Document:

Exhibit 10.3

 

March 21, 2007

Mr.
David E. Robertson

62
Van Dyke Road

Hollis, NH 03049

Dear David:

Congratulations!  It is with
great pleasure that we confirm our offer for the position of Vice President and
Chief Financial Officer of iParty Corp. (“iParty” or “the company”) providing
services to iParty and its subsidiaries at the Support Office.  As was discussed, while in the employ of
iParty your compensation and benefits package shall be as follows:

	
  START DATE

  	
  Your
  start date will be April 2, 2007.

   

  Your
  employment with the company is at-will. 
  You or the company is free to terminate your employment at any time,
  with or without Cause.

   

  Further,
  you agree to sign and strictly abide by the attached Confidentiality,
  Non-Disclosure, Inventions and Non-Competition Agreement (the “Confidentiality
  Agreement”).

   

  
	
  COMPENSATION

  	
  You
  will be paid $3,076.92 per week, which annualizes to $160,000, and you will
  be eligible for a salary and performance review on April 1, 2008, and then
  salary and performance reviews annually thereafter.

   

  
	
  EQUITY

  	
  Subject
  to approval by the Board of Directors of the company (“the Board”) at its
  next meeting held after the date you execute this letter, the Company shall
  grant you options to purchase 125,000 shares of iParty common stock and such
  options shall be subject to the terms and conditions of the iParty Corp. 1998
  Incentive Stock Option Plan.  The
  exercise price will be equal to the market price at the close of business on
  the day that the options are granted by the Board.  The first twenty-five percent of the
  options will vest on the one year anniversary of your grant date. The balance
  will vest in equal monthly installments (of approximately 2604 options per
  month) over the next 36 months, provided that you are employed with the
  company on such vesting dates.  A stock
  option grant letter will be distributed to you upon Board approval.

   

  
	
  HEALTH & DENTAL  INSURANCE

  	
  iParty
  currently offers you the choice of an HMO or PPO through Blue Cross/Blue
  Shield.  The cost is shared by both the
  employee and the Company. 
  Additionally, we provide dental insurance through Met Life.  Deductions for these benefits are on a
  pre-tax basis.  Your current weekly
  contribution for participation in these plans during this plan year will be:

  

 

 

	
  

  	
   

  	
  Single

  	
   

  	
  Single +1

  	
   

  	
  Family

  	
   

  
	
   HMO & Dental

  	
   

  	
  $

  	
  19.05

  	
   

  	
  $

  	
  38.78

  	
   

  	
  $

  	
  60.50

  	
   

  
	
   PPO & Dental

  	
   

  	
  $

  	
  41.74

  	
   

  	
  $

  	
  84.14

  	
   

  	
  $

  	
  134.12

  	
   

  
	
   PPO
  Dental Only

  	
   

  	
  $

  	
  5.93

  	
   

  	
  $

  	
  14.38

  	
   

  	
  $

  	
  14.38

  	
   

  

 

	
  HEALTH & DENTAL  INSURANCE

  (cont’)

  	
  You
  have 30 days from your date of hire to accept or waive coverage.  If you accept coverage, your health and
  welfare benefits will begin on the first of the month following your first 30
  days of employment.  If you choose to
  decline coverage, you are eligible to enroll during Open Enrollment, which,
  is held each year in July with an August 1 effective date.

   

  
	
  LIFE INSURANCE

  	
  You
  will receive basic life insurance coverage equal to one (1) times your
  annualized base salary rounded to the nearest thousand.  You will be eligible to be covered for this
  insurance plan on the first of the month following your 30th day of
  employment.  You will also be eligible
  to purchase additional life insurance at a small cost to you.

   

  
	
  DISABILITY

  	
  You
  will be eligible to receive both short-term and long-term disability
  coverage.  You will be eligible to
  receive coverage for these plans on the first of the month following your 30th day of employment.

     

  
	
  401K PLAN

  	
  You
  will become eligible to enroll in this program on the first of the month
  following 90 days of continuous employment. 
  Plan highlights and more detailed information will be provided to you
  as you near your eligibility date.  Our
  plan is administered by Sentinel Benefits and managed by John Hancock
  Financial.

   

  
	
  HOLIDAY

  	
  You
  will be eligible immediately for nine (9) paid holidays each calendar
  year.  Eight (8) holidays are standard
  while the remaining day is used on your birthday.  The holiday schedule will be forwarded to
  you during your first week of employment.

   

  
	
  VACATION

  	
  You
  will receive ten (10) days of vacation upon completion of your first six (6)
  months of service to a maximum of twenty (20) vacation days in a calendar
  year.  Following that time you will
  accrue vacation weekly.  You must have
  vacation available to you in order to use it. 
  You may carry up to an additional 80 hours in your vacation account at
  year end.

   

  
	
  SICK/PERSONAL

  LEAVE

  	
  You
  will be eligible for six (6) paid sick days per calendar year, accrued
  weekly.  Up to two (2) of your six (6)
  days may be used as personal time. 
  Unused sick/personal days may not be carried over into the next
  calendar year.

   

  

 

 2
 

 

	
  INCENTIVE

  COMPENSATION

  	
  You
  will be included in the iParty Executive Incentive Compensation Plan. The
  components of your plan will be based on the plan applicable to Support
  Office personnel.  This compensation
  will be based on previously determined financial goals.  You must be actively employed at the time
  of payment in order to be eligible for payment under this program.  This plan will be governed by the 2007
  Incentive Compensation Summary Plan Document.

   

  
	
  SEVERANCE

  	
  After
  you have completed 6 months of active, continuous employment with the
  company, if your employment with the company is subsequently terminated for
  any reason, other than as a result of death or disability or for Cause, you
  will be entitled to (a) receive 6 months of severance pay (to be payable in
  accordance with the normal payroll policies and procedures of the company,
  subject to compliance with Section 409A of the Internal Revenue Code); and
  (b) the continuation of health, dental and life insurance benefits on the
  company’s plans for a period of 6 months after the termination of your
  employment (to the extent such continuation of benefits is allowed by the applicable
  plans), and the continuation of the company’s contribution to the cost of
  such coverage (as of your termination of employment) for such period.

   

  The receipt of any
  payments or benefits under this section, is subject to your execution a
  release in a form acceptable to the company. 
  All payments to be made under this section are subject to applicable
  withholding and other taxes.

   

  For
  purposes of this letter, “Cause” shall mean you shall (a) be
  charged with the commission of a felony crime; (b) commit any act or omit to
  take any action in bad faith and to the detriment of the company; (c) fail to
  follow any commercially reasonable and lawful direction of the Board or Chief
  Executive Officer of the company and continue to fail to follow such direction
  within 10 days of written notification of same; (d) commit an act of fraud
  against the company; (e) knowingly provide materially false information
  concerning the company to the Board, any governmental body, any regulatory
  agency, any lender or other financing source of the company, or any
  shareholder of the company; or (f) breach any term of this letter or the
  Confidentiality Agreement and fail to correct such breach within 10 days
  after written notice of commission thereof.

   

  
	
  REPORTING RELATIONSHIP

  	
  While
  serving in this position with iParty, you will report directly to Sal
  Perisano, Chief Executive Officer, except with respect to such matters for
  which you may be required by applicable U.S. Securities and Exchange
  Commission rules and regulations to report directly to company’s Audit
  Committee.

   

  

 

 3
 

Speaking for myself and everyone at iParty, we look forward to working
with you.

Sincerely,

	
  iParty Corp.

  	
   

  
	
   

  	
   

  
	
  /s/ SAL PERISANO

  	
   

  
	
   

  	
   

  
	
  Sal Perisano,

  	
   

  
	
  Chief Executive Officer

  	
   

  

 

[Remainder of page intentionally left blank.]

 4
 

 

	
  ACCEPTANCE

  	
  This
  letter along with the following listed attachments contains the entire
  agreements between you and the company. 
  No modification of this agreement is valid unless in writing and signed
  by an authorized officer of the company. 
  Please confirm your acceptance of this offer and your understanding of
  and agreement to the attachments by signing each (keeping one copy for your
  files) and returning one copy to us.

   

  a)       Confidentiality Agreement

  b)        2007 Support Office Incentive Plan

   

  

 

	
  Accepted and Agreed to:

  
	
   

  
	
   

  
	
   

  
	
  /s/ DAVID E. ROBERTSON

  	
   

  
	
  David E. Robertson

  
	
   

  
	
   

  
	
  March 22, 2007

  	
   

  
	
  Date

  
			

 

 5Exhibit 10.1

Execution
Copy

$135,000,000

HEADWATERS
INCORPORATED

2.50%
CONVERTIBLE SENIOR SUBORDINATED NOTES DUE 2014

PURCHASE
AGREEMENT

January 16,
2007

January 16, 2007

J.P. Morgan Securities
Inc.

Deutsche Bank Securities Inc.

Morgan Stanley & Co. Incorporated

Canaccord Adams Inc.

Stephens Inc.

Wedbush Morgan Securities Inc.

c/o J.P. Morgan
Securities Inc.

277 Park Avenue

9th Floor

New York, New York 10172

c/o Deutsche Bank
Securities Inc.

60 Wall Street

New York, New York 10005

c/o Morgan Stanley &
Co. Incorporated

1585 Broadway

New York, New York  10036

Dear Sirs and Mesdames:

Headwaters Incorporated,
a Delaware corporation (the “Company”),
proposes to issue and sell to the several purchasers named in Schedule I hereto
(the “Initial Purchasers”) $135,000,000
principal amount of its 2.50% Convertible Senior Subordinated Notes due 2014
(the “Firm Securities”) to be issued pursuant
to the provisions of an Indenture to be dated as of 22, 2007 (the “Indenture”) between the Company and Wells Fargo Bank,
National Association, as Trustee (the “Trustee”).  The Company also proposes to issue and sell
to the several Initial Purchasers not more than an additional $25.0 million
principal amount of its 2.50% Convertible Senior Subordinated Notes due 2014
(the “Additional Securities”) if and to the
extent that the Representatives (as defined below) shall have determined to
exercise, on behalf of the Initial Purchasers, the right to purchase such
Additional Securities (or any portion thereof) granted in Section 2
hereof.  The Firm Securities and the
Additional Securities are hereinafter collectively referred to as the “Securities.”  The
Securities will be convertible into cash and shares of common stock of the
Company, par value $0.001 per share (the “Common Stock”).  The shares into which the Securities are
convertible are hereinafter collectively referred to as the “Underlying Securities.” 
J.P. Morgan Securities Inc., Deutsche Bank Securities Inc. and Morgan
Stanley & Co. Incorporated shall act as representatives (collectively, the “Representatives”) of the several Initial Purchasers.

The Securities will be
offered without being registered under the Securities Act of 1933, as amended
(the “Securities Act”), to qualified
institutional buyers in compliance with the exemption from registration
provided by Rule 144A under the Securities Act.

 1
 

Holders (including
subsequent transferees) of the Securities will have benefit of the registration
rights set forth in the registration rights agreement (the “Registration Rights Agreement”), for so long as such
Securities constitute Transfer Restricted Securities (as defined in the
Registration Rights Agreement).  This
Agreement, the Securities, the Indenture and the Registration Rights Agreement
are hereinafter referred to collectively as the “Operative
Documents.”  This is to
confirm the agreements concerning the purchase of the Securities from the
Company by the Initial Purchasers.

In connection with the
sale of the Securities, the Company has prepared a preliminary offering
memorandum dated January 16, 2007, (the “Preliminary Offering
Memorandum”) and a Pricing Supplement dated January 16, 2007,
describing the terms of the Securities and set forth on Schedule II hereto (the
“Pricing Supplement”), and will prepare
a final offering memorandum (the “Final Offering Memorandum”
and, together with the Preliminary Offering Memorandum, the “Offering Documents”) including or incorporating by reference
a description of the terms of the Securities, the terms of the offering and a
description of the Company.  As used
herein, the term “Offering Documents”
shall include in each case the documents incorporated by reference
therein.  The terms “supplement,”
“amendment” and “amend”
as used herein with respect to an Offering Document shall include all documents
deemed to be incorporated by reference in the Preliminary Offering Memorandum
or Final Offering Memorandum that are filed subsequent to the date of such
Offering Document with the Securities and Exchange Commission (the “Commission”) pursuant to the Securities Exchange Act of
1934, as amended (the “Exchange Act”).  “Time of Sale Memorandum”
means the Preliminary Offering Memorandum and the Pricing Supplement together
with the information in the form set forth on Schedule II hereto that has been
prepared and delivered by the Company to the Initial Purchasers in connection
with the offering and sale of the Securities. 
“Applicable Time” means 5:00 p.m. Eastern
Standard Time on January 16, 2007.

1.                                      Representations
and Warranties of the Company.  The
Company represents and warrants to and agrees with each of the Initial
Purchasers as of the date hereof, as of the Applicable Time, and as of the
Closing Date, that:

(a)                                  (i) Each document, if
any, filed or to be filed pursuant to the Exchange Act and incorporated by
reference in the Offering Documents complied or will comply when so filed in
all material respects with the Exchange Act and the applicable rules and
regulations of the Commission thereunder and (ii) The Time of Sale Memorandum,
at the Applicable Time, did not contain any untrue statement of a material fact
or omit to state a material fact necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading and
(iii) the Final Offering Memorandum as of its date and as of the Closing Date
will not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except that the
representations and warranties set forth in this paragraph do not apply to
statements or omissions in the Time of Sale Memorandum or the Final Offering
Memorandum based upon information furnished to the Company in writing by or on
behalf of the Initial Purchasers expressly for use therein.  No order preventing the use of the Time of
Sale Memorandum or the Final Offering Memorandum, or any amendment or
supplement thereto, or any order asserting that any of the transactions

 2
 

contemplated by this Agreement are subject to the registration
requirements of the Securities Act or any state securities or blue sky laws has
been issued.

(b)                                 The Company has been duly
incorporated, is validly existing as a corporation in good standing under the
laws of the state of Delaware, has the corporate power and authority to own its
property and to conduct its business as described in the Time of Sale
Memorandum and Final Offering Memorandum and is duly qualified to transact
business and is in good standing in each jurisdiction in which the conduct of
its business or its ownership or leasing of property requires such
qualification, except to the extent that the failure to be so qualified or be
in good standing would not have a material adverse effect on the Company and
its subsidiaries, taken as a whole.

(c)                                  Each subsidiary of
the Company has been duly incorporated, is validly existing as a corporation in
good standing under the laws of the jurisdiction of its incorporation, has the
corporate power and authority to own its property and to conduct its business
as described in the Time of Sale Memorandum and Final Offering Memorandum and
is duly qualified to transact business and is in good standing in each
jurisdiction in which the conduct of its business or its ownership or leasing
of property requires such qualification, except to the extent that the failure
to be so qualified or be in good standing would not have a material adverse
effect on the Company and its subsidiaries, taken as a whole; all of the issued
shares of capital stock of each subsidiary of the Company have been duly and
validly authorized and issued, are fully paid and nonassessable and are owned
directly by the Company (except for (a) FlexCrete Building Systems, L.C., in
which Headwaters Resources, Inc. owns a 90% limited company interest, (b) Blue
Flint Ethanol LLC, in which the Company owns a 51% limited liability company
interest) and (c) Florida N-Viro L.P., in which VFL Technologies, Inc. owns a
51.5% limited partnership interest, (d) Florida N-Viro Management LLC, in which
VFL Technologies, Inc. owns a 52% limited liability company interest, (e)
Degussa Headwaters LLP, in which Headwaters Incorporated owns a 50% membership
interest and (f) Degussa Headwaters Korea Co., Ltd., in which Headwaters
Incorporated owns a 50% membership interest), free and clear of all liens,
encumbrances, equities or claims except for the security interests granted
under the senior secured credit agreement, dated September 8, 2004, as amended,
between the Company and various lenders and Morgan Stanley Senior Funding,
Inc., as administrative agent.

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

(e)                                  The authorized
capital stock of the Company conforms as to legal matters to the description
thereof contained in each Offering Document.

(f)                                    The shares of
common stock, par value $0.001 per share, of the Company (the “Common Stock”) outstanding prior to the
issuance of the Securities have been duly authorized and are validly issued,
fully paid and nonassessable.

(g)                                 The Underlying
Securities issuable upon conversion of the Securities have been duly authorized
and reserved and, when issued upon conversion of

 3
 

the Securities in accordance with the terms of the Securities, will be
validly issued, fully paid and non-assessable, and the issuance of the
Underlying Securities will not be subject to any preemptive or similar rights.

(h)                                 The Securities have
been duly authorized and, at the Closing Date, will have been duly executed by
the Company and, when authenticated, issued and delivered in accordance with
the provisions of the Indenture and delivered to and paid for by the Initial
Purchasers in accordance with the terms of this Agreement, will be valid and
binding obligations of the Company, enforceable in accordance with their terms,
subject to applicable bankruptcy, insolvency and similar laws affecting
creditors’ rights generally and equitable principles of general applicability,
and will be entitled to the benefits of the Indenture pursuant to which such
Securities are to be issued and the Registration Rights Agreement.

(i)                                     Each of the
Indenture and the Registration Rights Agreement has been duly authorized by the
Company and, when duly executed and delivered by the Company and the Trustee,
will constitute a valid and binding agreement of the Company, enforceable
against the Company in accordance with its terms, subject to applicable
bankruptcy, insolvency and similar laws affecting creditors’ rights generally
and equitable principles of general applicability and except as rights to
indemnification and contribution under the Registration Rights Agreement may be
limited under applicable law.

(j)                                     The Securities and
the Indenture will conform in all material respects to the respective
statements relating thereto contained in the Time of Sale Memorandum and the
Final Offering Memorandum.

(k)                                  The execution and
delivery by the Company of, and the performance by the Company of its
obligations under, this Agreement, the Indenture, the Registration Rights
Agreement and the Securities will not contravene any provision of applicable
law or the certificate of incorporation or bylaws of the Company or any
agreement or other instrument binding upon the Company or any of its
subsidiaries that is material to the Company and its subsidiaries, taken as a
whole, or any judgment, order or decree of any governmental body, agency or
court having jurisdiction over the Company or any subsidiary, and no consent,
approval, authorization or order of, or qualification with, any governmental
body or agency is required for the performance by the Company of its
obligations under this Agreement, the Indenture, the Registration Rights
Agreement or the Securities except such as may be required by the securities or
Blue Sky laws of the various states in connection with the offer and sale of
the Securities and by Federal and state securities laws with respect to the
Company’s obligations under the Registration Rights Agreement.

(l)                                     There has not
occurred any material adverse change, or any development involving a
prospective material adverse change, in the condition, financial or otherwise,
or in the earnings, business or operations of the Company and its subsidiaries,
taken as a whole, from that set forth in the Offering Documents (exclusive

 4
 

of any subsequent amendments or supplements thereto) and the Time of
Sale Memorandum.

(m)                               There are no legal or
governmental proceedings pending or threatened to which the Company or any of
its subsidiaries is a party or to which any of the properties of the Company or
any of its subsidiaries is subject other than proceedings accurately described
in all material respects in the Final Offering Memorandum and the Time of Sale
Memorandum and proceedings that would not have a material adverse effect on the
Company and its subsidiaries, taken as a whole, or on the power or ability of
the Company to perform its obligations under this Agreement, the Indenture, the
Registration Rights Agreement or the Securities or to consummate the
transactions contemplated by the Offering Documents.

(n)                                 None of the Company or
its subsidiaries is in default in the performance or observance of any
obligation, agreement, covenant or condition contained in any contract,
indenture, loan agreement, note, lease or other agreement or instrument that is
described or referred to in the Final Offering Memorandum and the Time of Sale
Memorandum or filed as an exhibit to the Company’s Annual Report on Form 10-K
for the year-ended September 30, 2006, except for such defaults that would not,
singly or in the aggregate, have a material adverse effect on the Company and
its subsidiaries, taken as a whole.

(o)                                 The Company and its
subsidiaries (i) are in compliance with any and all applicable foreign,
federal, state and local laws and regulations relating to the protection of
human health and safety, the environment or hazardous or toxic substances or
wastes, pollutants or contaminants (“Environmental
Laws”), (ii) have received all permits, licenses or other approvals
required of them under applicable Environmental Laws to conduct their
respective businesses and (iii) are in compliance with all terms and conditions
of any such permit, license or approval, except where such noncompliance with
Environmental Laws, failure to receive required permits, licenses or other
approvals or failure to comply with the terms and conditions of such permits,
licenses or approvals would not, singly or in the aggregate, have a material
adverse effect on the Company and its subsidiaries, taken as a whole.

(p)                                 There are no costs or
liabilities associated with Environmental Laws (including, without limitation,
any capital or operating expenditures required for cleanup, closure of properties
or compliance with Environmental Laws or any permit, license or approval, any
related constraints on operating activities and any potential liabilities to
third parties) which would, singly or in the aggregate, have a material adverse
effect on the Company and its subsidiaries, taken as a whole.

(q)                                 The financial
statements (including the related notes and supporting schedules) included in
or incorporated by reference in the Time of Sale Memorandum and the Final
Offering Memorandum present fairly in all material respects the financial
position and results of operations of the entities purported to be shown
thereby, at the dates and for the periods indicated, and have been prepared in
conformity

 5
 

with U.S. generally accepted accounting principles applied on a
consistent basis throughout the periods involved, except as otherwise stated
therein.

(r)                                    Subsequent to the
respective dates as of which information is given in the Time of Sale
Memorandum, (i) the Company and its subsidiaries have not incurred any material
liability or obligation, direct or contingent, and have not entered into any
material transaction not in the ordinary course of business; (ii) the Company
has not purchased any of its outstanding capital stock, nor declared, paid or
otherwise made any dividend or distribution of any kind on its capital stock
other than ordinary and customary dividends; and (iii) there has not been any
material change in the capital stock, short-term debt or long-term debt of the
Company and its consolidated subsidiaries, except in each case as described in
the Time of Sale Memorandum and the Final Offering Memorandum.

(s)                                  To the knowledge of
the Company, no person or corporation which is a “holding company” or a “subsidiary
of a holding company”, within the meaning of such terms as defined in the
Public Utility Holding Company Act of 1935, directly or indirectly owns,
controls or holds with power to vote 10% or more of the outstanding voting
securities of the Company; and the Company is not a “holding company” or to its
knowledge, a “subsidiary of a holding company” as so defined.

(t)                                    The Company and its
subsidiaries possess all certificates, authorizations and permits issued by the
appropriate federal, state or foreign regulatory authorities, including,
without limitation, the Federal Energy Regulatory Commission, necessary to
conduct their respective businesses as described in the Time of Sale Memorandum
and the Final Offering Memorandum, except when the failure to possess such
certificates, authorizations or permits would not have a material adverse
effect on the Company and its subsidiaries, taken as a whole and neither the
Company nor any such subsidiary has received any notice of proceedings relating
to the revocation or modification of any such certificate, authorization or
permit which, singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would have a material adverse effect on the
Company and its subsidiaries, taken as a whole.

(u)                                 The Company and its
subsidiaries have good and marketable title in fee simple to all real property
and good and marketable title to all personal property owned by them which is
material to the business of the Company and its subsidiaries, in each case free
and clear of all liens, encumbrances and defects except such as are described
in the Time of Sale Memorandum and the Final Offering Memorandum or such as do
not materially affect the value of such property and do not interfere with the
use made and proposed to be made of such property by the Company and its
subsidiaries; and any real property and buildings held under lease by the
Company and its subsidiaries which are material to the business of the Company
and its subsidiaries are held by them under valid, subsisting and enforceable
leases with such exceptions as are not material and do not interfere with the
use made and proposed to be made of such property and buildings by the Company
and its subsidiaries, in each case except as described in the Time of Sale
Memorandum and the Final Offering Memorandum.

 6
 

(v)                                 The Company and its
subsidiaries own or possess, or can acquire on reasonable terms, all material
patents, patent rights, licenses, inventions, copyrights, know-how (including
trade secrets and other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures), trademarks, service marks and
trade names currently employed by them in connection with the business now
operated by them, and neither the Company nor any of its subsidiaries has
received any notice of infringement of or conflict with asserted rights of
others with respect to any of the foregoing which, singly or in the aggregate,
if the subject of an unfavorable decision, ruling or finding, would have a
material adverse effect on the Company and its subsidiaries, taken as a whole.

(w)                               No material labor
dispute with the employees of the Company or any of its subsidiaries exists,
except as described in the Time of Sale Memorandum and the Final Offering
Memorandum, or, to the knowledge of the Company, is imminent; and the Company
is not aware of any existing, threatened or imminent labor disturbance by the
employees of any of its principal suppliers, manufacturers or contractors that
could have a material adverse effect on the Company and its subsidiaries, taken
as a whole.

(x)                                   The Company and its
subsidiaries are insured by insurers of recognized financial responsibility
against such losses and risks and in such amounts as are prudent and customary
in the businesses in which they are engaged; except as disclosed in the Time of
Sale Memorandum and the Final Offering Memorandum, neither the Company nor any
of its subsidiaries has been refused any insurance coverage sought or applied
for that is material to the business of the Company and the subsidiaries; and
neither the Company nor any of its subsidiaries has any reason to believe that
it will not be able to renew its existing insurance coverage as and when such
coverage expires or to obtain similar coverage from similar insurers as may be
necessary to continue its business at a cost that would not have a material
adverse effect on the Company and its subsidiaries, taken as a whole, except as
described in the Time of Sale Memorandum and the Final Offering Memorandum.

(y)                                 The Company and each
of its subsidiaries keep books and records accurate in all material respects
reflecting their assets and maintain a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions are executed
in accordance with management’s general or specific authorizations; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain asset accountability; (iii) access to assets is permitted only in accordance
with management’s general or specific authorization; and (iv) the recorded
accountability for assets is compared with the existing assets at reasonable
intervals and appropriate action is taken with respect to any differences.  Except as described in the Time of Sale
Memorandum and the Final Offering Memorandum, since the end of the Company’s
most recent audited fiscal year, there has been (i) no material weakness in the
Company’s internal control over financial reporting (whether or not remediated)
and (ii) no change in the Company’s internal control over financial reporting
that has materially affected, or is reasonably likely to materially affect, the
Company’s internal control over financial reporting.

 7
 

(z)                                   The Company is not
and, after giving effect to the offering and sale of the Securities and the
application of the proceeds thereof as described in the Offering Documents,
will not be, required to register as an “investment company” as such term is
defined in the Investment Company Act of 1940, as amended.

(aa)                            Neither the Company nor any
affiliate (as defined in Rule 501(b) of Regulation D under the Securities Act,
an “Affiliate”) of the Company has
directly, or through any agent, (i) sold, offered for sale, solicited offers to
buy or otherwise negotiated in respect of, any security (as defined in the
Securities Act) which is or will be integrated with the sale of the Securities
in a manner that would require the registration under the Securities Act of the
Securities or (ii) offered, solicited offers to buy or sold the Securities by
any form of general solicitation or general advertising (as those terms are
used in Regulation D under the Securities Act) or in any manner involving a
public offering within the meaning of Section 4(2) of the Securities Act; provided, however, that no such
representation is made in respect to the Initial Purchasers.

(bb)                          It is not necessary in
connection with the offer, sale and delivery of the Securities to the Initial
Purchasers in the manner contemplated by this Agreement to register the
Securities under the Securities Act or to qualify the Indenture under the Trust
Indenture Act of 1939, as amended.

(cc)                            The Securities satisfy the
requirements set forth in Rule 144A(d)(3) under the Securities Act.

2.                                      Agreements to Sell and Purchase.  The Company hereby agrees to sell to the
several Initial Purchasers, and each Initial Purchaser, upon the basis of the
representations and warranties herein contained, but subject to the conditions
hereinafter stated, agrees, severally and not jointly, to purchase from the
Company the respective principal amount of Securities set forth in Schedule I
hereto opposite its name at a purchase price of 97% of the principal amount
thereof (the “Purchase Price”).

On the basis of the
representations and warranties contained in this Agreement, and subject to its
terms and conditions, the Company agrees to issue and sell to the Initial
Purchasers the Additional Securities, and the Initial Purchasers shall have the
right to purchase, severally and not jointly, up to $25.0 million principal
amount of Additional Securities at the purchase price set forth above plus
accrued interest, if any, to the date of payment and delivery.  The Initial Purchasers may exercise these
rights in whole or from time to time in part by giving written notice of each
election to exercise the foregoing option not later than 13 days after the date
of this Agreement.  Any exercise notice
shall specify the principal amount of Additional Securities to be purchased by
the Initial Purchasers and the date on which such Additional Securities are to
be purchased.  Each purchase date must be
at least one business day after the written notice is given and may not be
earlier than the Closing Date for the Firm Securities nor later than ten
business days after the date of such notice. 
Additional Securities may be purchased as provided in Section 3 hereof
solely for the purpose of covering over-allotments made in connection with the
offering of the Firm Securities.  On each
day, if any, that Additional Securities are to be purchased (each an “Option Closing Date”), each Initial Purchaser agrees,
severally and not jointly, to purchase the principal amount of Additional
Securities (subject to

 8
 

such adjustments to
eliminate fractional securities as you may determine) that bears the same
proportion to the total number of Additional Securities to be purchased on such
Option Closing Date as the principal amount of Firm Securities set forth in
Schedule I hereto opposite the name of such Initial Purchaser bears to the
total principal amount of Firm Securities.

The Company hereby agrees
that, without the prior written consent of J.P. Morgan Securities Inc.,
Deutsche Bank Securities Inc. and Morgan Stanley & Co. Incorporated on
behalf of the Initial Purchasers, it will not, during the period ending 90 days
after the date of the Final Offering Memorandum, (i) offer, pledge, sell,
contract to sell, sell any option or contract to purchase, purchase any option
or contract to sell, grant any option, right or warrant to purchase, lend, or
otherwise transfer or dispose of, directly or indirectly, any shares of Common
Stock or any securities convertible into or exercisable or exchangeable for
Common Stock, (ii) file any registration statement with the Commission relating
to the offering of any shares of Common Stock, (iii) enter into any swap or
other arrangement that transfers to another, in whole or in part, any of the
economic consequences of ownership of the Common Stock, whether any such
transaction in clause (i), (ii) or (iii) above is to be settled by delivery of
Common Stock or such other securities, in cash or otherwise, or (iv) publicly
announce an intention to effect any such transaction in clause (i), (ii) or
(iii).

The foregoing paragraph
shall not apply to (i) the Securities to be sold hereunder or the Underlying
Securities, (ii) the issuance by the Company of shares of Common Stock upon the
exercise of an option, warrant or note or the conversion of a security
outstanding on the date hereof of which the Initial Purchasers have been
advised in writing, (iii) the commencement of an exchange offer for the Company’s
existing 27⁄8% Convertible Senior Subordinated Notes due 2016 and the
issuance of the related convertible notes in connection with such exchange
offer, (iv) the filing of registration statements in respect of the Securities
and the Underlying Securities or in connection with clause (iii) above or Forms
S-8, (v) the issuance of shares of Common Stock or rights to acquire shares of
Common Stock in respect of securities offered pursuant to the terms of the
Company’s existing employee benefits plans or agreements, or (vi) transfers or
sales of shares of Common Stock pursuant to the convertible note hedge and
warrant transactions executed by the Company on the date hereof.

3.                                      Terms
of Offering.  The Company is advised
by you that the Initial Purchasers will make an offering of the Securities
purchased by the Initial Purchasers hereunder on the terms set forth in this
Agreement and to be set forth in the Final Offering Memorandum, as soon as
practicable after this Agreement is entered into as in your judgment is advisable.

4.                                      Payment
and Delivery.  Payment for the Firm
Securities shall be made to the Company in Federal or other funds immediately
available in New York City against delivery of such Firm Securities for the
respective accounts of the several Initial Purchasers at 9:00 a.m., New York
City time, on January 22, 2007, or at such other time on the same or such other
date as shall be designated in writing by you. 
The time and date of such payment are hereinafter referred to as the “Closing Date.”

Payment for any
Additional Securities shall be made to the Company in Federal or other funds
immediately available in New York City against delivery of such Additional
Securities for the respective accounts of the several Initial Purchasers at
9:00 a.m., New York 

 9
 

City time, on the date
specified in the corresponding notice described in Section 2 or at such other
time or on such other date as shall be designated in writing by you.

The Firm Securities and
the Additional Securities shall be in definitive form or global form, as
specified by you, and registered in such names and in such denominations as you
shall request in writing not later than one full business day prior to the
Closing Date or the applicable Option Closing Date, as the case may be.  The certificates evidencing the Firm
Securities and the Additional Securities shall be delivered to you on the
Closing Date for the respective accounts of the several Initial Purchasers,
with any transfer taxes payable in connection with the transfer of the
Securities to the Initial Purchasers duly paid, against payment of the Purchase
Price therefor.

5.                                      Conditions
to the Initial Purchasers’ Obligations. 
The obligations of the Company to sell the Securities to the Initial
Purchasers and the several obligations of the Initial Purchasers to purchase
and pay for the Securities on the Closing Date are subject to the following
conditions:

(a)                                  All of the
representations and warranties of the Company contained in this Agreement shall
have been true and correct on the date hereof and the Applicable Time, and
shall be true and correct on the Closing Date with the same force and effect as
if made on and as of the Closing Date. 
The Company shall have performed or complied in all material respects with
all of the agreements contained herein and required to be performed or complied
with by it at or prior to the Closing Date.

(b)                                 Subsequent to the
execution and delivery of this Agreement and prior to the Closing Date:

(i)                                     there shall not
have occurred any downgrading, nor shall any notice have been given of any
intended or potential downgrading or of any review for a possible change that
does not indicate the direction of the possible change, in the rating accorded
the Company or any of the securities of the Company or any of its subsidiaries
or in the rating outlook for the Company by any “nationally recognized
statistical rating organization,” as such term is defined for purposes of Rule
436(g)(2) under the Securities Act; and

(ii)                                  there shall not have
occurred any change, or any development involving a prospective change, in the
condition, financial or otherwise, or in the earnings, business or operations
of the Company and its subsidiaries, taken as a whole, from that set forth in
the Time of Sale Memorandum and the Final Offering Memorandum (exclusive of any
amendment or supplement thereto) that, in your judgment, is material and
adverse and that makes it, in your judgment, impracticable to market the
Securities on the terms and in the manner contemplated in the Time of Sale
Memorandum and the Final Offering Memorandum.

(c)                                  The Initial
Purchasers shall have received on the Closing Date a certificate, dated the
Closing Date and signed by each of the chief executive officer and

 10
 

the chief financial officer of the Company, to the effect set forth in
Section 5(b) above and to the effect that the representations and warranties of
the Company contained in this Agreement are true and correct as of the Closing
Date and that the Company has complied with all of the agreements and satisfied
all of the conditions on its part to be performed or satisfied hereunder on or
before the Closing Date.

Each of the officers
signing and delivering such certificate may rely upon the best of his or her
knowledge as to proceedings threatened.

(d)                                 The Initial Purchasers
shall have received on the Closing Date an opinion or opinions of Pillsbury
Winthrop Shaw Pittman LLP, outside counsel for the Company, to the effect set
forth in Exhibit A-1, and an opinion of Harlan Hatfield, Esq., Secretary and
General Counsel of the Company, to the effect set forth in Exhibit A-2, in each
case dated as of the Closing Date.  Such
opinions shall be rendered to the Initial Purchasers at the request of the
Company and shall so state therein.

(e)                                  The Initial
Purchasers shall have received on the Closing Date an opinion of Shearman &
Sterling LLP, counsel for the Initial Purchasers, and an opinion of Davis Polk
& Wardwell, counsel for the Initial Purchasers, in each case dated the
Closing Date, in form and substance reasonably satisfactory to the Initial
Purchasers.

(f)                                    The Initial
Purchasers shall have received, on each of the date hereof and the Closing
Date, a letter dated the date hereof or the Closing Date, as the case may be,
in form and substance reasonably satisfactory to the Initial Purchasers, from
Ernst & Young LLP, independent public accountants, containing statements
and information of the type ordinarily included in accountants’ “comfort
letters” to Initial Purchasers with respect to the financial statements and
certain financial information relating to the Company, contained in or
incorporated by reference into each Offering Document and the Time of Sale
Memorandum; provided that the letter delivered on the Closing Date shall use a “cut
off date” not earlier than the date hereof.

(g)                                 The “lock-up”
agreements, each substantially in the form of Exhibit B hereto, between you and
all of the executive officers and directors of the Company listed on Schedule
III hereto relating to sales and other dispositions of shares of Common Stock or
certain other securities, delivered to you on or before the date hereof, shall
be in full force and effect on the Closing Date.

(h)                                 The Representatives
shall have received such other documents and certificates as are reasonably
requested by you or counsel for the Initial Purchasers.

The several obligations
of the Initial Purchasers to purchase Additional Securities hereunder are
subject to the delivery to you on the applicable Option Closing Date of each of
the documents referred to above dated as of the Option Closing Date (except
that insofar as any documents relate to Securities, they may be limited to
covering only Additional Securities).

 11

6.                                      Covenants
of the Company.  In further
consideration of the agreements of the Initial Purchasers herein contained, the
Company covenants with each Initial Purchaser as set forth in Sections 6(a)
through 6(m) below:

(a)                                  To furnish to you in
New York City, without charge, prior to 10:00 a.m. New York City time on the
business day next succeeding the date of this Agreement and during the period
mentioned in Section 6(c) below, as many copies of the Time of Sale Memorandum
and the Final Offering Memorandum, any documents incorporated by reference and
any supplements and amendments thereto as you may reasonably request.

(b)                                 Before amending or
supplementing either the Time of Sale Memorandum or the Final Offering
Memorandum, to furnish to you a copy of each such proposed amendment or
supplement and not to use any such proposed amendment or supplement to which
you reasonably object.

(c)                                  If the Time of Sale
Memorandum is being used to solicit offers to buy the Securities at a time when
the Final Offering Memorandum is not yet available to prospective purchasers
and any event shall occur or condition exist as a result of which it is
necessary to amend or supplement the Time of Sale Memorandum in order to make
the statements therein, in the light of the circumstances when the Time of Sale
Memorandum is delivered to a purchaser, not misleading, or if in the opinion of
the Initial Purchasers or counsel for the Initial Purchasers it is otherwise
necessary to amend or supplement the Time of Sale Memorandum to comply with applicable
law, the Company agrees to promptly prepare, and furnish at its own expense to
the Initial Purchasers, amendments or supplements to the Time of Sale
Memorandum so that the statements in the Time of Sale Memorandum as so amended
or supplemented will not, in the light of the circumstances when the Time of
Sale Memorandum is delivered to a purchaser, be misleading or so that the Time
of Sale Memorandum, as amended or supplemented, will comply with applicable
law.

(d)                                 If, during such period
after the date the Final Offering Memorandum is made available to purchasers of
the Securities and prior to the date on which all of the Securities shall have
been sold by the Initial Purchasers, any event shall occur or condition exist
as a result of which it is necessary to amend or supplement the Final Offering
Memorandum in order to make the statements therein, in the light of the
circumstances when the Final Offering Memorandum is delivered to a purchaser,
not misleading, or if in the opinion of the Initial Purchasers or counsel for
the Initial Purchasers it is otherwise necessary to amend or supplement the
Final Offering Memorandum to comply with applicable law, the Company agrees to
promptly prepare, and furnish at its own expense to the Initial Purchasers, amendments
or supplements to the Final Offering Memorandum so that the statements in the
Final Offering Memorandum as so amended or supplemented will not, in the light
of the circumstances when the Final Offering Memorandum is delivered to a
purchaser, be misleading or so that the Final Offering Memorandum, as amended
or supplemented, will comply with applicable law.

 12
 

(e)                                  To endeavor to
qualify or register (or to obtain exemptions from qualifying or registering)
all or any part of the Securities for offer and sale under the securities or
Blue Sky laws of such jurisdictions as you shall reasonably request.  The Company shall not be required to qualify
as a foreign corporation or to take any action that would subject it to general
service of process in any such jurisdiction where it is not presently qualified
or where it would be subject to taxation as a foreign corporation.  The Company will advise the Initial
Purchasers promptly of the suspension of the qualification or registration of
(or any such exemption relating to) the Securities for offering, sale or
trading in any jurisdiction or any initiation or threat of any proceeding for
any such purpose, and in the event of the issuance of any order suspending such
qualification, registration or exemption, the Company shall use its best
efforts to obtain the withdrawal thereof at the earliest possible moment.

(f)                                    To make generally
available to the Company’s security holders and to you as soon as practicable
an earning statement covering a period of at least twelve months beginning with
the first fiscal quarter of the Company occurring after the date of this
Agreement that satisfies the provisions of Section 11(a) of the Securities Act
and the rules and regulations of the Commission thereunder.

(g)                                 For a period of five
years after the Closing Date, to furnish to you and, upon request, to each
Initial Purchaser, copies of all annual reports, quarterly reports and current
reports filed with the Commission on Forms 10-K, 10-Q and 8-K, or such other
similar forms as may be designated by the Commission, and such other documents,
reports and information as shall be furnished by the Company to its
stockholders generally.

(h)                                 Neither the Company
nor any Affiliate will sell, offer for sale or solicit offers to buy or
otherwise negotiate in respect of any security (as defined in the Securities
Act) which could be integrated with the sale of the Securities in a manner
which would require the registration under the Securities Act of the
Securities.

(i)                                     Not to solicit any
offer to buy or offer or sell the Securities by means of any form of general
solicitation or general advertising (as those terms are used in Regulation D
under the Securities Act) or in any manner involving a public offering within
the meaning of Section 4(2) of the Securities Act.

(j)                                     While any of the
Securities remain “restricted securities” within the meaning of the Securities
Act, to make available, upon request, to any seller of such Securities the
information specified in Rule 144A(d)(4) under the Securities Act, unless the
Company is then subject to Section 13 or 15(d) of the Exchange Act.

(k)                                  If requested by you,
to use its best efforts to permit the Securities to be designated PORTAL
securities in accordance with the rules and regulations adopted by the National
Association of Securities Dealers, Inc. relating to trading in the PORTAL
Market.

 13
 

(l)                                     During the period
of two years after the Closing Date, the Company will not, and will not permit
any of its affiliates (as defined in Rule 144 under the Securities Act) to
resell any of the Securities which constitute “restricted securities” under
Rule 144 that have been reacquired by any of them.

(m)                               Not to take any action
prohibited by Regulation M under the Exchange Act in connection with the
distribution of the Securities contemplated hereby.

(n)                                 To use best efforts to
have the Underlying Securities listed on the New York Stock Exchange.

 14
 

7.                                      Expenses.  Whether or not the transactions contemplated
in this Agreement are consummated or this Agreement is terminated, the Company
agrees to pay or cause to be paid all expenses incident to the performance of
its obligations under this Agreement, including:  (i) the fees, disbursements and expenses of
the Company’s counsel and the Company’s accountants in connection with the issuance
and sale of the Securities and all other fees or expenses in connection with
the preparation of each Offering Document and all amendments and supplements
thereto, all printing costs associated therewith, and the mailing and
delivering of copies thereof to the Initial Purchasers and dealers, in the
quantities hereinabove specified, (ii) all costs and expenses related to the
transfer and delivery of the Securities to the Initial Purchasers, including
any transfer or other taxes payable thereon, (iii) the cost of printing or
producing any Blue Sky or legal investment memorandum in connection with the
offer and sale of the Securities under state securities laws and all expenses
in connection with the qualification of the Securities for offer and sale under
state securities laws as provided in Section 6(e) hereof, including filing fees
and the reasonable fees and disbursements of counsel for the Initial Purchasers
in connection with such qualification and in connection with the Blue Sky or
legal investment memorandum, (iv) any fees charged by rating agencies for the
rating of the Securities, (v) all fees and expenses, if any, incurred in
connection with the admission of the Securities for trading in PORTAL or any
appropriate market system, (vi) the cost of preparation, issuance and delivery
of the Securities, including the cost of printing certificates representing the
Securities, (vii) the costs and charges of any trustee, transfer agent,
registrar or depositary, (viii) the costs and expenses of the Company relating
to investor presentations on any “road show” undertaken in connection with the
marketing of the offering of the Securities, including, without limitation,
expenses associated with the preparation or dissemination of any electronic
road show, reasonable expenses associated with the production of road show
slides and graphics, fees and expenses of any consultants engaged in connection
with the road show presentations with the prior approval of the Company, travel
and lodging expenses of the representatives and officers of the Company and any
such consultants, and half of the cost of any aircraft chartered in connection
with the road show, provided such charter is approved by the Company, (ix) the
document and production charges and expenses associated with printing this
Agreement and (x) all other costs and expenses incident to the performance of
the obligations of the Company hereunder for which provision is not otherwise
made in this Section.  It is understood,
however, that except as provided in this Section, Section 9 entitled “Indemnity
and Contribution”, and the last paragraph of Section 11 below, the Initial
Purchasers will pay all of their costs and expenses, including fees and
disbursements of their counsel, stock transfer taxes payable on resale of any
of the Securities by them and any advertising expenses connected with any
offers they may make.

8.                                      Offering of Securities; Restrictions on Transfer.  Each Initial
Purchaser, severally and not jointly, represents and warrants that such Initial
Purchaser is a qualified institutional buyer as defined in Rule 144A under the
Securities Act (a “QIB”).  Each Initial Purchaser, severally and not
jointly, agrees with the Company that (i) it will not solicit offers for, or
offer or sell, such Securities by any form of general solicitation or general
advertising (as those terms are used in Regulation D under the Securities Act)
or in any manner involving a public offering within the meaning of Section 4(2)
of the Securities Act and (ii) it will solicit offers for such Securities only
from, and will offer such Securities only to, persons that it reasonably
believes to be QIBs that in purchasing such Securities are deemed to have
represented

 15
 

and agreed as provided in the Final Offering Memorandum under the caption
“Transfer Restrictions”.

9.                                      Indemnity
and Contribution.  (a) The Company
agrees to indemnify and hold harmless each Initial Purchaser, each person, if
any, who controls any Initial Purchaser within the meaning of either Section 15
of the Securities Act or Section 20 of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), and each
affiliate of any Initial Purchaser within the meaning of Rule 405 under the
Securities Act, from and against any and all losses, claims, damages and
liabilities (including, without limitation, any legal or other expenses
reasonably incurred in connection with defending or investigating any such
action or claim) caused by any untrue statement or alleged untrue statement of
a material fact contained in the Time of Sale Memorandum or the Final Offering
Memorandum or any amendments or supplements thereto, or caused by any omission
or alleged omission to state therein a material fact necessary to make the
statements therein in the light of circumstances under which they were made not
misleading, except insofar as such losses, claims, damages or liabilities are
caused by any such untrue statement or omission or alleged untrue statement or
omission based upon information relating to any Initial Purchaser furnished to the
Company in writing by such Initial Purchaser through you expressly for use
therein.

(b)                                 Each Initial Purchaser
agrees, severally and not jointly, to indemnify and hold harmless the Company,
its directors, its officers and each person, if any, who controls the Company
within the meaning of either Section 15 of the Securities Act or Section 20 of
the Exchange Act, from and against any and all losses, claims, damages and
liabilities (including, without limitation, any legal or other expenses
reasonably incurred in connection with defending or investigating any such
action or claim) caused by any untrue statement or alleged untrue statement of
a material fact contained in the Time of Sale Memorandum or the Final Offering
Memorandum or any amendments or supplements thereto, or caused by any omission
or alleged omission to state therein a material fact necessary to make the
statements therein in the light of circumstances under which they were made not
misleading, but only with reference to information relating to such Initial
Purchaser furnished to the Company in writing by such Initial Purchaser through
you expressly for use in the Time of Sale Memorandum and the Final Offering
Memorandum or any amendments or supplements thereto.

(c)                                  In case any
proceeding (including any governmental investigation) shall be instituted
involving any person in respect of which indemnity may be sought pursuant to
Section 9(a) or 9(b), such person (the “indemnified
party”) shall promptly notify the person against whom such indemnity
may be sought (the “indemnifying party”)
in writing and the indemnifying party, upon request of the indemnified party,
shall retain counsel reasonably satisfactory to the indemnified party to
represent the indemnified party and any others the indemnifying party may
designate in such proceeding and shall pay the fees and disbursements of such
counsel related to such proceeding.  In
any such proceeding, any indemnified party shall have the right to retain its
own counsel, but the fees and expenses of such counsel shall be at the expense
of such indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the indemnifying party and the

 16
 

indemnified party and representation of both parties by the same
counsel would be inappropriate due to actual or potential differing interests
between them.  It is understood that the
indemnifying party shall not, in respect of the legal expenses of any
indemnified party in connection with any proceeding or related proceedings in
the same jurisdiction, be liable for the fees and expenses of more than one
separate firm (in addition to any local counsel) for all such indemnified
parties and that all such fees and expenses shall be reimbursed as they are
incurred.  Such firm shall be designated
in writing by the Representatives, in the case of parties indemnified pursuant
to Section 9(a), and by the Company, in the case of parties indemnified
pursuant to Section 9(b).  The
indemnifying party shall not be liable for any settlement of any proceeding
effected without its written consent, but if settled with such consent or if
there be a final judgment for the plaintiff, the indemnifying party agrees to
indemnify the indemnified party from and against any loss or liability by
reason of such settlement or judgment. 
Notwithstanding the foregoing sentence, if at any time an indemnified
party shall have requested an indemnifying party to reimburse the indemnified
party for fees and expenses of counsel as contemplated by the second and third
sentences of this paragraph, the indemnifying party agrees that it shall be
liable for any settlement of any proceeding effected without its written
consent if (i) such settlement is entered into more than 30 days after receipt
by such indemnifying party of the aforesaid request and (ii) such indemnifying
party shall not have reimbursed the indemnified party in accordance with such
request prior to the date of such settlement. 
No indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement of any pending or threatened
proceeding in respect of which any indemnified party is or could have been a
party and indemnity could have been sought hereunder by such indemnified party,
unless such settlement includes an unconditional release of such indemnified
party from all liability on claims that are the subject matter of such
proceeding.

(d)                                 To the extent the
indemnification provided for in Section 9(a) or 9(b) is unavailable to an
indemnified party or insufficient in respect of any losses, claims, damages or
liabilities referred to therein, then each indemnifying party under such
paragraph, in lieu of indemnifying such indemnified party thereunder, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages or liabilities (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company on the one
hand and the Initial Purchasers on the other hand from the offering of the
Securities or (ii) if the allocation provided by clause 9(d)(i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause 9(d)(i) above
but also the relative fault of the Company on the one hand and of the Initial
Purchasers on the other hand in connection with the statements or omissions
that resulted in such losses, claims, damages or liabilities, as well as any
other relevant equitable considerations. 
The relative benefits received by the Company on the one hand and the
Initial Purchasers on the other hand in connection with the offering of the
Securities shall be deemed to be in the same respective proportions as the net
proceeds from the offering of the Securities (before deducting expenses)
received by the Company and the total discounts and commissions received by the
Initial Purchasers, as set forth in the Final Offering Memorandum, bear to the
aggregate offering price of the Securities. 
The relative fault of each of the Company on the one hand and of the
Initial Purchasers on the other hand shall be determined by

 17
 

reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company or by the Initial
Purchasers and the parties’ relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission.  The Initial Purchasers’ respective
obligations to contribute pursuant to this Section 9 are several in proportion
to the respective principal amount of Securities they have purchased hereunder,
and not joint.

(e)                                  The Company and each
of the Initial Purchasers agree that it would not be just or equitable if
contribution pursuant to this Section 9 were determined by pro rata allocation
(even if the Initial Purchasers were treated as one entity for such purpose) or
by any other method of allocation that does not take account of the equitable
considerations referred to in Section 9(d). 
The amount paid or payable by an indemnified party as a result of the losses,
claims, damages and liabilities referred to in Section 9(d) shall be deemed to
include, subject to the limitations set forth above, any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim.  Notwithstanding the provisions of this
Section 9, no Initial Purchaser shall be required to contribute any amount in
excess of the amount by which the total price at which the Securities resold by
it in the initial placement of such Securities were offered to the investors
exceeds the amount of any damages that such Initial Purchaser has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission.  No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.  The remedies provided for in this Section 9
are not exclusive and shall not limit any rights or remedies which may
otherwise be available to any indemnified party at law or in equity.

(f)                                    The indemnity and
contribution provisions contained in this Section 9 and the representations,
warranties and other statements of the Company contained in this Agreement shall
remain operative and in full force and effect regardless of (i) any termination
of this Agreement, (ii) any investigation made by or on behalf of any Initial
Purchaser, any person controlling any Initial Purchaser or any affiliate of any
Initial Purchaser or by or on behalf of the Company, its officers or directors
or any person controlling the Company and (iii) acceptance of and payment for
any of the Securities.

10.                               Termination.  The Initial Purchasers may terminate this
Agreement by notice given by you to the Company, if after the execution and
delivery of this Agreement and prior to the Closing Date (i) trading generally
shall have been suspended or materially limited on, or by, as the case may be,
any of the New York Stock Exchange, the American Stock Exchange, the Nasdaq
National Market, the Chicago Board of Options Exchange, the Chicago Mercantile
Exchange or the Chicago Board of Trade, (ii) trading of any securities of the
Company shall have been suspended on any exchange or in any over-the-counter
market, (iii) a material disruption in securities settlement, payment or
clearance services in the United States shall have occurred, (iv) any
moratorium on commercial banking activities shall have been declared by Federal
or New York State authorities or (v) there shall have occurred any outbreak or
escalation of hostilities, or any change in financial markets or any calamity
or crisis that, in your judgment,

 18
 

is material and adverse
and which, singly or together with any other event specified in this clause
(v), makes it, in your judgment, impracticable or inadvisable to proceed with
the offer, sale or delivery of the Securities on the terms and in the manner
contemplated in the Time of Sale Memorandum or the Final Offering Memorandum.

11.                               Effectiveness;
Defaulting Initial Purchasers.  This
Agreement shall become effective upon the execution and delivery hereof by the
parties hereto.

If, on the Closing Date
or an Option Closing Date, as the case may be, any one or more of the Initial
Purchasers shall fail or refuse to purchase Securities that it has or they have
agreed to purchase hereunder on such date, and the aggregate principal amount
of Securities which such defaulting Initial Purchaser or Initial Purchasers
agreed but failed or refused to purchase is not more than one-tenth of the
aggregate principal amount of the Firm Securities to be purchased on such date,
the other Initial Purchasers shall be obligated severally in the proportions
that the number of Firm Securities set forth opposite their respective names in
Schedule I bears to the aggregate principal amount of Securities set forth
opposite the names of all such non-defaulting Initial Purchasers, or in such
other proportions as you may specify, to purchase the Securities which such
defaulting Initial Purchaser or Initial Purchasers agreed but failed or refused
to purchase on such date; provided that in no event shall the principal amount
of Securities that any Initial Purchaser has agreed to purchase pursuant to
this Agreement be increased pursuant to this Section 11 by an amount in excess
of one-ninth of such number of Securities without the written consent of such
Initial Purchaser.  If, on the Closing
Date, any Initial Purchaser or Initial Purchasers shall fail or refuse to
purchase Firm Securities which it or they have agreed to purchase hereunder on
such date and the aggregate principal amount of Firm Securities with respect to
which such default occurs is more than one-tenth of the aggregate principal
amount of Firm Securities to be purchased on such date, and arrangements
satisfactory to you and the Company for the purchase of such Firm Securities
are not made within 36 hours after such default, this Agreement shall terminate
without liability on the part of any non-defaulting Initial Purchaser or of the
Company.  In any such case either you or
the Company shall have the right to postpone the Closing Date, but in no event
for longer than seven days, in order that the required changes, if any, in the
Time of Sale Memorandum or the Final Offering Memorandum, or in any other
documents or arrangements may be effected. 
If, on an Option Closing Date, any Initial Purchaser or Initial
Purchasers shall fail or refuse to purchase Additional Securities and the aggregate
principal amount of Additional Securities with respect to which such default
occurs is more than one-tenth of the aggregate principal amount of Additional
Securities to be purchased on such Option Closing Date, the non-defaulting
Initial Purchasers shall have the option to (i) terminate their obligation
hereunder to purchase the Additional Securities to be sold on such Option
Closing Date or (ii) purchase not less than the number of Additional Securities
that such non-defaulting Initial Purchasers would have been obligated to
purchase in the absence of such default. 
Any action taken under this paragraph shall not relieve any defaulting
Initial Purchaser from liability in respect of any default of such Initial
Purchaser under this Agreement.

If this Agreement shall
be terminated by the Initial Purchasers, or any of them, because of any failure
or refusal on the part of the Company to comply with the terms or to fulfill
any of the conditions of this Agreement, excluding any termination pursuant to
clauses (i), (iii), (iv) or (v) of Section 11, or if for any reason, the
Company shall be unable to perform its

 19
 

obligations under this
Agreement, the Company will reimburse the Initial Purchasers or such Initial
Purchasers as have so terminated this Agreement with respect to themselves,
severally, for all out-of-pocket expenses (including the fees and disbursements
of their counsel) reasonably incurred by such Initial Purchasers in connection
with this Agreement or the offering contemplated hereunder.

12.                               Entire
Agreement.  This Agreement, together
with any contemporaneous written agreements and any prior written agreements
(to the extent not superseded by this Agreement) that relate to the offering of
the Securities, represents the entire agreement between the Company, on the one
hand, and the Initial Purchasers, on the other, with respect to the preparation
of the Offering Document, the conduct of the offering, and the purchase and
sale of the Securities.

13.                               No
Fiduciary Duties.  The Company
acknowledges and agrees that the Initial Purchasers are acting solely in the
capacity of an arm’s length contractual counterparty to the Company with
respect to the offering of Securities contemplated hereby (including in
connection with determining the terms of the offering) and not as financial
advisors or fiduciaries to, or agents of, the Company or any other person.  Additionally, neither the Representatives nor
any other Initial Purchaser is advising the Company or any other person as to
any legal, tax, investment, accounting or regulatory matters in any jurisdiction.  The Company shall consult with their own
advisors concerning such matters and shall be responsible for making their own
independent investigation and appraisal of the transactions contemplated
hereby, and neither the Representatives nor any other Initial Purchaser shall
have any responsibility or liability to the Company with respect thereto.  Any review by the Representatives or any
Initial Purchaser of the Company and the transactions contemplated hereby or
other matters relating to such transactions will be performed solely for the
benefit of the Representatives or such Initial Purchaser, as the case may be,
and shall not be on behalf of the Company or any other person.

14.                               Counterparts.  This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if
the signatures thereto and hereto were upon the same instrument.

15.                               Applicable
Law.  This Agreement shall be
governed by and construed in accordance with the internal laws of the State of
New York.

16.                               Headings.  The headings of the sections of this
Agreement have been inserted for convenience of reference only and shall not be
deemed a part of this Agreement.

17.                               Notices.  All communications hereunder shall be in
writing and effective only upon receipt and if to the Initial Purchasers shall
be delivered, mailed or sent to J.P. Morgan Securities Inc. at 277 Park Avenue,
9th Floor, New York, New York 10172, (telefax:
212-622-8358), Attention: Syndicate Desk, with a copy to the Legal Department;
Deutsche Bank Securities Inc. at 60 Wall Street, New York, New York 10005,
Attention Equity Capital Markets, Fax: 
212-797-9344 with a copy to the General Counsel, Fax:  212-797-4564.; Morgan Stanley & Co.
Incorporated at 1585 Broadway, New York, New York  10036, Attention: Syndicate Desk, with a copy
to the Legal Department; if to the Company shall be delivered, mailed or sent
to

 20
 

10653 South River Front
Parkway, Suite 300, South Jordan, Utah 84095, Attention:  Legal Department.

[Remainder
of page intentionally left blank]

 21

	
  

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
  HEADWATERS INCORPORATED

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

Signature Page to Purchase Agreement

Accepted as of the date hereof

J.P. MORGAN
SECURITIES INC.

DEUTSCHE BANK
SECURITIES INC.

MORGAN STANLEY & CO. INCORPORATED

Acting severally
on behalf of itself

and the several Initial
Purchasers

named in Schedule I
hereto.

	
  By: J.P. Morgan Securities Inc.

  
	
   

  
	
  By:

  	
   

  	
   

  
	
   

  
	
  Name:

  
	
  Title:

  
	
   

  
	
   

  
	
  By: Deutsche Bank Securities Inc.

  
	
   

  
	
  By:

  	
   

  	
   

  
	
   

  
	
  Name:

  
	
  Title:

  
	
   

  
	
  By:

  	
   

  	
   

  
	
   

  
	
  Name:

  
	
  Title:

  
	
   

  
	
   

  
	
  By: Morgan Stanley & Co. Incorporated

  
	
   

  
	
  By:

  	
   

  	
   

  
	
   

  
	
  Name:

  
	
  Title:

  
				

 

Signature Page to Purchase Agreement

SCHEDULE I

	
  Initial Purchaser

  	
   

  	
  Principal Amount

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  J.P. Morgan
  Securities Inc.

  	
   

  	
  $

  	
  40,500,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Deutsche Bank
  Securities Inc.

  	
   

  	
  $

  	
  40,500,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Morgan Stanley
  & Co. Incorporated

  	
   

  	
  $

  	
  40,500,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Canaccord Adams
  Inc.

  	
   

  	
  $

  	
  4,500,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Stephens Inc.

  	
   

  	
  $

  	
  4,500,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Wedbush Morgan
  Securities Inc.

  	
   

  	
  $

  	
  4,500,000

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Total Securities

  	
   

  	
  $

  	
  135,000,000

  	
   

  

 

 

Schedule I

SCHEDULE II

PRICING SUPPLEMENT

	
  

  	
   

  
	
  Headwaters Incorporated

  
	
  $135,000,000 Convertible Senior Subordinated
  Notes due 2014

  

 

Capitalization table on an actual and as adjusted
basis to give effect to the sale of the Convertible Senior Subordinated Notes,
after deducting assumed underwriting discounts and commissions and estimated
offering expenses, and the application of the net proceeds to repay a portion
of our senior secured credit facility.

	
  

  	
   

  	
  As of September

  30, 2006

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Actual

  	
   

  	
  As adjusted

  	
   

  
	
   

  	
   

  	
  (in Thousands)

  	
   

  	
  (in Thousands)

  	
   

  
	
  Cash and cash
  equivalents (1)

  	
   

  	
  $

  	
  79,151

  	
   

  	
  $

  	
  64,651

  	
   

  
	
  Current portion of
  long-term debt (2)

  	
   

  	
  $

  	
  7,267

  	
   

  	
  $

  	
  7,267

  	
   

  
	
  Senior secured debt,
  excluding current portion

  	
   

  	
  415,319

  	
   

  	
  280,319

  	
   

  
	
  Convertible senior
  subordinated notes due 2016

  	
   

  	
  172,500

  	
   

  	
  172,500

  	
   

  
	
  2.50%
  convertible senior subordinated notes due 2014

  	
   

  	
  —

  	
   

  	
  135,000

  	
   

  
	
  Other long-term debt

  	
   

  	
  1

  	
   

  	
  1

  	
   

  
	
  Stockholders’
  equity:(3)

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Common stock,
  $0.001 par value;  100,000 shares
  authorized, 42,306 shares issued and outstanding, including 254 shares held
  in treasury

  	
   

  	
  42

  	
   

  	
  42

  	
   

  
	
  Capital in excess of
  par value (4)

  	
   

  	
  502,265

  	
   

  	
  492,265

  	
   

  
	
  Retained earnings(5)

  	
   

  	
  299,866

  	
   

  	
  298,573

  	
   

  
	
  Treasury stock and
  other

  	
   

  	
  (1,215

  	
  )

  	
  (1,215

  	
  )

  
	
  Total
  stockholders’ equity

  	
   

  	
  800,958

  	
   

  	
  789,665

  	
   

  
	
  Total capitalization

  	
   

  	
  $

  	
  1,396,045

  	
   

  	
  $

  	
  1,384,752

  	
   

  

 

(1) We intend to use $10.0 million of available cash
to pay the net costs of the convertible not hedge and warrant transactions and
$4.5 million of available cash to repay part of our senior secured credit
facility.

(2) Represents primarily notes payable to a bank that
we assumed in connection with the acquisition of SCP in July 2004.  Because these notes are callable by the bank,
we have included the balance of $7.3 million in the current portion of
long-term debt.

(3) Based on the number of shares outstanding (in
thousands) as of September 30, 2006, excluding stock options outstanding.

(4) Represents the effect of the estimated net cost of
the convertible note hedge and warrant transactions.

(5) Reduction in retained earnings due to accelerated
amortization of issue costs, net of tax, related to senior secured debt repaid
with net proceeds of the offering of the notes.

	
  

  	
  

  	
  

  

 

Schedule II

SCHEDULE III

LOCK-UP PARTIES

Kirk A.
Benson

Scott
K.Sorensen

Harlan M.
Hatfield

Kenneth R.
Frailey

William H.
Gehrmann, III

Craig R.
Hickman

John N.
Lawless, III

Murphy K.
Lents

Michael S.
Lewis

Raymond J.
Weller

James A.
Herickhoff

E.J. “Jake”
Garn

R. Sam Christensen

William S. Dickinson

Blake O. Fisher, Jr.

Schedule III

EXHIBIT A-1

OPINION OF OUTSIDE COUNSEL FOR THE COMPANY

                                The opinion of
Pillsbury Winthrop Shaw Pittman LLP, outside counsel for the Company, to be
delivered pursuant to Section 5(d) of the Underwriting Agreement, shall be to
the effect that:

1.             The
Company has been duly incorporated, is validly existing as a corporation in
good standing under the Delaware General Corporation Law, has the corporate
power and authority to own its property and to conduct its business as
described in the Time of Sale Memorandum and the Final Offering Memorandum and
is duly qualified to transact business and is in good standing in the
jurisdictions set forth on Schedule A hereto.

2.             The
authorized capital stock of the Company conforms as to legal matters to the
description thereof in the Time of Sale Memorandum and the Final Offering
Memorandum.

3.             The
Notes are in the form contemplated by the Indenture and have been duly
authorized by the Company and, when issued and authenticated in accordance with
the provisions of the Indenture and delivered to and paid for by you in
accordance with the terms of the Purchase Agreement, will be valid and binding
obligations of the Company, enforceable against the Company in accordance with
their terms, subject to and limited by the effect of applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance and other similar
laws affecting creditors’ rights generally, general equitable principles
(whether considered in a proceeding in equity or at law), and concepts of
materiality, reasonableness, good faith and fair dealing, and will be entitled
to the benefits of the Indenture and the Registration Rights Agreement.

4.             The
Purchase Agreement has been duly authorized, executed and delivered by the
Company.

5.             The
Underlying Securities issuable upon conversion of the Notes have been duly
authorized and reserved upon such conversion and, if issued on the date hereof
in accordance with the terms of the Notes, upon such conversion would be
validly issued, fully paid and non-assessable and the issuance of the
Underlying Securities will not be subject to any preemptive or similar rights.

6.             Each
of the Indenture and the Registration Rights Agreement has been duly
authorized, executed and delivered by the Company, and is a valid and binding
agreement of the Company, enforceable against the Company in accordance with
its terms, subject to and limited by the effect of applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance and other similar
laws affecting creditors’ rights generally, general equitable principles
(whether considered in a proceeding in equity or at law), and concepts of
materiality, reasonableness, good faith and fair dealing, and except as rights
to indemnification and contribution under the Registration Rights Agreement may
be limited by applicable law.

 

7.             The
execution and delivery by the Company of and the performance by the Company of
its obligations under, the Purchase Agreement, the Indenture, the Registration
Rights Agreement and the Securities will not violate or conflict with, result
in a breach of, or constitute a default under, (a) any federal, New York or
California statute, rule or regulation or provision of the Delaware General
Corporation Law, (b) the certificate of incorporation or bylaws of the Company
or any Reviewed Agreement, or (c) to our knowledge, any judgment, order or
decree of any governmental body, agency or court having jurisdiction over the
Company or any subsidiary.  “Reviewed Agreement”
means the instruments or agreements to which the Company or its subsidiaries is
a party or by which the Company or its subsidiaries is bound or to which any of
the properties of the Company or its subsidiaries is subject, and which
instrument or agreement is included as an exhibit filed pursuant to Item
601(b)(4) and Item 601(b)(10) of Regulation S-K to the Annual Report.

8.             To
our knowledge, subject to the same assumptions set forth in paragraph 11 below
insofar as such paragraph relates to the Securities Act of 1933 (the
“Securities Act”) and the Trust Indenture Act of 1939 (the “TIA”), no consent,
approval, authorization or order of, or qualification with, any governmental
body or agency is required for the performance by the Company of its
obligations under the Purchase Agreement, the Indenture, the Registration
Rights Agreement and the Securities except such as may be required by (a) the
securities or Blue Sky laws of the various states in connection with the offer
and sale of the Securities by you and (b) the Securities Act or the TIA and the
rules and regulations thereunder and the securities or Blue Sky laws of the
various states with respect to the Registration Rights Agreement and the
transactions contemplated thereunder.

9.             The
statements included in the Time of Sale Memorandum and the Final Offering
Memorandum under the caption “Description of notes,” insofar as such statements
purport to constitute a summary of the terms of the Securities, the Indenture
and the Registration Rights Agreement, and under the captions “Plan of distribution”
and “Transfer restrictions,” insofar as such statements purport to constitute
summaries of the laws and documents referred to therein, are accurate in all
material respects.

10.           The
Company is not and, immediately after giving effect to the offering and sale of
the Securities and the application of the net proceeds thereof as described in
the Time of Sale Memorandum and the Final Offering Memorandum under the caption
“Use of Proceeds,” will not be required to register as an “investment company”
as such term is defined in the Investment Company Act of 1940, as amended.

11.           Assuming
that (i) the representations and warranties of each of the Company and you set
forth in Sections 1(aa), (bb) and (cc) and Section 8, respectively, of the
Purchase Agreement are accurate and the agreements contained therein have been
duly complied with, (ii) the Company will duly perform all of the covenants and
agreements set forth in Sections 6(h), (i), (j), (l) and (m) of the Purchase
Agreement, (iii) you have complied with the offering procedures and
restrictions described in the Time of Sale Memorandum and the Final Offering
Memorandum, and (iv) a copy of each of the Time of Sale Memorandum and the
Final Offering Memorandum have been delivered to any person

 

that acquires the Notes from you, no
registration of the Securities under the Securities Act or qualification of the
Indenture under the TIA is required in connection with the purchase of the
Securities by you or the initial resale of the Securities by you in the manner
contemplated by the Purchase Agreement, the Time of Sale Memorandum and the
Final Offering Memorandum.  With your
consent, we do not express any opinion, however, as to when or under what
circumstances any Securities initially sold by you may be reoffered or resold.

EXHIBIT A-2

OPINION OF GENERAL COUNSEL OF THE COMPANY

The opinion of Harlan
Hatfield, Esq., Secretary and General Counsel of the Company, to be delivered
pursuant to Section 5(d) of the Purchase Agreement, shall be to the effect
that:

(i)            The Company has been duly
incorporated, is validly existing as a corporation in good standing under the
laws of the jurisdiction of its incorporation, has the corporate power and
authority to own its property and to conduct its business as described in the
Time of Sale Memorandum and Final Offering Memorandum and is duly qualified to
transact business and is in good standing in each jurisdiction in which the
conduct of its business or its ownership or leasing of property requires such
qualification, except to the extent that the failure to be so qualified or be
in good standing would not have a material adverse effect on the Company and
its subsidiaries, taken as a whole.

(ii)           The Notes are in the form
contemplated by the Indenture and have been duly authorized by the Company and,
when executed and authenticated in accordance with the provisions of the
Indenture and delivered to and paid for by the Initial Purchasers in accordance
with the terms of the Purchase Agreement, will be valid and binding obligations
of the Company, enforceable against the Company in accordance with their terms,
subject to and limited by the effect of applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance and other similar laws
affecting creditors’ rights generally, general equitable principles (whether
considered in a proceeding in equity or at law), and concepts of materiality,
reasonableness, good faith and fair dealing, and will be entitled to the
benefits of the Indenture and the Registration Rights Agreement.

(iii)          The Purchase Agreement has been duly
authorized, executed and delivered by the Company.

(iv)          Each of the Indenture and the
Registration Rights Agreement has been duly authorized, executed and delivered
by the Company, and is a valid and binding agreement of the Company,
enforceable in accordance with its terms, subject to and limited by the effect
of applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance and other similar laws affecting creditors’ rights generally,
general equitable principles (whether considered in a proceeding in equity or
at law), and concepts of materiality, reasonableness, good faith and fair
dealing, and except as rights to indemnification and contribution under the
Registration Rights Agreement may be limited by applicable law.

(v)           The execution and
delivery by the Company of, and the performance by the Company of its
obligations under, the Purchase Agreement, the Indenture, the Registration
Rights Agreement and the Securities will not violate or conflict with, result
in a breach of, or constitute a default under, (a) any provision of federal or
Utah statute,

 

rule or regulation
or the Delaware General Corporation Law that, in my experience, is normally
applicable to transactions contemplated by such documents, (b) the certificate
of incorporation or bylaws of the Company or (c) to my knowledge, any agreement
or other instrument binding upon the Company that is material to the Company
and its subsidiaries, taken as a whole, any judgment, order or decree of any
governmental body, agency or court having jurisdiction over the Company or any
subsidiary, and no consent, approval, authorization or order of, or
qualification with, any governmental body or agency is required for the
performance by the Company of its obligations under the Purchase Agreement, the
Indenture, the Registration Rights Agreements and the Securities, except such
as may be required by the securities or Blue Sky laws of the various states in
connection with the offer and sale of the Securities by the Initial Purchasers.

(vi)          To my knowledge,
after due inquiry, I do not know of any legal or governmental proceedings
pending or threatened to which the Company or any of its subsidiaries is a
party or to which any of the properties of the Company or any of its
subsidiaries is subject other than proceedings fairly summarized in all
material respects in the Time of Sale Memorandum and the Final Offering
Memorandum and proceedings which I believe are not likely to have a material
adverse effect on the Company and its subsidiaries, taken as a whole, or on the
power or ability of the Company to perform its obligations under the Purchase
Agreement, the Indenture and the Registration Rights Agreement or to consummate
the transactions contemplated by the Final Offering Memorandum.

(vii)         The statements included in “Item 3
Legal Proceedings” of the Company’s annual report on Form 10-K for the year
ended September 30, 2006, insofar as such statements purport to constitute
summaries of the legal matters referred to therein, are accurate in all
material respects.

(viii)        To my knowledge (after due inquiry),
none of the Company nor its subsidiaries is in default in the performance or
observance of any material obligation, agreement, covenant or condition contained in any contract, indenture, loan
agreement, note, lease or other agreement or instrument that is described or
referred to in the Time of Sale Memorandum or the Final Offering Memorandum.

(ix)           (A) each
document filed pursuant to the Exchange Act and incorporated by reference in
the Time of Sale Memorandum and the Final Offering Memorandum (except for the
financial statements and financial schedules and other financial and
statistical data included or incorporated by reference therein or omitted
therefrom, as to which I need not express any opinion or belief) appeared on
its face to be appropriately responsive, in all material respects, to the
requirements of the Exchange Act and the applicable rules and regulations of
the Commission thereunder and (B) no facts have come to my attention that cause
me to believe that (1) the Time of Sale Memorandum (except for the financial
statements and financial schedules and other financial and statistical data
included or incorporated by reference therein or omitted therefrom, as to which
I need not express any belief) at the Applicable Time contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated

 

therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading, or (2) the Final Offering Memorandum (except for the
financial statements and financial schedules and other financial data included
or incorporated by reference therein or omitted therefrom, as to which, I need
not express any belief) as of its date or as of the date hereof contained or
contains any untrue statement of a material fact or omitted or omits to state a
material fact necessary in order to make the statements therein, in the light
of the circumstances under which they were made, not misleading.

EXHIBIT B

FORM OF LOCK-UP AGREEMENT

January          ,
2007

J.P. Morgan Securities Inc.

Deutsche Bank Securities Inc.

Morgan Stanley & Co. Incorporated

On behalf of the Initial Purchasers

c/o  J.P. Morgan
Securities Inc.

277 Park Avenue

9th Floor

New York, NY 10172

Dear Sirs and Mesdames:

The undersigned understands that J.P. Morgan
Securities Inc. (“J.P. Morgan”),
Deutsche Bank Securities Inc. (“Deutsche Bank”)
and Morgan Stanley & Co. Incorporated (“Morgan
Stanley”, together with J.P. Morgan and Deutsche Bank, the “Representatives”)on behalf of the Initial Purchasers (as
hereinafter defined), proposes to enter into a Purchase Agreement (the “Purchase Agreement”) with Headwaters Incorporated, a
Delaware corporation (the “Company”),
providing for the offering (the “Offering”) by
the several Initial Purchasers (the “Initial Purchasers”),
of $135,000,000 principal amount of Convertible Senior Subordinated Notes Due
2014 of the Company (the “Securities”).  The Securities will be convertible into
shares of common stock, par value $0.001 per share, of the Company (the “Common Stock”).

To induce the Initial Purchasers that may participate
in the Offering to continue their efforts in connection with the Offering, the
undersigned hereby agrees that, without the prior written consent of the
Representatives on behalf of the Initial Purchasers, it will not, during the
period commencing on the date of the final offering memorandum relating to the
Offering (the “Final Memorandum”) and ending 90
days after the date of the Final Memorandum, (1) offer, pledge, sell, contract
to sell, sell any option or contract to purchase, purchase any option or
contract to sell, grant any option, right or warrant to purchase, lend, or
otherwise transfer or dispose of, directly or indirectly, any shares of Common
Stock or any securities convertible into or exercisable or exchangeable for
Common Stock or (2) enter into any swap or other arrangement that transfers to
another, in whole or in part, any of the economic consequences of ownership of
the Common Stock, whether any such transaction described in clause (1) or
(2) above is to be settled by delivery of Common Stock or such other
securities, in cash or otherwise. The foregoing sentence shall not apply to
(a) the sale of any Securities to the Initial Purchasers pursuant to the
Purchase Agreement, (b) transactions relating to shares of Common Stock or
other securities acquired in open market transactions after the completion of
the Offering, (c) transfers of shares of Common Stock or securities convertible
into Common Stock by the undersigned as a bona fide gift or gifts or (d)
transfers of shares of Common Stock or securities convertible into Common Stock
by the undersigned to any trust for the benefit of the undersigned or the
undersigned’s immediate family; provided
that in the case of any transfer

pursuant to clause (c) or (d), (i) each transferee or
trustee of the trust shall execute and deliver to the Representatives a
duplicate form of this Lock-up Agreement and (ii) no filing by any party
(transferor, transferee or trustee) under Section 16(a) of the Securities
Exchange Act of 1934, as amended, shall be required or shall be made
voluntarily in connection with such transfer (other than a filing on a Form 5
made after the expiration of the 90-day period referred to above).  In addition, the undersigned agrees that,
without the prior written consent of the Representatives, on behalf of the
Initial Purchasers, it will not, during the period commencing on the date of
the Final Memorandum and ending 90 days after the date of the Final Memorandum,
make any demand for or exercise any right with respect to, the registration of
any shares of Common Stock or any security convertible into or exercisable or
exchangeable for Common Stock.  The
undersigned also agrees and consents to the entry of stop transfer instructions
with the Company’s transfer agent and registrar against the transfer of the
undersigned’s share of Common Stock except in compliance with the foregoing
restrictions.

The undersigned understands that the Company and the
Initial Purchasers are relying upon this Lock-Up Agreement in proceeding toward
consummation of the Offering.  The
undersigned further understands that this Lock-Up Agreement is irrevocable and
shall be binding upon the undersigned’s heirs, legal representatives,
successors and assigns.

Whether or not the Offering actually occurs depends on
a number of factors, including market conditions.  Any Offering will only be made pursuant to a
Purchase Agreement, the terms of which are subject to negotiation between the
Company and the Initial Purchasers.

It is understood that, if the Company notifies you
that it does not intend to proceed with the Offering, if the Purchase Agreement
does not become effective, or if the Purchase Agreement (other than the
provisions thereof which survive termination) shall terminate or be terminated
prior to payment for and delivery of the Securities, the undersigned will be
released from his or its obligations under this Lock-Up Agreement.  This Lock-Up Agreement shall lapse and become
null and void if the Offering shall not have occurred on or before April 15,
2007.

 

	
  

  	
  Very truly
  yours,

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (Name)

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (Address)

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