THIRD AMENDED SHARED SERVICES AGREEMENT
EXHIBIT
10.5
THIRD
AMENDED SHARED SERVICES AGREEMENT
This
THIRD AMENDED SHARED SERVICES AGREEMENT (this “Agreement”) is made and entered
into as of July 26, 2006 by and among Schnitzer Steel Industries, Inc., an
Oregon corporation (“SSI”), Schnitzer Investment Corp., an Oregon corporation
(“SIC”), and Island Equipment Company, Inc., a corporation organized under the
laws of the Territory of Guam (“IECO”).
RECITALS
SSI,
SIC
and IECO are parties to that certain Second Amended Shared Services Agreement
dated September 13, 1993, as amended by that certain Amendment to Second Amended
Shared Services Agreement dated September 1, 1994 (together, the “Prior
Agreement”). Pursuant to the Prior Agreement, certain companies controlled by
the Schnitzer Family, including SSI, SIC and IECO, as well as certain other
related parties, agreed to share services and costs over a number of management
and administrative areas. The Prior Agreement has been terminated with respect
to all parties other than SSI, SIC and IECO. Over the last 1½ years, SSI, SIC
and IECO have been reducing the sharing of services between the three companies,
and have now eliminated substantially all sharing of services. In certain
limited areas, however, the parties expect to continue to share services and
costs and, accordingly, desire to enter into this Agreement to evidence their
agreement regarding this limited sharing of services going forward.
NOW,
THEREFORE, in consideration of the terms and conditions contained herein, SSI,
SIC and IECO agree to amend, restate and supersede the Prior Agreement in its
entirety as follows:
1. Environmental
Management Services. SSI
employees
who work on environmental matters have under the Prior Agreement been involved
in managing environmental compliance and remediation at a number of sites on
behalf of SIC. To maintain continuity and utilize accumulated knowledge and
experience with respect to these sites, SSI agrees to provide to SIC the
services of employees in its environmental department (“SSI Environmental
Employees”) as reasonably requested by SIC and as the time of such employees is
reasonably available consistent with the duties of such employees as SSI
employees to continue to handle SIC’s environmental compliance and remediation
matters consistent with past practice. In exchange, SIC agrees to reimburse
SSI
for such services in accordance with this Agreement and to consult with SSI
Environmental Employees with respect to properties for which SSI has or may
have
liability to or shares or may share liability with SIC;
provided, however, that SIC will not be obligated to so consult with SSI
Environmental Employees if SIC makes a good faith determination that its and
SSI’s
interests are not the same with regard to liability, causation, or similar
issues.
If SSI
Environmental Employees provide services to SIC with respect to properties
for
which SSI has or may have liability to or shares or may
share
liability with SIC, only one-half of the time spent performing such services
shall be considered time spent performing services for SIC under this
Agreement.
2. Employee
Benefits Services. SIC
employees
have in the past participated in retirement, health and other employee benefit
plans and programs sponsored by SSI and
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administered
by employees of SSI (“SSI Benefits Employees”). Effective as of June 30, 2006,
participation by SIC employees in SSI benefit plans and programs has ceased.
However, SSI Benefits Employees are expected to continue to provide
administrative services to SIC in connection with transition issues. In
exchange, SIC agrees to reimburse SSI for such services in accordance with
this
Agreement. In addition, SSI has retained an outside consultant to assist with
employee education on the recent retirement plan changes for both SSI and SIC,
and SIC agrees to reimburse SSI for a pro rata portion of the cost of that
consultant based on the percentage of the total employees participating in
SSI’s
401(k) plan as of June 29, 2006 consisting of SIC employees.
3. Payroll
Services. SSI
employees
who administer payroll for SSI (“SSI Payroll Employees” and, together with the
SSI Environmental Employees and the SSI Benefits Employees, “SSI Employees”)
have under the Prior Agreement administered payroll for SIC and IECO. IECO
has
entered into an agreement to sell substantially all of its assets in a
transaction (the “IECO Sale”) that is expected to close in the near future.
Because of the pending IECO Sale, IECO has not transitioned its payroll
administration away from SSI. SSI agrees to provide to IECO the services of
SSI
Payroll Employees to continue to handle IECO’s payroll consistent with past
practice. Upon completion of the IECO Sale, but in any event no later than
December 31, 2006, all such services shall cease except for necessary year-end
reporting. Although SIC payroll is no longer administered by SSI Payroll
Employees, remaining transition issues and year-end reporting may require SSI
Payroll Employees to perform some services for SIC. In exchange for all such
services, SIC and IECO agree to reimburse SSI in accordance with this
Agreement.
4. Performance
Standard. SSI
Employees
will perform services for SIC and IECO as contemplated by this Agreement with
the same degree of care, skill and prudence customarily exercised in performing
services for SSI. SSI will have no liability under this Agreement for damage
or
loss of any type suffered by SIC, IECO or any third party as a result of the
performance of the services provided under this Agreement, and SSI will not
be
responsible for general, special, indirect, incidental or consequential damages
that SIC, IECO or any third party may incur or experience on account of entering
into or relying on this Agreement. No third party is intended to be a
third-party beneficiary under this Agreement.
5. Determination
of Charges.
5.1 Salary
Charge. At
the end of
each month, SSI Employees shall compile the number of hours of time spent
performing services for SIC or IECO (the “Shared Time Hours”). An SSI Employee’s
hourly rate (the “Hourly Rate”) will equal his or her annual base salary divided
by 2,080. The SSI Employee’s salary charge to SIC or IECO (the “Salary Charge”)
will equal the Shared Time Hours for the respective party multiplied by the
SSI
Employee’s Hourly Rate.
5.2 Burden
Charge. An
SSI
Employee’s burden charge to SIC or IECO for each month (the “Burden Charge”)
will equal thirty percent (30%) of the Salary Charge to such party for the
month.
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5.3 Auto
Allowance Charge. The
auto
allowance paid to each SSI Employee (computed on an annual basis) will be
divided by 2,080, and the resulting quotient will be multiplied by the Shared
Time Hours for each of SIC and IECO to establish the auto allowance charge
to
such party (the “Auto Allowance Charge”). If an SSI Employee is provided with an
automobile by SSI, the auto allowance for the purpose of the foregoing sentence
will equal the annual lease value calculated in accordance with the Internal
Revenue Code and Treasury Department Regulations.
5.4 Space
Charge. The
number of
square feet of office space occupied by each SSI Employee, if any, multiplied
by
the then current annual full-service, square-foot lease rate on the corporate
headquarters of SSI will be divided by 2,080, and the resulting quotient will
be
multiplied by the Shared Time Hours for each of SIC and IECO to establish the
space charge to such party (the “Space Charge”).
5.5 Actual
Charge. The
sum of
the Salary Charge, Burden Charge, Auto Allowance Charge and Space Charge of
each
SSI Employee with respect to each of SIC and IECO will equal the SSI Employee’s
actual charge to such party (the “Actual Charge”).
5.6 Billable
Charges. An
SSI
Employee’s Actual Charge to SIC or IECO multiplied by 1.15, which represents the
overhead costs and profit margin attributed to the SSI Employee, will equal
the
SSI Employee’s billable charge (the “Billable Charge”), and on a monthly basis
SIC and IECO will each be billed the sum of the Billable Charges of each SSI
Employee who performed services for it. All Billable Charges shall be due and
payable within 30 days after invoice.
6. Term. The
initial
term of this Agreement shall end on December 31, 2007. This Agreement will
automatically be renewed for additional six-month terms thereafter unless either
party gives written notice of termination to the other party not less than
sixty
days prior to a renewal date.
7. Miscellaneous.
7.1 Status
of Parties. Nothing
contained in this Agreement will constitute either party as an agent, general
representative, partner, joint venturer or employee of the other party or any
subsidiary or associated company of the other party for any purpose, and SSI
will render services under this Agreement as an independent contractor. No
party
will have the power to bind the other party unless and except as, in respect
of
any specific matters, it is hereafter expressly authorized to do so in writing
by such other party.
7.2 Confidentiality. SSI,
SIC and
IECO each agree to maintain the confidentiality of all nonpublic information,
oral or written, that any other party considers to be secret, sensitive or
confidential and that is or was acquired in the performance or receipt of
services under this Agreement, and none of SSI, SIC or IECO, nor any employee
or
agent of any of them, will disclose such confidential information to any third
party without the prior written consent of SSI, SIC or IECO, as applicable,
or
as required by law.
7.3 Assignment. No
party will
assign or transfer any of its rights under this Agreement without the prior
written consent of the other party.
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7.4 Entire
Agreement. This
Agreement supersedes in its entirety the Prior Agreement and represents the
entire agreement among the parties regarding its subject matter and supersedes
all prior negotiations and agreements regarding the subject matter. There are
no
other understandings, provisions, representations or warranties, express or
implied, among the parties.
7.5 Amendment. Any
and all
amendments, supplements and modifications to this Agreement will be in writing
and signed by the parties.
7.6 Notices. All
notices
and other communications under this Agreement will be transmitted in writing
by
registered or certified mail, return receipt requested, by Express Mail, air
courier service, facsimile, electronic mail or other express delivery service
(receipt requested) or by prepaid telegram, addressed to the respective party
at
the address given below. Such addresses may be changed by notice from one party
to the other party.
(a) If
to
SSI:
Schnitzer
Steel Industries, Inc.
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▇▇▇▇▇▇▇▇,
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Attention:
General Counsel
Facsimile:
(▇▇▇) ▇▇▇-▇▇▇▇
E-mail:
▇▇▇▇▇▇▇▇▇▇▇▇▇▇@▇▇▇▇.▇▇▇
(b) If
to
SIC:
Schnitzer
Investment Corp.
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▇▇▇▇▇▇▇▇,
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Attention:
Office Manager
Facsimile:
(▇▇▇) ▇▇▇-▇▇▇▇
E-mail:
▇▇▇▇▇▇▇@▇▇▇▇▇▇▇.▇▇▇
(c) If
to
IECO:
Island
Equipment Company, Inc.
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▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇ ▇▇▇▇▇
Attention:
Office Manager
Facsimile:
(▇▇▇) ▇▇▇-▇▇▇▇
E-mail:
▇▇▇▇▇▇▇@▇▇▇▇▇▇▇.▇▇▇
7.7 Choice
of Law. This
Agreement will be governed by, and all disputes arising under this Agreement
will be resolved in accordance with, the law of the State of
Oregon.
7.8 Severability. If
any
provision of this Agreement will, to any extent, be invalid or unenforceable,
the remainder of this Agreement will not be affected thereby and will be valid
and enforceable to the fullest extent permitted by law.
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7.9 Headings. The
section
headings in this Agreement are for convenience or reference only and will not
be
given any effect in the interpretation of this Agreement.
7.10 Counterparts. This
Agreement may be executed in counterparts, each of which will be considered
an
original, but all of which together will constitute the same
instrument.
| SCHNITZER STEEL INDUSTRIES, INC. | |
| By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ | |
| Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ | |
| Title: Secretary | |
| SCHNITZER INVESTMENT CORP | |
| By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇ | |
| Name:▇▇▇▇▇ ▇▇▇▇▇▇▇ | |
| Title: President | |
|
ISLAND
EQUIPMENT COMPANY, INC.
|
|
| By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ | |
| Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ | |
| Title: Vice President |
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