EXHIBIT 10.1
SCHNITZER STEEL INDUSTRIES, INC.
EXECUTIVE ANNUAL BONUS PLAN

1.           Purpose.  Schnitzer Steel Industries, Inc. (the “Company”) hereby
establishes the Schnitzer Steel Industries, Inc. Executive Annual Bonus Plan
(the “Plan”) with the intent of qualifying compensation paid under the Plan as
“performance-based compensation” within the meaning of Section 162(m) of the
Internal Revenue Code of 1986 (“Section 162(m)”) and the regulations promulgated
thereunder.  The Plan shall be interpreted in a manner consistent with the
foregoing intent.

2.           Administration.  The Plan shall be administered by the Compensation
Committee (the “Committee”) of the Board of Directors of the Company, which
shall be comprised solely of two or more “outside directors” as defined in
regulations promulgated under Section 162(m).  The Committee may adopt
guidelines to implement and administer the Plan.

3.           Plan Participants.  The participants in the Plan (the
“Participants”) shall be the Chief Executive Officer (the “CEO”) of the Company
and such directors and other executive officers of the Company as may be
designated in writing by the Committee at the time of the establishment of
Performance Goals for any fiscal year.  Other executives and employees of the
Company may receive bonuses on terms similar to the terms of bonuses paid to
Participants under the Plan, but those bonuses shall not be covered by the Plan
and, therefore, shall not qualify as performance-based compensation under
Section 162(m).

4.           Performance Goals.

(a)           To make an award under the Plan, the Committee shall, no later
than 90 days after the beginning of a fiscal year of the Company, establish in
writing the objectives (“Performance Goals”) that must be satisfied by the
Company or any subsidiary, division or other unit of the Company (“Business
Unit”) during such year as a condition to the payment or accrual of a cash bonus
for each Participant based on performance in that year.  The Committee shall
also establish (i) the amounts, or the formula for determining the amounts, of
cash bonuses to be paid or accrued based on achievement of the Performance
Goals, and (ii) the timing of payment and any other conditions to payment of
such amounts.  In establishing any Performance Goals, the Committee may, in its
sole discretion, reserve the right to reduce the resulting cash bonuses prior to
payment on such terms as determined by the Committee.

(b)           The Performance Goals for each fiscal year shall be one or more
targeted levels of performance with respect to one or more of the following
objective measures with respect to the Company or any Business Unit:  economic
profit (adjusted operating income after taxes less a capital charge), net
income, earnings per share, return on equity, return on assets, return on
capital, return on investment, revenues, gross margin, gross margin per ton (or
other unit of weight or volume), operating margin, operating income, operating
income per ton (or other measure of weight or volume), income before income
taxes, earnings before interest and taxes (“EBIT”), earnings before interest,
taxes, depreciation and amortization (“EBITDA”), working capital, inventories,
inventory turns, sales volume, production volume, intake purchase volumes, cash
flows, man hours per ton, conversion costs, safety metrics (including but not
 
 
 

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limited to OSHA Total Incident Rate, Lost Time Rate and Recordable Injuries) or
any of the foregoing before the effect of acquisitions, divestitures, accounting
changes, and restructuring and special charges (determined according to criteria
established by the Committee).

5.           Computation of Bonus.  Following the conclusion of any fiscal year,
prior to the payment of any cash bonuses under the Plan with respect to that
year, the Committee shall certify in writing the attainment of the Performance
Goals for the year and the calculation of the bonus amounts.  No bonus shall be
paid or accrued if the related Performance Goal is not met.

6.           Maximum Bonus.  The maximum cash bonus that may be paid or accrued
for any Participant with respect to performance of the Company in any fiscal
year shall be $6,000,000.

7.           Amendment and Termination of Plan.  The Board may at any time amend
or terminate the Plan, except that no amendment will be effective without
approval by the Company’s shareholders if such approval is necessary to qualify
amounts payable hereunder as performance-based compensation under Section
162(m).  Unless it is re-approved by the shareholders, the Plan shall terminate
on the date of the first shareholder meeting that occurs in the fifth year after
the year of the last re-approval by the shareholders.  No termination of the
Plan shall affect Performance Goals and related awards established by the
Committee prior to such termination.

8.           No Right of Continued Employment.  Nothing in the Plan or any award
pursuant to the Plan shall confer upon any person any right to be continued in
the employment of the Company or any subsidiary.

9.           Governing Law.  The Plan shall be construed in accordance with and
governed by the laws of the State of Oregon.
 
 
 
 
 
 
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