an orderly transition of duties, projects, or work in progress;

(ii)        except as otherwise noted
in this letter agreement, accounting for and/or arranging, as directed by
Power-One, an appropriate return to Power-One or disposition of all Power-One
property in Your possession (e.g. computer equipment, telephones, pagers,
files, etc.);

(iii)    reconciling and completing all
outstanding expense reports, travel arrangements, etc.;

(iv)      closing out and paying off
any credit card balances associated with any Power-One provided or sponsored
credit card arrangements (e.g., American Express, phone cards, etc.);

(v)          except as otherwise
noted in this letter agreement, closing out and paying off any cell phone,
pager, special email, or other comparable accounts associated with Your
employment with Power-One;

(vi)      assisting with any
arrangements related to any remote office space which may have been provided
for Your use by Power-One; and

(vii)  advising Power-One of all
scheduled meetings, appointments, commitments, etc., You have on Your calendar
which may need follow-up or further action by Power-One.

The preceding
listing of items of cooperation is not intended to be exhaustive. You
acknowledge that Your obligation to provide “wrap-up” cooperation to Power-One,
and in providing final accounting reconciliation of all applicable matters, is
an on-going obligation under this agreement which continues until all
applicable matters are closed. You agree to provide such cooperation in good
faith to Power-One to ensure that all matters connected with Your release from
service with Power-One are attended to promptly, completely, and in a manner
which complies in spirit and intent with the provisions of this paragraph 15. You
further acknowledge and agree that Power-One may be entitled to adjust, offset,
reduce or otherwise apply any amount otherwise payable to you under this
agreement for or toward closing out or making such payments as may be necessary
to effect the purposes of this paragraph 15, in the event You do not provide
Power-One with the cooperation called for under this paragraph 15.

16.   Non-Solicitation.   You agree that for a period of
twelve months following the termination date of Your employment with Power-One,
You shall not, in any capacity, induce or solicit, or attempt to induce or
solicit, or cause any other person, business or entity to induce or solicit,
any person who at the time of such inducement or solicitation is an employee of
Power-One, to perform work or services in any capacity for any other person or
entity other than Power-One; or otherwise solicit, offer to employ or retain,
or aid another in similar actions, any then current employee of Power-One.

17.   Tax Consequences.   Power-One makes no representations
or warranties with respect to the tax consequences of the payment of any sums
to You under the terms of this agreement. You agree and 

 6
 

understand that You are
responsible for payment, if any, of local, state and/or federal taxes on the
sums paid hereunder by Power-One and any penalties or assessments thereon. You
further agrees to indemnify and hold Power-One harmless from any claims,
demands, deficiencies, penalties, assessments, executions, judgments, or
recoveries by any government agency against Power-One for any amounts claimed
due on account of Your failure to pay federal or state taxes or damages
sustained by Power-One by reason of any such claims, including reasonable
attorneys’ fees.

18.   No Admission of Liability.   The Parties understand and
acknowledge that this agreement constitutes a compromise and settlement of
disputed claims. No action taken by the Parties hereto, or either of them,
either previously or in connection with this agreement will be considered (a) an
admission of the truth or falsity of any claims previously made or  (b) an acknowledgment or admission by
either party of any fault or liability whatsoever to the other party or to any
third party.

19.   Authority.   Power-One represents and warrants that the
undersigned has the authority to act on behalf of Power-One and to bind
Power-One and all who may claim through it to the terms and conditions of this
agreement. You represent and warrant that You have the capacity to act on Your
own behalf and on behalf of all who might claim through You to bind them to the
terms and conditions of this agreement. Each Party warrants and represents that
there are no liens or claims of lien or assignments in law or equity or
otherwise of or against any of the claims or causes of action released herein.

20.   No Representations.   Neither party has relied upon any
representations or statements made by the other party to this agreement which
are not specifically set forth in this agreement.

21.   Severability.   In the event that any provision hereof
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this agreement shall continue in full force and effect
without said provision.

22.   Entire Agreement.   This agreement represents the entire
agreement and understanding between Power-One and You concerning Your
separation from Power-One, and supersedes and replaces any and all prior
agreements and understandings concerning Your relationship with Power-One and
his compensation by Power-One.

23.   No Oral Modification.   This agreement may only be
amended in writing, signed by You and the President of Power-One.

24.   Governing Law/Enforcement.   This agreement shall be
governed by the laws of the State of California. In the event either party
initiates legal action seeking enforcement of or compliance with the terms and
conditions of this letter agreement, the prevailing party in any such legal
action will be entitled, in addition to any other rights and remedies it may
have, to reimbursement for its expenses, including court costs and reasonable
attorney and consultant fees.

26.   Effective Date.   This agreement is effective seven days
after it has been signed by both Parties, unless otherwise revoked by You
within the seven (7) day period.

27.   Counterparts.   This agreement may be executed in
counterparts, and each counterpart shall have the same force and effect as an
original and shall constitute an effective, binding agreement on the part of
each of the undersigned.

28.   Voluntary Execution of Agreement.   This agreement is
executed voluntarily and without any duress or undue influence on the part or
behalf of the Parties hereto, with the full intent of releasing all claims. The
Parties acknowledge that:

(a)    They have
read this agreement;

(b)   They have
been represented in the preparation, negotiation, and execution of this
agreement by legal counsel of their own choice or that they have voluntarily
declined to seek such counsel;

 7
 

(c)    They
understand the terms and consequences of this agreement and of the releases it
contains;

(d)   They are fully aware of the legal and binding effect of this
agreement.

POWER-ONE, INC.

	
  Dated:                               ,
  20     

  	
   

  	
  By 

  	
   

  
	
   

  	
   

  	
  Clara Shokat-Fadai, V. P. Human Resources

  
	
  ACCEPTED
  AND AGREED TO

  	
   

  	
   

  
	
  Dated:                                ,
  20    

  	
   

  	
   

  
	
   

  	
   

  	
  Veronica Tarrant

  

 

 8Exhibit
4.18

SECOND AMENDMENT TO CREDIT AGREEMENT

This
SECOND AMENDMENT TO CREDIT AGREEMENT (this “Amendment”) is dated as of
August 8, 2006 and is entered into by and among Russ Berrie and Company, Inc.
(the “Company”), Russ Berrie U.S. Gift, Inc., a Delaware corporation (“Russ Gift”), Russ Berrie & Co. (West), Inc. (“Russ
West”), Russ Berrie and Company Properties, Inc. (“Russ Properties”),
Russplus, Inc. (“Russplus”), and Russ Berrie and Company Investments, Inc. (“Russ
Investments”) (Russ Gift, Russ West, Russ Properties, Russplus, and Russ
Investments are sometimes referred to herein collectively as the “Borrowers”
and individually as a “Borrower” and, together with the Company, being
the “Credit Parties”), the financial institutions that are or may from
time to time become parties hereto as “Lenders” (and each being a “Lender”),
LASALLE BANK NATIONAL ASSOCIATION, in its capacity as “Issuing Bank,”
and LASALLE BUSINESS CREDIT, LLC (in its individual capacity, “LaSalle”),
as administrative agent (in such capacity, the “Administrative Agent”)
for the Lenders.

RECITALS:

A.            The
Credit Parties, the Administrative Agent, the Lenders and the Issuing Bank
(collectively, the “Parties”) have entered into that certain Credit
Agreement dated as of March 14, 2006 (as the same may have been or may
hereafter be amended, restated, supplemented or otherwise modified from time to
time, the “Credit Agreement”).

B.            The
Credit Parties have requested that the Administrative Agent and the Lenders
amend the Credit Agreement to modify certain of the financial covenants set
forth therein.

C.            The
Administrative Agent, the Lenders and the Issuing Bank are willing to enter
into such amendment subject to the terms and conditions set forth herein.

NOW, THEREFORE, in consideration of the premises and
for other good and valuable consideration, the receipt and adequacy of which
are hereby acknowledged, and subject to the terms and conditions set forth
herein, the Parties hereto hereby agree as follows:

AGREEMENTS:

SECTION  1           DEFINITIONS.  Unless otherwise defined herein, capitalized
terms used in this Amendment shall have the meanings ascribed to such terms in
the Credit Agreement.

SECTION  2           AMENDMENTS.  Subject to the satisfaction of the conditions
precedent set forth herein, Section 11.13.2 of the Credit Agreement is
hereby amended and restated in its entirety to read as follows:

“11.13.2  Minimum EBITDA.  Not permit EBITDA for the following periods
ending as of the last day of the following Fiscal Quarters, to be less than the
respective amounts set forth below:

 

 

 

	
  Period ending:

  	
   

  	
  Minimum EBITDA

  	
   

  
	
  Two Fiscal Quarter
  period ending June 30, 2006

  	
   

  	
  $

  	
  (15,200,000

  	
  )

  
	
  Three Fiscal Quarter
  period ending September 30, 2006

  	
   

  	
  $

  	
  (13,100,000

  	
  )

  
	
  Computation Periods
  ending as of the last day of each of the following Fiscal Quarters: December
  31, 2006

  	
   

  	
  $

  	
  (14,100,000

  	
  )

  
	
  March 31, 2007

  	
   

  	
  $

  	
  (10,800,000

  	
  )

  
	
  June 30, 2007

  	
   

  	
  $

  	
  (8,800,000

  	
  )

  
	
  September 30, 2007

  	
   

  	
  $

  	
  (6,000,000

  	
  )

  
	
  December 31, 2007

  	
   

  	
  $

  	
  (500,000

  	
  )

  
	
  March 31, 2008 and each Fiscal Quarter ending thereafter

  	
   

  	
  $

  	
  4,000,000.

  	
  ”

  

 

SECTION  3          
CONDITIONS; REPRESENTATIONS AND WARRANTIES.  The effectiveness of this Amendment is
subject to the satisfaction of the following conditions precedent (unless
specifically waived in writing by the Administrative Agent):

3.1           The Administrative Agent shall have
received fully executed copies of this Amendment executed by each of the Credit
Parties, the Lenders and the Issuing Bank.

3.2           No Event of Default or Unmatured
Event of Default has occurred and is continuing.

3.3           As of the effective date of this
Amendment, all representations and warranties of the Credit Parties set forth
herein shall be true and correct, and all representations and warranties of the
Credit Parties set forth in the Credit Agreement shall be true and correct in
all material respects (or, with respect to those representations and warranties
expressly limited by their terms by materiality or material adverse effect
qualifications, all respects) and shall be deemed remade on such date, except
to the extent any such representation and warranty expressly relates to an
earlier date, in which case such representation and warranty shall be true and
correct in all material respects (or, with respect to those representations and
warranties expressly limited by their terms by materiality or material adverse
effect qualifications, all respects) as to the date to which it relates.

 2
 

 

 

3.4           All proceedings taken in connection
with the transactions contemplated by this Amendment and all documents,
instruments and other legal matters incident thereto shall be reasonably
satisfactory to the Administrative Agent.

3.5           The Administrative Agent shall have
received payment from the Credit Parties in immediately available funds of a
fee (the “Amendment Fee”) in the amount of $15,000.

SECTION
4            REAFFIRMATION.

Each of the Credit Parties hereby expressly reaffirms
and assumes all of their obligations and liabilities to the Administrative
Agent, the Lenders and the Issuing Bank as set forth in the Credit Agreement
and the other Loan Documents and agree to be bound by and abide by and operate
and perform under and pursuant to and comply fully with all of the terms,
conditions, provisions, agreements, representations, undertakings, warranties,
indemnities, grants of security interests and covenants contained in the Credit
Agreement and the other Loan Documents, as such obligations and liabilities may
be modified by this Amendment, as though the Credit Agreement and the other
Loan Documents were being re-executed on the date hereof, except to the extent
that such terms expressly relate to an earlier date.  The Credit Parties hereby ratify, confirm and
affirm without condition, all liens and security interests granted to the
Administrative Agent pursuant to the Credit Agreement and the other Loan
Documents and such liens and security interests shall continue to secure the
Obligations under the Credit Agreement as amended by this Amendment, and all
extensions, renewals, refinancings, amendments or modifications of any of the foregoing.

SECTION 5            GENERAL
PROVISIONS.

5.1           No Changes. Except as
expressly provided in this Amendment, the terms and provisions of the Credit
Agreement shall remain in full force and effect and are hereby affirmed,
confirmed and ratified in all respects.

5.2           Fees and Costs.  In addition to the Amendment Fee, the Credit
Parties hereby jointly and severally agree to reimburse the Administrative
Agent for all of its reasonable out-of-pocket legal fees and expenses incurred
in the preparation and documentation of this Amendment and related documents.

5.3           Governing Law.  This Amendment shall be construed in
accordance with and governed by the internal laws (without regard to the
conflicts of law provisions, other than Section 5-1401 of the New York General
Obligations Law) of the State of New York.

5.4           Counterparts.  This Amendment may be executed in one or more
counterparts, each of which shall constitute an original, but all of which
taken together shall be one and the same instrument.  This Amendment may also be executed by
facsimile and each facsimile signature hereto shall be deemed for all purposes
to be an original signatory page.

 3
 

 

 

5.5           References.  On or after the effective date hereof, each
reference in the Credit Agreement to this “Agreement,” “hereof,” “herein”  or words of like import and all references to
the Credit Agreement in any other agreement, shall in either case unless the
context otherwise requires, be deemed to refer to the Credit Agreement as
amended hereby.

5.6           Successors.  This Amendment shall be binding on and inure
to the benefit of the Parties hereto and their respective successors and
assigns.

5.7           Section Headings.  Section headings used in this Amendment are
for convenience of reference only and shall not affect the construction of this
Amendment.

[Remainder of Page
Intentionally Left Blank]

 4
 

 

 

IN WITNESS
WHEREOF, the parties hereto have caused this Amendment to be executed by their
respective officers thereunto duly authorized and delivered as of the date
first written above.

CREDIT PARTIES:

RUSS BERRIE AND COMPANY, INC.,
a New Jersey corporation, as the Loan Party Representative

By: /s/  Andrew R. Gatto

Name: Andrew R. Gatto

Title: President
and Chief Executive Officer

RUSS BERRIE U.S. GIFT, INC.,
a Delaware corporation

By: /s/  Andrew R. Gatto

Name: Andrew R. Gatto

Title: President
and Chief Executive Officer

RUSS BERRIE & CO. (WEST),
INC., a California corporation

By: /s/  Andrew R. Gatto

Name: Andrew R. Gatto

Title: President
and Chief Executive Officer

RUSS
BERRIE AND COMPANY PROPERTIES, INC., a New Jersey corporation

By: /s/  Andrew R. Gatto

Name: Andrew R. Gatto

Title: President
and Chief Executive Officer

 5
 

 

 

RUSSPLUS,
INC., a New Jersey corporation

By: /s/  Andrew R. Gatto

Name: Andrew R. Gatto

Title: President
and Chief Executive Officer

RUSS
BERRIE AND COMPANY INVESTMENTS, INC., a New Jersey
corporation

By: /s/  Andrew R. Gatto

Name: Andrew R. Gatto

Title: President
and Chief Executive Officer

 6
 

 

 

ADMINISTRATIVE AGENT:

LASALLE BUSINESS CREDIT,
LLC, as Administrative Agent

By: /s/ Peter M. Walther

Name: Peter M. Walther

Title: Vice
President

ISSUING
BANK:

LASALLE
BANK NATIONAL ASSOCIATION, as Issuing Bank

By: /s/ Peter M. Walther

Name: Peter M. Walther

Title: Vice
President

 

 7

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