Document:

exv10wee

 

Exhibit 10.ee

SEVERANCE AGREEMENT

     THIS
SEVERANCE AGREEMENT (the “Agreement”), is made and
entered into effective as of                            ,
2008 between POLARIS INDUSTRIES INC., a Minnesota corporation (the “Company”), and                     
(the “Employee”).

R E C I T A L S:

     WHEREAS, Employee has been and currently is employed by the Company; and

     WHEREAS, as an inducement to continue employment and to enhance the loyalty and performance of
Employee with the Company, the Company desires to provide the Employee with certain compensation
and benefits in the event a termination of employment under the circumstances set forth herein.

     NOW, THEREFORE, in consideration of the mutual premises and agreements set forth herein, the
parties hereby agree as follows:

          1. Definitions. As used in this Agreement, these terms shall have the following
meanings:

          (a) Cause. For purposes of this Agreement only, “Cause” means (i) repeated
violations of the Employee’s employment obligations (other than as a result of incapacity
due to physical or mental illness), which are demonstrably willful and deliberate on
Employee’s part and which are not remedied in a reasonable period after written notice from
the Company specifying such violations; or (ii) conviction for (or plea of nolo contendere
to) a felony.

          (b) Change in Control. A “Change in Control” shall be deemed to have occurred
if, prior to the Termination Date (as defined below):

          (i) Any election has occurred of persons to the Board that causes at least
one-half of the Board to consist of persons other than (x) persons who were members
of the Board on January 1, 2007 and (y) persons who were nominated for election by
the Board as members of the Board at a time when more than one-half of the members
of the Board consisted of persons who were members of the Board on January 1, 2007;
provided, however, that any person nominated for election by the Board at a time
when at least one-half of the members of the Board were persons described in clauses
(x) and/or (y) or by persons who were themselves nominated by such Board shall, for
this purpose, be deemed to have been nominated by a Board composed of persons
described in clause (x) (persons described or deemed described in clauses (x) and/or
(y) are referred to herein as “Incumbent Directors”); or

 

 

          (ii) The acquisition in one or more transactions, other than from the Company,
by any individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”)) of beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of a number of Company Voting Securities
equal to or greater than 35% of the Company Voting Securities unless such
acquisition has been designated by the Incumbent Directors as an acquisition not
constituting a Change in Control for purposes hereof; or

          (iii) A liquidation or dissolution of the Company; or a reorganization, merger
or consolidation of the Company unless, following such reorganization, merger or
consolidation, the Company is the surviving entity resulting from such
reorganization, merger or consolidation or at least one-half of the Board of
Directors of the entity resulting from such reorganization, merger or consolidation
consists of Incumbent Directors; or a sale or other disposition of all or
substantially all of the assets of the Company unless, following such sale or
disposition, at least one-half of the Board of Directors of the transferee consists
of Incumbent Directors.

As used herein, “Company Voting Securities” means the combined voting power of all
outstanding voting securities of the Company entitled to vote generally in the election of the
Board.

          (c) Change in Control Termination. “Change in Control Termination” shall have
the meaning set forth in Paragraph 2.

          (d) Good Reason. “Good Reason” means (i) the assignment to Employee of any
duties inconsistent in any material respect with Employee’s position or any material
reduction in the scope of the Employee’s authority and responsibility; (ii) there is a
material reduction in Employee’s base compensation; (iii) there is a material change in the
geographic location of the Employee’s principal place of employment; or (iv) the Company
otherwise fails to perform any of its material obligations to Employee. The Employee must
give the Company notice of the existence of Good Reason during the 90-day period beginning
on the date of the initial existence of Good Reason. If the Company remedies the condition
giving rise to Good Reason within 30 days thereafter, Good Reason shall not exist and the
Employee will not be entitled to terminate employment for Good Reason.

          (e) Incentive Compensation Award. “Incentive Compensation Award” shall have
the meaning set forth in the LTIP.

          (f) Incentive Compensation Award Period. “Incentive Compensation Award Period”
shall have the meaning set forth in the LTIP.

          (g) LTIP. “LTIP” means the Polaris Industries Inc. Long Term Incentive Plan.

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          (h) Non-Change in Control Termination. “Non-Change in Control Termination”
shall have the meaning set forth in Paragraph 3.

          (i) Participant. “Participant” shall have the meaning set forth in the LTIP.

          (j) Senior Executive Incentive Plan. “Senior Executive Incentive Plan” means
the Polaris Industries Inc. Senior Executive Annual Incentive Plan.

          (k) Termination Date. “Termination Date” means the date on which the
Employee’s employment with the Company is terminated.

          2. Termination upon Change in Control. If a Change in Control occurs and, upon or
within twenty-four (24) months after such Change in Control, the Employee terminates his or her
employment for Good Reason or the Employee’s employment is terminated by the Company for any reason
other than for Cause (a “Change in Control Termination”), then the Employee shall be
entitled to the following severance benefits:

          (a) Termination Payment upon Change in Control. The Company shall pay the
Employee a lump sum cash payment, no later than thirty (30) days after the Termination Date,
in an amount equal to (i) two times Employee’s average annual cash compensation (including
base salary and cash bonuses, but excluding the award or exercise of stock options or stock
grants) for the three fiscal years (or lesser number of fiscal years if the Employee’s
employment has been of shorter duration) of the Company immediately preceding the Change in
Control Termination, plus (ii) the amount of the Employee’s earned but unused vacation time.
If the Employee is a “specified employee” (within the meaning of Section 409A of the
Internal Revenue Code and the regulations thereunder), and if the amount otherwise payable
to the Employee under this Paragraph 2(a) during the six-month period beginning on the
Termination Date exceeds two times the limitation applicable as of the Termination Date
under Section 401(a)(17) of the Internal Revenue Code, then such excess amount shall be paid
at the end of such six-month period.

          (b) Unpaid Annual Bonus Payment for Prior Fiscal Year upon Termination upon Change
in Control. If the Termination Date occurs before a cash incentive award under the
Senior Executive Incentive Plan for work performed in any preceding fiscal year has been
paid, the Company shall, in addition to the payment to be made pursuant to Paragraph
2(a), pay to the Employee the amount of the Employee’s cash incentive award under the
Senior Executive Incentive Plan for such preceding fiscal year as soon as it is determinable
and such amount shall be included in the calculation of the payment to be made pursuant to
Paragraph 2(a). Notwithstanding the foregoing regarding the payment of an unpaid
cash incentive award for performance in a prior fiscal year, no cash incentive award under
the Senior Executive Incentive Plan or otherwise shall be paid for performance during any
part of the fiscal year in which the Termination Date occurs.

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          3. Non-Change in Control Termination. Notwithstanding the foregoing, if the
Employee’s employment is terminated by the Company for any reason other than for Cause (a
“Non-Change in Control Termination”), and such termination does not occur upon or within
twenty-four (24) months after a Change in Control such that a Change in Control Termination
shall have occurred, then the Employee shall, subject to the conditions set forth in
Paragraph 4, be entitled to the following severance benefits:

          (a) Non-Change in Control Termination Payment. The Company shall pay the
Employee (i) an amount equal to the sum of (A) an amount equal to 150% of the Employee’s
annual base salary as of the Termination Date plus (B) the amount of the cash incentive
award that was paid to the Employee under the Senior Executive Incentive Plan for work
performed in the fiscal year immediately preceding the fiscal year in which the Termination
Date occurs, which amount shall be payable over a period of one year beginning on the
Termination Date in periodic installments in accordance with the Company’s normal payroll
practices, and (ii) a lump cash payment, no later than thirty (30) days after the
Termination Date, in an amount equal to the Employee’s earned but unused vacation time. If
the Employee is a “specified employee” (within the meaning of Section 409A of the Internal
Revenue Code and the regulations thereunder), and if the amount otherwise payable to the
Employee under this Paragraph 3(a) during the six-month period beginning on the Termination
Date exceeds two times the limitation applicable as of the Termination Date under Section
401(a)(17) of the Internal Revenue Code, then such excess amount shall be paid at the end of
such six-month period.

          (b) Unpaid Annual Bonus Payment for Prior Fiscal Year upon Non-Change in Control
Termination. If the Termination Date occurs before a cash incentive award under the
Senior Executive Incentive Plan for work performed in any preceding fiscal year has been
paid, the Company shall, in addition to the payments to be made pursuant to Paragraph
3(a), pay to the Employee the amount of the Employee’s cash incentive award under the
Senior Executive Incentive Plan for such preceding fiscal year as soon as it is determinable
and such amount shall be included in the calculation of the payment to be made pursuant to
Paragraph 3(a). Notwithstanding the foregoing regarding the payment of an unpaid
cash incentive award for performance in a prior fiscal year, no cash incentive award under
the Senior Executive Incentive Plan or otherwise shall be paid for performance during any
part of the fiscal year in which the Termination Date occurs.

          (c) LTIP Payment. If the Termination Date occurs before the Employee receives
payment of an Incentive Compensation Award, the Employee shall receive payment with respect
to such Incentive Compensation Award, in the same form and at the same time as would have
otherwise been payable to him or her as a Participant in the LTIP (notwithstanding the
provisions of Section 11 of the LTIP) had he or she remained employed by the Company through
the end of the Incentive Compensation Award Period applicable to such Incentive Compensation
Award and had he or she been employed on the date on which such Incentive Compensation Award
is paid. The amount payable to the Employee with respect to such Incentive Compensation
Award pursuant to this Paragraph 3 shall be equal to the amount that

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would otherwise
have been payable to the Employee with respect to such Incentive Compensation Award had the
Employee remained continuously employed by the Company through the end of the Incentive
Compensation Award Period and had he or she been employed on the date on which such
Incentive Compensation Award is paid, multiplied by a fraction, the numerator of which
is the number of full calendar years of the Incentive Compensation Award Period prior
to the Termination Date, and the denominator of which is three.

          (d) COBRA Premium. If the Employee elects to receive COBRA benefits upon
termination the Company shall pay the premium for coverage of the Employee and the
Employee’s eligible spouse and/or dependents under the Company’s group health plan(s)
pursuant to the Consolidated Omnibus Budget Reconciliation Act for the one-year period
beginning on the Termination Date.

          (e) Outplacement Counseling. The Company shall provide the Employee with
reasonable executive outplacement services, in accordance with Company policies for senior
executives as in effect on the Termination Date.

          (f) Lapse of Restrictions on Performance Based Restricted Share Awards.
Notwithstanding the terms of any agreement pursuant to which
performance-based restricted shares awards have been granted to the Employee by the Company, all restrictions applicable
to such awards shall lapse immediately upon the Termination Date if the measurement period
and performance goals applicable thereto have been achieved on or before the Termination
Date.

          (g) Eligibility for Early Retirement Benefits. The Employee shall be treated
as an “early retiree” and shall be eligible for all benefits under the Company’s Early
Retiree Benefit Plan for Officers without regard to age or time in service requirements.

          4. Condition to Receipt of Severance Benefits under Paragraph 3. As a condition to
receiving any severance benefits in connection with a Change in Control Termination under
Paragraph 2 or in connection with a Non-Change in Control Termination under Paragraph
3, the Employee shall execute a general waiver and release (the “Waiver and Release”)
in substantially the form attached hereto as Exhibit A. The Waiver and Release shall
become effective in accordance with the rescission provisions set forth therein.

          5. Benefits in Lieu of Severance Pay. The severance benefits provided for in
Paragraphs 2 and 3 are in lieu of any benefits that would otherwise be provided to the
Employee under any Company severance pay policy or practice and the Employee shall not be entitled
to any benefits under any Company severance pay policy or practice in the event that severance
benefits are paid hereunder.

          6. Rights in the Event of Dispute. In the event of a Change of Control Termination,
if there is a claim or dispute arising out of or relating to this Agreement or any breach thereof,
regardless of the party by whom such claim or dispute is initiated, the Company shall, in
connection with settlement in the Employee’s favor of any such matter or upon payment of any
judgment entered in the Employee’s favor, upon presentation of appropriate vouchers, pay all legal
expenses, including reasonable attorneys’ fees, court costs, and ordinary and necessary

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out-of-pocket cost of attorneys, billed to and payable by the Employee or by anyone claiming under
or through the Employee.

          7. Other Benefits. The benefits provided under this Agreement shall, except to the
extent otherwise specifically provided herein, be in addition to, and not in derogation or
diminution of, any benefits that Employee or his or her beneficiary may be entitled to receive
under any other contract, plan or program now or hereafter maintained by the Company, or its
subsidiaries, including any and all stock options and restricted stock award agreements.

          8. Effect on Employment. Neither this Agreement nor anything contained herein shall
be construed as conferring upon Employee the right to continue in the employment of the Company or
any of its affiliates, or as interfering with or limiting the right of the Company to terminate the
Employee’s employment with or without cause at any time.

          9. Limitation in Action. Prior to the occurrence of a Change in Control, Employee
shall have no rights under Paragraph 2 of this Agreement and the Board shall have the power
and the right, within its sole discretion, to rescind, modify or amend Paragraph 2 of this
Agreement without the consent of Employee. In all other cases, and notwithstanding the authority
granted to the Board to exercise any discretion to rescind, modify or amend Paragraph 2 of
this Agreement contained herein, the Board will not, following a Change in Control, have the power
or right to exercise such authority or otherwise take any action that is inconsistent with the
provisions of this Agreement.

          10. Successors. The Company shall require any successor (whether direct or indirect,
by purchase, merger, consolidation, or otherwise) to all or substantially all of the business
and/or assets of the Company, to expressly assume and agree to perform its obligations under this
Agreement in the same manner and to the same extent that the Company would be required to perform
them if no succession had taken place unless, in the opinion of legal counsel mutually acceptable
to the Company and the Employee, such obligations have been assumed by the successor as a matter of
law. The Employee’s rights under this Agreement shall inure to the benefit of, and shall be
enforceable by, the Employee’s legal representative or other successors in interest, but shall not
otherwise be assignable or transferable.

          11. Severability. If any provision of this Agreement or the application thereof is
held invalid or unenforceable, the invalidity or unenforceability thereof shall not affect any
other provisions or applications of this Agreement which can be given effect without the invalid or
unenforceable provision or application.

          12. Survival. The rights and obligations of the parties pursuant to this Agreement
shall survive the termination of the Employee’s employment with the Company to the extent that any
performance is required hereunder after such termination.

          13. Governing Law. This Agreement shall be governed by and construed under the laws
of the State of Minnesota, without giving effect to the conflicts of law provisions thereof.

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          14. Notices. All notices under this Agreement shall be in writing and shall be deemed
effective when delivered in person (in the Company’s case, to its Secretary) or 48 hours after
deposit thereof in the U.S. mails, postage prepaid, addressed, in the case of the Employee, to his
last known address as carried on the personnel records of the Company and, in the case of the
Company, to the corporate headquarters, attention of the Secretary, or to such other address
as the party to be notified may specify by written notice to the other party.

          15. Amendments and Construction. Except as set forth in Paragraph 9, this
Agreement may only be amended in a writing signed by the parties hereto. Paragraph headings are
for convenience only and shall not be considered a part of the terms and provisions of the
Agreement.

          16. Restatement of Change in Control Agreement. This Agreement amends and restates,
in its entirety, the Change in Control Agreement, dated _____  ___, 2007, between the Company and
the Employee and neither the Company nor the Employee shall have any rights or obligations under
such Change in Control Agreement from and after the date hereof.

          17. Non-Competition Agreement. The Non-Competition Agreement currently in effect
between the Employee and the Company remains in full force and effect and nothing contained herein
is intended to amend or modify the provisions of that agreement or any replacements thereof.

     IN WITNESS WHEREOF, the parties have duly executed this Severance Agreement as of the day and
year first written above.

	 	 	 	 	 	 	 
	POLARIS INDUSTRIES INC.	 	 	 	EMPLOYEE
	 
	 	 	 	 	 	 
	By:
	 	 	 	 	 	 
	 

	 	 
	 	 	 	 
	 

	 	Michael W. Malone
	 	 	 	Name:
	 

	 	Vice President-Finance, Chief Financial
	 	 	 	SSN:
	 

	 	Officer and Secretary	 	 	 	 

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EXHIBIT A

GENERAL RELEASE

This Release (hereafter, “Agreement”) is made and entered into this___ day
of ___, 2008, by and between ___ (hereafter, the “Employee”) and
Polaris Industries Inc., a Minnesota corporation (hereafter, the “Company”).

     WHEREAS, the Company and the Employee are parties to that certain Severance Agreement, dated
as of ___, 2008 (the “Severance Agreement”), pursuant to which the Employee is
entitled to certain severance benefits in the event of a Change in Control Termination or a
Non-Change in Control Termination (each as defined in the Severance Agreement); and

     WHEREAS, the Company and the Employee agree and acknowledge that the Employee has become
entitled to severance benefits specified in the Severance Agreement in connection with a Change in
Control Termination or Non-Change in Control Termination; and

     WHEREAS, under the Severance Agreement, as a condition to receipt of severance benefits in
connection with a Change in Control Termination or Non-Change in Control Termination, Employee has
agreed to execute this Agreement in order to settle, compromise, and resolve fully and finally any
and all claims and disputes with respect to the Company, whether known or unknown, which exist or
could exist.

NOW, THEREFORE, in consideration of the mutual promises and covenants established in this
Agreement, the parties agree as follows:

B. TERMINATION DATE

The Employee’s effective date of termination of employment is ___
(the “Effective Date”).

C. VOLUNTARY RELEASE

     In return for the benefits set forth in the Severance Agreement, the Employee, on behalf of
Employee, Employee’s heirs, executors, family members, beneficiaries, assignees, administrators,
successors, and executors or anyone acting or claiming to act on the Employee’s behalf, hereby
releases and forever discharges the Company and all divisions, parent, subsidiaries, and
successors, and all affiliated organizations, companies, foundations, and other corporations as
well as past and present employees, agents, officials, officers, directors, Board members and
representatives, both individually and in their representative capacities, from any and all claims
or causes of action of any type, both known or unknown, asserted and unasserted, direct and
indirect, and of any kind, nature, or description whatsoever, under any local, state, or federal
law(s), or the common law of the State of Minnesota, arising or such may have arisen at any time up
to and including the Effective Date which date is set forth in Section I of this Agreement.
This includes, but is not limited to, any and all claims arising from the Employee’s employment

 

 

with the
Company and the termination of that employment, including claims arising under any applicable state Human Rights laws, Title VII of the
1964 Civil Rights Act, the Age Discrimination in Employment Act, the Americans with Disabilities
Act, the Family and Medical Leave Act, the Federal, Minnesota State Fair Labor Standards Acts, the
Employee Retirement Income Security Act, and any other local, state, or federal law(s) relating to
illegal discrimination in the workplace on the basis of race, religion, disability, sex, age, or
other characteristics or traits, as well as any claims that the Employee may have been wrongfully
discharged, that an employment contract has been breached, that the Employee has been harassed or
otherwise treated unfairly during employment, or that the Employee has been defamed in any
fashion. This release includes any claims for attorneys’ fees that the Employee has or may have
had. The Employee acknowledges that the severance benefits set forth the Severance Agreement
constitute adequate consideration for this release.

The Employee also understands that while the Employee retains the right to pursue an administrative
action through an agency such as the Equal Employment Opportunity Commission or the Minnesota
Department of Human Rights, the Employee is releasing, and does hereby release, any claims for
monetary damages, by such administrative charge or otherwise, whether brought by the Employee on
the Employee’s own behalf or by any other party, governmental or otherwise.

D. NON-ADMISSION

It is understood and agreed that this Agreement does not constitute an admission by the Company of
any liability, wrongdoing, or violation of any law. Further, the Company expressly denies any
wrongdoing of any kind whatsoever in its actions and dealings with the Employee.

E. COMPANY PROPERTY, EQUIPMENT & MONEY OWED

The Employee agrees to immediately return all records, programs, information and Company product
and property assigned, loaned or otherwise in Employee’s possession including demo or management
units, cell phones and laptop computers except as specifically set forth herein. In addition, the
Employee agrees to reimburse the Company for expense account advances less any expenses incurred
prior to the Effective Date. This includes payment for outstanding personal account balances,
business equipment, and demo units assigned in Employee’s name.

F. CONFIDENTIALITY AND NONDISPARAGEMENT

The Employee agrees not to make any disparaging or negative remarks, either orally or in writing,
regarding the Company or any affiliated divisions or corporations, as well as any past or present
Board members, officers, employees, or agents of the Company or any affiliated entities. The
Employee acknowledges that this term is a material part of the Severance Agreement. In the event
it is determined that the employee has breached this provision, the Company, at its option, may
declare the Severance Agreement void and without effect, and the Employee shall be obligated to
immediately return the severance benefits paid to Employee under the Severance Agreement.

Employee acknowledges Employee’s ongoing obligation to not disclose the Company’s confidential and
proprietary information to any third parties in accordance with Company policies. This obligation
survives the termination of the Employee’s employment.

 

 

G. AGREEMENT TO COOPERATE

The Employee hereby agrees that the Employee shall cooperate and assist the Company to the extent
necessary to assist the Employee’s counsel or the Company in handling any claims made against it by
employees, former employees or third parties of which the Employee has some knowledge or
information. The Employee further agrees that the Employee will not hereafter volunteer any
information to third parties or their agents or representatives regarding claims that the party or
any other person may have or could have against the Company, nor will the Employee in any way
cooperate with any third party to assist in any way asserting a claim against the Company unless
subpoenaed or ordered to do so by a court of competent jurisdiction.

H. OPPORTUNITY TO SEEK ADVICE

The Employee has been advised by the Company that the Employee has the right to consult with an
attorney prior to signing this Agreement, and that Employee has forty five (45) days from the date
on which the Employee receives this Agreement (noted below) to consider whether or not the Employee
wishes to sign it. The date on which the Employee received this Agreement is accurately reflected
on the line marked “DATE RECEIVED” on the signature page hereto. For acceptance of this Agreement
to be effective, it must be in writing and hand delivered or mailed to Polaris Industries Inc.,
Attn: ______, 2100 Highway 55, Medina, MN 55340. If mailed, the acceptance must be
postmarked within the 45-day period, properly addressed as set forth in the preceding sentence and
sent by certified mail, return receipt requested. If delivered by hand, it must be given to
______ within the 45-day period.

I. OPPORTUNITY TO CONSIDER

The Employee may cancel this Agreement within seven (7) days after the Employee has signed it for
age related claims under the federal Age Discrimination in Employment Act or the Older Workers
Benefit Protection Act or within fifteen (15) days after signing it for any claims under the
Minnesota Human Rights Act (“MHRA”). The Employee understands and agrees that this
Agreement does not become effective or enforceable until after the rescission period has passed.
For cancellation to be effective, it must be in writing and hand delivered or mailed to Polaris
Industries Inc., Attn: ______, 2100 Highway 55, Medina, MN 55340. If mailed, the
cancellation must be postmarked within the 7-day (federal age claims) or 15-day (MHRA claims)
period, properly addressed as set forth in the preceding sentence and sent by certified mail,
return receipt requested. If delivered by hand, it must be given to ______ within the
7-day (federal age claims) or 15-day (MHRA claims) period.

J. NON ASSIGNMENT

The parties agree that this Agreement will not be assignable by either party unless the other party
first agrees in writing.

 

 

K. COUNTERPARTS

This Agreement may be signed simultaneously in two or more counterparts, each of which will be
deemed an original, but all of which together will constitute one and the same document.

L. SEVERABILITY CLAUSE

In the event that any provision of this Agreement shall be held void or unenforceable by a court of
competent jurisdiction which is affirmed on appeal, said judgment shall not affect, impair, or
invalidate the remainder of this Agreement unless the provision declared totally or partially
unenforceable destroys the release of claims provided to the Company in Section II.

M. COMPREHENSIVE NATURE OF AGREEMENT AND DRAFTSMANSHIP

This Agreement contains the entire agreement between the Employee and the Company regarding the
subject matter herein except for the non-competition agreement between Company and Employee
executed in conjunction with the stock options or restricted stock awarded to Employee and the
agreement evidencing such awards, which remain in full force and effect in accordance with and
subject to their respective terms and conditions. Employee acknowledges that the Employee has been
advised in writing to consult the Employee’s own attorney; that the Employee has had an opportunity
to consult with the Employee’s own attorney regarding the terms of this Agreement; that the
Employee has read and understands the terms of this Agreement; that the Employee is voluntarily
entering into this Agreement to take advantage of the benefits offered; that the Employee’s
execution of this Agreement is without coercion or duress of any kind; and that there have been no
promises leading to the signing of this Agreement except those that have been expressly contained
in this written document.

N. BANKRUPTCY

The Employee represents that the Employee is not a party to a pending personal bankruptcy, and that
the Employee is legally able and entitled to receive the money being paid to the Employee by the
Company pursuant to the Severance Agreement.

O. GOVERNING LAW

This Agreement will be construed and interpreted in accordance with the laws of the State of
Minnesota. It is further agreed that any action initiated in connection with the interpretation of
or adherence to the terms and provisions of this Agreement shall be venued solely and exclusively
in state court in the State of Minnesota in the County of Hennepin. The parties to this Agreement
agree and acknowledge that this Agreement shall be considered to have been drafted equally by each
of the parties.

P. WAIVER; AMENDMENT

No waiver, amendment, modification, or other change of any term, condition, or provision of this
Agreement shall be valid or have any force or effect unless made in writing and signed by the party
hereto against whom such waiver, amendment, modification, or change shall operate or

 

 

be enforced. No failure or delay on the part of any party in exercising any right, remedy, power, or
privilege under this Agreement shall operate as a waiver thereof or of any other right, remedy,
power, or privilege of such party under this Agreement; nor shall any single or partial exercise of
any such right, remedy, power, or privilege preclude any other right, remedy, power, or privilege
or further exercise thereof or the exercise of any other right, remedy, power, or privilege.

[Remainder
of page intentionally blank; signature page follows.]

 

 

IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement.

DATE RECEIVED BY THE EMPLOYEE: ______________________

	 	 	 	 	 	 	 	 	 
	Polaris Industries Inc.	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	BY:

	 	 	 	Date:
	 	                    /                    /                    
	 	 
	 

	 	 	 	 	 	 	 	 
	ITS:
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 

Employee

	 	 	 	 	 	 	 
	Signature:

	 	 	 	                    /                    /                    
	 	 
	 

	 	 	 	 	 	 
	Print Name:
	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	     Date Signed by the Employeeexv10w14

 

Exhibit 10.14

CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT TO CERTAIN PORTIONS OF THIS AGREEMENT.
CONFIDENTIAL PORTIONS HAVE BEEN OMITTED AND FILED SEPARATELY WITH THE U.S. SECURITIES AND EXCHANGE
COMMISSION.

OPERATING AGREEMENT

OF

SA RECYCLING LLC

          THIS OPERATING AGREEMENT (this “Agreement”) is made effective as of September 1, 2007,
by and between Adams Steel, LLC, a Delaware limited liability company (“Adams Steel”), and
Simsmetal West LLC (formerly known as Sims Hugo Neu West LLC), a Delaware limited liability company
(“Sims”).

RECITALS:

          A. SA Recycling LLC (the “Company”), is a limited liability company organized pursuant
to the Act; and

          B. The parties are entering into this Agreement to set forth their respective rights and
obligations with respect to each other and the Company.

          NOW, THEREFORE, in consideration of the mutual agreements hereinafter set forth, and for other
good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto, intending to be legally bound, agree as follows:

ARTICLE I

DEFINITIONS

     1.1 Definitions. For purposes of this Agreement, capitalized terms shall have the
meaning ascribed to them in Schedule 1.

     1.2 Rules of Construction. Unless the context clearly dictates otherwise, the
following shall apply: (a) references in this Agreement to a gender shall be deemed to include each
gender and the neuter, references to the singular shall be deemed to include the plural, and
references to “or” shall be deemed to be disjunctive but not necessarily exclusive; (b) use of the
word “include” or “including” shall be deemed to mean “including without limitation”; (c)
references to “Articles,” “Sections,” “Schedules” or “Exhibits” are references to the Articles,
Sections, Schedules or Exhibits of this Agreement unless otherwise noted; and (d) references to
Sections herein include all subsections that are subsidiary to the referenced Section.

ARTICLE II

FORMATION AND RELATED MATTERS

     2.1 Formation. The Company has been organized as a Delaware limited liability company
by executing and delivering the Certificate of Formation to the Delaware Secretary of State in
accordance with and pursuant to the Act.

     2.2 Intent. The Members intend that the Company shall be classified and treated as a
partnership for federal and state tax purposes only, and that no provision of this Agreement shall
be deemed or construed to constitute the Company a partnership (including a limited partnership) or
joint venture, or any Member, a partner or joint venturer of or with any other Member, for purposes
of Section 303 of the federal Bankruptcy Code or any other purpose. Accordingly, the Members
hereby agree not to take any position or any action or to make any election, in a tax return or
otherwise, inconsistent herewith.

     2.3
Name. The name of the Company shall be “SA Recycling LLC”.

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[•] CONFIDENTIAL TREATMENT REQUESTED

 

     2.4 Purpose. The purpose of the Company shall be to purchase, process and sell scrap
metal in the Territory (the “Business”) and to engage in any other lawful business or
activity permitted under the Act and to do any and all other actions and things which may be
necessary, incidental or convenient with respect thereto.

     2.5 Powers. The Company shall have the same powers as an individual to do all things
necessary and convenient to carry out its business, to the fullest extent provided by the Act.

     2.6 Registered Agent and Registered Office. The initial registered agent of the
Company is Corporation Service Company, and the street address of its registered office is 2711
Centerville Road, Suite 400, Wilmington, Delaware 19808. The registered agent of the Company and
its registered office may be changed in accordance with the provisions of the Act.

     2.7 Principal Place of Business. The Company’s principal place of business shall be
located at 3200 E. Frontera, Anaheim, California 92806. The Company’s principal place of business
may be changed from time to time by the Board of Directors (as defined herein) in accordance with
the provisions hereof.

     2.8 Term. The term of the Company shall be perpetual.

     2.9 Documents. The Members shall promptly execute and file all certificates or other
documents, including amendments to the Company’s Certificate of Formation and fictitious name or
assumed name certificates, and shall take such other acts as shall from time to time be required by
the Act, other applicable laws of the States of Delaware, California, Nevada and Arizona and
applicable laws of other states in which the Company conducts its business.

ARTICLE III

CAPITAL CONTRIBUTIONS AND ACCOUNTS

     3.1 Capital Contributions and Interests.

          (a) Capital Contributions for Issuance of Interests. Pursuant to the Contribution
Agreement, Sims shall make an initial Capital Contribution to the Company equal to the Sims Assets
in exchange for an Interest in the Company, and Adams Steel shall make an initial Capital
Contribution to the Company equal to the Adams Steel Assets in exchange for an Interest in the
Company. The corresponding initial Percentage Interest of each Member is set forth opposite its
name below:

	 	 	 	 	 
	Member	 	Percentage Interest
	 
	 	 	 	 
	Adams Steel
	 	 	50	%
	 
	 	 	 	 
	Sims
	 	 	50	%

          (b) Additional Capital Contributions. No Member shall be permitted to make any
additional Capital Contributions unless otherwise unanimously approved by all Members. In such
event, the amount of any such additional Capital Contributions shall be equal to such Member’s pro
rata portion of the aggregate Capital Contributions approved by the Members, based on such Member’s
Percentage Interest. All Capital Contributions in the form of cash shall be held by the Company in
an interest bearing account until released at such times and in such amounts as determined by the
Board of Directors in accordance with the provisions hereof.

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[•] CONFIDENTIAL TREATMENT REQUESTED

 

     3.2 Interest Earned on Company Capital. Interest earned on Company funds shall inure
to the benefit of the Company, and no Interest Holder shall be entitled to receive interest on any
Capital Contribution.

     3.3 Return of Capital Contributions. Except as otherwise provided in this Agreement,
no Interest Holder shall have the right to receive the return of any Capital Contribution.

     3.4 Capital Accounts. A separate Capital Account shall be maintained for each
Interest Holder in accordance with Regulations Section 1.704-1(b)(2)(iv) (taking into account any
future amendments to such Regulation and any corresponding provisions of any succeeding
Regulations). Without limiting the generality of the foregoing, an Interest Holder’s Capital
Account shall generally be computed as follows:

          (a) To each Interest Holder’s Capital Account, there shall be credited (i) such Interest
Holder’s Capital Contributions, (ii) such Interest Holder’s distributive share of Profits and any
items in the nature of income or gain which are specially allocated pursuant to Article 4 hereof,
and (iii) the amount of any Company liabilities assumed by such Interest Holder or that are secured
by any Company Property distributed to such Interest Holder;

          (b) To each Interest Holder’s Capital Account, there shall be debited (i) the amount of cash
and the Gross Asset Value of any Company Property distributed to such Interest Holder, (ii) such
Interest Holder’s distributive share of Losses and any items in the nature of expenses or losses
that are specially allocated pursuant to Article 4 hereof, and (iii) the amount of any liabilities
of such Interest Holder assumed by the Company or that are secured by any property contributed by
such Interest Holder to the Company;

          (c) In the event of a Transfer of an Interest, the transferee shall succeed to the Capital
Account of the transferor as of the effective date of the Transfer; and

          (d) In determining the amount of any liability for purposes of subparagraphs (a) and (b) and
the definition of “Capital Contribution,” there shall be taken into account Code Section 752(c) and
any other applicable provisions of the Code and the Regulations.

The foregoing provisions and the other provisions of this Agreement relating to the maintenance of
Capital Accounts are intended to comply with Regulations Section 1.704-1(b), and shall be
interpreted and applied in a manner consistent with such Regulations. In the event that the Board
of Directors determines that it is prudent to modify the manner in which the Capital Accounts or
any debits or credits thereto (including debits or credits relating to liabilities that are secured
by contributed or distributed property or that are assumed by the Company or the Interest Holders)
are computed in order to comply with such Regulations, the Board of Directors shall inform all of
the Interest Holders that it believes that it is necessary to make such modifications.

     3.5 Member Loans and Guarantees. No Member shall have any obligation to make any loan
or advance to the Company or guarantee any Company obligation.

     3.6 New Debt Facility.

          (a) On or prior to the date of this Agreement, the Company has entered into the Credit
Agreement with Bank of America, N.A (the “Lender”) for a line of credit (the “Line of
Credit”) in the principal amount of [•] to fund the Company’s working capital requirements and
other capital requirements to operate its business. Financing of working capital for the Company
shall be provided

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[•] CONFIDENTIAL TREATMENT REQUESTED

 

solely by the Line of Credit or alternatively by Capital Contributions by each of the Members
pursuant to Section 3.1(b) of this Agreement.

          (b) In accordance with Section 4.1(b) hereof, the Company shall use the proceeds of the Line
of Credit to make the Sims Special Initial Distribution (as defined herein) and the Adams Steel
Special Initial Distribution (as defined herein). Sims and Adams Steel shall use the Sims Special
Initial Distribution and the Adams Steel Special Initial Distribution, respectively, to retire debt
owed to third party creditors.

          (c) Sims Group Limited and Adams Steel (and certain of the members of Adams Steel) have agreed
to guarantee the repayment of the Line of Credit pursuant to the Credit Agreement.

          (d) It is the intent of the Members that the Sims Special Initial Distribution and the Adams
Steel Special Initial Distribution are allocated to Sims and Adams Steel, respectively, so that the
Sims Special Initial Distribution and the Adams Steel Special Initial Distribution will each
qualify as a non-taxable debt-financed distribution under Regulations Section 1.707-5(b) to the
maximum extent allowed by law (the “Intended Tax Treatment”). The Members agree to not
report or take any tax position (on a tax return or otherwise) for United States federal, state and
local income tax purposes that is inconsistent with the Intended Tax Treatment.

ARTICLE IV

DISTRIBUTIONS AND ALLOCATIONS

     4.1 Distributions.

          (a) Generally. Distributions of cash shall be made solely from Cash Available for
Distribution. Except as otherwise provided herein, all Distributions made from Cash Available for
Distribution shall be distributed to the Interest Holders pro rata in accordance with their
respective Percentage Interests. Subject to the provisions hereof, for each taxable year of the
Company, Distributions made to the Interest Holders shall be made in accordance with this Article 4
and determined by the Board. It is the intent of the parties that subject to the other provisions
of this Agreement, the target annual Distributions shall be at least ten percent (10%) of the total
net profit before taxes in such taxable year.

          (b) Special Initial Distribution. Notwithstanding Section 4.1(a) hereof, as soon as
practicable but in no event later than ninety (90) days following the Effective Date, the Company
shall make a one-time Distribution of cash to Sims (the “Sims Special Initial
Distribution”) and a one-time Distribution of cash to Adams Steel (the “Adams Steel
Special Initial Distribution”), in each case in an amount equal to the lesser of (i) the Third
Party Indebtedness of Adams Steel on the date of this Agreement and (ii) [•]. Neither Sims nor
Adams shall be entitled to any additional distribution to satisfy any tax obligation due and owing
as a result of either the Sims Special Initial Distribution or the Adams Special Initial
Distribution.

          (c) Other Limitations. No Distribution shall be declared or made if, after giving
effect to the Distribution, (i) the Company would be unable to pay its debts as they become due in
the usual course of business; (ii) the fair market value of the total assets of the Company would
be less than the sum of all liabilities of the Company; or (iii) such Distribution would otherwise
be in violation of the Act. Except as otherwise may be permitted upon liquidation of the Company
under Section 8.2 or as may be approved by the Board, the Company shall not make any Distribution
to the Interest Holders in property other than in cash.

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[•] CONFIDENTIAL TREATMENT REQUESTED

 

          (d) Certain Indemnification Obligations.

          (i) With reference to the initial Members’ respective indemnification obligations
pursuant to Article 9 of the Contribution Agreement and specifically Section 9.9 thereof and
the Members’ indemnification obligations pursuant to Section 10.4 of this Agreement, each
Member acknowledges and agrees that a Member or the Company, or certain Persons affiliated
therewith, may, from time to time, deliver to another Member a written claim for
indemnification thereunder (an “Indemnification Claim”). Upon any Final
Determination (as such term is defined herein) of any Indemnification Claim, then and solely
to the extent that the total monetary amount of the Adverse Consequences relating to such
Indemnification Claim (such amount, the “Indemnification Amount”) is unpaid by the
Indemnifying Person as of the date of any Distribution, that part of the cash amount of such
Distribution equal to the unpaid Indemnification Amount (or if the unpaid Indemnification
Amount is more than the total cash amount of such Distribution, the total cash amount of
such Distribution) otherwise payable to such Indemnifying Person or any transferee of an
Interest of such Indemnifying Person, as a Member, under this Agreement shall be retained by
the Company if the Company made such Indemnification Claim, or if the Indemnification Claim
is made by a Member or Person affiliated therewith then such amount shall be paid directly
by the Company to such Indemnified Person, as applicable, in accordance with Article 9 of
the Contribution Agreement or Section 10.4 of this Agreement, as the case may be. Any part
of the Indemnification Amount which is still unpaid after such retention or payment by the
Company will remain due and payable by the Indemnifying Person (including any interest
payable thereon under the Contribution Agreement or this Agreement). For the purposes
hereof, a “Final Determination” means the final, non-appealable resolution of any
Indemnification Claim pursuant to Article 9 of the Contribution Agreement (including, for
such purpose, the application of the dispute resolution process set forth in Section 12.4
thereof) or Section 10.5 hereof.

          (ii) Each Member expressly acknowledges and agrees that it shall have no right to
object, prevent, delay or otherwise dispute the payment to any Indemnified Person of any
portion of any Distribution pursuant to this Section 4.1(d). Each Member further expressly
acknowledges and agrees that, notwithstanding anything to the contrary herein, any and all
Distributions shall be applied as follows: (A) first, for tax distributions pursuant to
Section 4.2; (B) second, to satisfy any obligations of such Member relating to outstanding
Indemnification Claims for which there has been a Final Determination; (C) third, to
reimburse or repay any amounts otherwise due and payable to the Company by such Member with
respect to loans or advances made to such Member; and (D) fourth, for any such other
purpose.

     4.2 Tax Distributions. For each taxable year of the Company, the Company shall
calculate the following tax distribution amount (“Tax Distribution Amount”) with respect to
each Interest Holder by (i) multiplying the current year’s taxable income of the Company allocated
to each Interest Holder (taking into account allocations made pursuant to Section 4.8 below in
accordance with Code Section 704(c)) by (ii) the highest marginal combined federal and state income
tax rate applicable to an individual resident in the State of California (taking into account both
(x) the deductibility of state income taxes in computing federal income taxes, and (y) the
character of such income). After the Tax Distribution Amounts are calculated for each Interest
Holder, the Company shall determine what the largest Tax Distribution Amount is for all of the
Interest Holders for such taxable year (“Maximum Tax Distribution”) and shall make a
distribution from Cash Available for Distribution to each of the Interest Holders in an amount
equal to the Maximum Tax Distribution. Unless otherwise determined by the Board, the Maximum Tax
Distribution shall be payable to the Interest Holders in quarterly installments coinciding with the
Interest Holders’ estimated federal and state tax payment obligations. All amounts payable under
this Section 4.2 shall be determined by the Company’s accountants, using their best

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[•] CONFIDENTIAL TREATMENT REQUESTED

 

estimates. All amounts payable under this Section 4.2 shall be treated as advances on
Distributions to which such Interest Holder is otherwise entitled hereunder and shall be taken into
account upon subsequent Distributions under this Agreement.

     4.3 Withholding. All amounts withheld or required to be withheld pursuant to the Code
or any provision of any federal, state, local or foreign tax law with respect to any payment,
Distribution or allocation to the Company or the Interest Holders and treated by the Code (whether
or not withheld pursuant to the Code) or any such tax law as amounts payable by or in respect of
any Interest Holder shall be treated as amounts distributed to the Interest Holder with respect to
whom such amount was withheld pursuant to this Article 4 for all purposes under this Agreement.
The Company is authorized to withhold from Distributions, or with respect to allocations, to the
Interest Holders and to pay over to any federal, state, local or foreign government any amounts
required to be so withheld pursuant to the Code or any provisions of any other federal, state,
local or foreign law, and shall allocate such amounts to the Interest Holders with respect to which
such amount was withheld.

     4.4 Return of Distributions. Except for Distributions made in violation of the Act or
this Agreement, no Interest Holder shall be obligated to return to the Company any Distribution or
pay the amount of any Distribution for the account of the Company or to any creditor of the
Company. The amount of any Distribution returned to the Company by an Interest Holder or paid by
an Interest Holder for the account of the Company or to a creditor of the Company shall be added to
the account or accounts from which it was subtracted when it was distributed to such Interest
Holder.

     4.5 Allocation of Profits and Losses. Subject to any special allocations made
pursuant to Section 4.6, Profits and Losses for a fiscal year shall be allocated to the Interest
Holders in proportion to their respective Percentage Interests.

     4.6 Special Allocations. Notwithstanding Section 4.5, the following special
allocations shall be made for each fiscal year in the following order of priority:

          (a) Minimum Gain Chargeback. In the event there is a net decrease in Company Minimum
Gain during any fiscal year, the “minimum gain chargeback” described in Regulations Section
1.704-2(f) and Regulations Section 1.704-2(g) shall apply.

          (b) Member Minimum Gain Chargeback. In the event there is a net decrease in Member
Minimum Gain during any fiscal year, the “partner minimum gain chargeback” described in Regulations
Section 1.704-2(i)(4) shall apply.

          (c) Qualified Income Offset. This Section 4.6(c) incorporates the “qualified income
offset” set forth in Regulations Section 1.704-1(b)(2)(ii)(d) as if those provisions were fully set
forth in this Section 4.6(c). For any given fiscal year, an allocation pursuant to this Section
4.6(c) shall be made only if and to the extent that an Interest Holder would have a deficit balance
in its Adjusted Capital Account after all other allocations provided for in this Article 4 for such
fiscal year have been tentatively made as if this Section 4.6(c) were not in this Agreement.

          (d) Nonrecourse Deductions. Nonrecourse Deductions for any fiscal year (or any other
period in which it is necessary to make allocations of Profits or Losses) shall be allocated among
the Interest Holders in accordance with their respective Percentage Interests.

          (e) Member Nonrecourse Deductions. Any Member Nonrecourse Deductions for any fiscal
year (or any other period in which it is necessary to make allocations of Profits or Losses) shall
be specially allocated to the Interest Holder who bears the economic risk of loss with respect to
the Member

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[•] CONFIDENTIAL TREATMENT REQUESTED

 

Nonrecourse Debt to which such Member Nonrecourse Deductions are attributable in accordance
with Regulations Section 1.704-2(i)(1).

          (f) Section 754 Adjustment. To the extent an adjustment to the adjusted tax basis of
any Company Property, pursuant to Code Sections 734(b) or 743(b) is required, pursuant to
Regulations Sections 1.704-1(b)(2)(iv)(m)(2) or 1.704-1(b)(2)(iv)(m)(4), to be taken into account
in determining Capital Accounts as a result of a distribution to an Interest Holder in complete
liquidation of its Interest, the amount of such adjustment to Capital Accounts shall be treated as
an item of gain (if the adjustment increases the basis of the Company Property) or loss (if the
adjustment decreases such basis) and such gain or loss shall be specifically allocated to the
Interest Holders in accordance with their respective Percentage Interests (in the event Regulations
Section 1.704-1(b)(2)(iv)(m)(2) applies) or to the Interest Holder to whom such distribution was
made (in the event Regulations Section 1.704-1(b)(2)(iv)(m)(4) applies).

     4.7 Tax Allocations.

          (a) Each item of the Company’s income, gain, loss, deduction and credit as determined for
United States federal income tax purposes shall be allocated among the Interest Holders in the same
manner as such items are allocated for book purposes in accordance with the provisions of this
Article 4.

          (b) The Interest Holders are aware of the United States federal income tax consequences of the
allocations made by this Article 4 and hereby agree to be bound by the provisions of this Article 4
in reporting their shares of Profits and Losses for United States federal income tax purposes.

          (c) For purposes of determining the Profits, Losses or any other items allocable to any
period, such items shall be determined on a daily, monthly, or other basis, as determined by the
Board of Directors using any permissible method under Code Section 706 and the Regulations
thereunder.

          (d) Solely for purposes of determining an Interest Holder’s proportionate share of the “excess
nonrecourse liabilities” of the Company within the meaning of Regulations Section 1.752-3(a)(3),
the Interest Holders’ interests in Profits are in proportion to their respective Percentage
Interests.

     4.8 Tax Allocations; Code Section 704(c). In accordance with Code Section 704(c) and
the Regulations thereunder, income, gain, loss and deduction with respect to any property
contributed to the capital of the Company shall, solely for tax purposes, be allocated among the
Interest Holders so as to take account of any variation between the adjusted basis of such property
to the Company for federal income tax purposes and its initial Gross Asset Value. In the event the
Gross Asset Value of any Company asset is adjusted pursuant to the definition of Gross Asset Value,
subsequent allocations of income, gain, loss and deduction with respect to such asset shall take
account of any variation between the adjusted basis of such asset for federal income tax purposes
and its Gross Asset Value in the same manner as under Code Section 704(c) and the Regulations
thereunder. Any elections or other decisions relating to such allocations shall be made by the
Board of Directors in any manner that reasonably reflects the purpose and intention of this
Agreement; provided, however, that the Company shall use the “traditional method”
with respect to the Sims Assets and Adams Steel Assets in accordance with Regulations Section
1.704-3(b). Allocations pursuant to this Section 4.8 are solely for purposes of United States
federal, state, and local income taxes and shall not affect, or in any way be taken into account in
computing, any Interest Holder’s Capital Account or share of Profits, Losses, other items, or
Distributions pursuant to any provisions of this Agreement (other than Tax Distribution Amounts).

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ARTICLE V

MANAGEMENT RIGHTS, POWERS AND DUTIES

     5.1 Management. The business and affairs of the Company shall be managed by its
“managers” in accordance with the provisions of this Agreement and the Act. Such managers are
referred to herein as the “Board of Directors” or “Board.” Except as provided in, and subject to,
Section 5.2(c) and (d) hereof, the Board of Directors shall, to the fullest extent permitted by the
Act, have full and complete authority, power and discretion to direct, manage, and control the
business, affairs and properties of the Company. Consistent with the managers’ fiduciary
obligations towards the Company and the Members, the managers shall act in the best interests of
the Company with a view to promoting its growth and profitability (whether by acquisition or
otherwise).

     5.2 Board of Directors.

          (a) General Matters.

          (i) The members of the Board of Directors shall be appointed by the Members in
accordance with Section 5.2(a)(iii), and each Director appointed by a Member (a
“Designee”) shall hold office until his or her successor is appointed and qualified
or until his or her prior death, resignation, or removal. Any Director may be removed by
the Member that appointed such Director. A Director may resign at any time by giving
written notice to the Company. Vacancies may be filled by the Member that appointed such
vacating Director(s) pursuant to Section 5.2(a)(iii). Any Designees, other than initial
Member Designees set forth in Section 5.2(a)(iii)(A), must be reasonably acceptable to all
of the Members. No Director shall be entitled to compensation from the Company for serving
as a Director.

          (ii) Size of Board. The total number of directors that shall comprise the
Board of Directors shall initially be eight. The Members agree to take any and all actions
necessary to effectuate the provisions of this Section 5.2(a), including exercising their
voting rights, calling or attending meetings of the Members, and causing any necessary
amendments to this Agreement or the Certificate of Formation of the Company. All
designation of Directors under this Section 5.2(a) shall be reflected in the records of the
Company.

          (iii) Appointment of Directors.

          (A) For so long as the Percentage Interest of each Member is fifty percent
(50%), each shall be entitled to appoint four Directors. As of the Effective Date,
the initial Directors of Adams Steel shall be Wendy Adams, Terry Adams, George Adams
and Michael Adams. The initial Directors of Sims shall be
Robert Kelman, Myles Partridge, William Schmiedel and Jeremy Sutcliffe, provided
that: (1) Don Betson shall serve as an alternate Director in the place of either
Robert Kelman or Myles Partridge; (2) Brian Brandt shall serve as an alternate
Director in the place of William Schmiedel; and (3) Ross Cunningham or Scott Miller
shall serve as an alternate Director in the place of Jeremy Sutcliffe, in each case
should such Director be unable to attend any meeting of the Board of Directors or
otherwise be unavailable to execute written resolutions of the Board of Directors.

          (B) If the Percentage Interest of Adams Steel or Sims is less than fifty
percent (50%) (in such event, the “Minority Member”), then such Minority
Member shall be entitled to appoint a member to the Board of Directors for each
12.5% Percentage Interest (or incremental portion thereof), and the other Member
shall be entitled to

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appoint the remaining members of the Board of Directors; provided,
however, that the Minority Member shall have no right to designate any
members of the Board of Directors if its Percentage Interest is less than 12.5%. By
way of illustrative example only, the following shall apply with respect to any
Minority Member:

	 	 	 	 	 
	Percentage Interest	 	Director Designees
	More than 37.5% but equal to or less than 50%
	 	 	4	 
	More than 25% but equal to or less than 37.5%
	 	 	3	 
	More than 12.5% but equal to or less than 25%
	 	 	2	 
	12.5%
	 	 	1	 
	Less than 12.5%
	 	 	0	 

          (C) If at any time either Adams Steel or Sims is the sole Member, such Member
shall be entitled to appoint all of the Directors.

          (D) The Designee appointment rights of Adams Steel and Sims set forth herein,
if any, may be transferred to a Third Party, at the discretion of the transferring
Member, in connection with any Transfer of any Interest of such Member pursuant to
Section 6.2 and/or 6.3 hereof.

          (iv) Committees. The Board of Directors may create one or more committees,
each comprised of at least two Directors, whose members shall include Designees of the
Members in the same proportion as then constitute the Board of Directors. Any such
committee, to the extent provided in the resolution of the Board of Directors, shall have
and may exercise all of the powers and authority of the Board of Directors;
provided, however, that no such committee shall have the power or authority
to authorize or pay Distributions. Each committee shall keep regular minutes of its
meetings and report the same to the Board of Directors when required and shall fix its own
rules (consistent with this Agreement) governing the conduct of its activities.

          (v) Subsidiary Boards. The size and composition of the board of directors of
any subsidiary of the Company shall be the same as that of the Board.

          (vi) Other Activities. The members of the Board of Directors shall not be
required to manage the Company as their sole and exclusive full time work and may have other
business and investment interests and activities in addition to those relating to the
Company as are consistent with their duties under this Agreement.

          (b) Meetings of and Voting by Directors.

          (i) Regular Meetings. Regular meetings of the Board of Directors may be held
within or outside of the State of Delaware without notice, at such time and place as shall
from time to time be determined in advance by the Board.

          (ii) Special Meetings. Special meetings of the Board may be held within or
outside of the State of Delaware and may be called by any Director or the President (as
defined below) on 24 hours written notice (delivered personally, by facsimile or email) to
each Director.

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          (iii) Quorum. All of the Directors then-in-office shall constitute a quorum
for the transaction of business at any meeting of the Board of Directors. All sitting
members of any committee of the Board shall constitute a quorum for the transaction of
business at any meeting of such committee. If a quorum shall not be present at any meeting
of the Board of Directors or a committee, the Directors present thereat may adjourn the
meeting from time to time, without notice other than announcement at the meeting, until a
quorum shall be present.

          (iv) Conduct of Meetings.

          (A) Directors may participate in any meeting of the Board or any committee
thereof by means of conference telephone or similar communications equipment through
which all persons participating in the meeting can hear each other, and such
participation in a meeting shall constitute presence in person at the meeting.

          (B) Any action required or permitted to be taken at any meeting of the Board or
any committee thereof may be taken without a meeting, without prior notice and
without a vote, if a consent in writing, setting forth the action so taken, shall be
signed by all Directors, and such consent(s) are filed with the minutes of
proceedings of the Company.

          (C) When any notice is required to be given to any Director, a waiver thereof
in writing signed by such Director before, at or after the time stated therein shall
be equivalent to the giving of such notice. The Director’s presence at the meeting
shall also constitute a waiver of prior notice.

          (c) Powers of the Board; Manner of Acting.

          (i) General Powers. Except as otherwise provided herein, all actions of the
Board of Directors shall require the approval of not less than a majority of the Directors
present at any meeting of its Board (or all of the Directors if action is adopted by written
consent). Actions of any committee of the Board of Directors shall require an affirmative
vote of a majority of the committee members present at any meeting at which there is a
quorum.

          (ii) Matters Requiring Supermajority Approval. Notwithstanding anything to the
contrary herein, the Company may not take any of the following actions (the
“Supermajority Actions”) without the prior approval of at least [•] of the Directors
then-in-office:

          (A) the admission of any Interest Holder as a Member, other than (i) any
Permitted Transferees (provided that the Permitted Transfer in question complies
with Section 6.1 hereof), or (ii) an Interest Holder that acquires its Interests as
a result of a Transfer undertaken in strict compliance with the provisions of
Article VI;

          (B) any amendment of this Agreement or the Certificate of Formation of the
Company;

          (C) the issuance of Interests (other than pursuant to this Agreement and the
Contribution Agreement) or rights, warrants, options or convertible securities
granting the holder thereof the right to purchase from the Company any Interests;

          (D) (I) the acquisition of the Company by another entity by means of any
transaction or series of related transactions (including, without limitation, any

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[•] CONFIDENTIAL TREATMENT REQUESTED

 

reorganization, merger or consolidation or transfer of at least fifty percent
(50%) of the Company’s voting power, but excluding an acquisition resulting from a
Transfer undertaken in strict compliance with the provisions of Article VI), or (II)
the sale, lease or other conveyance (other than a pledge of assets or a grant of a
security interest therein to a commercial lender in connection with a commercial
lending or similar transaction) of a material portion of the assets of the Company
by means of a transaction or series of related transactions

          (E) the convening of a meeting of members of the Company to propose a voluntary
winding up of the Company or to appoint an administrator, receiver or liquidator;

          (F) a material expansion, reduction or restructuring of the Business;

          (G) the application by the Company for, or the provision to the Company of,
financial accommodation of any nature in excess of [•], except to the extent
previously approved by the Board of Directors;

          (H) (I) the incurrence or other entry into any obligations for borrowed money
(including, for such purpose but without limitation, any increase in the Line of
Credit, any guarantee, indemnity or other form of security by the Company (other
than retentions of title in the ordinary course of business)), (II) the issuance or
sale of its debt securities or warrants or other rights to acquire any of its debt
securities, (III) the loan, advance (other than advancement of expenses to its
employees in the ordinary course of business) or contribution to the capital of, or
invest in, any other Person, other than the Company or (IV) the entry into any
hedging agreement or other financial agreement or arrangement designed to protect
the Company against fluctuations in commodities prices or exchange rates;

          (I) any declaration, recommendation or the payment of a Distribution (other
than Distributions to pay taxes pursuant to Section 4.2 hereof);

          (J) the entry into or termination of any transaction or agreement between (x)
the Company on one hand, and (y) any officer, Director, Member or any of their
respective Related Persons (as defined in the Contribution Agreement), on the other
hand; provided, however, that Adams may cause the Company to
terminate the Foreign Sales Agreement, Shared Services Agreement and Non Ferrous
Agreement (each as defined herein) without the approval of 75% of the Directors
then-in-office, strictly in accordance with the provisions of Section 6.1(c);

          (K) the appointment and/or removal of the President; and

          (L) the entry of any agreement to take any of the aforementioned actions.

          (d) Matters Requiring Member Majority Approval. Notwithstanding anything to the
contrary herein, certain matters set forth in this Agreement require a Member Majority Vote and
those provisions shall not be affected or otherwise limited by the provisions of this Section 5.2.

     5.3 Officers.

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[•] CONFIDENTIAL TREATMENT REQUESTED

 

          (a) Election. The officers of the Company shall be elected by the Board and shall
include a President and Chief Executive Officer (“President”), a Secretary and a Chief
Financial Officer and Treasurer (“CFO”). The Board of Directors may also elect one or more
Vice Presidents or other officers as it shall deem necessary who shall hold their offices for such
terms and shall exercise such powers and perform such duties as shall be determined by the Board.
Any number of offices may be held by the same Person. Officers may, but need not, be Directors.
Until such time as Sims holds less than [•] of the total Percentage Interest, Sims shall have the
right to appoint one of its Designees as the Chairperson of the Board to preside at all meetings of
the Members and of the Board of Directors and to nominate the CFO.

          (b) Removal and Resignation. Any officer may be removed, with or without cause, by
the Board in accordance with Section 5.2(c). Any officer may resign at any time by giving written
notice to the Company.

          (c) President.

          (i) The President, subject to the reasonable direction and control of the Board of
Directors and the terms of any employment agreement with the Company, shall be the principal
executive officer of the Company. Subject to any limitations set forth in such employment
agreement or subsequent action by the Board of Directors, the President shall have authority
to execute and acknowledge, on behalf of the Company, all agreements, documents and
instruments necessary or proper to be executed in the course of the Company’s regular
business. In no instance may the President take or cause the Company to take any of the
Supermajority Actions without the prior approval of at least [•] of the Directors
then-in-office in accordance with Section 5.2(c)(ii).

          (ii) The initial President of the Company shall be George Adams. Mr. Adams shall be
employed pursuant to the terms of the employment agreement attached hereto as Exhibit
A.

          (d) Vice Presidents. In the absence of the President or in the event of his inability
or refusal to act, the Vice President (if there is one, and if there is more than one, the Vice
Presidents in the order designated by the Board, or absent designation, in the order of their
election) shall act in place of the President. The Vice President(s) shall also perform such other
duties and have such other powers as the Board of Directors may from time to time prescribe.

          (e) Secretary.

          (i) The Secretary shall give (or cause to be given) notice of and shall attend all
meetings of the Board of Directors and Members, shall record all of the proceedings of such
meetings, and shall be the custodian of the records of the Company. The Secretary shall
perform like duties for any committee of the Board of Directors when requested and shall
perform such other duties as are prescribed by this Agreement and by the Board of Directors
from time to time.

          (ii) The initial Secretary of the Company shall be Mark Sweetman.

          (f) Chief Financial Officer and Treasurer.

          (i) The CFO shall have custody of the Company’s funds and securities, shall disburse
the same upon the direction of the Board of Directors, shall keep full and accurate records
of all financial transactions of the Company and shall deposit all moneys and other
valuables in the name and to the credit of the Company in such depositories as may be
designated

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[•] CONFIDENTIAL TREATMENT REQUESTED

 

by the Board of Directors. The CFO shall have such other duties and exercise such
other authority as may be prescribed by the Board of Directors from time to time.

          (ii) The initial CFO of the Company shall be Mark Sweetman.

          (g) No Employment Agreement. Nothing contained in this Section 5.3 shall create,
affect or be construed as creating or affecting any contract of employment between the Company and
any officer.

          (h) Other Activities. Except as set forth in any employment agreements with the
Company, the officers of the Company shall not be required to devote their exclusive full time work
to the business of the Company and may have other business and investment interests and activities
in addition to those relating to the Company as are consistent with their duties under this
Agreement.

     5.4 Certain Member Matters.

          (a) Business Restrictions. Except as otherwise expressly provided in this Article 5
and Article 7, nothing in this Agreement shall be deemed to restrict in any way the rights of any
Member, or of its Affiliates, to conduct any other business or activity whatsoever, and a Member
shall not be accountable to the Company or to any other Member with respect to that business or
activity even if the business or activity competes with the Company’s business. The organization
of the Company shall be without prejudice to the Members’ rights (or the rights of their respective
Affiliates (other than the Company)) to maintain, expand or diversify such other interests and
activities and to receive and enjoy profits or compensation therefrom, subject in all cases to the
provisions of Article 7.

          (b) [Intentionally omitted.]

          (c) Conduct of Meetings.

          (i) Members may participate in any meeting of Members by means of conference telephone
or similar communications equipment through which all persons participating in the meeting
can hear each other, and such participation in a meeting shall constitute presence in person
at the meeting.

          (ii) Any action required or permitted to be taken at any meeting of the Members may be
taken without a meeting, without prior notice and without a vote, if a consent in writing,
setting forth the action so taken, shall be signed by all Members, and such consent(s) are
filed with the minutes of proceedings of the Company.

          (iii) When any notice is required to be given to any Member, a waiver thereof in
writing signed by such Member before, at or after the time stated therein shall be
equivalent to the giving of such notice.

     5.5 Liability and Indemnification.

          (a) Limitation on Liability. No Member (or any officer or director thereof), nor any
Director or officer of the Company, shall be liable, responsible, or accountable, in damages or
otherwise, to any Member or to the Company for any act performed by such Person within the scope of
the authority conferred on such Person by this Agreement, except for fraud, intentional misconduct,
an intentional breach of this Agreement, bad faith, a willful failure to deal fairly with the
Company or its Members in connection with a matter in which such Person had a material conflict of
interest, a violation of criminal law (unless such Person had reasonable cause to believe its
conduct was lawful or no reasonable cause to

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[•] CONFIDENTIAL TREATMENT REQUESTED

 

believe its conduct was unlawful), or a transaction from which such Person derived an improper
personal profit.

          (b) Indemnification. Subject to the indemnification obligations of such Member under
the Contribution Agreement: (i) each Member (and any officers and directors thereof) and each
Director and officer of the Company shall be entitled to indemnification to the full extent now or
hereafter provided by law and/or any insurance maintained by the Company and (ii) each Member (and
any officers and directors thereof) and each Director and officer of the Company shall be
indemnified against any losses, judgments, liabilities, expenses and amounts paid in settlement of
any claims sustained by such Person in connection with any action or inaction taken in good faith
and believed by such Person to be in the best interest of the Company, and further provided that
such action or inaction does not constitute one of the exceptions to the limitation on liability
set forth in Section 5.5(a). Company funds shall be advanced to such Person for legal expenses and
other costs incurred by such Person as a result of any legal action for which indemnification by
the Company is claimed by such Person if: (i) the legal action relates to the performance of
duties or services on behalf of the Company; and (ii) such Person undertakes to repay the advanced
funds to the Company in cases in which it is found by any court of competent jurisdiction not to be
entitled to indemnification pursuant to the provisions of this Agreement or the Act. Any indemnity
under this Section 5.5(b) shall be paid from, and only to the extent of, Company Property, and no
Member shall have any personal liability on account thereof.

     5.6 Expense Reimbursement to the Members. The Members and their Affiliates shall be
reimbursed by the Company for out-of-pocket expenses reasonably incurred or paid by them on behalf
of the Company, upon submission to the Company of documentation substantiating such expenses under
policies approved by the Board of Directors.

ARTICLE VI

RESTRICTIONS AND MEMBER WITHDRAWALS

     6.1 Transfer Rights.

          (a) Direct Transfers. Except for Permitted Transfers or Transfers undertaken in
strict compliance with the provisions of this Article VI, no Member may Transfer, solicit any
offers to Transfer or permit any Transfer of, all or any portion of, or any interest or rights in,
any of such Member’s Membership Rights or Interests without the unanimous consent of the Members.
In addition, no Member may effect such a Transfer (even a Permitted Transfer): (i) without
registration under applicable federal and state securities laws, unless such Member delivers an
opinion of counsel satisfactory to the other Members that registration under such laws is not
required; (ii) if the Transfer would result in the termination of the Company under Section 708 of
the Code; and (iii) without the proposed transferee agreeing in writing delivered to the other
Members to be bound by this Agreement.

          (b) Indirect Transfers of Adams Steel. For so long as Adams Steel is a Member:

          (i) Except for Transfers to a Permitted Transferee or Transfers undertaken in strict
compliance with the provisions of this Article VI, Adams Steel may not (and will cause its
Affiliates to not) directly or indirectly Transfer, solicit any offers to Transfer or permit
any Transfer of, all or any portion of, or any interest or rights in, any of the ownership
interests in Adams Steel or any Person that Controls Adams Steel (an “Indirect Adams
Interest”).

          (ii) If, at any time on or after [•], Adams Steel desires to accept a bona fide
Third-Party offer for any Indirect Adams Interest, then Adams Steel shall promptly notify
Sims of the intended disposition (“Adams Disposition Notice”) and the basic terms
and conditions

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[•] CONFIDENTIAL TREATMENT REQUESTED

 

thereof, including the identity of the proposed purchaser and the bona fide cash price
or, in reasonable detail, other consideration for which Adams Steel proposes to Transfer
such Indirect Adams Interest. Sims shall have the right to purchase (either itself or
through one of its Affiliates) that amount of the Interests owned by Adams Steel represented
by the Indirect Adams Interest proposed to be Transferred (but not less than such amount of
Interests), upon pricing terms and conditions to be agreed in good faith between Sims and
Adams Steel with reference to the terms and conditions specified in the Adams Disposition
Notice, or if no such terms are agreed between the parties within 30 days of the delivery of
such Adams Disposition Notice, for the price determined by an independent valuation firm
reasonably agreed by the parties. Sims and Adams Steel shall share equally the costs of
such valuation firm. Sims shall provide notice (the “Sims Response”) in writing to
Adams Steel given within 30 days after receipt of the Adams Disposition Notice of its
election to purchase such Interests, and if Sims fails to deliver the Sims Response to Adams
Steel within the 30-day period, Sims shall be deemed to have rejected such offer. In the
event that Sims timely delivers such Sims Response to Adams Steel electing to purchase such
Interests, the closing of the sale of such Interests shall be in accordance with Section
6.3(b) hereof.

          (c) Indirect Transfers of Sims. Sims (and its Affiliates) shall be free at any time to
directly or indirectly Transfer, solicit any offers to Transfer or permit any Transfer of, all or
any portion of, or any interest or rights in, any of the ownership interests in Sims or any Person
that Controls Sims (an “Indirect Sims Interest”), whether to a Permitted Transferee or
otherwise, subject only to the following:

          (i) If (A) such Transfer involves the sale of an ownership interest in Sims directly
(and not any other Transfer that may constitute a Change in Control of Sims, which shall be
dealt with pursuant to paragraph (ii) below) (a “Sims West Interest”), (B) the
transferee of such Sims West Interest is not a Permitted Transferee of Sims; (C) the only
asset of Sims at the time of such Transfer is Sims’ ownership interest in the Company,
and (D) such proposed Transfer of the Sims West Interest is not part of a larger
transaction or series of related transactions (including, without limitation, any
reorganization, merger, consolidation or other transfer involving assets other than that of
the Company or Sims), then if the applicable Affiliate(s) of Sims (the “Selling
Affiliate(s)”) desire to accept a bona fide Third-Party offer for the Sims West
Interest, Sims will cause the Selling Affiliates to promptly notify Adams Steel of the
intended disposition (“Sims Disposition Notice”) and the basic terms and conditions
thereof, including the identity of the proposed purchaser and the bona fide cash price or,
in reasonable detail, other consideration for which the Selling Affiliate(s) proposes to
Transfer such Sims West Interest. Adams Steel shall have the right to purchase (either
itself or through one of its Affiliates) by notice (the “Adams Response”) in writing
given within 30 days after receipt of the Sims Disposition Notice all of the Interests owned
by Sims. The Adams Response must set forth that Adams Steel wishes to acquire all of the
Interests owned by Sims and confirm that Adams Steel elects to purchase such Interests at
the price and on the terms specified in the Sims Disposition Notice. If Adams Steel fails
to deliver the Adams Response to Sims (on behalf of the Selling Affiliate(s)) within such
30-day period, Adams Steel shall be deemed to have rejected such offer. In the event that
Adams Steel timely delivers such Adams Response to Sims (on behalf of the Selling
Affiliate(s)) electing to purchase such Interests, the closing of the sale of such Interests
shall be in accordance with Section 6.3(b) hereof.

          (ii) If a Transfer of an Indirect Sims Interest to a Third Party results in a Change in
Control of Sims, then the following shall apply:

          (A) if (1) the Change in Control of Sims or the Change in Control of Global
Trade results in a change in the senior management personnel of Global Trade,

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[•] CONFIDENTIAL TREATMENT REQUESTED

 

and (2) as a result of such change in management, Global Trade’s performance
(in terms of its marketing, selling and exporting ferrous scrap) under the Foreign
Sales Agreement entered into on or about the Effective Date between the Company and
Global Trade (the “Foreign Sales Agreement”) is inconsistent (in a manner
adverse to the Company) with its performance under the Foreign Sales Agreement prior
to such Change in Control of Sims or Change in Control of Global Trade, then Adams
may cause the Company to terminate the Foreign Sales Agreement (by requiring the
Company to issue a notice of termination to Global Trade specifying the termination
date of the Foreign Sales Agreement), provided that such notice of termination must
be issued and have an effective date of termination no earlier than [•] and no later
than [•] following such change in management;

          (B) if, after the Change in Control of Sims, the performance of Sims Group USA
Holdings Corporation (formerly known as Sims Hugo Neu Corporation), a Delaware
corporation (“SGHC”), (in terms of providing services to the Company) under
the Shared Services Agreement entered into on or about the Effective Date between
the Company and SGHC (the “Shared Services Agreement”) is inconsistent (in a
manner adverse to the Company) with its performance under the Shared Services
Agreement prior to such Change in Control of Sims, then Adams may cause the Company
to terminate the Shared Services Agreement (by requiring the Company to issue a
notice of termination to SGHC specifying the termination date of the Shared Services
Agreement), provided that such notice of termination must be issued and have an
effective date of termination no earlier than [•] and no later than [•] of such
Change in Control of Sims;

          (C) if, after the Change in Control of Sims, the performance of Sims Group
Limited (or its Affiliate party to the Non Ferrous Agreement), (in terms of its
marketing, selling and exporting non-ferrous scrap) under the Non Ferrous Brokerage
Agreement to be entered into on or about the Effective Date between the Company and
Sims Group Limited (or one of its affiliates) (the “Non Ferrous Agreement”)
is inconsistent (in a manner adverse to the Company) with its performance under the
Non Ferrous Agreement prior to such Change in Control of Sims, then Adams may cause
the Company to terminate the Non Ferrous Agreement (by requiring the Company to
issue a notice of termination to Sims Group Limited specifying the termination date
of the Non Ferrous Agreement), provided that such notice of termination must be
issued and have an effective date of termination no earlier than [•] and no later
than [•] of such Change in Control of Sims; and

          (D) if at any point between [•] of such Change in Control of Sims, Adams Steel
delivers to Sims written notice of the existence of a Deadlock, Adams Steel
thereafter promptly pursues a resolution to such Deadlock through strict adherence
to the processes set forth in Section 10.5, and such Deadlock results in the sale by
Adams Steel of all of its Interests pursuant to the provisions of Section 10.5(c) of
this Agreement, then Adams Steel and the Adams Owners will (from the date of
consummation of such sale pursuant to these provisions) be released from any
non-competition obligations they then owe to the Company, whether pursuant to
Article VII hereof or otherwise, including pursuant to any employment or consulting
arrangement between the Company and any Adams Owner, and any such consulting or
employment agreement will be automatically terminated, and the applicable Adams
Owner released from its obligations thereunder.

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[•] CONFIDENTIAL TREATMENT REQUESTED

 

     6.2 Adams’ Put Right.

          (a) The Right. Adams Steel shall have the right (the “Put Right”) to Transfer
to Sims up to all of its Interests pursuant to this Section 6.2 as follows:

          (i) Up to [•] of the aggregate Interests (the “Estate Interests”) upon the
death of any Adams Owner (an “Adams Event”); and

          (ii) Up to all of its Interests at any time on or after [•].

          (b) Procedures for Exercise of Put Rights.

     In the event that Adams Steel desires to exercise the Put Right, then it shall deliver to Sims
a written notice (the “Put Right Notice”) no later than 90 days following the Adams Event
or its election to Transfer pursuant to Section 6.2(a)(ii), as the case may be. Such Put Right
Notice shall set forth (A) the proposed date of the Transfer determined in accordance with Section
6.3(b), and (B) the number of Interests proposed to be Transferred (the “Subject Adams
Interests”). The purchase price (the “Put Purchase Price”) for such Interests shall be
as follows:

[•]

[•] The closing of any such Transfer shall be in accordance with Section 6.3(b) hereof.

     6.3 Members’ Right of First Refusal. Notwithstanding the provisions of Section 6.2
hereof and without limiting the rights of the Members set forth therein, the following provisions
shall apply to any proposed Transfer of Interests (other than such Transfers to a Permitted
Transferee):

          (a) Right of First Refusal.

          (i) If, at any time on or after [•] (the “Trigger Date”), any Member desires to
accept a bona fide Third-Party offer for any of its Interests (the “Target
Interests”), then such Member (the “Selling Member”) shall promptly notify the
other Members of the intended disposition (“Third Party Disposition Notice”) and the
basic terms and conditions thereof, including the identity of the proposed purchaser and the
bona fide cash price or, in reasonable detail, other consideration for which the Selling
Member proposes to transfer such Target Interests.

          (ii) The other Members shall, for a period of 30-days from receipt of the Third Party
Disposition Notice, have the right to purchase all (but not less than all) of such Target
Interests, upon the terms and conditions specified in the Third Party Disposition Notice
(the “Right of First Refusal”). To exercise its right of first refusal, a Member
(an “Exercising Member”) must deliver to the Selling Member a written response
(“RFR Response”) within 30 days after the date on which the Exercising Member
received the Third Party Disposition Notice. Each RFR Response must set forth the amount of
the Target Interests, if any, which the Exercising Member wishes to acquire and confirm that
the Exercising Member elects to purchase such Target Interests at the price and on the terms
specified in the Third Party Disposition Notice. Any Member who does not so notify the
Selling Member within such 30-day period shall be deemed to have rejected such offer (each a
“Rejecting Member”). Each Exercising Member shall be entitled to purchase the
Target Interests pro rata in accordance with its respective Percentage Interests. In the
event that any Member does not elect to purchase its portion of the Target Interests, the
Exercising Members may purchase any or all of the Rejecting Members’ portion of

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[•] CONFIDENTIAL TREATMENT REQUESTED

 

the Target Interests (the “Residual Target Interests”) in such amounts as may
be agreed by the Exercising Members or, if no agreement is reached, that number which is
equal to the product obtained by multiplying the number of Residual Target Interests by a
fraction, the numerator of which is the number of Interests owned by such Exercising Member
and the denominator of which is the total number of outstanding Interests in the Company,
excluding those owned by the Rejecting Members and the Selling Member. In the event that an
RFR Response is timely delivered by any Member or Members as to all of the Target Interests,
the closing of the sale of the Target Interests shall be in accordance with Section 6.3(b)
hereof.

          (iii) Subject to the Co-Sale Right (as defined herein), in the event an RFR Response
(or RFR Responses) with respect to all of the Target Interests is not given to the Selling
Member within 30 days following receipt of the Third Party Disposition Notice, the Selling
Member shall have a period of 30 days after the expiration or exercise of the Co-Sale Right
in accordance with Section 6.3(c) herein, as the case may be, in which to sell such Target
Interests to the Third Party identified in the Third Party Disposition Notice at a price and
with other terms no more favorable to the Third Party than as stated in the Third Party
Disposition Notice.

          (iv) In the event the Selling Member does not notify the other Members or consummate
the sale or disposition of the Target Interests within the 30-day period described above,
then the provisions of Section 6.3(a) shall continue to be applicable to any subsequent
disposition (or proposed disposition) of the Target Interests by the Selling Member.

          (b) Closing Upon Exercise of Rights.

          (i) The closing of any Transfer of Target Interests pursuant to any of Sections 6.2 or
6.3(a) hereof shall take place at 9:00 a.m., local time, on the Closing Date (as defined
herein), at the offices of the Company or at such other location as the parties to such
Transfer may mutually determine. Subject to Section 6.3(b)(iii) hereof, at such closing,
the party or parties purchasing the Target Interests shall pay to the Selling Member (which
term shall include, solely for the purpose of this Section 6.3(b), Adams Steel to the extent
that it is exercising the Put Right) the appropriate price in United States dollars by wire
transfer, certified or cashier’s check in available funds or in any other currency
acceptable to the Selling Member. At the closing and against payment of the price, the
Selling Member shall deliver duly executed forms of transfer in respect of such Interests in
favor of the party or parties purchasing such portion of the Target Interests, free and
clear of all Liens. In the event that a Transfer shall take place in accordance with the
provisions hereof, the parties shall do, or cause to be done, all such acts or things as may
be required to give effect to the Transfer of the Target Interests and the registration
thereof on the books of the Company in the name or names of the purchaser(s).

          (ii) The date of the closing of any Transfer pursuant to Sections 6.2 or 6.3(a) hereof
(the “Closing Date”) shall be mutually determined by the Selling Member and each
purchaser; provided, however, that in each instance in which a Member is a purchaser of any
Target Interests, the following shall apply:

          (A) In the event that the Target Interests to be transferred are less than [•]
of all Interests then-outstanding, the purchaser(s) shall have up to [•] from the
date of the RFR Response or receipt of the Put Right Notice, as the case may be
(each such notice, a “Purchaser Notice”) to settle such purchase(s);

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[•] CONFIDENTIAL TREATMENT REQUESTED

 

          (B) In the event that the Target Interests to be transferred are at least [•]
but less than [•] of all Interests then-outstanding, the purchaser(s) shall have up
to [•] from the date of the Purchaser Notice to settle such purchase(s); and

          (C) In the event that the Target Interests to be transferred are equal to or
greater than [•] of all Interests then-outstanding, the purchaser(s) shall have up
to [•] from the date of the Purchaser Notice to settle such purchase(s).

          (iii) If the Selling Member is an Indemnifying Person (or the Permitted Transferee of
an Indemnifying Person) with respect to any Indemnification Claim(s):

          (A) for which a Final Determination has not been reached and such
Indemnification Claim(s) was made in accordance with the terms of the Contribution
Agreement or this Agreement prior to the Closing Date, then the following shall
apply:

          (I) If a Member is the purchaser of any Target Interests, then an
amount equal to Indemnification Amount (or the entire purchase price for the
Target Interests to be transferred, if such purchase price is less than such
Indemnification Amount) shall be deposited into an escrow account with a
third party escrow agent (pursuant to an escrow agreement consistent with
the terms herewith and reasonably agreed by the Selling Member and
Indemnified Person acting in good faith) by the Selling Member to be
distributed to the Indemnified Person or Selling Member as applicable
following the Final Determination of such Indemnification Claim(s), it being
understood that if the purchase price for the Target Interests is less than
the Indemnification Amount, then the provisions of Section 4.1(d) will apply
to the balance; and

          (II) If a Third Party is the purchaser of any Target Interests, then
the provisions of Section 4.1(d) will apply; and

          (B) for which a Final Determination has been reached but payment of the
Indemnification Amount relating to such Indemnification Claim is unpaid as of the
Closing Date, then the following shall apply:

          (I) If a Member is the purchaser of any Target Interests, then such
Member shall have the right of offset up to all of the unpaid
Indemnification Amount against the purchase price to be paid for such Target
Interests; and

          (II) If a Third Party is the purchaser of any Target Interests, then
the Selling Member shall, as a condition to the sale of such Transfer
Interests, first satisfy in full its obligation to pay such unpaid
Indemnification Amount.

          (c) Right of Co-Sale. No Selling Member may Transfer any Target Interests to any
Third Party pursuant to Section 6.3(a) unless as a condition of sale of the Target Interests, the
Third Party also offers to purchase all of the outstanding Interests of the Company at the same
price per Interest and on the same terms and conditions as the proposed sale of the Target
Interests by the Selling Member to such Third Party. Such right of the other Members to sell their
Interests to the Third Party pursuant to this provision is referred to herein as the “Co-Sale
Right.” The Co-Sale Right shall be exercised as follows:

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[•] CONFIDENTIAL TREATMENT REQUESTED

 

          (i) If the Selling Member desires to sell the Target Interests to a Third Party
pursuant to Section 6.3 and the other Members fail to timely deliver a RFR Response, then
within 30 days following the expiration of the time limit specified in Section 6.3(a), the
Selling Member must provide a notice (“Co-Sale Notice”) to the other Members which
includes (A) the name and address of the Third Party and (B) the price per Interest and
terms, if any, upon which the Third Party proposes to purchase all of the outstanding
Interests in the Company.

          (ii) To exercise its Co-Sale Right, a Member must provide the Selling Member with a
written response (“Co-Sale Response”) which must be received by the Selling Member
within 30 days after the Members have received the Co-Sale Notice. The Co-Sale Response
must state that such Member elects to sell to the Third Party, at the price and on the terms
specified in the Co-Sale Notice, all of the Interests owned by such Member immediately
before the sale (the “Co-Sale Interests”). The Members shall cooperate with and
execute and deliver such other documents as may be reasonably requested by the Third Party
or the Selling Member in connection with the transactions contemplated by the proposed sale
to the Third Party, including documents containing representations and warranties as to
title, power and authority and such other representations and warranties as are customary
and appropriate in transactions of this type.

          (iii) Immediately upon consummation of the sale of any Co-Sale Interests, the Selling
Member shall give notice thereof to the Members who exercised their Co-Sale Right, shall
remit to each such Member the net sales proceeds of the Interests of such Members sold
pursuant thereto (after deduction of a pro rata amount among all selling Members of amounts
placed in escrow (if any), reasonable fees and expenses incurred in connection with the
transaction and other appropriate deductions, as applicable), and shall furnish such other
evidence of the completion of such sale as may be reasonably requested by such Members.

          (iv) To the extent that the other Members fail to exercise their Co-Sale Rights within
the time limit specified in paragraph (ii) above, the Selling Member may Transfer all of the
Target Interests as set forth in the Third Party Disposition Notice pursuant to Section
6.2(a)(iii).

     6.4 Prohibited Transfers. Each Interest Holder hereby acknowledges the reasonableness
of the prohibition contained in Section 6.1 in view of the purposes of the Company and the
relationship of the Interest Holders. The Transfer of any Membership Rights or Interest (or
ownership interest in any Member) in violation of the prohibitions contained in this Article 6
shall (in so far as possible) be deemed invalid, null and void, and of no force or effect. Any
Person to whom Membership Rights or an Interest (or ownership interest in any Member) are attempted
to be transferred in violation of Section 6.1 shall not be entitled to vote on matters coming
before the Members, participate in the management of the Company, act as an agent of the Company
or, to the maximum extent permitted by law, receive Distributions from the Company or have any
other rights in or with respect to the Membership Rights.

     6.5 Withdrawals. Except as a result of a Permitted Transfer, no Member shall have the
power or the right to withdraw by voluntary act from the Company and any Member who shall withdraw
by voluntary act shall be in intentional breach of this Agreement.

     6.6 Documents; Effectiveness.

          (a) Documents. No acquisition of an Interest by a Person by Transfer, including
Permitted Transfers, shall be effective, and no such Person shall become a Member, until the
transferor and such Person execute all necessary certificates or other documents and perform all
acts required by law or

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[•] CONFIDENTIAL TREATMENT REQUESTED

 

          regulation, to the extent necessary to give effect to the Transfer and to preserve the status
of the Company as a limited liability company after the completion of the Transfer. Each
transferee of an Interest, whether or not such transferee becomes a Member, and each Person
acquiring an Interest from the Company, shall be bound by all the terms and conditions of this
Agreement.

          (b) Admission as Member; Membership Rights of Non-Members. Except as otherwise
provided herein, a Person may be admitted as a Member with the approval of the Board of Directors.
A Person who acquires an Interest in any manner and does not become a Member shall only be entitled
to receive the Distributions and to share the Profits and Losses of the Company to which the
transferor of such Interest would have been entitled with respect to such Interest, and shall not
be entitled to participate in the management of the business of the Company or to exercise any
other Membership Rights of a Member.

          (c) Date of Admission. Any admission of a Person as a Member shall be deemed to have
occurred, unless otherwise consented to by the Company, in its sole discretion, as of the opening
of business on the first day of the calendar month following the month in which all conditions have
been met and all actions have been taken to have such Member admitted to the Company.

     6.7 Conversion Intention. Sims and Adams Steel hereto agree that upon [•], the
Members shall meet and discuss a possible sale or exchange of the Membership Interests then owned
by Adams Steel in the Company. Sims and Adams Steel recognize that the mechanism, timing and format
of such a sale or exchange is difficult to formalize [•] before its enactment. It is anticipated
that the parties shall explore a sale of the Membership Interest in the Company owned by Adams
Steel to either Sims or the Company for cash and/or stock of Sims Group Limited.

ARTICLE VII

NON-COMPETE

     7.1 General Prohibition. No Interest Holder shall, and no Interest Holder shall cause
or permit any Affiliate of such Interest Holder (other than the Company) to, directly or
indirectly, for so long as such Interest Holder holds any Interests and for [•] thereafter (the
“Restricted Period”), engage in any Competitive Activity in the Territory or invest in,
own, manage, operate, control, finance, advise, render services to or participate in the ownership,
management, operation or control of or guarantee the obligations of any Person (other than the
Company) that is engaged in, or planning to become engaged in, a Competitive Activity in the
Territory. Further, each Interest Holder shall cause the Company not to engage in the Electronics
Business in the Territory during the Restricted Period (other than pursuant to the Supply Agreement
between Sims Group UK Limited (or one of its Affiliates) and the Company in a form to be agreed in
good faith between Adams Steel and Sims prior to the closing of the transactions contemplated by
the Contribution Agreement).

     7.2 Exceptions. Notwithstanding the provisions of Section 7.1, nothing contained
herein shall limit or restrict in any way the right or ability of:

          (a) any Interest Holder (or any Affiliate of any Interest Holder) to acquire or own securities
of a Person that is engaged in a Competitive Activity, provided that: (i) such securities are held
for investment purposes and represent less than one percent (1%) of the total equity interests of
such Person; (ii) such Interest Holder does not otherwise participate in the activities of such
Person; and (iii) such securities are listed on a national securities exchange or are regularly
quoted in the over-the-counter market by one or more members of the National Association of
Securities Dealers or have been registered under Section 12(g) of the Securities Exchange Act of
1934;

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[•] CONFIDENTIAL TREATMENT REQUESTED

 

          (b) Sims or any of its Affiliates to engage in any activity, including a Competitive Activity,
within the Sims Open Territory;

          (c) Sims or any of its Affiliates to conduct the Electronics Business within the Territory;

          (d) Sims or any of its Affiliates to conduct the Existing Sims Trading Business; or

          (e) Sims, or any of its Affiliates, to acquire a legal entity, group of companies or business
(the “Acquired Business”) which is engaged in any Competitive Activity in the Territory
(that part of the Acquired Business engaged in such Competitive Activity in the Territory, being
the “Overlapping Business”), provided, that, (i) Sims will, promptly after
such acquisition has been publicly disclosed by Sims (or its Affiliates), notify Adams Steel and
the Company of the acquisition of the Acquired Business, including a reasonable description of the
Overlapping Business (such notice, the “Acquired Business Acquisition Notice”); and (ii)
upon receipt of such Acquired Business Acquisition Notice, the Company shall have the right to
purchase the Overlapping Business from Sims (or its Affiliates) on the following conditions: (A)
the acquisition of the Acquired Business by Sims is consummated; (B) the Company’s acquisition of
the Overlapping Business is subject to applicable law and any order or action of any Governmental
Body (as defined in the Contribution Agreement); (C) the Designees of Sims on the Board will not be
entitled to vote with respect to the acquisition by the Company of the Overlapping Business; and
(D) all other terms in the purchase agreement will be agreed between the parties in good faith,
including the price for the Overlapping Business, provided, that, such price will
be based on [•]. Adams Steel shall cause the Company to provide notice (the “Company
Response”) in writing to Sims, given within 30 days after receipt of the Acquired Business
Acquisition Notice, of its election to purchase such Overlapping Business, and if the Company fails
to deliver the Company Response to Sims within the 30-day period, the Company shall be deemed to
have rejected such offer and, in such, case Sims (or its Affiliates) may continue to own the
Overlapping Business without breaching the terms of Section 7.1 hereof. In the event that the
Company timely delivers such Company Response to Sims electing to purchase the Overlapping
Business, the closing of the sale of such Overlapping Business shall occur on a date agreed in good
faith between the parties, provided, however, that such closing must occur within 180 days after
the Company’s receipt of the Acquired Business Acquisition Notice (unless the Company was unable to
obtain financing on reasonable terms to allow for such closing, in which case the parties would
negotiate in good faith a mutually acceptable delayed closing date), it being understood that Sims
(or its Affiliates) would not be in breach of Section 7.1 hereof during such period.

     7.3 Non-solicitation of Employees. During the Restricted Period, no Interest Holder
shall, and no Interest Holder shall cause or permit any Affiliate of such Interest Holder to,
directly or indirectly solicit for employment or hire (whether as an employee, consultant or
independent contractor) any current or former employee of the Company or any other Interest Holder
or their respective Affiliates, unless: (i) such employee has been separated from employment with
such Person for at least 90 days prior to the commencement of any employment discussions and such
employee approaches the Interest Holder for employment or retention without prior solicitation,
direct or indirect, on the part of the Interest Holder; or (ii) such employee is hired as a result
of the use of a general solicitation (such as an advertisement) not specifically directed to
employees of the Company, the other Interest Holders or their respective Affiliates, consistent
with the past practice of the hiring Interest Holder.

     7.4 Non-solicitation of Customers and Suppliers. During the Restricted Period, no
Interest Holder shall, and no Interest Holder shall cause or permit any Affiliate of such Interest
Holder to directly or indirectly, (a) solicit the business of any Person in the Territory who is a
customer or supplier of the Business, or (b) cause, induce or attempt to cause or induce any
customer, supplier, licensee, licensor, franchisee, consultant or other business relation of the
Company to cease doing business with the

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[•] CONFIDENTIAL TREATMENT REQUESTED

 

Company, to deal with any competitor of the Company, or in any way interfere with its
relationship with the Company.

     7.5 Non-Disparagement. During the Restricted Period, no Interest Holder shall and no
Interest Holder shall cause or permit any of its Affiliates to disparage the Company or any of
Company’s Members, managers, officers, employees or agents.

     7.6 Interpretation. If a final judgment of a court or tribunal of competent
jurisdiction determines that any term or provision contained in this Article 7 is invalid or
unenforceable, then the parties agree that the court or tribunal shall have the power to reduce the
scope, duration or geographic area of the term or provision, to delete specific words or phrases,
or to replace any invalid or unenforceable term or provision with a term or provision that is valid
and enforceable and that comes closest to expressing the intention of the invalid or unenforceable
term or provision. This Article 7 shall be enforceable as so modified after the expiration of the
time within which the judgment may be appealed. The parties agree that this Article 7 is
reasonable and necessary to protect and preserve the Company’s legitimate business interests and
the value of the parties’ Capital Contributions and to prevent any unfair advantage being conferred
on Sims or Adams Steel.

ARTICLE VIII

DISSOLUTION AND TERMINATION

     8.1 Events Causing Dissolution. Subject to Section 5.2(c) hereof, the Company shall
only be dissolved upon the occurrence of any one of the following events:

          (a) the unanimous written agreement of all of the Members to dissolve the Company; or

          (b) the entry of a judicial decree of dissolution under Section 18-802 of the Act.

     8.2 Winding Up; Liquidation and Distribution of Assets. Upon the dissolution of the
Company, the Board of Directors shall wind up the affairs of the Company in accordance with Section
18-803 of the Act. Upon such dissolution of the Company, an accounting shall be made of the
Company’s assets, liabilities and operations, from the date of the last previous accounting until
the date of dissolution. The Members shall proceed to sell or liquidate the Company’s assets
within a reasonable time. The proceeds from the liquidation of the Company’s assets shall be
distributed as follows:

          (a) First, to creditors, including Members who are creditors (if any) until all of the
Company’s debts and liabilities are paid and discharged (or provision is made for payment thereof);
and

          (b) The balance, if any, to the Interest Holders in accordance with their respective
Percentage Interests. Subject to the provisions in Section 6.3(b)(iii)(A) requiring a Selling
Member that is an Indemnifying Person (or the Permitted Transferee of an Indemnifying Person) to
comply with the provisions in Section 4.1(d), no Interest Holder shall be obligated to restore any
negative balance in its Capital Account upon the dissolution of the Company, the Transfer of all or
any portion of its Interest, or otherwise, and no creditor of the Company will have any right to
enforce any obligation to restore any deficit Capital Account of any Interest Holder.

     8.3 Deemed Contribution and Distribution. In the event the Company is liquidated
within the meaning of Regulations Section 1.704-1(b)(2)(ii)(g) but no dissolution has occurred,
Company Property shall not be liquidated, the Company’s liabilities shall not be paid or
discharged, and the Company’s affairs shall not be wound up. Instead, solely for U.S. federal
income tax purposes, the Company shall be deemed to have contributed all Company Property and
liabilities to a new partnership in exchange for an

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[•] CONFIDENTIAL TREATMENT REQUESTED

 

interest in such new partnership and immediately thereafter, the Company shall be deemed to
liquidate by distributing interests in the new partnership to the Interest Holders.

     8.4 Certificate of Cancellation. When all debts, liabilities and obligations of the
Company have been paid and discharged, or adequate provisions have been made for their payment and
discharge, and all of the remaining property and assets of the Company have been distributed, a
certificate of cancellation setting forth the information required by the Act shall be executed by
one or more authorized persons and filed with the Delaware Secretary of State. Upon such filing,
the existence of the Company shall cease, except for the purpose of suits, other proceedings and
appropriate action as provided in the Act.

ARTICLE IX

BOOKS, RECORDS, ACCOUNTING AND TAX ELECTIONS

     9.1 Bank Accounts. All funds of the Company shall be deposited in a bank account or
accounts maintained in the Company’s name. The Board of Directors shall determine the institution
or institutions at which the accounts shall be opened and maintained, the types of accounts, and
the Persons who shall have authority with respect to the accounts and the funds therein.

     9.2 Books and Records. The Board of Directors shall keep at the Company’s principal
place of business complete and accurate books and records with respect to all business transactions
of the Company as are required to be maintained by the Act as well as such other books, records and
accounts that, in reasonable detail, accurately and fairly reflect the assets, liabilities and
operations of the Company. Furthermore, the Company shall maintain a system of internal accounting
controls that shall provide reasonable assurance that: (a) transactions are executed in accordance
with management’s general or specific authorization; and (b) transactions are recorded as necessary
to (i) permit preparation of financial statements in conformity with GAAP or any other criteria
applicable to such statements and (ii) maintain accountability for assets.

     9.3 Annual Accounting Period. The annual accounting period of the Company shall be
its taxable year. The Company’s taxable and fiscal year shall be July 1 through June 30.

     9.4 Distribution of Financial Statements and Other Reports. The Company shall
distribute to each Member the following:

          (a) Monthly Information. As soon as practicable and in any event within fifteen (15)
days following the last day of each calendar month, the Company’s: (i) balance sheet, (ii) income
statement and (iii) a trial balance, in each case prepared in accordance with GAAP.

          (b) Annual Information. Within ninety (90) days after the end of each taxable year of
the Company, the Members shall cause to be sent to each Person who was a Member at any time during
the accounting year then ended: (i) audited financial statements prepared by the Company’s
independent accountants in accordance with GAAP; and (ii) a report summarizing the fees and other
remuneration paid by the Company to any Member or any Affiliate in respect of the taxable year. In
addition, within one-hundred eighty (180) days after the end of each taxable year of the Company,
the Company shall cause to be sent to each Person who was an Interest Holder at any time during the
taxable year then ended, that tax information concerning the Company which is necessary for
preparing the Interest Holder’s income tax returns for that year.

     9.5 Tax Matters Partner. Sims shall be the “Tax Matters Partner,” as that term is
defined in Section 6231 of the Code, for the Company. The Tax Matters Partner shall have all
powers and

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[•] CONFIDENTIAL TREATMENT REQUESTED

 

responsibilities provided in Code Section 6221, et seq. The Tax Matters Partner shall keep
all Members informed of all notices from government taxing authorities which may come to the
attention of the Tax Matters Partner. The Company shall pay and be responsible for all reasonable
third-party costs and expenses incurred by the Tax Matters Partner in performing those duties. The
Tax Matters Partner may not compromise any dispute with the Internal Revenue Service without a
Member Majority Vote.

     9.6 Tax Elections. Except as otherwise provided in this Agreement, all elections
permitted to be made by the Company under federal or state income, franchise or other tax laws,
including the elections referred to in Sections 734, 743 and 754 of the Code, shall be determined
by a Member Majority Vote, and each of the Members, upon request, shall supply to the Company such
information as may be necessary to give proper effect to any such election.

     9.7 Title to Company Property. All real and personal property acquired by the Company
shall be acquired and held by the Company in its name.

     9.8 Right of Inspection and Examination. At all reasonable times, each Member,
through its representatives, shall have the right to inspect and copy the records of the Company,
as well as the right to inspect the assets and facilities of the Company. These rights may be
exercised through any agent or employee of the Company which may include a certified public
accountant. The inspecting Member shall bear all expenses incurred in the inspection or
examination.

ARTICLE X

RIGHTS AND OBLIGATIONS OF INTEREST HOLDERS

     10.1 Limitation of Liability. No Member shall be liable for the debts, obligations
and liabilities of the Company except as expressly provided by the Act.

     10.2 Right to Bring Action. One or more Members may bring a legal action in the name
of the Company upon a Member Majority Vote, provided, however, that for purposes of
this provision, the vote of any Member who has an interest in the outcome of the action that is
adverse to the interest of the Company shall be excluded and Member Majority Vote shall mean the
affirmative vote, approval or consent, as the case may be, of one or more Members holding greater
than fifty percent (50%) of the remaining Interests.

     10.3 Confidentiality. Except as contemplated by this Agreement, each Interest Holder
shall keep confidential and not disclose to other Persons which are not Interest Holders, and shall
use reasonable efforts to prevent such Interest Holder and such Interest Holder’s Affiliates, and
their respective employees, agents, representatives and advisers, from disclosing to Persons which
are not Interest Holders, any information or materials that (a) pertain to this Agreement or the
Business of the Company, or (b) pertain to confidential or proprietary information of the Company;
provided however, that an Interest Holder may disclose to its Affiliates, and to the Interest
Holder’s and its Affiliates’ employees, agents, representatives and advisers, any information made
available to such Interest Holder to the extent reasonably necessary in connection with the
Interest Holder’s interest in the Company, the conduct of the Company’s Business, the performance
of services for or on behalf of the Company, or to secure legal, tax, accounting or other
professional advice; and provided further that an Interest Holder may disclose such information and
materials as may be required to be disclosed by law or by the rules of any securities exchange on
which the Interest Holder’s securities are then traded. Notwithstanding the foregoing, information
of the Company shall not be deemed confidential to the extent it is (a) known to the receiving
party prior to disclosure by the disclosing party, (b) disclosed to the receiving party by a third
party without any obligations of confidentiality to the disclosing party, (c) publicly available or
becomes publicly available other than as a result of a breach by the receiving party of its
obligation of

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[•] CONFIDENTIAL TREATMENT REQUESTED

 

confidentiality set forth herein, or (d) required to be disclosed in any legal proceeding.
The obligations of confidentiality contained herein shall survive the termination of this
Agreement.

     10.4 Indemnification.

          (a) Sims’ Indemnity. Sims shall indemnify and hold the Company Indemnitees, other
than Sims, harmless from and against, and shall promptly defend the Company Indemnitees from and
reimburse the Company Indemnitees for, any and all Adverse Consequences which the Company
Indemnitees may at any time suffer or incur, or become subject to, as a result of or in connection
with:

          (i) Any failure by Sims to carry out, perform, satisfy or discharge any of its
covenants, agreements, undertakings, liabilities or obligations under this Agreement; or

          (ii) Any suit, action or other proceeding brought by any Person arising out of, or in
any way related to, any of the matters referenced in Sections 10.4(a)(i).

          (b) Adams Steel’s Indemnity. Adams Steel shall indemnify and hold the Company
Indemnitees, other than Adams Steel, harmless from and against, and shall promptly defend the
Company Indemnitees from and reimburse the Company Indemnitees for, any and all Adverse
Consequences which the Company Indemnitees may at any time suffer or incur, or become subject to,
as a result of or in connection with:

          (i) Any failure by Adams Steel to carry out, perform satisfy or discharge any of its
covenants, agreements, undertakings, liabilities or obligations under this Agreement; or

          (ii) Any suit, action or other proceeding brought by any Person arising out of, or in
any way related to, any of the matters referenced in Section 10.4(b)(i).

          (c) Procedure for Indemnification. A claim for indemnification under this Agreement
for any matter not involving a third-party claim may be asserted by written notice by the
Indemnified Person to the Indemnifying Person (the “Claim Notice”). Within thirty (30)
days after delivery of a Claim Notice, the Indemnifying Person shall either (a) agree that the
Indemnified Person is entitled to receive some or all of the amount claimed or (b) dispute that the
Indemnified Person is entitled to receive any of the claimed amount, in which case the dispute will
be governed by, and subject to the terms of, Section 10.5 hereof. If the Indemnifying Person has
not delivered notice of its objection to or agreement with the Claim Notice within thirty (30) days
of its delivery, the Indemnifying Person shall be deemed to have agreed that the Indemnified Person
is entitled to receive all of the amount claimed. Following the final determination or resolution
of any such indemnification obligation pursuant to this Article 10 (including, to the extent
applicable, Section 10.5), and subject to Section 4.1(d), the Indemnifying Person will promptly pay
such indemnification obligation to the Indemnified Person. All payments will be made together with
interest at LIBOR plus 3% per annum, compounded daily beginning on the date of the final
determination or resolution of such indemnification obligation and ending on the date of payment.

          (d) Contribution Agreement Claims. If a claim for indemnification based upon the same
set of facts and circumstances may be brought by a Person under this Agreement or the Contribution
Agreement, Adams Steel and Sims agree that such claim shall be asserted only under the Contribution
Agreement.

     10.5 Dispute Resolution. The parties desire to resolve any and all disputes arising
out of or relating to this Agreement or their relationship without litigation. Accordingly, the
parties agree to use

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[•] CONFIDENTIAL TREATMENT REQUESTED

 

the following procedures as the sole remedy for any dispute, controversy or claim arising out
of or relating to this Agreement, including any Deadlock or alleged breach of this Agreement (a
“Dispute”):

          (a) Negotiation. At the written request of any of Adams Steel or Sims, each party
shall appoint a knowledgeable, responsible representative to meet and negotiate in good faith to
resolve any Dispute. The parties intend that these negotiations be conducted by non-lawyer,
business representatives. The location, format, frequency, duration and conclusion of these
discussions shall be left to the discretion of the representatives. Discussions and correspondence
among the representatives for purposes of these negotiations shall be treated as confidential
information developed for purposes of settlement and shall not be admissible in the arbitration
described below or in any lawsuit without the concurrence of all parties.

          (b) Arbitration. If a Deadlock occurs on or after [•], or at any time following a
Change in Control of Sims, and such Dispute is not resolved within 90 days of the written request
for negotiation described in Section 10.5(a), then within seven (7) days thereafter, either Sims or
Adams Steel may, by written notice (a “Notice of Arbitration”), to the other parties, elect
to refer the Deadlock to non-binding arbitration to be administered by the JAMS Endispute
(“JAMS”). The place of arbitration shall be Los Angeles, California, unless otherwise
agreed to by the parties.

          (i) Unless the parties to the Dispute agree that the arbitration be conducted by a
single independent arbitrator, the arbitration shall be carried out by an arbitration panel
consisting of three (3) independent arbitrators. If there are only two parties to a Dispute
(or if the parties can be conveniently grouped together into two groups based upon a common
interest and common position in the Dispute), then each party or group shall appoint one
arbitrator within fifteen (15) days of receipt of Notice of Arbitration, and the two
arbitrators so appointed shall select the presiding arbitrator within 30 days after the
later of the two arbitrators is appointed by the parties. If either party or group of
parties fails to appoint its arbitrator within 15 days of receipt of Notice of Arbitration,
or if the first two (2) arbitrators fail to agree on the third, the arbitrator in question
shall be appointed by JAMS.

          (ii) The arbitrators shall have no authority to render an award in excess of any
applicable limitations on liability included in this Agreement. Nothing in this dispute
resolution provision shall prevent a party from seeking immediate interim relief from an
appropriate court in appropriate circumstances. While the award of the arbitrators shall
not be binding on the parties, the parties agree to reasonably consider the recommendation
of the arbitrators in good faith in attempting to resolve the Dispute.

          (iii) If the parties to this Agreement or any of their Affiliates who are bound to this
or another similar arbitration agreement initiate multiple arbitration proceedings, the
subject matters of which are related by common questions of law or fact and which could
result in conflicting awards or obligations, then the parties hereby agree that all such
proceedings may be consolidated into a single arbitral proceeding by order of the
arbitrator(s) if the consolidated proceeding can be conducted in a manner consistent with
the terms of this Agreement. The parties do not intend or agree by this provision to
authorize a class action or a mass action.

          (c) Sale of the Company. If a Dispute which results in a Deadlock occurs on or after
[•], or at any time following a Change in Control of Sims, and such Dispute is not resolved within
thirty (30) days after a final decision has been rendered by the independent arbitrator(s) under
Section 10.5(b), then within thirty (30) days thereafter, the Company shall retain a
mutually-agreed to investment bank (“Bank”) to solicit offers from Third Parties for
purchase of the Company (“Company Offers”). Such offer period shall remain open for [•]
after the retention of the Bank (“Offer Solicitation Period”). In the event that no such
Company Offer is received for purchase of the Company or that the Members do not agree to accept

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[•] CONFIDENTIAL TREATMENT REQUESTED

 

one such Company Offer, then either of Adams Steel or Sims upon written notice to the other
may require that the Company be auctioned to the highest bidder or either of Adams Steel and Sims,
with a floor consisting of terms and conditions no less favorable to the Members than the terms and
conditions provided by the best of such Company Offers, if any Company Offers have been received or
the Purchase Price Formula if no such Company Offers have been received.

          (d) Each Member shall bear its own costs in the resolution of Disputes, but shall share pro
rata in accordance with its Percentage Interest in the cost of the Bank and the arbitrators.

          (e) Specific Performance. Notwithstanding Section 10.5(a), each party shall be
entitled to apply to a court of competent jurisdiction for injunctive relief to remedy any Dispute.
Each party agrees that, in such case, it may be impossible to measure in money the damages which
shall accrue to the Company and/or other Interest Holders by reason of such Dispute. Therefore, if
the Company or any Interest Holder institutes any action or proceeding relating to such a Dispute,
the Person against whom such action or proceeding is brought hereby waives the claim or defense
that the Company or such Interest Holder has an adequate remedy at law, and such Person shall not
assert in any action or proceeding the claim or defense that such remedy at law exists.

          (f) Breach of this Agreement. Notwithstanding anything to the contrary in this
Section 10.5, each party hereby acknowledges and agrees that in the event of a Dispute that is a
breach of this Agreement, neither party shall be deemed to have waived its rights to seek any
remedy available at law or in equity for such breach, and such remedy may be sought at any time.

ARTICLE XI

GENERAL PROVISIONS

     11.1 Notices. All notices, consents, waivers, and other communications under this
Agreement must be in writing and shall be deemed given to a party when: (a) delivered to the
appropriate address by hand or by nationally recognized overnight courier service (costs prepaid);
(b) sent by facsimile or e-mail with confirmation of transmission by the transmitting equipment; or
(c) received or rejected by the addressee, if sent by certified mail, return receipt requested; in
each case to the following addresses, facsimile numbers or e-mail addresses and marked to the
attention of the individual (by name or title) designated below (or to such other address,
facsimile number, e-mail address or individual as a party may designate by notice to the other
parties):

	 	 	 	 
	 	If to Adams Steel:

	 	Adams Steel
	 	 

	 	3200 E. Frontera
	 	 

	 	Anaheim, California 92806
	 	 

	 	Attn. George Adams
	 	 

	 	Fax. No.: (714) 630-6811
	 	 

	 	E-Mail: [•]
	 	 
	 	 
	 	If to Sims:

	 	Simsmetal West LLC
	 	 

	 	Address: 110 Fifth Avenue
	 	 

	 	New York, NY 10011
	 	 

	 	Attn. Myles Partridge
	 	 

	 	Fax No.: (212) 604-0722
	 	 

	 	E-Mail: [•]
	 	 
	 	 
	 	 

	 	With a copy to:

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[•] CONFIDENTIAL TREATMENT REQUESTED

 

	 	 	 	 
	 	 

	 	Simsmetal West LLC
	 	 

	 	Address: 110 Fifth Avenue
	 	 

	 	New York, NY 10011
	 	 

	 	Attn. Brian Brandt and Scott Miller
	 	 

	 	Fax No.: (212) 604-0722
	 	 

	 	E-Mail: [•]
	 	 
	 	 
	 	If to the Company:

	 	SA Recycling LLC
	 	 

	 	c/o both Adams Steel and Sims in accordance with this
	 	 

	 	Section

     11.2 Waiver of Partition. Each Member hereby agrees that neither such Member nor any
successor in interest shall have the right during the term of this Agreement to have any real
estate or any other Company Property partitioned, or to file a complaint or institute any
proceeding at law or in equity to have such property partitioned, and the Members, for themselves,
and on behalf of their respective successors, assigns, heirs and legal representatives, as
applicable, hereby waive any such right.

     11.3 Choice of Law. This Agreement and any Disputes shall be construed and resolved
in accordance with the internal laws of the State of Delaware, without application of its conflicts
of law principles.

     11.4 Severability. If any provision of this Agreement shall be unenforceable under
the laws of Delaware, or any other applicable law, at the present time or in the future, such
unenforceability shall not affect the enforceability of the remaining provisions of this Agreement.
This Agreement shall be deemed to be modified and amended so as to be in compliance with
applicable law and this Agreement shall then be construed so as to best serve the intention of the
parties at the time of the execution of this Agreement.

     11.5 Captions. The captions in this Agreement are inserted only as a matter of
convenience and in no way affect the terms or intent of any provisions of this Agreement.

     11.6 Counterparts. This Agreement may be executed in counterparts, including
counterparts transmitted by facsimile or electronic transmission. Each such counterpart shall be
considered an original, and all of such counterparts shall constitute a single agreement binding
the parties as if they had signed a single document.

     11.7 Binding Effect. Except as provided to the contrary herein, the terms and
provisions of this Agreement shall be binding upon and shall inure to the benefit of the Members
and their respective successors and assigns, as applicable.

     11.8 Entire Agreement. This Agreement constitutes the entire agreement between or
among the Members regarding its subject matter as of the date hereof, and supersedes all prior
agreements, statements, understandings and representations of the Members with respect thereto.

     11.9 Rights of Creditors. The provisions of this Agreement are not intended to be for
the benefit of any Person (other than a Member) to whom any debts, liabilities or obligations are
owed by, or who otherwise has a claim against, the Company or a Member, and no such Person shall
have any rights under such provisions or shall by reason of such provisions make any claim in
respect of any of such debts, liabilities or obligations against the Company or a Member.

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[•] CONFIDENTIAL TREATMENT REQUESTED

 

     11.10 Amendments. Subject to Section 5.2(b), this Agreement may be amended through a
writing signed by the Members holding a majority of the Interests.

     11.11 Compliance with Law. Notwithstanding anything contained in this Agreement, no
Transfer of an Interest may be made except if made in full compliance with all laws, including the
Act, any applicable federal and state securities laws.

     11.12 Legal Counsel. Each of the Members has been advised of its right to seek legal
counsel of its own choosing in connection with the negotiation and execution of this Agreement.

(This
space intentionally left blank)

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

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	ADAMS STEEL, LLC	 	 	 	SIMSMETAL WEST LLC	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	By:	 	/s/ George Adams	 	 	 	By:	 	/s/ Myles Partridge	 	 
	 	 	 	 	 	 	 	 	 	 	 
	 

	 	Name:
	 	George Adams
	 	 	 	 	 	Name:
	 	Myles Partridge	 	 
	 

	 	Title:
	 	President
	 	 	 	 	 	Title:
	 	Chief Financial
Officer	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Acknowledged and Agreed:	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	SA RECYCLING LLC	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	By:	 	/s/ Mark Sweetman	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	Name:
	 	Mark Sweetman	 	 	 	 	 	 	 	 	 	 
	 

	 	Title:
	 	Chief Financial
Officer	 	 	 	 	 	 	 	 	 	 

Signature Page to Operating Agreement

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[•] CONFIDENTIAL TREATMENT REQUESTED

 

SCHEDULE 1

Definitions

     “Act” means the Delaware Limited Liability Company Act, codified at Title 6 of the
Delaware Code, §§ Section 18-101 et seq.

     “Adams Disposition Notice” has the meaning set forth in Section 6.1(b)(ii).

     “Adams Event” has the meaning set forth in Section 6.2(a)(i).

     “Adams Owners” means each of Wendy Adams, Terry Adams, George Adams and Michael Adams.

     “Adams Response” has the meaning set forth in Section 6.1(c).

     “Adams Steel” has the meaning set forth in the introductory paragraph to this
Agreement and shall be deemed to include any Permitted Transferee.

     “Adams Steel Assets” has the meaning set forth in the Contribution Agreement.

     “Adjusted Capital Account” means, with respect to any Interest Holder, the balance, if
any, in such Interest Holder’s Capital Account as of the end of the relevant fiscal period after
giving effect to the following adjustments: (a) credit to such Capital Account of any amounts
which such Interest Holder is obligated to restore under this Agreement or is deemed to be
obligated to restore pursuant to the penultimate sentences of Regulations Sections 1.704-2(g)(1)
and 1.704-2(i)(5); and (b) debit to such Capital Account of the amounts described in Regulations
Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5) and 1.704-1(b)(2)(ii)(d)(6). The
foregoing definition of Adjusted Capital Account is intended to comply with the provisions of
Regulations Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.

     “Adverse Consequences” has the meaning set forth in the Contribution Agreement.

     “Affiliate” means, with respect to a Person, any other Person who Controls, is
Controlled by or is under common Control with such Person; provided, however, that
with respect to Adams Steel, each of the Adams Owners is expressly deemed an Affiliate.

     “Agreement” has the meaning set forth in the introductory paragraph to this Agreement,
as such may be amended from time to time in accordance with the provisions hereof.

     “Business” has the meaning set forth in Section 2.4.

     “Capital Account” means the capital account of an Interest Holder, as described and
maintained in accordance with Section 3.4.

     “Capital Contribution” means, with respect to any Interest Holder, the amount of money
and the initial Gross Asset Value of any property (other than money) contributed to the Company by
such Interest Holder. The principal amount of a promissory note that is not readily traded on an
established securities market and that is contributed to the Company by the maker of the note (or a
Person related to the maker of the note within the meaning of Regulations Section
1.704-1(b)(2)(ii)(c)) shall not be included in the Capital Contribution of any Interest Holder
until the Company makes a taxable disposition of the note or

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until (and to the extent) principal payments are made on the note, all in accordance with
Regulations Section 1.704-1(b)(2)(iv)(d)(2).

     “Cash Available for Distribution” means, as to any fiscal year of the Company, the
total cash receipts of the Company from all sources, loan proceeds and any decrease in the amount
of Reserves, minus (a) all noncapital expenditures, Debt payments, charges and expenses (other than
depreciation and amortization) of the Company, (b) the increase in the amount of Reserves, and (c)
any capital expenditures to the extent not funded from loan proceeds or Reserves. The amount of
Cash Available for Distribution shall be determined by the Board of Directors.

     “Cash of the Company” means all cash and cash equivalents, marketable securities and
short-term investments of the Company, in each case determined in accordance with GAAP.

     “Certificate of Formation” means the Certificate of Formation of the Company
originally filed with the Secretary of State of the State of Delaware, as the same may be amended
from time to time.

     “CFO” has the meaning set forth in Section 5.3(a).

     “Change in Control of Sims” means the acquisition directly or indirectly by any Person
or group of affiliated Persons (other than a Permitted Transferee) of more than [•] of the combined
voting power or equity of Sims’ outstanding securities.

     “Change in Control of Global Trade” means the acquisition directly or indirectly by
any Person or group of affiliated Persons (other than a Permitted Transferee) of more than [•] of
the combined voting power or equity of Global Trade’s outstanding securities.

     “Closing Date” has the meaning set forth in Section 6.3(b)(ii).

     “Code” means the Internal Revenue Code of 1986, as amended, and any successor
provisions or codes thereto. Any reference to a specific section or sections of the Code shall be
deemed to include a reference to any corresponding provision of succeeding law.

     “Company Indemnitees” means the Company and its Representatives, equity owners,
controlling persons and affiliates.

     “Company Minimum Gain” shall have the meaning set forth in Regulations Sections
1.704-2(b)(2) and 1.704-2(d) for the phrase “partnership minimum gain.”

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

     “Company Property” means all property of the Company.

     “Competitive Activity” means any business activity that involves the procurement,
purchase, processing, handling, trade, sale, or distribution of Materials, including the
Electronics Business.

     “Contribution Agreement” means that certain Contribution Agreement dated as of June
21, 2007, by and among Adams Steel, Sims and certain other Affiliates of Adams Steel.

     “Control” (and any derivative thereof) as used with respect to any Person, means the
possession, directly or indirectly, of the power to direct or cause the direction of the management
and policies of such

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Person, whether through the ownership of voting securities or by contract or otherwise and
shall be construed in accordance with the rules promulgated under the Securities Act of 1933, as
amended.

     “Co-Sale Interests” has the meaning set forth in Section 6.3(c)(ii).

     “Co-Sale Notice” has the meaning set forth in Section 6.3(c)(i).

     “Co-Sale Response” has the meaning set forth in Section 6.3(c)(ii).

     “Co-Sale Right” has the meaning set forth in Section 6.3(c).

     “Credit Agreement” has the meaning set forth in the Contribution Agreement.

     A “Deadlock” shall be deemed to occur if: (a) either (i) the Directors are deadlocked
on a matter that requires the approval of the Directors, or (ii) the Members are deadlocked on a
matter that requires the approval of the Members; and (b) by reason of either such deadlock the
business of the Company can no longer be effectively conducted as a going concern.

     “Debt” means all liabilities or obligations, whether primary or secondary or absolute
or contingent: (a) for borrowed money; or (b) evidenced by notes, bonds, debentures, guaranties or
similar obligations; or (c) secured by Liens.

     “Depreciation” means, for each fiscal year, an amount equal to the depreciation,
amortization, or other cost recovery deduction allowable with respect to an asset for such year, as
determined for federal income tax purposes, except that if the Gross Asset Value of an asset
differs from its adjusted basis for federal income tax purposes at the beginning of such year,
Depreciation shall be an amount which bears the same ratio to such beginning Gross Asset Value as
the federal income tax depreciation, amortization, or other cost recovery deduction for such year
bears to such beginning adjusted tax basis; provided, however, that if the adjusted basis for
federal income tax purposes of an asset at the beginning of such year is zero, Depreciation shall
be determined with reference to such beginning Gross Asset Value using any reasonable method
selected by the Company.

     “Designee” has the meaning set forth in Section 5.2(a)(i).

     “Director” means a member of the Board of Directors appointed in accordance with
Section 5.2(a)(iii).

     “Distribution” (and any derivative thereof) means a direct or indirect transfer by the
Company of money or other property to or for the benefit of an Interest Holder in respect of its
Interest.

     “Effective Date” means the date of this Agreement.

     “Electronics Business” means a recycling business involving material handling or
separation processes for commercial and consumer end-of-life electronic devices, including
computers, servers, computer and server peripherals (including printers), telephones, answering
machines, radios, stereo equipment, tape players/recorders, phonographs, video cassette
players/recorders, compact disc players/recorders, calculators and small appliances that are not
shreddable in an auto shredder in compliance with law, except major appliances.

     “Estate Interests” has the meaning set forth in Section 6.2(a)(i).

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     “Exercising Member” has the meaning set forth in Section 6.3(a)(i)(B).

     “Existing Sims Trading Business” means the business of Sims and its Affiliates in the
Territory solely with respect to the sale and brokerage of Materials that have been procured from
outside the Territory, consistent with the past practices of Sims and its Affiliates as of the date
of this Agreement.

     “Foreign Sales Agreement” has the meaning set forth in Section 6.1(c)(ii)(A).

     “GAAP” means generally accepted accounting principles for financial reporting in the
United States.

     “Global Trade” means Sims Group Global Trade Corporation (formerly known as Sims Hugo
Neu Global Trade Corporation), a Delaware corporation and successor by merger to Sims Hugo Neu
Global Trade LLC.

     “Gross Asset Value” means, with respect to any asset, the asset’s adjusted basis for
federal income tax purposes except as follows:

          (1) The initial Gross Asset Value of any asset contributed by an Interest Holder to the
Company shall be the gross fair market value of the asset;

          (2) The Gross Asset Value of all Company assets shall be adjusted to equal their respective
gross fair market values (taking Code Section 7701(g) into account) as of the following times: (a)
the acquisition of an additional Interest by any new or existing Interest Holder for more than a de
minimis contribution; (b) the distribution by the Company to an Interest Holder of more than a de
minimis amount of Company Property as consideration for an Interest; (c) the liquidation of the
Company within the meaning of Regulations Section 1.704-l(b)(2)(ii)(g); and (d) upon any other
event on which it is necessary or appropriate in order to comply with the Regulations under Code
Section 704(b);

          (3) The Gross Asset Value of any Company asset distributed to any Interest Holder shall be
adjusted to equal the gross fair market value of the asset (taking Code Section 7701(g) into
account) on the date of distribution;

          (4) The Gross Asset Value of Company assets shall be increased (or decreased) to reflect any
adjustments to the adjusted basis of these assets pursuant to Code Section 734(b) or Code Section
743(b), but only to the extent that such adjustments are taken into account in determining the
Capital Accounts pursuant to Regulations Section 1.704-l (b)(2)(iv)(m); and

          (5) If the Gross Asset Value of an asset has been determined or adjusted pursuant to (2) or
(3) above, such Gross Asset Value shall then be adjusted by the Depreciation taken into account
with respect to the asset for purposes of computing Profits and Losses.

     “Indebtedness” means, with respect to any Person, without duplication, the following:
(a) all obligations of such Person for borrowed money; (b) all obligations of such Person evidenced
by bonds, debentures, notes or similar instruments; or (c) all obligations of others for borrowed
money secured by (or for which the holder of such obligation has an existing right, contingent or
otherwise, to be secured by) any encumbrance on property owned or acquired by such Person, whether
or not the obligation secured thereby has been assumed.

     “Indemnified Person” means a Person entitled to indemnity under Section 9.2, 9.3 or
9.4 of the Contribution Agreement or Section 10.4 of this Agreement.

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     “Indemnifying Person” means a Person obligated to indemnity under Section 9.2, 9.3 or
9.4 of the Contribution Agreement or Section 10.4 of this Agreement.

     “Indirect Adams Interest” has the meaning set forth in Section 6.1(b)(i).

     “Indirect Sims Interest” has the meaning set forth in Section 6.1(c).

     “Interest” means an ownership interest in the Company entitling the holder thereof to
the rights set forth in this Agreement.

     “Interest Holder” means any Person who holds an Interest, whether as a Member or as an
unadmitted assignee of a Member.

     “LIBOR” means the London InterBank Offered Rate as published daily in The Wall Street
Journal.

     “Lien” means with respect to any asset: (a) any mortgage, pledge, lien, charge,
security interest, right of first refusal or other encumbrance of any kind; and (b) the interest of
a vendor or lessor under any conditional sale agreement, financing lease or other title retention
agreement relating to such asset.

     “Materials” means ferrous and non-ferrous recyclable metals, other ferrous steel
making raw materials, scrap substitutes, and other non-metallic materials (including plastics,
glass, rubber, paper and tires) generated by, or referenced in contracts with respect to, the
business to be conducted by the Company.

     “Member” means each Person who is a signatory to this Agreement (other than the
Company) and any Person who is subsequently admitted as a Member of the Company.

     “Member Majority Vote” means the affirmative vote, approval or consent, as the case
may be, of one or more Members with a combined Percentage Interest greater than [•].

     “Member Minimum Gain” shall have the meaning set forth in Regulations Section
1.704-2(i)(2) for “partner nonrecourse debt minimum gain.”

     “Member Nonrecourse Debt” shall have the meaning set forth in Regulations Section
1.704-2(b)(4) for “partner nonrecourse debt.”

     “Member Nonrecourse Deductions” shall have the same meaning as the term “partner
nonrecourse deductions” in Regulations Sections 1.704-2(i)(1) and 1.704-2(i)(2).

     “Membership Rights” means all of the rights of a Member in the Company, including a
Member’s: (a) Interest; (b) right to inspect the Company’s books and records; and (c) right to
participate in the management of and vote on matters coming before the Company, as set forth in
this Agreement.

     “Minority Member” has the meaning set forth in the Section 5.2(a)(iii)(B).

     “Non Ferrous Agreement” has the meaning set forth in Section 6.1(c)(ii)(C).

     “Nonrecourse Deductions” has the meaning set forth in Regulations Section
1.704-2(b)(1) and 1.704-2(c).

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     “Percentage Interest” means an Interest Holder’s percentage interest in the Profits,
income, gain, Losses, deductions and Distributions of the Company, with the initial Percentage
Interest of the Members set forth in Section 3.1(a) hereof.

     “Permitted Transfer” means a transfer of an Interest by a Member to a Permitted
Transferee.

     “Permitted Transferee” means (a) with respect to Adams Steel, any sibling of each
Adams Owner, the spouse of each Adams Owner, the direct lineal descendant of each Adams Owners or
his/her sibling, or a trust in which the foregoing persons are the primary beneficiaries, and (b)
with respect to any Member, any Affiliate of such Member, provided that, in the case of Adams
Steel, such Affiliate must at all times be directly or indirectly Controlled by one or more of the
Adams Owners.

     “Person” means an individual, a general partnership, a limited partnership, a domestic
or foreign limited liability company, a trust, an estate, an association, a corporation, a joint
venture or any other legal entity.

     “President” has the meaning set forth in Section 5.3(a).

     “Profits” or “Losses” means, for each fiscal year of the Company, an amount
equal to the Company’s taxable income or loss for the year, determined in accordance with Section
703(a) of the Code and Regulations Section 1.703-1 (for this purpose, all items of income, gain,
loss or deduction required to be stated separately under Section 703(a)(1) of the Code shall be
included in taxable income or loss), with the following adjustments:

          (a) any income of the Company that is exempt from federal income tax under Section
705(a)(1)(B) of the Code and not otherwise taken into account in computing Profits or Losses
pursuant to this Section shall be added to such taxable income or loss;

          (b) any expenditures of the Company described in Code Section 705(a)(2)(B) or treated as Code
Section 705(a)(2)(B) expenditures pursuant to Regulations Section 1.704-1(b)(2)(iv)(i) and not
otherwise taken into account in computing Profits or Losses pursuant to this Section shall be
subtracted from such taxable income or loss;

          (c) in the event the Gross Asset Value of any Company asset is adjusted pursuant to
subparagraph (2) or subparagraph (3) of the definition of Gross Asset Value hereof, the amount of
such adjustment shall be taken into account as gain or loss from the disposition of such asset for
purposes of computing Profits or Losses;

          (d) credits or debits to Capital Accounts due to a revaluation of Company assets in accordance
with Regulations Section 1.704-1(b)(2)(iv)(f), or due to a distribution of noncash assets, shall be
taken into account as gain or loss from the disposition of such assets for purposes of computing
Profits and Losses;

          (e) in lieu of the depreciation, amortization, and other cost recovery deductions taken into
account in computing such taxable income or loss, there shall be taken into account Depreciation
for such fiscal year, computed in accordance with the definition of “Depreciation”; and

          (f) notwithstanding any other provision in this Section, any items which are specially
allocated pursuant to Section 4.6 shall not be taken into account in computing Profits or Losses.

     “Purchaser Notice” has the meaning set forth in Section 6.3(b)(ii)(A).

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     “Purchase Price Formula” has the meaning set forth in Section 6.2(b).

     “Put Purchase Price” has the meaning set forth in Section 6.2(b).

     “Put Right” has the meaning set forth in the Section 6.2(a).

     “Put Right Notice” has the meaning set forth in Section 6.2(b).

     “Regulations” means the federal income tax regulations promulgated under the Code,
including temporary regulations, as such regulations may be amended from time to time. All
references herein to specific sections of the treasury regulations shall be deemed also to refer to
any corresponding provisions of succeeding treasury regulations, and any references to temporary
regulations shall be deemed also to refer to any corresponding provisions of final treasury
regulations.

     “Rejecting Member” has the meaning set forth in Section 6.3(a)(ii).

     “Representative” means, with respect to a particular Person, any stockholder, member
director, officer, employee, agent, consultant, advisor, legal counsel, accountant or other
representative of that Person.

     “Reserves” means the amounts set aside by the Company as agreed to by the Board of
Directors, to provide working capital and to pay for such known, contingent or unforeseen
liabilities or obligations of the Company as may be necessary or appropriate for the protection of
the Company.

     “Residual Target Interests” has the meaning set forth in Section 6.3(a)(ii).

     “Right of First Refusal” has the meaning set forth in Section 6.3(a)(ii).

     “RFR Response” has the meaning set forth in Section 6.3(a)(ii).

     “Selling Affiliate(s)” has the meaning set forth in Section 6.1(c)(i).

     “Selling Member” has the meaning set forth in Section 6.3(a)(i).

     “SGHC” has the meaning set forth in Section 6.1(c)(ii)(B).

     “Shared Services Agreement” has the meaning set forth in Section 6.1(c)(ii)(B).

     “Sims” has the meaning set forth in the introductory paragraph to this Agreement and
shall be deemed to include any of its Permitted Transferees.

     “Sims Assets” has the meaning set forth in the Contribution Agreement.

     “Sims Disposition Notice” has the meaning set forth in Section 6.1(c)(i).

     “Sims Open Territory” means the geographic region marked as “Open Territory” on the
map attached as Schedule 2.

     “Sims West Interest” has the meaning set forth in Section 6.1(c)(i).

     “Subject Adams Interest” has the meaning set forth in Section 6.2(b).

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     “Supermajority Actions” has the meaning set forth in Section 5.2(c)(ii).

     “Target Interests” has the meaning set forth in Section 6.3(a)(i).

     “Territory” means the geographic region marked as “Area A” on the map attached as
Schedule 2 and shall include: (a) all of the State of California south of, but including the Fresno
area; (b) all of the State of Nevada south of, but including the Las Vegas area; (c) all of the
State of Arizona; and (d) northern Mexico directly south of the States of California and Arizona
and shall expressly exclude the area marked as “Area B” on Schedule 2.

     “Third Party” means any Person which is not an Affiliate or Permitted Transferee of
any of the Members and who is not financed in whole or in part by any of the foregoing.

     “Third Party Disposition Notice” has the meaning set forth in Section 6.3(a)(i).

     “Third Party Indebtedness” means, with respect to any Person, all Indebtedness owed by
that Person to a Third Party.

     “Transfer” means any transfer of an interest in any stock, membership interest, equity
interest, or other ownership interest in a Person, whether by sale, gift, exchange, operation of
law, pledge, encumbrance or otherwise.

     “Trigger Date” has the meaning set forth in Section 6.3(a)(i).

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