Exhibit 10.2

FORM OF LONG-TERM INCENTIVE AWARD AGREEMENT

UNDER THE 1993 STOCK INCENTIVE PLAN

NOTE: The following form of Long-Term Incentive Award Agreement is the form used
for awards to corporate-level employees. In the Long-Term Incentive Award
Agreements for employees who work exclusively for the Company’s Metals Recycling
Business or Auto Parts Business, the ROCE Payout Factor in Section 2.3 is based
100% on the MRB/APB ROCE Payout Factor, all references to the SMB ROCE Payout
Factor are omitted, and various conforming language changes are made. In the
Long-Term Incentive Award Agreements for employees who work exclusively for the
Company’s Steel Manufacturing Business, the ROCE Payout Factor in Section 2.3 is
based 100% on the SMB ROCE Payout Factor, all references to the MRB/APB ROCE
Payout Factor are omitted and various conforming language changes are made.

SCHNITZER STEEL INDUSTRIES, INC.

LONG-TERM INCENTIVE AWARD AGREEMENT

(FY 20    -20     Performance Period)

On              , 20    , the Compensation Committee (the “Committee”) of the
Board of Directors (the “Board”) of Schnitzer Steel Industries, Inc. (the
“Company”) authorized and granted a performance-based award to
                     (“Recipient”) pursuant to Section 11 of the Company’s 1993
Stock Incentive Plan (the “Plan”). Compensation paid pursuant to the award is
intended to qualify as performance-based compensation under Section 162(m) of
the Internal Revenue Code of 1986 (the “Code”). By accepting this award,
Recipient agrees to all of the terms and conditions of this Agreement.

1. Award. Subject to the terms and conditions of this Agreement, the Company
shall issue to the Recipient the number of shares of Class A Common Stock of the
Company (“Performance Shares”) determined under this Agreement based on (a) the
performance of the Company during the three-year period from September 1, 20    
to August 31, 20     (the “Performance Period”) as described in Section 2, and
(b) Recipient’s continued employment during the Performance Period as described
in Section 3. Recipient’s “Target Share Amount” for purposes of this Agreement
is          shares.

2. Performance Conditions.

2.1 Payout Factor. Subject to adjustment under Sections 3, 4, 5 and 6, the
number of Performance Shares to be issued to Recipient shall be determined by
multiplying the Payout Factor by the Target Share Amount. The “Payout Factor”
shall be equal to the sum of (a) 50% of the EPS Payout Factor as determined
under Section 2.2 below, plus (b) 50% of the ROCE Payout Factor as determined
under Section 2.3 below.

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2.2 EPS Payout Factor.

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

 

Fiscal 20    

Adjusted EPS

 

Fiscal 20    

Adjusted EPS

 

Fiscal 20    

Adjusted EPS

 

Annual EPS

Payout Factor

Less than $        

  Less than $           Less than $           0%

$        

  $           $               %

$        

  $           $           100%

$         or more

  $         or more   $         or more   200%

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

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

2.3 ROCE Payout Factor.

2.3.1 The “ROCE Payout Factor” shall be equal to the sum of (a) the MRB/APB
Weight (as defined below) multiplied by the MRB/APB ROCE Payout Factor as
determined under Section 2.3.2 below, plus (b) the SMB Weight (as defined below)
multiplied by the SMB ROCE Payout Factor as determined under Section 2.3.3
below. The “SMB Weight” shall be equal to a fraction, the numerator of which is
the Three-Year ACE of the Company’s Steel Manufacturing Business (“SMB”) and the
denominator of which is the sum of the Three-Year ACE of SMB and the Three-Year
ACE of the Company’s Metals Recycling Business (“MRB”) and the Three-Year ACE of
the Company’s Auto Parts Business (“APB”). The “MRB/APB Weight” shall be equal
to one (1) minus the SMB Weight. The “Three-Year ACE” for each business shall
mean the average of thirteen (13) numbers consisting of the business’s Capital
Employed as of the last day of the Performance Period and as of the last day of
the twelve preceding fiscal quarters. Subject to adjustment in accordance with
Section 2.4 below, “Capital Employed” for each business as of any date shall
mean (i) the business’s total assets, minus (ii) the business’s total
liabilities other than debt for borrowed money and capital lease obligations,
plus (iii) its intercompany payable balances, minus (iv) its intercompany
receivable balances, in each case as set forth in the consolidated financial
statements of the Company and its subsidiaries as of the applicable date or
otherwise determined from the Company’s accounting records on a consistent
basis.

 

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2.3.2 MRB/APB ROCE Payout Factor.

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

 

MRB/APB ROCE

 

Annual

MRB/APB ROCE

Payout Factor

Less than     %

  0%

    %

      %

    %

      %

    %

  100%

    %

      %

    % or more

  200%

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

2.3.2.2 The “MRB/APB ROCE” for any fiscal year shall be equal to the sum of the
Adjusted Operating Income of MRB for that fiscal year and the Adjusted Operating
Income of APB for that fiscal year divided by the sum of the Average Capital
Employed of MRB for that fiscal year and the Average Capital Employed of APB for
that fiscal year. “Adjusted Operating Income” for each business for any fiscal
year shall mean the business’s segment operating income for that fiscal year as
set forth in the audited consolidated financial statements of the Company and
its subsidiaries for the year, adjusted in accordance with Section 2.4 below,
and then reduced by the Company’s effective tax rate for the fiscal year as
determined from the audited consolidated statement of operations of the Company
and its subsidiaries for the year. “Average Capital Employed” for each business
for any fiscal year shall mean the average of five (5) numbers consisting of the
business’s Capital Employed as of the last day of the fiscal year and as of the
last day of the four preceding fiscal quarters.

2.3.3 SMB ROCE Payout Factor.

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

 

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Fiscal 20    

SMB ROCE

 

Fiscal 20    

SMB ROCE

 

Fiscal 20    

SMB ROCE

 

Annual SMB ROCE

Payout Factor

Less than     %

  Less than     %   Less than     %   0%

    %

      %       %       %

    %

      %       %   100%

    % or more

      % or more       % or more   200%

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

2.3.3.2 The “SMB ROCE” for any fiscal year shall be equal to the Adjusted
Operating Income of SMB for that fiscal year divided by the Average Capital
Employed of SMB for that fiscal year.

2.4 Adjustments.

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

2.4.2 Other Adjustments. [additional adjustments as approved by Compensation
Committee for each grant]

3. Employment Condition.

3.1 Full Payout. In order to receive the full number of Performance Shares
determined under Section 2, Recipient must be employed by the Company on the
October 31 immediately following the end of the Performance Period (the “Vesting
Date”).

3.2 Retirement; Termination Without Cause After 12 Months. If Recipient’s
employment with the Company is terminated at any time prior to the Vesting Date
because of retirement (as defined in paragraph 6(a)(iv)(D) of the Plan), or if
Recipient’s employment is terminated by the Company without Cause (as defined
below) after the end of the 12th month of the Performance Period and prior to
the Vesting Date, Recipient shall be entitled to receive a pro-rated award to be
paid following completion of the Performance Period. The number of

 

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Performance Shares to be issued as a pro-rated award under this Section 3.2
shall be determined by multiplying the number of Performance Shares determined
under Section 2 by a fraction, the numerator of which is the number of days
Recipient was employed by the Company since the beginning of the Performance
Period and the denominator of which is the number of days in the period from the
beginning of the Performance Period to the Vesting Date. Any obligation of the
Company to issue a pro-rated award under this Section 3.2 shall be subject to
and conditioned upon the execution and delivery by Recipient of a Release of
Claims in such form as may be requested by the Company. For purposes of this
Section 3.2, “Cause” shall mean (a) the conviction (including a plea of guilty
or nolo contendere) of Recipient of a felony involving theft or moral turpitude
or relating to the business of the Company, other than a felony predicated on
Recipient’s vicarious liability, (b) Recipient’s continued failure or refusal to
perform with reasonable competence and in good faith any of the lawful duties
assigned by (or any lawful directions of) the Company that are commensurate with
Recipient’s position with the Company (not resulting from any illness, sickness
or physical or mental incapacity), which continues after the Company has given
notice thereof (and a reasonable opportunity to cure) to Recipient,
(c) deception, fraud, misrepresentation or dishonesty by Recipient in connection
with Recipient’s employment with the Company, (d) any incident materially
compromising Recipient’s reputation or ability to represent the Company with the
public, (e) any willful misconduct by Recipient that substantially impairs the
Company’s business or reputation, or (f) any other willful misconduct by
Recipient that is clearly inconsistent with Recipient’s position or
responsibilities.

3.3 Death or Disability. If Recipient’s employment with the Company is
terminated at any time prior to the Vesting Date because of death or disability,
Recipient shall be entitled to receive a pro-rated award to be paid as soon as
reasonably practicable following such event. The term “disability” means a
medically determinable physical or mental condition of Recipient resulting from
bodily injury, disease, or mental disorder which is likely to continue for the
remainder of Recipient’s life and which renders Recipient incapable of
performing the job assigned to Recipient by the Company or any substantially
equivalent replacement job. For purposes of calculating the pro-rated award
under this Section 3.3, the EPS Payout Factor and the ROCE Payout Factor shall
both be calculated as if the Performance Period ended on the last day of the
Company’s most recently completed fiscal quarter prior to the date of death or
disability. For this purpose, the Adjusted EPS for any partial fiscal year shall
be annualized (e.g., multiplied by 4/3 if the partial period is three quarters)
before determining the Annual EPS Payout Factor for that fiscal year, and the
EPS Payout Factor shall be determined by averaging however many full and partial
fiscal years for which an Annual EPS Payout Factor shall have been determined.
Also for this purpose, the Adjusted Operating Income of MRB and APB for any
partial fiscal year shall be annualized and the Average Capital Employed of MRB
and APB shall be determined based on the average of its Capital Employed as of
the last day of only those quarters that have been completed, before determining
the Annual MRB/APB ROCE Payout Factor for that partial fiscal year, and the
MRB/APB ROCE Payout Factor shall be determined by averaging however many full
and partial fiscal years for which an Annual MRB/APB ROCE Payout Factor shall
have been determined. Also for this purpose, the Adjusted Operating Income of
SMB for any partial fiscal year shall be annualized and the Average Capital
Employed of SMB shall be determined based on the average of its Capital Employed
as of the last day of only those quarters that have been completed, before
determining the Annual SMB ROCE Payout Factor for that partial fiscal year, and
the SMB ROCE Payout Factor shall be determined by averaging however many full
and partial fiscal years for which an Annual SMB ROCE Payout Factor shall have
been determined. The number of Performance Shares to be issued as a pro-rated

 

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award under this Section 3.3 shall be determined by multiplying the number of
Performance Shares determined after applying the modifications described in the
preceding sentences by a fraction, the numerator of which is the number of days
Recipient was employed by the Company since the beginning of the Performance
Period and the denominator of which is the number of days in the period from the
beginning of the Performance Period to the Vesting Date.

3.4 Other Terminations. If Recipient’s employment by the Company is terminated
at any time prior to the Vesting Date and neither Section 3.2 nor Section 3.3
applies to such termination, Recipient shall not be entitled to receive any
Performance Shares.

4. Company Sale.

4.1 If a Company Sale (as defined below) occurs before the Vesting Date,
Recipient shall be entitled to receive an award payout no later than the earlier
of fifteen (15) days following such event or the last day on which the
Performance Shares could be issued so that Recipient may participate as a
shareholder in receiving proceeds from the Company Sale. The amount of the award
payout under this Section 4.1 shall be the amount determined using a Payout
Factor equal to the greater of (a) 100%, or (b) the Payout Factor calculated as
if the Performance Period ended on the last day of the Company’s most recently
completed fiscal quarter prior to the date of the Company Sale. For this
purpose, the Adjusted EPS for any partial fiscal year shall be annualized (e.g.,
multiplied by 4/3 if the partial period is three quarters) before determining
the Annual EPS Payout Factor for that fiscal year, and the EPS Payout Factor
shall be determined by averaging however many full and partial fiscal years for
which an Annual EPS Payout Factor shall have been determined. Also for this
purpose, the Adjusted Operating Income of MRB and APB for any partial fiscal
year shall be annualized and the Average Capital Employed of MRB and APB shall
be determined based on the average of its Capital Employed as of the last day of
only those quarters that have been completed, before determining the Annual
MRB/APB ROCE Payout Factor for that partial fiscal year, and the MRB/APB ROCE
Payout Factor shall be determined by averaging however many full and partial
fiscal years for which an Annual MRB/APB ROCE Payout Factor shall have been
determined. Also for this purpose, the Adjusted Operating Income of SMB for any
partial fiscal year shall be annualized and the Average Capital Employed of SMB
shall be determined based on the average of its Capital Employed as of the last
day of only those quarters that have been completed, before determining the
Annual SMB ROCE Payout Factor for that partial fiscal year, and the SMB ROCE
Payout Factor shall be determined by averaging however many full and partial
fiscal years for which an Annual SMB ROCE Payout Factor shall have been
determined.

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

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

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

 

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4.3 If an SMB Sale (as defined below) occurs before the end of the Performance
Period, Recipient shall be entitled to receive a modified award to be paid
following completion of the Performance Period. The amount of the award payout
under this Section 4.3 shall be determined in accordance with the other
provisions of this Agreement, except that the SMB ROCE Payout Factor shall be
calculated as if the Performance Period ended on the last day of the Company’s
most recently completed fiscal quarter prior to the date of the SMB Sale. For
this purpose, the Adjusted Operating Income of SMB for any partial fiscal year
shall be annualized and the Average Capital Employed of SMB shall be determined
based on the average of its Capital Employed as of the last day of only those
quarters that have been completed, before determining the Annual SMB ROCE Payout
Factor for that partial fiscal year, and the SMB ROCE Payout Factor shall be
determined by averaging however many full and partial fiscal years for which an
Annual SMB ROCE Payout Factor shall have been determined. An “SMB Sale” shall
mean a sale by the Company of all of the stock of Cascade Steel Rolling Mills,
Inc. or the sale of all or substantially all of the assets of Cascade Steel
Rolling Mills, Inc.

5. Certification and Payment. As soon as practicable following the completion of
the audit of the Company’s consolidated financial statements for the final
fiscal year of the Performance Period, the Company shall calculate the Payout
Factor and the corresponding number of Performance Shares issuable to Recipient.
This calculation shall be submitted to the Committee. No later than the Vesting
Date the Committee shall certify in writing (which may consist of approved
minutes of a Committee meeting) the levels of Adjusted EPS, MRB/APB ROCE and SMB
ROCE attained by the Company for the Performance Period and the number of
Performance Shares issuable to Recipient based on such performance. Subject to
applicable tax withholding, the number of Performance Shares so certified shall
be issued to Recipient as soon as practicable following the Vesting Date, but no
Performance Shares shall be issued prior to certification. No fractional shares
shall be issued and the number of Performance Shares deliverable shall be
rounded to the nearest whole share. In the event of the death or disability of
Recipient as described in Section 3.3 or a Company Sale as described in
Section 4, each of which requires an award payout earlier than the Vesting Date,
a similar calculation and certification process shall be followed within the
time frames required by those sections.

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

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

 

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

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

10. Miscellaneous.

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

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

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

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

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

 

SCHNITZER STEEL INDUSTRIES, INC.

By

 

 

Title

 

 

 

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