Document:

Exhibit
10.16

Walter Industries, Inc.

4211 W. Boy Scout Blvd.

Tampa, FL  33607

(813) 871-4811

 

January 6, 2003

 

 

Mr. Brad Kitterman

340 Old York Road

Duluth, GA  30097

 

Dear Brad:

 

The purpose of this
letter is to confirm the terms of our offer to employ you as President and
Chief Operating Officer of the U. S. Pipe and Foundry Company, a wholly owned
subsidiary of Walter Industries, Inc. (the “Company”). This offer will remain
valid until and through January 13, 2003 and is subject to satisfactory completion
of a drug test.

 

1.                                       As
President and Chief Operating Officer of U. S. Pipe, you shall report to and
serve at the direction of the President and Chief Executive Officer of Walter
Industries, Inc., or to such other person as may be designated from time to
time.  Your initial responsibilities
shall be to manage the P & L for U. S. Pipe and to expand its
sales/marketing potential while making its operations efficient.  Such responsibilities may be changed from
time to time.

 

2.                                       Your
employment will commence on January 13, 2003.

 

3.                                       Your
compensation package will be as follows:

 

(a)                                  Base
Salary

 

$22,916.67 per
month ($275,000 annually), which will be paid in accordance with the payroll
practices of the Company, as they may change from time to time.

 

(b)                                 Bonus

 

Your annual target bonus
will be 60.0% of your base salary.  The
amount of your bonus will fluctuate based upon actual performance under the
Company’s bonus plan as in effect

 

 

from time to time.
Participation in the bonus pool is dependent upon the achievement of the
Company’s annual financial and other goals, as well as the accomplishment of
individual objectives mutually agreed upon in writing each year.  To receive a bonus, you must be employed at
the time the bonus is paid, except as allowed in Section 8 of this
document.  Please note that
participation in the Employee Stock Purchase Plan is a requirement for
participation in the bonus pool.

 

As discussed, the
Company desires to have you, as a senior executive of the Company, make a
meaningful investment in the Company. 
In this regard, you have committed to invest currently $50,000 in the
Company’s common stock.  This investment
should be made at the time you accept employment, prior to your obtaining any
inside information concerning the Company and its business.

 

(c)                                  Stock
Options

 

You will receive an
initial award of 30,500 shares under the Company’s stock option plan in the
form of a non-qualified stock option vesting one-third per year over three
years, subject to the terms of the Company’s stock option plan.  This option will be awarded and priced on or
about your first day of employment.

 

You will be eligible to
participate in the Company’s stock option plan going forward.  Your position would normally be eligible for
30,500 shares as a target award which may change under the Company’s executive
compensation program from time to time.

 

(d)                                 Auto
Allowance

 

You will receive $1,500
per month auto allowance.

 

(e)                                  Benefits

 

•                  Reimbursement
for all reasonable and customary business-related travel and entertainment
expenses, in accordance with the terms of the Company’s policy, as it may
change from time to time.

 

•                  Participation
in the Company’s life and health insurance benefit programs in accordance with
their terms, as they may change from time to time.  A benefits booklet will be available for your review upon
request.

 

•                  Participation in the Walter Industries, Inc.
Profit-Sharing Plan according to its terms.

 

2

 

•                  Participation in the Relocation Policy for transferred
employees.  Reasonable temporary living
expenses will be covered for a period of six (6) months, including the use of a
furnished apartment.

 

•                  Participation in the Walter
Industries 401(k) Plan, as it may change from time to time and in accordance
with its terms.  A 401(k) booklet will
be available for your review upon request. 
Your eligibility to participate will be consistent with the requirements
of ERISA.

 

•                  Eligibility
for four (4) weeks of annual vacation to be used each year in accordance with
the Company’s policy, as it may change from time to time.

 

4.                                       It
is agreed and understood that your employment with the Company is to be at
will, and either you or the Company may terminate the employment relationship
at any time for any reason, with or without cause, and with or without notice
to the other.  Nothing herein or
elsewhere constitutes or shall be construed as a commitment to employ you or
pay you severance, other than is stipulated in this letter, for any period of
time.  You confirm that you have read
and have fully understood the contents of this employment offer letter.

 

5.                                       You
agree that all inventions, improvements, trade secrets, reports, manuals,
computer programs, systems, tapes and other ideas and materials developed or
invented by you during the period of your employment with the Company, either
solely or in collaboration with others, which relate to the actual or
anticipated business or research of the Company, which result from or are
suggested by any work you may do for the Company, or which result from use of
the Company’s premises or the Company’s or its customers’ property
(collectively, the “Developments”) shall be the sole and exclusive property of
the Company.  You hereby assign to the
Company your entire right and interest in any such Developments, and will
hereafter execute any documents in connection therewith that the Company may
reasonably request.  This section does
not apply to any inventions that you made prior to your employment by the
Company, or to any inventions that you develop entirely on your own time
without using any of the Company’s equipment, supplies or facilities, or the
Company’s or its customers’ confidential information which do not relate to the
Company’s business, anticipated research and development, or the work you have
performed for the Company.

 

6.                                       As
an inducement to the Company to make this offer to you, you represent and
warrant that you are not a party to any agreement or obligation for personal
services, and there exists no impediment or restraint, contractual or otherwise
on your power, right or ability to accept this offer and to perform the duties
and obligations specified herein.

 

7.                                       You
acknowledge and agree that so long as you are an employee of the Company, you
will respect and safeguard Company’s trade secrets and confidential
information. In the event of your involuntary termination, other than for
“cause”, or “Termination for Good Reason” as defined in paragraph 8. (c) below,
you will be eligible for the following severance benefits:

 

3

 

•                  Twelve
months of salary continuance, including base and target bonus, at the
applicable rate in effect at the time of termination.

 

•                  Twelve
months of continuing fringe benefits to the extent plans permit continued
participation. In any event, health and life insurance will continue for the
period of your contractual severance and the COBRA election period will not
commence until the expiration of that period.

 

8.               Definitions:

 

(a)                                  “Cause”
shall mean your (i) conviction or guilty plea of a felony involving fraud or
dishonesty, (ii) theft or embezzlement of property from the company, (iii)
willful and continued refusal to perform the duties of your position (other
than any such failure resulting from your incapacity due to physical or mental
illness) or (iv) fraudulent preparation of financial information of the
Company.

 

(b)                                 For
purposes of this agreement, a significant diminution in pay or responsibility
shall not have occurred if (i) the amount of your bonus fluctuates due
to performance considerations under the Company’s incentive plan from time to
time or (ii) you are transferred to a position of comparable responsibility and
compensation with the Company carrying the title of President or higher, even
though that position may report to an officer who in turn reports to the Chief
Executive Officer.

 

(c)                                  For
purposes of this agreement, “Termination for Good Reason” shall mean any of the
following: (i) relocation of the headquarters of the U. S. Pipe and Foundry
Company more than fifty (50) miles from the current location, without your
concurrence, (ii) any material breach by the Company of this agreement, (iii) a
material change in the primary line of business of U. S. Pipe and Foundry Company,
excluding its subsidiaries or (iv) any significant diminution in pay or
responsibility as defined in (b) above.

 

9.                                       You
acknowledge and agree that you have read this letter agreement carefully, have
been advised by the Company to consult with an attorney regarding its contents,
and that you fully understand the same.

 

10.                                 It
is agreed and understood that this offer letter, if and when accepted, shall
constitute our entire agreement with respect to the subject matter hereof and
shall supersede all prior agreements, discussions, understandings and proposals
(written or oral) relating to your employment with the Company.  This letter agreement will be interpreted
under and in accordance with the laws of the State of Florida without regard to
conflicts of laws.

 

4

 

We are delighted that you
have agreed to join Walter Industries, Inc. and look forward to working with
you.  If the terms contained within this
letter are acceptable, please sign one of the enclosed copies and return it to
me.

 

 

Sincerely,

 

 

	
   

  	
   

  
	
  Don DeFosset

  
	
  Chairman, President
  & CEO

  
	
  Walter Industries, Inc.

  

 

 

ACCEPTANCE

 

I have read the
foregoing, have been advised to consult with counsel of my choice concerning
the same, and I fully understand the same. 
I approve and accept the terms set forth above as governing my
employment relationship with the Company.

 

	
  Signature

  	
   

  	
   

  	
  Date

  	
   

  

 

5Exhibit
10.19

 

 

 

 

STOCK PURCHASE
AGREEMENT

 

 

by and among

 

 

WALTER INDUSTRIES,
INC.,

 

 

WELLSPRING
ALUMINUM ACQUISITION CO. 2

 

 

And

 

 

WELLSPRING CAPITAL
PARTNERS III, LP

 

 

Dated as of October 30, 2003

 

 

 

 

TABLE
OF CONTENTS

 

	
   

  	
   

  
	
   

  	
   

  
	
  1. PURCHASE AND SALE OF THE SHARES

  	
   

  
	
   

  	
   

  
	
  2. CLOSING

  	
   

  
	
   

  	
   

  
	
  (a)  Closing.

  	
   

  
	
   

  	
   

  
	
  (b)
  Purchase Price Adjustment.

  	
   

  
	
   

  	
   

  
	
  3. CONDITIONS TO CLOSING

  	
   

  
	
   

  	
   

  
	
  (a)
  Buyer’s Obligation.

  	
   

  
	
   

  	
   

  
	
  (b)
  Seller’s Obligation.

  	
   

  
	
   

  	
   

  
	
  4. REPRESENTATIONS AND WARRANTIES
  RELATING TO SELLER AND THE COMPANY

  	
   

  
	
   

  	
   

  
	
  (a)
  Authority

  	
   

  
	
   

  	
   

  
	
  (b) No
  Conflicts; Consents

  	
   

  
	
   

  	
   

  
	
  (c) The
  Shares

  	
   

  
	
   

  	
   

  
	
  (d) Organization and Standing; Stock Ledger
  and Minutes

  	
   

  
	
   

  	
   

  
	
  (e)
  Capital Stock of the Company

  	
   

  
	
   

  	
   

  
	
  (f)
  Equity Interests

  	
   

  
	
   

  	
   

  
	
  (g)
  Financial Statements

  	
   

  
	
   

  	
   

  
	
  (h) Tax
  Matters

  	
   

  
	
   

  	
   

  
	
  (i)
  Tangible Personal Property

  	
   

  
	
   

  	
   

  
	
  (j) Intellectual Property

  	
   

  
	
   

  	
   

  
	
  (k)
  Contracts

  	
   

  
	
   

  	
   

  
	
  (l)
  Proceedings

  	
   

  
	
   

  	
   

  
	
  (m)
  Insurance

  	
   

  
	
   

  	
   

  
	
  (n)
  Benefit Plans

  	
   

  
	
   

  	
   

  
	
  (o)
  Compliance with Law and Environmental Law

  	
   

  
	
   

  	
   

  
	
  (p)
  Employee and Labor Matters

  	
   

  
	
   

  	
   

  
	
  (q)
  Permits

  	
   

  
	
   

  	
   

  
	
  (r) Real
  Property

  	
   

  
	
   

  	
   

  
	
  (s) No
  Undisclosed Liabilities

  	
   

  
	
   

  	
   

  
	
  (t) Transactions with Affiliates

  	
   

  
	
   

  	
   

  
	
  (u)
  Broker of Seller

  	
   

  
	
   

  	
   

  
	
  (v) No
  Company Material Adverse Change

  	
   

  
	
   

  	
   

  
	
  (w)
  Absence of Certain Changes

  	
   

  
	
   

  	
   

  
	
  5. COVENANTS OF SELLER

  	
   

  
	
   

  	
   

  
	
  (a) Access

  	
   

  
	
   

  	
   

  
	
  (b)
  Ordinary Conduct

  	
   

  
	
   

  	
   

  
	
   (c) Insurance

  	
   

  

 

i

 

	
   (d) Liens

  	
   

  
	
   

  	
   

  
	
  6. REPRESENTATIONS AND WARRANTIES OF BUYER

  	
   

  
	
   

  	
   

  
	
  (a)
  Authority

  	
   

  
	
   

  	
   

  
	
  (b) No Conflicts; Consents

  	
   

  
	
   

  	
   

  
	
  (c) Securities Act

  	
   

  
	
   

  	
   

  
	
  (d)
  Actions and Proceedings, etc.

  	
   

  
	
   

  	
   

  
	
  (e) No Financing Needed

  	
   

  
	
   

  	
   

  
	
  (f) Disclaimer Regarding Projections

  	
   

  
	
   

  	
   

  
	
  (g)
  Broker of Buyer

  	
   

  
	
   

  	
   

  
	
  7. COVENANTS OF BUYER

  	
   

  
	
   

  	
   

  
	
  (a)
  Confidentiality

  	
   

  
	
   

  	
   

  
	
  (b) No Additional Representations

  	
   

  
	
   

  	
   

  
	
  (c) Obligation to Pay Certain Fees

  	
   

  
	
   

  	
   

  
	
  8. ADDITIONAL COVENANTS

  	
   

  
	
   

  	
   

  
	
  (a)
  Consents

  	
   

  
	
   

  	
   

  
	
  (b) Cooperation

  	
   

  
	
   

  	
   

  
	
  (c)
  Publicity

  	
   

  
	
   

  	
   

  
	
  (d)
  Antitrust Notification

  	
   

  
	
   

  	
   

  
	
  (e)
  Records

  	
   

  
	
   

  	
   

  
	
  (f)
  Use of the “Walter Industries,” “Walter Industries, Inc.” and “Jim Walter”
  Names and Logos

  	
   

  
	
   

  	
   

  
	
  (g)
  Reasonable Efforts

  	
   

  
	
   

  	
   

  
	
  (h)
  Confidentiality

  	
   

  
	
   

  	
   

  
	
  9. EMPLOYEE BENEFIT PLANS

  	
   

  
	
   

  	
   

  
	
  10. FURTHER ASSURANCES

  	
   

  
	
   

  	
   

  
	
  11. INDEMNIFICATION

  	
   

  
	
   

  	
   

  
	
  (a) Tax Indemnification

  	
   

  
	
   

  	
   

  
	
  (b)
  Other Indemnification by Seller

  	
   

  
	
   

  	
   

  
	
  (c) Limitation on Indemnification by Seller

  	
   

  
	
   

  	
   

  
	
  (d)
  Other Indemnification by Buyer

  	
   

  
	
   

  	
   

  
	
  (e)
  Losses Net of Insurance

  	
   

  
	
   

  	
   

  
	
  (f) Other Limitations

  	
   

  
	
   

  	
   

  
	
  (g) Procedures Relating to Indemnification
  (other than under Section 11(a))

  	
   

  
	
   

  	
   

  
	
  (h) Other Claims

  	
   

  
	
   

  	
   

  
	
  (i) Procedures Relating to
  Indemnification of Tax Claims

  	
   

  
	
   

  	
   

  
	
  (j) Mitigation

  	
   

  

 

ii

 

	
  12. TAX MATTERS

  	
   

  
	
   

  	
   

  
	
  13. ASSIGNMENT

  	
   

  
	
   

  	
   

  
	
  14. NO THIRD-PARTY BENEFICIARIES

  	
   

  
	
   

  	
   

  
	
  15. TERMINATION

  	
   

  
	
   

  	
   

  
	
  16. SURVIVAL OF REPRESENTATIONS

  	
   

  
	
   

  	
   

  
	
  17. EXPENSES

  	
   

  
	
   

  	
   

  
	
  18. AMENDMENTS

  	
   

  
	
   

  	
   

  
	
  19. NOTICES

  	
   

  
	
   

  	
   

  
	
  20. INTERPRETATION: EXHIBITS AND
  SCHEDULES: CERTAIN DEFINITIONS

  	
   

  
	
   

  	
   

  
	
  21. Counterparts

  	
   

  
	
   

  	
   

  
	
  22. ENTIRE AGREEMENT

  	
   

  
	
   

  	
   

  
	
  23. SEVERABILITY

  	
   

  
	
   

  	
   

  
	
  24. CONSENT TO JURISDICTION

  	
   

  
	
   

  	
   

  
	
  25. GOVERNING LAW

  	
   

  
	
   

  	
   

  
	
  26. WAIVER OF JURY TRIAL

  	
   

  
	
   

  	
   

  
	
  27. GUARANTY

  	
   

  

 

iii

 

INDEX

 

Exhibits:

 

	
  Exhibit A

  	
  Definition of Terms

  
	
  Exhibit B

  	
  Officers of the Company

  
	
  Exhibit C

  	
  Form of Transition
  Services Agreement

  

 

 

Schedules:

 

Schedule 3(a)(ix)

Schedule 4(b) 

Schedule 4(c) 

Schedule 4(f) 

Schedule 4(h)(ii) 

Schedule 4(h)(iii)

Schedule 4(h)(iv)

Schedule 4(h)(v)

Schedule 4(i)

Schedule 4(j)

Schedule 4(k)

Schedule 4(l)

Schedule 4(m)

Schedule 4(n)(i)

Schedule 4(n)(vi)

Schedule 4(o)(i)

Schedule 4(o)(ii)

Schedule 4(p)(i)

Schedule 4(p)(ii)

Schedule 4(p)(iii)

Schedule 4(q)

Schedule 4(r)

Schedule 4(s)

Schedule 4(t)

Schedule 4(w)

Schedule 5(b)

Schedule 8(f)

Schedule 9(f)

Schedule 9(g)

Schedule 9(i)

 

2

 

STOCK PURCHASE AGREEMENT

 

STOCK
PURCHASE AGREEMENT dated as of the 30th day of October,
2003, by and among WALTER INDUSTRIES, INC., a Delaware corporation
(“Seller”), WELLSPRING ALUMINUM ACQUISITION CO. 2, a
Delaware corporation (“Buyer”), and WELLSPRING CAPITAL PARTNERS III, LP, a
Delaware limited partnership (“Guarantor”).

 

Buyer desires to
purchase from Seller, and Seller desires to sell to Buyer, all of the issued
and outstanding shares of common stock, $.01 par value per share (the “Shares”),
of JW Aluminum Company, a Delaware corporation and wholly owned subsidiary of
Seller (the “Company”).

 

Accordingly, the
parties hereto hereby agree as follows:

 

1. Purchase and Sale of
the Shares. On the terms and subject to the conditions of this Agreement,
Seller shall sell, transfer and deliver or cause to be sold, transferred and
delivered to Buyer, and Buyer shall purchase from Seller, the Shares, free and
clear of all Liens, for an aggregate purchase price of $125,000,000 (the “Purchase
Price”), payable as set forth below in Section 2(a), subject to
adjustment as provided in Section 2(b). The purchase and sale of the
Shares shall be referred to in this Agreement as the “Acquisition.”

 

2. Closing. 

(a)  Closing. 
Closing (the “Closing”) of the Acquisition shall be held at the
offices of Buyer’s lenders at 10:00 a.m. on the later of (a) December 15, 2003
and (b) a date that is no later than five (5) business days after all of the
conditions set forth in Section 3 have been satisfied (or, to the extent
permitted, waived in writing by the parties entitled to the benefits thereof)
or at such other place, time and date as shall be agreed in writing by Seller
and Buyer. The date on which the Closing shall occur is hereinafter referred to
as the “Closing Date.”

 

At the Closing, (i) Buyer shall deliver to Seller, by wire transfer to
a bank account designated in writing by Seller prior to the Closing Date,
immediately available United States funds in an amount equal to the Purchase
Price (the “Closing Date Amount”), and (ii) Seller shall deliver or
cause to be delivered to Buyer certificates representing the Shares, duly
endorsed in blank or accompanied by stock powers duly endorsed in blank in
proper form for transfer, with appropriate transfer stamps, if any, affixed.

 

(b) Purchase Price
Adjustment.

 

(i)
Within sixty (60) days after the Closing Date, Buyer shall prepare and deliver
to Seller an unaudited statement (the “Statement”) setting forth the
Closing Modified Working Capital (as defined below) as of the close of business
on the Closing Date. Seller shall assist Buyer in the preparation of the
Statement.

 

3

 

(A)
The Statement shall become final and binding upon the parties on the thirtieth
(30th) day following delivery thereof, unless Seller has given notice of its
disagreement with the Statement (a “Notice of Disagreement”) to Buyer
prior to such date. Any Notice of Disagreement shall specify in reasonable
detail the nature of any disagreement so asserted.

 

(B)
If a Notice of Disagreement is received by Buyer in a timely manner, then the
Statement (as revised in accordance with clause (1) or (2) below) shall become
final and binding upon Seller and Buyer on the earlier of (1) the date Seller
and Buyer resolve in writing any differences they have with respect to the
matters specified in the Notice of Disagreement or (2) the date any disputed
matters are finally resolved in writing by the Accounting Firm (as defined
below).

 

(C)
During the thirty (30) day period following the delivery of a Notice of
Disagreement, Seller and Buyer shall seek in good faith to resolve any
differences which they may have with respect to the matters specified in the
Notice of Disagreement and shall set forth the final resolution of any such
differences in writing. At the end of such thirty (30) day period, if any such
differences remain unresolved, Seller and Buyer shall submit to an independent
accounting firm (the “Accounting Firm”) for arbitration of any and all
matters which remain in dispute and which were properly included in the Notice
of Disagreement.  The Accounting Firm
shall be a nationally recognized independent accounting firm as shall be agreed
upon by Buyer and Seller in writing, or, if Buyer and Seller cannot so agree,
each shall select one nationally recognized independent accounting firm, and
such firm shall select a third such firm, which third such firm shall be the
“Accounting Firm”.  Seller and Buyer
hereby agree to use reasonable efforts to cause the Accounting Firm to render a
decision resolving the matters submitted to the Accounting Firm within thirty
(30) days following submission. Seller and Buyer agree that judgment may be
entered upon the arbitral award of the Accounting Firm in any court having
jurisdiction pursuant to Section 24.   The fees and expenses of the Accounting Firm pursuant to this Section
2(b) shall be borne equally by Buyer and Seller.  The scope of the disputes to be arbitrated by the Accounting Firm
is limited to whether the Statement was done in the manner prescribed in this
Section 2(b).

 

The
fees and disbursements of Buyer’s and Seller’s independent auditors and
attorneys incurred in connection with their review of the Statement shall be
borne by Buyer and Seller, respectively.

 

(ii)
The Purchase Price shall be increased by the amount by which Closing Modified
Working Capital exceeds (A) $36,500,000, in the event that the Closing occurs
on or prior to November 30, 2003, or (B) $38,500,000, in the event that the
Closing occurs after such date (the Purchase Price as so increased shall
hereinafter be referred to as the “Adjusted Purchase Price”). If the
Closing Date Amount is less than the Adjusted Purchase Price, Buyer shall,
within ten (10) business days after the

 

4

 

Statement becomes
final and binding on the parties, make payment by wire transfer to an account
specified in writing by Seller, in immediately available United States funds of
the amount of such difference together with interest thereon at a rate equal to
the prime rate as set forth in the Money Rates section of The Wall Street Journal, calculated
on the basis of the actual number of days elapsed, divided by 365, from the
Closing Date to the date of payment.

 

(iii)
The term “Closing Modified Working Capital” shall mean Assets minus
Liabilities. The term “Assets” shall mean the amounts that, as of the
Closing Date, correspond to the line items in the balance sheet dated December
31, 2002 that is a part of the Financial Statements (the “Balance Sheet”)
under the captions “Trade and Other Receivables, Net,” “Cash,” “Other
Receivables,” “Inventories,” and “Prepaid Expenses,” but not including any
receivables owing to the Company by any of its affiliates. The term “Liabilities”
shall mean the amounts that, as of the Closing Date, correspond to the line
items in the Balance Sheet under the captions “Accounts Payable” and “Accrued
Expenses,” but not including (A) any Accounts Payable or Accrued Expenses owing
by the Company to any of its affiliates or (B) any Taxes other than current
non-income Taxes not yet due and payable. 
Closing Modified Working Capital shall be calculated, subject to the
exclusions described in the immediately preceding sentence, in the same way,
using the same accounting principles, methods, practices and categories as were
used by the Company in determining the amounts of such line items on the
Balance Sheet, in accordance with the notes thereto and United States generally
accepted accounting principles (“GAAP”).

 

(iv)
Buyer agrees that following the Closing through the resolution of any
adjustment to the Purchase Price contemplated by this Section 2(b), it
shall not take any actions with respect to the accounting books and records of
the Company on which the Statement is to be based that would make it impossible
or impracticable to calculate Closing Modified Working Capital.

 

(v)
During the period of time from and after the Closing Date through the
resolution of any adjustment to the Purchase Price contemplated by this Section
2(b), Seller shall, and Buyer shall cause the Company to, afford to Buyer
and Seller, respectively, and any accountants, counsel or financial advisers
retained by Buyer and Seller, respectively, in connection with any adjustment
to the Purchase Price contemplated by this Section 2(b) reasonable
access during normal business hours to all of such person’s properties, books,
contracts, personnel and records relevant to the adjustment contemplated by
this Section 2(b) and the preparation of the Statement.

 

3. Conditions to
Closing.

 

(a) Buyer’s Obligation.
The obligation of Buyer to purchase and pay for the Shares is subject to the
satisfaction (or waiver by Buyer) as of the Closing of the following
conditions:

 

5

 

(i)
The representations and warranties of Seller made in this Agreement shall be
true and correct in all material respects, with respect to representations and
warranties not qualified by materiality, or in all respects, with respect to
representations and warranties qualified by materiality, as of the date hereof
and as of the Closing Date as though made as of such date, except to the extent
such representations and warranties expressly relate to a specified date that
is earlier than the date of this Agreement (in which case such representations
and warranties shall be deemed to have been made as of such earlier date), in
each case except for breaches that, individually or in the aggregate, could not
have a Company Material Adverse Effect.

 

(ii)
Seller shall have performed or complied in all material respects with all
covenants and obligations required by this Agreement to be performed or
complied with by Seller by the time of the Closing.

 

(iii)
Seller shall have delivered to Buyer a certificate dated the Closing Date and
signed by an authorized officer of Seller confirming the satisfaction of the
conditions set forth in Sections 3(a)(i) and (ii).

 

(iv)
As of the Closing, there shall not be any injunction, judgment, order, decree
or ruling in effect issued by any federal, state, local or foreign government
or any court of competent jurisdiction, administrative agency or commission or
other governmental authority or instrumentality (a “Governmental Entity”)
restraining or prohibiting the consummation of the Acquisition.

 

(v)
The waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the “HSR Act”), shall have expired or been terminated.
All other authorizations, consents, orders or approvals of, or declarations or
filings with, or expirations of waiting periods imposed by, any Governmental
Entity that are necessary for the consummation of the Acquisition shall have
been obtained or filed or shall have occurred.

 

(vi)
Buyer shall have received (A) a copy of the certificate of incorporation of the
Company certified by the Delaware Secretary of State, (B) a certificate of good
standing of the Company certified by the Delaware Secretary of State, (C) a
certificate of good existence of the Company certified by the South Carolina
Secretary of State and (D) a certificate of the secretary of the Seller dated
as of the Closing Date certifying (1) that the certificate of incorporation and
bylaws of the Seller and the Company attached thereto are true, correct, and
complete and in full force and effect, (2) as to the incumbency of officers
executing this Agreement, and (3) that this Agreement and the transactions
contemplated hereby have been duly authorized by all necessary corporate
actions.

 

(vii)
Buyer shall have received the certificate or certificates representing the
Shares, duly endorsed to Buyer or accompanied by duly executed and witnessed
stock powers duly endorsed to Buyer in blank in proper form for transfer, with
appropriate transfer stamps, if any, affixed.

 

6

 

(viii)
(A) The security interests granted to Bank of America, N.A. by the Company
pursuant to the Security Agreement dated as of April 17, 2003, among the
Seller, each of the subsidiaries of the Seller from time to time party thereto,
and Bank of America, N.A. (the “Security Agreement”), shall have been
released together with any other Liens on the Shares or any assets of the
Company; (B) Buyer shall have received UCC termination statements, in form and
substance reasonably satisfactory to Buyer and its lenders and suitable for
filing, in respect of the security interests and Liens described in the
immediately preceding clause (A); and (C) the Guaranty Agreement dated as of
April 17, 2003 among the Company, Bank of America, N.A. and the other parties
thereto shall have been terminated with respect to the Company, in form and
substance reasonably satisfactory to Buyer and its lenders.

 

(ix)
Buyer shall have received each of the consents set forth on Schedule
3(a)(ix), and each such consent (A) shall not be subject to the
satisfaction of any condition that has not been satisfied or waived, (B) shall
be in full force and effect, and (C) shall be in form and substance reasonably
satisfactory to Buyer.

 

(x)
Buyer shall have received each of the following documents, duly executed by the
parties thereto: (A) the estoppel certificates (dated no more than ten (10)
days prior to the Closing Date) referred to in Section 8(a); (B) the
non-disturbance agreements referred to in Section 8(a); (C) the landlord lien
waiver and consent referred to in Section 8(a); and (D) an affidavit of
non-foreign status of the Seller which complies with section 1445 of the Code.

 

(xi)
Seller shall have executed and delivered a transition services agreement,
substantially in the form attached hereto as Exhibit C (the “Transition
Services Agreement”).

 

(xii)  Since the date hereof, there shall not have
been any event, occurrence or development that has resulted in, or could result
in, a Company Material Adverse Effect.

 

(xiii)  Seller shall have executed and delivered an
assignment, in form and substance reasonably acceptable to Buyer, assigning to
the Company all invention assignment agreements with individuals who
contributed to the development of the Company’s intellectual property and all
such intellectual property (collectively, the “IP Assignments”).

 

(xiv)  Seller shall have executed and delivered a
sublicense, in form and substance reasonably acceptable to Buyer, of the
Seller’s rights under that certain Supplier Agreement dated as of July 31, 1999
between Seller and the Lemelson Medical, Education and Research Foundation (the
“Sublicense”).

 

(xv)  Seller shall have executed and delivered a
trademark assignment, in form and substance reasonably satisfactory to Buyer,
of the “JW Aluminum” mark (the “Trademark Assignment”).

 

7

 

(xvi)  Seller shall have terminated, in form and
substance reasonably satisfactory to Buyer, (A) all tax sharing agreements to
which the Company is a party or by which it is bound, and (B) the
Administrative Services Agreement set forth on Schedule 4(t), in each
case such that the Company shall have no liability or other obligations
thereunder or in respect thereof.

 

(b) Seller’s Obligation.
The obligation of Seller to sell and deliver the Shares to Buyer is subject to
the satisfaction (or waiver by Seller) as of the Closing of the following
conditions:

 

(i)
The representations and warranties of Buyer and Guarantor made in this
Agreement shall be true and correct in all material respects, with respect to
representations and warranties not qualified by materiality, or in all
respects, with respect to representations and warranties qualified by
materiality, as of the date hereof and as of the Closing Date as though made as
of such date, except to the extent such representations and warranties
expressly relate to a specified date that is earlier than the date of this
Agreement (in which case such representations and warranties shall be deemed to
have been made as of such earlier date), in each case except for breaches that,
individually or in the aggregate, could not have a Buyer Material Adverse
Effect.  

 

(ii)
Buyer shall have performed or complied in all material respects with all
covenants and obligations required by this Agreement to be performed or
complied with by Buyer by the time of the Closing.

 

(iii)
Buyer shall have delivered to Seller a certificate dated the Closing Date and
signed by an authorized officer of Buyer confirming the satisfaction of the
conditions in Sections 3(b)(i) and (ii).

 

(iv)
As of the Closing, there shall not be any injunction, judgment, order, decree
or ruling in effect issued by any Governmental Entity restraining or
prohibiting the consummation of the Acquisition.

 

(v)
The waiting period under the HSR Act shall have expired or been terminated. All
other authorizations, consents, orders or approvals of, or declarations or
filings with, or expirations of waiting periods imposed by, any Governmental
Entity that are necessary for the consummation of the Acquisition shall have
been obtained or filed or shall have occurred.

 

(vi)
Seller shall have received the Closing Date Amount simultaneously with or prior
to the Closing.

 

(vii) Seller shall have received for each of Buyer and
Guarantor, (A) a copy of the certificate or articles of incorporation or
equivalent constitutive documents certified by the Delaware Secretary of State,
(B) certificate of good standing or active status certified by the Delaware
Secretary of State, and (C) a certificate of the secretary of each of Buyer and
Guarantor dated as of the Closing Date certifying (1)

 

8

 

that the certificate or articles of incorporation and
bylaws or equivalent constitutive documents attached thereto are true, correct,
and complete and in full force and effect, (2) as to the incumbency of officers
executing this Agreement, and (3) that this Agreement and the transactions
contemplated hereby have been duly authorized by all necessary corporate
actions.

 

4. Representations and
Warranties Relating to Seller and the Company. Seller hereby represents and
warrants to Buyer that the statements contained in this Section 4 are true and
correct as of the date hereof and will be true and correct as of the Closing
Date:

 

(a) Authority. Seller
is a corporation duly organized, validly existing and in good standing under
the laws of the State of Delaware. 
Seller has all requisite corporate power and authority to enter into
this Agreement and the Ancillary Documents, to perform its obligations
hereunder and thereunder and to consummate the transactions contemplated hereby
and thereby.  The execution, delivery
and performance by Seller of this Agreement and the Ancillary Documents and the
consummation by Seller of the Acquisition and the other transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action (including without limitation the approval of Seller’s board
of directors), and no other action on the part of Seller or its stockholders is
or will be necessary to authorize the execution, delivery or performance of
this Agreement or the Ancillary Documents or the consummation of the
Acquisition.  Seller has duly executed
and delivered this Agreement and as of the Closing will have duly executed and
delivered the Ancillary Documents and, assuming the due authorization,
execution and delivery hereof and thereof by Buyer, this Agreement constitutes,
and upon and after the Closing the Ancillary Documents will constitute,
Seller’s legal, valid and binding obligations, enforceable against it in
accordance with their respective terms, subject to bankruptcy, insolvency,
reorganization, moratorium and similar laws of general application relating to
or affecting creditors’ rights and to general equity principles.

 

(b) No Conflicts; Consents.
Except as set forth in Schedule 4(b), the execution and delivery by
Seller of this Agreement and the Ancillary Documents does not, and the
consummation of the Acquisition and the other transactions contemplated hereby
and thereby and compliance by Seller with the terms hereof and thereof will
not, conflict with, or result in any violation of or default (with or without
notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or to loss of a
material benefit under, or to increased, additional, accelerated or guaranteed
rights or entitlements of any person under, or result in the creation or
imposition of any lien, mortgage, title defect, claim, encumbrance, security
interest, option, charge, easement or restriction of any kind (collectively, “Liens”)
upon the Shares, the Company or any of the properties or assets of the Company
under, any provision of (i) the certificate of incorporation or bylaws of
Seller or the Company, (ii) any note, bond, mortgage, indenture, deed of trust,
license, lease, contract or agreement, in each case whether written or oral (“Contract”),
to which Seller or the Company is a party or by which any of their respective
properties or assets are bound, or (iii) any Permit, any judgment, order,
injunction or decree (“Judgment”), or statute, law, ordinance, rule,
regulation or other pronouncement having the effect of law of any Governmental
Entity (“Law”) binding on Seller or the Company or their respective
properties or assets or the Shares. 
Except as set forth in Schedule 4(b), no

 

9

 

consent, approval,
license, permit, order or authorization (“Consent”) of, or registration,
declaration or filing with, any Governmental Entity or third party is required
to be obtained or made by or with respect to Seller or the Company in
connection with the execution, delivery and performance of this Agreement or
the Ancillary Documents or the consummation of the Acquisition or the other
transactions contemplated hereby or thereby, other than (x) compliance with and
filings under the HSR Act, (y) compliance with and filings and notifications
under applicable Environmental Law and (z) those that are required to be made
solely by Buyer.

 

(c) The Shares. Except
as set forth on Schedule 4(c), Seller has good and valid title to the
Shares, free and clear of any Liens. Assuming that Buyer has the requisite
power and authority to be the lawful owner of the Shares, upon delivery to
Buyer at the Closing of certificates representing the Shares, duly endorsed by
Seller for transfer to Buyer, and upon Seller’s receipt of the Closing Date
Amount, good and valid title to the Shares will pass to Buyer, free and clear
of any Liens, except for any Liens imposed by Buyer’s financing sources.  Other than this Agreement, the Shares are
not subject to any voting trust agreement or agreement, arrangement, commitment
or understanding restricting or otherwise relating to the voting, dividend
rights or disposition of the Shares.

 

(d) Organization and
Standing; Stock Ledger and Minutes. The Company is a corporation organized,
validly existing and in good standing under the laws of the State of Delaware.
The Company has full corporate power and authority necessary to enable it to
own, lease or otherwise hold its properties and assets and to carry on its
business as presently conducted. The Company is duly qualified and in good
standing to do business as a foreign corporation in each jurisdiction in which
the ownership, leasing or holding of its properties or the conduct of its
business makes such qualification necessary, except where the failure to be so
qualified and in good standing to do business as a foreign corporation would
not have a Company Material Adverse Effect.

 

Seller has prior
to the execution of this Agreement delivered to Buyer true and complete copies
of the certificate of incorporation and bylaws, each as amended to date, of the
Company. The stock transfer books and the minute books of the Company (which
have been made available for inspection by Buyer prior to the date hereof) are
true and complete in all material respects.

 

(e) Capital Stock of the
Company. The authorized capital stock of the Company consists of one
thousand (1,000) shares of common stock, $.01 par value per share, all of which
are duly authorized and validly issued and outstanding, fully paid and
non-assessable, and none of which were issued in violation of any preemptive
rights.  Seller is the record and
beneficial owner of the Shares. Except for the Shares, there are no shares of
capital stock or other equity securities of the Company outstanding. There are
no outstanding warrants, options, rights, “phantom” stock rights, agreements,
convertible or exchangeable securities or other commitments (other than this
Agreement) pursuant to which Seller or the Company is or may become obligated
to issue, sell, purchase, return or redeem any shares of capital stock or other
securities of the Company. There are no equity securities of the Company
reserved for issuance for any purpose. There are no outstanding bonds,

 

10

 

debentures, notes or
other indebtedness having the right to vote on any matters on which
stockholders of the Company may vote.

 

(f) Equity Interests.
Except as set forth in Schedule 4(f), (i) the Company does not directly
or indirectly own any capital stock of or other equity interests in any
corporation, partnership, limited liability company or other person and (ii)
the Company is not a member of or participant in any partnership, joint
venture, limited liability company or other person.

 

(g) Financial Statements.
Seller has delivered to Buyer an audited balance sheet of the Company as at
December 31, 2002 and December 31, 2001, including the notes thereto, and the
related audited statements of operations and accumulated earnings and of cash
flows for the fiscal years then ended, including the notes thereto
(collectively, the “Financial  Statements”).  Such Financial Statements are complete and
correct in all material respects and fairly present the financial condition and
the results of operations and cash flows of the Company as at the respective
dates of and for the periods referred to in such Financial Statements, all in
accordance with GAAP, consistently applied. The Financial Statements have been
prepared from and are in accordance with the accounting records of the Company.

 

(h) Tax Matters.

 

(i) Definitions. Seller and Company make the
following representations and warranties with respect to tax matters:

 

(A)
The term “Group” shall mean, individually and collectively, (1) the
Company, (2) Seller, and (3) any entity as to which the Company may be liable
for Taxes incurred by such entity either as a successor or transferee, or
pursuant to Treasury Regulations Section 1.1502-6, or pursuant to any other provision
of federal, territorial, state, local, or foreign law, rule, or regulations;
provided, however, that such entity shall be a member of the Group only with
respect to Taxes (and the Returns with respect to such Taxes) as to which such
liability on the part of the Company may exist.

 

(B)
The term “Taxes” or “Tax” shall mean all taxes, however
denominated, including any interest, penalties, or other additions to tax that
may become payable in respect thereof, imposed by any federal, territorial,
state, local, or foreign government or any agency or political subdivision of
any such government, which taxes shall include, without limiting the generality
of the foregoing, all income or profits taxes (including federal income taxes
and state income taxes), real property gains taxes, payroll and employee
withholding taxes, unemployment insurance taxes, social security taxes, sales
and use taxes, ad valorem taxes, value added taxes, excise taxes, franchise
taxes, gross receipts taxes, business license taxes, occupation taxes, real and
personal property taxes, stamp taxes, environmental taxes, transfer taxes,
workers’ compensation, Pension Benefit Guaranty Corporation premiums and other
governmental, charges, and other obligations of the same

 

11

 

or of a similar
nature to any of the foregoing, which the Group is required to pay, withhold,
or collect.

 

(C)
The term “Returns” shall mean all reports, estimates, declarations of
estimated tax, information statements and returns relating to, or required to
be filed in connection with, any Taxes, including information returns or
reports with respect to backup withholding and other payments to third parties.

 

(D)
“Code” shall mean the Internal Revenue Code of 1986, as amended.

 

(ii) Returns
Filed and Taxes Paid. All material Returns required to be filed by or on
behalf of members of the Group have been duly filed and such Returns are true,
complete, and correct in all material respects.

 

Except as set
forth on Schedule 4(h)(ii), all Taxes shown to be payable on the
Returns or on subsequent assessments with respect thereto have been paid in
full on a timely basis, and no other Taxes are payable by the Group with
respect to items or periods covered by such Returns (whether or not shown on or
reportable on such Returns) or with respect to any period prior to the date of
this Agreement other than Taxes not yet due and payable. Each member of the
Group has withheld and paid over all Taxes required to have been withheld and
paid over, and complied with all information reporting and backup withholding
requirements, including maintenance of required records with respect thereto,
in connection with amounts paid or owing to any employee, creditor, independent
contractor, or other third party. There are no Liens on any of the assets of
the Company with respect to Taxes, other than Liens for Taxes not yet due and
payable or for Taxes that a member of the Group is contesting in good faith
through appropriate proceedings and for which appropriate reserves have been
established. No taxing jurisdiction in which the Group does not file Returns
has asserted that the Group is required to file Returns in such jurisdiction.

 

(iii) Returns
Furnished. Buyer has been furnished by the Company copies of all federal
and state income or franchise tax returns of or including the Company as set
forth on Schedule 4(h)(iii). 

 

(iv) Tax
Deficiencies; Audits; Statutes of Limitations. Except as set forth in Schedule
4(h)(iv), there is no audit, either in progress or pending, by a
governmental or taxing authority with respect to any tax owed or alleged to be
owed by the Company; (B) no deficiencies exist or have been asserted in writing
with respect to Taxes of the Group, and no member of the Group has received
written notice that it has not filed a Return or paid Taxes required to be
filed or paid by it; and (C) no waiver or extension of any statute of
limitations is in effect with respect to Taxes or Returns of the Group.

 

(v) Tax Sharing
Agreements. Except as set forth in Schedule 4(h)(v), the Company is
not (nor has it ever been) a party to any Tax sharing agreement and has not
assumed the Tax liability of any other person under contract.

 

12

 

(vi) Tax
Elections and Special Tax Status. The Company has not filed a consent
pursuant to the collapsible corporation provisions of Section 341(f) of the
Code (or any corresponding provision of state, local or foreign income tax
law). No member of the Group is a party to any safe harbor lease within the
meaning of Section 168(f)(8) of the Code, as in effect prior to amendment by
the Tax Equity and Fiscal Responsibility Act of 1982. No member of the Group is
or has been a United States real property holding corporation within the meaning
of Section 897(c)(2) of the Code during the applicable period specified in
Section 897(c)(1)(A)(ii) of the Code and Buyer is not required to withhold tax
on the purchase of the stock of the Company by reason of Section 1445 of the
Code. Seller is not a “foreign person” (as that term is defined in Section 1445
of the Code).  The Company has not
agreed to make, nor is it required to make, any adjustment under Code Section
481 (a) by reason of a change in accounting method or otherwise.

 

(i) Tangible Personal
Property. The Company has good and marketable title to all tangible
personal property and assets purported to be owned by the Company that are
material to the conduct of the Company’s business, in each case, free and clear
of all Liens except (i) such as are set forth in Schedule 4(i), (ii)
mechanics’, carriers’, workmen’s, repairmen’s or other like Liens arising or
incurred in the ordinary course of business, that are not yet due and payable
and do not interfere with the use and enjoyment of any assets or properties of
the Company, (iii) Liens on personal property arising under original purchase
price conditional sales contracts and equipment leases with third parties
entered into in the ordinary course of business, (iv) Liens for Taxes that are
not yet due and payable, and (v) in the case of real property only,
encumbrances that are not violated and the existence of which, individually or
in the aggregate, does not render title to the subject property unmarketable or
materially impair, and could not reasonably be expected to materially impair,
the value or use and operation of the property subject thereto or affected
thereby (the Liens described in clauses (ii), (iii), (iv) and (v) above are
hereinafter referred to collectively as “Permitted Liens”).  Such personal property and assets are in good
repair and operating condition for their current use, ordinary wear and tear
excepted.  Except as set forth in this
Agreement, no representation or warranty is made as to the merchantability or
fitness for any particular purpose of such tangible personal property and
assets.

 

This Section 4(i)
does not relate to intellectual property, such items being the subject of Section
4(j).

 

(j) Intellectual Property.  Schedule 4(j) identifies all patents
and patent applications, trademarks, trade names and service marks, whether
registered or unregistered, and registered copyrights and applications therefor
and material unregistered copyrights licensed to, or owned or used by, the
Company, but does not include off-the-shelf computer software. Except as set
forth in Schedule 4(j), each item of Intellectual Property owned by the
Company is free and clear of all Liens. Except as set forth in Schedule 4(j),
the Company owns, and the Company has the right to use, execute, reproduce,
display, perform, modify, enhance, distribute, prepare derivative works of and
sublicense, without payment to any other person, all Intellectual Property, and
the consummation of the transactions contemplated hereby will not conflict
with, alter or impair any such rights. 
The Company is not infringing or otherwise violating the intellectual
property rights of any other person. 
Except as set forth in Schedule 4(j), no Proceedings are pending
or, to the knowledge of

 

13

 

Seller, threatened
against the Company by any person with respect to the ownership, validity,
enforceability, effectiveness or use of any Intellectual Property or alleging
that the Company is infringing or otherwise violating the intellectual property
rights of any third party. The Company has not, within the past four (4) years,
been involved in any Proceeding regarding the use, ownership, validity,
enforceability, effectiveness or exploitation of any Intellectual Property.  To the knowledge of Seller, no person is
currently infringing or otherwise violating the Company’s rights in the
Intellectual Property.  Other than the
logo described in Schedule 8(f), the Intellectual Property comprises all
intellectual property material to the conduct of the Company’s business.

 

(k) Contracts. Except as
set forth in Schedule 4(k), the Company is not a party to or bound by
any:

 

(i) employment, consulting, independent contractor or
similar Contract;

 

(ii) employee collective bargaining Contract with any
labor union;

 

(iii) Contract containing a covenant not to compete;

 

(iv) lease, sublease or similar Contract with any
person under which the Company is a lessor or sublessor of, or lessee or
sublessee of, or makes available for use to any person, any portion of any
premises occupied by the Company;

 

(v)
lease or similar Contract with any person under which (A) the Company is lessee
of any machinery, equipment, vehicle or other tangible personal property owned
by any person or (B) the Company is a lessor or sublessor of any tangible
personal property owned or leased by the Company;

 

(vi)
Contracts or orders for the future purchase of materials, supplies or equipment
each of which involves payments in excess of Two Hundred Fifty Thousand Dollars
($250,000.00);

 

(vii)
license, sublicense, option or other Contract relating in whole or in part to
the Intellectual Property set forth in Schedule 4(j) (including any
license, sublicense or other Contract under which the Company is licensee or
licensor or sublicensee or sublicensor of any such Intellectual Property);

 

(viii)
Contract under which the Company has borrowed any money from, or issued any
note, bond, debenture or other evidence of indebtedness to, any person or any
other note, bond, debenture or other evidence of indebtedness issued to any
person (other than the Company), or any guaranty of any of the foregoing;

 

(ix)
Contract or other instrument under which the Company has, directly or
indirectly, made any advance, loan, extension of credit or capital contribution
to, or other investment in, any person;

 

(x)  Contract
or instrument under which the Company has granted any power of attorney; 

 

14

 

(xi)
Contract to which the Company is a party or by or to which it or any of its
assets or business is bound providing for payments to or from the Company in
excess of Five Hundred Thousand Dollars ($500,000.00);

 

(xii)
joint venture, partnership, limited liability company or similar Contract;

 

(xiii)
Contract relating to the acquisition or disposition of any assets of the
Company, other than purchase orders and dispositions of inventory in the
ordinary course of business;

 

(xiv)
confidentiality Contract; 

 

(xv)
Contract with any Governmental Entity; or

 

(xvi)
any other Contract not made in the ordinary course of business.

 

Seller
has heretofore made available to Buyer true and complete copies of each
Contract set forth on Schedule 4(k), including all amendments, waivers
and modifications thereto.  Each
Contract set forth on Schedule 4(k) is a valid and binding contract of
the Company and is in full force and effect in accordance with its terms, and
neither the Company nor, to the knowledge of Seller, any other party thereto,
is in breach or default in any material respect thereunder.  Without limiting the generality of the
foregoing, the Company has satisfied and is in compliance with all conditions
to obtaining the benefits to be provided to the Company pursuant to that
certain Revitalization Agreement dated as of June 6, 1996 between the South
Carolina Advisory Coordinating Counsel for Economic Development and the Company
and that certain Fee Agreement dated as of December 1, 2000 between Berkeley
County, South Carolina and the Company.

 

(l) Proceedings. Schedule
4(1) sets forth a list of all pending and, to the knowledge of Seller,
threatened actions, suits, claims, hearings, investigations or other
proceedings (“Proceedings”) against the Company or its properties,
assets, operations or businesses or against Seller in respect of the Company.
Except as set forth in Schedule 4(1), neither Seller nor the Company is
a party to, affected by or in default under any Judgment of any Governmental
Entity or arbitration tribunal issued against or respecting the Company or any
of its properties, assets, operations or business.

 

(m) Insurance. The
insurance policies currently maintained with respect to the Company and its
assets and properties are listed in Schedule 4(m). Except as set forth
in Schedule 4(m), all such policies are in full force and effect, all
premiums due and payable thereon have been paid, and no notice of cancellation
or termination has been received with respect to any such policy. Each such
policy maintained by Seller for the benefit of the Company is so annotated on Schedule
4(m).  Except as otherwise provided
in Section 5(c), policies maintained by Seller for the benefit of the
Company will not cover the Company, its assets, properties, employees or third
parties for occurrences that take place following the Closing (in the case of
“occurrence” policies) or for claims made following the Closing (in the case of
“claims made” policies).

 

15

 

(n) Benefit Plans.

 

(i) Schedule 4(n)(i)
contains a complete list of each “employee pension benefit plan” (as defined in
Section 3(2) of the Employee Retirement Income Security Act of 1974, as amended
(“ERISA”)) (a “Pension Plan”), “employee welfare benefit plan”
(as defined in Section 3(1) of ERISA) (a “Welfare Plan”), and each other
plan, arrangement or policy relating to stock options, stock purchases,
incentive compensation, deferred compensation, severance pay, plant closing
benefits, disability insurance, life insurance, health benefits, dependent care
assistance benefits or other employee benefits, in each case maintained,
sponsored, adopted or contributed to, or required to be maintained, sponsored,
adopted or contributed to, by the Company or Seller or any of their respective
affiliates for the benefit of any present or former officers, employees,
agents, directors or independent contractors of the Company (all the foregoing
being herein collectively called “Benefit Plans” and individually called
a “Benefit Plan”). Schedule 4(n)(i) identifies each Benefit Plan
that is established, maintained, sponsored, adopted or contributed to solely by
the Company (the “Company Benefit Plans”). Each Benefit Plan not so
identified is herein referred to as a “Seller Benefit Plan”. The Company
has delivered or made available to Buyer true, complete and correct copies of
(i) each Benefit Plan, (ii) the most recent annual report on Form 5500 filed
with the Internal Revenue Service with respect to each Benefit Plan (if any
such report was required by applicable Law), and (iii) each trust agreement and
insurance or annuity contract or other funding or financing arrangement
relating to any Benefit Plan for which a funding or financing arrangement is
required by applicable Law.

 

(ii) Each Benefit Plan
has been administered in all material respects in accordance with its terms.
The Company, and all the Benefit Plans are in compliance in all material
respects with the applicable provisions of ERISA, the Code, all other
applicable Laws and the terms of all applicable collective bargaining
agreements. There are no investigations by any Governmental Entity, termination
proceedings or other claims (except routine claims for benefits payable under
the Benefit Plans) or Proceedings pending against or involving any Benefit Plan
or asserting any rights to or claims for benefits under any Benefit Plan that
could give rise to any material liability.

 

(iii) The Company’s and
Seller’s Pension Plans have received favorable determination letters from the
Internal Revenue Service to the effect that the plan documents for such plans
and related trusts satisfy the requirements to be considered qualified and
exempt from federal income taxes under Sections 401(a) and 501(a),
respectively, of the Code as in effect prior to the enactment of “GUST”
(General Agreement on Trade and Tariffs 1994, USERRA 1994, SBJPA 1996 and TRA
97) and, to the knowledge of Seller, no event has occurred and no circumstances
exist that would be reasonably likely to result in the revocation of any such
favorable determination letter.

 

16

 

(iv) The Company is not
required, and has never been obligated within the past five (5) years, to
contribute to any “multiemployer plan” (as defined in Section 4001(a)(3) of
ERISA), and there are no circumstances pursuant to which the Company would have
any liability with respect to any such plan.

 

(v) No Company Plan,
other than the Pension Plan for Hourly Employees of JW Aluminum at Mt. Holly,
South Carolina (the “JW Hourly Pension Plan”) is subject to Title IV of
ERISA.  With respect to the JW Hourly
Pension Plan (A) there has been no “accumulated funding deficiency” within the
meaning of section 302 of ERISA or section 412 of the Code, (B) the “amount of
unfunded benefit liabilities” as determined using the plan’s actuarial
assumptions for purposes of ongoing funding obligations does not exceed zero,
and (C) no “reportable event” (within the meaning of section 4043 of ERISA),
other than the transactions contemplated by this Agreement, has occurred.  There is no direct, contingent or secondary
liability that has been incurred or is expected to be incurred by the Company
under Title IV of ERISA, other than for premiums payable to the PBGC under
Title IV of ERISA with respect to any Pension Plan. 

 

(vi) Except as set forth
in Schedule 4(n)(vi), no benefit under any Benefit Plan, including without
limitation any severance, employment or parachute plan or agreement, will be
established or become accelerated, vested or payable by reason of any
transaction contemplated by this Agreement, either alone or in conjunction with
another event (e.g., termination of employment).

 

(vii) The tax
deductibility of any amount payable under any Benefit Plan to the Company,
Buyer or any of their affiliates will not be limited by operation of  section 280G of the Code.

 

This Section
4(n) contains the sole and exclusive representations and warranties of
Seller with respect to all ERISA matters, and all matters relating to Benefit
Plans, if any.

 

(o) Compliance with Law and
Environmental Law. (i) Except as set forth in Schedule  4(o)(i):
(A) the Company and the operation of its business is in compliance in all
material respects with all applicable Law; and (B) the Company has received no
written communication during the past two (2) years from a Governmental Entity
that alleges that the Company or its business is not in compliance with any
applicable Law.

 

(ii) Except as set forth in Schedule 4(o)(ii):

 

(A) The Company has
obtained, holds and at all times in the past has held all necessary
Environmental Permits, and such Environmental Permits currently held by the
Company are identified on Schedule 4(q), and each such Environmental
Permit will remain valid and effective after the Closing without any notice to
or consent of any Governmental Entity.

 

(B) The Company and the
operation of its business is and at all times in the past has been in
compliance in all material respects with all provisions of all applicable
Environmental Laws.

 

17

 

(C) There are no past,
pending or, to the knowledge of Seller, threatened claims or Judgments in
connection with or under any Environmental Law against the Company, and, to the
knowledge of Seller, there are no facts or circumstances which could reasonably
be expected to form the basis for any liability of the Company under any
Environmental Law.

 

(D) No Releases of
Hazardous Substances have occurred at, from, in, to, on or under any Site and
no Hazardous Substances are present in, on, about or migrating to or from any
Site, in each case other than any Site that is Leased Real Property.  To the knowledge of Seller, no Releases of
Hazardous Substances have occurred at, from, in, to, on or under any Site that
is Leased Real Property and no Hazardous Substances are present in, or, about
or migrating to or from any Site that is Leased Real Property.

 

(E) Neither the Company,
any predecessors of the Company nor any entity previously owned by the Company
has transported or arranged for the treatment, storage, handling, disposal or transportation
of any Hazardous Substance to any off-Site location which could result in any
liability of the Company under any Environmental Law. 

 

(F) The Company has not,
either expressly or by operation of Law, assumed or undertaken, or agreed to
assume or undertake, responsibility for any liability or obligation of any
other person, arising under or relating to Environmental Laws, including
without limitation any obligation for investigation, corrective or remedial
action.

 

(G) There have been no environmental investigations,
studies, audits, tests, reviews or other analyses conducted by, on behalf of,
or which are in the possession of, the Company, Seller or any representatives
thereof, with respect to any Site which have not been made available to the Buyer
prior to execution of this Agreement.

 

(H) There are no Sites owned, leased or operated by
the Company within the past ten (10) years.

 

(p) Employee
and Labor Matters. (i) Except as set forth in Schedule
4(p)(i), (A) none of the employees of the Company are represented by a
labor union or organization and the Company is not party to and does not have
any obligation under any collective bargaining agreement or other Contract with
such a labor union or organization, or any obligation to recognize or deal with
any labor union or organization, nor has it experienced any strike or material
grievance, claim of unfair labor practice or other collective bargaining
dispute within the past three (3) years, (B) no union organizational campaign
is pending or, to the knowledge of Seller, threatened with respect to the
employees of the Company, and no question concerning representation exists
respecting such employees, (C) there are no pending or, to the knowledge of
Seller, threatened strikes, slowdowns, work stoppages or lock-outs of any kind
by or with respect to any employees of the Company, (D) there are no

 

18

 

pending, or, to the
knowledge of Seller, threatened, charges against the Company or any current or
former employee of the Company before the Equal Employment Opportunity
Commission or any state or local agency responsible for the prevention of
unlawful employment practices and (E) the Company has received no written
notice during the past three (3) years of the intent of any Governmental Entity
responsible for the enforcement of labor or employment laws to conduct an
investigation of the Company.

 

(ii) A true and correct detailed list of all officers,
directors and employees of the Company, including without limitation names,
positions and rates of compensation, is set forth in Schedule 4(p)(ii).  The Company has at all times properly
classified each of its respective employees as employees and each of its
independent contractors as independent contractors, as applicable.  Except as set forth in Schedule 4(n)(i)
or 4(p)(ii), the Company has no obligation under any employment,
consulting or similar Contracts, employment policies or retirement or employee
benefit plans, arrangements or understandings, written or otherwise, with any
officer, director, employee or agent of the Company.

 

(iii) Except as set forth in Schedule 4(p)(iii):

 

(A) The Company and the
operation of its business is and at all times in the past has been in
compliance in all material respects with all provisions of all applicable OSHA
Laws.

 

(B) There are no past,
pending or, to the knowledge of Seller, threatened claims or Judgments in
connection with or under any OSHA Law against the Company, and, to the
knowledge of Seller, there are no facts or circumstances which could reasonably
be expected to form the basis for any liability of the Company under any OSHA
Law.

 

(C) The Company has not,
either expressly or by operation of Law, assumed or undertaken, or agreed to
assume or undertake, responsibility for any liability or obligation of any
other person, arising under or relating to OSHA Laws, including without
limitation any obligation for investigation, corrective or remedial action.

 

(q) Permits.

 

(i)
Schedule 4(q) sets forth all governmental franchises, licenses, permits,
authorizations and approvals (collectively, the “Permits”) issued or
granted to the Company by Governmental Entities that are used or held for use
in the use or operation of the Company, its business or its material properties
or material assets as of the date of this Agreement. Except as set forth in Schedule
4(q), (A) all Permits are validly held by the Company and the Company has
complied and is in compliance with all material terms and conditions thereof
and (B) during the past twelve (12) months, the Company has received no written
notice of any Proceedings relating to the revocation or modification of any
such Permits.

 

19

 

(ii)
The Company possesses all Permits required in order for the Company to own or
hold under lease and operate the business of the Company as currently
conducted, and all Permits will remain in full force and effect immediately
following the Closing and will not be affected by or terminate or lapse by reason
of the Acquisition or the other transactions contemplated hereby.

 

(r) Real Property.

 

(i) Schedule 4(r) lists and describes briefly
all real property that the Company owns (such real property, together with all
buildings, improvements, fixtures and systems thereon and all easements and
appurtenances relating thereto, the “Owned Real Property”), including
without limitation a legal description of each such parcel of real property.
With respect to each such parcel of Owned Real Property:

 

(A)
the Company has good and marketable fee simple title to the Owned Real
Property, free and clear of any Lien, except as set forth in item I on Schedule
4(r) and Addendum 1 to Schedule 4(r) and except for Permitted
Liens.  The Liens described in item I of
Schedule 4(r) and Addendum 1 to Schedule 4(r) do not,
individually or in the aggregate, render title to the subject property
unmarketable or materially impair, and could not reasonably be expected to
materially impair, the value or use and operation of the Owned Real Property.

 

(B)
there are no pending or, to the knowledge of Seller, threatened condemnation
proceedings, lawsuits, or administrative actions relating to the Owned Real
Property;

 

(C)
except as set forth in item II on Schedule 4(r) (the “Company Leases”),
there are no leases, subleases, licenses, concessions, or other agreements,
written or oral, granting to any party or parties the right of use or occupancy
of any portion of the Owned Real Property;

 

(D)
there are no outstanding options or rights of first refusal to purchase the
Owned Real Property, or any portion thereof or interest therein;

 

(E)
the tax parcels comprising the Owned Real Property do not encompass or apply to
any other real property; 

 

(F)
the Company has not transferred any development rights applicable to any Owned
Real Property;

 

(G)
there is no material construction at any parcel of Owned Real Property;

 

(H)
neither Seller nor the Company is in default under any of the Permitted Liens
or any of the Liens set forth in item I on Schedule 4(r) or Addendum 1
to Schedule 4(r);

 

20

 

(I)
the real property contained in the Owned Real Property is suitable for the
operation of the business conducted thereon, and the buildings, improvements,
fixtures and systems thereon are in good repair and operating condition,
ordinary wear and tear excepted;

 

(J)
public utilities currently adequately serve all utility requirements of each
parcel of Owned Real Property;

 

(K)
to Seller’s knowledge, the Owned Real Property, as a whole, does not rely on
any drainage, sewer, access, structural or other facilities located on any
other property not included in the same (except for normal easements granted to
utility providers and other entities for the provision of services to the Owned
Real Property) to fulfill any zoning, building code or other municipal or
governmental requirements, for structural support or to furnish to the same any
essential building systems or utilities. 
To Seller’s knowledge, no building or other improvement not included in
a parcel of Owned Real Property relies on any part of the same (except for
normal easements granted to utility providers and other entities for the
provision of services to the Owned Real Property as specified in item I on Schedule
4(r) and Addendum 1 to Schedule 4(r) to fulfill any zoning, building
code or other municipal or governmental requirement, for structural support or
the furnishing to such building or improvement of any essential building
systems or utilities; and 

 

(L)
the Owned Real Property is located in FEMA FIRM zone X.  No other portion of any parcel of Owned Real
Property is located in an area designated as a flood zone by any Governmental
Authority.

 

(ii) All leasehold
interests of the Company under leases or subleases (or other occupancy
agreements) of real property (“Leased Real Property” and, together with
the Owned Real Property, the “Real Property”) are listed in items III
and IV of Schedule 4(r), which sets forth, with respect to each lease of
Leased Real Property (the “Real Property Leases” and, together with the
Company Leases, the “Leases”), the date thereof, the original parties
thereto, the date of any amendments or supplements thereto, as well as the
address or location of the Leased Real Property. True and complete copies of
all Leases have been furnished to Buyer, and all Leases are in full force and
effect, are enforceable in accordance with their terms, subject to bankruptcy,
insolvency, reorganization, moratorium and similar laws of general application relating
to or affecting creditors’ rights and to general equity principles, and are
subject to no Liens, other than Permitted Liens. The Company has not received
any notice of any material default thereunder, and the Company is not and, to
the knowledge of Seller, no other party is in default under, any Lease and no
event has occurred which, with the giving of notice or the passage of time, or
both, would constitute a material default under any of the Leases.  Neither the Company nor Seller has assigned,
pledged, hypothecated or otherwise transferred any Lease.  The Company has not sublet all or any
portion of any Leased Real Property and the Company is in full possession
thereof.  No landlord or tenant under
any Lease has

 

21

 

exercised any option or right to (A) cancel or
terminate such Lease or shorten or lengthen the term thereof, (B) lease
additional premises, (C) reduce or relocate the premises demised by such Lease
or (D) purchase any property.  No security
deposit under any Lease has been utilized by any landlord.  The Real Property constitutes all real
property material to the Company’s business.

 

(s) No Undisclosed
Liabilities. Except as set forth in Schedule 4(s) and for
current liabilities incurred in the ordinary course of business since the date
of the Financial Statements, the Company has no liabilities or obligations of
any nature (whether known or unknown and whether absolute, accrued, contingent
or otherwise), except for liabilities reflected or reserved against in the
Financial Statements or disclosed in the footnotes thereto.

 

(t) Transactions with
Affiliates. Except as set forth in Schedule 4(t), none of Seller or
its affiliates have, or since December 31, 2001 have had, any Contract, business
arrangement or relationship with the Company, and none of Seller or its
affiliates own, or since December 31, 2001 have owned,  any asset, tangible or intangible, which is
used in the business of the Company.

 

(u) Broker of Seller.
With the exception of the fees and expenses payable to Banc of America
Securities, LLC, which shall be Seller’s sole responsibility, the Seller is not
a party to any agreement with any lender, broker or similar person in
connection with, and no such person is or will be entitled to any fee,
commission or other compensation on the basis of any act or statement made or
alleged to have been made by Seller, the Company or any of their respective
affiliates in connection with, the origin, negotiation, execution or
performance of this Agreement or the Acquisition.

 

(v) No Company Material
Adverse Change.  Since December 31,
2002, there has been no Company Material Adverse Change, and no event,
occurrence or development that could reasonably be expected to result in a
Company Material Adverse Change.

 

(w) Absence of Certain
Changes.  Except as set forth in the
corresponding subsection of Schedule 4(w), since December 31, 2002 the
Company has conducted its business in the ordinary course, and it has not:

 

(i) amended its certificate of incorporation or bylaws;

 

(ii)
redeemed or otherwise acquired any shares of its capital stock or issued any
capital stock or any option, warrant or right relating thereto or any
securities convertible into or exchangeable for any shares of capital stock;

 

(iii) adopted or amended in any material respect any
Benefit Plan of the Company, except as required by applicable Law;

 

(iv)
granted to any executive officer or employee of the Company any material
increase in compensation or benefits, except in the ordinary course of
business;

 

22

 

(v)
incurred or assumed any liabilities, obligations or indebtedness for borrowed
money or guaranteed any such liabilities, obligations or indebtedness, other
than in the ordinary course of business;

 

(vi) granted any Lien other than a Permitted Lien;

 

(vii)
except for intercompany transactions in the ordinary course of business
(including the transfer of all Company cash to the Seller) and payments under
any tax sharing agreement, paid, distributed, loaned or advanced any amount to,
or sold, transferred or leased any of its assets to, or entered into any
agreement or arrangement with, Seller or any of its affiliates;

 

(viii)
made any change in any method of accounting or accounting practice or policy
other than those required under applicable accounting principles;

 

(ix)
sold, leased or otherwise disposed of any of its assets which are material,
individually or in the aggregate, to the Company, except in the ordinary course
of business;

 

(x) entered into any material Contract outside the
ordinary course of business; 

 

(xi) made any material Tax election or change in any
material Tax practice;

 

(xii) demolished or made any material alteration to
any Real Property;

 

(xiii) acquired any equity interest in any person or
any material property, other than acquisitions of raw materials and equipment
in the ordinary course of business;

 

(xiv) other than in the ordinary course of business,
modified, extended, renewed, amended or terminated, or granted any waiver or
exercised any right or option under any material Contract; or 

 

(xv) agreed, whether in writing or otherwise, to do any of the
foregoing.

 

5. Covenants of Seller.
Seller covenants and agrees as follows:

 

(a) Access. Prior to the
Closing, Seller shall, and shall cause the Company to, give Buyer and its
representatives, employees, counsel and accountants reasonable access
(including access for conducting environmental assessments), during normal
business hours and upon reasonable notice, to the executive officers,
properties, books and records of the Company; provided, however,
that such access does not unreasonably disrupt the normal operations of Seller
or the Company.  Buyer shall indemnify
and hold the Company and each of its officers, directors, employees,
stockholders, agents and representatives harmless from all damage to property
caused by the negligence or intentional misconduct of Buyer or its officers,
directors, employees, stockholders, agents and representatives in connection with
such access.

 

23

 

(b) Ordinary Conduct.
Except as set forth in Schedule 5(b), from the date of this Agreement to
the Closing, Seller shall cause the business of the Company to be conducted in
the ordinary course in substantially the same manner as presently conducted and
shall make reasonable efforts consistent with past practices to preserve the
Company’s relationships with customers, suppliers and others with whom the
Company deals and to keep its business and properties substantially intact.
Seller shall not, and shall not permit the Company to, take any action that
will, or that could reasonably be expected to, result in any of the conditions
to the Acquisition set forth in Section 3(a) not being satisfied. In
furtherance of but not in limitation of the foregoing, prior to the Closing,
Seller shall cause the Company to comply with all Laws applicable to the
Company, fulfill its obligations under its Contracts and maintain insurance
relating to the business as in effect on the date hereof. In addition, except
as set forth in Schedule 5(b) or otherwise expressly permitted by the
terms of this Agreement, Seller shall not permit the Company to do any of the
following without the prior written consent of Buyer, which will not be
unreasonably withheld:

 

(i) amend its certificate of incorporation or bylaws;

 

(ii)
redeem or otherwise acquire any shares of its capital stock or issue any
capital stock or any option, warrant or right relating thereto or any securities
convertible into or exchangeable for any shares of capital stock;

 

(iii)
adopt or amend in any material respect any Benefit Plan of the Company, except
as required by applicable Law;

 

(iv)
grant to any executive officer or employee of the Company any material increase
in compensation or benefits, except in the ordinary course of business
consistent with past practice or as may be required under existing agreements
and except for any increases for which Seller shall be solely obligated;

 

(v)
incur or assume any liabilities, obligations or indebtedness for borrowed money
or guarantee any such liabilities, obligations or indebtedness;

 

(vi)
grant any Lien other than a Permitted Lien;

 

(vii)
except for intercompany transactions in the ordinary course of business
(including the transfer of all Company cash to Seller) and payments under any
tax sharing agreement, pay, loan or advance any amount to, or sell, transfer or
lease any of its assets to, or enter into any agreement or arrangement with,
Seller or any of its affiliates;

 

(viii)
make any change in any method of accounting or accounting practice or policy
other than those required under applicable accounting principles;

 

(ix)
sell, lease, assign, transfer or otherwise dispose of any of its assets, except
in the ordinary course of business;

 

(x) except as otherwise permitted in this Section
5(b) above, enter into any material Contract outside the ordinary course of
business; 

 

24

 

(xi) make any material Tax election or change in any
material Tax practice;

 

(xii) demolish or make any material alteration to any
Real Property;

 

(xiii) acquire any equity interest in any person or
any material property, other than acquisitions of raw materials and equipment
in the ordinary course of business; 

 

(xiv) except in the ordinary course of business,
modify, extend, renew, amend or terminate, or grant any waiver or exercise any
right or option under any material Contract; or

 

(xv) agree, whether in writing or otherwise, to do any
of the foregoing.

 

(c) Insurance. After
the Closing Date, Seller shall cause any third party administrator who
administered claims prior to the Closing Date on behalf of Seller to continue
to administer for the benefit of the Company, as to occurrences and claims made
prior to the Closing Date, all insurance programs applicable to Company, its
predecessors or its assets and properties in accordance with the terms and
conditions of such insurance programs in effect as of the Closing Date.  The Company will be liable for and will pay
all additional associated costs that are charged by such third party
administrator with respect to such administrative activities related to the
rights of the Company.  Seller further agrees
to cooperate with Buyer following the Closing Date, including without
limitation: (x) cooperating with Buyer in the prosecution of any claim under
any Insurance Policies and in connection with all reasonable requests of Buyer
in prosecuting such claims, including providing sworn testimony at the
reasonable request of the Buyer; and (y) preserving all documents and physical
evidence in its possession, custody or control that are necessary or desirable
for the prosecution of any such claims by Buyer, provided that Buyer
shall reimburse Seller for any out-of-pocket expenses that Seller incurs in
connection with such cooperation and document preservation.

 

(d) Liens. Seller shall take
and cause the Company to take all necessary actions to cause the termination,
release and removal, on or prior to the Closing Date, of all Liens on the
Shares or, other than Permitted Liens, any of the assets or properties of the
Company, and the release of the Company from all liabilities and obligations
underlying any such Lien. 

 

(e) No
Solicitation.  From the date of this
Agreement until the earlier of the Closing or the termination of this Agreement
pursuant to Section 15, the Seller shall not, and shall cause its subsidiaries
and its and their respective stockholders, officers, directors, employees,
agents, representatives and advisors not to, (i) solicit, initiate or encourage
any inquiry, proposal or offer from any person relating to (A) any purchase,
lease, pledge or other acquisition of any material portion of the assets of the
Company or of any capital stock, equity interests or equity equivalents in the
Company, whether by any merger, consolidation, business combination, asset
sale, stock issuance, recapitalization, liquidation, dissolution, license or
any other similar transaction, or (B) any other transaction the consummation of
which could reasonably be expected to impair, impede, interfere with, prevent
or materially delay the Closing or dilute the benefits to Buyer of the
transactions

 

25

 

contemplated hereby
(collectively, “Transaction Proposals”), (ii) agree to or endorse any
Transaction Proposal or (iii) enter into or participate in any discussions or
negotiations regarding any Transaction Proposal.

 

(f)                                    Intercompany
Accounts.  On or prior to the Closing,
Seller shall, and shall cause its affiliates to, forgive, cancel or otherwise
terminate all amounts owing by the Company to Seller or any affiliate thereof,
or owing by Seller or any such affiliate to the Company, such that there shall
be no such amounts owing by or to the Company as of the Closing.

 

6. Representations and
Warranties of Buyer.  Buyer hereby
represents and warrants to Seller that the statements contained in this Section
6 are true and correct as of the date hereof and will be true and correct as of
the Closing Date:

 

(a) Authority.
Buyer is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and has full corporate power and
authority and possesses all governmental franchises, licenses, permits,
authorizations and approvals necessary to enable it to own, lease or otherwise
hold its properties and assets and to carry on its business as presently
conducted, other than such franchises, licenses, permits, authorizations and
approvals the lack of which, individually or in the aggregate, have not had and
could not reasonably be expected to have a material adverse effect on the
ability of Buyer to perform its obligations under this Agreement or on the
ability of Buyer to consummate the Acquisition and the other transactions
contemplated hereby (a “Buyer Material Adverse Effect”). Buyer has
delivered to Seller true and complete copies of its certificate or articles of
incorporation and bylaws, in each case as amended through the date of this Agreement.
Buyer has full power and authority to execute this Agreement and the Ancillary
Documents and to consummate the Acquisition and the other transactions
contemplated hereby and thereby. The execution and delivery by Buyer of this
Agreement and the Ancillary Documents and the consummation by Buyer of the
Acquisition and the other transactions contemplated hereby and thereby have
been duly authorized by all necessary corporate action. Buyer has duly executed
and delivered this Agreement and the Ancillary Documents and, assuming the due
authorization, execution and delivery hereof and thereof by Seller, this
Agreement constitutes, and upon and after the Closing the Ancillary Documents
will constitute, Buyer’s legal, valid and binding obligations, enforceable
against it in accordance with their respective terms, subject to bankruptcy,
insolvency, reorganization, moratorium and similar laws of general application
relating to or affecting creditors’ rights and to general equity principles.

 

(b) No Conflicts; Consents.
The execution and delivery by Buyer of this Agreement and the Ancillary
Documents does not, and the consummation of the Acquisition and the other
transactions contemplated hereby and thereby and compliance by Buyer with the
terms hereof and thereof will not, conflict with, or result in any violation of
or default (with or without notice or lapse of time, or both) under, or give
rise to a right of termination, cancellation or acceleration of any obligation
or to loss of a material benefit under, or to increased, additional,
accelerated or guaranteed rights or entitlements of any person under, or result
in the creation or imposition of any Lien upon any of the properties or assets
of Buyer or any of its subsidiaries under, any provision of (i) the certificate
or articles of

 

26

 

incorporation or bylaws
of Buyer or any of its affiliates, (ii) any Contract to which Buyer or any of
its affiliates is a party or by which any of their respective properties or assets
is bound or (iii) any Permit, Judgment or Law applicable to Buyer or any of its
affiliates or their respective properties or assets, other than, in the case of
clauses (ii) and (iii) above, any such items that, individually or in the
aggregate, have not had and could not reasonably be expected to have a Buyer
Material Adverse Effect.  No consent of
or registration, declaration or filing with any Governmental Entity or third
party is required to be obtained or made by or with respect to Buyer or any of
its affiliates in connection with the execution, delivery and performance of
this Agreement or the Ancillary Documents or the consummation of the
Acquisition or the other transactions contemplated hereby or thereby, other
than (A) compliance with and filings under the HSR Act, (B) compliance with and
filings under applicable Environmental Laws, and (C) those that are required to
be made solely by Seller.

 

(c) Securities Act.
The Shares purchased by Buyer pursuant to this Agreement are being acquired for
its own account for investment purposes only and not with an intent or a view
to the sale or distribution thereof within the meaning of Section 2(11) of the
Securities Act of 1933, as amended (the “Securities Act”), and Buyer
shall not offer to sell or otherwise dispose of the Shares so acquired by it in
violation of any of the registration requirements of the Securities Act.

 

(d) Actions and
Proceedings, etc. There are no (i) outstanding Judgments of any
Governmental Entity or arbitration tribunal against or affecting Buyer or any
of its affiliates, (ii) Proceedings pending or, to the knowledge of Buyer,
threatened against Buyer or any of its affiliates, or (iii) investigations by
any Governmental Entity which are pending or, to the knowledge of Buyer, threatened
against Buyer or any of its affiliates, and which, in the case of each of
clauses (i), (ii) and (iii), have had or could reasonably be expected to have a
Buyer Material Adverse Effect.

 

(e) No Financing Needed.
Buyer covenants, represents and warrants that Buyer has received binding
commitment letters from General Electric Capital Corporation and OCM Mezzanine
Fund, L.P., which are currently in effect and copies of which have been
provided to Seller.

 

(f) Disclaimer Regarding
Projections.  In connection with
Buyer’s investigation of the Company, the Buyer has received from the Seller
and its affiliates and agents certain projections and other forecasts,
including, without limitation, projected financial statements, cash flow items,
certain business plan information and other data related to the Company.  Buyer acknowledges that (i) there are
uncertainties inherent in attempting to make such projections, forecasts and
plans and, accordingly, it is not relying on them, (ii) Buyer is familiar with
such uncertainties and is taking full responsibility for making its own
evaluation of the adequacy and accuracy of all projections, forecasts and plans
so furnished to it, and (iii) Buyer shall have no claim against Seller or such
affiliates or agents with respect to any of the foregoing.  Accordingly, Buyer acknowledges that the
Seller has made no representation or warranty with respect to such projections
and other forecasts and plans.

 

27

 

(g) Broker of Buyer.
The Buyer is not a party to any agreement with any lender, broker or similar
person in connection with, and no such person is or will be entitled to any
fee, commission or other compensation on the basis of any act or statement made
or alleged to have been made by Buyer in connection with the origin,
negotiation, execution or performance of this Agreement or the Acquisition.

 

7. Covenants of Buyer.
Buyer covenants and agrees as follows:

 

(a) Confidentiality.
Buyer acknowledges that the information being provided to it in connection with
the Acquisition and the consummation of the other transactions contemplated by
this Agreement is subject to the terms of a confidentiality agreement dated
July 8, 2003  between Buyer and Seller (the “Confidentiality Agreement”),
the terms of which are incorporated herein by reference. Effective upon, and
only upon, the Closing, the Confidentiality Agreement shall terminate with
respect to information relating to the Company; provided, however,
that Buyer acknowledges that any and all other information provided to it by
Seller or Seller’s representatives shall remain subject to the terms and
conditions of the Confidentiality Agreement after the Closing Date and that
Seller shall be entitled to the benefits of the Confidentiality Agreement
without giving effect to any waivers, amendments or other modifications thereto
not agreed to in writing by Seller. Notwithstanding anything else in this
Agreement to the contrary (including without limitation this Section 7(a) and
Section 9(h)), each party hereto (and each employee, representative or other
agent of any party) may disclose to any and all persons, without limitation of
any kind, the tax treatment and tax structure of the transactions contemplated
hereby and all materials of any kind (including opinions or other tax analyses)
that are or have been provided to any party (or to any employee, representative
or other agent of any party) relating to such tax treatment or tax structure; provided,
however, that this authorization of disclosure shall not apply to
restrictions reasonably necessary to comply with securities laws. The authorization set forth in the immediately
preceding sentence is not intended to permit disclosure of any other
information including, without limitation, (i) any portion of any materials to
the extent not related to the tax treatment or tax structure of such
transactions, (ii) the identities of participants in such transactions, (iii)
any pricing information, (iv) any financial information or (vi) any other term
or detail not related to the tax treatment or tax structure of such
transactions.  This authorization of
disclosure is retroactively effective immediately upon commencement of the
first discussions regarding the transactions contemplated hereby.

 

(b) No Additional
Representations. Buyer acknowledges that it and its representatives have
been permitted access to the books and records, facilities, equipment, Tax
Returns, contracts, insurance policies (or summaries thereof) and other
properties and assets of the Company which it and its representatives have
desired or requested to see and/or review, and that it and its representatives
have had an opportunity to conduct a due diligence investigation of the Company
and meet with the officers and employees of the Company to discuss the
businesses and assets of the Company. Notwithstanding such rights of access,
Buyer has the right to rely fully upon the representations, warranties,
covenants and agreements of the Seller contained in this Agreement. Buyer
acknowledges that none of Seller, the Company or any other person has made any
representation or warranty, expressed

 

28

 

or implied, as to the
accuracy or completeness of any written or oral information regarding the
Company furnished or made available to Buyer and its representatives, except as
expressly set forth in Section 4 of this Agreement or the Schedules
thereto, and none of Seller, the Company or any other person shall have or be
subject to any liability to Buyer or any other person resulting from the
distribution to Buyer, or Buyer’s review or use of, such written or oral
information, and any information, documents or material made available to Buyer
in certain “data rooms,” management presentations or in any other form in
expectation of the transactions contemplated hereby. 

 

(c) Obligation to Pay
Certain Fees. Buyer agrees to pay all filing fees and similar expenses
incurred in connection (i) with the filings required under the HSR Act and (ii)
any other filings to be made by Buyer with any Governmental Entity pursuant to
applicable Law.

 

8. Additional Covenants.

 

(a) Consents. As soon as
practicable after execution of this Agreement, Seller shall cause the Company
to: (i) obtain any necessary consent, approval or authorization of any person
as is required to be obtained, made or given to consummate the transactions
contemplated by this Agreement, including without limitation, any
authorizations, consents or approvals set forth in Schedule 3(a)(ix);
(ii) obtain non-disturbance agreements reasonably satisfactory to Buyer and its
lenders, with respect to the properties listed under item III and IV on Schedule
4(r) hereto from each holder of a mortgage, deed of trust or ground or
underlying lease encumbering such properties; (iii) obtain estoppel
certificates reasonably satisfactory to Buyer and its lenders, with respect to
the properties listed under items III and IV on Schedule 4(r) from each
landlord under a Real Property Lease respecting such properties; (iv) obtain landlord
lien waivers and consents in favor of Buyer’s lenders, reasonably satisfactory
to Buyer and its lenders, with respect to the properties listed under items III
and IV on Schedule 4(r); and (v) promptly deliver to Buyer a copy of any
notice sent or received under any Contract. Prior to and following the Closing,
Seller shall, and prior to the Closing shall cause the Company to, use
reasonable efforts to cooperate with Buyer, upon the request of Buyer, in
connection with Buyer obtaining any such consents and waivers; provided,
however, that such cooperation shall not include any requirement of
Seller or any of its affiliates (including, prior to the Closing, the Company)
to expend money, commence or participate in any litigation or offer or grant
any material accommodation (financial or otherwise) to any third party. If any
such consent or waiver shall not be obtained before or at the Closing, then
until such consent or waiver is obtained, Seller shall cooperate with Buyer in
any reasonable arrangement designed to provide Buyer with the benefits intended
to be acquired by Buyer pursuant to the transactions contemplated by this
Agreement, including, in the case of Contracts, enforcement for the account of
Buyer or the Company, as applicable, of any and all rights against any other
party to such Contract arising out of the breach, nonfulfillment or
cancellation thereof by such other party or otherwise.

 

(b) Cooperation.
Buyer and Seller shall cooperate with each other, and shall cause their
officers, employees, agents, auditors and representatives to cooperate with
each other, for so long as services are being provided pursuant to the
Transition Services Agreement, to

 

29

 

ensure the orderly
transition of the Company from Seller to Buyer and to minimize any disruption
to the respective businesses of Seller, Buyer or the Company that might result
from the transactions contemplated hereby. After the Closing, upon reasonable
written notice, Buyer and Seller shall furnish or cause to be furnished to each
other and their employees, counsel, auditors and representatives access, during
normal business hours, such information and assistance relating to the Company
as is reasonably necessary for financial reporting and accounting matters, the
preparation and filing of any Tax Returns or forms or the defense of any Tax
claim or assessment, worker’s compensation claims and insured claims relating
to periods prior to the Closing. Each party shall reimburse the other for reasonable
out-of-pocket costs and expenses incurred in assisting such party pursuant to
this Section 8(b).  Neither party
shall be required by this Section 8(b) to take any action that would
unreasonably interfere with the conduct of its business or unreasonably disrupt
its normal operations (or, in the case of Buyer, the business or operations of
the Company).

 

(c) Publicity. Seller and
Buyer agree that, from the date hereof through the Closing Date, no public
release or announcement concerning the transactions contemplated by this
Agreement shall be issued by either party without the prior consent of the
other party (which consent shall not be unreasonably withheld); provided,
however, that any release or announcement required by applicable Law or
the rules or regulations of any United States or foreign securities exchange
may be made by a party provided that such party shall allow the other party a
reasonable time under the circumstances to comment on such release or
announcement in advance of such issuance. Seller and Buyer shall issue a joint
announcement concerning the transactions contemplated by this Agreement to the
Company’s employees and customers and suppliers of the Company.

 

(d) Antitrust
Notification. Each of Seller and Buyer shall, as promptly as practicable
and before the expiration of any relevant legal deadline, but in no event later
than ten (10)  business days following
the execution and delivery of this Agreement, file with (i) the United States
Federal Trade Commission (the “FTC”) and the United States Department of
Justice (the “DOJ”) the notification and report form, if any, required
for the transactions contemplated hereby and any supplemental information
requested in connection therewith pursuant to the HSR Act, which forms shall
specifically request early termination of the waiting period prescribed by the
HSR Act, and (ii) any other Government Entity any other filings, reports,
information and documentation required for the transactions contemplated hereby
pursuant to any other antitrust or competition law or regulation.  Each of Buyer and Seller shall furnish to
the other’s counsel such necessary information and reasonable assistance as the
other may request in connection with its preparation of any filing or
submission which is necessary under the HSR Act and any antitrust or
competition law or regulation. Buyer and Seller shall keep each other apprised
of the status of any communications with, and any inquiries or requests for
additional information from, the FTC and the DOJ and any other Governmental
Entity and shall comply promptly with any such inquiry or request.  Each of Seller and Buyer shall use all
reasonable efforts to obtain any clearance required under the HSR Act for the
Acquisition; provided, however, that Buyer shall be solely
responsible for any filing fees payable under the HSR Act.

 

(e) Records. On the Closing
Date, Seller shall deliver or cause to be delivered to Buyer all agreements,
documents, books, records and files relating to the business and

 

30

 

operations of the Company
(collectively, “Records”), if any, in the possession of Seller to the
extent not then in the possession of the Company, subject to the following
exceptions:

 

(i)
Buyer recognizes that certain Records may contain incidental information
relating to the Company or may relate primarily to affiliates or divisions of
Seller other than the Company, and that Seller may retain such Records and
shall provide copies of the relevant portions thereof to Buyer;

 

(ii) Seller may retain all Records prepared in
connection with the Acquisition, including bids received from other parties and
analyses relating to the Company; and

 

(iii) Seller may retain any Tax Returns, work papers
and forms, and Buyer shall be provided with copies of such Tax Returns, work
papers and forms.

 

(f) Use of the “Walter
Industries,” “Walter Industries, Inc.” and “Jim Walter” Names  and Logos.
Except as set forth in this Section 8(f), no interest in or right to use
the names “Walter Industries,” “Walter Industries, Inc.” or “Jim Walter” or any
logo or trademark incorporating the names “Walter Industries,” “Walter
Industries, Inc.” or “Jim Walter,” including the logo described in Schedule
8(f) (collectively, the “Retained Names and Marks”) is being
transferred to Buyer pursuant to the transactions contemplated hereby or will
be retained by the Company, and the use of any and all of the Retained Names
and Marks in connection with the use and operation of the Company will cease
promptly following the Closing Date. Buyer, promptly following the Closing
Date, will remove or obliterate or cause the removal or obliteration of all the
Retained Names and Marks from the Company’s signs, purchase orders, invoices,
sales orders, labels, letterheads, shipping documents, and other items and
materials, and will not put into use after the Closing Date any such items and
materials not in existence on the Closing Date that bear any Retained Names or
Marks or any name, mark or logo similar thereto; provided, however,
that Buyer shall not be required to remove or obliterate or cause the removal
or obliteration of the Retained Names and Marks from the books and records of
the Company.  Notwithstanding the
foregoing, Seller hereby grants to the Company for six (6) months following the
Closing a royalty-free, fully paid-up, worldwide, non-exclusive license to use
the logo described on Schedule 8(f) solely for the purpose of utilizing
packaging, labels, letterhead, envelopes, promotional and marketing materials
and other inventory bearing such logo and owned by the Company as of the
Closing.

 

(g) Reasonable Efforts.  Each of the parties hereto shall use its
reasonable best efforts to take, cause to be taken, and do, or cause to be
done, all things necessary, proper or advisable to consummate the Acquisition
and the transactions contemplated hereby.

 

(h) Confidentiality.
From and after the Closing Date, Seller shall, and shall cause its affiliates
and their respective officers, directors, employees and advisors (collectively,
the “Recipients”) to, keep confidential any information relating to the
Company, except for any such information that (i) is available to the public on
the Closing Date, (ii) thereafter becomes available to the public other than as
a result of a disclosure by any of the Recipients or (iii) is or becomes
available to a Recipient on a non-confidential basis from a source that to the
Recipient’s knowledge is not prohibited from disclosing such information

 

31

 

to such Recipient by a
legal, contractual or fiduciary obligation to any other person.  Should a Recipient be required to disclose
any such information in response to a court order or as otherwise required by
Law or administrative process, it shall inform Buyer in writing of such request
or obligation as soon as possible after it is informed of it and, if possible,
before any information is disclosed, so that a protective order or other
appropriate remedy may be obtained.  If
a Recipient is obliged to make the disclosure, it shall only make the
disclosure to the extent to which it is so obliged but not further or
otherwise.  Nothing in this Section 8(h)
shall interfere with Seller’s normal reporting obligations under the Securities
Act and the Securities Exchange Act of 1934.

 

9. Employee Benefit Plans.

 

(a) Retention of Liability.  Effective immediately prior to the Closing,
Seller shall have taken all steps necessary to (i) except as otherwise provided
in this Section 9, terminate the Company’s participation in all Seller
Benefit Plans in compliance with applicable Law; (ii) assume sponsorship of the
JW Hourly Pension Plan; (iii) provide all required notices in connection
therewith; and (iv) prepare and execute all necessary documents, and make all
necessary regulatory filings, forms and approval requests in connection
therewith, all in compliance with the requirements of ERISA and the Code, and
any other applicable laws.  Neither
Buyer nor any affiliate thereof shall adopt, become a sponsoring employer
under, or have any obligation under or with respect to any Seller Benefit Plan
or the JW Hourly Pension Plan.  Seller
shall retain all liabilities with respect to all Seller Benefit Plans and the
JW Hourly Pension Plan. 

 

(b) Transition Services.  Upon or as soon as practicable following the
Closing, Buyer shall cause the Company to use its reasonable best efforts put
in place appropriate benefit plans providing for death, disability, and/or
health benefits for Company employees (the “Company Welfare Plans”).  Until such Company Welfare Plans are put in
place, but in no event beyond March 31, 2004, Seller shall permit the Company
to continue to participate in the Seller Benefit Plans in which the Company
participated prior to the Closing that provide death, disability and health
benefits.  With respect to any such
Seller Benefit Plan, the period of any such continued participation is
hereinafter referred to as the “Transition Services Period”.  Seller shall charge the Company for the cost
of such continued participation during the Transition Services Period, which
cost shall be calculated in a manner that is consistent with the manner that
such cost was allocated to the Company prior to the Closing for purposes of the
Financial Statements.

 

(c) Welfare Coverage.  Buyer and the Company shall (A) waive all limitations as to
preexisting conditions, exclusions and waiting periods with respect to
participation and coverage requirements applicable to the employees of the
Company under the Company Welfare Plans in which the Company’s employees and
their dependents, participate as of the end of the Transition Services Period
to the extent satisfied or waived under the applicable Seller Benefit Plan
immediately prior to the end of the Transition Services Period and (B) provide each
employee of the Company credit for any co-payments and deductibles paid prior
to the end of the Transition Service Period in the calendar year in which the
end of the Transition Service Period occurs, or, if later, in the calendar year
in which the Company employees and their dependents, commence participation in
the applicable Company

 

32

 

Welfare Plan for purposes
of satisfying any applicable deductible or out-of-pocket requirements under any
Company Welfare Plan in which the employees are eligible to participate from
and after the end of the Transition Service Period. With respect to Company
employees and their dependents, Buyer and the Company shall be responsible in
accordance with the Company Welfare Plans for all claims incurred after the
later of the Closing Date or the end of any applicable Transition Services
Period, and Seller shall be responsible in accordance with all Seller Benefit
Plans for all claims incurred on or before the later of the Closing Date or the
end of any applicable Transition Services Period.  In addition, Buyer and the Company shall be responsible in
accordance with the Company’s workers compensation program for all claims
incurred after the Closing Date, and Seller shall be responsible in accordance
with Seller’s workers compensation program for all claims incurred on or before
the Closing Date.  For purposes of the
foregoing, a medical or dental claim shall be considered incurred when the
medical services are rendered or medical supplies are provided, and not when
the condition arose.  A claim resulting
in short-term or long-term disability benefits shall be considered incurred
when the employee is first absent from work as a result of the injury or
condition giving rise to such claim, a workers compensation claim shall be
considered incurred when the claim is formally reported, and a death benefit
claim shall be considered incurred when death occurs.  A workers’ compensation claim shall be considered formally
reported on the earlier of the date the employee has provided a written claim
to the employer, or the date reflected in the employee’s personnel file on
which the employee orally reported to the employer that he or she would be
filing a workers’ compensation claim.

 

(d) WARN. 
Buyer shall be responsible for any obligations under the Worker
Adjustment and Retraining Notification Act of 1988 (“WARN”) for any
actions taken by the Buyer or the Company on or after the Closing Date with
regard to any site of employment, facility, operating unit or employee affected
by this Agreement.

 

(e) Pension Credit.  Prior to the Closing, Seller shall have taken all steps necessary
to cause all Company employees who, immediately prior to the Closing, were
participants in either the JW Hourly Pension Plan or the Pension Plan for
Salaried Employees of Walter Industries, Inc. Subsidiaries, Divisions and
Affiliates (the “Salaried Pension Plan”) to receive an additional
benefit accrual thereunder that assumes that pensionable services were rendered
through December 31, 2003.

 

(f) Full Vesting.  Prior to the Closing, Seller shall have taken all steps necessary
to cause each Company employee listed on Schedule 9(f) to become fully
vested, as of the Closing, in all stock options granted pursuant to any Seller
Benefit Plan.

 

(g) Early Retirement Benefit. Seller shall
amend the Salaried Pension Plan (if necessary), and/or take any other actions
necessary to (i) provide that any salaried employee of the Company, who, as of
the Closing Date is eligible to receive the Special Early Retirement Pension
(as defined in the Salaried Pension Plan) at the time of the Closing will be
entitled to commence such benefit (rather than the Deferred Vested Pension (as
defined in the Salaried Pension Plan)) to the extent permitted by ERISA or any
other applicable Law, at such future date as the employee terminates employment
from the Company, Buyer

 

33

 

and its affiliates, and
(ii) as to each person listed on Schedule 9(g), treat post-Closing
service with the Company, Buyer or its affiliates as service with Seller for
purposes of determining such person’s entitlement to the Special Early
Retirement Pension, and allow such person to commence such benefit (rather than
the Deferred Vested Pension) at such future date as the employee terminates
employment from the Company, Buyer and its affiliates following the date such
person satisfies the age and service requirements therefor.

 

(h) Retiree Health Coverage.  Seller shall amend its retiree health plan
under the Group Benefits Plan for Salaried Employees (if necessary), and/or
take any other actions necessary to (i) provide that salaried employees
rendering services to the Company at the Closing Date who have, as of the
Closing Date, satisfied the plan’s eligibility to commence retiree health
benefits on the basis of early or normal retirement will be entitled to
commence such retiree health coverage under the plan at such future date as the
employee terminates employment from the Company and Buyer and its affiliates,
and (ii) as to each person listed on Schedule 9(g), treat post-Closing
service with the Company, Buyer or its Affiliates as service with Seller for
purposes of determining such person’s entitlement to retiree health benefits
and allow such persons who by reason thereof satisfy the plan’s eligibility to
commence retiree health benefits on the basis of early or normal retirement, to
commence such retiree health coverage under the plan at such future date as the
employee terminates employment from the Company and Buyer and its
Affiliates.  From and after the Closing
Date, Seller shall continue to provide the retiree health benefits to employees
described in this Section 9(h) to the same extent that Seller provides
such benefits to salaried retirees of Seller who retire under similar
circumstances.  This paragraph shall not
limit any right Seller may have to terminate or modify the retiree medical
benefits for all similarly situated retirees.

 

(i) Bonus Payment. Seller shall make a payment
to each person listed on Schedule 9(i) in an amount equal to $60,000,
within five business days after Buyer or its affiliates have notified Seller
that the person has, on or prior to December 31,  2006, attained an age and/or completed a period of years of
service (taking into account service with both the Buyer and its affiliates and
the Seller and its affiliates) that, when taken together, equals 80.  Seller shall assume responsibility for any
and all applicable payroll, withholding and reporting obligations with respect
to such payments.

 

(j) Certain Information. 
On and after the Closing Date, the Company and Buyer shall provide
employment information and information as to welfare benefit coverage and
retirement benefit coverage to Seller as to employees who continue employment
with Company or Buyer following Closing, as is reasonably requested by Seller
for the purpose of administering retirement and welfare benefits for such
employees under Seller Benefit Plans to the extent permitted under applicable
law.  Seller shall provide Buyer or its
affiliates with such employment information as may be necessary to effectuate
the provisions of this Section 9.

 

(k) No Employee
Rights.  Nothing in this Section
9, express or implied, shall confer upon any Company employee, or legal
representative or beneficiary thereof, any rights or remedies, including any
right to employment or continued employment for any specified period, or
compensation or benefits of any nature or kind whatsoever under this Agreement.

 

34

 

Nothing in this Section
9, expressed or implied, shall be construed to prevent Buyer or its
affiliates from terminating or modifying to any extent or in any respect any
benefit plan that the Buyer or its affiliates may establish or maintain.

 

(l) HIPPA.  Buyer agrees to comply in all respects with
the requirements of HIPPA and to cause Company employees to cooperate with
Seller with respect to any protected health information that Company employees
possess with respect to any Seller Benefit Plan, to the extent required by
HIPPA or by the terms of the HIPPA privacy amendment contained in the Seller’s
self-insured group health plan. 

 

10. Further Assurances.
From time to time, as and when requested by either party hereto, the other
party shall execute and deliver, or cause to be executed and delivered, all
such documents and instruments and shall take, or cause to be taken, all such
further or other actions, as such other party may reasonably deem necessary or
desirable to consummate the transactions contemplated by this Agreement and the
Ancillary Documents.

 

11. Indemnification.  (a) Tax
Indemnification. Seller shall indemnify Buyer and its officers,
directors, shareholders, employees, agents and affiliates against and hold them
harmless from (i) to the extent not specifically reflected as a Liability in
the Statement that is final and binding on the parties hereto pursuant to Section
2 or the supporting schedules thereto, all liability for Taxes of the Company
for all taxable periods of the Company ending on or before the Closing Date and
the portion ending on the Closing Date of any taxable period of the Company
that includes (but does not end on) such day (a “Pre-Closing Tax Period”),
(ii) all liability (as a result of Treasury Regulation Section 1.1502-6(a) or
otherwise) for Taxes of Seller or any other corporation which is or has been
affiliated with Seller (other than the Company) or the Company, (iii) any
breach of any representation or warranty contained in Section 4(h) or any
obligation of Seller contained in Section 12, and (iv) all liability for
reasonable legal, accounting and other advisor, consultant or expert fees and
expenses attributable to any item in clause (i), (ii) or (iii) above.  Notwithstanding the foregoing, Seller shall
not indemnify and hold harmless Buyer and its affiliates from any liability for
Taxes attributable to any action taken after the Closing by Buyer described in Section
12(h).

 

Buyer shall, and
shall cause the Company to, indemnify Seller and its affiliates and its
officers, directors, shareholders, employees and agents and hold them harmless
from (i) all liability for Taxes of the Company for any taxable period ending
after the Closing Date (except to the extent such taxable period began before
the Closing Date, in which case Buyer’s indemnity will cover only that portion
of any such Taxes that are not for the Pre-Closing Tax Period), (ii) all
liability for Taxes attributable to an act of Buyer described in Section
12(h) and (iii) all liability for reasonable legal, accounting and other
advisor, consultant or expert fees and expenses attributable to any item in
clause (i) or (ii) above.

 

In the case of any
taxable period that includes (but does not end on) the Closing Date (a “Straddle
Period”), Taxes of the Company for the Pre-Closing Tax Period shall be
computed as if such taxable period ended as of the close of business on the
Closing Date. Seller’s indemnity obligation in respect of Taxes for a Straddle
Period shall initially be effected by its payment to Buyer of the excess of (x)
such Taxes for the Pre-Closing Tax

 

35

 

Period over (y) the
amount of such Taxes for the Pre-Closing Period paid by Seller or any of the
affiliates (other than the Company) at any time plus the amount of such Taxes
paid by the Company on or prior to the Closing Date. Seller shall initially pay
such excess to Buyer within thirty (30) days after the Return, report or form
with respect to the final liability for such Taxes is required to be filed (or,
if later, is actually filed). If the amount of such Taxes paid by Seller or any
of its affiliates (other than the Company) at any time plus the amount of such
Taxes paid by the Company on or prior to the Closing Date exceeds the amount
payable by Seller pursuant to the preceding sentence, Buyer shall pay to Seller
the amount of such excess within thirty (30) days after the Return or form with
respect to the final liability for such Taxes is required to be filed. The
payments to be made pursuant to this paragraph by Seller or Buyer with respect
to a Straddle Period shall be appropriately adjusted to reflect any final
determination with respect to Straddle Period Taxes.

 

(b) Other Indemnification
by Seller. Subject to the limitations otherwise set forth in Section 11,
Seller shall indemnify Buyer and its officers, directors, shareholders,
employees, agents and affiliates against and hold them harmless from any loss,
liability, claim, damage, fine, penalty, judgment or expense (including
interest, court costs and reasonable legal, accounting and other advisor,
consultant or expert fees and expenses) (collectively, “Losses”)
suffered or incurred by any such indemnified party (other than Losses described
in the first paragraph of Section 11(a)) to the extent arising from:

 

(i) any breach of any representation or warranty of
Seller contained in this Agreement; 

 

(ii) any breach of any covenants, obligations or
agreements of Seller contained in this Agreement; and

 

(iii) the Proceedings set forth on Schedules
4(h)(ii) and 4(l), and Proceedings arising out of the same
facts and circumstances underlying such scheduled Proceedings as such facts and
circumstances exist on or prior to the Closing Date.

 

(c) Limitation on
Indemnification by Seller. The Seller shall not have any liability under
Section 11(b)(i) to indemnify Buyer from any Losses relating thereto until
the Buyer has suffered Losses with respect to which the Buyer is entitled to be
indemnified for pursuant to Section 11(b) in an aggregate amount which exceeds
$1,000,000, and then only to the extent of any such excess; provided, however,
that Seller’s liability under Section 11(b)(i) above shall in no event
exceed 10% of the Purchase Price in the aggregate; and provided  further,
however, that the foregoing limitations shall not apply to breaches of
the representations and warranties contained in Sections 4(a), (c)
and (e). In no event shall Seller be obligated to indemnify Buyer or any
other person with respect to any matter set forth in Section 11(b) to the
extent that such matter was reflected in the calculation of the adjustment to
the Purchase Price, if any, pursuant to the terms of this Agreement or to the
extent specifically reflected as a Liability the Statement that is final and
binding on the parties hereto pursuant to Section 2 or the supporting
schedules thereto with respect to such matters.

 

36

 

Buyer acknowledges
and agrees that, should the Closing occur, except in the case of fraud and for
equitable relief, its sole and exclusive remedy with respect to any and all
claims relating to this Agreement, the transactions contemplated hereby, the
Company and its assets, liabilities and business shall be pursuant to the
indemnification provisions set forth in this Section 11.

 

In furtherance of
the foregoing, except in the case of fraud, Buyer hereby waives (and Buyer
shall cause the Company to waive), from and after the Closing, to the fullest
extent permitted under applicable Law, any and all rights, claims and causes of
action (i) which Buyer or the Company may have against the officers, directors,
shareholders, employees or agents of Seller arising under or based upon any
federal or state, local or foreign statute, law, ordinance, rule or regulation
or otherwise (except pursuant to the indemnification provisions set forth in
this Section 11) and (ii) which Buyer or the Company may have had, may
now have, or may hereafter have against any director or officer of the Company
who does not serve as a director or officer of the Company after the Closing by
reason of any matter, cause, happening, forbearance or action occurring or
arising prior to or on the Closing Date.

 

(d) Other Indemnification
by Buyer. Buyer shall, and following the Closing shall cause the Company
to, indemnify Seller and its officers, directors, shareholders, employees,
agents and affiliates against and hold them harmless from any Loss (including
reasonable legal fees and expenses) suffered or incurred by any such
indemnified party (other than Losses described in the second paragraph of
Section 11(a)) to the extent arising from:

 

(i) any breach of
any representation or warranty of Buyer contained in this Agreement; and

 

(ii) any breach of any covenants, obligations or
agreements of Buyer contained in this Agreement requiring performance after the
Closing Date.

 

(e) Losses Net of
Insurance. The amount of any Loss or Tax for which indemnification is
provided under this Section 11 shall be net of any amounts actually
recovered by the indemnified party under insurance policies with respect to
such Loss or Tax; provided, however, that in making such
calculation the amount recovered by the indemnified party under any such
insurance policy shall be reduced by the aggregate amount of premiums paid by
the indemnified party in respect of such policy from the Closing Date until the
date of such recovery.

 

(f) Other Limitations.
Seller shall have no liability (for indemnification or otherwise) with respect
to any representation or warranty of Seller under this Agreement, unless within
the “Applicable Period” after the Closing Date, as defined below, Buyer gives
notice to Seller of the particular claim, and it shall be a condition precedent
to the assertion of any such claim with respect thereto that notice of such
claim shall have been given to Seller, within the Applicable Period after the
Closing Date:

 

37

 

	
  Section

  	
   

  	
  Applicable Period

  
	
   

  	
   

  	
   

  
	
  4(b), (o)(i)

  	
   

  	
  three (3) years

  
	
   

  	
   

  	
   

  
	
  4(a), (c), (d) (first
  paragraph only), (e)

  	
   

  	
  Unlimited

  
	
   

  	
   

  	
   

  
	
  4(h)

  	
   

  	
  the applicable statute
  of limitations plus sixty (60) days (as extended)

  
	
   

  	
   

  	
   

  
	
  (o)(ii)

  	
   

  	
  seven (7) years

  
	
   

  	
   

  	
   

  
	
  All other Sections of

  this Agreement

  	
   

  	
  18 months

  

 

If notice of any claim
for breach of representation or warranty is given prior to the expiration of
the relevant Applicable Period as provided in this Section 11(f), such
claim shall survive until finally resolved and satisfied in full.

 

(g) Procedures
Relating to Indemnification (other than under Section 11(a)). In order for
a party (the “indemnified party”) to be entitled to any indemnification
provided for under this Agreement (other than under Section 11(a)) in
respect of, arising out of or involving a claim or demand made by any person
that is not a party hereto or an affiliate of a party hereto against the
indemnified party (a “Third Party Claim”), such indemnified party must
give notice to the indemnifying party, in reasonable detail, of the Third Party
Claim within five (5) business days after receipt by such indemnified party of
written notice of the Third Party Claim; provided, however, that
failure to give such notice shall not affect the indemnification provided
hereunder except to the extent the indemnifying party shall have been
prejudiced as a result of such failure (except that the indemnifying party
shall not be liable for any expenses incurred during the period in which the
indemnified party failed to give such notice). Thereafter, the indemnified
party shall deliver to the indemnifying party, within two (2) business days
after the indemnified party’s receipt thereof, copies of all notices and
documents (including court papers) received by the indemnified party relating
to the Third Party Claim.

 

If a Third Party Claim
is made against an indemnified party, the indemnifying party shall be entitled
to participate in the defense thereof and, if it so chooses, to assume the
defense thereof with counsel selected by the indemnifying party and reasonably
satisfactory to the indemnified party. Should the indemnifying party so elect
to assume the defense of a Third Party Claim, the indemnifying party shall
vigorously and diligently defend such Third Party Claim, and the indemnifying
party shall not be liable to the indemnified party for legal expenses
subsequently incurred by the indemnified party in connection with the defense
thereof.  If the indemnifying party
assumes such defense, the indemnified party shall have the right to participate
in the defense thereof and to employ counsel (not reasonably objected to by the
indemnifying party), at its own expense, separate from the counsel employed by
the indemnifying party, it being understood that the indemnifying party shall
control such defense. The indemnifying party shall be liable for the reasonable
fees and expenses of

 

38

 

counsel employed by the
indemnified party for any period during which the indemnifying party has failed
to assume the defense thereof (other than during the period prior to the time
the indemnified party shall have given notice of the Third Party Claim as
provided above).

 

If the
indemnifying party so elects to assume the defense of any Third Party Claim,
all of the indemnified parties shall cooperate with the indemnifying party in
the defense or prosecution thereof. Such cooperation shall include the
retention and (upon the indemnifying party’s request) the provision to the
indemnifying party of records and information which are reasonably relevant to
such Third Party Claim, and making employees available on a mutually convenient
basis to provide additional information and explanation of any material
provided hereunder. If the indemnifying party shall have assumed the defense of
a Third Party Claim, the indemnified party shall not admit any liability with
respect to, or settle, compromise or discharge, such Third Party Claim without
the indemnifying party’s prior written consent. If the indemnifying party shall
have assumed the defense of a Third Party Claim, the indemnified party shall
agree to any settlement, compromise or discharge of a Third Party Claim which
the indemnifying party may recommend and which by its terms obligates the
indemnifying party to pay the full amount of the liability in connection with
such Third Party Claim, which releases the indemnified party completely in
connection with such Third Party Claim and which imposes no continuing
obligations on the indemnified party. 
Notwithstanding the foregoing provisions of this Section 11(g),
Seller, as indemnifying party, shall not enter into any consent decree or agree
to any other settlement, compromise or discharge of any Third Party Claim
involving the Equal Employment Opportunity Commission without the prior written
consent of Buyer, which consent shall not be unreasonably withheld.

 

All claims under Section 11(b)
or Section 11(d) other than Third Party Claims shall be governed by
Section 11(h).  All Tax
Claims (as defined in Section 11(i)) shall be governed by Section 11(i).

 

(h) Other Claims. In
the event any indemnified party should have a claim against any indemnifying
party under Section 11(b) or Section 11(d) that does not involve
a Third Party Claim being asserted against or sought to be collected from such
indemnified party, the indemnified party shall give notice of such claim, in
reasonable detail, with reasonable promptness to the indemnifying party. The
failure by any indemnified party to give such notice to the indemnifying party
shall not relieve the indemnifying party from any liability which it may have
to such indemnified party under Section 11(b) or Section 11(d),
except to the extent that the indemnifying party has been prejudiced by such
failure.  The indemnified party and
indemnifying party shall proceed in good faith to negotiate a resolution of
such claim and, if such resolution is not reached, such claim shall be resolved
by litigation pursuant to Section 24.

 

(i) Procedures Relating
to Indemnification of Tax Claims. If a claim shall be made by any taxing
authority, which, if successful, might result in an indemnity payment to an
indemnified party pursuant to Section 11(a), the indemnified party
shall promptly give notice to the indemnifying party of such claim (a “Tax
Claim”). If notice of a Tax Claim is not given to the indemnifying party
within a sufficient period of time to allow the indemnifying party to
effectively contest such Tax Claim, or in reasonable detail to apprise

 

39

 

the indemnifying party of
the nature of the Tax Claim, in each case taking into account the facts and
circumstances with respect to such Tax Claim, the indemnifying party shall not
be liable to the indemnified party.

 

The indemnifying
party shall have the right to control all proceedings taken in connection with
such Tax Claim (including selection of counsel) and, without limiting the
foregoing, may in its sole discretion pursue or forego any and all
administrative appeals, proceedings, hearings and conferences with any taxing
authority with respect thereto, and may, in its sole discretion, either pay the
Tax claimed and sue for a refund where applicable Law permits such refund suits
or contest the Tax Claim in any permissible manner.

 

The indemnified
party and each of their respective affiliates shall cooperate with the
indemnifying party in contesting any Tax Claim, which cooperation shall
include, without limitation, the retention and (upon the indemnifying party’s
request) the provision to the indemnifying party of records and information
which are reasonably relevant to such Tax Claim, and making employees available
on a mutually convenient basis to provide additional information or explanation
of any material provided hereunder or to testify at proceedings relating to
such Tax Claim.

 

In no case shall
the indemnified party settle or otherwise compromise any Tax Claim without the
indemnifying party’s prior written consent. Seller shall not settle any Tax
Claim relating to the Company in a manner that could adversely affect Buyer or
the Company without prior written consent of Buyer, such consent not to be
unreasonably withheld. No party shall settle a Tax Claim relating to Taxes of
the Company for a Straddle Period without the other party’s prior written
consent.

 

(j) Mitigation. Buyer
and Seller shall cooperate reasonably with each other with respect to resolving
any claim or liability with respect to which one party is obligated to
indemnify the other party hereunder, including by making commercially
reasonably efforts to mitigate or resolve any such claim or liability.  

 

12. Tax Matters. (a)
Seller and Buyer acknowledge that the taxable year of the Company for federal
income tax purposes will terminate on the Closing Date pursuant to Treasury
Regulation Section 1.1502-76. For any taxable period of the Company that
includes (but does not end on) the Closing Date, Buyer shall timely prepare and
file with the appropriate authorities all Returns and forms required to be
filed and shall pay all Taxes due with respect to such Returns and forms; provided
that Seller shall reimburse Buyer (in accordance with the procedures set forth
in Section 11(a)) for any amount owed by Seller pursuant to Section
11(a) with respect to the taxable periods covered by such Returns or forms;
provided, further, that Buyer shall prepare such Returns in a
manner consistent with the Returns of the Company filed prior to the Closing,
except as required by Law, and shall furnish such Tax Returns to Seller for
Seller’s comments at least thirty (30) days prior to the due date for filing
such Returns. Buyer shall consider, but not be bound by, any comments of
Seller. For any taxable period of the Company that ends on or before the
Closing Date, Seller shall timely prepare and file with the appropriate
authorities all federal and state income Tax Returns and forms required to be
filed, and shall pay all Taxes due with respect to such Returns and forms, including any deferred items triggered into
income by Treas.

 

40

 

Reg.
§ 1.1502-13 and any excess loss account taken into income under Treas. Reg.
§1.1502-19.  Buyer shall timely
prepare and file with the appropriate authorities all other Returns of the
Company. Buyer and Seller agree to cause the Company to file all Tax Returns
and forms for the period including the Closing Date on the basis that the
relevant taxable period ended as of the close of business on the Closing Date,
unless the relevant taxing authority will not accept a Return or form filed on
that basis. Neither Seller nor any of its
affiliates shall elect to retain any net operating loss carryovers or capital
loss carryovers of the Company.

 

(b) Seller, the
Company and Buyer shall reasonably cooperate, and shall cause their respective
affiliates, officers, employees, agents, auditors and representatives
reasonably to cooperate, in preparing and filing all Returns and forms relating
to Taxes, including maintaining and making available to each other all records
necessary in connection with Taxes and in resolving all disputes and audits
with respect to all taxable periods relating to Taxes. In accordance with the
foregoing, at Seller’s request, Buyer shall cause the Company to make or to
join with Seller in making any election relating to Taxes if the making of such
election would not have a material adverse effect on Buyer or the Company.
Buyer and Seller recognize that Seller and its affiliates will need access,
from time to time, after the Closing Date, to certain accounting and Tax
records and information held by the Company to the extent such records and
information pertain to events occurring prior to the Closing Date; therefore,
Buyer agrees, and agrees to cause the Company, (i) to use all reasonable
efforts to properly retain and maintain such records until such time as Seller
agrees that such retention and maintenance is no longer necessary, and (ii) to
allow Seller and its agents and representatives (and agents or representatives
of any of its affiliates), at times and dates mutually acceptable to the
parties, to inspect, review and make copies of such records as Seller may deem
necessary or appropriate from time to time, such activities to be conducted
during normal business hours and at Seller’s expense.

 

(c) Any refunds or
credits of Taxes of the Company of the type indemnified under Section 11(a)
arising during any taxable period ending on or before the Closing Date shall be
for the account of Seller. Any refunds or credits of Taxes of the Company
arising during any taxable period beginning after the Closing Date shall be for
the account of Buyer. Any refunds or credits of Taxes of the Company of the
type indemnified under Section 11(a) for any Straddle Period shall be
equitably apportioned between Seller and Buyer. Buyer shall, if Seller so
requests and at Seller’s expense, cause the Company to file for and obtain any
refunds or credits to which Seller is entitled under this Section 12(c)
if such actions would cause no material adverse effect to Buyer or its
affiliates, and Seller shall indemnify and hold harmless Buyer and its affiliates
against any Loss resulting from any such actions. Buyer shall permit
Seller to control the prosecution of any such refund or credit claim and, where
deemed appropriate by Seller, shall cause the Company to authorize by
appropriate powers of attorney such persons as Seller shall designate to
represent the Company with respect to such refund or credit claim. Buyer shall
cause the Company to forward to Seller any refund to which Seller is entitled
under this Section 12(c) within ten (10) days after the refund is
received (or reimburse Seller for any credit to which Seller is entitled under
this Section 12(c) within ten (10) days after the credit is allowed, or
applied against other Tax liability); provided, however, that any
such amounts payable to Seller shall be net of any Tax cost to Buyer and the
Company, attributable to the receipt of such refund and/or the

 

41

 

payment of such amounts
to Seller. Notwithstanding the foregoing, the control of the prosecution of a
claim for refund of Taxes paid pursuant to a deficiency assessed subsequent to
the Closing Date as a result of an audit shall be governed by the provisions of
Section 11(i).

 

(d) Seller shall
be responsible for filing any amended consolidated, combined or unitary Tax
Returns for taxable years ending on or prior to the Closing Date which are
required as a result of examination adjustments made by the Internal Revenue
Service or by the applicable state, local or foreign taxing authorities for such
taxable years as finally determined. For those jurisdictions in which separate
income Tax Returns are filed by the Company, any required amended Returns
resulting from such examination adjustments, as finally determined, shall be
prepared by Seller and furnished to the Company, as the case may be, for
approval (which approval shall not be unreasonably withheld), signature and
filing at least thirty (30) days prior to the due date for filing such Returns.

 

(e) All transfer,
documentary, sales, use, registration and other such Taxes (including all
applicable real estate transfer or gains Taxes) and related fees (including any
penalties, interest and additions to Tax) incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid 50% by Buyer
and 50% by Seller, and Seller and Buyer shall cooperate in timely making all
filings, Returns and forms as may be required to comply with the provisions of
such Tax laws. Seller and Buyer agree, at least ten (10) business days prior to
the Closing, to reasonably allocate the purchase price among the assets to the
extent required or desirable to complete any necessary transfer Tax Returns or
reports and to compute the amount of any transfer Taxes.

 

(f) Seller shall
deliver to Buyer at the Closing a certificate in form and substance
satisfactory to Buyer, duly executed and acknowledged, certifying any facts
that would exempt the transactions contemplated hereby from withholding
pursuant to the provisions of the Foreign Investment in Real Property Tax Act.

 

(g) On the Closing
Date, Buyer shall cause the Company to conduct its businesses in the ordinary
course in substantially the same manner as presently conducted and on the
Closing Date shall not permit the Company to effect any extraordinary
transactions (other than any such transactions expressly required by applicable
Law or by this Agreement) that could result in Tax liability to the Company in
excess of Tax liability associated with the conduct of its business in the
ordinary course.

 

(h) Buyer shall
not, with respect to any Pre-Closing Tax Period, (i) file any amended Tax
Return with respect to the Company, (ii) extend any statute of limitation, or
(iii) take any position with respect to Taxes of the Company that would have
the effect of increasing any Tax liability to, or reducing any Tax benefit of,
Seller unless, in each case, Seller shall have consented in writing to such
action by Buyer or such action is required by Law.

 

(i) Seller shall
cause the provisions of any Tax sharing agreement between Seller and any of its
affiliates (other than the Company), on the one hand, and the Company, on the
other hand, to be terminated, together with any obligations thereunder, on or
before the Closing Date.

 

42

 

13. Assignment. This
Agreement and the rights and obligations hereunder shall not be assignable or
transferable by Buyer or Seller (including by operation of law in connection
with a merger, or sale of substantially all the assets, of Buyer or Seller)
without the prior written consent of the other party hereto; provided, however,
that Buyer may assign its right to purchase the Shares hereunder to a
wholly-owned subsidiary of Buyer and Buyer may assign its rights under this
Agreement to its lenders as security for borrowings without the prior written
consent of Seller; provided  further, however, that no such
assignment shall limit or affect Buyer’s or Guarantor’s obligations hereunder.
Any attempted assignment in violation of this Section 13 shall be void.

 

14. No Third-Party
Beneficiaries. Except as provided in Section 11, this Agreement is
for the sole benefit of the parties hereto and their permitted assigns and
nothing herein expressed or implied shall give or be construed to give to any
person, other than the parties hereto and such assigns, any legal or equitable
rights hereunder.

 

15. Termination.

 

(a) Anything
contained herein to the contrary notwithstanding, this Agreement may be
terminated and the transactions contemplated hereby abandoned at any time prior
to the Closing Date:

 

(i)  by mutual written consent
of Seller and Buyer; or

 

(ii)
by either party hereto, if the Closing does not occur on or prior to the date
that is ninety (90) days following the date hereof;

 

(iii)
by Buyer, if Seller shall have breached any of its representations and
warranties or any covenant or other agreement to be performed by it hereunder
and such breach is incapable of being cured or is not cured within twenty (20)
business days of receipt of written notice thereof from Buyer; or

 

(iv)
by Seller, if Buyer shall have breached any of its representations and
warranties or any covenant or other agreement to be performed by it and such
breach is incapable of being cured or is not cured within twenty (20) business
days of receipt of written notice thereof from Seller.

 

(b) In the event
of termination by Seller or Buyer pursuant to this Section 15, notice
thereof shall forthwith be given to the other party and the transactions
contemplated by this Agreement shall be terminated without further action by
either party. If the transactions contemplated by this Agreement are terminated
as provided herein:

 

(i)
Buyer shall return to Seller all documents and other material received from
Seller and the Company relating to the transactions contemplated hereby,
whether so obtained before or after the execution hereof, and

 

(ii)
all confidential information received by Buyer with respect to the business of
the Company shall be treated in accordance with the Confidentiality

 

43

 

Agreement, which
shall remain in full force and effect notwithstanding the termination of this
Agreement.

 

(c) If this
Agreement is terminated and the transactions contemplated hereby are abandoned
as described in this Section 15, this Agreement shall become void
and of no further force or effect, except for the provisions of (i) Section
7(a) relating to the obligation of Buyer to keep confidential certain
information and data obtained by it, (ii) Section 17 relating to certain
expenses, (iii) Section 8(c) relating to publicity, and (iv) this Section
15. Nothing in this Section 15 shall be deemed to release either
party from any liability for any breach by such party of the terms and
provisions of this Agreement or to impair the right of either party to compel
specific performance by the other party of its obligations under this
Agreement.

 

16. Survival of
Representations. The representations and warranties in this Agreement shall
survive the Closing solely for purposes of Section 11(a), Section 11(b)
and Section 11(d) and shall be subject to the limitations and other
terms of Section 11.

 

17. Expenses. Whether or
not the transactions contemplated hereby are consummated, and except as
otherwise specifically provided in this Agreement, all costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such costs or expenses.

 

18. Amendments. No
amendment, modification or waiver in respect of this Agreement shall be
effective unless it shall be in writing and signed by both parties hereto.

 

19. Notices. All notices or
other communications required or permitted to be given hereunder shall be in
writing and shall be delivered by hand or reputable courier service, sent by
registered, certified or express mail, or sent by facsimile transmission, and
shall be deemed given when so delivered by hand or courier service, or if
mailed, three (3) business days after mailing (one (1) business day in the case
of express mail), or if by facsimile transmission, when so transmitted, as
follows:

 

(i)                                     if
to Buyer:

 

Wellspring Aluminum Acquisition Co. 2

c/o Wellspring Capital Management LLC

Lever House

390 Park Avenue

New York, NY   10022

Facsimile:  212-318-9810

Attention:  William F. Dawson

 

with a copy to:

 

Morgan, Lewis & Bockius LLP

101 Park Avenue

New York, NY   10178

Facsimile:  212-309-6273

44

 

Attention:  David W. Pollak; and

 

(ii)                                  if
to Seller:

 

Walter Industries,
Inc.

 

if by mail:

P.O. Box 31601

Tampa, Florida 33631-3601

Attention: General Counsel

 

or

 

if by hand
delivery, courier service or facsimile transmission:

4211 W. Boy Scout Blvd.

Tampa, Florida 33607

Facsimile: 813-871-4420

Attention: General Counsel

 

A party hereto, by
notice given in accordance with this Section, may change the address to which
notices to it are to be given or the person to whose attention such notices are
to be given.

 

20. Interpretation:
Exhibits and Schedules: Certain Definitions. (a) The headings contained in
this Agreement, in any Exhibit or Schedule hereto and in the table of contents
to this Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement.  No disclosure made in any particular Schedule hereto shall be
deemed made in any other Schedule, unless expressly made in such other Schedule
by cross-reference or restatement or unless the applicability of such
disclosure to such other Schedule is reasonably apparent on the face of such
disclosure.  All Exhibits and Schedules
annexed hereto or referred to herein are hereby incorporated in and made a part
of this Agreement as if set forth in full herein. Any capitalized terms used in
any Schedule or Exhibit but not otherwise defined therein, shall have the
meaning as defined in this Agreement.

 

(b) For all
purposes of this Agreement, certain capitalized terms in this Agreement shall
have the meanings set forth in Exhibit A, except as otherwise expressly
provided in this Agreement.

 

21. Counterparts. This
Agreement may be executed in one or more counterparts, all of which shall be
considered one and the same agreement, and shall become effective when one or
more of such counterparts have been signed by each of the parties and delivered
to the other party.

 

22. Entire Agreement.
This Agreement and the Confidentiality Agreement contain the entire agreement
and understanding between the parties hereto with respect to the subject matter
hereof and supersede all prior agreements and understandings relating to such
subject matter. Neither party shall be liable or bound to any other party in
any manner

 

45

 

by any representations,
warranties, covenants, obligations or agreements relating to such subject
matter except as specifically set forth herein or in the Confidentiality
Agreement.

 

23. Severability. If
any provision of this Agreement (or any portion thereof) or the application of
any such provision (or any portion thereof) to any person or circumstance shall
be held invalid, illegal or unenforceable in any respect by a court of
competent jurisdiction, such invalidity, illegality or unenforceability shall
not affect any other provision hereof (or the remaining portion thereof) or the
application of such provision to any other persons or circumstances.

 

24. Consent to Jurisdiction.
Each of Buyer, Guarantor and Seller irrevocably submits to the exclusive
jurisdiction of (a) the courts of the State of Delaware, in New Castle County,
and (b) the United States District Court for the District of Delaware for the
purposes of any Proceeding arising out of this Agreement or any transaction
contemplated hereby. Each of Buyer, Guarantor and Seller agrees to commence any
such Proceeding only in such courts. Each of Buyer, Guarantor and Seller
irrevocably and unconditionally waives any objection to the laying of venue of
any Proceeding arising out of this Agreement or the transactions contemplated
hereby in (i) the courts of the State of Delaware, in New Castle County or (ii)
the United States District Court for the District of Delaware, and hereby
further irrevocably and unconditionally waives and agrees not to plead or claim
in any such court that any such Proceeding brought in any such court has been
brought in an inconvenient forum. Each of Buyer, Guarantor and Seller agree not
to litigate in any courts other than the courts described above any claim
arising out of this Agreement or any transaction contemplated hereby.

 

25. Governing Law.
This Agreement shall be governed by and construed in accordance with the
internal laws of the State of New York applicable to agreements made and to be
performed entirely within such State, without regard to the conflicts of law
principles of such State.

 

26. Waiver of Jury Trial. EACH PARTY HEREBY WAIVES
TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN RESPECT TO ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER
OR IN CONNECTION WITH THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.
EACH PARTY CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER
PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT,
IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THAT FOREGOING WAIVER AND ACKNOWLEDGES
THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS
AGREEMENT, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN
THIS SECTION 26.

 

27. Guaranty. (a)
Guarantor hereby absolutely, unconditionally and irrevocably guarantees, as
principal obligor, and not merely as surety, to Seller and its successors and
permitted assigns, the representations and warranties of Buyer contained in
this Agreement, the due and punctual payment in full, of the Purchase Price,
and the performance of all other

 

46

 

covenants, obligations
and agreements of Buyer under this Agreement, including Buyer’s indemnification
obligations under Section 11 (collectively, the “Obligations”).
The foregoing obligation of Guarantor constitutes a continuing guaranty of
payment and performance, and not of collection, and is and shall be absolute
and unconditional under any and all circumstances, including circumstances
which might otherwise constitute a legal or equitable discharge of a surety or
guarantor. The obligation of Guarantor hereunder shall not be discharged,
impaired or otherwise affected by the failure of Seller to assert any claim or
demand against Buyer or to enforce any remedy hereunder. Notwithstanding the
foregoing, (i) nothing in this Section 27(a) shall create any
liabilities or obligations for Guarantor to the extent Buyer would not have
liability or otherwise be responsible to Seller hereunder and (ii) Guarantor
shall have the right to assert as a defense (including rights of set off and
counterclaim) to any of its obligations hereunder any defense that would be
available to it had it duly authorized and entered into the Obligations
directly.

 

(b)
Guarantor hereby makes the representations and warranties set forth in Sections 6(a),
(b), (d), and (f) modified, for purposes of this subsection (b),
by substituting the term “Guarantor” for the term “Buyer” and limited
partnership terminology, as appropriate, for corporate terminology in such sections.

 

(c) Guarantor
hereby expressly agrees to the terms of Section 24, 25 and 26,
including without limitation Waiver of Jury Trial hereof and acknowledges that
such Sections personally bind Guarantor.

 

[Signature Page
Next]

 

47

 

IN WITNESS WHEREOF, the
parties have caused this Agreement to be duly executed as of the date first
written above.

 

	
   

  	
  WALTER INDUSTRIES, INC.,

  a Delaware corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  “Seller”

  
	
   

  	
  WELLSPRING ALUMINUM

  ACQUISITION CO. 2,

  
	
   

  	
  a Delaware corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  “Buyer”

  
	
   

  	
  WELLSPRING CAPITAL

  PARTNERS III, LP,

  
	
   

  	
  a Delaware limited
  partnership

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  “Guarantor”

  
								

 

 

Signature Page to Stock Purchase Agreement

 

 

EXHIBIT A

 

DEFINITION OF TERMS

 

 

“Accounting Firm” has the meaning set forth
in Section 2(b)(i)(C).

 

“Acquisition” has the meaning set forth in Section
1.

 

“Adjusted Purchase Price” has the meaning
set forth in Section 2(b)(ii).

 

“affiliate” of any person means another
person that directly or indirectly, through one or more intermediaries,
controls, is controlled by, or is under common control with, such first person.
“Affiliates” means more than one affiliate.

 

“Agreement” means this Stock Purchase
Agreement.

 

“Ancillary Documents” means, collectively,
the Transition Services Agreement, the IP Assignments, the Sublicense and the
Trademark Assignment.

 

“Applicable Period” has the meaning set
forth in Section 11(f).

 

“Assets” has the meaning set forth in Section
2(b)(iii).

 

“Balance Sheet” has the meaning set forth
in Section 2(b)(iii). 

 

“Benefit Plan” or “Benefit Plans” has the
meaning set forth in Section 4(n)(i). 

 

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

 

“Buyer Material Adverse Effect” has the
meaning set forth in Section 6(a). 

 

“Buyer’s Pension Trust” has the meaning set
forth in Section 9(e)(i). 

 

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

 

“Closing Date” has the meaning set forth in
Section 2(a).

 

“Closing Date Amount” has the meaning set
forth in Section 2(a).

 

“Closing Modified Working Capital” has the
meaning set forth in Section 2(b)(iii).

 

“Code” has the meaning set forth in Section
4(h)(i)(D).

 

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

 

A-1

 

“Company Benefit Plans” has the meaning set
forth in Section 4(n)(i).

 

“Company Leases” has the meaning set forth
in Section 4(r)(i)(C).

 

“Company Material Adverse Change” or “Company
Material Adverse Effect” means any change, effect, event or
occurrence which has a material adverse effect on the Company’s business,
assets, financial condition, operations or industry.

 

“Company Welfare Plans” has the meaning set
forth in Section 9(b)(i). 

 

“Confidentiality Agreement” has the meaning
set forth in Section 7(a). 

 

“Consent” has the meaning set forth in Section
4(b)(iii).

 

“Contract” has the meaning set forth in Section
4(b)(ii). 

 

“DOJ” has the meaning set forth in Section
8(d)(i).

 

“Environment” means all air, surface water,
groundwater or land, including land surface or subsurface, including all fish,
wildlife, biota and all other natural resources.

 

“Environmental Law” means any
and all federal, state, local, provincial and foreign, civil and criminal laws,
statutes, ordinances, orders, common law, codes, rules, regulations,
Environmental Permits, policies, guidance documents, judgments, decrees,
injunctions or agreements with any Governmental Entity, relating to the
protection of health and the Environment, or governing the handling, use,
generation, treatment, storage, transportation, disposal, manufacture,
distribution, formulation, packaging, labeling or Release of Hazardous
Substances in effect on the date hereof or the Closing Date, including without
limitation:  the Clean Air Act, 42
U.S.C. § 7401 et  seq.; the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, 42 U.S.C. § 9601 et
seq.; the Federal Water Pollution Control Act, 33 U.S.C. § 1251 et
seq.; the Hazardous Material Transportation Act 49 U.S.C. § 1801 et
seq.; the Federal Insecticide, Fungicide and Rodenticide Act 7 U.S.C.
§ 136 et  seq.; the Resource Conservation and Recovery Act of
1976, 42 U.S.C. § 6901 et  seq.; the Toxic Substances Control
Act, 15 U.S.C. § 2601 et  seq.; the Oil Pollution Act of
1990, 33 U.S.C. § 2701 et  seq.; and the state analogies
thereto, all as amended or superseded from time to time on or prior to the
Closing Date; and any common law doctrine related to or arising out of the
presence, Release, or exposure to a Hazardous Substance, including but not
limited to, negligence, nuisance, trespass, personal injury or property damage.

 

“Environmental Permit” means Permits
required by any Governmental Entity under or in connection with any
Environmental Law and includes any and all orders, consent orders or binding
agreements issued or entered into by a Governmental Entity under any applicable
Environmental Law.

 

“ERISA” has the meaning set forth in Section
4(n)(i). 

 

A-2

 

“Financial Statements” has the meaning set
forth in Section 4(g). 

 

“FTC” has the meaning set forth in Section
8(d)(i).

 

“GAAP” has the meaning set forth in Section
2(b)(iii).

 

“Governmental Entity” has the meaning set
forth in Section 3(a)(iv). 

 

“Group” has the meaning set forth in Section
4(h)(i)(A).

 

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

 

“Hazardous Substance” means petroleum,
petroleum hydrocarbons or petroleum products, petroleum by-products,
radioactive materials, asbestos or asbestos-containing materials, gasoline,
diesel fuel, pesticides, radon, urea formaldehyde, lead or lead-containing
materials, polychlorinated biphenyls; and any other chemicals, materials,
substances or wastes in any amount or concentration which are now on or prior
to the Closing Date become defined as or included in the definition of
“hazardous substances,” “hazardous materials,” “hazardous wastes,” “extremely
hazardous wastes,” “restricted hazardous wastes,” “toxic substances,” “toxic
pollutants,” “pollutants,” “regulated substances,” “solid wastes,” or
“contaminants” or words of similar import, under any Environmental Law.

 

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

 

“including” means including, without
limitation.

 

“indemnified party” has the meaning set
forth in Section 11(g). 

 

“Intellectual Property” means all of the
following that are licensed to, owned or used by the Company:  (i) all discoveries and inventions (whether
patentable or unpatentable and whether or not reduced to practice), all
improvements thereto, and all patents and patent applications, together with
all reissuances, continuations, continuations-in-part, revisions, extensions
and reexaminations thereof; (ii) all trademarks, service marks, trade dress,
brand names, logos (other than the logo described in Schedule 8(f)),
trade names and corporate names, including all goodwill associated therewith,
and all applications and registrations therefor; (iii) all copyrights and all
applications, registrations and renewals therefor; (iv) all trade secrets and
confidential business information (including ideas, research and development,
know-how, formulas, compositions, recipes, manufacturing and production
processes and techniques, technical data, designs, drawings, specifications,
customer and supplier lists, pricing and cost information and business and
marketing plans and proposals); (v) all computer software (including source
code, data and related documentation); (vi) all internet domain names and
websites; and (vii) the right to sue for infringement in connection with any of
the foregoing and to collect damages in such suits.

 

“IP Assignments” has the meaning set forth
in Section 3(a)(xiii).

 

A-3

 

“Judgment” has the meaning set forth in Section
4(b)(iii).

 

“JW Aluminum Hourly Pension Plan” has the
meaning set forth in Section 4(n)(v).

 

“knowledge of Seller” means the actual
knowledge of the specific persons listed in Exhibit B.

 

“Law” has the meaning set forth in Section
4(b)(iii).

 

“Leased Real Property” has the meaning set
forth in Section 4(r)(ii). 

 

“Leases” has the meaning set forth in Section
4(r)(ii).

 

“Liabilities” has the meaning set forth in Section
2(b)(iii).

 

“Liens” has the meaning set forth in Section
4(b).

 

“Losses” has the meaning set forth in Section
11(b).

 

“Notice of Disagreement” has the meaning
set forth in Section 2(b)(i)(A).

 

“Obligations” has the meaning set forth in Section
27.

 

“ordinary course of business” or “business in
the ordinary course” means the ordinary course of business
consistent with past custom and practice.

 

“OSHA Law” means any and all federal,
state, local, provincial and foreign, civil and criminal laws, statutes,
ordinances, orders, common law, codes, rules, regulations, Permits, policies,
guidance documents, judgments, decrees, injunctions or agreements with any
Governmental Entity relating to worker health and safety in effect on the date
hereof or the Closing Date, including without limitation the Occupational
Safety & Health Act of 1970, 29 U.S.C. § 651 et  seq. and the
state analogies thereto, all as amended or superseded from time to time.

 

“Owned Real Property” has the meaning set
forth in Section 4(r)(i). 

 

“Pension Plan” has the meaning set forth in
Section 4(n)(i).

 

“Permits” has the meaning set forth in Section
4(q)(i).

 

“Permitted Liens” has the meaning set forth
in Section 4(i).

 

“person” means any individual, firm,
corporation, partnership, limited liability company, trust, joint venture,
Governmental Entity or other entity.

 

“Pre-Closing Tax Period” has the meaning
set forth in Section 11(a). 

 

A-4

 

“Proceedings” has the meaning set forth in Section
4(1). 

 

“Purchase Price” has the meaning set forth
in Section 1. 

 

“Real Property” has the meaning set forth
in Section 4(r)(ii).

 

“Real Property Leases” has the meaning set
forth in Section 4(r)(ii).

 

“Recipients” has the meaning set forth in Section
8(h).

 

“Records” has the meaning set forth in Section
8(e).

 

“Release” means any spilling, leaking,
pumping, pouring, emitting, emptying, discharging, injecting, escaping,
leaching, dumping or disposing of a Hazardous Substance into the Environment.

 

“Retained Names and Marks” has the meaning
set forth in Section 8(f). 

 

“Returns” has the meaning set forth in Section
4(h)(i)(C).

 

“Salaried Pension Plan” has the meaning set
forth in Section 9(e).

 

“Securities Act” has the meaning set forth
in Section 6(c). 

 

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

 

“Seller Benefit Plans” has the meaning set
forth in Section 4(n)(i).

 

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

 

“Site” means any of the real properties
currently or previously owned, leased or operated by:  (i) the Company; (ii) any predecessors of the Company;
or (iii) any entities previously owned by the Company, in each case
including all soil, subsoil, surface waters and groundwater thereat.

 

“Statement” has the meaning set forth in Section
2(b)(i).

 

“Straddle Period” has the meaning set forth
in Section 1 l(a). 

 

“Sublicense” has the meaning set forth in Section
3(a)(xiv).

 

“Taxes” or “Tax” has the meaning set
forth in Section 4(h)(i)(B). 

 

“Tax Claim” has the meaning set forth in Section
11(i). 

 

“Third Party Claim” has the meaning set
forth in Section 11(g).

 

A-5

 

“Trademark Assignment” has the meaning set
forth in Section 3(a)(xv).

 

“Transaction Proposal” has the meaning set
forth in Section 5(e).

 

“Transition Services Period” has the
meaning set forth in Section 9(b).

 

“WARN” has the meaning set forth in Section
9(d).

 

“Welfare Plan” has the meaning set forth in
Section 4(n)(i). 

 

“Working Capital” has the meaning set forth
in Section 2(b)(iii). 

 

A-6

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