SCHNITZER STEEL INDUSTRIES INC (Form: 8-K, Received: 11/04/2008 09:00:52)

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): October 29 , 2008

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

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 5.02

Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers

Appointment of New CEO and New Chairman of the Board

On October 29, 2008, Tamara L. Lundgren was appointed President and Chief Executive Officer (collectively, the “CEO”) of Schnitzer Steel Industries, Inc. (the “Company”) by the Company’s Board of Directors (the “Board”) effective on December 1, 2008. The Board also elected Ms. Lundgren to the Board effective on December 1, 2008. Ms. Lundgren, 51, joined the Company in September 2005 as Vice President and Chief Strategy Officer and became Executive Vice President, Strategy and Investments and President - Shared Services in April 2006. Ms. Lundgren had served as Executive Vice President and Chief Operating Officer of the Company since November 6, 2006. Prior to joining the Company, Ms. Lundgren was an investment banker, most recently as a managing director at JPMorgan Chase, which she joined in 2001. From 1996 until 2001, Ms. Lundgren was a managing director at Deutsche Bank AG in New York and London. Prior to joining Deutsche Bank, Ms. Lundgren was a partner at the law firm of Hogan & Hartson, LLP in Washington, D.C.

The Company executed an amended and restated employment agreement dated October 29, 2008 with Ms. Lundgren (the “Lundgren Employment Agreement”), which is effective as of December 1, 2008, regarding her new position as the CEO of the Company. The Lundgren Employment Agreement supersedes the employment agreement dated March 24, 2006 entered into between the Company and Ms. Lundgren.

The Lundgren Employment Agreement governs the terms and conditions of her employment as the CEO through December 1, 2011. However, commencing on December 1, 2009, and on each subsequent anniversary, the term of the Lundgren Employment Agreement will be automatically extended for an additional one-year period, provided that either the Company or Ms. Lundgren may elect not to extend the term by giving at least 90 days’ prior written notice before the next extension date. The Lundgren Employment Agreement provides for (i) an annual base salary of $800,000, subject to annual review and increase, but not decrease, by the Compensation Committee of the Board (the “Compensation Committee”), (ii) a one-time signing bonus of $900,000, which is subject to repayment for termination by Ms. Lundgren without “good reason” (as such term is defined in the Lundgren Employment Agreement), provided that any such repayment is subject to reduction for each of the initial 36 months during which she remains employed with the Company, and (iii) an annual cash bonus to be determined by the Compensation Committee based on two components: achievement of Company financial measures and achievement of management objectives, each as established by the Compensation Committee at the beginning of each fiscal year. Ms. Lundgren’s target annual bonus for each fiscal year is her annual salary as in effect on the last day of such fiscal year. The actual amount of Ms. Lundgren’s annual bonus may be higher or lower than the target bonus, but will not exceed five times her annual salary. Ms. Lundgren will be awarded restricted stock units having an aggregate initial value of $45,000, 20% of which will vest on June 1, 2009 and at a rate of 20% per year on each of the first four anniversaries of June 1, 2009. Ms. Lundgren is eligible to participate in the Company’s long term incentive programs (“LTIP”), and her performance share award under the LTIP for the FY09-11 performance period will have an aggregate grant date value of $1.2 million. Ms. Lundgren is also eligible to participate in the Company’s employee benefits plans, insurance, executive medical coverage and such other benefits provided by the Company to its most senior officers, including the Company’s Supplemental Executive Retirement Bonus Plan (“SERBP”). Future stock option grants, equity-based awards and awards under the LTIP to Ms. Lundgren will be made at the discretion of the Committee.

In the event that Ms. Lundgren’s employment is terminated by the Company without “cause”, including the Company’s decision not to extend the term of the agreement, or by Ms. Lundgren for “good reason” (as such terms are defined in the Lundgren Employment Agreement) and not under circumstances that would give rise to severance payments to Ms. Lundgren under the Lundgren Change in Control Agreement (as defined below), Ms. Lundgren would be entitled to receive (i) her base salary, any earned but unpaid bonus for the prior fiscal year, and any other compensation or benefits which have been earned or become payable as of the date of termination but which have not yet been paid, (ii) all paid time off accrued but untaken through the effective date of such termination, (iii) reimbursement of expenses incurred through the effective date of such termination pursuant to the Company’s normal expense reimbursement policy, (iv) a lump sum severance payment in an amount equal to three times her then-current annual base salary and target annual bonus, (v) a pro rata portion of the incentive bonus which she would have received if she had remained employed for the fiscal year in which the termination occurs (based on the portion of the year worked) and (vi) for a 24-month period after the date of termination, life, accident and health insurance benefits for herself, her spouse and dependents. In addition, all options to purchase Company stock then held by Ms. Lundgren would become immediately vested and exercisable in full, all restricted stock then held by Ms. Lundgren would become immediately vested and all related forfeiture provisions would lapse and all performance shares then held by Ms. Lundgren would vest to the extent provided in the applicable plan and award agreement. In order to receive these severance benefits, Ms. Lundgren must execute a release in favor of the Company. The Lundgren Employment Agreement provides that the following events, among others, constitute “good reason” for termination: (i) an adverse change or diminution in Ms. Lundgren’s status, title, positions or responsibilities as the President and CEO or any removal of Ms. Lundgren or any failure to reappoint or reelect Ms. Lundgren to such positions and (ii) certain relocations from New York City, New York and Portland, Oregon.

If any severance payments or benefits received by Ms. Lundgren under the Lundgren Employment Agreement will be subject to an excise tax on “excess parachute payments,” the Company will make an additional payment to Ms. Lundgren such that Ms. Lundgren will receive net benefits as if no such tax and any related interest and penalties were payable. If such additional payments are required, the Company will not be able to deduct such additional payments for federal income tax purposes and also will be denied such a deduction for certain other payments made pursuant to the Lundgren Employment Agreement and its other plans and policies in connection with a change in control of the Company.

In consideration for the payments, benefits and other obligations of the Company to Ms. Lundgren under the Lundgren Employment Agreement, Ms. Lundgren is obligated not to (a) manage, control, participate in, consult with or render services for a “competing business” (as such term is defined in the Lundgren Employment Agreement) for so long as she is employed with the Company and for a period of one year after the termination of such employment and (b) for so long as she is employed with the Company and for a period of two years after the termination of such employment, divert any customer from its business relationship with the Company or solicit any such customer, except on behalf of the Company, or solicit the Company’s employees.

On October 29, 2008, Mr. Carter was elected by the Board to become the Chairman of the Board (the “Chairman”) effective on December 1, 2008, when he will step down as CEO of the Company. The Company executed an amended and restated employment agreement with Mr. Carter (the “Carter Employment Agreement”), which is effective as of December 1, 2008, regarding his new position. The Carter Employment Agreement supersedes the employment agreement dated February 17, 2006 entered into between the Company and Mr. Carter.

The Carter Employment Agreement governs the terms and conditions of his employment as the Chairman through December 1, 2011. At any time during the term of the Carter Employment Agreement, Mr. Carter may request a reduction in his duties and time commitment to the Company and, if the Board agrees to such request, Mr. Carter’s base salary will be proportionally reduced by a mutually agreed upon amount that appropriately reflects his reduced duties and time commitment. The Carter Employment Agreement provides for (i) an annual base salary of $720,000, subject to annual review and increase, but not decrease, by the Compensation Committee and (ii) an annual cash bonus to be determined by the Compensation Committee based on two components: achievement of Company financial measures and achievement of management objectives, each as established by the Compensation Committee at the beginning of each fiscal year. Mr. Carter’s target annual bonus for each fiscal year is his annual salary as in effect on the last day of such fiscal year. The actual amount of Mr. Carter’s annual bonus may be higher or lower than the target bonus, but will not exceed three times his annual salary. Mr. Carter will be awarded fully vested stock having an aggregate initial value of $2.4 million on or before December 31, 2008, subject to his continued employment or service with the Company or an earlier termination by the Company without “cause” (for the avoidance of doubt, termination by the Company due to death or disability does not constitute a termination without cause) or by Mr. Carter for “good reason” (as such terms are defined in the Carter Employment Agreement). Mr. Carter is eligible to participate in the Company employee benefits plans, insurance, executive medical coverage and such other benefits provided by the Company to its most senior officers, including the SERBP, but he will no longer be eligible to participate in the LTIP other than with respect to any awards under the LTIP that were outstanding on October 29, 2008.

In the event that Mr. Carter’s employment is terminated by the Company without “cause”, including the Company’s decision not to extend the term of the agreement, or by Mr. Carter for “good reason” and not under circumstances that would give rise to severance payments to Mr. Carter under the Carter Change in Control Agreement (as defined below), Mr. Carter would be entitled to receive (i) his base salary, any earned but unpaid bonus for the prior fiscal year, and any other compensation or benefits which have been earned or become payable as of the date of termination but which have not yet been paid, (ii) all paid time off accrued but untaken through the effective date of such termination, (iii) reimbursement of expenses incurred through the effective date of such termination pursuant to the Company’s normal expense reimbursement policy, (iv) a lump sum severance payment in an amount equal to three times his then-current annual base salary and target annual bonus, (v) a pro rata portion of his incentive bonus which he would have received if remained employed for the fiscal year in which the termination occurs (based on the portion of the year worked) and (vi) for a 24-month period after the date of

termination, life, accident and health insurance benefits for himself, his spouse and dependents. In addition, all options to purchase Company stock then held by Mr. Carter would become immediately vested and exercisable in full, all restricted stock then held by Mr. Carter would become immediately vested and all related forfeiture provisions would lapse and all performance shares then held by Mr. Carter would vest to the extent provided in the applicable plan and award agreement. In order to receive these severance benefits, Mr. Carter must execute a release in favor of the Company. The Carter Employment Agreement provides that the following events, among others, constitute “good reason” for termination: (i) an adverse change or diminution in Mr. Carter’s status, title, positions or responsibilities as Chairman and (ii) requirement of being based more than 30 miles from where Mr. Carter’s office is located on the date of the Carter Employment Agreement.

If any severance payments or benefits received by Mr. Carter under the Carter Employment Agreement will be subject to an excise tax on “excess parachute payments,” the Company will make an additional payment to Mr. Carter such that Mr. Carter will receive net benefits as if no such tax and any related interest and penalties were payable.

In consideration for the payments, benefits and other obligations of the Company to Mr. Carter under the Carter Employment Agreement, Mr. Carter is obligated not to (a) manage, control, participate in, consult with or render services for a “competing business” (as such term is defined in the Carter Employment Agreement) for so long as he is employed with the Company and for a period of one year after the termination of such employment and (b) for so long as he is employed with the Company and for a period of two years after the termination of such employment, divert any customer from its business relationship with the Company or solicit any such customer, except on behalf of the Company, or solicit the Company’s employees.

On October 29, 2008, the Company also executed amended and restated Change in Control Severance Agreements with Ms. Lundgren (the “Lundgren Change in Control Agreement”) and with Mr. Carter (the “Carter Change in Control Agreement”, together with the Lundgren Change in Control Agreement, the “Change in Control Agreements”), respectively. The Lundgren Change in Control Agreement supersedes the Change in Control Severance Agreement entered into between the Company and Ms. Lundgren on April 10, 2006, as amended by an Instrument of Amendment dated as of April 29, 2008. The Carter Change in Control Agreement supersedes the Change in Control Severance Agreement entered into between the Company and Mr. Carter on February 17, 2006.

The Lundgren Change in Control Agreement is effective as of December 1, 2008 and shall continue in effect until December 1, 2011 or earlier termination of Ms. Lundgren’s employment, provided that commencing on December 1, 2009, and on each subsequent anniversary, the Lundgren Change in Control Agreement will be automatically extended for an additional one-year period unless the Company or Ms. Lundgren gives at least 90 days prior notice not to extend. The Company’s ability to give such notice will be suspended during the period commencing on the date on which the Company executes an agreement to undergo a “change in control” (as such term is defined in the applicable Change in Control Agreement) and ending on the date on which such “change in control” is consummated or such agreement lapses or is otherwise terminated. In addition, the Lundgren Change in Control Agreement will remain in effect for a period of 24 months following consummation of a “change in control” of the Company that occurs during the term of the Lundgren Change in Control Agreement. The Carter Change in Control Agreement is effective as of December 1, 2008 and shall continue in effect until December 1, 2011 or earlier termination of Mr. Carter’s employment.

The Change in Control Agreements generally provide that in the event that the employment of Ms. Lundgren or Mr. Carter (together, the “Executives”) is terminated by the Company without “cause” (including termination by the Company due to disability) or by an Executive for “good reason” during a six-month period preceding a “change in control” of the Company or within a 24-month period following a “change in control” of the Company (as such terms are defined in the applicable Change in Control Agreement), such Executive would be entitled to receive (i) such Executive’s base salary plus the current year annual bonus payment through the date of termination and any other benefits or awards which, pursuant to the terms of any “plans” (as defined in the applicable Change in Control Agreement), have been earned or become payable but which have not yet been paid and (ii) severance pay in a single payment, the amount of which would be calculated as follows: in the case of Ms. Lundgren, such amount would be equal to the sum of (1) three times the greater of (x) her annual base salary in effect on the date of termination or (y) her annual base salary in effect immediately prior to the date of the change in control, plus (2) three times the greater of (x) the average of her last three annual bonuses, except that the amount taken into account for any such bonus shall not exceed three times the target bonus for such year or (y) the most recently established target bonus, and, in the case of Mr. Carter, such amount would be equal to three times the sum of (1) the greater of (x) his annual base salary in effect on the date of termination or (y) his annual base salary in effect immediately prior to the date of the change in control, plus (2) his most recently established target bonus. The Executive would also continue to receive such Executive’s life, accident and health insurance benefits for a period of up to thirty-six (36) months. In addition, all options to purchase Company stock then held by such Executive would become immediately vested and exercisable in full and all performance shares and restricted stock then held by such Executive would become immediately vested and all related forfeiture provisions would lapse.

Under the Change in Control Agreements, if any payments or benefits received by an Executive in connection with a “change in control” will be subject to an excise tax on “excess parachute payments,” the Company will make an additional payment to the Executive such that the Executive will receive net benefits as if no such tax and any related interest and penalties were payable.

The summaries herein of the Lundgren Employment Agreement, the Lundgren Change in Control Agreement, the Carter Employment Agreement and the Carter Change in Control Agreement are qualified in their entirety by the actual agreements, which are attached hereto as exhibits 10.1, 10.2, 10.3 and 10.4 and are incorporated herein by reference.

The announcement of these appointments is included in the press release attached hereto as exhibit 99.1.

Item 9.01

Financial Statements and Exhibits

*10.1	Amended and Restated Employment Agreement by and between Schnitzer Steel Industries, Inc. and Ms. Lundgren, dated October 29, 2008
*10.2	Amended and Restated Change in Control Severance Agreement by and between Schnitzer Steel Industries, Inc. and Ms. Lundgren, dated October 29, 2008
*10.3	Amended and Restated Employment Agreement by and between Schnitzer Steel Industries, Inc. and Mr. Carter, dated October 29, 2008
*10.4	Amended and Restated Change in Control Severance Agreement by and between Schnitzer Steel Industries, Inc. and Mr. Carter, dated October 29, 2008
99.1	Press Release of Schnitzer Steel Industries, Inc. issued on November 4, 2008

* Compensatory plan or arrangement.

SIGNATURE

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: November 4, 2008	By:	/s/ RICHARD C. JOSEPHSON
		Name: Richard C. Josephson
		Title: Senior Vice President

Exhibit Index

*10.1	Amended and Restated Employment Agreement by and between Schnitzer Steel Industries, Inc. and Ms. Lundgren, dated October 29, 2008
*10.2	Amended and Restated Change in Control Severance Agreement by and between Schnitzer Steel Industries, Inc. and Ms. Lundgren, dated October 29, 2008
*10.3	Amended and Restated Employment Agreement by and between Schnitzer Steel Industries, Inc. and Mr. Carter, dated October 29, 2008
*10.4	Amended and Restated Change in Control Severance Agreement by and between Schnitzer Steel Industries, Inc. and Mr. Carter, dated October 29, 2008
99.1	Press Release of Schnitzer Steel Industries, Inc. issued on November 4, 2008

* Compensatory plan or arrangement.

EXHIBIT 10.1

SCHNITZER STEEL INDUSTRIES, INC.

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

Tamara L. Lundgren — Executive

Schnitzer Steel Industries, Inc. — Company

3200 NW Yeon Avenue

Portland, Oregon 97210

In consideration of the mutual covenants contained herein, and other good and valuable consideration, the Company and Executive agree as follows.

1. Effective Date and Term . The effective date of this Amended and Restated Employment Agreement (the “ Agreement ”) is December 1, 2008 (the “ Effective Date ”), and this Agreement governs the terms and conditions of Executive’s employment through December 1, 2011 (the “ Term ”); provided , that commencing with the first anniversary of the Effective Date and on each anniversary thereafter (each, an “ Extension Date ”), the Term shall be automatically extended for an additional one-year period, unless the Company or Executive provides the other party hereto at least 90 days’ prior written notice before the next Extension Date that the Term shall not be so extended. This Agreement amends and restates the Employment Agreement, dated as of March 24, 2006, between the Company and Executive (the “ Prior Agreement ”). This Agreement has been approved by the Compensation Committee (the “ Committee ”) of the Company’s Board of Directors (the “ Board ”).

2. Employment At Will . During the Term, the Company will employ Executive as President and Chief Executive Officer of the Company on the terms and conditions set forth in this Agreement. Executive will serve in such position at the pleasure of the Board. Executive shall also serve as a member of the Board. Executive’s employment is at will and may be terminated at any time, for any reason or no reason, upon notice by either the Company or Executive, subject to the obligations of the Company and Executive as provided in this Agreement and any other agreement between Executive and the Company then in effect. Unless otherwise terminated in accordance with the terms and conditions set forth in this Agreement, Executive’s employment with the Company shall terminate upon the expiration of the Term. Termination of Executive as President and Chief Executive Officer, for any reason, shall constitute the resignation by Executive, effective upon such termination as a director and officer of the Company. Upon request, Executive shall provide the Company with additional written evidence of any such resignation

3. Change In Control Severance Agreement . In connection with the execution of this Agreement, the Company and the Executive also entered into an Amended and Restated Change in Control Severance Agreement dated October 29, 2008 (the “ Change in Control Agreement ”).

4. Annual Salary and Bonus .

(a) Base Salary . Beginning on the Effective Date, Executive’s base salary (the “ Base Salary ”) shall be at the annual rate of $800,000. Base Salary shall be payable in

installments on regular Company paydays, subject to withholding for taxes and other proper deductions. Base Salary for any partial period of employment shall be prorated. Executive’s performance and the amount of the Base Salary shall be reviewed annually in connection with the Company’s normal compensation review and bonus cycle for executive officers, and the Base Salary may be increased (but not decreased) from time to time in the sole discretion of the Committee.

(b) Sign-On Bonus . On the Effective Date, the Company shall pay to Executive a special one - time signing bonus in an amount equal to $900,000 (the “ Sign-On Bonus ”); provided , that if Executive’s employment is terminated by Executive without Good Reason (as defined in Section 6(c) below) during the three-year period commencing on the Effective Date, then Executive shall, within 90 days of such termination, repay the Company the Sign-On Bonus; provided , further , that the amount of the Sign-On Bonus that Executive must repay to the Company shall be reduced by an amount equal to 1/36 of the Sign-On Bonus on each monthly anniversary that Executive is employed with the Company following the Effective Date.

(i) For each fiscal year during the Term, the Committee will establish a bonus program at the beginning of such fiscal year (and in any event no later than 90 days into the fiscal year) that will have two components: a component based on objective Company financial measures and a component based on management objectives (“ MBO ”). The first component will set forth objective Company financial performance criteria that will determine the amount of Executive’s bonus. The plan will specify bonus amounts higher and lower than the target for Company performance based on the predetermined objectives. The second component will be based on MBO performance criteria. At the beginning of each fiscal year the Committee, in consultation with Executive, will establish MBO performance criteria for Executive which will be clearly understood and measurable. The plan will specify bonus amounts higher or lower than the target for performance based on the objectives. At the end of each applicable fiscal year, the Committee will review Executive’s performance, and determine the extent to which the objectives have been met and the applicable bonus amount.

(ii) For each applicable fiscal year, (A) the target annual bonus under the combined bonus plan will be 100% of the Base Salary at the rate in effect on the last day of such fiscal year (the “ Target Bonus ”), (B) the Company financial performance component will apply to 50% of the Target Bonus and the MBO component will apply to 50% of the Target Bonus, (C) with respect to any fiscal year, the minimum bonus payable to Executive shall be $0 and the maximum bonus payable to Executive shall be seven times the amount of the Target Bonus allocated to the Company financial performance component and three times the amount of Target Bonus allocated to the MBO component, and (D) with respect to both the Company financial performance component and the MBO component, the amount of bonus payable to Executive if the level of performance achieved falls between (x) the level required to receive a payout of the minimum amount for such component and the level required to receive a payout of the target amount for such component or (y) the level required to receive a payout of the target amount for such component and the level required to receive a payout of the maximum amount for such component, shall be determined by linear interpolation between the applicable points.

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The bonus earned for a fiscal year shall be payable to Executive on a date selected by the Company prior to the expiration of the period beginning on the first day after the end of the applicable fiscal year and ending on the date which is two and one-half months after the end of the applicable fiscal year, and shall be subject to withholding for taxes and other proper deductions.

5. Equity Grants and Other Benefits .

(a) Option and Equity Grants . On the Effective Date, the Company shall grant Executive restricted stock units having an aggregate grant date fair market value of $45,000 which restricted stock units shall vest 20% on June 1, 2009 (the “ Initial Vesting Date ”) and at a rate of 20% per year on each of the first four anniversaries of the Initial Vesting Date and such restricted stock units shall have such other terms and conditions as are set forth in the restricted stock unit agreement attached hereto as Exhibit A . The amount and terms of any stock option grants and any other equity-based awards after the Effective Date shall be in the discretion of the Committee.

(b) Benefits . Executive shall be entitled to participate in the Company’s employee benefit plans, insurance, executive medical coverage, sick leave, holidays, auto allowance and such other benefits as the Company from time to time may generally provide to its most senior officers, including, without limitation, the Company’s Supplemental Executive Retirement Bonus Plan (“ SERBP ”).

(c) Long Term Incentive Plan . Executive is eligible to participate in the Company’s long term incentive programs (“ LTIP ”), and awards to Executive under the LTIP will be made at the discretion of the Committee in accordance with the LTIP now in effect, or as later modified by the Company; provided , that Executive’s performance share award under the LTIP for the Fiscal Year 2009-2011 performance cycle shall have an aggregate grant date fair market value of $1,200,000.

6. Definitions . The following terms shall have the following meanings for purposes of this Agreement:

(a) “ Cause ” shall mean (i) the willful and continued failure by Executive to perform substantially Executive’s assigned duties with the Company (other than any such failure resulting from Executive’s incapacity due to physical or mental illness) after a demand for substantial performance is delivered to Executive by the Board which specifically identifies the manner in which the Board believes that Executive has not substantially performed Executive’s duties or (ii) the willful engaging by Executive in illegal conduct which is materially and demonstrably injurious to the Company. For purposes of Section 6(a)(ii), no act, or failure to act, on Executive’s part shall be considered “willful” unless done, or omitted to be done, by Executive in knowing bad faith and without reasonable belief that his action or omission was in, or not opposed to, the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by Executive in good faith and in the best interests of the Company. Notwithstanding the foregoing, Executive shall not be deemed to have been terminated for Cause unless and until there shall

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have been delivered to Executive a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board (excluding Executive) at a meeting of the Board called and held for the purpose (after reasonable notice to Executive and an opportunity for Executive, together with Executive’s counsel, to be heard before the Board), finding that in its good faith opinion Executive was guilty of the conduct set forth above in (i) or (ii) of this Section 6(a)) and specifying the particulars thereof in detail.

(b) “ Disability ” shall mean Executive’s absence from her duties with the Company on a full-time basis for one hundred eighty (180) consecutive days as a result of her incapacity due to physical or mental illness, unless within thirty (30) days after notice of termination is given to Executive following such absence she shall have returned to the full-time performance of her duties.

(c) “ Good Reason ” shall mean termination by Executive of Executive’s employment with the Company based on any of the following events:

(i) an adverse change or diminution in Executive’s status, title, positions or responsibilities as President and Chief Executive Officer or the assignment to Executive of any duties, reporting requirements or responsibilities which are inconsistent with such status, title or positions (including, without limitation, any requirement that Executive report to any person other than the Board or any failure of Executive to be the senior most officer of the Company), or any removal of Executive from or any failure to reappoint or reelect Executive to such positions (including, without limitation, a failure to appoint Executive as a member of the Board by December 1, 2008 and any subsequent failure of Executive to be reappointed or reelected to the Board), in each case except in connection with the termination of Executive’s employment for Cause or Disability or as a result of Executive’s death or by Executive other than for Good Reason;

(ii) a reduction by the Company in the Base Salary;

(iii) a failure by the Company to provide to Executive the compensation and benefits as provided in Section 4 or Section 5 of this Agreement;

(iv) a failure by the Company to provide and credit Executive with the number of paid vacation days to which Executive is then entitled in accordance with the Company’s normal vacation policy;

(v) the Company’s requiring Executive to relocate her personal residence, or to change her base office locations from either of the current locations in New York City, New York and Portland, Oregon, absent agreement with the Executive, except for required travel on the Company’s business to an extent substantially consistent with the business travel obligations which Executive undertook as of the Effective Date;

(vi) a failure by the Company to obtain from any Successor (as defined in Section 10 of this Agreement) the assent to this Agreement contemplated by Section 10; or

(vii) a failure by the Company to pay Executive any portion of Executive’s current compensation, to credit any deferred compensation plan account of

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Executive in accordance with Executive’s previous election, or to pay Executive any portion of an installment of deferred compensation under any plan in which Executive participated, within seven days of the date such compensation is due.

Notwithstanding any provision in this Agreement to the contrary, Executive may terminate her employment for Good Reason only if (1) within 90 days after the first occurrence of the circumstances giving rise to Good Reason, Executive gives written notice to the Company of Executive’s belief that Good Reason exists and of her intention to terminate her employment for Good Reason, (2) within 30 days of such notice from Executive the circumstances giving rise to Good Reason are not fully corrected, and (3) such termination occurs no later than 180 days following the first occurrence of the circumstances giving rise to Good Reason.

7. Effect of Termination of Employment .

(a) Termination by the Company for Cause or by Executive without Good Reason . If the Company terminates Executive’s employment for Cause or Executive terminates her employment without Good Reason, Executive shall be entitled to receive only (i) the Base Salary, any earned but unpaid bonus for the prior fiscal year, and any other compensation or benefits which have been earned or become payable as of the date of termination but which have not yet been paid to Executive, (ii) all paid time off accrued but untaken through the effective date of such termination, and (iii) reimbursement of expenses incurred through the effective date of such termination pursuant to the Company’s normal expense reimbursement policy, which reimbursement shall be paid promptly and in any event within 30 days after submission in accordance with Company policy; provided that Executive shall submit all outstanding unreimbursed business expenses no later than 15 days following the date of termination. The amounts described in clauses (i) through (iii) of the foregoing are referred to as the “ Accrued Obligations .”

(b) Termination by the Company Without Cause or by Executive for Good Reason . If the Company terminates Executive’s employment without Cause (which, for the avoidance of doubt, shall include any termination of Executive’s employment upon the expiration of the Term as a result of the Company’s election not to extend the Term in accordance with Section 1 of this Agreement) or Executive terminates her employment for Good Reason at any time during the Term and such termination does not occur under circumstances that would give rise to severance payments to Executive under the Change in Control Agreement:

(i) Executive shall be entitled to receive the Accrued Obligations;

(ii) Executive shall be entitled to receive a severance payment (subject to applicable taxes and withholding) in a lump sum in an amount equal to three times Executive’s annualized rate of Base Salary in effect immediately prior to the time of termination plus three times Executive’s target annual bonus in effect immediately prior to the termination;

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Termination Date during which Executive was employed, such amount to be paid at the same time as the annual incentive bonus would have been paid to Executive if she had remained employed on the applicable payment date for such annual incentive bonus;

(iv) for a 24-month period after the date of termination, the Company shall arrange to provide Executive, her spouse and dependents with life, accident and health insurance benefits substantially similar to those which Executive was receiving immediately prior to such termination; provided , that the Company shall not provide any benefit otherwise receivable by Executive pursuant to this Section 7(b)(iv) to the extent that a similar benefit is actually received by Executive from a subsequent employer during such 24-month period, and any such benefit actually received by Executive shall be reported to the Company; and

(v) all options to purchase Company common stock then held by Executive shall become immediately vested and exercisable in full, all restricted stock units and restricted stock then held by Executive shall become immediately vested and all related forfeiture provisions shall lapse, and all performance shares then held by Executive shall vest to the extent provided in the applicable plan and award agreement pursuant to which such performance shares were granted.

(c) Death . If Executive’s employment is terminated as a result of Executive’s death, Executive shall be entitled to receive the Accrued Obligations.

(d) Disability . If Executive’s employment is terminated as a result of Executive’s Disability, Executive shall be entitled to receive the Accrued Obligations.

(e) Date of Payment . Except as otherwise provided in this Agreement, all cash payments and lump-sum awards required to be made pursuant to the provisions of this Section 7 shall be paid (i) in the case of the Accrued Obligations, no later than the 30 th day following such termination of employment, (ii) in the case of the pro rata bonus, as provided in Section 7(b)(iii), and (iii) in the case of the payments described in Sections 7(b)(ii), within 45 days of the date of termination; provided that Executive has delivered an executed copy of a release of claims in the form attached hereto as Exhibit B (and not revoked such release) prior to the expiration of such 45-day period.

(f) Options, Performance Shares and Restricted Stock . The options, performance shares, restricted stock units and restricted stock awarded to Executive by the Company shall, in the event of a termination of Executive’s employment, be governed by the provisions of the applicable plan and award agreement; provided that the accelerated vesting provisions of Section 7(b)(v) shall, if triggered, control in the event of any inconsistency with any such agreement.

(g) No Obligation of Executive to Mitigate . The amount of any payment provided for in this Section 7 shall not be reduced, offset or subject to recovery by the Company by reason of any compensation earned by Executive as the result of employment by another employer after the date of termination.

(h) 280G Excise Tax Gross Up Provision . If any of the payments or benefits provided for in Section 7 of this Agreement, under any other agreement between Executive and

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the Company or otherwise (collectively, the “ Payments ”) will be subject to the tax imposed by section 4999 of the Internal Revenue Code of 1986, as amended (the “ Code ”), or any similar tax that may hereafter be imposed (the “ Excise Tax ”), the Company shall pay to Executive at the time any such Payment is paid an additional amount (the “ Gross-Up Payment ”) such that the net amount retained by Executive, after deduction of any Excise Tax on the Payments and any federal, state and local income tax and Excise Tax upon the Gross-Up Payment, shall be equal to the Payments. For purposes of determining the amount of the Gross-Up Payment, Executive shall be deemed to pay federal income taxes at the highest marginal rate of federal income taxation in the calendar year in which the Gross-Up Payment is to be made and state and local income taxes at the highest marginal rate of taxation in the state and locality of Executive’s personal residence on the date of termination, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes. In the event that the Excise Tax is subsequently determined to be less than the amount taken into account hereunder, Executive shall repay to the Company at the time that the amount of such reduction in Excise Tax is finally determined the portion of the Gross-Up Payment directly and indirectly attributable to such reduction plus interest on the amount of such repayment at the rate provided for in section 1274(d) of the Code. In the event that the Excise Tax is determined to exceed the amount taken into account hereunder (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross-Up Payment), the Company shall make an additional Gross-Up Payment in respect of such excess (plus any interest and penalties payable to the taxing authorities with respect to such excess) at the time that the amount of such excess is finally determined. The Company shall withhold the Excise Tax in accordance with section 4999(b) of the Code, and shall withhold federal, state and local income taxes from the Payments and Gross-Up Payments as required by law.

(i) Compliance with Code Section 409A . Notwithstanding anything herein to the contrary, (i) if at the time of Executive’s termination of employment with the Company Executive is a “specified employee” as defined in Section 409A of the Code and the deferral of the commencement of any payments or benefits otherwise payable hereunder as a result of such termination of employment is necessary in order to prevent any accelerated or additional tax under Section 409A of the Code, then the Company will defer the commencement of the payment of any such payments or benefits hereunder (without any reduction in such payments or benefits ultimately paid or provided to Executive) until the date that is six months following Executive’s termination of employment with the Company (or the earliest date as is permitted under Section 409A of the Code) and (ii) if any other payments of money or other benefits due to Executive hereunder could cause the application of an accelerated or additional tax under Section 409A of the Code, such payments or other benefits shall be deferred if deferral will make such payment or other benefits compliant under Section 409A of the Code, or otherwise such payment or other benefits shall be restructured, to the extent possible, in a manner, determined by the Board, that does not cause such an accelerated or additional tax. In the event that payments under this Agreement are deferred pursuant to this Section 7(i) in order to prevent any accelerated tax or additional tax under Section 409A of the Code, then such payments shall be paid at the time specified under this Section 7(i) (together with interest for any additional deferral period resulting from this Section 7(i) at the applicable federal rate under Section 7872(f)(2)(A) of the Code in effect on the date of termination). The Company shall consult with Executive in good faith regarding the implementation of this Section 7(i). For purposes of Section 409A of the Code, the right to a series of installment payments under this Agreement

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shall be treated as a right to a series of separate payments. Notwithstanding anything to the contrary herein, a termination of employment shall not be deemed to have occurred for purposes of any provision of this Agreement providing for the payment of amounts or benefits upon or following a termination of employment unless such termination is also a “Separation from Service” within the meaning of Section 409A of the Code and, for purposes of any such provision of this Agreement, references to a “resignation,” “termination,” “termination of employment” or like terms shall mean Separation from Service.

8. Restrictive Covenants .

(a) Noncompetition . In consideration of the payments, benefits and other obligations of the Company to Executive pursuant to this Agreement, including, without limitation, the Company’s obligation to provide Executive with Confidential Information pursuant to Section 8(c), and in order to protect the such Confidential Information and preserve the goodwill of the Company and its subsidiaries (collectively, the “ Company Group ”), Executive hereby covenants and agrees that, during the “ Restricted Period ” (as defined below), Executive shall not, anywhere in the world where any member of the Company Group conducts business, directly or indirectly, own any interest in, manage, control, participate in (whether as an officer, director, manager, employee, partner, equity holder, member, agent, representative or otherwise), consult with, render services for, or in any other manner engage in any business in which a member of the Company Group is materially engaged at the time of such termination (collectively, a “ Competing Business ”); provided that nothing herein shall prohibit Executive from (i) investing in stocks, bonds, or other securities in any business if such stocks, bonds, or other securities are listed on any United States securities exchange or are publicly traded in an over the counter market, and such investment does not exceed, in the case of any capital stock of any one issuer two percent (2%) of the issued and outstanding capital stock or in the case of bonds or other securities, two percent (2%) of the aggregate principal amount thereof issued and outstanding or (ii) working for a subsidiary, affiliate or division of a Competing Business if such subsidiary, affiliate or division is not itself engaged in a Competing Business and Executive does not provide services to such Competing Business. For purposes of this Section 8(a), the “ Restricted Period ” shall mean all times during which Executive is employed by the Company and the period commencing on the date of the termination of Executive’s employment with the Company for any reason and ending on the first anniversary of the date of such termination.

(b) Nonsolicitation . In further consideration of the payments by the Company to Executive pursuant to this Agreement, Executive hereby covenants and agrees that, during Executive’s employment with the Company and for the two-year period following the date of Executive’s termination for any reason, Executive shall not attempt to influence, persuade or induce, or assist any other person in so influencing, persuading or inducing, (i) any customer of the Company Group to give up, or to not commence, a business relationship with the Company Group and shall not otherwise directly or indirectly solicit any such customer except on behalf of the Company Group, and (ii) any employee of the Company Group to cease such employee’s employment with the Company Group and shall not otherwise directly or indirectly solicit for employment any such employee.

(c) Confidential Information . Executive acknowledges that the Company Group has a legitimate and continuing proprietary interest in the protection of its confidential

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information and that it has invested substantial sums and will continue to invest substantial sums to develop, maintain and protect such confidential information. During the Term and at all times thereafter, Executive shall not, except with the written consent of the Company or in connection with carrying out Executive’s duties or responsibilities hereunder, furnish or make accessible to anyone or use for Executive’s own benefit any trade secrets, confidential or proprietary information of the Company Group (all such information, “ Confidential Information ”), including its business plans, marketing plans, strategies, systems, programs, methods, employee lists, computer programs, insurance profiles and client lists; provided , that Confidential Information shall not include information known to the public or otherwise in the public domain without violation by Executive of this Section 8(c). Notwithstanding the foregoing, Executive may disclose Confidential Information when required to do so by a court of competent jurisdiction, by any governmental agency having supervisory authority over the business of the Company Group or by any administrative body or legislative body (including a committee thereof) with jurisdiction to order Executive to divulge, disclose or make accessible such information; provided , further , that in the event that Executive is ordered by a court or other government agency to disclose any Confidential Information, Executive shall (i) promptly notify the Company of such order, (ii) at the written request of the Company, diligently contest such order at the sole expense of the Company as expenses occur, and (iii) at the written request of the Company, seek to obtain, at the sole expense of the Company, such confidential treatment as may be available under applicable laws for any information disclosed under such order.

(d) Enforcement . Executive acknowledges and agrees that the Company’s remedies at law for a breach or threatened breach of any of the provisions of Sections 8(a), (b) or (c) herein would be inadequate and, in recognition of this fact, Executive agrees that, in the event of such a breach or threatened breach, in addition to any remedies at law, the Company shall be entitled to obtain equitable relief in the form of specific performance, temporary restraining order, temporary or permanent injunction or any other equitable remedy which may then be available. It is expressly understood and agreed that although Executive and the Company consider the restrictions contained in Sections 8(a) and 8(b) to be reasonable, if a judicial determination is made by a court of competent jurisdiction that the time or territory or any other restriction contained in this Agreement is an unenforceable restriction against Executive, the provisions of this Agreement shall not be rendered void but shall be deemed amended to apply as to such maximum time and territory and to such maximum extent as such court may judicially determine or indicate to be enforceable. Alternatively, if any court of competent jurisdiction finds that any restriction contained in this Agreement is unenforceable, and such restriction cannot be amended so as to make it enforceable, such finding shall not affect the enforceability of any of the other restrictions contained herein.

9. Withholding . Payment of all compensation under this Agreement, including but not limited to the Base Salary and annual performance bonus, shall be subject to all applicable federal, state and local tax withholding.

10. Attorneys’ Fees . The Company shall pay to Executive all reasonable legal fees and related expenses incurred by Executive in good faith as a result of Executive seeking to obtain or enforce in good faith any right or benefit provided by this Agreement.

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11. Successors; Binding Agreement .

(a) Upon Executive’s written request, the Company will seek to have any Successor (as hereinafter defined), by agreement in form and substance satisfactory to Executive, assent to the fulfillment by the Company of its obligations under this Agreement. For purposes of this Agreement, “ Successor ” shall mean any Person that succeeds to, or has the practical ability to control (either immediately or with the passage of time), the Company’s business directly, by merger, consolidation or purchase of assets, or indirectly, by purchase of the Company’s voting securities or otherwise.

(b) This Agreement shall inure to the benefit of and be enforceable by Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If Executive should die while any amount would still be payable to Executive hereunder if Executive had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to Executive’s devisee, legatee or other designee or, if there be no such designee, to Executive’s estate.

12. Survival . The respective obligations of, and benefits afforded to, the Company and Executive as provided in Sections 7-13 and 16 of this Agreement shall survive termination of Executive’s employment and this Agreement.

13. Notice . For the purposes of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered mail, return receipt requested, postage prepaid and addressed to the address of the Company as set forth on the first page of this Agreement or to Executive as set forth in the Company’s records, provided that all notices to the Company shall be directed to the attention of the Secretary of the Company, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt.

14. Miscellaneous . No provision of this Agreement may be modified, waived or discharged unless such modification, waiver or discharge is agreed to in a writing signed by Executive and a duly authorized officer of the Company (other than Executive). No waiver by either party hereto at any time of any breach by the other party hereto of, or of compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party that are not expressly set forth in this Agreement or the Change in Control Agreement. The validity, interpretation, construction and performance of this Agreement shall be governed by the internal laws of the State of Oregon, without regard to conflicts of law principles.

15. Validity . The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.

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16. Arbitration . Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration in Portland, Oregon by three arbitrators in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrators’ award, which award shall be a final and binding determination of the dispute or controversy, in any court having jurisdiction; provided , that Executive shall be entitled to seek specific performance of Executive’s right to be paid until the date of termination during the pendency of any dispute or controversy arising under or in connection with this Agreement. The Company shall bear all costs and expenses of the arbitrators arising in connection with any arbitration proceeding pursuant to this Section 16.

17. Related Agreements . To the extent that any provision of any other agreement between the Company or any of its subsidiaries and Executive, other than the Change in Control Agreement, shall limit, qualify or be inconsistent with any provision of this Agreement, then for purposes of this Agreement, while the same shall remain in force, the provision of this Agreement shall control and such provision of such other agreement shall be deemed to have been superseded, and to be of no force or effect, as if such other agreement had been formally amended to the extent necessary to accomplish such purpose.

18. Counterparts . This Agreement may be executed in several counterparts, each of which shall be deemed to be an original, but all of which together will constitute one and the same instrument.

Dated: October 29, 2008

SCHNITZER STEEL INDUSTRIES, INC.

By: /s/ Judith Johansen

Name: Judith Johansen

Title: Acting Chair, Compensation Committee of the Board of Directors

/s/ Tamara L. Lundgren

Tamara L. Lundgren

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EXHIBIT 10.2

October 29, 2008

Tamara L. Lundgren

President and Chief Executive Officer

Schnitzer Steel Industries, Inc.

3200 NW Yeon Avenue

Portland, Oregon 97210

Re: Change in Control Severance Agreement

Dear Tamara:

Schnitzer Steel Industries, Inc., an Oregon corporation (the “ Company ”), considers the establishment and maintenance of a sound and vital management to be essential to protecting and enhancing the best interests of the Company. In this connection, the Company recognizes that, as is the case with many publicly held corporations, the possibility of a change in control may exist and that such possibility, and the uncertainty and questions which it may raise among management, may result in the departure or distraction of management personnel to the detriment of the Company, its customers and its shareholders. Accordingly, the Board of Directors of the Company (the “ Board ”) has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of members of the Company’s management to their assigned duties without distraction in circumstances arising from the possibility of a change in control of the Company.

In order to induce you to remain in the employ of the Company, this amended and restated letter agreement (the “ Agreement ”), which has been approved by the Compensation Committee of the Board, sets forth severance benefits which the Company agrees will be provided to you in the event your employment with the Company is terminated in connection with a Change in Control (as defined in Section 3 hereof) under the circumstances described below. This Agreement amends and restates the Change in Control Severance Agreement between you and the Company, dated as of March 24, 2006.

1. Right to Terminate . The Company or you may terminate your employment as the Company’s President and Chief Executive Officer at any time, subject to the Amended and Restated Employment Agreement dated October 29, 2008 (the “ Employment Agreement ”) and this Agreement, as applicable. Capitalized terms not otherwise defined herein shall have the meanings ascribed to such terms in the Employment Agreement.

2. Term of Agreement . This Agreement shall commence on December 1, 2008 and shall continue in effect through December 1, 2011, or earlier termination of your employment; provided , that (1) commencing on December 1, 2009 and each December 1 thereafter, the term of this Agreement shall automatically be extended for one additional year unless at least 90 days prior to such December 1 date, the Company or you shall have given notice that this Agreement shall not be extended; provided , further that (1) the Company’s ability to give such a notice shall be suspended during the period commencing on the date on which the Company executes an agreement to undergo a Change in Control and ending on the date on which such Change in

Control is consummated or such agreement lapses or is otherwise terminated, as applicable and (2) in the event a Change in Control occurs during the term of this Agreement, the Agreement shall automatically be extended such that the Agreement shall remain in effect for the 24-month period commencing on the date such Change in Control is consummated.

3. Change in Control .

(i) For purposes of this Agreement, a “ Change in Control ” shall mean the occurrence of any of the following events:

(A) The consummation of:

(1) 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 corporation or a parent corporation of the surviving corporation immediately after the Merger, disregarding any Voting Securities issued to or retained by such holders in respect of securities of any other party to the Merger; 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;

(B) At any time during a period of two consecutive years, individuals who at the beginning of such period constituted the Board (“ Incumbent Directors ”) shall cease for any reason to constitute at least a majority thereof; provided, however, that the term “Incumbent Director” shall also include each new director elected during such two-year period whose nomination or election was approved by two-thirds of the Incumbent Directors then in office; or

(C) Any Person (as hereinafter defined) 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, as amended (the “ Exchange Act ”)), directly or indirectly, of Voting Securities representing twenty percent (20%) 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, no Change in Control shall be deemed to have occurred for purposes of this Agreement if (1) you acquire (other than on the same basis as all other holders of shares of Common Stock of the Company) an equity interest in an entity that acquires the Company in a Change in Control otherwise described under subparagraph (A) above, or (2) you are part of a 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 (C) above.

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(ii) 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 Exchange Act, other than the Company or any employee benefit plan sponsored by the Company.

4. Termination During Change in Control Protection Period . If a Change in Control occurs, you shall be entitled to the payments and benefits provided in Section 5(ii) hereof in the event that within 24 months following the Change in Control, (x) your employment with the Company is terminated by the Company for any reason other than Cause (for the avoidance of doubt, a termination by the Company “for any reason other than Cause” includes a termination by the Company due to your Disability), or (y) your employment with the Company is terminated by you for Good Reason (as defined below). Notwithstanding anything to the contrary herein, in the event a Change in Control shall occur during the six-month period following the termination of your employment by the Company without Cause, or by you for Good Reason, then your employment shall be deemed to have been terminated immediately after such Change in Control and you shall be entitled to the benefits provided in Section 5(ii) hereof, less the amount of severance (if any) you have received pursuant to Sections 7(b)(ii) and 7(b)(iii) of your Employment Agreement.

(i) Good Reason . Termination by you of your employment with the Company for “ Good Reason ” shall mean termination by you of your employment with the Company based on any of the following events set forth in (A) through (H) below, provided (1) you give Notice of Termination (as defined below) no later than 90 days after the first occurrence of the events giving rise to your intent to terminate your employment for Good Reason; (2) the Company fails to fully correct such events within 30 days of receiving such Notice of Termination, and (3) such termination occurs no later than 180 days following the first occurrence of the events giving rise to Good Reason:

(A) an adverse change or diminution in your status, title, positions or responsibilities as President and Chief Executive Officer or the assignment to you of any duties, reporting requirements or responsibilities which are inconsistent with such status, title or positions (including, without limitation, any requirement that you report to any person other than the Board or any failure to be the senior most officer of the Company), or your removal from or any failure to reappoint or you to such positions (including, without limitation, any failure to be reappointed or reelected to the Board), in each case except in connection with the termination of your employment for Cause or by you other than for Good Reason;

(B) a reduction by the Company in your base salary as in effect immediately prior to the Change in Control (or any higher rate in effect subsequent to the Change in Control);

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act, by the Company which would adversely affect your continued participation in any of such Plans on at least as favorable a basis to you as is the case immediately prior to the Change in Control or which would materially reduce your benefits in the future under any of such Plans or deprive you of any material benefit enjoyed by you immediately prior to the Change in Control;

(D) the failure by the Company to provide and credit you with the number of paid vacation days to which you are then entitled in accordance with the Company’s normal vacation policy as in effect immediately prior to the Change in Control (or any higher number of paid vacation days to which you are entitled following the Change in Control);

(E) the Company’s requiring you to relocate your personal residence, or to change your base office locations from either of the current locations in New York City, New York and Portland, Oregon, absent agreement by you, except for required travel on the Company’s business to an extent substantially consistent with the business travel obligations which you undertook on behalf of the Company prior to the Change in Control;

(F) the failure by the Company to obtain from any Successor (as hereinafter defined) the assent to this Agreement contemplated by Section 7 hereof;

(G) any purported termination by the Company of your employment which is not effected pursuant to a Notice of Termination satisfying the requirements of Section 4(iv) below; and for purposes of this Agreement, no such purported termination shall be effective; or

(H) the failure by the Company to pay you any portion of your current compensation, to credit your deferred compensation plan account in accordance with your previous election, or to pay you any portion of an installment of deferred compensation under any Plan in which you participated, within seven days of the date such compensation is due.

For purposes of this Agreement, “ Plan ” shall mean any compensation plan such as an incentive, stock option or restricted stock plan or any employee benefit plan, such as a thrift, pension, profit sharing, deferred compensation, medical, disability, accident, life insurance, or relocation plan or policy or any other plan, program or policy of the Company intended to benefit employees.

(ii) Notice of Termination . Any purported termination by the Company or by you (other than termination due to your death, which shall terminate your employment automatically) following a Change in Control shall be communicated by Notice of Termination to the other party hereto. For purposes of this Agreement, a “ Notice of Termination ” shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of your employment under the provision so indicated.

(iii) Date of Termination . “ Date of Termination ” shall mean the date your employment with the Company is terminated, which date shall be determined as follows:

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(A) if your employment is terminated due to your death, the date of your death;

(B) if your employment is to be terminated by the Company or if your employment is to be terminated by you without a claim of Good Reason, the date specified in the Notice of Termination; and

(C) if your employment is to be terminated by you for Good Reason, the date on which your employment terminates in accordance with Section 4(i) above.

5. Compensation Upon Termination .

(i) If your employment shall be terminated for Cause, the Company shall pay you the Accrued Obligations (as defined in the Employment Agreement). Thereupon the Company shall have no further obligations to you under this Agreement.

(ii) If within the twenty-four (24) months immediately following a Change in Control, a Date of Termination of your employment with the Company occurs as a result of (a) a termination by the Company other than for Cause (for the avoidance of doubt, a termination by the Company “for any reason other than Cause” includes a termination by the Company due to your Disability), or (b) a termination by you for Good Reason, then, by no later than the fifth day following the later of the Date of Termination or, if this Section 5(ii) applies due to the application of the last sentence of Section 4, the Change in Control (in each case, except as may otherwise be provided herein), you (or your estate, as applicable) shall be entitled to a severance benefit as follows:

(A) the Company shall pay your full base salary at the rate in effect just prior to the time a Notice of Termination is given plus your current year annual bonus through the Date of Termination plus any benefits or awards which pursuant to the terms of any Plans have been earned or become payable, but which have not yet been paid to you; provided , that with respect to a termination of your employment for Good Reason based on a reduction by the Company in your base salary as in effect immediately prior to the Change in Control, the Company shall pay your full base salary through the Date of Termination at the rate in effect just prior to such reduction plus any benefits or awards which pursuant to the terms of any Plans have been earned or become payable, but which have not yet been paid to you;

(B) as severance pay and in lieu of any further salary for periods subsequent to the Date of Termination, the Company shall pay to you (or your estate, as applicable) in a single payment an amount in cash equal to the sum of (1) three times the greater of (i) your annual rate of base salary in effect on the Date of Termination or (ii) your annual rate of base salary in effect immediately prior to the Change in Control plus (2) three times the sum of the greater of (i) the average of your last three annual bonuses (annualized in the case of any bonus paid with respect to a partial year); provided , that the amount taken into account with respect to each of the last three annual bonuses shall not exceed three times the target bonus established by the Board with respect to each such year or (ii) the target bonus as most recently established by the Board;

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(C) for a 36-month period after the Date of Termination, the Company shall arrange to provide you, your spouse and your dependents, as applicable, with life, accident and health insurance benefits substantially similar to those which you were receiving immediately prior to the Change in Control. Notwithstanding the foregoing, the Company shall not provide any benefit otherwise receivable by you pursuant to this subparagraph (C) to the extent that a similar benefit is actually received by you from a subsequent employer during such 36-month period, and any such benefit actually received by you shall be reported to the Company; and

(D) all options to purchase Company common stock then held by you shall become immediately vested and exercisable in full and all performance shares, restricted stock units and restricted stock then held by you shall become immediately vested and all forfeiture provisions shall lapse.

(iii) Except as expressly provided in Section 4 of this Agreement, the amount of any payment provided for in this Section 5 shall not be reduced, offset or subject to recovery by the Company by reason of any compensation earned by you as the result of employment by another employer after the Date of Termination or otherwise. Your entitlements under Section (5)(ii) are in addition to, and not in lieu of, any rights, benefits or entitlements you may have under the terms or provisions of any Plan.

6. Tax Gross-Up Payments .

(i) Whether or not your employment is terminated, if any of the payments provided for in this Agreement or any other payment or benefit received or to be received by you in connection with a Change in Control or the termination of your employment (collectively, the “ Change in Control Payments ”) will be subject to the tax imposed by section 4999 of the Internal Revenue Code of 1986, as amended (the “ Code ”), or any similar tax that may hereafter be imposed (the “ Excise Tax ”), the Company shall pay to you at the time any such Change in Control Payment is paid an additional amount (the “ Gross-Up Payment ”) such that the net amount retained by you, after deduction of any Excise Tax on the Change in Control Payments and any federal, state and local income tax and Excise Tax upon the Gross-Up Payment, shall be equal to the Change in Control Payments. For purposes of determining the amount of the Gross-Up Payment, you shall be deemed to pay federal income taxes at the highest marginal rate of federal income taxation in the calendar year in which the Gross-Up Payment is to be made and state and local income taxes at the highest marginal rate of taxation in the state and locality of your personal residence on the Date of Termination, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes. In the event that the Excise Tax is subsequently determined to be less than the amount taken into account hereunder, you shall repay to the Company at the time that the amount of such reduction in Excise Tax is finally determined the portion of the Gross-Up Payment directly and indirectly attributable to such reduction plus interest on the amount of such repayment at the rate provided for in section 1274(d) of the Code. In the event that the Excise Tax is determined to exceed the amount taken into account hereunder (including by reason of any Change in Control Payment the existence or amount of which cannot be determined at the time of the Gross-Up Payment), the Company shall make an additional Gross-Up Payment in respect of such excess (plus any

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interest and penalties payable to the taxing authorities with respect to such excess) at the time that the amount of such excess is finally determined.

(ii) The Company shall withhold the Excise Tax determined under Section 6(i) above in accordance with section 4999(b) of the Code, and shall withhold federal, state and local income taxes from Change in Control Payments and Gross-Up Payments as required by law.

7. Successors; Binding Agreement .

(i) The Company will seek to have any Successor (as hereinafter defined), by agreement in form and substance satisfactory to you, assent to the fulfillment by the Company of its obligations under this Agreement. For purposes of this Agreement, “ Successor ” shall mean any Person that succeeds to, or has the practical ability to control (either immediately or with the passage of time), the Company’s business directly, by merger, consolidation or purchase of assets, or indirectly, by purchase of the Company’s Voting Securities or otherwise.

(ii) This Agreement shall inure to the benefit of and be enforceable by your personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If you should die while any amount would still be payable to you hereunder if you had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to your devisee, legatee or other designee or, if there be no such designee, to your estate.

8. Fees and Expenses . The Company shall pay to you all legal fees and related expenses incurred by you in good faith as a result of your seeking to obtain or enforce in good faith any right or benefit provided by this Agreement.

9. Survival . The respective obligations of, and benefits afforded to, the Company and you as provided in Sections 4, 5, 6, 7, 8 and 13 of this Agreement shall survive termination of this Agreement, but only with respect to a Change in Control occurring during the term of this Agreement.

10. Notice . For the purposes of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered mail, return receipt requested, postage prepaid and addressed to the address of the respective party set forth on the first page of this Agreement or to Executive as set forth in the Company’s records, provided that all notices to the Company shall be directed to the attention of the Secretary of the Company, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt.

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any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement. The validity, interpretation, construction and performance of this Agreement shall be governed by the internal laws of the State of Oregon, without regard to conflicts of law principles.

12. Validity . The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.

13. Arbitration . Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration in Portland, Oregon by three arbitrators in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrators’ award, which award shall be a final and binding determination of the dispute or controversy, in any court having jurisdiction; provided , that you shall be entitled to seek specific performance of your right to be paid until the Date of Termination during the pendency of any dispute or controversy arising under or in connection with this Agreement. The Company shall bear all costs and expenses of the arbitrators arising in connection with any arbitration proceeding pursuant to this Section 13.

14. Compliance with Code Section 409A . Notwithstanding anything herein to the contrary, (i) if at the time of your termination of employment with the Company you are a “specified employee” as defined in Section 409A of the Code and the deferral of the commencement of any payments or benefits otherwise payable hereunder as a result of such termination of employment is necessary in order to prevent any accelerated or additional tax under Section 409A of the Code, then the Company will defer the commencement of the payment of any such payments or benefits hereunder (without any reduction in such payments or benefits ultimately paid or provided to you) until the date that is six months following your Date of Termination (or the earliest date as is permitted under Section 409A of the Code) and (ii) if any other payments of money or other benefits due to you hereunder could cause the application of an accelerated or additional tax under Section 409A of the Code, such payments or other benefits shall be deferred if deferral will make such payment or other benefits compliant under Section 409A of the Code, or otherwise such payment or other benefits shall be restructured, to the extent possible, in a manner, determined by the Board, that does not cause such an accelerated or additional tax. In the event that payments under this Agreement are deferred pursuant to this Section 14 in order to prevent any accelerated tax or additional tax under Section 409A of the Code, then such payments shall be paid at the time specified under this Section 14 (together with interest for any additional deferral period resulting from this Section 14 at the applicable federal rate under Section 7872(f)(2)(A) of the Code in effect on the date of termination). The Company shall consult with you in good faith regarding the implementation of this Section 14. For purposes of Section 409A of the Code, the right to a series of installment payments under this Agreement shall be treated as a right to a series of separate payments. Notwithstanding anything to the contrary herein, a termination of employment shall not be deemed to have occurred for purposes of any provision of this Agreement providing for the payment of amounts or benefits upon or following a termination of employment until such termination is also a “Separation from Service” within the meaning of Section 409A of the Code

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and, for purposes of any such provision of this Agreement, references to a “resignation,” “termination,” “termination of employment” or like terms shall mean Separation from Service.

15. Related Agreements . To the extent that any provision of any other agreement between the Company or any of its subsidiaries and you (including, without limitation, the Employment Agreement) shall limit, qualify or be inconsistent with any provision of this Agreement, while this Agreement remains in force and effect, then the provision of this Agreement shall control and such provision of such other agreement shall be deemed to have been superseded, and to be of no force or effect, as if such other agreement had been formally amended to the extent necessary to accomplish such purpose.

16. Counterparts . This Agreement may be executed in several counterparts, each of which shall be deemed to be an original, but all of which together will constitute one and the same instrument.

If this letter correctly sets forth our agreement on the subject matter hereof, kindly sign and return to the Company the enclosed copy of this letter which will then constitute our agreement on this subject.

Sincerely,

SCHNITZER STEEL INDUSTRIES, INC.

By: /s/ Judith Johansen

Name: Judith Johansen

Title: Acting Chair, Compensation Committee of the Board of Directors

Agreed to this 29 th day

of October, 2008

/s/ Tamara L. Lundgren

Tamara L. Lundgren

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EXHIBIT 10.3

SCHNITZER STEEL INDUSTRIES, INC.

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

John D. Carter – Executive

Schnitzer Steel Industries, Inc. – Company

3200 NW Yeon Avenue

Portland, Oregon 97210

In consideration of the mutual covenants contained herein, and other good and valuable consideration, the Company and Executive agree as follows.

1. Effective Date and Term . The effective date of this Amended and Restated Employment Agreement (the “ Agreement ”) is December 1, 2008 (the “ Effective Date ”) and this Agreement governs the terms and conditions of Executive’s employment through December 1, 2011 (the “ Term ”). This Agreement amends and restates the Employment Agreement, dated as of February 17, 2006, between the Company and Executive (the “ Prior Agreement ”). This Agreement has been approved by the Compensation Committee (the “ Committee ”) of the Company’s Board of Directors (the “ Board ”).

2. Employment At Will . During the Term, the Company will employ Executive as the Chairman of the Board on the terms and conditions set forth in this Agreement. Executive will serve in such position at the pleasure of the Board. Executive’s employment is at will and may be terminated at any time, for any reason or no reason, upon notice by either the Company or Executive, subject to the obligations of the Company and Executive as provided in this Agreement and any other agreement between Executive and the Company then in effect. Unless otherwise terminated in accordance with the terms and conditions set forth in this Agreement, Executive’s employment with the Company shall terminate upon the expiration of the Term. Termination of Executive for any reason, shall constitute the resignation by Executive, effective upon such termination as a director and officer of the Company. Upon request, Executive shall provide the Company with additional written evidence of any such resignation. At any time during the Term, Executive may request that the Board reduce his duties and time commitment to the Company. If the Board agrees to any such request, Executive’s Base Salary (as defined in Section 4 below) shall be proportionally reduced by a mutually agreed upon amount that appropriately reflects the extent by which Executive’s duties and time commitment to the Company have been reduced.

4. Annual Salary and Bonus .

(a) Base Salary. Beginning on the Effective Date, Executive’s base salary (the “ Base Salary ”) shall be at the annual rate of $720,000. Base Salary shall be payable in installments on regular Company paydays, subject to withholding for taxes and other proper

deductions. Base Salary for any partial period of employment shall be prorated. Executive’s performance and the amount of the Base Salary shall be reviewed annually in connection with the Company’s normal compensation review and bonus cycle for executive officers, and the Base Salary may be increased (but not decreased) from time to time in the sole discretion of the Committee.

(b) Annual Performance Bonus .

(ii) For each applicable fiscal year, (A) the target annual bonus under the combined bonus plan will be 100% of the Base Salary at the rate in effect on the last day of such fiscal year (the “ Target Bonus ”), (B) the Company financial performance component will apply to 50% of the Target Bonus and the MBO component will apply to 50% of the Target Bonus, (C) with respect to any fiscal year, the minimum bonus payable to Executive shall be $0 and the maximum bonus payable to Executive shall be three times the amount of the Target Bonus allocated to the Company financial performance component and three times the amount of Target Bonus allocated to the MBO component, and (D) with respect to both the Company financial performance component and the MBO component, the amount of bonus payable to Executive if the level of performance achieved falls between (x) the level required to receive a payout of the minimum amount for such component and the level required to receive a payout of the target amount for such component or (y) the level required to receive a payout of the target amount for such component and the level required to receive a payout of the maximum amount for such component, shall be determined by linear interpolation between the applicable points. The bonus earned for a fiscal year shall be payable to Executive on a date selected by the Company prior to the expiration of the period beginning on the first day after the end of the applicable fiscal year and ending on the date which is two and one-half months after the end of the applicable fiscal year, and shall be subject to withholding for taxes and other proper deductions.

5. Stock Award and Other Benefits .

(a) Stock Award. Subject to Executive’s continued employment or service with the Company on such date or an earlier termination by the Company without Cause (as defined below) or by Executive for Good Reason (as defined below), the Company shall grant

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Executive on or before December 31, 2008 a fully vested stock award having an aggregate grant date fair market value of $2,400,000. For the avoidance of doubt, a termination due to Executive’s death or Disability shall not constitute a termination without Cause. Executive hereby acknowledges and agrees that, effective as of the date of this Agreement, he shall no longer participate in the Company’s long term incentive program, other than with respect to any awards thereunder that are outstanding on the date of this Agreement.

(b) Benefits. Executive shall be entitled to participate in the Company’s employee benefit plans, insurance, executive medical coverage, sick leave, holidays, auto allowance and such other benefits as the Company from time to time may generally provide to its most senior officers, including, without limitation, the Company’s Supplemental Executive Retirement Bonus Plan (“ SERBP ”).

6. Definitions . The following terms shall have the following meanings for purposes of this Agreement:

(b) “ Disability ” shall mean Executive’s absence from his duties with the Company on a full-time basis for one hundred eighty (180) consecutive days as a result of his incapacity due to physical or mental illness, unless within thirty (30) days after notice of termination is given to Executive following such absence he shall have returned to the full-time performance of his duties.

(c) “ Good Reason ” shall mean termination by Executive of Executive’s employment with the Company based on any of the following events:

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(i) an adverse change or diminution in Executive’s status, title, positions or responsibilities as Chairman of the Board, as applicable, or the assignment to Executive of any duties, reporting requirements or responsibilities which are inconsistent with such status, title or positions, or any removal of Executive from or any failure to reappoint or reelect Executive to such positions, in each case except in connection with the termination of Executive’s employment for Cause or Disability or as a result of Executive’s death or by Executive other than for Good Reason;

(ii) a reduction by the Company in the Base Salary;

(iii) a failure by the Company to provide to Executive the compensation and benefits as provided in Section 4 or Section 5 of this Agreement;

(iv) a failure by the Company to provide and credit Executive with the number of paid vacation days to which Executive is then entitled in accordance with the Company’s normal vacation policy;

(v) the Company’s requiring Executive to be based more than 30 miles from where Executive’s office is located as of the date of this Agreement except for required travel on the Company’s business to an extent substantially consistent with the business travel obligations which Executive undertook as of the Effective Date;

(vi) a failure by the Company to obtain from any Successor (as defined in Section 10 of this Agreement) the assent to this Agreement contemplated by Section 10; or

(vii) a failure by the Company to pay Executive any portion of Executive’s current compensation, to credit any deferred compensation plan account of Executive in accordance with Executive’s previous election, or to pay Executive any portion of an installment of deferred compensation under any plan in which Executive participated, within seven days of the date such compensation is due.

Notwithstanding any provision in this Agreement to the contrary, Executive may terminate his employment for Good Reason only if (1) within 90 days after the first occurrence of the circumstances giving rise to Good Reason, Executive gives written notice to the Company of Executive’s belief that Good Reason exists and of his intention to terminate his employment for Good Reason, (2) within 30 days of such notice from Executive the circumstances giving rise to Good Reason are not fully corrected, and (3) such termination occurs no later than 180 days following the first occurrence of the circumstances giving rise to Good Reason.

7. Effect of Termination of Employment .

(a) Termination by the Company for Cause or by Executive without Good Reason. If the Company terminates Executive’s employment for Cause or Executive terminates his employment without Good Reason, Executive shall be entitled to receive only (i) the Base Salary, any earned but unpaid bonus for the prior fiscal year, and any other compensation or benefits which have been earned or become payable as of the date of termination but which have not yet been paid to Executive, (ii) all paid time off accrued but untaken through the effective date of such termination, and (iii) reimbursement of expenses

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incurred through the effective date of such termination pursuant to the Company’s normal expense reimbursement policy, which reimbursement shall be paid promptly and in any event within 30 days after submission in accordance with Company policy; provided that Executive shall submit all outstanding unreimbursed business expenses no later than 15 days following the date of termination. The amounts described in clauses (i) through (iii) of the foregoing are referred to as the “ Accrued Obligations .”

(b) Termination by the Company Without Cause or by Executive for Good Reason. If the Company terminates Executive’s employment without Cause (which, for the avoidance of doubt, shall include any termination of Executive’s employment upon the expiration of the Term as a result of the Company’s election not to extend the Term in accordance with Section 1 of this Agreement) or Executive terminates his employment for Good Reason at any time during the Term and such termination does not occur under circumstances that would give rise to severance payments to Executive under the Change in Control Agreement:

(i) Executive shall be entitled to receive the Accrued Obligations;

(iii) Executive shall be paid an amount equal to the product of the annual incentive bonus Executive would have received had Executive remained employed on the last day of such fiscal year multiplied by the percentage of days during the fiscal year prior to the Termination Date during which Executive was employed, such amount to be paid at the same time as the annual incentive bonus would have been paid to Executive if he had remained employed on the applicable payment date for such annual incentive bonus;

(c) Death. If Executive’s employment is terminated as a result of Executive’s death, Executive shall be entitled to receive the Accrued Obligations.

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(d) Disability. If Executive’s employment is terminated as a result of Executive’s Disability, Executive shall be entitled to receive the Accrued Obligations.

(e) Date of Payment. Except as otherwise provided in this Agreement, all cash payments and lump-sum awards required to be made pursuant to the provisions of this Section 7 shall be paid (i) in the case of the Accrued Obligations, no later than the 30 th day following such termination of employment, (ii) in the case of the pro rata bonus, as provided in Section 7(b)(iii), and (iii) in the case of the payments described in Sections 7(b)(ii), within 45 days of the date of termination; provided that Executive has delivered an executed copy of a release of claims in the form attached hereto as Exhibit B (and not revoked such release) prior to the expiration of such 45-day period.

(f) Options, Performance Shares and Restricted Stock. The options, performance shares, restricted stock units and restricted stock awarded to Executive by the Company shall, in the event of a termination of Executive’s employment, be governed by the provisions of the applicable plan and award agreement; provided that the accelerated vesting provisions of Section 7(b)(v) shall, if triggered, control in the event of any inconsistency with any such agreement.

(g) No Obligation of Executive to Mitigate. The amount of any payment provided for in this Section 7 shall not be reduced, offset or subject to recovery by the Company by reason of any compensation earned by Executive as the result of employment by another employer after the date of termination.

(h) 280G Excise Tax Gross Up Provision. If any of the payments or benefits provided for in Section 7 of this Agreement, under any other agreement between Executive and the Company or otherwise (collectively, the “ Payments ”) will be subject to the tax imposed by section 4999 of the Internal Revenue Code of 1986, as amended (the “ Code ”), or any similar tax that may hereafter be imposed (the “ Excise Tax ”), the Company shall pay to Executive at the time any such Payment is paid an additional amount (the “ Gross-Up Payment ”) such that the net amount retained by Executive, after deduction of any Excise Tax on the Payments and any federal, state and local income tax and Excise Tax upon the Gross-Up Payment, shall be equal to the Payments. For purposes of determining the amount of the Gross-Up Payment, Executive shall be deemed to pay federal income taxes at the highest marginal rate of federal income taxation in the calendar year in which the Gross-Up Payment is to be made and state and local income taxes at the highest marginal rate of taxation in the state and locality of Executive’s personal residence on the date of termination, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes. In the event that the Excise Tax is subsequently determined to be less than the amount taken into account hereunder, Executive shall repay to the Company at the time that the amount of such reduction in Excise Tax is finally determined the portion of the Gross-Up Payment directly and indirectly attributable to such reduction plus interest on the amount of such repayment at the rate provided for in section 1274(d) of the Code. In the event that the Excise Tax is determined to exceed the amount taken into account hereunder (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross-Up Payment), the Company shall make an additional Gross-Up Payment in respect of such excess (plus any interest and penalties payable to the taxing authorities with respect to such excess) at the time that the amount of such

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excess is finally determined. The Company shall withhold the Excise Tax in accordance with section 4999(b) of the Code, and shall withhold federal, state and local income taxes from the Payments and Gross-Up Payments as required by law.

8. Restrictive Covenants.

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(collectively, a “ Competing Business ”); provided that nothing herein shall prohibit Executive from (i) investing in stocks, bonds, or other securities in any business if such stocks, bonds, or other securities are listed on any United States securities exchange or are publicly traded in an over the counter market, and such investment does not exceed, in the case of any capital stock of any one issuer two percent (2%) of the issued and outstanding capital stock or in the case of bonds or other securities, two percent (2%) of the aggregate principal amount thereof issued and outstanding or (ii) working for a subsidiary, affiliate or division of a Competing Business if such subsidiary, affiliate or division is not itself engaged in a Competing Business and Executive does not provide services to such Competing Business. For purposes of this Section 8(a), the “ Restricted Period ” shall mean all times during which Executive is employed by the Company and the period commencing on the date of the termination of Executive’s employment with the Company for any reason and ending on the first anniversary of the date of such termination.

(c) Confidential Information . Executive acknowledges that the Company Group has a legitimate and continuing proprietary interest in the protection of its confidential information and that it has invested substantial sums and will continue to invest substantial sums to develop, maintain and protect such confidential information. During the Term and at all times thereafter, Executive shall not, except with the written consent of the Company or in connection with carrying out Executive’s duties or responsibilities hereunder, furnish or make accessible to anyone or use for Executive’s own benefit any trade secrets, confidential or proprietary information of the Company Group (all such information, “ Confidential Information ”), including its business plans, marketing plans, strategies, systems, programs, methods, employee lists, computer programs, insurance profiles and client lists; provided , that Confidential Information shall not include information known to the public or otherwise in the public domain without violation by Executive of this Section 8(c). Notwithstanding the foregoing, Executive may disclose Confidential Information when required to do so by a court of competent jurisdiction, by any governmental agency having supervisory authority over the business of the Company Group or by any administrative body or legislative body (including a committee thereof) with jurisdiction to order Executive to divulge, disclose or make accessible such information; provided , further , that in the event that Executive is ordered by a court or other government agency to disclose any Confidential Information, Executive shall (i) promptly notify the Company of such order, (ii) at the written request of the Company, diligently contest such order at the sole expense of the Company as expenses occur, and (iii) at the written request of the Company, seek to obtain, at the sole expense of the Company, such confidential treatment as may be available under applicable laws for any information disclosed under such order.

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11. Successors; Binding Agreement .

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18. Counterparts . This Agreement may be executed in several counterparts, each of which shall be deemed to be an original, but all of which together will constitute one and the same instrument.

Dated: October 29, 2008

SCHNITZER STEEL INDUSTRIES, INC.

By: /s/ Judith Johansen

Name: Judith Johansen

Title: Acting Chair, Compensation Committee of the Board of Directors

/s/ John D. Carter

John D. Carter

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EXHIBIT 10.4

October 29, 2008

John D. Carter

Schnitzer Steel Industries, Inc.

3200 NW Yeon Avenue

Portland, Oregon 97210

Re:

Change in Control Severance Agreement

Dear John:

1. Right to Terminate. The Company or you may terminate your employment as Chairman of the Board (the “ Chairman ”) at any time, subject to the Amended and Restated Employment Agreement dated October 29, 2008 (the “ Employment Agreement ”) and this Agreement, as applicable. Capitalized terms not otherwise defined herein shall have the meanings ascribed to such terms in the Employment Agreement.

2. Term of Agreement. This Agreement shall commence on December 1, 2008 and shall continue in effect through December 1, 2011, or earlier termination of your employment.

3. Change in Control

(i) For purposes of this Agreement, a “ Change in Control ” shall mean the occurrence of any of the following events:

(A) The consummation of:

(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;

(A) An adverse change or diminution in your status, title, positions or responsibilities as Chairman or the assignment to you of any duties, reporting requirements or responsibilities which are inconsistent with such status, title or positions, or any removal of you from or any failure to reappoint or reelect you to such positions, in each case except in connection with the termination of your employment for Cause or by you other than for Good Reason;

(B) a reduction by the Company in your base salary as in effect immediately prior to the Change in Control (or any higher rate in effect subsequent to the Change in Control);

(C) the failure by the Company to continue in effect any Plan (as hereinafter defined) in which you are participating immediately prior to the Change in Control (or Plans providing you with at least substantially similar benefits) other than as a result of the normal expiration of any such Plan in accordance with its terms as in effect immediately prior to the Change in Control, or the taking of any action, or the failure to act, by the Company which would adversely affect your continued participation in any of such Plans on at least as favorable a basis to you as is the case immediately prior to the Change in Control or which would materially reduce your benefits in the future under any of such Plans or deprive you of any material benefit enjoyed by you immediately prior to the Change in Control;

(E) the Company’s requiring you to be based more than 30 miles from where your office is located immediately prior to the Change in Control except for required travel on the Company’s business to an extent substantially consistent with the business travel obligations which you undertook on behalf of the Company prior to the Change in Control;

(F) the failure by the Company to obtain from any Successor (as hereinafter defined) the assent to this Agreement contemplated by Section 7 hereof;

For purposes of this Agreement, “ Plan ” shall mean any compensation plan such as an incentive, stock option or restricted stock plan or any employee benefit plan such as a thrift, pension, profit sharing, deferred compensation, medical, disability, accident, life insurance, or relocation plan or policy or any other plan, program or policy of the Company intended to benefit employees,

(iii) Date of Termination . “ Date of Termination ” shall mean the date your employment with the Company is terminated, which date shall be determined as follows:

(A) if your employment is terminated due to your death, the date of your death;

(B) if your employment is to be terminated by the Company or if your employment is to be terminated by you without a claim of Good Reason, the date specified in the Notice of Termination; and

(C) if your employment is to be terminated by you for Good Reason, the date on which your employment terminates in accordance with Section 4(i) above.

5. Compensation Upon Termination .

(iii) Except as expressly provided in Section 4 of this Agreement, the amount of any payment provided for in this Section 5 shall not be reduced, offset or subject to recovery by the Company by reason of any compensation earned by you as the result of employment by another employer after the Date of Termination, or otherwise, Your entitlements under Section (5)(ii) are in addition to, and not in lieu of, any rights, benefits or entitlements you may have under the terms or provisions of any Plan.

6. Tax Gross-Up Payments .

7. Successors; Binding Agreement .

(i) The Company will seek to have any Successor (as hereinafter defined), by agreement in form and substance satisfactory to you, assent to the fulfillment by the Company of its obligations under this Agreement. For purposes of this Agreement, “Successor” shall mean any Person that succeeds to, or has the practical ability to control (either immediately or with the passage of time), the Company’s business directly, by merger, consolidation or purchase of assets, or indirectly, by purchase of the Company’s Voting Securities or otherwise.

11. Amendment, Waiver; Applicable Law . No provision of this Agreement may be modified, waived or discharged unless such modification, waiver or discharge is agreed to in a writing signed by you and a duly authorized officer of the Company (other than yourself). No waiver by either party hereto at any time of any breach by the other party hereto of, or of compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement. The validity, interpretation, construction and performance of this Agreement shall be governed by the internal laws of the State of Oregon, without regard to conflicts of law principles.

Agreement shall control and such provision of such other agreement shall be deemed to have been superseded, and to be of no force or effect, as if such other agreement had been formally amended to the extent necessary to accomplish such purpose.

16. Counterparts . This Agreement may be executed in several counterparts, each of which shall be deemed to be an original, but all of which together will constitute one and the same instrument.

If this letter correctly sets forth our agreement on the subject matter hereof kindly sign and return to the Company the enclosed copy of this letter which will then constitute our agreement on this subject.

Sincerely,

SCHNITZER STEEL INDUSTRIES, INC.

By: /s/ Judith Johansen

Name: Judith Johansen

Title: Acting Chair, Compensation Committee of the Board of Directors

Agreed to this 29 th day

of October, 2008.

/s/ John D. Carter

John D. Carter

EXHIBIT 99.1

Schnitzer Steel Announces New Chief Executive Officer

Portland, OR-------November 4, 2008------- Schnitzer Steel Industries, Inc. (NASDAQ: SCHN) announced today that Tamara L. Lundgren, previously Executive Vice President and Chief Operating Officer of the Company, was elected President and Chief Executive Officer and a director by the Company’s board of directors at its meeting on October 29, 2008. Both positions will be effective December 1, 2008. John D. Carter, current President and Chief Executive Officer, was elected Chairman of the Board, also effective December 1, 2008.

Ms. Lundgren joined the Company in September 2005, and has been the Company’s Executive Vice President and Chief Operating Officer for the past two years. She has been the key architect of the Company’s growth strategy and enhanced operational efficiency. “We are fortunate to have Ms. Lundgren’s talent, strategic insight, and international experience continuing to provide leadership during the current market conditions,” said Chairman-elect John Carter. He also noted that “the combination of her financial expertise and demonstrated operational capabilities are ideal for the immediate challenges facing our industry as well as the longer-term growth opportunities available to us.”

Current board Chair Kenneth M. Novack, who will continue as a director, emphasized that “our Company has benefited from the complementary combination of Mr. Carter and Ms. Lundgren for the past three years. We are fortunate to be in a position to provide a seamless succession through these changes, which will be advantageous to both our shareholders and our employees going forward.” Mr. Novack noted that “Schnitzer has achieved record growth, earnings, and profitability since Mr. Carter and Ms. Lundgren joined the Company in 2005.” Both Ms. Lundgren and Mr. Carter cited the extraordinary expansion that has occurred in Schnitzer’s Metals Recycling, Auto Parts, and Steel Manufacturing businesses and noted the continuation of those opportunities in the future for the Company.

Ms. Lundgren, prior to joining Schnitzer, was a managing director in investment banking at Deutsche Bank and JPMorgan Chase in London and New York. She has served on the boards of financial services and technology companies, as well as being active in executive leadership groups. “I am honored to have the opportunity to lead our Company and its experienced management team into a new era for our industry,” said Ms. Lundgren.

Mr. Carter joined the Company in 2005 as the first non-family chief executive officer in the hundred-year history of the Company, leading the organization through regulatory issues facing Schnitzer at the time and building the platform upon which the expansion in geographic scope and profitability has occurred. Previously, Mr. Carter had retired after a distinguished career at Bechtel Group, the construction and engineering company headquartered in San Francisco.

Schnitzer Steel Industries, Inc. is one of the largest manufacturers and exporters of recycled ferrous metal products in the United States with 39 operating facilities located in 12 states throughout the country, including six export facilities located on both the East and West Coasts and in Hawaii. The Company’s vertically integrated operating platform also includes its auto parts and steel manufacturing businesses. The Company’s auto parts business sells used auto parts through its 38 self-service facilities and 18 full-service facilities located in 16 states and in western Canada. With an annual production capacity of nearly 800,000 tons, the Company’s steel manufacturing business produces finished steel products, including rebar, wire rod and other specialty products. The Company commenced its 103rd year of operations in fiscal 2009.

CONTACT:

Schnitzer Steel Industries, Inc.

Investor Relations Contact

Rob Stone, 503-224-9900

Press Relations Contact

Tom Zelenka, 503-323-2821

Website: www.schnitzersteel.com

Email: ir@schn.com