WWW.EXFILE.COM, INC. -- 14077 -- SCHNITZER STEEL INDUSTRIES, INC. -- EXHIBIT 10.2 TO FORM 8-K


    

      
        	  	SCHNITZER
                STEEL INDUSTRIES,
                INC. 
	
              	
                3200
                  NW Yeon
                  Avenue

                Phone
                  (503)
                  224-9900 

              	
                P.O.
                  Box
                  10047
Fax
                (503)
                321-2649 	Portland,
                Oregon 97296-0047 


      

    

     

    Exhibit
      10.2

    
      	
               

            	
              January
                6,
                2006

            


    

     

    Richard
      C. Josephson

    PO
      Box 10047

    Portland,
      OR 97296

     

    Dear
      Rich:

     

    This
      letter serves to outline those areas
      related to your offer of employment as a regular full-time employee with
      Schnitzer Steel Industries, Inc. (the “Company”). Here are the
      particulars:

     

    
      	
              Position:

               

            	
              Vice
                President and General Counsel for
                Schnitzer Steel Industries, Inc.

               

            
	
              Compensation:

               

            	
              Your
                salary will be $450,000 per
                annum.

            
	
              Reporting
                To:

               

            	
              John
                D. Carter, President and Chief
                Executive Officer

              Schnitzer
                Steel Industries,
                Inc.

               

            
	
              Hire
                Date:

            	
              January
                9, 2006 (“Hire
                Date”)

               

            
	
              Bonus
                Eligibility:

               

            	
              You
                are eligible for participation in
                the Company’s Economic Value Added (EVA®) bonus program
                beginning on your Hire Date. Your EVA target is 50% of your EVA earnings
                (that accrue beginning with the Hire Date), which is then adjusted
                by the
                EVA center multiple that you will be assigned. You will participate
                100%
                in the “SSI without Joint Ventures” EVA Center. Bonus amounts, as
                formulated, are payable following the Company’s fiscal year-end on August
                31st, and are based on Company performance and are not
                guaranteed.

               

            
	
              Performance
                and Salary
                Review:

            	
              Normally,
                performance appraisals are
                conducted during the second calendar quarter of each year (usually
                in
                April or May). Salary reviews are normally conducted in June of each
                year.
                Increases, if any, depend upon individual performance and company
                financial considerations and are not automatic in nature. You will
                be
                eligible to participate in the June 2006 salary review.

               

            
	
              Auto
                Allowance:

            	
              You
                will be granted Auto Allowance,
                Level C, Oregon, which is currently at $700 per month. You will also
                receive a Company gas card. The auto allowance and gas card are pursuant
                to Human Resources Policy #640, and are considered taxable income
                to
                employees.

               

            
	
              Long-Term
                Incentive
                Program

            	
              You
                will be eligible for participation
                in the Schnitzer Steel Industries, Inc. Long-Term Incentive Program
                (“LTIP”). The target LTIP award level is anticipated to be $350,000 for
                the performance cycle from September 1, 2005 thru August 31, 2008.
                However, based on your Hire Date, this amount will be pro-rated to
                a
                target award level of $311,000. Final details on this program will
                be
                confirmed following approval of the recent plan amendments by the
                Company’s shareholders at the annual meeting in January, 2006. Actual
                award levels under the LTIP are subject to approval by the Compensation
                Committee of the Board of Directors. 

               

              The
                exercise price for any non-statutory
                stock options granted to you will be established at the closing trading
                price of the underlying stock on or about the date of grant.

               

            


    

     

     

     

    
    

    
      	
              Richard
                C. Josephson

            	
              Page
                2

            


    

     

     

     

     

     

    
      	
              Benefits
                Effective:

               

               

               

               

               

            	
              The
                effective date of your benefits will
                be determined by the waiting periods, if any, contained in each of
                the
                plans for which you are eligible. Other benefits are effective per
                plans
                and coverages as currently exist or as modified in the future for
                the
                salary group of which you are a part. The Company reserves the right
                to
                amend, alter or eliminate coverages. In addition to benefits under
                the
                Schnitzer self-insured health plan, coverage will also be provided
                under
                the Executive medical reimbursement plan. 

               

              Based
                on your Hire Date, you will be
                eligible to enroll into the health and welfare medical plans on April
                1,
                2006. As additional consideration, the Company will reimburse you
                for your
                actual COBRA expenses under your current employers plan until you
                are
                eligible for coverage under the Company plan(s). This amount will
                be
                considered to be taxable income to you, and therefore will be included
                on
                your 2006 W-2.

               

            
	
              Other
                Benefits

            	
              The
                Company will pay, or reimburse you
                for all normal and reasonable business expenses, including Oregon
                State
                Bar fees.

               

              The
                Company will reimburse you, or pay
                directly on your behalf, up to $5,000 for your attorney’s fees incurred in
                connection with this agreement.

               

            
	
              Paid
                Time Off
                (“PTO”)

            	
              PTO
                will
                accrue on an accelerated schedule. You will begin accruing PTO at
                the four
                (4) year rate of 6.16 hours per pay period or 160 hours per year.
                Your
                accrual rate will remain the same until at such time in the future
                you
                become eligible for the next highest accrual level, which is currently
                at
                9 years of service. PTO guidelines are provided under Human Resources
                Policy #525.

               

            


    

    
      	
              Severance
                Provisions

            	
              The
                Company
                will be presenting a severance program for certain key executive
                positions
                to the Compensation Committee of the Board of Directors that will
                provide
                a compensation package in the event of a loss of employment related
                to
                change in control and/or termination without cause. Your position
                will be
                included in this evaluation and recommendation, and actual participation
                will be subject to approval by the Compensation Committee. In the
                event
                such a program is not approved, or you are not included within such
                program at substantially the same level as other similarly situated
                senior
                executives of the Company, then the Company will provide you with
                a
                severance program that will be in effect from your Hire Date, and
                for a
                period of three (3) years, to expire on January 2, 2009, as
                follows:

               

              If
                your
                employment terminates (unless by the Company for Cause or voluntarily
                by
                you), you will be eligible for the following severance payments:
                (1) One
                year of salary at your then current base annual salary at the time
                of
                termination; (2) one year equivalent EVA Bonus based on the most
                recently
                completed EVA Bonus Plan year multiplied by your then current EVA
                bonus
                target percentage; (3) one year of medical, dental and vision coverage
                at
                your then-current enrollment, paid by the Company (or an equivalent
                value
                in money to the extent the Company cannot continue your coverage
                past the
                end of the calendar year in which your employment terminates pursuant
                to
                the terms of the coverage plans); and (4) pension plan matching
                contributions to the same level that would have been made had you
                remained
                employed continuously through the 12th month following the month
                of your
                termination. You shall also be entitled to your EVA Bonus Bank balance
                as
                provided in the EVA Bonus Plan. You will be entitled to these severance
                considerations only if you execute a general release of claims in
                a form
                reasonably satisfactory to the Company within 30 days (or such other
                period as the Company, in its reasonable discretion, may specify)
                after
                the date as of which your employment terminates and does not revoke
                that
                release of claims during the

               

            


    

    
       

       

       

      
      

      
        	
                Richard
                  C. Josephson

              	
                Page
                  3

              


      

       

       

       

       

       

      
      

    

    
      	
               

            	
               

              7-day
                period
                (or such other period as the Company, in its reasonable discretion,
                may
                specify) immediately following the date on which you execute such
                release
                of claims (the "Revocation Period"). 

               

              By
                way of
                example and not limitation, the general release of claims will include
                any
                and all claims for wages, EVA Target Bonuses or EVA Bonus Bank, employment
                benefits or damages of any kind whatsoever, arising out of (or under)
                (a)
                any contracts, express or implied, (b) any covenant of good faith
                and fair
                dealing, express or implied, (c) any theory of wrongful discharge,
                (d) any
                legal restriction on Employer's right to terminate employment, (e)
                any
                federal, state or other governmental statute or ordinance, including,
                without limitation, Title VII of the Civil Rights Act of 1964, the
                federal
                Age Discrimination in Employment Act, the Americans with Disabilities
                Act,
                the Family and Medical Leave Act, Employee Retirement Income Security
                Act,
                or (f) any other legal limitation on the employment relationship;
                provided, that the general release of claims will not affect your
                rights
                to receive severance benefits as set forth herein.

               

              Termination
                For Cause: You will not be entitled to any severance provision in
                the
                event you are terminated for Cause. Cause means the following, as
                determined in good faith by the Company's Board of Directors:

               

              a)   Your
                conviction (including a plea of guilty or nolo contendere) of a felony
                involving theft or moral turpitude or relating to the business of
                the
                Company, other than a felony predicated on your vicarious
                liability.

              b)   Your
                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 your 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 you.

              c)   Deception,
                fraud, misrepresentation or dishonesty by you in connection with
                your
                employment with the Company; any incident materially compromising
                your
                reputation or ability to represent the Company with the public; any
                willful misconduct by you that substantially impairs the Company’s
                business or reputation; or any other willful misconduct by you that
                is
                clearly inconsistent with your position or responsibilities.

               

            


       

    

     

    The
      foregoing does not constitute a contract
      since the Company is an "at-will" employer. "At-will" means that employment
      and
      compensation can be terminated, with or without cause and with or without
      notice, at any time, at the option of the Company or yourself, subject to the
      obligations of the Company to pay severance benefits as set forth herein. This
      offer is made contingent on your successfully passing a drug screen provided
      by
      the Company, and finalization of a comprehensive background check conducted
      by
      the Company.

     

    Rich,
      we all join in congratulating you on
      your position with the Company and wish you a continuing successful
      career.

     

    
      	
              Sincerely,

            	
              Accepted,

            


    

     

    
      	
              /S/
                John D. Carter

            	
              /S/
                Richard C.
                Josephson

            


    

     

    
      	
              John
                D. Carter

            	
              Richard
                C. Josephson

            
	
              President
                and Chief Executive
                Officer

            	
              Employee

            	
               

            


    

     

    cc:
      Employee File