UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d)
of
the
Securities Exchange Act of 1934
Date
of
report (Date of earliest event reported):
July
26, 2006
SCHNITZER
STEEL INDUSTRIES, INC.
(Exact
name of registrant as specified in its charter)
|
OREGON
(State
or other j
urisdiction
of
i
ncorporation)
|
0-22496
(Commission
File
Number)
|
93-0341923
(I.R.S.
Employer
Identification
No.)
|
|
3200
N.W. Yeon Ave.
P.O.
Box 10047
Portland,
OR
(Address
of principal executive offices)
|
97296-0047
(Zip
Code)
|
Registrant’s
Telephone Number, Including Area Code
(503)
224-9900
NO
CHANGE
(Former
name or former address, if changed since last report)
Check
the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions
(
see
General
Instruction A.2. below):
|
o
|
Written
communications pursuant to Rule 425 under the Securities Act
(17 CFR
230.425)
|
|
o
|
Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
|
|
o
|
Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act
(17 CFR
240.14d-2(b))
|
|
o
|
Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act
(17 CFR
240.13e-4(c))
|
|
Item
1.01.
|
Entry
into a Material Definitive
Agreement.
|
On
July
26, 2006, at a regularly scheduled meeting of the Board of Directors
(the
“Board”) of Schnitzer Steel Industries, Inc. (the “Company”), on the
recommendation from the Board’s Compensation Committee, the Board took the
following action:
|
·
|
Authorized
the issuance of deferred stock units to non-employee directors
as the form
of the restricted stock awards approved by the Board in July
2005;
|
|
·
|
Approved
the Deferred Compensation Plan for Non-Employee Directors;
and
|
|
·
|
Approved
Indemnity Agreements to be entered into between the Company
and each of
the Company’s directors and, executive officers and certain other
officers.
|
Deferred
Stock Units
Deferred
stock units (“DSUs”) will be awarded to non-employee directors pursuant to the
Company’s 1993 Stock Incentive Plan. One DSU gives the director the right to
receive one share of Class A Common Stock at a future date. Annually,
immediately following the annual meeting of shareholders (commencing
with the
2007 annual meeting), each non-employee director will receive DSUs
for a number
of shares equal to $87,500 divided by the closing market price of the
Class A
Common Stock on the grant date. The DSUs will become fully vested on
the day
before the next annual meeting, subject to continued service on the
Board. The
DSUs will also become fully vested on the death or disability of a
director or a
change in control of the Company (as defined in the DSU award
agreement).
After
the
DSUs have become vested, directors will be credited with additional
whole or
fractional shares to reflect dividends that would have been paid on
the stock
subject to the DSUs. The Company will issue Class A Common Stock to
a director
pursuant to vested DSUs in a lump sum in January after the director
ceases to be
a director of the Company, subject to the right of the director to
elect an
installment payment program under the Company’s Deferred Compensation Plan for
Non-Employee Directors.
In
order
to move from a cycle of granting non-employee director equity awards
each year
in June to a cycle of granting the awards in January at the time of
the annual
meeting, the Company will grant a one-time award of DSUs to each non-employee
director, effective as of August 31, 2006. The DSUs will become fully
vested on
the day before the 2007 annual meeting, subject to continued Board
service. The
one-time grants will be for the number of DSUs equal to $43,750 divided
by the
closing market price of the Class A Common Stock on August 31,
2006.
The
form
of Deferred Stock Unit Award Agreement is filed as Exhibit 10.1 to
this Form
8-K.
Deferred
Compensation Plan for Non-Employee Directors
Commencing
August 31, 2006, non-employee directors can elect to defer all or part
of their
compensation under the Deferred Compensation Plan for Non-Employee
Directors.
Directors’ cash fees can be credited to a cash account or a stock account, as
selected by the director. Payments from the cash account are paid in
cash, and
payments from the stock account are paid in Class A Common Stock. The
cash
account will be credited with quarterly interest equal to the average
interest
rate paid by the Company under its senior revolving credit agreement
(or if
there are no borrowings in a quarter, at the prime rate) plus 2%. The
stock
account will be credited with additional whole or partial shares reflecting
dividends that would have been paid on the shares. Deferred amounts
will be paid
in a single payment or in equal annual installment payments for up
to 15 years
commencing in January following the date the director ceases to be
a director.
DSUs
issued to non-employee directors will be credited to the directors’ stock
accounts under the Plan when the DSUs become vested, and the awards
will be
administered under the Plan. A director may elect to receive stock
under a DSU
in equal annual installment payments for up to 15 years commencing
in January
following the date the director ceases to be a director.
The
Deferred Compensation Plan for Non-Employee Directors is filed as Exhibit
10.2
to this Form 8-K.
Indemnity
Agreement
The
Company may enter into Indemnity Agreements with each director, each
executive
officer and certain other officers pursuant to which the Company will
agree to
indemnify such director or officer in connection with claims or proceedings
involving the director or officer (by reason of serving as a director
or officer
of the Company), as provided in the agreement. The form of Indemnity
Agreement
is filed as Exhibit 10.3 to this Form 8-K.
Summary
of Compensation for Non-Employee Directors
Compensation
for the Company’s non-employee directors after giving effect to the changes
described above is summarized in Exhibit 10.4 to this Form 8-K.
Third
Amended Shared Services Agreement
On
July
26, 2006, the Company entered into a Third Amended Shared Services
Agreement
(the “Third Amended Agreement”) with Schnitzer Investment Corp. (“SIC”) and
Island Equipment Company, Inc. (“IECO”), which amended and restated the previous
Second Amended Shared Services Agreement among the parties dated September
13,
1993, as amended. SIC and IECO are owned by members of the Schnitzer
Family who
collectively are controlling shareholders of the Company through their
ownership
of Class B Common Stock of the Company. As previously disclosed, starting
in
fiscal 2005 and continuing into fiscal 2006, the Company and the other
parties
reduced or ceased the sharing of services in a number of areas as part
of a
process expected to eliminate substantially all of the sharing of services
among
the parties by the end of fiscal 2006. The Third Amended Agreement
reflects the
limited scope of shared services going forward, with such sharing limited
to
environmental management services for an indefinite period and to employee
benefits and payroll services for a transition period. As under the
prior
agreement, the Third Amended Agreement provides that the Company will
be
reimbursed for services provided by its employees to the other parties
at rates
based on the actual hourly compensation expense to the Company for
such
employees (including fringe benefits) plus an hourly charge for reimbursement
of
space costs associated with such employees, all increased by 15% as
a margin for
additional overhead. The Third Amended Agreement was reviewed and approved
by
the Company’s Audit Committee.
|
Item
9.01.
|
Financial
Statements and
Exhibits
|
(c)
Exhibits.
|
+
|
10.1
|
Form
of Deferred Stock Unit Award Agreement for non-employee
directors
|
|
|
|
|
|
+
|
10.2
|
Deferred
Compensation Plan for Non-Employee Directors
|
|
|
|
|
|
+
|
10.3
|
Form
of Indemnity Agreement for directors and executive
officers
|
|
|
|
|
|
+
|
10.4
|
Non-Employee
Director Compensation Schedule.
|
|
|
|
|
|
|
10.5
|
Third
Amended Shared Services Agreement dated July 26, 2006 between
the Company,
Schnitzer Investement Corp. and Island Equipment Company,
Inc.
|
|
|
|
|
+
Compensatory plan or arrangement
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant
has
duly caused this report to be signed on its behalf by the undersigned
hereunto
duly authorized.
|
|
|
|
|
|
SCHNITZER
STEEL INDUSTRIES, INC.
|
|
|
(Registrant)
|
|
|
|
|
Dated:
July 28, 2006
|
By:
|
/s/ Richard
C. Josephson
|
|
|
Name:
Richard
C. Josephson
|
|
|
Title: Secretary
|
Exhibit
Index
|
Exhibit
No.
|
Description
|
|
|
|
|
|
+
|
10.1
|
Form
of Deferred Stock Unit Award Agreement for non-employee
directors
|
|
|
|
|
|
+
|
10.2
|
Deferred
Compensation Plan for Non-Employee Directors
|
|
|
|
|
|
+
|
10.3
|
Form
of Indemnity Agreement for directors and executive
officers
|
|
|
|
|
|
+
|
10.4
|
Non-Employee
Director Compensation Schedule.
|
|
|
|
|
|
|
10.5
|
Third
Amended Shared Services Agreement dated July 26, 2006 between
the Company,
Schnitzer Investement Corp. and Island Equipment Company,
Inc.
|
|
|
|
|
+
Compensatory plan or arrangement
EXHIBIT
10.1
DEFERRED
STOCK UNIT
AWARD
AGREEMENT
This
Award Agreement (the “Agreement”) is entered into as of ____________ (the
“Award Date”) by and between Schnitzer Steel Industries, Inc, an Oregon
corporation (the “Company”), and ____________ , a non-employee director of the
Company (the “Recipient”), for the award of deferred stock units with respect to
the Company’s Class A Common Stock (“Common Stock”).
The
award
of deferred stock units to the Recipient is made pursuant to Section 8 of the
Company’s 1993 Stock Incentive Plan (the “Plan”) and the Recipient desires to
accept the award subject to the terms and conditions of this Agreement.
IN
CONSIDERATION of the mutual covenants and agreements set forth in this
Agreement, the parties agree to the following.
1.
Award
and Terms of Deferred Stock Units
.
The
Company awards to the Recipient under the Plan _________ deferred stock units
(the “Award”), subject to the restrictions, terms and conditions set forth in
this Agreement.
(a)
Rights
under Deferred Stock Units
.
A
deferred stock unit (a “DSU”) represents the unfunded, unsecured right to
require the Company to deliver to the Recipient one share of Common Stock for
each DSU. The number of shares of Common Stock deliverable with respect to
each DSU 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
DSUs awarded under this Agreement shall initially be 100% unvested and subject
to forfeiture. Subject to Sections 1(c) and (d), the DSUs shall vest
in full on the day before the 2007 annual meeting of shareholders (the “Vesting
Date”) if the Recipient is a director of the Company on the Vesting Date and has
served as a director of the Company continuously from the Award Date to the
Vesting Date.
(c)
Acceleration
on Death or Disability
.
If the
Recipient ceases to be a director of the Company by reason of the Recipient’s
death or physical disability, all outstanding but unvested DSUs shall become
immediately vested. The term “disability” means a medically determinable mental
or physical impairment that, in the opinion of the Board of Directors, causes
the Recipient to be unable to perform his or her duties as a director of the
Company.
(d)
Acceleration
of DSUs on a Change in Control
.
Upon a
Change in Control of the Company, all outstanding but unvested DSUs shall become
immediately vested. For purposes of this Agreement, a “Change in Control” of the
Company shall mean the occurrence of any of the following events:
(i)
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 or continuing corporation immediately after the Merger,
disregarding any Voting
Securities
issued or retained by such holders in respect of securities of any other party
to the Merger;
(ii)
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;
(iii)
At
any
time during a period of two consecutive years, individuals who at the beginning
of such period constituted the Board of Directors (“Incumbent Directors”) shall
cease for any reason to constitute at least a majority thereof, unless each
new
director elected during such two-year period was nominated or elected by
two-thirds of the Incumbent Directors then in office and voting (with new
directors nominated or elected by two-thirds of the Incumbent Directors also
being deemed to be Incumbent Directors); or
(iv)
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 fifty percent (50%) or more of the combined voting power of the
then outstanding Voting Securities.
Notwithstanding
anything in the foregoing to the contrary, unless otherwise determined by the
Board of Directors, no Change in Control 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 the Company Common Stock) an equity interest
in an
entity that acquires the Company in a Change in Control otherwise described
under subparagraph (i) or (ii) above, or (2) the Recipient is part of 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 under
subparagraph (iv) above. For purposes of this Agreement, the term “Person” shall
mean and include 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 (the “Exchange Act”), other than the Company, a wholly
owned subsidiary of the Company or any employee benefit plan(s) sponsored by
the
Company.
(e)
Forfeiture
of DSUs on Termination of Service
.
If the
Recipient ceases to be a director of the Company for any reason that does not
result in acceleration of vesting pursuant to Section 1(c) or 1(d), the
Recipient shall immediately forfeit all outstanding but unvested DSUs awarded
pursuant to this Agreement and the Recipient shall have no right to receive
the
related Common Stock.
(f)
Restrictions
on Transfer
.
The
Recipient may not sell, transfer, assign, pledge or otherwise encumber or
dispose of the DSUs subject to this Agreement. The Recipient may designate
beneficiaries to receive the shares of Common Stock underlying the DSUs 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 as provided
in
the Company’s Deferred Compensation Plan for Non-Employee Directors (the
“Deferred Compensation Plan”).
(g)
No
Voting Rights; Dividend Equivalents
.
The
Recipient shall have no rights as a shareholder with respect to the DSUs or
the
Common Stock underlying the DSUs until the underlying Common Stock is issued
to
the Recipient. The Recipient will not be entitled to receive cash payments
representing any cash dividends paid with respect to the Common Stock underlying
the DSUs. Following the Vesting Date, the DSUs shall be credited to the
Recipient’s account under the Deferred Compensation Plan and dividend
equivalents with respect to the DSUs shall thereafter be credited to Recipient’s
account as provided in the Deferred Compensation Plan.
(g)
Delivery
Date for the Shares Underlying the DSU.
The
Company shall not issue any shares underlying the DSUs, and the Recipient shall
have no right to receive any shares of Common Stock underlying the DSUs (even
to
the extent vested), while the Recipient is serving as a director of the Company.
When the Recipient ceases to serve as a director of the Company for any reason,
the Company shall, subject to any deferral elections made by the Recipient
as
provided in this paragraph Section 1(g) and the terms of the Deferred
Compensation Plan, deliver shares of Common Stock represented by vested DSUs
to
the Recipient as provided in the Deferred Compensation Plan (the date of
delivery of such shares is referred to as a “delivery date”). The shares
of Common Stock will be issued in the Recipient’s name or, in the event of the
Recipient’s death or disability, to the Recipient’s beneficiary or as provided
in the Deferred Compensation Plan. The Recipient may elect to defer the receipt
of the shares underlying the DSUs beyond the delivery date provided for in
this
Section 1(g) pursuant to the terms of the Deferred Compensation
Plan.
(h)
Taxes
and Tax Withholding
.
(i)
The
Company
shall be entitled to withhold from any delivery of Common Stock hereunder any
income or other tax withholding obligations arising as a result of this Award,
in amounts determined by the Company.
(ii)
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 DSUs.
2.
Miscellaneous
.
(a)
Entire
Agreement
.
This
Agreement, the Plan and the Deferred Compensation 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 of the Board of Directors (the “Administrator”), shall
have the sole authority to interpret the provisions of this Agreement, the
Plan
and the Deferred Compensation Plan, and all determinations by it shall be final
and conclusive.
(c)
Electronic
Delivery
.
The
Recipient consents to the electronic delivery of 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 further instruments and to take such further
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.
(g)
Counterparts
.
This
Agreement may be executed in two or more counterparts, each of which shall
be
deemed an original.
|
|
SCHNITZER
STEEL INDUSTRIES, INC.
|
|
|
|
|
|
|
|
|
By:
|
|
|
|
|
|
Authorized
Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
Recipient
|
EXHIBIT
10.2
SCHNITZER
STEEL INDUSTRIES, INC.
DEFERRED
COMPENSATION PLAN
FOR
NON-EMPLOYEE DIRECTORS
EFFECTIVE
AUGUST 31, 2006
TABLE
OF CONTENTS
|
|
|
PAGE
|
|
|
|
|
|
1.
|
Purpose;
Effective Date
|
1
|
|
|
|
|
|
2.
|
Eligibility
|
1
|
|
|
|
|
|
3.
|
Deferral
Elections
|
1
|
|
|
|
|
|
4.
|
Accounts
|
2
|
|
|
|
|
|
5.
|
Payment
of Benefits
|
4
|
|
|
|
|
|
6.
|
Administration
|
6
|
|
|
|
|
|
7.
|
Claims
Procedure
|
6
|
|
|
|
|
|
8.
|
Amendment
and Termination of the Plan
|
7
|
|
|
|
|
|
9.
|
Miscellaneous
|
8
|
SCHNITZER
STEEL INDUSTRIES, INC.
DEFERRED
COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS
1.
Purpose;
Effective Date
.
The
Board of Directors (the “Board”) of Schnitzer Steel Industries, Inc. (the
“Company”) adopts this Deferred Compensation Plan for Non-Employee Directors
(the “Plan”)
for
the
purpose of providing an unfunded nonqualified deferred compensation plan for
non-employee directors. The Plan is effective as of August 31, 2006
,
although initial deferral elections may be submitted at any time after August
1,
2006.
2.
Eligibility
.
Persons
eligible to defer compensation under the Plan shall consist of non-employee
directors of the Company (“Directors”)
3.
Deferral
Elections
.
A
Director may elect to defer compensation under the Plan by submitting a
“Participation Agreement” to the Company on a form specified by the Company no
later than the applicable deferral deadline. Any Director who has submitted
a
Participation Agreement or who has vested deferred stock units (“DSUs”) granted
under the 1993 Stock Incentive Plan that have been credited under the Plan
is
hereafter referred to as a “Participant.” A Participation Agreement submitted by
a Participant shall automatically continue from year to year and shall be
irrevocable with respect to compensation once the deferral deadline for that
compensation has passed, but the Participant may modify or terminate a
Participation Agreement for compensation payable in any year by submitting
a
revised Participation Agreement or otherwise giving written notice to the
Company at any time on or prior to the deferral deadline for that
compensation.
(a)
Elections
by Continuing Directors
.
(i)
Fees
.
A
Director may elect to defer receipt of all or any portion of the annual
retainer, meeting fees and any other cash fees payable for service as a director
(“Fees”). The deferral deadline for an election to defer Fees for services
performed in any calendar year shall be the last day of the prior calendar
year;
provided however, that the deferral deadline for an election to defer Fees
for
services performed in the last four months of 2006 shall be August 31,
2006.
(ii)
Deferred
Stock Units
.
When
DSUs become vested, the number of shares of the Company’s Class A Common
Stock (“Common Stock”) subject to the DSU (“DSU Shares”) shall be credited
to the Director’s Account under the Plan pursuant to Section 4(b). A
Director may elect to receive all or any portion of any DSU Shares in
installments as provided in this Plan rather than in a lump sum following
termination of Board service as provided in the DSU award agreement. Except
as
provided in Section 5(f), the deferral deadline for such an election with
respect to DSU Shares awarded in exchange for services performed in any calendar
year shall be the last day of the prior calendar year provided however, that
the
deferral deadline for an election to defer DSUs to vest over a service period
beginning August 31, 2006 shall be August 31, 2006. For example, if an award
of
DSUs is made on August 31, 2006 that will vest based on continued board service
beginning August 31, 2006, the deferral deadline shall be August 31, 2006;
and
if an award of DSUs is made in January 2007
that
will
vest based on continued board service until January 2008, the deferral deadline
shall be December 31, 2006.
(b)
New
Directors
.
A
person who first becomes a Director during a calendar year may elect to defer
any of the types of compensation referred to in paragraph (a) above that is
payable solely for services performed during the remainder of the calendar
year
after submission of the Participation Agreement, subject to all of the
provisions of paragraph (a), except that
the
election shall be made prior to the date the person becomes a
Director.
4.
Accounts
.
(a)
Accounts
.
The
Company shall establish on its books one or two separate accounts (individually,
an “Account” and collectively, the “Accounts”) for each Participant: a Stock
Account, which shall be denominated in shares of Common Stock, including
fractional shares, and a Cash Account, which shall be denominated in U.S.
dollars.
(b)
Allocation
of Deferrals Among Accounts; Transfers Among Accounts
.
DSU
Shares shall be credited solely to the Stock Account. Fees deferred by a
Director shall be credited to the Stock Account or the Cash Account as elected
by the Director at the time the Director elects to defer Fees. An election
between the Stock Account and the Cash Account shall be irrevocable as to the
deferred Fees covered by the election.
The
credit for Fees shall be entered on the Company’s books of account at the time
that Fees are paid to other Directors who do not elect to defer the payment
of
such Fees. The credit for DSU Shares shall be entered on the Company’s books of
account as of the date the DSU Shares become vested.
Subject
to such rules and conditions as may be approved by the Committee, Participants
may elect to transfer amounts previously credited to the Cash Account to the
Stock Account. No transfers may be made out of a Stock Account unless otherwise
permitted under Section 4(f)(iv).
(c)
Valuation
of Stock; Dividend Credits
.
With
respect to each amount of Fees deferred to a Director’s Stock Account, the Stock
Account shall be credited with a number of shares equal to the deferred Fees
divided by the closing market price of the Common Stock on the day the deferred
Fees would have been paid if not for the deferral. As of each date for payment
of dividends on the Common Stock, each Stock Account shall be credited with
an
additional number of shares (including fractional shares) equal to the total
amount of dividends that would have been paid on the number of shares recorded
as the balance of that Account as of the record date for such dividend divided
by the closing market price for the Common Stock on such dividend payment
date.
(d)
Cash
Account Interest
.
Interest shall be credited to the Cash Account of each Participant as of the
last day of each calendar quarter. The rate of interest to be applied at the
end
of each calendar quarter shall be the average interest rate paid by the Company
on borrowings under the Company’s senior revolving credit agreement (or if there
are no borrowings in a quarter, at the prime rate) plus 2%. Interest shall
be
calculated for each calendar quarter based upon the average daily balance of
the
Participant’s Cash Account during the quarter.
(e)
Statement
of Account
.
At the
end of each calendar quarter, a report shall be issued by the Company to each
Participant setting forth the balances of the Participant’s Accounts under the
Plan.
(f)
Effect
of Corporate Transaction on Stock Accounts
.
At the
time of consummation of a Corporate Transaction (as defined below), if any,
the
amount credited to a Participant’s Stock Account shall be converted into a
credit for cash or common stock of the acquiring company (“Acquiror Stock”)
based on the consideration received by shareholders of the Company in the
Corporate Transaction, as follows:
(i)
Stock
Transaction
.
If
holders of Common Stock receive Acquiror Stock in the Corporate Transaction,
then (1) the amount credited to each Participant’s Stock Account shall be
converted into a credit for the number of shares of Acquiror Stock that the
Participant would have received as a result of the Corporate Transaction if
the
Participant had actually held the Common Stock credited to his or her Stock
Account immediately prior to the consummation of the Corporate Transaction,
and
(2) Stock Accounts will thereafter be denominated in shares of Acquiror Stock
and ongoing deferral and crediting of Fees and DSU Shares, if any, shall
continue to be made into the Stock Accounts as so denominated in accordance
with
the terms of the DSUs and outstanding deferral elections.
(ii)
Cash
or Other Property Transaction
.
If
holders of Common Stock receive cash or other property in the Corporate
Transaction, then (1) the amount credited to a Participant’s Stock Account shall
be transferred to the Participant’s Cash Account and converted into a cash
credit for the amount of cash or the value of the property that the Participant
would have received as a result of the Corporate Transaction if the Participant
had actually held the Common Stock credited to his or her Stock Account
immediately prior to the consummation of the Corporate Transaction, and (2)
Stock Accounts shall no longer exist under the Plan and all ongoing deferrals,
if any, shall thereafter be made into Cash Accounts.
(iii)
Combination
Transaction
.
If
holders of Common Stock receive Acquiror Stock and cash or other property in
the
Corporate Transaction, then (1) the amount credited to each Participant’s Stock
Account shall be converted in part into a credit for Acquiror Stock under
Section 4(f)(i) and in part into a credit for cash under Section 4(f)(ii) in
the
same proportion as such consideration is received by shareholders, and (2)
ongoing deferral and crediting of Fees and DSU Shares, if any, shall continue
to
be made into the Stock Accounts as provided in Section 4(f)(i) in accordance
with the terms of the DSUs and outstanding deferral elections.
(iv)
Election
Following Stock Transaction
.
For a
period of 12 months following the consummation of any Corporate Transaction
which results in Participants having Stock Accounts denominated in Acquiror
Stock, each Participant shall have a one-time right to elect to transfer the
entire amount in the Participant’s Stock Account into the Participant’s Cash
Account. Such election shall be made by written notice to the Company and shall
be effective on the date received by the Company. If such an election is made,
the amount of cash to be credited to the Participant’s Cash Account shall be
determined by multiplying the number of shares of Acquiror Stock in the
Participant’s Stock Account by the closing market price of the Acquiror
Stock
reported for the effective date of the election or, if such day is not a trading
day, the next trading day.
(v)
For
purposes of this Plan, a “Corporate Transaction” shall mean any of the
following:
(1)
any
consolidation, merger or plan of share exchange involving the Company (a
“Merger”) pursuant to which shares of Common Stock would be converted into cash,
securities or other property; or
(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.
Payment
of Benefits
.
(a)
Plan
Benefits
.
The
Company shall pay Plan benefits to each Participant equal to the Participant’s
Accounts. Each Participation Agreement shall include an election by the
Participant as to the term of benefit payments with respect to amounts deferred
under the Participation Agreement. Except as otherwise provided in this Section
5, such elections shall be irrevocable with respect to compensation once the
deferral deadline for that compensation has passed. Participants may make
different payment elections with respect to subsequent deferrals of
compensation, but no Participant may at any time have compensation deferred
under the Plan payable under more than two different payment
elections.
(b)
Commencement
of Payments
.
Benefits shall commence in January of the year following the year in which
service as a Director of the Company ceases.
If a
Director has not filed a deferral election with respect to DSU Shares, all
amounts representing the DSU Shares shall be paid to the Director in a lump
sum
in January of the year following the year in which service as a director ceases.
(c)
Term
of Payments
.
Participants may elect in their Participation Agreements to have benefits from
their Accounts paid in (i) up to 15 annual installments, (ii) a single lump
sum
payment, or (iii) a combination of a partial lump sum payment (expressed as
a
percentage) and the remainder in up to 15 annual installments.
(d)
Form
of Payments
.
Benefits payable to a Participant from a Stock Account shall be paid as a
distribution of Common Stock plus cash for fractional shares. Benefits payable
to a Participant from a Cash Account shall be paid in cash.
(e)
Payment
Timing and Valuation
.
All
lump sum payments or installment payments due under the Plan in any year shall
be paid on a date in January determined by the Company. All payments shall
be
based on Account balances as of the close of business on the last trading day
of
the immediately preceding year. Each partial lump sum payment and installment
payment to a Participant shall be paid in the same proportion from each of
the
Accounts of the Participant subject to the applicable payment election. The
amount of each installment payment from each Account shall be determined by
dividing the Account balance by the number of remaining installments, including
the current installment to be paid.
(f)
Modification
of Payment Elections
.
After a
Participant’s election under Section 5(c) regarding the term of any benefit
payments has otherwise become irrevocable or after the deferral deadline for
a
deferral election under Section 3 with respect to DSU Shares has passed, the
Participant may elect to change such term of payments (including a change from
lump sum payment with respect to DSU Shares), provided (1) no such change shall
be effective unless the change election is made in writing delivered to the
Company no later than the last day of the second year preceding the year in
which payment of such benefits would otherwise have commenced and (2) the change
election must include an election to defer commencement of payment of benefits
for a period of not less than five (5) years from the year in which payment
of
such benefits would otherwise have commenced; provided, however, that all
payments under any such change election must be completed by the fifteenth
year
following the year in which service as a Director ceases.
(g)
Designation
of Beneficiaries; Death
.
(i)
Each
Participant shall have the right, at any time, to designate any person or
persons as the Participant’s beneficiary or beneficiaries (both primary as well
as secondary) to whom benefits under this Plan shall be paid in the event of
the
Participant’s death prior to complete distribution of the benefits due under the
Plan. If greater than fifty percent (50%) of the benefit is designated to a
beneficiary other than the Participant’s spouse, such beneficiary designation
shall be consented to by the Participant’s spouse. Each beneficiary designation
shall be in written form prescribed by the Company and will be effective only
if
filed with the Company during the Participant’s lifetime. Such designation may
be changed by the Participant at any time without the consent of a beneficiary,
subject to the spousal consent requirement above. If no designated beneficiary
survives the Participant, the balance of the Participant’s benefits shall be
paid to the Participant’s surviving spouse or, if no spouse survives, to the
Participant’s estate.
(ii)
Upon
the
death of a Participant, any benefits payable to a surviving spouse as
beneficiary shall be paid in accordance with the payment elections for such
benefits that would have applied if the Participant had not died, and any
benefits payable to any other beneficiary (including a secondary beneficiary
following the death of a surviving spouse) shall be paid in a single lump sum
payment in January of the year following death.
(h)
Unforeseeable
Emergency
.
Notwithstanding the foregoing provisions of this Section 5, an accelerated
payment from a Participant’s Accounts may be made to the Participant (or to the
Participant’s beneficiary following the Participant’s death) in the sole
discretion of the Committee based upon a finding that the Participant (or the
Participant’s beneficiary
following
the
Participant’s death) has suffered an Unforeseeable Emergency. For this purpose,
“Unforeseeable Emergency” means a severe financial hardship to the Participant
(or the Participant’s beneficiary following the Participant’s death) resulting
from a sudden and unexpected illness or accident of the Participant (or the
Participant’s beneficiary following the Participant’s death) or a dependent of
the Participant (or the Participant’s beneficiary following the Participant’s
death), loss of the Participant’s (or the Participant’s beneficiary following
the Participant’s death) property due to casualty, or other similar
extraordinary and unforeseeable circumstances arising as a result of events
beyond the control of the Participant (or the Participant’s beneficiary
following the Participant’s death). Unforeseeable Emergency shall be
determined
by the Committee on the basis of information supplied by the Participant (or
the
Participant’s beneficiary following the Participant’s death) in accordance with
uniform guidelines promulgated from time to time by the Committee. The amount
of
any accelerated payment under this Section 5(h) shall be limited to the amount
reasonably necessary to meet the Participant’s (or the beneficiary’s following
the Participant’s death) needs resulting from the Unforeseeable Emergency, after
taking into account insurance and other potential sources of funds to meet
such
needs, plus the amount reasonably necessary to cover income and withholding
taxes on the accelerated payment. Any such accelerated payment shall be paid
as
promptly as practicable following approval by the Committee and shall be paid
pro-rata from the Participant’s Accounts based on the account balances as of the
close of business on the day prior to the payment date.
(i)
Payment
to Guardian
.
If a
benefit under the Plan is payable to a minor or a person declared incompetent
or
to a person incapable of handling the disposition of his property, the Committee
may direct payment of such Plan benefit to the guardian, legal representative
or
person responsible for the care and custody of such minor, incompetent or
person. The Committee may require proof of incompetence, minority, incapacity
or
guardianship as it may deem appropriate prior to distribution of the Plan
benefit. Such distribution shall completely discharge the Committee and the
Company from all liability with respect to such benefit.
(j)
Withholding;
Payroll Taxes
.
The
Company shall withhold from payments made hereunder any taxes required to be
withheld from such payments under federal, state or local law.
6.
Administration
.
(a)
Committee
Duties
.
This
Plan shall be administered by the Compensation Committee of the Board (the
“Committee”). The Committee shall have responsibility for the general
administration of the Plan and for carrying out its intent and provisions.
The
Committee shall interpret the Plan and have such powers and duties as may be
necessary to discharge its responsibilities. The Committee may, from time to
time, employ other agents and delegate to them such administrative duties as
it
sees fit, and may from time to time consult with counsel who may be counsel
to
the Company.
(b)
Binding
Effect of Decisions
.
The
decision or action of the Committee in respect of any question arising out
of or
in connection with the administration, interpretation and application of the
Plan and the rules and regulations promulgated hereunder shall be final and
conclusive and binding upon all persons having any interest in the
Plan.
7.
Claims
Procedure
.
(a)
Claim
.
Any
person claiming a benefit, requesting an interpretation or ruling under the
Plan, or requesting information under the Plan shall present the request in
writing to the Committee, which shall respond in writing as soon as
practicable.
(b)
Denial
of Claim
.
If the
claim or request is denied, the written notice of denial shall
state:
(i)
The
reasons for denial, with specific reference to the Plan provisions on which
the
denial is based;
(ii)
A
description of any additional material or information required and an
explanation of why it is necessary; and
(iii)
An
explanation of the Plan’s claim review procedure.
(c)
Review
of Claim
.
Any
person whose claim or request is denied or who has not received a response
within thirty (30) days may request review by notice given in writing to the
Committee. The claim or request shall be reviewed by the Committee who may,
but
shall not be required to, grant the claimant a hearing. On review, the claimant
may have representation, examine pertinent documents, and submit issues and
comments in writing.
(d)
Final
Decision
.
The
decision on review shall normally be made within sixty (60) days. If an
extension of time is required for a hearing or other special circumstances,
the
claimant shall be notified and the time limit shall be one hundred twenty (120)
days. The decision shall be in writing and shall state the reasons and the
relevant Plan provisions. All decisions on review shall be final and bind all
parties concerned.
8.
Amendment
and Termination of the Plan
.
(a)
Amendment
.
The
Board may at any time amend the Plan in whole or in part; provided, however,
that no amendment shall affect the terms of any previously deferred amounts
or
the terms of any irrevocable Participation Agreement of any
Participant.
(b)
Termination
.
The
Board may at any time partially or completely terminate the Plan if, in its
judgment, the tax, accounting, or other effects of the continuance of the Plan,
or potential payments thereunder, would not be in the best interests of the
Company.
(i)
Partial
Termination
.
The
Board may partially terminate the Plan by instructing the Committee not to
accept any additional Participation Agreements and terminating all existing
Participation Agreements to the extent such Participation Agreements have not
yet become irrevocable. In the event of such a partial termination, the Plan
shall continue to operate and be effective with regard to all compensation
deferred prior to the effective date of such partial termination.
(ii)
Complete
Termination
.
The
Board may completely terminate the Plan as provided in this Section 8(b)(ii).
In
connection with any complete termination, the Company shall take all actions
necessary so that Participants do not incur any taxes under Section 409A of
the
Internal Revenue Code.
(1)
In
the
event the Board causes a complete termination of the Plan (other than in
connection with a Change in Control Event as provided in Section 8(b)(ii)(2)),
the Plan shall continue to operate as in a partial termination except as
provided in this Section 8(b)(ii)(1). For a period selected by the Board of
at
least twelve (12) months from the date the Board takes action to terminate
the
Plan, the Plan shall continue to pay benefits otherwise payable under the terms
of the Plan absent termination
of
the
Plan. On a date selected by the Board that is more than twelve (12) months
from
the date the Board took action to terminate the Plan, the Plan shall cease
to
operate, the Company shall determine the balance of each Participant’s Accounts
as of the close of business on such date and the Company shall pay out such
Account balances to the Participants in a single lump sum payment as soon as
practicable after such date, but in no event shall such distribution be made
later than 24 months after the date the Board took action to terminate the
Plan.
(2)
The
Board
may completely terminate the Plan at any time during the thirty (30) days
preceding or the twelve (12) months following a Change in Control Event (as
defined in the proposed regulations under Section 409A of the Internal Revenue
Code in effect as of the effective date of the Plan or in any revised or final
regulations adopted after the effective date of the Plan). In that event, on
the
effective date of the complete termination, the Plan shall cease to operate,
the
Company shall determine the balance of each participant’s Accounts as of the
close of business on such effective date, and the Company shall pay out such
Account balance to the Participants in a single lump sum payment as soon as
practicable after such effective date and in no event later than twelve (12)
months after such effective date.
9.
Miscellaneous
.
(a)
Unsecured
General Creditor
.
The
Accounts shall be established solely for the purpose of measuring the amounts
owed to a Participants or beneficiaries under the Plan. Participants and their
beneficiaries, heirs, successors and assigns shall have no legal or equitable
rights, interest or claims in any property or assets of the Company, nor shall
they be beneficiaries of, or have any rights, claims or interests in any mutual
funds, other investment products or the proceeds therefrom owned or which may
be
acquired by the Company. Except as may be provided in Section 9(b), such mutual
funds, other investment products or other assets of the Company shall not be
held under any trust for the benefit of the Participants, their beneficiaries,
heirs, successors or assigns, or held in any way as collateral security for
the
fulfilling of the obligations of the Company under the Plan. Any and all of
the
Company’s assets shall be, and remain, the general, unpledged, unrestricted
assets of the Company. The Company’s obligation under the Plan shall be that of
an unfunded and unsecured promise to pay money in the future, and the rights
of
Participants and beneficiaries shall be no greater than those of unsecured
general creditors of the Company.
(b)
Trust
Fund
.
The
Company shall be responsible for the payment of all benefits provided under
the
Plan. The Company may establish one or more trusts, with such trustees as the
Board may approve, for the purpose of providing for the payment of such
benefits, but the Company shall have no obligation to contribute to such trusts
except as specifically provided in the applicable trust documents. Such trust
or
trusts shall be irrevocable, but the assets thereof shall be subject to the
claims of the Company’s creditors. To the extent any benefits provided under the
Plan are actually paid from any such trust, the Company shall have no further
obligation with respect thereto, but to the extent not so paid, such benefits
shall remain the obligation of, and shall be paid by, the Company.
(c)
Non-assignability
.
Neither
a Participant nor any other person shall have the right to commute, sell,
assign, transfer, pledge, anticipate, mortgage or otherwise encumber, transfer,
hypothecate or convey in advance of actual receipt the amounts, if any, payable
hereunder, or any part thereof, which are, and all rights to which are,
expressly declared to be non-assignable and nontransferable. No part of the
amounts payable shall, prior to actual payment, be subject to seizure or
sequestration for the payment of any debts, judgments, alimony or separate
maintenance owed by a Participant or any other person, nor be transferable
by
operation of law in the event of a Participant’s or any other person’s
bankruptcy or insolvency.
(d)
Governing
Law
.
The
provisions of this Plan shall be construed and interpreted according to the
laws
of the State of Oregon, except as preempted by federal law.
(e)
Validity
.
In case
any provision of this Plan shall be held illegal or invalid for any reason,
said
illegality or invalidity shall not affect the remaining parts hereof, but this
Plan shall be construed and enforced as if such illegal and invalid provisions
had never been inserted herein.
(f)
Notice
.
Any
notice or filing required or permitted to be given to the Company or the
Committee under the Plan shall be sufficient if in writing and hand delivered,
or sent by registered or certified mail, to the Secretary of the Company. Such
notice shall be deemed given as of the date of delivery or, if delivery is
made
by mail, as of the date shown on the postmark on the receipt for registration
or
certification.
(g)
Successors
.
The
provisions of this Plan shall bind and inure to the benefit of the Company
and
its successors and assigns. The term successors as used herein shall include
any
corporate or other business entity which shall, whether by merger,
consolidation, purchase or otherwise acquire all or substantially all of the
business and assets of the Company, and successors of any such corporation
or
other business entity.
The
foregoing Plan was approved by the Board of Directors of Schnitzer Steel
Industries, Inc. on ____________, 2006.
|
|
|
SCHNITZER
STEEL INDUSTRIES, INC.
|
|
|
|
|
|
|
|
|
|
By:
|
|
|
|
|
|
|
|
Title
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXHIBIT
10.3
INDEMNITY
AGREEMENT
THIS
AGREEMENT is made as of ____________, 2006 by and between Schnitzer Steel
Industries, Inc., an Oregon corporation (Company), and _______________
(Indemnitee), a director or officer of the Company.
RECITALS
A.
It
is
essential to the Company to retain and attract as directors and officers the
most capable persons available.
B.
The
increase in corporate litigation subjects directors and officers to expensive
litigation risks at the same time that the availability and coverage of
directors’ and officers’ liability insurance have been reduced.
C.
It
is now
and always has been the express policy of the Company to indemnify its directors
and officers so as to provide them with the maximum possible protection
permitted by law.
D.
The
2006
Restated Articles of Incorporation of the Company require indemnification of
the
directors and officers of the Company to the fullest extent permitted by law.
The Oregon Business Corporation Act (the “Act”) expressly provides that the
indemnification provisions set forth in the Act are not exclusive, and thereby
contemplates that contracts may be entered into between the Company and members
of the Board of Directors and officers with respect to indemnification of
directors and officers.
NOW,
THEREFORE, the Company and Indemnitee agree as follows:
1.
Services
to the Company; Cooperation
.
Indemnitee will serve or continue to serve as a director or officer of the
Company for so long as Indemnitee is duly elected or appointed or until
Indemnitee tenders a resignation in writing or is removed. Indemnitee agrees
to
cooperate with the Company in connection with any investigation or inquiry
undertaken at the direction of the Board of Directors of the Company or any
committee of the Board of Directors.
2.
Definitions
.
As used
in this Agreement:
(a)
The
term
“Proceeding” shall include any threatened, pending or completed action, suit or
proceeding, arbitration, mediation or investigation, whether brought in the
right of the Company or otherwise and whether of a civil, criminal,
administrative or investigative nature, in which Indemnitee may be or may have
been involved as a party or otherwise, by reason of the fact that Indemnitee
is
or was a director or officer of the Company or is or was serving at the request
of the Company as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, whether or not serving
in
such capacity at the time any liability or expense is incurred for which
indemnification or reimbursement can be provided under this
Agreement.
(b)
The
term
“Expenses” includes, without limitation, expenses of investigations, judicial or
administrative proceedings or appeals, attorneys’ fees and disbursements and any
expenses of establishing a right to indemnification under Section 11 of this
Agreement, but shall not include amounts paid in settlement by Indemnitee or
the
amount of judgments or fines against Indemnitee.
(c)
References
to
“other enterprise” shall include employee benefit plans; references to “fines”
shall include any excise tax assessed with respect to any employee benefit
plan;
references to “serving at the request of the Company” shall include any service
as a director, officer, employee or agent of the Company which imposes duties
on, or involves services by, such director, officer, employee or agent with
respect to an employee benefit plan, its participants or beneficiaries; and
a
person who acted in good faith and in a manner reasonably believed to be in
the
best interest of an employee benefit plan shall be deemed to have acted in
a
manner “not opposed to the best interests of the Company” as referred to in this
Agreement.
3.
Indemnity
in Third-Party Proceedings
.
The
Company shall indemnify Indemnitee in accordance with the provisions of this
Section 3 if Indemnitee is a party to or threatened to be made a party to any
Proceeding (other than a Proceeding by or in the right of the Company to procure
a judgment in its favor) against all Expenses, judgments, fines and amounts
paid
in settlement actually and reasonably incurred by Indemnitee in connection
with
the Proceeding, but only if Indemnitee acted in good faith and in a manner
which
Indemnitee reasonably believed to be in or not opposed to the best interests
of
the Company and, in the case of a criminal proceeding, in addition, had no
reasonable cause to believe that Indemnitee’s conduct was unlawful.
4.
Indemnity
in Proceedings by or in the Right of the Company
.
The
Company shall indemnify Indemnitee in accordance with the provisions of this
Section 4 if Indemnitee is a party to or threatened to be made a party to any
Proceeding by or in the right of the Company to procure a judgment in its favor
against all Expenses actually and reasonably incurred by Indemnitee in
connection with the defense or settlement of the Proceeding, but only if
Indemnitee acted in good faith and in a manner which Indemnitee reasonably
believed to be in or not opposed to the best interests of the Company. No
indemnification for Expenses shall be made under this Section 4 in respect
of
any claim, issue or matter as to which Indemnitee shall have been finally
adjudged by a court to be liable to the Company, unless and only to the extent
that any court in which the Proceeding was brought shall determine upon
application that, despite the adjudication of liability but in view of all
the
circumstances of the case, Indemnitee is fairly and reasonably entitled to
indemnity.
5.
Indemnification
of Expenses of Successful Party
.
Notwithstanding any other provisions of this Agreement, to the extent that
Indemnitee has been successful, on the merits or otherwise, in defense of any
Proceeding or in defense of any claim, issue or matter therein, including the
dismissal of an action without prejudice, the Company shall indemnify Indemnitee
against all Expenses incurred in connection therewith.
6.
Additional
Indemnification
.
(a)
The
Company
agrees, as set forth in this Section 6(a), to indemnify Indemnitee to the
fullest extent permitted by law, notwithstanding that such indemnification
may
not be specifically authorized by the Company’s Restated Articles of
Incorporation, the Company’s Bylaws, the Act or the other provisions of this
Agreement. Accordingly, notwithstanding any limitation in Sections 3, 4 or
5,
the Company shall indemnify Indemnitee to the fullest extent permitted by law
if
Indemnitee is a party to or threatened to be made a party to any Proceeding
(including a Proceeding by or in the right of the Company to procure a judgment
in its favor) against all judgments, fines, amounts paid in settlement and
Expenses actually and reasonably incurred by Indemnitee in connection with
the
Proceeding. No indemnity shall be made under this Section 6(a) on account of
Indemnitee’s conduct which constitutes a breach of Indemnitee’s duty of loyalty
to the Company or its shareholders or is an act or omission not in good faith
or
which involves intentional misconduct or a knowing violation of the
law.
(b)
For
purposes
of Section 6(a), the meaning of the phrase “to the fullest extent permitted by
law” shall include, but not be limited to:
(i)
to
the
fullest extent permitted by the provision of the Act that authorizes or
contemplates additional indemnification by agreement, or the corresponding
provision of any amendment to or replacement of the Act, and
(ii)
to
the
fullest extent authorized or permitted by any amendments to or replacements
of
the Act adopted after the date of this Agreement that increase the extent to
which a corporation may indemnify its officers and directors.
(c)
The
Company
agrees to indemnify Indemnitee for Expenses if Indemnitee is called, in
connection with a Proceeding, as a non-party witness by reason of the fact
that
Indemnitee is or was a director or officer of the Company.
7.
Exclusions
.
Notwithstanding any provision in this Agreement, the Company shall not be
obligated under this Agreement to make any indemnity in connection with any
claim made against Indemnitee:
(a)
for
which
payment has actually been made to or on behalf of Indemnitee under any insurance
policy or other indemnity provision, except with respect to any excess beyond
the amount paid under any insurance policy or other indemnity
provision;
(b)
for
any
transaction from which Indemnitee derived an improper personal
benefit;
(c)
for
an
accounting of profits made from the purchase and sale (or sale and purchase)
by
Indemnitee of securities of the Company within the meaning of Section 16(b)
of
the Securities Exchange Act of 1934, as amended, or similar provisions of state
statutory or common law;
(d)
if
a court
having jurisdiction in the matter shall finally determine that such
indemnification is not lawful under any applicable statute or public policy
(and, in this respect, both the Company and Indemnitee have been advised that
the Securities and Exchange Commission believes that indemnification for
liabilities arising under the federal securities laws is against public policy
and is, therefore, unenforceable and that claims for indemnification should
be
submitted to appropriate courts for adjudication); or
(e)
in
connection
with any Proceeding (or part of any Proceeding) initiated by Indemnitee, or
any
Proceeding by Indemnitee against the Company and its directors, officers,
employees or other indemnitees, unless (i) the Company is expressly required
by
law to make the indemnification, (ii) the Proceeding was authorized by the
Board
of Directors of the Company, (iii) the Company provides the indemnification,
in
its sole discretion, pursuant to the powers vested in the Company under
applicable law, or (iv) Indemnitee initiated the Proceeding pursuant to Section
11 of this Agreement and Indemnitee is successful in whole or in part in the
Proceeding.
8.
Advances
of Expenses
.
The
Company shall pay the expenses incurred by Indemnitee in any Proceeding in
advance at the written request of Indemnitee, if Indemnitee:
(a)
furnishes
the
Company a written affirmation of the Indemnitee’s good faith belief that
Indemnitee is entitled to be indemnified by the Company under this Agreement;
and
(b)
furnishes
the
Company a written undertaking to repay the advance to the extent that it is
ultimately determined that Indemnitee is not entitled to be indemnified by
the
Company.
Advances
shall be made without regard to Indemnitee’s ability to repay the expenses and
without regard to Indemnitee’s ultimate entitlement to indemnification under the
other provisions of this Agreement. Advances made under this Section 8 shall
be
paid by the Company to Indemnitee as soon as practicable but in any event within
thirty (30) business days after written request by Indemnitee to the Company
pursuant to this Section 8. The Company’s obligation to advance expenses as
provided in this Section 8 is conditioned on Indemnitee’s actual cooperation
with investigations and inquiries, as provided in Section 1.
9.
Notification
and Defense of Claim
.
Not
later than thirty (30) days after receipt by Indemnitee of notice of the
commencement of any Proceeding, Indemnitee will, if a claim in respect of the
Proceeding is to be made against the Company under this Agreement, notify the
Company of the commencement of the Proceeding. The omission to notify the
Company will not relieve the Company from any liability which it may have to
Indemnitee otherwise than under this Agreement. With respect to any Proceeding
as to which Indemnitee notifies the Company of the commencement:
(a)
The
Company
will be entitled to participate in the Proceeding at its own
expense.
(b)
Except
as
otherwise provided below, the Company may, at its option and jointly with any
other indemnifying party similarly notified and electing to assume such defense,
assume
the defense of the Proceeding, with legal counsel reasonably satisfactory to
the
Indemnitee. Indemnitee shall have the right to use separate legal counsel in
the
Proceeding, but the Company shall not be liable to Indemnitee under this
Agreement, including Section 8 above, for the fees and expenses of separate
legal counsel incurred after notice from the Company of its assumption of the
defense, unless (i) Indemnitee reasonably concludes that there may be a conflict
of interest between the Company and Indemnitee in the conduct of the defense
of
the Proceeding or (ii) the Company does not use legal counsel to assume the
defense of such Proceeding. The Company shall not be entitled to assume the
defense of any Proceeding brought by or on behalf of the Company or as to which
Indemnitee shall have made the conclusion provided for in (i)
above.
(c)
If
two or
more persons who may be entitled to indemnification from the Company, including
the Indemnitee, are parties to any Proceeding, the Company may require
Indemnitee to use the same legal counsel as the other parties. Indemnitee shall
have the right to use separate legal counsel in the Proceeding, but the Company
shall not be liable to Indemnitee under this Agreement, including Section 8
above, for the fees and expenses of separate legal counsel incurred after notice
from the Company of the requirement to use the same legal counsel as the other
parties, unless the Indemnitee reasonably concludes that there may be a conflict
of interest between Indemnitee and any of the other parties required by the
Company to be represented by the same legal counsel.
(d)
The
Company
shall not be liable to indemnify Indemnitee under this Agreement for any amounts
paid in settlement of any Proceeding effected without its written consent,
which
shall not be unreasonably withheld. Indemnitee shall permit the Company to
settle any Proceeding the defense of which it assumes, except that the Company
shall not settle any action or claim in any manner which would impose any
penalty or limitation on Indemnitee without Indemnitee’s written consent, which
may be given or withheld in Indemnitee’s sole discretion.
10.
Procedure
Upon Application for Indemnification
.
Any
indemnification under Sections 3, 4, 5 or 6 of this Agreement shall be made
no
later than 90 days after receipt of the written request of Indemnitee for
indemnification and shall not require that a determination be made in accordance
with the Act by the persons specified in the Act that indemnification is
required under this Agreement. However, unless it is ordered by a court in
an
enforcement action under Section 11 of this Agreement, no such indemnification
shall be made if a determination is made within such 90-day period by (a) the
Board of Directors by a majority vote of a quorum consisting of directors who
were not parties to the Proceeding, or (b) independent legal counsel in a
written opinion (which counsel shall be appointed if a quorum is not
obtainable), that the Indemnitee is not entitled to indemnification under this
Agreement.
11.
Enforcement
.
Indemnitee may enforce any right to indemnification or advances granted by
this
Agreement to Indemnitee in any court of competent jurisdiction if (a) the
Company denies the claim for indemnification or advances, in whole or in part,
or (b) the Company does not dispose of the claim within 90 days of a written
request for indemnification or advances. Indemnitee, in the enforcement action,
if successful in whole or in part, shall be entitled to be paid also the expense
of prosecuting the claim. It shall be a defense to any such
enforcement
action (other than an action brought to enforce a claim for advancement of
Expenses pursuant to Section 8 above, if Indemnitee has tendered to the Company
the required affirmation and undertaking) that Indemnitee is not entitled to
indemnification under this Agreement, but the burden of proving this defense
shall be on the Company. Neither a failure of the Company (including its Board
of Directors or its shareholders) to make a determination prior to the
commencement of the enforcement action that indemnification of Indemnitee is
proper in the circumstances, nor an actual determination by the Company
(including its Board of Directors or its shareholders) that indemnification
is
improper shall be a defense to the action or create a presumption that
Indemnitee is not entitled to indemnification under this Agreement or otherwise.
The termination of any Proceeding by judgment, order of court, settlement,
conviction or upon a plea of nolo-contendere, or its equivalent, shall not,
of
itself, create a presumption that Indemnitee is not entitled to indemnification
under this Agreement or otherwise.
12.
Partial
Indemnification
.
If
Indemnitee is entitled under any provisions of this Agreement to indemnification
by the Company for some or part of the Expenses, judgments, fines and amounts
paid in settlement actually and reasonably incurred by Indemnitee in the
investigation, defense, appeal or settlement of any Proceeding but not, however,
for the total amount, the Company shall indemnify Indemnitee for the portion
of
the Expenses, judgments, fines and amounts paid in settlement to which
Indemnitee is entitled.
13.
Nonexclusivity
and Continuity of Rights
.
The
indemnification provided by this Agreement shall not be deemed exclusive of
any
other rights to which Indemnitee may be entitled under the Company’s Restated
Articles of Incorporation, the Company’s Bylaws, any other agreement, any vote
of shareholders or directors, the Act, or otherwise, both as to action in
Indemnitee’s official capacity and as to action in another capacity while
holding office. The indemnification under this Agreement shall continue as
to
Indemnitee even though Indemnitee ceases to be a director or officer and shall
inure to the benefit of the heirs and personal representatives of
Indemnitee.
14.
Business
Combinations
.
If any
person or group (as defined in Section 13(d)(3) of the Securities Exchange
Act
of 1934, as amended) acquires the legal right to elect a majority of the Board
of Directors of the Company in a transaction or series of transactions that
has
not received the prior approval of the Board of Directors of the Company, the
Company or its successor, as the case may be, shall, for a period of two years
following the date that such legal right is acquired (the “Trigger Date”),
maintain all directors and officers’ liability insurance in effect prior to the
Trigger Date that covers Indemnitee.
15.
Severability
.
If this
Agreement or any portion of it is invalidated on any ground by any court of
competent jurisdiction, the Company shall indemnify Indemnitee as to Expenses,
judgments, fines and amounts paid in settlement with respect to any Proceeding
to the full extent permitted by any applicable portion of this Agreement that
is
not invalidated or by any other applicable law or arrangement.
16.
Subrogation
.
In the
event of payment under this Agreement, the Company shall be subrogated to the
extent of such payment to all of the rights of recovery of Indemnitee.
Indemnitee shall execute all documents required and shall do all acts that
may
be necessary to secure such rights and to enable the Company effectively to
bring suit to enforce such rights.
17.
Modification
and Waiver
.
No
supplement, modification or amendment of this Agreement shall be binding unless
executed in writing by both parties. No waiver of any of the provisions in
this
Agreement shall constitute a waiver of any other provisions of this Agreement
(whether or not similar) nor shall any waiver constitute a continuing waiver,
unless expressly stated in any waiver.
18.
Notices
.
All
notices, requests, demands and other communications under this Agreement shall
be in writing and shall be deemed to have been duly given (a) upon delivery
if
delivered by hand to the party to whom the notice or other communication shall
have been directed, (b) upon delivery if mailed by certified or registered
mail
with postage prepaid or (c) upon delivery if sent by overnight mail or delivery
service:
(i)
If
to
Indemnitee, at the address indicated on the signature page of this
Agreement.
(ii)
If
to the
Company, to
Schnitzer
Steel Industries, Inc.
3200
NW
Yeon Avenue
Portland,
OR 97296
Attention:
President
or
to any
other address as may have been furnished to Indemnitee by the
Company.
19.
Counterparts
.
The
parties may execute this Agreement in two counterparts, each of which shall
constitute the original.
20.
Applicable
Law
.
This
Agreement shall be governed by and construed in accordance with the law of
the
state of Oregon.
21.
Successors
and Assigns
.
This
Agreement shall be binding upon the Company and its successors and
assigns.
IN
WITNESS WHEREOF, the parties have caused this Agreement to be signed as of
the
day and year first written above.
|
SCHNITZER STEEL INDUSTRIES,
INC.
|
INDEMNITEE
|
|
|
|
|
By:___________________________
|
By:___________________________
|
|
Signature
|
Signature
|
|
|
|
Type or Print Name
|
Type or Print Name
|
|
|
|
Title
|
Title
|
EXHIBIT
10.4
Non-Employee
Director Compensation Summary
1
The
following is a summary of the compensation provided to our non-employee
directors effective as of July 26, 2006.
|
Annual
fee for all non-employee directors
|
|
$
|
35,000
|
|
|
Board
meeting and Board committee meeting fees (where committee meeting
held
other than on the same day as a meeting of the Board)
|
|
$
|
1,200
|
|
|
Chairperson
retainer - Audit Committee
|
|
$
|
5,000
|
|
|
Chairperson
retainer - Compensation Committee
|
|
$
|
5,000
|
|
|
Chairperson
retainer - Nominating and Corporate Governance Committee
|
|
$
|
5,000
|
|
|
Annual
grant of deferred stock units (“DSUs”) relating to Class A common stock to
each non-employee directors (commencing with the 2007 annual meeting
of
shareholders), which will become fully vested based on continued
Board
service on the day before the next annual meeting
|
|
$
|
87,500
|
|
In
order to move from a cycle of granting non-employee director equity awards
each
year in June to a cycle of granting the awards in January at the time of the
annual meeting, the Company will grant a one-time award of DSUs to each
non-employee director, effective as of August 31, 2006. The DSUs will become
fully vested on the day before the 2007 annual meeting, subject to continued
Board service. The one-time grants will be for the number of DSUs equal to
$43,750 divided by the market price of the Common Stock on August 31,
2006.
Non-employee
directors may defer cash fees pursuant to the terms of the Company’s Deferred
Compensation Plan for Non-Employee Directors and may elect to receive Class
A
Common Stock under DSUs in installments pursuant to that plan.
Each
director may enter into an Indemnity Agreement with the Company pursuant to
which the Company will be contractually obligated to indemnity the director
in
connection with claims or proceedings involving the director (by reason of
serving as a director of the Company), as provided in the agreement.
The
Company’s directors are reimbursed for expenses incurred in attending Board and
Board committee meetings.
_________________________
1
The
Chairman of the Board may receive additional compensation as determined by
the
Compensation Committee.
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
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.
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.
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.
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
|