WWW.EXFILE.COM, INC. -- 14508 -- SCHNITZER STEEL INDUSTRIES, INC. -- EXHIBIT 10.5 TO FORM 8-K


     

    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 11⁄2 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.

    3200
      NW
      Yeon Avenue

    Portland,
      Oregon 97210

    Attention:
      General Counsel

    Facsimile:
      (503) 471-4417

    E-mail:
      generalcounsel@schn.com

     

    (b)    If
      to
      SIC:

     

    Schnitzer
      Investment Corp.

    1211
      SW
      Fifth Avenue, Suite 2250

    Portland,
      Oregon 97204

    Attention:
      Office Manager

    Facsimile:
      (503) 595-8315

    E-mail:
      dparker@schninv.com

     

    (c)    If
      to
      IECO:

     

    Island
      Equipment Company, Inc.

    1211
      SW
      Fifth Avenue, Suite 2250

    Portland,
      Oregon 97204

    Attention:
      Office Manager

    Facsimile:
      (503) 595-8315

    E-mail:
      dparker@schninv.com

     

    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/ Richard C. Josephson     
                
	 	Name:
              Richard C. Josephson      
                
	 	Title:
              Secretary                              
               
	 	 
	 	SCHNITZER INVESTMENT CORP 
	 	 
	 	By:
              /s/ Anton
              Pardini                   
                
	 	Name:Anton
              Pardini                    
                
	 	Title:
              President                              
                
	 	 
	 	
              ISLAND
                EQUIPMENT COMPANY, INC. 

            
	 	 
	 	By:
              /s/ Carl
              Rasmussen                  
	 	Name:
              Carl
              Rasmussen                   
	 	Title:
              Vice
              President                        


    

     

     

     

     

    
      
        
        

      

      
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