Document:

WWW.EXFILE.COM, INC. -- 13591 -- SCHNITZER STEEL INDUSTRIES, INC. -- EXHIBIT 10.1 TO FORM 8-K

 

 

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

 

 

_______________________________

 

 

 

 

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

 

-i-

 

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

 

-ii-

 

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

 

-iii-

 

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

 

-iv-

 

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)

 

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. 

 

-v-

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.

 

 

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

 

-2-

 

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;

 

-3-

 

(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.

 

-4-

 

“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.

 

-5-

 

“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

 

-6-

 

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.

 

-7-

 

“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)

 

-8-

 

	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)

 

-9-

 

	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.

 

-10-

 

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.

 

-11-

 

(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 

 

-12-

 

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 

 

-13-

 

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 

 

-14-

 

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.

 

-15-

 

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 

 

-16-

 

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.

 

-17-

 

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;

 

-18-

 

(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 

 

-19-

 

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.

 

-20-

 

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 

 

-21-

 

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 

 

-22-

 

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 

 

-23-

 

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 

 

-24-

 

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;

 

-25-

 

(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.

 

-26-

 

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 

 

-27-

 

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);

 

-28-

 

(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 

 

-29-

 

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 

 

-30-

 

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 

 

-31-

 

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 

 

-32-

 

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 

 

-33-

 

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 

 

-34-

 

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 

 

-35-

 

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.

 

-36-

 

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 

 

-39-

 

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 

 

-40-

 

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 

 

-41-

 

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 

 

-42-

 

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.

 

-43-

 

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 

 

-44-

 

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

 

-45-

 

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 

 

-46-

 

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.

 

-50-

 

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 

 

-51-

 

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

 

-52-

 

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;

 

-53-

 

(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 

 

-54-

 

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;

 

-55-

 

(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.

 

-56-

 

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

 

-57-

 

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 

 

-58-

 

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.

 

-59-

 

(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 

 

-60-

 

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 

 

-61-

 

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 

 

-62-

 

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 

 

-63-

 

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: 

 

-64-

 

	 	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.

 

-66-

 

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 

 

-67-

 

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]

 

 

-68-

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

 

	 	 	 
	 	HUGO NEU CO.,
    LLC
	 
 	 
 	 
 
		By:  	/s/ 
	 	
      

      Name:
	 	Title: 

 

	 	 	 
	 	HNE RECYCLING
    LLC
	 
 	 
 	 
 
		By:  	/s/ 
	 	
      

      Name:
	 	Title: 

 

 

	 	 	 
	 	HNW RECYCLING
    LLC
	 
 	 
 	 
 
		By:  	/s/ 
	 	
      

      Name:
	 	Title: 

 

 

	 	 	 
	 	JOINT VENTURE
      OPERATIONS, INC.
	 
 	 
 	 
 
		By:  	/s/ 
	 	
      

      Name:
	 	Title: 

 

 

-69-

 

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/ 
	 	
      

      Name:
	 	Title: 

 

 

	 	 	 
	 	
      SCHNITZER
      STEEL INDUSTRIES, INC.

	 
 	 
 	 
 
	 	By:  	/s/ 
	 	
      

      Name:
	 	Title: 

 

 

-70-June 9, 2005 8K Exhibit 10.1

 Exhibit 10.1
 

CONTRIBUTION AND SALE AGREEMENT

between

E-LOAN AUTO FUND TWO, LLC,

as Buyer,

and

E-LOAN, INC.,

as Seller,

Dated as of May 1, 2005

 

 

 

 

 

ALL RIGHTS IN AND TO THIS AGREEMENT ON THE PART OF E-LOAN AUTO FUND TWO, LLC HAVE
BEEN ASSIGNED TO, AND ARE SUBJECT TO A SECURITY INTEREST IN FAVOR OF, MERRILL LYNCH COMMERCIAL FINANCE
CORP. , AS SECURED PARTY, UNDER THE SECURITY AGREEMENT, DATED AS OF MAY 1, 2005, FOR THE BENEFIT OF THE
PERSONS REFERRED TO THEREIN.

 TABLE OF CONTENTS

	
  
	
Page

	 
	

Article I Definitions

	

 1 

	 
	
       
SECTION 1.1.Definitions

	

 1 

	 
	
       
SECTION 1.2.Other Definitional Provisions

	

 1 

	 
	

Article II Conveyance of Sold Assets

	

 2 

	 
	
       
SECTION 2.1.Conveyance of Initial Sold Assets

	

 2 

	 
	
       
SECTION 2.2.Conveyance of Sold Assets After the Initial Transfer Date

	

 2 

	 
	
       
SECTION 2.3.Security Grant

	

 3 

	 
	

Article III The Sold Assets

	

 3 

	 
	
       
SECTION 3.1.Sold Asset Representations and Warranties

	

 3 

	 
	
       
SECTION 3.2.Repurchase upon Breach

	

 5 

	 
	

Article IV The Seller

	

 6 

	 
	
       
SECTION 4.1.Representations and Warranties of Seller

	

 6 

	 
	
       
SECTION 4.2.Covenants of Seller

	

 8 

	 
	
       
SECTION 4.3.Corporate Existence

	

 10 

	 
	
       
SECTION 4.4.Liability of Seller; Indemnities

	

 10 

	 
	
       
SECTION 4.5.Merger or Consolidation of, or Assumption of the Obligations of, Seller

	

 10 

	 
	
       
SECTION 4.6.Limitation on Liability of Seller and Others

	

 11 

	 
	

Article V [Reserved]

	

 11 

	 
	

Article VI Miscellaneous Provisions

	

 12 

	 
	
       
SECTION 6.1.Amendment

	

 12 

	 
	
       
SECTION 6.2.Protection of Collateral

	

 12 

	 
	
       
SECTION 6.3.Notices

	

 13 

	 
	
       
SECTION 6.4.Assignment

	

 14 

	 
	
       
SECTION 6.5.Limitations on Rights of Others

	

 14 

	 
	
       
SECTION 6.6.Severability

	

 14 

	 
	
       
SECTION 6.7.Separate Counterparts

	

 14 

	 
	
       
SECTION 6.8.Headings

	

 14 

	 
	
       
SECTION 6.9.Governing Law

	

 14 

	 
	
       
SECTION 6.10.Assignment to Secured Party

	

 14 

	 
	
       
SECTION 6.11.No Petition

	

 15 

	 
	
       
SECTION 6.12.Submission to Jurisdiction; Waivers

	

 15 

	 
	
       
SECTION 6.13.Waiver OF Jury Trial

	

 16 

	 

SCHEDULES AND EXHIBITS

EXHIBIT AForm of Seller Assignment 

EXHIBIT BNon-Franchise Dealer Procedures

CONTRIBUTION AND SALE AGREEMENT (as amended, supplemented or otherwise modified from
time to time, this "Agreement") dated as of May 1, 2005, between E-LOAN AUTO FUND TWO, LLC, a Delaware limited liability
company (the "Buyer"), and E-LOAN, INC., a Delaware corporation (the "Seller").

RECITALS

WHEREAS, in contemplation of this Agreement, the Seller has agreed to sell, transfer, contribute and
assign to the Buyer on the initial Transfer Date, and the Buyer has agreed to accept on the initial Transfer Date, all right, title and
interest of the Seller in, to and under the Initial Sold Assets, originated by the Seller in the ordinary course of business, upon the terms
and conditions hereinafter set forth; and

WHEREAS, from time to time thereafter, the Seller may transfer, contribute and assign additional Sold
Assets to the Buyer upon the terms and conditions hereinafter set forth; and

WHEREAS, in connection with the transaction contemplated hereby, the Buyer will collaterally assign
to the Secured Party, all of its right, title and interest in and to the Sold Assets and this Agreement, as collateral for the Note to be
issued pursuant to the terms of the Credit Agreement; and

WHEREAS, each of the Seller and the Buyer agree that all representations, warranties, covenants and
agreements made by the Seller and the Buyer herein shall be for the benefit of the Secured Party;

NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained and
other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the parties hereto agree as
follows:

ARTICLE I

Definitions

SECTION 1.1   Definitions. Capitalized terms used herein and not
otherwise defined herein are defined in Schedule A to the Credit Agreement, dated as of May 1, 2005 (the "Credit Agreement"), among
the Buyer, the Seller and Merrill Lynch Commercial Finance Corp. , as Secured Party thereunder, as the same may be supplemented,
amended or otherwise modified from time to time in accordance with its terms.

SECTION 1.2   Other Definitional
Provisions.

	All terms defined in this Agreement shall have the defined meanings
when used in any certificate or other document made or delivered pursuant hereto unless otherwise defined
therein.

	As used in this Agreement and in any certificate or other document made or delivered pursuant hereto,
accounting terms not defined in this Agreement or in any such certificate or other document, and accounting terms partly defined in this
Agreement or in any such certificate or other document to the extent not defined, shall have the respective meanings given to them
under generally accepted accounting principles. To the extent that the definitions of accounting terms in this Agreement or in any such
certificate or other document are inconsistent with the meanings of such terms under generally accepted accounting principles, the
definitions contained in this Agreement or in any such certificate or other document shall control.

	The words "hereof', "herein", "hereunder" and words of similar import when used in this Agreement shall
refer to this Agreement as a whole and not to any particular provision of this Agreement; Section, Schedule and Exhibit references
contained in this Agreement are references to Sections, Schedules and Exhibits in or to this Agreement unless otherwise specified; and
the term "including" shall mean "including, without limitation,".

	The definitions contained in this Agreement are applicable to the singular as well as the plural forms of
such terms and to the masculine as well as to the feminine and neuter genders of such terms.

ARTICLE II

Conveyance of Sold Assets

SECTION 2.1    Conveyance of Initial Sold Assets. On the initial
Transfer Date, the Seller does hereby sell, contribute, transfer, assign, set over and otherwise convey to the Buyer, without recourse
(subject to the obligations herein), all of its right, title and interest in, to and under the Initial Sold Assets. Such assignment shall be
evidenced by a duly executed written assignment in substantially the form of Exhibit A (the "Seller Assignment"). On or prior to the initial
Advance Date, the Seller shall execute and deliver to the Custodian, as designee of the Buyer and the Secured Party each of the
documents set forth in Section 2.2(b) hereof.

SECTION 2.2   Conveyance of Sold Assets After the
Initial Transfer Date. 

	After the initial Transfer Date, the Seller hereafter may, from time to time, transfer to the Buyer, additional
Sold Assets. In consideration of the sale of the Sold Assets sold to the Buyer on any Transfer Date, the Buyer shall pay to the Seller on
such Transfer Date an amount equal to the remaining principal balance of all Receivables plus interest accrued from the prior
installment date, if any, transferred to the Buyer on such Transfer Date. Buyer shall pay such purchase price by (i) making a cash
payment to the Seller to the extent that the Buyer has received an Advance on such Transfer Date pursuant to the Credit Agreement
and (ii) if the purchase price to be paid for the Sold Assets exceeds the amount of any cash payment for the account of the Seller on
such day pursuant to clause (i) above, such excess shall automatically constitute a capital contribution to the Buyer by the Seller. In
connection with any such transfer, the Seller will execute and deliver on or prior to the respective Transfer Date each of the documents
set forth in Section 2.2(b) hereof.

	In connection with any transfer of Sold Assets by the Seller to the Buyer in accordance with the provisions
of Sections 2.1 or 2.2(a) of this Agreement, the Seller shall execute and deliver to the Buyer and the Secured Party on or before the
related Transfer Date, each of the following:

	A completed and executed Seller Assignment which assignment shall operate as an assignment, without
recourse, representation, or warranty, except for the other representations and warranties specifically set forth in this Agreement, of all
the Seller's right, title, and interest in and to the Sold Assets identified in such certificate;

	Completed UCC financing statements (if necessary or advisable) or documents of similar import described
in Section 6.2 hereof, together with evidence of filing of such financing statements in the appropriate filing offices and jurisdictions as
may be required with respect to the Sold Assets so transferred; and

	Copies of all applicable UCC and federal, state and local tax and judgment lien searches indicating the
absence of any Encumbrance other than a Permitted Encumbrance with respect to the Sold Assets identified in the related Seller
Assignment. 

SECTION 2.3   Security
Grant. The Seller and Buyer intend that all transfers of Sold Assets be a "true sale" or "true contribution" by the Seller to
the Buyer that are absolute and irrevocable and that provide the Buyer with the full benefits of ownership of the Sold Assets, and
neither the Seller nor the Buyer intends the transactions contemplated hereunder to be, or for any purpose to be characterized as,
loans from the Buyer to the Seller. It is, further, not the intention of the Buyer or the Seller that the conveyance of the Sold Assets by the
Seller be deemed a grant of a security interest in the Sold Assets by the Seller to the Buyer to secure a debt or other obligation of the
Seller. However, in the event that, notwithstanding the intent of the parties, any transfer of any property described in Sections 2.1
or 2.2 is characterized by a court or other governmental authority as a loan rather than a sale, Seller shall be deemed
hereunder to have granted to Buyer and its assignee, the Secured Party, a first priority security interest in all of Seller's right, title and
interest in, to and under such Sold Assets.

Such first priority security interest shall secure all of Seller's obligations (monetary or
otherwise) under this Agreement and the other Credit Documents to which it is a party, whether now or hereafter existing or arising, due
or to become due, direct or indirect, absolute or contingent. Buyer and its assignee, the Secured Party, shall have, with respect to such
property, and in addition to all the other rights and remedies available to Buyer under this Agreement and applicable law, all the rights
and remedies of a Secured Party under any applicable UCC, and this Agreement shall constitute a security agreement under applicable
law.

ARTICLE III

The Sold Assets

SECTION 3.1   Sold Asset Representations and Warranties.
The Seller makes the following representations and warranties as to the Sold Assets for the benefit of the Buyer, each Hedge
Counterparty and the Secured Party, on which the Buyer relies in acquiring the Initial Sold Assets (and on which the Buyer is deemed
to have relied in acquiring any additional Sold Assets, the Secured Party is deemed to have relied in making the loans and each Hedge
Counterparty is deemed to have relied in entering into its respective Hedge Agreement(s)). Such representations and warranties are
made as of each Transfer Date with respect to the Sold Assets transferred by the Seller to the Buyer on such date, unless otherwise
indicated, but shall survive the sale, transfer and assignment of the Sold Assets to the Buyer and the pledge thereof to the Secured
Party for the benefit of itself and each Hedge Counterparty pursuant to the Credit Agreement and the Auto Fund Security
Agreement.

	Fair Consideration. The consideration received and to be received by the Seller in exchange for
the assignment, transfer and contribution of the Sold Assets is (x) fair consideration having value equivalent to or in excess of the value
of the assets being transferred by the Seller to the Buyer and (y) not less than "reasonably equivalent value" as such term is used in
Section 548 of the U.S. Bankruptcy Code. Any such transfer shall not have been made for or on account of antecedent debt (as such
term is used in Section 547 of the U.S. Bankruptcy Code) owed by the Seller or any of its Affiliates to the Buyer and no such transfer is
or may be voidable under any section of the Bankruptcy Code;

	Ordinary Course. The transactions contemplated by this Agreement and the other Credit
Documents are being consummated by the Seller in furtherance of the Seller's ordinary business purposes and constitute a practical
and reasonable course of action by the Seller designed to improve the financial position of the Seller, with no contemplation of
insolvency and with no intent to hinder, delay or defraud any of its present or future creditors;

	Title. It is the intention of the Seller that any transfer and assignment herein contemplated
constitute a sale of the Sold Assets from the Seller to the Buyer and that the beneficial interest in and title to the Sold Assets not be part
of the Seller's estate in the event of the filing of a bankruptcy petition by or against the Seller under any bankruptcy or similar law. None
of the Sold Assets has been sold, transferred, assigned or pledged by the Seller to any Person other than the Buyer. Immediately prior
to the transfers and assignments herein contemplated, the Seller had good and marketable title to each Receivable and a first priority
perfected security interest in each Financed Vehicle and with respect to the other Sold Assets, the right, title and/or interest, free and
clear of all Encumbrances, except Permitted Encumbrances, and, immediately upon the transfer thereof, the Buyer shall have good and
marketable title to each Receivable and a first priority perfected security interest in each Financed Vehicle and, with respect to the other
Sold Assets, the right, title and/or interest, free and clear of all Encumbrances, except Permitted Encumbrances; and the transfer and
assignment to the Buyer of the Sold Assets has been perfected under the UCC;

	All Filings Made. All notations and filings (including UCC filings) necessary in any jurisdiction to
give the Buyer a first priority perfected ownership interest in the Sold Assets, and to give the Secured Party a first priority perfected
security interest therein have been made;

	Financed Vehicles and Receivables. With respect to the Sold Assets, the Seller hereby represents
and warrants to the Buyer as of the applicable Cutoff Date that: (i) the sale to the Buyer of the Seller's interest in such Sold
Assets transferred on such date and the assignment of the Seller's security interest in the Financed Vehicles pursuant to this
Agreement constitutes a valid transfer of all of Seller's right, title and interest in such Sold Assets, free and clear of any and all claims,
charges, liens or security interests created by the Seller or any of its Affiliates, except any Permitted Encumbrances and (ii) the
Seller did not, in the exercise of its interest in any such property, waive, discharge, release or otherwise permit any modification thereto
not in effect or agreed to at the time the Seller acquired its interest therein, except pursuant to a document, instrument or writing
included in the Receivable Files and no such amendment, waiver, alteration or modification causes such Receivable or related item of
Sold Assets not to conform to the other warranties contained in this Section;

	No Adverse Selection Procedures. The selection procedures used by the Seller in selecting any
Contract or Financed Vehicle to be included in the Sold Assets shall not intentionally discriminate against the Buyer as to type or age of
Financed Vehicle, Obligor or terms of the Contract in comparison to the Seller's entire pool of Contracts and Financed Vehicles as a
whole;

	Eligibility. Each Contract transferred by the Seller to the Buyer as a Sold Asset is, as of the
applicable Transfer Date, an Eligible Contract;

	Financial Reporting and Accounting Treatment. The Seller will treat the transfer of the Sold Assets
to the Buyer pursuant to this Agreement as either a sale or contribution, as applicable, of such Sold Assets for financial reporting and
accounting purposes, and the Seller has been advised by its independent accountants that such independent accountants agree with
such treatment;

	Bulk Transfer Act. No transfer, assignment or conveyance of the Sold Assets by the Seller to the
Buyer contemplated by this Agreement will be subject to the bulk transfer or any similar statutory provisions in effect in any applicable
jurisdiction;

	Rights to Contracts; No Violation of Contracts. The rights with
respect to each Contract transferred as a Sold Asset pursuant to this Agreement are assignable by the Seller without the consent of
any Person other than consents which will have been obtained on or before the related Transfer Date; and the transfer and conveyance
to the Buyer of the Sold Assets will not violate the terms or provisions of any Contract or any other agreement to which the Seller then
is a party or by which it is bound;

	Registration. A Certificate of Title for each Financed Vehicle has been or will be registered in the
name of the Obligor as owner and the Seller as Secured Party with each applicable department of motor vehicles;

	Casualty Loss. As of the applicable Transfer Date, to the knowledge of the Seller, no Financed
Vehicle shall have suffered a Casualty Loss;

	Dollars. All payments under each Contract are payable in Dollars;

	Receivable Files. Each Receivable File is stored in the Custodian's
offices located at 4315 Pickett Road, St. Joseph, MO 64503;

	Ordinary Course of Business. The collection practices used by the Seller or the Servicer, as the
case may be, with respect to each such Contract have been in all respects legal, proper, prudent and customary in the motor vehicle
financing and servicing business; 

	Contract Payments. Each transferred Contract provides for payment thereunder on a basis no
less frequently than monthly;

	Reserved.

	Enforceability. The operation of any of the terms of any transferred Contract or the exercise by the
Buyer, the Servicer or the Secured Party of any right under any such Contract will not render such Contract unenforceable in whole or
in part, and, to the best of the Seller's knowledge, no right of rescission, set-off, off-set, counterclaim or defense has been asserted in
writing with respect thereto;

	Form of Contract. Each transferred Contract is substantially similar, in both form and substance, to
the forms of contracts set forth as Schedules N, O and P to the Credit Agreement; and

	All Representations and Warranties True. All representations and warranties made by the Seller in
any certificate or other document delivered at the closing of the transactions contemplated by the Credit Documents (including all
representations and warranties made to Mayer, Brown, Rowe and Maw in support of its opinion letter issued and delivered in
connection with the issuance of the Note and each of the factual assumptions contained in such opinions to the extent compliance with
such assumptions is in the control of the Seller) are true and correct in all material respects.

	Obligor Insurance. Each Contract and the Seller requires, in accordance with its customary
origination policies and procedures, that each Financed Vehicle be insured by the related Obligor under insurance policies providing
physical damage and bodily injury/physical damage liability or similar coverage with respect to the Financed Vehicle or the
Obligor.

	Eligible Non-Franchise Dealer. Each Eligible Non-Franchise Dealer has been approved based on
the Non-Franchise Dealer Procedures attached as Exhibit B to this Agreement.

SECTION 3.2   Repurchase upon Breach. 

	The Seller or
the Buyer, as the case may be, shall (and each Hedge Counterparty, the Servicer or the Secured Party, as the case may be, may)
inform the other parties promptly, in writing, upon the discovery of any breach of the Seller's representations, warranties or covenants
made pursuant to any of Sections 3.1, 4.2(d), 4.2(f), or 4.2(g) as to a particular Contract. Unless any such breach
shall have been cured by the last day of the Monthly Period after such breach is discovered by a Hedge Counterparty, the Servicer, the
Seller, the Buyer, a Lender or the Secured Party or in which each Hedge Counterparty, the Servicer, the Seller, the Buyer and the
Secured Party receives written notice of such breach, the Seller shall be obligated to repurchase on the Payment Date following the
earlier of discovery by the Seller of such breach and notice to the Buyer of such breach any Receivable adversely affected by any such
breach as of such last day. Subject to the provisions of Section 4.4, the sole remedy of the Buyer, the Secured Party or a Hedge
Counterparty with respect to a breach of the representations, warranties or covenants made pursuant to any of Sections 3.1,
4.2(d), 4.2(f) or 4.2(g) as to a particular Contract and the agreement contained in this Section 3.2 shall be to require
the Seller to repurchase the related Receivable pursuant to this Section, subject to the conditions contained
herein.

	With respect to all Receivables repurchased by the Seller pursuant to this Agreement, the Buyer shall sell,
transfer, assign, set over and otherwise convey to the Seller, without recourse, representation or warranty, all of the Buyer's right, title
and interest in, to and under such Receivables, the related Sold Assets, and all security and documents relating thereto.

ARTICLE IV

The Seller

SECTION 4.1   Representations and Warranties of
Seller. The Seller makes the following representations and warranties as to itself on which the Buyer relies in acquiring
the Initial Sold Assets (and on which the Buyer is deemed to have relied in acquiring any additional Sold Assets), the Secured Party is
deemed to have relied in making the loans and each Hedge Counterparty is deemed to have relied in entering into its respective Hedge
Agreement(s). The representations and warranties speak as of the execution and delivery of this Agreement and each Transfer Date
and shall survive the sale of the Receivables and the other Sold Assets to the Buyer and the pledge thereof to the Secured Party for the
benefit of itself and each Hedge Counterparty pursuant to the Credit Agreement and the Auto Fund Security
Agreement.

	Organization and Good Standing. The Seller is duly organized and validly existing as a
corporation in good standing, and is a "registered organization" (within the meaning of the UCC) organized under the laws of the State
of Delaware, with the corporate power and authority to own its properties and to conduct its business as such properties are currently
owned and such business is presently conducted, and had at all relevant times, and has, the corporate power, authority and legal right
to acquire, own and sell the Receivables and the other Sold Assets.

	Due Qualification. The Seller is duly qualified to do business as a foreign corporation in good
standing, and has obtained all necessary licenses, permits, franchises, government authorizations and approvals, in all jurisdictions in
which the ownership or lease of property, the enforcement of the Receivables or its rights in the Financed Vehicles and the other Sold
Assets or the conduct of its business shall require such qualifications (except where the failure to be so qualified, in good standing or to
have obtained such licenses, permits, franchises, government authorizations and approvals would not individually or in the aggregate
have a Material Adverse Effect.

	Power and Authority. The Seller has the power and authority to execute and deliver this
Agreement and to carry out its terms; the Seller has full power and authority to sell and assign the property to be sold and assigned to
and deposited with the Buyer and has duly authorized such sale and assignment to the Buyer by all necessary corporate action; and
the execution, delivery and performance of this Agreement have been duly authorized by the Seller by all necessary corporate
action.

	Binding Obligation. Each of this Agreement and the Seller Assignment constitutes a legal, valid
and binding obligation of the Seller enforceable in accordance with their terms except as enforcement of such terms may be limited by
bankruptcy, insolvency, moratorium or other similar laws affecting the rights of creditors generally and by equitable principles
(regardless of whether such enforceability is in a proceeding in equity or at law).

	No Violation. The consummation of the transactions contemplated by this Agreement and the
fulfillment of the terms hereof do not:

	conflict with, result in any breach of any of the terms and provisions of, or constitute (with or without notice
or lapse of time) a default under, the certificate of incorporation or by-laws of the Seller, or any indenture, agreement or other
instrument to which the Seller is a party or by which it or any of its properties are bound; nor 

	result in the creation or imposition of any Encumbrance upon any of its properties pursuant to the terms of
any such indenture, agreement or other instrument (other than the Credit Documents to which it is a party); provided, however,
that the Seller shall not be in violation of this Section 4.1(e)(ii), on any date of calculation, if Encumbrances not exceeding an aggregate
amount of $250,000 have been created or imposed with respect to its properties and not then discharged; nor 

	violate any court order, law or, to the best of the Seller's knowledge, any order, rule or regulation applicable
to the Seller of any court or of any Federal or state regulatory body, administrative agency or other governmental instrumentality having
jurisdiction over the Seller or its properties.

	No Proceedings. There are no proceedings or investigations pending or, to the Seller's best
knowledge, threatened, against the Seller before any court, regulatory body, administrative agency or other governmental
instrumentality having jurisdiction over the Seller or its properties: (i) asserting the invalidity of this Agreement, the Credit Agreement or
any of the other Credit Documents or the Note, (ii) seeking to prevent the issuance of the Note or the consummation of any of the
transactions contemplated by this Agreement, the Credit Agreement or any of the other Credit Documents, (iii) seeking any
determination or ruling that would reasonably be expected to materially and adversely affect the performance by the Seller of its
obligations under, or the validity or enforceability of, this Agreement, the Credit Agreement, any of the other Credit Documents or the
Note or (iv) that would adversely affect the income tax treatment of the Note.

	Compliance with Law. The Seller:

	is not in violation of (A) any laws, ordinances, governmental rules or
regulations, or (B) court orders to which it is subject;

	has not failed to obtain any licenses, permits, franchises or other
governmental authorizations necessary to the ownership of its property or to the conduct of its business including, without limitation,
with respect to transactions contemplated by this Agreement and the other Credit Documents to which it is a party; and

	is not in violation in any respect of any term of any agreement, or other
instrument to which it is a party or by which it may be bound; 

which violation or failure to obtain (as referenced in clause (i), (ii) or (iii) above) could reasonably be expected
to, individually or in the aggregate, materially and adversely affect: (A) the business or financial condition of the Seller individually, or
the Seller and its subsidiaries (if any) taken as a whole, (B) the ability of the Seller to perform any of its obligations hereunder or under
any other Credit Document to which it is a party, (C) any Contract or the enforceability thereof or the interest of the Buyer or the
Secured Party therein or in any other Sold Asset such that the aggregate Discounted Contract Balance of all the affected Contracts plus
the aggregate face value of all the other affected Sold Assets would exceed an aggregate amount of $250,000, or (D) the enforceability
of this Agreement or any other Credit Document to which it is a party;

	Financial Statements. The Current Financials were prepared in accordance with GAAP and
present fairly the financial condition and the result of operations of Seller as of, and for the portion of the fiscal year ending on, the date
or dates thereof. All material liabilities (direct or indirect, fixed or contingent) of Seller as of the date or dates of the Current Financials
are reflected therein or in the notes thereto. Between the date or dates of the Current Financials and the date hereof, there has been no
material adverse change in the financial condition of Seller, nor has Seller incurred any material liability (direct or indirect, fixed or
contingent). 

Seller does not have any material liabilities or obligations other than those disclosed in the financial statements
referred to in the preceding paragraph or for which adequate reserves are reflected in such financial statements;

	Defaults. The Seller is not in default with respect to any Debt
or any other contractual obligation that could reasonably be expected to, individually or in the aggregate, materially and adversely
affect: (A) the business or financial condition of the Seller individually, or the Seller and its subsidiaries (if any) taken as a whole, (B) the
ability of the Seller to perform any of its obligations hereunder or under any other Credit Document to which it is a party, (C) any
Contract or the enforceability thereof or the interest of the Buyer or the Secured Party therein or in any other Sold Asset such that the
aggregate Discounted Contract Balance of all the affected Contracts plus the aggregate face value of all the other affected Sold Assets
would exceed an aggregate amount of $250,000, or (D) the enforceability of this Agreement or any other Credit Document to which it is
a party;

	Insolvency; Fraudulent Conveyance. The Seller is paying its debts as they become due and is not
"insolvent" within the meaning of any applicable Insolvency Law in that:

	both immediately before and after giving effect to each assignment, transfer
and contribution of the Sold Assets, the present value of the Seller's assets will be in excess of the amount that will be required to pay
the Seller's probable liabilities as they then exist and as they become absolute and matured; and

	both immediately before and after giving effect to each assignment, transfer and contribution of the Sold
Assets, the sum of the Seller's assets will be greater than the sum of the Seller's debts, valuing the Seller's assets at a fair market
value.

SECTION 4.2   Covenants of Seller. The
Seller hereby covenants to the Buyer, the Merrill Counterparty and the Secured Party that:

	Seller shall furnish to Secured Party and/or each Hedge Counterparty such information as reasonably
requested by Secured Party and/or such Hedge Counterparty. Additionally, Seller shall cause the following to be furnished to Secured
Party:

	As soon as available, but no later than one hundred five (105) days after the last day of each fiscal year of
Seller, unqualified audited Financial Statements showing the financial condition and result of operations of Seller as of, and for the year
ended on, such last day, accompanied by (i) the opinion of a firm of independent certified public accountants acceptable to Secured
Party, based on an audit using GAAP, that such Financial Statements were prepared in accordance with GAAP and present fairly the
financial condition and result of operations of Seller, and (ii) a Financial Report Certificate with respect to such Financial
Statements.

	As soon as available, but no later than thirty (30) days after the last day of each calendar month (i)
unaudited Financial Statements (balance sheet, income statement and cash flow statement only) showing the financial condition and
results of operations of Seller as of, and for the period from the beginning of the current fiscal year, to such last day, for the same time
period (ii) a Financial Report Certificate with respect to such Financial Statements. 

	As soon as available, but no later than five (5) Business Days after the last day of each calendar month, a
summary of Contracts originated. 

	Notice, promptly after Seller knows or has good faith reason to believe, of (i) the existence and status of
any litigation with respect to Seller which could have a Material Adverse Effect, (ii) any change in any material fact or circumstance
represented or warranted in any Credit Document or Loan Document, and/or (iii) a Pending Event of Default or Event of Default,
specifying the nature thereof and what action Seller has taken, is taking, or proposes to take with respect thereto.

	Promptly, but within ten (10) Business Days upon request therefor by Secured Party and/or a Hedge
Counterparty, such information (not otherwise required to be furnished under the Credit Documents) respecting the business affairs,
assets and liabilities of Seller, Buyer or any Person guaranteeing or providing Collateral to secure all or any part of the Obligations and
such opinions, certifications and documents, in addition to those mentioned in this Agreement, as Secured Party and/or such Hedge
Counterparty may reasonably request.

	As soon as available after the last day of each calendar month, (A) a loan aging summary with respect to
the Contracts, in form and substance acceptable to the Secured Party and (B) a Monthly Servicer Report substantially in the form
attached to the Credit Agreement as Schedule F.

	If any Obligor under a Contract ever substitutes, adds to or exchanges any Financed Vehicle or other
collateral subject to such Contract, Seller shall promptly deliver, or cause to be delivered, any new certificate of title, chattel paper
and/or any other documents or instruments related to such substitution, addition or exchange to the Custodian and shall take all
additional steps as shall be required to preserve the Secured Party's first priority security interest in such Collateral.

	Seller shall pay or reimburse, on a timely basis, the Secured Party for all out-of-pocket fees, costs and
expenses incurred by Secured Party, any Hedge Counterparty or their respective third parties selected by them in connection with the
execution of the transactions contemplated by the Credit Documents, including, without limitation, a third party to perform agreed upon
procedures reviews, whether or not the transactions contemplated by the Credit Documents are consummated; provided that the
Seller's reimbursement obligation with respect to the Secured Party's attorney's fees shall be limited as set forth to Section 12.7.1 of the
Credit Agreement.

	Seller shall deliver, or cause to be delivered, to the Custodian (to be stored in the related Receivable File)
the original Certificate of Title for each Financed Vehicle comprising the Sold Assets not later than 240 days after the related Transfer
Date thereof.

	Seller shall cause all Sold Assets sold to the Buyer on any one Transfer Date to be earmarked by the
Servicer and tracked separately as a tranche (each, a "Tranche"); and Seller shall cause each Monthly Servicer Report to set forth the
agreed upon information relating to each Tranche independent of any other Tranche.

	As of the related Transfer Date, no Contract shall be the subject of an uncured reversal of funds transfer
from its related Dealer or Eligible Non-Franchise Dealer to the Seller pursuant to a PowerCheck®.

	The Seller shall deliver the related Receivable File for each Contract included in the Sold Assets to the
Custodian, and shall cause the Custodian to deliver to the Secured Party an Acknowledgement of Custodian evidencing receipt by the
Custodian of all such Receivable Files, in each case, on or before the related Transfer Date.

SECTION 4.3   Corporate Existence. 

	During the term of this Agreement, the Seller will keep in full force and effect
its existence, rights and franchises as a corporation under the laws of the jurisdiction of its incorporation and will obtain and preserve its
qualification to do business in each jurisdiction in which such qualification is or shall be necessary to protect the validity and
enforceability of this Agreement, the Credit Documents and each other instrument or agreement necessary or appropriate to the proper
administration of this Agreement and the transactions contemplated hereby. 

	During the term of this Agreement, the Seller, individually and in its capacity as Originator, shall observe
the applicable legal requirements for the recognition of the Seller as a legal entity separate and apart from the Buyer, including as
follows:

	the Seller shall maintain corporate records and books of account separate from those of the
Buyer;

	except as otherwise provided in this Agreement and similar arrangements relating to securitizations, the
Seller shall not commingle its assets and funds with those of the Buyer;

	the Seller shall hold such appropriate meetings or obtain such appropriate consents of its Board of
Directors as are necessary to authorize all the Seller's corporate actions required by law to be authorized by the Board of Directors,
shall keep minutes of such meetings and of meetings of its stockholder(s) and observe all other customary corporate
formalities;

	the Seller shall at all times hold itself out to the public under the Seller's own name as a legal entity
separate and distinct from the Buyer; and

	all transactions and dealings between the Seller and the Buyer will be conducted on an arm's-length
basis.

SECTION 4.4   Liability of Seller;
Indemnities. The Seller shall be liable in accordance herewith only to the extent of the obligations specifically undertaken
by the Seller under this Agreement.

The Seller shall indemnify, defend and hold harmless, on an after tax basis, the
Buyer, the Secured Party and their respective successors and assigns (and any officers, directors, employees and agents of the
foregoing) from and against (a) any taxes that may at anytime be asserted against any of them with respect to the sale of the
Receivables and the other property transferred hereunder to the Buyer or the issuance and original sale of the Note, including any
sales, gross receipts, general corporation, tangible personal property, privilege or license taxes (but, in the case of the Buyer, not
including any taxes asserted with respect to ownership of the Receivables or Federal or other income taxes arising out of the
transactions contemplated by this Agreement) and costs and expenses in defending against the same and (b) any loss, costs,
expenses, damages, claims and liabilities and for all other amounts payable, including reasonable attorney's fees and disbursements
awarded against or incurred by any of them by reason of: (i) the Seller's willful misfeasance, bad faith or negligence in the performance
of its duties under this Agreement or any other Credit Document or any Contract, or by reason of reckless disregard of its obligations
and duties under this Agreement or any other Credit Document or any Contract, and (ii) any Insolvency Event that occurs with respect
to the Seller.

Indemnification under this Section shall survive the termination of this Agreement and the Credit Agreement and
shall include reasonable fees and expenses of counsel (including allocated costs of internal counsel) and expenses of litigation. If the
Seller shall have made any indemnity payments pursuant to this Section and the Person to or on behalf of whom such payments are
made thereafter shall collect any of such amounts from others, such Person shall promptly repay such amounts to the Seller, without
interest.

SECTION 4.5   Merger or Consolidation of, or
Assumption of the Obligations of, Seller. Any Person: (a) into which the Seller may be merged or consolidated, (b) that
may result from any merger or consolidation to which the Seller shall be a party or (c) that may succeed to the properties and assets of
the Seller substantially as a whole, shall execute an agreement of assumption to perform every obligation of the Seller under this
Agreement and, whether or not such assumption agreement is executed, shall be the successor to the Seller hereunder without the
execution or filing of any document or any further act by any of the parties to this Agreement; provided, however, that: (i)
immediately after giving effect to such transaction, no representation or warranty made pursuant to Section 3.1 shall have been
breached, (ii) the Seller shall have delivered to the Buyer, each Hedge Counterparty and the Secured Party an Officers' Certificate and
an Opinion of Counsel each stating that such consolidation, merger or succession and such agreement of assumption comply with this
Section 4.5 and that all conditions precedent, if any, provided for in this Agreement relating to such transaction have been
complied with, that all financing statements and continuation statements and amendments thereto shall have been executed and filed
that are necessary, and that no new Certificates of Title are required to be issued under applicable law to fully preserve and protect the
interest of the Buyer, each Hedge Counterparty and the Secured Party in the Sold Assets, and reciting the details of such filings, or
stating that no such action shall be necessary to preserve and protect such interest, and (iii) the Seller shall have delivered to the
Buyer, each Hedge Counterparty and the Secured Party an Opinion of Counsel or Opinions of Counsel regarding substantive
consolidation of such Person with the Buyer in the event of a bankruptcy filing by such Person which is substantially similar to the
opinion of counsel provided by Seller on May 17, 2005, and which may be subject to similar assumptions and qualifications as that
opinion.

SECTION 4.6   Limitation on Liability of Seller and
Others. The Seller and any director, officer, employee or agent of the Seller may rely in good faith on the advice of
counsel or on any document of any kind prima facie properly executed and submitted by any Person respecting any matters
arising hereunder. The Seller shall not be under any obligation to appear in, prosecute or defend any legal action that shall not be
incidental to its obligations under this Agreement, and that in its opinion may involve it in any expense or
liability.

ARTICLE V

[Reserved]

 

ARTICLE VI

Miscellaneous Provisions

SECTION 6.1   Amendment. This
Agreement may be amended from time to time by a written amendment duly executed and delivered by the Seller and the Buyer, with
the prior written consent of the Secured Party.

SECTION 6.2   Protection of Collateral.

	The Seller shall execute and file such financing statements, and cause to be executed and filed such
continuation statements, all in such manner and in such places as may be required by applicable law fully to preserve, maintain and
protect the right, title and interest of the Buyer and the interests of the Secured Party and the Lenders in the Receivables, the other
Sold Assets and in the proceeds thereof. The Seller shall deliver (or cause to be delivered) to the Secured Party file-stamped copies of,
or filing receipts for, any document filed as provided above as soon as available following such filing. The Buyer and the Secured Party
shall cooperate fully with the Seller in connection with the obligations set forth above and will execute any and all documents
reasonably required to fulfill the intent of this paragraph.

	The Seller shall not change its name, identity, location of organization, status as a "registered organization"
or corporate structure in any manner that makes any financing statement or continuation statement filed in accordance with
paragraph (a) seriously misleading within the applicable provisions of the UCC, unless (i) it shall have given the Secured Party
at least thirty (30) days' prior written notice thereof and (ii) shall have promptly filed appropriate amendments to all previously filed
financing statements or continuation statements as may be required to preserve and protect the Buyer's and the Secured Party's
security interest in the Sold Assets. The Seller shall pay all filing fees or taxes payable in respect of any UCC financing or continuation
statements required to be filed pursuant to this Section 6.2(b).

	If at any time the Seller shall propose to sell, grant a security interest in, or otherwise transfer any interest in
motor vehicles or the related receivables or contracts to any prospective purchaser, Secured Party or other transferee, the Seller shall
give to such prospective purchaser, Secured Party or other transferee computer tapes, records or printouts (including any restored from
backup archives) that, if they shall refer in any manner whatsoever to any Receivable or other Sold Assets, shall indicate clearly that
such Receivable and the other Sold Assets has been sold and is owned by the Buyer and has been pledged to the Secured
Party.

	The Seller shall permit the Secured Party, each Hedge Counterparty and their respective agents at any
time upon two (2) Business Days prior written notice (provided that if an Excess Spread Deficiency, a Swap Spread Deficiency,
a Pending Event of Default or an Event of Default shall have occurred and then be continuing, no such notice shall be required) during
normal business hours to inspect, audit and make copies of and abstracts from the Seller's records regarding any Receivable and the
other Sold Assets. The Seller shall only bear the expenses incident to the exercise by the Secured Party, any Hedge Counterparty or
their respective agents of their rights under this Section once per calendar year for each such entity (unless the Secured Party and
Hedge Counterparty are Affiliates) unless an Excess Spread Deficiency, a Swap Spread Deficiency, a Pending Event of Default or an
Event of Default shall have occurred and then be continuing in which case all such expenses for any number of inspections, audits or
copies shall be borne by the Seller.

	Upon request, the Seller shall furnish to a Lender, the Secured Party and/or any requesting Hedge
Counterparty, within five (5) Business Days, a list of all Receivables (by contract number and name of Obligor) and the other Sold
Assets then held as assets of the Buyer, together with a reconciliation of such list to the Schedules of Receivables attached to the
Seller Assignments furnished before such request.

SECTION 6.3   Notices. All notices,
requests and other communications to be given hereunder shall be in writing and shall be given to such party at its address or fax
number set forth below or such other address or fax number as such party may hereafter specify by notice to Secured Party and Buyer.
Each such notice, request or other communication shall be effective (i) if given by fax during the business hours of the party receiving
notice, when transmitted to the fax number specified in this Section and, on the day of transmittal thereof, a confirmation of receipt
(which may be telephonic) is given by the recipient and in any event no later than the next business day, (ii) if given by mail, on the third
day after such communication is deposited in the mails with first class postage prepaid, addressed as aforesaid or (iii) if given by any
other means (including, without limitation, by air courier), when delivered at the address specified in this Section; provided that
notices given under this subsection (iii) shall not be effective until received by the respective addressee. All notices shall also be given,
simultaneously and in like manner, to such party's legal counsel at its address or fax number set forth below or such other address or
fax number as such party may hereafter specify by notice to the other parties.

	
As to Buyer:
	
With a Copy to:

	
 

	
E-Loan Auto Fund Two, LLC

   6230 Stoneridge Mall Road

   Pleasanton, CA 94588

   Telephone: (925) ___-____Telephone: (925) ___-____

   Facsimile No: (925) 520-6200

   Attn: Mark Lefanowicz, COO

	
E-LOAN, Inc.

   6230 Stoneridge Mall Road

   Pleasanton, CA 94588

   Telephone: (925) ___-____

   Facsimile No: (925) 520-1099

   Attn: Edward A. Giedgowd, General Counsel

	
 

	
As to Seller:
	
With a Copy to:

	
 

	
E-Loan, Inc.

   6230 Stoneridge Mall Road

   Pleasanton, CA 94588

   Telephone: (925) ___-____

   Facsimile No: (925) 520-6200

   Attn: Mark Lefanowicz, COO

	
E-LOAN, Inc.

   6230 Stoneridge Mall Road

   Pleasanton, CA 94588

   Telephone: (925) ___-____

   Facsimile No: (925) 520-1099

   Attn: Edward A. Giedgowd, General Counsel

	
 

	
As to Secured Party:
	
With a Copy to:

	
 

	
Merrill Lynch Commercial Finance Corp. Merrill Lynch Commercial Finance Corp.

   4 World Financial Center, 10th Floor

   New York, NY 10080

   Telephone: (212) 449-9369

   Telefax: (212) 449-6673

   Attn: Jeffrey S. Cohen

	
Merrill Lynch Mortgage Capital Inc.

   4 World Financial Center, 16th Floor

   New York, NY 10080

   Telephone: (212) 449-7173

   Telefax: (212) 738-2666

   Attn: Chris Czako

	
 

	
As to Merrill Counterparty:
	
With a Copy to:

	
 

	
Merrill Lynch Commercial Finance Corp. Merrill Lynch Commercial Finance Corp.

   4 World Financial Center, 10th Floor

   New York, NY 10080

   Telephone: (212) 449-9369

   Telefax: (212) 449-6673

   Attn: Jeffrey S. Cohen

	
Merrill Lynch Mortgage Capital Inc.

   4 World Financial Center, 16th Floor

   New York, NY 10080

   Telephone: (212) 449-7173

   Telefax: (212) 738-2666

   Attn: Chris Czako

	
 

	
As to Servicer:
	
With a Copy to:

	
 

	
Systems & Services Technologies, Inc.

   4315 Pickett Road

   St. Joseph, MO 64503

   Telephone: (816) 671-2029

   Telefax: (816) 671-2029

   Attn: John J. Chappell, President

	
Systems & Services Technologies, Inc.

   4315 Pickett Road

   St. Joseph, MO 64503

   Telephone: (816) 671-2028

   Telefax: (816) 671-2029

   Attn: Joseph D. Booz, General Counsel

SECTION 6.4   Assignment.
Notwithstanding anything to the contrary contained herein, except as provided in the Credit Agreement or Section 4.5 hereof,
this Agreement may not be assigned by the Seller or the Buyer.

SECTION 6.5   Limitations on Rights of
Others. The provisions of this Agreement are solely for the benefit of the Seller, the Buyer, each Hedge Counterparty and
the Secured Party and nothing in this Agreement, whether express or implied, shall be construed to give to any other Person any legal
or equitable right, remedy or claim in the Collateral or under or in respect of this Agreement or any covenants, conditions or provisions
contained herein.

SECTION 6.6   Severability. Any
provision of this Agreement that is or becomes prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other
jurisdiction.

SECTION 6.7   Separate 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 shall together constitute but one and the same instrument.

SECTION 6.8   Headings. The headings
of the various Articles and Sections herein are for convenience of reference only and shall not define or limit any of the terms or
provisions hereof.

SECTION 6.9   Governing Law. THIS
AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK,
WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS; PROVIDED, THAT SECTIONS 5-1401 AND 5-1402 OF
THE NEW YORK GENERAL OBLIGATIONS LAW SHALL APPLY, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE
PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.

SECTION 6.10   Assignment to Secured
Party. The Seller hereby acknowledges and consents to any mortgage, pledge, assignment and grant of a security
interest by the Buyer to the Secured Party pursuant to the Credit Agreement of all right, title and interest of the Buyer in, to and under
the Receivables, the other Sold Assets and the assignment of any or all of the Buyer's rights and obligations hereunder to the Secured
Party.

SECTION 6.11   No Petition. 

	By entering into this Agreement, the Seller hereby covenants and agrees that it
will not at any time institute against the Buyer, or solicit or join in or cooperate with or encourage any institution against the Buyer of,
any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings, or other proceedings under any United States
Federal or State bankruptcy or similar law in connection with any obligations relating to the Note, this Agreement or any of the Credit
Documents. The foregoing shall not (i) limit the rights of the Seller to file any claim in or otherwise take any action with respect to any
insolvency proceeding that was instituted against the Buyer by any Person other than the Seller, or (ii) require the Seller to resist any
legal process.

	By entering into this Agreement, the Buyer hereby covenants and agrees that it will not at any time institute
against the Seller, or solicit or join in or cooperate with or encourage any institution against the Seller of, any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings, or other proceedings under any United States Federal or State
bankruptcy or similar law in connection with any obligations relating to the Note, this Agreement or any of the Credit Documents. The
foregoing shall not (i) limit the rights of the Buyer to file any claim in or otherwise take any action with respect to any insolvency
proceeding that was instituted against the Seller by any Person other than the Buyer, or (ii) require the Buyer to resist any legal
process.

SECTION 6.12   Submission to Jurisdiction; Waivers.

EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY: 

	SUBMITS ITSELF AND ITS PROPERTY TO THE NON-EXCLUSIVE GENERAL JURISDICTION OF THE
COURTS OF THE STATE OF NEW YORK, THE FEDERAL COURTS OF THE UNITED STATES OF AMERICA FOR THE
SOUTHERN DISTRICT OF NEW YORK OR ANY OTHER FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE
CITY OF NEW YORK AND APPELLATE COURTS FROM ANY THEREOF;

	CONSENTS THAT ANY ACTION OR PROCEEDING RELATING TO THE TRANSACTIONS
CONTEMPLATED BY OR ARISING FROM, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT IN RESPECT OF,
THE CREDIT DOCUMENTS MAY BE BROUGHT IN SUCH COURTS;

	WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH
ACTION OR PROCEEDING IN ANY SUCH COURT OR THAT SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN
INCONVENIENT COURT AND AGREES NOT TO PLEAD OR CLAIM THE SAME;

	AGREES THAT ANY SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING MAY BE
EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM
OF MAIL), POSTAGE PREPAID, TO ITS ADDRESS SET FORTH HEREIN OR AT SUCH OTHER ADDRESS OF WHICH EACH OF
THE OTHER PARTIES HERETO SHALL HAVE BEEN NOTIFIED IN ACCORDANCE WITH THE TERMS AND CONDITIONS OF THIS
AGREEMENT; PROVIDED THAT FOR THE AVOIDANCE OF DOUBT, EACH PARTY AGREES THAT ANY SERVICE OF
PROCESS ON THE BUYER SHALL BE SENT TO THE ADDRESS SET FORTH IN SECTION 4 OF ITS LIMITED LIABILITY
COMPANY AGREEMENT; AND

	AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO EFFECT SERVICE OF PROCESS
IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT TO SUE IN ANY OTHER
JURISDICTION.

SECTION 6.13   Waiver OF Jury Trial. EACH OF THE PARTIES
HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, ANY AND ALL RIGHT TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT AND THE OTHER CREDIT DOCUMENTS OR THE TRANSACTIONS CONTEMPLARED HEREBY OR THEREBY OR
ARISING HEREUNDER OR THEREUNDER.

[Signature page follows.]

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their
respective officers as of the day and year first above written.
E-LOAN AUTO FUND TWO, LLC

By: ____________________________

Name: _____________________________

Title: ____________________________

E-LOAN, INC.

By: ____________________________

Name: _____________________________

Title: ____________________________

EXHIBIT A

to Contribution and Sale Agreement

FORM OF SELLER ASSIGNMENT

For value received, in accordance with and subject to the Contribution and Sale Agreement, dated as of May 1,
2005 (the "Contribution and Sale Agreement"), between the undersigned (the "Seller") and E-LOAN Auto Funding One,
LLC (the "Buyer"), the undersigned does hereby sell, assign, transfer set over and otherwise convey unto the Buyer, without
recourse, all of its right, title and interest in, to and under: (a) the Receivables listed on Schedule I attached hereto, including all
documents constituting chattel paper included therewith, and all obligations of the Obligors thereunder, including all rights to payment
and moneys paid thereunder on or after the applicable Cutoff Date, and the related Receivable Files, (b) the security interests or
Encumbrances in the Financed Vehicles or any other property granted by Obligors pursuant to the Receivables and any other interest
of the Seller in such Financed Vehicles or other property, together with any and all interests of the Seller in any and all security interests
granted in connection with such Receivables, Financed Vehicles or other property, (c) all guarantees or other credit support supporting
or securing payment of any amount due under a Receivable and any proceeds with respect to the Receivables from any guaranties or
other credit support or claims on insurance policies covering Financed Vehicles or Obligors, (d) any agreements with a Dealer, Eligible
Non-Franchise Dealer or manufacturer of a Financed Vehicle to the extent any such agreement relates to such Financed Vehicle and
any payments, income and proceeds from recourse to Dealers, Eligible Non-Franchise Dealers or manufacturers with respect to the
Receivables, and (e) all present and future claims, demands, causes and choses in action in respect of any or all of the foregoing and
all payments on or under, income from and all proceeds of every kind and nature whatsoever in respect of any or all of the foregoing,
including all proceeds of the conversion, voluntary or involuntary, into cash or other liquid property, all cash proceeds, accounts,
accounts receivable, notes, drafts, acceptances, chattel paper, checks, deposit accounts, insurance proceeds, condemnation awards,
payment intangibles, general intangibles, rights to payment of any and every kind and other forms of obligations and receivables,
instruments and other property that at any time constitute all or part of or are included in the proceeds of any and all of the foregoing.
The foregoing sale does not constitute and is not intended to result in any assumption by the Buyer of any obligation of the undersigned
to the Obligors, insurers or any other person in connection with the Receivables, the other Sold Assets, Receivables Files, any
insurance policies or any agreement or instrument relating to any of them.

This Seller Assignment is made pursuant to and upon the representations, warranties and agreements on the
part of the undersigned contained in the Contribution and Sale Agreement and is to be governed in all respects by the Contribution and
Sale Agreement. Capitalized terms used herein and not otherwise defined shall have the meanings assigned to them Schedule A of the
Credit Agreement, dated as of May 1, 2005, among the Buyer, the Seller and Merrill Lynch Commercial Finance Corp. , as Secured
Party thereunder, as the same may be supplemented, amended or otherwise modified from time to time in accordance with its
terms.

IN WITNESS WHEREOF, the undersigned has caused this Seller Assignment to be duly executed as of this __
day of ________, 20__.
E-LOAN, INC.,

By:____________________________________

Name:

Title:

Schedule I

[Attach List of Receivables]

EXHIBIT B

 to the Contribution and Sale Agreement

Non-Franchise Dealer Procedures

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