POWER ONE INC, S-3/A, 1999-09-10

POWER ONE INC
S-3/A, 1999-09-10
ELECTRONIC COMPONENTS, NEC

Previous: RANDALLS FOOD MARKETS INC, 10-K405, 1999-09-10

Next: AMERICAN SKIING CO /ME, 5, 1999-09-10

<PAGE>

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 10, 1999

REGISTRATION NO. 333-84285

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------

AMENDMENT NO. 1
TO

FORM S-3

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

------------------------------

POWER-ONE, INC.

(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C> <C>
DELAWARE 3679 77-0420182
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification
incorporation or organization) No.)
</TABLE>

740 CALLE PLANO
CAMARILLO, CALIFORNIA 93012
(805) 987-8741

(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)

STEVEN J. GOLDMAN
CHAIRMAN, CHIEF EXECUTIVE OFFICER AND PRESIDENT
POWER-ONE, INC.
740 CALLE PLANO
CAMARILLO, CALIFORNIA 93012
(805) 987-8741

(Name and address, including zip code, and telephone number,
including area code, of agent for service)

------------------------------

COPIES TO:

KENDALL R. BISHOP, ESQ. C. DOUGLAS BUFORD, JR., ESQ.
O'MELVENY & MYERS LLP WRIGHT, LINDSEY & JENNINGS LLP
1999 AVENUE OF THE STARS, SUITE 700 200 WEST CAPITOL AVENUE, SUITE 2200
LOS ANGELES, CALIFORNIA 90067 LITTLE ROCK, ARKANSAS 72201
(310) 246-6780 (501) 212-1239

------------------------------

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.

------------------------------

If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Securities Act"), other than securities offered only in
connection with dividend or interest reinvestment plans, check the following
box. / /

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box, and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /

If delivery of the prospectus is expected to be made pursuant to Rule 434
under the Securities Act, please check the following box. / /

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
PROPOSED MAXIMUM
TITLE OF SHARES AMOUNT TO AGGREGATE OFFERING AMOUNT OF
TO BE REGISTERED BE REGISTERED PRICE(1) REGISTRATION FEE
<S> <C> <C> <C>
Common stock, $0.001 par value................................. 7,475,000 $188,977,344 $52,536*
</TABLE>

* Previously paid.

(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) under the Securities Act.

------------------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>

SUBJECT TO COMPLETION DATED SEPTEMBER 10, 1999

THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION BECOMES EFFECTIVE. THIS PROSPECTUS IS NOT AN
OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING OFFERS TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
6,500,000 SHARES

[LOGO]

Common Stock

This is a public offering of 6,500,000 shares of common stock of Power-One,
Inc. We are selling 4,000,000 shares of common stock being sold in this
offering. We will not receive any proceeds from the sale of the remaining
2,500,000 shares being sold by our stockholders identified in this prospectus.

Our common stock is traded on the Nasdaq National Market under the symbol
"PWER." The last reported sales price on the Nasdaq National Market of our
common stock on September 9, 1999 was $27 3/8.

SEE "RISK FACTORS" BEGINNING ON PAGE 8 FOR A DISCUSSION OF CERTAIN RISKS
THAT PURCHASERS OF OUR COMMON STOCK SHOULD CONSIDER.

---------------------

<TABLE>
<CAPTION>
PER SHARE TOTAL
<S> <C> <C>
Public offering price............................................................ $ $
Underwriting discount and commissions............................................ $ $
Proceeds, before expenses, to Power-One.......................................... $ $
Proceeds to selling stockholders................................................. $ $
</TABLE>

We have granted the underwriters an option for a period of 30 days to
purchase up to 975,000 additional shares of common stock.

The underwriters are severally underwriting the shares being offered. The
underwriters expect to deliver the shares on or about , 1999.

------------------------

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OF ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

STEPHENS INC.

BANCBOSTON ROBERTSON STEPHENS

THOMAS WEISEL PARTNERS LLC

The date of this prospectus is , 1999.
<PAGE>

<TABLE>
<S> <C>
POWERING GROWTH TECHNOLOGIES

OVER 40% OF POWER-ONE'S SALES ARE IN THE HIGH-GROWTH VOICE AND DATA COMMUNICATIONS MARKET
SEGMENTS.

[Picture of Telecommunications Product]

Power-One's leading-edge power conversion
products target customers with advanced
technologies, such as those that provide the
infrastructure for e-commerce.

[Picture of high power-density product used
in data communications]

A HIGH POWER-DENSITY PRODUCT USED IN DATA
COMMUNICATIONS.

POWERING DIVERSIFIED TECHNOLOGIES

POWER-ONE HAS PROVIDED POWER SOLUTIONS TO A DIVERSIFIED CUSTOMER BASE FOR OVER 20 YEARS.

[Pictures of various users and products]

Over 10,000 customers purchase over two
million Power-One products annually.
Customers rank among the Fortune 500 of
high-technology companies producing
industrial, automatic/ semiconductor test,
transportation, medical and other electronic
equipment.

[Picture of Power-One Products]

POWER-ONE MAKES OVER 2,500 PRODUCTS FROM ONE
WATT TO 4,000 WATTS, PROVIDING CUSTOMERS WITH
A ONE-STOP-SHOP POWER SUPPLY VENDOR.
</TABLE>
<PAGE>
TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
<S> <C>
PROSPECTUS SUMMARY......................................................................................... 4

SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA.......................................................... 6

RISK FACTORS............................................................................................... 8

USE OF PROCEEDS............................................................................................ 13

DIVIDEND POLICY............................................................................................ 13

CAPITALIZATION............................................................................................. 14

MARKET PRICES OF COMMON STOCK.............................................................................. 15

SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA......................................................... 16

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND OPERATING RESULTS.......................... 18

BUSINESS................................................................................................... 29

MANAGEMENT................................................................................................. 40

SELLING STOCKHOLDERS....................................................................................... 42

UNDERWRITING............................................................................................... 45

DESCRIPTION OF CAPITAL STOCK............................................................................... 47

LEGAL MATTERS.............................................................................................. 49

EXPERTS.................................................................................................... 49

WHERE YOU CAN FIND MORE INFORMATION........................................................................ 49
</TABLE>

------------------------

AS USED IN THIS PROSPECTUS, REFERENCES TO "WE," "OUR," "US," "POWER-ONE," AND
"THE COMPANY" REFER TO
POWER-ONE, INC. AND ITS CONSOLIDATED SUBSIDIARIES AND NOT TO THE UNDERWRITERS OR
TO THE SELLING STOCKHOLDERS.

3
<PAGE>
PROSPECTUS SUMMARY

THIS SUMMARY HIGHLIGHTS INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS. YOU
SHOULD READ THE ENTIRE PROSPECTUS CAREFULLY, ESPECIALLY THE INFORMATION
DISCUSSED UNDER "RISK FACTORS."

POWER-ONE, INC.

We are a leading designer and manufacturer of more than 2,500 high-quality
brand name power supplies. Our power supplies are designed to meet the power
needs of various subsystems and components within electronic equipment. Power
supplies primarily supply, regulate and distribute electrical power within
electronic equipment. AC/DC power supplies convert alternating current to direct
current, while DC/DC power supplies modify direct current into other levels of
direct current. Power supplies are typically classified as standard, modified
standard or custom. While we manufacture and sell all three product
classifications, we focus on standard and modified standard products. We believe
that as time-to-market is becoming a more important factor for success,
electronics companies increasingly prefer standard and modified standard power
supplies.

We are a merchant manufacturer. As such, we produce power supplies for use
by others, whereas captive manufacturers produce power supplies primarily for
their own use. We sell our products both to original equipment manufacturers, or
OEMs, and distributors who value quality, reliability, technology and service.
We have more than 10,000 customers in the communications, industrial,
automatic/semiconductor test equipment, transportation, medical equipment and
other electronic equipment industries. Our OEM customers include industry
leaders such as Cisco, Nortel, Teradyne, Lucent, Hewlett-Packard, Siemens and
Ericsson. We are also a leading provider of power supplies to domestic
distributors, including Pioneer Standard Electronics, Sterling, Arrow, Kent
Electronics and Future Electronics.

In the last year, we substantially expanded our product offerings, scale and
geographic breadth through two significant acquisitions. Our net sales have
increased from $75.4 million in 1996 to pro forma net sales of $161.6 million in
1998, a compound annual growth rate of 46.4%. We believe that we are one of the
largest power supply companies in the world that specializes in standard and
modified standard power supplies. We also believe that our gross profit margins
are among the highest in the industry. Our gross profit margin has been
approximately 40% during the past three years.

RECENT ACQUISITIONS

In August 1998, we increased our international presence and our portfolio of
products by acquiring Melcher Holding AG, or Melcher, for $53 million, including
debt assumed. Located in Uster, Switzerland, Melcher primarily designs and
manufactures high-reliability DC/DC and AC/DC power supplies which it sells to
leading OEMs throughout Europe and North America, including Ericsson, Daimler-
Chrysler and Siemens. Melcher has manufacturing operations in three European
locations and sales and application engineering offices in six European
countries. By acquiring Melcher, we added approximately 750 products to our
portfolio and gained better access to the $4 billion European power supply
market.

In January 1999, we further broadened our portfolio of DC/DC products by
acquiring International Power Devices, Inc., or IPD. We acquired IPD for $32
million, including capitalized lease obligations and other indebtedness of IPD.
IPD is a leading supplier of high-density DC/DC power supplies, which it sells
primarily in North America. High-density DC/DC power technology is preferred in
applications using high-speed/low-voltage logic, including the fast growing
voice and data communications industries. IPD sells over 90 models of
high-density DC/DC products to leading OEMs, including Cisco, Newbridge Networks
and Nortel. Our acquisition of IPD has given us greater access to the $2.9
billion worldwide merchant market for DC/DC power supplies. It has also made us
a leader in distributed

4
<PAGE>
power architecture, or DPA, which distributes DC/DC power supplies throughout
the electronic infrastructure of the end product. The worldwide market for DC/DC
products and, in particular, DPA products is estimated to grow faster during the
next five years than the overall power supply market.

BUSINESS STRATEGY

We focus on customers in high-end electronics industries who value quality,
reliability, technology and service. Our goal is to be the leading manufacturer
of standard and modified standard power supplies. To accomplish our goal, we
plan to:

- broaden our standard product line;

- expand relationships with key OEMs;

- strengthen our position as a leader in DC/DC power supplies and, in
particular, DPA products;

- pursue acquisitions; and

- maintain strong relationships with distributors.

We were incorporated in Delaware in January 1996 as a successor to a company
formed in 1973. Our principal executive offices are located at 740 Calle Plano,
Camarillo, California 93012, and our telephone number is (805) 987-8741. You can
find our website at www.power-one.com. The information found on our website is
not a part of this prospectus.

THE OFFERING

The following information assumes that the underwriters do not exercise the
option that we granted to them to purchase additional shares in the offering.

<TABLE>
<S> <C>
Common stock offered by us........ 4,000,000 shares

Common stock offered by selling
stockholders.................... 2,500,000 shares

Common stock to be outstanding
after the offering.............. 21,137,851 shares

Use of proceeds................... To repay debt, to pay earn-out consideration to the
former stockholders of IPD and for general corporate
purposes, including possible acquisitions.

Nasdaq National Market symbol..... "PWER"
</TABLE>

5
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND PERCENTAGES)

You should read the following financial information together with the
"Selected Consolidated Financial and Operating Data" and "Management's
Discussion and Analysis of Financial Condition and Operating Results" included
elsewhere in this prospectus.

<TABLE>
<CAPTION>
FISCAL YEARS ENDED DECEMBER 31,(1) SIX MONTHS ENDED JUNE 30,(1)
-------------------------------------------- -----------------------------------------
PRO FORMA PRO FORMA
1996 1997 1998 (2) 1998 (3) 1998 1999 (4) 1999 (5)
--------- --------- --------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS:
Net sales........................ $ 75,434 $ 93,068 $ 102,519 $ 161,567 $ 51,046 $ 81,402 $ 83,631
Gross profit..................... 30,129 37,587 39,073 62,925 21,176 33,128 34,463
Income from operations........... 8,002 14,617 8,102 11,919 8,017 1,098 3,358
Net income (loss)................ 3,396(6) 8,234 5,730 5,797 6,121 (1,538) 638
Net income (loss) attributable to
common stockholders............ $ 1,981 $ 6,720 $ 5,730 $ 5,797 $ 6,121 $ (1,538) $ 638
--------- --------- --------- ----------- ------------- ----------- -------------
--------- --------- --------- ----------- ------------- ----------- -------------
Basic earnings (loss) per common
share.......................... $ 0.20 $ 0.58 $ 0.34 $ 0.34 $ 0.36 $ (0.09) $ 0.04
--------- --------- --------- ----------- ------------- ----------- -------------
--------- --------- --------- ----------- ------------- ----------- -------------
Basic weighted average shares
outstanding.................... 10,000 11,659 17,073 17,073 17,060 17,099 17,099
--------- --------- --------- ----------- ------------- ----------- -------------
--------- --------- --------- ----------- ------------- ----------- -------------
Diluted earnings (loss) per
common share................... $ 0.20 $ 0.56 $ 0.33 $ 0.33 $ 0.35 $ (0.09) $ 0.04
--------- --------- --------- ----------- ------------- ----------- -------------
--------- --------- --------- ----------- ------------- ----------- -------------
Diluted weighted average shares
outstanding.................... 10,153 11,934 17,325 17,325 17,334 17,099 17,524
--------- --------- --------- ----------- ------------- ----------- -------------
--------- --------- --------- ----------- ------------- ----------- -------------
SELECTED OPERATING DATA:
Gross profit margin.............. 39.9% 40.4% 38.1% 38.9% 41.5% 40.7% 41.2%
EBITDA (7)....................... $ 12,215 $ 18,833 $ 14,439 $ 24,480 $ 10,274 $ 11,382 $ 10,399
EBITDA margin.................... 16.2% 20.2% 14.1% 15.2% 20.1% 14.0% 12.4%
Backlog (8)...................... $ 17,298 $ 32,232 $ 25,795 $ 30,411 $ 19,494 $ 62,505 $ 62,505
Cash flows from (used in):
Operating activities........... 4,249 8,481 21,836 14,772 (2,453)
Investing activities........... (3,457) (5,332) (52,954) (6,687) (42,207)
Financing activities........... (2,859) 27,185 9,291 -- 36,950
</TABLE>

<TABLE>
<CAPTION>
JUNE 30, 1999
--------------------------------
PRO FORMA
ACTUAL AS ADJUSTED (9)
--------------- ---------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents..................................................... $ 2,751 $ 60,936
Working capital............................................................... 1,483 105,332
Total assets.................................................................. 197,506 255,691
Total debt.................................................................... 60,942 15,278
Total stockholders' equity.................................................... 101,658 205,507
</TABLE>

(FOOTNOTES ON FOLLOWING PAGE)

6
<PAGE>
(1) Our fiscal year is the 52- or 53-week period ending on the Sunday nearest to
December 31, and our quarters are the 13- and 14-week periods ending on the
Sunday nearest to March 31, June 30, September 30 and December 31. For
clarity of presentation, we have described year-ends presented as if the
year ended on December 31 and quarter-ends presented as if the quarters
ended on March 31, June 30, September 30 and December 31. As such, the years
ended December 31, 1996 through 1998 represent 52-week years and the six
months ended June 30, 1998 and 1999 represent 26-week periods.

(2) On August 31, 1998, we acquired Melcher for a purchase price of $53 million,
including $11.2 million of debt assumed. In addition, we incurred
transaction costs of approximately $1.6 million. We accounted for the
acquisition using the purchase method of accounting. The year ended December
31, 1998 includes a non-recurring expense of $2.3 million, which consists of
an inventory fair market value write-up of $2.9 million related to the
purchase of Melcher, which increased cost of goods sold expense, and a
related income tax benefit of $0.6 million.

(3) This unaudited pro forma financial information combines the consolidated
results of operations as if the acquisitions of Melcher and IPD had occurred
at the beginning of the period presented. The pro forma year ended December
31, 1998 statement of operations data combines Melcher's fiscal year, which
ended on September 30, 1998, with our fiscal year and IPD's fiscal year,
each of which ended on December 31, 1998. Pro forma adjustments include only
the effects of the events directly attributable to the transactions that are
expected to have a continuing impact and that are factually supportable. The
pro forma amounts for the fiscal year ended December 31, 1998 exclude
non-recurring items totaling $6.7 million, which consist of the following:
inventory fair market value write-up of $2.9 million and $0.8 million
related to the purchases of Melcher and IPD, respectively, which increased
cost of goods sold expense; in-process research and development charge of
$3.3 million and write-off of $1.0 million technology and license agreement,
both of which related to the purchase of IPD; and related income tax benefit
of $1.3 million.

(4) On January 29, 1999, we purchased IPD for $32 million, including certain
capitalized lease obligations and other indebtedness of IPD. In addition, we
incurred approximately $1.2 million of transaction costs. We accounted for
the acquisition using the purchase method of accounting. Amounts for the six
months ended June 30, 1999 include non-recurring items totaling $4.4
million, which consist of the following: inventory fair market value
write-up of $0.8 million related to the purchase of IPD, which increased
cost of goods sold expense; in-process research and development charge of
$3.3 million and write-off of $1.0 million technology and license agreement,
both of which related to the purchase of IPD; and related income tax benefit
of $0.7 million.

(5) This unaudited pro forma financial information combines the consolidated
results of operations as if the acquisition of IPD had occurred at the
beginning of the period presented. Pro forma adjustments include only the
effects of the events directly attributable to the transaction that are
expected to have a continuing impact and that are factually supportable. The
pro forma amounts for the six months ended June 30, 1999 exclude
non-recurring items totaling $4.4 million, which consist of the following:
inventory fair market value write-up of $0.8 million related to the purchase
of IPD, which increased cost of goods sold expense; in-process research and
development charge of $3.3 million and write-off of $1.0 million technology
and license agreement, both of which related to the purchase of IPD; and
related income tax benefit of $0.7 million. The pro forma amounts include
non-recurring items totalling $1.0 million, which consist of the following:
$0.4 million of bonuses and $0.8 million of stock compensation paid by IPD
in January, 1999; $0.5 million of professional fees; and related income tax
benefit of $0.7 million.

(6) On January 29, 1996, we converted from a limited liability company to a C
corporation. Had we been a C corporation for the entire 1996 fiscal year,
the effect would have been a $0.5 million increase to provision for income
taxes from $0.4 million to $0.9 million, resulting in a similar decrease in
net income from $3.4 million to $2.9 million. For presentation purposes,
U.S. federal and state income taxes have not been provided on earnings of
our Puerto Rico subsidiary as we do not intend to remit these earnings.

(7) EBITDA, which we calculate as income from operations before depreciation,
amortization and compensation charges for stock option plans, is a
supplemental financial measurement used by us in the evaluation of business
and by many analysts in our industry. However, EBITDA should only be read in
conjunction with all of our financial data summarized above and our
financial statements prepared in accordance with generally accepted
accounting principles and incorporated herein by reference. EBITDA should
not be construed as an alternative either to income from operations (as
determined in accordance with generally accepted accounting principles) as
an indicator of our operating performance or to cash flows from operating
activities (as determined in accordance with generally accepted accounting
principles) as a measure of our liquidity.

(8) Consists of purchase orders on-hand having delivery dates scheduled within
the next six months.

(9) Adjusted to reflect the sale of the 4,000,000 shares of the common stock
being offered by us pursuant to this prospectus at $27.375 per share, and
the application of the estimated net proceeds therefrom. See "Use of
Proceeds."

7
<PAGE>
RISK FACTORS

YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING FACTORS AND OTHER INFORMATION IN
THIS PROSPECTUS BEFORE PURCHASING SHARES OF OUR COMMON STOCK.

OUR BUSINESS IS CYCLICAL.

In recent years, the power supply industry has experienced dramatic shifts
in demand and has become more cyclical. As a result, our quarterly results of
operations have fluctuated in the past and may continue to fluctuate in the
future. These fluctuations have significantly affected our net sales, which has
had a negative effect on our operating results. Any such fluctuations in the
future could have a material adverse effect on our operating results.

IF WE FAIL TO MANAGE OUR GROWTH EFFECTIVELY, WE MAY LOSE BUSINESS AND EXPERIENCE
REDUCED PROFITABILITY.

We have significantly increased our business within a short period of time
through our acquisitions of Melcher and IPD. As a result of these acquisitions,
internal growth and the transfer of production to our Mexico and Dominican
Republic factories, the number of our employees has grown from 1,726 as of June
27, 1998 to 2,941 as of June 27, 1999. If we are to grow successfully, we must:

- train our new employees;

- effectively manage increases in our production levels and transfers of
production;

- attract and retain qualified management and technical personnel;

- improve our operational, administrative and financial systems;

- implement our Oracle Enterprise Resource Planning, or ERP, system in our
operations; and

- manage multiple relationships with various customers and suppliers.

We may not be able to accomplish any of these requirements, and our failure
to do so would have a material adverse effect on our operating results. In
addition, our inability to manage our growth could lead to delayed shipment and
cancellation of customer orders.

IMPLEMENTATION OF THE ORACLE ERP SYSTEM HAS CAUSED AND MAY CONTINUE TO CAUSE
OPERATIONAL INEFFICIENCIES DURING THE CONVERSION PROCESS.

We are in the process of converting our business software to the new Oracle
ERP system. The conversion process is complicated and requires, among other
things, that data from our existing computer system be made Oracle-compatible
and that our employees be trained for the Oracle ERP system. As a result of
switching to Oracle at our California and Mexico plants, we experienced delays
in the ordering of materials, inventory-tracking problems and other
inefficiencies that delayed and may cause additional delays of shipments of
products to customers. Resolution of those problems in some cases required
manual data entry and processing, which increased manpower needs and reduced our
efficiency. Implementation of Oracle at our other manufacturing locations may
encounter similar or other difficulties. Delays in shipping products to
customers may lead to customer dissatisfaction and result in cancellations of
orders, which could have a material adverse effect on our operating results.

CANCELLATIONS, REDUCTIONS OR DELAYS IN PURCHASES COULD CAUSE OUR QUARTERLY
RESULTS TO FLUCTUATE.

We do not obtain long-term purchase orders or commitments from our
customers, and customers may cancel, reduce or postpone orders without penalty.
Cancellations, reductions or delays in orders could substantially reduce our
backlog and adversely affect our net sales, gross profit and operating results,
especially if we are unable to replace such orders. Our expense levels are
based, in part, on expected future revenues and are relatively fixed once set.
Therefore, fluctuations in sales (particularly

8
<PAGE>
if customers cancel, postpone or delay sales or sales fail to meet our
expectations) may adversely impact our operating results. Fluctuations in sales
and customer needs may also affect our mix of products and volume of orders,
which in turn affect our gross margin and operating results. High-volume orders,
especially custom orders, if cancelled, may substantially increase the risk of
inventory obsolescence, write-offs due to excess manufacturing capacity and
collection problems. These factors have caused our quarterly results to
fluctuate in the past and may continue to do so in the future, which could have
a material adverse effect on our operating results.

WE RELY ON A FEW MAJOR CUSTOMERS FOR A SIGNIFICANT PORTION OF OUR BUSINESS.

A few customers account for a significant portion of our net sales each
year. During the first six months of 1999, our top three customers accounted for
approximately 20% of our net sales. If we lose one of these customers, or if one
of them reduces or cancels a significant order, our net income and operating
results could decrease significantly.

FAILURE TO ANTICIPATE TRENDS IN THE ELECTRONIC EQUIPMENT INDUSTRY AND PRICE
EROSION MAY ADVERSELY AFFECT OUR BUSINESS.

Because we have many customers in the electronic equipment industry, the
factors and economic trends that affect these companies also affect our
business. Companies in the electronic equipment industry must continuously
develop new products to respond to rapid changes in technology. In addition,
because consumer demand for electronic equipment fluctuates frequently and the
industry is highly competitive, these companies must continuously develop and
produce higher-performance products at lower prices. To respond to the needs of
our customers in the electronic equipment industry, we must also continuously
develop new and more advanced products at lower prices. Our inability to
properly assess developments in the electronic equipment industry or to
anticipate the needs of our customers could cause us to lose some or all of
these customers and prevent us from obtaining new customers. Moreover, the power
supply industry has experienced significant price erosion in order to meet the
electronic equipment industry's demand for lower costs. Future downward pressure
on prices could have a material adverse effect on our operating results.

WE MAY ENCOUNTER PROBLEMS IN INTEGRATING THE OPERATIONS OF COMPANIES THAT WE
ACQUIRE.

To implement our strategy of growing through acquisitions, we need to:

- retain key management members and technical personnel of an acquired
company;

- successfully merge corporate cultures and business processes;

- realize sales and cost reduction synergies; and

- possibly operate in areas of the world in which we have little or no prior
experience.

In addition, after we have completed an acquisition, our management must be
able to assume significantly greater responsibilities, and this in turn may
cause them to divert their attention from our existing operations. We acquired
Melcher in August of 1998 and IPD in January of 1999. We are in the process of
transferring production to our Mexico and Dominican Republic facilities. We
expect to begin installing our Oracle ERP system in IPD's and Melcher's
operations in the middle of next year. If we are unable to completely integrate
Melcher's and IPD's businesses and operations into our business, including the
completion of planned transfers of production to our Dominican Republic and
Mexico facilities and implementation of our Oracle ERP system at Melcher and
IPD, our results of operations and financial condition would be adversely
affected.

9
<PAGE>
MUCH OF OUR BUSINESS IS SUBJECT TO RISKS ASSOCIATED WITH OPERATIONS IN FOREIGN
COUNTRIES.

Many of our operations are located outside of the U.S. and, consequently,
are vulnerable to:

- imposition of tariffs, quotas, taxes and other market barriers;

- restrictions on the export or import of technology;

- political and economic instability and work stoppages;

- difficulties in staffing and managing international operations; and

- fluctuations in the value of the U.S. dollar relative to foreign
currencies.

Historically, we have not hedged against any currency exchange rate risks.
The occurrence of any of these factors may adversely affect our operating
results.

WE MAY NOT BE ABLE TO GROW BY ACQUIRING OTHER COMPANIES.

We will not be able to acquire other companies if we cannot negotiate
acceptable terms or, if necessary, obtain acceptable financing. We may have to
incur debt to acquire other companies. If our cash flow and existing working
capital are not sufficient to fund our general working capital requirements and
debt service needs, we will have to raise additional funds by selling equity,
refinancing some or all of our existing debt or selling assets or subsidiaries.
None of these alternatives to raise additional funds may be available on
acceptable terms to us or in amounts sufficient for us to meet our requirements.

OUR SUCCESS DEPENDS ON OUR ABILITY TO RETAIN OUR SENIOR MANAGEMENT AND TO
ATTRACT AND RETAIN KEY TECHNICAL PERSONNEL.

If we lose one or more members of our senior management, our business and
financial results could be adversely affected. Our capacity to develop and
implement new technologies depends on our ability to employ personnel with
highly technical skills. Competition for such qualified technical personnel is
intense due to the relatively limited number of power supply engineers
worldwide. If we cannot attract and retain qualified management or highly
technical personnel, our business will be adversely affected.

WE MAY NOT BE ABLE TO COMPETE WITH COMPETITORS WHO ARE SIGNIFICANTLY LARGER AND
MAY HAVE SUBSTANTIALLY LOWER MATERIALS COSTS.

The merchant power supply manufacturing industry is characterized by intense
competition. We believe that the principal bases of competition in our targeted
markets are breadth of product line, quality, reliability, technical knowledge,
flexibility, readily available products and a competitive price. In times of an
economic downturn, or when dealing with high volume orders, we believe that
price becomes a more important competitive factor. Moreover, we believe price
will become a more important competitive factor in the future as the power
supply industry consolidates, OEMs become larger and more entrants from Asia
begin to compete with us. Many of our competitors are larger than us, and they
may be able to obtain materials at significantly lower prices. Depending on the
location of our plants, we may not be able to procure materials at costs as low
as the materials costs of some of our competitors. This may have a material
adverse effect on our operating results.

10
<PAGE>
WE WILL BE REQUIRED TO PAY SUBSTANTIAL UNITED STATES INCOME TAX IF WE REPATRIATE
EARNINGS FROM OUR PUERTO RICO OPERATIONS.

We do not pay U.S. federal or state income taxes on earnings from our Puerto
Rico operations as long as we do not repatriate the earnings. As of June 30,
1999, our Puerto Rico subsidiary had accumulated unremitted earnings of
approximately $11.3 million. If we decide to bring these funds into the U.S., we
will have to pay U.S. taxes on them at the normal rates. The resulting increase
in income tax expense would decrease our net income.

OUR INABILITY TO PROTECT OUR INTELLECTUAL PROPERTY COULD SERIOUSLY DAMAGE OUR
BUSINESS.

We rely upon a combination of patents, trademarks and trade secret laws to
protect our proprietary rights in certain of our products. Our competitors may,
however, misappropriate our technology or independently develop technologies
that are as good as or better than ours. Additionally, the laws of some foreign
countries do not protect our proprietary rights as much as U.S. laws. We
currently have several patents and may apply for additional patents, but the
U.S. Patent and Trademark Office may reject some or all of our patent
applications. The patents that the U.S. government issues to us may not provide
us with a competitive advantage or create a sufficiently broad claim to protect
the technology that we develop. Furthermore, our competitors may challenge or
circumvent our patents, and some of our patents may be invalidated. If we have
to initiate or defend against a patent infringement claim in the future to
protect our proprietary rights, the litigation over such claims could be
time-consuming and costly to us, adversely affecting our financial condition.

STEPHENS GROUP, INC. MAY BE ABLE TO CONTROL OUR MANAGEMENT, OPERATIONS AND
AFFAIRS.

Stephens Group, Inc., and certain of its affiliates have contributed their
shares of our common stock to a voting trust, which owns approximately 39.5% of
our outstanding common stock (24.7% after this offering). The voting trust must
vote the shares "for" or "against" proposals submitted to our stockholders in
the same proportion as votes cast "for" and "against" such shares by all other
stockholders. As long as these shares are held in the voting trust, Stephens
Group, Inc. cannot control our business. If Stephens Group, Inc., however,
decides to terminate the voting trust agreement, which it can do at its sole
option, Stephens Group, Inc. could, depending on the number of shares voted on a
particular matter, effectively be able to elect our entire Board of Directors,
approve any action requiring stockholder approval (except as provided by law)
and control our management, operations and affairs. If Stephens Group, Inc.
terminates the voting trust, Stephens Inc. would no longer be able to make a
market in our common stock.

SYSTEMS FAILURES DUE TO HARDWARE OR SOFTWARE FAILURES OR THE YEAR 2000 PROBLEM
COULD ADVERSELY AFFECT OUR BUSINESS.

Many existing computer systems and software programs are coded to accept two
digit entries rather than four digits to define the applicable year. These
systems may, for example, recognize the year "00" as 1900 instead of 2000. If
the problem is not corrected, many systems and computer applications could fail
or create erroneous results. Our Oracle ERP system, which is Year 2000
compliant, is partially operational in our California and Mexico facilities. We
may experience difficulties completing implementation in California or Mexico or
in installing it in our remaining operations. If we do, it could adversely
affect our business and our operating results. We may experience unforeseen
problems with some of our suppliers and customers whose computer systems are not
Year 2000 compliant, and these problems could adversely affect our operations.
Melcher has not yet finished assessing its products or computer systems or the
effect that problems with its suppliers' systems may have on its operations. At
this point, Melcher expects to finish its Year 2000 remediation and testing
efforts by the end of the third quarter of 1999, but Melcher may experience
delays, which could adversely affect Melcher's results of operations.

11
<PAGE>
OUR BUSINESS IS SUBJECT TO CERTAIN ENVIRONMENTAL RISKS.

We are subject to federal, state, local and foreign environmental laws and
regulations that govern the handling, transportation and discharge of materials
into the air, water and soil. If environmental laws become more stringent over
time, or existing laws are more stringently enforced, we could incur greater
compliance costs and be subject to increased risks and penalties for violations.
We could be held liable for significant damages for violating environmental laws
and could lose certain licenses or permits, which in turn could adversely affect
our financial results.

OUR CHARTER CONTAINS PROVISIONS THAT MAY HINDER OR PREVENT A CHANGE IN CONTROL
OF OUR COMPANY.

Certain provisions of our Certificate of Incorporation could make it more
difficult for a third party to acquire control of us, even if such a change in
control would benefit our stockholders. We have a staggered Board of Directors,
which means that our stockholders can only elect approximately one-third of the
board at each annual meeting of stockholders. Stockholders must inform our
corporate secretary before a stockholders' meeting of any business they wish to
discuss and any directors they wish to nominate. Our Certificate of
Incorporation also requires approval of 75% of our voting stock to amend certain
provisions. Finally, our Board of Directors can issue preferred stock without
stockholder approval. Your rights could be adversely affected by the rights of
holders of preferred stock that we issue in the future. Any one of the
provisions discussed above could discourage third parties from taking over
control of the Company. Such provisions may also impede a transaction in which
you could receive a premium over then current market prices and your ability to
approve transactions that you consider in your best interests.

THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS.

This prospectus contains statements which, to the extent that they do not
recite historical fact, constitute "forward-looking statements" within the
meaning of Section 27A of the Securities Act and Section 21E of the Securities
Exchange Act of 1934. The words "believe," "expect," "estimate," "may," "will,"
"could," "plan" or "continue" and similar expressions are intended to identify
forward-looking statements. Such forward-looking information involves important
risks and uncertainties that could materially alter results in the future from
those expressed in any forward-looking statements made by, or on behalf of, us.
These risks and uncertainties include, but are not limited to, our ability to:

- manage our growth;

- maintain existing and form new relationships with customers;

- successfully integrate the businesses of companies that we acquire,
including Melcher and IPD; and

- complete implementation of our Oracle ERP system.

Other risks and uncertainties include uncertainties relating to general
domestic and international economic conditions including interest rate and
currency exchange rate fluctuations, electronics industry market conditions and
growth rates, acquisitions, the cyclical nature of our business, government and
regulatory policies, technological developments and changes in the competitive
environment in which we operate. We caution you that such forward-looking
statements are only predictions and that actual events or results may differ
materially. In evaluating such statements, you should specifically consider the
various factors which could cause actual events or results to differ materially
from those indicated by such forward-looking statements, including the factors
that we discuss in this section.

12
<PAGE>
USE OF PROCEEDS

We estimate that our net proceeds (after we pay the underwriters and our
expenses) from the sale of the 4,000,000 shares that we are selling will be
$103.8 million ($129.3 million if the underwriters exercise their option to
acquire additional shares). We expect to use the net proceeds from sales of our
common stock to repay all of the $45.5 million of indebtedness outstanding under
our credit agreement with Bank of America, N.A. and approximately $0.2 million
of other debt. At June 30, 1999, our interest rate on the debt that we are
repaying was 7.26% per annum. We incurred approximately $28.3 million of this
debt to acquire IPD, $1.2 million to pay transaction costs, $4.3 million to
acquire IPD's facility and the remainder for working capital purposes. In
addition, we may use up to $13.0 million of the net proceeds to pay earn-out
consideration to the former stockholders of IPD if IPD achieves the performance
objectives set forth in the IPD acquisition agreement. We expect to use the
remaining net proceeds for general corporate purposes, including acquisitions,
additions to working capital and capital expenditures. We do not have any
agreements or understandings with respect to an acquisition. We may invest the
net proceeds not required immediately in short-term marketable securities.

We will not receive any of the proceeds from sales of common stock by our
selling stockholders.

DIVIDEND POLICY

We have not declared or paid any cash dividends on our capital stock since
we became a public company in 1997. We currently intend to retain future
earnings, if any, to operate and expand our business and do not anticipate
paying any cash dividends in the foreseeable future. In addition, our credit
agreement prohibits us from paying cash dividends without obtaining prior
approval from our lender.

13
<PAGE>
CAPITALIZATION

The following table sets forth our capitalization as of June 30, 1999 and on
a pro forma as adjusted basis, giving effect to our sale of the common stock in
this offering at an assumed offering price of $27.375 per share and the
application of the net proceeds as described under "Use of Proceeds."

<TABLE>
<CAPTION>
JUNE 30, 1999
-----------------------
PRO FORMA
ACTUAL AS ADJUSTED
---------- -----------
(IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents................................................................ $ 2,751 $ 60,936
---------- -----------
---------- -----------
Debt:
Notes payable to banks................................................................. $ 49,917 $ 4,253(1)
Current portion of long-term debt...................................................... 3,376 3,376(1)
Long-term debt, less current portion................................................... 5,466 5,466(1)
Capitalized leases..................................................................... 2,183 2,183
---------- -----------
Total debt........................................................................... 60,942 15,278
---------- -----------

Stockholders' equity:
Common stock, $.001 par value per share, 60,000,000 shares authorized; 17,103,257
shares issued and 21,103,257 shares issued as adjusted (2)........................... 17 21
Additional capital....................................................................... 92,409 196,254
Accumulated other comprehensive income (loss)............................................ (2,930) (2,930)
Retained earnings........................................................................ 12,162 12,162
---------- -----------
Total stockholders' equity........................................................... 101,658 205,507
---------- -----------
Total capitalization..................................................................... $ 162,600 $ 220,785
---------- -----------
---------- -----------
</TABLE>

- ------------------------

(1) All of our remaining debt will have an average interest rate of 4.1% per
annum.

(2) Excludes 1,762,465 shares issuable upon the exercise of outstanding stock
options at a weighted average exercise price of $7.02 per share and
1,656,180 additional shares reserved for issuance under our Amended and
Restated 1996 Stock Incentive Plan and 2,988,000 additional shares reserved
for issuance under our Employee Stock Purchase Plan.

14
<PAGE>
MARKET PRICES OF COMMON STOCK

Since the initial public offering of our common stock at $14.00 per share,
effective September 30, 1997, our common stock has been listed on the Nasdaq
National Market under the symbol "PWER." At August 31, 1999, we had 105 record
holders of our common stock. The last reported sales price of our common stock
is shown on the cover page of this prospectus. The following table sets forth
the high and low sales price per share as reported on the Nasdaq National Market
for the periods indicated.

<TABLE>
<CAPTION>
PRICE RANGE
----------------
HIGH LOW
------- -------
<S> <C> <C>
1997
Fourth Quarter................................................................ $19 5/8 $13 7/8

1998
First Quarter................................................................. $16 3/4 $13
Second Quarter................................................................ 17 7 3/4
Third Quarter................................................................. 10 6 7/16
Fourth Quarter................................................................ 7 1/2 5 1/2

1999
First Quarter................................................................. $12 1/4 $ 6 1/4
Second Quarter................................................................ 19 1/2 6 1/2
Third Quarter (through September 9, 1999)..................................... 34 19 1/4
</TABLE>

15
<PAGE>
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND PERCENTAGES)

In the table below, we provide you with selected consolidated historical
financial and operating data. We have prepared this information using financial
statements for the fiscal years ended December 31, 1996, 1997 and 1998 and the
six-month periods ended June 30, 1998 and 1999. The financial statements for
1996, 1997 and 1998 have been audited by Deloitte & Touche LLP, independent
auditors. The financial statements for the six-month periods ended June 30, 1998
and 1999 have not been audited. We have prepared this unaudited information on
substantially the same basis as the audited financial statements and included
all adjustments, consisting only of normal recurring adjustments, that we
consider necessary for a fair presentation of the financial position and results
of operations for the period. When you read this selected historical financial
and operating data, it is important that you read along with it the section
titled "Management's Discussion and Analysis of Financial Condition and
Operating Results" included elsewhere in this prospectus and the historical
financial statements and related notes incorporated by reference into this
prospectus. Historical results are not necessarily indicative of future results.

Selling expense......................... 7,537 8,199 11,771 17,877 4,994 10,244 10,487
General and administrative expense...... 6,486 6,778 8,311 12,643 3,567 7,083 9,538
Engineering expense..................... 4,215 3,937 6,257 12,117 2,399 6,210 6,679
Quality assurance expense............... 1,886 2,027 2,007 2,688 1,185 1,633 1,687
Amortization of intangibles............. 2,003 2,029 2,625 5,681 1,014 3,560 2,714
In-process research and development..... -- -- -- -- -- 3,300 --
--------- --------- --------- ----------- ----------- ----------- -----------
Total expense......................... 22,127 22,970 30,971 51,006 13,159 32,030 31,105

Income from operations.................. 8,002 14,617 8,102 11,919 8,017 1,098 3,358
Interest income......................... 28 358 1,387 148 915 37 37
Interest expense........................ (4,222) (3,181) (806) (4,275) (185) (1,710) (1,909)
Other income (expense).................. (16) (18) (627) 64 155 276 (246)
--------- --------- --------- ----------- ----------- ----------- -----------
Income (loss) before income taxes....... 3,792 11,776 8,056 7,856 8,902 (299) 1,240
Income taxes............................ 396(6) 3,542 2,326 2,059 2,781 1,239 602
--------- --------- --------- ----------- ----------- ----------- -----------
Net income (loss)....................... 3,396(6) 8,234 5,730 5,797 6,121 (1,538) 638

Less: preferred stock accretion and
dividends............................. 1,415 1,514 -- -- -- -- --
--------- --------- --------- ----------- ----------- ----------- -----------
Net income (loss) attributable to common
stockholders.......................... $ 1,981 $ 6,720 $ 5,730 $ 5,797 $ 6,121 $ (1,538) $ 638
--------- --------- --------- ----------- ----------- ----------- -----------
--------- --------- --------- ----------- ----------- ----------- -----------
Basic earnings (loss) per common
share................................. $ 0.20 $ 0.58 $ 0.34 $ 0.34 $ 0.36 $ (0.09) $ 0.04
--------- --------- --------- ----------- ----------- ----------- -----------
--------- --------- --------- ----------- ----------- ----------- -----------
Basic weighted average shares
outstanding........................... 10,000 11,659 17,073 17,073 17,060 17,099 17,099
--------- --------- --------- ----------- ----------- ----------- -----------
--------- --------- --------- ----------- ----------- ----------- -----------
Diluted earnings (loss) per common
share................................. $ 0.20 $ 0.56 $ 0.33 $ 0.33 $ 0.35 $ (0.09) $ 0.04
--------- --------- --------- ----------- ----------- ----------- -----------
--------- --------- --------- ----------- ----------- ----------- -----------
Diluted weighted average shares
outstanding........................... 10,153 11,934 17,325 17,325 17,334 17,099 17,524
--------- --------- --------- ----------- ----------- ----------- -----------
--------- --------- --------- ----------- ----------- ----------- -----------
SELECTED OPERATING DATA:
Gross profit margin..................... 39.9% 40.4% 38.1% 38.9% 41.5% 40.7% 41.2%
EBITDA (7).............................. $ 12,215 $ 18,833 $ 14,439 $ 24,480 $ 10,274 $ 11,382 $ 10,399
EBITDA margin........................... 16.2% 20.2% 14.1% 15.2% 20.1% 14.0% 12.4%
Depreciation & amortization............. $ 4,213 $ 4,216 $ 6,337 $ 12,561 $ 2,257 $ 6,984 $ 6,260
Capital expenditures.................... 2,903 5,185 11,569 13,514 6,791 12,301 12,346
Backlog (8)............................. 17,298 32,232 25,795 30,411 19,494 62,505 62,505
Cash flows from (used in):
Operating activities.................. 4,249 8,481 21,836 14,772 (2,453)
Investing activities.................. (3,457) (5,332) (52,954) (6,687) (42,207)
Financing activities.................. (2,859) 27,185 9,291 -- 36,950
</TABLE>

16
<PAGE>

<TABLE>
<CAPTION>
JUNE 30, 1999
--------------------------------
PRO FORMA AS
ACTUAL ADJUSTED (9)
--------------- ---------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents........................................................... $ 2,751 $ 60,936
Working capital..................................................................... 1,483 105,332
Total assets........................................................................ 197,506 255,691
Total debt.......................................................................... 60,942 15,278
Total stockholders' equity.......................................................... 101,658 205,507
</TABLE>

- ------------------------------

(1) Our fiscal year is the 52- or 53-week period ending on the Sunday nearest to
December 31, and our quarters are the 13- and 14-week periods ending on the
Sunday nearest to March 31, June 30, September 30 and December 31. For
clarity of presentation, we have described year-ends presented as if the
year ended on December 31 and quarter-ends presented as if the quarters
ended on March 31, June 30, September 30 and December 31. As such, the years
ended December 31, 1996 through 1998 represent 52-week years and the six
months ended June 30, 1998 and 1999 represent 26-week periods.

(5) This unaudited pro forma financial information combines the consolidated
results of operations as if the acquisition of IPD had occurred at the
beginning of the period presented. Pro forma adjustments include only the
effects of the events directly attributable to the transaction that are
expected to have a continuing impact and that are factually supportable. The
pro forma amounts for the six months ended June 30, 1999 exclude
non-recurring items totaling $4.4 million, which consist of the following:
inventory fair market value write-up of $0.8 million related to the purchase
of IPD, which increased cost of goods sold expense; in-process research and
development charge of $3.3 million and write-off of $1.0 million technology
and license agreement, both of which related to the purchase of IPD and
related income tax benefit of $0.7 million. The pro forma amounts include
non-recurring items totalling $1.0 million, which consist of the following:
$0.4 million of bonuses; $0.8 million of stock compensation paid by IPD in
January, 1999; $0.5 million of professional fees; and related income tax
benefit of $0.7 million.

(8) Consists of purchase orders on-hand having delivery dates scheduled within
the next six months.

17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND OPERATING RESULTS

YOU SHOULD READ THE FOLLOWING DISCUSSION IN CONJUNCTION WITH OUR FINANCIAL
STATEMENTS AND THE RELATED NOTES AND THE OTHER FINANCIAL INFORMATION
INCORPORATED BY REFERENCE INTO THIS PROSPECTUS. IN ADDITION TO HISTORICAL
INFORMATION, THE FOLLOWING DISCUSSION AND OTHER PARTS OF THIS PROSPECTUS CONTAIN
FORWARD-LOOKING INFORMATION THAT INVOLVES RISKS AND UNCERTAINTIES. OUR ACTUAL
RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED BY FORWARD-LOOKING
INFORMATION DUE TO FACTORS DISCUSSED UNDER "RISK FACTORS," "BUSINESS" AND
ELSEWHERE IN THIS PROSPECTUS.

GENERAL

We are a leading designer and manufacturer of more than 2,500 high-quality
brand name power supplies. We sell our products both to OEMs and distributors
who value quality, reliability, technology and service. We have more than 10,000
customers in the communications, industrial, automatic/semiconductor test
equipment, transportation, medical equipment and other electronic equipment
industries.

We were founded in 1973 as a manufacturer of AC/DC power supplies and until
1981 operated solely from our Southern California facility. During the 1980s, we
established additional operations in Puerto Rico and Mexico to take advantage of
certain labor, manufacturing and, in Puerto Rico, tax efficiencies. Between 1994
and 1996, we moved most of our Puerto Rico manufacturing operations to the
Dominican Republic to capitalize on certain labor benefits. In September 1995,
Stephens Group, Inc., an affiliate of Stephens Inc., and our management
purchased Power-One from its previous owners and formulated a more aggressive
growth strategy, which included a plan to grow through acquisitions.

In August 1998, we increased our international presence and our product
offerings by acquiring Melcher for $53 million, including debt assumed. In
January 1999, we further broadened our DC/DC product offerings by acquiring IPD
for $32 million, including certain capitalized lease obligations and other
indebtedness of IPD.

All references herein to Power-One and to operating data for the year ended
December 31, 1998, include four months of Melcher's operations. For the six
months ended June 30, 1999, financial results are consolidated to include both
Melcher and, for five months, IPD.

18
<PAGE>
The following table sets forth, for the periods indicated, certain
Consolidated Statements of Operations data as a percentage of net sales for the
periods presented:

<TABLE>
<CAPTION>
FISCAL YEARS ENDED DECEMBER 31, SIX MONTHS
ENDED JUNE 30,
------------------------------- --------------------
1996 1997 1998 1998 1999
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net sales.................................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of goods sold........................................... 60.1 59.6 61.9 58.5 59.3
--------- --------- --------- --------- ---------
Gross profit................................................. 39.9 40.4 38.1 41.5 40.7
Selling expense.............................................. 10.0 8.8 11.5 9.8 12.6
General and administrative expense........................... 8.6 7.3 8.1 7.0 8.7
Engineering expense.......................................... 5.6 4.2 6.1 4.7 7.6
Quality assurance expense.................................... 2.5 2.2 1.9 2.3 2.0
Amortization of intangibles.................................. 2.6 2.2 2.6 2.0 4.4
In-process research and development.......................... 0.0 0.0 0.0 0.0 4.1
--------- --------- --------- --------- ---------
Income from operations....................................... 10.6 15.7 7.9 15.7 1.3
Interest expense............................................. (5.6) (3.4) (0.8) (0.4) (2.1)
Other, net................................................... 0.0 0.4 0.8 2.1 0.4
--------- --------- --------- --------- ---------
Income (loss) before income taxes............................ 5.0 12.7 7.9 17.4 (0.4)
Income taxes................................................. 0.5 3.8 2.3 5.4 1.5
--------- --------- --------- --------- ---------
Net income (loss)............................................ 4.5 8.8 5.6 12.0 (1.9)
Preferred stock accretion and dividends...................... 1.9 1.6 0.0 0.0 0.0
--------- --------- --------- --------- ---------
Net income (loss) to common shareholders..................... 2.6% 7.2% 5.6% 12.0% (1.9%)
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>

SIX MONTHS ENDED JUNE 30, 1999 AND JUNE 30, 1998.

NET SALES. Our net sales increased $30.4 million, or 59.5%, to $81.4
million for the six months ended June 30, 1999 from $51.0 million for the same
period last year. Included in net sales for the first half of 1999 are $22.1
million contributed by Melcher and $18.4 million contributed by IPD since the
date of acquisition. The principal contributors to the $30.4 million increase in
net sales were DC/DC power supplies, which contributed $35.7 million, low-range
power supplies, which contributed $5.9 million, and custom power supplies, which
contributed $2.8 million. These increases were offset by declines in our
high-range power supply line of $9.8 million, linear power supplies of $3.4
million and all other product lines of $0.8 million, net. Excluding Melcher and
IPD, our net sales decreased $10.2 million, or 20.0%, to $40.8 million in the
first half of 1999 from $51.0 million for the comparable period in 1998. This
decrease was primarily due to general weak demand for our high-range and linear
power supplies in the first four months of 1999.

Sales to OEMs in the first six months of 1999 were $60.7 million, or 74.5%
of net sales, up from $29.2 million, or 57.1% of net sales, over the comparable
period in 1998. Sales to Cisco, one of our primary OEM customers, represented
10.9% of net sales. Cisco was the only customer that exceeded 10% of net sales
in the first six months of 1999. Sales in the first six months of 1999 through
distributors were $20.7 million, or 25.5% of net sales, down $1.2 million from
$21.9 million, or 42.9% of net sales, in the same period last year. The lower
percentage of net sales through distributors in the first six months of 1999 is
primarily due to the change in the mix of our customer base, since most of
Melcher's and IPD's customers are OEMs.

Our recent acquisition of IPD has significantly broadened our customer base
by increasing sales to key OEMs and adding new OEMs in the communications
market.

19
<PAGE>
Sales by markets for the six months ended June 30, 1998 and June 30, 1999
were:

<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30,
-------------
1998 1999
----- -----
<S> <C> <C>
Communications.................................................................. 13% 42%
Industrial...................................................................... 23% 19%
Transportation.................................................................. 0% 8%
Automatic/Semiconductor test equipment.......................................... 27% 8%
Medical equipment............................................................... 15% 8%
Computer, Retail and Other...................................................... 22% 15%
--- ---
Total......................................................................... 100% 100%
--- ---
--- ---
</TABLE>

The changes in our percentage distribution of sales for
automatic/semiconductor test equipment, communications, and transportation
markets are primarily due to the downturn in the automatic/semiconductor test
equipment market and a larger concentration of sales in the communications and
transportation markets by IPD and Melcher, respectively.

During the first six months of 1999, demand for our products increased
significantly. Our combined backlog on June 30, 1999 was $62.5 million, an
increase of 142.3% compared to backlog of $25.8 million on December 31, 1998.
Pro forma backlog, which assumes IPD's backlog was in place at December 31,
1998, increased 105.5% at the end of June 1999 as compared to year-end 1998. For
comparison, our backlog on June 30, 1998 was $19.5 million. For the quarter
ended June 30, 1999 we achieved record bookings of $69.3 million, with much of
this growth coming from strong demand in the communications market, as well as
increased demand for our high-power product line, which are typically sold to
the automatic/semiconductor test equipment market.

GROSS PROFIT. Gross profit increased $12.0 million, or 56.4%, to $33.1
million for the six months ended June 30, 1999 from $21.2 million for the six
months ended June 30, 1998. As a percent of net sales, our gross profit margin
decreased to 40.7% for the first half of 1999 from 41.5% for the same period in
1998. The decline in gross profit margin primarily resulted from the inventory
write-up related purchase accounting adjustments due to the IPD acquisition.
Excluding the non-recurring IPD purchase related adjustments, gross profit
margin would have been 41.6% for the first six months of 1999.

SELLING EXPENSE. Selling expense increased $5.2 million, or 105.1%, to
$10.2 million for the six months ended June 30, 1999 from $5.0 million for the
comparable period in 1998. As a percent of net sales, selling expense increased
to 12.6% for the first half of 1999 from 9.8% for the same period last year. The
increase of $5.2 million in the first half of 1999 was primarily due to
Melcher's and IPD's selling expense of $3.9 million and $1.4 million,
respectively. Excluding Melcher and IPD, Power-One's core selling expense
remained unchanged at $5.0 million in the first half of 1999 as compared to the
prior year. The increase in selling expense as a percentage of net sales is
primarily due to Melcher, which has higher selling expenses than Power-One and
IPD as a percentage of net sales.

GENERAL AND ADMINISTRATIVE EXPENSE. General and administrative expense
increased $3.5 million, or 98.6%, to $7.1 million for the six months ended June
30, 1999 from $3.6 million for the six months ended June 30, 1998. As a percent
of net sales, general and administrative expense increased to 8.7% for the first
half of 1999 from 7.0% for the comparable period in 1998. The increase of $3.5
million was primarily attributable to Melcher's and IPD's general and
administrative expenses of $1.3 million and $1.0 million, respectively, as well
as an increase of $1.2 million in our core general and administrative expense.
The increase in our core general and administrative expense was primarily due to
higher

20
<PAGE>
employee costs related to an increase in employee performance bonuses, higher
professional fees, and increased depreciation expense primarily related to the
Oracle ERP project.

ENGINEERING EXPENSE. Engineering expense increased $3.8 million, or 158.9%,
to $6.2 million for the six months ended June 30, 1999 from $2.4 million for the
six months ended June 30, 1998. As a percent of net sales, engineering expense
increased to 7.6% for the first half of 1999 from 4.7% for the comparable period
in 1998. The increase of $3.8 million was primarily due to Melcher's and IPD's
engineering expense of $2.4 million and $1.3 million, respectively.

QUALITY ASSURANCE EXPENSE. Quality assurance expense increased $448,000, or
37.8%, to $1.6 million for the six months ended June 30, 1999 from $1.2 million
for the six months ended June 30, 1998. As a percent of net sales, quality
assurance expense decreased to 2.0% for the first half of 1999 from 2.3% for the
comparable period in 1998. The increase of $448,000 was primarily due to higher
quality assurance expense related to Melcher and IPD.

AMORTIZATION EXPENSE. Amortization of intangibles increased $2.5 million,
or 251.1%, to $3.6 million for the six months ended June 30, 1999 from $1.0
million for the same period in 1998. The majority of the increase is
attributable to a $1.0 million charge taken to write-off the unamortized balance
of the intangible asset value of a technology and license agreement related to
substantially similar product technology acquired as a result of the IPD
acquisition. The balance of the increase is due to five months of amortization
of the intangibles initially recorded upon the acquisition of IPD on January 29,
1999 totaling approximately $768,000, as well as $836,000 of amortization of
intangibles related to the Melcher acquisition.

IN-PROCESS RESEARCH & DEVELOPMENT. In connection with the IPD acquisition,
we recorded a one time charge of $3.3 million for purchased in-process
technology that had not reached technological feasibility.

INCOME FROM OPERATIONS. As a result of the items discussed above, income
from operations decreased $6.9 million, or 86.3%, to $1.1 million for the six
months ended June 30, 1999 from $8.0 million for the comparable period in 1998.
The lower income from operations for the first half of 1999 resulted from
several significant non-recurring items totaling approximately $5.1 million,
including an $0.8 million inventory write-up related purchase accounting
adjustment for IPD, $1.0 million write-off of a previously acquired technology
license, and $3.3 million charge for in-process research and development.
Excluding these items, income from operations would have been $6.2 million.

INTEREST INCOME. Interest income decreased $878,000, or 96.0%, to $37,000
for the six months ended June 30, 1999 from $915,000 for the six months ended
June 30, 1998. The decrease is primarily due to the decrease in short-term,
interest-bearing financial instruments due to cash used for the Melcher
acquisition in the third quarter of 1998.

INTEREST EXPENSE. Interest expense increased $1.5 million, or 824.3%, to
$1.7 million for the six months ended June 30, 1999 from $185,000 for the
comparable period in 1998. The increase is primarily due to advances under our
credit facilities to finance the IPD acquisition, as well as additional
investments in facilities and capital equipment to increase our capacity to
support the rapid growth in our business.

OTHER INCOME (EXPENSE), NET. Other income, net, increased $121,000, to
$276,000 for the six months ended June 30, 1999 from $155,000 for the six months
ended June 30, 1998. Other income increased primarily due to gains on sales of
fixed assets and foreign currency transactions.

21
<PAGE>
INCOME TAXES. The provision for income taxes decreased to $1.2 million for
the six months ended June 30, 1999 from $2.8 million income tax for the
comparable period in 1998. The recorded loss for the first half of 1999 did not
generate a significant income tax benefit primarily due to the $3.3 million
charge for in-process research and development and $768,000 amortization of
goodwill related to the IPD acquisition, both of which were nondeductible for
tax purposes.

YEARS ENDED DECEMBER 31, 1998 AND DECEMBER 31, 1997.

NET SALES. Net sales increased $9.5 million, or 10.2%, to $102.5 million
for the year ended December 31, 1998 from $93.1 million for the year ended
December 31, 1997. The increase in net sales resulted primarily from a $18.8
million contribution from Melcher since the date of acquisition, as well as
strong growth in unit shipments of standard and modified standard power
supplies, particularly in high-range power configurations, during the first half
of 1998. Including Melcher's results, the principal contributors to the $9.5
million increase in net sales were DC/DC power products, which contributed $14.1
million in net sales, and low-range power products, which contributed $4.4
million. These increases were offset by declines in linear and custom power
products of $3.4 million and $3.9 million, respectively, and decreases in all
other product lines of $1.7 million, net. Excluding Melcher, our net sales
decreased $9.4 million, or 10.1%, to $83.7 million in 1998 from $93.1 million in
1997. This was primarily due to the general slowdown in demand for products
within the electronics industry, as well as domestic inventory reductions at
OEMs, including some of our customers, in the second half of 1998.

Sales to OEMs for the year ended December 31, 1998 were $62.2 million, or
61% of net sales, an increase of $10.2 million or 19.7% over the comparable
period in 1997, when sales to OEMs represented 56% of net sales. Sales through
distributors for the year ended December 31, 1998 were $40.3 million, or 39% of
net sales, a decrease of $0.8 million or 1.9% compared to the same period in
1997, when such sales represented 44% of net sales. As a result of the Melcher
acquisition, our OEM sales to the communications and transportation markets
increased $7.1 million and $3.6 million, respectively.

Our total backlog on December 31, 1998 was $25.8 million, which is comprised
of Power-One's backlog of $13.4 million and Melcher's backlog of $12.4 million.
Power-One's backlog stood at $32.2 million on December 31, 1997.

Beginning in the three month period ended June 30, 1998, demand for products
slowed significantly within the electronics industry. This was the result of a
softening trend in capital equipment markets, which in turn has been negatively
influenced by weak demand due to the business recessions in various Asian
economies, as well as an overall slowing in global economic activities. Demand
for our products was further weakened by domestic inventory reduction
initiatives at OEMs and distributors, including some of our customers. The
contribution of Melcher, which sells primarily into the European market, more
than offset the decline in our North American business. We expect that the
Melcher acquisition will continue to have a positive impact on our overall
business growth, particularly in data communications and telecommunications.

To counter the impact of the soft business climate in 1998, management
pursued action steps to position us for increased growth in 1999. Some of these
initiatives included actively pursuing new business synergies with Melcher in
the areas of sales and cost reductions; aggressively pursuing acquisitions which
culminated in the acquisition of IPD on January 29, 1999; and providing for
additional investment in research and development. Additionally, we made
significant progress to further upgrade our core business systems with the
implementation of a new Oracle ERP system. Although this fully integrated Oracle
ERP system is Year 2000 certified, the key reasons for implementing the new
system are to further enhance our technical infrastructure by providing to
management the tools available in a new generation of systems and software to
speed information retrieval; to position us for business growth; to facilitate
business integration of acquired companies; and to provide a clearer audit trail
for the source of information.

22
<PAGE>
GROSS PROFIT. Gross profit increased $1.5 million, or 4.0%, to $39.1
million for the year ended
December 31, 1998 from $37.6 million for the year ended December 31, 1997, which
is primarily due to the inclusion of Melcher's gross profit since the date of
the acquisition. As a percent of net sales, gross profit decreased to 38.1% for
the year ended December 31, 1998 from 40.4% for the same period in 1997. The
decline in gross profit margin primarily resulted from the inventory write-up
related purchase accounting adjustments related to the Melcher acquisition.
Excluding the Melcher related inventory fair market value purchase write-up
adjustments, gross profit margin would have been 40.9% in 1998 and 40.4% in
1997.

SELLING EXPENSE. Selling expense increased $3.6 million, or 43.6%, to $11.8
million for the year ended December 31, 1998 from $8.2 million for the year
ended December 31, 1997. The increase of $3.6 million is primarily due to the
inclusion of Melcher's selling expense of $3.6 million since the date of
acquisition. Excluding Melcher, selling expense was unchanged at $8.2 million
compared to the prior year. As a percent of net sales, selling expense increased
to 11.5% in 1998 from 8.8% for the year ended December 31, 1997, which is
primarily due to our decision to maintain its sales resources intact during the
business downturn in the latter portion of 1998, and due to the addition of
Melcher which had proportionately higher selling expense on a stand-alone basis.

GENERAL AND ADMINISTRATIVE EXPENSE. General and administrative expense
increased $1.5 million, or 22.6%, to $8.3 million for the year ended December
31, 1998 from $6.8 million for the year ended December 31, 1997. As a percent of
net sales, general and administrative expense increased to 8.1% in 1998 from
7.3% in 1997. The increase of $1.5 million is primarily due to higher public
company expenses of $268,000, higher travel costs primarily related to pursuing
other acquisitions of $149,000, higher depreciation expense of $244,000, higher
general office expenses of $291,000, other expenses aggregating $385,000 and the
inclusion of Melcher's general and administrative expenses of $748,000 since the
date of acquisition. These increases are partially offset by decreases in
salaries of $270,000 and bad debt expense of $315,000.

ENGINEERING EXPENSE. Engineering expense increased $2.3 million, or 58.9%,
to $6.3 million for the year ended December 31, 1998 from $3.9 million for the
year ended December 31, 1997. As a percent of net sales, engineering expense
increased to 6.1% for the year ended December 31, 1998 from 4.2% for the year
ended December 31, 1997. The increase is primarily due to higher employee costs
of $484,000, increased product development expense of $109,000, and the
inclusion of Melcher's engineering expenses of $1.7 million since the date of
acquisition.

QUALITY ASSURANCE EXPENSE. Quality assurance expense remained flat at $2.0
million for both 1998 and 1997. As a percent of net sales, quality assurance
expense decreased to 1.9% for the year ended December 31, 1998 from 2.2% from
the year ended December 31, 1997. Excluding Melcher, quality assurance expense
decreased $153,000, or 7.5%, to $1.9 million in 1998 compared to $2.0 million in
1997. This decrease is primarily attributable to a decrease in salary expense.

AMORTIZATION EXPENSE. The amortization of intangibles increased $596,000,
or 29.4%, to $2.6 million for the year ended December 31, 1998 from $2.0 million
for the year ended December 31, 1997. As a percent of net sales, amortization of
intangibles increased to 2.6% for the year ended December 31, 1998 from 2.2% for
the year ended December 31, 1997. The increase is directly attributable to four
months of amortization of intangibles initially recorded upon the acquisition of
Melcher on August 31, 1998.

INCOME FROM OPERATIONS. As a result of the above factors, income from
operations decreased $6.5 million, or 44.6%, to $8.1 million for the year ended
December 31, 1998 from $14.6 million for the year ended December 31, 1997. As a
percent of sales, income from operations decreased to 7.9% for the year ended
December 31, 1998 from 15.7% for the year ended December 31, 1997. Excluding the
charge to cost of sales of $2.9 million for the Melcher-related inventory fair
market value purchase

23
<PAGE>
write-up adjustments, income from operations would have been $11.0 million in
1998 compared to $14.6 million in 1997.

INTEREST INCOME. Interest income increased $1.0 million, or 287.4%, to $1.4
million for the year ended December 31, 1998 from $0.4 million for the year
ended December 31, 1997. This increase is primarily due to the interest income
derived from investment of a portion of the net proceeds from our initial public
offering, or IPO, in short-term, interest-bearing investment-grade financial
instruments.

INTEREST EXPENSE. Interest expense decreased $2.4 million, or 74.7%, to
$0.8 million for the year ended December 31, 1998 from $3.2 million for the year
ended December 31, 1997. This decrease is primarily the result of the repayment
of all bank borrowings under our existing bank credit facility using the net
proceeds from our IPO completed in the fourth quarter of 1997.

OTHER INCOME (EXPENSE), NET. Other expense increased $609,000, to $627,000
for the year ended December 31, 1998, from $18,000 for the year ended December
31, 1997, and is primarily due to foreign currency translation losses of
$455,000 related to Melcher since the date of acquisition and other expenses
aggregating $154,000.

INCOME TAXES. The provision for income taxes decreased $1.2 million, to
$2.3 million for the year ended December 31, 1998, from $3.5 million for the
year ended December 31, 1997. Income taxes as a percent of net sales decreased
to 2.3% in 1998 from 3.8% in 1997. The decrease is due to a $721,000 reduction
in tax provision related to the $7.2 million write-up of assets to fair value as
a result of purchase accounting adjustments made for the Melcher acquisition.
The remainder is attributable to a $122,000 tax credit related to a pre-tax loss
incurred by our U.S. operations in the third quarter of 1998, as well as a
decrease in the overall effective tax rate due to a relatively lower portion of
operating income generated in the second half of 1998, primarily as a result of
lower sales of high-power products.

YEARS ENDED DECEMBER 31, 1997 AND DECEMBER 31, 1996.

We have reclassified certain reimbursements from customers from selling,
engineering and quality assurance expenses to net sales for consistency with the
current year presentation.

NET SALES. Net sales increased $17.6 million, or 23.4%, to $93.1 million
for the year ended December 31, 1997 from $75.4 million for the year ended
December 31, 1996. The increase in revenue resulted primarily from strong growth
in unit shipments of standard, modified standard and custom power supplies in
both low-range and high-range power configurations during the third and fourth
quarter of 1997. Price changes in 1997 were not a significant contributor to
overall sales growth. Mirroring the sales increase, our backlog grew to $32.2
million at December 31, 1997, compared to $17.3 million at December 31, 1996.
Power conversion product sales increased over 1996 as the result of our wide
range of product offerings, continued growth in existing OEM customer accounts
and distributors, as well as an increased focus by our strategic national
accounts team on key OEM customers.

GROSS PROFIT. Gross profit increased $7.5 million, or 24.8%, to $37.6
million for the year ended December 31, 1997 from $30.1 million for the year
ended December 31, 1996, primarily as a result of higher sales. For the year
ended December 31, 1997, gross profit margin as a percent of sales increased
slightly to 40.4%, up from 39.9% for the prior year ended December 31, 1996. The
improvement in gross profit margin was primarily due to lower costs of
production following the transfer of manufacturing from our Puerto Rico facility
to our Dominican Republic facility, which was completed towards the end of 1996.

SELLING EXPENSE. Selling expense increased $662,000, or 8.8%, to $8.2
million for the year ended December 31, 1997 from $7.5 million for the year
ended December 31, 1996. The increase of $662,000

24
<PAGE>
is primarily due to higher payroll costs related to an increase in bonuses to
our sales force of $465,000, reclassification of certain distribution expense
from manufacturing to selling expense related to our operations in the Dominican
Republic totaling $340,000 and other operating costs aggregating $496,000. These
increases were partially offset by a $639,000 reduction in commissions paid to
manufacturers' representatives as a result of our renegotiating these commission
agreements. As a percent of net sales, selling expense decreased to 8.8% for the
year ended December 31, 1997 from 10.0% for the year ended December 31, 1996,
which is primarily attributable to higher sales volume.

GENERAL AND ADMINISTRATIVE EXPENSE. General and administrative expense
increased $292,000, or 4.5%, to $6.8 million for the year ended December 31,
1997 from $6.5 million for the year ended December 31, 1996. As a percent of net
sales, general and administrative expense decreased to 7.3% in 1997 from 8.6% in
1996. The increase of $292,000 is primarily due to an $861,000 increase in
employee performance bonuses as well as growth in staffing levels of
administrative personnel, offset by $613,000 of expenses incurred in connection
with the transfer of production from Puerto Rico to the Dominican Republic in
1996.

ENGINEERING EXPENSE. Engineering expense declined $278,000, or 6.6%, to
$3.9 million for the year ended December 31, 1997 from $4.2 million for the year
ended December 31, 1996. As a percent of net sales, engineering expense
decreased to 4.2% for the year ended December 31, 1997 from 5.6% for the year
ended December 31, 1996. Certain engineering expenses, which had been increased
in the first half of 1996 based upon anticipated sales increases, were reduced,
primarily by the reduction of administrative personnel as well as a reduction in
the use of consultants, in the last half of 1996 as sales declined. We believe
that no strategic business was affected by this reduction. We refilled many of
these positions by the end of the third quarter of 1997, and management expects
its investment in engineering to increase in 1998.

QUALITY ASSURANCE EXPENSE. Quality assurance expense increased $141,000, or
7.5%, to $2.0 million for the year ended December 31, 1997 from $1.9 million for
the year ended December 31, 1996. As a percent of net sales, quality assurance
expense decreased slightly to 2.2% in 1997 from 2.5% in 1996. The increase of
$141,000 is primarily due to higher payroll costs related to growth in staffing
levels to support the increase in quality activities generated by the increase
in sales volume.

INCOME FROM OPERATIONS. As a result of the above factors, income from
operations increased $6.6 million, or 82.7%, to $14.6 million for the year ended
December 31, 1997 from $8.0 million for the year ended December 31, 1996. As a
percent of sales, income from operations increased to 15.7% for the year ended
December 31, 1997 from 10.6% for the year ended December 31, 1996.

INTEREST EXPENSE. Interest expense decreased $1.0 million, or 24.7%, to
$3.2 million for the year ended December 31, 1997 from $4.2 million for the year
ended December 31, 1996. This decrease was the result of lower bank borrowings
and the repayment of all amounts outstanding under our existing bank credit
facility with the net proceeds from our IPO in the fourth quarter.

INTEREST AND OTHER INCOME, NET. Interest and other income increased
$328,000, to $340,000 for the year ended December 31, 1997, from $12,000 for the
year ended December 31, 1996, and is due to interest income generated from
investment of a portion of the proceeds from the IPO in short-term,
interest-bearing instruments.

INCOME TAXES. The provision for income taxes increased $2.6 million, to
$3.5 million for the year ended December 31, 1997, from the pro forma tax
expense of $923,000 for the year ended December 31, 1996. Income taxes as a
percent of net sales increased to 3.8% in 1997 from a pro forma 1.2% in 1996.
The percentage increase primarily reflects an increase in our effective tax rate
from 24.3% in 1996 to 30.1% in 1997 resulting from a higher proportion of our
earnings being generated in the U.S. rather than in Puerto Rico.

25
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES

Our cash and cash equivalents balance decreased $8.0 million, or 74.5% from
$10.8 million at December 31, 1998 to $2.8 million at June 30, 1999. The primary
source of cash for the first six months of 1999 consisted of net borrowings from
credit facilities of $34.5 which was primarily used to finance the purchase of
IPD and its manufacturing facility. The primary uses of cash for the first six
months of 1999 consisted of $28.3 million for the purchase of IPD, $1.2 million
of transaction costs, $12.3 million for the acquisition of property and
equipment and $2.5 million for operating activities.

The $2.5 million used for operating activities was primarily attributable to
cash earnings from operations of $8.7 million (net income plus depreciation,
amortization and in-process research and development charge) offset by $11.2
million used in working capital. The $11.2 million use of working capital was
primarily due to an increase in accounts receivable and inventories of $11.4
million and $8.1 million, respectively, offset by an increase in accounts
payable of $7.5 million.

The $12.3 million for acquisition of property and equipment included
approximately $4.3 million for the purchase of IPD's manufacturing facility,
$2.5 million for hardware, software and implementation support related to our
Oracle ERP system conversion, and the balance reflected additional property,
plant and capital equipment expenditures consistent to support our growth plans.

We have a $65 million revolving line of credit, which bears interest on
amounts outstanding payable quarterly based on our leverage ratio and one of the
following rates as selected by us: LIBOR plus 1.25% to 2.50%, or the bank's base
rate plus 0% to 1.25%. The credit agreement (a) provides for restrictions on
additional borrowings, leases and capital expenditures; (b) prohibits us,
without prior approval, from paying dividends, liquidating, merging,
consolidating or selling our assets or business; and (c) requires us to maintain
a specified net worth, minimum working capital and certain ratios of current
liabilities and total debt to net worth. At June 30, 1999, amounts outstanding
under our line of credit were $45.5 million.

As a result of the Melcher acquisition, we have various credit facilities
with banks in Switzerland and Germany which can be drawn upon in the form of
term loans. The aggregate credit limit for all such credit facilities is
approximately $13.6 million. Melcher's credit facilities in Switzerland bear
interest on amounts outstanding payable at various time intervals and market
rates based on Swiss LIBOR plus a margin ranging from 1.25% to 2.00%. Some of
Melcher's credit agreements require Melcher to maintain certain financial
covenants and to provide certain financial reports to the lenders, none of which
materially restricts Melcher. At June 30, 1999, short-term and long-term amounts
outstanding under Melcher's credit facilities were $4.3 million and $8.8
million, respectively, and Melcher was in compliance with all debt covenants.

As a result of the IPD acquisition, we have an additional line of credit in
the U.S., which bears interest at the bank's prime rate plus 0.75%. Borrowings
are limited to the lesser of $4.5 million or 80% of IPD's eligible accounts
receivable, as defined. At June 30, 1999, amounts outstanding under IPD's line
of credit were $0.2 million.

At June 30, 1999, short-term and long-term amounts outstanding under all
credit facilities with banks were $53.3 million and $5.5 million, respectively.
Borrowings are collateralized by substantially all of our assets.

We currently anticipate that our total capital expenditures for 1999 will be
approximately $16 million, of which approximately $2.8 million represents costs
to complete the implementation of our Oracle ERP system, approximately $4.6
million represents investments in surface mount technology automation and
approximately $2.9 million represents investments in manufacturing improvements.
The amount of these anticipated capital expenditures will frequently change
based on future changes in business plans, our financial condition and general
economic conditions.

26
<PAGE>
Based on current plans and business conditions, we believe our existing
working capital and borrowing capacity, coupled with the funds generated from
our operations, will be sufficient to fund our anticipated working capital,
capital expenditures and debt payment requirements for the foreseeable future.
However, if we make a large acquisition, it may be necessary to raise debt or
equity in the private or public securities markets.

QUARTERLY RESULTS

The following table presents our unaudited quarterly operating results. In
the opinion of our management, this information has been prepared on the same
basis as the financial statements incorporated by reference in this prospectus
and includes all adjustments (consisting of only normal recurring accruals) that
management considers necessary for a fair presentation of the results for such
periods. Such quarterly results are not necessarily indicative of the results of
operations of any future period. Our results of operations have fluctuated and
may continue to fluctuate from period to period, including on a quarterly basis.

<TABLE>
<CAPTION>
1997 QUARTERS ENDED 1998 QUARTERS ENDED
-------------------------------------------- --------------------------------------------
MAR. 31 JUNE 30 SEPT. 30 DEC. 31 MAR. 31 JUNE 30 SEPT. 30 DEC. 31
--------- --------- ----------- --------- --------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
CONSOLIDATED STATEMENTS
OF OPERATIONS:
Net sales................ $ 17,910 $ 23,023 $ 24,852 $ 27,283 $ 26,673 $ 24,373 $ 23,101 $ 28,372
Gross profit............. 7,308 9,277 10,073 10,929 11,103 10,073 8,141 9,756
Income from operations... 2,295 3,100 3,945 5,277 4,088 3,929 328 (243)
Net income (loss)
attributable to common
stockholders........... 586 1,146 1,706 3,282 3,073 3,048 287 (678)
Diluted earnings (loss)
per share.............. $ 0.06 $ 0.11 $ 0.17 $ 0.20 $ 0.18 $ 0.18 $ 0.02 $ (0.04)

<CAPTION>
1999 QUARTERS
ENDED
------------------
MAR. 31 JUNE 30
------- ---------
<S> <C> <C>

CONSOLIDATED STATEMENTS
OF OPERATIONS:
Net sales................ $34,834 $ 46,568
Gross profit............. 13,181 19,947
Income from operations... (3,364) 4,462
Net income (loss)
attributable to common
stockholders........... (3,517) 1,979
Diluted earnings (loss)
per share.............. $ (0.21) $ 0.11
</TABLE>

YEAR 2000 ISSUE

Our business faces risk from unforeseen problems with our own information
systems and systems of our third party suppliers and customers. To address these
risks, we established a task force in early 1998, and since then have been
actively engaged in ensuring that our systems are Year 2000 compliant.

We have substantially completed an extensive review to ensure the internal
readiness of our computer systems and the embedded systems commonly found in
manufacturing equipment such as microcontrollers. We have assessed our products,
and they are not date sensitive.

We have also assessed the readiness of our key suppliers, subcontractors and
customers for the Year 2000 calendar change. To date we have received survey
responses from approximately 85% of our most important suppliers, which indicate
that they are aware of the Year 2000 compliance issue and that they intend to be
fully Year 2000 compliant and certified by year-end 1999. We expect the balance
of critical vendors to respond to our surveys by the third quarter of 1999.

In April 1999, we significantly reduced our exposure to the Year 2000
compliance issue by partially implementing a new Oracle ERP system, which is
Year 2000 compliant, in our California and Mexico facilities. However, we may
experience difficulties in completing implementation in California and Mexico
and in installing it in our remaining operations. If we do, it could adversely
affect our business and our operating results.

27
<PAGE>
We are also modifying or replacing, as necessary, other third party software
applications in order to ensure that they are Year 2000 compliant. We expect to
substantially complete the remediation of our computer systems in California,
Mexico and the Dominican Republic by the end of September 1999, before any
potential adverse impact on our business. Melcher, however, has not yet finished
assessing its products or computer systems or the effect that problems with its
suppliers' systems may have on its operations. At this point, Melcher expects to
finish its Year 2000 remediation and testing efforts by the end of the third
quarter of 1999, but Melcher may experience delays, which could adversely affect
Melcher's results of operations. In any event, we do not expect the overall
costs to complete our Year 2000 project to be material. We believe that the most
significant adverse effect on our business related to Year 2000 compliance would
be that some of our smaller and less relied-upon suppliers may not have systems
that are Year 2000 compliant, delaying our receipt of materials from them and
our fulfillment of customers' orders.

28
<PAGE>
BUSINESS

- primarily supply, regulate and distribute electrical power within
electronic equipment;

- either convert alternating current to direct current, an AC/DC power
supply, or modify direct current into other levels of direct current, a
DC/DC power supply;

- provide electronic components with a precise and constant supply of
electrical power at one or more voltage levels;

- regulate and monitor voltages to protect electronic components within
equipment from surges or drops in voltage, to prevent electronic equipment
from being damaged by its own malfunction and to provide back-up power if
a primary power source fails; and

- are typically classified as standard, modified standard and custom. While
we manufacture and sell all three product classifications, we focus on
standard and modified standard products.

We sell our products both to OEMs and distributors who value quality,
reliability, technology and service. We have more than 10,000 customers in the
communications, industrial, automatic/semiconductor test equipment,
transportation, medical equipment, and other electronic equipment industries.
Our OEM customers include industry leaders such as Cisco, Nortel, Teradyne,
Lucent, Hewlett-Packard, Siemens and Ericsson. We are also a leading provider of
power supplies to domestic distributors, including Pioneer Standard Electronics,
Sterling, Arrow, Kent Electronics and Future Electronics.

We were founded in 1973 as a manufacturer of AC/DC power supplies and until
1981 operated solely from our Southern California facility. During the 1980's,
we established additional operations in Puerto Rico and Mexico to take advantage
of certain labor, manufacturing and, in Puerto Rico, tax efficiencies. Between
1994 and 1996, we moved most of our Puerto Rico manufacturing operations to the
Dominican Republic to capitalize on certain labor benefits. In September 1995,
Stephens Group Inc., an affiliate of Stephens Inc., and our management purchased
Power-One from its previous owners and formulated a more aggressive growth
strategy, which included a plan to grow through acquisitions. In the last year,
we substantially expanded our product offerings, scale and geographic breadth
through two significant acquisitions. Our pro forma net sales have increased
from $75.4 million in 1996 to pro forma net sales of $161.6 million in 1998, a
compound annual growth rate of 46.4%. We believe that we are one of the largest
power supply companies in the world that specializes in standard and modified
standard power supplies. We also believe that our gross profit margins are among
the highest in the industry. Our gross profit margin has been approximately 40%
during the past three years.

RECENT ACQUISITIONS

In August 1998, we increased our international presence and our portfolio of
products by acquiring Melcher for $53 million, including debt assumed. Located
in Uster, Switzerland, Melcher primarily designs and manufactures
high-reliability DC/DC and AC/DC power supplies which it sells to leading OEMs
throughout Europe and North America, including Ericsson, Daimler-Chrysler and
Siemens. High-reliability power supplies are designed for rugged use in
heavy-duty equipment in industries such as transportation and
telecommunications. Melcher has manufacturing operations in three European
locations and sales and application engineering offices in six European
countries. By acquiring Melcher, we added approximately 750 products to our
portfolio and gained better access to the $4 billion European power supply
market. In addition, we are now able to use Melcher's direct sales force of 59
sales professionals and its marketing channels to sell Power-One's portfolio of
products both to new customers and Melcher's existing customers in Europe.

29
<PAGE>
In January 1999, we further broadened our portfolio of DC/DC products by
acquiring IPD. We acquired IPD for $32 million including capitalized lease
obligations and other indebtedness of IPD, or a total capital outlay of $28.3
million. In addition, we are required to pay up to $13 million to IPD's former
shareholders, if IPD attains certain defined operational performance objectives
in the 13 month period ending on March 31, 2000. We subsequently acquired IPD's
facility in Boston, Massachusetts for approximately $4 million. IPD is a leading
supplier of high-density DC/DC power supplies, which it distributes primarily in
North America. High-density DC/DC power technology is preferred in applications
using high-speed/low-voltage logic, including the fast growing voice and data
communications industries. IPD sells over 90 models of high-density DC/DC
products to leading OEMs, including Cisco, Newbridge Networks and Nortel. As
part of the acquisition, we also acquired IPD's 49% ownership position in
Shenzhen SED-IPD International Electronic Device Co., Ltd., a joint-venture
based in Shenzhen, China. We are currently moving the production of IPD's higher
volume products from its Boston facility to our lower cost manufacturing
facility in Mexico. Our acquisition of IPD has given us greater access to the
$2.9 billion worldwide merchant market for DC/DC power supplies. It has also
made us a leader in distributed power architecture, which distributes DC/DC
power supplies throughout the electronic infrastructure of the end product. The
worldwide market for DC/DC products is estimated to grow faster during the next
five years than the overall power supply market.

INDUSTRY AND MARKET OVERVIEW

The two primary types of power supplies are AC/DC and DC/DC power supplies.
AC/DC power supplies convert alternating current from a primary power source,
such as a wall outlet, into a precisely controlled direct current. Virtually
every electronic device that plugs into an AC wall socket requires some type of
AC/DC power supply. DC/DC power supplies modify an existing DC voltage level to
other DC levels to meet the power needs of various subsystems and components
within electronic equipment.

Power supplies are configured using both linear and switching technology.
Linear power supplies offer low noise and precise voltage regulation
specifications, which are characteristics required for specialized applications
such as analog-to-digital converters and operational amplifiers used in the
instrumentation industry. Switching power supplies utilize energy more
efficiently, are smaller and weigh less than linear power supplies. The market
for switching power supplies is estimated to be the fastest growing segment of
the power supply market. Switching power supplies comprise most of our product
line.

Power supplies are typically classified as standard, modified standard or
custom. Standard power supplies are not typically industry-wide standards.
Rather, they are power supplies that a particular company, such as Power-One,
manufactures as its own standard catalog products that customers can use for
many different applications. Modified standard products are standard products
that are modified slightly to meet a customer's specific design requirements.
Because they have already been designed and manufactured, standard and modified
standard products allow end customers to reduce their time-to-market and
minimize costs for new product introductions. Custom power supplies are designed
for a specific customer to meet the specifications for a unique application. It
typically takes four to six months to produce a custom product and requires the
expenditure of significant up-front engineering costs. In addition, users of
custom products frequently have high-volume production requirements and operate
in more price sensitive industries. As a result, profit margins on custom
products are typically lower than margins on standard products. Unlike some
technology products, power supplies, whether standard, modified standard, or
custom, can be difficult to match exactly or replace with products manufactured
by another supplier without considerable investment. Thus, once a power supply
has been designed into a customer's product, it is normally difficult and costly
for the customer to change suppliers during that product's life cycle. However,
customers who manufacture their products in high volumes typically require two
sources for power supplies.

30
<PAGE>
MARKET SIZE AND TRENDS

The power supply industry is highly fragmented, consisting of an estimated
1,000 companies worldwide, including over 300 in North America. Only six power
supply companies in the world, most of which specialize in custom products, had
merchant market sales greater than $200 million in 1997. The average power
supply company is estimated to have annual sales of approximately $15 million.
In 1998, the worldwide market for switching power supplies was estimated to be
approximately $16 billion, including approximately $7 billion in North America.
The worldwide market is expected to grow to approximately $21 billion in 2002,
and the North American market is expected to grow to approximately $9 billion by
2002.

We see the significant trends in the power supply industry as:

USE OF DISTRIBUTED POWER ARCHITECTURE. The communications and networking
industries are utilizing lower voltage semiconductors that require the power
supply to be located closer to the specific application. As a result, many new
products are designed with distributed power architecture, or DPA, that
distributes high-density switching DC/DC power supplies throughout the
electronic infrastructure of the end product. This DPA segment of the power
supply industry is expected to grow faster than the overall market for the next
several years.

SHORTENED TIME-TO-MARKET. To compete successfully in their industries, OEMs
must bring products with a wider variety of features to market as quickly as
possible. We believe that as OEMs face greater competition to accelerate the
time-to-market for their new products, they are increasingly incorporating
standard and modified standard power supplies into their products.

RELIANCE ON FEWER SUPPLIERS. In the past, customers typically purchased
power supplies from multiple suppliers. However, in order to lower costs and
accelerate delivery schedules, OEMs and electronic distributors are increasingly
reducing their supplier base to include only vendors who can offer a broad range
of products and service most of their needs. In addition, OEMs who purchase
power supplies have merged with or acquired other companies as part of
consolidation trends in their own industries. These larger OEM customers
increasingly rely on suppliers with greater financial resources and broader
product lines.

OUTSOURCING TO MERCHANT MANUFACTURERS. Captive power supply manufacturers
design and manufacture power supplies primarily for use in their own products.
Merchant power supply manufacturers design and manufacture power supplies for
use by OEMs. The merchant segment of the power supply market in North America
was estimated to be approximately 62% of the total power supply market in 1997.
The merchant segment is expected to grow to approximately 69% of the overall
market by 2002 as OEMs increasingly focus on core competencies and outsource the
manufacturing of power supplies to more efficient suppliers. In many cases, we
believe that as this outsourcing occurs, many OEMs will divest their power
supply businesses.

BUSINESS STRATEGY

BROADEN OUR STANDARD PRODUCT LINE. We believe that we offer customers one
of the broadest ranges of AC/DC and DC/DC standard and modified standard power
supplies in the world. Our standard product line includes over 2,500 different
models that are available from 1 to 4,000 watts. We are a leader in power supply
design, innovation and new product introduction. We plan to continue to develop
and expand our standard and modified standard product lines. We believe this
expansion,

31
<PAGE>
together with our highly flexible and quick changeover manufacturing process,
will allow us to meet the requirements of our customers to bring new products to
market more rapidly and cost effectively.

EXPAND RELATIONSHIPS WITH KEY OEMS. We focus on maintaining and
establishing long-term relationships with leading OEMs in high growth
industries. As part of our efforts to develop and expand these key
relationships, we implemented our Strategic National Accounts Program, or SNAP,
in 1997. As part of SNAP, we have seven professionals who work directly with
OEMs who are large enough to have annual orders of more than $3 million. In
addition, our recent acquisitions have significantly expanded our OEM customer
base, and we are implementing programs to aggressively cross-sell our broad
range of products to these new customers.

STRENGTHEN OUR POSITION AS A LEADER IN DC/DC POWER SUPPLIES AND, IN
PARTICULAR, DPA PRODUCTS. By acquiring Melcher and IPD, we have become a
leading supplier of DC/DC power supplies with over 1,750 products. In addition,
we believe that our acquisition of IPD, a technological leader in high-density
DC/DC products, has positioned us to better fulfill our customers' DPA
requirements. We intend to continue expanding our DC/DC product offerings so
that we can strengthen our competitive position in the DPA market.

PURSUE ACQUISITIONS. We plan to pursue growth opportunities by continuing
to acquire other power supply companies. We believe the fragmentation of the
power supply market, our customers' consolidation of their supplier bases and
the limited product offerings and relative undercapitalization of most of our
smaller competitors will present opportunities for further consolidation in our
industry. We also believe that an acquisition in Asia will significantly lower
our materials and labor costs.

MAINTAIN STRONG RELATIONSHIPS WITH DISTRIBUTORS. We believe that we were
one of the first manufacturers to sell power supplies through distributors.
Additionally, as a result of Power-One's strong brand name for quality and
service, we have developed one of the largest networks of distributors in the
U.S. We believe that our large network of distributors enables us to efficiently
sell our products to significantly more customers than we could using our direct
sales force. In addition, our relationships with our distributors provide us
with readily available shelf-space for our new products that we develop and
acquire.

32
<PAGE>
PRODUCTS

Our products are divided primarily into the following categories:

<TABLE>
<CAPTION>
REPRESENTATIVE
SALES
RANGE WATTS TYPICAL CHARACTERISTICS REPRESENTATIVE APPLICATIONS PRICE RANGE (1)
- ------------------ --------------- --------------------------- ------------------------------ ---------------
<S> <C> <C> <C> <C>
AC/DC PRODUCTS

Low-Power 30-200 watts -Higher unit volume -Small industrial $15 - 125
-Low technology implementation
systems
-Point-of-sale terminals
-Small networking systems

Mid-Power 200-500 watts -Medium unit volume -Work stations $130 - 400
-Moderate technology -Data/voice communication
systems
-Medical diagnostic equipment

High-Power 500-4000 watts -Lower unit volume -Semiconductor test systems $400 - 2,500
-High technology -Flight simulators
-Advanced medical imaging
equipment
-Large scale data processors

DC/DC PRODUCTS

Low-Power/ 1-50 watts -More compatible with -Diverse industrial $5 - 90
Low-Density power supplies applications
manufactured by -Communication products
competitors -Transportation
-Easily sold through
distributors

High-Power/ 50-300 watts -Technologically complex -Telecommunication equipment $55 - 145
High-Density -Complex manufacturing -Data communication equipment
process -Diverse industrial
-Relatively new technology applications
-Very small size

LINEAR PRODUCTS

5-150 watts -Low noise -Analog-to-digital converters $20 - 150
-Excellent voltage -Operational amplifiers
regulation -Medical electronics
-High voltage isolation
</TABLE>

- ------------------------------

(1) Melcher products, which are designed for high reliability and rugged
conditions, are typically sold for substantially higher prices than those
represented here.

LOW-POWER AC/DC PRODUCTS. Most of our low-power AC/DC power supplies use a
universal input voltage circuit, which automatically detects if the AC line is
110 or 220 volts, allowing the products to be used worldwide without
modification. In 1997, we introduced a new generation of low-range power
supplies targeted to our higher volume customers and the communications markets.
In addition, we have designed a line of low-power, high-reliability AC/DC
products that are specifically designed for our customers in the transportation
and high-reliability industrial markets.

MID-POWER AC/DC PRODUCTS. Most of our mid-power AC/DC products have the
universal input voltage circuit described above. We offer a range of products
that provide our customers a variety of features and options within the
mid-range power area. In 1999, we added a new line of 250-watt power supplies to
address the needs of customers in the communications market.

33
<PAGE>
HIGH-POWER AC/DC PRODUCTS. Our high-power AC/DC power supplies are based
upon a modular configuration. We have ten platforms and 83 modules that we have
sold in more than 1,400 configurations. Additionally, through our acquisition of
Melcher, we have a non-modular line of high-power telecommunications power
supplies that are designed for use in rugged applications.

LOW-POWER/LOW-DENSITY DC/DC PRODUCTS. We manufacture over 500 different
types of low-power DC/DC power supplies. Unlike AC/DC products, DC/DC power
supplies are typically more compatible with power supplies manufactured by
others and can often replace competitors' DC/DC products.

HIGH-POWER/HIGH-DENSITY DC/DC PRODUCTS. We manufacture high-density DC/DC
products, which are best suited for DPA. These products are essentially the same
size as low-density DC/DC products but have significantly greater output power.
We also manufacture a line of DC/DC products specifically for use by OEMs in the
transportation and high-reliability industrial markets, as well as sectors of
the communications industry that require rugged, high-reliability products.

LINEAR PRODUCTS. We are an industry leader in and have manufactured
standard linear AC/DC products since our founding in 1973. Linear power supplies
are larger, heavier and less efficient than switching power supplies. However,
linear products are better suited for equipment with low noise requirements,
such as high precision medical and industrial equipment. We expect that sales of
our linear products, which accounted for 17% of our net sales in 1998, will
decline in dollar volume in the coming years, as end-users redesign their
products to use switching power supplies. Also, as a result of rapid growth in
sales of our other products, we expect that sales of linear products as a
percentage of overall sales will decline significantly.

In addition to the standard and modified standard products described above,
we design and manufacture AC/DC and DC/DC custom products for select OEM
customers to meet unique requirements in size, wattage or configuration. We
believe that we can use our large base of standard products and standard circuit
designs as platforms to address the custom needs of our customers quickly and
effectively.

CUSTOMERS

We sell our power supplies to over 10,000 OEMs through our direct sales
force, manufacturers representatives and indirectly through our distributors.
Teradyne and Cisco are the only OEM customers who have accounted for more than
10% of our net sales in any year since 1995. Teradyne accounted for 15% of our
net sales in 1997 and 13% in 1998. Cisco accounted for 11% of net sales in 1997
and 11% in the first half of 1999.

Our top 25 OEM customers accounted for 45% of sales in the first half of
1999, up from 41% in 1998, and included Cisco, Nortel, Teradyne, Lucent,
Hewlett-Packard, Siemens and Ericsson.

34
<PAGE>
Sales in 1996, 1997, 1998 and the first six months of 1999 were to the
following markets:

<TABLE>
<CAPTION>
FISCAL YEARS ENDED DECEMBER 31,
SIX MONTHS
------------------------------------- ENDED
1996 1997 1998 JUNE 30, 1999
----- ----- ----- -----------------
<S> <C> <C> <C> <C>
Communications............................................ 26% 30% 29% 42%

Industrial................................................ 10% 9% 14% 19%

Automatic/Semiconductor test equipment.................... 21% 32% 23% 8%

Medical equipment......................................... 22% 12% 10% 8%

Transportation............................................ 0% 0% 7% 8%

Computer, Retail and Other................................ 21% 17% 17% 15%
--- --- --- ---

Total..................................................... 100% 100% 100% 100%
--- --- --- ---
--- --- --- ---
</TABLE>

SALES AND MARKETING

At June 27, 1999, we had 110 sales and marketing professionals. Our domestic
sales and marketing department consisted of 51 professionals, including 25
salespeople, 12 regional sales managers, two product marketing managers, six
strategic national account managers and a comprehensive technical support and
service staff. Our European sales and marketing department consisted of 59 sales
professionals located in six sales offices in Switzerland, Germany, France,
England, Italy, and the Netherlands. Six product managers and a technical and
service staff located in Switzerland and Germany support our European sales
force. Additionally, we sell products in China through IPD's joint venture in
Shenzhen and through one of our distributors.

The percentage break-down of products that we sold to OEMs and distributors
in 1996, 1997, 1998 and the first six months of 1999 is as follows:

<TABLE>
<CAPTION>
FISCAL YEARS ENDED DECEMBER 31,
SIX MONTHS
------------------------------------- ENDED
1996 1997 1998 JUNE 30, 1999
----- ----- ----- -----------------
<S> <C> <C> <C> <C>
OEMs...................................................... 49% 56% 61% 75%
Distributors.............................................. 51% 44% 39% 25%
</TABLE>

Although dollar volume sales to distributors have remained relatively constant,
they have decreased as a percentage of our total sales because our acquisitions
and SNAP program have increased sales to OEMs.

OEM AND STRATEGIC ACCOUNT SALES. In North America, we use our direct sales
force and manufacturers' representatives to sell our products to OEMs. In
Europe, we primarily use our direct sales force but also utilize some
manufacturers' representatives and distributors. Our manufacturers'
representatives cover North America, Eastern Europe, Northern Europe, the Middle
East, Asia, Africa and Australia. In 1997, we formed SNAP to target existing and
potential OEM customers who are leaders in high-growth industries and who we
believe could order over $3 million of power supplies annually. We expect that
our sales to OEMs will increase in the future as we increasingly emphasize sales
to strategic accounts.

SMALL ACCOUNT SALES BY DISTRIBUTORS. We have one of the largest domestic
distribution networks in the power supply industry. We have contracts with over
48 distributors with locations in more than 478 cities worldwide. Twenty-eight
of our distributors are headquartered in the U.S. with branch offices throughout
the U.S. and Canada. Many of these distributors have been selling our products
for over

35
<PAGE>
ten years. We believe that customer loyalty to the Power-One brand and our wide
range of standard products enhances our distribution network. Pioneer Standard
Electronics accounted for 15% and 12% of net sales in 1996 and 1997,
respectively. No other distributor accounted for more than 10% of our annual net
sales during the last three years. Pioneer has distributed our products for more
than ten years.

RESEARCH AND DEVELOPMENT/ENGINEERING

Our research and development group consists of 20 design teams and 118
full-time employees located in California, Massachusetts, Switzerland and
Ireland. We invested over 6% of our 1998 net sales in engineering. Our research
and development department primarily develops new standard power supply
products, as well as modifications and improvements for existing products.
Within our target markets, we strive to expand applications that use our power
supplies by approaching current and potential customers and discussing their
future product directions and requirements. We also direct a limited amount of
our engineering activities toward creating custom products. Additionally, we
focus our research activities on improving power conversion efficiency, reducing
product and component costs, improving manufacturability, reducing product size,
and implementing new manufacturing processes.

MANUFACTURING PROCESS AND QUALITY CONTROL

A typical power supply consists primarily of a printed circuit board,
electronic components, transformers and other electromagnetic components, and a
sheet metal chassis. Production of our power supplies entails the assembly of
structural hardware combined with a sophisticated assembly of circuit boards. In
response to market demands for increased quality and reliability, design
complexity, and sophisticated technology, we automated many electronic assembly
and testing processes which we previously performed manually. We also
standardized our manufacturing processes to utilize our resources efficiently
and optimize our capacities.

Our manufacturing process is designed to quickly produce a wide variety of
quality products at a low cost. We use many techniques such as cell-based
manufacturing, common componentry in our product designs and state-of-the-art
production equipment to achieve this goal. We recently purchased four new
surface mount technology, or SMT, assembly lines. We have already installed
three of these lines in our Mexico facility, and we expect the fourth to be
operational in our Dominican Republic facility by the end of October. These SMT
lines are capable of changeovers in under five minutes and up to approximately
44,000 component placements per hour. SMT permits us to reduce board size by
eliminating the need for holes in the printed circuit boards and by allowing us
to use smaller components. We believe our substantial investment in SMT
technology will significantly increase throughput and capacity while also
increasing product quality.

Many of our customers and other end-users increasingly require that their
power supplies meet or exceed established international safety and quality
standards as their operations expand internationally. In response to this need,
we design and manufacture power supplies in accordance with the certification
requirements of many international agencies. These agencies include Underwriters
Laboratories (UL) in the U.S.; the Canadian Standards Association (CSA) in
Canada; Technischer Uberwachungs-Verein (TUV) and Verband Deutscher
Electrotechniker (VDE) in Germany; the British Approval Board for
Telecommunications (BABT) in the United Kingdom; and International
Electrotechnical Committee (IEC), a European standards organization.

Quality products and responsiveness to the customer's needs are of critical
importance in our efforts to compete successfully. Given their importance, we
emphasize quality and reliability in both the design and manufacture of our
products. In addition to testing throughout the design and manufacturing
process, we test and burn-in 100% of all products using automated equipment and
customer-

36
<PAGE>
approved processes. We perform an additional out-of-box test or pre-ship audit
on randomly selected units before shipment, further ensuring manufacturing
quality and integrity.

We manufacture and assemble our products primarily at our facilities in
Slovakia, the Dominican Republic, Mexico and Massachusetts. All of our
facilities are ISO 9000 certified. We are currently in the process of moving
much of our high volume IPD business to our lower cost facilities in Mexico and
the Dominican Republic and our high volume Melcher business to Slovakia, the
Dominican Republic and Mexico.

SUPPLIERS

We typically design products using components readily available from several
sources and attempt to minimize our use of components that we can obtain through
only one source. Raw materials are generally available in large quantities from
a number of different suppliers who provide electronic bonding and safety stock
programs to ensure availability. We have a number of volume purchase agreements,
or VPA's, with selected suppliers of key items such as wire, fuses, resistors,
connectors, capacitors, sheet metal and semiconductors. We use VPA's, which
typically have 12 to 18 month terms, to ensure that we have a constant source
for required supplies. This practice enables us to reduce inventory expense and
produce substantial cost savings through volume purchase discounts. We have not
had a supply shortage that had a material adverse effect on our business.

MANAGEMENT INFORMATION TECHNOLOGY

In April 1999, we installed an Oracle ERP system. The Oracle ERP system
enables us to better organize and share critical information for our management
team. The web-based system allows for the input and access of important
information from any location. The system is capable of supporting a much larger
business and will allow us to easily integrate future acquisitions into our
operations. The system is Year 2000 compliant, and although it is not fully
operational, we have already used it to close our second quarter financials for
1999.

BACKLOG

We sell our products pursuant to purchase orders rather than long-term
contracts. Backlog consists of purchase orders on-hand having delivery dates
scheduled within the next six months. The table below illustrates our backlog at
December 31, 1998, March 31, 1999 and June 30, 1999:

<TABLE>
<CAPTION>
DECEMBER 31, 1998 MARCH 31, 1999 JUNE 30, 1999
----------------- -------------- -------------
<S> <C> <C> <C>
Backlog........................... $ 26 million $ 42 million $ 63 million
</TABLE>

Customers may cancel or reschedule most deliveries without penalty. Our
backlog has historically been a reliable indicator of future financial results;
however, backlog may not be as reliable an indicator in the future as customers
switch more orders to just-in-time deliveries. As a result, backlog may decrease
even if sales increase.

37
<PAGE>
COMPETITION

The merchant power supply manufacturing industry is highly fragmented and
characterized by intense competition. As of October 1997, there were estimated
to be over 1,000 power supply manufacturers worldwide, including over 300 in
North America. Only six power supply companies in the world, most of which
specialize in custom products, had merchant market sales greater than $200
million in 1997. The average power supply company is estimated to have annual
sales of approximately $15 million. No single company dominates the overall
power supply market, and our competitors vary depending upon the power range of
the product. Our competition includes companies located throughout the world
including Artesyn, Astec and Lucent. We believe that the principal bases of
competition in our targeted markets are breadth of product line, quality,
reliability, technical knowledge, flexibility, readily available products and a
competitive price. In times of an economic downturn, or when dealing with high
volume orders, we believe that price becomes a more important competitive
factor. Moreover, we believe price will become a more important competitive
factor in the future as the power supply industry consolidates, OEMs become
larger and more entrants from Asia begin to compete with us. Many of our
competitors are larger than us, and they may be able to obtain materials at
significantly lower prices. Depending on the location of our plants, we may not
be able to procure materials at costs as low as the materials costs of some of
our competitors.

INTELLECTUAL PROPERTY MATTERS

We regard certain equipment, processes, information and knowledge that we
have developed and use to design and manufacture our products as proprietary. We
rely on a combination of trade secret and other intellectual property laws,
confidentiality agreements executed by most of our Camarillo employees and other
measures to protect our proprietary rights. We currently hold 20 issued patents,
most of which are protected in more than one country. The remaining terms of
these patents vary with the earliest expiring in 2005. We also have various
patents pending as well as nine trademarks.

EMPLOYEES

At June 27, 1999, we employed 2,941 employees at our facilities in the
following functions:

<TABLE>
<CAPTION>
NUMBER OF
CAPACITY EMPLOYEES
- ------------------------------------------------------------------------ -----------
<S> <C>
Manufacturing........................................................... 2,340
Engineering............................................................. 205
General and administrative.............................................. 167
Sales and marketing..................................................... 141
Quality assurance....................................................... 88
-----
Total............................................................... 2,941
-----
-----
</TABLE>

We believe that our continued success depends, in part, on our ability to
attract and retain qualified personnel. We consider our relations with our
employees to be good. None of our employees are represented by a union.

38
<PAGE>
FACILITIES

The table below lists the Company's principal manufacturing and research and
development facilities.

<TABLE>
<CAPTION>
APPROXIMATE SIZE
LOCATION (SQUARE FEET) EMPLOYEES PRIMARY ACTIVITY
- --------------------------------- ---------------- ---------- -----------------------------------------------
<S> <C> <C> <C>
San Luis, Mexico 113,000 956 Manufacturing and Assembly

Santo Domingo, Dominican Republic 99,000 931 Manufacturing and Assembly, Warehousing

Camarillo, California 98,000 218 Administration, Research and Development,
Manufacturing, Sheet Metal Fabrication,
Warehousing, Marketing and Sales

Boston, Massachusetts 58,000 420 Administration, Research and Development,
Manufacturing, Warehousing, Marketing and Sales

Uster, Switzerland 53,000 204 Administration, Research and Development,
Manufacturing, Warehousing, Marketing and Sales

Isabela, Puerto Rico 46,000 29 Sub-assembly

Dubnica Nad Vahom, Slovakia 36,000 119 Manufacturing and Assembly

Limerick, Ireland 9,000 19 Research and Development, Small-volume
Manufacturing and Assembly
</TABLE>

We own our facilities in Mexico, Massachusetts, Slovakia and one 27,000
square foot facility in Uster, Switzerland included in the facilities listed
above. We lease the rest of our facilities pursuant to lease agreements with
expiration dates through 2008 in North America and 2005 in Europe.

LEGAL PROCEEDINGS

We are involved in routine litigation arising in the ordinary course of our
business. In our opinion, none of the pending litigation matters will have a
material adverse effect on our consolidated financial condition or results of
operations.

39
<PAGE>
MANAGEMENT

The following is a list of our current directors and executive officers:

<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------------- --- ---------------------------------------------------------------------
<S> <C> <C>
Steven J. Goldman.................... 42 President, Chief Executive Officer and Chairman of the Board

Eddie K. Schnopp..................... 41 Sr. Vice President, Finance, Chief Financial Officer and Secretary

Dennis R. Roark...................... 52 Executive Vice President and Chief Technology Officer

Brad W. Godfrey...................... 40 Sr. Vice President, Operations

David J. Hage........................ 52 Sr. Vice President, Sales and Marketing

Dr. Hanspeter Brandli................ 60 Director

Jon E.M. Jacoby...................... 61 Director
</TABLE>

STEVEN J. GOLDMAN. Mr. Goldman, who joined us in 1982, became our President
and Chief Executive Officer in 1990 and was named Chairman of the Board in
February 1997. He received his B.S. degree in electrical engineering from the
University of Bridgeport and his M.B.A. degree from Pepperdine University's
Executive program. Mr. Goldman is a contributing member and Co-Membership
Chairman of the San Fernando Valley Chapter of the Young President's
Organization.

EDDIE K. SCHNOPP. Mr. Schnopp, who joined us in 1981, was appointed Vice
President of Finance and Logistics in 1993 and Secretary and Chief Financial
Officer in 1995. He was appointed Sr. Vice President, Finance, Chief Financial
Officer and Secretary in February 1999. He received his B.S. degree in
Accounting from California State University Northridge. Mr. Schnopp is married
to Ms. Koep.

DENNIS R. ROARK. Mr. Roark, who joined us in 1988, was appointed Executive
Vice President of the Company in 1990. He was appointed Chief Technology Officer
in February 1999. Before joining us, Mr. Roark co-owned and managed California
D.C. Power Supplies, Inc., a designer and manufacturer of power supplies. He
received his B.S. degree in Engineering from California Polytechnic University-
Pomona.

BRAD W. GODFREY. Mr. Godfrey, who joined us in 1988, was appointed Vice
President of Worldwide Manufacturing in 1993. He was appointed Sr. Vice
President, Operations in February 1999. Before joining us, Mr. Godfrey owned
Reflections Manufacturing, a furniture and glass manufacturing company in
Canada.

DAVID J. HAGE. Mr. Hage was appointed Vice President of Sales and Marketing
when he joined us in 1993. He was appointed Sr. Vice President, Sales and
Marketing in February 1999. Before joining us, Mr. Hage was the Executive Vice
President of Power Convertibles Corporation, a subsidiary of Burr/Brown, Inc.
His previous experience includes Marketing Manager of International Electric
Utility and Field Systems Support Manager at Honeywell, and Director of
Marketing Systems and Director of Marketing Planning at SGS-Thomson
Semiconductors. Mr. Hage received his B.S. degree in Electrical Engineering from
Northern Arizona University and his M.B.A. degree from Arizona State University.

DR. HANSPETER BRANDLI. Dr. Brandli, who became a director in 1998, is
Chairman of the Board of Danzas Holding Ltd. Since 1993, Dr. Brandli has owned
and operated HPB Management Services, a management services company. He received
a Diploma in Physics in 1963 from the Federal Institute of Technology (ETH) in
Zurich, Switzerland and Ph.D. in Physics from the University of
Berne/Switzerland in 1968. Dr. Brandli is also President of the Board of
Directors of Melcher Ltd., Uster, Domenic Melcher Ltd., Uster, Melcher Holding
Ltd., Cham, and Melcher Produktion Ltd., Cham, which are all subsidiaries of the
Company's subsidiary, Melcher Holding AG.

40
<PAGE>
JON E.M. JACOBY. Mr. Jacoby is a director and an Executive Vice President
of Stephens Group, Inc. Mr. Jacoby is a Senior Executive Vice President of
Stephens Inc., an affiliate of Stephens Group, Inc., where he has been employed
since 1963. He received his B.S. degree from the University of Notre Dame and
his M.B.A. from Harvard Business School. He is a director of Delta & Pine Land
Company and Beverly Enterprises, Inc.

41
<PAGE>
SELLING STOCKHOLDERS

The following table sets forth certain information regarding the beneficial
ownership of our common stock by the selling stockholders immediately before
this offering and as adjusted to reflect their sales of our common stock
pursuant to this offering. The selling stockholders have provided us with all
information with respect to their beneficial ownership.

<TABLE>
<CAPTION>
OWNERSHIP
OF COMMON STOCK OWNERSHIP
PRIOR TO THE OF COMMON STOCK
OFFERING(2) NUMBER OF AFTER THE OFFERING(2)(3)
----------------------- SHARES ---------------------------
NUMBER PERCENTAGE OFFERED NUMBER PERCENTAGE
OWNER(1) OF SHARES OWNERSHIP HEREBY OF SHARES OF OWNERSHIP
- ------------------------------------------------ ---------- ----------- ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C>
Voting Trust dated as of June 8, 1998 (4)....... 6,771,188 39.5 1,540,600 5,230,588 24.7
Steven J. Goldman (5)........................... 1,835,847 10.7 459,200 1,376,647 6.5
Eddie K. Schnopp (6)............................ 253,835 1.5 63,500 190,335 *
Dennis R. Roark................................. 528,775 3.1 132,200 396,575 1.9
David J. Hage................................... 535,511 3.1 133,900 401,611 1.9
Brad W. Godfrey (7)............................. 289,938 1.7 72,500 217,438 1.0
Donna Koep (8).................................. 154,849 * 38,700 116,149 *
All other selling stockholders (9).............. 237,609 1.4 59,400 178,209 *
</TABLE>

- ------------------------

* Less than 1%.

(1) The address for each stockholder listed above is c/o the Company, 740 Calle
Plano, Camarillo, California 93012, except for the Voting Trust, whose
address is 111 Center Street, Little Rock, Arkansas 72201.

(2) Beneficial ownership is determined in accordance with rules of the
Securities and Exchange Commisson and includes shares over which the
indicated beneficial owner exercises voting and/or investment power. Shares
of our common stock subject to options currently exercisable or exercisable
within 60 days are deemed outstanding for computing the percentage ownership
of the person holding the options but are not deemed outstanding for
computing the percentage ownership of any other person. This information is
based on 17,137,851 shares outstanding on August 31, 1999 and 21,137,851
shares outstanding after this offering.

(3) Assumes no exercise of the option that we have granted to the underwriters
to purchase an additional 975,000 shares.

42
<PAGE>
(4) Stephens Group, Inc. and certain of its shareholders, directors, officers
and related parties have contributed their shares to a voting trust pursuant
to which the trustee of the trust has sole voting power. The voting trust is
required to vote such shares "for" or "against" proposals submitted to our
stockholders in the same proportion as the votes cast "for" and "against"
such proposals by all other stockholders, excluding abstentions.

The following entities and individuals, who have contributed shares to
the voting trust, as shown below, are selling stock in this offering:

<TABLE>
<CAPTION>
COMMON STOCK COMMON STOCK
HELD IN VOTING TRUST PRIOR NUMBER HELD IN VOTING TRUST AFTER
TO THE OFFERING OF THE OFFERING
-------------------------- SHARES --------------------------
NUMBER OF PERCENTAGE OFFERED NUMBER OF PERCENTAGE
SHARES OWNERSHIP HEREBY SHARES OWNERSHIP
----------- ------------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Stephens Group, Inc............................ 3,704,050 21.6% 860,400 2,843,650 13.5%
Jackson T. Stephens Trust One.................. 96,908 * 24,200 72,708 *
Bess C. Stephens Trust UID 1/4/85.............. 151,204 * 37,800 113,404 *
Warren & Harriet Stephens Children's Trust..... 120,679 * 20,700 99,979 *
Harriet Calhoun Stephens Trust UID 3/22/84..... 20,618 * 5,200 15,418 *
Elizabeth Ann Stephens Campbell Revocable
Trust........................................ 304,362 1.8% 76,100 228,262 1.1%
W. R. Stephens Jr. Revocable Trust............. 364,363 2.1% 91,100 273,263 1.3%
Jackson T. Stephens Grandchildrens Trust
AAAA......................................... 492,289 2.9% 123,100 369,189 1.7%
Pamela Diane Stephens Trust One UID 4/10/92.... 366,871 2.1% 91,700 275,171 1.3%
Warren Miles Amerine Stephens Trust UID
9/10/86...................................... 63,720 * 10,000 53,720 *
John Calhoun Stephens Trust UID 12/1/87........ 63,720 * 10,000 53,720 *
Laura Whitaker Stephens Trust UID 12/28/90..... 63,720 * 10,000 53,720 *
Coral Two Corporation.......................... 143,748 * 35,900 107,848 *
Coral Partners................................. 94,089 * 23,500 70,589 *
Jon E.M. Jacoby................................ 94,089 * 23,500 70,589 *
Jacoby Enterprises, Inc........................ 209,088 1.2% 52,300 156,788 *
J & J Partners................................. 52,272 * 13,100 39,172 *
Doug Martin.................................... 67,953 * 17,000 50,953 *
Rebecca Dickson................................ 20,000 * 5,000 15,000 *
Paula Ruffin................................... 20,000 * 5,000 15,000 *
Sarah Dickson.................................. 20,000 * 5,000 15,000 *
</TABLE>

Doug Martin was previously one of our directors from September 1995 to
April 1998. Jon E.M. Jacoby is currently one of our directors. Mr. Jacoby is
deemed beneficially to own a total of 1,437,385 shares (8.4%) of our common
stock, including the shares contributed to the Voting Trust by Coral Two
Corporation, Coral Partners, Jacoby Enterprises, Inc., J&J Partners, Warren
& Harriet Stephens Children's Trust and Jackson T. Stephens Grandchildrens
Trust AAAA, as well as the shares described in footnote 9 below. Not all of
the shares beneficially owned by Mr. Jacoby and certain of the persons and
entities shown in the table above have been contributed to the Voting Trust
and thus some shares beneficially owned by them are not reflected in the
table above. Mr. Jacoby disclaims beneficial ownership of all shares he is
deemed to own in his capacity as a trustee.

(5) Includes 750 shares owned by Mr. Goldman's wife's mother. Mr. Goldman
disclaims beneficial ownership of these shares.

(6) Does not include 154,849 shares owned by Ms. Koep, who is married to Mr.
Schnopp, but does include 3,800 shares owned by a trust for the benefit of
Mr. Schnopp's children. Mr. Schnopp disclaims beneficial ownership of all of
these shares.

(7) Includes 1,750 shares owned by Mr. Godfrey's brother. Mr. Godfrey disclaims
beneficial ownership of these shares.

43
<PAGE>
(8) Does not include 250,035 shares owned by Mr. Schnopp, who is married to Ms.
Koep. Ms. Koep is our Senior Vice President, Human Resources. Ms. Koep
disclaims beneficial ownership of these shares.

(9) Consists of the following trusts, none of which owns greater than one
percent:

<TABLE>
<CAPTION>
NUMBER OF NUMBER OF
SHARES OWNED NUMBER OF SHARES OWNED
PRIOR TO THE SHARES OFFERED AFTER THE
OFFERING HEREBY OFFERING
--------------- ----------------- -------------
<S> <C> <C> <C>

Grandchild's Trust One UID 12/16/85......................... 39,203 9,800 29,403
Grandchild's Trust Two UID 12/16/85......................... 39,203 9,800 29,403
Grandchild's Trust Three UID 12/89.......................... 39,203 9,800 29,403
Susan Stephens Campbell 1995 Trust UID 12/16/85............. 30,000 7,500 22,500
Craig D. Campbell, Jr. 1995 Trust UID 12/4/95............... 30,000 7,500 22,500
Elizabeth Chisum Campbell 1995 Trust UID 12/4/95............ 30,000 7,500 22,500
W R Stephens Jr. Children's Trust UID 3/1/95................ 30,000 7,500 22,500
</TABLE>

Jon E.M. Jacoby, a director of the Company, is a trustee of each of the
Trusts other than the W. R. Stephens Jr. Children's Trust and is deemed to
beneficially own the shares held by the Trusts. Mr. Jacoby disclaims
beneficial ownership of all shares he is deemed to own in his capacity as a
trustee.

44
<PAGE>
UNDERWRITING

The underwriters named below, through their representatives, Stephens Inc.,
BancBoston Robertson Stephens Inc. and Thomas Weisel Partners LLC, have
severally agreed to purchase from us and the selling stockholders the following
respective number of shares of our common stock:

<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
- ---------------------------------------------------------------------------------------------------- ------------
<S> <C>
Stephens Inc........................................................................................
BancBoston Robertson Stephens Inc...................................................................
Thomas Weisel Partners LLC..........................................................................

------------
Total...............................................................................................
------------
------------
</TABLE>

The underwriters propose to offer the shares of our common stock directly to
the public at the public offering price set forth on the cover page of this
prospectus, and to certain dealers at that price less a concession not in excess
of $___ per share. The underwriters may allow and such dealers may reallow a
concession not in excess of $___ per share to certain other dealers. After the
public offering of the shares, the underwriters may change the offering price
and other selling terms. The representatives of the underwriters have advised us
that the underwriters do not intend to confirm any shares to any accounts over
which they exercise discretionary authority.

The underwriting agreement makes the obligations of the underwriters subject
to conditions that we and the selling stockholders must satisfy, such as the
receipt of certificates, opinions and letters from us, the selling stockholders,
our counsel and our independent auditors. The underwriters are committed to
purchase all shares of common stock offered in this prospectus (other than those
covered by the over-allotment option described below) if any of those shares are
purchased.

The offering of the shares is made for delivery when, as and if accepted by
the underwriters and subject to prior sale and to withdrawal, cancellation or
modification of the offering without notice. The underwriters reserve the right
to reject an order for the purchase of shares in whole or in part.

OVER-ALLOTMENT OPTION. We have granted the underwriters an option,
exercisable within 30 days after the date of this prospectus, to purchase up to
975,000 additional shares of our common stock. To the extent that the
underwriters exercise this option, each underwriter is committed to purchase a
number of shares that reflects approximately the same percentage of total shares
that such underwriter purchased in the above table. We will be obligated to sell
shares to the underwriters to the extent the option is exercised. The
underwriters may exercise their option only to cover over-allotments made in
connection with the sale of common stock offered in this prospectus.

UNDERWRITING DISCOUNTS AND COMMISSIONS. The following table shows the per
share and total underwriting discounts and commissions that we and the selling
stockholders will pay to the underwriters. These amounts are shown assuming both
no exercise and full exercise of the underwriters' option to purchase 975,000
additional shares.

<TABLE>
<CAPTION>
PAID BY SELLING
PAID BY COMPANY STOCKHOLDERS
------------------------------------ -----------------
<S> <C> <C> <C>
NO EXERCISE FULL EXERCISE
----------------- -----------------
Per share................................................ $ $ $
----------------- ----------------- -----------------
Total.................................................... $ $ $
----------------- ----------------- -----------------
----------------- ----------------- -----------------
</TABLE>

45
<PAGE>
INDEMNITY. We and the selling stockholders have agreed to indemnify the
underwriters against certain liabilities, including liabilities under the
Securities Act, and to contribute to payments the underwriters may be required
to make in respect thereof.

LOCK-UP AGREEMENTS. Our executive officers and directors and the selling
stockholders have agreed that they will not, without the underwriters' consent,
sell or otherwise dispose of any shares of our common stock during the 90-day
period following the effective date of the registration statement relating to
this prospectus. This prohibition on sales also applies to options and other
securities that may be exercised for or converted into our common stock. The
underwriters have the discretion, at any time and without notice, to release the
sale prohibitions in part or in whole.

PASSIVE MARKET MAKING. In general, the SEC's rules prohibit the
underwriters from making a market in our common stock during the "cooling off"
period immediately preceding the commencement of sales in the offering. The SEC
has, however, adopted exemptions from these rules that permit passive market
making. These exemptions allow an underwriter to continue to make a market
subject to the conditions, among others, that its bid not exceed the highest bid
by a market maker not connected with the offering and that its net purchases on
any one trading day not exceed prescribed limits. Certain of the underwriters
intend to rely on these exemptions to engage in passive market making in our
common stock during the cooling off period.

STABILIZATION. The underwriters may over-allot or effect transactions that
stabilize, maintain or otherwise affect the market price of our common stock at
levels above those which might otherwise prevail in the open market. This may be
done by entering stabilizing bids, effecting syndicate covering transactions or
imposing penalty bids. A stabilizing bid means placing a bid or making a
purchase for the purpose of pegging, fixing or maintaining the price of the
common stock. A syndicate covering transaction means placing a bid on behalf of
the underwriting syndicate or making a purchase to reduce a short position
created in connection with the offering. A penalty bid means an arrangement that
permits the underwriters to reclaim a selling concession from a syndicate member
in connection with the offering when shares of common stock sold by the
syndicate member are purchased in syndicate covering transactions. Such
transactions may be effected on the Nasdaq National Market, in the
over-the-counter market or otherwise. Such stabilizing, if commenced, may be
discontinued at any time.

QUALIFIED INDEPENDENT UNDERWRITER. Under Rule 2720 of the National
Association of Securities Dealers, Inc., or NASD, Stephens Group's ownership of
our common stock makes the Company an affiliate of Stephens Inc. Because of
Stephens Group's ownership, the offering is being conducted in accordance with
Rule 2720. Under Rule 2720, when a NASD member participates in the underwriting
of an affiliate's equity securities, the initial public offering price can be no
higher than that recommended by a "qualified independent underwriter" meeting
certain standards, although this procedure need not be used if a bona fide
independent market exists for the securities. In this offering, however, the
underwriters have elected to use a qualified independent underwriter. BancBoston
Robertson Stephens Inc. has served in the role of qualified independent
underwriter for this offering and has recommended a price in compliance with the
requirements of Rule 2720. BancBoston Robertson Stephens Inc. has performed due
diligence investigations and reviewed and participated in the preparation of the
prospectus and the related registration statement.

OTHER MATTERS. Stephens Inc., one of the representatives of the
underwriters, has previously provided financial advisory services to us,
including in connection with the Melcher and IPD acquisitions. We currently have
engaged Stephens Inc. to advise us concerning other potential acquisitions, and
Stephens Inc. may provide advisory or other investment banking services to us in
the future.

Thomas Weisel Partners LLC, one of the representatives of the underwriters,
was organized and registered as a broker-dealer in December 1998. Since December
1998, Thomas Weisel Partners LLC, has been named as a lead or co-manager on 64
filed public offerings of equity securities, of which 33 have been completed,
and has acted as a syndicate manager in an additional 32 public offerings of
equity securities. Thomas Weisel Partners LLC does not have any material
relationship with us or any of our officers, directors or controlling persons,
except its contractual relationship with us under the underwriting agreement.

46
<PAGE>
DESCRIPTION OF CAPITAL STOCK

The following description summarizes the most important terms of our capital
stock. Because it is only a summary, it does not contain all of the information
that may be important to you. For a complete description, you should refer to
our Restated Certificate of Incorporation, or Certificate of Incorporation, and
Amended and Restated Bylaws, or Bylaws.

Our Certificate of Incorporation authorizes us to issue 60 million shares of
common stock and 30 million shares of preferred stock. As of August 31, 1999, we
had 17,137,851 shares of common stock and no shares of preferred stock issued
and outstanding. No other classes of capital stock are authorized under our
Certificate of Incorporation. The issued and outstanding shares of common stock
are duly authorized, validly issued, fully paid and non-assessable.

COMMON STOCK

Each share of common stock is entitled to one vote on all matters submitted
to a vote of the stockholders. Holders of common stock may receive dividends
only when our Board of Directors declares them, but our credit agreement
prohibits us from paying dividends without obtaining prior approval. In certain
cases, common stockholders may not receive dividends until we have satisfied our
obligations to any preferred stockholders. If we liquidate, dissolve or wind-up
our business, either voluntarily or not, common stockholders will share equally
in the assets remaining after we pay our creditors and any preferred
stockholders. The common stock has no preemptive, conversion or other
subscription rights, and all outstanding shares are fully paid and
non-assessable.

PREFERRED STOCK

Our Board of Directors may issue shares of preferred stock at any time, in
one or more series, without stockholder approval. The Board of Directors will
determine the designation, relative rights, preferences and limitations of each
series of preferred stock. If we issue preferred stock, it could delay a change
in control of the Company and make it harder to remove present management. Under
certain circumstances, preferred stock could also adversely affect the voting
power of common stockholders.

POSSIBLE ANTI-TAKEOVER EFFECT OF CERTAIN CHARTER PROVISIONS

The Certificate of Incorporation has several provisions that may delay or
deter changes in control or management of the Company. The Certificate of
Incorporation establishes a classified Board and requires that any action
required or permitted to be taken by stockholders of the Company must be
effected at a duly called annual or special meeting of stockholders and may not
be effected by a consent in writing. In addition, the Certificate of
Incorporation and Bylaws require that stockholders give advance notice to the
Company's Secretary of any directorship nominations or other business to be
brought by stockholders at any stockholders' meeting. The Certificate of
Incorporation also requires the approval of 75% of the Company's voting stock to
amend certain provisions of the Certificate of Incorporation. These provisions
may have the effect of delaying changes in control or management of the Company,
deterring hostile takeovers or deferring or preventing a tender offer or
takeover attempt that a stockholder might consider to be in such stockholder's
best interest, including those attempts that might result in a premium over the
market price for the shares held by the stockholders.

CERTAIN PROVISIONS OF DELAWARE LAW

We are a Delaware corporation and are subject to Section 203 of the Delaware
General Corporations Law, or DGCL. In general, Section 203 prevents an
"interested stockholder" (defined generally as a person owning 15% or more of a
corporation's outstanding voting stock) from engaging in a "business
combination" (as defined therein) with a Delaware corporation for three years
following the date such person became an interested stockholder, unless (i)
before such person became an interested

47
<PAGE>
stockholder, the Board of Directors of the corporation approved the transaction
in which the interested stockholder became an interested stockholder or approved
the business combination, (ii) upon consummation of the transaction that
resulted in the interested stockholder becoming an interested stockholder, the
interested stockholder owns at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced (excluding shares owned by
persons who are both officers and directors of the corporation and shares held
by certain employee stock ownership plans) or (iii) following the transaction in
which such person became an interested stockholder, the business combination is
approved by the Board of Directors of the corporation and authorized at a
meeting of stockholders by the affirmative vote of the holders of at least
two-thirds of the outstanding voting stock of the corporation not owned by the
interested stockholder.

LIMITATION OF LIABILITY AND INDEMNIFICATION AGREEMENTS

Our Certificate of Incorporation provides that to the fullest extent
permitted by the DGCL, our directors will not be liable to us or our
stockholders for monetary damages for breach of fiduciary duty as a director.
Under the DGCL, liability of a director may not be limited (i) for any breach of
the director's duty of loyalty to us or our stockholders, (ii) for acts or
omissions not in good faith or involving intentional misconduct or a knowing
violation of law, (iii) in respect of certain unlawful dividend payments or
stock redemptions or repurchases and (iv) for any transaction from which the
director derives an improper personal benefit. The effect of the provisions of
our Certificate of Incorporation is to eliminate the rights of the Company and
its stockholders (through stockholders' derivative suits on behalf of the
Company) to recover monetary damages against a director for breach of the
fiduciary duty of care as a director (including breaches resulting from
negligent or grossly negligent behavior), except in the situations described in
clauses (i) through (iv) above. This provision does not limit or eliminate the
rights of the Company or any stockholder to seek nonmonetary relief, such as an
injunction or rescission, in the event of a breach of a director's duty of care.
In addition, our Certificate of Incorporation provides that the Company shall
indemnify its directors, officers, employees and agents against losses incurred
by any such person because such person was acting in such capacity.

We have entered into indemnification agreements, with each of the directors,
executive officers and certain other officers of the Company pursuant to which
we have agreed to indemnify such director or officer from claims, liabilities,
damages, expenses, losses, costs, penalties or amounts paid in settlement
incurred by such director or officer in or arising out of his or her capacity as
a director, officer, employee and/or agent of the Company or any other
corporation of which such person is a director or officer at our request to the
maximum extent provided by applicable law. In addition, such director or officer
is entitled to an advance of expenses to the maximum extent authorized or
permitted by law.

To the extent that the Board of Directors or the stockholders of the Company
wish to limit or repeal our ability to provide indemnification as set forth in
the Certificate of Incorporation, such repeal or limitation may not be effective
as to directors and officers who are parties to the indemnification agreements,
because their rights to full protection would be contractually assured by the
indemnification agreements. It is anticipated that similar contracts may be
entered into, from time to time, with future directors of the Company.

TRANSFER AGENT AND REGISTRAR

The Transfer Agent and Registrar for our common stock is American Stock
Transfer & Trust Company.

48
<PAGE>
LEGAL MATTERS

O'Melveny & Myers LLP, Los Angeles, California, will pass upon the validity
of the common stock that we are offering. Wright, Lindsey & Jennings LLP, Little
Rock, Arkansas will pass upon certain legal matters for the underwriters.
Attorneys at O'Melveny & Myers LLP involved in this offering own 8,400 shares of
the Company's common stock.

EXPERTS

The financial statements and the related financial statement schedule
incorporated in this prospectus by reference from the Company's Annual Report on
Form 10-K for the year ended December 31, 1998 have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their report, which is
incorporated herein by reference, and such financial statements have been so
incorporated in reliance upon the report of such firm given upon their authority
as experts in accounting and auditing.

WHERE YOU CAN FIND MORE INFORMATION

We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any document we file at the
SEC's public reference rooms at 450 Fifth Street, N.W., in Washington, D.C.,
20549. Please call the SEC at 1-800-SEC-0330 for further information on the
public reference rooms. You may also obtain our SEC filings from the SEC's
Website at "http://www.sec.gov."

The SEC allows us to "incorporate by reference" the information we file with
them, which means that we can disclose important information to you by referring
you to those documents. Statements made in this prospectus as to the contents of
any contract, agreement or other document are not necessarily complete, and, in
each instance, we refer you to the copy of such document filed as an exhibit to
the registration statement or otherwise filed with the SEC. The information
incorporated by reference is considered to be part of this prospectus. When we
file information with the SEC in the future, that information will automatically
update and supersede this information. We incorporate by reference the documents
listed below and any future filings we will make with the SEC under Sections
13(a), 13(c), 14 or 15(d) of the Securities and Exchange Act of 1934:

1. Annual Report on Form 10-K for the fiscal year ended December 27, 1998;

2. Quarterly Reports on Form 10-Q for the quarters ended March 28, 1999 and
June 27, 1999;

3. Current Reports on Form 8-K and Form 8-K/A dated January 29, 1999; and

4. Current Reports on Form 8-K and Form 8-K/A dated August 31, 1998.

You may request a copy of these filings, at no cost, by writing or
telephoning our transfer agent at the following address:

American Stock Transfer & Trust Company
40 Wall Street
New York, New York 10065
(212) 936-5100

49
<PAGE>
[Picture of Various Power-One Products]
<PAGE>
[LOGO]

---------------------

PROSPECTUS

---------------------

STEPHENS INC.
BANCBOSTON ROBERTSON STEPHENS
THOMAS WEISEL PARTNERS LLC
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, incurred by the Company in connection
with the sale and distribution of common stock being registered. All amounts are
estimates except the SEC registration fee and the NASD fee.

<TABLE>
<CAPTION>
AMOUNT TO
BE PAID
----------
<S> <C>
SEC registration fee........................................................................ $ 52,538
NASD fee.................................................................................... 19,398
Listing fee on NASDAQ....................................................................... 17,500
Printing and engraving expenses............................................................. 135,000
Legal fees and expenses..................................................................... 110,000
Accounting fees and expenses................................................................ 90,000
Blue Sky qualification fees and expenses.................................................... 2,500
Transfer Agent and Registrar fees........................................................... 3,500
Miscellaneous fees and expenses............................................................. 19,564
----------
Total................................................................................... $ 450,000
----------
----------
</TABLE>

The selling stockholders will bear the underwriting discounts and
commissions attributable to the shares sold by them in this offering, as well as
their pro rata portion of the SEC and NASD fees.

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS

The Company's Certificate of Incorporation provides that to the fullest
extent permitted by the DGCL, a director of the Company shall not be liable to
the Company or its stockholders for monetary damages for breach of fiduciary
duty as a director. Under the DGCL, liability of a director may not be limited
(i) for any breach of the director's duty of loyalty to the Company or its
stockholders, (ii) for acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law, (iii) in respect of
certain unlawful dividend payments or stock redemptions or repurchases and (iv)
for any transaction from which the director derives an improper personal
benefit. The effect of the provisions of the Company's Certificate of
Incorporation is to eliminate the rights of the Company and its stockholders
(through stockholders' derivative suits on behalf of the Company) to recover
monetary damages against a director for breach of the fiduciary duty of care as
a director (including breaches resulting from negligent or grossly negligent
behavior), except in the situations described in clauses (i) through (iv) above.
This provision does not limit or eliminate the rights of the Company or any
stockholder to seek nonmonetary relief, such as an injunction or rescission, in
the event of a breach of a director's duty of care. In addition, the Company's
Certificate of Incorporation provides that the Company shall indemnify its
directors, officers, employees and agents against losses incurred by any such
person because such person was acting in such capacity.

The Company has entered into agreements (the "Indemnification Agreements")
with each of the directors and officers of the Company pursuant to which the
Company has agreed to indemnify such director or officer from claims,
liabilities, damages, expenses, losses, costs, penalties or amounts paid in
settlement incurred by such director or officer in or arising out of such
person's capacity as a director, officer, employee and/or agent of the Company
or any other corporation of which such person is a director or officer at the
request of the Company to the maximum extent provided by applicable law. In
addition, such director or officer is entitled to an advance of expenses to the
maximum extent authorized or permitted by law.

II-1
<PAGE>
To the extent that the Board of Directors or the stockholders of the Company
wish to limit or repeal the ability of the Company to provide indemnification as
set forth in the Company's Certificate of Incorporation, such repeal or
limitation may not be effective as to directors and officers who are parties to
the Indemnification Agreements, because their rights to full protection would be
contractually assured by the Indemnification Agreements. It is anticipated that
similar contracts may be entered into, from time to time, with future directors
of the Company.

The Form of Underwriting Agreement filed as Exhibit 1.1 to this Registration
Statement provides for indemnification by the Underwriters of the Company and
its directors and officers for certain liabilities arising under the Securities
Act or otherwise.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- --------- -------------------------------------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement
5.1 Opinion of O'Melveny & Myers LLP
10.1 Second Amended and Restated Credit Agreement among Power-One, Inc., Certain Subsidiaries of
Power-One, Inc., Certain Lenders and Bank of America, N.A., as Administrative Agent, and
Union Bank of California, N.A., as Co-Agent
23.1 Independent Auditor's Consent
23.2 Consent of O'Melveny & Myers LLP (included in Exhibit 5.1)
24.1 Power of Attorney (see page S-1)
</TABLE>

ITEM 17. UNDERTAKINGS

(a) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933 (the "Securities
Act") each filing of the Registrant's annual report pursuant to Section 13(a) or
15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing
of an employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in this
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.

(b) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described in Item 14 or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Securities Act, and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered hereunder, the Registrant will,
unless in the opinion of its counsel, the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.

(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of Prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
Prospectus filed by the Registrant pursuant to

II-2
<PAGE>
Rule 424(b)(1) or (4) or Rule 497(h) under the Securities Act shall be
deemed to be part of this Registration Statement as of the time it was
declared effective.

(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of Prospectus shall
be deemed to be a new Registration Statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.

II-3
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Amendment to
the Registration Statement on Form S-3 to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Camarillo, State of
California on the 10th day of September, 1999.

<TABLE>
<S> <C> <C>
POWER-ONE, INC.

By: /s/ STEVEN J. GOLDMAN
-----------------------------------------
Steven J. Goldman
PRESIDENT AND CHIEF EXECUTIVE OFFICER
</TABLE>

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints Steven J. Goldman and Eddie K. Schnopp,
and each of them acting individually, as his attorney in fact and agent, each
with full power of substitution, for him in any and all capacities, to sign any
and all amendments to this Registration Statement (including post-effective
amendments), and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in connection therewith, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them or their substitutes, may lawfully
do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------ -------------------------- -------------------

<C> <S> <C>
President, Chief Executive
/s/ STEVEN J. GOLDMAN Officer and Chairman
- ------------------------------ (Principal Executive September 10, 1999
Steven J. Goldman Officer)

Senior Vice President -
* Finance, Chief Financial
- ------------------------------ Officer and Secretary September 10, 1999
Eddie K. Schnopp (Principal Financial and
Accounting Officer)

*
- ------------------------------ Director September 10, 1999
Jon E.M. Jacoby

*
- ------------------------------ Director September 10, 1999
Hanspeter Brandli
</TABLE>

<TABLE>
<S> <C> <C> <C>
*By: /s/ STEVEN J. GOLDMAN
-------------------------
Steven J. Goldman
ATTORNEY-IN-FACT
</TABLE>

II-4
<PAGE>
EXHIBIT INDEX

<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- ------ --------------------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement

5.1 Opinion of O'Melveny & Myers LLP

10.1 Second Amended and Restated Credit Agreement among Power-One, Inc.,
Certain Subsidiaries of Power-One, Inc., Certain Lenders and Bank of
America, N.A., as Administrative Agent, and Union Bank of California,
N.A., as Co-Agent

23.1 Independent Auditor's Consent

23.2 Consent of O'Melveny & Myers LLP (included in Exhibit 5.1)

24.1 Power of Attorney (see page S-1)
</TABLE>

<PAGE>
POWER-ONE, INC.

6,500,000 SHARES*
COMMON STOCK

($0.001 PAR VALUE)

UNDERWRITING AGREEMENT

September ___, 1999
STEPHENS INC., BANCBOSTON ROBERTSON STEPHENS INC.
AND THOMAS WEISEL PARTNERS LLC
As Representatives of the several
Underwriters named in Schedule II hereto.
c/o Stephens Inc.
111 Center Street
Little Rock, Arkansas 72201

Gentlemen:

Power-One, Inc., a Delaware corporation (the "Company"), and the
individuals whose names appear on Schedule I hereto, designated as selling
stockholders (collectively, the "Selling Stockholders"), severally and not
jointly, confirm their agreement with the several underwriters (the
"Underwriters") for whom you are acting as representatives (the
"Representatives") as follows:

The Company proposes to issue and sell 4,000,000 shares of its
authorized and unissued shares of common stock, par value $0.001 per share,
to the several Underwriters (the "Company Shares"), and the Selling
Stockholders, acting severally and not jointly, propose to sell an aggregate
of 2,500,000 shares of the authorized and outstanding shares of the Company's
common stock, par value $0.001 per share, to the several Underwriters (the
"Selling Stockholders Shares"). The Company Shares and the Selling
Stockholders Shares are hereinafter collectively referred to as the
"Underwritten Shares." The Company and the Selling Stockholders are
sometimes referred to collectively herein as "Sellers." The respective
amounts of Underwritten Shares to be initially sold by each of the Sellers is
set forth on Schedule I attached hereto. The Company's common stock is more
fully described in the Registration Statement and the Prospectus hereinafter
mentioned.

For the sole purpose of covering over-allotments in connection with the
sale of the Underwritten Shares, the Company shall grant to the Underwriters
the option (the "Option") described in Section 2 hereof to purchase all or
any part of an additional 975,000 shares of the Company's common stock (the
"Option Shares"). The Underwritten Shares and the Option Shares purchased
pursuant to this Underwriting Agreement (this "Agreement") are herein called
the "Shares" and the proposed offering of the Shares by the Underwriters is
hereinafter referred to as the "Public Offering."

The Company has filed with the Securities and Exchange Commission (the
"Commission"), pursuant to the Securities Act of 1933, as amended (the "Act"),
and published rules and regulations adopted

- -----------------------
*Plus up to 975,000 additional shares of common stock to cover over-allotments.

<PAGE>

by the Commission under the Act (the "Rules"), a registration statement on
Form S-3 ("Form S-3") (File No. 333-84285), including a Preliminary
Prospectus, relating to the Shares, and such amendments to such registration
statement as may have been filed with the Commission to the date of this
Agreement. The Company will also file with the Commission one of the
following: (A) prior to effectiveness of such registration statement, a
further amendment to such registration statement, including the form of final
prospectus, and/or (B) after effectiveness of such registration statement, a
final prospectus in accordance with Rules 430A and 424(b). The Company has
furnished to the Representatives copies of such registration statement, each
amendment to it filed by the Company with the Commission, and each
Preliminary Prospectus filed by the Company with the Commission. The
registration statement as amended at the time it becomes or became effective
(the "Effective Date"), including financial statements and all exhibits and
any information deemed to be included by Rule 430A, is called the
"Registration Statement." The term "Preliminary Prospectus" means any
Preliminary Prospectus (as referred to in Rule 430 or Rule 430A of the Rules)
included at any time as a part of the registration statement and the term
"Prospectus" means the prospectus relating to the Shares that is first filed
pursuant to Rule 424(b) after the date hereof.

Any reference herein to the Registration Statement, any Preliminary
Prospectus or the Prospectus shall be deemed to refer to and include any
documents incorporated by reference therein on or before the Effective Date
or the date of such Preliminary Prospectus or the Prospectus, as the case may
be (the "Incorporated Documents"), and shall be deemed to refer to and
include any documents incorporated by reference therein filed after the date
of such Registration Statement, any Preliminary Prospectus or the Prospectus.

As the Representatives, you have advised the Company that (a) you are
authorized to enter into this Agreement on behalf of the several Underwriters
and (b) the Underwriters are willing, acting severally and not jointly, to
purchase the amounts of the Underwritten Shares set forth opposite their
respective names in Schedule II hereto, plus their pro rata portion of the
Option Shares if you elect to exercise the over-allotment Option in whole or
in part for the accounts of the several Underwriters.

In consideration of the mutual agreements contained herein and of the
interests of the parties in the transactions contemplated hereby, the
Company, the Selling Stockholders and the Underwriters hereby agree as
follows:

1. REPRESENTATIONS, WARRANTIES AND AGREEMENTS

(a) The Company represents and warrants to, and agrees with, each
Underwriter as follows:

(i) The Company has been duly organized, is in compliance
with its Certificate of Incorporation, and is validly existing as a
corporation in good standing under the laws of the State of Delaware,
with full corporate power and authority to own its properties and
conduct its business as described in the Prospectus. Each significant
subsidiary (as defined by the Act) of the Company (each a "Subsidiary"
and collectively, the "Subsidiaries") has been duly incorporated and
is validly existing as a corporation, in good standing under the laws
of the jurisdiction of its organization, with full corporate power and
authority to own or lease its properties, and conduct its business.
The Company and the Subsidiaries are duly qualified to transact
business in all jurisdictions in which the conduct of their business
or the ownership or lease of their properties requires such
qualifications except where the failure to be so qualified would not
reasonably be expected to have a Material Adverse Effect (as defined
below). The Company owns all of the outstanding capital stock of its
Subsidiaries free and clear of any pledge, lien, security interest,
encumbrance, claim or equitable interest (except for (A) shares owned
by others

2
<PAGE>

and held in trust for the Company in accordance with the
laws of the country of incorporation and (B) a pledge of 65% of the
issued and outstanding capital stock of each of Power Electronics,
Inc., Poder Uno de Mexico, S.A., de C.V. and Melcher Holding AG made
by the Company in favor of Bank of America N.A., pursuant to that
certain second Amended and Restated Credit Agreement among the
Company, certain subsidiaries of the Company, certain lenders and Bank
of America, N.A. as Administrative Agent and Union Bank of California,
N.A. as Co-Agent).

(ii) The outstanding shares of common stock of the Company,
including the Selling Stockholders Shares, have been duly and validly
authorized and issued and are fully paid and non-assessable; the
Shares are duly and validly authorized, and, if not now issued, when
issued and paid for as contemplated herein, will be fully paid and
non-assessable. There are no preemptive or other similar rights to
subscribe for or to purchase, or any restriction upon the voting or
transfer of the Shares pursuant to the Company's Certificate of
Incorporation, bylaws, or other governing documents or any agreement
or other instrument to which the Company or any of its Subsidiaries is
a party or by which any of them may be bound. Neither the filing of
the Registration Statement nor the offering of the Shares as
contemplated by this Agreement gives rise to any rights, other than
those which have been waived or satisfied, for or relating to the
registration of any shares of any class of the Company's capital
stock. The Company Shares have been approved for listing on the
Nasdaq National Market, subject to official notice of issuance.

(iii) The Shares conform in all material respects with the
statements concerning them in the Prospectus. As of the Closing Date
(as defined below) and any Option Closing Date (as defined below), if
applicable, the Company will have the authorized capital stock set
forth under the caption "Description of Capital Stock" in the
Prospectus. No further corporate approval or authority on behalf of
the Company will be required for the issuance and sale of the Shares
to be sold by the Company as contemplated herein.

(iv) Any Preliminary Prospectus, the Prospectus and the
Registration Statement comply as to form with the requirements of the
Act and the Rules, including Form S-3. The Company meets the
requirements of, and is entitled to use, Form S-3 for the Public
Offering.

(v) Neither the Commission nor any other agency, body,
authority, court or arbitrator of competent jurisdiction has, by order
or otherwise, prohibited or suspended the use of any Preliminary
Prospectus or the Prospectus relating to the proposed offering of the
Shares or, to the Company's knowledge, instituted proceedings for that
purpose. The Registration Statement, the Prospectus and any
amendments or supplements thereto at the time they became or become
effective or were filed or are filed with the Commission contained or
will contain all statements which are required to be stated therein
by, and in all material respects conformed or will conform to the
requirements of, the Act and the Rules. Neither the Registration
Statement nor any any amendment thereto, and neither the Prospectus
nor any supplement thereto, as of its date and while effective,
contained any untrue statement of a material fact or omitted to state
any material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they
were made, not misleading; PROVIDED, HOWEVER, that the Company does
not make any representations or warranties as to information contained
in or omitted from the Registration Statement or the Prospectus, or
any such amendment or supplement, in reliance upon, and in conformity
with, written information furnished to the Company by or

3
<PAGE>

on behalf of any Underwriter through the Representatives, expressly
for use in the preparation thereof as hereinafter set forth in
Section 14.

(vi) The documents which are incorporated by reference in the
Registration Statement, any Preliminary Prospectus or the Prospectus
or from which information is so incorporated by reference, when they
were filed (or, if any amendment with respect to such document was
filed, when such amendment was filed) with the Commission complied in
all material respects with the requirements of the Exchange Act, and
the rules and regulations thereunder and any documents so filed and
incorporated by reference subsequent to the Effective Date shall, when
they are so filed with the Commission, conform in all material
respects with the requirements of the Exchange Act and the rules and
regulations thereunder.

(vii) The consolidated financial statements of the Company and
the Subsidiaries, together with related notes and schedules, as set
forth or incorporated by reference in the Registration Statement,
present fairly the consolidated financial condition and the results of
operations of the Company and the Subsidiaries, at the indicated dates
and for the indicated periods. Such financial statements have been
prepared in accordance with generally accepted accounting principles
("GAAP"), consistently applied throughout the periods involved, and
all adjustments necessary for a fair presentation of results for such
periods have been made. The summary financial information and the
selected financial data included in the Prospectus present fairly in
accordance with GAAP (other than the "EBITDA," "EBITDA margin" and
"backlog" information) the information shown therein and have been
compiled on a basis consistent with that of the audited and unaudited
financial statements from which they were derived.

(viii) Except as is disclosed in the Prospectus, there is no
action or proceeding pending or, to the knowledge of the Company,
threatened against the Company, any of its Subsidiaries or any of
their respective officers or any of their properties, assets or rights
before any court or administrative or governmental agency or other
body which reasonably would be expected to (A) result in any material
adverse change in the financial condition, or in the earnings,
business, affairs, properties, business prospects or results of
operations of the Company and its Subsidiaries taken as a whole
("Material Adverse Change" or "Material Adverse Effect," as the case
may be), whether or not arising in the ordinary course of business,
(B) adversely affect the performance of this Agreement or the
consummation of the transactions herein contemplated, except as
disclosed in the Prospectus and for which the Company maintains a
reserve in an amount which it believes is adequate to cover potential
liabilities, or (C) be required to be disclosed in the Registration
Statement.

(ix) The Company and each of its Subsidiaries are not in
violation of any law, ordinance, governmental rule or regulation or
court decree to which they may be subject which violation reasonably
would be expected to have a Material Adverse Effect.

(x) The Company and its Subsidiaries have (A) to the best of
the Company's knowledge, good and marketable title to all of the real
properties and (B) valid title to all other assets reflected in the
consolidated financial statements hereinabove described or as
described in the Prospectus as being owned by them, subject to no
lien, mortgage, pledge, charge or encumbrance of any kind except those
securing indebtedness described in such financial statements or as
described in the Prospectus or which do not materially affect the
present or proposed use of such properties or assets or would not
cause a Material Adverse

4
<PAGE>

Effect. The Company and its Subsidiaries occupy their leased
properties under valid, subsisting and binding leases with only
such exceptions as in the aggregate are not material and do not
interfere with the conduct of the business of the Company and its
Subsidiaries. There exists no default by the Company, or to the
Company's knowledge, of any other party, under the provisions of
any lease, contract or other obligation to which the Company is a
party which may result in a Material Adverse Change.

(xi) The Company and its Subsidiaries have filed all federal,
state and other tax returns and reports which have been required to be
filed and have paid all taxes indicated by said returns and all
assessments received by them to the extent that such taxes have become
due and there is no tax deficiency that has been or, to the Company's
knowledge, might be asserted against the Company or any of its
Subsidiaries that might have a Material Adverse Effect. All material
tax liabilities are adequately provided for on the books of the
Company and its Subsidiaries.

(xii) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, as they may be
amended or supplemented, and except as set forth in the Registration
Statement, (A) there has not been any Material Adverse Change nor, to
the knowledge of the Company, is any such change threatened, (B) there
has not been any transaction entered into by the Company or its
Subsidiaries that is material to the earnings, business, affairs,
properties, business prospects or operations of the Company and its
Subsidiaries taken as a whole, other than transactions in the ordinary
course of business and changes and transactions contemplated by the
Registration Statement and the Prospectus, as they may be amended or
supplemented, (C) other than changes in the amounts outstanding under
the Company's and its Subsidiaries' revolving credit facilities, there
has not been any material change in the capital stock, long term debt
or material liabilities of the Company or its Subsidiaries, and (D)
there has not been any dividend or distribution of any kind declared,
paid or made on the capital stock of the Company. Neither the Company
nor any Subsidiary has any contingent obligations or liabilities which
are required to be but are not disclosed in the Registration Statement
and the Prospectus.

(xiii) The filing of the Registration Statement and related
Prospectus and the execution and delivery of this Agreement have been
duly authorized by the Board of Directors of the Company; this
Agreement constitutes a valid and binding obligation of the Company
enforceable in accordance with its terms except as enforceability may
be limited by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other laws affecting creditors' rights
generally and by general principles of equity and federal and state
securities laws. Neither the Company nor any of its Subsidiaries is
in breach or violation of or default under any indenture, mortgage,
deed of trust, lease, contract, note or other agreement or instrument
to which it is a party or by which it or any of its properties is
bound and which breach, violation or default would reasonably be
expected to have a Material Adverse Effect. The consummation of the
transactions herein contemplated and the fulfillment of the terms
hereof will not result in a breach or violation of any of the material
terms and provisions of, or constitute a default under, any indenture,
mortgage, deed of trust, lease, contract, note or other agreement or
instrument to which the Company or any Subsidiary is a party, or of
the Company's or any Subsidiary's Certificate of Incorporation or
bylaws or any law, decree, order, rule, writ, injunction or regulation
applicable to the Company or any Subsidiary of a court or of any
regulatory body or administrative agency or other governmental body
having jurisdiction over the Company

5
<PAGE>

and its Subsidiaries except for such breaches, violations or
defaults as would not reasonably be expected to have a Material
Adverse Effect.

(xiv) Each approval, consent, order, authorization,
designation, declaration or filing by or with any regulatory,
administrative or other governmental body necessary in connection with
the execution and delivery by the Company of this Agreement and
performance of its obligations hereunder (except such additional steps
as may be necessary to qualify the Shares for public offering by the
Underwriters under state securities or Blue Sky laws, and filing the
Prospectus under Rule 424(b)) has been obtained or made and is in full
force and effect.

(xv) The Company and each Subsidiary hold all material
licenses, authorizations, charters, certificates and permits from
governmental authorities which are necessary to the conduct of their
businesses, except where the failure to hold any such licenses,
authorizations, charters, certificates or permits would not reasonably
be expected to result in a Material Adverse Effect, and neither the
Company nor any Subsidiary has received notice of any proceeding
relating to the revocation or modification of any of such licenses,
authorizations, charters, certificates or permits. The Company and
its Subsidiaries own or otherwise possess rights to the patents,
patent rights, licenses, inventions, copyrights, trademarks, service
marks and trade names presently employed by them in connection with
the businesses now operated by them as described in the Prospectus,
and neither the Company nor any of its Subsidiaries has infringed or
received any notice of infringements of or conflict with asserted
rights of others with respect to any of the foregoing, except where
such infringement or conflict would not reasonably be expected to
result in a Material Adverse Effect.

(xvi) Deloitte & Touche LLP, independent auditors, who have
certified certain of the financial statements filed with the
Commission and incorporated by reference in the Registration Statement
and Prospectus, are independent public accountants within the meaning
of the Act, the Rules and Regulation S-X of the Commission and Rule
101 of the Code of Professional Ethics of the American Institute of
Certified Public Accountants.

(xvii) There are no agreements, contracts or other documents of
a character required to be described in the Registration Statement or
the Prospectus or required by Form S-3 to be filed as exhibits to the
Registration Statement or incorporated by reference in the
Registration Statement which are not described, filed or incorporated
as required.

(xviii) No labor dispute is pending or, to the knowledge of the
Company, threatened by the Company's or any Subsidiary's employees
which could result in a Material Adverse Effect. No collective
bargaining agreement exists with any of the Company's employees and,
to the Company's knowledge, no agreement is imminent.

(xix) Except as contemplated by Section 2 hereof and as
disclosed in the Prospectus and permitted by the Rules, the Company
has not (itself or through any person) taken and will not take,
directly or indirectly, any action designed to or which might
reasonably be expected to, cause or result in a violation of Section 5
of the Act or Regulation M under the Act or in stabilization or
manipulation of the price of the Company's common stock.

(xx) Without limiting the generality of any of the foregoing
representations and warranties and except to the extent no Material
Adverse Effect would reasonably be

6
<PAGE>

expected to occur, (a) none of the operations of the Company or its
Subsidiaries is in violation of any material environmental law,
regulation or any permit; (b) neither the Company nor any of its
Subsidiaries has been notified that it is under investigation or
under review by any governmental agency with respect to compliance
therewith or with respect to the generation, use, treatment,
storage or release of hazardous material; (c) neither the Company
nor any of its Subsidiaries have any material liability in
connection with the past generation, use, treatment, storage,
disposal or release of any hazardous material; (d) there is no
hazardous material that may reasonably be expected to pose any
material risk to safety, health, or the environment, on, under or
about any property owned, leased or operated by the Company or any
of its Subsidiaries or, to the knowledge of the Company, any
property adjacent to any such property; and (e) there has
heretofore been no release of any hazardous material on, under or
about such property, or, to the knowledge of the Company, any such
adjacent property. None of the present or, to the knowledge of the
Company, past property of the Company or any of its Subsidiaries is
listed or proposed for listing on the National Priorities List
pursuant to the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended ("CERCLA"), or on the
Comprehensive Environmental Response Compensation Liability
Information System List ("CERCLIS") or any similar state list of
sites requiring remedial action. Neither the Company nor any of
its Subsidiaries is subject to any state Environmental Property
Transfer Act, or to the extent that any such statute is applicable
to any property, the Company and its Subsidiaries have fully
complied with their obligations under such statute(s), and neither
has any outstanding obligations or liabilities under any state
Environmental Property Transfer Act.

(xxi) The Company and its Subsidiaries maintain insurance of
the types and in the amounts customary for their businesses,
including, but not limited to, insurance covering liability and real
and personal property owned or leased by the Company against theft,
damage, destruction, acts of vandalism and all other risks customarily
insured against, all of which insurance is in full force and effect.

(xxii) Neither the Company nor any Subsidiary has at any time
during the last five years (a) made any unlawful contribution to any
candidate for foreign office, or failed to disclose fully any
contribution in violation of law, or (b) made any payment to any
federal or state governmental officer or official, or other person
charged with similar public or quasi-public duties, other than
payments required or permitted by the laws of the United States or any
jurisdiction thereof.

(xxiii) Each executive officer or director of the Company who is
not a Selling Stockholder has executed a lock-up agreement, a form of
which is attached hereto as Exhibit "A" (the "Lock-Up Agreement").

(b) Each Selling Stockholder, severally and not jointly, represents
and warrants as follows:

(i) Such Selling Stockholder has duly executed and delivered
a power of attorney (individually, a "Power of Attorney" and with all
other powers of attorney, collectively the "Powers of Attorney"), in
the form heretofore delivered to the Representatives, appointing the
person named therein as such Selling Stockholder's attorney-in-fact
(the "Attorney-in-Fact") with authority to perform this Agreement on
behalf of such Selling Stockholder. Certificates in negotiable form
for the Shares to be sold by such Selling Stockholder hereunder have
been delivered to the Company's transfer

7
<PAGE>

agent for the purpose of delivery pursuant to this Agreement. All
authorizations, orders and consents necessary for the execution and
delivery by such Selling Stockholder of this Agreement and the
Power of Attorney have been duly and validly given, and such
Selling Stockholder has full legal right, power and authority to
enter into this Agreement and the Power of Attorney and to sell,
assign, transfer and deliver to the several Underwriters the Shares
to be sold by such Selling Stockholder hereunder. Such Selling
Stockholder agrees that the Shares to be sold by such Selling
Stockholder that are represented by the certificates delivered to
the transfer agent are for the benefit of, coupled with and subject
to the interests of the Underwriters hereunder, that the
arrangements made for the appointment of the Attorney-in-Fact are
to that extent irrevocable, and that the obligations of such
Selling Stockholder hereunder shall not be terminated except as
provided in this Agreement or the Power of Attorney, by any act of
such Selling Stockholder, by operation of law or otherwise, whether
by death or incapacity or by the occurrence of any other event. If
such Selling Stockholder should die or become incapacitated or if
any other event shall occur before delivery of Shares to be sold by
such Selling Stockholder hereunder, the certificates for such
Shares delivered to the transfer agent shall be delivered by the
transfer agent in accordance with this Agreement as if such death,
incapacity or other event had not occurred, regardless of whether
the transfer agent or the Attorney-in-Fact shall have received
notice thereof.

(ii) Such Selling Stockholder will have at the Closing (as
such date is hereinafter defined) good and valid title to the portion
of the Shares to be sold by such Selling Stockholder, free of any
liens, encumbrances, equities and claims, and full right, power and
authority to effect the sale and delivery of such Shares; and upon the
delivery of and payment for such Shares pursuant to this Agreement,
good and valid title thereto, free of any liens, encumbrances,
equities and claims, will be transferred to the several Underwriters.

(iii) The consummation by such Selling Stockholder of the
transactions herein contemplated and the fulfillment of the terms
hereof will not result in a breach of any of the terms and provisions
of, or constitute a default under, any indenture, mortgage, deed of
trust or other agreement or instrument to which such Selling
Stockholder is a party, or of any order, rule or regulation applicable
to such Selling Stockholder of any court, or of any regulatory body or
administrative agency or other governmental body having jurisdiction.

(iv) Such Selling Stockholder has not taken and will not take
for a period of 180 days following the date hereof, directly or
indirectly, any action designed to, or which has constituted, or which
might reasonably be expected to cause or result in stabilization or
manipulation of the price of the common stock of the Company;
PROVIDED, HOWEVER, that activities undertaken by Stephens Inc. in its
capacity as a Representative of the Underwriters or as a broker-dealer
shall not be considered direct or indirect actions of any Selling
Stockholder.

(v) Such Selling Stockholder has not distributed and will not
distribute any prospectus or other offering material in connection
with the offering and sale of the Shares other than the Preliminary
Prospectus and the Prospectus or other material permitted by the Act.

(vi) All information furnished to the Company by such Selling
Stockholder or on such Selling Stockholder's behalf for use in
connection with the preparation of the Registration Statement and
Prospectus (including, without limiting the foregoing, all

8
<PAGE>

representations and warranties of such Selling Stockholder in such
Selling Stockholder's Power of Attorney), is true and correct and does
not omit to state any material fact necessary to be stated therein in
order to make such information not misleading.

(vii) Such Selling Stockholder has no reason to believe that
the representations and warranties of the Company contained in this
Section 1 are not true and correct, is familiar with the Registration
Statement and has no knowledge of any material fact, condition or
information not disclosed in the Prospectus which has adversely
affected or may adversely affect the business of the Company or the
Subsidiaries, and the sale of the portion of the Shares to by sold by
such Selling Stockholder pursuant hereto is not prompted by any
information concerning the Company or the Subsidiaries which is not
set forth in the Prospectus.

(c) Any certificate signed by any officer of the Company and
delivered to you or counsel for the Underwriters shall be deemed a
representation and warranty by the Company to the Underwriters as to the
matters covered thereby.

2. PURCHASE, SALE AND DELIVERY OF THE UNDERWRITTEN SHARES. On the basis
of the representations, warranties and covenants herein contained, and subject
to the terms and conditions herein set forth, the Company and the Selling
Stockholders, severally and not jointly, agree to sell to each Underwriter, and
each Underwriter agrees, severally and not jointly, to purchase, at a price of
$_____ per share, the respective number of the Underwritten Shares set forth
opposite the name of the Company and each Selling Stockholder on Schedule II
attached hereto. The obligation of each Underwriter to the Company and to each
Selling Stockholder shall be to purchase from the Company or such Selling
Stockholder that number of Company Shares or Selling Stockholders Shares, as the
case may be, which (as nearly as practicable, as determined by you) is in the
same proportion to the number of Company Shares or Selling Stockholders Shares,
as the case may be, set forth opposite the name of the Company or such Selling
Stockholder in Schedule I hereto as the number of Underwritten Shares which is
set forth opposite the name of such Underwriter in Schedule II hereto (subject
to adjustment as provided as provided in Section 11 hereof) is to the total
number of Underwritten Shares to be purchased by all of the Underwriters under
this Agreement.

Payment for the Underwritten Shares shall be made by wire transfer of
immediately available U.S. Funds to designated accounts, to the order of the
Sellers, against delivery of certificates for the Shares to the Representatives
for the accounts of the several Underwriters. Delivery of certificates shall be
to the Representatives c/o Stephens Inc. ("Stephens"), 111 Center Street, Little
Rock, Arkansas 72201, or at such other address as Stephens may designate in
writing. Payment will be made at the offices of Stephens, or at such other
place as shall be agreed upon by Stephens and the Sellers, at approximately 9:00
a.m., central time, on ____________, 1999, such time and date being herein
referred to as the "Closing Date." The certificates for the Underwritten Shares
will be delivered in such denominations and in such registrations as Stephens
reasonably requests in writing and will be made available for inspection at such
locations as Stephens may reasonably request at least one full business day
prior to the Closing Date.

In addition, on the basis of the representations, warranties, agreements
and covenants herein contained and subject to the terms and conditions herein
set forth, the Company hereby grants the Option to the several Underwriters to
purchase the Option Shares at the price per share as set forth in the first
paragraph of this Section 2. The Option may be exercised in whole or in part on
one occasion upon written notice (or oral notice, subsequently confirmed in
writing) given not more than thirty (30) days following the date of this
Agreement, by Stephens, on behalf of the Representatives of the several
Underwriters, to the Company setting forth the number of Option Shares as to
which the several Underwriters are exercising the

9
<PAGE>

Option and the names and denominations in which the Option Shares are to be
registered. Closing on the purchase of the Option Shares (the "Option
Closing Date"), if any, shall occur no later than three (3) business days
following the date upon which notice of exercise of the Option is given to
the Company, and shall take place at the offices of Stephens, or at such
other place as shall be agreed upon by Stephens and the Company. Subject to
Section 11, the number of Option Shares to be purchased by each Underwriter
shall be in the same proportion to the total number of shares of the common
stock being purchased by such Underwriter bears to 6,500,000 shares, adjusted
by you in such manner as to avoid fractional shares. The Option may be
exercised only to cover over-allotments in the sale of the Underwritten
Shares by the Underwriters. Stephens, on behalf of the Representatives of
the several Underwriters, may cancel such option at any time prior to its
expiration by giving written notice (or oral notice, subsequently confirmed
in writing) of such cancellation to the Company. To the extent, if any, that
the Option is exercised, payment for the Option Shares shall be made by wire
transfer of immediately available U.S. Funds to a designated account of the
Company, to the order of the Company. Certificates for the Option Shares
shall be delivered in the same manner and upon the same terms as the
Underwritten Shares.

3. QUALIFIED INDEPENDENT UNDERWRITER. The Company hereby confirms its
engagement of BancBoston Robertson Stephens Inc. ("BRS"), and BRS hereby
confirms its agreement with the Company, to render services as a "qualified
independent underwriter" within the meaning of Section b(15) of Rule 2720 of the
National Association of Securities Dealers, Inc. (the "NASD") with respect to
the offering and sale of the Shares. BRS, in its capacity as qualified
independent underwriter and not otherwise, is referred to herein as the "QIU."

4. OFFERING BY THE UNDERWRITERS. It is understood that the Public
Offering of the Underwritten Shares is to be made as soon as the Representatives
deem it advisable to do so after the Registration Statement has become
effective. The Underwritten Shares are to be initially offered to the public at
the public offering price set forth in the Prospectus. The Representatives may
from time to time thereafter change the public offering price and other selling
terms. To the extent, if at all, that any Option Shares are purchased pursuant
to Section 2 hereof, the Underwriters will offer them to the public on the
foregoing terms.

It is further understood that you will act as the Representatives for the
Underwriters in the offering and sale of the Shares, in accordance with an
Agreement Among Underwriters which has been entered into by you and the several
other Underwriters.

5. COVENANTS OF THE COMPANY AND THE SELLING STOCKHOLDERS. The Company
covenants and agrees, and the Selling Stockholders covenant and agree, each for
himself and with respect only to paragraphs (j) and (l), with each of the
several Underwriters that:

(a) The Company will use its best efforts to cause the Registration
Statement to become effective and will not, either before or after
effectiveness, file any amendment thereto or supplement to the Prospectus
(including a prospectus filed pursuant to Rule 424(b) which differs from
the Prospectus on file at the time the Registration Statement becomes
effective) or file any documents under the Exchange Act before the earlier
to occur of (A) the 35th day following the Effective Date or (B) the
closing date of the Underwriters' purchase of the Option Shares if such
document would be deemed to be incorporated by reference into the
Registration Statement, the Preliminary Prospectus or the Prospectus of
which the Representatives shall not previously have been advised and
furnished with a copy or to which the Representatives shall have reasonably
objected in writing or which is not in compliance with the Act or Rules or
the Exchange Act or the rules and regulations thereunder.

<PAGE>

(b) The Company will advise the Representatives promptly of any
request of the Commission or other securities regulatory agency ("Other
Securities Regulator") for amendment of the Registration Statement or for
supplement to the Prospectus or for any additional information, or of the
issuance by the Commission of any stop order suspending the effectiveness
of the Registration Statement or the use of the Prospectus or of the
institution of any proceedings for that purpose, or comparable action taken
or initiated by any Other Securities Regulator, and the Company will use
its reasonable efforts to prevent the issuance of any such stop order
preventing or suspending the use of the Prospectus and to obtain as soon as
possible the lifting thereof, if issued.

(c) The Company will use its reasonable efforts with the
Representatives in endeavoring to qualify the Shares for sale under the
securities laws of such jurisdictions (including foreign jurisdictions) as
the Representatives may reasonably designate, and will make such
applications, file such documents, and furnish such information as may be
reasonably required for that purpose; PROVIDED, HOWEVER, the Company shall
not be required to qualify as a foreign corporation or to file a general
consent to service of process in any jurisdiction where it is not so
qualified or required to file such a consent. The Company will, from time
to time, prepare and file such statements, reports, and other documents, as
are or may be required to continue such qualifications in effect for so
long a period as the Representatives may reasonably request for
distribution of the Shares.

(d) The Company will deliver to, or upon the order of, the
Representatives, from time to time, as many copies of any Preliminary
Prospectus or the Prospectus as the Representatives may reasonably request.
The Company will deliver to, or upon the order of, the Representatives, on
the Effective Date and thereafter from time to time during the period
necessary to effect the distribution of the Shares as many copies of the
Prospectus in final form, or as thereafter amended or supplemented, as the
Representatives may reasonably request. The Company will deliver to each
of the Representatives at or before the Closing Date, one (1) manually
signed copy of the Registration Statement and all amendments thereto
including all exhibits filed therewith and will deliver to the
Representatives such number of copies of the Registration Statement, but
without exhibits, and of all amendments thereto, as the Representatives may
reasonably request.

(e) During the time necessary to effect the distribution of the
Shares, the Company shall comply with all requirements imposed upon it by
the Act, as now and hereafter amended, and by the Rules, as from time to
time in force, so far as is necessary to permit the continuance of sales of
or dealings in the Shares as contemplated by the provisions hereof and the
Prospectus. If, during the period necessary to effect the distribution of
the Shares, any event shall occur as a result of which, in the judgment of
the Company or in the opinion of counsel for the Underwriters, it becomes
necessary to amend or supplement the Prospectus in order to make the
statements therein, in the light of the circumstances existing at the time
the Prospectus is delivered to a purchaser, not misleading, or, if it is
necessary at any time to amend or supplement the Prospectus to comply with
any law or to file under the Exchange Act any document which would be
deemed to be incorporated by reference in the Prospectus in order to comply
with the Act or the Exchange Act, the Company promptly will notify the
Representatives and, subject to the Representatives' prior review, prepare
and file with the Commission and any appropriate Other Securities Regulator
an appropriate amendment or supplement to the Prospectus or file such
document (at the expense of the Company) so that the Prospectus as so
amended or supplemented will not, in light of the circumstances when it is
so delivered, be misleading, or so that the Prospectus will comply with the
law.

(f) The Company will make generally available to its security holders
in the manner contemplated by Rule 158(b) under the Act, as soon as it is
practicable to do so, but in any event not

11
<PAGE>

later than the 90th day after the end of the fiscal quarter first occurring
one year after the Effective Date, an earnings statement in reasonable
detail, covering a period of at least twelve consecutive months beginning
after the Effective Date, which earnings statement shall satisfy the
requirements of Section 11(a) of the Act and will advise you in writing
when such statement has been so made available.

(g) For a period of three years from the date of this Agreement, the
Company will furnish to the Representatives (a) concurrently with
furnishing of such reports to its stockholders, statements of income of the
Company for each quarter in the form furnished to the Company's
stockholders; (b) concurrently with furnishing to its stockholders, a
balance sheet of the Company as at the end of such fiscal year, together
with statements of earnings, stockholders' equity and cash flow of the
Company for such fiscal year, all in reasonable detail and accompanied by a
copy of the certificate or report thereon of independent public
accountants; (c) as soon as they are available, copies of all reports
(financial or other) mailed to stockholders; (d) as soon as they are
available, copies of all reports and financial statements furnished to or
filed with the Commission; (e) every press release which was released or
prepared by the Company; and (f) any additional information of a public
nature concerning the Company or its business which you may reasonably
request. During such period, if the Company shall have active subsidiaries
the foregoing financial statements shall be on a consolidated basis to the
extent that the accounts of the Company and its subsidiaries are
consolidated, and shall be accompanied by similar financial statements for
any significant subsidiary (as defined by the Act) which is not so
consolidated.

(h) Promptly after the Company is advised thereof, it will advise the
Representatives, and confirm in writing, that the Registration Statement
and any amendments shall have become effective.

(i) The Company will use the net proceeds from the sale of the Shares
substantially in the manner set forth in the Prospectus under the caption
"Use of Proceeds."

(j) Other than as permitted by the Act and the Rules, the Company and
the Selling Stockholders will not distribute any prospectus or offering
materials in connection with the offering and sale of the Shares and prior
to the Closing Date or, if applicable, the Option Closing Date will not
issue any press releases or other communications directly or indirectly and
will hold no press conferences with respect to the Company, the financial
condition, results of operations, business, properties, assets or
liabilities of the Company, or the offering of the Shares, without the
prior written consent of the Representatives.

(k) The Company will maintain a transfer agent and, if necessary
under the jurisdiction of incorporation of the Company, a registrar for its
common stock and will use its best efforts to maintain the listing of the
Shares on the Nasdaq National Market.

(l) Except pursuant to the exercise of stock options existing prior
to the execution of this Agreement or as contemplated hereby or by the
Prospectus, the Company and the Selling Stockholders will not, for a period
of ninety (90) days after the Effective Date of the Registration Statement,
offer to sell, contract to sell, sell or otherwise dispose of any shares of
the Company's common stock or securities convertible into shares of the
Company's common stock without the prior written consent of BRS, which
consent will not be unreasonably withheld.

The foregoing covenants and agreements shall apply to any successor of the
Company, including without limitation, any entity into which the Company might
consolidate or merge.

12
<PAGE>

6. COSTS AND EXPENSES. Whether or not the Registration Statement becomes
effective, the Company and the Selling Stockholders will pay all costs, expenses
and fees incident to the performance of the obligations of the Company and the
Selling Stockholders under this Agreement, including, without limiting the
generality of the foregoing, the following: accounting fees of the Company; the
fees and disbursements of counsel for the Company; the cost of printing and
delivering to Underwriters copies of the Registration Statement, any Preliminary
Prospectus, the Prospectus, this Agreement, the Agreement Among Underwriters,
the Selected Dealer Agreement, Underwriters' Questionnaire and Power of
Attorney, and the Blue Sky Survey and any supplements thereto; the filing fees
of the Commission; the filing fees incident to securing any required review by
the NASD of the terms of the sale of the Shares on behalf of, and any
disbursements made by, the Representatives or BRS in its capacity as a
"qualified independent underwriter;" any applicable listing fees; the cost of
printing certificates representing the Shares; and the cost and charges of any
transfer agent or registrar. Any transfer taxes imposed on the sale of the
Shares to the Underwriters will be paid by the Company or the Selling
Stockholders, as appropriate. Neither the Company nor the Selling Stockholders
shall, however, be required to pay for any of the Underwriters' expenses (other
than those related to qualification under State securities or Blue Sky laws)
except that, if the Public Offering shall not be consummated because the
conditions in Section 8 hereof are not satisfied, or because this Agreement is
terminated by the Representatives pursuant to Section 7 hereof, or by reason of
any failure, refusal or inability on the part of the Company to perform any
undertaking or satisfy any condition of this Agreement or to comply with any of
the terms hereof on their part to be performed, unless such failure to satisfy
said condition or to comply with said terms is due to the default or omission of
any Underwriter, then the Company shall reimburse the several Underwriters for
all costs and expenses, including attorney fees and out-of-pocket expenses,
reasonably incurred in connection with investigating, marketing and proposing to
market the Shares or in contemplation of performing their obligations hereunder,
but the Company shall not in any event be liable to any of the several
Underwriters for damages on account of loss of anticipated profits from the sale
by them of the Shares. The Company and the Selling Stockholders may agree, as
among themselves and without limiting the rights of the Underwriters under this
Agreement, as to the respective amounts of such costs for which they each shall
be responsible.

7. CONDITIONS OF OBLIGATIONS OF THE UNDERWRITERS. The obligations of the
several Underwriters to purchase and pay for the Shares as provided herein, are
subject to the accuracy, as of the Closing Date and as of the Option Closing
Date, of the representations and warranties and agreements of the Company and
the Selling Stockholders contained herein and to the performance by the Company
and the Selling Stockholders of their obligations hereunder and to the following
additional conditions:

(a) The Registration Statement shall have become effective not
later than 10:00 a.m., central time, on the day immediately following
the date of this Agreement, unless a later time and date is agreed to by
the Representatives, and no stop order or other order suspending the
effectiveness thereof or the qualification of the Shares under the State
securities or Blue Sky laws of any jurisdiction shall have been issued
and no proceeding for that purpose shall have been taken or, to the
knowledge of the Company or the Selling Stockholders, shall be
contemplated or threatened by the Commission or any Other Securities
Regulator. If the Company has elected to rely upon Rule 430A of the
Rules, the price of the Shares and any price-related information
previously omitted from the effective Registration Statement pursuant to
such Rule 430A shall have been transmitted to the Commission for filing
pursuant to Rule 424(b) of the Act within the prescribed time period,
and prior to the Closing Date the Company shall have provided evidence
satisfactory to the Representatives of such timely filing, or a
post-effective amendment providing such information shall have been
promptly filed and declared effective in accordance with the
requirements of Rule 430A under the Act. All requests for additional
information on the part of the Commission or any other government or
regulatory authority with jurisdiction (to be included in the
Registration

13
<PAGE>

Statement or Prospectus or otherwise) shall be complied with to the
satisfaction of the Commission or such authorities.

(b) The Representatives shall have received on the Closing Date and
on the Option Closing Date the opinion of O'Melveny & Myers LLP, counsel
for the Company and the Selling Stockholders who are executive officers of
the Company (the "Officer Selling Stockholders"), with respect to the
Company and such Selling Stockholders as to the matters set forth below in
subparagraphs (i) through (x), and opinions of Massachusetts, Puerto Rico,
Mexico and Switzerland counsel to the Company with respect to the
Subsidiaries, as to matters set forth below in subparagraphs (i) and (vi),
each dated the Closing Date and, if applicable, the Option Closing Date,
addressed to the Underwriters in form and substance satisfactory to Wright,
Lindsey & Jennings LLP, counsel to the Underwriters, to the effect that:

(i) The Company and the Subsidiaries have been duly organized
and are validly existing in good standing under the laws of the
state(s) or similar foreign jurisdictions (with respect to the
Subsidiaries) of their organization with corporate power to own their
properties and conduct their business as described in the Registration
Statement and Prospectus; and to such counsel's knowledge, except as
set forth in the Prospectus and the Registration Statement, no
options, warrants or other rights to purchase, agreements or other
obligations to issue or other rights to convert any obligations into
any shares of capital stock of the Company are outstanding.

(ii) The Company has authorized capital stock as set forth
under the caption "Description of Capital Stock" in the Registration
Statement and Prospectus, except for issuances subsequent to the date
of the Prospectus, if any, pursuant to reservations, commitments,
employee benefit plans, or other existing agreements; all of the
Shares conform to the description thereof contained in the Prospectus;
the Company Shares and the Option Shares, if any, have been duly
authorized by all necessary corporate action on the part of the
Company and, upon payment for and delivery of the Shares in accordance
with this Agreement and the countersigning of the certificates
representing the Shares by a duly authorized signatory, the Shares
will be validly issued, fully paid and non-assessable; holders of the
capital stock of the Company are not entitled to any preemptive right
to subscribe to any additional shares of the Company's capital stock
under the Company's Certificate of Incorporation or bylaws, or, to
such counsel's knowledge, any agreement or other instrument filed as
an exhibit to the Registration Statement.

(iii) The Registration Statement has been declared effective
under the Act and to such counsel's knowledge, no stop order
suspending the effectiveness of the Registration Statement has been
issued or threatened by the Commission.

(iv) The Registration Statement and each amendment or
supplement thereto on the dates they were filed appeared on their
face to comply as to form in all material respects with the
requirements as to form for registration statements on Form S-3 under
the Act and the Rules, except that such counsel need express no
opinion as to the information supplied by the Underwriters or the
financial statements, schedules and other financial or statistical
information included or incorporated by reference therein. The
Incorporated Documents, on the respective dates they were filed,
appeared on their face to comply in all material respects with the
requirements as to form for reports on Form 10-K, Form 10-Q and Form
8-K, as the case may be, under the Exchange Act and the rules and
regulations thereunder in effect at the respective dates of their
filing, except that such counsel need

14
<PAGE>

express no opinion as to the financial statements, schedules and
other financial or statistical information included or incorporated
by reference therein.

(v) Except as set forth in the Registration Statement and the
Prospectus, to such counsel's knowledge, there are no contracts,
agreements or understandings between the Company and any person
granting such person the right to require the Company to file a
registration statement under the Act with respect to any securities of
the Company owned or to be owned by such person or to require the
Company to include such securities in the securities being registered
pursuant to a registration statement filed by the Company under the
Act.

(vi) To such counsel's knowledge, the Company's execution and
delivery of, and performance of its obligations under, this Agreement
do not (A) violate the Company's and its Subsidiaries' respective
charter or bylaws, or (B) breach or otherwise violate any existing
obligation of or restriction on the Company or its Subsidiaries under
any order, judgment or decree of any federal or Delaware court or
government authority binding on the Company or its Subsidiaries that
such counsel has, in the exercise of customary professional diligence,
recognized as applicable to the Company or its Subsidiaries or to
transactions of the type contemplated by this Agreement, except that
such counsel need not express an opinion regarding any federal
securities laws or Blue Sky or state securities laws. The execution
and delivery by the Company of, and performance of its obligations
under, this Agreement, do not violate any Delaware or federal statute
or regulation that such counsel has, in the exercise of customary
professional diligence, recognized as applicable to the Company or its
Subsidiaries or to transactions of the type contemplated by this
Agreement, except that such counsel need not express an opinion
regarding any federal securities laws or Blue Sky or state securities
laws.

(vii) This Agreement has been duly authorized, executed and
delivered by the Company.

(viii) No approval, consent, order or permit of Delaware or any
U.S. Federal governmental authority is required on the part of the
Company for the execution and delivery of this Agreement or for the
issuance and sale of the Shares by the Company herein contemplated
(other than required by NASD regulation or state securities and Blue
Sky laws, as to which such counsel need express no opinion) except
such as have been obtained or made, specifying the same.

(ix) This Agreement has been duly executed and delivered on
behalf of each of the Officer Selling Stockholders.

(x) Upon the delivery of and payment for the Officer Selling
Stockholders Shares as contemplated in this Agreement, each of the
Underwriters will receive such Shares purchased by it from such
Selling Stockholder, free and clear of any adverse claim. In
rendering such opinion, such counsel may assume that the Underwriters
are acquiring such Shares in good faith, without notice of any adverse
claim.

In addition to the matters set forth above, such counsel shall also
include a statement to the effect that such counsel has participated in the
preparation of the Registration Statement and the Prospectus and, based on
such participation, no facts have come to the attention of such counsel
which appeared on their face to cause such counsel to believe that any part
of the Registration Statement or any amendment thereto (other than the
financial statements and other financial and

15
<PAGE>

statistical data contained therein, as to which such counsel may express
no belief), as of its effective date, contained any untrue statement of
a material fact or omitted to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading or that the Prospectus or any amendment or supplement thereto
(other than the financial statements and other financial data contained
therein, as to which such counsel may express no belief), contains any
untrue statement of a material fact or omitted to state any material
fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. Such counsel
does not know of any legal or governmental proceedings required to be
described in the Registration Statement or the Prospectus which are not
described as required or of any contracts or documents of a character
required to be described in the Registration Statement or the Prospectus
or to be filed as exhibits to the Registration Statement which are not
described and filed as required; it being understood that such counsel
need express no opinion as to the financial statements or other
financial data contained in the Registration Statement or the
Prospectus. Such counsel may state that its opinion is limited to the
applicable law of the United States of America, the Delaware General
Corporation Law and the general corporate law of jurisdictions under
which the Subsidiaries are organized, and that such counsel renders no
opinion with respect to the law of any other jurisdiction. Such opinion
may state further that whenever such opinion is based on factual matters
to such counsel's knowledge or known to such counsel, such counsel has
relied exclusively on certificates of officers (after discussion of the
contents thereof with such officers) of the Company or certificates of
others as to the existence or nonexistence of factual matters on which
such opinion is predicated but has no reason to believe that any such
certificate is untrue or inaccurate in any material respect.

Such opinion shall contain only those qualifications as Wright,
Lindsey & Jennings LLP, counsel to the Underwriters, may reasonably request
or allow.

(c) The Representatives shall have received from Wright, Lindsey &
Jennings LLP, counsel to the Underwriters, an opinion dated the Closing
Date, substantially to the effects specified in subparagraph (iii) and (iv)
of paragraph (b) of this Section 7, and that the Company is a validly
organized and existing corporation under the laws of the State of Delaware.
In rendering such opinion, Wright, Lindsey & Jennings LLP may rely as to
all matters governed other than by Federal law on the opinions of counsel
referred to in paragraph (b) of this Section 7. In addition to the matters
set forth above, such opinion shall also include a statement to the effect
that nothing has come to the attention of such counsel which leads them to
believe that the Registration Statement or any amendment thereto at the
time the Registration Statement or amendment became effective or the
Preliminary Prospectus or the Prospectus or any amendment or supplement
thereto as of their respective dates contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, not misleading (except
that such counsel need express no view as to financial statements,
schedules and other financial or statistical information included therein).

(d) The Representatives shall have received at or prior to the
Closing Date from Wright, Lindsey & Jennings LLP a memorandum or summary,
in form and substance satisfactory to the Representatives, with respect to
the qualification or exemption therefrom for offering and sale by the
Underwriters of the Shares under the State securities or Blue Sky laws of
such jurisdictions as the Representatives may reasonably have designated.

(e) The Representatives shall have received on the Closing Date and
on the Option Closing Date, as the case may be, signed letters from
Deloitte & Touche LLP, addressed to the Underwriters dated as of the
Effective Date and again dated as of the Closing Date and as of the Option
Closing Date, as the case may be, with respect to the financial statements
and certain

16
<PAGE>

financial and statistical information contained in the Registration
Statement and the Prospectus. All such letters shall be in form and
substance satisfactory to the Representatives and Wright, Lindsey &
Jennings LLP, counsel to the Underwriters.

(f) The Representatives shall have received on the Closing Date and
on the Option Closing Date, as the case may be, a certificate or
certificates of the Company, executed by the President & Chief Executive
Officer and Senior Vice President and Chief Financial Officer of the
Company to the effect that, on and as of the Closing Date and on and as of
the Option Closing Date, as the case may be, each of them severally
represents as follows:

(i) (A) the representations and warranties of the Company in
this Agreement are true and correct on and as of the Closing Date and
on and as of the Option Closing Date, as the case may be, and (B) the
Company has complied with all of its agreements and covenants and has
satisfied all of the conditions on its part to be performed or
satisfied at or prior to the Closing Date and at or prior to the
Option Closing Date, as the case may be.

(ii) They have carefully examined the Registration Statement
and the Prospectus and, in their opinion, such Registration Statement
and Prospectus did not omit to state a material fact necessary in
order to make the statements therein not misleading.

(g) The Company shall have furnished to the Representatives evidence
of the due qualification of the Company and the Subsidiaries to transact
business in all jurisdictions in which the conduct of their business or
ownership or lease of their properties requires such qualifications, except
where the failure to be so qualified would not reasonably be expected to
have a Material Adverse Effect.

(h) Since the respective dates as of which information is given in
the Prospectus, there shall not have been any Material Adverse Change.

(i) The Company Shares shall have been approved for listing on the
Nasdaq National Market, subject to official notice of issuance.

The opinions and certificates mentioned in this Agreement shall be deemed
to be in compliance with the provisions hereof only if they are in all material
respects satisfactory to the Representatives and Wright, Lindsey & Jennings LLP,
counsel for the Underwriters.

If any of the conditions hereinabove provided for in this Section 7 shall
not have been fulfilled when and as required by this Agreement to be fulfilled,
the obligations of the Underwriters hereunder may be terminated by the
Representatives by notifying the Company of such termination in writing or by
confirmed telefax at or prior to the Closing Date. In such event, the Company,
the Selling Stockholders and the Underwriters shall not be under any obligation
to each other (except to the extent provided in Sections 6, and 9 hereof).

8. CONDITIONS OF THE OBLIGATIONS OF THE SELLERS. The obligations of the
Sellers to sell and deliver the Shares are subject to the conditions that (a) at
or before 10:00 a.m., central time, on the day immediately following the date of
this Agreement, or such later time and date as the Company and the
Representatives may from time to time consent to in writing or by confirmed
telefax, the Registration Statement shall have become effective, and (b) at the
Closing Date no stop order suspending the effectiveness of the Registration
Statement shall have been issued or proceedings therefor initiated or
threatened. If either of the conditions hereinabove provided for in this
Section 8 shall not have been fulfilled

17
<PAGE>

when and as required by this Agreement to be fulfilled, this Agreement may be
terminated by the Company by notifying the Representatives of such
termination in writing or by confirmed telefax at or prior to the Closing Date.

9. INDEMNIFICATION.

(a) The Company agrees to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter within
the meaning of the Act, the Rules and the Exchange Act from and against any
and all losses, claims, damages, liabilities, joint or several, to which
such Underwriter or such controlling person may become subject under the
Act or otherwise, insofar as such losses, claims, damages or liabilities
(or actions or proceedings in respect thereof) arise out of or are based
upon any breach of any representation, warranty, agreement, or covenant of
the Company, or any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement, any Preliminary
Prospectus, the Prospectus or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading; and the Company will reimburse each
Underwriter and each such controlling person for legal and other expenses
reasonably incurred in connection with investigating or defending any such
loss, claim, damage, liability, action or proceeding; PROVIDED, HOWEVER,
that the Company will not be liable in any such case to the extent that any
such loss, claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement made in, or omission or
alleged omission from, the Registration Statement, any Preliminary
Prospectus, the Prospectus, or such amendment or supplement, in reliance
upon and in conformity with written information furnished to the Company by
or through the Representatives specifically for use in the preparation
thereof, it being understood and agreed that the only such information
furnished by any Underwriter consists of the information described as such
in Section 14 below; and PROVIDED FURTHER, that with respect to any untrue
statement or alleged untrue statement in or omission or alleged omission
from any Preliminary Prospectus, the indemnity agreement contained in this
Section 9(a) shall not inure to the benefit of any Underwriter from whom
the person asserting any such losses, claims, damages or liabilities
purchased the Shares concerned, to the extent that a prospectus relating to
such Shares was required to be delivered by such Underwriter under the Act
in connection with such purchase and any such loss, claim, damage or
liability of such Underwriter, results from the fact that there was not
sent or given to such person, at or prior to the written confirmation of
the sale of such Shares to such person, a copy of the Prospectus as then
amended or supplemented (excluding any documents incorporated by reference
therein) if the Company had previously furnished copies thereof to such
Underwriter. This indemnity agreement will be in addition to any liability
which the Company may otherwise have.

(b) Each Selling Stockholder severally and not jointly agrees to
indemnify and hold harmless each Underwriter and each person, if any, who
controls any Underwriter, within the meaning of the Act, the Rules and the
Exchange Act, from and against any losses, claims, damages, or liabilities,
joint or several (or actions or proceedings in respect thereof) and all
expenses (including costs of investigation and legal expenses) to which
such Underwriters or such controlling person may become subject under the
Act or otherwise, insofar as such losses, claims, liabilities or expenses
arise out of or are based upon any breach of any representation, warranty,
agreement, or covenant of such Selling Stockholder contained in this
Agreement or any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement, any Preliminary
Prospectus, the Prospectus or any amendment or supplement thereto, or arise
out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or
omission or alleged

18
<PAGE>

omission was made in the Registration Statement, any Preliminary
Prospectus, the Prospectus, or any amendment or supplement thereto, in
conformity with written information furnished to the Company by or on
behalf of such Selling Stockholder specifically for use therein;
PROVIDED, HOWEVER, that such Selling Stockholder will not be liable in
any such case to the extent that such statement or omission was
contained or made in any Preliminary Prospectus and corrected in the
Prospectus and (A) any such loss, claim, damage or liability suffered or
incurred by any Underwriter (or any person who controls any Underwriter)
resulted from any action, claim or suit by any person who purchased
Shares which are the subject thereof from such Underwriter in the
offering and (B) such Underwriter failed to deliver or provide a copy of
the Prospectus to such person at or prior to the confirmation of the
sale of such Shares, in the case where such delivery is required by the
Act. This indemnity agreement will be in addition to any liability
which the Selling Stockholders may otherwise have.

Each Selling Stockholder shall be liable to all persons under the
indemnity agreements contained in this paragraph (b) and for breaches of
its representations contained in Section 1 hereof only for an amount not
exceeding the net proceeds received by such Selling Stockholder from the
sale of Shares hereunder.

(c) Each Underwriter severally, but not jointly, will indemnify and
hold harmless the Selling Stockholders and the Company, each of its
directors, each of its officers who have signed the Registration Statement,
and each person, if any, who controls the Company, within the meaning of
the Act, the Rules and the Exchange Act from and against any losses,
claims, damages or liabilities to which the Company, or any such director,
officer, or controlling person may become subject, under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or
actions or proceedings in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of any material fact
contained in the Registration Statement, any Preliminary Prospectus, the
Prospectus or any amendment or supplement thereto, or arise out of or are
based upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances under which they were
made; and will reimburse any legal or other expenses reasonably incurred by
the Selling Stockholders or the Company, or any such director, officer, or
controlling person in connection with investigating or defending any such
loss, claim, damage, liability, action or proceeding; PROVIDED, HOWEVER,
that each Underwriter will be liable in such case only to the extent that
such untrue statement, or alleged untrue statement or omission or alleged
omission has been made in the Registration Statement, any Preliminary
Prospectus, the Prospectus, or such amendment or supplement, in reliance
upon and in conformity with information furnished to the Company by or
through the Representatives expressly for use in the preparation thereof,
which information is described in Section 14. This indemnity agreement
will be in addition to any liability which such Underwriter may otherwise
have.

(d) Promptly after receipt by an indemnified party under this Section
9 of notice of the commencement of any action or proceeding, such
indemnified party will, if a claim in respect thereof is to be made against
an indemnifying party under this Section 9, notify the indemnifying party
of the commencement thereof; but the omission so to notify the indemnifying
party will not relieve it from any liability which it may have to any
indemnified party otherwise than under this Section 9, except to the extent
that the indemnifying party is substantially prejudiced by the omission of
such notification. In case any such action or proceeding is brought
against any party, and it notifies an indemnifying party of the
commencement thereof, the indemnifying party will be entitled to
participate therein, and, to the extent that it may wish, jointly with any
other indemnifying party similarly notified, to assume the defense thereof
with counsel reasonably satisfactory to such indemnified party, and after
notice from the indemnifying party to such

19
<PAGE>

indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under
this Section 9 for any legal or other expenses subsequently incurred by
such indemnified party in connection with the defense thereof other than
reasonable costs of investigation. No indemnifying party shall, without
the prior written consent of the indemnified party, effect any
settlement of any pending or threatened proceeding in respect of which
any indemnified party is or could have been a party and indemnity could
have been sought hereunder by such indemnified party, unless such
settlement includes an unconditional release of such indemnified party
from all liability on claims that are the subject matter of such
proceeding. Any indemnified party shall have the right to employ
separate counsel in any such action and participate in the defense
thereof, but the fees and expenses of such counsel shall be at the
expense of such indemnified party uness (i) the employment of such
counsel has been specifically authorized in writing by the indemnifying
party, (ii) the indemnifying party has failed to assume the defense and
employ counsel, or (iii) the named parties to any such action (including
any impleaded parties) include such indemnified party and the
indemnifying party, as the case may be, and such indemnified party shall
have been advised in writing by such counsel that there may be one or
more legal defenses available to it which are different from or
additional to those available to the indemnifying party, in which case
the indemnifying party shall not have the right to assume the defense of
such action on behalf of such indemnified party, it being understood,
however, that (A) the indemnifying party shall not, in connection with
any one such action or separate but substantially similar or related
actions in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the fees and expenses of
more than one separate firm of attorneys (in addition to any local
counsel) for all such indemnified parties, which firm shall be
designated in writing by the indemnified parties, and that (B) all such
fees and expenses shall be reimbursed as they are incurred. Subject to
the foregoing provisions of this Section 9(d), the indemnifying party
shall not be liable for the costs and expenses of any settlement of any
action without the consent of the indemnifying party.

(e) In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in this Section 9
is for any reason held to be unavailable to an indemnified party under
subsection (a), (b) or (c) above in respect to any losses, claims, damages,
liabilities or expenses referred to therein, then each applicable
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, liabilities and expenses (i) in
such proportion as is appropriate to reflect the relative benefits received
by the Sellers on the one hand and the Underwriters on the other hand from
the offering of the Shares or (ii) if the allocation provided by clause (i)
above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause
(i) above but also the relative fault of the parties in connection with the
statements or omissions which resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable
considerations. The relative benefits received by the Sellers on the one
hand and the Underwriters on the other hand shall be deemed to be in the
same proportion as the total proceeds from the offering (net of
underwriting discounts and commissions but before deducting expenses)
received by the Sellers bears to the underwriting discounts and commissions
received by the Underwriters. The relative fault of a party shall be
determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by each
party and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The
amount paid or payable by a party as a result of the losses, claims,
damages, liabilities and expenses referred to above shall be deemed to
include any legal or other fees or expenses reasonably incurred by such
party in connection with investigating or defending any such action or
claim.

<PAGE>

The Sellers and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 9 were determined by pro
rata allocation (even if the Underwriters were treated as one entity for
such purpose) or by any other method of allocation which does not take
account of the equitable considerations referred to in the immediately
preceding paragraph. Notwithstanding the provisions of this Section 9, no
Underwriter shall be required to contribute any amount in excess of the
amount by which the total price at which the Shares underwritten by it and
distributed to the public were offered to the public exceeds the amount of
any damages that such Underwriters have otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. The
Underwriters' obligations in this subsection (e) to contribute shall be
several in proportion to their respective underwriting obligations and not
joint.

(f) In any proceeding relating to the Registration Statement, any
Preliminary Prospectus, the Prospectus or any supplement or amendment
thereto, each party against whom contribution may be sought under this
Section 9 hereby consents to the jurisdiction of any court having
jurisdiction over any other contributing party, agrees that process issuing
from such court may be served upon him or it by any other contributing
party and consents to the service of such process and agrees that any other
contributing party may join him or it as an additional defendant in any
such proceeding in which such other contributing party is a party.

(g) Without limitation and in addition to its obligations under the
other subsections of this Section 9, the Company agrees to indemnify and
hold harmless BRS, and each person, if any, who controls BRS within the
meaning of the Act, the Rules or the Exchange Act, from and against any
loss, claim, damage, liabilities or expense, as incurred, arising out of or
based upon BRS acting as a "qualified independent underwriter" (within the
meaning of Rule 2720 of the NASD's Conduct Rules) in connection with the
offering contemplated by this Agreement, and agrees to reimburse each such
indemnified person for any legal and other expense reasonably incurred by
them in connection with investigating, defending, settling, compromising or
paying any such loss, claim, damage, liability, expense or action;
PROVIDED, HOWEVER, that the Company shall not be liable in any such case to
the extent that any such loss, claim, damage, liability or expense results
from the gross negligence or willful misconduct of BRS.

10. REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO SURVIVE DELIVERY. All
representations, warranties and agreements of the Selling Stockholders, the
Company, and the officers of the Company herein or in certificates delivered
pursuant hereto, and the indemnity and contribution agreements contained in
Section 9 hereof, shall remain operative and in full force and effect regardless
of any investigation made by or on behalf of any Underwriters or any controlling
person, or by or on behalf of the Company or any of its officers, directors or
controlling persons, and shall survive delivery of the Underwritten Shares and,
if appropriate, the Option Shares to the Representatives or termination of this
Agreement.

11. DEFAULT BY UNDERWRITERS. If any Underwriter shall fail to purchase
and pay for the Shares which such Underwriter has agreed to purchase and pay for
hereunder (otherwise than by reason of any default on the part of the Company or
any of the Selling Stockholders), you, as the Representatives of the
Underwriters, shall use your best efforts to procure within twenty-four hours
thereafter one or more of the other Underwriters, or any others, to purchase
from the Company and the Selling Stockholders such amounts as may be agreed upon
and upon the terms set forth herein, the Shares which the defaulting Underwriter
or Underwriters failed to purchase. If during such twenty-four hours you, as
such Representatives, shall not have procured such other Underwriters, or any
others, to purchase the Shares agreed to be purchased by the defaulting
Underwriter or Underwriters, then (a) if the aggregate number of

21
<PAGE>

Shares with respect to which such default shall occur does not exceed 10% of
the Shares which the Underwriters are obligated to purchase hereby, the other
Underwriters shall be obligated, severally, in proportion to the respective
number of Shares which they are obligated to purchase hereunder, to purchase
the Shares which such defaulting Underwriter or Underwriters failed to
purchase, or (b) if the aggregate number of Shares with respect to which such
default shall occur exceeds 10% of the Shares covered hereby, the Company or
you, as the Representatives of the Underwriters, will have the right, by
written notice given within the next twenty-four hour period to the parties
to this Agreement, to terminate this Agreement without liability on the part
of the non-defaulting Underwriters or the Company or the Selling Stockholders
except to the extent provided in Section 9 hereof. In the event of a default
by any Underwriter or Underwriters, as set forth in this Section 11, the time
of closing may be postponed for such period, not to exceed seven days, as
you, as the Representatives, may determine in order that the required changes
in the Registration Statement, the Prospectus or in any other documents or
arrangements may be effected. The term "Underwriters" includes any person
substituted for a defaulting Underwriter. Any action taken under Section 11
shall not relieve any defaulting Underwriter from liability in respect of any
default of such Underwriter under this Agreement.

12. NOTICES. All communications hereunder shall be in writing and,
except as otherwise provided in, will be mailed, delivered or telefaxed and
confirmed as follows: if to the Underwriters, c/o the Representatives as
follows: to Stephens Inc., 111 Center Street, Little Rock, Arkansas 72201,
Attention: Sandra Farmer, with a copy to C. Douglas Buford, Jr., Wright,
Lindsey & Jennings LLP, 200 West Capitol Avenue, Suite 2200, Little Rock,
Arkansas 72201; if to the Company or the Selling Stockholders, to Power-One,
Inc., 740 Calle Plano, Camarillo, California 93012, Attention: Steven J.
Goldman, with a copy to Kendall R. Bishop, O'Melveny & Myers LLP, 1999 Avenue
of the Stars, Suite 700, Los Angeles, California 90067-6035.

13. TERMINATION. This Agreement may be terminated by notice to the
Sellers as follows:

(a) at any time prior to the Closing Date if any of the following has
occurred: (i) since the respective dates as of which information is given
in the Registration Statement and the Prospectus, any Material Adverse
Change which would, in your reasonable judgment, materially make it
impracticable to market the Shares in the manner contemplated by the
Prospectus, (ii) any outbreak of hostilities or other national or
international calamity or crisis or change in economic or political
conditions if the effect of such outbreak, calamity, crisis or change on
the financial markets of the United States would, in your reasonable
judgment, make the offering or delivery of the Shares impracticable, (iii)
suspension of trading or general trading halts in securities on the New
York Stock Exchange, the American Stock Exchange, the Nasdaq National
Market or the over-the-counter market or limitation on prices (other than
limitations on hours or numbers of days or trading) for securities on
either such Exchange, the Nasdaq National Market or the over-the-counter
market, (iv) the enactment, publication, decree or other promulgation of
any federal or state statute, regulation, rule or order of any court or
other governmental authority which in your reasonable opinion materially
and adversely affects or will materially or adversely affect the business
or operations of the Company, or (v) declaration of a banking moratorium by
either federal or state authorities; or

(b) as provided in Sections 7 and 11 of this Agreement.

14. INFORMATION FURNISHED BY UNDERWRITERS. The information set forth in
the Prospectus: (a) in the penultimate paragraph on the cover page, (b) in the
table under the caption "Underwriting" on page _____, listing the Underwriters
and the number of shares each has agreed to purchase, and in the first and third
paragraphs immediately following such table, relating to the concession to
dealers and the reallowance to certain other dealers and the delivery of the
Shares, (c) in the subsection captioned "Stabilization" under

22
<PAGE>

the caption "Underwriting", (d) the last sentence of the subsection captioned
"Qualified Independent Underwriter" under the caption "Underwriting", and (e)
in the second paragraph of the subsection captioned "Other Matters" under the
caption "Underwriting" constitute the written information furnished by or on
behalf of any Underwriters referred to in paragraph (a) (v) of Section 1
hereof and in paragraphs (a) and (b) of Section 9 hereof.

15. SUCCESSORS. This Agreement has been and is made solely for the
benefit of the Underwriters, the Company, the Selling Stockholders and their
respective successors, executors, administrators, heirs, and assigns, and the
officers, directors and controlling persons referred to herein, and no other
person will have any right or obligation hereunder. The term "successors" shall
not include any purchaser of the Shares merely because of such purchase.

16. MISCELLANEOUS. The Representatives will act for the several
Underwriters in connection with this offering, and any action under this
Agreement taken by the Representatives jointly or by Stephens Inc. will be
binding upon all of the Underwriters.

This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.

This Agreement shall be governed by, and construed in accordance with, the
laws of the State of Arkansas, without giving effect to the choice of law or
conflict of law principles thereof.

If the foregoing is in accordance with your understanding of our agreement,
please sign and return to us the enclosed duplicates hereof, whereupon it will
become a binding agreement among the Company, the Selling Stockholders and the
several Underwriters in accordance with its terms.

Very truly yours,

POWER-ONE, INC.

By:
-----------------------------------
Steven J. Goldman
President and Chief Executive Officer

SELLING STOCKHOLDERS

By:
-----------------------------------
Attorney in Fact

23
<PAGE>

The foregoing Underwriting Agreement is hereby
confirmed and accepted as of the date first above written.

STEPHENS INC., BANCBOSTON ROBERTSON STEPHENS INC.
AND THOMAS WEISEL PARTNERS LLC

By:
-----------------------------------
Stephens Inc., Senior Manager
Name:
---------------------------------
Title:
--------------------------------

As Representatives of the several Underwriters
named in Schedule II hereto

24
<PAGE>

SCHEDULE I

Seller No. of Underwritten Shares
- ------ --------------------------
<S> <C>
Power-One, Inc. 4,000,000
Voting Trust dated as of June 8, 1998 1,540,600
Steven J. Goldman 459,200
Eddie K. Schnopp 63,500
Dennis R. Roark 132,200
David J. Hage 133,900
Brad W. Godfrey 72,500
Donna Koep 38,700
Grandchild's Trust One UID 12/16/85 9,800
Grandchild's Trust Two UID 12/16/85 9,800
Grandchild's Trust Three UID 12/89 9,800
Susan Stephens Campbell 1995 Trust UID 12/16/85 7,500
Craig D. Campbell, Jr. 1995 Trust UID 12/4/95 7,500
Elizabeth Chisum Campbell Trust UID 12/4/95 7,500
W.R. Stephens Jr. Children's Trust UID 3/1/95 7,500
---------

Total 6,500,000
---------
---------
</TABLE>

25
<PAGE>

SCHEDULE II

Name No. of Underwritten Shares
- ---- --------------------------
<S> <C>
Stephens Inc.
BancBoston Robertson Stephens Inc.
Thomas Weisel Partners LLC

----------

Total
----------
----------
</TABLE>

26
<PAGE>

EXHIBIT A

_______________, 1999

Stephens Inc., BancBoston Robertson Stephens Inc. and
Thomas Weisel Partners LLC, as Representatives of the Several Underwriters
c/o Stephens Inc.
111 Center Street
Little Rock, Arkansas 72201

Re: Agreement Not to Sell Power-One, Inc. Stock
- ------------------------------------------------

Ladies and Gentlemen:

This letter is provided, at the request of Power-One, Inc. (the "Company"),
for the benefit of the Company and the Underwriters in connection with the
proposed public offering of 6,500,000 shares of Power-One, Inc. Common Stock
(plus an additional 975,000 shares if the Underwriters choose to exercise their
over-allotment option) pursuant to a Registration Statement on Form S-3 (File
No. __________). As an inducement to the Underwriters to (a) enter into an
Underwriting Agreement with the Company and (b) consummate the transactions
contemplated in such Underwriting Agreement, the undersigned hereby represents
and agrees as follows:

1. Upon the closing of the Company's public offering, the undersigned
will beneficially own the number of shares of the Company's Common Stock set
forth below opposite the signature of the undersigned (the "Shares"), and no
others.

2. The undersigned agrees that, for a period of 90 days from the
effective date of the Registration Statement, except for bona fide gifts to
persons who agree with you in writing to be bound by this letter, the
undersigned will not offer, sell or otherwise dispose of any of the Shares,
directly or indirectly, without written consent of BancBoston Robertson Stephens
Inc., on behalf of the Representatives of the Underwriters, which consent will
not be unreasonably withheld; except that (a) such Shares may be pledged as
collateral against loans of the undersigned without such written consent, and
(b) if loans secured by Shares are called, the undersigned and any applicable
pledgee will have the right to sell the shares pledged on such loans to the
extent necessary to satisfy such loans.

Shares of Common Stock: Very truly yours,

- ----------------------- --------------------------

<PAGE>

September 10, 1999

Power-One, Inc.
740 Calle Plano
Camarillo, California 93012

Ladies and Gentlemen:

In connection with the registration under the Securities Act of
1933, as amended (the "Act") of up to 4,975,000 shares of Common Stock of
Power-One, Inc. (the "Company"), par value $0.001 per share, to be sold by
the Company (the "Company Shares") and 2,500,000 shares to be sold by certain
of the Company's stockholders (the "Stockholder Shares"), pursuant to a
Registration Statement on Form S-3 (the "Registration Statement"), filed with
the Securities and Exchange Commission on August 2, 1999, as amended, you
have requested our opinion with respect to the matters set forth below.

We have considered such facts and examined such questions of law as
we have considered appropriate for purposes of rendering the opinion
expressed below.

We are opining only as to the General Corporation Law of the State
of Delaware and we express no opinion with respect to the applicability or
the effect of any other laws or as to any matters of municipal law or of any
other local agencies within any state.

Subject to the foregoing and in reliance thereon, in our opinion,
(i) the Company Shares have been duly authorized by all necessary corporate
action on the part of the Company and, upon payment for and delivery of the
Company Shares as contemplated in the Registration Statement and the
countersigning of any certificates representing the Company Shares by a duly
authorized signatory of the registrar for the Company's Common Stock, the
Company Shares will be validly issued, fully paid and non-assessable, and
(ii) the Stockholder Shares are duly authorized, validly issued, fully paid
and non-assessable.

We consent to your filing this opinion as an exhibit to the
Registration Statement and the reference to our firm under the heading "Legal
Matters."

Very truly yours,

/s/ O'Melveny & Myers LLP
----------------------------
O'MELVENY & MYERS LLP

CC1:424140.1

//ex99-1_1622_aa.cecc
<PAGE>

$65,000,000

SECOND AMENDED AND RESTATED

CREDIT AGREEMENT

AMONG

POWER-ONE, INC.

CERTAIN SUBSIDIARIES OF POWER-ONE, INC.

CERTAIN LENDERS

AND

BANK OF AMERICA, N.A.,
AS ADMINISTRATIVE AGENT

AND

UNION BANK OF CALIFORNIA, N.A.
AS CO-AGENT

August 12, 1999

BANC OF AMERICA SECURITIES LLC,
AS LEAD ARRANGER AND LEAD BOOK MANAGER

<PAGE>

TABLE OF CONTENTS

PAGE

ARTICLE 1 DEFINITIONS
Section 1.1 DEFINED TERMS. . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.2 AMENDMENTS AND RENEWALS. . . . . . . . . . . . . . . . . .22
Section 1.3 CONSTRUCTION . . . . . . . . . . . . . . . . . . . . . . .22

ARTICLE 2 REVOLVING CREDIT ADVANCES
Section 2.1 THE REVOLVING CREDIT ADVANCES. . . . . . . . . . . . . . .23
Section 2.2 MANNER OF BORROWING AND DISBURSEMENT . . . . . . . . . . .23
Section 2.3 INTEREST . . . . . . . . . . . . . . . . . . . . . . . . .25
Section 2.4 FEES . . . . . . . . . . . . . . . . . . . . . . . . . . .26
Section 2.5 PREPAYMENTS. . . . . . . . . . . . . . . . . . . . . . . .27
Section 2.6 REDUCTION OF REVOLVING CREDIT COMMITMENT . . . . . . . . .29
Section 2.7 NON-RECEIPT OF FUNDS BY THE ADMINISTRATIVE AGENT . . . . .29
Section 2.8 PAYMENT OF PRINCIPAL OF REVOLVING CREDIT ADVANCES. . . . .30
Section 2.9 REIMBURSEMENT. . . . . . . . . . . . . . . . . . . . . . .30
Section 2.10 MANNER OF PAYMENT. . . . . . . . . . . . . . . . . . . . .30
Section 2.11 LENDING OFFICES. . . . . . . . . . . . . . . . . . . . . .31
Section 2.12 SHARING OF PAYMENTS. . . . . . . . . . . . . . . . . . . .31
Section 2.13 CALCULATION OF OFFSHORE DOLLAR RATE. . . . . . . . . . . .32
Section 2.14 TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . .32
Section 2.15 LETTERS OF CREDIT. . . . . . . . . . . . . . . . . . . . .35

ARTICLE 3 CONDITIONS PRECEDENT
Section 3.1 CONDITIONS PRECEDENT TO CLOSING, THE INITIAL REVOLVING
CREDIT ADVANCE AND THE INITIAL LETTERS OF CREDIT . . . .42
Section 3.2 CONDITIONS PRECEDENT TO ALL REVOLVING CREDIT ADVANCES
AND LETTERS OF CREDIT. . . . . . . . . . . . . . . . . 44
Section 3.3 CONDITIONS PRECEDENT TO CONVERSIONS AND CONTINUATIONS. . .45

ARTICLE 4R EPRESENTATIONS AND WARRANTIES
Section 4.1 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . .45
Section 4.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES, ETC. . . . . .53

ARTICLE 5G ENERAL COVENANTS
Section 5.1 PRESERVATION OF EXISTENCE AND SIMILAR MATTERS. . . . . . .53
Section 5.2 BUSINESS; COMPLIANCE WITH APPLICABLE LAW . . . . . . . . .54
Section 5.3 MAINTENANCE OF PROPERTIES. . . . . . . . . . . . . . . . .54
Section 5.4 ACCOUNTING METHODS AND FINANCIAL RECORDS . . . . . . . . .54
Section 5.5 INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . .54

-2-
<PAGE>

Section 5.6 PAYMENT OF TAXES AND CLAIMS. . . . . . . . . . . . . . . .54
Section 5.7 VISITS AND INSPECTIONS . . . . . . . . . . . . . . . . . .55
Section 5.8 USE OF PROCEEDS. . . . . . . . . . . . . . . . . . . . . .55
SECTION 5.9 INDEMNITY. . . . . . . . . . . . . . . . . . . . . . . . .55
Section 5.10 ENVIRONMENTAL LAW COMPLIANCE.. . . . . . . . . . . . . . .56
Section 5.11 FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . .57
Section 5.12 YEAR 2000 COMPLIANCE . . . . . . . . . . . . . . . . . . .57

ARTICLE 6 INFORMATION COVENANTS
Section 6.1 QUARTERLY FINANCIAL STATEMENTS AND INFORMATION . . . . . .58
Section 6.2 ANNUAL FINANCIAL STATEMENTS AND INFORMATION;
CERTIFICATE OF NO DEFAULT . . . . . . . . . . . . . . .58
Section 6.3 COMPLIANCE CERTIFICATE . . . . . . . . . . . . . . . . . .59
Section 6.4 COPIES OF OTHER REPORTS AND NOTICES. . . . . . . . . . . .59
Section 6.5 NOTICE OF LITIGATION, DEFAULT AND OTHER MATTERS. . . . . .60
Section 6.6 ERISA REPORTING REQUIREMENTS . . . . . . . . . . . . . . .60

ARTICLE 7NEGATIVE COVENANTS
Section 7.1 INDEBTEDNESS . . . . . . . . . . . . . . . . . . . . . . .61
Section 7.2 LIENS. . . . . . . . . . . . . . . . . . . . . . . . . . .62
Section 7.3 INVESTMENTS. . . . . . . . . . . . . . . . . . . . . . . .62
Section 7.4 LIQUIDATION, MERGER, NEW SUBSIDIARIES. . . . . . . . . . .63
Section 7.5 SALES OF ASSETS. . . . . . . . . . . . . . . . . . . . . .63
Section 7.6 ACQUISITIONS . . . . . . . . . . . . . . . . . . . . . . .64
Section 7.7 CAPITAL EXPENDITURES . . . . . . . . . . . . . . . . . . .64
Section 7.8 RESTRICTED PAYMENTS. . . . . . . . . . . . . . . . . . . .64
Section 7.9 AFFILIATE TRANSACTIONS . . . . . . . . . . . . . . . . . .65
Section 7.10 COMPLIANCE WITH ERISA. . . . . . . . . . . . . . . . . . .65
Section 7.11 MAXIMUM LEVERAGE RATIO . . . . . . . . . . . . . . . . . .65
Section 7.12 MINIMUM FIXED CHARGE COVERAGE RATIO. . . . . . . . . . . .65
Section 7.13 MINIMUM NET WORTH. . . . . . . . . . . . . . . . . . . . .65
Section 7.14 SALE AND LEASEBACK . . . . . . . . . . . . . . . . . . . .66
Section 7.15 SALE OR DISCOUNT OF RECEIVABLES. . . . . . . . . . . . . .66
Section 7.16 BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . .66
Section 7.17 FISCAL YEAR. . . . . . . . . . . . . . . . . . . . . . . .66

ARTICLE 8 DEFAULT
Section 8.1 EVENTS OF DEFAULT. . . . . . . . . . . . . . . . . . . . .66
Section 8.2 REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . .69

ARTICLE 9 CHANGES IN CIRCUMSTANCES
Section 9.1 OFFSHORE BASIS DETERMINATION INADEQUATE. . . . . . . . . .70
Section 9.2 ILLEGALITY . . . . . . . . . . . . . . . . . . . . . . . .70

-3-
<PAGE>

Section 9.3 INCREASED COSTS. . . . . . . . . . . . . . . . . . . . . .71
Section 9.4 EMU CHANGES. . . . . . . . . . . . . . . . . . . . . . . .72
Section 9.5 EFFECT ON BASE RATE ADVANCES . . . . . . . . . . . . . . .73
Section 9.6 CAPITAL ADEQUACY . . . . . . . . . . . . . . . . . . . . .73
Section 9.7 REPLACEMENT LENDER . . . . . . . . . . . . . . . . . . . .74

ARTICLE 10 AGREEMENT AMONG LENDERS
Section 10.1 AGREEMENT AMONG LENDERS. . . . . . . . . . . . . . . . . .74
Section 10.2 LENDER CREDIT DECISION . . . . . . . . . . . . . . . . . .77
Section 10.3 BENEFITS OF ARTICLE. . . . . . . . . . . . . . . . . . . .77

ARTICLE 11 MISCELLANEOUS
Section 11.1 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . .78
Section 11.2 EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . .78
Section 11.3 WAIVERS. . . . . . . . . . . . . . . . . . . . . . . . . .79
Section 11.4 CALCULATION BY THE LENDERS CONCLUSIVE AND BINDING. . . . .79
Section 11.5 SET-OFF. . . . . . . . . . . . . . . . . . . . . . . . . .79
Section 11.6 ASSIGNMENT . . . . . . . . . . . . . . . . . . . . . . . .80
Section 11.7 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . .82
Section 11.8 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . .82
Section 11.9 INTEREST AND CHARGES . . . . . . . . . . . . . . . . . . .82
Section 11.10 HEADINGS . . . . . . . . . . . . . . . . . . . . . . . . .82
Section 11.11 AMENDMENT AND WAIVER . . . . . . . . . . . . . . . . . . .82
Section 11.12 EXCEPTION TO COVENANTS . . . . . . . . . . . . . . . . . .83
Section 11.13 NO LIABILITY OF ISSUING BANK . . . . . . . . . . . . . . .83
Section 11.14 CONFIDENTIALITY. . . . . . . . . . . . . . . . . . . . . .84
Section 11.15 AMENDMENT, RESTATEMENT, EXTENSION, AND RENEWAL . . . . . .84
Section 11.16 JOINT AND SEVERAL OBLIGATIONS. . . . . . . . . . . . . . .84
Section 11.17 CONVERSION OF CURRENCIES . . . . . . . . . . . . . . . . .85
Section 11.18 NO DUTIES OF CO-AGENT. . . . . . . . . . . . . . . . . . .85
Section 11.19 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . .85
Section 11.20 WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . . . .86
Section 11.21 ENTIRE AGREEMENT . . . . . . . . . . . . . . . . . . . . .87

-4-
<PAGE>

SCHEDULES AND EXHIBITS

Schedule 1: Approved Offshore Currency Lending Offices and Approved
Offshore Currency Payment Offices
Schedule 2: Existing Liens
Schedule 3: Existing Litigation and Material Liabilities
Schedule 4.1(a): Subsidiaries
Schedule 4.1(g): Title Exceptions
Schedule 4.1(h): Litigation Exceptions
Schedule 4.1(t): Patent Exceptions
Schedule 5: Existing Investments
Schedule 6: Existing Indebtedness
Schedule 7: Existing Letters of Credit

Exhibit A: Revolving Credit Note
Exhibit B: Pledge Agreement
Exhibit C: Compliance Certificate
Exhibit D: Assignment Agreement
Exhibit E: Subsidiary Guaranty
Exhibit F: Subordination Agreement
Exhibit G: Notice of Borrowing
Exhibit H: Notice of Continuation/Conversion

-5-

//ex99-1_1622_ab.cecc

<PAGE>

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

THIS SECOND AMENDED AND RESTATED CREDIT AGREEMENT is dated as of August 20,
1999, among POWER-ONE, INC., a corporation organized and existing under the laws
of the State of Delaware (the "PARENT"), INTERNATIONAL POWER DEVICES, INC., a
corporation organized under the laws of the Commonwealth of Massachusetts
("IPD"), MELCHER HOLDING AG, a Swiss corporation ("MELCHER") (the Parent, IPD
and Melcher are hereinafter sometimes referred to herein collectively as the
"BORROWERS"), the Lenders from time to time party hereto, BANK OF AMERICA, N.A.,
a national banking association, as administrative agent for the Lenders, and
UNION BANK OF CALIFORNIA, N.A., a national banking association, as co-agent for
the Lenders.

BACKGROUND

The Borrowers have requested that the Lenders make a credit facility
available to the Borrowers in the maximum principal amount of $65,000,000 to
(a) refinance existing debt of the Parent outstanding pursuant to the terms of
that certain Amended and Restated Credit Agreement, dated as of December 10,
1997, among the Parent, the lenders party thereto, and Bank of America, N.A.
(formerly known as Bank of America National Trust and Savings Association,
successor by merger to Bank of America, N.A., formerly known as NationsBank,
N.A. and successor by merger to NationsBank of Texas, N.A.), as Administrative
Agent, as amended, modified, supplemented and restated from time to time (the
"EXISTING CREDIT AGREEMENT"), (b) finance Acquisitions (as hereinafter defined)
permitted hereunder, and (c) finance the ongoing working capital and general
corporate requirements of the Parent and its Subsidiaries (as hereinafter
defined). The Lenders have agreed to do so, subject to the terms and conditions
set forth below.

In consideration of the mutual covenants and agreements contained herein,
and other good and valuable consideration hereby acknowledged, the parties
hereto agree that the Existing Credit Agreement shall be amended, restated and
superseded as follows:

ARTICLE 1

DEFINITIONS

Section 1.1 DEFINED TERMS. For purposes of this Agreement:

"ACQUISITION" shall mean any transaction pursuant to which the Parent or
any of its Subsidiaries, (i) whether by means of a capital contribution or
purchase or other acquisition of stock or other securities or other equity
participation or interest, (A) acquires more than 50% of

-6-
<PAGE>

the equity interest in any Person pursuant to a solicitation by the Parent or
such Subsidiary of tenders of equity securities of such Person, or through
one or more negotiated block, market, private or other transactions not
involving an unfriendly tender offer, or a combination of any of the
foregoing, or (B) makes any corporation a Subsidiary of the Parent or such
Subsidiary, or causes any corporation, other than a Subsidiary of the Parent
or such Subsidiary, to be merged into the Parent or such Subsidiary (or
agrees to be merged into any other corporation other than a wholly-owned
Subsidiary (excluding directors' qualifying shares) of the Parent or such
Subsidiary), or (ii) in one transaction or a series of related transactions,
purchases or acquires any business or assets of any Person other than in the
ordinary course of business.

"ACQUISITION CONSIDERATION" means the consideration given by the Parent or
any of its Subsidiaries for an Acquisition, including but not limited to the
fair market value of any cash, property, stock or services given, the maximum
amount that could reasonably be expected to be paid pursuant to any earn-out
contracts or agreements and the amount of any Indebtedness in respect of debt
for borrowed money, Synthetic Leases and Capitalized Lease Obligations assumed
or incurred by the Parent or any of its Subsidiaries in connection with such
Acquisition.

"ADMINISTRATIVE AGENT" means Bank of America, N.A., a national banking
association, as administrative agent for Lenders, or such successor
administrative agent appointed pursuant to SECTION 10.1(b) hereof.

"ADVANCE" means any amount advanced by the Lenders to the Borrowers
pursuant to ARTICLE 2 hereof on the occasion of any borrowing.

"AFFILIATE" means, as applied to any Person, any other Person that,
directly or indirectly, through one or more Persons, Controls or is Controlled
By or Under Common Control with, that Person.

"AGREEMENT" means this Second Amended and Restated Credit Agreement, as
amended, modified, supplemented or restated from time to time.

"AGREEMENT CURRENCY" has the meaning specified in SECTION 11.17 hereof.

"AGREEMENT DATE" means the date of this Agreement.

"APPLICABLE CURRENCY" means, as to any particular payment or Advance,
Dollars or the Approved Offshore Currency in which it is denominated or is
payable.

"APPLICABLE ENVIRONMENTAL LAWS" means applicable laws pertaining to health
or the environment, including without limitation, the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended by
the Superfund Amendments and Reauthorization Act of 1986 (as amended from time
to time, "CERCLA"), the Resource Conservation and Recovery Act of 1976, as
amended by the Used Oil Recycling Act of 1980, the

-7-
<PAGE>

Solid Waste Disposal Act amendments of 1980, and the Hazardous and Solid
Waste Amendments of 1984 (as amended from time to time, "RCRA").

"APPLICABLE LAW" means (a) in respect of any Person, all provisions of
constitutions, statutes, rules, regulations and orders of governmental bodies or
regulatory agencies applicable to such Person and its properties, including,
without limiting the foregoing, all orders and decrees of all courts and
arbitrators in proceedings or actions to which the Person in question is a
party, and (b) in respect of contracts relating to interest or finance charges
that are made or performed in the State of Texas, "APPLICABLE LAW" shall mean
the laws of the United States of America, including without limitation 12 USC
Sections 85 and 86, as amended from time to time, and any other statute of the
United States of America now or at any time hereafter prescribing the maximum
rates of interest on loans and extensions of credit, and the laws of the State
of Texas, including, without limitation, Article 5069-IH, Title 79, Revised
Civil Statutes of Texas, 1925, as amended ("ART. IH"), if applicable, and if
Art. IH is not applicable, Article 5069-ID, Title 79, Revised Civil Statutes of
Texas, 1925, as amended ("ART. ID"), and any other statute of the State of Texas
now or at any time hereafter prescribing maximum rates of interest on loans and
extensions of credit; provided that the parties hereto agree that the provisions
of Chapter 346 of the Texas Finance Code, as amended, shall not apply to
Advances, the Reimbursement Obligations, this Agreement, the Notes or any other
Loan Documents.

"APPLICABLE LENDER" has the meaning specified in SECTION 11.17 hereof.

"APPLICABLE MARGIN" means the following per annum percentages, applicable
in the following situations:

<TABLE>
<CAPTION>
Base Rate Offshore
Applicability Basis Basis
------------- ---------- --------
<S> <C> <C>
(a) INITIAL PRICING PERIOD 1.25 2.50
SUBSEQUENT PRICING PERIOD
(b) The Leverage Ratio is greater than 1.25 2.50
or equal to 2.50 to 1
(c) The Leverage Ratio is less than 0.75 2.00
2.50 to 1 but greater than or equal
to 1.75 to 1
(d) The Leverage Ratio is less than 0.25 1.50
1.75 to 1 but greater than or equal
to 1.00 to 1
(e) The Leverage Ratio is less than 0.00 1.25
1.00 to 1
</TABLE>

The Applicable Margin payable by the applicable Borrower on the Advances
outstanding hereunder shall be subject to reduction or increase, as applicable
and as set forth in the table above, on a quarterly basis (except as otherwise
provided in SECTION 7.6 hereof) according to the performance of the Parent as
tested by using the Leverage Ratio calculated as of the end of each fiscal
quarter during the Subsequent Pricing Period; PROVIDED, that each adjustment in
the Offshore Rate shall be effective with respect to Offshore Advances (i) made
following receipt by

-8-
<PAGE>

the Administrative Agent of the financial statements required to be delivered
pursuant to SECTION 6.1 or 6.2 hereof, as applicable, for each such fiscal
quarter, and the corresponding Compliance Certificate required pursuant to
SECTION 6.3 hereof, on the date of making of such Offshore Advance and (ii)
outstanding on the date of receipt of such financial statements and
Compliance Certificate referred to in clause (i) immediately preceding, on
the date which is 2 Business Days following the date of receipt of such
financial statements and Compliance Certificate. If such financial
statements and Compliance Certificate are not received by the Administrative
Agent by the date required, the Applicable Margin shall be determined as if
the Leverage Ratio is greater than or equal to 2.50 to 1 until such time as
such financial statements and Compliance Certificate are received.

"APPROVED OFFSHORE CURRENCY" means any Pound Sterling, Danish Kroner, Swiss
Francs, Canadian Dollars, the Euro and any other freely available currency
(excluding Mexican Pesos) notified to the Administrative Agent upon not less
than 10 Business Days' notice that in the opinion of all Lenders, in their sole
discretion, is at such time freely traded in the offshore interbank foreign
exchange markets and is freely transferable and freely convertible into Dollars.

"APPROVED OFFSHORE CURRENCY ADVANCE" means an Advance denominated in an
Approved Offshore Currency.

"APPROVED OFFSHORE CURRENCY BORROWING LIMIT" means the Dollar Equivalent of
$25,000,000; provided, however, no more than the Dollar Equivalent of
$15,000,000 in proceeds of Approve Offshore Currency Advances may be used for
purposes other than to refinance Indebtedness of Melcher which exists on the
Agreement Date and is set forth on SCHEDULE 6 hereto.

"APPROVED OFFSHORE CURRENCY LENDING OFFICE" means the address of each
Lender specified on SCHEDULE 1 attached hereto as its Approved Offshore Currency
Lending Office.

"APPROVED OFFSHORE CURRENCY PAYMENT OFFICE" means the addresses of each
Lender specified on SCHEDULE 1 attached hereto.

"APPROVED OFFSHORE CURRENCY RATE" means, for any Offshore Advance to be
made in an Approved Offshore Currency for any Interest Period therefor, the
interest rate per annum (rounded upward to the nearest 1/16th of one percent)
determined by the Administrative Agent at approximately 9:00 a.m. (London time),
on the date which is two Business Days before the first day of such Interest
Period to be the offered quotations that appear on the Reuter's Screen SIDE page
for deposits in the applicable Approved Offshore Currency in the applicable
Interbank Market for such Approved Offshore Currency for a length of time
approximately equal to the Interest Period for the Approved Offshore Currency
Advance sought by the Borrowers. If at least two such offered quotations appear
on the Reuter's Screen SIDE page, the Approved Offshore Currency Rate shall be
the arithmetic mean (rounded upward to the nearest 1/16th of one percent) of
such offered quotations, as determined by the Administrative Agent. If the

-9-
<PAGE>

Reuter's Screen SIDE page is not available or has been discontinued, the
Approved Offshore Currency Rate shall be the rate per annum that the
Administrative Agent determines to be the arithmetic mean (rounded as
aforesaid) of the per annum rates of interest at which deposits in the
applicable Approved Offshore Currency in an amount approximately equal to the
principal amount of, and for a length of time approximately equal to the
Interest Period for, the Offshore Advance sought by the Borrowers are offered
to the Administrative Agent in immediately available funds in the applicable
Interbank Market for such Approved Offshore Currency at 11:00 a.m. (local
time of such Interbank Market), on the date which is two Business Days prior
to the first day of an Interest Period.

"ART. ID" has the meaning specified in the definition of "APPLICABLE LAW".

"ART. IH" has the meaning specified in the definition of "APPLICABLE LAW".

"ASSIGNMENT AGREEMENT" has the meaning specified in SECTION 11.6 hereof.

"AUTHORIZED SIGNATORY" means Eddie K. Schnopp or such other senior
personnel of the Parent as may be duly authorized and designated in writing by
the Borrowers delivered to the Administrative Agent to execute documents,
agreements and instruments on behalf of the Borrowers, and to request Advances
and Letters of Credit hereunder.

"BASE RATE ADVANCE" means any Advance bearing interest at the Base Rate
Basis.

"BASE RATE BASIS" means, for any day, a per annum interest rate equal to
the higher of (a) the sum of (i) 0.50% plus (ii) the Federal Funds Rate on such
day plus (iii) the Applicable Margin or (b) the sum of (i) the Prime Rate on
such day plus (ii) the Applicable Margin. The Base Rate Basis shall be adjusted
automatically without notice to the Borrowers as of the opening of business on
the effective date of each change in the Prime Rate to account for such change.

"BUSINESS DAY" means any day other than a Saturday, Sunday or other day on
which commercial banks in New York City or Dallas, Texas are authorized or
required by Law to close, and, if the applicable Business Day relates to:

(a) an Offshore Advance denominated in Dollars, any such day on which
dealings are carried on in the applicable offshore Dollar market;

(b) with respect to the Euro, any such day which is:

(i) for payments or purchases of the Euro, a TARGET Business Day; and

(ii) for all other purposes, including without limitation the giving
and receiving of notices hereunder, a TARGET Business Day on which banks
are generally

-10-
//ex99-1_1622_ac.cecc

<PAGE>

open for business in London, Frankfurt and in any other principal
financial center as the Administrative Agent may from time to time
determine for this purpose; and

(c) an Offshore Advance denominated in any other Approved Offshore
Currency, a day on which commercial banks are open for foreign exchange business
in London, England, and on which dealings in the relevant Approved Offshore
Currency are carried on in the applicable offshore foreign exchange interbank
market in which disbursement of or payment in such Approved Offshore Currency
will be made or received hereunder.

"CAPITAL EXPENDITURES" means, for any period, expenditures made by the
Parent and its Subsidiaries to acquire or construct fixed assets, plant and
equipment (including renewals, improvements and replacements during such period
and the aggregate amount of items leased or acquired under Capital Leases at the
cost of the item, but excluding any such assets, plant and equipment acquired in
connection with an Acquisition permitted pursuant to SECTION 7.6 hereof)
computed in accordance with GAAP, consistently applied.

"CAPITAL STOCK" means, as to any Person, the equity interests in such
Person, including, without limitation, the shares of each class of capital stock
in any Person that is a corporation, each class of partnership interest
(including, without limitation, general, limited and preference units) in any
Person that is a partnership, and each member interest in any Person that is a
limited liability company.

"CAPITALIZED LEASE OBLIGATIONS" means that portion of any obligation of the
Parent or any of its Subsidiaries as lessee under a lease which at the time
would be required to be capitalized on a balance sheet of the Parent or such
Subsidiary prepared in accordance with GAAP.

"CASH AND CASH EQUIVALENTS" means with respect to the Parent and each of
its Subsidiaries (i) cash (which after the occurrence of an Event of Default
shall exclude any cash proceeds of accounts), (ii) securities issued or directly
and fully guaranteed or insured by the United States Government or any agency or
instrumentality thereof having maturities of not more than six months from the
date of acquisition, (iii) certificates of deposit and eurodollar time deposits
with maturities of six months or less from the date of acquisition, bankers'
acceptances with maturities not exceeding six months and overnight bank
deposits, in each case with any Lender or with any domestic commercial bank
having capital and surplus in excess of $500,000,000, (iv) repurchase
obligations with a term of not more than seven days for underlying securities of
the types described in clauses (ii) and (iii) entered into with any financial
institution meeting the qualifications specified in clause (iii) above,
(v) commercial paper issued by any Lender or the parent corporation of any
Lender, and commercial paper rated A-1 or the equivalent thereof by Standard &
Poor's Ratings Group, a Division of McGraw-Hill, Inc., a New York corporation,
or P-1 or the equivalent thereof by Moody's Investors Service, Inc., and in each
case maturing within six months after the date of acquisition, and (vi) a
readily redeemable "money market mutual fund" advised by a bank described in
clause (iii) hereof, or an investment advisor registered under Section 203 of
the Investment Advisors Act of 1940, that has and

-11-
<PAGE>

maintains an investment policy limiting its investments primarily to
instruments of the types described in clauses (i) through (v) hereof and
having on the date of such Investment total assets of at least One Hundred
Million Dollars ($100,000,000.00).

"CASH COLLATERALIZED LETTERS OF CREDIT" means Letters of Credit with
respect to which cash in the amount of such Letters of Credit has been deposited
in the L/C Cash Collateral Account as provided in SECTION 2.15(g)(i) hereof.

"CHANGE OF CONTROL" means (a) any merger or consolidation of the Parent
with or into any Person (other than a merger or consolidation in which the
Parent is a surviving corporation) or any sale, transfer or other conveyance,
whether direct or indirect, of all or substantially all of the assets of the
Parent, on a consolidated basis, in one transaction or a series of related
transactions, (b) any "person" or "group" (as such terms are used for
purposes of Sections 13(d) and 14(d) of the Securities Exchange Act of 1934,
as amended, whether or not applicable) is or becomes the "beneficial owner",
directly or indirectly, of more than 50% of the total voting power in the
aggregate of all classes of capital stock of the Parent then outstanding
normally entitled to vote in elections of directors, or (c) during any period
of 24 consecutive months after the Agreement Date, individuals who at the
beginning of such 24-month period constituted the board of directors of the
Parent (together with any new directors whose election by such board of
directors or whose nomination for election by the shareholders of the Parent
was approved by a vote of a majority of the directors then still in office
who were either directors at the beginning of such period or whose election
or nomination for election was previously so approved) cease for any reason
to constitute a majority of the board of directors of the Parent then in
office.

"CO-AGENT" means Union Bank of California, N.A., a national banking
association.

"COBRA" has the meaning specified in SECTION 4.1(L) hereof.

"CODE" means the Internal Revenue Code of 1986, as amended.

"COLLATERAL" means any collateral hereafter granted by any Person to the
Administrative Agent for the benefit of the Lenders or any Affiliate of any
Lender to secure the Obligations.

"COLLATERAL DOCUMENT" means any document under which Collateral is granted
and any document related thereto.

"COMPLIANCE CERTIFICATE" means a certificate, signed by an Authorized
Signatory, in substantially the form of EXHIBIT C, appropriately completed.

"CONTROL" or "CONTROLLED BY" or "UNDER COMMON CONTROL" means possession,
directly or indirectly, of power to direct or cause the direction of management
or policies (whether through ownership of voting securities, by contract or
otherwise); provided, however, that in any event any Person which beneficially
owns, directly or indirectly, 10% or more (in number of votes) of

-12-
<PAGE>

the securities having ordinary voting power for the election of directors of
a corporation shall be conclusively presumed to control such corporation.

"CONTROLLED GROUP" means as of the applicable date, as to any Person not an
individual, all members of a controlled group of corporations and all trades or
businesses (whether or not incorporated) which are under common control with
such Person and which, together with such Person, are treated as a single
employer under Section 414(b), (c), (m) or (o) of the Code; provided, however,
that the Subsidiaries of the Parent shall be deemed to be members of the
Parent's Controlled Group.

"DEBTOR RELIEF LAWS" means any applicable liquidation, conservatorship,
bankruptcy, moratorium, rearrangement, insolvency, reorganization or similar
debtor relief Laws affecting the rights of creditors generally from time to time
in effect.

"DEFAULT" means an Event of Default and/or any of the events specified in
SECTION 8.1, regardless of whether there shall have occurred any passage of time
or giving of notice that would be necessary in order to constitute such event an
Event of Default.

"DEFAULT RATE" means a simple per annum interest rate equal to (a) with
respect to Base Rate Advances, the lesser of (i) the Highest Lawful Rate or
(ii) the Prime Rate plus two percent, or (b) with respect to Offshore Advances,
the lesser of (i) the Highest Lawful Rate or (ii) the Offshore Basis plus two
percent.

"DETERMINING LENDERS" means, on any date of determination, any combination
of the Lenders having more than 50% of the aggregate amount of the Advances then
outstanding; provided, however, that if there are no Advances outstanding
hereunder, "Determining Lenders" shall mean any combination of Lenders whose
Specified Percentages aggregate more than 50%.

"DIVIDEND" means, as to any Person, (a) any declaration or payment of any
dividend (other than a stock dividend) on, or the making of any distribution on
account of, any shares of Capital Stock of, or other similar interest in, such
Person and (b) any purchase, redemption, or other acquisition or retirement for
value of any shares of Capital Stock of, or similar interest in, such Person.

"DOLLAR" or "$" means the lawful currency of the United States of America.

"DOLLAR ADVANCE" means an Advance denominated in Dollars.

"DOLLAR EQUIVALENT" means (a) in relation to any amount denominated in
Dollars, the amount thereof and (b) in relation to an amount denominated in an
Approved Offshore Currency, the amount of such Dollars required to purchase the
relevant stated amount of Approved Offshore Currency at the Exchange Rate on the
date of determination. For the purposes of this Agreement, unless otherwise
expressly stated herein, the Dollar Equivalent principal amount any

-13-
<PAGE>

Advance or Letter of Credit shall be determined on the date on which the
Notice of Borrowing or Notice of Issuance is received with respect thereto.

"DOLLAR EQUIVALENT EXCESS" has the meaning specified in SECTION 2.5(b)
hereof.

"DOMESTIC SUBSIDIARY" means any Subsidiary of the Parent other than a
Foreign Subsidiary.

"EBITDA" means, for any period, determined in accordance with GAAP on a
consolidated basis for the Parent and its Subsidiaries, the sum of (a) Pretax
Net Income (excluding therefrom, to the extent included in determining Pretax
Net Income, any items of extraordinary gain, including net gains on the sale
of assets other than asset sales in the ordinary course of business, and
adding thereto, to the extent included in determining Pretax Net Income, any
items of extraordinary loss, including net losses on the sale of assets other
than asset sales in the ordinary course of business), plus (b) interest
expense, plus (c) depreciation and amortization plus (d) to the extent
included in such period, a one-time charge for acquired in-process research
and development related to IPD not to exceed $3,300,000 in aggregate amount,
plus (e) to the extent included in such period, a one-time charge for the
inventory write-up with respect to purchase accounting adjustments related to
the Acquisition of IPD and Melcher not to exceed $3,700,000 in aggregate
amount, plus (f) a one-time write-off with respect to the Calex license not
to exceed $1,000,000 in aggregate amount.

"ELIGIBLE ASSIGNEE" means (a) a Lender, (b) an Affiliate of a Lender
organized under the laws of the United States or any state thereof, (c) any
commercial bank organized under the laws of the United States or any state
thereof, and (d) any savings and loan association or savings bank organized
under the laws of the United States or any state thereof, (e) a commercial bank
organized under the laws of any other country which is a member of the
Organization for Economic Cooperation and Development, provided that such bank
is acting through a branch or agency located in the United States, and (f) a
finance company, insurance company or other financial institution or fund
organized under the laws of the United States or any state thereof that is
engaged in making, purchasing or otherwise investing in commercial loans in the
ordinary course of its business; PROVIDED, HOWEVER, that neither the Parent nor
any of its Affiliates shall qualify as an Eligible Assignee.

"EMU" means Economic and Monetary Union as contemplated in the Treaty.

"EMU LEGISLATION" means (a) the Treaty and (b) legislative measures of the
European Council for the introduction of, changeover to, or operation of, the
Euro, in each case as amended or supplemented from time to time.

"EQUITY" means shares of capital stock or partnership, profits, capital or
member interest, or options, warrants or any other right to subscribe for or
otherwise acquire capital stock or a partnership, profits, capital or member
interest, of the Parent or any of its Subsidiaries.

-14-
<PAGE>

"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any regulation promulgated thereunder.

"ERISA EVENT" means, with respect to the Parent and its Subsidiaries, (a) a
Reportable Event (other than a Reportable Event not subject to the provision for
30-day notice to the PBGC under regulations issued under Section 4043 of ERISA),
(b) the withdrawal of any such Person or any member of its Controlled Group from
a Plan subject to Title IV of ERISA during a plan year in which it was a
"substantial employer" as defined in Section 4001(a)(2) of ERISA, (c) the filing
of a notice of intent to terminate under Section 4041(c) of ERISA, (d) the
institution of proceedings to terminate a Plan by the PBGC, (e) the failure to
make required contributions which could result in the imposition of a lien under
Section 412 of the Code or Section 302 of ERISA, or (f) any other event or
condition which might reasonably be expected to constitute grounds under
Section 4042 of ERISA for the termination of, or the appointment of a trustee to
administer, any Plan or the imposition of any liability under Title IV of ERISA
other than PBGC premiums due but not delinquent under Section 4007 of ERISA;
PROVIDED, HOWEVER, that ERISA Event shall not include the termination by Service
Supply of its employee stock option plan.

"EURO" means the single currency of Participating Member States introduced
in accordance with the provisions of Article 109(l)4 of the Treaty; all payments
to be made under this Agreement in euros shall be made in immediately available,
freely transferable funds.

"EVENT OF DEFAULT" means any of the events specified in SECTION 8.1,
provided that any requirement for notice or lapse of time has been satisfied.

"EXCHANGE RATE" means with respect to any Approved Offshore Currency on a
particular date, the rate at which such Approved Offshore Currency may be
exchanged into Dollars, as set forth on such date on the Reuters currency page
for exchanges of such Approved Offshore Currency into Dollars. In the event
that such rate does not appear on any Reuters currency page, the Exchange Rate
with respect to such Approved Offshore Currency shall be determined by reference
to such other publicly available service for displaying exchange rates as may be
agreed upon by the Administrative Agent and the Borrowers or, in the absence of
such agreement, such Exchange Rate shall instead be the arithmetic mean of the
spot rates of exchange for the Administrative Agent and two other money center
banks in the interbank market where the foreign currency exchange operations of
the Administrative Agent and such two other money center banks in respect of
such Approved Offshore Currency are then being conducted, at or about 10:00 a.m.
local time, at such date for the purchase of Dollars with such Approved Offshore
Currency, for delivery two Business Days later; PROVIDED, HOWEVER, that if at
the time of any such determination, for any reason, no such spot rate is being
quoted by the Administrative Agent, the Administrative Agent may use any
reasonable method it deems applicable to determine its respective spot rate, and
such determination shall be prima facie evidence of such rate.

-15-
//ex99-1_1622_ad.cecc
<PAGE>

"EXISTING LETTERS OF CREDIT" means those Letters of Credit issued under the
Existing Credit Agreement and outstanding on the Agreement Date which are set
forth on SCHEDULE 7 hereto.

"FEDERAL FUNDS RATE" means, for any day, the rate per annum (rounded
upwards if necessary, to the nearest 1/100th of 1%) equal to the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers on such day, as
published by the Federal Reserve Bank of Dallas on the Business Day next
succeeding such day, provided that (a) if such day is not a Business Day, the
Federal Funds Rate for such day shall be such rate on such transactions on the
next preceding Business Day as so published on the next succeeding Business Day,
and (b) if no such rate is so published on such next succeeding Business Day,
the Federal Funds Rate for such day shall be the average rate quoted to the
Administrative Agent on such day on such transactions as reasonably determined
by Administrative Agent.

"FEE LETTER" has the meaning specified in SECTION 2.4(b) hereof.

"FISCAL YEAR" means each period of 52 or 53 weeks ending on the Sunday
closest to December 31 of each year.

"FIXED CHARGES" means, for any period of calculation, calculated for the
Parent and its Subsidiaries on a consolidated basis, the sum of, without
duplication, (a) scheduled principal payments in respect of Indebtedness during
such period, plus (b) interest expense (including interest expense pursuant to
Capitalized Lease Obligations during such period), plus (c) lease expense under
Operating Leases during such period.

"FIXED CHARGE COVERAGE RATIO" means the ratio of Pretax Cash Flow to Fixed
Charges, calculated for the four consecutive fiscal quarters immediately
preceding the date of calculation.

"FOREIGN SUBSIDIARY" means any Subsidiary of the Parent which is not
organized under the laws of any state of the United States of America or the
District of Columbia.

"GAAP" means generally accepted accounting principles applied on a
consistent basis, set forth in the Opinions of the Accounting Principles Board
of the American Institute of Certified Public Accountants, or their successors
which are applicable in the circumstances as of the date in question. The
requirement that such principles be applied on a consistent basis shall mean
that the accounting principles applied in a current period are comparable in all
material respects to those applied in a preceding period.

"GUARANTY" or "GUARANTEED", as applied to an obligation of another Person,
means (a) a guaranty, direct or indirect, in any manner, of any part or all of
such obligation, and (b) an agreement, direct or indirect, contingent or
otherwise, the practical effect of which is to assure in any way the payment or
performance (or payment of damages in the event of nonperformance) of

-16-
<PAGE>

any part or all of such obligation, including, without limiting the
foregoing, any reimbursement obligations with respect to amounts which may be
drawn by beneficiaries of outstanding letters of credit; provided, however,
Guaranty does not mean (A) the endorsement of instruments for collection or
deposit in the ordinary course of business and (B) customary indemnities
given in connection with asset sales in the ordinary course of business.

"HIGHEST LAWFUL RATE" means at the particular time in question the maximum
rate of interest which, under Applicable Law, the Lenders are then permitted to
charge on the Obligations. If the maximum rate of interest which, under
Applicable Law, the Lenders are permitted to charge on the Obligations shall
change after the date hereof, the Highest Lawful Rate shall be automatically
increased or decreased, as the case may be, from time to time as of the
effective time of each change in the Highest Lawful Rate without notice to the
Borrowers. For purposes of determining the Highest Lawful Rate under the
Applicable Law of the State of Texas, the applicable rate ceiling shall be
(a) the weekly rate ceiling described in and computed in accordance with the
provisions of Art. ID.003 or (b) if the parties subsequently contract as allowed
by Applicable Law, the quarterly ceiling or the annualized ceiling computed
pursuant to Art. ID.008; provided, however, that at any time the indicated rate
ceiling, the quarterly ceiling or the annualized ceiling shall be less than 18%
per annum or more than 24% per annum, the provisions of Art. ID.009(a) and (b)
shall control for purposes of such determination, as applicable.

"INDEBTEDNESS" means, with respect to any Person, without duplication,
(a) all items, except accounts payable arising in the normal course of business,
which in accordance with GAAP would be included in determining total liabilities
as shown on the liability side of a balance sheet of such Person, (b) all
obligations secured by any Lien on any property or asset owned by such Person
(other than accounts payable arising in the ordinary course of business),
whether or not the obligation secured thereby shall have been assumed, (c) all
Capitalized Lease Obligations of such Person, all obligations in respect of
letters of credit, bankers' acceptances and similar instruments, and all
obligations under Interest Hedge Agreements, (d) any "withdrawal liability" of
the Parent or any of its Subsidiaries, as such term is defined under Part I of
Subtitle E of Title IV of ERISA, (e) all preferred Capital Stock issued by such
Person and required by the terms thereof to be redeemed, or for which mandatory
sinking fund payments are due, on or before December 1, 2002, (f) the principal
portion of all obligations of such Person under any Synthetic Lease, and (g) any
Guaranty of such Person of any obligation of another Person constituting
obligations of a type set forth above.

"INDEMNIFIED MATTERS" has the meaning specified in SECTION 5.9(a) hereof.

"INDEMNITEES" has the meaning specified in SECTION 5.9(a) hereof.

"INITIAL PRICING PERIOD" means that period from the Agreement Date to and
including the Rate Adjustment Date.

-17-
<PAGE>

"INSTITUTIONAL DEBT" means unsecured Indebtedness of the Parent which may
be raised by the Parent in the private placement or public debt markets,
PROVIDED THAT, (a) the maturity date of such Indebtedness is after the Maturity
Date, (b) there shall be no scheduled payments or mandatory prepayments or
redemptions of such Indebtedness prior to the Maturity Date, (c) the covenants
and events of default with respect to such Indebtedness shall be no more
restrictive than the covenants and Events of Default set forth herein and
(d) all other terms and provisions of such Indebtedness shall be reasonably
satisfactory to the Administrative Agent, with only such changes or amendments
as are approved by the Administrative Agent.

"INTEREST HEDGE AGREEMENTS" means any and all agreements, devices or
arrangements designed to protect at least one of the parties thereto from the
fluctuations of interest rates, exchange rates or forward rates applicable to
such party's assets, liabilities or exchange transactions, including, but not
limited to, dollar-denominated or cross-currency interest rate exchange
agreements, forward currency exchange agreements, interest rate cap, swap or
collar protection agreements, and forward rate currency or interest rate
options, as the same may be amended or modified and in effect from time to time,
and any and all cancellations, buy backs, reversals, terminations or assignments
of any of the foregoing.

"INTEREST PERIOD" means the period beginning on the day any Offshore
Advance is made and ending one, two or three, or, subject to availability and
agreement by each Lender, six months thereafter (as the Borrowers shall select).

"INVESTMENT" means any direct or indirect purchase or other acquisition of,
or beneficial interest in, capital stock or other securities of any other
Person, or any direct or indirect loan, advance (other than advances to
employees for moving and travel expenses, drawing accounts and similar
expenditures in the ordinary course of business) or capital contribution to, or
investment in any other Person, including without limitation the purchase of
accounts receivable of any other Person that are not current assets or do not
arise in the ordinary course of business.

"ISSUING BANK" means Bank of America, N.A., a national banking association,
in its capacity as issuer of the Letters of Credit.

"JUDGMENT CURRENCY" has the meaning specified in SECTION 11.17 hereof.

"LAW" means any statute, law, ordinance, regulation, rule, order, writ,
injunction, or decree of any Tribunal.

"LENDER" means each financial institution shown on the signature pages
hereof so long as such financial institution maintains a portion of the
Revolving Credit Commitment or is owed any part of the Obligations (including
the Administrative Agent in its individual capacity), and each Assignee that
hereafter becomes a party hereto pursuant to SECTION 11.6 hereof, subject to the
limitations set forth therein.

-18-
<PAGE>

"L/C RELATED DOCUMENTS" has the meaning specified in SECTION 2.15(e)
hereof.

"LETTER OF CREDIT" has the meaning specified in SECTION 2.15(a) hereof.

"LETTER OF CREDIT AGREEMENT" has the meaning specified in SECTION 2.15(b)
hereof.

"LETTER OF CREDIT FACILITY" has the meaning specified in SECTION 2.15(a)
hereof.

"LEVERAGE RATIO" means, for any date of calculation, the ratio of Total
Debt as of the date of calculation to EBITDA calculated for the four consecutive
fiscal quarters immediately preceding the date of calculation. For purpose of
calculation of the Leverage Ratio only, EBITDA shall be measured on a pro forma
basis and each Person or line of business that was acquired or disposed of
during the four fiscal quarter period ending on or before such date of
calculation shall be deemed to have been acquired or disposed of on the first
day of such period.

"LIEN" means, with respect to any property, any mortgage, lien, pledge,
collateral assignment, hypothecation, charge, security interest, title retention
agreement, levy, execution, seizure, attachment, garnishment or other similar
encumbrance of any kind in respect of such property, whether or not choate,
vested or perfected.

"LITIGATION" means any proceeding, claim, lawsuit, arbitration, and/or
investigation by or before any Tribunal, including, without limitation,
proceedings, claims, lawsuits, and/or investigations under or pursuant to any
environmental, occupational, safety and health, antitrust, unfair competition,
securities, Tax or other Law, or under or pursuant to any contract, agreement or
other instrument.

"LOAN DOCUMENTS" means this Agreement, the Notes, any Subsidiary Guaranty,
any Pledge Agreement, any Subordination Agreement, the Fee Letter, any Interest
Hedge Agreements entered into with any Lender or any Affiliate of any Lender,
and any other document or agreement executed or delivered from time to time by
the Parent, any of its Subsidiaries or any other Person in connection herewith
or as security for the Obligations.

"MATERIAL ADVERSE EFFECT" means any act or circumstance or event that
(a) causes a Default, (b) otherwise could reasonably be expected to be material
and adverse to the business, financial condition, results of operations, or
business prospects of the Parent and its Subsidiaries taken as a whole, or
(c) in any manner whatsoever does or could reasonably be expected to materially
and adversely affect the validity or enforceability of any Loan Documents.

"MATERIAL SUBSIDIARY" means each Subsidiary of the Parent or of a
Subsidiary of the Parent (a) the gross revenues of which for the then most
recently completed four fiscal quarters constituted (or, with respect to any
such Subsidiary acquired during such fiscal quarters, would have constituted had
the gross revenues of such Subsidiary been included for such period) 5% or more
of the

-19-
<PAGE>

consolidated gross revenues of the Parent and its Subsidiaries for such
period or (b) the assets of which as of the end of any fiscal quarter
constituted 5% or more of the consolidated assets of the Parent and its
Subsidiaries as of the end of such fiscal quarter. For purposes of this
Agreement, each of Melcher Holding AG, Melcher AG, Melcher Produktion AG,
IPD, Power-Electronics, Inc. and Poder Uno de Mexico, S.A. de C.V. shall at
all times be deemed to be a Material Subsidiary.

"MATURITY DATE" means December 1, 2002, or the earlier date of termination
in whole of the Revolving Credit Commitment pursuant to SECTION 2.6 or 8.2
hereof.

"MAXIMUM AMOUNT" means the maximum amount of interest which, under
Applicable Law, the Lenders are permitted to charge on the Obligations.

"MULTIEMPLOYER PLAN" means, as to any Person, at any time, a "multiemployer
plan" within the meaning of Section 4001(a)(3) of ERISA and to which such Person
or any member of its Controlled Group is making, or is obligated to make
contributions or has made, or been obligated to make, contributions.

"NATIONSBANK" means Bank of America, N.A., a national banking association,
in its capacity as a Lender.

"NECESSARY AUTHORIZATION" means any right, franchise, license, permit,
consent, approval or authorization from, or any filing or registration with, any
Tribunal or any Person necessary or appropriate to enable the Parent or any of
its Subsidiaries to maintain and operate its business and properties.

"NEGATIVE PLEDGE" means any agreement, contract or other arrangement
whereby the Parent or any of its Subsidiaries is prohibited from, or would
otherwise be in default as a result of, creating, assuming, incurring or
suffering to exist, directly or indirectly, any Lien on any of its assets.

"NET CASH PROCEEDS" means, with respect to any sale, lease, transfer or
other disposition of any asset or issuance of any Capital Stock or Indebtedness
by or of any Person, the amount of cash received by such Person in connection
with such transaction (including cash proceeds of any property received in
consideration of any such sale, lease, transfer or other disposition) after
deducting therefrom the aggregate, without duplication, of the following amounts
to the extent properly attributable to such transaction or to the asset that is
the subject thereof: (i) reasonable brokerage commissions, legal fees, finder's
fees, financial advisory fees, accounting fees, underwriting fees, investment
banking fees and other similar commissions and fees, in each case, to the extent
paid or payable by such Person; (ii) filing, recording or registration fees or
charges or similar fees or charges paid by such Person; (iii) without
duplication, taxes paid or payable by such Person or any shareholder, partner or
member of such Person to governmental taxing authorities as a result of such
sale or other disposition; and (iv) the payment of the outstanding principal
amount of, premium or penalty, if any, and interest on any Indebtedness (other
than the Loans) that is secured by a Lien on the Capital Stock or assets in
question and that is required to

-20-
//ex99-1_1622_ae.cecc
<PAGE>

be repaid under the terms thereof as a result of such sale, lease, transfer
or other disposition.

"NET INCOME" means, net earnings (or deficit) after taxes of the Parent and
its Subsidiaries, on a consolidated basis, determined in accordance with GAAP.

"NET WORTH" means, for the Parent and its Subsidiaries, on a consolidated
basis, determined in accordance with GAAP, total assets minus total liabilities.

"NOTICE OF BORROWING" has the meaning specified in SECTION 2.2(a) hereof.

"NOTICE OF CONTINUATION/CONVERSION" has the meaning specified in SECTION
2.2(d) hereof.

"NOTICE OF ISSUANCE" has the meaning specified in SECTION 2.15(b) hereof.

"OBLIGATIONS" means (a) all obligations of any nature (whether matured or
unmatured, fixed or contingent, including the Reimbursement Obligations) of the
Parent, any of its Subsidiaries or any other Obligor to any Lender or any
Affiliate of any Lender under the Loan Documents as they may be amended from
time to time, and (b) all obligations of the Parent, any of its Subsidiaries or
any other Obligor for losses, damages, expenses or any other liabilities of any
kind that any Lender may suffer by reason of a breach by the Parent, any of its
Subsidiaries or any other Obligor of any obligation, covenant or undertaking
with respect to any Loan Document payable by the Parent, any of its Subsidiaries
or any other Obligor under any Loan Document.

"OBLIGOR" means the Borrowers or any other Person liable for performance of
any of the Obligations or the property of which secures any of the Obligations.

"OFFSHORE ADVANCE" means any Advance bearing interest at the Offshore
Basis.

"OFFSHORE BASIS" means a simple per annum interest rate equal to the lesser
of (a) the Highest Lawful Rate, or (b) the sum of the Offshore Dollar Rate or
Approved Offshore Currency Rate, as applicable, plus the Applicable Margin. The
Offshore Basis shall, with respect to Offshore Advances subject to reserve or
deposit requirements, be subject to premiums for such reserve or deposit
requirements assessed by each Lender to the extent incurred by such Lender,
which are payable directly to each Lender. Once determined, the Offshore Basis
shall remain unchanged during the applicable Interest Period.

"OFFSHORE DOLLAR RATE" means, for any Offshore Advance to be made in
Dollars for any Interest Period therefor, the rate per annum (rounded upwards,
if necessary, to the nearest 1/100th of 1%) appearing on Telerate Page 3750 (or
any successor page) as the London interbank offered rate for deposits in Dollars
at approximately 11:00 a.m. (London time) two Business Days prior to the first
day of such Interest Period for a term comparable to such Interest Period. If
for any reason such rate is not available, the term "OFFSHORE DOLLAR RATE" shall
mean, for any

-21-
<PAGE>

Offshore Advance for any Interest Period therefor, the rate per annum
(rounded upwards, if necessary, to the nearest 1/100th of 1%) appearing on
Reuters Screen LIBO Page as the London interbank offered rate for deposits in
Dollars at approximately 11:00 a.m. (London time) two Business Days prior the
first day of such Interest Period for a term comparable to such Interest
Period; PROVIDED, HOWEVER, if more than one rate is specified on Reuters
Screen LIBO Page, the applicable rate shall be the arithmetic mean of all
such rates (rounded upwards, if necessary, to the nearest 1/100th of 1%).

"OFFSHORE LENDING OFFICE" means, with respect to a Lender, the office
designated as its Offshore Lending Office for Dollar Advances on SCHEDULE 1
attached hereto, and such other office of the Lender or any of its Affiliates
hereafter designated by notice to the Borrowers and the Administrative Agent.

"OPERATING LEASE" means any operating lease, as defined in the Financial
Accounting Standard Board Statement of Financial Accounting Standards No. 13,
dated November, 1976 or otherwise in accordance with GAAP.

"PARTICIPANT" has the meaning specified in SECTION 11.6(c) hereof.

"PARTICIPATION" has the meaning specified in SECTION 11.6(c) hereof.

"PARTICIPATING MEMBER STATE" means each country which from time to time
becomes a Participating Member State as described in EMU Legislation.

"PAYMENT DATE" means the last day of the Interest Period for any Offshore
Advance.

"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.

"PEI" means Power-Electronics, Inc., a corporation organized under the laws
of the Commonwealth of Puerto Rico.

"PERMITTED LIENS" means, as applied to any Person:

(a) Any Lien to secure the Obligations hereunder;

(b) (i) Liens on real estate for ad valorem taxes not yet delinquent,
(ii) Liens on leasehold interests created by the lessor in favor of any
mortgagee of the leased premises, and (iii) Liens for taxes, assessments,
governmental charges, levies or claims that are not yet delinquent or that are
being diligently contested in good faith by appropriate proceedings in
accordance with SECTION 5.6 hereof and for which adequate reserves shall have
been set aside on such Person's books, but only so long as no foreclosure,
restraint, sale or similar proceedings have been commenced with respect thereto;

-22-
<PAGE>

(c) Liens of carriers, warehousemen, landlords, mechanics, laborers and
materialmen and other similar Liens incurred in the ordinary course of business
for sums not yet due or being contested in good faith, if such reserve or
appropriate provision, if any, as shall be required by GAAP shall have been made
therefor;

(d) Liens incurred in the ordinary course of business in connection with
worker's compensation, unemployment insurance or similar legislation;

(e) Easements, right-of-way, restrictions and other similar encumbrances
on the use of real property which do not interfere in any material respect with
the ordinary conduct of the business of such Person;

(f) Liens created to secure the purchase price of assets acquired by such
Person or created to secure Indebtedness permitted by SECTION 7.1(c) hereof,
which is incurred solely for the purpose of financing the acquisition of such
assets and incurred at the time of acquisition, so long as each such Lien shall
at all times be confined solely to the asset or assets so acquired (and proceeds
thereof), and refinancings thereof so long as any such Lien remains solely on
the asset or assets acquired and the amount of Indebtedness related thereto is
not increased;

(g) Liens in respect of judgments or awards for which appeals or
proceedings for review are being prosecuted and in respect of which a stay of
execution upon any such appeal or proceeding for review shall have been secured,
provided that (i) such Person shall have established adequate reserves for such
judgments or awards, (ii) such judgments or awards shall be fully insured
(subject to customary deductibles) and the insurer shall not have denied
coverage, or (iii) such judgments or awards shall have been bonded to the
satisfaction of the Determining Lenders;

(h) Any Liens which are described on SCHEDULE 2 hereto, and Liens
resulting from the refinancing of the related Indebtedness, provided that the
Indebtedness secured thereby shall not be increased and the Liens shall not
cover additional assets of the Parent or any of its Subsidiaries;

(i) Leases or subleases granted to others not interfering in any material
respect with the ordinary conduct of the business of the Parent or any of its
Subsidiaries;

(j) Liens arising from filing Uniform Commercial Code financing statements
for precautionary purposes relating solely to true leases of personal property
permitted by this Agreement under which the Parent or any of its Subsidiaries is
a lessee;

(k) Any zoning or similar law or right reserved to or vested in any
Tribunal to control or regulate the use of any real property;

-23-
<PAGE>

(l) Any other title exception with respect to real property assets
disclosed by any preliminary title report, title commitment report or other
search of title provided to the Administrative Agent in accordance with this
Agreement unless disapproved by the Administrative Agent prior to the Agreement
Date; and

(m) Any Lien in favor of any Lender or any Affiliate of any Lender to
secure any obligations owed to such Lender in respect of any Interest Hedge
Agreement.

"PERSON" means an individual, corporation, partnership, trust or
unincorporated organization, or a government or any agency or political
subdivision thereof.

"PLAN" means an employee benefit plan as defined in Section 3(3) of ERISA
(including a Multiemployer Plan) pursuant to which any employees of the Parent,
its Subsidiaries or any member of their Controlled Group participate.

"PLEDGE AGREEMENT" means any pledge agreement, substantially in the form of
EXHIBIT B hereto, as amended, modified, renewed, supplemented or restated from
time to time, executed by the Parent with respect to 66% of the issued and
outstanding Capital Stock of each Foreign Subsidiary directly owned by the
Parent or any Domestic Subsidiary.

"PRETAX CASH FLOW" means, for any period of determination, calculated for
the Parent and its Subsidiaries on a consolidated basis, an amount equal to the
sum of (a) EBITDA for such period, plus (b) lease expense under Operating Leases
for such period.

"PRETAX NET INCOME" means net profit (or loss) before taxes of the Parent
and its Subsidiaries, on a consolidated basis, determined in accordance with
GAAP.

"PRIME RATE" means, at any time, the prime interest rate announced or
published by the Administrative Agent from time to time as its reference rate
for the determination of interest rates for loans of varying maturities in
United States dollars to United States residents of varying degrees of
creditworthiness and being quoted at such time by the Administrative Agent as
its "prime rate;" it being understood that such rate may not be the lowest rate
of interest charged by the Administrative Agent.

"PUM" shall mean Poder Uno de Mexico, S.A. de C.V., a corporation organized
under the laws of the United Mexican States.

"QUARTERLY DATE" means the last day of each March, June, September and
December, beginning September 30, 1999.

"RATE ADJUSTMENT DATE" means the date that the Lenders receive the
financial statements for the fiscal quarter ending June 30, 1999 required to be
delivered pursuant to SECTION 6.1.

-24-
<PAGE>

"REIMBURSEMENT OBLIGATIONS" means, in respect of any Letter of Credit as at
any date of determination, the sum of (a) the maximum aggregate amount which is
then available to be drawn under such Letter of Credit plus (b) the aggregate
amount of all drawings under such Letter of Credit not theretofore reimbursed by
the Borrowers.

"RELEASE DATE" means the date on which the Notes have been paid, all other
Obligations due and owing have been paid and performed in full, and the
Revolving Credit Commitment has been terminated.

"REPORTABLE EVENT" has the meaning set forth in Section 4043(b) of ERISA.

"RESET DATE" means the date on which any Offshore Advance denominated in an
Approved Offshore Currency is continued for an additional Interest Period.

"RESTRICTED PAYMENTS" means, collectively, (i) Dividends, and (ii) any
(A) payment or prepayment of principal, premium or penalty on any Institutional
Debt of the Parent or any or its Subsidiaries or any defeasance, redemption,
purchase, repurchase or other acquisition or retirement for value, in whole or
in part, of any Institutional Debt (including, without limitation, the setting
aside of assets or the deposit of funds therefor) and (B) prepayment of interest
on any Institutional Debt.

"REVOLVING COMMITMENT FEE" has the meaning specified in SECTION 2.4(a)
hereof.

"REVOLVING CREDIT ADVANCE" means an Advance made pursuant to SECTION 2.1(a)
hereof.

"REVOLVING CREDIT COMMITMENT" means $65,000,000.00.

"REVOLVING CREDIT NOTE" means the Promissory Note of the Borrowers
evidencing Revolving Credit Advances hereunder, substantially in the form of
EXHIBIT A hereto, together with any extension, renewal, or amendment thereof, or
substitution therefor.

"RIGHTS" means rights, remedies, powers and privileges.

"SHAREHOLDER CONTRIBUTION" means any contribution of cash to the Parent or
any of its Subsidiaries made by any shareholder of the Parent or any of its
Affiliates which is used by the Parent for Capital Expenditures or Acquisitions
or pursuant to SECTION 8.1(c) hereof.

"SOLVENT" means, with respect to any Person, that the fair value of the
assets of such Person (both at fair valuation and at present fair saleable
value) is, on the date of determination, greater than the total amount of
liabilities (including contingent and unliquidated liabilities) of such Person
as of such date and that, as of such date, such Person is able to pay all
liabilities of such Person as such liabilities mature and such Person does not
have unreasonably small capital with which to carry on its business. In
computing the amount of contingent or unliquidated

-25-
//ex99-1_1622_af.cecc
<PAGE>

liabilities at any time, such liabilities will be computed at the amount
which, in light of all the facts and circumstances existing at such time,
represents the amount that can reasonably be expected to become an actual or
matured liability discounted to present value at rates believed to be
reasonable by such Person.

"SPECIAL COUNSEL" means the law firm of Donohoe, Jameson & Carroll, P.C.,
or such other legal counsel as the Administrative Agent may select.

"SPECIFIED PERCENTAGE" means, as to any Lender, the percentage indicated
beside its name on the signature pages hereof, or if applicable, specified in
its most recent Assignment Agreement.

"SUBORDINATION AGREEMENT" means any Subordination Agreement, executed by
one or more Subsidiaries of the Parent, substantially in the form of EXHIBIT F
hereto, as amended, modified, renewed, supplemented or restated from time to
time.

"SUBSEQUENT PARTICIPANT" means each country that adopts the Euro as its
lawful currency after January 1, 1999.

"SUBSEQUENT PRICING PERIOD" means the period from the date which is the
first day following the end of the Initial Pricing Period to the Maturity Date.

"SUBSIDIARY" of any Person means any corporation, partnership, joint
venture, trust or estate or other Person of which (or in which) more than 50%
of:

(a) the outstanding capital stock having voting power to elect a
majority of the Board of Directors of such corporation (irrespective of
whether at the time capital stock of any other class or classes of such
corporation shall or might have voting power upon the occurrence of any
contingency),

(b) the interest in the capital or profits of such partnership or
joint venture,

(d) the equity interest of such other Person,

is at the time directly or indirectly owned by such Person, by such Person
and one or more of its Subsidiaries or by one or more of such Person's
Subsidiaries.

"SUBSIDIARY GUARANTY" means any Subsidiary Guaranty, executed by one or
more Domestic Subsidiaries, substantially in the form of EXHIBIT E hereto, as
amended, modified, renewed, supplemented or restated from time to time.

-26-
<PAGE>

"SYNTHETIC LEASES" means any synthetic lease, tax retention operating
lease, off-balance sheet loan or similar off-balance sheet financing product
where such transaction is considered borrowed money indebtedness for tax
purposes but which is classified as an Operating Lease pursuant to GAAP.

"TARGET BUSINESS DAY" is a day when TARGET (Trans-European Automated
Real-time Gross settlement Express Transfer system), or any successor
thereto, is scheduled to be open for business.

"TAXES" has the meaning specified in SECTION 2.14 hereof.

"TOTAL DEBT" means, as of any date of determination, determined for the
Parent and its Subsidiaries on a consolidated basis, without duplication,
(i) indebtedness for borrowed money, (ii) obligations evidenced by bonds,
debentures, notes or other similar instruments, (iii) obligations to pay the
deferred purchase price of property or services other than trade payables
incurred in the ordinary course of business, and (iv) Capitalized Lease
Obligations.

"TREATY" means the Treaty establishing the European Economic Community,
being the Treaty of Rome of March 25, 1957 as amended by the single European Act
1986 and the Maastricht Treaty (which was signed on February 7, 1992 and came
into force on November 1, 1993) as amended, varied or supplemented from time to
time.

"TRIBUNAL" means any state, commonwealth, federal, foreign, territorial, or
other court or government body, subdivision, agency, department, commission,
board, bureau, or instrumentality of a governmental or other regulatory body or
authority.

"UCC" means the Uniform Commercial Code of Texas, as amended from time to
time, and the Uniform Commercial Code applicable in such other states as any
Collateral may be located.

"UNUSED PORTION" means an amount equal to the result of (i) the Revolving
Credit Commitment minus (ii) the sum of (A) the outstanding Revolving Credit
Advances plus (B) outstanding Reimbursement Obligations in respect of the
Letters of Credit less the amount of Cash Collateralized Letters of Credit. The
Unused Portion shall be calculated with respect to (a) each Offshore Advance in
an Approved Offshore Currency by assuming that the Dollar Equivalent for such
Approved Offshore Currency in effect on the (i) date of such Offshore Advance
remains the same for each day from such date to the immediately following
Quarterly Date, and (ii) last day of each Quarterly Date thereafter was the rate
in effect for each day during the calendar quarter ending on such Quarterly Date
and (b) Reimbursement Obligations in respect of Letters of Credit denominated in
an Approved Offshore Currency by assuming that the Dollar Equivalent for such
Approved Offshore Currency in effect on the last day of each Quarterly Date was
the rate in effect for each day during the calendar quarter ending on such
Quarterly Date.

-27-
<PAGE>

Section 1.2 AMENDMENTS AND RENEWALS. Each definition of an agreement in
this ARTICLE 1 shall include such agreement as amended to date, and as amended
or renewed from time to time in accordance with its terms, but only with the
prior written consent of the Determining Lenders or all the Lenders as required
pursuant to SECTION 11.11 hereof.

Section 1.3 CONSTRUCTION. The terms defined in this ARTICLE 1 (except
as otherwise expressly provided in this Agreement) for all purposes shall have
the meanings set forth in SECTION 1.1 hereof, and the singular shall include the
plural, and vice versa, unless otherwise specifically required by the context.
All accounting terms used in this Agreement which are not otherwise defined
herein shall be construed in accordance with GAAP on a consolidated basis for
the Parent and its Subsidiaries, unless otherwise expressly stated herein.

ARTICLE 2

REVOLVING CREDIT ADVANCES

Section 2.1 THE REVOLVING CREDIT ADVANCES.

(a) Each Lender severally agrees, upon the terms and subject to the
conditions of this Agreement, to make Revolving Credit Advances to the Borrowers
in Dollars and Approved Offshore Currencies from time to time in an aggregate
amount not to exceed its Specified Percentage of the Revolving Credit Commitment
less its Specified Percentage of the remainder of (i) the aggregate amount of
all Reimbursement Obligations then outstanding (assuming compliance with all
conditions to drawing) minus (ii) the outstanding amount of Cash Collateralized
Letters of Credit for the purposes set forth in SECTION 5.9 hereof; PROVIDED,
HOWEVER, notwithstanding anything herein to the contrary, in no event shall the
Dollar Equivalent of the principal amount of all Advances and Reimbursement
Obligations outstanding in Approved Offshore Currencies exceed the Approved
Offshore Currency Borrowing Limit. Subject to SECTION 2.9 hereof, Revolving
Credit Advances may be repaid and then reborrowed. Notwithstanding any
provision in any Loan Document to the contrary, in no event shall the Dollar
Equivalent principal amount of all outstanding Revolving Credit Advances exceed
the Revolving Credit Commitment minus the remainder of (i) the Dollar Equivalent
outstanding Reimbursement Obligations minus (ii) the Dollar Equivalent
outstanding amount of Cash Collateralized Letters of Credit.

(b) Any Revolving Credit Advance shall, at the option of the Borrower as
provided in SECTION 2.2 hereof (and, in the case of Offshore Advances, subject
to the provisions of ARTICLE 9 hereof), be made as a Base Rate Advance or an
Offshore Advance; provided that there shall not be outstanding to any Lender, at
any one time, more than ten Offshore Advances.

Section 2.2 MANNER OF BORROWING AND DISBURSEMENT.

(a) In the case of Base Rate Advances, the Borrowers, through an
Authorized

-28-
<PAGE>

Signatory, shall give the Administrative Agent prior to 11:00 a.m., Dallas,
Texas time, on the date of any proposed Base Rate Advance irrevocable written
notice, or irrevocable telephonic notice followed immediately by written
notice substantially in the form of EXHIBIT G hereto (a "NOTICE OF
BORROWING") (provided, however, that the Borrowers' failure to confirm any
telephonic notice in writing shall not invalidate any notice so given), of
their intention to borrow a Base Rate Advance hereunder. Such Notice of
Borrowing shall specify the requested funding date, which shall be a Business
Day, and the amount of the proposed aggregate Base Rate Advances to be made
by Lenders.

(b) In the case of Offshore Advances, the Borrowers, through an Authorized
Signatory, shall give the Administrative Agent at least three Business Days' (or
four Business Days', if such Advance is to be made in an Approved Offshore
Currency) irrevocable written notice, or irrevocable telephonic notice followed
immediately by written notice pursuant to a Notice of Borrowing (provided,
however, that the Borrowers' failure to confirm any telephonic notice in writing
shall not invalidate any notice so given), of its intention to borrow an
Offshore Advance hereunder. Notice shall be given to the Administrative Agent
prior to 11:00 a.m., Dallas, Texas time, in order for such Business Day to count
toward the minimum number of Business Days required. Offshore Advances shall in
all cases be subject to ARTICLE 9 hereof. For Offshore Advances, the Notice of
Borrowing shall specify the requested funding date, which shall be a Business
Day, whether such Advance is to be made in Dollars or in an Approved Offshore
Currency and specifying such Approved Offshore Currency, the amount of the
proposed aggregate Offshore Advances to be made by Lenders and the Interest
Period selected by the Borrowers, provided that no such Interest Period shall
extend past the Maturity Date, or prohibit or impair the Borrowers' ability to
comply with SECTION 2.8 hereof.

(c) Subject to SECTIONS 2.1 and 2.9 hereof, the Borrowers shall have the
option (i) to convert at any time all or any part of the outstanding (A) Base
Rate Advances to Offshore Advances or (B) Offshore Advances to Base Rate
Advances or (ii) upon expiration of any Interest Period applicable to an
Offshore Advance, to continue all or any portion of such Offshore Advance equal
to $500,000 and integral multiples of $100,000 (or the Dollar Equivalent of each
such amount) in excess of that amount as an Offshore Advance and the succeeding
Interest Period(s) of such continued Offshore Advance shall commence on the last
day of the Interest Period of the Offshore Advance to be continued; provided,
however, (a) Offshore Advances may only be converted into Base Rate Advances on
the expiration date of the Interest Period applicable thereto and
(b) notwithstanding anything in this Agreement to the contrary, no outstanding
Advance may be continued as, or converted into, an Offshore Advance when any
Default or Event of Default has occurred and is continuing. At least three
Business Days (or four Business Days prior to a proposed conversion to an
Offshore Advance in an Approved Offshore Currency) prior to a proposed
conversion/continuation date, the Borrowers, through an Authorized Signatory,
shall give the Administrative Agent irrevocable written notice, or irrevocable
telephonic notice followed immediately by written notice in substantially the
form of EXHIBIT H hereto (a "NOTICE OF CONTINUATION/CONVERSION") (provided,
however, that the Borrowers' failure to confirm any telephonic notice in writing
shall not invalidate any notice so

-29-
<PAGE>

given), stating (i) the proposed conversion/continuation date (which shall be
a Business Day), (ii) the amount of the Advance to be converted/continued,
(iii) in the case of a conversion to, or a continuation of, an Offshore
Advance, the requested Interest Period, (iv) in the case of a conversion of a
Base Rate Advance to an Offshore Advance or continuation of an Offshore
Advance, stating that no Default or Event of Default has occurred and is
continuing, and (v) whether such Advance to be converted/continued is to be
made in Dollars or an Approved Offshore Currency, and specifying such
Approved Offshore Currency. If the Borrowers, through an Authorized
Signatory, shall fail to give any notice in accordance with this SECTION
2.2(c), the Borrowers shall be deemed irrevocably to have requested that such
Offshore Advance be converted to a Base Rate Advance in the same principal
amount. Notice shall be given to the Administrative Agent prior to 11:00
a.m., Dallas, Texas time, in order for such Business Day to count toward the
minimum number of Business Days required.

(d) The aggregate amount of Base Rate Advances to be made by the Lenders
on any day shall be in a principal amount which is at least $250,000 and which
is an integral multiple of $100,000; provided, however, that such amount may
equal the unused amount of the Revolving Credit Commitment. The aggregate
amount of Offshore Advances having the same Interest Period and to be made by
the Lenders on any day shall be in a principal amount which is at least $500,000
and which is an integral multiple of $100,000 (or the Dollar Equivalent of each
such amount on the date of such Advance).

(e) The Administrative Agent shall promptly notify the Lenders of each
notice received from the Borrowers pursuant to this Section. If such notice
from the Borrowers designated an Approved Offshore Currency, the Administrative
Agent shall promptly notify the Borrowers and the Lenders of the Dollar
Equivalent thereof. Each Lender shall, not later than noon, Dallas, Texas time,
on the date of any Revolving Credit Advance, deliver to the Administrative
Agent, at its address set forth herein, such Lender's Specified Percentage of
such Revolving Credit Advance in immediately available funds in accordance with
the Administrative Agent's instructions, except that if such Advance is
denominated in an Approved Offshore Currency, each Lender shall make available
its funds at such office as the Administrative Agent has previously specified in
a notice to each Lender, in such funds as are then customary for the settlement
of international transactions in the applicable Approved Offshore Currency and
no later than such local time as is necessary for such funds to be received and
transferred to the appropriate Borrower for same day value on the date of such
Advance. Prior to 2:00 p.m., Dallas, Texas time, on the date of any Revolving
Credit Advance hereunder, the Administrative Agent shall, subject to
satisfaction of the conditions set forth in ARTICLE 3, disburse the amounts made
available to the Administrative Agent by the Lenders by (i) transferring such
amounts by wire transfer pursuant to the Borrowers' instructions, or (ii) in the
absence of such instructions, crediting such amounts to the account of the
appropriate Borrower maintained with the Administrative Agent. All Revolving
Credit Advances shall be made by each Lender according to its Specified
Percentage.

Section 2.3 INTEREST.

-30-
//ex99-1_1622_ag.cecc
<PAGE>

(a) ON BASE RATE ADVANCES.

(i) The Borrowers shall pay interest on the outstanding unpaid
principal amount of the Base Rate Advances outstanding from time to time,
until such Base Rate Advances are due (whether at maturity, by reason of
acceleration, by scheduled reduction, or otherwise) and repaid at a simple
interest rate per annum equal to the Base Rate Basis for the Base Rate
Advances as in effect from time to time, provided that interest on the Base
Rate Advances shall not exceed the Maximum Amount. If at any time the Base
Rate Basis would exceed the Highest Lawful Rate, interest payable on the
Base Rate Advances shall be limited to the Highest Lawful Rate, but the
Base Rate Basis shall not thereafter be reduced below the Highest Lawful
Rate until the total amount of interest accrued on the Base Rate Advances
equals the amount of interest that would have accrued if the Base Rate
Basis had been in effect at all times.

(ii) Interest on the Base Rate Advances shall be computed on the basis
of a year of 365 or 366 days, as appropriate, for the actual number of days
elapsed, and shall be payable in arrears on each Quarterly Date and on the
Maturity Date.

(b) ON OFFSHORE ADVANCES.

(i) The Borrowers shall pay interest on the unpaid principal amount
of each Offshore Advance, from the date such Advance is made until it is
due (whether at maturity, by reason of acceleration, by scheduled
reduction, or otherwise) and repaid, at a rate per annum equal to the
Offshore Basis for such Offshore Advance. The Administrative Agent, whose
determination shall be controlling in the absence of manifest error, shall
determine the Offshore Basis on the second Business Day prior to the
applicable funding date and shall notify the Borrowers and the Lenders of
such Offshore Basis.

(ii) Subject to SECTION 11.9 hereof, interest on each Offshore Advance
shall be computed on the basis of a 360-day year for the actual number of
days elapsed, and shall be payable in arrears on the applicable Payment
Date and on the Maturity Date; provided, however, that if the Interest
Period for such Offshore Advance exceeds three months, interest shall also
be due and payable in arrears on each three-month anniversary of the
commencement of such Interest Period during such Interest Period.

(c) INTEREST AFTER AN EVENT OF DEFAULT. (i) After an Event of Default
(other than an Event of Default specified in SECTION 8.1(f) or (g) hereof) and
during any continuance thereof, at the option of Determining Lenders and
provided that the Administrative Agent has given notice of the decision to
charge interest at the Default Rate, and (ii) after an Event of Default
specified in SECTION 8.1(f) or (g) hereof and during any continuance thereof,
automatically and without any action or notice by the Administrative Agent or
any Lender, the Obligations shall bear interest at

-31-
<PAGE>

a rate per annum equal to the Default Rate. Such interest shall be payable
on the earlier of demand or the Maturity Date, and shall accrue until the
earlier of (i) waiver or cure (to the satisfaction of the Determining
Lenders) of the applicable Event of Default, (ii) agreement by the
Determining Lenders to rescind the charging of interest at the Default Rate,
or (iii) payment in full of the Obligations. The Lenders shall not be
required to accelerate the maturity of the Advances, to exercise any other
rights or remedies under the Loan Documents, or in case of an Event of
Default specified in clause (ii)hereof, to give notice to the Borrowers of
the decision to charge interest at the Default Rate.

Section 2.4 FEES.

(a) REVOLVING COMMITMENT FEE. Subject to SECTION 11.9 hereof, the
Borrowers agree to pay to the Administrative Agent, for the ratable account of
the Lenders, a commitment fee on the daily average Unused Portion at the
following per annum percentages, applicable in the following situations:

Applicability Percentage

(a) Initial Pricing Period 0.500
(b) Subsequent Pricing Period

(i) If the Leverage Ratio is greater than or equal 0.500
to 1.75 to 1
(ii) If the Leverage Ratio is greater than or equal 0.375
to 1.00 to 1 but is less than 1.75 to 1
(iii) If the Leverage Ratio is less than 1.00 0.300
to 1

Such fee shall be (i) payable in arrears on each Quarterly Date and on the
Maturity Date, (ii) fully earned when due and, subject to SECTION 11.9 hereof,
nonrefundable when paid and (iii) subject to SECTION 11.9 hereof, computed on
the basis of a year of 365 or 366 days, as appropriate, for the actual number of
days elapsed. The commitment fee shall be subject to reduction or increase, as
applicable and as set forth in the table above, on a quarterly basis (except as
otherwise provided in SECTION 7.6 hereof) by using the Leverage Ratio calculated
as of the end of each fiscal quarter during the Subsequent Pricing Period. Any
such increase or decrease in the commitment fee shall be effective two Business
Days after the date of receipt of the financial statements required to be
delivered pursuant to SECTION 6.1 or 6.2 hereof, as applicable, for each such
fiscal quarter, and the Compliance Certificate required pursuant to SECTION 6.3
hereof. If such financial statements and Compliance Certificate are not
received by the date required hereunder, the commitment fee shall be determined
as if the Leverage Ratio is greater than or equal to 2.50 to 1 until such time
as such financial statements and Compliance Certificate are received.

(b) OTHER FEES. Subject to SECTION 11.9 hereof, the Borrowers agree to
pay to the Administrative Agent, the fees on the dates and in the amounts
specified in the letter agreement (the "FEE LETTER"), dated as of April 22,
1999, among the Parent, the Administrative Agent and Banc of America Securities
LLC.

-32-
<PAGE>

Section 2.5 PREPAYMENTS.

(a) VOLUNTARY OFFSHORE ADVANCE PREPAYMENTS. Upon three Business Days'
prior telephonic notice (to be promptly followed by written notice) by an
Authorized Signatory to the Administrative Agent, Offshore Advances may be
voluntarily prepaid but only so long as the Borrowers concurrently reimburse the
Lenders in accordance with SECTION 2.9 hereof. Any notice of prepayment shall
be irrevocable.

(b) MANDATORY PREPAYMENT. On or before the date of any reduction of the
Revolving Credit Commitment, the Borrowers shall prepay applicable outstanding
Revolving Credit Advances and/or cash collateralize Letters of Credit in an
amount necessary to reduce the sum of outstanding Revolving Credit Advances and
Reimbursement Obligations less Cash Collateralized Letters of Credit to an
amount less than or equal to the Revolving Credit Commitment as so reduced. To
the extent required by the preceding sentence, the Borrowers shall first prepay
all Base Rate Advances, and shall thereafter prepay Offshore Advances. To the
extent that any prepayment requires that an Offshore Advance be repaid on a date
other than the last day of its Interest Period, the Borrowers shall reimburse
each Lender in accordance with SECTION 2.9 hereof. To the extent that
outstanding Revolving Credit Advances exceed the Revolving Credit Commitment
after any reduction thereof, the Borrowers shall repay any such excess amount
and all accrued interest attributable to such excess Revolving Credit Advances
on the date of such reduction. Furthermore, if on any Reset Date, the Dollar
Equivalent of all outstanding Revolving Credit Advances, PLUS the Dollar
Equivalent of all outstanding Reimbursement Obligations MINUS the Dollar
Equivalent of all outstanding Cash Collateralized Letters of Credit exceeds the
Revolving Credit Commitment as a result of a change in Dollar Equivalents
("DOLLAR EQUIVALENT EXCESS"), then, within two Business Days after notice
thereof from the Administrative Agent, the Borrowers shall prepay Advances in an
amount equal to the Dollar Equivalent Excess.

(c) PREPAYMENTS FROM SALES OF ASSETS. Not later than one Business Day
after the receipt of Net Cash Proceeds from the sale or disposition by the
Parent or any of its Subsidiaries of any assets (other than the sale or
disposition of (i) inventory in the ordinary course of business, (ii) obsolete
or worn-out assets, (iii) assets, the Net Cash Proceeds of which are to be
reinvested as provided in SECTION 7.5(c) hereof, and (iv) assets of a value
(determined at the greater or book or fair market value) in an aggregate amount
during any Fiscal Year not in excess of $1,000,000), the Borrowers shall prepay
Revolving Credit Advances in a principal amount equal to the amount of such Net
Cash Proceeds. Any such prepayments shall be applied to permanently reduce the
Revolving Credit Commitment.

(d) PREPAYMENT FROM SALE OF CAPITAL STOCK. Not later than one Business
Day after the receipt of Net Cash Proceeds from the issuance or sale by the
Parent or any of its Subsidiaries of any Capital Stock of the Parent or any of
its Subsidiaries (excluding (i) all such Net Cash Proceeds to be applied by the
Parent or any of its Subsidiaries to amounts owed in connection

-33-
<PAGE>

with any Acquisition permitted hereunder, including without limitation,
repayment of Indebtedness and (ii) issuances of Capital Stock in the ordinary
course of business to employees, directors and officers and pursuant to
exercises of stock options, the Borrowers shall prepay Revolving Credit
Advances in a principal amount equal to the amount of such Net Cash Proceeds.
Any such prepayments shall be applied to permanently reduce the Revolving
Credit Commitment.

(e) PREPAYMENT FROM SALE OF INSTITUTIONAL DEBT. Not later than one
Business Day after the receipt of Net Cash Proceeds from the issuance of any
Institutional Debt by the Parent, the Borrowers shall prepay Revolving Credit
Advances in a principal amount equal to the amount of such Net Cash Proceeds.
Any such prepayments shall be applied to permanently reduce the Revolving Credit
Commitment.

(f) PAYMENTS, GENERALLY. Any prepayment of any Revolving Credit Advance
shall be accompanied by interest accrued on the principal amount being prepaid.
Any voluntary partial payment of a Base Rate Advance shall be in a principal
amount which is at least $250,000 and which is an integral multiple of $100,000.
Any voluntary partial payment of an Offshore Advance shall be in a principal
amount which is at least $500,000 and which is an integral multiple of $100,000
(or the Dollar Equivalent thereof), and to the extent that any prepayment of an
Offshore Advance is made on a date other than the last day of its Interest
Period, the Borrowers shall reimburse each Lender in accordance with SECTION 2.9
hereof.

Section 2.6 REDUCTION OF REVOLVING CREDIT COMMITMENT.

(a) VOLUNTARY REDUCTION. The Borrowers shall have the right, upon not
less than 5 Business Days' notice by an Authorized Signatory to the
Administrative Agent (if telephonic, to be confirmed by telex or in writing on
or before the date of reduction or termination), which shall promptly notify the
Lenders, to terminate or reduce the Revolving Credit Commitment, in whole or in
part. Each partial termination shall be in an aggregate amount which is at
least $1,000,000 and which is an integral multiple of $100,000, and no voluntary
reduction in the Revolving Credit Commitment shall cause any Offshore Advance to
be repaid prior to the last day of its Interest Period unless the Parent shall
reimburse each Lender in accordance with SECTION 2.9 hereof.

(b) MANDATORY REDUCTION. The Revolving Credit Commitment shall be
automatically reduced to zero on the Maturity Date.

(c) GENERAL REQUIREMENTS. Upon a reduction of the Revolving Credit
Commitment pursuant to this Section, the Borrowers shall immediately make a
repayment of the Revolving Credit Advances in accordance with SECTION 2.5(b)
hereof. The Borrowers shall reimburse each Lender in connection with any such
payment in accordance with SECTION 2.9 hereof to the extent applicable. The
Borrowers shall not have any right to rescind any termination or reduction.
Once reduced, the Revolving Credit Commitment may not be increased or
reinstated.

-34-
<PAGE>

Section 2.7 NON-RECEIPT OF FUNDS BY THE ADMINISTRATIVE AGENT. Unless
the Administrative Agent shall have been notified by a Lender prior to the date
of any proposed Revolving Credit Advance (which notice shall be effective upon
receipt) that such Lender does not intend to make the proceeds of such Revolving
Credit Advance available to the Administrative Agent, the Administrative Agent
may assume that such Lender has made such proceeds available to the
Administrative Agent on such date, and the Administrative Agent may in reliance
upon such assumption (but shall not be required to) make available to the
Borrowers a corresponding amount. If such corresponding amount is not in fact
made available to the Administrative Agent by such Lender, the Administrative
Agent shall be entitled to recover such amount on demand from such Lender (or,
if such Lender fails to pay such amount forthwith upon such demand, from the
Borrowers) together with interest thereon in respect of each day during the
period commencing on the date such amount was available to the Borrowers and
ending on (but excluding) the date the Administrative Agent receives such amount
from the Lender, with interest thereon at a per annum rate equal to the lesser
of (i) the Highest Lawful Rate or (ii) the Federal Funds Rate, with respect to
an Advance to be made in Dollars, or at a per annum rate equal to the lesser of
(i) the Highest Lawful Rate or (ii) the Administrative Agent's cost of funds for
the Applicable Currency computed on the same basis as regular interest on
Advances made hereunder in such Applicable Currency, with respect to an Advance
to be made in an Approved Offshore Currency. No Lender shall be liable for any
other Lender's failure to fund a Revolving Credit Advance hereunder.

Section 2.8 PAYMENT OF PRINCIPAL OF REVOLVING CREDIT ADVANCES. To the
extent not otherwise required to be paid earlier as provided herein, the
principal amount of the Revolving Credit Advances, all accrued interest and fees
thereon, and all other Obligations related thereto, shall be due and payable in
full on the Maturity Date.

Section 2.9 REIMBURSEMENT. Whenever any Lender shall sustain or
incur (other than through a default by that Lender) any losses or reasonable
out-of-pocket expenses in connection with (a) failure by any Borrower to
borrow any Offshore Advance after having given notice of its intention to
borrow in accordance with SECTION 2.2 hereof (whether by reason of any
Borrower's election not to proceed or the non-fulfillment of any of the
conditions set forth in ARTICLE 3 hereof), (b) any prepayment for any reason
of any Offshore Advance in whole or in part (including a prepayment pursuant
to SECTION 9.3(b) hereof) on other than the last day of an Interest Period
applicable to such Offshore Advance or (c) any prepayment of any of its
Offshore Advances that is not made on any date specified in a notice of
prepayment given by any Borrower, the Borrowers agree to pay to any such
Lender, within 30 days after demand by such Lender, an amount sufficient to
compensate such Lender for all such losses and out-of-pocket expenses,
subject to SECTION 11.9 hereof. Such losses shall include, without limiting
the generality of the foregoing, reasonable expenses incurred by such Lender
in connection with the re-employment of funds prepaid, repaid, converted or
not borrowed, converted or paid, as the case may be. A certificate as to any
amounts payable to any Lender under this SECTION 2.9 submitted to the
Borrowers by such Lender shall certify that such amounts were actually
incurred

-35-
//ex99-1_1622_ah.cecc
<PAGE>

by such Lender and shall show in reasonable detail an accounting of
the amount payable and the calculations used to determine in good faith such
amount and shall be conclusive absent manifest or demonstrable error. Nothing
in this SECTION 2.9 shall provide the Parent or any of its Subsidiaries the
right to inspect the records, files or books of any Lender.

Section 2.10 MANNER OF PAYMENT.

(a) Each payment (including prepayments) by the Borrowers of the principal
of or interest on the Revolving Credit Advances, fees, and any other amount owed
under this Agreement or any other Loan Document shall be made not later than
12:00 noon (Dallas, Texas time) on the date specified for payment under this
Agreement to the Administrative Agent at the Administrative Agent's office (or
the Approved Offshore Currency Payment Office, if payment is made in respect of
an Approved Offshore Currency Advance or Letter of Credit), in immediately
available funds. Except as provided in SECTION 9.4 hereof, such payments shall
be made in the Applicable Currency borrowed.

(b) If any payment under this Agreement or any other Loan Document shall
be specified to be made upon a day which is not a Business Day, it shall be made
on the next succeeding day which is a Business Day, unless, with respect to a
payment due in respect of an Offshore Advance, such Business Day falls in
another calendar month, in which case payment shall be made on the preceding
Business Day. Any extension of time shall in such case be included in computing
interest and fees, if any, in connection with such payment.

(c) The Borrowers agree to pay principal, interest, fees and all other
amounts due under the Loan Documents without deduction for set-off or
counterclaim or any deduction whatsoever.

(d) If some but less than all amounts due from the Borrowers are received
by the Administrative Agent, the Administrative Agent shall apply such amounts
in the following order of priority: (i) to the payment of the Administrative
Agent's expenses incurred on behalf of the Lenders then due and payable, if any;
(ii) to the payment of all other fees then due and payable; (iii) to the payment
of interest then due and payable on the Revolving Credit Advances; (iv) to the
payment of all other amounts not otherwise referred to in this clause (d) then
due and payable under the Loan Documents; and (v) to the payment of principal
then due and payable on the Revolving Credit Advances.

(e) The Administrative Agent shall not be liable to any party to this
Agreement in any way whatsoever for any delay, or the consequences of any delay,
in the crediting to any account of any amount denominated in Euro, unless and to
the extent that such delay is the result of gross negligence or wilful
misconduct of the Administrative Agent.

Section 2.11 LENDING OFFICES. Each Lender's initial Lending Office for
Base Rate Advances and Offshore Advances in Dollars and Approved Offshore
Currencies, as appropriate,

-36-
<PAGE>

is set forth opposite its name in SCHEDULE 1 attached hereto. Each Lender
shall have the right at any time and from time to time to designate a
different office of itself or of any Affiliate of such Lender as such
Lender's Lending Office for Base Rate Advances and Offshore Advances, as
appropriate, and to transfer any outstanding Offshore Advance or Base Rate
Advance to such Lending Office. No such designation or transfer shall result
in any liability on the part of the Borrowers for increased costs or expenses
resulting solely from such designation or transfer (except any such transfer
which is made by a Lender pursuant to SECTION 9.2 or 9.3 hereof, or otherwise
for the purpose of complying with Applicable Law). Increased costs for
expenses resulting from a change in law occurring subsequent to any such
designation or transfer shall be deemed not to result solely from such
designation or transfer.

Section 2.12 SHARING OF PAYMENTS. Any Lender obtaining a payment
(whether voluntary or involuntary, due to the exercise of any right of set-off,
or otherwise) on account of its Advances (other than pursuant to SECTIONS 2.14,
2.15(d), 2.15(f)(II), 9.3, 9.4, or 9.6) in excess of its Specified Percentage of
all payments made by the Borrowers with respect to Revolving Credit Advances
shall purchase from each other Lender such participation in the Revolving Credit
Advances made by such other Lender as shall be necessary to cause such
purchasing Lender to share the excess payment pro rata according to Specified
Percentages with each other Lender; provided, however, that if all or any
portion of such excess payment is thereafter recovered from such purchasing
Lender, the purchase shall be rescinded and the purchase price restored to the
extent of such recovery, but without interest. The Borrowers agree that any
Lender so purchasing a participation from another Lender pursuant to this
Section, to the fullest extent permitted by law, may exercise all its rights of
payment (including the right of set-off) with respect to such participation as
fully as if such Lender were the direct creditor of the Borrowers in the amount
of such participation.

Section 2.13 CALCULATION OF OFFSHORE DOLLAR RATE. The provisions of this
Agreement relating to calculation of the Offshore Dollar Rate and Approved
Offshore Currency Rate are included only for the purpose of determining the rate
of interest or other amounts to be paid hereunder that are based upon such rate,
it being understood that each Lender shall be entitled to fund and maintain its
funding of all or any part of an Offshore Advance as it sees fit.

Section 2.14 TAXES.

(a) Any and all payments by the Borrowers hereunder shall be made, in
accordance with SECTION 2.10, free and clear of and without deduction for any
and all present or future taxes, levies, imposts, deductions, charges and
withholdings, and all liabilities with respect thereto, EXCLUDING, in the case
of each Lender and the Administrative Agent, taxes imposed on, based upon or
measured by its overall net income, net worth or capital, and franchise taxes,
doing business taxes or minimum taxes imposed on it, (i) by the jurisdiction
under the laws of which such Lender or the Administrative Agent (as the case may
be) is organized and in which it has its applicable lending office or any
political subdivision thereof; (ii) by any other jurisdiction, or any political
subdivision thereof, other than those imposed by reason of (A) an asserted
relation

-37-
<PAGE>

of such jurisdiction to the transactions contemplated by this Agreement, (B)
the activities of any Borrower in such jurisdiction, or (C) the activities in
connection with the transactions contemplated by this Agreement of a Lender
or the Administrative Agent; (iii) by reason of failure by the Lender or the
Administrative Agent to comply with the requirements of paragraph (e) of this
SECTION 2.14; and (iv) in the case of any Lender, any Taxes in the nature of
transfer, stamp, recording or documentary taxes resulting from a transfer
(other than as a result of foreclosure) by such Lender of all or any portion
of its interest in this Agreement, the Notes or any other Loan Documents (all
such non-excluded taxes, levies, imposts, deductions, charges, withholdings
and liabilities being hereinafter referred to as "TAXES"). If the Borrowers
shall be required by law to deduct any Taxes from or in respect of any sum
payable hereunder to any Lender or the Administrative Agent, (x) the sum
payable shall be increased as may be necessary so that after making all
required deductions (including deductions applicable to additional sums
payable under this SECTION 2.14) such Lender or the Administrative Agent (as
the case may be) receives an amount equal to the sum it would have received
had no such deductions been made, (y) the Borrowers shall make such
deductions and (z) the Borrowers shall pay the full amount deducted to the
relevant taxation authority or other authority in accordance with applicable
law.

(b) In addition, the Borrowers agree to pay any and all stamp and
documentary taxes and any and all other excise and property taxes, charges and
similar levies (other than Taxes described in clause (iv) of the first sentence
of SECTION 2.14(a)) that arise from any payment made hereunder or from the
execution, delivery or registration of, or otherwise with respect to, this
Agreement or any other Loan Document (hereinafter referred to as "OTHER TAXES").

(c) The Borrowers will indemnify each Lender and the Administrative Agent
for the full amount of Taxes and Other Taxes (including, without limitation, any
Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this
SECTION 2.14) paid by such Lender or the Administrative Agent (as the case may
be) and all liabilities (including penalties, additions to tax, interest and
reasonable expenses) arising therefrom or with respect thereto whether or not
such Taxes or Other Taxes were correctly or legally asserted, other than
penalties, additions to tax, interest and expenses arising as a result of gross
negligence or wilful misconduct on the part of such Lender or the Administrative
Agent, PROVIDED, HOWEVER, that the Borrowers shall have no obligation to
indemnify such Lender or the Administrative Agent unless and until such Lender
or the Administrative Agent shall have delivered to the Borrowers a certificate
certifying that such Taxes or Other Taxes (and/or penalties, additions to tax,
interest and reasonable expenses) were actually incurred by such Lender or the
Administrative Agent and showing in reasonable detail an accounting of the
amount payable and the calculations used to determine in good faith such amount,
which certificate shall be conclusive absent manifest or demonstrable error.
Nothing in this SECTION 2.14 shall provide the Parent or any of its Subsidiaries
the right to inspect the records, files or books of any Lender or the
Administrative Agent. This indemnification shall be made within 30 days from
the date such Lender or the Administrative Agent (as the case may be) makes
written demand therefor.

(d) Within 30 days after the date of any payment of Taxes, the Borrowers
will furnish

-38-
<PAGE>

to the Administrative Agent the original or a certified copy of a receipt
evidencing payment thereof. For purposes of this SECTION 2.14 the terms
"UNITED STATES" and "UNITED STATES PERSON" shall have the meanings set forth
in Section 7701 of the Code.

(e) Each Lender which is not a United States Person hereby agrees that:

(i) it shall, no later than the Agreement Date (or, in the case of a
Lender which becomes a party hereto pursuant to SECTION 11.6 after the
Agreement Date, the date upon which such Lender becomes a party hereto)
deliver to the Borrowers through the Administrative Agent, with a copy to
the Administrative Agent:

(A) if any lending office is located in the United States of
America, two (2) accurate and complete signed originals of
Internal Revenue Service Form 4224 or any successor thereto
("FORM 4224"),

(B) if any lending office is located outside the United States of
America, two (2) accurate and complete signed originals of
Internal Revenue Service Form 1001 or any successor thereto
("FORM 1001").

in each case indicating that such Lender is on the date of delivery thereof
entitled to receive payments of principal, interest and fees for the
account of such lending office or lending offices under this Agreement free
from withholding of United States Federal income tax;

(ii) if at any time such Lender changes its lending office or lending
offices or selects an additional lending office it shall, at the same time
or reasonably promptly thereafter but only to the extent the forms
previously delivered by it hereunder are no longer effective, deliver to
the Borrowers through the Administrative Agent, with a copy to the
Administrative Agent, in replacement for the forms previously delivered by
it hereunder:

(A) if such changed or additional lending office is located in the
United States of America, two (2) accurate and complete signed
originals of Form 4224; or

(B) otherwise, two (2) accurate and complete signed originals of
Form 1001, in each case indicating that such Lender is on the
date of delivery thereof entitled to receive payments of
principal, interest and fees for the account of such changed or
additional lending office under this Agreement free from
withholding of United States Federal income tax;

(iii) it shall, before or promptly after the occurrence of any event
(including the passing of time but excluding any event mentioned in
clause (ii) above) requiring a

-39-
<PAGE>

change in the most recent Form 4224 or Form 1001 previously delivered by
such Lender and if the delivery of the same be lawful, deliver to the
Borrowers through the Administrative Agent with a copy to the
Administrative Agent, two (2) accurate and complete original signed
copies of Form 4224 or Form 1001 in replacement for the forms previously
delivered by such Lender;

(iv) it shall, promptly upon the request of the Borrowers to that
effect, deliver to the Borrowers such other forms or similar documentation
as may be required from time to time by any applicable law, treaty, rule or
regulation in order to establish such Lender's tax status for withholding
purposes; and

(v) it shall notify the Borrowers within 30 days after any event
(including an amendment to, or a change in any applicable law or regulation
or in the written interpretation thereof by any regulatory authority or any
judicial authority, or by ruling applicable to such Lender of any
governmental authority charged with the interpretation or administration of
any law) shall occur that results in such Lender no longer being capable of
receiving payments without any deduction or withholding of United States
federal income tax.

(f) Without prejudice to the survival of any other agreement of the
Borrowers hereunder, the agreements and obligations of the Borrowers contained
in this SECTION 2.14 shall survive the payment in full of principal and interest
hereunder.

(g) Each Lender (and the Administrative Agent with respect to payments to
the Administrative Agent for its own account) agrees that (i) it will take all
reasonable actions by all usual means to maintain all exemptions, if any,
available to it from United States withholding taxes (whether available by
treaty, existing administrative waiver or by virtue of the location of any
Lender's lending office), (ii) it will use reasonable best efforts (consistent
with its internal policy and legal and regulatory restrictions) to change the
jurisdiction of its lending office, if the making of such a change would avoid
the need for, or reduce the amount of, any such additional amounts which may
thereafter accrue and would not, in the reasonable judgment of such Lender, be
materially disadvantageous to such Lender, and (iii) otherwise cooperate with
the Borrowers to minimize amounts payable by the Borrowers under this
SECTION 2.14; PROVIDED, HOWEVER, the Lenders and the Administrative Agent shall
not be obligated by reason of this SECTION 2.14(g) to contest the payment of any
Taxes or Other Taxes or to disclose any information regarding its tax affairs or
tax computations or reorder its tax or other affairs or tax or other planning.
Subject to the foregoing, to the extent the Borrowers pay sums pursuant to this
SECTION 2.14 and the Lender or the Administrative Agent receives a refund of any
or all of such sums, such refund shall be applied to reduce any amounts then due
and owing under this Agreement or, to the extent that no amounts are due and
owing under this Agreement at the time such refunds are received, the party
receiving such refund shall promptly pay over all such refunded sums to the
Borrowers, provided that no Default or Event of Default is in existence at such
time.

-40-
//ex99-1_1622_ai.cecc
<PAGE>

(h) If the Borrowers become obligated to pay additional amounts described
in this SECTION 2.14 to any Lender, the Borrowers may designate a financial
institution reasonably acceptable to the Administrative Agent to replace such
Lender by purchasing for cash and receiving an assignment of such Lender's pro
rata share of the Revolving Credit Commitment and the Rights of such Lender
under the Loan Documents without recourse to or warranty by, or expense to, such
Lender, for a purchase price equal to the outstanding amounts owed to such
Lender (including such additional amounts owing to such Lender pursuant to this
SECTION 2.14). Upon execution of an Assignment Agreement, such other financial
institution shall be deemed to be a "Lender" for all purposes of this Agreement
as set forth in SECTION 11.6 hereof.

Section 2.15 LETTERS OF CREDIT.

(a) THE LETTER OF CREDIT FACILITY. The Borrowers, through an Authorized
Signatory, may request the Issuing Bank, on the terms and conditions hereinafter
set forth, to issue, and the Issuing Bank shall, if so requested, issue,
commercial and standby letters of credit (the "LETTERS OF CREDIT") for the
account of any Borrower from time to time on any Business Day from the date of
the initial Advance until the Maturity Date in an aggregate maximum amount
(assuming compliance with all conditions to drawing) not to exceed, at any time
outstanding (less Cash Collateralized Letters of Credit), the lesser of
(i) $10,000,000 (or the Dollar Equivalent thereof in an Approved Offshore
Currency) (the "LETTER OF CREDIT FACILITY"), and (ii) the result of (1) the
Revolving Credit Commitment MINUS (2) the aggregate principal amount of
Revolving Credit Advances then outstanding; provided, however, in no event shall
the Dollar Equivalent of all Advances and Reimbursement Obligations outstanding
in Approved Offshore Currencies exceed the Approved Offshore Currency Borrowing
Limit. No Letter of Credit shall have an expiration date (including all rights
of renewal) later than the earlier of (i) ten days prior to the Maturity Date or
(ii) one year after the date of issuance thereof. Immediately upon the issuance
of each Letter of Credit (or on the Agreement Date, with respect to Existing
Letters of Credit), the Issuing Bank shall be deemed to have sold and
transferred to each Lender, and each Lender shall be deemed to have purchased
and received from the Issuing Bank, in each case irrevocably and without any
further action by any party, an undivided interest and participation in such
Letter of Credit, each drawing thereunder and the obligations of the Borrowers
under this Agreement in respect thereof in an amount equal to the product of
(x) such Lender's Specified Percentage times (y) the maximum amount in Dollars
(or the Dollar Equivalent thereof in an Approved Offshore Currency) to be drawn
under such Letter of Credit (assuming compliance with all conditions to
drawing). Within the limits of the Letter of Credit Facility, and subject to
the limits referred to above, the Borrowers may request the issuance of Letters
of Credit under this SECTION 2.15(a), repay any Revolving Credit Advances
resulting from drawings thereunder pursuant to SECTION 2.15(c) and request the
issuance of additional Letters of Credit under this SECTION 2.15(a).

(b) REQUEST FOR ISSUANCE. Each Letter of Credit shall be issued upon
notice, given not later than 11:00 a.m. (Dallas time) on the third Business Day
prior to the date of the proposed issuance of such Letter of Credit, by the
Borrowers, through an Authorized Signatory, to the

-41-
<PAGE>

Issuing Bank. Each Letter of Credit shall be issued upon notice given in
accordance with the terms of any separate agreement between the Borrowers and
the Issuing Bank in form and substance reasonably satisfactory to the
Borrowers and the Issuing Bank providing for the issuance of Letters of
Credit pursuant to this Agreement and containing terms and conditions not
inconsistent with this Agreement (a "LETTER OF CREDIT AGREEMENT"), PROVIDED
that if any such terms and conditions are inconsistent with this Agreement,
this Agreement shall control. Each such notice of issuance of a Letter of
Credit by the Borrowers (a "NOTICE OF ISSUANCE") shall be by telex,
telecopier or cable, specifying therein, in the case of a Letter of Credit,
the requested (A) date of such issuance (which shall be a Business Day), (B)
maximum amount of such Letter of Credit, (C) expiration date of such Letter
of Credit, (D) name and address of the beneficiary of such Letter of Credit,
(E) the Applicable Currency of such Letter of Credit, and (F) form of such
Letter of Credit and specifying such other information as shall be required
pursuant to the relevant Letter of Credit Agreement. If the requested terms
of such Letter of Credit are acceptable to the Issuing Bank in its reasonable
discretion, the Issuing Bank will, upon fulfillment of the applicable
conditions set forth in ARTICLE 3 hereof, make such Letter of Credit
available to the appropriate Borrower at its office referred to in SECTION
11.1 or as otherwise agreed with such Borrower in connection with such
issuance.

(c) DRAWING AND REIMBURSEMENT. The payment by the Issuing Bank of a draft
drawn under any Letter of Credit shall constitute for all purposes of this
Agreement the making by the Issuing Bank of a Revolving Credit Advance, which
shall bear interest at the Base Rate Basis, in the amount of such draft (but
without any requirement for compliance with the conditions set forth in
ARTICLE 3 hereof). The Issuing Bank shall notify the Borrowers within one
Business Day of a draw request with respect to a Letter of Credit issued in
other than Dollars. In the event that a drawing under any Letter of Credit is
not reimbursed by the Borrowers by 11:00 a.m. (Dallas time) on the first
Business Day after such drawing, the Issuing Bank shall promptly notify
Administrative Agent and each other Lender. Each such Lender shall, on the
first Business Day following such notification, make a Revolving Credit Advance
in Dollars, which shall bear interest at the Base Rate Basis, and shall be used
to repay the applicable portion of the Issuing Bank's advance with respect to
such Letter of Credit, in an amount equal to the amount of its participation in
such drawing for application to reimburse the Issuing Bank (but without any
requirement for compliance with the applicable conditions set forth in ARTICLE 3
hereof) and shall make available to the Administrative Agent for the account of
the Issuing Bank, by deposit at the Administrative Agent's office, in same day
funds, the amount of such Revolving Credit Advance in Dollars. In the event
that any Lender fails to make available to the Administrative Agent for the
account of the Issuing Bank the amount of such Revolving Credit Advance in
Dollars, the Issuing Bank shall be entitled to recover such amount on demand
from such Lender together with interest thereon at a rate per annum equal to the
lesser of (i) the Highest Lawful Rate or (ii) the Federal Funds Rate.

(d) INCREASED COSTS. If (a) the applicability of any law, rule,
regulation or guideline adopted pursuant to or arising out of the July 1988
report of the Basle Committee on Banking Regulations and Supervisory Practices
entitled "International Convergence of Capital

-42-
<PAGE>

Measurement and Capital Standards" or (b) any change in any Law or in the
interpretation thereof by any court or administrative or governmental
authority charged with the administration thereof shall either (i) impose,
modify or deem applicable any reserve, special deposit or similar requirement
against letters of credit or guarantees issued by, or assets held by, or
deposits in or for the account of, the Issuing Bank or any Lender or any
corporation controlling the Issuing Bank or any Lender or (ii) impose on the
Issuing Bank or any Lender or any corporation controlling the Issuing Bank or
any Lender any other condition regarding this Agreement or any Letter of
Credit, and the result of any event referred to in the preceding clause (i)
or (ii) shall be to increase the cost to the Issuing Bank or any corporation
controlling the Issuing Bank of issuing or maintaining any Letter of Credit
or to any Lender or any corporation controlling such Lender of purchasing any
participation therein or making any Revolving Credit Advance pursuant to
SECTION 2.15(c), then, within 30 days after demand by the Issuing Bank or
such Lender, the Borrowers shall, subject to SECTION 11.9 hereof, pay to the
Issuing Bank or such Lender, from time to time as specified by the Issuing
Bank or such Lender, additional amounts that shall be sufficient to
compensate the Issuing Bank or such Lender or any corporation controlling
such Lender for such increased cost. A certificate as to the amount of such
increased cost, submitted to the Borrowers by the Issuing Bank or such
Lender, shall certify that such increased costs were actually incurred by the
Issuing Bank or such Lender and shall show in reasonable detail an accounting
of the amount payable and the calculation used to determine in good faith
such amount and shall be conclusive absent manifest or demonstrable error.
In determining such amount, the Issuing Bank or such Lender may use any
reasonable averaging or attribution method. Nothing in this SECTION 2.15(d)
shall provide the Parent or any of its Subsidiaries the right to inspect the
records, files or books of the Issuing Bank or any Lender. If the Borrowers
become obligated to pay additional amounts described in this SECTION 2.15(d)
to any Lender, the Borrowers may designate a financial institution reasonably
acceptable to the Administrative Agent to replace such Lender by purchasing
for cash and receiving an assignment of such Lender's Specified Percentage of
the Revolving Credit Commitment and the Rights of such Lender under the Loan
Documents without recourse to or warranty by, or expenses to, such Lender,
for a purchase price equal to the outstanding amounts owing to such Lender
(including such additional amounts owing to such Lender pursuant to this
SECTION 2.15(d). Upon execution of an Assignment Agreement, such other
financial institution shall be deemed to be a "Lender" for all purposes of
this Agreement as set forth in SECTION 11.6 hereof. The obligations of the
Borrowers under this SECTION 2.15(d) shall survive termination of this
Agreement. The Issuing Bank or any Lender claiming any additional
compensation under this SECTION 2.15(d) shall use reasonable efforts
(consistent with legal and regulatory restrictions) to reduce or eliminate
any such additional compensation which may thereafter accrue and which
efforts would not, in the reasonable judgment of the Issuing Bank or such
Lender, be otherwise disadvantageous.

(e) OBLIGATIONS ABSOLUTE. The obligations of the Borrowers under this
Agreement with respect to any Letter of Credit, any Letter of Credit Agreement
and any other agreement or instrument relating to any Letter of Credit or any
Revolving Credit Advance pursuant to SECTION 2.15(c) shall be unconditional and
irrevocable, and shall be paid strictly in accordance with the terms of this
Agreement, such Letter of Credit Agreement and such other agreement or

-43-
<PAGE>

instrument under all circumstances, including, without limitation, the following
circumstances:

(i) any lack of validity or enforceability of this Agreement, any
other Loan Document, any Letter of Credit Agreement, any Letter of Credit
or any other agreement or instrument relating thereto (collectively, the
"L/C RELATED DOCUMENTS");

(ii) (a) any change in the time, manner or place of payment of, or in
any other term of, all or any of the Obligations of the Parent in respect
of the Letters of Credit or any Revolving Credit Advance pursuant to
SECTION 2.15(c) or (B) any other amendment or waiver of or any consent to
departure from all or any of the L/C Related Documents;

(iii) the existence of any claim, set-off, defense or other right that
the Borrowers may have at any time against any beneficiary or any
transferee of a Letter of Credit (or any Persons for whom any such
beneficiary or any such transferee may be acting), the Issuing Bank, any
Lender or any other Person, whether in connection with this Agreement, the
transactions contemplated hereby or by the L/C Related Documents or any
unrelated transaction;

(iv) any statement or any other document presented under a Letter of
Credit proving to be forged, fraudulent, invalid or insufficient in any
respect or any statement therein being untrue or inaccurate in any respect;

(v) payment by the Issuing Bank under a Letter of Credit against
presentation of a draft or certificate that does not strictly comply with
the terms of the Letter of Credit;

(vi) any exchange, release or non-perfection of any Collateral, or
any release or amendment or waiver of or consent to departure from any
guarantee, for all or any of the Obligations of the Borrowers in respect of
the Letters of Credit or any Revolving Credit Advance pursuant to
SECTION 2.15(c); or

(vii) any other circumstance or happening whatsoever, whether or not
similar to any of the foregoing, including, without limitation, any other
circumstance that might otherwise constitute a defense available to, or a
discharge of, the Borrowers or a guarantor;

PROVIDED in each case in this SUBSECTION 2.15(e) that payment by the Issuing
Bank under the applicable Letter of Credit shall not have constituted gross
negligence or wilful misconduct.

(f) COMPENSATION FOR LETTERS OF CREDIT.

(i) CREDIT FEE. Subject to SECTION 11.9 hereof, the Borrowers shall
pay to the Administrative Agent for the account of each Lender a fee (which
shall be payable quarterly in arrears on each Quarterly Date and on the
Maturity Date) on the average

-44-
<PAGE>

daily amount available for drawing under all outstanding Letters of Credit
at the following per annum percentages, applicable in the following
situations:

<TABLE>
<CAPTION>
Applicability Percentage
------------- ----------
<S> <C>
(a) Initial Pricing Period 2.50
(b) Subsequent Pricing Period

(1) If the Leverage Ratio is greater than or equal to 2.50 to 2.50
1
(2) If the Leverage Ratio is less than 2.50 to 1 but greater 2.00
than or equal to 1.75 to 1
(3) If the Leverage Ratio is less than 1.75 to 1 but greater 1.50
than or equal to 1.00 to 1
(4) If the Leverage Ratio is less than 1.00 to 1 1.25
</TABLE>

The fee payable in respect of the Letters of Credit shall be subject to
reduction or increase, as applicable and as set forth in the table above,
on a quarterly basis by using the Leverage Ratio calculated as of the end
of each fiscal quarter during the Subsequent Pricing Period. Any such
increase or reduction in such fee shall be effective within 2 Business Days
of the date of receipt by the Administrative Agent of the financial
statements required pursuant to SECTION 6.1 or 6.2 hereof, as applicable,
for each such fiscal quarter and the Compliance Certificate required
pursuant to SECTION 6.3 hereof. If such financial statements and
Compliance Certificate are not received by the date required, the fee
payable in respect of the Letters of Credit shall be determined as if the
Leverage Ratio is greater than or equal to 2.50 to 1 until such time as
such financial statements and Compliance Certificate are received. Subject
to SECTION 11.9 hereof, such fee shall be computed on the basis of a
360-day year for the actual number of days elapsed.

(ii) ISSUANCE FEE. Subject to SECTION 11.9 hereof, the Borrowers
shall pay to the Administrative Agent for the account of the Issuing Bank
an issuance fee (which shall be payable on the date of issuance and renewal
of each Letter of Credit) in an amount equal to the greater of (a) $250 or
(b) the product of (x) 0.125% times (y) the face amount of the Letter of
Credit being issued.

(iii) ADMINISTRATIVE FEE. Subject to SECTION 11.9 hereof, the
Borrowers shall pay, with respect to each amendment, renewal or transfer of
each Letter of Credit and each drawing made thereunder, reasonable
documentary and processing charges in accordance with the Issuing Bank's
standard schedule for such charges in effect at the time of such amendment,
renewal, transfer or drawing, as the case may be.

(g) L/C CASH COLLATERAL ACCOUNT.

(i) Upon the occurrence of an Event of Default and demand by the
Administrative Agent pursuant to SECTION 8.2(c) (but in the case of an
Event of Default specified in SECTION 8.1(f) or (g) hereof, without any
demand or taking of any other action

-45-
<PAGE>

by the Administrative Agent or any other Lender), the Borrowers will
promptly pay to the Administrative Agent in immediately available funds
an amount equal to the maximum amount then available to be drawn under
the Letters of Credit then outstanding. Any amounts so received by the
Administrative Agent shall be deposited by the Administrative Agent in a
deposit account maintained by the Issuing Bank (the "L/C CASH COLLATERAL
ACCOUNT"). In addition, as provided in SECTION 2.5(b) hereof, the
Borrowers will also deposit in the L/C Cash Collateral Account
immediately available funds to cash collateralize Letters of Credit.

(ii) As security for the payment of all Reimbursement Obligations and
for any other Obligations, the Borrowers hereby grant, convey, assign,
pledge, set over and transfer to the Administrative Agent (for the benefit
of the Issuing Bank and Lenders), and creates in the Administrative Agent's
favor (for the benefit of the Issuing Bank and Lenders) a Lien in, all
money, instruments and securities at any time held in or acquired in
connection with the L/C Cash Collateral Account, together with all proceeds
thereof. The L/C Cash Collateral Account shall be under the sole dominion
and control of the Administrative Agent and the Borrowers shall have no
right to withdraw or to cause the Administrative Agent to withdraw any
funds deposited in the L/C Cash Collateral Account. At any time and from
time to time, upon the Administrative Agent's request, the Borrowers
promptly shall execute and deliver any and all such further instruments and
documents, including UCC financing statements, as may be necessary,
appropriate or desirable in the Administrative Agent's judgment to obtain
the full benefits (including perfection and priority) of the security
interest created or intended to be created by this paragraph (ii) and of
the rights and powers herein granted. The Borrowers shall not create or
suffer to exist any Lien on any amounts or investments held in the L/C Cash
Collateral Account other than the Lien granted under this paragraph (ii)
and Liens arising by operation of Law and not by contract which secure
amounts not yet due and payable.

(iii) The Administrative Agent shall (A) apply any funds in the L/C
Cash Collateral Account on account of Reimbursement Obligations when the
same become due and payable, (B) if at any time prior to the occurrence of
a Default or Event of Default, the amount in the L/C Cash Collateral
Account exceeds the amount of the Cash Collateralized Letters of Credit,
pay such excess to the Borrowers, and (C) after the Maturity Date or if at
any time the amount in the L/C Cash Collateral Account exceeds the amount
of the Reimbursement Obligations, apply any proceeds remaining in the L/C
Cash Collateral Account FIRST to pay any unpaid Obligations then
outstanding hereunder and THEN to refund any remaining amount to the
Borrowers.

(iv) The Borrowers, no more than once in any calendar month, may
direct the Administrative Agent to invest the funds held in the L/C Cash
Collateral Account (so long as the aggregate amount of such funds exceeds
any relevant minimum investment requirement) in (A) Cash Equivalents or
direct obligations of the United States or any agency thereof, or
obligations guaranteed by the United States or any agency thereof and

-46-
//ex99-1_1622_ak.cecc
<PAGE>

(B) one or more other types of investments permitted by the Determining
Lenders, in each case with such maturities as the Borrowers, with the
consent of the Determining Lenders, may specify, pending application of
such funds on account of Reimbursement Obligations or on account of other
Obligations, as the case may be. In the absence of any such direction from
the Borrowers, the Administrative Agent shall invest the funds held in the
L/C Cash Collateral Account (so long as the aggregate amount of such funds
exceeds any relevant minimum investment requirement) in one or more types
of investments with the consent of the Determining Lenders with such
maturities as the Borrowers, with the consent of the Determining Lenders,
may specify, pending application of such funds on account of Reimbursement
Obligations or on account of other Obligations, as the case may be. All
such investments shall be made in the Administrative Agent's name for the
account of the Lenders, subject to the ownership interest therein of the
Borrowers. The Borrowers recognize that any losses or taxes with respect
to such investments shall be borne solely by the Borrowers, and the
Borrowers agree to hold the Administrative Agent and the Lenders harmless
from any and all such losses and taxes. Administrative Agent may liquidate
any investment held in the L/C Cash Collateral Account in order to apply
the proceeds of such investment on account of the Reimbursement Obligations
as provided in SECTION 2.15(g)(III) hereof (or on account of any other
Obligation then due and payable, as the case may be) without regard to
whether such investment has matured and without liability for any penalty
or other fee incurred (with respect to which the Borrowers hereby agree to
reimburse the Administrative Agent) as a result of such application.

(v) After the establishment of the L/C Cash Collateral Account
pursuant to SECTION 2.15(g)(i) hereof, the Borrowers shall pay to the
Administrative Agent the fees customarily charged by the Issuing Bank with
respect to the maintenance of accounts similar to the L/C Cash Collateral
Account.

(h) ICC. UNLESS OTHERWISE EXPRESSLY AGREED BY THE ISSUING BANK AND THE
BORROWER WHEN A LETTER OF CREDIT IS ISSUED, THE UNIFORM CUSTOMS AND PRACTICE FOR
DOCUMENTARY CREDITS, AS PUBLISHED IN ITS MOST RECENT VERSION BY THE
INTERNATIONAL CHAMBER OF COMMERCE (THE "ICC") ON THE DATE ANY LETTER OF CREDIT
IS ISSUED, SHALL BE DEEMED A PART OF THIS SECTION 2.15 AND SHALL APPLY TO SUCH
LETTER OF CREDIT, INCLUDING THE ICC DECISION PUBLISHED BY THE COMMISSION ON
BANKING TECHNIQUE AND PRACTICE OF APRIL 6, 1998 ENTITLED "THE IMPACT OF THE
EUROPEAN SINGLE CURRENCY (EURO) ON MONETARY OBLIGATIONS RELATED TO TRANSACTIONS
INVOLVING ICC RULES".

ARTICLE 3

CONDITIONS PRECEDENT

-47-
<PAGE>

Section 3.1 CONDITIONS PRECEDENT TO CLOSING, THE INITIAL REVOLVING
CREDIT ADVANCE AND THE INITIAL LETTERS OF CREDIT. The obligation of each Lender
to make any Revolving Credit Advance and the obligation of the Issuing Bank to
issue Letters of Credit is subject to (i) receipt by the Administrative Agent of
the following items which are to be delivered, in form and substance
satisfactory to each Lender, with a copy (except for the Notes) for each Lender,
and (ii) satisfaction of the following conditions which are to be satisfied:

(a) A loan certificate of each Borrower certifying as to the accuracy of
its representations and warranties in the Loan Documents, certifying that no
Default has occurred, and including a certificate of incumbency with respect to
each Authorized Signatory, and including (i) with respect to the Parent and IPD,
(A) a copy of the Certificate of Incorporation of such Borrower, certified to be
true, complete and correct by the Secretary of State of its jurisdiction of
incorporation, (B) a copy of its Bylaws, as in effect on the Agreement Date, and
(C) a copy of a certificate of good standing and a certificate of existence for
its state of organization and each state in which the nature of its business
requires it to be qualified to do business except where the failure to be in
good standing would not have a Material Adverse Effect, and (ii) with respect to
Melcher, documents equivalent under the laws of Switzerland to those requested
of the Parent and IPD in clauses (A), (B) and (C) above;

(b) a duly executed Revolving Credit Note payable to the order of each
Lender and in an amount for each Lender equal to its Specified Percentage of the
Revolving Credit Commitment;

(d) opinions of counsel to the Parent and each of its Material
Subsidiaries (including any appropriate foreign counsel) addressed to the
Lenders and in form and substance reasonably satisfactory to the Lenders, dated
the Agreement Date, and covering the matters set forth in EXHIBIT I hereto and
such other matters incident to the transactions contemplated hereby as the
Administrative Agent or Special Counsel may reasonably request;

(e) reimbursement for the Administrative Agent for Special Counsel's
reasonable and customary fees (on an hourly basis) and expenses rendered through
the date hereof;

(f) evidence that all proceedings of the Parent and its Subsidiaries taken
in connection with the transactions contemplated by this Agreement and the other
Loan Documents shall be reasonably satisfactory in form and substance to the
Lenders and Special Counsel; and the Lenders shall have received copies of all
documents or other evidence which the Administrative Agent, Special Counsel or
any Lender may reasonably request in connection with such transactions;

(g) any fees or expenses required to be paid pursuant to the Fee Letter;

-48-
<PAGE>

(h) duly executed and completed Pledge Agreements, dated as of the
Agreement Date granting a Lien, subject only to Permitted Liens, in all
Collateral covered thereby, together with related financing statements, stock
powers, stock certificates evidencing ownership of 66% of the issued and
outstanding Capital Stock of each Foreign Subsidiary owned directly by the
Parent;

(i) simultaneously with the making of the initial Advance, executed UCC-3
Termination Statements to be filed in appropriate jurisdictions to terminate all
Liens against assets of the Parent and its Subsidiaries other than Permitted
Liens;

(j) there shall have occurred no material adverse change in the business,
assets or financial condition of the Parent and its Material Subsidiaries, taken
as a whole, since the date of the financial statements referred to in
SECTION 4.1(j)(i)(a) hereof;

(k) simultaneously with the making of the initial Advance, all
Indebtedness of the Borrowers under the Existing Credit Agreement (other than in
respect of the Existing Letters of Credit) shall have been refinanced in full
pursuant to the terms hereof, provided that the Liens granted with respect to
the Capital Stock of each Foreign Subsidiary shall remain in full force and
effect (whereupon each lender under the Existing Credit Agreement shall mark its
respective promissory note "PAID" and shall return such note to the Parent);

(l) duly executed Subordination Agreements executed by the Parent and each
Subsidiary of the Parent, dated as of the Agreement Date; and

(m) in form and substance reasonably satisfactory to the Lenders and
Special Counsel, such other documents, instruments and certificates as the
Administrative Agent or any Lender may reasonably require in connection with the
transactions contemplated hereby, including without limitation, evidence of the
status, organization or authority of the Parent or any of its Subsidiaries, and
the enforceability of the Obligations.

Section 3.2 CONDITIONS PRECEDENT TO ALL REVOLVING CREDIT ADVANCES AND
LETTERS OF CREDIT. The obligation of each Lender to make each Revolving Credit
Advance hereunder and the obligation of the Issuing Bank to issue each Letter of
Credit is subject to fulfillment of the following conditions immediately prior
to or contemporaneously with each such Revolving Credit Advance or issuance:

(a) With respect to each Revolving Credit Advance and each issuance of a
Letter of Credit, all of the representations and warranties of the Parent under
this Agreement, which, pursuant to SECTION 4.2 hereof, are made at and as of the
time of each such Revolving Credit Advance or issuance, shall be true and
correct at such time in all material respects, both before and after giving
effect to the application of the proceeds of the Revolving Credit Advance,
except as otherwise expressly provided in said SECTION 4.2 hereof;

-49-
<PAGE>

(b) The incumbency of the Authorized Signatories shall be as stated in the
certificate of incumbency delivered in each Borrower's loan certificate pursuant
to SECTION 3.1(a) or as subsequently modified and reflected in a certificate of
incumbency delivered to the Administrative Agent. The Lenders may, without
waiving this condition, consider it fulfilled and a representation by the
Borrowers made to such effect if no written notice to the contrary, dated on or
before the date of such Revolving Credit Advance, is received by the
Administrative Agent from the Borrowers prior to the making of such Revolving
Credit Advance;

(c) There shall not exist a Default or Event of Default hereunder, and,
with respect to each Revolving Credit Advance and Letter of Credit, the
Administrative Agent shall have received written or telephonic certification
thereof by an Authorized Signatory (which certification, if telephonic, shall be
followed promptly by written certification);

(d) The aggregate Revolving Advances and Letters of Credit, after giving
effect to such proposed Revolving Credit Advance or Letter of Credit, shall not
exceed the maximum principal amount then permitted to be outstanding hereunder;

(e) No order, judgment, injunction or decree of any Tribunal shall purport
to enjoin or restrain any Lender or the Issuing Bank from making any Revolving
Credit Advance or issuing any Letter of Credit;

(f) There shall not be pending, or to the knowledge of the Parent,
threatened any Litigation against or affecting the Parent or any of its
Subsidiaries or any property of the Parent or any of its Subsidiaries that has
not been disclosed in writing by the Parent pursuant to SECTION 4.1(h), 6.4(d)
or 6.5(a) prior to the making of the last preceding Revolving Credit Advance or
the issuance of the last preceding Letter of Credit (or in the case of the
initial Revolving Credit Advances and Letters of Credit, prior to the Agreement
Date) and there shall have occurred no development not so disclosed in any such
Litigation that, in either event, would reasonably be expected to have a
Material Adverse Effect; and

(g) There shall have occurred no material adverse change in the business,
financial condition, results of operations or business prospects of the Parent
and its Subsidiaries, taken as a whole, since December 31, 1998.

Section 3.3 CONDITIONS PRECEDENT TO CONVERSIONS AND CONTINUATIONS. The
obligation of the Lenders to convert any existing Base Rate Advance into an
Offshore Advance or to continue any existing Offshore Advance is subject to the
condition precedent that on the date of such conversion or continuation no
Default or Event of Default shall have occurred and be continuing or would
result from the making of such conversion or continuation. The acceptance of
the benefits of each such conversion and continuation shall constitute a
representation and warranty by the Borrowers to each of the Lenders that no
Default or Event of Default shall have occurred and be continuing or would
result from the making of such conversion or continuation.

-50-
<PAGE>

ARTICLE 4

REPRESENTATIONS AND WARRANTIES

Section 4.1 REPRESENTATIONS AND WARRANTIES. The Parent hereby
represents and warrants to each Lender as follows:

(a) ORGANIZATION; POWER; QUALIFICATION. The respective jurisdiction of
organization or incorporation and percentage ownership by the Parent of the
Subsidiaries listed on SCHEDULE 4.1(a) are true and correct as of the Agreement
Date. SCHEDULE 4.1(a) is a complete and accurate listing as of the Agreement
Date, showing with respect to each Subsidiary of the Parent (a) its mailing
address, which is its principal place of business, (b) the classes of its
Capital Stock and the number of amount of its Capital Stock authorized and
outstanding, (c) each record and beneficial owner of its outstanding Capital
Stock, and (d) all outstanding options, rights, rights of conversion,
redemption, purchase or repurchase, rights of first refusal and similar rights
relating to the Capital Stock. All of the outstanding Capital Stock of the
Parent and each of its Material Subsidiaries is validly issued, fully paid and
non-assessable. Each of the Parent and its Material Subsidiaries is a
corporation duly organized, validly existing and in good standing under the laws
of its state, county or province of organization. Each of the Parent and its
Material Subsidiaries has the legal power and authority to own its properties
and to carry on its business as now being and hereafter proposed to be
conducted. Each of the Parent and its Material Subsidiaries is authorized to do
business, duly qualified and in good standing in its jurisdiction of
organization or incorporation and no qualification or authorization is necessary
in any other jurisdictions in which the character of its properties or the
nature of its business requires such qualification or authorization except where
the failure to be so qualified or authorized would not have a Material Adverse
Effect.

(b) AUTHORIZATION. Each Borrower has legal power and has taken all
necessary legal action to authorize it to borrow and request Letters of Credit
hereunder. Each of the Parent and its Subsidiaries has legal power and has
taken all necessary legal action to execute, deliver and perform the Loan
Documents to which it is party in accordance with the terms thereof, and to
consummate the transactions contemplated thereby. Each Loan Document has been
duly executed and delivered by the Parent or its Subsidiary executing it. Each
of the Loan Documents to which the Parent or any of its Subsidiaries is a party
is a legal, valid and binding obligation of the Parent or such Subsidiary, as
applicable, enforceable in accordance with its terms, subject, to enforcement of
remedies, to the following qualifications: (i) equitable principles generally,
(ii) Debtor Relief Laws (insofar as any such law relates to the bankruptcy,
insolvency or similar event of the Parent or any of its Subsidiaries), and
(iii) with respect to Melcher and its Subsidiaries that are located in
Switzerland, the Swiss Federal Act on Debt Collection and Bankruptcy.

-51-
//ex99-1_1622_al.cecc
<PAGE>

execution, delivery and performance by the Parent and its Subsidiaries
of the Loan Documents to which they are respectively a party, and the
consummation of the transactions contemplated thereby, do not and will
not (i) require any consent or approval necessary on or prior to the
Agreement Date not already obtained, except to the extent that the
failure to obtain any such consent or approval could not reasonably be
expected to have a Material Adverse Effect, (ii) violate any Applicable
Law, except to the extent that any such violation could not reasonably
be expected to have a Material Adverse Effect, (iii) conflict with,
result in a breach of, or constitute a default under the certificate of
incorporation or by-laws of the Parent or any of its Material
Subsidiaries, (iv) conflict with, result in a breach of, or constitute a
default under any Necessary Authorization, indenture, agreement or other
instrument, to which the Parent or any of its Subsidiaries is a party or
by which they or their respective properties may be bound, the result of
which could reasonably be expected to have a Material Adverse Effect, or
(v) result in or require the creation or imposition of any Lien upon or
with respect to any property now owned or hereafter acquired by the
Parent or any of its Material Subsidiaries, except Permitted Liens.

(d) BUSINESS. The Parent and its Material Subsidiaries are engaged
primarily in the business of designing, manufacturing and marketing alternating
current and direct current power supplies and activities directly related
thereto.

(e) LICENSES, ETC. All Necessary Authorizations have been duly obtained,
and are in full force and effect without any known conflict with the rights of
others and free from any unduly burdensome restrictions, unless the failure to
obtain or have in effect such Necessary Authorizations would not result in a
Material Adverse Effect. The Parent and its Material Subsidiaries are and will
continue to be in compliance in all material respects with all provisions
thereof. No circumstance exists which could reasonably be expected to impair
the utility of the Necessary Authorization or the right to renew such Necessary
Authorization the effect of which would have a Material Adverse Effect. No
Necessary Authorization is the subject of any pending or, to the best of the
Parent's knowledge, threatened challenge, suspension, cancellation or
revocation, the effect of which could reasonably be expected to have a Material
Adverse Effect.

(f) COMPLIANCE WITH LAW. The Parent and its Subsidiaries are in
compliance in all respects with all Applicable Laws, except where the failure to
so comply could not reasonably be expected to have a Material Adverse Effect.

(g) TITLE TO PROPERTIES. Except as set forth on SCHEDULE 4.1(g) hereto,
the Parent and its Material Subsidiaries have good and indefeasible title to, or
a valid leasehold interest in, all of their material assets. None of their
assets are subject to any Liens, except Permitted Liens. No financing statement
or other Lien filing (except relating to Permitted Liens) is on file in any
state or jurisdiction that names the Parent or any of its Material Subsidiaries
as debtor or covers (or purports to cover) any assets of the Parent or any of
its Material Subsidiaries. The Parent and its Material Subsidiaries have not
signed any such financing statement or filing, nor any security agreement
authorizing any Person to file any such financing statement or filing (except
relating

-52-
<PAGE>

to Permitted Liens).

(h) LITIGATION. Except as reflected on SCHEDULE 4.1(h) hereto, as of the
Agreement Date there is no Litigation pending against, or, to the Parent's
current actual knowledge, threatened against the Parent, or in any other manner
relating directly and adversely to the Parent or any of its Material
Subsidiaries, or any of their respective properties, in any court or before any
arbitrator of any kind or before or by any governmental body in which the amount
claimed (in excess of applicable insurance) exceeds $500,000.

(i) TAXES. All federal, state and other tax returns of the Parent and its
Subsidiaries required by law to be filed have been duly filed or extensions have
been timely filed, and all federal, state and other Taxes upon the Parent, its
Material Subsidiaries or any of their properties, income, profits and assets,
which are due and payable, have been paid, unless the same are being diligently
contested in accordance with SECTION 5.6 hereof. The charges, accruals and
reserves on the books of the Parent and its Material Subsidiaries in respect of
their Taxes are, in the judgment of the Parent, adequate.

(j) FINANCIAL STATEMENTS; MATERIAL LIABILITIES.

(i) The Parent has heretofore delivered to Lenders (a) the audited
combined balance sheets of the Parent and its Subsidiaries as at
December 31, 1998, and the related statements of earnings and changes in
investment and statement of cash flows for the twelve-month period then
ended, and (b) unaudited combined balance sheets of the Parent and its
Subsidiaries as at March 31, 1999, and the related statements of earnings
and changes in investment and statement of cash flows for the three-month
period then ended. Such financial statements were prepared in conformity
with GAAP (except for the absence of footnotes) and fairly present, in all
material respects, the financial position of the Parent and its
Subsidiaries as at the dates thereof and the combined results of operations
and cash flows for the periods covered thereby.

(ii) The projected financial statements of the Parent and its
Subsidiaries delivered to the Lenders prior to or on the Agreement Date
were prepared in good faith, and management of the Parent believes them to
be based on reasonable assumptions and to fairly present in all material
respects the projected financial condition of the Parent and its
Subsidiaries and the projected results of operations as of the dates and
for the periods shown for the Parent and its Subsidiaries, it being
recognized by the Lenders that such projections as to future events are not
to be viewed as facts and that actual results during the period or periods
covered by any such projections may differ from the projected results.

(iii) The financial statements of the Parent and its Subsidiaries
delivered to the Lenders pursuant to SECTION 6.1 and 6.2 hereof fairly
present in all material respects their respective financial condition and
their respective results of operations as of the dates and

-54-
<PAGE>

for the periods shown, all in accordance with GAAP, subject to normal
year-end adjustments. The latest of such financial statements reflects
all material liabilities, direct and contingent, of the Parent and each
of its Subsidiaries that are required to be disclosed in accordance with
GAAP. As of the date of the latest of such financial statements, there
were no (A) Guaranties, (B) liabilities for Taxes or (C) forward or
long-term commitments or unrealized or anticipated losses from any
unfavorable commitments that, in the case of either clause (A), (B) or
(C), are substantial in amount that are required to be reflected but
that are not reflected on such financial statements.

(k) NO ADVERSE CHANGE. Since the date of the last financial statements
delivered to the Lenders pursuant to SECTION 6.1 or 6.2 hereof, no event or
circumstance has occurred or arisen which is reasonably likely to have a
Material Adverse Effect.

(l) ERISA. None of the Parent or its Controlled Group maintains or
contributes to any Plan subject to Title IV of ERISA other than those disclosed
to the Administrative Agent in writing. Each such Plan (other than any
Multiemployer Plan) is in compliance in all material respects with the
applicable provisions of ERISA, the Code, and any other applicable Law, except
to the extent that failure to so comply would not reasonably be expected to have
a Material Adverse Effect. With respect to each Plan (other than any
Multiemployer Plan) of the Parent and each member of its Controlled Group, all
reports required under ERISA or any other Applicable Law to be filed with any
governmental authority, the failure of which to file could reasonably result in
liability of the Parent or any member of its Controlled Group in excess of
$500,000, have been duly filed. All such reports are true and correct in all
material respects as of the date given. No Plan of the Parent or any member of
its Controlled Group has been terminated under Section 4041(c) of ERISA nor has
any accumulated funding deficiency (as defined in Section 412(a) of the Code)
been incurred (without regard to any waiver granted under Section 412 of the
Code), nor has any funding waiver from the Internal Revenue Service been
received or requested the result of which could reasonably be expected to have
Material Adverse Effect. None of the Parent or any member of its Controlled
Group has failed to make any contribution or pay any amount due or owing as
required under the terms of any such Plan, or by Section 412 of the Code or
Section 302 of ERISA by the due date under Section 412 of the Code and Section
302 of ERISA, the result of which could reasonably be expected to have a
Material Adverse Effect. There has been no ERISA Event or any event requiring
disclosure under Section 4041(c)(3)(C) or 4063(a) of ERISA with respect to any
Plan or its related trust of the Parent or any member of its Controlled Group
since the effective date of ERISA. The present value of the benefit
liabilities, as defined in Title IV of ERISA, of each Plan subject to Title IV
of ERISA (other than a Multiemployer Plan) of the Parent and each member of its
Controlled Group does not exceed by more than $500,000 the present value of the
assets of each such Plan as of the most recent valuation date using each such
Plan's actuarial assumptions at such date. There are no pending, or to the best
of the Parent's knowledge threatened, claims, lawsuits or actions (other than
routine claims for benefits in the ordinary course) asserted or instituted
against, and neither the Parent nor any member of its Controlled Group has
knowledge of any threatened litigation or claims against, the assets of any Plan
or its related trust or against any

-54-
<PAGE>

fiduciary of a Plan with respect to the operation of such Plan, the
result of which could reasonably be expected to have a Material Adverse
Effect. None of the Parent or, to the best of the Parent's knowledge,
any member of its Controlled Group has engaged in any prohibited
transactions, within the meaning of Section 406 of ERISA or Section 4975
of the Code, in connection with any Plan the result of which could
reasonably be expected to have Material Adverse Effect. None of the
Parent or any member of its Controlled Group has withdrawn from any
Multiemployer Plan, nor has incurred or reasonably expects to incur (A)
any liability under Title IV of ERISA (other than premiums due under
Section 4007 of ERISA to the PBGC), (B) any withdrawal liability (and no
event has occurred which with the giving of notice under Section 4219 of
ERISA would result in such liability) under Section 4201 of ERISA as a
result of a complete or partial withdrawal (within the meaning of
Section 4203 or 4205 of ERISA) from a Multiemployer Plan, or (C) any
liability under Section 4062 of ERISA to the PBGC or to a trustee
appointed under Section 4042 of ERISA. None of the Parent, any member
of its Controlled Group, or any organization to which the Parent or any
member of its Controlled Group is a successor or parent corporation
within the meaning of ERISA Section 4069(b), has engaged in a
transaction within the meaning of ERISA Section 4069, the result of
which could reasonably be expected to have a Material Adverse Effect.
None of the Parent or any member of its Controlled Group maintains or
has established any Plan, which is a welfare benefit plan within the
meaning of Section 3(1) of ERISA and which provides for continuing
benefits or coverage for any participant or any beneficiary of any
participant after such participant's termination of employment, except
as may be required by the Consolidated Omnibus Budget Reconciliation Act
of 1985, as amended ("COBRA"), the result of which could reasonably be
expected to have a Material Adverse Effect. Each of Parent and its
Controlled Group which maintains a Plan which is a welfare benefit plan
within the meaning of Section 3(1) of ERISA has complied in all material
respects with any applicable notice and continuation requirements of
COBRA and the regulations thereunder. None of the Parent or any member
of its Controlled Group maintains, has established, or has ever
participated in a multiemployer welfare benefit arrangement within the
meaning of Section 3(40)(A) of ERISA.

(m) COMPLIANCE WITH REGULATIONS T, U AND X. Neither the Parent nor any of
its Subsidiaries is engaged principally or as one of its important activities in
the business of extending credit for the purpose of purchasing or carrying any
margin stock within the meaning of Regulations T, U and X of the Board of
Governors of the Federal Reserve System, and no part of the proceeds of the
Advances or Letters of Credit will be used to purchase or carry any margin stock
or to extend credit to others for the purpose of purchasing or carrying any
margin stock. No more than 25% of the assets of the Parent and its Subsidiaries
are margin stock. None of the Parent and its Subsidiaries nor any agent acting
on their behalf, have taken or will knowingly take any action which would cause
this Agreement or any other Loan Documents to violate any regulation of the
Board of Governors of the Federal Reserve System or to violate the Securities
Exchange Act of 1934, in each case as in effect now or as the same may hereafter
be in effect.

(n) GOVERNMENTAL REGULATION. The Parent and its Subsidiaries are not
required to obtain any Necessary Authorization on or prior to the Agreement Date
that has not already been

-55-
//ex99-1_1622_am.cecc
<PAGE>

obtained from, or effect any material filing or registration that has
not already been effected with, any Tribunal in connection with the
execution and delivery of this Agreement or any other Loan Document, or
the performance thereof, in accordance with their respective terms,
including any borrowings hereunder other than any Necessary
Authorizations or filings or registrations the absence of which could
not reasonably be expected to have a Material Adverse Effect.

(o) ABSENCE OF DEFAULT. The Parent and its Material Subsidiaries
are in compliance in all material respects with all of the provisions of
their certificates of incorporation and by-laws, and no event has
occurred or failed to occur, which has not been remedied or waived, the
occurrence or non-occurrence of which constitutes, or which with the
passage of time or giving of notice or both would constitute, (i) an
Event of Default or (ii) a default by the Parent or any of its
Subsidiaries under any material indenture, agreement or other
instrument, or any judgment, decree or order to which the Parent or any
of its Subsidiaries or by which they or any of their respective
properties is bound, except to the extent that such default could not
reasonably be expected to have a Material Adverse Effect.

(p) GOVERNMENTAL REGULATION. Neither the Parent nor any of its Material
Subsidiaries is subject to regulation under the Public Utility Holding Company
Act of 1935, the Federal Power Act, the Interstate Commerce Act or the
Investment Company Act of 1940, or any other Law, domestic or foreign, limiting
its ability to incur Indebtedness for money borrowed or to create Liens on any
of its properties or assets to secure such Indebtedness. Neither the entering
into or performance by the Borrowers of this Agreement nor the issuance of the
Notes violates any provision of such act or requires any consent, approval, or
authorization of, or registration with, the Securities and Exchange Commission
or any other governmental or public body of authority pursuant to any provisions
of such act.

(q) ENVIRONMENTAL MATTERS. Neither the Parent nor any of its Subsidiaries
has any current actual knowledge that any substance deemed hazardous by any
Applicable Environmental Law, has been installed (i) on any real property fee
title to which is now owned by the Parent or any of its Subsidiaries or (ii) by
the Parent or any of its Subsidiaries on any real property leased by the Parent
or any of its Subsidiaries, in either case in a manner which does not comply
with Applicable Environmental Laws, except to the extent that the failure to so
comply could not reasonably be expected to have a Material Adverse Effect. The
Parent and its Subsidiaries are not in violation of or subject to any existing,
pending or, to the best of the Parent's knowledge, threatened investigation or
inquiry by any Tribunal or to any material remedial obligations under any
Applicable Environmental Laws, the effect of which could reasonably be expected
to have a Material Adverse Effect. The Parent and its Subsidiaries have not
obtained and are not required to obtain any permits, licenses or similar
authorizations other than certificates of occupancy and building permits and
other authorizations that have been obtained to construct, occupy, operate or
use any buildings, improvements, fixtures, and equipment forming a part of any
real property owned or leased by the Parent or any of its Subsidiaries by reason
of any Applicable Environmental Laws, except to the extent that the failure to
so obtain could not reasonably be expected to have a Material Adverse Effect.
The

-56-
<PAGE>

Parent and its Material Subsidiaries undertook, at the time of
acquisition of fee title to any real property, reasonable inquiry into
the previous ownership and uses of such real property consistent with
good commercial or customary practice. The Parent and its Subsidiaries
have taken reasonable steps to determine, and the Parent and its
Subsidiaries have no current actual knowledge, that any hazardous
substances or solid wastes have been disposed of or otherwise released
(i) on or to the real property fee title to which is owned by the Parent
or any of its Subsidiaries or (ii) by the Parent or any of its
Subsidiaries on or to any real property leased by the Parent or any of
its Subsidiaries, all within the meaning of the Applicable Environmental
Laws, the effect of which, in the case of clause (i) or (ii), could
reasonably be expected to have a Material Adverse Effect.

(r) CERTAIN FEES. No broker's, finder's or other fee or commission will
be payable by the Borrowers (other than to the Lenders hereunder) with respect
to the making of the Revolving Credit Commitment or the Revolving Credit
Advances hereunder. The Borrowers agree to indemnify and hold harmless the
Administrative Agent and each Lender from and against any claims, demand,
liability, proceedings, costs or expenses asserted with respect to or arising in
connection with any such fees or commissions.

(s) NECESSARY AUTHORIZATIONS. No event has occurred which permits (or
with the passage of time would permit) the revocation or termination of any
Necessary Authorization, or which could reasonably be expected to result in the
imposition of any restriction thereon of such a nature that could reasonably be
expected in either case to be classified as a Material Adverse Effect.

(t) PATENTS, ETC. The Parent and its Subsidiaries have collectively
obtained or applied for all patents, trademarks, service marks, trade names,
copyrights, licenses and other rights, free from burdensome restrictions, that
are necessary for the operation of their business as presently conducted and as
proposed to be conducted, except to the extent that the failure to so obtain or
apply could not reasonably be expected to have a Material Adverse Effect.
Except as set forth on SCHEDULE 4.1(T) hereto, nothing has come to the current
actual knowledge of the Parent or any of its Subsidiaries to the effect that
(i) any process, method, part or other material presently contemplated to be
employed by the Parent or any of its Subsidiaries may infringe any patent,
trademark, service mark, trade name, copyright, license or other right owned by
any other Person, or (ii) there is pending or overtly threatened any claim or
litigation against or affecting the Parent or any of its Subsidiaries contesting
its right to sell or use any such process, method, part or other material,
which, in the case of clause (i) or (ii), could reasonably be expected to be
classified as a Material Adverse Effect.

(u) DISCLOSURE. Neither this Agreement nor any other document,
certificate or statement which has been furnished to any Lender by or on
behalf of the Parent or any of its Material Subsidiaries in connection
herewith contained any untrue statement of a material fact or omitted to
state a material fact necessary in order to make the statement contained
herein and therein not misleading at the time it was furnished, unless such
statements were corrected in

-57-
<PAGE>

writing and delivered to the Lenders prior to the Agreement Date. The
representation and warranty made in the immediately preceding sentence shall be
qualified to the best of the Parent's knowledge to the extent the information
referred to therein was prepared or furnished to the Parent by another Person on
their behalf. As of the Agreement Date, there is no fact known to the Parent
and not known to the public generally that could reasonably be expected to have
a Material Adverse Effect, which has not been set forth in this Agreement or in
the documents, certificates and statements furnished to the Lenders by or on
behalf of the Borrowers prior to the date hereof in connection with the
transaction contemplated hereby.

(v) SOLVENCY. Each Borrower is, and the Parent and its Subsidiaries on a
consolidated basis are, Solvent.

(w) LABOR RELATIONS. Neither the Parent nor any of its Subsidiaries is a
party to a collective bargaining agreement or similar agreement, and the Parent
and each of its Material Subsidiaries is in compliance in all material respects
with all Laws respecting employment and employment practices, terms and
conditions of employment, wages and hours and other laws related to the
employment of its employees, and there are no arrears in the payment of wages,
withholding or social security taxes, unemployment insurance premiums or other
similar obligations of the Parent or any of its Material Subsidiaries or for
which the Parent or any of its Material Subsidiaries may be responsible other
than in the ordinary course of business. There is no strike, work stoppage or
labor dispute with any union or group of employees pending or overtly threatened
involving the Parent or any of its Subsidiaries that would have a Material
Adverse Effect.

(x) CONSOLIDATED BUSINESS ENTITY. The Parent and its Subsidiaries are
operated as a part of one consolidated business entity and are directly
dependent upon each other for and in connection with their respective business
activities.

(y) YEAR 2000 COMPLIANCE. The Parent has (i) initiated a review and
assessment of all material items of computer and data processing hardware and
software used by it and each of its Material Subsidiaries' business and
operations (including making contact with its material suppliers and vendors to
inquire as to whether or not such suppliers' and vendors' computer systems have
a Year 2000 Problem (as defined below) that could reasonably be expected to have
a material adverse effect on the Parent and its Material Subsidiaries business
and operations) that could be adversely affected by the "Year 2000 Problem"
(that is, the risk that computer applications used by the Parent or any of its
Subsidiaries or any of their respective material suppliers and vendors may be
unable to recognize and perform properly date-sensitive functions involving
certain dates prior to and any date after December 31, 1999), and is
(ii) developing a plan and timeline for addressing the Year 2000 Problem on a
timely basis. The Parent reasonably believes that all computer and data
processing hardware and software used by it and its Material Subsidiaries that
are material to its or any of its Material Subsidiaries' business and operations
will on a timely basis be able to perform properly date-sensitive functions for
all dates before and after January 1, 2000 (that is, be "Year 2000 compliant"),
except to the extent that a

-58-
<PAGE>

failure to do so could not reasonably be expected to have a Material Adverse
Effect.

Section 4.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES, ETC. All
representations and warranties made under this Agreement and the other Loan
Documents shall be deemed to be made at and as of the Agreement Date and at and
as of the date of each Revolving Credit Advance and the date of issuance of each
Letter of Credit, and each shall be true and correct in all material respects
when made, except to the extent (a) previously fulfilled in accordance with the
terms hereof, (b) previously waived in writing by the Determining Lenders with
respect to any particular factual circumstance or permitted by the terms of this
Agreement or (c) such representations and warranties specifically relate to an
earlier date, in which case such representations and warranties shall have been
true and correct in all material respects on and as of such date. All such
representations and warranties shall survive, and not be waived by, the
execution hereof by any Lender, any investigation or inquiry by any Lender, or
by the making of any Revolving Credit Advance or the issuance of any Letter of
Credit under this Agreement.

ARTICLE 5

GENERAL COVENANTS

So long as any of the Obligations are outstanding and unpaid or the
Revolving Credit Commitment is outstanding (whether or not the conditions to
borrowing have been or can be fulfilled):

Section 5.1 PRESERVATION OF EXISTENCE AND SIMILAR MATTERS. The Parent
shall, and shall cause each of its Subsidiaries to:

(a) except as otherwise permitted pursuant to SECTION 7.4 hereof, preserve
and maintain, or timely obtain and thereafter preserve and maintain, its
existence, rights, franchises, licenses, authorizations, consents, privileges
and all other Necessary Authorizations from any Tribunal, the loss of which
could reasonably be expected to have a Material Adverse Effect; and

(b) except as otherwise permitted pursuant to SECTION 7.4 hereof, qualify
and remain qualified and authorized to do business in each jurisdiction in which
the character of its properties or the nature of its business requires such
qualification or authorization, unless the failure to do so could not reasonably
be expected to have a Material Adverse Effect.

Section 5.2 BUSINESS; COMPLIANCE WITH APPLICABLE LAW. The Parent and
its Subsidiaries shall (a) engage primarily in the businesses set forth in
SECTION 4.1(d) hereof, and (b) comply in all respects with the requirements of
all applicable Law, except where the failure to so comply could not reasonably
be expected to have a Material Adverse Effect.

Section 5.3 MAINTENANCE OF PROPERTIES. The Parent shall, and shall
cause each of its

-59-
<PAGE>

Subsidiaries to, maintain or cause to be maintained all its properties
(whether owned or held under lease) in reasonably good repair, working order
and condition, taken as a whole, and from time to time make or cause to be
made all appropriate (in the reasonable judgment of the Parent) repairs,
renewals, replacements, additions, betterments and improvements thereto,
except where the failure to so maintain, repair, renew, replace or improve
could not reasonably be expected to have a Material Adverse Effect.

Section 5.4 ACCOUNTING METHODS AND FINANCIAL RECORDS. The Parent shall,
and shall cause each of its Subsidiaries to, maintain a system of accounting
established and administered in accordance with GAAP, keep adequate records and
books of account in which complete entries will be made and all transactions
reflected in accordance with GAAP, and keep accurate and complete records of its
respective assets. The Parent and each of its Subsidiaries shall maintain a
fiscal year ending on the Sunday closest to the last day of December.

Section 5.5 INSURANCE. The Parent shall, and shall cause each of its
Material Subsidiaries to, maintain insurance from responsible companies in such
amounts and against such risks as shall be customary and usual in the industry
for companies of similar size and capability, but in no event less than the
amount and types insured as of the Agreement Date to the extent available at
reasonable cost.

Section 5.6 PAYMENT OF TAXES AND CLAIMS. The Parent shall, and shall
cause each of its Material Subsidiaries to, pay and discharge all material Taxes
upon it or its income or properties prior to the date on which penalties attach
thereto, and all lawful material claims for labor, materials and supplies which,
if unpaid, might become a Lien upon any of its properties; except that no such
Tax or claim need be paid which is being diligently contested in good faith by
appropriate proceedings and for which adequate reserves shall have been set
aside on the appropriate books, but only so long as no Lien (other than a
Permitted Lien) shall attach with respect thereto and no foreclosure, distraint,
sale or similar proceedings shall have been commenced. The Parent shall, and
shall cause each of its Material Subsidiaries to, timely file all information
returns (or extensions of such filing deadlines) required by federal, state or
local tax authorities.

Section 5.7 VISITS AND INSPECTIONS. The Parent shall, and shall cause
each of its Subsidiaries to, promptly permit representatives of the
Administrative Agent or any Lender from time to time after notice by the
Administrative Agent or any Lender no later than the previous Business Day to
(a) visit and inspect the properties of the Parent and its Subsidiaries as often
as the Administrative Agent or any Lender shall reasonably deem advisable,
(b) audit, inspect and make extracts from and copies of the Parent's and each
such Subsidiary's books and records, and (c) discuss with the Parent's and each
such Subsidiary's directors, officers, employees and auditors its business,
assets, liabilities, financial positions, results of operations and business
prospects. The Borrowers shall pay the reasonable expenses related to
inspections and audits performed by the Administrative Agent. Prior to the
occurrence of an Event of Default, all such visits and inspections shall be
conducted during normal business hours. Following the

-60-
//ex99-1_1622_an.cecc
<PAGE>

occurrence and during the continuance of an Event of Default, such visits and
inspections shall be conducted at any time requested by the Administrative
Agent or any Lender without any requirement for advance notice.

Section 5.8 USE OF PROCEEDS. The Borrowers shall use the proceeds of
Revolving Credit Advances and Letters of Credit for refinancing of certain
Indebtedness of the Borrowers (including in respect of the Existing Credit
Agreement), for Acquisitions permitted hereunder and for working capital and
other general corporate purposes, subject to the limitation on Approved Offshore
Currency Advances set forth in the definition of the Approved Offshore Currency
Borrowing Limit.

Section 5.9 INDEMNITY.

(a) THE BORROWERS AGREE TO DEFEND, PROTECT, INDEMNIFY AND HOLD HARMLESS
THE ADMINISTRATIVE AGENT, EACH LENDER, EACH OF THEIR RESPECTIVE AFFILIATES, AND
EACH OF THEIR RESPECTIVE (INCLUDING SUCH AFFILIATES') OFFICERS, DIRECTORS,
EMPLOYEES, AGENTS, ATTORNEYS, SHAREHOLDERS AND CONSULTANTS (INCLUDING, WITHOUT
LIMITATION, THOSE RETAINED IN CONNECTION WITH THE SATISFACTION OR ATTEMPTED
SATISFACTION OF ANY OF THE CONDITIONS SET FORTH HEREIN) OF EACH OF THE FOREGOING
(COLLECTIVELY, "INDEMNITEES") FROM AND AGAINST ANY AND ALL LIABILITIES,
OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, CLAIMS,
REASONABLE COSTS, REASONABLE EXPENSES AND REASONABLE DISBURSEMENTS OF ANY KIND
OR NATURE WHATSOEVER (INCLUDING, WITHOUT LIMITATION, THE REASONABLE FEES AND
DISBURSEMENTS OF COUNSEL FOR SUCH INDEMNITEES IN CONNECTION WITH ANY
INVESTIGATIVE, ADMINISTRATIVE OR JUDICIAL PROCEEDING, WHETHER OR NOT SUCH
INDEMNITEES SHALL BE DESIGNATED A PARTY THERETO), IMPOSED ON, INCURRED BY, OR
ASSERTED AGAINST SUCH INDEMNITEES (WHETHER DIRECT, INDIRECT OR CONSEQUENTIAL AND
WHETHER BASED ON ANY FEDERAL, STATE, OR LOCAL LAWS AND REGULATIONS, UNDER COMMON
LAW OR AT EQUITABLE CAUSE, OR ON CONTRACT, TORT OR OTHERWISE, ARISING FROM OR
CONNECTED WITH THE PAST, PRESENT OR FUTURE OPERATIONS OF THE BORROWERS OR THEIR
RESPECTIVE PREDECESSORS IN INTEREST, OR THE PAST, PRESENT OR FUTURE
ENVIRONMENTAL CONDITION OF PROPERTY OF THE BORROWERS), IN ANY MANNER RELATING TO
OR ARISING OUT OF THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR ANY ACT, EVENT OR
TRANSACTION OR ALLEGED ACT, EVENT OR TRANSACTION RELATING OR ATTENDANT THERETO,
THE MANAGEMENT OF THE ADVANCES, INCLUDING IN CONNECTION WITH, OR AS A RESULT, IN
WHOLE OR IN PART, OF ANY ORDINARY OR MERE NEGLIGENCE OF ADMINISTRATIVE AGENT OR
ANY LENDER (OTHER THAN THOSE

-61-
<PAGE>

MATTERS RAISED EXCLUSIVELY BY A PARTICIPANT AGAINST THE ADMINISTRATIVE AGENT
OR ANY LENDER AND NOT THE BORROWERS), OR THE USE OR INTENDED USE OF THE
PROCEEDS OF THE ADVANCES OR LETTERS OF CREDIT HEREUNDER, OR IN CONNECTION
WITH ANY INVESTIGATION OF ANY POTENTIAL MATTER COVERED HEREBY, BUT EXCLUDING
(i) ANY CLAIM OR LIABILITY THAT ARISES AS THE RESULT OF THE GROSS NEGLIGENCE
OR WILFUL MISCONDUCT OF ANY INDEMNITEE, AS FINALLY JUDICIALLY DETERMINED BY A
COURT OF COMPETENT JURISDICTION, AND (ii) MATTERS RAISED BY ONE LENDER
AGAINST ANOTHER LENDER OR BY ANY SHAREHOLDERS OF A LENDER AGAINST A LENDER OR
ITS MANAGEMENT (COLLECTIVELY, "INDEMNIFIED MATTERS"). TO THE EXTENT THAT ANY
INDEMNIFIED MATTER INVOLVES ONE OR MORE INDEMNITEES, SUCH INDEMNITEES SHALL
USE THE SAME LEGAL COUNSEL UNLESS ANY INDEMNITEE IN ITS REASONABLE DISCRETION
DETERMINES THAT CONFLICTS EXIST OR MAY ARISE IN CONNECTION WITH SUCH
REPRESENTATION.

(b) IN ADDITION, THE BORROWERS SHALL PERIODICALLY, UPON REQUEST, REIMBURSE
EACH INDEMNITEE FOR ITS REASONABLE LEGAL AND OTHER ACTUAL REASONABLE EXPENSES
(INCLUDING THE REASONABLE COST OF ANY INVESTIGATION AND PREPARATION) INCURRED IN
CONNECTION WITH ANY INDEMNIFIED MATTER. THE REIMBURSEMENT, INDEMNITY AND
CONTRIBUTION OBLIGATIONS UNDER THIS SECTION SHALL BE IN ADDITION TO ANY
LIABILITY WHICH THE BORROWERS MAY OTHERWISE HAVE, SHALL EXTEND UPON THE SAME
TERMS AND CONDITIONS TO EACH INDEMNITEE, AND SHALL BE BINDING UPON AND INURE TO
THE BENEFIT OF ANY SUCCESSORS, ASSIGNS, HEIRS AND PERSONAL REPRESENTATIVES OF
THE BORROWERS, THE ADMINISTRATIVE AGENT, THE LENDERS AND ALL OTHER INDEMNITEES.
THIS SECTION SHALL SURVIVE ANY TERMINATION OF THIS AGREEMENT AND PAYMENT OF THE
OBLIGATIONS.

Section 5.10 ENVIRONMENTAL LAW COMPLIANCE. The use which the Parent or
any of its Subsidiaries intends to make of any real property which is owned or
leased by it will not result in the disposal or other release of any hazardous
substance or solid waste on or to such real property which is in violation of
Applicable Environmental Laws, the effect of which could reasonably be expected
to have a Material Adverse Effect. As used herein, the terms "hazardous
substance" and "release" as used in this Section shall have the meanings
specified in CERCLA (as defined in the definition of Applicable Environmental
Laws), and the terms "solid waste" and "disposal" shall have the meanings
specified in RCRA (as defined in the definition of Applicable Environmental
Laws); provided, however, that if CERCLA or RCRA is amended so as to broaden or
lessen the meaning of any term defined thereby, such broader or lesser meaning
shall apply subsequent to the effective date of such amendment; and provided
further, to the extent

-62-
<PAGE>

that any other law applicable to the Parent, any of its Material Subsidiaries
or any of their properties establishes a meaning for "hazardous substance,"
"release," "solid waste," or "disposal" which is broader or lesser than that
specified in either CERCLA or RCRA, such broader or lesser meaning shall
apply. The Borrowers agree to indemnify and hold the Administrative Agent
and each Lender harmless from and against, and to reimburse them with respect
to, any and all claims, demands, causes of action, loss, damage, liabilities,
reasonable costs and reasonable expenses (including reasonable attorneys'
fees and courts costs) of any kind or character, known or unknown, fixed or
contingent, asserted against or incurred by any of them at any time and from
time to time by reason of or arising out of (a) the failure of the Parent or
any of its Material Subsidiaries to perform any of their obligations
hereunder regarding asbestos or Applicable Environmental Laws, (b) any
violation on or before the Release Date of any Applicable Environmental Law
in effect on or before the Release Date, and (c) any act, omission, event or
circumstance existing or occurring on or prior to the Release Date (including
without limitation the presence on such real property or release from such
real property of hazardous substances or solid wastes disposed of or
otherwise released on or prior to the Release Date), resulting from or in
connection with the ownership of the real property, regardless of whether the
act, omission, event or circumstance constituted a violation of any
Applicable Environmental Law at the time of its existence or occurrence;
provided that, the Parent shall not be under any obligation to indemnify the
Administrative Agent or any Lender to the extent that any such liability
arises as the result of the negligence or wilful misconduct of such Person,
as finally judicially determined by a court of competent jurisdiction. The
provisions of this paragraph shall survive the Release Date and shall
continue thereafter in full force and effect.

Section 5.11 FURTHER ASSURANCES. At any time or from time to time upon
reasonable request by the Administrative Agent, the Parent or any of its
Subsidiaries shall execute and deliver such further documents and do such other
acts and things as the Administrative Agent may reasonably request in order to
effect fully the purposes of this Agreement and the other Loan Documents and to
provide for payment of the Obligations in accordance with the terms of this
Agreement and the other Loan Documents. Without limiting the generality of the
foregoing, the Borrowers agree to update and deliver to the Administrative Agent
SCHEDULES 3 AND 4 hereto at the time of delivery of the financial statements set
forth in SECTIONS 6.1 and 6.2 hereof if the information provided therein is not
complete and correct.

Section 5.12 YEAR 2000 COMPLIANCE. The Parent will promptly notify the
Administrative Agent in the event that the Parent discovers or determines that
any computer application (including those of its suppliers and vendors) that is
material to its or any of its Subsidiaries' business and operations will have a
Year 2000 Problem, except to the extent that such failure could not reasonably
be expected to have a Material Adverse Effect.

ARTICLE 6

INFORMATION COVENANTS

-63-
<PAGE>

So long as any of the Obligations are outstanding and unpaid or the
Revolving Credit Commitment is outstanding (whether or not the conditions to
borrowing have been or can be fulfilled), the Parent shall furnish or cause to
be furnished to each Lender:

Section 6.1 QUARTERLY FINANCIAL STATEMENTS AND INFORMATION. Within 45
days after the end of each fiscal quarter, the consolidated and consolidating
balance sheets of the Parent and its Subsidiaries as at the end of such fiscal
quarter and the related consolidated and consolidating statements of income for
such fiscal quarter and for the elapsed portion of the year ended with the last
day of such fiscal quarter, and consolidated and consolidating statements of
cash flow for the elapsed portion of the year ended with the last day of such
fiscal quarter, all of which shall be certified by the president or chief
financial officer or other officer of the Parent acceptable to the
Administrative Agent, to be, in his or her opinion acting solely in his or her
capacity as an officer of the Parent, present fairly in all material respects,
in accordance with GAAP (except for the absence of footnotes), the financial
position and results of operations of the Parent and its Subsidiaries as at the
end of and for such fiscal quarter, and for the elapsed portion of the year
ended with the last day of such fiscal quarter, subject only to normal year-end
adjustments.

Section 6.2 ANNUAL FINANCIAL STATEMENTS AND INFORMATION; CERTIFICATE OF
NO DEFAULT.

(a) Within 90 days after the end of each fiscal year, a copy of (i) the
consolidated and consolidating balance sheets of the Parent and its
Subsidiaries, as of the end of the current and prior fiscal years and (ii) the
consolidated and consolidating statements of earnings and consolidated
statements of changes in shareholders' equity, and statements of cash flow as of
and through the end of such fiscal year, all of which are prepared in accordance
with GAAP, and certified by independent certified public accountants reasonably
acceptable to the Lenders (provided, however, any big six public accounting firm
shall be acceptable to the Lenders), whose opinion shall be in scope and
substance in accordance with generally accepted auditing standards and shall be
unqualified as to scope of audit and going concern.

(b) Simultaneously with the delivery of the statements required by this
SECTION 6.2, a letter from the Parent's public accountants certifying that no
Default was detected during the examination of the Parent and its Subsidiaries.

(c) As soon as available, but in any event within 90 days following the
end of each fiscal year, a copy of the annual consolidated operating budget of
the Parent and its Subsidiaries for the succeeding fiscal year.

Section 6.3 COMPLIANCE CERTIFICATE. At the time financial statements
are furnished pursuant to SECTIONS 6.1 and 6.2 hereof, the Compliance
Certificate, completed as provided therein.

Section 6.4 COPIES OF OTHER REPORTS AND NOTICES.

-64-
<PAGE>

(a) Promptly upon their becoming available, a copy of (i) all material
reports or letters submitted to the Parent or any of its Subsidiaries by
accountants in connection with any annual, interim or special audit, including
without limitation any report prepared in connection with the annual audit
referred to in SECTION 6.2 hereof, and, if requested by the Administrative
Agent, any other comment letter submitted to management in connection with any
such audit, (ii) each financial statement, report, notice or proxy statement
sent by the Parent to stockholders generally, (iii) each regular, periodic or
other report and any registration statement (other than statements on Form S-8)
or prospectus (or material written communication in respect of any thereof)
filed by the Parent or any of its Subsidiaries with any securities exchange,
with the Securities and Exchange Commission or any successor agency, and
(iv) all press releases concerning material financial aspects of the Parent or
any of its Subsidiaries;

(b) Promptly upon becoming aware that (i) the holder(s) of any note(s) or
other evidence of indebtedness or other security of the Parent or any of its
Subsidiaries in excess of $250,000 in the aggregate has given notice or taken
any action with respect to a breach, failure to perform, claimed default or
event of default thereunder, (ii) any occurrence or non-occurrence of any event
which constitutes or which with the passage of time or giving of notice or both
could constitute a material breach by the Parent or any of its Material
Subsidiaries under any material agreement or instrument other than this
Agreement to which the Parent or any of its Material Subsidiaries is a party or
by which any of their properties may be bound, or (iii) any event, circumstance
or condition which could reasonably be expected to be classified as a Material
Adverse Effect, a written notice specifying the details thereof (or the nature
of any claimed default or event of default) and what action is being taken or is
proposed to be taken with respect thereto;

(c) Promptly upon becoming aware that any party to any Capitalized Lease
Obligations or Operating Lease, in each case, in excess of $250,000, has given
notice or taken any action with respect to a breach, failure to perform, claimed
default or event of default thereunder, a written notice specifying the details
thereof (or the nature of any claimed default or event of default) and what
action is being taken or is proposed to be taken with respect thereto;

(d) Promptly upon receipt thereof, information with respect to and copies
of any notices received from any Tribunal relating to any order, ruling, law,
information or policy that relates to a breach of or noncompliance with any Law,
or could reasonably be expected to result in the payment of money by the Parent
or any of its Subsidiaries in an amount of $250,000 or more in the aggregate, or
otherwise have a Material Adverse Effect, or result in the loss or suspension of
any Necessary Authorization where such loss could reasonably be expected to have
a Material Adverse Effect; and

(e) From time to time and promptly upon each request, such data,
certificates, reports, statements, documents or further information regarding
the assets, business, liabilities, financial position, projections, results of
operations or business prospects of the Parent and its

-65-
//ex99-1_1622_ao.cecc
<PAGE>

Subsidiaries, as the Administrative Agent or any Lender may reasonably
request.

Section 6.5 NOTICE OF LITIGATION, DEFAULT AND OTHER MATTERS. Prompt
notice of the following events after the Parent has knowledge or notice thereof:

(a) The commencement of all Litigation and investigations by or before any
Tribunal, and all actions and proceedings in any court or before any arbitrator
involving claims for damages (including punitive damages) in excess of $250,000
(after deducting the amount with respect to which the Parent or any of its
Subsidiaries is insured), against or in any other way relating directly to the
Parent, any of its Subsidiaries, or any of their respective properties or
businesses; and

(b) Promptly upon the happening of any condition or event of which the
Parent has current actual knowledge which constitutes a Default, a written
notice specifying the nature and period of existence thereof and what action is
being taken or is proposed to be taken with respect thereto.

Section 6.6 ERISA REPORTING REQUIREMENTS.

(a) Promptly and in any event (i) within 30 days after the Parent or any
member of its Controlled Group has current actual knowledge that any ERISA Event
described in clause (a) of the definition of ERISA Event or any event described
in Section 4063(a) of ERISA with respect to any Plan of the Parent or any member
of its Controlled Group has occurred, and (ii) within 10 days after the Parent
or any member of its Controlled Group has current actual knowledge that any
other ERISA Event with respect to any Plan of the Parent or any member of its
Controlled Group has occurred or a request for a minimum funding waiver under
Section 412 of the Code with respect to any Plan of the Parent or any member of
its Controlled Group, a written notice describing such event and describing what
action is being taken or is proposed to be taken with respect thereto, together
with a copy of any notice of event that is given to the PBGC;

(b) Promptly and in any event within three Business Days after receipt
thereof by the Parent or any member of its Controlled Group from the PBGC,
copies of each notice received by the Parent or any member of its Controlled
Group of the PBGC's intention to terminate any Plan or to have a trustee
appointed to administer any Plan;

(c) Promptly and in any event within 30 days after the filing thereof by
the Parent or any member of its Controlled Group with the United States
Department of Labor or the Internal Revenue Service, copies of each annual
report (including Schedule B thereto, if applicable) with respect to each Plan
subject to Title IV of ERISA of which Borrower or any member of its Controlled
Group is the "plan sponsor";

(d) Promptly, and in any event within 10 Business Days after receipt
thereof, a copy of any correspondence the Parent or any member of its Controlled
Group receives from the Plan

-66-
<PAGE>

Sponsor (as defined by Section 4001(a)(10) of ERISA) of any Plan concerning
potential withdrawal liability pursuant to Section 4219 or 4202 of ERISA, and
a statement from the chief financial officer of the Parent or such member of
its Controlled Group setting forth details as to the events giving rise to
such potential withdrawal liability and the action which the Parent or such
member of its Controlled Group is taking or proposes to take with respect
thereto;

(e) Notification within 30 days of any material increases in the benefits
of any existing Plan which is not a Multiemployer Plan, or the establishment of
any new Plans, or the commencement of contributions to any Plan to which the
Parent or any member of its Controlled Group was not previously contributing
which would in either case result in a material liability to the Parent;

(f) Notification within three Business Days after the Parent or any member
of its Controlled Group knows that the Parent or any such member of its
Controlled Group has filed or intends to file a notice of intent to terminate
any Plan under a distress termination within the meaning of Section 4041(c) of
ERISA and a copy of such notice; and

(g) Within three Business Days after receipt of written notice of
commencement thereof, notice of all actions, suits and proceedings before any
court or governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, affecting the Parent or any member of its
Controlled Group with respect to any Plan, except those which, in the aggregate,
if adversely determined could not have a Material Adverse Effect.

ARTICLE 7

NEGATIVE COVENANTS

So long as any of the Obligations are outstanding and unpaid or the
Revolving Credit Commitment is outstanding (whether or not the conditions to
borrowing have been or can be fulfilled):

Section 7.1 INDEBTEDNESS. The Parent shall not, and shall not permit
any of its Subsidiaries to, create, assume, incur or otherwise become or remain
obligated in respect of, or permit to be outstanding, or suffer to exist any
Indebtedness, except:

(a) Indebtedness under the Loan Documents;

(b) Accounts payable and accrued liabilities incurred in the ordinary
course of business; PROVIDED, HOWEVER, all obligations of the Borrowers to any
of their respective Subsidiaries in respect of accounts payable and accrued
liabilities shall be subject to a Subordination Agreement;

-67-
<PAGE>

(c) Indebtedness, including in respect of Capitalized Lease Obligations,
incurred to purchase, or to finance the purchase of, assets which constitute
property, plant and equipment in an aggregate principal amount not in excess of
$2,500,000 outstanding at any time;

(d) Interest hedging obligations under Interest Hedge Agreements entered
into with any Lender or any Affiliate of any Lender;

(e) Indebtedness existing on the Agreement Date which is described on
SCHEDULE 6 hereto, including renewals (but no increases);

(f) Indebtedness in respect of endorsement of negotiable instruments in
the ordinary course of business;

(g) Institutional Debt, the Net Cash Proceeds of which are used to prepay
Revolving Credit Advances to the extent required in SECTION 2.5(e) hereof; and

(h) Other Indebtedness not to exceed $5,000,000 in aggregate principal
amount outstanding at any time.

Section 7.2 LIENS. The Parent shall not, and shall not permit any of
its Subsidiaries to, create, assume, incur, permit or suffer to exist, directly
or indirectly, any Lien on any of its assets, whether now owned or hereafter
acquired, except Permitted Liens. The Parent shall not, and shall not permit
any of its Subsidiaries to, agree with any other Person that it shall not
create, assume, incur, permit or suffer to exist or to be created, assumed,
incurred or permitted to exist, directly or indirectly, any Lien on any of its
assets.

Section 7.3 INVESTMENTS. The Parent shall not, and shall not permit any
of its Subsidiaries to, make any Investment, except that the Parent and any of
its Subsidiaries may purchase or otherwise acquire and own:

(a) Cash and Cash Equivalents;

(b) Accounts receivable that arise in the ordinary course of business and
are payable on standard terms;

(d) Investments which are Acquisitions permitted pursuant to SECTION 7.6
hereof;

(e) Investments in the form of Interest Hedge Agreements permitted by
SECTION 7.1(d) hereof;

-68-
<PAGE>

(f) Investments (excluding accounts receivable from Foreign Subsidiaries
created in the ordinary course of business) in, and expenditures in respect of
Acquisitions of, Foreign Subsidiaries by the Parent in an aggregate amount not
to exceed (calculated immediately prior to the date of each such Investment or
Acquisition) 50% of Net Worth at any time outstanding; and

(g) Other Investments not to exceed $500,000 in aggregate amount
outstanding at any time.

Section 7.4 LIQUIDATION, MERGER, NEW SUBSIDIARIES. The Parent shall
not, and shall not permit any of its Subsidiaries to, at any time:

(a) liquidate or dissolve itself (or suffer any liquidation or
dissolution) or otherwise wind up, except that a Subsidiary of the Parent may
liquidate or dissolve into the Parent or a Subsidiary of the Parent which is
(i) a Borrower, (ii) a Domestic Subsidiary, (iii) in the case of any Foreign
Subsidiary directly owned by the Parent, a Borrower, a Domestic Subsidiary or
any other Foreign Subsidiary directly owned by the Parent, or (iv) in the case
of any other Foreign Subsidiary, a Borrower, a Domestic Subsidiary, or any other
Foreign Subsidiary;

(b) enter into any merger or consolidation unless (i) with respect to a
merger or consolidation involving the Parent, the Parent shall be the surviving
corporation, or if the merger or consolidation involves a Subsidiary of the
Parent and not the Parent, such surviving corporation shall be (A) a Borrower,
(B) a Domestic Subsidiary, (C) in the case of any Foreign Subsidiary directly
owned by the Parent, the Borrower, a Domestic Subsidiary or any other Foreign
Subsidiary directly owned by the Parent, or (D) in the case of any other Foreign
Subsidiary, the Borrower, a Domestic Subsidiary, or any other Foreign
Subsidiary, (ii) such transaction shall not be utilized to circumvent compliance
with any term or provision herein and (iii) no Default or Event of Default shall
then be in existence or occur as a result of such transaction; or

Section 7.5 SALES OF ASSETS. The Parent shall not, and shall not permit
any of its Subsidiaries to, sell, lease, transfer or otherwise dispose of, any
of its assets except (a) inventory in the ordinary course of business,
(b) obsolete or worn-out assets, (c) asset sales in which the Net Cash Proceeds
from the disposition thereof are reinvested, within 90 days before or after such
disposition, in productive tangible assets of a similar nature of the Parent and
its Subsidiaries, (d) asset sales the Net Cash Proceeds of which are applied in
accordance with SECTION 2.5(c) hereof and (e) any assets (determined at the
greater of book or fair market value) during any Fiscal Year in an aggregate
amount not in excess of $1,000,000.

Section 7.6 ACQUISITIONS. The Parent shall not, and shall not permit
any of its Subsidiaries to, make any Acquisitions; provided, however, if
immediately prior to and after

-69-
<PAGE>

giving effect to the proposed Acquisition there shall not exist a Default or
Event of Default, the Parent or any of its Subsidiaries may make Acquisitions
so long as (a) Lenders shall have received written notice at least 30
Business Days prior to the date of such Acquisition, (b) if the Acquisition
Consideration for such Acquisition exceeds $20,000,000, (A) the
Administrative Agent shall have received at least 20 Business Days prior to
the date of such Acquisition a Compliance Certificate setting forth the
covenant calculations both immediately prior to and after giving effect to
the proposed Acquisition and (B) notwithstanding the calculation of
Applicable Margin set forth in SECTION 1.1 hereof, the commitment fee set
forth in SECTION 2.4(a) hereof or the fee for Letters of Credit set forth in
SECTION 2.15(f)(i) hereof, the Applicable Margin, such commitment fee and
such Letter of Credit fee shall be adjusted effective as of the date of such
Acquisition based on a pro forma calculation of the Leverage Ratio for the
four fiscal quarters immediately preceding the date of such Acquisition, (c)
the assets, property or business acquired shall be in the business described
in SECTION 4.1(d) hereof, (d) if such Acquisition results in a Domestic
Subsidiary directly owned by the Parent or a Domestic Subsidiary of the
Parent, (A) such Subsidiary shall execute a Subsidiary Guaranty and (B) the
Lenders receive such board resolutions, officer's certificates and opinions
of counsel as the Administrative Agent shall reasonably request in connection
with the Subsidiary Guaranty, (e) if such Acquisition results in a Foreign
Subsidiary, (A) 66% of such Subsidiary's Capital Stock shall be pledged to
secure the Obligations pursuant to a Pledge Agreement and (B) the Lenders
receive such board resolutions, officer's certificates and opinions of
counsel as the Administrative Agent shall reasonably request in connection
with clause (A) immediately preceding and (f) the Person or assets being
acquired shall have had EBITDA (but calculated with respect to such Person or
assets) of greater than zero for the twelve-month period immediately
preceding the date of Acquisition. Notwithstanding anything in this SECTION
7.6 or any other provision of this Agreement to the contrary, the Acquisition
Consideration for any single Acquisition shall not exceed $40,000,000, and
(b) the aggregate amount of expenditures made on and after the Agreement Date
in respect of Acquisitions of, and Investments made on and after the
Agreement Date in, Foreign Subsidiaries by the Parent shall not exceed
(calculated immediately prior to the date of each such Investment or
Acquisition) 50% of Net Worth at any time outstanding.

Section 7.7 CAPITAL EXPENDITURES. The Parent shall not, and shall not
permit any of its Subsidiaries to, make or commit to make any Capital
Expenditures (a) during Fiscal Year 1999 in excess of $16,000,000 in aggregate
amount and (b) during any Fiscal Year thereafter in excess of $15,000,000 in
aggregate amount (in the case of clause (a) and (b), the "Maximum Amount")
PROVIDED, HOWEVER, that the Maximum Amount for each fiscal year shall be
increased by an amount equal to the excess, if any, of the Maximum Amount for
the previous fiscal year (before making any adjustments in accordance with this
proviso) over the actual aggregate Capital Expenditures for such previous fiscal
year.

Section 7.8 RESTRICTED PAYMENTS. The Parent shall not, and shall not
permit any of its Subsidiaries to, directly or indirectly declare, pay or make
any Restricted Payments except (i) any Subsidiary may declare and pay Dividends
to its parent, and (ii) any Foreign Subsidiary may declare and pay Dividends in
respect of its Capital Stock issued to its directors, to the extent

-70-
//ex99-1_1622_ap.cecc
<PAGE>

such issuance is required by law.

Section 7.9 AFFILIATE TRANSACTIONS. The Parent shall not, and shall
not permit any of its Subsidiaries to, at any time engage in any transaction
with an Affiliate on terms materially less advantageous to the Parent or such
Subsidiary than would be the case if such transaction had been effected with
a non-Affiliate (other than compensation and advances to employees in the
ordinary course of business). The Parent shall not, and shall not permit any
of its Subsidiaries to, in any event incur or suffer to exist any
Indebtedness or Guaranty in favor of any Affiliate, unless such Affiliate
shall subordinate the payment and performance thereof to the Obligations on
terms, conditions and documentation satisfactory to the Determining Lenders.

Section 7.10 COMPLIANCE WITH ERISA. The Parent shall not, and shall not
permit any of its Subsidiaries to, directly or indirectly, or permit any member
of its Controlled Group to directly or indirectly, (a) terminate any Plan so as
to result in any material (in the opinion of the Determining Lenders) liability
to the Parent or any member of its Controlled Group taken as a whole, (b) permit
to exist any ERISA Event, or any other event or condition which could reasonably
be expected to have a Material Adverse Effect, (c) make a complete or partial
withdrawal (within the meaning of Section 4201 of ERISA) from any Multiemployer
Plan so as to result in any material (in the opinion of the Determining Lenders)
liability to the Parent or any member of its Controlled Group taken as a whole,
(d) enter into any new Plan or modify any existing Plan so as to increase its
obligations thereunder which could reasonably be expected to have a Material
Adverse Effect, or (e) permit the present value of all benefit liabilities, as
defined in Title IV of ERISA, under each Plan (other than a Multiemployer Plan)
of the Parent or any member of its Controlled Group (using the actuarial
assumptions utilized by each such Plan) to exceed the fair market value of Plan
assets allocable to such benefits by more than $100,000, all determined as of
the most recent valuation date for each such Plan.

Section 7.11 MAXIMUM LEVERAGE RATIO. The Parent shall not permit the
Leverage Ratio to be greater than 3.00 to 1 at the end of any fiscal quarter.

Section 7.12 MINIMUM FIXED CHARGE COVERAGE RATIO. The Parent shall not
permit the Fixed Charge Coverage Ratio to be less than 2.50 to 1 at the end of
any fiscal quarter.

Section 7.13 MINIMUM NET WORTH. The Borrower shall not permit the Net
Worth at any time to be less than the sum of (a) $85,000,000, plus (b) 85% of
cumulative Net Income for the period from and including April 1, 1999 to the
date of calculation (but excluding from the calculation of such cumulative Net
Income the effect, if any, of any fiscal quarter, or a portion of a fiscal
quarter not yet ended, for which the Net Income was a negative number), plus
(c) an amount equal to 100% of any increase in Net Worth pursuant to issuances
of Capital Stock of the Parent or any of its Subsidiaries or pursuant to the
conversion or exchange of any convertible subordinated debt or redeemable
preferred stock into Capital Stock of the Parent or any of its Subsidiaries.

-71-
<PAGE>

Section 7.14 SALE AND LEASEBACK. The Parent shall not, and shall not
permit any of its Subsidiaries to, enter into any arrangement whereby it sells
or transfers any of its assets, and thereafter rents or leases such assets.

Section 7.15 SALE OR DISCOUNT OF RECEIVABLES. The Parent shall not, and
shall not permit any of its Subsidiaries to, directly or indirectly, sell, with
or without recourse, for discount or otherwise, any notes or accounts
receivable.

Section 7.16 BUSINESS. Neither the Parent nor any of its Subsidiaries
shall conduct any business other than the business described in SECTION 4.1(d)
hereof.

Section 7.17 FISCAL YEAR. Neither the Parent nor any of its Subsidiaries
shall change its fiscal year.

ARTICLE 8

DEFAULT

Section 8.1 EVENTS OF DEFAULT. Each of the following shall
constitute an Event of Default, whatever the reason for such event, and
whether voluntary, involuntary, or effected by operation of law or pursuant
to any judgment or order of any court or any order, rule or regulation of any
governmental or non-governmental body:

(a) Any representation or warranty made under any Loan Document shall
prove to have been incorrect or misleading in any material respect when made;

(b) The Borrowers shall fail to pay any (i) principal under any Note when
due or (ii) interest under any Note or any fees payable hereunder or any other
costs, fees, expenses or other amounts payable hereunder or under any other Loan
Document within 3 days after the date due;

(c) The Parent or any of its Subsidiaries shall default in the performance
or observance of any agreement or covenant contained in SECTION 5.1 or ARTICLE 7
hereof and, if such default is capable of being cured by the payment of cash,
such default is not cured within three Business Days after discovery thereof by
the Parent by the making of a Shareholder Contribution;

(d) The Parent or any of its Subsidiaries shall default in the performance
or observance of any other agreement or covenant contained in this Agreement not
specifically referred to elsewhere in this SECTION 8.1, and such default shall
not be cured within a period of 30 days after the earlier of notice from the
Administrative Agent thereof or actual notice thereof by the Parent or such
Subsidiary;

-72-
<PAGE>

(e) There shall occur any default or breach in the performance or
observance of any agreement or covenant in any of the Loan Documents (other than
this Agreement) and such default shall not be cured within a period of 30 days
after the earlier of notice from the Administrative Agent thereof or actual
notice thereof by the Parent or any of its Subsidiaries;

(f) There shall be entered a decree or order by a court having competent
jurisdiction constituting an order for relief in respect of the any Borrower or
any Material Subsidiary, under Title 11 of the United States Code, as now
constituted or hereafter amended, or any other applicable Federal, state or
foreign bankruptcy law or other similar law, or appointing a receiver,
liquidator, assignee, trustee, custodian, sequestrator or similar official of
such Borrower or any Material Subsidiary, or of any substantial part of their
respective properties, or ordering the winding-up or liquidation of the affairs
of such Borrower or any Material Subsidiary, and any such decree or order shall
continue unstayed and in effect for a period of 45 consecutive days;

(g) Any Borrower or any Material Subsidiary shall file a petition, answer
or consent seeking relief under Title 11 of the United States Code, as now
constituted or hereafter amended, or any other applicable Federal, state or
foreign bankruptcy law or other similar law, or any Borrower or any Material
Subsidiary shall consent to the institution of proceedings thereunder or to the
filing of any such petition or to the appointment or taking of possession of a
receiver, liquidator, assignee, trustee, custodian, sequestrator or other
similar official of any Borrower or any Material Subsidiary or of substantially
all of its properties, or any Borrower or any Material Subsidiary shall make a
general assignment for the benefit of creditors, or take any action in
furtherance of any such action;

(h) A final judgment or judgments shall be entered by any court against
the Parent or any of its Subsidiaries for the payment of money which exceeds
$250,000 in the aggregate, or a warrant of attachment or execution or similar
process shall be issued or levied against property of the Parent or any of its
Subsidiaries which, together with all other such property of the Parent and its
Subsidiaries subject to other such process, exceeds in value $250,000 in the
aggregate, and if such judgment or award is not insured or, within 30 days after
the entry, issue or levy thereof, such judgment, warrant or process shall not
have been paid or discharged or stayed pending appeal, or if, after the
expiration of any such stay, such judgment, warrant or process shall not have
been paid or discharged;

(i) With respect to any Plan of the Parent or any member of its Controlled
Group: (i) the Borrower, any such member, or any other party-in-interest or
disqualified person shall engage in transactions which in the aggregate would
reasonably result in a direct or indirect liability to the Parent or any member
of its Controlled Group under Section 409 or 502 of ERISA or Section 4975 of the
Code; (ii) the Parent or any member of its Controlled Group shall incur any
accumulated funding deficiency, as defined in Section 412 of the Code, or
request a funding waiver from the Internal Revenue Service for contributions;
(iii) the Parent or any member of its Controlled Group shall incur any
withdrawal liability as a result of a complete or partial

-73-
<PAGE>

withdrawal within the meaning of Section 4203 or 4205 of ERISA, or any other
liability with respect to a Plan, unless the amount of such liability has
been funded within the Plan or pursuant to one or more insurance contracts;
(iv) the Parent or any member of its Controlled Group shall fail to make a
required contribution by the due date under Section 412 of the Code or
Section 302 of ERISA which would result in the imposition of a lien under
Section 412 of the Code or Section 302 of ERISA; (v) the Parent, any member
of its Controlled Group or any Plan sponsor shall notify the PBGC of an
intent to terminate, or the PBGC shall institute proceedings to terminate, or
the PBGC shall institute proceedings to terminate, any Plan subject to Title
IV of ERISA; (vi) a Reportable Event shall occur with respect to a Plan
subject to Title IV of ERISA, and within 15 days after the reporting of such
Reportable Event to the Administrative Agent, the Administrative Agent shall
have notified the Parent in writing that the Determining Lenders have made a
determination that, on the basis of such Reportable Event, there are
reasonable grounds for the termination of such Plan by the PBGC or for the
appointment by the appropriate United States District Court of a trustee to
administer such Plan and as a result thereof an Event of Default shall have
occurred hereunder; (vii) a trustee shall be appointed by a court of
competent jurisdiction to administer any Plan or the assets thereof; (viii)
the benefits of any Plan shall be increased, or the Parent or any member of
its Controlled Group shall begin to maintain, or begin to contribute to, any
Plan, without the prior written consent of the Determining Lenders; or (ix)
any ERISA Event with respect to a Plan subject to Title IV of ERISA shall
have occurred, and 30 days thereafter (A) such ERISA Event, other than such
event described in clause (f) of the definition of ERISA Event herein, (if
correctable) shall not have been corrected and (B) the then present value of
such Plan's benefit liabilities, as defined in Title IV of ERISA, shall
exceed the then current value of assets accumulated in such Plan; PROVIDED,
HOWEVER, that the events listed in subsections (i) - (ix) above shall
constitute Events of Default only if the maximum aggregate liability which
the Parent or any member of its Controlled Group has a reasonable likelihood
of incurring under the applicable provisions of ERISA resulting from an event
or events exceeds $250,000;

(j) The Parent or any of its Subsidiaries shall default in the payment of
any Indebtedness or any lease obligations in an aggregate amount of $500,000 or
more beyond any grace period provided with respect thereto, or shall default in
the performance of any agreement or instrument under which such Indebtedness is
created or evidenced beyond any applicable grace period, if the effect of such
default is to permit or cause the holder of such Indebtedness (or a trustee on
behalf of any such holder) to (i) cause such Indebtedness to become due prior to
its date of maturity or (ii) require the Borrower or any Subsidiary of the
Borrower to purchase or redeem such Indebtedness;

(k) Any lease where the Parent or any of its Subsidiaries is the lessee
shall terminate or cease to be effective, and termination or cessation thereof,
together with all other leases, if any, which have been terminated or cease to
be effective, could reasonably be expected to have a Material Adverse Effect;
provided, however, that termination or cessation of a lease shall not constitute
an Event of Default if another lease reasonably satisfactory to the Determining
Lenders is contemporaneously substituted therefor;

-74-
<PAGE>

(l) Any material provision of any Loan Document shall for any reason cease
to be valid and binding on or enforceable against any party to it (other than
the Administrative Agent or any Lender) in all material respects, or any such
party (other than the Administrative Agent or any Lender) shall so assert in
writing;

(m) The Parent shall fail to own (i) 99% of the Capital Stock of PUM or
(ii) 100% of the Capital Stock of PEI, IPD or Melcher;

(n) Except as a result of the Administrative Agent's gross negligence or
wilful misconduct, the Administrative Agent shall fail to have a valid and
perfected first priority Lien in 66% of the Capital Stock of PUM, PEI, Melcher
or any other Foreign Subsidiary required to be pledged hereunder; or

(o) A Change of Control shall occur.

Section 8.2 REMEDIES. If an Event of Default shall have occurred and
shall be continuing:

(a) With the exception of an Event of Default specified in SECTION 8.1(f)
or (g) hereof, the Administrative Agent shall, upon the direction of the
Determining Lenders, terminate the Revolving Credit Commitment and/or declare
the principal of and interest on the Advances and all Obligations and other
amounts owed under the Loan Documents to be forthwith due and payable without
presentment, demand, protest or notice of any kind, all of which are hereby
expressly waived, anything in the Loan Documents to the contrary
notwithstanding.

(b) Upon the occurrence of an Event of Default specified in SECTION 8.1(f)
or (g) hereof, such principal, interest and other amounts shall thereupon and
concurrently therewith become due and payable and the Revolving Credit
Commitment shall forthwith terminate, all without any action by the
Administrative Agent, any Lender or any holders of the Notes and without
presentment, demand, protest or other notice of any kind, all of which are
expressly waived, anything in the Loan Documents to the contrary
notwithstanding.

(c) If any Letter of Credit shall be then outstanding, the Administrative
Agent may demand upon the Borrowers to, and forthwith upon such demand (but in
the case of an Event of Default specified in SECTION 8.1(f) or (g) hereof,
without any demand or taking of any other action by the Administrative Agent or
any other Lender), the Borrowers shall, pay to the Administrative Agent in same
day funds at the office of the Administrative Agent for deposit in the L/C Cash
Collateral Account, an amount equal to the maximum amount available to be drawn
under the Letters of Credit then outstanding.

(d) The Administrative Agent and the Lenders may exercise all of the
Rights granted to them under the Loan Documents or under Applicable Law.

-75-
//ex99-1_1622_aq.cecc
<PAGE>

(e) The Rights of the Administrative Agent and the Lenders hereunder shall
be cumulative, and not exclusive.

ARTICLE 9

CHANGES IN CIRCUMSTANCES

Section 9.1 OFFSHORE BASIS DETERMINATION INADEQUATE. If with respect to
any proposed Offshore Advance for any Interest Period, (i) any Lender determines
that deposits in Dollars or an Approved Offshore Currency (in the applicable
amount) are not being offered to that Lender in the relevant market for such
Interest Period or (ii) the Determining Lenders determine that the Offshore
Dollar Rate or Approved Offshore Currency Rate, as appropriate, for such
proposed Offshore Advance does not adequately cover the cost to such Lender of
making and maintaining such proposed Offshore Advance for such Interest Period,
such Lender or Determining Lenders, as the case may be, shall forthwith give
notice thereof to the Borrowers, whereupon until such Lender or Determining
Lenders, as the case may be, notify the Borrowers that the circumstances giving
rise to such situation no longer exist, the obligation of such Lender to make
Offshore Advances shall be suspended; PROVIDED, HOWEVER, such Lender or the
Determining Lenders, as the case may be, shall promptly notify the Borrowers if
the circumstances giving rise to such situation no longer exist.

Section 9.2 ILLEGALITY. If any change in applicable law, rule or
regulation, or adoption thereof, or any change in any interpretation or
administration thereof by any governmental authority, central bank or comparable
agency charged with the interpretation or administration thereof, or compliance
by any Lender (or its Offshore Lending Office or its Approved Offshore Currency
Lending Office) with any request or directive (whether or not having the force
of law) of any such authority, central bank or comparable agency, shall make it
unlawful or impossible for such Lender (or its Offshore Lending Office or its
Approved Offshore Currency Lending Office) to make, maintain or fund its
Offshore Advances, such Lender shall so notify the Borrowers and the
Administrative Agent. Before giving any notice to the Borrowers pursuant to
this Section, the notifying Lender shall designate a different Offshore Lending
Office or Approved Offshore Currency Lending Office if such designation will
avoid the need for giving such notice and will not, in the sole judgment of the
Lender, be materially disadvantageous to the Lender. Upon receipt of such
notice, notwithstanding anything contained in ARTICLE 2 hereof, the Borrowers
shall repay in full the then outstanding principal amount of each Offshore
Advance owing to the notifying Lender, together with accrued interest thereon
and any reimbursement required under SECTION 2.9 hereof, on either (a) the last
day of the Interest Period applicable to such Advance, if the Lender may
lawfully continue to maintain and fund such Advance to such day, or
(b) immediately, if the Lender may not lawfully continue to fund and maintain
such Advance to such day or if the Borrower so elects. Concurrently with
repaying each affected Offshore Advance owing to such Lender if the Borrowers do
not terminate this Agreement,

-76-
<PAGE>

notwithstanding anything contained in ARTICLE 2 hereof, the Borrowers shall,
without any requirement to satisfy the conditions precedent set forth in
SECTION 3.1, 3.2 or 3.3, borrow a Base Rate Advance from such Lender, and
such Lender shall make such Base Rate Advance, in an amount such that the
outstanding principal amount of the Revolving Credit Advances owing to such
Lender shall equal the outstanding principal amount of the Revolving Credit
Advances owing immediately prior to such repayment.

Section 9.3 INCREASED COSTS.

(a) If (a) the applicability of any law, rule, regulation or guideline
adopted pursuant to or arising out of the July 1988 report of the Basle
Committee on Banking Regulations and Supervisory Practices entitled
"International Convergence of Capital Measurement and Capital Standards" or
(b) any change in or adoption of any law, rule or regulation, or any change in
the interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof or compliance by any Lender (or its Offshore Lending
Office or Approved Offshore Currency Lending Office) with any request or
directive (whether or not having the force of law) of any such authority,
central bank or compatible agency:

(i) shall subject a Lender (or its Offshore Lending Office or its
Approved Offshore Currency Lending Office) to any Tax (net of any tax
benefit engendered thereby) imposed after the Agreement Date with respect
to its Offshore Advances or its obligation to make such Advances, or shall
change after the Agreement Date the basis of taxation of payments to a
Lender (or to its Offshore Lending Office or its Approved Offshore Currency
Lending Office) of the principal of or interest on its Offshore Advances or
in respect of any other amounts due under this Agreement, as the case may
be, or its obligation to make such Advances (except for changes in the rate
of tax on the overall net income, net worth or capital of the Lender and
franchise taxes, doing business taxes or minimum taxes imposed upon such
Lender); or

(ii) shall impose, modify or deem applicable any reserve (including,
without limitation, any imposed by the Board of Governors of the Federal
Reserve System), special deposit or similar requirement against assets of,
deposits with or for the account of, or credit extended by, a Lender's
Offshore Lending Office or Approved Offshore Currency Lending Office or
shall impose on the Lender (or its Offshore Lending Office or its Approved
Offshore Currency Lending Office) or on the London interbank market any
other condition affecting its Offshore Advances or its obligation to make
such Advances (but excluding any reserves or deposits that are included in
the calculation of Offshore Basis);

and the result of any of the foregoing is to increase the cost to a Lender (or
its Offshore Lending Office or its Approved Offshore Currency Lending Office) of
making or maintaining any Offshore Advances, or to reduce the amount of any sum
received or receivable by a Lender (or

-77-
<PAGE>

its Offshore Lending Office or its Approved Offshore Currency Lending Office)
with respect thereto, by an amount deemed by a Lender to be material, then,
within 30 days after demand by a Lender, the Borrowers agree to pay to such
Lender such additional amount as will compensate such Lender for such
increased costs or reduced amounts, subject to SECTION 11.9 hereof. The
affected Lender will as soon as practicable notify the Borrowers of any event
of which it has knowledge, occurring after the date hereof, which will
entitle such Lender to compensation pursuant to this Section and will
designate a different Offshore Lending Office or Approved Offshore Currency
Lending Office or other lending office if such designation will avoid the
need for, or reduce the amount of, such compensation and will not, in the
reasonable judgment of the affected Lender made in good faith, be
disadvantageous to such Lender.

(b) A certificate of any Lender claiming compensation under this Section
and setting forth the additional amounts to be paid to it hereunder shall
certify that such amounts or costs were actually incurred by such Lender and
shall show in reasonable detail an accounting of the amount payable and the
calculations used to determine in good faith such amount and shall be conclusive
absent manifest or demonstrable error. In determining such amount, a Lender may
use any reasonable averaging and attribution methods. Nothing in this
SECTION 9.3 shall provide the Parent or any of its Subsidiaries the right to
inspect the records, files or books of any Lender. If a Lender demands
compensation under this Section, the Borrowers may at any time, upon at least
five Business Days' prior notice to the Lender, after reimbursement to the
Lender by the Borrowers in accordance with this Section of all costs incurred,
prepay in full the then outstanding Offshore Advances of the Lender, together
with accrued interest thereon to the date of prepayment, along with any
reimbursement required under SECTION 2.9 hereof. Concurrently with prepaying
such Offshore Advances, the Borrowers shall borrow a Base Rate Advance from the
Lender, and the Lender shall make such Base Rate Advance, in an amount such that
the outstanding principal amount of the Revolving Credit Advances owing to such
Lender shall equal the outstanding principal amount of the Revolving Credit
Advances owing immediately prior to such prepayment.

Section 9.4 EMU CHANGES.

(a) If, as a result of the implementation of Emu, (i) any currency
available for borrowing under this Agreement (a "NATIONAL CURRENCY") ceases to
be lawful currency of the state issuing the same and is replaced by the Euro or
(ii) any national currency and the Euro are at the same time both recognized by
the central bank or comparable governmental authority of the state issuing such
currency as lawful currency of such state and the Administrative Agent or the
Determining Lenders shall so request in a notice delivered to the Parent, then
any amount payable hereunder by any party hereto in such national currency
(including, without limitation, any Advance to be made under this Agreement)
shall instead be payable in the Euro and the amount so payable shall be
determined by redenominating or converting such amount into the Euro at the
exchange rate officially fixed by the European Central Bank for the purpose of
implementing the Emu, PROVIDED, that to the extent any Emu Legislation provides
that an amount denominated either in the Euro or in the applicable national
currency can be paid either in Euros

-78-
<PAGE>

or in the applicable national currency, each party to this Agreement shall be
entitled to pay or repay such amount in Euros or in the applicable national
currency. Prior to the occurrence of the event or events described in clause
(i) or (ii) of the preceding sentence, each amount payable hereunder in any
such national currency will, except as otherwise provided herein, continue to
be payable only in that national currency.

(b) The Borrowers agree, at the request of any Lender, to compensate such
Lender for any loss, cost, expense or reduction in return, incurred or suffered
by such Lender upon or after any of the occurrence of any of the events referred
to in clauses (i) or (ii) of the first sentence of SECTION 9.4(a), that such
Lender shall reasonably determined shall be incurred or sustained by such Lender
as a result of the implementation of the Emu and that would not have been
incurred or sustained but for the transactions provided for herein, and that was
incurred or sustained during the 120-day period prior to the date of demand
therefor by such Lender. A certificate of a Lender setting forth in reasonably
detail such Lender's calculation of the amount or amounts necessary to
compensate such Lender shall be delivered to the Parent and shall be conclusive
absent manifest error so long as such determination is made on a reasonable
basis. The Borrowers shall pay such Lender the amount shown as due on any such
certificate within 10 days after receipt thereof.

(c) In addition, this Agreement (including, without limitation, the
definition of Approved Offshore Currency Rate) will be amended to the extent
determined by the Administrative Agent and the Borrowers to be necessary to
reflect such implementation of the Emu and replacement of any national currency
by the Euro and to put the Lenders and the Borrowers in the same position, so
far as possible, that they would have been in if such implementation and change
in currency had not occurred. Except as provided in the foregoing provisions of
this Section, no such implementation or replacement of any national currency by
the Euro nor any economic consequences resulting therefrom shall (i) give rise
to any right to terminate prematurely, contest, cancel, rescind, alter, modify
or renegotiate the provisions of this Agreement or (ii) discharge, excuse or
otherwise affect the performance of any obligations of any parties to this
Agreement or other Loan Documents or to any assert any claims for compensation
as a result of the matters covered in this SECTION 9.4.

(d) Each Lender shall use its reasonable best efforts (consistent with its
internal policy and legal and regulatory restrictions) to minimize any amounts
payable by the Borrowers under this SECTION 9.4.

Section 9.5 EFFECT ON BASE RATE ADVANCES. If notice has been given
pursuant to SECTION 9.1, 9.2, 9.3 or 9.4 hereof suspending the obligation of a
Lender to make Offshore Advances, or requiring Offshore Advances of a Lender to
be repaid or prepaid, then, unless and until the Lender notifies the Borrower
that the circumstances giving rise to such repayment no longer apply, all
Advances which would otherwise be made by such Lender as Offshore Advances shall
be made instead as Base Rate Advances.

-79-
<PAGE>

Section 9.6 CAPITAL ADEQUACY. If (a) the applicability of any law,
rule, regulation or guideline adopted after the Agreement Date pursuant to or
arising out of the July 1988 report of the Basle Committee on Banking
Regulations and Supervisory Practices entitled "International Convergence of
Capital Measurement and Capital Standards", (b) the introduction of or any
change in or in the interpretation of any law, rule or regulation after the
Agreement Date or (c) compliance by a Lender with any law, rule or regulation or
any guideline or request from any central bank or other governmental authority
(whether or not having the force of law) adopted or promulgated after the
Agreement Date affects or would affect the amount of capital required or
expected to be maintained by a Lender or any corporation controlling such
Lender, and such Lender determines that the amount of such capital is increased
by or based upon the existence of such Lender's commitment or Advances hereunder
and other commitments or advances of such Lender of this type, then, within 30
days after demand by such Lender, subject to SECTION 11.9, the Borrowers shall
immediately pay to such Lender, from time to time as specified by such Lender,
additional amounts sufficient to compensate such Lender with respect to such
circumstances, to the extent that such Lender reasonably determines in good
faith such increase in capital to be allocable to the existence of such Lender's
share of the Revolving Credit Commitment hereunder. A certificate as to any
additional amounts payable to any Lender under this SECTION 9.5 submitted to the
Borrowers by such Lender shall certify that such amounts were actually incurred
by such Lender or corporation controlling such Lender and shall show in
reasonable detail an accounting of the amount payable and the calculations used
to determine in good faith such amount and shall be conclusive absent manifest
or demonstrable error. In determining such amount, such Lender or a corporation
controlling such Lender may use any reasonable averaging and attribution
methods. Notwithstanding the foregoing, nothing in this SECTION 9.6 shall
provide the Parent or any of its Subsidiaries the right to inspect the records,
files or books of any Lender or any corporation controlling such Lender.

Section 9.7 REPLACEMENT LENDER. If the Borrower becomes obligated to
pay additional amounts to any Lender described in SECTION 9.3, 9.4 or 9.6, the
Borrowers may designate a financial institution reasonably acceptable to the
Administrative Agent to replace such Lender by purchasing for cash and receiving
an assignment of such Lender's Specified Percentage share of such Lender's share
of the Revolving Credit Commitment and the Rights of such Lender under the Loan
Documents without recourse to or warranty by, or expense to, such Lender, for a
purchase price equal to the outstanding amounts owing to such Lender (including
such additional amounts owing to such Lender pursuant to SECTION 9.3, 9.4 or
9.6). Upon execution of an Assignment Agreement, such other financial
institution shall be deemed to be a "Lender" for all purposes of this Agreement
as set forth in SECTION 11.6 hereof.

ARTICLE 10

AGREEMENT AMONG LENDERS

Section 10.1 AGREEMENT AMONG LENDERS. The Lenders agree among themselves
that:

-80-
//ex99-1_1622_ar.cecc
<PAGE>

(a) ADMINISTRATIVE AGENT. Each Lender hereby appoints the Administrative
Agent as its nominee in its name and on its behalf, to receive all documents and
items to be furnished hereunder; to act as nominee for and on behalf of all
Lenders under the Loan Documents; to, except as otherwise expressly set forth
herein, take such action as may be requested by the Determining Lenders,
provided that, (i) unless and until the Administrative Agent shall have received
such requests, the Administrative Agent may take such administrative action, or
refrain from taking such administrative action, as it may deem advisable and in
the best interests of the Lenders, and (ii) the Administrative Agent shall not
be required to take any action that exposes the Administrative Agent to personal
liability or that is contrary to any Loan Document or Applicable Law; to arrange
the means whereby the proceeds of the Revolving Credit Advances of the Lenders
are to be made available to the Borrowers; to distribute promptly to each Lender
information, requests and documents received from the Borrowers, and each
payment (in like funds received) with respect to any of such Lender's Revolving
Credit Advances, fee or other amount; and to deliver to the Borrowers requests,
demands, approvals and consents received from the Lenders. Administrative Agent
agrees to promptly distribute to each Lender, at such Lender's address set forth
below information, requests, documents and payments received from the Borrowers.
The Administrative Agent shall have no fiduciary relationship in respect of any
Lender by reason of this Agreement or any other Loan Document. The
Administrative Agent shall have no duties or responsibilities except those
expressly set forth in this Agreement. The duties of the Administrative Agent
under the Loan Documents are merely mechanical and administrative in nature.

(b) REPLACEMENT OF ADMINISTRATIVE AGENT. Should the Administrative Agent
or any successor Administrative Agent ever cease to be a Lender hereunder, or
should the Administrative Agent or any successor Administrative Agent ever
resign as Administrative Agent, or should the Administrative Agent or any
successor Administrative Agent ever be removed with cause or without cause by
the action of all Lenders (other than the Administrative Agent), then the Lender
appointed by the other Lenders (provided that no Event of Default shall have
occurred and be continuing, with the consent of the Borrowers, which consent
shall not be unreasonably withheld) shall forthwith become the Administrative
Agent, and the Borrowers and the Lenders shall execute such documents as any
Lender may reasonably request to reflect such change at no cost to the
Borrowers. Any resignation or removal of the Administrative Agent or any
successor Administrative Agent shall become effective upon the appointment by
the Lenders of a successor Administrative Agent; provided, however, if no
successor Administrative Agent shall have been so appointed and shall have
accepted such appointment within 30 days after the retiring Administrative
Agent's giving of notice of resignation or the Lenders' removal of the retiring
Administrative Agent, then the retiring Administrative Agent may, on behalf of
the Lenders, appoint a successor Administrative Agent, which shall be a
commercial bank organized under the Laws of the United States of America or of
any State thereof and having a combined capital and surplus of at least
$250,000,000. Upon the acceptance of any appointment as the Administrative
Agent hereunder by a successor Administrative Agent, such successor
Administrative Agent shall thereupon succeed to and become vested with all the
rights and duties

-81-
<PAGE>

of the retiring Administrative Agent, and the retiring Administrative Agent
shall be discharged from its duties and obligations under the Loan Documents,
provided that if the retiring or removed Administrative Agent is unable to
appoint a successor Administrative Agent, the Administrative Agent shall,
after the expiration of a 60 day period from the date of notice, be relieved
of all obligations as Administrative Agent hereunder. Notwithstanding any
Administrative Agent's resignation or removal hereunder, the provisions of
this Article shall continue to inure to its benefit as to any actions taken
or omitted to be taken by it while it was the Administrative Agent under this
Agreement.

(c) EXPENSES. Each Lender shall pay its pro rata share, based on its
Specified Percentage, of any expenses paid by the Administrative Agent directly
and solely in connection with any of the Loan Documents if Administrative Agent
does not receive reimbursement therefor from other sources within 60 days after
the date incurred. Any amount so paid by the Lenders to the Administrative
Agent shall be returned by the Administrative Agent pro rata to each paying
Lender to the extent later paid by the Borrowers or any other Person on the
Borrowers' behalf to the Administrative Agent.

(d) DELEGATION OF DUTIES. The Administrative Agent may execute any of its
duties hereunder by or through officers, directors, employees, attorneys or
agents, and shall be entitled to (and shall be protected in relying upon) advice
of counsel concerning all matters pertaining to its duties hereunder.

(e) RELIANCE BY ADMINISTRATIVE AGENT. The Administrative Agent and its
officers, directors, employees, attorneys and agents shall be entitled to rely
and shall be fully protected in relying on any writing, resolution, notice,
consent, certificate, affidavit, letter, cablegram, telegram, telex or teletype
message, statement, order, or other document or conversation reasonably believed
by it or them in good faith to be genuine and correct and to have been signed or
made by the proper Person and, with respect to legal matters, upon opinions of
counsel selected the Administrative Agent. The Administrative Agent may, in its
reasonable judgment, deem and treat the payee of any Note as the owner thereof
for all purposes hereof.

(f) LIMITATION OF ADMINISTRATIVE AGENT'S LIABILITY. Neither the
Administrative Agent nor any of its officers, directors, employees, attorneys or
agents shall be liable for any action taken or omitted to be taken by it or them
hereunder in good faith and believed by it or them to be within the discretion
or power conferred to it or them by the Loan Documents or be responsible for the
consequences of any error of judgment, except for its or their own gross
negligence or wilful misconduct. Except as aforesaid, the Administrative Agent
shall be under no duty to enforce any rights with respect to any of the
Revolving Credit Advances, or any security therefor. The Administrative Agent
shall not be compelled to do any act hereunder or to take any action towards the
execution or enforcement of the powers hereby created or to prosecute or defend
any suit in respect hereof, unless indemnified to its satisfaction against loss,
cost, liability and expense. The Administrative Agent shall not be responsible
in any manner to any Lender for the effectiveness, enforceability, genuineness,
validity or due execution of any of

-82-
<PAGE>

the Loan Documents, or for any representation, warranty, document,
certificate, report or statement made herein or furnished in connection with
any Loan Documents, or be under any obligation to any Lender to ascertain or
to inquire as to the performance or observation of any of the terms,
covenants or conditions of any Loan Documents on the part of the Borrowers.
TO THE EXTENT NOT REIMBURSED BY THE BORROWERS, EACH LENDER HEREBY SEVERALLY
INDEMNIFIES AND HOLDS HARMLESS THE ADMINISTRATIVE AGENT, PRO RATA ACCORDING
TO ITS SPECIFIED PERCENTAGE, FROM AND AGAINST ANY AND ALL LIABILITIES,
OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS,
EXPENSES AND/OR DISBURSEMENTS OF ANY KIND OR NATURE WHATSOEVER WHICH MAY BE
IMPOSED ON, ASSERTED AGAINST, OR INCURRED BY THE ADMINISTRATIVE AGENT IN ANY
WAY WITH RESPECT TO ANY LOAN DOCUMENTS OR ANY ACTION TAKEN OR OMITTED BY THE
ADMINISTRATIVE AGENT UNDER THE LOAN DOCUMENTS (INCLUDING ANY NEGLIGENT ACTION
OF THE ADMINISTRATIVE AGENT), EXCEPT TO THE EXTENT THE SAME ARE FINALLY
DETERMINED BY A COURT OF COMPETENT JURISDICTION TO RESULT FROM GROSS
NEGLIGENCE OR WILFUL MISCONDUCT BY THE ADMINISTRATIVE AGENT. THE INDEMNITY
PROVIDED IN THIS SECTION 10.1(f) SHALL SURVIVE TERMINATION OF THIS AGREEMENT.

(g) LIABILITY AMONG LENDERS. No Lender shall incur any liability (other
than the sharing of expenses and other matters specifically set forth herein and
in the other Loan Documents) to any other Lender, except for acts or omissions
in bad faith.

(h) RIGHTS AS LENDER. With respect to its commitment hereunder, the
Advances made by it and the Notes issued to it, the Administrative Agent shall
have the same rights as a Lender and may exercise the same as though it were not
the Administrative Agent, and the term "Lender" or "Lenders" shall, unless the
context otherwise indicates, include the Administrative Agent in its individual
capacity. The Administrative Agent or any Lender may accept deposits from, act
as trustee under indentures of, and generally engage in any kind of business
with, the Parent and any of its Affiliates, and any Person who may do business
with or own securities of the Parent or any of its Affiliates, all as if the
Administrative Agent were not the Administrative Agent hereunder and without any
duty to account therefor to the Lenders.

Section 10.2 LENDER CREDIT DECISION. Each Lender acknowledges that it
has, independently and without reliance upon the Administrative Agent or any
other Lender and based upon the financial statements referred to in
SECTIONS 4.1(j), 6.1, and 6.2 hereof, and such other documents and information
as it has deemed appropriate, made its own credit analysis and decision to enter
into this Agreement. Each Lender also acknowledges that it will, independently
and without reliance upon the Administrative Agent or any other Lender and based
upon such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Agreement and the other Loan Documents. Each Lender also acknowledges that
its decision to fund the initial Revolving Credit Advance shall constitute
evidence to the Administrative Agent that such Lender has deemed all

-83-
<PAGE>

of the conditions set forth in SECTION 3.1 to have been satisfied.

Section 10.3 BENEFITS OF ARTICLE. None of the provisions of this Article
shall inure to the benefit of any Person other than Lenders and, with respect to
SECTION 10.1(b), the Borrowers; consequently, no such other Person shall be
entitled to rely upon, or to raise as a defense, in any manner whatsoever, the
failure of the Administrative Agent or any Lender to comply with such
provisions.

ARTICLE 11

MISCELLANEOUS

Section 11.1 NOTICES.

(a) All notices and other communications under this Agreement shall be
in writing (except in those cases where giving notice by telephone is
expressly permitted) and shall be deemed to have been given on the date
personally delivered or sent by telecopy (answerback received), or three days
after deposit in the mail, designated as certified mail, return receipt
requested, postage-prepaid, or one day after being entrusted to a reputable
commercial overnight delivery service, or one day after being delivered to
the telegraph office or sent out by telex addressed to the party to which
such notice is directed at its address determined as provided in this
Section. All notices and other communications under this Agreement shall be
given to the parties hereto at the following addresses:

(i) If to the Borrowers, at:

c/o Power-One, Inc.
740 Calle Plano
Camarillo, California 93012-8583
Attn: Eddie K. Schnopp

(ii) If to the Administrative Agent, at:

Bank of America, N.A.
555 California Street, 41st Floor
San Francisco, California 94104
Attn: Doug Meckelnburg, Vice President

(iii) If to a Lender, at its address shown below its name on the
signature pages hereof, or if applicable, set forth in its
Assignment Agreement.

(b) Any party hereto may change the address to which notices shall be
directed by

-84-
<PAGE>

giving 10 days' written notice of such change to the other parties.

Section 11.2 EXPENSES. The Borrowers shall promptly pay:

(a) all reasonable out-of-pocket expenses of the Administrative Agent in
connection with the preparation, negotiation, execution and delivery of this
Agreement and the other Loan Documents, the transactions contemplated hereunder
and thereunder, and the making of Advances hereunder, including without
limitation the reasonable fees and disbursements of Special Counsel;

(b) all reasonable out-of-pocket expenses and reasonable attorneys' fees
of the Administrative Agent in connection with the administration of the
transactions contemplated in this Agreement and the other Loan Documents and the
preparation, negotiation, execution and delivery of any waiver, amendment or
consent by the Administrative Agent relating to this Agreement or the other Loan
Documents; and

(c) all costs, out-of-pocket expenses and reasonable attorneys' fees of
the Administrative Agent and each Lender incurred for enforcement, collection,
restructuring, refinancing and "work-out", or otherwise incurred in obtaining
performance under the Loan Documents, which in each case shall include without
limitation fees and expenses of consultants, counsel for the Administrative
Agent and any Lender, and administrative fees for the Administrative Agent.

Section 11.3 WAIVERS. The rights and remedies of the Lenders under this
Agreement and the other Loan Documents shall be cumulative and not exclusive of
any rights or remedies which they would otherwise have. No failure or delay by
the Administrative Agent or any Lender in exercising any right shall operate as
a waiver of such right. The Lenders expressly reserve the right to require
strict compliance with the terms of this Agreement in connection with any
funding of a request for a Revolving Credit Advance. In the event that any
Lender decides to fund a Revolving Credit Advance at a time when the Borrowers
are not in strict compliance with the terms of this Agreement, such decision by
such Lender shall not be deemed to constitute an undertaking by the Lender to
fund any further requests for Revolving Credit Advances or preclude the Lenders
from exercising any rights available under the Loan Documents or at law or
equity. Any waiver or indulgence granted by the Lenders shall not constitute a
modification of this Agreement, except to the extent expressly provided in such
waiver or indulgence, or constitute a course of dealing by the Lenders at
variance with the terms of the Agreement such as to require further notice by
the Lenders of the Lenders' intent to require strict adherence to the terms of
the Agreement in the future. Any such actions shall not in any way affect the
ability of the Administrative Agent or the Lenders, in their discretion, to
exercise any rights available to them under this Agreement or under any other
agreement, whether or not the Administrative Agent or any of the Lenders are a
party thereto, relating to the Borrowers.

Section 11.4 CALCULATION BY THE LENDERS CONCLUSIVE AND BINDING. Any
mathematical

-85-
//ex99-1_1622_as.cecc
<PAGE>

calculation required or expressly permitted to be made by the Administrative
Agent or any Lender under this Agreement shall be made in its reasonable
judgment and in good faith, and shall when made, absent manifest error, be
controlling.

Section 11.5 SET-OFF. In addition to any rights now or hereafter granted
under Applicable Law and not by way of limitation of any such rights, upon the
occurrence of an Event of Default, each Lender and any subsequent holder of any
Note, and any assignee of any Note is hereby authorized by the Borrowers at any
time or from time to time, without notice to the Borrowers or any other Person,
any such notice being hereby expressly waived, to set-off, appropriate and apply
any deposits (general or special (except trust and escrow accounts), time or
demand, including without limitation Indebtedness evidenced by certificates of
deposit, in each case whether matured or unmatured) and any other Indebtedness
at any time held or owing by such Lender or holder to or for the credit or the
account of any Borrower, against and on account of the Obligations and other
liabilities of such Borrower to such Lender or holder, irrespective of whether
or not (a) the Lender or holder shall have made any demand hereunder, or (b) the
Lender or holder shall have declared the principal of and interest on the
Revolving Credit Advances and other amounts due hereunder to be due and payable
as permitted by SECTION 8.2. Any sums obtained by any Lender or by any
assignee or subsequent holder of any Note shall be subject to pro rata treatment
of all Obligations and other liabilities hereunder.

Section 11.6 ASSIGNMENT.

(a) The Borrowers may not assign or transfer any of its rights or
obligations hereunder or under the other Loan Documents without the prior
written consent of the Lenders.

(b) No Lender shall be entitled to assign its interest in this Agreement,
its Notes or its Advances, except as hereinafter set forth.

(c) Without the consent of the Borrowers, any Lender may at any time sell
participations in all or any part of its Advances and Reimbursement Obligations
(collectively, "PARTICIPATIONS") to any banks or other financial institutions
("PARTICIPANTS") provided that such Participation shall not confer on any Person
(other than the parties hereto) any right to vote on, approve or sign amendments
or waivers, or any other independent benefit or any legal or equitable right,
remedy or other claim under this Agreement or any other Loan Documents, other
than the right to vote on, approve, or sign amendments or waivers or consents
with respect to items that would result in (i) any increase in the commitment of
any Participant; or (ii)(A) the extension of the date of maturity of, or (B) the
extension of the due date for any payment of principal, interest or fees
respecting, or (C) the reduction of the amount of any installment of principal
or interest on or the change or reduction of any mandatory reduction required
hereunder, or (D) a reduction of the rate of interest on, the Revolving Credit
Advances, the Letters of Credit, or the Reimbursement Obligations; or (iii) the
release of security for the Obligations, including without limitation any
guarantee; or (iv) the reduction of any fees payable hereunder. Notwithstanding
the foregoing, the Borrowers agree that the Participants shall be

-86-
<PAGE>

entitled to the benefits of ARTICLE 9 hereof as though they were Lenders and
the Lenders may provide copies of all financial information received from the
Borrowers to such Participants.

(d) Each Lender may assign to one or more Eligible Assignees its rights
and obligations under this Agreement and the other Loan Documents; PROVIDED,
HOWEVER, that (i) each such assignment shall be subject to (A)the written
consent of the Administrative Agent and (B) prior to the occurrence and
continuance of an Event of Default, the written consent of the Parent, which
consent shall not be unreasonably withheld or delayed, (ii) no such assignment
shall be in an amount of the Revolving Credit Commitment less than $5,000,000,
(iii) the applicable Lender, Administrative Agent and applicable Eligible
Assignee shall execute and deliver to the Administrative Agent an Assignment and
Acceptance Agreement (an "ASSIGNMENT AGREEMENT") in substantially the form of
EXHIBIT D hereto, together with the Revolving Credit Notes subject to such
assignment and (iv) the Eligible Assignee executing the Assignment, shall
deliver to the Administrative Agent a processing fee of $3,500. Upon such
execution, delivery and acceptance from and after the effective date specified
in each Assignment, which effective date shall be at least three Business Days
after the execution thereof, (A) the Eligible Assignee thereunder shall be party
hereto and, to the extent that rights and obligations hereunder have been
assigned to it pursuant to such Assignment, have the rights and obligations of a
Lender hereunder and (B) the applicable Lender shall, to the extent that rights
and obligations hereunder have been assigned by it pursuant to such Assignment,
relinquish such rights and be released from such obligations under this
Agreement.

(e) Notwithstanding anything in clause (d) above to the contrary, any
Lender may assign and pledge all or any portion of its Revolving Credit Advances
and Revolving Credit Notes to any Federal Reserve Bank as collateral security
pursuant to Regulation A of F.R.S. Board and any Operating Circular issued by
such Federal Reserve Bank; provided, however, that no such assignment under this
clause (e) shall release the assignor Lender from its obligations hereunder.

(f) Upon its receipt of an Assignment Agreement executed by a Lender and
an Eligible Assignee, and any Revolving Credit Note or Revolving Credit Notes
subject to such assignment, the Borrowers shall, within five Business Days after
its receipt of such Assignment Agreement, at no expense to the Borrowers,
execute and deliver to the Administrative Agent in exchange for the surrendered
Notes new Notes to the order of such Assignee in an amount equal to the portion
of the Revolving Credit Advances and Revolving Credit Commitment assigned to it
pursuant to such Assignment Agreement and new Revolving Credit Notes to the
order of the assignor Lender in an amount equal to the portion of the Revolving
Credit Advances and Revolving Credit Commitment retained by it hereunder. Such
new Revolving Credit Notes shall be in an aggregate principal amount equal to
the aggregate principal amount of such surrendered Revolving Credit Notes, shall
be dated the effective date of such Assignment Agreement and shall otherwise be
in substantially the form of EXHIBIT A hereto.

(g) Any Lender may, in connection with any assignment or participation or
proposed

-87-
<PAGE>

assignment or participation pursuant to this SECTION 11.6, disclose to the
assignee or Participant or proposed assignee or participant, any information
relating to the Borrowers furnished to such Lender by or on behalf of the
Borrowers, provided such Person agrees to handle such information in
accordance with the standards set forth in SECTION 11.14 hereof.

(h) Except as specifically set forth in this SECTION 11.6, nothing in this
Agreement or any other Loan Documents, expressed or implied, is intended to or
shall confer on any Person other than the respective parties hereto and thereto
and their successors and assignees permitted hereunder and thereunder any
benefit or any legal or equitable right, remedy or other claim under this
Agreement or any other Loan Documents.

(i) Notwithstanding anything in this SECTION 11.6 to the contrary, no
Eligible Assignee or Participant shall be entitled to receive any greater
payment under SECTION 2.14, SECTION 2.15 or SECTION 9.3 than such assigning or
participating Lender would have been entitled to receive with respect to the
interest assigned or participated to such Eligible Assignee or Participant.

Section 11.7 COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which shall be deemed to be an original, but all such
separate counterparts shall together constitute but one and the same instrument.

Section 11.8 SEVERABILITY. Any provision of this Agreement which is for
any reason prohibited or found or held invalid or unenforceable by any court or
governmental agency shall be ineffective to the extent of such prohibition or
invalidity or unenforceability without invalidating the remaining provisions
hereof in such jurisdiction or affecting the validity or enforceability of such
provision in any other jurisdiction.

Section 11.9 INTEREST AND CHARGES. It is not the intention of any
parties to this Agreement to make an agreement in violation of the laws of any
applicable jurisdiction relating to usury. Regardless of any provision in any
Loan Documents, no Lender shall ever be entitled to receive, collect or apply,
as interest on the Obligations, any amount in excess of the Maximum Amount. If
any Lender or participant ever receives, collects or applies, as interest, any
such excess, such amount which would be excessive interest shall be deemed a
partial repayment of principal and treated hereunder as such; and if principal
is paid in full, any remaining excess shall be paid to the Borrowers. In
determining whether or not the interest paid or payable, under any specific
contingency, exceeds the Maximum Amount, the Borrowers and the Lenders shall, to
the maximum extent permitted under Applicable Law, (a) characterize any
nonprincipal payment as an expense, fee or premium rather than as interest,
(b) exclude voluntary prepayments and the effect thereof, and (c) amortize,
prorate, allocate and spread in equal parts, the total amount of interest
throughout the entire contemplated term of the Obligations so that the interest
rate is uniform throughout the entire term of the Obligations; provided,
however, that if the Obligations are paid and performed in full prior to the end
of the full contemplated term thereof, and if the interest received for the
actual period of existence thereof exceeds the

-88-
<PAGE>

Maximum Amount, the Lenders shall refund to the Borrowers the amount of such
excess or credit the amount of such excess against the total principal amount
of the Obligations owing, and, in such event, the Lenders shall not be
subject to any penalties provided by any laws for contracting for, charging
or receiving interest in excess of the Maximum Amount. This Section shall
control every other provision of all agreements pertaining to the
transactions contemplated by or contained in the Loan Documents.

Section 11.10 HEADINGS. Headings used in this Agreement are for
convenience only and shall not be used in connection with the interpretation of
any provision hereof.

Section 11.11 AMENDMENT AND WAIVER. The provisions of this Agreement may
not be amended, modified or waived except by the written agreement of the
Borrowers and the Determining Lenders; provided, however, that no such
amendment, modification or waiver shall (a) be made without the consent of all
Lenders, if it would (i) release all or substantially all of the security and
guaranties for the Obligations (except pursuant to this Agreement), or
(ii) revise this SECTION 11.11, or (iii) amend the definitions of Determining
Lenders or Revolving Credit Commitment, or (b) increase the Specified Percentage
or commitment of any Lender, or extend or postpone the date of maturity of,
extend the scheduled due date for any payment of principal or interest on,
reduce the amount of any installment of principal or interest on, or reduce the
rate of interest on, any Advance, the Reimbursement Obligations or other amount
owing under any Loan Documents to any Lender, or extend the scheduled date for
payment of any fees hereunder owing to any Lender, without in each case
specified in this clause (b) the consent of such Lender; (c) be made without the
consent of the Administrative Agent, if it would alter the rights, duties or
obligations of the Administrative Agent; or (d) be made without the consent of
the Issuing Bank, if it would alter the rights, duties or obligations of the
Issuing Bank. Neither this Agreement nor any term hereof may be amended orally,
nor may any provision hereof be waived orally but only by an instrument in
writing signed by the Administrative Agent and, in the case of an amendment, by
the Borrowers.

Section 11.12 EXCEPTION TO COVENANTS. Neither the Parent nor any of its
Subsidiaries shall be deemed to be permitted to take any action or fail to take
any action which is permitted as an exception to any of the covenants contained
herein or which is within the permissible limits of any of the covenants
contained herein if such action or omission would result in the breach of any
other covenant contained herein.

Section 11.13 NO LIABILITY OF ISSUING BANK. The Borrowers assume all
risks of the acts or omissions of any beneficiary or transferee of any Letter of
Credit with respect to its use of such Letter of Credit. Neither the Issuing
Bank nor any Lender nor any of their respective officers or directors shall be
liable or responsible for: (a) the use that may be made of any Letter of Credit
or any acts or omissions of any beneficiary or transferee in connection
therewith; (b) the validity, sufficiency or genuineness of documents, or of any
endorsement thereon, even if such documents should prove to be in any or all
respects invalid, insufficient, fraudulent or forged; (c) payment by the Issuing
Bank against presentation of documents that do not strictly

-89-
<PAGE>

comply with the terms of a Letter of Credit, including failure of any
documents to bear any reference or adequate reference to the Letter of
Credit, except for any payment made upon the Issuing Bank's gross negligence
or wilful misconduct; or (d) any other circumstances whatsoever in making or
failing to make payment under any Letter of Credit, EXCEPT that the Borrowers
shall have a claim against the Issuing Bank, and the Issuing Bank shall be
liable to the Borrowers, to the extent of any direct, but not consequential,
damages suffered by the Borrowers that a court of competent jurisdiction
determines were caused by (i) the Issuing Bank's wilful misconduct or gross
negligence or (ii) the Issuing Bank's wilful failure to make lawful payment
under a Letter of Credit after the presentation to it of a draft and
certificates strictly complying with the terms and conditions of the Letter
of Credit. In furtherance and not in limitation of the foregoing, the
Issuing Bank may accept documents that appear on their face to be in order,
without responsibility for further investigation, regardless of any notice or
information to the contrary.

Section 11.14 CONFIDENTIALITY. Each Lender and the Administrative Agent
agrees (on behalf of itself and each of its Affiliates, directors, officers,
employees and representatives) to use reasonable precautions to keep
confidential, in accordance with customary procedures for handling confidential
information of this nature and in accordance with safe and sound banking
practices, any non-public information supplied to it by the Borrowers pursuant
to this Agreement which is identified by the Borrowers as being confidential at
the time the same is delivered to the Lenders or the Administrative Agent,
provided that nothing herein shall limit the disclosure of any such information
(a) to the extent required by statute, rule, regulation or judicial process,
(b) to counsel for any Lender or the Administrative Agent, (c) to bank
examiners, auditors or accountants of any Lender, (d) to the Administrative
Agent or any other Lender, (e) in connection with any Litigation to which any
one or more of Lenders is a party, (f) to the extent necessary in connection
with the enforcement of any Rights under this Agreement or any other Loan
Document, provided, further, that, unless specifically prohibited by Applicable
Law or court order, each Lender shall, prior to disclosure thereof, notify the
Borrowers of any request for disclosure of any such non-public information
(i) by any Tribunal or representative thereof (other than any such request in
connection with an examination of such Lender's financial condition by such
governmental agency) or (ii) pursuant to legal process, or (f) to any Eligible
Assignee or Participant (or prospective Eligible Assignee or Participant) so
long as such Eligible Assignee or Participant (or prospective Eligible Assignee
or Participant) agrees to handle such information in accordance with the
provisions of this SECTION 11.14.

Section 11.15 AMENDMENT, RESTATEMENT, EXTENSION, AND RENEWAL. This
Agreement is a renewal, extension, amendment and restatement of the Existing
Credit Agreement, and is not a novation of the "Obligations" (as defined in the
Existing Credit Agreement) thereunder. All terms and provisions of this
Agreement supersede in their entirety the Existing Credit Agreement. The Liens
against the Capital Stock of PUM, and Melcher pledged pursuant to the Existing
Credit Agreement shall remain valid, binding and enforceable Liens against the
Borrowers.

Section 11.16 JOINT AND SEVERAL OBLIGATIONS. All obligations and
liabilities of each

-90-
//ex99-1_1622_at.cecc
<PAGE>

Borrower hereunder shall be joint and several; provided, however, that
Melcher shall be liable only for its borrowings hereunder and the interest,
fees and other obligations and liabilities allocable thereto; and provided
further that, with respect to each Borrower other than the Parent, in any
action or proceeding involving any corporate Law, or any bankruptcy,
insolvency, reorganization or other Law affecting the rights of creditors
generally (collectively, the "FRAUDULENT TRANSFER LAWS"), if the obligations
of such Borrower hereunder would otherwise, in each case after giving effect
to all other liabilities of such Borrower, contingent or otherwise, that are
relevant under the Fraudulent Transfer Laws (specifically excluding, however,
any liabilities of such Borrower in respect of intercompany indebtedness to
the Parent, other Affiliates of the Parent or other Obligors to the extent
that such indebtedness would be discharged in an amount equal to the amount
paid by such Borrower hereunder and after giving effect as assets to the
value (as determined under the applicable provisions of Fraudulent Transfer
Laws) of any agreement providing for an equitable allocation among such
Borrower and other Obligors), be held or determined to be void, invalid or
unenforceable or subordinated to the claims of any other creditors, on
account of the amount of its liability under this Agreement, then,
notwithstanding any other provision hereof to the contrary, the amount of
such liability shall, without any further action by such Borrower, any
Lender, the Administrative Agent or any other Person, be automatically
limited and reduced to the highest amount that is valid and enforceable and
not subordinated to the claims of other creditors as determined in such
action or proceeding. Such reduction shall not in any way limit or affect
the obligations of the remaining Borrowers hereunder. Each Borrower hereby
waives any right by which it might be entitled to require suit on an accrued
right of action in respect of any of the Obligations or require suit against
any Borrower or any other Obligor or any other Person, whether arising
pursuant to Section 34.02 of the Texas Business and Commerce Code, as
amended, Section 17.001 of the Texas Civil Practice and Remedies Code, as
amended, Rule 31 of the Texas Rules of Civil Procedure, as amended, or
otherwise.

Section 11.17 CONVERSION OF CURRENCIES. If, for the purpose of obtaining
judgment in any court, it is necessary to convert a sum owing hereunder in one
currency into another currency, each party hereto agrees, to the fullest extent
that it may effectively do so, that the rate of exchange used shall be that at
which in accordance with normal banking procedures in the relevant jurisdiction
the first currency could be purchased with such other currency on the Business
Day immediately preceding the date on which final judgment is given. The
obligations of the Borrowers in respect of any such due to any Lender (the
"APPLICABLE LENDER") shall, notwithstanding any judgment in a currency (the
"JUDGMENT CURRENCY") other than the currency in which such sum is stated to be
due hereunder (the "AGREEMENT CURRENCY"), be discharged only to the extent that
on the Business Day following receipt by the Applicable Lender of any sum
adjudged to be so due in the Judgment Currency, the Applicable Lender may in
accordance with normal banking procedures in the relevant jurisdiction purchase
the Agreement Currency with the Judgment Currency; if the amount of the
Agreement Currency so purchased is less than the sum originally due to the
Applicable Lender in the Agreement Currency, the Borrowers agree, as a separate
obligation and notwithstanding any such judgment, to indemnify the Applicable
Lender against such loss. The obligations of the Borrowers contained in this
SECTION 11.17 shall

-91-
<PAGE>

survive the termination of this Agreement and the payment of all other
amounts owing hereunder.

Section 11.18 NO DUTIES OF CO-AGENT. The Borrower, the Lenders and the
Administrative Agent acknowledge that the Co-Agent shall have no duties,
responsibilities, or liabilities hereunder in its capacity as a Co-Agent.

Section 11.19 GOVERNING LAW.

(a) THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF TEXAS (WITHOUT REGARD
TO PRINCIPLES OF CONFLICTS OF LAWS) AND OF THE UNITED STATES OF AMERICA;
PROVIDED, HOWEVER, THAT THE PARTIES HERETO AGREE THAT THE PROVISIONS OF
CHAPTER 346 OF THE TEXAS FINANCE CODE, AS AMENDED, SHALL NOT APPLY TO THE
ADVANCES, THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS. THE LOAN DOCUMENTS ARE
PERFORMABLE IN DALLAS, DALLAS COUNTY, TEXAS, AND BORROWERS AND EACH SURETY,
GUARANTOR, ENDORSER AND ANY OTHER PARTY EVER LIABLE FOR PAYMENT OF ANY MONEY
PAYABLE WITH RESPECT TO THE LOAN DOCUMENTS, JOINTLY AND SEVERALLY WAIVE THE
RIGHT TO BE SUED ELSEWHERE. THE BORROWERS, THE ADMINISTRATIVE AGENT AND EACH
LENDER EACH AGREES THAT THE STATE AND FEDERAL COURTS OF TEXAS LOCATED IN DALLAS,
TEXAS SHALL HAVE EXCLUSIVE JURISDICTION OVER PROCEEDINGS IN CONNECTION WITH THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS AND HEREBY SUBMITS WITH RESPECT TO ITSELF
AND ITS PROPERTY TO THE EXCLUSIVE JURISDICTION OF ANY SUCH COURT FOR THE PURPOSE
OF ANY SUIT, ACTION, PROCEEDING OR JUDGMENT RELATING TO OR ARISING OUT OF THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT. THE PARTIES HERETO IRREVOCABLY WAIVE ANY
OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE
OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS THAT ANY OF THE PARTIES MAY NOW
OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING IN DALLAS,
TEXAS. TO THE EXTENT THAT ANY BORROWER HAS OR HEREAFTER MAY ACQUIRE ANY
IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER
THROUGH SERVICE OF NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF
EXECUTION, EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, SUCH
BORROWER HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS
UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.

(b) THE BORROWERS HEREBY WAIVE PERSONAL SERVICE OF ANY

-92-
<PAGE>

LEGAL PROCESS. THE BORROWERS AGREE THAT SERVICE OF PROCESS MAY BE MADE UPON
THEM BY REGISTERED MAIL (RETURN RECEIPT REQUESTED) DIRECTED TO THE BORROWERS
AT THE ADDRESS DESIGNATED FOR NOTICE UNDER THIS AGREEMENT AND SERVICE SO MADE
SHALL BE DEEMED TO BE COMPLETED FIVE DAYS AFTER DEPOSIT IN THE UNITED STATES
MAIL. NOTHING IN THIS SECTION 11.18 SHALL AFFECT THE RIGHT OF THE
ADMINISTRATIVE AGENT OR ANY LENDER TO SERVE LEGAL PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW.

Section 11.20 WAIVER OF JURY TRIAL. EACH OF THE BORROWERS, THE
ADMINISTRATIVE AGENT AND THE LENDERS HEREBY KNOWINGLY VOLUNTARILY, IRREVOCABLY
AND INTENTIONALLY WAIVE, TO THE MAXIMUM EXTENT PERMITTED BY LAW, ALL RIGHT TO
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR CLAIM ARISING OUT OF OR RELATED TO
ANY OF THE LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY. THIS
PROVISION IS A MATERIAL INDUCEMENT TO EACH LENDER ENTERING INTO THIS AGREEMENT
AND MAKING ANY ADVANCES HEREUNDER.

Section 11.21 ENTIRE AGREEMENT. THIS WRITTEN AGREEMENT, TOGETHER WITH THE
OTHER LOAN DOCUMENTS, REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES
REGARDING THE SUBJECT MATTER HEREIN AND THEREIN AND MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES
HERETO. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

REMAINDER OF PAGE LEFT INTENTIONALLY BLANK

-93-
<PAGE>

IN WITNESS WHEREOF, this Credit Agreement is executed as of the date first
set forth above.

BORROWER: POWER-ONE, INC.

By:
Name: Ed K. Schnopp
Title: Vice President

-94-
<PAGE>

BORROWER: INTERNATIONAL POWER DEVICES, INC.

By:
Name: Ed K. Schnopp
Title:

-95-
//ex99-1_1622_au.cecc
<PAGE>

BORROWER: MELCHER HOLDING AG

By:
Name: Dr. Hans Gruter
Title:

By:
Name: Marcel V. Galli
Title:

-96-
<PAGE>

ADMINISTRATIVE AGENT: BANK OF AMERICA, N.A.,
as Administrative Agent

By:
Name:
Title:

LENDERS: BANK OF AMERICA, N.A.,
as a Lender and Issuing Bank
Specified Percentage:
30.77%

By:
Name:
Title:

555 California Street, 41st Floor
San Francisco, California 94104
Attention: Doug Meckelnburg
Vice President

-97-
<PAGE>

UNION BANK OF CALIFORNIA, N.A.
Specified Percentage:
30.77%

By:
Name:
Title:

445 South Figueroa Street, 16th Floor
Los Angeles, California 90071-1100
Attn: John Kase

-98-
<PAGE>

CITY NATIONAL BANK
Specified Percentage:
15.38%

By:
Name:
Title:

400 North Roxbury Drive, 5th Floor
Beverly Hills, California 90210
Attn: Ann Yasuda

-99-
<PAGE>

CALIFORNIA BANK & TRUST
Specified Percentage:
23.08%

By:
Name:
Title:

550 South Hope Street, 3rd Floor
Los Angeles, California 90017
Attn: Jan Okinshi

-100-
//ex99-1_1622_av.cecc
<PAGE>

SCHEDULE 1

PART I. OFFSHORE LENDING OFFICES

BANK OF AMERICA, N.A.
901 Main Street, 14th Floor
Dallas, Texas 75202

UNION BANK OF CALIFORNIA, N.A.
445 South Figueroa Street, 16th Floor
Los Angeles, California 90071-1100

CITY NATIONAL BANK
City Loan Center
831 South Douglas, Suite 100
El Segundo, California 90245
Attention: Pam Terry

CALIFORNIA BANK & TRUST
550 South Hope Street, 3rd Floor
Los Angeles, California 90017

PART II. APPROVED OFFSHORE CURRENCY LENDING OFFICES

BANK OF AMERICA, N.A.
901 Main Street, 14th Floor
Dallas, Texas 75202

UNION BANK OF CALIFORNIA, N.A.
445 South Figueroa Street, 10th Floor
Los Angeles, California 90071-1100

CITY NATIONAL BANK
City Loan Center
831 South Douglas, Suite 100

<PAGE>

El Segundo, California 90245
Attention: Pam Terry

CALIFORNIA BANK & TRUST
550 South Hope Street, 3rd Floor
Los Angeles, California 90017

PART III. APPROVED OFFSHORE CURRENCY PAYMENT OFFICES

BANK OF AMERICA, N.A.
901 Main Street, 14th Floor
Dallas, Texas 75202

UNION BANK OF CALIFORNIA, N.A.
445 South Figueroa Street, 10th Floor
Los Angeles, California 90071-1100

CALIFORNIA BANK & TRUST
550 South Hope Street, 3rd Floor
Los Angeles, California 90017

CITY NATIONAL BANK

CURRENCY PAYMENT INSTRUCTIONS
-------- --------------------
Pound Sterling Bank/Address: Barclays Bank PLC/44 Lombard Street, London
EC3 P3AH, England, UK
SWIFT ID: BARCGB22
Sort Code: 20-32-53
For Account: City National Bank/400 North Roxbury
Drive, Beverly Hills, California 90210
Account No.: 40789038

Danish Kroner Bank/Address: Jyske Bank A/S/Vesterbrogate 9, DK-1051,
Copenhagen, Denmark
SWIFT ID: JYBADKKK
For Account: City National Bank/400 North Roxbury
Drive, Beverly Hills, California 90210
Account No.: 7759-090107-8

<PAGE>

Swiss Francs Bank/Address: Union Bank of Switzerland (UBS)/Paradeplatz
6, 8010 Zurich, Switzerland
SWIFT ID: UBSWCHZH80A
For Account: City National Bank/400 North Roxbury
Drive, Beverly Hills, California 90210
Account No.: 0230-77836.05C

Canadian Bank/Address: Royal Bank of Canada/200 Bay Street, Toronto,
Dollars Ontario M4J 2J5, Canada
SWIFT ID: ROYCCAT2
For Account: City National Bank/400 North Roxbury
Drive, Beverly Hills, California 90210
Account No.: 095913214004
Euro Bank/Address: Citibank N.A./Citibank House Floor 336
Strand, London WC2R 1HB, England, U.K.
SWIFT ID: CITIGB2L
For Account: City National Bank/400 North Roxbury
Drive, Beverly Hills, California 90210
Account No.: 8251436

<PAGE>

SCHEDULE 2

EXISTING LIENS

PROPERTY SUBJECT AMOUNT OF
TO LIEN LIENHOLDER DEBT SECURED MATURITY DATE
---------------- ---------- ------------ -------------

<PAGE>

SCHEDULE 4.1(a)

SUBSIDIARIES

State of
Incorporation Percentage
Name or Organization of Ownership Owner
---- --------------- ------------ -----

//ex99-1_1622_aw.cecc
<PAGE>

SCHEDULE 4.1(g)

TITLE EXCEPTIONS

<PAGE>

SCHEDULE 4.1(h)

LITIGATION EXCEPTIONS

<PAGE>

SCHEDULE 4.1(t)

PATENT EXCEPTIONS

<PAGE>

SCHEDULE 5

EXISTING INVESTMENTS

<PAGE>

SCHEDULE 6

EXISTING INDEBTEDNESS

<PAGE>

SCHEDULE 7

EXISTING LETTERS OF CREDIT

<PAGE>

EXHIBIT 23.1

INDEPENDENT AUDITORS' CONSENT

We consent to the incorporation by reference in this Registration Statement
of Power-One, Inc. on Form S-3 of our report dated February 26, 1999,
appearing in the Annual Report on Form 10-K of Power-One, Inc. for the year
ended December 31, 1998 and to the reference to us under the headings
"Selected Financial Data" and "Experts" in the Prospectus, which is part of
this Registration Statement.

DELOITTE & TOUCHE LLP

August 2, 1999