Document:

EX-10.1

Exhibit 10.1

STOCK PURCHASE AGREEMENT

by and between

METALICO, INC.

“Buyer”

and

THE STOCKHOLDERS OF

TOTALCAT GROUP, INC.

“Stockholders”

June 25, 2007

1

STOCK PURCHASE AGREEMENT

This Stock Purchase Agreement (this “Agreement”) is entered into as of June 25, 2007, by and
between METALICO, INC., a Delaware corporation (“Buyer”), and the stockholders signatory hereto
(collectively, “Stockholders” and each individually a “Stockholder”) of TOTALCAT GROUP, INC., a
Delaware corporation (the “Company”; collectively, with Buyer and Stockholders, the “Parties” and
each individually a “Party”).

RECITALS

This Agreement contemplates a transaction in which Buyer shall purchase 82.5% of the issued
and outstanding stock of the Company (the “Company Stock”) in return for cash and other
consideration set forth herein.

STATEMENT OF AGREEMENT

Now, therefore, in consideration of the premises and the mutual promises herein made, and in
consideration of the representations, warranties, and covenants herein contained, the Parties agree
as follows.

1. DEFINITIONS

“Accounts Receivable” has the meaning set forth in §3.10 below.

“Act” has the meaning set forth in §5.1 below.

“Advanced Nano” means Advanced Nano-Catalyst Materials, LLC, a Delaware limited liability
company jointly owned by Nanostellar (which holds 51% of the company’s membership interests) and
Hypercat Coating (which holds 49% of the company’s equity).

“Adverse Consequences” means all costs incurred in the defense or prosecution of all claims,
Proceedings, charges, and demands, and all damages associated with all Orders, penalties, fines,
costs, amounts paid in settlement, obligations, Taxes, liens, losses, expenses, and fees, including
court costs and reasonable attorneys’ fees and expenses.

“Affiliate” means a Person that directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, the Person specified.

“Appreciated Price” means the average daily closing price for Buyer’s common stock on the
American Stock Exchange for the twenty (20) consecutive Trading Days ending on the day before the
second anniversary of the Closing Date.

“Arbitration Referral Period” has the meaning set forth in §9.6 below.

“Assets” means all right, title, and interest in and to all of the assets of and used in the
Business, including without limitation, all assets set forth in Schedule A attached hereto
and all tangible and intangible real and personal property of the Company and its Subsidiaries
(such as, without limitation, Business Equipment, inventory, inventories of materials and supplies,
computers, real property and leaseholds, together with buildings and improvements thereon,
manufactured furniture, automobiles, trucks, tractors, trailers, containers, wagons, spare parts,
leases, subleases and rights thereunder, Marks and other intellectual property owned or licensed by
or on behalf of the Company, agreements, contracts and contract rights, securities, equity
interests (including, without limitation, all interests in Advanced Nano), cash, accounts
receivable, accounts, deposit accounts maintained by or on behalf of the Company, notes, and other
receivables, claims, deposits, prepayments, refunds, causes of action, rights of recovery, rights
of set off and rights of recoupment, Governmental Authorizations, variances and similar rights
obtained from Governmental Bodies, customer lists, customer accounts, books, records, ledgers,
files, documents, correspondence and lists).

“Assumed Debt” means an amount not exceeding $3,000,000 consisting of (i) the amount of the
liabilities set forth on the Interim Financial Statements and (ii) any additional drawdowns on the
Company’s line of credit with Northfork Bank. For purposes of this definition, the Company’s
liabilities or debts shall mean any and all loans, notes, mortgages, capital leases and operating
leases, and will not mean any trade accounts payable or accrued expenses.

“Basis” means any past or present fact, situation, circumstance, status, condition, activity,
practice, plan, occurrence, event, incident, action, failure to act, or transaction that forms or
could form the basis for any specified consequence.

“Benefit Arrangement” has the meaning set forth in §3.16(i) below.

“Business” means all of the Company’s operating divisions and businesses as constituted as of
the date of this Agreement, including without limitation the businesses and operations of Hypercat
Coating, Federal AutoCat, Recycalytics, and Hypercat DMG.

“Business Equipment” means all machinery, equipment, vehicles, tools, supplies, and other
similar tangible personal property used or maintained by the Company or its Subsidiaries in the
operation of the Business.

“Business Records” has the meaning set forth in §9.1 below.

“Buyer” has the meaning set forth in the preface above.

“Buyer’s Advisors” has the meaning set forth in §7.1 below.

“Buyer’s Release” has the meaning set forth in §2.6(b)(ii) below.

“Call Notice” has the meaning set forth in §2.3(a) below.

“Call Price” has the meaning set forth in §2.3(a) below.

“Cash Component” has the meaning set forth in §2.4(a) below.

“Closing” has the meaning set forth in §2.5 below.

“Closing Date” has the meaning set forth in §2.5 below.

“Code” means the Internal Revenue Code of 1986 as amended or any successor law and any
regulation issued by the Internal Revenue Service pursuant to the Internal Revenue Code of 1986 or
any successor law.

“Collection Actions A/R” has the meaning set forth in §3.10 below.

“Company Stock” has the meaning set forth in the recitals above.

“Confidential Information” means any and all information concerning the business and affairs
of Buyer or the Company that is not generally available to the public, including, without
limitations:

(a) trade secrets concerning the business and affairs of Buyer or the Company, product
specifications, data, know how, formulae, compositions, processes, designs, sketches,
photographs, graphs, drawings, samples, inventions and ideas, past, current, and planned
research and development, current and planned manufacturing or distribution methods and
processes, customer lists, current and anticipated customer requirements, price lists,
market studies, business plans, computer software and programs (including object code and
source code), computer software and database technologies, systems, structures, and
architectures (and related formulae, compositions, processes, improvements, devices, know
how, inventions, discoveries, concepts, ideas, designs, methods and information), and any
other information, however documented, that is a trade secret within the meaning of the
laws of the State of New Jersey; and

(b) information concerning the business and affairs of Buyer or the Company (which
includes historical financial statements, financial projections and budgets, historical and
projected sales, capital spending budgets and plans, the names and backgrounds of key
personnel, personnel training and techniques and materials), however documented; and

(c) notes, analysis, compilations, studies, summaries, and other material prepared by
or for Buyer or the Company containing or based, in whole or in part, on any information
included in the foregoing;

provided that “Confidential Information” shall not include such portions thereof which (i) are or
become available to the public through no fault or action by the receiving Party or its
representatives or (ii) are or hereafter become available to the receiving Party on a
non-confidential basis from a source other than the disclosing Party or the disclosing Party’s
representatives, which source, to the best of the receiving Party’s knowledge, is not prohibited
from disclosing such information to the receiving Party by a contractual, legal or fiduciary
obligation to the disclosing Party.

“Consulting Agreement” has the meaning set forth in §2.4(a) below.

“Disclosure Schedule” has the meaning set forth in §3 below.

“Eligible Loss” has the meaning set forth in §6.8 below.

“Employment Agreements” has the meaning set forth in §2.4(b) below.

“Employment Laws” has the meaning set forth in §3.23(a) below.

“Encumbrance” means any charge, claim, community property interest, condition, encumbrance,
equitable interest, mortgage, lien, option, pledge, security interest, right of first refusal, or
restriction of any kind, including any restriction on use, voting, transfer, receipt of income, or
exercise of any other attribute of ownership.

“Enforceability Exceptions” means exceptions to enforceability as may be imposed by applicable
bankruptcy, insolvency or other similar laws from time to time in effect which affect the
enforcement of creditors’ rights and by general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).

“Environment” means soil, land surface or subsurface strata, surface waters (including
navigable waters, ocean waters, streams, ponds, drainage basins, and wetlands), groundwaters,
drinking water supply, stream sediments, ambient air (including indoor air), plant and animal life,
and any other environmental medium or natural resource.

“Environmental Claim” has the meaning set forth in §6.5(a) below.

“Environmental, Health, and Safety Liabilities” means any cost, damages, expense, liability,
obligation or other responsibility arising from or under Environmental Law or Occupational Safety
and Health Law and related to the Assets or the Business.

“Environmental Laws” or “Environmental Law” means any and all Legal Requirements relating to
Hazardous Activities, Hazardous Materials, pollution, or protection or remediation of the
Environment, including, without limitation, the Comprehensive Environmental Response, Compensation,
and Liability Act of 1980, as amended, 42 U.S.C. § 9601 et seq.; the Resource Conservation
and Recovery Act, as amended, 42 U.S.C. § 6901 et seq.; the Federal Water Pollution Control
Act, as amended, 33 U.S.C. § 1251 et seq.; the Oil Pollution Control Act of 1990, as
amended, 33 U.S.C. § 2701 et seq.; the Toxic Substances Control Act, as amended, 15 U.S.C.
§ 2601 et seq.; the Clean Air Act, as amended, 42 U.S.C. § 7401 et seq.; the Safe
Drinking Water Act, as amended, 42 U.S.C. § 300f et seq.; the Emergency Planning and
Community Right to Know Act, as amended, 42 U.S.C. § 11001 et seq.; and all comparable
state and local laws; and any common law that imposes liability or obligations for injuries or
damages due to, or threatened as a result of, the presence of or exposure to any Hazardous
Material, but excluding Occupational Safety and Health Laws.

“Environmental Warranty” means a representation or warranty set forth in Section 3.20, but
only as it shall relate to any Environmental Law, and shall not include any representation or
warranty with respect to any other safety or health law.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, or any
successor law, and regulations and rules issued pursuant to that act or any successor law.

“Facility” means the Newark Facility or the Pennsylvania Facility, as appropriate, and
“Facilities” means, collectively, the Newark Facility and the Pennsylvania Facility.

“Federal AutoCat” means Federal AutoCat Recycling, LLC, a New Jersey limited liability company
and wholly-owned subsidiary of the Company.

“Financial Statements” has the meaning set forth in §3.5 below.

“GAAP” means United States generally accepted accounting principles as in effect from time to
time.

“Governmental Authorization” means any authorization, permit, license, lease, franchise,
certificate, qualification, easement, right of way or other right and/or approval obtained or
obtainable from a Governmental Body which is necessary or advisable for the operation of the
Business as presently conducted and as proposed to be conducted.

“Governmental Body” means any nation or government, any federal, state, local, or other
political subdivision thereof, any entity exercising executive, legislative, judicial, regulatory
or administrative functions of or pertaining to government, and any federal, state, local, or other
governmental or administrative body, instrumentality, department, or agency or any court, tribunal,
administrative hearing body, arbitrator, arbitration panel, commission, or other similar
dispute-resolving panel or body.

“Guaranty Release Documents” has the meaning set forth in §2.6(a)(vi) below.

“Hazardous Activity” means the distribution, generation, handling, importing, management,
manufacturing, processing, production, refinement, Release, storage, transfer, transportation,
treatment, or use (including any withdrawal or other use of groundwater) of Hazardous Materials in,
on, under, about, or from the Facilities or any part thereof into the Environment, and any other
act, business, operation, or thing that increases the danger, or risk of danger, or poses an
unreasonable risk of harm to persons or property on or off the Facilities, or that may affect the
value of the Facilities or the Assets.

“Hazardous Materials” means any waste or other substance that is listed, defined, designated,
or classified as, or otherwise determined to be, hazardous, radioactive, or toxic or a pollutant or
a contaminant under or pursuant to any Environmental Law, including any admixture or solution
thereof, and specifically including petroleum and all derivatives thereof or synthetic substitutes
therefor and asbestos or asbestos containing materials.

“Hypercat Coating” means Hypercat Coating Limited Liability Company (d/b/a HyperCatTM Advanced
Catalyst Products), a New Jersey limited liability company and wholly-owned subsidiary of the
Company.

“Hypercat DMG” means Hypercat DMG, L.L.C., a New Jersey limited liability company and
wholly-owned subsidiary of the Company.

“Indebtedness”, as applied to any Person, means all obligations of that Person to repay or pay
both current and long-term liabilities owed to another Person, including all items (except items
of capital stock, capital surplus, general contingency reserves, deferred income taxes, retained
earnings and amounts attributable to minority interest, if any) which in accordance with the tax
method of accounting adopted by such Person would be included in determining total liabilities as
shown on the liability side of a balance sheet of that Person as of the date Indebtedness is to be
determined, including obligations of that Person properly treated as capital lease obligations or
their equivalent under GAAP.

“Indemnified Party” has the meaning set forth in §6.4(a) below.

“Indemnifying Party” has the meaning set forth in §6.4(a) below.

“Insurance” has the meaning set forth in §3.21(a) below.

“Interim Balance Sheet” means the balance sheet contained within the Interim Financial
Statements.

“Interim Financial Statements” has the meaning set forth in §3.5 below.

“Interim Fiscal Month End” has the meaning set forth in §3.5 below.

“Inventory Date” has the meaning set forth in §2.2(c) below.

“Key Employees” means each Key Person other than Andrew Fradkin and Walter Greenblatt.

“Key Person” has the meaning set forth in §2.2(b) below.

“Key Person Fund” has the meaning set forth in §2.2(b) below.

“Knowledge” means (a) with respect to any Stockholder, the actual knowledge of such
Stockholder; (b) with respect to the Company, the actual knowledge of any director or officer of
the Company; and (c) with respect to Buyer, the actual knowledge of any executive officer of Buyer.

“Legal Requirement” means any federal, state, local, municipal, foreign or other constitution,
law, ordinance, principle of common law, code, regulation, statute or treaty, or requirement under
any Order, Governmental Authorization, or other document issued by or entered into with any
Governmental Body.

“Liability” means any liability (whether known or unknown, asserted or unasserted, absolute or
contingent, accrued or unaccrued, liquidated or unliquidated, and/or due or to become due),
including any liability for Taxes.

“Marks” has the meaning set forth in §3.24 below.

“Material Adverse Effect” means an effect (or circumstance involving a prospective effect) on
the business, operations, assets, liabilities, results of operations, cash flows, condition
(financial or otherwise) or prospects of the Business, taken as a whole, which is materially
adverse to the Business.

“Net Working Capital” means, as of any date of determination, (i) the sum of Accounts
Receivable net of uncollectibles, inventory at cost, and cash and cash equivalents, minus (ii) the
sum of accounts payable and accrued expenses (expressly including any accrued expense for new
converter cutting equipment but excluding any accruals in respect of the Severance Fee), if any.

“Net Worth” means net worth as determined in accordance with GAAP.

“Newark Facility” means those premises at 2-20 E. Peddie Street, Newark, New Jersey, leased by
Federal AutoCat and used in the Business.

“Newark Landlord” means 1448 McCarthur Highway, LLC.

“Non-Competition Agreement” has the meaning set forth in §2.4(a) below.

“Occupational Safety and Health Law” means any Legal Requirement primarily designed to provide
safe and healthful working conditions and to reduce occupational safety and health hazards,
including the federal Occupational Safety and Health Act, as amended, and any program, whether
governmental or private (such as those promulgated or sponsored by industry associations and
insurance companies), designed to provide safe and healthful working conditions.

“Order” means an order, injunction, judgment, decree, ruling, or charge of any Governmental
Body that is binding on the Company.

“Ordinary Course of Business” means the ordinary course of business of the Company consistent
with past custom and practice.

“Part” means a part or section of the Disclosure Schedule.

“Party” and “Parties” have the meanings set forth in the preface above.

“Pennsylvania Facility” means those premises at 901 South Bolmar Street, West Goshen,
Pennsylvania, leased by Hypercat Coating and used in the Business.

“Pennsylvania Landlord” means South Bolmar Street Associates, L.P.

“Pension Plan” has the meaning set forth in §3.16(i) below.

“Person” means any individual, corporation (including any non-profit corporation), general or
limited partnership, limited liability company, joint venture, estate, trust, association,
organization, labor union, or other entity or Governmental Body.

“Proceeding” means any action, arbitration, audit, hearing, investigation, litigation or suit
(whether civil, criminal, administrative, investigative or informal) commenced, brought, conducted
or heard by or before, or otherwise involving, any Governmental Body.

“Proprietary Rights Agreement” has the meaning set forth in §3.22(b) below.

“Purchase Price” has the meaning set forth in §2.2(a) below.

“Put Notice” has the meaning set forth in §2.3(b) below.

“Put Price” has the meaning set forth in §2.3(b) below.

“Plan” has the meaning set forth in §3.22(a) below.

“Recycalytics” means the trade name used by Federal AutoCat for its metal substrate and
industrial catalyst device recycling activities.

“Related Person” means with respect to a particular individual:

(a) each other member of such individual’s Family (as hereinafter defined);

(b) any Person that is directly or indirectly controlled by such individual or one or
more members of such individual’s Family (as defined below);

(c) any Person in which such individual or members of such individual’s Family hold
(individually or in the aggregate) a Material Interest (as defined below); and

(d) any Person with respect to which such individual or one or more members of such
individual’s Family serves as a director, officer, partner, executor, or trustee (or in a
similar capacity).

With respect to a specified Person other than an individual:

(a) any Affiliate of such specified Person;

(b) any Person that holds a Material Interest in such specified Person;

(c) each Person that serves as a director, officer, partner, executor, or trustee of
such specified Person (or in a similar capacity);

(d) any Person in which such specified Person holds a Material Interest;

(e) any Person with respect to which such specified Person serves as a general partner
or a trustee (or in a similar capacity); and

(f) any Related Person of any individual described in clause (b) or (c).

For purposes of this definition, (a) the “Family” of an individual includes (i) the
individual, (ii) the individual’s spouse and former spouses, (iii) the parents, grandparents,
children and/or grandchildren (whether biological or by means of adoption or other law) of the
individual, and (iv) any other natural person who resides with such individual and (b) “Material
Interest” means direct or indirect beneficial ownership (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934) of voting securities or other voting interests representing at
least 5% of the outstanding voting power of a Person or equity securities or other equity interests
representing at least 10% of the outstanding equity securities or equity interests in a Person.

“Release” means any spilling, leaking, emitting, discharging, depositing, escaping, leaching,
dumping, or other releasing into the Environment, whether intentional or unintentional.

“Remaining Stock” means the 17.5% of Company Stock not being purchased by Buyer on the Closing
Date.

“Remainder Valuation” means Five Million Seven Hundred Sixty-Nine Dollars ($5,769,000).

“Remedial Plan” has the meaning set forth in §6.5(c) below.

“Required Net Working Capital” means Net Working Capital totaling Three Million Five Hundred
Fifty-Five Thousand Dollars ($3,555,000).

“Required Net Worth” means Net Worth totaling Three Million Five Hundred Thousand Dollars
($3,500,000).

“Severance Fee” has the meaning set forth in the Third Amendment to Employment Agreement.

“Share Price” means the average daily closing price for shares of Buyer’s common stock on the
American Stock Exchange for the twenty (20) consecutive Trading Days ending June 29, 2007.

“Stockholder” and “Stockholders” have the meanings set forth in the preface above.

“Stockholder Representative” has the meaning set forth in §10.14(a) below.

“Stockholder’s Release” has the meaning set forth in §2.6(a)(ii) below.

“Subsidiary” means any corporation, limited liability company or other business entity with
respect to which a specified Person (or a Subsidiary thereof) owns a majority of the securities or
equity interests or has the power to vote or direct the voting of sufficient securities to elect a
majority of the board of directors, board of managers, or members of a comparable governing body.

“Tax” means any federal, state, local, or foreign income, gross receipts, license, payroll,
employment, excise, severance, stamp, occupation, premium, windfall profits, environmental
(including taxes under Code §59A), customs duties, capital stock, franchise, profits, withholding,
social security (or similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum, estimated, or other tax of
any kind whatsoever, including any interest, penalty, or addition thereto, whether disputed or not.

“Third Amendment to Employment Agreement” has the meaning set forth in §2.4(a)) below.

“Trading Day” means a day on which stocks are traded on the American Stock Exchange.

“Transaction Stock” means 82.5% of the issued and outstanding Company Stock as of the date of
this Agreement.

“Welfare Plan” has the meaning set forth in §3.16(a) below.

“Year-End Balance Sheet” means the balance sheet contained within the Year-End Financial
Statements.

“Year-End Financial Statements” has the meaning set forth in §3.5 below.

2. BASIC TRANSACTION

2.1 Purchase and Sale of Stock. On and subject to the terms and conditions of this
Agreement, at the Closing Buyer agrees to purchase from Stockholders, and Stockholders agree to
sell, assign, transfer, convey, and deliver to Buyer, all of the Transaction Stock for the
consideration specified below in this §2.

2.2 Purchase Price of Stock. In exchange for the Transaction Stock and other
consideration provided by Stockholders hereunder:

(a) At the Closing, Buyer shall pay to Stockholders the sum of Thirty Million Dollars
($30,000,000) as adjusted pursuant to §2.2(d) below (as so adjusted the “Cash Component”
and, together with the amounts deposited in the Key Person Fund, the “Purchase Price”) by
bank wire transfer of immediately available funds to an account designated by Stockholders
prior to the Closing Date.

(b) Buyer shall establish a fund (the “Key Person Fund”) in the aggregate amount of
One Million Five Hundred Fifty-Five Thousand Six Hundred Sixty Five Dollars ($1,555,665) to
be funded at a rate of approximately $500,000 each year for the first three years after the
Closing and to be distributed in installments on the Closing Date and thereafter
semi-annually to the individuals (the “Key Persons”) and in the amounts allocated and
installments set forth in Schedule 2.2(b) attached hereto, subject to §2.4(b)
below.

(c) The unadjusted Cash Component as stated in §2.2(a) above includes and assumes the
retention by the Company and transfer to Buyer of the Required Net Working Capital,
determined as of June 30, 2007 (the “Inventory Date”). The Parties shall use commercially
reasonable efforts in good faith to establish prior to the Inventory Date a mutually
satisfactory method for estimating, counting, and valuing inventory subject to the
contemplated purchase by Buyer, established by reference to the actual cost of purchases,
so as to permit a final determination of the inventory value to be made on the Inventory
Date in order to make satisfactory determinations of Net Working Capital and Net Worth. In
the event the Company’s actual Net Working Capital exceeds the Required Net Working Capital
on the Inventory Date, the Cash Component (and therefore the Purchase Price) shall be
increased in the amount of such excess, and in the event the Company’s actual Net Working
Capital is less than the Required Net Working Capital on the Inventory Date, the Cash
Component (and therefore the Purchase Price) shall be reduced in the amount of such
deficit. Neither the Stockholders nor the Company shall take any actions out of the
ordinary course of business from the Inventory Date to the Closing Date that would have an
effect on the Company’s Net Working Capital or Net Worth during such period.

2.3 Remainder Stock.

(a) Buyer shall have the right to acquire from Stockholders all (but not less than
all) of the Remaining Stock by delivering written notice thereof (a “Call Notice”) at any
time during a period of thirty days commencing on the second anniversary of the Closing
Date for aggregate consideration (the “Call Price”) equal to the sum of:

(i) the Remainder Valuation plus

(ii) a percentage of the Remainder Valuation equal to 36% of the appreciation,
if any, in the per-share price of Metalico stock (A) from the Share Price (B) to
the Appreciated Price.

By way of example, assume that the Share Price is $6.00 and the Appreciated Price is $8.00.
The Call Price would be $6,460,703, being the sum of (i) $5,769,000 (the Remainder
Valuation) plus (ii) 11.99% (being the percentage of the Remainder Valuation equal to 36%
of the 33% appreciation ($8-$6=$2) in the per-share price) of $5,769,000.

Upon their receipt of a Call Notice, Stockholders shall have ten (10) days to deliver a Put
Notice as provided in §2.3(b) below. Notwithstanding anything to the contrary set forth
herein, (i) if Buyer has received a Put Notice before it has delivered a Call Notice,
Buyer’s right to acquire the Remaining Stock under this §2.3(a) shall immediately terminate
and the Remaining Stock shall be transferred in accordance with such Put Notice and §2.3(b)
below; and (ii) Stockholders’ delivery of a Put Notice either before receipt of a Call
Notice or within such ten-day period shall supersede and cancel any exercise of Buyer’s
right to acquire the Remaining Stock under this section. Failure by Stockholders to
deliver a Put Notice either before receipt of a Call Notice or within such ten-day period
after receipt of a Call Notice shall be deemed an irrevocable acceptance of Buyer’s call
hereunder and shall terminate Stockholders’ right to put the Remaining Stock to Buyer under
§2.3(b). Buyer shall pay the Call Price by bank wire transfer of immediately available
funds to an account designated by Stockholders within fifteen (15) business days after the
expiration of such ten-day period.

(b) Stockholders shall have the right to put to Buyer all (but not less than all) of
the Remaining Stock by delivering written notice thereof (a “Put Notice”) at any time
during a period of thirty days commencing on the second anniversary of the Closing Date for
aggregate consideration (the “Put Price”) equal to the greater of:

	 	 	 	 	 
	(i)

(ii)

	 	$6,750,000, and

The sum of

(A)
	 	

the Remainder Valuation plus

(B) a percentage of the Remainder Valuation equal to 35% of the
appreciation, if any, in the per-share price of Metalico common stock (i)
from the Share Price (ii) to the Appreciated Price.

By way of example, assume that the Share Price is $6.00 and the Appreciated Price is
$10.00. The Put Price would be $7,114,908, being the sum of (i) $5,769,000 (the Remainder
Valuation) plus (ii) 23.33% (being the percentage of the Remainder Valuation equal to 35%
of the 66% appreciation ($10-$6=$4) in the per-share price) of $5,769,000.

Buyer shall pay the Put Price by bank wire transfer of immediately available funds to an
account designated by Stockholders within fifteen (15) days after its receipt of a Put
Notice.

2.4 Non-Competition, Consulting and Employment Agreements.

(a) At the Closing, Robert Graifman shall execute a third amendment to his employment
agreement (the “Third Amendment to Employment Agreement”) and enter into a non-competition
agreement with Buyer (the “Graifman Non-Competition Agreement”), and shall be offered a
position as a consultant to the Company for such period commencing on the Closing Date and
under such terms as shall be mutually agreed upon between Buyer and Mr. Graifman as set
forth in a consulting agreement (the “Consulting Agreement”).

(b) Each individual Key Employee’s right to receive his or her allocated installments
of the Key Person Fund shall be subject to such Key Employee’s continued employment with
the Company as of the payment date for each installment, provided that termination of a Key
Employee by Buyer for any reason other than for cause shall not affect such Key Employee’s
right to receive all of his or her remaining allocated installments after such termination.
It is expressly acknowledged and agreed that not all Key Persons entitled to distributions
from the Key Person Fund shall or desire to be retained as Key Employees and that the
provisions of this section regarding termination of payments in connection with termination
of employment are applicable only to those Key Persons who are also Key Employees.

2.5 The Closing. Subject to the fulfillment of the conditions to Closing set forth
herein, the closing of the transactions contemplated by this Agreement (the “Closing”) shall take
place at the offices of of Goldman and Kramer, 101 Eisenhower Parkway, Roseland, New Jersey 07068,
on or before July 10, 2007 commencing at 10:00 a.m. local time and effective as of the close of
business on such date or at such other place and on such other date as the Parties may mutually
determine (the “Closing Date”).

2.6 Deliveries at the Closing. At the Closing and as conditions to the effectiveness
of this Agreement:

(a) Stockholders shall deliver or cause to be delivered to Buyer:

(i) the certificates representing the Transaction Stock, duly endorsed (or
accompanied by duly executed stock powers) for transfer to Buyer;

(ii) a release in the form of Exhibit 2.6(a)(ii) executed by each
Stockholder (the “Stockholder’s Release”);

(iii) appropriate consents to and authorizations of assignments of all
Governmental Authorizations necessary and appropriate for the continued operation
of the Business by Buyer, duly executed by the applicable Governmental Bodies, to
the extent necssary;

(iv) the Non-Competition Agreement executed by Mr. Graifman;

(v) the Consulting Agreement executed by Mr. Graifman;

(vi) the Third Amendment to Employment Agreement executed by Mr. Graifman;

(vii) such agreements, instruments, as documents, in form reasonably
satisfactory to Buyer and Stockholders and counsel to Stockholders, as shall be
necessary and appropriate to effect the release of any personal guaranties of and
security for Assumed Debt (the “Guaranty Release Documents”);

(viii) an amendment to that certain Invention Assignment Agreement dated as of
January 16, 2007 by and between the Company and Mr. Graifman, on terms and
conditions satisfactory to Buyer, executed by Mr. Graifman;

(ix) worksheets reasonably satisfactory to Buyer, pursuant to the terms set
forth in §2.2(c), to the effect that the Company had the Required Net Worth as of
the Inventory Date, signed or initialed by the Company’s chief financial officer;

(ix) worksheets reasonably satisfactory to Buyer, pursuant to the terms set
forth in §2.2(c), establishing the Company’s Net Working Capital for purposes of
§2.2(c);

(x) the various certificates, instruments, and other documents as required
herein;

(xi) certified copies of the certificate of incorporation and by-laws of the
Company;

(xii) complete stock books, stock ledgers, minute books and the corporate seal
of the Company; and

(xiii) the resignations of the directors and officers of the Company.

(b) Buyer shall deliver to Stockholders or the applicable individual Stockholder:

(i) the Cash Component;

(ii) a release in the form of Exhibit 2.6(b)(ii) executed by Buyer
(the “Buyer’s Release”);

(iii) the Non-Competition Agreement executed by Buyer;

(iv) the Consulting Agreement executed by Buyer;

(v) the Third Amendment to Employment Agreement executed by Buyer;

(vi) the Guaranty Release Documents; and

(vii) the various certificates, instruments, and other documents as required
herein.

3. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDER

Stockholders represent and warrant to Buyer severally but not jointly that the statements
contained in this §3 are correct and complete as of the date of this Agreement and as of the
Closing Date. Such representations and warranties are made and given subject to the disclosures
set forth in the schedule of disclosures accompanying this Agreement (the “Disclosure Schedule”).

3.1 Organization of the Company.

(a) Stockholders are the only stockholders of the Company.

(b) The Company is a corporation duly incorporated, validly existing, and in good
standing under the laws of the jurisdiction of its incorporation, with full corporate power
and authority to conduct its business as it is now being conducted, and to own or use the
properties and assets that it purports to own or use, and to perform all its obligations
under all contracts. The Company is duly qualified to do business as a foreign corporation
and is in good standing under the laws of each state or other jurisdiction in which the
failure to have such qualification or standing could reasonably be expected to have a
Material Adverse Effect.

(c) Each Subsidiary of the Company is duly organized, validly existing, and in good
standing under the laws of the jurisdiction of its organization, with full organizational
power and authority to conduct its business as it is now being conducted, and to own or use
the properties and assets that it purports to own or use, and to perform all its
obligations under all contracts. Each Subsidiary of the Company is duly qualified to do
business as a foreign entity and is in good standing under the laws of each state or other
jurisdiction in which the failure to have such qualification or standing could reasonably
be expected to have a Material Adverse Effect.

(d) Stockholders have delivered to Buyer copies of the certificate of incorporation
and bylaws of the Company, as currently in effect.

(e) Part 3.1(e) of the Disclosure Schedule contains a complete and accurate list for
the Company, each of its Subsidiaries, and each of its equity investments (including
without limitation Advanced Nano), of its name, its jurisdiction of organization, its
Federal taxpayer identification number, other jurisdictions in which it is authorized to do
business, and its capitalization (including the identity of each equityholder and the
number of shares or other equity interests held by each).

3.2 Authorization of Transaction. Each Stockholder represents and warrants with
respect to such Stockholder that this Agreement constitutes the legal, valid and binding obligation
of such Stockholder, enforceable against such Stockholder in accordance with its terms. Such
Stockholder has the absolute and unrestricted right, power, authority and capacity to execute and
deliver this Agreement and to perform such Stockholder’s obligations hereunder, subject to the
Enforceability Exceptions.

3.3 Noncontravention. Neither the execution and the delivery of this Agreement, nor
the consummation of the transactions contemplated hereby (including the matters and undertakings
referred to in §2 above), shall (i) violate any injunction, judgment, or Order to which any
Stockholder or the Company is subject, (ii) to the Knowledge of each Stockholder, violate any
constitution, statute, regulation, rule, or other restriction of any Governmental Body to which the
Company is subject, (iii) violate any provision of the certificate of incorporation or by-laws of
the Company or (iv) except as set forth in Part 3.3 of the Disclosure Schedule, conflict with,
result in a breach of, constitute a default under, result in the acceleration of, create in any
party the right to accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement to which the Company is a
party or by which it is bound or to which any of the Assets is subject (or result in the imposition
of any Encumbrance upon any of the Assets) which could reasonably be expected to result in a
Material Adverse Effect. Except as set forth in Part 3.3 of the Disclosure Schedule, tothe
Knowledge of each Stockholder, the Company does not need to give any notice to, make any filing
with, or obtain any authorization, consent, or approval of, any Governmental Body in order for the
Parties to consummate the transactions contemplated by this Agreement (including the matters and
undertakings referred to in §2 above).

3.4 Capitalization.

(a) The authorized equity securities of the Company consist of two hundred thousand
(200,000) shares of common stock, par value $0.001, 155,399 of which are issued and
outstanding and constitute the Stock. Stockholders are and shall be on the Closing Date
the record and beneficial owners and holders of the Transaction Stock, free and clear of
all Encumbrances.

(b) No legend or other reference to any purported Encumbrance appears upon any
certificate representing the Transaction Stock. All of the issued and outstanding equity
securities of the Company have been duly authorized and validly issued, and are fully paid
and nonassessable and are held of record by Stockholders, and, with respect to the
Transaction Stock, shall be free and clear of all Encumbrances upon their transfer to
Buyer. There are no outstanding (i) shares of capital stock or voting securities of the
Company other than the Stock, (ii) securities of the Company convertible into or
exchangeable for shares of capital stock or voting securities or ownership interests in the
Company, or (iii) options or other rights to securities or ownership interests in or
securities convertible into or exchangeable for capital stock or voting securities or
ownership interests in the Company. The Company has no outstanding bonds, debentures, notes
or other obligations the holders of which have the right to vote (or are convertible into
or exercisable for securities having the right to vote) on any matter before the Company.

(c) To the Knowledge of each Stockholder, none of the outstanding equity securities or
other securities of the Company issued to such Stockholder was issued in violation of the
Act or any other requirement of law.

(d) The Company does not own or have any contract to acquire any equity securities or
other securities of any Person or any direct or indirect equity or ownership interest in
any other business except as set forth on Part 3.1(e) of the Disclosure Schedule.

3.5 Financial Statements. Attached hereto as Schedule 3.5 are the following
financial statements (collectively, the “Financial Statements”): (i) audited balance sheets and
statements of income and retained earnings, and cash flow as of and for the fiscal year ended
December 31, 2006 for the Company (the “Year-End Financial Statements”), and (ii) internally
prepared unaudited balance sheets and statements of income (the “Interim Financial Statements”) for
the five-month stub period ended May 31, 2007 (the “Interim Fiscal Month End”) for the Company.
The Financial Statements (including the notes thereto), are correct and complete, and are
consistent with the books and records of the Company (which books and records are correct and
complete); provided, however, that the Interim Financial Statements are subject to normal year-end
adjustments (which shall not be material, individually or in the aggregate) and lack footnotes and
other presentation items.

3.6 Brokers’ Fees. The Company and Stockholders have no Liability or obligation to
pay any fees or commissions to any broker, finder, or agent with respect to the transactions
contemplated by this Agreement except as set forth on Schedule 3.6. The Company and
Stockholders have no such Liabilities or obligations for which Buyer could become liable or
obligated.

3.7 Title To Properties. Schedule 3.7 contains a complete and accurate list
of all real property, leaseholds, or other interests therein owned by the Company. Stockholders
have delivered or made available to Buyer copies of the deeds and other instruments (as recorded)
by which the Company acquired such real property and interests, and copies of all title insurance
policies, opinions, abstracts, and surveys in the possession of the Company and relating to such
property or interests. The Company leases the Newark Facility from the Landlord and the
Pennsylvania Facility from the Pennsylvania Landlord, and operates the Business at the Facilities.
Subject only to the matters listed under Part 3.7 of the Disclosure Schedule, all of the Assets
(whether real, personal, or mixed and whether tangible or intangible) that the Company purports to
own or lease are located at the Facilities. Schedule A contains a true and complete list
of the furniture, fixtures, machinery, equipment, and other tangible personal property interests of
the Company.

3.8 Encumbrances. Except as set forth in Part 3.8 of the Disclosure Schedule, all
material properties and assets reflected in the Year-End Balance Sheet and the Interim Balance
Sheet are free and clear of all Encumbrances and are not, in the case of real property, subject to
any rights of way, building use restrictions, exceptions, variances, reservations, or limitations
of any nature except, with respect to all such properties and assets, (a) mortgages or security
interests shown on the Year-End Balance Sheet or the Interim Balance Sheet as securing specified
liabilities or obligations, with respect to which no default (or event that, with notice or lapse
of time or both, would constitute a default) exists, (b) mortgages or security interests incurred
in the Ordinary Course of Business in connection with the purchase of property or assets after the
date of the Interim Balance Sheet (such mortgages and security interests being limited to the
property or assets so acquired), with respect to which no default (or event that, with notice or
lapse of time or both, would constitute a default) exists, and (c) liens for current taxes not yet
due. To the Knowledge of Stockholders, all buildings, plants, and structures at the Facilities lie
wholly within the boundaries of the Real Property and do not encroach upon the property of, or
otherwise conflict with the property rights of, any other Person.

3.9 Condition and Sufficiency of Assets. To the Knowledge of Stockholders, the
buildings, plants, and structures, of the Company are structurally sound, are in good operating
condition and repair (subject to normal wear and tear), and are adequate for the uses to which they
are being put, and none of such buildings, plants, or structures, is in need of maintenance or
repairs except for ordinary, routine maintenance and repairs that are not material in nature or
cost. The Assets constitute all the assets currently owned, leased or used in the Business, and
include substantially all the assets, property or other rights or interests necessary to carry on
the Business in a manner consistent with the Company’s past practices.

3.10 Accounts Receivable. All accounts receivable of the Company that are set forth
on Part 3.10 of the Disclosure Schedule (collectively, the “Accounts Receivable”) represent valid
obligations arising from sales actually made or services actually performed in the Ordinary Course
of Business. The Accounts Receivable set forth on Part 3.10 of the Disclosure Schedule are current
and, to the Knowledge of Stockholders, collectible. Except as set forth in Part 3.10 of the
Disclosure Schedule, there is no contest, claim, or right of set-off, other than adjustments in the
Ordinary Course of Business, under any contract with any obligor of an Accounts Receivable relating
to the amount or validity of such Accounts Receivable. Part 3.10 of the Disclosure Schedule
contains (i) a complete and accurate list of all Accounts Receivable as of the Closing Date, which
list sets forth the aging of such Accounts Receivable, and (ii) a complete and accurate list and
description of actions pending as of the date hereof to pursue collection of the Accounts
Receivable (the “Collection Actions A/R”).

3.11 Inventory of the Company. The Company’s inventory as of June 30, 2007, is set
forth on Schedule 3.11 attached hereto or will be prior to the Closing Date. The Company’s
inventory has been acquired for resale in the Ordinary Course of Business.

3.12 Machinery and Equipment. Except as set forth in Part 3.12 of the Disclosure
Schedule, all machinery and equipment included in the Assets consists of a quality and quantity
usable in the Ordinary Course of Business. All such machinery and equipment has been recorded at
book value and has been depreciated as provided in the footnotes to the Financial Statements. All
such machinery and equipment is in good operating condition and repair, subject to normal wear and
tear, and has been maintained in accordance with normal industry practice.

3.13 No Undisclosed Liabilities; Assumed Debt. To the Knowledge of Stockholders,
except as set forth in Part 3.13 of the Disclosure Schedule the Company has no liabilities or
obligations of any nature (whether absolute, accrued, contingent, or otherwise) except for (a)
liabilities or obligations reflected or reserved against in the Year-End Balance Sheet or the
Interim Balance Sheet and (b) trade payables and accrued expenses properly categorized as current
liabilities incurred in the Ordinary Course of Business since the respective dates thereof. The
Company has no liabilities or debts other than the Assumed Debt.

3.14 Taxes. Except as set forth in Part 3.14 of the Disclosure Schedule, the Company
has filed all Tax returns and reports required to be filed by it and, to the Knowledge of
Stockholders, such returns are accurate, complete and correct. The Company has paid all Taxes
required to be paid pursuant to said returns or otherwise required to be paid by it, and, to the
Knowledge of Stockholders, there are no other Taxes payable on account of the Company’s operations
except: (A) as are reflected or reserved against on the Interim Balance Sheet; or (B) for Taxes
arising from the conduct of the Business at the Facilities for and during periods subsequent to the
date of the Interim Fiscal Month End and which are not yet due. There is no Tax audit or
examination now pending (or, to the Knowledge of Stockholders, threatened) with respect to the
Company. No correspondence has been received by the Company from any state taxing authority
requesting information concerning the extent of the Company’s nexus with such state or asserting
that the Company has such nexus so as to impose such state’s taxing jurisdiction to the Company.
To the Knowledge of Stockholders, all Taxes and assessments which the Company was or is required by
law to withhold or collect have been and are being withheld or collected by it and have been and
are being paid over to the proper Governmental Body or are being held by the Company for such
payment. The Company has not waived or extended any applicable statute of limitations relating to
the assessment of any Tax.

3.15 Conduct of Business; No Material Adverse Effect.

(a) To the Knowledge of Stockholders, there are no undisclosed events that could reasonably be
expected to have a Material Adverse Effect upon the Business or operations of the Company and,
since the Interim Fiscal Month End, the Company has (i) operated its business in accordance with
past custom and usage and not made or obligated itself to make any acquisition or disposition other
than in the Ordinary Course of Business or upon prior notice to Buyer, and (ii) caused its business
to function in its Ordinary Course of Business. In addition, since the Interim Fiscal Month End,
there has not been any Material Adverse Effect and, to the Knowledge of Stockholders, nothing has
occurred or failed to occur that could reasonably be expected to result in a Material Adverse
Effect. Without limiting the generality of the foregoing, since the Interim Fiscal Month End, to
the Knowledge of Stockholders:

(i) the Company has not imposed or suffered to be imposed any Encumbrance upon any of
the Assets;

(ii) the Company has not paid, discharged or satisfied any claim, liability or
obligation of the Company other than in the Ordinary Course of Business; and

(iii) the Company has not made any change which could reasonably be expected to result
in a Material Adverse Effect (including without limitation any acceleration or deferral of
the payment of accounts payable or other current liabilities).

(b) Since December 31, 2006, none of the following events has occurred or is occurring and, to
the Knowledge of Stockholders, no conditions exist which could result in the occurrence of such
events:

(i) Any strike, union organizational activity, grievance, arbitration proceeding,
labor dispute, change in relations with the Company’s employees or any other occurrence,
event or condition of any similar character which has had or which could reasonably be
expected to have a Material Adverse Effect on the Business;

(ii) To the Knowledge of Stockholders, any change or proposed change in applicable law
or governmental policy which has had or which could reasonably be expected to have a
Material Adverse Effect on the Business;

(iii) Any change in the financial condition of the Company and/or the Assets,
including, without limitation, any changes in the composition of the equipment and tools
described in Schedule A attached hereto, or liabilities of Seller other than
changes occurring in the Ordinary Course of Business; or

(iv) Any occurrence not included in clauses (i) through (iii) of this §3.15(b) which,
to the Knowledge of Stockholders, has resulted in or could reasonably be expected to result
in a Material Adverse Effect.

3.16 Employee Benefits Matters.

(a) Part 3.16(a) of the Disclosure Schedule lists and identifies: (i) each employee pension
benefit plan, as defined in §3(2) of ERISA (a “Pension Plan”); (ii) each employee welfare benefit
plan, as defined in Part 3(1) of ERISA (a “Welfare Plan”); and (iii) each compensation, employment,
and employee benefit arrangement, including, but not limited to, any fringe benefit, 401(k) plan,
VEBA, incentive compensation plan, bonus plan, severance plan, deferred compensation plan,
supplemental executive compensation plan, other pension, retirement, or profit sharing plan, thrift
plan, savings plan, stock bonus, stock option, or cash bonus plan, employee stock ownership
(including investment credit or payroll stock ownership) plan, other medical insurance or welfare
plan, vacation plan, and employment arrangement (each a “Benefit Arrangement”), that is maintained
by the Company or has been maintained by the Company since December 31, 2001.

(b) To the Knowledge of Stockholders, each Welfare Plan that provides medical benefits has
been administered in compliance in all respects with the requirements of all applicable laws.

(c) Neither the Company nor any ERISA Affiliate (as hereinafter defined) of the Company has
participated in any multi-employer plan, as defined in §3(37) of ERISA during the most recent five
years. As used herein, the term “ERISA Affiliate” shall mean any subsidiary of the Company and any
trade or business (whether or not incorporated) that is part of the same controlled group, or under
common control with, or part of an affiliated service group that includes the Company within the
meaning of Code §§414(b), (c), (m) or (o).

(d) Except as set forth in Part 3.16(d) of the Disclosure Schedule, to the Knowledge of
Stockholders no Pension Plan, Welfare Plan, or Benefit Arrangement shall result in any liability to
Buyer or shall have an adverse impact upon the Assets or subject the Assets to any lien under
ERISA, the Code, or the laws of any state or country.

(e) No Pension Plan is subject to Title IV of ERISA.

(f) Each Pension Plan is qualified in form and operation under Code §401(a) and any related
trust is exempt from taxation under Code §501(a) and has received a current favorable determination
letter from the Internal Revenue Service to such effect, and each Pension Plan has complied in all
material respects with ERISA and the applicable provisions of the Code.

(g) Each Pension Plan has been administered in accordance with its terms and applicable law.

3.17 Compliance With Legal Requirements; Governmental Authorizations.

(a) Except as set forth in Part 3.17 of the Disclosure Schedule:

(i) To the Knowledge of Stockholders, the Company is, and at all times has
been, in material compliance with each requirement of law that is or was applicable
to it or to the conduct or operation of the Business or the ownership or use of any
of the Assets;

(ii) To the Knowledge of Stockholders, no event has occurred or circumstance
exists that (with or without notice or lapse of time) (A) may constitute or result
in a violation by the Company of, or a failure on the part of the Company to comply
with, any Legal Requirement, or (B) may give rise to any obligation on the part of
the Company to undertake, or to bear all or any portion of the cost of, any
remedial action of any nature; and

(iii) The Company has not received, at any time, any notice or other
communication (whether oral or written) from any Governmental Body or any other
Person regarding (A) any actual, alleged, possible, or potential violation of, or
failure to comply with, any Legal Requirement, or (B) any actual, alleged,
possible, or potential obligation on the part of the Company to undertake, or to
bear all or any portion of the cost of, any remedial action of any nature.

(b) Part 3.17 of the Disclosure Schedule contains a complete and accurate list of each
Governmental Authorization that is held by the Company or that otherwise relates to the Business or
to any of the Assets. Each Governmental Authorization listed or required to be listed in Part 3.17
of the Disclosure Schedule is valid and in full force and effect. Except as set forth in Part 3.17
of the Disclosure Schedule:

(i) To the Knowledge of Stockholders, the Company is, and at all times since
December 31, 2001 has been, in material compliance with all of the terms and
requirements of each Governmental Authorization identified or required to be
identified in Part 3.17 of the Disclosure Schedule;

(ii) To the Knowledge of Stockholders, no event has occurred or circumstance
exists that may (with or without notice or lapse of time) (A) constitute or result
directly or indirectly in a violation of or a failure to comply with any term or
requirement of any Governmental Authorization listed or required to be listed in
Part 3.17 of the Disclosure Schedule, or (B) result directly or indirectly in the
revocation, withdrawal, suspension, cancellation, or termination of, any
Governmental Authorization listed or required to be listed in Part 3.17 of the
Disclosure Schedule;

(iii) The Company has not received any notice or other communication (whether
oral or written) from any Governmental Body or any other Person regarding (A) any
actual, alleged, possible, or potential violation of or failure to comply with any
term or requirement of any Governmental Authorization, or (B) any actual, proposed,
possible, or potential revocation, withdrawal, suspension, cancellation,
termination of, or modification to any Governmental Authorization; and

(iv) To the Knowledge of Stockholders, all applications required to have been
filed for the renewal of the Governmental Authorizations listed or required to be
listed in Part 3.17 of the Disclosure Schedule have been duly filed on a timely
basis with the appropriate Governmental Bodies, and all other filings required to
have been made with respect to such Governmental Authorizations have been duly made
on a timely basis with the appropriate Governmental Bodies.

(c) To the Knowledge of Stockholders, the Governmental Authorizations listed in Part 3.17 of
the Disclosure Schedule collectively constitute all of the Governmental Authorizations necessary to
permit the Company to lawfully conduct and operate the Business in the manner it currently conducts
and operates the Business and to permit the Company to own and use the Assets in the manner in
which it currently owns and uses the Assets.

(d) Except as set forth in Part 3.17 of the Disclosure Schedule, there are no suits, actions
or claims, nor any governmental investigations or inquiries, nor any legal, administrative or
arbitration proceedings, pending or, to the Knowledge of Stockholders, threatened against the
Company which shall or may in any manner materially affect the Assets or the Business, and, except
as described in Part 3.17 of the Disclosure Schedule, to the Knowledge of Stockholders there is no
basis or grounds for any such suit, action, claim, order, writ, injunction decree, investigation,
inquiry or proceeding.

3.18 Legal Proceedings; Orders.

(a) Part 3.18 of the Disclosure Schedule contains a complete and correct list of each
Proceeding by or against the Company that is currently pending, has been pending at any time since
December 31, 2001 (with the stated amount in controversy in excess of $5,000.00 and all Proceedings
where no dollar amount has been stipulated), and that:

(i) relates to or may affect the Business, or any of the Assets; or

(ii) challenges, or may have the effect of preventing, delaying, making
illegal, or otherwise interfering with, any of the transactions contemplated under
this Agreement.

Except as set forth in Part 3.18 of the Disclosure Schedule, to the Knowledge of Stockholders,
no such Proceeding has been threatened, no event has occurred or circumstance exists that may give
rise to or serve as a basis for the commencement of any such Proceeding, and no Proceeding has been
settled since December 31, 2001, for an amount greater than $5,000.00. Except as set forth in Part
3.18 of the Disclosure Schedule, Stockholders have no reason to believe that any such Proceeding
may be brought or threatened against the Company. Stockholders have delivered or caused to be
delivered to Buyer copies of all pleadings, correspondence, and other documents relating to each
Proceeding listed in Part 3.18 of the Disclosure Schedule. To the Knowledge of Stockholders, the
Proceedings listed in Part 3.18 of the Disclosure Schedule are not likely to result in a Material
Adverse Effect.

(b) Except as set forth in Part 3.18 of the Disclosure Schedule:

(i) there is no Order to which the Company or any of the Assets is subject;

(ii) the Company is not subject to any Order that relates to the Business or
any of the Assets; and

(iii) no officer, director, agent or employee of the Company is subject to any
Order that prohibits such officer, director, agent or employee from engaging in or
continuing any conduct, activity, or practice relating to the Business.

(c) Except as set forth in Part 3.18 of the Disclosure Schedule:

(i) the Company is, and at all times since December 31, 2006 has been, in full
compliance with all of the terms and requirements of each Order to which it, or any
of the Assets, is or has been subject;

(ii) no event has occurred or circumstance exists that may constitute or
result in (with or without notice or lapse of time) a violation of or failure to
comply with any term or requirement of any Order to which the Company, or any of
the Assets, is subject; and

(iii) the Company has not received, at any time, any notice or other
communication (whether oral or written) from any Governmental Body or any other
Person regarding any actual, alleged, possible, or potential violation of, or
failure to comply with, any term or requirement of any Order to which the Company,
or any of the Assets, is or has been subject.

3.19 Contracts.

(a) Part 3.19(a) of the Disclosure Schedule lists the following contracts and other agreements
to which the Company is a party:

(i) any agreement (or group of related agreements) for the executory lease of
personal property to or from any Person providing for lease payments in excess of
$10,000.00 per annum;

(ii) any agreement (or group of related agreements) for the purchase or sale
of machinery, equipment or supplies, products, or other personal property, or for
the furnishing or receipt of services, the performance of which shall extend over a
period of more than one year, result in a material loss to the Company, or involve
consideration in excess of $10,000.00;

(iii) any agreement concerning a partnership or joint venture;

(iv) any agreement (or group of related agreements) under which the Company
has created, incurred, assumed, or guaranteed any Indebtedness for borrowed money
that remains outstanding, or any capitalized lease obligation, in excess of
$10,000.00 or under which the Company has imposed or suffered to be imposed an
Encumbrance on any of the Assets;

(v) any agreement concerning confidentiality (other than agreements pertaining
to products of customers) or non-competition;

(vi) any agreement involving Stockholders relating to the Business or the
Assets;

(vii) any agreement for the employment of any individual on a full-time,
part-time, consulting, or other Basis providing annual compensation in excess of
$25,000.00 or providing severance benefits;

(viii) any agreement under which the Company has advanced or loaned any amount
to any of its directors, officers, and employees outside the Ordinary Course of
Business;

(ix) any agreement under which the consequences of a default or termination
could reasonably be expected to have a Material Adverse Effect; or

(x) any other agreement (or group of related agreements) the performance of
which involves consideration in excess of $10,000.00.

(b) Except as set forth in Part 3.19(b) of the Disclosure Schedule, each contract identified
or required to be identified in Part 3.19(a) of the Disclosure Schedule is in full force and
effect, is valid and enforceable in accordance with its terms, and no party is in default or breach
thereof, no conditions exist or events have occurred which, with the giving of notice or the
passage of time, or both, could give rise to such breach or default and there are no unresolved
disputes thereunder. Except as set forth in Part 3.19(b) of the Disclosure Schedule, no consent is
required to assign any of the contracts.

(c) There are no renegotiations, attempts to renegotiate, or outstanding rights to renegotiate
any material amounts paid or payable to the Company under current or complete contracts with any
Person and, to the Knowledge of Stockholders and the Company, no such Person has made written
demand for such renegotiation.

3.20 Environmental Matters.

Except as set forth in Part 3.20 of the Disclosure Schedule:

(a) To the Knowledge of Stockholders, the Company is, and at all times has been, in full
compliance with, and has not been and is not in violation of or liable under, any Environmental
Law. Stockholders have no basis to expect, nor has the Company or any other Person for whose
conduct the Company is or may be held to be responsible received, any actual or threatened Order,
notice, or other communication from (i) any Governmental Body or private citizen acting in the
public interest, or (ii) the current or prior owner or operator of any Facilities, of any actual or
potential violation or failure to comply with any Environmental Law, or of any actual or threatened
obligation to undertake or bear the cost of any Environmental Law, or of any actual or threatened
obligation to undertake or bear the cost of any Environmental, Health, and Safety Liabilities with
respect to any of the Facilities or any other properties or assets (whether real, personal, or
mixed) in which the Company has had an interest, or with respect to any property or Facility at or
to which Hazardous Materials were generated, manufactured, refined, transferred, imported, used, or
processed by the Company or any other Person for whose conduct they are or may be held responsible,
or from which Hazardous Materials have been transported, treated, stored, handled, transferred,
disposed, recycled, or received.

(b) There are no pending or, to the Knowledge of Stockholders, threatened claims, judicial
actions, Encumbrances, or restrictions of any nature resulting from any Environmental, Health, and
Safety Liabilities or arising under or pursuant to any Environmental Law, with respect to or
affecting any of the Facilities or any other properties and assets (whether real, personal, or
mixed) in which the Company or any Stockholder has or has had an interest.

(c) Stockholders have no Knowledge of or any Basis to expect, nor has the Company or any other
Person for whose conduct it is or may be held responsible received, any citation, directive,
inquiry, notice, Order, summons, warning, or other communication that relates to Hazardous
Activity, Hazardous Materials, or any alleged, actual, or potential violation or failure to comply
with any Environmental Law, or of any alleged, actual, or potential obligation to undertake or bear
the cost of any Environmental, Health, and Safety Liabilities with respect to any of the Facilities
or with respect to any property or facility to which Hazardous materials generated, manufactured,
refined, transferred, imported, used, or processed by the Company or any other Person for whose
conduct it is or may be held responsible, have been transported, treated, stored, handled,
transferred, disposed, recycled, or received.

(d) Neither the Company nor any other Person for whose conduct it is or may be held
responsible has any Environmental, Health, and Safety Liabilities with respect to the Facilities or
at any property geologically or hydrologically adjoining the Facilities or any such other property
or assets.

(e) To the Knowledge of Stockholders, there are no Hazardous Materials present on or in the
Environment at the Facilities, including any Hazardous Materials contained in barrels, above or
underground storage tanks, landfills, land deposits, dumps, equipment (whether moveable or fixed)
or other containers, either temporary or permanent, and deposited or located in land, water, sumps,
or any other part of the Facilities or such adjoining property, or incorporated into any structure
therein or thereon. Neither the Company nor any other Person for whose conduct it is or may be
held responsible, nor any other Person, has permitted or conducted, or is aware of, any Hazardous
Activity conducted with respect to the Facilities or any other properties or assets (whether real,
personal, or mixed) in which the Company has or had an interest.

(f) There has been no Release or, to the Knowledge of Stockholders, threat of Release, of any
Hazardous Materials at or from the Facilities or at any other locations where any Hazardous
Materials at or from the Facilities or at any other locations where any Hazardous Materials were
generated, manufactured, refined, transferred, produced, imported, used, or processed from or by
the Facilities, or from or by any other properties and assets (whether real, personal, or mixed) in
which the Company has or had an interest.

(g) The Company has delivered to Buyer true and complete copies and results of any reports,
studies, analyses, tests, or monitoring possessed or initiated by the Company pertaining to
Hazardous Materials or Hazardous Activities in, on, or under the Facilities, or concerning
compliance by the Company or any other Person for whose conduct they are or may be held
responsible, with Environmental Laws.

3.21 Insurance.

(a) Part 3.21(a) of the Disclosure Schedule lists each policy of insurance owned or held by
the Company (including, without limitation, policies for fire and casualty, liability, worker’s
compensation, business interruption, umbrella coverage, products liability, medical, disability and
other forms of insurance) specifying the insurer, amount of coverage, type of insurance, policy
number, deductible limits, date of expiration and any pending claim in excess of $5,000.00, whether
or not covered by insurance (the “Insurance”). To the Knowledge of Stockholders, the Insurance is
sufficient for compliance with all requirements of law and with all agreements to which the Company
is a party. To the Knowledge of Stockholders, the policies evidencing the Insurance are valid and
enforceable, subject to the terms and conditions contained therein, and there has not occurred any
act or omission of the Company which could result in cancellation of any such policy prior to its
scheduled expiration date. The Company has not received any notice from or on behalf of any
insurance carrier issuing any such policy that: (i) insurance rates shall hereafter be
substantially increased; (ii) there shall hereafter be no renewal of any such policy; or (iii)
alteration of any personal or real property, purchase of additional equipment, or modification of
any method of doing business is required or suggested. No such policy shall in any way be affected
by, or terminate or lapse by reason of, the transactions contemplated by this Agreement.

(b) Within the last five (5) years, the Company has not been refused any insurance with
respect to its assets or operations, nor has the Company’s coverage been limited by any insurance
carrier to which it has applied for or with which it has carried insurance.

(c) Part 3.21(c) of the Disclosure Schedule sets forth a summary of information pertaining to
all claims (other than workers’ compensation claims) of property damage and personal injury or
death against the Company which are currently pending or were made during the preceding two (2)
fiscal years or the current fiscal year. Except as set forth in said Part 3.21(c) of the
Disclosure Schedule, all of such claims are fully satisfied or are being defended by an insurance
carrier and, to the Knowledge of Stockholder, involve no exposure to the Company.

3.22 Employees.

(a) Part 3.22 of the Disclosure Schedule contains a complete and accurate list of the
following information for each employee, officer, or director of the Company, including each
employee on leave of absence or layoff status: name; job title; date of hire; social security
number; current annual compensation paid or payable and any change in compensation since December
31, 2006; vacation accrued; and service credited for purposes of vesting and eligibility to
participate in the Company’s Pension Plan, Welfare Plan and Benefit Arrangements (collectively, the
“Plans”), or any director Plan.

(b) No employee, officer, or director of the Company is a party to, or is otherwise bound by,
any agreement or arrangement, including any confidentiality, non-competition, or proprietary rights
agreement, between such employee, officer, or director and any other Person (a “Proprietary Rights
Agreement”) that in any way adversely affects or shall affect (i) the performance of his or her
duties as an employee, officer, or director of the Company, or (ii) the ability of the Company to
conduct its business, including any Proprietary Rights Agreement with the Company by any such
employee, officer, or director. To the Knowledge of Stockholders, except as previously disclosed
to Buyer no officer or other key employee of the Company intends to terminate his employment with
the Company and no such officer or other key employee of the Company has threatened to terminate
his employment with the Company.

(c) Part 3.22 of the Disclosure Schedule also contains a complete and accurate list of the
following information for each retired employee, officer, or director of the Company, or their
dependents, receiving benefits or scheduled to receive benefits in the future: name, pension
benefit, pension option election, retiree medical insurance coverage, retiree life insurance
coverage, and other benefits.

3.23 Labor Matters.

(a) To the Knowledge of Stockholders, the Company (A) is in material compliance with all laws,
rules and regulations, whether federal, state or local, respecting employment and employment
practices, terms and conditions of employment, wages and hours, and nondiscrimination in
employment, disabilities, family and medical leave, immigration, wrongful termination, workers’
compensation for injury or sickness, collective bargaining and OSHA matters (collectively, the
“Employment Laws”); (B) is not engaged in any unfair labor practice, and (C) has made, in a timely
manner, true, complete and accurate filings (in all material respects) required in connection with
such Employment Laws by any Governmental Body.

(b) Except as set forth in Part 3.23(b) of the Disclosure Schedule, the Company is not a party
to, or subject to any obligation, liability or commitment with respect to any written or oral
employment, compensation, consulting, severance pay or similar agreement, express or implied, and
the employment of each employee of the Company is terminable at will by the Company (subject to
applicable federal, state or local Employment Laws) subject to payment for services actually
performed, non-material payments for accrued benefits or such payments as may be provided for under
federal, state or local Employment Laws.

(c) Except as set forth in Part 3.23(c) of the Disclosure Schedule, the Company does not have
any outstanding workers’ compensation claims or liabilities and has paid all workers’ compensation
and unemployment compensation premiums due to date.

(e) The employees of the Company are not represented by a labor organization, the Company is
not a signatory to a collective bargaining agreement with any labor organization, no union claims
to represent any such employees, and to the Knowledge of Stockholder, no union organizing effort is
or within the last two (2) years has been under way involving the employees of the Company.

3.24 Customers and Suppliers. Part 3.24 of the Disclosure Schedule sets forth the
Company’s top twenty customers based on the revenue generated by such customers during the fiscal
year ended December 31, 2006. Also set forth therein are the Company’s top ten vendors. Based upon
the Knowledge of Stockholders, nothing has occurred since December 31, 2006 that would in any way
have a Material Adverse Effect on the relationship that the Company has with any party listed on
Part 3.28 of the Disclosure Schedule.

3.25 Marks. Part 3.25 of the Disclosure Schedule contains a complete and accurate
list and summary description of all of the Company’s fictional business names, trading names,
registered or unregistered trademarks, service marks, and applications therefor (collectively, the
“Marks”). The Company is the owner of all right, title, and interest in and to each of the Marks,
free and clear of all Encumbrances.

3.26 Certain Payments. Neither any Stockholder nor, to the Knowledge of Stockholders,
the Company, or any director, officer, agent, employee or any other Person associated with or
acting for or on behalf of the Company, has directly or indirectly (a) made any contribution, gift,
bribe, rebate, payoff, influence payment, kickback, or other payment in violation of any applicable
law, applicable tort law, or any applicable contract, to any Person, private or public, regardless
of form, whether in money, property, or services (i) to obtain favorable treatment in securing
business, (ii) to pay for favorable treatment for business secured, or (iii) to obtain special
concessions or for special concessions already obtained, for or in respect of the Company or any
Affiliate of the Company, or (b) established or maintained any fund or asset that has not been
recorded in the books and records of the Company.

3.27 Relationships With Related Persons. Except as set forth in Part 3.27 of the
Disclosure Schedule, neither any Stockholder nor any Related Person of such Stockholder has, or
since December 31, 2006, has had, any interest in any property (whether real, personal, or mixed
and whether tangible or intangible), used in or pertaining to the Business. Other than the
ownership of less than 1% of the outstanding stock of any publicly traded corporation and except as
set forth in Part 3.27 of the Disclosure Schedule, neither any Stockholder nor any Related Person
of such Stockholder owns, or since December 31, 2006, has owned (of record or as a beneficial
owner) an equity interest or any other financial or profit interest in, a Person that has (i) had
business dealings or a material financial interest in any transaction with the Company, or (ii)
engaged in competition with the Company with respect to the Business in any market presently served
by the Company. Except as set forth in Part 3.27 of the Disclosure Schedule, neither any
Stockholder nor, to the Knowledge of Stockholders, any Related Person is, or since December 31,
2006, was, a party to any contract with, or has or had any claim or right against, the Company.

3.28 Disclosure.

(a) No representation or warranty of any Stockholder in this Agreement and no statement in the
Disclosure Schedule contains any untrue statement or omits to state a material fact necessary to
make the statements herein or therein, in light of the circumstances in which they were made, not
misleading.

(b) There is no fact known to any Stockholder that has specific application to the Company
(other than general economic or industry conditions) and that materially adversely affects or, as
far as such Stockholder can reasonably foresee, materially threatens, the assets, business,
prospects, financial condition, or results of operations of the Company (separately or on a
consolidated basis) that has not been set forth in this Agreement or the Disclosure Schedule.

4. REPRESENTATIONS AND WARRANTIES OF THE BUYER

Buyer represents and warrants to Stockholders that the statements contained in this §4 shall
be true, correct, and complete as of the Closing Date.

4.1 Organization of Buyer. Buyer is a corporation duly organized, validly existing,
and in good standing under the laws of the State of Delaware, with full corporate power and
authority to conduct its business as it is now being conducted, and to own or use the properties
and assets that it purports to own or use, and to perform all its obligations under all contracts.

4.2 Authorization of Transaction. Buyer has full power and authority (including full
corporate power and authority) to execute and deliver this Agreement and to perform its obligations
hereunder. This Agreement constitutes the valid and legally binding obligation of Buyer,
enforceable in accordance with its terms and conditions, subject to the Enforceability Exceptions.

4.3 Noncontravention. Neither the execution and the delivery of this Agreement, nor
the consummation of the transactions contemplated hereby (including the matters and undertakings
referred to in §2 above), shall (i) violate any injunction, judgment, or Order, (ii) to the
Knowledge of Buyer, violate any constitution, statute, regulation, rule or other restriction of any
Governmental Body to which Buyer is subject, (iii) violate any provision of its Certificate of
Incorporation or bylaws of Buyer, or (iv) conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any party the right to accelerate,
terminate, modify, or cancel, or require any notice under any agreement, contract, lease, license,
instrument, or other arrangement to which Buyer is a party or by which it is bound or to which any
of its assets is subject. Buyer does not need to give any notice to, make any filing with, or
obtain any authorization, consent, or approval of any Governmental Body in order for the Parties
to consummate the transactions contemplated by this Agreement (including the matters and
undertakings referred to in §2 above).

4.4 Brokers’ Fees. Buyer has no Liability or obligation to pay any fees or
commissions to any broker, finder, or agent with respect to the transactions contemplated by this
Agreement for which Stockholders could become liable or obligated.

5. [INTENTIONALLY OMITTED]

6. REMEDIES FOR BREACHES OF THIS AGREEMENT

6.1 Survival of Representations and Warranties; Right to Indemnification Not Affected by
Knowledge. All of the representations and warranties of the Parties contained in this
Agreement shall survive the Closing hereof for a period from and including the Closing Date to and
including the second (2nd) anniversary of the Closing Date, provided, however, that the
representations and warranties set forth in §3.14 shall survive for a period of time equal to
ninety (90) days after the expiration of the statutory period of limitations applicable to
third-party claims with respect to the matters that are the subject of the representations and
warranties set forth therein. The right to indemnification hereunder shall not be affected by any
investigation conducted with respect to, or any Knowledge acquired (or capable of being acquired)
at any time, whether before or after the Closing Date, regarding the accuracy or inaccuracy of or
compliance with, any representation, warranty, covenant or obligation under this Agreement.

6.2 Indemnification Provisions for Benefit of Buyer. Subject to the terms of §6.8
below, Stockholders agree severally but not jointly to indemnify Buyer against and agree to hold it
harmless from any and all Adverse Consequences incurred or suffered by it relating to or arising
out of or in connection with any of the following:

(a) any breach of or any inaccuracy in any representation or warranty made by a
Stockholder in this Agreement;

(b) any liabilities or obligations resulting from the operation of the Business
incurred prior to the Closing Date, including any claims for Taxes and any Environmental
Claims; or

(c) any breach of or failure by a Stockholder to perform any covenant or obligation of
such Stockholder set forth in this Agreement.

6.3 Indemnification Provisions for Benefit of Stockholder. Subject to the terms of
§6.8 below, Buyer agrees to indemnify Stockholders against, and agrees to hold them harmless from,
any and all Adverse Consequences incurred or suffered by them or any of them relating to or arising
out of or in connection with any of the following.

(a) any breach of or any inaccuracy in any representation or warranty made by Buyer in
this Agreement;

(b) any liabilities or obligations resulting from the operation of the Business from
and after the Closing Date, including any claims for Taxes and any Environmental Claims; or

(c) any breach of or failure by Buyer to perform any covenant or obligation of Buyer
set forth in this Agreement.

6.4 Notice of Third Party Claims; Assumption of Defense.

(a) Except with respect to Environmental Claims as provided under §6.5 below, a Party entitled
to Indemnification under this Agreement (an “Indemnified Party”) shall give notice as promptly as
is reasonably practicable to the appropriate Party required to provide indemnification under this
Agreement (an “ Indemnifying Party”) of the assertion or commencement of any Proceeding, by any
Person not a party hereto in respect of which indemnity may be sought under this Agreement;
provided that the failure of the Indemnified Party to give notice shall not relieve the
Indemnifying Party of its obligations under this §6 except to the extent (if any) that the
Indemnifying Party shall have been prejudiced thereby. The Indemnifying Party may, at its own
expense (a) participate in the defense of any Proceeding and (b) upon notice to the Indemnified
Party at any time during the course of any such Proceeding, assume the defense thereof; provided
that (i) the Indemnifying Party’s counsel is reasonably satisfactory to the Indemnified Party, and
(ii) the Indemnifying Party shall thereafter consult with the Indemnified Party upon the
Indemnified Party’s reasonable request for such consultation from time to time with respect to such
Proceeding. If the Indemnifying Party assumes such defense, the Indemnified Party shall have the
right (but not the obligation) to participate in the defense thereof and to employ counsel, at its
own expense, separate from the counsel employed by the Indemnifying Party. If, however, the
Indemnified Party reasonably determines in its judgment that representation by the Indemnifying
Party’s counsel of both the Indemnifying Party and the Indemnified Party would present such counsel
with a conflict of interest, and either the Indemnified Party or its counsel sets forth the basis
for such conflict of interest in writing and delivers the same to the Indemnifying Party or its
counsel, then such Indemnified Party may employ separate counsel to represent or defend it in any
such Proceeding and the Indemnifying Party shall pay the fees and disbursements of such separate
counsel. Whether or not the Indemnifying Party chooses to defend or prosecute any such Proceeding,
all of the Parties shall cooperate in the defense or prosecution thereof.

(b) Any settlement or compromise made or caused to be made by the Indemnified Party or the
Indemnifying Party, as the case may be, of any such Proceeding of the Indemnifying Party referred
to in Section 6.4 shall also be binding upon the Indemnifying Party or the Indemnified Party, as
the case may be, in the same manner as if a final judgment or decree had been entered by a court of
competent jurisdiction in the amount of such settlement or compromise; provided that no obligation,
restriction or Liability shall be imposed on the Indemnified Party as a result of such settlement
without its prior written consent. The Indemnified Party shall give the Indemnifying Party at
least 30 days’ notice of any proposed settlement or compromise of any Proceeding it is defending,
during which time the Indemnifying Party may reject such proposed settlement or compromise;
provided that from and after such rejection, the Indemnifying Party shall be obligated to assume
the defense of and full and complete liability and responsibility for such Proceeding and any and
all Liabilities in connection therewith in excess of the amount of unindemnifiable Liabilities
which the Indemnified Party would have been obligated to pay under the proposed settlement or
compromise.

(c) In the event that the Indemnifying Party does not elect to assume the defense of any
Proceeding, then any failure of the Indemnified Party to defend or to participate in the defense of
any such Proceeding or to cause the same to be done, shall not relieve the Indemnifying Party of
its obligations hereunder.

6.5 Environmental Claims.

(a) Buyer shall notify Stockholders of any claim for indemnification relating to a breach of
an Environmental Warranty (an “Environmental Claim”) in writing promptly after learning of the
existence of such Environmental Claim, which notice shall describe in reasonable detail the claim,
the amount thereof (if known and quantifiable), and a reasonably detailed description of the facts
giving rise to such Environmental Claim; provided however, the failure to so notify a Stockholder
shall not relieve such Stockholder of his or her obligations hereunder except to the extent that
such failure shall have caused the costs for which such Stockholder is obligated to be greater than
they would have been had Buyer given such Stockholder prompt notice hereunder.

(b) Stockholders shall be entitled to assume principal management of an Environmental Claim
which they acknowledge to be Stockholders’ sole or principal responsibility under this Agreement.
To assume principal management, Stockholders must notify Buyer within thirty (30) calendar days (or
such other period as the Parties may agree to in writing) of receipt of said notice that they
intend to assume principal management, subject to Stockholders’ right to rescind such
acknowledgment upon their reasonable determination, and upon prompt written notice to Buyer (a
“Denial Notice”), that they do not bear sole or principal liability under this Agreement for the
Environmental Claim, provided, however, that Stockholders may not issue a Denial Notice after Buyer
has incurred substantial expenditures, obligations, or exposure in reliance on Stockholders’
assumption of principal management. In the event Stockholders either (i) elect not to undertake
principal management or (ii) provide Buyer with a timely Denial Notice, Buyer shall assume
principal management of the subject matter of the Environmental Claim, and reserve whatever rights
it may have against Stockholders. Any acknowledgment of responsibility for an Environmental Claim
shall be without prejudice to any rights to seek indemnity or contribution from third parties.

(c) The Party not exercising principal management with respect to a particular Environmental
Claim shall be entitled, as its sole cost and expense, to monitor the satisfaction of the
Environmental Claim. Monitoring shall include (i) receiving copies of all reports, work plans and
analytical data submitted to Governmental Bodies, all notices or other letters or documents
received from Governmental Bodies, any other documentation and correspondence materially bearing on
the Environmental Claim, and notices of material meetings, (ii) the opportunity to attend and
participate in such material meetings, and (iii) the right of reasonable consultation with the
Party exercising principal management. The Party exercising principal management in respect of a
matter, prior to taking any action to satisfy an Environmental Claim unless not practicable in view
of exigent circumstances, shall prepare a written plan describing the details of such action (the
“Remedial Plan”) and provide the other party with copies of the Remedial Plan. Within thirty (30)
calendar days of the date that the Remedial Plan is received, the Party receiving the Remedial Plan
shall notify the Party that provided the Remedial Plan, in writing, if it believes that the
Remedial Plan is not in conformity with the standards set forth in §6.8(f) and shall provide a
detailed explanation of the reasons for its conclusions. The Parties shall negotiate in good faith
any dispute arising from the Remedial Plan and attempt to resolve any differences within twenty
(20) calendar days. If they are unable to resolve their differences within that time period, the
matter shall be submitted to arbitration as provided in §9.6 below.

(d) In the event they undertake principal management of any matter, Stockholders shall, upon
notice to Buyer, have access to the Assets and the Facilities necessary to implement the Remedial
Plan. Stockholders shall use commercially reasonable efforts to undertake all activities that they
conduct or coordinate hereunder in a manner which does not unreasonably interfere with the
day-to-day operations of the Business.

(e) The Party undertaking principal management hereunder for any matter shall manage the
matter in good faith and in a responsible manner, and any activities conducted in connection
therewith shall be undertaken promptly and concluded expeditiously using commercially reasonable
efforts.

(f) The adequacy of any remedial action with respect to an Environmental Claim hereunder shall
be evaluated using the following criteria: Remedial action shall be deemed adequate for purposes
of satisfying the obligations hereunder to the extent that it:

(i) Attains compliance in a cost-effective manner with any lawful Order or directive
of the applicable Governmental Body, subject to Stockholders’ right to challenge or
negotiate the appropriateness or scope of such order or directive in good faith; and

(ii) Interferes to the least extent reasonably practicable with the operations of the
Business; provided that for purposes of this provision, a determination of what is
“reasonably practicable” shall include an evaluation of the relative costs and benefits of
proposed remedial actions. Remedial action shall not be required to render the Facilities
suitable for use beyond use as a scrap metal processing facility, provided,
however, that the remedial action shall meet all lawful requirements imposed by the
applicable Governmental Body.

(g) Neither Party shall contact any Governmental Body or third parties, other than such
Party’s own agents and representatives, regarding potential Liability for an Environmental Claim
without prior and reasonably prompt notice thereof to the other Party, when reasonably possible
within the available time constraints, provided nothing herein shall require any delay in
contacting any Governmental Body or third party if such delay would violate any Environmental Law
or Order or materially disadvantage the Party making such contact. In connection with
Stockholders’ performance under §6.5 or either Party’s assumption of the defense of the other Party
of a third-party claim relating to environmental matters, the Indemnifying Party shall promptly
provide the Indemnified Party with any material correspondence with Governmental Bodies and any
test results, work plans, reports, data and other material information relating thereto.

6.6 Mitigation. Each Party agrees to cooperate reasonably with the other Parties to
mitigate damages with respect to claims under this Agreement. The duty to mitigate may include a
timely removal, remediation, or response action or settlement of a notice, claim or demands.

6.7 Determination of Adverse Consequences. The Parties shall make appropriate
adjustments for Tax benefits and insurance coverage in determining Adverse Consequences for
purposes of this §6, which adjustments shall be deemed to be adjustments to the Purchase Price.
For such purposes, Adverse Consequences shall not include any Adverse Consequences that result from
any changes in practices, methods, or the manner of conducting business of the Company on or after
the Closing Date (including, without limitation, the treatment of items on tax returns) that vary
from the practices, methods, or manner of conducting the Business prior to the Closing Date, except
where such changes in practices, methods, or the manner of conducting business are necessary, in
the good faith business judgment of the Company, to comply with applicable laws, including changes
in applicable laws.

6.8 Limitations on Indemnification.

(a) Limitations on Indemnification Obligations of Stockholders. Notwithstanding any
provision to the contrary contained herein, Stockholder will not be liable for indemnification
arising under this §6 for any Adverse Consequences of or to Buyer or the Company unless (a) the
amount of such Adverse Consequences exceeds, in each case, $5,000 (each such Adverse Consequence in
excess of $5,000 is referred to in this §6.8 as an “Eligible Loss”), and (b) the aggregate amount
of Eligible Losses for which Stockholder would be liable exceeds $100,000, in which case
Stockholder will be liable for all Eligible Losses incurred by Buyer; provided, however, that the
maximum aggregate amount that Stockholders may be required to pay for indemnification arising under
this §6 in respect of all claims by all Indemnified Parties for Losses is $17,500,000.
Notwithstanding the preceding sentence, neither the minimum nor maximum limits specified in this
§6, including the threshold for Eligible Losses, will apply to Adverse Consequences resulting from
the failure of Stockholders or the Company to pay any Taxes when due or any other breach of
Stockholders’ representations, warranties, covenants and agreements with respect to Tax matters
contained in this Agreement. Stockholders shall have no liability for any indemnification
hereunder unless Buyer makes a written claim for indemnification against Stockholders by the second
(2nd) anniversary of the Closing Date or, solely with respect to claims in connection
with the representations and warranties set forth in §3.14, for a period of time equal to ninety
(90) days after the expiration of the statutory period of limitations applicable to third-party
claims with respect to the matters that are the subject of the representations and warranties set
forth therein.

(b) Limitations on Indemnification Obligations of Buyer. Notwithstanding any
provision to the contrary contained herein, Buyer will not be liable for indemnification arising
under this §6 for any Adverse Consequences of or to Stockholders unless (a) the amount of such
Adverse Consequences exceeds, in each case, an Eligible Loss, and (b) the aggregate amount of
Eligible Losses for which Buyer would be liable exceeds $100,000, in which case Buyer will be
liable for all Eligible Losses incurred by Stockholders; provided, however, that the maximum
aggregate amount that Buyer will be required to pay for indemnification arising under this §6 in
respect of all claims by all Indemnified Parties for Losses is an amount equal to $17,500,000.
Buyer shall have no liability for any indemnification hereunder unless Stockholders make a written
claim for indemnification against Buyer by the second (2nd) anniversary of the Closing
Date.

	7.	 	COVENANTS OF STOCKHOLDERS AND BUYER PRIOR TO THE CLOSING DATE

7.1 Covenants of Stockholders.

(a) Access and Investigation. Between the date of this Agreement and the
Closing Date, subject to pre-approval by Stockholders, Stockholders and their agents and
representatives shall, for Buyer’s review solely in connection with the transactions
contemplated under this Agreement, (i) afford Buyer’s agents, representatives, financial
and legal advisors, lenders, and prospective lenders (collectively, “Buyer’s Advisors”)
reasonable and appropriate access to the Company’s employees, contracts, books and records,
and other documents and data, for review by Buyer and Buyer’s Advisors solely in connection
with the transactions contemplated under this Agreement; (ii) furnish Buyer’s Advisors with
copies of such contracts, books and records, and other existing documents and data as Buyer
may reasonably request; and (iii) furnish Buyer’s Advisors with such reasonable and
appropriate additional financial, operating, and other data and information maintained by
Stockholders or the Company in the Ordinary Course of Business as Buyer may reasonably
request. Buyer’s Advisors and Stockholders shall coordinate such activities in a manner so
as to eliminate or reduce the disruption to the Company’s business resulting therefrom.

(b) Operation of the Business of the Company. Between the date of this
Agreement and the Closing Date, Stockholders shall cause the Company to:

(i) conduct its Business only in the Ordinary Course of Business and otherwise
refrain from any extraordinary transactions or significant deviations from past
practices without the written consent of Buyer, which consent shall not be
unreasonably withheld or delayed;

(ii) preserve intact the current business organization of the Company, keep
available the services of the current officers, employees, and agents of the
Company, and maintain the relations and good will with suppliers, customers,
landlords, creditors, employees, agents, and others having business relationships
with the Company; and

(iii) report periodically to Buyer concerning the status of the Business.

(c) Negative Covenant. Except as otherwise expressly permitted by this
Agreement, between the date of this Agreement and the Closing Date, Stockholders shall not
and shall not permit or suffer the Company to, without the prior consent of Buyer, take any
affirmative action, or fail to take any reasonable action as a result of which any of the
changes or events listed in §3.18 shall occur.

(d) No Negotiation. Until such time, if any, as this Agreement is terminated
pursuant to §8, Stockholders shall not, and shall not permit or suffer the Company to,
directly or indirectly solicit, initiate, or encourage any inquiries or proposals from,
discuss or negotiate with, provide any non-public information to, or consider the merits of
any unsolicited inquiries or proposals from, any Person (other than Buyer) relating to any
transaction involving the sale of the Business or Assets (other than in the Ordinary Course
of Business), or any of the Stock, or any merger, consolidation, business combination, or
similar transaction involving the Company. Stockholders shall immediately notify Buyer
regarding any contact between Stockholders and any other Person regarding any such offer or
proposal or any related inquiry of which Stockholders has Knowledge.

(e) Reasonable Efforts. Between the date of this Agreement and the Closing
Date, Stockholders shall use commercially reasonable efforts in good faith to cause the
conditions to Closing set forth in this Agreement, as applicable to Stockholders, to be
satisfied.

7.2 Covenants of Buyer.

(a) Approvals of Governmental Bodies. As promptly as practicable after the
date of this Agreement, Buyer shall make all filings, if any, required by any applicable
laws, rules or regulations to be made by it to consummate the transactions contemplated by
this Agreement. Between the date of this Agreement and the Closing Date, Buyer shall (i)
cooperate with Stockholders with respect to all filings that the Company or Stockholders
are required by any applicable law, rules or regulations to make in connection with the
transactions contemplated by this Agreement, and (ii) cooperate with Stockholders in
obtaining all consents, provided that this Agreement shall not require Buyer to dispose of
or make any change in any portion of its business or to incur any other burden to obtain
any governmental consent, license or other approval to consummate the transactions
contemplated by this Agreement.

(b) Reasonable Efforts. Between the date of this Agreement and the Closing
Date, Buyer shall use commercially reasonable efforts in good faith to cause the conditions
to Closing set forth in this Agreement, as applicable to Buyer, to be satisfied.

	8.	 	TERMINATION OF AGREEMENT

8.1 Termination ofAgreement. This Agreement may be terminated at any time prior to
Closing:

(a) by mutual written agreement between the Parties;

(b) by Buyer by giving written notice to Stockholders at any time prior to the Closing
(i) in the event Stockholders have breached any representation, warranty, or covenant
contained in this Agreement in any material respect, Buyer has notified Stockholders of the
breach, and the breach has continued without cure for a period of fifteen (15) days after
the notice of breach, or (ii) if events occur which render compliance with one or more
conditions to Closing set forth in this Agreement impossible or materially harmful or
injurious to Buyer and such conditions are not waived by Buyer; provided that such events
did not result from any action or omission by Buyer which was reasonably within its control
and which it was not expressly permitted to take or omit by the terms of this Agreement;
and

(c) by Stockholders by giving written notice to Buyer at any time prior to the Closing
(i) in the event Buyer has breached any representation, warranty, or covenant contained in
this Agreement in any material respect, Stockholders have notified Buyer of the breach, and
the breach has continued without cure for a period of fifteen (15) days after the notice of
breach, or (ii) if events occur which render compliance with one or more conditions to
Closing set forth in this Agreement impossible or materially harmful or injurious to
Stockholders, and such conditions are not waived by Stockholders; provided that such events
did not result from any action or omission by Stockholders which was reasonably within its
control and which it was not expressly permitted to take or omit by the terms of this
Agreement.

8.2 Effect of Termination. If either Buyer or Stockholders terminate this Agreement
as permitted by §8.1 above, all rights and obligations of the Parties hereunder shall terminate
without any liability of any Party to any other Party. The provisions of §9.4 shall survive any
termination hereof pursuant to this §8.

9. POST-CLOSING COVENANTS

The Parties agree as follows with respect to the period following the Closing.

9.1 Further Assurances, etc.. In case at any time after the Closing any further
action is necessary or desirable to carry out the purposes of this Agreement, each of the Parties
shall take such further action (including the execution and delivery of such further instruments
and documents) as the other Party reasonably may request, at the sole cost and expense of the
requesting Party (unless the requesting Party is entitled to indemnification therefor under §6
above). Stockholders acknowledge and agree that from and after the Closing Buyer shall be entitled
to possession of all documents, books, records (including Tax and personnel records), agreements,
and data of any sort relating to the Company (the “Business Records”) other than as excluded in the
definition of Assets. From and after the Closing Date Buyer agrees to provide Stockholders with
access, upon notice and at reasonable times, to records of the Company relating to the Assets,
including the Business Records of the Company transferred to Buyer to the extent necessary to
permit Stockholders to prepare their respective tax returns and to respond to any governmental
inquiry, litigation, prospective litigation, threatened litigation, claims or other events.

9.2 Litigation Support. In the event and for so long as any Party actively is
contesting or defending against any Proceeding, charge, claim, or demand in connection with (i) any
transaction contemplated under this Agreement or (ii) any fact, situation, circumstance, status,
condition, activity, practice, plan, occurrence, event, incident, action, failure to act, or
transaction on or prior to the Closing Date involving the Company, the other Party shall cooperate
with the contesting or defending Party and its counsel in the contest or defense, make available
its personnel, and provide such testimony and access to its books and records as shall be necessary
in connection with the contest or defense, all at the sole cost and expense of the contesting or
defending Party (unless the contesting or defending Party is entitled to indemnification therefor
under §6 herein).

9.3 Transition. Stockholders shall not, without the consent of Buyer, take any action
that is designed or intended to have the effect of discouraging any lessor, licensor, customer,
supplier, or other business associate of Stockholders or the Company or its Subsidiaries from
maintaining the same business relationships with Buyer after the Closing as it maintained with the
Company or its Subsidiaries prior to the Closing except for actions in the Ordinary Course of
Business designed or intended to protect the greater interests of the Company and the Business.
Stockholders shall refer all customer inquiries relating to the Business to Buyer from and after
the Closing.

9.4 Confidentiality. Stockholders shall treat and hold as confidential all of the
Confidential Information, refrain from using any of the Confidential Information except in
connection with this Agreement, and deliver promptly to Buyer or destroy, at the request and option
of Buyer, all tangible embodiments (and all copies) of the Confidential Information which are in
their possession. In the event that any Stockholder is requested or required (by oral question or
request for information or documents in any legal proceeding, interrogatory, subpoena, civil
investigative demand, or similar process) to disclose any Confidential Information, such
Stockholder shall notify Buyer promptly of the request or requirement so that Buyer may seek an
appropriate protective order or waive compliance with the provisions of this §9.4. If, in the
absence of a protective order or the receipt of a waiver hereunder, a Stockholder is, on the advice
of counsel, compelled to disclose any Confidential Information to any tribunal or else stand liable
for contempt, such Stockholder may disclose the Confidential Information to the tribunal; provided,
however, that such Stockholder shall use commercially reasonable efforts to obtain, at the
reasonable request of Buyer, an Order or other assurance that confidential treatment shall be
accorded to such portion of the Confidential Information required to be disclosed as Buyer shall
designate.

9.5 Stub Taxes. Buyer shall file all Tax returns and reports for the Company required
to be filed in connection with the stub period ending on the Closing Date within ninety (90) days
of the Closing Date. Stockholders shall have the right but not the obligation to review such Tax
returns through the Stockholder Representative prior to filing by providing notice to Buyer of
their intent to do so. Buyer shall cause the Company to pay promptly all Taxes indicated
thereunder to be due.

9.6 Arbitration. Any Party shall have the option of referring any dispute to
arbitration by written notice to the other Parties within thirty (30) calendar days (or such longer
period of time as may be agreed to by the parties) following the giving of any notice of claim
hereunder, or the initiation of litigation by any Party against any other Party (the “Arbitration
Referral Period”). If the matter is referred to arbitration, each Party shall select an arbitrator
and the two so selected shall agree on a third arbitrator. The arbitration shall be pursuant to
the Rules of the American Arbitration Association and shall be conducted in Newark, New Jersey.
Judgment upon any resulting arbitration award may be entered in any court of competent
jurisdiction. As part of such award, the arbitrators shall establish their fees and expenses in
connection therewith and allocate such fees and expenses between the parties, who shall promptly
pay their allocable shares. Any award shall be a conclusive determination of the matter. If
neither Party properly refers the matter to arbitration prior to the expiration of the Arbitration
Referral Period, then the Parties shall be free to pursue such remedies as may be available at law
or in equity.

10. MISCELLANEOUS

10.1 Press Releases and Public Announcements. No Party shall issue any press release
or make any public announcement relating to the subject matter of this Agreement prior to the
Closing without the prior written approval of the other Party; provided, however, that any Party
may make any public disclosure it believes in good faith is required by applicable law or any
listing or trading agreement concerning its or any of its Affiliates’ publicly-traded securities
(in which case the disclosing Party shall use its commercially reasonable efforts to advise the
other Party in writing prior to making the disclosure unless prohibited by applicable law or any
listing or trading agreement concerning its or any of its Affiliates’ publicly-traded securities).

10.2 Entire Agreement. This Agreement and the Schedules and Exhibits hereto, which
are incorporated herein and a part hereof, constitute the entire agreement between the Parties and
supersede any prior understandings, agreements, or representations by or between the Parties,
written or oral, to the extent they relate in any way to the subject matter hereof.

10.3 Succession and Assignment. This Agreement shall be binding upon and inure to the
benefit of the Parties named herein and their respective successors and permitted assigns. No
Party may assign either this Agreement or any of its rights, interests, or obligations hereunder
without the prior written approval of the other Party; provided, however, that Buyer may (i) assign
all but not less than all of its rights and interests hereunder to one or more of its Affiliates
and (ii) designate one or more of its Affiliates to perform its obligations hereunder (in any or
all of which cases such transferee shall agree to be bound by all of the terms and conditions of
this Agreement but Buyer nonetheless shall remain responsible for the performance of all of its
obligations hereunder).

10.4 Counterparts. This Agreement may be executed in one or more counterparts, each
of which shall be deemed an original but all of which together shall constitute one and the same
instrument.

10.5 Headings. The section headings contained in this Agreement are inserted for
convenience only and shall not affect in any way the meaning or interpretation of this Agreement.

10.6 Notices. Any notice, request, demand, waiver, consent, approval or other
communication which is required or permitted hereunder shall be in writing and shall be deemed
given only if delivered as hereinafter provided, as follows:

	 	 	 
	If to Buyer, to:	 	METALICO, INC.
	
 
	 	186 North Avenue East

Cranford, New Jersey 07016

Attention:Carlos E. Agüero

President

Telephone:(908) 497-9610

Fax: (908) 497-1097

Email: ceaguero@metalico.com
	
 
	 	 
	with a copy to:

	 	Metalico, Inc.

186 North Avenue East

Cranford, New Jersey 07016

Attention:General Counsel

Telephone:(908) 497-9610

Fax: (908) 497-1097

Email: asgraber@metalico.com
	
 
	 	 
	If to Stockholders, to:

	 	Robert Graifman
	
 
	 	Telephone:
	
 
	 	Fax :
	
 
	 	Email:
	with a copy to:

	 	Andrew Fradkin, Esq.
	
 
	 	Telephone:
	
 
	 	Fax:
	
 
	 	Email:

Any Party may send any notice, request, demand, claim or other communication hereunder to the
intended recipient at the address set forth above using any other means (including personal
delivery, expedited courier, messenger service, telecopy, telex, ordinary mail, or electronic
mail), but no such notice, request, demand, claim, or other communication shall be deemed to have
been duly given unless and until it actually is received by the intended recipient. Any Party may
change the address to which notices, requests, demands, claims, and other communications hereunder
are to be delivered by giving the other Party notice in the manner herein set forth. All notices,
requests, demands, claims, and other communications hereunder shall be in writing.

10.7 Governing Law; Jurisdiction. This Agreement shall be governed by and construed
in accordance with the domestic laws of the State of New Jersey without giving effect to any choice
or conflict of law provision or rule that would cause the application of the laws of any
jurisdiction other than the State of New Jersey. In any court proceeding, each Party agrees to
submit to the jurisdiction of the courts of the State of New Jersey, Essex County, and/or the
United States District Court for the District of New Jersey. Each of each Stockholder and Buyer
hereby irrevocably waives to the fullest extent permitted by law any objection which it may now
have or hereafter have to the laying of such venue and any claim that any such forum is an
inconvenient forum.

10.8 Amendments and Waivers. No amendment of any provision of this Agreement shall be
valid unless the same shall be in writing and signed by Buyer and Stockholders. No waiver by any
Party of any default, misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent default,
misrepresentation, or breach of warranty or covenant hereunder or affect in any way any rights
arising by virtue of any prior or subsequent such occurrence.

10.9 Severability. Any term or provision of this Agreement that is invalid or
unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability
of the remaining terms and provisions hereof or the validity or enforceability of the offending
term or provision in any other situation or in any other jurisdiction.

10.10 Expenses. Except as otherwise indicated in this Agreement or agreed by the
Parties, each of the Parties shall bear its own costs and expenses (including legal fees and
expenses) incurred in connection with this Agreement and the transactions contemplated hereby.

10.11 No Third-Party Beneficiaries. Nothing contained in this Agreement shall be
construed to confer any benefit or standing to pursue any claim on any person other than the
Parties, and nothing contained in this section shall create any third-party beneficiaries.

10.12 Construction. The Parties have participated jointly in the negotiation and
drafting of this Agreement. In the event an ambiguity or question of intent or interpretation
arises, this Agreement shall be construed as if drafted jointly by the Parties and no presumption
or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any
of the provisions of this Agreement. Any reference to any federal, state, local, or foreign
statute or law shall be deemed also to refer to all rules and regulations promulgated thereunder,
unless the context requires otherwise. The word “including” shall mean including without
limitation. The Parties intend that each representation, warranty, and covenant contained herein
shall have independent significance.

10.13 Specific Performance. Each Party acknowledges and agrees that the other Party
would be damaged irreparably in the event any of the provisions of this Agreement are not performed
in accordance with their specific terms or otherwise are breached. Accordingly, each Party agrees
that the other Party shall be entitled to an injunction or injunctions to prevent breaches of the
provisions of this Agreement and to enforce specifically this Agreement and the terms and
provisions hereof in any action instituted in any court of the United States or any state thereof
having jurisdiction over the Parties and the matter, in addition to any other remedy to which it
may be entitled, at law or in equity.

10.14 Stockholder Representative.

(a) By execution of this Agreement, Stockholders appoint Robert Graifman to act as the agent,
representative and attorney-in-fact for each Stockholder for all purposes and with respect to all
matters arising under this Agreement (in such capacity the “Stockholder Representative”). The
powers and authority of the Stockholder Representative shall include, but not be limited to, the
power and authority to give and accept notices as provided hereunder; initiate, investigate,
defend, compromise, arbitrate, settle, mediate, prosecute and authorize payment of any and all
indemnification claims pursuant to this Agreement; pay from the Purchase Price any and all
outstanding bank indebtedness and advisory, accounting or legal fees and expenses incurred in
connection with the transactions contemplated herein; and to otherwise carry out the purposes and
intent of this Agreement.

(b) Buyer shall be able to rely conclusively on the instructions and decisions of the
Stockholder Representative as to the initiation, investigation, defense, compromise, arbitration,
mediation, prosecution or settlement of any indemnification claim by Buyer pursuant to this
Agreement or any other actions required or permitted to be taken by the Stockholder Representative
under this Agreement, and no Party shall have any cause of action against Buyer for any action
taken by it in reliance upon the instructions or decisions of the Stockholder Representative; nor
shall any Party hereunder have any cause of action against Buyer for any failure by the Stockholder
Representative to perform his obligations hereunder for any reason, whether deliberate,
inadvertent, due to negligence or otherwise.

(c) All actions, decisions and instructions of the Stockholder Representative in connection
with discharging his duties hereunder shall be conclusive and binding on each Stockholder and no
Stockholder shall have any cause of action against the Stockholder Representative for any action
taken, decision made, payment made or instruction given, or omission to do any of the foregoing, by
him under this Agreement, except for fraud in connection with, or willful breach of, this Agreement
by the Stockholder Representative. In his capacity as the Stockholder Representative, Robert
Graifman will be acting for the convenience of Stockholders, without compensation, and, in such
capacity, he shall have no duties or liabilities beyond those expressly assumed by him hereunder.
The Stockholder Representative shall be entitled to rely on any communication or document that he
believes to be genuine. Stockholders hereby indemnify and hold harmless the Stockholder
Representative against any liabilities resulting from his role as Stockholder Representative by
Stockholders, except to the extent caused by or arising out of the Stockholder Representative’s
gross negligence or willful misconduct. In the event of the death, resignation or incapacity of
Robert Graifman, Andrew Fradkin shall serve as a successor stockholder representative and he shall
have all of the rights, powers and duties of the Stockholder Representative set out herein.

2

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

Buyer:

METALICO, INC.

By:

Carlos E. Agüero

President and Chief Executive Officer

Stockholders:

ROBERT GRAIFMAN

WALTER GREENBLATT

ANDREW FRADKIN

MARILYN KOTCHEK

KURT ELLIS

SCOTT SPECTOR

GERALD SMITH

BRUCE ROGOVE

DAVID JOHNSTON

LOUIS CHERICHELLA

STUART LIPKIN

EZRA ANGRIST

JOHN SLAVITT

COREY HOROWITZ

3EX-10.1

EMPLOYMENT AGREEMENT

(dated as of July 9, 2007)

AGREEMENT, made and entered into as of the date first above written, by and between, XL
Capital Ltd, a Cayman Islands corporation (the “Company”), X.L. Global Services, Inc. (“XLGS”), and
BRIAN W. NOCCO (the “Executive”).

WHEREAS, the Company and Executive each desire Executive become employed by the Company and
XLGS and to memorialize the terms and conditions of such employment by a written agreement;

NOW, THEREFORE, in consideration of the premises and mutual covenants contained herein and for
other good and valuable consideration, the Company, XLGS, the Guarantors (as hereinafter defined)
and the Executive (the “Parties”) agree as follows:

1. EMPLOYMENT.

The Company hereby employs the Executive, and the Executive hereby accepts employment with the
Company, for the term of this Agreement as set forth in Section 2, below, in the position and with
duties and responsibilities set forth in Section 3, below, and upon such other terms and conditions
as are hereinafter stated.

2. TERM OF EMPLOYMENT.

The stated term of employment under this Agreement shall commence on the date first above
written (the “Date of the Agreement”) and shall continue through the close of business on the first
anniversary of the Date of the Agreement, subject to earlier termination as provided in Section 8,
below, and extension as provided in the next succeeding sentence. On the first anniversary of the
Date of the Agreement and on each anniversary thereafter, the stated term of employment shall be
automatically extended for an additional one year unless the Company gives notice in writing to the
Executive or the Executive gives notice in writing to the Company at least six months prior to such
anniversary that the term is not to be so extended.

3. POSITIONS, DUTIES AND RESPONSIBILITIES.

(a) GENERAL. The Executive shall be employed as Executive Vice President of the Company
effective July 23, 2007, and shall be appointed, effective August 10, 2007, the Chief Financial
Officer of the Company. In such position, the Executive shall have the duties, responsibilities
and authority normally associated with the office, position and titles of such an officer of an
insurance, reinsurance and financial services company, or holding company, whose shares are
publicly traded in the United States. Such duties shall include responsibility for managing the
finance organization on a global basis, overseeing the corporate finance functions, controllership,
treasury, capital management, taxation, business segment finance functions, finance shared
services, investor relations, rating agency management, and financial reporting and controls. In
carrying out his duties and responsibilities, the Executive shall report to the Company’s Chief
Executive Officer (the “CEO”) or his designee. During the term of this Agreement, the Executive
shall devote his full business time to the business and affairs of the Company, provided that the
Executive may manage his personal and family passive investments, be involved with and serve on
boards and advisory committees of charitable, professional, trade and civic organization, and with
the consent of the CEO, serve on for profit boards and advisory committees provided that the
foregoing activities in the aggregate do not materially interfere with Executive’s performance of
his duties.

(b) PERFORMANCE OF SERVICES. The Executive’s services under this Agreement, which are global
in nature, shall be performed at the location or locations reasonably requested by the Company;
provided, however, that Executive’s principal place of business shall be located in
Bermuda. Executive acknowledges that certain services may be required to be performed outside the
United States and in accordance with the guidelines established by the Company from time to time
for the location of the performance of services on behalf of the Company and its subsidiaries. The
Executive acknowledges that the Company may require the Executive to travel to the extent such
travel is reasonably necessary to perform the services hereunder and that such travel may be
extensive.

4. BASE SALARY.

The Executive shall be paid a Base Salary by the Company of no less than $550,000, payable in
accordance with the Company’s regular pay practices. Such Base Salary shall be subject to annual
review in accordance with the Company’s practices for executives as in effect from time to time and
may be increased (but not decreased) at the discretion of the Compensation Committee of the Board
of Directors of the Company (the “Compensation Committee”).

5. BONUSES.

In addition to the Base Salary provided for in Section 4, above, the Executive shall be
eligible for an annual cash bonus under the Company’s Annual Incentive Compensation Plan as in
effect from time to time, with a bonus target of at least 125% of his or her Base Salary. For
fiscal year 2007, provided Executive remains otherwise eligible to receive a bonus, such bonus
shall be no less than the target award. The Executive may be awarded such annual bonuses
thereunder as may be approved by the Compensation Committee based on corporate, individual and
business unit performance measures, as appropriate, established or approved from time to time, by
the Compensation Committee. Any annual bonus shall be paid in cash in a lump sum after the end of
the calendar year for which the annual bonus is paid and no later than March 15 following such
calendar year, unless deferred at the Executive’s option in accordance with the provisions of any
applicable deferred compensation plan of the Company or it subsidiaries in effect from time to
time. Nothing in this Section 5 shall confer upon the Executive any right to a minimum annual
bonus.

6. EMPLOYEE BENEFIT PROGRAMS.

During the term of the Executive’s employment under this Agreement, the Executive shall be
entitled to participate in all employee benefit programs of the Company as are in effect from time
to time and in which similarly situated senior executives of the Company are eligible to
participate.

7. BUSINESS EXPENSE REIMBURSEMENT, FRINGE BENEFITS. During the term of the Executive’s
employment under this Agreement, the Executive shall be entitled to participate in the Company’s
travel and entertainment expense reimbursement programs and its executive fringe benefit plans and
arrangements, all in accordance with the terms and conditions of such programs, plans and
arrangements as in effect from time to time as applied to the Company’s similarly situated
executives.

8. TERMINATION OF EMPLOYMENT.

(a) TERMINATION DUE TO DEATH. In the event the Executive dies during the term of employment
hereunder, the Executive’s spouse, if the spouse survives the Executive, (or, if the Executive’s
spouse does not survive him, the estate or other legal representative of the Executive) shall be
entitled to receive the Base Salary as provided in Section 4, above, at the rate in effect at the
time of Executive’s death, to be paid in accordance with the Company’s regular payroll practices
through the end of the sixth month after the month in which the Executive dies. In addition to the
above, the estate or other legal representative of the Executive shall be entitled to:

(i) any annual bonus awarded in accordance with the Company’s bonus program but not yet
paid under Section 5, above, to be paid at the time such bonus would otherwise be due under
Section 5 above, and reimbursement of business expenses incurred prior to death in
accordance with Section 7 above,

(ii) within 45 days after the date of death, a pro rata bonus for the year of death in
an amount determined by the Compensation Committee, but in no event less than a pro rata
portion of the Executive’s average annual bonus for the immediately preceding three years
(or the period of the Executive’s employment with the Company, if less),

(iii) the rights under any options to purchase equity securities of the Company or
other rights with respect to equity securities of the Company, including any restricted
stock or other securities, held by the Executive determined in accordance with the terms
thereof,

(iv) for a period of six months following the Executive’s death, continued medical
benefit plan coverage (including dental and vision benefits if provided under the applicable
plans) for the Executive’s dependents, if any, under the Company’s medical benefit plans
upon substantially the same terms and conditions (including cost of coverage to the
dependents) as is then in existence for other executives during the coverage period;
provided, that, if the Executive’s dependents cannot continue to participate
in the Company plans providing such benefits, the Company shall otherwise provide such
benefits on substantially the same after-tax basis as if continued participation had been
permitted (and any payment made by the Company in respect of any taxes imposed with respect
to such benefits shall be paid to the Executive’s dependents, or to the applicable taxing
authority on their behalf, no later than the due date of such taxes), and

(v) the vested accrued benefits, if any, under the employee benefit programs of the
Company, as provided in Section 6, above, determined in accordance with the applicable terms
and provisions of such programs.

(b) TERMINATION DUE TO DISABILITY. In the event the Executive’s employment hereunder is
terminated due to his disability, which shall mean that Executive has been unable to perform his
material duties due to illness or injury for a continuous twenty-six (26) week period, as
determined under the Company’s long-term disability plan, the Executive shall be entitled to,
subject to Subsection 25 hereof:

(i) a cash lump sum payment made within 45 days after the date of termination in an
amount equal to the Base Salary as provided in Section 4, above, that would have been paid
to the Executive had he remained employed through the end of the sixth month after the month
in which the Executive’s employment terminates due to disability,

(ii) any annual bonus awarded in accordance with the Company’s bonus program but not
yet paid under Section 5, to be paid at the time such bonus would otherwise be due under
Section 5 above, and reimbursement of business expenses incurred prior to termination of
employment in accordance with Section 7 above,

(iii) within 45 days after the date of termination, a pro rata bonus for the year of
termination in an amount determined by the Compensation Committee, but in no event less than
a pro rata portion of the Executive’s average annual bonus for the immediately preceding
three years (or the period of the Executive’s employment with the Company, if less),

(iv) the rights under any options to purchase equity securities of the Company or other
rights with respect to equity securities of the Company, including any restricted stock or
other securities, held by the Executive, determined in accordance with the terms thereof,

(v) for a period of six months following the termination of the Executive’s employment,
continued medical benefit plan coverage (including dental and vision benefits if provided
under the applicable plans) for the Executive (and the Executive’s dependents, if any) under
the Company’s medical benefit plans upon substantially the same terms and conditions
(including cost of coverage to the Executive) as is then in existence for other executives
during the coverage period; provided, that, if the Executive cannot continue
to participate in the Company plans providing such benefits, the Company shall otherwise
provide such benefits on substantially the same after-tax basis as if continued
participation had been permitted (and any payment made by the Company in respect of any
taxes imposed with respect to such benefits shall be paid to the Executive, or to the
applicable taxing authority on his behalf, no later than the due date of such taxes);
provided further, however, that, in the event the Executive becomes
reemployed with another employer and becomes eligible to receive medical benefits from such
employer, the medical benefits described herein shall immediately cease, and

(vi) the vested accrued benefits, if any, under the employee benefit programs of the
Company, as provided in Section 6 above, determined in accordance with the applicable terms
and provisions of such programs.

(c) TERMINATION FOR CAUSE.

(i) The employment of the Executive under this Agreement may be terminated by the Company for
Cause, such termination to be effective upon the Company giving the Executive written notice of
termination in accordance with the provisions of this Agreement. For this purpose, “Cause” shall
mean:

(A) conviction of the Executive of a felony involving moral turpitude, dishonesty or
laws to which the Company or its Affiliates are subject in connection with the conduct of
its or their business;

(B) the Executive, in carrying out his duties for the Company under this Agreement, has
been guilty of (1) willful misconduct of a material nature or (2) substantial and continual
refusal by the Executive to perform the duties assigned to the Executive pursuant to the
terms hereof; provided, however, that any act or failure to act by the
Executive shall not constitute Cause for purposes of this Section 8(c)(i)(B) if such act or
failure to act was committed, or omitted, by the Executive in good faith and in a manner he
reasonably believed to be in the overall best interests of the Company, as the case may be.
The determination of whether the Executive acted in good faith and that he reasonably
believed his action to be in the Company’s overall best interest, as the case may be, will
be in the reasonable judgment of the General Counsel of the Company or, if the General
Counsel shall have an actual or potential conflict of interest, the Compensation Committee;
or

(C) the Executive’s continued willful refusal to obey any lawful policy or requirement
duly adopted by the Company Board and the continuance of such refusal after receipt of
written notice.

(ii) In the event of a termination for Cause under Section 8(c)(i), above, the Executive shall
be entitled only to:

(A) Base Salary as provided in Section 4, above, at the rate in effect at the time of
his termination of employment for Cause, through the date on which termination for Cause
occurs, to be paid in accordance with the Company’s regular payroll practices,

(B) the rights under any options to purchase equity securities of the Company or other
rights with respect to equity securities of the Company, including any restricted stock or
other securities, held by the Executive, determined in accordance with the terms thereof,
and

(C) the vested accrued benefits, if any, under employee benefit programs of the
Company, as provided in Section 6, above, and reimbursement of properly incurred
unreimbursed business expenses under the business expense reimbursement program as described
in Section 7, above, determined in accordance with the applicable terms and provisions of
such employee benefit and expense reimbursement programs; provided that the
Executive shall not be entitled to any such benefits unless the terms and provisions of such
programs expressly state that the Executive shall be entitled thereto in the event his
employment is terminated for Cause (as defined in this Agreement or otherwise).

(d) TERMINATION WITHOUT CAUSE.

(i) Anything in this Agreement to the contrary notwithstanding, the Executive’s employment may
be terminated by the Company without Cause as provided in this Section 8(d). A termination due to
death or disability, as described in Section 8(a) or (b), above, or a termination for Cause, as
described in Section 8(c), above, shall not be deemed a termination without Cause under this
Section 8(d). For the avoidance of doubt, if a notice of non-renewal of this Agreement pursuant to
Section 2 is issued by the Company, the termination of the Executive’s employment at the end of the
Term shall be considered a termination by the Company without Cause hereunder.

(ii) in the event the Executive’s employment is terminated by the Company without Cause (x)
prior to a Change in Control (other than as provided in the last paragraph of Section 8(d)(iii), in
which case the provisions of Section 8(d)(iii) shall apply in lieu of this Section 8(d)(ii)) or (y)
following the Post-Change Period (as hereinafter defined), the Executive shall be entitled to:

(A) Base Salary as provided in Section 4, above, at the rate in effect at the time of
his termination of employment without Cause, through the date on which termination without
Cause occurs, to be paid in accordance with the Company’s regular payroll practices,

(B) provided the Executive executes and does not revoke a general release of claims
against the Company and its affiliates in substantially the form of Exhibit C hereto, a cash
lump sum payment made within 30 days after termination of employment equal to (x) two times
the Executive’s annual Base Salary, at the annual rate in effect in accordance with Section
4, above, immediately prior to such termination and (y) one times the higher of the targeted
annual bonus for the year of such termination, if any, or the average of the Executive’s
annual bonus payable by the Company for the three years immediately preceding the year of
termination (or such shorter period during which the Executive has been employed by the
Company),

(C) any annual bonus awarded in accordance with the Company’s bonus program but not yet
paid under Section 5, above, to be paid at the time such bonus would otherwise be due under
Section 5 above, and reimbursement of business expenses incurred prior to termination of
employment in accordance with Section 7 above,

(D) the rights under any options to purchase equity securities of the Company or other
rights with respect to equity securities of the Company, including any restricted stock or
other securities, held by the Executive, determined in accordance with the terms thereof,

(E) for a period of twenty-four months following the termination of the Executive’s
employment, continued medical benefit plan coverage (including dental and vision benefits if
provided under the applicable plans) for the Executive (and the Executive’s dependents, if
any) under the Company’s medical benefit plans upon substantially the same terms and
conditions (including cost of coverage to the Executive) as is then in existence for other
executives during the coverage period; provided, that, if the Executive
cannot continue to participate in the Company plans providing such benefits because of
underwriting or plan provisions or if such participation would cause the Executive to be
taxed on the benefits under Section 105(h) of the Internal Revenue Code of 1986, as amended
(the “Code”), the Company shall otherwise provide such benefits on substantially the same
after-tax basis as if continued participation had been permitted (and any payment made by
the Company in respect of any taxes imposed with respect to such benefits shall be paid to
the Executive, or to the applicable taxing authority on his behalf, no later than the due
date of such taxes); provided, however, that, in the event the Executive
becomes reemployed with another employer and becomes eligible to receive medical benefits
from such employer, the medical benefits described herein shall immediately cease,

(F) the vested accrued benefits, if any, under the employee benefit programs of the
Company, as provided in Section 6 above, determined in accordance with the applicable terms
and provisions of such programs.

(iii) In the event the Executive’s employment is terminated by (x) the Company without Cause
within the twenty-four month period following a Change in Control (as defined in Exhibit A hereto)
(the “Post-Change Period”) or (y) the Executive terminates his employment for “Good Reason” (as
defined in Exhibit B hereto) during the Post-Change Period, the Executive shall be entitled to the
following, paid in the case of amounts set forth in (A), (B), (C), (D) and (G) below, subject to
Section 25 below, within 30 days after termination of employment:

(A) Base Salary as provided in Section 4, above, at the rate in effect at the time of
his termination of employment, through the date on which termination occurs,

(B) a cash lump sum payment equal to two times the Executive’s annual Base Salary, at
the rate in effect in accordance with Section 4, above, or immediately prior to such
termination or Change in Control, whichever is greater,

(C) a cash lump sum payment equal to two times the average annual bonus awarded to the
Executive by the Company in the three years prior to the year in which the Change in Control
occurs (or shorter period during which the Executive had been employed by the Company);
provided such bonuses shall be at least equal to the targeted annual bonus, if any,
for the year of such termination,

(D) an amount equal to (i) the higher of (x) the bonus actually awarded to the
Executive by the Company for the year immediately preceding the year in which the Change in
Control occurs or (y) the targeted amount of bonus, if any, that would have been awarded to
the Executive in respect of the year in which the termination of employment occurs,
multiplied by (ii) a fraction, the numerator of which is the number of months or fraction
thereof in which the Executive was employed by the Company in the year of termination of
employment, and the denominator of which is 12,

(E) options to purchase equity securities of the Company or other rights with respect
to equity securities of the Company held by the Executive shall immediately vest in full and
shall continue to be exercisable for three years from the date of termination of employment,
notwithstanding the Executive’s termination of employment, or the original full term of the
option or other right, if shorter,

(F) for a period of twenty-four months following the termination of the Executive’s
employment, continued medical benefit plan coverage (including dental and vision benefits if
provided under the applicable plans) for the Executive (and the Executive’s dependents, if
any) under the Company’s medical benefit plans upon substantially the same terms and
conditions (including cost of coverage to the Executive) as is then in existence for other
executives during the coverage period; provided, that, if the Executive
cannot continue to participate in the Company plans providing such benefits because of
underwriting or plan provisions or, if such participation would cause the Executive to be
taxed in the benefits under Section 105(h) of the Code, the Company shall otherwise provide
such benefits on substantially the same after-tax basis as if continued participation had
been permitted (and any payment made by the Company in respect of any taxes imposed with
respect to such benefits shall be paid to the Executive, or to the applicable taxing
authority on his behalf, no later than the due date of such taxes); provided,
however, that, in the event the Executive becomes reemployed with another employer
and becomes eligible to receive medical benefits from such employer, the medical benefits
described herein shall immediately cease, and

(G) full and immediate vesting under the Company’s retirement plans as of the date of
termination, to the extent permitted by applicable law; provided, however,
that if such full and immediate vesting cannot be provided under a retirement plan under
applicable law, then the present value of economically equivalent benefits, determined using
reasonable assumptions and on an after tax basis to the Executive, shall be paid in a cash
lump sum to the Executive.

Anything in this Agreement to the contrary notwithstanding, the Executive shall be entitled to
the benefits described in (A)-(G) above, if the Executive’s employment with the Company is
terminated by the Company (other than for Cause) within one year prior to the date on which a
Change in Control occurs, and it is reasonably demonstrated that such termination (i) was at the
request of a third party who has taken steps reasonably calculated or intended to effect the Change
in Control or (ii) otherwise arose in connection with or anticipation of the Change in Control;
provided, however, that in such event, amounts in excess of those otherwise payable
to the Executive under Section 8(d)(ii) above will be payable hereunder only following the Change
in Control (and, subject to Section 25 below, within 10 days thereafter).

(iv) If, in situations where Section 8(d)(iii) does not apply, at any time during the term of
the Executive’s employment hereunder and without the Executive’s written consent, duties are
assigned to the Executive that are materially inconsistent with his position as described in
Section 3 herein, or the Company does not cure any material breach by it of any provision of
Sections 3 through 7 of this Agreement within 30 calendar days following written notice of same by
the Executive (which written notice must be given within 30 calendar days after such breach), the
Executive shall have the right to terminate his employment within 30 calendar days of the Company’s
failure to rescind such assignment in accordance with the proviso below or of such failure to cure
a breach, as the case may be, and such termination shall be deemed a termination by the Company
without Cause under Section 8(d)(ii), above, provided, in the case of assignment of
inconsistent duties that are materially inconsistent with those set for in Section 3, the Executive
shall have given the Company written notice of such assignment within 30 calendar days of such
assignment and shall not, within 30 calendar days thereafter, have had the assignment of
inconsistent duties rescinded.

(e) VOLUNTARY TERMINATION BY THE EXECUTIVE. The Executive may voluntarily terminate his
employment prior to the expiration of the term of this Agreement upon at least three months’ prior
written notice to the Company. Such termination shall constitute a voluntary termination and,
except as provided in Section 8(d)(iii) or Section 8(d)(iv), above, in such event the Executive
shall be limited to the same rights and benefits as applicable to a termination by the Company for
Cause as provided in Section 8(c), above. A voluntary termination in accordance with this Section
8(e) shall not be deemed a breach of this Agreement. A termination of the Executive’s employment
due to disability or death as described in Section 8(b) or 8(a), above, a termination by the
Executive which the Executive is entitled to treat as a termination by the Company pursuant to
Section 8(d), above, or a termination by the Executive under Section 8(d)(iv), above, shall not be
deemed a voluntary termination within the meaning of this Section 8(e).

9. EXCISE TAX PAYMENTS.

(a) Anything in this Agreement to the contrary notwithstanding, in the event it shall be
determined that (i) any payment or distribution made, or benefit provided (including, without
limitation, the acceleration of any payment, distribution or benefit or accelerated vesting or
exercisability of any award) by the Company, any acquirer or any party related to the Company or
the acquirer, to or for the benefit of the Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise, but determined without regard
to any additional payments required under this Section 9) (a “Payment”) would be subject to the
excise tax imposed by Section 4999 of the Code (or any successor provision or similar excise tax),
or any interest or penalties are incurred by the Executive with respect to such excise tax (such
excise tax, together with any such interest and penalties, are hereinafter collectively referred to
as the “Excise Tax”), (ii) the aggregate amount of the Executive’s Parachute Payments (as defined
in Section 280G(b)(2)(A) of the Code) is less than 3.25 times the Executive’s Base Amount (as
defined in Section 280G(b)(3)(A) of the Code), and (iii) no such Payment would be subject to the
Excise Tax if the payments set forth in Section 8(d)(iii)(B) and (C) hereof were each reduced by up
to 20 percent, then the payments set forth in Section 8(d)(iii)(B) and (C) will each be reduced to
the smallest extent possible (and in no event by more than 20 percent in the aggregate) such that
no Payment is subject to the Excise Tax.

(b) Anything in this Agreement to the contrary notwithstanding, in the event it shall be
determined that (i) the aggregate amount of the Executive’s Parachute Payments equals or exceeds
3.25 times the Executive’s Base Amount, (ii) the aggregate amount of the Executive’s Parachute
Payments is less than 3.25 times the Base Amount but one or more Payments would be subject to the
Excise Tax even if the payments set forth in Section 8(d)(iii)(B) and (C) hereof were each reduced
by 20 percent, or (iii) notwithstanding a reduction in payments pursuant to Section 9(a) above, an
Excise Tax is payable by the Executive on one or more Payments, then, in any such case, Payments
shall not be reduced and the Executive shall be entitled to receive an additional payment (a
“Gross-Up Payment”) in an amount such that after payment by the Executive of all taxes (including
any income or Excise Tax) imposed upon the Gross-Up Payment and any interest or penalties imposed
with respect to such taxes, the Executive retains from the Gross-Up Payment an amount equal to the
Excise Tax imposed upon the Payments.

(c) Subject to the provisions of Section 9(d), all determinations required to be made under
this Section 9, including determination of whether a Gross-Up Payment is required and of the amount
of any such Gross-Up Payment, shall be made by a nationally recognized public accounting firm
selected by the Company (the “Accounting Firm”) which shall provide detailed supporting
calculations both to the Company and the Executive within l5 business days of the date of
termination of the Executive’s employment, if applicable, or such earlier time as is reasonably
requested. The initial Gross-Up Payment, if any, as determined pursuant to this Section 9(c),
shall be paid to the Executive within five business days of the receipt of the Accounting Firm’s
determination. If the Accounting Firm determines that no Excise Tax is payable by the Executive,
it shall furnish the Executive with a written opinion that he has substantial authority not to
report any Excise Tax on his Federal income tax return. Any determination by the Accounting Firm
meeting the requirements of this Section 9(c) shall be binding upon the Company and the Executive,
subject only to payments pursuant to the following sentence based on a determination that
additional Gross-Up Payments should have been made, consistent with the calculations required to be
made hereunder (the amount of such additional payments are referred to herein as the “Gross-Up
Underpayment”). In the event that the Company exhausts its remedies pursuant to Section 9(d) and
the Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall
determine the amount of the Gross-Up Underpayment that has occurred and any such Gross-Up
Underpayment shall be promptly paid by the Company to or for the benefit of the Executive. The
fees and disbursements of the Accounting Firm shall be paid by the Company.

(d) The Executive shall notify the Company in writing of any claim by the United States
Internal Revenue Service that, if successful, would require the payment by the Executive of any
Excise Tax and, therefore, the payment by the Company of a Gross-Up Payment. Such notification
shall be given as soon as practicable but not later than 30 business days after the Executive
receives written notice of such claim and shall apprise the Company of the nature of such claim and
the date on which such claim is requested to be paid. The Executive shall not pay such claim prior
to the expiration of the 30-day period following the date on which he gives such notice to the
Company (or such shorter period ending on the date that any payment of taxes with respect to such
claim is due). If the Company notifies the Executive in writing prior to the expiration of such
period that it desires, in good faith, to contest such claim (which notice shall set forth the
bases for such contest) and that it will bear the costs and provide the indemnification as required
by this sentence, the Executive shall, in good faith:

(i) give the Company any information reasonably requested by the Company relating to
such claim,

(ii) take such action in connection with contesting such claim as the Company shall, in
good faith, reasonably request in writing from time to time, including, without limitation,
accepting legal representation with respect to such claim by an attorney selected by the
Company and reasonably acceptable to the Executive,

(iii) cooperate with the Company in good faith in order effectively to contest such
claim, and

(iv) permit the Company to participate, in good faith, in any proceedings relating to
such claim;

provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection with such contest and
shall indemnify and hold the Executive harmless, on an after-tax basis to the Executive, for any
Excise Tax or income tax, including interest and penalties with respect thereto, imposed as a
result of such representation and payment of all costs and expenses.

Without limitation on the foregoing provisions of this Section 9(d), the Company shall,
exercising good faith, control all proceedings taken in connection with such contest and, at its
sole option (but in good faith), may pursue or forego any and all administrative appeals,
proceedings, hearings and conferences with the taxing authority in respect of such claim and may,
at its sole option (but in good faith), either direct the Executive to pay the tax claimed and sue
for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute
such contest to a determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall determine; provided,
however, that if the Company directs the Executive to pay such claim and sue for a refund,
the Company shall advance the amount of such payment to the Executive on an interest-free basis and
shall indemnify and hold the Executive harmless, on an after-tax basis to the Executive, from any
Excise Tax or income tax, including interest or penalties with respect thereto, imposed with
respect to such advance or with respect to any imputed income with respect to such advance;
and further provided that any extension of the statute of limitations
relating to the payment of taxes for the taxable year of the Executive with respect to which such
contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the
Company’s control of the contest shall be limited to issues with respect to which a Gross-Up
Payment would be payable hereunder and the Executive shall be entitled to settle or contest, as the
case may be, any other issue raised by the Internal Revenue Service or any other taxing authority.
If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section
9(d), the Executive becomes entitled to receive any refund with respect to such claim, the
Executive shall (subject to the Company’s complying with the requirements of Section 9(d)) promptly
pay to the Company, as the case may be, the amount of such refund (together with any interest paid
or credited thereon after taxes applicable thereto). If, after the receipt by the Executive of an
amount advanced by the Company pursuant to Section 9(d), a determination is made that the Executive
shall not be entitled to any refund with respect to such claim and the Company does not notify the
Executive in writing of its intent to contest such denial of refund prior to the expiration of 30
days after such determination, then any obligation of the Executive to repay such advance shall be
forgiven and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up
Payment required to be paid.

Notwithstanding any provision herein to the contrary, the Executive’s failure to strictly
comply with the notice provisions set forth in this Section 9, so long as such failure does not
prevent the Company from contesting an excise tax claim, shall not adversely affect the Executive’s
rights under this Section 9. Payments required under this Section 9 shall be paid within the time
periods required by Treasury Regulation Section 1.409A-3(i)(1)(v).

10. NO MITIGATION; NO OFFSET.

In the event of any termination of employment under Section 8, above, the Executive shall be
under no obligation to mitigate damages or seek other employment, and, except as expressly set
forth herein with respect to Executive’s requirement to accept the medical, dental and other
welfare benefits offered by a prospective employer, there shall be no offset against amounts due
the Executive under this Agreement on account of any remuneration attributable to any subsequent
employment that he may obtain.

11. NONCOMPETITION AND NONSOLICITATION.

The Executive hereby represents and warrants to the Company that (a) the execution, delivery
and performance of this Agreement by the Executive does not and will not conflict with, breach,
violate or cause a default under any contract, agreement, instrument, order, judgment or decree to
which the Executive is a party or by which he is bound, (b) except for agreements provided to the
Company by the Executive, the Executive is not a party to or bound by any employment agreement,
noncompetition agreement, confidentiality agreement or similar agreement with any other person, and
(c) upon the execution and delivery of this Agreement by the Company, this Agreement will be the
valid and binding obligation of the Executive, enforceable in accordance with its terms. The
Executive agrees that the products of the Company and its Affiliates shall constitute the exclusive
property of the Company and its Affiliates.

For the avoidance of doubt, all trademarks, policy language or forms, products or services
(including products and services under development), trade names, trade secrets, service marks,
designs, computer programs and software, utility models, copyrights, know-how and confidential
information, applications for registration of any of the foregoing and the right to apply for them
in any part of the world (whether any of the foregoing shall be registered or unregistered) created
or discovered or participated in by the Executive during the course of his employment (whether or
not pursuant to the terms of this Agreement) or under the instructions of the Company or its
Affiliates are and shall be the absolute property of the Company and its Affiliates, as
appropriate. Without limiting the foregoing, the Executive hereby assigns to the Company any and
all of the Executive’s right, title and interest, if any, pertaining to the insurance and
reinsurance (including, without limitation, finite insurance and reinsurance), risk assumption,
risk management, brokerage, financial and other products or services developed or improved upon by
the Executive (including, without limitation, any related “know-how”) while employed by the Company
or its Affiliates, including any patent, trademark, trade name, copyright, ownership or other right
that may pertain thereto.

Since Executive has obtained and is likely to obtain in the course of Executive’s employment
with the Company and its Affiliates knowledge of trade names, trade secrets, know-how, products and
services (including products and services under development), techniques, methods, lists, computer
programs and software and other confidential information relating to the Company and its
Affiliates, and their employees, clients, business or business opportunities, Executive hereby
undertakes that:

(i) Executive will not (either alone or jointly with or on behalf of others and whether
directly or indirectly) encourage, entice, solicit or endeavor to encourage, entice or
solicit away from employment with the Company or its Affiliates, or hire or cause to be
hired, any officer or employee of the Company or its Affiliates (or any individual who was
within the prior twelve (12) months an officer or employee of the Company or its
Affiliates), or encourage, entice, solicit or endeavor to encourage, entice or solicit any
individual to violate the terms of any employment agreement or arrangement between such
individual and the Company or any of its Affiliates; provided, however, that
nothing in this subsection shall prevent Executive from providing a personal reference on
behalf of any officer or employee of the Company to a third party, appearing or being
involved in a general advertisement for employment not specifically tailored to entice only
officers or employees of the Company;

(ii) Executive will not (either alone or jointly with or on behalf of others and
whether directly or indirectly) interfere with or disrupt or seek to interfere with or
disrupt (A) the relationships between the Company and its Affiliates, on the one hand, and
any primary property, casualty, specialty insurance and/or reinsurance customer or client of
the Company and its Affiliates, on the other hand, (including any insured or reinsured
party) with regard to such area of insurance and /or reinsurance who during the period of
twenty-four months immediately preceding such termination shall have been such a customer or
client, or (B) the supply to the Company and its Affiliates of any services by any supplier
or agent or broker with regard to the insurance and/or reinsurance areas who during the
period of twenty-four months immediately preceding such termination shall have supplied
services to any such person, with regard to the insurance and/or reinsurance areas nor will
Executive interfere or seek to interfere with the terms on which such supply or agency or
brokering services during such period as aforesaid have been made or provided; and

(iii) Executive will not (either alone or jointly with or on behalf of others and
whether directly or indirectly) whether as an employee, consultant, partner, principal,
agent, distributor, representative or stockholder (except solely as a less than one percent
stockholder of a publicly traded company), without the written consent of the Company
through the Chief Executive Officer, after receipt of specific notice by Executive of the
potential competitive situation (such consent not to be unreasonably withheld) engage in any
activities in Bermuda or the United States if such activities are competitive with the
primary or reinsurance property, casualty, specialty insurance and/or reinsurance businesses
that (i) are then being conducted by the Company or its Affiliates and (ii) during the
period of the Executive’s employment were either being conducted by the Company or its
Affiliates or actively being developed by the Company or its Affiliates.

The provisions of the immediately preceding sentence shall continue as long as the Executive
is employed by the Company or its Affiliates and such provisions shall continue in effect after
such employment is terminated for any reason until the first anniversary of such termination,
provided that if such employment is terminated by the Company under Section 8(d)(iii) or by the
Executive under Section 8(d)(iii), the provisions of clauses (ii) and (iii) shall automatically
terminate upon such termination of employment, unless the Company elects, in writing, upon such
termination to continue the provisions of clauses (ii) and (iii) in effect through the six-month
anniversary of such termination of employment in which case the Company shall be obligated to pay
the Executive, in addition to any of the Executive’s rights under Section 8(d)(iii), a lump sum
payment equal to the sum of (x) six months of his Base Salary and (y) one half of the Executive’s
average annual bonus payable by the Company or its subsidiaries for the three years (or shorter
period of employment by any of such entities) immediately preceding the year of termination, and
such lump sum payment shall, subject to Section 25 below, be made within 10 days following
termination of employment.

For purposes of this Agreement, an “Affiliate” of the Company includes any person, directly or
indirectly, through one or more intermediaries, controlling, controlled by, or under common control
with the Company, and such term shall specifically include, without limitation, the Company’s
majority-owned subsidiaries.

The limitations on the Executive set forth in this Section shall also apply to any agent or
other representative acting on behalf of Executive at the Executive’s specific intentional
direction.

While the restrictions aforesaid are considered by both parties to be reasonable in all the
circumstances it is recognized that restrictions of the nature in question may fail for reasons
unforeseen and accordingly it is hereby declared and agreed that if any of such restrictions or the
geographic or other scope thereof shall be adjudged to be void as going beyond what is reasonable
in the circumstances for the protection of the interests of the Company and its Affiliates but
would be valid if part of the wording thereof were deleted and/or the periods (if any) thereof
reduced and/or geographic or other area dealt with thereby reduced in scope then said restrictions
shall apply with such modifications as may be necessary to make them valid and effective.

Nothing contained in this Section 11 shall limit in any manner any additional obligations to
which Executive may be bound pursuant to any other agreement or any applicable law, rule or
regulation and Section 11 shall apply, subject to its terms, after employment has terminated for
any reason.

12. CONFIDENTIAL INFORMATION.

The Executive covenants that he shall not, without the prior written consent of the Company,
use for the Executive’s own benefit or the benefit of any other person or entity other than the
Company and its Affiliates or disclose to any person, other than an employee of the Company or
other person to whom disclosure is in good faith believed to be desirable to the performance by the
Executive of his duties in the employ of the Company, any confidential, proprietary, secret, or
privileged information about the Company or its Affiliates or their business or operations,
including, but not limited to, information concerning trade secrets, know-how, software, data
processing systems, policy language and forms, inventions, designs, processes, formulae, notations,
improvements, financial information, business plans, prospects, referral sources, lists of
suppliers and customers, legal advice and other information with respect to the affairs, business,
clients, customers, agents or other business relationships of the Company or its Affiliates.
Executive shall hold in a fiduciary capacity for the benefit of the Company all secret,
confidential proprietary or privileged information or data relating to the Company or any of its
Affiliates or predecessor companies, and their respective businesses, which shall have been
obtained by Executive during his employment, unless and until such information has become known to
the public generally (other than as a result of unauthorized disclosure by the Executive) or unless
he is required to disclose such information by a court or by a governmental body with apparent
authority to require such disclosure. The foregoing covenant by the Executive shall be without
limitation as to time and geographic application and this Section 12 shall apply in accordance with
its terms after employment has terminated for any reason. The Executive acknowledges and agrees
that he shall have no authority to waive any attorney-client or other privilege without the express
prior written consent of the Compensation Committee as evidenced by the signature of the Company’s
General Counsel.

13. WITHHOLDING.

Anything in this Agreement to the contrary notwithstanding, all payments required to be made
by the Company hereunder to the Executive shall be subject to withholding of such amounts relating
to taxes as the Company may reasonably determine should be withheld pursuant to any applicable law
or regulation. In lieu of withholding such amounts, in whole or in part, the Company may, in its
sole discretion, accept other provision for payment of taxes as required by law, provided it is
satisfied that all requirements of law affecting its responsibilities to withhold such taxes have
been satisfied.

14. GUARANTY AND AFFILIATE SERVICES.

(a) LIABILITY. Each of XL Insurance Ltd and XL Re Ltd (together, the “Guarantors”) hereby
agrees to be jointly and severally liable together with the Company, for the performance of all
obligations and duties, and the payment of all amounts, due to the Executive under this Agreement.
In case of the failure of the Company to punctually pay any of the amounts necessary to satisfy the
obligations, the Guarantor shall cause such amounts to be paid punctually when and as the same
shall become due and payable as if such payment were made by the Company. This is a guaranty of
payment and not collection. The obligations of the Guarantor under this Guaranty shall not be
affected or impaired by reason of the happening from time to time of any of the following with
respect to the Agreement or the Company, although without notice to or the consent of the
Guarantor: (i) the waiver by the Executive or the Company of the performance or the observance of
any provision of the Agreement; (ii) the modification or amendment (whether material or otherwise)
of any of the obligations of the Company or the Executive under the Agreement; (iii) any failure,
omission or delay on the part of the Executive to enforce, assert or exercise any right conferred
on him in the Agreement or otherwise; or (iv) any bankruptcy, insolvency or reorganization of, any
arrangement or assignment for benefit of creditors by, or any trusteeship with respect to, the
Company or any of its assets or any liquidation or sale of the Company or its assets. The
resolution of any arbitration under Section 18 hereof shall be binding on the Guarantor.

(b) RESPONSIBILITY. All of the other terms and provisions of this Agreement relating to the
Executive’s employment by the Company shall likewise apply mutatis mutandis to the Executive’s
employment by any of its Affiliates, it being understood that if the Executive’s employment with
the Company is terminated, his employment with its Affiliates shall also be terminated and the
Executive shall be required to resign immediately from all directorships and other positions held
by the Executive in the Company and its Affiliates or in any other entities in respect of which the
Executive was acting as a representative or designee of the Company or its Affiliates in connection
with his employment.

15. ENTIRE AGREEMENT.

This Agreement, together with the Exhibits, contains the entire agreement between the Parties
concerning the subject matter hereof and supersedes all prior agreements, understandings,
discussions, negotiations and undertakings, whether written or oral, between the Company and the
Executive with respect thereto.

16. ASSIGNABILITY; BINDING NATURE.

This Agreement shall be binding upon and inure to the benefit of the Parties and their
respective successors, heirs and assigns. No rights or obligations of the Executive under this
Agreement may be assigned or transferred by the Executive other than his right to compensation and
benefits hereunder, which may be transferred only by will or operation of law subject to the
limitations of this Agreement. No rights or obligations of the Company under this Agreement may be
assigned or transferred by the Company except that such rights or obligations may be assigned or
transferred pursuant to a merger or consolidation or amalgamation or scheme of arrangement in which
the Company is not the continuing entity, or the sale or liquidation of all or substantially all of
the assets of the Company, provided that the assignee or transferee is the successor to all or
substantially all of the assets of the Company and such assignee or transferee assumes by operation
of law or in writing duly executed by the assignee or transferee all of the liabilities,
obligations and duties of the Company, as contained in this Agreement, either contractually or as a
matter of law.

17. INDEMNIFICATION.

The Executive shall be provided indemnification by the Company to the maximum extent permitted
by applicable law and its charter documents. In addition, he shall be covered by a directors’ and
officers’ liability policy with coverage for all directors and officers of the Company in an amount
equal to at least US $75,000,000. Such directors’ and officers’ liability insurance shall be
maintained in effect for a period of six years following termination of the Executive’s employment
for any reason.

18. SETTLEMENT OF DISPUTES.

(a) Any dispute between the Parties arising from or relating to the terms of this Agreement or
the Executive’s employment with the Company or its Affiliates shall, except as provided in Section
18(b) or Section 18(c), be resolved by binding arbitration held in New York City in accordance with
the rules of the American Arbitration Association.

(b) Executive acknowledges that the Company and its Affiliates will suffer irreparable injury,
not readily susceptible of valuation in monetary damages, if Executive breaches his obligations
under Section 11 or 12. Accordingly, Executive agrees that the Company and its Affiliates will be
entitled, in addition to any other available remedies, to obtain injunctive relief against any
breach or prospective breach by Executive of his obligations under Section 11 or 12 in any Federal
or state court sitting in the City and State of New York or court sitting in Bermuda or the United
Kingdom, or, at the Company’s or any Affiliate’s election, in any other jurisdiction in which
Executive maintains his residence or his principal place of business. Executive hereby submits to
the non-exclusive jurisdiction of all those courts for the purposes of any actions or proceedings
instituted by the Company or its Affiliates to obtain such injunctive relief, and Executive agrees
that process in any or all of those actions or proceedings may be served by registered mail or
delivery, addressed to the last address of Executive known to the Company or its Affiliates, or in
any other manner authorized by law. Executive further agrees that, in addition to any other
remedies available to the Company or its Affiliates by operation of law or otherwise, because of
any breach by Executive of his obligations under Section 11 or 12 he will forfeit any and all bonus
and rights to any payments to which he might otherwise then be entitled by virtue hereof and such
payments may be suspended so long as any good faith dispute with respect thereto is continuing;
provided, however, that payments, benefits and other rights and privileges of the
Executive under this Agreement following termination of the Executive’s employment during a
Post-Change Period shall not be forfeited, suspended, offset, diminished or otherwise altered in
any way on account of any breach or prospective breach of Section 11, Section 12 or any other
provision of this Agreement alleged by the Company.

(c) Notwithstanding any other provision of this Agreement, the Executive may elect to resolve
any dispute involving a breach or alleged breach of this Agreement following termination of the
Executive’s employment during a Post-Change Period in any Federal or State court sitting in the
City and State of New York or court sitting in Bermuda or the United Kingdom. The Company and the
Guarantors hereby submit to the non-exclusive jurisdiction of all those courts for the purposes of
any such actions or proceedings instituted by the Executive, and the Company and the Guarantors
agree that process in any or all of such actions or proceedings may be served by registered mail or
delivery, addressed to the Company as set forth in Section 20, or in any other manner authorized by
law. The Company and the Guarantors shall pay all costs associated with any court proceeding under
this Section 18(c) without regard to the outcome of such proceeding, including all legal fees and
expenses of the Executive, who shall be reimbursed for all such costs within ten (10) days
following written demand therefor by the Executive (which written demand shall be made no later
than six (6) months following the end of the year in which such costs were incurred).

(d) Each Party shall bear its own costs incurred in connection with any proceeding under
Sections 18(a) or 18(b) hereof, including all legal fees and expenses: provided,
however, that the Company shall bear all such costs of the Executive (to the extent such costs
are reasonable) if the Executive substantially prevails in the proceeding. The Executive shall be
reimbursed by the Company for all such reasonable costs within ten (10) days following written
demand therefor by the Executive which is made within sixty (60) days following the proceeding and
is supported by documentation of such costs.

19. AMENDMENT OR WAIVER.

No provision in this Agreement may be amended unless such amendment is agreed to in writing,
signed by the Executive and by a duly authorized officer of the Company and the Guarantors. No
waiver by any Party of any breach by the other Party of any condition or provision of this
Agreement to be performed by such other Party shall be deemed a waiver of a similar or dissimilar
condition or provision at the same or any prior or subsequent time. Except as set forth in Section
8(d)(iv) or Exhibit B, any waiver must be in writing and signed by the Executive or a duly
authorized officer of the Company and the Guarantors, as the case may be.

20. NOTICES.

Any notice required or permitted to be given under this Agreement shall be in writing and
shall be deemed to have been given when delivered personally or sent by courier, or by certified or
registered mail, postage prepaid, return receipt requested, duly addressed to the Party concerned
at the address indicated below or to such changed address as such Party may subsequently by similar
process give notice of:

If to the Company:

XL Capital Ltd

One Bermudiana Road

Hamilton HM11, Bermuda

Att’n: General Counsel

If to the Executive:

Mr. Brian Nocco

7880 Palmer Court

Dublin, OH 43017

21. SEVERABILITY.

In the event that any provision or portion of this Agreement shall be determined to be invalid
or unenforceable for any reason, in whole or in part, the remaining provisions of this Agreement
shall be unaffected thereby and shall remain in full force and effect to the fullest extent
permitted by law.

22. SURVIVORSHIP.

The respective rights and obligations of the Parties shall survive any termination of this
Agreement to the extent necessary to the intended preservation of such rights and obligations.

23. REFERENCE.

In the event of the Executive’s death or a judicial determination of his incompetence,
reference in this Agreement to the Executive shall be deemed, where appropriate, to refer to his
estate or other legal representative.

24. GOVERNING LAW.

This Agreement shall be governed by and construed and interpreted in accordance with the laws
of the State of New York without reference to the principles of conflict of laws.

25. SECTION 409A.

(a) It is intended that this Agreement will comply with Section 409A of the Code (and any
regulations and guidelines issued thereunder) to the extent the Agreement is subject thereto, and
the Agreement shall be interpreted on a basis consistent with such intent. If an amendment of the
Agreement is necessary in order for it to comply with Section 409A, the parties hereto will
negotiate in good faith to amend the Agreement in a manner that preserves the original intent of
the parties to the extent reasonably possible. No action or failure to act, pursuant to this
Section 25 shall subject the Company to any claim, liability, or expense, and the Company shall not
have any obligation to indemnify or otherwise protect the Executive from the obligation to pay any
taxes pursuant to Section 409A of the Code.

(b) Notwithstanding any provision to the contrary in this Agreement, if the Executive is
deemed on the date of termination of his employment to be a “specified employee” within the meaning
of that term under Section 409A(a)(2)(B) of the Code, then with regard to any payment or the
provision of any benefit that is required to be delayed pursuant to Section 409A(a)(2)(B) of the
Code, such payment or benefit shall not be made or provided prior to the earlier of (i) the
expiration of the six (6)-month period measured from the date of his “separation from service” (as
such term is defined in Treasury Regulations issued under Code Section 409A), or (ii) the date of
his death (the “Delay Period”). Upon the expiration of the Delay Period, all payments and benefits
delayed pursuant to this Section 25 (whether they would have otherwise been payable in a single sum
or in installments in the absence of such delay) shall be paid or reimbursed to the Executive in a
lump sum, and any remaining payments and benefits due under this Agreement shall be paid or
provided in accordance with the normal payment dates specified for them herein. In no case will
compliance with this Section by the Company constitute a breach of the Company’s or the Guarantors’
obligations under this Agreement.

26. HEADINGS.

The heading of the sections contained in this Agreement are for convenience only and shall not
be deemed to control or affect the meaning or construction of any provision of this Agreement.

27. COUNTERPARTS.

This Agreement may be executed in one or more counterparts.

1

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

XL CAPITAL LTD

By: /s/ Kirstin R. Gould 

	 	 	                                  

XL GLOBAL SERVICES, INC.

By: /s/ Celia R. Brown

	 	 	GUARANTORS:

XL INSURANCE LTD

By: /s/ Kirstin R. Gould

	 	 	XL RE LTD

By: /s/ Kirstin R. Gould

READ, ACCEPTED & AGREED

/s/ Brian W. Nocco

2

EXHIBIT A

CHANGE IN CONTROL

A “Change in Control” shall be deemed to have occurred:

(i) any person (which, for all purposes hereof, shall include, without limitation, an
individual, sole proprietorship, partnership, unincorporated association, unincorporated
syndicate, unincorporated organization, trust, body corporate and a trustee, executor,
administrator or other legal representative) (a “Person”) or any group, as defined in
Sections 13(d) or 14(d) of the United States Securities Exchange Act of 1934 (other than a
group of which the Executive is a member or which has been organized by the Executive),
becomes the beneficial owner, directly or indirectly, of securities of the Company
representing, or acquires the right to control or direct, or to acquire through the
conversion of securities or the exercise of warrants or other rights to acquire securities,
30% or more of either (I) the outstanding Ordinary Shares of the Company, (II) the
outstanding securities of the Company having a right to vote in the election of directors,
or (III) the combined voting power of the outstanding securities of the Company having a
right to vote in the election of directors; or

(ii) if there shall be elected or appointed to the Board of Directors of the Company
(the “Board”) any director or directors whose appointment or election by the Board or
nomination for election by the Company’s shareholders was not approved by a vote of at least
a majority of the directors then still in office who were either directors on the date of
execution of this Agreement or whose election or appointment or nomination for election was
previously so approved; or

(iii) upon consummation of a reorganization, scheme of arrangement, merger,
consolidation, combination, amalgamation, corporate restructuring, liquidation, winding up,
exchange of securities, or similar transaction (each, an “Event”), in each case, in respect
of which the beneficial owners of the outstanding Company Ordinary Shares immediately prior
to such Event do not, following such Event, beneficially own, directly or indirectly, more
than 60% of each of the outstanding equity share capital, and the combined voting power of
the then outstanding voting securities entitled to vote in the election of the directors, of
the Company and any resulting entity, in substantially the same proportions as their
ownership, immediately prior to such Event, of the Ordinary Shares and voting power of the
Company; or

(iv) if there occurs an Event involving the Company as a result of which 25% of more of
the members of the Board of the Company are not persons who were members of the Board
immediately prior to the earlier of (x) the Event, (y) execution of an agreement, the
consummation of which would result in the Event, or (z) announcement by the Company of an
intention to effect the Event; or

(v) if the Board adopts a resolution to the effect that, for purposes of this
Agreement, a Change in Control has occurred.

3

EXHIBIT B

GOOD REASON

For purposes of this Agreement, “Good Reason” shall mean any of the following, unless done
with the prior express written consent of the Executive:

(i) (A) The assignment to Executive of duties inconsistent with Executive’s position
(including duties, responsibilities, status, titles or offices as set forth in Section 3
hereof); or (B) any elimination, diminution or reduction of Executive’s duties or
responsibilities except in connection with the termination of Executive’s employment for
Cause, disability or as a result of Executive’s death or by Executive other than for Good
Reason; and for purposes for this clause (i), the determination of whether there has been a
reduction of duties or responsibilities or an assignment of duties inconsistent with the
Executive’s position shall take into account the Executive’s duties, responsibilities and
position with the ultimate parent of the parent/subsidiary group as a whole which includes
the Company;

(ii) The (A) reduction in Executive’s Base Salary from the level in effect immediately
prior to the Change in Control, or (B) payment of an annual bonus in an amount less than the
lesser of (x) the most recent annual bonus paid prior to the Change in Control or (y) the
greater of (I) the most recent target bonus, if any, established prior to the Change in
Control or (II) the annual average bonus paid for the preceding three complete years prior
to the Change in Control (or such lesser number of complete years as the Executive shall
have been employed by the Company);

(iii) The failure by the Company or the Guarantors to obtain the specific written
assumption of this Agreement by any successor or assign of the Company or the Guarantors or
any person acquiring substantially all of the Company’s or the Guarantors’ assets;

(iv) Any breach by the Company or the Guarantors of any provision of this Agreement or
any agreements entered into pursuant thereto that remains uncured for 20 calendar days
following written notice of same by the Executive;

(v) Notwithstanding the provisions of Section 3(b) of this Agreement, requiring the
Executive to be based at any office or location that is greater than 35 miles from the
office or location at which the Executive was principally located immediately prior to the
Change in Control;

(vi) During the Post-Change Period, (A) the failure to continue in effect any
compensation or incentive plan in which Executive participates immediately prior to the time
of the Change in Control unless an equitable arrangement (embodied in an ongoing substitute
or alternative plan providing Executive with at least the same aggregate economic
opportunity on an after-tax basis available to the Executive immediately prior to the Change
in Control) has been made with respect to such plan in connection with the Change in
Control, or the failure to continue Executive’s participation therein on substantially the
same basis both in terms of the amount of benefits provided and the level of his
participation relative to other participants, as existed at the time of the Change in
Control; or (B) the failure to continue to provide Executive with benefits and coverage at
least as favorable in the aggregate as those enjoyed by him under the Company’s pension,
life insurance, medical, health and accident, disability, deferred compensation or savings
plans in which he was participating at the time of the Change in Control; or

(vii) The failure by the Company to pay within 7 calendar days of the due date any
amounts due under any benefit or compensation plan, including any deferred compensation
plan.

Notwithstanding any provision in this Agreement to the contrary, the Executive must give written
notice of his intention to terminate his employment for Good Reason within sixty (60) days after
the act or omission which constitutes Good Reason, and any failure to give such written notice
within such period will result in a waiver by the Executive of his right to terminate for Good
Reason as a result of such act or omission.

4

EXHIBIT C

Form of General Release and Covenant Not to Sue

	1.	 	General Release of Claims. In consideration for the payments and benefits paid to
you under Section 8 of the Agreement, you hereby release and forever discharge the Company, XL
Global Services, Inc. and any and all of their respective affiliates, predecessors,
successors, assigns, and their respective officers, directors, administrators and employees of
and from all actions, claims, liabilities, demands and causes of action, known or unknown,
fixed or contingent, in law or equity, included but not limited to those arising under the
Civil Rights Act of 1964, the Reconstruction Era Civil Rights Act, the Age Discrimination in
Employment Act of 1967 (“ADEA”), the Employee Retirement Income Security Act of 1974, The
Americans with Disabilities Act, The Family and Medical Leave Act of 1993, The New York State
Human Rights Law Section 196 et seq., the New York City Administrative Code, as
amended, actions under the Connecticut Wage and Hour Laws; the Connecticut Fair Employment
Practices Act, C.G.S. Section 46a-60, as amended; the Connecticut Family Medical Leave Act,
C.G.S. Section 31-51 pp; and the Connecticut Workers Compensation Act, C.G.S. Section 31-290a
and any and all other federal, state, and local laws, rules and regulations prohibiting,
without limitation, discrimination in employment, tortious or wrongful discharge, breach of an
express or implied contract, breach of a covenant of good faith and fair dealing, negligent or
intentional infliction of emotional distress, defamation, misrepresentation or fraud, which
you ever had, now have or hereafter can, shall or may have for, upon or by reason of any
matter, cause or thing, up to and including the day on which you sign this Agreement;
provided, however, that you are not waiving any right to claim benefits under the XL America,
Inc. Employee Savings Plan, any right of indemnification, any rights to directors and
officers’ liability insurance or any amounts due to you on termination under your employment
agreement with the Company.

	2.	 	Effect of General Release; Limitations on General Release. You understand that by
signing this General Release you are prevented from filing, commencing or maintaining any
action, complaint, or proceeding with regard to any of the claims released hereby. However,
nothing in the General Release of claims above precludes you from filing a charge with an
administrative agency or from participating in an agency investigation. You are, however,
waiving your right to recover money in connection with any such charge or investigation. You
are also waiving your right to recover money in connection with a charge filed by any other
individual or by the Equal Employment Opportunity Commission or any other federal or state
agency.

	3.	 	Covenant Not to Sue. In addition to waiving and releasing the claims and rights
covered by the General Release of Claims above, you promise not to sue the Company or any
other Released Party in any forum for any reason, including but not limited to claims, laws or
theories covered by the General Release of Claims. This covenant by you not to sue is
different from the General Release of Claims, which will provide the Company a defense in the
event you violate the General Release. If you violate this Covenant Not to Sue by suing a
Released Party, you may be liable to that party for monetary damages. More specifically, if
you sue a Released Party in violation of this Covenant Not to Sue, you will be required to
either: (1) pay that Released Party’s attorneys’ fees and other costs incurred as a result of
having to defend against your suit; or (2) alternatively, at the Released Party’s option,
return to the Company all of the severance pay provided to you under Section 8 of the
Agreement, except for one-hundred dollars ($100.00). In the event of such violation, the
Company will also be excused from providing you any remaining severance payments under
Section 8 of the Agreement. However, nothing in this Covenant Not to Sue or in any other part
of this Agreement prevents you from challenging the validity of this Agreement under the ADEA.

	4.	 	Knowing and Voluntary Decision to Sign. You further agree that no statements,
representations, promises, threats or suggestions have been made by the Company or its
representatives, officers, or employees to influence you to sign this General Release except
such statements as are expressly set forth herein. You have signed this General Release upon
reaching the considered conclusion that it is best for you, and of your own free will, relying
entirely upon your own judgment, and the judgment of such lawyers and other personal advisors
who you have chosen to consult. You further acknowledge that you are under no disability or
impairment, which affects your decision to sign this General Release.

	5.	 	Time to Consider the Agreement. You have actually read this General Release, and
have had adequate time of at least 21 days to consider its terms and effect, and to ask any
questions that you may have of the legal or other personal advisors of your own choosing.

	6.	 	Subsequent Facts. No fact, evidence, event or transaction currently unknown to you
but which may hereafter become known to you shall affect in any way or manner the final and
unconditional nature of this General Release.

READ, ACCEPTED & AGREED

     

     

Dated

5

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