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

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MASTER AGREEMENT
 
 
by and among
 
 
HUGO NEU CO., LLC,
 
HNE RECYCLING LLC,
 
HNW RECYCLING LLC,
 
 
and
 
 
JOINT VENTURE OPERATIONS, INC.
 
 
and
 
 
for certain limited purposes
 
 
HUGO NEU CORPORATION
 
 
and
 
SCHNITZER STEEL INDUSTRIES, INC.
 
 
_______________________________
 
 
 
As of June 8, 2005
 
 
_______________________________
 

 

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TABLE OF CONTENTS

 
 

  Page 
ARTICLE I DEFINITIONS
2
         
1.1
Defined Terms
2
 
1.2
References to HNC
10
   
ARTICLE II EXCHANGE OF INTERESTS; CONSIDERATION
11
         
2.1
Transfers by the HNC Group
11
 
2.2
Transfer of HNC Entities
11
 
2.3
Global Trade Redemption
11
 
2.4
Closing; Closing Date
11
 
2.5
Deliveries and Payments at Closing
11
 
2.6
Consents of Third Parties
13
 
2.7
“As Is, Where Is”
14
       
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE HNC GROUP
16
         
3.1
Due Incorporation; Authority to Execute and Perform Agreement
16
 
3.2
Title to the Schnitzer Entities; etc
17
 
3.3
No Options
18
 
3.4
Financial Statements
18
 
3.5
Absence of Certain Changes
18
 
3.6
Properties and Assets
19
 
3.7
Real Property; Facilities
19
 
3.8
Equipment
20
 
3.9
Contracts
20
 
3.10
Intellectual Property
20
 
3.11
Indebtedness
20
 
3.12
Compliance with Laws; Permits
20
 
3.13
Litigation
21
 
3.14
Taxes
21
 
3.15
Employee Benefit Plans
22
 
3.16
Insurance
23
 
3.17
Employment of Officers, Employees
23
 
3.18
Environmental Matters
23
 
3.19
Labor Relations
24
 
3.20
Delivery of Documents
24
 
3.21
New Credit Agreement
25
       
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF JVOI
25
         
4.1
Due Incorporation; Authority to Execute and Perform Agreement
25
 
4.2
Title to the HNC Entities
26

 
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TABLE OF CONTENTS
 
(continued)
 

      Page   
4.3
No Options
26
       
ARTICLE V CERTAIN COVENANTS
26
         
5.1
Conduct of Business
26
 
5.2
Prohibited Actions
27
 
5.3
Periodic Meetings
29
 
5.4
Notice of Developments
29
 
5.5
Consents and Notices
29
 
5.6
Access and Information
30
 
5.7
Resignation of Directors
31
 
5.8
Estimated Financial Statements; Distributions, etc
31
 
5.9
Indebtedness, Intercompany Accounts etc
35
 
5.10
Settlement of Outstanding Trading Receivables
36
 
5.11
Expenses
37
 
5.12
Publicity
37
 
5.13
Certain Consents and Notices
38
 
5.14
Shared Contracts
39
 
5.15
Trademarks
39
 
5.16
PNE Scrap Metal
39
 
5.17
Further Assurances
40
 
5.18
Section 754 Election
41
 
5.19
Transfer Taxes
41
 
5.20
Delivery of Records; Preservation of Records
42
 
5.21
Post-Closing Access
43
 
5.22
Confidentiality Obligations
43
 
5.23
Standstill Restrictions
44
 
5.24
Use of Advisors
45
 
5.25
Insurance Matters
45
 
5.26
Russia and Baltic Business Noncompete
46
 
5.27
China Export License
47
 
5.28
Maui Metals
47
 
5.29
Navassa Release
48
 
5.30
Consummation of Financing
48
 
5.31
Hawaii Fire
48
       
ARTICLE VI CONDITIONS PRECEDENT TO THE OBLIGATION OF THE HNC GROUP TO CLOSE
49
         
6.1
Representations and Warranties
49
 
6.2
Covenants
49
 
6.3
JVOI Certificate
49
 
6.4
Required Consents
49

 
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TABLE OF CONTENTS
 
(continued)
 

      Page   
6.5
No Legal Proceedings
49
 
6.6
Financing
49
       
ARTICLE VII CONDITIONS PRECEDENT TO THE OBLIGATION OF JVOI TO CLOSE
50
         
7.1
Representations and Warranties
50
 
7.2
Covenants
50
 
7.3
HNC Group Certificate
50
 
7.4
Required Consents
50
 
7.5
Repayment of Loans
50
 
7.6
Hawaii Title Policy
50
 
7.7
Navassa Release
51
 
7.8
No Legal Proceedings
51
       
ARTICLE VIII INDEMNIFICATION
51
         
8.1
Indemnification by the HNC Group
51
 
8.2
Indemnification by JVOI
52
 
8.3
Notice and Opportunity to Defend Against Third Party Claims
54
 
8.4
Limitations on Indemnification
55
 
8.5
Time Limits
55
 
8.6
Certain Matters Relating to Indemnification
56
 
8.7
Tax Treatment of Indemnity Payments
56
 
8.8
Clarification
56
 
8.9
Guaranty by HNC
56
 
8.10
Guaranty by SSI
58
 
8.11
Assumption of Obligations
60
 
8.12
Exclusive Remedies
60
       
ARTICLE IX TAX MATTERS
60
         
9.1
Tax Contests
60
 
9.2
Tax Return Filing and Preparation
61
       
ARTICLE X TERMINATION
63
         
10.1
Termination
63
 
10.2
Effect of Termination
64
 
10.3
Survival
64
       
ARTICLE XI MISCELLANEOUS
64
         
11.1
Notices
64

 
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TABLE OF CONTENTS
 
(continued)
 

      Page   
11.2
Entire Agreement
65
 
11.3
Waivers and Amendments
65
 
11.4
Governing Law
65
 
11.5
Binding Effect, Assignment
65
 
11.6
Usage
65
 
11.7
Articles and Sections
66
 
11.8
Interpretation
66
 
11.9
Severability of Provisions
66
 
11.10
No Third Party Beneficiaries
66
 
11.11
Consent to Jurisdiction; Service of Process
66
 
11.12
Waiver of Punitive Damages and Jury Trial
67
 
11.13
Specific Performance
67
 
11.14
Counterparts
67

 
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TABLE OF CONTENTS
 
(continued)
 

Schedules1
     
Schedule A
Shared Contracts, Consents, Procedures
Schedule B
Schnitzer Business
Schedule C
HNC Business
Schedule D-1
Acquired Trading Assets
Schedule D-2
Excluded Trading Assets
Schedule D-3
Assumed Trading Liabilities
Schedule D-4
Excluded Trading Liabilities
Schedule E
Required Consents and Notices
Schedule F
Acquired Hawaii Assets
Schedule G
Excluded Hawaii Assets
Schedule H
Excluded Hawaii Liabilities
Schedule I
Certain Financial Adjustments and JV Indebtedness
Schedule J
Insurance Policies
Schedule K
Capital Projects
Schedule 5.2(c)
Permitted Distributions
   
Exhibits
     
Exhibit A
Form of Mexico Trading Agreement
Exhibit B
Form of North Carolina Landfill Access Agreement
Exhibit C
Form of Mutual Release
Exhibit D
Form of Employee Matters Agreement
Exhibit E
Form of Transitional Services Agreement
Exhibit F
Form of Amendment to “Propat” Patent Agreement
Exhibit G
Form of Amendment to the “Propat” Trademark Agreement
Exhibit H
Form of JV Indemnification Agreement
Exhibit I
Form of Press Release
Exhibit J
Form of Assignment of Membership Interest (HNC III LLC to JVOI)
Exhibit K
Form of Bill of Sale
Exhibit L
Form of Assumption Agreement
Exhibit M
Form of Assignment of Membership Interest (JVOI to HNS Global Trade)

 

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1 These Schedules and Exhibits to the Master Agreement have been omitted in
accordance with Item 601(b)(2) of Regulation S-K. Schnitzer Steel Industries,
Inc. will furnish supplementally a copy of any omitted exhibit or schedule to
the Securities and Exchange Commission upon request; provided, however, that
Schnitzer Steel Industries, Inc. may request confidential treatment pursuant to
Rule 24b-2 of the Securities Exchange Act of 1934, as amended, for any schedule
or exhibit.
 

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MASTER AGREEMENT
 
Master Agreement, dated as of June 8, 2005 (as amended, restated or supplemented
from time to time, this “Agreement”), by and among Hugo Neu Co., LLC, a Delaware
limited liability company (“HNC I LLC”), HNE Recycling LLC, a Delaware limited
liability company (“HNC II LLC”), HNW Recycling LLC, a Delaware limited
liability company (“HNC III LLC”), and Joint Venture Operations, Inc., a
Delaware corporation (“JVOI”), and, solely for purposes of Sections 2.3, 2.5(d),
2.5(e), 2.5(f), 2.5(g), 2.5(h), 2.5(i), 2.5(j), 2.5(k), 2.5(l), 2.5(m), 2.7, 8.9
and 8.11 and Articles V (but only to the extent any sections therein bind HNC or
SSI, as applicable), IX, X and XI, Hugo Neu Corporation, a New York corporation
(“HNC”), and Schnitzer Steel Industries, Inc., an Oregon corporation (“SSI”).
 
R E C I T A L S:
 
A. HNC and its Affiliates, on the one hand, and JVOI and its Affiliates, on the
other hand, have been parties to various joint ventures on a 50/50 basis that
are engaged in the scrap metal and recycling businesses. HNC and JVOI now wish
to unwind such joint ventures by causing to be transferred to JVOI or its
Affiliates certain interests in the joint ventures that are the Schnitzer
Entities and by causing to be transferred to Affiliates of HNC (or in the case
of HNS Global Trade redeemed) certain interests in the joint ventures that are
the HNC Entities, in each case upon the terms and subject to the conditions set
forth in this Agreement.
 
B. HNC and certain of its Affiliates (i) have transferred and caused to be
transferred their interests in the Joint Ventures that are Schnitzer Entities to
TTS Recycling LLC, a Delaware limited liability company (“HNC IV LLC”), and (ii)
prior to the Closing may transfer their interests in the Joint Ventures that are
HNC Entities to HNC II LLC.
 
C. In addition, HNC and certain of its Affiliates have caused to be transferred
to THS Recycling LLC, a Delaware limited liability company (“HNC V LLC”),
substantially all of the assets and liabilities of HNC and its Affiliates used
in, relating to or arising out of the metals and greenwaste recycling business
in the State of Hawaii conducted by HNC or its Affiliates (the “Hawaii
Business”), which has been conducted as “Hawaii Metal Recycling Co.,” “Big
Island Recycling” and in certain instances “Flynn-Learner”. HNC III LLC
currently owns HNC IV LLC and HNC V LLC and HNC I LLC currently owns HNC III
LLC, and prior to the Closing, may own HNC II LLC.
 
D. In addition, HNC and JVOI own (on a 50/50 basis) Hugo Neu Schnitzer Global
Trade LLC, a Delaware limited liability company (“HNS Global Trade”), which is
engaged in several businesses, including the Russia and Baltic Trading Business.
Prior to the Closing, HNC may transfer its interest in HNS Global Trade to HNC
II LLC.
 

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E. Under the terms hereof, (i) HNC III LLC will transfer all of the outstanding
membership interests in HNC IV LLC and HNC V LLC to JVOI, (ii) JVOI will
transfer and cause to be transferred the interests it holds in the HNC Entities
to HNC III LLC and (iii) HNS Global Trade will transfer certain assets and
liabilities relating to the Russia and Baltic Trading Business to JVOI or its
Affiliate in redemption of all of the membership interests of JVOI (or its
designee) in HNS Global Trade, and the parties will consummate the other
transactions contemplated hereby.
 
NOW THEREFORE, in consideration of the mutual covenants, representations,
warranties and agreements entered into herein, and intending to be legally bound
hereby, the parties agree as follows:
 
ARTICLE I
 
DEFINITIONS
 
1.1  Defined Terms.  For all purposes of this Agreement, the following terms
shall have the respective meanings set forth in this Section 1.1 (such
definitions to be equally applicable to both the singular and plural forms of
the terms herein defined):
 
“Acquired Hawaii Assets” means all of the assets of HNC, Flynn-Learner, the HNC
Group and their Affiliates, wherever located, to the extent used in, relating to
or arising out of the Hawaii Business, including the assets described on
Schedule F, but excluding the Excluded Hawaii Assets.
 
“Adjusted Net Income,” with respect to a Joint Venture for any period, means
such Joint Venture’s Net Income for such period, plus an amount equal to the
amount charged for an increase in the LIFO reserve of the inventory of such
Joint Venture as of the last day of such period or minus an amount equal to the
amount credited for a decrease in the LIFO reserve of the inventory of such
Joint Venture as of the last day of such period, as the case may be.
 
“Affiliate” means, with respect to any Person, any other Person who either now
or hereafter controls, is controlled by or is under common control with such
Person. The term “control” (including, with correlative meaning, the terms
“controlled by” and “under common control with”), as applied to any Person,
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of such Person, whether through the
ownership of voting or other securities, by contract or otherwise. For all
purposes hereunder, (i) each member of the HNC Group and Flynn-Learner will be
deemed to be an Affiliate of HNC, and (ii) for the avoidance of doubt, after the
Closing Date, each HNC Entity will be an Affiliate of the HNC Group and each
Schnitzer Entity will be an Affiliate of JVOI.
 
“Assumed Hawaii Liabilities” means all Liabilities of HNC, Flynn-Learner, the
HNC Group and their Affiliates to the extent (i) relating to or arising out of
the Hawaii Business, whether arising before, on or after the Closing Date, and
(ii) relating to or arising out of or emanating from the condition of the Real
Property, regardless
 
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of when the condition that gave rise to any such Liability arose, but in the
case of both clauses (i) and (ii) excluding any Excluded Hawaii Liability.
 
“Business Agreement” means the Business Agreement, dated August 31, 2004,
between The Town of Navassa, North Carolina, North Carolina Resource
Conservation, LLC, North Carolina Recycling, LLC, HNC and SSI.
 
“Business Day” means a day other than Saturday, Sunday or any day on which banks
located in New York, New York or Portland, Oregon are authorized or obligated by
Law or executive order to close.
 
“CERCLA” means the Comprehensive Environmental Response, Compensation and
Liability Act.
 
“Claim” means any action, cause of action, suit, claim, complaint, demand,
litigation or other similar proceeding.
 
“Code” means the Internal Revenue Code of 1986, as amended.
 
“Confidentiality Agreement” means the confidentiality agreement, dated
January 7, 2005, between HNC and SSI.
 
“Contract” means any agreement, contract, lease, license, promissory note,
conditional sales contract, indenture, mortgage, deed of trust, commitment,
undertaking, instrument or arrangement of any kind, whether or not in writing,
under which (in each case) any obligation is legally enforceable against any
Person, asset or right. Without limiting the generality of the foregoing, any
agreement, commitment, undertaking or arrangement of any kind with a
Governmental Body shall constitute a “Contract” whether it was entered into
voluntarily or pursuant to applicable Law or in settlement of a claim or
possible claim by such Governmental Body, or otherwise.
 
“Credit Facility” means the Credit Agreement, dated as of July 26, 2002, as
amended, by and among Standard Chartered Bank, as Issuing Bank and
Administrative Agent, and the Joint Ventures party thereto.
 
“Employee Matters Agreement” means the Employee Matters Agreement to be executed
and delivered by HNC and SSI substantially in the form attached hereto as
Exhibit D.
 
“Environmental Laws” means any common law or federal, state, local or foreign
statute, treaty, ordinance, rule, regulation, policy, guidelines, standards,
Permit or Order, and all amendments thereto, relating to the pollution or
protection of the environment or to human health or safety, including all
requirements pertaining to: (i) the manufacture, processing, distribution, use,
handling, treatment, storage and disposal of Hazardous Materials; (ii) the
reporting, investigation and remediation of Releases of Hazardous Materials into
any media, including soil, groundwater, surface water and air; (iii) the health
and safety of employees in the workplace or of any member of the public;
 
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(iv) natural resources; (vi) wetlands; and (vii) endangered or threatened
species or habitats.
 
“Excluded Hawaii Asset” means any asset described on Schedule G.
 
“Excluded Hawaii Liability” means any Liability described on Schedule H.
 
“Flynn-Learner” means Flynn-Learner, a California corporation.
 
“GAAP” means U.S. generally accepted accounting principles.
 
“Hawaii Employees” means any employee whose duties primarily concern the Hawaii
Business, including any full-time, part-time, or temporary employee or an
individual in any other employment relationship with the Hawaii Business.
 
“Hazardous Material” means any substance which is listed, regulated or defined
as a hazardous substance, hazardous material, toxic substance, hazardous waste,
hazardous chemical, carcinogen, mutagen, reproductive toxicant, explosive
substance, corrosive substance, flammable or ignitable substance, or pollutant
or contaminant under any Environmental Laws, including (i) radioactive
substances; (ii) asbestos; (iii) radon gas; (iv) polychlorinated biphenyls
(PCBs); (v) petroleum (including crude oil and any fractions thereof) and
petroleum products, and any additives thereto (including MTBE); (vi) natural or
synthetic gas or any mixture thereof, (vii) medical or infectious waste;
(viii) lead-based paint; (ix)  urea foam insulation; and (x) microbial matter.
 
“HNC Business” means the business conducted by the HNC Entities, but excluding
the Russia and Baltic Trading Business.
 
“HNC Entities” means (i) HNSE, (ii) Hugo Neu-Proler Company, a California
general partnership, (iii) Dover Barge Company, a Delaware corporation,
(iv) North Carolina Resource Conservation, LLC, a North Carolina limited
liability company, (v) North Carolina Recycling, LLC, a North Carolina limited
liability company, (vi) Alameda Street Metal Corp., a California corporation,
(vii) Pacific Bulk Loading, Inc., a California corporation, and (viii) HNS
Global Trade, and “HNC Entity” means any one of the foregoing.
 
“HNC Group” means HNC I LLC, HNC II LLC and HNC III LLC.
 
“HNC Group’s knowledge” or “to knowledge of the HNC Group” or similar knowledge
qualification means the actual knowledge of any of the following persons: Andrew
Feuerstein, Donald Hamaker and John Neu, and in the case of the Hawaii Business,
in each case after due inquiry of James Banigan following his review of this
Agreement and the Schedules to this Agreement relating to the Hawaii Business.
 
“HNC Plan” has the meaning ascribed to it in the Employee Matters Agreement.
 
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“HNSE” means Hugo Neu Schnitzer East, a New York general partnership.
 
“HNSP” means Hugo Neu Steel Products, Inc., a Massachusetts corporation.
 
“Included Income Tax Liabilities” means any Income Taxes that are asserted by
any non-United States Tax authority against HNS Global Trade or any of its
members as a result of or in connection with the activities of HNS Global Trade
on or prior to the Closing Date.
 
“Income Taxes” means any Taxes (including franchise, estimated, alternative
minimum, profit or other Taxes) based in whole or in part on income, gross
receipts or net revenue.
 
“Indebtedness” means as applied to any Person, all indebtedness of such Person
for borrowed money, whether current or funded, or secured or unsecured,
including (a) all indebtedness of any such Person for the deferred purchase
price of property or services represented by a note, (b) all indebtedness of any
such Person created or arising under any conditional sale or other title
retention agreement with respect to property acquired by such Person (even
though the rights and remedies of the seller or lender under such agreement in
the event of default are limited to repossession or sale of such property),
(c) all indebtedness of any such Person secured by a purchase money mortgage or
other lien to secure all or part of the purchase price of the property subject
to such mortgage or lien, (d) all the obligations under leases which shall have
been or must be, in accordance with GAAP, recorded as capital leases in respect
of which Person is liable as a lessee, (e) any liability of such Person in
respect of banker’s acceptances or letters of credit, (f) all interest, fees and
other expenses owed with respect to the indebtedness referred to above, (g) all
indebtedness referred to above which is directly or indirectly guaranteed by
such Person or which such Person has agreed (contingently or otherwise) to
purchase or otherwise acquire or in respect of which it has otherwise assured a
creditor against loss, and (h) all “break” fees and other direct expenses
associated with repaying any of the outstanding Indebtedness of such Person at
the Closing.
 
“Independent Accounting Firm” means Deloitte & Touche LLP.
 
“Joint Ventures” means the HNC Entities and the Schnitzer Entities, and “Joint
Venture” means any one of such entities.
 
“JV Indemnification Agreement” means the separate indemnification agreements to
be executed by each Joint Venture substantially in the form attached hereto as
Exhibit H.
 
“Liability” means any liability or obligation, whether accrued, known or
unknown, choate or inchoate, secured or unsecured, absolute, contingent or
otherwise and whether due or to become due.
 
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“Lien” means any lien, pledge, mortgage, deed of trust, security interest,
claim, lease, license, charge, option, right of first refusal, transfer
restriction, encumbrance or any other restriction or limitation whatsoever.
 
“Materiality Qualifier” means any qualification based on materiality such as “in
all material respects”; “material adverse effect”, “material to the Hawaii
Business” and other similar phrases.
 
“Maui Metals” means Maui Scrap Metal Co., Inc., a Hawaii corporation.
 
“Mexico Trading Agreement” means the Mexico Trading Agreement substantially in
the form attached hereto as Exhibit A.
 
“MRL” means Metals Recycling L.L.C., a Rhode Island limited liability company.
 
“Mutual Release” means the release substantially in the form attached hereto as
Exhibit C.
 
“Net Income,” with respect to a Joint Venture for any period, means the amount
recorded as net income on the financial statements of such Joint Venture for
such period, prepared in accordance with GAAP applied on a basis consistent with
the principles used to prepare the relevant Joint Venture’s annual audited
financial statements (excluding footnotes but including period end adjustments).
 
“Net Working Capital” with respect to the Hawaii Business at any date, means the
book value of the current assets included in the Acquired Hawaii Assets, less
the book value of the current liabilities included in the Assumed Hawaii
Liabilities (other than the current liability portion of the capital leases
included in the Acquired Hawaii Assets).
 
“North Carolina Landfill Access Agreement” means the Landfill Access Agreement
substantially in the form attached hereto as Exhibit B.
 
“Patent License Amendment” means the Amendment to the “Propat” Patent Agreement
substantially in the form attached hereto as Exhibit F.
 
“Permitted Liens” means (i) mechanics’, materialmen’s, workmen’s, repairmen’s,
warehousemen’s, carrier’s and other similar Liens (including Liens created by
operation of Law) incurred in the ordinary course of business; (ii) Liens for
Taxes (and assessments, impositions and other governmental charges) not yet due
and payable or due but not delinquent or that are being contested in good faith
by appropriate proceedings; (iii) Liens in respect of pledges or deposits under
workers’ compensation Laws or similar legislation, unemployment insurance or
other types of social security or to secure government contracts and similar
obligations; (iv) municipal by-laws, development restrictions or regulations,
facility costs, sharing and servicing contracts, and zoning, building or
planning restrictions or regulations; (v) Liens in respect of
 
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easements, permits, licenses, right of way, restrictive covenants, reservations
or encroachments or irregularities in, and other similar exceptions to, title
and any conditions with respect to real property that would be disclosed by a
physical inspection of the property or a current survey or title report or other
public record; and (vi) in respect of the Owned Real Property, defects or
irregularities in title; and in each of the foregoing clauses (i) through (vi),
except to the extent that any such Lien would reasonably be expected to
materially impair the existing use or value of the asset subject thereto.
 
“Person” means any individual, corporation, partnership, limited liability
company, limited liability partnership, firm, joint venture, association,
joint-stock company, trust, unincorporated organization or association,
Governmental Body or other entity.
 
“Proleride” means Proleride Transport Systems, Inc., a Delaware corporation.
 
“Real Property” means the Owned Real Property and the real property described in
Section 3.7(b) of the HNC Disclosure Schedule.
 
“Release” means any spilling, leaking, pumping, pouring, emitting, emptying,
discharging, injecting, escaping, migration, leaching, placing, discarding,
dumping or disposing of any Hazardous Material into the environment (including
the abandonment of barrels, containers or other closed receptacles containing
any Hazardous Materials).
 
“Required Consents and Notices” means the HNC Consents and Notices and the SSI
Consents and Notices set forth on Schedule E.
 
“Russia and Baltic Trading Business” means the business of purchasing scrap
metal from suppliers located in Russia, Poland, Denmark, Finland, Norway and
Sweden as currently or previously conducted by HNS Global Trade, but does not
include the business of selling such scrap metal or other metal anywhere in the
world.
 
“Schnitzer Business” means, collectively, the business conducted by the
Schnitzer Entities, the Hawaii Business and the Russia and Baltic Trading
Business.
 
“Schnitzer Entities” means (i) Prolerized New England Company, a New York
general partnership (which owns a 60% limited liability company interest in
MRL), (ii) Bulkloader LLC, a New Hampshire limited liability company (which has
been involuntarily dissolved by the State of New Hampshire), (iii) H. Finkelman
Inc., a Maine corporation, (iv) New England Metal Recycling, LLC, a
Massachusetts limited liability company, (v) Independent Erectors Co. Inc., a
Massachusetts corporation, and (vi) Worcester Recycling Inc., a Massachusetts
corporation, and “Schnitzer Entity” means any one of the foregoing.
 
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“Schnitzer Group” means any of the persons named in the Amendment #11 to
Schedule 13G filed with the Securities and Exchange Commission on February 11,
2005 and their family members, spouses and Affiliates.
 
“Shared Contracts” means the Contracts set forth on Schedule A attached hereto.
 
“Target Hawaii Net Working Capital” means $2,030,000.
 
“Tax Returns” means any and all reports, returns, declarations, claims for
refund, elections, disclosures, estimates, information reports or returns or
statements required to be supplied to a Tax authority in connection with Taxes,
including any schedule or attachment thereto or amendment thereof.
 
“Taxes” means (i) any and all federal, state, provincial, local and foreign
taxes, levies, fees imposts, duties and similar governmental charges (including
any interest, fines, assessments, penalties or additions to tax imposed in
connection therewith), including (x) taxes imposed on, or measured by, income,
franchise, profits or gross receipts, and (y) intangible, ad valorem, value
added, capital gains, sales, goods and services, use, real or personal property,
capital stock, license, branch, payroll, estimated, withholding, employment,
social security, unemployment, compensation, utility, severance, production,
excise, stamp, occupation, premium, windfall profits, transfer and gains taxes,
and customs duties, and (ii) any transferee liability in respect of any items
described in clause (i).
 
“Trademark License Amendment” means the Amendment to the “Propat” Trademark
Agreement substantially in the form attached hereto as Exhibit G.
 
“Transaction Documents” means this Agreement, the Confidentiality Agreement, the
Employee Matters Agreement, the Mexico Trading Agreement, the North Carolina
Landfill Access Agreement, the Transitional Services Agreement, the Trademark
License Amendment, the Patent License Amendment, the JV Indemnification
Agreements, and the Mutual Release.
 
“Transitional Services Agreement” means the Transitional Services Agreement
substantially in the form attached hereto as Exhibit E.
 
(a)  The following capitalized terms are defined in the following Sections of
this Agreement:
 
Term
 
Section
 
8-K
5.12(a)
Acquired Trading Assets
Schedule D-1
Acquiring Person
5.26(b)
Agreement
Preamble
Alternative Financing
5.30(a)

 
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Term  Section     
Asserted Liability
8.3(a)
Assumed Benefit Arrangements
Schedule F
Assumed Trading Liabilities
Schedule D-3
Cash Payment
2.1
Claims Notice
8.3(a)
Closing
2.4
Closing Date
2.4
Closing Hawaii Net Working Capital
5.8(c)(ii)(w)
Closing Net Income
5.8(c)(ii)(x)
Closing R&B Debt
5.8(c)(ii)(y)
Confidential Information
5.22(d)
Contest
9.1(a)
DES  Schedule E 
Employee Benefit Plan
3.15(a)
Environmental Permits
3.12
EPA
3.18(a)
Equipment
Schedule F
ERISA
3.15(b)
Estimated Closing Net Income
5.8(b)
Estimated Hawaii Net Working Capital
5.8(b)
Estimated R&B Debt
5.8(b)
Excluded Trading Asset
Schedule D-2
Excluded Trading Liability
Schedule D-4
Global Trade Redemption
2.3
Governmental Bodies
3.1(b)(iv)
Government Contract
Schedule F
Hawaii Bank Debt
2.5(p)
Hawaii Business
Recital C
Hawaii Closing Balance Sheet
5.8(c)
HNC
Preamble
HNC I LLC
Preamble
HNC II LLC
Preamble
HNC III LLC
Preamble
HNC IV LLC
Recital B
HNC V LLC
Recital C
HNC Consents and Notices
3.1(b)(ii)
HNC Directors and Officers
5.7(a)
HNC Disclosure Schedule
Article III
HNC Indemnified Parties
8.2
HNC Proposed Calculations
5.8(c)(ii)
HNC Obligation
8.9(a)
HNS Global Trade
Recital D
Identified Party
5.26(b)
Indemnifying Party
8.3(a)
Indemnitee
8.3(a)
Indemnity Payment
8.6(a)

 
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Term  Section     
Interim Balance Sheet
3.4
ISRA  Schedule E 
JV Closing Balance Sheet
5.8(c)
JV Closing Income Statement
5.8(c)
JVOI
Preamble
JVOI Disclosure Schedule
Article IV
JVOI Obligation
8.10(a)
Laws
3.1(b)(iv)
Losses
8.1(a)
Maui Strategic Proposal
5.28
Most Recent Balance Sheet
3.4
New Credit Agreement
3.21
NJDEP  Schedule E 
Orders
3.1(b)(iv)
Outstanding Trading Receivables
5.9(a)
Owned Real Property
Schedule F
PBGC
3.15(c)
Permits
Schedule F
Pre-Closing Return
9.2(a)
Pre-Closing Taxable Period
9.2(a)
Pre-Closing Taxes
9.2(a)
Press Release
5.12(a)
Remaining Disputed Items
5.8(d)
Reorganization Consents and Notices
3.20
Restricted Activity
5.26(a)
Restricted Location
5.26(a)
SSI
Preamble
SSI Change of Control
5.23(b)
SSI Consents and Notices
4.1(b)(ii)
SSI Directors and Officers
5.7(b)
SSI Indemnified Parties
8.1(a)
SSI Proposed Calculations
5.8(d)
Straddle Period
9.2(b)
Straddle Returns
9.2(b)
Transfer Taxes
5.19(a)
   

 
1.2  References to HNC.  In this Agreement, references to “HNC (if applicable)”
in any section of this Agreement shall mean that HNC shall be a primary obligor
with respect to such section if, on or prior to the Closing, HNC has not
transferred its equity interests in the HNC Entity (or Entities) that are the
subject of such section to HNC II LLC.
 
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ARTICLE II
 
EXCHANGE OF INTERESTS; CONSIDERATION
 
2.1  Transfers by the HNC Group.  At the Closing, upon the terms and subject to
the conditions set forth in this Agreement, (i) HNC III LLC shall sell,
transfer, assign, convey and deliver to JVOI or its Affiliates, and JVOI or its
Affiliates shall acquire from HNC III LLC, all of the outstanding membership
interests in (x) HNC IV LLC, the sole assets and liabilities of which will
consist of the interests in the Schnitzer Entities as set forth on Part I of
Schedule B attached hereto, and (y) HNC V LLC, the sole assets and liabilities
of which will consist of the Acquired Hawaii Assets and the Assumed Hawaii
Liabilities, and (ii) HNC III LLC shall pay JVOI cash in the amount of
$52,350,864 (the “Cash Payment”), subject to the adjustment contemplated by
Section 5.8(b).
 
2.2  Transfer of HNC Entities.  At the Closing, upon the terms and subject to
the conditions set forth in this Agreement, JVOI shall sell, transfer, assign,
convey and deliver to HNC III LLC, and HNC III LLC shall acquire from JVOI, all
of its right, title and interest in and to the interests in the HNC Entities set
forth on Schedule C attached hereto (other than JVOI’s membership interest in
HNS Global Trade, which will be redeemed pursuant to Section 2.3).
 
2.3  Global Trade Redemption.  At the Closing, upon the terms and subject to the
conditions set forth in this Agreement, as of the Closing Date, HNC (if
applicable) or HNC II LLC and JVOI shall cause HNS Global Trade to distribute
the Acquired Trading Assets to JVOI or its designee in redemption of all of the
membership interest of JVOI (or its designee) in HNS Global Trade (such
transaction, the “Global Trade Redemption”) and JVOI or its designee will assume
all of the Assumed Trading Liabilities. In no event will JVOI or its designee
acquire the Excluded Trading Assets or assume the Excluded Trading Liabilities.
 
2.4  Closing; Closing Date.  The closing of the transactions contemplated hereby
(the “Closing”) shall take place at the offices of Paul, Weiss, Rifkind, Wharton
& Garrison LLP, at 1285 Avenue of the Americas, New York, New York at 10:00 a.m.
on the third Business Day following the date the conditions set forth in
Sections 6.4, 7.4, 7.6 and 7.7 have been satisfied or waived by the appropriate
party, or at such other place or time as the parties may mutually agree. The
date on which the Closing occurs is referred to herein as the “Closing Date,”
and the Closing shall be deemed to have occurred at 12:01 a.m. (local time) on
the Closing Date.
 
2.5  Deliveries and Payments at Closing.  At the Closing:
 
(a)  Cash Payment. HNC III LLC shall pay JVOI the Cash Payment (as adjusted
pursuant to Section 58(b)) by wire transfer of immediately available funds in
United States dollars to the bank account of JVOI designated by JVOI in writing
to HNC III LLC not less than two Business Days prior to the Closing for such
purpose.
 
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(b)  HNC IV LLC, HNC V LLC. HNC III LLC shall execute and deliver an Assignment
of Membership Interests in the form of Exhibit J attached hereto and such other
instruments or deeds of transfer or similar documents as may be required by
applicable Law to evidence and effect the transfer of its equity interests in
HNC IV LLC and HNC V LLC to JVOI.
 
(c)  HNC Entities. JVOI shall execute and deliver such instruments or deeds of
transfer, stock powers or similar documents as may be required by applicable Law
to evidence and effect the transfer of its equity interests in the HNC Entities
(other than in HNS Global Trade) to HNC III LLC, including stock certificates
or, in lieu thereof, affidavits of lost stock certificates accompanied with an
indemnity reasonably satisfactory to HNC III LLC evidencing its equity interests
in those HNC Entities that are corporations.
 
(d)  Acquired Trading Assets. HNC (if applicable) or HNC II LLC and JVOI shall
cause HNS Global Trade to duly execute and deliver to JVOI (or its designee) a
bill of sale in the form of Exhibit K attached hereto and such other deeds,
bills of sale, certificates of title and other instruments of assignment or
transfer with respect to the Acquired Trading Assets as JVOI may reasonably
request and as may be necessary to vest in JVOI (or its designee) good record
(where applicable) and valid title to all of the Acquired Trading Assets, in
each case subject to no Liens except for Permitted Liens.
 
(e)  Assumed Trading Liabilities; Global Trade Redemption. JVOI (or its
designee) shall duly execute and deliver to HNS Global Trade (i) an instrument
of assumption with respect to the Assumed Trading Liabilities in the form of
Exhibit L attached hereto and such other instruments to effect such assumption
as HNC  (if applicable) or HNC II may reasonably request, and (ii) an Assignment
of Membership Interests in the form of Exhibit M attached hereto and such other
instruments or deeds of transfer or similar documents as may be required by
applicable Law to evidence and effect the transfer of the membership interest in
HNS Global Trade of JVOI pursuant to the Global Trade Redemption.
 
(f)  Intercompany Payments; Credit Facility. HNC (if applicable), HNC II LLC,
HNC III LLC and JVOI shall cause the HNC Entities and Schnitzer Entities, as
applicable, to make the intercompany payments, and HNC (if applicable), HNC II
LLC and HNC III LLC will cause HNSE to repay all outstanding Indebtedness under
the Credit Facility, as provided by Section 5.9.
 
(g)  Mexico Trading Agreement. HNC (if applicable), HNC II LLC and HNC III LLC
shall cause HNS Global Trade and HNSE to, and JVOI shall cause Prolerized New
England Company and MRL to, execute and deliver the Mexico Trading Agreement and
such agreement shall be in full force and effect.
 
(h)  North Carolina Landfill Access Agreement. Each of HNC (if applicable),
HNC II LLC and HNC III LLC shall cause North Carolina Resource
 
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Conservation LLC to, and JVOI shall, execute and deliver the North Carolina
Landfill Access Agreement and such agreement shall be in full force and effect.
 
(i)  Mutual Release. SSI, HNC and each of their respective Affiliates named
therein shall execute and deliver the Mutual Release.
 
(j)  Employee Matters Agreement. Each of HNC and SSI shall execute and deliver
the Employee Matters Agreement and such agreement shall be in full force and
effect.
 
(k)  Transitional Services Agreement. Each of HNC (if applicable) or HNC I LLC
and JVOI shall execute and deliver the Transitional Services Agreement and such
agreement shall be in full force and effect.
 
(l)  Trademark License Amendment. HNC shall, and SSI shall cause Proler
International Corporation to, execute and deliver the Trademark License
Amendment and such agreement shall be in full force and effect.
 
(m)  Patent License Amendment. HNC shall, and SSI shall cause Proler
International Corporation to, execute and deliver the Patent License Amendment
and such agreement shall be in full force and effect.
 
(n)  JV Indemnification Agreements. Each Schnitzer Entity and each HNC Entity
shall execute and deliver a JV Indemnification Agreement in favor of the HNC
Indemnified Parties and the SSI Indemnified Parties, respectively, and such
agreements shall be in full force and effect.
 
(o)  FIRPTA Certificate. HNC III LLC shall deliver to JVOI a certificate stating
that HNC III LLC is not a “foreign person” within the meaning of Section 1445 of
the Code, which certificate shall set forth all information required by, and
otherwise be executed in accordance with, Treasury Regulation
Section 1.1445-2(b)(2).
 
(p)  Repayment of Hawaii Bank Debt. HNC III LLC shall repay or cause to be
repaid all outstanding Indebtedness for borrowed money of the Hawaii Business or
HNC V LLC in favor of First Hawaiian Bank (the “Hawaii Bank Debt”) by wire
transfer of immediately available funds and shall obtain from First Hawaiian
Bank, and deliver to JVOI at the Closing, pay-off letters, releases and lien
discharges with respect to all of the Hawaii Bank Debt in a form reasonably
satisfactory to JVOI.
 
2.6  Consents of Third Parties.
 
(a)  To the extent that any Contract to be assumed by JVOI under Section 2.3 and
Schedule D-1 is not capable of being transferred by HNS Global Trade without the
consent, approval or waiver of a third Person, and such consent, approval or
waiver is not obtained prior to the Closing, or if such transfer or attempted
 
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transfer would constitute a breach thereof or a violation of applicable Law,
nothing in this Agreement will constitute a transfer or an attempted transfer
thereof.
 
(b)  Notwithstanding anything contained in this Agreement to the contrary, HNS
Global Trade will not be obligated to transfer to JVOI (or its designee) any of
its rights and obligations in and to any of the Contracts referred to in
Section 2.6(a) without first having obtained all consents, approvals and waivers
necessary for such transfers. HNC II LLC shall cause HNS Global Trade to use its
commercially reasonable efforts to obtain such consents, approvals and waivers,
to resolve the impracticalities of transfer referred to in Section 2.6(a) and to
obtain any other consents, approvals and waivers necessary to transfer to JVOI
(or its designee) any of such Contracts.
 
(c)  If such consents, approvals and waivers referred to in Section 2.6(a) are
not obtained by HNS Global Trade, then HNC II LLC shall cause HNS Global Trade
to use its commercially reasonable efforts, at its own expense, to (i) provide
to JVOI the benefits and burdens of any Contract referred to in Section 2.6(a),
(ii) cooperate in any reasonable and lawful arrangement designed to provide such
benefits and burdens to JVOI (or its designee) without incurring any obligation
to any other Person other than to provide such benefits to JVOI (or its
designee), including the appointment of JVOI (or its designee) as the agent of
HNS Global Trade for purposes of such Contract, and (iii) enforce, at the
request of JVOI (or its designee) for the account of JVOI (or its designee) any
rights of HNS Global Trade arising from any such Contract (including the right
to elect to terminate such Contract in accordance with the terms thereof upon
the request of JVOI (or its designee)). JVOI will provide reasonable cooperation
in implementing any such arrangements, and shall be responsible for the economic
burdens of any such Contract.
 
(d)  No consent, approval or waiver of a third Person with respect to the
transfer of, or any novation with respect to, any Contract referred to in
Section 2.6(a), shall cause an Excluded Trading Liability to be deemed for
purposes of this Agreement to have become an Assumed Trading Liability or
vice-versa or otherwise affect the respective rights of JVOI (or its designee)
and HNS Global Trade under Article VIII.
 
2.7  “As Is, Where Is”.  AS OF THE DATE HEREOF AND AS OF THE CLOSING DATE,
EXCEPT FOR THE REPRESENTATIONS, WARRANTIES AND INDEMNIFICATION OBLIGATIONS
SPECIFICALLY CONTAINED IN THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT:
 
(a)  NONE OF THE HNC GROUP, JVOI OR ANY OTHER PERSON MAKES ANY REPRESENTATION OR
WARRANTY OF ANY KIND WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO ANY OF THE
TRANSACTIONS CONTEMPLATED HEREBY OR THE BUSINESS, ASSETS OR CONDITION (FINANCIAL
OR OTHERWISE) OF, OR ANY OTHER MATTER INVOLVING, THE HNC BUSINESS, THE SCHNITZER
BUSINESS OR THE OTHER ASSETS TO BE TRANSFERRED OR DISTRIBUTED OR THE LIABILITIES
TO BE
 
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ASSUMED IN ACCORDANCE WITH THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT;
 
(b)  THE HNC BUSINESS, THE SCHNITZER BUSINESS AND THE OTHER ASSETS TO BE
TRANSFERRED OR DISTRIBUTED OR LIABILITIES TO BE ASSUMED IN ACCORDANCE WITH THIS
AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT SHALL BE TRANSFERRED OR DISTRIBUTED
OR ASSUMED ON AN “AS IS, WHERE IS” BASIS, AND ALL IMPLIED WARRANTIES OF
MERCHANTABILITY, FITNESS FOR A SPECIFIC PURPOSE OR OTHERWISE ARE HEREBY
EXPRESSLY DISCLAIMED;
 
(c)  WITHOUT LIMITING CLAUSES (a) AND (b) ABOVE, THE HNC GROUP AND ITS
AFFILIATES ARE ASSUMING ALL ENVIRONMENTAL LIABILITIES RELATED TO THE HNC
BUSINESS AND JVOI AND ITS AFFILIATES ARE ASSUMING ALL ENVIRONMENTAL LIABILITIES
RELATED TO THE SCHNITZER BUSINESS;
 
(d)  NONE OF THE HNC GROUP, JVOI OR ANY OTHER PERSON MAKES ANY REPRESENTATION OR
WARRANTY WITH RESPECT TO ANY INFORMATION, DOCUMENTS OR MATERIAL MADE AVAILABLE
IN ANY “DATA ROOMS,” IN CONNECTION WITH ANY MANAGEMENT PRESENTATIONS, OR IN
CONNECTION WITH ANY OTHER DUE DILIGENCE MATTER RELATING TO THE RELATIONSHIP
BETWEEN THE HNC GROUP AND JVOI OR THEIR AFFILIATES, OR THE ENTERING INTO THIS
AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY (INCLUDING THE PROVISION OF ANY BUSINESS OR FINANCIAL
ESTIMATES AND PROJECTIONS AND OTHER FORECASTS AND PLANS (AND THE REASONABLENESS
OF THE ASSUMPTIONS UNDERLYING THE SAME)); AND
 
(e)  THE HNC GROUP, JVOI, HNC AND SSI ACKNOWLEDGE THAT (i) THERE ARE
UNCERTAINTIES INHERENT IN ATTEMPTING TO MAKE ANY SUCH ESTIMATES, PROJECTIONS AND
OTHER FORECASTS AND PLANS, (ii) THE HNC GROUP, JVOI, HNC AND SSI ARE FAMILIAR
WITH SUCH UNCERTAINTIES, (iii) EACH OF THE HNC GROUP, JVOI, HNC AND SSI IS
TAKING FULL RESPONSIBILITY FOR MAKING ITS OWN EVALUATION OF THE ADEQUACY AND
ACCURACY OF ALL ESTIMATES AND PROJECTIONS AND OTHER FORECASTS AND PLANS SO
FURNISHED TO IT (AND THE REASONABLENESS OF THE ASSUMPTIONS UNDERLYING THE SAME),
AND (iv) EACH OF THE HNC GROUP, JVOI, HNC AND SSI ACKNOWLEDGES AND AGREES THAT
IT IS NOT RELYING ON ANY SUCH INFORMATION, DOCUMENTS OR MATERIAL IN ANY MANNER
WHATSOEVER AND THAT IT SHALL HAVE NO CLAIM AGAINST THE OTHER OR ANY OTHER PERSON
OR ANY RIGHT TO INDEMNIFICATION BASED ON SUCH INFORMATION, DOCUMENTS OR
MATERIAL.
 
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ARTICLE III
 
REPRESENTATIONS AND WARRANTIES OF THE HNC GROUP
 
Except as otherwise set forth in the disclosure schedule prepared by the HNC
Group and delivered separately to JVOI on the date hereof (the “HNC Disclosure
Schedule”), the HNC Group represents and warrants to JVOI as follows:
 
3.1  Due Incorporation; Authority to Execute and Perform Agreement.
 
(a)  Each member of the HNC Group and HNC IV LLC and HNC V LLC is a limited
liability company duly organized, validly existing and in good standing under
the laws of the State of Delaware. Each member of the HNC Group has all
requisite limited liability company power and authority and has taken all
limited liability company action required, to execute and deliver this Agreement
and to perform its obligations hereunder. This Agreement has been duly executed
and delivered by HNC and each member of the HNC Group. This Agreement
constitutes the legal, valid and binding obligation of HNC and each member of
the HNC Group, enforceable against it in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium or
similar Laws, Laws of general applicability relating to or affecting creditors’
rights, and to general equity principles.
 
(b)  The execution and delivery by HNC and each member of the HNC Group of this
Agreement, the consummation of the transactions contemplated hereby, and the
performance by HNC and each member of the HNC Group of this Agreement in
accordance with its terms have been duly authorized by HNC and each member of
the HNC Group, and will not:
 
(i)  violate the certificate of formation or limited liability company agreement
of any member of the HNC Group, HNC IV LLC or HNC V LLC;
 
(ii)  except as set forth on Section 3.1(b) of the HNC Disclosure Schedule,
require HNC, any member of the HNC Group or any HNC Entity to obtain any
consents, approvals, authorizations or actions of, or make any filings with or
give any notices to, any Person, except for any consents, approvals,
authorizations, actions or filings which, if not obtained or made, would not
individually or in the aggregate, have a material adverse effect on (x) the HNC
Business, taken as a whole, or (y) the ability of HNC, any member of the HNC
Group or any HNC Entity to perform its obligations hereunder or under any other
Transaction Document (collectively, the “HNC Consents and Notices”);
 
(iii)  except as set forth on Section 3.1(b) of the HNC Disclosure Schedule,
violate or result in the breach of any of the terms and conditions of, cause the
termination of or give any other contracting party the right to terminate, or
constitute (or with notice or lapse of time, or both, constitute) a default
under, any contract, agreement, lease or license (but not
 
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including any permit of any Governmental Body) to which HNC, any member of the
HNC Group, HNC IV LLC, HNC V LLC or any HNC Entity is a party or by or to which
any member of the HNC Group or any HNC Entity is or may be bound or subject,
except for such violations, breaches, terminations or defaults that would not,
individually or in the aggregate, have a material adverse effect on (x) JVOI (in
its capacity as a joint venturer of any Joint Venture), the Schnitzer Entities,
taken as a whole, the Hawaii Business or the Russia and Baltic Trading Business
or (y) the ability of HNC, any member of the HNC Group or any HNC Entity to
perform its obligations hereunder or under any other Transaction Document; or
 
(iv)  violate or result in the breach of any applicable orders, judgments,
injunctions, rulings, awards, decrees or writs (collectively, “Orders”),
applicable to any member of the HNC Group or any HNC Entity or by which any of
them is subject or any applicable laws, statutes, regulations or other
requirements (collectively, “Laws”), of any courts, administrative agencies or
commissions or other governmental authorities (collectively, “Governmental
Bodies”).
 
3.2  Title to the Schnitzer Entities; etc.
 
(a)  HNC III LLC owns beneficially and of record, and has full limited liability
company power and authority to convey to JVOI or its Affiliates, the membership
interests of HNC IV LLC and HNC V LLC, free and clear of any Liens, and at the
Closing HNC III LLC will convey to JVOI or its designees good and valid title to
such membership interests, free and clear of Liens.
 
(b)  Except as set forth in Section 3.2(b) of the HNC Disclosure Schedule, HNC
IV LLC owns beneficially and of record the equity interests of the Schnitzer
Entities described in Part I of Schedule B, free and clear of any Liens. Other
than such equity interests in the Schnitzer Entities, HNC IV LLC does not own
beneficially or of record any assets and is not bound by or subject to any
Liabilities (other than Liabilities in its capacity as a general partner of any
Schnitzer Entity that is a general partnership).
 
(c)  Except as set forth in Section 3.2(c) of the HNC Disclosure Schedule, HNC V
LLC owns beneficially and of record the Acquired Hawaii Assets free and clear of
all Liens other than Permitted Liens. Other than the Acquired Hawaii Assets, HNC
V LLC does not own beneficially or of record any assets and except for the
Assumed Hawaii Liabilities is not bound by or subject to any Liabilities.
 
(d)  HNS Global Trade owns beneficially and of record, and has full limited
liability company power and authority to convey to JVOI (or its designee), the
Acquired Trading Assets pursuant to Section 2.3, free and clear of any Liens
other than Permitted Liens, and at the Closing will convey to JVOI or its
designees good and valid title to such assets, free and clear of Liens other
than Permitted Liens.
 
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3.3  No Options.  Except for this Agreement, no member of the HNC Group nor any
of their Affiliates has or is bound by any outstanding subscriptions, options,
warrants, calls, commitments or agreements of any character calling for the
purchase of all or any portion of the Schnitzer Business.
 
3.4  Financial Statements.  Set forth on Section 3.4 of the HNC Disclosure
Schedule are copies of (i) the audited balance sheets of Flynn-Learner and
Hawaii Metal Recycling Company as of December 31, 2003 (the “Most Recent Balance
Sheet”) and the audited balance sheets of Hawaii Metal Recycling Company, a
joint venture, as of December 31, 2001 and 2002, and the related audited
statements of income and retained earnings and cash flows, respectively, of
Flynn-Learner or Hawaii Metal Recycling Company, as the case may be, for the
fiscal years ended on such dates, accompanied by the audit report thereon of
Gomez & Nishimura, the independent public accountants of Flynn-Learner and for
2001 and 2002, Hawaii Metal Recycling Company, and (ii) the unaudited balance
sheet of Flynn-Learner as of December 31, 2004 (the “Interim Balance Sheet”),
and the related unaudited statements of income and retained earnings and cash
flows, respectively, of Flynn-Learner, for the 12-month period ended on such
date. Each of such financial statements has been prepared in accordance with
GAAP applied on a basis consistent with prior periods; each of such balance
sheets fairly presents the financial condition of Flynn-Learner or Hawaii Metal
Recycling Company, as the case may be, as of its respective date; and each of
such statements of income and retained earnings and cash flows, respectively,
fairly presents the results of operations and retained earnings, or cash flows,
as the case may be, of Flynn-Learner or Hawaii Metal Recycling Company, as the
case may be, for the period covered thereby; in each case, subject, with respect
to the unaudited financial statements referred to in clause (ii) of this
Section 3.4, to the absence of footnote disclosure and to normal, recurring
end-of-period adjustments.
 
3.5  Absence of Certain Changes.  During the period from the date of the Most
Recent Balance Sheet up to and including the date of this Agreement, with
respect to the Hawaii Business only, except as set forth in Section 3.5 of the
HNC Disclosure Schedule, there has not been:
 
(a)  any change in the assets, Liabilities, sales, income or business, of the
Hawaii Business, other than changes in the ordinary course of business;
 
(b)  any acquisition or disposition by Flynn-Learner or HNC V LLC or any of
their Affiliates of any material asset or property other than in the ordinary
course of business;
 
(c)  any damage, destruction or loss affecting any Acquired Hawaii Asset that is
not covered by insurance and that involves an amount of $50,000 or more;
 
(d)  any increase in the compensation, pension or other benefits payable or to
become payable to any officers or key employees of or consultants to the Hawaii
Business or any changes to any bonus arrangements with any of them;
 
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(e)  any incurrence or forgiveness or cancellation of any Indebtedness or claim
by the Hawaii Business or any waiver of any right, in each case in excess of
$50,000, other than compromises of accounts receivable in the ordinary course of
business;
 
(f)  any entry by or with respect to the Hawaii Business into any transaction
with any Affiliate of Flynn-Learner or HNC V LLC;
 
(g)  any incurrence or imposition of any Lien on any of the Acquired Hawaii
Assets other than Permitted Liens; or
 
(h)  any discharge or satisfaction by Flynn-Learner or HNC V LLC (or any
Affiliate) of any Lien or payment by any member of the HNC Group (or any
Affiliate) of any material Liability, other than (i) current liabilities
included in the Most Recent Balance Sheet or the Interim Balance Sheet,
(ii) current liabilities to Persons incurred since the date of the Most Recent
Balance Sheet in the ordinary course of business, and (iii) current liabilities
incurred in connection with the transactions contemplated hereby and listed in
Section 3.5 of the HNC Disclosure Schedule.
 
3.6  Properties and Assets.
 
(a)  The Acquired Hawaii Assets have been duly transferred to HNC V LLC and HNC
V LLC has duly assumed the Assumed Hawaii Liabilities. HNC V LLC has not
acquired, and has no interest in, any Excluded Hawaii Asset and HNC V LLC has
not assumed any Excluded Hawaii Liability. The Acquired Hawaii Assets constitute
substantially all of the assets currently used to conduct the Hawaii Business.
 
(b)  True and complete copies of all deeds, existing title insurance policies
and surveys of or pertaining to the Owned Real Property in the HNC Group’s
possession have been delivered to JVOI.
 
(c)  The Acquired Hawaii Assets do not include any equity interest in any
corporation or other entity.
 
3.7  Real Property; Facilities.
 
(a)  Section 3.7(a) of the HNC Disclosure Schedule contains a correct legal
description, street address and tax parcel identification number of all tracts,
parcels and subdivided lots in which HNC V LLC or any Affiliate has an ownership
interest to the extent relating to the Hawaii Business.
 
(b)  Except as set forth in Section 3.7(b) of the HNC Disclosure Schedule, the
Hawaii Business does not lease or occupy any real property. Section 3.7(b) of
the HNC Disclosure Schedule also identifies certain other real property
previously used or occupied by the Hawaii Business.
 
(c)  As of the date hereof, there are no pending condemnation or similar
proceedings affecting the Owned Real Property or any part thereof, for which
 
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HNC V LLC or any of its Affiliates has been served with process and, to the
knowledge of the HNC Group, as of the date hereof, there are no threatened
condemnation or similar proceedings affecting the Owned Real Property or any
part thereof.
 
3.8  Equipment.  Section 3.8 of the HNC Disclosure Schedule sets forth a
complete and correct list, as of March 31, 2005 of all capital assets to the
extent used in, related to or arising out of the Hawaii Business having either a
book or fair market value in excess of $50,000. All Equipment used in the Hawaii
Business is in the possession of HNC V LLC, unless on temporary short-term loan
to suppliers or other Persons doing business with the Hawaii Business as set
forth on Section 3.8 of the HNC Disclosure Schedule. As of the date hereof, all
Equipment, taken as a whole, is in such repair and operating condition as is
sufficient to conduct the Hawaii Business as currently conducted.
 
3.9  Contracts.  Section 3.9 of the HNC Disclosure Schedule sets forth a
complete and accurate list, as of the date of this Agreement, of all outstanding
Contracts involving payments by or to the Hawaii Business in any 12-month period
in excess of $50,000 to which HNC V LLC or any Affiliate is a party or by or to
which either of them or any of the Acquired Hawaii Assets is bound or subject.
HNC III LLC has delivered to JVOI true and complete copies of all such
Contracts. As of the date of this Agreement, each such Contract is in full force
and effect and no member of the HNC Group or their Affiliates, nor to the
knowledge of the HNC Group, any other party thereto, is in material breach or
material default thereunder.
 
3.10  Intellectual Property.  Neither HNC nor any of its Affiliates owns any
issued patents, registered trademarks or applications therefor with respect to
intellectual property used in, related to or arising out of the Hawaii Business,
other than the patents or trademarks that are the subject of the Patent License
Amendment or the Trademark License Amendment. As of the date hereof, no
litigation (or other proceeding in or before any Governmental Body) charging HNC
or any of its Affiliates with infringement or unauthorized or unlawful use of
any patent, trademark, service mark, trade name, logo, copyright, trade secret,
or other proprietary right in any case used in, related to or arising out of the
Hawaii Business is pending, or to the knowledge of the HNC Group, threatened.
 
3.11  Indebtedness.  At the date hereof, except as set forth in Section 3.11 of
the HNC Disclosure Schedule, neither HNC nor any of its Affiliates has
Indebtedness outstanding to the extent relating to or arising out of the Hawaii
Business. Complete and correct copies of all agreements and instruments
(including all amendments, supplements, waivers and consents) relating to any
such Indebtedness of HNC or any of its Affiliates have been furnished to JVOI.
 
3.12  Compliance with Laws; Permits.  To the knowledge of the HNC Group, and
except for any violations that have been previously resolved and for which no
further payments in the nature of fines, penalties, settlement payments or
remediation expenses will be required, the Hawaii Business has complied, and is
in compliance, in all material respects with all Laws and Orders applicable to
it or any Acquired Hawaii Asset.
 
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As of the date of this Agreement, neither HNC nor any Affiliate is the subject
of any charge, or to the knowledge of the HNC Group, any investigation with
respect to, any violation of any provision of any Law or Order with respect to
the Hawaii Business. Section 3.12 of the HNC Disclosure Schedule sets forth a
complete and correct list of all material Permits as are necessary for the
conduct of the Hawaii Business or in connection with the ownership or use of the
Acquired Hawaii Assets (other than any Permits required under any Environmental
Law (“Environmental Permits”)). True and complete copies of the Permits listed
in Section 3.12 of the HNC Disclosure Schedule have previously been delivered to
JVOI. To the knowledge of the HNC Group, the Hawaii Business is in compliance in
all material respects with the terms of such Permits.
 
3.13  Litigation.  As of the date hereof, except as disclosed in Section 3.13 of
the HNC Disclosure Schedule, no action, suit, proceeding or investigation
(whether conducted by any Governmental Body, arbitrator or other Person) is
pending or, to the knowledge of the HNC Group, threatened, against or involving
HNC V LLC, Flynn-Learner or the Hawaii Business.
 
3.14  Taxes.
 
(a)  HNC or its Affiliates has timely filed or will have timely filed all
material Tax Returns with respect to all Taxes (other than Income Taxes)
relating to the Hawaii Business for the periods or portions thereof ending on or
prior to the Closing Date that are required to be filed on or prior to the
Closing Date with any Taxing authority, and all such Tax Returns are true,
accurate and complete in all respects. HNC or its Affiliates has timely paid, or
made adequate provision for the payment of, all Taxes (other than Income Taxes)
shown to be due on such Tax Returns, all material Tax assessments received
(other than Income Taxes), and all material Taxes (other than Income Taxes) that
have or may become due under applicable law with respect to all periods or
portions thereof ending on or prior to the Closing Date, and, with respect to
all periods through December 31, 2004, such adequate provision is reflected in
the Interim Balance Sheet.
 
(b)  There are no Liens for Taxes (other than statutory Liens for current Taxes
not yet due and payable) on any of the Acquired Hawaii Assets.
 
(c)  Each of HNC IV LLC and HNC V LLC is, and at all times since its
organization has been, an entity disregarded as separate from its owner for
federal Income Tax purposes, and is a non-taxable entity for U.S. federal Income
Tax purposes. Neither HNC nor its Affiliates has filed or will file an election
to classify either HNC IV LLC or HNC V LLC as an association for federal income
tax purposes.
 
(d)  Neither HNC nor any of its Affiliates has, to the extent relating to or
arising out of the Hawaii Business, received notice of any claim for assessment
or collection of Taxes (other than for Income Taxes) and, to the knowledge of
the HNC Group, no such claim is pending or is presently being asserted against
HNC or any of its Affiliates or with respect to any of the Acquired Hawaii
Assets. Neither HNC nor any of its Affiliates is a party to any pending audit,
investigation, action or proceeding with any Taxing authority, to the extent
relating to or arising out of the Hawaii Business or any of the Acquired Hawaii
Assets (other than with respect to Income Taxes), nor does the HNC Group have
knowledge of any such threatened audit, investigation, action or
 
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proceeding by any Taxing authority. Neither HNC nor any of its Affiliates has
received written notice of any claim by any Taxing authority in any jurisdiction
where it does not file Tax Returns or pay Taxes that it is or may be subject to
Tax (other than to Income Tax) by that jurisdiction, in each case to the extent
relating to or arising out of the Hawaii Business or any Acquired Hawaii Asset.
 
(e)  HNC or its Affiliate has timely withheld and timely paid all Taxes that are
required to have been withheld and paid by HNC or its Affiliates in connection
with amounts paid or owing to any employee, independent contractor, creditor or
other person, in each case to the extent relating to or arising out of the
Hawaii Business. Neither HNC nor any of its Affiliates is a party to or bound by
any Tax sharing agreement, Tax allocation agreement, or Tax indemnity agreement
with respect to the Hawaii Business. Neither HNC nor any of its Affiliates is
presently liable, nor does any of them have any potential liability, for the
Taxes of another Person under applicable Tax law, as transferee or successor, or
by contract, indemnity or otherwise, in each case to the extent relating to or
arising out of the Hawaii Business or the Acquired Hawaii Assets.
 
3.15  Employee Benefit Plans.
 
(a)  Each pension, profit-sharing, deferred compensation, bonus, stock option,
share appreciation right, severance, group health, dental, medical, life
insurance, survivor benefit, or similar plan, policy, or arrangement, for the
benefit of any current or former director, officer, consultant or employee that
HNC or any Affiliate currently maintains or contributes to, in each case in
connection with employees performing services for the Hawaii Business, is listed
on Section 3.15 of the HNC Disclosure Schedule. Each of the foregoing
arrangements is hereinafter referred to as an “Employee Benefit Plan.”
 
(b)  To the knowledge of the HNC Group: (i) each Employee Benefit Plan that will
be an Assumed Benefit Arrangement is and has heretofore been maintained and
operated in compliance in all material respects with the terms of such Assumed
Benefit Arrangement and with all the material requirements prescribed (whether
as a matter of substantive law or as necessary to secure favorable tax
treatment) by applicable Law, including the Employee Retirement Income Security
Act of 1974, as amended (“ERISA”) and the Code and applicable to such Assumed
Benefit Arrangement; (ii) there is no material pending or threatened legal
action, proceeding or investigation, other than routine claims for benefits,
concerning any Assumed Benefit Arrangement or any fiduciary thereof; and
(iii) all premiums in respect to each Assumed Benefit Arrangement, required to
have been paid under the terms of each such arrangement or applicable law, as
applied through the Closing Date, will have been paid.
 
(c)  No Liability to the Pension Benefit Guaranty Corporation (“PBGC”) or any
multi-employer plan has been incurred by HNC or any affiliate thereof (other
than insurance premiums satisfied in due course), no reportable event or event
or
 
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condition which presents a material risk of termination by the PBGC, has
occurred with respect to any Employee Benefit Plan, or any retirement plan of
HNC or any of its affiliates, which is subject to Title IV of ERISA, and no
accumulated funding deficiency (as defined in Section 302 of ERISA and
Section 412 of the Code), whether or not waived, exists with respect to any such
Plan or retirement plan. Solely for purposes of this Section 3.15(c),
“affiliate” means any entity which under Section 414 of the Code or
Section 4001(b) of ERISA is treated as a single employer with HNC other than any
Schnitzer Entity.
 
3.16  Insurance.  Section 3.16 of the HNC Disclosure Schedule lists the policies
of theft, fire, liability, workmen’s compensation, life, property and casualty,
and other insurance owned or held by HNC or any of its Affiliates in connection
with the Hawaii Business (other than any insurance which is an Employee Benefit
Plan). All such policies are in full force and effect.
 
3.17  Employment of Officers, Employees.  Section 3.17 of the HNC Disclosure
Schedule lists, as of the date of this Agreement, the name and current annual
cash compensation payable by HNC or any of its Affiliates to each exempt
non-hourly employee whose current total annual compensation or estimated
compensation from HNC or any of its Affiliates (including wages, salary,
commissions, and annual bonus) is $50,000 or more and in each case who is
employed by or in connection with the Hawaii Business (other than any employee
of HNC based in New York, New York or Jersey City, New Jersey).
 
3.18  Environmental Matters.
 
(a)  Except as set forth in Section 3.18 of the HNC Disclosure Schedule, as of
the date of this Agreement, neither HNC nor any of its Affiliates has received
(with respect to clause (i), since January 1, 2000 only), with respect to the
Hawaii Business, any written notice from any third party, including any
Governmental Body, indicating or to the effect that (i) HNC or any of its
Affiliates is or has been in violation of any Environmental Law, which violation
has not been cured or otherwise resolved, (ii) HNC or any of its Affiliates
(either itself, in any capacity or identity under which it operates or otherwise
does business or as a successor) has been identified by the United States
Environmental Protection Agency (“EPA”) as a potentially responsible party under
CERCLA with respect to a site listed on the National Priorities List, 40 C.F.R.
Part 300 Appendix B (1986); (iii) any Hazardous Material that the Hawaii
Business has generated, transported or disposed of has been found at any site at
which a federal, state or local agency or other third party has conducted or has
ordered HNC or any of its Affiliates to conduct a remedial investigation,
removal or other response action pursuant to any Environmental Law; or (iv) HNC
or any of its Affiliates (either itself, in any capacity or identity under which
it operates or otherwise does business or as a successor) is or shall be a named
party to any Claim arising out of any third party’s
 
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incurrence of Liability in connection with the presence or Release of Hazardous
Materials.
 
(b)  To the knowledge of the HNC Group, any Hazardous Materials (other than any
Hazardous Materials contained in any auto shredder residue or fluff) that have
been generated on the Real Property or by the Hawaii Business have been
transported offsite only by carriers having identification numbers issued by the
EPA and, to the knowledge of the HNC Group, have been treated or disposed of
only by treatment or disposal facilities maintaining valid permits as required
under applicable Environmental Laws.
 
(c)  To the knowledge of the HNC Group, except as set forth in Section 3.18(c)
of the HNC Disclosure Schedule, all automobile shredder residue and fluff
generated on the Real Property or by the Hawaii Business prior to the date of
this Agreement has been transported, treated and disposed of in compliance in
all material respects with applicable Environmental Laws.
 
(d)  Section 3.18(d) of the HNC Disclosure Schedule sets forth a complete and
correct list of all material Environmental Permits as are necessary for the
conduct of the Hawaii Business or in connection with the ownership or use of the
Acquired Hawaii Assets. True and complete copies of the Environmental Permits
listed in Section 3.18(d) of the HNC Disclosure Schedule have previously been
delivered to JVOI.
 
(e)  This Section 3.18 contains the exclusive representations and warranties of
the HNC Group in respect of Liabilities under or pursuant to Environmental Laws
or with respect to Environmental Permits.
 
3.19  Labor Relations.  There is no labor strike, dispute, work slow-down, or
work stoppage pending or, to the knowledge of the HNC Group, threatened against
or involving the Hawaii Business. None of the employees of HNC or any of its
Affiliates to the extent relating to the Hawaii Business is currently covered by
any collective bargaining agreement, no collective bargaining agreement is
currently being negotiated by HNC or any of its Affiliates with respect to the
Hawaii Business and to the knowledge of the HNC Group, within the past three
years no employee of the Hawaii Business has filed a petition with the National
Labor Relations Board or is now petitioning for union representation.
 
3.20  Delivery of Documents.  Prior to the date hereof, the HNC Group has
delivered to JVOI complete copies of all documents reflecting the transfer by
HNC or its Affiliates of (x) the equity interests in the Schnitzer Entities to
HNC IV LLC and (y) the Acquired Hawaii Assets and Assumed Hawaii Liabilities to
HNC V LLC. Except as set forth in Section 3.20 of the HNC Disclosure Schedule,
such transfers did not and do not require HNC, any of its Affiliates or any
member of the HNC Group to obtain any consents, approvals, authorizations or
actions of, or make any filings with or give any notices to any Person that have
not been obtained or made or that, if not obtained or made, would not
individually or in the aggregate have a material adverse effect
 
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on the Schnitzer Entities, taken as a whole, the Hawaii Business or the Russia
and Baltic Trading Business (all such consents and notices, the “Reorganization
Consents and Notices”).
 
3.21  New Credit Agreement.  Concurrently with the execution of this Agreement,
HNC has delivered or otherwise made available to JVOI a true and correct copy of
the Credit Agreement, dated as of even date herewith (as amended, restated or
supplemented, the “New Credit Agreement”), between HNC I LLC, certain other
designated borrowers named therein, Standard Chartered Bank, as issuing bank and
swingline lender, administrative agent and lead arranger, and the lenders named
therein and each other Loan Document (as defined in the New Credit Agreement),
and all fees required to be paid under the New Credit Agreement as of the date
hereof and in an amount previously disclosed to JVOI in writing have been paid.
The financing contemplated by the New Credit Agreement, if funded in accordance
with its terms, either alone or with cash on hand as of the Closing Date, will
provide sufficient funds for the HNC Group to consummate the transactions
contemplated by this Agreement, including the payments by members of the HNC
Group and the HNC Entities contemplated by Sections 2.5(a), 2.5(f), 2.5(p) and
5.8.
 
ARTICLE IV
 
REPRESENTATIONS AND WARRANTIES OF JVOI
 
Except as otherwise set forth in the disclosure schedule prepared by JVOI and
delivered separately to HNC on the date hereof (the “JVOI Disclosure Schedule”),
JVOI represents and warrants to the HNC Group as follows:
 
4.1  Due Incorporation; Authority to Execute and Perform Agreement.
 
(a)  JVOI is a corporation duly incorporated, validly existing and in good
standing under the laws of Delaware. JVOI has all requisite corporate power and
authority and has taken all corporate action required to execute and deliver
this Agreement and to perform its obligations hereunder. This Agreement has been
duly executed and delivered by JVOI. This Agreement constitutes the legal, valid
and binding obligation of JVOI, enforceable against JVOI in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium or similar Laws, Laws of general applicability relating to or
affecting creditors’ rights, and to general equity principles.
 
(b)  The execution and delivery by SSI and JVOI of this Agreement, the
consummation of the transactions contemplated hereby, and the performance by SSI
and JVOI of this Agreement in accordance with its terms have been duly
authorized by SSI and JVOI, and will not:
 
(i)  violate the certificate of incorporation or by-laws of JVOI;
 
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(ii)  except as set forth on Section 4.1(b) of the JVOI Disclosure Schedule,
require SSI, JVOI or any Schnitzer Entity to obtain any consents, approvals,
authorizations or actions of, or make any filings with or give any notices to,
any Person, except such consents, approvals, authorizations, actions or filings,
which, if not obtained or made, would not, individually or in the aggregate,
have a material adverse effect on (x) the Schnitzer Entities, taken as a whole,
the Hawaii Business or the Russia and Baltic Trading Business or (y) the ability
of SSI, JVOI or any Schnitzer Entity to perform its obligations hereunder or
under any other Transaction Document (the “SSI Consents and Notices”);
 
(iii)  except as set forth on Section 4.1(b) of the JVOI Disclosure Schedule,
violate or result in the breach of any of the terms and conditions of, cause the
termination of or give any other contracting party the right to terminate, or
constitute (or with notice or lapse of time, or both, constitute) a default
under, any contract, agreement, lease or license (but not including any permit
of any Governmental Body) to which SSI, JVOI or any Schnitzer Entity is a party
or by or to which such Person is or may be bound or subject, except for such
violations, breaches, terminations or defaults that would not, individually or
in the aggregate, have a material adverse effect on (x) the HNC Business, taken
as a whole or (y) the ability of SSI, JVOI or any Schnitzer Entity to perform
hereunder or under any other Transaction Document; or
 
(iv)  violate or result in the breach of any applicable Orders applicable to
JVOI or any Schnitzer Entity or by which any of them is subject or any
applicable Laws of any Governmental Bodies.
 
4.2  Title to the HNC Entities.  JVOI owns beneficially and, other than in the
case of North Carolina Resource Conservation, LLC and North Carolina Recycling,
LLC, of record, and has full corporate power and authority to convey to HNC III
LLC, the equity interests of the HNC Entities described in Schedule C pursuant
to Section 2.2, free and clear of any Liens, and at the Closing will convey to
HNC III LLC good and valid title to such equity interests, free and clear of
Liens. JVOI owns beneficially, and has full corporate power and authority to
convey to HNS Global Trade, a 50% membership interest in HNS Global Trade, free
and clear of any Liens, and at the Closing will convey to HNS Global Trade good
and valid title to such membership interest, free and clear of Liens.
 
4.3  No Options.  Except for this Agreement, neither JVOI nor any of its
Affiliates has or is bound by any outstanding subscriptions, options, warrants,
calls, commitments or agreements of any character calling for the purchase of
all or any portion of the HNC Business.
 
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ARTICLE V
 
CERTAIN COVENANTS
 
5.1  Conduct of Business.  Except as otherwise expressly contemplated by this
Agreement (including the Recitals) or as otherwise agreed to in writing by the
HNC Group and JVOI, during the period from the date of this Agreement to the
Closing Date, HNC (if applicable), the HNC Group and JVOI will, and will cause
each Joint Venture to (with respect to such Joint Venture), and HNC III LLC will
cause HNC V LLC with respect to the Hawaii Business to:
 
(a)  conduct (i) the business of such Joint Venture, (ii) the Hawaii Business
and (iii) the Russia and Baltic Trading Business in the ordinary course
consistent with prior practice and maintain the assets of each of them in the
ordinary course consistent with prior practice, and carry on each such business
diligently and substantially in the same manner as heretofore conducted and
shall not make or institute any unusual or novel methods of management,
accounting or operation;
 
(b)  pay accounts payable and other obligations of each such business when they
become due and payable in the ordinary course of business consistent with prior
practice, except that an HNC Entity may satisfy any Indebtedness or other
Liability owed by it to another HNC Entity (but not to a Schnitzer Entity) by
assigning accounts receivable owned by it to the other HNC Entity;
 
(c)  use commercially reasonable efforts to maintain through the Closing all of
the insurance policies described in Schedule J or, for any such policies which
expire or are terminated prior to Closing, substantially equivalent coverage;
 
(d)  use commercially reasonable efforts to preserve its business organization
intact, to keep available its present key officers and employees and to preserve
its present relationships with its suppliers, customers, independent contractors
and others having business relations with such Joint Venture or such business in
the ordinary course of business consistent with past practice;
 
(e)  pursue the capital projects set forth in Schedule K; and
 
(f)  replenish inventory of the Joint Ventures in a normal and customary manner
consistent with prior practice and allocate sales of inventory among the Joint
Ventures consistent with prior practice, subject to adjustments required in
connection with the megashredder installations at HNSE, Hugo-Neu Proler Company
and Prolerized New England Company.
 
5.2  Prohibited Actions.  Except as otherwise expressly contemplated by this
Agreement or as otherwise agreed to in writing by the HNC Group and JVOI, during
the period from the date of this Agreement to the Closing Date, none of HNC (if
applicable), any member of the HNC Group or JVOI shall, and each will not permit
any Joint Venture to, and HNC III LLC will not permit HNC V LLC to, with respect
to the
 
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Hawaii Business, without the consent of the other party (which consent, with
respect to Sections 5.2(d) and (k), shall not be unreasonably withheld):
 
(a)  grant any general or uniform increase in the rates of pay of employees of
any such business, nor grant any general or uniform increase (including vesting)
in the benefits under any bonus or pension plan or other contract or commitment
to, for or with any such employees (other than any changes that are contemplated
by the Employee Matters Agreement);
 
(b)  increase the compensation payable or to become payable to officers, key
salaried employees or agents, or increase any bonus, insurance, pension or other
benefit plan, payment or arrangement made to, for or with any such officers, key
salaried employees or agents (other than any changes that are contemplated by
the Employee Matters Agreement);
 
(c)  except pursuant to Section 5.8, other than in respect of the Hawaii
Business or as set forth in Schedule 5.2(c) (subject to the terms and conditions
set forth therein), declare or pay any dividends (whether in cash, shares of
stock or otherwise) on, or make any other distribution, directly or indirectly,
in respect of any shares of capital stock or membership or partnership
interests, or issue, purchase, redeem or acquire for value any shares of capital
stock, partnership interests or membership interests;
 
(d)  except as provided in authorizations for expenditures for capital projects
set forth in Schedule K, enter into any Contract with a value of $100,000 or
more or engage in any transaction, not in the usual and ordinary course of
business and consistent with prior practices;
 
(e)  except as provided by authorizations for expenditures in Section 5.2(d),
purchase or sell or otherwise dispose of capital assets with a market value in
excess of $100,000 and in no event purchase, sell or otherwise dispose of any
capital asset other than in the ordinary course of business and consistent with
prior practices;
 
(f)  incur any Liability in excess of $100,000, except current Liabilities for
trade or business obligations incurred in connection with the purchase of goods,
inventory or services in the ordinary course of business consistent with prior
practice;
 
(g)  discharge or satisfy any Lien involving a liability in excess of $100,000,
other than those required to be discharged or satisfied pursuant to their terms,
or pay any Liability, other than (i) current Liabilities incurred in the
ordinary course of business consistent with prior practice and (ii) any
Indebtedness or other Liability owed by an HNC Entity to another HNC Entity (but
not to a Schnitzer Entity), which may be satisfied by the assignment of accounts
receivables owned by the debtor HNC Entity to the creditor HNC Entity (but not
to a Schnitzer Entity);
 
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(h)  make any purchase commitment in excess of the normal, ordinary and usual
requirements of its business, or make any change in its pricing or personnel
practices inconsistent with its prior practice;
 
(i)  make any changes in its selling practices inconsistent with its prior
practice, except that with respect to the Hawaii Business, HNC V LLC shall be
permitted to enter into one sale contract for the sale of inventory in an amount
that is less than a complete shipload;
 
(j)  transfer to or remove from any Joint Venture, the Hawaii Business or the
Russia and Baltic Trading Business any asset used directly in, necessary for or
material to the business, other than inventory purchased or sold in the ordinary
course of business;
 
(k)  acquire any real property or any interest in real property; or
 
(l)  institute, settle or agree to settle any litigation, action or proceeding
before any Governmental Body other than in the ordinary course of business
consistent with prior practices.
 
5.3  Periodic Meetings.  After the date hereof until the Closing Date the HNC
Group shall make available to JVOI not less than once every two weeks such
representatives of HNC reasonably acceptable to JVOI as may be necessary to
discuss in detail the operation of the Joint Ventures, the Hawaii Business and
the Russia and Baltic Trading Business and transitional matters under this
Agreement.
 
5.4  Notice of Developments.  At all times prior to the Closing, the HNC Group
and JVOI shall promptly notify the other in writing of any fact, condition,
event or occurrence that will or may result in the failure of any of the
conditions contained in Articles VI and VII to be satisfied, promptly upon
either of them becoming aware of the same.
 
5.5  Consents and Notices.
 
(a)  Subject to the terms and conditions herein provided, (i) the HNC Group
shall use its commercially reasonable efforts to promptly make or obtain (or
cause to be made or obtained) the HNC Consents and Notices that are Required
Consents and Notices and, to the extent not previously made or obtained, any
Reorganization Consents and Notices, (ii) JVOI shall use its commercially
reasonable efforts to promptly make or obtain (or cause to be made or obtained)
the SSI Consents and Notices that are Required Consents and Notices, and
(iii) each of the HNC Group and JVOI shall use commercially reasonable efforts,
and shall take, or cause to be taken, all actions and to do, or cause to be
done, all things necessary, proper or advisable under applicable Laws, to
promptly make or obtain any other waivers, consents and approvals of any Person,
to effect all registrations, filings and submissions to any Governmental Body
that, in each case, are required for the consummation of the transactions
contemplated hereby. Without limiting the generality of the foregoing, at all
times prior to the Closing, the
 
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parties hereto shall promptly cooperate and coordinate with each other, as
appropriate, with respect to filings with and notifications to Governmental
Bodies in connection with obtaining or making the Required Consents and Notices
and the Reorganization Consents and Notices. Each of the HNC Group and JVOI
shall promptly make or cause to be made available all information reasonably
requested by the other party to permit all necessary filings and notices to be
made with or to any such Person as promptly as practicable after the date
hereof. Each party shall promptly furnish or cause to be furnished all
information and documents reasonably required by the relevant Person appropriate
in order to obtain or make the Required Consents and Notices and the
Reorganization Consents and Notices.
 
(b)  Notwithstanding the foregoing, in connection with making or obtaining any
Required Consent or Notice or any Reorganization Consent or Notice, neither the
HNC Group nor JVOI shall apply to any Governmental Body or to any other Person
for a consent or notice with respect to any transaction other than the
transactions contemplated hereby without the prior review and consent of, in the
case of the HNC Group, JVOI, and, in the case of JVOI, the HNC Group. Subject to
such consent (which will not be unreasonably withheld), a party may make
parallel but separate filings, applications or reports to any Governmental Body
or any other Person with respect to the transactions contemplated hereby and any
other transactions that such party may enter into or contemplate with any third
party. In the event of a parallel filing, application or report by the HNC
Group, JVOI, or in the event of a parallel filing, application or report by
JVOI, the HNC Group, may request that such parallel filing, application or
report be rescinded or deferred if in the reasonable judgment of JVOI or the HNC
Group (as the case may be) such parallel filing, application or report is
reasonably expected to result in a material delay or other adverse effect on a
filing, application or report with respect to a Required Consent or Notice or a
Reorganization Consent or Notice. Promptly following such request by JVOI, the
HNC Group, or promptly following such request by the HNC Group, JVOI, will
request that such parallel filing, application or report be rescinded or
deferred with the applicable Governmental Body in order to expedite the receipt
of the applicable Required Consent or Notice or Reorganization Consent or
Notice.
 
(c)  The HNC Group and JVOI shall keep the other reasonably apprised of the
status of matters relating to the completion of the transactions contemplated
hereby and work cooperatively in connection with making or obtaining all
Required Consents and Notices. In that regard, each party shall, subject to
applicable Laws: (i) promptly notify the other of, and if in writing, furnish
the other with copies of (or, in the case of material oral communications,
advise the other of) any communications from or with any Person with respect to
Required Consents and Notices and Reorganization Consents and Notices;
(ii) permit the other to review and discuss in advance, and consider in good
faith the views of the other in connection with, any proposed written (or any
material proposed oral) communication with any such Person; (iii) not
participate in any meeting with any such Person unless it consults with the
other in advance and to the extent permitted by such Person gives the other the
opportunity to attend and participate thereat; (iv) furnish the other with
copies of all correspondence, filings and communications (and memoranda setting
forth the substance thereof) between it and any such Person with respect to this
Agreement; and (v) furnish the other with such
 
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necessary information and reasonable assistance as such other party may
reasonably request in connection with its preparation of necessary filings or
submissions of information to any Person.
 
5.6  Access and Information.
 
(a)  During the period between the date of this Agreement and the Closing, the
HNC Group shall, and shall cause their Affiliates and their respective
accountants, counsel, consultants, employees and agents to, give JVOI and its
accountants, counsel, consultants, employees and agents reasonable access during
normal business hours to, and furnish them with all documents, records, work
papers and information with respect to, all of such Person’s properties, assets,
books, contracts, commitments, reports and records relating to the Joint
Ventures and the Hawaii Business as JVOI shall from time to time reasonably
request (including with respect to shipping and freight of products). In
addition, the HNC Group will permit JVOI and its accountants, counsel,
consultants, employees and agents reasonable access to such personnel of (or
whose work relates to) the Joint Ventures and the Hawaii Business, during normal
business hours, as may be necessary or useful to JVOI in its review of the
properties, assets and business affairs of the Joint Ventures and the Hawaii
Business, and the above-mentioned documents, records and information.
 
(b)  The provisions of Section 5.6(a) are not intended to impair or limit the
rights of JVOI, the HNC Group or their Affiliates to access to information
relating to the Joint Ventures in such Person’s capacity as a stockholder,
member or partner of such Joint Venture or as an employee or representative of
any of the foregoing.
 
5.7  Resignation of Directors.
 
(a)  On the Closing Date, the HNC Group shall cause all members of the board of
directors (or similar governing body) and all of the officers of each of the
Schnitzer Entities who are designated by any HNC Group member or any of their
Affiliates to resign from their positions as directors or officers of such
Schnitzer Entity (the “HNC Directors and Officers”).
 
(b)  On the Closing Date, JVOI shall cause all members of the board of directors
(or similar governing body) and all of the officers of each of the HNC Entities
who are designated by JVOI or any of its Affiliates to resign from their
positions as directors or officers of such HNC Entity (the “SSI Directors and
Officers”).
 
5.8  Estimated Financial Statements; Distributions, etc.
 
(a)  The parties acknowledge and agree that (i) the aggregate distribution of
$40,000,000 made in September 2004 shall be deemed to be a distribution of the
Net Income of the Joint Ventures arising on or prior to August 31, 2004, (ii) a
further aggregate distribution of $46,623,000 in cash and certain receivables
was made in February and May 2005 of Net Income of certain of the Joint Ventures
earned after August 31, 2004 and (iii) certain other Joint Ventures may make
similar distributions of
 
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Net Income after the date hereof but prior to the Closing Date as contemplated
by Schedule 5.2(c).
 
(b)  No later than two Business Days prior to the Closing Date, the Chief
Financial Officer of HNC and the HNC Controller for the Joint Ventures shall,
after consultation with the SSI Controller for the Joint Ventures, prepare and
deliver to JVOI a certificate setting forth such officers’ reasonable best
estimate of (x) the Adjusted Net Income of each Joint Venture arising from and
after September 1, 2004 through the close of business on the day immediately
preceding the Closing Date (with respect to each Joint Venture, the “Estimated
Closing Net Income”), (y) the estimated Indebtedness of HNS Global Trade owed to
HNSE as of the Closing Date and the estimated amount of such Indebtedness
attributable to the Russia and Baltic Trading Business (the “Estimated R&B
Debt”) and (z) the estimated Net Working Capital of the Hawaii Business as of
the day immediately preceding the Closing Date (the “Estimated Hawaii Net
Working Capital”), each as determined in accordance with the methodology set
forth in Schedule I. Such estimates shall be calculated and prepared in
accordance with GAAP as applied on a basis consistent with the preparation of
the audited financial statements of the Joint Ventures for the fiscal year ended
August 31, 2004, taking into account the adjustments contemplated by Schedule I.
Immediately prior to the Closing, HNC (if applicable), HNC II LLC, HNC III LLC
and JVOI shall cause an amount equal to the Estimated Closing Net Income of each
Joint Venture (less the amount of the distributions made by such Joint Venture
as contemplated by Section 5.8(a)) to be distributed in cash to HNC (if
applicable), HNC II LLC or HNC IV LLC, as the case may be, and to JVOI or to
Proleride, as the case may be, on a 50/50 basis to the extent not previously
distributed by such Joint Venture. To the extent required, HNC (if applicable)
and the HNC Group shall ensure that each Joint Venture has sufficient available
cash to fund such distributions, including, to the extent necessary, by
borrowing funds under the Credit Facility. At the Closing, the Estimated R&B
Debt will be paid or credited as provided in Section 5.9(b). At the Closing, the
Cash Payment (i) will be increased by an amount equal to the excess of the
Target Hawaii Net Working Capital over the Estimated Hawaii Net Working Capital
(if the Target Hawaii Net Working Capital exceeds the Estimated Hawaii Net
Working Capital) or (ii) will be decreased by an amount equal to the excess of
the Estimated Hawaii Net Working Capital over the Target Hawaii Net Working
Capital (if the Estimated Hawaii Net Working Capital exceeds the Target Hawaii
Net Working Capital).
 
(c)  Within 60 days following the Closing Date, HNC I LLC shall prepare and
deliver to JVOI for each Joint Venture and the Hawaii Business an unaudited
balance sheet as of the close of business on the day immediately preceding the
Closing Date (such balance sheet for any Joint Venture, a “JV Closing Balance
Sheet” and such balance sheet for the Hawaii Business, the “Hawaii Closing
Balance Sheet”) and for each Joint Venture only an unaudited income statement
for the period beginning September 1, 2004 and ending on the close of business
on the day immediately preceding the Closing Date (each, a “JV Closing Income
Statement”). The Hawaii Closing Balance Sheet shall be prepared in accordance
with GAAP as applied on a basis consistent with the preparation of the Most
Recent Balance Sheet referred to in Section 3.4 and shall reflect the
adjustments contemplated by Schedule I. The JV Closing Balance Sheets and
 
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JV Closing Income Statements shall be prepared in accordance with GAAP as
applied on a basis consistent with the preparation of the audited financial
statements of the Joint Ventures for the year ended August 31, 2004 (but shall
not include footnotes) and shall reflect period-end adjustments (analogous to
year-end adjustments made consistent with prior practices) and the other
adjustments contemplated by Schedule I. When HNC I LLC delivers the Hawaii
Closing Balance Sheet, the JV Closing Balance Sheets and the JV Closing Income
Statements, HNC I LLC shall also deliver a certificate:
 
(i)  certifying that the Hawaii Closing Balance Sheet, the JV Closing Balance
Sheets and the JV Closing Income Statements were prepared in accordance with
this Section 5.8(c), and
 
(ii)  containing HNC I LLC’s calculations, based on the Hawaii Closing Balance
Sheet, JV Closing Balance Sheets and the JV Closing Income Statements, of (the
amounts described in this clause (ii) are referred to herein as the “HNC
Proposed Calculations”):
 
(w) the Net Working Capital of the Hawaii Business as of the close of business
on the day immediately preceding the Closing Date (the “Closing Hawaii Net
Working Capital”);
 
(x) the Net Income of each Joint Venture arising from and after September 1,
2004 through the close of business on the day immediately preceding the Closing
Date and the Adjusted Net Income of each Joint Venture for such period (with the
Adjusted Net Income for any Joint Venture for such period referred to as a
“Closing Net Income”);
 
(y) the amount of Indebtedness of HNS Global Trade owed to HNSE as of the close
of business on the day immediately preceding the Closing Date and the amount of
such Indebtedness attributable to the Russia and Baltic Trading Business as
determined in accordance with the methodology set forth in Schedule I (the
“Closing R&B Debt”); and
 
(z) the difference (if any) between: (1) the Closing Hawaii Net Working Capital
and the Estimated Hawaii Net Working Capital; (2) the Closing Net Income of any
Joint Venture and the Estimated Closing Net Income for such Joint Venture; and
(3) the Estimated R&B Debt and the Closing R&B Debt.
 
(d)  Within 45 days after receipt of the Hawaii Closing Balance Sheet, the JV
Closing Balance Sheets, the JV Closing Income Statements and the certificate
described in Section 5.8(c), JVOI shall have the right, with its accountants if
it chooses and at its expense, to review and test the Hawaii Closing Balance
Sheet, the JV Closing Balance Sheets, the JV Closing Income Statements and the
HNC Proposed Calculations. HNC I LLC shall (and shall cause its Affiliates to)
give JVOI reasonable access to any books and records and employees of the HNC
Group and the HNC Entities that are relevant to the Hawaii Closing Balance
Sheet, the JV Closing Balance Sheets, the
 
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JV Closing Income Statements or the HNC Proposed Calculations. Within such
45-day period, JVOI shall notify HNC I LLC of its agreement or disagreement with
the Hawaii Closing Balance Sheet, any JV Closing Balance Sheet and any JV
Closing Income Statement and the accuracy of the HNC Proposed Calculations, and
shall propose alternative calculations of the Closing Hawaii Net Working
Capital, the Closing Net Income of any Joint Venture and the Closing R&B Debt
(the “SSI Proposed Calculations”). If JVOI does not so object within such 45-day
period, the Hawaii Closing Balance Sheet, the JV Closing Balance Sheets, the JV
Closing Income Statements and the HNC Proposed Calculations shall become final
and binding for the purpose of determining the adjusting payments pursuant to
Section 5.8(e). If HNC I LLC does not accept the SSI Proposed Calculations
within 30 days after their submission to HNC I LLC, HNC I LLC shall notify JVOI
in writing and JVOI and HNC I LLC shall, within five days following delivery of
such notice, retain the Independent Accounting Firm to resolve the remaining
disputed items (the “Remaining Disputed Items”) by conducting its own review and
test of the disputed items in the Hawaii Closing Balance Sheet, the JV Closing
Balance Sheets and JV Closing Income Statements. If the Remaining Disputed Items
are submitted to the Independent Accounting Firm as provided above, the
Independent Accounting Firm shall be instructed that: (i) the scope of its
review shall be limited solely to the Remaining Disputed Items, (ii) it is to
use every reasonable effort to complete such assignment and deliver copies of
such opinion and, if required, a revised Hawaii Closing Balance Sheet, any JV
Closing Balance Sheet and any JV Closing Income Statement and revised
calculation of, as applicable, the Closing Hawaii Net Working Capital, the
Closing Net Income of any Joint Venture or the Closing R&B Debt to JVOI and HNC
I LLC within 45 days following the date such Remaining Disputed Items are
referred to it and (iii) it is to select either the HNC Proposed Calculations,
the SSI Proposed Calculations or an amount in between the two based on the
principles described in Section 5.8(c). The determination of the Remaining
Disputed Items by the Independent Accounting Firm shall be final, binding and
conclusive on the HNC Group and JVOI. HNC I LLC and JVOI shall each pay the
percentage of the costs and expenses of the Independent Accounting Firm in
settling the Remaining Disputed Items equal to (i) the aggregate dollar amount
of the Remaining Disputed Items submitted to the Independent Accounting Firm
that are unsuccessfully disputed by such party (as finally determined by the
Independent Accounting Firm), divided by (ii) the aggregate dollar amount of all
Remaining Disputed Items submitted to the Independent Accounting Firm.
 
(e)  Upon the determination pursuant to Section 5.8(d) of the definitive Hawaii
Closing Balance Sheet, JV Closing Balance Sheets, JV Closing Income Statements,
Closing Hawaii Net Working Capital, Closing Net Income of each Joint Venture and
Closing R&B Debt:
 
(i)  if the finally determined Closing Hawaii Net Working Capital is less than
the Estimated Hawaii Net Working Capital, HNC III LLC shall pay to JVOI the
amount of such difference;
 
(ii)  if the finally determined Closing Hawaii Net Working Capital is greater
than the Estimated Hawaii Net Working Capital, JVOI
 
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shall pay (or cause HNC V LLC to pay) to HNC III LLC the amount of such
difference;
 
(iii)  if the finally determined Closing Net Income of any Joint Venture is less
than the Estimated Closing Net Income for such Joint Venture, the HNC Group and
JVOI shall, or shall cause their Affiliates to, refund to such Joint Venture 50%
of the excess of (x) the Estimated Closing Net Income of such Joint Venture,
over (y) the Closing Net Income of such Joint Venture;
 
(iv)  if the finally determined Closing Net Income of any Joint Venture is
greater than the Estimated Closing Net Income of such Joint Venture, if such
difference is owed by an HNC Entity, the HNC Group shall cause such HNC Entity
to pay to JVOI or its applicable Affiliate, and, if such difference is owed by a
Schnitzer Entity, JVOI shall cause such Schnitzer Entity to pay to the HNC Group
or its applicable Affiliate, 50% of the excess of (x) the Closing Net Income of
such Joint Venture over (y) the Estimated Closing Net Income of such Joint
Venture;
 
(v)  if the Estimated R&B Debt exceeds the finally determined Closing R&B Debt,
the HNC Group shall (or shall cause HNSE to) pay to JVOI an amount equal to such
difference; and
 
(vi)  if the finally determined Closing R&B Debt exceeds the Estimated R&B Debt,
JVOI shall pay to the HNC Group or its Affiliates the amount of such difference.
 
5.9  Indebtedness, Intercompany Accounts etc.
 
(a)  As of the Closing Date, except as provided in the next sentence and in
Section 5.10, (i) JVOI shall (including by making available sufficient funding
to the extent necessary) cause each Schnitzer Entity to pay or otherwise settle
in full any amounts owing to an HNC Entity or to HNC or any of its Affiliates,
whether in respect of Indebtedness, trade or other account payables or otherwise
(but, for the avoidance of doubt, excluding any amount claimed by HNC or the HNC
Group or any Affiliate in respect of fees, bonuses or other amounts related to
the management and oversight of any Joint Venture), and (ii) HNC (if applicable)
or the HNC Group shall (including by making available sufficient funding to the
extent necessary) cause each HNC Entity to pay or otherwise settle in full in
cash any amounts owing to a Schnitzer Entity or to JVOI or any of its
Affiliates, whether in respect of Indebtedness, trade or other account payables
or otherwise including any amounts owed to Prolerized New England Company or MRL
by HNS Global Trade. Notwithstanding the foregoing, if the amounts described in
clause (ii) above (but specifically excluding any amounts owed by HNS Global
Trade) are amounts owing to any Joint Venture as a result of funds not yet
received as of the Closing Date by HNC or any HNC Entity from a third party in
respect of a sale transaction that was entered into for and on behalf of such
Joint Venture (collectively, the “Outstanding Trading Receivables”), such
amounts shall remain due
 
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and owing and shall be paid or otherwise settled in full as soon as reasonably
practicable after the receipt of funds from such third party as provided by
Section 5.10.
 
(b)  With respect to the Credit Facility, the parties acknowledge that (i) in
accordance with past practice, HNSE is the only Joint Venture that incurs
Indebtedness under the Credit Facility, (ii) HNSE from time to time on-lends all
or a portion of such Indebtedness to other Joint Ventures, and (iii) such
Indebtedness loaned by HNSE to the other Joint Ventures are evidenced as
intercompany balances, an example of which is set forth in a balance sheet
attached to Schedule I (such balances, to the extent they relate to Indebtedness
owed by a Schnitzer Entity to HNSE shall be repaid at the Closing Date pursuant
to Section 5.9(a)). At the Closing, JVOI shall (including by making available
sufficient funding to the extent necessary) cause an amount equal to the
Estimated R&B Debt to be paid or credited from a Schnitzer Entity to HNSE.
 
(c)  On or before the Closing Date, to the extent HNS Global Trade has available
cash, HNC (if applicable) or HNC II LLC and JVOI, in their capacity as joint
venturers, shall cause HNS Global Trade to repay to HNSE any amounts that it
owes HNSE with respect to the Indebtedness under the Credit Facility to the
extent of such available cash.
 
(d)  On the Closing Date, following completion of the transactions contemplated
by Sections 5.9(a), 5.9(b) and 5.9(c), HNC (if applicable) or HNC II LLC shall
cause HNSE to pay and discharge all outstanding Indebtedness under the Credit
Facility by wire transfer of immediately available funds (it being understood
that to the extent HNSE has occurred Indebtedness for its own account (and not
for the account of any other Joint Venture), then with respect to such
Indebtedness, HNC (if applicable) or HNC II LLC and HNC III LLC shall (including
by making available sufficient funding to the extent necessary) cause HNSE to
pay and discharge such Indebtedness). HNC (if applicable) or HNC II LLC and
JVOI, in their capacity as joint venturers, shall cause HNSE to obtain from the
lender under the Credit Facility and deliver to HNC (if applicable) or HNC II
LLC and JVOI at the Closing pay-off letters, releases and Lien discharges (or
agreements therefor) with respect to all such Indebtedness in a form reasonably
satisfactory to HNC (if applicable) or HNC II LLC and JVOI.
 
(e)  In connection with the preparation of the Estimated Closing Net Income and
the JV Closing Balance Sheet for each Joint Venture, prepaid items of HNS Global
Trade shall be allocated to the Russia and Baltic Trading Business and the
remaining businesses of HNS Global Trade as the Chief Financial Officer of HNC
and the SSI Controller for Joint Ventures may mutually agree prior to the
Closing Date.
 
(f)  In the event the Credit Facility is required by its terms to be repaid but
the Closing has not occurred, the parties hereto will use commercially
reasonable efforts to negotiate with the lenders thereunder to extend the
maturity date thereof or to seek a refinancing thereof with the existing or new
lenders. The term “Credit Facility” hereunder will be deemed to include any
credit facility entered into by the Joint Ventures to refinance the Credit
Facility.
 
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5.10  Settlement of Outstanding Trading Receivables.
 
(a)  After the Closing Date, HNC and the HNC Entities will remit to the
Schnitzer Entities, promptly following receipt of funds and in any event within
five Business Days, any proceeds collected by HNC or any such HNC Entity in
settlement of Outstanding Trading Receivables of such Schnitzer Entities, net of
any related freight, claims, selling and shipping expenses and other deductions
paid or estimated as payable by HNC or any such HNC Entity as of the Closing
Date (all incurred in accordance with prior practices).
 
(b)  Periodically after the Closing Date, but in any event no more often than
once every three months, HNC shall prepare a comparison of actual freight,
claims, selling and shipping expenses and other deductions paid or incurred by
HNC or any HNC Entity on and after the Closing Date (in accordance with prior
practices) related to all Outstanding Trading Receivables with the estimated
freight, claims, selling and shipping expenses and other deductions related to
Outstanding Trading Receivables deducted by HNC or any such HNC Entity from any
remittances to the Joint Ventures. If the actual payments or incurrence of
freight, claims, selling and shipping expenses and other deductions related to
the Outstanding Trading Receivables are less than the estimated amounts thereof,
HNC shall remit 50% of the difference to JVOI (or its designees) within 10 days
following HNC’s completion of the comparison. If the actual payments or
incurrences of freight, claims, selling and shipping expenses and other
deductions related to the Outstanding Trading Receivables are greater than the
estimated amounts thereof, then JVOI shall remit 50% of the excess to HNC within
10 days following JVOI’s receipt of a statement setting forth HNC’s comparison
in reasonable detail. JVOI will be entitled to receive and review copies of all
statements, invoices and other evidence related to such freight, claims, selling
and shipping expenses and other deductions related to the Outstanding Trading
Receivables.
 
5.11  Expenses.  Except as set forth in Section 7.6, each party shall bear its
own costs and expenses (including legal fees and expenses) incurred in the
preparation, negotiation and finalization of the Transaction Documents and,
except as set forth in Section 5.19, the HNC Group shall bear all costs and
expenses related to the transfer of assets and liabilities to HNC IV LLC and HNC
V LLC as contemplated by Section 3.20.
 
5.12  Publicity.
 
(a)  The HNC Group and JVOI have each approved a single joint press release in
the form of Exhibit I attached hereto (the “Press Release”), which the parties
may distribute following the execution and delivery of this Agreement. Except as
may be required by Law, including the filing by SSI of a Current Report on Form
8-K substantially in the form previously furnished to the HNC Group (the “8-K”)
and any investor presentations made by SSI relating to the transactions
contemplated by this Agreement, the parties hereto agree that no other publicity
release or announcement concerning this Agreement or the transactions
contemplated hereby shall be made by either party or any of its directors,
officers, Affiliates or Permitted Representatives (as
 
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defined in the Confidentiality Agreement) without advance approval thereof by
the HNC Group and JVOI; provided, however, that if the HNC Group or any of its
Affiliates enter into an agreement with any Person with respect to a strategic
transaction that is to be consummated after the transactions contemplated by
this Agreement, then the HNC Group may issue publicity releases or announcements
with respect to such transaction that includes references to this Agreement and
the transactions contemplated hereby; and provided, further, however, that any
party hereto may make any publicity release or announcement in connection with
any litigation relating to or arising out of this Agreement or any transaction
contemplated hereby. If any other public announcement is required by Law to be
made by any party hereto or any of its directors, officers, Affiliates or any
Permitted Representative, prior to making such announcement, to the extent
practicable such party or Permitted Representative shall deliver a draft of such
announcement to the other parties and shall give the other parties reasonable
opportunity to comment thereon.
 
(b)  Notwithstanding the above, other than in respect of the Press Release and
the 8-K: (i) HNC shall be free to make any appropriate public comment if SSI or
any of its directors or officers makes any public announcement by way of press
release, filings with the Securities and Exchange Commission or otherwise, with
respect to this Agreement or the transactions contemplated hereby; and (ii) JVOI
shall be free to make appropriate comment if HNC, any Industry Partner (as
defined in the Confidentiality Agreement) or any director or officer of any of
the foregoing makes any public announcement, by way of press release, filings
with the Securities and Exchange Commission or otherwise, with respect to this
Agreement or the transactions contemplated hereby.
 
(c)  This Section 5.12 hereby supersedes and replaces paragraph 3 of the
Confidentiality Agreement.
 
5.13  Certain Consents and Notices.
 
(a)  If any of the HNC Consents and Notices that are not Required Consents and
Notices are not obtained or made on or prior to the Closing, the HNC Group
shall, or shall cause its agents to, exercise commercially reasonable efforts to
obtain or make any such HNC Consents and Notices after the Closing Date until
such time as such HNC Consents and Notices have been obtained or made.
 
(b)  If any of the SSI Consents and Notices that are not Required Consents and
Notices are not obtained or made on or prior to the Closing, JVOI shall, or
shall cause its agents to, exercise commercially reasonable efforts to obtain or
make any such SSI Consents and Notices after the Closing Date until such time as
such SSI Consents and Notices have been obtained or made.
 
(c)  In the event that any federal Government Contract relating to the Hawaii
Business has not been transferred to HNC V LLC prior to the date hereof, as
promptly as practicable after the date hereof, the HNC Group shall prepare any
written request that may be required by Federal Acquisition Regulations Part 42,
(P) 42.12 and
 
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any applicable agency regulations or policies, as interpreted by the Responsible
Contracting Officer (as such term is defined in Federal Acquisition Regulations
Part 42, (P) 42.1202(a)) that the HNC Group will submit to the applicable
Responsible Contracting Officer for the U.S. Government to: (i) recognize HNC V
LLC as successor in interest of the HNC Group (or Flynn-Learner) to such
Government Contract and (ii) enter into a novation agreement in form and
substance reasonably satisfactory to JVOI and the HNC Group, pursuant to which
all of the right, title and interest in and to, and all Liabilities under such
Government Contract of the HNC Group (or Flynn-Learner) shall be validly
conveyed, transferred and assigned and novated to HNC V LLC by all parties
thereto. The HNC Group will keep JVOI informed of the status of this process and
permit JVOI to review in advance all documents submitted in connection
therewith. The HNC Group shall use commercially reasonable efforts to obtain all
consents, approvals and waivers required for the purpose of processing, entering
into and completing such novation agreement for each Government Contract. The
HNC Group will not, however, consent to any modification of any Government
Contract that would adversely affect the rights of JVOI or HNC V LLC without
JVOI’s prior written consent.
 
(d)  No consent, approval or waiver of a third Person with respect to the
transfer of, or any novation with respect to, any Contract referred to in
Section 5.13(c) shall cause an Excluded Hawaii Liability to be deemed for
purposes of this Agreement to have become an Assumed Hawaii Liability or
vice-versa or otherwise affect the respective rights of JVOI and the HNC Group
under Article VIII.
 
5.14  Shared Contracts.  Following the Closing, the HNC Entity or Schnitzer
Entity, as applicable, that is the party to a Shared Contract shall continue to
hold such Shared Contract for the remainder of its term for the benefit and
burden of both the HNC Entities and the Schnitzer Entities. In furtherance of
the foregoing, the HNC Group and JVOI shall abide by the procedures,
indemnification and contribution arrangements and payment protocols for any such
Shared Contracts as described more fully on Schedule A, to facilitate, in the
case of Shared Contracts held by the HNC Entities, the continued implementation
of such Shared Contracts for the benefit and burden of the Schnitzer Entities,
as well as the HNC Entities, and in the case of Shared Contracts held by the
Schnitzer Entities, the continued implementation of such Shared Contracts for
the benefit and burden of the HNC Entities, as well as the Schnitzer Entities.
 
5.15  Trademarks.  HNC and the HNC Group acknowledge and agree that they are not
acquiring any rights in and to the name “Schnitzer” or the name “Proler” and (x)
within 60 days following the Closing Date they will amend the names of the HNC
Entities known as Hugo Neu Schnitzer East and Hugo Neu Schnitzer Global Trade
LLC to names not containing the name “Schnitzer,” and (y) within 30 days after
the first anniversary of the Closing Date, they will amend the name of Hugo Neu
Proler Company to a name not containing the name “Proler”, or in any case, any
name confusingly similar thereto. Notwithstanding the foregoing, the HNC Group
and its Affiliates shall have a worldwide, royalty-free, irrevocable, fully-paid
license, for a period of (i) 90 days following the Closing Date, to use the
“Schnitzer” name in the name of the HNC Entities known as Hugo Neu Schnitzer
East and Hugo Neu Schnitzer Global Trade LLC and
 
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otherwise consistent with its use of the “Schnitzer” name prior to the Closing
Date, and (ii) for a period of 12 months after the Closing to use the “Proler”
name in the name of the HNC Entity known as Hugo Neu Proler Company and
otherwise consistent with its use of the “Proler” name prior to the Closing
Date, in each case including on letterhead, business cards, correspondence,
signage or other printed materials of such HNC Entities.
 
5.16  PNE Scrap Metal.  The parties acknowledge and agree that any inventories
of scrap metal purchased by HNS Global Trade from Prolerized New England Company
or MRL prior to the Closing Date shall be sold to Mexican mills in accordance
with the practice of HNS Global Trade as of the date hereof and shall not be
subject to the Mexico Trading Agreement.
 
5.17  Further Assurances.
 
(a)  Subject to the terms and conditions herein provided, each of the parties
hereto agrees to exercise commercially reasonable efforts to take or cause to be
taken all actions and to do or cause to be done all things reasonably necessary,
proper or advisable under applicable Law to consummate and make effective the
transactions contemplated by this Agreement, including (i) contesting any legal
proceeding relating to the transactions contemplated hereby and (ii) executing
any additional instruments necessary to consummate the transactions contemplated
hereby. If at any time after the Closing Date any further action is necessary to
carry out the purposes of this Agreement, the proper officers and directors of
each party hereto and its Affiliates shall exercise commercially reasonable
efforts to take such necessary action.
 
(b)  In order to secure the implementation of the transactions contemplated by
this Agreement on the Closing Date:
 
(i)  Each of the HNC Group and JVOI shall, and shall cause its Affiliates and
its representatives on the board of directors or similar governing body of each
Joint Venture to, adopt such board (or other similar governing body) or
shareholder, partner or member resolutions as may be necessary to approve,
ratify or confirm the transfers or redemptions of equity interests, assets or
Liabilities, as the case may be and the execution delivery and performance of
any applicable Transaction Document.
 
(ii)  Each of the HNC Group and JVOI shall, and shall cause its Affiliates to,
execute and deliver such instruments or deeds of transfer, stock powers or
similar documents as may be required by applicable Law to evidence and effect
the transfers or redemptions of equity interests contemplated hereby, all of
which instruments, deeds, stock powers or similar documents shall be in
customary and usual form.
 
(iii)  Each of the HNC Group and JVOI shall, and shall cause its Affiliates to,
execute and deliver such instruments or deeds of transfer, assignment and
assumption agreements, bills of sale or similar documents as may be required by
applicable Law to evidence and effect the transfers of assets and
 
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assumptions of Liabilities contemplated hereby, all of which instruments, deeds,
agreements, bills or similar documents shall be in customary and usual form.
 
(c)  If any asset or Liability used primarily in the HNC Business is held by
JVOI, a Schnitzer Entity or any Affiliate of any of them following the Closing
or any asset or Liability used primarily in the Schnitzer Business is held by a
member of the HNC Group, an HNC Entity or any Affiliate of any of them following
the Closing, then the HNC Group or JVOI, as applicable, shall hold such asset or
Liability in trust for, and for the account of, JVOI or the HNC Group, as
applicable, and shall transfer such asset or Liability to the HNC Group or JVOI,
as applicable, as soon as practicable. If any asset or Liability is used in both
the HNC Business and the Schnitzer Business and not otherwise allocated to the
HNC Group, JVOI or an Affiliate thereof under any Transaction Document, the HNC
Group and JVOI shall allocate or transfer such asset or Liability equitably
based on the relative use between the HNC Business and the Schnitzer Business
and with each party bearing costs and Liabilities in a manner consistent with
the degree of benefit it is receiving from such asset or Liability.
 
(d)  The HNC Group covenants that HNC shall make available to the HNC Group such
operating assets and personnel as it may have available to permit the members of
the HNC Group to satisfy their obligations under the Transaction Documents.
 
5.18  Section 754 Election.  Each of the HNC Group and JVOI shall, at the
request of the other party, cause the Joint Ventures that are entities
classified as partnerships for U.S. federal income tax purposes to make an
election under Section 754 of the Code.
 
5.19  Transfer Taxes.
 
(a)  Except as provided in Section 5.19(b), the HNC Group shall bear all sales,
use, value added, transfer, stamp, registration, documentary, excise, real
property transfer or gains, or similar Taxes (collectively, “Transfer Taxes”)
incurred in connection with (i) the transfer of interests in the Schnitzer
Entities from HNSP to HNC IV LLC, (ii) the transfer of interests in the HNC
Entities from HNC to HNC II LLC, (iii) the transfer of the Hawaii Business from
Flynn-Learner to HNC V LLC, (iv) any other transfers of any of the HNC Group or
HNC IV LLC or HNC V LLC prior to the date of this Agreement or prior to Closing,
(v) the transfer of interests in the HNC Entities pursuant to Section 2.5(c),
and (vi) the Global Trade Redemption.
 
(b)  Except as otherwise provided in the last sentence of this Section 5.19(b),
JVOI shall bear all Transfer Taxes incurred in connection with the transfer of
HNC IV LLC and HNC V LLC to JVOI or its Affiliates pursuant to Section 2.5(b).
In addition, in the event that JVOI does not incur Transfer Taxes pursuant to
the preceding sentence and HNC or any of its Affiliates incurs Transfer Taxes
pursuant to Section 5.19(a)(i) or (iii) that would have been payable if the
interests in the Schnitzer Entities or assets and liabilities comprising the
Hawaii Business had been transferred directly to JVOI or its Affiliates from
HNSP or Flynn-Learner, as the case may be, then
 
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JVOI shall reimburse HNC or its applicable Affiliate for such Transfer Taxes. In
the event JVOI is required to reimburse HNC or its applicable Affiliate for any
Transfer Taxes pursuant to the preceding sentence, JVOI shall not bear any
incremental Transfer Taxes incurred in connection with the transfer of HNC IV
LLC and HNC V LLC to JVOI or its Affiliates pursuant to Section 2.5(b).
 
(c)  In connection with the transactions contemplated hereby, the HNC Group and
its Affiliates, on the one hand, and JVOI and its Affiliates, on the other hand,
shall jointly file (or cause to be filed) all required change of ownership and
similar statements.
 
5.20  Delivery of Records; Preservation of Records.
 
(a)  The HNC Group shall deliver or cause to be delivered and covenants that HNC
shall deliver to JVOI: (i) at the Closing all available original minute books
and organizational corporate records of HNC IV LLC, HNC V LLC and each Schnitzer
Entity (and their subsidiaries) in their possession or control; (ii) within 45
days following the Closing Date, all originals of books, other records, data,
paper and, by way of tape or computer disc, computer files relating primarily to
the Schnitzer Business in their possession or control (it being understood that
the parties will jointly undertake reasonable efforts to separate any books,
other records, data, paper and computer files that are commingled with
information relating to the HNC Business); and (iii) within 60 days following
the Closing Date, copies of all books, other records, data, paper and, by way of
tape or computer disc, computer files relating to the Schnitzer Business in
their possession or control that are commingled with information related to the
HNC Business and that the parties agree are impractical to separate.
 
(b)  JVOI shall deliver or cause to be delivered to the HNC Group or its
Affiliates: (i) within 45 days following the Closing Date, all available
originals of books, other records, data, paper and, by way of tape or computer
disc, computer files relating primarily to the HNC Business in its possession
and control (it being understood the parties will jointly undertake reasonable
efforts to separate any books, other records, data, paper and computer files
that are commingled with information relating to the Schnitzer Business); and
(ii) within 60 days following the Closing Date, copies of all books, other
records, data, paper and, by way of tape or computer disc, computer files
relating to the HNC Business in its possession or control that are commingled
with information related to the Schnitzer Business and that the parties agree
are impractical to separate.
 
(c)  In addition to their obligations under Section 5.20(a), the HNC Group, at
its own expense, shall, and covenants that HNC shall, preserve and keep records
held by them or their Affiliates or under the control of any of them relating to
the Schnitzer Business and its operations for periods prior to the Closing, and
which shall not otherwise have been delivered to JVOI, for a period of five
years from the Closing Date, during which time the HNC Group shall, and
covenants that HNC shall, provide reasonable access to such records to JVOI or
their representatives as reasonably requested by JVOI. The HNC Group may destroy
such records after that time, but only after the
 
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HNC Group gives 90 days prior written notice to JVOI and details the contents of
the records to be destroyed, in which case JVOI shall have the option to take
possession of the records, at its own expense, within 90 days following the date
of such notice by the HNC Group.
 
(d)  In addition to its obligations under Section 5.20(b), JVOI, at its own
expense, shall preserve and keep any records held by it or its Affiliates or
under the control of any of them relating to the HNC Business and its operations
for periods prior to the Closing, and which shall not otherwise have been
delivered to the HNC Group, for a period of five years from the Closing Date,
during which time JVOI shall provide reasonable access to such records to the
HNC Group or its representatives as reasonably requested by the HNC Group. JVOI
may destroy such records after that time, but only after JVOI gives 90 days
prior written notice to the HNC Group and details the contents of the records to
be destroyed, in which case the HNC Group shall have the option to take
possession of the records, at its own expense, within 90 days following the date
of such notice by JVOI.
 
(e)  For the purposes of this Section 5.20, “computer files” shall not include
daily e-mail correspondence.
 
5.21  Post-Closing Access.
 
(a)  After the Closing Date, the HNC Group will, will cause its Affiliates,
accountants, counsel, consultants, employees and agents to, and covenants that
HNC will, give JVOI and its Affiliates, accountants, counsel, consultants,
employees and agents reasonable access during normal business hours to, and
furnish them with all documents, records, work papers and information with
respect to, all of such Person’s properties, assets, books, contracts,
commitments, reports and records relating to (i) the Schnitzer Business to the
extent required to permit JVOI to prepare (or have prepared) audited financial
statements with respect to the Schnitzer Business or (ii) to the HNC Business to
the extent required to permit JVOI to wind up matters related to its ownership
of the applicable Joint Ventures.
 
(b)  After the Closing Date, JVOI will, and will cause its Affiliates,
accountants, counsel, consultants, employees and agents to, give the HNC Group
and its Affiliates, accountants, counsel, consultants, employees and agents
reasonable access during normal business hours to, and furnish them with all
documents, records, work papers and information with respect to, all of such
Person’s properties, assets, books, contracts, commitments, reports and records
relating to (i) the HNC Business to the extent required to permit the HNC Group
or its Affiliates to prepare (or have prepared) audited financial statements
with respect to the HNC Business or (ii) to the Schnitzer Business to the extent
required to permit the HNC Group to wind up matters related to its ownership of
the applicable Joint Ventures.
 
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5.22  Confidentiality Obligations.
 
(a)  HNC and SSI hereby acknowledge and confirm that the Confidentiality
Agreement has been reinstated and that any purported termination thereof prior
to the date hereof is and has been waived and rescinded.
 
(b)  Following the Closing, the HNC Group shall, and covenants that HNC shall,
and each of them shall cause its officers, directors, Affiliates, stockholders,
members, consultants, agents and advisors to, keep confidential and not disclose
to any third party any Confidential Information in the possession or control of
any of them relating to the Schnitzer Business, whether such Person received
such Confidential Information as a result of the negotiation, execution and
performance of the Transaction Documents or the transactions contemplated
thereby or otherwise. Nothing herein shall (i) limit any employee of any HNC
Business from disclosing any such Confidential Information internally in
connection with the operation of the HNC Business, (ii) limit the ability of any
HNC Business to operate in any geographic region or market or limit any person
from performing his or her employment duties or other obligations to any HNC
Business, (iii) permit the disclosure of Confidential Information to any
Industry Partners (as defined in the Confidentiality Agreement) other than in
connection with the operation of the HNC Business and so long as any such
Industry Partner agrees to be bound by the obligations set forth in this
Section 5.22(b), or (iv) limit any disclosure of Confidential Information in
connection with any litigation relating to or arising out of any Transaction
Document.
 
(c)  Following the Closing, SSI and JVOI shall, and shall cause its officers,
directors, Affiliates, stockholders, consultants, agents or advisors to, keep
confidential and not disclose to any third party any Confidential Information in
the possession or control of any of them relating to the HNC Business, whether
such Person received such Confidential Information as a result of the
negotiation, execution and performance of the Transaction Documents or the
transactions contemplated thereby or otherwise. Nothing herein shall (i) limit
any employee of any Schnitzer Business from disclosing any such Confidential
Information internally in connection with the operation of the Schnitzer
Business, (ii) limit the ability of any Schnitzer Business to operate in any
geographic region or market or limit any person from performing his or her
employment duties or other obligations to any Schnitzer Business or (iii) limit
any disclosure of Confidential Information in connection with any litigation
relating to or arising out of any Transaction Document.
 
(d)  “Confidential Information” means any non-public information, but shall not
include information that (i) is or becomes generally available to the public
other than as a result of a disclosure by the receiving party or its officers,
directors, Affiliates, stockholders, members, partners, consultants, agents or
advisors, (ii) is received from a third party not known to the recipient to be
under an obligation to keep such information confidential, (iii) the recipient
can demonstrate was independently developed by such Person without the use of
Confidential Information, and (iv) information that a Person is required by Law
to disclose (provided such Person notifies the other party hereto of such
requirement and provides such other party a
 
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reasonable opportunity to contest such requirement and such Person limits such
disclosure to only the portion of Confidential Information required to be
disclosed).
 
(e)  Nothing in this Section 5.22 shall be deemed to limit, or provide
exceptions to, the separate confidentiality provisions in the Transitional
Services Agreement.
 
5.23  Standstill Restrictions.
 
(a)  From the Closing Date to the fifth anniversary of the Closing Date, HNC
shall not, and shall cause its directors, officers, any holders of 10% or more
of its capital stock and their family members not to, acquire or agree to
acquire, directly or indirectly, by purchase or otherwise any beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Securities
Exchange Act of 1934, as amended), of any shares of capital stock of SSI, or
direct or indirect rights or options to acquire any shares of capital stock of
SSI (it being understood that nothing herein shall be deemed to prohibit the
indirect ownership of capital stock of SSI by any such Person through any mutual
fund, any limited partnership (provided such Person is not a general partner
thereof) formed to hold passive investments in equity securities, or in any
other securities investment vehicle).
 
(b)  The restrictions set forth in Section 5.23 shall terminate upon the
occurrence of a SSI Change of Control. “SSI Change of Control” means (i) the
Schnitzer Group ceasing to have beneficial ownership, directly or indirectly, of
50% or more of the combined voting power of SSI’s outstanding securities
entitled to vote generally in the election of directors, or (ii) a majority of
the directors of SSI being individuals who are not nominated by the board of
directors of SSI or members of the Schnitzer Group.
 
5.24  Use of Advisors.  Each of HNC, the HNC Group and JVOI acknowledges that
the Schnitzer Entities, the HNC Entities, the Hawaii Business and the Russia and
Baltic Trading Business have retained (or had retained on their behalf) various
legal, accounting, environmental consulting and other service providers to
assist them in their operations prior to the Closing Date. In order to
facilitate continued operation of the Schnitzer Business and the HNC Business
following the Closing Date, each of HNC, the HNC Group and JVOI on behalf of
itself and its Affiliates hereby consents to the continued representation of
such businesses by such service providers and agrees to not assert any claim of
privilege or confidentiality or otherwise seek to prevent JVOI, HNC, the HNC
Group or any Affiliate of any of them from retaining any such service provider
in any matter relating to the Schnitzer Business or the HNC Business.
 
5.25  Insurance Matters.
 
(a)  Following the Closing, each of JVOI, HNC (if applicable) and the HNC Group
shall use commercially reasonable efforts to make available to the other, the
HNC Business and the Schnitzer Business, respectively, the benefits under the
insurance policies that cover the activities of the HNC Business, the Schnitzer
Business
 
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and their subsidiaries prior to Closing, including those policies described in
Schedule J. Neither party shall take any action, or fail to take any action,
that would result in coverage under such policies to be voided or to lapse
either prior to or following the Closing without the written consent of the
other party. Each of JVOI, HNC (if applicable) and the HNC Group shall cooperate
with the other (including by making available copies of necessary documents and
personnel) in giving notice of any claim to any insurer from which recovery in
respect of a loss is reasonably believed to be available under such policies and
in pursuing such recovery. For any claim outstanding under such policies as of
the Closing Date, the party that initially filed such claim shall continue to
prosecute it, unless JVOI and the HNC Group agree otherwise with respect to any
particular claim. For any claim arising after the Closing Date, JVOI (or the
applicable entity) shall assume all responsibility for prosecuting any claims
under an insurance policy covering the activities of a Schnitzer Business and
the HNC Group (or the applicable entity) shall assume all responsibility for
prosecuting any claims under an insurance policy covering the activities of an
HNC Business, including in each case paying any deductibles under such policies
applicable to such claim. HNC (if applicable) or the HNC Group shall promptly
pay to the applicable Schnitzer Entity following receipt thereof an amount equal
to any premiums refunded or otherwise credited in respect of any canceled
coverage after the Closing Date under insurance policies that covered any
Schnitzer Entity (or its properties assets or operations) prior to Closing.
 
(b)  With respect to any claim outstanding as of the Closing Date under any
insurance policy described in Section 5.25(a) that relates to any damage,
destruction or loss of equipment or property of the Hawaii Business, if prior to
the Closing Date, HNC V LLC or any of its Affiliates has repaired or replaced
any such equipment and paid all related costs or ordered and paid for any
replacement equipment, then any recovery of insurance proceeds under such claim
shall be paid over to HNC III LLC in full, but if prior to the Closing Date, HNC
V LLC or any of its Affiliates has not completed the repair of any such
equipment, then a portion of any insurance proceeds that are recovered under any
such claim after the Closing Date in an amount equal to the total expenses
incurred by HNC V LLC or its Affiliates up to the Closing Date for any such
repairs shall be paid by JVOI or its Affiliates to HNC III LLC; provided,
however, that in either case the foregoing shall apply only to the extent any
such claim is not reflected as a current asset on the Hawaii Closing Balance
Sheet.
 
5.26  Russia and Baltic Business Noncompete.
 
(a)  Following the Closing until the fifth anniversary hereof, subject to
Sections 5.26(b) and (c), neither HNC nor any member of the HNC Group will, and
HNC and the HNC Group will not permit any Affiliate of any member of the HNC
Group (including any acquiror of any member of the HNC Group or a majority of
the business of the HNC Group (whether determined by the value of assets or net
sales over the preceding 12-month period prior to the date of the execution of a
definitive agreement for such acquisition)(such acquiring person, the “Acquiring
Person”)) to, directly or indirectly through an Affiliate or another Person, on
its own behalf or in the service or on behalf of others, engage in, or make any
loan to or for the benefit of any Person that engages in, the purchase of scrap
metal (the “Restricted Activity”) shipped from any seaport located in Poland,
Latvia, Lithuania, Estonia or in the Russian Federation on the Baltic Sea, the
 
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Barents Sea or the Kara Sea, or any river flowing into any of them, as far east
as (and including) Dudinka, Russian Federation. For the purposes of this Section
5.2, each of Poland, Latvia, Lithuania, Estonia and each of the areas of the
Russian Federation that has a coastline on (i) the Baltic Sea, (ii) the Barents
Sea or (iii) the Kara Sea, is referred to as a “Restricted Location.”
 
(b)  Notwithstanding Section 5.26(a), if, prior to the expiration of the term
thereof, an Acquiring Person (other than the Person or any of its Affiliates
previously identified in writing to JVOI prior to the date hereof (the
“Identified Party”)), acquires HNC, the HNC Group or a majority of the business
of the HNC Group as described in Section 5..26(a) and, as of the date of
executing a definitive agreement for such acquisition, such Acquiring Person
directly or indirectly through an Affiliate or any other Person, engages in any
Restricted Activity in a Restricted Location with purchases of scrap metal from
such Restricted Locations of at least $5,000,000 in the preceding 12-month
period prior to the date of the execution of a definitive agreement for the
acquisition (other than a Restricted Activity commenced in such Restricted
Location in anticipation of or in connection with such acquisition), then
Section 5.26(a) shall automatically terminate and shall have no force or effect
with respect to such Acquiring Person or the business acquired in such
Restricted Location, effective as of the date of the execution of a definitive
agreement for the acquisition. If, however, such Acquiring Person, as of the
date of the consummation of such acquisition, does not, directly or indirectly
through an Affiliate or any other Person, engage in a Restricted Activity in any
Restricted Location or in the preceding 12-month period prior to the date of the
execution of a definitive agreement for the acquisition has purchased less than
$5,000,000 of scrap metal from a Restricted Location (excluding a Restricted
Activity commenced in such Restricted Location in anticipation of or in
connection with such acquisition), then Section 5.26(a) shall continue to apply
in accordance with its terms. If the Identified Party is the Acquiring Person,
then Section 5.26(a) shall continue to apply in accordance with its terms
irrespective of whether the Identified Party has in the past engaged in, or
continues to engage in, a Restricted Activity in any Restricted Location.
 
(c)  If Section 5.26(a) applies to an Acquiring Person (including the Identified
Party), and such Acquiring Person (other than the Identified Party) is engaged
as part of its business activities in providing commercial loans or financing to
third parties, then the prohibition set forth in Section 5.26(a) of making any
loan to or for the benefit of any Person that engages in a Restricted Activity
in a Restricted Location shall not apply to the commercial lending or financing
activities of such Acquiring Person.
 
5.27  China Export License.  In the event that any Schnitzer Business is
prevented from transporting or selling any ferrous metals scrap or nonferrous
metal products to the People’s Republic of China, HNC shall, and shall cause HNS
Global Trade to, use commercially reasonable efforts to permit such products to
be transported or sold to the People’s Republic of China under a valid export
license then held by HNC or HNS Global Trade, as the case may be, for a period
of (a) 180 days following the Closing, with respect to products of any Schnitzer
Entity, and (y) 90 days following the Closing, with respect to products of the
Hawaii Business, in each case following a request by JVOI. Such shipments shall
be transported at no incremental cost to JVOI in excess of freight, claims,
selling and shipping expenses and other deductions actually incurred by HNC or
HNS Global Trade, as the case may be, in connection with such shipments.
 
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5.28  Maui Metals.  Each of HNC and the HNC Group acknowledges, on behalf of
itself and its Affiliates, that a meaningful inducement to JVOI to consummate
the transactions contemplated by this Agreement includes the prospect of
entering into discussions with Maui Metals and/or its landlord concerning a
possible strategic transaction. Accordingly, HNC and the HNC Group agree that
(x) prior to the Closing Date, the HNC Group will consult with JVOI regarding
any negotiations with Maui Metals, its landlord or other parties regarding such
a strategic transaction and neither HNC nor the HNC Group will, nor will they
permit any of their Affiliates to, enter into any Contract with or with respect
to Maui Metals or any real property on which Maui Metals conducts its business
without the prior written consent of JVOI, and (y) for a period of three years
following the Closing, neither HNC nor the HNC Group will, or will permit any of
its Affiliates or representatives to, directly or indirectly, (i) solicit,
initiate, encourage or take any other action to facilitate any Maui Strategic
Proposal or (ii) participate in any discussions or negotiations regarding a Maui
Strategic Proposal. For purposes of this Agreement, “Maui Strategic Proposal”
means any proposal or offer by any Person relating to any direct or indirect
acquisition or purchase of assets or capital stock of, investment in, or joint
venture with or involving Maui Metals or any Affiliate of Maui Metals or the
site on which Maui Metals is currently located.
 
5.29  Navassa Release.  Beginning promptly after the date hereof, the HNC Group
shall, or shall cause its Affiliates to, use commercially reasonable efforts to
cause the Town of Navassa, North Carolina to execute and deliver to JVOI a
release in a form reasonably satisfactory to JVOI releasing SSI from its
guarantee under Section 8a. of the Business Agreement.
 
5.30  Consummation of Financing.
 
(a)  Each member of the HNC Group will use its commercially reasonable efforts
to consummate the transactions contemplated by the New Credit Agreement (or any
alternative financing on substantially similar terms and for an aggregate
principal amount of not less than $210 million (the “Alternative Financing”)).
HNC I LLC will keep JVOI informed of the status of its financing arrangements
for the transactions contemplated by this Agreement, including providing written
notification to JVOI as promptly as practicable (but in any event within 48
hours) with respect to (i) any adverse developments relating to such financing
or (ii) the ability of the HNC Group to satisfy any of the conditions set forth
in the New Credit Agreement (or any Alternative Financing). HNC I LLC will
provide JVOI copies of any proposed amendments to the New Credit Agreement as
promptly as possible (but in any event within 24 hours) and will not agree to
any amendment to Section 4.02(d) of the New Credit Agreement or the definition
of “Material Adverse Effect” thereof without the prior written consent of JVOI
(or any Alternative Financing that contains any conditions that differ in any
material respect to those in the New Credit Agreement, or a definition of any
term similar to “Material Adverse Effect” that differs in any material respect
from such term in the New Credit Agreement).
 
(b)  In the event that on the date the Closing is to occur pursuant to Section
2.4, the transactions contemplated hereby cannot be consummated
 
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because of a failure of the condition set forth in Section 6.6 to be satisfied
or waived: (x) the Closing shall be deferred for a period not to exceed 30 days
from such date in order to provide the HNC Group an additional opportunity to
satisfy the conditions of the New Credit Agreement (or the Alternative
Financing) and (y) if the date until which the Closing is to be deferred under
clause (x) above may possibly fall after December 31, 2005, Section 10.1(d)
shall be automatically amended without any action by any party hereto by
substituting the date “January 31, 2006” for “December 31, 2005” therein. During
such period, the HNC Group will continue to use its commercially reasonable
efforts to satisfy the conditions of the New Credit Agreement (or the
Alternative Financing).
 
5.31  Hawaii Fire.  With respect to the fire that occurred on or about May 26,
2005 at the facilities of the Hawaii Business, the HNC Group shall use its
commercially reasonable efforts to repair and/or replace the damage to equipment
or property as soon as practicable after the date hereof to the reasonable
satisfaction of JVOI.
 
ARTICLE VI
 
CONDITIONS PRECEDENT TO THE OBLIGATION
OF THE HNC GROUP TO CLOSE
 
The obligation of the HNC Group to enter into and complete the Closing is
subject to the fulfillment on or prior to the Closing Date of the following
conditions, any one or more of which may be waived by the HNC Group:
 
6.1  Representations and Warranties.  The representations and warranties of JVOI
contained in this Agreement (i) shall be true and correct in all respects at and
as of the date hereof and (ii) shall be repeated and shall be true and correct
in all respects on and as of the Closing Date with the same effect as though
made on and as of the Closing Date, except for representations and warranties
that address matters only as of a certain date, in which case such
representations and warranties shall be true and correct as of such certain
date, and except where the failure to be so true and correct (without giving
effect to any Materiality Qualifier in such representations or warranties) would
not, individually or in the aggregate, have a material adverse effect on the HNC
Business, taken as a whole.
 
6.2  Covenants.  SSI and JVOI shall have performed, satisfied and complied with,
in all material respects, all covenants and agreements required by this
Agreement and each other Transaction Document to which it is a party to be
performed, satisfied or complied with by it at or before the Closing.
 
6.3  JVOI Certificate.  JVOI shall have delivered to the HNC Group a certificate
to the effect that each of the conditions specified in Sections 6.1 and 6.2 has
been satisfied.
 
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6.4  Required Consents.  All of the Required Consents and Notices (other than
the SSI Consents and Notices) shall have been duly received or made (as the case
may be).
 
6.5  No Legal Proceedings.  There shall not be any Order issued by any
Governmental Body directing that the transactions contemplated by this Agreement
not be consummated.
 
6.6  Financing.  The initial extension of credit under the New Credit Agreement
shall have been funded by the lenders thereunder in accordance with the terms of
the New Credit Agreement or the HNC Group shall have received the Alternative
Financing, in either case, sufficient to permit the HNC Group to perform its
obligations hereunder, including the making of the Cash Payment and causing HNSE
to pay off all amounts owing under, and to terminate, the Credit Facility.
 
ARTICLE VII
 
CONDITIONS PRECEDENT TO THE OBLIGATION
OF JVOI TO CLOSE
 
The obligation of JVOI to enter into and complete the Closing is subject to the
fulfillment on or prior to the Closing Date of the following conditions, any one
or more of which may be waived by JVOI:
 
7.1  Representations and Warranties.  The representations and warranties of the
HNC Group contained in this Agreement (i) shall be true and correct in all
respects at and as of the date hereof and (ii) shall be repeated and shall be
true and correct in all respects on and as of the Closing Date with the same
effect as though made on and as of the Closing Date, except for representations
and warranties that address matters only as of a certain date, in which case
such representations and warranties shall be true and correct as of such certain
date, and except where the failure to be so true and correct (without giving
effect to any Materiality Qualifier in such representations or warranties) would
not, individually or in the aggregate, have a material adverse effect on the
Schnitzer Entities, taken as a whole, the Hawaii Business or the Russia and
Baltic Trading Business.
 
7.2  Covenants.  HNC and each member of the HNC Group shall have performed,
satisfied and complied with, in all material respects, all covenants and
agreements required by this Agreement and each other Transaction Document to
which it is a party to be performed, satisfied or complied with by it at or
before the Closing.
 
7.3  HNC Group Certificate.  The HNC Group shall have delivered to JVOI a
certificate to the effect that each of the conditions specified in Sections 7.1
and 7.2 has been satisfied.
 
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7.4  Required Consents.  All of the Required Consents and Notices (other than
the HNC Consents and Notices) shall have been duly received or made (as the case
may be).
 
7.5  Repayment of Loans.  The HNC Group (or Flynn-Learner) shall have, or shall
have caused to be, paid off in full the outstanding principal of, and all
accrued interest on, the Hawaii Bank Debt.
 
7.6  Hawaii Title Policy.  JVOI shall have received an ALTA owner’s title
insurance policy issued by First American Title Insurance Company insuring HNC V
LLC’s title to the Owned Real Property, subject only to Permitted Liens, and
such endorsements as JVOI may reasonably require, the cost of such initial
policy having been paid by JVOI, but the cost of any subsequent endorsements in
favor of JVOI and its Affiliates having been paid by the HNC Group.
 
7.7  Navassa Release.  The Town of Navassa, North Carolina shall have executed
and delivered a release in a form reasonably satisfactory to SSI releasing SSI
from its guarantee under Section 8a. of the Business Agreement.
 
7.8  No Legal Proceedings.  There shall not be any Order of any nature issued by
any Governmental Body directing that the transactions contemplated by this
Agreement not be consummated.
 
ARTICLE VIII
 
INDEMNIFICATION
 
8.1  Indemnification by the HNC Group.
 
(a)  From and after the Closing Date, subject to the terms of this Agreement,
the HNC Group shall indemnify and hold harmless JVOI and its Affiliates and
their respective officers, directors, employees, agents and representatives
(including the SSI Directors and Officers) and each of their respective heirs,
executors, successors and assigns (the “SSI Indemnified Parties”) from and
against all claims, liabilities, losses, costs, expenses and damages, including
the reasonable fees, expenses and other charges of counsel (collectively,
“Losses”), to the extent relating to, arising out of or resulting from, or
asserted by third Persons against the SSI Indemnified Parties in connection
with:
 
(i)  the breach (x) of any representation or warranty set forth in Article III
of this Agreement or any representation of any member of the HNC Group in
Section 3.1(j) of the Employee Matters Agreement, or (y) of any covenant or
agreement by HNC or any member of the HNC Group in this Agreement or the
Employee Matters Agreement;
 
(ii)  any Excluded Hawaii Liability;
 
(iii)  any claim by any Person for brokerage or finder’s fees or similar
commissions or payments based upon any agreement or
 
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understanding alleged to have been made by any such Person with HNC or any of
its Affiliates or any Person acting on their behalf in connection with the
transactions contemplated hereby;
 
(iv)  any Liability of HNC or any Affiliate with respect to the Hawaii Bank
Debt;
 
(v)  any Liability relating to or arising out of any Contract with HNC or any
Affiliate that is not an Acquired Hawaii Asset;
 
(vi)  any Liability of HNC or any Affiliate that is to be retained by them under
the Employee Matters Agreement;
 
(vii)  any Liability of HNC V LLC relating to or arising out of it being or
having been on or prior to the Closing Date a member of a controlled group of
corporations or trade or businesses under common control, within the meaning of
Section 414 of the Code or Section 4001(b) of ERISA, with any Person (other than
a Schnitzer Entity); or
 
(viii)  in connection with the contribution by HNSP of its equity interests in
New England Metal Recycling, LLC to HNC IV LLC, the failure of HNSP to obtain
any Reorganization Consent or Notice with respect thereto prior to such
contribution.
 
(b)  From and after the Closing Date, subject to the terms of this Agreement,
the HNC Group shall indemnify and hold harmless the SSI Indemnified Parties from
and against all Losses, to the extent relating to, arising out of or resulting
from, or asserted by third Persons against the SSI Indemnified Parties in
connection with:
 
(i)  the HNC Entities and all direct or indirect subsidiaries thereof and the
ownership or operation thereof, whether before, on or after the Closing Date,
but expressly excluding the Assumed Trading Liabilities;
 
(ii)  any act or omission or alleged act or omission (even if negligent)
performed or omitted to be performed by any SSI Director or Officer in
connection with the activities of any HNC Entity (and all direct or indirect
subsidiaries thereof) on or prior to the Closing Date, unless such Loss shall
have resulted from such SSI Director’s or Officer’s own fraud or willful
misconduct;
 
(iii)  any Excluded Trading Liability;
 
(iv)  any Liability relating to the establishment, operation or termination of
any HNC Plan at any time on or prior to the Closing (or, if later, up to and
including the date of the transfer of plan accounts referred to in Section
8.2(h), in the case of any HNC Plan intended to be qualified under Section
401(a) of the Code), except to the extent of (x) any Liability expressly assumed
by SSI or a Schnitzer Entity under the Employee Matters Agreement and (y) any
Liability subject to JVOI’s indemnity under Section 8.2(a) (but only with
respect to a breach of any representation of SSI or its Affiliates in Section
3.1(j) of the
 
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Employee Matters Agreement or of any covenant or agreement of SSI or JVOI set
forth in the Employee Matters Agreement) or 8.2(h);
 
(v)  any Liability of HNC IV LLC relating to or arising out of it being or
having been on or prior to the Closing Date, a member of a controlled group of
corporations or trade or businesses under common control, within the meaning of
Section 414 of the Code or Section 4001(b) of ERISA, with any other Person
(other than a Schnitzer Entity);
 
(vi)  with respect to any Shared Contract, those Liabilities and
responsibilities allocable to the HNC Entities pursuant to Section 5.14; or
 
(vii)      the making or obtaining of (or the failure to duly make or obtain)
any HNC Consent and Notice.
 
8.2  Indemnification by JVOI.  From and after the Closing Date, subject to the
terms of this Agreement, JVOI shall indemnify and hold harmless the HNC Group
and its Affiliates and their respective officers, directors, employees, agents
and representatives (including the HNC Directors and Officers) and each of their
respective heirs, executors, successors and assigns (the “HNC Indemnified
Parties”) from and against all Losses, to the extent relating to, arising out of
or resulting from, or asserted by third Persons against the HNC Indemnified
Parties in connection with:
 
(a)  the breach of (x) any representation or warranty set forth in Article IV of
this Agreement or any representation of SSI or its Affiliates in
Section 3.1(j) of the Employee Matters Agreement or (y) any covenant or
agreement of SSI or JVOI set forth in this Agreement or the Employee Matters
Agreement;
 
(b)  the Schnitzer Entities and all direct or indirect subsidiaries thereof
(including MRL) and the ownership or operation thereof, whether before, on or
after the Closing Date;
 
(c)  any act or omission or alleged act or omission (even if negligent)
performed or omitted to be performed by any HNC Director or Officer in
connection with the activities of any Schnitzer Entity (and all direct or
indirect subsidiaries thereof (including MRL)) on or prior to the Closing Date,
unless such Loss shall have resulted from such HNC Director’s or Officer’s own
fraud or willful misconduct;
 
(d)  any Assumed Hawaii Liabilities, including the Assumed Benefit Arrangements;
 
(e)  any Assumed Trading Liabilities;
 
(f)  any shipments of ferrous scrap metal or other products as contemplated by
Section 5.27 to the People’s Republic of China under one or more export licenses
held by HNC or HNS Global Trade;
 
(g)  with respect to any Shared Contract, those Liabilities and responsibilities
allocable to the Schnitzer Entities pursuant to Section 5.14;
 
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(h)  50% of any Liability relating to the establishment, operation or
termination of any HNC Plan at any time prior to the Closing or in the case of
any HNC Plan intended to be qualified under Section 401(a) of the Code at any
time up to and including the date the account balances of employees of the
Schnitzer Entities are transferred to a SSI Plan (as defined in the Employee
Matters Agreement) intended to be qualified under Section 401(a) of the Code
pursuant to Article III of the Employee Matters Agreement and asserted on behalf
of any current or former employee of any of the Schnitzer Entities, or any
beneficiary or other person claiming rights derived from such current or former
employee’s participation in any HNC Plan; or
 
(i)  any claim by any Person for brokerage or finder’s fees or similar
commissions or payments based upon any agreement or understanding alleged to
have been made by any such Person with SSI or any of its Affiliates or any
Person acting on their behalf in connection with the transactions contemplated
hereby.
 
(j)  the making or obtaining of (or the failure to duly make or obtain) any SSI
Consent and Notice.
 
8.3  Notice and Opportunity to Defend Against Third Party Claims.
 
(a)  Promptly after receipt by any SSI Indemnified Party or HNC Indemnified
Party (each, an “Indemnitee”) from any third party of notice of any demand,
claim or circumstance that, with or without the lapse of time, would give rise
to a claim or the commencement or threatened commencement of any action,
proceeding or investigation (an “Asserted Liability”) that may result in a Loss
under Section 8.1 or 8.2, as the case may be, the Indemnitee shall give notice
thereof (the “Claims Notice”) to the HNC Group or JVOI, as the case may be (the
“Indemnifying Party”); provided, that, any failure to promptly give a Claims
Notice shall not relieve any Indemnifying Party of its liability hereunder
except to the extent that such Indemnifying Party has been materially prejudiced
thereby. The Claims Notice shall describe the Asserted Liability in reasonable
detail, and shall indicate the amount, estimated, if necessary and if possible,
of the Loss that has been or may be suffered by the Indemnitee.
 
(b)  The Indemnifying Party may elect to compromise or defend, at its own
expense and by its own counsel, any Asserted Liability; provided, however, that
no Indemnifying Party shall consent to entry of any judgment or enter into any
settlement without the consent of the Indemnitee if the effect thereof is to
permit any injunction, declaratory judgment, order or other nonmonetary relief
to be entered, directly or indirectly, against the Indemnitee. If the
Indemnifying Party elects to compromise or defend such Asserted Liability and
gives such notice, it shall within 30 Business Days, or sooner, if the nature of
the Asserted Liability so requires, notify the Indemnitee of its intent to do
so, and the Indemnitee shall cooperate in the compromise of, or defense against,
such Asserted Liability. If the Indemnifying Party elects not to compromise or
defend the Asserted Liability, fails to notify the Indemnitee of its election as
herein provided or contests its liability to indemnify the Indemnitee, the
Indemnitee may pay or defend such Asserted Liability. Notwithstanding the
foregoing, neither the Indemnifying Party nor the Indemnitee may settle any
claim over the objection of the other, unless such settlement (i) does not
directly or indirectly involve the entry of any injunction, declaratory
judgment, order or other nonmonetary relief against the Indemnitee or
Indemnifying Party, (ii) includes a full release from liability of the
Indemnifying Party
 
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and the Indemnitee, and (iii) is paid by the settling party only. In any event,
the Indemnitee and the Indemnifying Party may participate, at their own expense,
in the defense of such Asserted Liability. If the Indemnifying Party chooses to
defend any Asserted Liability, the Indemnitee shall make available to the
Indemnifying Party any books, records or other documents within its control that
are necessary or appropriate for such defense. If the Indemnifying Party does
not so choose, it will make available to the Indemnitee any books, records or
other documents within its control that are necessary or appropriate for the
defense of the Asserted Liability.
 
(c)  If any Asserted Liability involves a Loss in respect of which an
Indemnifying Party has an indemnification obligation under this Article VIII, as
well as a Loss in respect of which such Indemnifying Party does not have an
indemnification obligation under this Article VIII, the parties shall cooperate
in allocating responsibility therefor.
 
8.4  Limitations on Indemnification.  The indemnification provided for in this
Article VIII shall be subject to the following limitations:
 
(a)  An Indemnifying Party shall not be required to indemnify any Indemnitee
under Section 8.1(a)(i)(x) or Section 8.2(a)(x), or under Section 8.1(a)(i)(y)
or Section 8.2(a)(y) for any Losses incurred as a result of a breach of Section
5.1 or 5.2, as the case may be, and shall not have any liability for any
individual (or series of related) occurrences, events, circumstances, acts or
omissions where the Loss relating thereto is less than $50,000, and such
occurrences, events, circumstances, acts or omissions shall not be aggregated
for the purposes of Section 8.4(b).
 
(b)  An Indemnifying Party shall not be obligated to pay any amounts for
indemnification under Section 8.1(a)(i)(x) or Section 8.2(a)(x), or under
Section 8.1(a)(i)(y) or Section 8.2(a)(y) for any Losses incurred as a result of
a breach of Section 5.1 or 5.2, as the case may be, until the aggregate amount
of all Losses for which it would be liable exceeds on a cumulative basis an
amount equal to $500,000, whereupon the Indemnifying Party shall be obligated to
pay in full all such Losses.
 
8.5  Time Limits.
 
(a)  Subject to Section 8.5(b), the indemnification obligations set forth in
this Article VIII shall survive indefinitely, subject to any applicable statute
of limitations, except that claims for indemnification of any Loss under
Section 8.1(a)(i)(x) to the extent relating to, arising out of or resulting
from, or asserted by third Persons in connection with a breach of:
 
(i)  Section 3.5 must be made prior to the date that is the later of (x) six
months after the Closing Date and (y) March 31, 2006;
 
(ii)  Sections 3.4, 3.6 (except to the extent related to title to Acquired
Hawaii Assets), 3.7 through 3.13, and 3.15 through 3.20 must be made prior to
the second anniversary of the Closing Date;
 
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(iii)  Section 3.14 must be made on or prior to the sixth anniversary of the
Closing Date; and
 
(iv)  Sections 3.2 and 3.6 (solely to the extent related to title to Acquired
Hawaii Assets) may be made at any time following the Closing (other than any
such claim in respect of the title of the Owned Real Property, for which no
claim may be made following the Closing).
 
(b)  Section 3.21 shall not survive the Closing Date.
 
(c)  Claims for indemnification under Section 8.1(a)(i)(y) or Section 8.2(a)(y)
to the extent relating to, arising out of or resulting from, or asserted by
third Persons in connection with, a breach of Section 5.1 or Section 5.2 must be
made prior to the first anniversary of the Closing Date.
 
8.6  Certain Matters Relating to Indemnification.
 
(a)  The amount which any Indemnifying Party is required to pay to any
Indemnitee entitled to indemnification hereunder will be reduced by any
insurance proceeds or other amount recovered or recoverable from any third party
in reduction of the related Loss. If an Indemnitee receives a payment (an
“Indemnity Payment”) required by this Agreement from an Indemnifying Party in
respect of any Loss and subsequently receives insurance proceeds or recovers any
other amount as provided in this Section 8.6, then the Indemnitee will without
demand reimburse the Indemnifying Party such amount as is equal to the excess of
the Indemnity Payment received over the amount of the Indemnity Payment that
would have been due if the insurance proceeds or other amounts had been
received, realized or recovered before the Indemnity Payment was made.
 
(b)  In no event shall HNC IV LLC, HNC V LLC or any of their successors be
liable to HNC or any member of the HNC Group in connection with such member’s
obligations under Section 8.1, whether for contribution or otherwise.
 
8.7  Tax Treatment of Indemnity Payments.  It is the intention of the parties to
treat any indemnity payment made under this Agreement as an adjustment to the
purchase price for all federal, state and local Tax purposes, and the parties
agree to file their Tax Returns accordingly (unless otherwise required by a
change in applicable Tax law or a good faith resolution of a contest).
 
8.8  Clarification.  For the avoidance of doubt, the obligations of the HNC
Group under Section 8.1 and of JVOI under Section 8.2 shall not include any
obligation to indemnify an Indemnitee for any Taxes that are based upon or
related to income or receipts for which such Indemnitee is liable as a result of
its ownership of any interest in any Joint Venture prior to the Closing Date.
 
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8.9  Guaranty by HNC.
 
(a)  HNC hereby unconditionally guarantees to JVOI and each SSI Indemnified
Party the payment and performance in full of each obligation of any nature of
the HNC Group: (i) after the date hereof until the Closing Date, arising under
or in connection with this Agreement (including any breach of any representation
or warranty under Article III); and (ii) after the Closing Date, under this
Article VIII only (each, an “HNC Obligation”), when and as such HNC Obligation
becomes due and payable or is otherwise required to be performed. HNC agrees
that if any member of the HNC Group shall fail to pay or perform any HNC
Obligation when and as such HNC Obligation shall be due and payable or is
otherwise required to be performed as set forth in this Agreement (subject to
the first sentence of this Section 8.9(a)), then HNC will make such payment of
such HNC Obligation in funds immediately available to JVOI or the applicable SSI
Indemnified Party, as the case may be, or otherwise perform such HNC Obligation
if such HNC Obligation does not entail the payment of money. This guaranty is an
absolute, unconditional and continuing guaranty of the full and punctual payment
and performance by each member of the HNC Group of the HNC Obligations and not
of their collectibility only, and is in no way conditioned upon any requirement
that JVOI or the applicable SSI Indemnified Party first attempt to collect any
of the HNC Obligations from any member of the HNC Group or resort to any
security or other means of obtaining payment of the HNC Obligations that JVOI or
the applicable SSI Indemnified Party now has or may acquire after the date
hereof, or upon any other contingency whatsoever. Payments or performance by HNC
hereunder may be required by JVOI or the SSI Indemnified Party on any number of
occasions.
 
(b)  The obligations of HNC under this Section 8.9 shall continue in full force
and effect until the HNC Obligations are finally paid and satisfied in full,
provided that this guaranty shall continue to be effective or shall be
reinstated, as the case may be, if at any time payment or other satisfaction of
any of the HNC Obligations is rescinded or must otherwise be restored or
returned upon the bankruptcy, insolvency or reorganization of any member of the
HNC Group, or otherwise, as though such payment had not been made or other
satisfaction occurred. No invalidity, irregularity or unenforceability by reason
of the federal Bankruptcy Code or any insolvency or other similar Law, or any
Law or Order of any Governmental Body purporting to reduce, amend or otherwise
affect the HNC Obligations shall impair, affect or be a defense to or claim
against the obligations of HNC under this guaranty.
 
(c)  HNC waives promptness, diligence, presentment, demand, protest, notice of
acceptance, notice of any HNC Obligations incurred and all other notices of any
kind, other than demand for payment or performance hereunder, and all defenses
which may be available by virtue of any valuation, stay, moratorium Law or other
similar Law now or hereafter in effect, any right to require the marshalling of
assets of any member of the HNC Group or any other Person primarily or
secondarily liable with respect to any of the HNC Obligations, and all
suretyship defenses generally. Without limiting the generality of the foregoing,
HNC agrees that the obligations of HNC hereunder shall not be released or
discharged, in whole or in part, or otherwise affected by (i) the failure of
JVOI or an SSI Indemnified Party to assert any claim or demand or to
 
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enforce any right or remedy against any member of the HNC Group or any other
Person primarily or secondarily liable with respect to any of the HNC
Obligations; (ii) any extensions, compromises, consolidations or renewals of any
HNC Obligation; (iii) any change in the time, place or manner of payment of any
of the HNC Obligations or any rescissions, waivers, compromises, consolidations,
amendments or modifications of any of the terms or provisions of this Agreement;
(iv) the addition, substitution or release of any Person primarily or
secondarily liable for any HNC Obligation; or (v) any other act or omission
which might in any manner or to any extent vary the risk of HNC or otherwise
operate as a release or discharge of HNC, all of which may be done without
notice to HNC.
 
(d)  Notwithstanding anything to the contrary contained herein, but without in
any way affecting HNC’s waiver of suretyship defenses generally pursuant to
Section 8.9(c), HNC shall be entitled to rely on any defenses to the payment or
performance of any HNC Obligation that any member of the HNC Group is entitled
to rely on pursuant to this Agreement, other than any defenses that are personal
to any member of the HNC Group such as lack of capacity or authority or
discharge in bankruptcy.
 
(e)  Until the final payment and performance in full of all of the HNC
Obligations: (i) HNC shall not exercise any rights against any member of the HNC
Group arising as a result of payment or performance by HNC hereunder, by way of
subrogation, reimbursement, restitution, contribution or otherwise, and will not
prove any claim in competition with JVOI or any SSI Indemnified Party in respect
of any payment hereunder in any bankruptcy, insolvency or reorganization case or
proceedings of any nature; (ii) HNC will not claim any setoff, recoupment or
counterclaim against any member of the HNC Group in respect of any liability of
HNC to any member of the HNC Group; and (iii) HNC waives any benefit of and any
right to participate in any collateral security which may be held by JVOI or any
SSI Indemnified Party.
 
8.10  Guaranty by SSI.
 
(a)  SSI hereby unconditionally guarantees to the HNC Group and each HNC
Indemnified Party the payment and performance in full of each obligation of any
nature of JVOI: (i) after the date hereof until the Closing Date, arising under
or in connection with this Agreement (including any breach of any representation
or warranty under Article IV); and (ii) after the Closing Date, under this
Article VIII only (each, a “JVOI Obligation”), when and as such JVOI Obligation
becomes due and payable or is otherwise required to be performed. SSI agrees
that if JVOI shall fail to pay or perform any JVOI Obligation when and as such
JVOI Obligation shall be due and payable or is otherwise required to be
performed as set forth in this Agreement (subject to the first sentence of this
Section 8.10(a)), then SSI will make such payment of such JVOI Obligation in
funds immediately available to the HNC Group or the applicable HNC Indemnified
Party or otherwise perform such JVOI Obligation if such JVOI Obligation does not
entail the payment of money. This guaranty is an absolute, unconditional and
continuing guaranty of the full and punctual payment and performance by JVOI of
the JVOI Obligations and not of their collectibility only, and is in no way
conditioned upon
 
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any requirement that the HNC Group or the applicable HNC Indemnified Party first
attempt to collect any of the JVOI Obligations from JVOI or resort to any
security or other means of obtaining payment of the JVOI Obligations that the
HNC Group or the applicable HNC Indemnified Party now has or may acquire after
the date hereof, or upon any other contingency whatsoever. Payments or
performance by JVOI hereunder may be required by the HNC Indemnified Party on
any number of occasions.
 
(b)  The obligations of SSI under this Section 8.10 shall continue in full force
and effect until the JVOI Obligations are finally paid and satisfied in full,
provided that this guaranty shall continue to be effective or shall be
reinstated, as the case may be, if at any time payment or other satisfaction of
any of the JVOI Obligations is rescinded or must otherwise be restored or
returned upon the bankruptcy, insolvency or reorganization of JVOI, or
otherwise, as though such payment had not been made or other satisfaction
occurred. No invalidity, irregularity or unenforceability by reason of the
federal Bankruptcy Code or any insolvency or other similar Law, or any Law or
Order of any Governmental Body purporting to reduce, amend or otherwise affect
the JVOI Obligations shall impair, affect or be a defense to or claim against
the obligations of SSI under this guaranty.
 
(c)  SSI waives promptness, diligence, presentment, demand, protest, notice of
acceptance, notice of any JVOI Obligations incurred and all other notices of any
kind, other than demand for payment or performance hereunder, and all defenses
which may be available by virtue of any valuation, stay, moratorium Law or other
similar Law now or hereafter in effect, any right to require the marshalling of
assets of JVOI or any other Person primarily or secondarily liable with respect
to any of the JVOI Obligations, and all suretyship defenses generally. Without
limiting the generality of the foregoing, SSI agrees that the obligations of
JVOI hereunder shall not be released or discharged, in whole or in part, or
otherwise affected by (i) the failure of the HNC Group or an HNC Indemnified
Party to assert any claim or demand or to enforce any right or remedy against
JVOI or any other Person primarily or secondarily liable with respect to any of
the JVOI Obligations; (ii) any extensions, compromises, consolidations or
renewals of any JVOI Obligation; (iii) any change in the time, place or manner
of payment of any of the JVOI Obligations or any rescissions, waivers,
compromises, consolidations, amendments or modifications of any of the terms or
provisions of this Agreement; (iv) the addition, substitution or release of any
Person primarily or secondarily liable for any JVOI Obligation; or (v) any other
act or omission which might in any manner or to any extent vary the risk of SSI
or otherwise operate as a release or discharge of SSI, all of which may be done
without notice to SSI.
 
(d)  Notwithstanding anything to the contrary contained herein, but without in
any way affecting SSI’s waiver of suretyship defenses generally pursuant to
Section 8.10(c), SSI shall be entitled to rely on any defenses to the payment or
performance of any JVOI Obligation that JVOI is entitled to rely on pursuant to
this Agreement, other than any defenses that are personal to JVOI such as lack
of capacity or authority or discharge in bankruptcy.
 
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(e)  Until the final payment and performance in full of all of the JVOI
Obligations: (i) SSI shall not exercise any rights against JVOI arising as a
result of payment or performance by SSI hereunder, by way of subrogation,
reimbursement, restitution, contribution or otherwise, and will not prove any
claim in competition with the HNC Group or any HNC Indemnified Party in respect
of any payment hereunder in any bankruptcy, insolvency or reorganization case or
proceedings of any nature; (ii) SSI will not claim any setoff, recoupment or
counterclaim against JVOI in respect of any liability of SSI to JVOI; and
(iii) SSI waives any benefit of and any right to participate in any collateral
security which may be held by the HNC Group or any HNC Indemnified Party.
 
8.11  Assumption of Obligations.  HNC may, at any time, by notice in writing to
JVOI and SSI elect to assume any or all of the obligations of the HNC Group
under Section 8.1(a) and to become the primary obligor with respect thereto, and
upon the execution and delivery by HNC of an assignment agreement in form and
substance reasonably satisfactory to JVOI and SSI, (a) the HNC Group shall be
automatically, and without further action, released from such obligations under
Section 8.1(a), and (b) the other provisions of this Article VIII (including,
for the avoidance of doubt, Section 8.3) shall become binding on HNC to the same
extent as they were previously binding on the HNC Group thereunder with respect
to the indemnification obligations that it so assumes.
 
8.12  Exclusive Remedies.  Except for any claim based on fraud, each of the
parties acknowledges that its sole and exclusive remedy after the Closing with
respect to any Claims relating to this Agreement or the transactions
contemplated hereby shall be pursuant to the indemnification provisions set
forth in this Article VIII, and that each party shall not seek recovery from any
other party other than pursuant to this Article VIII. Nothing in this Section
8.12 will limit the remedies otherwise available to any party under any
Transaction Document, other than this Agreement and the Employee Matters
Agreement.
 
ARTICLE IX
 
TAX MATTERS
 
9.1  Tax Contests.
 
(a)  After the Closing Date, HNC and JVOI shall jointly control the conduct,
through counsel of their own choosing, of any audit, claim for refund, or
administrative or judicial proceeding involving any asserted Tax liability or
refund with respect to the HNC Business or the Schnitzer Business relating to
Pre-Closing Taxable Periods or Straddle Periods (any such audit, claim for
refund, or proceeding relating to an asserted Tax liability referred to herein
as a “Contest”). Neither HNC nor JVOI shall, and each of them shall cause its
Affiliates not to, settle, compromise and/or concede any
 
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portion of such Contest without the consent of the other party, which consent
shall not be unreasonably withheld or delayed.
 
(b)  HNC and JVOI shall furnish or cause to be furnished to each other, upon
request, as promptly as practicable, such information (including access to books
and records) and assistance relating to the HNC Business and the Schnitzer
Business as is reasonably requested for the filing of any Tax Returns and the
preparation, prosecution, defense or conduct of any Contest. HNC and JVOI shall
reasonably cooperate with each other in the conduct of any Contest or other
proceeding involving or otherwise relating to the HNC Business or the Schnitzer
Business (or their income or assets) with respect to any Tax and each party
shall execute and deliver such powers of attorney and other documents as are
necessary to carry out the intent of this Section 9.1(b). Any information
obtained under this Section 9.1(b) shall be kept confidential, except as may be
otherwise necessary in connection with the filing of Tax Returns or in the
conduct of a Contest or other Tax proceeding.
 
(c)  Each of HNC and JVOI shall, and shall cause its Affiliates to: (i) use its
commercially reasonable efforts to properly retain and maintain the Tax and
accounting records of the HNC Business and the Schnitzer Business that relate to
Pre-Closing Taxable Periods or Straddle Periods and shall provide the other
party with written notice prior to any destruction, abandonment or disposition
of all or any portions of such records, (ii) transfer such records to the other
party upon its written request prior to any such destruction, abandonment or
disposition and (iii) allow the other party and their respective agents and
representatives, at times and dates reasonably and mutually acceptable to the
parties, to from time to time inspect and review such records as such other
party may deem necessary or appropriate; provided, however, that in all cases,
such activities are to be conducted during normal business hours. Any
information obtained under this Section 9.1(c) shall be kept confidential,
except as may be otherwise necessary in connection with the filing of Tax
Returns or in the conduct of a Contest or other Tax proceeding.
 
9.2  Tax Return Filing and Preparation.
 
(a)  HNC shall prepare (or cause to be prepared) and timely file all Tax Returns
of the HNC Business and the Hawaii Business and JVOI shall prepare (or cause to
be prepared) and timely file all Tax Returns of the Schnitzer Business (other
than the Hawaii Business), in each case, with respect to any taxable period that
ends on or before the Closing Date (“Pre-Closing Taxable Period”) that are
required to be filed with any Tax authority after the Closing Date (each, a
“Pre-Closing Return”). HNC and JVOI shall prepare their respective Pre-Closing
Returns in a manner consistent with prior practice (unless otherwise required by
law). HNC and JVOI shall provide to the other any Pre-Closing Return for review
at least 30 days prior to the date on which such Tax Return is required to be
filed. If either party disputes any item on such Tax Return, it shall notify the
other party of such disputed item (or items) and the basis for its objection.
The parties shall act in good faith to resolve any such dispute prior to the
date on which the relevant Tax Return is required to be filed. If the parties
cannot resolve any disputed item, the item in question shall be resolved by the
Independent Accounting Firm, the fees
 
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and expenses of which shall be borne equally by HNC and JVOI. HNC and JVOI shall
each remit (or cause to be remitted) to the appropriate Tax authority 50% of any
Taxes, (other than Taxes arising out of any transactions not in the ordinary
course of business which occur on the Closing Date but after the Closing) due in
respect of Pre-Closing Taxable Periods (“Pre-Closing Taxes”) (except in the case
of the Hawaii Business, for which HNC shall have responsibility for all
Pre-Closing Taxes).
 
(b)  HNC shall prepare (or cause to be prepared) and timely file all Tax Returns
of the HNC Business and JVOI shall prepare (or cause to be prepared) and timely
file all Tax Returns of the Schnitzer Business, in each case, with respect to
any taxable period that begins before and ends after the Closing Date (“Straddle
Period”) that are required to be filed with any Tax authority by or with respect
to the HNC Entities or the Schnitzer Entities (each, a “Straddle Return”). HNC
and JVOI shall prepare their respective Straddle Returns in a manner consistent
with prior practice (unless otherwise required by Law). HNC and JVOI shall
provide to the other any Straddle Return for review at least 30 days prior to
the date on which such Tax Return is required to be filed. If either party
disputes any item on such Tax Return, it shall notify the other party of such
disputed item (or items) and the basis for its objection. The parties shall act
in good faith to resolve any such dispute prior to the date on which the
relevant Tax Return is required to be filed. If the parties cannot resolve any
disputed item, the item in question shall be resolved by the Independent
Accounting Firm, the fees and expenses of which shall be borne equally by HNC
and JVOI.
 
(c)  Neither HNC nor JVOI shall, and each of them shall cause its Affiliates not
to, amend, refile or otherwise modify any Tax Return relating in whole or in
part to the HNC Business or the Schnitzer Business with respect to any
Pre-Closing Taxable Period (or with respect to any Straddle Period) without the
written consent of the other party, which shall not be unreasonably withheld or
delayed.
 
(d)  For purposes of this Agreement, HNC and JVOI shall each pay 50% of any
Taxes payable with respect to any Straddle Period that are Pre-Closing Taxes.
With respect to any Straddle Period, Pre-Closing Taxes shall be determined as
follows: (i) in the case of Taxes that are either (x) Income Taxes, or
(y) imposed in connection with any sale, transfer or assignment or any deemed
sale, transfer or assignment of property (real or personal, tangible or
intangible), be deemed equal to the amount that would be payable if the Tax year
or period ended on the Closing Date; and (ii) in the case of Taxes (other than
those described in clause (i) above) that are imposed on a periodic basis with
respect to the business or assets of the Joint Ventures or otherwise measured by
the level of any item, be deemed to be the amount of such Taxes for the entire
Straddle Period (or, in the case of such Taxes determined on an arrears basis,
the amount of such Taxes for the immediately preceding Tax period), multiplied
by a fraction the numerator of which is the number of calendar days in the
portion of the Straddle Period ending on the Closing Date and the denominator of
which is the number of calendar days in the entire Straddle Period. For purposes
of clause (i) of the preceding sentence, any exemption, deduction, credit or
other item (including the effect of any graduated rates of tax) that is
calculated on an annual basis shall be allocated to the portion of the Straddle
Period ending on the Closing Date on a pro rata basis determined
 
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by multiplying the total amount of such item allocated to the Straddle Period by
a fraction, the numerator of which is the number of calendar days in the portion
of the Straddle Period ending on the Closing Date and the denominator of which
is the number of calendar days in the entire Straddle Period. All determinations
necessary to give effect to the foregoing allocations shall be made in a manner
consistent with prior practice. The parties hereto will, to the extent permitted
by applicable law, elect with the relevant Tax authority to treat a portion of
any Straddle Period as a short taxable period ending as of the close of business
on the Closing Date.
 
(e)  Nothing in this Article IX shall be deemed to apply to Transfer Taxes,
which shall be paid as provided by Section 5.19.
 
ARTICLE X
 
TERMINATION
 
10.1  Termination.  This Agreement may be terminated at any time prior to the
Closing under the provisions of any of the following paragraphs of this
Section 10.1 that is applicable:
 
(a)  By mutual written agreement of HNC I LLC and JVOI;
 
(b)  By JVOI by notice to HNC I LLC if (i) HNC or any member of the HNC Group
shall have breached in any material respect any of its covenants and agreements
contained in any Transaction Document such that the condition set forth in
Section 7.2 cannot be fulfilled, or (ii) any of the representations and
warranties set forth in Article III hereof were not true and correct as of the
date hereof, where the failure to be so true and correct (without giving effect
to any Materiality Qualifier in such representation or warranty) has a material
adverse effect on (x) the ability of HNC or any member of the HNC Group or
Affiliates to perform its obligations hereunder or under any other Transaction
Document or (y) the Schnitzer Entities, taken as a whole, the Hawaii Business or
the Russia and Baltic Trading Business; provided, that such breach by HNC or any
member of the HNC Group of any of its covenants and agreements or any of its
representations and warranties is not
 
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cured within 30 days after JVOI has notified HNC of its intent to terminate this
Agreement pursuant to this Section 10.1(b);
 
(c)  By HNC I LLC by notice to JVOI if (i) JVOI or any JVOI Affiliate shall have
breached in any material respect any of its covenants and agreements contained
in any Transaction Document such that the condition set forth in Section 6.2
cannot be fulfilled, or (ii) any of the representations and warranties set forth
in Article IV hereof were not true and correct as of the date hereof, where the
failure to be true and correct (without giving effect to any Materiality
Qualifier in such representation or warranty) has a material adverse effect on
(x) the ability of JVOI or Affiliates to perform its obligations hereunder or
under any other Transaction Document or (y) the HNC Business, taken as a whole;
provided, that such breach by JVOI (or JVOI Affiliate) of any of its covenants
and agreements or any of its representations and warranties is not cured within
30 days after HNC I LLC has notified JVOI of its intent to terminate this
Agreement pursuant to this Section 10.1(c);
 
(d)  Subject to Section 5.30, by JVOI or by HNC I LLC by notice to the other if
for any reason (other than breach of obligations on the part of the party (or
its Affiliates) seeking to terminate this Agreement under this Section 10.1(d))
the Closing has not occurred on or before December 31, 2005; or
 
(e)  By JVOI or HNC I LLC by notice to the other without liability to the
terminating party if there shall be issued any Order of any Governmental Body
that is final, non-appealable and binding on JVOI, the Schnitzer Business, HNC
or the HNC Business and that prohibits or restrains any of the parties hereto
from consummating the transactions contemplated by this Agreement and such Order
is not terminated or rescinded within 60 days.
 
10.2  Effect of Termination.  No termination of this Agreement shall relieve a
party of any liability for any breach by it of any of the provisions of this
Agreement.
 
10.3  Survival.  Upon the termination of this Agreement, the Confidentiality
Agreement and Sections 5.11, 5.12, 5.19, 8.9 and 8.10 and Article XI shall
survive the termination of this Agreement and all other provisions of this
Agreement shall cease to have any force or effect, except as provided in
Section 10.2.
 
ARTICLE XI
 
MISCELLANEOUS
 
11.1  Notices.
 
Any notice or other communication required or permitted hereunder shall be in
writing and shall be deemed to have been duly given (a) on the day of delivery
if delivered in person, or if delivered by facsimile upon confirmation of
receipt or (b) on the date of receipt if delivered by a reputable express
courier service or by registered or certified mail, return receipt requested,
postage prepaid. All notices hereunder shall be delivered as set forth below, or
pursuant to such other instructions as may be designated by notice given in
accordance with this Section 11.1 by the party to receive such notice:
 
  
 
 (i)    
if to HNC or any member of the HNC Group, to:       Hugo Neu Co., LLC    110
Fifth Avenue, 7th Floor    New York, New York 10011    Attention: Mr. John L.
Neu    Facsimile: (212) 604-0722        with a copy to: 

 
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  Paul, Weiss, Rifkind, Wharton & Garrison LLP    1285 Avenue of the Americas   
New York, New York 10019-6064    Attention: Richard S. Borisoff, Esq.    Alfred
D. Youngwood, Esq.    Facsimile: (212) 757-3990     

 
  
 
(ii)    
if to SSI or JVOI, to:       Schnitzer Steel Industries, Inc.    3200 N.W. Yeon
Avenue    Portland, Oregon 97296-0047    Attention: General Counsel   
Facsimile: (503) 323-2804        with a copy to:        Bingham McCutchen LLP   
150 Federal Street    Boston, Massachusetts 02110    Attention: John R.
Utzschneider, Esq.    Facsimile: (617) 951-8736 

  
11.2  Entire Agreement.  This Agreement, together with the other Transaction
Documents, contain the entire agreement among the parties with respect to the
subject matter hereof and supersede all prior agreements, written or oral, with
respect thereto.
 
11.3  Waivers and Amendments.  This Agreement may be amended, superseded,
canceled, renewed or extended, and the terms hereof may be waived, only by a
written instrument signed by HNC I LLC and JVOI or, in the case of a waiver, by
the party waiving compliance. No delay on the part of any party in exercising
any right, power or privilege hereunder shall operate as a waiver thereof, nor
shall any waiver on the part of any party of any such right, power or privilege,
nor any single or partial exercise of any such right, power or privilege,
preclude any further exercise thereof or the exercise of any other such right,
power or privilege.
 
11.4  Governing Law.  This Agreement and each other Transaction Document shall
be governed by and construed in accordance with the Laws of the State of
New York.
 
11.5  Binding Effect, Assignment.  This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and assigns,
and for purposes of the foregoing, but without limiting the circumstances in
which a third party could be deemed to be a successor, any acquiror of all or
substantially all of a party’s assets will be deemed to be such party’s
successor (it being understood, however, that the sale by HNC of its membership
interests in HNC I LLC shall not be deemed a sale by
 
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HNC of all or substantially all of its assets). This Agreement is not assignable
by either party without the prior written consent of the other party.
 
11.6  Usage.  All pronouns and any variations thereof refer to the masculine,
feminine or neuter, singular or plural, as the context may require. All terms
defined in this Agreement in their singular or plural forms have correlative
meanings when used herein in their plural or singular forms, respectively.
Unless otherwise expressly provided, the words “include,” “includes” and
“including” do not limit the preceding words or terms and shall be deemed to be
followed by the words “without limitation.” Any Law defined or referred to
herein (or in any agreement or instrument that is referred to herein) means such
Law as, from time to time, may be amended, modified or supplemented, including
(in the case of statutes) by succession of comparable successor statutes.
References to a Person also refer to its predecessors and permitted successors
and assigns.
 
11.7  Articles and Sections.  All references herein to Articles and
Sections shall be deemed references to such parts of this Agreement, unless the
context shall otherwise require. The Article and Section headings in this
Agreement are for reference only and shall not affect the interpretation of this
Agreement.
 
11.8  Interpretation.  The parties acknowledge and agree that (a) each party and
its counsel reviewed and negotiated the terms and provisions of this Agreement
and each other Transaction Document and have contributed to their revision,
(b) the rule of construction to the effect that any ambiguities are resolved
against the drafting party shall not be employed in the interpretation of this
Agreement or any other Transaction Document, and (c) the terms and provisions of
this Agreement and each Transaction Document shall be construed fairly as to all
parties, regardless of which party was generally responsible for the preparation
of such document.
 
11.9  Severability of Provisions.  If any provision or any portion of any
provision of this Agreement shall be held invalid or unenforceable, the
remaining portion of such provision and the remaining provisions of this
Agreement shall not be affected thereby. If the application of any provision or
any portion of any provision of this Agreement to any Person or circumstance
shall be held invalid or unenforceable, the application of such provision or
portion of such provision to Persons or circumstances other than those as to
which it is held invalid or unenforceable shall not be affected thereby.
 
11.10  No Third Party Beneficiaries.  Except for those Persons identified in
Sections 8.1 and 8.2 as being entitled to indemnification, no provision of this
Agreement is intended to, or shall, confer any third party beneficiary or other
rights or remedies upon any Person other than the parties hereto.
 
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11.11  Consent to Jurisdiction; Service of Process.
 
(a)  Any Claim arising out of or relating to this Agreement, any other
Transaction Document (other than the North Carolina Landfill Access Agreement)
or the transactions contemplated hereby or thereby shall be instituted in any
state or federal court in the State of New York located in New York County, and
each party agrees not to assert, by way of motion, as a defense or otherwise, in
any such Claim, that it is not subject personally to the jurisdiction of such
court, that the Claim is brought in an inconvenient forum, that the venue of the
Claim is improper or that this Agreement or such other Transaction Document or
the subject matter hereof or thereof may not be enforced in or by such court.
Each party further irrevocably submits to the exclusive jurisdiction of such
court in any such Claim.
 
(b)  Any and all service of process and any other notice in any such Claim shall
be effective against any party if given personally or by registered or certified
mail, return receipt requested, or by any other means of mail that requires a
signed receipt, postage prepaid, mailed to such party as provided herein or the
relevant Transaction Document. Nothing herein contained shall be deemed to
affect the right of any party to serve process in any manner permitted by Law or
to commence legal proceedings or otherwise proceed against any other party in
any other jurisdiction.
 
11.12  Waiver of Punitive Damages and Jury Trial.
 
(a)  THE PARTIES TO THIS AGREEMENT EXPRESSLY WAIVE AND FOREGO ANY RIGHT TO
RECOVER PUNITIVE, EXEMPLARY OR SIMILAR DAMAGES IN ANY ARBITRATION, LAWSUIT,
LITIGATION OR PROCEEDING ARISING OUT OF OR RESULTING FROM ANY CONTROVERSY OR
CLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
 
(b)  EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY THAT MAY ARISE
UNDER THIS AGREEMENT OR ANY TRANSACTION DOCUMENT IS LIKELY TO INVOLVE
COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF
ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS
AGREEMENT, ANY OTHER TRANSACTION DOCUMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY.
 
(c)  EACH PARTY ACKNOWLEDGES AND CERTIFIES THAT (i) 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 EITHER OF THE
FOREGOING WAIVERS, (ii) IT UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF
SUCH WAIVERS, (iii) IT MAKES SUCH WAIVERS VOLUNTARILY, AND (iv) IT HAS BEEN
INDUCED TO ENTER
 
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INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION 11.12.
 
11.13  Specific Performance.  The parties hereto intend that, without limiting
any other remedies of the parties hereunder, each party shall have the right to
obtain specific performance if any other party fails to perform such party’s
obligations hereunder.
 
11.14  Counterparts.  This Agreement may be executed by the parties hereto in
separate counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts together shall constitute one and the same
instrument. Each counterpart may consist of a number of copies hereof each
signed by less than all, but together signed by all, of the parties hereto.
 
[Remainder of page intentionally left blank]
 

 

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

        HUGO NEU CO., LLC  
   
   
  By:   /s/   

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Name:   Title: 

 

        HNE RECYCLING LLC  
   
   
  By:   /s/   

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Name:   Title: 

 
 

        HNW RECYCLING LLC  
   
   
  By:   /s/   

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Name:   Title: 

 
 

        JOINT VENTURE OPERATIONS, INC.  
   
   
  By:   /s/   

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Name:   Title: 

 
 
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Agreed and accepted to solely for the purposes of Sections 2.3, 2.5(d), 2.5(e),
2.5(f), 2.5(g), 2.5(h), 2.5(i), 2.5(j), 2.5(k), 2.5(l), 2.5(m), 2.7, 8.9 and
8.11 and Articles V (but only to the extent any sections therein bind HNC or
SSI, as applicable), IX, X and XI:
 

        HUGO NEU CORPORATION  
   
   
    By:   /s/   

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Name:   Title: 

 
 

       
SCHNITZER STEEL INDUSTRIES, INC.
 
   
   
    By:   /s/   

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Name:   Title: 

 
 

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