Document:

exv10w1

Exhibit 10.1

     EXECUTION COPY

 

 

STOCK PURCHASE AGREEMENT

among

CHATT HOLDINGS LLC,

CHATT HOLDINGS INC.,

CLOPAY ACQUISITION CORP.

and

GRIFFON CORPORATION

(Solely for purposes of Section 7.09)

July 19, 2010

 

 

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 
	 	 	 	 	Page
	ARTICLE I PURCHASE AND SALE	 	 	1	 
	Section 1.01.

	 	Purchase and Sale of Shares
	 	 	1	 
	Section 1.02.

	 	Preliminary Closing Statement
	 	 	2	 
	Section 1.03.

	 	Post-Closing Determination
	 	 	3	 
	Section 1.04.

	 	The Closing
	 	 	5	 
	Section 1.05.

	 	Escrow Amount
	 	 	6	 
	 
	 	 	 	 	 	 
	ARTICLE II CONDITIONS TO CLOSING	 	 	8	 
	Section 2.01.

	 	Conditions to the Obligations of the Buyer and the Seller
	 	 	8	 
	Section 2.02.

	 	Conditions to the Buyer’s Obligations
	 	 	9	 
	Section 2.03.

	 	Conditions to the Seller’s Obligations
	 	 	11	 
	 
	 	 	 	 	 	 
	ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE SELLER	 	 	12	 
	Section 3.01.

	 	Due Organization and Good Standing
	 	 	12	 
	Section 3.02.

	 	Execution, Delivery; Valid and Binding Agreements
	 	 	12	 
	Section 3.03.

	 	Authority
	 	 	12	 
	Section 3.04.

	 	Non-Contravention; No Consents or Approvals
	 	 	12	 
	Section 3.05.

	 	Title and Ownership
	 	 	13	 
	Section 3.06.

	 	No Brokers’ Fees
	 	 	13	 
	 
	 	 	 	 	 	 
	ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY	 	 	13	 
	Section 4.01.

	 	Organization and Power
	 	 	14	 
	Section 4.02.

	 	Subsidiaries
	 	 	14	 
	Section 4.03.

	 	Non-Contravention; No Consents or Approvals
	 	 	14	 
	Section 4.04.

	 	Execution; Delivery; Valid and Binding Agreements; Authority
	 	 	15	 
	Section 4.05.

	 	Capitalization
	 	 	15	 
	Section 4.06.

	 	Financial Statements
	 	 	16	 
	Section 4.07.

	 	Absence of Certain Developments
	 	 	17	 
	Section 4.08.

	 	Title to Properties
	 	 	19	 
	Section 4.09.

	 	Tax Matters
	 	 	20	 
	Section 4.10.

	 	Contracts and Commitments
	 	 	23	 
	Section 4.11.

	 	Intellectual Property
	 	 	25	 
	Section 4.12.

	 	Litigation
	 	 	26	 
	Section 4.13.

	 	No Brokers’ Fees
	 	 	26	 
	Section 4.14.

	 	Employee Benefit Plans
	 	 	26	 
	Section 4.15.

	 	Employment Matters
	 	 	30	 
	Section 4.16.

	 	Compliance with Laws
	 	 	31	 
	Section 4.17.

	 	Environmental Compliance
	 	 	31	 
	Section 4.18.

	 	Insurance
	 	 	32	 
	Section 4.19.

	 	Undisclosed Liabilities
	 	 	32	 
	Section 4.20.

	 	Customers and Suppliers
	 	 	33	 
	Section 4.21.

	 	Permits
	 	 	33	 
	Section 4.22.

	 	Accounts Receivable
	 	 	33	 

i

 

	 	 	 	 	 	 	 
	 	 	 	 	Page
	 
	 	 	 	 	 	 
	Section 4.23.

	 	Inventory
	 	 	34	 
	Section 4.24.

	 	Affiliate Transactions
	 	 	34	 
	Section 4.25.

	 	Warranties/Product Liability
	 	 	34	 
	Section 4.26.

	 	Indebtedness
	 	 	35	 
	Section 4.27.

	 	Foreign Corrupt Practices
	 	 	35	 
	Section 4.28.

	 	Holding Company
	 	 	35	 
	 
	 	 	 	 	 	 
	ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE BUYER	 	 	35	 
	Section 5.01.

	 	Organization and Corporate Power
	 	 	35	 
	Section 5.02.

	 	Authorization
	 	 	35	 
	Section 5.03.

	 	Non-Contravention; Consents and Approvals
	 	 	36	 
	Section 5.04.

	 	Litigation
	 	 	36	 
	Section 5.05.

	 	No Brokers’ Fees
	 	 	36	 
	Section 5.06.

	 	Investment Representation
	 	 	36	 
	Section 5.07.

	 	Financing
	 	 	36	 
	Section 5.08.

	 	Solvency
	 	 	37	 
	 
	 	 	 	 	 	 
	ARTICLE VI PRE CLOSING COVENANTS OF THE COMPANY	 	 	38	 
	Section 6.01.

	 	Conduct of the Business
	 	 	38	 
	Section 6.02.

	 	Access to Books and Records
	 	 	41	 
	Section 6.03.

	 	Notification
	 	 	41	 
	Section 6.04.

	 	Regulatory Filings
	 	 	41	 
	Section 6.05.

	 	Conditions
	 	 	42	 
	Section 6.06.

	 	Exclusive Dealing
	 	 	42	 
	Section 6.07.

	 	Financing Commitments
	 	 	42	 
	Section 6.08.

	 	FIRPTA Certificate
	 	 	44	 
	Section 6.09.

	 	Termination of Related Party Agreements
	 	 	44	 
	Section 6.10.

	 	Monthly Financial Reports
	 	 	44	 
	Section 6.11.

	 	280G Payments
	 	 	44	 
	 
	 	 	 	 	 	 
	ARTICLE VII COVENANTS OF THE BUYER	 	 	45	 
	Section 7.01.

	 	Access to Books and Records
	 	 	45	 
	Section 7.02.

	 	Notification
	 	 	45	 
	Section 7.03.

	 	Director and Officer Liability and Indemnification
	 	 	45	 
	Section 7.04.

	 	Regulatory Filings
	 	 	46	 
	Section 7.05.

	 	Conditions
	 	 	46	 
	Section 7.06.

	 	Senior Notes Obligations
	 	 	47	 
	Section 7.07.

	 	Employment and Benefit Arrangements
	 	 	48	 
	Section 7.08.

	 	Financing Commitments
	 	 	49	 
	Section 7.09.

	 	Actions by Griffon
	 	 	50	 
	Section 7.10.

	 	Eligible Payments
	 	 	50	 
	 
	 	 	 	 	 	 
	ARTICLE VIII TERMINATION	 	 	50	 
	Section 8.01.

	 	Termination
	 	 	50	 
	Section 8.02.

	 	Effect of Termination
	 	 	51	 

ii

 

	 	 	 	 	 	 	 
	 	 	 	 	Page
	 
	 	 	 	 	 	 
	ARTICLE IX SURVIVAL AND INSURANCE; INDEMNIFICATION	 	 	52	 
	Section 9.01.

	 	Survival
	 	 	52	 
	Section 9.02.

	 	Buyer’s Insurance Policy
	 	 	52	 
	Section 9.03.

	 	Indemnification by the Seller
	 	 	52	 
	Section 9.04.

	 	Limitations on Indemnification
	 	 	53	 
	 
	 	 	 	 	 	 
	ARTICLE X ADDITIONAL COVENANTS	 	 	54	 
	Section 10.01.

	 	Disclosure Generally
	 	 	54	 
	Section 10.02.

	 	No Additional Representations; Disclaimer
	 	 	54	 
	Section 10.03.

	 	Certain Tax Matters
	 	 	55	 
	Section 10.04.

	 	Publicity
	 	 	56	 
	Section 10.05.

	 	Further Assurances
	 	 	56	 
	 
	 	 	 	 	 	 
	ARTICLE XI DEFINITIONS	 	 	57	 
	Section 11.01.

	 	Defined Terms
	 	 	57	 
	 
	 	 	 	 	 	 
	ARTICLE XII MISCELLANEOUS	 	 	69	 
	Section 12.01.

	 	Specific Performance; Remedies
	 	 	69	 
	Section 12.02.

	 	Expenses
	 	 	71	 
	Section 12.03.

	 	Notices
	 	 	71	 
	Section 12.04.

	 	Assignment
	 	 	73	 
	Section 12.05.

	 	Severability
	 	 	73	 
	Section 12.06.

	 	Construction
	 	 	73	 
	Section 12.07.

	 	Amendment and Waiver
	 	 	73	 
	Section 12.08.

	 	Complete Agreement
	 	 	74	 
	Section 12.09.

	 	Counterparts
	 	 	74	 
	Section 12.10.

	 	No Third-Party Beneficiaries
	 	 	74	 
	Section 12.11.

	 	Governing Law; Jurisdiction
	 	 	74	 
	Section 12.12.

	 	Prevailing Party
	 	 	74	 
	Section 12.13.

	 	Waiver of Jury Trial
	 	 	74	 
	Section 12.14.

	 	Representation of the Company and the Seller
	 	 	75	 
	Section 12.15.

	 	Releases
	 	 	75	 
	Section 12.16.

	 	Post-Closing Obligations of the Company and its Subsidiaries
	 	 	76	 

iii

 

SCHEDULES AND EXHIBITS

	 	 	 

	Seller Disclosure Schedules
	 
	 	 
	Section 3.04

	 	Non-Contravention

	 	 	 

	Company Disclosure Schedules
	 
	 	 
	Section 2.01(a)

	 	Governmental Entity Consents
	Section 2.02(c)(vii)

	 	Resignation of Directors and Officers
	Section 4.02(a)

	 	Joint Venture Interests
	Section 4.02(b)

	 	Subsidiaries
	Section 4.03

	 	Non-Contravention
	Section 4.05(a)

	 	Liens on Subsidiaries’ Capital Stock
	Section 4.05(b)

	 	Issued and Outstanding Equity
	Section 4.05(c)

	 	Obligations to Acquire Capital Stock
	Section 4.06

	 	Financial Statements
	Section 4.07

	 	Certain Developments
	Section 4.08(a)

	 	Leased Real Property
	Section 4.08(c)

	 	Owned Real Property
	Section 4.08(d)

	 	Obligations to Purchase Owned Real Property
	Section 4.08(e)

	 	Real Property Compliance with Laws
	Section 4.09

	 	Tax Matters
	Section 4.10

	 	Material Contracts
	Section 4.11(a)

	 	Owned Intellectual Property; Exclusive Possession
	Section 4.11(c)

	 	Intellectual Property Disputes
	Section 4.11(d)

	 	Infringement of Intellectual Property
	Section 4.12

	 	Litigation
	Section 4.14(a)

	 	Employee Benefit Plans
	Section 4.14(g)

	 	Employee Benefit Plan Audits and Investigations
	Section 4.14(m)

	 	Changes in Projected Costs
	Section 4.14(n)

	 	Plans Providing Benefits Beyond Termination of Service or Retirement
	Section 4.14(o)

	 	Effect of Transaction on Benefits
	Section 4.14(q)

	 	Current Salaries and Bonus Potential
	Section 4.14(x)

	 	Assets and Liabilities of Foreign Plans
	Section 4.15

	 	Employment Matters
	Section 4.16

	 	Compliance with Laws
	Section 4.17

	 	Environmental Matters
	Section 4.18

	 	Insurance
	Section 4.19

	 	Undisclosed Liabilities
	Section 4.20

	 	Customers and Suppliers
	Section 4.21

	 	Permits
	Section 4.24

	 	Affiliate Transactions
	Section 4.25

	 	Warranties/Product Liability
	Section 6.01(b)

	 	Pre-Closing Activities
	Section 6.09

	 	Termination of Related Party Agreements
	Section 7.07(a)

	 	Retention of Employee Benefits

iv

 

	 	 	 

	Section 11.01(a)

	 	Eligible Payments
	Section 11.01(b)

	 	Closing Date Indebtedness
	Section 11.01(c)

	 	Company Closing Costs
	Section 11.01(d)

	 	Permitted Liens
	 
	 	 
	Buyer Disclosure Schedules
	 
	 	 
	Section 5.03

	 	Non-Contravention
	Section 5.07

	 	Commitment Letters
	 
	 	 
	Exhibits
	 
	 	 
	Exhibit A

	 	Form of Escrow Agreement
	Exhibit B

	 	Form of Key Executive Management Agreement
	 
	 	 
	Annexes
	 	 
	 
	 	 
	Annex A

	 	Net Working Capital Calculation
	Annex B

	 	Form of General Release

v

 

STOCK PURCHASE AGREEMENT

          THIS AGREEMENT (“Agreement”) is made as of July 19, 2010, by and among (i) Clopay
Acquisition Corp., a Delaware corporation (the “Buyer”), (ii) CHATT Holdings LLC, a
Delaware limited liability company (the “Seller”), (iii) and CHATT Holdings Inc., a
Delaware corporation (the “Company” and, together with the Buyer and the Seller, the
“Parties”) and (iv) solely for purposes of Section 7.09 hereof, Griffon
Corporation, a Delaware Corporation (“Griffon”).

          WHEREAS, the Seller owns all of the issued and outstanding shares of capital stock of the
Company, which as of the date hereof consists of 10 shares of common stock, par value $0.01 per
share (the “Shares”);

          WHEREAS, the Company owns all of the issued and outstanding shares of capital stock of ATT
Holding Co., a Delaware corporation (“Holdco”), which as of the date hereof consists of (i)
62,495 shares of Series A preferred stock, par value $0.0001 per share, (ii) 726,556 shares of
Class A common stock, par value $0.0001 per share, and (iii) 267,448 shares of Class B common
stock, par value $0.0001 per share;

          WHEREAS, Holdco owns all of the issued and outstanding shares of capital stock of Ames True
Temper, Inc., a Delaware corporation (“Ames”), which as of the date hereof consists of
1,000 shares of common stock, par value $1.00 per share;

          WHEREAS, prior to or concurrently herewith, each of the Key Executives has or will have
executed a management agreement, effecting, among other things, an amendment to such Key
Executive’s existing employment agreement with the Company, in the form attached hereto as
Exhibit B which will be effective at, and are subject to, the Closing; and

          WHEREAS, upon the terms and subject to the conditions set forth in this Agreement, the Buyer
desires to acquire from the Seller all of the Shares, and the Seller desires to sell to the Buyer
all of such Shares.

          NOW, THEREFORE, in consideration of the mutual covenants contained herein and other good and
valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties
hereto agree as follows:

ARTICLE I

PURCHASE AND SALE

          Section 1.01. Purchase and Sale of Shares.

               (a) At the Closing, upon the terms and subject to the conditions set forth in this Agreement,
the Seller shall sell, assign, transfer and convey to the Buyer, and the Buyer shall purchase and
acquire from the Seller, the Shares, free and clear from all Liens and transfer restrictions (other
than restrictions under applicable federal and state securities Laws and

 

Liens imposed by the Buyer or its Affiliates), against payment of the Estimated Purchase Price at the Closing as provided in
Section 1.01(b) below.

               (b) On the terms and subject to the conditions set forth in this Agreement, the Buyer shall
deliver to the Seller at the Closing in accordance with Section 1.04(b)(ii) aggregate
consideration for the Shares (the “Estimated Purchase Price”) consisting of the following:

                    (i) $542,000,000 plus

	 	(A)	 	the Estimated
Closing Date Cash and Cash Equivalents; and
	 
	 	(B)	 	the Westmix
Deposit, if Ames Australia’s pending acquisition of
Westmix has not been consummated prior to the Closing,
except if such failure is because of a material default
by Ames Australia (but only if such material default
occurs prior to the Closing) and as a result of such
default Westmix lawfully terminates the Westmix
Agreement;

                    (ii) minus the sum of:

	 	(A)	 	without duplication, the Estimated Company Closing Costs;
	 
	 	(B)	 	the Estimated Closing Date Indebtedness;
	 
	 	(C)	 	the aggregate amount of the Eligible Payments;
	 
	 	(D)	 	the Escrow Amount; and
	 
	 	(E)	 	the Westmix Purchase Price, if Ames Australia’s pending acquisition
of Westmix has not been consummated prior to the
Closing.

          Section 1.02. Preliminary Closing Statement. The Company shall, at least three
Business Days prior to the Closing Date, but not earlier than five Business Days prior to the
Closing Date, cause to be prepared and delivered to the Buyer a good faith statement (the
“Preliminary Closing Statement”), duly executed on behalf of the Company by the Chief
Financial Officer of the Company, that references and attaches (i) a good faith estimated
consolidated balance sheet of the Company and its Subsidiaries (the “Estimated Closing Date
Balance Sheet”) as of the close of business on the Closing Date and (ii) a good faith estimate
of the Estimated Purchase Price, in sufficient detail to identify on an item by item basis the
calculation of each item comprising the Estimated Closing Date Balance Sheet and the Estimated
Purchase Price, including an estimate of the Cash and Cash Equivalents (the “Estimated Closing
Date Cash and Cash Equivalents”), an estimate of the Company Closing Costs (the “Estimated
Company Closing Costs”), an estimate of the Closing Date Indebtedness (the “Estimated
Closing

2

 

Date Indebtedness”), in each case, prepared in accordance with GAAP applied in a manner
consistent with the Financial Statements and utilizing the same methodologies, practices and
policies employed by the Company and as set forth in Annex A hereto and in accordance with
the definition of Cash and Cash Equivalents, Closing Date Indebtedness and Company Closing
Costs set forth herein, without regard to the transaction described herein or the consummation of
any financing contemplated herewith and as of the close of business on the Closing Date. The
Company shall make available to Buyer such information as Buyer shall reasonably request relating
to the matters set forth in the Preliminary Closing Statement.

          Section 1.03. Post-Closing Determination.

               (a) Within sixty (60) days following the Closing Date, the Buyer shall cause to be prepared
and delivered to the Seller a statement (the “Post-Closing Statement”), which shall include
(i) a consolidated balance sheet of the Company and its Subsidiaries as of the close of business on
the Closing Date (the “Closing Date Balance Sheet”), including the Cash and Cash
Equivalents (as determined pursuant to Section 1.03(b), the “Final Closing Date Cash
and Cash Equivalents”), the Closing Date Indebtedness (as determined pursuant to Section
1.03(b), the “Final Closing Date Indebtedness”), and the Company Closing Costs (as
determined pursuant to Section 1.03(b), the “Final Company Closing Costs”) and (ii)
the Buyer’s calculation of Net Working Capital as of the close of business on the Closing Date (as
determined pursuant to Section 1.03(b), the “Final Net Working Capital”), in each
case, prepared in accordance with GAAP applied in a manner consistent with the Financial Statements
and utilizing the same methodologies, practices and policies as were used in the Financial
Statements and as set forth in Annex A hereto and in accordance with the definition of Cash
and Cash Equivalents, Closing Date Indebtedness, Company Closing Costs, and Net Working Capital set
forth herein, without regard to the transaction described herein or the consummation of any
financing contemplated herewith and as of the close of business on the Closing Date;
provided that, to the extent there are one or more line items contained in the Financial
Statements that are not reflected in Annex A hereto, such line item shall not be considered
in determining Final Net Working Capital; provided, further, that in the event of any discrepancy
between Annex A hereto and the terms of this Agreement relating to the determination of Net
Working Capital, Annex A shall prevail.

               (b) The Buyer will make available to the Seller and its auditors and representatives all
records and work papers used in preparing the Post-Closing Statement and, upon reasonable prior
notice, the Seller shall be entitled to discuss such records and work papers with the Buyer and
those Persons responsible for the preparation thereof, provided, to the extent that any
working papers or similar documents prepared by accountants of the Buyer are requested, the Seller
shall execute and deliver any customary non-reliance letters as may be requested by such
accountants prior to receiving such information.

               (c) Unless the Seller, within 30 days after receipt of the Post-Closing Statement, gives the
Buyer a written notice objecting thereto and specifying the basis for each such objection (the only
basis for each such objection shall be either that the Post-Closing Statement was not prepared in
accordance with Section 1.03(a) hereof or that there were mathematical errors in
determining the amounts set forth in the Post-Closing Statement) and the amount in dispute (an
“Objection Notice”), such Post-Closing Statement and the Final Purchase

3

 

Price resulting therefrom shall be final, conclusive and binding upon the Buyer and the Seller. The Seller and the
Buyer shall use reasonable efforts to resolve any disagreements as to the Post-Closing Statement
and the Objection Notice, but if they do not obtain a final resolution within 30 days after the
Buyer has received the Objection Notice, the Seller and the Buyer
shall jointly retain a mutually agreed nationally recognized “big four” accounting firm (the “Accounting
Firm”) to resolve any remaining disagreements. The Buyer and the Seller shall direct the
Accounting Firm to render a determination within 30 days of its retention, and the Buyer, the
Seller and their respective employees or agents shall cooperate with, and provide reasonable access
to all relevant records and work papers to, the Accounting Firm during its engagement. The
Accounting Firm may consider only those items and amounts in the Post-Closing Statement set forth
in the Objection Notice which the Buyer and the Seller are unable to resolve. The scope of the
disputes to be resolved by the Accounting Firm is limited to whether the Post-Closing Statement was
prepared in accordance with Section 1.03(a) hereof and whether there were mathematical
errors in determining the amounts set forth in the Post-Closing Statement, and the Accounting Firm
is not to make any other determination. The Accounting Firm’s determination shall be based solely
on written submissions by the Buyer and the Seller (i.e., not on the basis of an independent
review) and on the definitions included herein. In resolving any disputed item, the Accounting
Firm may not assign a value to any item greater than the greatest value for such item claimed by
either party or less than the smallest value for such item claimed by either party. The
determination of the Accounting Firm shall be conclusive and binding upon the Buyer, the Company
and the Seller. The cost of the resolution of the disputed items by the Accounting Firm shall be
equitably allocated by the Accounting Firm based on the accuracy of the Parties’ positions relative
to the final determination by the Accounting Firm.

               (d) Post-Closing Adjustment. Effective upon the determination of the Post-Closing
Statement pursuant to Section 1.03(b) above, the Estimated Purchase Price will be adjusted
as follows and netted against each other as appropriate (as adjusted, the “Final Purchase
Price”):

                    (i) upwards dollar-for-dollar, if

                         (A) the Final Net Working Capital is greater than the upper limit of the Target Net Working
Capital Range, by the amount by which Final Net Working Capital is greater than the upper limit of
Target Net Working Capital Range; provided that, for the avoidance of doubt, if the Final
Net Working Capital falls within the Target Net Working Capital Range, then no adjustment to the
Estimated Purchase Price shall be made pursuant to this Section 1.03(d)(i)(A);

                         (B) the Final Closing Date Indebtedness is less than the Estimated Closing Date Indebtedness,
by the amount of such shortfall;

                         (C) the Final Company Closing Costs is less than the Estimated Company Closing Costs, by the
amount of such shortfall; and

                         (D) the Final Closing Date Cash and Cash Equivalents exceeds the Estimated Closing Date Cash
and Cash Equivalents, by the amount of such excess.

4

 

                    (ii) downwards dollar-for-dollar, if

                         (A) the Final Net Working Capital is less than the lower limit of the Target Net Working
Capital Range, by the amount by which Final Net Working Capital is less than the lower limit of the
Target Net Working Capital Range; provided that, for the avoidance of doubt, if the Final Net Working Capital falls within the Target Net Working
Capital Range, then no adjustment to the Estimated Purchase Price shall be made pursuant to this
Section 1.03(c)(ii)(A);

                         (B) the Final Closing Date Indebtedness exceeds the Estimated Closing Date Indebtedness, by
the amount of such excess;

                         (C) the Final Company Closing Costs exceeds the Estimated Company Closing Costs, by the amount
of such excess; and

                         (D) the Final Closing Date Cash and Cash Equivalents is less than the Estimated Closing Date
Cash and Cash Equivalents, by the amount of such shortfall.

               (e) Within three Business Days following the final determination of the Post Closing Statement
pursuant to Section 1.03(b), (i) if the Final Purchase Price exceeds the Estimated Purchase
Price, the Buyer shall, subject to Section 1.05(a), pay to the Seller the amount equal to
such excess (the “Purchase Price Excess”), or (ii) if the Estimated Purchase Price exceeds
the Final Purchase Price, the Seller and the Buyer shall, subject to Section 1.05(b),
direct the Escrow Agent to deliver to the Buyer an amount equal to such excess (the “Purchase
Price Shortfall” and, together with the Purchase Price Excess, the “Purchase Price
Adjustment”). Any amount to be paid pursuant to this Section 1.03(e) shall be paid by
wire transfer or other delivery of immediately available funds. Any Purchase Price Adjustment
required to be paid pursuant to this Section 1.03(e) shall bear interest from the Closing
Date to the date of payment at an interest rate that is equal to 8% per annum.

               (f) For purposes of this Section 1.03, any action taken by the Buyer, the Seller, the
Company or any of its Subsidiaries following the Closing with respect to the accounting books and
records of the Company, or the items reflected thereon, on which the Post-Closing Statement is to
be based, that is inconsistent with this Agreement, GAAP, the Financial Statements or Annex
A hereto shall be disregarded and no effect shall be given thereto for purposes of the
determination of the Final Closing Date Cash and Cash Equivalents, the Final Company Closing Costs,
the Final Closing Date Indebtedness and the Final Net Working Capital; provided that, to the extent
that there are one or more line items contained in the Financial Statements that are not reflected
in Annex A hereto, such line item shall not be considered in determining the Final Net
Working Capital.

          Section 1.04. The Closing.

               (a) The closing of the transactions contemplated by this Agreement (the “Closing”)
shall take place at the offices of Schulte Roth & Zabel LLP, 919 Third Avenue, New York, New York
10022, at 10:00 a.m. on the third Business Day to occur following full satisfaction or waiver of
all of the closing conditions set forth in Article II hereof (other than

5

 

those required to be satisfied at the Closing) or on such other date or at such other location as is mutually
agreeable to the Buyer and the Seller; provided, however, that, unless the Buyer
consents in writing, in no event shall the Closing occur before the earlier of (A) all conditions
precedent to the availability of the Debt Financing (including in respect of any Replacement
Commitment, as applicable) have been satisfied (other than those that are only capable of
being satisfied as of the Closing Date) and (B) the End Date. The date and time of the Closing are
herein referred to as the “Closing Date.”

               (b) Subject to the terms and conditions set forth in this Agreement, the Parties hereto shall
consummate the following “Closing Transactions” at the Closing:

                    (i) the Seller shall deliver to the Buyer original stock certificates representing the Shares,
duly endorsed in blank for transfer to, or accompanied by duly executed stock transfer powers
executed in favor of, the Buyer or its nominee as the Buyer may have designated in writing to the
Seller at least two Business Days prior to the Closing Date;

                    (ii) the Buyer shall deliver to the Seller the amount of the Estimated Purchase Price by wire
transfer of immediately available funds to the account(s) designated by the Seller at least two
Business Days prior to the Closing Date;

                    (iii) the Buyer shall deposit $15,000,000 (the “Escrow Amount”) into an escrow account
(the “Escrow Account”) established pursuant to the terms and conditions of an escrow
agreement (the “Escrow Agreement”) by and among the Buyer, the Seller and U.S. Bank, N.A.,
as escrow agent (the “Escrow Agent”), substantially in the form of Exhibit A;

                    (iv) the Buyer shall pay, on behalf of the Company and its Subsidiaries, the Estimated Company
Closing Costs by wire transfer of immediately available funds to the account(s) designated by the
Seller at least two Business Days prior to the Closing Date;

                    (v) the Buyer shall repay, on behalf of the Company and its Subsidiaries, by wire transfer of
immediately available funds to one or more account(s) specified in the respective Payoff Letters,
the Estimated Closing Indebtedness;

                    (vi) the Buyer shall deliver to the Company evidence reasonably satisfactory to the Company of
the insurance coverage required to be maintained by the Buyer or the Company and its Subsidiaries
after the Closing pursuant to Section 7.03(b); and

                    (vii) the Buyer, the Company and the Seller shall make such other deliveries as are required
by and in accordance with Article II hereof.

          Section 1.05. Escrow Amount.

               (a) Concurrently with the payment of the Purchase Price Adjustment in accordance with
Section 1.03(e), the Seller and the Buyer shall direct the Escrow Agent to deliver to the
Seller the remaining Escrow Amount (after taking into account the payment of the

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Purchase Price Adjustment), if any, minus, to the extent available, the sum of (x) $2,500,000 less any amount
previously paid out to any Buyer Indemnitee pursuant to Section 9.03(i), (y) $2,500,000
less any amount previously paid out to any Buyer Indemnitee pursuant to Section 9.03(ii)
(but in no event shall (y) be less than zero), and (z) any amount subject to any unresolved
claims made by any Buyer Indemnitee pursuant to Section 9.03(ii) hereof to the extent
in excess of the amount set forth in (y) above. Promptly following the later to occur of (i) three
Business Days following the final determination of the Post Closing Statement, and (ii) the
Covenant Limitation Date, the Seller and the Buyer shall direct the Escrow Agent to deliver to the
Seller the remaining Escrow Amount, minus, to the extent available, the sum of (x) $2,500,000 less
any amount previously paid out to any Buyer Indemnitee pursuant to Section 9.03(i), and (y)
any amount subject to any unresolved claims made by any Buyer Indemnitee pursuant to Section
9.03(ii) hereof. Promptly following the later to occur of (i) three Business Days following
the final determination of the Post Closing Statement, and (ii) December 31, 2011 (such later date,
the “Interim Release Date”), the Seller and the Buyer shall direct the Escrow Agent to
deliver to the Seller the remaining Escrow Amount, minus, to the extent available, the sum of (x)
$2,500,000 less any amount previously paid out to any Buyer Indemnitee pursuant to Section
9.03(i), and (y) any amount subject to any unresolved claims made by any Buyer Indemnitee
pursuant to Section 9.03(i) or (ii); provided, however, if (X) the
Buyer has not made a claim against the Seller or the Company pursuant to Section 9.03(i) on
or prior to the Interim Release Date, on the Interim Release Date, the Seller and the Buyer shall
direct the Escrow Agent to deliver to the Seller the remaining Escrow Amount, minus, to the extent
available, any amount subject to any unresolved claims made by any Buyer Indemnitee pursuant to
Section 9.03(ii) or (Y) if, as of the Interim Release Date, the sum of (I) the amounts
previously paid out to any Buyer Indemnitee pursuant to Section 9.03(i) as of the Interim
Release Date and (II) any amounts subject to any unresolved claims made by any Buyer Indemnitee
pursuant to Section 9.03(i) or (ii) is less than$1.25 million, on the
Interim Release Date, the Seller shall direct the Escrow Agent to deliver to the Seller a portion
of the Escrow Amount equal to (aa) the balance of the remaining Escrow Amount less (bb) the sum of
(I) and (II). In the event that the Buyer made a claim against the Seller or the Company pursuant
to Section 9.03(i) on or prior to the Interim Release Date, promptly following the later to
occur of (i) three Business Days following the final determination of the Post Closing Statement,
and (ii) the third anniversary of the Closing Date, the Seller and the Buyer shall direct the
Escrow Agent to deliver to the Seller the remaining Escrow Amount, minus, to the extent available,
any amount subject to any unresolved claims made by any Buyer Indemnitee pursuant to Section
9.03(i) or (ii) hereof.

               (b) The Seller and the Buyer shall cause the Escrow Agent to:

                    (i) from time to time from and after the Closing until the Covenant Limitation Date, deliver
to the Buyer Indemnitee from the Escrow Account the amount, if any, to which such Buyer Indemnitee
shall be entitled for indemnification pursuant to Section 9.03(ii), but only to the extent
such amount is Finally Determined.

                    (ii) from time to time from and after the Closing until the Representation Limitation Date,
deliver to the Buyer Indemnitee from the Escrow Account the amount, if any, to which such Buyer
Indemnitee shall be entitled for indemnification pursuant to Section 9.03(i), but only to
the extent such amount is Finally Determined.

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                    (iii) For purposes of this Section 1.05, “Finally Determined” shall mean (i)
consented to in writing by the Seller and the Buyer, (ii) finally determined pursuant to a final,
non-appealable judgment of a court of competent jurisdiction or (iii) is no longer subject to
challenge under applicable Law.

               (c) When and to the extent that any Buyer Indemnitee’s claim for indemnification pursuant to
Section 9.03(i) that is pending as of the Representation Limitation Date, or Section
9.03(ii) that is pending as of the Covenant Limitation Date, in either case, is Finally
Determined, the Seller and the Buyer shall cause the Escrow Agent to, within two Business Days of
such determination deliver (a) to the Buyer Indemnitee from the Escrow Account the amount of such
claim Finally Determined in the Buyer Indemnitee’s favor, and (b) to the Seller from the Escrow
Account, the amount Finally Determined in the favor of the Seller.

               (d) The Buyer acknowledges that (i) its sole and exclusive remedy to receive payments owed to
it under Section 1.03(e) shall in no event exceed the aggregate amount of, and shall be
recoverable solely from, the Escrow Amount, and (ii) the sole and exclusive remedy for effecting
the payment and discharge of any amounts to which the Buyer Indemnitees shall be entitled to
indemnification pursuant to Section 9.03(i) and/or Section 9.03(ii) hereof shall in
no event exceed the aggregate amount of, and shall be recoverable solely from, the Escrow Amount.
In the event that the Escrow Amount is insufficient to pay the Buyer any amounts owed to the Buyer
pursuant to Section 1.03(e) or any Buyer Indemnitee pursuant to Section 9.03(i)
and/or Section 9.03(ii), as the case may be, the Buyer and the Buyer Indemnitees shall not
be entitled to collect any remaining amounts not satisfied from the Escrow Amount and neither the
Seller, the Company or any of its Subsidiaries, nor any other Person shall have any liability for
any such deficiency.

               (e) The Parties acknowledge that no Party shall be obligated to make any payment to other
Party after the Closing pursuant to Section 1.03(e) of this Agreement in excess of an
amount equal to $15,000,000.

ARTICLE II

CONDITIONS TO CLOSING

          Section 2.01. Conditions to the Obligations of the Buyer and the Seller. The
obligations of each of the Buyer and the Seller to consummate the transactions contemplated by this
Agreement are subject to the satisfaction or waiver of the following conditions at or prior to the
Closing:

               (a) the applicable waiting periods, if any, under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976 (as may be amended from time to time, the “HSR Act”), shall have expired or
been terminated, and all other filings, consents, authorizations and approvals of any Governmental
Entity that are set forth on Section 2.01(a) of the Company Disclosure Schedules shall have
been duly made and obtained; and

               (b) no injunction, judgment, decree or Order (whether temporary, preliminary or permanent) by
any court of competent jurisdiction shall have been issued, and

8

 

there shall be no Proceeding brought (and still pending) by any Governmental Entity seeking to, and there shall not be any
action taken, or Law enacted, entered or enforced, which would, in each case, prevent the
performance of this Agreement or the consummation of any of the transactions contemplated hereby,
declare unlawful the transactions contemplated by this Agreement or cause such transactions to be
rescinded.

          Section 2.02. Conditions to the Buyer’s Obligations. The obligation of the Buyer to
consummate the transactions contemplated by this Agreement is subject to the satisfaction or waiver
of the following conditions at or prior to the Closing:

               (a) (i) the representations and warranties contained in Sections 3.02,
3.03, 3.05, 4.04, 4.05 and clause (i) of Section 4.07 shall
be true and correct in all respects as of the Closing Date as though then made and as though the
Closing Date were substituted for the date of this Agreement throughout such representations and
warranties, (ii) the representations and warranties contained in Sections 3.01,
3.06, 4.01 and 4.13 shall be true and correct in all respects as of the Closing
Date as though then made and as though the Closing Date were substituted for the date of this
Agreement throughout such representations and warranties except to the extent such representations
and warranties expressly relate to an earlier date (in which case such representations and
warranties shall be true and correct as of such date); provided, however, that if
the representations and warranties contained in Sections 3.01,3.06, 4.01
and 4.13 are not true and correct in all respects as of the Closing Date as a result of a
breach that could not reasonably be expected to result in Losses to the Buyer or the Company of
more than $3,000,000, the Seller may cure such breach by using its good faith efforts to cure such
breach to the satisfaction of the Buyer prior to Closing, which may include by depositing into
escrow on terms satisfactory to the Buyer an amount in cash for the benefit of the Buyer reasonably
required by Buyer to recover any Losses arising from such breach (including fees and costs
associated with pursuing such actions as the Buyer reasonably deems necessary to cure such breach);
provided, further, however, that any costs or expenses required to cure
such breach that are not fully paid in cash prior to the Closing or fully reflected in the Final
Net Working Capital shall reduce the purchase price on a dollar-for-dollar basis, and (iii) each of
the other representations and warranties set forth in Articles III and IV hereof
shall be true and correct (without giving effect to any limitation as to “materiality” or any
derivative thereof or “Company Material Adverse Effect” set forth therein) as of the
Closing Date as though then made and as though the Closing Date were substituted for the date of
this Agreement throughout such representations and warranties except to the extent such
representations and warranties expressly relate to an earlier date (in which case such
representations and warranties shall be true and correct as of such date), except, in the case of
clause (iii), where the failure or failures of such representations or warranties of the Seller and
the Company set forth in Articles III and IV hereof to be so true and correct,
individually or in the aggregate, has not had, and would not reasonably be expected to have, a
Company Material Adverse Effect, and, in the case of clauses (i) through (iii) after giving effect
to the applicable disclosures set forth in the Seller Disclosure Schedules and the Company
Disclosure Schedules delivered to the Buyer;

               (b) each of the agreements and covenants of the Company and the Seller required to be
performed and complied with by the Company and the Seller pursuant to this Agreement at or prior to
Closing will have been duly performed and complied with in all material respects;

9

 

               (c) the Company or the Seller, as the case may be, shall have delivered to the Buyer each of
the following:

                    (i) a certificate of a duly authorized officer of the Company given on behalf of the Company,
dated as of the Closing Date, stating that the conditions specified conditions in Sections 2.02(a) and (b) hereof as they relate to the Company
and its Subsidiaries have been satisfied;

                    (ii) a certificate of a duly authorized officer of the Seller given on behalf of the Seller,
dated as of the Closing Date, stating that the conditions in Sections 2.02(a) and (b)
hereof as they relate to the Seller have been satisfied;

                    (iii) (A) certified copies of the certificate of incorporation and bylaws of the Company and
the resolutions of the Company’s board of directors approving this Agreement, the Ancillary
Agreements and the transactions contemplated hereby and thereby and (B) a certified copy of the
certificate of formation and limited liability company operating agreement of the Seller and the
resolutions of the Seller’s board of directors (or other governing body) approving this Agreement,
the Ancillary Agreements and the transactions contemplated hereby and thereby;

                    (iv) (A) pay-off letters or similar documents evidencing the discharge or payment in full of
the Closing Date Indebtedness with respect to the Credit Facility, in each case in form and
substance reasonably satisfactory to the Buyer (the “Payoff Letters”) and (B) termination
statements on Form UCC-3, or other appropriate releases, which when filed will release and satisfy
any and all Liens relating to the Closing Date Indebtedness with respect to the Credit Facility,
together with proper authority to file such termination statements or other releases at and
following the Closing, in each case in form and substance reasonably acceptable to the Buyer;

                    (v) documents evidencing the release of all mortgages, deeds of trust and similar security
instruments in recordable form with respect to any recorded Liens in connection with the Credit
Facility (other than Permitted Liens) on any Real Property, together with proper authority to file
such releases at and following the Closing, in each case in form and substance reasonably
acceptable to the Buyer and any nationally recognized title insurance company;

                    (vi) stock certificates representing the Shares, duly endorsed in blank for transfer to, or
accompanied by duly executed stock transfer powers executed in favor of, the Buyer or its nominee
as the Buyer may have designated in writing to the Seller at least two Business Days prior to the
Closing Date;

                    (vii) written resignations effective as of the Closing Date from all directors and officers of
the Company and each of its Subsidiaries (other than those individuals listed on Section
2.02(c)(vii) of the Company Disclosure Schedules); and

                    (viii) the Escrow Agreement, duly executed by the Seller and the Escrow Agent.

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               (d) from the date of this Agreement to the Closing Date, no Company Material Adverse Effect
shall have occurred;

               (e) the Management Agreement shall have been terminated and, after giving effect to such
termination, no management fees shall be payable, from and after the Closing, by the Company or any
Subsidiary thereof, to any stockholder or Affiliate thereof; and

               (f) the Buyer’s Insurance Policy shall be in full force and effect in the form attached to the
Binder Agreement as of the date hereof.

Notwithstanding anything to the contrary contained in this Agreement, the termination of the Swap
Agreements shall not be a condition to the Buyer’s obligations and the Buyer and the Company may,
after the Closing Date, choose to retain or terminate the Swap Agreements in their sole discretion
and at their sole expense.

          Section 2.03. Conditions to the Seller’s Obligations. The obligations of the Seller
to consummate the transactions contemplated by this Agreement are subject to the satisfaction of
the following conditions as of the Closing:

               (a) (i) the representations and warranties contained in 5.02 shall be true and correct
as of the Closing Date as though then made and as though the Closing Date were substituted for the
date of this Agreement throughout such representations and warranties, except to the extent such
representations and warranties expressly relate to an earlier date (in which case such
representations and warranties shall be true and correct as of such date), and (ii) each of the
other representations and warranties set forth in Article V hereof shall be true and
correct (without giving effect to any limitation as to “materiality” or any derivative thereof set
forth therein) as of the Closing Date as though then made and as though the Closing Date were
substituted for the date of this Agreement throughout such representations and warranties, except
to the extent such representations and warranties expressly relate to an earlier date (in which
case such representations and warranties shall be true and correct as of such date) except, in the
case of clause (ii), where the failure or failures of such representations or warranties of the
Buyer set forth in Article V hereof to be so true and correct, individually or in the
aggregate, has not had, and would not reasonably be expected to have, a material adverse effect on
the ability of the Buyer to consummate the transactions contemplated by this Agreement, and, in the
case of clauses (i) and (ii), after giving effect to the applicable disclosures set forth in the
Buyer Disclosure Schedules delivered to the Seller;

               (b) each of the agreements and covenants of the Buyer required to be performed and complied
with by the Buyer pursuant to this Agreement at or prior to Closing will have been duly performed
and complied with in all material respects; and

               (c) the Buyer shall have delivered to the Seller each of the following:

                    (i) a certificate of a duly authorized officer of the Buyer given on behalf of the Buyer,
dated as of the Closing Date, stating that the conditions specified in Sections 2.03(a) and
(b) hereof have been satisfied;

11

 

                    (ii) to the Seller, by wire transfer of immediately available funds to accounts designated in
writing by the Seller at least two Business Days prior to the Closing, the Estimated Purchase
Price; and

                    (iii) the Purchase Price Adjustment Escrow Agreement, duly executed by the Buyer and the
Escrow Agent.

               (d) to the Escrow Agent, by wire transfer of immediately available funds to accounts
designated in writing by the Escrow Agent at least two Business Days prior to the Closing, the
Purchase Price Adjustment Escrow Amount.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE SELLER

          Except as set forth in the Seller Disclosure Schedules, the Seller hereby represents and
warrants as follows (it being understood that the Seller’s representations and warranties set forth
in this Article III shall not include, and the Seller shall not make any representations or
warranties with respect to, the assets, liabilities, operations or business of West Barrows Mix Pty
Ltd. and its Subsidiaries (collectively, “Westmix”) irrespective of whether the pending
acquisition of Westmix occurs prior to the Closing Date):

          Section 3.01. Due Organization and Good Standing. The Seller is a limited liability
company duly formed, validly existing and in good standing under the Laws of the State of Delaware.

          Section 3.02. Execution, Delivery; Valid and Binding Agreements. This Agreement and
the Ancillary Agreements have been duly executed and delivered by the Seller, and assuming that
this Agreement and the Ancillary Agreements have been duly executed and delivered by the other
parties hereto and thereto, constitute, or, when executed by the other parties hereto and thereto,
will constitute, valid and binding agreements of the Seller, enforceable against the Seller in
accordance with their terms, except to the extent that the enforceability thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other Laws
from time to time in effect relating to creditors’ rights and remedies generally and general
principles of equity).

          Section 3.03. Authority. The Seller has all requisite limited liability company power
and authority to execute and deliver this Agreement and the Ancillary Agreements and to perform its
obligations hereunder and thereunder (including, without limitation, all right, power, capacity and
authority to sell, transfer, convey and surrender the Shares as provided by this Agreement, subject
to restrictions under applicable federal and state securities Laws), and the execution, delivery
and performance by the Seller of this Agreement and the Ancillary Agreements have been duly
authorized by all necessary limited liability company action on the part of the Seller and no other
company proceedings are necessary to authorize the execution, delivery and performance by the
Seller of this Agreement and the Ancillary Agreements.

          Section 3.04. Non-Contravention; No Consents or Approvals. Except as set forth in
Section 3.04 of the Seller Disclosure Schedules, the execution, delivery and performance

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of this Agreement and the Ancillary Agreements by the Seller, the consummation of the transactions
contemplated hereby and thereby and the performance by the Seller of its obligations hereunder and
thereunder does not and will not (i) (with or without due notice or lapse of time or both) require a consent, approval or notification under, conflict with or
result in any breach of or acceleration of rights under, constitute a default under, result in a
violation of or result in the creation of any Lien upon any material properties or assets of the
Seller under (A) the provisions of the certificate of formation or limited liability operating
company agreement of the Seller or (B) any of the terms, conditions or provisions of any Contract
or Permit to which the Seller is a party or by which the Seller or any of its properties or assets
is bound, (ii) require the authorization, consent, approval, qualification or waiver of, filings
with or notice or other action to, with or by any Governmental Entity or any Person or (iii)
violate any Order or Law applicable to the Seller or any of its properties or assets, except in the
case of clauses (i)(B) and (ii) of this Section 3.04, that would not, individually or in
the aggregate, have a material adverse effect on the ability of the Seller to consummate the
transactions contemplated by this Agreement and the Ancillary Agreements.

          Section 3.05. Title and Ownership. The Seller is the record owner of the Shares and
has good, valid and marketable title to all of the issued and outstanding Shares, free and clear of
all Liens. The Seller is not a party to any option, warrant, purchase right or other contract or
commitment that could require the Seller to sell, transfer, or otherwise dispose of any capital
stock of the Company (other than this Agreement). The Seller is not a party to any voting trust,
proxy, or other agreement or understanding with respect to the voting of any capital stock of the
Company. Upon payment for the Shares by the Buyer pursuant to the terms of this Agreement, the
Seller shall transfer to the Buyer good, valid and marketable title to the Shares, free and clear
of all Liens and transfer restrictions (other than Liens imposed by the Buyer or any of its
Affiliates and restrictions under applicable federal and state securities Laws).

          Section 3.06. No Brokers’ Fees. There are no claims for brokerage commissions,
finders’ fees or other similar compensation in connection with the transactions contemplated by
this Agreement based on any arrangement or agreement made by or on behalf of the Seller, except for
the fees and expenses of Credit Suisse Securities (USA) LLC and UBS Securities LLC, which shall be
paid by the Seller at Closing and included within the Company Closing Costs.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

          Except as set forth in the Company Disclosure Schedules and except as disclosed in Ames’
Annual Report on Form 10-K for the fiscal year ended October 3, 2009, as filed on December 15,
2009, or Ames’ Current Reports on Form 8-K and Quarterly Reports on Form 10- Q filed with the SEC
after such 10-K filing was made but prior to the date hereof (but excluding any risk factor
disclosures contained under the heading “Risk Factors,” any disclosure of risks included in any
“forward-looking statements” disclaimer or any other statements that are similarly non-specific or
predictive or forward-looking in nature) to the extent that it is reasonably apparent on the face
of the disclosed information that such disclosure is an exception to one or more of the following
representations and warranties contained in this Article IV, the

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Company hereby represents and warrants to the Buyer as follows (it being understood that the Company’s representations and
warranties set forth in this Article IV shall not include, and the Company shall not make
any representations or warranties with respect to, the assets, liabilities, operations or business of Westmix irrespective of whether the pending acquisition of Westmix
occurs prior to the Closing Date, except for the representation in Section 4.03 which shall
be deemed made with respect to Westmix solely to the Knowledge of the Company; provided
that solely for purposes of such representation, the definition of “Knowledge of the Company” shall
include Paul Jones:

          Section 4.01. Organization and Power. The Company is a corporation duly incorporated,
validly existing and in good standing under the Laws of the State of Delaware, and the Company has
all requisite corporate power and authority necessary to own, lease, license and operate its
properties and assets and to carry on its businesses as now conducted. The Company is qualified to
do business and is in good standing in each jurisdiction in which the failure to be so qualified
would have a Company Material Adverse Effect.

          Section 4.02. Subsidiaries. Except as set forth in Section 4.02(a) of the
Company Disclosure Schedules, neither the Company nor any of its Subsidiaries owns or holds the
right to acquire any stock, equity interest, partnership interest or joint venture interest or
other equity ownership interest in any other corporation, organization or entity. Section
4.02(b) of the Company Disclosure Schedules sets forth the name of each Subsidiary of the
Company, together with a list of each partnership, joint venture or other business entity in which
the Company holds a direct or indirect interest, indicating the jurisdiction of its incorporation
or organization and the Persons owning the outstanding capital stock of such Subsidiary or such
partnership, joint venture or other business entity. Each Subsidiary is duly organized, validly
existing and (to the extent applicable) in good standing under the Laws of the jurisdiction of its
incorporation or formation, and each Subsidiary has all requisite corporate or other power and
authority necessary to own, lease, license and operate its properties and assets and to carry on
its businesses as currently conducted. Each Subsidiary of the Company is qualified to do business
and is in good standing in each jurisdiction in which the failure to be so qualified would have a
Company Material Adverse Effect. There is no provision of the Company’s or any of its
Subsidiaries’ governing or organizational documents that would restrict the ability to encumber any
of the assets or equity interests of the Company or any of its Subsidiaries. The Company has made
available to the Buyer true, correct and complete copies of the governing or organizational
documents of the Company and its Subsidiaries, in each case as amended through the date hereof.

          Section 4.03. Non-Contravention; No Consents or Approvals. Except as set forth in
Section 4.03 of the Company Disclosure Schedules, the execution and delivery of this
Agreement and the Ancillary Agreements by the Company, the consummation of the transactions
contemplated hereby and thereby and the performance by the Company of its obligations hereunder and
thereunder does not and will not (i) (with or without due notice or lapse of time or both) require
a consent, approval or notification under, conflict with or result in any breach of or acceleration
of rights under, constitute a default under, result in a violation of or result in the creation of
any Lien upon any properties or assets of the Company or any of its Subsidiaries under (A) the
provisions of the Company’s certificate of incorporation or bylaws or the governing or
organizational documents of any of the Company’s Subsidiaries, or (B) any of

14

 

the terms, conditions or provisions of any Contract or Permit to which the Company or any of its Subsidiaries is a party
or by which the Company or any of its Subsidiaries or any their respective properties or assets is
bound, (ii) require the authorization, consent, approval, qualification or
waiver of, filings with or notice or other action to, with or by any Governmental Entity or
any Person or (iii) violate any Order or Law applicable to the Company or any of its Subsidiaries
or any of their respective properties or assets, except in the case of clause (i)(B) and (ii) of
this Section 4.03, that would not, individually or in the aggregate, have or reasonably be
expected to have an adverse effect that is material on the Company and its Subsidiaries, taken as a
whole, or have a material adverse effect on the ability of the Company to consummate the
transactions contemplated hereby in a timely manner.

          Section 4.04. Execution; Delivery; Valid and Binding Agreements; Authority. This
Agreement and the Ancillary Agreements have been duly executed and delivered by the Company, and
assuming that this Agreement and the Ancillary Agreements have been duly executed and delivered by
the other parties hereto and thereto, constitute, or, when executed by the other parties hereto and
thereto, will constitute, the valid and binding agreements of the Company, enforceable against the
Company in accordance with their terms, except to the extent that the enforceability thereof may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or
other Laws from time to time in effect relating to creditors’ rights and remedies generally and
general principles of equity). The execution, delivery and performance by the Company of this
Agreement and the Ancillary Agreements have been duly authorized by all necessary corporate action
on the part of the Company and no other corporate proceedings are necessary to authorize the
execution, delivery and performance by the Company of this Agreement and the Ancillary Agreements.

          Section 4.05. Capitalization. The authorized capital stock of the Company consists of
1,000 shares of common stock, par value $0.01 per share. The Shares represent all of the issued
and outstanding equity interests in the Company and the Seller is the record owner of all of the
Shares. All issued and outstanding shares of capital stock of each of the Company’s Subsidiaries
are owned of record and beneficially by the Company or one of its Subsidiaries, in each case free
and clear of all Liens, except as set forth in Section 4.05(a) of the Company Disclosure
Schedules. All of the Shares, and the outstanding shares of capital stock of each of the
Subsidiaries of the Company, have been duly authorized and are validly issued, fully paid and
nonassessable, and have not been issued in violation of any preemptive right, rights of first
refusal or similar rights. All of the Shares, and the outstanding shares of capital stock of each
of the Subsidiaries of the Company were issued in compliance with all applicable Laws, including
securities Laws. Except as set forth in Section 4.05(b) of the Company Disclosure
Schedules, neither the Company nor any of its Subsidiaries has issued or outstanding any other
shares of capital stock, equity securities or securities containing any equity features, and there
are no subscriptions, options, warrants, calls, commitments, phantom shares, phantom equity
interests or other rights, agreements, undertakings or arrangements existing or outstanding
obligating the Seller or the Company to issue, deliver or sell, or cause to be issued, delivered or
sold, Shares or other equity interests in the Company or any of its Subsidiaries. Except as set
forth in Section 4.05(c) of the Company’s Disclosure Schedules, there are no agreements or
other obligations (contingent or otherwise) which require the Company or any of its Subsidiaries to
repurchase or otherwise acquire any shares of the Company’s capital stock or other equity
securities. Neither the Company nor any of its Subsidiaries is a party to any voting trust, proxy,

15

 

or other agreement or understanding with respect to the voting of any capital stock of any of the
Company’s Subsidiaries.

          Section 4.06. Financial Statements. (a) The Company has furnished the Buyer with
copies of: (i) the audited consolidated balance sheet as of October 3, 2009 (the “Balance
Sheet Date”) of Holdco and its Subsidiaries (the “Latest Audited Balance Sheet”), and
the related audited statements of operations and cash flow for the fiscal year ended October 3,
2009 (such statements, together with the Latest Audited Balance Sheet, the “Audited Financial
Statements”), and (ii) the unaudited consolidated balance sheet as of April 3, 2010 of Holdco
and its Subsidiaries (the “Latest Unaudited Balance Sheet”) and the related statements of
operations and cash flow for the six months ended April 3, 2010 (such statements, together with the
Latest Unaudited Balance Sheet, the “Unaudited Financial Statements”). Except as set forth
in Section 4.06 of the Company Disclosure Schedules, the Audited Financial Statements and
the Unaudited Financial Statements (collectively, the “Financial Statements”) have been
prepared from and are in accordance with the books of account and other financial records of Holdco
and its Subsidiaries, have been prepared in accordance with GAAP applied on a consistent basis and
fairly present in all material respects the consolidated financial condition and the consolidated
results of operations and cash flow of Holdco and its Subsidiaries as of the dates and for the
periods referred to therein, subject, in the case of Unaudited Financial Statements, to normal,
year-end adjustments (none of which are material individually or in the aggregate) and the lack of
footnotes.

               (b) Since December 31, 2007 (the “Applicable Date”), Ames has timely filed or
otherwise furnished (as applicable) all forms, statements, certifications, reports and documents
with the SEC required to be filed or furnished by Ames under the Securities Act or the Exchange Act
(such forms, statements, certifications, reports and documents as amended, supplemented, modified
since the date of being furnished or filed, the “SEC Documents”). As of their respective
dates or, if amended, as of the date of the last amendment, the SEC Documents complied in all
material respects with the requirements of the Securities Act, the Exchange Act and the
Sarbanes-Oxley Act of 2002 and any of the rules and regulations promulgated thereunder applicable
to the SEC Documents. As of their respective dates (or, if amended prior to the date of this
Agreement, as of the date of such amendment), the SEC Documents did not, and any SEC Document filed
with or furnished to the SEC subsequent to the date of this Agreement will not, contain any untrue
statement of a material fact or omit to state a material fact required to be stated therein or
necessary to make the statements made therein, in light of the circumstances in which they were
made, not misleading. The Company has made available to the Buyer correct and complete copies of
all material written correspondence between the SEC, on the one hand, and Ames and any of Ames’
Subsidiaries, on the other hand, occurring since the Applicable Date. As of the date of this
Agreement, there are no outstanding or unresolved comments in comment letters from the SEC staff
with respect to any of the SEC Documents. As of the date of this Agreement, to the Knowledge of
the Company, none of the SEC Documents is the subject of ongoing SEC review, outstanding SEC
comment or outstanding SEC investigation.

               (c) Ames and its Subsidiaries have established and maintain internal controls and procedures
and disclosure controls and procedures required by Rule 13a-15 and/or 15d-15 under the Exchange
Act. Such controls and procedures are designed to provide

16

 

reasonable assurance and are effective in providing reasonable assurance (i) regarding the reliability of Ames’ financial reporting and
the preparation of Ames’ financial statements for external purposes in accordance with GAAP and
(ii) that Ames’ principal executive officer and its principal financial officer are alerted on a timely basis to material information relating
to Ames required to be included in Ames’ periodic reports required under the Exchange Act. Ames
has disclosed, based on its most recent evaluation prior to the date of this Agreement, to Ames’
auditors and the audit committee of the Seller’s Board of Directors (x) all significant
deficiencies and material weaknesses in the design or operation of its internal controls over
financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that are reasonably
likely to adversely affect Ames’ ability to record, process, summarize and report financial
information and (y) any fraud, whether or not material, that involves management or other employees
who have a significant role in Ames’ internal control over financial reporting.

          Section 4.07. Absence of Certain Developments. Since the Balance Sheet Date, the
Company and its Subsidiaries (i) have not suffered any event, change, occurrence, facts or
circumstances that has resulted in a Company Material Adverse Effect and (ii) have conducted their
business in all material respects in the ordinary course of such business consistent with past
practice, except in connection with this Agreement and the transactions contemplated herein. In
addition, without limiting the generality of the forgoing, except as set forth in Section
4.07 of the Company Disclosure Schedules and except as expressly contemplated by this
Agreement, since the Balance Sheet Date, neither the Company nor any of its Subsidiaries has:

               (a) amended or authorized the amendment of its certificate or articles of incorporation,
bylaws or similar organizational or constituent documents;

               (b) borrowed any amount or incurred Indebtedness except for the incurrence of Indebtedness
under its existing revolving credit facility to meet ordinary working capital requirements;

               (c) mortgaged, pledged or subjected any portion of its properties or assets to any material
Liens, except Liens for current property taxes not yet due and payable and for which adequate
reserves have been established in the Financial Statements to the extent required by GAAP;

               (d) sold, leased, assigned, licensed or transferred any of its tangible properties, assets or
any portion thereof, except sales of inventory in the ordinary course of business consistent with
past practice;

               (e) sold, assigned, licensed or transferred any material Company Intellectual Property or
other intangible assets;

               (f) issued, sold or transferred any of its equity interests or other equity securities,
securities convertible into its equity interests or other equity securities or warrants, options or
other rights to acquire its equity interests or other equity securities, or any bonds or debt
securities;

17

 

               (g) declared or paid any dividends or made any distributions on the Company’s equity interests
or other equity securities or redeemed or purchased any of the Company’s equity interests or other
equity securities;

               (h) made any capital expenditures or commitments exceeding $225,000 per expenditure or
commitment or $500,000 in the aggregate for all capital expenditures or commitments, or failed to
make any capital expenditure in the ordinary course of business consistent with past practice or
otherwise consistent with the most recent budget and forecasts provided to Buyer prior to the date
hereof;

               (i) changed any of its accounting methods, principles or practices, except as required by
GAAP, or changed any of the assumptions underlying, or methods of calculating, any bad debt,
contingency or other reserve;

               (j) made any change in its trade payables and trade receivables and other credit collection
and payment policies, including (i) acceleration of collections or receivables (including through
the use of discounts for early payment, request for early payment or otherwise) and (ii) failure to
pay payables when due or delay in payment of payables compared to past practices;

               (k) suffered any material damage, destruction or other casualty loss with respect to any
properties or assets leased or owned by the Company or any of its Subsidiaries (whether or not
covered by insurance);

               (l) waived any rights of material value or entered into any material transaction, except in
the ordinary course of business consistent with past practice;

               (m) amended or modified any employment contract, arrangement or severance entitlement to
increase the compensation, severance or other benefits of any Employee whose annual base
compensation is in excess of $100,000 other than as may be required under a pre-existing Contract
or as may be required by applicable Law;

               (n) entered into any employment agreement whose annual base compensation is in excess of
$100,000, stay bonus, change in control payment or other retention agreement or any collective
bargaining agreement;

               (o) increased the compensation, including without limitation any severance benefits, of any
present or former director, officer or Employee, except as may be required by any Contract as in
effect on the date thereof (except, in the case of Employees who are neither directors nor officers
of the Company or any of its Subsidiaries, in the ordinary course of business consistent with past
practice);

               (p) established, entered into, adopted or amended any material Employee Benefit Plan, except
as may be required by any then existing Employee Benefit Plan or Contract; and

               (q) committed or agreed to do any of the foregoing.

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          Section 4.08. Title to Properties.

               (a) The real property demised by the leases (the “Leases”) described in Section
4.08(a) of the Company Disclosure Schedules constitutes all of the real property leased,
licensed or subleased (whether as tenant or subtenant) by the Company and its Subsidiaries
(the “Leased Real Property”).

               (b) The Leases are in full force and effect, and, assuming good title in the landlord under
the Leases, the Company or one of its Subsidiaries, as applicable, holds a valid and existing
leasehold interest under each of the Leases for the term set forth in Section 4.08(a) of
the Company Disclosure Schedules, free and clear of all Liens, except Permitted Liens and the
subleases (the “Subleases”) described in Section 4.08(a) of the Company Disclosure
Schedules, executed by the Company or one of its Subsidiaries, as sublandlord, with respect to the
Leased Real Property. The Company has made available to the Buyer a complete and accurate copy of
each of the Leases and Subleases, and all amendments, modifications and supplemental agreements
thereto, each as set forth on Section 4.08(a) of the Company Disclosure Schedules, and none
of the Leases or Subleases has been modified in any material respect except to the extent that such
modifications are disclosed by the copies made available to the Buyer prior to the date hereof.
Neither the Company nor any of its Subsidiaries is in default in any material respect under any of
such Leases or Subleases, nor has there occurred with respect to the Company or its Subsidiaries
or, to the Knowledge of the Company, any other party to the Leases or Subleases any event which
with the passage of time or the giving of notice or both (x) would constitute a breach or default,
except for breaches or defaults that are not material, or (y) increase in any material respect of
any obligations, liabilities or restrictions of the Company or its Subsidiaries under the Leases.
Neither the Company nor any of its Subsidiaries is obligated to pay any leasing or brokerage
commission relating to any of the Leases or Subleases that has not already been paid and has no
obligation to pay any leasing or brokerage commission upon the renewal of any of the Leases or
Subleases. No construction, alteration or other leasehold improvement work remains to be paid for
or to be performed by the Company or its Subsidiaries under any Leases or Subleases. Neither the
Company nor any of its Subsidiaries has any outstanding obligations to provide deposits, letters of
credit or other credit enhancements to retain its rights under the Leases or otherwise operate its
business at the Leased Real Property.

               (c) Section 4.08(c) of the Company Disclosure Schedules contains a true and complete
list of all real property owned by the Company or any of its Subsidiaries (the “Owned Real
Property” and, together with the Leased Real Property, the “Real Property”).

               (d) The Company or its Subsidiaries, as applicable, has good and marketable fee simple title
to all Owned Real Property free and clear of all Liens, except Permitted Liens. Except as
disclosed in Section 4.08(d) of the Company Disclosure Schedules, there are no outstanding
options, repurchase rights or rights of first refusal to purchase or lease any Owned Real Property,
or any portion thereof or interest therein to which the Company or its Subsidiaries is a party.

               (e) The Company or its Subsidiaries presently enjoy peaceful and undisturbed possession of its
Real Property sufficient for current use and operations, subject to the Permitted Liens and any
Subleases. Neither the Company, any of its Subsidiaries or the

19

 

Seller, nor, to the Knowledge of the Company, any landlord of Leased Real Property has received written notice of any material
eminent domain, condemnation or other similar proceedings pending or threatened against the Company
(or any Subsidiary of the Company) or with respect to, or otherwise affecting any portion of, the
Real Property. Except as set forth in Section 4.08(e) of the Company Disclosure Schedules, neither the Company nor any of
its Subsidiaries is in violation of any covenant, condition, restriction, easement or order of any
governmental authority having jurisdiction over the Real Property or the use or occupancy thereof,
except for such violations as would not materially interfere with the continued use and operations
of the Real Property to which they relate or materially adversely affect the value of any Owned
Real Property for its current use. Except as set forth in Section 4.08(e) of the Company
Disclosure Schedules, the Real Property is in compliance in all material respects with all
applicable building, zoning, subdivision, health and safety and other land use and similar
applicable laws, rules and regulations, permits, licenses and certificates of occupancy affecting
the Real Property, and neither the Company, any of its Subsidiaries or the Seller nor, to Knowledge
of the Company, any landlord of Leased Real Property has received any notice of any violation or
claimed violation by the Company or any of its Subsidiaries of any such laws, rules and regulations
with respect to the Real Property which have not been resolved or for which any obligation of the
Company remains to be fulfilled, including but not limited to payments of monetary damages, fines
or penalties, or completion of any remedial or corrective measures. Except as set forth on
Section 4.08(e) of the Company Disclosure Schedules, (i) the Real Property is adequately
served by utilities, parking and other building services necessary for its current use and for
compliance with all applicable laws, rules, regulations, permits, licenses and certificates of
occupancy and (ii) the buildings and other improvements at each Real Property are structurally
sound and the systems located therein are in good working order and condition. Neither the Company
nor any of its Subsidiaries operate their business at any location other than those listed as
Leased Real Properties and Owned Real Properties in Section 4.08(c) of the Company
Disclosure Schedules.

          Section 4.09. Tax Matters. Except as set forth in Section 4.09 of the Company
Disclosure Schedules:

               (a) The Company and each of its Subsidiaries have filed, or has caused to be filed on its
behalf, all Tax Returns which are required to be filed by it, and all such Tax Returns are true,
complete and correct in all respects.

               (b) The Company and each of its Subsidiaries have timely paid or properly accrued as of the
date hereof all Taxes due and owning by it (whether or not actually shown on its Tax Returns). The
Company and each of its Subsidiaries have, within the time and in the manner prescribed by
applicable Law, withheld and fully paid over to the appropriate taxing authority all Taxes which
they are required to withhold from amounts paid or owing to any employee, independent contractor,
creditor, stockholder or other third party. There are no Liens for Taxes (other than Permitted
Liens) upon any of the properties or assets of the Company or any of its Subsidiaries. Since the
Balance Sheet Date, the Company has not incurred any Liability for Taxes other than in the ordinary
course of business.

               (c) Neither the Company nor any of its Subsidiaries have waived any statute of limitations
with respect to any Taxes or agreed to any extension of time with respect to

20

 

any Tax assessment or deficiency, which waiver or extension is still outstanding. None of the Company nor any of its
Subsidiaries currently is the beneficiary of any extension of time within which to file any Tax
Return.

               (d) There are no pending or threatened audits or administrative or judicial Proceedings,
similar examinations or additional Tax assessments from any authority with respect to any Tax
Returns of the Company or any of its Subsidiaries. There are no current, pending or threatened tax
assessments proposed by any Governmental Entity that would affect the liability of the Company or
any of its Subsidiaries with respect to Taxes. Except for claims that have been settled, closed or
otherwise resolved or which are set forth on Section 4.09 of the Company Disclosure
Schedules, no claim has ever been made by any taxing authority in any jurisdiction where the
Company or any of its Subsidiaries does not file a particular Tax Return that the Company or any of
its Subsidiaries is or may be subject to taxation by that jurisdiction or is required to submit any
Tax Returns to such jurisdiction. Neither the Company nor any of its Subsidiaries has granted any
power of attorney with respect to any matters related to Taxes that is currently in force.

               (e) To the extent the acquisition of interests in the Seller by the Employees were governed by
Section 83 of the Code, such Employees each made valid elections described in Section 83(b) of the
Code with respect to such interests in the Seller.

               (f) None of the Company or any of its Subsidiaries is a party to any agreement, contract,
arrangement or plan that has resulted or could result, separately or in the aggregate, in the
payment of any “excess parachute payment” within the meaning of Section 280G of the Code (or any
comparable provision of state, local or foreign Tax law) (including any payment deemed to be made
in connection with the transactions contemplated by this Agreement).

               (g) Neither the Company nor any of its Subsidiaries will be required to include any item of
income in, or exclude any item of deduction from, taxable income for any taxable period (or portion
thereof) ending after the Closing Date as a result of any: (A) adjustment made on or prior to the
Closing Date pursuant to Section 481(a) of the Code (or any comparable provision of state, local or
foreign Tax Law), (B) change in method of accounting for a taxable period ending on or prior to the
Closing Date; (C) agreement with any taxing authority executed on or prior to the Closing Date; (D)
intercompany transaction or excess loss account described in U.S. Treasury Regulations under
Section 1502 of the Code (or any corresponding or comparable provision of state, local or foreign
income Tax Law) for taxable periods ending on or prior to the Closing Date; (E) installment sale or
open transaction disposition made on or prior to the Closing Date; or (F) prepaid amount received
on or prior to the Closing Date. Neither the Company nor any of its Subsidiaries has any election
in effect pursuant to Section 108(i) of the Code.

               (h) The Company and each of its United States Subsidiaries is a member of the same affiliated,
combined, consolidated unitary or other similar group, the parent of which was the Company, prior
to the Closing Date under any provision of U.S. federal, local, state or foreign Law.

21

 

               (i) Neither the Company nor any of its Subsidiaries (A) has been a member of an
affiliated, combined, consolidated, unitary or other similar group during the period commencing
with the Seller’s ownership of the Company and ending on the Closing Date under any provision of
U.S. federal, state, local or foreign Law (other than a group the common parent of which was the
Company) or (B) is a party to, is bound by or has any obligation under, any agreement relating to
allocating or sharing the payment of, or liability for, Taxes, or has liability for Taxes of
another Person (other than the Company or any of its Subsidiaries) under Section 1.1502-6 of the
U.S. Treasury Regulations (or comparable provisions of state, local or foreign law), as a
transferee or successor or by contract.

               (j) Neither the Company nor any of its Subsidiaries has any indemnity obligation for any Taxes
imposed under Section 4999 or 409A of the Code.

               (k) Neither the Company nor any of its Subsidiaries has distributed stock of another Person,
or has had its stock distributed by another Person, in a transaction that was purported or intended
to be governed in whole or in part by Code Section 355 or Code Section 361.

               (l) Section 4.09(l) of the Company Disclosure Schedules correctly sets forth (i) each
entity classification election that has been made pursuant to Section 301.7701-3 of the U.S.
Treasury Regulations with respect to the Company and each of its Subsidiaries, and (ii) with
respect to each such election, (A) the U.S. federal income Tax classification (under Section
301.7701-3 of the U.S. Treasury Regulations) pursuant thereto, (B) the effective date thereof, and
(C) whether such election was effective on the date of formation for the Company and each of its
Subsidiaries. No entity classification election pursuant to Section 301.7701-3 of the U.S.
Treasury Regulations has been made for the Company or any of its Subsidiaries within the last 60
months.

               (m) Section 4.09(m) of the Company Disclosure Schedules correctly sets forth a list of
all Subsidiaries of the Company that have been treated as a “controlled foreign corporation” (as
defined in Section 957 of the Code) for U.S. federal income Tax purposes during the period of time
that the Seller has owned the Company. Except as disclosed in Section 4.09(m) of the
Company Disclosure Schedules, during the period of time that the Seller has owned the Company, the
Company has never recognized any “subpart F income” (within the meaning of Section 952 of the Code)
with respect to any of the Subsidiaries listed in Section 4.09(m) of the Company Disclosure
Schedules and none of the Subsidiaries listed in Section 4.09(m) of the Company Disclosure
Schedules own directly or indirectly any “United States property” (within the meaning of Section
956 of the Code).

               (n) Neither the Company nor any of its Subsidiaries is or has been a party to any “reportable
transaction,” as defined in U.S. Treasury Regulation Section 1.6011-4(b).

               (o) Neither the Company nor any of its Subsidiaries is resident for Tax purposes or has a
branch, permanent establishment, agency of other taxable presence in any jurisdiction other than
its jurisdiction of organization.

22

 

               (p) The Seller (i) is classified as either a disregarded entity owned by a United States
partnership or as a United States partnership for U.S. federal income Tax purposes, (ii) is not a
“publicly traded partnership” within the meaning of Section 7704 of the Code, if applicable, and
(iii) has filed any applicable Tax Returns consistent with the representations in (i) and (ii)
above

               (q) The Swap Arrangements (i) are “hedging transactions” (as defined in Section 1221(b) of the
Code), (ii) were clearly identified as a “hedging transaction” (as defined in Section 1221(b) of
the Code) before the close of the day on which they were acquired, originated, or entered into and
(iii) were entered into by Ames in the ordinary course of Ames’ trade or business.

          Section 4.10. Contracts and Commitments .

               (a) As of the date hereof, except as set forth in Section 4.10 of the Company
Disclosure Schedules, neither the Company nor any of its Subsidiaries is party to, nor bound by,
any:

                    (i) Contract for the employment of any officer, individual employee or other person on a
full-time or consulting basis with annual payments in excess of $100,000;

                    (ii) Contract relating to Indebtedness of the Company or any of its Subsidiaries or to
mortgaging, pledging or otherwise placing a Lien on any material portion of the assets of the
Company or any of its Subsidiaries;

                    (iii) material guarantee of any obligation for Indebtedness or other material guarantee;

                    (iv) Contract under which it is lessee of, or holds or operates any personal property, owned
by any other party, for which the annual rental exceeds $250,000;

                    (v) Contract under which it is lessor of or permits any third party to hold or operate any
personal property, for which the annual rental exceeds $250,000;

                    (vi) Contract that involves the performance of services or delivery of goods or materials by
the Company or any of its Subsidiaries resulting in annual revenue to the Company and its
Subsidiaries in excess of $500,000;

                    (vii) Contract that involves the performance of services for, or delivery of goods or
materials to, the Company or any of its Subsidiaries resulting in annual expense to the Company and
its Subsidiaries in excess of $500,000;

                    (viii) Contract which prohibits the Company or any of its Subsidiaries from freely engaging in
any business in any geographical area or contains any exclusivity provisions or restrictions
binding on the Company and its Subsidiaries or that would be binding on the Buyer and its
Affiliates after the Closing;

23

 

                    (ix) joint venture, partnership or limited liability company agreement or other similar
Contract;

                    (x) Contract relating to interest rate, derivative or hedging transactions;

                    (xi) Contract between the Company or any Subsidiary thereof, on the one hand, and any officer,
director, employee, holder of Shares or other equity interests or Affiliate of the Company or any
of its Subsidiaries, on the other hand (but excluding any Contracts required to be disclosed
pursuant to clause (i) above or would be required to be disclosed if not for the dollar threshold
set forth therein);

                    (xii) IP Licenses requiring annual payment to or from the Company or any of its Subsidiaries
in excess of $50,000 (other than a shrink wrap or similar license for generally available Software
on reasonable terms for a license fee of no more than $25,000), or that otherwise are material to
the Company or any Subsidiary thereof (including with respect to any material product); and

                    (xiii) any other Contract or arrangement that is material to the Company and its Subsidiaries,
taken as a whole.

               (b) The Buyer either has been supplied with, or has been given access to, a true and correct
copy of all written Contracts (together with all material amendments, waivers or other
modifications thereto) required to be set forth in Section 4.10 of the Company Disclosure
Schedules (collectively, the “Material Contracts”).

               (c) Each Material Contract is in full force and effect and constitutes a legal, valid and
binding obligation of the Company or its Subsidiaries and, to the Knowledge of the Company, the
other parties thereto, and is enforceable against the Company or such Subsidiary in accordance with
its terms (except to the extent that the enforceability thereof may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other Laws from time
to time in effect relating to creditors’ rights and remedies generally and general principles of
equity). Neither the Company nor any of its Subsidiaries is in breach or default of any Material
Contract in any material respect, nor has the Company or any of its Subsidiaries received written
(or to the Company’s Knowledge, oral) notice of any such material breach or default, and, to the
Knowledge of the Company, no condition or event or fact exists which, with notice, lapse of time or
both, would constitute a material breach or default thereof on the part of the Company or such
Subsidiary or result in a termination thereof or permit other changes of any right or obligation or
loss of benefit thereunder. To the Knowledge of the Company, no other party to any Material
Contract is in breach or default in any material respect thereunder, nor does any condition exist
that, with notice or lapse of time, or both, would constitute a material breach or default by such
other party thereunder. Neither the Company nor any of its Subsidiaries has received any notice of
termination or cancellation under any Material Contract.

24

 

          Section 4.11. Intellectual Property .

               (a) Section 4.11(a) of the Company Disclosure Schedules sets forth a complete and
accurate list of all registrations and applications for registration of the Company Intellectual
Property and material unregistered trademarks owned by the Company or any of its Subsidiaries. The
Company and its Subsidiaries, as the case may be, exclusively own or possess the valid right to use
all Intellectual Property used in connection with the operation of the business of the Company and
its Subsidiaries as currently conducted free and clear of any Liens (other than Permitted Liens).

               (b) The Intellectual Property listed on Section 4.11(a) of the Company Disclosure
Schedules has been duly registered in, applied for, filed in, or issued by the United States Patent
and Trademark Office (“USPTO”), United States Copyright Office (“USCO”), a duly
accredited and appropriate domain name registrar, the appropriate offices in the various states of
the United States, or the appropriate offices of other jurisdictions (foreign and domestic), and
each such registration, filing and issuance remains valid, enforceable, and in full force and
effect and is registered in the name of the Company or a Subsidiary of the Company.

               (c) To the Knowledge of the Company, the operation and conduct of the Company’s and the
Company’s Subsidiaries’ business (including, without limitation, the manufacturing, marketing,
licensing, sale or distribution of products and use of the Company Intellectual Property in such
businesses) does not violate, infringe, misappropriate, misuse, or otherwise conflict with any
Intellectual Property rights of any third party. Except as set forth in Section 4.11(c) of
the Company Disclosure Schedules, neither the Company nor any of its Subsidiaries has received any
written notices of infringement or misappropriation of any Intellectual Property rights of any
other Person. There are no pending, or, to the Company’s Knowledge, threatened claims or
proceedings against the Company or any of its Subsidiaries by or before any Person or Governmental
Entity involving the ownership, validity, enforceability or use of any Intellectual Property.
Except as set forth in Section 4.11(c) of the Company Disclosure Schedules, there are no
interferences, cancellation proceedings, oppositions, or other contested proceedings pending in the
USPTO, USCO, or any Governmental Entity relating to any Company Intellectual Property owned by the
Company or any of its Subsidiaries.

               (d) Except as set forth in Section 4.11(d) of the Company Disclosure Schedules, to the
Knowledge of the Company, no Person is currently infringing or misappropriating any Intellectual
Property owned by the Company or its Subsidiaries nor has the Company or any of its Subsidiaries
made any claim in writing of a violation, infringement, misuse, or misappropriation by any Person
of its rights to, or in connection with any of the Company Intellectual Property, which claim is
still pending.

               (e) The Company’s IT Systems operate and perform in all material respects as currently
required to operate the business of the Company and its Subsidiaries. The Company IT Systems have
not materially malfunctioned or failed and have been repaired or replaced within the last three
years. The Company has implemented reasonable backup, disaster recovery, virus protection,
firewall, and other information technology security technology and procedures consistent with
applicable regulatory standards and best industry practice.

25

 

          Section 4.12. Litigation. Except as set forth in Section 4.12 of the Company
Disclosure Schedules, there are no Proceedings pending or, to the Knowledge of the Company,
threatened against the Company or any of its Subsidiaries, at law or in equity, or before or by any
Governmental Entity involving (i) the Company or its Subsidiaries, (ii) the properties or assets of
the Company or its Subsidiaries or (iii) the officers, directors or employees of the Company or its
Subsidiaries, in their capacity as officers, directors or employees, in each case other than such
Proceedings that, if determined adversely against the Company, would not reasonably be expected to
result in monetary damages in excess of $100,000 or injunctive or other equitable relief against
the Company or any of its Subsidiaries. Except as set forth in Section 4.12 of the Company
Disclosure Schedules, neither the Company nor any of its Subsidiaries is subject to any outstanding
judgment, Order or decree of any Governmental Entity.

          Section 4.13. No Brokers’ Fees . There are no claims for brokerage commissions,
finders’ fees or other similar compensation in connection with the transactions contemplated by
this Agreement based on any arrangement or agreement made by or on behalf of the Company, except
for the fees and expenses of Credit Suisse Securities (USA) LLC, UBS Securities LLC, Robert W.
Baird & Co. Inc., and Transworld Capital Group, Ltd. which shall be paid by the Seller at Closing.

          Section 4.14. Employee Benefit Plans .

               (a) Set forth on Section 4.14(a) of the Company Disclosure Schedules, is a true and
complete list of each (i) “employee benefit plan” (as defined in Section 3(3) of ERISA, and (ii)
all other pension, retirement, supplemental retirement, stock-based, stock purchase, stock
ownership, stock option, deferred compensation, excess benefit, profit sharing, bonus, incentive,
employment, severance, termination, change in control, paid time off, health, life, disability,
group insurance, vacation, holiday and fringe benefit plan, program or arrangement (whether written
or unwritten), maintained, contributed to, or required to be contributed to, by the Company or
under which the Company has any liability (all within the United States) (the “Employee Benefit
Plans”).

               (b) As applicable with respect to each Employee Benefit Plan, the Company has made available
to Buyer, true and complete copies of (i) each Employee Benefit Plan document, including all
amendments thereto, and in the case of an unwritten material Employee Benefit Plan, a written
description thereof, (ii) all trust documents, investment management contracts, custodial
agreements and insurance contracts relating thereto, (iii) the current summary plan description and
each summary of material modifications thereto, (iv) the most recent annual reports (Form 5500 and
all schedules thereto) filed with the Internal Revenue Service (“IRS”) or the Department of
Labor (“DOL”), (v) the most recent IRS determination letter and each currently pending
application to the IRS for a determination letter, (vi) the three most recent summary annual
reports, actuarial reports, financial statements and trustee reports, (vii) the most recent annual
premium payment forms filed with the Pension Benefit Guaranty Corporation (“PBGC”), and
(viii) all records, notices and filings made, or received, by the Company or any ERISA Affiliate
during the last three years concerning IRS or DOL audits or investigations, “prohibited
transactions” within the meaning of Section 406 of ERISA or Section 4975 of the Code and
“reportable events” within the meaning of Section 4043 of ERISA.

26

 

               (c) The Company and each of its Subsidiaries are in compliance in all material respects with
the provisions of ERISA and the Code applicable to the Employee Benefit Plan. Each Employee
Benefit Plan has been maintained, operated and administered, and in all material respects, in
accordance with its terms.

               (d) The Employee Benefit Plans, which are “employee pension benefit plans” within the meaning
of Section 3(2) of ERISA, and which are intended to meet the qualification requirements of Section
401(a) of the Code, have received determination letters from the IRS to the effect that such plans
are qualified and the trusts in respect thereof are exempt from federal income taxes under Sections
401(a) and 501(a), respectively, of the Code, as amended, and each such Employee Benefit Plan is so
qualified and the trusts in respect thereof are exempt from federal income taxes.

               (e) All contributions to, and payments from, the Employee Benefit Plans, which have been
required to be made in accordance with the Employee Benefit Plans and, when applicable, Section 302
of ERISA or Sections 412 and/or 430 of the Code, have, in all material respects, been timely made.
All payments under the Employee Benefit Plans, except those to be made from a trust qualified under
Section 401(a) of the Code, for any period ending before the Closing Date that are not yet, but
will be, required to be made are properly accrued and reflected on the Financial Statements. No
asset of the Company, and no asset of an ERISA Affiliate, which is to be acquired by Buyer pursuant
to this Agreement, is subject to any Lien under Code Section 401(a)(29), ERISA Section 302(f), Code
Section 412(n), Code Section 430(k) or ERISA Section 4068 or arising out of any action filed under
ERISA Section 4301(b).

               (f) The Company and each of its Subsidiaries have complied with the notice and continuation
coverage requirements of Section 4980B of the Code and the regulations thereunder with respect to
each Employee Benefit Plan that is a group health plan within the meaning of Section 5000(b)(1) of
the Code. Each Employee Benefit Plan is in compliance in all material respects with the applicable
provisions of the Health Insurance Portability and Accountability Act of 1996 and the regulations
issued thereunder.

               (g) Except as set forth on Section 4.14(g) of the Company Disclosure Schedules, there
are no pending audits or investigations by any Governmental Entity involving any Employee Benefit
Plan, no termination proceedings involving any Employee Benefit Plan, and no threatened or pending
claims (except for individual claims for benefits payable in the normal operation of the Employee
Benefit Plans), suits or Proceedings involving any Employee Benefit Plan or asserting any rights or
claims to benefits under any Employee Benefit Plan, nor, to Knowledge of the Company, are there any
facts which could reasonably give rise to any liability in the event of any such audit,
investigation, claim, suit or Proceeding.

               (h) Neither the Employee Benefit Plans, any trusts created thereunder, the Company, any ERISA
Affiliate, nor, to the Knowledge of the Company, any employee of the foregoing, nor, to the
Knowledge of the Company, any trustee, administrator or other fiduciary thereof, has engaged in a
“prohibited transaction” (as such term is defined in Section 4975 of the Code or Section 406 of
ERISA).

27

 

               (i) Neither the Company nor any ERISA Affiliate has incurred any material liability to the
PBGC with respect to any Employee Benefit Plan subject to Title IV of ERISA, other than for the
payment of premiums, all of which have been paid when due that could result in any liability to the
Company. No Employee Benefit Plan nor any “employee pension benefit plan” within the meaning of
Section 3(2) of ERISA of any ERISA Affiliate (an “ERISA Affiliate Plan”) has applied for or
received a waiver of the minimum funding standards imposed by Section 412 of the Code. The PBGC
has not instituted Proceedings to terminate any Employee Benefit Plan or any employee benefit plan
sponsored by an ERISA Affiliate or to appoint a trustee or administrator of any such Employee
Benefit Plan, and no circumstances exist that constitute grounds under Title IV of ERISA for any
such Proceeding. For each year beginning on or after January 1, 2008, the Company has made
contributions to each Employee Benefit Plan and each ERISA Affiliate has made contributions to its
respective ERISA Affiliate Plans, which in each case is subject to Section 412 of the Code that is
not less than the minimum required contribution under Section 430 of the Code.

               (j) Neither the Employee Benefit Plans nor any such trust has been terminated nor have there
been any “reportable events” (as defined in Section 4043 of ERISA and the regulations thereunder)
with respect to either thereof.

               (k) At no time has (i) the Company or (ii) any ERISA Affiliate, incurred any liability which
could subject the Buyer to liability under Sections 4062, 4063, 4064 or 4069 of ERISA.

               (l) At no time, has the Company or any ERISA Affiliate, been required to contribute to, or
incurred any withdrawal liability, within the meaning of Section 4201 of ERISA to any Multiemployer
Plan nor does the Company or ERISA Affiliate have any potential withdrawal liability arising from a
transaction described in Section 4204 of ERISA nor does the Company or ERISA Affiliate have any
potential liability arising from an event described in Section 4241 of ERISA.

               (m) With respect to each Employee Benefit Plan that is a defined benefit pension plan, the
Company has provided the Buyer with an actuarial statement setting forth the unfunded liabilities
and projected costs of such plan as of December 31, 2009. With respect to each Employee Benefit
Plan that is a retiree medical plan or a retiree life insurance plan, the Company has provided the
Buyer with financial information setting forth the unfunded liabilities and projected costs of such
plan as of December 31, 2009 and, except as set forth on Section 4.14(m) of the Company
Disclosure Schedules, to the Knowledge of the Company, there exists no current or reasonably
foreseeable circumstances or set of facts (other than standard benefit accruals pursuant to the
terms of the applicable Employee Benefit Plans) which would be likely to result in a material
increase in such unfunded liabilities or projected costs between such date and the Closing.

               (n) Except as set forth on Section 4.14(n) of the Company Disclosure Schedules, no
Employee Benefit Plan provides benefits, including, without limitation, death or medical benefits,
beyond termination of service or retirement other than (i) coverage mandated by law or (ii) death
or retirement benefits under an Employee Benefit Plan qualified under Section 401(a) of the Code.

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               (o) Except as set forth on Section 4.14(o) of the Company Disclosure Schedules, the
Company’s execution of, and performance of the transactions contemplated by this Agreement will not
either alone or in connection with any other event(s) (i) result in any payment becoming due to any
current or former director, officer, employee or independent contractor of the Company or any of
its Subsidiaries, (ii) increase any amount of compensation or benefits otherwise payable under any
Employee Benefit Plan, (iii) result in the acceleration of the time of payment, funding or vesting
of any benefits under any Employee Benefit Plan, (iv) require any contributions or payments to fund
any obligations under any Employee Benefit Plan or (v) limit the right to merge, amend or terminate
any Employee Benefit Plan.

               (p) No payment, acceleration, vesting or increase in benefits which is or may be made by, from
or with respect to any Employee Benefit Plan or otherwise, to any employee, former employee,
director or agent of the Company or any ERISA Affiliate, either alone or in conjunction with any
other payment, event or occurrence, will or could properly be characterized as an “excess parachute
payment” under Section 280G of the Code. No such employee, former employee, director or agent of
the Company or any ERISA Affiliate has any “gross up” agreements or other assurance of
reimbursement for any Taxes resulting from any such “excess parachute payments.”

               (q) Section 4.14(q) of the Company Disclosure Schedules sets forth the name, title,
current annual salary, and bonus potential, if applicable, of all present officers and employees of
the Company and its Subsidiaries whose rate of annual compensation, including any bonus potential,
equals or exceeds $100,000 together with a statement of the full amount of all remuneration paid by
the Company or any of its Subsidiaries to each such person, during the twelve (12)-month period
ending October 3, 2009.

               (r) The Company and its Subsidiaries have, for purposes of each Employee Benefit Plan and for
all other purposes, correctly classified all individuals performing services for the Company and
its Subsidiaries as common law employees, independent contractors or agents, as applicable.

               (s) With respect to any Employee Benefit Plan that is a nonqualified deferred compensation
plan (as defined in Section 409A(d)(1) of the Code), (i) such plan has been operated since January
1, 2005 in good faith compliance with Section 409A of the Code and the guidance issued thereunder
and (ii) since January 1, 2009, such plan complies in form and operation with Section 409A of the
Code and the guidance issued thereunder.

               (t) The only material welfare, pension, retirement, supplemental retirement, stock-based,
stock purchase, stock ownership, stock option, deferred compensation, excess benefit, profit
sharing, bonus, incentive, employment, severance, termination, change in control, paid time off,
health, life, disability, group insurance, vacation, holiday and fringe benefit plan maintained,
contributed to, or required to be contributed to, or required to be contributed to, by the Company
or any of its Subsidiaries or under which the Company or any of its Subsidiaries has any liability,
including any such plan required to be maintained or contributed to by the Law of the relevant
jurisdiction, which would be described in Section 4.14(a) above, but for the fact that such
plans are maintained outside the jurisdiction of

29

 

the United States (but excluding plans maintained by a governmental entity), are listed on
Section 4.14(a) of the Company Disclosure Schedules (the “Foreign Plans”).

               (u) The Company has made available to Buyer, true and complete copies of each written Foreign
Plan including all amendments thereto, and in the case of an unwritten material Employee Benefit
Plan, a written description thereof.

               (v) The Company, its Subsidiaries and each of the Foreign Plans are in compliance in all
material respects with the applicable Laws of each jurisdiction in which any of the Foreign Plans
are maintained and each such Foreign Plans has been administered, in all material respects, in
accordance with its terms.

               (w) All contributions to, and payments from, the Foreign Plans (other than payments to be made
from a trust, insurance contract or other funding medium) which may have been required to be made
in accordance with the terms of any such plan, and, when applicable, the Law of the jurisdiction in
which such plan is maintained, have, in all material respects, been timely made.

               (x) Except as set forth on Section 4.14(x) of the Company Disclosure Schedules, the
assets of each of the Foreign Plans (which would be an employee pension benefit plan as defined in
Section 3(2) of ERISA if such plan were maintained in the United States or otherwise provides
retirement, medical or life insurance benefits following retirement) are at least equal to the
liabilities of such plans.

               (y) There are no pending investigations by any Governmental Entity involving the Foreign
Plans, no claims pending or threatened in writing (except for claims for benefits payable in the
normal operation of the Foreign Plans), suits or proceedings against any Foreign Plan or asserting
any rights or claims to benefits under any Foreign Plan which could give rise to any liability,
nor, are there any facts that could give rise to any material liability in the event of such
investigation, claim, suit or proceeding.

          Section 4.15. Employment Matters . Except as set forth in Section 4.15 of the
Company Disclosure Schedules, neither the Company nor any of its Subsidiaries is a party to or
bound by any collective bargaining agreement or any other Contract with a labor union or labor
organization. Except as set forth in Section 4.15 of the Company Disclosure Schedules, no
employees of the Company or any of its Subsidiaries (the “Employees”), in their capacity as
such, are represented by any labor union or labor organization. To the Company’s Knowledge, there
are no organizing activities or campaigns in progress with respect to any of the Employees. There
is no pending or, to the Knowledge of the Company, threatened labor dispute, strike, slowdown, work
stoppage or lockout at the Company or any of its Subsidiaries, and there has been no such actions
since January 1, 2007. Except as set forth on Section 4.15 of the Company Disclosure
Schedules, there is no unfair labor practice, charge or complaint pending or, to the Knowledge of
the Company, threatened against the Company or any of its Subsidiaries. Neither Company nor any of
its Subsidiaries has engaged in any plant closing or employee layoff activities violating or giving
rise to the requirement that notice be given to any Employee under the Worker Adjustment and
Retraining Notification Act or under any similar state or local Law since January 1, 2005. The
Company and its Subsidiaries are and have been since January 1,

30

 

2007 in compliance, in all material respects, with all applicable Law relating to labor or
labor relations and employment terms and conditions, including any provision thereof relating to
(i) wages, hours, bonuses, commissions, termination pay, vacation pay, sick pay, fringe benefits,
employee benefits, health insurance continuation (COBRA), and the payment and/or accrual of the
same and all insurance and all other costs and expenses applicable thereto; (ii) unlawful,
wrongful, retaliatory, or discriminatory employment or labor practices; (iii) occupational health
and safety standards, (iv) immigration, workers’ compensation, disability, unemployment
compensation, whistleblower laws, and other employment laws; and neither Company nor any of its
Subsidiaries is liable for any arrearage, or any costs or penalties for failure to comply with any
of the foregoing. All Employees who perform work in the United States are authorized to work in
the United States, and a Form I-9 has been properly completed and retained with respect to each
Employee. To the Knowledge of the Company, the activities of the Employees for the Company and its
Subsidiaries do not conflict with or constitute a breach of the terms of any employment agreement,
intellectual property disclosure agreement, restrictive covenant, or other agreement by which such
Employee is obligated or bound, and neither the Company nor any of its Subsidiaries has received
(within the past two years) any written allegation to such effect.

          Section 4.16. Compliance with Laws . Except as set forth in Section 4.16 of
the Company Disclosure Schedules, the Company and each of its Subsidiaries are in compliance in all
material respects with all applicable Laws. Since January 1, 2009, neither the Company nor any of
its Subsidiaries (i) has received any written notice from any Governmental Entity asserting that
the Company or any of its Subsidiaries is not in material compliance with any material applicable
Law or Order or (ii) entered into or been subject to any material Order with respect to any aspect
of its business, operations, properties, assets or employees or received any material request for
information, notice, demand letter, administrative inquiry or formal complaint or claim from any
Governmental Entity with respect to any of the foregoing. To the Knowledge of the Company, neither
the Company nor any of its Subsidiaries are under investigation by any Governmental Entity with
respect to any potential material violation of any applicable Laws. To the Knowledge of the
Company, since the Balance Sheet Date, no Laws have been proposed or enacted which would reasonably
be expected to require a material modification in the manner in which the businesses of the Company
and its Subsidiaries are operated, either before or after the Closing Date. This Section
4.16 does not relate to environmental matters, it being the intent of the Parties hereto that
environmental matters are solely the subject of Section 4.17 of this Agreement.

          Section 4.17. Environmental Compliance. Except as set forth in Section 4.17
of the Company Disclosure Schedules: (i) the Company and its Subsidiaries have obtained and possess
all material Permits required by applicable Law relating to pollution or to protection of the
environment, natural resources, or human health and safety (“Environmental Laws”), all
applications for renewal of such Permits have been timely filed, and none of the Company and the
Subsidiaries has been advised in writing by any Governmental Entity of any actual or potential
material change in status or terms and conditions of any such Permits; (ii) except with respect to
matters that have been fully and finally settled or resolved, the Company and its Subsidiaries are
in and for the past six (6) years have been in, material compliance with all terms and conditions
of such Permits and with all other Environmental Laws; (iii) except with respect to matters that
have been fully and finally settled or resolved, none of the Company or its Subsidiaries has
received any written notice regarding any actual or alleged material violation of

31

 

Environmental Laws, or any investigatory, remedial, corrective or payment obligations under
Environmental Laws, (“Environmental Claim”), relating to any of the Real Property or any
other real property formerly owned, leased or occupied by the Company, its Subsidiaries or their
predecessors; (iv) there are no pending Orders or Proceedings arising under Environmental Laws
against the Company, its Subsidiaries, or, to the Knowledge of the Company, their predecessors,
and, to the Knowledge of the Company, no such Orders or Proceedings are threatened; (v) to the
Knowledge of the Company, none of the Company or its Subsidiaries, or any of their predecessors,
has Released any Hazardous Materials at, from or on any real property, including the Real Property,
other than in material compliance with Environmental Law or in a manner which would not reasonably
be expected to result in material liability of the Company or any Subsidiary under Environmental
Law or Releases of a minor or de minimis nature, that would not reasonably be expected to result in
material liability of the Company or any Subsidiary under Environmental Law; (vi) to the Knowledge
of the Company, no Environmental Claims have been asserted against the Company arising out of any
facilities that may have received Hazardous Materials generated by the Company or any predecessor
in interest which is reasonably likely to result in liability under Environmental Laws; (vii) the
Company has made available to the Buyer material reports, assessments, investigation results,
audits and other documents in the possession, custody or control of the Company or the Subsidiaries
sufficient to describe the actual or potential material liability of the Company and the
Subsidiaries pursuant to Environmental Law; and (viii) none of the Company or its Subsidiaries has
assumed by Contract, including by indemnity agreement, any material liabilities related to
Hazardous Materials or Environmental Law. Except for Section 4.03, Section 4.06
and Section 4.19 (but only to the extent such Sections relate to Environmental Laws or
compliance with Environmental Laws), the representations and warranties contained in this
Section 4.17 constitute the sole and exclusive representations and warranties of the
Company in connection with environmental matters.

          Section 4.18. Insurance . The Company maintains insurance policies in such amounts
and against such losses and risks as are customary for the operation of such business. Section
4.18 of the Company Disclosure Schedules contains a true and complete list of each insurance
policy owned by, or maintained for the benefit of, the Company and its Subsidiaries, including
self-insurance or co-insurance programs (if any. Copies of each of such insurance policies have
been made available to the Buyer. All such policies are in full force and effect and have been in
full force and effect since January 1, 2007 Except as set forth in Section 4.18 of the
Company Disclosure Schedules: (i) neither the Company nor any of its Subsidiaries is in material
default under any such insurance policy the effect of which would reasonably be expected to
jeopardize coverage thereunder; (ii) all premiums due have been paid on such insurance policies,
and neither the Company nor any Subsidiary of the Company has received any written notice of
cancellation of any such insurance policy or written notice with respect to any refusal of coverage
thereunder the resolution of which is still pending or unresolved; (iii) there is no claim for
which the insurance company is denying coverage or defending under a reservation of rights or
similar clause; and (iv) there are no outstanding unpaid claims under any such policy that are
material, individually or in the aggregate, and no policy limits under any such policy have been
exhausted or materially reduced.

          Section 4.19. Undisclosed Liabilities. Neither the Company nor any of its
Subsidiaries has any Liability of any nature except for (a) Liabilities set forth on the Latest

32

 

Audited Balance Sheet (including any footnotes thereto), (b) those liabilities and obligations
not required by GAAP to be reflected on the Latest Audited Balance Sheet (or any footnotes
thereto), (c) Liabilities incurred in the ordinary course of business consistent with past practice
since the Balance Sheet Date and (d) Liabilities disclosed in Section 4.19 of the Company
Disclosure Schedules.

          Section 4.20. Customers and Suppliers . Set forth in Section 4.20 of the
Company Disclosure Schedules is a true and correct list of (i) the ten (10) largest customers (by
revenues) of the Company and its Subsidiaries (taken as a whole), and (ii) the ten (10) largest
suppliers (by expense for purchases) of the Company and its Subsidiaries (taken as a whole), in
each case, during the twelve month period ended April 3, 2010. No customer or supplier that is not
listed in Section 4.20 of the Company Disclosure Schedules accounted for in excess of 3% of
the revenues or expense for purchases of the Company and its Subsidiaries (taken as a whole) during
the twelve month period ended April 3, 2010. Since the Balance Sheet Date, no customer or supplier
listed in Section 4.20 of the Company Disclosure Schedules has canceled or otherwise
terminated, or threatened to terminate, its relationship with the Company or its Subsidiaries, or
decreased or limited in any material respect, or threatened to decrease or limit in any material
respect, its purchases from or sales to the Company and its Subsidiaries.

          Section 4.21. Permits . Section 4.21 of the Company Disclosure Schedules
contains a complete and accurate list of all material Permits required for the operation of the
business of the Company and each Subsidiary as currently conducted (the “Material
Permits”). Except as set forth on Section 4.21 of the Company Disclosure Schedules,
each Material Permit is in full force and effect without any default or violation thereunder in any
material respect by the Company, any Subsidiary of the Company or, to the Knowledge of the Company,
by any other party thereto. No Proceeding is pending or, to the Knowledge of the Company,
threatened by any Governmental Entity to revoke or deny the renewal of any Material Permit, and
since January 1, 2009, neither the Company nor any of its Subsidiaries have been notified in
writing that any Material Permit may not in the ordinary course be renewed upon its expiration or
that by virtue of the transactions contemplated by this Agreement, any Material Permit may be
terminated or materially amended or not be granted or renewed. For the avoidance of doubt, the
second sentence of this Section 4.21 does not relate to Permits with respect to
Environmental Laws, it being the intent of the Parties hereto that environmental matters are solely
the subject to Section 4.17 of this Agreement.

          Section 4.22. Accounts Receivable . All accounts receivable, trade accounts and notes
receivable and other miscellaneous receivables of any of the Company or any of its Subsidiaries
reflected on the Latest Unaudited Balance Sheet, and all such receivables arising since the date of
the Latest Unaudited Balance Sheet, represent bona fide claims against debtors for sales, services
performed or other charges, and no Person has claimed or, to the Knowledge of the Company, has
threatened to claim a defense, setoff or counterclaim with respect thereto. All such receivables
are fully collectible in the ordinary course of business consistent with past practice except, in
the case of receivables shown on the Latest Unaudited Balance Sheet, to the extent of reserves set
forth thereon, and, in the case of receivables arising since the Latest Unaudited Balance Sheet
Date, for a reasonable allowance for bad debts which does not reflect a rate of bad debts
materially higher than that reflected by the reserve for bad debts on the Latest Unaudited Balance
Sheet.

33

 

          Section 4.23. Inventory . The inventories included in the Latest Unaudited Balance
Sheet were properly stated thereon at the lesser of cost or fair market value determined in
accordance with GAAP applied on a consistent basis. Since the date of the Latest Unaudited Balance
Sheet, the inventories of the Company and its Subsidiaries have been maintained in the ordinary
course of business consistent with past practice. All such inventories are owned free and clear of
all Liens, other than Permitted Liens. All of the inventories recorded on the Latest Unaudited
Balance Sheet consist of, and all inventories of the Company and its Subsidiaries on the Closing
Date will consist of, items of a quality usable or saleable in the ordinary course of business
consistent with past practice and are and will be in quantities sufficient for the normal operation
of the businesses of the Company and its Subsidiaries in accordance with past practice.

          Section 4.24. Affiliate Transactions . Except as set forth in Section 4.24 of
the Company Disclosure Schedules and other than ordinary course salaries, wages and benefits,
neither (i) the Company, any Affiliate of the Company nor (ii) any officer, director, stockholder,
member, manager, partner or Affiliate of the Company or any of its Subsidiaries nor (iii) to the
Company’s Knowledge any individual related by blood, adoption or marriage to any such Person, is,
in each case, a party to any material Contract with the Company or its Subsidiaries or has,
directly or indirectly, any material interest in or rights with respect to, any assets or
properties used or held for use by the Company or its Subsidiaries (except for sales of inventory
in the ordinary course of business among the Company and its Subsidiaries that are not material to
the operations of the business of the Company or its Subsidiaries), or any Person that is a
supplier, customer or competitor of the Company or any of its Subsidiaries, or is a debtor or
creditor of the Company or any of its Subsidiaries, and no such Person owes any money or other
amounts to, nor is any such Person owed any money or other amounts by, the Company or any of its
Subsidiaries.

          Section 4.25. Warranties/Product Liability . Except as described in Section
4.25 of the Company Disclosure Schedules, (i) there is no notice, demand, claim, action, suit,
inquiry, hearing, Proceeding, notice of violation or investigation from, by or before any
Government Entity relating to any product (including the packaging and advertising related thereto)
designed, formulated, manufactured, processed, sold or placed in the stream of commerce by the
Company or any of its Subsidiaries (a “Product”), or claim or lawsuit involving a Product
which is currently pending or, to the Knowledge of the Company, threatened, by any Person, and (ii)
there has not been, nor is there under consideration by the Company or any of its Subsidiaries, any
Product recall or post-sale warning of a material nature conducted by or on behalf of the Company
or any of its Subsidiaries concerning any Product. All Products complied and comply in all
material respects with applicable Laws, and there have not been and there are no material defects
or deficiencies in such Products. Each Product sold and delivered by the Company and its
Subsidiaries since January 1, 2008 has conformed in all material respects with all applicable
Contractual commitments and all express and implied warranties, are free from significant defects
in workmanship and materials, and conform in all material respects with standards for products of
that type and none of the Company nor any of its Subsidiaries has any material liability (and, to
the Knowledge of the Company, there is no basis for any assertion of liability) for replacement or
repair thereof or other damages in connection therewith, subject only to wear and tear in the
ordinary course of business and reserves in the Financial Statements for product warranty claims
and claims of damaged or defective products from customers or the Company and its Subsidiaries.

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          Section 4.26. Indebtedness . Except as set forth in Section 11.01(a) of the
Company Disclosure Schedules, neither the Company nor any of its Subsidiaries has any Indebtedness.

          Section 4.27. Foreign Corrupt Practices . Neither the Company, nor any of its
Subsidiaries, nor any agent or other Person acting on behalf of the Company or any of its
Subsidiaries, has (i) directly or indirectly, used any funds for unlawful contributions, gifts,
entertainment or other unlawful expenses related to foreign or domestic political activity, (ii)
made any unlawful payment to foreign or domestic government officials or employees or to any
foreign or domestic political parties or campaigns from corporate funds, (iii) failed to disclose
fully any campaign contribution made by the Company or any of its Subsidiaries (or made by any
Person acting on their behalf) which is in violation of Law, or (iv) violated in any material
respect any provision of the Foreign Corrupt Practices Act of 1977, as amended.

          Section 4.28. Holding Company. The Company is a holding company and has no
operations, assets (other than its ownership interest in Holdco) or Liabilities (other than as a
result of this Agreement and the Company’s status as the common parent for the consolidated Tax
Returns (and similar status for state, local and foreign unitary, combined or similar Tax Returns)
of the Company and its Subsidiaries).

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF THE BUYER

          Except as set forth in the corresponding sections of the Buyer Disclosure Schedules, the Buyer
hereby represents and warrants as follows:

          Section 5.01. Organization and Corporate Power. The Buyer is a corporation duly
incorporated, validly existing and in good standing under the Laws of the State of Delaware, with
all requisite corporate power and authority to execute and deliver this Agreement and perform its
obligations hereunder.

          Section 5.02. Authorization . The execution and delivery of this Agreement and the
Ancillary Agreements by the Buyer, the consummation of the transactions contemplated hereby and
thereby and the performance by the Buyer of its obligations hereunder and thereunder have been duly
and validly authorized by all requisite corporate action, and no other actions on its part are
necessary to authorize the execution, delivery or performance of this Agreement, the Ancillary
Agreements or the consummation by the Buyer of the transactions contemplated hereby and thereby.
Assuming that this Agreement and the Ancillary Agreements are valid and binding obligations of the
other parties hereto and thereto, this Agreement and the Ancillary Agreements constitute, or, when
executed by the other parties hereto or thereto, will constitute, the valid and binding obligations
of the Buyer, enforceable against the Buyer in accordance with their terms, except to the extent
that the enforceability thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or other Laws from time to time in effect
relating to creditors’ rights and remedies generally and general principles of equity.

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          Section 5.03. Non-Contravention; Consents and Approvals . Except as set forth on
Section 5.03 of the Buyer Disclosure Schedules, the execution and delivery of this
Agreement and the Ancillary Agreements by the Buyer, the consummation of the transactions
contemplated hereby and thereby and the performance by the Buyer of its obligations hereunder and
thereunder does not and will not (a) (with or without due notice or lapse of time or both) require
a consent, approval or notification, under, conflict with or result in any breach of or
acceleration of rights under, constitute a default under, result in a violation of or result in the
creation of any Lien upon an material properties or assets of the Buyer under (i) the provisions of
the Buyer’s certificate of incorporation or bylaws or (ii) any of the terms, conditions or
provisions of any Contract or Permit to which the Buyer is a party or by which the Buyer or its
properties or assets is bound, (b) require the authorization, consent, approval, qualification or
waiver of, filings with or notice or other action to, with or by any Governmental Entity or any
Person or (c) violate any Order or Law applicable to the Buyer or its properties or assets, except
in the case of clauses (a)(ii), (b) and (c) of this Section 5.03, that would not,
individually or in the aggregate, have or reasonably be expected to have a material adverse effect
on the ability of the Buyer to perform its obligations under this Agreement or the Ancillary
Agreements.

          Section 5.04. Litigation . There are no Proceedings pending or, to the Knowledge of
the Buyer, threatened against or affecting the Buyer at law or in equity, or before or by any
Governmental Entity, and the Buyer is not subject to any outstanding judgment, Order or decree of
any Governmental Entity, in each case, which would have a material adverse effect on the ability of
the Buyer to perform its obligations under this Agreement or the Ancillary Agreements.

          Section 5.05. No Brokers’ Fees . There are no claims for brokerage commissions,
finders’ fees or other similar compensation in connection with the transactions contemplated by
this Agreement based on any arrangement or agreement made by or on behalf of the Buyer, except for
the fees and expenses of Goldman Sachs & Co., Goldman Sachs Lending Partners LLC, and Lazard Frères
& Co. LLC, which shall be paid by the Buyer at Closing.

          Section 5.06. Investment Representation . The Buyer is acquiring the Shares for
investment for its own account and not with a view towards, or for resale in connection with, the
public sale or distribution thereof, except pursuant to sales registered or exempted under the
Securities Act and any applicable federal or state securities Laws. The Buyer acknowledges that it
has sufficient experience and expertise to evaluate, and is fully informed as to, the risks of the
transactions contemplated by this Agreement and ownership of the Shares. The Buyer has been
offered the opportunity to ask questions of and obtain information from the Seller and the Company
with respect to the Shares.

          Section 5.07. Financing .

               (a) The Buyer has delivered to the Seller and the Company (i) executed commitment letters
dated as of the date hereof from the parties listed in Section 5.07 of the Buyer Disclosure
Schedules (including all exhibits, schedules and annexes to such letters, collectively, the
“Debt Commitment Letters”), pursuant to which, and subject to the terms and conditions
thereof, the parties thereto have committed to provide the debt financing set forth
therein for the purpose of funding the transactions contemplated by this Agreement (the
“Debt

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Financing”) and (ii) an executed equity commitment letter (the “Equity Commitment
Letter” and, together with the Debt Commitment Letters, the “Commitment Letters”),
pursuant to which Griffon has committed, subject to the terms and conditions thereof to invest the
amount set forth therein (the “Equity Financing” and, together with the Debt Financing, the
“Financings”).

               (b) As of the date hereof, the Commitment Letters, in the form so delivered, are in full force
and effect, have not been terminated or otherwise amended or modified and the commitments set forth
in the Commitment Letters have not been withdrawn or rescinded in any respect and the Equity
Commitment Letter constitutes a legal, valid and binding obligation of Buyer, and to the Knowledge
of the Buyer, the Commitment Letters constitute a legal, valid and binding obligation of the other
parties thereto, in each case, except to the extent that the enforceability thereof may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other
Laws from time to time in effect relating to creditors’ rights and remedies generally and general
principles of equity. Except as expressly set forth in the Commitment Letters, there are no
conditions precedent to the respective obligations of the lenders specified in the Commitment
Letters to fund the full amount of the Financings. Subject to the accuracy of the representations
and warranties of the Seller and the Company set forth in Articles III and IV
hereof, as of the date hereof, no event has occurred which, with or without notice, lapse of time
or both, would constitute a material default or material breach on the part of the Buyer under the
Commitment Letters. Subject to the terms and conditions of this Agreement, assuming the funding of
the Financings in accordance with the terms and conditions of the Commitment Letters, the aggregate
proceeds from the Financings constitute all of the financing required to be provided by the Buyer
for the consummation of the transactions contemplated hereby and will, in the aggregate, be
sufficient to make payment of all amounts required to be paid by Buyer or on its behalf hereunder
on the Closing Date. As of the date hereof, the Buyer has no reason to believe that any of the
conditions to the Financings will not be satisfied or that the Financings will not be available to
Buyer on the Closing Date. As of the date hereof, there are no side letters or other Contracts or
arrangements related to the funding or investing, as applicable, of the full amount of the
Financings other than as expressly set forth in the Commitment Letters. As of the date hereof, all
commitment and other fees, costs and expenses that have been incurred and are due or payable on or
prior to the date hereof in connection with the Commitment Letters has been paid.

          Section 5.08. Solvency . Assuming the accuracy (i) of the representations and
warranties of the Seller and the Company set forth in Articles III and IV hereof
(without giving effect to materiality or Company Material Adverse Effect) and (ii) the information
heretofore provided by the Seller and the Company to the Buyer (including, without limitation, all
financial information and projections) ((i) and (ii), the “Solvency Assumptions”)
immediately after giving effect to the transactions contemplated by this Agreement, the Company and
each of its Subsidiaries shall be able to pay their respective debts as they become due and shall
own property which has a fair saleable value greater than the amounts required to pay their
respective debts (including a reasonable estimate of the amount of all contingent liabilities).
Immediately after giving effect to the transactions contemplated by this Agreement, and assuming
the Solvency Assumptions, the Company and each of its Subsidiaries shall have adequate capital to
carry on their respective businesses.

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ARTICLE VI

PRE CLOSING COVENANTS OF THE COMPANY

          Section 6.01. Conduct of the Business .

               (a) From the date hereof until the earlier to occur of the Closing Date and such time as this
Agreement is terminated in accordance with Article VIII, the Company shall, and shall cause
its Subsidiaries to (i) carry on its and its Subsidiaries’ respective businesses according to their
ordinary course of business and consistent with past practice; provided that the Company
may use all available cash to repay any Indebtedness of the Company or its Subsidiaries prior to
the Closing and may pay dividends or distributions between and among the Company and its
Subsidiaries and (ii) use their commercially reasonable efforts to preserve, in all material
respects, their respective properties, business and relationships with Employees, suppliers,
customers and other Persons with whom the Company or any of its Subsidiaries has material
commercial dealings.

               (b) From the date hereof until the earlier to occur of the Closing Date and such time as this
Agreement is terminated in accordance with Article VIII, except as otherwise explicitly
required by this Agreement, consented to in writing by the Buyer (for purposes of subsections
(xvi), (xviii) and (xix) hereof, which consent shall not be unreasonably withheld, delayed or
conditioned) or set forth in Section 6.01(b) of the Company Disclosure Schedules, the
Company shall not and shall not permit any of its Subsidiaries to:

                    (i) issue, sell or deliver any of its capital stock or the capital stock of any of its
Subsidiaries or issue or sell any securities convertible into, or options with respect to, or
warrants to purchase or rights to subscribe for, any of its capital stock or the capital stock of
any of its Subsidiaries;

                    (ii) effect any recapitalization, merger, reclassification, equity dividend, equity split or
like change in its capitalization or the capitalization of any of its Subsidiaries;

                    (iii) declare, set aside, make or pay any dividend or other distribution with respect to the
Company or any of its Subsidiaries (other than dividends or distributions between and among the
Company and its Subsidiaries);

                    (iv) liquidate, dissolve or wind-up the Company or any of its Subsidiaries;

                    (v) amend its or any of its Subsidiaries’ governing or organizational documents;

                    (vi) make any redemption or purchase of any of the Company’s capital stock or the capital
stock of any of the Company’s Subsidiaries;

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                    (vii) sell, assign, license or transfer any of the properties or assets of the Company or any
of its Subsidiaries, except for sales of inventory in the ordinary course of business consistent
with past practice;

                    (viii) make any capital investment in, or any material loan to, any other Person;

                    (ix) incur, assume or guarantee any Indebtedness (except in the ordinary course of business
under the Company’s existing revolving credit facility);

                    (x) enter into or amend any collective bargaining agreement;

                    (xi) increase the salary, compensation or benefits (including without limitation any severance
benefits) of any present or former director, officer or Employee, except as may be required by any
Employee Benefit Plan or Contract as in effect on the date hereof (except, in the case of Employees
who are neither directors nor officers of the Company or any of its Subsidiaries, in the ordinary
course of business consistent with past practice);

                    (xii) establish, enter into, adopt or amend any Employee Benefit Plan, except as may be
required by applicable Law;

                    (xiii) change any method of accounting or accounting principles or practices, except for any
change required by reason of a concurrent change in GAAP;

                    (xiv) acquire (by merger, consolidation, stock or asset purchase or otherwise) any Person or
any business (or portion or division thereof) or execute, enter into or agree upon any letter of
intent, term sheet or similar arrangement, whether binding or non-binding, to so acquire any Person
or any business (or portion or division thereof);

                    (xv) create, grant, assume, allow or suffer to be incurred any Lien (other than Permitted
Liens) of any kind on any of its material properties or assets;

                    (xvi) enter into any Contract that would constitute a Material Contract had it been entered
into prior to the date hereof or terminate, amend, supplement or waive any material rights under
any existing Material Contract (except for annual line reviews and related Contracts with existing
customers of the Company and its Subsidiaries);

                    (xvii) provide any material discount in favor of any customer or suppliers, other than in the
ordinary course of business consistent with past practices;

                    (xviii) institute outside of the ordinary course of business or settle any Proceeding or claim
involving equitable or injunctive relief or a monetary payment of more than $100,000;

                    (xix) make any capital expenditures or commitments therefor except those reflected in the
Company’s current budget and not in excess of $500,000 in the aggregate;

39

 

                    (xx) make or change any election (including any “check-the-box” election pursuant to U.S.
Treasury Regulation Section 301.1101-3), change an annual accounting period, adopt or change any
accounting method, file or amend any Tax Return, prepare Tax Returns that are inconsistent with
past practice, enter into any closing agreement, settle any Tax claim or assessment or change any
of its respective financial, tax or accounting policies, surrender any right to claim a refund of
Taxes, consent to any extension or waiver of the limitations period applicable to any Tax claim or
assessment relating to the Company or any of its Subsidiaries or take any other similar action
relating to the filing of any Tax Return or the payment of any Tax;

                    (xxi) with respect to any material Company Intellectual Property, (a) impair, abandon, or fail
to diligently maintain such Company Intellectual Property, or (b) amend, waive, cancel or modify
any rights in or to such Company Intellectual Property; or

                    (xxii) enter into any Contract to do or engage in any of the foregoing.

               (c) From the date hereof until the earlier to occur of the Closing Date and such time as this
Agreement is terminated in accordance with Section 8.01, the Company shall, and shall cause
its Subsidiaries to, conduct its cash management practices in the ordinary course of business
consistent with past practice (including, without limitation, with respect to the maintenance of
normalized working capital balances and normalized inventory levels (taking into account seasonal
fluctuations), making of capital expenditures (except those reflected in the Company’s current
budget or as set forth in Section 6.01(b) of the Company Disclosure Schedules), absence of
acceleration of collection of accounts receivable (whether by granting of discounts, credits,
concessions, write-offs, modifications of terms or otherwise other than in the ordinary course of
business consistent with past practice), timing of payment of accounts payable, accrued liabilities
and other Liabilities and pricing and credit policies).

               (d) Notwithstanding anything to the contrary herein, in the event that in connection with the
consummation of the Closing the Buyer does not have access to sufficient cash to pay the full
Estimated Purchase Price (or, if the Buyer shall otherwise request of the Company prior to the
Closing), the Company’s Subsidiaries shall be permitted to effect the transfer of existing Cash and
Cash Equivalents from such Subsidiaries to the Company by making dividends or other distributions
to the Company, paying-off amounts due to the Company on existing loans or other obligations,
extending credit to the Company, the Company purchasing or leasing assets to such Subsidiaries or
such other transactions as the Seller and the Buyer shall reasonably agree upon, with such method
selected to minimize Tax and any other liabilities for the Company (each, a “Transfer”),
but such Transfers shall only be permitted to the extent (x) necessary to enable the Buyer to meet
its obligations to pay the Estimated Purchase Price upon consummation of the Closing (by, upon
consummation of the Closing, causing the Company to distribute to the Seller the Cash and Cash
Equivalents at the Company in partial satisfaction of the Estimated Purchase Price), and (y) any
Tax liability arising from such Transfers shall not exceed the amount of the Company’s net
operating losses within the meaning of Section 172 of the Code calculated at the time of such
Transfer(s). Any Tax liability arising as a result of any Transfer in accordance with the foregoing
sentence shall not be a Pre-Closing Tax

40

 

as defined herein and shall be a Tax liability of the Company and its Subsidiaries not subject
to indemnification by the Seller.

          Section 6.02. Access to Books and Records . From the date hereof until the earlier to
occur of the Closing Date and such time as this Agreement is terminated in accordance with
Article VIII, the Company shall provide the Buyer and its Representatives and each
Financing Source with full access to the offices, properties, personnel, books and records of the
Company and its Subsidiaries and shall make available to the Buyer, the Buyer’s Representatives and
each Financing Source all officers, accountants, counsel and other representatives or agents of the
Company or the Seller for discussion of the Company and its Subsidiaries, during regular business
hours and upon reasonable advance notice and under reasonable circumstances in order for the Buyer
to have the opportunity to make such investigation as it shall reasonably desire to make of the
affairs of the Company and its Subsidiaries; provided that the Buyer and its
Representatives may not conduct any environmental sampling or other intrusive investigation unless
permitted by the Seller in its sole discretion. Any information provided to or obtained by the
Buyer or the Buyer’s Representatives pursuant to this Section 6.02 will be subject to that
certain Confidentiality Agreement, dated April 29, 2010, with the Company (the “Confidentiality
Agreement”) and must be held by the Buyer and the Buyer’s Representatives in accordance with
and be subject to the terms of the Confidentiality Agreement.

          Section 6.03. Notification . From the date hereof until the earlier to occur of the
Closing Date and such time as this Agreement is terminated in accordance with Article VIII,
the Company shall give prompt written notice to the Buyer of (i) the occurrence or non-occurrence
of any event which, to the Knowledge of the Company, has caused any representation or warranty made
by it herein to be untrue or inaccurate in any material respect at any time on or after the date
hereof and prior to the Closing and (ii) any material failure on the part of the Seller, the
Company or any of its Subsidiaries to comply with or satisfy any covenant, condition or agreement
set forth herein to be complied with or satisfied by the Seller, the Company or any of its
Subsidiaries, as the case may be, hereunder on or after the date hereof and prior to the Closing.

          Section 6.04. Regulatory Filings . The Seller and the Company shall (i) within five
Business Days of the date of this Agreement (or such later date as may be mutually agreed in
writing by the Buyer and the Seller) make or cause to be made all filings and submissions under the
HSR Act and any other Laws applicable to the Seller and the Company and its Subsidiaries with
respect to the consummation of the transactions contemplated hereby, and use reasonable best
efforts to cause the expiration or termination of any applicable waiting periods under the HSR Act,
including requesting early termination of the HSR waiting period, (ii) make any further filings
pursuant thereto that may be necessary, proper or advisable in connection therewith; (iii) use
reasonable best efforts to comply as promptly as practicable with any additional requests for
information, including requests for production of information or documents and production of
witnesses for interviews or depositions by any Governmental Entity in connection with such filings
that may be requested pursuant to any Law or by such Governmental Entity and (iv) reasonably
cooperate with the Buyer in exchanging such information and assistance as the Buyer may reasonably
request in connection with the foregoing.

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          Section 6.05. Conditions . Subject to the terms and conditions of this Agreement, the
Seller and the Company shall use reasonable efforts to cause the conditions set forth in
Section 2.01 and Section 2.02 to be satisfied and to consummate the transactions
contemplated herein as soon as reasonably practicable after the satisfaction of the conditions set
forth in Article II (other than those required to be satisfied at the Closing) but in any
event no later than the third Business Day occurring after such date.

          Section 6.06. Exclusive Dealing . From the date hereof until the earlier to occur of
the Closing Date and such time as this Agreement is terminated in accordance with Article
VIII, the Company and the Seller shall not, nor shall either of them authorize or permit any of
their respective Affiliates or any of their respective officers, directors, employees, accountants,
counsel, consultants, advisors, agents or other representatives to, take any action to directly or
indirectly encourage (including by providing information), initiate, solicit or engage in
discussions or negotiations with any Person (other than the Buyer, the Buyer’s Representatives and
the Buyer’s permitted assigns) or enter into any agreement concerning any purchase of the Shares or
any merger of or sale of any material properties or assets of, the Company or any of its
Subsidiaries, or similar transactions involving the Company or any of its Subsidiaries (other than
sales of assets in the ordinary course of business consistent with past practice) (each, a
“Competing Transaction”). The Company and the Seller shall, and shall authorize their
respective Affiliates and their respective officers, directors, employees, accountants, counsel,
consultants, advisors and agents to, (a) promptly (but in no event later than twenty-four (24)
hours) after receipt of any inquiry related to or proposal or offer which may be reasonably be
expected to lead to, a Competing Transaction, inform the Buyer in writing of the material terms and
conditions of any such inquiry, proposal or offer and the identity of the potential parties thereto
and (b) immediately cease any existing activities, discussions or negotiations with any parties
conducted on or prior to the date of this Agreement with respect to any Competing Transaction.

          Section 6.07. Financing Commitments .

               (a) Prior to Closing, the Seller and the Company agree to cooperate, and to cause their
Subsidiaries, their and each of their Subsidiaries’ respective representatives and advisors to
cooperate with the arrangement of the financings contemplated by the Debt Commitment Letters (or
any new financing commitment) as may be reasonably requested by the Buyer or any Financing Source,
including without limitation (i) providing to the Buyer and the Financing Source financial and
other information relating to the Company and its Subsidiaries reasonably requested in connection
with such Debt Financing (including information to be used in the preparation of information
packages regarding the business, operations, financial projections and prospects of the Buyer and
the Company and including information relating to the transactions contemplated hereunder), (ii)
providing (x) audited consolidated financial statements of Holdco for each of the three (3) fiscal
years immediately preceding the Closing, (y) unaudited consolidated financial statements of Holdco
for any quarterly period or periods of Holdco ended after the date of the most recent audited
financial statements within 45 days after the last day of the relevant quarter and (z) any
financial reports required to be delivered to the Buyer pursuant to Section 6.10 and any
additional audited and unaudited financial statements for all recent, probable or pending
acquisitions (it being understood that financial statements for Westmix shall not be required),
(iii) assisting with the preparation of materials for presentations,

42

 

memoranda, information packages, marketing materials and similar documents required in
connection with the Debt Financing (including without limitation pro forma financial statements and
information and materials for rating agency presentations), (iv) participating in a reasonable
number of meetings (including customary one-on-one meetings with the parties acting as lead
arrangers for the Debt Financing and senior management, representatives and advisors with
appropriate seniority and expertise, of the Seller and/or Company), presentations, due diligence
sessions and sessions with prospective lenders and agents, and the rating agencies, (v) reasonably
cooperating with the marketing efforts for any of the Debt Financing (including consenting to the
use of the Seller’s, the Company’s or any Subsidiaries’ logos), (vi) executing and delivering (or
causing its Subsidiaries to execute and deliver) any definitive financing documents, interest
hedging agreements, certificates (including a certificate from the principal financial officer of
the Company or any Subsidiary with respect to solvency matters), or other instruments (including
those relating to guarantees and other matters ancillary to the Debt Financing), (vii) providing
customary authorization letters to any Financing Source authorizing the distribution of information
to prospective lenders and containing a representation to such Financing Source that the public
lender versions of such documents, if any, do not include information that would be material
non-public information (within the meaning of the United States federal securities laws) about the
Company or its Subsidiaries, (viii) using its commercially reasonable efforts to ensure that any
Financing Source benefits materially from the existing lending relationships of the Seller, the
Company and its Subsidiaries and (ix) reasonably cooperating with any Financing Source’s due
diligence, in each case as may be reasonably requested by the Buyer; provided that (x) no
such documents, agreements or certificates executed and delivered pursuant to clause (vi) shall
take effect prior to the Closing Date, (y) neither the Seller, the Company nor any of its
Subsidiaries shall be required to pay any commitment or other similar fee or incur any other
liability in connection with the financings contemplated by the Commitment Letters (or any
Replacement Commitment) prior to the Closing Date, and (z) nothing herein shall require such
cooperation to the extent that it would unreasonably interfere with the ongoing operations of the
Seller, the Company and its Subsidiaries. Buyer shall promptly, upon the request of the Seller or
the Company, reimburse the Seller and the Company for all reasonable and documented out-of-pocket
costs and expenses (including reasonable attorneys’ fees) incurred by Seller, the Company or any of
its Subsidiaries in connection with the cooperation of the Seller and the Company contemplated by
this Section 6.07 and shall indemnify and hold harmless the Seller, the Company and its
Subsidiaries and their respective Affiliates and Representatives from and against any and all
Losses suffered or incurred by any of them of any type in connection with the arrangement of any
Debt Financing and any information used in connection therewith except with respect to any
information prepared or provided by the Seller, the Company or any of its Subsidiaries or any of
their respective Representatives or to the extent such Losses result from the gross negligence or
willful misconduct of the Seller, the Company or any of its Subsidiaries or any of their respective
Representatives, and the foregoing obligations shall survive the termination of this Agreement.

               (b) All material non-public information provided by the Seller, the Company or any of its
Subsidiaries shall be kept confidential in accordance with the Confidentiality Agreement, except
that the Buyer and its Subsidiaries and Affiliates shall be permitted to disclose such information
to the Financing Sources and other potential sources of capital, rating agencies and prospective
lenders and investors in connection with the Financings, subject to customary confidentiality
undertakings with respect to such information by such

43

 

Persons; provided that the Seller, the Company and its Subsidiaries shall have no
obligation to waive attorney-client privilege.

               (c) In the event that the Debt Commitment Letters are amended, replaced, supplemented or
otherwise modified, including as a result of obtaining any Replacement Commitment, the Seller and
the Company shall comply with its covenants in Section 6.07 with respect to the Debt
Commitment Letters, as so amended, replaced, supplemented or otherwise modified, or with respect to
such Replacement Commitment, to the same extent that the Seller and the Company would have been
obligated to comply with respect to the original Debt Financing.

          Section 6.08. FIRPTA Certificate . The Company shall deliver to the Buyer on or
before the Closing Date a certificate, dated no earlier than thirty days prior to the Closing Date,
certifying that either the Shares do not constitute “United States real property interests” within
the meaning of Section 897 of the Code or that Seller is not a foreign person within the meaning of
Section 897 of the Code, and such certificate shall otherwise be in compliance with Section 897 and
1445 of the Code.

          Section 6.09. Termination of Related Party Agreements . Except as set forth on
Section 6.09 of the Company Disclosure Schedules, prior to or effective as of the Closing,
the Company shall terminate all Contracts between the Company or any of its Subsidiaries, on the
one hand, and any officer, director, management level employee (including without limitation all
Key Executives), shareholder or controlling Affiliate of the Company or any of its Subsidiaries
(other than the Company and its Subsidiaries), on the other hand.

          Section 6.10. Monthly Financial Reports . From the date hereof until the earlier to
occur of the Closing Date and such time as this Agreement is terminated in accordance with
Article VIII, the Seller shall deliver to the Buyer its monthly financial reports for Ames
and its Subsidiaries by the earlier of: (i) two (2) Business Days after such report is available to
the board of directors of the Seller and (ii) 30 days after the last day of the relevant period,
which report shall be prepared in a manner consistent with the most recent monthly financial report
furnished to the Buyer.

          Section 6.11. 280G Payments. Prior to Closing, the Sellers and the Company shall (a)
cause each of the Company’s “Disqualified Individuals” (as such term is defined in Section 280G(c)
of the Code) to waive, and/or make the receipt or payment of subject to and contingent upon the
attainment of a successful 280G Shareholder Vote, any payments or benefits, including without
limitation the removal of any forfeiture restrictions on any equity of the Seller or its Affiliates
held by such executives, that would not be deductible pursuant to Section 280G of the Code if the
280G Shareholder Vote (as defined below) fails or does not attain the requisite approval, and (b)
take all actions necessary to timely conduct a shareholder vote which complies in all respects with
the shareholder vote requirements needed for the Company to avail itself of the exemption contained
in Section 280G(b)(5) of the Code and the applicable regulations promulgated thereunder with
respect to each of the individuals specified in clause (a) above (the “280G Shareholder
Vote”). The Company shall provide drafts of the form of such waivers and stockholder approval
materials to the Buyer for its review and approval (which approval will not be unreasonably delayed
or withheld) no later than five (5) Business

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Days prior to obtaining such waivers and soliciting such 280G Shareholder Vote. If the 280G
Shareholder Vote fails to achieve the requisite approval in respect of any Disqualified Individual
or otherwise does not qualify for such exemption, the Seller shall provide to the Buyer the name of
such individual and the amount waived or otherwise subject to such approval, and no amount so
waived or otherwise subject to such approval shall be paid to any such individual.

ARTICLE VII

COVENANTS OF THE BUYER

          Section 7.01. Access to Books and Records . From and after the Closing, the Buyer
shall, and shall cause the Company and its Subsidiaries to, provide the Seller and its authorized
representatives with reasonable access (for the purpose of examining and copying), during normal
business hours and upon reasonable notice, to the books and records of the Company and its
Subsidiaries with respect to periods or occurrences prior to the Closing Date in connection with
the preparation of tax returns or responding to tax authorities or the defense of a Third Party
Claim; provided that the Buyer may condition such access on execution and delivery of a
confidentiality agreement in customary form. Unless otherwise consented to in writing by the
Seller, neither the Company nor its Subsidiaries shall, for a period of seven years following the
Closing Date, destroy, alter or otherwise dispose of any of the material books and records of the
Company or its Subsidiaries for the period prior to the Closing Date without first offering to
surrender to the Seller such books and records or any portion thereof which the Buyer, the Company
or its Subsidiaries may intend to destroy, alter or dispose of.

          Section 7.02. Notification . From the date hereof until the earlier to occur of the
Closing Date and such time as this Agreement is terminated in accordance with Article VIII,
the Buyer shall give prompt written notice to the Seller of the occurrence or non-occurrence of any
event which, to the Knowledge of the Buyer, has caused any representation or warranty made by it
herein to be untrue or inaccurate, in any material respect, at any time on or after the date hereof
and prior to the Closing.

          Section 7.03. Director and Officer Liability and Indemnification .

               (a) For a period of six years after the Closing, the Buyer shall not, and shall not permit the
Company or any of its Subsidiaries to amend, repeal or modify any provision in the Company’s or any
of its Subsidiaries’ governing documents, including the Company’s certificate of incorporation and
bylaws, relating to the exculpation or indemnification of former officers and directors (unless
required by applicable Law), it being the intent of the Parties that the officers and directors of
the Company and its Subsidiaries prior to the Closing shall continue to be entitled to such
exculpation and indemnification to the fullest extent permitted under applicable Law.

               (b) For a period of six years after the Closing, the Buyer shall, or shall cause the Company
and its Subsidiaries to, maintain director and officer liability insurance or a “tail” policy,
providing coverage for the individuals who were officers and directors of the Company prior to the
Closing and are currently covered by the Company’s or its Subsidiaries’ liability insurance
policies with respect to directors and officers comparable to the policy or

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policies maintained by the Company or its Subsidiaries immediately prior to the Closing for
the benefit of such individuals; provided, however, that in no event shall the
Buyer be required to expend in the aggregate for such directors’ and officers’ liability insurance,
or “tail” policy, an amount in excess of 200% of the annual premium currently paid by the Company
or its Subsidiaries for its directors’ and officers’ liability insurance as in effect on the date
hereof.

          Section 7.04. Regulatory Filings .

               (a) The Buyer shall (i) within five Business Days of the date of this Agreement (or such later
date as may be mutually agreed in writing by the Seller and the Buyer) make or cause to be made all
filings and submissions under the HSR Act and any other Laws applicable to the Buyer with respect
to the consummation of the transactions contemplated hereby, and use reasonable best efforts to
cause the expiration or termination of any applicable waiting periods under the HSR Act, including
requesting early termination of the HSR waiting period, (ii) make any further filings pursuant
thereto that may be necessary, proper or advisable in connection therewith; (iii) use reasonable
best efforts to comply as promptly as practicable with any additional requests for information,
including requests for production of information or documents and production of witnesses for
interviews or depositions by any Governmental Entity in connection with such filings that may be
requested pursuant to any Law or by such Governmental Entity; and (iv) reasonably cooperate with
the Company and its Subsidiaries and the Seller in exchanging such information and assistance as
the Company or its Subsidiaries or the Seller may reasonably request in connection with the
foregoing.

               (b) The Buyer and its Affiliates agree to take, or cause to be taken, all actions and do, or
cause to be done, all other things necessary, proper or advisable to consummate and make effective
the transactions contemplated hereby, including taking all such further action as may be necessary
to promptly resolve such objections, if any, as any Governmental Entity may assert under any Law
with respect to the transactions contemplated hereby, and to avoid or eliminate each and every
impediment under applicable Law that may be asserted by any Governmental Entity with respect to the
transactions contemplated hereby so as to enable the Closing to occur as soon as reasonably
possible (and in any event no later than the End Date); provided, however,
notwithstanding anything to the contrary contained herein, nothing in this Agreement will require
Buyer or its Affiliates to take any action, enter into any agreement, or make any offer to hold
separate, divest or to accept any operational restriction.

          Section 7.05. Conditions . The Buyer shall use reasonable efforts to (a) cause the
conditions set forth in Section 2.01, Section 2.02(f) (to the extent within the
Buyer’s control) and Section 2.03 to be satisfied and (b) to consummate the transactions
contemplated herein as soon reasonably possible after the satisfaction of the conditions set forth
in Article II (other than those to be satisfied at the Closing) but in any event no later
than the third Business Day occurring after such date; provided, however, in no
event shall the Buyer be required to consummate the transaction contemplated herein prior to the
earlier of (A) all conditions precedent to the availability of the Debt Financing (including in
respect of any Replacement Commitment, as applicable) have been satisfied and (B) the End Date.

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          Section 7.06. Senior Notes Obligations.

               (a) The Buyer and the Seller acknowledge and agree that, subject to Sections 7.06(b)
and (c) below, all obligations of Ames and its Subsidiaries with respect to the Senior
Notes (including all principal, accrued and unpaid interest and all other amounts), shall remain
obligations of Ames and its Subsidiaries through and after Closing.

               (b) Subject to Section 7.06(c), in accordance with the terms of the Indentures and
applicable Law, after the Closing the Buyer shall, and shall cause the issuer of the Senior Notes,
either to redeem the Senior Notes in full or commence a Change of Control Offer (as defined in the
Indentures). The Buyer agrees that the Seller and its Affiliates (other than Ames and its
Subsidiaries from and after the Closing) shall not have any liability or obligation in respect of
any such redemption or Change of Control Offer, including, without limitation, any change of
control penalty or premium or other payment or fee arising out of or resulting from the
consummation of the transactions contemplated by this Agreement under or pursuant to the Indenture
or the Senior Notes. For the avoidance of doubt, any fee, payment or premium offered or paid by
the Buyer in connection with any such Change of Control Offer shall be paid by the Buyer and shall
not constitute or form any part of any reduction to the Estimated Purchase Price or the Final
Purchase Price.

               (c) Notwithstanding anything in this Section 7.06 to the contrary, after the date
hereof and prior to the Closing Date, the Buyer may commence a tender offer and consent
solicitation for the Senior Notes (the “Tender Offers”). The Seller and the Company shall,
and shall cause their Subsidiaries to, use commercially reasonable efforts to assist the Buyer in
connection with the preparation of all filings, mailings or other submissions to be made in
connection with the Tender Offers. The terms, conditions and structure of the Tender Offers (which
may also include the elimination of substantially all negative covenants in the Senior Notes) and
the form and substance of any documents delivered or entered into in connection with the Tender
Offers shall be reasonably satisfactory to the Seller, the Company and its counsel and such terms,
conditions and structure shall comply with all applicable Laws. The consummation of the Tender
Offers shall be contingent upon the Closing, and the Tender Offers shall not be consummated nor
shall any amounts be payable to the holders of the Senior Notes in the event this Agreement is
terminated pursuant to Article VIII; it being understood that the completion of the Tender
Offers or the tender of any particular percentage of Senior Notes or the delivery of consents from
any particular percentage of Senior Notes shall not be a condition to Closing. If at any time
prior to the Closing, the Seller, the Company or the Buyer discover information relating to the
Company or its Subsidiaries of a type that should be set forth in an amendment or supplement to the
documents filed or delivered in respect of the Tender Offers so that such documents would not
include any misstatement of a material fact or omit to state any material fact necessary to make
the statements therein not misleading, the Party that discovers such information shall promptly
notify the other Parties hereto and the Seller and the Company shall assist Buyer in promptly
preparing an appropriate amendment or supplement describing such information to the extent required
by applicable Law. All costs, fees and expenses incurred in connection with the Tender Offers or
payments made in connection therewith, including any penalties, premiums or fees arising out of or
resulting from the Tender Offers, payments made to the investment banking firm managing the Tender
Offers, and legal and accounting fees and expenses incurred in connection therewith, shall be paid
by the Buyer, and the Seller and its

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Affiliates (other than the Company and its Subsidiaries from and after the Closing) shall not
have any liability or obligation in respect of any such Tender Offers (other than with respect to
information supplied in writing by or on behalf of the Seller or the Company expressly for
inclusion in the Tender Offer documents).

          Section 7.07. Employment and Benefit Arrangements.

               (a) For a period of twelve months following the Closing Date, the Buyer shall provide each
Employee of the Company and its Subsidiaries with employee benefits that are no less favorable in
the aggregate to those employee benefits (other than benefits under an equity incentive plan or
non-qualified deferred compensation plan) provided to each such employee immediately prior to the
Closing Date. The Buyer shall, for a period of twelve months following the Closing Date, maintain
a severance pay practice, program or arrangement for the benefit of each Employee that is no less
favorable in the aggregate than such practice, program or arrangement in effect immediately prior
to the Closing Date with respect to such Employee. For a period of at least two years following
the Closing Date, the Buyer shall honor and continue in full force and effect all employment
agreements in effect as of the date hereof with the Key Executives, on the one hand, and the
Company and its Subsidiaries, on the other hand, in each case, as set forth on Schedule
7.07(a).

               (b) The Buyer shall give Employees full credit for purposes of eligibility and vesting and
benefit accrual (other than benefit accrual under a defined benefit pension plan or retiree medical
plan) under the employee benefit plans or arrangements maintained by the Buyer or its Affiliates in
which such Employees participate for such Transferred Employees’ service with the Seller or its
Affiliates or predecessors to the same extent recognized by the Seller immediately prior to the
Closing Date; provided that the foregoing shall not apply (x) to the extent it would result
in a duplication of benefits or (y) to equity incentive compensation.

               (c) With respect to any welfare benefit plans maintained by the Buyer for the benefit of
Employees on and after the Closing Date, the Buyer shall (i) cause there to be waived any
eligibility requirements or pre-existing condition limitations to the same extent waived under
comparable plans of the Seller and (ii) give effect, in determining any deductible and maximum
out-of-pocket limitations, amounts paid by such Employees with respect to similar plans maintained
by Seller.

               (d) For the avoidance of doubt, nothing contained in this Section 7.07 shall have any
effect on or otherwise impair any rights under, in any respect, any Contract in effect on the date
hereof between the Company or any of its Subsidiaries, on the one hand, and any Employee, on the
other hand.

               (e) No provision of this Agreement shall be deemed to be the adoption of, or an amendment to,
any employee benefit plan, as that term is defined in Section 3(3) of ERISA, or otherwise limit the
right of the Buyer or its Affiliates to amend, modify or terminate any such employee benefit plan
or the employment of any employee of the Company or its Subsidiaries.

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          Section 7.08. Financing Commitments.

               (a) The Buyer will use its reasonable best efforts to (i) fully satisfy, on a timely basis,
subject to the terms and conditions of this Agreement and the Debt Commitment Letters, the terms,
conditions, representations and warranties set forth in the Debt Commitment Letters, (ii) maintain
in effect the Debt Commitment Letters and negotiate definitive agreements with respect to the Debt
Commitment Letters on the terms and conditions set forth in the Debt Commitment Letter or on other
terms no less favorable, in the aggregate, to the Buyer than those in the Debt Commitment Letters
and that would not be reasonably expected to prevent the Closing from occurring on or before the
End Date, (iii) satisfy on a timely basis all conditions applicable to Buyer set forth in such
definitive agreements that are within their reasonable control and (iv) consummate the Debt
Financing contemplated by the Debt Commitment Letters at or prior to the Closing. In the event
that all conditions in the Debt Commitment Letters (other than the availability of funding any of
the Equity Financing) have been satisfied or, upon funding, will be satisfied, the Buyer shall use
its reasonable best efforts to cause such lender and the other Persons providing the Debt Financing
to fund on the Closing Date the Debt Financing required to consummate the transactions contemplated
by this Agreement and otherwise enforce its rights under the Debt Commitment Letter. The Buyer
agrees to notify the Seller promptly if at any time prior to the Closing Date (i) any Debt
Commitment Letter shall expire or be terminated for any reason, or (ii) any Financing Source that
is a party to any Debt Commitment Letter notifies the Buyer that such source no longer intends to
provide financing to the Buyer on the terms set forth therein. The Buyer shall not amend, alter or
waive, or agree to amend, alter or waive, any Debt Commitment Letter in any manner that would
reasonably be expected to materially impair, materially delay or prevent the occurrence of the
transactions contemplated by this Agreement without the prior written consent of the Seller. The
Buyer will furnish correct and complete copies of definitive agreements with respect to the Debt
Financing to the Seller promptly upon their execution.

               (b) If any Debt Commitment Letter shall be terminated or modified in a manner materially
adverse to the Buyer for any reason, the Buyer shall use its reasonable best efforts to obtain,
and, if obtained, will provide the Seller and the Company with a copy of, a new financing
commitment from alternative sources on terms no less favorable, in the aggregate, to the Buyer than
those in the Debt Commitment Letters and that would not be reasonably expected to prevent the
Closing from occurring on or before the End Date (a “Replacement Commitment”).

               (c) In the event that the Debt Commitment Letters are amended, replaced, supplemented or
otherwise modified, including as a result of obtaining any Replacement Commitment, (i) the Buyer
shall keep the Seller and the Company informed on the terms thereof and shall deliver to the
Company final drafts of any such amended, replaced, supplemented or modified Debt Commitment
Letter, and (ii) the Buyer shall comply with its covenants in Section 7.08 with respect to
the Debt Commitment Letters, as so amended, replaced, supplemented or otherwise modified, or with
respect to such Replacement Commitment, to the same extent that the Buyer would have been obligated
to comply with respect to the original Debt Financing.

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          Section 7.09. Actions by Griffon. Griffon hereby covenants and agrees that it shall
not, and shall not permit the Buyer or any of Griffon’s direct or indirect Subsidiaries to, take,
or fail to take, any action that would result in any breach by the Buyer of Section 7.08.

          Section 7.10. Eligible Payments. Following and contingent upon (x) the consummation
of the transactions contemplated hereby, (y) the delivery of the releases noted below and
(z) to the extent a member of management is entitled to payments and/or benefits that would result
in an excise tax under Section 4999 of the Code, shareholder approval of the Eligible Payment
pursuant to Section 280G(b)(5), the Buyer shall cause the Company to make each Eligible Payment to
the applicable member of management to whom such Eligible Payment relates on or promptly following
the thirteenth (13th) day following the Closing and, only in the case of the Releasing Executives,
subject to the receipt by the Company of a release, substantially in the form attached hereto as
Annex B, executed by each of the Releasing Executives within ten (10) days following the
Closing Date; provided that, if a Releasing Executive does not deliver such release on or
prior to the tenth day following the Closing, the Buyer shall deliver the amount owed to such
Releasing Executive to the Seller by wire transfer of immediately available funds within two
Business Days. Notwithstanding anything to the contrary contained in this Agreement, if the
Company shall be required to withhold and pay over any Taxes in respect of the Eligible Payments,
the Company shall withhold and pay over such Taxes to the relevant Governmental Entity in
accordance with applicable Law and the Company shall send the recipient of the applicable Eligible
Payment documentation evidencing payment of the amount or amounts so withheld and paid over.

ARTICLE VIII

TERMINATION

          Section 8.01. Termination. This Agreement may be terminated at any time prior to the
Closing:

               (a) by the mutual written consent of the Buyer and the Seller;

               (b) by the Buyer, if there has been a material violation or breach by the Company or the
Seller of any representation or warranty (or any such representation or warranty shall have become
untrue in any material respect after the date of this Agreement) or covenant or agreement contained
in this Agreement which, in either case, would prevent the satisfaction of or result in the failure
of any condition to the obligations of the Buyer at the Closing and such violation or breach has
not been waived by the Buyer or, in the case of a breach of any covenant under this Agreement, has
not been cured by the Company or the Seller prior to the earlier to occur of (x) ten days after
receipt by the Seller of written notice of such breach from the Buyer or (y) the End Date;
provided, however, that the Buyer may not terminate this Agreement pursuant to this
Section 8.01(b) at any time during which the Buyer is in material breach of this Agreement;

               (c) by the Seller, if there has been a material violation or breach by the Buyer of any
representation or warranty (or any such representation or warranty shall have become untrue in any
material respect after the date of this Agreement) or covenant or agreement

50

 

contained in this Agreement which would, in either case, prevent the satisfaction of or result
in the failure of any condition to the obligations of the Seller or the Company at the Closing and
such violation or breach has not been waived by the Seller or, with respect to a breach of any
covenant under this Agreement, has not been cured by the Buyer prior to the earlier to occur of (x)
ten days after receipt by the Buyer of written notice of such breach from the Seller or (y) the End
Date; provided, however, that the Seller may not terminate this Agreement pursuant
to this Section 8.01(c) at any time during which the Seller or the Company is in material
breach of this Agreement;

               (d) by either the Buyer or the Seller if the transactions contemplated hereby have not been
consummated by October 4, 2010 (the “End Date”), provided that neither the Buyer
nor the Seller shall be entitled to terminate this Agreement pursuant to this Section
8.01(d) if such Person’s (or, in the case of the Seller, the Company’s or the Seller’s) breach
of this Agreement has prevented the consummation of the transactions contemplated hereby; or

               (e) by the Seller, if (x) all conditions set forth in Sections 2.01 and 2.02
have been satisfied or waived (other than those conditions that by their terms are to be satisfied
at the Closing), other than Section 2.02(f), if the failure of such condition to be
satisfied is due to the failure by the Buyer to take such reasonable actions to satisfy the
conditions to effectiveness of the Buyer’s Insurance Policy as are within its reasonable control,
and (y) the Buyer shall have not, on or prior to the End Date, received the proceeds of the Debt
Financing.

          Section 8.02. Effect of Termination.

               (a) In the event of a termination of this Agreement by either the Buyer or the Seller in
accordance with Section 8.01, the provisions of this Agreement shall immediately become
void and of no further force or effect (other than the last sentence of Section 6.07(a),
this Section 8.02, the last sentence of Section 7.06(c), Article XII hereof
and the Confidentiality Agreement and the Limited Guarantee which shall survive the termination of
this Agreement (in the case of the Confidentiality Agreement and the Limited Guarantee, subject to
the terms thereof)), and there shall be no liability on the part of the Buyer, the Company or the
Seller to one another, except for liability of the Company or the Seller to the Buyer for a Willful
Breach of this Agreement prior to the time of such termination.

               (b) Notwithstanding anything in this Agreement to the contrary, (i) in the event that the
Seller terminates this Agreement pursuant to Section 8.01(e), the Buyer shall promptly, but
in no event later than three Business Days after notice of such termination of this Agreement by
Seller, pay to the Seller a fee of $20,000,000 (the “Buyer Termination Fee”) in cash by
wire transfer of immediately available funds to an account designated by the Seller and (ii) in the
event the Buyer Termination Fee becomes payable and is paid, or caused to be paid, by the Buyer
pursuant to this Section 8.02(b), the Buyer Termination Fee shall be the Company’s and the
Seller’s sole and exclusive remedy against Buyer and Griffon under this Agreement.

               (c) Sole and Exclusive Remedy. The Parties may only terminate this Agreement pursuant
to Section 8.01 and following such termination, or if the Closing does not otherwise occur,
subject to Section 12.01(b), each such Party’s sole and exclusive remedy with respect to
any and all claims for any breach or liability under this Agreement or otherwise

51

 

relating to the subject matter of this Agreement and the transactions contemplated hereby
shall be as provided in Section 8.02 hereof; provided, that nothing in this
Section 8.02 shall prevent the Buyer, the Seller or the Company from electing to not
terminate this Agreement and, to the extent applicable, seek specific performance under Section
12.01(a); and provided, further that nothing in this Section 8.02 shall limit
the rights of the Buyer or the Seller under the Equity Commitment Letter, the rights of the Seller
under the Limited Guarantee or, the obligations of Griffon under the Limited Guarantee or the
Equity Commitment Letter or the rights of any Party under Section 12.12 hereof.

ARTICLE IX

SURVIVAL AND INSURANCE; INDEMNIFICATION

          Section 9.01. Survival. The representations and warranties set forth in Article
III, and Article IV hereof shall survive the Closing for a period of 36 months
following the Closing Date; provided that, the Title Representations shall survive until
the earlier of (i) the expiration of the applicable statue of limitations and (ii) six years
following the Closing Date. The representations and warranties set forth in Article V
hereof shall expire at and shall not survive the Closing. The covenants of the Parties that
require performance prior to Closing shall expire at and shall not survive the Closing and those
covenants that require or contemplate performance after the Closing shall survive in accordance
with their terms; provided that the covenants in Section 6.01 shall survive the
Closing for a period of six months following the Closing Date (the “Covenant Limitation
Date”).

          Section 9.02. Buyer’s Insurance Policy. Subject to Section 9.03(i), following
the Closing, except with respect to claims based upon fraud, Buyer acknowledges and agrees that the
Buyer’s Insurance Policy shall be the sole and exclusive remedy of Buyer and its Affiliates and
their respective officers, directors, shareholders, members, agents, employees, successors and
permitted assigns (the “Buyer Indemnitees”) of whatever kind and nature, in law, equity or
otherwise, known or unknown, which such parties have now or may have in the future, resulting from,
arising out of, or related to any inaccuracy or breach of any representation or warranty of the
Seller or the Company contained in this Agreement.

          Section 9.03. Indemnification by the Seller. Subject to the terms of this Article
IX, from and after the Closing, the Seller shall indemnify the Buyer Indemnitees and hold them
harmless from and against any and all Losses incurred or suffered by a Buyer Indemnitee resulting
from, arising out of or related to (i) any breach or inaccuracy of any representation or warranty
made by the Seller or the Company in this Agreement (or any certificate or documents delivered
pursuant to this Agreement to the extent relating to the accuracy of such representations and
warranties) to the extent that a Buyer Indemnitee provides written notice of such breach or
inaccuracy to the Seller prior to the Representation Limitation Date, provided, that for
purposes of determining the amount of any Losses incurred (but not for purposes of determining
whether a breach has occurred), arising out of or relating to any such breach of a representation
or warranty, any references to materiality or any similar exception or qualification contained in
or otherwise applicable to such representation or warranty shall be disregarded; and (ii) the
nonfulfillment, nonperformance or other breach of Section 6.01 by the Company in any
respect.

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          Section 9.04. Limitations on Indemnification. The indemnification provided for in
Section 9.03 is subject to the following limitations:

               (a) the Buyer and the Seller shall each be responsible for 50% of such Buyer Indemnitee’s
Losses under Section 9.03(i) up to $5,000,000 in the aggregate with respect to claims made
by such Buyer Indemnitee on or prior to the Representation Limitation Date(it being understood that
the Buyer’s Insurance Policy shall be the sole and exclusive remedy of the Buyer Indemnitees to the
extent their Losses exceed $5,000,000 in the aggregate prior to, on or after the Representation
Limitation Date); provided that, for the avoidance of doubt, the aggregate amount required
to be paid by the Seller pursuant to Section 9.03(i) shall not exceed $2,500,000;
provided, further, that the Seller’s obligations under Section 9.03(i)
shall be satisfied solely from and shall not exceed the available Escrow Amount;

               (b) the Seller shall be liable for Losses under Section 9.03(i) only to the extent
that the Buyer Indemnitee would have been entitled to indemnification for such Losses under the
terms of the Buyer’s Insurance Policy in effect as of the date hereof (taking into account all
limitations, exclusions, qualifications, rights of subrogation and covenants and agreements set
forth therein), but for (x) Item 5 of the “Declarations” set forth in the Buyer’s Insurance Policy,
(y) any exclusions related to or arising out of Buyer’s actual knowledge of breaches of any
representations or warranties as of the Inception Date which breach the Buyer did not have actual
knowledge of as of the date hereof and (z) Item 4(j) of the Buyer’s Insurance Policy;

               (c) the Seller shall have no obligations under Section 9.03(i) from and after the
Representation Limitation Date; provided that, so long as a Buyer Indemnitee delivers
written notice of a claim to the Seller describing in reasonable detail the claim, the amount
thereof (if known and quantifiable), and the basis thereof prior to the Representation Limitation
Date, the Seller shall be required to indemnify such Buyer Indemnitee for all indemnifiable Losses
(subject to the other limitations contained herein) which such Buyer Indemnitee may incur in
respect to the matters which are the subject of such claim;

               (d) the Seller shall be liable to a Buyer Indemnitee with respect to indemnifiable Losses
referred to in clause (ii) of Section 9.03 only if and to the extent the Buyer Indemnitee
provides the Seller with written notice thereof with reasonable detail supporting such Losses prior
to the Covenant Limitation Date;

               (e) the Seller’s obligations under clause (ii) of Section 9.03 shall be satisfied
solely from and shall not exceed the available Escrow Amount; and

               (f) in the event of a breach of Section 6.01, in no event shall the Buyer be entitled
to any recovery thereunder for amounts already received by the Buyer pursuant to the adjustments
contemplated by Section 1.03 hereof.

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ARTICLE X

ADDITIONAL COVENANTS

          Section 10.01. Disclosure Generally. If and to the extent any information required to
be furnished in the Seller Disclosure Schedules or the Company Disclosure Schedules is contained in
this Agreement or in the Seller Disclosure Schedules or the Company Disclosure Schedules attached
hereto and such information is reasonably apparent on its face to be responsive to any other
section of the Seller Disclosure Schedules or the Company Disclosure Schedules, such information
shall be deemed to be included in all sections in which the information is required to be included.
The inclusion of any information in the Seller Disclosure Schedules or the Company Disclosure
Schedules attached hereto shall not be deemed to be an admission or acknowledgment by the Company,
its Subsidiaries or the Seller, in and of itself, that such information is material to or outside
the ordinary course of the business of the Company or its Subsidiaries.

          Section 10.02. No Additional Representations; Disclaimer.

               (a) The Buyer acknowledges that neither the Seller, the Company nor any of its Subsidiaries,
nor any other Person acting on behalf of the Company or any of its Affiliates has made any
representation or warranty, express or implied, as to the accuracy or completeness of any
information regarding the Company or any of its Subsidiaries or their respective businesses or
assets, except as expressly set forth in this Agreement or the Schedules hereto. The Buyer further
agrees that, except as provided herein, neither the Seller nor any other Person shall have or be
subject to any liability to the Buyer or any other Person resulting from the distribution to the
Buyer, or the Buyer’s use of, any such information and any information, document or material made
available to the Buyer or the Buyer’s Representatives in certain “data rooms,” management
presentations or any other form in expectation of the transactions contemplated by this Agreement.

               (b) In connection with the Buyer’s investigation of the Company and its Subsidiaries, the
Buyer or the Buyer’s Representatives has received from or on behalf of the Company certain
projections, including projected statements of operating revenues and income from operations of the
Company and its Subsidiaries for the fiscal year ending October 3, 2010 and for subsequent fiscal
years and certain business plan information for such fiscal year and succeeding fiscal years. The
Buyer acknowledges that there are uncertainties inherent in attempting to make such estimates,
projections and other forecasts and plans, that the Buyer is familiar with such uncertainties, that
the Buyer is taking full responsibility for making its own evaluation of the adequacy and accuracy
of all estimates, projections and other forecasts and plans so furnished to it (including the
reasonableness of the assumptions underlying such estimates, projections and forecasts), and that
the Buyer shall have no claim against the Seller or any other Person with respect thereto.
Accordingly, except as provided herein, neither the Company nor the Seller make any representations
or warranties whatsoever with respect to such estimates, projections and other forecasts and plans
(including the reasonableness of the assumptions underlying such estimates, projections and
forecasts).

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               (c) The Buyer acknowledges that it has conducted to its satisfaction, an independent
investigation and verification of the financial condition, results of operations, assets,
liabilities, properties and projected operations of the Company and its Subsidiaries and, in making
its determination to proceed with the transactions contemplated by this Agreement, Buyer has relied
on the results of its own independent investigation and verification and the representations and
warranties of the Company and the Seller expressly and specifically set forth in this Agreement,
including the Seller Disclosure Schedules and the Company Disclosure Schedules attached hereto.
SUCH REPRESENTATIONS AND WARRANTIES BY THE COMPANY AND THE SELLER CONTAINED IN THIS AGREEMENT OR
ANY CERTIFICATE DELIVERED BY THE COMPANY OR THE SELLER PURSUANT TO THIS AGREEMENT CONSTITUTE THE
SOLE AND EXCLUSIVE REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SELLERS TO BUYER IN
CONNECTION WITH THE TRANSACTIONS CONTEMPLATED HEREBY, AND BUYER UNDERSTANDS, ACKNOWLEDGES AND
AGREES THAT ALL OTHER REPRESENTATIONS AND WARRANTIES OF ANY KIND OR NATURE EXPRESSED OR IMPLIED
(INCLUDING, BUT NOT LIMITED TO, ANY RELATING TO THE FUTURE OR HISTORICAL FINANCIAL CONDITION,
RESULTS OF OPERATIONS, ASSETS OR LIABILITIES OF THE COMPANY AND ITS SUBSIDIARIES) ARE SPECIFICALLY
DISCLAIMED BY THE COMPANY AND THE SELLER.

          Section 10.03. Certain Tax Matters.

               (a) The Company shall file or cause to be filed with the appropriate Governmental Entity
having jurisdiction all Tax Returns required to be filed by or with respect to the Company and each
of its Subsidiaries on or prior to the Closing Date. The Company shall deliver a draft of such Tax
Return to Buyer at least 30 days prior to the due date for filing such Tax Return for Buyer’s
review and consent, which shall not be unreasonably withheld, delayed or conditioned. Such Tax
Returns shall be prepared by the Company in a manner that is consistent with the preparation of
such Tax Returns in prior taxable periods.

               (b) After the Closing, the Buyer, shall file or cause to be filed when due with the
appropriate Governmental Entities having jurisdiction all Tax Returns of the Company and each of
its Subsidiaries that are required to be filed after the Closing Date.

               (c) After the Closing, the Buyer and the Company shall cooperate fully with, as and to the
extent reasonably requested by the Seller in connection with the filing of any Tax Returns of the
Seller or any of its Affiliates and any audit, litigation or other Proceeding with respect to Taxes
of the Company or any of its Subsidiaries or the Buyer or the Seller and any of their Affiliates.
Such cooperation shall include the retention and (upon the other Party’s request) the provision of
records and information which are reasonably relevant to any such audit, litigation or other
Proceeding and making employees available on a mutually convenient basis to provide additional
information and explanation of any material provided hereunder. The Company shall retain all books
and records with respect to tax matters pertinent to the Company and its Subsidiaries relating to
any tax periods and shall abide by all record retention agreements entered into with any taxing
authority, and shall give the Seller reasonable written notice prior to transferring, destroying or
discarding any such books and records prior to the expiration of the

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applicable statute of limitations for that tax period, and if the Seller so requests, the
Company shall allow the Seller to take possession of such books and records.

               (d) All transfer, documentary, sales, use, stamp, registration and other such Taxes and fees
(including any penalties and interest) incurred in connection with this Agreement (“Transfer
Taxes”) shall be paid fifty percent by the Buyer and fifty percent by the Seller when due, and
the party primarily or customarily responsible under applicable Law for filing any Tax Returns and
other documentation that must be filed in connection with Transfers Taxes will, at its own expense,
file all necessary Tax Returns and other documentation with respect to all such transfer,
documentary, sales, use, stamp, registration and other Taxes and fees, and, if required by
applicable Law, the other party will join in the execution of any such Tax Returns and other
documentation. Each party shall promptly pay all Transfer Taxes for which it is responsible
pursuant to this Section 10.03(d). For the avoidance of doubt, Transfer Taxes shall not
include any Tax imposable on gain derived by the Seller with respect to the transactions
contemplated by this Agreement.

               (e) Any Tax sharing agreement, Tax allocation agreement or other similar arrangement to which
the Company or any of its Subsidiaries is a party shall be terminated as of or prior to the Closing
Date and, after the Closing Date, none of the Company or any of its Subsidiaries shall be bound
thereby or have any liability thereunder.

               (f) The Seller, the Company and the Buyer agree that any United States federal, state or local
income tax deduction arising from the termination of the Swap Arrangements and the payment of the
Eligible Payments shall have accrued for income tax purposes after the Closing Date and further
agree that they shall each file all income Tax Returns in a manner consistent therewith.

          Section 10.04. Publicity. Parties agree that except as may be required by applicable
Law (in the reasonable opinion of counsel) including the rules and regulations promulgated by the
SEC and the New York Stock Exchange, no public release or announcement by the Seller, the Company,
the Buyer or any of their respective Affiliates concerning this Agreement or the transactions
contemplated hereby shall be made without advance approval thereof by the Seller and the Buyer,
which approval shall not be unreasonably withheld, delayed or conditioned. If any such public
announcement is required by Law (in the reasonable opinion of counsel) to be made by any Party,
prior to making such announcement, such Party will deliver a draft of such announcement to the
other Party, and shall provide each other Party reasonable opportunity to comment thereon.

          Section 10.05. Further Assurances. From time to time, as and when reasonably
requested by any Party hereto and at such Party’s expense, any other Party shall execute and
deliver, or cause to be executed and delivered, all such documents and instruments and shall take,
or cause to be taken, all such further or other actions as such other Party may reasonably deem
necessary or desirable to evidence and effectuate the transactions contemplated by this Agreement.

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ARTICLE XI

DEFINITIONS

          Section 11.01. Defined Terms. For all purposes of this Agreement, the following terms
shall have the respective meanings set forth in this Section 11.01.

          “280G Shareholder Vote” has the meaning set forth in Section 6.11.

          “Accounting Firm” has the meaning set forth in Section 1.03(b).

          “Affiliates” means with respect to any Person, any other Person, directly or
indirectly through one or more intermediaries, controlling, controlled by or under common control
with such particular Person. The term “control” (including, with the correlative meaning, the
terms “controlled by” and “under common control with”), as applied to any Person, means the
possession, directly or indirectly, of the power to direct or cause the direction of the management
and policies of such Person whether through the ownership of voting securities, by contract or
otherwise.

          “Agreement” has the meaning set forth in the preamble.

          “Allocation Schedule” has the meaning set forth in Section 10.03(e).

          “Ames” has the meaning set forth in the preamble.

          “Ames Australia” means Ames True Temper Australia Pty Ltd.

          “Ancillary Documents” means this Agreement, the Purchase Price Adjustment Escrow
Agreement and the other instruments and documents contemplated hereby and thereby.

          “Applicable Date” has the meaning set forth in Section 4.06(b).

          “Audited Financial Statements” has the meaning set forth in Section 4.06(a).

          “Balance Sheet Date” has the meaning set forth in Section 4.06(a).

          “Binder Agreement” means the Binder Agreement Number 14363199 issued by Chartis to the
Buyer.

          “Business Day” means any day other than (i) Saturday or Sunday or (ii) any other day
on which banks in New York, New York, are permitted or required to be closed.

          “Buyer” has the meaning set forth in the preamble.

          “Buyer Disclosure Schedules” means the disclosure schedules to this Agreement that are
referred to in Article V and are being delivered by the Buyer to the Seller concurrently
herewith.

          “Buyer Indemnitees” has the meaning set forth in Section 9.02.

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          “Buyer’s Insurance Policy” means the Buyer-Side Representations and Warranties
Insurance Policy Number 14363199 issued by Chartis to the Buyer in effect as of the date hereof;
provided that the terms of such Buyer’s Insurance Policy are not amended, modified or changed after
the date hereof and prior to the Representation Limitation Date unless reasonably consented to by
the Seller and the Buyer.

          “Buyer Termination Fee” has the meaning set forth in Section 8.02(b).

          “Cash and Cash Equivalents” means those items which are required by GAAP to be
included as “cash” or “cash equivalents” on the Closing Balance Sheet but excluding, (i) in each
case, any effects of the consummation of the transactions contemplated by this Agreement and the
financing thereof (ii) with respect to “cash”, any restricted cash, which shall be limited to cash
held by or for the benefit of third parties to secure an obligation of the Company or any of its
Subsidiaries and in no event shall “cash” or “cash equivalents” be deemed to be restricted by
virtue of it being held outside the United States.

          “Chartis” means Chartis Specialty Insurance Company.

          “Claims” has the meaning set forth in Section 12.15.

          “Closing” has the meaning set forth in Section 1.04(a).

          “Closing Date” has the meaning set forth in Section 1.04(a).

          “Closing Date Balance Sheet” has the meaning set forth in Section 1.03(a).

          “Closing Date Indebtedness” shall mean the sum of (i) the Indebtedness of the Company
and its Subsidiaries outstanding and unpaid immediately prior to the Closing that is being assumed,
repaid, prepaid, defeased or retired by the Buyer, on behalf of the Company and its Subsidiaries,
which shall include any fees, costs, penalties or make-whole or similar payments in connection
therewith; provided that the face amount of any letter of credit shall be considered
“Closing Date Indebtedness” only to the extent drawn upon; plus, without duplication, (ii)
the Swap Settlement Cost. The Closing Date Indebtedness (other than the Swap Settlement Cost) is
set forth in Section 11.01(b) of the Company Disclosure Schedules.

          “Closing Transactions” has the meaning set forth in Section 1.04(b).

          “Code” means the Internal Revenue Code of 1986, as amended.

          “Commitment Letters” has the meaning set forth in Section 5.07(a).

          “Company” has the meaning set forth in the preamble.

          “Company Closing Costs” means all of the fees, expenses and other payments (including
compensatory payments) incurred by the Company in connection with the transactions contemplated by
this Agreement and the Ancillary Agreements (on its own behalf and on behalf of the Seller),
including, without limitation, any fees and expenses owed to Schulte Roth & Zabel LLP, Credit
Suisse Securities (USA) LLC, UBS Securities, LLC, Robert W. Baird

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& Co. Inc., Transworld Capital Group, Ltd. any Management Agreement Termination Fee,
$1,200,000, representing 75% of the aggregate premium payable with respect to the Buyer’s Insurance
Policy for the entire term of such policy, and such other costs as are set forth on Section
11.01(c) of the Company Disclosure Schedules.

          “Company Disclosure Schedules” means the disclosure schedules to this Agreement that
are referred to in Article IV and are being delivered by the Company to the Buyer
concurrently herewith.

          “Company Intellectual Property” means all Intellectual Property owned, used or held
for use by the Company or any of its Subsidiaries.

          “Company Material Adverse Effect” means any change, effect, event, occurrence, state
of facts or development that, individually or in the aggregate with any other change, effect,
event, occurrence, state of facts or development, is or is reasonably likely to be materially
adverse to (i) the financial condition or results of operations, assets, liabilities or business of
the Company and its Subsidiaries taken as a whole, provided that any material adverse change
(including a prospective change) to the Company and its Subsidiaries, taken as a whole, business
relationship with The Home Depot Inc., Lowe’s Companies, Inc., Wal-Mart Stores, Inc. or any of
their respective Subsidiaries or Affiliates with whom the Company and its Subsidiaries, taken as a
whole, has a material business relationship as of the date hereof (collectively, the “Major
Customers”) shall constitute the basis for a Material Adverse Effect and Material Adverse
Change; provided, however, that none of the following shall be deemed in itself, or in any
combination, to constitute, and none of the following shall be taken into account in determining
whether there has been or will be, a Material Adverse Effect or Material Adverse Change: (a) any
adverse change, effect, event, occurrence, state of facts or development attributable to the
announcement or pendency of the transactions contemplated by this Agreement (other than with
respect to any Company and its Subsidiaries relationship with any Major Customer); (b) any adverse
change, effect, event, occurrence, state of facts or development affecting the lawn and garden
industry (that does not disproportionately affect the Company and its Subsidiaries, taken as a
whole), the United States economy as a whole or the capital markets in general; (c) any adverse
change, event, development, or effect arising from or relating to changes in GAAP; (d) any adverse
change, effect, event, occurrence, state of facts or development resulting from or relating to
compliance with the terms of, or the taking of any action required by, this Agreement (other than
consummation of the Closing itself); or (e) any adverse change, effect, event, occurrence; state of
facts or development arising from or relating to the commencement, continuation or escalation of a
war, material armed hostilities or other material international or national calamity or act of
terrorism directly involving the United States of America, or (ii) the ability of the Company to
timely consummate the transactions contemplated hereby.

          “Company Releasees” has the meaning set forth in Section 12.15.

          “Competing Transaction” has the meaning set forth in Section 6.06.

          “Confidentiality Agreement” has the meaning set forth in Section 6.02.

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          “Contract” means any agreement, contract, trust, indenture, instrument, note, deed,
lease for personal property, license, obligation, arrangement, understanding, commitment, or
undertaking (whether written or oral, whether express or implied and whether formal or informal).

          “Covenant Limitation Date” has the meaning set forth in Section 9.01.

          “Credit Facility” means that certain Amended and Restated Credit Agreement, dated as
of April 7, 2006, by and among Ames True Temper, Inc., Acorn Products, Inc., UnionTools, Inc. and
Ames True Temper Properties, Inc., as Borrowers, ATT Holding Co., as a Parent Guarantor, Bank of
America, N.A., as Administrative Agent, Swingline Lender and L/C Issuer, and the other lender
parties thereto (including all amendments thereto).

          “Current Assets” means, as of any date, the consolidated current assets of the Company
and its Subsidiaries determined in accordance with GAAP (excluding Cash and Cash Equivalents),
which current assets shall include only the line items set forth on Annex A hereto under
the heading “Current Assets.”

          “Current Liabilities” means, as of any date, the consolidated current Liabilities of
the Company and its Subsidiaries determined in accordance with GAAP, which current Liabilities
shall include only the line items set forth on Annex A hereto under the heading “Current
Liabilities” and no other Liabilities.

          “Debt Commitment Letter” has the meaning set forth in Section 5.07(a).

          “Debt Financing” has the meaning set forth in Section 5.07(a).

          “Eligible Payments” means those payments to be made to certain members of management
by the Company, as and to the extent set forth on Schedule 11.01(a).

          “Employee Benefit Plans” has the meaning set forth in Section 4.14(a).

          “Employees” has the meaning set forth in Section 4.15.

          “End Date” has the meaning set forth in Section 8.01(d).

          “Environmental Claims” has the meaning set forth in Section 4.17.

          “Environmental Laws” has the meaning set forth in Section 4.17.

          “Equity Commitment Letter” has the meaning set forth in Section 5.07(a).

          “Equity Financing” has the meaning set forth in Section 5.07(a).

          “ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

          “ERISA Affiliate” means any entity that is considered a single employer with the
Company under Section 414 of the Code.

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          “Escrow Account” has the meaning set forth in Section 1.04(b)(iii).

          “Escrow Agent” has the meaning set forth in Section 1.04(b).

          “Escrow Agreement” has the meaning set forth in Section 1.04(b)(iii).

          “Estimated Company Closing Costs” has the meaning set forth in Section 1.02.

          “Estimated Closing Date Balance Sheet” has the meaning set forth in Section
1.02.

          “Estimated Closing Date Cash and Cash Equivalents” has the meaning set forth in
Section 1.02.

          “Estimated Closing Date Indebtedness” has the meaning set forth in Section
1.02.

          “Estimated Purchase Price” has the meaning set forth in Section 1.01(b).

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

          “Final Closing Date Cash and Cash Equivalents” has the meaning set forth in
Section 1.03(a).

          “Final Closing Date Indebtedness” has the meaning set forth in Section
1.03(a).

          “Final Company Closing Costs” has the meaning set forth in Section 1.03(a).

          “Final Purchase Price” has the meaning set forth in Section 1.03(c).

          “Final Net Working Capital” has the meaning set forth in Section 1.03(a).

          “Finally Determined” has the meaning set forth in Section 1.05(b)(iii).

          “Financial Statements” has the meaning set forth in Section 4.06(a).

          “Financings” has the meaning set forth in Section 5.07(a).

          “Financing Source” means the entities that have committed to provide or otherwise
enter into agreements in connection with the Debt Financing or other financings in connection with
the transactions contemplated hereby, including the parties to the Debt Commitment Letters, the
commitment letters relating to any Replacement Commitment and any joinder agreements or credit
agreements relating thereto.

          “Foreign Plans” has the meaning set forth in Section 4.14(r).

          “GAAP” means the United States generally accepted accounting principles, applied on a
basis consistent with the Company’s financial statements described in Section 4.06.

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          “Griffon” has the meaning set forth in the preamble hereto.

          “Governmental Entity” means any supranational, national, state, provincial, municipal,
local or foreign government, any instrumentality, subdivision, court, administrative agency or
commission or other authority thereof, or any quasi-governmental body exercising any regulatory,
judicial, administrative, taxing, importing or other governmental or quasi-governmental authority.

          “Hazardous Materials” means any materials, substances or wastes, whether solid, liquid
or gaseous, defined, listed, classified, or regulated as “hazardous”, “extremely hazardous”,
“toxic”, a “pollutant”, or a “contaminant” in or under any Environmental Laws, including petroleum
products and any fractions or distillates thereof, friable asbestos, radioactive materials,
polychlorinated biphenyls, lead based paint, and urea formaldehyde foam insulation.

          “Holdco” has the meaning set forth in the preamble.

          “HSR Act” has the meaning set forth in Section 2.01(a).

          “Indebtedness” means any liability or obligation, whether or not contingent, (i) in
respect of borrowed money or evidenced by bonds, monies, debentures, or similar instruments or upon
which interest payments are normally made, (ii) under capitalized leases, (iii) in respect of loans
and advances, (iv) for the payment of any deferred purchase price of any property, assets or
services (including pursuant to capital leases) but excluding trade payables, (v) guarantees,
direct or indirect, in any manner, of all or any part of any Indebtedness, leases, dividends or
other obligations of any Person in any manner, whether directly or indirectly, provided
that guarantees by the Company or any of its Subsidiaries of an obligation of another Subsidiary of
the Company shall not constitute Indebtedness, (vi) all obligations under acceptance, standby
letters of credit or similar facilities, (vii) all matured obligations to purchase, redeem, retire,
defease or otherwise make any payment in respect of any membership interests, shares of capital
stock or other ownership or profit interest or any warrants, rights or options to acquire such
membership interests, shares or such other ownership or profit interest, (viii) all premiums,
penalties or make whole or similar payments paid or payable in connection with the obligations
referred to in (i) — (vii) except in connection with the Senior Notes, (ix) all accrued interest
of all obligations referred to in (i) — (viii) and (ix) all obligations referred to in (i) — (ix)
of a third party secured by any Lien on property or assets; provided that in no event shall
any underfunding or underfunded portion of any Employee Benefit Plan be considered “Indebtedness”
for purposes of this Agreement, nor shall any Indebtedness between or among the Company or any of
its Subsidiaries be considered “Indebtedness” for purposes of this Agreement.

          “Indentures” means the Senior Floating Rates Notes Indenture and the Senior
Subordinated Notes Indenture.

          “Intellectual Property” means all intellectual property rights and related priority
rights, whether protected, created or arising under the laws of the United States or any other
jurisdiction or under any international convention, including all patents, copyrights, trademarks,
service marks, trade names, brand names, Internet domain names, logos or other indicia of

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origin, and trade secrets and know-how and similar proprietary rights, and all applications or
registrations thereof.

          “Interim Release Date” has the meaning set forth in Section 1.05(a).

          “IP Licenses” means all licenses, sublicenses, and other agreements under which the
Company or any of its Subsidiaries has granted or received any licenses or rights that involve
Intellectual Property (including settlement and co-existence agreements).

          “IRS” has the meaning set forth in Section 4.14(b).

          “IT Systems” means all communications systems, computer systems, servers, network
equipment and other hardware owned, licensed or leased by the Company or any of its Subsidiaries.

          “Key Executives” means Duane Greenly, Daniel Yurovich, Larry Baab, David Nuti, Geoff
Brownrigg, Chris Ebling, Joe Wersosky, Jean Gaudreault and Mike Tomchak.

          “Knowledge” means, (i) with respect to the representations and warranties of the
Company set forth herein which are made subject to the qualification “to the Knowledge of the
Company,” or other qualification of similar import, as of the date hereof or the Closing Date, the
actual knowledge of Duane Greenly, Tom O’Connor, Daniel Yurovich, Larry Baab, Mike Tomchak, David
Nuti, Geoff Brownrigg, Chris Ebling, Tony Tang, Joe Wersosky and Jean Gaudreault of any matter,
fact, or thing, and such knowledge that such individuals should have had after reasonable due
inquiry, or (ii) with respect to the representations and warranties of the Buyer set forth herein
which are made subject to the qualification “to the Knowledge of the Buyer,” or other qualification
of similar import, as of the date hereof or the Closing Date, the actual knowledge of Ronald
Kramer, Douglas Wetmore, Brian Harris, Gene Colleran, Seth Kaplan and Michael Gray, of any matter,
fact, or thing, and such knowledge that such individuals should have had after reasonable due
inquiry.

          “Latest Audited Balance Sheet” has the meaning set forth in Section 4.06(a).

          “Latest Unaudited Balance Sheet” has the meaning set forth in Section 4.06(a).

          “Law” means any statute, code, Order, law, ordinance, rule, regulation, common law or
other requirement of any Governmental Entity.

          “Lease” has the meaning set forth in Section 4.08(a).

          “Leased Real Property” has the meaning set forth in Section 4.08(a).

          “Liabilities” means any and all debts, liabilities, commitments and obligations of any
kind, whether fixed, contingent or absolute, matured or unmatured, liquidated or unliquidated,
accrued or not accrued, asserted or not asserted, known or unknown, determined, determinable or
otherwise, whenever or however arising (including, whether arising out of contract or tort, based
on negligence or strict liability) and whether or not the same would be required by GAAP to be
reflected in financial statements or disclosed in the notes thereto.

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          “Lien” means any security interest, pledge, mortgage, lien, charge, hypothecation,
option or purchase or lease or otherwise acquire any interest, conditional sales agreement, title
retention, adverse claim of ownership or use, title defect, easement, right of way or other
encumbrance of any kind on or with respect to any property (real or personal) or property interest.

          “Loss” means, with respect to any Person, any loss, liability, fine, penalty, claim,
action, cause of action, cost, damage, deficiency, Tax or other loss or expense, including
reasonably legal fees and expenses, but excluding, exemplary or punitive damages (unless such
punitive damages are awarded against such Person in favor of any unaffiliated third Person).

          “Management Agreement Termination Fee” means any cash payment by the Company and/or
its Subsidiaries to Castle Harlan, Inc., pursuant to, and in full settlement and termination of,
the Management Agreement, dated as of June 28, 2004 (as amended or supplemented from time to time),
by and among Castle Harlan, Inc., the Company, Holdco and Ames.

          “Material Contracts” has the meaning set forth in Section 4.10(b).

          “Material Permits” has the meaning set forth in Section 4.21.

          “Multiemployer Plan” means a plan as described in Section 3(37)(A) of ERISA.

          “Net Working Capital” means as of the Closing Date (i) the Company’s Current Assets
minus (ii) the Company’s Current Liabilities, in each case on a consolidated basis, and as
of the Closing Date.

          “Non-Recourse Party” has the meaning set forth in Section 9.02.

          “Objection Notice” has the meaning set forth in Section 1.03(b).

          “Order” means any judgment, order, injunction, stipulation, decree, writ, doctrine,
ruling, assessment or arbitration award or similar order of any Governmental Entity.

          “Owned Real Property” has the meaning set forth in Section 4.08(c).

          “Parties” has the meaning set forth in the preamble.

          “Pay-Off Letters” has the meaning set forth in Section 2.02(c)(iv).

          “Permit” means any approvals, authorizations, consents, licenses, permits or
certificates, variances and exemptions of a Governmental Entity.

          “Permitted Liens” means (i) any and all mechanics’, workmen’s, common carrier,
warehousemen’s and other similar Liens arising by operation of Law and incurred in the ordinary
course of business which are not yet due and payable, (ii) Liens that relate to Taxes, assessments
and governmental charges or levies imposed upon the Company that are not yet due and payable or
that are being contested in good faith by appropriate Proceedings, and for which adequate

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reserves have been established in the Financial Statements to the extent required by GAAP,
(iii) Liens imposed by Law that relate to obligations that are not yet due and have arisen in the
ordinary course of business, (iv) pledges or deposits to secure obligations under workers’
compensation Laws or similar Laws or to secure public or statutory obligations and which pledges or
deposits are reflected in the Financial Statements to the extent required by GAAP, (v) Liens that
relate to zoning, entitlement and other land use Laws or Environmental Laws which are not violated
by the current use and operation by the Company or its Subsidiaries, as applicable, of the Real
Property, (vi) utility easements for electricity, gas, water, sanitary, sewer, surface water
drainage or other rights and easements granted to any Governmental Entities which do not materially
impair the occupancy or use of the Real Property for the purposes for which it is currently used,
(vii) any recorded utility company rights, easements or franchises for electricity, water, steam,
gas, telephone or other service or the right to use and maintain poles, lines, wires, cables,
pipes, boxes and other fixtures and facilities in, over, under and upon any Real Property which do
not materially impair the occupancy or use of the Real Property, (viii) any Subleases, minor
imperfections of title and other Liens on any Real Property that, individually or in the aggregate
with all other Liens affecting such Real Property, do not materially diminish the value of any
Owned Real Property or materially interfere with the use of such Real Property in the operation of
the business of the Company in the ordinary course and consistent with past practice and (ix) Liens
described in Section 11.01(d) of the Company Disclosure Schedules.

          “Person” means any individual, partnership, corporation, limited liability company,
association, joint stock company, trust, joint venture, an unincorporated organization and a
Governmental Entity.

          “Post-Closing Statement” has the meaning set forth in Section 1.03(a).

          “Pre-Closing Taxes” means all liability for all Taxes of the Company and its
Subsidiaries (i) for all Pre-Closing Tax Periods and (ii) with respect to a Straddle Period, that
are allocable to the portion of such period that ends on or before the Closing Date, determined on
an interim closing of the books as of the close of business at the Closing Date.

          “Pre-Closing Tax Period” means any taxable period that ends on or before the Closing
Date.

          “Preliminary Closing Statement” has the meaning set forth in Section 1.02.

          “Proceeding” means any action, suit, claim, arbitration, audit, assessment, hearing,
investigation, litigation or suit (whether civil, criminal, administrative, judicial or
investigative, whether formal or informal, whether public or private) commenced, brought, conducted
or heard by or before, or otherwise involving, any Governmental Entity or arbitrator.

          “Product” has the meaning set forth in Section 4.25.

          “Purchase Price Adjustment” has the meaning set forth in Section 1.03(e).

          “Purchase Price Excess” has the meaning set forth in Section 1.03(e).

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          “Purchase Price Shortfall” has the meaning set forth in Section 1.03(e).

          “Real Property” has the meaning set forth in Section 4.08(c).

          “Registered” means issued, registered, renewed or subject of a pending application.

          “Release” in the context of Hazardous Materials means any release, spill, leak,
discharge, disposal, pumping, pouring, emitting, emptying, injecting, leaching, dumping, migrating
or allowing to escape into the indoor or outdoor environment.

          “Releasing Executives” means Duane Greenly, David Nuti, Dan Yurovich, Joseph Wersosky,
Geoff Brownrigg, Chris Ebling, Jean Gaudreault, Larry Baab, Mike Tomchak and Tony Tang.

          “Replacement Commitment” has the meaning set forth in Section 7.08(b).

          “Representatives” means, with respect to any Person, such Person’s directors,
officers, employees, Affiliates, investment bankers, attorneys, accountants and other advisors or
representatives.

          “Representation Limitation Date” means, the earliest of: (i) the 36-month anniversary
of the Closing Date, (ii) if the Buyer has not made a claim against the Seller or the Company under
Section 9.01(i) on or prior to December 31, 2011, December 31, 2011 or (iii) the date on
which, in accordance with Section 1.05(a), the Seller is no longer obligated to maintain
funds in the Escrow Account for claims under Section 9.03(i).

          “Retention Dropdown Date” has the meaning set forth in the Buyer’s Insurance Policy as
in effect on the date hereof.

          “SEC” means the Securities and Exchange Commission.

          “SEC Documents” has the meaning set forth in Section 4.06(b).

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

          “Seller Disclosure Schedules” means the disclosure schedules to this Agreement that
are referred to in Article III and are being delivered by the Seller to the Buyer
concurrently herewith.

          “Senior Notes” means the Senior Floating Rate Notes and the Senior Subordinated Notes.

          “Senior Floating Rate Notes” means the Senior Floating Rate Notes due 2012 issued by
Ames.

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          “Senior Floating Rate Notes Indenture” means the Indenture, dated as of January
14, 2005, by and among Ames, as the issuer, Holdco, as the parent guarantor, and the Bank of New
York, N.A., as trustee.

          “Senior Subordinated Notes” means the 10% Senior Subordinated Notes due 2012 issued by
Ames.

          “Senior Subordinated Notes Indenture” means the Indenture, dated as of June 28, 2004,
by and among Ames, as the issuer, Holdco, as the parent guarantor, and The Bank of New York, N.A.,
as trustee.

          “Shares” has the meaning set forth in the preamble.

          “Software” means all (a) computer programs, including all software implementations of
algorithms, models and methodologies, whether in source code or object code, (b) databases and
compilations, including all data and collections of data, whether machine readable or otherwise,
(c) descriptions, flow-charts and other work product used to design, plan, organize and develop any
of the foregoing, screens, user interfaces, report formats, firmware, development tools, templates,
menus, buttons and icons and (d) documentation, including user manuals and other training
documentation, related to any of the foregoing.

          “Solvency Assumptions” has the meaning set forth in Section 5.08.

          “SRZ” has the meaning set forth in Section 12.14.

          “Straddle Period” means a taxable period which includes the Closing Date but does not
end on that date.

          “Sublease” has the meaning set forth in Section 4.08(b).

          “Subsidiary” means, with respect to any Person, any corporation, association,
partnership, limited liability company, trust or other entity of which more than 50% of the voting
power is held, directly or indirectly, by such Person.

          “Swap Arrangements” means the interest rate swap transaction, dated as of January 9,
2009, by and between Wachovia Bank, N.A. and Ames True Temper, Inc., with an effective date of
January 15, 2010, and the interest rate swap transaction, dated as of January 9, 2009, by and
between Wachovia Bank, N.A. and Ames True Temper, Inc., with an effective date of January 18, 2011.

          “Swap Settlement Cost” means the sum of (A) a Market Quotation (as defined in the Swap
Arrangements) representing the price to be paid by the Company in
respect of each Swap Arrangement, determined in accordance with such definition of Market Quotation provided, that, (i) such Market
Quotation shall be determined on the basis of quotations from no less than three Reference
Market-makers , and (ii) and shall be as of a date no later than 72 hours prior to the Closing,
plus (B) any Unpaid Amounts (as defined in the Swap Arrangements) in respect of such Swap
Arrangements.

67

 

          “Target Net Working Capital Range” means $108,000,000 to $118,000,000.

          “Tax” or “Taxes” means (i) any federal, state, local or foreign taxes
(including any tax on or based upon net income, gross income, or income as specially defined, or
earnings, profits, or selected items of income, earnings or profits) and all gross receipts,
capital stock, franchise, profits, withholding, employment, social security, unemployment,
disability, real property, environmental, ad valorem/personal property, stamp, excise, occupation,
sales, use, transfer, transaction, value added, windfall profits, customs duties, alternative
minimum, estimated or other taxes of any kind whatsoever, including any interest, penalty or
addition thereto, whether disputed or not, (ii) any penalties attributable to Tax Returns and (iii)
any liability in respect of any item described in clause (i) or (ii) payable by reason of contract,
assumption, transferee or successor liability, operation of Law, Treasury Regulation Section
1.1502-6(a) (or any predecessor or successor thereof or any comparable or similar provision under
applicable Law).

          “Tax Returns” means any return, report, information return or other document
(including schedules or any related or supporting information) filed or required to be filed with
any governmental entity or other authority in connection with the determination, assessment or
collection of any Tax or the administration of any laws, regulations or administrative requirements
relating to any Tax.

          “Title Representations” means the representations and warranties contained in Sections
3.02, 3.03, 3.05, 4.02, 4.04, 4.05, 4.09
and 4.14.

          “Transfer” has the meaning set forth in Section 6.01(d).

          “Transfer Taxes” has the meaning set forth in Section 10.03(d).

          “Unaudited Financial Statements” has the meaning set forth in Section 4.06(a).

          “U.S. Dollar Equivalent” means the equivalent amount in U.S. Dollars of Australian
Dollars as determined by reference to the New York foreign exchange selling rates, as published by
The Wall Street Journal three Business Days prior to the Closing Date.

          “Westmix” has the meaning set forth in the preamble to Article III.

          “Westmix Agreement” means the Business Sale Agreement dated as of July 5, 2010, among
West Barrows Mix Pty Ltd., Ames Australia and Michelangelo Cantone and Jewell Cantone.

          “Westmix Purchase Price” means the U.S. Dollar Equivalent of 14,050,000 Australian
Dollars.

          “Westmix Deposit” means the U.S. Dollar Equivalent of $1,405,000 Australian Dollars
determined as of the Closing Date.

          “Willful Breach” has the meaning set forth in Section 12.01(b).

68

 

ARTICLE XII

MISCELLANEOUS

          Section 12.01. Specific Performance; Remedies.

               (a) The Parties to this Agreement each acknowledge that the Buyer, the Seller and the Company
would be irreparably damaged in the event that the provisions of this Agreement were not performed
in accordance with the terms hereof and the Parties further agree that such damage could not be
adequately remedied by the payment of money damages. Accordingly, (i) the Buyer shall be entitled
to specific performance of the terms hereof, in addition to any other remedy at law or equity
without posting any bond and without proving that monetary damages would be inadequate, and (ii)
subject to Section 8.02(b), the Seller and the Company shall be entitled, without posting
any bond and without proving that monetary damages would be inadequate, to an injunction or
injunctions to prevent breaches of this Agreement by the Buyer or Griffon or to enforce
specifically the terms and provisions of this Agreement and the Equity Commitment Letter in each
case only to prevent breaches of or enforce compliance with (x) the Buyer’s and Griffon’s covenants
and agreements contained in Article VII hereof (other than Section 7.05(b) and any
requirement of Griffon to consummate the funding contemplated by the Equity Commitment Letter) and
(y) those covenants and agreements of the Buyer that require the Buyer to consummate the purchase
of the Shares or require Griffon to consummate the funding contemplated by the Equity Commitment
Letter, only if in the case of this clause (y), the financing provided for in the Debt Commitments
Letters (or any Replacement Commitments) is available to be drawn down by the Buyer pursuant to the
terms of the applicable agreements but is not so drawn down as a result of the Buyer refusing to do
so in breach of this Agreement, Griffon’s refusal to provide the funding contemplated by the Equity
Commitment Letter or Buyer’s refusal to call the funding commitment contemplated by the Equity
Commitment Letter. In the circumstances in which any Party is entitled to specific performance,
the other Parties shall not oppose, argue, contend or otherwise be permitted to raise as a defense
that an adequate remedy at law exists or that injunctive relief is inappropriate or unavailable.
If the financing provided for in the Debt Commitments Letters is available to be drawn down by the
Buyer pursuant to the terms of the applicable agreements but is not so drawn down as a result of
the Buyer refusing to do so in breach of this Agreement, Griffon’s refusal to consummate the
funding contemplated by the Equity Commitment Letter or Buyer’s refusal to call such funding
commitment, it is explicitly agreed that (A) the Company and/or the Seller shall be entitled to
cause the Buyer to fully enforce the terms of the Equity Commitment Letter against Griffon
(including by directly filing, and/or demanding that Buyer file, one or more lawsuits against
Griffon to fully enforce Griffon’s obligations thereunder) and (B) the Company and/or the Seller
shall be entitled to cause the Buyer to enforce the terms of the Debt Commitment Letters (or, if
replacement financing is being used, the terms of the Replacement Commitment), including by
demanding Buyer to file one or more lawsuits against the sources of the Debt Financing to fully
enforce such sources’ obligations thereunder and Buyer’s rights thereunder.

               (b) If (x) the Seller or the Company institute a Proceeding for injunctive relief or specific
performance under Section 12.01(a) and a court of competent jurisdiction does not award
injunctive relief or specific performance to the Seller or the Company

69

 

in a final Order in accordance with Section 12.01(a) (other than, if such court, in
the process of such Proceeding, determines that neither the Buyer nor Griffon has committed a
Willful Breach), (y) the Buyer or Griffon has committed a Willful Breach of this Agreement (other
than a failure to consummate the purchase of the Shares if the financing provided for in the Debt
Commitments Letters is not available to be drawn down by the Buyer pursuant to the terms of the
applicable agreements, other than as a result of Buyer’s or Griffon’s breaches of its obligations
under this Agreement or the Equity Commitment Letter) and (z) the Seller has not terminated this
Agreement under Section 8.01(e) and collected the Buyer Termination Fee, then the Company
or the Seller may institute a Proceeding for monetary damages against the Buyer, in which case, the
Parties hereby agree and stipulate that if the Seller or the Company establish a Willful Breach of
this Agreement by the Buyer or Griffon, the amount awarded to the Seller or the Company shall not
be less than $20,000,000 nor exceed $40,000,000 in the aggregate. Notwithstanding anything in this
Agreement to the contrary, if the Seller or the Company is awarded injunctive relief or specific
performance pursuant to Section 12.01(a) as a result of which the Closing actually occurs,
or monetary damages pursuant to Section 12.01(b), such equitable relief or monetary
damages, as the case may be, shall be the Seller’s and the Company’s sole and exclusive remedy
against Buyer and Griffon under this Agreement. “Willful Breach” means a material breach
of any representation, warranty or covenant made by the applicable Party (or Griffon) in this
Agreement that is a consequence of an act or failure to act by such party with the actual knowledge
that the taking of such action or failure to take such action would cause a material breach of this
Agreement, and such party has received written notice of such Willful Breach and has failed to cure
such Willful Breach (if such Willful Breach is curable) within four Business Days of such notice or
such shorter period as is necessary to permit the Closing to occur by the End Date.

               (c) Notwithstanding anything in this Agreement to the contrary, the Parties hereto agree that,
except as provided in Sections 8.02(b) and 12.01(b) and the Limited Guarantee,
specific performance (including, as and to the extent set forth in Section 12.01(b), the
right to require Griffon to consummate the funding contemplated by the Equity Commitment Letter)
shall be its sole and exclusive remedy with respect to breaches by Griffon and/or Buyer in
connection with this Agreement or the transactions contemplated hereby and, except as provided in
Sections 8.02(b) and12.01(b) (including, as and to the extent set forth in
Section 12.01(b), the right to require Griffon to consummate the funding contemplated by
the Equity Commitment Letter) and the Limited Guarantee, that it may not seek or accept any other
form of relief that may be available for breach under this Agreement or the transactions
contemplated hereby (including monetary damages). The Parties hereto further agree that subject to
the obligations of the Seller and the Company to seek specific performance prior to seeking damages
pursuant to Section 12.01(b), nothing in this Section 12.01 shall require any Party
to institute any Proceeding for (or limit any Party’s right to institute any Proceeding for)
specific performance under Section 12.01(a) prior or as a condition to exercising any
termination right under Article VIII (or receipt of any amounts due thereunder), nor shall
the commencement of any Proceeding pursuant to Section 12.01(a) or anything set forth in
this Section 12.01 restrict or limit any Party’s right to terminate this Agreement in
accordance with the terms hereof; it being understood and agreed by the Parties that during the
pendency of any Proceeding initiated by the Company or the Seller under Section 12.01(a) or
Section 12.01(b) the Seller shall maintain the right to terminate this Agreement under
Section 8.01(e) and receive payment of the Buyer Termination Fee provided and so long as
the circumstances under which the Seller has the right to terminate the Agreement

70

 

under Section 8.01(e) continue to exist; provided further that, (i) the payment of
the Buyer Termination Fee shall be the sole and exclusive remedy available to the Seller and the
Company in the event of such election as provided in Section 8.02(b), and (ii) concurrently
with the election to terminate this Agreement under Section 8.01(e) the Seller and the Company
shall deliver to the Buyer a duly executed stipulation of dismissal with prejudice with respect to
any such Proceedings pending under Sections 12.01(a) or Section 12.01(b), to be
held in escrow pending payment of the Buyer Termination Fee, following which Buyer may file such
stipulation with the applicable court(s).

               (d) To the extent the Company or the Seller brings any action under Section 12.01(a)
or Section 12.01(b), the End Date may, at the option of the Company or the Seller, be
extended by written notice to the Buyer by the amount of time during which such action is pending,
plus 10 Business Days.

          Section 12.02. Expenses. Except as otherwise expressly provided herein, the Seller
and the Buyer shall pay all of their own expenses (including attorneys’ and accountants’ fees and
expenses) in connection with the negotiation of this Agreement, the performance of their respective
obligations hereunder and the consummation of the transactions contemplated by this Agreement
(whether consummated or not); provided that (i) the Buyer and the Seller shall each be
responsible for 50% of the fee and expenses of the Escrow Agent related to the Purchase Price
Adjustment Escrow Agreement and (ii) the Buyer and the Seller shall each be responsible 50% for
filing fees applicable under the HSR Act and the antitrust Laws of other jurisdictions.

          Section 12.03. Notices. Any notice provided for in this Agreement shall be in writing
and shall be either personally delivered, or received by certified mail, return receipt requested,
or sent by reputable overnight courier service (charges prepaid) or telecopy to the Company at the
address set forth below and to any other recipient at the address indicated in this Agreement and
to any subsequent holder of Shares at such address as indicated by the Company’s records or at such
address or to the attention of such other person as the recipient party has specified by prior
written notice to the sending party. Notices will be deemed to have been given hereunder (i) when
delivered personally to the recipient, (ii) one Business Day after being sent to the recipient by
reputable overnight courier service (charges prepaid), (iii) upon machine-generated acknowledgment
of receipt after transmittal by facsimile if so acknowledged to have been received before 5:00 p.m.
on a Business Day at the location of receipt and otherwise on the next following Business Day,
provided that such notice, demand or other communication is also deposited within
twenty-four hours thereafter with a reputable overnight courier service (charges prepaid) for
delivery to the same Person or (iv) five calendar days after being mailed to the recipient by
certified or registered mail, return receipt requested and postage prepaid.

          Notices to the Buyer (and, following the Closing,

          the Company):

c/o Griffon Corporation

712 5th Avenue, 18th Floor

New York, NY 10019

71

 

Facsimile:(212) 957-5096

Attention: General Counsel

with a copy to (which shall not constitute notice):

Dechert LLP

1095 Avenue of the Americas

New York, NY 10036

Facsimile: (212) 698-3599

Attention: Martin Nussbaum

                    Derek M. Winokur

Notices to the Seller:

CHATT Holdings LLC

c/o Castle Harlan, Inc.

150 East 58th Street

New York, New York 10155

Attention: Justin Wender

Facsimile: (212) 888-5460

with a copy to (which shall not constitute notice):

Schulte Roth & Zabel LLP

919 Third Avenue

New York, New York 10022

Attention: Robert Goldstein, Esq.

Facsimile: (212) 593 5955

Notices to the Company prior to Closing:

CHATT Holdings Inc.

c/o CHATT Holdings LLC

c/o Castle Harlan, Inc.

150 East 58th Street

New York, New York 10155

Attention: Justin Wender

Facsimile: (212) 207-8042

CHATT Holdings Inc.

c/o Ames True Temper, Inc.

465 Railroad Avenue

Camp Hill, Pennsylvania 17011

Attention: Duane Greenly

Facsimile: (717) 303-2552

with a copy to (which shall not constitute notice):

72

 

Schulte Roth & Zabel LLP

919 Third Avenue

New York, New York 10022

Attention: Robert Goldstein, Esq.

Facsimile: (212) 593 5955

          Section 12.04. Assignment. This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the Parties hereto and their respective successors and
permitted assigns, except that neither this Agreement nor any of the rights, interests or
obligations hereunder may be assigned or delegated by the Buyer prior to the Closing without the
prior written consent of the Seller or by the Seller or the Company without the prior written
consent of the Buyer; provided that the Buyer may assign any of its rights, interests or
obligations hereunder without the consent of the Seller to one or more direct or indirect
Affiliates of the Buyer, and the Buyer (or any such assignees, if applicable) may, without the
consent of the Seller, pledge, assign or grant to the Buyer’s (or any such assignee’s, if
applicable) lenders, for the benefit of such lenders, a continuing security interest and lien on
all of the Buyer’s (or any such assignees’, if applicable) right, title and interest in and to this
Agreement and any and all Ancillary Documents, as security for the payment and performance of the
obligations of the Buyer (or any such assignees, if applicable) to such lenders by reason of
borrowings, the guarantee of borrowings or otherwise (provided that no such assignment
shall relieve the Buyer from its obligations hereunder).

          Section 12.05. Severability. If any provision of this Agreement is prohibited by Law
or otherwise determined to be invalid or unenforceable by a court of competent jurisdiction, the
provision that would otherwise be prohibited, invalid or unenforceable shall be deemed amended to
apply to the broadest extent that it would be valid and enforceable, and the invalidity or
unenforceability of such provision shall not affect the validity of the remaining provisions of
this Agreement so long as this Agreement as so modified continues to express, without material
change, the original intentions of the parties as to the subject matter hereof and the prohibited
nature, invalidity or unenforceability of the provision(s) in question does not substantially
impair the respective expectations or reciprocal obligations of the parties or the practical
realization of the benefits that would otherwise be conferred upon the parties. The Parties will
endeavor in good faith negotiations to replace the prohibited, invalid or unenforceable
provision(s) with a valid provision(s), the effect of which comes as close as possible to that of
the prohibited, invalid or unenforceable provision(s).

          Section 12.06. Construction. The language used in this Agreement shall be deemed to
be the language chosen by the Parties hereto to express their mutual intent. Cash denominated in
currency other than U.S. Dollars shall be calculated as of the relevant date of determination at
the exchange rate published in the Wall Street Journal on the date of such determination.

          Section 12.07. Amendment and Waiver. Any provision of this Agreement or the Schedules
or Exhibits hereto may be amended or waived only in writing signed by the Buyer, the Company and
the Seller. No waiver of any provision hereunder or any breach or default thereof shall extend to
or affect in any way any other provision or prior or subsequent breach or default.

73

 

          Section 12.08. Complete Agreement. This Agreement, the Disclosure Schedules, the
Exhibits and the documents referred to herein (including the Confidentiality Agreement, the
Ancillary Documents, the Equity Commitment Letter and the Limited Guarantee) contain the complete
agreement between the Parties hereto and supersede any prior understandings, agreements or
representations by or between the Parties, written or oral, which may have related to the subject
matter hereof in any way.

          Section 12.09. Counterparts. This Agreement may be executed in multiple counterparts,
any one of which need not contain the signatures of more than one party, but all such counterparts
taken together shall constitute one and the same instrument. This Agreement and any signed
Contract entered into in connection herewith or contemplated hereby and any amendments hereto, to
the extent signed and delivered by means of a facsimile or electronically transmitted PDF, shall be
treated in all manner and respects as an original Contract (or counterpart thereof) and shall be
considered to have the same binding legal effect as if it were the original signed version thereof
delivered in person.

          Section 12.10. No Third-Party Beneficiaries. This Agreement is for the sole benefit
of the Parties and their permitted assigns, and except for Section 7.03, nothing herein
expressed or implied shall give or be construed to give any Person (other than the Parties hereto
and such assigns) any legal or equitable rights hereunder; provided, however, that
the provisions of Sections 8.02 (b), (c) and (d), 12.01,
12.11 and 12.13 shall be enforceable by each Financing Source and its successors
and permitted assigns.

          Section 12.11. Governing Law; Jurisdiction. All matters relating to the
interpretation, construction, validity and enforcement of this Agreement shall be governed by and
construed in accordance with the domestic Laws of the State of New York without giving effect to
any choice or conflict of law provision or rule that would cause the application of Laws of any
jurisdiction other than the State of New York. The Parties hereto irrevocably and unconditionally
submit to the exclusive jurisdiction of any state or federal court sitting in New York, New York,
Borough of Manhattan, with respect to any Proceeding arising out of or relating to this Agreement
or the transactions contemplated hereby, and each Party hereby irrevocable and unconditionally
agrees that all claims in respect of such Proceeding shall be heard and determined in such courts

          Section 12.12. Prevailing Party. If any Proceeding is commenced by any Party hereto
to enforce its rights under this Agreement against any other party hereto, all fees, costs and
expenses, including, without limitation, reasonable attorneys fees and court costs, incurred by the
prevailing party in such Proceeding shall be reimbursed by the losing party; provided,
that, if the Buyer is the losing party, such fees, costs and expenses will be reimbursed by
Griffon; provided, further that if a Party to such Proceeding prevails in part, and loses
in part, the court, arbitrator or other adjudicator presiding over such Proceeding shall award a
reimbursement of the fees, costs and expenses incurred by such party on an equitable basis.

          Section 12.13. Waiver of Jury Trial. The Parties to this Agreement each hereby waives,
to the fullest extent permitted by law, any right to trial of any claim, demand, action, or cause
of action (i) arising under this Agreement or (ii) in any way connected with or related or
incidental to the dealings of the Parties hereto in respect of this Agreement or any of the

74

 

transactions related hereto, in each case whether now existing or hereafter arising, and
whether in contract, tort, equity, or otherwise. The Parties to this Agreement each hereby agree
and consents that any such claim, demand, action, cause of action shall be decided by court trial
without a jury and that the Parties to this Agreement may file an original counterpart of a copy of
this Agreement with any court as written evidence of the consent of the Parties hereto to the
waiver of their right to trial by jury.

          Section 12.14. Representation of the Company and the Seller. This Agreement
constitutes notice to each of the Parties that the Company and the Seller have each engaged Schulte
Roth & Zabel LLP (“SRZ”) as its legal counsel in connection with the transactions
contemplated by this Agreement. Each of the Parties hereby agrees, on its own behalf and on behalf
of its directors, members, partners, officers, employees and Affiliates, that SRZ may continue to
serve as counsel to each and any of the Seller and its Affiliates, on the one hand, and the
Company, on the other hand, in connection with the negotiation, preparation, execution and delivery
of this Agreement and the consummation of the transactions contemplated hereby, and that, following
consummation of the transactions contemplated by this Agreement, SRZ (or any successor) may serve
as counsel to the Seller and the Company and their respective directors, members, partners,
officers, employees or Affiliates, in connection with any litigation, claim, dispute or obligation
arising out of or relating to this Agreement or the transactions contemplated hereby, and each of
the Parties hereby consents thereto and waives any actual or alleged conflict of interest or
alleged violation of ethical or comparable rules applicable to SRZ arising therefrom. The Parties
further agree that, as to all communications among SRZ, the Company, and/or the Seller or its
Affiliates that relate in any way to the transactions contemplated by this Agreement, the
attorney-client privilege and the expectation of client confidence belongs to the Seller and may be
controlled by the Seller and shall not pass or be claimed by the Buyer or the Company.
Notwithstanding the foregoing, in the event that a dispute arises among the Buyer, the Company and
a third party (other than a Party to this Agreement) after the Closing, the Company may assert the
attorney-client privilege to prevent disclosure of confidential communications by SRZ to such third
party; provided, however, that the Company may not waive such privilege without the
prior written consent of SRZ.

          Section 12.15. Releases. Subject to Section 12.16 and the occurrence of the
Closing, effective from and after the Closing, the Seller, on behalf of itself and its Affiliates,
hereby forever and unconditionally waives and releases the Company and each of their respective
past and present agents, representatives, employees, officers, directors and Affiliates (the
“Company Releasees”) from all actions, causes of action, suits, debts, costs (including
reasonable attorneys’ fees), penalties, dues, sums of money, accounts, reckonings, bonds, bills,
liabilities, specialties, covenants, contracts, controversies, agreements, promises, variances,
trespasses, damages, judgments, extends, executions, claims, demands and administrative grievances
of every kind and nature, known and unknown, existing or claimed to exist, fixed or contingent,
both at law and in equity (collectively, “Claims”) that Seller or any of its Affiliates now
has, have ever had or may hereafter have against the respective Company Releasees arising
contemporaneously with or prior to the Closing Date or on account of or arising out of any matter,
cause or event occurring contemporaneously with or prior to the Closing Date; provided,
however, that nothing contained herein will release any Company Releasees from any Claims
(i) arising under this Agreement, the Ancillary Agreements, any other document or instrument
executed and delivered in connection with the transactions contemplated by this Agreement or

75

 

the transactions contemplated hereby or thereby, (ii) related to directors and officers
insurance, and (iii) arising under the certificate of incorporation or bylaws or similar
organizational and governing documents of the Company and its Subsidiaries (and any amendments
thereto).

          Section 12.16. Post-Closing Obligations of the Company and its Subsidiaries. The
Buyer and the Company hereby acknowledge and agree that, following the Closing, the Company and its
Subsidiaries shall be jointly and severally liable for the post-Closing obligations of the Buyer
under this Agreement.

* * * * *

Rest of page left intentionally blank

76

 

          IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on the day and year first
above written.

	 	 	 	 	 
	 	BUYER:

CLOPAY ACQUISITION CORP.

 	 
	 	By:  	/s/ Seth L. Kaplan
 	 
	 	 	Name:  	Seth L. Kaplan 	 
	 	 	Title:  	Senior Vice President 	 
	 
	 	GRIFFON:

GRIFFON CORPORATION

(solely for purposes of Section 7.09)

 	 
	 	By:  	/s/ Seth L. Kaplan
 	 
	 	 	Name:  	Seth L. Kaplan 	 
	 	 	Title:  	Senior Vice President 	 
	 
	 	COMPANY:

CHATT HOLDINGS INC.

 	 
	 	By:  	/s/ Duane R. Greenly
 	 
	 	 	Name:  	Duane R. Greenly 	 
	 	 	Title:  	President and Chief Executive Officer 	 
	 
	 	SELLER:

CHATT HOLDINGS LLC

 	 
	 	By:  	/s/ Duane R. Greenly
 	 
	 	 	Name:  	Duane R. Greenly 	 
	 	 	Title:  	President and Chief Executive Officerexv4w1

Exhibit 4.1

DIGITAL ANGEL CORPORATION

2003 FLEXIBLE STOCK PLAN

(as Amended and Restated through June 25, 2010)

ii

 

DIGITAL ANGEL CORPORATION

2003 FLEXIBLE STOCK PLAN

(as Amended and Restated through June 25, 2010)

TABLE OF CONTENTS

	 	 	 	 	 

	1. NAME AND PURPOSE
	 	 	1	 
	1.1 Name
	 	 	1	 
	1.2 Purpose
	 	 	1	 
	 
	 	 	 	 
	2. DEFINITIONS OF TERMS AND RULES OF CONSTRUCTION
	 	 	1	 
	2.1 General Definitions
	 	 	1	 
	2.1.1 Affiliate
	 	 	1	 
	2.1.2 Agreement
	 	 	1	 
	2.1.3 Benefit
	 	 	1	 
	2.1.4 Board
	 	 	1	 
	2.1.5 Cash Award
	 	 	1	 
	2.1.6 Change of Control
	 	 	2	 
	2.1.7 Code
	 	 	3	 
	2.1.8 Company
	 	 	3	 
	2.1.9 Committee
	 	 	3	 
	2.1.10 Common Stock
	 	 	3	 
	2.1.11 Effective Date
	 	 	3	 
	2.1.12 Employee
	 	 	3	 
	2.1.13 Employer
	 	 	3	 
	2.1.14 Exchange Act
	 	 	4	 
	2.1.15 Fair Market Value
	 	 	4	 
	2.1.16 Fiscal Year
	 	 	4	 
	2.1.17 ISO
	 	 	4	 
	2.1.18 NQSO
	 	 	4	 
	2.1.19 Option
	 	 	4	 
	2.1.20 Other Stock Based Award
	 	 	4	 
	2.1.21 Parent
	 	 	4	 
	2.1.22 Participant
	 	 	4	 
	2.1.23 Performance Based Compensation
	 	 	4	 
	2.1.24 Performance Share
	 	 	5	 
	2.1.25 Plan
	 	 	5	 
	2.1.26 Reload Option
	 	 	5	 

iii

 

	 	 	 	 	 

	2.1.27 Restricted Stock
	 	 	5	 
	2.1.28 Rule 16b-3
	 	 	5	 
	2.1.29 SEC
	 	 	5	 
	2.1.30 Share
	 	 	5	 
	2.1.31 SAR
	 	 	5	 
	2.1.32 Subsidiary
	 	 	5	 
	2.2 Other Definitions
	 	 	5	 
	2.3 Conflicts
	 	 	5	 
	 
	 	 	 	 
	3. COMMON STOCK
	 	 	6	 
	3.1 Number of Shares
	 	 	6	 
	3.2 Reusage
	 	 	6	 
	3.3 Adjustments
	 	 	6	 
	 
	 	 	 	 
	4. ELIGIBILITY
	 	 	6	 
	4.1 Determined By Committee
	 	 	6	 
	 
	 	 	 	 
	5. ADMINISTRATION
	 	 	6	 
	5.1 Committee
	 	 	6	 
	5.2 Authority
	 	 	7	 
	5.3 Delegation
	 	 	7	 
	5.4 Determination
	 	 	7	 
	 
	 	 	 	 
	6. AMENDMENT
	 	 	8	 
	6.1 Power of Board
	 	 	8	 
	6.2 Limitation
	 	 	8	 
	 
	 	 	 	 
	7. TERM AND TERMINATION
	 	 	8	 
	7.1 Term
	 	 	8	 
	7.2 Termination
	 	 	8	 
	 
	 	 	 	 
	8. MODIFICATION OR TERMINATION OF BENEFITS
	 	 	8	 
	8.1 General
	 	 	8	 
	8.2 Committee’s Right
	 	 	8	 
	8.3 Compliance with Applicable Laws
	 	 	8	 
	 
	 	 	 	 
	9. CHANGE OF CONTROL
	 	 	9	 

iv

 

	 	 	 	 	 

	9.1 Vesting and Payment
	 	 	9	 
	9.2 Other Action
	 	 	9	 
	 
	 	 	 	 
	10. AGREEMENTS AND CERTAIN BENEFITS
	 	 	9	 
	10.1 Grant Evidenced by Agreement
	 	 	9	 
	10.2 Provisions of Agreement
	 	 	9	 
	10.3 Transferability
	 	 	10	 
	 
	 	 	 	 
	11. REPLACEMENT AND TANDEM AWARDS
	 	 	10	 
	11.1 Replacement
	 	 	10	 
	11.2 Tandem Awards
	 	 	10	 
	 
	 	 	 	 
	12. PAYMENT, DIVIDENDS AND WITHHOLDING
	 	 	10	 
	12.1 Payment
	 	 	10	 
	12.2 Dividend Equivalents
	 	 	10	 
	12.3 Withholding
	 	 	11	 
	 
	 	 	 	 
	13. OPTIONS
	 	 	11	 
	13.1 Types of Options
	 	 	11	 
	13.2 Grant of ISOs and Option Price
	 	 	11	 
	13.3 Other Requirements for ISOs
	 	 	11	 
	13.4 NQSOs
	 	 	11	 
	13.5 Determination by Committee
	 	 	11	 
	 
	 	 	 	 
	14. SARS
	 	 	11	 
	14.1 Grant and Payment
	 	 	11	 
	14.2 Grant of Tandem Award
	 	 	11	 
	14.3 ISO Tandem Award
	 	 	12	 
	14.4 Payment of Award
	 	 	12	 
	 
	 	 	 	 
	15. ANNUAL LIMITATIONS
	 	 	12	 
	15.1 Limitation on Options and SARs
	 	 	12	 
	15.2 Limitation on Performance Shares
	 	 	12	 
	15.3 Computations
	 	 	12	 
	 
	 	 	 	 
	16. RESTRICTED STOCK AND PERFORMANCE SHARES
	 	 	12	 
	16.1 Restricted Stock
	 	 	12	 

v

 

	 	 	 	 	 

	16.2 Cost of Restricted Stock
	 	 	12	 
	16.3 Non-Transferability
	 	 	13	 
	16.4 Performance Shares
	 	 	13	 
	16.5 Grant
	 	 	13	 
	 
	 	 	 	 
	17. CASH AWARDS
	 	 	13	 
	17.1 Grant
	 	 	13	 
	17.2 Annual Limits
	 	 	13	 
	17.3 Restrictions
	 	 	13	 
	 
	 	 	 	 
	18. OTHER STOCK BASED AWARDS AND OTHER BENEFITS
	 	 	14	 
	18.1 Other Stock Based Awards
	 	 	14	 
	18.2 Other Benefits
	 	 	14	 
	 
	 	 	 	 
	19. MISCELLANEOUS PROVISIONS
	 	 	14	 
	19.1 Underscored References
	 	 	14	 
	19.2 Number and Gender
	 	 	14	 
	19.3 Unfunded Status of Plan
	 	 	14	 
	19.4 Termination of Employment
	 	 	14	 
	19.5 Designation of Beneficiary
	 	 	14	 
	19.6 Governing Law
	 	 	15	 
	19.7 Purchase for Investment
	 	 	15	 
	19.8 No Employment Contract
	 	 	15	 
	19.9 No Effect on Other Benefits
	 	 	15	 

vi

 

DIGITAL ANGEL CORPORATION

2003 FLEXIBLE STOCK PLAN

(as Amended and Restated through September 25, 2009)

1. NAME AND PURPOSE

1.1 Name.

The name of this Plan is the “Digital Angel Corporation 2003 Flexible Stock Plan.”

1.2 Purpose.

The Company has established this Plan to attract, retain, motivate and reward Employees and other
individuals, to encourage ownership of the Company’s common stock by Employees and other
individuals, and to promote and further the best interests of the Company by granting cash and
other awards. The Company also intends in appropriate circumstances to grant awards of its common
stock in lieu of cash compensation pursuant to the mutual agreement of the Participant and the
Company.

2. DEFINITIONS OF TERMS AND RULES OF CONSTRUCTION

2.1 General Definitions.

The following words and phrases, when used in the Plan, unless otherwise specifically defined or
unless the context clearly otherwise requires, shall have the following respective meanings:

2.1.1 Affiliate.

A Parent or Subsidiary of the Company.

2.1.2 Agreement.

The document which evidences the grant of any Benefit under the Plan and which sets forth the
Benefit and the terms, conditions and provisions of, and restrictions relating to, such Benefit.

2.1.3 Benefit.

Any benefit granted to a Participant under the Plan.

2.1.4 Board.

The Board of Directors of the Company.

2.1.5 Cash Award.

A Benefit payable in the form of cash.

1

 

2.1.6 Change of Control.

The occurrence of any of the following:

	 	A.	 	An acquisition of any common stock or other voting securities of the
Company entitled to vote generally for the election of directors (the “Voting
Securities”) by any “Person” or “Group” (as each such term is used for purposes of
Section 13(d) or 14(d) of the Exchange Act), immediately after which such Person or
Group, as the case may be, has “Beneficial Ownership” (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of more than 20% of the then outstanding
            shares of common stock or the combined voting power of the Company’s then
outstanding Voting Securities; provided, however, that in determining whether a
Change of Control has occurred, shares of common stock or Voting Securities that
are acquired in a Non-Control Acquisition (as defined below) shall not constitute
an acquisition which would cause a Change of Control. A “Non-Control Acquisition”
shall mean an acquisition by (i) the Company, (ii) any Subsidiary or (ii) any
employee benefit plan maintained by the Company or any Subsidiary, including a
trust forming part of any such plan (an “Employee Benefit Plan”);
	 
	 	B.	 	When, during any 2-year period, individuals who, at the beginning of
the 2-year period, constitute the Board (the “Incumbent Board”), cease for any
reason to constitute at least 50% of the members of the Board; provided, however,
that (i) if the election or nomination for election by the Company’s shareholders
of any new director was approved by a vote of at least two-thirds of the Incumbent
Board, such new director shall, for purposes hereof, be deemed to be a member of
the Incumbent Board; and (ii) no individual shall be deemed to be a member of the
Incumbent Board if such individual initially assumed office as a result of either
an actual or threatened “Election Contest” (as described in Rule 14a-11 promulgated
under the Exchange Act) or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person or Group other than the Board (a “Proxy
Contest”) including by reason of any agreement intended to avoid or settle any
Election Contest or Proxy Contest;
	 
	 	C.	 	The consummation of:

	 	i.	 	a merger, consolidation or reorganization involving
the Company or any Subsidiary, unless the merger, consolidation or
reorganization is a Non-Control Transaction. A “Non-Control Transaction”
shall mean a merger, consolidation or reorganization of the Company or
any Subsidiary where:

	 	(a)	 	the shareholders of the Company immediately prior to the merger,
consolidation or reorganization own, directly or indirectly,
immediately following such merger, consolidation or reorganization, at
least 50% of the combined voting power of the outstanding voting
securities of the corporation resulting from such merger,
consolidation or reorganization (the “Surviving Corporation”) in
substantially the same proportion as their ownership of the common
stock or Voting Securities, as the case may be, immediately prior to
the merger, consolidation or reorganization,
	 
	 	(b)	 	the individuals who were members of the Incumbent Board immediately
prior to the execution of the agreement providing for the merger,
consolidation or reorganization constitute at least two-thirds of the
members of the board of directors of the Surviving Corporation, or a
corporation beneficially owning, directly or indirectly, a majority of
the voting securities of the Surviving Corporation, and
	 
	 	(c)	 	no Person or Group, other than (1) the Company, (2) any Subsidiary,
(3) any Employee Benefit Plan or (4) any other Person or Group who,
immediately prior to the merger, consolidation or reorganization, had
Beneficial Ownership of not less than 20% of the then outstanding
Voting Securities or common stock, has Beneficial Ownership of 20% or
more of the combined voting power of the Surviving Corporation’s then
outstanding voting securities or common stock;

2

 

	 	(d)	 	A complete liquidation or dissolution of the Company; or
	 
	 	(e)	 	The sale or other disposition of all or substantially all of the
assets of the Company to any Person (other than a transfer to a
Subsidiary).

Notwithstanding the foregoing, a Change of Control shall not be deemed to have occurred solely
because any Person or Group (the “Subject Person”) acquired Beneficial Ownership of more than the
permitted amount of the then outstanding Voting Securities or common stock of the Company as a
result of an acquisition of Voting Securities or common stock by the Company which, by reducing the
number of shares of Voting Securities or common stock then outstanding, increases the proportional
number of shares beneficially owned by the Subject Person; provided, however, that if a Change of
Control would have occurred (but for the operation of this sentence) as a result of the acquisition
of Voting Securities or common stock by the Company, and after such acquisition by the Company, the
Subject Person becomes the beneficial owner of any additional shares of Voting Securities or common
stock, which increases the percentage of the then outstanding shares of Voting Securities or common
stock beneficially owned by the Subject Person, then a Change of Control shall be deemed to have
occurred.

2.1.7 Code.

The Internal Revenue Code of 1986, as amended. Any reference to the Code includes the regulations
promulgated pursuant to the Code.

2.1.8 Company.

Digital Angel Corporation

2.1.9 Committee.

The Committee described in Section 5.1.

2.1.10 Common Stock.

The Company’s common stock, which presently has a par value of $.01 per Share.

2.1.11 Effective Date.

The date that the amended and restated Plan is approved by the shareholders of the Company which
must occur within one year before or after approval by the Board. Any grants of Benefits prior to
the approval by the shareholders of the Company shall be void if such approval is not obtained.

2.1.12 Employee.

Any person employed by the Employer.

2.1.13 Employer.

The Company and all Affiliates.

3

 

2.1.14 Exchange Act.

The Securities Exchange Act of 1934, as amended.

2.1.15 Fair Market Value.

The closing price of Shares on the Nasdaq National Market on a given date, or, in the absence of
sales on a given date, the closing price on the Nasdaq National Market on the last day on which a
sale occurred prior to such date.

2.1.16 Fiscal Year.

The taxable year of the Company which is the calendar year.

2.1.17 ISO.

An Incentive Stock Option as defined in Section 422 of the Code.

2.1.18 NQSO.

A non-qualified stock Option, which is an Option that does not qualify as an ISO.

2.1.19 Option.

An option to purchase Shares granted under the Plan.

2.1.20 Other Stock Based Award.

An award under Section 3.1 that is valued in whole or in part by reference to, or otherwise based
on, common stock.

2.1.21 Parent.

Any corporation (other than the Company or a Subsidiary) in an unbroken chain of corporations
ending with the Company, if, at the time of the grant of an Option or other Benefit, each of the
corporations (other than the Company) owns stock possessing 50% or more of the total combined
voting power of all classes of stock in one of the other corporations in such chain.

2.1.22 Participant.

An individual who is granted a Benefit under the Plan. Benefits may be granted only to Employees,
members of the Board, (including former Employees and former members of the Board if in connection
with their separation from the Company), employees and owners of entities which are not Affiliates
but which have a direct or indirect ownership interest in an Employer or in which an Employer has a
direct or indirect ownership interest, individuals who, and employees and owners of entities which,
are customers and suppliers of an Employer, individuals who, and employees and owners of entities
which, render services to an Employer, and individuals who, and employees and owners of entities,
which have ownership or business affiliations with any individual or entity previously described.

2.1.23 Performance Based Compensation.

Compensation which meets the requirements of Section 162(m)(4)(C) of the Code.

4

 

2.1.24 Performance Share.

A Share awarded to a Participant under Section 16.4 of the Plan.

2.1.25 Plan.

The Digital Angel Corporation 2003 Flexible Stock Plan and all amendments and supplements to it.

2.1.26 Reload Option.

An Option to purchase the number of Shares used by a Participant to exercise an Option and to
satisfy any withholding requirement incident to the exercise of such Option.

2.1.27 Restricted Stock.

Shares issued under Section 16.1 of the Plan.

2.1.28 Rule 16b-3.

Rule 16b-3 promulgated by the SEC, as amended, or any successor rule in effect from time to time.

2.1.29 SEC.

The Securities and Exchange Commission.

2.1.30 Share.

A share of common stock.

2.1.31 SAR.

A stock appreciation right, which is the right to receive an amount equal to the appreciation, if
any, in the Fair Market Value of a Share from the date of the grant of the right to the date of its
payment.

2.1.32 Subsidiary.

Any corporation, other than the Company, in an unbroken chain of corporations beginning with the
Company if, at the time of grant of an Option or other Benefit, each of the corporations, other
than the last corporation in the unbroken chain, owns stock possessing 50% or more of the total
combined voting power of all classes of stock in one of the other corporations in such chain.

2.2 Other Definitions.

In addition to the above definitions, certain words and phrases used in the Plan and any Agreement
may be defined in other portions of the Plan or in such Agreement.

2.3 Conflicts.

In the case of any conflict in the terms of the Plan relating to a Benefit, the provisions in the
section of the Plan which specifically grants such Benefit shall control those in a different
section. In the case of any conflict between

5

 

the terms of the Plan relating to a Benefit and the terms of an Agreement relating to a Benefit,
the terms of the Plan shall control.

3. COMMON STOCK

3.1 Number of Shares.

The number of Shares which may be issued or sold or for which Options, SARs or Performance Shares
may be granted under the Plan shall be 4,000,000 Shares. Such Shares may be authorized but unissued
Shares, Shares held in the treasury, or both. The full number of Shares available may be used for
any type of Option or other Benefit; provided, however, that the number of Shares that may be
issued under ISOs shall not exceed 162,500.

3.2 Reusage.

If an Option or SAR expires or is terminated, surrendered, or canceled without having been fully
exercised, if Restricted Shares or Performance Shares are forfeited, or if any other grant results
in any Shares not being issued, the Shares covered by such Option or SAR, grant of Restricted
Shares, Performance Shares or other grant, as the case may be, shall again be available for use
under the Plan. Any Shares which are used as full or partial payment to the Company upon exercise
of an Option or for any other Benefit that requires a payment to the Company shall be available for
purposes of the Plan.

3.3 Adjustments.

If there is any change in the common stock of the Company by reason of any stock dividend,
spin-off, split-up, spin-out, recapitalization, merger, consolidation, reorganization, combination
or exchange of shares, or otherwise, the number of SARs and number and class of shares available
for Options and grants of Restricted Stock, Performance Shares and Other Stock Based Awards and the
number of Shares subject to outstanding Options, SARs, grants of Restricted Stock which are not
vested, grants of Performance Shares which are not vested, and Other Stock Based Awards, and the
price thereof, as applicable, may be appropriately adjusted by the Committee.

4. ELIGIBILITY

4.1 Determined By Committee.

The Participants and the Benefits they receive under the Plan shall be determined solely by the
Committee. In making its determinations, the Committee shall consider past, present and expected
future contributions of Participants and potential Participants to the Employer, including, without
limitation, the performance of, or the refraining from the performance of, services. Unless
specifically provided otherwise herein, all determinations of the Committee in connection with the
Plan or an Agreement shall be made in its sole discretion.

5. ADMINISTRATION

5.1 Committee.

The Plan shall be administered by the Committee. The Committee shall consist of the “outside
directors” of the Board, unless the Board appoints a Committee of two or more but less than all of
the Board all of whom are “outside directors” as defined in Section 162(m) of the Code. The
Committee shall use its best efforts to grant Options, SARs, Restricted Stock, Performance Shares,
Cash Awards and Other Stock Based Awards under this Plan to an Employee which will qualify as
“performance-based compensation” for purposes of Section 162(m) of the Code, except where the
Committee deems that the Company’s interests when viewed broadly will be better served by a

6

 

grant which is free of the conditions required to so qualify any such grant for purposes of Section
162(m) of the Code.

If the Committee does not include the entire outside directors of the Board, it shall serve at the
pleasure of the outside directors of the Board, which may from time to time appoint members in
substitution for members previously appointed and fill vacancies, however caused, in the Committee.
The Committee may select one of its members as its Chairman and shall hold its meetings at such
times and places as it may determine. A majority of its members shall constitute a quorum. All
determinations of the Committee made at a meeting at which a quorum is present shall be made by a
majority of its members present at the meeting. Any decision or determination reduced to writing
and signed by a majority of the members shall be fully as effective as if it had been made by a
majority vote at a meeting duly called and held.

5.2 Authority.

Subject to the terms of the Plan, the Committee shall have discretionary authority to:

	 	(a)	 	determine the individuals to whom Benefits are granted, the type and amounts of
Benefits to be granted and the date of issuance and duration of all such grants;
	 
	 	(b)	 	determine the terms, conditions and provisions of, and restrictions relating to,
each Benefit granted;
	 
	 	(c)	 	interpret and construe the Plan and all Agreements;
	 
	 	(d)	 	prescribe, amend and rescind rules and regulations relating to the Plan;
	 
	 	(e)	 	determine the content and form of all Agreements;
	 
	 	(f)	 	determine all questions relating to Benefits under the Plan;
	 
	 	(g)	 	maintain accounts, records and ledgers relating to Benefits;
	 
	 	(h)	 	maintain records concerning its decisions and proceedings;
	 
	 	(i)	 	employ agents, attorneys, accountants or other persons for such purposes as the
Committee considers necessary or desirable;
	 
	 	(j)	 	take, at any time, any action described in Section 9.1 or permitted by Section
9.2(a), irrespective of whether any Change of Control has occurred or is imminent;
	 
	 	(k)	 	determine, except to the extent otherwise provided in the Plan, whether and the
extent to which Benefits under the Plan will be structured to conform to the requirements
applicable to Performance-Based Compensation, and to take such action, establish such
procedures, and impose such restrictions at the time such Benefits are granted as the
Committee determines to be necessary or appropriate to conform to such requirements; and
	 
	 	(l)	 	do and perform all acts which it may deem necessary or appropriate for the
administration of the Plan and carry out the purposes of the Plan.

5.3 Delegation.

Except as required by Rule 16b-3 with respect to grants of Options, Stock Appreciation Awards,
Performance Shares, Other Stock Based Awards, or other Benefits to individuals who are subject to
Section 16b-3 of the Exchange Act or as otherwise required for compliance with Rule 16b-3 or other
applicable law, the Committee may delegate all or any part of its authority under the Plan to any
Employee, Employees or committee.

5.4 Determination.

All determinations of the Committee shall be final and binding on all persons.

7

 

6. AMENDMENT

6.1 Power of Board.

Except as hereinafter provided, the Board shall have the sole right and power to amend the Plan at
any time and from time to time.

6.2 Limitation.

The Board may not amend the Plan, without approval of the shareholders of the Company:

	 	(a)	 	in a manner which would cause Options which are intended to qualify as
ISOs to fail to qualify;
	 
	 	(b)	 	in a manner which would cause the Plan to fail to meet the requirements of Rule 16b-3; or
	 
	 	(c)	 	in a manner which would violate applicable law.

7. TERM AND TERMINATION

7.1 Term.

The Plan shall commence as of the Effective Date and, subject to the terms of the Plan, including
those requiring approval by the shareholders of the Company and those limiting the period over
which ISOs or any other Benefits may be granted, shall continue in full force and effect until
terminated.

7.2 Termination.

The Plan may be terminated at any time by the Board.

8. MODIFICATION OR TERMINATION OF BENEFITS

8.1 General.

Subject to the provisions of Section 8.2, the amendment or termination of the Plan shall not
adversely affect a Participant’s right to any Benefit granted prior to such amendment or
termination.

8.2 Committee’s Right.

Any Benefit granted may be converted, modified, forfeited or canceled, in whole or in part, by the
Committee if and to the extent permitted in the Plan or applicable Agreement or with the consent of
the Participant to whom such Benefit was granted. Except as may be provided in an Agreement, the
Committee may, in its sole discretion, in whole or in part, waive any restrictions or conditions
applicable to, or accelerate the vesting of, any Benefit.

8.3 Compliance with Applicable Laws.

The Plan shall be administered and interpreted in accordance with applicable federal tax laws,
including Section 409A of the Code, and the regulations promulgated thereunder.

8

 

9. CHANGE OF CONTROL

9.1 Vesting and Payment.

In the event of a Change of Control:

	 	(a)	 	provide for the purchase of any Benefit for an amount of cash equal to
the amount which could have been attained upon the exercise or realization of such
Benefit;
	 
	 	(b)	 	all outstanding SARs shall become immediately payable, except to the
extent that the right to exercise the SAR is subject to restrictions established in
connection with an Option that is issued in tandem with the SAR;
	 
	 	(c)	 	all Shares of Restricted Stock shall become fully vested;
	 
	 	(d)	 	all Performance Shares shall be deemed to be fully earned and shall be
paid out in such manner as determined by the Committee; and
	 
	 	(e)	 	all Cash Awards, Other Stock Based Awards and other Benefits shall become
fully vested and/or earned and paid out in such manner as determined by the
Committee.

9.2 Other Action.

In the event of a Change of Control, the Committee, in its sole discretion, may, in addition to the
provisions of Section 9.1 above and to the extent not inconsistent therewith:

	 	(a)	 	provide for the purchase of any Benefit for an amount of cash equal to
the amount which could have been attained upon the exercise or realization of such
Benefit;
	 
	 	(b)	 	make such adjustment to the Benefits then outstanding as the Committee
deems appropriate to reflect such transaction or change; and/or
	 
	 	(c)	 	cause the Benefits then outstanding to be assumed, or new Benefits
substituted therefor, by the surviving corporation in such change.

10. AGREEMENTS AND CERTAIN BENEFITS

10.1 Grant Evidenced by Agreement.

The grant of any Benefit under the Plan may be evidenced by an Agreement which shall describe the
specific Benefit granted and the terms and conditions of the Benefit. The granting of any Benefit
shall be subject to, and conditioned upon, the recipient’s execution of any Agreement required by
the Committee. Except as otherwise provided in an Agreement, all capitalized terms used in the
Agreement shall have the same meaning as in the Plan, and the Agreement shall be subject to all of
the terms of the Plan.

10.2 Provisions of Agreement.

Each Agreement shall contain such provisions that the Committee shall determine to be necessary,
desirable and appropriate for the Benefit granted which may include, but not necessarily be limited
to, the following with respect to any Benefit: description of the type of Benefit; the Benefit’s
duration; its transferability; if an Option, the exercise price, the exercise period and the person
or persons who may exercise the Option; the effect upon such Benefit of the Participant’s death,
disability, changes of duties or termination of employment; the Benefit’s conditions; when, if, and
how any Benefit may be forfeited, converted into another Benefit, modified, exchanged for another
Benefit, or replaced; and the restrictions on any Shares purchased or granted under the Plan.

9

 

10.3 Transferability.

Unless otherwise specified in an Agreement or permitted by the Committee, each Benefit granted
shall be not transferable other than by will or the laws of descent and distribution and shall be
exercisable during a Participant’s lifetime only by him.

11. REPLACEMENT AND TANDEM AWARDS

11.1 Replacement.

The Committee may permit a Participant to elect to surrender a Benefit in exchange for a new
Benefit.

11.2 Tandem Awards.

Awards may be granted by the Committee in tandem. However, no Benefit may be granted in tandem with
an ISO except SARs.

12. PAYMENT, DIVIDENDS AND WITHHOLDING

12.1 Payment.

Upon the exercise of an Option or in the case of any other Benefit that requires a payment by a
Participant to the Company, the amount due the Company is to be paid:

	 	(a)	 	in cash;
	 
	 	(b)	 	by the surrender of all or part of a Benefit (including the Benefit
being exercised) including by means of a so-called “cashless exercise” of an option;
	 
	 	(c)	 	by the tender to the Company of Shares owned by the optionee and
registered in his name having a Fair Market Value equal to the amount due to the
Company;
	 
	 	(d)	 	in other property, rights and credits deemed acceptable by the
Committee, including the Participant’s promissory note;
	 
	 	(e)	 	by any combination of the payment methods specified in (a), (b), (c) and
(d) above.

Notwithstanding, the foregoing, any method of payment other than (a) may be used only with the
consent of the Committee or if and to the extent so provided in an Agreement. The proceeds of the
sale of Shares purchased pursuant to an Option and any payment to the Company for other Benefits
shall be added to the general funds of the Company or to the Shares held in treasury, as the case
may be, and used for the corporate purposes of the Company as the Board shall determine.

12.2 Dividend Equivalents.

Grants of Benefits in Shares or Share equivalents may include dividend equivalent payments or
dividend credit rights.

10

 

12.3 Withholding.

The Company may, at the time any distribution is made under the Plan, whether in cash or in Shares,
or at the time any Option is exercised, withhold from such distribution or Shares issuable upon the
exercise of an Option, any amount necessary to satisfy federal, state and local income and/or other
tax withholding requirements with respect to such distribution or exercise of such Options. The
Committee or the Company may require a participant to tender to the Company cash and/or Shares in
the amount necessary to comply with any such withholding requirements.

13. OPTIONS

13.1 Types of Options.

It is intended that both ISOs and NQSOs, which may be Reload Options, may be granted by the
Committee under the Plan.

13.2 Grant of ISOs and Option Price.

Each ISO must be granted to an Employee and granted within ten years from the earlier of the date
of adoption by the Board or the Effective Date. The purchase price for Shares under any ISO shall
be no less than the Fair Market Value of the Shares at the time the Option is granted.

13.3 Other Requirements for ISOs.

The terms of each Option which is intended to qualify as an ISO shall meet all requirements of
Section 422 of the Code.

13.4 NQSOs.

The terms of each NQSO shall provide that such Option will not be treated as an ISO. The purchase
price for Shares under any NQSO shall be no less than 100% of the Fair Market Value of the Shares
at the time the Option is granted.

13.5 Determination by Committee.

Except as otherwise provided in Section 13.1 through Section 13.4, the terms of all Options shall
be determined by the Committee.

14. SARS

14.1 Grant and Payment.

The Committee may grant SARs. Upon electing to receive payment of a SAR, a Participant shall
receive payment in Shares.

14.2 Grant of Tandem Award.

The Committee may grant SARs in tandem with an Option, in which case: the exercise of the Option
shall cause a correlative reduction in SARs standing to a Participant’s credit which were granted
in tandem with the Option; and the payment of SARs shall cause a correlative reduction of the
Shares under such Option.

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14.3 ISO Tandem Award.

When SARs are granted in tandem with an ISO, the SARs shall have such terms and conditions as shall
be required for the ISO to qualify as an ISO.

14.4 Payment of Award.

SARs shall be paid by the Company to a Participant, to the extent payment is elected by the
Participant (and is otherwise due and payable), as soon as practicable after the date on which such
election is made.

15. ANNUAL LIMITATIONS

15.1 Limitation on Options and SARs.

The number of (a) Shares covered by Options where the purchase price is no less than the Fair
Market Value of the Shares on the date of grant plus (b) SARs which may be granted to any
Participant in any Fiscal Year shall not exceed 125,000.

15.2 Limitation on Performance Shares

The number of Shares covered by Performance Shares in any Fiscal Year shall not exceed 62,500.

15.3 Computations.

For purposes of Section 15.1: Shares covered by an Option that is canceled shall count against the
maximum, and, if the exercise price under an Option is reduced, the transaction shall be treated as
a cancellation of the Option and a grant of a new Option; and SARs covered by a grant of SARs that
is canceled shall count against the maximum, and, if the Fair Market Value of a Share on which the
appreciation under a grant of SARs will be calculated is reduced, the transaction will be treated
as a cancellation of the SARs and the grant of a new grant of SARs.

16. RESTRICTED STOCK AND PERFORMANCE SHARES

16.1 Restricted Stock.

The Committee may grant Benefits in Shares available under Section 3.1 of the Plan as Restricted
Stock. Shares of Restricted Stock shall be issued and delivered at the time of the grant or as
otherwise determined by the Committee, but shall be subject to forfeiture until provided otherwise
in the applicable Agreement or the Plan. Each certificate representing Shares of Restricted Stock
shall bear a legend referring to the Plan and the risk of forfeiture of the Shares and stating that
such Shares are nontransferable until all restrictions have been satisfied and the legend has been
removed. At the discretion of the Committee, the grantee may or may not be entitled to full voting
and dividend rights with respect to all shares of Restricted Stock from the date of grant.

16.2 Cost of Restricted Stock.

Unless otherwise determined by the Committee, grants of Shares of Restricted Stock shall be made at
a per Share cost to the Participant equal to par value.

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16.3 Non-Transferability.

Shares of Restricted Stock shall not be transferable until after the removal of the legend with
respect to such Shares.

16.4 Performance Shares.

Performance Shares are the right of an individual to whom a grant of such Shares is made to receive
Shares or cash equal to the Fair Market Value of such Shares at a future date in accordance with
the terms and conditions of such grant. The terms and conditions shall be determined by the
Committee, in its sole discretion, but generally are expected to be based substantially upon the
attainment of targeted profit and/or performance objectives. The Committee shall determine the
performance targets which will be applied with respect to each grant of Performance Shares at the
time of grant, but in no event later than 90 days after the beginning of the period of service to
which the performance targets relate. The performance criteria applicable to Performance Shares
will be one or more of the following: (1) stock price; (2) average annual growth in earnings per
share; (3) increase in shareholder value; (4) earnings per share; (5) net income; (6) return on
assets; (7) return on shareholders’ equity; (8) increase in cash flow; (9) operating profit or
operating margins; (10) revenue growth of the Company; and (11) operating expenses. Each
performance target applicable to a Performance Share award and the deadline for satisfying each
such target shall be stated in the Agreement between the Company and the Employee. The Committee
must certify in writing that each such target has been satisfied before the Performance Shares
award becomes effective.

16.5 Grant.

The Committee may grant an award of Performance Shares. The number of Performance Shares and the
terms and conditions of the grant shall be set forth in the applicable Agreement.

17. CASH AWARDS

17.1 Grant.

The Committee may grant Cash Awards at such times and (subject to Section 17.2) in such amounts as
it deems appropriate.

17.2 Annual Limits.

The amount of any Cash Award in any Fiscal Year to any Participant shall not exceed the greater of
$100,000 or 100% of his cash compensation (excluding any Cash Award under this Section 17.2) for
such Fiscal Year.

17.3 Restrictions.

Cash Awards may be subject or not subject to conditions (such as an investment requirement),
restricted or nonrestricted, vested or subject to forfeiture and may be payable currently or in the
future or both. The Committee may make grants of Cash Awards that are intended to be Performance
Based Compensation and grants of Cash Awards that are not intended to be Performance Based
Compensation.

The Committee shall determine the performance targets which will be applied with respect to each
grant of Cash Awards that are intended to be Performance Based Compensation at the time of grant,
but in no event later than 90 days after the beginning of the period of service to which the
performance targets relate. The performance criteria applicable to Performance Based Compensation
awards will be one or more of the following: (1) stock price; (2) average annual growth in earnings
per share; (3) increase in shareholder value; (4) earnings per share; (5) net income; (6) return on
assets; (7) return on shareholders’ equity; (8) increase in cash flow; (9) operating profit or
operating margins; (10) revenue growth of the Company; and (11) operating expenses. Each
performance target applicable to a Cash Award intended to be Performance Based Compensation and the
deadline for satisfying each such target shall be stated in the Agreement between the Company and
the Employee. The Committee must certify

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in writing that each such target has been satisfied before
the Performance Based Compensation award is paid.

18. OTHER STOCK BASED AWARDS AND OTHER BENEFITS

18.1 Other Stock Based Awards.

The Committee shall have the right to grant Other Stock Based Awards which may include, without
limitation, the grant of Shares based on certain conditions, the payment of cash based on the
performance of the common stock, the grant of securities convertible into Shares, and the grant of
Shares in lieu of the payment of cash compensation pursuant to the mutual agreement of the
Participant and the Company.

18.2 Other Benefits.

The Committee shall have the right to provide types of Benefits under the Plan in addition to those
specifically listed, if the Committee believes that such Benefits would further the purposes for
which the Plan was established.

19. MISCELLANEOUS PROVISIONS

19.1 Underscored References.

The underscored references contained in the Plan are included only for convenience, and they shall
not be construed as a part of the Plan or in any respect affecting or modifying its provisions.

19.2 Number and Gender.

The masculine and neuter, wherever used in the Plan, shall refer to either the masculine, neuter or
feminine; and, unless the context otherwise requires, the singular shall include the plural and the
plural the singular.

19.3 Unfunded Status of Plan.

The Plan is intended to constitute an “unfunded” plan for incentive and deferred compensation. With
respect to any payments or deliveries of Shares not yet made to a Participant by the Company,
nothing contained herein shall give any rights that are greater than those of a general creditor of
the Company. The Committee may authorize the creation of trusts or other arrangements to meet the
obligations created under the Plan to deliver Shares or payments hereunder consistent with the
foregoing.

19.4 Termination of Employment.

If the employment of a Participant by the Company terminates for any reason, except as otherwise
provided in an Agreement, all unexercised, deferred, and unpaid Benefits may be exercisable or paid
only in accordance with rules established by the Committee. These rules may provide, as the
Committee may deem appropriate, for the expiration, forfeiture, continuation, or acceleration of
the vesting of all or part of the Benefits.

19.5 Designation of Beneficiary.

A Participant may file with the Committee a written designation of a beneficiary or beneficiaries
(subject to such limitations as to the classes and number of beneficiaries and contingent
beneficiaries as the Committee may from time to time prescribe) to exercise, in the event of the
death of the Participant, an Option, or to receive, in such event, any Benefits. The Committee
reserves the right to review and approve beneficiary designations. A Participant

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may from time to
time revoke or change any such designation of beneficiary and any designation of beneficiary under
the Plan shall be controlling over any other disposition, testamentary or otherwise; provided,
however, that if the Committee shall be in doubt as to the right of any such beneficiary to
exercise any Option or to receive any Benefit, the Committee may determine to recognize only an
exercise by the legal representative of the recipient, in which case the Company, the Committee and
the members thereof shall not be under any further liability to anyone.

19.6 Governing Law.

This Plan shall be construed and administered in accordance with the laws of the State of Delaware

19.7 Purchase for Investment.

The Committee may require each person purchasing Shares pursuant to an Option or other award under
the Plan to represent to and agree with the Company in writing that such person is acquiring the
Shares for investment and without a view to distribution or resale. The certificates for such
Shares may include any legend which the Committee deems appropriate to reflect any restrictions on
transfer. All certificates for Shares delivered under the Plan shall be subject to such
stock-transfer orders and other restrictions as the Committee may deem advisable under all
applicable laws, rules and regulations, and the Committee may cause a legend or legends to be put
on any such certificates to make appropriate references to such restrictions.

19.8 No Employment Contract.

Neither the adoption of the Plan nor any Benefit granted hereunder shall confer upon any Employee
any right to continued employment nor shall the Plan or any Benefit interfere in any way with the
right of the Employer to terminate the employment of any of its Employees at any time.

19.9 No Effect on Other Benefits.

The receipt of Benefits under the Plan shall have no effect on any benefits to which a Participant
may be entitled from the Employer, under another plan or otherwise, or preclude a Participant from
receiving any such benefits.

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