8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 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)   January 6, 2006

Schnitzer Steel Industries, Inc.

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(Exact Name of Registrant as Specified in Its Charter)

Oregon --------------------------- (State or Other Jurisdiction of Incorporation) 0-22496 --------------------------- (Commission File Number) 93-0341923 --------------------------- (IRS Employer Identification No.)

  3200 N.W. Yeon Ave. P.O. Box 10047 Portland, OR --------------------------- (Address of Principal Executive Offices)   97296-0047 --------------------------- (Zip Code)

(503) 224-9900

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(Registrant’s Telephone Number, Including Area Code)

N/A

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(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01 Entry into a Material Definitive Agreement

On January 6, 2006, Gregory J. Witherspoon executed a letter agreement (the “Witherspoon Letter”) with Schnitzer Steel Industries, Inc. (the “Company”) regarding his position as Chief Financial Officer of the Company. The Witherspoon Letter is effective as of January 9, 2006. Mr. Witherspoon will receive compensation of $450,000 per annum and will be eligible to participate in the Company’s Economic Value Added bonus program and the Company’s Long-Term Incentive Program. Beginning in June 2006, Mr. Witherspoon will be eligible for consideration in the Company’s annual salary review program pursuant to which his salary may increase. Mr. Witherspoon will be granted an auto allowance of $700 per month, a Company gas card and will be eligible for certain other benefits. The Company will also assist Mr. Witherspoon with his relocation expenses. Mr. Witherspoon is an “at-will” employee of the Company and his employment and compensation can be terminated, with or without cause and with or without notice, at any time, at the option of the Company or Mr. Witherspoon. A copy of the Witherspoon Letter is attached hereto as Exhibit 10.1 and incorporated by reference herein.

In connection with execution of the Witherspoon letter, the letter agreement, dated August 31, 2005, between the Company and Mr. Witherspoon, regarding Mr. Witherspoon’s position as Interim Chief Financial Officer, was terminated as of January 9, 2006.

On January 6, 2006, Richard C. Josephson executed a letter agreement (the “Josephson Letter”) with the Company regarding his position as Vice President and General Counsel of the Company. The Josephson Letter is effective as of January 9, 2006. Before joining the Company, Mr. Josephson was a partner in the Portland, Oregon office of the law firm Stoel Rives LLP which has served as outside legal counsel to the Company. Mr. Josephson will receive compensation of $450,000 per annum and will be eligible to participate in the Company’s Economic Value Added bonus program and the Company’s Long-Term Incentive Program. Beginning in June 2006, Mr. Josephson will be eligible for consideration in the Company’s annual salary review program pursuant to which his salary may increase. Mr. Josephson will be granted an auto allowance of $700 per month, a Company gas card and will be eligible for certain other benefits. The Company will also pay, or reimburse, Mr. Josephson’s normal and reasonable business expenses, including Oregon State Bar fees.

The Company will be presenting a severance program for certain key executive positions to the Compensation Committee of the Board of Directors that will provide a compensation package in the event of a loss of employment related to change in control and/or termination without cause. Mr. Josephson’s position will be included in this evaluation and recommendation, and actual participation will be subject to approval by the Compensation Committee. In the event such a program is not approved, or Mr. Josephson is not included within such program at substantially the same level as other similarly situated senior executives of the Company, then the Company will provide Mr. Josephson with a severance program during the period between January 9, 2006 and January 2, 2009, pursuant to which if Mr. Josephson’s employment is terminated by the Company (unless for cause)he will be eligible for the following severance payments so long as he executes a general release of claims in a form reasonably satisfactory to the Company: (i) one year of salary at his then-current base salary, (ii) one year equivalent of his Economic Value Added Bonus based on the most recently completed Economic Value Added Bonus Plan year multiplied by his then current Economic Value Added Bonus target percentage, (iii) one year of medical, dental and vision coverage at his then-current enrollment, paid by the Company (or an equivalent value in

money to the extent the Company cannot continue his coverage past the end of the calendar year in which his employment terminates pursuant to the terms of the coverage plans) and (iv) pension plan matching contributions to the same level that would have been made had he remained employed continuously through the twelfth month following the month of his termination. He would also be entitled to his Economic Value Added Bonus Bank balance as provided in the Economic Value Added Bonus Plan.

Mr. Josephson is an “at-will” employee of the Company and his employment and compensation can be terminated, with or without cause and with or without notice, at any time, at the option of the Company or Mr. Josephson, subject to the obligations of the Company to pay certain severance benefits. A copy of the Josephson Letter is attached hereto as Exhibit 10.2 and incorporated by reference herein.

Item 5.02 Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers

On January 9, 2006, Gregory J. Witherspoon was hired as Chief Financial Officer of the Company. Mr. Witherspoon had served as Interim Chief Financial Officer of the Company since August 23, 2005. Prior to joining the Company, Mr. Witherspoon, 59, was a Managing Director with the financial consulting firm Plan Bravo Partners, LLC in Los Angeles for seven years. Mr. Witherspoon’s financial consulting engagements have included a two-year assignment as President of a chain of hotels and restaurants and a six-month assignment as Interim President and Chief Financial Officer of an automobile lender. He served as Chief Financial Officer of Aames Financial Corp., a sub-prime mortgage lender, which became a publicly traded company in 1991, from 1987 to 1998. Mr. Witherspoon began his career with Deloitte & Touche as a Certified Public Accountant. On January 6, 2006, the Company entered into a letter agreement with Mr. Witherspoon regarding his position as Chief Financial Officer. A description of the letter agreement is included under item 1.01 herein.

Item 9.01              Financial Statements and Exhibits

(d) Exhibits

10.1 Letter agreement, dated January 6, 2006, between Schnitzer Steel Industries, Inc. and Gregory J. Witherspoon, regarding Mr. Witherspoon’s position as Chief Financial Officer.

10.2 Letter agreement, dated January 6, 2006, between Schnitzer Steel Industries, Inc. and Richard C. Josephson, regarding Mr. Josephson’s position as Vice President and General Counsel.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	Schnitzer Steel Industries, Inc.
Date:    January 10, 2006	By:	/s/ John D. Carter
		Name: John D. Carter
		Title: President and Chief Executive Officer

Exhibit Index

Exhibit No. Description

10.1 Letter agreement, dated January 6, 2006, between Schnitzer Steel Industries, Inc. and Gregory J. Witherspoon, regarding Mr. Witherspoon’s position as Chief Financial Officer.

10.2 Letter agreement, dated January 6, 2006, between Schnitzer Steel Industries, Inc. and Richard C. Josephson, regarding Mr. Josephson’s position as Vice President and General Counsel.

EX-10.1

	SCHNITZER STEEL INDUSTRIES, INC.
	3200 NW Yeon Avenue Phone (503) 224-9900	P.O. Box 10047 Fax (503) 321-2649	Portland, Oregon 97296-0047

Exhibit 10.1

January 6, 2006

Gregory (Greg) J. Witherspoon

PO Box 10047

Portland, OR 97296

Dear Greg:

This letter serves to outline those areas related to your transfer from a temporary employee to a regular full-time employee with Schnitzer Steel Industries, Inc. (“Company”) effective January 9, 2006 (“Effective Date”):

Position:	Chief Financial Officer for Schnitzer Steel Industries, Inc.
Compensation:	Your salary will be $450,000 per annum on the Effective Date
Reporting To:	John D. Carter, President and Chief Executive Officer Schnitzer Steel Industries, Inc.
Seniority Date:	You will be granted Company seniority based on your hire date as a temporary employee as of August 23, 2005 (“Seniority Date”). Further, your status as an employee will become that of a Regular, Full-Time employee, as defined by the Company’s Human Resources Policy Manual, on the Effective Date.
Bonus Eligibility:	You are eligible for participation in the Company’s Economic Value Added (EVA®) bonus program as of the Effective Date. Your EVA target is 65% of your EVA earnings (that accrue beginning with the Effective Date), which is then adjusted by the EVA center multiple that you will be assigned. You will participate 100% in the “SSI without Joint Ventures” EVA Center. Bonus amounts, as formulated, are payable following the Company’s fiscal year-end on August 31st, and are based on Company performance and are not guaranteed.
Performance and Salary Review:	Normally, performance appraisals are conducted during the second calendar quarter of each year (usually in April or May). Salary reviews are normally conducted in June of each year. Increases, if any, depend upon individual performance and company financial considerations and are not automatic in nature. You will be eligible to participate in the June 2006 salary review.
Auto Allowance:	You will be granted Auto Allowance, Level C, Oregon, which is currently at $700 per month. You will also receive a Company gas card. The auto allowance and gas card are pursuant to Human Resources Policy #640, and are considered taxable income to employees.
Relocation:	The Company will provide a relocation package to include packing, insurance, shipment, storage and unpacking for your household goods at the final destination for you and your immediate family (those living at the same residence). Please understand that some portion of this relocation package will likely be taxable to you and you should consult your personal tax advisor for more information.

Gregory J. Witherspoon Page 2

Long-Term Incentive Program	You will be eligible for participation in the Schnitzer Steel Industries, Inc. Long-Term Incentive Program (“LTIP”) at a level commensurate with your position as a member of the executive team. Final details on this program will be confirmed following approval of the recent plan amendments by the Company’s shareholders at the annual meeting in January, 2006. Actual award levels under the LTIP are subject to approval by the Compensation Committee of the Board of Directors.
Benefits Effective:	The effective date of your benefits will be determined by the waiting periods, if any, contained in each of the plans for which you are eligible. Other benefits are effective per plans and coverages as currently exist or as modified in the future for the salary group of which you are a part. The Company reserves the right to amend, alter or eliminate coverages. In addition to benefits under the Schnitzer self-insured health plan, coverage will also be provided under the Executive medical reimbursement plan. Based on your Seniority Date, you will be eligible to enroll into the health and welfare medical plans on the Effective Date.
Paid Time Off (“PTO”)	PTO will accrue on an accelerated schedule. You will begin accruing PTO at the four (4) year rate of 6.16 hours per pay period or 160 hours per year. Your accrual rate will remain the same until at such time in the future you become eligible for the next highest accrual level, which is currently at 9 years of service. PTO guidelines are provided under Human Resources Policy #525.

Upon your acceptance of this letter and commencement of your full time employment your employment as interim Chief Financial Officer under the letter dated August 31, 2005 shall terminate and the terms of your employment shall be governed by this letter.

The foregoing does not constitute a contract since the Company is an "at-will" employer. "At-will" means that employment and compensation can be terminated, with or without cause and with or without notice, at any time, at the option of the Company or yourself. This offer is made contingent on your successfully passing a drug screen provided by the Company.

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

Sincerely, Accepted,

/S/ John D. Carter /S/ Gregory J. Witherspoon

John D. Carter	Gregory J. Witherspoon
President and Chief Executive Officer	Employee

cc: Employee File

EX-10.2

	SCHNITZER STEEL INDUSTRIES, INC.
	3200 NW Yeon Avenue Phone (503) 224-9900	P.O. Box 10047 Fax (503) 321-2649	Portland, Oregon 97296-0047

Exhibit 10.2

January 6, 2006

Richard C. Josephson

PO Box 10047

Portland, OR 97296

Dear Rich:

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

Position:	Vice President and General Counsel for Schnitzer Steel Industries, Inc.
Compensation:	Your salary will be $450,000 per annum.
Reporting To:	John D. Carter, President and Chief Executive Officer Schnitzer Steel Industries, Inc.
Hire Date:	January 9, 2006 (“Hire Date”)
Bonus Eligibility:	You are eligible for participation in the Company’s Economic Value Added (EVA®) bonus program beginning on your Hire Date. Your EVA target is 50% of your EVA earnings (that accrue beginning with the Hire Date), which is then adjusted by the EVA center multiple that you will be assigned. You will participate 100% in the “SSI without Joint Ventures” EVA Center. Bonus amounts, as formulated, are payable following the Company’s fiscal year-end on August 31st, and are based on Company performance and are not guaranteed.
Performance and Salary Review:	Normally, performance appraisals are conducted during the second calendar quarter of each year (usually in April or May). Salary reviews are normally conducted in June of each year. Increases, if any, depend upon individual performance and company financial considerations and are not automatic in nature. You will be eligible to participate in the June 2006 salary review.
Auto Allowance:	You will be granted Auto Allowance, Level C, Oregon, which is currently at $700 per month. You will also receive a Company gas card. The auto allowance and gas card are pursuant to Human Resources Policy #640, and are considered taxable income to employees.
Long-Term Incentive Program	You will be eligible for participation in the Schnitzer Steel Industries, Inc. Long-Term Incentive Program (“LTIP”). The target LTIP award level is anticipated to be $350,000 for the performance cycle from September 1, 2005 thru August 31, 2008. However, based on your Hire Date, this amount will be pro-rated to a target award level of $311,000. Final details on this program will be confirmed following approval of the recent plan amendments by the Company’s shareholders at the annual meeting in January, 2006. Actual award levels under the LTIP are subject to approval by the Compensation Committee of the Board of Directors. The exercise price for any non-statutory stock options granted to you will be established at the closing trading price of the underlying stock on or about the date of grant.

Richard C. Josephson Page 2

Benefits Effective:	The effective date of your benefits will be determined by the waiting periods, if any, contained in each of the plans for which you are eligible. Other benefits are effective per plans and coverages as currently exist or as modified in the future for the salary group of which you are a part. The Company reserves the right to amend, alter or eliminate coverages. In addition to benefits under the Schnitzer self-insured health plan, coverage will also be provided under the Executive medical reimbursement plan. Based on your Hire Date, you will be eligible to enroll into the health and welfare medical plans on April 1, 2006. As additional consideration, the Company will reimburse you for your actual COBRA expenses under your current employers plan until you are eligible for coverage under the Company plan(s). This amount will be considered to be taxable income to you, and therefore will be included on your 2006 W-2.
Other Benefits	The Company will pay, or reimburse you for all normal and reasonable business expenses, including Oregon State Bar fees. The Company will reimburse you, or pay directly on your behalf, up to $5,000 for your attorney’s fees incurred in connection with this agreement.
Paid Time Off (“PTO”)	PTO will accrue on an accelerated schedule. You will begin accruing PTO at the four (4) year rate of 6.16 hours per pay period or 160 hours per year. Your accrual rate will remain the same until at such time in the future you become eligible for the next highest accrual level, which is currently at 9 years of service. PTO guidelines are provided under Human Resources Policy #525.

Severance Provisions The Company will be presenting a severance program for certain key executive positions to the Compensation Committee of the Board of Directors that will provide a compensation package in the event of a loss of employment related to change in control and/or termination without cause. Your position will be included in this evaluation and recommendation, and actual participation will be subject to approval by the Compensation Committee. In the event such a program is not approved, or you are not included within such program at substantially the same level as other similarly situated senior executives of the Company, then the Company will provide you with a severance program that will be in effect from your Hire Date, and for a period of three (3) years, to expire on January 2, 2009, as follows:   If your employment terminates (unless by the Company for Cause or voluntarily by you), you will be eligible for the following severance payments: (1) One year of salary at your then current base annual salary at the time of termination; (2) one year equivalent EVA Bonus based on the most recently completed EVA Bonus Plan year multiplied by your then current EVA bonus target percentage; (3) one year of medical, dental and vision coverage at your then-current enrollment, paid by the Company (or an equivalent value in money to the extent the Company cannot continue your coverage past the end of the calendar year in which your employment terminates pursuant to the terms of the coverage plans); and (4) pension plan matching contributions to the same level that would have been made had you remained employed continuously through the 12th month following the month of your termination. You shall also be entitled to your EVA Bonus Bank balance as provided in the EVA Bonus Plan. You will be entitled to these severance considerations only if you execute a general release of claims in a form reasonably satisfactory to the Company within 30 days (or such other period as the Company, in its reasonable discretion, may specify) after the date as of which your employment terminates and does not revoke that release of claims during the  

Richard C. Josephson Page 3

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

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

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

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

b)   Your continued failure or refusal to perform with reasonable competence and in good faith any of the lawful duties assigned by (or any lawful directions of) the Company that are commensurate with your position with the Company (not resulting from any illness, sickness or physical or mental incapacity), which continues after the Company has given notice thereof (and a reasonable opportunity to cure) to you.

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

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

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

Sincerely, Accepted,

/S/ John D. Carter /S/ Richard C. Josephson

John D. Carter	Richard C. Josephson
President and Chief Executive Officer	Employee

cc: Employee File