Document:

Exhibit
4.4

 

POWER-ONE, INC.

as Issuer

 

AND

 

THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A.

as Trustee

 

 

 

SUPPLEMENTAL INDENTURE

 

Dated as of May 8, 2009

 

 

 

Supplementing the Indenture

Dated as of June 17, 2008

with respect to the

8% Senior Secured Convertible Notes Due 2013

 

 

 

THIS
SUPPLEMENTAL INDENTURE dated as of May 8, 2009 (the “Supplemental Indenture”)
among POWER-ONE, INC., a Delaware corporation (the “Company”),
and THE BANK OF NEW YORK MELLON TRUST COMPANY, N.A., a national banking association,
as Trustee (the “Trustee”) under the Indenture
dated as of June 17, 2008 (the “Indenture”)
between the Company and the Trustee, pursuant to which the Company issued its
8% Senior Secured Convertible Notes due 2013 (the “Notes”).

 

WHEREAS,
the Company issued Notes in an aggregate principal amount of $80,000,000 under
the Indenture, of which $63,000,000 are outstanding.

 

WHEREAS,
Section 12.01 of the Indenture provides that the Indenture or the
Notes may be amended with the consent of Holders of at least a majority of the
principal amount of the Notes then outstanding (including consents obtained in
connection with a purchase of the Notes).

 

WHEREAS,
the Company has obtained the written consent to the proposed amendments to the
Indenture from the Holders of at least a majority in aggregate outstanding
principal amount of the Notes.

 

NOW, THEREFORE, for and in consideration of the foregoing
premises, it is mutually covenanted and agreed, for the equal and proportionate
benefit of all Holders of the Notes, as follows:

 

ARTICLE ONE

 

                Section 1.1.           Amendments to the Indenture.

 

(a)           The following
sections of the Indenture are deleted in their entirety and, in the case of
each such section, replaced with the phrase “[Intentionally Omitted.]”, and any
and all references to such sections, whether direct or indirect, in any term,
condition, limitation or other provision in the Indenture, are deleted, and
such sections and references shall be of no further force or effect:

 

	
   

  	
  ·

  	
  Section 3.07

  	
   

  	
  Ownership
  of Subsidiaries.

  
	
   

  	
  ·

  	
  Section 3.09

  	
   

  	
  Redemption
  and Dividends

  
	
   

  	
  ·

  	
  Section 3.12(a)

  	
   

  	
  Total
  Debt.

  
	
   

  	
  ·

  	
  Section 3.12(c)

  	
   

  	
  Tangible
  Net Worth.

  
	
   

  	
  ·

  	
  Article VI

  	
  Rights
  of Participation in Future Equity Issuances.

  

 

All
corresponding provisions of the Notes are deleted in their entirety and such
provisions shall be of no further force or effect.

 

(b)           Section 3.08 of the
Indenture shall be amended and restated in its entirety to read as follows:

 

1

 

“Section 3.08       RESTRICTED PAYMENTS.

 

The Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, redeem, defease, repurchase, repay or make any payments
in respect of, by the payment of cash or Cash Equivalents (in whole or in part,
whether by way of open market purchases, tender offers, private transactions or
otherwise), all or any portion of any unsecured Subordinated Indebtedness (or
any extension, refinancing or renewal thereof), whether by way of payment in
respect of principal of (or premium, if any) or interest on such Indebtedness
if at the time such payment is due or otherwise made or, after giving effect to
such payment, an Event of Default pursuant to Sections 7.01(a), (b),
(c), (d) or (h) has occurred and is continuing.

 

(c)           Section 3.10 of the
Indenture shall be amended and restated in its entirety to read as follows:

 

“Section 3.10       LIENS.

 

The Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, allow or suffer to exist any Lien upon or in any
property or assets (including accounts and contract rights) owned by the
Company or any of its Subsidiaries other than (i) Permitted Liens and (ii) Liens
securing Indebtedness permitted under Section 3.11.”

 

(d)           Section 3.11 of the
Indenture shall be amended and restated in its entirety to read as follows:

 

“Section 3.11       INDEBTEDNESS.

 

The Company shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create, incur, issue, assume, guarantee or otherwise become
directly or indirectly liable, contingently or otherwise (collectively, “incurrence”;
provided that accretion or amortization of original issue discount shall not
constitute an incurrence), with respect to any Indebtedness unless, in each
case, (x) no Default or Event of Default shall have occurred and be
continuing at the time of or as a consequence of such incurrence of
Indebtedness, and (y) at the time of the incurrence of such Indebtedness
the aggregate principal amount of all outstanding Indebtedness of the Company
and its Subsidiaries (taking into account such incurrence of additional
Indebtedness) shall not exceed the Permitted Indebtedness Amount.

 

(e)           Section 3.12(b) of the
Indenture shall be amended and restated in its entirety to read as follows:

 

“At the end of each fiscal quarter, cash and Cash Equivalents shall not
be less than the lesser of (i) $20 million and (ii) 50% of the
aggregate principal amount of the Outstanding Securities.”

 

(f)            The following
is hereby added as a new Section 4.15 of the Indenture:

 

“Section 4.15       ASSET SALES.

 

(a)          (i)           If the Company or a Pledged
Subsidiary sells a material portion of the property and assets (other than a
sale that constitutes a Permitted Disposition) of the Company and its
Subsidiaries, taken as a whole, and such sale does not constitute a Fundamental
Change (an “Asset Sale”), then within 360
calendar days after the receipt of the consideration therefor, the 

 

2

 

Company or a Subsidiary, at its option, may apply the net cash and Cash
Equivalents received in respect of such Asset Sale (the “Net Proceeds”)
(x) to make capital expenditures in the ordinary course of business of the
Company and its Subsidiaries, (y) otherwise to acquire capital assets that
are used or useful in the business of the Company or any of its Subsidiaries or
(z) to make a Permitted Investment; provided that a binding commitment to
make such expenditure or investment that is made not later than such 360th day
shall be treated as such a permitted application of the Net Proceeds as of the
date of such commitment so long as the Company or a Subsidiary enters into such
commitment with the good faith expectation that such Net Proceeds will be
applied to satisfy such commitment within 180 calendar days after the date such
commitment is made and, in the event any such Net Proceeds are not actually so
invested in accordance with this subsection (a)(i) by such 180th day, then
such remaining Net Proceeds shall be applied in accordance with subsection (a)(ii) below.

 

(ii)          Any Net
Proceeds that are not applied as provided in subsection (a)(i) above shall
constitute “Excess Proceeds”.  When the aggregate amount of Excess Proceeds
exceeds $1.0 million, the Company shall make an offer to all Holders of
Securities (an “Asset Sale Repurchase Offer”) and,
if required by the terms of any other Indebtedness that ranks equally with the
Notes in right of payment (“Pari Passu Indebtedness”),
to all holders of Pari Passu Indebtedness, to purchase the maximum principal
amount of Securities and such other Pari Passu Indebtedness that can be
purchased with the Excess Proceeds, pro rata in proportion to the respective
outstanding principal amounts (together with premium, if any) of the Securities
and such other Pari Passu Indebtedness. 
The offer price in respect of Securities in any Asset Sale Repurchase
Offer shall be 100% of the aggregate principal amount of such Securities plus
accrued and unpaid interest to the date of purchase, subject to the right of
the Holders of record on a Record Date to receive interest on the relevant
Interest Payment Date in accordance with the procedures set forth in this
Indenture and the Notes.

 

(b)          (i)           If the Company makes an Asset
Sale Repurchase Offer pursuant to subsection (a) above, the Company shall
provide to all Holders and the Trustee a notice (the “Asset Sale
Notice”) with the following information (if applicable):

(A)          the
occurrence of an Asset Sale;

 

(B)          that an
Asset Sale Repurchase Offer is being made pursuant to this Section 4.15
and the maximum principal amount of the Securities that may be purchased by the
Company pursuant to the Asset Sale Repurchase Offer;

 

(C)          the
purchase price and the purchase date with respect to Securities purchased by
the Company pursuant to the Asset Sale Repurchase Offer, which will be no
earlier than 20 Business Days nor later than 35 calendar days from the date
such notice is mailed (the “Asset Sale Payment Date”);
provided that the Asset Sale Payment Date may be extended in accordance with
applicable law;

 

(D)          the
name and address of the Paying Agent and the Conversion Agent;

 

(E)          the
then current Conversion Rate;

 

(F)          that
the Holder shall have the right to withdraw any tendered Securities and the
Holder’s election to require the Company to purchase such Securities; provided 

 

3

 

that the Paying Agent receives, not later than the close of business on
the expiration date of the Asset Sale Repurchase Offer, a facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of Securities tendered for purchase, and a statement that such Holder is
withdrawing its tendered Securities and its election to have such Securities
purchased;

 

(G)          that
unless the Company defaults in the payment of the purchase price therefor, all
Securities accepted for payment pursuant to the Asset Sale Repurchase Offer
will cease to accrue interest on the Asset Sale Payment Date;

 

(H)          if the
Securities to be repurchased are certificated, that the Holders electing to
have any Securities purchased pursuant to the Asset Sale Repurchase Offer will
be required to surrender such Securities to the Paying Agent at the address
specified in the notice prior to the close of business on the third Business Day
preceding the Asset Sale Payment Date;

 

(I)           if the
Securities to be repurchased are represented by a Global Security, that the
Holders electing to have any Securities purchased pursuant to the Asset Sale
Repurchase Offer will be required to comply with the appropriate procedures of
the Depositary; and

 

(J)           any
other instructions, as determined by the Company, consistent with the
provisions of this Section 4.15, that a Holder must follow.

 

(ii)          The
Company shall comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws or regulations are applicable in connection with the
repurchase of Securities pursuant to a Asset Sale Repurchase Offer.  To the extent that the provisions of any
securities laws or regulations conflict with the provisions of this Indenture,
the Company will comply with the applicable securities laws and regulations and
shall not be deemed to have breached its obligations described in this
Indenture by virtue thereof.

 

(iii)         On the
Asset Sale Payment Date, the Company shall

 

(A)          accept for payment such principal
amount of the Securities required to be purchased under the Asset Sale
Repurchase Offer or portions thereof properly tendered pursuant to the Asset Sale
Repurchase Offer,

 

(B)          at or prior to 11:00 a.m.,
New York City time, deposit with the Paying Agent an amount equal to the
aggregate Asset Sale Payment in respect of all Securities accepted for payment
in the Asset Sale Repurchase Offer, and

 

(C)          deliver, or cause to be
delivered, to the Trustee for cancellation the Securities so accepted together
with an Officer’s Certificate to the Trustee consistent with Section 4.14.

 

(iv)         If the
aggregate principal amount of Securities surrendered by the Holders in respect
of an Asset Sale Repurchase Offer exceeds the amount of Net Proceeds or the pro
rata portion thereof available for the Asset Sale Repurchase Offer, as the case
may be, the Trustee shall select the Securities to be purchased on a pro rata
basis for all tendered Securities.

 

4

 

(c)           Any Net
Proceeds remaining after application as set forth in Section 4.15(a) may
be used by the Company or any of its Subsidiaries for general corporate
purposes subject to the terms of this Indenture.”

 

(g)           Section 7.01(i) of the
Indenture shall be amended and restated in its entirety to read as follows:

 

“the suspension from trading or failure of the Common Stock to be listed
on The Nasdaq Global Market or on an Eligible Market for a period of five
consecutive days or for more than an aggregate of 15 days in any 365-day
period; provided, however, that an Event of Default shall not occur as a result
of a suspension from trading or the failure to be listed on The Nasdaq Global Market
as a result of (x) a failure to comply with Nasdaq Marketplace Rule 4310(c)(4) (requiring
a minimum bid price of $1 per share) or (y) a failure to file any required
information, documents or reports with the Commission.”

 

(h)           The first
sentence of Section 10.03(a) of the Indenture shall be amended
and restated in its entirety to read as follows:

 

“The Company shall file with the Trustee any information, documents or
reports that the Company is required to file with the Commission pursuant to Section 13
or 15(d) of the Exchange Act as and when filed with the Commission and, in
any event, within nine (9) months after
the same are required under Section 13 or 15(d) of the Exchange Act
to be filed with the Commission (giving effect to any grace period provided by Rule 12b-25
under the Exchange Act).”

 

(i)            The following
sentence shall be added to the end of Section 13.01(b) of the
Indenture:

 

“Holders of a majority principal amount or more of the Outstanding
Securities shall have the power to direct the Collateral Agent to amend, modify
or supplement the Pledge Agreement in any manner expressly directed by such
Holders and to direct the Collateral Agent to release Pledged Collateral from
the lien of the Pledge Agreement, and the Collateral Agent shall execute any
such amendment, modification or supplement (as long as such amendment,
modification or supplement does not adversely affect the rights of the
Collateral Agent acting in such capacity) or appropriate instruments of
release; provided that that Collateral Agent shall not release all or
substantially all of the Pledged Collateral without the consent of Holders of
all of the Outstanding Securities.”

 

                Section 1.2.           Definitions Amendment.

 

(a)           Any definitions
used exclusively in the deleted provisions of the Indenture set forth in Section 1.1(a) above,
and all references to such deleted provisions, are hereby deleted in their
entirety from the Indenture and shall be of no further force or effect.

 

(b)           The following
definitions shall either be amended in Section 1.01 of the Indenture as
provided herein or added to Section 1.01 of the Indenture, as applicable.

 

5

 

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

 

“Equity Interests” shall mean with respect to any Person,
shares of capital stock of (or other ownership or profit interests in) such
Person, warrants, options or other rights for the purchase or other acquisition
from such Person of shares of capital stock of (or other ownership or profit
interests in) such Person, securities convertible into or exchangeable for
shares of capital stock of (or other ownership or profit interests in) such
Person or warrants, rights or options for the purchase or other acquisition
from such Person of such shares (or such other interests), and other ownership
or profit interests in such Person (including, without limitation, partnership,
member or trust interests therein), whether voting or nonvoting.

 

“Foreign Subsidiary” shall mean any direct or indirect
Subsidiary of Company that is not a Domestic Subsidiary.

 

“Guarantee Obligation” means as to any Person, any obligation,
contingent or otherwise of such Person guaranteeing any Indebtedness of any
other third Person (the “primary obligor”) in any manner, whether
directly or indirectly, and including, without limitation, any obligation of
the guaranteeing Person (i) to purchase any such Indebtedness or any
property constituting direct or indirect security therefor, (ii) to
advance or supply funds (a) for the purchase or payment of any such
Indebtedness or (b) to maintain working capital or equity capital of the
primary obligor or otherwise to maintain the net worth or solvency of the
primary obligor so as to enable such primary obligor to pay such Indebtedness, (iii) to
purchase property, securities or services for the purpose of assuring the owner
of any such Indebtedness of the ability of the primary obligor to make payment
of such Indebtedness or (iv) otherwise to protect the owner of any such
Indebtedness against loss in respect thereof; provided, however, that the term
Guarantee Obligation shall not include (x) any liability by endorsement of
instruments for deposit or collection or similar transactions in the ordinary
course of business, (y) indemnification obligations of the Company or any
of its Subsidiaries entered into in the ordinary course of business or (z) obligations
of the Company or any of its Subsidiaries under arrangements entered into in
the ordinary course of business whereby the Company or such Subsidiary sells
goods or inventory to other Persons under agreements obligating the Company or
such Subsidiary to repurchase such goods or inventory, at a price not exceeding
the original sale price, upon the occurrence of certain specified events.  The amount of any Guarantee Obligation of any
guaranteeing Person at any time shall be deemed to be the lower of (1) an
amount equal to the stated or determinable amount of the Indebtedness in
respect of which such Guarantee Obligation is made at such time and (2) the
maximum amount for which such guaranteeing Person may be liable pursuant to the
terms of the instrument embodying such Guarantee Obligation at such time,
unless such Indebtedness and such maximum amount for which such guaranteeing
Person may be liable are not stated or determinable, in which case the amount
of such Guarantee Obligation shall be such guaranteeing Person’s maximum
reasonably anticipated liability in respect thereof as determined by the
Company in good faith at such time; provided, however, that for purposes of
this definition the liability of the guaranteeing Person with respect to any
obligation as to which a third Person or Persons are jointly or jointly and
severally liable as a guarantor or otherwise as contemplated hereby and have
not defaulted on its or their portions thereof shall be only as to its pro rata
portion of such obligation.

 

“Indebtedness” shall be amended and restated to read in its
entirety as follows:

 

6

 

“Indebtedness” means of any Person at any date, without
duplication, all indebtedness of such Person for borrowed money or evidenced by
a note, bond or debenture (other than current trade liabilities and
indemnification obligations incurred in the ordinary course of business), as
reflected on a balance sheet of such Person prepared in accordance with GAAP,
and all Guarantee Obligations of such Person.

 

“Investment” shall mean with respect to any Person, (a) any
purchase or other acquisition by such Person of (i) any Equity Interest
issued by, (ii) a beneficial interest in any Equity Interest issued by, or
(iii) any other equity ownership interest in, any other Person, (b) any
purchase by such Person of all or substantially all of the assets of a business
or product line conducted by another Person or all or substantially all of the
assets constituting the business or product line of a division, branch or other
unit operation of any other Person, (c) any loan, advance (other than
deposits with financial institutions available for withdrawal on demand,
prepaid expenses, accounts receivable and similar items made or incurred in the
ordinary course of business as presently conducted), or capital contribution by
such Person to any other Person, including all Indebtedness of any other Person
to such Person arising from a sale of property by such Person other than in the
ordinary course of its business, (d) any guarantee obligation incurred by
such Person in respect of any obligation of another and (e) any purchase,
or entry into, of any derivative instrument or other contract by such Person
providing for the economic or risk equivalent of all or any part of any
investment in another Person of the type referred to in clause (a), (b), (c) or
(d) above.

 

“Permitted Disposition” shall mean (a) dispositions in
the ordinary course of business of inventory, (b) dispositions of obsolete
or worn out property (including obsolete or valueless intellectual property),
whether now owned or hereafter acquired, in the ordinary course of business,
and dispositions of property (including intellectual property) that are
reasonably determined by the Board of Directors of the disposing Company or
Pledged Subsidiary (or, in the case of any disposition or series of related
dispositions in an amount not in excess of $100,000, reasonably determined by
the disposing Company or Pledged Subsidiary) in good faith to be of no
practical use to the business of the Company and its Subsidiaries, which
dispositions do not, in the aggregate, materially adversely affect the value of
the Collateral taken as a whole, in an aggregate amount not in excess of
$2,000,000 over the term of this Indenture, (c) dispositions of cash or
Cash Equivalents not otherwise prohibited under the Pledge Agreement, (d) dispositions
to any Subsidiary not otherwise prohibited herein, (e) dispositions of
property to the extent such transaction constitutes a Permitted Investment, and
(f) dispositions of equipment to the extent that such equipment is
exchanged for credit against the purchase price of similar replacement
equipment.

 

“Permitted Indebtedness Amount” shall mean, as of any date,
the greater of (i) $150 million and (ii) an amount equal to 3.0 times
LTM EBITDA for the immediately preceding 4 consecutive completed fiscal
quarters for which financial statements of the Company prepared in accordance
with GAAP are available.

 

“Permitted Investment” shall mean (i) Investments by the
Company that are not through or in any Subsidiary or other Person and that are (x) reasonably
determined by the Company to be strategic in nature and to have a valid
business purpose or (y) in the ordinary course of business, (ii) Investments
in cash and Cash Equivalents, (iii) Investments in any Pledged Subsidiary
(including, for the avoidance of doubt, any newly formed Domestic or Foreign
Subsidiary (first tier or otherwise) that has become a Domestic or Foreign
Subsidiary Pledgor 

 

7

 

hereunder),
(iv) Investments in any Subsidiary of a Pledged Subsidiary that are in
existence as of the Issue Date, (v) Investments in the ordinary course of
business in any newly formed wholly-owned Foreign Subsidiary of a newly formed
first tier Domestic or Foreign Subsidiary that has become a Domestic or Foreign
Subsidiary Pledgor hereunder where the Company has in good faith reasonably
determined that the creation of the newly formed wholly-owned Foreign
Subsidiary and the Investment each have a valid business purpose and do not
materially impair the value of the Collateral taken as a whole, (vi) Investments
(including debt obligations and Equity Interests) received in connection with
the bankruptcy or reorganization of suppliers and customers or in settlement of
delinquent obligations of, or other disputes with, customers and suppliers
arising in the ordinary course of business or upon the foreclosure with respect
to any secured Investment or other transfer of title with respect to any
secured Investment, and (vii) Investments by the Company or a Pledged
Subsidiary in equipment, fixed assets, real property or improvements, or
replacements or substitutions therefor or additions thereto (excluding normal
replacements and maintenance which are properly charged to current operations
as operating expenses in accordance with GAAP), that have been or should be, in
accordance with GAAP, reflected as additions to property, plant or equipment on
a consolidated balance sheet of the Company or such Pledged Subsidiary or have
a useful life of more than one year, (viii) lease, utility and other
similar deposits in the ordinary course of business, (ix) hedging or other
derivative obligations otherwise permitted to be incurred under the Section 3.09
and incurred in the ordinary course of business for a valid business purpose, (x) receivables
owing to the Company or any Subsidiary if created or acquired in the ordinary
course of business and payable or dischargeable in accordance with customary
trade terms; provided, however,
that such trade terms may include such concessionary trade terms as the Company
or any such Subsidiary deems commercially reasonable under the circumstances,
(xi) Investments that are advances paid to third-party contract manufacturers
in the ordinary course of business to purchase specialized equipment required
to produce specialized products for the Company or its Subsidiaries, (xii)
Investments made by the Company or a Subsidiary for consideration consisting
only of Common Stock of the Company, (xiii) stock, obligations or securities
received in settlement of debts created in the ordinary course of business and
owing to the Company or any Subsidiary or in satisfaction of judgments, (xiv)
any other Investment where the Company has in good faith reasonably determined
that the Investment has a valid business purpose and does not materially impair
the value of the Collateral taken as a whole if, upon the consummation of the
Investment, the resulting Investment has been pledged for the benefit of the
Trustee, the Collateral Agent and the Holders on a basis consistent with the
Pledge Agreement and (xv) any other Investments not specified above that do not
in the aggregate, since the Issue Date, exceed $1,000,000 (for purposes of
calculating which, the amount of any Investment shall be the amount actually
invested, without adjustment for subsequent increases or decreases in the value
of such Investment).

 

ARTICLE TWO

 

                Section 2.1            Effective Date of This Supplemental
Indenture.

 

                This Supplemental Indenture
shall be effective as of the date first written above.

 

                Section 2.2            Indenture Ratified.

 

                Except as hereby otherwise
expressly provided, the Indenture, as modified by this Supplemental Indenture,
is in all respects ratified and confirmed, and all the terms, provisions and
conditions thereof shall be and remain in full force and effect.

 

8

 

                Section 2.3            Counterparts.

 

                This Supplemental Indenture
may be executed in any number of counterparts, each of which shall be an
original, but such counterparts shall together constitute but one and the same
instrument.

 

                Section 2.4            Trustee Not Responsible.

 

                The recitals contained
herein shall be taken as the statements of the Company and the Trustee assumes
no responsibility for their correctness. 
The Trustee makes no representation as to the validity or sufficiency of
this Supplemental Indenture.

 

                Section 2.5            Definitions and Terms.

 

                Unless otherwise defined
herein, all capitalized terms used but not defined herein shall have the
meanings assigned to such terms in the Indenture.

 

Section 2.6            Supplemental
Indenture is an Indenture.

 

                This Supplemental Indenture
is an amendment to and implementation of the Indenture, and the Indenture and
this Supplemental Indenture shall be read together from and after the
effectiveness of this Supplemental Indenture.

 

                Section 2.7            Governing Law.

 

                This Supplemental Indenture
shall be governed by and construed in accordance with the laws of the State of
New York.

 

[Remainder of Page Intentionally Left Blank]

 

9

 

IN WITNESS WHEREOF, the parties hereto have
caused this Supplemental Indenture to be duly executed as of the day and year
first above written.

 

	
   

  	
  POWER-ONE, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
     /s/
  Richard J. Thompson

  
	
   

  	
  Name:

  	
  Richard J. Thompson

  
	
   

  	
  Title:

  	
  President and Chief
  Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  THE BANK OF NEW YORK MELLON TRUST

  COMPANY, N.A., as Trustee

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
     /s/
  Teresa Petta

  
	
   

  	
  Name:

  	
  Teresa Petta

  
	
   

  	
  Title:

  	
  Vice PresidentExhibit 4.5

 

CERTIFICATE
OF DESIGNATION

 

OF
SERIES A CONVERTIBLE PREFERRED STOCK

 

OF

 

POWER-ONE,
INC.

 

Power-One, Inc. (the
“Company”), a corporation organized and existing under the General
Corporation Law of the State of Delaware (the “DGCL”), hereby certifies,
pursuant to Section 151 of the DGCL, that the following resolutions were
duly adopted by its Board of Directors (the “Board”) on April 21,
2009:

 

WHEREAS, the Company’s
Restated Certificate of Incorporation (the “Certificate of Incorporation”)
authorizes 30,000,000 shares of preferred stock, par value $.001 per share (the
“Preferred Stock”) issuable from time to time in one or more series;

 

WHEREAS, the Certificate
of Incorporation authorizes the Board to provide by resolution for the issuance
of the shares of Preferred Stock in one or more series, and to establish from
time to time the number of shares to be included in each such series, and to
fix the designation, powers, privileges, preferences and relative
participating, optional or other rights, if any, of the shares of each such
series and the qualifications, limitations or restrictions thereof;

 

NOW, THEREFORE, BE IT
RESOLVED, that a series of Preferred Stock with the powers, designations,
preferences and rights and the qualifications, limitations and restrictions
thereof, as provided herein is hereby authorized and established as follows:

 

SECTION 1.                                Number;
Designation; Rank.

 

(a)                                  This
series of convertible participating Preferred Stock is designated as the “Series A
Convertible Preferred Stock” (the “Series A Preferred Stock”).  The number of shares constituting the Series A
Preferred Stock is 23,625 shares, par value $.001 per share.

 

(b)                                 The
Series A Preferred Stock ranks, with respect to dividend rights and rights
upon liquidation, dissolution or winding up of the Company:

 

(i)             senior in preference
and priority to the common stock of the Company, par value $.001 per share (the
“Common Stock”), the series of Preferred Stock of the Company that is
designated as “Junior Participating Preferred Stock”, par value $.001 per
share, and each other class or series of Equity Security of the Company the
terms of which do not expressly provide that it ranks senior in preference or
priority to or on parity, without preference or priority, with the Series A
Preferred Stock with respect to dividend rights or rights upon liquidation,
dissolution or winding up of the Company (collectively with the Common Stock,
the “Junior Securities”);

 

(ii)          on parity, without
preference and priority, with each other class or series of Equity Security of
the Company, the terms of which expressly provide that it will rank on parity,
without preference or priority, with the Series A Preferred Stock with
respect to dividend 

 

 

rights or rights upon
liquidation, dissolution or winding up of the Company (collectively, the “Parity
Securities”), and

 

(iii)       junior in preference and
priority to each other class or series of Equity Security of the Company the
terms of which expressly provide that it will rank senior in preference or priority
to the Series A Preferred Stock with respect to dividend rights or rights
upon liquidation, dissolution or winding up of the Company (collectively, the “Senior
Securities”).

 

SECTION 2.                                Dividends.

 

(a)                                  Regular
Dividends.

 

(i)             Each holder of issued
and outstanding Series A Preferred Stock shall be entitled to receive,
when, as and if declared by the Board, on each share of Series A Preferred
Stock, dividends (the “Regular Dividends”) with respect to each Dividend
Period equal to (A) the Dividend Rate on the Regular Liquidation
Preference per share of Series A Preferred Stock minus (B) the
amount of all Participating Dividends paid in respect of a share of Series A
Preferred Stock during the applicable Dividend Period; provided that (x) in
no event will the Regular Dividend for any Dividend Period be less than zero
(0) and (y) Participating Dividends will not reduce the amount payable in
respect of any Regular Dividend that has accrued in any Dividend Period other
than the Dividend Period during which the Participating Dividend is paid.  For purpose of this clause (a)(i), the amount
of any Participating Dividend that is not paid in cash will be deemed to equal
the Fair Market Value of the securities in the other property constituting such
Participating Dividend that is paid on a share of Series A Preferred
Stock.

 

(ii)          Regular Dividends shall
accrue on a daily basis and be cumulative from the Series A Original
Issuance Date and, without duplication, unpaid Regular Dividends shall compound
quarterly to the extent not paid on the Dividend Payment Date relating to the
applicable Dividend Period (i.e., dividends shall begin to accrue on other
dividends to the extent that such other dividends are not paid on the Dividend
Payment Date for the Dividend Period for which such other dividends originally
accrued).  Regular Dividends that are
declared and payable on the Series A Preferred Stock on any Dividend
Payment Date shall be payable in cash out of funds legally available therefor
to holders of record of the Series A Preferred Stock as they appear on the
stock register of the Company on the record date for such dividend, which shall
be the date 15 days prior to the applicable Dividend Payment Date, provided
that Regular Dividends payable upon conversion of a share of Series A
Preferred Stock will be payable to the holder of record at the time of such
conversion.

 

(iii)       Regular Dividends on the Series A
Preferred Stock in respect of any Dividend Period shall be computed on the
basis of a 360-day year consisting of twelve 30-day months.  The amount of dividends payable at the
Dividend Rate on the Series A Preferred Stock on any date prior to the end
of a Dividend Period, and for the initial Dividend Period, shall be computed on
the basis of a 360-day year consisting of twelve 30-day months, and actual days
elapsed over a 30-day month.

 

(iv)      Regular Dividends are
payable only in cash.  Regular Dividends
will accrue and cumulate whether or not the Company has earnings or profits,
whether or not there are 

 

2

 

funds legally available
for the payment of Regular Dividends and whether or not Regular Dividends are
declared.

 

(b)                                 Participating
Dividends.  (i) Each holder of issued
and outstanding Series A Preferred Stock will be entitled to receive,
when, as and if declared by the Board, out of funds legally available for the
payment of dividends for each share of Series A Preferred Stock, dividends
of the same type as any dividends or other distribution, whether in cash, in
kind or in other property, payable or to be made on outstanding shares of
Common Stock, in an amount equal to the amount of such dividends or other
distribution as would be made on the number of shares of Common Stock into
which such share of Series A Preferred Stock could be converted on the
applicable record date for such dividends or other distribution on the Common
Stock, without giving effect to the limitations set forth in SECTION 5(b) (the
“Participating Dividends”); provided, however, that
notwithstanding the above, the holders of Series A Preferred Stock shall
not be entitled to receive any dividends or distributions for which an
adjustment to the Conversion Price shall be made pursuant to SECTION 5(f)(i)(A) or
SECTION 5(f)(ii) (and such dividends or distributions that are not
payable to the holders of Series A Preferred Stock as a result of this
proviso shall not be deemed to be Participating Dividends).

 

(ii)          Participating Dividends
are payable at the same time as and when such dividend or other distribution on
Common Stock is paid to the holders of Common Stock and are payable to holders
of record of Series A Preferred Stock on the record date for the
corresponding dividend or distribution on the Common Stock; provided, however,
that no dividend or distribution on Common Stock shall be made to holders of
the Common Stock unless and until (A) all accrued and unpaid Regular
Dividends and Additional Dividends (other than Regular Dividends accruing
pursuant to SECTION 2(a)(i) in respect of the applicable Dividend
Period in which the Participating Dividend is paid) have been paid in full and (B) the
Participating Dividends are paid (or are concurrently being paid) pursuant to SECTION 2(b)(ii) hereof.

 

(c)                                  Additional
Dividends. Following the occurrence of an Increase Event, and for so long
as such Increase Event continues, each holder of issued and outstanding Series A
Preferred Stock will be entitled to receive, when, as and if declared by the
Board, out of funds legally available for the payment of dividends for each
share of Series A Preferred Stock, with respect to each Dividend Period,
dividends at a rate per annum equal to the Additional Rate multiplied by the
Regular Liquidation Preference per share of the Series A Preferred Stock
(the “Additional Dividends” and, together with the Regular Dividends and
the Participating Dividends, the “Dividends”).  Any Additional Dividends payable pursuant to
this SECTION 2(c) shall be in addition to any Regular Dividends or
Participating Dividends, as applicable, payable pursuant to SECTION 2(a) and
2(b) hereof.  In addition, the right
of the holders of the Series A Preferred Stock to receive the Additional
Dividends is in addition to, and not in lieu of, any remedies such holders may
have at law or equity.

 

(i)             Additional Dividends
will accrue on a daily basis and be cumulative from the date on which an
Increase Event occurs until such date as such Increase Event is no longer
continuing, and are payable in arrears on each Dividend Payment Date until such
date as the Increase Event is no longer continuing.  Unpaid Additional Dividends shall, without
duplication, compound quarterly to the extent not paid on the applicable
Dividend Payment Date for such Additional Dividend.

 

3

 

(ii)          Additional Dividends in
respect of any Dividend Period shall be computed on the basis of a 360-day year
consisting of twelve 30-day months.  The
amount of Additional Dividends payable for any dividend period shorter or
longer than a full quarterly dividend period, will be computed on the basis of
a 360-day year consisting of twelve 30-day months.

 

(iii)       Additional Dividends that
are declared and payable on a Dividend Payment Date will be paid to the holders
of record of Series A Preferred Stock as they appear in the records of the
Company at the close of business on the 15th day of the calendar month prior to
the month in which the applicable Dividend Payment Date falls, provided
that Additional Dividends payable upon conversion of a share of Series A Preferred
Stock will be payable to the holder of record at the time of such
conversion.  Any payment of an Additional
Dividend will first be credited against the earliest accumulated but unpaid
Additional Dividend due with respect to each share that remains payable.

 

(iv)      Additional Dividends are
payable only in cash.  Additional
Dividends will accrue and cumulate whether or not the Company has earnings or
profits, whether or not there are funds legally available for the payment of Additional
Dividends and whether or not Additional Dividends are declared.

 

(v)         While an Increase Event
has occurred and is continuing, neither the Company nor any of its subsidiaries
may (A) declare, pay or set aside for payment any dividends or
distributions on any Junior Securities, (B) repurchase, redeem or
otherwise acquire any Junior Securities or (C) make any loan or other
advance to any direct or indirect Beneficial Owner of a majority of the
outstanding Common Stock or any direct or indirect subsidiary of any such
owner, except for repurchase of unvested shares of restricted Common
Stock from officers and employees pursuant to any employment plan or agreement.

 

(vi)      Each of the following shall
constitute an “Increase Event” for the purposes hereof:

 

(A)      a failure by the Company to
pay any Redemption Price on the Redemption Date or the Company Redemption Date,
including the absence of funds legally available for such payment;

 

(B)        a failure by the Company
to deliver the Fundamental Change Notice to the holders of shares of Series A
Preferred Stock pursuant to SECTION 7(a)(ii) hereof within the time
period provided therein or to pay the Repurchase Price in respect of all shares
of Series A Preferred Stock on the Fundamental Change Purchase Date
pursuant to SECTION 7 for any reason, including the absence of funds
legally available for such payment; or

 

(C)        a failure by the Company
to deliver any cash (including, without limitation, cash in lieu of fractional
shares and accrued and unpaid Dividends), shares of Common Stock and/or shares
of Series B Preferred Stock, when such cash, shares of Common Stock and/or
shares of Series B Preferred Stock, if any, are required to be delivered
upon conversion of the Series A Preferred Stock pursuant to SECTION 5
or SECTION 8, as applicable, where the Company does not remedy such
default within ten (10) days after the 

 

4

 

date such cash,
shares of Common Stock and/or shares of Series B Preferred Stock, if any,
are required to be delivered.

 

(d)                                 If
Dividends are not paid in full, all Dividends declared upon the Series A
Preferred Stock and all dividends declared on any Parity Securities shall be
declared pro rata so that the amount of Dividends declared per share of the Series A
Preferred Stock and dividends declared per share of such Parity Securities
shall in all cases bear to each other the same ratio that accrued and unpaid
Dividends per share on the Series A Preferred Stock and accrued and unpaid
dividends per share of such Parity Securities bear to each other.

 

(e)                                  The
Company shall take all actions available to it that are reasonably necessary or
advisable under the DGCL to permit the payment of Dividends to the holders of Series A
Preferred Stock, including, without limitation, through the revaluation of its
assets in accordance with Delaware law. 
Holders of Series A Preferred Stock are not entitled to any
dividend, whether payable in cash, in kind or other property, in excess of the
Dividends as provided in this SECTION 2.

 

(f)                                    Any
holder that, together with its Affiliates, Beneficially Owns more than 1,000
shares of Series A Preferred Stock will be entitled to receive all cash
Dividends by wire transfer of immediately available funds.

 

SECTION 3.                                Liquidation
Preference.

 

(a)                                  Upon
any voluntary or involuntary liquidation, dissolution or winding up of the
Company, each share of Series A Preferred Stock entitles the holder
thereof to receive and to be paid out of the assets of the Company available
for distribution, before any distribution or payment may be made to a holder of
any Junior Securities, an amount in cash per share of Series A Preferred
Stock equal to the sum of (i) the greater of (A) the Original
Purchase Price per share and (B) an amount equal to the amount the holders
of Series A Preferred Stock would have received per share of Series A
Preferred Stock upon liquidation, dissolution or winding up of the Company had
such holders converted their shares of Series A Preferred Stock into
shares of Common Stock immediately prior thereto, plus (ii) an amount
equal to all accrued and unpaid Dividends, if any, on such share of Series A
Preferred Stock (such sum, the “Regular Liquidation Preference” if
pursuant to subclauses (i)(A) and (ii) and the “Participating
Liquidation Preference” if pursuant to subclauses (i)(B) and
(ii), and such greater amount, the “Liquidation Preference”).

 

(b)                                 If
upon any such liquidation, dissolution or winding up of the Company, the assets
of the Company available for distribution are insufficient to pay the holders of
Series A Preferred Stock the full Liquidation Preference and the holders
of all Parity Securities the full liquidation preferences to which they are
entitled, the holders of Series A Preferred Stock and such Parity
Securities will share ratably in any such distribution of the assets of the
Company in proportion to the full respective amounts to which they are
entitled.

 

(c)                                  After
payment to the holders of Series A Preferred Stock of the full Liquidation
Preference to which they are entitled, the holders of Series A Preferred
Stock as such will have no right or claim to any of the assets of the Company.

 

5

 

(d)                                 The
value of any property not consisting of cash that is distributed by the Company
to the holders of the Series A Preferred Stock will equal the Fair Market
Value thereof on the date of distribution.

 

(e)                                  For
the purposes of this SECTION 3, a Fundamental Change (in and of
itself) shall be deemed not to be a liquidation, dissolution or winding-up of
the Company subject to this SECTION 3 (it being understood that an actual
liquidation, dissolution or winding up of
the Company in connection with a Fundamental Change will be subject to this SECTION 3).

 

SECTION 4.                                Voting
Rights; Board Representation.

 

(a)                                  The
holders of Series A Preferred Stock are entitled to vote on all matters on
which the holders of Common Stock are entitled to vote, and except as otherwise
provided herein or by law, the holders of Series A Preferred Stock will
vote together with the holders of Common Stock as a single class.  Each holder of Series A Preferred Stock
is entitled to a number of votes equal to the number of shares of Common Stock
into which all of the outstanding shares of Series A Preferred Stock held
by such holder on the record date for any such vote are convertible as of such
record date without giving effect to the limitations set forth in SECTION 5(b);
provided, however, that in any vote of the holders of the Series A
Preferred Stock, Common Stock and any other securities that constitute Voting
Stock voting together as a single class, to the extent that the aggregate
voting power of a holder of Series A Preferred Stock together with its
Affiliates would exceed 19.9% of the Maximum Voting Power (the “Maximum
Voting Percentage”), then the aggregate number of votes entitled to be cast
in such vote by such holder and its Affiliates with respect to the Series A
Preferred Stock held by such holder and its Affiliates will be reduced, pro
rata, to that number (not less than zero) that results in the aggregate voting
power of such holder and its Affiliates in such vote being equal to the Maximum
Voting Percentage of the Maximum Voting
Power of the Company.  For purposes
hereof, “Maximum Voting Power” means, at
the time of determination of the Maximum Voting Power, the total number of
votes which may be cast by all capital stock on the applicable matter subject
to the vote of the Common Stock, Series A Preferred Stock and any other
securities that constitute Voting Stock voting together as a single class and
after giving effect to any limitation on voting power set forth in this
Certificate of Designation and the certificate of designation or other similar
document governing other Voting Stock.

 

(b)                                 Notwithstanding
SECTION 4(a) hereof:

 

(i)             (A) For as long
as the holders of Series A Preferred Stock have the exclusive right to
elect Preferred Directors pursuant to SECTION 4(d), the holders of Series A
Preferred Stock will not be entitled to vote for the election of directors
other than Preferred Directors, and (B) at any time that the conditions in
clause (A) are not satisfied, the holders of Series A Preferred Stock
will vote together with the holders of Common Stock for the election of
directors in accordance with SECTION 4(a).

 

(ii)          Following a Fundamental
Change pursuant to which the Series A Preferred Stock is converted, or
convertible, into a security of an entity other than (x) the Company or (y) the
surviving entity of a merger or consolidation to which the Company is a
constituent party (a “Non-Constituent Issuer Fundamental Change”), the Series A
Preferred Stock (or the security into which it is converted (the “Conversion
Security”)) shall not entitle the holder thereof to vote on any 

 

6

 

matters other than those
set forth in SECTION 4(c)(i), (ii), (iii), (iv), (v) and (vi) (but
only to the extent clause (vi) relates to clauses (i), (ii), (iii), (iv) and
(v)) below and such other matters (if any) as shall be required by law. For purposes
of clarity, to the extent that the Conversion Security does not entitle the
holders thereof to vote on any matters other than those set forth in SECTION 4(c)(i)-(vi) (but
only to the extent clause (vi) relates to clauses (i), (ii), (iii), (iv) and
(v)) below and such other matters (if any) as shall be required by law, the
conversion of the Series A Preferred Stock into the Conversion Security
shall not be deemed to be an amendment, repeal, alteration, addition, deletion
or other change to the powers, preferences, rights or privileges of the Series A
Preferred Stock in a manner adverse to the holders thereof.

 

(c)                                  So
long as any shares of Series A Preferred Stock are outstanding and except
as otherwise expressly permitted hereby, the Company and its subsidiaries may
not take any of the following actions (including by means of merger,
consolidation, reorganization, recapitalization or otherwise) without the prior
vote or written consent of holders representing at least a majority of the
then-outstanding shares of Series A Preferred Stock, voting together as a
separate class:

 

(i)             any amendment,
repeal, alteration, addition, deletion or other change to the powers,
preferences, rights or privileges of the Series A Preferred Stock or the Series B
Preferred Stock in a manner adverse to the holders thereof (whether by Board
resolution, amendment to the Certificate of Incorporation or Bylaws, merger,
consolidation or otherwise);

 

(ii)          any increase or decrease
in the authorized amount of shares of Series A Preferred Stock, except for
the cancellation and retirement of shares set forth in SECTION 10(a);

 

(iii)       any issuance of additional
shares of Series A Preferred Stock after the Series A Original
Issuance Date;

 

(iv)      any authorization, creation or issuance
(by reclassification or otherwise) of any Senior Securities or Parity
Securities;

 

(v)         declare, pay or set aside for payment any
dividends or distributions on, or repurchase, redeem or otherwise acquire any
Junior Securities or Parity Securities if (A) all accrued Dividends on the
Series A Preferred Stock (other than Regular Dividends accruing pursuant
to SECTION 2(a)(i) in respect of the applicable Dividend Period) have
not been paid in full or (B) if after giving effect to such action, the
Company would not have sufficient funds legally available to redeem all
shares of Series A Preferred Stock for the Regular Liquidation Preference;
or

 

(vi)      agree to do any of the
foregoing actions set forth in clause (c)(i) through (c)(v), unless such
agreement expressly provides that the Company’s obligation to undertake any of
the foregoing is subject to the prior approval of holders of Series A
Preferred Stock.

 

Without expanding the
scope of the foregoing voting rights of Series A Preferred Stock, it is
understood that in the context of a Fundamental Change, so long as immediately
following such Fundamental Change:

 

(i)  the Series A
Preferred Stock (or any preferred security into which the Series A
Preferred Stock is converted in such Fundamental Change as contemplated by clause
(ii)(B) below) is 

 

7

 

convertible into the kind
and amount of shares of capital stock, other securities or other property
receivable upon such Fundamental Change by a holder of a number of shares of
Common Stock issuable upon conversion of such shares of Series A Preferred
Stock in accordance with SECTION 5(e); and

 

(ii)  the Series A
Preferred Stock either:

 

(A) remains
outstanding with the same powers, preferences, rights and privileges set forth
in this Certificate of Designation (except to the extent necessary or
appropriate to implement clause (i) above), or

 

(B) is converted
into or otherwise exchanged for preferred securities of the Acquirer, which
preferred securities have the same powers, preferences, rights and privileges
(other than those that by their terms automatically terminate or otherwise are
altered following such a Fundamental Change pursuant to the terms of this
Certificate of Designation and other than to the extent necessary or appropriate
to reflect the consummation of the transaction and the fact that the issuer is
a different entity) as the Series A Preferred Stock, provided that
such exchange does not result in income tax consequences generally to U.S.
individual holders of the Series A Preferred Stock that are more severe
than the income tax consequences such holders would have suffered if such
holders had been holders of Common Stock and been treated as such in the
Fundamental Change; and

 

(iii)  in connection
with such Fundamental Change, no action takes place that would otherwise
require the approval of the holders of the Series A Preferred Stock
pursuant to this SECTION 4(c),

 

the Series A
Preferred Stock shall not have any vote or consent as a separate class with
respect to such Fundamental Change.  For
the avoidance of doubt, the foregoing shall not limit or otherwise modify any
holder’s rights pursuant to SECTION 7.

 

(d)                                 Right
to Designate/Elect Preferred Directors. From and after the Series A
Original Issuance Date and for as long as SLS and its Permitted Transferees
Beneficially Own a majority of the outstanding shares of Series A
Preferred Stock, but subject to a Representation Reduction Event, the holders
of shares of Series A Preferred Stock, voting together as a separate class
by a majority of the then-outstanding shares of Series A Preferred Stock
as of any applicable record date, shall have the exclusive right to elect a
total number of directors (such persons, the “Preferred Directors”), to
the Board equal to the Board Representation Entitlement.  If the holders of Series A Preferred
Stock fail to elect a number of Preferred Directors sufficient to fill the
Board Representation Entitlement, then the Board will take such actions as are
necessary to reduce the size of the Board until such time as the holders of Series A
Preferred Stock fill such directorship by vote or by written consent in lieu of
a meeting; and no such directorship may be filled by stockholders of the
Company other than the holders of Series A Preferred Stock.  In addition, upon the occurrence of an
increase in the authorized number of directors then constituting the Board that
results in an increase of the Board Representation Entitlement to a number
greater than the number of Preferred Directors then serving on the Board, the
Board will take such actions as are necessary to increase the 

 

8

 

authorized number of Preferred Directors on the Board
so that the total authorized number of Preferred Directors is equal to the
Board Representation Entitlement at such time.

 

(i)             Term of Office.
Unless a Preferred Director’s term of office shall have terminated prior to
such time pursuant to SECTION 4(d)(ii), (iii), (iv), (v), (vi) or (vii) below,
such Preferred Director designated or elected pursuant to this SECTION 4
shall serve until the next special or annual meeting of stockholders of the
Company called for the purpose of electing Preferred Directors at which such
Preferred Director is up for election or at any special meeting of the holders
of Series A Preferred Stock, as the case may be, for the purpose of
removing Preferred Directors, or until his or her successor shall be duly
elected.

 

(ii)          Removal and Vacancies.  So long as the Board Representation
Entitlement is equal to at least one (1), a majority of the directors may call,
and upon the written request of holders of record of at least 50% of the
then-outstanding shares of Series A Preferred Stock, addressed to the
Secretary of the Company at the principal office of the Company, shall call, a
special meeting of the holders of shares of Series A Preferred Stock, for
the sole purpose of filling any vacancy caused by the resignation, death or
removal of a Preferred Director (but only to the extent required to maintain
the then applicable Board Representation Entitlement and permitted by the
Certificate of Incorporation), or to remove from office a Preferred Director
with or without cause. Such meeting shall be held as soon as reasonably
practicable after delivery of such request to the Secretary, at the place and
upon the notice provided by law and in the Bylaws for the holding of meetings
of stockholders. Subject to the Certificate of Incorporation and SECTION 4(d)(iii),
(iv), (v), (vi) or (vii) below, only the holders of a majority of the
then-outstanding shares of Series A Preferred Stock, voting together as a
single class, are entitled to fill any vacancy caused by the resignation, death
or removal of a Preferred Director (but only to the extent required to maintain
the then applicable Board Representation Entitlement and permitted by the
Certificate of Incorporation), and only the holders of Series A Preferred
Stock are entitled to remove from office a Preferred Director without
cause.  Any Preferred Director may be
removed from office (A) with or without cause by holders of a majority of
the then-outstanding shares of Series A Preferred Stock or (B) only
for cause by the holders of a majority of the then-outstanding shares of Common
Stock.

 

(iii)       Change Following
Representation Reduction Event. Upon the occurrence of a Representation
Reduction Event, the number of Preferred Directors on the Board (but not the
number of directors constituting the whole Board) shall be reduced immediately
so that the total number of Preferred Directors after the occurrence of a
Representation Reduction Event is equal to the Board Representation Entitlement
at such time. To effect such reduction, the term of office of the requisite
number of Preferred Directors shall immediately end, such person(s) shall
cease to be director(s), and neither the remaining Preferred Directors nor the
holders of shares of Series A Preferred Stock shall have any right to
elect or appoint a Preferred Director to replace such director.  To the extent that there is more than one
Preferred Director on the Board immediately prior to the Representation
Reduction Event, the holders of a majority of the then-outstanding shares of Series A
Preferred Stock shall have the right to designate which of the Preferred Directors’
terms shall end pursuant to this SECTION 4(d)(iii) and cause such
person to resign from the Board; provided that if holders of a majority
of the then-outstanding shares of Series A Preferred Stock fail to
designate in advance which of the Preferred Directors’ terms shall end, the
directors (other than the Preferred Directors) shall then be entitled to make
such designation.

 

9

 

(iv)  Change Following Board Size Decrease. 
Upon the occurrence of a decrease in the authorized number of directors
then constituting the Board that, as a result thereof results in a reduction of
the Board Representation Entitlement to less than the then authorized number of
Preferred Directors (a “Board Size Decrease”), the number of Preferred
Directors on the Board shall be reduced immediately so that the total number of
Preferred Directors is equal to the Board Representation Entitlement at such
time. To effect such reduction, the term of office of that number of Preferred
Directors required to reduce the number of Preferred Directors to the new Board
Representation Entitlement shall immediately end, such person(s) shall
cease to be director(s), and neither the remaining Preferred Directors nor the
holders of shares of Series A Preferred Stock shall have any right to
elect or appoint a Preferred Director to replace such director at such
time.  To the extent that there is
more than one Preferred
Director on the Board immediately prior to the Board Size Decrease, the
holders of a majority
of the then-outstanding shares of Series A Preferred Stock shall have the
right to designate which of the Preferred Directors’ terms shall end pursuant
to this SECTION 4(d)(iv) and cause such person to resign from the
Board; provided that if holders of a majority of the then-outstanding
shares of Series A Preferred Stock fail to designate in advance which of
the Preferred Directors’ terms shall end, the directors (other than the
Preferred Directors) shall then be entitled to make such designation.

 

(v)   Loss of Preferred Directors on a Non-Constituent
Issuer Fundamental Change.  Upon the occurrence of a
Non-Constituent Issuer Fundamental Change, the terms of office of all Preferred
Directors shall immediately end, such persons shall cease to be directors, and
the holders of shares of Series A Preferred Stock shall not have any right
to elect or appoint Preferred Directors to replace the directors whose terms of
office shall have ended.

 

(vi)  Loss of Preferred Director on a Fundamental Change
Other than a Non-Constituent Issuer Fundamental Change. Upon the occurrence of a Fundamental
Change other than a Non-Constituent Issuer Fundamental Change, if the Board
Representation Entitlement is at least one (1) Preferred Director at
such time, the terms of office of all but one (1) Preferred Director
shall immediately end, such persons shall cease to be directors
(notwithstanding the proviso in SECTION 4(d)(vii) below), and neither
the remaining Preferred Director nor the holders of shares of Series A
Preferred Stock shall have any right to elect or appoint Preferred Directors to
replace the directors whose terms of office shall have ended pursuant to this SECTION 4(d)(vi).
To the extent that there is more than one Preferred Director on the Board
immediately prior to such Fundamental Change, the holders of a majority of the
then-outstanding shares of Series A Preferred Stock shall have the right
to designate which of the Preferred Directors’ terms shall end pursuant to this
SECTION 4(d)(vi) and cause such person to resign from the Board; provided
that if the holders of a majority of the then-outstanding shares of Series A
Preferred Stock fail to designate in advance which of the Preferred Directors’
terms shall end, the directors (other than the Preferred Directors) shall then
be entitled to make such designation.

 

(vii) Loss of Board Representation Entitlement. 
From and after the first time that the Board Representation Entitlement
is equal to zero (0), the holders of Series A Preferred Stock shall cease
to have any rights under this SECTION 4(d) (including, without
limitation, the right to vote to fill any vacancies of Preferred Directors
other than pursuant to SECTION 4(d)(ix)); provided, however,
that if, immediately following such time, the Investor Securityholders continue
to benefit from the contractual rights set forth in Section 7.1 of the
Securities Purchase Agreement, each Preferred Director serving on the Board at
such time (the “Transition Time”) shall continue as a

 

10

 

director, but not as a
Preferred Director (other than with respect to SECTION 4(d)(iii), pursuant
to which such director shall not continue as a director if the conditions
therein for the elimination of such director’s seat are met), until the next
special or annual meeting of stockholders of the Company called for the purpose
of electing directors, or until his or her successor shall be elected.  From and after the Transition Time, the
holders of shares of Series A Preferred Stock shall not have any right,
voting as a separate class, to elect or appoint a Preferred Director to replace
such director.

 

(viii)   Filling Vacancy Upon Cessation of
Preferred Director. Any vacancy resulting from the cessation of the term of
office of a Preferred Director pursuant to SECTION 4(d)(iii), (v), (vi) or
(vii) may be filled by either (A) the Board or (B) to the extent
permitted by the Certificate of Incorporation, the holders of Common Stock
generally, and not the holders of Series A Preferred Stock voting as a
separate class, in accordance with the Certificate of Incorporation, the Bylaws
of the Company and applicable law.

 

(ix)   Additional Preferred Director After
Increase Event.  If an Increase Event
occurs, and for so long as such Increase Event continues, the holders of shares
of Series A Preferred Stock, voting together as a separate class by a
majority of the then-outstanding shares of Series A Preferred Stock as of
any applicable record date, shall have the exclusive right to elect one
director (the “Additional Director”) to the Board in addition to the
number of Preferred Directors that would otherwise constitute the Board
Representation Entitlement.  If the
election of such Additional Director would cause the size of the Board to
exceed the maximum number of directors permitted under the Certificate of
Incorporation, the Company shall take all reasonable actions to cause one
director (other than a Preferred Director or Nominated Director (as defined in
the Securities Purchase Agreement)) to immediately resign from the Board.  The term of such Additional Director shall
expire automatically upon such Increase Event no longer continuing.

 

(e)           Exchange Compliance. 
Notwithstanding the foregoing, to the fullest extent permitted by
applicable law:

 

(i)    the rights of the holders of the Series A
Preferred Stock set forth in SECTION 4(a) to vote as a single class
with the Common Stock shall be subject to applicable rules of the Exchange
on which the Company is then listed to the extent required such that the Common
Stock shall continue to be listed on such Exchange, including, without
limitation, compliance by the Company with Rule 4351 of Nasdaq (or any
successor thereto) insofar as it may be applied in the event that the
Conversion Price is determined to be less than the greater of “book or market
value” as defined in such rules, and such rights to vote with the Common Stock
shall be accordingly reduced or otherwise modified to the minimum extent
required to comply with such rules; and

 

(ii)   if after the Series A Original Issuance Date
there is a change in the applicable rules of the primary Exchange on which
the Common Stock is listed at the time such change becomes effective or in the interpretation
of such applicable rules that would cause the Common Stock to be delisted
by such Exchange as a result of the terms of this SECTION 4, the voting
rights of the holders of the Series A Preferred Stock set forth in this SECTION 4
shall thereafter be limited to the extent required by such changed rules in
order for the Common Stock to continue to be listed on such Exchange.

 

11

 

SECTION 5.           Conversion.

 

Each share of Series A
Preferred Stock is convertible into shares of Common Stock as provided in this SECTION 5.

 

(a)           Conversion at the Option of Holders of Series A
Preferred Stock.  Subject to SECTION 5(b) and SECTION 5(e)(viii),
each holder of Series A Preferred Stock is entitled to convert, at any
time and from time to time, at the option and election of such holder, any or
all shares of outstanding Series A Preferred Stock held by such holder
into a number of duly authorized, validly issued, fully paid and nonassessable
shares of Common Stock equal to the amount (the “Conversion Amount”)
determined by dividing (i) the Original Purchase Price for each share of Series A
Preferred Stock to be converted by such holder by (ii) the Conversion
Price in effect at the time of conversion. 
The “Conversion Price” initially is $1.35, as adjusted from time
to time as provided in SECTION 5(f). 
In order to convert shares of Series A Preferred Stock into shares
of Common Stock, the holder must surrender the certificates representing such
shares of Series A Preferred Stock, accompanied by transfer instruments
reasonably satisfactory to the Company, free of any adverse interest or liens
at the office of the Company’s transfer agent for the Series A Preferred
Stock (or at the principal office of the Company, if the Company serves as its
own transfer agent), together with written notice that such holder elects to
convert all or such number of shares represented by such certificates as
specified therein.  With respect to a
conversion pursuant to this SECTION 5(a), the date of receipt of such
certificates, together with such notice, by the transfer agent or the Company
will be the date of conversion (the “Conversion Date”).

 

(b)           Limitations on Conversion. 
Notwithstanding SECTION 5(a) or SECTION 5(c) but
subject to SECTION 8, the Company shall not effect any conversion of the Series A
Preferred Stock or otherwise issue shares of Common Stock pursuant to SECTION 5(a) or
(c), and no holder of Series A Preferred Stock will be permitted to
convert shares of Series A Preferred Stock into shares of Common Stock if,
and to the extent that, following such conversion, either (i) such holder’s,
together with such holder’s Affiliates’, aggregate voting power on a matter
being voted on by holders of Common Stock would exceed 19.9% of the Maximum
Voting Power or (ii) such holder, together with such holder’s Affiliates,
would Beneficially Own (disregarding for this purpose clause (ii) of the
definition of “Beneficially Own”) more than 19.9% of the then outstanding
Common Stock; provided, however, that such conversion restriction
shall not apply to any conversion in connection with and subject to completion
of (A) a Public Sale of the Common Stock to be issued upon such
conversion, if following consummation of such Public Sale such holder and its
Affiliates will not Beneficially Own (disregarding for this purpose clause (ii) of
the definition of “Beneficially Own”) in excess of 19.9% of the then
outstanding Common Stock or (B) a bona fide third
party tender offer for the Common Stock issuable thereupon.  For purposes of the foregoing sentence, the
number of shares of Common Stock Beneficially Owned by a holder and its
Affiliates shall include the number of shares of Common Stock issuable upon
conversion of the Series A Preferred Stock with respect to which a
conversion notice has been given, but shall exclude the number of shares of
Common Stock which would be issuable upon conversion or exercise of (x) the
remaining, unconverted portion of the Series A Preferred Stock and any
Junior Preferred Stock (as defined in the Securities Purchase Agreement), (y) any
outstanding Notes, or (z) any outstanding Warrants (as defined in the
Securities Purchase Agreement) Beneficially Owned by such holder or any of its
Affiliates.  Upon the written request of
the holder, the Company shall within two (2) Business Days confirm in
writing to any holder the number of shares of Common Stock then outstanding.

 

12

 

(c)           Conversion at the Option of the Company. 
Subject to SECTION 5(b) and SECTION 8, on and after the
two-and-a-half year anniversary of the Series A Original Issuance Date, at
the Company’s option and election and upon its compliance with this SECTION 5(c),
all outstanding shares of Series A Preferred Stock shall be converted
automatically into a number of duly authorized, validly issued, fully paid and
nonassessable shares of Common Stock equal to the Conversion Amount on the date
of written notice by the Company to the holders of Series A Preferred
Stock notifying such holders of the conversion contemplated by this SECTION 5(c),
which conversion shall occur on the date specified in such notice, not less
than 10 Business Days nor more than 30 days following the date of such
notice (which date shall be the Conversion Date in respect of a conversion
pursuant to this SECTION 5(c)), provided that such notice may be
delivered by the Company only if (i) the Closing Price per share of the
Common Stock for each of 20 or more Trading Days in a 30 consecutive Trading
Day period ending on the Trading Day immediately prior to delivery of a notice
of conversion pursuant to this SECTION 5(c) was at or above 300% of
the then-applicable Conversion Price and (ii) all requisite arrangements
with the Company’s transfer agent, the Exchange on which shares of the Common
Stock are then listed, and any other requisite securities intermediary
(including The Depository Trust Company and Cede & Co., if applicable)
to permit trading of such shares of Common Stock on the Conversion Date shall
have been completed; provided, however, that the Company shall
not have the right to require conversion of the Series A Preferred Stock
pursuant to this SECTION 5(c), unless (x) the Company shall have, as
of the Conversion Date, funds legally available therefor to pay all accrued and
unpaid Dividends on the shares of Series A Preferred Stock that are being
converted into Common Stock and (y) at the time of the mailing of the
notice of conversion, either (1) the shelf registration statement referred
to in Section 2.2 of the Registration Rights Agreement is effective and
available for resales of the Common Stock issuable upon conversion of the Series A
Preferred Stock or (2) the shares of Common Stock for which the Series A
Preferred Stock are convertible into may be sold by all holders of the Series A
Preferred Stock under Rule 144 under the Securities Act without volume or
other limitation.  Once delivered, such
notice shall be irrevocable, unless the Company obtains the written consent of
the holders representing a majority of the outstanding shares of Series A
Preferred Stock. Notwithstanding the foregoing, the holders of Series A
Preferred Stock shall continue to have the right to convert their shares of Series A
Preferred Stock pursuant to SECTION 5(a) until and through the
Conversion Date contemplated in this SECTION 5(c) and if such shares
of Series A Preferred Stock are converted pursuant to SECTION 5(a) such
shares shall no longer be converted pursuant to this SECTION 5(c) and
the Company’s notice delivered to the holders pursuant to this SECTION 5(c) shall
be of no effect with respect to such shares converted pursuant to SECTION 5(a).

 

(d)           Fractional Shares.  No fractional
shares of Common Stock will be issued upon conversion of the Series A
Preferred Stock.  In lieu of fractional
shares, the Company shall pay cash equal to such fractional amount multiplied
by the Fair Market Value of Common Stock as of the Conversion Date.  If more than one share of Series A
Preferred Stock is being converted at one time by the same holder, then the
number of full shares issuable upon conversion will be calculated on the basis
of the aggregate number of shares of Series A Preferred Stock converted by
such holder at such time.

 

13

 

(e)           Mechanics of Conversion.

 

(i)    As soon as practicable after the Conversion Date (and
in any event within three Business Days), the Company shall (A) issue and
deliver to such holder the number of shares of Common Stock to which such
holder is entitled, together with a check or cash for payment of fractional
shares, if any, in exchange for the certificates formerly representing shares
of Series A Preferred Stock and (B) pay to such holder, to the extent
of funds legally available therefor, all accrued and unpaid Dividends on the
shares of Series A Preferred Stock that are being converted into Common
Stock.  Such conversion will be deemed to
have been made on the Conversion Date, and the person entitled to receive the
shares of Common Stock issuable upon such conversion shall be treated for all
purposes as the record holder of such shares of Common Stock on such Conversion
Date.  In case fewer than all the shares
represented by any such certificate are to be converted, a new certificate
shall be issued representing the unconverted shares without cost to the holder
thereof, except for any documentary, stamp or similar issue or transfer tax due
because any certificates for shares of Common Stock or Series A Preferred
Stock are issued in a name other than the name of the converting holder.  The Company shall pay any documentary, stamp
or similar issue or transfer tax due on the issue of Common Stock upon
conversion or due upon the issuance of a new certificate for any shares of Series A
Preferred Stock not converted other than any such tax due because shares of
Common Stock or a certificate for shares of Series A Preferred Stock are
issued in a name other than the name of the converting holder.

 

(ii)   The Company shall at all times reserve and keep
available, free from any preemptive rights, out of its treasury or out of
authorized but unissued shares of Common Stock (or a combination of both) for
the purpose of effecting the conversion of the Series A Preferred Stock
the full number of shares of Common Stock deliverable upon the conversion of
all outstanding Series A Preferred Stock (as may be adjusted from time to
time pursuant to the terms of this SECTION 5 and assuming for the purposes
of this calculation that all outstanding shares of Series A Preferred
Stock are held by one holder), and the Company shall take all actions to amend
its Certificate of Incorporation to increase the authorized amount of Common
Stock if necessary therefor.  Before
taking any action which would cause an adjustment reducing the Conversion Price
below the then par value of the shares of Common Stock issuable upon conversion
of the Series A Preferred Stock, the Company will take any corporate
action which may, in the opinion of its counsel, be necessary in order that the
Company may validly and legally issue fully paid and nonassessable shares of
Common Stock at such adjusted Conversion Price.

 

(iii)  From and after the Conversion Date, the shares of Series A
Preferred Stock to be converted on such Conversion Date will no longer be deemed
to be outstanding, and all rights of the holder thereof as a holder of Series A
Preferred Stock (except the right to receive from the Company the Common Stock
upon conversion, together with the right to receive any payment in lieu of a
fractional share of Common Stock and any accrued and unpaid Dividends thereon)
shall cease and terminate with respect to such shares; provided, that in
the event that a share of Series A Preferred Stock is not converted, such
share of Series A Preferred Stock will remain outstanding and will be
entitled to all of the rights as provided herein.  Any shares of Series A Preferred Stock
that have been converted will, after such conversion, upon issuance of the
shares of Common Stock issuable upon conversion thereof and the payment of all
accrued and unpaid Dividends thereon and cash in lieu of fractional shares of
Common Stock, be deemed cancelled and retired, shall not be reissued as such
and, following the filing of any certificate required by the DGCL, have the
status of 

 

14

 

authorized but unissued
Preferred Stock, without designation as to series until such shares are once
more designated as part of a particular series by the Board; provided, however,
that if such shares become convertible into Senior Redeemable Preferred, such
shares shall not be deemed cancelled and retired but may instead be reissued as
shares of Senior Redeemable Preferred. 
Notwithstanding anything to the contrary set forth herein, in the event
that (1) any shares of Series A Preferred Stock are converted into
Common Stock pursuant to the terms hereof or Series B Preferred Stock
pursuant to SECTION 8, and (2) the Company, at the time of such
conversion, does not have sufficient lawfully available funds to pay all
accrued and unpaid Dividends then due and payable thereon, upon such conversion
the holder of such shares shall in addition to receiving shares of Common Stock
issuable pursuant to this SECTION 5 or Series B Preferred Stock
issuable pursuant to SECTION 8, as applicable, receive one share of a
series of preferred stock of the Company having the rights, powers and
preferences hereinafter described (the “Senior Redeemable Preferred”)
for each share of Series A Preferred Stock that was converted in lieu of
the accrued and unpaid Dividends then due and payable thereon.  The Company hereby covenants that, if any
shares of Series A Preferred Stock become convertible into Senior
Redeemable Preferred, the Board shall take all necessary action to authorize the
creation of the Senior Redeemable Preferred and to provide that the Senior
Redeemable Preferred shall rank senior to all Junior Securities, pari passu
with all Parity Securities and junior to all Senior Securities, and shall have
no special rights, powers or preferences, other than the following:  (A) each share of Senior Redeemable
Preferred shall be redeemed automatically by the Company, at such time as the
Company shall have sufficient lawfully available funds therefor, at a purchase
price equal to (x) the amount of accrued and unpaid Dividends attributable
to the share of Series A Preferred Stock that was converted into such
share of Senior Redeemable Preferred at the time of such conversion, plus (y) any
Dividends payable thereon at the rate and on the basis as would otherwise be
applicable pursuant to SECTION 2 hereof from the date of such conversion
through the date of redemption, (B) for so long as any shares of Senior
Redeemable Preferred are outstanding, the Company shall not take any of the actions
referenced in sub-clauses (i) — (vi) of SECTION 4(c) hereof
and (C) upon any voluntary or involuntary liquidation or dissolution or
winding up of the Company, the holders of Senior Redeemable Preferred shall
have a liquidation preference equal to an amount calculated in accordance with
clause (A) of this sentence.

 

(iv)  If the conversion is in connection with any sale,
transfer or other disposition of the Common Stock issuable upon conversion of
the Series A Preferred Stock, the conversion may, at the option of any
holder tendering any share of Series A Preferred Stock for conversion, be
conditioned upon the closing of the sale, transfer or the disposition of shares
of Common Stock issuable upon conversion of Series A Preferred Stock with
the underwriter, transferee or other acquirer in such sale, transfer or
disposition, in which event such conversion of such shares of Series A
Preferred Stock shall not be deemed to have occurred until immediately prior to
the closing of such sale, transfer or other disposition.

 

(v)   The Company shall comply with all federal and state
laws, rules and regulations and applicable rules and regulations of
the Exchange on which shares of the Common Stock are then listed.  If any shares of Common Stock to be reserved
for the purpose of conversion of shares of Series A Preferred Stock
require registration with or approval of any person or group under any federal
or state law or the rules and regulations of the Exchange on which shares
of the Common Stock are then listed before such shares may be validly issued or
delivered upon conversion, then the Company will, as expeditiously as possible,
use its reasonable best efforts to secure such registration or approval, as the
case may be.  So long as any shares of
Common Stock 

 

15

 

into which the shares of Series A
Preferred Stock are then convertible is then listed on an Exchange, the Company
will list and keep listed on such Exchange, upon official notice of issuance,
all shares of such Common Stock issuable upon conversion.

 

(vi)  All shares of Common Stock issued upon conversion of
the shares of Series A Preferred Stock will, upon issuance by the Company,
be duly and validly issued, fully paid and nonassessable, not issued in
violation of any preemptive rights arising under law or contract and free from
all taxes, liens and charges with respect to the issuance thereof, and the
Company shall take no action which will cause a contrary result.

 

(vii) If, prior to a Rights Trigger, shares of Series A Preferred Stock
are converted into Common Stock, upon the conversion of such shares of Series A
Preferred Stock, the shares of Common Stock issued in respect thereof shall be
issued with the same Rights, if any, attached thereto as are attached to the
then-outstanding shares of Common Stock.

 

(viii)   Partial Cash Settlement.

 

(A)  The Company may in its sole discretion at any time,
and from time to time, deliver a written notice (a “Partial Cash Notice”)
to each holder of Series A Preferred Stock (1) stating (x) that
the Company is exercising its option pursuant to this SECTION 5(e)(viii) and
(y) the aggregate number of shares of Series A Preferred Stock
subject to, or the aggregate dollar amount payable by the Company pursuant to
this SECTION 5(e)(viii) in respect of, such option (the “Cash
Amount”), or (2) revoking an Outstanding Partial Cash Notice, as the
case may be.  Each Partial Cash Notice
will be effective on and after the tenth (10th) day such notice has been
delivered to a holder.

 

(B)   If an Outstanding Partial Cash Notice is effective at
the time that a holder delivers to the Company a notice of conversion pursuant
to SECTION 5(a) or SECTION 8(b), or the Company delivers a
notice of mandatory conversion pursuant to SECTION 5(c), then the Company
shall deliver the following on the applicable Conversion Date in lieu of such
number of shares of Common Stock and/or Series B Preferred Stock, as
applicable, that would otherwise be deliverable upon conversion of Series A
Preferred Stock: (1) cash, in an amount equal to Original Purchase Price
per share of Series A Preferred Stock to be converted, plus cash in
an amount equal to accrued and unpaid Dividends on the shares of Series A
Preferred Stock being converted and (2) a number of shares of Common Stock
and/or shares of Series B Preferred Stock, as the case may be, equal to (x) the
aggregate Fair Market Value (as of the Conversion Date) of all shares of Common
Stock issuable upon conversion of such shares of Series A Preferred Stock
without giving effect to this SECTION 5(e)(viii) or the limitations
set forth in SECTION 5(b), less the Original Purchase Price for
such share of Series A Preferred Stock, divided  by (y) (i) with
respect to shares of Common Stock issuable upon conversion of such Series A
Preferred Stock, the Fair Market Value of the Common Stock on the Conversion
Date or (ii) with respect to shares of Series B Preferred Stock
issuable upon conversion of such Series A Preferred Stock, the Original
Purchase Price for such share of Series A Preferred Stock; provided
that in the event the holders of shares of Series A Preferred Stock seek
to convert, or the Company requires the conversion of, a number of shares of Series A
Preferred Stock that would exceed the then applicable Cash Amount (such shares
in excess of such Cash Amount, the “Unaffected Shares”), such Unaffected
Shares shall be converted without giving effect to this SECTION 5(e)(viii).

 

16

 

(C)   For purposes hereof, an “Outstanding Partial Cash
Notice” means a Partial Cash Notice pursuant to which the Company has
exercised its option pursuant to this SECTION 5(e)(viii) and which
has not been revoked by an effective subsequent Partial Cash Notice.

 

(f)            Adjustments to Conversion Price.

 

(i)    Adjustment for Change In Capital Stock.

 

(A)  If the Company shall, at any time and from time to
time while any shares of the Series A Preferred Stock are outstanding,
issue a dividend or make a distribution on its Common Stock payable in shares
of its Common Stock to all or substantially all holders of its Common Stock,
then the Conversion Price at the opening of business on the Ex-Dividend Date
for such dividend or distribution will be adjusted by multiplying such
Conversion Price by a fraction:

 

(1)   the numerator of which shall be the number of shares
of Common Stock outstanding at the close of business on the Business Day
immediately preceding such Ex-Dividend Date; and

 

(2)   the denominator of which shall be the sum of the
number of shares of Common Stock outstanding at the close of business on the
Business Day immediately preceding the Ex-Dividend Date for such dividend or
distribution, plus the total number of shares of Common Stock constituting such
dividend or other distribution.

 

If any dividend or distribution
of the type described in this SECTION 5(f)(i) is declared but not so
paid or made, the Conversion Price shall again be adjusted to the Conversion
Price which would then be in effect if such dividend or distribution had not
been declared.  Except as set forth in
the preceding sentence, in no event shall the Conversion Price be increased
pursuant to this SECTION 5(f)(i).

 

(B)   If the Company shall, at any time or from time to time
while any of the Series A Preferred Stock are outstanding, subdivide or
reclassify its outstanding shares of Common Stock into a greater number of
shares of Common Stock, then the Conversion Price in effect at the opening of
business on the day upon which such subdivision becomes effective shall be
proportionately decreased, and conversely, if the Company shall, at any time or
from time to time while any of the Series A Preferred Stock are
outstanding, combine or reclassify its outstanding shares of Common Stock into
a smaller number of shares of Common Stock, then the Conversion Price in effect
at the opening of business on the day upon which such combination or
reclassification becomes effective shall be proportionately increased.  In each such case, the Conversion Price shall
be adjusted by multiplying such Conversion Price by a fraction, the numerator
of which shall be the number of shares of Common Stock outstanding immediately
prior to such subdivision or combination and the denominator of which shall be
the number of shares of Common Stock outstanding immediately after giving
effect to such subdivision, combination or reclassification.  Such increase or reduction, as the case may
be, shall become effective immediately after the opening of business on the day
upon which such subdivision, combination or reclassification becomes effective.

 

17

 

(ii)   Adjustment for
Rights Issue.  If the Company shall, at any time or
from time to time, while any shares of the Series A Preferred Stock are
outstanding, distribute rights, options or warrants to all or substantially all
holders of its Common Stock entitling them, for a period expiring within 60
days after the record date for such distribution, to purchase shares of Common
Stock, or securities convertible into, or exchangeable or exercisable for,
Common Stock, in either case, at less than the average of the Closing Prices
for the five consecutive Trading Days immediately preceding the first public
announcement of the distribution, then the Conversion Price shall be adjusted
so that the same shall equal the rate determined by multiplying the Conversion Price
in effect at the opening of business on the Ex-Dividend Date for such
distribution by a fraction:

 

(A)  the numerator of
which shall be the sum of (1) the number of shares of Common Stock
outstanding on the close of business on the Business Day immediately preceding
the Ex-Dividend Date for such distribution, plus (2) the number of shares
of Common Stock that the aggregate offering price of the total number of shares
of Common Stock issuable pursuant to such rights, options or warrants would
purchase at the Current Market Price of the Common Stock on the declaration
date for such distribution (determined by multiplying such total number of
shares of Common Stock so offered by the exercise price of such rights, options
or warrants and dividing the product so obtained by such Current Market Price);
and

 

(B)   the denominator of
which shall be the number of shares of Common Stock outstanding at the close of
business on the Business Day immediately preceding the Ex-Dividend Date for
such distribution, plus the total number of additional shares of Common Stock
issuable pursuant to such rights, options or warrants.

 

Such adjustment shall
become effective immediately after the opening of business on the Ex-Dividend
Date for such distribution.

 

To the extent that shares
of Common Stock are not delivered pursuant to such rights, options or warrants
or upon the expiration or termination of such rights, options or warrants, the
Conversion Price shall be readjusted to the Conversion Price that would then be
in effect had the adjustments made upon the issuance of such rights, options or
warrants been made on the basis of the delivery of only the number of shares of
Common Stock actually delivered.  In the
event that such rights, options or warrants are not so distributed, the
Conversion Price shall again be adjusted to be the Conversion Price which would
then be in effect if the Ex-Dividend Date for such distribution had not
occurred.  In determining whether any
rights, options or warrants entitle the holders to purchase shares of Common
Stock at less than the average of the Closing Prices for the five consecutive
Trading Days immediately preceding the first public announcement of the
relevant distribution, and in determining the aggregate offering price of such
shares of Common Stock, there shall be taken into account any consideration
received for such rights, options or warrants and the value of such
consideration if other than cash, to be determined in good faith by the Board
of Directors.  Except as set forth in
this paragraph, in no event shall the Conversion Price be increased pursuant to
this SECTION 5(f)(ii).

 

(iii)  Adjustment for Certain Tender
Offers or Exchange Offers.  In case the Company or any of its
Subsidiaries shall, at any time or from time to time, while any shares of the Series A
Preferred Stock are outstanding, distribute cash or other consideration in
respect of a tender offer or an exchange offer (that is treated as a “tender
offer” under U.S. federal securities laws) made 

 

18

 

by the Company or any
Subsidiary for all or any portion of the Common Stock, where the sum of the
aggregate amount of such cash distributed and the aggregate Fair Market Value,
as of the Expiration Date (as defined below), of such other consideration
distributed (such sum, the “Aggregate Amount”) expressed as an amount
per share of Common Stock validly tendered or exchanged, and not withdrawn,
pursuant to such tender offer or exchange offer as of the Expiration Time (as
defined below) (such tendered or exchanged shares of Common Stock, the “Purchased
Shares”) exceeds the Closing Price per share of the Common Stock on the
first Trading Day immediately following the last date (such last date, the “Expiration
Date”) on which tenders or exchanges could have been made pursuant to such
tender offer or exchange offer (as the same may be amended through the
Expiration Date), then, and in each case, immediately after the close of
business on such date, the Conversion Price shall be decreased so that the same
shall equal the rate determined by multiplying the Conversion Price in effect
immediately prior to the close of business on the Trading Day immediately
following the Expiration Date by a fraction:

 

(A)  the numerator of which shall be
equal to the product of (A) the number of shares of Common Stock
outstanding as of the last time (the “Expiration Time”) at which tenders
or exchanges could have been made pursuant to such tender offer or exchange
offer (including all Purchased Shares) and (B) the Closing Price per share
of the Common Stock on the first Trading Day immediately following the
Expiration Date; and

 

(B)   the denominator of which is
equal to the sum of (x) the Aggregate Amount and (y) the product of (I) an
amount equal to (1) the number of shares of Common Stock outstanding as of
the Expiration Time, less (2) the Purchased Shares and (II) the
Closing Price per share of the Common Stock on the first Trading Day
immediately following the Expiration Date.

 

An adjustment, if any, to
the Conversion Price pursuant to this SECTION 5(f)(iii) shall become
effective immediately prior to the opening of business on the second Trading
Day immediately following the Expiration Date. 
In the event that the Company or a Subsidiary is obligated to purchase
shares of Common Stock pursuant to any such tender offer or exchange offer, but
the Company or such Subsidiary is permanently prevented by applicable law from
effecting any such purchases, or all such purchases are rescinded, then the
Conversion Price shall again be adjusted to be the Conversion Price which would
then be in effect if such tender offer or exchange offer had not been
made.  Except as set forth in the
preceding sentence, if the application of this SECTION 5(f)(iii) to
any tender offer or exchange offer would result in an increase in the
Conversion Price, no adjustment shall be made for such tender offer or exchange
offer under this SECTION 5(f)(iii).

 

(iv)  Disposition Events.

 

(A)          If any of the following
events (any such event, a “Disposition Event”) occurs:

 

(1)           any reclassification or
exchange of the Common Stock (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);

 

19

 

(2)           any merger,
consolidation or other combination to which the Company is a constituent party;
or

 

(3)           any sale, conveyance,
lease, or other disposal of all or substantially all the properties and assets
of the Company to any other person;

 

in each case, as a result
of which all of the holders of Common Stock shall be entitled to receive cash,
securities or other property for their shares of Common Stock, the Company or
the successor or purchasing person, as the case may be, shall provide that the Series A
Preferred Stock converted following the effective date of any Disposition
Event, shall be converted, in lieu of the Common Stock otherwise deliverable,
into the same amount and type (in the same proportion) of cash, securities or
other property received by holders of Common Stock in the relevant event
(collectively, “Reference Property”) received upon the occurrence of
such Disposition Event by a holder of Common Stock holding, immediately prior
to the transaction, a number of shares of Common Stock equal to the Conversion
Amount (without giving effect to any limitations on conversion set forth in SECTION 5(b))
immediately prior to such Disposition Event; provided that if the
Disposition Event provides the holders of Common Stock with the right to
receive more than a single type of consideration determined based in part upon
any form of stockholder election, the Reference Property shall be comprised of
the weighted average of the types and amounts of consideration received by the
holders of the Common Stock.  The Company
may not cause, or agree to cause, a Disposition Event to occur, unless the
issuer of any securities or other property into which the Series A
Preferred Stock that remains outstanding thereafter (if any) becomes convertible
agrees, for the express benefit of the holders of record of Series A
Preferred Stock (including making them beneficiaries of such agreement), to
issue such securities or property.

 

(B)           The above provisions of
this SECTION 5(f)(iv) shall similarly apply to successive Disposition
Events.  If this SECTION 5(f)(iv) applies
to any event or occurrence, neither SECTION 5(f)(i) nor SECTION 5(f)(iii) shall
apply; provided, however, that this SECTION 5(f)(iv) shall
not apply to any stock split or combination to which SECTION 5(f)(i) is
applicable or to a liquidation, dissolution or winding up to which SECTION 3
applies.  To the extent that equity
securities of a company are received by the holders of Common Stock in
connection with a Disposition Event, the portion of the Series A Preferred
Stock which will be convertible into such equity securities will continue to be
subject to the anti-dilution adjustments set forth in this SECTION 5(f).

 

(v)   Minimum Adjustment.  Notwithstanding the foregoing, the Conversion
Price will not be reduced if the amount of such reduction would be an amount
less than $0.01, but any such amount will be carried forward and reduction with
respect thereto will be made at the time that such amount, together with any
subsequent amounts so carried forward, aggregates to $0.01 or more.

 

(vi)  When No Adjustment Required.

 

(A)  No adjustment need be made for a
transaction referred to in SECTION 5(f)(i) or SECTION 5(f)(ii) if
the Series A Preferred Stock participates, without conversion, in the transaction
or event that would otherwise give rise to an adjustment pursuant to such Section at
the same time as holders of the Common Stock participate with respect to such 

 

20

 

transaction or event and
on the same terms as holders of the Common Stock participate with respect to
such transaction or event as if the holders of Series A Preferred Stock,
at such time, held a number of shares of Common Stock equal to the Conversion
Amount at such time.

 

(B)   No adjustment need be made for
rights to purchase Common Stock pursuant to a Company plan for reinvestment of
dividends or interest.

 

(C)   No adjustment need be made for
a change in the par value or no par value of the Common Stock.

 

(D)  To the extent the Series A
Preferred Stock become convertible pursuant to this SECTION 5 into cash,
no adjustment need be made thereafter as to the cash.  Interest will not accrue on the cash.

 

(vii) Rules of Calculation;
Treasury Stock.  All calculations
will be made to the nearest one-hundredth of a cent or to the nearest one-ten
thousandth of a share.  Except as
explicitly provided herein, the number of shares of Common Stock outstanding
will be calculated on the basis of the number of issued and outstanding shares
of Common Stock, not including shares held in the treasury of the Company.  The Company shall not pay any dividend on or
make any distribution to shares of Common Stock held in treasury.

 

(viii)   Waiver.  Notwithstanding the foregoing, the Conversion
Price will not be reduced if the Company receives, prior to the effective time
of the adjustment to the Conversion Price, written notice from the holders
representing at least a majority of the then outstanding shares of Series A
Preferred Stock, voting together as a separate class, that no adjustment is to
be made as the result of a particular issuance of Common Stock or other
dividend or other distribution on shares of Common Stock.  This waiver will be limited in scope and will
not be valid for any issuance of Common Stock or other dividend or other
distribution on shares of Common Stock not specifically provided for in such
notice.

 

(ix)   Tax Adjustment.  Anything in this SECTION 5
notwithstanding, the Company shall be entitled to make such downward
adjustments in the Conversion Price, in addition to those required by this SECTION 5,
as the Board in its sole discretion shall determine to be advisable in order
that any event treated for federal income tax purposes as a dividend or stock
split will not be taxable to the holders of Common Stock.

 

(x)    Par Value.  Anything in this SECTION 5
notwithstanding, no adjustment to the Conversion Price shall reduce the
Conversion Price below the then par value per share of Common Stock, and any
such purported adjustment shall instead reduce the Conversion Price to such par
value.

 

(xi)   No Duplication.  If any action would require adjustment of the
Conversion Price pursuant to more than one of the provisions described in this SECTION 5
in a manner such that such adjustments are duplicative, only one adjustment
shall be made.

 

(xii)  Provisions Governing Adjustment to Conversion Price.  Rights, options or warrants distributed by the Company to
all or substantially all holders
of Common Stock 

 

21

 

entitling
the holders thereof to subscribe for or purchase shares of the Company’s capital stock (either initially or under certain circumstances), which rights,
options or warrants, until the occurrence of a specified event or events (“Rights
Trigger”): (A) are
deemed to be transferred with such shares of Common Stock; (B) are not
exercisable; and (C) are also issued in respect of future issuances of
Common Stock, shall be deemed not to have been distributed for purposes of SECTION 5(f)(i),
(ii), (iii) or (iv) (and no adjustment to the Conversion Price
under SECTION 5(f)(i), (ii), (iii) or
(iv) will be required) until the occurrence of the earliest Rights
Trigger, whereupon such rights, options and warrants shall be deemed to have
been distributed, except as set forth in SECTION 5(e)(vii), and (x) if
and to the extent such rights, options and warrants are exercisable for shares
of Common Stock or Common Stock equivalents, an appropriate adjustment (if any
is required) to the Conversion Price shall be made under SECTION 5(f)(ii) (without giving effect
to the 60 day limit on the exercisability of rights, options and warrants
ordinarily subject to such SECTION 5(f)(ii)), and/or (y) if and to
the extent such rights, options and warrants are exercisable for cash and/or
any shares of the Company’s capital stock other than shares of Common Stock or
Common Stock equivalents, shall be subject to the provisions of SECTION 2(b) applicable
to Participating Dividends and shall be distributed to the holders of Series A
Preferred Stock.  If any such right, option or warrant, including any such
existing rights, options or warrants distributed prior to the Series A
Original Issuance Date, are subject to events, upon the occurrence of which
such rights, options or warrants become exercisable to purchase different
securities, evidences of indebtedness or other assets, then the date of the
occurrence of any and each such event shall be deemed to be the date of
distribution and Ex-Dividend Date with respect to new rights, options or
warrants with such rights (and a termination or expiration of the existing
rights, options or warrants without exercise by any of the holders thereof),
except as set forth in SECTION 5(e)(vii).  In addition, except as set
forth in SECTION 5(e)(vii), in the event of any distribution (or deemed
distribution) of rights, options or warrants, or any Rights Trigger or other
event (of the type described in the preceding sentence) with respect thereto
that was counted for purposes of calculating a distribution amount for which an
adjustment to the Conversion Price under
SECTION 5(f)(i), (ii), (iii) or (iv) was made, (1) in the
case of any such rights, options or warrants that shall all have been redeemed
or repurchased without exercise by any holders thereof, the Conversion
Price shall be readjusted at the
opening of business on following such final redemption or repurchase by
multiplying such Conversion Price by a fraction (x) the numerator
of which shall be the Current Market Price per share of Common Stock on such
date, less the amount equal to the per share redemption or repurchase
price received by a holder or holders of Common Stock with respect to such
rights, option or warrants (assuming such holder had retained such rights,
options or warrants), made to all or substantially all holders of Common Stock
as of the date of such redemption or repurchase and (y) the denominator of
which shall be the Current Market Price,
and (2) in the case of such rights, options or warrants that shall have
expired or been terminated without exercise by any holders thereof, the Conversion
Price shall be readjusted as if such
rights, options and warrants had not been issued.  Notwithstanding the foregoing, (A) to
the extent any such rights, options or warrants are redeemed by the Company
prior to a Rights Trigger or are exchanged by the Company, in either case for
shares of Common Stock, the Conversion Price shall be appropriately readjusted
(if and to the extent previously adjusted pursuant to this SECTION 5(f)(xii))
as if such rights, options or warrants had not been issued, and instead the
Conversion Price will be adjusted as if the Company had issued the shares of
Common Stock issued upon such redemption or exchange as a dividend or
distribution of shares of Common Stock subject to SECTION 5(f)(i)(A) and
(B) to the extent any such rights, options or warrants are redeemed by the
Company prior to a Rights Trigger or are exchanged by the Company, in either
case for any 

 

22

 

shares
of the Company’s capital stock (other than Common Stock) or any other assets of
the Company, such redemption or exchange shall be deemed to be a distribution
and shall be subject to, and paid to the holders of Series A Preferred
Stock pursuant to, the provisions of SECTION 2(b) applicable to
Participating Dividends.

 

(g)           Notice of Record
Date.  In the event of:

 

(i)    any stock split or combination
of the outstanding shares of Common Stock;

 

(ii)   any declaration or making of a
dividend or other distribution to holders of Common Stock in Additional Shares
of Common Stock, any other capital stock, other securities or other property
(including but not limited to cash and evidences of indebtedness);

 

(iii)  any reclassification or change
to which SECTION 5(f)(i)(B) applies;

 

(iv)  the dissolution, liquidation or
winding up of the Company; or

 

(v)   any other event constituting a
Fundamental Change of the type described in clause (ii) of the definition
thereof in SECTION 9(s);

 

then the Company shall file with its corporate
records and mail to the holders of the Series A Preferred Stock at their
last addresses as shown on the records of the Company, at least 10 days prior
to the record date specified in (A) below or 10 days prior to the date
specified in (B) below, a notice stating:

 

(A)  the record date of such stock
split, combination, dividend or other distribution, or, if a record is not to
be taken, the date as of which the holders of Common Stock of record to be
entitled to such stock split, combination, dividend or other distribution are
to be determined, or

 

(B)   the date on which such
reclassification, change, dissolution, liquidation, winding up or other event
constituting a Fundamental Change of the type described in clause (ii) of
the definition thereof in SECTION 9(s), is estimated to become effective,
and the date as of which it is expected that holders of Common Stock of record
will be entitled to exchange their shares of Common Stock for the capital
stock, other securities or other property (including but not limited to cash
and evidences of indebtedness) deliverable upon such reclassification, change,
liquidation, dissolution, winding up or other Fundamental Change.

 

Disclosures made by the
Company in any filings required to be made under the Exchange Act shall be
deemed to satisfy the notice requirements set forth in this SECTION 5(g).

 

(h)           Certificate of
Adjustments.  Upon the occurrence of
each adjustment or readjustment of the Conversion Price pursuant to this SECTION 5,
the Company at its expense shall promptly as reasonably practicable compute
such adjustment or readjustment in accordance with the terms hereof and furnish
to each holder of Series A Preferred Stock a certificate, signed by an
officer of the Company, setting forth such adjustment or readjustment and
showing in detail the facts upon 

 

23

 

which such adjustment or readjustment is based and
shall file a copy of such certificate with its corporate records.  The Company shall, upon the reasonable written
request of any holder of Series A Preferred Stock, furnish to such holder
a similar certificate setting forth (i) the calculation of such
adjustments and readjustments in reasonable detail, (ii) the Conversion
Price then in effect, and (iii) the number of shares of Common Stock and
the amount, if any, of capital stock, other securities or other property
(including but not limited to cash and evidences of indebtedness) which then
would be received upon the conversion of Series A Preferred Stock.

 

SECTION 6.           Redemption.

 

Each share of Series A
Preferred Stock is redeemable as provided in this SECTION 6.

 

(a)           Redemption at the
Option of Holders.

 

(i)    Subject to compliance with SECTION 6(a)(iii),
each holder of shares of Series A Preferred Stock shall have the right
(the “Redemption Right”), at such holder’s option, to require the
Company to purchase (out of funds legally available therefor) all or any
portion of such holder’s shares of Series A Preferred Stock pursuant to
this SECTION 6(a) on any Redemption Date, at a purchase price,
payable in cash, equal to 100% of the Regular Liquidation Preference as of such
Redemption Date (the “Redemption Price”).

 

(ii)   At least 30 days, but not more
than 60 days, prior to each Redemption Date, the Company shall mail a notice of
optional redemption by first-class mail, postage prepaid to each holder of Series A
Preferred Stock, which notice shall state (A) the Redemption Date and the
Redemption Price, (B) the date upon which the Redemption Right terminates,
(C) the then applicable Conversion Price for the Series A Preferred
Stock, (D) the names and telephonic contact information for no more than
three (3) registered broker-dealers affiliated with a reputable,
nationally recognized brokerage house (collectively, the “Brokers”) and (E) reference
to this SECTION 6(a).

 

(iii)  Any holder may, in its sole
discretion, exercise its Redemption Right with respect to all or any portion of
the Series A Preferred Stock (the “Redemption Securities”)
Beneficially Owned by such holder by delivery to the Company of a written
notice (a “Redemption Acceptance Notice”) no less than seven nor more
than 30 days prior to the Redemption Date stating (A) that such holder is
exercising the Redemption Right, (B) the number of shares of the
Redemption Securities with respect to which such holder is exercising its
Redemption Right, (C) the price quotes provided, if any, by the Brokers
with respect to such Redemption Securities, (D) the names of the Brokers
contacted by such holder and (E) that such holder attempted in good faith
to obtain the price quotes referred to in clause (A) of the definition of
Redemption Fair Market Value.

 

(iv)  Notwithstanding the foregoing,
the Redemption Right shall be exercisable by any holder only if the Redemption
Fair Market Value of the Redemption Securities Beneficially Owned by such
holder is equal to or less than 110% of the aggregate Redemption Price of the
Redemption Securities Beneficially Owned by such holder.

 

(v)   For purposes of this Section 6(a),
“Redemption Fair Market Value” shall mean, with respect to the
Redemption Securities Beneficially Owned by any holder:

 

24

 

(A)  if such holder is able to obtain
on the Business Day prior to such holder’s mailing or other transmittal to the
Company of the Redemption Acceptance Notice a firm price quote from one or more
Brokers pursuant to which such Broker offers to purchase on such date all, but
not less than all, of the Redemption Securities that such holder wishes to
redeem, the highest net purchase price quoted; or

 

(B)   if such holder is unable to
obtain any price quotes as contemplated in clause (A) (including, for the
avoidance of doubt, as a result of any Broker failing to respond to such holder’s
inquiry for, or to provide, a firm price quote with respect to such Redemption
Securities), then the Redemption Fair Market Value of such Redemption
Securities shall conclusively be deemed to be an amount less than 110% of the
Redemption Price.

 

(b)           Redemption at the
Option of the Company.

 

(i)    At any time after the fifth
anniversary of the Series A Original Issuance Date, the Company, at its
option and election, may redeem (out of funds legally available therefor) any
or all of the outstanding shares of Series A Preferred Stock at the
Redemption Price; provided that the Company shall not have the right to
redeem any shares of Series A Preferred Stock pursuant to this SECTION 6(b) unless
at the time of the mailing of the notice of redemption, either (x) the
shelf registration statement referred to in Section 2.2 of the
Registration Rights Agreement is effective and available for resales of the
Common Stock issuable upon conversion of the Series A Preferred Stock or (y) the
shares of Common Stock for which the Series A Preferred Stock are
convertible into may be sold by all holders of the Series A Preferred
Stock under Rule 144 under the Securities Act without volume or other
limitation.

 

(ii)   If the Company elects to redeem
the Series A Preferred Stock pursuant to SECTION 6(b)(i), the “Company
Redemption Date” shall be the date on which the Company elects to
consummate such redemption.  The Company
shall deliver a notice of redemption not less than 15 nor more than 30 Business
Days prior to the Company Redemption Date, addressed to the holders of record
of the Series A Preferred Stock as they appear in the records of the
Company as of the date of such notice. 
Each notice must state the following: (A) the Company Redemption
Date; (B) the number of shares to be redeemed; (C) the Redemption
Price as of the Company Redemption Date (it being understood that the actual
Redemption Price will be determined as of the actual Company Redemption Date); (D) the
name of the redemption agent to whom, and the address of the place to where,
the Series A Preferred Stock are to be surrendered for payment of the
Redemption Price; and (E) that Dividends, if any, on the shares to be
redeemed will cease to accrue on such Company Redemption Date provided that the
Redemption Price shall have been paid on the Company Redemption Date.

 

(iii)  If the Company has elected to
redeem less than all the Series A Preferred Stock pursuant to this SECTION 6(b),
the Company shall select the shares of Series A Preferred Stock to be
redeemed by lot, on a pro rata basis
or in accordance with any other method the Company considers fair and
appropriate.  The Company shall make such
selection from shares of Series A Preferred Stock then outstanding and not
already to be redeemed by virtue of having been previously called for redemption.

 

25

 

(c) Mechanics of
Redemption.

 

(i)    Prior to 2:00 p.m. (New
York City time) on or prior to Business Day prior to the Redemption Date or
Company Redemption Date, as applicable (such date, the “Irrevocable Date”),
the Company shall deposit with a redemption agent an amount of money (in
immediately available funds) sufficient to pay the Redemption Price on the
Redemption Date or the Company Redemption Date, as the case may be.  The redemption agent shall return to the Company,
as soon as practicable, any money not required for that purpose.  If the Company or an Affiliate of the Company
acts as redemption agent, it shall, before 3:00 p.m., New York City time
on or prior to Business Day prior to the Redemption Date or Company Redemption
Date, as applicable, segregate the money and hold it as a separate trust fund.

 

(ii)   The redemption agent on behalf
of the Company shall pay the applicable Redemption Price on the Redemption Date
or Company Redemption Date, as the case may be, upon surrender of the
certificates representing the shares of Series A Preferred Stock to be
redeemed (properly endorsed or assigned for transfer, if the Company shall so
require and letters of transmittal and instructions therefor on reasonable
terms are included in the notice sent by the Company); provided that if
such certificates are lost, stolen or destroyed, the Company may require such
holder to indemnify the Company, in a reasonable amount and in a reasonable
manner, and post a customary bond in respect of such indemnity, prior to paying
such Redemption Price.  Notwithstanding
the foregoing, the Company shall remain liable for the payment of the
Redemption Price to the extent such amounts are not paid as provided herein.  Any holder that, together with its
Affiliates, Beneficially Owns more than 1,000 shares of Series A Preferred
Stock will be entitled to receive all cash payments hereunder by wire transfer
of immediately available funds.

 

(iii)  Shares of Series A
Preferred Stock to be redeemed on the Redemption Date or Company Redemption
Date, as the case may be, will from and after such date, no longer be deemed to
be outstanding; and all powers, designations, preferences and other rights of
the holder thereof as a holder of Series A Preferred Stock (except the
right to receive from the Company the applicable Redemption Price) shall cease
and terminate with respect to such shares; provided that in the event
that a share of Series A Preferred Stock is not redeemed due to a default
in payment by the Company or because the Company is otherwise unable to pay the
applicable Redemption Price in cash in full, such share of Series A
Preferred Stock will remain outstanding and will be entitled to all of the
powers, designations, preferences and other rights (including but not limited
to the accrual and payment of Dividends and the conversion rights) as provided
herein.

 

(iv)  Notwithstanding anything in this
SECTION 6 to the contrary, each holder shall retain the right to convert
shares of Series A Preferred Stock to be redeemed at any time on or prior
to the Redemption Date or Company Redemption Date, as the case may be; provided,
however, that any shares of Series A Preferred Stock for which a
holder delivers a conversion notice to the Company prior to the Redemption Date
or Company Redemption Date, as the case may be, shall not be redeemed pursuant
to this SECTION 6.

 

(v)   Any redemption of the Series A
Preferred Stock pursuant to this SECTION 6 (such redemption, the “Redemption”)
shall be payable out of any cash legally available therefor, and if there is
not a sufficient amount of cash available, then out of the remaining assets of
the Company legally available therefor (valued at the Fair Market Value thereof
on the date of payment).  At the time of
the Redemption, the Company shall take all actions required or permitted under
Delaware law to permit the Redemption, including, without limitation, through
the revaluation 

 

26

 

of its assets in accordance with Delaware law, to make
funds legally available for such Redemption. 
To the extent that the Company has insufficient funds to redeem all of
the shares of Series A Preferred Stock upon the Redemption, the Company
shall use available funds to redeem a pro rata
portion of such Series A Preferred Stock.

 

SECTION 7.         Fundamental Change.

 

(a)           Offer to Repurchase.

 

(i)    In connection with any
Fundamental Change, unless waived by holders representing a majority of the
outstanding shares of Series A Preferred Stock, each holder shall have the
right, at such holder’s option, to require the Company to, or to cause the
Survivor of a Fundamental Change (such Survivor of a Fundamental Change, the “Acquirer”)
to, purchase each share of Series A Preferred Stock then-outstanding (the “Fundamental
Change Offer”) at a purchase price per share (such amount being the “Repurchase
Price”) in cash equal to the sum of (x) 101% of the Regular
Liquidation Preference, plus (y) in the case of a Fundamental
Change of the type described in clause (i), (ii), (iii) or (iv) of
the definition of “Fundamental Change” (each, a “Change in Control”),
the Make Whole Amount, on a date selected by the Company (the “Fundamental
Change Purchase Date”), which Fundamental Change Purchase Date shall be the
date on which the Fundamental Change is consummated (provided that in the case
of a Fundamental Change described in clause (i) of the definition thereof,
the Fundamental Change Purchase Date shall be a date no later than
35 Business Days following the date of the first public announcement of
such Fundamental Change having occurred).

 

(ii)   As promptly as practicable
following the date of announcement of such transaction or execution of such
agreement providing for such Fundamental Change, but in no event less than 20
Business Days prior to the anticipated effective date of a Fundamental Change
in the case of a Fundamental Change within the control of the Company or of
which the Company has at least 30 Business Days prior notice, the Company shall
mail a written notice of Fundamental Change (the “Fundamental Change Notice”)
by first-class mail addressed to the holders of record of the Series A
Preferred Stock as they appear in the records of the Company as of the date of
announcement of such transaction or execution of such agreement providing for
such Fundamental Change.  Each notice
must state that: (A) the Fundamental Change Offer may be accepted by
delivery of a written revocable notice specifying the number of shares to be
repurchased, and the date by which such notice must be given pursuant to this SECTION 7(a);
(B) the expected Repurchase Price as of the expected Fundamental Change
Purchase Date, and specifying the individual components thereof (it being
understood that the actual Repurchase Price will be determined as of the actual
Fundamental Change Purchase Date); (C) the name of the paying agent to
whom, and the address of the place to where, the Series A Preferred Stock
are to be surrendered for payment of the Repurchase Price; (D) any shares
of Series A Preferred Stock not tendered for payment shall continue to be
outstanding and holders thereof shall remain entitled to, among other things,
the payment of Dividends thereon and exercise their conversion rights (whether
on the date of consummation of the Fundamental Change or otherwise), (E) the
consummation of the Fundamental Change Offer and the payment of the Repurchase
Price shall be subject to the consummation of the Fundamental Change, and (F) the
circumstances and material facts regarding such Fundamental Change, including
the anticipated effective date of the Fundamental Change.  If 

 

27

 

the Fundamental Change is not consummated, the
Fundamental Change Offer shall be automatically withdrawn.

 

(iii)  Notwithstanding this SECTION 7,
the Fundamental Change Offer shall be subject to, and be made in compliance
with, Regulation 14E under the Exchange Act and any other federal and
state securities laws, as applicable, including any applicable time
periods.  The Company shall notify the
holders Series A Preferred Stock of the results of the Fundamental Change
Offer on or as soon as practicable after the Fundamental Change Purchase Date.

 

(b)           Mechanics of
Repurchase.

 

(i)    Prior to 2:00 p.m. (New
York City time) on or prior to the Business Day prior to the Fundamental Change
Purchase Date, the Company shall deposit with a paying agent an amount of money
(in immediately available funds) sufficient to pay the aggregate Repurchase
Price upon on the Fundamental Change Purchase Date.  The paying agent shall return to the Company,
as soon as practicable, any money not required for that purpose.   If the Company or an Affiliate of the
Company acts as paying agent, it shall, before 3:00 p.m., New York City
time on or prior to Business Day prior to the Fundamental Change Purchase Date,
as applicable, segregate the money and hold it as a separate trust fund.  Notwithstanding the deposit of such funds,
the Company shall remain liable for the payment of the Repurchase Price to the
extent such Repurchase Price is not paid as provided herein.

 

(ii)   The paying agent on behalf of
the Company shall pay the Repurchase Price on the Fundamental Change Purchase
Date upon surrender of the certificates representing the shares of Series A
Preferred Stock to be repurchased (properly endorsed or assigned for transfer,
if the Company shall so require and letters of transmittal and instructions
therefor on reasonable terms are included in the notice sent by the Company); provided
that if such certificates are lost, stolen or destroyed, the Company may
require such holder to indemnify the Company, and post a customary bond in
respect of such indemnity, in a reasonable amount and in a reasonable manner,
prior to paying such Repurchase Price. 
Notwithstanding the foregoing, the Company shall remain liable for the
payment of the Repurchase Price to the extent such amounts are not paid as
provided herein.  Any holder that,
together with its Affiliates, Beneficially Owns more than 1,000 shares of Series A
Preferred Stock will be entitled to receive all cash payments hereunder by wire
transfer of immediately available funds.

 

(iii)  In case fewer than all the
shares represented by any such certificate are to be repurchased, a new
certificate shall be issued representing the shares not purchased, without cost
to the holder thereof, except for any documentary, stamp or similar issue or
transfer tax due because any certificate for shares Series A Preferred
Stock are issued in a name other than the name of the selling holder.  The Company shall pay any documentary, stamp
or similar issue or transfer tax due upon the issuance of a new certificate for
any shares of Series A Preferred Stock not repurchased other man any such
tax due because a certificate for shares Series A Preferred Stock is
issued in a name other than the name of the selling holder.

 

(iv)  Subject to clause (vi) below,
from and after the Fundamental Change Purchase Date, shares of the Series A
Preferred Stock to be repurchased on such Fundamental Change Purchase Date will
no longer be deemed to be outstanding; and all powers, designations, 

 

28

 

preferences and other rights of the holder thereof as
a holder of Series A Preferred Stock (except the right to receive from the
Company the Repurchase Price) shall cease and terminate with respect to such
shares; provided that in the event that a share of Series A
Preferred Stock is not repurchased due to a default in payment by the Company
or because the Company is otherwise unable to pay the Repurchase Price in full,
such share of Series A Preferred Stock will remain outstanding and will be
entitled to all of the powers, designations, preferences and other rights
(including but not limited to the payment of dividends and the conversion
rights) as provided herein.

 

(v)   Notwithstanding anything in
this SECTION 7 to the contrary, each holder shall retain the right to (A) convert
shares of Series A Preferred Stock to be repurchased at any time on or
prior to the Fundamental Change Purchase Date or (B) withdraw an election
to have such shares repurchased or any tender of such shares in the Fundamental
Change Offer on or prior to the Fundamental Change Purchase Date; provided,
however, that, where a holder of Series A Preferred Stock exercises
its rights under (A) or (B) above, the shares of Series A
Preferred Stock of such holder shall not be repurchased pursuant to this SECTION 7.

 

(vi)  The Company shall not be
required to make a Fundamental Change Offer if an Affiliate in control of the
Company makes the Fundamental Change Offer in the manner, at the times and
otherwise in compliance with the requirements set forth in this SECTION 7
and purchases all shares of Series A Preferred Stock validly tendered and
not withdrawn under such Fundamental Change Offer; provided, that if an
Affiliate in control of the Company makes such repurchase, the shares of Series A
Preferred Stock so purchased shall remain outstanding in the hands of such
Affiliate.

 

(vii) The Company will not enter into
any agreement providing for or otherwise authorize a Fundamental Change unless
the Acquirer agrees to cause the Company to make the repurchases contemplated
in this SECTION 7 and agrees, for the benefit of the holders of record of
the Series A Preferred Stock (including making them beneficiaries of such
agreement), that to the extent the Company is not legally able to repurchase
the Series A Preferred Stock, the Acquirer will purchase the Series A
Preferred Stock.

 

(viii) Any
repurchase of the Series A Preferred Stock pursuant to this SECTION 7
shall be payable out of any cash legally available therefor, and if there is
not a sufficient amount of cash available, then out of the remaining assets of
the Company legally available therefor (valued at the Fair Market Value thereof
on the date of payment).  The Company
shall take all actions required or permitted under Delaware law to permit the
repurchase of the Series A Preferred Stock, including, without limitation,
through the revaluation of its assets in accordance with Delaware law, to make
funds legally available for such repurchase. To the extent that the Company has
insufficient funds to repurchase all of the shares of Series A Preferred
Stock pursuant to this SECTION 7, the Company shall use available funds to
repurchase a pro rata portion of such Series A
Preferred Stock.

 

SECTION 8.         Conversion Into Series B
Preferred Stock.

 

(a)           After receiving a
notice of conversion pursuant to SECTION 5(c) or a notice of
redemption pursuant to SECTION 6(b), any holder of shares of Series A Preferred Stock as to whom
relevant the provisions of the following sentence are applicable may, at such
holder’s option, 

 

29

 

convert shares of Series A
Preferred Stock subject to such conversion or redemption, as the case may be,
at any time on or prior to the close of business on the Business Day
immediately preceding the Conversion Date or the Company Redemption Date, as
the case may be, specified in such notice into Series B Preferred Stock to
the extent necessary to address the conditions described in the immediately
following sentence.  If such holder would
not be permitted to convert one or more shares of its Beneficially Owned Series A
Preferred Stock (such shares, the “Preferred Conversion Shares”) or
Notes into shares of Common Stock due to the restrictions contained in SECTION 5(b) or
because any applicable waiting period has not lapsed, or approval has not been
obtained, under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, or other applicable antitrust law, then, subject to SECTION 5(e)(viii), each Preferred Conversion Share of
such holder shall be converted into one share of Series B Preferred Stock
on the Conversion Date or the Company Redemption Date, as the case may be.

 

(b)           As soon as practicable (and in any event within three Business
Days of receipt of the notice described in this SECTION 8(b)), which
notice shall include the amount of shares of Series B Preferred Stock to
which such holder is entitled and the basis for such conversion into Series B
Preferred Stock, the Company shall (i) issue and deliver to such
holder a certificate for the number of shares of Series B Preferred Stock,
if any, to which such holder is entitled in exchange for the certificates
formerly representing shares of Series A Preferred Stock and (ii) pay
to such holder, to the extent of funds legally available therefor, all accrued
and unpaid Dividends on the shares of Series A Preferred Stock that are
being converted into Series B Preferred Stock.  Such conversion will be deemed to have been
made on the Conversion Date or the Company Redemption Date, as applicable, and
the person entitled to receive the shares of Series B Preferred Stock
issuable upon such conversion shall be treated for all purposes as the record
holder of such shares of Series B Preferred Stock on such Conversion Date
or Company Redemption Date, as the case may be. 
In case fewer than all the shares of Series A Preferred Stock
represented by any such certificate are to be converted into Series B
Preferred Stock, a new certificate shall be issued representing the unconverted
shares without cost to the holder thereof, except for any documentary, stamp or
similar issue or transfer tax due because any certificates for shares of Series B
Preferred Stock or Series A Preferred Stock are issued in a name other
than the name of the converting holder. 
The Company shall pay any documentary, stamp or similar issue or
transfer tax due on the issue of Series B Preferred Stock upon conversion
or due upon the issuance of a new certificate for any shares of Series A
Preferred Stock not converted other than any such tax due because shares of Series B
Preferred Stock or a certificate for shares of Series A Preferred Stock
are issued in a name other than the name of the converting holder.

 

(c)           The Company shall at
all times reserve and keep available, free from any preemptive rights, out of
its treasury or out of authorized but unissued shares of Series B
Preferred Stock (or a combination of both) for the purpose of effecting the
conversion of the Series A Preferred Stock the full number of shares of Series B
Preferred Stock deliverable upon the conversion all outstanding Series A
Preferred Stock, and the Company shall take all actions to amend its
Certificate of Incorporation to increase the authorized amount of Preferred
Stock if necessary therefor.

 

(d)           All shares of Series B
Preferred Stock issued upon conversion of the shares of Series A Preferred
Stock will, upon issuance by the Company, be duly and validly issued, fully
paid and nonassessable, not issued in violation of any preemptive rights
arising under law or contract and 

 

30

 

free from all taxes, liens and charges with respect to
the issuance thereof, and the Company shall take no action which will cause a
contrary result.

 

SECTION 9.           Additional
Definitions.  For purposes of these
resolutions, the following terms shall have the following meanings:

 

(a)           “Additional Rate”
means an annual rate initially equal to 2.0% per annum, and increasing by 1.0%
on every six month anniversary of the occurrence of the Increase Event, up to a
maximum of 16% per annum.

 

(b)           “Affiliate”
means, with respect to any person, any other person that directly or indirectly
through one or more intermediaries, controls, is controlled by or is under
common control with, such specified person. Notwithstanding the foregoing, the
Company, its subsidiaries and its other controlled Affiliates shall not be
considered Affiliates of the Investor Securityholders.

 

(c)           “Beneficial Owner”,
“Beneficially Own” and “Beneficial Ownership” shall have the
meaning set forth in Rule 13d-3 of the rules and regulations
promulgated under the Exchange Act; provided, however, that (i) a
person will be deemed to be the Beneficial Owner of any security which may be
acquired by such person whether within 60 days or thereafter, upon the
conversion, exchange or exercise (without giving effect to any provision
governing such security that would limit, reduce or otherwise restrict the
conversion, exchange or exercise features of such security) of any rights,
options, warrants or similar securities to subscribe for, purchase or otherwise
acquire such security and (ii) none of the Investor Securityholders shall
be deemed to Beneficially Own any securities owned by their portfolio companies
as long as the Investor Securityholders did not directly or indirectly
encourage, assist or provide any information to such portfolio company in
respect of the acquisition or voting of such securities.

 

(d)           “Board
Representation Entitlement” means a number of Preferred Directors (rounded
up to the nearest whole number) equal to the product of (x) the total
number of members then comprising the full Board (including the Preferred
Directors) and (y) the lesser of (1) 20.0% and (2) the SLS
Director Beneficial Ownership Percentage; provided, however,
that, notwithstanding the foregoing, (A) at any time that the Investor
Securityholders and their Affiliates in the aggregate cease to Beneficially Own
a number of shares of Series A Preferred Stock that if then converted
would be convertible into a number of shares of Common Stock that is greater
than or equal to 7.5% of the shares of Common Stock then outstanding based on
the Conversion Price that is in effect at the time of such calculation
(including shares of Series A Preferred Stock pledged pursuant to a bond fide pledge but not foreclosed thereon) without giving
effect to the limitations in SECTION 5(b), the Board Representation
Entitlement shall be zero (0) Preferred Directors, (B) from and after
the occurrence of a Non-Constituent Issuer Fundamental Change, the Board
Representation Entitlement shall be zero (0) Preferred Directors and (C) from
and after the occurrence of a Fundamental Change described in clause (i) of
the definition thereof other than a Non-Constituent Issuer Fundamental Change,
the Board Representation Entitlement shall be no more than one (1) Preferred
Director.

 

(e)           “Business Day”
means any day except a Saturday, Sunday or other day on which commercial banks
in New York, New York are authorized or obligated to close.

 

31

 

(f)            “capital stock”
means any and all shares, interests, participations or other equivalents
(however designated, whether voting or non-voting) of capital stock,
partnership interests (whether general or limited) or equivalent ownership
interests in or issued by such person, and with respect to the Company
includes, without limitation, any and all shares of Common Stock and the
Preferred Stock.

 

(g)           “Closing Price”
of the Common Stock on any date means the closing sale price per share (or if
no closing sale price is reported, the average of the bid and ask prices or, if
more than one in either case, the average of the average bid and the average
ask prices) on that date as reported in composite transactions for the
principal U.S. securities exchange on which the Common Stock is listed or
admitted for trading or, if the Common Stock is not listed or admitted for
trading on a U.S. national or regional securities exchange, as reported on the
quotation system on which such security is quoted. If the Common Stock is not
listed or admitted for trading on a United States national or regional
securities exchange and not reported on a quotation system on the relevant
date, the “closing price” will be the last quoted bid price for the Common
Stock in the over-the-counter market on the relevant date as reported by the
National Quotation Bureau or similar organization.  If the Common Stock is not so quoted, the
last reported sale price will be the average of the mid-point of the last bid
and ask prices for the Common Stock on the relevant date from each of at least
three nationally recognized investment banking firms selected by the Company
for this purpose.

 

(h)           “Company Rights Plan”
means that certain Amended and Restated Rights Agreement, dated as of April 23,
2009, between the Company and American Stock Transfer & Trust Company.

 

(i)            “control,” “controlling,”
“controlled by” and “under common control with,” with respect to
any person, means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such person,
whether through the ownership of Voting Stock, by contract or otherwise.

 

(j)            “Current Market
Price” of Common Stock on any day means the average of the Closing Prices
per share of Common Stock for each of the five (5) consecutive Trading
Days ending on the earlier of the day in question and the day before the
Ex-Dividend Date with respect to the issuance or distribution requiring such
computation.

 

(k)           “Dividend Payment
Date” means (i) each January 1, April 1, July 1 and October 1
of each year, commencing on July 1, 2009, (ii) with respect to any
shares of Series A Preferred Stock that is to be converted or redeemed,
the Conversion Date, the Redemption Date or the Company Redemption Date, as
applicable, and (iii) any date on which Participating Dividends are paid
(if any); provided that if any such Dividend Payment Date would
otherwise occur on a day that is not a Business Day, such Dividend Payment Date
shall instead be (and any dividend payable on Series A Preferred Stock on
such Dividend Date shall instead be payable on) the immediately succeeding
Business Day.

 

(l)            “Dividend Period”
means the period which commences on and includes a Dividend Payment Date (other
than the initial Dividend Period which shall commence on and include the Series A
Original Issuance Date) pursuant to clauses (i) and (ii) of the
definition of 

 

32

 

“Dividend Payment Date” and ends on and includes the
calendar day next preceding the next Dividend Payment Date.

 

(m)          “Dividend Rate”
means 10.0% per annum.

 

(n)           “Equity Securities”
means (x) any shares of capital stock of the Company, (y) any rights,
options, warrants or similar securities to subscribe for, purchase or otherwise
acquire any shares of capital stock of the Company, and (z) capital stock
or other equity securities directly or indirectly convertible into or
exercisable or exchangeable for any shares of capital stock of the Company,
excluding, for all purposes, any debt, including, without limitation, any debt
convertible into any of the foregoing described in clauses (x) through
(z).

 

(o)           “Ex-Dividend Date”
means, with respect to any issuance or distribution, the first date on which
the shares of Common Stock trade on the applicable exchange or in the
applicable market, regular way, without the right to receive such issuance or
distribution.

 

(p)           “Exchange” means
Nasdaq or any other U.S. national securities exchange.

 

(q)           “Exchange Act”
means the Securities Exchange Act of 1934, as amended, and the rules and
regulations promulgated thereunder.

 

(r)            “Fair Market Value”
of Common Stock or any other security or property means the fair market value
thereof as determined in good faith by the Board, which determination must be
set forth in a written resolution of the Board, in accordance with the
following rules:

 

(i)    for Common Stock or other
security traded or quoted on an Exchange, the Fair Market Value will be the
average of the Closing Prices of such security on such Exchange over a ten (10) consecutive
trading day period, ending on the trading day immediately prior to the date of
determination;

 

(ii)   for any security that is not so
traded or quoted, or for any other property, the Fair Market Value shall be
determined by the Board in good faith assuming a willing buyer and a willing
seller in an arms’-length transaction; provided that if any
determination of the Board pursuant to this clause (ii) that in the
aggregate for all shares of Series A Preferred Stock is in excess of $10,000,000,
the holders representing a majority of the then-outstanding shares of Series A
Preferred Stock may object to such determination.  In the event of such an objection by such
holders, the Fair Market Value of such property shall be as determined by a
nationally recognized investment bank, appraisal or accounting firm (whose fees
and expenses will be paid by the Company) selected by mutual agreement between
the Board and such holders.

 

(s)           “Fundamental Change”
shall be deemed to have occurred at such time as any of the following events
shall occur:

 

(i)    any “person” or “group”, other
than the Company, its Subsidiaries or any employee benefits plan of the Company
or its Subsidiaries, files, or is required by applicable law to file, a
Schedule 13D or Schedule TO (or any successor schedule, form or report)
pursuant to the Exchange Act, disclosing that such person has become the direct
or indirect beneficial owner of shares with a majority of the total voting
power of the Company’s outstanding Voting Stock; unless 

 

33

 

such beneficial ownership arises solely as a result of
a revocable proxy delivered in response to a proxy or consent solicitation made
pursuant to the applicable rules and regulations under the Exchange Act;

 

(ii)   the Company consolidates with
or merges with or into another person (other than a Subsidiary of the Company),
or sells, conveys, transfers, leases or otherwise disposes of all or
substantially all of the consolidated properties and assets of the Company and
its Subsidiaries to any person (other than a Subsidiary of the Company) or any
person (other than a Subsidiary of the Company) consolidates with or merges
with or into the Company, provided that none of the circumstances set forth in
this clause (ii) will be a Fundamental Change if persons that beneficially
own the Voting Securities of the Company immediately prior to the transaction
own, directly or indirectly, shares with a majority of the total voting power
of all outstanding Voting Stock the surviving or transferee person immediately
after the transaction in substantially the same proportion as their ownership
of the Company’s Voting Stock immediately prior to the transaction;

 

(iii)  Continuing Directors cease to
constitute at least a majority of the Board of Directors, “Continuing
Director” means a director who either was a member of the Board on the Series A
Original Issuance Date or who becomes a member of the Board of Directors
subsequent to that date and who was nominated or elected by at least a majority
of the directors who were Continuing Directors at the time of such nomination
or election or whose election to the Board of Directors was recommended or
endorsed by at least a majority of the directors who were Continuing Directors
at the time of such nomination or election, in each case either by a specific
vote or by approval of a proxy statement issued by the Company on behalf of the
entire Board of Directors in which such individual is named as a nominee of the
Board of Directors for election as director;

 

(iv)  the Company’s stockholders or
Board of Directors adopts a plan for the liquidation or dissolution of the
Company; or

 

(v)   upon the occurrence of a
Termination of Trading (other than in connection with an Unexpected Delisting).

 

(t)            “group” has the
meaning assigned to such term in Section 13(d)(3) of the Exchange
Act.

 

(u)           “hereof”; “herein”
and “hereunder” and words of similar import refer to these resolutions
as a whole and not merely to any particular clause, provision, section or
subsection.

 

(v)           “Investor
Securityholder” shall have the meaning ascribed thereto in the Securities
Purchase Agreement.

 

(w)          “Make Whole Amount” means, with respect to any share of Series A
Preferred Stock being repurchased pursuant to SECTION 7, the excess, if
any, of (a) the present value on the date of such repurchase of (i) 100%
of the Regular Liquidation Preference of such share as of such date, assuming
such share of Series A Preferred Stock was redeemed at the option of the
company on May 8, 2014 pursuant to SECTION 6(b), plus (ii) all
Regular Dividends payable on 

 

34

 

such share of Series A
Preferred Stock through May 8, 2014, computed using a 3.125% discount rate
over (b) 100% of the Regular Liquidation Preference as of such date.

 

(x)            “Market Disruption
Event” means the occurrence or existence for more than one half hour period
in the aggregate on any scheduled Trading Day for the Common Stock of any
suspension or limitation imposed on trading (by reason of movements in price
exceeding limits permitted by the Nasdaq National Market or otherwise) in the
Common Stock or in any options, contracts or future contracts relating to the
Common Stock, and such suspension or limitation occurs or exists at any time
before 1:00 p.m. (New York City time) on such day.

 

(y)           “Nasdaq” means
The NASDAQ Global Market.

 

(z)            “Notes” means
the 6.0%/8.0%/10.0% Convertible Senior Notes due 2019 of the Company.

 

(aa)         “Original Purchase
Price” means $1,000 per share of Series A Preferred Stock, as adjusted
for any stock dividends, splits, combinations and similar events on the Series A
Preferred Stock.

 

(bb)         “person” means any
individual, corporation, limited liability company, limited or general
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization, government, any agency or political subdivisions
thereof or other “person” as contemplated by Section 13(d) of the
Exchange Act.

 

(cc)         “Permitted Transferee”
shall have the meaning set forth in the Securities Purchase Agreement.

 

(dd)         “Public Sale” has
the meaning set forth in the Securities Purchase Agreement.

 

(ee)         “Redemption Date”
means May 8, 2014 and May 8 of each subsequent year on which any of
the Series A Preferred Stock is outstanding, or, if any such day is not a
Business Day, the immediately succeeding Business Day.

 

(ff)           “Representation
Reduction Event” means a decrease,
for any reason, in the SLS Director Beneficial Ownership Percentage that
results in a reduction in the number of directors of the Board that constitutes
the Board Representation Entitlement.

 

(gg)         “Rights” shall
have the meaning given thereto in the Company Rights Plan (or the comparable
right under any successor, substitute or additional stockholder rights plan).

 

(hh)         “Securities Act”
means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.

 

(ii)           “Securities Purchase
Agreement” means that certain Securities Purchase Agreement, dated April 23,
2009, among the Company, SLS and Silver Lake Technology Investors Sumeru, L.P.

 

35

 

(jj)           “Series A
Original Issuance Date” means the date on which the first share of Series A
Preferred Stock was issued.

 

(kk)         “Series B Preferred
Stock” means the Series B Junior Participating Convertible Preferred
Stock so denominated and authorized by the Company concurrently with the Series A
Preferred Stock.

 

(ll)           “SLS” means
Silver Lake Sumeru Fund, L.P.

 

(mm)       “SLS Director Beneficial
Ownership Percentage” means, at any time, the quotient of (a) the
aggregate number of shares of Common Stock Beneficially Owned (excluding the
number of shares of Common Stock issuable upon the exercise of the Warrants (as
defined in the Securities Purchase Agreement)) by the Investor Securityholders divided
by (b) the number of Common Shares Outstanding (as defined in the
Securities Purchase Agreement) (calculated without giving effect to clause (iv) of
“Common Shares Outstanding”).

 

(nn)         “Subsidiary” means
with respect to any person, any corporation, association or other business
entity of which more than 50% of the outstanding Voting Stock is owned,
directly or indirectly, by, or, in the case of a partnership, the sole general
partner or the managing partner or the only general partners of which are, such
person and one or more Subsidiaries of such person (or a combination
thereof).  Unless otherwise specified, “Subsidiary”
means a Subsidiary of the Company.

 

(oo)         “Survivor of a
Fundamental Change” means the issuer of the securities received by the
holders of Common Stock (in their capacities as such) upon the consummation of
a Fundamental Change, to the extent the holders of Common Stock receive other
securities in exchange, conversion or substitution of their Common Stock in the
transaction that resulted in such Fundamental Change.

 

(pp)         “Termination of
Trading” will be deemed to have occurred if for 10 consecutive Business
Days the Common Stock (or other common stock into which the Series A
Preferred Stock are then convertible) is neither listed for trading on a U.S.
national securities exchange nor approved for trading on an established U.S.
automated interdealer quotation system and no American Depositary Shares or
similar instruments for such common stock are so listed or approved for listing
in the United States.

 

(qq)         “Trading Day”
means any day on which (i) there is no Market Disruption Event and (ii) Nasdaq
or, if the Common Stock is not listed on Nasdaq, the principal national
securities exchange on which the Common Stock is listed, is open for trading
or, if the Common Stock is not so listed, admitted for trading or quoted, any
Business Day.  A Trading Day only
includes those days that have a scheduled closing time of 4:00 p.m. (New
York City time) or the then standard closing time for regular trading on the
relevant exchange or trading system.

 

(rr)           “Unexpected
Delisting” means any delisting of the Common Stock from the Nasdaq directly
as a result of the execution of the Securities Purchase Agreement and the
consummation of the transactions contemplated thereby.

 

36

1

(ss)         “Voting Stock”
shall mean the Series A Preferred Stock and securities of any class or
kind ordinarily having the power to vote generally for the election of
directors of the Board of the Company or its successor (including the Common
Stock).

 

(tt)           Each of the following
terms is defined in the Section set forth opposite such term:

 

 

	
  Term

  	
   

  	
  Section

  
	
  Acquirer

  	
   

  	
  SECTION 7(a)(i)

  
	
  Additional Director

  	
   

  	
  Section 4(d)(ix)

  
	
  Additional Dividends

  	
   

  	
  SECTION 2(c)

  
	
  Aggregate Amount

  	
   

  	
  SECTION 5(f)(iii)

  
	
  Board

  	
   

  	
  Recital

  
	
  Board Size Decrease

  	
   

  	
  SECTION 4(d)(iv)

  
	
  Brokers

  	
   

  	
  SECTION 6(a)(ii)

  
	
  Cash Amount

  	
   

  	
  SECTION 5(e)(viii)(A)

  
	
  Certificate of Incorporation

  	
   

  	
  Recital

  
	
  Change in Control

  	
   

  	
  SECTION 7(a)(i)

  
	
  Common Stock

  	
   

  	
  SECTION 1(b)(i)

  
	
  Company

  	
   

  	
  Recital

  
	
  Company Redemption Date

  	
   

  	
  SECTION 6(b)(ii)

  
	
  Conversion Amount

  	
   

  	
  SECTION 5(a)

  
	
  Conversion Date

  	
   

  	
  SECTION 5(a)

  
	
  Conversion Price

  	
   

  	
  SECTION 5(a)

  
	
  Conversion Security

  	
   

  	
  SECTION 4(b)(ii)

  
	
  DGCL

  	
   

  	
  Recital

  
	
  Disposition Event

  	
   

  	
  SECTION 5(f)(iv)

  
	
  Dividends

  	
   

  	
  SECTION 2(c)

  
	
  Expiration Date

  	
   

  	
  SECTION 5(f)(iii)

  
	
  Expiration Time

  	
   

  	
  SECTION 5(f)(iii)(A)

  
	
  Fundamental Change Notice

  	
   

  	
  SECTION 7(a)(ii)

  
	
  Fundamental Change Offer

  	
   

  	
  SECTION 7(a)(i)

  
	
  Fundamental Change Purchase Date

  	
   

  	
  SECTION 7(a)(i)

  
	
  Increase Event

  	
   

  	
  SECTION 2(c)(vi)

  
	
  Irrevocable Date

  	
   

  	
  SECTION 6(c)(i)

  
	
  Junior Securities

  	
   

  	
  SECTION 1(b)(i)

  
	
  Liquidation Preference

  	
   

  	
  SECTION 3(a)

  
	
  Maximum Voting Percentage

  	
   

  	
  SECTION 4(a)

  
	
  Maximum Voting Power

  	
   

  	
  SECTION 4(a)

  
	
  Non-Constituent Issuer Fundamental Change

  	
   

  	
  SECTION 4(b)(ii)

  
	
  Outstanding Partial Cash Notice

  	
   

  	
  SECTION 5(e)(viii)(C)

  
	
  Parity Securities

  	
   

  	
  SECTION 1(b)(ii)

  
	
  Partial Cash Notice

  	
   

  	
  SECTION 5(e)(viii)(A)

  
	
  Participating Dividends

  	
   

  	
  SECTION 2(b)

  
	
  Participating Liquidation Preference

  	
   

  	
  SECTION 3(a)

  
	
  Preferred Conversion Shares

  	
   

  	
  SECTION 8(a)

  
	
  Preferred Directors

  	
   

  	
  SECTION 4(d)

  

 

37

 

	
  Preferred Stock

  	
   

  	
  Recital

  
	
  Purchased Shares

  	
   

  	
  SECTION 5(f)(iii)

  
	
  Redemption

  	
   

  	
  SECTION 6(c)(v)

  
	
  Redemption Acceptance Notice

  	
   

  	
  SECTION 6(a)(iii)

  
	
  Redemption Fair Market Value

  	
   

  	
  SECTION 6(a)(v)

  
	
  Redemption Price

  	
   

  	
  SECTION 6(a)(i)

  
	
  Redemption Right

  	
   

  	
  SECTION 6(a)(i)

  
	
  Redemption Securities

  	
   

  	
  SECTION 6(a)(iii)

  
	
  Reference Property

  	
   

  	
  SECTION 5(f)(iv)

  
	
  Regular Dividends

  	
   

  	
  SECTION 2(a)

  
	
  Regular Liquidation Preference

  	
   

  	
  SECTION 3(a)

  
	
  Repurchase Price

  	
   

  	
  SECTION 7(a)(i)

  
	
  Rights Trigger

  	
   

  	
  SECTION 5(f)(xii)

  
	
  Senior Redeemable Preferred

  	
   

  	
  SECTION 5(e)(iii)

  
	
  Senior Securities

  	
   

  	
  SECTION 1(b)(iii)

  
	
  Series A Preferred Stock

  	
   

  	
  SECTION 1(a)

  
	
  Transition Time

  	
   

  	
  SECTION 4(d)(vii)

  
	
  Unaffected Shares

  	
   

  	
  SECTION 5(e)(viii)(B)

  

 

SECTION 10.         Miscellaneous.  For purposes of these resolutions, the
following provisions shall apply:

 

(a)           Status of Cancelled
Shares.  Shares of Series A
Preferred Stock which have been converted, redeemed, repurchased or otherwise
acquired by the Company or cancelled shall be retired, not be reissued as such
and, following the filing of any certificate required by the DGCL, have the
status of authorized and unissued shares of Preferred Stock, without
designation as to series until such shares are once more, subject to SECTION 4,
designated as part of a particular series by the Board.

 

(b)           Severability.  If any right, preference or limitation of the
Preferred Stock set forth in this resolution (as such resolution may be amended
from time to time) is invalid, unlawful or incapable of being enforced by
reason of any rule of law or public policy, all other rights, preferences
and limitations set forth in this resolution (as so amended) which can be given
effect without the invalid, unlawful or unenforceable right, preference or
limitation shall, nevertheless, remain in full force and effect, and no right,
preference or limitation herein set forth shall be deemed dependent upon any
other such right, preference or limitation unless so expressed herein.

 

(c)           Headings.  The headings of the various subdivisions
hereof are for convenience of reference only and shall not affect the
interpretation of any of the provisions hereof.

 

(d)           Amendment.  Any provision in this Certificate of
Designation (including, but not limited to, any notice requirements) may be
waived, in whole or in part, amended or otherwise modified by the prior vote or
written consent of holders representing at least a majority of the
then-outstanding shares of Series A Preferred Stock, voting together as a
separate class.

 

[Rest of page intentionally
left blank.]

 

38

 

 

IN WITNESS WHEREOF, the Company has caused this Certificate
of Designation to be executed by a duly authorized officer of the Company as of
May 8, 2009.

 

	
   

  	
  POWER-ONE, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Richard J. Thompson

  
	
   

  	
   

  
	
   

  	
  Name:  Richard J. Thompson

  
	
   

  	
   

  
	
   

  	
  Title:  President and Chief Executive
  Officer

  

 

SERIES A CERTIFICATE OF DESIGNATION

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