Document:

Fuhuiyuan International Holdings Ltd.: Exhibit 10.1 - Filed by newsfilecorp.com

SHARE EXCHANGE AGREEMENT

THIS AGREEMENT is made effective as of the 15th day of August,
2013

	AMONG: 
	               
                         
         FUHUIYUAN INTERNATIONAL HOLDINGS LIMITED. a State of
    
	               
                         
         Nevada corporation having its executive officer at Suite 204,
      15615 102 
	               
                         
         Avenue, Edmonton, Alberta Canada. 
	 
	               
                         
         (“Pubco”) 
	AND: 
	               
                         
         FUHUIYUAN INTERNATIONAL GROUP (HOLDINGS) LIMITED.,
  
	               
                         
         a British Virgin Islands corporation with an office at
      23rd Floor, Great 
	               
                         
         Eagle Center, 23 Harbour Road, Wanchai, Hong Kong. 
	 
	               
                         
         (“Priveco”) 
	AND: 
	               
                         
         THE UNDERSIGNED SHAREHOLDERS OF PRIVECO AS 
	               
                         
         LISTED ON SCHEDULE 1 ATTACHED HERETO 
	 
	               
                         
         (the “Selling Shareholders”) 

WHEREAS:

	A. 	
      the Selling Shareholders are the registered and
      beneficial owners of 100% of the issued and outstanding securities in the
      capital stock of Priveco; and

	 	 
	B. 	
      Pubco and Priveco have entered into a letter of intent
      dated July 19, 2013 pursuant to which Pubco has agreed to issue 7,500,000
      common shares in the capital stock of Pubco (being 33.33% of the
      outstanding common shares of Pubco) as of the Closing Date (as defined
      herein) to the Selling Shareholders as consideration for the purchase by
      Pubco of all 100 of the issued and outstanding common shares of Priveco
      held by the Selling Shareholders on the Closing
Date

THEREFORE, in consideration of the mutual covenants and
agreements herein contained and other good and valuable consideration (the
receipt and sufficiency of which are hereby acknowledged), the parties covenant
and agree as follows:

	1. 	
      DEFINITIONS

	 	 	 
	1.1 	
      Definitions. The following terms have the
      following meanings, unless the context indicates otherwise:

	 	 	 
		(a) 	
      “Agreement” shall mean this Agreement, and all the
      exhibits, schedules and other documents attached to or referred to in this
      Agreement, and all amendments and supplements, if any, to this
      Agreement;

- 2 -

	 	(b) 	
      “Closing” shall mean the completion of the
      Transaction, in accordance with Section 7 hereof, at which the Closing
      Documents shall be exchanged by the parties, except for those documents or
      other items specifically required to be exchanged at a later
  time;

	 	 	 
	 	(c) 	
      “Closing Date” shall mean a date mutually agreed
      upon by the parties hereto in writing and in accordance with Section 10.6
      following the satisfaction or waiver by Pubco and Priveco of the
      conditions precedent set out in Sections 5.1 and 5.2
  respectively;

	 	 	 
	 	(d) 	
      “Closing Documents” shall mean the papers,
      instruments and documents required to be executed and delivered at the
      Closing pursuant to this Agreement;

	 	 	 
	 	(e) 	
      “Exchange Act” shall mean the United States
      Securities Exchange Act of 1934, as amended;

	 	 	 
	 	(f) 	
      “Liabilities” shall include any direct or indirect
      indebtedness, guaranty, endorsement, claim, loss, damage, deficiency,
      cost, expense, obligation or responsibility, fixed or unfixed, known or
      unknown, asserted choate or inchoate, liquidated or unliquidated, secured
      or unsecured;

	 	 	 
	 	(g) 	
      “Priveco Accounting Date” shall mean the date
      being that of the end of the most recent financial quarter of
    Priveco;

	 	 	 
	 	(h) 	
      “Priveco Financial Statements” shall mean the
      audited balance sheet of Priveco dated as of the most recent fiscal year
      end of Priveco, together with related statements of income, cash flows,
      and changes in shareholder’s equity for the most recent fiscal year end of
      Priveco and the unaudited balance sheet of Priveco dated as of the Priveco
      Accounting Date, together with related statements of income, cash flows,
      and changes in shareholder’s equity for the interim period ended on the
      Priveco Accounting Date;

	 	 	 
	 	(i) 	
      “Priveco Shares” shall mean the 50,000 common
      shares of Priveco held by the Selling Shareholders, being all of the
      issued and outstanding common shares of Priveco beneficially held, either
      directly or indirectly, by the Selling Shareholders;

	 	 	 
	 	(j) 	
      “Pubco Financing” shall have the meaning defined
      in section 6.1(a) hereof;

	 	 	 
	 	(k) 	
      “Pubco Shares” shall mean the 7,500,00 fully paid
      and non-assessable common shares of Pubco, to be issued to the Selling
      Shareholders by Pubco on the Closing.

	 	 	 
	 	(l) 	
      “SEC” shall mean the Securities and Exchange
      Commission;

	 	 	 
	 	(m) 	
      “Securities Act” shall mean the United States
      Securities Act of 1933, as amended;

	 	 	 
	 	(n) 	
      “Taxes” shall include international, federal,
      state, provincial and local income taxes, capital gains tax, value-added
      taxes, franchise, personal property and real property taxes, levies,
      assessments, tariffs, duties (including any customs duty), business
      license or other fees, sales, use and any other taxes relating to the
      assets of the designated party or the business of the designated party for
      all periods up to and including the Closing Date, together with any
      related charge or amount, including interest, fines, penalties and
      additions to tax, if any, arising out of tax assessments;
  and

- 3 -

	 	(o) 	
      “Transaction” shall mean the purchase of the
      Priveco Shares by Pubco from the Selling Shareholders in consideration for
      the issuance of the Pubco Shares.

	1.2 	
      Schedules. The following schedules are attached to
      and form part of this Agreement:

	 	Schedule 1 	– 	Selling Shareholders 
	 	Schedule 2 	– 	Certificate of Non-U.S. Shareholder 
	 	Schedule 3 	– 	Directors and Officers of Priveco 
	 	Schedule 4 	– 	Directors and Officers of Pubco 
	 	Schedule 5 	– 	Priveco Material Leases, Subleases, Claims,
      Capital 
	 	  	  	Expenditures, Taxes and Other Property
      Interests 
	 	Schedule 6 	– 	Priveco Intellectual Property 
	 	Schedule 7 	– 	Priveco Material Contracts 
	 	Schedule 8 	– 	Priveco Employment Agreements and Arrangements
    
	 	Schedule 9 	– 	Subsidiaries 

	1.3 	
      Currency. All references to currency referred to
      in this Agreement are in United States Dollars (US$), unless expressly
      stated otherwise.

	 	 
	2. 	
      THE OFFER, PURCHASE AND SALE OF
    SHARES

	 	 
	2.1 	
      Offer, Purchase and Sale of Shares. Subject to the
      terms and conditions of this Agreement, the Selling Shareholders hereby
      covenant and agree to sell, assign and transfer to Pubco, and Pubco hereby
      covenants and agrees to purchase from the Selling Shareholders all of the
      Priveco Shares held by the Selling Shareholders.

	 	 
	2.2 	
      Consideration. As consideration for the sale of
      the Priveco Shares by the Selling Shareholders to Pubco, Pubco shall allot
      and issue the Pubco Shares to the Selling Shareholders or their nominees
      in the amount set out opposite each Selling Shareholder’s name in Schedule
      1. The Selling Shareholders acknowledge and agree that the Pubco Shares
      are being issued pursuant to an exemption from the prospectus and
      registration requirements of the Securities Act. As required by applicable
      securities law, the Selling Shareholders agree to abide by all applicable
      resale restrictions and hold periods imposed by all applicable securities
      legislation. All certificates representing the Pubco Shares issued on
      Closing will be endorsed with the following legend pursuant to the
      Securities Act in order to reflect the fact that the Pubco Shares will be
      issued to the Selling Shareholders pursuant to an exemption from the
      registration requirements of the Securities Act:

	 	 
		
      For Selling Shareholders not resident in the United
      States:

	 	 
		
      “THE SECURITIES REPRESENTED HEREBY HAVE BEEN OFFERED IN
      AN OFFSHORE TRANSACTION TO A PERSON WHO IS NOT A U.S. PERSON (AS DEFINED
      HEREIN) PURSUANT TO REGULATION S UNDER THE UNITED STATES SECURITIES ACT OF
      1933, AS AMENDED (THE “1933 ACT”).

	 	 
		
      NONE OF THE SECURITIES REPRESENTED HEREBY HAVE BEEN
      REGISTERED UNDER THE 1933 ACT, OR ANY U.S. STATE SECURITIES LAWS, AND,
      UNLESS SO REGISTERED, MAY NOT BE OFFERED OR SOLD, DIRECTLY OR INDIRECTLY,
      IN THE UNITED STATES (AS DEFINED HEREIN) OR TO U.S. PERSONS EXCEPT IN
      ACCORDANCE WITH THE PROVISIONS OF REGULATION S UNDER THE 1933 ACT,
      PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 ACT, OR PURSUANT TO
      AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
      REGISTRATION REQUIREMENTS OF THE 1933 ACT AND IN EACH CASE ONLY IN
      ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS. IN ADDITION, HEDGING
      TRANSACTIONS INVOLVING THE SECURITIES MAY NOT BE CONDUCTED UNLESS IN
      COMPLIANCE WITH THE 1933 ACT. “UNITED STATES” AND “U.S. PERSON” ARE AS
  DEFINED BY REGULATION S UNDER THE 1933 ACT.”

- 4 -

		
      For Selling Shareholders resident in the United
      States:

	 	 
		
      “NONE OF THE SECURITIES REPRESENTED HEREBY HAVE BEEN
      REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE
      “1933 ACT”), OR ANY U.S. STATE SECURITIES LAWS, AND, UNLESS SO REGISTERED,
      MAY NOT BE OFFERED OR SOLD, DIRECTLY OR INDIRECTLY, IN THE UNITED STATES
      (AS DEFINED HEREIN) OR TO U.S. PERSONS EXCEPT IN ACCORDANCE WITH THE
      PROVISIONS OF REGULATION S UNDER THE 1933 ACT, PURSUANT TO AN EFFECTIVE
      REGISTRATION STATEMENT UNDER THE 1933 ACT, OR PURSUANT TO AN AVAILABLE
      EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
      REQUIREMENTS OF THE 1933 ACT AND IN EACH CASE ONLY IN ACCORDANCE WITH
      APPLICABLE STATE SECURITIES LAWS. IN ADDITION, HEDGING TRANSACTIONS
      INVOLVING THE SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH
      THE 1933 ACT. “UNITED STATES” AND “U.S. PERSON” ARE AS DEFINED BY
      REGULATION S UNDER THE 1933 ACT.”

	 	 
	2.3 	
      Share Exchange Procedure. Each Selling Shareholder
      may exchange his, her or its certificate representing the Priveco Shares
      by delivering such certificate to Pubco duly executed and endorsed in
      blank (or accompanied by duly executed stock powers duly endorsed in
      blank), in each case in proper form for transfer, with signatures
      guaranteed, and, if applicable, with all stock transfer and any other
      required documentary stamps affixed thereto and with appropriate
      instructions to allow the transfer agent to issue certificates for the
      Pubco Shares to the holder thereof, together with a Certificate of
      Non-U.S. Shareholder (the “Certificate of Non-U.S. Shareholder”), a
      copy of which is set out in Schedule 2.

	 	 
	2.4 	
      Fractional Shares. Notwithstanding any other
      provision of this Agreement, no certificate for fractional shares of the
      Pubco Shares will be issued in the Transaction. In lieu of any such
      fractional shares the Selling Shareholders would otherwise be entitled to
      receive upon surrender of certificates representing the Priveco Shares for
      exchange pursuant to this Agreement, the Selling Shareholders will be
      entitled to have such fraction rounded up to the nearest whole number of
      Pubco Shares and will receive from Pubco a stock certificate representing
      same.

	 	 
	2.5 	
      Restricted Securities. The Selling Shareholders
      acknowledge that the Pubco Shares issued pursuant to the terms and
      conditions set forth in this Agreement will have such hold periods as are
      required under applicable securities laws and as a result may not be sold,
      transferred or otherwise disposed, except pursuant to an effective
      registration statement under the Securities Act, or pursuant to an
      exemption from, or in a transaction not subject to, the registration
      requirements of the Securities Act and in each case only in accordance
      with all applicable securities laws.

- 5 -

	3. 	
      REPRESENTATIONS AND WARRANTIES OF PRIVECO AND THE
      SELLING SHAREHOLDERS

	 	 
		
      Priveco and the Selling Shareholders, jointly and
      severally, represent and warrant to Pubco, and acknowledge that Pubco is
      relying upon such representations and warranties, in connection with the
      execution, delivery and performance of this Agreement, notwithstanding any
      investigation made by or on behalf of Pubco, as follows:

	 	 
	3.1 	
      Organization and Good Standing. Priveco is a
      corporation duly organized, validly existing and in good standing under
      the laws of the British Virgin Islands and has the requisite corporate
      power and authority to own, lease and to carry on its business as now
      being conducted. Priveco is duly qualified to do business and is in good
      standing as a corporation in each of the jurisdictions in which Priveco
      owns property, leases property, does business, or is otherwise required to
      do so, where the failure to be so qualified would have a material adverse
      effect on the business of Priveco taken as a whole.

	 	 
	3.2 	
      Authority. Priveco has all requisite corporate
      power and authority to execute and deliver this Agreement and any other
      document contemplated by this Agreement (collectively, the “Priveco
      Documents”) to be signed by Priveco and to perform its obligations
      hereunder and to consummate the transactions contemplated hereby. The
      execution and delivery of each of the Priveco Documents by Priveco and the
      consummation of the transactions contemplated hereby have been duly
      authorized by Priveco’s board of directors. No other corporate or
      shareholder proceedings on the part of Priveco is necessary to authorize
      such documents or to consummate the transactions contemplated hereby. This
      Agreement has been, and the other Priveco Documents when executed and
      delivered by Priveco as contemplated by this Agreement will be, duly
      executed and delivered by Priveco and this Agreement is, and the other
      Priveco Documents when executed and delivered by Priveco as contemplated
      hereby will be, valid and binding obligations of Priveco enforceable in
      accordance with their respective terms except:

	 	(a) 	
      as limited by applicable bankruptcy, insolvency,
      reorganization, moratorium, and other laws of general application
      affecting enforcement of creditors’ rights generally;

	 	 	 
	 	(b) 	
      as limited by laws relating to the availability of
      specific performance, injunctive relief, or other equitable remedies;
      and

	 	 	 
	 	(c) 	
      as limited by public policy.

	3.3 	
      Capitalization of Priveco. The entire authorized
      capital stock and other equity securities of Priveco consists of 50,000
      common shares with par value of USD$1.00 per share (the “Priveco Common
      Stock”) and no preference shares. As of the date of this Agreement,
      there are 50,000 shares of Priveco Common Stock issued and outstanding.
      All of the issued and outstanding shares of Priveco Common Stock have been
      duly authorized, are validly issued, were not issued in violation of, or
      subject to, any pre-emptive rights and are fully paid and non-assessable,
      the whole in full compliance with the laws of the British Virgin Islands.
      There are no outstanding options, warrants, subscriptions, conversion
      rights, or other rights, agreements, or commitments obligating Priveco to
      issue any additional common shares of Priveco Common Stock, or any other
      securities convertible into, exchangeable for, or evidencing the right to
      subscribe for or acquire from Priveco any common shares of Priveco Common
      Stock. There are no agreements purporting to restrict the transfer of the
      Priveco Common Stock, no voting agreements, shareholders’ agreements,
      voting trusts, or other arrangements restricting or affecting the voting
      of the Priveco Common Stock.

- 6 -

	3.4 	
      Title and Authority of Selling Shareholders. Each
      of the Selling Shareholders is and will be as of the Closing, the
      registered and beneficial owner of and will have good and marketable title
      to all of the Priveco Common Stock held by him, her or it and will hold
      such free and clear of all liens, charges and encumbrances whatsoever; and
      such Priveco Common Stock held by such Selling Shareholders have been duly
      and validly issued and are outstanding as fully paid and non- assessable
      common shares in the capital stock of Priveco. Each of the Selling
      Shareholders has due and sufficient right and authority to enter into this
      Agreement on the terms and conditions herein set forth and to transfer the
      registered, legal and beneficial title and ownership of the Priveco Common
      Stock held by it.

	 	 
	3.5 	
      Shareholders of Priveco Common Stock. Schedule 1
      contains a true and complete list of the holders of all issued and
      outstanding shares of the Priveco Common Stock including each holder’s
      name, address and number of Priveco Shares held.

	 	 
	3.6 	
      Directors and Officers of Priveco. The duly
      elected or appointed directors and the duly appointed officers of Priveco
      are as set out in Schedule 3.

	 	 
	3.7 	
      Corporate Records of Priveco. The corporate
      records of Priveco, as required to be maintained by it pursuant to all
      applicable laws, are accurate, complete and current in all material
      respects, and the minute book of Priveco is, in all material respects,
      correct and contains all records required by all applicable laws, as
      applicable, in regards to all proceedings, consents, actions and meetings
      of the shareholders and the board of directors of Priveco.

	 	 
	3.8 	
      Non-Contravention. Neither the execution, delivery
      or performance of this Agreement, nor the consummation of the Transaction,
      will:

	 	(a) 	
      conflict with, result in a violation of, cause a default
      under (with or without notice, lapse of time or both) or give rise to a
      right of termination, amendment, cancellation or acceleration of any
      obligation contained in or the loss of any material benefit under, or
      result in the creation of any lien, security interest, charge or
      encumbrance upon any of the material properties or assets of Priveco or
      any of its subsidiaries under any term, condition or provision of any loan
      or credit agreement, note, debenture, bond, mortgage, indenture, lease or
      other agreement, instrument, permit, license, judgment, order, decree,
      statute, law, ordinance, rule or regulation applicable to Priveco or any
      of its subsidiaries, or any of their respective material property or
      assets;

	 	 	 
	 	(b) 	
      violate any provision of the constating documents of
      Priveco, any of its subsidiaries or any applicable laws; or

	 	 	 
	 	(c) 	
      violate any order, writ, injunction, decree, statute,
      rule, or regulation of any court or governmental or regulatory authority
      applicable to Priveco, any of its subsidiaries or any of their respective
      material property or assets.

	3.9 	
      Actions and Proceedings. To the best knowledge of
      Priveco, there is no basis for and there is no action, suit, judgment,
      claim, demand or proceeding outstanding or pending, or threatened against
      or affecting Priveco, any of its subsidiaries or which involves any of the
      business, or the properties or assets of Priveco or any of its
      subsidiaries that, if adversely resolved or determined, would have a
      material adverse effect on the business, operations, assets, properties,
      prospects, or conditions of Priveco and its subsidiaries taken as a whole
      (a “Priveco Material Adverse Effect”). There is no reasonable basis
      for any claim or action that, based upon the likelihood of its being
      asserted and its success if asserted, would have such a Priveco Material
      Adverse Effect.

- 7 -

	3.10 	
      Compliance.

	 	 	 
		(a) 	
      To the best knowledge of Priveco, Priveco and each of its
      subsidiaries is in compliance with, is not in default or violation in any
      material respect under, and has not been charged with or received any
      notice at any time of any material violation of any statute, law,
      ordinance, regulation, rule, decree or other applicable regulation to the
      business or operations of Priveco and its subsidiaries;

	 	 	 
		(b) 	
      To the best knowledge of Priveco, neither Priveco nor any
      of its subsidiaries is subject to any judgment, order or decree entered in
      any lawsuit or proceeding applicable to its business and operations that
      would constitute a Priveco Material Adverse Effect;

	 	 	 
		(c) 	
      Each of Priveco and, if any, its subsidiaries has duly
      filed all reports and returns required to be filed by it with governmental
      authorities and has obtained all governmental permits and other
      governmental consents, except as may be required after the execution of
      this Agreement. All of such permits and consents are in full force and
      effect, and no proceedings for the suspension or cancellation of any of
      them, and no investigation relating to any of them, is pending or to the
      best knowledge of Priveco, threatened, and none of them will be adversely
      affected by the consummation of the Transaction; and

	 	 	 
		(d) 	
      Each of Priveco and, if any, its subsidiaries has
      operated in material compliance with all laws, rules, statutes,
      ordinances, orders and regulations applicable to its business. Neither
      Priveco nor any of its subsidiaries has received any notice of any
      violation thereof, nor is Priveco aware of any valid basis
    therefore.

	3.11 	
      Filings, Consents and Approvals. No filing or
      registration with, no notice to and no permit, authorization, consent, or
      approval of any public or governmental body or authority or other person
      or entity is necessary for the consummation by Priveco or any of its
      subsidiaries of the Transaction contemplated by this Agreement or to
      enable Pubco to continue to conduct Priveco’s business after the Closing
      Date in a manner which is consistent with that in which the business is
      presently conducted.

	 	 	 
	3.12 	
      Absence of Undisclosed Liabilities. Neither
      Priveco nor any of its subsidiaries has any material Liabilities or
      obligations either direct or indirect, matured or unmatured, absolute,
      contingent or otherwise that exceed $5,000, which have either been
      disclosed or:

	 	 	 
		(a) 	
      will be set forth in the Priveco Financial
    Statements;

	 	 	 
		(b) 	
      did not arise in the regular and ordinary course of
      business under any agreement, contract, commitment, lease or plan
      specifically disclosed in writing to Pubco; or

	 	 	 
		(c) 	
      have not been incurred in amounts and pursuant to
      practices consistent with past business practice, in or as a result of the
      regular and ordinary course of its business since the date of the last
      Priveco Financial Statements.

	3.13 	
      Tax Matters.

	 	 	 	 
		(a) 	
      As of the date hereof:

	 	 	 	 
			(i) 	
      each of Priveco and its subsidiaries has timely filed all
      tax returns in connection with any Taxes which are required to be filed on
      or prior to the date hereof, taking into account any extensions of the filing
      deadlines which have been validly granted to Priveco or its subsidiaries,
  and

- 8 -

	 	(ii) 	
      all such returns are true and correct in all material
      respects;

	 	(b) 	
      each of Priveco and its subsidiaries has paid all Taxes
      that have become or are due with respect to any period ended on or prior
      to the date hereof, and has established an adequate reserve therefore on
      its balance sheets for those Taxes not yet due and payable, except for any
      Taxes the non-payment of which will not have a Priveco Material Adverse
      Effect;

	 	 	 
	 	(c) 	
      neither Priveco nor any of its subsidiaries is presently
      under or has received notice of, any contemplated investigation or audit
      by regulatory or governmental agency of body or any foreign or state
      taxing authority concerning any fiscal year or period ended prior to the
      date hereof;

	 	 	 
	 	(d) 	
      all Taxes required to be withheld on or prior to the date
      hereof from employees for income Taxes, social security Taxes,
      unemployment Taxes and other similar withholding Taxes have been properly
      withheld and, if required on or prior to the date hereof, have been
      deposited with the appropriate governmental agency; and

	 	 	 
	 	(e) 	
      to the best knowledge of Priveco, the Priveco Financial
      Statements will contain full provision for all Taxes including any
      deferred Taxes that may be assessed to Priveco or its subsidiaries for the
      accounting period ended on the Priveco Accounting Date or for any prior
      period in respect of any transaction, event or omission occurring, or any
      profit earned, on or prior to the Priveco Accounting Date or for any
      profit earned by Priveco on or prior to the Priveco Accounting Date or for
      which Priveco is accountable up to such date and all contingent
      Liabilities for Taxes have been provided for or disclosed in the Priveco
      Financial Statements.

	3.14 	
      Absence of Changes. Since the Priveco Accounting
      Date, neither Priveco or any of its subsidiaries
has:

	 	(a) 	
      incurred any Liabilities, other than Liabilities incurred
      in the ordinary course of business consistent with past practice, or
      discharged or satisfied any lien or encumbrance, or paid any Liabilities,
      other than in the ordinary course of business consistent with past
      practice, or failed to pay or discharge when due any Liabilities of which
      the failure to pay or discharge has caused or will cause any material
      damage or risk of material loss to it or any of its assets or
      properties;

	 	 	 
	 	(b) 	
      sold, encumbered, assigned or transferred any material
      fixed assets or properties except for ordinary course business
      transactions consistent with past practice;

	 	 	 
	 	(c) 	
      created, incurred, assumed or guaranteed any indebtedness
      for money borrowed, or mortgaged, pledged or subjected any of the material
      assets or properties of Priveco or its subsidiaries to any mortgage, lien,
      pledge, security interest, conditional sales contract or other encumbrance
      of any nature whatsoever;

	 	 	 
	 	(d) 	
      made or suffered any amendment or termination of any
      material agreement, contract, commitment, lease or plan to which it is a
      party or by which it is bound, or cancelled, modified or waived any
      substantial debts or claims held by it or waived any rights of substantial
      value, other than in the ordinary course of
business;

- 9 -

	 	(e) 	
      declared, set aside or paid any dividend or made or
      agreed to make any other distribution or payment in respect of its capital
      shares or redeemed, purchased or otherwise acquired or agreed to redeem,
      purchase or acquire any of its capital shares or equity
  securities;

	 	 	 
	 	(f) 	
      suffered any damage, destruction or loss, whether or not
      covered by insurance, that materially and adversely effects its business,
      operations, assets, properties or prospects;

	 	 	 
	 	(g) 	
      suffered any material adverse change in its business,
      operations, assets, properties, prospects or condition (financial or
      otherwise);

	 	 	 
	 	(h) 	
      received notice or had knowledge of any actual or
      threatened labour trouble, termination, resignation, strike or other
      occurrence, event or condition of any similar character which has had or
      might have an adverse effect on its business, operations, assets,
      properties or prospects;

	 	 	 
	 	(i) 	
      made commitments or agreements for capital expenditures
      or capital additions or betterments exceeding in the aggregate
    $5,000;

	 	 	 
	 	(j) 	
      other than in the ordinary course of business, increased
      the salaries or other compensation of, or made any advance (excluding
      advances for ordinary and necessary business expenses) or loan to, any of
      its employees or directors or made any increase in, or any addition to,
      other benefits to which any of its employees or directors may be
      entitled;

	 	 	 
	 	(k) 	
      entered into any transaction other than in the ordinary
      course of business consistent with past practice; or

	 	 	 
	 	(l) 	
      agreed, whether in writing or orally, to do any of the
      foregoing.

	3.15 	
      Absence of Certain Changes or Events. Since the
      Priveco Accounting Date, there will have not been:

	 	 	 
		(a) 	
      a Priveco Material Adverse Effect; or

	 	 	 
		(b) 	
      any material change by Priveco in its accounting methods,
      principles or practices.

	 	 	 
	3.16 	
      Subsidiaries. Except as set forth on Schedule 9,
      Priveco does not have any subsidiaries or agreements of any nature to
      acquire any subsidiary or to acquire or lease any other business
      operations. Each subsidiary of Priveco is a corporation duly organized,
      validly existing and in good standing under the laws of its jurisdiction
      of incorporation and has the requisite corporate power and authority to
      own, lease and to carry on its business as now being conducted. Each
      subsidiary of Priveco is duly qualified to do business and is in good
      standing as a corporation in each of the jurisdictions in which Priveco
      owns property, leases property, does business, or is otherwise required to
      do so, where the failure to be so qualified would have a material adverse
      effect on the business of Priveco and its subsidiaries taken as a whole.
      Priveco owns all of the shares of each subsidiary of Priveco and there are
      no outstanding options, warrants, subscriptions, conversion rights, or
      other rights, agreements, or commitments obligating any subsidiary of
      Priveco to issue any additional common shares of such subsidiary, or any
      other securities convertible into, exchangeable for, or evidencing the
      right to subscribe for or acquire from any subsidiary of Priveco any
      shares of such subsidiary.

- 10 -

	3.17 	
      Personal Property. Each of Priveco and its
      subsidiaries possesses, and has good and marketable title of all property
      necessary for the continued operation of the business of Priveco and its
      subsidiaries as presently conducted and as represented to Pubco. All such
      property is used in the business of Priveco and its subsidiaries. All such
      property is in reasonably good operating condition (normal wear and tear
      excepted), and is reasonably fit for the purposes for which such property
      is presently used. All material equipment, furniture, fixtures and other
      tangible personal property and assets owned or leased by Priveco and its
      subsidiaries is owned by Priveco or its subsidiaries free and clear of all
      liens, security interests, charges, encumbrances, and other adverse
      claims, except as disclosed in Schedule 5.

	 	 
	3.18 	
      Intellectual Property

	 	(a) 	
      Intellectual Property Assets. Priveco and its
      subsidiaries own or hold an interest in all intellectual property assets
      necessary for the operation of the business of Priveco and its
      subsidiaries as it is currently conducted (collectively, the
      “Intellectual Property Assets”), including:

	 	 	 	 
	 		(i) 	
      all functional business names, trading names, registered
      and unregistered trademarks, service marks, and applications
      (collectively, the “Marks”);

	 	 	 	 
	 		(ii) 	
      all patents, patent applications, and inventions,
      methods, processes and discoveries that may be patentable (collectively,
      the “Patents”);

	 	 	 	 
	 		(iii) 	
      all copyrights in both published works and unpublished
      works (collectively, the “Copyrights”); and

	 	 	 	 
	 		(iv) 	
      all know-how, trade secrets, confidential information,
      customer lists, software, technical information, data, process technology,
      plans, drawings, and blue prints owned, used, or licensed by Priveco and
      its subsidiaries as licensee or licensor (collectively, the “Trade
      Secrets”).

	 	(b) 	
      Agreements. Schedule 6 contains a complete and
      accurate list and summary description, including any royalties paid or
      received by Priveco and its subsidiaries, of all contracts and agreements
      relating to the Intellectual Property Assets to which Priveco and its
      subsidiaries is a party or by which Priveco and its subsidiaries is bound,
      except for any license implied by the sale of a product and perpetual,
      paid-up licenses for commonly available software programs with a value of
      less than $500 under which Priveco or its subsidiaries is the licensee. To
      the best knowledge of Priveco, there are no outstanding or threatened
      disputes or disagreements with respect to any such agreement.

	 	 	 
	 	(c) 	
      Intellectual Property and Know-How Necessary for the
      Business. Except as set forth in Schedule 6, Priveco and its
      subsidiaries is the owner of all right, title, and interest in and to each
      of the Intellectual Property Assets, free and clear of all liens, security
      interests, charges, encumbrances, and other adverse claims, and has the
      right to use without payment to a third party of all the Intellectual
      Property Assets. Except as set forth in Schedule 6, all former and current
      employees and contractors of Priveco and its subsidiaries have executed
      written contracts, agreements or other undertakings with Priveco and its
      subsidiaries that assign all rights to any inventions, improvements,
      discoveries, or information relating to the business of Priveco and its
      subsidiaries. No employee, director, officer or shareholder of Priveco or
      any of its subsidiaries owns directly or indirectly in whole or in part,
      any Intellectual Property Asset which Priveco
or any of its subsidiaries is presently using or which is
      necessary for the conduct of its business. To the best knowledge of
      Priveco, no employee or contractor of Priveco or its subsidiaries has
      entered into any contract or agreement that restricts or limits in any way
      the scope or type of work in which the employee may be engaged or requires
      the employee to transfer, assign, or disclose information concerning his
  work to anyone other than Priveco or its subsidiaries.

- 11 -

	 	(d) 	
      Patents. Except as set out in Schedule 6, neither
      Priveco nor any of its subsidiaries holds any right, title or interest in
      and to any Patent and Priveco has not filed any patent application with
      any third party. To the best knowledge of Priveco, none of the products
      manufactured and sold, nor any process or know-how used, by Priveco or any
      of its subsidiaries infringes or is alleged to infringe any patent or
      other proprietary night of any other person or entity.

	 	 	 
	 	(e) 	
      Trademarks. Except as set out in Schedule 6,
      neither Priveco nor any of its subsidiaries holds any right, title or
      interest in and to any Mark and Priveco has not registered or filed any
      application to register any Mark with any third party. To the best
      knowledge of Priveco, none of the Marks, if any, used by Priveco or any of
      its subsidiaries infringes or is alleged to infringe any trade name,
      trademark, or service mark of any third party.

	 	 	 
	 	(f) 	
      Copyrights. Schedule 6 contains a complete and
      accurate list and summary description of all Copyrights. Priveco and its
      subsidiaries is the owner of all right, title, and interest in and to each
      of the Copyrights, free and clear of all liens, security interests,
      charges, encumbrances, and other adverse claims. If applicable, all
      registered Copyrights are currently in compliance with formal legal
      requirements, are valid and enforceable, and are not subject to any
      maintenance fees or taxes or actions falling due within ninety days after
      the Closing Date. To the best knowledge of Priveco, no Copyright is
      infringed or has been challenged or threatened in any way and none of the
      subject matter of any of the Copyrights infringes or is alleged to
      infringe any copyright of any third party or is a derivative work based on
      the work of a third party. All works encompassed by the Copyrights have
      been marked with the proper copyright notice.

	 	 	 
	 	(g) 	
      Trade Secrets. Each of Priveco and its
      subsidiaries has taken all reasonable precautions to protect the secrecy,
      confidentiality, and value of its Trade Secrets. Each of Priveco and its
      subsidiaries has good title and an absolute right to use the Trade
      Secrets. The Trade Secrets are not part of the public knowledge or
      literature, and to the best knowledge of Priveco, have not been used,
      divulged, or appropriated either for the benefit of any person or entity
      or to the detriment of Priveco or any of its subsidiaries. No Trade Secret
      is subject to any adverse claim or has been challenged or threatened in
      any way.

	3.19 	
      Employees and Consultants. All employees and
      consultants of Priveco and its subsidiaries have been paid all salaries,
      wages, income and any other sum due and owing to them by Priveco or its
      subsidiaries, as at the end of the most recent completed pay period, or
      such amounts have been accrued, as indicated on the Priveco Financial
      Statements. Neither Priveco nor any of its subsidiaries is aware of any
      labor conflict with any employees that might reasonably be expected to
      have a Priveco Material Adverse Effect. To the best knowledge of Priveco,
      no employee of Priveco or any of its subsidiaries is in violation of any
      term of any employment contract, non- disclosure agreement,
      non-competition agreement or any other contract or agreement relating to
      the relationship of such employee with Priveco or its subsidiaries or any
      other nature of the business conducted or to be conducted by Priveco its
      subsidiaries.

- 12 -

	3.20 	
      Real Property. Neither Priveco nor any of its
      subsidiaries owns any real property. Each of the material leases,
      subleases, claims or other real property interests (collectively, the
      “Leases”) to which Priveco or any of its subsidiaries is a party or
      is bound, as set out in Schedule 5, is legal, valid, binding, enforceable
      and in full force and effect in all material respects. All rental and
      other payments required to be paid by Priveco and its subsidiaries
      pursuant to any such Leases have been duly paid and no event has occurred
      which, upon the passing of time, the giving of notice, or both, would
      constitute a breach or default by any party under any of the Leases. The
      Leases will continue to be legal, valid, binding, enforceable and in full
      force and effect on identical terms following the Closing Date. Neither
      Priveco nor any of its subsidiaries has assigned, transferred, conveyed,
      mortgaged, deeded in trust, or encumbered any interest in the Leases or
      the leasehold property pursuant thereto.

	 	 
	3.21 	
      Material Contracts and Transactions. Schedule 7
      attached hereto lists each material contract, agreement, license, permit,
      arrangement, commitment, instrument or contract to which Priveco or any of
      its subsidiaries is a party (each, a “Contract”). Each Contract is
      in full force and effect, and there exists no material breach or violation
      of or default by Priveco or any of its subsidiaries under any Contract, or
      any event that with notice or the lapse of time, or both, will create a
      material breach or violation thereof or default under any Contract by
      Priveco or any of its subsidiaries. The continuation, validity, and
      effectiveness of each Contract will in no way be affected by the
      consummation of the Transaction contemplated by this Agreement. There
      exists no actual or threatened termination, cancellation, or limitation
      of, or any amendment, modification, or change to any Contract.

	 	 
	3.22 	
      Certain Transactions. Neither Priveco nor any of
      its subsidiaries is a guarantor or indemnitor of any indebtedness of any
      third party, including any person, firm or corporation.

	 	 
	3.23 	
      No Brokers. Neither Priveco nor any of its
      subsidiaries has incurred any independent obligation or liability to any
      party for any brokerage fees, agent’s commissions, or finder’s fees in
      connection with the Transaction contemplated by this Agreement.

	 	 
	3.24 	
      Completeness of Disclosure. No representation or
      warranty by Priveco in this Agreement nor any certificate, schedule,
      statement, document or instrument furnished or to be furnished to Pubco
      pursuant hereto contains or will contain any untrue statement of a
      material fact or omits or will omit to state a material fact required to
      be stated herein or therein or necessary to make any statement herein or
      therein not materially misleading.

Notwithstanding section 10.1 hereof, the representations and
warranties contained in this Section 3 shall survive the Closing
indefinitely.

	4. 	
      REPRESENTATIONS AND WARRANTIES OF
    PUBCO

Pubco represents and warrants to Priveco and the Selling
Shareholders and acknowledges that Priveco and the Selling Shareholders are
relying upon such representations and warranties in connection with the
execution, delivery and performance of this Agreement, notwithstanding any
investigation made by or on behalf of Priveco or the Selling Shareholders, as
follows:

	4.1 	
      Organization and Good Standing. Pubco is duly
      incorporated, organized, validly existing and in good standing under the
      laws of the State of Nevada and has all requisite corporate power and
      authority to own, lease and to carry on its business as now being
      conducted. Pubco is qualified to do business and is in good standing as a
      foreign corporation in each of the jurisdictions in which it owns
      property, leases property, does business, or is otherwise required to do
      so, where the failure to be so qualified would have a material adverse
      effect on the businesses, operations, or financial condition of
  Pubco.

- 13 -

	4.2 	
      Authority. Pubco has all requisite corporate power
      and authority to execute and deliver this Agreement and any other document
      contemplated by this Agreement (collectively, the “Pubco
      Documents”) to be signed by Pubco and to perform its obligations
      hereunder and to consummate the transactions contemplated hereby. The
      execution and delivery of each of the Pubco Documents by Pubco and the
      consummation by Pubco of the transactions contemplated hereby have been
      duly authorized by its board of directors and no other corporate or
      shareholder proceedings on the part of Pubco is necessary to authorize
      such documents or to consummate the transactions contemplated hereby. This
      Agreement has been, and the other Pubco Documents when executed and
      delivered by Pubco as contemplated by this Agreement will be, duly
      executed and delivered by Pubco and this Agreement is, and the other Pubco
      Documents when executed and delivered by Pubco, as contemplated hereby
      will be, valid and binding obligations of Pubco enforceable in accordance
      with their respective terms, except:

	 	(a) 	
      as limited by applicable bankruptcy, insolvency,
      reorganization, moratorium, and other laws of general application
      affecting enforcement of creditors’ rights generally;

	 	 	 
	 	(b) 	
      as limited by laws relating to the availability of
      specific performance, injunctive relief, or other equitable remedies;
      and

	 	 	 
	 	(c) 	
      as limited by public policy.

	4.3 	
      Capitalization of Pubco. The entire authorized
      capital stock and other equity securities of Pubco consists of 100,000,000
      shares of common stock with a par value of $0.0001 (the “Pubco Common
      Stock”) and 90,000,000 shares of preferred stock with a par value of
      $0.0001 (the “Pubco Preferred Stock”). As of the date of this
      Agreement, there are 15,000,000 shares of Pubco Common Stock issued and
      outstanding and no share of Pubco Preferred Stock outstading. All of the
      issued and outstanding shares of Pubco Common Stock have been duly
      authorized, are validly issued, were not issued in violation of any
      pre-emptive rights and are fully paid and non- assessable, are not subject
      to pre-emptive rights and were issued in full compliance with all federal,
      state, and local laws, rules and regulations. As of the date of this
      Agreement and except as contemplated by this Agreement and by the Letter
      of Intent between Priveco and Pubco dated July 19, 2013, there are no
      outstanding options, warrants, subscriptions, phantom shares, conversion
      rights, or other rights, agreements, or commitments obligating Pubco to
      issue any additional shares of Pubco Common Stock, or any other securities
      convertible into, exchangeable for, or evidencing the right to subscribe
      for or acquire from Pubco any shares of Pubco Common Stock. There are no
      agreements purporting to restrict the transfer of the Pubco Common Stock,
      no voting agreements, voting trusts, or other arrangements restricting or
      affecting the voting of the Pubco Common Stock.

	 	 
	4.4 	
      Directors and Officers of Pubco. The duly elected
      or appointed directors and the duly appointed officers of Pubco are as
      listed on Schedule 4.

	 	 
	4.5 	
      Corporate Records of Pubco. The corporate records
      of Pubco, as required to be maintained by it pursuant to the laws of the
      State of Nevada are accurate, complete and current in all material
      respects, and the minute book of Pubco is, in all material respects,
      correct and contains all material records required by the law of the State
      of Nevada in regards to all proceedings, consents, actions and meetings of
      the shareholders and the board of directors of
Pubco.

- 14 -

	4.6 	
      Non-Contravention. Neither the execution, delivery
      and performance of this Agreement, nor the consummation of the
      Transaction, will:

	 	 	 
		(a) 	
      conflict with, result in a violation of, cause a default
      under (with or without notice, lapse of time or both) or give rise to a
      right of termination, amendment, cancellation or acceleration of any
      obligation contained in or the loss of any material benefit under, or
      result in the creation of any lien, security interest, charge or
      encumbrance upon any of the material properties or assets of Pubco under
      any term, condition or provision of any loan or credit agreement, note,
      debenture, bond, mortgage, indenture, lease or other agreement,
      instrument, permit, license, judgment, order, decree, statute, law,
      ordinance, rule or regulation applicable to Pubco or any of its material
      property or assets;

	 	 	 
		(b) 	
      violate any provision of the applicable incorporation or
      charter documents of Pubco; or

	 	 	 
		(c) 	
      violate any order, writ, injunction, decree, statute,
      rule, or regulation of any court or governmental or regulatory authority
      applicable to Pubco or any of its material property or
  assets.

	4.7 	
      Validity of Pubco Common Stock Issuable upon the
      Transaction. The Pubco Shares to be issued to the Selling Shareholders
      upon consummation of the Transaction in accordance with this Agreement
      will, upon issuance, have been duly and validly authorized and, when so
      issued in accordance with the terms of this Agreement, will be duly and
      validly issued, fully paid and non- assessable.

	 	 
	4.8 	
      Actions and Proceedings. To the best knowledge of
      Pubco, there is no claim, charge, arbitration, grievance, action, suit,
      investigation or proceeding by or before any court, arbiter,
      administrative agency or other governmental authority now pending or, to
      the best knowledge of Pubco, threatened against Pubco which involves any
      of the business, or the properties or assets of Pubco that, if adversely
      resolved or determined, would have a material adverse effect on the
      business, operations, assets, properties, prospects or conditions of Pubco
      taken as a whole (a “Pubco Material Adverse Effect”). There is no
      reasonable basis for any claim or action that, based upon the likelihood
      of its being asserted and its success if asserted, would have such a Pubco
      Material Adverse Effect.

	 	 
	4.9 	
      Compliance.

	 	(a) 	
      To the best knowledge of Pubco, Pubco is in compliance
      with, is not in default or violation in any material respect under, and
      has not been charged with or received any notice at any time of any
      material violation of any statute, law, ordinance, regulation, rule,
      decree or other applicable regulation to the business or operations of
      Pubco;

	 	 	 
	 	(b) 	
      To the best knowledge of Pubco, Pubco is not subject to
      any judgment, order or decree entered in any lawsuit or proceeding
      applicable to its business and operations that would constitute a Pubco
      Material Adverse Effect;

	 	 	 
	 	(c) 	
      Pubco has duly filed all reports and returns required to
      be filed by it with governmental authorities and has obtained all
      governmental permits and other governmental consents, except as may be
      required after the execution of this Agreement. All of such permits and
      consents are in full force and effect, and no proceedings for the
      suspension or cancellation of any of them, and no investigation relating
      to any of them, is pending or to the best knowledge of Pubco, threatened, and none of them
      will be affected in a material adverse manner by the consummation of the
  Transaction; and

- 15 -

	 	(d) 	
      Pubco has operated in material compliance with all laws,
      rules, statutes, ordinances, orders and regulations applicable to its
      business. Pubco has not received any notice of any violation thereof, nor
      is Pubco aware of any valid basis therefore.

	4.10 	
      Filings, Consents and Approvals. No filing or
      registration with, no notice to and no permit, authorization, consent, or
      approval of any public or governmental body or authority or other person
      or entity is necessary for the consummation by Pubco of the Transaction
      contemplated by this Agreement to continue to conduct its business after
      the Closing Date in a manner which is consistent with that in which it is
      presently conducted.

	 	 	 
	4.11 	
      Absence of Undisclosed Liabilities. Pubco has no
      material Liabilities or obligations either direct or indirect, matured or
      unmatured, absolute, contingent or otherwise, which:

	 	 	 
		(a) 	
      did not arise in the regular and ordinary course of
      business under any agreement, contract, commitment, lease or plan
      specifically disclosed in writing to Priveco; or

	 	 	 
		(b) 	
      have not been incurred in amounts and pursuant to
      practices consistent with past business practice, in or as a result of the
      regular and ordinary course of its business.

	4.12 	
      Tax Matters.

	 	 	 	 
		(a) 	
      As of the date hereof:

	 	 	 	 
			(i) 	
      Pubco has filed all tax returns in connection with any
      Taxes which are required to be filed on or prior to the date hereof,
      taking into account any extensions of the filing deadlines which have been
      validly granted to them, and

	 	 	 	 
			(ii) 	
      all such returns are true and correct in all material
      respects;

	 	 	 	 
		(b) 	
      Pubco has paid all Taxes that have become or are due with
      respect to any period ended on or prior to the date hereof;

	 	 	 	 
		(c) 	
      Pubco is not presently under and has not received notice
      of, any contemplated investigation or audit by the Internal Revenue
      Service or any foreign or state taxing authority concerning any fiscal
      year or period ended prior to the date hereof; and

	 	 	 	 
		(d) 	
      All Taxes required to be withheld on or prior to the date
      hereof from employees for income Taxes, social security Taxes,
      unemployment Taxes and other similar withholding Taxes have been properly
      withheld and, if required on or prior to the date hereof, have been
      deposited with the appropriate governmental
agency.

	4.13 	
      Absence of Changes. Except as contemplated in this
      Agreement or as disclosed in Pubco’s filings with the United States
      Securities and Exchange Commission (the “Pubco SEC Filings”) , Pubco has
      not:

	 	 	 
		(a) 	
      incurred any Liabilities, other than Liabilities incurred
      in the ordinary course of business consistent with past practice, or
      discharged or satisfied any lien or encumbrance, or paid any Liabilities,
      other than in the ordinary course of business consistent with past
      practice, or failed to pay or discharge when due any Liabilities of
      which the failure to pay or discharge has caused or will cause any
      material damage or risk of material loss to it or any of its assets or
  properties;

- 16 -

	 	(b) 	
      sold, encumbered, assigned or transferred any material
      fixed assets or properties;

	 	 	 
	 	(c) 	
      created, incurred, assumed or guaranteed any indebtedness
      for money borrowed, or mortgaged, pledged or subjected any of the material
      assets or properties of Pubco to any mortgage, lien, pledge, security
      interest, conditional sales contract or other encumbrance of any nature
      whatsoever;

	 	 	 
	 	(d) 	
      made or suffered any amendment or termination of any
      material agreement, contract, commitment, lease or plan to which it is a
      party or by which it is bound, or cancelled, modified or waived any
      substantial debts or claims held by it or waived any rights of substantial
      value, other than in the ordinary course of business;

	 	 	 
	 	(e) 	
      declared, set aside or paid any dividend or made or
      agreed to make any other distribution or payment in respect of its capital
      shares or redeemed, purchased or otherwise acquired or agreed to redeem,
      purchase or acquire any of its capital shares or equity
  securities;

	 	 	 
	 	(f) 	
      suffered any damage, destruction or loss, whether or not
      covered by insurance, that materially and adversely effects its business,
      operations, assets, properties or prospects;

	 	 	 
	 	(g) 	
      suffered any material adverse change in its business,
      operations, assets, properties, prospects or condition (financial or
      otherwise);

	 	 	 
	 	(h) 	
      received notice or had knowledge of any actual or
      threatened labor trouble, termination, resignation, strike or other
      occurrence, event or condition of any similar character which has had or
      might have an adverse effect on its business, operations, assets,
      properties or prospects;

	 	 	 
	 	(i) 	
      made commitments or agreements for capital expenditures
      or capital additions or betterments exceeding in the aggregate
    $5,000;

	 	 	 
	 	(j) 	
      other than in the ordinary course of business, increased
      the salaries or other compensation of, or made any advance (excluding
      advances for ordinary and necessary business expenses) or loan to, any of
      its employees or directors or made any increase in, or any addition to,
      other benefits to which any of its employees or directors may be
      entitled;

	 	 	 
	 	(k) 	
      entered into any transaction other than in the ordinary
      course of business consistent with past practice; or

	 	 	 
	 	(l) 	
      agreed, whether in writing or orally, to do any of the
      foregoing.

	4.14 	
      Absence of Certain Changes or Events. Except as
      disclosed herein or in the Pubco SEC Filings, there has not
been:

	 	 	 
		(a) 	
      a Pubco Material Adverse Effect; or

	 	 	 
		(b) 	
      any material change by Pubco in its accounting methods,
      principles or practices.

- 17 -

	4.15 	
      Subsidiaries. Except as disclosed in this
      Agreement, Pubco does not have any subsidiaries or agreements of any
      nature to acquire any subsidiary or to acquire or lease any other business
      operations.

	 	 
	4.16 	
      Personal Property. There are no material
      equipment, furniture, fixtures and other tangible personal property and
      assets owned or leased by Pubco.

	 	 
	4.17 	
      Employees and Consultants. Except as disclosed in
      the Pubco SEC Filings, Pubco does not have any employees or
      consultants.

	 	 
	4.18 	
      Material Contracts and Transactions. Other than as
      expressly contemplated by this Agreement or as disclosed in the Pubco SEC
      Filings, there are no material contracts, agreements, licenses, permits,
      arrangements, commitments, instruments, understandings or contracts,
      whether written or oral, express or implied, contingent, fixed or
      otherwise, to which Pubco is a party except as disclosed in writing to
      Priveco.

	 	 
	4.19 	
      No Brokers. Pubco has not incurred any obligation
      or liability to any party for any brokerage fees, agent’s commissions, or
      finder’s fees in connection with the Transaction contemplated by this
      Agreement.

	 	 
	4.20 	
      Completeness of Disclosure. No representation or
      warranty by Pubco in this Agreement nor any certificate, schedule,
      statement, document or instrument furnished or to be furnished to Priveco
      pursuant hereto contains or will contain any untrue statement of a
      material fact or omits or will omit to state a material fact required to
      be stated herein or therein or necessary to make any statement herein or
      therein not materially misleading.

	 	 
	5. 	
      CLOSING CONDITIONS

	 	 
	5.1 	
      Conditions Precedent to Closing by Pubco. The
      obligation of Pubco to consummate the Transaction is subject to the
      satisfaction or written waiver of the conditions set forth below by a date
      mutually agreed upon by the parties hereto in writing and in accordance
      with Section 10.6. The Closing of the Transaction contemplated by this
      Agreement will be deemed to mean a waiver of all conditions to Closing.
      These conditions precedent are for the benefit of Pubco and may be waived
      by Pubco in its sole discretion.

	 	(a) 	
      Representations and Warranties. The
      representations and warranties of Priveco and the Selling Shareholders set
      forth in this Agreement will be true, correct and complete in all respects
      as of the Closing Date, as though made on and as of the Closing Date and
      Priveco will have delivered to Pubco a certificate dated as of the Closing
      Date, to the effect that the representations and warranties made by
      Priveco in this Agreement are true and correct.

	 	 	 
	 	(b) 	
      Performance. All of the covenants and obligations
      that Priveco and the Selling Shareholders are required to perform or to
      comply with pursuant to this Agreement at or prior to the Closing must
      have been performed and complied with in all material respects.

	 	 	 
	 	(c) 	
      Transaction Documents. This Agreement, the Priveco
      Documents, the Priveco Financial Statements and all other documents
      necessary or reasonably required to consummate the Transaction, all in
      form and substance reasonably satisfactory to Pubco, will have been
      executed and delivered to Pubco.

- 18 -

	 	(d) 	
      Third Party Consents. Pubco will have received
      duly executed copies of all third party consents and approvals
      contemplated by this Agreement, in form and substance reasonably
      satisfactory to Pubco.

	 	 	 	 
	 	(e) 	
      No Liabilities. The Priveco Financial Statements
      will be free of any material liabilities as of the Priveco Accounting
      Date, other than as expressly consented to by Pubco in writing.

	 	 	 	 
	 	(f) 	
      Employment Agreements. Pubco will have received
      from Priveco copies of all agreements or arrangements that evidence the
      employment of all of the hourly and salaried employees of Priveco as set
      out on Schedule 8 attached hereto, which constitute all of the employees
      reasonably necessary to operate the business of Priveco substantially as
      presently operated.

	 	 	 	 
	 	(g) 	
      No Material Adverse Change. No Priveco Material
      Adverse Effect will have occurred since the date of this
  Agreement.

	 	 	 	 
	 	(h) 	
      No Action. No suit, action, or proceeding will be
      pending or threatened which would:

	 	 	 	 
	 		(i) 	
      prevent the consummation of any of the transactions
      contemplated by this Agreement; or

	 	 	 	 
	 		(ii) 	
      cause the Transaction to be rescinded following
      consummation.

	 	 	 	 
	 	(i) 	
      Outstanding Shares. Priveco will have no more than
      50,000 shares of Priveco Common Stock issued and outstanding on the
      Closing Date.

	 	 	 	 
	 	(j) 	
      Due Diligence Review of Financial Statements.
      Pubco and its accountants will be reasonably satisfied with their due
      diligence investigation and review of the Priveco Financial
    Statements.

	 	 	 	 
	 	(k) 	
      Management. Pubco shall have appointed two (2)
      nominees of Priveco to the board of Directors of Pubco. The board of
      Directors of Pubco shall consist of 4 directors, including two nominees of
      Pubco. One nominee of Pubco shall sit as Chairman of the Board of
      Directors and shall carry the tie-breaking vote of the board.

	 	 	 	 
	 	(l) 	
      Due Diligence Generally. Pubco and its solicitors
      will be reasonably satisfied with their due diligence investigation of
      Priveco that is reasonable and customary in a transaction of a similar
      nature to that contemplated by the Transaction,
  including:

	 	(i) 	
      materials, documents and information in the possession
      and control of Priveco and the Selling Shareholders which are reasonably
      germane to the Transaction;

	 	 	 
	 	(ii) 	
      a physical inspection of the assets of Priveco by Pubco
      or its representatives; and

	 	 	 
	 	(iii) 	
      title to the material assets of
Priveco.

	 	(m) 	
      Compliance with Securities Laws. Pubco will have
      received evidence satisfactory to Pubco that the Pubco Shares issuable in
      the Transaction will be issuable without registration pursuant to the
      Securities Act in reliance on an exemption from the registration
      requirements of the Securities Act provided by Regulation S and Section
      4(2) of the Securities Act of 1933.

- 19 -

In order to establish the availability
of the safe harbor from the registration requirements of the Securities Act for
the issuance of the Pubco Shares to each Selling Shareholder or their nominees,
Priveco will deliver to Pubco on Closing, the applicable Certificate duly
executed by each Selling Shareholder.

	5.2 	
      Conditions Precedent to Closing by Priveco. The
      obligation of Priveco and the Selling Shareholders to consummate the
      Transaction is subject to the satisfaction or written waiver of the
      conditions set forth below by a date mutually agreed upon by the parties
      hereto in writing and in accordance with Section 10.6. The Closing of the
      Transaction will be deemed to mean a waiver of all conditions to Closing.
      These conditions precedent are for the benefit of Priveco and the Selling
      Shareholders and may be waived by Priveco and the Selling Shareholders in
      their discretion.

	 	(a) 	
      Representations and Warranties. The
      representations and warranties of Pubco set forth in this Agreement will
      be true, correct and complete in all respects as of the Closing Date, as
      though made on and as of the Closing Date and Pubco will have delivered to
      Priveco a certificate dated the Closing Date, to the effect that the
      representations and warranties made by Pubco in this Agreement are true
      and correct.

	 	 	 	 
	 	(b) 	
      Performance. All of the covenants and obligations
      that Pubco are required to perform or to comply with pursuant to this
      Agreement at or prior to the Closing must have been performed and complied
      with in all material respects. Pubco must have delivered each of the
      documents required to be delivered by it pursuant to this
  Agreement.

	 	 	 	 
	 	(c) 	
      Transaction Documents. This Agreement, the Pubco
      Documents and all other documents necessary or reasonably required to
      consummate the Transaction, all in form and substance reasonably
      satisfactory to Priveco, will have been executed and delivered by
      Pubco.

	 	 	 	 
	 	(d) 	
      No Material Adverse Change. No Pubco Material
      Adverse Effect will have occurred since the date of this
  Agreement.

	 	 	 	 
	 	(e) 	
      Management. Pubco shall have appointed two (2)
      nominees of Priveco to the board of Directors of Pubco. The board of
      Directors of Pubco shall consist of 4 directors, including two nominees of
      Pubco. One nominee of Pubco shall sit as Chairman of the Board of
      Directors and shall carry the tie-breaking vote of the board.

	 	 	 	 
	 	(f) 	
      No Action. No suit, action, or proceeding will be
      pending or threatened before any governmental or regulatory authority
      wherein an unfavorable judgment, order, decree, stipulation, injunction or
      charge would:

	 	 	 	 
	 		(i) 	
      prevent the consummation of any of the transactions
      contemplated by this Agreement; or

	 	 	 	 
	 		(ii) 	
      cause the Transaction to be rescinded following
      consummation.

	 	 	 	 
	 	(g) 	
      Outstanding Shares. On the Closing Date, the
      issued and outstanding capital stock of Pubco shall consist of 22,500,000
      Pubco Common Shares including:

- 20 -

	 		(i) 	
      7,500,000 Pubco Common Shares issued pursuant to this
      Agreement; and

	 	 	 	 
	 		(ii) 	
      15,000,000 Pubco Common Shares held by the current
      shareholders of Pubco.

	 	 	 	 
	 	(h) 	
      Due Diligence Generally. Priveco will be
      reasonably satisfied with their due diligence investigation of Pubco that
      is reasonable and customary in a transaction of a similar nature to that
      contemplated by the Transaction.

	6. 	
      ADDITIONAL COVENANTS OF THE
  PARTIES

	 	 	 
	6.1 	
      Notification of Financial Liabilities. Priveco and
      Pubco will immediately notify the other in accordance with Section 10.6
      hereof, if either party receives any advice or notification from its
      independent certified public accounts that the other party has used any
      improper accounting practice that would have the effect of not reflecting
      or incorrectly reflecting in the books, records, and accounts of such
      party, any properties, assets, Liabilities, revenues, or expenses.
      Notwithstanding any statement to the contrary in this Agreement, this
      covenant will survive Closing and continue in full force and
  effect.

	 	 	 
	6.2 	
      Access and Investigation. Between the date of this
      Agreement and the Closing Date, Priveco, on the one hand, and Pubco, on
      the other hand, will, and will cause each of their respective
      representatives to:

	 	 	 
		(a) 	
      afford the other and its representatives full and free
      access to its personnel, properties, assets, contracts, books and records,
      and other documents and data;

	 	 	 
		(b) 	
      furnish the other and its representatives with copies of
      all such contracts, books and records, and other existing documents and
      data as required by this Agreement and as the other may otherwise
      reasonably request; and

	 	 	 
		(c) 	
      furnish the other and its representatives with such
      additional financial, operating, and other data and information as the
      other may reasonably request.

		
      All of such access, investigation and communication by a
      party and its representatives will be conducted during normal business
      hours and in a manner designed not to interfere unduly with the normal
      business operations of the other party. Each party will instruct its
      auditors to co- operate with the other party and its representatives in
      connection with such investigations.

	 	 
	6.3 	
      Confidentiality. All information regarding the
      business of Priveco including, without limitation, financial information
      that Priveco provides to Pubco during Pubco’s due diligence investigation
      of Priveco will be kept in strict confidence by Pubco and will not be used
      (except in connection with due diligence), dealt with, exploited or
      commercialized by Pubco or disclosed to any third party (other than
      Pubco’s professional accounting and legal advisors) without the prior
      written consent of Priveco. If the Transaction contemplated by this
      Agreement does not proceed for any reason, then upon receipt of a written
      request from Priveco, Pubco will immediately return to Priveco (or as
      directed by Priveco) any information received regarding Priveco’s
      business. Likewise, all information regarding the business of Pubco
      including, without limitation, financial information that Pubco provides
      to Priveco during its due diligence investigation of Pubco will be kept in
      strict confidence by Priveco and will not be used (except in connection
      with due diligence), dealt with, exploited or commercialized by Priveco or
      disclosed to any third party (other than Priveco’s professional accounting
      and legal advisors) without Pubco’s prior written consent. If the
      Transaction contemplated by this Agreement does not proceed for any
      reason, then upon receipt of a written request from Pubco,
      Priveco will immediately return to Pubco (or as directed by Pubco) any
  information received regarding Pubco’s business.

- 21 -

	6.4 	
      Notification. Between the date of this Agreement
      and the Closing Date, each of the parties to this Agreement will promptly
      notify the other parties in writing if it becomes aware of any fact or
      condition that causes or constitutes a material breach of any of its
      representations and warranties as of the date of this Agreement, if it
      becomes aware of the occurrence after the date of this Agreement of any
      fact or condition that would cause or constitute a material breach of any
      such representation or warranty had such representation or warranty been
      made as of the time of occurrence or discovery of such fact or condition.
      Should any such fact or condition require any change in the Schedules
      relating to such party, such party will promptly deliver to the other
      parties a supplement to the Schedules specifying such change. During the
      same period, each party will promptly notify the other parties of the
      occurrence of any material breach of any of its covenants in this
      Agreement or of the occurrence of any event that may make the satisfaction
      of such conditions impossible or unlikely.

	 	 
	6.5 	
      Exclusivity. Until such time, if any, as this
      Agreement is terminated pursuant to the terms of this Agreement, Priveco
      and Pubco will not, directly or indirectly, solicit, initiate, entertain
      or accept any inquiries or proposals from, discuss or negotiate with,
      provide any non-public information to, or consider the merits of any
      unsolicited inquiries or proposals from, any person or entity relating to
      any transaction involving the sale of the business or assets (other than
      in the ordinary course of business), or any of the capital stock of
      Priveco or Pubco, as applicable, or any merger, consolidation, business
      combination, or similar transaction other than as contemplated by this
      Agreement.

	 	 
	6.6 	
      Conduct of Priveco and Pubco Business Prior to
      Closing. From the date of this Agreement to the Closing Date, and
      except to the extent that Pubco otherwise consents in writing, Priveco
      will operate its business substantially as presently operated and only in
      the ordinary course and in compliance with all applicable laws, and use
      its best efforts to preserve intact its good reputation and present
      business organization and to preserve its relationships with persons
      having business dealings with it. Likewise, from the date of this
      Agreement to the Closing Date, and except to the extent that Priveco
      otherwise consents in writing, Pubco will operate its business
      substantially as presently operated and only in the ordinary course and in
      compliance with all applicable laws, and use its best efforts to preserve
      intact its good reputation and present business organization and to
      preserve its relationships with persons having business dealings with
      it.

	 	 
	6.7 	
      Certain Acts Prohibited – Priveco. Except as
      expressly contemplated by this Agreement or for purposes in furtherance of
      this Agreement, between the date of this Agreement and the Closing Date,
      Priveco will not, without the prior written consent of
  Pubco:

	 	(a) 	
      amend its Certificate of Incorporation, Articles of
      Incorporation or other incorporation documents;

	 	 	 
	 	(b) 	
      incur any liability or obligation other than in the
      ordinary course of business or encumber or permit the encumbrance of any
      properties or assets of Priveco except in the ordinary course of
      business;

	 	 	 
	 	(c) 	
      dispose of or contract to dispose of any Priveco property
      or assets, including the Intellectual Property Assets, except in the
      ordinary course of business consistent with past
  practice;

- 22 -

	 	(d) 	
      issue, deliver, sell, pledge or otherwise encumber or
      subject to any lien any shares of the Priveco Common Stock, or any rights,
      warrants or options to acquire, any such shares, voting securities or
      convertible securities;

	 	 	 	 
	 	(e) 	
      

	 	 	 	 
	 		(i) 	
      declare, set aside or pay any dividends on, or make any
      other distributions in respect of the Priveco Common Stock, or

	 	 	 	 
	 		(ii) 	
      split, combine or reclassify any Priveco Common Stock or
      issue or authorize the issuance of any other securities in respect of, in
      lieu of or in substitution for shares of Priveco Common Stock;
or

	 	 	 	 
	 	(f) 	
      materially increase benefits or compensation expenses of
      Priveco, other than as contemplated by the terms of any employment
      agreement in existence on the date of this Agreement, increase the cash
      compensation of any director, executive officer or other key employee or
      pay any benefit or amount not required by a plan or arrangement as in
      effect on the date of this Agreement to any such
person.

	6.8 	
      Certain Acts Prohibited - Pubco. Except as
      expressly contemplated by this Agreement, between the date of this
      Agreement and the Closing Date, Pubco will not, without the prior written
      consent of Priveco:

	 	 	 
		(a) 	
      incur any liability or obligation or encumber or permit
      the encumbrance of any properties or assets of Pubco except in the
      ordinary course of business consistent with past practice;

	 	 	 
		(b) 	
      dispose of or contract to dispose of any Pubco property
      or assets except in the ordinary course of business consistent with past
      practice;

	 	 	 
		(c) 	
      declare, set aside or pay any dividends on, or make any
      other distributions in respect of the Pubco Common Stock; or

	 	 	 
		(d) 	
      materially increase benefits or compensation expenses of
      Pubco, increase the cash compensation of any director, executive officer
      or other key employee or pay any benefit or amount to any such
    person.

	6.9 	
      Public Announcements. Pubco and Priveco each agree
      that they will not release or issue any reports or statements or make any
      public announcements relating to this Agreement or the Transaction
      contemplated herein without the prior written consent of the other party,
      except as may be required upon written advice of counsel to comply with
      applicable laws or regulatory requirements after consulting with the other
      party hereto and seeking their reasonable consent to such
    announcement.

	 	 
	6.10 	
      Employment Agreements. Between the date of this
      Agreement and the Closing Date, Priveco will have made necessary
      arrangements to employ all of the hourly and salaried employees of Priveco
      reasonably necessary to operate such business substantially as presently
      operated. Priveco agrees to provide copies of all such agreements and
      arrangements that evidence such employment at or prior to
  Closing.

- 23 -

	7. 	
      CLOSING

	 	 
	7.1 	
      Closing. The Closing shall take place on the
      Closing Date at the offices of the lawyers for Pubco or at such other
      location as agreed to by the parties. Notwithstanding the location of the
      Closing, each party agrees that the Closing may be completed by the
      exchange of undertakings between the respective legal counsel for Priveco
      and Pubco, provided such undertakings are satisfactory to each party’s
      respective legal counsel.

	 	 
	7.2 	
      Closing Deliveries of Priveco and the Selling
      Shareholders. At Closing, Priveco and the Selling Shareholders will
      deliver or cause to be delivered the following, fully executed and in the
      form and substance reasonably satisfactory to
Pubco:

	 	(a) 	
      copies of all resolutions and/or consent actions adopted
      by or on behalf of the board of directors of Priveco evidencing approval
      of this Agreement and the Transaction;

	 	 	 
	 	(b) 	
      if any of the Selling Shareholders appoint any person, by
      power of attorney or equivalent, to execute this Agreement or any other
      agreement, document, instrument or certificate contemplated by this
      agreement, on behalf of the Selling Shareholder, a valid and binding power
      of attorney or equivalent from such Selling Shareholder;

	 	 	 
	 	(c) 	
      share certificates, if issued, representing the Priveco
      Shares as required by Section 2.3 of this Agreement;

	 	 	 
	 	(d) 	
      all certificates and other documents required by Sections
      2.3 and 5.1 of this Agreement;

	 	 	 
	 	(e) 	
      the Priveco Documents and any other necessary documents,
      each duly executed by Priveco, as required to give effect to the
      Transaction; and

	 	 	 
	 	(f) 	
      copies of all agreements and arrangements required by
      Section 6.11 of this Agreement.

	7.3 	
      Closing Deliveries of Pubco. At Closing, Pubco
      will deliver or cause to be delivered the following, fully executed and in
      the form and substance reasonably satisfactory to Priveco:

	 	 	 
		(a) 	
      copies of all resolutions and/or consent actions adopted
      by or on behalf of the board of directors of Pubco evidencing approval of
      this Agreement and the Transaction;

	 	 	 
		(b) 	
      all certificates and other documents required by Section
      5.2 of this Agreement;

	 	 	 
		(c) 	
      all certificates, stock powers, and other documents
      required for the cancellation or consolidation of a sufficient amount of
      Pubco common shares to comply with Section 5.2(h) herein; and

	 	 	 
		(d) 	
      the Pubco Documents and any other necessary documents,
      each duly executed by Pubco, as required to give effect to the
      Transaction.

	7.4 	
      Delivery of Financial Statements. Prior to the
      Closing Date, Priveco will have delivered to Pubco the Priveco Financial
      Statements and financial statements for the three month interim period
      ended on the Priveco Accounting Date.

	 	 
	7.5 	
      Additional Closing Delivery of Pubco. At Closing,
      Pubco will deliver or cause to be delivered the share certificates
      representing the Pubco Shares.

- 24 -

	8. 	
      TERMINATION

	 	 	 
	8.1 	
      Termination. This Agreement may be terminated at
      any time prior to the Closing Date contemplated hereby by:

	 	 	 
		(a) 	
      mutual agreement of Pubco and Priveco;

	 	 	 
		(b) 	
      Pubco, if there has been a material breach by Priveco or
      any of the Selling Shareholders of any material representation, warranty,
      covenant or agreement set forth in this Agreement on the part of Priveco
      or the Selling Shareholders that is not cured, to the reasonable
      satisfaction of Pubco, within ten business days after notice of such
      breach is given by Pubco (except that no cure period will be provided for
      a breach by Priveco or the Selling Shareholders that by its nature cannot
      be cured);

	 	 	 
		(c) 	
      Priveco, if there has been a material breach by Pubco of
      any material representation, warranty, covenant or agreement set forth in
      this Agreement on the part of Pubco that is not cured by the breaching
      party, to the reasonable satisfaction of Priveco, within ten business days
      after notice of such breach is given by Priveco (except that no cure
      period will be provided for a breach by Pubco that by its nature cannot be
      cured);

	 	 	 
		(d) 	
      Pubco or Priveco, if the Transaction is not closed by
      September 15, 2013, unless the parties hereto agree to
      extend such date in writing; or

	 	 	 
		(e) 	
      Pubco or Priveco if any permanent injunction or other
      order of a governmental entity of competent authority preventing the
      consummation of the Transaction contemplated by this Agreement has become
      final and non-appealable.

	8.2 	
      Effect of Termination. In the event of the
      termination of this Agreement as provided in Section 8.1, this Agreement
      will be of no further force or effect, provided, however, that no
      termination of this Agreement will relieve any party of liability for any
      breaches of this Agreement that are based on a wrongful refusal or failure
      to perform any obligations.

	 	 	 
	9. 	
      INDEMNIFICATION, REMEDIES,
  SURVIVAL

	 	 	 
	9.1 	
      Certain Definitions. For the purposes of this
      Article 9, the terms “Loss” and “Losses” mean any and all
      demands, claims, actions or causes of action, assessments, losses,
      damages, Liabilities, costs, and expenses, including without limitation,
      interest, penalties, fines and reasonable attorneys, accountants and other
      professional fees and expenses, but excluding any indirect, consequential
      or punitive damages suffered by Pubco or Priveco including damages for
      lost profits or lost business opportunities.

	 	 	 
	9.2 	
      Agreement of Priveco to Indemnify. Priveco will
      indemnify, defend, and hold harmless, to the full extent of the law, Pubco
      and its shareholders from, against, and in respect of any and all Losses
      asserted against, relating to, imposed upon, or incurred by Pubco and its
      shareholders by reason of, resulting from, based upon or arising out
      of:

	 	 	 
		(a) 	
      the breach by Priveco of any representation or warranty
      of Priveco contained in or made pursuant to this Agreement, any Priveco
      Document or any certificate or other instrument delivered pursuant to this
      Agreement; or

- 25 -

	 	(b) 	
      the breach or partial breach by Priveco of any covenant
      or agreement of Priveco made in or pursuant to this Agreement, any Priveco
      Document or any certificate or other instrument delivered pursuant to this
      Agreement.

	9.3 	
      Agreement of the Selling Shareholders to
      Indemnify. The Selling Shareholders will indemnify, defend, and hold
      harmless, to the full extent of the law, Pubco and its shareholders from,
      against, and in respect of any and all Losses asserted against, relating
      to, imposed upon, or incurred by Pubco and its shareholders by reason of,
      resulting from, based upon or arising out of:

	 	 	 
		(a) 	
      any breach by the Selling Shareholders of Section 2.2 of
      this Agreement; or

	 	 	 
		(b) 	
      any misstatement, misrepresentation or breach of the
      representations and warranties made by the Selling Shareholders contained
      in or made pursuant to the Certificate executed by each Selling
      Shareholder or their nominee as part of the share exchange procedure
      detailed in Section 2.3 of this Agreement.

	9.4 	
      Agreement of Pubco to Indemnify. Pubco will
      indemnify, defend, and hold harmless, to the full extent of the law,
      Priveco and the Selling Shareholders from, against, for, and in respect of
      any and all Losses asserted against, relating to, imposed upon, or
      incurred by Priveco and the Selling Shareholders by reason of, resulting
      from, based upon or arising out of:

	 	 	 
		(a) 	
      the breach by Pubco of any representation or warranty of
      Pubco contained in or made pursuant to this Agreement, any Pubco Document
      or any certificate or other instrument delivered pursuant to this
      Agreement; or

	 	 	 
		(b) 	
      the breach or partial breach by Pubco of any covenant or
      agreement of Pubco made in or pursuant to this Agreement, any Pubco
      Document or any certificate or other instrument delivered pursuant to this
      Agreement.

	10. 	
      MISCELLANEOUS PROVISIONS

	 	 
	10.1 	
      Effectiveness of Representations; Survival. Each
      party is entitled to rely on the representations, warranties and
      agreements of each of the other parties and all such representation,
      warranties and agreement will be effective regardless of any investigation
      that any party has undertaken or failed to undertake. Unless otherwise
      stated in this Agreement, and except for instances of fraud, the
      representations, warranties and agreements will survive the Closing Date
      and continue in full force and effect until one year after the Closing
      Date.

	 	 
	10.2 	
      Further Assurances. Each of the parties hereto
      will co-operate with the others and execute and deliver to the other
      parties hereto such other instruments and documents and take such other
      actions as may be reasonably requested from time to time by any other
      party hereto as necessary to carry out, evidence, and confirm the intended
      purposes of this Agreement.

	 	 
	10.3 	
      Amendment. This Agreement may not be amended
      except by an instrument in writing signed by each of the
parties.

	 	 
	10.4 	
      Expenses. Pubco will bear all costs incurred in
      connection with the preparation, execution and performance of this
      Agreement and the Transaction contemplated hereby, including all fees and
      expenses of agents, representatives, legal and
  accountants.

- 26 -

	10.5 	
      Entire Agreement. This Agreement, the schedules
      attached hereto and the other documents in connection with this
      transaction contain the entire agreement between the parties with respect
      to the subject matter hereof and supersede all prior arrangements and
      understandings, both written and oral, expressed or implied, with respect
      thereto. Any preceding correspondence or offers are expressly superseded
      and terminated by this Agreement.

	 	 	 
	10.6 	
      Notices. All notices and other communications
      required or permitted under to this Agreement must be in writing and will
      be deemed given if sent by personal delivery, faxed with electronic
      confirmation of delivery, internationally-recognized express courier or
      registered or certified mail (return receipt requested), postage prepaid,
      to the parties at the addresses (or at such other address for a party as
      will be specified by like notice) on the first page of this
    Agreement.

	 	 	 
		
      All such notices and other communications will be deemed
      to have been received:

	 	 	 
		(a) 	
      in the case of personal delivery, on the date of such
      delivery;

	 	 	 
		(b) 	
      in the case of a fax, when the party sending such fax has
      received electronic confirmation of its delivery;

	 	 	 
		(c) 	
      in the case of delivery by internationally-recognized
      express courier, on the business day following dispatch; and

	 	 	 
		(d) 	
      in the case of mailing, on the fifth business day
      following mailing.

	10.7 	
      Headings. The headings contained in this Agreement
      are for convenience purposes only and will not affect in any way the
      meaning or interpretation of this Agreement.

	 	 
	10.8 	
      Benefits. This Agreement is and will only be
      construed as for the benefit of or enforceable by those persons party to
      this Agreement.

	 	 
	10.9 	
      Assignment. This Agreement may not be assigned
      (except by operation of law) by any party without the consent of the other
      parties.

	 	 
	10.10 	
      Governing Law. This Agreement will be governed by
      and construed in accordance with the laws of the State of Nevada
      applicable to contracts made and to be performed therein.

	 	 
	10.11 	
      Construction. The language used in this Agreement
      will be deemed to be the language chosen by the parties to express their
      mutual intent, and no rule of strict construction will be applied against
      any party.

	 	 
	10.12 	
      Gender. All references to any party will be read
      with such changes in number and gender as the context or reference
      requires.

	 	 
	10.13 	
      Business Days. If the last or appointed day for
      the taking of any action required or the expiration of any rights granted
      herein shall be a Saturday, Sunday or a legal holiday in the State of
      Nevada, then such action may be taken or right may be exercised on the
      next succeeding day which is not a Saturday, Sunday or such a legal
      holiday.

	 	 
	10.14 	
      Counterparts. This Agreement may be executed in
      one or more counterparts, all of which will be considered one and the same
      agreement and will become effective when one or more counterparts have
      been signed by each of the parties and delivered to the other parties, it
      being understood that all parties need not sign the same
    counterpart.

- 27 -

	10.15 	
      Fax and PDF Execution. This Agreement may be
      executed by delivery of executed signature pages by fax or PDF document
      via Email and such execution will be effective for all purposes.

	 	 
	10.16 	
      Schedules and Exhibits. The schedules and exhibits
      are attached to this Agreement and incorporated
herein.

[THIS PART LEFT INTENTIONALLY BLANK]

- 28 -

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

FUHUIYUAN INTERNATIONAL HOLDINGS LIMITED.

	Per: 	/s/Stolfin
      Wong                            
      
		Name: Stolfin
  Wong  
	  	Title: President and Director

FUHUIYUAN INTERNATIONAL GROUP (HOLDINGS) LIMITED

	Per: 	/s/Xiao Bei
      Bei                               
      
		Name: Xiao Bei
  Bei  
	  	Title: Chief Executive Officer

YQ INTERNATIONAL HOLDINGS LIMITED.

	Per: 	/s/Jinglan
      Dong                                
      
	  	Name: Jinglan Dong 
	  	Title: Director and Authorized Signatory 
	  	  
	  	  
	  	  
	Per: 	/s/Bowen
      Dong                                  
      
	  	Name: Bowen Dong 
	  	Title: Director and Authorized Signatory
  

	SCHEDULE 1 
	TO THE SHARE EXCHANGE AGREEMENT AMONG 
	FUHUIYUAN INTERNATIONAL HOLDINGS LIMITED, FUHUIYUAN
      INTERNATIONAL GROUP 
	(HOLDINGS) LIMITED. AND THE SELLING SHAREHOLDERS AS SET
      OUT IN THE 
	SHARE EXCHANGE AGREEMENT 
	  
	THE SELLING SHAREHOLDERS 

	

      

Name 	

      Number of Priveco 
Shares held before
      
Closing 	Total Number of 

      Pubco Shares to be
    
issued by Pubco on 
Closing 
	YQ INTERNATIONAL HOLDINGS
      LIMITED. 	50,000 	7,500,000 
	 	 	 

	SCHEDULE 2 
	TO THE SHARE EXCHANGE AGREEMENT AMONG 
	FUHUIYUAN INTERNATIONAL HOLDINGS LIMITED, FUHUIYUAN
      INTERNATIONAL GROUP 
	(HOLDINGS) LIMITED. AND THE SELLING SHAREHOLDERS AS SET
      OUT IN THE 
	SHARE EXCHANGE AGREEMENT 
	  
	CERTIFICATE OF NON-U.S. SHAREHOLDER

In connection with the issuance of common stock (the “Pubco
Shares” and, together with the Pubco Shares, the “Pubco Securities”) of
FUHUIYUAN INTERNATIONAL HOLDINGS LIMITED, a company incorporated pursuant to the
laws of the State of Nevada (“Pubco”), to the undersigned, pursuant to
that certain Share Exchange Agreement dated ______________, 2013 (the
“Agreement”), among Pubco, FUHUIYUAN INTERNATIONAL GROUP (HOLDINGS)
LIMITED., a company incorporated pursuant to the laws of the British Virgin
Islands (“Priveco”), and the shareholders of Priveco as set out in the
Agreement (each, a “Selling Shareholder”), the undersigned hereby agrees,
acknowledges, represents and warrants that:

     1. the undersigned is not a “U.S.
Person” as such term is defined by Rule 902 of Regulation S under the United
States Securities Act of 1933, as amended (“U.S. Securities Act”) (the
definition of which includes, but is not limited to, an individual resident in
the U.S. and an estate or trust of which any executor or administrator or trust,
respectively is a U.S. Person and any partnership or corporation organized or
incorporated under the laws of the U.S.);

     2. none of the Pubco Securities
have been or will be registered under the U.S. Securities Act, or under any
state securities or “blue sky” laws of any state of the United States, and may
not be offered or sold in the United States or, directly or indirectly, to U.S.
Persons, as that term is defined in Regulation S, except in accordance with the
provisions of Regulation S or pursuant to an exemption from, or in a transaction
not subject to, the registration requirements of the U.S. Securities Act and in
compliance with any applicable state and foreign securities laws;

     3. the undersigned understands
and agrees that offers and sales of any of the Pubco Securities prior to the
expiration of a period of one year after the date of original issuance of the
Pubco Securities (the one year period hereinafter referred to as the
Distribution Compliance Period) shall only be made in compliance with the safe
harbor provisions set forth in Regulation S, pursuant to the registration
provisions of the U.S. Securities Act or an exemption therefrom, and that all
offers and sales after the Distribution Compliance Period shall be made only in
compliance with the registration provisions of the U.S. Securities Act or an
exemption therefrom and in each case only in accordance with applicable state
and foreign securities laws;

     4. the undersigned understands
and agrees not to engage in any hedging transactions involving any of the Pubco
Securities unless such transactions are in compliance with the provisions of the
U.S. Securities Act and in each case only in accordance with applicable state
and provincial securities laws;

     5. the undersigned is acquiring
the Pubco Securities for investment only and not with a view to resale or
distribution and, in particular, it has no intention to distribute either
directly or indirectly any of the Pubco Securities in the United States or to
U.S. Persons;

     6. the undersigned has not
acquired the Pubco Securities as a result of, and will not itself engage in, any
directed selling efforts (as defined in Regulation S under the U.S. Securities
Act) in the United States in respect of the Pubco Securities which would
include any activities undertaken for the purpose of, or that could reasonably
be expected to have the effect of, conditioning the market in the United States
for the resale of any of the Pubco Securities; provided, however, that the
undersigned may sell or otherwise dispose of the Pubco Securities pursuant to
registration thereof under the U.S. Securities Act and any applicable state and
provincial securities laws or under an exemption from such registration
requirements;

- 2 -

     7. the statutory and regulatory
basis for the exemption claimed for the sale of the Pubco Securities, although
in technical compliance with Regulation S, would not be available if the
offering is part of a plan or scheme to evade the registration provisions of the
U.S. Securities Act or any applicable state and provincial securities laws;

     8. the undersigned has not
undertaken, and will have no obligation, to register any of the Pubco Securities
under the U.S. Securities Act;

     9. Pubco is entitled to rely on
the acknowledgements, agreements, representations and warranties and the
statements and answers of the Selling Shareholders contained in the Agreement
and those of the undersigned contained in this Certificate, and the undersigned
will hold harmless Pubco from any loss or damage either one may suffer as a
result of any such acknowledgements, agreements, representations and/or
warranties made by the Selling Shareholders and/or the undersigned not being
true and correct;

     10. the undersigned has been
advised to consult their own respective legal, tax and other advisors with
respect to the merits and risks of an investment in the Pubco Securities and,
with respect to applicable resale restrictions, is solely responsible (and Pubco
is not in any way responsible) for compliance with applicable resale
restrictions;

     11. none of the Pubco Securities
are listed on any stock exchange or automated dealer quotation system and no
representation has been made to the undersigned that any of the Pubco Securities
will become listed on any stock exchange or automated dealer quotation system,
except that currently certain market makers make market in the common shares of
Pubco on the OTC Bulletin Board;

     12. the undersigned is outside
the United States when receiving and executing this Agreement and is acquiring
the Pubco Securities as principal for their own account, for investment purposes
only, and not with a view to, or for, resale, distribution or fractionalization
thereof, in whole or in part, and no other person has a direct or indirect
beneficial interest in the Pubco Securities; 

     13. neither the SEC nor any other
securities commission or similar regulatory authority has reviewed or passed on
the merits of the Pubco Securities;

     14. the Pubco Securities are not
being acquired, directly or indirectly, for the account or benefit of a U.S.
Person or a person in the United States;

     15. the undersigned acknowledges
and agrees that Pubco shall refuse to register any transfer of Pubco Securities
not made in accordance with the provisions of Regulation S, pursuant to
registration under the U.S. Securities Act, or pursuant to an available
exemption from registration under the U.S. Securities Act;

     16. the undersigned understands
and agrees that the Pubco Securities will bear the following legend:

- 3 -

“THE SECURITIES REPRESENTED HEREBY HAVE
BEEN OFFERED IN AN OFFSHORE TRANSACTION TO A PERSON WHO IS NOT A U.S. PERSON (AS
DEFINED HEREIN) PURSUANT TO REGULATION S UNDER THE UNITED STATES SECURITIES ACT
OF 1933, AS AMENDED (THE “1933 ACT”).

NONE OF THE SECURITIES REPRESENTED
HEREBY HAVE BEEN REGISTERED UNDER THE 1933 ACT, OR ANY U.S. STATE SECURITIES
LAWS, AND, UNLESS SO REGISTERED, MAY NOT BE OFFERED OR SOLD, DIRECTLY OR
INDIRECTLY, IN THE UNITED STATES (AS DEFINED HEREIN) OR TO U.S. PERSONS EXCEPT
IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S UNDER THE 1933 ACT, PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 ACT, OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE 1933 ACT AND IN EACH CASE ONLY IN ACCORDANCE WITH APPLICABLE
STATE SECURITIES LAWS. IN ADDITION, HEDGING TRANSACTIONS INVOLVING THE
SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE 1933 ACT. “UNITED
STATES” AND “U.S. PERSON” ARE AS DEFINED BY REGULATION S UNDER THE 1933
ACT.”

     17. the address of the
undersigned included herein is the sole address of the undersigned as of the
date of this certificate.

IN WITNESS WHEREOF, I have executed this Certificate of
Non-U.S. Shareholder.

		 	Date:
      _____________________________________ , 20__________
	Signature 	 	 
	 	 	 
	 	 	 
	Print Name 	 	 
	 	 	 
	 	 	 
	Title (if applicable) 	 	 
	 	 	 
	 	 	 
	Address 	 	 
	 	 	 

	SCHEDULE 3 
	TO THE SHARE EXCHANGE AGREEMENT AMONG 
	FUHUIYUAN INTERNATIONAL HOLDINGS LIMITED, FUHUIYUAN
      INTERNATIONAL GROUP 
	(HOLDINGS) LIMITED. AND THE SELLING SHAREHOLDERS AS SET
      OUT IN THE 
	SHARE EXCHANGE AGREEMENT 
	  
	DIRECTORS AND OFFICERS OF PRIVECO

Directors:

1. Jinglan Dong

2. Bowen Dong

Officers:

1. Beibei Xiao — Chief Executive
Officer

2. Xue Chao Lan — Secretary

3. Guohui Xu — Chief Financial Officer,
Treasurer

	SCHEDULE 4 
	TO THE SHARE EXCHANGE AGREEMENT AMONG 
	FUHUIYUAN INTERNATIONAL HOLDINGS LIMITED, FUHUIYUAN
      INTERNATIONAL GROUP 
	(HOLDINGS) LIMITED. AND THE SELLING SHAREHOLDERS AS SET
      OUT IN THE 
	SHARE EXCHANGE AGREEMENT 
	  
	DIRECTORS AND OFFICERS OF PUBCO

Directors:

1. Stolfin Wong

2. Eric Lo

Officers:

1. Stolfin Wong – President, Chief
Executive Officer, Chief Financial Officer, Treasurer, Director

2. Eric Lo — Secretary 

	SCHEDULE 5 
	TO THE SHARE EXCHANGE AGREEMENT AMONG 
	FUHUIYUAN INTERNATIONAL HOLDINGS LIMITED, FUHUIYUAN
      INTERNATIONAL GROUP 
	(HOLDINGS) LIMITED. AND THE SELLING SHAREHOLDERS AS SET
      OUT IN THE 
	SHARE EXCHANGE AGREEMENT 
	  
	PRIVECO MATERIAL LEASES, SUBLEASES, CLAIMS, CAPITAL
      EXPENDITURES, 
	TAXES AND OTHER PROPERTY INTERESTS

None.

	SCHEDULE 6 
	TO THE SHARE EXCHANGE AGREEMENT AMONG 
	FUHUIYUAN INTERNATIONAL HOLDINGS LIMITED, FUHUIYUAN
      INTERNATIONAL GROUP 
	(HOLDINGS) LIMITED. AND THE SELLING SHAREHOLDERS AS SET
      OUT IN THE 
	SHARE EXCHANGE AGREEMENT 
	  
	PRIVECO INTELLECTUAL PROPERTY

	  	Identifier: 	Description: 
	1. 

	“FUHUIYUAN 
INTERNATIONAL
      GROUP 
(HOLDINGS) LIMITED” 	Common (corporate) Use

	SCHEDULE 7 
	FUHUIYUAN INTERNATIONAL HOLDINGS LIMITED, FUHUIYUAN
      INTERNATIONAL GROUP 
	(HOLDINGS) LIMITED. AND THE SELLING SHAREHOLDERS AS SET
      OUT IN THE 
	SHARE EXCHANGE AGREEMENT 
	  
	PRIVECO MATERIAL CONTRACTS

	  	With: 	Dated: 	Material Terms/Description:
	1. 	Qingdao Fuhuiyuan Investment Co. Ltd. 	June 30, 2013 	International Trade Agency Agreement
  

	SCHEDULE 8 
	FUHUIYUAN INTERNATIONAL HOLDINGS LIMITED, FUHUIYUAN
      INTERNATIONAL GROUP 
	(HOLDINGS) LIMITED. AND THE SELLING SHAREHOLDERS AS SET
      OUT IN THE 
	SHARE EXCHANGE AGREEMENT 
	  
	PRIVECO EMPLOYMENT AGREEMENTS AND ARRANGEMENTS
  

As of the date of this Agreement, the following hourly and
salaried employees of Priveco are reasonably necessary to operate the business
of Priveco as substantially presently operated:

None. 

	SCHEDULE 9 
	FUHUIYUAN INTERNATIONAL HOLDINGS LIMITED, FUHUIYUAN
      INTERNATIONAL GROUP 
	(HOLDINGS) LIMITED. AND THE SELLING SHAREHOLDERS AS SET
      OUT IN THE 
	SHARE EXCHANGE AGREEMENT 
	  
	SUBSIDIARIES 

Pubco:

	Name: 	Jurisdiction: 
	KWest Investments & Development Inc. 	Alberta, Canada 

Priveco:

None.ex10-1_17563.htm

EXHIBIT 10.1

 

Execution Version

SEVERANCE AGREEMENT

WITH COVENANTS

1.    PARTIES.

The parties to this Severance Agreement with Covenants (the “Agreement”) are PATRICK L. CHRISTOPHER and SCHNITZER STEEL INDUSTRIES, INC., an Oregon corporation (“Schnitzer”).

1.1 PATRICK L. CHRISTOPHER.

For the purposes of this Agreement, “Christopher” means Patrick L. Christopher, his attorneys, heirs, executors, administrators, assigns, and spouse (as applicable).

1.2 THE COMPANY.

For purposes of this Agreement the “Company” means Schnitzer, and all subsidiaries, affiliated companies and other business entities thereof, all predecessors and successors of each, and all of each entity’s officers, shareholders, directors, employees, agents, or assigns in their individual and representative capacities.

2.    BACKGROUND AND PURPOSE.

Christopher was employed by Schnitzer pursuant to an Employment Agreement effective March 13, 2012 (the “Employment Contract”). On August 10, 2013 Christopher communicated to Schnitzer the resignation of his employment and the parties hereby agree that Christopher’s employment with Schnitzer terminated on August 14, 2013 (the “Effective Date”). Christopher asserts that his resignation was a resignation for “good reason” pursuant to Section 5(b)(iv) of the Employment Contract. Schnitzer disputes that assertion. The parties are entering into this Agreement to settle fully and finally any and all claims Christopher may have against the Company, whether asserted or not, known or unknown, including, but not limited to, claims arising out of or related

 

  

  

  

to the Employment Contract, Christopher’s resignation or any other claims, whether asserted or not, known or unknown, past or future, that relate to the Employment Contract or Christopher’s employment with and resignation from Schnitzer.

3.    CONSIDERATION.

3.1  Schnitzer shall modify certain of Christopher’s outstanding equity awards which would otherwise be forfeited upon his resignation as follows:

a. Unvested restricted stock units which would have vested on June 1, 2014 but would otherwise be forfeited upon Christopher’s resignation shall be modified to vest on the first anniversary of the Effective Date as set forth in the modified award agreements attached as Exhibits 1-5; 

 

b. LTIP performance shares which would have vested on October 31, 2013 but would otherwise be forfeited upon Christopher’s resignation shall be modified to vest on the first anniversary of the Effective Date based on the level of performance during the performance period certified by the Compensation Committee of Schnitzer’s Board of Directors (the “Committee”) and shall be payable in accordance with the terms of the modified award agreement attached as Exhibit 6; 

 

c. NIR RSUs which would have vested during Schnitzer’s Fiscal 2014 but would otherwise be forfeited upon Christopher’s resignation shall be modified to vest as they mature based on the level of performance under the terms of the relevant award agreement certified by the Committee as set forth in the modified award agreements attached as Exhibits 7-9.

3.2  For the 12-month period commencing September 1, 2013, Schnitzer shall pay Christopher $2,620 each quarter in arrears, with the first payment due on or before December 15, 2013 and each subsequent payment due within 15 days of the end of the

 

  

2

  

quarter, which Christopher may elect to use to purchase medical, dental and vision benefits; provided, that Schnitzer shall not be obligated to make any payments to Christopher for any period that Christopher is receiving medical, dental or vision benefits from a subsequent employer during such 12-month period, and any such benefit actually received by Christopher shall be reported to Schnitzer.

3.3  Schnitzer shall pay Christopher a one time, lump sum severance payment of $125,000 (One Hundred Twenty-Five Thousand Dollars) in twelve regular monthly installments beginning on August 31, 2013; provided that the Company shall deduct from such payments the FICA taxes due with respect to the restricted stock units in Section 3.1(a) and the performance shares in Section 3.1(b).

3.4  Christopher shall be permitted to retain his current cell phone number. Schnitzer will cooperate in communicating with the telephone Company provider to ensure that Christopher is able to maintain this phone number.

3.5  On the Effective Date, Christopher’s vested options for 4,404 shares that expire November 29, 2015, unvested options for 14,803 shares having an August 28, 2014 vesting date, all other unvested equity awards and any right to any Fiscal 2013 AICP or other bonus payment are forfeited.

4.    CONTINUING OBLIGATIONS.

 

Christopher shall honor his obligations under this Agreement and his continuing obligations set forth in Sections 5, 7 and 8 of the Employment Contract.

5.    NONDISPARAGEMENT.

 

Christopher agrees that he will not disparage or make false or adverse statements about the Company or its officers and directors. Schnitzer shall report to Christopher any actions or statements that are attributed to Christopher and known to Schnitzer’s

 

  

3

  

executive management that Schnitzer believes are disparaging, false or adverse. Schnitzer agrees that it will not disparage or make false or adverse statements about Christopher. Christopher shall report to Schnitzer any actions or statements that are attributed to Schnitzer and known to Christopher that Christopher believes are disparaging, false or adverse.

6.    PROTECTED INFORMATION.

Should Christopher or his attorneys or agents be requested in any judicial, administrative, or other proceeding to disclose Protected Information (as defined in the Employment Contract), Christopher shall promptly notify Schnitzer of such request and provide Schnitzer an opportunity to appear and protect its interests.

7.    RELEASE.

 

Christopher hereby releases the Company from any and all claims, demands, actions, or causes of action, whether known or unknown, arising from or related in any way to any contract with or employment of Christopher by the Company, or any other past or future claim that relates in any way to Christopher’s employment, resignation, the Employment Contract, compensation or benefits, with the exception of any claim Christopher may have against Schnitzer for enforcement of this Agreement. This release includes any and all claims, direct or indirect, which might otherwise be made under any applicable local, state or federal authority, including but not limited to any claim arising under the state or local statutes where Christopher was employed by Schnitzer dealing with civil rights, employment, wage and hour, discrimination in employment, Employee Retirement Income Security Act (ERISA), Title VII of the Civil Rights Act of 1964, the Post-Civil War Civil Rights Act (42 U.S.C. §§ 1981-1988), the Civil Rights Act of 1991, the Americans With Disabilities Act, the Family and Medical Leave Act of 1993, the

 

  

4

  

Equal Pay Act of 1963, Executive Order 11246, the Rehabilitation Act of 1973, the Uniformed Services Employment and Reemployment Rights Act of 1994, the Worker Adjustment and Retraining Notification Act, the Age Discrimination in Employment Act, the Older Workers Benefit Protection Act, the Fair Labor Standards Act, all as amended, any regulations under such authorities, or any other applicable constitutional, statutory, contract, tort, or common law theories, except that Christopher does not hereby release Schnitzer from its obligations under this Agreement; its contribution and indemnification obligations, whether arising under this Agreement or otherwise; from any coverage under any policy of insurance providing indemnity and related costs for the benefit of Christopher; or for vested benefits under Schnitzer’s defined benefit pension plan. As a partial inducement to Christopher to provide the foregoing release, the Company confirms that as of the date of this Agreement, Schnitzer’s executive management is not aware of any claims or facts which would give rise to a claim by Schnitzer against Christopher.

8.    COVENANTS.

 

8.1 COVENANT NOT TO PROSECUTE OR MAINTAIN ANY ACTION OR PROCEEDING AGAINST COMPANY.

Christopher covenants not to prosecute or hereafter maintain or institute any action at law, suit or proceeding in equity, administrative or any proceeding of any kind or nature whatsoever against the Company for any reason related in any way to any claim released herein. Christopher further covenants and agrees that Christopher will not raise any claim against the Company by way of defense, counterclaim or cross-claim or in any other manner, on any alleged claim, demand, liability or cause of action released herein. Schnitzer covenants not to prosecute or hereafter maintain or institute any action at law, suit or proceeding in equity, administrative or any proceeding of any kind or 

 

  

5

  

nature whatsoever against Christopher for any reason related in any way to any claim released herein. Schnitzer further covenants and agrees that it will not raise any claim against Christopher by way of defense, counterclaim or cross-claim or in any other manner, on any alleged claim, demand, liability or cause of action released herein.

8.2  COOPERATION IN DEFENSE OF COMPANY; CONSULTATION.

Christopher covenants now and in the future that Christopher will assist the Company in good faith in the defense of any claim brought against the Company of which Christopher has any personal knowledge and the Company agrees it will reimburse Christopher reasonable out-of-pocket expenses in providing such assistance. In the event that this assistance requires more than eight hours of time in the course of a one-year period (excluding time spent testifying under a valid subpoena) the parties will negotiate reasonable compensation that is based on an amount that is roughly equivalent to Employee’s base salary under the Employment Contract, translated to a daily or hourly rate.

9.    SCOPE OF AGREEMENT.

 

The provisions of this Agreement shall be deemed to obligate, extend to, and inure to the benefit of the parties; to Schnitzer’s affiliates, successors, predecessors, assigns, directors, officers, and employees; and to each parties’ insurers, transferees, grantees, legatees, agents and heirs, including those who may assume any and all of the above-described capacities subsequent to the execution and effective date of this Agreement.

 

 

 

  

6

  

10.  OPPORTUNITY FOR ADVICE OF COUNSEL.

 

Christopher acknowledges that Christopher has been encouraged by Schnitzer to seek advice of counsel with respect to this Agreement and has had the opportunity to do so and has done so.

 

11.  SEVERABILITY.

 

Every provision of this Agreement is intended to be severable. In the event any term or provision of this Agreement is declared to be illegal or invalid for any reason whatsoever by a court of competent jurisdiction or by final and unappealed order of an administrative agency of competent jurisdiction, such illegality or invalidity should not affect the balance of the terms and provisions of this Agreement, which terms and provisions shall remain binding and enforceable.

 

12.  NO WAIVER.

 

Failure of either party to enforce any term of this Agreement shall not constitute a waiver of the party’s right to enforce that term or any other term of this Agreement.

 

13.  COSTS AND ATTORNEY’S FEES.

 

The parties each agree to bear their own costs and attorneys’ fees which have been or may be incurred in connection with any matter herein or in connection with the negotiation and consummation of this Agreement or any action to enforce the provisions of this Agreement.

 

14.  GOVERNING LAW.

 

The rights and obligations of the parties under this Agreement shall in all respects be governed by the laws of the United States and the State of Oregon.

 

 

 

 

  

7

  

 

15.  ENTIRE AGREEMENT; NO MODIFICATION.

 

This Agreement and Sections 5, 7 and 8 of the Employment Contract contain the entire agreement and understanding between the parties and supersedes and replaces all other prior negotiations and proposed agreements.  Christopher and Schnitzer acknowledge that no other party, nor agent nor attorney of any other party, has made any promise, representation, or warranty, express or implied, not contained in this Agreement concerning the subject matter of this Agreement or to induce this Agreement, and Christopher and Schnitzer acknowledge that they have not executed this Agreement in reliance upon any such promise, representation, or warranty not contained in this Agreement.  No modification or waiver of any of the provisions or any future representation, promise or addition shall be binding upon the parties unless made in writing and signed by the parties.

 

 

Dated:  August 27, 2013                                  

 

Name: /s/ Patrick L. Christopher                    

            PATRICK L. CHRISTOPHER 

 

 

 

SCHNITZER STEEL INDUSTRIES, INC.

 

By:  /s/ Richard C. Josephson                        

 

Its:  Senior Vice President                               

 

 

 

 

  

8

  

Exhibit 1

to Severance Agreement with Covenants

Between Patrick Christopher and Schnitzer Steel Industries, Inc.

 

AMENDED AND RESTATED RESTRICTED STOCK UNIT AWARD AGREEMENT

 

Pursuant to Section 8 of the 1993 Stock Incentive Plan (the “Plan”) of Schnitzer Steel Industries, Inc., an Oregon corporation (the “Company”), on July 28, 2009, the Compensation Committee of the Board of Directors of the Company authorized and granted to Patrick L. Christopher (the “Recipient”) an award of restricted stock units with respect to the Company’s Class A Common Stock (“Common Stock”), subject to the terms and conditions of a Restricted Stock Unit Award Agreement between the Company and the Recipient covering the award (the “Original Agreement”). In connection with the termination of the Recipient’s employment on August 14, 2013 and pursuant to the terms of that certain Severance Agreement with Covenants dated August __, 2013, the parties desire to modify the Original Agreement. 

 

Now, therefore, the parties agree to amend, restate and supersede the Original Agreement in its entirety as follows (as amended, the “Agreement”):

1. Award and Terms of Restricted Stock Units. The Company awards to the Recipient under the Plan 2,789 restricted stock units (the “Award”), subject to the restrictions, terms and conditions set forth in this Agreement. 

(a) Rights under Restricted Stock Units. A restricted stock unit (a “RSU”) obligates the Company, upon vesting in accordance with this Agreement, to issue to the Recipient one share of Common Stock for each RSU. The number of shares of Common Stock issuable with respect to each RSU is subject to adjustment as determined by the Board of Directors of the Company as to the number and kind of shares of stock deliverable upon any merger, reorganization, consolidation, recapitalization, stock dividend, spin-off or other change in the corporate structure affecting the Common Stock generally.

(b) Vesting Date. The RSUs awarded under this Agreement shall initially be 100% unvested and subject to forfeiture. Subject to Sections 1(c), (d), (e) and (f), 20% of the RSUs vested on each of June 1, 2010, June 1, 2011, June 1, 2012 and June 1, 2013. In addition, subject to Sections 1(c), (d) and (e), 558 RSUs (the “Severance RSUs”) shall vest on August 14, 2014, and the Severance RSUs shall not terminate under Section 1(f) as a result of Recipient’s termination of employment.

(c) Acceleration on Death or Disability. If the Recipient dies or becomes disabled, the Severance RSUs shall become immediately vested. The term “disabled” means the inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months.

(d) Certain Transactions. Notwithstanding any provision in this Agreement (but subject to the last sentence of this Section 1(d)), in the event of dissolution of the Company or a merger, consolidation or plan of exchange affecting the Company, the Compensation Committee of the Board of Directors (the “Compensation Committee”) may, in its sole discretion

 

  

  

  

and to the extent possible under the structure of the applicable transaction, select one or a combination of the following alternatives for treating this Award of RSUs: 

(i) The Award shall remain in effect in accordance with its terms;

(ii) All or a portion of the RSUs shall, to the extent then still subject to the vesting restrictions, be released from the vesting restrictions in connection with the closing of the applicable transaction; or

(iii) The RSUs shall be converted into restricted stock units or restricted stock of one or more of the corporations that are the surviving or acquiring corporations in the applicable transaction. The amount and type of converted restricted stock units or restricted stock shall be determined by the Company, taking into account the relative values of the companies involved in the applicable transaction and the exchange rate, if any, used in determining shares of the surviving corporation(s) to be held by holders of shares of the Company following the applicable transaction. Unless otherwise determined by the Company, by action of the Compensation Committee, the converted restricted stock units or restricted stock shall continue to be subject to the forfeiture provisions applicable to the RSUs at the time of the applicable transaction. 

 

Notwithstanding the foregoing provisions of this Section 1(d) to the contrary, no such alternative shall occur with respect to the RSUs to the extent that, if it did, a 20% tax would be imposed under Section 409A of the Internal Revenue Code on the Recipient.

(e) Special Acceleration in Certain Events. Notwithstanding any other provision in this Agreement, upon a change in control of the Company, the Severance RSUs shall become immediately vested. The term “change in control of the Company” means the occurrence of any of the following events:

(i) The consummation of:

 

(A) any consolidation, merger or plan of share exchange involving the Company (a “Merger”) as a result of which the holders of outstanding securities of the Company ordinarily having the right to vote for the election of directors (“Voting Securities”) immediately prior to the Merger do not continue to hold at least 50% of the combined voting power of the outstanding Voting Securities of the surviving corporation or a parent corporation of the surviving corporation immediately after the Merger, disregarding any Voting Securities issued to or retained by such holders in respect of securities of any other party to the Merger; or

 

(B) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, the assets of the Company;

(ii) At any time during a period of two consecutive years, individuals who at the beginning of such period constituted the Board of Directors of the Company (“Incumbent Directors”) shall cease for any reason to constitute at least a majority thereof;

 

  

2

  

provided, however, that the term “Incumbent Director” shall also include each new director elected during such two-year period whose nomination or election was approved by two-thirds of the Incumbent Directors then in office; or

(iii) Any person shall, as a result of a tender or exchange offer, open market purchases or privately negotiated purchases from anyone other than the Company, have become the beneficial owner (within the meaning of Rule 13d-3 under the Securities Exchange Act of 1934), directly or indirectly, of Voting Securities representing 20% or more of the combined voting power of the then outstanding Voting Securities. For purposes of this Section 1(e), the term “person” means and includes any individual, corporation, partnership, group, association or other “person,” as such term is used in Section 14(d) of the Securities Exchange Act of 1934, other than the Company or any employee benefit plan sponsored by the Company. 

 

Notwithstanding anything in this Section 1(e) to the contrary, no event shall be considered a change in control of the Company for purposes of this Agreement if the event is not also a “change in ownership,” “change in effective control,” or “change in ownership of a substantial portion of the assets” as those terms are defined in Treas Reg §1.409A-3(i)(5).

 

Notwithstanding anything in this Section 1(e) to the contrary, unless otherwise determined by the Board of Directors of the Company, no change in control of the Company shall be deemed to have occurred for purposes of this Agreement if (1) the Recipient acquires (other than on the same basis as all other holders of shares of Common Stock of the Company) an equity interest in an entity that acquires the Company in a change in control of the Company otherwise described under subparagraph (i) of this Section 1(e), or (2) the Recipient is part of a group that constitutes a person which becomes a beneficial owner of Voting Securities in a transaction that otherwise would have resulted in a change in control of the Company under subparagraph (iii) of this Section 1(e).

(f) Forfeiture of RSUs on Termination of Service. If the Recipient ceases to be an employee of the Company or a parent or subsidiary of the Company under circumstances where the RSUs have not previously vested and do not become vested pursuant to Section 1(c) or 1(d), the Recipient shall immediately forfeit all outstanding but unvested RSUs awarded pursuant to this Agreement and the Recipient shall have no right to receive the related Common Stock; provided, however, that the Severance RSUs shall not be forfeited under this section.

(g) Restrictions on Transfer. The Recipient may not sell, transfer, assign, pledge or otherwise encumber or dispose of the RSUs subject to this Agreement. The Recipient may designate beneficiaries to receive the shares of Common Stock underlying the RSUs subject to this Agreement if the Recipient dies before delivery of the shares of Common Stock by so indicating on a form supplied by the Company. If the Recipient fails to designate a beneficiary, such Common Stock will be delivered to the person or persons establishing rights of ownership by will or under the laws of descent and distribution.

(h) No Voting Rights; Dividends. The Recipient shall have no rights as a shareholder with respect to the RSUs or the Common Stock underlying the RSUs until the underlying Common Stock is issued to the Recipient. The Recipient will be entitled to receive

 

  

3

  

any cash dividends declared on the Common Stock underlying the RSUs after the RSUs have vested and the Common Stock has been issued. The Company shall accrue and pay to the Recipient on the vesting of the RSUs an amount in cash equal to dividends that would have been paid on the Common Stock underlying the RSUs after the date of the issuance of the RSUs. No interest shall be paid by the Company on accrued amounts.

(i) Delivery Date for the Shares Underlying the RSUs. As soon as practicable, but in no event later than thirty days, following a date on which any RSUs vest, the Company will issue the Recipient the Common Stock underlying the then vested RSUs in the form of uncertificated shares in book entry form. The shares of Common Stock will be issued in the Recipient’s name or, in the event of the Recipient’s death, in the name of either (i) the beneficiary designated by the Recipient on a form supplied by the Company or (ii) if the Recipient has not designated a beneficiary, the person or persons establishing rights of ownership by will or under the laws of descent and distribution.

(j) Taxes and Tax Withholding. The Recipient acknowledges and agrees that no election under Section 83(b) of the Internal Revenue Code can or will be made with respect to the RSUs. The Recipient acknowledges that, except as provided below, on each date that shares underlying the RSUs are issued to the Recipient (the “Payment Date”), the Value (as defined below) on that date of the shares so issued will be treated as ordinary compensation income for federal and state income and FICA tax purposes, and that the Company will be required to withhold taxes on these income amounts. To satisfy the required minimum withholding amount, the Company shall withhold from the shares otherwise issuable the number of shares having a Value equal to the minimum withholding amount. For purposes of this Section 6, the “Value” of a share shall be equal to the closing market price for the Common Stock on the last trading day preceding the Payment Date. The Recipient acknowledges that under current tax law, the Company is required to withhold FICA taxes with respect to the Severance RSUs on the date of this amended and restated Agreement. To satisfy the required FICA withholding, the Recipient shall, immediately upon notification of the amount due, pay to the Company in cash or by check amounts necessary to satisfy applicable FICA withholding requirements. If the Recipient fails to pay the amount demanded, the Company or the Recipient’s employer may withhold that amount from other amounts payable to the Recipient, including salary, subject to applicable law.

(k) Not a Contract of Employment. Nothing in the Plan or this Agreement shall confer upon Recipient any right to be continued in the employment of the Company or any parent or subsidiary of the Company, or to interfere in any way with the right of the Company or any parent or subsidiary by whom Recipient is employed to terminate Recipient’s employment at any time or for any reason, with or without cause, or to decrease Recipient’s compensation or benefits.

2.  Miscellaneous.

 

(a) Entire Agreement; Amendment. This Agreement and the Plan constitute the entire agreement of the parties with regard to the subjects hereof.

 

  

4

  

(b) Interpretation of the Plan and the Agreement. The Compensation Committee shall have the sole authority to interpret the provisions of this Agreement and the Plan and all determinations by it shall be final and conclusive. 

(c) Electronic Delivery. The Recipient consents to the electronic delivery of notices and any prospectus and any other documents relating to this Award in lieu of mailing or other form of delivery.

(d) Rights and Benefits. The rights and benefits of this Agreement shall inure to the benefit of and be enforceable by the Company’s successors and assigns and, subject to the restrictions on transfer of this Agreement, be binding upon the Recipient’s heirs, executors, administrators, successors and assigns.

(e) Further Action. The parties agree to execute such instruments and to take such action as may reasonably be necessary to carry out the intent of this Agreement.

(f) Governing Law. This Agreement and the Plan will be interpreted under the laws of the state of Oregon, exclusive of choice of law rules.

 

 

Dated: _________________

 

 

_______________________________

Patrick L. Christopher

 

 

 

 

 

 

SCHNITZER STEEL INDUSTRIES, INC.

 

 

By:  ____________________________

        Authorized Officer

 

 

 

  

5

  

Exhibit 2

to Severance Agreement with Covenants

Between Patrick Christopher and Schnitzer Steel Industries, Inc.

 

AMENDED AND RESTATED RESTRICTED STOCK UNIT AWARD AGREEMENT

Pursuant to Section 8 of the 1993 Stock Incentive Plan (the “Plan”) of Schnitzer Steel Industries, Inc., an Oregon corporation (the “Company”), on July 27, 2010, the Compensation Committee of the Board of Directors of the Company authorized and granted to Patrick L. Christopher (the “Recipient”) an award of restricted stock units with respect to the Company’s Class A Common Stock (“Common Stock”), subject to the terms and conditions of a Restricted Stock Unit Award Agreement between the Company and the Recipient covering the award (the “Original Agreement”). In connection with the termination of the Recipient’s employment on August 14, 2013 and pursuant to the terms of that certain Severance Agreement with Covenants dated August __, 2013, the parties desire to modify the Original Agreement. 

 

Now, therefore, the parties agree to amend, restate and supersede the Original Agreement in its entirety as follows (as amended, the “Agreement”):

1.   Award and Terms of Restricted Stock Units. The Company awards to the Recipient under the Plan 3,317 restricted stock units (the “Award”), subject to the restrictions, terms and conditions set forth in this Agreement.

(a) Rights under Restricted Stock Units. A restricted stock unit (a “RSU”) obligates the Company, upon vesting in accordance with this Agreement, to issue to the Recipient one share of Common Stock for each RSU. The number of shares of Common Stock issuable with respect to each RSU is subject to adjustment as determined by the Board of Directors of the Company as to the number and kind of shares of stock deliverable upon any merger, reorganization, consolidation, recapitalization, stock dividend, spin-off or other change in the corporate structure affecting the Common Stock generally.

(b) Vesting Date. The RSUs awarded under this Agreement shall initially be 100% unvested and subject to forfeiture. Subject to Sections 1(c), (d), (e) and (f), 20% of the RSUs vested on each of June 1, 2011, June 1, 2012 and June 1, 2013. In addition, subject to Sections 1(c), (d) and (e), 663 RSUs (the “Severance RSUs”) shall vest on August 14, 2014, and the Severance RSUs shall not terminate under Section 1(f) as a result of Recipient’s termination of employment. For the avoidance of doubt, 664 RSUs granted under the Original Agreement were irrevocably forfeited under Section 1(f) as a result of Recipient’s termination of employment.

(c) Acceleration on Death or Disability. If the Recipient dies or becomes disabled, the Severance RSUs shall become immediately vested. The term “disabled” means the inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months.

(d) Certain Transactions. Notwithstanding any provision in this Agreement (but subject to the last sentence of this Section 1(d)), in the event of dissolution of the Company

 

  

  

  

or a merger, consolidation or plan of exchange affecting the Company, the Compensation Committee of the Board of Directors (the “Compensation Committee”) may, in its sole discretion and to the extent possible under the structure of the applicable transaction, select one or a combination of the following alternatives for treating this Award of RSUs: 

(i) The Award shall remain in effect in accordance with its terms;

(ii) All or a portion of the RSUs shall, to the extent then still subject to the vesting restrictions, be released from the vesting restrictions in connection with the closing of the applicable transaction; or

(iii) The RSUs shall be converted into restricted stock units or restricted stock of one or more of the corporations that are the surviving or acquiring corporations in the applicable transaction. The amount and type of converted restricted stock units or restricted stock shall be determined by the Company, taking into account the relative values of the companies involved in the applicable transaction and the exchange rate, if any, used in determining shares of the surviving corporation(s) to be held by holders of shares of the Company following the applicable transaction. Unless otherwise determined by the Company, by action of the Compensation Committee, the converted restricted stock units or restricted stock shall continue to be subject to the forfeiture provisions applicable to the RSUs at the time of the applicable transaction. 

 

Notwithstanding the foregoing provisions of this Section 1(d) to the contrary, no such alternative shall occur with respect to the RSUs to the extent that, if it did, a 20% tax would be imposed under Section 409A of the Internal Revenue Code on the Recipient.

(e) Special Acceleration in Certain Events. Notwithstanding any other provision in this Agreement, upon a change in control of the Company, the Severance RSUs shall become immediately vested. The term “change in control of the Company” means the occurrence of any of the following events:

(i) The consummation of:

(A) any consolidation, merger or plan of share exchange involving the Company (a “Merger”) as a result of which the holders of outstanding securities of the Company ordinarily having the right to vote for the election of directors (“Voting Securities”) immediately prior to the Merger do not continue to hold at least 50% of the combined voting power of the outstanding Voting Securities of the surviving corporation or a parent corporation of the surviving corporation immediately after the Merger, disregarding any Voting Securities issued to or retained by such holders in respect of securities of any other party to the Merger; or

(B) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, the assets of the Company;

 

  

2

  

(ii) At any time during a period of two consecutive years, individuals who at the beginning of such period constituted the Board of Directors of the Company (“Incumbent Directors”) shall cease for any reason to constitute at least a majority thereof; provided, however, that the term “Incumbent Director” shall also include each new director elected during such two-year period whose nomination or election was approved by two-thirds of the Incumbent Directors then in office; or

(iii) Any person shall, as a result of a tender or exchange offer, open market purchases or privately negotiated purchases from anyone other than the Company, have become the beneficial owner (within the meaning of Rule 13d-3 under the Securities Exchange Act of 1934), directly or indirectly, of Voting Securities representing 20% or more of the combined voting power of the then outstanding Voting Securities. For purposes of this Section 1(e), the term “person” means and includes any individual, corporation, partnership, group, association or other “person,” as such term is used in Section 14(d) of the Securities Exchange Act of 1934, other than the Company or any employee benefit plan sponsored by the Company. 

 

Notwithstanding anything in this Section 1(e) to the contrary, no event shall be considered a change in control of the Company for purposes of this Agreement if the event is not also a “change in ownership,” “change in effective control,” or “change in ownership of a substantial portion of the assets” as those terms are defined in Treas Reg §1.409A-3(i)(5). 

 

Notwithstanding anything in this Section 1(e) to the contrary, unless otherwise determined by the Board of Directors of the Company, no change in control of the Company shall be deemed to have occurred for purposes of this Agreement if (1) the Recipient acquires (other than on the same basis as all other holders of shares of Common Stock of the Company) an equity interest in an entity that acquires the Company in a change in control of the Company otherwise described under subparagraph (i) of this Section 1(e), or (2) the Recipient is part of a group that constitutes a person which becomes a beneficial owner of Voting Securities in a transaction that otherwise would have resulted in a change in control of the Company under subparagraph (iii) of this Section 1(e).

(f) Forfeiture of RSUs on Termination of Service. If the Recipient ceases to be an employee of the Company or a parent or subsidiary of the Company under circumstances where the RSUs have not previously vested and do not become vested pursuant to Section 1(c) or 1(d), the Recipient shall immediately forfeit all outstanding but unvested RSUs awarded pursuant to this Agreement and the Recipient shall have no right to receive the related Common Stock; provided, however, that the Severance RSUs shall not be forfeited under this section.

(g) Restrictions on Transfer. The Recipient may not sell, transfer, assign, pledge or otherwise encumber or dispose of the RSUs subject to this Agreement. The Recipient may designate beneficiaries to receive the shares of Common Stock underlying the RSUs subject to this Agreement if the Recipient dies before delivery of the shares of Common Stock by so indicating on a form supplied by the Company. If the Recipient fails to designate a beneficiary, such Common Stock will be delivered to the person or persons establishing rights of ownership by will or under the laws of descent and distribution.

 

  

3

  

(h) No Voting Rights; Dividends. The Recipient shall have no rights as a shareholder with respect to the RSUs or the Common Stock underlying the RSUs until the underlying Common Stock is issued to the Recipient. The Recipient will be entitled to receive any cash dividends declared on the Common Stock underlying the RSUs after the RSUs have vested and the Common Stock has been issued. The Company shall accrue and pay to the Recipient on the vesting of the RSUs an amount in cash equal to dividends that would have been paid on the Common Stock underlying the RSUs after the date of the issuance of the RSUs. No interest shall be paid by the Company on accrued amounts.

(i) Delivery Date for the Shares Underlying the RSUs. As soon as practicable, but in no event later than thirty days, following a date on which any RSUs vest, the Company will issue the Recipient the Common Stock underlying the then vested RSUs in the form of uncertificated shares in book entry form. The shares of Common Stock will be issued in the Recipient’s name or, in the event of the Recipient’s death, in the name of either (i) the beneficiary designated by the Recipient on a form supplied by the Company or (ii) if the Recipient has not designated a beneficiary, the person or persons establishing rights of ownership by will or under the laws of descent and distribution.

(j) Taxes and Tax Withholding. The Recipient acknowledges and agrees that no election under Section 83(b) of the Internal Revenue Code can or will be made with respect to the RSUs. The Recipient acknowledges that, except as provided below, on each date that shares underlying the RSUs are issued to the Recipient (the “Payment Date”), the Value (as defined below) on that date of the shares so issued will be treated as ordinary compensation income for federal and state income and FICA tax purposes, and that the Company will be required to withhold taxes on these income amounts. To satisfy the required minimum withholding amount, the Company shall withhold from the shares otherwise issuable the number of shares having a Value equal to the minimum withholding amount. For purposes of this Section 6, the “Value” of a share shall be equal to the closing market price for the Common Stock on the last trading day preceding the Payment Date. The Recipient acknowledges that under current tax law, the Company is required to withhold FICA taxes with respect to the Severance RSUs on the date of this amended and restated Agreement. To satisfy the required FICA withholding, the Recipient shall, immediately upon notification of the amount due, pay to the Company in cash or by check amounts necessary to satisfy applicable FICA withholding requirements. If the Recipient fails to pay the amount demanded, the Company or the Recipient’s employer may withhold that amount from other amounts payable to the Recipient, including salary, subject to applicable law.

(k) Not a Contract of Employment. Nothing in the Plan or this Agreement shall confer upon Recipient any right to be continued in the employment of the Company or any parent or subsidiary of the Company, or to interfere in any way with the right of the Company or any parent or subsidiary by whom Recipient is employed to terminate Recipient’s employment at any time or for any reason, with or without cause, or to decrease Recipient’s compensation or benefits.

2.   Miscellaneous.

(a) Entire Agreement; Amendment. This Agreement and the Plan constitute the entire agreement of the parties with regard to the subjects hereof.

 

  

4

  

(b) Interpretation of the Plan and the Agreement. The Compensation Committee shall have the sole authority to interpret the provisions of this Agreement and the Plan and all determinations by it shall be final and conclusive.

(c) Electronic Delivery. The Recipient consents to the electronic delivery of notices and any prospectus and any other documents relating to this Award in lieu of mailing or other form of delivery.

(d) Rights and Benefits. The rights and benefits of this Agreement shall inure to the benefit of and be enforceable by the Company’s successors and assigns and, subject to the restrictions on transfer of this Agreement, be binding upon the Recipient’s heirs, executors, administrators, successors and assigns.

(e) Further Action. The parties agree to execute such instruments and to take such action as may reasonably be necessary to carry out the intent of this Agreement.

(f) Governing Law. This Agreement and the Plan will be interpreted under the laws of the state of Oregon, exclusive of choice of law rules.

 

 

 

Dated: _________________

 

 

_______________________________

Patrick L. Christopher

 

 

 

 

 

 

SCHNITZER STEEL INDUSTRIES, INC.

 

 

By:  ____________________________

        Authorized Officer

 

 

  

5

  

Exhibit 3

to Severance Agreement with Covenants

Between Patrick Christopher and Schnitzer Steel Industries, Inc.

AMENDED AND RESTATED RESTRICTED STOCK UNIT AWARD AGREEMENT

Pursuant to Section 8 of the 1993 Stock Incentive Plan (the “Plan”) of Schnitzer Steel Industries, Inc., an Oregon corporation (the “Company”), on July 26, 2011, the Compensation Committee of the Board of Directors of the Company authorized and granted to Patrick L. Christopher (the “Recipient”) an award of restricted stock units with respect to the Company’s Class A Common Stock (“Common Stock”), subject to the terms and conditions of a Restricted Stock Unit Award Agreement between the Company and the Recipient covering the award (the “Original Agreement”). In connection with the termination of the Recipient’s employment on August 14, 2013 and pursuant to the terms of that certain Severance Agreement with Covenants dated August __, 2013, the parties desire to modify the Original Agreement. 

 

Now, therefore, the parties agree to amend, restate and supersede the Original Agreement in its entirety as follows (as amended, the “Agreement”):

1.  Award and Terms of Restricted Stock Units. The Company awards to the Recipient under the Plan 3,287 restricted stock units (the “Award”), subject to the restrictions, terms and conditions set forth in this Agreement.

(a) Rights under Restricted Stock Units. A restricted stock unit (a “RSU”) obligates the Company, upon vesting in accordance with this Agreement, to issue to the Recipient one share of Common Stock for each RSU. The number of shares of Common Stock issuable with respect to each RSU is subject to adjustment as determined by the Board of Directors of the Company as to the number and kind of shares of stock deliverable upon any merger, reorganization, consolidation, recapitalization, stock dividend, spin-off or other change in the corporate structure affecting the Common Stock generally.

(b) Vesting Date. The RSUs awarded under this Agreement shall initially be 100% unvested and subject to forfeiture. Subject to Sections 1(c), (d), (e) and (f), 20% of the RSUs vested on each of June 1, 2012 and June 1, 2013. In addition, subject to Sections 1(c), (d) and (e), 658 RSUs (the “Severance RSUs”) shall vest on August 14, 2014, and the Severance RSUs shall not terminate under Section 1(f) as a result of Recipient’s termination of employment. For the avoidance of doubt, 1,315 RSUs granted under the Original Agreement were irrevocably forfeited under Section 1(f) as a result of Recipient’s termination of employment.

(c) Acceleration on Death or Disability. If the Recipient dies or becomes disabled, the Severance RSUs shall become immediately vested. The term “disabled” means the inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months.

(d) Certain Transactions. Notwithstanding any provision in this Agreement (but subject to the last sentence of this Section 1(d)), in the event of dissolution of the Company

 

  

  

  

or a merger, consolidation or plan of exchange affecting the Company, the Compensation Committee of the Board of Directors (the “Compensation Committee”) may, in its sole discretion and to the extent possible under the structure of the applicable transaction, select one or a combination of the following alternatives for treating this Award of RSUs:

(i) The Award shall remain in effect in accordance with its terms;

(ii) All or a portion of the RSUs shall, to the extent then still subject to the vesting restrictions, be released from the vesting restrictions in connection with the closing of the applicable transaction; or

(iii) The RSUs shall be converted into restricted stock units or restricted stock of one or more of the corporations that are the surviving or acquiring corporations in the applicable transaction. The amount and type of converted restricted stock units or restricted stock shall be determined by the Company, taking into account the relative values of the companies involved in the applicable transaction and the exchange rate, if any, used in determining shares of the surviving corporation(s) to be held by holders of shares of the Company following the applicable transaction. Unless otherwise determined by the Company, by action of the Compensation Committee, the converted restricted stock units or restricted stock shall continue to be subject to the forfeiture provisions applicable to the RSUs at the time of the applicable transaction.

Notwithstanding the foregoing provisions of this Section 1(d) to the contrary, no such alternative shall occur with respect to the RSUs to the extent that, if it did, a 20% tax would be imposed under Section 409A of the Internal Revenue Code on the Recipient.

(e) Special Acceleration in Certain Events. Notwithstanding any other provision in this Agreement, upon a change in control of the Company, the Severance RSUs shall become immediately vested. The term “change in control of the Company” means the occurrence of any of the following events:

(i) The consummation of:

(A) any consolidation, merger or plan of share exchange involving the Company (a “Merger”) as a result of which the holders of outstanding securities of the Company ordinarily having the right to vote for the election of directors (“Voting Securities”) immediately prior to the Merger do not continue to hold at least 50% of the combined voting power of the outstanding Voting Securities of the surviving corporation or a parent corporation of the surviving corporation immediately after the Merger, disregarding any Voting Securities issued to or retained by such holders in respect of securities of any other party to the Merger; or

(B) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, the assets of the Company;

(ii) At any time during a period of two consecutive years, individuals

 

  

2

  

who at the beginning of such period constituted the Board of Directors of the Company (“Incumbent Directors”) shall cease for any reason to constitute at least a majority thereof; provided, however, that the term “Incumbent Director” shall also include each new director elected during such two-year period whose nomination or election was approved by two-thirds of the Incumbent Directors then in office; or

(iii) Any person shall, as a result of a tender or exchange offer, open market purchases or privately negotiated purchases from anyone other than the Company, have become the beneficial owner (within the meaning of Rule 13d-3 under the Securities Exchange Act of 1934), directly or indirectly, of Voting Securities representing 20% or more of the combined voting power of the then outstanding Voting Securities. For purposes of this Section 1(e), the term “person” means and includes any individual, corporation, partnership, group, association or other “person,” as such term is used in Section 14(d) of the Securities Exchange Act of 1934, other than the Company or any employee benefit plan sponsored by the Company. 

 

Notwithstanding anything in this Section 1(e) to the contrary, no event shall be considered a change in control of the Company for purposes of this Agreement if the event is not also a “change in ownership,” “change in effective control,” or “change in ownership of a substantial portion of the assets” as those terms are defined in Treas Reg §1.409A-3(i)(5). 

 

Notwithstanding anything in this Section 1(e) to the contrary, unless otherwise determined by the Board of Directors of the Company, no change in control of the Company shall be deemed to have occurred for purposes of this Agreement if (1) the Recipient acquires (other than on the same basis as all other holders of shares of Common Stock of the Company) an equity interest in an entity that acquires the Company in a change in control of the Company otherwise described under subparagraph (i) of this Section 1(e), or (2) the Recipient is part of a group that constitutes a person which becomes a beneficial owner of Voting Securities in a transaction that otherwise would have resulted in a change in control of the Company under subparagraph (iii) of this Section 1(e).

(f) Forfeiture of RSUs on Termination of Service. If the Recipient ceases to be an employee of the Company or a parent or subsidiary of the Company under circumstances where the RSUs have not previously vested and do not become vested pursuant to Section 1(c) or 1(d), the Recipient shall immediately forfeit all outstanding but unvested RSUs awarded pursuant to this Agreement and the Recipient shall have no right to receive the related Common Stock; provided, however, that the Severance RSUs shall not be forfeited under this section.

(g) Restrictions on Transfer. The Recipient may not sell, transfer, assign, pledge or otherwise encumber or dispose of the RSUs subject to this Agreement. The Recipient may designate beneficiaries to receive the shares of Common Stock underlying the RSUs subject to this Agreement if the Recipient dies before delivery of the shares of Common Stock by so indicating on a form supplied by the Company. If the Recipient fails to designate a beneficiary, such Common Stock will be delivered to the person or persons establishing rights of ownership by will or under the laws of descent and distribution.

(h) No Voting Rights; Dividends. The Recipient shall have no rights as a

 

  

3

  

shareholder with respect to the RSUs or the Common Stock underlying the RSUs until the underlying Common Stock is issued to the Recipient. The Recipient will be entitled to receive any cash dividends declared on the Common Stock underlying the RSUs after the RSUs have vested and the Common Stock has been issued. The Company shall accrue and pay to the Recipient on the vesting of the RSUs an amount in cash equal to dividends that would have been paid on the Common Stock underlying the RSUs after the date of the issuance of the RSUs. No interest shall be paid by the Company on accrued amounts.

(i) Delivery Date for the Shares Underlying the RSUs. As soon as practicable, but in no event later than thirty days, following a date on which any RSUs vest, the Company will issue the Recipient the Common Stock underlying the then vested RSUs in the form of uncertificated shares in book entry form. The shares of Common Stock will be issued in the Recipient’s name or, in the event of the Recipient’s death, in the name of either (i) the beneficiary designated by the Recipient on a form supplied by the Company or (ii) if the Recipient has not designated a beneficiary, the person or persons establishing rights of ownership by will or under the laws of descent and distribution.

(j) Taxes and Tax Withholding. The Recipient acknowledges and agrees that no election under Section 83(b) of the Internal Revenue Code can or will be made with respect to the RSUs. The Recipient acknowledges that, except as provided below, on each date that shares underlying the RSUs are issued to the Recipient (the “Payment Date”), the Value (as defined below) on that date of the shares so issued will be treated as ordinary compensation income for federal and state income and FICA tax purposes, and that the Company will be required to withhold taxes on these income amounts. To satisfy the required minimum withholding amount, the Company shall withhold from the shares otherwise issuable the number of shares having a Value equal to the minimum withholding amount. For purposes of this Section 6, the “Value” of a share shall be equal to the closing market price for the Common Stock on the last trading day preceding the Payment Date. The Recipient acknowledges that under current tax law, the Company is required to withhold FICA taxes with respect to the Severance RSUs on the date of this amended and restated Agreement. To satisfy the required FICA withholding, the Recipient shall, immediately upon notification of the amount due, pay to the Company in cash or by check amounts necessary to satisfy applicable FICA withholding requirements. If the Recipient fails to pay the amount demanded, the Company or the Recipient’s employer may withhold that amount from other amounts payable to the Recipient, including salary, subject to applicable law.

(k) Not a Contract of Employment. Nothing in the Plan or this Agreement shall confer upon Recipient any right to be continued in the employment of the Company or any parent or subsidiary of the Company, or to interfere in any way with the right of the Company or any parent or subsidiary by whom Recipient is employed to terminate Recipient’s employment at any time or for any reason, with or without cause, or to decrease Recipient’s compensation or benefits.

2.   Miscellaneous.

 

(a) Entire Agreement; Amendment. This Agreement and the Plan constitute the entire agreement of the parties with regard to the subjects hereof.

 

  

4

  

(b) Interpretation of the Plan and the Agreement. The Compensation Committee shall have the sole authority to interpret the provisions of this Agreement and the Plan and all determinations by it shall be final and conclusive.

(c) Electronic Delivery. The Recipient consents to the electronic delivery of notices and any prospectus and any other documents relating to this Award in lieu of mailing or other form of delivery.

(d) Rights and Benefits. The rights and benefits of this Agreement shall inure to the benefit of and be enforceable by the Company’s successors and assigns and, subject to the restrictions on transfer of this Agreement, be binding upon the Recipient’s heirs, executors, administrators, successors and assigns.

(e) Further Action. The parties agree to execute such instruments and to take such action as may reasonably be necessary to carry out the intent of this Agreement.

(f) Governing Law. This Agreement and the Plan will be interpreted under the laws of the state of Oregon, exclusive of choice of law rules.

 

 

Dated: _________________

 

 

_______________________________

Patrick L. Christopher

 

 

 

 

 

 

SCHNITZER STEEL INDUSTRIES, INC.

 

 

By:  ____________________________

        Authorized Officer

 

 

 

 

  

5

  

Exhibit 4

to Severance Agreement with Covenants

Between Patrick Christopher and Schnitzer Steel Industries, Inc.

AMENDED AND RESTATED RESTRICTED STOCK UNIT AWARD AGREEMENT

Pursuant to Section 8 of the 1993 Stock Incentive Plan (the “Plan”) of Schnitzer Steel Industries, Inc., an Oregon corporation (the “Company”), on November 21, 2011, the Compensation Committee of the Board of Directors of the Company authorized and granted to Patrick L. Christopher (the “Recipient”) an award of restricted stock units with respect to the Company’s Class A Common Stock (“Common Stock”), subject to the terms and conditions of a Restricted Stock Unit Award Agreement between the Company and the Recipient covering the award (the “Original Agreement”). In connection with the termination of the Recipient’s employment on August 14, 2013 and pursuant to the terms of that certain Severance Agreement with Covenants dated August __, 2013, the parties desire to modify the Original Agreement. 

 

Now, therefore, the parties agree to amend, restate and supersede the Original Agreement in its entirety as follows (as amended, the “Agreement”):

1. Award and Terms of Restricted Stock Units. The Company awards to the Recipient under the Plan 3,287 restricted stock units (the “Award”), subject to the restrictions, terms and conditions set forth in this Agreement.

(a) Rights under Restricted Stock Units. A restricted stock unit (a “RSU”) obligates the Company, upon vesting in accordance with this Agreement, to issue to the Recipient one share of Common Stock for each RSU. The number of shares of Common Stock issuable with respect to each RSU is subject to adjustment as determined by the Board of Directors of the Company as to the number and kind of shares of stock deliverable upon any merger, reorganization, consolidation, recapitalization, stock dividend, spin-off or other change in the corporate structure affecting the Common Stock generally.

(b) Vesting Date. The RSUs awarded under this Agreement shall initially be 100% unvested and subject to forfeiture. Subject to Sections 1(c), (d), (e) and (f), 20% of the RSUs vested on each of June 1, 2012 and June 1, 2013. In addition, subject to Sections 1(c), (d) and (e), 658 RSUs (the “Severance RSUs”) shall vest on August 14, 2014, and the Severance RSUs shall not terminate under Section 1(f) as a result of Recipient’s termination of employment. For the avoidance of doubt, 1,315 RSUs granted under the Original Agreement were irrevocably forfeited under Section 1(f) as a result of Recipient’s termination of employment.

(c) Acceleration on Death or Disability. If the Recipient dies or becomes disabled, the Severance RSUs shall become immediately vested. The term “disabled” means the inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months.

(d) Certain Transactions. Notwithstanding any provision in this Agreement (but subject to the last sentence of this Section 1(d)), in the event of dissolution of the Company

 

  

  

  

or a merger, consolidation or plan of exchange affecting the Company, the Compensation Committee of the Board of Directors (the “Compensation Committee”) may, in its sole discretion and to the extent possible under the structure of the applicable transaction, select one or a combination of the following alternatives for treating this Award of RSUs:

(i) The Award shall remain in effect in accordance with its terms;

(ii) All or a portion of the RSUs shall, to the extent then still subject to the vesting restrictions, be released from the vesting restrictions in connection with the closing of the applicable transaction; or

(iii) The RSUs shall be converted into restricted stock units or restricted stock of one or more of the corporations that are the surviving or acquiring corporations in the applicable transaction. The amount and type of converted restricted stock units or restricted stock shall be determined by the Company, taking into account the relative values of the companies involved in the applicable transaction and the exchange rate, if any, used in determining shares of the surviving corporation(s) to be held by holders of shares of the Company following the applicable transaction. Unless otherwise determined by the Company, by action of the Compensation Committee, the converted restricted stock units or restricted stock shall continue to be subject to the forfeiture provisions applicable to the RSUs at the time of the applicable transaction.

Notwithstanding the foregoing provisions of this Section 1(d) to the contrary, no such alternative shall occur with respect to the RSUs to the extent that, if it did, a 20% tax would be imposed under Section 409A of the Internal Revenue Code on the Recipient.

(e) Special Acceleration in Certain Events. Notwithstanding any other provision in this Agreement, upon a change in control of the Company, the Severance RSUs shall become immediately vested. The term “change in control of the Company” means the occurrence of any of the following events:

(i) The consummation of:

(A) any consolidation, merger or plan of share exchange involving the Company (a “Merger”) as a result of which the holders of outstanding securities of the Company ordinarily having the right to vote for the election of directors (“Voting Securities”) immediately prior to the Merger do not continue to hold at least 50% of the combined voting power of the outstanding Voting Securities of the surviving corporation or a parent corporation of the surviving corporation immediately after the Merger, disregarding any Voting Securities issued to or retained by such holders in respect of securities of any other party to the Merger; or 

 

(B) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, the assets of the Company;

(ii) At any time during a period of two consecutive years, individuals

 

  

2

  

who at the beginning of such period constituted the Board of Directors of the Company (“Incumbent Directors”) shall cease for any reason to constitute at least a majority thereof; provided, however, that the term “Incumbent Director” shall also include each new director elected during such two-year period whose nomination or election was approved by two-thirds of the Incumbent Directors then in office; or

(iii) Any person shall, as a result of a tender or exchange offer, open market purchases or privately negotiated purchases from anyone other than the Company, have become the beneficial owner (within the meaning of Rule 13d-3 under the Securities Exchange Act of 1934), directly or indirectly, of Voting Securities representing 20% or more of the combined voting power of the then outstanding Voting Securities. For purposes of this Section 1(e), the term “person” means and includes any individual, corporation, partnership, group, association or other “person,” as such term is used in Section 14(d) of the Securities Exchange Act of 1934, other than the Company or any employee benefit plan sponsored by the Company. 

 

Notwithstanding anything in this Section 1(e) to the contrary, no event shall be considered a change in control of the Company for purposes of this Agreement if the event is not also a “change in ownership,” “change in effective control,” or “change in ownership of a substantial portion of the assets” as those terms are defined in Treas Reg §1.409A-3(i)(5).

Notwithstanding anything in this Section 1(e) to the contrary, unless otherwise determined by the Board of Directors of the Company, no change in control of the Company shall be deemed to have occurred for purposes of this Agreement if (1) the Recipient acquires (other than on the same basis as all other holders of shares of Common Stock of the Company) an equity interest in an entity that acquires the Company in a change in control of the Company otherwise described under subparagraph (i) of this Section 1(e), or (2) the Recipient is part of a group that constitutes a person which becomes a beneficial owner of Voting Securities in a transaction that otherwise would have resulted in a change in control of the Company under subparagraph (iii) of this Section 1(e).

(f) Forfeiture of RSUs on Termination of Service. If the Recipient ceases to be an employee of the Company or a parent or subsidiary of the Company under circumstances where the RSUs have not previously vested and do not become vested pursuant to Section 1(c) or 1(d), the Recipient shall immediately forfeit all outstanding but unvested RSUs awarded pursuant to this Agreement and the Recipient shall have no right to receive the related Common Stock; provided, however, that the Severance RSUs shall not be forfeited under this section.

(g) Restrictions on Transfer. The Recipient may not sell, transfer, assign, pledge or otherwise encumber or dispose of the RSUs subject to this Agreement. The Recipient may designate beneficiaries to receive the shares of Common Stock underlying the RSUs subject to this Agreement if the Recipient dies before delivery of the shares of Common Stock by so indicating on a form supplied by the Company. If the Recipient fails to designate a beneficiary, such Common Stock will be delivered to the person or persons establishing rights of ownership by will or under the laws of descent and distribution.

(h) No Voting Rights; Dividends. The Recipient shall have no rights as a

 

  

3

  

shareholder with respect to the RSUs or the Common Stock underlying the RSUs until the underlying Common Stock is issued to the Recipient. The Recipient will be entitled to receive any cash dividends declared on the Common Stock underlying the RSUs after the RSUs have vested and the Common Stock has been issued. The Company shall accrue and pay to the Recipient on the vesting of the RSUs an amount in cash equal to dividends that would have been paid on the Common Stock underlying the RSUs after the date of the issuance of the RSUs. No interest shall be paid by the Company on accrued amounts.

(i) Delivery Date for the Shares Underlying the RSUs. As soon as practicable, but in no event later than thirty days, following a date on which any RSUs vest, the Company will issue the Recipient the Common Stock underlying the then vested RSUs in the form of uncertificated shares in book entry form. The shares of Common Stock will be issued in the Recipient’s name or, in the event of the Recipient’s death, in the name of either (i) the beneficiary designated by the Recipient on a form supplied by the Company or (ii) if the Recipient has not designated a beneficiary, the person or persons establishing rights of ownership by will or under the laws of descent and distribution.

(j) Taxes and Tax Withholding. The Recipient acknowledges and agrees that no election under Section 83(b) of the Internal Revenue Code can or will be made with respect to the RSUs. The Recipient acknowledges that, except as provided below, on each date that shares underlying the RSUs are issued to the Recipient (the “Payment Date”), the Value (as defined below) on that date of the shares so issued will be treated as ordinary compensation income for federal and state income and FICA tax purposes, and that the Company will be required to withhold taxes on these income amounts. To satisfy the required minimum withholding amount, the Company shall withhold from the shares otherwise issuable the number of shares having a Value equal to the minimum withholding amount. For purposes of this Section 6, the “Value” of a share shall be equal to the closing market price for the Common Stock on the last trading day preceding the Payment Date. The Recipient acknowledges that under current tax law, the Company is required to withhold FICA taxes with respect to the Severance RSUs on the date of this amended and restated Agreement. To satisfy the required FICA withholding, the Recipient shall, immediately upon notification of the amount due, pay to the Company in cash or by check amounts necessary to satisfy applicable FICA withholding requirements. If the Recipient fails to pay the amount demanded, the Company or the Recipient’s employer may withhold that amount from other amounts payable to the Recipient, including salary, subject to applicable law.

(k) Not a Contract of Employment. Nothing in the Plan or this Agreement shall confer upon Recipient any right to be continued in the employment of the Company or any parent or subsidiary of the Company, or to interfere in any way with the right of the Company or any parent or subsidiary by whom Recipient is employed to terminate Recipient’s employment at any time or for any reason, with or without cause, or to decrease Recipient’s compensation or benefits.

2.   Miscellaneous.

(a) Entire Agreement; Amendment. This Agreement and the Plan constitute the entire agreement of the parties with regard to the subjects hereof.

 

  

4

  

(b) Interpretation of the Plan and the Agreement. The Compensation Committee shall have the sole authority to interpret the provisions of this Agreement and the Plan and all determinations by it shall be final and conclusive.

(c) Electronic Delivery. The Recipient consents to the electronic delivery of notices and any prospectus and any other documents relating to this Award in lieu of mailing or other form of delivery.

(d) Rights and Benefits. The rights and benefits of this Agreement shall inure to the benefit of and be enforceable by the Company’s successors and assigns and, subject to the restrictions on transfer of this Agreement, be binding upon the Recipient’s heirs, executors, administrators, successors and assigns.

(e) Further Action. The parties agree to execute such instruments and to take such action as may reasonably be necessary to carry out the intent of this Agreement. 

(f) Governing Law. This Agreement and the Plan will be interpreted under the laws of the state of Oregon, exclusive of choice of law rules.

 

 

Dated: _________________

 

 

_______________________________

Patrick L. Christopher

 

 

 

 

 

SCHNITZER STEEL INDUSTRIES, INC.

 

 

By:  ____________________________

        Authorized Officer

  

5

  

Exhibit 5

to Severance Agreement with Covenants

Between Patrick Christopher and Schnitzer Steel Industries, Inc.

AMENDED AND RESTATED RESTRICTED STOCK UNIT AWARD AGREEMENT

Pursuant to Section 8 of the 1993 Stock Incentive Plan (the “Plan”) of Schnitzer Steel Industries, Inc., an Oregon corporation (the “Company”), on November 6, 2012, the Compensation Committee of the Board of Directors of the Company authorized and granted to Patrick L. Christopher (the “Recipient”) an award of restricted stock units with respect to the Company’s Class A Common Stock (“Common Stock”), subject to the terms and conditions of a Restricted Stock Unit Award Agreement between the Company and the Recipient covering the award (the “Original Agreement”). In connection with the termination of the Recipient’s employment on August 14, 2013 and pursuant to the terms of that certain Severance Agreement with Covenants dated August __, 2013, the parties desire to modify the Original Agreement. 

 

Now, therefore, the parties agree to amend, restate and supersede the Original Agreement in its entirety as follows (as amended, the “Agreement”):

1. Award and Terms of Restricted Stock Units. The Company awards to the Recipient under the Plan 11,475 restricted stock units (the “Award”), subject to the restrictions, terms and conditions set forth in this Agreement.

(a) Rights under Restricted Stock Units. A restricted stock unit (a “RSU”) obligates the Company, upon vesting in accordance with this Agreement, to issue to the Recipient one share of Common Stock for each RSU. The number of shares of Common Stock issuable with respect to each RSU is subject to adjustment as determined by the Board of Directors of the Company as to the number and kind of shares of stock deliverable upon any merger, reorganization, consolidation, recapitalization, stock dividend, spin-off or other change in the corporate structure affecting the Common Stock generally.

(b) Vesting Date. The RSUs awarded under this Agreement shall initially be 100% unvested and subject to forfeiture. Subject to Sections 1(c), (d), (e) and (f), 20% of the RSUs (2,295 RSUs) vested on June 1, 2013. In addition, subject to Sections 1(c), (d) and (e), 2,295 RSUs (the “Severance RSUs”) shall vest on August 14, 2014, and the Severance RSUs shall not terminate under Section 1(f) as a result of Recipient’s termination of employment. For the avoidance of doubt, 6,885 RSUs granted under the Original Agreement were irrevocably forfeited under Section 1(f) as a result of Recipient’s termination of employment.

(c) Acceleration on Death or Disability. If the Recipient dies or becomes disabled, the Severance RSUs shall become immediately vested. The term “disabled” means the inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months.

(d) Certain Transactions. Notwithstanding any provision in this Agreement (but subject to the last sentence of this Section 1(d)), in the event of dissolution of the Company or a merger, consolidation or plan of exchange affecting the Company, the Compensation

 

  

  

  

Committee of the Board of Directors (the “Compensation Committee”) may, in its sole discretion and to the extent possible under the structure of the applicable transaction, select one or a combination of the following alternatives for treating this Award of RSUs:

(i) The Award shall remain in effect in accordance with its terms;

(ii) All or a portion of the RSUs shall, to the extent then still subject to the vesting restrictions, be released from the vesting restrictions in connection with the closing of the applicable transaction; or

(iii) The RSUs shall be converted into restricted stock units or restricted stock of one or more of the corporations that are the surviving or acquiring corporations in the applicable transaction. The amount and type of converted restricted stock units or restricted stock shall be determined by the Company, taking into account the relative values of the companies involved in the applicable transaction and the exchange rate, if any, used in determining shares of the surviving corporation(s) to be held by holders of shares of the Company following the applicable transaction. Unless otherwise determined by the Company, by action of the Compensation Committee, the converted restricted stock units or restricted stock shall continue to be subject to the forfeiture provisions applicable to the RSUs at the time of the applicable transaction.

Notwithstanding the foregoing provisions of this Section 1(d) to the contrary, no such alternative shall occur with respect to the RSUs to the extent that, if it did, a 20% tax would be imposed under Section 409A of the Internal Revenue Code on the Recipient.

(e) Special Acceleration in Certain Events. Notwithstanding any other provision in this Agreement, upon a change in control of the Company, the Severance RSUs shall become immediately vested. The term “change in control of the Company” means the occurrence of any of the following events:

(i) The consummation of:

(A) any consolidation, merger or plan of share exchange involving the Company (a “Merger”) as a result of which the holders of outstanding securities of the Company ordinarily having the right to vote for the election of directors (“Voting Securities”) immediately prior to the Merger do not continue to hold at least 50% of the combined voting power of the outstanding Voting Securities of the surviving corporation or parent corporation of the surviving corporation immediately after the Merger, disregarding any Voting Securities issued to or retained by such holders in respect of securities of any other party to the Merger; or

(B) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, the assets of the Company;

(ii) At any time during a period of two consecutive years, individuals who at the beginning of such period constituted the Board of Directors of the Company

 

  

2

  

(“Incumbent Directors”) shall cease for any reason to constitute at least a majority thereof; provided, however, that the term “Incumbent Director” shall also include each new director elected during such two-year period whose nomination or election was approved by two-thirds of the Incumbent Directors then in office; or

(iii) Any person shall, as a result of a tender or exchange offer, open market purchases or privately negotiated purchases from anyone other than the Company, have become the beneficial owner (within the meaning of Rule 13d-3 under the Securities Exchange Act of 1934), directly or indirectly, of Voting Securities representing 20% or more of the combined voting power of the then outstanding Voting Securities. For purposes of this Section 1(e), the term “person” means and includes any individual, corporation, partnership, group, association or other “person,” as such term is used in Section 14(d) of the Securities Exchange Act of 1934, other than the Company or any employee benefit plan sponsored by the Company. 

 

Notwithstanding anything in this Section 1(e) to the contrary, no event shall be considered a change in control of the Company for purposes of this Agreement if the event is not also a “change in ownership,” “change in effective control,” or “change in ownership of a substantial portion of the assets” as those terms are defined in Treas Reg §1.409A-3(i)(5). 

 

Notwithstanding anything in this Section 1(e) to the contrary, unless otherwise determined by the Board of Directors of the Company, no change in control of the Company shall be deemed to have occurred for purposes of this Agreement if (1) the Recipient acquires (other than on the same basis as all other holders of shares of Common Stock of the Company) an equity interest in an entity that acquires the Company in a change in control of the Company otherwise described under subparagraph (i) of this Section 1(e), or (2) the Recipient is part of a group that constitutes a person which becomes a beneficial owner of Voting Securities in a transaction that otherwise would have resulted in a change in control of the Company under subparagraph (iii) of this Section 1(e).

(f) Forfeiture of RSUs on Termination of Service. If the Recipient ceases to be an employee of the Company or a parent or subsidiary of the Company under circumstances where the RSUs have not previously vested and do not become vested pursuant to Section 1(c) or 1(d), the Recipient shall immediately forfeit all outstanding but unvested RSUs awarded pursuant to this Agreement and the Recipient shall have no right to receive the related Common Stock; provided, however, that the Severance RSUs shall not be forfeited under this section.

(g) Restrictions on Transfer. The Recipient may not sell, transfer, assign, pledge or otherwise encumber or dispose of the RSUs subject to this Agreement. The Recipient may designate beneficiaries to receive the shares of Common Stock underlying the RSUs subject to this Agreement if the Recipient dies before delivery of the shares of Common Stock by so indicating on a form supplied by the Company. If the Recipient fails to designate a beneficiary, such Common Stock will be delivered to the person or persons establishing rights of ownership by will or under the laws of descent and distribution.

(h) No Voting Rights; Dividends. The Recipient shall have no rights as a shareholder with respect to the RSUs or the Common Stock underlying the RSUs until the

 

  

3

  

underlying Common Stock is issued to the Recipient. The Recipient will be entitled to receive any cash dividends declared on the Common Stock underlying the RSUs after the RSUs have vested and the Common Stock has been issued. The Company shall accrue and pay to the Recipient on the vesting of the RSUs an amount in cash equal to dividends that would have been paid on the Common Stock underlying the RSUs after the date of the issuance of the RSUs. No interest shall be paid by the Company on accrued amounts.

(i) Delivery Date for the Shares Underlying the RSUs. As soon as practicable, but in no event later than thirty days, following a date on which any RSUs vest (a “Vesting Date”), the Company will issue the Recipient the Common Stock underlying the then vested RSUs in the form of uncertificated shares in book entry form. The shares of Common Stock will be issued in the Recipient’s name or, in the event of the Recipient’s death, in the name of either (i) the beneficiary designated by the Recipient on a form supplied by the Company or (ii) if the Recipient has not designated a beneficiary, the person or persons establishing rights of ownership by will or under the laws of descent and distribution.

(j) Taxes and Tax Withholding. The Recipient acknowledges and agrees that no election under Section 83(b) of the Internal Revenue Code can or will be made with respect to the RSUs. The Recipient acknowledges that, except as provided below, on each date that shares underlying the RSUs are issued to the Recipient (the “Payment Date”), the Value (as defined below) on that date of the shares so issued will be treated as ordinary compensation income for federal and state income and FICA tax purposes, and that the Company will be required to withhold taxes on these income amounts. To satisfy the required minimum withholding amount, the Company shall withhold from the shares otherwise issuable the number of shares having a Value equal to the minimum withholding amount. For purposes of this Section 6, the “Value” of a share shall be equal to the closing market price for the Common Stock on the last trading day preceding the Payment Date. The Recipient acknowledges that under current tax law, the Company is required to withhold FICA taxes with respect to the Severance RSUs on the date of this amended and restated Agreement. To satisfy the required FICA withholding, the Recipient shall, immediately upon notification of the amount due, pay to the Company in cash or by check amounts necessary to satisfy applicable FICA withholding requirements. If the Recipient fails to pay the amount demanded, the Company or the Recipient’s employer may withhold that amount from other amounts payable to the Recipient, including salary, subject to applicable law.

(k) Not a Contract of Employment. Nothing in the Plan or this Agreement shall confer upon Recipient any right to be continued in the employment of the Company or any parent or subsidiary of the Company, or to interfere in any way with the right of the Company or any parent or subsidiary by whom Recipient is employed to terminate Recipient’s employment at any time or for any reason, with or without cause, or to decrease Recipient’s compensation or benefits.

2.   Non-Competition.

(a) Consequences of Violation. If the Company determines that Recipient has engaged in an action prohibited by Section 2(b) below, then:

(i) Recipient shall immediately forfeit all outstanding RSUs awarded

 

  

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pursuant to this Agreement and shall have no right to receive the underlying shares or the related dividend equivalent payment; and

(ii) If the Payment Date for any RSUs has occurred, and the Company’s determination of a violation occurs on or before the first anniversary of the Vesting Date for those RSUs, Recipient shall repay to the Company (A) the number of shares of Common Stock issued to Recipient under this Agreement on that Payment Date (the “Forfeited Shares”), plus (B) the amount of cash equal to the withholding taxes paid by withholding shares from Recipient on that Payment Date, plus (C) the amount of any dividend equivalent payment paid to Recipient on that Payment Date. If any Forfeited Shares are sold by Recipient prior to the Company’s demand for repayment, Recipient shall repay to the Company 100% of the proceeds of such sale or sales. The Company may, in its sole discretion, reduce the amount to be repaid by Recipient to take into account the tax consequences of such repayment for Recipient.

(b) Prohibited Actions. The consequences described in Section 2(a) shall apply if during Recipient’s employment with the Company, or at any time during the period of one year following termination of such employment, Recipient, directly or indirectly, owns, manages, controls, or participates in the ownership, management or control of, or is employed by, consults for, or is connected in any manner with:

(i) if Recipient is, or was at the time of termination of employment, employed by the Company’s Steel Manufacturing Business (“SMB”), any business that (A) is engaged in the steel manufacturing business, (B) produces any of the same steel products as SMB, and (C) competes with SMB for sales to customers in California, Oregon, Washington, Nevada, British Columbia or Alberta;

(ii) if Recipient is, or was at the time of termination of employment, employed by the Company’s Metals Recycling Business (“MRB”), any business that (A) is engaged in the metals recycling business, and (B) operates a metal recycling collection or processing facility within 75 miles of any of MRB’s metal recycling facilities;

(iii) if Recipient is, or was at the time of termination of employment, employed by the Company’s Auto Parts Business (“APB”), any business that (A) is engaged in the self-service used auto parts business, and (B) operates a self-service used auto parts store within 75 miles of any of APB’s stores; or

(iv) if Recipient is, or was at the time of termination of employment, employed in the Company’s Corporate Shared Services Division, any business that is described in Section 2(b)(i), Section 2(b)(ii) or Section 2(b)(iii).

3.   Miscellaneous.

(a) Entire Agreement; Amendment. This Agreement and the Plan constitute the entire agreement of the parties with regard to the subjects hereof. 

(b) Interpretation of the Plan and the Agreement. The Compensation Committee shall have the sole authority to interpret the provisions of this Agreement and the

 

  

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Plan and all determinations by it shall be final and conclusive.

(c) Electronic Delivery. The Recipient consents to the electronic delivery of notices and any prospectus and any other documents relating to this Award in lieu of mailing or other form of delivery.

(d) Rights and Benefits. The rights and benefits of this Agreement shall inure to the benefit of and be enforceable by the Company’s successors and assigns and, subject to the restrictions on transfer of this Agreement, be binding upon the Recipient’s heirs, executors, administrators, successors and assigns.

(e) Further Action. The parties agree to execute such instruments and to take such action as may reasonably be necessary to carry out the intent of this Agreement.

(f) Severability. Each provision of this Agreement will be treated as a separate and independent clause and unenforceability of any one clause will in no way impact the enforceability of any other clause. Should any of the provisions of this Agreement be found to be unreasonable or invalid by a court of competent jurisdiction, such provision will be enforceable to the maximum extent enforceable by the law of that jurisdiction.

 

 

Dated: _________________

 

 

_______________________________

Patrick L. Christopher

 

 

 

 

 

SCHNITZER STEEL INDUSTRIES, INC.

 

 

By:  ____________________________

        Authorized Officer

 

 

  

6

  

Exhibit 6

to Severance Agreement with Covenants

Between Patrick Christopher and Schnitzer Steel Industries, Inc.

SCHNITZER STEEL INDUSTRIES, INC.

AMENDED AND RESTATED LONG-TERM INCENTIVE AWARD AGREEMENT

(MRB/APB FY 2011-2013 Performance Period)

On October 26, 2010, the Compensation Committee (the “Committee”) of the Board of Directors (the “Board”) of Schnitzer Steel Industries, Inc. (the “Company”) authorized and granted a performance-based award to Patrick L. Christopher (“Recipient”) pursuant to Section 11 of the Company’s 1993 Stock Incentive Plan (the “Plan”), subject to the terms and conditions of a Long-Term Incentive Award Agreement between the Company and the Recipient covering the award (the “Original Agreement”). Compensation paid pursuant to the award is intended to qualify as performance-based compensation under Section 162(m) of the Internal Revenue Code of 1986 (the “Code”). In connection with the termination of the Recipient’s employment on August 14, 2013 and pursuant to the terms of that certain Severance Agreement with Covenants dated August __, 2013, the parties desire to modify the Original Agreement.

Now, therefore, the parties agree to amend, restate and supersede the Original Agreement in its entirety as follows (as amended, the “Agreement”):

1. Award. Subject to the terms and conditions of this Agreement, the Company shall issue to the Recipient the number of shares of Class A Common Stock of the Company (“Performance Shares”) determined under this Agreement based on the performance of the Company during the three-year period from September 1, 2010 to August 31, 2013 (the “Performance Period”) as described in Section 2. Recipient’s “Target Share Amount” for purposes of this Agreement is 3,317 shares.

2. Performance Conditions.

2.1 Payout Factor. Subject to adjustment under Sections 5 and 6, the number of Performance Shares to be issued to Recipient shall be determined by multiplying the Payout Factor by the Target Share Amount. The “Payout Factor” shall be equal to the sum of (a) 50% of the EPS Payout Factor as determined under Section 2.2 below, plus (b) 50% of the MRB/APB ROCE Payout Factor as determined under Section 2.3 below.

2.2  EPS Payout Factor.

2.2.1 The “EPS Payout Factor” shall be equal to the average of the Annual EPS Payout Factors determined for each of the three fiscal years of the Performance Period. The “Annual EPS Payout Factor” for each applicable fiscal year shall be determined under the table below based on the Adjusted EPS of the Company for the fiscal year.

 

  

  

  

 

	
Fiscal 2011

	
Fiscal 2012

	
Fiscal 2013

	
Annual EPS

	
Adjusted EPS

	
Adjusted EPS

	
Adjusted EPS

	
Payout Factor

	  	  	  	  
	
Less than $3.21

	
Less than $3.53

	
Less than $3.88

	
0%

	
$3.21

	
$3.53

	
$3.88

	
50%

	
$3.77

	
$4.15

	
$4.56

	
100%

	
$4.62 or more

	
$5.08 or more

	
$5.59 or more 

	
200%

 

If the Adjusted EPS for any fiscal year is between any two data points set forth in the applicable column of the above table for that fiscal year, the Annual EPS Payout Factor shall be determined by interpolation between the corresponding data points in the fourth column of the table as follows: the difference between the Adjusted EPS and the lower data point shall be divided by the difference between the higher data point and the lower data point, the resulting fraction shall be multiplied by the difference between the two corresponding data points in the fourth column of the table, and the resulting product shall be added to the lower corresponding data point in the fourth column of the table, with the resulting sum being the Annual EPS Payout Factor.

2.2.2 The Company’s “Adjusted EPS” for any fiscal year of the Performance Period shall mean the Company’s diluted earnings per share for that fiscal year, before extraordinary items and cumulative effects of changes in accounting principles, if any, as set forth in the audited consolidated financial statements of the Company and its subsidiaries for that fiscal year, and as adjusted in accordance with Section 2.4 below.

2.3   MRB/APB ROCE Payout Factor.

2.3.1 The “MRB/APB ROCE Payout Factor” shall be equal to the average of the Annual MRB/APB ROCE Payout Factors for each of the three fiscal years of the Performance Period. The “Annual MRB/APB ROCE Payout Factor” for each fiscal year shall be determined under the table below based on the MRB/APB ROCE for the fiscal year.

 

	  	
Annual

	  	
MRB/APB ROCE

	
MRB/APB ROCE 

	
Payout Factor

	  	  
	
Less than 9% 

	
0%

	
9% 

	
50%

	
10% 

	
75%

	
11% 

	
100%

	
12% 

	
150%

	
13% or more 

	
200%

If the MRB/APB ROCE is between any two data points set forth in the first column of the above table, the Annual MRB/APB ROCE Payout Factor shall be determined by interpolation between the corresponding data points in the second column of the table as follows: the difference between the MRB/APB ROCE and the lower data point shall be divided by the difference between the higher data point and the lower data point, the resulting fraction shall be multiplied by the difference between the two corresponding data points in the second column of the table, and the resulting product shall be added to the lower corresponding data point in the second column of the table, with the resulting sum being the Annual MRB/APB ROCE Payout Factor.

 

  

2

  

2.3.2 The “MRB/APB ROCE” for any fiscal year shall be equal to the sum of the Adjusted Operating Income of the Company’s Metals Recycling Business (“MRB”) for that fiscal year and the Adjusted Operating Income of the Company’s Auto Parts Business (“APB”) for that fiscal year divided by the sum of the Average Capital Employed of MRB for that fiscal year and the Average Capital Employed of APB for that fiscal year. “Adjusted Operating Income” for each business for any fiscal year shall mean the business’s segment operating income for that fiscal year as set forth in the audited consolidated financial statements of the Company and its subsidiaries for the year, adjusted in accordance with Section 2.4 below, and then reduced by the Company’s effective tax rate for the fiscal year as determined from the audited consolidated statement of operations of the Company and its subsidiaries for the year. “Average Capital Employed” for each business for any fiscal year shall mean the average of five (5) numbers consisting of the business’s Capital Employed as of the last day of the fiscal year and as of the last day of the four preceding fiscal quarters. Subject to adjustment in accordance with Section 2.4 below, “Capital Employed” for each business as of any date shall mean (i) the business’s total assets, minus (ii) the business’s total liabilities other than debt for borrowed money and capital lease obligations, plus (iii) its intercompany payable balances, minus (iv) its intercompany receivable balances, in each case as set forth in the consolidated financial statements of the Company and its subsidiaries as of the applicable date or otherwise determined from the Company’s accounting records on a consistent basis.

2.4 Adjustments.

2.4.1 Change in Accounting Principle. If the Company implements a change in accounting principle during the Performance Period either as a result of issuance of new accounting standards or otherwise, and the effect of the accounting change was not reflected in the Company’s business plan at the time of approval of this award, then the Adjusted EPS and the Adjusted Operating Income and Capital Employed of each business for each affected period shall be adjusted to eliminate the impact of the change in accounting principle.

2.4.2 Investigation Expenses. Adjusted EPS and the Adjusted Operating Income of each business for each fiscal year during the Performance Period shall be adjusted to eliminate the impact of the fees, expenses, costs and indemnification payments and any insurance or other reimbursements of amounts paid or incurred by the Company in relation to or in connection with the investigations by the United States Department of Justice and the United States Securities and Exchange Commission into the Company’s past payment practices in Asia.

2.4.3 Impairments. Adjusted EPS and the Adjusted Operating Income of each business for each fiscal year during the Performance Period, and Capital Employed as of each quarter end during the Performance Period, shall be adjusted to eliminate the impact of any charges taken by the Company during the Performance Period for impairment of goodwill or other intangible assets.

2.4.4 Gas Contract Derivative Accounting. Adjusted EPS for each fiscal year during the Performance Period shall be adjusted to eliminate the impact of any expense or income recorded in such fiscal year under SFAS 133 relating to the change in fair value of the Company’s contract for the purchase of natural gas for the Company’s Steel Manufacturing Business, as well as any reduction in expenses recorded in such fiscal year upon the purchase of natural gas under the contract resulting in reversal of liabilities recorded in prior periods.

 

  

3

  

2.4.5 Discontinued Operations. Adjusted EPS and the Adjusted Operating Income of each business for each fiscal year during the Performance Period shall be adjusted to eliminate any profit or loss reported in the Company’s financial statements as discontinued operations and any gain or loss from the disposition of a Company subsidiary, all or substantially all of the assets of a Company subsidiary or a division, or any material amount of assets of a Company subsidiary.

2.4.6 Portland Harbor Accruals and Expenses. Adjusted EPS and the Adjusted Operating Income of MRB for each fiscal year during the Performance Period, and Capital Employed of MRB as of each quarter end during the Performance Period, shall be adjusted to eliminate the impact of any changes in environmental liabilities recorded during the Performance Period in connection with the Portland Harbor Superfund Site investigation and remediation costs and natural resource damage claims (“Portland Harbor Accruals”). Adjusted EPS and the Adjusted Operating Income of MRB for each fiscal year during the Performance Period shall also be adjusted to eliminate any fees, costs and expenses incurred in connection with the Portland Harbor Superfund Site (net of any insurance or other reimbursements thereof and excluding Portland Harbor Accruals).

3. Time of Payment.

3.1 Scheduled Payment. Subject to Sections 3.2, 4, 5 and 6, the number of Performance Shares determined under Section 2 shall be issued by the Company to the Recipient on August 14, 2014 (the “Vesting Date”) or as soon as practicable thereafter.

3.2 Acceleration on Death or Disability. If the Recipient dies or becomes disabled before August 14, 2014, the Vesting Date shall be the later of October 31, 2013 and the date of Recipient’s death or disability. The term “disabled” means the inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months.

4. Acceleration on Company Sale.

4.1 If a Company Sale (as defined below) occurs before August 14, 2014, the Vesting Date shall be no later than the earlier of fifteen (15) days following such event or the last day on which the Performance Shares could be issued so that Recipient may participate as a shareholder in receiving proceeds from the Company Sale.

4.2 For purposes of this Agreement, a “Company Sale” shall mean the occurrence of any of the following events:

4.2.1 any consolidation, merger or plan of share exchange involving the Company (a “Merger”) in which the Company is not the continuing or surviving corporation or pursuant to which outstanding shares of Class A Common Stock would be converted into cash, other securities or other property; or

4.2.2 any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, the assets of the Company. 

 

Notwithstanding anything in this Section 4.2 to the contrary, no event shall be considered a

 

  

4

  

Company Sale if the event is not also a “change in ownership,” “change in effective control,” or “change in ownership of a substantial portion of the assets” as those terms are defined in Treas Reg §1.409A-3(i)(5).

5. Certification and Payment. As soon as practicable following the completion of the audit of the Company’s consolidated financial statements for the final fiscal year of the Performance Period, the Company shall calculate the Payout Factor and the corresponding number of Performance Shares issuable to Recipient. This calculation shall be submitted to the Committee. No later than October 31, 2013 the Committee shall certify in writing (which may consist of approved minutes of a Committee meeting) the levels of Adjusted EPS and MRB/APB ROCE attained by the Company for the Performance Period and the number of Performance Shares issuable to Recipient based on such performance. Subject to applicable tax withholding, the number of Performance Shares so certified shall be issued to Recipient as soon as practicable following the Vesting Date, but no Performance Shares shall be issued prior to certification. No fractional shares shall be issued and the number of Performance Shares deliverable shall be rounded to the nearest whole share.

6. Tax Withholding. Recipient acknowledges that, on the date the Performance Shares are issued to Recipient (the “Payment Date”), the Value (as defined below) on that date of the Performance Shares will be treated as ordinary compensation income for federal and state income tax purposes, and that the Company will be required to withhold taxes on these income amounts. To satisfy the required minimum withholding amount, the Company shall withhold the number of Performance Shares having a Value equal to the minimum withholding amount. For purposes of this Section 6, the “Value” of a Performance Share shall be equal to the closing market price for Class A Common Stock on the last trading day preceding the Payment Date. The Recipient acknowledges that under current tax law, the Company is required to withhold FICA taxes on the date of this amended and restated Agreement with respect to the 1,780 Performance Shares issuable under this Agreement as a result of the Company’s performance in fiscal 2011 and fiscal 2012. Furthermore, the Recipient acknowledges that the Company will be required to withhold FICA taxes with respect to any Performance Shares issuable under this Agreement as a result of the Company’s performance in fiscal 2013 on the date the Committee certifies the number of Performance Shares issuable based on that performance. To satisfy the required FICA withholding, the Recipient shall, immediately upon notification of the amount due, pay to the Company in cash or by check amounts necessary to satisfy applicable FICA withholding requirements. If the Recipient fails to pay the amount demanded, the Company or the Recipient’s employer may withhold that amount from other amounts payable to the Recipient, including salary, subject to applicable law.

7. Changes in Capital Structure. If the outstanding Class A Common Stock of the Company is hereafter increased or decreased or changed into or exchanged for a different number or kind of shares or other securities of the Company by reason of any stock split, combination of shares or dividend payable in shares, recapitalization or reclassification, appropriate adjustment shall be made by the Committee in the number and kind of shares subject to this Agreement so that the Recipient’s proportionate interest before and after the occurrence of the event is maintained.

8. Approvals. The obligations of the Company under this Agreement are subject to the approval of state, federal or foreign authorities or agencies with jurisdiction in the matter. The Company will use its reasonable best efforts to take steps required by state, federal or

 

  

5

  

foreign law or applicable regulations, including rules and regulations of the Securities and Exchange Commission and any stock exchange on which the Company’s shares may then be listed, in connection with the award evidenced by this Agreement. The foregoing notwithstanding, the Company shall not be obligated to deliver Class A Common Stock under this Agreement if such delivery would violate or result in a violation of applicable state or federal securities laws.

9.  No Right to Employment. Nothing contained in this Agreement shall confer upon Recipient any right to be employed by the Company or to continue to provide services to the Company or to interfere in any way with the right of the Company to terminate Recipient’s services at any time for any reason, with or without cause.

10.  Miscellaneous.

10.1 Entire Agreement. This Agreement constitutes the entire agreement of the parties with regard to the subjects hereof.

10.2 Notices. Any notice required or permitted under this Agreement shall be in writing and shall be deemed sufficient when delivered personally to the party to whom it is addressed or when deposited into the United States Mail as registered or certified mail, return receipt requested, postage prepaid, addressed to the Company, Attention: Corporate Secretary, at its principal executive offices or to Recipient at the address of Recipient in the Company’s records, or at such other address as such party may designate by ten (10) days’ advance written notice to the other party.

10.3 Assignment; Rights and Benefits. Recipient shall not assign this Agreement or any rights hereunder to any other party or parties without the prior written consent of the Company. The rights and benefits of this Agreement shall inure to the benefit of and be enforceable by the Company’s successors and assigns and, subject to the foregoing restriction on assignment, be binding upon Recipient’s heirs, executors, administrators, successors and assigns.

10.4 Further Action. The parties agree to execute such instruments and to take such action as may reasonably be necessary to carry out the intent of this Agreement.

10.5 Applicable Law; Attorneys’ Fees. The terms and conditions of this Agreement shall be governed by the laws of the State of Oregon. In the event either party institutes litigation hereunder, the prevailing party shall be entitled to reasonable attorneys’ fees to be set by the trial court and, upon any appeal, the appellate court.

 

 

 

 

Dated: _________________

 

 

_______________________________

PATRICK L. CHRISTOPHER

 

 

 

 

SCHNITZER STEEL INDUSTRIES, INC.

 

 

By:  ____________________________

 

Its:  Senior Vice President                            

        

 

 

 

  

6

  

Exhibit 7

to Severance Agreement with Covenants

Between Patrick Christopher and Schnitzer Steel Industries, Inc.

SCHNITZER STEEL INDUSTRIES, INC.

AMENDED AND RESTATED LONG-TERM INCENTIVE AWARD AGREEMENT

(NIR Upgrade Project - Everett)

On May 20, 2010, the Compensation Committee (the “Committee”) of the Board of Directors (the “Board”) of Schnitzer Steel Industries, Inc. (the “Company”) authorized and granted a performance-based award to Pat Christopher (“Recipient”) pursuant to Section 7 of the Company’s 1993 Stock Incentive Plan (the “Plan”), subject to the terms and conditions of a Long-Term Incentive Award Agreement between the Company and the Recipient covering the award (the “Original Agreement”). Due to discretion retained under the performance goals, compensation paid pursuant to the award will not qualify as performance-based compensation under Section 162(m) of the Internal Revenue Code of 1986 (the “Code”). In connection with the termination of the Recipient’s employment on August 14, 2013 and pursuant to the terms of that certain Severance Agreement with Covenants dated August __, 2013, the parties desire to modify the Original Agreement.

Now, therefore, the parties agree to amend, restate and supersede the Original Agreement in its entirety as follows (as amended, the “Agreement”):

1. Award. Subject to the terms and conditions of this Agreement, the Company shall issue to the Recipient the number of shares of Class A Common Stock of the Company (“Performance Shares”) determined under this Agreement based on the performance of the upgrade described in approved Company AFE #23001462 (the “NIR Upgrade”) to the nonferrous metals recovery system at the Company’s Everett, Massachusetts metals recycling facility during the period commencing on March 1, 2011 and ending on February 28, 2014 (the “Performance Period”) as described in Section 2. Recipient’s “Target Share Amount” for purposes of this Agreement is 1,610 shares.

2. Performance Condition.

2.1 Payout Factor. Subject to adjustment under Sections 4, 5 and 6, the number of Performance Shares to be issued to Recipient shall be determined by multiplying the Payout Factor by the Target Share Amount. The “Payout Factor” shall be determined under the table below based on the NIR Upgrade ROI.

 

	
NIR Upgrade ROI 

	
Payout Factor

	  	  
	
Less than 54.655% 

	
0%

	
54.655% 

	
85%

	
59.4775% 

	
92.5%

	
64.3% or more 

	
100%

 

If the NIR Upgrade ROI is between any two data points set forth in the first column of the above table, the Payout Factor shall be determined by interpolation between the corresponding data points in the second column of the table as follows: the difference between the NIR Upgrade ROI and the lower data point shall be divided by the difference between the higher data point

 

  

  

  

and the lower data point, the resulting fraction shall be multiplied by the difference between the two corresponding data points in the second column of the table, and the resulting product shall be added to the lower corresponding data point in the second column of the table, with the resulting sum being the Payout Factor.

2.2 The “NIR Upgrade ROI” shall be equal to the percentage determined by dividing the total cash flow attributable to the NIR Upgrade for the Performance Period by three (3), and then dividing the result by the actual capitalized cost of the NIR Upgrade, including the installation of all buildings and equipment covered by approved Company AFE #23001462; for avoidance of doubt, the actual capital expenditures shall be offset by the amount of insurance proceeds from the fire at the facility that occurred on July 2, 2009. Cash flow shall be determined in a manner generally consistent with the cash flow analysis included in AFE #23001462, specifically including the assumption that commodity prices as stated in the AFE will be in effect during the entire Performance Period, and with all other calculations and adjustments to be determined by the Committee in its sole discretion.

3. Employment Condition. The continued employment requirement included in the Original Agreement has been deleted.

4. Company Sale.

4.1 If a Company Sale (as defined below) occurs before the end of the Performance Period, Recipient shall be entitled to receive an award payout equal to 100% of the Target Share Amount no later than the earlier of fifteen (15) days following such event or the last day on which the Performance Shares could be issued so that Recipient may participate as a shareholder in receiving proceeds from the Company Sale.

4.2 For purposes of this Agreement, a “Company Sale” shall mean the occurrence of any of the following events:

4.2.1 any consolidation, merger or plan of share exchange involving the Company (a “Merger”) in which the Company is not the continuing or surviving corporation or pursuant to which outstanding shares of Class A Common Stock would be converted into cash, other securities or other property; or

4.2.2 any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, the assets of the Company.

5. Certification and Payment. As soon as practicable following the end of the Performance Period, the Company shall calculate the Payout Factor and the corresponding number of Performance Shares issuable to Recipient. This calculation shall be submitted to the Committee for certification (including possible discretionary adjustment) and such written certification (which may consist of approved minutes of a Committee meeting) shall be completed no later than 60 days following the end of the Performance Period. Subject to applicable tax withholding, the number of Performance Shares so certified shall be issued to Recipient as soon as practicable following such certification. No fractional shares shall be issued and the number of Performance Shares deliverable shall be rounded to the nearest whole share.

 

  

2

  

6. Tax Withholding. Recipient acknowledges that, on the date the Performance Shares are issued to Recipient (the “Payment Date”), the Value (as defined below) on that date of the Performance Shares will be treated as ordinary compensation income for federal and state income and FICA tax purposes, and that the Company will be required to withhold taxes on these income amounts. To satisfy the required minimum withholding amount, the Company shall withhold the number of Performance Shares having a Value equal to the minimum withholding amount. For purposes of this Section 6, the “Value” of a Performance Share shall be equal to the closing market price for Class A Common Stock on the last trading day preceding the Payment Date.

7. Changes in Capital Structure. If the outstanding Class A Common Stock of the Company is hereafter increased or decreased or changed into or exchanged for a different number or kind of shares or other securities of the Company by reason of any stock split, combination of shares or dividend payable in shares, recapitalization or reclassification, appropriate adjustment shall be made by the Committee in the number and kind of shares subject to this Agreement so that the Recipient’s proportionate interest before and after the occurrence of the event is maintained.

8. Approvals. The obligations of the Company under this Agreement are subject to the approval of state, federal or foreign authorities or agencies with jurisdiction in the matter. The Company will use its reasonable best efforts to take steps required by state, federal or foreign law or applicable regulations, including rules and regulations of the Securities and Exchange Commission and any stock exchange on which the Company’s shares may then be listed, in connection with the award evidenced by this Agreement. The foregoing notwithstanding, the Company shall not be obligated to deliver Class A Common Stock under this Agreement if such delivery would violate or result in a violation of applicable state or federal securities laws.

9. No Right to Employment. Nothing contained in this Agreement shall confer upon Recipient any right to be employed by the Company or to continue to provide services to the Company or to interfere in any way with the right of the Company to terminate Recipient’s services at any time for any reason, with or without cause.

10. Miscellaneous.

10.1 Entire Agreement. This Agreement constitutes the entire agreement of the parties with regard to the subjects hereof.

10.2 Notices. Any notice required or permitted under this Agreement shall be whom it is addressed or when deposited into the United States Mail as registered or certified mail, return receipt requested, postage prepaid, addressed to the Company, Attention: Corporate Secretary, at its principal executive offices or to Recipient at the address of Recipient in the Company’s records, or at such other address as such party may designate by ten (10) days’ advance written notice to the other party.

 

  

3

  

10.3 Assignment; Rights and Benefits. Recipient shall not assign this Agreement or any rights hereunder to any other party or parties without the prior written consent of the Company. The rights and benefits of this Agreement shall inure to the benefit of and be enforceable by the Company’s successors and assigns and, subject to the foregoing restriction on assignment, be binding upon Recipient’s heirs, executors, administrators, successors and assigns.

10.4 Further Action. The parties agree to execute such instruments and to take such action as may reasonably be necessary to carry out the intent of this Agreement.

10.5 Applicable Law; Attorneys’ Fees. The terms and conditions of this Agreement shall be governed by the laws of the State of Oregon. In the event either party institutes litigation hereunder, the prevailing party shall be entitled to reasonable attorneys’ fees to be set by the trial court and, upon any appeal, the appellate court.

 

 

Dated: _________________

 

 

_______________________________

PATRICK L. CHRISTOPHER

 

 

 

 

SCHNITZER STEEL INDUSTRIES, INC.

 

 

By:  ____________________________

 

Its:  Senior Vice President                            

        

 

 

 

 

 

  

4

  

Exhibit 8

to Severance Agreement with Covenants

Between Patrick Christopher and Schnitzer Steel Industries, Inc.

SCHNITZER STEEL INDUSTRIES, INC.

AMENDED AND RESTATED LONG-TERM INCENTIVE AWARD AGREEMENT

(NIR Upgrade Project - Oakland)

On July 27, 2010, the Compensation Committee (the “Committee”) of the Board of Directors (the “Board”) of Schnitzer Steel Industries, Inc. (the “Company”) authorized and granted a performance-based award to Pat Christopher (“Recipient”) pursuant to Section 7 of the Company’s 1993 Stock Incentive Plan (the “Plan”), subject to the terms and conditions of a Long-Term Incentive Award Agreement between the Company and the Recipient covering the award (the “Original Agreement”). Due to discretion retained under the performance goals, compensation paid pursuant to the award will not qualify as performance-based compensation under Section 162(m) of the Internal Revenue Code of 1986 (the “Code”). In connection with the termination of the Recipient’s employment on August 14, 2013 and pursuant to the terms of that certain Severance Agreement with Covenants dated August __, 2013, the parties desire to modify the Original Agreement.

Now, therefore, the parties agree to amend, restate and supersede the Original Agreement in its entirety as follows (as amended, the “Agreement”):

1. Award. Subject to the terms and conditions of this Agreement, the Company shall issue to the Recipient the number of shares of Class A Common Stock of the Company (“Performance Shares”) determined under this Agreement based on the performance of the upgrade described in approved Company AFE #10201709 (the “NIR Upgrade”) to the nonferrous metals recovery system at the Company’s Oakland, California metals recycling facility during the period commencing on May 1, 2011 and ending on April 30, 2014 (the “Performance Period”) as described in Section 2. Recipient’s “Target Share Amount” for purposes of this Agreement is 1,431 shares.

2. Performance Condition.

2.1 Payout Factor. Subject to adjustment under Sections 4, 5 and 6, the number of Performance Shares to be issued to Recipient shall be determined by multiplying the Payout Factor by the Target Share Amount. The “Payout Factor” shall be determined under the table below based on the NIR Upgrade ROI.

 

	
NIR Upgrade ROI 

	
Payout Factor

	  	  
	
Less than 28.57% 

	
0%

	
28.57% 

	
85%

	
31.09% 

	
92.5%

	
33.61% or more 

	
100%

 

If the NIR Upgrade ROI is between any two data points set forth in the first column of the above table, the Payout Factor shall be determined by interpolation between the corresponding data points in the second column of the table as follows: the difference between the NIR Upgrade ROI and the lower data point shall be divided by the difference between the higher data point

 

  

  

  

and the lower data point, the resulting fraction shall be multiplied by the difference between the two corresponding data points in the second column of the table, and the resulting product shall be added to the lower corresponding data point in the second column of the table, with the resulting sum being the Payout Factor.

2.2 The “NIR Upgrade ROI” shall be equal to the percentage determined by dividing the total cash flow attributable to the NIR Upgrade for the Performance Period by three (3) and then dividing the result by the actual capitalized cost of the NIR Upgrade. Cash flow shall be determined in a manner generally consistent with the cash flow analysis included in AFE #10201709, specifically including the assumption that commodity prices as stated in the AFE will be in effect during the entire Performance Period, and with all other calculations and adjustments to be determined by the Committee in its sole discretion.

3. Employment Condition. The continued employment requirement included in the Original Agreement has been deleted.

4. Company Sale.

4.1 If a Company Sale (as defined below) occurs before the end of the Performance Period, Recipient shall be entitled to receive an award payout equal to 100% of the Target Share Amount no later than the earlier of fifteen (15) days following such event or the last day on which the Performance Shares could be issued so that Recipient may participate as a shareholder in receiving proceeds from the Company Sale.

4.2 For purposes of this Agreement, a “Company Sale” shall mean the occurrence of any of the following events:

4.2.1 any consolidation, merger or plan of share exchange involving the Company (a “Merger”) in which the Company is not the continuing or surviving corporation or pursuant to which outstanding shares of Class A Common Stock would be converted into cash, other securities or other property; or

4.2.2 any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, the assets of the Company.

5. Certification and Payment. As soon as practicable following the end of the Performance Period, the Company shall calculate the Payout Factor and the corresponding number of Performance Shares issuable to Recipient. This calculation shall be submitted to the Committee for certification (including possible discretionary adjustment) and such written certification (which may consist of approved minutes of a Committee meeting) shall be completed no later than 60 days following the end of the Performance Period. Subject to applicable tax withholding, the number of Performance Shares so certified shall be issued to Recipient as soon as practicable following such certification. No fractional shares shall be issued and the number of Performance Shares deliverable shall be rounded to the nearest whole share.

6. Tax Withholding. Recipient acknowledges that, on the date the Performance Shares are issued to Recipient (the “Payment Date”), the Value (as defined below) on that date of the Performance Shares will be treated as ordinary compensation income for federal and state

 

 

  

2

  

 

income and FICA tax purposes, and that the Company will be required to withhold taxes on these income amounts. To satisfy the required minimum withholding amount, the Company shall withhold the number of Performance Shares having a Value equal to the minimum withholding amount. For purposes of this Section 6, the “Value” of a Performance Share shall be equal to the closing market price for Class A Common Stock on the last trading day preceding the Payment Date.

7. Changes in Capital Structure. If the outstanding Class A Common Stock of the Company is hereafter increased or decreased or changed into or exchanged for a different number or kind of shares or other securities of the Company by reason of any stock split, combination of shares or dividend payable in shares, recapitalization or reclassification, appropriate adjustment shall be made by the Committee in the number and kind of shares subject to this Agreement so that the Recipient’s proportionate interest before and after the occurrence of the event is maintained.

8. Approvals. The obligations of the Company under this Agreement are subject to the approval of state, federal or foreign authorities or agencies with jurisdiction in the matter. The Company will use its reasonable best efforts to take steps required by state, federal or foreign law or applicable regulations, including rules and regulations of the Securities and Exchange Commission and any stock exchange on which the Company’s shares may then be listed, in connection with the award evidenced by this Agreement. The foregoing notwithstanding, the Company shall not be obligated to deliver Class A Common Stock under this Agreement if such delivery would violate or result in a violation of applicable state or federal securities laws.

9. No Right to Employment. Nothing contained in this Agreement shall confer upon Recipient any right to be employed by the Company or to continue to provide services to the Company or to interfere in any way with the right of the Company to terminate Recipient’s services at any time for any reason, with or without cause.

10. Miscellaneous.

10.1 Entire Agreement. This Agreement constitutes the entire agreement of the parties with regard to the subjects hereof.

10.2 Notices. Any notice required or permitted under this Agreement shall be in writing and shall be deemed sufficient when delivered personally to the party to whom it is addressed or when deposited into the United States Mail as registered or certified mail, return receipt requested, postage prepaid, addressed to the Company, Attention: Corporate Secretary, at its principal executive offices or to Recipient at the address of Recipient in the Company’s records, or at such other address as such party may designate by ten (10) days’ advance written notice to the other party.

10.3 Assignment; Rights and Benefits. Recipient shall not assign this Agreement or any rights hereunder to any other party or parties without the prior written consent of the Company. The rights and benefits of this Agreement shall inure to the benefit of and be

 

  

3

  

enforceable by the Company’s successors and assigns and, subject to the foregoing restriction on assignment, be binding upon Recipient’s heirs, executors, administrators, successors and assigns.

10.4 Further Action. The parties agree to execute such instruments and to take such action as may reasonably be necessary to carry out the intent of this Agreement.

10.5 Applicable Law; Attorneys’ Fees. The terms and conditions of this Agreement shall be governed by the laws of the State of Oregon. In the event either party institutes litigation hereunder, the prevailing party shall be entitled to reasonable attorneys’ fees to be set by the trial court and, upon any appeal, the appellate court.

 

 

 

 

 

Dated: _________________

 

 

_______________________________

PATRICK L. CHRISTOPHER

 

 

 

 

SCHNITZER STEEL INDUSTRIES, INC.

 

 

By:  ____________________________

 

Its:  Senior Vice President                            

        

 

 

4

 

Exhibit 9

to Severance Agreement with Covenants

Between Patrick Christopher and Schnitzer Steel Industries, Inc.

SCHNITZER STEEL INDUSTRIES, INC.

AMENDED AND RESTATED LONG-TERM INCENTIVE AWARD AGREEMENT

(NIR Upgrade Project - Tacoma)

On May 20, 2010, the Compensation Committee (the “Committee”) of the Board of Directors (the “Board”) of Schnitzer Steel Industries, Inc. (the “Company”) authorized and granted a performance-based award to Pat Christopher (“Recipient”) pursuant to Section 7 of the Company’s 1993 Stock Incentive Plan (the “Plan”), subject to the terms and conditions of a Long-Term Incentive Award Agreement between the Company and the Recipient covering the award (the “Original Agreement”). Due to discretion retained under the performance goals, compensation paid pursuant to the award will not qualify as performance-based compensation under Section 162(m) of the Internal Revenue Code of 1986 (the “Code”). In connection with  the termination of the Recipient’s employment on August 14, 2013 and pursuant to the terms of that certain Severance Agreement with Covenants dated August __, 2013, the parties desire to modify the Original Agreement.

Now, therefore, the parties agree to amend, restate and supersede the Original Agreement in its entirety as follows (as amended, the “Agreement”):

1. Award. Subject to the terms and conditions of this Agreement, the Company shall issue to the Recipient the number of shares of Class A Common Stock of the Company (“Performance Shares”) determined under this Agreement based on the performance of the upgrade described in approved Company AFE #12551555 (the “NIR Upgrade”) to the nonferrous metals recovery system at the Company’s Tacoma, Washington metals recycling facility during the period commencing on November 1, 2010 and ending on October 31, 2013 (the “Performance Period”) as described in Section 2. Recipient’s “Target Share Amount” for purposes of this Agreement is 1,610 shares.

2. Performance Condition.

2.1 Payout Factor. Subject to adjustment under Sections 4, 5 and 6, the number of Performance Shares to be issued to Recipient shall be determined by multiplying the Payout Factor by the Target Share Amount. The “Payout Factor” shall be determined under the table below based on the NIR Upgrade ROI using the performance goals in the first column of the table; provided, however, that if the Company enters into a joint venture with the party currently contemplated by the Company’s Project Alexis at any time prior to the end of the Performance Period, the Payout Factor shall be determined using the performance goals in the second column of the table.

 

	
NIR Upgrade ROI 

	
NIR Upgrade ROI (w/Alexis) 

	
Payout Factor

	  	  	  
	
Less than 39.695% 

	
Less than 32.13% 

	
0%

	
39.695% 

	
32.13% 

	
85%

	
43.1975% 

	
34.965% 

	
92.5%

	
46.7% or more 

	
37.8% or more 

	
100%

  

  

  

 

If the NIR Upgrade ROI is between any two data points set forth in the first or second column of the above table, the Payout Factor shall be determined by interpolation between the corresponding data points in the third column of the table as follows: the difference between the NIR Upgrade ROI and the lower data point shall be divided by the difference between the higher data point and the lower data point, the resulting fraction shall be multiplied by the difference between the two corresponding data points in the third column of the table, and the resulting product shall be added to the lower corresponding data point in the third column of the table, with the resulting sum being the Payout Factor.

2.2 The “NIR Upgrade ROI” shall be equal to the percentage determined by dividing the total cash flow attributable to the NIR Upgrade for the Performance Period by three (3), and then dividing the result by the actual capitalized cost of the NIR Upgrade, including the installation of all equipment covered by approved Company AFE #12551555.  Cash flow shall be determined in a manner generally consistent with the cash flow analysis included in AFE #12551555, specifically including the assumption that commodity prices as stated in the AFE will be in effect during the entire Performance Period, and with all other calculations and adjustments to be determined by the Committee in its sole discretion.

3. Employment Condition. The continued employment requirement included in the Original Agreement has been deleted.

4. Company Sale.

4.1 If a Company Sale (as defined below) occurs before the end of the Performance Period, Recipient shall be entitled to receive an award payout equal to 100% of the Target Share Amount no later than the earlier of fifteen (15) days following such event or the last day on which the Performance Shares could be issued so that Recipient may participate as a shareholder in receiving proceeds from the Company Sale.

4.2 For purposes of this Agreement, a “Company Sale” shall mean the occurrence of any of the following events:

4.2.1 any consolidation, merger or plan of share exchange involving the Company (a “Merger”) in which the Company is not the continuing or surviving corporation or pursuant to which outstanding shares of Class A Common Stock would be converted into cash, other securities or other property; or

4.2.2 any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all, or substantially all, the assets of the Company.

5. Certification and Payment. As soon as practicable following the end of the Performance Period, the Company shall calculate the Payout Factor and the corresponding number of Performance Shares issuable to Recipient. This calculation shall be submitted to the Committee for certification (including possible discretionary adjustment) and such written certification (which may consist of approved minutes of a Committee meeting) shall be completed no later than 60 days following the end of the Performance Period. Subject to applicable tax withholding, the number of Performance Shares so certified shall be issued to

 

  

2

  

Recipient as soon as practicable following such certification. No fractional shares shall be issued and the number of Performance Shares deliverable shall be rounded to the nearest whole share.

6. Tax Withholding. Recipient acknowledges that, on the date the Performance Shares are issued to Recipient (the “Payment Date”), the Value (as defined below) on that date of the Performance Shares will be treated as ordinary compensation income for federal and state income and FICA tax purposes, and that the Company will be required to withhold taxes on these income amounts. To satisfy the required minimum withholding amount, the Company shall withhold the number of Performance Shares having a Value equal to the minimum withholding amount. For purposes of this Section 6, the “Value” of a Performance Share shall be equal to the closing market price for Class A Common Stock on the last trading day preceding the Payment Date. 

7. Changes in Capital Structure. If the outstanding Class A Common Stock of the Company is hereafter increased or decreased or changed into or exchanged for a different number or kind of shares or other securities of the Company by reason of any stock split, combination of shares or dividend payable in shares, recapitalization or reclassification, appropriate adjustment shall be made by the Committee in the number and kind of shares subject to this Agreement so that the Recipient’s proportionate interest before and after the occurrence of the event is maintained.

8. Approvals. The obligations of the Company under this Agreement are subject to the approval of state, federal or foreign authorities or agencies with jurisdiction in the matter. The Company will use its reasonable best efforts to take steps required by state, federal or foreign law or applicable regulations, including rules and regulations of the Securities and Exchange Commission and any stock exchange on which the Company’s shares may then be listed, in connection with the award evidenced by this Agreement. The foregoing notwithstanding, the Company shall not be obligated to deliver Class A Common Stock under this Agreement if such delivery would violate or result in a violation of applicable state or federal securities laws.

9. No Right to Employment. Nothing contained in this Agreement shall confer upon Recipient any right to be employed by the Company or to continue to provide services to the Company or to interfere in any way with the right of the Company to terminate Recipient’s services at any time for any reason, with or without cause.

10. Miscellaneous.

10.1 Entire Agreement. This Agreement constitutes the entire agreement of the parties with regard to the subjects hereof. 

10.2 Notices. Any notice required or permitted under this Agreement shall be in writing and shall be deemed sufficient when delivered personally to the party to whom it is addressed or when deposited into the United States Mail as registered or certified mail, return receipt requested, postage prepaid, addressed to the Company, Attention: Corporate Secretary, at its principal executive offices or to Recipient at the address of Recipient in the Company’s

 

  

3

  

records, or at such other address as such party may designate by ten (10) days’ advance written notice to the other party.

10.3 Assignment; Rights and Benefits. Recipient shall not assign this Agreement or any rights hereunder to any other party or parties without the prior written consent of the Company. The rights and benefits of this Agreement shall inure to the benefit of and be enforceable by the Company’s successors and assigns and, subject to the foregoing restriction on assignment, be binding upon Recipient’s heirs, executors, administrators, successors and assigns.

10.4 Further Action. The parties agree to execute such instruments and to take such action as may reasonably be necessary to carry out the intent of this Agreement.

10.5 Applicable Law; Attorneys’ Fees. The terms and conditions of this Agreement shall be governed by the laws of the State of Oregon. In the event either party institutes litigation hereunder, the prevailing party shall be entitled to reasonable attorneys’ fees to be set by the trial court and, upon any appeal, the appellate court.

Dated: _________________

 

 

_______________________________

PATRICK L. CHRISTOPHER

 

 

 

 

SCHNITZER STEEL INDUSTRIES, INC.

 

 

By:  ____________________________

 

Its:  Senior Vice President                            

 

 

 

 

 

 

 

 

 

 

 

4

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